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Segment Information
 6 Months Ended
Jun. 30, 2013
Segment Reporting [Abstract]  
Segment Information

13. SEGMENT INFORMATION

Ambac has two reportable segments, as follows: (i) Financial Guarantee, which provided financial guarantees (including credit derivatives) for public finance, structured finance and other obligations; and (ii) Financial Services, which provided investment agreements, funding conduits, interest rate and currency swaps, principally to clients of the financial guarantee business. Ambac’s reportable segments were 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 affiliates. Additionally, Ambac Assurance provides loans to the Financial Services businesses. Inter-segment revenues include the premiums and investment income earned under those agreements. Such premiums are determined as if they were premiums paid by third parties, that is, at current market prices.

 

Information provided below for “Corporate and Other” primarily relates to (i) Fresh Start items, including the discharge of liabilities subject to compromise and fair value adjustments to assets and liabilities (ii) amounts received by Ambac under the Mediation Agreement dated September 21, 2011 (as more fully described in Note 1); and (iii) other corporate activities, including interest income on the investment portfolio, including accrual of interest on the Junior Surplus Notes issued by the Segregated Account. Corporate and Other intersegment revenue relates to receipts under the Mediation Agreement. The following table is a summary of financial information by reportable segment for the affected periods:

 

Successor Ambac – Period from May 1 through June 30, 2013

    Financial
Guarantee		     Financial
Services		     Corporate
and Other		     Inter-segment
Eliminations		     Consolidated  

Revenues:

         

Unaffiliated customers (1)

    $ 160,275      $ 82,490      $ 20      $ —       $ 242,785   

Inter-segment

      399        (374 )      5,425        (5,450 )      —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total revenues

    $ 160,674      $ 82,116      $ 5,445      $ (5,450 )    $ 242,785   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Pre-tax income (loss) from continuing operations:

         

Unaffiliated customers (1) (2) (3)

    $ 124,890      $ 81,692      $ (787 )    $ —        $ 205,795   

Inter-segment

      (5,497 )      (523 )      6,020        —          —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Pre-tax income (loss) from continuing operations

    $ 119,393      $ 81,169      $ 5,233      $ —        $ 205,795   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total assets as of June 30, 2013

    $ 26,934,044      $ 486,346      $       54,977      $ —       $ 27,475,367   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net investment income

    $ 26,385      $ 158      $ 23      $ —        $ 26,566   

Insurance intangible amortization

    $ 24,952      $ —        $ —        $ —        $ 24,952   

Interest expense

    $ 20,776      $ 368      $ —        $ —        $ 21,144   

Reorganization items (4)

    $ —        $ —        $ 424      $ —        $ 424   

 

 

 

Predecessor Ambac – Period from April 1 through April 30, 2013

    Financial
Guarantee (3)		     Financial
Services		     Corporate
and Other		     Inter-segment
Eliminations		     Consolidated  

Revenues:

         

Unaffiliated customers (1)

    $ 382,957      $ (33,266 )    $ 10      $ —        $ 349,701   

Inter-segment

      214        (198 )      197,055        (197,071 )      —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total revenues

    $ 383,171      $ (33,464 )    $ 197,065      $ (197,071 )    $ 349,701   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Pre-tax income (loss) from continuing operations:

         

Unaffiliated customers (1) (2)

    $ 1,583,465      $ (35,614 )    $ 1,517,273      $ —        $ 3,065,124   

Inter-segment

      (197,115 )      (252 )      197,367      $ —          —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Pre-tax income (loss) from continuing operations

    $ 1,386,350      $ (35,866 )    $ 1,714,640      $ —        $ 3,065,124   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total assets as of April 30, 2013

    $ 28,287,321      $ 536,711      $ 29,403      $ —        $ 28,853,435   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net investment income

    $ 32,040      $ 361      $ 10      $ —        $ 32,411   

Interest expense

    $ 7,542      $ 318      $ —        $ —        $ 7,860   

Reorganization items (4)

    $ (1,231,550 )    $ 1,505      $ (1,517,194 )    $ —        $ (2,747,239 ) 

 

Predecessor Ambac – Period from January 1 through April 30, 2013

    Financial
Guarantee		     Financial
Services		     Corporate
and Other		     Inter-segment
Eliminations		     Consolidated  

Revenues:

           

Unaffiliated customers (1)

    $ 633,750      $ 7,339      $ 39      $ —        $ 641,128   

Inter-segment

      940        (882 )    $ 197,055        (197,113 )      —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total revenues

    $ 634,690      $ 6,457      $ 197,094      $ (197,113 )    $ 641,128   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Pre-tax income (loss) from continuing operations:

           

Unaffiliated customers (1) (2)

    $ 1,830,165      $ 3,233      $ 1,514,635      $ —        $ 3,348,033   

Inter-segment

      (197,187 )      (1,101 )      198,288      $ —          —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Pre-tax income (loss) from continuing operations

    $ 1,632,978      $ 2,132      $ 1,712,923      $ —        $ 3,348,033   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total assets as of April 30, 2013

    $ 28,287,321      $ 536,711      $ 29,403      $ —        $ 28,853,435   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net investment income

    $ 115,869      $ 1,572      $ 39      $ —        $ 117,480   

Interest expense

    $ 29,718      $ 1,307      $ —        $ —        $ 31,025   

Reorganization items (4)

    $ (1,231,550 )    $ 1,505      $ (1,515,135 )    $ —        $ (2,745,180 ) 

 

Predecessor Ambac – Three months ended June 30, 2012

    Financial
Guarantee		     Financial
Services		     Corporate
and Other		     Inter-segment
Eliminations		     Consolidated  

Revenues:

           

Unaffiliated customers (1)

    $ 87,665      $ (93,682 )    $ 56      $ —        $ (5,961 ) 

Inter-segment

      1,397        (1,346 )      —          (51 )      —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total revenues

    $ 89,062      $ (95,028 )    $ 56      $ (51 )    $ (5,961 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Pre-tax loss from continuing operations:

           

Unaffiliated customers (1) (2)

    $ (717,187 )    $ (96,257 )    $ (117 )    $ —       $ (813,561 ) 

Inter-segment

      (712 )      (429 )      1,141        —          —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Pre-tax loss from continuing operations

    $ (717,899 )    $ (96,686 )    $ 1,024      $ —        $ (813,561 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total assets as of June 30, 2012

    $ 25,771,887      $ 800,677      $       39,227      $ —       $ 26,611,791   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net investment income

    $ 89,953      $ 3,826      $ 57      $ —        $ 93,836   

Interest expense

    $ 30,205      $ 1,650      $ —        $ —        $ 31,855   

Reorganization items (4)

    $ —        $ —        $ 767      $ —        $ 767   

 

Predecessor Ambac – Six months ended June 30, 2012

    Financial
Guarantee		     Financial
Services		     Corporate
and Other		     Inter-segment
Eliminations		     Consolidated  

Revenues:

           

Unaffiliated customers (1)

    $ 357,492      $ (39,430 )    $ 113      $ —       $ 318,175   

Inter-segment

      2,896        (2,789 )      645        (752 )      —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total revenues

    $ 360,388      $ (42,219 )    $ 758      $ (752 )    $ 318,175   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Pre-tax loss from continuing operations:

           

Unaffiliated customers (1) (2)

    $ (510,900 )    $ (44,587 )    $ (4,452 )    $ —       $ (559,939 ) 

Inter-segment

      315        (1,784 )      1,469        —          —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Pre-tax loss from continuing operations

    $ (510,585 )    $ (46,371 )    $ (2,983 )    $ —        $ (559,939 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total assets as of June 30, 2012

    $ 25,771,887      $ 800,677      $       39,227      $ —       $ 26,611,791   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net investment income

    $ 195,214      $ 10,625      $ 114      $ —       $ 205,953   

Interest expense

    $ 62,254      $ 3,440      $ —       $ —       $ 65,694   

Reorganization items (4)

    $ —        $ —        $ 3,228      $ —       $ 3,228   

 

(1) Included in both revenues from unaffiliated customers and in pre-tax income (loss) from continuing operations from unaffiliated customers is net investment income.
(2) Included in pre-tax income (loss) from continuing operations from unaffiliated customers is interest expense.
(3) Included in pre-tax income from continuing operations from unaffiliated customers is amortization of intangible asset arising from financial guarantee contracts that were set to fair value upon adoption of Fresh Start. See “Note 7: Financial Guarantee Insurance Contracts,” for additional information.
(4) Refer to Note 2: Fresh Start Financial Statement Reporting, for a further discussion of Reorganization items.

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:

 

    Successor Ambac – Period from
May 1 through June 30, 2013		              Predecessor Ambac – Period from
April 1 through April 30, 2013		     Predecessor Ambac – Three Months
Ended June 30, 2012		  
    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		     Gross
Premiums
Written		     Net
Premiums
Earned		     Net Change in
Fair Value of
Credit
Derivatives		  

United States

   $ (24,493 )    $ 46,340      $ 14,948            $ (7,386 )    $ 23,537      $ (47,664 )    $ (31,936 )    $ 70,555      $ (4,816 ) 

United Kingdom

     (1,917 )      8,840        2,113              2,167        4,317        (3,686 )            5,971        25,551        (813 ) 

Other international

     (7,671 )      2,859        34,159              (5,376 )      1,890        (21,821 )      (1,908 )      6,936        (1,786 ) 
 

 

 

    

 

 

    

 

 

          

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total

   $ (34,081 )    $ 58,039      $ 51,220            $ (10,595 )    $ 29,744      $ (73,171 )    $ (27,873 )    $ 103,042      $ (7,415 ) 
 

 

 

    

 

 

    

 

 

          

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

    Successor Ambac – Period from
May 1 through June 30, 2013		              Predecessor Ambac – Period from
January 1 through April 30, 2013		     Predecessor Ambac – Six Months
Ended June 30, 2012		  
    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		     Gross
Premiums
Written		     Net
Premiums
Earned		     Net Change in
Fair Value of
Credit
Derivatives		  

United States

   $ (24,493 )    $ 46,340      $ 14,948            $ (16,102 )    $ 104,594      $ (31,134 )    $ (124,661 )    $ 143,541      $ (8,267 ) 

United Kingdom

     (1,917 )      8,840        2,113              10,673        18,071        (5,861 )      12,385        40,592        (4,437 ) 

Other international

     (7,671 )      2,859        34,159              (8,696 )      7,335        (23,389 )      (8,191 )      13,859        (1,933 ) 
 

 

 

    

 

 

    

 

 

          

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total

   $ (34,081 )    $ 58,039      $ 51,220            $ (14,125 )    $ 130,000      $ (60,384 )    $ (120,467 )    $ 197,992      $ (14,637 )