NU Online News Service, April 25, 1:32 p.m. EDT

Ambac Assurance's segregated account will not begin to make claims payments beginning in May because regulatory officials are not comfortable with the company's ability to pay claims, officials say.

The news came in separate statements issued late Friday by the company and the rehabilitator, the Wisconsin Department of Insurance. Both statements said the Ambac Assurance Corp. segregated account will not begin making payments on claims beginning in May as it originally intended.

"The rehabilitator is not satisfied that the conditions necessary for the plan to become effective have all been satisfied, and believes that this decision is in the best interest of the policyholders," according to a statement.

For its part, Ambac issued a separate statement saying that after a discussion with the special deputy commission for the segregated account that it no longer expected to beginning in May.

The company went on to say that "there can be no assurances as to when policy claim payments will resume."

A spokesman for the Wisconsin Department of Insurance rehabilitator declined to comment further.

In an e-mail, Michael E. Fitzgerald, managing director, investor relations for Ambac says Wisconsin regulators "did not feel that the conditions to the effectiveness of the plan had been entirely satisfied, and as of this time, they have not provided the market with additional, more detailed, information. Our announcement on Friday came in response to their decision and we will provide such additional information to the market as it becomes available."

The announcement of the May payments was made a month ago. Ambac, which is currently in bankruptcy, established the segregated account to deal with the company's liabilities stemming from the credit derivatives, residential mortgage-backed securities and other structured finance transactions totaling more than $57 billion.

Ambac Assurance Corp. is domiciled in Wisconsin and is a subsidiary of Amabc Financial Group which is based in New York.

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Ambac Segregated Account Not Making Claims Payments

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