Ambac Responds to Moody's Rating Action.

NEW YORK -- Ambac Financial Group, Inc. (NYSE: ABK) (Ambac) expressed surprise and disappointment with Moody's decision to place the ratings of Ambac and its subsidiaries on review for downgrade. Throughout this difficult market environment and credit cycle, the Company has engaged in constructive dialogue with Moody's regarding its housing-related exposures, the strengths of its business model and strategies to enhance its standing in a marketplace where many, if not all, financial institutions have experienced diminished franchise value.

Ambac expects to continue to work with Moody's as the rating agency seeks to apply its most recent mortgage-related assumptions to unique attributes of the individual transactions in Ambac's portfolio. Ambac believes that the current housing-related situation is unprecedented and should be viewed as an extreme stress scenario against which its financial strength is being assessed.

In its September 18th, 2008 announcement related to loss projections for subprime RMBS, Moody's acknowledged that "Othere continues to be significant uncertainty around the ultimate losses for these loans, which will depend in part on future loss severities and default frequencies, the level of loan modifications and/or government intervention, and the future state of the US economy." Further, the rating agency recognized that "Othe bulk of ultimate losses will be recognized over a longer period of time, as evidenced by cumulative loss levels which are currently averaging 1.5% to 4.2% across the vintages reviewed." They further confirmed that, "Current losses are still low because loans remain relatively unseasoned in more recent vintages and partly because modifications may also be slowing down loss recognition."

Michael Callen, Chairman and CEO, commented, "Ambac believes that Moody's rating actions continue to cause confusion, uncertainty and the risk of material economic damage if their assumptions ultimately prove to be too onerous. We are aggressively managing our mortgage-related exposures and have made demonstrable progress in reducing the risk in our insured portfolio. Ambac's financial strength will continue to improve as we de-lever and commute and remediate our exposures."

Forward-Looking Statements

This release contains statements that may constitute "forward-looking statements" within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Any or all of management's forward-looking statements here or in other publications may turn out to be wrong and are based on Ambac's management current belief or opinions. Ambac's actual results may vary materially, and there are no guarantees about the performance of Ambac's securities. Among events, risks, uncertainties or factors that could cause actual results to differ materially are: (1) changes in the economic, credit, foreign currency or interest rate environment in the United States and abroad; (2) the level of activity within the national and worldwide credit markets; (3) competitive conditions, pricing levels and reduction in demand for financial guarantee products; (4) legislative and regulatory developments; (5) changes in tax laws; (6) changes in our business plan, our decision to discontinue writing new business in the financial services area, to significantly reduce new underwriting of structured finance business and to discontinue all new underwritings of structured finance business for six months from March 6, 2008; (7) the policies and actions of the United States and other governments; (8) changes in capital requirements whether resulting from downgrades in our insured portfolio or changes in rating agencies' rating criteria or other reasons; (9) changes in Ambac's and/or Ambac Assurance's credit or financial strength ratings; (10) changes in accounting principles or practices relating to the financial guarantee industry or that may impact Ambac's reported financial results; (11) inadequacy of reserves established for losses and loss expenses; (12) default by one or more of Ambac Assurance's portfolio investments, insured issuers, counterparties or reinsurers; (13) credit risk throughout our business, including large single exposures to reinsurers; (14) market spreads and pricing on insured collateralized debt obligations ("CDOs") and other derivative products insured or issued by Ambac; (15) credit risk related to residential mortgage securities and CDOs; (16) the risk that holders of debt securities or counterparties on credit default swaps or other similar agreements seek to declare events of default or seek judicial relief or bring claims alleging violation or breach of covenants by Ambac or one of its subsidiaries; (17) the risk that our underwriting and risk management policies and practices do not anticipate certain risks and/or the magnitude of potential for loss as a result of unforeseen risks; (18) the risk of volatility in income and earnings, including volatility due to the application of fair value accounting, or FAS 133, to the portion of our credit enhancement business which is executed in credit derivative form; (19) operational risks, including with respect to internal processes, risk models, systems and employees; (20) the risk of decline in market position; (21) the risk that market risks impact assets in our investment portfolio; (22) the risk of credit and liquidity risk due to unscheduled and unanticipated withdrawals on investment agreements; (23) changes in prepayment speeds on insured asset-backed securities; (24) factors that may influence the amount of installment premiums paid to Ambac; (25) the risk that we may be required to raise additional capital, which could have a dilutive effect on our outstanding equity capital and/or future earnings; (26) our ability or inability to raise additional capital, including the risks that regulatory or other approvals for any plan to raise capital are not obtained, or that various conditions to such a plan, either imposed by third parties or imposed by Ambac or its Board of Directors, are not satisfied and thus potentially necessary capital raising transactions do not occur, or the risk that for other reasons the Company cannot accomplish any potentially necessary capital raising transactions; (27) the risk that Ambac's holding company structure and certain regulatory and other constraints, including adverse business performance, affect Ambac's ability to pay dividends and make other payments; (28) the risk of litigation and regulatory inquiries or investigations, and the risk of adverse outcomes in connection therewith, which could have a material adverse effect on our business, operations, financial position, profitability or cash flows; (29) changes in expectations regarding future realization of gross deferred tax assets; (30) risks relating to the re-launch of Connie Lee; (31) other factors described in the Risk Factors section in Part I, 1A of our Annual Report on Form 10-K for the fiscal year ended December 31, 2007 and in Part II, Item 1A of our Quarterly Report on Form 10-Q for the quarter ended June 30, 2008, and also disclosed from time to time by Ambac in its subsequent reports on Form 10-Q and Form 8-K, which are or will be available on the Ambac website at www.ambac.com and at the SEC's website, www.sec.gov; and (32) other risks and uncertainties that have not been identified at this time. Readers are cautioned that forward-looking statements speak only as of the date they are made and that Ambac does not undertake to update forward-looking statements to reflect circumstances or events that arise after the date the statements are made. You are therefore advised to consult any further disclosures we make on related subjects in Ambac's reports to the SEC.

Ambac Financial Group, Inc., headquartered in New York City, is a holding company whose affiliates provide financial guarantees and financial services to clients in both the public and private sectors around the world. Ambac's principal operating subsidiary, Ambac Assurance Corporation, a guarantor of public finance and structured finance obligations, has earned a Aa3 rating from Moody's Investors Service, Inc. and a AA rating from Standard & Poor's Ratings Services; both Moody's and Standard & Poor's maintain a negative outlook. Ambac Financial Group, Inc. common stock is listed on the New York Stock Exchange (ticker symbol ABK).