Financial Guarantee Insurance Contracts (Tables)

6 Months Ended

Jun. 30, 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 June 30, 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
June 30, 2017:
Loss and loss expense reserves	$	2,418,005	$	600,510	$	2,869,074	$	(1,158,779	)	$	(146,657	)	$	4,582,153
Subrogation recoverable	581,533		148,878		41,217		(1,430,503		)	—			(658,875		)
Totals	$	2,999,538	$	749,388	$	2,910,291	$	(2,589,282	)	$	(146,657	)	$	3,923,278

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:



	Six Months Ended June 30,
	2017			2016
Beginning premium receivable	$	661,337		$	831,575
Premium receipts	(33,953		)	(39,569		)
Adjustments for changes in expected and contractual cash flows	4,285			(43,125		)
Accretion of premium receivable discount	8,379			9,967
Changes to uncollectable premiums	(151		)	4,337
Other adjustments (including foreign exchange)	13,279			(21,771		)
Ending premium receivable⁽¹⁾	$	653,176		$	741,414


(1)	Gross premium receivable includes premiums to be received in foreign denominated currencies most notably in British Pounds and Euros. At June 30, 2017 and 2016, premium receivables include British Pounds of $192,983 (£148,277) and $206,834 (£156,136), respectively, and Euros of $35,814 (€31,361) and $37,741 (€34,056), 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 June 30,
	2017					2016
	Written			Earned		Written			Earned
Direct	$	6,928		$	47,235	$	(4,041	)	$	44,974
Assumed	—			20		—			21
Ceded	238			4,103		(854		)	3,593
Net premiums	$	6,690		$	43,152	$	(3,187	)	$	41,402

	Six Months Ended June 30,
	2017					2016
	Written			Earned		Written			Earned
Direct	$	12,512		$	99,300	$	(28,821	)	$	101,963
Assumed	—			41		—			43
Ceded	(1,577		)	8,576		(6,899		)	7,804
Net premiums	$	14,089		$	90,765	$	(21,922	)	$	94,202

Schedule of Revenue from External Customers Attributed to Foreign Countries by Geographic Area [Table Text Block]

The following table summarizes net premiums earned by location of risk for the respective periods:



	Three Months Ended June 30,				Six Months Ended June 30,
	2017		2016		2017		2016
United States	$	36,006	$	34,632	$	76,627	$	80,746
United Kingdom	5,558		6,704		10,821		13,092
Other international	1,588		66		3,317		364
Total	$	43,152	$	41,402	$	90,765	$	94,202

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 June 30, 2017:



	Future premiums to be collected ⁽¹⁾		Future premiums to be earned net of reinsurance ⁽¹⁾
Three months ended:
September 30, 2017	$	17,154	$	23,632
December 31, 2017	14,693		20,366
Twelve months ended:
December 31, 2018	61,748		72,838
December 31, 2019	58,367		66,387
December 31, 2020	55,492		62,269
December 31, 2021	49,222		57,042
Five years ended:
December 31, 2026	217,611		233,432
December 31, 2031	173,390		157,907
December 31, 2036	102,072		88,261
December 31, 2041	35,463		30,421
December 31, 2046	16,977		14,596
December 31, 2051	5,250		6,148
December 31, 2056	240		686
Total	$	807,679	$	833,985

(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:



	Six Months Ended June 30,
	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	5,137		12
Prior year	195,974		(157,789		)
Total ^{(1) (2)}	201,111		(157,777		)
Loss and loss expenses (recovered) paid:
Current year	153		—
Prior year	7,607		(1,011,956		)
Total	7,760		(1,011,956		)
Foreign exchange effect	17,622		(48,260		)
Ending net loss and loss expense reserves	3,876,244		3,620,673
Reinsurance recoverable ⁽³⁾	47,034		30,108
Ending gross loss and loss expense reserves⁽⁴⁾	$	3,923,278	$	3,650,781


(1)	Total losses and loss expenses (benefit) includes $(16,469) and $7,607 for the six months ended June 30, 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 R&Ws within losses and loss expenses (benefit). The losses and loss expense (benefit) incurred associated with changes in estimated representation and warranties for the six months ended June 30, 2017 and 2016 was $22,175 and $(48,646), 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 $(568) and $(1,404) as of June 30, 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 $20,212 (€17,699) and $16,655 (€15,029) at June 30, 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 June 30, 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 June 30, 2017 and December 31, 2016 was 2.5% and 2.7%, respectively.



Surveillance Categories as of June 30, 2017
	I/SL			IA			II			III			IV			V			Total
Number of policies	23			23			33			47			168			4			298
Remaining weighted-average contract period (in years) ⁽¹⁾	11			22			11			21			13			3			16
Gross insured contractual payments outstanding:
Principal	$	1,050,971		$	418,857		$	1,630,620		$	2,591,392		$	7,347,507		$	49,370		$	13,088,717
Interest	327,175			376,557			730,585			7,624,470			2,293,047			18,197			11,370,031
Total	$	1,378,146		$	795,414		$	2,361,205		$	10,215,862		$	9,640,554		$	67,567		$	24,458,748
Gross undiscounted claim liability ⁽²⁾	$	3,845		$	33,672		$	110,022		$	1,430,192		$	6,058,978		$	67,526		$	7,704,235
Discount, gross claim liability	(363		)	(4,758		)	(19,363		)	(504,001		)	(599,815		)	(4,663		)	(1,132,963		)
Gross claim liability before all subrogation and before reinsurance	3,482			28,914			90,659			926,191			5,459,163			62,863			6,571,272
Less:
Gross RMBS subrogation⁽³⁾	$	—		$	—		$	—		$	—		$	(1,908,130	)	$	—		$	(1,908,130	)
Discount, RMBS subrogation	—			—			—			—			23,674			—			23,674
Discounted RMBS subrogation, before reinsurance	—			—			—			—			(1,884,456		)	—			(1,884,456		)
Less:
Gross other subrogation⁽⁴⁾	—			—			(18,962		)	(152,634		)	(596,660		)	(12,679		)	(780,935		)
Discount, other subrogation	—			—			8,889			11,529			52,126			3,565			76,109
Discounted other subrogation, before reinsurance	—			—			(10,073		)	(141,105		)	(544,534		)	(9,114		)	(704,826		)
Gross claim liability, net of all subrogation and discounts, before reinsurance	3,482			28,914			80,586			785,086			3,030,173			53,749			3,981,990
Less: Unearned premium revenue	(2,114		)	(6,758		)	(18,329		)	(61,611		)	(57,462		)	(383		)	(146,657		)
Plus: Loss expense reserves	13,481			2,174			331			18,414			53,396			149			87,945
Gross loss and loss expense reserves	$	14,849		$	24,330		$	62,588		$	741,889		$	3,026,107		$	53,515		$	3,923,278
Reinsurance recoverable reported on Balance Sheet ⁽⁵⁾	$	170		$	2,697		$	14,704		$	45,897		$	(17,002	)	$	—		$	46,466


(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 $47,034 related to future loss and loss expenses and $(568) 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 June 30, 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 June 30, 2017	$	1,360,985	$	(1,884,456	)	$	(523,471	)

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


(1)	Amount represents gross loss reserves for policies that have established a representation and warranty subrogation recovery. 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:



	Six Months Ended June 30,
	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⁾	(22,579		)	49,251
Discounted R&W subrogation (gross of reinsurance) at end of period	$	1,884,456		$	1,883,826

(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⁾	$	45,673	$	80,743	$	72,291	$	66,509	$	60,041	$	586,916

(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. If consummated, the Segregated Account transaction highlighted in Note 1. Background and Business Description will cause an acceleration of amortization expense for a portion of the insurance intangible asset.