Net Premiums Earned (Tables)

9 Months Ended

Sep. 30, 2012

Summary of Premium Receivable Roll-Forward

Below is the premium receivable roll-forward for the nine month and twelve month periods ended September 30, 2012 and December 31, 2011, respectively:


	September 30, 2012			December 31, 2011
Beginning premium receivable	$	2,028,479		$	2,422,596
Premium payments received		(115,336	)		(190,823	)
Adjustments for changes in expected life of homogeneous pools and actual changes to contractual cash flows		(198,811	)		(240,547	)
Accretion of premium receivable discount		38,801			62,841
Consolidation of certain VIEs		—			(104,736	)
Deconsolidation of certain VIEs		—			87,978
Other adjustments (including foreign exchange)		2,697			(8,830	)

Ending premium receivable	$	1,755,830		$	2,028,479

Summarized Future Gross Undiscounted Premiums Expected to be Collected and Future Expected Premiums Earned

The table below summarizes the future gross undiscounted premiums expected to be collected, and future expected premiums earned, net of reinsurance at September 30, 2012:


	Future premiums to be collected⁽¹⁾		Future expected premiums to be earned, net of reinsurance⁽¹⁾
Three months ended:
December 31, 2012	$	38,490	$	62,992

Twelve months ended:
December 31, 2013		138,330		226,879
December 31, 2014		141,878		204,041
December 31, 2015		136,275		190,320
December 31, 2016		130,297		179,438

Five years ended:
December 31, 2021		578,474		750,984
December 31, 2026		462,155		539,033
December 31, 2031		340,300		357,079
December 31, 2036		199,914		195,106
December 31, 2041		69,794		62,902
December 31, 2046		21,420		19,306
December 31, 2051		5,325		6,236
December 31, 2056		242		686

Total	$	2,262,894	$	2,795,002

(1)

The future premiums expected to be collected and future premiums expected to be earned, net of reinsurance disclosed in the above table relate to the discounted premium receivable asset and unearned premium liability 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 described above, which results in a higher premium receivable balance than if expected lives were considered. If installment paying policies are retired early as a result of rate step-ups or other early retirement provision incentives for the issuer, premiums reflected in the premium receivable asset and amounts reported in the above table for such policies may not be collected in the future.

Premiums Written on Gross and Net Basis

The table below shows premiums written on a gross and net basis for the three and nine month periods ended September 30, 2012 and 2011:


	Three Months Ended September 30,						Nine Months Ended September 30,
	2012			2011			2012			2011
Revenues:
Financial Guarantee:
Gross premiums written	($	55,310	)	$	242,573		($	175,777	)	($	125,712	)
Ceded premiums written		2,082			(2,047	)		18,055			18,742

Net premiums written	($	53,228	)	$	240,526		($	157,722	)	($	106,970	)