Announces Discontinuance of Dividends on Ambac Assurance Corporation Preferred Shares and Interest on Ambac Financial Group, Inc.’s Directly-Issued Subordinated Capital Securities

Schedules Second Quarter Earnings Release for August 5, 2009

Ambac Financial Group, Inc. (NYSE: ABK) (Ambac) today announced that Ambac Assurance Corporation (AAC), its principal operating subsidiary, expects to report that estimated statutory impairment losses on credit derivatives increased by approximately $1.6 billion in the second quarter to approximately $4.9 billion at June 30, 2009. Additionally, AAC expects to report statutory loss and loss expenses incurred amounting to approximately $800 million for the quarter ended June 30, 2009. The increase in impairment losses, which relate to AAC’s insured portfolio of collateralized debt obligations of asset-backed securities transactions (CDOs of ABS), was driven by rising forward LIBOR rates, which increase estimated future cash outflows, and further deterioration of the underlying collateral within the CDO of ABS transactions. The statutory loss and loss expenses relate primarily to deterioration in AAC’s second-lien and Alt-A mortgage-backed securities financial guarantee portfolios.

The increase in the estimated impairment losses in the second quarter is net of the impact of a settlement that reduced a significant portion of exposure under a CDO of ABS transaction that closed in July and a commutation of all of the exposure under a different CDO of ABS transaction that we expect will close by the end of July. The two transactions, with an aggregate of approximately $2.8 billion net notional outstanding at March 31, 2009, are expected to be settled with counterparties for a total cash payment of approximately $750 million.

Estimated impairment losses on credit derivatives is a statutory accounting measurement reported in AAC’s statutory filings as “Estimated impairment losses on subsidiary guarantees and commitments.” An increase in estimated impairment losses is recorded as a reduction to statutory income and therefore reduces statutory surplus. At March 31, 2009, AAC reported statutory capital and surplus of $372.8 million and contingency reserves of $1,946.6 million. AAC has requested the approval of the Office of the Commissioner of Insurance of the State of Wisconsin (OCI) to release a substantial portion of its contingency reserves, however, there can be no assurance that the OCI will approve such release. The amount of contingency reserves released, if any, will increase AAC’s statutory capital and surplus by such amount.

At March 31, 2009, AAC reported total claims-paying resources of approximately $11.9 billion. Total claims-paying resources will be reduced by commutation and settlement payments related to the CDO of ABS portfolio, including the two transactions referred to above, and claims paid related to the direct financial guarantee portfolio since March 31, 2009. Total claims-paying resources is a term used by rating agencies and other analysts to quantify total resources available to pay claims in stress case scenarios and represents an aggregate of contingency reserves, capital and surplus, unearned premiums, losses and loss adjustment expenses, estimated impairment losses on credit derivatives and the present value of future installment premiums. Except for the present value of future installment premiums, each item is a statutory accounting measurement.

Under U.S. generally accepted accounting principles (GAAP), Ambac reports unrealized gains (losses) on credit derivative contracts which is impacted by market valuations of the CDO exposures and includes the effect of AAC’s own credit default swap spreads in the measurement. This mark-to-market valuation often differs significantly from the statutory measure of impairment discussed above. For the second quarter of 2009, Ambac expects to report a net unrealized gain of approximately $34 million for GAAP reporting purposes.