FINANCIAL GUARANTEE INSURANCE CONTRACTS

Amounts presented in this Note relate only to Ambac’s non-derivative insurance business for insurance policies issued to beneficiaries, including VIEs, for which we do not consolidate the VIE.

Net Premiums Earned:

Gross premiums are received either upfront (typical of public finance obligations) or in installments (typical of structured finance obligations). For premiums received upfront, an unearned premium revenue (“UPR”) liability is established, which is initially recorded as the cash amount received. For installment premium transactions, a premium receivable asset and offsetting UPR liability is initially established in an amount equal to: (i) the present value of future contractual premiums due (the “contractual” method) or (ii) if the underlying insured obligation is a homogenous pool of assets which are contractually prepayable, the present value of premiums to be collected over the expected life of the transaction (the “expected” method). An appropriate risk-free rate corresponding to the weighted average life of each policy and currency is used to discount the future premiums contractually due or expected to be collected. For example, U.S. dollar exposures are discounted using U.S. Treasury rates while exposures denominated in a foreign currency are discounted using the appropriate risk-free rate for the respective currency. The weighted average risk-free rate at June 30, 2015 and December 31, 2014, was 2.7% and 2.7%, respectively, and the weighted average period of future premiums used to estimate the premium receivable at June 30, 2015 and December 31, 2014, was 9.5 years and 10.1 years, respectively.

Insured obligations consisting of homogeneous pools for which Ambac uses expected future premiums to estimate the premium receivable and UPR include residential mortgage-backed securities. As prepayment assumptions change for homogenous pool transactions, or if there is an actual prepayment for a “contractual” method installment transaction, the related premium receivable and UPR are adjusted in equal and offsetting amounts with no immediate effect on earnings using new premium cash flows and the then current risk-free rate.

Generally, the priority for the payment of financial guarantee premiums to Ambac, as required by the bond indentures of the insured obligations, is senior in the waterfall. Additionally, in connection with the allocation of certain liabilities to the Segregated Account, trustees and other parties are required under the Segregated Account Rehabilitation Plan and related court orders to continue to pay installment premiums, notwithstanding the Segregated Account Rehabilitation Proceedings. In evaluating the credit quality of the premium receivables, management evaluates the transaction waterfall structures and the internal ratings of the transactions underlying the premium receivables. Uncollectable premiums are determined on a policy basis and utilize a combination of historical premium collection data in addition to cash flow analysis to determine if an impairment in the related policy's premium receivables exist. As of June 30, 2015 and December 31, 2014, approximately 27% and 32% of the premium receivables related to transactions with non-investment grade internal ratings, comprised mainly of non-investment grade RMBS, lease securitizations and student loan transactions, which comprised 8%, 6%, and 5% , of the total premium receivables at June 30, 2015 and 7%, 6%, and 8% of the total premium receivables at December 31, 2014, respectively. At June 30, 2015 and December 31, 2014, $14,973 and $17,780 respectively, of premium receivables were deemed uncollectable. Past due premiums on policies insuring non-investment grade obligations amounted to less than $500 at June 30, 2015.

Below is the gross premium receivable roll-forward (direct and assumed contracts) for the affected periods:



	Six Months Ended June 30,
	2015			2014
Beginning premium receivable	$	1,000,607		$	1,453,021
Premium receipts	(49,040		)	(61,876		)
Adjustments for changes in expected and contractual cash flows	(25,513		)	(70,464		)
Accretion of premium receivable discount	12,576			20,247
Changes to uncollectable premiums	2,807			(1,035		)
Other adjustments (including foreign exchange)	(4,513		)	16,469
Ending premium receivable	$	936,924		$	1,356,362

Similar to gross premiums, premiums ceded to reinsurers are paid either upfront or in installments. Premiums ceded to reinsurers reduce the amount of premiums earned by Ambac from its financial guarantee insurance policies.

When a bond issue insured by Ambac Assurance has been retired, including those retirements due to refundings or calls, any remaining UPR is recognized at that time to the extent the financial guarantee contract is legally extinguished, causing accelerated premium revenue. For installment premium paying transactions, the recognition of any remaining UPR is offset by the reduction of the related premium receivable to zero (as it will not be collected as a result of the retirement), which may cause negative accelerated premium revenue. Ambac’s accelerated premium revenue for retired obligations for the three and six months ended June 30, 2015 was $13,641 and $36,493, and for the three and six months ended June 30, 2014 was $7,990 and $33,104, respectively. Certain obligations insured by Ambac have been legally defeased whereby government securities are purchased by the issuer with the proceeds of a new bond issuance, or less frequently with other funds of the issuer, and held in escrow. The principal and interest received from the escrowed securities are then used to retire the Ambac-insured obligations at a future date either to their maturity date (a refunding) or a specified call date (a pre-refunding). Ambac has evaluated the provisions in certain financial guarantee insurance policies issued on legally defeased obligations and determined those insurance policies have not been legally extinguished. For policies with refunding securities, premium revenue recognition is not impacted as the escrowed maturity date is the same as the previous legal maturity date. For policies with pre-refunding securities, the maturity date of the pre-refunded security has been shortened from its previous legal maturity. Although premium revenue recognition has not been accelerated in the period of the pre-refunding, it results in an increase in the rate at which the policy's remaining UPR is to be recognized.

The effect of reinsurance on premiums written and earned for the respective periods was as follows:



	Three Months Ended June 30, 2015					Three Months Ended June 30, 2014
	Written			Earned		Written			Earned
Direct	$	(11,192	)	$	65,156	$	(45,486	)	$	68,025
Assumed	—			22		—			23
Ceded	(1,142		)	4,299		(4,967		)	3,035
Net premiums	$	(10,050	)	$	60,879	$	(40,519	)	$	65,013



	Six Months Ended June 30, 2015					Six Months Ended June 30, 2014
	Written			Earned		Written			Earned
Direct	$	(10,130	)	$	136,806	$	(51,252	)	$	154,209
Assumed	—			43		—			91
Ceded	(777		)	10,252		(4,511		)	6,740
Net premiums	$	(9,353	)	$	126,597	$	(46,741	)	$	147,560

The table below summarizes the future gross undiscounted premiums to be collected and future premiums earned, net of reinsurance at June 30, 2015:



	Future premiums to be collected ⁽¹⁾		Future premiums to be earned net of reinsurance ⁽¹⁾
Three months ended:
September 30, 2015	$	22,273	$	37,587
December 31, 2015	21,471		34,681
Twelve months ended:
December 31, 2016	84,330		125,263
December 31, 2017	78,696		109,613
December 31, 2018	73,574		99,333
December 31, 2019	69,741		92,422
Five years ended:
December 31, 2024	308,352		378,905
December 31, 2029	256,512		267,686
December 31, 2034	180,354		167,874
December 31, 2039	66,338		67,332
December 31, 2044	25,295		23,340
December 31, 2049	9,838		9,800
December 31, 2054	1,244		2,183
December 31, 2059	5		3
Total	$	1,198,023	$	1,416,022

(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 further 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. 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.

Loss and Loss Expense Reserves:

The loss and loss expense reserve (“loss reserve”) policy for financial guarantee insurance relates only to Ambac’s non-derivative insurance business for insurance policies issued to beneficiaries, including VIEs, for which we do not consolidate the VIE. Losses and loss expenses are based upon estimates of the ultimate aggregate losses inherent in the non-derivative financial guarantee portfolio as of the reporting date. A loss reserve is recorded on the balance sheet on a policy-by-policy basis. Loss reserve components of an insurance policy include unpaid claims and the present value ("PV") of expected net cash flows required to be paid under an insurance contract, further described below:

•

Unpaid claims represent the sum of (i) claims presented and not yet paid for policies allocated to the Segregated Account, including Deferred Amounts and (ii) accrued interest on Deferred Amounts as required by the amended Segregated Account Rehabilitation Plan that became effective on June 12, 2014. Refer to Note 1. Background and Business Description in the Notes to Consolidated Financial Statements included in Ambac's Annual Report on Form 10-K for further discussion of the amended Segregated Account Rehabilitation Plan. Unpaid claims are measured based on the estimated cost of settling the claims, which is principal plus accrued interest.

•

The PV of expected net cash flows represents the PV of expected cash outflows less the PV of expected cash inflows. The PV of expected net cash flows are impacted by: (i) expected future claims to be paid under an insurance contract, including the impact of potential settlement outcomes upon future installment premiums, (ii) expected recoveries from contractual breaches of RMBS representations and warranties by transaction sponsors, (iii) excess spread within the underlying transaction's cash flow structure, and (iv) other subrogation recoveries. Expected receipts from third parties within the underlying transaction's cash flow structure relating to contractual breaches in non-RMBS securitizations may also reduce expected future claims. Ambac’s approach to resolving disputes involving contractual breaches by transaction sponsors or other third parties has included negotiations and/or pursuing litigation. Ambac does not include potential recoveries from litigation attributed solely to fraudulent inducement claims in our estimate of subrogation recoveries, since any remedies under such claims would be non-contractual.

Net cash outflow policies represent contracts where the sum of unpaid claims plus the PV of expected cash outflows are greater than the PV of expected cash inflows. For such policies, a “Loss and loss expense reserves” liability is recorded for the sum of: (i) unpaid claims plus (ii) the excess of the PV of expected net cash outflows over the unearned premium reserve. Net cash inflow policies represent contracts where losses have been paid, but not yet recovered, such that the PV of expected cash inflows are greater than the sum of unpaid claims plus the PV of expected cash outflows. For such policies, a “Subrogation recoverable” asset is recorded for the difference between (i) the PV of expected net cash inflows and (ii) unpaid claims.

The approaches used to estimate expected future claims and expected future recoveries considers the likelihood of all possible outcomes. The evaluation process for determining expected losses is subject to certain estimates and judgments based on our assumptions regarding the probability of default by the issuer of the insured security, probability of settlement outcomes (which may include commutation settlements, refinancing and/or other settlement outcomes) and expected severity of credits for each insurance contract. Ambac’s loss reserves are based on management’s on-going review of the financial guarantee credit portfolio. Below are the components of the Loss and loss expense reserves liability and the Subrogation recoverable asset at June 30, 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
June 30, 2015:
Loss and loss expense reserves	$	2,218,211	$	299,846	$	3,260,860	$	(1,226,174	)	$	(185,329	)	$	4,367,414
Subrogation recoverable	742,807		108,803		155,281		(1,988,293		)	—			(981,402		)
Totals	$	2,961,018	$	408,649	$	3,416,141	$	(3,214,467	)	$	(185,329	)	$	3,386,012

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

Below is the loss and loss expense reserve roll-forward, net of subrogation recoverable and reinsurance, for the affected periods:



	Six Months Ended June 30,
	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	737			209
Claim and loss expense (payments) recoveries, net of subrogation and reinsurance	—			(3		)
Total current year	737			206
Prior years:
Change in previously established loss and loss expense reserves, gross of RMBS subrogation and net of reinsurance	(262,962		)	131,124
Claim and loss expense (payments) recoveries, net of subrogation and reinsurance	(88,387		)	73,347
(Increase) decrease in previously established RMBS subrogation recoveries, net of reinsurance	(32,785		)	(74,398		)
Total prior years	(384,134		)	130,073
Net change in net loss and loss expense reserves	(383,397		)	130,279
Ending net loss and loss expense reserves	3,314,981			5,478,156
Add reinsurance on loss and loss expense reserves ⁽¹⁾	71,031			110,015
Ending gross loss and loss expense reserves	$	3,386,012		$	5,588,171


(1)	Reinsurance recoverable reported on the Balance Sheet also includes reinsurance recoverables (payables) of previously presented loss and loss expenses of $4,974 and $(760) as of June 30, 2015 and 2014, respectively.

The positive development in loss and loss expense reserves established in prior years for the six months ended June 30, 2015 was primarily due to the impact of commutations in the student loan portfolio and reduced future claims for both the Ambac UK and RMBS portfolios partially offset by negative development in certain public finance transactions and interest accrued on Deferred Amounts. The negative development in loss and loss expense reserves established in prior years for the six months ended June 30, 2014 was primarily due to the addition of accrued interest on Deferred Amounts pursuant to the amended Segregated Account Rehabilitation Plan offset by improved performance of the RMBS portfolio.

The net change in net loss and loss expense reserves are included in losses and loss expenses in the Consolidated Statements of Total Comprehensive Income. Reinsurance recoveries of losses included in losses and loss expenses in the Consolidated Statements of Total Comprehensive Income were an expense of $3,219 and $23,821 for the three and six months ended June 30, 2015 compared to an expense of $1,602 and $12,160 for the three and six months ended June 30, 2014, respectively.

The tables below summarize information related to policies currently included in Ambac’s loss and loss expense reserves or subrogation recoverable at June 30, 2015 and December 31, 2014. Gross 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, 2015 and December 31, 2014 was 2.5% and 2.3%, respectively.



Surveillance Categories as of June 30, 2015
	I/SL			IA			II			III			IV			V			Total
Number of policies	39			18			33			69			162			3			324
Remaining weighted-average contract period (in years)	7			16			14			19			13			6			15
Gross insured contractual payments outstanding:
Principal	$	2,080,087		$	385,118		$	1,518,386		$	4,065,996		$	9,075,142		$	54,590		$	17,179,319
Interest	733,337			158,442			425,025			3,028,085			1,898,244			18,166			6,261,299
Total	$	2,813,424		$	543,560		$	1,943,411		$	7,094,081		$	10,973,386		$	72,756		$	23,440,618
Gross undiscounted claim liability ⁽¹⁾	$	14,688		$	6,265		$	47,307		$	1,837,013		$	6,130,231		$	72,749		$	8,108,253
Discount, gross claim liability	(833		)	(685		)	(5,928		)	(632,267		)	(762,058		)	(7,364		)	(1,409,135		)
Gross claim liability before all subrogation and before reinsurance	$	13,855		$	5,580		$	41,379		$	1,204,746		$	5,368,173		$	65,385		$	6,699,118
Less:
Gross RMBS subrogation⁽²⁾	—			—			—			—			(2,569,494		)	—			(2,569,494		)
Discount, RMBS subrogation	—			—			—			—			12,920			—			12,920
Discounted RMBS subrogation, before reinsurance	—			—			—			—			(2,556,574		)	—			(2,556,574		)
Less:
Gross other subrogation⁽³⁾	—			—			(16,477		)	(140,596		)	(570,379		)	(13,219		)	(740,671		)
Discount, other subrogation	—			—			4,448			42,937			31,211			4,182			82,778
Discounted other subrogation, before reinsurance	—			—			(12,029		)	(97,659		)	(539,168		)	(9,037		)	(657,893		)
Gross claim liability, net of all subrogation and discounts, before reinsurance	$	13,855		$	5,580		$	29,350		$	1,107,087		$	2,272,431		$	56,348		$	3,484,651
Less: Unearned premium revenue	(10,512		)	(2,121		)	(18,984		)	(88,332		)	(64,886		)	(494		)	(185,329		)
Plus: Loss expense reserves	—			13			714			12,399			73,528			36			86,690
Gross loss and loss expense reserves	$	3,343		$	3,472		$	11,080		$	1,031,154		$	2,281,073		$	55,890		$	3,386,012
Reinsurance recoverable reported on Balance Sheet ⁽⁴⁾	$	274		$	899		$	62		$	90,351		$	(15,581	)	$	—		$	76,005


(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 $71,031 related to future loss and loss expenses and $4,974 related to 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 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 presented loss and loss expenses.

Ambac records estimated subrogation recoveries for breaches of representations and warranties (R&W) by sponsors of certain RMBS transactions. Prior to the June 30, 2014 reporting period, Ambac utilized the Adverse and Random Sample approaches to estimate R&W subrogation recoveries for certain RMBS transactions. For a discussion of these subrogation recovery approaches, see Note 2. Basis Of Presentation And Significant Accounting Policies in the Notes to Consolidated Financial Statements included Part II, Item 8 in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014. Beginning with the June 30, 2014 reporting period, as a result of gaining further access to loan files, the Random Sample approach has been utilized for all transactions which were previously evaluated using the Adverse Sample approach.

Ambac has recorded RMBS subrogation recoveries of $2,556,574 ( $2,529,300 net of reinsurance) and $2,523,540 ( $2,496,515 net of reinsurance) at June 30, 2015 and December 31, 2014, respectively. The balance of RMBS subrogation recoveries and the related loss reserves, using random samples as the estimation approach, at June 30, 2015 and December 31, 2014, are as follows:



Random Samples Approach ⁽⁴⁾	Gross loss reserves before subrogation recoveries ⁽¹⁾		Subrogation recoveries ⁽²⁾⁽³⁾			Gross loss reserves after subrogation recoveries
At June 30, 2015	$	1,869,797	$	(2,556,574	)	$	(686,777	)

At December 31, 2014	$	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.

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:
Impact of sponsor actions ⁽²⁾	—			—			—
All other changes ⁽³⁾	33,034			—			33,034
Discounted RMBS subrogation( (gross of reinsurance) at June 30, 2015	$	2,556,574		$	—		$	2,556,574

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


(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.

(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:

The insurance intangible amortization expense is included in insurance intangible amortization on the Consolidated Statements of Total Comprehensive Income. For the three and six months ended June 30, 2015, the insurance intangible amortization expense was $38,088 and $75,520, respectively, and for the three and six months ended June 30, 2014, the insurance intangible amortization expense was $36,256 and $67,970, respectively. As of June 30, 2015 and December 31, 2014, the gross carrying value of the insurance intangible asset was $1,665,087 and $1,660,125, respectively. Accumulated amortization of the insurance intangible asset was $325,660 and $249,205, as of June 30, 2015 and December 31, 2014, respectively, resulting in a net insurance intangible asset of $1,339,427 and $1,410,920, respectively.

The estimated future amortization expense for the net insurance intangible asset is as follows:



	2015		2016		2017		2018		2019		Thereafter
Amortization expense	$	60,630	$	109,308	$	99,248	$	91,385	$	84,630	$	894,226