Financial Guarantee Insurance Contracts (Tables)

3 Months Ended

Mar. 31, 2017

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, 2017 and December 31, 2016:



	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, 2017:
Loss and loss expense reserves	$	2,406,397	$	565,369	$	2,862,877	$	(1,182,839	)	$	(141,475	)	$	4,510,329
Subrogation recoverable	581,979		140,242		44,638		(1,446,833		)	—			(679,974		)
Totals	$	2,988,376	$	705,611	$	2,907,515	$	(2,629,672	)	$	(141,475	)	$	3,830,355

December 31, 2016:
Loss and loss expense reserves	$	2,411,105	$	529,703	$	2,681,198	$	(1,098,096	)	$	(143,141	)	$	4,380,769
Subrogation recoverable	583,042		132,139		68,419		(1,468,331		)	—			(684,731		)
Totals	$	2,994,147	$	661,842	$	2,749,617	$	(2,566,427	)	$	(143,141	)	$	3,696,038

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,
	2017			2016
Beginning premium receivable	$	661,337		$	831,575
Premium receipts	(17,978		)	(21,377		)
Adjustments for changes in expected and contractual cash flows	1,352			(35,029		)
Accretion of premium receivable discount	4,244			5,123
Changes to uncollectable premiums	(12		)	5,126
Other adjustments (including foreign exchange)	3,734			(3,340		)
Ending premium receivable⁽¹⁾	$	652,677		$	782,078


(1)	Gross premium receivable includes premiums to be received in foreign denominated currencies most notably in British Pounds and Euros. At March 31, 2017 and 2016, premium receivables include British Pounds of $185,204 (£147,726) and $220,662 (£153,536), respectively, and Euros of $34,908 (€32,671) and $47,245 (€41,487), respectively.

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, 2017
	2017					2016
	Written			Earned		Written			Earned
Direct	$	5,584		$	52,065	$	(24,780	)	$	56,990
Assumed	—			21		—			21
Ceded	(1,815		)	4,473		(6,045		)	4,211
Net premiums	$	7,399		$	47,613	$	(18,735	)	$	52,800

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, 2017:



	Future premiums to be collected ⁽¹⁾		Future premiums to be earned net of reinsurance ⁽¹⁾
Three months ended:
June 30, 2017	$	15,490	$	26,449
September 30, 2017	16,958		23,676
December 31, 2017	14,583		20,442
Twelve months ended:
December 31, 2018	61,045		73,108
December 31, 2019	57,574		66,576
December 31, 2020	54,725		62,413
December 31, 2021	48,636		57,214
Five years ended:
December 31, 2026	215,417		233,977
December 31, 2031	172,005		157,264
December 31, 2036	101,505		88,021
December 31, 2041	35,221		30,593
December 31, 2046	16,921		14,783
December 31, 2051	5,250		6,148
December 31, 2056	239		686
Total	$	815,569	$	861,350

(1)

Future premiums to be collected are 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 premiums 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 Policies in the Notes to Consolidated Financial Statements included in Ambac's Annual Report on Form 10-K for the year ended December 31, 2016. 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 different 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,
	2017		2016
Beginning gross loss and loss expense reserves	$	3,696,038	$	2,858,813
Reinsurance recoverable	30,767		44,059
Beginning balance of net loss and loss expense reserves	3,665,271		2,814,754
Losses and loss expenses (benefit):
Current year	1,543		768
Prior year	133,468		(106,049		)
Total ^{(1) (2)}	135,011		(105,281		)
Loss and loss expenses (recovered) paid:
Current year	696		—
Prior year	9,749		(916,206		)
Total	10,445		(916,206		)
Foreign exchange effect	5,827		(10,081		)
Ending net loss and loss expense reserves	3,795,664		3,615,598
Reinsurance recoverable ⁽³⁾	34,691		27,478
Ending gross loss and loss expense reserves⁽⁴⁾	$	3,830,355	$	3,643,076


(1)	Total losses and loss expenses (benefit) incurred includes $4,112 and $9,454 for the three months ended March 31, 2017 and 2016, respectively, related to ceded reinsurance.

(2)

Ambac records the impact of estimated recoveries related to securitized loans in RMBS transactions that breached certain representations and warranties within losses and loss expenses (benefit). The losses and loss expense (benefit) incurred associated with changes in estimated representation and warranties for the three months ended March 31, 2017 and 2016 was $13,797 and $(20,319), respectively.


(3)	Represents reinsurance recoverable on future loss and loss expenses. Additionally, the Balance Sheet line "Reinsurance recoverable on paid and unpaid losses" includes reinsurance recoverables (payables) of $(418) and $(162) as of March 31, 2017 and 2016, respectively, related to previously presented loss and loss expenses and subrogation.


(4)	Includes Euro denominated gross loss and loss expense reserves of $20,984 (€19,639) and $22,321 (€19,600) at March 31, 2017 and 2016, 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, 2017 and December 31, 2016. Gross par exposures include capital appreciation bonds which are reported at the par amount at the time of issuance of the insurance policy as opposed to the current accreted value of the bond. The weighted average risk-free rate used to discount loss reserves at March 31, 2017 and December 31, 2016 was 2.6% and 2.7%, respectively.



Surveillance Categories as of March 31, 2017
	I/SL			IA			II			III			IV			V			Total
Number of policies	19			20			35			46			166			3			289
Remaining weighted-average contract period (in years) ⁽¹⁾	11			6			13			21			13			5			16
Gross insured contractual payments outstanding:
Principal	$	925,810		$	345,593		$	1,656,293		$	2,588,384		$	7,581,597		$	49,247		$	13,146,924
Interest	334,340			74,931			738,349			7,631,485			2,291,449			14,182			11,084,736
Total	$	1,260,150		$	420,524		$	2,394,642		$	10,219,869		$	9,873,046		$	63,429		$	24,231,660
Gross undiscounted claim liability ⁽²⁾	$	4,038		$	1,463		$	87,521		$	1,440,449		$	6,127,145		$	63,429		$	7,724,045
Discount, gross claim liability	(410		)	(86		)	(19,176		)	(525,964		)	(656,494		)	(5,515		)	(1,207,645		)
Gross claim liability before all subrogation and before reinsurance	3,628			1,377			68,345			914,485			5,470,651			57,914			6,516,400
Less:
Gross RMBS subrogation⁽³⁾	$	—		$	—		$	—		$	—		$	(1,912,844	)	$	—		$	(1,912,844	)
Discount, RMBS subrogation	—			—			—			—			19,870			—			19,870
Discounted RMBS subrogation, before reinsurance	—			—			—			—			(1,892,974		)	—			(1,892,974		)
Less:
Gross other subrogation⁽⁴⁾	—			—			(17,848		)	(161,545		)	(630,230		)	(12,842		)	(822,465		)
Discount, other subrogation	—			—			8,826			14,160			59,010			3,771			85,767
Discounted other subrogation, before reinsurance	—			—			(9,022		)	(147,385		)	(571,220		)	(9,071		)	(736,698		)
Gross claim liability, net of all subrogation and discounts, before reinsurance	3,628			1,377			59,323			767,100			3,006,457			48,843			3,886,728
Less: Unearned premium revenue	(2,324		)	(625		)	(18,733		)	(62,228		)	(57,199		)	(366		)	(141,475		)
Plus: Loss expense reserves	10,013			203			521			16,206			58,159			—			85,102
Gross loss and loss expense reserves	$	11,317		$	955		$	41,111		$	721,078		$	3,007,417		$	48,477		$	3,830,355
Reinsurance recoverable reported on Balance Sheet ⁽⁵⁾	$	150		$	3		$	8,865		$	42,314		$	(17,059	)	$	—		$	34,273


(1)	Remaining weighted-average contract period is weighted based on projected gross claims over the lives of the respective policies.


(2)	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.


(3)	RMBS subrogation represents Ambac’s estimate of subrogation recoveries from RMBS transaction sponsors for representation and warranty ("R&W") breaches.


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


(5)	Reinsurance recoverable reported on Balance Sheet includes reinsurance recoverables of $34,691 related to future loss and loss expenses and $(418) related to presented loss and loss expenses and subrogation.



Surveillance Categories as of December 31, 2016
	I/SL			IA			II			III			IV			V			Total
Number of policies	19			22			26			43			169			3			282
Remaining weighted-average contract period (in years) ⁽¹⁾	9			8			30			17			14			5			16
Gross insured contractual payments outstanding:
Principal	$	918,456		$	733,036		$	1,992,543		$	1,779,889		$	7,926,991		$	49,247		$	13,400,162
Interest	345,802			199,631			7,080,969			1,110,051			2,275,421			14,185			11,026,059
Total	$	1,264,258		$	932,667		$	9,073,512		$	2,889,940		$	10,202,412		$	63,432		$	24,426,221
Gross undiscounted claim liability ⁽²⁾	$	3,439		$	21,175		$	547,550		$	861,455		$	6,139,060		$	63,431		$	7,636,110
Discount, gross claim liability	(314		)	(1,243		)	(331,234		)	(256,108		)	(710,608		)	(5,859		)	(1,305,366		)
Gross claim liability before all subrogation and before reinsurance	3,125			19,932			216,316			605,347			5,428,452			57,572			6,330,744
Less:
Gross RMBS subrogation ⁽³⁾	—			—			—			—			(1,926,165		)	—			(1,926,165		)
Discount, RMBS subrogation	—			—			—			—			19,130			—			19,130
Discounted RMBS subrogation, before reinsurance	—			—			—			—			(1,907,035		)	—			(1,907,035		)
Less:
Gross other subrogation ⁽⁴⁾	—			—			(14,529		)	(118,272		)	(593,919		)	(12,751		)	(739,471		)
Discount, other subrogation	—			—			6,526			13,426			56,273			3,854			80,079
Discounted other subrogation, before reinsurance	—			—			(8,003		)	(104,846		)	(537,646		)	(8,897		)	(659,392		)
Gross claim liability, net of all subrogation and discounts, before reinsurance	3,125			19,932			208,313			500,501			2,983,771			48,675			3,764,317
Less: Unearned premium revenue	(2,394		)	(1,807		)	(49,578		)	(31,785		)	(57,194		)	(383		)	(143,141		)
Plus: Loss expense reserves	6,621			339			777			11,036			56,089			—			74,862
Gross loss and loss expense reserves	$	7,352		$	18,464		$	159,512		$	479,752		$	2,982,666		$	48,292		$	3,696,038
Reinsurance recoverable reported on Balance Sheet⁽⁵⁾	$	120		$	6,063		$	2,737		$	39,352		$	(17,854	)	$	—		$	30,418


(1)	Remaining weighted-average contract period is weighted based on projected gross claims over the lives of the respective policies.


(2)	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.


(3)	RMBS subrogation represents Ambac’s estimate of subrogation recoveries from RMBS transaction sponsors for R&W breaches.


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


(5)	Reinsurance recoverable reported on Balance Sheet includes reinsurance recoverables of $30,767 related to future loss and loss expenses and $(349) related to presented loss and loss expenses and subrogation.

Summary of Balance of Subrogation Recoveries and Related Claim Liabilities, by Estimation Approach

The balance of R&W subrogation recoveries and the related loss reserves, using the Random Sample estimation approach, at March 31, 2017 and December 31, 2016, 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, 2017	$	1,348,141	$	(1,892,974	)	$	(544,833	)

At December 31, 2016	$	1,351,640	$	(1,907,035	)	$	(555,395	)


(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 future cash flows for each policy. To the extent losses have been paid but not yet fully recovered, the recorded amount of R&W 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 R&W subrogation, by random sample estimation approach, for the affected periods:



	Three Months Ended March 31,
	2017			2016
Discounted R&W subrogation (gross of reinsurance) at beginning of period	$	1,907,035		$	2,829,575
Changes recognized during the period:
Impact of sponsor actions ⁽¹⁾	—			(995,000		)
All other changes ⁽²⁾	(14,061		)	20,498
Discounted R&W subrogation (gross of reinsurance) at end of period	$	1,892,974		$	1,855,073

(1)

Sponsor actions include loan repurchases, direct payments to Ambac and other contributions from sponsors. In January 2016, Ambac Assurance settled its RMBS-related disputes and litigation against JP Morgan Chase & Co. and certain of its affiliates (collectively "JP Morgan"). Pursuant to the settlement, JP Morgan paid Ambac Assurance $995,000 in cash in return for releases of all of Ambac Assurance's claims against JP Morgan arising from certain RMBS transactions insured by Ambac Assurance. Ambac Assurance also agreed to withdraw its objections to JP Morgan's global RMBS settlement with RMBS trustees.

(2)

All other changes which may impact R&W 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 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:



	2017		2018		2019		2020		2021		Thereafter
Amortization expense ⁽¹⁾	$	69,876	$	80,522	$	72,085	$	66,314	$	59,899	$	582,463


(1)	Future amortization considers the use of contractual lives for many bond types which do not have homogeneous pools of underlying collateral. Actual maturities will differ from contractual maturities because borrowers may have the right to call or prepay certain obligations. If those bonds types are retired early, amortization expense may differ in the period of call or refinancing.