Company Name: AMBAC Indemnity Corp.
Public Availability Date: 12-19-1996

INQUIRY LETTER

AMBAC INDEMNITY CORPORATION
ONE STATE STREET PLAZA
NEW YORK, NEW YORK 10004

December 13, 1996

Re: Rule 411 of Regulation C Under
the Securities Act of 1933

Office of Chief Counsel
Division of Corporation Finance
Securities and Exchange Commission
450 Fifth Street, N.W.
Mail Stop 3-3
Judiciary Plaza
Washington, DC 20549

Attn.: Michael H. Mitchell, Esq.

Dear Mr. Mitchell:

I am Vice President and Counsel of AMBAC Inc. ("AMBAC"), a New York Stock Exchange-listed holding company and Vice President and Assistant General Counsel of AMBAC Indemnity Corporation ("AIC"), a wholly-owned financial guaranty insurance subsidiary of AMBAC. I hereby request confirmation from the Division of Corporation Finance that it will not recommend enforcement action to the Securities and Exchange Commission (the "Commission") in the event that registration statements and prospectuses under the Securities Act of 1933, as amended (the "Securities Act"), relating to securities insured by AIC, incorporate AIC's financial statements by reference to the periodic filings with the Commission made by AIC's parent company, AMBAC. This letter replaces my letter to you dated November 6, 1996.

Background

AIC, a Wisconsin stock insurance company, licensed as a financial guaranty insurer in 50 states, the District of Columbia, Puerto Rico and Guam, is primarily engaged in insuring municipal and structured financial obligations. AIC is the successor of the oldest municipal bond insurance company, which wrote the first municipal bond insurance policy in 1971. Financial guarantee insurance written by AIC in both the primary and secondary markets guarantees payment when due of the principal of and interest on the obligation insured. AIC has been assigned triple-A claims-paying ability ratings, the highest ratings of Moody's Investors Service, Inc., Standard & Poor's Ratings Group, Fitch Investors Service, L.P. and Nippon Investors Service, Inc.

Current Practice

AIC insures securities sold in primary and secondary public offerings registered under the Securities Act. AIC's insurance policies are exempt from registration pursuant to Section 3(a)(8) of the Securities Act. Securities insured by AIC and not otherwise exempt from registration are registered under the Securities Act, and registration statements and prospectuses in respect of such securities are filed and distributed in accordance with the requirements of the Securities Act.

Registration statements and prospectuses for securities insured by AIC currently include a summary description of AIC in the prospectus with full financial statements meeting the requirements of Regulation S-X attached in an appendix to the prospectus. This information is extensive and including it in this manner is burdensome and time-consuming and adds to the cost associated with the production and distribution of the prospectuses.

Proposed Practice

AMBAC includes AIC's financial statements with its periodic reports with the Commission under the Securities Exchange Act of 1934, as amended (the "Exchange Act"). AIC proposes that registration statements and prospectuses under the Securities Act relating to securities insured by AIC incorporate AIC's financial statements by reference to AMBAC's Form 10-K and Form 10-Q (or Form 8-K, if appropriate) filings in lieu of physically including AIC's financial statements as appendices to such registration statements and prospectuses, provided that AIC's accountants furnish a consent to such incorporation by reference to be filed as an exhibit to each registration statement. This consent would be in the same form and manner as the consent used when incorporating by reference financial statements in accordance with the requirements of Form S-3. This practice would be consistent with the Commission's integrated disclosure policy and the positions taken by the Commission in two other no-action letters issued to financial guaranty insurers. See MBIA Insurance Corporation (pub. avail. Sept. 6, 1996) and Financial Security Assurance Inc. (pub. avail. July 16, 1993). Moreover, it would provide the same protection to investors as is provided in the current practice as well as reduce the cost and time required to execute insured transactions.

Enclosed for your reference are copies of the following documents:

1. The Annual Report on Form 10-K for the year ended December 31, 1995 (without exhibits) as filed by AMBAC with the Commission;

2. AIC's consolidated financial statements for the year ended December 31, 1995 (filed as Exhibit 99.02 in AMBAC's Current Report on Form 8-K/A dated March 15, 1996);

3. The Quarterly Report on Form 10-Q for the quarter ended September 30, 1996 (without exhibits) as filed by AMBAC with the Commission; and

4. AIC's consolidated (unaudited) financial statements for the quarter ended September 30, 1996 (filed as Exhibit 99.05 to Item No. 3).

In accordance with Securities Act Release No. 6269, enclosed herewith are the original and seven (7) additional copies of this letter. We previously supplied you with copies of the enclosures and the no-action letters referenced herein. Please do not hesitate to call me at (212) 208-3355 or Richard B. Gross, Senior Vice President and General Counsel of AMBAC Inc., at (212) 208-3353 if you have any questions regarding this request or require any additional information in connection with the above matters.

Very truly yours,

Anne G. Gill
Vice President and
Assistant General Counsel

Enclosures

copy to:

Richard B. Gross, Senior Vice President
and General Counsel
AMBAC Inc.STAFF REPLY LETTER

December 19, 1996

RESPONSE OF THE OFFICE OF CHIEF COUNSEL
DIVISION OF CORPORATION FINANCE

Re: AMBAC Indemnity Corporation ("AIC")
Incoming letter dated December 13, 1996

Based on the facts presented, the Division will not raise any objection if, under the Commission's incorporated by reference regulations, Rule 411 of Regulation C under the Securities Act of 1933 and Item 10(d) of Regulation S-K, AIC's financial statements filed as exhibits as its parent's Securities Exchange Act of 1934 reports are incorporated by reference into another issuer's registration statement on Form S-3. In the staff's view, this position is limited solely to the presentation of AIC financial statements in an issuer's prospectus and does not affect an issuer's disclosure obligations under the federal securities laws. In this regard, Item 11 of Form S-3, relating to material changes, would apply to information concerning AIC. Further, if an issuer elects to use the incorporation by reference procedures for AIC's financial statements, the Commission's rules applicable to documents incorporated by reference into Form S-3, including the delivery and liability undertakings set forth in Items 502 and 512 of Regulation S-K, respectively, would apply to AIC's documents.

Because this position is based on the representations made to the Division, it should be noted that any different facts may result in another conclusion.

Sincerely,

Michael H. Mitchell
Special Counsel