Ambac Financial Group Inc. expects to soon receive approval from regulators to capitalize its bond insurance subsidiary, Connie Lee Insurance Co., with $850 million in new capital.

The new capital will be used to garner triple-A ratings for Connie Lee, which would then allow the subsidiary to start writing new public finance and infrastructure business.

Ambac said it has had "positive discussions" about the plan with the Wisconsin insurance commissioner's office and its head, commissioner Sean Dilweg, who expects to see Ambac's official filing in the next few days.

"We have been working very closely with them as they implement their business plan," Dilweg said. "As soon as we get it in we will be reviewing it thoroughly and responding quickly. As I look at it now, Ambac is in a good capital position at this point, but we do have to get the physical filing in and look through everything."

The $850 million in capital would come from the company's financial guarantor, Ambac Assurance Corp., who would serve as Connie Lee's parent. This would bring the total amount of capital at Connie Lee to about $1 billion, the company said. It was not immediately known how the diverted funds would affect Ambac Assurance's claims-paying ability.

Ambac hopes the new capital will be enough for the credit rating agencies to assign a triple-A rating to Connie Lee. The company has already held discussions with the agencies and will continue to do so after regulatory approval has been finalized.

Ambac Assurance is now rated Aa3 with a negative outlook by Moody's Investors Service and AA with a negative watch from Standard & Poor's. Fitch Ratings recently withdrew its rating from Ambac. Only Standard & Poor's rates Connie Lee, currently assigning a rating of AA with a negative watch.

With the recent actions, the credit agencies have expressed their view that it may be some time before Ambac Assurance proves it is again deserving of triple-A ratings. In the meantime, Ambac has come up with the current plan for getting triple-A's for Connie Lee.

Ambac chief executive officer Michael Callen said he believes Connie Lee's 37 years of experience in the market will ensure a positive response from market participants.

"We expect that it will be received favorably by the market as it will provide much needed capacity and execution capability," Callen said in a statement. "I am confident that the management team of Connie Lee, which will be primarily assembled from within [Ambac Assurance]'s public finance division, will have a level of experience unrivaled in the industry."

It is not immediately clear how much business Connie Lee would be able to write with $1 billion in capital.

"It should be enough to get everyone comfortable with the seriousness of that entity being a triple-A rated entity and being a real competitor in the market," said Ambac spokesman Peter Poillon. "As the capital is needed, we'll take care of that as needed."

Ambac purchased Connie Lee Holdings Inc. and its financial guaranty insurance subsidiary, Connie Lee Insurance, in December 1997. Connie Lee Insurance is currently licensed in all 49 states except Virginia, whose license the company is currently working to secure.

Despite the fact that the money will be shunted from Ambac Assurance, Poillon said policyholders will not be negatively affected. He said the holding company's primary goal remains getting Ambac Assurance back to its former top ratings.

"That is still our optimal goal, to have Ambac Assurance as a triple-A rated entity," he said.

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