874501--3/1/2007--AMBAC_FINANCIAL_GROUP

related topics

{regulation, change, law}

{capital, credit, financial}

{loss, insurance, financial}

{condition, economic, financial}

{operation, natural, condition}

{debt, indebtedness, cash}

{competitive, industry, competition}

A downgrade of the financial strength rating of Ambac Assurance and/or Ambac Assurance UK Limited would adversely affect our business and prospects and, consequently, our results of operations and financial condition. A downgrade of our long term credit ratings would adversely affect our liquidity and increase our borrowing costs. We are subject to credit risk throughout our businesses, including large single risks and correlated risks. General economic conditions can adversely affect our business results and prospects. Changes in prevailing interest rate levels could adversely impact our business results and prospects. The financial guarantee business is highly competitive. Adequate capital support and liquidity may not be available. Our holding company structure and certain regulatory and other constraints could affect our ability to pay dividends and make other payments. Loss Reserves May Not Be Adequate to Cover Potential Losses Our risk management policies and practices may not anticipate unforeseen risks and/or the magnitude of potential for loss as the result of foreseen risks. Our net income and earnings could become more volatile due to the application of fair value accounting (FAS 133) to the portion of our credit enhancement business which is executed in credit derivative form Changes to accounting rules relating to the financial guarantee industry could have a material adverse affect on us and our industry. We are subject to the compliance requirements of the federal securities laws. We are subject to extensive regulation in the conduct of our financial guarantee insurance business. We are subject to a variety of operational risks which could have a material adverse impact on our business results. Changes in the rating agencies capital models and rating methodology with respect to financial guarantee insurers may adversely affect our business results and prospects. Changes in tax laws impacting marginal tax rates and/or the preferred tax treatment of municipal obligations could adversely impact our business

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874501--3/1/2007--AMBAC_FINANCIAL_GROUP_INC