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)
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(Zip code)
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212-658-7470
|
(Registrant's telephone number, including area code)
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Large accelerated filer
|
x
|
Accelerated filer
|
¨
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Non-accelerated filer
|
¨
|
Smaller reporting company
|
¨
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PAGE
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PART I.
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FINANCIAL INFORMATION
|
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Item 1.
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Unaudited Consolidated Financial Statements of Ambac Financial Group, Inc. and Subsidiaries
|
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Item 2.
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Item 3.
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Item 4.
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PART II.
|
OTHER INFORMATION
|
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Item 1.
|
|
||
Item 1A.
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|
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Item 2.
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|
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Item 3.
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Item 4.
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Item 5.
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Item 6.
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|
September 30,
|
|
December 31,
|
||||
(Dollars in thousands, except share data) (September 30, 2016 (Unaudited))
|
2016
|
|
2015
|
||||
Assets:
|
|
|
|
||||
Investments:
|
|
|
|
||||
Fixed income securities, available for sale, at fair value (amortized cost: $5,806,949 and $4,992,756)
|
$
|
5,990,397
|
|
|
$
|
5,043,776
|
|
Fixed income securities pledged as collateral, available for sale, at fair value (amortized cost: $64,777 and $64,612)
|
64,972
|
|
|
64,555
|
|
||
Short-term investments, available for sale, at fair value (amortized cost: $130,732 and $225,789)
|
130,732
|
|
|
225,789
|
|
||
Other investments (includes $391,075 and $285,261 at fair value)
|
419,885
|
|
|
310,600
|
|
||
Total investments
|
6,605,986
|
|
|
5,644,720
|
|
||
Cash and cash equivalents
|
21,218
|
|
|
35,744
|
|
||
Receivable for securities
|
98,406
|
|
|
44,030
|
|
||
Investment income due and accrued
|
25,456
|
|
|
25,264
|
|
||
Premium receivables
|
706,228
|
|
|
831,575
|
|
||
Reinsurance recoverable on paid and unpaid losses
|
24,441
|
|
|
43,999
|
|
||
Deferred ceded premium
|
74,630
|
|
|
96,758
|
|
||
Subrogation recoverable
|
703,621
|
|
|
1,229,293
|
|
||
Loans
|
4,513
|
|
|
5,206
|
|
||
Derivative assets
|
103,373
|
|
|
84,995
|
|
||
Insurance intangible asset
|
1,022,865
|
|
|
1,212,112
|
|
||
Other assets
|
239,663
|
|
|
185,877
|
|
||
Variable interest entity assets:
|
|
|
|
||||
Fixed income securities, at fair value
|
2,828,685
|
|
|
2,588,556
|
|
||
Restricted cash
|
5,477
|
|
|
5,822
|
|
||
Loans, at fair value
|
11,476,766
|
|
|
11,690,324
|
|
||
Derivative assets
|
68,676
|
|
|
—
|
|
||
Other assets
|
5,625
|
|
|
3,795
|
|
||
Total assets
|
$
|
24,015,629
|
|
|
$
|
23,728,070
|
|
Liabilities and Stockholders’ Equity:
|
|
|
|
||||
Liabilities:
|
|
|
|
||||
Unearned premiums
|
$
|
1,048,754
|
|
|
$
|
1,280,282
|
|
Loss and loss expense reserves
|
4,207,535
|
|
|
4,088,106
|
|
||
Ceded premiums payable
|
43,511
|
|
|
53,494
|
|
||
Obligations under investment agreements
|
82,358
|
|
|
100,358
|
|
||
Deferred taxes
|
1,736
|
|
|
2,205
|
|
||
Current taxes
|
16,750
|
|
|
5,835
|
|
||
Long-term debt
|
1,109,814
|
|
|
1,124,950
|
|
||
Accrued interest payable
|
400,737
|
|
|
355,536
|
|
||
Derivative liabilities
|
435,410
|
|
|
353,358
|
|
||
Other liabilities
|
52,177
|
|
|
61,134
|
|
||
Payable for securities purchased
|
201,980
|
|
|
84,690
|
|
||
Variable interest entity liabilities:
|
|
|
|
||||
Accrued interest payable
|
3,121
|
|
|
3,230
|
|
||
Long-term debt, at fair value
|
11,930,434
|
|
|
12,327,960
|
|
||
Derivative liabilities
|
2,304,789
|
|
|
1,928,403
|
|
||
Other liabilities
|
149
|
|
|
183
|
|
||
Total liabilities
|
21,839,255
|
|
|
21,769,724
|
|
||
Commitments and contingencies (see Note 11)
|
|
|
|
||||
Stockholders’ equity:
|
|
|
|
||||
Preferred stock, par value $0.01 per share; 20,000,000 shares authorized; issued and outstanding shares—none
|
—
|
|
|
—
|
|
||
Common stock, par value $0.01 per share; 130,000,000 shares authorized; issued and outstanding shares: 45,121,788 and 45,044,222
|
451
|
|
|
450
|
|
||
Additional paid-in capital
|
194,383
|
|
|
190,813
|
|
||
Accumulated other comprehensive income
|
61,917
|
|
|
15,215
|
|
||
Retained earnings
|
1,652,846
|
|
|
1,478,439
|
|
||
Treasury stock, shares at cost: 0 and 8,202
|
—
|
|
|
(118
|
)
|
||
Total Ambac Financial Group, Inc. stockholders’ equity
|
1,909,597
|
|
|
1,684,799
|
|
||
Noncontrolling interest
|
266,777
|
|
|
273,547
|
|
||
Total stockholders’ equity
|
2,176,374
|
|
|
1,958,346
|
|
||
Total liabilities and stockholders’ equity
|
$
|
24,015,629
|
|
|
$
|
23,728,070
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
(Dollars in thousands, except share data)
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
Revenues:
|
|
|
|
|
|
|
|
||||||||
Net premiums earned
|
$
|
53,218
|
|
|
$
|
71,535
|
|
|
$
|
147,420
|
|
|
198,132
|
|
|
Net investment income:
|
|
|
|
|
|
|
|
||||||||
Securities available-for-sale and short-term
|
79,530
|
|
|
65,619
|
|
|
201,880
|
|
|
191,229
|
|
||||
Other investments
|
11,387
|
|
|
(1,424
|
)
|
|
20,616
|
|
|
10,702
|
|
||||
Total net investment income
|
90,917
|
|
|
64,195
|
|
|
222,496
|
|
|
201,931
|
|
||||
Other-than-temporary impairment losses:
|
|
|
|
|
|
|
|
||||||||
Total other-than-temporary impairment losses
|
(15,906
|
)
|
|
(31,743
|
)
|
|
(82,856
|
)
|
|
(43,495
|
)
|
||||
Portion of other-than-temporary impairment recognized in other comprehensive income
|
13,053
|
|
|
22,593
|
|
|
63,228
|
|
|
30,206
|
|
||||
Net other-than-temporary impairment losses recognized in earnings
|
(2,853
|
)
|
|
(9,150
|
)
|
|
(19,628
|
)
|
|
(13,289
|
)
|
||||
Net realized investment gains (losses)
|
11,749
|
|
|
2,106
|
|
|
27,748
|
|
|
50,854
|
|
||||
Change in fair value of credit derivatives:
|
|
|
|
|
|
|
|
||||||||
Realized gains and other settlements
|
226
|
|
|
1,693
|
|
|
711
|
|
|
2,519
|
|
||||
Unrealized gains (losses)
|
1,507
|
|
|
35,259
|
|
|
17,843
|
|
|
42,227
|
|
||||
Net change in fair value of credit derivatives
|
1,733
|
|
|
36,952
|
|
|
18,554
|
|
|
44,746
|
|
||||
Derivative products
|
(14,510
|
)
|
|
(65,083
|
)
|
|
(134,265
|
)
|
|
(51,858
|
)
|
||||
Net realized gains (losses) on extinguishment of debt
|
24
|
|
|
1,420
|
|
|
4,845
|
|
|
81
|
|
||||
Other income (expense)
|
2,693
|
|
|
7,150
|
|
|
17,611
|
|
|
5,206
|
|
||||
Income (loss) on variable interest entities
|
2,057
|
|
|
(21,435
|
)
|
|
(16,119
|
)
|
|
38,130
|
|
||||
Total revenues
|
145,028
|
|
|
87,690
|
|
|
268,662
|
|
|
473,933
|
|
||||
Expenses:
|
|
|
|
|
|
|
|
||||||||
Losses and loss expense (benefit)
|
(69,204
|
)
|
|
(133,213
|
)
|
|
(226,981
|
)
|
|
(431,642
|
)
|
||||
Insurance intangible amortization
|
44,553
|
|
|
39,680
|
|
|
134,456
|
|
|
115,200
|
|
||||
Operating expenses
|
21,466
|
|
|
25,006
|
|
|
77,470
|
|
|
75,402
|
|
||||
Interest expense
|
31,493
|
|
|
29,899
|
|
|
92,632
|
|
|
85,980
|
|
||||
Goodwill impairment
|
—
|
|
|
514,511
|
|
|
—
|
|
|
514,511
|
|
||||
Total expenses (benefit)
|
28,308
|
|
|
475,883
|
|
|
77,577
|
|
|
359,451
|
|
||||
Pre-tax income (loss)
|
116,720
|
|
|
(388,193
|
)
|
|
191,085
|
|
|
114,482
|
|
||||
Provision for income taxes
|
15,282
|
|
|
2,838
|
|
|
21,877
|
|
|
8,464
|
|
||||
Net income (loss)
|
101,438
|
|
|
(391,031
|
)
|
|
169,208
|
|
|
106,018
|
|
||||
Less: net (gain) loss attributable to noncontrolling interest
|
(36
|
)
|
|
(44
|
)
|
|
(328
|
)
|
|
(401
|
)
|
||||
Net income (loss) attributable to common stockholders
|
$
|
101,474
|
|
|
$
|
(390,987
|
)
|
|
$
|
169,536
|
|
|
$
|
106,419
|
|
Other comprehensive income (loss), after tax:
|
|
|
|
|
|
|
|
||||||||
Net income (loss)
|
$
|
101,438
|
|
|
$
|
(391,031
|
)
|
|
$
|
169,208
|
|
|
$
|
106,018
|
|
Unrealized gains (losses) on securities, net of deferred income taxes of $0
|
24,719
|
|
|
8,382
|
|
|
132,680
|
|
|
(122,905
|
)
|
||||
Gains (losses) on foreign currency translation, net of deferred income taxes of $0
|
(13,323
|
)
|
|
(30,909
|
)
|
|
(86,256
|
)
|
|
(24,224
|
)
|
||||
Changes to postretirement benefit, net of tax of $0
|
(254
|
)
|
|
(220
|
)
|
|
278
|
|
|
(467
|
)
|
||||
Total other comprehensive income (loss), net of tax
|
11,142
|
|
|
(22,747
|
)
|
|
46,702
|
|
|
(147,596
|
)
|
||||
Total comprehensive income (loss)
|
112,580
|
|
|
(413,778
|
)
|
|
215,910
|
|
|
(41,578
|
)
|
||||
Less: comprehensive (gain) loss attributable to the noncontrolling interest:
|
|
|
|
|
|
|
|
||||||||
Net (gain) loss
|
(36
|
)
|
|
(44
|
)
|
|
(328
|
)
|
|
(401
|
)
|
||||
Currency translation adjustments
|
—
|
|
|
(272
|
)
|
|
—
|
|
|
(200
|
)
|
||||
Total comprehensive income (loss) attributable to Ambac Financial Group, Inc.
|
$
|
112,616
|
|
|
$
|
(413,462
|
)
|
|
$
|
216,238
|
|
|
$
|
(40,977
|
)
|
Net income (loss) per share attributable to Ambac Financial Group, Inc. common stockholders
|
|
|
|
|
|
|
|
||||||||
Basic
|
$
|
2.24
|
|
|
$
|
(8.66
|
)
|
|
$
|
3.75
|
|
|
$
|
2.36
|
|
Diluted
|
$
|
2.22
|
|
|
$
|
(8.66
|
)
|
|
$
|
3.74
|
|
|
$
|
2.30
|
|
|
|
|
Ambac Financial Group, Inc.
|
|
|
||||||||||||||||||||||||||
(Dollars in thousands)
|
Total
|
|
Retained
Earnings |
|
Accumulated
Other Comprehensive Income |
|
Preferred
Stock |
|
Common
Stock |
|
Additional Paid-in
Capital |
|
Common
Stock Held in Treasury, at Cost |
|
Noncontrolling
Interest |
||||||||||||||||
Balance at January 1, 2016
|
$
|
1,958,346
|
|
|
$
|
1,478,439
|
|
|
$
|
15,215
|
|
|
$
|
—
|
|
|
$
|
450
|
|
|
$
|
190,813
|
|
|
$
|
(118
|
)
|
|
$
|
273,547
|
|
Total comprehensive income (loss)
|
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
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Balance at January 1, 2015
|
1,673,735
|
|
|
989,290
|
|
|
220,283
|
|
|
—
|
|
|
450
|
|
|
189,138
|
|
|
(56
|
)
|
|
274,630
|
|
||||||||
Total comprehensive income (loss)
|
(41,578
|
)
|
|
106,419
|
|
|
(147,396
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(601
|
)
|
||||||||
Stock-based compensation
|
2,150
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,150
|
|
|
—
|
|
|
—
|
|
||||||||
Cost of shares (acquired) issued under equity plan
|
(256
|
)
|
|
(56
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(200
|
)
|
|
—
|
|
||||||||
Cost of warrants acquired
|
(5,017
|
)
|
|
(3,707
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,310
|
)
|
|
—
|
|
|
—
|
|
||||||||
Warrants exercised
|
3
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3
|
|
|
—
|
|
|
—
|
|
||||||||
Balance at September 30, 2015
|
$
|
1,629,037
|
|
|
$
|
1,091,946
|
|
|
$
|
72,887
|
|
|
$
|
—
|
|
|
$
|
450
|
|
|
$
|
189,981
|
|
|
$
|
(256
|
)
|
|
$
|
274,029
|
|
|
|
Nine Months Ended September 30,
|
||||||
(Dollars in thousands)
|
|
2016
|
|
2015
|
||||
Cash flows from operating activities:
|
|
|
|
|
||||
Net income attributable to common stockholders
|
|
$
|
169,536
|
|
|
$
|
106,419
|
|
Noncontrolling interest in subsidiaries’ earnings
|
|
(328
|
)
|
|
(401
|
)
|
||
Net income
|
|
169,208
|
|
|
106,018
|
|
||
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
|
||||
Depreciation and amortization
|
|
920
|
|
|
2,137
|
|
||
Impairment of goodwill
|
|
—
|
|
|
514,511
|
|
||
Amortization of bond premium and discount
|
|
(102,956
|
)
|
|
(99,534
|
)
|
||
Share-based compensation
|
|
4,228
|
|
|
2,150
|
|
||
Deferred income taxes
|
|
(469
|
)
|
|
(122
|
)
|
||
Current income taxes
|
|
11,848
|
|
|
(6,686
|
)
|
||
Unearned premiums, net
|
|
(210,722
|
)
|
|
(229,251
|
)
|
||
Losses and loss expenses, net
|
|
666,196
|
|
|
(424,334
|
)
|
||
Ceded premiums payable
|
|
(9,983
|
)
|
|
(2,785
|
)
|
||
Investment income due and accrued
|
|
(145
|
)
|
|
(91
|
)
|
||
Premium receivables
|
|
126,047
|
|
|
106,521
|
|
||
Accrued interest payable
|
|
45,201
|
|
|
30,860
|
|
||
Amortization of insurance intangible assets
|
|
134,456
|
|
|
115,200
|
|
||
Net mark-to-market (gains) losses
|
|
(17,843
|
)
|
|
(42,227
|
)
|
||
Net realized investment gains
|
|
(27,748
|
)
|
|
(50,854
|
)
|
||
Other-than-temporary impairment charges
|
|
19,628
|
|
|
13,289
|
|
||
Net realized (gains) losses on extinguishment of debt
|
|
(4,845
|
)
|
|
(81
|
)
|
||
Variable interest entity activities
|
|
16,119
|
|
|
(38,130
|
)
|
||
Other, net
|
|
6,392
|
|
|
85,450
|
|
||
Net cash provided by operating activities
|
|
825,532
|
|
|
82,041
|
|
||
Cash flows from investing activities:
|
|
|
|
|
||||
Proceeds from sales of bonds
|
|
457,423
|
|
|
795,855
|
|
||
Proceeds from matured bonds
|
|
940,948
|
|
|
695,879
|
|
||
Purchases of bonds
|
|
(2,085,939
|
)
|
|
(1,696,643
|
)
|
||
Proceeds from sales of other invested assets
|
|
132,437
|
|
|
147,731
|
|
||
Purchases of other invested assets
|
|
(250,727
|
)
|
|
(101,913
|
)
|
||
Change in short-term investments
|
|
94,651
|
|
|
(4,477
|
)
|
||
Loans
|
|
693
|
|
|
215
|
|
||
Change in swap collateral receivable
|
|
(51,986
|
)
|
|
(17,032
|
)
|
||
Other, net
|
|
(10,714
|
)
|
|
(2,287
|
)
|
||
Net cash (used in) investing activities
|
|
(773,214
|
)
|
|
(182,672
|
)
|
||
Cash flows from financing activities:
|
|
|
|
|
||||
Proceeds received from a secured borrowing
|
|
—
|
|
|
144,189
|
|
||
Paydowns of a secured borrowing
|
|
(25,306
|
)
|
|
(7,355
|
)
|
||
Payments for investment agreement draws
|
|
(17,964
|
)
|
|
(63,872
|
)
|
||
Payments for extinguishment of long-term debt
|
|
(19,550
|
)
|
|
(13,752
|
)
|
||
Proceeds from warrant exercises
|
|
2
|
|
|
3
|
|
||
Cost of warrants acquired
|
|
(2,104
|
)
|
|
(5,017
|
)
|
||
Net cash provided by (used in) financing activities
|
|
(64,922
|
)
|
|
54,196
|
|
||
Effect of foreign exchange rate changes on cash and cash equivalents
|
|
(1,922
|
)
|
|
(369
|
)
|
||
Net cash flow
|
|
(14,526
|
)
|
|
(46,804
|
)
|
||
Cash and cash equivalents at beginning of period
|
|
35,744
|
|
|
73,903
|
|
||
Cash and cash equivalents end of period
|
|
$
|
21,218
|
|
|
$
|
27,099
|
|
|
|
|
|
|
||||
Supplemental disclosure of cash flow information:
|
|
|
|
|
||||
Cash paid during the period for:
|
|
|
|
|
||||
Income taxes
|
|
$
|
10,098
|
|
|
$
|
15,176
|
|
Interest on secured borrowing
|
|
3,314
|
|
|
449
|
|
||
Interest on investment agreements
|
|
435
|
|
|
261
|
|
•
|
Active runoff of Ambac Assurance and its subsidiaries through accretive transaction terminations, policy commutations, settlements and restructurings, and maximizing the risk-adjusted return on invested assets;
|
•
|
Loss recovery through litigation and exercise of contractual and legal rights;
|
•
|
Improved cost effectiveness and efficiency of the operating platform;
|
•
|
Rationalization of Ambac Assurance's capital and liability structures, enabling simplification of corporate governance and facilitating the successful rehabilitation of the Segregated Account; and
|
•
|
Selective business transactions offering attractive risk-adjusted returns that, among other things, may permit utilization of Ambac’s tax net operating loss carry-forwards.
|
|
|
Nine Months Ended September 30, 2015
|
||
Beginning balance
|
|
$
|
514,511
|
|
Impairment loss
|
|
(514,511
|
)
|
|
Ending balance
|
|
$
|
—
|
|
•
|
Remeasurement of loss reserves, classified in Loss and loss expenses, in the amount of
$(56,910)
and
$(13,347)
for the
nine months ended September 30, 2016
and
2015
, respectively;
|
•
|
Sales 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
$22,030
and
$3,801
for the
nine months ended September 30, 2016
and
2015
, respectively;
|
•
|
Remeasurement of premium receivables, classified in Other income, in the amount of
$8,264
and
$(3,234)
for the
nine months ended September 30, 2016
and
2015
, respectively;
|
•
|
Remeasurement of credit derivative liabilities, classified in Net change in fair value of credit derivative, in the amount of
$(929)
and
$4,895
for the
nine months ended September 30, 2016
and
2015
, respectively; and
|
•
|
Remeasurement of cash held, classified in Other income, in the amount of
$457
and
$1,140
for the
nine months ended September 30, 2016
and
2015
, respectively.
|
•
|
Debt prepayment or debt extinguishment costs
- Such payments will be classified as a financing cash outflow.
|
•
|
Settlement of zero-coupon debt or other debt with coupon rates that are insignificant in relation to the effective interest rate of the borrowing
- The portion of the cash payment attributable to accreted interest will be classified as an operating cash outflow and the portion attributable to the principal will be classified as a financing cash outflow.
|
•
|
Distributions from equity-method investees
- An entity will elect one of the two following approaches. Under the "cumulative earnings approach": i) distributions received up to the amount of cumulative earnings recognized will be treated as returns
on
investments and classified as cash inflows from operating activities and ii) distributions received in excess of earnings recognized will be treated as returns
of
investments and classified as cash inflows from investing activities. Under the "nature of the distribution" approach, distributions received will be classified based on the nature of the activity that generated the distribution (i.e. classified as a return on investment or return of investment), when such information is available to the investor.
|
•
|
Beneficial interests in securitization transactions -
Any beneficial interests obtained in financial assets transferred to an unconsolidated securitization entity will be disclosed as a non-cash investing activity. Subsequent cash receipts from the beneficial interests in previously transferred trade receivables will be classified as cash inflows from investing activities.
|
•
|
Since their inception, there have been
15
individual transactions with these entities, of which
three
transactions remain outstanding as of
September 30, 2016
. In each case, Ambac sold assets to these entities. The purchase by these entities of financial assets was financed through the issuance of medium-term notes (“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 entities for economic hedging purposes only. Derivative positions were established at the time MTNs were issued to purchase financial assets. Total principal amount of MTN debt outstanding was
$412,750
and
$465,160
at
September 30, 2016 and December 31, 2015
, respectively, the decline was due to changes in foreign exchange rates relative to the British Pound. The assets are composed of utility obligations with a weighted average rating of
BBB+
at
September 30, 2016
and weighted average life of
5.9 years
. As of
September 30, 2016
Ambac Assurance had financial guarantee insurance policies issued for all assets, MTNs and derivative contracts owned and outstanding by the entities.
|
•
|
Insurance premiums paid to Ambac Assurance by these entities 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.
|
|
September 30,
2016 |
|
December 31,
2015 |
||||
Investments:
|
|
|
|
||||
Corporate obligations
|
$
|
2,828,685
|
|
|
$
|
2,588,556
|
|
Total variable interest entity assets: fixed income securities
|
$
|
2,828,685
|
|
|
$
|
2,588,556
|
|
|
Estimated fair value
|
|
Unpaid principal balance
|
||||
September 30, 2016:
|
|
|
|
||||
Loans
|
$
|
11,476,766
|
|
|
$
|
8,058,125
|
|
Long-term debt
|
11,930,434
|
|
|
9,327,859
|
|
||
December 31, 2015:
|
|
|
|
||||
Loans
|
$
|
11,690,324
|
|
|
$
|
9,182,284
|
|
Long-term debt
|
12,327,960
|
|
|
10,803,729
|
|
|
Carrying Value of Assets and Liabilities
|
||||||||||||||
|
Maximum
Exposure To Loss (1) |
|
Insurance
Assets (2) |
|
Insurance
Liabilities (3) |
|
Net Derivative
Assets (Liabilities) (4) |
||||||||
September 30, 2016:
|
|
|
|
|
|
|
|
||||||||
Global structured finance:
|
|
|
|
|
|
|
|
||||||||
Collateralized debt obligations
|
$
|
845,991
|
|
|
$
|
231
|
|
|
$
|
3,400
|
|
|
$
|
(184,838
|
)
|
Mortgage-backed—residential
|
15,412,198
|
|
|
744,303
|
|
|
3,040,292
|
|
|
—
|
|
||||
Other consumer asset-backed
|
2,419,657
|
|
|
27,943
|
|
|
289,372
|
|
|
—
|
|
||||
Other commercial asset-backed
|
1,768,494
|
|
|
71,686
|
|
|
68,884
|
|
|
—
|
|
||||
Other
|
3,073,443
|
|
|
72,461
|
|
|
430,985
|
|
|
15,430
|
|
||||
Total global structured finance
|
23,519,783
|
|
|
916,624
|
|
|
3,832,933
|
|
|
(169,408
|
)
|
||||
Global public finance
|
26,485,274
|
|
|
354,769
|
|
|
380,103
|
|
|
(9,220
|
)
|
||||
Total
|
$
|
50,005,057
|
|
|
$
|
1,271,393
|
|
|
$
|
4,213,036
|
|
|
$
|
(178,628
|
)
|
|
|
|
|
|
|
|
|
||||||||
December 31, 2015:
|
|
|
|
|
|
|
|
||||||||
Global structured finance:
|
|
|
|
|
|
|
|
||||||||
Collateralized debt obligations
|
$
|
980,935
|
|
|
$
|
264
|
|
|
$
|
3,639
|
|
|
$
|
(129,525
|
)
|
Mortgage-backed—residential
|
17,081,002
|
|
|
1,279,650
|
|
|
2,680,739
|
|
|
—
|
|
||||
Other consumer asset-backed
|
3,853,443
|
|
|
47,346
|
|
|
535,090
|
|
|
—
|
|
||||
Other commercial asset-backed
|
2,393,805
|
|
|
104,033
|
|
|
94,191
|
|
|
—
|
|
||||
Other
|
3,286,568
|
|
|
81,017
|
|
|
461,364
|
|
|
15,410
|
|
||||
Total global structured finance
|
27,595,753
|
|
|
1,512,310
|
|
|
3,775,023
|
|
|
(114,115
|
)
|
||||
Global public finance
|
28,586,582
|
|
|
377,412
|
|
|
427,299
|
|
|
(24,860
|
)
|
||||
Total
|
$
|
56,182,335
|
|
|
$
|
1,889,722
|
|
|
$
|
4,202,322
|
|
|
$
|
(138,975
|
)
|
(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, 2016:
|
|
|
|
|
|
|
|
||||||||
Beginning Balance
|
$
|
158,924
|
|
|
$
|
9,876
|
|
|
$
|
(118,025
|
)
|
|
$
|
50,775
|
|
Other comprehensive income before reclassifications
|
33,625
|
|
|
—
|
|
|
(13,323
|
)
|
|
20,302
|
|
||||
Amounts reclassified from accumulated other comprehensive income
|
(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
|
|
|
|
|
|
|
|
|
|
||||||||
Three Months Ended September 30, 2015:
|
|
|
|
|
|
|
|
||||||||
Beginning Balance
|
$
|
79,406
|
|
|
$
|
9,784
|
|
|
$
|
6,172
|
|
|
$
|
95,362
|
|
Other comprehensive income before reclassifications
|
1,342
|
|
|
—
|
|
|
(30,637
|
)
|
|
(29,295
|
)
|
||||
Amounts reclassified from accumulated other comprehensive income
|
7,040
|
|
|
(220
|
)
|
|
—
|
|
|
6,820
|
|
||||
Net current period other comprehensive income (loss)
|
8,382
|
|
|
(220
|
)
|
|
(30,637
|
)
|
|
(22,475
|
)
|
||||
Balance at September 30, 2015
|
$
|
87,788
|
|
|
$
|
9,564
|
|
|
$
|
(24,465
|
)
|
|
$
|
72,887
|
|
|
|
|
|
|
|
|
|
||||||||
Nine Months Ended September 30, 2016:
|
|
|
|
|
|
|
|
||||||||
Beginning Balance
|
$
|
50,963
|
|
|
$
|
9,344
|
|
|
$
|
(45,092
|
)
|
|
$
|
15,215
|
|
Other comprehensive income before reclassifications
|
140,810
|
|
|
—
|
|
|
(86,256
|
)
|
|
54,554
|
|
||||
Amounts reclassified from accumulated other comprehensive income
|
(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
|
|
|
|
|
|
|
|
|
|
||||||||
Nine Months Ended September 30, 2015:
|
|
|
|
|
|
|
|
||||||||
Beginning Balance
|
$
|
210,693
|
|
|
$
|
10,031
|
|
|
$
|
(441
|
)
|
|
$
|
220,283
|
|
Other comprehensive income before reclassifications
|
(85,313
|
)
|
|
—
|
|
|
(24,024
|
)
|
|
(109,337
|
)
|
||||
Amounts reclassified from accumulated other comprehensive income
|
(37,592
|
)
|
|
(467
|
)
|
|
—
|
|
|
(38,059
|
)
|
||||
Net current period other comprehensive income (loss)
|
(122,905
|
)
|
|
(467
|
)
|
|
(24,024
|
)
|
|
(147,396
|
)
|
||||
Balance at September 30, 2015
|
$
|
87,788
|
|
|
$
|
9,564
|
|
|
$
|
(24,465
|
)
|
|
$
|
72,887
|
|
(1)
|
All amounts are net of tax and noncontrolling interest. Amounts in parentheses indicate debits.
|
|
|
Amount Reclassified from Accumulated
Other Comprehensive Income (1) |
|
Affected Line Item in the
|
||||||
Details about Accumulated Other
|
|
Three Months Ended September 30,
|
|
Consolidated Statement of
|
||||||
Comprehensive Income Components
|
|
2016
|
|
2015
|
|
Total Comprehensive Income (Loss)
|
||||
Unrealized Gains (Losses) on Available-for-Sale Securities
|
|
|
|
|
|
|
||||
|
|
$
|
(8,906
|
)
|
|
$
|
7,040
|
|
|
Net realized investment (losses) gains and other-than-temporary impairment losses
|
|
|
—
|
|
|
—
|
|
|
Tax (expense) benefit
|
||
|
|
$
|
(8,906
|
)
|
|
$
|
7,040
|
|
|
Net of tax and noncontrolling interest
|
Amortization of Postretirement Benefit
|
|
|
|
|
|
|
||||
Prior service cost
|
|
$
|
(167
|
)
|
|
$
|
(167
|
)
|
|
Operating expenses
(2)
|
Actuarial (losses)
|
|
(87
|
)
|
|
(53
|
)
|
|
Operating expenses
(2)
|
||
|
|
(254
|
)
|
|
(220
|
)
|
|
Total before tax
|
||
|
|
—
|
|
|
—
|
|
|
Tax (expense) benefit
|
||
|
|
$
|
(254
|
)
|
|
$
|
(220
|
)
|
|
Net of tax and noncontrolling interest
|
Total reclassifications for the period
|
|
$
|
(9,160
|
)
|
|
$
|
6,820
|
|
|
Net of tax and noncontrolling interest
|
|
|
|
|
|
|
|
||||
|
|
Nine Months Ended September 30,
|
|
|
||||||
|
|
2016
|
|
2015
|
|
|
||||
Unrealized Gains (Losses) on Available-for-Sale Securities
|
|
|
|
|
|
|
||||
|
|
$
|
(8,130
|
)
|
|
$
|
(37,592
|
)
|
|
Net realized investment (losses) gains and other-than-temporary impairment losses
|
|
|
—
|
|
|
—
|
|
|
Tax (expense) benefit
|
||
|
|
$
|
(8,130
|
)
|
|
$
|
(37,592
|
)
|
|
Net of tax and noncontrolling interest
|
Amortization of Postretirement Benefit
|
|
|
|
|
|
|
||||
Prior service cost
|
|
$
|
(500
|
)
|
|
$
|
(500
|
)
|
|
Operating expenses
(2)
|
Actuarial gains
|
|
778
|
|
|
33
|
|
|
Operating expenses
(2)
|
||
|
|
278
|
|
|
(467
|
)
|
|
Total before tax
|
||
|
|
—
|
|
|
—
|
|
|
Tax (expense) benefit
|
||
|
|
$
|
278
|
|
|
$
|
(467
|
)
|
|
Net of tax and noncontrolling interest
|
Total reclassifications for the period
|
|
$
|
(7,852
|
)
|
|
$
|
(38,059
|
)
|
|
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,
|
||||||||
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||
Basic weighted average shares outstanding
|
45,229,570
|
|
|
45,174,521
|
|
|
45,206,429
|
|
|
45,173,671
|
|
Effect of potential dilutive shares:
|
|
|
|
|
|
|
|
||||
Warrants
|
293,311
|
|
|
—
|
|
|
—
|
|
|
1,154,313
|
|
Stock options
|
—
|
|
|
—
|
|
|
—
|
|
|
7,083
|
|
Restricted stock units
|
156,023
|
|
|
—
|
|
|
105,794
|
|
|
14,418
|
|
Performance stock units
|
113,179
|
|
|
—
|
|
|
60,481
|
|
|
2,729
|
|
Diluted weighted average shares outstanding
|
45,792,083
|
|
|
45,174,521
|
|
|
45,372,704
|
|
|
46,352,214
|
|
|
|
Nine Months Ended September 30,
|
||||||
|
|
2016
|
|
2015
|
||||
Beginning premium receivable
|
|
$
|
831,575
|
|
|
$
|
1,000,607
|
|
Premium receipts
|
|
(60,609
|
)
|
|
(70,940
|
)
|
||
Adjustments for changes in expected and contractual cash flows
|
|
(57,932
|
)
|
|
(39,613
|
)
|
||
Accretion of premium receivable discount
|
|
14,304
|
|
|
18,795
|
|
||
Changes to uncollectable premiums
|
|
4,264
|
|
|
1,978
|
|
||
Other adjustments (including foreign exchange)
|
|
(25,374
|
)
|
|
(15,381
|
)
|
||
Ending premium receivable
(1)
|
|
$
|
706,228
|
|
|
$
|
895,446
|
|
(1)
|
Gross premium receivable includes premiums to be received in foreign denominated currencies most notab
ly in British Pounds and Euros. At
September 30, 2016
and 2015 premium receivables include British Pounds of
$195,187
(
£150,575
) and
$253,092
(
£167,367
), respectively, and Euros of
$38,284
(
€34,067
) and
$51,640
(
€46,251
), respectively.
|
|
Future premiums
to be collected (1) |
|
Future
premiums to be earned net of reinsurance (1) |
||||
Three months ended:
|
|
|
|
||||
December 31, 2016
|
$
|
17,213
|
|
|
$
|
29,942
|
|
Twelve months ended:
|
|
|
|
||||
December 31, 2017
|
67,650
|
|
|
96,399
|
|
||
December 31, 2018
|
63,131
|
|
|
77,484
|
|
||
December 31, 2019
|
59,548
|
|
|
71,357
|
|
||
December 31, 2020
|
56,542
|
|
|
67,017
|
|
||
Five years ended:
|
|
|
|
||||
December 31, 2025
|
231,529
|
|
|
269,853
|
|
||
December 31, 2030
|
186,809
|
|
|
186,311
|
|
||
December 31, 2035
|
121,623
|
|
|
109,372
|
|
||
December 31, 2040
|
41,618
|
|
|
40,087
|
|
||
December 31, 2045
|
18,852
|
|
|
17,219
|
|
||
December 31, 2050
|
7,151
|
|
|
7,785
|
|
||
December 31, 2055
|
601
|
|
|
1,298
|
|
||
Total
|
$
|
872,267
|
|
|
$
|
974,124
|
|
(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 Principles
in the Notes to Consolidated Financial Statements included in Ambac's Annual Report on Form 10-K/A for the year ended
December 31, 2015
. 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
in the Notes to Consolidated Financial Statements included in Ambac's Annual Report on Form 10-K/A 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 by transaction sponsors, (iii) excess spread within the underlying transaction's cash flow structure, and (iv) other subrogation recoveries. Expected receipts from third parties within the underlying transaction's cash flow structure
relating to
contractual breaches in non-RMBS securitizations may also reduce expected future claims. 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, 2016:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Loss and loss expense reserves
|
$
|
2,392,674
|
|
|
$
|
490,099
|
|
|
$
|
2,772,357
|
|
|
$
|
(1,290,553
|
)
|
|
$
|
(157,042
|
)
|
|
$
|
4,207,535
|
|
Subrogation recoverable
|
616,987
|
|
|
127,810
|
|
|
96,406
|
|
|
(1,544,824
|
)
|
|
—
|
|
|
(703,621
|
)
|
||||||
Totals
|
$
|
3,009,661
|
|
|
$
|
617,909
|
|
|
$
|
2,868,763
|
|
|
$
|
(2,835,377
|
)
|
|
$
|
(157,042
|
)
|
|
$
|
3,503,914
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
December 31, 2015:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Loss and loss expense reserves
|
$
|
2,138,952
|
|
|
$
|
349,668
|
|
|
$
|
3,265,349
|
|
|
$
|
(1,476,276
|
)
|
|
$
|
(189,587
|
)
|
|
$
|
4,088,106
|
|
Subrogation recoverable
|
828,802
|
|
|
141,349
|
|
|
207,674
|
|
|
(2,407,118
|
)
|
|
—
|
|
|
(1,229,293
|
)
|
||||||
Totals
|
$
|
2,967,754
|
|
|
$
|
491,017
|
|
|
$
|
3,473,023
|
|
|
$
|
(3,883,394
|
)
|
|
$
|
(189,587
|
)
|
|
$
|
2,858,813
|
|
|
Nine Months Ended September 30,
|
||||||
|
2016
|
|
2015
|
||||
Beginning gross loss and loss expense reserves
|
$
|
2,858,813
|
|
|
$
|
3,798,733
|
|
Less reinsurance on loss and loss expense reserves
|
44,059
|
|
|
100,355
|
|
||
Beginning balance of net loss and loss expense reserves
|
$
|
2,814,754
|
|
|
$
|
3,698,378
|
|
Changes in the loss and loss expense reserves due to:
|
|
|
|
||||
Current year:
|
|
|
|
||||
Establishment of new loss and loss expense reserves, gross of RMBS subrogation and net of reinsurance
|
11,033
|
|
|
1,404
|
|
||
Claim and loss expense (payments) recoveries, net of subrogation and reinsurance
|
(2,056
|
)
|
|
—
|
|
||
Total current year
|
8,977
|
|
|
1,404
|
|
||
Prior years:
|
|
|
|
||||
Change in previously established loss and loss expense reserves, gross of RMBS subrogation and net of reinsurance
|
(207,615
|
)
|
|
(414,642
|
)
|
||
Claim and loss expense (payments) recoveries, net of subrogation and reinsurance
|
950,810
|
|
|
(61,740
|
)
|
||
(Increase) decrease in previously established RMBS subrogation recoveries, net of reinsurance
|
(87,310
|
)
|
|
(31,744
|
)
|
||
Total prior years
|
655,885
|
|
|
(508,126
|
)
|
||
Net change in net loss and loss expense reserves
|
664,862
|
|
|
(506,722
|
)
|
||
Ending net loss and loss expense reserves
|
3,479,616
|
|
|
3,191,656
|
|
||
Add reinsurance on loss and loss expense reserves
(1)
|
24,298
|
|
|
63,657
|
|
||
Ending gross loss and loss expense reserves
(2)
|
$
|
3,503,914
|
|
|
$
|
3,255,313
|
|
(1)
|
Reinsurance recoverable reported on the Balance Sheet also includes reinsurance recoverables (payables) of previously presented loss and loss expenses of
$143
and
$4,662
as of
September 30, 2016 and 2015
, respectively.
|
(2)
|
Includes Euro denominated gross loss and loss expense reserves of
$17,029
(
€15,153
) and
$16,094
(
€14,415
) at
September 30, 2016 and 2015
, respectively.
|
Surveillance Categories as of September 30, 2016
|
|||||||||||||||||||||||||||
|
I/SL
|
|
IA
|
|
II
|
|
III
|
|
IV
|
|
V
|
|
Total
|
||||||||||||||
Number of policies
|
32
|
|
|
25
|
|
|
21
|
|
|
47
|
|
|
168
|
|
|
3
|
|
|
296
|
|
|||||||
Remaining weighted-average contract period (in years)
|
9
|
|
|
14
|
|
|
28
|
|
|
18
|
|
|
15
|
|
|
6
|
|
|
16
|
|
|||||||
Gross insured contractual payments outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Principal
|
$
|
1,780,294
|
|
|
$
|
541,278
|
|
|
$
|
1,743,119
|
|
|
$
|
1,992,587
|
|
|
$
|
8,197,140
|
|
|
$
|
49,247
|
|
|
$
|
14,303,665
|
|
Interest
|
733,068
|
|
|
152,233
|
|
|
6,804,123
|
|
|
1,389,838
|
|
|
2,354,765
|
|
|
15,422
|
|
|
11,449,449
|
|
|||||||
Total
|
$
|
2,513,362
|
|
|
$
|
693,511
|
|
|
$
|
8,547,242
|
|
|
$
|
3,382,425
|
|
|
$
|
10,551,905
|
|
|
$
|
64,669
|
|
|
$
|
25,753,114
|
|
Gross undiscounted claim liability
(1)
|
$
|
6,798
|
|
|
$
|
6,349
|
|
|
$
|
183,255
|
|
|
$
|
847,307
|
|
|
$
|
6,134,180
|
|
|
$
|
64,669
|
|
|
$
|
7,242,558
|
|
Discount, gross claim liability
|
(387
|
)
|
|
(475
|
)
|
|
(88,544
|
)
|
|
(186,037
|
)
|
|
(550,510
|
)
|
|
(4,028
|
)
|
|
(829,981
|
)
|
|||||||
Gross claim liability before all subrogation and before reinsurance
|
$
|
6,411
|
|
|
$
|
5,874
|
|
|
$
|
94,711
|
|
|
$
|
661,270
|
|
|
$
|
5,583,670
|
|
|
$
|
60,641
|
|
|
$
|
6,412,577
|
|
Less:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Gross RMBS subrogation
(2)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,936,829
|
)
|
|
—
|
|
|
(1,936,829
|
)
|
|||||||
Discount, RMBS subrogation
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
13,573
|
|
|
—
|
|
|
13,573
|
|
|||||||
Discounted RMBS subrogation, before reinsurance
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,923,256
|
)
|
|
—
|
|
|
(1,923,256
|
)
|
|||||||
Less:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Gross other subrogation
(3)
|
—
|
|
|
—
|
|
|
(8,968
|
)
|
|
(226,073
|
)
|
|
(836,767
|
)
|
|
(12,938
|
)
|
|
(1,084,746
|
)
|
|||||||
Discount, other subrogation
|
—
|
|
|
—
|
|
|
2,198
|
|
|
59,125
|
|
|
108,342
|
|
|
2,960
|
|
|
172,625
|
|
|||||||
Discounted other subrogation, before reinsurance
|
—
|
|
|
—
|
|
|
(6,770
|
)
|
|
(166,948
|
)
|
|
(728,425
|
)
|
|
(9,978
|
)
|
|
(912,121
|
)
|
|||||||
Gross claim liability, net of all subrogation and discounts, before reinsurance
|
$
|
6,411
|
|
|
$
|
5,874
|
|
|
$
|
87,941
|
|
|
$
|
494,322
|
|
|
$
|
2,931,989
|
|
|
$
|
50,663
|
|
|
$
|
3,577,200
|
|
Less: Unearned premium revenue
|
(3,774
|
)
|
|
(2,255
|
)
|
|
(46,411
|
)
|
|
(38,390
|
)
|
|
(65,811
|
)
|
|
(401
|
)
|
|
(157,042
|
)
|
|||||||
Plus: Loss expense reserves
|
8,977
|
|
|
160
|
|
|
572
|
|
|
15,761
|
|
|
58,286
|
|
|
—
|
|
|
83,756
|
|
|||||||
Gross loss and loss expense reserves
|
$
|
11,614
|
|
|
$
|
3,779
|
|
|
$
|
42,102
|
|
|
$
|
471,693
|
|
|
$
|
2,924,464
|
|
|
$
|
50,262
|
|
|
$
|
3,503,914
|
|
Reinsurance recoverable reported on Balance Sheet
(4)
|
$
|
699
|
|
|
$
|
946
|
|
|
$
|
177
|
|
|
$
|
39,241
|
|
|
$
|
(16,622
|
)
|
|
$
|
—
|
|
|
$
|
24,441
|
|
(1)
|
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.
|
(2)
|
RMBS subrogation represents Ambac’s estimate of subrogation recoveries from RMBS transaction sponsors for representation and warranty ("R&W") breaches.
|
(3)
|
Other subrogation primarily represents subrogation related to excess spread and other contractual cash flows on public finance and structured finance transactions, including RMBS.
|
(4)
|
Reinsurance recoverable reported on Balance Sheet includes reinsurance recoverables of
$24,298
related to future loss and loss expenses and
$143
related to presented loss and loss expenses.
|
Surveillance Categories as of December 31, 2015
|
|||||||||||||||||||||||||||
|
I/SL
|
|
IA
|
|
II
|
|
III
|
|
IV
|
|
V
|
|
Total
|
||||||||||||||
Number of policies
|
33
|
|
|
14
|
|
|
23
|
|
|
63
|
|
|
157
|
|
|
3
|
|
|
293
|
|
|||||||
Remaining weighted-average contract period (in years)
|
9
|
|
|
17
|
|
|
26
|
|
|
19
|
|
|
13
|
|
|
6
|
|
|
15
|
|
|||||||
Gross insured contractual payments outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Principal
|
$
|
1,830,549
|
|
|
$
|
263,288
|
|
|
$
|
1,912,237
|
|
|
$
|
2,972,615
|
|
|
$
|
8,942,730
|
|
|
$
|
54,590
|
|
|
$
|
15,976,009
|
|
Interest
|
724,940
|
|
|
107,624
|
|
|
6,834,538
|
|
|
1,792,525
|
|
|
2,391,523
|
|
|
16,791
|
|
|
11,867,941
|
|
|||||||
Total
|
$
|
2,555,489
|
|
|
$
|
370,912
|
|
|
$
|
8,746,775
|
|
|
$
|
4,765,140
|
|
|
$
|
11,334,253
|
|
|
$
|
71,381
|
|
|
$
|
27,843,950
|
|
Gross undiscounted claim liability
(1)
|
$
|
6,188
|
|
|
$
|
5,632
|
|
|
$
|
173,930
|
|
|
$
|
1,595,525
|
|
|
$
|
6,339,537
|
|
|
$
|
71,381
|
|
|
$
|
8,192,193
|
|
Discount, gross claim liability
|
(515
|
)
|
|
(652
|
)
|
|
(96,218
|
)
|
|
(458,805
|
)
|
|
(770,694
|
)
|
|
(6,779
|
)
|
|
(1,333,663
|
)
|
|||||||
Gross claim liability before all subrogation and before reinsurance
|
$
|
5,673
|
|
|
$
|
4,980
|
|
|
$
|
77,712
|
|
|
$
|
1,136,720
|
|
|
$
|
5,568,843
|
|
|
$
|
64,602
|
|
|
$
|
6,858,530
|
|
Less:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Gross RMBS subrogation
(2)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(2,841,291
|
)
|
|
—
|
|
|
(2,841,291
|
)
|
|||||||
Discount, RMBS subrogation
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
11,716
|
|
|
—
|
|
|
11,716
|
|
|||||||
Discounted RMBS subrogation, before reinsurance
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(2,829,575
|
)
|
|
—
|
|
|
(2,829,575
|
)
|
|||||||
Less:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Gross other subrogation
(3)
|
—
|
|
|
—
|
|
|
(12,937
|
)
|
|
(526,957
|
)
|
|
(835,078
|
)
|
|
(13,098
|
)
|
|
(1,388,070
|
)
|
|||||||
Discount, other subrogation
|
—
|
|
|
—
|
|
|
3,961
|
|
|
198,643
|
|
|
127,669
|
|
|
3,978
|
|
|
334,251
|
|
|||||||
Discounted other subrogation, before reinsurance
|
—
|
|
|
—
|
|
|
(8,976
|
)
|
|
(328,314
|
)
|
|
(707,409
|
)
|
|
(9,120
|
)
|
|
(1,053,819
|
)
|
|||||||
Gross claim liability, net of all subrogation and discounts, before reinsurance
|
$
|
5,673
|
|
|
$
|
4,980
|
|
|
$
|
68,736
|
|
|
$
|
808,406
|
|
|
$
|
2,031,859
|
|
|
$
|
55,482
|
|
|
$
|
2,975,136
|
|
Less: Unearned premium revenue
|
(3,360
|
)
|
|
(1,796
|
)
|
|
(48,871
|
)
|
|
(63,257
|
)
|
|
(71,848
|
)
|
|
(455
|
)
|
|
(189,587
|
)
|
|||||||
Plus: Loss expense reserves
|
—
|
|
|
66
|
|
|
629
|
|
|
15,090
|
|
|
57,479
|
|
|
—
|
|
|
73,264
|
|
|||||||
Gross loss and loss expense reserves
|
$
|
2,313
|
|
|
$
|
3,250
|
|
|
$
|
20,494
|
|
|
$
|
760,239
|
|
|
$
|
2,017,490
|
|
|
$
|
55,027
|
|
|
$
|
2,858,813
|
|
Reinsurance recoverable reported on Balance Sheet
(4)
|
$
|
642
|
|
|
$
|
880
|
|
|
$
|
85
|
|
|
$
|
59,503
|
|
|
$
|
(17,111
|
)
|
|
$
|
—
|
|
|
$
|
43,999
|
|
(1)
|
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.
|
(2)
|
RMBS subrogation represents Ambac’s estimate of subrogation recoveries from RMBS transaction sponsors for R&W breaches.
|
(3)
|
Other subrogation primarily represents subrogation related to excess spread and other contractual cash flows on public finance and structured finance transactions, including RMBS.
|
(4)
|
Reinsurance recoverable reported on Balance Sheet includes reinsurance recoverables of
$44,059
related to future loss and loss expenses and
$(60)
related to presented loss and loss expenses.
|
Random Sample Approach
|
Gross loss
reserves before subrogation recoveries (1) |
|
Subrogation
recoveries (2)(3) |
|
Gross loss
reserves after subrogation recoveries |
||||||
At September 30, 2016
|
$
|
1,364,835
|
|
|
$
|
(1,923,256
|
)
|
|
$
|
(558,421
|
)
|
|
|
|
|
|
|
||||||
At December 31, 2015
|
$
|
1,850,804
|
|
|
$
|
(2,829,575
|
)
|
|
$
|
(978,771
|
)
|
(1)
|
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 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 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. The estimated subrogation recovery for these transactions is based primarily on loan level data provided through trustee reports received in the normal course of our surveillance activities or provided by the sponsor. While this data may not include all the components of the sponsor’s contractual repurchase obligation we believe it is the best information available to estimate the subrogation recovery.
|
|
Nine Months Ended September 30,
|
||||||
|
2016
|
|
2015
|
||||
Discounted R&W subrogation (gross of reinsurance) at beginning of period
|
$
|
2,829,575
|
|
|
$
|
2,523,540
|
|
Changes recognized during the period:
|
|
|
|
||||
Impact of sponsor actions
(1)
|
(995,000
|
)
|
|
—
|
|
||
All other changes
(2)
|
88,681
|
|
|
31,921
|
|
||
Discounted R&W subrogation (gross of reinsurance) at end of period
|
$
|
1,923,256
|
|
|
$
|
2,555,461
|
|
(1)
|
Sponsor actions include loan repurchases, direct payments to Ambac and other contributions.
|
(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.
|
|
|
2016
|
|
2017
|
|
2018
|
|
2019
|
|
2020
|
|
Thereafter
|
||||||||||||
Amortization expense
(1)
|
|
$
|
26,750
|
|
|
$
|
96,523
|
|
|
$
|
83,807
|
|
|
$
|
75,292
|
|
|
$
|
69,421
|
|
|
$
|
671,072
|
|
(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, most financial services 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 financial services 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, 2016:
|
Level 1
|
|
Level 2
|
|
Level 3
|
||||||||||||||
Financial assets:
|
|
|
|
|
|
|
|
|
|
||||||||||
Fixed income securities:
|
|
|
|
|
|
|
|
|
|
||||||||||
Municipal obligations
|
$
|
399,522
|
|
|
$
|
399,522
|
|
|
$
|
—
|
|
|
$
|
399,522
|
|
|
$
|
—
|
|
Corporate obligations
|
1,872,756
|
|
|
1,872,756
|
|
|
—
|
|
|
1,872,756
|
|
|
—
|
|
|||||
Foreign obligations
|
56,923
|
|
|
56,923
|
|
|
56,365
|
|
|
558
|
|
|
—
|
|
|||||
U.S. government obligations
|
33,425
|
|
|
33,425
|
|
|
33,425
|
|
|
—
|
|
|
—
|
|
|||||
U.S. agency obligations
|
4,106
|
|
|
4,106
|
|
|
—
|
|
|
4,106
|
|
|
—
|
|
|||||
Residential mortgage-backed securities
|
2,387,531
|
|
|
2,387,531
|
|
|
—
|
|
|
1,707,956
|
|
|
679,575
|
|
|||||
Collateralized debt obligations
|
106,844
|
|
|
106,844
|
|
|
—
|
|
|
106,844
|
|
|
—
|
|
|||||
Other asset-backed securities
|
1,129,290
|
|
|
1,129,290
|
|
|
—
|
|
|
1,056,391
|
|
|
72,899
|
|
|||||
Fixed income securities, pledged as collateral:
|
|
|
|
|
|
|
|
|
|
||||||||||
U.S. government obligations
|
64,972
|
|
|
64,972
|
|
|
64,972
|
|
|
—
|
|
|
—
|
|
|||||
Short term investments
|
130,732
|
|
|
130,732
|
|
|
130,732
|
|
|
—
|
|
|
—
|
|
|||||
Other investments
(2)
|
419,885
|
|
|
403,414
|
|
|
78,572
|
|
|
—
|
|
|
12,339
|
|
|||||
Cash and cash equivalents
|
21,218
|
|
|
21,218
|
|
|
21,218
|
|
|
—
|
|
|
—
|
|
|||||
Loans
|
4,513
|
|
|
4,467
|
|
|
—
|
|
|
—
|
|
|
4,467
|
|
|||||
Derivative assets:
|
|
|
|
|
|
|
|
|
|
||||||||||
Interest rate swaps—asset position
|
103,373
|
|
|
103,373
|
|
|
—
|
|
|
21,340
|
|
|
82,033
|
|
|||||
Other assets
|
7,729
|
|
|
7,729
|
|
|
—
|
|
|
—
|
|
|
7,729
|
|
|||||
Variable interest entity assets:
|
|
|
|
|
|
|
|
|
|
||||||||||
Fixed income securities:
|
|
|
|
|
|
|
|
|
|
||||||||||
Corporate obligations
|
2,828,685
|
|
|
2,828,685
|
|
|
—
|
|
|
—
|
|
|
2,828,685
|
|
|||||
Restricted cash
|
5,477
|
|
|
5,477
|
|
|
5,477
|
|
|
—
|
|
|
—
|
|
|||||
Loans
|
11,476,766
|
|
|
11,476,766
|
|
|
—
|
|
|
—
|
|
|
11,476,766
|
|
|||||
Derivative assets:
|
|
|
|
|
|
|
|
|
|
||||||||||
Currency swaps—asset position
|
68,676
|
|
|
68,676
|
|
|
—
|
|
|
68,676
|
|
|
—
|
|
|||||
Total financial assets
|
$
|
21,122,423
|
|
|
$
|
21,105,906
|
|
|
$
|
390,761
|
|
|
$
|
5,238,149
|
|
|
$
|
15,164,493
|
|
Financial liabilities:
|
|
|
|
|
|
|
|
|
|
||||||||||
Obligations under investment agreements
|
$
|
82,358
|
|
|
$
|
82,541
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
82,541
|
|
Long term debt, including accrued interest
|
1,510,529
|
|
|
1,422,602
|
|
|
—
|
|
|
1,121,249
|
|
|
301,353
|
|
|||||
Derivative liabilities:
|
|
|
|
|
|
|
|
|
|
||||||||||
Credit derivatives
|
16,700
|
|
|
16,700
|
|
|
—
|
|
|
—
|
|
|
16,700
|
|
|||||
Interest rate swaps—asset position
|
(97,964
|
)
|
|
(97,964
|
)
|
|
—
|
|
|
(97,964
|
)
|
|
—
|
|
|||||
Interest rate swaps—liability position
|
516,638
|
|
|
516,638
|
|
|
—
|
|
|
332,199
|
|
|
184,439
|
|
|||||
Futures contracts
|
36
|
|
|
36
|
|
|
36
|
|
|
—
|
|
|
—
|
|
|||||
Liabilities for net financial guarantees written
(1)
|
2,787,131
|
|
|
4,175,019
|
|
|
—
|
|
|
—
|
|
|
4,175,019
|
|
|||||
Variable interest entity liabilities:
|
|
|
|
|
|
|
|
|
|
||||||||||
Long-term debt
|
11,930,434
|
|
|
11,930,434
|
|
|
—
|
|
|
9,347,134
|
|
|
2,583,300
|
|
|||||
Derivative liabilities:
|
|
|
|
|
|
|
|
|
|
||||||||||
Interest rate swaps—liability position
|
2,304,789
|
|
|
2,304,789
|
|
|
—
|
|
|
2,304,789
|
|
|
—
|
|
|||||
Total financial liabilities
|
$
|
19,050,651
|
|
|
$
|
20,350,795
|
|
|
$
|
36
|
|
|
$
|
13,007,407
|
|
|
$
|
7,343,352
|
|
|
Carrying
Amount |
|
Total Fair
Value |
|
Fair Value Measurements Categorized as:
|
||||||||||||||
December 31, 2015:
|
Level 1
|
|
Level 2
|
|
Level 3
|
||||||||||||||
Financial assets:
|
|
|
|
|
|
|
|
|
|
||||||||||
Fixed income securities:
|
|
|
|
|
|
|
|
|
|
||||||||||
Municipal obligations
|
$
|
420,770
|
|
|
$
|
420,770
|
|
|
$
|
—
|
|
|
$
|
420,770
|
|
|
$
|
—
|
|
Corporate obligations
|
1,593,669
|
|
|
1,593,669
|
|
|
—
|
|
|
1,593,669
|
|
|
—
|
|
|||||
Foreign obligations
|
96,306
|
|
|
96,306
|
|
|
87,808
|
|
|
8,498
|
|
|
—
|
|
|||||
U.S. government obligations
|
26,687
|
|
|
26,687
|
|
|
26,687
|
|
|
—
|
|
|
—
|
|
|||||
U.S. agency obligations
|
4,212
|
|
|
4,212
|
|
|
—
|
|
|
4,212
|
|
|
—
|
|
|||||
Residential mortgage-backed securities
|
1,977,338
|
|
|
1,977,338
|
|
|
—
|
|
|
1,488,454
|
|
|
488,884
|
|
|||||
Collateralized debt obligations
|
84,267
|
|
|
84,267
|
|
|
—
|
|
|
84,267
|
|
|
—
|
|
|||||
Other asset-backed securities
|
840,527
|
|
|
840,527
|
|
|
—
|
|
|
840,527
|
|
|
—
|
|
|||||
Fixed income securities, pledged as collateral:
|
|
|
|
|
|
|
|
|
|
||||||||||
U.S. government obligations
|
64,555
|
|
|
64,555
|
|
|
64,555
|
|
|
—
|
|
|
—
|
|
|||||
Short term investments
|
225,789
|
|
|
225,789
|
|
|
197,398
|
|
|
28,391
|
|
|
—
|
|
|||||
Other investments
(2)
|
310,600
|
|
|
298,095
|
|
|
45,745
|
|
|
—
|
|
|
12,834
|
|
|||||
Cash and cash equivalents
|
35,744
|
|
|
35,744
|
|
|
35,744
|
|
|
—
|
|
|
—
|
|
|||||
Loans
|
5,206
|
|
|
5,128
|
|
|
—
|
|
|
—
|
|
|
5,128
|
|
|||||
Derivative assets:
|
|
|
|
|
|
|
|
|
|
||||||||||
Interest rate swaps—asset position
|
84,886
|
|
|
84,886
|
|
|
—
|
|
|
21,848
|
|
|
63,038
|
|
|||||
Futures contracts
|
109
|
|
|
109
|
|
|
109
|
|
|
—
|
|
|
—
|
|
|||||
Other assets
|
8,696
|
|
|
8,696
|
|
|
—
|
|
|
—
|
|
|
8,696
|
|
|||||
Variable interest entity assets:
|
|
|
|
|
|
|
|
|
|
||||||||||
Fixed income securities:
|
|
|
|
|
|
|
|
|
|
||||||||||
Corporate obligations
|
2,588,556
|
|
|
2,588,556
|
|
|
—
|
|
|
—
|
|
|
2,588,556
|
|
|||||
Restricted cash
|
5,822
|
|
|
5,822
|
|
|
5,822
|
|
|
—
|
|
|
—
|
|
|||||
Loans
|
11,690,324
|
|
|
11,690,324
|
|
|
—
|
|
|
—
|
|
|
11,690,324
|
|
|||||
Total financial assets
|
$
|
20,064,063
|
|
|
$
|
20,051,480
|
|
|
$
|
463,868
|
|
|
$
|
4,490,636
|
|
|
$
|
14,857,460
|
|
Financial liabilities:
|
|
|
|
|
|
|
|
|
|
||||||||||
Obligations under investment agreements
|
$
|
100,358
|
|
|
$
|
101,400
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
101,400
|
|
Long term debt, including accrued interest
|
1,481,045
|
|
|
1,235,721
|
|
|
—
|
|
|
132,837
|
|
|
1,102,884
|
|
|||||
Derivative liabilities:
|
|
|
|
|
|
|
|
|
|
||||||||||
Credit derivatives
|
34,543
|
|
|
34,543
|
|
|
—
|
|
|
—
|
|
|
34,543
|
|
|||||
Interest rate swaps—asset position
|
(52,128
|
)
|
|
(52,128
|
)
|
|
—
|
|
|
(52,128
|
)
|
|
—
|
|
|||||
Interest rate swaps—liability position
|
370,943
|
|
|
370,943
|
|
|
—
|
|
|
243,256
|
|
|
127,687
|
|
|||||
Futures contracts
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Liabilities for net financial guarantees written
(1)
|
2,033,484
|
|
|
2,325,859
|
|
|
—
|
|
|
—
|
|
|
2,325,859
|
|
|||||
Variable interest entity liabilities:
|
|
|
|
|
|
|
|
|
|
||||||||||
Long-term debt
|
12,327,960
|
|
|
12,327,960
|
|
|
—
|
|
|
9,147,790
|
|
|
3,180,170
|
|
|||||
Derivative liabilities:
|
|
|
|
|
|
|
|
|
|
||||||||||
Interest rate swaps—liability position
|
1,965,265
|
|
|
1,965,265
|
|
|
—
|
|
|
1,965,265
|
|
|
—
|
|
|||||
Currency swaps—liability position
|
(36,862
|
)
|
|
(36,862
|
)
|
|
—
|
|
|
(36,862
|
)
|
|
—
|
|
|||||
Total financial liabilities
|
$
|
18,224,608
|
|
|
$
|
18,272,701
|
|
|
$
|
—
|
|
|
$
|
11,400,158
|
|
|
$
|
6,872,543
|
|
(1)
|
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.
|
(2)
|
Excluded from the fair value measurement categories in the table above are investments funds of
$312,503
and
$239,516
as of
September 30, 2016 and December 31, 2015
, respectively, which are measured using NAV per share as a practical expedient.
|
a. Coupon rate:
|
5.96%
|
|
|
|
b. Average Life:
|
17.93 years
|
|
|
|
c. Yield:
|
12%
|
|
|
|
|
|
Fair Value
|
|
|
|
|
||||||
Class of Funds
|
|
September 30,
2016 |
|
December 31,
2015 |
|
Redemption Frequency
|
|
Redemption Notice Period
|
||||
Real estate properties
(1)
|
|
$
|
34,412
|
|
|
$
|
59,719
|
|
|
quarterly
|
|
10 business days
|
Diversified hedge fund strategies
(2)
|
|
55,884
|
|
|
35,464
|
|
|
semi-monthly
|
|
15 - 30 days
|
||
Credit products
(3)
|
|
182,391
|
|
|
99,579
|
|
|
daily, weekly or monthly
|
|
0 - 30 days
|
||
Illiquid investments
(4)
|
|
39,816
|
|
|
44,754
|
|
|
quarterly
|
|
180 days
|
(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.
|
|
|
September 30, 2016
|
|
December 31, 2015
|
||||||||||||
|
|
CLOs
|
|
Other
|
|
CLOs
|
|
Other
(1)
|
||||||||
Notional outstanding
|
|
$
|
176,384
|
|
|
$
|
644,604
|
|
|
$
|
295,253
|
|
|
$
|
617,148
|
|
Weighted average reference obligation price
|
|
99.3
|
|
|
92.2
|
|
|
98.4
|
|
|
85.2
|
|
||||
Weighted average life (WAL) in years
|
|
0.7
|
|
|
6.2
|
|
|
1.1
|
|
|
6.1
|
|
||||
Weighted average credit rating
|
|
AA
|
|
|
BBB+
|
|
|
AA
|
|
|
BBB+
|
|
||||
Weighted average relative change ratio
|
|
36.6
|
%
|
|
31.0
|
%
|
|
36.3
|
%
|
|
33.3
|
%
|
||||
CVA percentage
|
|
5.93
|
%
|
|
14.37
|
%
|
|
8.34
|
%
|
|
23.34
|
%
|
||||
Fair value of derivative liabilities
|
|
$
|
399
|
|
|
$
|
16,301
|
|
|
$
|
1,837
|
|
|
$
|
32,697
|
|
(1)
|
Excludes contract for which fair values are based on credit derivative quotes rather than reference obligations quotes. As of
December 31, 2015
, these contracts had a combined notional outstanding of
$58,482
, WAL of
0.2 years
and liability fair value of
$9
. Other inputs to the valuation of these transactions at
December 31, 2015
include weighted ave
rage quotes of less than
1%
of notional, weighted average rating of
A+
and Ambac CVA percentage of
0.09%
.
|
September 30, 2016:
|
|
December 31, 2015:
|
||
a. Coupon rate:
|
0.47%
|
|
a. Coupon rate:
|
1.38%
|
b. Maturity:
|
16.41 years
|
|
b. Maturity:
|
16.44 years
|
c. Yield:
|
5.25%
|
|
c. Yield:
|
6.08%
|
September 30, 2016:
|
|
December 31, 2015:
|
||
a. Coupon rate:
|
5.88%
|
|
a. Coupon rate:
|
5.88%
|
b. Maturity:
|
21.10 years
|
|
b. Maturity:
|
21.81 years
|
c. Yield:
|
5.90%
|
|
c. Yield:
|
9.14%
|
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, 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
|
|
|||||||
Issuances
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||||
Sales
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||||
Settlements
|
|
(5,460
|
)
|
|
—
|
|
|
(2,854
|
)
|
|
—
|
|
|
(66,503
|
)
|
|
3,722
|
|
|
(71,095
|
)
|
|||||||
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
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Three Months Ended September 30, 2015:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Balance, beginning of period
|
|
$
|
380,332
|
|
|
$
|
9,704
|
|
|
$
|
(119,309
|
)
|
|
$
|
2,747,181
|
|
|
$
|
13,005,216
|
|
|
$
|
(2,166,826
|
)
|
|
$
|
13,856,298
|
|
Total gains/(losses) realized and unrealized:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Included in earnings
|
|
8,429
|
|
|
(382
|
)
|
|
20,073
|
|
|
39,630
|
|
|
44,404
|
|
|
(59,760
|
)
|
|
52,394
|
|
|||||||
Included in other comprehensive income
|
|
(4,288
|
)
|
|
—
|
|
|
—
|
|
|
(106,916
|
)
|
|
(471,321
|
)
|
|
79,314
|
|
|
(503,211
|
)
|
|||||||
Purchases
|
|
28
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
28
|
|
|||||||
Issuances
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||||
Sales
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||||
Settlements
|
|
(712
|
)
|
|
—
|
|
|
(2,822
|
)
|
|
—
|
|
|
(70,115
|
)
|
|
3,740
|
|
|
(69,909
|
)
|
|||||||
Deconsolidation of VIEs
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(325,123
|
)
|
|
$
|
—
|
|
|
$
|
(325,123
|
)
|
Balance, end of period
|
|
$
|
383,789
|
|
|
$
|
9,322
|
|
|
$
|
(102,058
|
)
|
|
$
|
2,679,895
|
|
|
$
|
12,183,061
|
|
|
$
|
(2,143,532
|
)
|
|
$
|
13,010,477
|
|
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
|
|
$
|
—
|
|
|
$
|
(382
|
)
|
|
$
|
(12,285
|
)
|
|
$
|
39,630
|
|
|
$
|
102,901
|
|
|
$
|
(107,567
|
)
|
|
$
|
22,297
|
|
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, 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
|
|
|||||||
Issuances
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||||
Sales
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||||
Settlements
|
|
(14,619
|
)
|
|
—
|
|
|
3,336
|
|
|
—
|
|
|
(194,728
|
)
|
|
216,582
|
|
|
10,571
|
|
|||||||
Transfers into 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
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Nine Months Ended September 30, 2015:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Balance, beginning of period
|
|
$
|
198,201
|
|
|
$
|
12,036
|
|
|
$
|
(215,346
|
)
|
|
$
|
2,743,050
|
|
|
$
|
12,371,177
|
|
|
$
|
(1,263,664
|
)
|
|
$
|
13,845,454
|
|
Total gains/(losses) realized and unrealized:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Included in earnings
|
|
21,066
|
|
|
(1,009
|
)
|
|
20,640
|
|
|
14,490
|
|
|
701,562
|
|
|
(922,849
|
)
|
|
(166,100
|
)
|
|||||||
Included in other comprehensive income
|
|
(48,611
|
)
|
|
—
|
|
|
—
|
|
|
(77,645
|
)
|
|
(311,773
|
)
|
|
35,303
|
|
|
(402,726
|
)
|
|||||||
Purchases
|
|
234,880
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
234,880
|
|
|||||||
Issuances
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||||
Sales
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||||
Settlements
|
|
(21,747
|
)
|
|
(1,705
|
)
|
|
4,430
|
|
|
—
|
|
|
(252,782
|
)
|
|
7,678
|
|
|
(264,126
|
)
|
|||||||
Transfers in Level 3
|
|
—
|
|
|
—
|
|
|
88,218
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
88,218
|
|
|||||||
Deconsolidation of VIEs
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(325,123
|
)
|
|
—
|
|
|
(325,123
|
)
|
|||||||
Balance, end of period
|
|
$
|
383,789
|
|
|
$
|
9,322
|
|
|
$
|
(102,058
|
)
|
|
$
|
2,679,895
|
|
|
$
|
12,183,061
|
|
|
$
|
(2,143,532
|
)
|
|
$
|
13,010,477
|
|
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
|
|
$
|
—
|
|
|
$
|
(1,009
|
)
|
|
$
|
(20,081
|
)
|
|
$
|
14,490
|
|
|
$
|
760,059
|
|
|
$
|
(970,656
|
)
|
|
$
|
(217,197
|
)
|
Level 3 - Investments by Class:
|
|
|
|
|
|
|
|
|
||||||||
|
|
Other Asset
Backed Securities |
|
Corporate
Obligations |
|
Non-Agency
RMBS |
|
Total
Investments |
||||||||
Three Months Ended September 30, 2016:
|
|
|
|
|
|
|
|
|
||||||||
Balance, beginning of period
|
|
$
|
71,820
|
|
|
$
|
—
|
|
|
$
|
650,850
|
|
|
$
|
722,670
|
|
Total gains/(losses) realized and unrealized:
|
|
|
|
|
|
|
|
|
||||||||
Included in earnings
|
|
999
|
|
|
—
|
|
|
14,805
|
|
|
15,804
|
|
||||
Included in other comprehensive income
|
|
336
|
|
|
—
|
|
|
11,998
|
|
|
12,334
|
|
||||
Purchases
|
|
—
|
|
|
—
|
|
|
7,126
|
|
|
7,126
|
|
||||
Issuances
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Sales
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Settlements
|
|
(256
|
)
|
|
—
|
|
|
(5,204
|
)
|
|
(5,460
|
)
|
||||
Balance, end of period
|
|
$
|
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
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
||||||||
Three Months Ended September 30, 2015:
|
|
|
|
|
|
|
|
|
||||||||
Balance, beginning of period
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
380,332
|
|
|
$
|
380,332
|
|
Total gains/(losses) realized and unrealized:
|
|
|
|
|
|
|
|
|
||||||||
Included in earnings
|
|
—
|
|
|
—
|
|
|
8,429
|
|
|
8,429
|
|
||||
Included in other comprehensive income
|
|
—
|
|
|
—
|
|
|
(4,288
|
)
|
|
(4,288
|
)
|
||||
Purchases
|
|
—
|
|
|
—
|
|
|
28
|
|
|
28
|
|
||||
Issuances
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Sales
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Settlements
|
|
—
|
|
|
—
|
|
|
(712
|
)
|
|
(712
|
)
|
||||
Balance, end of period
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
383,789
|
|
|
$
|
383,789
|
|
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:
|
|
|
|
|
|
|
|
|
||||||||
|
|
Other Asset
Backed Securities |
|
Corporate
Obligations |
|
Non-Agency
RMBS |
|
Total
Investments |
||||||||
Nine Months Ended September 30, 2016:
|
|
|
|
|
|
|
|
|
||||||||
Balance, beginning of period
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
488,884
|
|
|
$
|
488,884
|
|
Total gains/(losses) realized and unrealized:
|
|
|
|
|
|
|
|
|
||||||||
Included in earnings
|
|
1,560
|
|
|
—
|
|
|
41,263
|
|
|
42,823
|
|
||||
Included in other comprehensive income
|
|
1,401
|
|
|
—
|
|
|
34,169
|
|
|
35,570
|
|
||||
Purchases
|
|
—
|
|
|
—
|
|
|
99,018
|
|
|
99,018
|
|
||||
Issuances
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Sales
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Settlements
|
|
(769
|
)
|
|
—
|
|
|
(13,850
|
)
|
|
(14,619
|
)
|
||||
Transfers into Level 3
|
|
70,707
|
|
|
—
|
|
|
30,091
|
|
|
100,798
|
|
||||
Balance, end of period
|
|
$
|
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
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
||||||||
Nine Months Ended September 30, 2015:
|
|
|
|
|
|
|
|
|
||||||||
Balance, beginning of period
|
|
$
|
—
|
|
|
$
|
3,808
|
|
|
$
|
194,393
|
|
|
$
|
198,201
|
|
Total gains/(losses) realized and unrealized:
|
|
|
|
|
|
|
|
|
||||||||
Included in earnings
|
|
—
|
|
|
(19
|
)
|
|
21,085
|
|
|
21,066
|
|
||||
Included in other comprehensive income
|
|
—
|
|
|
(286
|
)
|
|
(48,325
|
)
|
|
(48,611
|
)
|
||||
Purchases
|
|
—
|
|
|
—
|
|
|
234,880
|
|
|
234,880
|
|
||||
Issuances
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Sales
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Settlements
|
|
—
|
|
|
(3,503
|
)
|
|
(18,244
|
)
|
|
(21,747
|
)
|
||||
Balance, end of period
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
383,789
|
|
|
$
|
383,789
|
|
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, 2016:
|
|
Three Months Ended September 30, 2015:
|
||||||||||||||||||||
|
|
Interest
Rate Swaps |
|
Credit
Derivatives |
|
Total
Derivatives |
|
Interest
Rate Swaps |
|
Credit
Derivatives |
|
Total
Derivatives |
||||||||||||
Balance, beginning of period
|
|
$
|
(85,825
|
)
|
|
$
|
(18,207
|
)
|
|
$
|
(104,032
|
)
|
|
$
|
(52,819
|
)
|
|
$
|
(66,490
|
)
|
|
$
|
(119,309
|
)
|
Total gains/(losses) realized and unrealized:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Included in earnings
|
|
(13,953
|
)
|
|
1,733
|
|
|
(12,220
|
)
|
|
(16,879
|
)
|
|
36,952
|
|
|
20,073
|
|
||||||
Included in other comprehensive income
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Purchases
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Issuances
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Sales
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Settlements
|
|
(2,628
|
)
|
|
(226
|
)
|
|
(2,854
|
)
|
|
(2,473
|
)
|
|
(349
|
)
|
|
(2,822
|
)
|
||||||
Balance, end of period
|
|
$
|
(102,406
|
)
|
|
$
|
(16,700
|
)
|
|
$
|
(119,106
|
)
|
|
$
|
(72,171
|
)
|
|
$
|
(29,887
|
)
|
|
$
|
(102,058
|
)
|
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
|
|
$
|
(13,953
|
)
|
|
$
|
1,503
|
|
|
$
|
(12,450
|
)
|
|
$
|
(16,879
|
)
|
|
$
|
4,594
|
|
|
$
|
(12,285
|
)
|
Level 3 - Derivatives by Class:
|
|
|
|
|
||||||||||||||||||||
|
|
Nine Months Ended September 30, 2016:
|
|
Nine Months Ended September 30, 2015:
|
||||||||||||||||||||
|
|
Interest
Rate Swaps |
|
Credit
Derivatives |
|
Total
Derivatives |
|
Interest
Rate Swaps |
|
Credit
Derivatives |
|
Total
Derivatives |
||||||||||||
Balance, beginning of period
|
|
$
|
(64,649
|
)
|
|
$
|
(34,543
|
)
|
|
$
|
(99,192
|
)
|
|
$
|
(141,887
|
)
|
|
$
|
(73,459
|
)
|
|
$
|
(215,346
|
)
|
Total gains/(losses) realized and unrealized:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Included in earnings
|
|
(41,804
|
)
|
|
18,554
|
|
|
(23,250
|
)
|
|
(24,106
|
)
|
|
44,746
|
|
|
20,640
|
|
||||||
Included in other comprehensive income
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Purchases
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Issuances
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Sales
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Settlements
|
|
4,047
|
|
|
(711
|
)
|
|
3,336
|
|
|
5,604
|
|
|
(1,174
|
)
|
|
4,430
|
|
||||||
Transfers into Level 3
|
|
—
|
|
|
—
|
|
|
—
|
|
|
88,218
|
|
|
—
|
|
|
88,218
|
|
||||||
Balance, end of period
|
|
$
|
(102,406
|
)
|
|
$
|
(16,700
|
)
|
|
$
|
(119,106
|
)
|
|
$
|
(72,171
|
)
|
|
$
|
(29,887
|
)
|
|
$
|
(102,058
|
)
|
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
|
|
$
|
(41,804
|
)
|
|
$
|
17,778
|
|
|
$
|
(24,026
|
)
|
|
$
|
(24,106
|
)
|
|
$
|
4,025
|
|
|
$
|
(20,081
|
)
|
|
|
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, 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
|
)
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Three Months Ended September 30, 2015:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Total gains or losses included in earnings for the period
|
|
$
|
8,429
|
|
|
$
|
1,693
|
|
|
$
|
35,259
|
|
|
$
|
(16,879
|
)
|
|
$
|
24,724
|
|
|
$
|
(382
|
)
|
Changes in unrealized gains or losses relating to the assets and liabilities still held at the reporting date
|
|
—
|
|
|
—
|
|
|
4,594
|
|
|
(16,879
|
)
|
|
34,964
|
|
|
(382
|
)
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
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
|
)
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Nine Months Ended September 30, 2015:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Total gains or losses included in earnings for the period
|
|
$
|
21,066
|
|
|
$
|
2,519
|
|
|
$
|
42,227
|
|
|
$
|
(24,106
|
)
|
|
$
|
(206,797
|
)
|
|
$
|
(1,009
|
)
|
Changes in unrealized gains or losses relating to the assets and liabilities still held at the reporting date
|
|
—
|
|
|
—
|
|
|
4,025
|
|
|
(24,106
|
)
|
|
(196,107
|
)
|
|
(1,009
|
)
|
|
|
Amortized
Cost |
|
Gross
Unrealized Gains |
|
Gross
Unrealized Losses |
|
Estimated
Fair Value |
|
Non-credit
other-than temporary Impairments (1) |
||||||||||
September 30, 2016:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Fixed income securities:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Municipal obligations
|
|
$
|
389,573
|
|
|
$
|
14,700
|
|
|
$
|
4,751
|
|
|
$
|
399,522
|
|
|
$
|
—
|
|
Corporate obligations
|
|
1,821,981
|
|
|
52,436
|
|
|
1,661
|
|
|
1,872,756
|
|
|
—
|
|
|||||
Foreign obligations
|
|
53,431
|
|
|
3,498
|
|
|
6
|
|
|
56,923
|
|
|
—
|
|
|||||
U.S. government obligations
|
|
30,638
|
|
|
2,810
|
|
|
23
|
|
|
33,425
|
|
|
—
|
|
|||||
U.S. agency obligations
|
|
4,108
|
|
|
—
|
|
|
2
|
|
|
4,106
|
|
|
—
|
|
|||||
Residential mortgage-backed securities
|
|
2,323,156
|
|
|
109,663
|
|
|
45,288
|
|
|
2,387,531
|
|
|
35,594
|
|
|||||
Collateralized debt obligations
|
|
106,582
|
|
|
521
|
|
|
259
|
|
|
106,844
|
|
|
—
|
|
|||||
Other asset-backed securities
|
|
1,077,480
|
|
|
52,477
|
|
|
667
|
|
|
1,129,290
|
|
|
—
|
|
|||||
|
|
5,806,949
|
|
|
236,105
|
|
|
52,657
|
|
|
5,990,397
|
|
|
35,594
|
|
|||||
Short-term
|
|
130,732
|
|
|
—
|
|
|
—
|
|
|
130,732
|
|
|
—
|
|
|||||
|
|
5,937,681
|
|
|
236,105
|
|
|
52,657
|
|
|
6,121,129
|
|
|
35,594
|
|
|||||
Fixed income securities pledged as collateral:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
U.S. government obligations
|
|
64,777
|
|
|
195
|
|
|
—
|
|
|
64,972
|
|
|
—
|
|
|||||
Total collateralized investments
|
|
64,777
|
|
|
195
|
|
|
—
|
|
|
64,972
|
|
|
—
|
|
|||||
Total available-for-sale investments
|
|
$
|
6,002,458
|
|
|
$
|
236,300
|
|
|
$
|
52,657
|
|
|
$
|
6,186,101
|
|
|
$
|
35,594
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
December 31, 2015:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Fixed income securities:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Municipal obligations
|
|
$
|
424,048
|
|
|
$
|
4,910
|
|
|
$
|
8,188
|
|
|
$
|
420,770
|
|
|
$
|
—
|
|
Corporate obligations
|
|
1,610,912
|
|
|
7,089
|
|
|
24,332
|
|
|
1,593,669
|
|
|
—
|
|
|||||
Foreign obligations
|
|
96,638
|
|
|
1,491
|
|
|
1,823
|
|
|
96,306
|
|
|
—
|
|
|||||
U.S. government obligations
|
|
26,086
|
|
|
789
|
|
|
188
|
|
|
26,687
|
|
|
—
|
|
|||||
U.S. agency obligations
|
|
4,239
|
|
|
—
|
|
|
27
|
|
|
4,212
|
|
|
—
|
|
|||||
Residential mortgage-backed securities
|
|
1,942,285
|
|
|
99,670
|
|
|
64,617
|
|
|
1,977,338
|
|
|
41,673
|
|
|||||
Collateralized debt obligations
|
|
85,706
|
|
|
42
|
|
|
1,481
|
|
|
84,267
|
|
|
—
|
|
|||||
Other asset-backed securities
|
|
802,842
|
|
|
41,177
|
|
|
3,492
|
|
|
840,527
|
|
|
—
|
|
|||||
|
|
4,992,756
|
|
|
155,168
|
|
|
104,148
|
|
|
5,043,776
|
|
|
41,673
|
|
|||||
Short-term
|
|
225,789
|
|
|
1
|
|
|
1
|
|
|
225,789
|
|
|
—
|
|
|||||
|
|
5,218,545
|
|
|
155,169
|
|
|
104,149
|
|
|
5,269,565
|
|
|
41,673
|
|
|||||
Fixed income securities pledged as collateral:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
U.S. government obligations
|
|
64,612
|
|
|
—
|
|
|
57
|
|
|
64,555
|
|
|
—
|
|
|||||
Total collateralized investments
|
|
64,612
|
|
|
—
|
|
|
57
|
|
|
64,555
|
|
|
—
|
|
|||||
Total available-for-sale investments
|
|
$
|
5,283,157
|
|
|
$
|
155,169
|
|
|
$
|
104,206
|
|
|
$
|
5,334,120
|
|
|
$
|
41,673
|
|
(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, 2016 and December 31, 2015
.
|
|
|
Amortized
Cost |
|
Estimated
Fair Value |
||||
Due in one year or less
|
|
$
|
201,230
|
|
|
$
|
201,995
|
|
Due after one year through five years
|
|
1,204,340
|
|
|
1,228,927
|
|
||
Due after five years through ten years
|
|
909,093
|
|
|
940,582
|
|
||
Due after ten years
|
|
180,577
|
|
|
190,932
|
|
||
|
|
2,495,240
|
|
|
2,562,436
|
|
||
Residential mortgage-backed securities
|
|
2,323,156
|
|
|
2,387,531
|
|
||
Collateralized debt obligations
|
|
106,582
|
|
|
106,844
|
|
||
Other asset-backed securities
|
|
1,077,480
|
|
|
1,129,290
|
|
||
Total
|
|
$
|
6,002,458
|
|
|
$
|
6,186,101
|
|
|
|
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, 2016:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Fixed income securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Municipal obligations
|
|
$
|
35,192
|
|
|
$
|
1,410
|
|
|
$
|
103,482
|
|
|
$
|
3,341
|
|
|
$
|
138,674
|
|
|
$
|
4,751
|
|
Corporate obligations
|
|
201,291
|
|
|
1,611
|
|
|
9,937
|
|
|
50
|
|
|
211,228
|
|
|
1,661
|
|
||||||
Foreign obligations
|
|
2,604
|
|
|
6
|
|
|
—
|
|
|
—
|
|
|
2,604
|
|
|
6
|
|
||||||
U.S. government obligations
|
|
1,883
|
|
|
18
|
|
|
5,070
|
|
|
5
|
|
|
6,953
|
|
|
23
|
|
||||||
U.S. agency obligations
|
|
—
|
|
|
—
|
|
|
4,106
|
|
|
2
|
|
|
4,106
|
|
|
2
|
|
||||||
Residential mortgage-backed securities
|
|
388,104
|
|
|
10,199
|
|
|
517,756
|
|
|
35,089
|
|
|
905,860
|
|
|
45,288
|
|
||||||
Collateralized debt obligations
|
|
7,409
|
|
|
26
|
|
|
29,459
|
|
|
233
|
|
|
36,868
|
|
|
259
|
|
||||||
Other asset-backed securities
|
|
354,221
|
|
|
641
|
|
|
25,813
|
|
|
26
|
|
|
380,034
|
|
|
667
|
|
||||||
|
|
990,704
|
|
|
13,911
|
|
|
695,623
|
|
|
38,746
|
|
|
1,686,327
|
|
|
52,657
|
|
||||||
Short-term
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
|
|
990,704
|
|
|
13,911
|
|
|
695,623
|
|
|
38,746
|
|
|
1,686,327
|
|
|
52,657
|
|
||||||
Fixed income securities, pledged as collateral:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
U. S. government obligations
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Total collateralized investments
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Total temporarily impaired securities
|
|
$
|
990,704
|
|
|
$
|
13,911
|
|
|
$
|
695,623
|
|
|
$
|
38,746
|
|
|
$
|
1,686,327
|
|
|
$
|
52,657
|
|
|
|
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, 2015:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Fixed income securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Municipal obligations
|
|
$
|
117,008
|
|
|
$
|
2,070
|
|
|
$
|
114,708
|
|
|
$
|
6,118
|
|
|
$
|
231,716
|
|
|
$
|
8,188
|
|
Corporate obligations
|
|
938,916
|
|
|
21,331
|
|
|
92,581
|
|
|
3,001
|
|
|
1,031,497
|
|
|
24,332
|
|
||||||
Foreign obligations
|
|
34,904
|
|
|
1,018
|
|
|
8,584
|
|
|
805
|
|
|
43,488
|
|
|
1,823
|
|
||||||
U.S. government obligations
|
|
2,938
|
|
|
18
|
|
|
10,658
|
|
|
170
|
|
|
13,596
|
|
|
188
|
|
||||||
U.S. agency obligations
|
|
—
|
|
|
—
|
|
|
4,212
|
|
|
27
|
|
|
4,212
|
|
|
27
|
|
||||||
Residential mortgage-backed securities
|
|
584,699
|
|
|
53,367
|
|
|
213,303
|
|
|
11,250
|
|
|
798,002
|
|
|
64,617
|
|
||||||
Collateralized debt obligations
|
|
77,538
|
|
|
1,481
|
|
|
—
|
|
|
—
|
|
|
77,538
|
|
|
1,481
|
|
||||||
Other asset-backed securities
|
|
450,690
|
|
|
3,456
|
|
|
19,274
|
|
|
36
|
|
|
469,964
|
|
|
3,492
|
|
||||||
|
|
2,206,693
|
|
|
82,741
|
|
|
463,320
|
|
|
21,407
|
|
|
2,670,013
|
|
|
104,148
|
|
||||||
Short-term
|
|
9,982
|
|
|
1
|
|
|
—
|
|
|
—
|
|
|
9,982
|
|
|
1
|
|
||||||
|
|
2,216,675
|
|
|
82,742
|
|
|
463,320
|
|
|
21,407
|
|
|
2,679,995
|
|
|
104,149
|
|
||||||
Fixed income securities, pledged as collateral:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
U. S. government obligations
|
|
64,555
|
|
|
57
|
|
|
—
|
|
|
—
|
|
|
64,555
|
|
|
57
|
|
||||||
Total collateralized investments
|
|
64,555
|
|
|
57
|
|
|
—
|
|
|
—
|
|
|
64,555
|
|
|
57
|
|
||||||
Total temporarily impaired securities
|
|
$
|
2,281,230
|
|
|
$
|
82,799
|
|
|
$
|
463,320
|
|
|
$
|
21,407
|
|
|
$
|
2,744,550
|
|
|
$
|
104,206
|
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
Gross realized gains on securities
|
|
$
|
3,912
|
|
|
$
|
343
|
|
|
$
|
10,391
|
|
|
$
|
54,484
|
|
Gross realized losses on securities
|
|
(561
|
)
|
|
(2,463
|
)
|
|
(4,673
|
)
|
|
(7,431
|
)
|
||||
Net foreign exchange gains
|
|
8,398
|
|
|
4,226
|
|
|
22,030
|
|
|
3,801
|
|
||||
Net realized gains
|
|
$
|
11,749
|
|
|
$
|
2,106
|
|
|
$
|
27,748
|
|
|
$
|
50,854
|
|
Net other-than-temporary impairments
(1)
|
|
$
|
(2,853
|
)
|
|
$
|
(9,150
|
)
|
|
$
|
(19,628
|
)
|
|
$
|
(13,289
|
)
|
(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,
|
||||||
|
|
2016
|
|
2015
|
||||
Balance, beginning of period
|
|
$
|
31,176
|
|
|
$
|
14,062
|
|
Additions for credit impairments recognized on:
|
|
|
|
|
||||
Securities not previously impaired
|
|
2,257
|
|
|
7,172
|
|
||
Securities previously impaired
|
|
16,672
|
|
|
4,059
|
|
||
Balance, end of period
|
|
$
|
50,105
|
|
|
$
|
25,293
|
|
|
|
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, 2016:
|
|
|
|
|
|
|
||||||
Sources of Collateral:
|
|
|
|
|
|
|
||||||
Cash and securities pledged directly from the investment portfolio
|
|
$
|
370,964
|
|
|
$
|
88,933
|
|
|
$
|
282,031
|
|
|
|
|
|
|
|
|
||||||
December 31, 2015:
|
|
|
|
|
|
|
||||||
Sources of Collateral:
|
|
|
|
|
|
|
||||||
Cash and securities pledged directly from the investment portfolio
|
|
$
|
338,007
|
|
|
$
|
108,379
|
|
|
$
|
229,628
|
|
|
|
Municipal
obligations |
|
Corporate
obligations |
|
Mortgage
and asset- backed securities |
|
Total
|
|
Weighted
Average Underlying Rating (1) |
||||||||
September 30, 2016:
|
|
|
|
|
|
|
|
|
|
|
||||||||
Ambac Assurance Corporation
(2)
|
|
$
|
90,503
|
|
|
$
|
—
|
|
|
$
|
2,772,240
|
|
|
$
|
2,862,743
|
|
|
CC
|
National Public Finance Guarantee Corporation
|
|
39,561
|
|
|
—
|
|
|
—
|
|
|
39,561
|
|
|
A-
|
||||
Assured Guaranty Municipal Corporation
|
|
29,774
|
|
|
—
|
|
|
—
|
|
|
29,774
|
|
|
AA
|
||||
MBIA Insurance Corporation
|
|
—
|
|
|
23,085
|
|
|
—
|
|
|
23,085
|
|
|
AA-
|
||||
Total
|
|
$
|
159,838
|
|
|
$
|
23,085
|
|
|
$
|
2,772,240
|
|
|
$
|
2,955,163
|
|
|
CCC-
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
December 31, 2015:
|
|
|
|
|
|
|
|
|
|
|
||||||||
Ambac Assurance Corporation
(2)
|
|
$
|
60,836
|
|
|
$
|
—
|
|
|
$
|
2,216,317
|
|
|
$
|
2,277,153
|
|
|
CC
|
National Public Finance Guarantee Corporation
|
|
47,846
|
|
|
—
|
|
|
—
|
|
|
47,846
|
|
|
A-
|
||||
Assured Guaranty Municipal Corporation
|
|
57,715
|
|
|
—
|
|
|
—
|
|
|
57,715
|
|
|
A+
|
||||
MBIA Insurance Corporation
|
|
—
|
|
|
25,645
|
|
|
—
|
|
|
25,645
|
|
|
A+
|
||||
Total
|
|
$
|
166,397
|
|
|
$
|
25,645
|
|
|
$
|
2,216,317
|
|
|
$
|
2,408,359
|
|
|
CCC-
|
(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 asset-backed securities with a fair value of
$120,028
and
$119,802
at
September 30, 2016 and December 31, 2015
, insured by Ambac UK
.
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
Fixed income securities
|
|
$
|
81,831
|
|
|
$
|
67,293
|
|
|
$
|
207,358
|
|
|
$
|
197,506
|
|
Short-term investments
|
|
194
|
|
|
85
|
|
|
1,124
|
|
|
186
|
|
||||
Loans
|
|
97
|
|
|
113
|
|
|
273
|
|
|
338
|
|
||||
Investment expense
|
|
(2,592
|
)
|
|
(1,872
|
)
|
|
(6,875
|
)
|
|
(6,801
|
)
|
||||
Securities available-for-sale and short-term
|
|
79,530
|
|
|
65,619
|
|
|
201,880
|
|
|
191,229
|
|
||||
Other investments
|
|
11,387
|
|
|
(1,424
|
)
|
|
20,616
|
|
|
10,702
|
|
||||
Total net investment income
|
|
$
|
90,917
|
|
|
$
|
64,195
|
|
|
$
|
222,496
|
|
|
$
|
201,931
|
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
Net gains (losses) recognized during the period on trading securities
|
|
$
|
10,197
|
|
|
$
|
(2,549
|
)
|
|
$
|
17,145
|
|
|
$
|
7,493
|
|
Less: net gains (losses) recognized during the reporting period on trading securities sold during the period
|
|
1,859
|
|
|
933
|
|
|
5,268
|
|
|
7,534
|
|
||||
Unrealized gains (losses) recognized during the reporting period on trading securities still held at the reporting date
|
|
$
|
8,338
|
|
|
$
|
(3,482
|
)
|
|
$
|
11,877
|
|
|
$
|
(41
|
)
|
|
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, 2016:
|
|
|
|
|
|
|
|
|
|
||||||||||
Derivative Assets:
|
|
|
|
|
|
|
|
|
|
||||||||||
Interest rate swaps
|
$
|
201,337
|
|
|
$
|
97,964
|
|
|
$
|
103,373
|
|
|
$
|
—
|
|
|
$
|
103,373
|
|
Total non-VIE derivative assets
|
$
|
201,337
|
|
|
$
|
97,964
|
|
|
$
|
103,373
|
|
|
$
|
—
|
|
|
$
|
103,373
|
|
Derivative Liabilities:
|
|
|
|
|
|
|
|
|
|
||||||||||
Credit derivatives
|
$
|
16,700
|
|
|
$
|
—
|
|
|
$
|
16,700
|
|
|
$
|
—
|
|
|
$
|
16,700
|
|
Interest rate swaps
|
516,638
|
|
|
97,964
|
|
|
418,674
|
|
|
230,873
|
|
|
187,801
|
|
|||||
Futures contracts
|
36
|
|
|
—
|
|
|
36
|
|
|
36
|
|
|
—
|
|
|||||
Total non-VIE derivative liabilities
|
$
|
533,374
|
|
|
$
|
97,964
|
|
|
$
|
435,410
|
|
|
$
|
230,909
|
|
|
$
|
204,501
|
|
VIE derivative assets:
|
|
|
|
|
|
|
|
|
|
||||||||||
Currency swaps
|
$
|
68,676
|
|
|
$
|
—
|
|
|
$
|
68,676
|
|
|
$
|
—
|
|
|
$
|
68,676
|
|
Total VIE derivative assets
|
$
|
68,676
|
|
|
$
|
—
|
|
|
$
|
68,676
|
|
|
$
|
—
|
|
|
$
|
68,676
|
|
VIE derivative liabilities:
|
|
|
|
|
|
|
|
|
|
||||||||||
Interest rate swaps
|
$
|
2,304,789
|
|
|
$
|
—
|
|
|
$
|
2,304,789
|
|
|
$
|
—
|
|
|
$
|
2,304,789
|
|
Total VIE derivative liabilities
|
$
|
2,304,789
|
|
|
$
|
—
|
|
|
$
|
2,304,789
|
|
|
$
|
—
|
|
|
$
|
2,304,789
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
December 31, 2015:
|
|
|
|
|
|
|
|
|
|
||||||||||
Derivative Assets:
|
|
|
|
|
|
|
|
|
|
||||||||||
Interest rate swaps
|
$
|
137,015
|
|
|
$
|
52,129
|
|
|
$
|
84,886
|
|
|
$
|
—
|
|
|
$
|
84,886
|
|
Futures contracts
|
109
|
|
|
—
|
|
|
109
|
|
|
—
|
|
|
109
|
|
|||||
Total non-VIE derivative assets
|
$
|
137,124
|
|
|
$
|
52,129
|
|
|
$
|
84,995
|
|
|
$
|
—
|
|
|
$
|
84,995
|
|
Derivative Liabilities:
|
|
|
|
|
|
|
|
|
|
||||||||||
Credit derivatives
|
$
|
34,543
|
|
|
$
|
—
|
|
|
$
|
34,543
|
|
|
$
|
—
|
|
|
$
|
34,543
|
|
Interest rate swaps
|
370,944
|
|
|
52,129
|
|
|
318,815
|
|
|
176,386
|
|
|
142,429
|
|
|||||
Total non-VIE derivative liabilities
|
$
|
405,487
|
|
|
$
|
52,129
|
|
|
$
|
353,358
|
|
|
$
|
176,386
|
|
|
$
|
176,972
|
|
Variable Interest Entities Derivative Assets:
|
|
|
|
|
|
|
|
|
|
||||||||||
Currency swaps
|
36,862
|
|
|
36,862
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Total VIE derivative assets
|
$
|
36,862
|
|
|
$
|
36,862
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Variable Interest Entities Derivative Liabilities:
|
|
|
|
|
|
|
|
|
|
||||||||||
Interest rate swaps
|
$
|
1,965,265
|
|
|
$
|
—
|
|
|
$
|
1,965,265
|
|
|
$
|
—
|
|
|
$
|
1,965,265
|
|
Currency swaps
|
—
|
|
|
36,862
|
|
|
(36,862
|
)
|
|
—
|
|
|
(36,862
|
)
|
|||||
Total VIE derivative liabilities
|
$
|
1,965,265
|
|
|
$
|
36,862
|
|
|
$
|
1,928,403
|
|
|
$
|
—
|
|
|
$
|
1,928,403
|
|
|
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,
|
|||||||||||||
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|||||||||
Financial Guarantee:
|
|
|
|
|
|
|
|
|
|
||||||||
Credit derivatives
|
Net change in fair value of credit derivatives
|
|
$
|
1,733
|
|
|
$
|
36,952
|
|
|
$
|
18,554
|
|
|
$
|
44,746
|
|
Financial Services derivatives products:
|
|
|
|
|
|
|
|
|
|
||||||||
Interest rate swaps
|
Derivative products
|
|
(14,646
|
)
|
|
(63,044
|
)
|
|
(125,079
|
)
|
|
(48,839
|
)
|
||||
Futures contracts
|
Derivative products
|
|
136
|
|
|
(2,039
|
)
|
|
(9,186
|
)
|
|
(3,019
|
)
|
||||
Total Financial Services derivative products
|
|
|
(14,510
|
)
|
|
(65,083
|
)
|
|
(134,265
|
)
|
|
(51,858
|
)
|
||||
Variable Interest Entities:
|
|
|
|
|
|
|
|
|
|
||||||||
Currency swaps
|
Income (loss) on variable interest entities
|
|
5,509
|
|
|
12,235
|
|
|
31,814
|
|
|
53,552
|
|
||||
Interest rate swaps
|
Income (loss) on variable interest entities
|
|
(180,744
|
)
|
|
(15,793
|
)
|
|
(339,524
|
)
|
|
68,044
|
|
||||
Total Variable Interest Entities
|
|
|
(175,235
|
)
|
|
(3,558
|
)
|
|
(307,710
|
)
|
|
121,596
|
|
||||
Total derivative contracts
|
|
|
$
|
(188,012
|
)
|
|
$
|
(31,689
|
)
|
|
$
|
(423,421
|
)
|
|
$
|
114,484
|
|
|
|
September 30, 2016
|
|
December 31, 2015
|
||||||||||||||||||||
Ambac Rating
|
|
CLO
|
|
Other
|
|
Total
|
|
CLO
|
|
Other
|
|
Total
|
||||||||||||
AAA
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
AA
|
|
176,384
|
|
|
200,077
|
|
|
376,461
|
|
|
295,254
|
|
|
241,458
|
|
|
536,712
|
|
||||||
A
|
|
—
|
|
|
241,385
|
|
|
241,385
|
|
|
—
|
|
|
9,322
|
|
|
9,322
|
|
||||||
BBB
(1)
|
|
—
|
|
|
131,110
|
|
|
131,110
|
|
|
—
|
|
|
356,323
|
|
|
356,323
|
|
||||||
Below investment grade
(2)
|
|
—
|
|
|
72,032
|
|
|
72,032
|
|
|
—
|
|
|
68,526
|
|
|
68,526
|
|
||||||
Total
|
|
$
|
176,384
|
|
|
$
|
644,604
|
|
|
$
|
820,988
|
|
|
$
|
295,254
|
|
|
$
|
675,629
|
|
|
$
|
970,883
|
|
(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, 2016
|
|
December 31, 2015
|
||||||||||||||||||||
|
|
CLO
|
|
Other
|
|
Total
|
|
CLO
|
|
Other
|
|
Total
|
||||||||||||
Number of CDS transactions
|
|
3
|
|
|
5
|
|
|
8
|
|
|
5
|
|
|
9
|
|
|
14
|
|
||||||
Remaining expected weighted-average life of obligations (in years)
|
|
0.7
|
|
|
6.2
|
|
|
5.0
|
|
|
1.1
|
|
|
5.6
|
|
|
4.3
|
|
||||||
Gross principal notional outstanding
|
|
$
|
176,384
|
|
|
$
|
644,604
|
|
|
$
|
820,988
|
|
|
$
|
295,254
|
|
|
$
|
675,629
|
|
|
$
|
970,883
|
|
Net derivative liabilities at fair value
|
|
$
|
399
|
|
|
$
|
16,301
|
|
|
$
|
16,700
|
|
|
$
|
1,837
|
|
|
$
|
32,706
|
|
|
$
|
34,543
|
|
|
Notional
|
||||||
Type of derivative
|
September 30,
2016 |
|
December 31,
2015 |
||||
Interest rate swaps—receive-fixed/pay-variable
|
$
|
919,719
|
|
|
$
|
773,072
|
|
Interest rate swaps—pay-fixed/receive-variable
|
1,741,644
|
|
|
1,429,644
|
|
||
Interest rate swaps—basis swaps
|
—
|
|
|
38,965
|
|
||
Futures contracts
|
115,000
|
|
|
100,000
|
|
|
Notional
|
||||||
Type of VIE derivative
|
September 30,
2016 |
|
December 31,
2015 |
||||
Interest rate swaps—receive-fixed/pay-variable
|
$
|
1,424,555
|
|
|
$
|
1,616,289
|
|
Interest rate swaps—pay-fixed/receive-variable
|
2,444,149
|
|
|
2,796,496
|
|
||
Currency swaps
|
322,277
|
|
|
331,992
|
|
||
Credit derivatives
|
12,706
|
|
|
15,616
|
|
Jurisdiction
|
Tax Year
|
United States
|
2010
|
New York State
|
2012
|
New York City
|
2012
|
United Kingdom
|
2012
|
Italy
|
2010
|
|
September 30,
2016 |
|
December 31,
2015 |
||||
Deferred tax liabilities:
|
|
|
|
||||
Insurance intangible
|
$
|
358,003
|
|
|
$
|
424,239
|
|
Variable interest entities
|
51,358
|
|
|
10,053
|
|
||
Investments
|
168,627
|
|
|
66,278
|
|
||
Unearned premiums and credit fees
|
91,250
|
|
|
98,945
|
|
||
Unremitted foreign earnings
|
23,296
|
|
|
—
|
|
||
Other
|
33,705
|
|
|
34,025
|
|
||
Total deferred tax liabilities
|
726,239
|
|
|
633,540
|
|
||
Deferred tax assets:
|
|
|
|
||||
Net operating loss and capital carryforward
|
1,438,595
|
|
|
1,504,569
|
|
||
Loss reserves
|
143,401
|
|
|
122,635
|
|
||
Compensation
|
6,279
|
|
|
2,839
|
|
||
AMT Credits
|
29,963
|
|
|
27,252
|
|
||
Other
|
9,912
|
|
|
9,913
|
|
||
Subtotal deferred tax assets
|
1,628,150
|
|
|
1,667,208
|
|
||
Valuation allowance
|
903,647
|
|
|
1,035,873
|
|
||
Total deferred tax assets
|
724,503
|
|
|
631,335
|
|
||
Net deferred tax (liability)
|
$
|
(1,736
|
)
|
|
$
|
(2,205
|
)
|
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%
|
•
|
Bragg Communities, LLC v. Ambac Assurance Corporation (General Court of Justice, Cumberland county, North Carolina, Case No. 15-CVS-9013). Ambac Assurance filed a motion to dismiss on February 5, 2016, which was granted on June 14, 2016. The court entered the dismissal of plaintiff’s complaint on June 24, 2016. Plaintiff’s time to appeal the dismissal has expired.
|
•
|
Ambac Assurance Corporation v. Fort Leavenworth Frontier Heritage Communities, II, LLC (U.S. District Court, District of Kansas, Index No. 15-CV-9596). On January 4, 2016, defendant moved to dismiss for failure to join an indispensable party, which Ambac Assurance opposed on January 25, 2016. Defendant filed its reply on February 8, 2016. On June 29, 2016, the court denied defendant’s motion to dismiss and granted Ambac Assurance leave to file an amended complaint, which was filed 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.
|
•
|
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). Ambac Assurance filed an Amended Complaint on September 8, 2011. 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. The court heard oral argument on July 15, 2015. 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 October 27, 2015 decision relating to its secondary-liability. Both the primary liability and successor liability appeals have been fully briefed. Oral argument has not yet been scheduled.
|
•
|
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). Defendant filed a motion to dismiss the complaint on February 20, 2015. The court heard oral argument on two of Countrywide’s grounds for dismissal on June 23, 2015, and indicated that it would dismiss the Wisconsin Action without prejudice for lack of personal jurisdiction. The court issued an order to that effect on July 2, 2015. Ambac Assurance appealed the July 2, 2015 order. On June 23, 2016, the Wisconsin Court of Appeals reversed the dismissal of the complaint and defendant petitioned the Wisconsin Supreme Court to review that decision. On October 11, 2016, the Wisconsin Supreme Court granted defendant’s petition. On June 30, 2015, plaintiffs filed a Summons with Notice in the Supreme Court of the State of New York, County of New York, No. 652321/15 (the “2015 New York Action”), alleging claims identical to the Wisconsin Action. On July 21, 2015, plaintiffs filed a complaint in the 2015 New York Action and a motion to stay the 2015 New York Action pending appeal and litigation of the Wisconsin Action. On August 5, 2015, Countrywide filed its opposition to plaintiffs’ motion to stay and on August 10, 2015, Countrywide filed a motion to dismiss the complaint, which Ambac opposed. The court held oral argument in November 2015 and on September 20, 2016 granted Ambac Assurance’s motion to stay. Countrywide’s motion to dismiss the complaint is held in abeyance pending resolution of the Wisconsin Action.
|
|
|
Financial
Guarantee |
|
Financial
Services |
|
Corporate
and Other |
|
Inter-segment
Eliminations |
|
Consolidated
|
||||||||||
Three Months Ended September 30, 2016:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Revenues:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Unaffiliated customers
(1)
|
|
$
|
156,236
|
|
|
$
|
(14,286
|
)
|
|
$
|
1,888
|
|
|
$
|
—
|
|
|
$
|
143,838
|
|
Equity in net income of investees accounted for by equity method
|
|
—
|
|
|
—
|
|
|
1,190
|
|
|
—
|
|
|
1,190
|
|
|||||
Inter-segment
|
|
375
|
|
|
(308
|
)
|
|
229
|
|
|
(296
|
)
|
|
—
|
|
|||||
Total revenues before expenses and reorganization items
|
|
156,611
|
|
|
(14,594
|
)
|
|
3,307
|
|
|
(296
|
)
|
|
145,028
|
|
|||||
Pre-tax income:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Unaffiliated customers
(1)(2)(3)
|
|
131,162
|
|
|
(14,912
|
)
|
|
(720
|
)
|
|
—
|
|
|
115,530
|
|
|||||
Equity in net income of investees accounted for by equity method
|
|
—
|
|
|
—
|
|
|
1,190
|
|
|
—
|
|
|
1,190
|
|
|||||
Inter-segment
|
|
(690
|
)
|
|
(435
|
)
|
|
1,125
|
|
|
—
|
|
|
—
|
|
|||||
Pre-tax income
|
|
130,472
|
|
|
(15,347
|
)
|
|
1,595
|
|
|
—
|
|
|
116,720
|
|
|||||
Total assets as of September 30, 2016
|
|
23,264,567
|
|
|
396,509
|
|
|
350,613
|
|
|
3,940
|
|
|
24,015,629
|
|
|||||
Net investment income
|
|
87,350
|
|
|
195
|
|
|
3,372
|
|
|
—
|
|
|
90,917
|
|
|||||
Insurance intangible amortization
|
|
44,553
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
44,553
|
|
|||||
Interest expense
|
|
31,352
|
|
|
141
|
|
|
—
|
|
|
—
|
|
|
31,493
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Three Months Ended September 30, 2015:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Revenues:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Unaffiliated customers
(1)
|
|
$
|
152,024
|
|
|
$
|
(66,997
|
)
|
|
$
|
1,538
|
|
|
$
|
—
|
|
|
$
|
86,565
|
|
Equity in net income of investees accounted for by equity method
|
|
—
|
|
|
—
|
|
|
1,125
|
|
|
—
|
|
|
1,125
|
|
|||||
Inter-segment
|
|
24
|
|
|
(204
|
)
|
|
252
|
|
|
(72
|
)
|
|
—
|
|
|||||
Total revenues before expenses and reorganization items
|
|
152,048
|
|
|
(67,201
|
)
|
|
2,915
|
|
|
(72
|
)
|
|
87,690
|
|
|||||
Pre-tax income (loss):
|
|
|
|
|
|
|
||||||||||||||
Unaffiliated customers
(1) (2) (3)
|
|
(320,414
|
)
|
|
(67,655
|
)
|
|
(1,249
|
)
|
|
—
|
|
|
(389,318
|
)
|
|||||
Equity in net income of investees accounted for by equity method
|
|
—
|
|
|
—
|
|
|
1,125
|
|
|
—
|
|
|
1,125
|
|
|||||
Inter-segment
|
|
(763
|
)
|
|
425
|
|
|
1,302
|
|
|
(964
|
)
|
|
—
|
|
|||||
Pre-tax income (loss)
|
|
(321,177
|
)
|
|
(67,230
|
)
|
|
1,178
|
|
|
(964
|
)
|
|
(388,193
|
)
|
|||||
Total assets as of September 30, 2015
|
|
23,610,582
|
|
|
363,118
|
|
|
289,238
|
|
|
3,981
|
|
|
24,266,919
|
|
|||||
Net investment income
|
|
61,292
|
|
|
139
|
|
|
2,764
|
|
|
—
|
|
|
64,195
|
|
|||||
Insurance intangible amortization
|
|
39,680
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
39,680
|
|
|||||
Interest expense
|
|
29,738
|
|
|
161
|
|
|
—
|
|
|
—
|
|
|
29,899
|
|
|||||
Goodwill impairment
|
|
514,511
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
514,511
|
|
(1)
|
Included in both revenues from unaffiliated customers and in pre-tax income from unaffiliated customers is net investment income.
|
(2)
|
Included in pre-tax income from unaffiliated customers is interest expense.
|
(3)
|
Included in pre-tax income from unaffiliated customers is the amortization of insurance intangible asset and impairment of goodwill. Such assets were established upon the adoption of Fresh Start on April 30, 2013.
|
|
|
Financial
Guarantee |
|
Financial
Services |
|
Corporate
and Other |
|
Inter-segment
Eliminations |
|
Consolidated
|
||||||||||
Nine Months Ended September 30, 2016:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Revenues:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Unaffiliated customers
(1)
|
|
$
|
393,557
|
|
|
$
|
(133,613
|
)
|
|
$
|
5,247
|
|
|
$
|
—
|
|
|
$
|
265,191
|
|
Equity in net income of investees accounted for by equity method
|
|
—
|
|
|
—
|
|
|
3,471
|
|
|
—
|
|
|
3,471
|
|
|||||
Inter-segment
|
|
1,214
|
|
|
(1,039
|
)
|
|
615
|
|
|
(790
|
)
|
|
—
|
|
|||||
Total revenues before expenses and reorganization items
|
|
394,771
|
|
|
(134,652
|
)
|
|
9,333
|
|
|
(790
|
)
|
|
268,662
|
|
|||||
Pre-tax income:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Unaffiliated customers
(1)(2)(3)
|
|
328,906
|
|
|
(135,529
|
)
|
|
(5,763
|
)
|
|
—
|
|
|
187,614
|
|
|||||
Equity in net income of investees accounted for by equity method
|
|
—
|
|
|
—
|
|
|
3,471
|
|
|
—
|
|
|
3,471
|
|
|||||
Inter-segment
|
|
(1,896
|
)
|
|
(1,401
|
)
|
|
3,297
|
|
|
—
|
|
|
—
|
|
|||||
Pre-tax income
|
|
327,010
|
|
|
(136,930
|
)
|
|
1,005
|
|
|
—
|
|
|
191,085
|
|
|||||
Total assets as of September 30, 2016
|
|
23,264,567
|
|
|
396,509
|
|
|
350,613
|
|
|
3,940
|
|
|
24,015,629
|
|
|||||
Net investment income
|
|
212,595
|
|
|
596
|
|
|
9,305
|
|
|
—
|
|
|
222,496
|
|
|||||
Insurance intangible amortization
|
|
134,456
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
134,456
|
|
|||||
Interest expense
|
|
92,193
|
|
|
439
|
|
|
—
|
|
|
—
|
|
|
92,632
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Nine Months Ended September 30, 2015:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Revenues:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Unaffiliated customers
(1)
|
|
$
|
521,340
|
|
|
$
|
(53,566
|
)
|
|
$
|
2,951
|
|
|
$
|
—
|
|
|
$
|
470,725
|
|
Equity in net income of investees accounted for by equity method
|
|
—
|
|
|
—
|
|
|
3,208
|
|
|
—
|
|
|
3,208
|
|
|||||
Inter-segment
|
|
286
|
|
|
(565
|
)
|
|
388
|
|
|
(109
|
)
|
|
—
|
|
|||||
Total revenues before expenses and reorganization items
|
|
521,626
|
|
|
(54,131
|
)
|
|
6,547
|
|
|
(109
|
)
|
|
473,933
|
|
|||||
Pre-tax income:
|
|
|
|
|
|
|
||||||||||||||
Unaffiliated customers
(1) (2) (3)
|
|
172,271
|
|
|
(55,861
|
)
|
|
(5,136
|
)
|
|
—
|
|
|
111,274
|
|
|||||
Equity in net income of investees accounted for by equity method
|
|
—
|
|
|
—
|
|
|
3,208
|
|
|
—
|
|
|
3,208
|
|
|||||
Inter-segment
|
|
(2,087
|
)
|
|
(139
|
)
|
|
3,027
|
|
|
(801
|
)
|
|
—
|
|
|||||
Pre-tax income
|
|
170,184
|
|
|
(56,000
|
)
|
|
1,099
|
|
|
(801
|
)
|
|
114,482
|
|
|||||
Total assets as of September 30, 2015
|
|
23,610,582
|
|
|
363,118
|
|
|
289,238
|
|
|
3,981
|
|
|
24,266,919
|
|
|||||
Net investment income
|
|
195,270
|
|
|
401
|
|
|
6,260
|
|
|
—
|
|
|
201,931
|
|
|||||
Insurance intangible amortization
|
|
115,200
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
115,200
|
|
|||||
Interest expense
|
|
85,165
|
|
|
815
|
|
|
—
|
|
|
—
|
|
|
85,980
|
|
|||||
Goodwill impairment
|
|
514,511
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
514,511
|
|
(1)
|
Included in both revenues from unaffiliated customers and in pre-tax income from unaffiliated customers is net investment income.
|
(2)
|
Included in pre-tax income from unaffiliated customers is interest expense.
|
(3)
|
Included in pre-tax income from unaffiliated customers is the amortization of insurance intangible asset and impairment of goodwill. Such assets were established upon the adoption of Fresh Start on April 30, 2013
.
|
|
|
Three Months Ended September 30, 2016
|
|
Three Months Ended September 30, 2015
|
||||||||||||||||||||
|
|
Gross
Premiums Written |
|
Net
Premiums Earned |
|
Net Change in
Fair Value of Credit Derivatives |
|
Gross
Premiums Written |
|
Net
Premiums Earned |
|
Net Change in
Fair Value of Credit Derivatives |
||||||||||||
United States
|
|
$
|
(7,555
|
)
|
|
$
|
45,257
|
|
|
$
|
520
|
|
|
$
|
(2,386
|
)
|
|
$
|
60,402
|
|
|
$
|
30,604
|
|
United Kingdom
|
|
(598
|
)
|
|
6,018
|
|
|
—
|
|
|
260
|
|
|
8,081
|
|
|
—
|
|
||||||
Other international
|
|
(2,390
|
)
|
|
1,943
|
|
|
1,213
|
|
|
(6,584
|
)
|
|
3,052
|
|
|
6,348
|
|
||||||
Total
|
|
$
|
(10,543
|
)
|
|
$
|
53,218
|
|
|
$
|
1,733
|
|
|
$
|
(8,710
|
)
|
|
$
|
71,535
|
|
|
$
|
36,952
|
|
|
|
Nine Months Ended September 30, 2016
|
|
Nine Months Ended September 30, 2015
|
||||||||||||||||||||
|
|
Gross
Premiums Written |
|
Net
Premiums Earned |
|
Net Change in
Fair Value of Credit Derivatives |
|
Gross
Premiums Written |
|
Net
Premiums Earned |
|
Net Change in
Fair Value of Credit Derivatives |
||||||||||||
United States
|
|
$
|
(25,988
|
)
|
|
$
|
126,003
|
|
|
$
|
1,613
|
|
|
$
|
(5,172
|
)
|
|
$
|
163,094
|
|
|
$
|
39,286
|
|
United Kingdom
|
|
14,157
|
|
|
19,111
|
|
|
—
|
|
|
7,295
|
|
|
23,659
|
|
|
—
|
|
||||||
Other international
|
|
(27,533
|
)
|
|
2,306
|
|
|
16,941
|
|
|
(20,963
|
)
|
|
11,379
|
|
|
5,460
|
|
||||||
Total
|
|
$
|
(39,364
|
)
|
|
$
|
147,420
|
|
|
$
|
18,554
|
|
|
$
|
(18,840
|
)
|
|
$
|
198,132
|
|
|
$
|
44,746
|
|
($ in billions)
|
September 30,
2016 |
|
December 31,
2015 |
|
$ Variance
|
|
% Variance
|
|||||||
Total
|
$
|
86.4
|
|
|
$
|
108.3
|
|
|
$
|
(21.9
|
)
|
|
(20
|
)%
|
BIG
|
17.3
|
|
|
19.8
|
|
|
(2.5
|
)
|
|
(13
|
)%
|
•
|
Liquid investments in asset-backed and short-term securities of
$213.1 million
;
|
•
|
Investments in Ambac Assurance-insured securities with a fair value of
$84.1 million
;
|
•
|
Investments in Ambac Assurance surplus notes with a fair value of
$13.9 million
, which are eliminated in consolidation and
|
•
|
Residual interest with a carrying value of
$28.8 million
in a VIE Trust that was created in 2014 to monetize Ambac's ownership interest in Segregated Account's junior surplus notes.
|
•
|
A reduction of investments and loan values held in British Pounds and Euros of approximately $24.2 million. As of
September 30, 2016
Ambac held British Pound and Euro loans and investments of £171.1 million and €23.7 million, respectively. All but £3.5 million of these amounts were held by Ambac UK. Included within the British Pound portfolio is £26.5 million invested in a UK property fund.
|
◦
|
Since the referendum vote, there have been reduced valuations of commercial real estate and a number of such funds have suspended redemptions. The UK property fund that Ambac UK has invested in has not suspended redemptions as of this date.
|
•
|
A reduction in premiums receivable denominated in British Pounds and Euros of $21.4 million. As of
September 30, 2016
premium receivables in British Pounds totaled £150.4 million and Euros totaled €34.1 million.
|
•
|
An increase in the carrying value of loss reserves related to policies where loss payments will be made in currencies other than the US dollar of $0.2 million. As of
September 30, 2016
, loss and loss expense reserves for British Pounds totaled zero and Euros totaled €15.2 million.
|
(1)
|
A portion of Ambac UK's, and to a lesser extent Ambac Assurance's, transactions, assets and liabilities are denominated in currencies other than its functional currency and accordingly, we recognized net foreign currency transactions gains/(losses) as a result of changes to foreign currency rates through our Consolidated Statement of Total Comprehensive Income. Refer to
Note 1. Background and Business Description
to the Unaudited Consolidated Financial Statements included in Part I, Item 1 in this Form 10-Q for further details on transaction gains and losses.
|
($ in millions)
|
September 30,
2016 |
|
December 31,
2015 |
||||
Public Finance
(1) (2)
|
$
|
50,135
|
|
|
$
|
65,436
|
|
Structured Finance
|
17,922
|
|
|
21,814
|
|
||
International Finance
|
18,346
|
|
|
21,049
|
|
||
Total net par outstanding
(3)
|
$
|
86,403
|
|
|
$
|
108,299
|
|
(1)
|
Includes
$5,971
and
$6,015
of Military Housing net par outstanding at
September 30, 2016 and December 31, 2015
, respectively.
|
(2)
|
Includes
$2,085
and
$2,163
of Puerto Rico net par outstanding at
September 30, 2016 and December 31, 2015
, 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.
|
(3)
|
Included in the above net par exposures at
September 30, 2016 and December 31, 2015
are
$821
and
$971
, respectively, of exposures that were executed in credit derivative form.
|
•
|
Reductions in public finance net par outstanding included
$6,862 million
from calls of insured exposures and
$5,207 million
from refundings and pre-refundings of insured exposures and scheduled paydown activity of
$3,232 million
.
|
•
|
Reductions in structured finance net par primarily were due to RMBS paydown activity of
$1,522 million
, asset-backed bond cancellations of
$459 million
, student loan commutations of
$387 million
and other policy runoff.
|
•
|
Reductions in international finance were primarily due to changes in foreign exchange rates of
$1,615 million
primarily related to changes in the British Pound, in addition to policy runoff including prepayments of investor-owned utility and asset-backed transactions. The British Pound has decreased in value relative to all the major currencies, primarily driven by the result of the Brexit vote.
|
Currency
(Amounts in millions)
|
|
Net Par Amount
Outstanding in
Base Currency
|
|
Net Par Amount
Outstanding in
U.S. Dollars
|
||||
U.S. Dollars
|
|
$
|
69,390
|
|
|
$
|
69,390
|
|
British Pounds
|
|
£
|
10,155
|
|
|
13,181
|
|
|
Euros
|
|
€
|
1,841
|
|
|
2,069
|
|
|
Australian Dollars
|
|
A$
|
1,932
|
|
|
1,480
|
|
|
New Zealand Dollars
|
|
NZ$
|
389
|
|
|
283
|
|
|
Total
|
|
|
|
$
|
86,403
|
|
($ in millions)
|
Ambac
Ratings
(1)
|
|
Net Par
Outstanding
|
|
% of Total
Net Par
Outstanding
|
|||
New Jersey Transportation Trust Fund Authority - Transportation System
|
BBB+
|
|
$
|
1,646
|
|
|
1.9
|
%
|
California State - GO
|
A
|
|
1,344
|
|
|
1.6
|
%
|
|
Puerto Rico Sales Tax Financing Corporation - Senior Sales Tax Revenue (COFINA)
|
BIG
|
|
805
|
|
|
0.9
|
%
|
|
Massachusetts Commonwealth - GO
|
AA
|
|
802
|
|
|
0.9
|
%
|
|
Chicago, IL - GO
|
BBB-
|
|
586
|
|
|
0.7
|
%
|
|
Mets Queens Baseball Stadium Project, NY, Lease Revenue
|
BIG
|
|
572
|
|
|
0.7
|
%
|
|
Hickam Community Housing LLC
|
BBB
|
|
477
|
|
|
0.6
|
%
|
|
Puerto Rico Infrastructure Financing Authority, Special Tax Revenue
|
BIG
|
|
471
|
|
|
0.5
|
%
|
|
Puerto Rico Highways & Transportation Authority, Transportation Revenue
|
BIG
|
|
458
|
|
|
0.5
|
%
|
|
Metropolitan Washington Airports Authority, DC, Airport System Revenue
|
AA-
|
|
448
|
|
|
0.5
|
%
|
|
Total
|
|
|
$
|
7,609
|
|
|
8.8
|
%
|
(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
|
|
|
1.0
|
%
|
Wachovia Asset Securitization Issuance II, LLC 2007-HE2
(3)
|
Mortgage Backed Securities
|
|
BIG
|
|
664
|
|
|
0.8
|
%
|
|
Timberlake Financial, LLC
|
Structured Insurance
|
|
BBB
|
|
573
|
|
|
0.7
|
%
|
|
Progress Energy Carolinas, Inc.
|
Investor Owned Utility
|
|
A-
|
|
558
|
|
|
0.6
|
%
|
|
Wachovia Asset Securitization Issuance II, LLC 2007-HE1
(3)
|
Mortgage Backed Securities
|
|
BIG
|
|
468
|
|
|
0.5
|
%
|
|
CenterPoint Energy Inc.
|
Investor Owned Utility
|
|
BBB+
|
|
376
|
|
|
0.4
|
%
|
|
Consolidated Edison Company of New York
|
Investor Owned Utility
|
|
A
|
|
347
|
|
|
0.4
|
%
|
|
Option One Mortgage Loan Trust 2007-FXD1
(3)
|
Mortgage Backed Securities
|
|
BIG
|
|
317
|
|
|
0.4
|
%
|
|
Countrywide Asset-Backed Certificates Trust 2005-16
(3)
|
Mortgage Backed Securities
|
|
BIG
|
|
283
|
|
|
0.3
|
%
|
|
Impac CMB Trust Series 2005-7
(3)
|
Mortgage Backed Securities
|
|
BIG
|
|
271
|
|
|
0.3
|
%
|
|
Total
|
|
|
|
|
$
|
4,757
|
|
|
5.5
|
%
|
(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+
|
|
$
|
1,520
|
|
|
1.8
|
%
|
National Grid Electricity Transmission
|
|
UK-Utility
|
|
A-
|
|
1,047
|
|
|
1.2
|
%
|
|
Aspire Defence Finance plc
|
|
UK-Infrastructure
|
|
BBB+
|
|
911
|
|
|
1.1
|
%
|
|
Capital Hospitals plc
(2)
|
|
UK-Infrastructure
|
|
A-
|
|
874
|
|
|
1.0
|
%
|
|
Posillipo Finance II S.r.l
|
|
Italy-Sub-Sovereign
|
|
BBB-
|
|
801
|
|
|
0.9
|
%
|
|
Telereal Securitisation plc
|
|
UK-Asset Securitizations
|
|
AA
|
|
787
|
|
|
0.9
|
%
|
|
Ostregion Investmentgesellschaft NR 1 SA
(2)
|
|
Austria-Infrastructure
|
|
BIG
|
|
753
|
|
|
0.9
|
%
|
|
Anglian Water
|
|
UK-Utility
|
|
A-
|
|
730
|
|
|
0.8
|
%
|
|
National Grid Gas
|
|
UK-Utility
|
|
A-
|
|
674
|
|
|
0.8
|
%
|
|
RMPA Services plc
|
|
UK-Infrastructure
|
|
BBB+
|
|
611
|
|
|
0.7
|
%
|
|
Total
|
|
|
|
|
|
$
|
8,708
|
|
|
10.1
|
%
|
(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)
|
A portion of this transaction is insured by Ambac Assurance whose obligations generally are second to pay to Ambac UK's policy.
|
Percentage of Net Par Outstanding For Guaranteed Portfolio
Ambac Rating
(1)
|
September 30,
2016 |
|
December 31,
2015 |
||
AAA
|
<1%
|
|
|
<1%
|
|
AA
|
14
|
|
|
16
|
|
A
|
40
|
|
|
39
|
|
BBB
|
26
|
|
|
27
|
|
Below investment grade
|
20
|
|
|
18
|
|
Total
|
100
|
%
|
|
100
|
%
|
(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,
2016 |
|
December 31,
2015 |
||||
Public Finance:
|
|
|
|
||||
Lease and tax-backed revenue
(1)
|
$
|
2,146
|
|
|
$
|
2,168
|
|
General obligation
(1)
|
709
|
|
|
746
|
|
||
Transportation
|
415
|
|
|
432
|
|
||
Housing
(2)
|
126
|
|
|
126
|
|
||
Health care
|
6
|
|
|
6
|
|
||
Other
|
791
|
|
|
766
|
|
||
Total Public Finance
|
4,193
|
|
|
4,244
|
|
||
Structured Finance:
|
|
|
|
||||
Residential mortgage-backed and home equity—first lien
|
5,373
|
|
|
6,055
|
|
||
Residential mortgage-backed and home equity—second lien
|
3,703
|
|
|
4,374
|
|
||
Structured Insurance
|
900
|
|
|
1,037
|
|
||
Student loans
|
1,007
|
|
|
1,426
|
|
||
Mortgage-backed and home equity—other
|
203
|
|
|
251
|
|
||
Other
|
290
|
|
|
525
|
|
||
Total Structured Finance
|
11,476
|
|
|
13,668
|
|
||
International Finance:
|
|
|
|
||||
Transportation
|
899
|
|
|
895
|
|
||
Asset-backed
|
478
|
|
|
703
|
|
||
Other
|
272
|
|
|
282
|
|
||
Total International Finance
|
1,649
|
|
|
1,880
|
|
||
Total
|
$
|
17,318
|
|
|
$
|
19,792
|
|
(1)
|
Lease and tax-backed revenue includes
$1,871
and
$1,916
of Puerto Rico net par at
September 30, 2016 and December 31, 2015
, respectively. General obligation includes
$214
and
$247
of Puerto Rico net par at
September 30, 2016 and December 31, 2015
, 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.
|
(2)
|
Includes
$125
of military housing net par at
September 30, 2016 and December 31, 2015
.
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
($ in millions)
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
Revenues:
|
|
|
|
|
|
|
|
||||||||
Net premiums earned
|
$
|
53.2
|
|
|
$
|
71.5
|
|
|
$
|
147.4
|
|
|
$
|
198.1
|
|
Net investment income
|
90.9
|
|
|
64.2
|
|
|
222.5
|
|
|
201.9
|
|
||||
Net other-than-temporary impairment losses
|
(2.9
|
)
|
|
(9.2
|
)
|
|
(19.6
|
)
|
|
(13.3
|
)
|
||||
Net realized investment gains (losses)
|
11.7
|
|
|
2.1
|
|
|
27.7
|
|
|
50.9
|
|
||||
Change in fair value of credit derivatives
|
1.7
|
|
|
37.0
|
|
|
18.6
|
|
|
44.7
|
|
||||
Derivative product revenues
|
(14.5
|
)
|
|
(65.1
|
)
|
|
(134.3
|
)
|
|
(51.9
|
)
|
||||
Other income
|
2.7
|
|
|
7.2
|
|
|
17.6
|
|
|
5.2
|
|
||||
Income (loss) on variable interest entities
|
2.1
|
|
|
(21.4
|
)
|
|
(16.1
|
)
|
|
38.1
|
|
||||
Expenses:
|
|
|
|
|
|
|
|
||||||||
Loss and loss expenses (benefit)
|
(69.2
|
)
|
|
(133.2
|
)
|
|
(227.0
|
)
|
|
(431.6
|
)
|
||||
Insurance intangible amortization
|
44.6
|
|
|
39.7
|
|
|
134.5
|
|
|
115.2
|
|
||||
Operating expenses
|
21.5
|
|
|
25.0
|
|
|
77.5
|
|
|
75.4
|
|
||||
Interest expense
|
31.5
|
|
|
29.9
|
|
|
92.6
|
|
|
86.0
|
|
||||
Goodwill impairment
|
—
|
|
|
514.5
|
|
|
—
|
|
|
514.5
|
|
||||
Provision (benefit) for income taxes
|
15.3
|
|
|
2.8
|
|
|
21.9
|
|
|
8.5
|
|
||||
Less: net loss (gain) attributable to noncontrolling interest
|
—
|
|
|
—
|
|
|
(0.3
|
)
|
|
(0.4
|
)
|
||||
Net income (loss) attributable to common stockholders
|
$
|
101.5
|
|
|
$
|
(391.0
|
)
|
|
$
|
169.5
|
|
|
$
|
106.4
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
($ in millions)
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
Normal Premiums Earned:
|
|
|
|
|
|
|
|
||||||||
Public Finance
|
$
|
20.8
|
|
|
$
|
24.4
|
|
|
$
|
64.1
|
|
|
$
|
73.9
|
|
Structured Finance
|
6.4
|
|
|
7.6
|
|
|
20.0
|
|
|
25.7
|
|
||||
International Finance
|
7.8
|
|
|
11.1
|
|
|
25.1
|
|
|
33.6
|
|
||||
Total normal premiums earned
|
35.0
|
|
|
43.1
|
|
|
109.2
|
|
|
133.2
|
|
||||
Accelerated earnings:
|
|
|
|
|
|
|
|
||||||||
Public Finance
|
18.5
|
|
|
26.1
|
|
|
39.3
|
|
|
61.1
|
|
||||
Structured Finance
|
(0.5
|
)
|
|
2.2
|
|
|
2.6
|
|
|
2.4
|
|
||||
International Finance
|
0.2
|
|
|
0.1
|
|
|
(3.7
|
)
|
|
1.4
|
|
||||
Total accelerated earnings
|
18.2
|
|
|
28.4
|
|
|
38.2
|
|
|
64.9
|
|
||||
Total net premiums earned
|
$
|
53.2
|
|
|
$
|
71.5
|
|
|
$
|
147.4
|
|
|
$
|
198.1
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
($ in millions)
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
Financial Guarantee
|
$
|
87.3
|
|
|
$
|
61.3
|
|
|
$
|
212.6
|
|
|
$
|
195.2
|
|
Financial Services
|
0.2
|
|
|
0.1
|
|
|
0.6
|
|
|
0.4
|
|
||||
Corporate
|
3.4
|
|
|
2.8
|
|
|
9.3
|
|
|
6.3
|
|
||||
Total net investment income
|
$
|
90.9
|
|
|
$
|
64.2
|
|
|
$
|
222.5
|
|
|
$
|
201.9
|
|
($ in millions)
|
Financial
Guarantee
|
|
Financial
Services
|
|
Corporate
|
|
Total
|
||||||||
Three Months Ended September 30, 2016:
|
|
|
|
|
|
|
|
||||||||
Net gains on securities sold or called
|
$
|
3.3
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
3.3
|
|
Net foreign exchange gains
|
8.4
|
|
|
—
|
|
|
—
|
|
|
8.4
|
|
||||
Total net realized gains
|
$
|
11.7
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
11.7
|
|
|
|
|
|
|
|
|
|
||||||||
Three Months Ended September 30, 2015:
|
|
|
|
|
|
|
|
||||||||
Net (losses) on securities sold or called
|
$
|
(2.1
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(2.1
|
)
|
Net foreign exchange gains
|
4.2
|
|
|
—
|
|
|
—
|
|
|
4.2
|
|
||||
Total net realized gains
|
$
|
2.1
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
2.1
|
|
|
|
|
|
|
|
|
|
||||||||
Nine Months Ended September 30, 2016:
|
|
|
|
|
|
|
|
||||||||
Net gains on securities sold or called
|
$
|
5.7
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
5.7
|
|
Net foreign exchange gains
|
22.0
|
|
|
—
|
|
|
—
|
|
|
22.0
|
|
||||
Total net realized gains
|
$
|
27.7
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
27.7
|
|
|
|
|
|
|
|
|
|
||||||||
Nine Months Ended September 30, 2015:
|
|
|
|
|
|
|
|
||||||||
Net gains on securities sold or called
|
$
|
47.1
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
47.1
|
|
Net foreign exchange gains
|
3.8
|
|
|
—
|
|
|
—
|
|
|
3.8
|
|
||||
Total net realized gains
|
$
|
50.9
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
50.9
|
|
($ in millions)
|
September 30,
2016 |
|
December 31,
2015 |
||||
Mark-to-market liability of credit derivatives, excluding CVA
|
$
|
19.5
|
|
|
$
|
44.6
|
|
CVA on credit derivatives
|
(2.8
|
)
|
|
(10.1
|
)
|
||
Net credit derivative liability at fair value
|
$
|
16.7
|
|
|
$
|
34.5
|
|
($ in millions)
|
September 30,
2016 |
|
December 31,
2015 |
||||
Derivative products mark-to-market liability, excluding CVA
|
$
|
389.9
|
|
|
$
|
312.5
|
|
CVA on derivative products portfolio
|
(74.6
|
)
|
|
(78.7
|
)
|
||
Net derivative products portfolio liability at fair value
|
$
|
315.3
|
|
|
$
|
233.8
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
($ in millions)
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
Foreign exchange gain/(loss)
|
$
|
2.6
|
|
|
$
|
2.2
|
|
|
$
|
8.7
|
|
|
$
|
(2.1
|
)
|
Other
|
0.1
|
|
|
5.0
|
|
|
8.9
|
|
|
7.3
|
|
||||
Total other income (loss)
|
$
|
2.7
|
|
|
$
|
7.2
|
|
|
$
|
17.6
|
|
|
$
|
5.2
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
($ in millions)
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
RMBS
(1)
|
$
|
(48.3
|
)
|
|
$
|
(179.0
|
)
|
|
$
|
(367.6
|
)
|
|
$
|
(391.9
|
)
|
Student Loans
|
(34.9
|
)
|
|
(34.9
|
)
|
|
(123.7
|
)
|
|
(142.4
|
)
|
||||
Domestic Public Finance
|
(7.9
|
)
|
|
(29.4
|
)
|
|
52.4
|
|
|
35.5
|
|
||||
Ambac UK
|
(44.3
|
)
|
|
46.7
|
|
|
40.2
|
|
|
(89.2
|
)
|
||||
All other credits
|
0.4
|
|
|
(3.1
|
)
|
|
2.2
|
|
|
(5.3
|
)
|
||||
Interest on Deferred Amounts
|
43.0
|
|
|
40.7
|
|
|
126.9
|
|
|
120.2
|
|
||||
Loss expenses
|
22.8
|
|
|
25.8
|
|
|
42.6
|
|
|
41.5
|
|
||||
Totals
|
$
|
(69.2
|
)
|
|
$
|
(133.2
|
)
|
|
$
|
(227.0
|
)
|
|
$
|
(431.6
|
)
|
(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 related losses and loss expense (benefit) was ($38.7) and ($87.3) for the
three and nine months ended September 30, 2016
, respectively, and $1.0 and ($31.7) for the
three and nine months ended September 30, 2015
, respectively.
|
•
|
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 during the quarter;
|
•
|
Lower projected losses in the Ambac UK portfolio for the
three months ended September 30, 2016
are 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
are 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).
|
•
|
Lower projected losses in the RMBS portfolio due to improved deal performance and lower interest rates;
|
•
|
The positive impact of executed commutations, an improved outlook with regards to our risk remediation efforts and lower interest rates on student loan policies;
|
•
|
Lower projected losses in domestic public finance for the
three months ended September 30, 2015
largely driven by the positive impact related to the cancellation of certain Puerto Rico Highways and Transportation Authority bonds. Higher projected losses in domestic public finance for the
nine months ended September 30, 2015
largely driven by negative development on Puerto Rico bonds.
|
•
|
Increased projected losses in the Ambac UK portfolio for the
three months ended September 30, 2015
due to an increase in interest rates and foreign exchange losses of $16.8 million. Decrease in projected losses for the
nine months ended September 30, 2015
due to reduced claim expectations for an Ambac UK transaction resulting from proactive remediation efforts and lower interest rates, partially offset by foreign exchange losses of $13.3 million. A portion of Ambac UK's loss reserves are denominated currencies other than their functional currency of British Pounds resulting in incurred losses (gains) when the British Pound depreciates (appreciates).
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
($ in millions)
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
Claims recorded
(1)
|
$
|
122.7
|
|
|
$
|
62.2
|
|
|
$
|
354.1
|
|
|
$
|
306.5
|
|
Subrogation received
(2)
|
(64.9
|
)
|
|
(84.1
|
)
|
|
(1,293.0
|
)
|
|
(246.9
|
)
|
||||
Net Claims Recorded
|
$
|
57.8
|
|
|
$
|
(21.9
|
)
|
|
$
|
(938.9
|
)
|
|
$
|
59.6
|
|
(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)
|
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)
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
Gross operating expenses
|
$
|
21.1
|
|
|
$
|
25.0
|
|
|
$
|
76.0
|
|
|
$
|
75.3
|
|
Reinsurance commissions, net
|
0.4
|
|
|
—
|
|
|
1.5
|
|
|
0.1
|
|
||||
Total
|
$
|
21.5
|
|
|
$
|
25.0
|
|
|
$
|
77.5
|
|
|
$
|
75.4
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
($ in millions)
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
Surplus notes
|
$
|
30.1
|
|
|
$
|
28.7
|
|
|
$
|
88.2
|
|
|
$
|
84.2
|
|
Investment agreements
|
0.1
|
|
|
0.2
|
|
|
0.4
|
|
|
0.8
|
|
||||
Secured borrowing
|
1.3
|
|
|
1.0
|
|
|
4.0
|
|
|
1.0
|
|
||||
Total
|
$
|
31.5
|
|
|
$
|
29.9
|
|
|
$
|
92.6
|
|
|
$
|
86.0
|
|
•
|
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 $20.7 million and $61.2 million during the
three and nine months ended September 30, 2016
, respectively and $12.7 million and $69.5 million during the
three and nine months ended September 30, 2015
, 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
$617.9 million
through
September 30, 2016
.
|
•
|
the Segregated Account will establish Junior Deferred Amounts in respect of general claims, instead of issuing junior surplus notes as originally contemplated. Junior Deferred Amounts will generally accrue and compound interest at an annual effective rate of 5.1% and will be payable, as and when determined by the Rehabilitator, in his sole discretion. If approved by the Rehabilitator, payment of these Junior Deferred Amounts, together with interest thereon, will be a use of future liquidity.
|
|
Nine Months Ended September 30,
|
||||||
($ in million)
|
2016
|
|
2015
|
||||
Cash provided by (used in):
|
|
|
|
||||
Operating activities
|
$
|
825.5
|
|
|
$
|
82.0
|
|
Investing activities
|
(773.2
|
)
|
|
(182.7
|
)
|
||
Financing activities
|
(64.9
|
)
|
|
54.2
|
|
||
Net cash flow
|
$
|
(14.5
|
)
|
|
$
|
(46.8
|
)
|
($ in millions)
|
Financial
Guarantee
(1)
|
|
Financial
Services
|
|
Corporate
|
|
Total
|
||||||||
September 30, 2016:
|
|
|
|
|
|
|
|
||||||||
Fixed income securities
|
$
|
5,609.7
|
|
|
$
|
89.3
|
|
|
$
|
291.4
|
|
|
$
|
5,990.4
|
|
Short-term
|
128.7
|
|
|
—
|
|
|
2.0
|
|
|
130.7
|
|
||||
Other investments
|
391.1
|
|
|
—
|
|
|
28.8
|
|
|
419.9
|
|
||||
Fixed income securities pledged as collateral
|
65.0
|
|
|
—
|
|
|
—
|
|
|
65.0
|
|
||||
Total investments
|
$
|
6,194.5
|
|
|
$
|
89.3
|
|
|
$
|
322.2
|
|
|
$
|
6,606.0
|
|
Percent of total
|
93.8
|
%
|
|
1.3
|
%
|
|
4.9
|
%
|
|
100
|
%
|
||||
|
|
|
|
|
|
|
|
||||||||
December 31, 2015:
|
|
|
|
|
|
|
|
||||||||
Fixed income securities
|
$
|
4,758.7
|
|
|
$
|
109.3
|
|
|
$
|
175.8
|
|
|
$
|
5,043.8
|
|
Short-term
|
177.5
|
|
|
0.2
|
|
|
48.1
|
|
|
225.8
|
|
||||
Other investments
|
285.3
|
|
|
—
|
|
|
25.3
|
|
|
310.6
|
|
||||
Fixed income securities pledged as collateral
|
64.5
|
|
|
—
|
|
|
—
|
|
|
64.5
|
|
||||
Total investments
|
$
|
5,286.0
|
|
|
$
|
109.5
|
|
|
$
|
249.2
|
|
|
$
|
5,644.7
|
|
Percent of total
|
93.7
|
%
|
|
1.9
|
%
|
|
4.4
|
%
|
|
100
|
%
|
(1)
|
Includes investments denominated in non-US dollar currencies with a fair value of
£167.6
(
$217.5
) and
€23.7
(
$26.6
) as of
September 30, 2016
and
£198.1
(
$291.7
) and
€32.7
(
$35.5
) as of
December 31, 2015
.
|
($ in millions)
|
Financial
Guarantee
(1)
|
|
Financial
Services
|
|
Corporate
(1)
|
|
Total
|
||||||||
September 30, 2016:
|
|
|
|
|
|
|
|
||||||||
Residential mortgage-backed securities:
|
|
|
|
|
|
|
|
||||||||
RMBS—First-Lien—Alt-A
|
$
|
967.7
|
|
|
$
|
—
|
|
|
$
|
82.8
|
|
|
$
|
1,050.5
|
|
RMBS—Second Lien
|
935.2
|
|
|
—
|
|
|
1.3
|
|
|
936.5
|
|
||||
RMBS—First Lien—Sub Prime
|
400.5
|
|
|
—
|
|
|
—
|
|
|
400.5
|
|
||||
Total residential mortgage-backed securities
|
2,303.4
|
|
|
—
|
|
|
84.1
|
|
|
2,387.5
|
|
||||
Other asset-backed securities
|
|
|
|
|
|
|
|
||||||||
Credit Cards
|
185.4
|
|
|
89.3
|
|
|
57.9
|
|
|
332.6
|
|
||||
Military Housing
|
244.0
|
|
|
—
|
|
|
—
|
|
|
244.0
|
|
||||
Auto
|
104.9
|
|
|
—
|
|
|
137.3
|
|
|
242.2
|
|
||||
Student Loans
|
149.4
|
|
|
—
|
|
|
—
|
|
|
149.4
|
|
||||
Structured Insurance
|
120.0
|
|
|
—
|
|
|
—
|
|
|
120.0
|
|
||||
Other
|
40.4
|
|
|
—
|
|
|
0.7
|
|
|
41.1
|
|
||||
Total other asset-backed securities
|
844.1
|
|
|
89.3
|
|
|
195.9
|
|
|
1,129.3
|
|
||||
Total
|
$
|
3,147.5
|
|
|
$
|
89.3
|
|
|
$
|
280.0
|
|
|
$
|
3,516.8
|
|
|
|
|
|
|
|
|
|
||||||||
December 31, 2015:
|
|
|
|
|
|
|
|
||||||||
Residential mortgage-backed securities:
|
|
|
|
|
|
|
|
||||||||
RMBS—First-Lien—Alt-A
|
$
|
772.1
|
|
|
$
|
—
|
|
|
$
|
75.1
|
|
|
$
|
847.2
|
|
RMBS—Second Lien
|
814.0
|
|
|
—
|
|
|
1.2
|
|
|
815.2
|
|
||||
RMBS—First Lien—Sub Prime
|
314.9
|
|
|
—
|
|
|
—
|
|
|
314.9
|
|
||||
Total residential mortgage-backed securities
|
1,901.0
|
|
|
—
|
|
|
76.3
|
|
|
1,977.3
|
|
||||
Other asset-backed securities
|
|
|
|
|
|
|
|
||||||||
Credit Cards
|
50.9
|
|
|
104.8
|
|
|
22.4
|
|
|
178.1
|
|
||||
Military Housing
|
238.2
|
|
|
—
|
|
|
—
|
|
|
238.2
|
|
||||
Auto
|
192.6
|
|
|
4.5
|
|
|
54.1
|
|
|
251.2
|
|
||||
Student Loans
|
19.8
|
|
|
—
|
|
|
—
|
|
|
19.8
|
|
||||
Structured Insurance
|
119.8
|
|
|
—
|
|
|
—
|
|
|
119.8
|
|
||||
Other
|
31.3
|
|
|
—
|
|
|
2.1
|
|
|
33.4
|
|
||||
Total other asset-backed securities
|
652.6
|
|
|
109.3
|
|
|
78.6
|
|
|
840.5
|
|
||||
Total
|
$
|
2,553.6
|
|
|
$
|
109.3
|
|
|
$
|
154.9
|
|
|
$
|
2,817.8
|
|
(1)
|
Includes investments guaranteed by Ambac Assurance and Ambac UK. Refer to
Note 8. Investments
to the Unaudited Consolidated Financial Statements included in P
art I, Item 1 in this Fo
rm 10-Q for further details of Ambac insured securities held in the investment portfolio.
|
Ratings
(1)
|
Financial
Guarantee
|
|
Financial
Services
|
|
Corporate
|
|
Combined
|
||||
September 30, 2016:
|
|
|
|
|
|
|
|
||||
AAA
|
10
|
%
|
|
100
|
%
|
|
69
|
%
|
|
14
|
%
|
AA
|
8
|
|
|
—
|
|
|
2
|
|
|
8
|
|
A
|
16
|
|
|
—
|
|
|
—
|
|
|
15
|
|
BBB
|
16
|
|
|
—
|
|
|
—
|
|
|
15
|
|
Below investment grade
(2)
|
42
|
|
|
—
|
|
|
29
|
|
|
41
|
|
Not rated
(2)
|
8
|
|
|
—
|
|
|
—
|
|
|
7
|
|
Total
|
100
|
%
|
|
100
|
%
|
|
100
|
%
|
|
100
|
%
|
|
|
|
|
|
|
|
|
||||
December 31, 2015:
|
|
|
|
|
|
|
|
||||
AAA
|
11
|
%
|
|
100
|
%
|
|
66
|
%
|
|
15
|
%
|
AA
|
10
|
|
|
—
|
|
|
—
|
|
|
9
|
|
A
|
19
|
|
|
—
|
|
|
—
|
|
|
18
|
|
BBB
|
14
|
|
|
—
|
|
|
—
|
|
|
14
|
|
Below investment grade
(2)
|
38
|
|
|
—
|
|
|
34
|
|
|
37
|
|
Not rated
(2)
|
8
|
|
|
—
|
|
|
—
|
|
|
7
|
|
Total
|
100
|
%
|
|
100
|
%
|
|
100
|
%
|
|
100
|
%
|
(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
45%
and
41%
of the
2016
and
2015
combined portfolio, respectively.
|
|
September 30, 2016
|
|
December 31, 2015
|
||||||||||||
($ in millions)
|
Estimated
Fair Value
(1)
|
|
Gross
Unrealized Losses
|
|
Estimated
Fair Value
(1)
|
|
Gross
Unrealized Losses
|
||||||||
Municipal obligations:
|
|
|
|
|
|
|
|
||||||||
Less than 12 months
|
$
|
35.2
|
|
|
$
|
1.4
|
|
|
$
|
117.0
|
|
|
$
|
2.1
|
|
Greater than 12 months
|
103.5
|
|
|
3.4
|
|
|
114.7
|
|
|
6.1
|
|
||||
|
138.7
|
|
|
4.8
|
|
|
231.7
|
|
|
8.2
|
|
||||
Corporate obligations:
|
|
|
|
|
|
|
|
||||||||
Less than 12 months
|
201.3
|
|
|
1.6
|
|
|
938.9
|
|
|
21.3
|
|
||||
Greater than 12 months
|
9.9
|
|
|
0.1
|
|
|
92.6
|
|
|
3.0
|
|
||||
|
211.2
|
|
|
1.7
|
|
|
1,031.5
|
|
|
24.3
|
|
||||
Foreign obligations:
|
|
|
|
|
|
|
|
||||||||
Less than 12 months
|
2.6
|
|
|
—
|
|
|
34.9
|
|
|
1.0
|
|
||||
Greater than 12 months
|
—
|
|
|
—
|
|
|
8.6
|
|
|
0.8
|
|
||||
|
2.6
|
|
|
—
|
|
|
43.5
|
|
|
1.8
|
|
||||
U.S. government obligations:
|
|
|
|
|
|
|
|
||||||||
Less than 12 months
|
1.9
|
|
|
—
|
|
|
67.5
|
|
|
0.1
|
|
||||
Greater than 12 months
|
5.0
|
|
|
—
|
|
|
10.6
|
|
|
0.2
|
|
||||
|
6.9
|
|
|
—
|
|
|
78.1
|
|
|
0.3
|
|
||||
U.S. agency obligations:
|
|
|
|
|
|
|
|
||||||||
Less than 12 months
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Greater than 12 months
|
4.1
|
|
|
—
|
|
|
4.2
|
|
|
—
|
|
||||
|
4.1
|
|
|
—
|
|
|
4.2
|
|
|
—
|
|
||||
Residential mortgage-backed securities:
|
|
|
|
|
|
|
|
||||||||
Less than 12 months
|
388.1
|
|
|
10.2
|
|
|
584.7
|
|
|
53.4
|
|
||||
Greater than 12 months
|
517.8
|
|
|
35.1
|
|
|
213.3
|
|
|
11.2
|
|
||||
|
905.9
|
|
|
45.3
|
|
|
798.0
|
|
|
64.6
|
|
||||
Collateralized debt obligations:
|
|
|
|
|
|
|
|
||||||||
Less than 12 months
|
7.4
|
|
|
—
|
|
|
77.6
|
|
|
1.5
|
|
||||
Greater than 12 months
|
29.5
|
|
|
0.2
|
|
|
—
|
|
|
—
|
|
||||
|
36.9
|
|
|
0.2
|
|
|
77.6
|
|
|
1.5
|
|
||||
Other asset-backed securities:
|
|
|
|
|
|
|
|
||||||||
Less than 12 months
|
354.2
|
|
|
0.7
|
|
|
450.7
|
|
|
3.5
|
|
||||
Greater than 12 months
|
25.8
|
|
|
—
|
|
|
19.3
|
|
|
—
|
|
||||
|
380.0
|
|
|
0.7
|
|
|
470.0
|
|
|
3.5
|
|
||||
Short-term securities:
|
|
|
|
|
|
|
|
||||||||
Less than 12 months
|
—
|
|
|
—
|
|
|
10.0
|
|
|
—
|
|
||||
Greater than 12 months
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
|
—
|
|
|
—
|
|
|
10.0
|
|
|
—
|
|
||||
Total
|
$
|
1,686.3
|
|
|
$
|
52.7
|
|
|
$
|
2,744.6
|
|
|
$
|
104.2
|
|
(1)
|
Since the table is presented in millions, securities with market values and unrealized losses that are less than $0.1 will be shown as zero.
|
|
September 30, 2016
|
|
December 31, 2015
|
||||||||||||
($ in millions)
|
Amortized
Cost |
|
Estimated
Fair Value |
|
Amortized
Cost |
|
Estimated
Fair Value |
||||||||
Municipal obligations:
|
|
|
|
|
|
|
|
||||||||
Due in one year or less
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
2.2
|
|
|
$
|
2.2
|
|
Due after one year through five years
|
32.9
|
|
|
32.2
|
|
|
62.3
|
|
|
60.7
|
|
||||
Due after five years through ten years
|
83.6
|
|
|
80.8
|
|
|
135.6
|
|
|
129.6
|
|
||||
Due after ten years
|
27.0
|
|
|
25.7
|
|
|
39.8
|
|
|
39.2
|
|
||||
|
143.5
|
|
|
138.7
|
|
|
239.9
|
|
|
231.7
|
|
||||
Corporate obligations:
|
|
|
|
|
|
|
|
||||||||
Due in one year or less
|
12.0
|
|
|
11.9
|
|
|
46.1
|
|
|
46.0
|
|
||||
Due after one year through five years
|
82.8
|
|
|
82.2
|
|
|
521.3
|
|
|
514.0
|
|
||||
Due after five years through ten years
|
104.2
|
|
|
103.4
|
|
|
425.3
|
|
|
411.3
|
|
||||
Due after ten years
|
13.9
|
|
|
13.7
|
|
|
63.1
|
|
|
60.2
|
|
||||
|
212.9
|
|
|
211.2
|
|
|
1,055.8
|
|
|
1,031.5
|
|
||||
Foreign obligations:
|
|
|
|
|
|
|
|
||||||||
Due in one year or less
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Due after one year through five years
|
0.9
|
|
|
0.9
|
|
|
12.1
|
|
|
11.3
|
|
||||
Due after five years through ten years
|
1.7
|
|
|
1.7
|
|
|
30.0
|
|
|
29.3
|
|
||||
Due after ten years
|
—
|
|
|
—
|
|
|
3.2
|
|
|
2.9
|
|
||||
|
2.6
|
|
|
2.6
|
|
|
45.3
|
|
|
43.5
|
|
||||
U.S. government obligations:
|
|
|
|
|
|
|
|
||||||||
Due in one year or less
|
5.0
|
|
|
5.0
|
|
|
—
|
|
|
—
|
|
||||
Due after one year through five years
|
—
|
|
|
—
|
|
|
76.1
|
|
|
75.8
|
|
||||
Due after five years through ten years
|
0.2
|
|
|
0.2
|
|
|
2.3
|
|
|
2.3
|
|
||||
Due after ten years
|
1.7
|
|
|
1.7
|
|
|
—
|
|
|
—
|
|
||||
|
6.9
|
|
|
6.9
|
|
|
78.4
|
|
|
78.1
|
|
||||
U.S. agency obligations:
|
|
|
|
|
|
|
|
||||||||
Due in one year or less
|
4.1
|
|
|
4.1
|
|
|
—
|
|
|
—
|
|
||||
Due after one year through five years
|
—
|
|
|
—
|
|
|
4.2
|
|
|
4.2
|
|
||||
Due after five years through ten years
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Due after ten years
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
|
4.1
|
|
|
4.1
|
|
|
4.2
|
|
|
4.2
|
|
||||
Residential mortgage-backed securities
|
951.2
|
|
|
905.9
|
|
|
862.6
|
|
|
798.0
|
|
||||
Collateralized debt obligations
|
37.1
|
|
|
36.9
|
|
|
79.1
|
|
|
77.6
|
|
||||
Other asset-backed securities
|
380.7
|
|
|
380.0
|
|
|
473.5
|
|
|
470.0
|
|
||||
Short-term securities
|
—
|
|
|
—
|
|
|
10.0
|
|
|
10.0
|
|
||||
Total
|
$
|
1,739.0
|
|
|
$
|
1,686.3
|
|
|
$
|
2,848.8
|
|
|
$
|
2,744.6
|
|
Currency
(Amounts in millions) |
|
Premium Receivable in
Payment Currency |
|
Premium Receivable in
U.S. Dollars |
||||
U.S. Dollars
|
|
$
|
471.2
|
|
|
$
|
471.2
|
|
British Pounds
|
|
£
|
150.4
|
|
|
195.2
|
|
|
Euros
|
|
€
|
34.1
|
|
|
38.3
|
|
|
Australian Dollars
|
|
A$
|
1.9
|
|
|
1.4
|
|
|
New Zealand Dollars
|
|
NZ$
|
0.1
|
|
|
0.1
|
|
|
Total
|
|
|
|
$
|
706.2
|
|
|
Unpaid Claims
|
|
Present Value of Expected
Net Cash Flows |
|
|
|
|
||||||||||||||||
($ in millions)
Balance Sheet Line Item |
Claims
|
|
Accrued Interest
|
|
Claims and
Loss Expenses |
|
Recoveries
(1)
|
|
Unearned
Premium Revenue |
|
Gross Loss
and Loss Expense Reserves (2) |
||||||||||||
September 30, 2016:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Loss and loss expense reserves
|
$
|
2,393
|
|
|
$
|
490
|
|
|
$
|
2,772
|
|
|
$
|
(1,290
|
)
|
|
$
|
(157
|
)
|
|
$
|
4,208
|
|
Subrogation recoverable
|
617
|
|
|
128
|
|
|
96
|
|
|
(1,545
|
)
|
|
—
|
|
|
(704
|
)
|
||||||
Totals
|
$
|
3,010
|
|
|
$
|
618
|
|
|
$
|
2,868
|
|
|
$
|
(2,835
|
)
|
|
$
|
(157
|
)
|
|
$
|
3,504
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
December 31, 2015:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Loss and loss expense reserves
|
$
|
2,139
|
|
|
$
|
350
|
|
|
$
|
3,265
|
|
|
$
|
(1,476
|
)
|
|
$
|
(190
|
)
|
|
$
|
4,088
|
|
Subrogation recoverable
|
829
|
|
|
141
|
|
|
208
|
|
|
(2,407
|
)
|
|
—
|
|
|
(1,229
|
)
|
||||||
Totals
|
$
|
2,968
|
|
|
$
|
491
|
|
|
$
|
3,473
|
|
|
$
|
(3,883
|
)
|
|
$
|
(190
|
)
|
|
$
|
2,859
|
|
(1)
|
Present value of future recoveries include R&W subrogation recoveries of
$1,923
and
$2,830
at
September 30, 2016 and December 31, 2015
, respectively.
|
(2)
|
Includes Euro denominated gross loss and loss expense reserves. US dollar equivalents of such reserves were $17 (€15) and $19 (€18) at
September 30, 2016 and December 31, 2015
, respectively.
|
|
|
|
Unpaid Claims
|
|
Present Value of Expected
Net Cash Flows |
|
|
|
|
||||||||||||||||||
($ in millions)
|
Gross par
outstanding (1) |
|
Claims
|
|
Accrued
Interest |
|
Claims and
Loss Expenses |
|
Recoveries
|
|
Unearned
Premium Revenue |
|
Gross Loss
and Loss Expense Reserves (1)(2) |
||||||||||||||
September 30, 2016:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
RMBS
|
$
|
6,983
|
|
|
$
|
2,998
|
|
|
$
|
616
|
|
|
$
|
1,171
|
|
|
$
|
(2,460
|
)
|
|
$
|
(29
|
)
|
|
$
|
2,296
|
|
Student Loans
|
733
|
|
|
—
|
|
|
—
|
|
|
326
|
|
|
(47
|
)
|
|
(16
|
)
|
|
263
|
|
|||||||
Domestic Public Finance
|
5,015
|
|
|
12
|
|
|
2
|
|
|
829
|
|
|
(315
|
)
|
|
(75
|
)
|
|
453
|
|
|||||||
Ambac UK
(3)
|
941
|
|
|
—
|
|
|
—
|
|
|
432
|
|
|
(13
|
)
|
|
(23
|
)
|
|
396
|
|
|||||||
All other credits
|
632
|
|
|
—
|
|
|
—
|
|
|
26
|
|
|
—
|
|
|
(14
|
)
|
|
12
|
|
|||||||
Loss expenses
|
—
|
|
|
—
|
|
|
—
|
|
|
84
|
|
|
—
|
|
|
—
|
|
|
84
|
|
|||||||
Totals
|
$
|
14,304
|
|
|
$
|
3,010
|
|
|
$
|
618
|
|
|
$
|
2,868
|
|
|
$
|
(2,835
|
)
|
|
$
|
(157
|
)
|
|
$
|
3,504
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
December 31, 2015:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
RMBS
|
$
|
8,067
|
|
|
$
|
2,957
|
|
|
$
|
490
|
|
|
$
|
1,364
|
|
|
$
|
(3,376
|
)
|
|
$
|
(34
|
)
|
|
$
|
1,401
|
|
Student Loans
|
1,207
|
|
|
—
|
|
|
—
|
|
|
559
|
|
|
(39
|
)
|
|
(34
|
)
|
|
486
|
|
|||||||
Domestic Public Finance
|
5,246
|
|
|
11
|
|
|
1
|
|
|
993
|
|
|
(456
|
)
|
|
(79
|
)
|
|
470
|
|
|||||||
Ambac UK
(3)
|
943
|
|
|
—
|
|
|
—
|
|
|
460
|
|
|
(12
|
)
|
|
(28
|
)
|
|
420
|
|
|||||||
All other credits
|
513
|
|
|
—
|
|
|
—
|
|
|
24
|
|
|
—
|
|
|
(15
|
)
|
|
9
|
|
|||||||
Loss expenses
|
—
|
|
|
—
|
|
|
—
|
|
|
73
|
|
|
—
|
|
|
—
|
|
|
73
|
|
|||||||
Totals
|
$
|
15,976
|
|
|
$
|
2,968
|
|
|
$
|
491
|
|
|
$
|
3,473
|
|
|
$
|
(3,883
|
)
|
|
$
|
(190
|
)
|
|
$
|
2,859
|
|
(1)
|
Ceded par outstanding on policies with loss reserves and ceded loss and loss expense reserves at
September 30, 2016 and December 31, 2015
, are
$788
and
$24
and
$847
and
$44
, respectively. Ceded loss and loss expense reserves are included in Reinsurance recoverable on paid and unpaid losses.
|
(2)
|
Loss reserves are included in the balance sheet as Loss and loss expense reserves or Subrogation recoverable dependent on if a policy is in a net liability or net recoverable position.
|
(3)
|
Present value of Expected Net Cash Flows is reduced by estimated recoveries from the Ambac UK v. J.P. Morgan Investment Management litigation.
|
($ 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, 2016:
|
|
|
|
|
|
|
|
|
||||||||
Second-lien
|
|
$
|
1,229
|
|
|
$
|
719
|
|
|
$
|
—
|
|
|
$
|
719
|
|
First-lien Mid-prime
|
|
2,303
|
|
|
1,763
|
|
|
—
|
|
|
1,763
|
|
||||
First-lien Sub-prime
|
|
1,202
|
|
|
233
|
|
|
—
|
|
|
233
|
|
||||
Other
|
|
170
|
|
|
139
|
|
|
—
|
|
|
139
|
|
||||
Total Credits Without Subrogation
|
|
4,904
|
|
|
2,854
|
|
|
—
|
|
|
2,854
|
|
||||
Second-lien
|
|
1,125
|
|
|
708
|
|
|
(1,339
|
)
|
|
(631
|
)
|
||||
First-lien Mid-prime
|
|
73
|
|
|
92
|
|
|
(78
|
)
|
|
14
|
|
||||
First-lien Sub-prime
|
|
881
|
|
|
565
|
|
|
(506
|
)
|
|
59
|
|
||||
Total Credits With Subrogation
|
|
2,079
|
|
|
1,365
|
|
|
(1,923
|
)
|
|
(558
|
)
|
||||
Total
|
|
$
|
6,983
|
|
|
$
|
4,219
|
|
|
$
|
(1,923
|
)
|
|
$
|
2,296
|
|
|
|
|
|
|
|
|
|
|
||||||||
December 31, 2015:
|
|
|
|
|
|
|
|
|
||||||||
Second-lien
|
|
$
|
1,261
|
|
|
$
|
423
|
|
|
$
|
—
|
|
|
$
|
423
|
|
First-lien-Mid-prime
|
|
2,594
|
|
|
1,575
|
|
|
—
|
|
|
1,575
|
|
||||
First-lien-Sub-prime
|
|
1,401
|
|
|
250
|
|
|
—
|
|
|
250
|
|
||||
Other
|
|
193
|
|
|
132
|
|
|
—
|
|
|
132
|
|
||||
Total Credits Without Subrogation
|
|
5,449
|
|
|
2,380
|
|
|
—
|
|
|
2,380
|
|
||||
Second-lien
|
|
1,520
|
|
|
921
|
|
|
(2,072
|
)
|
|
(1,151
|
)
|
||||
First-lien Mid-prime
|
|
116
|
|
|
424
|
|
|
(260
|
)
|
|
164
|
|
||||
First-lien Sub-prime
|
|
982
|
|
|
506
|
|
|
(498
|
)
|
|
8
|
|
||||
Total Credits With Subrogation
|
|
2,618
|
|
|
1,851
|
|
|
(2,830
|
)
|
|
(979
|
)
|
||||
Total
|
|
$
|
8,067
|
|
|
$
|
4,231
|
|
|
$
|
(2,830
|
)
|
|
$
|
1,401
|
|
|
September 30, 2016
|
|
December 31, 2015
|
||||||||||||
Issuer Type
($ in millions) |
Gross Par
Outstanding |
|
Gross Loss
Reserves |
|
Gross Par
Outstanding |
|
Gross Loss
Reserves |
||||||||
Lease and tax-backed
|
$
|
2,141
|
|
|
$
|
301
|
|
|
$
|
2,277
|
|
|
$
|
284
|
|
General obligation
|
2,030
|
|
|
75
|
|
|
2,039
|
|
|
99
|
|
||||
Transportation revenue
|
516
|
|
|
66
|
|
|
603
|
|
|
62
|
|
||||
Housing
|
180
|
|
|
11
|
|
|
192
|
|
|
24
|
|
||||
Other
|
148
|
|
|
—
|
|
|
135
|
|
|
1
|
|
||||
Total
|
$
|
5,015
|
|
|
$
|
453
|
|
|
$
|
5,246
|
|
|
$
|
470
|
|
•
|
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 heavily 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 segment contracts to be accounted for consistent with the Financial Services – Insurance Topic of ASC, whether or not they are subject to derivative accounting rules.
|
•
|
Financial guarantee VIEs consolidated:
Elimination of the effects of VIEs that were consolidated as a result of being insured by Ambac. These adjustments eliminate the VIE consolidation and ensure that all financial guarantee segment contracts are accounted for consistent with the provisions of the Financial Services – Insurance Topic of the ASC, whether or not they are subject to consolidation accounting rules.
|
•
|
Insurance intangible amortization:
Elimination of the amortization of the financial guarantee insurance intangible asset and impairment of goodwill that arose as a result of Ambac’s emergence from bankruptcy and the implementation of Fresh Start reporting. These adjustments ensure that all financial guarantee segment 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. For periods prior to the three months and nine months ended September 30, 2016, we eliminated the foreign exchange gains (losses) on the re-measurement of net premium receivables and loss and loss expense reserves in non-functional currencies. Given the long-duration of a significant portion of these premium receivables and loss reserves, the foreign exchange re-measurement gains (losses) are not necessarily indicative of the total foreign exchange gains (losses) that Ambac will ultimately recognize. Beginning with the three and nine months ended September 30, 2016, we have eliminated the foreign exchange gains (losses) on all assets, liabilities and transactions in non-functional currencies. Expanding this adjustment to include all foreign exchange gains (losses) 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. Note that we have not recast prior period adjustments to conform to the methodology as such amounts were not material.
|
•
|
Fair value (gain) loss on derivative products from Ambac CVA:
Elimination of the gains (losses) relating to Ambac’s CVA on derivative contracts other than credit derivatives. 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,
|
||||||||||||||
|
2016
|
|
2015
|
||||||||||||
($ in millions, except share data)
|
$ Amount
|
|
Per Diluted Share
|
|
$ Amount
|
|
Per Diluted Share
|
||||||||
Net income (loss) attributable to common stockholders
|
$
|
101.5
|
|
|
$
|
2.22
|
|
|
$
|
(391.0
|
)
|
|
$
|
(8.66
|
)
|
Adjustments:
|
|
|
|
|
|
|
|
||||||||
Non-credit impairment fair value (gain) loss on credit derivatives
|
(1.6
|
)
|
|
(0.03
|
)
|
|
(34.1
|
)
|
|
(0.76
|
)
|
||||
Financial guarantee VIEs consolidated
|
4.4
|
|
|
0.09
|
|
|
30.5
|
|
|
0.68
|
|
||||
Insurance intangible amortization
|
44.5
|
|
|
0.97
|
|
|
39.7
|
|
|
0.88
|
|
||||
Impairment of goodwill
|
—
|
|
|
—
|
|
|
514.5
|
|
|
11.39
|
|
||||
Foreign exchange (gains) losses
(1)
|
(15.5
|
)
|
|
(0.34
|
)
|
|
14.7
|
|
|
0.32
|
|
||||
Fair value (gain) loss on derivative products from Ambac CVA
|
14.8
|
|
|
0.32
|
|
|
(3.8
|
)
|
|
(0.08
|
)
|
||||
Operating earnings
|
$
|
148.1
|
|
|
$
|
3.23
|
|
|
$
|
170.5
|
|
|
$
|
3.77
|
|
|
Nine Months Ended September 30,
|
||||||||||||||
|
2016
|
|
2015
|
||||||||||||
($ in millions, except share data)
|
$ Amount
|
|
Per Diluted Share
|
|
$ Amount
|
|
Per Diluted Share
|
||||||||
Net income attributable to common stockholders
|
$
|
169.5
|
|
|
$
|
3.74
|
|
|
$
|
106.4
|
|
|
$
|
2.30
|
|
Adjustments:
|
|
|
|
|
|
|
|
||||||||
Non-credit impairment fair value (gain) loss on credit derivatives
|
(6.6
|
)
|
|
(0.15
|
)
|
|
(39.3
|
)
|
|
(0.85
|
)
|
||||
Financial guarantee VIEs consolidated
|
154.9
|
|
|
3.41
|
|
|
(12.0
|
)
|
|
(0.26
|
)
|
||||
Insurance intangible amortization
|
134.5
|
|
|
2.97
|
|
|
115.2
|
|
|
2.48
|
|
||||
Impairment of goodwill
|
—
|
|
|
—
|
|
|
514.5
|
|
|
11.10
|
|
||||
Foreign exchange (gain) loss
(1)
|
24.9
|
|
|
0.55
|
|
|
18.8
|
|
|
0.41
|
|
||||
Fair value (gain) loss on derivative products from Ambac CVA
|
4.1
|
|
|
0.09
|
|
|
(19.4
|
)
|
|
(0.42
|
)
|
||||
Operating earnings
|
$
|
481.3
|
|
|
$
|
10.61
|
|
|
$
|
684.2
|
|
|
$
|
14.76
|
|
(1)
|
Refer to the description of the foreign exchange (gain) loss adjustment above this table for a discussion of the change in methodology that was effective for the
three and nine months ended September 30, 2016
.
|
•
|
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 heavily 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 segment 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.
|
•
|
Financial guarantee VIEs consolidated:
Elimination of the effects of VIEs that were consolidated as a result of being insured by Ambac. These adjustments eliminate VIE consolidation and ensure that all financial guarantee segment contracts are 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 consolidation 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 segment contracts are accounted for within Adjusted Book Value consistent with the provisions of the Financial Services—Insurance Topic of the ASC.
|
•
|
Ambac CVA on derivative product liabilities (excluding credit derivatives):
Elimination of the gain relating to Ambac’s CVA embedded in the fair value of derivative contracts other than credit derivatives. 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 on financial guarantee contracts and fees on credit derivative contracts, adjusted for management's expected future net premiums and credit derivative receipts, in excess of expected losses, net of reinsurance.
|
•
|
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, 2016
|
|
December 31, 2015
|
||||||||||||
($ in millions, except share data)
|
$ Amount
|
|
Per Share
|
|
$ Amount
|
|
Per Share
|
||||||||
Total Ambac Financial Group, Inc. stockholders’ equity
|
$
|
1,909.6
|
|
|
$
|
42.32
|
|
|
$
|
1,684.8
|
|
|
$
|
37.41
|
|
Adjustments:
|
|
|
|
|
|
|
|
||||||||
Non-credit impairment fair value losses on credit derivatives
|
12.4
|
|
|
0.27
|
|
|
19.0
|
|
|
0.42
|
|
||||
Financial guarantee VIEs consolidated
|
(130.5
|
)
|
|
(2.89
|
)
|
|
(302.8
|
)
|
|
(6.72
|
)
|
||||
Insurance intangible asset
|
(1,022.9
|
)
|
|
(22.67
|
)
|
|
(1,212.1
|
)
|
|
(26.91
|
)
|
||||
Ambac CVA on derivative product liabilities (excluding credit derivatives)
|
(74.6
|
)
|
|
(1.65
|
)
|
|
(78.7
|
)
|
|
(1.75
|
)
|
||||
Net unearned premiums and fees in excess of expected losses
|
938.8
|
|
|
20.81
|
|
|
1,056.6
|
|
|
23.46
|
|
||||
Net unrealized investment (gains) losses in accumulated other comprehensive income
|
(183.6
|
)
|
|
(4.07
|
)
|
|
(51.0
|
)
|
|
(1.13
|
)
|
||||
Adjusted book value
|
$
|
1,449.2
|
|
|
$
|
32.12
|
|
|
$
|
1,115.8
|
|
|
$
|
24.78
|
|
|
|
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
|
|
$
|
107
|
|
|
$
|
80
|
|
|
$
|
45
|
|
|
$
|
—
|
|
|
$
|
(61
|
)
|
|
$
|
(88
|
)
|
Estimated net fair value
|
|
2,178
|
|
|
2,151
|
|
|
2,116
|
|
|
2,071
|
|
|
2,010
|
|
|
1,983
|
|
(1)
|
Incorporates an interest rate floor of 0%.
|
|
|
Change in Reference Obligation 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
|
|
$
|
(25
|
)
|
|
$
|
(5
|
)
|
|
$
|
—
|
|
|
$
|
5
|
|
|
$
|
15
|
|
Estimated fair value
|
|
(42
|
)
|
|
(22
|
)
|
|
(17
|
)
|
|
(12
|
)
|
|
(2
|
)
|
|
|
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
|
|
$
|
30
|
|
|
$
|
6
|
|
|
$
|
—
|
|
|
$
|
(7
|
)
|
|
$
|
(40
|
)
|
Estimated fair value
|
|
(302
|
)
|
|
(326
|
)
|
|
(332
|
)
|
|
(339
|
)
|
|
(372
|
)
|
|
|
Change in 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
|
|
$
|
(309
|
)
|
|
$
|
(61
|
)
|
|
$
|
—
|
|
|
$
|
62
|
|
|
$
|
315
|
|
Estimated fair value
|
|
3,228
|
|
|
3,476
|
|
|
3,537
|
|
|
3,599
|
|
|
3,852
|
|
|
|
Change in Foreign Exchange Rates Against U.S. Dollar
|
||||||||||||||
($ in millions)
|
|
20%
Decrease |
|
10%
Decrease |
|
10%
Increase |
|
20%
Increase |
||||||||
Estimated change in fair value
|
|
$
|
(46
|
)
|
|
$
|
(23
|
)
|
|
$
|
23
|
|
|
$
|
46
|
|
Item 2.
|
Unregistered Sales of Equity Securities and Use of Proceeds
|
(a)
|
Unregistered Sales of Equ
ity Securities
|
(b)
|
Purchases of Equity Securities By the Issuer and Affiliated Purchasers
|
Item 3.
|
Defaults Upon Senior Securities
|
Exhibit
Number |
|
Description
|
10.1
|
|
Separation Agreement dated September 15, 2016 by and between Ambac Financial Group, Inc. and Cathleen J. Matanle (filed as Exhibit 10.1 to Ambac financial Group, Inc.'s Current Report on Form 8-K, filed on September 16, 2016 and incorporated herein by reference).
|
10.2+
|
|
Employment Agreement dated as of November 1, 2016 by and among Ambac Financial Group, Inc., Ambac Assurance Corporation and David Trick.
|
12.1+
|
|
Computation of Ratio of Earnings to Fixed Charges.
|
31.1+
|
|
Certification of Chief Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) Promulgated under the Securities Exchange Act of 1934, as amended.
|
31.2+
|
|
Certification of Chief Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) Promulgated under the Securities Exchange Act of 1934, as amended.
|
32.1++
|
|
Certification of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
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 3, 2016
|
By:
|
/S/ DAVID TRICK
|
|
|
Name:
|
David Trick
|
|
|
Title:
|
Chief Financial Officer and Treasurer
|
|
|
|
(Duly Authorized Officer and
|
|
|
|
Principal Financial Officer)
|
(a)
|
Non-Disclosure.
|
|
|
AGREED:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David Trick
|
|
Date
|
|
|
|
|
Successor
|
|
|
Predecessor
|
||||||||||||||||||||
|
|
Nine Months Ended
|
|
Year Ended December 31,
|
|
Period from May 1 through
|
|
|
Period from Jan 1 through
|
|
Year Ended
|
||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||
($ in thousands, except ratios)
|
|
September 30,
2016 |
|
2015
|
|
2014
|
|
December 31, 2013
|
|
|
April 30, 2013
|
|
December 31, 2012
|
||||||||||||
Earnings:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Pre-tax income (loss)
|
|
$
|
191,085
|
|
|
$
|
510,058
|
|
|
$
|
493,253
|
|
|
$
|
512,316
|
|
|
|
$
|
3,348,033
|
|
|
$
|
(256,505
|
)
|
Fixed Charges
|
|
88,951
|
|
|
115,016
|
|
|
127,754
|
|
|
84,736
|
|
|
|
30,342
|
|
|
107,724
|
|
||||||
Earnings
|
|
$
|
280,036
|
|
|
$
|
625,074
|
|
|
$
|
621,007
|
|
|
$
|
597,052
|
|
|
|
$
|
3,378,375
|
|
|
$
|
(148,781
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Fixed charges:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Interest expense
|
|
$
|
88,200
|
|
|
$
|
113,100
|
|
|
$
|
125,891
|
|
|
$
|
83,595
|
|
|
|
$
|
29,718
|
|
|
$
|
105,973
|
|
Portion of rental expense deemed to be interest
|
|
751
|
|
|
1,916
|
|
|
1,863
|
|
|
1,141
|
|
|
|
624
|
|
|
1,751
|
|
||||||
Fixed charges
|
|
$
|
88,951
|
|
|
$
|
115,016
|
|
|
$
|
127,754
|
|
|
$
|
84,736
|
|
|
|
$
|
30,342
|
|
|
$
|
107,724
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Ratio of earnings to fixed charges
|
|
3.1
|
x
|
|
5.4
|
x
|
|
4.9
|
x
|
|
7.0
|
x
|
|
|
111.3
|
x
|
|
*
|
|
*
|
Earning for the year ended December 31, 2012 were inadequate to cover fixed charges by $256,505.
|
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 3, 2016
|
By:
|
/s/ Nader Tavakoli
|
|
|
|
Nader Tavakoli
|
|
|
|
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 3, 2016
|
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/ Nader Tavakoli
|
|
|
Name:
|
Nader Tavakoli
|
|
|
Title:
|
President and Chief Executive Officer
|
|
|
By:
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/s/ David Trick
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Name:
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David Trick
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Title:
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Chief Financial Officer and Treasurer
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Dated:
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November 3, 2016
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