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Financial Guarantee Insurance Contracts (Tables)
 6 Months Ended
Jun. 30, 2014
Insurance [Line Items]  
Summary of Gross Premium Receivable Roll-Forward (Direct and Assumed Contracts)
Below is the gross premium receivable roll-forward (direct and assumed contracts) for the affected periods:
 
Successor Ambac
 
 
Predecessor Ambac
 
Period from January 1
through June 30, 2014
Period from May 1
through June 30, 2013
 
 
Period from January 1
through April 30, 2013
Beginning premium receivable
$
1,453,021

$
1,531,631

 
 
$
1,620,621

Premium receipts
(61,876
)
(19,352
)
 
 
(48,296
)
Adjustments for changes in expected and contractual cash flows
(70,464
)
(40,898
)
 
 
(28,237
)
Accretion of premium receivable discount
20,247

7,359

 
 
14,740

Uncollectable premiums
(1,035
)
(543
)
 
 
(634
)
Other adjustments (including foreign exchange)
16,469

(13,299
)
 
 
(26,563
)
Ending premium receivable
$
1,356,362

$
1,464,898

 
 
$
1,531,631
Effect of Reinsurance on Premiums Written and Earned
The effect of reinsurance on premiums written and earned was as follows:
 
 
Successor Ambac
 
 
Predecessor Ambac
 
Period from April 1 through June 30, 2014
 
Period from May 1 through June 30, 2013
 
 
Period from April 1 through April 30, 2013
 
Written
 
Earned
 
Written
 
Earned
 
 
Written
 
Earned
Direct
$
(45,486
)
 
$
68,025

 
$
(34,081
)
 
$
62,033

 
 
$
(10,595
)
 
$
31,388

Assumed
—

 
23

 
—

 
16

 
 
—

 
8

Ceded
(4,967
)
 
3,035

 
(3,038
)
 
4,010

 
 
(84
)
 
1,652

Net premiums
$
(40,519
)
 
$
65,013

 
$
(31,043
)
 
$
58,039

 
 
$
(10,511
)
 
$
29,744

 
Successor Ambac
 
 
Predecessor Ambac
 
Period from January 1 through June 30, 2014
 
Period from May 1 through June 30, 2013
 
 
Period from January 1 through April 30, 2013
 
Written
 
Earned
 
Written
 
Earned
 
 
Written
 
Earned
Direct
(51,252
)
 
$
154,209

 
$
(34,081
)
 
$
62,033

 
 
$
(14,125
)
 
$
138,468

Assumed
—

 
91

 
—

 
16

 
 
—

 
32

Ceded
(4,511
)
 
6,740

 
(3,038
)
 
4,010

 
 
(1,098
)
 
8,500

Net premiums
$
(46,741
)
 
$
147,560

 
$
(31,043
)
 
$
58,039

 
 
$
(13,027
)
 
$
130,000
Summarized Future Gross Undiscounted Premiums Expected to be Collected and Future Expected Premiums Earned, Net of Reinsurance
The table below summarizes the future gross undiscounted premiums to be collected, and future premiums earned, net of reinsurance at June 30, 2014:
 
 
Future premiums
to be collected (1)
 
Future expected
premiums to
be earned, net of reinsurance (1)
 
 
Three months ended:
 
 
 
September 30, 2014
39,988

 
45,841

December 31, 2014
31,037

 
44,006

Twelve months ended:
 
 
 
December 31, 2015
123,705

 
163,207

December 31, 2016
116,974

 
148,927

December 31, 2017
110,511

 
137,708

December 31, 2018
105,182

 
128,484

Five years ended:
 
 
 
December 31, 2023
466,339

 
532,361

December 31, 2028
370,487

 
373,862

December 31, 2033
237,081

 
218,488

December 31, 2038
92,686

 
95,496

December 31, 2043
30,826

 
32,182

December 31, 2048
12,538

 
12,064

December 31, 2053
2,252

 
3,324

December 31, 2058
31

 
84

Total
$
1,739,637

 
$
1,936,034

 
(1)
Future premiums to be collected relates to the discounted premium receivable asset recorded on Ambac's balance sheet. Future premiums to be earned, net of reinsurance relate to the unearned premium liability and deferred ceded premium asset recorded on Ambac’s balance sheet. The use of contractual lives for many bond types which do not have homogeneous pools of underlying collateral is required in the calculation of the premium receivable as described above, which results in a higher premium receivable balance than if expected lives were considered. If installment paying policies are retired early, premiums reflected in the premium receivable asset and amounts reported in the above table for such policies may not be collected in the future.
Summary of Loss Reserve Roll-Forward, Net of Subrogation Recoverable and Reinsurance
Below is the loss and loss expense reserve roll-forward, net of subrogation recoverable and reinsurance, for the affected periods:
 
Successor Ambac
 
 
Predecessor Ambac
 
Period from January 1
through June 30, 2014
Period from May 1
through June 30, 2013
 
 
Period from
January 1 through
April 30, 2013
Beginning gross loss and loss expense reserves
$
5,470,234

$
5,572,672

 
 
$
6,122,140

Less reinsurance on loss and loss expense reserves
122,357

138,155

 
 
$
147,409

Beginning balance of net loss and loss expense reserves
$
5,347,877

$
5,434,517

 
 
$
5,974,731

Changes in the loss and loss expense reserves due to:


 
 

Current year:


 
 

Establishment of new loss and loss expense reserves, gross of RMBS subrogation and net of reinsurance
209

2,416

 
 
2,748

Claim and loss expense payments, net of subrogation and reinsurance
(3
)
(37
)
 
 
(58
)
Establishment of RMBS subrogation recoveries, net of reinsurance
—

(320
)
 
 
(159
)
Total current year
206

2,059

 
 
2,531

Prior years:


 
 

Change in previously established loss and loss expense reserves, gross of RMBS subrogation and net of reinsurance
131,124

(128,680
)
 
 
(52,642
)
Claim and loss expense recoveries, net of subrogation and reinsurance
73,347

3,793

 
 
20,902

Change in previously established RMBS subrogation recoveries, net of reinsurance
(74,398
)
87,361

 
 
(12,596
)
Total prior years
130,073

(37,526
)
 
 
(44,336
)
Net change in loss and loss expense reserves
130,279

(35,467
)
 
 
(41,805
)
Net consolidation of certain VIEs
—

—

 
 
(498,409
)
Ending net loss and loss expense reserves
$
5,478,156

$
5,399,050

 
 
$
5,434,517

Add reinsurance on loss and loss expense reserves
110,015

142,512

 
 
138,155

Ending gross loss and loss expense reserves
$
5,588,171

$
5,541,562

 
 
$
5,572,672
Summary of Information Related to Policies Currently Included in Ambac's Loss Reserves or Subrogation Recoverable
The tables below summarize information related to policies currently included in Ambac’s loss and loss expense reserves or subrogation recoverable at June 30, 2014 and December 31, 2013. Net par exposures include capital appreciation bonds which are reported at the par amount at the time of issuance of the insurance policy. The weighted average risk-free rate used to discount loss reserves at June 30, 2014 and December 31, 2013 was 2.7% and 3.2%, respectively.
Surveillance Categories (at June 30, 2014)
 
I/SL
 
IA
 
II
 
III
 
IV
 
V
 
Total
Number of policies
29

 
24

 
49

 
88

 
172

 
1

 
363

Remaining weighted-average contract period (in years)
12

 
13

 
16

 
19

 
12

 
6

 
15

Gross insured contractual payments outstanding:
 
 
 
 
 
 
 
 
 
 
 
 
 
Principal
$
815,549

 
$
479,218

 
$
3,517,374

 
$
5,849,928

 
$
10,818,754

 
$
47

 
$
21,480,870

Interest
428,964

 
222,412

 
2,298,152

 
2,873,112

 
2,427,376

 
19

 
8,250,035

Total
$
1,244,513

 
$
701,630

 
$
5,815,526

 
$
8,723,040

 
$
13,246,130

 
$
66

 
$
29,730,905

Gross undiscounted claim liability (1)
$
5,477

 
$
12,134

 
$
189,385

 
$
2,752,311

 
$
7,958,481

 
$
62

 
$
10,917,850

Discount, gross claim liability
(700
)
 
(1,091
)
 
(20,747
)
 
(964,005
)
 
(943,887
)
 
(3
)
 
(1,930,433
)
Gross claim liability before all subrogation and before reinsurance
$
4,777

 
$
11,043

 
$
168,638

 
$
1,788,306

 
$
7,014,594

 
$
59

 
$
8,987,417

Less:
 
 
 
 
 
 
 
 
 
 
 
 
 
Gross RMBS subrogation (2)
—

 
—

 
—

 
(2,154
)
 
(2,298,331
)
 
—

 
(2,300,485
)
Discount, RMBS subrogation
—

 
—

 
—

 
14

 
16,047

 
—

 
16,061

Discounted RMBS subrogation, before reinsurance
—

 
—

 
—

 
(2,140
)
 
(2,282,284
)
 
—

 
(2,284,424
)
Less:
 
 
 
 
 
 
 
 
 
 
 
 
 
Gross other subrogation (3)
—

 
—

 
(17,558
)
 
(110,818
)
 
(698,439
)
 
—

 
(826,815
)
Discount, other subrogation
—

 
—

 
7,045

 
29,735

 
54,031

 
—

 
90,811

Discounted other subrogation, before reinsurance
—

 
—

 
(10,513
)
 
(81,083
)
 
(644,408
)
 
—

 
(736,004
)
Gross claim liability, net of all subrogation and discounts, before reinsurance
$
4,777

 
$
11,043

 
$
158,125

 
$
1,705,083

 
$
4,087,902

 
$
59

 
$
5,966,989

Less: Unearned premium reserves
(3,198
)
 
(3,925
)
 
(90,254
)
 
(297,274
)
 
(81,346
)
 
—

 
(475,997
)
Plus: Loss expense reserves
—

 
1,824

 
(799
)
 
4,488

 
91,666

 
—

 
97,179

Gross loss and loss expense reserves
$
1,579

 
$
8,942

 
$
67,072

 
$
1,412,297

 
$
4,098,222

 
$
59

 
$
5,588,171

Reinsurance recoverable reported on Balance Sheet
$
55

 
$
895

 
$
1,956

 
$
115,403

 
$
(9,054
)
 
$
—

 
$
109,255

 
(1)
Gross undiscounted claim liability includes unpaid claims, including accrued interest on Deferred Amounts, and Ambac's estimate of expected future claims.
(2)
RMBS subrogation represents Ambac’s estimate of subrogation recoveries from RMBS transaction sponsors for representation and warranty breaches.
(3)
Other subrogation represents subrogation, including subrogation from RMBS transactions, other than subrogation as defined in (2) above.



Surveillance Categories (at December 31, 2013)
 
I/SL
 
IA
 
II
 
III
 
IV
 
V
 
Total
Number of policies
18

 
23

 
52

 
76

 
169

 
1

 
339

Remaining weighted-average contract period (in years)
13

 
19

 
17

 
19

 
11

 
6

 
14

Gross insured contractual payments outstanding:
 
 
 
 
 
 
 
 
 
 
 
 
 
Principal
$
834,708

 
$
1,125,284

 
$
3,464,420

 
$
5,597,387

 
$
11,184,943

 
$
47

 
$
22,206,789

Interest
506,903

 
871,751

 
2,130,271

 
2,331,222

 
2,556,968

 
18

 
8,397,133

Total
$
1,341,611

 
$
1,997,035

 
$
5,594,691

 
$
7,928,609

 
$
13,741,911

 
$
65

 
$
30,603,922

Gross undiscounted claim liability (1)
$
7,447

 
$
54,398

 
$
221,321

 
$
3,029,891

 
$
7,963,137

 
$
65

 
$
11,276,259

Discount, gross claim liability
(1,225
)
 
(6,726
)
 
(32,630
)
 
(1,299,032
)
 
(1,112,829
)
 
(6
)
 
(2,452,448
)
Gross claim liability before all subrogation and before reinsurance
$
6,222

 
$
47,672

 
$
188,691

 
$
1,730,859

 
$
6,850,308

 
$
59

 
$
8,823,811

Less:
 
 
 
 
 
 
 
 
 
 
 
 
 
Gross RMBS subrogation (2)
—

 
—

 
—

 
(4,516
)
 
(2,211,333
)
 
—

 
(2,215,849
)
Discount, RMBS subrogation
—

 
—

 
—

 
15

 
9,236

 
—

 
9,251

Discounted RMBS subrogation, before reinsurance
—

 
—

 
—

 
(4,501
)
 
(2,202,097
)
 
—

 
(2,206,598
)
Less:
 
 
 
 
 
 
 
 
 
 
 
 
 
Gross other subrogation (3)
—

 
—

 
(20,367
)
 
(116,145
)
 
(710,187
)
 
—

 
(846,699
)
Discount, other subrogation
—

 
—

 
9,522

 
36,125

 
45,666

 
—

 
91,313

Discounted other subrogation, before reinsurance
—

 
—

 
(10,845
)
 
(80,020
)
 
(664,521
)
 
—

 
(755,386
)
Gross claim liability, net of all subrogation and discounts, before reinsurance
$
6,222

 
$
47,672

 
$
177,846

 
$
1,646,338

 
$
3,983,690

 
$
59

 
$
5,861,827

Less: Unearned premium reserves
(4,060
)
 
(22,901
)
 
(95,550
)
 
(280,245
)
 
(100,228
)
 
—

 
(502,984
)
Plus: Loss expense reserves
—

 
11

 
2,257

 
1,658

 
107,465

 
—

 
111,391

Gross loss and loss expense reserves
$
2,162

 
$
24,782

 
$
84,553

 
$
1,367,751

 
$
3,990,927

 
$
59

 
$
5,470,234

Reinsurance recoverable reported on Balance Sheet
$
146

 
$
2,271

 
$
2,273

 
$
119,795

 
$
(3,236
)
 
$
—

 
$
121,249

(1)
Gross undiscounted claim liability includes unpaid claims, including accrued interest on Deferred Amounts, and Ambac's estimate of expected future claims.
(2)
RMBS subrogation represents Ambac’s estimate of subrogation recoveries from RMBS transaction sponsors for representation and warranty breaches.
(3)
Other subrogation represents subrogation, including subrogation from RMBS transactions, other than subrogation as defined in (2) above.
Summary of Balance of Subrogation Recoveries and Related Claim Liabilities, by Estimation Approach
The balance of RMBS subrogation recoveries and the related claim liabilities, by estimation approach, at June 30, 2014 and December 31, 2013, are as follows:
 
June 30, 2014
 
Gross loss reserves
before subrogation recoveries (1)
 
Subrogation recoveries (2)  (3)
 
Gross loss reserves
after subrogation recoveries
Approach
 
 
Random samples (4)
$
2,736,871

 
$
(2,284,424
)
 
$
452,447

Totals
$
2,736,871

 
$
(2,284,424
)
 
$
452,447

 
 
December 31, 2013
 
Gross loss reserves
before subrogation recoveries (1)
 
Subrogation recoveries (2) (3)
 
Gross loss reserves
after subrogation recoveries
Approach
 
 
Adverse samples
$
2,084,911

 
$
(1,252,773
)
 
$
832,138

Random samples (4)
1,078,861

 
(953,825
)
 
125,036

Totals
$
3,163,772

 
$
(2,206,598
)
 
$
957,174

 
(1)
Includes unpaid claims, including accrued interest on Deferred Amounts, on policies allocated to the Segregated Account.
(2)
The amount of recorded subrogation recoveries related to each securitization is limited to ever-to-date paid and unpaid losses plus the present value of expected cash flows for each policy. To the extent losses have been paid but not yet fully recovered, the recorded amount of RMBS subrogation recoveries may exceed the sum of the unpaid claims and the present value of expected cash flows for a given policy. The net cash inflow for these policies is recorded as a “Subrogation recoverable” asset. For those transactions where the subrogation recovery is less than the sum of unpaid claims and the present value of expected cash flows, the net cash outflow for these policies is recorded as a “Loss and loss expense reserves” liability.
(3)
The sponsor’s repurchase obligation may differ depending on the terms of the particular transaction and the status of the specific loan, such as whether it is performing or has been liquidated or charged off. The estimated subrogation recovery for these transactions is based primarily on loan level data provided through trustee reports received in the normal course of our surveillance activities or provided by the sponsor. While this data may not include all the components of the sponsor’s contractual repurchase obligation we believe it is the best information available to estimate the subrogation recovery.
(4)
From time to time R&W subrogation may include estimates of potential sponsor settlements that are currently in negotiation but have not been subject to a sampling approach. However, such estimates are not material to Ambac’s financial results and therefore are included in the Random Sample section of this table.
Summary of Rollforward of RMBS Subrogation, by Estimation Approach
Below is the rollforward of RMBS subrogation, by estimation approach, for the affected periods:
 
Random
sample
 
Adverse
sample
 
Total
Successor Ambac:
 
 
 
 
 
Rollforward:
 
 
 
 
 
Discounted RMBS subrogation (gross of reinsurance) at January 1, 2014
$
953,825

 
$
1,252,773

 
$
2,206,598

Changes recognized in 2014:
 
 
 
 
 
Additional transactions reviewed
24,510

 
—

 
24,510

Changes in estimation approach (1)
1,341,917

 
(1,218,681
)
 
123,236

Impact of Sponsor Actions (2)
(90,000
)
 
—

 
(90,000
)
All other changes (3) 
54,172

 
(34,092
)
 
20,080

Discounted RMBS subrogation (gross of reinsurance) at June 30, 2014
$
2,284,424

 
$
—

 
$
2,284,424


 
Random
sample
 
Adverse
sample
 
Total
Successor Ambac:
 
 
 
 
 
Rollforward:
 
 
 
 
 
Discounted RMBS subrogation (gross of reinsurance) at May 1, 2013
$
1,004,252

 
$
1,478,666

 
$
2,482,918

Changes recognized through June 30, 2013:
 
 
 
 
 
Additional transactions reviewed
—

 
—

 
—

Changes in estimation approach (1)
—

 
—

 
—

Impact of Sponsor Actions (2)
(2,489
)
 
—

 
(2,489
)
All other changes (3) 
(43,158
)
 
(42,338
)
 
(85,496
)
Discounted RMBS subrogation (gross of reinsurance) at June 30, 2013
$
958,605

 
$
1,436,328

 
$
2,394,933


 
Random
sample
 
Adverse
sample
 
Total
Predecessor Ambac
 
 
 
 
 
Discounted RMBS subrogation (gross of reinsurance) at January 1, 2013
$
1,080,408

 
$
1,442,817

 
$
2,523,225

Changes recognized through April 30, 2013:


 


 


Additional transactions reviewed
—

 
—

 
—

Changes in estimation approach (1)
—

 
—

 
—

Impact of sponsor actions (2)
(54,195
)
 
—

 
(54,195
)
All other changes (3) 
(21,961
)
 
35,849

 
13,888

Discounted RMBS subrogation (gross of reinsurance) at April 30, 2013
$
1,004,252

 
$
1,478,666

 
$
2,482,918

 
(1)
Represents estimated subrogation for those transactions previously evaluated using the Adverse Sample approach, which are evaluated using a Random Sample approach beginning June 30, 2014. The amounts shown in the Random and Adverse Sample columns are different as a result of the differences in estimation approaches.
(2)
Sponsor actions include loan repurchases, direct payments to Ambac, and other contributions from sponsors.
(3)
All other changes which may impact RMBS subrogation recoveries include changes in actual or projected collateral performance, changes in the creditworthiness of a sponsor, and/or the projected timing of recoveries. All other changes may also include estimates of potential sponsor settlements that are currently in negotiation but have not been subject to a sampling approach. However, such estimates are not material to Ambac’s financial results and therefore are included in the Random Sample column of this table.
Insurance Intangible Asset [Member]
  
Insurance [Line Items]  
Schedule of Finite-Lived Intangible Assets, Future Amortization Expense [Table Text Block]
The estimated future amortization expense for the insurance intangible asset is as follows:
2014
$
66,545

2015
121,914

2016
110,968

2017
102,293

2018
95,522

Thereafter
1,052,142