Similar to measures recently announced by rival MBIA Inc., Ambac's strategy is to preserve its top-notch triple-A rating, which it needs to compete in the market of insuring municipal bonds. The plans were partly in response to comments by Moody's Investors Service, which continues to review the bond insurer for possible downgrade.
"Once our triple-A ratings are fully confirmed by Standard & Poor's and Moody's, we will be in a position to take advantage of the current market environment," Ambac Chief Executive Michael Callen said.
Ambac will stop underwriting policies using credit-default swaps and will discontinue writing investment agreements. It also will stop writing business in some international structured-finance sectors, Mr. Callen said. He said these moves would help free up about $600 million in capital.
Moody's said Ambac still may lose its triple-A rating but suggested that a plan Ambac is working on to raise new capital could be enough to avoid a downgrade. Ambac is trying to raise at least $2 billion, said people familiar with the matter. The bond insurer falls $2 billion short of Moody's "target" level requirement for a stable triple-A rating.
Also, Ambac Friday said it received a subpoena from the state of Massachusetts that seeks information concerning Massachusetts public issuer bonds. It also said it has been named in at least four federal lawsuits seeking class-action status, alleging false and misleading statements regarding its insurance coverage on collateralized-debt-obligation contracts and conducting alleged insider trading.