Financial Guarantee Insurance Contracts (Tables)

3 Months Ended

Mar. 31, 2015

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

Below are the components of the Loss and loss expense reserves liability and the Subrogation recoverable asset at March 31, 2015 and December 31, 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
March 31, 2015:
Loss and loss expense reserves	$	2,158,007	$	265,708	$	3,579,957	$	(1,268,916	)	$	(258,765	)	$	4,475,991
Subrogation recoverable	774,960		103,429		175,415		(2,037,933		)	—			(984,129		)
Totals	$	2,932,967	$	369,137	$	3,755,372	$	(3,306,849	)	$	(258,765	)	$	3,491,862

December 31, 2014:
Loss and loss expense reserves	$	2,172,041	$	234,802	$	3,792,133	$	(1,205,621	)	$	(241,348	)	$	4,752,007
Subrogation recoverable	772,948		94,425		197,751		(2,018,398		)	—			(953,274		)
Totals	$	2,944,989	$	329,227	$	3,989,884	$	(3,224,019	)	$	(241,348	)	$	3,798,733

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:



	Three Months Ended March 31,
	2015			2014
Beginning premium receivable	$	1,000,607		$	1,453,021
Premium receipts	(27,453		)	(33,128		)
Adjustments for changes in expected and contractual cash flows	(5,918		)	(15,062		)
Accretion of premium receivable discount	6,282			10,370
Uncollectable premiums	698			(1,074		)
Other adjustments (including foreign exchange)	(22,217		)	3,987
Ending premium receivable	$	951,999		$	1,418,114

Effect of Reinsurance on Premiums Written and Earned

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



	Three months ended March 31, 2015				Three months ended March 31, 2014
	Written		Earned		Written			Earned
Direct	$	1,062	$	71,649	$	(5,766	)	$	86,183
Assumed	—		22		—			68
Ceded	365		5,953		456			3,704
Net premiums	$	697	$	65,718	$	(6,222	)	$	82,547

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 March 31, 2015:



	Future premiums to be collected ⁽¹⁾		Future premiums to be earned net of reinsurance ⁽¹⁾
Three months ended:
June 30, 2015	$	22,082	$	38,127
September 30, 2015	22,103		35,798
December 31, 2015	21,686		33,635
Twelve months ended:
December 31, 2016	83,054		123,206
December 31, 2017	76,968		110,175
December 31, 2018	72,261		101,113
December 31, 2019	68,564		94,047
Five years ended:
December 31, 2024	304,049		385,547
December 31, 2029	254,696		272,177
December 31, 2034	179,393		169,638
December 31, 2039	65,595		67,126
December 31, 2044	25,189		23,328
December 31, 2049	9,831		9,824
December 31, 2054	1,244		2,183
December 31, 2059	5		3
Total	$	1,206,720	$	1,465,927

(1)

Future premiums to be collected is undiscounted and 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 in Note 2. Basis of Presentation and Significant Accounting Principles in the Notes to Consolidated Financial Statements included in Ambac's Annual Report on Form 10-K for the year ended December 31, 2014. This results in a different 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:



	Three Months Ended March 31,
	2015			2014
Beginning gross loss and loss expense reserves	$	3,798,733		$	5,470,234
Less reinsurance on loss and loss expense reserves	100,355			122,357
Beginning balance of net loss and loss expense reserves	$	3,698,378		$	5,347,877
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	1			151
Total current year	1			151
Prior years:
Change in previously established loss and loss expense reserves, gross of RMBS subrogation and net of reinsurance	(132,639		)	(117,692		)
Claim and loss expense (payments) recoveries, net of subrogation and reinsurance	(104,202		)	(9,375		)
(Increase) decrease in previously established RMBS subrogation recoveries, net of reinsurance	(44,195		)	(18,331		)
Total prior years	(281,036		)	(145,398		)
Net change in net loss and loss expense reserves	(281,035		)	(145,247		)
Ending net loss and loss expense reserves	$	3,417,343		$	5,202,630
Add reinsurance on loss and loss expense reserves ⁽¹⁾	74,519			111,303
Ending gross loss and loss expense reserves	$	3,491,862		$	5,313,933


(1)	Reinsurance recoverable reported on the Balance Sheet also includes reinsurance recoverables of previously presented loss and loss expenses of $4,789 and $139 as of March 31, 2015 and 2014, respectively.

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 March 31, 2015 and December 31, 2014. 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 March 31, 2015 and December 31, 2014 was 2.1% and 2.3%, respectively.



Surveillance Categories as of March 31, 2015
	I/SL			IA			II			III			IV			V			Total
Number of policies	34			21			43			66			163			3			330
Remaining weighted-average contract period (in years)	7			16			17			21			13			6			15
Gross insured contractual payments outstanding:
Principal	$	910,033		$	399,516		$	4,186,210		$	3,550,121		$	9,376,691		$	59,712		$	18,482,283
Interest	339,721			159,138			8,484,779			2,286,780			1,928,647			19,651			13,218,716
Total	$	1,249,754		$	558,654		$	12,670,989		$	5,836,901		$	11,305,338		$	79,363		$	31,700,999
Gross undiscounted claim liability ⁽¹⁾	$	12,901		$	6,344		$	239,113		$	1,596,918		$	6,297,440		$	79,357		$	8,232,073
Discount, gross claim liability	(644		)	(605		)	(18,502		)	(521,225		)	(712,562		)	(6,592		)	(1,260,130		)
Gross claim liability before all subrogation and before reinsurance	$	12,257		$	5,739		$	220,611		$	1,075,693		$	5,584,878		$	72,765		$	6,971,943
Less:
Gross RMBS subrogation⁽²⁾	—			—			—			—			(2,579,450		)	—			(2,579,450		)
Discount, RMBS subrogation	—			—			—			—			11,097			—			11,097
Discounted RMBS subrogation, before reinsurance	—			—			—			—			(2,568,353		)	—			(2,568,353		)
Less:
Gross other subrogation⁽³⁾	—			—			(12,388		)	(142,548		)	(646,741		)	(13,356		)	(815,033		)
Discount, other subrogation	—			—			3,474			35,608			33,795			3,660			76,537
Discounted other subrogation, before reinsurance	—			—			(8,914		)	(106,940		)	(612,946		)	(9,696		)	(738,496		)
Gross claim liability, net of all subrogation and discounts, before reinsurance	$	12,257		$	5,739		$	211,697		$	968,753		$	2,403,579		$	63,069		$	3,665,094
Less: Unearned premium revenue	(8,812		)	(2,175		)	(107,836		)	(76,061		)	(63,368		)	(513		)	(258,765		)
Plus: Loss expense reserves	—			16			2,185			7,465			75,825			42			85,533
Gross loss and loss expense reserves	$	3,445		$	3,580		$	106,046		$	900,157		$	2,416,036		$	62,598		$	3,491,862
Reinsurance recoverable reported on Balance Sheet ⁽⁴⁾	$	1		$	910		$	2,331		$	85,082		$	(9,016	)	$	—		$	79,308


(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 probability-weighted estimate of subrogation recoveries from RMBS transaction sponsors for representation and warranty ("R&W") breaches.


(3)	Other subrogation primarily represents subrogation related to excess spread or other contractual cash flows on public finance and structured finance transactions, including RMBS.


(4)	Reinsurance recoverable reported on Balance Sheet includes reinsurance recoverables of $74,519 related to future loss and loss expenses and $4,789 related to previously presented loss and loss expenses.



Surveillance Categories as of December 31, 2014
	I/SL			IA			II			III			IV			V			Total
Number of policies	36			26			33			69			160			1			325
Remaining weighted-average contract period (in years)	8			12			15			21			12			6			16
Gross insured contractual payments outstanding:
Principal	$	1,026,513		$	519,291		$	3,091,744		$	3,792,559		$	9,892,760		$	47		$	18,322,914
Interest	418,746			212,296			1,878,770			2,765,537			1,979,627			19			7,254,995
Total	$	1,445,259		$	731,587		$	4,970,514		$	6,558,096		$	11,872,387		$	66		$	25,577,909
Gross undiscounted claim liability ⁽¹⁾	$	16,360		$	11,525		$	155,488		$	2,040,402		$	6,456,139		$	60		$	8,679,974
Discount, gross claim liability	(1,147		)	(937		)	(16,438		)	(716,812		)	(774,611		)	(3		)	(1,509,948		)
Gross claim liability before all subrogation and before reinsurance	$	15,213		$	10,588		$	139,050		$	1,323,590		$	5,681,528		$	57		$	7,170,026
Less:
Gross RMBS subrogation ⁽²⁾	—			—			—			—			(2,541,219		)	—			(2,541,219		)
Discount, RMBS subrogation	—			—			—			—			17,679			—			17,679
Discounted RMBS subrogation, before reinsurance	—			—			—			—			(2,523,540		)	—			(2,523,540		)
Less:
Gross other subrogation ⁽³⁾	—			—			(18,034		)	(127,143		)	(647,110		)	—			(792,287		)
Discount, other subrogation	—			—			6,069			36,779			48,960			—			91,808
Discounted other subrogation, before reinsurance	—			—			(11,965		)	(90,364		)	(598,150		)	—			(700,479		)
Gross claim liability, net of all subrogation and discounts, before reinsurance	$	15,213		$	10,588		$	127,085		$	1,233,226		$	2,559,838		$	57		$	3,946,007
Less: Unearned premium revenue	(10,945		)	(3,432		)	(73,749		)	(88,332		)	(64,890		)	—			(241,348		)
Plus: Loss expense reserves	3			1,303			1,968			6,470			84,330			—			94,074
Gross loss and loss expense reserves	$	4,271		$	8,459		$	55,304		$	1,151,364		$	2,579,278		$	57		$	3,798,733
Reinsurance recoverable reported on Balance Sheet⁽⁴⁾	$	73		$	890		$	1,355		$	110,957		$	(13,437	)	$	—		$	99,838


(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 probability-weighted estimate of subrogation recoveries from RMBS transaction sponsors for representation and warranty ("R&W") breaches.


(3)	Other subrogation primarily represents subrogation related to excess spread or other contractual cash flows on public finance and structured finance transactions, including RMBS.


(4)	Reinsurance recoverable reported on Balance Sheet includes reinsurance recoverables of $100,355 related to future loss and loss expenses and $(517) 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 March 31, 2015 and December 31, 2014, are as follows:



Approach	Gross loss reserves before subrogation recoveries ⁽¹⁾		Subrogation recoveries ⁽²⁾⁽³⁾			Gross loss reserves after subrogation recoveries
March 31, 2015:
Random samples ⁽⁴⁾	$	1,899,087	$	(2,568,353	)	$	(669,266	)

December 31, 2014:
Random samples ⁽⁴⁾	$	1,897,426	$	(2,523,540	)	$	(626,114	)


(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
Discounted RMBS subrogation (gross of reinsurance) at January 1, 2015	$	2,523,540	$	—		$	2,523,540
Changes recognized in 2015:
Changes in estimation approach	—		—			—
Impact of sponsor actions ⁽¹⁾	—		—			—
All other changes ⁽²⁾	44,813		—			44,813
Discounted RMBS subrogation (gross of reinsurance) at March 31, 2015	$	2,568,353	$	—		$	2,568,353

Discounted RMBS subrogation (gross of reinsurance) at January 1, 2014	$	953,825	$	1,252,773		$	2,206,598
Changes recognized in 2014:
Changes in estimation approach	—		—			—
Impact of sponsor actions ⁽¹⁾	—		—			—
All other changes ⁽²⁾	51,789		(34,092		)	17,697
Discounted RMBS subrogation (gross of reinsurance) at March 31, 2014	$	1,005,614	$	1,218,681		$	2,224,295


(1)	Sponsor actions include loan repurchases, direct payments to Ambac and other contributions.

(2)

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 net insurance intangible asset is as follows:



	2015		2016		2017		2018		2019		Thereafter
Amortization expense	$	90,801	$	107,443	$	97,726	$	90,095	$	83,380	$	877,850