I didn’t include the real big Ambac problem. They insured a whole lot of CDO exposures which are currently non-defaulted but whose credit profile is deteriorating and on which the end losses will be large but are uncertain.
Here is what I refer to as the oops slide from Ambac’s last fixed income presentation. It breaks up the CDO exposure by original rating and Ambac’s current (self estimated) rating:
This slide alone explains why Ambac is so much more damaged than MBIA. It’s the reason why I might be mad with my Ambac holding.
Nothing much else in Ambac’s insurance company alarms me… but this is petrifying.
If someone has some granularity on the deals – both likely default rate and likely loss given default I would love to see it.