Tuesday, July 22, 2008

The Oops Slide

Yesterday I noted that Ambac’s paid claims are running about 20 million a month – which is somewhat less than the 150 million a month that say MGIC is paying. I also noted that their claims paying capacity was a fair multiple of MGIC.

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.


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