Wisconsin Court Confirms the Plan to Rehabilitate the Segregated Account of Ambac Assurance Corp.

MADISON, Wis., Jan. 25, 2011 /PRNewswire/ -- The Wisconsin Office of the Commissioner of Insurance (OCI) today obtained confirmation of its Plan of Rehabilitation for the Segregated Account of Ambac Assurance Corporation ("Segregated Account") in Dane County Circuit Court in Wisconsin.  

"We look forward to implementing the Plan for the benefit of all policyholders," said Commissioner Ted Nickel.

The Plan maximizes claims-paying resources, limits damage to policyholders and provides a clear framework to address claims in an orderly and reasonable fashion. Absent further orders by this or other courts, the Segregated Account expects to promptly begin processing Allowed Claims under the terms of the Plan of Rehabilitation upon satisfaction of certain conditions in the Plan.

"When we started reviewing Ambac Assurance Corporation's (AAC) financial condition almost three years ago, we were concerned the Company wouldn't have sufficient reserves to pay all valid claims," said Roger Peterson, Deputy Administrator in OCI's Division of Regulation and Enforcement. "Confirmation of the plan has mitigated that risk."

Once the Plan takes effect, holders of permitted policy claims will receive 25% of their permitted claims in cash and 75% in surplus notes bearing interest at the rate of 5.1% per year with a scheduled maturity on June 7, 2020. Commissioner Nickel said that the decision to adopt a 25/75 split was guided by the need to preserve sufficient cash to pay all valid policy claims, including those that exist today and those that may arise in the future. The cash/note ratio may be adjusted in conjunction with a yearly assessment of liabilities and claims-paying resources.

Substantially all claims-paying resources of AAC will be available to pay claims of policyholders whose policies have been allocated to the Segregated Account.

In confirming the Plan, the Honorable William D. Johnston found that the Plan satisfied all applicable requirements of Wisconsin law. Judge Johnston also found that the Plan is more favorable to policyholders, creditors and the public than any of the alternative regulatory options.

The Segregated Account was established by AAC on March 24, 2010, to segregate certain liabilities that presented serious financial hazards to the Company and all of its policyholders. As of October 2010, approximately 700 in-force policies covering a net par outstanding amount of approximately $50 billion were held in the Segregated Account.

OCI has closely monitored AAC's capital position and financial health since the subprime mortgage crisis began resonating through the national economy almost three years ago. The economic downturn, combined with AAC's substantial investment in, and insurance of, mortgage-related exposures particularly damaged AAC's business and financial position.

AAC is domiciled in Wisconsin and regulated by OCI. AAC's parent company, Ambac Financial Group Inc., headquartered in New York, is not regulated by OCI and is not subject to the terms of the Plan.

A notice will be posted on www.ambacpolicyholders.com advising of the effective date of the Plan.

The Plan of Rehabilitation, related Disclosure Statement and supporting exhibits provide extensive additional information and are available at www.ambacpolicyholders.com, where policyholders will find legal documentation and answers to frequently asked questions.

SOURCE Wisconsin Office of the Commissioner of Insurance