Financial Guarantee Insurance Contracts (Tables)

9 Months Ended

Sep. 30, 2014

Schedule Of Loss And Loss Expense Reserves And Subrogation Recoverable [Table Text Block]

Below are the components of the Loss and loss expense reserves liability and the Subrogation recoverable asset at September 30, 2014 and December 31, 2013:



	September 30, 2014
	Unpaid Claims				Present Value of Expected Net Cash Flows
Balance Sheet Line Item	Claims		Accrued Interest		Claims and Loss Expenses		Recoveries			Unearned Premium Revenue			Gross Loss and Loss Expense Reserves
Loss and loss expense reserves	$	3,319,248	$	289,865	$	4,324,634	$	(1,488,476	)	$	(441,797	)	$	6,003,474
Subrogation recoverable	695,918		69,955		138,738		(1,393,848		)	—			(489,237		)
Totals	$	4,015,166	$	359,820	$	4,463,372	$	(2,882,324	)	$	(441,797	)	$	5,514,237



	December 31, 2013
	Unpaid Claims				Present Value of Expected Net Cash Flows
Balance Sheet Line Item	Claims		Accrued Interest		Claims and Loss Expenses		Recoveries			Unearned Premium Revenue			Gross Loss and Loss Expense Reserves
Loss and loss expense reserves	$	3,374,224	$	—	$	4,895,277	$	(1,797,805	)	$	(502,984	)	$	5,968,712
Subrogation recoverable	530,091		—		135,610		(1,164,179		)	—			(498,478		)
Totals	$	3,904,315	$	—	$	5,030,887	$	(2,961,984	)	$	(502,984	)	$	5,470,234

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			Period from May 1			Period from January 1
	through			through			through
	September 30, 2014			September 30, 2013			April 30, 2013
Beginning premium receivable	$	1,453,021		$	1,531,631		$	1,620,621
Premium receipts	(100,646		)	(49,940		)	(48,296		)
Adjustments for changes in expected and contractual cash flows	(93,795		)	(70,900		)	(28,237		)
Accretion of premium receivable discount	29,644			17,232			14,740
Uncollectable premiums	(801		)	(14,800		)	(634		)
Other adjustments (including foreign exchange)	(20,791		)	22,787			(26,563		)
Ending premium receivable	$	1,266,632		$	1,436,010		$	1,531,631

Effect of Reinsurance on Premiums Written and Earned

The effect of reinsurance on premiums written and earned was as follows:



	Period from July 1 through					Period from July 1 through
	September 30, 2014					September 30, 2013
	Written			Earned		Written			Earned
Direct	$	(13,700	)	$	68,685	$	(34,380	)	$	73,997
Assumed	—			23		—			24
Ceded	(2,805		)	3,877		(4,017		)	3,072
Net premiums	$	(10,895	)	$	64,831	$	(30,363	)	$	70,949



	Successor Ambac										Predecessor Ambac
	Period from January 1 through					Period from May 1 through					Period from January 1 through
	September 30, 2014					September 30, 2013					April 30, 2013
	Written			Earned		Written			Earned		Written			Earned
Direct	$	(64,952	)	$	222,894	$	(68,461	)	$	136,029	$	(14,125	)	$	138,468
Assumed	—			114		—			40		—			32
Ceded	(7,316		)	10,617		(7,055		)	7,081		(1,098		)	8,500
Net premiums	$	(57,636	)	$	212,391	$	(61,406	)	$	128,988	$	(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 September 30, 2014:



	Future premiums to be collected ⁽¹⁾		Future premiums to be earned, net of reinsurance ⁽¹⁾
Three months ended:
December 31, 2014	$	30,343	$	44,483
Twelve months ended:
December 31, 2015	119,080		161,776
December 31, 2016	112,384		145,435
December 31, 2017	105,925		133,804
December 31, 2018	100,696		124,570
Five years ended:
December 31, 2023	444,832		514,973
December 31, 2028	352,220		360,470
December 31, 2033	224,150		209,229
December 31, 2038	85,447		88,255
December 31, 2043	28,756		27,365
December 31, 2048	11,920		12,028
December 31, 2053	2,253		3,324
December 31, 2058	31		84
Total	$	1,618,037	$	1,825,796

(1)

Future premiums to be collected are undiscounted and relate 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 or prepay 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. Future premiums to be earned also considers the use of contractual lives for many bond types which do not have homogeneous pools of underlying collateral, which results in higher unearned premium than if expected lives were considered. If those bonds types are retired early, premium earnings may be negative in the period of call or refinancing.

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			Period from May 1			Period from January 1
	through			through			through
	September 30, 2014			September 30, 2013			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	236			47,838			2,748
Claim and loss expense payments, net of subrogation and reinsurance	(4		)	(163		)	(58		)
Establishment of RMBS subrogation recoveries, net of reinsurance	—			(315		)	(159		)
Total current year	232			47,360			2,531
Prior years:
Change in previously established loss and loss expense reserves, gross of RMBS subrogation and net of reinsurance	(934		)	(322,165		)	(52,642		)
Claim and loss expense recoveries (payments), net of subrogation and reinsurance	67,736			(2,376		)	20,902
Change in previously established RMBS subrogation recoveries, net of reinsurance	(6,315		)	119,294			(12,596		)
Total prior years	60,487			(205,247		)	(44,336		)
Net change in loss and loss expense reserves	60,719			(157,887		)	(41,805		)
Net consolidation of certain VIEs	—			—			(498,409		)
Ending net loss and loss expense reserves	5,408,596			5,276,630			5,434,517
Add reinsurance on loss and loss expense reserves	105,641			123,425			138,155
Ending gross loss and loss expense reserves	$	5,514,237		$	5,400,055		$	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 September 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 September 30, 2014 and December 31, 2013 was 2.7% and 3.2%, respectively.



Surveillance Categories (at September 30, 2014)
	I/SL			IA			II			III			IV			V			Total
Number of policies	36			26			41			86			164			1			354
Remaining weighted-average contract period (in years)	8			12			15			20			12			6			15
Gross insured contractual payments outstanding:
Principal	$	898,817		$	478,130		$	3,101,558		$	5,516,840		$	10,463,229		$	47		$	20,458,621
Interest	344,788			208,929			1,974,807			3,051,291			2,255,635			19			7,835,469
Total	$	1,243,605		$	687,059		$	5,076,365		$	8,568,131		$	12,718,864		$	66		$	28,294,090
Gross undiscounted claim liability ⁽¹⁾	$	16,134		$	11,620		$	176,815		$	2,474,118		$	7,832,910		$	60		$	10,511,657
Discount, gross claim liability	(1,124		)	(1,043		)	(18,676		)	(869,612		)	(894,405		)	(2		)	(1,784,862		)
Gross claim liability before all subrogation and before reinsurance	$	15,010		$	10,577		$	158,139		$	1,604,506		$	6,938,505		$	58		$	8,726,795
Less:
Gross RMBS subrogation⁽²⁾	—			—			—			(6		)	(2,231,234		)	—			(2,231,240		)
Discount, RMBS subrogation	—			—			—			—			16,810			—			16,810
Discounted RMBS subrogation, before reinsurance	—			—			—			(6		)	(2,214,424		)	—			(2,214,430		)
Less:
Gross other subrogation⁽³⁾	—			—			(18,030		)	(112,998		)	(622,128		)	—			(753,156		)
Discount, other subrogation	—			—			7,035			29,133			49,094			—			85,262
Discounted other subrogation, before reinsurance	—			—			(10,995		)	(83,865		)	(573,034		)	—			(667,894		)
Gross claim liability, net of all subrogation and discounts, before reinsurance	$	15,010		$	10,577		$	147,144		$	1,520,635		$	4,151,047		$	58		$	5,844,471
Less: Unearned premium revenue	(10,604		)	(3,441		)	(76,255		)	(280,123		)	(71,374		)	—			(441,797		)
Plus: Loss expense reserves	109			1,754			2,420			9,152			98,128			—			111,563
Gross loss and loss expense reserves	$	4,515		$	8,890		$	73,309		$	1,249,664		$	4,177,801		$	58		$	5,514,237
Reinsurance recoverable reported on Balance Sheet ⁽⁴⁾	$	64		$	896		$	1,393		$	112,683		$	(9,525	)	$	—		$	105,511


(1)	Gross undiscounted claim liability includes unpaid claims, including accrued interest on Deferred Amounts, on policies allocated to the Segregated Account 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.


(4)	Reinsurance recoverable reported on Balance Sheet includes reinsurance recoverables of $105,641 related to future loss and loss expenses and $(130) related to previously presented loss and loss expenses.



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 revenue	(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, on policies allocated to the Segregated Account 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.


(4)	Reinsurance recoverable reported on Balance Sheet includes reinsurance recoverables of $122,357 related to future loss and loss expenses and $(1,108) related to previously presented loss and loss expenses.

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 September 30, 2014 and December 31, 2013, are as follows:



	September 30, 2014
Approach	Gross loss reserves before subrogation recoveries ⁽¹⁾		Subrogation recoveries ⁽²⁾⁽³⁾			Gross loss reserves after subrogation recoveries
Random samples ⁽⁴⁾	$	2,670,550	$	(2,214,430	)	$	456,120
Totals	$	2,670,550	(2,214,430		)	$	456,120



	December 31, 2013
Approach	Gross loss reserves before subrogation recoveries ⁽¹⁾		Subrogation recoveries ^(2) (3)		Gross loss reserves after subrogation recoveries
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 RMBS 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:
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	24,565			—			24,565
Changes in estimation approach ⁽¹⁾	1,272,532			(1,218,681		)	53,851
Impact of Sponsor Actions ⁽²⁾	(90,000		)	—			(90,000		)
All other changes ⁽³⁾	53,508			(34,092		)	19,416
Discounted RMBS subrogation (gross of reinsurance) at September 30, 2014	2,214,430			—			2,214,430



	Random sample			Adverse sample			Total
Successor Ambac:
Discounted RMBS subrogation (gross of reinsurance) at May 1, 2013	$	1,004,252		$	1,478,666		$	2,482,918
Changes recognized through September 30, 2013:
Additional transactions reviewed	2,426			—			2,426
Changes in estimation approach ⁽¹⁾	—			—			—
Impact of Sponsor Actions ⁽²⁾	—			—			—
All other changes ⁽³⁾	(48,910		)	(74,578		)	(123,488		)
Discounted RMBS subrogation (gross of reinsurance) at September 30, 2013	$	957,768		$	1,404,088		$	2,361,856



	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	$	33,238
2015	122,516
2016	110,532
2017	100,993
2018	93,711
Thereafter	1,014,022