Financial Guarantee Insurance Contracts (Tables)

3 Months Ended

Mar. 31, 2016

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, 2016 and December 31, 2015:



	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, 2016:
Loss and loss expense reserves	$	2,348,259	$	417,508	$	3,090,003	$	(1,384,282	)	$	(167,941	)	$	4,303,547
Subrogation recoverable	635,735		115,320		200,258		(1,611,784		)	—			(660,471		)
Totals	$	2,983,994	$	532,828	$	3,290,261	$	(2,996,066	)	$	(167,941	)	$	3,643,076

December 31, 2015:
Loss and loss expense reserves	$	2,138,952	$	349,668	$	3,265,349	$	(1,476,276	)	$	(189,587	)	$	4,088,106
Subrogation recoverable	828,802		141,349		207,674		(2,407,118		)	—			(1,229,293		)
Totals	$	2,967,754	$	491,017	$	3,473,023	$	(3,883,394	)	$	(189,587	)	$	2,858,813

Summary of Gross Premium Receivable Roll-Forward (Direct and Assumed Contracts)

Below is the gross premium receivable roll-forward for the affected periods:



	Three Months Ended March 31,
	2016			2015
Beginning premium receivable	$	831,575		$	1,000,607
Premium receipts	(21,377		)	(27,453		)
Adjustments for changes in expected and contractual cash flows	(35,029		)	(5,918		)
Accretion of premium receivable discount	5,123			6,282
Changes to uncollectable premiums	5,126			698
Other adjustments (including foreign exchange)	(3,340		)	(22,217		)
Ending premium receivable	$	782,078		$	951,999

Effect of Reinsurance on Premiums Written and Earned

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



	Three Months Ended March 31, 2016					Three Months Ended March 31, 2015
	Written			Earned		Written		Earned
Direct	$	(24,780	)	$	56,990	$	1,062	$	71,649
Assumed	—			21		—		22
Ceded	(6,045		)	4,211		365		5,953
Net premiums	$	(18,735	)	$	52,800	$	697	$	65,718

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, 2016:



	Future premiums to be collected ⁽¹⁾		Future premiums to be earned net of reinsurance ⁽¹⁾
Three months ended:
June 30, 2016	$	19,259	$	31,587
September 30, 2016	18,942		29,248
December 31, 2016	19,299		27,519
Twelve months ended:
December 31, 2017	72,081		96,126
December 31, 2018	67,527		84,162
December 31, 2019	63,878		77,934
December 31, 2020	60,815		73,366
Five years ended:
December 31, 2025	249,945		294,692
December 31, 2030	203,751		203,435
December 31, 2035	131,456		119,037
December 31, 2040	44,366		42,309
December 31, 2045	20,266		17,763
December 31, 2050	7,247		7,818
December 31, 2055	601		1,298
Total	$	979,433	$	1,106,294

(1)

Future premiums to be collected is undiscounted and are used to derive 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, 2015. 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 may result 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,
	2016			2015
Beginning gross loss and loss expense reserves	$	2,858,813		$	3,798,733
Less reinsurance on loss and loss expense reserves	44,059			100,355
Beginning balance of net loss and loss expense reserves	$	2,814,754		$	3,698,378
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	768			1
Claim and loss expense (payments) recoveries, net of subrogation and reinsurance	—			—
Total current year	768			1
Prior years:
Change in previously established loss and loss expense reserves, gross of RMBS subrogation and net of reinsurance	(95,811		)	(132,639		)
Claim and loss expense (payments) recoveries, net of subrogation and reinsurance	916,206			(104,202		)
(Increase) decrease in previously established RMBS subrogation recoveries, net of reinsurance	(20,319		)	(44,195		)
Total prior years	800,076			(281,036		)
Net change in net loss and loss expense reserves	800,844			(281,035		)
Ending net loss and loss expense reserves	3,615,598			3,417,343
Add reinsurance on loss and loss expense reserves ⁽¹⁾	27,478			74,519
Ending gross loss and loss expense reserves	$	3,643,076		$	3,491,862


(1)	Reinsurance recoverable reported on the Balance Sheet also includes reinsurance recoverables (payables) of previously presented loss and loss expenses of $(162) and $4,789 as of March 31, 2016 and 2015, 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, 2016 and December 31, 2015. 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 March 31, 2016 and December 31, 2015 was 2.0% and 2.4%, respectively.



Surveillance Categories as of March 31, 2016
	I/SL			IA			II			III			IV			V			Total
Number of policies	40			14			26			59			166			3			308
Remaining weighted-average contract period (in years)	10			17			26			17			15			6			16
Gross insured contractual payments outstanding:
Principal	$	2,217,143		$	262,318		$	1,962,283		$	2,440,917		$	8,662,183		$	54,590		$	15,599,434
Interest	962,608			107,335			6,835,208			1,619,094			2,342,277			16,790			11,883,312
Total	$	3,179,751		$	369,653		$	8,797,491		$	4,060,011		$	11,004,460		$	71,380		$	27,482,746
Gross undiscounted claim liability ⁽¹⁾	$	7,717		$	5,630		$	165,930		$	1,259,532		$	6,254,134		$	71,379		$	7,764,322
Discount, gross claim liability	(534		)	(502		)	(83,763		)	(291,056		)	(645,766		)	(4,876		)	(1,026,497		)
Gross claim liability before all subrogation and before reinsurance	$	7,183		$	5,128		$	82,167		$	968,476		$	5,608,368		$	66,503		$	6,737,825
Less:
Gross RMBS subrogation⁽²⁾	—			—			(1,203		)	—			(1,860,701		)	—			(1,861,904		)
Discount, RMBS subrogation	—			—			4			—			6,827			—			6,831
Discounted RMBS subrogation, before reinsurance	—			—			(1,199		)	—			(1,853,874		)	—			(1,855,073		)
Less:
Gross other subrogation⁽³⁾	—			—			(10,907		)	(502,340		)	(882,664		)	(13,098		)	(1,409,009		)
Discount, other subrogation	—			—			2,731			159,858			102,074			3,353			268,016
Discounted other subrogation, before reinsurance	—			—			(8,176		)	(342,482		)	(780,590		)	(9,745		)	(1,140,993		)
Gross claim liability, net of all subrogation and discounts, before reinsurance	$	7,183		$	5,128		$	72,792		$	625,994		$	2,973,904		$	56,758		$	3,741,759
Less: Unearned premium revenue	(4,411		)	(1,767		)	(48,102		)	(43,791		)	(69,434		)	(436		)	(167,941		)
Plus: Loss expense reserves	1,907			64			275			13,486			53,526			—			69,258
Gross loss and loss expense reserves	$	4,679		$	3,425		$	24,965		$	595,689		$	2,957,996		$	56,322		$	3,643,076
Reinsurance recoverable reported on Balance Sheet ⁽⁴⁾	$	722		$	920		$	104		$	40,904		$	(15,334	)	$	—		$	27,316


(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 ("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 $27,478 related to future loss and loss expenses and $(162) related to presented loss and loss expenses.



Surveillance Categories as of December 31, 2015
	I/SL			IA			II			III			IV			V			Total
Number of policies	33			14			23			63			157			3			293
Remaining weighted-average contract period (in years)	9			17			26			19			13			6			15
Gross insured contractual payments outstanding:
Principal	$	1,830,549		$	263,288		$	1,912,237		$	2,972,615		$	8,942,730		$	54,590		$	15,976,009
Interest	724,940			107,624			6,834,538			1,792,525			2,391,523			16,791			11,867,941
Total	$	2,555,489		$	370,912		$	8,746,775		$	4,765,140		$	11,334,253		$	71,381		$	27,843,950
Gross undiscounted claim liability ⁽¹⁾	$	6,188		$	5,632		$	173,930		$	1,595,525		$	6,339,537		$	71,381		$	8,192,193
Discount, gross claim liability	(515		)	(652		)	(96,218		)	(458,805		)	(770,694		)	(6,779		)	(1,333,663		)
Gross claim liability before all subrogation and before reinsurance	$	5,673		$	4,980		$	77,712		$	1,136,720		$	5,568,843		$	64,602		$	6,858,530
Less:
Gross RMBS subrogation ⁽²⁾	—			—			—			—			(2,841,291		)	—			(2,841,291		)
Discount, RMBS subrogation	—			—			—			—			11,716			—			11,716
Discounted RMBS subrogation, before reinsurance	—			—			—			—			(2,829,575		)	—			(2,829,575		)
Less:
Gross other subrogation ⁽³⁾	—			—			(12,937		)	(526,957		)	(835,078		)	(13,098		)	(1,388,070		)
Discount, other subrogation	—			—			3,961			198,643			127,669			3,978			334,251
Discounted other subrogation, before reinsurance	—			—			(8,976		)	(328,314		)	(707,409		)	(9,120		)	(1,053,819		)
Gross claim liability, net of all subrogation and discounts, before reinsurance	$	5,673		$	4,980		$	68,736		$	808,406		$	2,031,859		$	55,482		$	2,975,136
Less: Unearned premium revenue	(3,360		)	(1,796		)	(48,871		)	(63,257		)	(71,848		)	(455		)	(189,587		)
Plus: Loss expense reserves	—			66			629			15,090			57,479			—			73,264
Gross loss and loss expense reserves	$	2,313		$	3,250		$	20,494		$	760,239		$	2,017,490		$	55,027		$	2,858,813
Reinsurance recoverable reported on Balance Sheet⁽⁴⁾	$	642		$	880		$	85		$	59,503		$	(17,111	)	$	—		$	43,999


(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 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 $44,059 related to future loss and loss expenses and $(60) related to 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 loss reserves, using the Random Sample estimation approach, at March 31, 2016 and December 31, 2015, are as follows:



Random Sample Approach	Gross loss reserves before subrogation recoveries ⁽¹⁾		Subrogation recoveries ⁽²⁾⁽³⁾			Gross loss reserves after subrogation recoveries
At March 31, 2016	$	1,298,065	$	(1,855,073	)	$	(557,008	)

At December 31, 2015	$	1,850,804	$	(2,829,575	)	$	(978,771	)


(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.

Summary of Rollforward of RMBS Subrogation, by Estimation Approach

Below is the rollforward of RMBS subrogation, by random sample estimation approach, for the affected periods:



	Three Months Ended March 31,
	2016			2015
Discounted RMBS subrogation (gross of reinsurance) at beginning of period	$	2,829,575		$	2,523,540
Changes recognized during the period:
Impact of sponsor actions ⁽¹⁾	(995,000		)	—
All other changes ⁽²⁾	20,498			44,813
Discounted RMBS subrogation (gross of reinsurance) at end of period	$	1,855,073		$	2,568,353


(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 may not have been subject to a sampling approach, are currently in negotiation or have been executed but the settlement amounts have not yet been received. Those that have not been subject to a sampling approach 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:



	2016		2017		2018		2019		2020		Thereafter
Amortization expense	$	84,089	$	99,230	$	88,572	$	80,088	$	74,213	$	723,774