Segment Information

9 Months Ended

Sep. 30, 2015

Segment Reporting [Abstract]

Segment Information

12. SEGMENT INFORMATION

Ambac has two reportable business segments, as follows: (i) Financial Guarantee, which provides financial guarantees (including credit derivatives) for public finance, structured finance and international obligations; and (ii) Financial Services, which provides investment agreements, funding conduits, interest rate swaps, principally to clients of the financial guarantee business. Ambac’s reportable business segments are 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 subsidiaries. Additionally, Ambac Assurance provides loans to the Financial Services businesses. Inter-segment revenues include the premiums and investment income earned under those agreements.

Information provided below for unaffiliated “Corporate and Other” primarily relates to investment income on Ambac's investment portfolio. Equity in net income of investees accounted for by the equity method relates to the Owner Trust Certificate received when Ambac deposited its Segregated Account junior surplus note into a Trust (see Note 1. Background and Business Description in the Notes to Consolidated Financial Statements included Part II, Item 8 in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014 for further information relating to the sale by Ambac of a junior surplus note issued to it by the Segregated Account). Inter-segment for "Corporate and Other" relates to amounts received by Ambac under the Mediation Agreement dated September 21, 2011 (as more fully described in Note 1. Background and Business Description in the Notes to Consolidated Financial Statements included Part II, Item 8 in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014), including accrual of interest on the junior surplus note issued by the Segregated Account prior to Ambac's sale of the note.

The following table is a summary of financial information by reportable business segment for the affected periods:

	Financial Guarantee			Financial Services			Corporate and Other			Inter-segment Eliminations			Consolidated
Three Months Ended September 30, 2015:
Revenues:
Unaffiliated customers (1)	$	152,024		$	(66,997	)	$	1,538		$	—		$	86,565
Equity in net income of investees accounted for by equity method	—			—			1,125			—			1,125
Inter-segment	24			(204		)	252			(72		)	—
Total revenues before expenses and reorganization items	152,048			(67,201		)	2,915			(72		)	87,690
Pre-tax income (loss):
Unaffiliated customers (1)(2)(3)	(320,414		)	(67,655		)	(1,249		)	—			(389,318		)
Equity in net income of investees accounted for by equity method	—			—			1,125			—			1,125
Inter-segment	(763		)	425			1,302			(964		)	—
Pre-tax income (loss)	(321,177		)	(67,230		)	1,178			(964		)	(388,193		)
Total assets as of September 30, 2015	23,610,582			363,118			289,238			3,981			24,266,919
Net investment income	61,292			139			2,764			—			64,195
Insurance intangible amortization	39,680			—			—			—			39,680
Interest expense	29,738			161			—			—			29,899
Goodwill impairment	514,511			—			—			—			514,511
Three Months Ended September 30, 2014:
Revenues:
Unaffiliated customers (1)	$	170,335		$	(15,445	)	$	78		$	—		$	154,968
Equity in net income of investees accounted for by equity method	—			—			371			—			371
Inter-segment	237			(219		)	5,838			(5,856		)	—
Total revenues before expenses and reorganization items	170,572			(15,664		)	6,287			(5,856		)	155,339
Pre-tax income (loss):
Unaffiliated customers (1) (2) (3)	101,975			(16,304		)	(1,269		)	—			84,402
Equity in net income of investees accounted for by equity method	—			—			371			—			371
Inter-segment	(6,441		)	(281		)	6,722			—			—
Pre-tax income (loss)	95,534			(16,585		)	5,824			—			84,773
Total assets as of September 30, 2014	25,926,306			349,411			298,873			16,195			26,590,785
Net investment income	82,978			154			449			—			83,581
Insurance intangible amortization	41,908			—			—			—			41,908
Interest expense	31,491			350			—			—			31,841

(1) Included in both revenues from unaffiliated customers and in pre-tax income (loss) from unaffiliated customers is net investment income.

(2) Included in pre-tax income (loss) from unaffiliated customers is interest expense.

(3) Included in pre-tax income (loss) from unaffiliated customers is amortization of intangible asset and impairment of goodwill. Such assets were established upon the adoption of Fresh Start on April 30, 2013.

	Financial Guarantee			Financial Services			Corporate and Other			Inter-segment Eliminations			Consolidated
Nine Months Ended September 30, 2015:
Revenues:
Unaffiliated customers (1)	$	521,340		$	(53,566	)	$	2,951		$	—		$	470,725
Equity in net income of investees accounted for by equity method	—			—			3,208			—			3,208
Inter-segment	286			(565		)	388			(109		)	—
Total revenues before expenses and reorganization items	521,626			(54,131		)	6,547			(109		)	473,933
Pre-tax income (loss):
Unaffiliated customers (1)(2)(3)	172,271			(55,861		)	(5,136		)	—			111,274
Equity in net income of investees accounted for by equity method	—			—			3,208			—			3,208
Inter-segment	(2,087		)	(139		)	3,027			(801		)	—
Pre-tax income (loss)	170,184			(56,000		)	1,099			(801		)	114,482
Total assets as of September 30, 2015	23,610,582			363,118			289,238			3,981			24,266,919
Net investment income	195,270			401			6,260			—			201,931
Insurance intangible amortization	115,200			—			—			—			115,200
Interest expense	85,165			815			—			—			85,980
Goodwill impairment	514,511			—			—			—			514,511
Nine Months Ended September 30, 2014:
Revenues:
Unaffiliated customers (1)	$	437,591		$	(116,294	)	$	142		$	—		$	321,439
Equity in net income of investees accounted for by equity method	—			—			371			—			371
Inter-segment	937			(901		)	23,309			(23,345		)	—
Total revenues before expenses and reorganization items	438,528			(117,195		)	23,822			(23,345		)	321,810
Pre-tax income (loss):
Unaffiliated customers (1) (2) (3)	157,551			(119,287		)	(4,976		)	—			33,288
Equity in net income of investees accounted for by equity method	—			—			371			—			371
Inter-segment	(24,995		)	(1,150		)	26,145			—			—
Pre-tax income (loss)	132,556			(120,437		)	21,540			—			33,659
Total assets as of September 30, 2014	25,926,306			349,411			298,873			16,195			26,590,785
Net investment income	232,995			967			513			—			234,475
Insurance intangible amortization	109,878			—			—			—			109,878
Interest expense	94,886			1,236			—			—			96,122

(1) Included in both revenues from unaffiliated customers and in pre-tax income (loss) from unaffiliated customers is net investment income.

(2) Included in pre-tax income (loss) from unaffiliated customers is interest expense.

(3) Included in pre-tax income (loss) from unaffiliated customers is amortization of intangible asset and impairment of goodwill. Such assets were established upon the adoption of Fresh Start on April 30, 2013.

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:

	Three Months Ended September 30, 2015							Three Months Ended September 30, 2014
	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	$	(2,386	)	$	60,402	$	30,604	$	(15,355	)	$	44,882	$	262
United Kingdom	260			8,081		—		1,482			14,309		—
Other international	(6,584		)	3,052		6,348		173			5,640		7,154
Total	$	(8,710	)	$	71,535	$	36,952	$	(13,700	)	$	64,831	$	7,416

	Nine Months Ended September 30, 2015							Nine Months Ended September 30, 2014
	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	$	(5,172	)	$	163,094	$	39,286	$	(44,266	)	$	141,472	$	6,283
United Kingdom	7,295			23,659		—		(1,681		)	55,752		—
Other international	(20,963		)	11,379		5,460		(19,005		)	15,167		7,296
Total	$	(18,840	)	$	198,132	$	44,746	$	(64,952	)	$	212,391	$	13,579