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Employment Benefit Plans (Notes)
 12 Months Ended
Dec. 31, 2022
Share-Based Compensation Arrangement by Share-Based Payment Award, Options, Outstanding, Weighted Average Exercise Price [Abstract]  
Compensation and Employee Benefit Plans [Text Block]
18.    EMPLOYMENT BENEFIT PLANS
Postretirement Health Care and Postemployment Benefits
Ambac provides postretirement and postemployment/severance benefits, including health and life benefits for certain employees who meet predefined age and service requirements. None of the plans are currently funded. Postretirement and postemployment benefits expense, including severance benefits paid, were $2, $1 and $1 for the years ended December 31, 2022, 2021 and 2020, respectively.
Effective August 1, 2005, new employees were not eligible for postretirement benefits. The current postretirement benefit requires retirees to purchase their own medical insurance policy with a portion of their premium being reimbursed by Ambac. The unfunded accumulated postretirement benefit obligation was $11 as of December 31, 2022. The assumed health care cost trend rates range from 5.5% in 2023, decreasing ratably to 4.5% in 2032.
The following table sets forth projected benefit payments from Ambac’s postretirement plan over the next ten years for current retirees:
2023$— 
2024— 
2025— 
2026— 
20271 
Thereafter3 
Total$5 
The discount rate used in determining the projected benefit obligations for the postretirement plan is selected by reference to a pension liability index with similar duration to that of the benefit plan. The rates used for the projected plan benefit obligations at the measurement date for December 31, 2022 and 2021, were 5.00% and 2.75%, respectively.
Savings Incentive Plans
As a result of the acquisitions of All Trans and Capacity Marine effective November 1, 2022, Ambac has multiple savings incentive plans. Substantially all US employees are covered by one of these plans. The Plan sponsored by AFG includes employer matching contributions equal to 100% of the employees’ contributions, up to 3% of such participants’ compensation, as defined in the plan, plus 50% of contributions up to an additional 2% of compensation, subject to limits set by the Internal Revenue Code. Xchange employees moved to this plan from a previous plan sponsored by Xchange during 2022. The Xchange sponsored plan included employer matching contributions equal to 4% of such participants' compensation, as defined in the plan. Employees of All Trans and Capacity Marine are included in a multiple employer plan that has discretionary contributions for which none were made during Ambac's ownership of these entities. The total cost of the
savings incentive plans were $1, $1 and $1 for the years December 31, 2022, 2021 and 2020, respectively.
Incentive Compensation - Stock Units and Cash
Employees, directors and consultants of Ambac are eligible to participate in Ambac’s 2020 Incentive Plan, which is the successor plan to the 2013 Incentive Plan, subject to the discretion of the compensation committee of Ambac’s Board of Directors. There are 1,475,000 and 4,000,000 shares of Ambac's common stock authorized for awards under the 2020 Plan and 2013 Plan, respectively. Awards may also be made under the 2020 Plan with respect to the shares that remained available for grant under the 2013 Plan. In addition, shares subject to outstanding awards granted under the 2013 Plan that subsequently terminate by expiration or forfeiture, cancellation, or otherwise without the issuance of such shares become available for awards under the 2020 Plan. Of the total shares authorized for issuance pursuant to the 2020 Plan and 2013 Plan, the following are the number of shares available for future grant at December 31, 2022:
•74,907 shares when shares available for future grant are reduced by the maximum number of shares that could be issued pursuant to outstanding performance awards; and
•1,145,243 shares when shares available for future grant are reduced by the probable number of shares that could be issued pursuant to outstanding performance awards which are subject to change depending on actual performance.
On June 24, 2021, the compensation committee of Ambac's Board of Directors adopted the Ambac Financial Group, Inc. Executive Stock Deferral Plan (the “Stock Deferral Plan”). Under the Stock Deferral Plan, certain executives of AFG and its subsidiaries who are designated by the compensation committee as eligible to participate in the Stock Deferral Plan may elect to defer the settlement of all or a portion of the RSU (as defined below) awards and PSU (as defined below) awards that are granted to the executives to a future date(s) selected by the executive. Deferred awards under the Stock Deferral Plan (and any related dividend equivalents) will continue to be paid in shares of common stock of AFG, which will be issued under the 2020 Plan, provided that any dividend equivalents credited on a participant’s deferred awards in respect of cash dividends paid by AFG will be paid to the participant in cash. The Stock Deferral Plan is not funded, and deferred awards under the Stock Deferral Plan are not segregated from the Company’s general assets.
The amount of stock-based compensation expense and corresponding after-tax expense are as follows:
Year Ended December 31,
202220212020
Restricted stock units5 5 3 
Performance awards 12 10 8 
Total stock-based compensation$17 $14 $11 
Total stock-based compensation (after-tax)$17 $14 $11 
Restricted Stock Units (“RSUs”)
RSUs can be awarded to certain employees for a portion of their STIP compensation, LTIP compensation, sign-on and special awards for exceptional performance. RSUs can also be awarded to consultants for meeting certain contractual performance goals. The LTIP, sign-on, consultant and special awards generally vest in equal installments over a two to three year period. Such vesting is expressly conditioned upon continued service with Ambac through the applicable vesting date, although vesting may be accelerated in certain circumstances under the awards, including for terminations due to death, disability, eligible retirement, or involuntary termination by Ambac other than for cause.
As part of our director compensation program, prior to 2021 RSUs were awarded annually on or about April 30 of each year to directors and would vest on the last day of April of the following year. During 2021, the director compensation program was revised to provide for quarterly grants of RSUs that would vest one year from the grant date. These RSUs will not settle until the respective director’s termination from the board of directors or, if earlier, upon a change in control. All RSUs provide for accelerated vesting upon a change in control, death or disability or involuntary removal other than for cause (not including removal pursuant to a shareholder vote at a regularly scheduled annual meeting of shareholders). Upon termination (other than for cause), the unvested RSUs shall partially vest as of the date of such termination in an amount equal to the number of then outstanding unvested RSUs multiplied by a fraction, the numerator of which shall be the number of calendar days which have lapsed since the grant date and the denominator of which shall be the number of calendar days from the grant date until the next regularly scheduled quarterly grant date pursuant to Ambac’s director compensation program.
As of December 31, 2022, 923,250 RSUs remained outstanding, of which (i) 538,163 units required future service as a condition to the delivery of the underlying shares of common stock and (ii) 385,087 units do not require future service and are deferred for future settlement. As of December 31, 2021, 837,070 RSUs remained outstanding, of which (i) 504,764 units required future service as a condition to the delivery of the underlying shares of common stock, and (ii) 332,306 units did not require future service and were deferred for future settlement.
A summary of RSU activity for 2022 is as follows:
Shares
Weighted Average
Grant Date
Fair Value Per Share
Outstanding at beginning of period837,070 $17.82 
Granted352,141 $12.48 
Delivered or returned to plan (1)
(263,505)$17.13 
Forfeited(2,456)$15.65 
Outstanding at end of period923,250 $15.94 
(1)    When restricted stock unit awards issued by Ambac become taxable compensation to employees, shares may be withheld to cover the employee’s withholding taxes. For the year ended December 31, 2022, Ambac withheld 97,871 shares from
employees that settled restricted stock units to meet the required tax withholdings.
Ambac’s closing share price on the grant date was used to estimate the fair value of the service condition based RSU on the grant date. The weighted average grant date fair value per share of RSUs granted during 2022, 2021 and 2020 was $12.48, $17.39 and $17.36, respectively. As of December 31, 2022, there was $4 of total unrecognized compensation costs related to unvested RSUs granted. These costs are expected to be recognized over a weighted average period of 1.6 years. The fair value for RSUs vested and delivered during the year ended December 31, 2022, 2021 and 2020 was $4, $4 and $4, respectively.
Performance Stock Awards ("PSUs")
PSUs are awarded to certain employees for a portion of their LTIP compensation and vest after 3 years from grant date. The actual number of shares payable at settlement is subject to performance metrics relative to AFG, Xchange, Everspan and AAC. Actual payout can range from 0% to 240% of the number of units granted. Under currently outstanding award agreements, performance will be evaluated as follows:
•In regards to Xchange, for the 2021 and 2022 PSU awards, cumulative earnings before interest, taxes, depreciation and amortization over the vesting period.
•In regards to Everspan, for the 2022 PSU awards, cumulative earnings before interest, taxes, depreciation and amortization over the vesting period.
•In regards to AAC: (i) changes in AAC's assets relative to its insurance and financial obligations, which is intended to reward participants for increases in the relative value of AAC (2020 PSU awards only) and (ii) reductions in watch list and adversely classified credits, which is intended to reward participants for de-risking the financial guarantee insured portfolio.
•Relative Total Shareholder Return; the modifier will cause the payout at the end of the performance period to be increased or decreased 10% for awards issued through 2021 and 20% for 2022 awards, if AFG's stock performance compared to a peer group is at or above the 75th percentile or at or below the 25th percentile, respectively.
Pursuant to the LTIP award agreements if (i) a termination occurs by reason of disability, an involuntary termination by the Company other than for “cause,” or "retirement," the recipient would be entitled to receive the PSU award which would only be payable at the end of the relevant performance period and based on the satisfaction of the performance conditions related to such award at the time of termination and (ii) a termination occurred prior to the last day of the performance period by reason of death, the beneficiaries of the recipient would be entitled to receive the number of PSUs that the recipient would have been entitled to receive at a 100% overall payout multiple regardless of the outcome of any of the performance conditions. The current performance awards shall be settled within 75 days after the end of the performance period, including those with partial or accelerated vesting, subject to any deferrals made pursuant to the Stock Deferral Plan.
A summary of PSU activity for 2022 is as follows:
SharesWeighted Average
Grant Date
Fair Value Per Share
Outstanding at beginning of period722,056 $18.97 
Granted (1)
529,285 13.44 
Delivered (2)
(422,620)19.42 
Forfeited(7,361)16.93 
Performance adjustment (3)
97,591 19.17 
Outstanding at end of period918,951 $15.67 
(1)    Represents performance share units at 100% of units granted for LTIP Awards.
(2)    Reflects the number of performance shares attributable to the performance goals attained over the completed performance period and for which service conditions have been met. When performance stock unit awards issued by Ambac become taxable compensation to employees, shares may be withheld to cover the employee’s withholding taxes. For the year ended December 31, 2022, Ambac purchased 157,377 of shares from employees that settled performance based restricted stock units to meet the required tax withholdings.
(3)    Represents the number of additional shares issued for awards granted in 2019 as a result of actual performance during the performance period.
As of December 31, 2022, there was $8 of total unrecognized compensation costs related to the PSU portion of unvested performance awards, which are expected to be recognized over a weighted average period of 1.6 years. The fair value for PSUs vested and delivered during the year ended December 31, 2022, 2021 and 2020 was $5, $10 and $4, respectively.