Schedule II - Condensed Financial Information of Registrant (Parent Company Only) (Notes)

12 Months Ended

Dec. 31, 2014

Condensed Financial Information of Parent Company Only Disclosure [Abstract]

Condensed Financial Information of Parent Company Only Disclosure

AMBAC FINANCIAL GROUP, INC. AND SUBSIDIARIES

SCHEDULE II— CONDENSED FINANCIAL INFORMATION

OF REGISTRANT (PARENT COMPANY ONLY)

Condensed Balance Sheets

	December 31,
($ in Thousands, except share data)	2014			2013
Assets:
Fixed income securities, at fair value (amortized cost of $234,029 in 2014 and $28,149 in 2013)	$	234,310		$	28,145
Junior surplus note of Ambac Assurance Segregated Account	—			177,194
Short-term investments, at cost (approximates fair value)	22,936			8,319
Other investments	21,003			—
Total investments	278,249			213,658
Cash	141			43
Investment in subsidiaries	1,116,044			473,215
Investment income due and accrued	54			11,959
Other assets	5,770			4,936
Total assets	$	1,400,258		$	703,811
Liabilities and Stockholders' Equity:
Liabilities:
Current taxes	221			—
Accounts payable and other liabilities	932			828
Total liabilities	1,153			828
Stockholders’ equity:
Preferred stock, par value $0.01 per share; authorized shares—20,000,000; issued and outstanding shares—none	—			—
Common stock, par value $0.01 per share; authorized shares—130,000,000; issued and outstanding shares—45,005,932 at December 31, 2014 and 45,003,461 at December 31, 2013	450			450
Additional paid-in capital	189,138			185,672
Accumulated other comprehensive income	220,283			11,661
Retained earnings	989,290			505,219
Common stock held in treasury at cost, 2,459 shares at December 31, 2014 and 937 shares at December 31, 2013	(56		)	(19		)
Total Ambac Financial Group, Inc. stockholders’ equity	1,399,105			702,983
Total liabilities and stockholders’ equity	$	1,400,258		$	703,811

The condensed financial statements should be read in conjunction with the consolidated financial statements and notes thereto and the accompanying notes.

AMBAC FINANCIAL GROUP, INC. AND SUBSIDIARIES

SCHEDULE II— CONDENSED FINANCIAL INFORMATION

OF REGISTRANT (PARENT COMPANY ONLY)

Condensed Statement of Comprehensive Income (Loss)

	Successor Ambac						Predecessor Ambac
				Period from May 1			Period from January 1
	Year Ended			through			through			Year Ended
($ in Thousands)	December 31, 2014			December 31, 2013			April 30, 2013			December 31, 2012
Revenues:
Investment income	$	25,147		$	22,227		$	39		$	221
Other income	—			197,122			—			758
Net realized gains (losses)	(46		)	2			—			—
Total revenues	25,101			219,351			39			979
Expenses:
Operating expenses	6,458			3,018			539			(151		)
Total expenses	6,458			3,018			539			(151		)
Income (loss) before income taxes, reorganization costs and equity in undistributed net loss of subsidiaries	18,643			216,333			(500		)	1,130
Reorganization items	211			493			(2,745,180		)	7,215
Income (loss) before income taxes and equity in undistributed net loss of subsidiaries	18,432			215,840			2,744,680			(6,085		)
Federal income tax benefit	221			—			(703		)	(136		)
Income (loss) before equity in undistributed net income (loss) of subsidiaries	18,211			215,840			2,745,383			(5,949		)
Equity in undistributed net income (loss) of subsidiaries	465,860			289,379			603,666			(250,729		)
Net income (loss)	$	484,071		$	505,219		$	3,349,049		$	(256,678	)
Other comprehensive income, after tax:
Net income (loss)	$	484,071		$	505,219		$	3,349,049		$	(256,678	)
Unrealized gains (losses) on securities, net of deferred income taxes of $0	252,603			(41,910		)	175,347			166,252
Gain (loss) gain on foreign currency translation, net of deferred income taxes of $0.	(43,165		)	42,724			(657		)	(334		)
Changes to postretirement benefit, net of tax	(816		)	10,847			185			(3,792		)
Total other comprehensive income	208,622			11,661			174,875			162,126
Total comprehensive income (loss) attributable to Ambac Financial Group, Inc.	$	692,693		$	516,880		$	3,523,924		$	(94,552	)

The condensed financial statements should be read in conjunction with the consolidated financial statements and notes thereto and the accompanying notes.

AMBAC FINANCIAL GROUP, INC. AND SUBSIDIARIES

SCHEDULE II— CONDENSED FINANCIAL INFORMATION

OF REGISTRANT (PARENT COMPANY ONLY)

Condensed Statement of Stockholders' Equity

($ in Thousands)	Total			Retained Earnings			Accumulated Other Comprehensive Income			Preferred Stock		Common Stock			Additional Paid-in Capital			Common Stock Held in Treasury, at Cost
Successor Ambac
Balance at January 1, 2014	$	702,983		$	505,219		$	11,661		$	—	$	450		$	185,672		$	(19	)
Total comprehensive income	692,693			484,071			208,622			—		—			—			—
Stock based compensation	3,450			—			—			—		—			3,450			—
Shares issued under equity plan	(37		)	—			—			—		—			—			(37		)
Warrants exercised	16			—			—			—		—			16			—
Balance at December 31, 2014	$	1,399,105		$	989,290		$	220,283		$	—	$	450		$	189,138		$	(56	)
Successor Ambac
Balance at May 1, 2013	$	—		$	—		$	—		$	—	$	—		$	—		$	—
Issuance of new equity in connection with emergence from Chapter 11	185,000			—			—			—		450			184,550			—
Balance at May 1, 2013	185,000			—			—			—		450			184,550			—
Total comprehensive income	516,880			505,219			11,661			—		—			—			—
Stock based compensation	1,106			—			—			—		—			1,106			—
Cost of shares acquired	(19		)	—			—			—		—			—			(19		)
Warrants exercised	16			—			—			—		—			16			—
Balance at December 31, 2013	$	702,983		$	505,219		$	11,661		$	—	$	450		$	185,672		$	(19	)
Predecessor Ambac
Balance at January 1, 2013	$	(3,907,527	)	$	(6,297,264	)	$	625,385		$	—	$	3,080		$	2,172,027		$	(410,755	)
Total comprehensive income	3,523,924			3,349,049			174,875			—		—			—			—
Stock-based compensation	(60		)	(60		)	—			—		—			—			—
Shares issued under equity plans	60			—			—			—		—			—			60
Elimination of Predecessor Ambac Shareholder equity accounts	383,603			2,948,275			(800,260		)	—		(3,080		)	(2,172,027		)	410,695
Balance at April 30, 2013	$	—		$	—		$	—		$	—	$	—		$	—		$	—
Predecessor Ambac
Balance at January 1, 2012	$	(3,812,975	)	$	(6,039,922	)	$	463,259		$	—	$	3,080		$	2,172,027		$	(411,419	)
Total comprehensive loss	(94,552		)	(256,678		)	162,126			—		—			—			—
Stock-based compensation	(664		)	(664		)	—			—		—			—			—
Shares issued under equity plans	664			—			—			—		—			—			664
Balance at December 31, 2012	$	(3,907,527	)	$	(6,297,264	)	$	625,385		$	—	$	3,080		$	2,172,027		$	(410,755	)

The condensed financial statements should be read in conjunction with the consolidated financial statements and notes thereto and the accompanying notes.

AMBAC FINANCIAL GROUP, INC. AND SUBSIDIARIES

SCHEDULE II— CONDENSED FINANCIAL INFORMATION

OF REGISTRANT (PARENT COMPANY ONLY)

Condensed Statements of Cash Flow

	Successor Ambac						Predecessor Ambac
				Period from May 1			Period from January 1
	Year Ended			through			through			Year Ended
($ in Thousands)	December 31, 2014			December 31, 2013			April 30, 2013			December 31, 2012
Cash flows from operating activities:
Net income (loss)	$	484,071		$	505,219		$	3,349,049		$	(256,678	)
Adjustments to reconcile net income loss to net cash used in operating activities:
Equity in undistributed net (income) loss of non-debtor subsidiaries	(465,860		)	(289,379		)	(603,666		)	250,729
Reorganization items	211			493			(2,745,180		)	7,215
Junior surplus notes received from Ambac Assurance Corporation Segregated Account	—			(167,020		)	—			—
Net realized gains	46			(2		)	—			—
Increase (decrease) in current income taxes payable	221			—			(1,900		)	—
Share-based compensation	3,450			1,106			—			—
Investment income due and accrued	11,905			(11,942		)	(6		)	9
(Increase) decrease in other assets	(834		)	(1,677		)	3,182			21
Other, net	(36,624		)	(28,030		)	(4,107		)	(6,334		)
Net cash provided by (used in) operating activities	(3,414		)	8,768			(2,628		)	(5,038		)
Cash flows from investing activities:
Proceeds from matured bonds	65,032			14,355			—			—
Purchases of bonds	(271,181		)	(42,506		)	—			—
Change in short-term investments	(14,617		)	19,360			2,637			4,583
Net cash (used in) provided by investing activities	(220,766		)	(8,791		)	2,637			4,583
Cash flows from financing activities:
Proceeds from the sale of Junior Surplus Notes of the Segregated Account	224,262			—			—			—
Proceeds from warrant exercise	16			16			—			—
Net cash provided by financing activities	224,278			16			—			—
Net cash flow	98			(7		)	9			(455		)
Cash at beginning of period	43			50			41			496
Cash at end of period	$	141		$	43		$	50		$	41
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Income taxes	$	—		$	—		$	1,900		$	—
Cash payments related to reorganization items:
Professional fees paid for services rendered in connection with the Chapter 11 proceeding	$	272		$	15,546		$	3,860		$	9,141

The condensed financial statements should be read in conjunction with the consolidated financial statements and notes thereto and the accompanying notes.

AMBAC FINANCIAL GROUP, INC. AND SUBSIDIARIES

SCHEDULE II— CONDENSED FINANCIAL INFORMATION

OF REGISTRANT (PARENT COMPANY ONLY)

Notes to Condensed Financial Information

(Dollar Amounts in Thousands)

The condensed financial information of Ambac Financial Group, Inc. (“Ambac” or the “Company”) as of December 31, 2014 and 2013 and for the years ended December 31, 2014, 2013 and 2012, should be read in conjunction with the consolidated financial statements of Ambac Financial Group, Inc. and Subsidiaries and the notes thereto. Investments in subsidiaries are accounted for using the equity method of accounting.

Ambac, headquartered in New York City, is a financial services holding company incorporated in the state of Delaware on April 29, 1991. On May 1, 2013 (the “Effective Date”), Ambac emerged from Chapter 11 bankruptcy protection when the Second Modified Fifth Amended Plan of Reorganization of Ambac Financial Group, Inc. (the “Reorganization Plan”) became effective. On December 26, 2013, the United States Bankruptcy Court for the Southern District of New York (the “Bankruptcy Court”) entered an order of final decree closing Ambac’s Chapter 11 case. Ambac filed a voluntary petition for relief under Chapter 11 of the United States Bankruptcy Code in the Bankruptcy Court on November 8, 2010 as a result of losses incurred since the beginning of the financial crisis in 2007.

Chapter 11 Reorganization of Ambac:

The Reorganization Plan reflects a resolution of certain issues (the “Amended Plan Settlement”) among the Company, the statutory committee of creditors appointed by the United States Trustee on November 17, 2010 (the “Creditors’ Committee”), Ambac Assurance, the Segregated Account and OCI related to (i) the net operating loss carry forwards (“NOLs”) of the consolidated tax group of which the Company is the parent and Ambac Assurance is a member, (ii) certain tax refunds received in respect thereof and (iii) the sharing of expenses between the Company and Ambac Assurance. The terms of the Amended Plan Settlement are memorialized in that certain Mediation Agreement dated September 21, 2011 (the “Mediation Agreement”) among such parties. In accordance with the Amended Plan Settlement, the Company shall use its best efforts to preserve the use of NOLs as contemplated by the Amended Plan Settlement.

Pursuant to the Amended Plan Settlement, (i) the Company, Ambac Assurance and certain affiliates entered into an amended and restated tax sharing agreement (the “Amended TSA”), (ii) the Company, Ambac Assurance and certain affiliates entered into an expense sharing and cost allocation agreement (the “Cost Allocation Agreement”) and (iii) the Company, Ambac Assurance, the Segregated Account and OCI entered into an amendment of the Cooperation Agreement (the “Cooperation Agreement Amendment”).

The Amended TSA amended and restated the existing tax sharing agreement among the Company and its affiliates. The Amended TSA addresses certain issues including, but not limited to, the allocation and use of NOLs by the Company, Ambac Assurance and their respective subsidiaries.

The Cost Allocation Agreement provides for the allocation of costs and expenses among the Company, Ambac Assurance and certain affiliates. Additionally, the Cost Allocation Agreement requires Ambac Assurance to reimburse reasonable operating expenses incurred by the Company, subject to an annual $5,000 cap, which, during 2017, shall be reduced to a $4,000 per year cap, only with the approval by the Rehabilitator.

The Cooperation Agreement Amendment provides for the Rehabilitator to have certain rights with respect to (a) the tax positions taken by the Company in its consolidated tax return; (b) the acceptance by Ambac Assurance of the repayment of intercompany loans or the modification of the terms thereof; (c) changes by Ambac Assurance in the assumptions or vendors utilized in determining loss reserves determined in accordance with Statutory Accounting Principles; and (d) changes to Ambac Assurance’s investment policy and transfer of the investment management function for Ambac Assurance’s investment portfolio.

As provided for in the Reorganization Plan, Ambac’s Amended and Restated Certificate of Incorporation and revised Bylaws became effective on the Effective Date. On February 28, 2014, Ambac’s Bylaws were amended, primarily to (i) revise the advance notice provisions for stockholders proposing business or nominating directors; (ii) add procedural and disclosure requirements for stockholders proposing business or nominating directors, calling special meetings or taking action by written consent; (iii) add a forum selection clause specifying state or federal courts located in the State of Delaware as the sole and exclusive forum for proceedings which, among other things, (A) are brought on behalf of Ambac, (B)claim breaches of fiduciary duty, (C) involve claims arising under Ambac’s governing documents or the Delaware General Corporation Law, or (D) are governed by the internal affairs doctrine; and (iv) update other bylaw provisions, including revisions related to the use of electronic communication technologies. Pursuant to the Amended and Restated Certificate of Incorporation of Ambac, Ambac is authorized to issue 150,000,000 shares of capital stock, consisting of 130,000,000 shares of common stock, par value $0.01 per share and 20,000,000 shares of preferred stock, par value $0.01 per share. Pursuant to the Reorganization Plan, Ambac distributed 45,000,000 shares of new common stock on May 1, 2013. Under the Reorganization Plan, Ambac also distributed warrants to holders of allowed general unsecured claims and subordinated debt securities, which as of the Effective Date entitled such holders to acquire an additional 5,047,138 shares of new common stock of the Company at an exercise price of $16.67 per share at any time on or prior to April 30, 2023. Through December 31, 2014, 7,261 warrants were exercised, resulting in an issuance of 3,473 shares of common stock. The new common stock and warrants are listed on NASDAQ and trade under the symbols “AMBC” and “AMBCW,” respectively. All such common stock and warrants were issued without registration under the Securities Act of 1933, as amended or state securities laws, in reliance on Section 1145 of the United States Bankruptcy Code. The common stock of the Company in existence prior to the Effective Date was cancelled on the Effective Date and the holders of such stock did not receive, and will not receive, any distributions under the Reorganization Plan.

Pursuant to the Mediation Agreement, Ambac Assurance transferred $30,000 (plus accrued interest) from an escrow account to Ambac on the Effective Date. Additionally, the Segregated Account issued a junior surplus note in the amount of $350,000 (recorded at the fair value of $167,020) to Ambac on the Effective Date in accordance with the Mediation Agreement. Ambac recorded such amounts received as Other income in the Condensed Statements of Total Comprehensive Income (Loss). On August 28, 2014, Ambac deposited this junior surplus note plus accrued but unpaid interest thereon, into a newly formed Trust in exchange for cash of $224,262 and a subordinated owner trust certificate (the "Owner Trust Certificate") issued by the Trust in the face amount of $74,794. The Trust funded the cash portion of its purchase of the junior surplus note with proceeds of the private placement of $299,175 face amount of notes to third party investors ("Notes"), which amount equates to approximately 80% of par plus accrued and unpaid interest on the junior surplus note. The Notes have a final maturity of August 28, 2039. Interest on the Notes will accrue at 5.1% per annum and compound annually on June 7th of each year up to and including the maturity date. Payments on the Notes will be made when and to the extent that the Segregated Account makes payments on the junior surplus note. The Notes must be paid in full before any payments will be made on the Owner Trust Certificate. The Notes and Owner Trust Certificate are non-recourse to Ambac, Ambac Assurance and the Segregated Account, but are collateralized by the junior surplus note. Ambac records the Owner Trust Certificate as an equity investment and will reflect the activities of the non-consolidated Trust within Net investment income on the Consolidated Statements of Total Comprehensive Income (Loss).

Ambac’s Amended and Restated Certificate of Incorporation limits voting and transfer rights of stockholders in significant ways. Article IV contains voting restrictions applicable to any person owning at least 10% of Ambac’s common stock so that such person (including any group consisting of such person and any other person with whom such person or any affiliate or associate of such person has any agreement, contract, arrangement or understanding with respect to acquiring, voting, holding or disposing of Ambac’s common stock) shall not be entitled to cast votes in excess of one vote less than 10% of the votes entitled to be cast by all common stock holders, except as otherwise approved by OCI.

There are substantial restrictions on the ability to transfer Ambac’s common stock set forth in Article XII of Ambac’s Amended and Restated Certificate of Incorporation. In order to preserve certain tax benefits, subject to limited exceptions, any attempted transfer of common stock shall be prohibited and void to the extent that, as a result of such transfer (or any series of transfers of which such transfer is a part), either (i) any person or group of persons shall become a holder of 5.0% or more of the Company’s common stock or (ii) the percentage stock ownership interest in Ambac of any holder of 5.0% or more of the Company’s common stock shall be increased (a “Prohibited Transfer”). These restrictions shall not apply to an attempted transfer if the transferor or the transferee obtains the written approval of Ambac’s Board of Directors to such transfer. A purported transferee of a Prohibited Transfer shall not be recognized as a stockholder of Ambac for any purpose whatsoever in respect of the securities which are the subject of the Prohibited Transfer (the “Excess Securities”). Until the Excess Securities are acquired by another person in a transfer that is not a Prohibited Transfer, the purported transferee of a Prohibited Transfer shall not be entitled with respect to such Excess Securities to any rights of stockholders of Ambac, including, without limitation, the right to vote such Excess Securities and to receive dividends or distributions, whether liquidating or otherwise, in respect thereof, if any. Once the Excess Securities have been acquired in a transfer that is not a Prohibited Transfer, the securities shall cease to be Excess Securities. If the Board determines that a transfer of securities constitutes a Prohibited Transfer then, upon written demand by Ambac, the purported transferee shall transfer or cause to be transferred any certificate or other evidence of ownership of the Excess Securities within the purported transferee’s possession or control, together with any distributions paid by Ambac with respect to such Excess Securities, to an agent designated by Ambac. Such agent shall thereafter sell such Excess Securities and the proceeds of such sale shall be distributed as set forth in the Amended and Restated Certificate of Incorporation. If the purported transferee of a Prohibited Transfer has resold the Excess Securities before receiving such demand, such person shall be deemed to have sold the Excess Securities for Ambac’s agent and shall be required to transfer to such agent the proceeds of such sale, which shall be distributed as set forth in the Amended and Restated Certificate of Incorporation.

As of the Effective Date, the Company was generally discharged and released from all pre-Effective Date debts, liabilities, claims, causes of action and interests in accordance with the provisions of the Reorganization Plan. Holders of claims and equity interests are also generally barred from commencing or continuing any action or proceeding relating to such claims, causes of action or interests. The Reorganization Plan also provides for broad exculpation and releases of the Company, Ambac Assurance, the Segregated Account, OCI, the Rehabilitator, the board of directors and board committees of the Company and Ambac Assurance, all individual directors, officers and employees of the Company and Ambac Assurance, the Creditors’ Committee and the individual members thereof, and each of the respective representatives of such parties, for actions or omissions that occurred on or prior to the Effective Date.

Reorganization items:

Professional advisory fees and other costs directly associated with our reorganization are reported separately as reorganization items pursuant to the Reorganizations Topic of the ASC. Reorganization items also include adjustments to reflect the carrying value of certain pre-petition liabilities at their allowable claim amounts, gain on the settlement of liabilities subject to compromise and fresh start reporting adjustments. The reorganization items in the Consolidated Statements of Total Comprehensive Income (Loss) consisted of the following items:

	Successor Ambac				Predecessor Ambac
			Period from May 1		Period from January 1
	Year Ended		through		through			Year Ended
($ in Thousands)	December 31, 2014		December 31, 2013		April 30, 2013			December 31, 2012
U.S. Trustee fees	$	7	$	33	$	23		$	50
Professional fees	204		460		4,483			7,165
Gain from cancellation and satisfaction of Predecessor Ambac debt	—		—		(1,521,435		)	—
Fresh start reporting adjustments	—		—		(1,228,251		)	—
Total reorganization items	$	211	$	493	$	(2,745,180	)	$	7,215