FORM 10-Q |
x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) |
OF THE SECURITIES EXCHANGE ACT OF 1934 |
¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) |
OF THE SECURITIES EXCHANGE ACT OF 1934 |
Ambac Financial Group, Inc. |
(Exact name of Registrant as specified in its charter) |
Delaware | 13-3621676 | |
(State of incorporation) | (I.R.S. employer identification no.) | |
One State Street Plaza, New York, New York | 10004 | |
(Address of principal executive offices) | (Zip code) |
212-658-7470 |
(Registrant's telephone number, including area code) |
Large accelerated filer | x | Accelerated filer | ¨ | Non-accelerated filer | ¨ | Smaller reporting company | ¨ | Emerging growth company | ¨ |
PAGE | |||
PART I. | FINANCIAL INFORMATION | ||
Item 1. | Unaudited Consolidated Financial Statements of Ambac Financial Group, Inc. and Subsidiaries | ||
Item 2. | |||
Item 3. | |||
Item 4. | |||
PART II. | OTHER INFORMATION | ||
Item 1. | |||
Item 1A. | |||
Item 2. | |||
Item 3. | |||
Item 4. | |||
Item 5. | |||
Item 6. | |||
September 30, | December 31, | ||||||
(Dollars in thousands, except share data) (September 30, 2017 (Unaudited)) | 2017 | 2016 | |||||
Assets: | |||||||
Investments: | |||||||
Fixed income securities, at fair value (amortized cost of $4,825,555 and $5,435,385) | $ | 4,978,118 | $ | 5,554,215 | |||
Fixed income securities pledged as collateral, at fair value (amortized cost of $99,424 and $64,833) | 99,424 | 64,905 | |||||
Short-term investments, at fair value (amortized cost of $716,666 and $430,827) | 716,516 | 430,788 | |||||
Other investments (includes $406,310 and $420,304 at fair value) | 439,987 | 450,307 | |||||
Total investments | 6,234,045 | 6,500,215 | |||||
Cash and cash equivalents | 107,018 | 91,025 | |||||
Receivable for securities | 68,686 | 2,090 | |||||
Investment income due and accrued | 20,137 | 26,023 | |||||
Premium receivables | 601,757 | 661,337 | |||||
Reinsurance recoverable on paid and unpaid losses | 45,976 | 30,418 | |||||
Deferred ceded premium | 54,773 | 69,624 | |||||
Subrogation recoverable | 703,930 | 684,731 | |||||
Loans | 10,390 | 4,160 | |||||
Derivative assets | 77,287 | 77,742 | |||||
Insurance intangible asset | 877,972 | 962,080 | |||||
Other assets | 48,228 | 158,423 | |||||
Variable interest entity assets: | |||||||
Fixed income securities, at fair value | 2,785,608 | 2,622,566 | |||||
Restricted cash | 37,793 | 4,873 | |||||
Loans, at fair value | 11,557,788 | 10,658,963 | |||||
Derivative assets | 57,714 | 80,407 | |||||
Other assets | 3,481 | 1,025 | |||||
Total assets | $ | 23,292,583 | $ | 22,635,702 | |||
Liabilities and Stockholders’ Equity: | |||||||
Liabilities: | |||||||
Unearned premiums | $ | 817,538 | $ | 967,258 | |||
Loss and loss expense reserves | 4,704,285 | 4,380,769 | |||||
Ceded premiums payable | 38,593 | 42,529 | |||||
Obligations under investment agreements | — | 82,358 | |||||
Deferred taxes | 1,930 | 1,720 | |||||
Current taxes | 18,484 | 14,280 | |||||
Long-term debt | 988,148 | 1,114,405 | |||||
Accrued interest payable | 417,522 | 421,975 | |||||
Derivative liabilities | 90,899 | 319,286 | |||||
Other liabilities | 65,840 | 76,589 | |||||
Payable for securities purchased | 55,486 | 1,084 | |||||
Variable interest entity liabilities: | |||||||
Accrued interest payable | 3,213 | 859 | |||||
Long-term debt, at fair value | 12,229,569 | 11,155,936 | |||||
Derivative liabilities | 2,088,922 | 2,078,601 | |||||
Other liabilities | 17 | 29 | |||||
Total liabilities | 21,520,446 | 20,657,678 | |||||
Commitments and contingencies (See Note 11) | |||||||
Stockholders’ equity: | |||||||
Preferred stock, par value $0.01 per share; 20,000,000 shares authorized shares; issued and outstanding shares—none | — | — | |||||
Common stock, par value $0.01 per share; 130,000,000 shares authorized; issued and outstanding shares: 45,275,982 and 45,194,954 | 453 | 452 | |||||
Additional paid-in capital | 198,629 | 195,267 | |||||
Accumulated other comprehensive income (loss) | 62,680 | (38,990 | ) | ||||
Retained earnings | 1,246,736 | 1,557,681 | |||||
Treasury stock, shares at cost: 24,816 and 22,458 | (471 | ) | (496 | ) | |||
Total Ambac Financial Group, Inc. stockholders’ equity | 1,508,027 | 1,713,914 | |||||
Noncontrolling interest | 264,110 | 264,110 | |||||
Total stockholders’ equity | 1,772,137 | 1,978,024 | |||||
Total liabilities and stockholders’ equity | $ | 23,292,583 | $ | 22,635,702 |
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
(Dollars in thousands, except share data) | 2017 | 2016 | 2017 | 2016 | ||||||||||||
Revenues: | ||||||||||||||||
Net premiums earned | $ | 52,989 | $ | 53,218 | $ | 143,754 | 147,420 | |||||||||
Net investment income: | ||||||||||||||||
Securities available-for-sale and short-term | 80,999 | 79,530 | 235,092 | 201,880 | ||||||||||||
Other investments | 6,178 | 11,387 | 18,804 | 20,616 | ||||||||||||
Total net investment income | 87,177 | 90,917 | 253,896 | 222,496 | ||||||||||||
Other-than-temporary impairment losses: | ||||||||||||||||
Total other-than-temporary impairment losses | (25,664 | ) | (15,906 | ) | (48,581 | ) | (82,856 | ) | ||||||||
Portion of other-than-temporary impairment recognized in other comprehensive income | 12,154 | 13,053 | 29,366 | 63,228 | ||||||||||||
Net other-than-temporary impairment losses recognized in earnings | (13,510 | ) | (2,853 | ) | (19,215 | ) | (19,628 | ) | ||||||||
Net realized investment gains (losses) | 6,150 | 11,749 | 5,434 | 27,748 | ||||||||||||
Change in fair value of credit derivatives: | ||||||||||||||||
Realized gains and other settlements | 134 | 226 | 1,467 | 711 | ||||||||||||
Unrealized gains (losses) | 45 | 1,507 | 6,388 | 17,843 | ||||||||||||
Net change in fair value of credit derivatives | 179 | 1,733 | 7,855 | 18,554 | ||||||||||||
Net gains (losses) on interest rate derivatives | 3,984 | (14,510 | ) | 36,538 | (134,265 | ) | ||||||||||
Net realized gains (losses) on extinguishment of debt | — | 24 | 4,920 | 4,845 | ||||||||||||
Other income (expense) | 46 | 2,693 | 427 | 17,611 | ||||||||||||
Income (loss) on variable interest entities | (4,049 | ) | 2,057 | (1,567 | ) | (16,119 | ) | |||||||||
Total revenues | 132,966 | 145,028 | 432,042 | 268,662 | ||||||||||||
Expenses: | ||||||||||||||||
Losses and loss expenses (benefit) | 209,806 | (69,204 | ) | 410,917 | (226,981 | ) | ||||||||||
Insurance intangible amortization | 45,690 | 44,553 | 116,686 | 134,456 | ||||||||||||
Operating expenses | 33,791 | 21,466 | 92,822 | 77,470 | ||||||||||||
Interest expense | 29,145 | 31,493 | 88,951 | 92,632 | ||||||||||||
Total expenses | 318,432 | 28,308 | 709,376 | 77,577 | ||||||||||||
Pre-tax income (loss) | (185,466 | ) | 116,720 | (277,334 | ) | 191,085 | ||||||||||
Provision for income taxes | 5,439 | 15,282 | 31,902 | 21,877 | ||||||||||||
Net income (loss) | (190,905 | ) | 101,438 | (309,236 | ) | 169,208 | ||||||||||
Less: net gain (loss) attributable to noncontrolling interest | — | (36 | ) | — | (328 | ) | ||||||||||
Net income (loss) attributable to common shareholders | $ | (190,905 | ) | $ | 101,474 | $ | (309,236 | ) | $ | 169,536 | ||||||
Other comprehensive income (loss), after tax: | ||||||||||||||||
Net income (loss) | $ | (190,905 | ) | $ | 101,438 | $ | (309,236 | ) | $ | 169,208 | ||||||
Unrealized gains (losses) on securities, net of deferred income taxes of $0 | (434 | ) | 24,719 | 33,550 | 132,680 | |||||||||||
Gains (losses) on foreign currency translation, net of deferred income taxes of $0 | 24,624 | (13,323 | ) | 66,509 | (86,256 | ) | ||||||||||
Changes to postretirement benefit, net of tax of $0 | (338 | ) | (254 | ) | 1,611 | 278 | ||||||||||
Total other comprehensive income (loss), net of tax | 23,852 | 11,142 | 101,670 | 46,702 | ||||||||||||
Total comprehensive income (loss) | (167,053 | ) | 112,580 | (207,566 | ) | 215,910 | ||||||||||
Less: comprehensive (gain) loss attributable to the noncontrolling interest: | ||||||||||||||||
Net gain (loss) | — | (36 | ) | — | (328 | ) | ||||||||||
Total comprehensive income (loss) attributable to Ambac Financial Group, Inc. | $ | (167,053 | ) | $ | 112,616 | $ | (207,566 | ) | $ | 216,238 | ||||||
Net income (loss) per share attributable to Ambac Financial Group, Inc. common stockholders | ||||||||||||||||
Basic | $ | (4.20 | ) | $ | 2.24 | $ | (6.82 | ) | $ | 3.75 | ||||||
Diluted | $ | (4.20 | ) | $ | 2.22 | $ | (6.82 | ) | $ | 3.74 |
Ambac Financial Group, Inc. | |||||||||||||||||||||||||||||||
(Dollars in thousands) | Total | Retained Earnings | Accumulated Other Comprehensive Income (Loss) | Preferred Stock | Common Stock | Additional Paid-in Capital | Common Stock Held in Treasury, at Cost | Noncontrolling Interest | |||||||||||||||||||||||
Balance at January 1, 2017 | $ | 1,978,024 | $ | 1,557,681 | $ | (38,990 | ) | $ | — | $ | 452 | $ | 195,267 | $ | (496 | ) | $ | 264,110 | |||||||||||||
Total comprehensive income | (207,566 | ) | (309,236 | ) | 101,670 | — | — | — | — | — | |||||||||||||||||||||
Adjustment to initially apply ASU 2016-09 | (137 | ) | (137 | ) | — | — | — | — | — | — | |||||||||||||||||||||
Stock-based compensation | 3,362 | — | — | — | — | 3,362 | — | — | |||||||||||||||||||||||
Cost of shares (acquired) issued under equity plan | (1,547 | ) | (1,572 | ) | — | — | — | — | 25 | — | |||||||||||||||||||||
Issuance of common stock | 1 | — | — | — | 1 | — | — | — | |||||||||||||||||||||||
Balance at September 30, 2017 | $ | 1,772,137 | $ | 1,246,736 | $ | 62,680 | $ | — | $ | 453 | $ | 198,629 | $ | (471 | ) | $ | 264,110 | ||||||||||||||
Balance at January 1, 2016 | $ | 1,958,346 | $ | 1,478,439 | $ | 15,215 | $ | — | $ | 450 | $ | 190,813 | $ | (118 | ) | $ | 273,547 | ||||||||||||||
Total comprehensive income | 215,910 | 169,536 | 46,702 | — | — | — | — | (328 | ) | ||||||||||||||||||||||
Adjustment to initially apply ASU 2014-13 | — | 6,442 | — | — | — | — | — | (6,442 | ) | ||||||||||||||||||||||
Stock-based compensation | 4,228 | — | — | — | — | 4,228 | — | — | |||||||||||||||||||||||
Cost of shares (acquired) issued under equity plan | (9 | ) | (127 | ) | — | — | — | — | 118 | — | |||||||||||||||||||||
Cost of warrants acquired | (2,104 | ) | (1,444 | ) | — | — | — | (660 | ) | — | — | ||||||||||||||||||||
Issuance of common stock | 1 | — | — | — | 1 | — | — | — | |||||||||||||||||||||||
Warrants exercised | 2 | — | — | — | — | 2 | — | — | |||||||||||||||||||||||
Balance at September 30, 2016 | $ | 2,176,374 | $ | 1,652,846 | $ | 61,917 | $ | — | $ | 451 | $ | 194,383 | $ | — | $ | 266,777 |
Nine Months Ended September 30, | ||||||||
(Dollars in thousands) | 2017 | 2016 | ||||||
Cash flows from operating activities: | ||||||||
Net income (loss) attributable to common shareholders | $ | (309,236 | ) | $ | 169,536 | |||
Noncontrolling interest in subsidiaries’ earnings | — | (328 | ) | |||||
Net income (loss) | $ | (309,236 | ) | $ | 169,208 | |||
Adjustments to reconcile net income to net cash used in operating activities: | ||||||||
Depreciation and amortization | 766 | 920 | ||||||
Amortization of bond premium and discount | (133,901 | ) | (102,956 | ) | ||||
Share-based compensation | 3,362 | 4,228 | ||||||
Deferred income taxes | 210 | (469 | ) | |||||
Current income taxes | 4,441 | 11,848 | ||||||
Unearned premiums, net | (137,127 | ) | (210,722 | ) | ||||
Losses and loss expenses, net | 282,317 | 666,196 | ||||||
Ceded premiums payable | (3,936 | ) | (9,983 | ) | ||||
Investment income due and accrued | 5,874 | (145 | ) | |||||
Premium receivables | 62,205 | 126,047 | ||||||
Accrued interest payable | 27,295 | 45,201 | ||||||
Amortization of insurance intangible assets | 116,686 | 134,456 | ||||||
Net mark-to-market (gains) losses | (6,388 | ) | (17,843 | ) | ||||
Net realized investment gains | (5,434 | ) | (27,748 | ) | ||||
Other-than-temporary impairment charges | 19,215 | 19,628 | ||||||
(Gain) loss on extinguishment of debt | (4,920 | ) | (4,845 | ) | ||||
Variable interest entity activities | 1,567 | 16,119 | ||||||
Derivative assets and liabilities | (211,659 | ) | 81,517 | |||||
Other, net | 9,932 | (75,125 | ) | |||||
Net cash provided by (used in) operating activities | (278,731 | ) | 825,532 | |||||
Cash flows from investing activities: | ||||||||
Proceeds from sales of bonds | 1,523,182 | 457,423 | ||||||
Proceeds from matured bonds | 669,979 | 940,948 | ||||||
Purchases of bonds | (1,560,024 | ) | (2,085,939 | ) | ||||
Proceeds from sales of other invested assets | 312,699 | 132,437 | ||||||
Purchases of other invested assets | (274,445 | ) | (250,727 | ) | ||||
Change in short-term investments | (285,775 | ) | 94,651 | |||||
Loans, net | (6,230 | ) | 693 | |||||
Change in cash collateral receivable | 103,255 | (51,986 | ) | |||||
Other, net | (8,524 | ) | (10,714 | ) | ||||
Net cash provided by (used in) investing activities | 474,117 | (773,214 | ) | |||||
Cash flows from financing activities: | ||||||||
Paydowns of a secured borrowing | (24,666 | ) | (25,306 | ) | ||||
Payments for investment agreement draws | (82,358 | ) | (17,964 | ) | ||||
Payments for extinguishment of long-term debt | (69,499 | ) | (19,550 | ) | ||||
Tax payments related to shares withheld for share-based compensation plans | (1,268 | ) | — | |||||
Proceeds from warrant exercises | — | 2 | ||||||
Cost of warrants acquired | — | (2,104 | ) | |||||
Net cash used in financing activities | (177,791 | ) | (64,922 | ) | ||||
Effect of foreign exchange on cash and cash equivalents | (1,602 | ) | (1,922 | ) | ||||
Net cash flow | 15,993 | (14,526 | ) | |||||
Cash and cash equivalents at beginning of period | 91,025 | 35,744 | ||||||
Cash and cash equivalents end of period | $ | 107,018 | $ | 21,218 | ||||
Supplemental disclosure of cash flow information: | ||||||||
Cash paid during the period for: | ||||||||
Income taxes | $ | 29,556 | $ | 10,098 | ||||
Interest on long-term debt and investment agreements | 38,325 | 3,749 | ||||||
Non-cash financing activities: | ||||||||
Decrease in long-term debt as a result of an exchange for investment securities | $ | 55,426 | $ | — |
• | Active runoff of Ambac Assurance and its subsidiaries through transaction terminations, policy commutations, settlements and restructurings, with a focus on known and potential future adversely classified credits, that we believe will improve our risk profile, and maximizing the risk-adjusted return on invested assets; |
• | Rationalization of Ambac's and its subsidiaries' capital and liability structures, enabling simplification of corporate governance and facilitating the successful rehabilitation of the Segregated Account of Ambac Assurance; |
• | Loss recovery through active litigation management and exercise of contractual and legal rights; |
• | Ongoing review of organizational effectiveness and efficiency of the operating platform; and |
• | Evaluation of opportunities in certain business sectors that meet acceptable criteria that will generate long-term stockholder value with attractive risk-adjusted returns. |
• | Ambac Assurance shall maintain a level of surplus and contingency reserves as regards policyholders which provides reasonable security against contingencies affecting its financial position that are not otherwise fully covered by reserves or reinsurance, such that the Commissioner may continue to determine that Ambac Assurance’s surplus and contingency reserves are reasonably in excess of a level that would constitute a financially hazardous condition. |
• | Statutory surplus may not reflect the benefit of any reserve discounting, except to the extent approved by the Commissioner. |
• | Ambac Assurance may not enter any transactions with affiliates, including the payment of a dividend or other distribution, without the approval of the Commissioner, subject to limited exceptions. |
• | Ambac Assurance may not change its business plan or that of Everspan, including but not limited to the writing of new business, unless approved by the Commissioner. |
• | Ambac Assurance must obtain OCI approval with respect to the exercise of certain control rights in connection with policies that had been allocated to the Segregated Account. |
• | Ambac Assurance must obtain OCI approval with respect to any transaction Ambac Assurance proposes to enter into other than in ordinary course of business with non-affiliated counterparties where the aggregate consideration to be paid by Ambac Assurance is equal to or greater than$100,000. |
• | Ambac Assurance must obtain OCI approval for any change to its Investment Policy or Derivative Use Plan. |
• | Ambac Assurance must provide OCI with a monthly report of financial information, the scope of which is to be determined. |
• | Ambac Assurance shall provide, and Ambac shall also provide, notice to the Commissioner within ten (10) days of receipt of any communication from any governmental authority, government-sponsored enterprise, or lender to Ambac Assurance, Ambac, or any affiliates which pertains to a circumstance, event or issue which would be reasonably likely to have a material adverse effect on the financial condition or operations of Ambac Assurance and its subsidiaries taken as whole. |
• | Ambac Assurance shall provide notice as soon as practicable of any development in any litigation, including any delay in RMBS litigation, involving Ambac Assurance or any affiliate of Ambac Assurance which would or would be reasonably likely to have a material adverse effect on Ambac Assurance. |
• | Ambac Assurance shall provide notice to the Commissioner of the occurrence, or failure to occur, of any event which would or would be reasonably likely to cause a material adverse effect to the business, assets, properties, operations, or condition, financial or otherwise, or, insofar as can reasonably be foreseen, prospects, financial or otherwise, of Ambac Assurance, an affiliate of Ambac Assurance, or Ambac Assurance and all affiliates taken as a whole. A material adverse effect shall be conclusively presumed if the effect results, or reasonably could result, in a reduction of more than 10% in Ambac Assurance’s surplus as regards policyholders. |
• | Ambac Assurance shall disclose, and Ambac shall disclose, to the Commissioner any instance of fraud or any significant change to the internal control environment incurred by Ambac Assurance, any of its subsidiaries, or Ambac. |
• | If Ambac Assurance proposes to make any changes in the assumptions or vendors utilized in determining statutory loss reserves from the prior year’s statutory loss reserves which would cause the difference (whether positive or negative) between (a) Ambac Assurance’s statutory reserves determined with such proposed changes and (b) Ambac Assurance’s statutory reserves determined without such proposed changes to exceed the lesser of (i) $200,000 or (ii) 10% of Ambac Assurance’s statutory reserves without such proposed changes, Ambac Assurance shall notify the Commissioner. |
• | Ambac shall use its best efforts to preserve use of net operating loss carry-forwards for the benefit of Ambac Assurance and its subsidiaries, including but not limited to, refraining from taking any action that would result in, and taking such affirmative steps as are appropriate to avoid, any deconsolidation event. |
• | Ambac shall provide the Commissioner and Ambac Assurance its full cooperation in relation to any issues that Ambac Assurance or its subsidiaries may have relative to the United States Internal Revenue Service, including efforts to obtain a private letter ruling, pre-filing agreement, or other form of guidance or clarification. |
• | Remeasurement of loss reserves, classified in Loss and loss expenses, in the amount of $26,556 and $(56,910) for the nine months ended September 30, 2017 and 2016, respectively; |
• | Realized gain (losses) from the sale of investment securities and the unrealized gains (losses) of trading and short-term investment securities, classified in Net realized investment gains, in the amount of $(3,780) and $22,030 for the nine months ended September 30, 2017 and 2016, respectively; |
• | Remeasurement of premium receivables, classified in Other income, in the amount of $(1,960) and $8,264 for the nine months ended September 30, 2017 and 2016, respectively; and |
• | Remeasurement of credit derivative liabilities, classified in Net change in fair value of credit derivative, in the amount of $(1,141) and $(929) for the nine months ended September 30, 2017 and 2016, respectively. |
• | Ambac most commonly provides financial guarantees, including credit derivative contracts, for various debt obligations issued by special purpose entities, including VIEs ("FG VIEs"). |
• | Ambac sponsors special purpose entities that issued notes to fund the purchase of certain financial assets. |
• | Ambac monetized its ownership of the junior surplus note issued to it by the Segregated Account by depositing the junior surplus note into a newly formed VIE trust in exchange for cash and an owner trust certificate, which represents Ambac's right to residual cash flows from the junior surplus note. |
• | Ambac is an investor in collateralized debt obligations, mortgage-backed and other asset-backed securities issued by VIEs and its ownership interest is generally insignificant to the VIE and/or Ambac does not have rights that direct the activities that are most significant to such VIE. |
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
Income (loss) on changes related to: | ||||||||||||||||
Net fair value of VIE assets and liabilities | $ | (4,049 | ) | $ | 2,057 | $ | (1,567 | ) | $ | (16,119 | ) | |||||
Consolidation / Deconsolidation | — | — | — | — | ||||||||||||
Income (loss) on Variable Interest Entities | $ | (4,049 | ) | $ | 2,057 | $ | (1,567 | ) | $ | (16,119 | ) |
September 30, 2017 | December 31, 2016 | ||||||
Investments: | |||||||
Corporate obligations | $ | 2,785,608 | $ | 2,622,566 | |||
Total variable interest entity assets: fixed income securities | $ | 2,785,608 | $ | 2,622,566 |
Estimated fair value | Unpaid principal balance | ||||||
September 30, 2017: | |||||||
Loans | $ | 11,557,788 | $ | 8,133,313 | |||
Long-term debt | 12,229,569 | 9,373,933 | |||||
December 31, 2016: | |||||||
Loans | $ | 10,658,963 | $ | 7,641,756 | |||
Long-term debt | 11,155,936 | 8,854,530 |
• | Total principal amount of debt outstanding was $421,560 and $388,950 at September 30, 2017 and December 31, 2016, respectively. In each case, Ambac sold assets to this entity. The assets are composed of utility obligations with a weighted average rating of BBB+ at September 30, 2017 and weighted average life of 3.3 years. The purchase by this entity of financial assets was financed through the issuance of MTNs, which are cross-collateralized by the purchased assets. The MTNs have the same expected weighted average life as the purchased assets. Derivative contracts (interest rate swaps) are used within the entity for economic hedging purposes only. Derivative positions were established at the time MTNs were issued to purchase financial assets. As of September 30, 2017 Ambac Assurance had financial guarantee insurance policies issued for all assets, MTNs and derivative contracts owned and outstanding by the entity. |
• | Insurance premiums paid to Ambac Assurance by this entity are earned in a manner consistent with other insurance policies, over the risk period. Additionally, any losses incurred on such insurance policies are included in Ambac’s Consolidated Statements of Total Comprehensive Income (Loss). Under the terms of an Administrative Agency Agreement, Ambac provides certain administrative duties, primarily collecting amounts due on the obligations and making interest payments on the MTNs. |
Carrying Value of Assets and Liabilities | |||||||||||||||
Maximum Exposure To Loss (1) | Insurance Assets (2) | Insurance Liabilities (3) | Net Derivative Assets (Liabilities) (4) | ||||||||||||
September 30, 2017: | |||||||||||||||
Global structured finance: | |||||||||||||||
Collateralized debt obligations | $ | 38,405 | $ | 182 | $ | — | $ | (23 | ) | ||||||
Mortgage-backed—residential | 13,589,640 | 694,449 | 3,184,474 | — | |||||||||||
Other consumer asset-backed | 2,263,774 | 24,458 | 328,216 | — | |||||||||||
Other commercial asset-backed | 1,031,168 | 32,355 | 35,321 | — | |||||||||||
Other | 2,616,461 | 60,812 | 311,968 | 10,770 | |||||||||||
Total global structured finance | 19,539,448 | 812,256 | 3,859,979 | 10,747 | |||||||||||
Global public finance | 25,814,183 | 338,562 | 374,312 | (8,938 | ) | ||||||||||
Total | $ | 45,353,631 | $ | 1,150,818 | $ | 4,234,291 | $ | 1,809 | |||||||
December 31, 2016: | |||||||||||||||
Global structured finance: | |||||||||||||||
Collateralized debt obligations | $ | 761,451 | $ | 218 | $ | 3,319 | $ | (145,402 | ) | ||||||
Mortgage-backed—residential | 14,859,909 | 725,106 | 3,118,892 | — | |||||||||||
Other consumer asset-backed | 2,391,604 | 26,758 | 302,335 | — | |||||||||||
Other commercial asset-backed | 1,686,256 | 66,277 | 64,961 | — | |||||||||||
Other | 2,963,521 | 66,091 | 412,929 | 13,347 | |||||||||||
Total global structured finance | 22,662,741 | 884,450 | 3,902,436 | (132,055 | ) | ||||||||||
Global public finance | 25,608,471 | 338,587 | 359,142 | (8,827 | ) | ||||||||||
Total | $ | 48,271,212 | $ | 1,223,037 | $ | 4,261,578 | $ | (140,882 | ) |
(1) | Maximum exposure to loss represents the maximum future payments of principal and interest on insured obligations and derivative contracts plus Deferred Amounts and accrued and unpaid interest thereon. Ambac’s maximum exposure to loss does not include the benefit of any financial instruments (such as reinsurance or hedge contracts) that Ambac may utilize to mitigate the risks associated with these variable interests. |
(2) | Insurance assets represent the amount recorded in “Premium receivables” and “Subrogation recoverable” for financial guarantee contracts on Ambac’s Consolidated Balance Sheets. |
(3) | Insurance liabilities represent the amount recorded in “Loss and loss expense reserves” and “Unearned premiums” for financial guarantee contracts on Ambac’s Consolidated Balance Sheets. |
(4) | Net derivative assets (liabilities) represent the fair value recognized on credit derivative contracts and interest rate swaps on Ambac’s Consolidated Balance Sheets. |
Unrealized Gains (Losses) on Available for Sale Securities (1) | Amortization of Postretirement Benefit (1) | Gain (Loss) on Foreign Currency Translation (1) | Total | ||||||||||||
Three Months Ended September 30, 2017: | |||||||||||||||
Beginning Balance | $ | 152,847 | $ | 11,316 | $ | (125,335 | ) | $ | 38,828 | ||||||
Other comprehensive income (loss) before reclassifications | (7,801 | ) | — | 24,624 | 16,823 | ||||||||||
Amounts reclassified from accumulated other comprehensive income (loss) | 7,367 | (338 | ) | — | 7,029 | ||||||||||
Net current period other comprehensive income (loss) | (434 | ) | (338 | ) | 24,624 | 23,852 | |||||||||
Balance at September 30, 2017 | $ | 152,413 | $ | 10,978 | $ | (100,711 | ) | $ | 62,680 | ||||||
Three Months Ended September 30, 2016: | |||||||||||||||
Beginning Balance | $ | 158,924 | $ | 9,876 | $ | (118,025 | ) | $ | 50,775 | ||||||
Other comprehensive income (loss) before reclassifications | 33,625 | — | (13,323 | ) | 20,302 | ||||||||||
Amounts reclassified from accumulated other comprehensive income (loss) | (8,906 | ) | (254 | ) | — | (9,160 | ) | ||||||||
Net current period other comprehensive income (loss) | 24,719 | (254 | ) | (13,323 | ) | 11,142 | |||||||||
Balance at September 30, 2016 | $ | 183,643 | $ | 9,622 | $ | (131,348 | ) | $ | 61,917 | ||||||
Nine Months Ended September 30, 2017: | |||||||||||||||
Beginning Balance | $ | 118,863 | $ | 9,367 | $ | (167,220 | ) | $ | (38,990 | ) | |||||
Other comprehensive income (loss) before reclassifications | 19,769 | — | 66,509 | 86,278 | |||||||||||
Amounts reclassified from accumulated other comprehensive income (loss) | 13,781 | 1,611 | — | 15,392 | |||||||||||
Net current period other comprehensive income (loss) | 33,550 | 1,611 | 66,509 | 101,670 | |||||||||||
Balance at September 30, 2017 | $ | 152,413 | $ | 10,978 | $ | (100,711 | ) | $ | 62,680 | ||||||
Nine Months Ended September 30, 2016: | |||||||||||||||
Beginning Balance | $ | 50,963 | $ | 9,344 | $ | (45,092 | ) | $ | 15,215 | ||||||
Other comprehensive income (loss) before reclassifications | 140,810 | — | (86,256 | ) | 54,554 | ||||||||||
Amounts reclassified from accumulated other comprehensive income (loss) | (8,130 | ) | 278 | — | (7,852 | ) | |||||||||
Net current period other comprehensive income (loss) | 132,680 | 278 | (86,256 | ) | 46,702 | ||||||||||
Balance at September 30, 2016 | $ | 183,643 | $ | 9,622 | $ | (131,348 | ) | $ | 61,917 |
(1) | All amounts are net of tax and noncontrolling interest. Amounts in parentheses indicate debits. |
Details about Accumulated Other Comprehensive Income Components | Amount Reclassified from Accumulated Other Comprehensive Income (1) | Affected Line Item in the Consolidated Statement of Total Comprehensive Income (Loss) | ||||||||
Three Months Ended September 30, | ||||||||||
2017 | 2016 | |||||||||
Unrealized Gains (Losses) on Available-for-Sale Securities | ||||||||||
$ | 7,367 | $ | (8,906 | ) | Net realized investment (losses) gains and other-than-temporary impairment losses | |||||
— | — | Tax (expense) benefit | ||||||||
$ | 7,367 | $ | (8,906 | ) | Net of tax and noncontrolling interest | |||||
Amortization of Postretirement Benefit | ||||||||||
Prior service cost | $ | (241 | ) | $ | (167 | ) | Operating expenses (2) | |||
Actuarial (losses) | (97 | ) | (87 | ) | Operating expenses (2) | |||||
(338 | ) | (254 | ) | Total before tax | ||||||
— | — | Tax (expense) benefit | ||||||||
(338 | ) | (254 | ) | Net of tax and noncontrolling interest | ||||||
Total reclassifications for the period | $ | 7,029 | $ | (9,160 | ) | Net of tax and noncontrolling interest | ||||
Details about Accumulated Other Comprehensive Income Components | Amount Reclassified from Accumulated Other Comprehensive Income (1) | Affected Line Item in the Consolidated Statement of Total Comprehensive Income (Loss) | ||||||||
Nine Months Ended September 30, | ||||||||||
2017 | 2016 | |||||||||
Unrealized Gains (Losses) on Available-for-Sale Securities | ||||||||||
$ | 13,781 | $ | (8,130 | ) | Net realized investment (losses) gains and other-than-temporary impairment losses | |||||
— | — | Tax (expense) benefit | ||||||||
$ | 13,781 | $ | (8,130 | ) | Net of tax and noncontrolling interest | |||||
Amortization of Postretirement Benefit | ||||||||||
Prior service cost | $ | (723 | ) | $ | (500 | ) | Operating expenses (2) | |||
Actuarial gains | 2,334 | 778 | Operating expenses (2) | |||||||
1,611 | 278 | Total before tax | ||||||||
— | — | Tax (expense) benefit | ||||||||
$ | 1,611 | $ | 278 | Net of tax and noncontrolling interest | ||||||
Total reclassifications for the period | $ | 15,392 | $ | (7,852 | ) | Net of tax and noncontrolling interest |
(1) | Amounts in parentheses indicate debits to the Consolidated Statement of Total Comprehensive Income (Loss). |
(2) | These accumulated other comprehensive income components are included in the computation of net periodic benefit cost. |
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||
Basic weighted average shares outstanding | 45,404,315 | 45,229,570 | 45,355,671 | 45,206,429 | ||||||||
Effect of potential dilutive shares (1): | ||||||||||||
Warrants | — | 293,311 | — | — | ||||||||
Restricted stock units | — | 156,023 | — | 105,794 | ||||||||
Performance stock units | — | 113,179 | — | 60,481 | ||||||||
Diluted weighted average shares outstanding | 45,404,315 | 45,792,083 | 45,355,671 | 45,372,704 | ||||||||
Anti-dilutive shares excluded from the above reconciliation: | ||||||||||||
Stock options | 126,667 | 143,334 | 126,667 | 143,334 | ||||||||
Warrants | 4,053,670 | — | 4,053,670 | — | ||||||||
Restricted stock units | 68,654 | 23,334 | 68,654 | 23,334 | ||||||||
Performance stock units (2) | 327,109 | — | 327,109 | — |
(1) | For the three and nine months ended September 30, 2017, Ambac had a net loss and accordingly excluded all potentially dilutive securities from the determination of diluted loss per share as their impact was anti-dilutive. |
(2) | Performance stock units are reflected herein at their target issuance amounts. Vesting of these units is contingent upon meeting certain performance metrics. Although a portion of these performance metrics have been achieved as of the respective period end, it is possible that awards may no longer meet the metric at the end of the performance period. |
Nine Months Ended September 30, | ||||||||
2017 | 2016 | |||||||
Beginning premium receivable | $ | 661,337 | $ | 831,575 | ||||
Premium receipts | (66,141 | ) | (60,609 | ) | ||||
Adjustments for changes in expected and contractual cash flows | (24,407 | ) | (57,932 | ) | ||||
Accretion of premium receivable discount | 12,326 | 14,304 | ||||||
Changes to uncollectable premiums | (103 | ) | 4,264 | |||||
Other adjustments (including foreign exchange) | 18,745 | (25,374 | ) | |||||
Ending premium receivable (1) | $ | 601,757 | $ | 706,228 |
(1) | Gross premium receivable includes premiums to be received in foreign denominated currencies most notably in British Pounds and Euros. At September 30, 2017 and 2016, premium receivables include British Pounds of $153,964 (£114,847) and $195,187 (£150,575), respectively, and Euros of $36,815 (€31,154) and $38,284 (€34,067), respectively. |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||||||||||||||||||
Written | Earned | Written | Earned | Written | Earned | Written | Earned | ||||||||||||||||||||||||
Direct | $ | (24,696 | ) | $ | 57,282 | $ | (10,543 | ) | $ | 59,096 | $ | (12,184 | ) | $ | 156,582 | $ | (39,364 | ) | $ | 161,058 | |||||||||||
Assumed | — | 20 | — | 21 | — | 61 | — | 64 | |||||||||||||||||||||||
Ceded | (385 | ) | 4,313 | (1,526 | ) | 5,899 | (1,962 | ) | 12,889 | (8,425 | ) | 13,702 | |||||||||||||||||||
Net premiums | $ | (24,311 | ) | $ | 52,989 | $ | (9,017 | ) | $ | 53,218 | $ | (10,222 | ) | $ | 143,754 | $ | (30,939 | ) | $ | 147,420 |
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
United States | $ | 31,929 | $ | 45,257 | $ | 108,556 | $ | 126,003 | ||||||||
United Kingdom | 17,273 | 6,018 | 28,094 | 19,111 | ||||||||||||
Other international | 3,787 | 1,943 | 7,104 | 2,306 | ||||||||||||
Total | $ | 52,989 | $ | 53,218 | $ | 143,754 | $ | 147,420 |
Future premiums to be collected (1) | Future premiums to be earned net of reinsurance (1) | ||||||
Three months ended: | |||||||
December 31, 2017 | $ | 14,211 | $ | 19,425 | |||
Twelve months ended: | |||||||
December 31, 2018 | 58,939 | 69,108 | |||||
December 31, 2019 | 55,612 | 62,710 | |||||
December 31, 2020 | 52,651 | 58,482 | |||||
December 31, 2021 | 46,202 | 53,259 | |||||
Five years ended: | |||||||
December 31, 2026 | 202,854 | 216,188 | |||||
December 31, 2031 | 160,963 | 146,422 | |||||
December 31, 2036 | 99,487 | 85,982 | |||||
December 31, 2041 | 33,996 | 29,902 | |||||
December 31, 2046 | 16,050 | 14,454 | |||||
December 31, 2051 | 5,250 | 6,147 | |||||
December 31, 2056 | 240 | 686 | |||||
Total | $ | 746,455 | $ | 762,765 |
(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. |
• | Unpaid claims represent the sum of (i) claims presented and not yet paid for policies allocated to the Segregated Account, including Deferred Amounts and (ii) accrued interest on Deferred Amounts as required by the amended Segregated Account Rehabilitation Plan that became effective on June 12, 2014. Refer to Note 1. Background and Business Description and to Note 1. Background and Business Description in the Notes to Consolidated Financial Statements included in Ambac's Annual Report on Form 10-K for further discussion of the amended Segregated Account Rehabilitation Plan. Unpaid claims are measured based on the cost of settling the claims, which is principal plus accrued interest. |
• | The PV of expected net cash flows represents the PV of expected cash outflows less the PV of expected cash inflows. The PV of expected net cash flows are impacted by: (i) expected future claims to be paid under an insurance contract, including the impact of potential settlement outcomes upon future installment premiums, (ii) expected recoveries from contractual breaches of RMBS representations and warranties ("R&W") by transaction sponsors, (iii) excess spread within the underlying transaction's cash flow structure, and (iv) other subrogation recoveries, including expected receipts from third parties within the underlying transaction's cash flow structure. Ambac’s approach to resolving disputes involving contractual breaches by transaction sponsors or other third parties has included negotiations and/or pursuing litigation. Ambac does not include potential recoveries attributed solely to fraudulent inducement claims in our estimate of subrogation recoveries, since any remedies under such claims would be non-contractual. |
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 | |||||||||||||||||
September 30, 2017: | |||||||||||||||||||||||
Loss and loss expense reserves | $ | 2,392,734 | $ | 630,338 | $ | 2,900,693 | $ | (1,078,173 | ) | $ | (141,307 | ) | $ | 4,704,285 | |||||||||
Subrogation recoverable | 615,373 | 163,749 | 105,253 | (1,588,305 | ) | — | (703,930 | ) | |||||||||||||||
Totals | $ | 3,008,107 | $ | 794,087 | $ | 3,005,946 | $ | (2,666,478 | ) | $ | (141,307 | ) | $ | 4,000,355 | |||||||||
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 |
Nine Months Ended September 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 | 5,328 | 11,033 | |||||
Prior year | 405,589 | (238,015 | ) | ||||
Total (1) (2) | 410,917 | (226,982 | ) | ||||
Loss and loss expenses (recovered) paid: | |||||||
Current year | 330 | 2,056 | |||||
Prior year | 148,082 | (950,810 | ) | ||||
Total | 148,412 | (948,754 | ) | ||||
Foreign exchange effect | 26,556 | (56,910 | ) | ||||
Ending net loss and loss expense reserves | 3,954,332 | 3,479,616 | |||||
Reinsurance recoverable (3) | 46,023 | 24,298 | |||||
Ending gross loss and loss expense reserves (4) | $ | 4,000,355 | $ | 3,503,914 |
(1) | Total losses and loss expenses (benefit) includes $(21,189) and $11,990 for the nine months ended September 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 nine months ended September 30, 2017 and 2016 was $62,451 and $(87,310), 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 $(47) and $143 as of September 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 $21,142 (€17,891) and $17,029 (€15,153) at September 30, 2017 and 2016, respectively. |
Surveillance Categories as of September 30, 2017 | |||||||||||||||||||||||||||
I/SL | IA | II | III | IV | V | Total | |||||||||||||||||||||
Number of policies | 21 | 24 | 31 | 23 | 189 | 4 | 292 | ||||||||||||||||||||
Remaining weighted-average contract period (in years) (1) | 9 | 23 | 9 | 25 | 14 | 4 | 17 | ||||||||||||||||||||
Gross insured contractual payments outstanding: | |||||||||||||||||||||||||||
Principal | $ | 949,992 | $ | 573,865 | $ | 1,483,272 | $ | 1,913,092 | $ | 7,573,829 | $ | 49,370 | $ | 12,543,420 | |||||||||||||
Interest | 258,114 | 602,701 | 482,551 | 7,156,992 | 2,621,448 | 18,195 | 11,140,001 | ||||||||||||||||||||
Total | $ | 1,208,106 | $ | 1,176,566 | $ | 1,965,823 | $ | 9,070,084 | $ | 10,195,277 | $ | 67,565 | $ | 23,683,421 | |||||||||||||
Gross undiscounted claim liability (2) | $ | 2,341 | $ | 52,976 | $ | 94,609 | $ | 1,191,399 | $ | 6,551,752 | $ | 67,533 | $ | 7,960,610 | |||||||||||||
Discount, gross claim liability | (215 | ) | (10,757 | ) | (12,371 | ) | (528,293 | ) | (694,892 | ) | (4,462 | ) | (1,250,990 | ) | |||||||||||||
Gross claim liability before all subrogation and before reinsurance | 2,126 | 42,219 | 82,238 | 663,106 | 5,856,860 | 63,071 | 6,709,620 | ||||||||||||||||||||
Less: | |||||||||||||||||||||||||||
Gross RMBS subrogation (3) | $ | — | $ | — | $ | — | $ | — | $ | (1,861,859 | ) | $ | — | $ | (1,861,859 | ) | |||||||||||
Discount, RMBS subrogation | — | — | — | — | 17,743 | — | 17,743 | ||||||||||||||||||||
Discounted RMBS subrogation, before reinsurance | — | — | — | — | (1,844,116 | ) | — | (1,844,116 | ) | ||||||||||||||||||
Less: | |||||||||||||||||||||||||||
Gross other subrogation (4) | — | (10,276 | ) | (10,974 | ) | (57,855 | ) | (811,521 | ) | (13,257 | ) | (903,883 | ) | ||||||||||||||
Discount, other subrogation | — | 6,836 | 2,996 | 8,906 | 59,072 | 3,711 | 81,521 | ||||||||||||||||||||
Discounted other subrogation, before reinsurance | — | (3,440 | ) | (7,978 | ) | (48,949 | ) | (752,449 | ) | (9,546 | ) | (822,362 | ) | ||||||||||||||
Gross claim liability, net of all subrogation and discounts, before reinsurance | 2,126 | 38,779 | 74,260 | 614,157 | 3,260,295 | 53,525 | 4,043,142 | ||||||||||||||||||||
Less: Unearned premium revenue | (1,243 | ) | (10,205 | ) | (14,057 | ) | (44,894 | ) | (70,613 | ) | (295 | ) | (141,307 | ) | |||||||||||||
Plus: Loss expense reserves | 15,716 | 3,499 | 265 | 5,680 | 73,360 | — | 98,520 | ||||||||||||||||||||
Gross loss and loss expense reserves | $ | 16,599 | $ | 32,073 | $ | 60,468 | $ | 574,943 | $ | 3,263,042 | $ | 53,230 | $ | 4,000,355 | |||||||||||||
Reinsurance recoverable reported on Balance Sheet (5) | $ | 134 | $ | 3,796 | $ | 15,086 | $ | 39,250 | $ | (12,290 | ) | $ | — | $ | 45,976 |
(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 $46,023 related to future loss and loss expenses and $(47) 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. |
Random Sample Approach | Gross loss reserves before subrogation recoveries (1) | Subrogation recoveries (2)(3) | Gross loss reserves after subrogation recoveries | |||||||||
At September 30, 2017 | $ | 1,310,563 | $ | (1,844,116 | ) | $ | (533,553 | ) | ||||
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 out 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. |
Nine Months Ended September 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) | (62,919 | ) | 88,681 | ||||
Discounted R&W subrogation (gross of reinsurance) at end of period | $ | 1,844,116 | $ | 1,923,256 |
(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. |
2017 | 2018 | 2019 | 2020 | 2021 | Thereafter | |||||||||||||||||||
Amortization expense (1) | $ | 22,983 | $ | 78,847 | $ | 70,336 | $ | 65,037 | $ | 59,216 | $ | 581,553 |
(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. |
l | Level 1 | Quoted prices for identical instruments in active markets. Assets and liabilities classified as Level 1 include US Treasury and other foreign government obligations traded in highly liquid and transparent markets, exchange traded futures contracts, variable rate demand obligations and money market funds. | |
l | Level 2 | Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets. Assets and liabilities classified as Level 2 generally include investments in fixed income securities representing municipal, asset-backed and corporate obligations, certain interest rate swap contracts, and most long-term debt of variable interest entities consolidated under the Consolidation Topic of the ASC. | |
l | Level 3 | Model derived valuations in which one or more significant inputs or significant value drivers are unobservable. This hierarchy requires the use of observable market data when available. Assets and liabilities classified as Level 3 include credit derivative contracts written as part of the financial guarantee business, certain uncollateralized interest rate swap contracts, equity interests in Ambac sponsored special purpose entities and certain investments in fixed income securities. Additionally, Level 3 assets and liabilities generally include fixed income securities, loan receivables, and certain long-term debt of variable interest entities consolidated under the Consolidation Topic of the ASC. |
Carrying Amount | Total Fair Value | Fair Value Measurements Categorized as: | ||||||||||||||||||
September 30, 2017: | Level 1 | Level 2 | Level 3 | |||||||||||||||||
Financial assets: | ||||||||||||||||||||
Fixed income securities: | ||||||||||||||||||||
Municipal obligations | $ | 539,254 | $ | 539,254 | $ | — | $ | 539,254 | $ | — | ||||||||||
Corporate obligations | 1,285,468 | 1,285,468 | — | 1,285,468 | — | |||||||||||||||
Foreign obligations | 30,210 | 30,210 | 29,271 | 939 | — | |||||||||||||||
U.S. government obligations | 89,824 | 89,824 | 89,824 | — | — | |||||||||||||||
Residential mortgage-backed securities | 2,279,639 | 2,279,639 | — | 1,568,968 | 710,671 | |||||||||||||||
Collateralized debt obligations | 90,925 | 90,925 | — | 90,925 | — | |||||||||||||||
Other asset-backed securities | 662,798 | 662,798 | — | 597,660 | 65,138 | |||||||||||||||
Fixed income securities, pledged as collateral: | ||||||||||||||||||||
Short-term | 99,424 | 99,424 | 99,424 | — | — | |||||||||||||||
Short term investments | 716,516 | 716,516 | 412,681 | 303,835 | — | |||||||||||||||
Other investments (1) | 439,987 | 423,971 | 68,318 | 40,050 | 17,661 | |||||||||||||||
Cash and cash equivalents | 107,018 | 107,018 | 63,115 | 43,903 | — | |||||||||||||||
Loans | 10,390 | 10,370 | — | — | 10,370 | |||||||||||||||
Derivative assets: | ||||||||||||||||||||
Interest rate swaps—asset position | 75,051 | 75,051 | — | 13,001 | 62,050 | |||||||||||||||
Futures contracts | 2,236 | 2,236 | 2,236 | — | — | |||||||||||||||
Other assets | 6,337 | 6,337 | — | — | 6,337 | |||||||||||||||
Variable interest entity assets: | ||||||||||||||||||||
Fixed income securities: | ||||||||||||||||||||
Corporate obligations | 2,785,608 | 2,785,608 | — | — | 2,785,608 | |||||||||||||||
Restricted cash | 37,793 | 37,793 | 37,793 | — | — | |||||||||||||||
Loans | 11,557,788 | 11,557,788 | — | — | 11,557,788 | |||||||||||||||
Derivative assets: | ||||||||||||||||||||
Currency swaps-asset position | 57,714 | 57,714 | — | 57,714 | — | |||||||||||||||
Total financial assets | $ | 20,873,980 | $ | 20,857,944 | $ | 802,662 | $ | 4,541,717 | $ | 15,215,623 | ||||||||||
Financial liabilities: | ||||||||||||||||||||
Long term debt, including accrued interest | $ | 1,405,670 | $ | 1,392,295 | $ | — | $ | 1,053,453 | $ | 338,842 | ||||||||||
Derivative liabilities: | ||||||||||||||||||||
Credit derivatives | 8,961 | 8,961 | — | — | 8,961 | |||||||||||||||
Interest rate swaps—asset position | (1,152 | ) | (1,152 | ) | — | (1,152 | ) | — | ||||||||||||
Interest rate swaps—liability position | 83,090 | 83,090 | — | 83,090 | — | |||||||||||||||
Liabilities for net financial guarantees written (2) | 3,302,677 | 5,187,773 | — | — | 5,187,773 | |||||||||||||||
Variable interest entity liabilities: | ||||||||||||||||||||
Long-term debt | 12,229,569 | 12,229,569 | — | 9,283,185 | 2,946,384 | |||||||||||||||
Derivative liabilities: | ||||||||||||||||||||
Interest rate swaps—liability position | 2,088,922 | 2,088,922 | — | 2,088,922 | — | |||||||||||||||
Total financial liabilities | $ | 19,117,737 | $ | 20,989,458 | $ | — | $ | 12,507,498 | $ | 8,481,960 |
Carrying Amount | Total Fair Value | Fair Value Measurements Categorized as: | ||||||||||||||||||
December 31, 2016: | Level 1 | Level 2 | Level 3 | |||||||||||||||||
Financial assets: | ||||||||||||||||||||
Fixed income securities: | ||||||||||||||||||||
Municipal obligations | $ | 374,368 | $ | 374,368 | $ | — | $ | 374,368 | $ | — | ||||||||||
Corporate obligations | 1,802,165 | 1,802,165 | — | 1,802,165 | — | |||||||||||||||
Foreign obligations | 43,135 | 43,135 | 42,212 | 923 | — | |||||||||||||||
U.S. government obligations | 36,186 | 36,186 | 36,186 | — | — | |||||||||||||||
U.S. agency obligations | 4,060 | 4,060 | — | 4,060 | — | |||||||||||||||
Residential mortgage-backed securities | 2,351,595 | 2,351,595 | — | 1,654,882 | 696,713 | |||||||||||||||
Collateralized debt obligations | 113,923 | 113,923 | — | 113,923 | — | |||||||||||||||
Other asset-backed securities | 828,783 | 828,783 | — | 762,793 | 65,990 | |||||||||||||||
Fixed income securities, pledged as collateral: | ||||||||||||||||||||
U.S. government obligations | 64,905 | 64,905 | 64,905 | — | — | |||||||||||||||
Short term investments | 430,788 | 430,788 | 371,367 | 59,421 | — | |||||||||||||||
Other investments (1) | 450,307 | 435,237 | 83,791 | — | 14,934 | |||||||||||||||
Cash and cash equivalents | 91,025 | 91,025 | 46,587 | 44,438 | — | |||||||||||||||
Loans | 4,160 | 4,066 | — | — | 4,066 | |||||||||||||||
Derivative assets: | ||||||||||||||||||||
Interest rate swaps—asset position | 77,206 | 77,206 | — | 16,950 | 60,256 | |||||||||||||||
Futures contracts | 536 | 536 | 536 | — | — | |||||||||||||||
Other assets | 7,382 | 7,382 | — | — | 7,382 | |||||||||||||||
Variable interest entity assets: | ||||||||||||||||||||
Fixed income securities: | ||||||||||||||||||||
Corporate obligations | 2,622,566 | 2,622,566 | — | — | 2,622,566 | |||||||||||||||
Restricted cash | 4,873 | 4,873 | 4,873 | — | — | |||||||||||||||
Loans | 10,658,963 | 10,658,963 | — | — | 10,658,963 | |||||||||||||||
Derivative assets: | ||||||||||||||||||||
Currency swaps—asset position | 80,407 | 80,407 | — | 80,407 | — | |||||||||||||||
Total financial assets | $ | 20,047,333 | $ | 20,032,169 | $ | 650,457 | $ | 4,914,330 | $ | 14,130,870 | ||||||||||
Financial liabilities: | ||||||||||||||||||||
Obligations under investment agreements | $ | 82,358 | $ | 82,333 | $ | — | $ | — | $ | 82,333 | ||||||||||
Long term debt, including accrued interest | 1,536,352 | 1,494,340 | — | 1,147,728 | 346,612 | |||||||||||||||
Derivative liabilities: | ||||||||||||||||||||
Credit derivatives | 15,349 | 15,349 | — | — | 15,349 | |||||||||||||||
Interest rate swaps—asset position | (61,839 | ) | (61,839 | ) | — | (61,839 | ) | — | ||||||||||||
Interest rate swaps—liability position | 365,776 | 365,776 | — | 220,587 | 145,189 | |||||||||||||||
Liabilities for net financial guarantees written (2) | 3,009,943 | 4,490,070 | — | — | 4,490,070 | |||||||||||||||
Variable interest entity liabilities: | ||||||||||||||||||||
Long-term debt | 11,155,936 | 11,155,936 | — | 8,573,716 | 2,582,220 | |||||||||||||||
Derivative liabilities: | ||||||||||||||||||||
Interest rate swaps—liability position | 2,078,601 | 2,078,601 | — | 2,078,601 | — | |||||||||||||||
Total financial liabilities | $ | 18,182,476 | $ | 19,620,566 | $ | — | $ | 11,958,793 | $ | 7,661,773 |
(1) | Excluded from the fair value measurement categories in the table above are investment funds of $297,942 and $336,513 as of September 30, 2017 and December 31, 2016, respectively, which are measured using NAV per share as a practical expedient. |
(2) | The carrying value of net financial guarantees written includes the following balance sheet items: Premium receivables; Reinsurance recoverable on paid and unpaid losses; Deferred ceded premium; Subrogation recoverable; Insurance intangible asset; Unearned premiums; Loss and loss expense reserves; Ceded premiums payable, premiums taxes payable and other deferred fees recorded in Other liabilities. |
September 30, 2017 | ||
a. Coupon rate: | 1.74% | |
b. Average Life: | 0.86 years | |
c. Yield: | 10.00% |
September 30, 2017: | December 31, 2016: | |||
a. Coupon rate: | 5.97% | a. Coupon rate: | 5.93% | |
b. Average Life: | 17.26 years | b. Maturity: | 17.74 years | |
c. Yield: | 13.50% | c. Yield: | 13.50% |
September 30, 2017 | December 31, 2016 | |||||||
Notional outstanding | $ | 397,003 | $ | 737,380 | ||||
Weighted average reference obligation price | 93.7 | 93.5 | ||||||
Weighted average life (WAL) in years | 6.5 | 5.2 | ||||||
Weighted average credit rating | BBB+ | A- | ||||||
Weighted average relative change ratio | 29.4 | % | 31.6 | % | ||||
CVA percentage | 8.41 | % | 11.14 | % | ||||
Fair value of derivative liabilities | $ | 8,961 | $ | 15,349 |
September 30, 2017: | December 31, 2016: | |||
a. Coupon rate: | 0.40% | a. Coupon rate: | 0.46% | |
b. Maturity: | 15.55 years | b. Maturity: | 16.16 years | |
c. Yield: | 4.90% | c. Yield: | 4.95% |
September 30, 2017: | December 31, 2016: | |||
a. Coupon rate: | 5.88% | a. Coupon rate: | 5.88% | |
b. Maturity: | 0.06 years | b. Maturity: | 20.85 years | |
c. Yield: | 5.88% | c. Yield: | 5.86% |
Level 3 - Financial Assets and Liabilities Accounted for at Fair Value | ||||||||||||||||||||||||||||
VIE Assets and Liabilities | ||||||||||||||||||||||||||||
Investments | Other assets | Derivatives | Investments | Loans | Long-term debt | Total | ||||||||||||||||||||||
Three Months Ended September 30, 2017: | ||||||||||||||||||||||||||||
Balance, beginning of period | $ | 765,682 | $ | 6,691 | $ | 52,729 | $ | 2,722,316 | $ | 11,301,298 | $ | (2,804,218 | ) | $ | 12,044,498 | |||||||||||||
Total gains/(losses) realized and unrealized: | ||||||||||||||||||||||||||||
Included in earnings | 8,330 | (354 | ) | 2,031 | (18,064 | ) | 137,513 | (62,887 | ) | 66,569 | ||||||||||||||||||
Included in other comprehensive income | 8,557 | — | — | 81,356 | 327,087 | (84,793 | ) | 332,207 | ||||||||||||||||||||
Purchases | — | — | — | — | — | — | — | |||||||||||||||||||||
Settlements | (6,760 | ) | — | (1,671 | ) | — | (208,110 | ) | 5,514 | (211,027 | ) | |||||||||||||||||
Transfers into Level 3 | — | — | — | — | — | — | — | |||||||||||||||||||||
Transfers out of Level 3 | — | — | — | — | — | — | — | |||||||||||||||||||||
Balance, end of period | $ | 775,809 | $ | 6,337 | $ | 53,089 | $ | 2,785,608 | $ | 11,557,788 | $ | (2,946,384 | ) | $ | 12,232,247 | |||||||||||||
The amount of total gains/(losses) included in earnings attributable to the change in unrealized gains or losses relating to assets and liabilities still held at the reporting date | $ | — | $ | (354 | ) | $ | 1,889 | $ | (18,064 | ) | $ | 137,513 | $ | (62,887 | ) | $ | 58,097 | |||||||||||
Three Months Ended September 30, 2016: | ||||||||||||||||||||||||||||
Balance, beginning of period | $ | 722,670 | $ | 8,687 | $ | (104,032 | ) | $ | 2,577,293 | $ | 11,074,772 | $ | (2,258,009 | ) | $ | 12,021,381 | ||||||||||||
Total gains/(losses) realized and unrealized: | ||||||||||||||||||||||||||||
Included in earnings | 15,804 | (958 | ) | (12,220 | ) | 307,147 | 690,431 | (378,139 | ) | 622,065 | ||||||||||||||||||
Included in other comprehensive income | 12,334 | — | — | (55,755 | ) | (221,934 | ) | 49,126 | (216,229 | ) | ||||||||||||||||||
Purchases | 7,126 | — | — | — | — | — | 7,126 | |||||||||||||||||||||
Settlements | (5,460 | ) | — | (2,854 | ) | — | (66,503 | ) | 3,722 | (71,095 | ) | |||||||||||||||||
Transfers into Level 3 | — | — | — | — | — | — | — | |||||||||||||||||||||
Transfers out of Level 3 | — | — | — | — | — | — | — | |||||||||||||||||||||
Balance, end of period | $ | 752,474 | $ | 7,729 | $ | (119,106 | ) | $ | 2,828,685 | $ | 11,476,766 | $ | (2,583,300 | ) | $ | 12,363,248 | ||||||||||||
The amount of total gains/(losses) included in earnings attributable to the change in unrealized gains or losses relating to assets and liabilities still held at the reporting date | $ | — | $ | (958 | ) | $ | (12,450 | ) | $ | 307,147 | $ | 690,431 | $ | (378,139 | ) | $ | 606,031 |
Level 3 - Financial Assets and Liabilities Accounted for at Fair Value | ||||||||||||||||||||||||||||
VIE Assets and Liabilities | ||||||||||||||||||||||||||||
Investments | Other assets | Derivatives | Investments | Loans | Long-term debt | Total | ||||||||||||||||||||||
Nine Months Ended September 30, 2017: | ||||||||||||||||||||||||||||
Balance, beginning of period | $ | 762,703 | $ | 7,382 | $ | (100,282 | ) | $ | 2,622,566 | $ | 10,658,963 | $ | (2,582,220 | ) | $ | 11,369,112 | ||||||||||||
Total gains/(losses) realized and unrealized: | ||||||||||||||||||||||||||||
Included in earnings | 34,628 | (1,045 | ) | 53,329 | (49,518 | ) | 515,904 | (143,194 | ) | 410,104 | ||||||||||||||||||
Included in other comprehensive income | 25,654 | — | — | 228,487 | 913,477 | (233,187 | ) | 934,431 | ||||||||||||||||||||
Purchases | 35,781 | — | — | — | — | — | 35,781 | |||||||||||||||||||||
Sales | (79,319 | ) | — | — | — | — | — | (79,319 | ) | |||||||||||||||||||
Settlements | (25,716 | ) | — | 100,042 | (15,927 | ) | (530,556 | ) | 12,217 | (459,940 | ) | |||||||||||||||||
Transfers into Level 3 | 22,078 | — | — | — | — | — | 22,078 | |||||||||||||||||||||
Transfers out of Level 3 | — | — | — | — | — | — | — | |||||||||||||||||||||
Balance, end of period | $ | 775,809 | $ | 6,337 | $ | 53,089 | $ | 2,785,608 | $ | 11,557,788 | $ | (2,946,384 | ) | $ | 12,232,247 | |||||||||||||
The amount of total gains/(losses) included in earnings attributable to the change in unrealized gains or losses relating to assets and liabilities still held at the reporting date | $ | — | $ | (1,045 | ) | $ | 5,640 | $ | (49,518 | ) | $ | 515,904 | $ | (143,194 | ) | $ | 327,787 | |||||||||||
Nine Months Ended September 30, 2016: | ||||||||||||||||||||||||||||
Balance, beginning of period | $ | 488,884 | $ | 8,696 | $ | (99,192 | ) | $ | 2,588,556 | $ | 11,690,324 | $ | (3,180,170 | ) | $ | 11,497,098 | ||||||||||||
Total gains/(losses) realized and unrealized: | ||||||||||||||||||||||||||||
Included in earnings | 42,823 | (967 | ) | (23,250 | ) | 571,739 | 1,367,063 | (712,696 | ) | 1,244,712 | ||||||||||||||||||
Included in other comprehensive income | 35,570 | — | — | (331,610 | ) | (1,385,893 | ) | 355,086 | (1,326,847 | ) | ||||||||||||||||||
Purchases | 99,018 | — | — | — | — | — | 99,018 | |||||||||||||||||||||
Settlements | (14,619 | ) | — | 3,336 | — | (194,728 | ) | 216,582 | 10,571 | |||||||||||||||||||
Transfers in Level 3 | 100,798 | — | — | — | — | — | 100,798 | |||||||||||||||||||||
Transfers out of Level 3 | — | — | — | — | — | 737,898 | 737,898 | |||||||||||||||||||||
Balance, end of period | $ | 752,474 | $ | 7,729 | $ | (119,106 | ) | $ | 2,828,685 | $ | 11,476,766 | $ | (2,583,300 | ) | $ | 12,363,248 | ||||||||||||
The amount of total gains/(losses) included in earnings attributable to the change in unrealized gains or losses relating to assets and liabilities still held at the reporting date | $ | — | $ | (967 | ) | $ | (24,026 | ) | $ | 571,739 | $ | 1,367,063 | $ | (712,696 | ) | $ | 1,201,113 |
Level 3 - Investments by Class: | ||||||||||||||||||||||||
Three Months Ended September 30, 2017 | Three Months Ended September 30, 2016 | |||||||||||||||||||||||
Other Asset Backed Securities | Non-Agency RMBS | Total Investments | Other Asset Backed Securities | Non-Agency RMBS | Total Investments | |||||||||||||||||||
Balance, beginning of period | $ | 65,366 | $ | 700,316 | $ | 765,682 | $ | 71,820 | $ | 650,850 | $ | 722,670 | ||||||||||||
Total gains/(losses) realized and unrealized: | ||||||||||||||||||||||||
Included in earnings | 420 | 7,910 | 8,330 | 999 | 14,805 | 15,804 | ||||||||||||||||||
Included in other comprehensive income | (383 | ) | 8,940 | 8,557 | 336 | 11,998 | 12,334 | |||||||||||||||||
Purchases | — | — | — | — | 7,126 | 7,126 | ||||||||||||||||||
Settlements | (265 | ) | (6,495 | ) | (6,760 | ) | (256 | ) | (5,204 | ) | (5,460 | ) | ||||||||||||
Transfers into Level 3 | — | — | — | — | — | — | ||||||||||||||||||
Transfers out of Level 3 | — | — | — | — | — | — | ||||||||||||||||||
Balance, end of period | $ | 65,138 | $ | 710,671 | $ | 775,809 | $ | 72,899 | $ | 679,575 | $ | 752,474 | ||||||||||||
The amount of total gains/(losses) included in earnings attributable to the change in unrealized gains or losses relating to assets and liabilities still held at the reporting date | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — |
Level 3 - Investments by Class: | ||||||||||||||||||||||||
Nine Months Ended September 30, 2017 | Nine Months Ended September 30, 2016 | |||||||||||||||||||||||
Other Asset Backed Securities | Non-Agency RMBS | Total Investments | Other Asset Backed Securities | Non-Agency RMBS | Total Investments | |||||||||||||||||||
Balance, beginning of period | $ | 65,990 | $ | 696,713 | $ | 762,703 | $ | — | $ | 488,884 | $ | 488,884 | ||||||||||||
Total gains/(losses) realized and unrealized: | ||||||||||||||||||||||||
Included in earnings | 1,129 | 33,499 | 34,628 | 1,560 | 41,263 | 42,823 | ||||||||||||||||||
Included in other comprehensive income | (1,217 | ) | 26,871 | 25,654 | 1,401 | 34,169 | 35,570 | |||||||||||||||||
Purchases | — | 35,781 | 35,781 | — | 99,018 | 99,018 | ||||||||||||||||||
Sales | — | (79,319 | ) | (79,319 | ) | — | — | — | ||||||||||||||||
Settlements | (764 | ) | (24,952 | ) | (25,716 | ) | (769 | ) | (13,850 | ) | (14,619 | ) | ||||||||||||
Transfers into Level 3 | — | 22,078 | 22,078 | 70,707 | 30,091 | 100,798 | ||||||||||||||||||
Transfers out of Level 3 | — | — | — | — | — | — | ||||||||||||||||||
Balance, end of period | 65,138 | 710,671 | 775,809 | 72,899 | 679,575 | 752,474 | ||||||||||||||||||
The amount of total gains/(losses) included in earnings attributable to the change in unrealized gains or losses relating to assets and liabilities still held at the reporting date | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — |
Level 3 - Derivatives by Class: | ||||||||||||||||||||||||
Three Months Ended September 30, 2017 | Three Months Ended September 30, 2016 | |||||||||||||||||||||||
Interest Rate Swaps | Credit Derivatives | Total Derivatives | Interest Rate Swaps | Credit Derivatives | Total Derivatives | |||||||||||||||||||
Balance, beginning of period | $ | 61,735 | $ | (9,006 | ) | $ | 52,729 | $ | (85,825 | ) | $ | (18,207 | ) | $ | (104,032 | ) | ||||||||
Total gains/(losses) realized and unrealized: | ||||||||||||||||||||||||
Included in earnings | 1,852 | 179 | 2,031 | (13,953 | ) | 1,733 | (12,220 | ) | ||||||||||||||||
Settlements | (1,537 | ) | (134 | ) | (1,671 | ) | (2,628 | ) | (226 | ) | (2,854 | ) | ||||||||||||
Transfers into Level 3 | — | — | — | — | — | — | ||||||||||||||||||
Transfers out of Level 3 | — | — | — | — | — | — | ||||||||||||||||||
Balance, end of period | $ | 62,050 | $ | (8,961 | ) | $ | 53,089 | $ | (102,406 | ) | $ | (16,700 | ) | $ | (119,106 | ) | ||||||||
The amount of total gains/(losses) included in earnings attributable to the change in unrealized gains or losses relating to assets and liabilities still held at the reporting date | $ | 1,852 | $ | 37 | $ | 1,889 | $ | (13,953 | ) | $ | 1,503 | $ | (12,450 | ) |
Level 3 - Derivatives by Class: | ||||||||||||||||||||||||
Nine Months Ended September 30, 2017: | Nine Months Ended September 30, 2016: | |||||||||||||||||||||||
Interest Rate Swaps | Credit Derivatives | Total Derivatives | Interest Rate Swaps | Credit Derivatives | Total Derivatives | |||||||||||||||||||
Balance, beginning of period | $ | (84,933 | ) | $ | (15,349 | ) | $ | (100,282 | ) | $ | (64,649 | ) | $ | (34,543 | ) | $ | (99,192 | ) | ||||||
Total gains/(losses) realized and unrealized: | ||||||||||||||||||||||||
Included in earnings | 45,474 | 7,855 | 53,329 | (41,804 | ) | 18,554 | (23,250 | ) | ||||||||||||||||
Settlements | 101,509 | (1,467 | ) | 100,042 | 4,047 | (711 | ) | 3,336 | ||||||||||||||||
Transfers into Level 3 | — | — | — | — | — | — | ||||||||||||||||||
Transfers out of Level 3 | — | — | — | — | — | — | ||||||||||||||||||
Balance, end of period | $ | 62,050 | $ | (8,961 | ) | $ | 53,089 | $ | (102,406 | ) | $ | (16,700 | ) | $ | (119,106 | ) | ||||||||
The amount of total gains/(losses) included in earnings attributable to the change in unrealized gains or losses relating to assets and liabilities still held at the reporting date | $ | 5,715 | $ | (75 | ) | $ | 5,640 | $ | (41,804 | ) | $ | 17,778 | $ | (24,026 | ) |
Net investment income | Realized gains or (losses) and other settlements on credit derivative contracts | Unrealized gains or (losses) on credit derivative contracts | Derivative products revenues (interest rate swaps) | Income (loss) on variable interest entities | Other income or (loss) | |||||||||||||||||||
Three Months Ended September 30, 2017: | ||||||||||||||||||||||||
Total gains or losses included in earnings for the period | $ | 8,330 | $ | 134 | $ | 45 | $ | 1,852 | $ | 56,562 | $ | (354 | ) | |||||||||||
Changes in unrealized gains or losses relating to the assets and liabilities still held at the reporting date | — | — | 37 | 1,852 | 56,562 | (354 | ) | |||||||||||||||||
Three Months Ended September 30, 2016: | ||||||||||||||||||||||||
Total gains or losses included in earnings for the period | $ | 15,804 | $ | 226 | $ | 1,507 | $ | (13,953 | ) | $ | 619,439 | $ | (958 | ) | ||||||||||
Changes in unrealized gains or losses relating to the assets and liabilities still held at the reporting date | — | — | 1,503 | (13,953 | ) | 619,439 | (958 | ) | ||||||||||||||||
Nine Months Ended September 30, 2017: | ||||||||||||||||||||||||
Total gains or losses included in earnings for the period | $ | 34,628 | $ | 1,467 | $ | 6,388 | $ | 45,474 | $ | 323,192 | $ | (1,045 | ) | |||||||||||
Changes in unrealized gains or losses relating to the assets and liabilities still held at the reporting date | — | — | (75 | ) | 5,715 | 323,192 | (1,045 | ) | ||||||||||||||||
Nine Months Ended September 30, 2016: | ||||||||||||||||||||||||
Total gains or losses included in earnings for the period | $ | 42,823 | $ | 711 | $ | 17,843 | $ | (41,804 | ) | $ | 1,226,106 | $ | (967 | ) | ||||||||||
Changes in unrealized gains or losses relating to the assets and liabilities still held at the reporting date | — | — | 17,778 | (41,804 | ) | 1,226,106 | (967 | ) |
Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Estimated Fair Value | Non-credit other-than temporary Impairments (1) | ||||||||||||||||
September 30, 2017: | ||||||||||||||||||||
Fixed income securities: | ||||||||||||||||||||
Municipal obligations | $ | 537,068 | $ | 10,827 | $ | 8,641 | $ | 539,254 | $ | — | ||||||||||
Corporate obligations | 1,278,995 | 12,804 | 6,331 | 1,285,468 | — | |||||||||||||||
Foreign obligations | 29,863 | 510 | 163 | 30,210 | — | |||||||||||||||
U.S. government obligations | 90,960 | 519 | 1,655 | 89,824 | — | |||||||||||||||
U.S. agency obligations | — | — | — | — | — | |||||||||||||||
Residential mortgage-backed securities | 2,197,085 | 101,487 | 18,933 | 2,279,639 | 16,481 | |||||||||||||||
Collateralized debt obligations | 90,556 | 369 | — | 90,925 | — | |||||||||||||||
Other asset-backed securities | 601,028 | 69,882 | 8,112 | 662,798 | — | |||||||||||||||
4,825,555 | 196,398 | 43,835 | 4,978,118 | 16,481 | ||||||||||||||||
Short-term | 716,666 | 10 | 160 | 716,516 | — | |||||||||||||||
5,542,221 | 196,408 | 43,995 | 5,694,634 | 16,481 | ||||||||||||||||
Fixed income securities pledged as collateral: | ||||||||||||||||||||
Short-term | 99,424 | — | — | 99,424 | — | |||||||||||||||
Total collateralized investments | 99,424 | — | — | 99,424 | — | |||||||||||||||
Total available-for-sale investments | $ | 5,641,645 | $ | 196,408 | $ | 43,995 | $ | 5,794,058 | $ | 16,481 | ||||||||||
December 31, 2016: | ||||||||||||||||||||
Fixed income securities: | ||||||||||||||||||||
Municipal obligations | $ | 376,064 | $ | 5,509 | $ | 7,205 | $ | 374,368 | $ | — | ||||||||||
Corporate obligations | 1,803,136 | 19,589 | 20,560 | 1,802,165 | — | |||||||||||||||
Foreign obligations | 41,932 | 1,303 | 100 | 43,135 | — | |||||||||||||||
U.S. government obligations | 33,732 | 2,551 | 97 | 36,186 | — | |||||||||||||||
U.S. agency obligations | 4,063 | — | 3 | 4,060 | — | |||||||||||||||
Residential mortgage-backed securities | 2,284,425 | 110,955 | 43,785 | 2,351,595 | 35,232 | |||||||||||||||
Collateralized debt obligations | 113,650 | 493 | 220 | 113,923 | — | |||||||||||||||
Other asset-backed securities | 778,383 | 58,028 | 7,628 | 828,783 | — | |||||||||||||||
5,435,385 | 198,428 | 79,598 | 5,554,215 | 35,232 | ||||||||||||||||
Short-term | 430,827 | 5 | 44 | 430,788 | — | |||||||||||||||
5,866,212 | 198,433 | 79,642 | 5,985,003 | 35,232 | ||||||||||||||||
Fixed income securities pledged as collateral: | ||||||||||||||||||||
U.S. government obligations | 64,833 | 72 | — | 64,905 | — | |||||||||||||||
Total collateralized investments | 64,833 | 72 | — | 64,905 | — | |||||||||||||||
Total available-for-sale investments | $ | 5,931,045 | $ | 198,505 | $ | 79,642 | $ | 6,049,908 | $ | 35,232 |
(1) | Represents the amount of non-credit other-than-temporary impairment losses remaining in accumulated other comprehensive income on securities that also had a credit impairment. These losses are included in gross unrealized losses as of September 30, 2017 and December 31, 2016. |
Amortized Cost | Estimated Fair Value | |||||||
Due in one year or less | $ | 928,100 | $ | 928,060 | ||||
Due after one year through five years | 771,616 | 775,497 | ||||||
Due after five years through ten years | 544,655 | 546,607 | ||||||
Due after ten years | 508,605 | 510,532 | ||||||
2,752,976 | 2,760,696 | |||||||
Residential mortgage-backed securities | 2,197,085 | 2,279,639 | ||||||
Collateralized debt obligations | 90,556 | 90,925 | ||||||
Other asset-backed securities | 601,028 | 662,798 | ||||||
Total | $ | 5,641,645 | $ | 5,794,058 |
Less Than 12 Months | 12 Months or More | Total | ||||||||||||||||||||||
Fair Value | Gross Unrealized Loss | Fair Value | Gross Unrealized Loss | Fair Value | Gross Unrealized Loss | |||||||||||||||||||
September 30, 2017: | ||||||||||||||||||||||||
Fixed income securities: | ||||||||||||||||||||||||
Municipal obligations | $ | 305,343 | $ | 7,848 | $ | 18,144 | $ | 793 | $ | 323,487 | $ | 8,641 | ||||||||||||
Corporate obligations | 347,247 | 4,696 | 55,831 | 1,635 | 403,078 | 6,331 | ||||||||||||||||||
Foreign obligations | 12,179 | 141 | 1,029 | 22 | 13,208 | 163 | ||||||||||||||||||
U.S. government obligations | 81,227 | 1,655 | — | — | 81,227 | 1,655 | ||||||||||||||||||
U.S. agency obligations | — | — | — | — | — | — | ||||||||||||||||||
Residential mortgage-backed securities | 270,691 | 5,447 | 436,052 | 13,486 | 706,743 | 18,933 | ||||||||||||||||||
Collateralized debt obligations | — | — | — | — | — | — | ||||||||||||||||||
Other asset-backed securities | 97,058 | 108 | 66,981 | 8,004 | 164,039 | 8,112 | ||||||||||||||||||
1,113,745 | 19,895 | 578,037 | 23,940 | 1,691,782 | 43,835 | |||||||||||||||||||
Short-term | 290,938 | 160 | — | — | 290,938 | 160 | ||||||||||||||||||
Total temporarily impaired securities | $ | 1,404,683 | $ | 20,055 | $ | 578,037 | $ | 23,940 | $ | 1,982,720 | $ | 43,995 |
Less Than 12 Months | 12 Months or More | Total | ||||||||||||||||||||||
Fair Value | Gross Unrealized Loss | Fair Value | Gross Unrealized Loss | Fair Value | Gross Unrealized Loss | |||||||||||||||||||
December 31, 2016: | ||||||||||||||||||||||||
Fixed income securities: | ||||||||||||||||||||||||
Municipal obligations | $ | 98,147 | $ | 2,045 | $ | 122,928 | $ | 5,160 | $ | 221,075 | $ | 7,205 | ||||||||||||
Corporate obligations | 963,513 | 20,232 | 6,492 | 328 | 970,005 | 20,560 | ||||||||||||||||||
Foreign obligations | 5,063 | 100 | — | — | 5,063 | 100 | ||||||||||||||||||
U.S. government obligations | 6,037 | 93 | 5,045 | 4 | 11,082 | 97 | ||||||||||||||||||
U.S. agency obligations | 4,060 | 3 | — | — | 4,060 | 3 | ||||||||||||||||||
Residential mortgage-backed securities | 226,889 | 7,201 | 550,807 | 36,584 | 777,696 | 43,785 | ||||||||||||||||||
Collateralized debt obligations | 6,986 | 23 | 25,780 | 197 | 32,766 | 220 | ||||||||||||||||||
Other asset-backed securities | 115,622 | 203 | 77,712 | 7,425 | 193,334 | 7,628 | ||||||||||||||||||
1,426,317 | 29,900 | 788,764 | 49,698 | 2,215,081 | 79,598 | |||||||||||||||||||
Short-term | 65,176 | 44 | — | — | 65,176 | 44 | ||||||||||||||||||
Total temporarily impaired securities | $ | 1,491,493 | $ | 29,944 | $ | 788,764 | $ | 49,698 | $ | 2,280,257 | $ | 79,642 |
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
Gross realized gains on securities | $ | 14,430 | $ | 3,912 | $ | 25,374 | $ | 10,391 | ||||||||
Gross realized losses on securities | (4,932 | ) | (561 | ) | (16,160 | ) | (4,673 | ) | ||||||||
Net foreign exchange (losses) gains | (3,348 | ) | 8,398 | (3,780 | ) | 22,030 | ||||||||||
Net realized gains (losses) | $ | 6,150 | $ | 11,749 | $ | 5,434 | $ | 27,748 | ||||||||
Net other-than-temporary impairments (1) | $ | (13,510 | ) | $ | (2,853 | ) | $ | (19,215 | ) | $ | (19,628 | ) |
(1) | Other-than-temporary impairments exclude impairment amounts recorded in other comprehensive income under ASC Paragraph 320-10-65-1, which comprise non-credit related amounts on securities that are credit impaired but which management does not intend to sell and it is not more likely than not that Ambac will be required to sell before recovery of the amortized cost basis. |
Nine Months Ended September 30, | ||||||||
2017 | 2016 | |||||||
Balance, beginning of period | $ | 52,070 | $ | 31,176 | ||||
Additions for credit impairments recognized on: | ||||||||
Securities not previously impaired | 3,274 | 2,257 | ||||||
Securities previously impaired | 11,596 | 16,672 | ||||||
Balance, end of period | $ | 66,940 | $ | 50,105 |
Fair Value of Cash and Underlying Securities | Fair Value of Cash and Securities Pledged to Investment Agreement Counterparties | Fair Value of Cash and Securities Pledged to Derivative Counterparties | ||||||||||
September 30, 2017: | ||||||||||||
Cash and securities pledged directly from the investment portfolio | $ | 123,985 | $ | — | $ | 123,985 | ||||||
December 31, 2016: | ||||||||||||
Cash and securities pledged directly from the investment portfolio | $ | 291,545 | $ | 88,940 | $ | 202,605 |
Municipal obligations | Corporate obligations | Mortgage and asset- backed securities | Total | Weighted Average Underlying Rating (1) | ||||||||||||||
September 30, 2017: | ||||||||||||||||||
Ambac Assurance Corporation (2) | $ | 465,075 | $ | 32,073 | $ | 2,731,184 | $ | 3,228,332 | CC | |||||||||
National Public Finance Guarantee Corporation | 21,395 | — | — | 21,395 | BBB | |||||||||||||
Assured Guaranty Municipal Corporation | 6,058 | — | — | 6,058 | BBB+ | |||||||||||||
MBIA Insurance Corporation | — | — | — | — | ||||||||||||||
Total | $ | 492,528 | $ | 32,073 | $ | 2,731,184 | $ | 3,255,785 | CC | |||||||||
December 31, 2016: | ||||||||||||||||||
Ambac Assurance Corporation (2) | $ | 81,651 | $ | — | $ | 2,739,073 | $ | 2,820,724 | CC | |||||||||
National Public Finance Guarantee Corporation | 38,687 | — | — | 38,687 | A- | |||||||||||||
Assured Guaranty Municipal Corporation | 25,660 | — | — | 25,660 | AA | |||||||||||||
MBIA Insurance Corporation | — | 2,630 | — | 2,630 | BBB+ | |||||||||||||
Total | $ | 145,998 | $ | 2,630 | $ | 2,739,073 | $ | 2,887,701 | CC |
(1) | Ratings are based on the lower of Standard & Poor’s or Moody’s rating. If unavailable, Ambac’s internal rating is used. |
(2) | Includes corporate obligations and asset-backed securities with a fair value of $171,034 and $118,813 at September 30, 2017 and December 31, 2016, respectively, insured by Ambac UK. |
Fair Value | ||||||||||||
Class of Funds | September 30, 2017 | December 31, 2016 | Redemption Frequency | Redemption Notice Period | ||||||||
Real estate properties (1) | $ | 32,138 | $ | 33,303 | quarterly | 10 business days | ||||||
Diversified hedge fund strategies (2) | 52,324 | 53,985 | semi-monthly | 15 - 30 days | ||||||||
Interest rate products (3) (7) | 151,650 | 261,315 | daily, weekly or monthly | 0 - 30 days | ||||||||
Illiquid investments (4) | 66,283 | 39,068 | quarterly | 180 days | ||||||||
Insurance-linked investments (5) | 23,308 | — | quarterly | 90-120 days | ||||||||
Equity market investments (6) (7) | 40,557 | 32,633 | daily | 0 days | ||||||||
Total equity investments in pooled funds | $ | 366,260 | $ | 420,304 |
(1) | Investments consist of UK property to generate income and capital growth. |
(2) | Investments seek diversified exposure to hedge fund core strategies to produce high risk-adjusted returns, with low long-term correlation to traditional markets and with targeted volatility levels. Funds may have the right to defer redemptions under certain circumstances. |
(3) | This class of funds includes investments in a range of instruments including leveraged loans, CLOs, asset-backed securities and floating rate notes to generate income and capital appreciation. Funds with less frequent redemption periods limit redemptions to as little as 15% per period. Funds with a same day redemption notice period are redeemable only weekly, while funds that may be redeemed any business day have notice periods of 15-30 days. |
(4) | This class seeks to obtain high long-term total return through investments with low liquidity and defined term, resulting in expected capital distributions to subscribers between 2020 and 2023. Redemptions cannot occur prior to the expiration of the investment lock-up period in May 2018. |
(5) | This class aims to provide returns from the insurance and reinsurance markets through investments in catastrophe bonds, life insurance and other insurance linked investments. Redemption periods are quarterly, subject to 90-day notice for January/July redemption dates and 120-day notice for April/October redemption dates with redemptions greater than 3.5% during the first five years following share issuance subject to redemption fees. |
(6) | Investments represent a diversified exposure to global equity market returns through holdings of various regional market index funds. |
(7) | Interest rate products include $27,761 at September 30, 2017 and $51,158 at December 31, 2016 and equity market investments include $40,557 at September 30, 2017 and $32,633 at December 31, 2016 that have readily determinable fair values priced through pricing vendors. |
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
Fixed income securities | $ | 81,054 | $ | 81,831 | $ | 236,876 | $ | 207,358 | ||||||||
Short-term investments | 1,986 | 194 | 4,124 | 1,124 | ||||||||||||
Loans | 187 | 97 | 361 | 273 | ||||||||||||
Investment expense | (2,228 | ) | (2,592 | ) | (6,269 | ) | (6,875 | ) | ||||||||
Securities available-for-sale and short-term | 80,999 | 79,530 | 235,092 | 201,880 | ||||||||||||
Other investments | 6,178 | 11,387 | 18,804 | 20,616 | ||||||||||||
Total net investment income | $ | 87,177 | $ | 90,917 | $ | 253,896 | $ | 222,496 |
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
Net gains (losses) recognized during the period on trading securities | $ | 4,919 | $ | 10,197 | $ | 15,130 | $ | 17,145 | ||||||||
Less: net gains (losses) recognized during the reporting period on trading securities sold during the period | 5,024 | 1,859 | 8,140 | 5,268 | ||||||||||||
Unrealized gains (losses) recognized during the reporting period on trading securities still held at the reporting date | $ | (105 | ) | $ | 8,338 | $ | 6,990 | $ | 11,877 |
Gross Amounts of Recognized Assets / Liabilities | Gross Amounts Offset in the Consolidated Balance Sheet | Net Amounts of Assets/ Liabilities Presented in the Consolidated Balance Sheet | Gross Amount of Collateral Received / Pledged Not Offset in the Consolidated Balance Sheet | Net Amount | |||||||||||||||
September 30, 2017: | |||||||||||||||||||
Derivative Assets: | |||||||||||||||||||
Interest rate swaps | $ | 76,203 | $ | 1,152 | $ | 75,051 | $ | — | $ | 75,051 | |||||||||
Futures contracts | 2,236 | — | 2,236 | — | 2,236 | ||||||||||||||
Total non-VIE derivative assets | $ | 78,439 | $ | 1,152 | $ | 77,287 | $ | — | $ | 77,287 | |||||||||
Derivative Liabilities: | |||||||||||||||||||
Credit derivatives | $ | 8,961 | $ | — | $ | 8,961 | $ | — | $ | 8,961 | |||||||||
Interest rate swaps | 83,090 | 1,152 | 81,938 | 81,762 | 176 | ||||||||||||||
Total non-VIE derivative liabilities | $ | 92,051 | $ | 1,152 | $ | 90,899 | $ | 81,762 | $ | 9,137 | |||||||||
Variable Interest Entities Derivative Assets: | |||||||||||||||||||
Currency swaps | $ | 57,714 | $ | — | $ | 57,714 | $ | — | $ | 57,714 | |||||||||
Total VIE derivative assets | $ | 57,714 | $ | — | $ | 57,714 | $ | — | $ | 57,714 | |||||||||
Variable Interest Entities Derivative Liabilities: | |||||||||||||||||||
Interest rate swaps | $ | 2,088,922 | $ | — | $ | 2,088,922 | $ | — | $ | 2,088,922 | |||||||||
Total VIE derivative liabilities | $ | 2,088,922 | $ | — | $ | 2,088,922 | $ | — | $ | 2,088,922 | |||||||||
December 31, 2016: | |||||||||||||||||||
Derivative Assets: | |||||||||||||||||||
Interest rate swaps | $ | 139,045 | $ | 61,839 | $ | 77,206 | $ | — | $ | 77,206 | |||||||||
Futures contracts | 536 | — | 536 | — | 536 | ||||||||||||||
Total non-VIE derivative assets | $ | 139,581 | $ | 61,839 | $ | 77,742 | $ | — | $ | 77,742 | |||||||||
Derivative Liabilities: | |||||||||||||||||||
Credit derivatives | $ | 15,349 | $ | — | $ | 15,349 | $ | — | $ | 15,349 | |||||||||
Interest rate swaps | 365,776 | 61,839 | 303,937 | 156,925 | 147,012 | ||||||||||||||
Total non-VIE derivative liabilities | $ | 381,125 | $ | 61,839 | $ | 319,286 | $ | 156,925 | $ | 162,361 | |||||||||
Variable Interest Entities Derivative Assets: | |||||||||||||||||||
Currency swaps | $ | 80,407 | $ | — | $ | 80,407 | $ | — | $ | 80,407 | |||||||||
Total VIE derivative assets | $ | 80,407 | $ | — | $ | 80,407 | $ | — | $ | 80,407 | |||||||||
Variable Interest Entities Derivative Liabilities: | |||||||||||||||||||
Interest rate swaps | $ | 2,078,601 | $ | — | $ | 2,078,601 | $ | — | $ | 2,078,601 | |||||||||
Total VIE derivative liabilities | $ | 2,078,601 | $ | — | $ | 2,078,601 | $ | — | $ | 2,078,601 |
Location of Gain or (Loss) Recognized in Consolidated Statements of Total Comprehensive Income (Loss) | Amount of Gain or (Loss) Recognized in Consolidated Statement of Total Comprehensive Income (Loss) | ||||||||||||||||||
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||||||
Non-VIEs: | |||||||||||||||||||
Credit derivatives | Net change in fair value of credit derivatives | $ | 179 | $ | 1,733 | $ | 7,855 | $ | 18,554 | ||||||||||
Non-VIE derivatives: | |||||||||||||||||||
Interest rate swaps | Net gains (losses) on interest rate derivatives | 3,394 | (14,646 | ) | 40,643 | (125,079 | ) | ||||||||||||
Futures contracts | Net gains (losses) on interest rate derivatives | 590 | 136 | (4,105 | ) | (9,186 | ) | ||||||||||||
Total Non-VIE derivatives | 3,984 | (14,510 | ) | 36,538 | (134,265 | ) | |||||||||||||
Variable Interest Entities: | |||||||||||||||||||
Currency swaps | Income (loss) on variable interest entities | (7,794 | ) | 5,509 | (22,693 | ) | 31,814 | ||||||||||||
Interest rate swaps | Income (loss) on variable interest entities | (24,851 | ) | (180,744 | ) | (10,321 | ) | (339,524 | ) | ||||||||||
Total Variable Interest Entities | (32,645 | ) | (175,235 | ) | (33,014 | ) | (307,710 | ) | |||||||||||
Total derivative contracts | $ | (28,482 | ) | $ | (188,012 | ) | $ | 11,379 | $ | (423,421 | ) |
Ambac Rating | September 30, 2017 | December 31, 2016 | ||||||
AAA | $ | — | $ | — | ||||
AA | 175,576 | 315,201 | ||||||
A | — | 227,146 | ||||||
BBB (1) | 147,712 | 127,250 | ||||||
Below investment grade (2) | 73,715 | 67,783 | ||||||
Total | $ | 397,003 | $ | 737,380 |
(1) | BBB internal ratings reflect bonds which are of medium grade credit quality with adequate capacity to pay interest and repay principal. Certain protective elements and margins may weaken under adverse economic conditions and changing circumstances. These bonds are more likely than higher rated bonds to exhibit unreliable protection levels over all cycles. |
(2) | Below investment grade internal ratings reflect bonds which are of speculative grade credit quality with the adequacy of future margin levels for payment of interest and repayment of principal potentially adversely affected by major ongoing uncertainties or exposure to adverse conditions. |
September 30, 2017 | December 31, 2016 | |||||||
Number of CDS transactions | 4 | 8 | ||||||
Remaining expected weighted-average life of obligations (in years) | 6.5 | 5.2 | ||||||
Gross principal notional outstanding | $ | 397,003 | $ | 737,380 | ||||
Net derivative liabilities at fair value | $ | 8,961 | $ | 15,349 |
Notional | ||||||||
Type of derivative | September 30, 2017 | December 31, 2016 | ||||||
Interest rate swaps—receive-fixed/pay-variable | $ | 1,431,977 | $ | 973,130 | ||||
Interest rate swaps—pay-fixed/receive-variable | 384,235 | 1,874,678 | ||||||
US Treasury futures contracts—short | 1,555,000 | 195,000 |
Notional | ||||||||
Type of VIE derivative | September 30, 2017 | December 31, 2016 | ||||||
Interest rate swaps—receive-fixed/pay-variable | $ | 1,471,309 | $ | 1,352,010 | ||||
Interest rate swaps—pay-fixed/receive-variable | 2,471,105 | 2,300,584 | ||||||
Currency swaps | 398,270 | 312,357 | ||||||
Credit derivatives | 12,001 | 12,059 |
Jurisdiction | Tax Year |
United States | 2010 |
New York State | 2013 |
New York City | 2013 |
United Kingdom | 2014 |
Italy | 2013 |
September 30, 2017 | December 31, 2016 | ||||||
Deferred tax liabilities: | |||||||
Insurance intangible | $ | 307,290 | $ | 336,728 | |||
Variable interest entities | 42,232 | 46,343 | |||||
Investments | 91,231 | 38,656 | |||||
Unearned premiums and credit fees | 64,807 | 68,682 | |||||
Unremitted foreign earnings | 74,459 | 30,699 | |||||
Other | 4,173 | 4,276 | |||||
Total deferred tax liabilities | 584,192 | 525,384 | |||||
Deferred tax assets: | |||||||
Net operating loss and capital carryforward | 1,490,682 | 1,409,565 | |||||
Loss reserves | 269,597 | 224,553 | |||||
AMT Credits | 31,532 | 31,532 | |||||
Compensation | 4,967 | 4,759 | |||||
Other | 8,878 | 11,967 | |||||
Subtotal deferred tax assets | 1,805,656 | 1,682,376 | |||||
Valuation allowance | 1,223,394 | 1,158,712 | |||||
Total deferred tax assets | 582,262 | 523,664 | |||||
Net deferred tax (liability) | $ | (1,930 | ) | $ | (1,720 | ) |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
U.S. | $ | (211,769 | ) | $ | 45,238 | $ | (428,264 | ) | $ | 171,137 | |||||
Foreign | 26,303 | 71,482 | 150,930 | 19,948 | |||||||||||
Total | $ | (185,466 | ) | $ | 116,720 | $ | (277,334 | ) | $ | 191,085 |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Current taxes | |||||||||||||||
U. S. federal | $ | (617 | ) | $ | 2,635 | $ | — | $ | 2,711 | ||||||
U.S. state and local | — | 191 | — | 428 | |||||||||||
Foreign | 6,056 | 12,456 | 31,902 | 18,852 | |||||||||||
Current taxes | 5,439 | 15,282 | 31,902 | 21,991 | |||||||||||
Deferred taxes | |||||||||||||||
Deferred taxes | — | — | — | (114 | ) | ||||||||||
Provision for income taxes | $ | 5,439 | $ | 15,282 | $ | 31,902 | $ | 21,877 |
NOL Usage Tier | Allocated NOLs | Applicable Percentage | ||
A | The first | $479,000 | 15% | |
B | The next | $1,057,000 | after Tier A | 40% |
C | The next | $1,057,000 | after Tier B | 10% |
D | The next | $1,057,000 | after Tier C | 15% |
• | Meade Communities LLC v. Ambac Assurance Corporation (Circuit Court, Anne Arundel County, Maryland, Case No. C-02-CV-15-003745). On April 26, 2017, the court granted a motion by Meade to amend its complaint to add a new count that Ambac had allegedly "unreasonably withheld" consent to a proposed Out-Year Development plan submitted by Meade to Ambac for approval. On April 28, 2017, Ambac Assurance filed a motion for summary judgment on all counts of the original Meade complaint. On April 28, 2017, Meade filed a motion for partial summary judgment on two counts of the complaint and certain Ambac Assurance affirmative defenses. On June 2, 2017, the parties filed oppositions to the summary judgment motions. The parties filed reply briefs in support of their motions on June 16, 2017. On July 14, 2017, the parties cross-moved for summary judgment on the additional count added to the amended complaint on April 26, 2017. The court heard oral argument on all motions for summary judgment on September 1, 2017. On October 20, 2017, the court granted Meade's motion for summary judgment that the statute of limitations had run on Ambac Assurance's counterclaim for specific performance and that this ruling was sufficient to fully resolve Meade's claims and Ambac's counterclaims concerning the debt service reserve surety bond. |
• | Monterey Bay Military Housing LLC and Monterey Bay Land LLC v. Ambac Assurance Corporation (Superior Court, Monterey County, California, Case No. 15CV000599). On March 30, 2017, Ambac Assurance filed a motion for summary judgment on all counts of the Monterey Bay complaint. On March 30, 2017, Monterey Bay filed a motion for partial summary judgment on two counts of the complaint and certain Ambac Assurance affirmative defenses. The parties filed their opposition briefs on June 2, 2017 and reply briefs on June 9, 2017. On June 19, 2017, the court issued a preliminary order that partially granted Monterey Bay's motion for summary judgment and ruled that the California statute of limitations had run on Ambac Assurance's claim for specific performance, subject to Ambac Assurance's defense of equitable tolling. The court also partially granted Ambac Assurance's motion for summary judgment on certain of Monterey Bay's declaratory judgment claims. On June 23, 2017, Ambac Assurance withdrew its defense of equitable tolling. The parties agreed that the court's summary judgment ruling on the statute of limitations was sufficient to end the case at the trial court level and submitted final orders to the court for approval. The court signed the final orders on July 13, 2017. On September 14, 2017, Ambac Assurance filed a notice of appeal. |
• | Ambac Assurance Corporation v. Riley Communities, LLC (District Court, Shawnee County Kansas, No. 2016-CV-00026). Ambac Assurance filed this action on January 8, 2016. On February 2, 2016, defendant served its answer. On September 29, 2017, Ambac Assurance filed a motion for summary judgment on all counts of the Complaint and most of Riley's affirmative defenses. On September 29, 2017, Riley filed a motion for partial summary judgment on two of its affirmative defenses. The parties filed their oppositions to the summary judgment motions on October 27 and replies are due November 10, 2017. |
• | Ambac Assurance Corporation v. Fort Leavenworth Frontier Heritage Communities, II, LLC (U.S. District Court, District of Kansas, Index No. 15-CV-9596). Ambac Assurance filed an amended complaint on July 13, 2016. On August 1, 2016, Defendant filed a motion to dismiss the amended complaint for lack of subject matter jurisdiction. Ambac Assurance opposed the motion. On March 17, 2017, the court granted Fort Leavenworth's motion to dismiss for lack of subject matter jurisdiction. On March 28, 2017, Ambac re-filed the case in state court in Shawnee County, Kansas. The re-filed case is styled Ambac Assurance Corporation v. Fort Leavenworth Frontier Heritage Communities II, LLC (District Court, Shawnee County, Kansas, No. 2017-cv-000216). |
• | Ambac Assurance Corporation and The Segregated Account of Ambac Assurance Corporation v. Countrywide Securities Corp., Countrywide Financial Corp. (a.k.a. Bank of America Home Loans) and Bank of America Corp. (Supreme Court of the State of New York, County of New York, Case No. 651612/2010, filed on September 28, 2010). On May 1, 2015, Ambac Assurance filed motions for partial summary judgment, which defendants opposed. Defendants also each filed motions for summary judgment, which Ambac Assurance opposed. On October 27, 2015, the court issued a decision dated October 22, 2015 granting in part and denying in part the parties’ respective summary judgment motions regarding Ambac Assurance’s claims against Countrywide (primary-liability claims), and issued a second decision granting Ambac Assurance’s partial motion for summary judgment and denying Bank of America’s motion for summary judgment regarding Ambac Assurance’s secondary-liability claims against Bank of America. Ambac Assurance and Countrywide filed notices of appeal of the October 22, 2015 decision relating to primary liability and Bank of America filed a notice of appeal of the |
• | Ambac Assurance Corporation and The Segregated Account of Ambac Assurance Corporation v. Nomura Credit & Capital, Inc. and Nomura Holding America Inc. (Supreme Court of the State of New York, County of New York, Case No. 651359/2013, filed on April 15, 2013). On June 3, 2015, the court denied defendants’ July 2013 motion to dismiss Ambac’s claim for breaches of R&Ws, but granted the defendants’ motion to dismiss Ambac’s claims for breach of the repurchase protocol and for alter ego liability against Nomura Holding. On March 27, 2017, Nomura appealed the June 2015 decision to the extent it denied its motion to dismiss and filed its opening appellate brief. Ambac Assurance filed its opening brief on June 23, 2017. Oral argument on the appeal is scheduled for November 14, 2017. Discovery is ongoing. |
• | The Segregated Account of Ambac Assurance Corporation and Ambac Assurance Corporation v. Countrywide Home Loans, Inc. (Wisconsin Circuit Court for Dane County, Case No 14 CV 3511, filed on December 30, 2014). On June 23, 2016, the Wisconsin Court of Appeals reversed the trial court’s prior dismissal of the complaint, and on October 11, 2016, the Wisconsin Supreme Court granted Countrywide’s petition for review of the June 23 decision by the Wisconsin Court of Appeals. The Wisconsin Supreme Court appeal was argued on February 28, 2017. On June 30, 2017, the Wisconsin Supreme Court reversed the decision of the Wisconsin Court of Appeals and remanded the case to the Wisconsin Court of Appeals for further proceedings. |
• | Ambac Assurance Corporation and The Segregated Account of Ambac Assurance Corporation v. U.S. Bank National Association (United States District Court, Southern District of New York, Docket No. 17-cv-00446 (SHS), filed January 20, 2017). On February 23, 2017, plaintiffs filed a second amended complaint to reflect a revised settlement offer, and also filed a motion for a preliminary injunction, which U.S. Bank opposed. On March 9, 2017, U.S. Bank filed a motion to dismiss the second amended complaint, which plaintiffs opposed. The court heard oral argument on plaintiffs’ motion for a preliminary injunction and U.S. Bank’s motion to dismiss on April 24, 2017. On June 1, 2017, the court denied U.S. Bank’s motion to dismiss and denied plaintiffs’ motion for preliminary injunction. U.S. Bank filed a motion for reconsideration of the court’s denial of its motion to dismiss, which has been fully briefed. On March 6, 2017, U.S. Bank filed a trust instruction proceeding in Minnesota state court concerning the proposed settlement, which is captioned, In the matter of HarborView Mortgage Loan Trust 2005-10, No. 27-TR-CV-17-32 (the “Minnesota Action”). On April 5, 2017, Ambac Assurance filed a motion to dismiss the Minnesota Action. On June 12, 2017, U.S. Bank filed an amended petition in the Minnesota Action, and on July 7, 2017 Ambac Assurance filed a renewed motion to dismiss, which U.S. Bank opposed. Additionally, certain certificateholders have objected or otherwise responded to the petition filed by U.S. Bank. |
• | Ambac Assurance Corporation and The Segregated Account of Ambac Assurance Corporation v. U.S. Bank National Association (United States District Court, Southern District of New York, Docket No. 17-cv-02614, filed April 11, 2017). Ambac alleges claims for breach of contract, breach of fiduciary duty, declaratory judgment, and violation of the Streit Act in connection with defendant’s failure to enforce rights and remedies and defendant’s treatment of trust recoveries, as trustee of five residential mortgage-backed securitizations for which Ambac Assurance issued insurance policies. On September 15, 2017, U.S. Bank filed a motion to dismiss, which Ambac Assurance opposed on October 13, 2017. Oral argument on that motion is scheduled for November 17, 2017. |
($ in billions) | September 30, 2017 | December 31, 2016 | $ Variance | % Variance | ||||||||||
Total | $ | 66.7 | $ | 79.3 | $ | (12.6 | ) | (16 | )% | |||||
BIG | 14.4 | 16.8 | (2.4 | ) | (14 | )% |
• | Asset backed and short-term securities of $97.9 million |
• | Ambac-insured securities with a fair value of $5.9 million |
• | Ambac Assurance surplus notes with a fair value of $203.5 million, which are eliminated in consolidation |
• | Residual equity interest in the Corolla Trust that was created in 2014 to monetize Ambac's ownership interest in junior surplus notes issued by the Segregated Account. Ambac carries this interest using the equity method with a current value of $33.7 million at September 30, 2017. Refer to Note 3. Special Purpose Entities, Including Variable Interest Entities to the Consolidated Financial Statements included in Part II, Item 8 in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016 for more information on the Corolla Trust. Additionally, at September 30, 2017 Ambac held $45.0 million par amount of the debt issued by this VIE. |
($ in millions) | ||||
Net income (1) | $ | 19.1 | ||
Gain on foreign currency translation | 66.5 | |||
Unrealized (losses) on non-functional currency available-for-sale securities | (19.0 | ) | ||
Impact on total comprehensive income (loss) | $ | 66.6 |
(1) | A portion of Ambac UK's, and to a lesser extent Ambac Assurance's, assets and liabilities are denominated in currencies other than its functional currency and accordingly, we recognized net foreign currency transaction gains/(losses) as a result of changes to foreign currency rates through our Consolidated Statement of Total Comprehensive Income (Loss). Refer to Note 2. Basis of Presentation and Significant Accounting Policies to the Consolidated Financial Statements included in Part II, Item 8 in the Company's Form 10-K for the year ended December 2016 for further details on transaction gains and losses. |
($ in millions) | September 30, 2017 | December 31, 2016 | |||||
Public Finance (1) (2) | $ | 34,769 | $ | 45,062 | |||
Structured Finance | 14,944 | 16,951 | |||||
International Finance | 17,015 | 17,333 | |||||
Total net par outstanding (3) | $ | 66,728 | $ | 79,346 |
(1) | Includes $5,847 and $5,896 of Military Housing net par outstanding at September 30, 2017 and December 31, 2016, respectively. |
(2) | Includes $1,968 and $2,058 of Puerto Rico net par outstanding at September 30, 2017 and December 31, 2016, respectively. Components of Puerto Rico net par outstanding includes capital appreciation bonds which are reported at the par amount at the time of issuance of the related insurance policy as opposed to the current accreted value of the bonds. |
(3) | Includes $397 and $737 of exposures that were executed in credit derivative form at September 30, 2017 and December 31, 2016, respectively. |
• | Reductions in public finance net par outstanding included $7,269 million from calls of insured exposures, $990 million from refundings and pre-refundings of insured exposures and $2,034 million from scheduled paydown activity. |
• | Reductions in structured finance net par primarily were due to RMBS reductions of $1,352 million. |
• | Decreases in international finance were primarily due to policy runoff including prepayments of investor-owned utility, asset-backed and CDO transactions, partially offset by the impact of foreign exchange rates of $1,351 million primarily related to changes in the British Pound. |
Currency (Amounts in millions) | Net Par Amount Outstanding in Base Currency | Net Par Amount Outstanding in U.S. Dollars | ||||||
U.S. Dollars | $ | 50,661 | $ | 50,661 | ||||
British Pounds | £ | 9,832 | 13,181 | |||||
Euros | € | 1,709 | 2,019 | |||||
Australian Dollars | A$ | 873 | 685 | |||||
New Zealand Dollars | NZ$ | 252 | 182 | |||||
Total | $ | 66,728 |
($ in millions) | Ambac Ratings(1) | Net Par Outstanding | % of Total Net Par Outstanding | ||||||
New Jersey Transportation Trust Fund Authority - Transportation System | BBB+ | $ | 1,642 | 2.5 | % | ||||
Puerto Rico Sales Tax Financing Corporation - Senior Sales Tax Revenue (COFINA) | BIG | 805 | 1.2 | % | |||||
Massachusetts Commonwealth - GO | AA | 802 | 1.2 | % | |||||
Mets Queens Baseball Stadium Project, NY, Lease Revenue | BBB | 564 | 0.8 | % | |||||
Hickam Community Housing LLC | BBB | 474 | 0.7 | % | |||||
Chicago, IL - GO | BBB- | 452 | 0.7 | % | |||||
Puerto Rico Infrastructure Financing Authority, Special Tax Revenue | BIG | 438 | 0.7 | % | |||||
Puerto Rico Highways & Transportation Authority, Transportation Revenue | BIG | 433 | 0.6 | % | |||||
Bragg Communities, LLC | A- | 431 | 0.6 | % | |||||
Metropolitan Washington Airports Authority, DC, Airport System Revenue | AA- | 408 | 0.6 | % | |||||
Total | $ | 6,449 | 9.7 | % |
(1) | Internal credit ratings are provided solely to indicate the underlying credit quality of guaranteed obligations based on the view of Ambac Assurance. In cases where Ambac Assurance has insured multiple tranches of an issue with varying internal ratings, or more than one obligation of an issuer with varying internal ratings, a weighted average rating is used. Ambac Assurance credit ratings are subject to revision at any time and do not constitute investment advice. Ambac Assurance, or one of its affiliates, has guaranteed the obligations listed and may also provide other products or services to the issuers of these obligations for which Ambac Assurance, or one of its affiliates, may have received premiums or fees. “BIG” denotes credits deemed below investment grade. |
($ in millions) | Bond Type | Ambac Rating(1) | Net Par Outstanding | % of Total Net Par Outstanding | |||||||
Ballantyne Re Plc (2) | Structured Insurance | BIG | $ | 900 | 1.3 | % | |||||
Wachovia Asset Securitization Issuance II, LLC 2007-HE2 (3) | Mortgage Backed Securities | BIG | 569 | 0.9 | % | ||||||
Progress Energy Carolinas, Inc. | Investor Owned Utility | A- | 558 | 0.8 | % | ||||||
Timberlake Financial, LLC | Structured Insurance | BBB | 532 | 0.8 | % | ||||||
Wachovia Asset Securitization Issuance II, LLC 2007-HE1 (3) | Mortgage Backed Securities | BIG | 399 | 0.6 | % | ||||||
CenterPoint Energy Inc. | Investor Owned Utility | BBB+ | 376 | 0.6 | % | ||||||
Consolidated Edison Company of New York | Investor Owned Utility | A | 347 | 0.5 | % | ||||||
Option One Mortgage Loan Trust 2007-FXD1 (3) | Mortgage Backed Securities | BIG | 294 | 0.4 | % | ||||||
Niagara Mohawk Power Corporation | Investor Owned Utility | A | 257 | 0.4 | % | ||||||
Duke Energy Ohio, Inc. | Investor Owned Utility | BBB+ | 255 | 0.4 | % | ||||||
Total | $ | 4,487 | 6.7 | % |
(1) | Internal credit ratings are provided solely to indicate the underlying credit quality of guaranteed obligations based on the view of Ambac Assurance, and for Ambac UK related transactions, based on the view of Ambac UK. In cases where Ambac Assurance or Ambac UK has insured multiple tranches of an issue with varying internal ratings, or more than one obligation of an issuer with varying internal ratings, a weighted average rating is used. Ambac Assurance and Ambac UK credit ratings are subject to revision at any time and do not constitute investment advice. Ambac Assurance, or one of its affiliates, has guaranteed the obligations listed and may also provide other products or services to the issuers of these obligations for which Ambac may have received premiums or fees. “BIG” denotes credits deemed below investment grade. |
(2) | Insurance policy issued by Ambac UK. |
(3) | Ambac Assurance has allocated this transaction to the Segregated Account. |
($ in millions) | Country-Bond Type | Ambac Rating(1) | Net Par Outstanding | % of Total Net Par Outstanding | |||||||
Mitchells & Butlers Finance plc-UK Pub Securitisation | UK-Asset Securitizations | A+ | $ | 1,483 | 2.2 | % | |||||
National Grid Electricity Transmission | UK-Utility | A- | 1,121 | 1.7 | % | ||||||
Aspire Defence Finance plc | UK-Infrastructure | BBB+ | 921 | 1.4 | % | ||||||
Capital Hospitals plc(2) | UK-Infrastructure | A- | 911 | 1.4 | % | ||||||
Posillipo Finance II S.r.l | Italy-Sub-Sovereign | BBB- | 817 | 1.2 | % | ||||||
Anglian Water | UK-Utility | A- | 783 | 1.2 | % | ||||||
Telereal Securitisation plc | UK-Asset Securitizations | AA | 771 | 1.2 | % | ||||||
Ostregion Investmentgesellschaft NR 1 SA(2) | Austria-Infrastructure | BIG | 770 | 1.2 | % | ||||||
National Grid Gas | UK-Utility | A- | 723 | 1.1 | % | ||||||
RMPA Services plc | UK-Infrastructure | BBB+ | 616 | 0.9 | % | ||||||
Total | $ | 8,916 | 13.4 | % |
(1) | Internal credit ratings are provided solely to indicate the underlying credit quality of guaranteed obligations based on the view of Ambac Assurance, and for Ambac UK related transactions, based on the view of Ambac UK. In cases where Ambac Assurance or Ambac UK has insured multiple tranches of an issue with varying internal ratings, or more than one obligation of an issuer with varying internal ratings, a weighted average rating is used. Ambac Assurance and Ambac UK credit ratings are subject to revision at any time and do not constitute investment advice. Ambac Assurance, or one of its affiliates, has guaranteed the obligations listed and may also provide other products or services to the issuers of these obligations for which Ambac may have received premiums or fees. “BIG” denotes credits deemed below investment grade. |
(2) | Ambac Assurance has issued an insurance policy for this transaction that will only pay in the event that Ambac UK does not pay under its insurance policy. |
(1) | Internal credit ratings are provided solely to indicate the underlying credit quality of guaranteed obligations based on the view of Ambac Assurance, and for Ambac UK related transactions, based on the view of Ambac UK. In cases where Ambac Assurance or Ambac UK has insured multiple tranches of an issue with varying internal ratings, or more than one obligation of an issuer with varying internal ratings, a weighted average rating is used. Ambac Assurance and Ambac UK credit ratings are subject to revision at any time and do not constitute investment advice. |
Summary of Below Investment Grade Exposure Net Par Outstanding ($ in millions) | September 30, 2017 | December 31, 2016 | ||||||
Public Finance: | ||||||||
Lease and tax-backed (1) | $ | 1,942 | $ | 2,145 | ||||
General obligation (1) | 672 | 681 | ||||||
Transportation | 397 | 415 | ||||||
Housing (2) | 318 | 125 | ||||||
Health care | 27 | 29 | ||||||
Other | 189 | 775 | ||||||
Total Public Finance | 3,545 | 4,170 | ||||||
Structured Finance: | ||||||||
Residential mortgage-backed and home equity—first lien | 4,545 | 5,163 | ||||||
Residential mortgage-backed and home equity—second lien | 2,940 | 3,483 | ||||||
Student loans | 940 | 991 | ||||||
Structured Insurance | 900 | 900 | ||||||
Mortgage-backed and home equity—other | 172 | 251 | ||||||
Other | 22 | 304 | ||||||
Total Structured Finance | 9,519 | 11,092 | ||||||
International Finance: | ||||||||
Other | 1,297 | 1,562 | ||||||
Total International Finance | 1,297 | 1,562 | ||||||
Total | $ | 14,361 | $ | 16,824 |
(1) | Lease and tax-backed revenue includes $1,802 and $1,871 of Puerto Rico net par at September 30, 2017 and December 31, 2016, respectively. General obligation includes $166 and $187 of Puerto Rico net par at September 30, 2017 and December 31, 2016, respectively. Components of Puerto Rico net par outstanding includes capital appreciation bonds which are reported at the par amount at the time of issuance of the related insurance policy as opposed to the current accreted value of the bonds. |
(2) | Relates to military housing net par at September 30, 2017 and December 31, 2016. |
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
($ in millions) | 2017 | 2016 | 2017 | 2016 | ||||||||||||
Revenues: | ||||||||||||||||
Net premiums earned | $ | 53.0 | $ | 53.2 | $ | 143.8 | $ | 147.4 | ||||||||
Net investment income | 87.2 | 90.9 | 253.9 | 222.5 | ||||||||||||
Net other-than-temporary impairment losses | (13.5 | ) | (2.9 | ) | (19.2 | ) | (19.6 | ) | ||||||||
Net realized investment gains (losses) | 6.2 | 11.7 | 5.4 | 27.7 | ||||||||||||
Change in fair value of credit derivatives | 0.2 | 1.7 | 7.9 | 18.6 | ||||||||||||
Net gains (losses) on interest rate derivatives | 4.0 | (14.5 | ) | 36.5 | (134.3 | ) | ||||||||||
Net realized gains (losses) on extinguishment of debt | — | — | 4.9 | 4.8 | ||||||||||||
Other income | — | 2.7 | 0.4 | 17.6 | ||||||||||||
Income (loss) on variable interest entities | (4.0 | ) | 2.1 | (1.6 | ) | (16.1 | ) | |||||||||
Expenses: | ||||||||||||||||
Losses and loss expenses (benefit) | 209.8 | (69.2 | ) | 410.9 | (227.0 | ) | ||||||||||
Insurance intangible amortization | 45.7 | 44.6 | 116.7 | 134.5 | ||||||||||||
Operating expenses | 33.8 | 21.5 | 92.8 | 77.5 | ||||||||||||
Interest expense | 29.1 | 31.5 | 89.0 | 92.6 | ||||||||||||
Provision for income taxes | 5.4 | 15.3 | 31.9 | 21.9 | ||||||||||||
Net income (loss) (attributable to common shareholders) | $ | (190.9 | ) | $ | 101.5 | $ | (309.2 | ) | $ | 169.5 |
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
($ in millions) | 2017 | 2016 | 2017 | 2016 | ||||||||||||
Normal Premium Earned: | ||||||||||||||||
Public finance | $ | 14.7 | $ | 20.8 | $ | 50.9 | $ | 64.1 | ||||||||
Structured finance | 5.6 | 6.4 | 16.5 | 20.0 | ||||||||||||
International finance | 6.5 | 7.8 | 20.7 | 25.1 | ||||||||||||
Total normal premiums earned | 26.8 | 35.0 | 88.1 | 109.2 | ||||||||||||
Accelerated Earnings: | ||||||||||||||||
Public finance | 10.0 | 18.5 | 39.3 | 39.3 | ||||||||||||
Structured Finance | 1.6 | (0.5 | ) | 1.8 | 2.6 | |||||||||||
International finance | 14.6 | 0.2 | 14.6 | (3.7 | ) | |||||||||||
Accelerated earnings | 26.2 | 18.2 | 55.7 | 38.2 | ||||||||||||
Total net premiums earned | $ | 53.0 | $ | 53.2 | $ | 143.8 | $ | 147.4 |
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
($ in millions) | 2017 | 2016 | 2017 | 2016 | ||||||||||||
Net (losses) on securities sold or called | $ | 9.5 | $ | 3.3 | $ | 9.2 | $ | 5.7 | ||||||||
Net foreign exchange gains | (3.3 | ) | 8.4 | (3.8 | ) | 22.0 | ||||||||||
Total net realized gains (losses) | $ | 6.2 | $ | 11.7 | $ | 5.4 | $ | 27.7 |
($ in millions) | September 30, 2017 | December 31, 2016 | |||||
Mark-to-market liability of credit derivatives, excluding CVA | $ | 9.8 | $ | 17.2 | |||
CVA on credit derivatives | (0.8 | ) | (1.9 | ) | |||
Credit derivative liability at fair value | $ | 9.0 | $ | 15.3 |
($ in millions) | September 30, 2017 | December 31, 2016 | |||||
Interest rate derivatives mark-to-market liability, excluding CVA(1) | $ | 81.9 | $ | 348.8 | |||
CVA on interest rate derivatives portfolio | — | (44.9 | ) | ||||
Interest rate derivatives portfolio liability at fair value | $ | 81.9 | $ | 303.9 |
(1) | Concurrent with rule changes effective January 3, 2017 that govern the character of variation payments on Ambac's centrally cleared interest rate swaps, variation margin in the amount of $71 million was reclassified as a reduction to derivative liabilities. Refer to Note 9. Derivative Instruments to the Unaudited Consolidated Financial Statements included in Part I, Item 1 in this Form 10-Q for further information. |
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
($ in millions) | 2017 | 2016 | 2017 | 2016 | ||||||||||||
Foreign exchange gain/(loss) | $ | (1.0 | ) | $ | 2.6 | $ | (2.5 | ) | $ | 8.7 | ||||||
Other | 1.0 | 0.1 | 2.9 | 8.9 | ||||||||||||
Total other income (loss) | $ | — | $ | 2.7 | $ | 0.4 | $ | 17.6 |
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
($ in millions) | 2017 | 2016 | 2017 | 2016 | ||||||||||||
RMBS (1) | $ | (34.4 | ) | $ | (39.0 | ) | $ | (59.0 | ) | $ | (353.4 | ) | ||||
Domestic Public Finance | 212.5 | 6.4 | 434.1 | 78.0 | ||||||||||||
Student Loans | 1.6 | (36.3 | ) | 24.2 | (125.0 | ) | ||||||||||
Ambac UK | (12.7 | ) | (43.7 | ) | (121.0 | ) | 44.5 | |||||||||
All other credits | (1.9 | ) | 0.4 | 0.4 | 2.0 | |||||||||||
Interest on Deferred Amounts | 44.7 | 43.0 | 132.2 | 126.9 | ||||||||||||
Totals (2) | $ | 209.8 | $ | (69.2 | ) | $ | 410.9 | $ | (227.0 | ) |
(1) | Ambac records the impact of estimated recoveries related to securitized loans in RMBS transactions that breached certain representations and warranties within losses and loss expenses (benefit). The losses and loss expense (benefit) associated with changes in estimated representation and warranties was $40.3 and $62.5 for the three and nine months ended September 30, 2017, respectively, and ($38.7) and ($87.3) for the three and nine months ended September 30, 2016, respectively. |
(2) | Includes loss expenses incurred of $29.5 and $63.5 for the three and nine months ended September 30, 2017, respectively, and $22.8 and $42.6 for the three and nine months ended September 30, 2016, respectively. |
• | Higher projected losses in domestic public finance largely driven by negative development on insured Puerto Rico bonds for the three and nine months ended September 30, 2017, in addition to negative development in the Military Housing sector; |
• | Interest on deferred amounts; partially offset by |
• | Lower projected losses for the nine months ended September 30, 2017 in the Ambac UK portfolio primarily is due to the confidential settlement of litigation brought by Ambac UK in the name of Ballantyne against JPMIM and from activities executed by the Ballantyne trust that indirectly reduced future expected claims on the Ambac insured notes; |
• | Foreign exchange gains of $8.9 million and $26.6 million for the three and nine months ended September 30, 2017, respectively. A portion of Ambac UK's loss reserves are denominated in currencies other than their functional currency of British Pounds resulting in incurred losses (gains) when the British Pound depreciates (appreciates). . |
• | A benefit of approximately $49.8 million ($49.7 million net of reinsurance) with respect to two transactions that benefited from a mortgage insurance settlement expected to be received as a reimbursement of claims paid. Five of our mortgage-backed transactions have active pool-level mortgage insurance; which consists of a master policy issued to the mortgage securitization trust that indemnifies the trust either on a first loss or mezzanine basis in the event that covered mortgage loans in the trust default. The mortgage insurance master policy includes various conditions such as exclusions, conditions for notification of loans in default and claims settlement. We have noted with regard to these securitization trusts, payments by mortgage insurers of claims presented by the securitization trusts have been inconsistent, resulting in higher claims presented under Ambac Assurance’s financial guarantee policies. During the three and nine months ended September 30, 2017, a settlement was reached between a provider of mortgage insurance and the trustee, among other parties, with respect to two of the mortgage-backed transactions. The pool-level mortgage insurance has a negligible benefit to loss reserves for the remaining three transactions with pool-level mortgage insurance. |
• | Lower projected losses in the RMBS portfolio due to lower interest rates (other than for the quarter ended September 30, 2016), improved deal performance, higher representation and warranty subrogation recoveries and a second quarter settlement of a non-representation and warranty dispute with regards to an Ambac insured RMBS transaction; |
• | The positive impact of executed commutations and an improved outlook with regards to our risk remediation efforts on student loan policies primarily associated with student loan bonds acquired; |
• | Lower projected losses in the Ambac UK portfolio for the three Months Ended September 30, 2016 were due to lower interest rates and higher probabilities associated with risk remediation efforts, offset by foreign exchange losses of $8.7 million. Increased projected losses in the Ambac UK portfolio for the nine months ended September 30, 2016 were primarily due to foreign exchange losses of $56.9 million partially offset by lower interest rates and higher probabilities associated with risk remediation efforts. A portion of Ambac UK's loss reserves are denominated currencies other than their functional currency of British Pounds resulting in incurred losses (gains) when the British Pound depreciates (appreciates). |
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
($ in millions) | 2017 | 2016 | 2017 | 2016 | ||||||||||||
Claims recorded (1) (2) (3) | $ | 167.6 | $ | 122.7 | $ | 278.0 | $ | 354.1 | ||||||||
Subrogation received (4) | (37.6 | ) | (64.9 | ) | (155.9 | ) | (1,293.0 | ) | ||||||||
Net Claims Recorded | $ | 130.0 | $ | 57.8 | $ | 122.1 | $ | (938.9 | ) |
(1) | Claims recorded include (i) claims paid, including commutation payments and (ii) changes to claims presented and not yet presented through the balance sheet date for policies which were allocated to the Segregated Account. Item (ii) includes permitted policy claims for policies allocated to the Segregated Account that were presented and approved by the Rehabilitator of the Segregated Account but not paid through to the balance sheet date in accordance with the amended Segregated Account Rehabilitation Plan and associated rules and guidelines. Amounts recorded for claims not yet presented and/or permitted are based on management’s judgment. Claims recorded exclude interest accrued on Deferred Amounts. |
(2) | Claims recorded includes claims paid (including commutation payments) of $159.1 and $264.1 for the three and nine months ended September 30, 2017, respectively, and $115.8 and $312.2 for the three and nine months ended September 30, 2016. |
(3) | Claims recorded includes claims paid on Puerto Rico policies of $127.6 and $142.1 for the three and nine months ended September 30, 2017, respectively, and $52.9 and $63.3 for the three and nine months ended September 30, 2016. |
(4) | Subrogation received for the nine months ended September 30, 2016 includes $992.8 million ($995 million gross of reinsurance) received from the settlement of representation and warranty related litigation with JP Morgan and $99.1 million ($100.3 million gross of reinsurance) related to the Countrywide Investor Settlement. |
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
($ in millions) | 2017 | 2016 | 2017 | 2016 | ||||||||||||
Compensation | $ | 16.5 | $ | 13.9 | $ | 41.4 | $ | 45.8 | ||||||||
Non-compensation | 17.2 | 7.2 | 51.0 | 30.2 | ||||||||||||
Gross operating expenses | 33.7 | 21.1 | 92.4 | 76.0 | ||||||||||||
Reinsurance commissions, net | 0.1 | 0.4 | 0.4 | 1.5 | ||||||||||||
Total operating expenses | $ | 33.8 | $ | 21.5 | $ | 92.8 | $ | 77.5 |
• | Higher non-compensation costs primarily due to (i) $6.3 million of incremental legal, consulting and advisory fees in connection with the plan of exit from Rehabilitation by the Segregated Account, (ii) $0.6 million of incremental OCI legal, consulting and advisory fees primarily in connection with the plan of exit from Rehabilitation by the Segregated Account. The increase in non-compensation costs is also driven by a $2.3 million reduction of accrued state income taxes due to the final resolution of state insurance tax assessments in the third quarter of 2016. |
• | Higher compensation costs primarily related to: (i) the impact of the corporate reorganization and resulting reduction in force causing $2.8 million increase in severance and related costs and (ii) a $1.0 million increase in long term incentive compensation expense primarily as a result of the impact of improved performance. Following a review of the needs of the organization, Ambac took steps to streamline its cost structure and improve operating efficiency, which included a corporate reorganization resulting in a headcount reduction of approximately 19% of the employee base since December 31, 2016. As a result of these actions, it is estimated that approximately $8.5 million of annual compensation expense savings will be realized. This annual benefit will be partially offset by an increase in non-compensation costs associated with the outsourcing of certain functions. |
• | Higher non-compensation costs primarily due to (i) $17.4 million of incremental legal, consulting and advisory fees in connection with the plan of exit from Rehabilitation by the Segregated Account, (ii) $2.6 million of incremental OCI legal, consulting and advisory fees primarily in connection with the plan of exit from Rehabilitation by the Segregated Account (iii) a $1.5 million increase of litigation contingencies, and (iv) a $2.3 million reduction of accrued state income taxes due to the final resolution of state insurance tax assessments in the third quarter of 2016. These were partially offset by costs associated with stockholder activism of $5.8 million in the nine months ended September 30, 2016. |
• | Lower compensation costs primarily related to reduced salaries and bonuses as a result of reductions in headcount during 2016, offset by higher severance costs paid in 2017. Additionally, for 2017 a larger employee population is receiving a portion of their short-term incentive compensation in the form of equity in lieu of a cash bonus. Equity will be expensed upon grant in 2018. |
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
($ in millions) | 2017 | 2016 | 2017 | 2016 | ||||||||||||
Surplus notes | $ | 27.9 | $ | 30.1 | $ | 85.3 | $ | 88.2 | ||||||||
Investment agreements | — | 0.1 | 0.2 | 0.4 | ||||||||||||
Secured borrowing | 0.9 | 1.3 | 3.2 | 4.0 | ||||||||||||
Tier 2 commitment fees | 0.3 | — | 0.3 | — | ||||||||||||
Total interest expense | $ | 29.1 | $ | 31.5 | $ | 89.0 | $ | 92.6 |
• | the Rehabilitator has sought and received approval from the Rehabilitation Court to make Supplemental Payments and Special Policy Payments with respect to certain insured securities. The Segregated Account made, in aggregate, Supplemental Payments and Special Policy Payments in respect of permitted policy claims of $8.4 million and $44.8 million during the three and nine months ended September 30, 2017, respectively and $20.7 million and $61.2 million during the three and nine months ended September 30, 2016, respectively. |
• | under the Segregated Account Rehabilitation Plan the unpaid balance of permitted policy claims ("Deferred Amounts") will accrue interest until such outstanding policy obligations are paid in full. Interest on the Deferred Amounts will accrue generally at an effective rate of 5.1%, compounded annually. The Segregated Account is responsible for unpaid accrued interest of $794.1 million through September 30, 2017. |
Nine Months Ended September 30, | |||||||
($ in million) | 2017 | 2016 | |||||
Cash provided by (used in): | |||||||
Operating activities | $ | (278.7 | ) | $ | 825.5 | ||
Investing activities | 474.1 | (773.2 | ) | ||||
Financing activities | (177.8 | ) | (64.9 | ) | |||
Foreign exchange impact on cash and cash equivalents | (1.6 | ) | (1.9 | ) | |||
Net cash flow | $ | 16.0 | $ | (14.5 | ) |
• | During the nine months ended September 30, 2017, Ambac made payments of $94.4 million to commute interest rate swaps with a special purpose entity, Augusta Funding Limited IV; |
• | During the nine months ended September 30, 2017, Ambac made payments of $104.7 million to extinguish (on a consolidated basis) principal and interest of surplus notes of Ambac Assurance and the Segregated Account of Ambac Assurance and settled certain residual obligations related to previously called surplus notes ($69.5 million principal and $35.2 million interest). The interest amount reduces operating cash flows and the principal reduced financing cash flows; and |
• | During the nine months ended September 30, 2017, Ambac had net loss and loss expenses paid of $148.4 million compared to net loss and loss expenses recovered of $948.8 million, for the nine months ended September 30, 2016. Included in the recoveries for the nine months ended September 30, 2016 were the representation and warranty receipt from JP Morgan of $992.8 million and $99.1 million of subrogation recoveries related to the Countrywide Investor Settlement. Excluding subrogation receipts, loss and loss expenses paid, including commutation payments, were $304.4 and $344.3 million for the nine months ended September 30, 2017 and 2016, respectively. Losses paid on Puerto Rico polices were $142.1 million and $63.3 million for the nine months ended September 30, 2017 and 2016, respectively. |
• | During the nine months ended September 30, 2017 and 2016 tax payments amounted to $29.6 million and $10.1 million, respectively. |
($ in millions) | September 30, 2017 | December 31, 2016 | ||||||
Fixed income securities | $ | 4,978.1 | $ | 5,554.2 | ||||
Short-term | 716.5 | 430.8 | ||||||
Other investments | 440.0 | 450.3 | ||||||
Fixed income securities pledged as collateral | 99.4 | 64.9 | ||||||
Total investments (1) | $ | 6,234.0 | $ | 6,500.2 |
(1) | Includes investments denominated in non-US dollar currencies with a fair value of £198.2 ($265.7) and €40.1 ($47.4) as of September 30, 2017 and £167.8 ($206.7) and €23.5 ($24.7) as of December 31, 2016. |
($ in millions) | September 30, 2017 | December 31, 2016 | ||||||
Residential mortgage-backed securities: | ||||||||
RMBS—First-lien—Alt-A | $ | 1,038.4 | $ | 1,044.3 | ||||
RMBS—Second Lien | 850.2 | 910.4 | ||||||
RMBS—First Lien—Sub Prime | 391.0 | 396.9 | ||||||
Total residential mortgage-backed securities | 2,279.6 | 2,351.6 | ||||||
Other asset-backed securities | ||||||||
Military Housing | 236.4 | 236.6 | ||||||
Student Loans | 151.5 | 151.4 | ||||||
Structured Insurance | 139.0 | 118.8 | ||||||
Credit Cards | 86.6 | 164.1 | ||||||
Auto | 49.1 | 137.8 | ||||||
Other | 0.2 | 20.1 | ||||||
Total other asset-backed securities | 662.8 | 828.8 | ||||||
Total (1) | $ | 2,942.4 | $ | 3,180.4 |
(1) | Includes investments guaranteed by Ambac Assurance and Ambac UK for both periods presented. Refer to Note 8. Investments to the Unaudited Consolidated Financial Statements included in Part I, Item 1 in this Form 10-Q for further details of Ambac insured securities held in the investment portfolio. |
(1) | Ratings are based on the lower of Moody’s or S&P ratings. If ratings are unavailable from Moody's or S&P, Fitch ratings are used. If guaranteed, rating represents the higher of the underlying or guarantor’s financial strength rating. |
(2) | Below investment grade and not rated bonds insured by Ambac represent 55% and 45% of the 2017 and 2016 combined fixed income portfolio, respectively. |
Currency (Amounts in millions) | Premium Receivable in Payment Currency | Premium Receivable in U.S. Dollars | ||||||
U.S. Dollars | $ | 410.1 | $ | 410.1 | ||||
British Pounds | £ | 114.8 | 154.0 | |||||
Euros | € | 31.2 | 36.8 | |||||
Australian Dollars | A$ | 1.1 | 0.9 | |||||
Total | $ | 601.8 |
Unpaid Claims | Present Value of Expected Net Cash Flows | Unearned Premium Revenue | Gross Loss and Loss Expense Reserves (2) | |||||||||||||||||||||
($ in millions) Balance Sheet Line Item | Claims | Accrued Interest | Claims and Loss Expenses | Recoveries (1) | ||||||||||||||||||||
September 30, 2017: | ||||||||||||||||||||||||
Loss and loss expense reserves | $ | 2,393 | $ | 630 | $ | 2,900 | $ | (1,078 | ) | $ | (141 | ) | $ | 4,704 | ||||||||||
Subrogation recoverable | 615 | 164 | 105 | (1,588 | ) | — | (704 | ) | ||||||||||||||||
Totals | $ | 3,008 | $ | 794 | $ | 3,005 | $ | (2,666 | ) | $ | (141 | ) | $ | 4,000 | ||||||||||
December 31, 2016: | ||||||||||||||||||||||||
Loss and loss expense reserves | $ | 2,411 | $ | 530 | $ | 2,681 | $ | (1,098 | ) | $ | (143 | ) | $ | 4,381 | ||||||||||
Subrogation recoverable | 583 | 132 | 68 | (1,468 | ) | — | (685 | ) | ||||||||||||||||
Totals | $ | 2,994 | $ | 662 | $ | 2,749 | $ | (2,566 | ) | $ | (143 | ) | $ | 3,696 |
(1) | Present value of future recoveries include R&W subrogation recoveries of $1,844 and $1,907 at September 30, 2017 and December 31, 2016, respectively. |
(2) | Includes Euro denominated gross loss and loss expense reserves. US dollar equivalents of such reserves were $21 (€18) and $21 (€20) at September 30, 2017 and December 31, 2016, respectively. |
Gross Par Outstanding (1)(2) | Unpaid Claims | Present Value of Expected Net Cash Flows | Unearned Premium Revenue | Gross Loss and Loss Expense Reserves (1)(3) | ||||||||||||||||||||||||
($ in millions) | Claims | Accrued Interest | Claims and Loss Expenses | Recoveries | ||||||||||||||||||||||||
September 30, 2017: | ||||||||||||||||||||||||||||
RMBS | $ | 5,895 | $ | 2,995 | $ | 791 | $ | 951 | $ | (2,224 | ) | $ | (24 | ) | $ | 2,489 | ||||||||||||
Domestic Public Finance | 4,451 | 13 | 3 | 1,247 | (387 | ) | (75 | ) | 801 | |||||||||||||||||||
Student Loans | 707 | — | — | 361 | (41 | ) | (13 | ) | 307 | |||||||||||||||||||
Ambac UK | 940 | — | — | 323 | (14 | ) | (19 | ) | 290 | |||||||||||||||||||
All other credits | 550 | — | — | 24 | — | (10 | ) | 14 | ||||||||||||||||||||
Loss expenses | — | — | — | 99 | — | — | 99 | |||||||||||||||||||||
Totals | $ | 12,543 | $ | 3,008 | $ | 794 | $ | 3,005 | $ | (2,666 | ) | $ | (141 | ) | $ | 4,000 | ||||||||||||
December 31, 2016: | ||||||||||||||||||||||||||||
RMBS | $ | 6,756 | $ | 2,982 | $ | 660 | $ | 1,073 | $ | (2,295 | ) | $ | (26 | ) | $ | 2,394 | ||||||||||||
Domestic Public Finance | 4,410 | 12 | 2 | 822 | (216 | ) | (73 | ) | 547 | |||||||||||||||||||
Student Loans | 728 | — | — | 337 | (45 | ) | (13 | ) | 279 | |||||||||||||||||||
Ambac UK (4) | 939 | — | — | 416 | (10 | ) | (18 | ) | 388 | |||||||||||||||||||
All other credits | 567 | — | — | 26 | — | (13 | ) | 13 | ||||||||||||||||||||
Loss expenses | — | — | — | 75 | — | — | 75 | |||||||||||||||||||||
Totals | $ | 13,400 | $ | 2,994 | $ | 662 | $ | 2,749 | $ | (2,566 | ) | $ | (143 | ) | $ | 3,696 |
(1) | Ceded par outstanding on policies with loss reserves and ceded loss and loss expense reserves are $664 and $46, respectively, at September 30, 2017 and $607 and $31, respectively at December 31, 2016. Ceded loss and loss expense reserves are included in Reinsurance recoverable on paid and unpaid losses. |
(2) | Gross Par Outstanding includes capital appreciation bonds, which are reported at the par amount at the time of issuance of the insurance policy as opposed to the current accreted value of the bond. |
(3) | Loss reserves are included in the balance sheet as Loss and loss expense reserves or Subrogation recoverable dependent on if a policy is in a net liability or net recoverable position. |
(4) | Present value of Expected Net Cash Flows is reduced by estimated recoveries from the Ambac UK v. J.P. Morgan Investment Management litigation. |
($ in millions) | Gross Par Outstanding | Gross Loss Reserves Before Representation and Warranty Subrogation Recoveries | Representation and Warranty Subrogation Recoveries | Gross Loss Reserves Net of Representation and Warranty Subrogation Recoveries | ||||||||||||
September 30, 2017: | ||||||||||||||||
Second-lien | $ | 1,046 | $ | 719 | $ | — | $ | 719 | ||||||||
First-lien Mid-prime | 1,950 | 1,934 | — | 1,934 | ||||||||||||
First-lien Sub-prime | 1,088 | 226 | — | 226 | ||||||||||||
Other | 141 | 143 | — | 143 | ||||||||||||
Total Credits Without Subrogation | 4,225 | 3,022 | — | 3,022 | ||||||||||||
Second-lien | 844 | 662 | (1,276 | ) | (614 | ) | ||||||||||
First-lien Mid-prime | 63 | 102 | (79 | ) | 23 | |||||||||||
First-lien Sub-prime | 763 | 547 | (489 | ) | 58 | |||||||||||
Total Credits With Subrogation | 1,670 | 1,311 | (1,844 | ) | (533 | ) | ||||||||||
Total | $ | 5,895 | $ | 4,333 | $ | (1,844 | ) | $ | 2,489 | |||||||
December 31, 2016: | ||||||||||||||||
Second-lien | $ | 1,169 | $ | 679 | $ | — | $ | 679 | ||||||||
First-lien-Mid-prime | 2,226 | 1,901 | — | 1,901 | ||||||||||||
First-lien-Sub-prime | 1,194 | 231 | — | 231 | ||||||||||||
Other | 201 | 138 | — | 138 | ||||||||||||
Total Credits Without Subrogation | 4,790 | 2,949 | — | 2,949 | ||||||||||||
Second-lien | 1,045 | 705 | (1,333 | ) | (628 | ) | ||||||||||
First-lien Mid-prime | 72 | 97 | (79 | ) | 18 | |||||||||||
First-lien Sub-prime | 849 | 550 | (495 | ) | 55 | |||||||||||
Total Credits With Subrogation | 1,966 | 1,352 | (1,907 | ) | (555 | ) | ||||||||||
Total | $ | 6,756 | $ | 4,301 | $ | (1,907 | ) | $ | 2,394 |
September 30, 2017 | December 31, 2016 | |||||||||||||||
Issuer Type ($ in millions) | Gross Par Outstanding (1) | Gross Loss Reserves | Gross Par Outstanding (1) | Gross Loss Reserves | ||||||||||||
Lease and tax-backed | $ | 2,010 | $ | 622 | $ | 2,114 | $ | 395 | ||||||||
General obligation | 1,363 | 78 | 1,422 | 78 | ||||||||||||
Transportation revenue | 561 | 64 | 516 | 62 | ||||||||||||
Housing | 450 | 28 | 179 | 9 | ||||||||||||
Other | 68 | 8 | 179 | 3 | ||||||||||||
Total | $ | 4,451 | $ | 801 | $ | 4,410 | $ | 547 |
(1) | Gross Par Outstanding includes 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. |
• | Non-credit impairment fair value (gain) loss on credit derivatives: Elimination of the non-credit impairment fair value gains (losses) on credit derivatives, which is the amount in excess of the present value of the expected estimated credit losses. Such fair value adjustments are affected by, and in part fluctuate with, changes in market factors such as interest rates and credit spreads, including the market’s perception of Ambac’s credit risk (“Ambac CVA”), and are not expected to result in an economic gain or loss. These adjustments allow for all financial guarantee contracts to be accounted for consistent with the Financial Services – Insurance Topic of ASC, whether or not they are subject to derivative accounting rules. |
• | Insurance intangible amortization: Elimination of the amortization of the financial guarantee insurance intangible asset that arose as a result of Ambac’s emergence from bankruptcy and the implementation of Fresh Start reporting. This adjustment ensures that all financial guarantee contracts are accounted for consistent with the provisions of the Financial Services – Insurance Topic of the ASC. |
• | Foreign exchange (gains) losses: Elimination of the foreign exchange gains (losses) on the re-measurement of assets, liabilities and transactions in non-functional currencies. This adjustment eliminates the foreign exchange gains (losses) on all assets, liabilities and transactions in non-functional currencies, which enables users of our financial statements to better view the business results without the impact of fluctuations in foreign currency exchange rates, particularly as assets held in non-functional currencies have grown, and facilitates period-to-period comparisons of Ambac's operating performance. |
• | Fair value (gain) loss on interest rate derivatives from Ambac CVA: Elimination of the gains (losses) relating to Ambac’s CVA on interest rate derivative contracts. Similar to credit derivatives, fair values include the market’s perception of Ambac’s credit risk and this adjustment only allows for such gain or loss when realized. |
Three Months Ended September 30, | |||||||||||||||
2017 | 2016 | ||||||||||||||
($ in millions, except share data) | $ Amount | Per Diluted Share | $ Amount | Per Diluted Share | |||||||||||
Net income (loss) attributable to common stockholders | $ | (190.9 | ) | $ | (4.20 | ) | $ | 101.5 | $ | 2.22 | |||||
Adjustments: | |||||||||||||||
Non-credit impairment fair value (gain) loss on credit derivatives | (0.1 | ) | — | (1.6 | ) | (0.03 | ) | ||||||||
Insurance intangible amortization | 45.7 | 1.01 | 44.6 | 0.97 | |||||||||||
Foreign exchange (gains) losses | (4.5 | ) | (0.11 | ) | (15.3 | ) | (0.34 | ) | |||||||
Fair value (gain) loss on interest rate derivatives from Ambac CVA | — | — | 14.8 | 0.32 | |||||||||||
Adjusted earnings (loss) | $ | (149.8 | ) | $ | (3.30 | ) | $ | 143.9 | $ | 3.14 | |||||
Nine Months Ended September 30, | |||||||||||||||
2017 | 2016 | ||||||||||||||
($ in millions, except share data) | $ Amount | Per Diluted Share | $ Amount | Per Diluted Share | |||||||||||
Net income (loss) attributable to common stockholders | $ | (309.2 | ) | $ | (6.82 | ) | $ | 169.5 | $ | 3.74 | |||||
Adjustments: | |||||||||||||||
Non-credit impairment fair value (gain) loss on credit derivatives | (2.9 | ) | (0.06 | ) | (6.6 | ) | (0.15 | ) | |||||||
Insurance intangible amortization | 116.7 | 2.57 | 134.5 | 2.96 | |||||||||||
Foreign exchange (gain) loss | (20.1 | ) | (0.44 | ) | 26.0 | 0.57 | |||||||||
Fair value (gain) loss on derivative products from Ambac CVA | 44.9 | 0.99 | 4.1 | 0.10 | |||||||||||
Adjusted earnings (loss) | $ | (170.6 | ) | $ | (3.76 | ) | $ | 327.6 | $ | 7.22 |
• | Non-credit impairment fair value losses on credit derivatives: Elimination of the non-credit impairment fair value loss on credit derivatives, which is the amount in excess of the present value of the expected estimated economic credit loss. GAAP fair values are affected by, and in part fluctuate with, changes in market factors such as interest rates, credit spreads, including Ambac’s CVA that are not expected to result in an economic gain or loss. These adjustments allow for all financial guarantee contracts to be accounted for within Adjusted Book Value consistent with the provisions of the Financial Services—Insurance Topic of the ASC, whether or not they are subject to derivative accounting rules. |
• | Insurance intangible asset: Elimination of the financial guarantee insurance intangible asset that arose as a result of Ambac’s emergence from bankruptcy and the implementation of Fresh Start reporting. This adjustment ensures that all financial guarantee contracts are accounted for within Adjusted Book Value consistent with the provisions of the Financial Services—Insurance Topic of the ASC. |
• | Ambac CVA on interest rate derivative liabilities: Elimination of the gain relating to Ambac’s CVA on interest rate derivative contracts. Similar to credit derivatives, fair values include the market’s perception of Ambac’s credit risk and this adjustment only allows for such gain when realized. |
• | Net unearned premiums and fees in excess of expected losses: Addition of the value of the unearned premium revenue ("UPR") on financial guarantee contracts, in excess of expected losses, net of reinsurance. This non-GAAP adjustment presents the economics of UPR and expected losses for financial guarantee contracts on a consistent basis. In accordance with GAAP, stockholders’ equity reflects a reduction for expected losses only to the extent they exceed UPR. However, when expected losses are less than UPR for a financial guarantee contract, neither expected losses nor UPR have an impact on stockholders’ equity. This non-GAAP adjustment adds UPR in excess of expected losses, net of reinsurance, to stockholders’ equity for financial guarantee contracts where expected losses are less than UPR. |
• | Net unrealized investment (gains) losses in Accumulated Other Comprehensive Income: Elimination of the unrealized gains and losses on the Company’s investments that are recorded as a component of accumulated other comprehensive income (“AOCI”). The AOCI component of the fair value adjustment on the investment portfolio may differ from realized gains and losses ultimately recognized by the Company based on the Company’s investment strategy. This adjustment only allows for such gains and losses in Adjusted Book Value when realized. |
September 30, 2017 | December 31, 2016 | ||||||||||||||
($ in millions, except share data) | $ Amount | Per Share | $ Amount | Per Share | |||||||||||
Total Ambac Financial Group, Inc. stockholders’ equity | $ | 1,508.0 | $ | 33.33 | $ | 1,713.9 | $ | 37.94 | |||||||
Adjustments: | |||||||||||||||
Non-credit impairment fair value losses on credit derivatives | 8.5 | 0.19 | 11.4 | 0.25 | |||||||||||
Insurance intangible asset | (878.0 | ) | (19.41 | ) | (962.1 | ) | (21.30 | ) | |||||||
Ambac CVA on interest rate derivative liabilities | — | — | (44.9 | ) | (0.99 | ) | |||||||||
Net unearned premiums and fees in excess of expected losses | 625.4 | 13.82 | 732.2 | 16.21 | |||||||||||
Net unrealized investment (gains) losses in Accumulated Other Comprehensive Income | (152.4 | ) | (3.37 | ) | (118.9 | ) | (2.63 | ) | |||||||
Adjusted book value | $ | 1,111.6 | $ | 24.56 | $ | 1,331.7 | $ | 29.48 |
Change in Interest Rates | ||||||||||||||||||||||||
($ in millions) | 300 basis point rise | 200 basis point rise | 100 basis point rise | Base scenario | 100 basis point decline(1) | 200 basis point decline(1) | ||||||||||||||||||
Estimated change in net fair value | $ | 110 | $ | 70 | $ | 33 | $ | — | $ | (27 | ) | $ | (35 | ) | ||||||||||
Estimated net fair value | 1,472 | 1,432 | 1,395 | 1,362 | 1,335 | 1,327 |
(1) | Incorporates an interest rate floor of 0%. |
Change in Obligor Spreads | ||||||||||||||||||||
($ in millions) | 250 basis point widening | 50 basis point widening | Base scenario | 50 basis point narrowing | 250 basis point narrowing | |||||||||||||||
Estimated change in fair value | $ | (28 | ) | $ | (6 | ) | $ | — | $ | 6 | $ | 20 | ||||||||
Estimated fair value | (42 | ) | (20 | ) | (14 | ) | (8 | ) | 6 |
Change in Ambac Credit Spreads | ||||||||||||||||||||
($ in millions) | 250 basis point widening | 50 basis point widening | Base scenario | 50 basis point narrowing | 250 basis point narrowing | |||||||||||||||
Estimated change in fair value | $ | 1 | $ | — | $ | — | $ | — | $ | (1 | ) | |||||||||
Estimated fair value | (13 | ) | (14 | ) | (14 | ) | (14 | ) | (15 | ) |
Change in Spreads | ||||||||||||||||||||
($ in millions) | 250 basis point widening | 50 basis point widening | Base scenario | 50 basis point narrowing (1) | 250 basis point narrowing (1) | |||||||||||||||
Estimated change in fair value | $ | (196 | ) | $ | (39 | ) | $ | — | $ | 38 | $ | 101 | ||||||||
Estimated fair value | 2,913 | 3,070 | 3,109 | 3,147 | 3,210 |
(1) | Incorporates a credit spread floor of 0 basis points. |
Change in Foreign Exchange Rates Against U.S. Dollar | ||||||||||||||||
($ in millions) | 20% Decrease | 10% Decrease | 10% Increase | 20% Increase | ||||||||||||
Estimated change in fair value | $ | (62 | ) | $ | (31 | ) | $ | 31 | $ | 62 |
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds |
(a) | Unregistered Sales of Equity Securities |
(b) | Purchases of Equity Securities By the Issuer and Affiliated Purchasers |
Item 3. | Defaults Upon Senior Securities |
Exhibit Number | Description | |
10.1 | ||
12.1+ | ||
31.1+ | ||
31.2+ | ||
32.1++ | ||
101.INS | XBRL Instance Document. | |
101.SCH | XBRL Taxonomy Extension Schema Document. | |
101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document. | |
101.LAB | XBRL Taxonomy Extension Label Linkbase Document. | |
101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document. | |
101.DEF | XBRL Taxonomy Extension Definition Linkbase Document. | |
+ Filed herewith. ++ Furnished herewith. |
AMBAC FINANCIAL GROUP, INC. | |||
Dated: | November 8, 2017 | By: | /S/ DAVID TRICK |
Name: | David Trick | ||
Title: | Chief Financial Officer and Treasurer | ||
(Duly Authorized Officer and | |||
Principal Financial Officer) |
Successor | Predecessor | ||||||||||||||||||||||||
Nine Months Ended September 30, 2017 | Period from May 1 through December 31, 2013 | Period from Jan 1 through April 30, 2013 | |||||||||||||||||||||||
Year Ended December 31, | |||||||||||||||||||||||||
($ in thousands, except ratios) | 2016 | 2015 | 2014 | ||||||||||||||||||||||
Earnings: | |||||||||||||||||||||||||
Pre-tax income (loss) | $ | (277,334 | ) | $ | 105,026 | $ | 510,058 | $ | 493,253 | $ | 512,316 | $ | 3,348,033 | ||||||||||||
Fixed Charges | 86,010 | 119,503 | 115,016 | 127,754 | 84,736 | 30,342 | |||||||||||||||||||
Earnings | $ | (191,324 | ) | $ | 224,529 | $ | 625,074 | $ | 621,007 | $ | 597,052 | $ | 3,378,375 | ||||||||||||
Fixed charges: | |||||||||||||||||||||||||
Interest expense | $ | 85,300 | $ | 118,500 | $ | 113,100 | $ | 125,891 | $ | 83,595 | $ | 29,718 | |||||||||||||
Portion of rental expense deemed to be interest | 710 | 1,003 | 1,916 | 1,863 | 1,141 | 624 | |||||||||||||||||||
Fixed charges | $ | 86,010 | $ | 119,503 | $ | 115,016 | $ | 127,754 | $ | 84,736 | $ | 30,342 | |||||||||||||
Ratio of earnings to fixed charges | * | 1.9 | x | 5.4 | x | 4.9 | x | 7.0 | x | 111.3 | x |
1. | I have reviewed this Quarterly Report on Form 10-Q of Ambac Financial Group, Inc. (the "registrant"); |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a—15(e) and 15d—15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b. | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c. | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d. | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors: |
a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Dated: | November 8, 2017 | By: | /s/ Claude LeBlanc |
Claude LeBlanc | |||
President and Chief Executive Officer |
1. | I have reviewed this Quarterly Report on Form 10-Q of Ambac Financial Group, Inc. (the"registrant"); |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a—15(e) and 15d—15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b. | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c. | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d. | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors: |
a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Dated: | November 8, 2017 | By: | /s/ David Trick |
David Trick | |||
Chief Financial Officer and Treasurer |
(1) | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
(2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
By: | /s/ Claude LeBlanc | ||
Name: | Claude LeBlanc | ||
Title: | President and Chief Executive Officer |
By: | /s/ David Trick | ||
Name: | David Trick | ||
Title: | Chief Financial Officer and Treasurer | ||
Dated: | November 8, 2017 |
:K2P?".7Y3B*%?$<2X^O2A.5.A
ME]25"-&FHRJ8W'5L'EU"%2OC*4)<./XR? ,*'%=+&XC 8[*,7A\7E=?!S4,:
MLSH5%6P:PDGI[95::J7E>$:<)SJ)TX31_,C^S;_P1%_:>^,?BK6%^)E]I7P6
M^&OA_P 076COXRU"V?7-<\
!L/3>/S'GQ>:9MBXU
M/[+XNWYN8XWLK[5QH
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M,L@'5+;S8[L]?^/<'!P!7Z?@@@$$$$ @@Y!!&00>X/4'N*_Z4?V2/'669_\
M1RSG@NE5I1SG@+CO-HXW"*2=;^R^)J.'S?*LQG!2;C2Q>,CG>!I-I
Document and Entity Information - shares |
9 Months Ended | |
---|---|---|
Sep. 30, 2017 |
Nov. 03, 2017 |
|
Document And Entity Information [Abstract] | ||
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Date | Sep. 30, 2017 | |
Entity Well-known Seasoned Issuer | Yes | |
Entity Current Reporting Status | Yes | |
Entity Voluntary Filers | No | |
Document Fiscal Year Focus | 2017 | |
Document Fiscal Period Focus | Q3 | |
Trading Symbol | AMBC | |
Entity Registrant Name | AMBAC FINANCIAL GROUP INC | |
Entity Central Index Key | 0000874501 | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Large Accelerated Filer | |
Entity Common Stock, Shares Outstanding | 45,251,166 |
Consolidated Balance Sheets (Parenthetical) - Successor [Member] - USD ($) $ in Thousands |
Sep. 30, 2017 |
Dec. 31, 2016 |
---|---|---|
Fixed income securities, amortized cost | $ 4,825,555 | $ 5,435,385 |
Fixed income securities pledged as collateral, amortized cost | 99,424 | 64,833 |
Short-term investments, amortized cost | 716,666 | 430,827 |
Other Investments at Fair Value | 406,310 | 420,304 |
Other investments | $ 439,987 | $ 450,307 |
Preferred stock, par value | $ 0.01 | $ 0.01 |
Preferred stock, shares authorized | 20,000,000 | 20,000,000 |
Preferred stock, shares issued | 0 | 0 |
Preferred stock, shares outstanding | 0 | 0 |
Common stock, par value | $ 0.01 | $ 0.01 |
Common stock, shares authorized | 130,000,000 | 130,000,000 |
Common stock, shares issued | 45,275,982 | 45,194,954 |
Common stock, shares outstanding | 45,275,982 | 45,194,954 |
Treasury stock, shares | 24,816 | 22,458 |
Consolidated Statements of Total Comprehensive Income (Parenthetical) - Successor [Member] - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2017 |
Sep. 30, 2016 |
Sep. 30, 2017 |
Sep. 30, 2016 |
|
Unrealized (loss) gain on securities, taxes | $ 0 | $ 0 | $ 0 | $ 0 |
Gain (loss) on foreign currency translation, taxes | 0 | 0 | 0 | 0 |
Amortization of postretirement benefit, taxes | $ 0 | $ 0 | $ 0 | $ 0 |
Background and Business Description |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Background and Business Description | 1. BACKGROUND AND BUSINESS DESCRIPTION Ambac Financial Group, Inc. (“Ambac” or the “Company”), headquartered in New York City, is a financial services holding company incorporated in the state of Delaware on April 29, 1991. Ambac provides financial guarantee insurance policies through its principal operating subsidiary, Ambac Assurance Corporation (“Ambac Assurance" or "AAC") and its wholly owned subsidiary, Ambac Assurance UK Limited (“Ambac UK”). Insurance policies issued by Ambac Assurance and Ambac UK generally guarantee payment when due of the principal and interest on the obligations guaranteed. Ambac also has another wholly-owned subsidiary, Everspan Financial Guarantee Corp. (“Everspan”), which has been in runoff since its acquisition in 1997. The deterioration of Ambac Assurance’s financial condition resulting from losses in its insured portfolio since 2007 has prevented Ambac Assurance and Ambac UK from being able to write new business. The inability to write new business has and will continue to negatively impact Ambac’s future operations and financial results. Ambac Assurance’s ability to pay dividends and, as a result, Ambac’s liquidity, have been significantly restricted by the deterioration of Ambac Assurance’s financial condition, by the rehabilitation of the Segregated Account (as defined below) and by the terms of the Settlement Agreement, dated as of June 7, 2010 (the "Settlement Agreement"), by and among Ambac Assurance, Ambac Credit Products LLC (“ACP”), Ambac and certain counterparties to credit default swaps with ACP that were guaranteed by Ambac Assurance. Ambac Assurance is also restricted in its ability to pay dividends pursuant to regulatory restrictions, the terms of its Auction Market Preferred Shares and the terms of agreements entered into with the Segregated Account. It is highly unlikely that Ambac Assurance will be able to make dividend payments to Ambac for the foreseeable future. Ambac also provides other financial products through subsidiaries of Ambac Assurance. These products consist of interest rate swaps, funding conduits, and investment agreements (until the first quarter of 2017) that were provided principally to clients that were also provided financial guarantee policies. These financial products have been in active run-off since 2007. Prior to the second quarter of 2017, Ambac had two reportable business segments: i) the financial guarantee segment, which consisted of financial guarantee insurance policies and credit derivative contracts and ii) the financial services segment which consisted of the other financial products discussed above. With respect to the financial services segment, there were significant swap commutations in June 2017. The remaining interest rate swaps, along with other interest rate derivatives, are managed to economically hedge interest rate risk in the financial guarantee and investment portfolios. The last remaining investment agreement matured in March 2017 and the remaining conduit transactions are not material. The significant wind-down of these financial products, along with the appointment of a new Chief Executive Officer effective January 1, 2017, has resulted in a change in how the Company manages its business. Management now reviews financial information, allocates resources and measures financial performance on a consolidated basis. As a result, beginning with the second quarter of 2017, the Company has a single reportable segment. All prior period amounts and disclosures have been adjusted to reflect the reportable segment change. During the third quarter of 2017, management and the Board of Directors of Ambac engaged in a comprehensive review of its key corporate strategies. Following that review, Ambac's key strategic objectives are as follows:
With respect to our new business strategy, we have identified certain business sectors adjacent to Ambac's core business, in which future opportunities will be evaluated. The evaluation will be conducted through a measured and disciplined approach to identify opportunities that are synergistic to Ambac, match Ambac's core competencies, are rapidly scalable or available through mergers and acquisitions and that may allow for the utilization of Ambac's net operating loss carry-forwards. Although we are exploring new business opportunities for Ambac, no assurance can be given that we will be able to execute the acquisition or development of any new businesses or assets. In addition, there can be no assurance that we will be able to obtain the financial and other resources that may be required to finance the acquisition or development of new businesses or assets that may permit utilization of Ambac’s tax net operating loss carry-forwards. Due to these factors, as well as uncertainties relating to the ability of Ambac Assurance to deliver value to Ambac, the value of our securities remains speculative. The execution of Ambac’s strategy to increase the value of its investment in Ambac Assurance remains subject to the authority of the Rehabilitator to control the management of the Segregated Account. In exercising such authority, the Rehabilitator will act for the benefit of policyholders, and will not take into account the interests of Ambac. The Rehabilitator's authority includes, but is not limited to, sole discretion over the rate at which the Segregated Account pays claims and the accretion rate on Deferred Amounts. Similarly, by operation of the contracts executed in connection with the establishment, and subsequent rehabilitation, of the Segregated Account, the Rehabilitator retains rights to oversee and approve certain actions taken by or in respect of Ambac Assurance. As indicated below under "Stipulation and Order," OCI (defined below) is expected to exercise enhanced oversight over the activities of Ambac Assurance after the conclusion of the Segregated Account Rehabilitation Proceedings (as defined below). Opportunities for remediating losses on poorly performing insured transactions also depend on market conditions, including the perception of Ambac Assurance’s creditworthiness, the structure of the underlying risk and associated policy as well as other counterparty specific factors. Oversight by the Rehabilitator or OCI could impair Ambac’s ability to execute certain of its strategies. Ambac Assurance's ability to commute policies or purchase certain investments may also be limited by available liquidity. As a result of uncertainties associated with the oversight by the Rehabilitator of the Segregated Account as noted herein, management has concluded that there is substantial doubt about Ambac's ability to continue as a going concern. Ambac’s financial statements as of and for the three and nine months ended September 30, 2017 and the year ended December 31, 2016, are prepared assuming Ambac continues as a going concern and do not include any adjustment that might result from its inability to continue as a going concern. The Segregated Account In March 2010, Ambac Assurance established a Segregated Account pursuant to Wisc. Stat. §611.24 (2) (the “Segregated Account”) to segregate certain segments of Ambac Assurance’s liabilities, and the Office of the Commissioner of Insurance for the State of Wisconsin (“OCI” (which term shall be understood to refer to such office as regulator of Ambac Assurance and to refer to the Commissioner of Insurance for the State of Wisconsin as rehabilitator of the Segregated Account (the “Rehabilitator”), as the context requires)) commenced rehabilitation proceedings in the Dane County, Wisconsin Circuit Court (the “Rehabilitation Court”) with respect to the Segregated Account (the “Segregated Account Rehabilitation Proceedings”) in order to permit OCI to facilitate an orderly run-off and/or settlement of the liabilities allocated to the Segregated Account pursuant to the provisions of the Wisconsin Insurers Rehabilitation and Liquidation Act. On October 8, 2010, OCI filed a plan of rehabilitation for the Segregated Account (the “Segregated Account Rehabilitation Plan”) in the Rehabilitation Court. The Rehabilitation Court confirmed the Segregated Account Rehabilitation Plan on January 24, 2011. On June 11, 2014, the Rehabilitation Court approved amendments to the Segregated Account Rehabilitation Plan and the Segregated Account Rehabilitation Plan, as amended, became effective on June 12, 2014. Net par exposure as of September 30, 2017 for policies allocated to the Segregated Account was $10,174,798. Policy obligations not allocated to the Segregated Account remain in the General Account of Ambac Assurance, and such policies in the General Account are not subject to and, therefore, are not directly impacted by the Segregated Account Rehabilitation Plan. To pay claims and other liabilities, the Segregated Account has the ability to demand payment from time to time under an aggregate excess of loss reinsurance agreement provided by Ambac Assurance (the “Reinsurance Agreement”). In addition, certain operating and administrative costs and expenses of the Segregated Account are reimbursable by Ambac Assurance pursuant to the Cooperation Agreement, dated as of March 24, 2010, by and between the Segregated Account and Ambac Assurance, as amended (the “Cooperation Agreement”). Ambac Assurance is not obligated to make payments under the Reinsurance Agreement or Cooperation Agreement if its surplus as regards to policyholders is less than $100,000 (the “Minimum Surplus Amount”). As long as the surplus as regards to policyholders is not less than the Minimum Surplus Amount, payments by Ambac Assurance to the Segregated Account under the Reinsurance Agreement and Cooperation Agreement are not capped. At September 30, 2017, Ambac Assurance’s surplus as regards to policyholders exceeded the Minimum Surplus Amount. In the event that Ambac Assurance does not maintain surplus in excess of the Minimum Surplus Amount, the Segregated Account would experience a shortfall in funds available to pay its liabilities. Any such shortfall would be a consideration for the Rehabilitator in the determination of whether any changes to the Segregated Account Rehabilitation Plan and/or the amount of partial policy claim payments are necessary or appropriate or whether to institute general rehabilitation proceedings against Ambac Assurance. Rehabilitation Exit Support Agreement On July 19, 2017, Ambac Assurance and Ambac entered into an agreement (the “Rehabilitation Exit Support Agreement”) with holders or beneficial owners (the “Supporting Holders”) of surplus notes issued by Ambac Assurance and beneficial interests in Deferred Amounts (as defined in the Segregated Account Rehabilitation Plan) of the Segregated Account with respect to a transaction which, subject to the conditions precedent set forth in the Rehabilitation Exit Support Agreement, and if consummated, would generally involve (i) the exchange of certain surplus notes held by holders of surplus notes that elect to participate in a voluntary exchange transaction and (ii) the satisfaction and discharge of all Deferred Amounts, in each case for an effective consideration package comprised of cash and new Secured Notes (as defined below) and certain existing surplus notes and (iii) the exit from rehabilitation of the Segregated Account (the “Rehabilitation Exit Transactions”). The settlement of the Deferred Amounts and the Segregated Account’s exit from rehabilitation are expected to be realized through the amendment (the “Rehabilitation Plan Amendment”) of the Segregated Account Rehabilitation Plan to be pursued by the Rehabilitator, and a series of transactions which would provide to holders of beneficial interests in Deferred Amounts (other than Ambac, but including Ambac Assurance) a total effective consideration package, in full satisfaction and discharge of each $1.00 of Deferred Amounts (including accretion), of (i) $0.40 in cash, (ii) $0.41 in principal amount of new Secured Notes (as defined below) and (iii) from certain holders of surplus notes, $0.125 currently outstanding surplus notes. Such consideration package would thereby provide a discount of $0.065 (set first against accretion of Deferred Amounts). Ambac would receive $0.91 in principal amount of Secured Notes for each $1.00 of Deferred Amounts (including accretion) that it holds, and would provide a $0.09 discount in full satisfaction and discharge of its Deferred Amount claims. On September 25, 2017 the Rehabilitator filed a motion in the Rehabilitation Court by seeking entry of an order approving the Rehabilitation Plan Amendment. On September 26, 2017, the Rehabilitation Court entered a scheduling order in connection with this motion providing that objections to the motion shall be filed by November 24, 2017, the Rehabilitator’s response to any objections shall be filed by December 11, 2017, the Rehabilitator’s Pretrial Report shall be filed by December 11, 2017, the Pretrial Conference shall be held on December 14, 2017, and the evidentiary Confirmation Hearing shall be held on January 4 and 5, 2018. The Rehabilitation Exit Support Agreement calls for a series of interrelated transactions involving the exchange of certain surplus notes (collectively, the “Exchange Offers”), pursuant to which, for each $1.00 of principal amount outstanding and accrued and unpaid interest thereon, holders effectively would (i) receive $0.40 in cash, (ii) receive $0.41 in principal amount of Secured Notes, (iii) retain $0.125 in principal amount and accrued and unpaid interest thereon of surplus notes and (iv) provide a discount of $0.065 in principal amount and accrued and unpaid interest thereon. Ambac will not participate in the Exchange Offers and will hold surplus notes issued by the Segregated Account and Ambac Assurance until the Rehabilitation Exit Transactions are consummated and a certain amount of such surplus notes for a time after such transactions are completed, as described below. As part of the Rehabilitation Exit Transactions, Ambac and Ambac Assurance will seek consents from holders of surplus notes to a waiver and amendment (the “BSA Waiver and Amendment”) of certain provisions of the Settlement Agreement, such consents to be executed by holders of more than 50% in aggregate principal amount of the surplus notes. Holders who participate in the Exchange Offers will be required to deliver their consent to the BSA Waiver and Amendment. As contemplated by the Rehabilitation Exit Support Agreement and as a portion of the consideration received by holders of beneficial interests in Deferred Amounts (including Ambac Assurance) in satisfaction and discharge of their claims pursuant to the Rehabilitation Plan Amendment and by holders of surplus notes pursuant to the Exchange Offers (as specified above), a newly formed special purpose entity will issue new secured notes (the “Secured Notes”), secured by all assets of the special purpose entity, which include a note issued by Ambac Assurance to the special purpose entity (the "Ambac Note"), which note is secured by a pledge of Ambac Assurance’s right, title and interest in up to the first $1,400,000 of proceeds (net of reinsurance) from certain litigations in which Ambac Assurance and the Segregated Account seek redress for breaches of representations and warranties and/or fraud related to residential mortgage-backed securitizations (the “RMBS Litigations”). In addition, the Ambac Note will be secured by RMBS securities having a market value of not less than $350,000 on the date that is not more than five business days prior to the closing date of the Rehabilitation Exit Transactions. Ambac Assurance will also pledge for the benefit of the holders of Secured Notes (other than Ambac Assurance) the proceeds of any Secured Notes held by AAC from time to time, and will issue a financial guaranty insurance policy to a trustee for the benefit of holders of Secured Notes irrevocably guarantying all principal and interest payments in respect of the Secured Notes as and when such payments become due and owing. Should Ambac Assurance settle any of the RMBS Litigations before the closing of the Rehabilitation Exit Transactions, any proceeds received by Ambac Assurance from any settlement which would have secured the Secured Notes will replace Secured Notes having a face amount equal to the amount of proceeds received that would otherwise be issued. Following the consummation of the Rehabilitation Exit Transactions and until the earlier of (i) June 8, 2020 and (ii) the date on which at least 25% of the principal amount of Remaining Senior Surplus Notes (as defined the Rehabilitation Exit Support Agreement) are no longer outstanding, Ambac shall hold and not sell Remaining Senior Surplus Notes which, as of June 30, 2017, have an aggregate of $60,000 of principal amount and accrued and unpaid interest outstanding. The Company may terminate the Rehabilitation Exit Support Agreement upon the occurrence of certain events, including if the Rehabilitation Exit Transactions have not been consummated within 365 days of the signing date of the Rehabilitation Exit Support Agreement. Supporting Holders that, in the aggregate, beneficially own at least 66 2/3% of the principal amount outstanding under the surplus notes and 66 2/3% of the principal amount of the Deferred Amounts, held by the Supporting Holders as a whole may terminate the Rehabilitation Exit Support Agreement upon the occurrence of certain events, including if (i) within 75 days of signing date of the Rehabilitation Exit Support Agreement, the Rehabilitator has not filed a motion in the Rehabilitation Court seeking entry of the approval order; (ii) the confirmation hearing has not commenced within 180 days of the signing date of the Rehabilitation Exit Support Agreement; and (iii) the Rehabilitation Exit Transactions have not been consummated within 270 days of the Signing Date. The condition described in clause (i) of the preceding sentence has been satisfied. In addition if the Rehabilitation Exit Transactions have not been consummated within 365 days of the signing date of the Rehabilitation Exit Support Agreement, each Supporting Holder shall have the right to terminate the Agreement with respect to itself. Ambac can provide no assurance that any of the termination events described above or in the Rehabilitation Exit Support Agreement will not arise. On September 21, 2017, Ambac Assurance, Ambac and the Supporting Holders entered into the First Amendment to the Rehabilitation Exit Support Agreement (the “First Amendment”) to amend certain provisions of the Rehabilitation Exit Support Agreement, including the term sheets attached thereto, to reflect the terms of the definitive documents to which the parties had agreed during the course of their negotiation. The First Amendment, among other things: (A) amends certain terms in the Rehabilitation Exit Term Sheet attached as Exhibit A to the Rehabilitation Exit Support Agreement (the “ Plan Amendment Term Sheet ”) to (i) specify that the record date with respect to the Rehabilitation Plan Amendment shall be September 30, 2017; (ii) provide that if the amount of accretion on a holder’s Deferred Amount is less than 7.4% on the record date, and if such Deferred Amount relates to an insured obligation that is undercollateralized, then the remaining amount of such Deferred Amount that is to be discharged may include the portion of the applicable Deferred Amount that is in excess of the amount of accretion; (iii) provide that the Rehabilitator may provide alternative consideration to holders of Deferred Amounts, in an amount equal to the currently contemplated consideration, to the extent that Ambac Assurance determines, in its sole discretion, that doing so is necessary or advisable to maintain compliance with any legal or regulatory requirements applicable to Ambac Assurance or the Segregated Account; (iv) provide that, subject to the occurrence of the effective date of the Rehabilitation Plan Amendment, no accretion shall arise or accrue with respect to policy claims arising on or after the record date through and including one business day immediately preceding the effective date and such policy claims shall be paid in cash; (v) provide that where underlying securities related to Deferred Amounts arising prior to the record date (“ Pre-Record Date Deferred Amounts ”) are held through the Depository Trust Company, the consideration for the Pre-Record Date Deferred Amounts shall be distributed to the ultimate beneficial holders of the securities and not to the applicable trustee; the consideration shall be deemed to be transferred to the trustee and the distribution will be deemed to have been received by beneficial holders on the next scheduled bond distribution date applicable to the relevant insured obligation or underlying indenture that gives rise to the related claim, notwithstanding the date when the consideration was actually received by such beneficial holders; and (vi) amend the condition to the effectiveness of the Rehabilitation Plan Amendment such that the confirmation order of the Rehabilitation Court approving the Rehabilitation Plan Amendment does not need to have become a final order; and (B) amends certain terms in the Secured Notes Term Sheet attached as Exhibit C to the Rehabilitation Exit Support Agreement (the "Secured Notes Term Sheet") to (i) specify that the issuer (the “ Secured Notes Issuer ”) of the Secured Notes will liquidate on or after a date that is at least 12 months after the earlier of (a) the satisfaction of all of the Secured Notes Issuer’s obligations under the Secured Notes (other than contingent indemnification obligations) and (b) the maturity date of the Secured Notes (the “ Maturity Date ”); provided that (X) prior to the satisfaction of all of the Secured Notes Issuer’s obligations under the Secured Notes (other than contingent indemnification obligations), holders of the Secured Notes shall retain their rights to the collateral securing the Secured Notes and the financial guaranty insurance policy on the Secured Notes and any liquidation of the Secured Notes Issuer prior to such satisfaction shall result in the note collateral agent under the Secured Notes becoming the “Holder” of the Ambac Note (as defined in the Secured Notes Term Sheet) and retaining all rights and powers of the “Holder” thereunder (subject to the transfer restrictions for the Ambac Note) and (Y) such liquidation shall, in any event, be completed no later than the date that is 18 months after the earlier of (1) the satisfaction of all of the Secured Notes Issuer’s obligations under the Secured Notes (other than contingent indemnification obligations) and (2) the Maturity Date; and (ii) provide that none of the collateral agent, the trustee or the holders of Secured Notes may sell the Ambac Note or the right to receive the proceeds from the RMBS litigations without the prior consent of Ambac Assurance; provided that the foregoing shall not limit the assignment of the Ambac Note to the collateral agent in connection with a liquidation of the Secured Notes Issuer but shall limit the further assignment by the collateral agent without the prior consent of Ambac Assurance. The Exchange Offers will be subject to a number of conditions precedent, including, among others, (i) approval by the OCI; (ii) the effectiveness of the Rehabilitation Plan Amendment concurrent with the closing of the Exchange Offers; (iii) participation by 85% of the outstanding principal amount owned by holders of surplus notes (including Ambac and Ambac Assurance) in the Exchange Offers; (iv) receipt of consents of at least a majority of the outstanding aggregate principal amount of the surplus notes (other than surplus notes beneficially owned by Ambac or Ambac Assurance or any of their affiliates) to the BSA Waiver and Amendment; and (v) subject to the approval of the OCI, a one-time current interest payment of approximately $12,500 on the surplus notes outstanding immediately following the effective date of the Rehabilitation Plan Amendment. Effectiveness of the Rehabilitation Plan Amendment shall be determined and announced by the Rehabilitator provided that a number of conditions precedent have been satisfied or waived by the Rehabilitator, in his sole discretion, including, among others, (i) the Rehabilitation Plan Amendment will have been approved by the Rehabilitation Court; (ii) as of the effective date, Ambac Assurance will have sufficient capital and claims-paying resources to effect all of the Rehabilitation Exit Transactions and to exit rehabilitation, as determined by the Rehabilitator in his sole and absolute discretion; (iii) the conditions to consummation of the Exchange Offers will have been satisfied or waived in full in accordance with the terms thereof; and (iv) Ambac will have received from the Internal Revenue Service a ruling, in form and substance reasonably satisfactory to the Rehabilitator, Ambac Assurance, and Ambac. Ambac can provide no assurances that these approvals or consents will be obtained or that the other conditions precedent will be satisfied or waived in a timely manner or at all. Even if the Rehabilitation Exit Transactions are consummated, OCI is expected to impose on Ambac and Ambac Assurance reporting requirements and restrictions on transactions or other activities, as described below under "Stipulation and Order," and may impose additional requirements or restrictions on Ambac or Ambac Assurance, which may create additional challenges or obstacles with respect to Ambac Assurance's ability to deliver value to Ambac and Ambac's ability to deliver value to its stockholders. Tier 2 Commitment On July 19, 2017, Ambac Assurance also entered into a commitment letter (the “Commitment Letter”) with certain investors (the “Investors”), with respect to the issuance of an aggregate principal amount of $240,000 of senior notes (the “Tier 2 Notes”) secured by Ambac Assurance’s rights, title and interest in the cash and non-cash proceeds (net of reinsurance) above $1,600,000 received in connection with the RMBS Litigations. The Commitment Letter will terminate upon the earliest occurrence of: (i) 365 days from the execution of the Rehabilitation Exit Support Agreement, and (ii) the date on which the Tier 2 Notes are issued. In addition, Ambac Assurance and the Investors have the option to terminate the Commitment Letter following (i) the resolution of Ambac Assurance Corp. et al. v. Countrywide Home Loans, Inc. et al., Index No. 651612/2010 (N.Y. Sup. Ct. N.Y. Cnty.) (Bransten, J.) or (ii) the termination of the Rehabilitation Exit Support Agreement. The issuance of the Tier 2 Notes is subject to a number of conditions precedent including, among others, satisfaction or waiver of the conditions to effectiveness set forth in the Plan Amendment. The terms, conditions, and timing of the conclusion of the Segregated Account Rehabilitation Proceedings are in the sole discretion of the OCI, and subject to the approval of the Rehabilitation Court. No assurance can be given that Rehabilitation Exit Transactions or issuance of the Tier 2 Notes will be consummated. OCI retains the authority, subject to the approval of the Rehabilitation Court, to address Segregated Account obligations without the agreement of Ambac Assurance or its board of directors. Moreover, even if the Segregated Account Rehabilitation Proceedings could be brought to a successful conclusion, there can be no assurance that any level of capital deemed sufficient by OCI to permit such conclusion will be sufficient to cover all future losses, whether currently anticipated or unanticipated. Ambac Assurance will seek to further improve its financial condition by continuing to pursue asset monetizations; loss recoveries; restructurings, purchases, modifications or exchanges of certain outstanding obligations; extinguishment or modification of certain contractual restrictions; and/or commuting or reducing insured exposures Separately from or in connection with the actions described above, we may seek to further optimize our capital and corporate structure to unlock shareholder value. Stipulation and Order It is expected that a Stipulation and Order, the terms of which have been agreed between OCI, Ambac and Ambac Assurance, will become effective upon the effective date of the Rehabilitation Plan Amendment and provide as follows:
The Commissioner reserves the right to modify or terminate the Stipulation and Order after it becomes effective in a manner consistent with the interests of policyholders, creditors and the public generally, and recognizes that Ambac Assurance may request the Commissioner to do so periodically as conditions warrant. Augusta Funding Limited IV ("Augusta") Commutation On June 27, 2017, Ambac entered into a termination agreement with various parties, including Augusta, in connection with the commutation of interest rate swaps between Augusta and Ambac's wholly-owned subsidiary, Ambac Financial Services. During the second quarter, Ambac paid $94,407 under the termination agreement and reported a gain on the Augusta swaps of $43,443. In July 2017, Augusta redeemed its outstanding Ambac-insured debt and accordingly Ambac recognized approximately $2,617 in accelerated earnings in the third quarter of 2017 relating to this redemption. Ballantyne Litigation On March 25, 2017, Ambac UK agreed in principle to a confidential settlement of litigation brought by Ambac UK in the name of Ballantyne Re plc ("Ballantyne") against J.P. Morgan Investment Management Inc. ("JPMIM") relating to the management of Ballantyne’s investment accounts, which were funded with the proceeds of notes issued in 2006 in connection with a structured reinsurance transaction and guaranteed in part by Ambac UK. On April 11, 2017, Ambac UK, Ballantyne and JPMIM signed a settlement agreement. Pursuant to the settlement, Ballantyne received a payment of $325,600 from JPMIM in return for releases of all claims by Ballantyne and Ambac UK. As a result of the settlement, Ambac recognized an incremental benefit through a reduction in losses and loss expenses of approximately $91,600 in the first quarter of 2017. Ambac had previously included an estimated benefit through a reduction of loss and loss expense reserves of approximately $53,000 related to our probability weighted estimate of the value of the litigation. The total $144,600 benefit recognized from the settlement of the litigation will reduce the ultimate Ballantyne claims Ambac UK is expecting to pay and not result in a direct cash payment to Ambac UK. Puerto Rico On March 13, 2017, the Financial Management and Oversight Board for Puerto Rico (the "Oversight Board") certified the 10-year Fiscal and Economic Growth Plan ("FEGP") for the Commonwealth of Puerto Rico (the “Commonwealth"). The certified FEGP, among other things, was intended to provide Commonwealth creditors a base from which to progress consensual negotiations under Title VI of the Puerto Rico Oversight, Management and Economic Stability Act ("PROMESA"). However, the certified FEGP implied a 77% discount to all debt service due to be paid by the Commonwealth and its instrumentalities covered by the FEGP over the ten-years of the plan (FY2017-2026). The FEGP did not provide details regarding its underlying assumptions and data, expense definitions, cause of expense growth or accounting adjustments and did not include any restructuring proposals. These deficiencies of the FEGP, when combined with the absence of sufficient projected cash flows for debt service, increased the uncertainty of whether successful consensual negotiations can be reached. As a result of the damage inflicted by Hurricane Maria, the anticipated influx of certain federal funds, and other structural changes following the hurricane, the Commonwealth is drafting a revised fiscal and economic growth plan (the “Revised FEGP”) that will cover 5 fiscal years, inclusive of the Commonwealth’s current fiscal year. A draft Revised FEGP is expected to be presented to the Oversight Board on or around December 22, 2017, after which time the Oversight Board is expected to either recommend revisions to or certify the Revised FEGP. On April 28, 2017, the Fiscal Agency and Financial Advisory Authority of Puerto Rico (“FAFAA”) released a restructuring proposal covering General Obligation (“GO”), GO-guaranteed, Puerto Rico Sales Tax Financing Corporation ("COFINA"), Puerto Rico Highways and Transportation Authority ("PRHTA"), Puerto Rico Infrastructure Financing Authority ("PRIFA") and Puerto Rico Convention Center District Authority ("CCDA") bonds. Under the proposal, bondholders would receive a “senior bond” based on amounts expected to be available for debt service under the FEGP and a “cash flow bond” that would allow for additional payments if amounts available for debt service exceeded FEGP forecasts. FAFAA’s proposal further provides that GO and GO-guaranteed bondholders would be offered a maximum recovery of 77% (52% senior bond, 25% cash flow bond), COFINA bondholders would receive a maximum recovery of 58% (39% senior bond, 19% cash flow bond), and PRHTA, CCDA, PRIFA, and Metropolitan Bus Authority bondholders would receive a maximum recovery of 30% (0% senior bond, 30% cash flow bond). Recoveries relating to the cash flow bond component could be lower depending upon future surpluses at the General Fund and future new money GO bond issuances. The proposal was premised only on the cash available for debt service included in the certified FEGP, despite challenges from creditors and repeated calls for a review and adjustment of the assumptions underlying such Plan. Among other infirmities, the proposal lacks textured narrative or economic or financial logic for treating Senior and Junior tranches within the COFINA structure as pari passu obligations and fails to explain how the allocation of cashflow between GO and GO-guaranteed bonds and COFINA bonds was derived. The proposal was not accepted by affected bondholders. On April 29, 2017, the Commonwealth enacted the Fiscal Plan Compliance Act, also known as Act No. 26 (the “Fiscal Plan Compliance Act” or “Act 26-2017”). Articles 4.01 and 4.02 of Chapter 4 of the Fiscal Plan Compliance Act order all public corporations, agencies and instrumentalities of the Government of Puerto Rico to transfer their revenue surplus to the Commonwealth Treasury, after covering operational expenses and obligations, as per the expense budget recommended by the Office of Management and Budget of Puerto Rico for each fiscal year. Article 4.01 further states that such funds would be considered “available resources” for the Commonwealth and would be deposited in the Commonwealth’s General Fund to meet the liquidity requirements contemplated in the FEGP. Article 4.02 empowers a committee composed of the Executive Director of the Fiscal Agency and Financial Advisory Authority of Puerto Rico, the Secretary of the Puerto Rico Treasury Department and the Executive Director of the Office of Management and Budget of Puerto Rico to determine the amount each public corporation and instrumentality would contribute. Such committee is also empowered to revise the sources of revenue of the public corporations, agencies and instrumentalities and adjust, increase or reduce any of their charges, fees, tariffs and similar revenues, with the objective of complying with the metrics stated in the FEGP. Article 4.03 of Chapter 4 of Act 26-2017, “Exclusions”, explicitly excludes certain entities from coverage of Articles 4.01 and 4.02, including the University of Puerto Rico, the Public Corporation for the Supervision and Insurance of Cooperatives (COSSEC), and funds from public corporations and entities received by private entities for community-related objectives. While Article 4.03 does not explicitly exclude COFINA from coverage of such Articles 4.01 and 4.02, as it does with other entities, it does state that the Executive Branch shall be authorized to use the COFINA funds, occasionally, solely as a last alternative, and subject to the filing of a sworn certification before the Legislative Assembly. Such sworn certification, which, according to Article 4.03 shall not be interpreted to give the Executive Branch indefinite use of the COFINA funds, must establish the need, term and amount of funds that will be used to cover significant occasional cash flow deficits to comply with the FEGP. An Explicative Declaration of Act 26-2017 signed by the Governor of Puerto Rico on April 29, 2017 states that because COFINA does not generate surpluses, the dispositions of Chapter 4 are not applicable to COFINA. The Explicative Declaration further states that the Fiscal Plan Compliance Act does not refer to other revenues from public corporations except for those determined by fee adjustments of the corporations specifically included in the FEGP. The statements in the Explicative Declaration appear to contradict the statutory language of Articles 4.01, 4.02 and 4.03, resulting in uncertainty about how the Fiscal Plan Compliance Act will be implemented. In its Chapter 6, the Fiscal Plan Compliance Act also requires that, commencing July 1, 2017, all special funds and other revenues of dependencies and public corporations must be deposited with the Puerto Rico Treasury. The Puerto Rico Secretary of Treasury is authorized to establish the order of priority for the disbursement of payments chargeable to the special funds and other revenues, in accordance with the approved budget and the Fiscal Plan. On May 1, 2017, Ambac Assurance sent COFINA a notice of failures to comply with covenants and events of default under COFINA’s bond resolution and enabling legislation. Among other things, Ambac Assurance stated that the Commonwealth had violated its covenant not to limit or restrict the right granted by the Resolution or COFINA’s rights to meet its obligations to its bondholders by enacting the Fiscal Plan Compliance Act; that COFINA had violated its covenant to defend, preserve, and protect the pledge of the Dedicated Sales Tax to COFINA and the rights of COFINA’s bondholders under the Resolution against all claims and demands; and that both covenant violations were incurable and therefore constituted immediate Events of Default under the COFINA resolution. Also on May 1, 2017, the COFINA trustee, Bank of New York Mellon (“BNY”), sent a letter to COFINA and the Puerto Rico Fiscal Agency and FAFAA stating that the Fiscal Plan Compliance Act was inconsistent with COFINA’s and the Commonwealth’s covenants under COFINA’s resolution and enabling legislation, and seeking a response detailing any curative action either intended to take. On May 4, 2017, BNY sent COFINA a notice of default arising out of the Fiscal Plan Compliance Act, and stated that the defaults by COFINA and the Commonwealth would be deemed Events of Default under the COFINA resolution if left uncured within 30 days of Ambac’s May 1, 2017 letter noticing the defaults. Later on May 4, 2017, Ambac Assurance, together with holders of more than 25% of the senior COFINA bonds, sent a letter to BNY demanding immediate acceleration of all senior bonds issued by COFINA. On May 16, 2017, BNY filed an interpleader action in COFINA’s Title III case against COFINA and certain creditors of COFINA, including Ambac Assurance, that have made competing claims of entitlement to funds held by BNY. This action will resolve the parties’ respective entitlements to the funds, including a determination of whether an Event of Default have occurred under the COFINA resolution. On May 2, 2017, the Oversight Board certified a ten-year fiscal plan (the “PRHTA Fiscal Plan”) for the PRHTA. The PRHTA Fiscal Plan reflects an expectation that the Puerto Rico Treasury and PRHTA will temporarily cease funding debt service payments in July of 2017. The PRHTA Fiscal Plan states that as a result of the “clawback” of certain revenues pledged to PRHTA, PRHTA has insufficient cash flow to service debt. It is currently unclear when the funding of PRHTA debt service payments with pledged revenues will resume. Similar to the revisions of the FEGP, however, PRHTA is drafting a revised fiscal plan (the “Revised PRHTA Fiscal Plan”) as a result of the changes occurring in the wake of Hurricane Maria. Like the Revised FEGP, the Revised PRHTA Fiscal Plan will cover 5 fiscal years, inclusive of the Commonwealth’s current fiscal year. A draft Revised PRHTA Fiscal Plan is expected to be presented to the Oversight Board on or around February 9, 2018, after which time the Oversight Board is expected to either recommend revisions to or certify the Revised PRHTA Fiscal Plan. The Governor signed into law Act No. 1 of 2017, on January 11, 2017, which amended the Commonwealth’s Public-Private Partnership Act (Act No. 29 of 2009) ("P3 Act") authorizing the Public-Private Partnerships Authority (“P3A”) to facilitate privatization agreements between Partnering Government Entities (as such term is defined in the P3 Act) and private entities. The 2017 amendments allow the P3A to receive and consider unsolicited or voluntary proposals from proponents that meet the minimum criteria set forth in the P3 Act, whereas prior to the 2017 amendments, proposals could only be received in response to a P3A request for proposals. Direct negotiations with proponents of unsolicited or voluntary proposals may be conducted without a request for qualifications or a request for proposals process if the P3A determines that certain criteria have been met. The 2017 amendments also permit the use of the initial and/or periodical payments received from any partnership for contributions to the retirement systems of the Government of Puerto Rico, in addition to other uses provided for by the P3 Act, including the payment of debts of Partnering Government Entities. It is unclear how Puerto Rico will make use of the law and to what extent it will impact the obligations that we insure. In response to letter requests from Governor Rosselló, the Oversight Board commenced a Title III proceeding for the Commonwealth of Puerto Rico on May 3, 2017 and for COFINA on May 5, 2017, in the United States District Court for the District of Puerto Rico. Subsequently, the Oversight Board commenced a Title III proceeding for the Employees Retirement System ("ERS") and PRHTA on May 21, 2017, and for the Puerto Rico Electric Power Authority ("PREPA") on July 2, 2017. Ambac Assurance has not issued any financial guaranty policies with respect to obligations of ERS or PREPA. As part of the Title III filings for the Commonwealth, COFINA, and PRHTA, the Oversight Board noted that the Oversight Board and the Commonwealth intend to continue pursuing consensual negotiations under the protection of the Title III automatic stay. On June 14, 2017, Judge Laura Taylor Swain entered an order appointing a team of mediators to facilitate confidential mediation discussions in order to facilitate consensual resolution of certain issues arising in the context of these Title III cases. The mediation team is led by Chief Judge Barbara Houser of the United States Bankruptcy Court for the Northern District of Texas, and consists of Circuit Judge Thomas Ambro of the United States Court of Appeals for the Third Circuit, Senior District Judge Nancy Atlas of the United States District Court for the Southern District of Texas, Bankruptcy Judge Christopher Klein of the United States Bankruptcy Court for the Eastern District of California, and Senior District Judge Victor Marrero of the United States District Court for the Southern District of New York. Confidential mediation proceedings are ongoing. No assurances can be given that consensual resolutions will be achieved with respect to the Commonwealth’s or COFINA’s obligations or those of any other Puerto Rico instrumentality. In addition, Ambac is uncertain how the Title III process will be implemented and to what extent the rights of Ambac Assurance will be respected as part of that process. On June 30, 2017, the Oversight Board certified the Commonwealth’s fiscal year 2018 budget, which is largely compliant with the FEGP. The budget does not allocate funds for debt service, stating only that it will do so after a Title III plan of adjustment or Title VI agreement is approved by the Court. Ambac Assurance is party to ten litigations related to its Puerto Rico exposures. These include three litigations challenging the constitutionality and legality of the FEGP and the Fiscal Plan Compliance Act, discussed below under Note 11. Commitments and Contingencies, one of which is an adversary proceeding actively pending in PRHTA’s Title III proceedings. Ambac Assurance filed several of those cases to protect and assert its rights under transaction documents and applicable law. Six of these litigations are stayed under Title III of PROMESA, and one has been stayed by order of the United States District Court for the District of Puerto Rico pending resolution of an interpleader action related to COFINA funds (to which interpleader action Ambac is also a party). The three active litigations are proceeding as adversary proceedings under the Title III process before the United States District Court for the District of Puerto Rico. Accordingly, Ambac is unable to predict when and how the issues raised in those cases will be resolved. If Ambac Assurance is unsuccessful with any of these challenges, Ambac’s financial condition, including liquidity, loss reserves and capital resources may suffer a material negative impact. On September 6, 2017, Hurricane Irma, a Category 5 storm, passed north of Puerto Rico, leaving more than one million people without electricity on the island. On September 20, 2017, Hurricane Maria, a Category 4 storm at the time, made landfall in Puerto Rico, causing severe damage to the island and its infrastructure, including the destruction to a significant portion of the electrical transmission and distribution system. It will take time to fully evaluate and remedy damage to public infrastructure and private property as well as assess future capital needs. In addition, the amount, timing, and structure of anticipated federal aid is uncertain beyond an initial $4.9 billion liquidity loan for Puerto Rico and the U.S. Virgin Islands as part of a $36.5 billion disaster aid bill signed into law on October 26, 2017. Consequently, for at least the near-term, the Commonwealth faces uncertain financial and economic prospects due to the scale and scope of the damage caused by Hurricane Maria. As a result of the damage, the anticipated influx of certain federal funds, and other structural changes following the hurricane, a "Revised FEGP" and a "Revised PRHTA Fiscal Plan" are being drafted, both of which will cover 5 fiscal years, inclusive of the Commonwealth’s current fiscal year. The revised fiscal plans are expected to be presented to the Oversight Board (on or around December 22, 2017 for the "Revised FEGP" and on or around February 9, 2018 for the “Revised PRHTA Fiscal Plan”) after which time the Oversight Board is expected to either recommend revisions to or certify. While certain litigation and mediation deadlines have been postponed, the ultimate impact of Hurricane Maria on Puerto Rico, its instrumentalities, the FEGP, the PRHTA Fiscal Plan, the Title III proceedings and related restructuring activity remains unclear. Ambac has considered these developments and other factors in evaluating its Puerto Rico loss reserves. During the nine months ended September 30, 2017, Ambac had incurred losses associated with its Domestic Public Finance insured portfolio of $434,100, which was significantly impacted by the continued uncertainty and volatility of the situation in Puerto Rico. While management believes its reserves are adequate to cover losses in its Public Finance insured portfolio, there can be no assurance that Ambac may not incur additional losses in the future, particularly given the developing economic, political, and legal circumstances in Puerto Rico. Such additional losses may have a material adverse effect on Ambac’s results of operations and financial condition. For public finance credits, including Puerto Rico, as well as other issuers, for which Ambac has an estimate of expected loss at September 30, 2017, the possible increase in loss reserves under stress or other adverse conditions and circumstances was estimated to be approximately $1,500,000. However, there can be no assurance that losses may not exceed such amount. Impact of Hurricane Maria and Other Natural Disasters In August and September 2017, there were three major hurricanes, Harvey, Irma and Maria, which made landfall in regions where a number of issuers of Ambac-insured bonds, including municipalities, state or commonwealth instrumentalities, military housing related issuers, residential mortgage backed securities issuers, and utilities, are located. Areas affected where Ambac has exposure include Houston, Texas, Harris County, Texas, a number of counties in southern and western Florida, the U.S. Virgin Islands and the Commonwealth of Puerto Rico. Early assessments of the near-term credit impact on insured exposure to the hurricanes in Texas and Florida is modest with no expectations of missed debt service payments. However, we continue to monitor the recovery process in both areas for any change in expectations. The credit impact on insured exposures related to Hurricanes Irma and Maria on the U.S. Virgin Islands, where Ambac Assurance has relatively little exposure ($42,615 net par outstanding), and Puerto Rico, where Ambac Assurance has a large exposure ($1.968 billion of net par outstanding), is negative at least in the near-term due to the uncertainty related to the recovery from the hurricanes and to the size and timing of Federal aid and support in the recovery. As previously noted, Ambac has considered these developments and other factors in evaluating its Puerto Rico reserves as well as those related to the U.S. Virgin Islands. In October 2017, large wildfires in Northern California caused significant damage in a number of municipalities where Ambac Assurance provides financial guaranty insurance. Early assessments of near-term credit impact on insured exposures in the affected areas is modest at this time, but subject to further evaluation as the full scope of the damage becomes available. |
Basis of Presentation and Significant Accounting Policies (Notes) |
9 Months Ended | ||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2017 | |||||||||||||||||
Accounting Policies [Abstract] | |||||||||||||||||
Organization, Consolidation, Basis of Presentation, Business Description and Accounting Policies [Text Block] | 2. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES The Company has disclosed its significant accounting policies in Note 2. Basis of Presentation and Significant Accounting Policies in the Notes to Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016. The following significant accounting policies provide an update to those included in the Company’s Annual Report on Form 10-K. Basis of Presentation The accompanying unaudited consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles ("GAAP") for interim financial reporting and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and disclosures required by GAAP for annual periods. These financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Annual Report on Form 10-K for the year ended December 31, 2016. The accompanying consolidated financial statements have not been audited by an independent registered public accounting firm in accordance with the standards of the Public Company Accounting Oversight Board (U.S.), but in the opinion of management such financial statements include all adjustments necessary for the fair presentation of the Company’s consolidated financial position and results of operations. All intercompany balances and transactions have been eliminated. The results of operations for the three and nine months ended September 30, 2017 may not be indicative of the results that may be expected for the year ending December 31, 2017. The December 31, 2016 consolidated balance sheet was derived from audited financial statements. The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. As additional information becomes available or actual amounts become determinable, the recorded estimates are revised and reflected in operating results. Foreign Currency: Financial statement accounts expressed in foreign currencies are translated into U.S. dollars in accordance with the Foreign Currency Matters Topic of the ASC. The functional currencies of Ambac's subsidiaries are the local currencies of the country where the respective subsidiaries are based, which are also the primary operating environments in which the subsidiaries operate. Foreign currency translation: Functional currency assets and liabilities of Ambac’s foreign subsidiaries are translated into U.S. dollars using exchange rates in effect at the balance sheet dates and the related translation adjustments, net of deferred taxes, are included as a component of Accumulated Other Comprehensive Income in Stockholders' Equity. Consolidated Statements of Total Comprehensive Income (Loss) accounts expressed in functional currencies are translated using average exchange rates. Foreign currency transactions: The impact of non-functional currency transactions and the remeasurement of non-functional currency assets and liabilities into the respective subsidiaries' functional currency (collectively "foreign currency transactions gains/(losses)") are $19,142 and $(26,741) for the nine months ended September 30, 2017 and 2016. Foreign currency transactions gains/(losses) are primarily the result of remeasuring Ambac UK's assets and liabilities denominated in currencies other than its functional currency, primarily the U.S. dollar and the Euro. The significant components of foreign currency transaction gains/(losses), including the respective classifications in the Consolidated Statement of Total Comprehensive Income, are as follows:
Reclassifications: Reclassifications may have been made to prior years' amounts to conform to the current year's presentation. Recently Adopted Accounting Standards: Effective January 1, 2017, Ambac adopted the following accounting standards: Consolidation of Variable Interest Entities - Decision Makers In October 2016, the FASB issued ASU 2016-17, Consolidation (Topic 810) - Interests Held through Related Parties That Are under Common Control. The new guidance changes how a reporting entity that is a single decision maker for a VIE will consider its indirect interests in that VIE when determining whether the reporting entity is the primary beneficiary and should consolidate the VIE. Under previous GAAP, a single decision maker in a VIE is required to consider an indirect interest held by a related party under common control in its entirety. Under the new ASU, the single decision maker will consider the indirect interest on a proportionate basis. Adoption of this ASU did not have an impact on Ambac's financial statements. Improvements to Employee Share-Based Payment Accounting In March 2016, the FASB issued ASU 2016-09, Compensation-Stock Compensation (Topic 718) - Improvements to Employee Share-Based Payment Accounting. The objective of this ASU is to improve and simplify the accounting for employee share-based payment accounting. The amendments are as follows: (i) recognizing excess tax benefits and tax deficiencies as income tax expense, (ii) recognizing excess tax benefits regardless of whether it reduces taxes payable in the current period, (iii) classifying excess tax benefits related to share-based payments along with other income tax cash flows as an operating activity on the statement of cash flows, (iv) for purposes of accruing compensation costs, allowing companies to make an accounting policy election to either: a) estimate forfeitures or b) account for forfeitures as they occur, which Ambac elected to do upon adoption, (v) to qualify for equity classification treatment, permitting tax withholding by employees up to the maximum statutory tax rate and (vi) classifying cash paid by an employer to a taxing authority when directly withholding shares as a financing activity on the statement of cash flows. Adoption of this ASU did not have a material impact on Ambac's financial statements. Equity Method of Accounting In March 2016, the FASB issued ASU 2016-07, Investments-Equity Method and Joint Ventures (Topic 323) - Simplifying the Transition to the Equity Method of Accounting. This ASU eliminates the requirement that when an investment qualifies for use of the equity method as a result of an increase in the level of ownership interest or degree of influence, an investor must adjust the investment, results of operations, and retained earnings retroactively as if the equity method had been in effect during all previous periods that the investment had been owned. The ASU will now require that at the date an available-for-sale equity security becomes qualified for the equity method of accounting, the reporting entity will recognize through earnings the unrealized holding gain or loss in accumulated other comprehensive income. Adoption of this ASU did not have an impact on Ambac's financial statements. Contingent Put and Call Options in Debt Instruments In March 2016, the FASB issued ASU 2016-06, Derivatives and Hedging (Topic 815) - Contingent Put and Call Options in Debt Instruments. Previous accounting rules required that embedded derivatives be separated from the host contract in a financial instrument and accounted for separately as derivatives if certain criteria are met. One of these criteria is that the economic characteristics and risks of the embedded derivatives are not "clearly and closely related" to the host contract. The objective of the ASU is to resolve diversity in practice in assessing embedded contingent put and call options. The ASU clarifies what steps are required when assessing whether the economic characteristics and risk of put and call options are clearly and closely related to their debt host contracts. Adoption of this ASU did not have an impact on Ambac's financial statements. Future Application of Accounting Standards: Equity-linked instruments with down round features In July 2017, the FASB issued ASU 2017-11, Earnings Per Share (Topic 260) and Derivatives and Hedging (Topic 815) - Accounting for Certain Financial Instruments with Down Round Features. Equity-linked instruments, such as warrants and convertible instruments may contain down round features that result in the strike price being reduced on the basis of the pricing of future equity offerings. Under the ASU, a down round feature will no longer require a freestanding equity-linked instrument (or embedded conversion option) to be classified as a liability that is remeasured at fair value through the income statement (i.e. marked-to-market). However, other features of the equity-linked instrument (or embedded conversion option) must still be evaluated to determine whether liability or equity classification is appropriate. Equity classified instruments are not marked-to-market. For earnings per share ("EPS") reporting, the ASU requires companies to recognize the effect of the down round feature only when it is triggered by treating it as a dividend and as a reduction of income available to common shareholders in basic EPS. The amendments in this ASU are effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. Early adoption is permitted, including adoption in any interim period. We have not determined whether Ambac will early adopt this ASU. The adoption of this ASU is not expected to have a material impact on Ambac's financial statements. Stock Compensation--Scope of Modification Accounting In May 2017, the FASB issued ASU 2017-09, Compensation-Stock Compensation (Topic 718) - Scope of Modification Accounting. The ASU provides guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting. Entities will apply the modification accounting guidance if the value, vesting conditions or classification of the award changes. The current disclosure requirements in Topic 718 apply regardless of whether an entity is required to apply modification accounting under the amendments in this ASU. The amendments in this ASU are effective for all entities for annual periods, and interim periods within those annual periods, beginning after December 15, 2017. Early adoption is permitted, including adoption in any interim period for which financial statements have not yet been issued. Ambac will adopt this ASU on January 1, 2018. The adoption of this ASU is not expected to have a consequential impact on Ambac's financial statements. Premium Amortization on Callable Debt Securities In March 2017, the FASB issued ASU 2017-08, Receivables-Nonrefundable Fees and Other Costs (Subtopic 310-20) - Premium Amortization on Purchased Callable Debt Securities. The ASU shortens the amortization period for the premium on callable debt securities to the earliest call date. Under current GAAP, a reporting entity generally amortizes the premium as yield adjustment over the contractual life (i.e. maturity) of the debt security and if that debt security is called, the entity would record a loss equal to the unamortized premium. The ASU does not change the accounting for callable debt securities held at a discount, which will continue to be amortized to maturity. ASU 2017-08 is effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years, with early adoption permitted. The ASU must be applied on a modified retrospective basis through a cumulative-effect adjustment directly to retained earnings as of the beginning of the period of adoption. We have not determined whether Ambac will early adopt this ASU and are evaluating the impact on Ambac's financial statements. Net Periodic Pension and Postretirement Costs In March 2017, the FASB issued ASU 2017-07, Compensation-Retirement Benefits (Topic 715) - Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost. The objective of the ASU is to increase transparency in the reporting of net pension cost and net postretirement cost (collectively "net benefit cost"). The ASU requires that the service cost component of net benefit cost be reported on the same line item as other compensation costs arising from services rendered by employees. It further requires that the other components of net benefit costs (i.e. interest costs, amortization of prior service cost, etc.) be presented separately from the service cost component and outside the subtotal of income from operations, if one is presented. ASU 2017-09 is effective for fiscal years beginning after December 15, 2017 and interim periods within those fiscal years, with early adoption permitted. Ambac will adopt this ASU on January 1, 2018. The adoption of this ASU is not expected to have a consequential impact on Ambac's financial statements. Revenue recognition In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606) that amends the accounting guidance for recognizing revenue for contracts with customers to transfer goods and contracts for the transfer of non-financial assets unless those contracts are within the scope of other accounting standards. ASU 2015-14 deferred the effective date of ASU 2014-09 to annual periods beginning after December 15, 2017, including interim periods within that reporting period. Ambac will adopt this ASU on January 1, 2018. While we have made significant progress evaluating the ASU, we note that this ASU does not apply to insurance contracts and most financial instruments and therefore is not expected to have a consequential impact on Ambac's financial statements. |
Special Purpose Entities, Including Variable Interest Entities |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Special Purpose Entities, Including Variable Interest Entities | 3. SPECIAL PURPOSE ENTITIES, INCLUDING VARIABLE INTEREST ENTITIES Ambac, with its subsidiaries, has engaged in transactions with special purpose entities, including VIEs, in various capacities.
FG VIEs: Ambac’s subsidiaries provide financial guarantees in respect of assets held or debt obligations of special purpose entities, including VIEs. Ambac’s primary variable interest exists through this financial guarantee insurance or credit derivative contract. The transaction structures provide certain financial protection to Ambac. This financial protection can take several forms; however, the most common are over-collateralization, first loss and excess spread. In the case of over-collateralization (i.e., the principal amount of the securitized assets exceeds the principal amount of the debt obligations guaranteed), the structure allows the transaction to experience defaults among the securitized assets before a default is experienced on the debt obligations that have been guaranteed by Ambac’s subsidiaries. In the case of first loss, the financial guarantee insurance policy or credit derivative contract only covers a senior layer of losses on assets held or debt issued by special purpose entities, including VIEs. The first loss with respect to the assets is either retained by the asset seller or sold off in the form of equity or mezzanine debt to other investors. In the case of excess spread, the securitized assets contributed to special purpose entities, including VIEs, generate interest cash flows that are in excess of the interest payments on the related debt; such excess cash flow is applied to redeem debt, thus creating over-collateralization. Generally, upon deterioration in the performance of a transaction or upon an event of default as specified in the transaction legal documents, Ambac will obtain certain loss remediation rights. These rights may enable Ambac to direct the activities of the entity that most significantly impact the entity’s economic performance. We determined that Ambac’s subsidiaries generally have the obligation to absorb a FG VIE's expected losses given that they have issued financial guarantees supporting the liabilities (and in certain cases assets). As further described below, we consolidated certain FG VIEs because: (i) we determined, for certain transactions that experienced the aforementioned performance deterioration, that Ambac’s subsidiaries had the power, through voting rights or similar rights, to direct the activities that most significantly impact the VIE’s economic performance because certain triggers had been breached in these transactions resulting in Ambac's subsidiaries' ability to exercise certain loss remediation activities, or (ii) due to the passive nature of the VIEs’ activities, Ambac’s subsidiaries’ contingent loss remediation rights upon a breach of certain triggers in the future is considered to be the power to direct the activities that most significantly impact the VIEs’ economic performance. With respect to existing VIEs involving Ambac financial guarantees, Ambac is generally required to consolidate a VIE in the period that applicable triggers result in Ambac having control over the VIE’s most significant economic activities. In connection with the potential exit from Rehabilitation of the Segregated Account, as further described in Note 1. Background and Business Description, Ambac will need to evaluate consolidation of certain VIEs in the event certain rights are obtained by Ambac Assurance. As further discussed in Note 1. Background and Business Description, the OCI is expected to require Ambac Assurance to obtain their approval with respect to the exercise of certain control rights in connection with policies that had been allocated to the Segregated Account. Accordingly management expects the number of additional VIEs that may be consolidated as a result of the Segregated Account's potential exit from Rehabilitation will be reduced and possibly eliminated. A VIE is deconsolidated in the period that Ambac no longer has such control, which could occur in connection with the execution of remediation activities on the transaction or amortization of insured exposure, any of which may reduce the degree of Ambac’s control over a VIE. Assets and liabilities of FG VIEs that are consolidated are reported within Variable interest entity assets or Variable interest entity liabilities on the Consolidated Balance Sheets. The net results from such FG VIEs are reported within Income (loss) on variable interest entities in the Consolidated Statements of Total Comprehensive Income (Loss). Upon initial consolidation of a FG VIE, we recognize a gain or loss in earnings for the difference between: (i) the fair value of the consideration paid, the fair value of any non-controlling interests and the reported amount of any previously held interests and (ii) the net amount, as measured on a fair value basis, of the assets and liabilities consolidated. Upon deconsolidation of a FG VIE, we recognize a gain or loss for the difference between: (i) the fair value of any consideration received, the fair value of any retained non-controlling investment in the VIE and the carrying amount of any non-controlling interest in the VIE and (ii) the carrying amount of the VIE’s assets and liabilities. Gains or losses from consolidation and deconsolidation that are reported in earnings are reported within Income (loss) on variable interest entities on the Consolidated Statements of Total Comprehensive Income (Loss). The impact of consolidating such FG VIEs on Ambac’s balance sheet is the elimination of transactions between the consolidated FG VIEs and Ambac’s operating subsidiaries and the inclusion of the FG VIE’s third party assets and liabilities. For a financial guarantee insurance policy issued to a consolidated VIE, Ambac does not reflect the financial guarantee insurance policy in accordance with the related insurance accounting rules under the Financial Services – Insurance Topic of the ASC. Consequently, upon consolidation, Ambac eliminates the insurance assets and liabilities associated with the policy from the Consolidated Balance Sheets. Such insurance assets and liabilities may include premium receivables, reinsurance recoverable, deferred ceded premium, subrogation recoverable, unearned premiums, loss and loss expense reserves, ceded premiums payable and insurance intangible assets. For investment securities owned by Ambac that are debt instruments issued by the VIE, the investment securities balance is eliminated upon consolidation. As of September 30, 2017 consolidated FG VIE assets and liabilities relating to 12 consolidated entities were $14,442,384 and $14,321,721, respectively. As of December 31, 2016, consolidated FG VIE assets and liabilities relating to 12 consolidated entities were $13,367,834 and $13,235,425, respectively. As of both September 30, 2017 and December 31, 2016, eight and four consolidated FG VIEs related to transactions insured by Ambac UK and Ambac Assurance, respectively. As of September 30, 2017, FG VIE assets and liabilities of $14,056,435 and $13,941,513 and as of December 31, 2016, FG VIE assets and liabilities of $12,950,009 and $12,833,466 related to transactions guaranteed by Ambac UK. The remaining balance of consolidated FG VIE assets and liabilities are related to transactions guaranteed by Ambac Assurance. Ambac is not primarily liable for, and generally does not guarantee all of the debt obligations issued by the VIEs. Ambac would only be required to make payments on the VIE debt obligations in the event that the issuer of such debt obligations defaults on any principal or interest due and such obligation is guaranteed by Ambac. Additionally, Ambac’s general creditors, other than those specific policy holders which own the VIE debt obligations, do not have rights with regard to the assets of the VIEs. Ambac evaluates the net income effects and earnings per share effects to determine attributions between Ambac and non-controlling interests as a result of consolidating a VIE. Ambac has determined that the net income and earnings per share effect of most consolidated FG VIEs are attributable to Ambac’s interests through financial guarantee premium and loss payments with the VIE. Below is a schedule detailing the change in fair value of the various financial instruments within the consolidated FG VIEs, along with gains (losses) from consolidating and deconsolidating FG VIEs that together comprise Income (loss) on variable interest entities for the affected periods:
Ambac consolidated zero and deconsolidated zero VIEs for the three and nine months ended September 30, 2017 and 2016. The table below provides the fair value of fixed income securities, by asset-type, held by consolidated VIEs as of September 30, 2017 and December 31, 2016:
The following table provides supplemental information about the loans held as assets and long-term debt associated with the VIEs for which the fair value option has been elected as of September 30, 2017 and December 31, 2016:
Ambac Sponsored VIEs: A subsidiary of Ambac transferred financial assets to a special purpose entity. The business purpose of this entity was to provide certain financial guarantee clients with funding for their debt obligations. This special purpose entity was established as a separate legal entity, demonstrably distinct from Ambac and that Ambac, its affiliates or its agents could not unilaterally dissolve. The permitted activities of this entity are contractually limited to purchasing assets from Ambac, issuing medium-term notes (“MTNs”) to fund such purchases, executing derivative hedges and obtaining financial guarantee policies with respect to indebtedness incurred. Ambac does not consolidate this entity because Ambac Assurance’s policies issued to this entity were allocated to the Segregated Account, thereby limiting Ambac’s control over the entity's most significant economic activities. Ambac elected to account for its equity interest in this entity at fair value under the fair value option in accordance with the Financial Instruments Topic of the ASC. We believe that the fair value of the investments in this entity provides for greater transparency for recording profit or loss as compared to the equity method under the Investments – Equity Method and Joint Ventures Topic of the ASC. Refer to Note 7. Fair Value Measurements for further information on the valuation technique and inputs used to measure the fair value of Ambac’s equity interest in this entity. At September 30, 2017 and December 31, 2016 the fair value of this entity was $6,337 and $7,382, respectively, and is reported within Other assets on the Consolidated Balance Sheets.
In July 2015, Ambac Assurance entered into a secured borrowing transaction whereby it sold 17 Ambac insured residential mortgage-backed securities (the "Securities") and all rights associated therewith as of May 31, 2015, to a Delaware statutory trust (the "Trust") in exchange for an equity certificate in the Trust, all financial guarantee claim payments associated with the Securities and cash of $146,000 (prior to expenses associated with the transaction). Although the Securities were legally sold to the Trust, the Securities will remain in Invested assets on the Consolidated Balance Sheets. The Securities had par and fair value of $301,130 and $351,339 as of September 30, 2017, respectively. Refer to Note 8. Investments for further discussion of the restrictions on the invested assets. At the same time, a second Delaware statutory trust (the "Issuer"), issued $146,000 of debt securities and used the proceeds, together with an equity certificate of the Issuer, to purchase from the Trust a certificate secured by and entitling the Issuer to all principal and interest payments (other than financial guarantee claim payments) on the Securities. Interest on the debt securities is payable monthly at an annual rate of one month LIBOR + 2.8%. Both the Trust and the Issuer are consolidated VIEs because Ambac Assurance was involved in their design and holds a significant amount of the beneficial interests issued by the VIEs or guaranteed the assets held by the VIEs. VIE debt outstanding to third parties under this secured borrowing transaction had a carrying value of $78,319 and $102,403 as of September 30, 2017 and December 31, 2016, respectively, and is reported in Long-Term Debt on the Consolidated Balance Sheets. Interests in Non-Consolidated VIEs On August 28, 2014, Ambac monetized its ownership of the junior surplus note issued to it by the Segregated Account by depositing the junior surplus note into a newly formed VIE trust in exchange for cash and an owner trust certificate, which represents Ambac's right to residual cash flows from the junior surplus note. Ambac does not consolidate the VIE. Ambac reports this interest in the VIE as an equity investment within Other investments on the Consolidated Balance Sheets with associated results from operations included within Net investment income: Other investments on the Consolidated Statements of Total Comprehensive Income (Loss). The equity investment had a carrying value of $33,677 and $30,003 as of September 30, 2017 and December 31, 2016, respectively. Additionally, at September 30, 2017 Ambac held $45,000 of the debt issued by this VIE. The following table displays the carrying amount of the assets, liabilities and maximum exposure to loss of Ambac’s variable interests in non-consolidated VIEs resulting from financial guarantee and derivative contracts by major underlying asset classes, as of September 30, 2017 and December 31, 2016:
|
Comprehensive Income |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2017 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Equity [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Comprehensive Income | 4. COMPREHENSIVE INCOME The following tables detail the changes in the balances of each component of accumulated other comprehensive income for the affected periods:
The following table details the significant amounts reclassified from each component of accumulated other comprehensive income, shown in the above rollforward tables, for the affected periods:
|
Net Income Per Share |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2017 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings Per Share [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net Income Per Share | 5. NET INCOME PER SHARE On May 1, 2013, pursuant to the Second Modified Fifth Amended Plan of Reorganization of Ambac (the "Reorganization Plan"), 45,000,000 shares of new common stock at par value of $0.01 per share and 5,047,138 of warrants were issued. Warrants entitled such holders to acquire up to 5,047,138 shares of new common stock at an exercise price of $16.67 per share at any time on or prior to April 30, 2023. For the nine months ended September 30, 2017 and 2016, 0 and 136 warrants were exercised, respectively, resulting in an issuance of 0 and 136 shares of common stock, respectively. On June 30, 2015, the Board of Directors of Ambac authorized the establishment of a warrant repurchase program that permits the repurchase of up to $10,000 of warrants. On November 3, 2016, the Board of Directors of Ambac authorized a $10,000 increase to the warrant repurchase program. For the nine months ended September 30, 2017, Ambac repurchased 0 warrants at a cost of $0. As of September 30, 2017, Ambac has repurchased 985,331 warrants totaling $8,092, (average cost of $8.21 per warrant) leaving 4,053,670 warrants outstanding. The remaining aggregate authorization at September 30, 2017 is $11,939. Basic net income per share is computed by dividing net income attributable to common stockholders by the weighted-average number of common shares outstanding and vested restricted stock units. Diluted net income per share is computed by dividing net income attributable to common stockholders by the weighted-average number of common shares used for basic earnings per share plus all potential dilutive common shares outstanding during the period. All potential dilutive common shares outstanding consider common stock deliverable pursuant to warrants issued under the Reorganization Plan, vested and unvested options, unvested restricted stock units and performance stock units granted under employee and director compensation plans. The following table provides a reconciliation of the common shares used for basic net income per share to the diluted shares used for diluted net income per share:
|
Financial Guarantee Insurance Contracts |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Insurance [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Financial Guarantee Insurance Contracts | 6. FINANCIAL GUARANTEE INSURANCE CONTRACTS Amounts presented in this Note relate only to Ambac’s non-derivative insurance business for insurance policies issued to beneficiaries, including VIEs, for which we do not consolidate the VIE. Net Premiums Earned: Gross premiums are received either upfront or in installments. For premiums received upfront, an unearned premium revenue (“UPR”) liability is established, which is initially recorded as the cash amount received. For installment premium transactions, a premium receivable asset and offsetting UPR liability is initially established in an amount equal to: (i) the present value of future contractual premiums due (the “contractual” method) or (ii) if the assets underlying the insured obligation are homogenous pools which are contractually prepayable, the present value of premiums to be collected over the expected life of the transaction (the “expected” method). An appropriate risk-free rate corresponding to the weighted average life of each policy and currency is used to discount the future premiums contractually due or expected to be collected. For example, U.S. dollar exposures are discounted using U.S. Treasury rates while exposures denominated in a foreign currency are discounted using the appropriate risk-free rate for the respective currency. The weighted average risk-free rate at September 30, 2017 and December 31, 2016, was 2.6% and 2.6%, respectively, and the weighted average period of future premiums used to estimate the premium receivable at September 30, 2017 and December 31, 2016, was 8.9 years and 9.0 years, respectively. Insured obligations consisting of homogeneous pools for which Ambac uses expected future premiums to estimate the premium receivable and UPR include residential mortgage-backed securities. As prepayment assumptions change for homogenous pool transactions, or if there is an actual prepayment for a “contractual” method installment transaction, the related premium receivable and UPR are adjusted in equal and offsetting amounts with no immediate effect on earnings using new premium cash flows and the then current risk-free rate. In structured finance transactions, the priority for the payment of financial guarantee premiums to Ambac, as required by bond indentures of insured structured finance obligations, is generally senior in the waterfall. Additionally, in connection with the allocation of certain liabilities to the Segregated Account, trustees and other parties are required under the Segregated Account Rehabilitation Plan and related court orders to continue to pay installment premiums, notwithstanding the Segregated Account Rehabilitation Proceedings. In evaluating the credit quality of the premium receivables, management evaluates the transaction waterfall structures and the internal ratings of the transactions underlying the premium receivables. Uncollectable premiums are determined on a policy basis and utilize a combination of historical premium collection data in addition to cash flow analysis to determine if an impairment in the related policy's premium receivables exist. At September 30, 2017 and December 31, 2016, $9,289 and $9,186 respectively, of premium receivables were deemed uncollectable. As of September 30, 2017 and December 31, 2016, approximately 23% and 25% of the premium receivables, net of uncollectable receivables, related to transactions with non-investment grade internal ratings, comprised mainly of non-investment grade RMBS, structured insurance, lease securitizations and student loan transactions, which comprised 7%, 6%, 2% and 3%, of the total premium receivables at September 30, 2017 and 8%, 5%, 4% and 3% of the total premium receivables at December 31, 2016, respectively. Past due premiums on policies insuring non-investment grade obligations amounted to less than $500 at September 30, 2017. Below is the gross premium receivable roll-forward for the affected periods:
Similar to gross premiums, premiums ceded to reinsurers are paid either upfront or in installments. Premiums ceded to reinsurers reduce the amount of premiums earned by Ambac from its financial guarantee insurance policies. When a bond issue insured by Ambac Assurance has been retired early, typically due to an issuer call, any remaining UPR is recognized at that time to the extent the financial guarantee contract is legally extinguished, causing accelerated premium revenue. For installment premium paying transactions, we offset the recognition of any remaining UPR by the reduction of the related premium receivable to zero (as it will not be collected as a result of the retirement), which may cause negative accelerated premium revenue. Ambac’s accelerated premium revenue for retired obligations for the three and nine months ended September 30, 2017 was $26,178 and $55,648, respectively, and for the three and nine months ended September 30, 2016 was $18,174 and $38,231, respectively. Certain obligations insured by Ambac have been legally defeased whereby government securities are purchased by the issuer with the proceeds of a new bond issuance, or less frequently with other funds of the issuer, and held in escrow. The principal and interest received from the escrowed securities are then used to retire the Ambac-insured obligations at a future date either to their maturity date (a refunding) or a specified call date (a pre-refunding). Ambac has evaluated the provisions in policies issued on these obligations and determined those insurance policies have not been legally extinguished. For policies with refunding securities, premium revenue recognition is not impacted as the escrowed maturity date is the same as the previous legal maturity date. For policies with pre-refunding securities, the maturity date of the pre-refunded security has been shortened from its previous legal maturity. Although premium revenue recognition has not been accelerated in the period of the pre-refunding, it results in an increase in the rate at which the policy's remaining UPR is to be recognized. The effect of reinsurance on premiums written and earned for the respective periods was as follows:
The following table summarizes net premiums earned by location of risk for the respective periods:
The table below summarizes the future gross undiscounted premiums to be collected and future premiums earned, net of reinsurance at September 30, 2017:
Loss and Loss Expense Reserves: The loss and loss expense reserve (“loss reserve”) policy for financial guarantee insurance relates only to Ambac’s non-derivative insurance business for insurance policies issued to beneficiaries, including VIEs, for which we do not consolidate the VIE. Losses and loss expenses are based upon estimates of the ultimate aggregate losses inherent in the non-derivative financial guarantee portfolio as of the reporting date. A loss reserve is recorded on the balance sheet on a policy-by-policy basis. Loss reserve components of an insurance policy include unpaid claims and the present value ("PV") of expected net cash flows required to be paid under an insurance contract, further described below:
Net cash outflow policies represent contracts where the sum of unpaid claims plus the PV of expected cash outflows are greater than the PV of expected cash inflows. For such policies, a “Loss and loss expense reserves” liability is recorded for the sum of: (i) unpaid claims plus (ii) the excess of the PV of expected net cash outflows over the unearned premium revenue. Net cash inflow policies represent contracts where losses have been paid, but not yet recovered, such that the PV of expected cash inflows are greater than the sum of unpaid claims plus the PV of expected cash outflows. For such policies, a “Subrogation recoverable” asset is recorded for the difference between (i) the PV of expected net cash inflows and (ii) unpaid claims. The approaches used to estimate expected future claims and expected future recoveries considers the likelihood of all possible outcomes. The evaluation process for determining expected losses is subject to material estimates and judgments based on our assumptions regarding the probability of default by the issuer of the insured security, probability of settlement outcomes (which may include commutation settlements, refinancing and/or other settlement outcomes), expected severity of credits for each insurance contract and the timing of expected events including default, commutation and recovery. Ambac’s loss reserves are based on management’s on-going review of the financial guarantee credit portfolio. Below are the components of the Loss and loss expense reserves liability and the Subrogation recoverable asset at September 30, 2017 and December 31, 2016:
Below is the loss and loss expense reserve roll-forward, net of subrogation recoverable and reinsurance, for the affected periods:
For 2017, the net adverse development was primarily the result of negative development in certain public finance transactions, including Puerto Rico, and interest accrued on Deferred Amounts partially offset by positive developments in certain Ambac UK transactions. For 2016, the net positive development was primarily the result of lower estimated projected losses in the RMBS and Student Loan portfolios partially offset by interest accrued on Deferred Amounts and by negative development in certain public finance, including Puerto Rico, and Ambac UK transactions. The tables below summarize information related to policies currently included in Ambac’s loss and loss expense reserves or subrogation recoverable at September 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 September 30, 2017 and December 31, 2016 was 2.5% and 2.7%, respectively.
Ambac records estimated subrogation recoveries for breaches of R&Ws by sponsors of certain RMBS transactions. For a discussion of the Random Sample approach utilized to estimate R&W subrogation recoveries, see Note 2. Basis of Presentation and Significant Accounting Policies 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, 2016. R&W subrogation may include estimates of potential sponsor settlements, but have not been subject to a sampling approach. However, such estimates are not material to Ambac’s financial results and therefore are included in the Random Sample table. Ambac has recorded R&W subrogation recoveries of $1,844,116 ($1,816,289 net of reinsurance) and $1,907,035 ($1,878,740 net of reinsurance) at September 30, 2017 and December 31, 2016, respectively. The balance of R&W subrogation recoveries and the related loss reserves, using the Random Sample estimation approach, at September 30, 2017 and December 31, 2016, are as follows:
Below is the rollforward of R&W subrogation, by random sample estimation approach, for the affected periods:
Our ability to realize R&W subrogation recoveries is subject to significant uncertainty, including risks inherent in litigation, collectability of such amounts from counterparties (and/or their respective parents and affiliates), timing of receipt of any such recoveries, intervention by the Rehabilitator or OCI, which could impede our ability to take actions required to realize such recoveries, and uncertainty inherent in the assumptions used in estimating such recoveries. Insurance intangible asset: The insurance intangible amortization expense is included in insurance intangible amortization on the Consolidated Statements of Total Comprehensive Income (Loss). For the three and nine months ended September 30, 2017, the insurance intangible amortization expense was $45,690 and $116,686, respectively. For the three and nine months ended September 30, 2016, the insurance intangible amortization expense was $44,553 and $134,456, respectively. As of September 30, 2017 and December 31, 2016, the gross carrying value of the insurance intangible asset was $1,576,788 and $1,534,419, respectively. Accumulated amortization of the insurance intangible asset was $698,816 and $572,339, as of September 30, 2017 and December 31, 2016, respectively, resulting in a net insurance intangible asset of $877,972 and $962,080, respectively. The estimated future amortization expense for the net insurance intangible asset is as follows:
|
Fair Value Measurements |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Measurements | 7. FAIR VALUE MEASUREMENTS The Fair Value Measurement Topic of the ASC establishes a framework for measuring fair value and disclosures about fair value measurements. Fair Value Hierarchy: The Fair Value Measurement Topic of the ASC specifies a fair value hierarchy based on whether the inputs to valuation techniques used to measure fair value are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect Company-based assumptions. The fair value hierarchy prioritizes model inputs into three broad levels as follows:
The following table sets forth the carrying amount and fair value of Ambac’s financial assets and liabilities as of September 30, 2017 and December 31, 2016, including the level within the fair value hierarchy at which fair value measurements are categorized. As required by the Fair Value Measurement Topic of the ASC, financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.
Determination of Fair Value: When available, Ambac uses quoted active market prices specific to the financial instrument to determine fair value, and classifies such items within Level 1. Because many fixed income securities do not trade on a daily basis, pricing sources apply available market information through processes such as matrix pricing to calculate fair value. In those cases, the items are classified within Level 2. If quoted market prices are not available, fair value is based upon models that use, where possible, current market-based or independently-sourced market parameters. Items valued using valuation models are classified according to the lowest level input or value driver that is significant to the valuation. Thus, an item may be classified in Level 3 even though there may be significant inputs that are readily observable. The determination of fair value for financial instruments categorized in Level 2 or 3 involves significant judgment due to the complexity of factors contributing to the valuation. Third-party sources from which we obtain independent market quotes also use assumptions, judgments and estimates in determining financial instrument values and different third parties may use different methodologies or provide different prices for securities. In addition, the use of internal valuation models may require assumptions about hypothetical or inactive markets. As a result of these factors, the actual trade value of a financial instrument in the market, or exit value of a financial instrument position by Ambac, may be significantly different from its recorded fair value. Ambac’s financial instruments carried at fair value are mainly comprised of investments in fixed income securities, equity interests in pooled investment funds, derivative instruments, variable interest entity assets and liabilities and equity interests in Ambac sponsored special purpose entities. Valuation of financial instruments is performed by Ambac’s finance group using methods approved by senior financial management with consultation from risk management and portfolio managers as appropriate. Preliminary valuation results are discussed with portfolio managers quarterly to assess consistency with market transactions and trends as applicable. Market transactions such as trades or negotiated settlements of similar positions, if any, are reviewed to validate fair value model results. However many of the financial instruments valued using significant unobservable inputs have very little or no observable market activity. Methods and significant inputs and assumptions used to determine fair values across portfolios are reviewed quarterly by senior financial management. Other valuation control procedures specific to particular portfolios are described further below. We reflect Ambac’s own creditworthiness in the fair value of financial liabilities by including a credit valuation adjustment (“CVA”) in the determination of fair value. A decline (increase) in Ambac’s creditworthiness as perceived by market participants will generally result in a higher (lower) CVA, thereby lowering (increasing) the fair value of Ambac’s financial liabilities as reported. Fixed Income Securities: The fair values of fixed income investment securities are based primarily on market prices received from dealer quotes or alternative pricing sources with reasonable levels of price transparency. Such quotes generally consider a variety of factors, including recent trades of the same and similar securities. For those fixed income investments where quotes were not available or cannot be reasonably corroborated, fair values are based on internal valuation models. Key inputs to the internal valuation models generally include maturity date, coupon and yield curves for asset-type and credit rating characteristics that closely match those characteristics of the specific investment securities being valued. Longer (shorter) expected maturities or higher (lower) yields used in the valuation model will, in isolation, result in decreases (increases) in fair value. Generally, lower credit ratings or longer expected maturities will be accompanied by higher yields used to value a security. At September 30, 2017, approximately 5%, 82% and 13% of the fixed income investment portfolio (excluding variable interest entity investments) was valued using dealer quotes, alternative pricing sources with reasonable levels of price transparency and internal valuation models, respectively. At December 31, 2016, approximately 5%, 82% and 13% of the fixed income investment portfolio (excluding variable interest entity investments) was valued using dealer quotes, alternative pricing sources with reasonable levels of price transparency and internal valuation models, respectively. Among the investments valued using internal valuation models are Ambac insured securities for which projected cash flows consist solely of Deferred Amounts and interest thereon. These securities are internally valued based upon the valuation of Ambac Assurance's surplus notes and comprise 12% and 12% of the portfolio at September 30, 2017 and December 31, 2016, respectively. Ambac performs various review and validation procedures to quoted and modeled prices for fixed income securities, including price variance analyses, missing and static price reviews, overall valuation analysis by senior traders and finance managers and reviews associated with our ongoing impairment analysis. Unusual prices identified through these procedures will be evaluated further against alternative third party quotes (if available) and/or internally modeled prices, and the pricing source values will be challenged as necessary. Price challenges generally result in the use of the pricing source’s quote as originally provided or as revised by the source following their internal diligence process. A price challenge may result in a determination by either the pricing source or Ambac management that the pricing source cannot provide a reasonable value for a security or cannot adequately support a quote, in which case Ambac would resort to using either other quotes or internal models. Results of price challenges are reviewed by senior traders and finance managers. Valuation Inputs Information about the valuation inputs for fixed income securities classified as Level 3 is included below: Residential mortgage-backed securities: A portion of these securities are guaranteed under policies that are subject to the Segregated Account Rehabilitation Plan and have projected future cash flows consisting solely of Deferred Amounts under such policies including interest thereon. The fair value of such securities classified as Level 3 was $684,638 and $696,713 at September 30, 2017 and December 31, 2016, respectively. Fair value was calculated based on the valuation of Ambac Assurance surplus notes which, under the terms of the Segregated Account Rehabilitation Plan, are to be redeemed in proportion with the payment of Deferred Amounts on or about the dates when such payments are made. Refer to Note 1. Background and Business Description in the Notes to Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016 for further description of the Segregated Account Rehabilitation Plan and its impact on the payment of Segregated Account policy claims and surplus note redemptions. The remaining portion of Level 3 residential mortgage-backed securities are an Ambac-insured re-REMIC containing distressed mortgage-backed securities as collateral, the fair value of which was $26,033 at September 30, 2017. There were $0 such securities classified as Level 3 as of December 31, 2016. Fair value was calculated using a discounted cash flow approach with expected future cash flows discounted using a yield consistent with the security type and rating. Significant inputs for the valuation at September 30, 2017 were as follows:
Other asset-backed securities: These securities are a subordinated tranche of a resecuritization collateralized by Ambac-insured military housing bonds. The fair value of such securities classified as Level 3 was $65,138 and $65,990 at September 30, 2017 and December 31, 2016, respectively. Fair value was calculated using a discounted cash flow approach with expected future cash flows discounted using a yield consistent with the security type and rating. Significant inputs for the valuation at September 30, 2017 and December 31, 2016 include the following weighted averages:
Other Investments: Other investments primarily relate to investments in pooled investment funds. The fair value of pooled investment funds is determined using dealer quotes or alternative pricing sources when such investments have readily determinable fair values. When fair value is not readily determinable, pooled investment funds are valued using the net asset value (“NAV”) per share as a practical expedient as permitted under the Fair Value Measurement Topic of the ASC. Refer to Note 8. Investments for additional information about such investments in pooled funds that are reported at fair value using NAV as a practical expedient. Other investments also includes Ambac's equity interest in a non-consolidated VIE, which is carried under the equity method. Valuation of this equity interest is internally calculated using a discounted cash flow approach and is classified as Level 3. Derivative Instruments: Ambac’s derivative instruments primarily comprise interest rate and credit default swaps and exchange traded futures contracts. Fair value is determined based upon market quotes from independent sources, when available. When independent quotes are not available, fair value is determined using valuation models. These valuation models require market-driven inputs, including contractual terms, credit spreads and ratings on underlying referenced obligations, yield curves and tax-exempt interest ratios. The valuation of certain interest rate as well as all credit derivative contracts also require the use of data inputs and assumptions that are determined by management and are not readily observable in the market. Under the Fair Value Measurement Topic of the ASC, Ambac is required to consider its own credit risk when measuring the fair value of derivatives and other liabilities. The fair value of credit derivative liabilities was reduced by $823 and $1,924 at September 30, 2017 and December 31, 2016, respectively, as a result of incorporating an Ambac CVA into the valuation model for these contracts. Interest rate swaps may also require an adjustment to fair value to reflect Ambac’s credit risk. During the three months ended June 30, 2017, interest rate swaps that had incorporated an Ambac CVA into the valuation were terminated. As a result, derivative liabilities are no longer reduced as a result of Ambac CVA at September 30, 2017 compared to $44,943 at December 31, 2016. Additional factors considered in estimating the amount of any Ambac CVA on such contracts include collateral posting provisions, right of set-off with the counterparty, the period of time remaining on the derivative and the pricing of recent terminations. As described further below, certain valuation models require other inputs that are not readily observable in the market. The selection of a model to value a derivative depends on the contractual terms of, and specific risks inherent in the instrument as well as the availability of pricing information in the market. Derivatives that are less complex may be valued primarily by reference to interest rates and yield curves that are observable and regularly quoted, such as interest rate swaps, for which we generally utilize vendor-developed models. These models provide the net present value of the derivatives based on contractual terms and observable market data. Downgrades of Ambac Assurance, as guarantor of the derivatives, have increased collateral requirements and triggered termination provisions in certain interest rate swaps. Termination activity since the initial rating downgrades of Ambac Assurance provided additional information about the replacement and/or exit value of certain derivatives, which has been incorporated into the fair value of these derivatives as appropriate. Generally, the need for counterparty (or Ambac) CVAs is mitigated by the existence of collateral posting agreements under which adequate collateral has been posted. Derivative contracts entered into with financial guarantee customers are not subject to collateral posting agreements. Counterparty credit risk related to such customer derivative assets is included in our fair value adjustments. For derivatives that do not trade, or trade in less liquid markets such as credit derivatives, an internal model is generally used because such instruments tend to be unique, contain complex or heavily modified and negotiated terms and pricing information is not readily available in the market. Derivative fair value models and the related assumptions are continuously re-evaluated by management and enhanced, as appropriate, based on improvements in modeling techniques. Ambac has not made any significant changes to its modeling techniques or related model inputs for the periods presented. Credit Derivatives (“CDS”): Fair value of Ambac’s CDS is determined using internal valuation models and represents the hypothetical transfer cost of the contract calculated as the difference between the net present value of the projected fees receivable under the CDS and our estimate of the fees a financial guarantor of comparable credit quality would charge to provide the same protection at the balance sheet date. Financial guarantee contracts, including CDS, are typically priced to capture some portion of the spread that would be observed in the capital markets for the underlying (insured) obligation. Because of this relationship and in the absence of severe credit deterioration, changes in the fair value of our credit default swaps will generally be less than changes in the fair value of the underlying reference obligations. Key variables used in the valuation of our credit derivatives include the balance of unpaid notional, expected term, fair values of the underlying reference obligations, reference obligation credit ratings and the CVA applied against Ambac Assurance liabilities by market participants. Notional balances, expected remaining term and reference obligation credit ratings are monitored and determined by Ambac’s portfolio risk management group. Fair values of the underlying reference obligations are obtained from broker quotes when available or are estimated internally using the same methodologies used to value Ambac’s fixed income securities in its investment portfolio. Ambac reflects changes in reference obligation credit ratings within the fair value of its CDS contracts by changing the percentage of the obligation's market spread (over LIBOR) that would be captured as a CDS fee at the valuation date. We adjust this percentage (“relative change ratio”) in our valuations based on internal rating changes such that the resulting fair value liability of the CDS contract, excluding the effect of Ambac's own credit risk, will increase up to the full amount of the unrealized loss on the reference obligation as the credit rating declines. Ambac incorporates its own credit risk into the valuation of its CDS liabilities by applying a CVA to the calculations described above. The Ambac CVA represents the difference between the present value of the hypothetical fees discounted at LIBOR compared to discount rates that incorporate Ambac credit risk. Information about the above described model inputs used to determine the fair value of credit derivatives, including the CVA as a percentage of the gross mark-to-market liability before considering Ambac credit risk (“CVA percentage”), as of September 30, 2017 and December 31, 2016 is summarized below:
Significant unobservable inputs for credit derivatives include WAL, internal credit rating, relative change ratio and CVA percentage. A longer (shorter) WAL, lower (higher) reference obligation credit rating, higher (lower) relative change ratio or lower (higher) CVA, in isolation, would result in an increase (decrease) in the fair value liability measurement. A change in an internal credit rating of a reference obligation in our model will generally result in a directionally opposite change in the relative change ratio. Also, a shorter (longer) WAL will generally correspond with a lower (higher) CVA percentage. Financial Guarantees: Fair value of net financial guarantees written represents our estimate of the cost to Ambac to completely transfer its insurance obligation to another market participant of comparable credit worthiness. In theory, this amount should be the same amount that another market participant of comparable credit worthiness would hypothetically charge in the market place, on a present value basis, to provide the same protection as of the balance sheet date. This fair value estimate of financial guarantees is presented on a net basis and includes direct and assumed contracts written, net of ceded reinsurance contracts. The fair value estimate of financial guarantees is computed by utilizing cash flows calculated at the policy level. For direct and assumed contracts, net cash flows for each policy includes future: (i) installment premium receipts, (ii) gross claim payments, (iii) subrogation receipts, and (iv) unpaid claims on claims presented and not yet paid for policies allocated to the Segregated Account, including Deferred Amounts and interest thereon. The timing of future claim payments of the Segregated Account are at the sole discretion of the Rehabilitator. For ceded reinsurance contracts, net cash flows for each policy includes future: (i) installment ceded premium payments, (ii) ceding commission receipts, (iii) ceded claim receipts, and (iv) ceded subrogation payments. For each assumed or ceded reinsurance contract, the respective undiscounted cash flow components are aggregated to determine if we are in a net asset or net liability position. U.S. GAAP requires that the nonperformance risk of a financial liability be included in the estimation of fair value, which includes considering Ambac Assurance’s own credit risk. Accordingly, for each contract in a net liability position, we estimate the fair value using internally developed discount rates and market pricing that incorporate Ambac’s own credit risk and subsequently apply a profit margin. This profit margin represents what another market participant would require to assume the financial guarantee contracts. Given the unique nature of financial guarantees there is a lack of observable market information to make this estimate. A profit margin was developed based on discussions with the third-party institutions with valuation expertise, discussions with industry participants and yields on Ambac Assurance surplus notes. The discount rates used for contracts in a net liability position are derived from the rates implicit in the fair value of surplus notes and guaranteed securities with future cash flows that are highly dependent upon Ambac financial guarantee payments. For each contract in a net asset position, we estimate the fair value using a discount rate that is commensurate with a hypothetical buyer’s cost of capital. This methodology is based on management’s expectations of how a market participant would estimate net cash flows. We are aware of a number of factors that may cause such fair or exit value to differ, perhaps materially. For example, (i) since no financial guarantor with Ambac Assurance’s credit quality is writing or otherwise obtaining financial guarantee business (e.g. reinsurance or novation of policies from other insurers) we do not have access to observable pricing data points and (ii) certain segments of Ambac's financial guarantees have been allocated to the Segregated Account and timing of the payments of such liabilities are at the sole discretion of the Rehabilitator. Long-term Debt: Long-term debt includes surplus notes issued by Ambac Assurance, surplus notes issued by the Segregated Account of Ambac Assurance and notes outstanding to third parties arising from Ambac Assurance's secured borrowing transaction. The fair values of Ambac Assurance surplus notes and the secured borrowing notes are based on market prices received from dealer quotes or alternative pricing sources with reasonable levels of price transparency. The fair value of Segregated Account surplus notes are classified as Level 3 and are internally estimated considering market transactions when available and internally developed discounted cash flow models. Internal valuation estimates of Segregated Account surplus notes consider differences in contractual accrued interest and seniority of payment relative to Ambac Assurance surplus notes. Other Financial Assets and Liabilities: The fair values of Ambac’s equity interest in Ambac sponsored special purpose entities (included in Other assets), Loans, and Obligations under investment agreements are estimated based upon internal valuation models that discount expected cash flows using discount rates consistent with the credit quality of the obligor after considering collateralization. Variable Interest Entity Assets and Liabilities: The financial assets and liabilities of VIEs consolidated under the Consolidation Topic of the ASC consist primarily of fixed income securities, loans, derivative and debt instruments and are generally carried at fair value. These consolidated VIEs are securitization entities which have liabilities and/or assets guaranteed by Ambac Assurance. The fair values of VIE debt instruments are determined using the same methodologies used to value Ambac’s fixed income securities in its investment portfolio as described above. VIE debt fair value is based on market prices received from dealer quotes or alternative pricing sources with reasonable levels of price transparency. Such quotes are considered Level 2 and generally consider a variety of factors, including recent trades of the same and similar securities. For those VIE debt instruments where quotes were not available, the debt instrument fair values are considered Level 3 and are based on internal discounted cash flow models. Comparable to the sensitivities of investments in fixed income securities described above, longer (shorter) expected maturities or higher (lower) yields used in the valuation model will, in isolation, result in decreases (increases) in fair value liability measurement for VIE debt. VIE debt instruments considered Level 3 include fixed rate, floating rate and zero coupon notes secured by various asset types, primarily European ABS. Information about the valuation inputs for the various VIE debt categories classified as Level 3 is as follows: European ABS transactions: The fair value of such obligations classified as Level 3 was $2,914,985 and $2,551,278 at September 30, 2017 and December 31, 2016, respectively. Fair values were calculated by using a discounted cash flow approach. The discount rates used were based on the rates implied from the third party quoted values for comparable notes from the same securitization entity. Significant inputs for the valuation at September 30, 2017 and December 31, 2016 include the following weighted averages:
US Commercial ABS transaction: The fair value of such obligations classified as Level 3 was $31,399 and $30,942 at September 30, 2017 and December 31, 2016, respectively. Fair values were calculated as the sum of the present value of expected future cash flows from the underlying VIE assets plus the present value of the related Ambac financial guarantee cash flows. The discount rates applied to cash flows sourced from VIE assets were based on interest rates for similar obligations. The fair value of financial guarantee cash flows include internal estimates of future loss payments by Ambac, when applicable, discounted at a rate that incorporates Ambac’s own credit risk. As a result of a negotiated settlement to refinance this Ambac-insured debt, the valuation input for maturity as of September 30, 2017 reflects the final paydown date of the bond which occurred in October 2017. Significant inputs for the valuation at September 30, 2017 and December 31, 2016, include the following weighted averages:
VIE derivative asset and liability fair values are determined using valuation models. When specific derivative contractual terms are available and may be valued primarily by reference to interest rates, foreign exchange rates and yield curves that are observable and regularly quoted, the derivatives are valued using vendor-developed models. Other derivatives within the VIEs that include significant unobservable valuation inputs are valued using internally developed models. VIE derivative fair value balances at September 30, 2017 and December 31, 2016 were developed using vendor-developed models and do not use significant unobservable inputs. The fair value of VIE assets are obtained from market quotes when available. Typically VIE asset fair values are not readily available from market quotes and are estimated internally. The consolidated VIEs are securitization entities in which net cash flows from assets and derivatives (after adjusting for financial guarantor cash flows and other expenses) will be paid out to note holders or equity interests. Our valuation of VIE assets (fixed income securities or loans), therefore, are derived from the fair value of notes and derivatives, as described above, adjusted for the fair value of cash flows from Ambac’s financial guarantee. The fair value of financial guarantee cash flows include: (i) estimated future premiums discounted at a rate consistent with that implicit in the fair value of the VIE’s liabilities and (ii) internal estimates of future loss payments by Ambac discounted at a rate that includes Ambac’s own credit risk. Estimated future premium payments to be paid by the VIEs were discounted at a weighted average rate of 3.0% and 3.6% at September 30, 2017 and December 31, 2016, respectively. The value of future loss payments to be paid by Ambac to the VIEs was adjusted to include an Ambac CVA appropriate for the term of expected Ambac claim payments. Additional Fair Value Information for Financial Assets and Liabilities Accounted for at Fair Value: The following tables present the changes in the Level 3 fair value category for the periods presented in 2017 and 2016. Ambac classifies financial instruments in Level 3 of the fair value hierarchy when there is reliance on at least one significant unobservable input to the valuation model. In addition to these unobservable inputs, the valuation models for Level 3 financial instruments typically also rely on a number of inputs that are readily observable either directly or indirectly. Thus, the gains and losses presented below include changes in the fair value related to both observable and unobservable inputs.
The tables below provide roll-forward information by class of investments and derivatives measured using significant unobservable inputs.
Invested assets and VIE long-term debt are transferred into Level 3 when internal valuation models that include significant unobservable inputs are used to estimate fair value. All such securities that have internally modeled fair values have been classified as Level 3. Non-agency RMBS securities transferred into Level 3 in 2017 consist of an Ambac-insured re-REMIC collateralized by distressed mortgage-backed securities. Non-agency RMBS transferred into Level 3 in 2016 consist of certain investments in Ambac-wrapped RMBS securities for which projected cash flows consist solely of Deferred Amounts and interest thereon. Other asset-backed securities transferred into Level 3 in 2016 consist of a subordinated tranche of a resecuritization collateralized by Ambac-insured military housing bonds. These invested assets were internally valued as management could not corroborate the reasonableness of third party quotes. Derivative instruments are transferred into Level 3 when the use of unobservable inputs becomes significant to the overall valuation. There were no transfers of derivative instruments into or out of Level 3 in the periods disclosed. All transfers out of Level 3 represent transfers between Level 3 and Level 2 for the periods presented. There were no transfers between Level 1 and Level 2 for the periods presented. All transfers between fair value hierarchy Levels 1, 2, and 3 are recognized at the beginning of each accounting period. Gains and losses (realized and unrealized) relating to Level 3 assets and liabilities included in earnings for the affected periods are reported as follows:
|
Investments |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Investments, Debt and Equity Securities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Investments | 8. INVESTMENTS Ambac’s non-VIE invested assets are primarily comprised of fixed income securities classified as available-for-sale and equity interests in pooled investment funds. Such equity interests in the form of common stock or in-substance common stock are classified as trading securities and are reported within Other investments on the Consolidated Balance Sheets. Other investments also include Ambac's debt and equity interests in an unconsolidated trust created in connection with its sale of Segregated Account junior surplus notes on August 28, 2014. Fixed Income Securities: The amortized cost and estimated fair value of available-for-sale investments, excluding VIE investments, at September 30, 2017 and December 31, 2016 were as follows:
The amortized cost and estimated fair value of available-for-sale investments, excluding VIE investments, at September 30, 2017, by contractual maturity, were as follows:
Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay certain obligations with or without call or prepayment penalties. Unrealized Losses on Fixed Income Securities: The following table shows gross unrealized losses and fair values of Ambac’s available-for-sale investments, aggregated by investment category and length of time that the individual securities have been in a continuous unrealized loss position, at September 30, 2017 and December 31, 2016:
Management has determined that the unrealized losses reflected in the tables above are temporary in nature as of September 30, 2017 and December 31, 2016 based upon (i) no unexpected principal and interest payment defaults on these securities; (ii) analysis of the creditworthiness of the issuer and financial guarantor, as applicable, and analysis of projected defaults on the underlying collateral; (iii) management has no intent to sell these investments in debt securities; and (iv) it is not more likely than not that Ambac will be required to sell these debt securities before the anticipated recovery of its amortized cost basis. The assessment under (iv) is based on a comparison of future available liquidity from the investment portfolio against the projected net cash outflow from operating activities and debt service. For purposes of this assessment, available liquidity from the investment portfolio is comprised of the fair value of securities for which management has asserted its intent to sell, the fair value of other securities that are available for sale and in an unrealized gain position, trading securities plus the scheduled maturities and interest payments from the remaining securities in the portfolio. To the extent that securities that management intends to sell are in an unrealized loss position, they would have already been considered other-than-temporarily impaired with the amortized cost written down to fair value. Because the above-described assessment indicates that future available liquidity exceeds projected net cash outflow, it is not more likely than not that we would be required to sell securities in an unrealized loss position before the recovery of their amortized cost basis. In the liquidity assessment described above, principal payments on securities pledged as collateral are not considered to be available for other liquidity needs until the collateralized positions are projected to be settled. Projected interest receipts on securities pledged as collateral generally belong to Ambac and are considered to be sources of available liquidity from the investment portfolio. As of September 30, 2017, for securities that have indications of possible other-than-temporary impairment but which management does not intend to sell and will not more likely than not be required to sell, management compared the present value of cash flows expected to be collected to the amortized cost basis of the securities to assess whether the amortized cost will be recovered. Cash flows were discounted at the effective interest rate implicit in the security at the date of acquisition (or Fresh Start Reporting Date of April 30, 2013 for securities purchased prior to that date) or for debt securities that are beneficial interests in securitized financial assets, at a rate equal to the current yield used to accrete the beneficial interest. For floating rate securities, future cash flows and the discount rate used were both adjusted to reflect changes in the index rate applicable to each security as of the evaluation date. Of the securities that were in a gross unrealized loss position at September 30, 2017, $1,090,352 of the total fair value and $35,661 of the unrealized loss related to below investment grade and non-rated securities. Of the securities that were in a gross unrealized loss position at December 31, 2016, $890,952 of the total fair value and $53,273 of the unrealized loss related to below investment grade and non-rated securities. With respect to Ambac guaranteed securities, future cash flows relating to those invested assets include the sum of (i) the bond’s intrinsic cash flows and (ii) the estimated Ambac claim payments, including Deferred Amounts (as defined in the Segregated Account Rehabilitation Plan) for securities with policies allocated to the Segregated Account. Ambac estimates the timing of such claim payment receipts but the actual timing of such amounts are at the sole discretion of the Rehabilitator. Further modifications to the Segregated Account Rehabilitation Plan or to the rules and guidelines promulgated thereunder, orders from the Rehabilitation Court or actions by the Rehabilitator with respect to the form, amount and timing of satisfying permitted policy claims, or making payments on Deferred Amounts or surplus notes, or the accretion rate on Deferred Amounts, may have a material effect on the fair value of Ambac insured securities and future recognition of other-than-temporary impairments. Refer to Note 1. Background and Business Description and to Note 1. Background and Business Description in the Notes to Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016 for information relating to the amended Segregated Account Rehabilitation Plan. Ambac’s assessment about whether a decline in value is other-than-temporary reflects management’s current judgment regarding facts and circumstances specific to a security and the factors noted above. If that judgment changes, Ambac may ultimately record a charge for other-than-temporary impairment in future periods. Municipal and corporate obligations The gross unrealized losses on municipal and corporate obligations as of September 30, 2017 are primarily the result of the increase in interest rates since purchase (or the Fresh Start Reporting Date of April 30, 2013 if owned as of that date). These securities are primarily fixed-rate securities with an investment grade credit rating. Management believes that the timely receipt of all principal and interest on these positions is probable. Residential mortgage-backed securities Of the $18,933 of unrealized losses on residential mortgage-backed securities, $18,933 is attributable to Ambac insured securities. The unrealized loss on these securities is primarily the result of discount accretion, which has exceeded the increase in fair value since either the purchase date or Fresh Start Reporting Date of April 30, 2013 for securities owned prior to such date. As part of the quarterly impairment review process, management estimates expected future cash flows from residential mortgage-backed securities. This approach includes the utilization of market accepted software models in conjunction with detailed data of the historical performance of the collateral pools, which assists in the determination of assumptions such as defaults, severity and voluntary prepayment rates that are largely driven by home price forecasts as well as other macro-economic factors. Additionally, for Ambac insured securities that are allocated to the Segregated Account, expected future cash flows include assumptions about the timing of Ambac Assurance claim payments, including interest on Deferred Amounts, although the actual timing of such payments are at the sole discretion of the Rehabilitator. These assumptions are used to project future cash flows for each security. Management considered this analysis in making our determination that a credit loss has not occurred at September 30, 2017 on these transactions. Realized Gains and Losses and Other-Than-Temporary Impairments: The following table details amounts included in net realized gains (losses) and other-than-temporary impairments included in earnings for the affected periods:
Since commencement of the Segregated Account Rehabilitation Proceedings, changes in the estimated timing of claim payments have resulted in adverse changes in projected cash flows on certain impaired Ambac insured securities. Such changes in estimated claim payments on Ambac insured securities contributed to net other-than-temporary impairments for the three and nine months ended September 30, 2017 and 2016, presented in the table above. Further changes to the estimated timing of claim payments could result in additional other-than-temporary impairment charges in the future. Future changes in our estimated liquidity needs could result in a determination that Ambac no longer has the ability to hold securities that are in an unrealized loss position, which could result in additional other-than-temporary impairment charges. The following table presents a roll-forward of Ambac’s cumulative credit losses on debt securities held as of September 30, 2017 and 2016 for which a portion of an other-than-temporary impairment was recognized in other comprehensive income:
Counterparty Collateral, Deposits with Regulators and Other Restrictions: Ambac routinely pledges and receives collateral related to certain transactions. Ambac pledges assets it holds in its investment portfolio to investment agreement (prior to repayment in March 2017) and derivative counterparties as collateral. Securities pledged to investment agreement counterparties were not to be re-pledged to another entity. Ambac’s counterparties under derivative agreements have the right to pledge or rehypothecate the securities and as such, these pledged securities are separately classified on the Consolidated Balance Sheets as “Fixed income securities pledged as collateral, at fair value”. The following table presents (i) the sources of collateral either received from various counterparties where Ambac is permitted to sell or re-pledge the collateral or collateral held directly in the investment portfolio and (ii) how that collateral was pledged to investment agreement and derivative counterparties at September 30, 2017 and December 31, 2016:
Securities carried at $6,019 and $5,872 at September 30, 2017 and December 31, 2016, respectively, were deposited by Ambac Assurance and Everspan with governmental authorities or designated custodian banks as required by laws affecting insurance companies. Securities with fair value of $351,339 and $360,759 at September 30, 2017 and December 31, 2016, respectively, were held by a bankruptcy remote trust to collateralize and fund repayment of debt issued through a re-securitization transaction. The securities may not be sold or repledged by the trust. These assets are held and the secured debt is issued by entities that qualify as VIEs and are consolidated in Ambac’s unaudited consolidated financial statements. Refer to Note 3. Special Purpose Entities, Including Variable Interest Entities for a further description of this transaction. Guaranteed Securities: Ambac’s fixed income portfolio includes securities covered by guarantees issued by Ambac Assurance and other financial guarantors (“insured securities”). The published rating agency ratings on these securities reflect the higher of the financial strength rating of the financial guarantor or the rating of the underlying issuer. Rating agencies do not always publish separate underlying ratings (those ratings excluding the insurance by the financial guarantor). In the event these underlying ratings are not available from the rating agencies, Ambac will assign an internal rating. The following table represents the fair value, including the value of the financial guarantee, and weighted-average underlying rating, excluding the financial guarantee, of the insured securities at September 30, 2017 and December 31, 2016, respectively:
Equity Interests: Ambac's investment portfolio includes equity interests in various pooled investment funds, which are classified as trading. The fair value and additional information about such investments in pooled funds, by investment type, is summarized in the table below. Except as noted in the table, fair value reported is determined using NAV per share as a practical expedient. There are no unfunded commitments applicable to any of these investments for the periods disclosed.
Ambac also holds debt and equity interests in an unconsolidated trust created in connection with the 2014 sale of Segregated Account junior surplus notes. The investment in debt securities is accounted for as trading and the equity interest is accounted for under the equity method. Investment Income: Net investment income was comprised of the following for the affected periods:
Net investment income from Other investments primarily represents changes in fair value on securities classified as trading or under the fair value option plus income from Ambac's equity interest in an unconsolidated trust created in connection with its sale of Segregated Account junior surplus notes. The portion of net unrealized gains (losses) related to trading securities still held at the end of each period is as follows:
|
Derivative Instruments |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Derivative Instruments | 9. DERIVATIVE INSTRUMENTS The following tables summarize the gross fair values of individual derivative instruments and the impact of legal rights of offset as reported in the Consolidated Balance Sheets as of September 30, 2017 and December 31, 2016:
Effective January 3, 2017, the central clearing party ("CCP") for certain of Ambac's derivative contracts changed its rules governing the character of variation payments. Under the new CCP rules, variation payments are considered settlements of the associated derivative balance. Prior to the rule change such variation payments were considered to be margin and were not offset against the fair value of the derivatives, but were recognized as collateral receivable or payable. The amount of variation margin included within "Other assets" on the Consolidated Balance Sheet as of December 31, 2016, and was applied as a reduction to derivative liabilities effective January 3, 2017 under the new CCP rules is $71,023. Amounts recognized for the right to reclaim cash collateral or the obligation to return cash collateral are not offset against fair value amounts recognized for derivative instruments on the Consolidated Balance Sheets. The amounts representing the right to reclaim cash collateral and posted margin, recorded in “Other assets” were $24,561 and $137,701 as of September 30, 2017 and December 31, 2016, respectively. There were no amounts held representing an obligation to return cash collateral as of September 30, 2017 and December 31, 2016. The following tables summarize the location and amount of gains and losses of derivative contracts in the Consolidated Statements of Total Comprehensive Income (Loss) for the three and nine months ended September 30, 2017 and 2016:
Credit Derivatives: Credit derivatives, which are privately negotiated contracts, provide the counterparty with credit protection against the occurrence of a specific event such as a payment default or bankruptcy relating to an underlying obligation. Upon a credit event, Ambac is required to make payments equal to the difference between the scheduled debt service payment and the actual payment made by the issuer. Credit derivatives issued are insured by Ambac Assurance. None of the outstanding credit derivative transactions at September 30, 2017 include ratings based collateral-posting triggers or otherwise require Ambac to post collateral regardless of Ambac’s ratings or the size of the mark to market exposure to Ambac. The portfolio of our credit derivatives were written on a “pay-as-you-go” basis. Similar to an insurance policy execution, pay-as-you-go provides that Ambac pays interest shortfalls on the referenced transaction as they are incurred on each scheduled payment date, but only pays principal shortfalls upon the earlier of (i) the date on which the assets designated to fund the referenced obligation have been disposed of and (ii) the legal final maturity date of the referenced obligation. Ambac maintains internal credit ratings on its guaranteed obligations, including credit derivative contracts, solely to indicate management’s view of the underlying credit quality of the guaranteed obligations. Independent rating agencies may have assigned different ratings on the credits in Ambac’s portfolio than Ambac’s internal ratings. The following table summarizes the gross principal notional outstanding for CDS contracts, by Ambac rating as of September 30, 2017 and December 31, 2016:
The table below summarizes other information related to credit derivatives outstanding as of September 30, 2017 and December 31, 2016:
The maximum potential amount of future payments under Ambac’s credit derivative contracts is generally the gross principal notional outstanding amount included in the above table plus future interest payments by the derivative reference obligations. Since Ambac’s credit derivatives typically reference obligations of or assets held by special purpose entities that meet the definition of a VIE, the amount of maximum potential future payments for credit derivatives is included in the table in Note 3. Special Purpose Entities, Including Variable Interest Entities. Changes in fair value of Ambac’s credit derivative contracts are accounted for at fair value since they do not qualify for the financial guarantee scope exception under the Derivatives and Hedging Topic of the ASC. Changes in fair value are recorded in “Net change in fair value of credit derivatives” on the Consolidated Statements of Total Comprehensive Income (Loss). Although CDS contracts are accounted for at fair value, they are surveilled similar to non-derivative financial guarantee contracts. As with financial guarantee insurance policies, Ambac’s Portfolio Risk Management group tracks credit migration of CDS contracts’ reference obligations from period to period. Adversely classified credits are assigned risk classifications by the Portfolio Risk Management group. As of September 30, 2017, there are two CDS contracts on Ambac’s adversely classified credit listing, with a net derivative liability fair value of $6,180 and gross notional principal outstanding of $73,715. As of December 31, 2016, there were two CDS contracts on Ambac’s adversely classified credit listing, with a net derivative liability fair value of $6,123 and total notional principal outstanding of $67,783. Interest Rate Derivatives: Ambac, through its subsidiary Ambac Financial Services (“AFS”), provided interest rate swaps to states, municipalities and their authorities, asset-backed issuers and other entities in connection with their financings. Additionally, AFS uses interest rate derivatives as an economic hedge against the effects of rising interest rates elsewhere in the Company, including on Ambac’s financial guarantee exposures. As of September 30, 2017 and December 31, 2016 the notional amounts of AFS’s derivatives are as follows:
Derivatives of Consolidated Variable Interest Entities Certain VIEs consolidated under the Consolidation Topic of the ASC entered into derivative contracts to meet specified purposes within the securitization structure. The notional for VIE derivatives outstanding as of September 30, 2017 and December 31, 2016 are as follows:
Contingent Features in Derivatives Related to Ambac Credit Risk Ambac’s over-the-counter interest rate swaps are centrally cleared when eligible. Certain interest rate swaps remain with professional swap-dealer counterparties and certain front-end counterparties. These non-cleared swaps are generally executed under standardized derivative documents including collateral support and master netting agreements. Under these agreements, Ambac is required to post collateral in the event net unrealized losses exceed predetermined threshold levels. Additionally, given that Ambac Assurance is no longer rated by an independent rating agency, counterparties have the right to terminate the swap positions. As of September 30, 2017 and December 31, 2016, the net liability fair value of derivative instruments with contingent features linked to Ambac’s own credit risk was $81,762 and $82,944, respectively, related to which Ambac had posted cash and securities as collateral with a fair value of $115,037 and $128,754, respectively. All such ratings-based contingent features have been triggered as requiring maximum collateral levels to be posted by Ambac while preserving counterparties’ rights to terminate the contracts. Assuming all such contracts terminated on September 30, 2017, settlement of collateral balances and net derivative liabilities would result in a net receipt of cash and/or securities by Ambac. If counterparties elect to exercise their right to terminate, the actual termination payment amounts will be determined in accordance with derivative contract terms, which may result in amounts that differ from market values as reported in Ambac’s financial statements. |
Income Taxes |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2017 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income Tax Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income Taxes | 10. INCOME TAXES Ambac files a consolidated Federal income tax return with its subsidiaries. Ambac and its subsidiaries also file separate or combined income tax returns in various states, local and foreign jurisdictions. The following are the major jurisdictions in which Ambac and its subsidiaries operate and the earliest tax years subject to examination:
As of September 30, 2017 Ambac had loss carryforwards totaling $4,259,092. This includes carryforwards of $62,947 relating to U.S. capital losses and an ordinary U.S. federal net operating tax carryforward of approximately $4,196,145, which, if not utilized, will begin expiring in 2029, and will fully expire in 2038. Ambac's capital losses will begin expiring in 2017 and fully expire in 2022. The tax effects of temporary differences that give rise to significant portions of the deferred tax liabilities and deferred tax assets at September 30, 2017 and December 31, 2016 are presented below:
In accordance with the Income Tax Topic of the ASC, a valuation allowance is recognized if, based on the weight of available evidence, it is more-likely-than-not that some, or all, of the deferred tax asset will not be realized. As a result of the risks and uncertainties associated with future operating results, management believes it is more likely than not that the Company will not generate sufficient taxable income to recover the deferred tax operating asset and therefore has a full valuation allowance. U.S. and foreign components of pre-tax income were as follows:
The components of the provision for income taxes were as follows:
NOL Usage Pursuant to the Amended TSA (as defined in Note 1. Background and Business Description to the Consolidated Financial Statements included in Part II, Item 8 in the Company's Annual Report on Form 10-K for the year ended December 31, 2016), to the extent Ambac Assurance generates taxable income after September 30, 2011, which is offset with "Allocated NOLs" of $3,650,000, it is obligated to make payments (“Tolling Payments”), subject to certain credits, to Ambac in accordance with the following NOL usage table, where the “Applicable Percentage” is applied to the aggregate amount of federal income tax liability that would have been paid if the Allocated NOLs were not available. Pursuant to the Closing Agreement between Ambac and the Internal Revenue Service ("IRS"), the IRS will receive 12.5% of Tier C and 17.5% of Tier D payments, if made. NOL Usage Table
Any post determination date NOLs generated by Ambac Assurance are utilized prior to any Allocated NOLs for which Tolling Payments will be due. Ambac Assurance utilized all of its current post determination date NOLs generated from September 30, 2011 through December 31, 2016, generating cumulative taxable income of $1,086,124. Of the bankruptcy related credits available to offset the first $5,000 of payments due under each of the NOL usage Tiers A, B, and C, Ambac Assurance has fully utilized the combined $10,000 of Tier A and Tier B credits. For the two years ended December 31, 2016, Ambac Assurance utilized all of the $479,000 Tier A NOL and $607,124 of the $1,057,000 Tier B NOL resulting in cumulative Tolling Payments, net of applicable credits, of $100,145, of which $71,454 was paid to Ambac in 2016 and $28,691 was paid in 2017. For the nine months ended September 30, 2017, Ambac Assurance generated a new post determination date NOL of $253,843, which must be utilized by Ambac Assurance before further Tolling Payments accrue. Beginning on the fifth anniversary date subsequent to Ambac's May 1, 2013 emergence from bankruptcy, and subject to Ambac's consent, not to be unreasonably withheld, to the extent Ambac Assurance generates post-determination date income in excess of the $3,650,000 Allocated NOLs, Ambac Assurance may utilize Ambac's then remaining NOLs in exchange for a payment of 25% of the federal income tax liability that Ambac Assurance would have paid had Ambac's NOLs not been available. After Ambac fully utilizes its Allocated NOLs it may utilize Ambac Assurance's then remaining Allocated NOLs in exchange for a payment of 50% of the federal income tax liability that Ambac would have paid had Ambac Assurance's NOL not been available. As of September 30, 2017, the remaining balance of the $4,196,145 NOL allocated to Ambac Assurance was $2,817,719. As of September 30, 2017 Ambac's NOL was $1,378,426. |
Commitments and Contingencies |
9 Months Ended | ||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2017 | |||||||||||||||||||||||||||||||||||||
Commitments and Contingencies Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||
Commitments and Contingencies | 11. COMMITMENTS AND CONTINGENCIES The following commitments and contingencies provide an update of those discussed in Note 18: Commitments and Contingencies 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 2016, and should be read in conjunction with the complete descriptions provided in the aforementioned Form 10-K. The Segregated Account and Wisconsin Rehabilitation Proceeding On July 15, 2016, the Rehabilitator filed a motion to confirm and declare the nature of the Segregated Account Rehabilitation Proceedings in order to avoid misunderstandings that may arise in litigation involving Ambac Assurance concerning certain military housing projects. Certain parties to these military housing litigations filed an opposition to the Rehabilitator’s motion on September 30, 2016. On October 11, 2016 the Rehabilitation Court held a hearing on the motion and on October 24, 2016, the Rehabilitation Court entered an order granting the Rehabilitator’s motion. On November 7, 2016, the interested parties that had opposed the Rehabilitator’s motion filed a notice of appeal from the October 24 order, and that appeal is now fully briefed before the Wisconsin Court of Appeals. On November 21, 2016, the Rehabilitator filed a motion to quash a subpoena served on the Wisconsin Commissioner of Insurance by certain parties to the military housing litigations. The Rehabilitation Court granted the Rehabilitator’s motion to quash on November 23, 2016. The interested parties that had served the subpoena filed an opposition to the Rehabilitator’s motion to quash on November 23, 2016, and filed on November 28, 2016 a motion to reconsider the November 23 order, which the Rehabilitator opposed on December 6, 2016. The Rehabilitation Court held a hearing on January 6, 2017 and entered an order on January 20, 2017 denying the motion to reconsider and clarifying procedures for discovery relating to the Segregated Account Rehabilitation Proceedings. In connection with the Rehabilitation Exit Transactions, the Rehabilitator filed on September 25, 2017 a Motion to Further Amend The Plan of Rehabilitation Confirmed on January 24, 2011 To Facilitate An Exit from Rehabilitation. On September 26, 2017, the Rehabilitation Court entered a scheduling order in connection with this motion providing that objections to the motion shall be filed by November 24, 2017, the Rehabilitator’s response to any objections shall be filed by December 11, 2017, the Rehabilitator’s Pretrial Report shall be filed by December 11, 2017, the Pretrial Conference shall be held on December 14, 2017, and the evidentiary Confirmation Hearing shall be held on January 4 and 5, 2018. Litigation Against Ambac Ori Wilbush, individually and on behalf of all others similarly situated v. Ambac Financial Group, Inc., Diana N. Adams, David Trick, Jeffrey S. Stein, Nader Tavakoli and Cathleen Matanle (United States District Court, Southern District of New York, Civil Action No. 16-cv-05076-RMB, filed on June 28, 2016). Defendants filed a motion to dismiss the amended complaint on February 27, 2017, which plaintiff opposed. On September 5, 2017, the Court granted defendants’ motion dismissing the amended complaint. County of Alameda et al. v. Ambac Assurance Corporation et al. (Superior Court of the State of California, County of San Francisco, second amended complaint filed on or about August 23, 2011); Contra Costa County et al. v. Ambac Assurance Corporation et al. (Superior Court of the State of California, County of San Francisco, third amended complaint filed on or about October 21, 2011); The Olympic Club v. Ambac Assurance Corporation et al. (Superior Court of the State of California, County of San Francisco, fourth amended complaint filed on or about October 21, 2011). Ambac Assurance and plaintiffs have executed an agreement to settle these litigations and the cases against Ambac Assurance were dismissed on August 1, 2017. Ambac Assurance is defending several lawsuits in which borrowers have brought declaratory judgment actions claiming, among other things, that Ambac Assurance’s claims for specific performance related to the construction and development of housing at various military bases to replace or cash-fund a debt-service-reserve surety bond, as required under the applicable loan documents (see Litigation Filed By Ambac), are time-barred or are barred by the doctrine of laches, that Ambac lacks standing on the basis that there has been an “Ambac Default,” and that Ambac is not entitled to specific performance pursuant to the terms of the loan documents. Ambac Assurance is a defendant in various lawsuits, including the following:
Monterey Bay Military Housing, LLC, et al. v. Ambac Assurance Corporation, et al. (United States District Court, Northern District of California, San Jose Division, Case No. 17-cv-04992-BLF, filed August 28, 2017). Plaintiffs-the corporate developers of various military housing projects-filed a complaint asserting claims for (i) violation of 18 U.S.C §§ 1962(c) and 1962(d) (civil Racketeer Influenced and Corrupt Organizations Act (“RICO”) and conspiracy to commit civil RICO), (ii) breach of fiduciary duty, (iii) aiding and abetting breach of fiduciary duty, (iv) fraudulent misrepresentation, (v) fraudulent concealment and (vi) conspiracy to commit fraud. Ambac Assurance and a former employee of Ambac Assurance are included as named defendants. The claims relate to bonds insured by Ambac Assurance that were issued to finance the renovation and construction of housing at certain military bases. Plaintiffs allege that defendants secretly conspired to overcharge plaintiffs for the financing of the projects and directed the excess profits to themselves. Plaintiffs allege defendants generated these excess profits by supposedly charging inflated interest rates, manipulating “shadow ratings,” charging unnecessary fees, rigging the Guaranteed Investment Contract (“GIC”) bidding process, and hiding evidence of their alleged wrongdoing. Plaintiffs seek, among other things, compensatory damages, disgorgement of profits and fees, punitive damages, trebled damages and attorneys’ fees. On September 21, 2017, Ambac Assurance filed a motion to transfer venue to the United States District Court for the Southern District of New York, which motion plaintiffs opposed on October 6, 2017. The motion is fully briefed and is presently set for hearing on November 30, 2017. Plaintiffs filed an amended complaint on October 27, 2017. Defendants’ response to the complaint is currently due on or before November 13, 2017. Ambac believes the lawsuit is without merit and intends to file a motion to dismiss the complaint. Ambac Assurance’s estimates of projected losses for RMBS transactions consider, among other things, the RMBS transactions’ payment waterfall structure, including the application of interest and principal payments and recoveries, and depend in part on our interpretations of contracts and other bases of our legal rights. From time to time, bond trustees and other transaction participants have employed different contractual interpretations. It is not possible to predict whether additional disputes will arise, nor the outcomes of any potential litigation. It is possible that there could be unfavorable outcomes in this or other disputes or proceedings and that our interpretations may prove to be incorrect, which could lead to changes to our estimate of loss reserves. It is not reasonably possible to predict whether additional suits will be filed or whether additional inquiries or requests for information will be made, and it is also not possible to predict the outcome of litigation, inquiries or requests for information. It is possible that there could be unfavorable outcomes in these or other proceedings. Legal accruals for litigation against Ambac which are probable and reasonably estimable, and management's estimated range of loss for such matters, are not material to the operating results or financial position of the Company. For the litigation matters Ambac is defending that do not meet the “probable and reasonably estimable” accrual threshold and where no loss estimates have been provided above, management is unable to make a meaningful estimate of the amount or range of loss that could result from unfavorable outcomes. Under some circumstances, adverse results in any such proceedings could be material to our business, operations, financial position, profitability or cash flows. The Company believes that it has substantial defenses to the claims above and, to the extent that these actions proceed, the Company intends to defend itself vigorously; however, the Company is not able to predict the outcomes of these actions. Litigation Filed or Joined by Ambac In the ordinary course of their businesses, certain of Ambac’s subsidiaries assert claims in legal proceedings against third parties to recover losses already paid and/or mitigate future losses. The amounts recovered and/or losses avoided which may result from these proceedings is uncertain, although recoveries and/or losses avoided in any one or more of these proceedings during any quarter or fiscal year could be material to Ambac’s results of operations in that quarter or fiscal year. Ambac UK v. J.P. Morgan Investment Management (Supreme Court of the State of New York, County of New York, filed May 4, 2009, No. 650259/2009). Trial commenced in March 2017. On March 25, 2017 the parties reached a confidential settlement in principle and on April 11, 2017 executed a settlement agreement memorializing the terms of the agreement. Erste Europäische Pfandbriefund Kommunalkreditbank AG In Luxemburg and Ambac Assurance Corporation v. City of San Bernardino, California (United States Bankruptcy Court, Central District of California, Riverside Division, Docket No. 15-1185, filed on January 7, 2015). Plaintiffs commenced this adversary proceeding, which relates to the Debtor’s obligations under the Public Employees Retirement Law, California Government Code Section 20000 et seq. (the “Retirement Law”), in connection with the City of San Bernardino’s bankruptcy proceeding. In the complaint, plaintiffs seek a declaratory judgment that the Debtor is obligated to make equivalent payments to both the holders of certain pension obligation bonds (the “Bonds”), a portion of which are insured by Ambac, and the California Public Employees Retirement Systems (“CalPERS”) to fund pension and other retirement benefits. It is the plaintiffs’ position that they are entitled to declaratory judgment because (i) when the City issue the Bonds, the City argued and a California court found, that the obligations under the Bonds were of the same legal character as the City’s obligations to CalPERS and (ii) the amounts owed to the bondholders and to CalPERS are merely separate portions of a single obligation owed by the Debtor under the Retirement Law. Plaintiffs therefore seek equivalent payment as to CalPERS, whether such payment takes for the form of current payments during the bankruptcy proceeding and thereafter, payments otherwise made in connection with the Retirement Law or any agreements entered into in accordance therewith, or distributions under a plan of adjustment. On March 13, 2015, the City filed a motion to dismiss the complaint, which plaintiffs opposed. On May 11, 2015, the court heard oral argument and granted the City’s motion to dismiss. On June 8, 2015, plaintiffs filed a notice of appeal of the court’s order granting the City’s motion to dismiss with the Bankruptcy Appellate Panel for the Ninth Circuit and filed their appellate brief on January 5, 2016. The parties have reached a settlement and pursuant to the settlement agreement dated March 28, 2016, the plaintiffs have agreed to dismiss the appeal with prejudice upon confirmation of the City’s plan of adjustment by the bankruptcy judge and the plan of adjustment becoming effective. The plan of adjustment was confirmed on February 7, 2017 and became effective on June 15, 2017. Accordingly, the parties filed a stipulation agreeing to dismiss the appeal with prejudice with the Bankruptcy Appellate Panel on June 25, 2017. The bankruptcy appellate panel dismissed the appeal on July 13, 2017. CFPB v. Nat’l Collegiate Master Student Loan Trust (United States District Court, District of Delaware, Case No. 1:17-cv-01323, filed September 18, 2017). The Consumer Financial Protection Bureau (“CFPB”) filed a complaint against fifteen National Collegiate Student Loan Trusts, regarding alleged improprieties and deficiencies in servicing practices. Simultaneous with the filing of its complaint, CFPB also filed a motion for entry of a proposed consent judgment that would grant monetary damages and injunctive relief against the Trusts. Ambac Assurance guaranteed certain securities issued by three of the Trusts and indirectly insures obligations of six other Trusts. Ambac Assurance filed a motion to intervene in the action on September 20, 2017. On November 1, 2017, the CFPB and the entities purporting to act on behalf of the Trusts filed briefs in response to Ambac Assurance's motion to intervene stating, among other things, that they do not oppose Ambac Assurance's motion. Nat’l Collegiate Master Student Loan Trust v. Pa. Higher Education Assistance Agency (PHEAA) (Delaware Court of Chancery, C.A. No. 12111-VCS, filed March 21, 2016). Plaintiffs purporting to act on behalf of fifteen National Collegiate Student Loan Trusts filed a lawsuit against PHEAA, a servicer of loans in the Trusts, alleging improprieties and deficiencies in servicing practices and seeking an order compelling PHEAA to submit to an emergency audit. Both PHEAA and the Owner Trustee of the Trusts, Wilmington Trust Company ("WTC"), have submitted papers contesting the validity of certain transfers to Plaintiffs of beneficial ownership interests in the Trusts. In addition, WTC, citing irreconcilable differences with Plaintiffs, has resigned from its role as Owner Trustee and moved for appointment of a successor Owner Trustee. On October 9, 2017, the court directed the parties to meet and confer to develop a process for selecting an interim Owner Trustee. Ambac guaranteed certain securities issued by three of the Trusts and indirectly insures certain securities in six other Trusts. Ambac filed a motion to intervene in the action on October 23, 2017, for the limited purpose of being heard regarding the appointment of a successor Owner Trustee and regarding WTC’s contractual commitment and obligation to remain in that role until such appointment is made. On October 30, 2017, the court denied without prejudice a stipulation filed by Plaintiffs and WTC purporting to address the Owner Trustee issue, and instructed that all interested parties be given notice and an opportunity to participate in discussions to formulate a process for selecting a successor Owner Trustee. Assured Guaranty Corp., Assured Guaranty Municipal Corp., and Ambac Assurance Corporation v. Alejandro Garcia Padilla, et al. (United States District Court, District of Puerto Rico No. 3:16-cv-01037, filed January 7, 2016). Ambac Assurance, along with co-plaintiffs Assured Guaranty Corp. and Assured Guaranty Municipal Corp., filed a complaint for declaratory and injunctive relief to protect its rights against the illegal clawback of certain revenue by the Commonwealth of Puerto Rico. Defendants (including the Government Development Bank (GDB) President but solely in her capacity as a member of the Working Group For The Fiscal and Economic Restoration of Puerto Rico) filed a motion to dismiss for lack of subject matter jurisdiction on January 29, 2016. The GDB President, in her official capacity, moved to dismiss for failure to state a claim upon which relief can be granted on January 29, 2016. Plaintiffs filed their oppositions to the motions on February 16, 2016 and defendants filed replies on February 23, 2016. This case was administratively consolidated with a similar case before the same judge, Financial Guaranty Insurance Company v. Alejandro Garcia Padilla, et al. (United States District Court, District of Puerto Rico No. 3:16- cv-01095). On October 4, 2016, the court denied the Defendants’ and GDB President’s motions to dismiss with respect to all claims asserted by Ambac Assurance and Assured. On October 14, 2016, Defendants filed a Notice of Automatic Stay, asserting that Plaintiffs’ claims have been rendered moot and further asserting that the case is automatically stayed under section 405 of the Puerto Rico Oversight, Management and Economic Stability Act (PROMESA). On October 28, 2016, Plaintiffs informed the court that neither party was currently challenging the stay, and expressly reserved their right to seek to lift the stay at any time. Plaintiffs also objected to Defendants’ assertion that the case should be dismissed as moot. PROMESA’s litigation stay expired on May 2, 2017. On May 3, 2017, a petition under Title III of PROMESA was filed on behalf of the Commonwealth of Puerto Rico. On May 16, 2017, Defendants filed a statement requesting that the court take notice of the stay resulting from the Commonwealth’s Title III filing. On May 17, 2017, the court issued an order staying this case until further order of the court. Ambac Assurance Corporation v. Puerto Rico Highways and Transportation Authority (United States District Court, District of Puerto Rico, No. 16-cv-1893, filed May 10, 2016). Ambac Assurance filed a complaint against the Puerto Rico Highways and Transportation Authority (PRHTA) on May 10, 2016, alleging breach of fiduciary duty and breach of contract in connection with PRHTA’s extension of an existing toll road concession agreement. The complaint alleges that it was inappropriate for PRHTA to enter into the extension agreement in its current state of financial distress because PRHTA has no control over, and is unlikely to receive, the proceeds of the transaction. The complaint also seeks specific performance of PRHTA’s contractual duty to provide information requested by Ambac Assurance under documents related to PRHTA bonds insured by Ambac Assurance. Ambac Assurance filed related motions seeking the appointment of a provisional receiver for PRHTA and expedited discovery. In addition to those remedies, Ambac Assurance seeks an order of the court that would, among other things, compel PRHTA to allow Ambac Assurance to inspect PRHTA’s financial records on an ongoing basis and permanently enjoin PRHTA from committing further breaches of its fiduciary and contractual duties. On July 1, 2016, PRHTA filed an Emergency Notice of Stay, asserting that the case was automatically stayed under section 405 of PROMESA. Ambac Assurance filed a response on July 11, 2016, disagreeing that the PROMESA stay applies but electing not to contest the stay at such time and reserving the right to challenge it or to seek to lift the stay in the future. Ambac Assurance also asserted that PRHTA still is obligated to make available to Ambac Assurance certain information, notwithstanding the stay on litigation and provided a proposed order for the court to issue. PRHTA filed a reply on July 18, 2016, contesting Ambac Assurance’s characterization, and provided an alternative order for the court to issue. Ambac Assurance’s response was filed July 25, 2016. PRHTA also filed an Urgent Motion to Exempt PRHTA from Outstanding Filings in the case during the pendency of the stay, which was granted. On August 23, 2016 the court issued an order staying the case. PROMESA’s litigation stay expired on May 2, 2017. The Commonwealth and Oversight Board have stated to Ambac Assurance that they believe this action is stayed due to the Commonwealth’s Title III filing. Subsequent to that statement, on May 21, 2017, a petition under Title III of PROMESA was filed on behalf of PRHTA. On May 24, 2017, the court issued an order staying this case until further order of the court. Lex Claims, LLC et al. v. Alejandro Garcia Padilla et al. (United States District Court, District of Puerto Rico, No. 16-2374, filed July 20, 2016). On October 7, 2016, certain General Obligation bondholder Plaintiffs in an action to which Ambac Assurance was not then a party filed a motion for leave to amend their complaint and for partial relief from the PROMESA stay. Plaintiffs’ proposed second amended complaint added the Puerto Rico Sales Tax Financing Corporation (COFINA), COFINA’s executive director, and the trustee for the COFINA bonds as Defendants, and asserted numerous claims that challenge the legal validity of the COFINA structure and sought injunctive relief requiring the sales and use tax proceeds securing COFINA’s bonds to be transferred to the Puerto Rico Treasury. Plaintiffs contended that many of the claims challenging COFINA are not subject to PROMESA’s litigation stay provisions. On October 24, 2016, Defendants filed an opposition to the motion for leave to amend, arguing that the entire action is subject to the PROMESA stay. On October 26, 2016, Ambac Assurance filed a motion for leave to intervene and in support of the PROMESA stay. Ambac Assurance seeks to intervene principally to argue that the claims challenging COFINA are stayed by PROMESA, but also reserves the right to move to dismiss or otherwise defend against those claims should the court determine they are not stayed. On November 4, 2016, the Court granted Plaintiffs’ motion for leave to amend. Plaintiffs filed their second amended complaint that same day. On November 7, 2016, government Defendants sought to stay the case. On February 17, 2017, the court granted the motions to intervene of Ambac Assurance and certain other parties. The court also denied Defendants’ motion to stay, rejecting the arguments in support of the stay filed by Defendants and the intervenors, including Ambac Assurance. On March 20, 2017, Ambac Assurance filed in the district court an answer to the second amended complaint and a motion to dismiss Plaintiffs’ claim against COFINA, to strike certain portions of the second amended complaint, or, in the alternative, to certify the question of COFINA’s constitutionality to the Supreme Court of Puerto Rico. Certain other intervenors also filed answers and various motions in the district court. On April 4, 2017, the U.S. Court of Appeals for the First Circuit reversed the district court’s decision concerning the application of the PROMESA stay, which had the effect of reinstating the stay. PROMESA’s litigation stay expired on May 2, 2017. On May 3, 2017, a petition under Title III of PROMESA was filed on behalf of the Commonwealth of Puerto Rico. On May 16, 2017, Defendants filed a statement requesting that the court take notice of the stay resulting from the Commonwealth’s Title III filing. On May 17, 2017, the court issued an order staying this case until further order of the court. Ambac Assurance Corporation v. Puerto Rico, et al. (United States District Court, District of Puerto Rico, No. 17-1567, filed May 2, 2017). On May 2, 2017, Ambac Assurance filed a complaint seeking a declaration that the Commonwealth’s Fiscal and Economic Growth Plan (the FEGP) and a recently enacted statute called the “Fiscal Plan Compliance Law” are unconstitutional and unlawful because they violate the Contracts, Takings, and Due Process Clauses of the U.S. Constitution, are preempted by PROMESA, and are unlawful transfers of property from COFINA to the Commonwealth in violation of PROMESA. The complaint further seeks an injunction against the filing of any Title III petitions, an injunction against the enactment or enforcement of any future legislation, rules, budgets, or restructuring plans premised on the FEGP, and a declaration that the Commonwealth is liable for any funds unlawfully transferred to it from COFINA. The complaint also seeks a declaration that the FEGP and Fiscal Plan Compliance Law violate covenants made by the Commonwealth and COFINA in the COFINA Resolution, which constitute Events of Default under the COFINA Resolution. On May 3, 2017, a petition under Title III of PROMESA was filed on behalf of the Commonwealth of Puerto Rico, and on May 5, 2017, a petition under Title III of PROMESA was filed on behalf of COFINA. On May 15, 2017, the Oversight Board filed a statement requesting that the court take notice of the stays resulting from these Title III filings. On May 17, 2017, the court issued an order staying this case until further order of the court. Ambac Assurance Corporation v. Puerto Rico, et al. (United States District Court, District of Puerto Rico, No. 17-1568, filed May 2, 2017). On May 2, 2017, Ambac Assurance filed a complaint alleging that various moratorium laws and executive orders enacted by the Commonwealth to claw back funds from the PRIFA, PRHTA, and PRCCDA bonds violate the Contracts, Takings, and Due Process Clauses of the U.S. Constitution, are preempted by PROMESA, and unlawfully transfer PRHTA, PRCCDA, and PRIFA property to the Commonwealth. The complaint further seeks a declaration that the Commonwealth is liable for any funds unlawfully transferred to it from COFINA, an injunction against enforcement of the moratorium laws and executive orders, an injunction against the filing of any Title III petitions, and an injunction against the enactment or enforcement of any future legislation, rules, budgets, or restructuring plans premised on the FEGP. On May 3, 2017, a petition under Title III of PROMESA was filed on behalf of the Commonwealth of Puerto Rico. On May 15, 2017, the Oversight Board filed a statement requesting that the court take notice of the stay resulting from the Commonwealth’s Title III filing. On May 17, 2017, the court issued an order staying this case until further order of the court. Ambac Assurance Corporation v. U.S. Department of Treasury et al. (United States District Court, District of Columbia, No. 17-809, filed May 2, 2017). On May 2, 2017, Ambac Assurance filed a complaint against the U.S. Department of Treasury and Steven Mnuchin, in his official capacity as Secretary of the Treasury, alleging that Puerto Rico’s ongoing diversion of rum taxes from PRIFA violates the Contracts, Takings, and Due Process Clauses of the U.S. Constitution, and seeking an equitable lien on all rum taxes possessed by the U.S. Treasury, and an injunction preventing their transfer to the Commonwealth, in order to prevent further dissipation of those funds by the Commonwealth. On May 24, 2017, the Oversight Board filed a statement requesting that the court take notice of the stay resulting from the Commonwealth’s Title III filing. On May 25, 2017, the court issued an order staying this case pending the final disposition of the Title III proceedings. Ambac Assurance Corporation v. Bank of New York Mellon (United States District Court, Southern District of New York. No. 1:17-cv-03804, filed May 2, 2017). On May 2, 2017, Ambac Assurance filed a complaint in New York State Supreme Court, New York County, against the trustee for the COFINA bonds, Bank of New York Mellon (BNY), alleging breach of fiduciary, contractual, and other duties for failing to adequately and appropriately protect the holders of certain Ambac Assurance-insured senior COFINA bonds. The complaint seeks money damages; a declaration that BONY breached its fiduciary, contractual, and other duties; a declaration compelling BNY to recognize an event of default under the COFINA Resolution and accelerate the COFINA debt; an injunction to prevent BNY from making payments to holders of subordinate COFINA bonds; and forced replacement of BNY as trustee. On May 19, 2017, BNY filed a notice of removal of this action from New York state court to the United States District Court for the Southern District of New York. On May 30, 2017, the United States District Court for the District of Puerto Rico entered an order in an adversary proceeding brought by BNY (No. 1:17-ap-00133) staying this litigation pending further order of the court. Bank of New York Mellon v. COFINA, et al. (United States District Court, District of Puerto Rico, No. 1:17-ap-00133, filed May 16, 2017). On May 16, 2017, BNY filed an adversary complaint in COFINA’s Title III case for an order to show cause why the court should not: (i) grant an interpleader of funds that BNY is holding for future interest payments to holders of COFINA bonds; (ii) stay pending and future litigation against BNY related to its role as trustee for COFINA bonds, including the action by Ambac Assurance against BNY; and (iii) discharge BNY from any liability in association with the interpleaded funds. BNY filed this interpleader action against COFINA and certain creditors of COFINA, including Ambac Assurance, that have made competing claims of entitlement to funds held by BNY in order to determine the parties’ respective entitlements to the funds. On May 30, 2017, the court granted BNY’s motion to interplead, and on June 6, 2017, the court set a schedule for discovery and briefing. Discovery and briefing are ongoing. Summary judgment briefing is scheduled to conclude on December 1, 2017. An ad hoc group of general obligation bondholders and the Official Committee of Unsecured Creditors for the Commonwealth of Puerto Rico (the "Creditors' Committee") each moved to intervene (respectively) on May 23 and July 31, 2017; these motions to intervene were denied (respectively) on July 6 and August 1, 2017. On August 29, 2017, the Creditors’ Committee moved to intervene again, this time in its capacity as Commonwealth Agent. Multiple parties objected to the motion, including Ambac Assurance. Oral argument was heard in front of Magistrate Judge Dein on September 15, 2017. On September 27, 2017, Judge Dein issued an opinion and order denying the motion to intervene but holding that the Creditors’ Committee may renew its request to intervene as a statutory committee, rather than as Commonwealth Agent. Fact stipulations among the parties were entered and so-ordered on September 26 and October 12, 2017, obviating the need for certain depositions. Peaje Investments LLC v. Puerto Rico Highways and Transportation Authority, et al. (United States District Court, District of Puerto Rico, No. 1:17-ap-00151, filed May 31, 2017). On June 15, 2017, Ambac Assurance moved to intervene in an adversary proceeding brought by Peaje Investments (Peaje), a holder of 1968 Bonds issued by PRHTA, against PRHTA. On May 31, 2017, Peaje filed a complaint seeking relief with respect to its ownership of the 1968 Bonds, including a declaration that the toll road revenues pledged to the 1968 Bonds are “special revenues” under Section 922 of the Bankruptcy Code, an injunction preventing the diversion of toll revenues to the Commonwealth and ordering the application of the toll revenues to the 1968 Bonds, and various declarations and injunctions related thereto. Peaje also filed a motion for a temporary restraining order and preliminary injunction on the same day, seeking to enjoin PRHTA from diverting the toll revenues to the Commonwealth. A hearing on the motion for a temporary restraining order was held on June 5, 2017, at which time Peaje withdrew the motion for a temporary restraining order. In its motion to intervene, Ambac Assurance argued that issues in this case will have a significant impact on Ambac’s own interests with respect to PRHTA bonds. On July 21, 2017, the court denied Ambac Assurance's motion to intervene. On July 21, 2017, the Creditors’ Committee moved to intervene, which motion both Peaje and Defendants opposed on July 28, 2017; on August 10, the court denied the motion. On July 31, 2017, Defendants moved to strike certain arguments Peaje raised in its reply in support of its motion for a preliminary injunction, arguing that Peaje improperly raised these arguments for the first time in its reply. On August 3, 2017, the court granted Defendants’ motion to strike. On August 3, 2017, the court approved a stipulation entered into by the parties that BNYM, as fiscal agent for PRHTA bondholders, shall continue to hold the funds in the reserve accounts established under PRHTA’s governing bond documents until further order of the court. On August 8, 2017, the court held a preliminary injunction hearing. On September 8, 2017, the court denied Peaje’s motion for a preliminary injunction, finding that Peaje had not demonstrated either (i) a likelihood of success on the merits of its underlying claim that the 1968 bonds are secured by a statutory lien, or (ii) that it would be irreparably harmed in the absence of a preliminary injunction. On October 10, 2017, Peaje filed an amended complaint; Defendants must answer the complaint by November 9, and briefing on a motion to dismiss is scheduled to conclude by January 8, 2018. Ambac Assurance Corporation v. Puerto Rico, et al. (United States District Court, District of Puerto Rico, No. 1:17-ap-00159, filed June 8, 2017). On June 8, 2017, Ambac Assurance filed an adversary complaint in the Commonwealth’s Title III case against the Commonwealth, PRHTA, the Oversight Board, AAFAF, and other Commonwealth government officers. The complaint seeks declarations that (i) various moratorium laws and executive orders enacted by the Commonwealth to claw back funds from the PRIFA, PRHTA, and PRCCDA bonds and (ii) the FEGP and Fiscal Plan Complaint Act violate the Contracts, Takings, and Due Process Clauses of the U.S. Constitution, are preempted by PROMESA, and unlawfully transfer PRHTA, PRCCDA, and PRIFA property to the Commonwealth. The complaint further seeks a declaration that revenues pledged to the PRHTA bonds are “special revenues” under Sections 922 and 928 of the Bankruptcy Code, and an injunction compelling defendants to remit the pledged special revenues to PRHTA for payment of the PRHTA bonds. On July 7, 2017, Ambac Assurance filed an amended complaint that added an additional claim for relief: a declaration that the funds held in the PRHTA reserve accounts are property of the PRHTA bondholders. A pre-trial conference was held in this and other related matters on June 28, 2017. Briefing on Defendants’ motion to dismiss concluded on October 31, 2017 and oral argument is scheduled to be heard on November 21, 2017. On August 3, 2017, the court entered an order, to which all parties stipulated, providing that BNYM, as fiscal agent for PRHTA bondholders, shall continue to hold the funds in the reserve accounts established under PRHTA’s governing bond documents until further order of the court. On September 1, 2017, the Creditors’ Committee moved to intervene, arguing that it has an unconditional right to do so under 11 U.S.C. 1109(b). Ambac Assurance opposed the motion to intervene on September 12, 2017, and Magistrate Judge Dein ordered supplemental briefing on the matter in light of the decision of the U.S. Court of Appeals for the First Circuit in Assured Guaranty Corp. v. The Financial Oversight and Management Board for Puerto Rico, 17-1831. Ambac Assurance filed its supplemental brief on October 9, 2017, arguing that the Creditors’ Committee’s participation should limited, and that the Creditors’ Committee should not be allowed to assert any claims on behalf of the Commonwealth’s unsecured creditors in this adversary proceeding. On October 27, 2017, the court ordered that the Creditors’ Committee is entitled to “limited intervention,” which permits the Creditors’ Committee to receive discovery but not propound discovery requests, to file briefs restricted to issues raised by the original parties, to participate at oral argument only with prior permission of the court, and with no right to settle, oppose settlement, or appeal settlement in this case. Official Committee of Unsecured Creditors v. Whyte (United States District Court, District of Puerto Rico, No. 1:17-ap-00257, filed September 8, 2017). On August 10, 2017, the court approved a stipulation between the Oversight Board, the Commonwealth, COFINA, and certain creditor parties, including Ambac Assurance, to resolve the Commonwealth-COFINA dispute regarding entitlement to sales and use taxes. The stipulation contemplates separate agents for each of COFINA and the Commonwealth, which agents will litigate the dispute, while preserving the ability of interested parties, including Ambac Assurance, to participate in the litigation. The court order names Ms. Bettina Whyte as the agent for COFINA, and names the Creditors’ Committee as the agent for the Commonwealth. On September 8, 2017, pursuant to a stipulation and scheduling order entered by the court, the Creditors’ Committee, as Commonwealth Agent, filed an adversary proceeding against Bettina Whyte, as COFINA Agent. The 13-count complaint for declaratory relief alleges that COFINA’s enabling legislation did not, and could not, transfer present ownership of the future Sales and Use Tax revenues to COFINA. It alleges that this purported transfer is governed by Article 9 of the Uniform Commercial Code, and that it is not enforceable, never perfected, and avoidable. Lastly, it alleges that the COFINA structure is unconstitutional because the enabling legislation was designed to evade the constitutional debt limit, the constitutional priority of payment granted to Puerto Rico’s public debtholders, and the balanced budget provision. The Creditors’ Committee filed a revised complaint on October 25, 2017, making technical corrections to the original complaint; the COFINA Agent filed an answer to this amended complaint on October 30, 2017. Ambac filed a notice of intervention, together with an answer and counterclaims, on November 6, 2017. Ambac Assurance has filed various lawsuits seeking specific performance of obligations of borrowers on loans related to the construction and development of housing at various military bases to replace or cash-fund a debt-service-reserve surety bond provided by Ambac Assurance, as required under the applicable loan documents. Ambac Assurance has filed various lawsuits, including the following:
In connection with Ambac Assurance’s efforts to seek redress for breaches of R&Ws and fraud related to the information provided by both the underwriters and the sponsors of various transactions and for failure to comply with the obligation by the sponsors to repurchase ineligible loans, Ambac Assurance has filed various lawsuits, including the following:
|
Basis of Presentation and Significant Accounting Policies (Policies) |
9 Months Ended | ||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2017 | |||||||||||||||||
Accounting Policies [Abstract] | |||||||||||||||||
Basis of Presentation and Significant Accounting Policies [Text Block] | Basis of Presentation The accompanying unaudited consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles ("GAAP") for interim financial reporting and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and disclosures required by GAAP for annual periods. These financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Annual Report on Form 10-K for the year ended December 31, 2016. The accompanying consolidated financial statements have not been audited by an independent registered public accounting firm in accordance with the standards of the Public Company Accounting Oversight Board (U.S.), but in the opinion of management such financial statements include all adjustments necessary for the fair presentation of the Company’s consolidated financial position and results of operations. All intercompany balances and transactions have been eliminated. The results of operations for the three and nine months ended September 30, 2017 may not be indicative of the results that may be expected for the year ending December 31, 2017. The December 31, 2016 consolidated balance sheet was derived from audited financial statements. The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. As additional information becomes available or actual amounts become determinable, the recorded estimates are revised and reflected in operating results. |
||||||||||||||||
Foreign Currency Transactions and Translations Policy [Policy Text Block] | Foreign Currency: Financial statement accounts expressed in foreign currencies are translated into U.S. dollars in accordance with the Foreign Currency Matters Topic of the ASC. The functional currencies of Ambac's subsidiaries are the local currencies of the country where the respective subsidiaries are based, which are also the primary operating environments in which the subsidiaries operate. Foreign currency translation: Functional currency assets and liabilities of Ambac’s foreign subsidiaries are translated into U.S. dollars using exchange rates in effect at the balance sheet dates and the related translation adjustments, net of deferred taxes, are included as a component of Accumulated Other Comprehensive Income in Stockholders' Equity. Consolidated Statements of Total Comprehensive Income (Loss) accounts expressed in functional currencies are translated using average exchange rates. Foreign currency transactions: The impact of non-functional currency transactions and the remeasurement of non-functional currency assets and liabilities into the respective subsidiaries' functional currency (collectively "foreign currency transactions gains/(losses)") are $19,142 and $(26,741) for the nine months ended September 30, 2017 and 2016. Foreign currency transactions gains/(losses) are primarily the result of remeasuring Ambac UK's assets and liabilities denominated in currencies other than its functional currency, primarily the U.S. dollar and the Euro. The significant components of foreign currency transaction gains/(losses), including the respective classifications in the Consolidated Statement of Total Comprehensive Income, are as follows:
|
||||||||||||||||
Reclassifications | Reclassifications: Reclassifications may have been made to prior years' amounts to conform to the current year's presentation. |
||||||||||||||||
New Accounting Pronouncements, Policy [Policy Text Block] | Recently Adopted Accounting Standards: Effective January 1, 2017, Ambac adopted the following accounting standards: Consolidation of Variable Interest Entities - Decision Makers In October 2016, the FASB issued ASU 2016-17, Consolidation (Topic 810) - Interests Held through Related Parties That Are under Common Control. The new guidance changes how a reporting entity that is a single decision maker for a VIE will consider its indirect interests in that VIE when determining whether the reporting entity is the primary beneficiary and should consolidate the VIE. Under previous GAAP, a single decision maker in a VIE is required to consider an indirect interest held by a related party under common control in its entirety. Under the new ASU, the single decision maker will consider the indirect interest on a proportionate basis. Adoption of this ASU did not have an impact on Ambac's financial statements. Improvements to Employee Share-Based Payment Accounting In March 2016, the FASB issued ASU 2016-09, Compensation-Stock Compensation (Topic 718) - Improvements to Employee Share-Based Payment Accounting. The objective of this ASU is to improve and simplify the accounting for employee share-based payment accounting. The amendments are as follows: (i) recognizing excess tax benefits and tax deficiencies as income tax expense, (ii) recognizing excess tax benefits regardless of whether it reduces taxes payable in the current period, (iii) classifying excess tax benefits related to share-based payments along with other income tax cash flows as an operating activity on the statement of cash flows, (iv) for purposes of accruing compensation costs, allowing companies to make an accounting policy election to either: a) estimate forfeitures or b) account for forfeitures as they occur, which Ambac elected to do upon adoption, (v) to qualify for equity classification treatment, permitting tax withholding by employees up to the maximum statutory tax rate and (vi) classifying cash paid by an employer to a taxing authority when directly withholding shares as a financing activity on the statement of cash flows. Adoption of this ASU did not have a material impact on Ambac's financial statements. Equity Method of Accounting In March 2016, the FASB issued ASU 2016-07, Investments-Equity Method and Joint Ventures (Topic 323) - Simplifying the Transition to the Equity Method of Accounting. This ASU eliminates the requirement that when an investment qualifies for use of the equity method as a result of an increase in the level of ownership interest or degree of influence, an investor must adjust the investment, results of operations, and retained earnings retroactively as if the equity method had been in effect during all previous periods that the investment had been owned. The ASU will now require that at the date an available-for-sale equity security becomes qualified for the equity method of accounting, the reporting entity will recognize through earnings the unrealized holding gain or loss in accumulated other comprehensive income. Adoption of this ASU did not have an impact on Ambac's financial statements. Contingent Put and Call Options in Debt Instruments In March 2016, the FASB issued ASU 2016-06, Derivatives and Hedging (Topic 815) - Contingent Put and Call Options in Debt Instruments. Previous accounting rules required that embedded derivatives be separated from the host contract in a financial instrument and accounted for separately as derivatives if certain criteria are met. One of these criteria is that the economic characteristics and risks of the embedded derivatives are not "clearly and closely related" to the host contract. The objective of the ASU is to resolve diversity in practice in assessing embedded contingent put and call options. The ASU clarifies what steps are required when assessing whether the economic characteristics and risk of put and call options are clearly and closely related to their debt host contracts. Adoption of this ASU did not have an impact on Ambac's financial statements. |
||||||||||||||||
Description of New Accounting Pronouncements Not yet Adopted [Text Block] | Future Application of Accounting Standards: Equity-linked instruments with down round features In July 2017, the FASB issued ASU 2017-11, Earnings Per Share (Topic 260) and Derivatives and Hedging (Topic 815) - Accounting for Certain Financial Instruments with Down Round Features. Equity-linked instruments, such as warrants and convertible instruments may contain down round features that result in the strike price being reduced on the basis of the pricing of future equity offerings. Under the ASU, a down round feature will no longer require a freestanding equity-linked instrument (or embedded conversion option) to be classified as a liability that is remeasured at fair value through the income statement (i.e. marked-to-market). However, other features of the equity-linked instrument (or embedded conversion option) must still be evaluated to determine whether liability or equity classification is appropriate. Equity classified instruments are not marked-to-market. For earnings per share ("EPS") reporting, the ASU requires companies to recognize the effect of the down round feature only when it is triggered by treating it as a dividend and as a reduction of income available to common shareholders in basic EPS. The amendments in this ASU are effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. Early adoption is permitted, including adoption in any interim period. We have not determined whether Ambac will early adopt this ASU. The adoption of this ASU is not expected to have a material impact on Ambac's financial statements. Stock Compensation--Scope of Modification Accounting In May 2017, the FASB issued ASU 2017-09, Compensation-Stock Compensation (Topic 718) - Scope of Modification Accounting. The ASU provides guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting. Entities will apply the modification accounting guidance if the value, vesting conditions or classification of the award changes. The current disclosure requirements in Topic 718 apply regardless of whether an entity is required to apply modification accounting under the amendments in this ASU. The amendments in this ASU are effective for all entities for annual periods, and interim periods within those annual periods, beginning after December 15, 2017. Early adoption is permitted, including adoption in any interim period for which financial statements have not yet been issued. Ambac will adopt this ASU on January 1, 2018. The adoption of this ASU is not expected to have a consequential impact on Ambac's financial statements. Premium Amortization on Callable Debt Securities In March 2017, the FASB issued ASU 2017-08, Receivables-Nonrefundable Fees and Other Costs (Subtopic 310-20) - Premium Amortization on Purchased Callable Debt Securities. The ASU shortens the amortization period for the premium on callable debt securities to the earliest call date. Under current GAAP, a reporting entity generally amortizes the premium as yield adjustment over the contractual life (i.e. maturity) of the debt security and if that debt security is called, the entity would record a loss equal to the unamortized premium. The ASU does not change the accounting for callable debt securities held at a discount, which will continue to be amortized to maturity. ASU 2017-08 is effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years, with early adoption permitted. The ASU must be applied on a modified retrospective basis through a cumulative-effect adjustment directly to retained earnings as of the beginning of the period of adoption. We have not determined whether Ambac will early adopt this ASU and are evaluating the impact on Ambac's financial statements. Net Periodic Pension and Postretirement Costs In March 2017, the FASB issued ASU 2017-07, Compensation-Retirement Benefits (Topic 715) - Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost. The objective of the ASU is to increase transparency in the reporting of net pension cost and net postretirement cost (collectively "net benefit cost"). The ASU requires that the service cost component of net benefit cost be reported on the same line item as other compensation costs arising from services rendered by employees. It further requires that the other components of net benefit costs (i.e. interest costs, amortization of prior service cost, etc.) be presented separately from the service cost component and outside the subtotal of income from operations, if one is presented. ASU 2017-09 is effective for fiscal years beginning after December 15, 2017 and interim periods within those fiscal years, with early adoption permitted. Ambac will adopt this ASU on January 1, 2018. The adoption of this ASU is not expected to have a consequential impact on Ambac's financial statements. Revenue recognition In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606) that amends the accounting guidance for recognizing revenue for contracts with customers to transfer goods and contracts for the transfer of non-financial assets unless those contracts are within the scope of other accounting standards. ASU 2015-14 deferred the effective date of ASU 2014-09 to annual periods beginning after December 15, 2017, including interim periods within that reporting period. Ambac will adopt this ASU on January 1, 2018. While we have made significant progress evaluating the ASU, we note that this ASU does not apply to insurance contracts and most financial instruments and therefore is not expected to have a consequential impact on Ambac's financial statements. |
Special Purpose Entities, Including Variable Interest Entities (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Variable Interest Entity, Consolidated, Carrying Amount, Assets and Liabilities, Net [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Components of VIE Gain (Loss) [Table Text Block] | Below is a schedule detailing the change in fair value of the various financial instruments within the consolidated FG VIEs, along with gains (losses) from consolidating and deconsolidating FG VIEs that together comprise Income (loss) on variable interest entities for the affected periods:
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Fair Value of Fixed Income Securities, by Asset-Type, Held by Consolidated Variable Interest Entities | The table below provides the fair value of fixed income securities, by asset-type, held by consolidated VIEs as of September 30, 2017 and December 31, 2016:
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Supplemental Information about Loans Held as Assets and Long-Term Debt Associated with Consolidated Variable Interest Entities | The following table provides supplemental information about the loans held as assets and long-term debt associated with the VIEs for which the fair value option has been elected as of September 30, 2017 and December 31, 2016:
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Carrying Amount of Assets, Liabilities and Maximum Exposure to Loss of Ambac's Variable Interests in Non-Consolidated Variable Interest Entities | The following table displays the carrying amount of the assets, liabilities and maximum exposure to loss of Ambac’s variable interests in non-consolidated VIEs resulting from financial guarantee and derivative contracts by major underlying asset classes, as of September 30, 2017 and December 31, 2016:
|
Comprehensive Income (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Equity [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Changes in Balances of Each Component of Accumulated Other Comprehensive Income | The following tables detail the changes in the balances of each component of accumulated other comprehensive income for the affected periods:
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Amounts Reclassed Out of Each Component of Accumulated Other Comprehensive Income | The following table details the significant amounts reclassified from each component of accumulated other comprehensive income, shown in the above rollforward tables, for the affected periods:
|
Net Income Per Share (Tables) |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2017 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings Per Share [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Reconciliation of Common Shares Used for Basic and Diluted Earnings Per Share | The following table provides a reconciliation of the common shares used for basic net income per share to the diluted shares used for diluted net income per share:
|
Financial Guarantee Insurance Contracts (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Insurance [Line Items] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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 September 30, 2017 and December 31, 2016:
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Gross Premium Receivable Roll-Forward (Direct and Assumed Contracts) | Below is the gross premium receivable roll-forward for the affected periods:
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Effect of Reinsurance on Premiums Written and Earned | The effect of reinsurance on premiums written and earned for the respective periods was as follows:
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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:
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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 September 30, 2017:
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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:
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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 September 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 September 30, 2017 and December 31, 2016 was 2.5% and 2.7%, respectively.
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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 September 30, 2017 and December 31, 2016, are as follows:
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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:
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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:
|
Fair Value Measurements (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Carrying Amount and Fair Value of Ambac's Financial Assets and Liabilities | The following table sets forth the carrying amount and fair value of Ambac’s financial assets and liabilities as of September 30, 2017 and December 31, 2016, including the level within the fair value hierarchy at which fair value measurements are categorized. As required by the Fair Value Measurement Topic of the ASC, financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Information about Valuation Inputs for Variable Interest Entity Assets and Liabilities Classified as Level 3 | Information about the above described model inputs used to determine the fair value of credit derivatives, including the CVA as a percentage of the gross mark-to-market liability before considering Ambac credit risk (“CVA percentage”), as of September 30, 2017 and December 31, 2016 is summarized below:
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Changes in Level 3 Fair Value Category | The following tables present the changes in the Level 3 fair value category for the periods presented in 2017 and 2016. Ambac classifies financial instruments in Level 3 of the fair value hierarchy when there is reliance on at least one significant unobservable input to the valuation model. In addition to these unobservable inputs, the valuation models for Level 3 financial instruments typically also rely on a number of inputs that are readily observable either directly or indirectly. Thus, the gains and losses presented below include changes in the fair value related to both observable and unobservable inputs.
The tables below provide roll-forward information by class of investments and derivatives measured using significant unobservable inputs.
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Gains and Losses (Realized and Unrealized) Relating to Level 3 Assets and Liabilities Included in Earnings | Gains and losses (realized and unrealized) relating to Level 3 assets and liabilities included in earnings for the affected periods are reported as follows:
|
Investments (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Investments, Debt and Equity Securities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Equity Method Investments [Table Text Block] | There are no unfunded commitments applicable to any of these investments for the periods disclosed.
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Amortized Cost and Estimated Fair Value of Available-for-Sale Investments, Excluding VIE Investments | The amortized cost and estimated fair value of available-for-sale investments, excluding VIE investments, at September 30, 2017 and December 31, 2016 were as follows:
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Amortized Cost and Estimated Fair Value of Available-for-Sale Investments, Excluding VIE Investments Held by Successor Ambac, by Contractual Maturity | The amortized cost and estimated fair value of available-for-sale investments, excluding VIE investments, at September 30, 2017, by contractual maturity, were as follows:
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Gross Unrealized Losses and Fair Values of Ambac's Available-for-Sale Investments | The following table shows gross unrealized losses and fair values of Ambac’s available-for-sale investments, aggregated by investment category and length of time that the individual securities have been in a continuous unrealized loss position, at September 30, 2017 and December 31, 2016:
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Amounts Included in Net Realized (Losses) Gains and Other-Than-Temporary Impairments | The following table details amounts included in net realized gains (losses) and other-than-temporary impairments included in earnings for the affected periods:
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Roll-Forward of Ambac's Cumulative Credit Losses on Debt Securities for Which Portion of Other-than-Temporary Impairment was Recognized in Other Comprehensive Income | The following table presents a roll-forward of Ambac’s cumulative credit losses on debt securities held as of September 30, 2017 and 2016 for which a portion of an other-than-temporary impairment was recognized in other comprehensive income:
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Sources of Collateral Received and Various Investment Agreement in which Collateral Pledged | The following table presents (i) the sources of collateral either received from various counterparties where Ambac is permitted to sell or re-pledge the collateral or collateral held directly in the investment portfolio and (ii) how that collateral was pledged to investment agreement and derivative counterparties at September 30, 2017 and December 31, 2016:
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Fair Value, Including Financial Guarantee, and Weighted-Average Underlying Rating, Excluding Financial Guarantee, of Insured Securities | The following table represents the fair value, including the value of the financial guarantee, and weighted-average underlying rating, excluding the financial guarantee, of the insured securities at September 30, 2017 and December 31, 2016, respectively:
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Net Investment Income | Net investment income was comprised of the following for the affected periods:
Net investment income from Other investments primarily represents changes in fair value on securities classified as trading or under the fair value option plus income from Ambac's equity interest in an unconsolidated trust created in connection with its sale of Segregated Account junior surplus notes. The portion of net unrealized gains (losses) related to trading securities still held at the end of each period is as follows:
|
Derivative Instruments (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Gross Fair Values of Individual Derivative Instruments | The following tables summarize the gross fair values of individual derivative instruments and the impact of legal rights of offset as reported in the Consolidated Balance Sheets as of September 30, 2017 and December 31, 2016:
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Location and Amount of Gains and Losses of Derivative Contracts | There were no amounts held representing an obligation to return cash collateral as of September 30, 2017 and December 31, 2016. The following tables summarize the location and amount of gains and losses of derivative contracts in the Consolidated Statements of Total Comprehensive Income (Loss) for the three and nine months ended September 30, 2017 and 2016:
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Gross Principal Notional Outstanding for CDS Contracts | The following table summarizes the gross principal notional outstanding for CDS contracts, by Ambac rating as of September 30, 2017 and December 31, 2016:
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summarize Information by Major Category of CDS Contracts | The table below summarizes other information related to credit derivatives outstanding as of September 30, 2017 and December 31, 2016:
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Notional Amounts of AFS's Trading Derivative Products | As of September 30, 2017 and December 31, 2016 the notional amounts of AFS’s derivatives are as follows:
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Variable Interest Entity, Not Primary Beneficiary, Aggregated Disclosure [Member] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Notional Amounts of AFS's Trading Derivative Products | The notional for VIE derivatives outstanding as of September 30, 2017 and December 31, 2016 are as follows:
|
Income Taxes (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income Tax Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Major Jurisdictions | The following are the major jurisdictions in which Ambac and its subsidiaries operate and the earliest tax years subject to examination:
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Significant Portions of Deferred Tax Liabilities and Deferred Tax Assets | The tax effects of temporary differences that give rise to significant portions of the deferred tax liabilities and deferred tax assets at September 30, 2017 and December 31, 2016 are presented below:
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Income before Income Tax, Domestic and Foreign [Table Text Block] | U.S. and foreign components of pre-tax income were as follows:
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Components of Income Tax Expense (Benefit) | The components of the provision for income taxes were as follows:
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Net Operating Loss And Tax Credit Carryovers | Pursuant to the Amended TSA (as defined in Note 1. Background and Business Description to the Consolidated Financial Statements included in Part II, Item 8 in the Company's Annual Report on Form 10-K for the year ended December 31, 2016), to the extent Ambac Assurance generates taxable income after September 30, 2011, which is offset with "Allocated NOLs" of $3,650,000, it is obligated to make payments (“Tolling Payments”), subject to certain credits, to Ambac in accordance with the following NOL usage table, where the “Applicable Percentage” is applied to the aggregate amount of federal income tax liability that would have been paid if the Allocated NOLs were not available. Pursuant to the Closing Agreement between Ambac and the Internal Revenue Service ("IRS"), the IRS will receive 12.5% of Tier C and 17.5% of Tier D payments, if made. NOL Usage Table
|
Background and Business Description Tier 2 Notes (Details) $ in Thousands |
9 Months Ended |
---|---|
Sep. 30, 2017
USD ($)
| |
Tier 2 Notes | $ 240,000 |
Tier 2 Note Security in RMBS Litigation Settlement Proceeds | $ 1,600,000 |
Tier 2 Termination Date from Date of Execution of Rehab Exit Support Agreement | 365 days |
Background and Business Description Stipulation and Order (Details) $ in Thousands |
Sep. 30, 2017
USD ($)
|
---|---|
OCIApprovalLimmitwithNonAffiliatedCounterparties | $ 100,000 |
MatieralAdverseEffectThreshold | 10.00% |
ChangeinLossReserveAssumptionsThresholdDollars | $ 200,000 |
ChangeinLossReserveAssumptionsThresholdPercent | 10.00% |
Basis of Presentation and Significant Accounting Policies FX gain (loss) (Details) - Successor [Member] - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2017 |
Sep. 30, 2016 |
Sep. 30, 2017 |
Sep. 30, 2016 |
|
Foreign Currency Transaction Gain (Loss), before Tax | $ 19,142 | $ (26,741) | ||
Loss and Loss Reserves [Member] | ||||
Foreign Currency Transaction Gain (Loss), before Tax | 26,556 | (56,910) | ||
Gain (Loss) on Investments [Member] | ||||
Foreign Currency Transaction Gain (Loss), before Tax | $ (3,348) | $ 8,398 | (3,780) | 22,030 |
Premiums Receivable [Member] | ||||
Foreign Currency Transaction Gain (Loss), before Tax | (1,960) | 8,264 | ||
Unrealized Gains Or (Losses) On Credit Derivative Contracts [Member] | ||||
Foreign Currency Transaction Gain (Loss), before Tax | $ (1,141) | $ (929) |
Basis of Presentation and Significant Accounting Policies Reportable Segments (Details) |
12 Months Ended |
---|---|
Dec. 31, 2016
Segment
| |
Successor [Member] | |
Number of Reportable Segments | 2 |
Special Purpose Entities, Including Variable Interest Entities - Summary of Fair Value of Fixed Income Securities, by Asset-Type, Held by Consolidated Variable Interest Entities (Detail) - Successor [Member] - USD ($) $ in Thousands |
Sep. 30, 2017 |
Dec. 31, 2016 |
---|---|---|
Investments: | ||
Fixed income securities | $ 5,794,058 | $ 6,049,908 |
Variable Interest Entities [Member] | ||
Investments: | ||
Fixed income securities | 2,785,608 | 2,622,566 |
Corporate Obligations [Member] | ||
Investments: | ||
Fixed income securities | $ 2,785,608 | $ 2,622,566 |
Special Purpose Entities, Including Variable Interest Entities - Supplemental Information about Loans Held as Assets and Long-Term Debt Associated with Consolidated Variable Interest Entities (Detail) - USD ($) $ in Thousands |
Sep. 30, 2017 |
Dec. 31, 2016 |
---|---|---|
Variable Interest Entities [Line Items] | ||
Variable Interest Entity, Consolidated, Carrying Amount, Liabilities | $ 14,321,721 | $ 13,235,425 |
Variable Interest Entities [Member] | Successor [Member] | ||
Variable Interest Entities [Line Items] | ||
Loans, Estimated fair value | 11,557,788 | 10,658,963 |
Long-term debt, Estimated fair value | 12,229,569 | 11,155,936 |
Loans, Unpaid principal balance | 8,133,313 | 7,641,756 |
Long-term debt, Unpaid principal balance | $ 9,373,933 | $ 8,854,530 |
Financial Guarantee Insurance Contracts - Effect of Reinsurance on Premiums Written and Earned (Detail) - Successor [Member] - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2017 |
Sep. 30, 2016 |
Sep. 30, 2017 |
Sep. 30, 2016 |
|
Reinsurance Premiums for Insurance Companies, by Product Segment [Line Items] | ||||
Direct Premiums Written | $ (24,696) | $ (10,543) | $ (12,184) | $ (39,364) |
Assumed Reinsurance Premiums Written | 0 | 0 | 0 | 0 |
Ceded Reinsurance Premiums Written | (385) | (1,526) | (1,962) | (8,425) |
Premiums written, net of reinsurance | 24,311 | 9,017 | 10,222 | 30,939 |
Direct Premiums Earned | 57,282 | 59,096 | 156,582 | 161,058 |
Assumed Reinsurance Premiums Earned | 20 | 21 | 61 | 64 |
Ceded Reinsurance Premiums Earned | 4,313 | 5,899 | 12,889 | 13,702 |
Reinsurance on premiums earned, Net | $ 52,989 | $ 53,218 | $ 143,754 | $ 147,420 |
Financial Guarantee Insurance Contracts - Summary of Information Related to Policies Currently Included in Ambac's Loss Reserves or Subrogation Recoverable (Phantom) (Detail) - Successor [Member] - USD ($) $ in Thousands |
Sep. 30, 2017 |
Dec. 31, 2016 |
Sep. 30, 2016 |
Dec. 31, 2015 |
---|---|---|---|---|
Schedule of Insured Financial Obligations with Credit Deterioration [Line Items] | ||||
Loss Reserves Ceded To Reinsurers | $ 46,023 | $ 30,767 | $ 24,298 | $ 44,059 |
Loss and loss expense reserves | 4,704,285 | 4,380,769 | ||
Subrogation recoverable | (703,930) | (684,731) | ||
Liability for Claims | 4,000,355 | 3,696,038 | 3,503,914 | $ 2,858,813 |
Ceded Loss And Loss Expenses Paid Not Yet Recovered | $ (47) | $ (349) | $ 143 |
Financial Guarantee Insurance Contracts - Summary of Rollforward of RMBS Subrogation, by Estimation Approach (Detail) - Successor [Member] - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | |
---|---|---|---|
Mar. 31, 2016 |
Sep. 30, 2017 |
Sep. 30, 2016 |
|
Summary Of Rollforward Of Subrogation By Estimation Approach [Line Items] | |||
Litigation Settlement, Amount (Deprecated 2017-01-31) | $ 995,000 | ||
Subrogation By Estimation Approach [Roll Forward] | |||
Discounted RMBS subrogation (gross of reinsurance), beginning balance | $ 1,907,035 | ||
Changes recognized | |||
Discounted RMBS subrogation (gross of reinsurance), ending balance | 1,844,116 | ||
Random Samples [Member] | |||
Subrogation By Estimation Approach [Roll Forward] | |||
Discounted RMBS subrogation (gross of reinsurance), beginning balance | $ 2,829,575 | 1,907,035 | $ 2,829,575 |
Changes recognized | |||
Impact of sponsor actions | 0 | (995,000) | |
Other Changes Rmbs Subrogation | (62,919) | 88,681 | |
Discounted RMBS subrogation (gross of reinsurance), ending balance | $ 1,844,116 | $ 1,923,256 |
Financial Guarantee Insurance Contracts - Estimated Future Amortization Expense for Insurance Intangible Asset (Detail) - Successor [Member] - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | |||
---|---|---|---|---|---|
Sep. 30, 2017 |
Sep. 30, 2016 |
Sep. 30, 2017 |
Sep. 30, 2016 |
Dec. 31, 2016 |
|
Amortization Of Intangible Assets [Line Items] | |||||
Amortization of insurance intangible assets | $ 45,690 | $ 44,553 | $ 116,686 | $ 134,456 | |
Intangible Assets, Gross (Excluding Goodwill) | 1,576,788 | 1,576,788 | $ 1,534,419 | ||
Accumulated amortization on insurance intangible asset | 698,816 | 698,816 | 572,339 | ||
2016 | 22,983 | 22,983 | |||
2017 | 78,847 | 78,847 | |||
2018 | 70,336 | 70,336 | |||
2019 | 65,037 | 65,037 | |||
2020 | 59,216 | 59,216 | |||
Thereafter | 581,553 | 581,553 | |||
Insurance intangible asset | $ 877,972 | $ 877,972 | $ 962,080 |
Financial Guarantee Insurance Contracts Earned Premiums by Geographic Location (Details) - Successor [Member] - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2017 |
Sep. 30, 2016 |
Sep. 30, 2017 |
Sep. 30, 2016 |
|
Premiums Earned, Net, Financial Guarantee Insurance Contracts | $ 52,989 | $ 53,218 | $ 143,754 | $ 147,420 |
United States [Member] | Reportable Geographical Components [Member] | ||||
Premiums Earned, Net, Financial Guarantee Insurance Contracts | 31,929 | 45,257 | 108,556 | 126,003 |
United Kingdom [Member] | Reportable Geographical Components [Member] | ||||
Premiums Earned, Net, Financial Guarantee Insurance Contracts | 17,273 | 6,018 | 28,094 | 19,111 |
Other International [Member] | Reportable Geographical Components [Member] | ||||
Premiums Earned, Net, Financial Guarantee Insurance Contracts | $ 3,787 | $ 1,943 | $ 7,104 | $ 2,306 |
Investments - Summary of Amounts Included in Net Realized (Losses) Gains and Other-Than-Temporary Impairments (Detail) - Successor [Member] - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2017 |
Sep. 30, 2016 |
Sep. 30, 2017 |
Sep. 30, 2016 |
|
Investment [Line Items] | ||||
Gross realized gains on securities | $ 14,430 | $ 3,912 | $ 25,374 | $ 10,391 |
Gross realized losses on securities | (4,932) | (561) | 16,160 | 4,673 |
Foreign exchange (losses) gains | 19,142 | (26,741) | ||
Net realized (losses) gains | 6,150 | 11,749 | 5,434 | 27,748 |
Net other-than-temporary impairments | (13,510) | (2,853) | (19,215) | (19,628) |
Gain (Loss) on Investments [Member] | ||||
Investment [Line Items] | ||||
Foreign exchange (losses) gains | $ (3,348) | $ 8,398 | $ (3,780) | $ 22,030 |
Investments - Summary of Roll-Forward of Ambac's Cumulative Credit Losses on Debt Securities for Which Portion of Other-than-Temporary Impairment was Recognized in Other Comprehensive Income (Detail) - Successor [Member] - USD ($) $ in Thousands |
9 Months Ended | |||
---|---|---|---|---|
Sep. 30, 2017 |
Sep. 30, 2016 |
Dec. 31, 2016 |
Dec. 31, 2015 |
|
Other than Temporary Impairment, Credit Losses Recognized in Earnings [Roll Forward] | ||||
Balance at beginning | $ 66,940 | $ 50,105 | $ 52,070 | $ 31,176 |
Additions for credit impairments recognized on: | ||||
Securities not previously impaired | 3,274 | 2,257 | ||
Securities previously impaired | 11,596 | 16,672 | ||
Reductions for credit impairments previously recognized on: | ||||
Balance at end | $ 66,940 | $ 50,105 | $ 52,070 | $ 31,176 |
Investments - Summary of Sources of Collateral Received and Various Investment Agreement in which Collateral Pledged (Detail) - USD ($) $ in Thousands |
Sep. 30, 2017 |
Dec. 31, 2016 |
---|---|---|
Investment [Line Items] | ||
Fair Value Of Securities Deposited With Governmental Authorities | $ 6,019 | $ 5,872 |
Fair Value of Securities Placed in Trust | 351,339 | 360,759 |
Successor [Member] | Cash and Securities Pledged Directly from Investment Portfolio [Member] | ||
Investment [Line Items] | ||
Fair Value of Cash and Underlying Securities | 123,985 | 291,545 |
Fair Value of Cash and Securities Pledged to Investment and Repurchase Agreement Counterparties | 0 | 88,940 |
Fair Value of Cash and Securities Pledged to Derivative Counterparties | $ 123,985 | $ 202,605 |
Investments - Summary of Fair Value, Including Financial Guarantee, and Weighted-Average Underlying Rating, Excluding Financial Guarantee, of Insured Securities (Phantom) (Detail) - USD ($) $ in Thousands |
Sep. 30, 2017 |
Dec. 31, 2016 |
---|---|---|
Ambac UK [Member] | ||
Investment [Line Items] | ||
Corporate and Asset Backed Securities Fair Value Disclosure | $ 171,034 | $ 118,813 |
Investments - Summary of Net Investment Income (Detail) - Successor [Member] - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2017 |
Sep. 30, 2016 |
Sep. 30, 2017 |
Sep. 30, 2016 |
|
Investment [Line Items] | ||||
Net Realized and Unrealized Gain (Loss) on Trading Securities | $ 4,919 | $ 10,197 | ||
Trading Securities, Realized Gain (Loss) | 5,024 | 1,859 | ||
Fixed income securities | 81,054 | 81,831 | $ 236,876 | $ 207,358 |
Short-term investments | 1,986 | 194 | 4,124 | 1,124 |
Loans | 187 | 97 | 361 | 273 |
Investment expense | (2,228) | (2,592) | (6,269) | (6,875) |
Securities available-for-sale and short-term | 80,999 | 79,530 | 235,092 | 201,880 |
Other investments | 6,178 | 11,387 | 18,804 | 20,616 |
Total net investment income | 87,177 | 90,917 | 253,896 | 222,496 |
Gains (losses) on securities held as of reporting date [Member] | ||||
Investment [Line Items] | ||||
Net Realized and Unrealized Gain (Loss) on Trading Securities | 15,130 | 17,145 | ||
Trading Securities, Realized Gain (Loss) | 8,140 | 5,268 | ||
Other investments | $ (105) | $ 8,338 | $ 6,990 | $ 11,877 |
Derivative Instruments - Summary of Gross Principal Notional Outstanding for CDS Contracts (Detail) - Successor [Member] - USD ($) $ in Thousands |
Sep. 30, 2017 |
Dec. 31, 2016 |
---|---|---|
Ambac Rating | ||
Notional outstanding | $ 397,003 | $ 737,380 |
Other Derivatives [Member] | ||
Ambac Rating | ||
Notional outstanding | 397,003 | 737,380 |
Other Derivatives [Member] | AAA Rating [Member] | ||
Ambac Rating | ||
Notional outstanding | 0 | 0 |
Other Derivatives [Member] | AA Rating [Member] | ||
Ambac Rating | ||
Notional outstanding | 175,576 | 315,201 |
Other Derivatives [Member] | A Rating [Member] | ||
Ambac Rating | ||
Notional outstanding | 0 | 227,146 |
Other Derivatives [Member] | BBB Rating [Member] | ||
Ambac Rating | ||
Notional outstanding | 147,712 | 127,250 |
Other Derivatives [Member] | Below Investment Grade Rating [Member] | ||
Ambac Rating | ||
Notional outstanding | $ 73,715 | $ 67,783 |
Derivative Instruments - Summarize Information by Major Category of CDS Contracts (Detail) - Successor [Member] $ in Thousands |
9 Months Ended | 12 Months Ended |
---|---|---|
Sep. 30, 2017
USD ($)
Transactions
|
Dec. 31, 2016
USD ($)
Transactions
|
|
Summary of information by major category of CDS contracts | ||
Number of CDS transactions | Transactions | 4 | 8 |
Derivative, Average Remaining Maturity | 6 years 6 months | 5 years 2 months |
Gross principal notional outstanding | $ 397,003 | $ 737,380 |
Credit Derivatives [Member] | ||
Summary of information by major category of CDS contracts | ||
Net derivative liabilities at fair value | $ 8,961 | $ 15,349 |
Income Taxes - Additional Information (Detail) - USD ($) $ in Thousands |
9 Months Ended | ||
---|---|---|---|
Sep. 30, 2017 |
Sep. 30, 2011 |
Dec. 31, 2016 |
|
Tax Credit Carryforward [Line Items] | |||
Tolling Payment Payable to AFG, Gross | $ 28,691 | ||
NOL allocated amount | $ 4,259,092 | $ 3,650,000 | |
AFG [Member] | |||
Tax Credit Carryforward [Line Items] | |||
NOL allocated amount | 1,378,426 | ||
Percentage Of Notional Federal Tax Liability | 50.00% | ||
U. S. Federal Net Operating Tax [Member] | |||
Tax Credit Carryforward [Line Items] | |||
NOL allocated amount | 4,196,145 | ||
Capital Loss Carryforward [Member] | United States [Member] | |||
Tax Credit Carryforward [Line Items] | |||
NOL allocated amount | $ 62,947 | ||
Minimum [Member] | |||
Tax Credit Carryforward [Line Items] | |||
Operating Loss Carryforwards, Expiration Date | Dec. 31, 2029 | ||
Maximum [Member] | |||
Tax Credit Carryforward [Line Items] | |||
Operating Loss Carryforwards, Expiration Date | Dec. 31, 2038 |
Income Taxes Income Taxes - Provision for Income Taxes Charged To Income From Continuing Operations (Details) - Successor [Member] - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2017 |
Sep. 30, 2016 |
Sep. 30, 2017 |
Sep. 30, 2016 |
|
Provision for Income Taxes [Line Items] | ||||
Current Federal Tax Expense (Benefit) | $ (617) | $ 2,635 | $ 0 | $ 2,711 |
Income (Loss) from Continuing Operations before Income Taxes, Domestic | (211,769) | 45,238 | (428,264) | 171,137 |
Current Income Tax Expense (Benefit) | 5,439 | 15,282 | 31,902 | 21,991 |
Deferred Income Tax Expense (Benefit) | 0 | 0 | 0 | (114) |
Income Tax Expense (Benefit) | 5,439 | 15,282 | 31,902 | 21,877 |
Income (Loss) from Continuing Operations before Income Taxes, Foreign | 26,303 | 71,482 | 150,930 | 19,948 |
Pre-tax income (loss) | (185,466) | 116,720 | (277,334) | 191,085 |
Current State and Local Tax Expense (Benefit) | 0 | 191 | 0 | 428 |
Current Foreign Tax Expense (Benefit) | $ 6,056 | $ 12,456 | $ 31,902 | $ 18,852 |
Income Taxes Schedule of Income Before Income Taxes (Details) - Successor [Member] - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2017 |
Sep. 30, 2016 |
Sep. 30, 2017 |
Sep. 30, 2016 |
|
Schedule of Income Before Income Tax, Domestic and Foreign [Line Items] | ||||
Income (Loss) from Continuing Operations before Income Taxes, Domestic | $ (211,769) | $ 45,238 | $ (428,264) | $ 171,137 |
Income (Loss) from Continuing Operations before Income Taxes, Foreign | 26,303 | 71,482 | 150,930 | 19,948 |
Pre-tax income (loss) | $ (185,466) | $ 116,720 | $ (277,334) | $ 191,085 |
Commitments and Contingencies - Additional Information (Detail) $ in Thousands |
Sep. 30, 2017
USD ($)
|
---|---|
Loss Contingencies [Line Items] | |
Loss Contingency, Damages Sought, Value | $ 1,400,000 |
')X1W6V;Y+>4IUIZ06'IE$CU2(<
MA>P:O?\"G$\AJ3URCG")4ZCT$%4T@RQ#(QIDIR*3WGQ:!!,71/.S,,[2Z/$'
ML$:84X4=%*-/Q(8=.:?I,1@8">0T/X K_6WXH72Y]) U
MC-;\T"KSR1U9A_O S+GT<2^,O<$>TZ]T_27C.]4[*I61B] AR6J#%G+IX('3KXA',E$-#NAK*- MFRH^TI'-!
M-CF0392E'5M"W9C58%2/?##6H8RU(*1\/F*L!":'+@F2!/T<9-I@MBM- E>RJ'[6QV5J1:\
ME) E"E( J'523R^8&\/E(&
M3-@T()'R0$LQM90#$Y[.0C&W5-Q150P+1![@*":. IR4L/T@D?3X
MP=!1ER@>^ZJ*D:+I'57%P%"7&"[M9)7;Q[A2]I1>(YTDG"2>10@#R @H;6R%
M-(JFKKA*"+'[_*B3$UW"$YYZ & 8:(98M:L$1-[FQ3#0#+%J-XY1-$U=)DH0
MF=JYN\*8"*6(9X8P3#]#]/M,8/K9'?0S3#]#8-N]#HBD7;_U.Z)Y,+A%,)=^
M18@=#!)1.YC;HGDPN(\PMX\HXIMWN(^P._H(PWV$@977+;W;('S;1]P;N-L;
M%/&T=XY9YO3CN7*,*?\(IMRE+Z$D3NP9,.JF'2I6K $?!NB_%.JCZHX!L%_U9A
MD6TV@"(#:D>?L;_()E^C L=U@D59 !1VHF5EUBC/=:,0SBP ,PN@VGBP0@@J
MA%!M_$5M!E P=XJC!2A?@S .(MA+!'J)("^+VF;1*HSK!G&X, .@PC#"L)L-
MZ&8#U?:=TXE!A1C*)UKD$W_JWJU1T+T#4,"]6Z.@>X=FCU5#^%%DUHS$3KWO17CBW9%C
M;\K@C*V(=YB\0^^UX/QCQJY!:,:<)@Q?878+@J'Z$H)OA3CQ?^A\FYYN9IA&
M>KJFI\FVP'Y38!\%]O\M<0.3_ETD6_54@VWB-#E2FJ&+D[SR+@-[S^.;_(%/
MT_XD;",[1R[&X\O&_M?&>,!4DAL
VB+\'7(\CID=1'2WQ/B
M=YW NZYM$>Y E]*Y#EE>AZPN0OKI8-TAT+YJ>Y-$H-44-MGKF.@RID\7:QP!
M^=(#_2X-[.IOV-835B8"RN1.FG22U?:<785$%R%]KE@""?6E]OZ$W!Z12^8'
MTB[ R]'(""%%)6&,#4TV%F!"QP7V_H3 >0&%DE<[3#N!L<@((84F.M])]A/
M,DRN#-/@01268;I!A@G+,"$9=M8L:(?L^;L*B2Y"^L=F6&,ETMB!)D5B79,W
M]%,2:XU$6F,?(D"0W>=X9P?"J
CG,V&6U)*+I181]JBE.+=M
M"N=680].[#Q3$$A9L?;O$[FA4JVXO7O:J/V\[B(HPW;
MTD.MGOGI"W,)D3ARV7]C1U9KN%&B8ZQY+>UOM#Y(Q1O'HJ4T]*U_5JU]GAS_
MV2WL@)P#&ASZXEQU2)U#>JL#=@[XW0';:O6IV-H\4D47,\%/D>C;VU'S+X+W
M6%=_;8RVV/:=+H_4UN,BQV26' V1PRQ[#!IA2G )6?D0." 2+6!0@4(JELAS
MSW$V">%CT"7BT4>45U2DP5JDUC^]4)&'"7"0 %L"?$%03(K98W*+:7N1)0$
MA..08!P2$%J&";(@0>8+)=.69IY06((%GAE&N'_&[-TH'%G4(%*DI/I4$*_
M,),6]H-S ^.E^N 4/T!T>[=A> 1A&B@ GN:5>GF!:48^Y--'
VQ=2X)G-,K,V-J\?7A'(T&7]9TF
M^<>VY+J\S6K6X>GF=XNOOMS=__[PX71Z?/'/VYM/#Z]??GA\_/S3U=7#KQ].
MM]?[G[?/JT_)_?[NYOKQ^7/]Z_OWKX?'^Z?O?TH=N;*Q^&^>KV^N.GEV]>
M/?W=S_=O7MW]\7CS\=/IY_L7#W_
@_L3O]C(V"/QL .5H8L?6%/-J!_R,23@U.YJ<%8-'DHL@P98V
MALY/7)JD9H5H&(A&$SNWIJA7._#XTA2B2HQJSE&V"&+[ED+[^[>F.%4 59=;
MA3J(*%QXTZ1Z)$C6"'Q!?;ME_HQZP&(TH=6-*L\<"2*JH80OM8L<).@3O-
M8#&PI((LAL@^6BR84P/H%.!B0DDGMVEV(F(1/%UDHW:86!/HJ3G8$'FG%(BH
M(2.:$&.'IRM]QECPI.:TOYDH8\\^0F/&$+S%&9M@50U@U6P"RUQY,]P*'KS=S@"@[4 PR1%1("K!N1JKIH
M"KZ-[X+8URFRWH@?4/.I
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MOY0K4A8W^7@^8A$R-X2]5JY*-F0;")=I)F^278!K2Y^+ZB)7A .O8$"HA%D?@PV$&O1I
M]TZ 9+V-R# YV!7)(WM2 ^(3N0$H(#< !>4&D3FY!;U_]PM1'=NSE]K;R4NI
MFE7OC=[.=UYQ[L /?/A/(WF4WC: C&?#1>F\?S]
MP_UTV_JM:(]ETWFOIK>G^/&L?3"FUY8]^VPK