Ambac Gains OK for Muni Subsidiary - TheStreet

Ambac Gains OK for Muni Subsidiary

Connie Lee will focus on insuring safer municipal bonds, rather than the shaky structured finance that got the bond insurer in hot water.
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Ambac Financial

(ABK)

shares were soaring in after-hours trading after the company said the Wisconsin insurance commissioner had approved a plan to capitalize and launch its new subsidiary to insure municipal bonds.

Connie Lee Insurance will be capitalized with $850 million from Ambac and will act as a separate corporate and legal entity in the company's framework. Ambac is seeking triple-A ratings for Connie Lee, which expects to begin writing policies in the fourth quarter, Ambac said.

Douglas Renfield-Miller, an Ambac executive vice president and chairman and CEO of Ambac Assurance UK Ltd., has been named Connie Lee's CEO. Other underwriting, management and support staff will be moved from Ambac to Connie Lee in the next few months, Ambac said.

Shares of Ambac, rival

MBIA

(MBI) - Get Report

and other bond insurers plummeted in value earlier this year, after investors feared they would be overwhelmed by potential claims by risky structured debt they insured. The municipal side of the business carries less risk of default and is therefore more attractive.

Ambac shares were jumping 16.7% to $8.25 in recent after-hours action.

This article was written by a staff member of TheStreet.com.