Segment Information

9 Months Ended

Sep. 30, 2016

Segment Reporting [Abstract]

Segment Information

12. SEGMENT INFORMATION

Ambac has two reportable business segments, as follows: (i) Financial Guarantee, which provides financial guarantees (including credit derivatives) for public finance, structured finance and international obligations; and (ii) Financial Services, which provides investment agreements, funding conduits, interest rate swaps, principally to clients of the financial guarantee business. Ambac’s reportable business segments are strategic business units that offer different products and services. They are managed separately because each business required different marketing strategies, personnel skill sets and technology.

Ambac Assurance guarantees the swap and investment agreement obligations of its Financial Services subsidiaries. Additionally, Ambac Assurance provides loans to the Financial Services businesses. Inter-segment revenues include the premiums and investment income earned under those agreements.

Information provided below for unaffiliated “Corporate and Other” primarily relates to investment income on Ambac's investment portfolio. Equity in net income of investees accounted for by the equity method relates to the Owner Trust Certificate received when Ambac deposited its Segregated Account junior surplus note into a Trust (see Note 1. Background and Business Description in the Notes to Consolidated Financial Statements included Part II, Item 8 in the Company’s Annual Report on Form 10-K/A for the year ended December 31, 2015 for further information relating to the sale by Ambac of a junior surplus note issued to it by the Segregated Account). Inter-segment for "Corporate and Other" relates to amounts received by Ambac under the Mediation Agreement dated September 21, 2011, as more fully described in Note 1. Background and Business Description in the Notes to Consolidated Financial Statements included Part II, Item 8 in the Company’s Annual Report on Form 10-K/A for the year ended December 31, 2015.

The following table is a summary of financial information by reportable business segment for the affected periods:

	Financial Guarantee			Financial Services			Corporate and Other			Inter-segment Eliminations			Consolidated
Three Months Ended September 30, 2016:
Revenues:
Unaffiliated customers (1)	$	156,236		$	(14,286	)	$	1,888		$	—		$	143,838
Equity in net income of investees accounted for by equity method	—			—			1,190			—			1,190
Inter-segment	375			(308		)	229			(296		)	—
Total revenues before expenses and reorganization items	156,611			(14,594		)	3,307			(296		)	145,028
Pre-tax income:
Unaffiliated customers (1)(2)(3)	131,162			(14,912		)	(720		)	—			115,530
Equity in net income of investees accounted for by equity method	—			—			1,190			—			1,190
Inter-segment	(690		)	(435		)	1,125			—			—
Pre-tax income	130,472			(15,347		)	1,595			—			116,720
Total assets as of September 30, 2016	23,264,567			396,509			350,613			3,940			24,015,629
Net investment income	87,350			195			3,372			—			90,917
Insurance intangible amortization	44,553			—			—			—			44,553
Interest expense	31,352			141			—			—			31,493
Three Months Ended September 30, 2015:
Revenues:
Unaffiliated customers (1)	$	152,024		$	(66,997	)	$	1,538		$	—		$	86,565
Equity in net income of investees accounted for by equity method	—			—			1,125			—			1,125
Inter-segment	24			(204		)	252			(72		)	—
Total revenues before expenses and reorganization items	152,048			(67,201		)	2,915			(72		)	87,690
Pre-tax income (loss):
Unaffiliated customers (1) (2) (3)	(320,414		)	(67,655		)	(1,249		)	—			(389,318		)
Equity in net income of investees accounted for by equity method	—			—			1,125			—			1,125
Inter-segment	(763		)	425			1,302			(964		)	—
Pre-tax income (loss)	(321,177		)	(67,230		)	1,178			(964		)	(388,193		)
Total assets as of September 30, 2015	23,610,582			363,118			289,238			3,981			24,266,919
Net investment income	61,292			139			2,764			—			64,195
Insurance intangible amortization	39,680			—			—			—			39,680
Interest expense	29,738			161			—			—			29,899
Goodwill impairment	514,511			—			—			—			514,511

(1) Included in both revenues from unaffiliated customers and in pre-tax income from unaffiliated customers is net investment income.

(2) Included in pre-tax income from unaffiliated customers is interest expense.

(3) Included in pre-tax income from unaffiliated customers is the amortization of insurance intangible asset and impairment of goodwill. Such assets were established upon the adoption of Fresh Start on April 30, 2013.

	Financial Guarantee			Financial Services			Corporate and Other			Inter-segment Eliminations			Consolidated
Nine Months Ended September 30, 2016:
Revenues:
Unaffiliated customers (1)	$	393,557		$	(133,613	)	$	5,247		$	—		$	265,191
Equity in net income of investees accounted for by equity method	—			—			3,471			—			3,471
Inter-segment	1,214			(1,039		)	615			(790		)	—
Total revenues before expenses and reorganization items	394,771			(134,652		)	9,333			(790		)	268,662
Pre-tax income:
Unaffiliated customers (1)(2)(3)	328,906			(135,529		)	(5,763		)	—			187,614
Equity in net income of investees accounted for by equity method	—			—			3,471			—			3,471
Inter-segment	(1,896		)	(1,401		)	3,297			—			—
Pre-tax income	327,010			(136,930		)	1,005			—			191,085
Total assets as of September 30, 2016	23,264,567			396,509			350,613			3,940			24,015,629
Net investment income	212,595			596			9,305			—			222,496
Insurance intangible amortization	134,456			—			—			—			134,456
Interest expense	92,193			439			—			—			92,632
Nine Months Ended September 30, 2015:
Revenues:
Unaffiliated customers (1)	$	521,340		$	(53,566	)	$	2,951		$	—		$	470,725
Equity in net income of investees accounted for by equity method	—			—			3,208			—			3,208
Inter-segment	286			(565		)	388			(109		)	—
Total revenues before expenses and reorganization items	521,626			(54,131		)	6,547			(109		)	473,933
Pre-tax income:
Unaffiliated customers (1) (2) (3)	172,271			(55,861		)	(5,136		)	—			111,274
Equity in net income of investees accounted for by equity method	—			—			3,208			—			3,208
Inter-segment	(2,087		)	(139		)	3,027			(801		)	—
Pre-tax income	170,184			(56,000		)	1,099			(801		)	114,482
Total assets as of September 30, 2015	23,610,582			363,118			289,238			3,981			24,266,919
Net investment income	195,270			401			6,260			—			201,931
Insurance intangible amortization	115,200			—			—			—			115,200
Interest expense	85,165			815			—			—			85,980
Goodwill impairment	514,511			—			—			—			514,511

(1) Included in both revenues from unaffiliated customers and in pre-tax income from unaffiliated customers is net investment income.

(2) Included in pre-tax income from unaffiliated customers is interest expense.

(3) Included in pre-tax income from unaffiliated customers is the amortization of insurance intangible asset and impairment of goodwill. Such assets were established upon the adoption of Fresh Start on April 30, 2013.

The following table summarizes gross premiums written, net premiums earned and the net change in fair value of credit derivatives included in the Financial Guarantee segment by location of risk for the affected periods:

	Three Months Ended September 30, 2016							Three Months Ended September 30, 2015
	Gross Premiums Written			Net Premiums Earned		Net Change in Fair Value of Credit Derivatives		Gross Premiums Written			Net Premiums Earned		Net Change in Fair Value of Credit Derivatives
United States	$	(7,555	)	$	45,257	$	520	$	(2,386	)	$	60,402	$	30,604
United Kingdom	(598		)	6,018		—		260			8,081		—
Other international	(2,390		)	1,943		1,213		(6,584		)	3,052		6,348
Total	$	(10,543	)	$	53,218	$	1,733	$	(8,710	)	$	71,535	$	36,952

	Nine Months Ended September 30, 2016							Nine Months Ended September 30, 2015
	Gross Premiums Written			Net Premiums Earned		Net Change in Fair Value of Credit Derivatives		Gross Premiums Written			Net Premiums Earned		Net Change in Fair Value of Credit Derivatives
United States	$	(25,988	)	$	126,003	$	1,613	$	(5,172	)	$	163,094	$	39,286
United Kingdom	14,157			19,111		—		7,295			23,659		—
Other international	(27,533		)	2,306		16,941		(20,963		)	11,379		5,460
Total	$	(39,364	)	$	147,420	$	18,554	$	(18,840	)	$	198,132	$	44,746