FORM
|
|
10-Q
|
☒
|
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
|
Commission File Number:
|
|
1-10777
|
AMBAC FINANCIAL GROUP INC
|
Delaware
|
|
13-3621676
|
||
(State of incorporation)
|
|
(I.R.S. employer identification no.)
|
||
|
|
|
||
One State Street Plaza
|
New York
|
NY
|
|
10004
|
(Address of principal executive offices)
|
|
(Zip code)
|
|
(212)
|
658-7470
|
|
(Registrant's telephone number, including area code)
|
Securities registered pursuant to Section 12(b) of the Act:
|
|
|
||
Title of each class
|
|
Trading Symbol
|
|
Name of each exchange on which registered
|
Common stock par value $0.01 per share
|
|
AMBC
|
|
New York Stock Exchange
|
Warrants
|
|
AMBC WS
|
|
New York Stock Exchange
|
Large accelerated filer
|
☒
|
Accelerated filer
|
☐
|
Non-accelerated filer
|
☐
|
Smaller reporting company
|
☐
|
Emerging growth company
|
☐
|
Item Number
|
Page
|
|
Item Number
|
Page
|
||
PART I. FINANCIAL INFORMATION
|
|
|
PART I (CONTINUED)
|
|
||
1
|
Unaudited Consolidated Financial Statements of Ambac Financial Group, Inc. and Subsidiaries
|
|
|
3
|
||
|
|
4
|
||||
|
|
|
|
|
||
|
|
PART II. OTHER INFORMATION
|
|
|||
|
|
1
|
||||
|
|
1A
|
||||
2
|
|
2
|
||||
|
|
3
|
||||
|
|
5
|
Other Information
|
|||
|
|
6
|
Exhibits
|
|||
|
|
|||||
|
|
|
|
|
||
|
|
|
|
|
||
|
|
|
|
|
||
|
|
|
|
|
||
|
|
|
|
|
||
|
|
|
|
|
||
|
|
|
|
|
||
|
|
|
|
|
|
March 31,
|
|
December 31,
|
||||
(Dollars in millions, except share data) (March 31, 2020 (Unaudited))
|
2020
|
|
2019
|
||||
Assets:
|
|
|
|
||||
Investments:
|
|
|
|
||||
Fixed income securities, at fair value (amortized cost of $2,367 and $2,450)
|
$
|
2,367
|
|
|
$
|
2,577
|
|
Short-term investments pledged as collateral, at fair value (amortized cost of $85 and $85)
|
85
|
|
|
85
|
|
||
Short-term investments, at fair value (amortized cost of $586 and $653)
|
586
|
|
|
653
|
|
||
Other investments (includes $317 and $432 at fair value)
|
363
|
|
|
478
|
|
||
Total investments (net of allowance for credit losses of $0 at March 31, 2020)
|
3,400
|
|
|
3,792
|
|
||
Cash and cash equivalents
|
58
|
|
|
24
|
|
||
Restricted cash
|
31
|
|
|
55
|
|
||
Premium receivables (net of allowance for credit losses of $14 at March 31, 2020)
|
403
|
|
|
416
|
|
||
Reinsurance recoverable on paid and unpaid losses
|
36
|
|
|
26
|
|
||
Deferred ceded premium
|
79
|
|
|
82
|
|
||
Subrogation recoverable
|
2,192
|
|
|
2,029
|
|
||
Derivative assets
|
88
|
|
|
75
|
|
||
Current taxes
|
16
|
|
|
11
|
|
||
Insurance intangible asset
|
406
|
|
|
427
|
|
||
Other assets
|
144
|
|
|
95
|
|
||
Variable interest entity assets:
|
|
|
|
||||
Fixed income securities, at fair value
|
2,928
|
|
|
3,121
|
|
||
Restricted cash
|
2
|
|
|
2
|
|
||
Loans, at fair value
|
2,932
|
|
|
3,108
|
|
||
Derivative assets
|
62
|
|
|
52
|
|
||
Other assets
|
1
|
|
|
3
|
|
||
Total assets
|
$
|
12,777
|
|
|
$
|
13,320
|
|
Liabilities and Stockholders’ Equity:
|
|
|
|
||||
Liabilities:
|
|
|
|
||||
Unearned premiums
|
$
|
507
|
|
|
$
|
518
|
|
Loss and loss expense reserves
|
1,797
|
|
|
1,548
|
|
||
Ceded premiums payable
|
28
|
|
|
29
|
|
||
Deferred taxes
|
26
|
|
|
32
|
|
||
Long-term debt
|
2,760
|
|
|
2,822
|
|
||
Accrued interest payable
|
457
|
|
|
441
|
|
||
Derivative liabilities
|
137
|
|
|
90
|
|
||
Other liabilities
|
131
|
|
|
93
|
|
||
Variable interest entity liabilities:
|
|
|
|
||||
Accrued interest payable
|
—
|
|
|
1
|
|
||
Long-term debt (includes $4,092 and $4,351 at fair value)
|
4,263
|
|
|
4,554
|
|
||
Derivative liabilities
|
1,610
|
|
|
1,657
|
|
||
Total liabilities
|
11,716
|
|
|
11,783
|
|
||
Commitments and contingencies (See Note 11)
|
|
|
|
||||
Stockholders’ equity:
|
|
|
|
||||
Preferred stock, par value $0.01 per share; 20,000,000 shares authorized shares; issued and outstanding shares—none
|
—
|
|
|
—
|
|
||
Common stock, par value $0.01 per share; 130,000,000 shares authorized; issued shares: 45,865,081 and 45,571,743
|
—
|
|
|
—
|
|
||
Additional paid-in capital
|
235
|
|
|
232
|
|
||
Accumulated other comprehensive income (loss)
|
(149
|
)
|
|
42
|
|
||
Retained earnings
|
917
|
|
|
1,203
|
|
||
Treasury stock, shares at cost: 86,058 and 16,343
|
(2
|
)
|
|
—
|
|
||
Total Ambac Financial Group, Inc. stockholders’ equity
|
1,002
|
|
|
1,477
|
|
||
Noncontrolling interest
|
60
|
|
|
60
|
|
||
Total stockholders’ equity
|
1,062
|
|
|
1,536
|
|
||
Total liabilities and stockholders’ equity
|
$
|
12,777
|
|
|
$
|
13,320
|
|
|
|
Three Months Ended March 31,
|
||||||
(Dollars in millions, except share data)
|
|
2020
|
|
2019
|
||||
Revenues:
|
|
|
|
|
||||
Net premiums earned
|
|
$
|
10
|
|
|
$
|
28
|
|
Net investment income (loss)
|
|
(21
|
)
|
|
55
|
|
||
Net realized investment gains (losses)
|
|
8
|
|
|
17
|
|
||
Net gains (losses) on derivative contracts
|
|
(70
|
)
|
|
(16
|
)
|
||
Other income (expense)
|
|
—
|
|
|
1
|
|
||
Income (loss) on variable interest entities
|
|
3
|
|
|
16
|
|
||
Total revenues
|
|
(70
|
)
|
|
100
|
|
||
Expenses:
|
|
|
|
|
||||
Losses and loss expenses (benefit)
|
|
117
|
|
|
12
|
|
||
Insurance intangible amortization
|
|
13
|
|
|
36
|
|
||
Operating expenses
|
|
24
|
|
|
25
|
|
||
Interest expense
|
|
63
|
|
|
68
|
|
||
Total expenses
|
|
217
|
|
|
142
|
|
||
Pre-tax income (loss)
|
|
(287
|
)
|
|
(41
|
)
|
||
Provision (benefit) for income taxes
|
|
(7
|
)
|
|
2
|
|
||
Net income (loss) attributable to common stockholders
|
|
$
|
(280
|
)
|
|
$
|
(43
|
)
|
Other comprehensive income (loss), after tax:
|
|
|
|
|
||||
Net income (loss)
|
|
$
|
(280
|
)
|
|
$
|
(43
|
)
|
Unrealized gains (losses) on securities, net of income tax provision (benefit) of $(0) and $(1)
|
|
(146
|
)
|
|
56
|
|
||
Gains (losses) on foreign currency translation, net of income tax provision (benefit) of $0 and $0
|
|
(46
|
)
|
|
15
|
|
||
Credit risk changes of fair value option liabilities, net of income tax provision (benefit) of $1 and $0
|
|
3
|
|
|
—
|
|
||
Changes to postretirement benefit, net of income tax provision (benefit) of $0 and $0
|
|
(2
|
)
|
|
—
|
|
||
Total other comprehensive income (loss), net of income tax
|
|
(191
|
)
|
|
71
|
|
||
Total comprehensive income (loss) attributable to common stockholders
|
|
$
|
(470
|
)
|
|
$
|
28
|
|
Net income (loss) per share attributable to common stockholders:
|
|
|
|
|
||||
Basic
|
|
$
|
(6.07
|
)
|
|
$
|
(0.94
|
)
|
Diluted
|
|
$
|
(6.07
|
)
|
|
$
|
(0.94
|
)
|
Weighted average number of common shares outstanding:
|
|
|
|
|
||||
Basic
|
|
46,060,324
|
|
|
45,832,297
|
|
||
Diluted
|
|
46,060,324
|
|
|
45,832,297
|
|
|
|
|
Ambac Financial Group, Inc.
|
|
|
||||||||||||||||||||||||||
(Dollars in millions)
|
Total
|
|
Retained
Earnings |
|
Accumulated
Other Comprehensive Income (Loss) |
|
Preferred
Stock |
|
Common
Stock |
|
Additional Paid-in
Capital |
|
Common
Stock Held in Treasury, at Cost |
|
Noncontrolling
Interest |
||||||||||||||||
Balance at January 1, 2020
|
$
|
1,536
|
|
|
$
|
1,203
|
|
|
$
|
42
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
232
|
|
|
$
|
—
|
|
|
$
|
60
|
|
Total comprehensive income (loss)
|
(470
|
)
|
|
(280
|
)
|
|
(191
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||||
Adjustment to initially apply ASU 2016-13
|
(4
|
)
|
|
(4
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||||
Stock-based compensation
|
3
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3
|
|
|
—
|
|
|
—
|
|
||||||||
Cost of shares (acquired) issued under equity plan
|
(3
|
)
|
|
(1
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1
|
)
|
|
—
|
|
||||||||
Balance at March 31, 2020
|
$
|
1,062
|
|
|
$
|
917
|
|
|
$
|
(149
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
235
|
|
|
$
|
(2
|
)
|
|
$
|
60
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Balance at January 1, 2019
|
$
|
1,633
|
|
|
$
|
1,421
|
|
|
$
|
(49
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
219
|
|
|
$
|
—
|
|
|
$
|
41
|
|
Total comprehensive income (loss)
|
28
|
|
|
(43
|
)
|
|
71
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||||
Stock-based compensation
|
4
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
4
|
|
|
—
|
|
|
—
|
|
||||||||
Cost of shares (acquired) issued under equity plan
|
(2
|
)
|
|
(2
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||||
Re-issuance of Ambac Assurance auction market preferred shares
|
3
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3
|
|
||||||||
Balance at March 31, 2019
|
$
|
1,666
|
|
|
$
|
1,376
|
|
|
$
|
23
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
224
|
|
|
$
|
(1
|
)
|
|
$
|
44
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
||||||
(Dollars in millions)
|
|
2020
|
|
2019
|
||||
Cash flows from operating activities:
|
|
|
|
|
||||
Net income (loss)
|
|
$
|
(280
|
)
|
|
$
|
(43
|
)
|
Adjustments to reconcile net income to net cash used in operating activities:
|
|
|
|
|
||||
Depreciation and amortization
|
|
—
|
|
|
—
|
|
||
Amortization of bond premium and discount
|
|
(4
|
)
|
|
(12
|
)
|
||
Share-based compensation
|
|
3
|
|
|
4
|
|
||
Deferred income taxes
|
|
(6
|
)
|
|
(1
|
)
|
||
Current income taxes
|
|
(5
|
)
|
|
4
|
|
||
Unearned premiums, net
|
|
(7
|
)
|
|
(36
|
)
|
||
Losses and loss expenses, net
|
|
77
|
|
|
(119
|
)
|
||
Ceded premiums payable
|
|
(1
|
)
|
|
(1
|
)
|
||
Premium receivables
|
|
13
|
|
|
8
|
|
||
Accrued interest payable
|
|
23
|
|
|
29
|
|
||
Amortization of insurance intangible assets
|
|
13
|
|
|
36
|
|
||
Net mark-to-market (gains) losses
|
|
2
|
|
|
—
|
|
||
Net realized investment gains
|
|
(8
|
)
|
|
(17
|
)
|
||
Variable interest entity activities
|
|
(3
|
)
|
|
(16
|
)
|
||
Derivative assets and liabilities
|
|
32
|
|
|
12
|
|
||
Other, net
|
|
63
|
|
|
57
|
|
||
Net cash used in operating activities
|
|
(87
|
)
|
|
(95
|
)
|
||
Cash flows from investing activities:
|
|
|
|
|
||||
Proceeds from sales of bonds
|
|
221
|
|
|
641
|
|
||
Proceeds from matured bonds
|
|
49
|
|
|
35
|
|
||
Purchases of bonds
|
|
(150
|
)
|
|
(183
|
)
|
||
Proceeds from sales of other invested assets
|
|
243
|
|
|
2
|
|
||
Purchases of other invested assets
|
|
(195
|
)
|
|
(29
|
)
|
||
Change in short-term investments
|
|
67
|
|
|
(478
|
)
|
||
Change in cash collateral receivable
|
|
(56
|
)
|
|
57
|
|
||
Proceeds from paydowns of consolidated VIE assets
|
|
66
|
|
|
67
|
|
||
Other, net
|
|
(1
|
)
|
|
—
|
|
||
Net cash provided by investing activities
|
|
244
|
|
|
112
|
|
||
Cash flows from financing activities:
|
|
|
|
|
||||
Paydowns of Ambac note
|
|
(77
|
)
|
|
(13
|
)
|
||
Issuance of auction market preferred shares of Ambac Assurance
|
|
—
|
|
|
3
|
|
||
Tax payments related to shares withheld for share-based compensation plans
|
|
(3
|
)
|
|
(2
|
)
|
||
Payments of consolidated VIE liabilities
|
|
(66
|
)
|
|
(63
|
)
|
||
Net cash used in financing activities
|
|
(146
|
)
|
|
(76
|
)
|
||
Effect of foreign exchange on cash, cash equivalents and restricted cash
|
|
—
|
|
|
—
|
|
||
Net cash flow
|
|
10
|
|
|
(58
|
)
|
||
Cash, cash equivalents, and restricted cash at beginning of period
|
|
81
|
|
|
83
|
|
||
Cash, cash equivalents, and restricted cash at end of period
|
|
$
|
91
|
|
|
$
|
25
|
|
•
|
Active runoff of Ambac Assurance and its subsidiaries through transaction terminations, policy commutations, reinsurance, settlements and restructurings, with a focus on our watch list credits and known and potential future adversely classified credits, that we believe will improve our risk profile, and maximizing the risk-adjusted return on invested assets;
|
•
|
Ongoing rationalization of Ambac's capital and liability structures;
|
•
|
Loss recovery through active litigation management and exercise of contractual and legal rights;
|
•
|
Ongoing review of the effectiveness and efficiency of Ambac's operating platform; and
|
•
|
Evaluation of opportunities in certain business sectors that meet acceptable criteria that will generate long-term stockholder value with attractive risk-adjusted returns.
|
Supplemental Disclosure of Cash Flow Information
|
|
Three Months Ended March 31,
|
||||||
|
|
2020
|
|
2019
|
||||
Cash paid during the period for:
|
|
|
|
|
||||
Income taxes
|
|
$
|
2
|
|
|
$
|
1
|
|
Interest on long-term debt
|
|
31
|
|
|
38
|
|
||
Non-cash financing activities:
|
|
|
|
|
||||
Exchange of investments in Puerto Rico COFINA bonds for new bonds issued in the Plan of Adjustment
|
|
$
|
—
|
|
|
$
|
510
|
|
|
|
|
|
|
||||
|
|
March 31,
|
||||||
|
|
2020
|
|
2019
|
||||
Reconciliation of cash, cash equivalents, and restricted cash reported within the Consolidated Balance Sheets to the Consolidated Statements of Cash Flows:
|
|
|
|
|
||||
Cash and cash equivalents
|
|
$
|
58
|
|
|
$
|
22
|
|
Restricted cash
|
|
31
|
|
|
—
|
|
||
Variable Interest Entity Restricted cash
|
|
2
|
|
|
3
|
|
||
Total cash, cash equivalents, and restricted cash shown on the Consolidated Statements of Cash Flows
|
|
$
|
91
|
|
|
$
|
25
|
|
•
|
Removals: 1) Amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy, 2) Policy for timing of transfers between levels, and 3) Valuation processes for Level 3 fair value measurements.
|
•
|
Modifications: 1) For investments in certain entities that calculate net asset value, disclosures are required for the timing of liquidation of an investee's assets and the date when restrictions from redemption might lapse, only if the investee has communicated the timing to the reporting entity or publicly announced it and 2) Clarification that the measurement uncertainty disclosure is to communicate information about the uncertainty in measurement as of the reporting date and not possible future changes.
|
•
|
Additions: 1) Changes in unrealized gains and losses for the period included in other comprehensive income for recurring Level 3 fair value measurements held at the end of the reporting period and 2) Range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements. Alternatively, an entity may disclose other quantitative information (such as the median or arithmetic average) if it determines that it is a more reasonable and rational method to reflect the distribution of unobservable inputs used.
|
•
|
Ambac provides financial guarantees, including credit derivative contracts, for various debt obligations issued by special purpose entities, including VIEs ("FG VIEs");
|
•
|
Ambac sponsors special purpose entities that issued notes to investors for various purposes; and
|
•
|
Ambac is an investor in collateralized debt obligations, mortgage-backed and other asset-backed securities issued by VIEs and its ownership interest is generally insignificant to the VIE and/or Ambac does not have rights that direct the activities that are most significant to such VIE.
|
•
|
We determined that Ambac’s subsidiaries generally have the obligation to absorb a FG VIE's expected losses given that they have issued financial guarantees supporting certain liabilities (and in some cases certain assets). As further described below, Ambac consolidates certain FG VIEs in cases where we also have the power to direct the activities that most significantly impact the VIE’s economic performance due to one or more of the following: (i) the transaction experiencing deterioration and breaching performance triggers, giving Ambac the ability to exercise certain control rights, (ii) Ambac being involved in the design of the VIE and receiving control rights from its inception, such as may occur from loss remediation activities, or (iii) the transaction not experiencing deterioration, however due to the passive nature of the VIE, Ambac's contingent control rights upon a future breach of performance triggers is considered to be the power over the most significant activity.
|
•
|
A VIE is deconsolidated in the period that Ambac no longer has such control rights, which could occur in connection with the execution of remediation activities on the transaction or amortization of insured exposure, either of which may reduce the degree of Ambac’s control over a VIE.
|
•
|
Assets and liabilities of FG VIEs that are consolidated are reported within Variable interest entity assets or Variable interest entity liabilities on the Consolidated Balance Sheets.
|
•
|
The election to use the fair value option is made on an instrument by instrument basis. Ambac has elected the fair value option for consolidated FG VIE financial assets and financial liabilities, except in cases where Ambac was involved in the design of the VIE and was granted control rights at its inception.
|
◦
|
When the fair value option is elected, changes in the fair value of the FG VIE's financial assets and liabilities are reported within Income (loss) on variable interest entities in the Consolidated Statements of Total Comprehensive Income (Loss), except for the portion of the total change in fair value of financial liabilities caused by changes in the instrument-specific credit risk which is presented separately in Other comprehensive income (loss).
|
◦
|
In cases where the fair value option has not been elected, the FG VIE's invested assets are fixed income securities and are considered available-for-sale as defined by the Investments - Debt Securities Topic of the ASC. These assets are reported in the financial statements at fair value with unrealized gains and losses reflected in Accumulated Other Comprehensive Income in Stockholders' Equity.
|
•
|
Upon initial consolidation of a FG VIE, Ambac recognizes a gain or loss in earnings for the difference between: (i) the fair value of the consideration paid, the fair value of any non-controlling interests and the reported amount of any previously held interests and (ii) the net amount, as measured on a fair value basis, of the assets and liabilities consolidated. Upon deconsolidation of a FG VIE, we recognize a gain or loss for the difference between: (i) the fair value of any consideration received, the fair value of any retained non-controlling investment in the VIE and the carrying amount of any non-controlling interest in the VIE and (ii) the carrying amount of the VIE’s assets and liabilities. Gains or losses from consolidation and deconsolidation that are reported in earnings are reported within Income (loss) on variable interest entities on the Consolidated Statements of Total Comprehensive Income (Loss).
|
•
|
The impact of consolidating such FG VIEs on Ambac’s balance sheet is the elimination of transactions between the consolidated FG VIEs and Ambac’s operating subsidiaries and the inclusion of the FG VIE’s third party assets and liabilities. For a financial guarantee insurance policy issued to a consolidated VIE, Ambac does not reflect the financial guarantee insurance policy in accordance with the related insurance accounting rules under the Financial Services –
|
|
March 31, 2020
|
|
December 31, 2019
|
||||||||||||||||||||
|
Ambac UK
|
|
Ambac Assurance
|
|
Total VIEs
|
|
Ambac UK
|
|
Ambac Assurance
|
|
Total VIEs
|
||||||||||||
Fixed income securities, at fair value:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Corporate obligations, fair value option
|
$
|
2,806
|
|
|
$
|
—
|
|
|
$
|
2,806
|
|
|
$
|
2,957
|
|
|
$
|
—
|
|
|
$
|
2,957
|
|
Municipal obligations, available-for-sale (1)
|
—
|
|
|
122
|
|
|
122
|
|
|
—
|
|
|
164
|
|
|
164
|
|
||||||
Total FG VIE fixed income securities, at fair value
|
2,806
|
|
|
122
|
|
|
2,928
|
|
|
2,957
|
|
|
164
|
|
|
3,121
|
|
||||||
Restricted cash
|
1
|
|
|
1
|
|
|
2
|
|
|
1
|
|
|
1
|
|
|
2
|
|
||||||
Loans, at fair value (2)
|
2,932
|
|
|
—
|
|
|
2,932
|
|
|
3,108
|
|
|
—
|
|
|
3,108
|
|
||||||
Derivative assets
|
62
|
|
|
—
|
|
|
62
|
|
|
52
|
|
|
—
|
|
|
52
|
|
||||||
Other assets
|
—
|
|
|
1
|
|
|
1
|
|
|
1
|
|
|
2
|
|
|
3
|
|
||||||
Total FG VIE assets
|
$
|
5,801
|
|
|
$
|
124
|
|
|
$
|
5,925
|
|
|
$
|
6,119
|
|
|
$
|
167
|
|
|
$
|
6,286
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Accrued interest payable
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1
|
|
|
$
|
—
|
|
|
$
|
1
|
|
Long-term debt:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Long-term debt, at fair value (3)
|
4,092
|
|
|
—
|
|
|
4,092
|
|
|
4,351
|
|
|
—
|
|
|
4,351
|
|
||||||
Long-term debt, at par less unamortized discount
|
—
|
|
|
171
|
|
|
171
|
|
|
—
|
|
|
203
|
|
|
203
|
|
||||||
Total long-term debt
|
4,092
|
|
|
171
|
|
|
4,263
|
|
|
4,351
|
|
|
203
|
|
|
4,554
|
|
||||||
Derivative liabilities
|
1,610
|
|
|
—
|
|
|
1,610
|
|
|
1,657
|
|
|
—
|
|
|
1,657
|
|
||||||
Total FG VIE liabilities
|
$
|
5,702
|
|
|
$
|
171
|
|
|
$
|
5,873
|
|
|
$
|
6,009
|
|
|
$
|
203
|
|
|
$
|
6,212
|
|
Number of FG VIEs consolidated
|
6
|
|
|
1
|
|
|
7
|
|
|
6
|
|
|
1
|
|
|
7
|
|
(1)
|
Available-for-sale FG VIE fixed income securities consist of municipal obligations with an amortized cost basis of $116 and $139, and aggregate gross unrealized gains and (losses) of $6 and $25 at March 31, 2020 and December 31, 2019, respectively. All such securities had contractual maturities due after ten years as of March 31, 2020.
|
(2)
|
The unpaid principal balances of loan assets carried at fair value were $2,439 as of March 31, 2020 and $2,618 as of December 31, 2019.
|
(3)
|
The unpaid principal balances of long-term debt carried at fair value were $3,550 as of March 31, 2020 and $3,800 as of December 31, 2019.
|
|
|
Three Months Ended March 31,
|
||||||
|
|
2020
|
|
2019
|
||||
Net change in fair value of VIE assets and liabilities reported under the fair value option
|
|
$
|
—
|
|
|
$
|
2
|
|
Less: Credit risk changes of fair value option long-term debt reported through other comprehensive income (loss)
|
|
(4
|
)
|
|
—
|
|
||
Net change in fair value of VIE assets and liabilities reported in earnings
|
|
(4
|
)
|
|
2
|
|
||
Investment income on available-for-sale securities
|
|
2
|
|
|
2
|
|
||
Net realized investment gains (losses) on available-for-sale securities
|
|
8
|
|
|
—
|
|
||
Interest expense on long-term debt carried at par less unamortized cost
|
|
(2
|
)
|
|
(2
|
)
|
||
Other expenses
|
|
—
|
|
|
—
|
|
||
Gain (loss) from consolidating FG VIEs
|
|
—
|
|
|
15
|
|
||
Income (loss) on variable interest entities
|
|
$
|
3
|
|
|
$
|
16
|
|
|
Carrying Value of Assets and Liabilities
|
||||||||||||||
|
Maximum
Exposure To Loss (1) |
|
Insurance
Assets (2) |
|
Insurance
Liabilities (3) |
|
Net Derivative
Assets (Liabilities) (4) |
||||||||
March 31, 2020:
|
|
|
|
|
|
|
|
||||||||
Global structured finance:
|
|
|
|
|
|
|
|
||||||||
Mortgage-backed—residential
|
$
|
5,063
|
|
|
$
|
2,075
|
|
|
$
|
609
|
|
|
—
|
|
|
Other consumer asset-backed
|
1,276
|
|
|
30
|
|
|
235
|
|
|
—
|
|
||||
Other commercial asset-backed
|
100
|
|
|
3
|
|
|
2
|
|
|
—
|
|
||||
Other
|
1,046
|
|
|
6
|
|
|
18
|
|
|
9
|
|
||||
Total global structured finance
|
7,485
|
|
|
2,114
|
|
|
864
|
|
|
9
|
|
||||
Global public finance
|
22,533
|
|
|
285
|
|
|
329
|
|
|
(2
|
)
|
||||
Total
|
$
|
30,018
|
|
|
$
|
2,399
|
|
|
$
|
1,193
|
|
|
$
|
7
|
|
|
|
|
|
|
|
|
|
||||||||
December 31, 2019:
|
|
|
|
|
|
|
|
||||||||
Global structured finance:
|
|
|
|
|
|
|
|
||||||||
Mortgage-backed—residential
|
$
|
5,373
|
|
|
$
|
1,913
|
|
|
$
|
523
|
|
|
$
|
—
|
|
Other consumer asset-backed
|
1,373
|
|
|
31
|
|
|
216
|
|
|
—
|
|
||||
Other commercial asset-backed
|
314
|
|
|
9
|
|
|
6
|
|
|
—
|
|
||||
Other
|
1,107
|
|
|
7
|
|
|
18
|
|
|
8
|
|
||||
Total global structured finance
|
8,165
|
|
|
1,961
|
|
|
762
|
|
|
8
|
|
||||
Global public finance
|
23,341
|
|
|
287
|
|
|
321
|
|
|
—
|
|
||||
Total
|
$
|
31,506
|
|
|
$
|
2,247
|
|
|
$
|
1,083
|
|
|
$
|
7
|
|
(1)
|
Maximum exposure to loss represents the maximum future payments of principal and interest on insured obligations and derivative contracts. 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 included in “Premium receivables” and “Subrogation recoverable” for financial guarantee insurance contracts on Ambac’s Consolidated Balance Sheets.
|
(3)
|
Insurance liabilities represent the amount included in “Loss and loss expense reserves” and “Unearned premiums” for financial guarantee insurance 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.
|
•
|
Total principal amount of debt outstanding was $378 and $403 at March 31, 2020 and December 31, 2019, respectively. In each case, Ambac sold assets to this entity, which are composed of utility obligations with a weighted average rating of BBB+ at March 31, 2020 and weighted average life of 0.9 years. The purchase by this entity of financial assets was financed through the issuance of MTNs, which are cross-collateralized by the purchased assets. The MTNs have the same expected weighted average life as the purchased assets. Derivative contracts (interest rate swaps) are used within the entity for economic hedging purposes only. Derivative positions were established at the time MTNs were issued to purchase financial assets. As of March 31, 2020 Ambac Assurance had financial guarantee
|
•
|
Insurance premiums paid to Ambac Assurance by this entity are earned in a manner consistent with other insurance policies, over the risk period. Additionally, any losses incurred on such insurance policies are included in Ambac’s Consolidated Statements of Total Comprehensive Income (Loss). Under the terms of an Administrative Agency Agreement, Ambac provides certain administrative duties, primarily collecting amounts due on the obligations and making interest payments on the MTNs.
|
|
|
Unrealized Gains
(Losses) on Available for Sale Securities (1) |
|
Amortization of
Postretirement Benefit (1) |
|
Gain (Loss) on
Foreign Currency Translation (1) |
|
Credit Risk Changes of Fair Value Option Liabilities (1) (2)
|
|
Total
|
||||||||||
Three Months Ended March 31, 2020:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Beginning Balance
|
|
$
|
151
|
|
|
$
|
8
|
|
|
$
|
(116
|
)
|
|
$
|
(2
|
)
|
|
$
|
42
|
|
Other comprehensive income (loss) before reclassifications
|
|
(139
|
)
|
|
(2
|
)
|
|
(46
|
)
|
|
—
|
|
|
(187
|
)
|
|||||
Amounts reclassified from accumulated other comprehensive income (loss)
|
|
(7
|
)
|
|
—
|
|
|
—
|
|
|
3
|
|
|
(4
|
)
|
|||||
Net current period other comprehensive income (loss)
|
|
(146
|
)
|
|
(2
|
)
|
|
(46
|
)
|
|
3
|
|
|
(191
|
)
|
|||||
Balance at March 31, 2020
|
|
$
|
5
|
|
|
$
|
6
|
|
|
$
|
(162
|
)
|
|
$
|
2
|
|
|
$
|
(149
|
)
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Three Months Ended March 31, 2019:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Beginning Balance
|
|
$
|
86
|
|
|
$
|
9
|
|
|
$
|
(142
|
)
|
|
$
|
(2
|
)
|
|
$
|
(49
|
)
|
Other comprehensive income (loss) before reclassifications
|
|
73
|
|
|
1
|
|
|
15
|
|
|
—
|
|
|
89
|
|
|||||
Amounts reclassified from accumulated other comprehensive income (loss)
|
|
(17
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(17
|
)
|
|||||
Net current period other comprehensive income (loss)
|
|
56
|
|
|
—
|
|
|
15
|
|
|
—
|
|
|
71
|
|
|||||
Balance at March 31, 2019
|
|
$
|
142
|
|
|
$
|
9
|
|
|
$
|
(127
|
)
|
|
$
|
(2
|
)
|
|
$
|
23
|
|
(1)
|
All amounts are net of tax and noncontrolling interest. Amounts in parentheses indicate reductions to Accumulated Other Comprehensive Income.
|
(2)
|
Represents the changes in fair value attributable to instrument-specific credit risk of liabilities for which the fair value option is elected.
|
Details about Accumulated
Other Comprehensive
Income Components
|
|
Amount Reclassified from Accumulated Other Comprehensive Income
|
|
Affected Line Item in the
Consolidated Statement of Total Comprehensive Income (Loss) |
||||||
|
Three Months Ended March 31,
|
|
||||||||
|
2020
|
|
2019
|
|
||||||
Unrealized Gains (Losses) on Available-for-Sale Securities
|
|
|
|
|
|
|
||||
|
|
$
|
(8
|
)
|
|
$
|
(17
|
)
|
|
Net realized investment gains (losses) and other-than-temporary impairment losses
|
|
|
1
|
|
|
(1
|
)
|
|
Provision for income taxes
|
||
|
|
$
|
(7
|
)
|
|
$
|
(17
|
)
|
|
Net of tax and noncontrolling interest
|
Amortization of Postretirement Benefit
|
|
|
|
|
|
|
||||
Prior service cost
|
|
$
|
—
|
|
|
$
|
—
|
|
|
Other income
|
Actuarial (losses)
|
|
—
|
|
|
—
|
|
|
Other income
|
||
|
|
—
|
|
|
—
|
|
|
Total before tax
|
||
|
|
—
|
|
|
—
|
|
|
Provision for income taxes
|
||
|
|
$
|
—
|
|
|
$
|
—
|
|
|
Net of tax and noncontrolling interest
|
Credit risk changes of fair value option liabilities
|
|
|
|
|
|
|
||||
|
|
$
|
4
|
|
|
$
|
—
|
|
|
Credit Risk Changes of Fair Value Option Liabilities
|
|
|
(1
|
)
|
|
—
|
|
|
Provision for income taxes
|
||
|
|
$
|
3
|
|
|
$
|
—
|
|
|
Net of tax and noncontrolling interest
|
Total reclassifications for the period
|
|
$
|
(4
|
)
|
|
$
|
(17
|
)
|
|
Net of tax and noncontrolling interest
|
|
|
Three Months Ended March 31,
|
||||
|
|
2020
|
|
2019
|
||
Basic weighted average shares outstanding
|
|
46,060,324
|
|
|
45,832,297
|
|
Effect of potential dilutive shares (1):
|
|
|
|
|
||
Stock options
|
|
—
|
|
|
—
|
|
Warrants
|
|
—
|
|
|
—
|
|
Restricted stock units
|
|
—
|
|
|
—
|
|
Performance stock units (2)
|
|
—
|
|
|
—
|
|
Diluted weighted average shares outstanding
|
|
46,060,324
|
|
|
45,832,297
|
|
Anti-dilutive shares excluded from the above reconciliation:
|
|
|
|
|
||
Stock options
|
|
16,667
|
|
|
16,667
|
|
Warrants
|
|
4,877,749
|
|
|
4,877,783
|
|
Restricted stock units
|
|
236,189
|
|
|
271,763
|
|
Performance stock units (2)
|
|
738,039
|
|
|
478,739
|
|
(1)
|
For the three months ended March 31, 2020 and the three months ended March 31, 2019, Ambac had a net loss and accordingly excluded all potentially dilutive securities from the determination of diluted loss per share as their impact was anti-dilutive.
|
(2)
|
Performance stock units are reflected based on the performance metrics through the balance sheet date. Vesting of these units is contingent upon meeting certain performance metrics. Although a portion of these performance metrics have been achieved as of the respective period end, it is possible that awards may no longer meet the metric at the end of the performance period.
|
|
|
Three Months Ended March 31,
|
||||||
|
|
2020
|
|
2019
|
||||
Beginning premium receivable
|
|
$
|
416
|
|
|
$
|
495
|
|
Adjustment to initially apply ASU 2016-13
|
|
(3
|
)
|
|
—
|
|
||
Premium receipts
|
|
(12
|
)
|
|
(13
|
)
|
||
Adjustments for changes in expected and contractual cash flows (1)
|
|
10
|
|
|
—
|
|
||
Accretion of premium receivable discount
|
|
2
|
|
|
3
|
|
||
Changes to allowance for credit losses
|
|
(2
|
)
|
|
—
|
|
||
Other adjustments (including foreign exchange)
|
|
(8
|
)
|
|
2
|
|
||
Ending premium receivable (2)
|
|
$
|
403
|
|
|
$
|
487
|
|
(1)
|
Adjustments for changes in expected and contractual cash flows primarily due to changes in indexation rates on certain UK transactions partially offset by reductions in insured exposure as a result of early policy terminations and unscheduled principal paydowns.
|
(2)
|
Premium receivable includes premiums to be received in foreign denominated currencies most notably in British Pounds and Euros. At March 31, 2020 and 2019, premium receivables include British Pounds of $128 (£103) and $142 (£109), respectively, and Euros of $24 (€22) and $30 (€27), respectively.
|
|
Three Months Ended March 31,
|
||||||||||||||
|
2020
|
|
2019
|
||||||||||||
|
Written
|
|
Earned
|
|
Written
|
|
Earned
|
||||||||
Direct
|
$
|
11
|
|
|
$
|
13
|
|
|
$
|
3
|
|
|
$
|
29
|
|
Assumed
|
—
|
|
|
1
|
|
|
—
|
|
|
—
|
|
||||
Ceded
|
(1
|
)
|
|
3
|
|
|
(1
|
)
|
|
2
|
|
||||
Net premiums
|
$
|
12
|
|
|
$
|
10
|
|
|
$
|
4
|
|
|
$
|
28
|
|
|
Three Months Ended March 31,
|
||||||
|
2020
|
|
2019
|
||||
United States
|
$
|
7
|
|
|
$
|
28
|
|
United Kingdom
|
4
|
|
|
4
|
|
||
Other international
|
—
|
|
|
(5
|
)
|
||
Total
|
$
|
10
|
|
|
$
|
28
|
|
|
Future Premiums
to be
Collected (1)
|
|
Future
Premiums to be Earned Net of Reinsurance (2) |
||||
Three months ended:
|
|
|
|
||||
June 30, 2020
|
$
|
12
|
|
|
$
|
10
|
|
September 30, 2020
|
10
|
|
|
10
|
|
||
December 31, 2020
|
10
|
|
|
10
|
|
||
Twelve months ended:
|
|
|
|
||||
December 31, 2021
|
37
|
|
|
36
|
|
||
December 31, 2022
|
35
|
|
|
34
|
|
||
December 31, 2023
|
34
|
|
|
32
|
|
||
December 31, 2024
|
32
|
|
|
30
|
|
||
Five years ended:
|
|
|
|
||||
December 31, 2029
|
142
|
|
|
125
|
|
||
December 31, 2034
|
104
|
|
|
83
|
|
||
December 31, 2039
|
52
|
|
|
38
|
|
||
December 31, 2044
|
23
|
|
|
14
|
|
||
December 31, 2049
|
9
|
|
|
5
|
|
||
December 31, 2054
|
1
|
|
|
1
|
|
||
Total
|
$
|
501
|
|
|
$
|
428
|
|
(1)
|
Future premiums to be collected are undiscounted, gross of allowance for credit losses, and are used to derive the discounted premium receivable asset recorded on Ambac's balance sheet.
|
(2)
|
Future premiums to be earned, net of reinsurance relate to the unearned premiums liability and deferred ceded premium asset recorded on Ambac’s balance sheet. The use of contractual lives for many bond types which do not have homogeneous pools of underlying collateral is required in the calculation of the premium receivable, as further described in Note 2. Basis of Presentation and Significant Accounting Policies in the Notes to Consolidated Financial Statements included in Ambac's Annual Report on Form 10-K for the year ended December 31, 2019. 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.
|
Beginning balance (1)
|
|
$
|
9
|
|
Current period provision (2)
|
|
5
|
|
|
Write-offs of the allowance
|
|
—
|
|
|
Recoveries of previously written-off amounts
|
|
—
|
|
|
Ending balance
|
|
$
|
14
|
|
(1)
|
At December 31, 2019, $9 of premiums receivable were deemed uncollectible as determined under prior GAAP rules.
|
(2)
|
Includes $3from the adoption of ASU 2016-13 on January 1, 2020.
|
|
|
March 31, 2020:
|
|
December 31, 2019:
|
||||||||||||||||||||||||||||
|
|
Present Value of Expected
Net Cash Flows |
|
Unearned
Premium Revenue |
|
Gross Loss and
Loss Expense Reserves |
|
Present Value of Expected
Net Cash Flows |
|
Unearned
Premium Revenue |
|
Gross Loss and
Loss Expense Reserves |
||||||||||||||||||||
Balance Sheet Line Item
|
|
Claims and
Loss Expenses |
|
Recoveries
|
|
|
|
Claims and
Loss Expenses |
|
Recoveries
|
|
|
||||||||||||||||||||
Loss and loss expense reserves
|
|
$
|
2,112
|
|
|
$
|
(245
|
)
|
|
$
|
(70
|
)
|
|
$
|
1,797
|
|
|
$
|
1,835
|
|
|
$
|
(233
|
)
|
|
$
|
(54
|
)
|
|
$
|
1,548
|
|
Subrogation recoverable
|
|
135
|
|
|
(2,327
|
)
|
|
—
|
|
|
(2,192
|
)
|
|
131
|
|
|
(2,160
|
)
|
|
—
|
|
|
(2,029
|
)
|
||||||||
Totals
|
|
$
|
2,247
|
|
|
$
|
(2,572
|
)
|
|
$
|
(70
|
)
|
|
$
|
(395
|
)
|
|
$
|
1,966
|
|
|
$
|
(2,394
|
)
|
|
$
|
(54
|
)
|
|
$
|
(482
|
)
|
|
Three Months Ended March 31,
|
||||||
|
2020
|
|
2019
|
||||
Beginning gross loss and loss expense reserves
|
$
|
(482
|
)
|
|
$
|
(107
|
)
|
Reinsurance recoverable
|
26
|
|
|
23
|
|
||
Beginning balance of net loss and loss expense reserves
|
(508
|
)
|
|
(130
|
)
|
||
Losses and loss expenses (benefit):
|
|
|
|
||||
Current year
|
27
|
|
|
1
|
|
||
Prior years
|
90
|
|
|
12
|
|
||
Total (1) (2)
|
117
|
|
|
12
|
|
||
Loss and loss expenses paid (recovered):
|
|
|
|
||||
Current year
|
—
|
|
|
—
|
|
||
Prior years
|
39
|
|
|
64
|
|
||
Total
|
39
|
|
|
64
|
|
||
Foreign exchange effect
|
—
|
|
|
6
|
|
||
Ending net loss and loss expense reserves
|
(430
|
)
|
|
(176
|
)
|
||
Impact of VIE consolidation
|
—
|
|
|
(72
|
)
|
||
Reinsurance recoverable (3)
|
35
|
|
|
26
|
|
||
Ending gross loss and loss expense reserves
|
$
|
(395
|
)
|
|
$
|
(222
|
)
|
(1)
|
Total losses and loss expenses (benefit) includes $(10) and $(5) for the three months ended March 31, 2020 and 2019, respectively, related to ceded reinsurance.
|
(2)
|
Ambac records the impact of estimated recoveries related to securitized loans in RMBS transactions that breached certain representations and warranties ("R&W"s) by transaction sponsors within losses and loss expenses (benefit). The losses and loss expense (benefit) incurred associated with changes in estimated R&Ws for the three months ended March 31, 2020 and 2019 was $(36) and $4, respectively.
|
(3)
|
Represents reinsurance recoverable on future loss and loss expenses. Additionally, the Balance Sheet line "Reinsurance recoverable on paid and unpaid losses" includes reinsurance recoverables (payables) of $1 and $1 as of March 31, 2020 and 2019, respectively, related to previously presented loss and loss expenses and subrogation.
|
Surveillance Categories as of March 31, 2020
|
|||||||||||||||||||||||||||
|
I
|
|
IA
|
|
II
|
|
III
|
|
IV
|
|
V
|
|
Total
|
||||||||||||||
Number of policies
|
33
|
|
|
22
|
|
|
14
|
|
|
16
|
|
|
136
|
|
|
3
|
|
|
224
|
|
|||||||
Remaining weighted-average contract period (in years) (1)
|
24
|
|
|
21
|
|
|
9
|
|
|
17
|
|
|
15
|
|
|
2
|
|
|
15
|
|
|||||||
Gross insured contractual payments outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Principal
|
$
|
727
|
|
|
$
|
483
|
|
|
$
|
607
|
|
|
$
|
1,524
|
|
|
$
|
3,667
|
|
|
$
|
37
|
|
|
$
|
7,046
|
|
Interest
|
394
|
|
|
507
|
|
|
512
|
|
|
326
|
|
|
1,608
|
|
|
11
|
|
|
3,358
|
|
|||||||
Total
|
$
|
1,121
|
|
|
$
|
991
|
|
|
$
|
1,119
|
|
|
$
|
1,850
|
|
|
$
|
5,275
|
|
|
$
|
48
|
|
|
$
|
10,404
|
|
Gross undiscounted claim liability
|
$
|
18
|
|
|
$
|
44
|
|
|
$
|
41
|
|
|
$
|
521
|
|
|
$
|
1,778
|
|
|
$
|
48
|
|
|
$
|
2,450
|
|
Discount, gross claim liability
|
(1
|
)
|
|
(2
|
)
|
|
(1
|
)
|
|
(71
|
)
|
|
(184
|
)
|
|
—
|
|
|
(259
|
)
|
|||||||
Gross claim liability before all subrogation and before reinsurance
|
17
|
|
|
42
|
|
|
41
|
|
|
450
|
|
|
1,594
|
|
|
47
|
|
|
2,191
|
|
|||||||
Less:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Gross RMBS subrogation (2)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,771
|
)
|
|
—
|
|
|
(1,771
|
)
|
|||||||
Discount, RMBS subrogation
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
7
|
|
|
—
|
|
|
7
|
|
|||||||
Discounted RMBS subrogation, before reinsurance
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,764
|
)
|
|
—
|
|
|
(1,764
|
)
|
|||||||
Less:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Gross other subrogation (3)
|
—
|
|
|
—
|
|
|
—
|
|
|
(39
|
)
|
|
(777
|
)
|
|
(13
|
)
|
|
(829
|
)
|
|||||||
Discount, other subrogation
|
—
|
|
|
—
|
|
|
—
|
|
|
1
|
|
|
18
|
|
|
1
|
|
|
21
|
|
|||||||
Discounted other subrogation, before reinsurance
|
—
|
|
|
—
|
|
|
—
|
|
|
(38
|
)
|
|
(759
|
)
|
|
(11
|
)
|
|
(809
|
)
|
|||||||
Gross claim liability, net of all subrogation and discounts, before reinsurance
|
17
|
|
|
42
|
|
|
41
|
|
|
412
|
|
|
(929
|
)
|
|
36
|
|
|
(381
|
)
|
|||||||
Less: Unearned premium revenue
|
(2
|
)
|
|
(9
|
)
|
|
(5
|
)
|
|
(19
|
)
|
|
(34
|
)
|
|
—
|
|
|
(70
|
)
|
|||||||
Plus: Loss expense reserves
|
—
|
|
|
1
|
|
|
1
|
|
|
4
|
|
|
50
|
|
|
—
|
|
|
55
|
|
|||||||
Gross loss and loss expense reserves
|
$
|
15
|
|
|
$
|
34
|
|
|
$
|
36
|
|
|
$
|
397
|
|
|
$
|
(914
|
)
|
|
$
|
36
|
|
|
$
|
(395
|
)
|
Reinsurance recoverable reported on Balance Sheet (4)
|
$
|
—
|
|
|
$
|
6
|
|
|
$
|
9
|
|
|
$
|
27
|
|
|
$
|
(7
|
)
|
|
$
|
—
|
|
|
$
|
36
|
|
(1)
|
Remaining weighted-average contract period is weighted based on projected gross claims over the lives of the respective policies.
|
(2)
|
RMBS subrogation represents Ambac’s estimate of subrogation recoveries from RMBS transaction sponsors for R&W breaches.
|
(3)
|
Other subrogation 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 the Balance Sheet includes reinsurance recoverables of $35 related to future loss and loss expenses and $1 related to presented loss and loss expenses and subrogation.
|
Surveillance Categories as of December 31, 2019
|
|||||||||||||||||||||||||||
|
I
|
|
IA
|
|
II
|
|
III
|
|
IV
|
|
V
|
|
Total
|
||||||||||||||
Number of policies
|
34
|
|
|
18
|
|
|
11
|
|
|
16
|
|
|
139
|
|
|
3
|
|
|
221
|
|
|||||||
Remaining weighted-average contract period (in years) (1)
|
8
|
|
|
21
|
|
|
9
|
|
|
17
|
|
|
14
|
|
|
3
|
|
|
15
|
|
|||||||
Gross insured contractual payments outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Principal
|
$
|
668
|
|
|
$
|
510
|
|
|
$
|
277
|
|
|
$
|
857
|
|
|
$
|
3,819
|
|
|
$
|
37
|
|
|
$
|
6,168
|
|
Interest
|
340
|
|
|
507
|
|
|
128
|
|
|
366
|
|
|
1,678
|
|
|
11
|
|
|
3,029
|
|
|||||||
Total
|
$
|
1,007
|
|
|
$
|
1,016
|
|
|
$
|
404
|
|
|
$
|
1,223
|
|
|
$
|
5,498
|
|
|
$
|
48
|
|
|
$
|
9,197
|
|
Gross undiscounted claim liability
|
$
|
2
|
|
|
$
|
44
|
|
|
$
|
21
|
|
|
$
|
541
|
|
|
$
|
1,778
|
|
|
$
|
48
|
|
|
$
|
2,434
|
|
Discount, gross claim liability
|
—
|
|
|
(5
|
)
|
|
(1
|
)
|
|
(152
|
)
|
|
(381
|
)
|
|
(2
|
)
|
|
(541
|
)
|
|||||||
Gross claim liability before all subrogation and before reinsurance
|
2
|
|
|
39
|
|
|
20
|
|
|
389
|
|
|
1,397
|
|
|
46
|
|
|
1,893
|
|
|||||||
Less:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Gross RMBS subrogation (2)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,777
|
)
|
|
—
|
|
|
(1,777
|
)
|
|||||||
Discount, RMBS subrogation
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
49
|
|
|
—
|
|
|
49
|
|
|||||||
Discounted RMBS subrogation, before reinsurance
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,727
|
)
|
|
—
|
|
|
(1,727
|
)
|
|||||||
Less:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Gross other subrogation (3)
|
—
|
|
|
—
|
|
|
—
|
|
|
(41
|
)
|
|
(666
|
)
|
|
(13
|
)
|
|
(720
|
)
|
|||||||
Discount, other subrogation
|
—
|
|
|
—
|
|
|
—
|
|
|
4
|
|
|
47
|
|
|
3
|
|
|
53
|
|
|||||||
Discounted other subrogation, before reinsurance
|
—
|
|
|
—
|
|
|
—
|
|
|
(37
|
)
|
|
(620
|
)
|
|
(10
|
)
|
|
(666
|
)
|
|||||||
Gross claim liability, net of all subrogation and discounts, before reinsurance
|
2
|
|
|
39
|
|
|
20
|
|
|
353
|
|
|
(950
|
)
|
|
36
|
|
|
(501
|
)
|
|||||||
Less: Unearned premium revenue
|
(1
|
)
|
|
(9
|
)
|
|
(1
|
)
|
|
(7
|
)
|
|
(35
|
)
|
|
—
|
|
|
(54
|
)
|
|||||||
Plus: Loss expense reserves
|
1
|
|
|
1
|
|
|
1
|
|
|
4
|
|
|
67
|
|
|
—
|
|
|
73
|
|
|||||||
Gross loss and loss expense reserves
|
$
|
1
|
|
|
$
|
30
|
|
|
$
|
20
|
|
|
$
|
349
|
|
|
$
|
(918
|
)
|
|
$
|
36
|
|
|
$
|
(482
|
)
|
Reinsurance recoverable reported on Balance Sheet (4)
|
$
|
—
|
|
|
$
|
6
|
|
|
$
|
7
|
|
|
$
|
24
|
|
|
$
|
(10
|
)
|
|
$
|
—
|
|
|
$
|
26
|
|
(1)
|
Remaining weighted-average contract period is weighted based on projected gross claims over the lives of the respective policies.
|
(2)
|
RMBS subrogation represents Ambac’s estimate of subrogation recoveries from RMBS transaction sponsors for R&W breaches.
|
(3)
|
Other subrogation 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 $26 related to future loss and loss expenses and $0 related to presented loss and loss expenses and subrogation.
|
|
Three Months Ended March 31,
|
||||||
|
2020
|
|
2019
|
||||
Discounted R&W subrogation (gross of reinsurance) at beginning of period
|
$
|
1,727
|
|
|
$
|
1,771
|
|
All other changes (1)
|
36
|
|
|
(43
|
)
|
||
Discounted R&W subrogation (gross of reinsurance) at end of period
|
$
|
1,764
|
|
|
$
|
1,727
|
|
(1)
|
All other changes which may impact RMBS R&W subrogation recoveries include changes in actual or projected collateral
|
(1)
|
The insurance intangible asset will be amortized using a level-yield method based on par exposure of the related financial guarantee insurance or reinsurance contracts. 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, certain highly liquid pooled fund investments, exchange traded futures contracts, variable rate demand obligations and money market funds.
|
|
|
|
|
l
|
Level 2
|
|
Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets. Assets and liabilities classified as Level 2 generally include investments in fixed income securities representing municipal, asset-backed and corporate obligations, certain interest rate swap contracts and most long-term debt of variable interest entities consolidated under the Consolidation Topic of the ASC.
|
|
|
|
|
l
|
Level 3
|
|
Model derived valuations in which one or more significant inputs or significant value drivers are unobservable. This hierarchy requires the use of observable market data when available. Assets and liabilities classified as Level 3 include credit derivative contracts, certain uncollateralized interest rate swap contracts, equity interests in Ambac sponsored special purpose entities and certain investments in fixed income securities. Additionally, Level 3 assets and liabilities generally include 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:
|
||||||||||||||
March 31, 2020:
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
||||||||||||||
Financial assets:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Fixed income securities:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Municipal obligations
|
|
$
|
218
|
|
|
$
|
218
|
|
|
$
|
—
|
|
|
$
|
218
|
|
|
$
|
—
|
|
Corporate obligations
|
|
1,261
|
|
|
1,261
|
|
|
—
|
|
|
1,261
|
|
|
—
|
|
|||||
Foreign obligations
|
|
42
|
|
|
42
|
|
|
42
|
|
|
—
|
|
|
—
|
|
|||||
U.S. government obligations
|
|
177
|
|
|
177
|
|
|
177
|
|
|
—
|
|
|
—
|
|
|||||
Residential mortgage-backed securities
|
|
203
|
|
|
203
|
|
|
—
|
|
|
203
|
|
|
—
|
|
|||||
Commercial mortgage-backed securities
|
|
51
|
|
|
51
|
|
|
—
|
|
|
51
|
|
|
—
|
|
|||||
Collateralized debt obligations
|
|
132
|
|
|
132
|
|
|
—
|
|
|
132
|
|
|
—
|
|
|||||
Other asset-backed securities
|
|
283
|
|
|
283
|
|
|
—
|
|
|
217
|
|
|
66
|
|
|||||
Fixed income securities, pledged as collateral:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Short-term
|
|
85
|
|
|
85
|
|
|
85
|
|
|
—
|
|
|
—
|
|
|||||
Short term investments
|
|
586
|
|
|
586
|
|
|
528
|
|
|
57
|
|
|
—
|
|
|||||
Other investments (1)
|
|
363
|
|
|
345
|
|
|
84
|
|
|
—
|
|
|
30
|
|
|||||
Cash, cash equivalents and restricted cash
|
|
89
|
|
|
89
|
|
|
86
|
|
|
3
|
|
|
—
|
|
|||||
Derivative assets:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Credit derivatives
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
|
|
|
|||||
Interest rate swaps—asset position
|
|
89
|
|
|
89
|
|
|
—
|
|
|
10
|
|
|
79
|
|
|||||
Interest rate swaps—liability position
|
|
(1
|
)
|
|
(1
|
)
|
|
—
|
|
|
(1
|
)
|
|
—
|
|
|||||
Other assets - equity in sponsored VIE
|
|
3
|
|
|
3
|
|
|
—
|
|
|
—
|
|
|
3
|
|
|||||
Other assets-Loans
|
|
10
|
|
|
11
|
|
|
—
|
|
|
—
|
|
|
11
|
|
|||||
Variable interest entity assets:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Fixed income securities: Corporate obligations
|
|
2,806
|
|
|
2,806
|
|
|
—
|
|
|
—
|
|
|
2,806
|
|
|||||
Fixed income securities: Municipal obligations
|
|
122
|
|
|
122
|
|
|
—
|
|
|
122
|
|
|
—
|
|
|||||
Restricted cash
|
|
2
|
|
|
2
|
|
|
2
|
|
|
—
|
|
|
—
|
|
|||||
Loans
|
|
2,932
|
|
|
2,932
|
|
|
—
|
|
|
—
|
|
|
2,932
|
|
|||||
Derivative assets: Currency swaps-asset position
|
|
62
|
|
|
62
|
|
|
—
|
|
|
62
|
|
|
—
|
|
|||||
Total financial assets
|
|
$
|
9,513
|
|
|
$
|
9,498
|
|
|
$
|
1,004
|
|
|
$
|
2,335
|
|
|
$
|
5,927
|
|
Financial liabilities:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Long term debt, including accrued interest
|
|
$
|
3,217
|
|
|
$
|
2,924
|
|
|
$
|
—
|
|
|
$
|
2,584
|
|
|
$
|
341
|
|
Derivative liabilities:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Credit derivatives
|
|
2
|
|
|
2
|
|
|
—
|
|
|
—
|
|
|
2
|
|
|||||
Interest rate swaps—asset position
|
|
(1
|
)
|
|
(1
|
)
|
|
—
|
|
|
(1
|
)
|
|
—
|
|
|||||
Interest rate swaps—liability position
|
|
136
|
|
|
136
|
|
|
—
|
|
|
136
|
|
|
—
|
|
|||||
Liabilities for net financial guarantees written (2)
|
|
(763
|
)
|
|
1,057
|
|
|
—
|
|
|
—
|
|
|
1,057
|
|
|||||
Variable interest entity liabilities:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Long-term debt (includes $4,092 at fair value)
|
|
4,263
|
|
|
4,274
|
|
|
—
|
|
|
4,115
|
|
|
158
|
|
|||||
Derivative liabilities: Interest rate swaps—liability position
|
|
1,610
|
|
|
1,610
|
|
|
—
|
|
|
1,610
|
|
|
—
|
|
|||||
Total financial liabilities
|
|
$
|
8,464
|
|
|
$
|
10,001
|
|
|
$
|
—
|
|
|
$
|
8,444
|
|
|
$
|
1,558
|
|
|
|
Carrying
Amount |
|
Total Fair
Value |
|
Fair Value Measurements Categorized as:
|
||||||||||||||
December 31, 2019:
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
||||||||||||||
Financial assets:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Fixed income securities:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Municipal obligations
|
|
$
|
215
|
|
|
$
|
215
|
|
|
$
|
—
|
|
|
$
|
215
|
|
|
$
|
—
|
|
Corporate obligations
|
|
1,430
|
|
|
1,430
|
|
|
—
|
|
|
1,430
|
|
|
—
|
|
|||||
Foreign obligations
|
|
44
|
|
|
44
|
|
|
44
|
|
|
—
|
|
|
—
|
|
|||||
U.S. government obligations
|
|
156
|
|
|
156
|
|
|
156
|
|
|
—
|
|
|
—
|
|
|||||
Residential mortgage-backed securities
|
|
248
|
|
|
248
|
|
|
—
|
|
|
248
|
|
|
—
|
|
|||||
Commercial mortgage-backed securities
|
|
50
|
|
|
50
|
|
|
—
|
|
|
50
|
|
|
—
|
|
|||||
Collateralized debt obligations
|
|
146
|
|
|
146
|
|
|
—
|
|
|
146
|
|
|
—
|
|
|||||
Other asset-backed securities
|
|
287
|
|
|
287
|
|
|
—
|
|
|
215
|
|
|
72
|
|
|||||
Fixed income securities, pledged as collateral:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Short-term
|
|
85
|
|
|
85
|
|
|
85
|
|
|
—
|
|
|
—
|
|
|||||
Short term investments
|
|
653
|
|
|
653
|
|
|
598
|
|
|
55
|
|
|
—
|
|
|||||
Other investments (1)
|
|
478
|
|
|
493
|
|
|
136
|
|
|
—
|
|
|
61
|
|
|||||
Cash and cash equivalents and restricted cash
|
|
79
|
|
|
79
|
|
|
70
|
|
|
9
|
|
|
—
|
|
|||||
Derivative assets:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Interest rate swaps—asset position
|
|
75
|
|
|
75
|
|
|
—
|
|
|
8
|
|
|
67
|
|
|||||
Other assets - equity in sponsored VIE
|
|
3
|
|
|
3
|
|
|
—
|
|
|
—
|
|
|
3
|
|
|||||
Other assets-loans
|
|
10
|
|
|
13
|
|
|
—
|
|
|
—
|
|
|
13
|
|
|||||
Variable interest entity assets:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Fixed income securities: Corporate obligations
|
|
2,957
|
|
|
2,957
|
|
|
—
|
|
|
—
|
|
|
2,957
|
|
|||||
Fixed income securities: Municipal obligations
|
|
164
|
|
|
164
|
|
|
—
|
|
|
164
|
|
|
—
|
|
|||||
Restricted cash
|
|
2
|
|
|
2
|
|
|
2
|
|
|
—
|
|
|
—
|
|
|||||
Loans
|
|
3,108
|
|
|
3,108
|
|
|
—
|
|
|
—
|
|
|
3,108
|
|
|||||
Derivative assets: Currency swaps—asset position
|
|
52
|
|
|
52
|
|
|
—
|
|
|
52
|
|
|
—
|
|
|||||
Total financial assets
|
|
$
|
10,242
|
|
|
$
|
10,260
|
|
|
$
|
1,091
|
|
|
$
|
2,593
|
|
|
$
|
6,281
|
|
Financial liabilities:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Long term debt, including accrued interest
|
|
$
|
3,262
|
|
|
$
|
3,274
|
|
|
$
|
—
|
|
|
$
|
2,829
|
|
|
$
|
445
|
|
Derivative liabilities:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Interest rate swaps—liability position
|
|
89
|
|
|
89
|
|
|
—
|
|
|
89
|
|
|
—
|
|
|||||
Liabilities for net financial guarantees written (2)
|
|
(863
|
)
|
|
284
|
|
|
—
|
|
|
—
|
|
|
284
|
|
|||||
Variable interest entity liabilities:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Long-term debt
|
|
4,554
|
|
|
4,567
|
|
|
—
|
|
|
4,408
|
|
|
159
|
|
|||||
Derivative liabilities: Interest rate swaps—liability position
|
|
1,657
|
|
|
1,657
|
|
|
—
|
|
|
1,657
|
|
|
—
|
|
|||||
Total financial liabilities
|
|
$
|
8,699
|
|
|
$
|
9,872
|
|
|
$
|
—
|
|
|
$
|
8,983
|
|
|
$
|
889
|
|
(1)
|
Excluded from the fair value measurement categories in the table above are investment funds of $232 and $296 as of March 31, 2020 and December 31, 2019, respectively, which are measured using NAV as a practical expedient.
|
(2)
|
The carrying value of net financial guarantees written includes the following balance sheet items: Premium receivables; Reinsurance recoverable on paid and unpaid losses; Deferred ceded premium; Subrogation recoverable; Insurance intangible asset; Unearned premiums; Loss and loss expense reserves; Ceded premiums payable, premiums taxes payable and other deferred fees recorded in Other liabilities.
|
March 31, 2020:
|
|
a. Coupon rate:
|
5.98%
|
b. Average Life:
|
15.36 years
|
c. Yield:
|
13.00%
|
|
|
December 31, 2019:
|
|
a. Coupon rate:
|
5.97%
|
b. Average Life:
|
15.58 years
|
c. Yield:
|
11.75%
|
(1)
|
Other assets carried at fair value and classified as Level 3 relate to an equity interest in an Ambac sponsored VIE.
|
|
Level 3 - Investments by Class:
|
|
|
|
|
||||
|
|
Three Months Ended March 31,
|
||||||
Other Asset Backed Securities
|
|
2020
|
|
2019
|
||||
Balance, beginning of period
|
|
$
|
72
|
|
|
$
|
72
|
|
Total gains/(losses) realized and unrealized:
|
|
|
|
|
||||
Included in earnings
|
|
—
|
|
|
—
|
|
||
Included in other comprehensive income
|
|
(6
|
)
|
|
—
|
|
||
Purchases
|
|
—
|
|
|
—
|
|
||
Issuances
|
|
—
|
|
|
—
|
|
||
Sales
|
|
—
|
|
|
—
|
|
||
Settlements
|
|
—
|
|
|
—
|
|
||
Balance, end of period
|
|
$
|
66
|
|
|
$
|
72
|
|
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
|
|
$
|
—
|
|
|
$
|
—
|
|
The amount of total gains/(losses) included in other comprehensive income attributable to the change in unrealized gains or losses relating to assets and liabilities still held at the reporting date
|
|
(6
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Level 3 - Derivatives by Class:
|
|
|
|
|
||||||||||||||||||||
|
|
Three Months Ended March 31, 2020
|
|
Three Months Ended March 31, 2019
|
||||||||||||||||||||
|
|
Interest
Rate Swaps |
|
Credit
Derivatives |
|
Total
Derivatives |
|
Interest
Rate Swaps |
|
Credit
Derivatives |
|
Total
Derivatives |
||||||||||||
Balance, beginning of period
|
|
$
|
67
|
|
|
$
|
—
|
|
|
$
|
66
|
|
|
$
|
47
|
|
|
$
|
(1
|
)
|
|
$
|
46
|
|
Total gains/(losses) realized and unrealized:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Included in earnings
|
|
13
|
|
|
(1
|
)
|
|
12
|
|
|
8
|
|
|
—
|
|
|
8
|
|
||||||
Included in other comprehensive income
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Purchases
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Issuances
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Sales
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Settlements
|
|
(1
|
)
|
|
—
|
|
|
(1
|
)
|
|
(1
|
)
|
|
—
|
|
|
(1
|
)
|
||||||
Balance, end of period
|
|
$
|
79
|
|
|
$
|
(2
|
)
|
|
$
|
77
|
|
|
$
|
54
|
|
|
$
|
(1
|
)
|
|
$
|
53
|
|
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
|
|
|
$
|
(2
|
)
|
|
$
|
12
|
|
|
$
|
8
|
|
|
$
|
—
|
|
|
$
|
8
|
|
|
|
|
Net
Investment Income |
|
Net Gains
(Losses) on
Derivative
Contracts
|
|
Income
(Loss) on Variable Interest Entities |
|
Other
Income or (Loss) |
||||||||
Three Months Ended March 31, 2020:
|
|
|
|
|
|
|
|
|
||||||||
Total gains or losses included in earnings for the period
|
|
$
|
—
|
|
|
$
|
12
|
|
|
$
|
118
|
|
|
$
|
—
|
|
Changes in unrealized gains or losses included in earnings relating to the assets and liabilities still held at the reporting date
|
|
—
|
|
|
12
|
|
|
118
|
|
|
—
|
|
||||
|
|
|
|
|
|
|
|
|
||||||||
Three Months Ended March 31, 2019:
|
|
|
|
|
|
|
|
|
||||||||
Total gains or losses included in earnings for the period
|
|
$
|
—
|
|
|
$
|
8
|
|
|
$
|
152
|
|
|
$
|
—
|
|
Changes in unrealized gains or losses included in earnings relating to the assets and liabilities still held at the reporting date
|
|
—
|
|
|
8
|
|
|
152
|
|
|
—
|
|
|
|
Amortized
Cost |
|
Allowance for Credit Losses
|
|
Gross
Unrealized Gains in AOCI |
|
Gross
Unrealized Losses in AOCI |
|
Estimated
Fair Value |
||||||||||
March 31, 2020:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Fixed income securities:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Municipal obligations
|
|
$
|
196
|
|
|
$
|
—
|
|
|
$
|
23
|
|
|
$
|
1
|
|
|
$
|
218
|
|
Corporate obligations (1)
|
|
1,284
|
|
|
—
|
|
|
18
|
|
|
42
|
|
|
1,261
|
|
|||||
Foreign obligations
|
|
41
|
|
|
—
|
|
|
1
|
|
|
—
|
|
|
42
|
|
|||||
U.S. government obligations
|
|
168
|
|
|
—
|
|
|
10
|
|
|
—
|
|
|
177
|
|
|||||
Residential mortgage-backed securities
|
|
207
|
|
|
—
|
|
|
14
|
|
|
19
|
|
|
203
|
|
|||||
Commercial mortgage-backed securities
|
|
51
|
|
|
—
|
|
|
1
|
|
|
1
|
|
|
51
|
|
|||||
Collateralized debt obligations
|
|
144
|
|
|
—
|
|
|
—
|
|
|
11
|
|
|
132
|
|
|||||
Other asset-backed securities
|
|
277
|
|
|
—
|
|
|
14
|
|
|
8
|
|
|
283
|
|
|||||
|
|
2,367
|
|
|
—
|
|
|
81
|
|
|
81
|
|
|
2,367
|
|
|||||
Short-term
|
|
586
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
586
|
|
|||||
|
|
2,953
|
|
|
—
|
|
|
81
|
|
|
81
|
|
|
2,952
|
|
|||||
Fixed income securities pledged as collateral:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Short-term
|
|
85
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
85
|
|
|||||
Total collateralized investments
|
|
85
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
85
|
|
|||||
Total available-for-sale investments
|
|
$
|
3,038
|
|
|
$
|
—
|
|
|
$
|
81
|
|
|
$
|
81
|
|
|
$
|
3,037
|
|
|
|
Amortized
Cost |
|
Gross
Unrealized Gains |
|
Gross
Unrealized Losses |
|
Estimated
Fair Value |
|
Non-credit
Other-than temporary Impairments (2) |
||||||||||
December 31, 2019:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Fixed income securities:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Municipal obligations
|
|
$
|
194
|
|
|
$
|
22
|
|
|
$
|
—
|
|
|
$
|
215
|
|
|
$
|
—
|
|
Corporate obligations (1)
|
|
1,396
|
|
|
36
|
|
|
2
|
|
|
1,430
|
|
|
—
|
|
|||||
Foreign obligations
|
|
44
|
|
|
1
|
|
|
—
|
|
|
44
|
|
|
—
|
|
|||||
U.S. government obligations
|
|
157
|
|
|
2
|
|
|
2
|
|
|
156
|
|
|
—
|
|
|||||
Residential mortgage-backed securities
|
|
200
|
|
|
47
|
|
|
—
|
|
|
248
|
|
|
—
|
|
|||||
Commercial mortgage-backed securities
|
|
49
|
|
|
1
|
|
|
—
|
|
|
50
|
|
|
—
|
|
|||||
Collateralized debt obligations
|
|
147
|
|
|
—
|
|
|
1
|
|
|
146
|
|
|
—
|
|
|||||
Other asset-backed securities
|
|
263
|
|
|
24
|
|
|
—
|
|
|
287
|
|
|
—
|
|
|||||
|
|
2,450
|
|
|
132
|
|
|
5
|
|
|
2,577
|
|
|
—
|
|
|||||
Short-term
|
|
653
|
|
|
—
|
|
|
—
|
|
|
653
|
|
|
—
|
|
|||||
|
|
3,103
|
|
|
132
|
|
|
5
|
|
|
3,230
|
|
|
—
|
|
|||||
Fixed income securities pledged as collateral:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Short-term
|
|
85
|
|
|
—
|
|
|
—
|
|
|
85
|
|
|
—
|
|
|||||
Total collateralized investments
|
|
85
|
|
|
—
|
|
|
—
|
|
|
85
|
|
|
—
|
|
|||||
Total available-for-sale investments
|
|
$
|
3,187
|
|
|
$
|
132
|
|
|
$
|
5
|
|
|
$
|
3,314
|
|
|
$
|
—
|
|
(1)
|
Includes Ambac's holdings of the secured notes issued by Ambac LSNI in connection with the Rehabilitation Exit Transactions.
|
(2)
|
At December 31, 2019, 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 at December 31, 2019.
|
|
|
Amortized
Cost |
|
Estimated
Fair Value |
||||
Due in one year or less
|
|
$
|
683
|
|
|
$
|
683
|
|
Due after one year through five years
|
|
1,083
|
|
|
1,062
|
|
||
Due after five years through ten years
|
|
447
|
|
|
462
|
|
||
Due after ten years
|
|
145
|
|
|
161
|
|
||
|
|
2,359
|
|
|
2,368
|
|
||
Residential mortgage-backed securities
|
|
207
|
|
|
203
|
|
||
Commercial mortgage-backed securities
|
|
51
|
|
|
51
|
|
||
Collateralized debt obligations
|
|
144
|
|
|
132
|
|
||
Other asset-backed securities
|
|
277
|
|
|
283
|
|
||
Total
|
|
$
|
3,038
|
|
|
$
|
3,037
|
|
|
|
Less Than 12 Months
|
|
12 Months or More
|
|
Total
|
||||||||||||||||||
|
|
Fair Value
|
|
Gross
Unrealized Loss |
|
Fair Value
|
|
Gross
Unrealized Loss |
|
Fair Value
|
|
Gross
Unrealized Loss |
||||||||||||
March 31, 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Fixed income securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Municipal obligations
|
|
$
|
15
|
|
|
$
|
1
|
|
|
$
|
8
|
|
|
$
|
—
|
|
|
$
|
23
|
|
|
$
|
1
|
|
Corporate obligations
|
|
769
|
|
|
42
|
|
|
—
|
|
|
—
|
|
|
769
|
|
|
42
|
|
||||||
Foreign obligations
|
|
1
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1
|
|
|
—
|
|
||||||
U.S. government obligations
|
|
3
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3
|
|
|
—
|
|
||||||
Residential mortgage-backed securities
|
|
125
|
|
|
19
|
|
|
—
|
|
|
—
|
|
|
125
|
|
|
19
|
|
||||||
Commercial mortgage-backed securities
|
|
24
|
|
|
1
|
|
|
—
|
|
|
—
|
|
|
24
|
|
|
1
|
|
||||||
Collateralized debt obligations
|
|
99
|
|
|
8
|
|
|
33
|
|
|
3
|
|
|
132
|
|
|
11
|
|
||||||
Other asset-backed securities
|
|
83
|
|
|
7
|
|
|
7
|
|
|
1
|
|
|
90
|
|
|
8
|
|
||||||
|
|
1,119
|
|
|
77
|
|
|
48
|
|
|
4
|
|
|
1,167
|
|
|
81
|
|
||||||
Short-term
|
|
50
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
50
|
|
|
—
|
|
||||||
Total securities
|
|
$
|
1,169
|
|
|
$
|
77
|
|
|
$
|
48
|
|
|
$
|
4
|
|
|
$
|
1,217
|
|
|
$
|
81
|
|
|
|
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, 2019:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Fixed income securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Municipal obligations
|
|
$
|
13
|
|
|
$
|
—
|
|
|
$
|
10
|
|
|
$
|
—
|
|
|
$
|
23
|
|
|
$
|
—
|
|
Corporate obligations
|
|
63
|
|
|
2
|
|
|
5
|
|
|
—
|
|
|
68
|
|
|
2
|
|
||||||
Foreign obligations
|
|
20
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
20
|
|
|
—
|
|
||||||
U.S. government obligations
|
|
36
|
|
|
2
|
|
|
2
|
|
|
—
|
|
|
38
|
|
|
2
|
|
||||||
Residential mortgage-backed securities
|
|
5
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
5
|
|
|
—
|
|
||||||
Commercial mortgage-backed securities
|
|
7
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
7
|
|
|
—
|
|
||||||
Collateralized debt obligations
|
|
53
|
|
|
—
|
|
|
63
|
|
|
1
|
|
|
116
|
|
|
1
|
|
||||||
Other asset-backed securities
|
|
2
|
|
|
—
|
|
|
7
|
|
|
—
|
|
|
10
|
|
|
—
|
|
||||||
|
|
200
|
|
|
4
|
|
|
88
|
|
|
1
|
|
|
288
|
|
|
5
|
|
||||||
Short-term
|
|
201
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
201
|
|
|
—
|
|
||||||
Total securities
|
|
$
|
401
|
|
|
$
|
4
|
|
|
$
|
88
|
|
|
$
|
1
|
|
|
$
|
489
|
|
|
$
|
5
|
|
|
|
Three Months Ended March 31,
|
||||||
|
|
2020
|
|
2019
|
||||
Gross realized gains on securities
|
|
$
|
6
|
|
|
$
|
24
|
|
Gross realized losses on securities
|
|
—
|
|
|
(4
|
)
|
||
Net foreign exchange (losses) gains
|
|
2
|
|
|
(3
|
)
|
||
Credit impairments (1)
|
|
—
|
|
|
—
|
|
||
Intent / requirement to sell impairments (2)
|
|
—
|
|
|
—
|
|
||
Net realized gains (losses)
|
|
$
|
8
|
|
|
$
|
17
|
|
(1)
|
Includes securities which management does not intend to sell and it is not more likely than not that the company will be required to sell before recovery of the amortized cost basis.
|
(2)
|
Includes securities which management either intends sell or it is more likely than not that the company will be required to sell before recovery of the amortized cost basis.
|
Three Months Ended March 31, 2019
|
|
|
||
Balance, beginning of period
|
|
$
|
12
|
|
Additions for credit impairments recognized on:
|
|
|
||
Securities not previously impaired
|
|
—
|
|
|
Securities previously impaired
|
|
—
|
|
|
Reductions for credit impairments previously recognized on:
|
|
|
||
Securities that matured or were sold during the period
|
|
—
|
|
|
Balance, end of period
|
|
$
|
12
|
|
|
|
Municipal
Obligations |
|
Corporate
Obligations (2) |
|
Mortgage
and Asset- backed Securities |
|
Total
|
|
Weighted
Average Underlying Rating (1) |
||||||||
March 31, 2020:
|
|
|
|
|
|
|
|
|
|
|
||||||||
Ambac Assurance Corporation
|
|
$
|
181
|
|
|
$
|
495
|
|
|
$
|
396
|
|
|
$
|
1,072
|
|
|
B
|
National Public Finance Guarantee Corporation
|
|
9
|
|
|
—
|
|
|
—
|
|
|
9
|
|
|
BBB-
|
||||
Total
|
|
$
|
189
|
|
|
$
|
495
|
|
|
$
|
396
|
|
|
$
|
1,081
|
|
|
B
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
December 31, 2019:
|
|
|
|
|
|
|
|
|
|
|
||||||||
Ambac Assurance Corporation
|
|
$
|
176
|
|
|
$
|
535
|
|
|
$
|
442
|
|
|
$
|
1,153
|
|
|
B-
|
National Public Finance Guarantee Corporation
|
|
11
|
|
|
—
|
|
|
—
|
|
|
11
|
|
|
BBB-
|
||||
Total
|
|
$
|
187
|
|
|
$
|
535
|
|
|
$
|
442
|
|
|
$
|
1,164
|
|
|
B-
|
(1)
|
Ratings are based on the lower of Standard & Poor’s or Moody’s rating. If unavailable, Ambac’s internal rating is used.
|
(2)
|
Represents Ambac's holdings of secured notes issued by Ambac LSNI in connection with the Rehabilitation Exit Transactions. These secured notes are insured by Ambac Assurance.
|
|
|
Fair Value
|
|
|
|
|
||||||
Class of Funds
|
|
March 31,
2020 |
|
December 31,
2019 |
|
Redemption Frequency
|
|
Redemption Notice Period
|
||||
Real estate properties (1)
|
|
$
|
15
|
|
|
$
|
16
|
|
|
quarterly
|
|
10 business days
|
Hedge funds (2)
|
|
60
|
|
|
65
|
|
|
quarterly
|
|
90 days
|
||
High yields and leveraged loans (3) (10)
|
|
57
|
|
|
176
|
|
|
daily
|
|
0 - 30 days
|
||
Private credit (4)
|
|
47
|
|
|
51
|
|
|
quarterly
|
|
180 days if permitted
|
||
Insurance-linked investments (5)
|
|
3
|
|
|
3
|
|
|
fully redeemed
|
|
none
|
||
Equity market investments (6) (10)
|
|
58
|
|
|
55
|
|
|
daily
|
|
0 days
|
||
Investment grade floating rate income (7)
|
|
52
|
|
|
66
|
|
|
weekly
|
|
0 days
|
||
Private equity (8)
|
|
4
|
|
|
—
|
|
|
quarterly
|
|
90 days if permitted
|
||
Emerging markets debt (9) (10)
|
|
16
|
|
|
—
|
|
|
daily
|
|
0 days
|
||
Total equity investments in pooled funds
|
|
$
|
312
|
|
|
$
|
432
|
|
|
|
|
|
(1)
|
Investments consist of UK property to generate income and capital growth.
|
(2)
|
This class seeks to generate superior risk-adjusted returns through selective asset sourcing, active trading and hedging strategies within structured credit markets, including mortgage-backed securities, commercial real estate securities and loans, CLOs, REITs and asset backed securities.
|
(3)
|
This class of funds includes investments in a range of instruments including high-yield bonds, leveraged loans, CLOs, ABS and floating rate notes to generate income and capital appreciation.
|
(4)
|
This class aims to obtain high long-term return primarily through credit and preferred equity investments with low liquidity and defined term.
|
(5)
|
This class seeks to generate returns from insurance markets through investments in catastrophe bonds, life insurance and other insurance linked investments.
|
(6)
|
This class of funds aim to achieve long term growth through diversified exposure to global equity markets.
|
(7)
|
This class of funds includes investments in high quality floating rate debt securities including ABS and corporate floating rate notes as well as ultra-short term bonds and money market instruments.
|
(8)
|
This class seeks to generate long-term capital appreciation through investments in private equity, equity-related and other instruments.
|
(9)
|
This class seeks long-term income and growth through investments in the bonds of issuers in emerging markets.
|
(10)
|
These categories include fair value amounts totaling $81 and $136 at March 31, 2020 and December 31, 2019, respectively that are readily determinable and are priced through pricing vendors, including for High yield and leveraged loans products: $17 and $81; for Equity market investments: $48 and $55; and for Emerging markets debt $16 and $0
|
|
|
Three Months Ended March 31,
|
||||||
|
|
2020
|
|
2019
|
||||
Fixed income securities
|
|
$
|
30
|
|
|
$
|
44
|
|
Short-term investments
|
|
2
|
|
|
4
|
|
||
Loans
|
|
—
|
|
|
—
|
|
||
Investment expense
|
|
(2
|
)
|
|
(1
|
)
|
||
Securities available-for-sale and short-term
|
|
31
|
|
|
47
|
|
||
Other investments
|
|
(52
|
)
|
|
8
|
|
||
Total net investment income (loss)
|
|
$
|
(21
|
)
|
|
$
|
55
|
|
|
|
Three Months Ended March 31,
|
||||||
|
|
2020
|
|
2019
|
||||
Net gains (losses) recognized during the period on trading securities
|
|
$
|
(32
|
)
|
|
$
|
7
|
|
Less: net gains (losses) recognized during the reporting period on trading securities sold during the period
|
|
(3
|
)
|
|
1
|
|
||
Unrealized gains (losses) recognized during the reporting period on trading securities still held at the reporting date
|
|
$
|
(29
|
)
|
|
$
|
6
|
|
|
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
|
||||||||||
March 31, 2020:
|
|
|
|
|
|
|
|
|
|
||||||||||
Derivative Assets:
|
|
|
|
|
|
|
|
|
|
||||||||||
Interest rate swaps
|
$
|
89
|
|
|
$
|
1
|
|
|
$
|
88
|
|
|
$
|
—
|
|
|
$
|
88
|
|
Total non-VIE derivative assets
|
$
|
89
|
|
|
$
|
1
|
|
|
$
|
88
|
|
|
$
|
—
|
|
|
$
|
88
|
|
Derivative Liabilities:
|
|
|
|
|
|
|
|
|
|
||||||||||
Credit derivatives
|
$
|
2
|
|
|
$
|
—
|
|
|
$
|
2
|
|
|
$
|
—
|
|
|
$
|
2
|
|
Interest rate swaps
|
136
|
|
|
1
|
|
|
135
|
|
|
134
|
|
|
1
|
|
|||||
Total non-VIE derivative liabilities
|
$
|
138
|
|
|
$
|
1
|
|
|
$
|
137
|
|
|
$
|
134
|
|
|
$
|
3
|
|
Variable Interest Entities Derivative Assets:
|
|
|
|
|
|
|
|
|
|
||||||||||
Currency swaps
|
$
|
62
|
|
|
$
|
—
|
|
|
$
|
62
|
|
|
$
|
—
|
|
|
$
|
62
|
|
Total VIE derivative assets
|
$
|
62
|
|
|
$
|
—
|
|
|
$
|
62
|
|
|
$
|
—
|
|
|
$
|
62
|
|
Variable Interest Entities Derivative Liabilities:
|
|
|
|
|
|
|
|
|
|
||||||||||
Interest rate swaps
|
$
|
1,610
|
|
|
$
|
—
|
|
|
$
|
1,610
|
|
|
$
|
—
|
|
|
$
|
1,610
|
|
Total VIE derivative liabilities
|
$
|
1,610
|
|
|
$
|
—
|
|
|
$
|
1,610
|
|
|
$
|
—
|
|
|
$
|
1,610
|
|
December 31, 2019:
|
|
|
|
|
|
|
|
|
|
||||||||||
Derivative Assets:
|
|
|
|
|
|
|
|
|
|
||||||||||
Interest rate swaps
|
$
|
75
|
|
|
$
|
—
|
|
|
$
|
75
|
|
|
$
|
—
|
|
|
$
|
75
|
|
Total non-VIE derivative assets
|
$
|
75
|
|
|
$
|
—
|
|
|
$
|
75
|
|
|
$
|
—
|
|
|
$
|
75
|
|
Derivative Liabilities:
|
|
|
|
|
|
|
|
|
|
||||||||||
Credit derivatives
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Interest rate swaps
|
89
|
|
|
—
|
|
|
90
|
|
|
89
|
|
|
1
|
|
|||||
Total non-VIE derivative liabilities
|
$
|
90
|
|
|
$
|
—
|
|
|
$
|
90
|
|
|
$
|
89
|
|
|
$
|
1
|
|
Variable Interest Entities Derivative Assets:
|
|
|
|
|
|
|
|
|
|
||||||||||
Currency swaps
|
$
|
52
|
|
|
$
|
—
|
|
|
$
|
52
|
|
|
$
|
—
|
|
|
$
|
52
|
|
Total VIE derivative assets
|
$
|
52
|
|
|
$
|
—
|
|
|
$
|
52
|
|
|
$
|
—
|
|
|
$
|
52
|
|
Variable Interest Entities Derivative Liabilities:
|
|
|
|
|
|
|
|
|
|
||||||||||
Interest rate swaps
|
$
|
1,657
|
|
|
$
|
—
|
|
|
$
|
1,657
|
|
|
$
|
—
|
|
|
$
|
1,657
|
|
Total VIE derivative liabilities
|
$
|
1,657
|
|
|
$
|
—
|
|
|
$
|
1,657
|
|
|
$
|
—
|
|
|
$
|
1,657
|
|
|
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 March 31,
|
|||||||||
|
|
2020
|
|
2019
|
|||||||
Non-VIE derivatives:
|
|
|
|
|
|
|
|
||||
Credit derivatives
|
Net gains (losses) on derivative contracts
|
|
$
|
(1
|
)
|
|
$
|
—
|
|
||
Interest rate swaps
|
Net gains (losses) on derivative contracts
|
|
(29
|
)
|
|
(3
|
)
|
||||
Futures contracts
|
Net gains (losses) on derivative contracts
|
|
(40
|
)
|
|
(14
|
)
|
||||
Total Non-VIE derivatives
|
|
|
|
|
$
|
(70
|
)
|
|
$
|
(16
|
)
|
Variable Interest Entities:
|
|
|
|
|
|
|
|
||||
Currency swaps
|
Income (loss) on variable interest entities
|
|
$
|
10
|
|
|
$
|
(7
|
)
|
||
Interest rate swaps
|
Income (loss) on variable interest entities
|
|
47
|
|
|
(70
|
)
|
||||
Total Variable Interest Entities
|
|
57
|
|
|
(77
|
)
|
|||||
Total derivative contracts
|
|
|
$
|
(13
|
)
|
|
$
|
(93
|
)
|
|
|
Notional
|
||||||
Type of Derivative
|
|
March 31,
2020 |
|
December 31,
2019 |
||||
Interest rate swaps—receive-fixed/pay-variable
|
|
$
|
328
|
|
|
$
|
332
|
|
Interest rate swaps—pay-fixed/receive-variable
|
|
1,261
|
|
|
1,261
|
|
||
US Treasury futures contracts—short
|
|
240
|
|
|
755
|
|
|
|
Notional
|
||||||
Type of VIE Derivative
|
|
March 31,
2020 |
|
December 31,
2019 |
||||
Interest rate swaps—receive-fixed/pay-variable
|
|
$
|
1,121
|
|
|
$
|
1,194
|
|
Interest rate swaps—pay-fixed/receive-variable
|
|
1,093
|
|
|
1,176
|
|
||
Currency swaps
|
|
302
|
|
|
329
|
|
||
Credit derivatives
|
|
8
|
|
|
9
|
|
Jurisdiction
|
Tax Year
|
United States
|
2010
|
New York State
|
2013
|
New York City
|
2015
|
United Kingdom
|
2016
|
Italy
|
2015
|
|
Three Months Ended March 31,
|
||||||
|
2020
|
|
2019
|
||||
Current taxes
|
|
|
|
||||
U. S. federal
|
$
|
—
|
|
|
$
|
—
|
|
U.S. state and local
|
—
|
|
|
(4
|
)
|
||
Foreign
|
(2
|
)
|
|
6
|
|
||
Current taxes
|
(2
|
)
|
|
3
|
|
||
Deferred taxes
|
|
|
|
||||
Foreign
|
(5
|
)
|
|
(1
|
)
|
||
Deferred taxes
|
(5
|
)
|
|
(1
|
)
|
||
Provision for income taxes
|
$
|
(7
|
)
|
|
$
|
2
|
|
NOL Usage Tier
|
Allocated NOLs
|
|
Applicable
Percentage
|
|
A
|
The first
|
$479
|
|
15%
|
B
|
The next
|
$1,057
|
after Tier A
|
40%
|
C
|
The next
|
$1,057
|
after Tier B
|
10%
|
D
|
The next
|
$1,057
|
after Tier C
|
15%
|
•
|
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’s Second Amended Complaint, filed on May 28, 2013, asserted claims against Countrywide and Bank of America (as successor to Countrywide’s liabilities) for, among other things, breach of contract and fraudulent inducement. In August and October 2018, Defendants filed various pre-trial motions. On December 30, 2018, the court denied all of these pre-trial motions in their entirety and Defendants appealed. On September 17, 2019, the First Department affirmed in part and reversed in part the trial court’s rulings. On October 17, 2019, Countrywide filed a motion for leave to appeal certain issues to the New York Court of Appeals and for reargument or leave to appeal certain other issues. On January 16, 2020, the First Department recalled and vacated its September 17, 2019 decision and order and substituted a new decision and order. On the same date, the First Department denied Countrywide’s motion seeking leave to appeal, without prejudice to seeking such leave from the reissued decision and order. On January 30, 2020, Countrywide filed a new motion for leave to appeal the First Department’s denial of its motions, which Ambac Assurance opposed. On January 14, 2020, the trial court granted Ambac Assurance’s motion to supplement and amend certain of its expert reports, and expert discovery is ongoing. Due to the impact of COVID-19 on the court system in New York State, which has caused the postponement of all in-person proceedings, the Court vacated the previously scheduled July 13, 2020 trial date. Given the difficulty or impossibility of predicting the scope, duration and magnitude of the effect of COVID-19 on the New York court system, and the possibility of other intervening causes of delay, we can provide no assurance as to when the trial will be rescheduled.
|
•
|
Ambac Assurance Corporation v. U.S. Bank National Association (United States District Court, Southern District of New York, Docket No. 18-cv-5182 (LGS), filed June 8, 2018 (the “SDNY Action”)); In the matter of HarborView Mortgage Loan Trust 2005-10 (Minnesota state court, Docket No. 27-TR-CV-17-32 (the “Minnesota Action”)). These two actions relate to U.S. Bank National Association’s (“U.S. Bank”) acceptance of a proposed settlement in a separate litigation that U.S. Bank is prosecuting, as trustee, related to the Harborview Mortgage Loan Trust, Series 2005-10 (“Harborview 2005-10”), a residential mortgage-backed securitization for which Ambac Assurance issued an insurance policy. On March 6, 2017, U.S. Bank filed a petition commencing the Minnesota Action, a trust instruction proceeding in Minnesota state court concerning the proposed settlement, and on June 12, 2017, U.S. Bank filed an amended petition. Ambac Assurance filed a
|
•
|
In re application of Deutsche Bank National Trust Company as Trustee of the Harborview Mortgage Loan Trust Mortgage Loan Pass-Through Certificates, Series 2006-9 (Supreme Court of the State of New York, County of New York, No. 654208/2018), filed August 23, 2018 (the “Trust Instruction Proceeding”). This action relates to Deutsche Bank National Trust Company’s (“DBNT”) proposed settlement of claims related to the Harborview Mortgage Loan Trust Series 2006-9 (“Harborview 2006-09”). On August 23, 2018, DBNT filed a Petition commencing the Trust Instruction Proceeding, seeking judicial instruction pursuant to CPLR Article 77, inter alia, to accept the proposed settlement with respect of claims relating to Harborview 2006-9. On November 2, 2018, Ambac Assurance and other interested persons filed notices of intention to appear and answers to DBNT’s petition. Ambac Assurance sought a period of discovery before resolution on the merits. Under the current case schedule discovery is to be completed by May 20, 2020 and merits briefing by July 10, 2020. Ambac Assurance expects this schedule to be modified.
|
Item 2.
|
Management’s Discussion and Analysis of Financial Condition and Results of Operations
|
•
|
A commutation in January 2020, via a refunding, of a watch list public finance transaction with net par outstanding of $171 million at December 31, 2019; and
|
•
|
A refinancing in February 2020 of an adversely classified asset-backed leasing transaction with net par outstanding of $86 million at December 31, 2019.
|
($ in millions)
|
March 31,
2020 |
|
December 31,
2019 |
|
Variance
|
|||||||||
Total
|
$
|
36,186
|
|
|
$
|
38,018
|
|
|
$
|
(1,832
|
)
|
|
(5
|
)%
|
ACC
|
8,376
|
|
|
7,535
|
|
|
841
|
|
|
11
|
%
|
|||
Watch list
|
5,442
|
|
|
6,752
|
|
|
(1,310
|
)
|
|
(19
|
)%
|
•
|
Ambac’s insurance policies will be drawn in the event that the issuers of insured obligations do not make payments on their obligations when due. As a result of the COVID-19 related economic disruption on markets where Ambac provides financial guarantees, including lower tax, project, and business revenues and increases in forbearances or delinquencies on mortgage and student loan payments, we have increased our loss reserves and may further increase them in the future depending on the duration and severity of the crisis. Ambac also has premiums due from issuers; we currently do not expect any significant delay or increase in credit impairments with respect to insurance premiums, but that is subject to change.
|
•
|
Ambac has exposure to reinsurance counterparties for their portions of future claim payments. Ambac has reinsured approximately 13.8% of its gross par outstanding to four reinsurance counterparties. Each of these reinsurance counterparties is experienced in the business of reinsuring and/or writing financial guaranty insurance. All have ratings of A+ (by S&P) or better and have sufficient collateralization or replacement triggers upon downgrade. Ambac actively monitors each of these reinsurance entities and at present believes they have the ability to perform under their respective reinsurance policies, but that is subject to change.
|
•
|
Ambac is exposed to the risk that contractual counterparties (including those under our RMBS litigations and derivative counterparties) may default in their financial obligations, whether as the result of insolvency, lack of liquidity, operational failure, fraud or other reasons. At present, Ambac has no concerns about the ability of our contractual counterparties, which include certain regulated exchanges in the case of interest rate swaps and futures, to perform under their contracts, but that is also subject to change.
|
•
|
Asset prices have declined substantially during the quarter, particularly in directly affected industries such as tourism, airlines, hospitality, commercial real estate and manufacturing. While Ambac does not have significant investments in these asset classes, we did experience a negative total return for the investment portfolio of approximately (4.4)% during the three month period ending March 31, 2020. We evaluated and did not recognize credit impairments on the investment portfolio as of such date. However, in early April 2020, we decided to monetize a material portion of our investments in certain assets classes; including corporate securities rated below the 'A 'rated category, all directly owned CMBS (other than Military Housing bonds and mostly 'AAA' rated), and approximately
|
($ in millions)
|
|
|
||
Cash and short-term investments
|
|
$
|
317
|
|
Other investments (1)
|
|
157
|
|
|
Other net assets (2)
|
|
8
|
|
|
Total
|
|
$
|
482
|
|
(1)
|
Includes surplus notes (fair value of $59 million) issued by Ambac Assurance that are eliminated in consolidation.
|
(2)
|
Includes accruals for tolling payments from Ambac Assurance in accordance with the Amended Tax Sharing Agreement of $28 million. Refer to Note 10. Income Taxes for discussion over the timing of collection.
|
(1)
|
A portion of Ambac UK's, and to a lesser extent Ambac Assurance's, assets and liabilities are denominated in currencies other than its functional currency and accordingly, we recognized net foreign currency transaction gains/(losses) as a result of changes to foreign currency rates through our Unaudited Consolidated Statement of Total Comprehensive Income (Loss). Refer to Note 2. Basis of Presentation and Significant Accounting Policies to the Unaudited Consolidated Financial Statements included in Part I, Item 1 in this Form 10-Q for further details on transaction gains and losses.
|
($ in millions)
|
March 31,
2020 |
|
December 31,
2019 |
||||
Public Finance (1) (2)
|
$
|
17,093
|
|
|
$
|
17,653
|
|
Structured Finance
|
7,139
|
|
|
7,508
|
|
||
International Finance
|
11,954
|
|
|
12,857
|
|
||
Total net par outstanding
|
$
|
36,186
|
|
|
$
|
38,018
|
|
(1)
|
Includes $5,636 and $5,654 of Military Housing net par outstanding at March 31, 2020 and December 31, 2019, respectively.
|
(2)
|
Includes $1,105 and $1,123 of Puerto Rico net par outstanding at March 31, 2020 and December 31, 2019, respectively. Components of Puerto Rico net par outstanding include capital appreciation bonds which are reported at the par amount at the time of issuance of the related insurance policy as opposed to the current accreted value of the bonds.
|
(1)
|
Internal credit ratings are provided solely to indicate the underlying credit quality of guaranteed obligations based on the view of Ambac. In cases where Ambac 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 credit ratings are subject to revision at any time and do not constitute investment advice. BIG denotes credits deemed below investment grade.
|
(2)
|
Net Par includes capital appreciation bonds, which are reported at the par amount at the time of issuance of the insurance policy as opposed to the current accreted value of the bonds.
|
(3)
|
A portion of this transaction is insured by an insurance policy issued by Ambac Assurance. Ambac Assurance has issued policies for these transactions that will only pay in the event that Ambac UK does not pay under its insurance policies ("second to pay policies").
|
•
|
$500 billion for direct lending, loans, loan guarantees and investments to eligible businesses, states and municipalities, including $25 billion dedicated to passenger airlines and $4 billion dedicated to cargo airlines;
|
•
|
$659 billion for small business loans (Paycheck Protection Program, as amended by the Paycheck Protection Program and Health Care Enhancement Act (“PPP & HCE Act”));
|
•
|
$150 billion allocation of direct aid to state and local governments to reimburse them for the costs of dealing with COVID-19;
|
•
|
$175 billion to the Public Health and Social Services Fund for distribution of grants to healthcare providers and hospitals (as amended by the PPP & HCE Act);
|
•
|
$25 billion of grants for transit agencies;
|
•
|
$10 billion of grants for airport authorities; and
|
•
|
direct payments to households and for unemployment insurance, estimated to cost $560 billion.
|
•
|
$500 billion for the Municipal Liquidity Facility;
|
•
|
$750 billion for the Primary Market Corporate Credit Facility and Secondary Market Corporate Credit Facility; and
|
•
|
The Money Market Mutual Fund Liquidity Facility.
|
($ in millions)
Market / Sector
|
Total NPO
|
Total Debt Service Due Next Twelve Months
|
||||
Hotels / Convention Centers
|
$
|
258
|
|
$
|
36.7
|
|
Stadiums
|
635
|
|
41.7
|
|
||
Airports
|
124
|
|
22.4
|
|
||
Dedicated Tax
|
622
|
|
290.1
|
|
||
Higher Education Auxiliary
|
252
|
|
27.0
|
|
||
Rail / Mass Transit
|
329
|
|
30.2
|
|
||
Toll Roads / Bridges
|
502
|
|
37.6
|
|
||
Total Public Finance
|
$
|
2,722
|
|
$
|
485.7
|
|
Currency
(Amounts in millions)
|
|
Net Par Amount
Outstanding in
Base Currency
|
|
Net Par Amount
Outstanding in
U.S. Dollars
|
||||
U.S. Dollars
|
|
$
|
24,621
|
|
|
$
|
24,621
|
|
British Pounds
|
|
£
|
7,665
|
|
|
9,530
|
|
|
Euros
|
|
€
|
1,543
|
|
|
1,700
|
|
|
Australian Dollars
|
|
A$
|
545
|
|
|
335
|
|
|
Total
|
|
|
|
$
|
36,186
|
|
(1)
|
Internal credit ratings are provided solely to indicate the underlying credit quality of guaranteed obligations based on the view of Ambac. In cases where Ambac 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 credit ratings are subject to revision at any time and do not constitute investment advice.
|
|
|
Net Par Outstanding
|
||||||
Summary of Below Investment
Grade Exposure ($ in millions)
|
|
March 31,
2020 |
|
December 31,
2019 |
||||
Public Finance:
|
|
|
|
|
||||
Lease and tax-backed (1)
|
|
$
|
1,236
|
|
|
$
|
1,109
|
|
General obligation (1)
|
|
354
|
|
|
525
|
|
||
Housing (2)
|
|
310
|
|
|
311
|
|
||
Transportation
|
|
27
|
|
|
27
|
|
||
Other
|
|
42
|
|
|
42
|
|
||
Total Public Finance
|
|
1,969
|
|
|
2,014
|
|
||
Structured Finance:
|
|
|
|
|
||||
RMBS
|
|
3,204
|
|
|
3,362
|
|
||
Student loans
|
|
592
|
|
|
620
|
|
||
Other
|
|
21
|
|
|
33
|
|
||
Total Structured Finance
|
|
3,817
|
|
|
4,015
|
|
||
International Finance:
|
|
|
|
|
||||
Other
|
|
1,477
|
|
|
1,455
|
|
||
Total International Finance
|
|
1,477
|
|
|
1,455
|
|
||
Total
|
|
$
|
7,263
|
|
|
$
|
7,484
|
|
(1)
|
Lease and tax-backed revenue includes $996 and $1,014 of Puerto Rico net par at March 31, 2020 and December 31, 2019, respectively. General obligation includes $109 and $109 of Puerto Rico net par at March 31, 2020 and December 31, 2019, respectively. Components of Puerto Rico net par outstanding includes capital appreciation bonds which are reported at the par amount at the time of issuance of the related insurance policy as opposed to the current accreted value of the bonds.
|
(2)
|
Relates to military housing net par.
|
|
|
Three Months Ended March 31,
|
||||||
($ in millions)
|
|
2020
|
|
2019
|
||||
Revenues:
|
|
|
|
|
||||
Net premiums earned
|
|
$
|
10
|
|
|
$
|
28
|
|
Net investment income (loss)
|
|
(21
|
)
|
|
55
|
|
||
Net realized investment gains (losses)
|
|
8
|
|
|
17
|
|
||
Net gains (losses) on derivative contracts
|
|
(70
|
)
|
|
(16
|
)
|
||
Income (loss) on variable interest entities
|
|
3
|
|
|
16
|
|
||
Expenses:
|
|
|
|
|
||||
Losses and loss expenses (benefit)
|
|
117
|
|
|
12
|
|
||
Insurance intangible amortization
|
|
13
|
|
|
36
|
|
||
Operating expenses
|
|
24
|
|
|
25
|
|
||
Interest expense
|
|
63
|
|
|
68
|
|
||
Provision for income taxes
|
|
(7
|
)
|
|
2
|
|
||
Net income (loss) attributable to common stockholders
|
|
$
|
(280
|
)
|
|
$
|
(43
|
)
|
|
|
Three Months Ended March 31,
|
||||||
($ in millions)
|
|
2020
|
|
2019
|
||||
Normal premiums earned
|
|
|
|
|
||||
Public finance
|
|
$
|
5
|
|
|
$
|
8
|
|
Structured finance
|
|
1
|
|
|
3
|
|
||
International finance
|
|
4
|
|
|
5
|
|
||
Total normal premiums earned
|
|
10
|
|
|
16
|
|
||
Accelerated earnings
|
|
—
|
|
|
12
|
|
||
Total net premiums earned
|
|
$
|
10
|
|
|
$
|
28
|
|
|
Three Months Ended March 31,
|
||||||
($ in millions)
|
2020
|
|
2019
|
||||
Securities available-for-sale: Ambac-insured (including Secured Notes)
|
$
|
16
|
|
|
$
|
29
|
|
Securities available-for-sale and short-term other than Ambac-insured
|
15
|
|
|
18
|
|
||
Other investments (includes trading securities)
|
(52
|
)
|
|
8
|
|
||
Net investment (loss) income
|
$
|
(21
|
)
|
|
$
|
55
|
|
|
|
Three Months Ended March 31,
|
||||||
($ in millions)
|
|
2020
|
|
2019
|
||||
Net gains (losses) on securities sold or called
|
|
$
|
6
|
|
|
$
|
20
|
|
Net foreign exchange gains (losses)
|
|
2
|
|
|
(3
|
)
|
||
Credit impairments
|
|
—
|
|
|
—
|
|
||
Intent / requirement to sell impairments
|
|
—
|
|
|
—
|
|
||
Total net realized gains (losses)
|
|
$
|
8
|
|
|
$
|
17
|
|
|
|
Three Months Ended March 31,
|
||||||
($ in millions)
|
|
2020
|
|
2019
|
||||
RMBS
|
|
$
|
(83
|
)
|
|
$
|
(39
|
)
|
Domestic Public Finance
|
|
178
|
|
|
69
|
|
||
Student Loans
|
|
14
|
|
|
(4
|
)
|
||
Ambac UK and Other Credits
|
|
7
|
|
|
(15
|
)
|
||
Totals (1)
|
|
$
|
117
|
|
|
$
|
12
|
|
(1)
|
Includes loss expenses incurred (benefit) of $3 and $29 for the three months ended March 31, 2020 and 2019, respectively.
|
•
|
Higher projected losses in domestic public finance driven mostly by lower discount rates (primarily relating to Puerto Rico) and incurred losses related to transactions directly impacted by the economic impact from COVID-19; and
|
•
|
An increase in student loan losses as a result of lower discount rates and the impact from COVID-19; partially offset by
|
•
|
Favorable RMBS development as a result of the positive impact of lower interest rates on excess spread, reduced by the negative impact of lower discount rates and expected losses from COVID-19 related delinquencies/defaults.
|
•
|
Higher projected losses in domestic public finance largely driven by additions to Puerto Rico loss reserves; partially offset by
|
•
|
Favorable RMBS development as a result of credit improvement and the impact on excess spread from declines in interest rates reduced by an increase in loss expenses;
|
•
|
Favorable development within Ambac UK and Other Credits primarily from certain Ambac UK credits; and
|
•
|
A portion of Ambac UK's loss reserves are denominated in currencies other than their functional currency of British Pounds resulting in incurred losses (gains) when the British Pound depreciates (appreciates). Ambac recognized $6 million in foreign exchange gain for the three months ended March 31, 2019.
|
|
|
Three Months Ended March 31,
|
||||||
($ in millions)
|
|
2020
|
|
2019
|
||||
Compensation
|
|
$
|
14
|
|
|
$
|
14
|
|
Non-compensation
|
|
9
|
|
|
10
|
|
||
Gross operating expenses
|
|
24
|
|
|
25
|
|
||
Reinsurance commissions, net
|
|
—
|
|
|
—
|
|
||
Total operating expenses
|
|
$
|
24
|
|
|
$
|
25
|
|
•
|
Lower compensation costs primarily due to lower salaries resulting from continued right sizing of staffing levels during 2019, partially offset by higher incentive compensation costs related to final performance metrics impacting settlement of 2019 annual bonuses, and
|
•
|
Lower non-compensation costs primarily due to a $1 million UK Value Added Tax (VAT) refund recognized in the three months ended March 31, 2020.
|
|
|
Three Months Ended March 31,
|
||||||
($ in millions)
|
|
2020
|
|
2019
|
||||
Surplus notes (1)
|
|
$
|
26
|
|
|
$
|
24
|
|
Ambac note
|
|
31
|
|
|
38
|
|
||
Tier 2 notes
|
|
7
|
|
|
6
|
|
||
Other
|
|
—
|
|
|
—
|
|
||
Total interest expense
|
|
$
|
63
|
|
|
$
|
68
|
|
(1)
|
Includes junior surplus notes.
|
•
|
Pursuant to the amended and restated tax sharing agreement among AFG, Ambac Assurance and certain affiliates (the "Amended TSA"), Ambac Assurance is required to make payments ("tolling payments") to AFG with respect to the utilization of net operating loss carry-forwards (“NOLs”). AFG has accrued $28 million of tolling payments based on NOLs used by Ambac Assurance in 2017. In May 2018, AFG executed a waiver under the intercompany tax sharing agreement pursuant to which Ambac Assurance was relieved of the requirement to make this payment by June 1, 2018. AFG also agreed to defer the tolling payment for the use of
|
•
|
Under an inter-company cost allocation agreement, AFG is reimbursed by Ambac Assurance for a portion of certain operating costs and expenses and, if approved by OCI, entitled to an additional payment of up to $4 million per year to cover expenses not otherwise reimbursed. OCI approved this $4 million reimbursement for 2019 expenses, which was paid in March 2020.
|
•
|
The COVID-19 pandemic had a negative impact on Ambac's available liquidity as a consequence of the adverse reaction of the capital markets, which led to a reduction in the value and marketability of our invested assets; derivative losses, which required additional collateral posting; and higher credit risk within the insured portfolio, as further described below.
|
•
|
Claim payments may increase during the global recession and COVID-19 pandemic as issuers, particularly those with revenues that will be interrupted by social distancing, other restrictions and the increase in unemployment, may not have sufficient cash inflows to pay debt service on Ambac-insured debt. Refer to "Financial Guarantees in Force" in this Management's Discussion and Analysis for further discussion of the potential impact of the COVID-19 pandemic on claim payments.
|
•
|
Interest and principal payments on surplus notes are subject to the approval of OCI, which has full discretion over payments regardless of the liquidity position of Ambac Assurance. Any such payment on surplus notes would require either payment or collateralization of a portion of the Tier 2 Notes under the terms of the Tier 2 Note indenture. See Note 13. Long-term Debt in the Notes to Consolidated Financial Statements, included in Part II, Item 8, in the Company's Annual Report on Form 10-K for the year ended December 31, 2019 for further discussion of the payment terms and conditions of the Tier 2 Notes. As discussed more fully in "Results of Operations" above in this Management's Discussion and Analysis OCI declined Ambac Assurance's request to pay the principal amount of the surplus notes, plus all accrued and unpaid interest thereon, on June 7, 2020.
|
|
Three Months Ended March 31,
|
||||||
($ in million)
|
2020
|
|
2019
|
||||
Cash provided by (used in):
|
|
|
|
||||
Operating activities
|
$
|
(87
|
)
|
|
$
|
(95
|
)
|
Investing activities
|
244
|
|
|
112
|
|
||
Financing activities
|
(146
|
)
|
|
(76
|
)
|
||
Foreign exchange impact on cash and cash equivalents
|
—
|
|
|
—
|
|
||
Net cash flow
|
$
|
10
|
|
|
$
|
(58
|
)
|
•
|
Cash used in operating activities relating to long-term debt on the Ambac Note were $31 million and $38 million for the three months ended March 31, 2020 and 2019, respectively.
|
•
|
Cash used in operating activities related to interest rate derivatives were $25 million and $23 million for the three months ended March 31, 2020 and 2019, respectively.
|
•
|
Cash provided by operating activities relating to the investment portfolio were $30 million and $36 million for the three months ended March 31, 2020 and 2019, respectively.
|
•
|
Net loss and loss expenses paid, including commutation payments, during the three months ended March 31, 2020 and 2019 are detailed below:
|
|
Three Months Ended March 31,
|
||||||
($ in million)
|
2020
|
|
2019
|
||||
Net loss and loss expenses paid (recovered):
|
|
|
|
||||
Net losses paid (1)
|
$
|
44
|
|
|
$
|
123
|
|
Net subrogation received (2)
|
(25
|
)
|
|
(68
|
)
|
||
Net loss expenses paid
|
20
|
|
|
10
|
|
||
Net cash flow
|
$
|
39
|
|
|
$
|
64
|
|
(1)
|
Net losses paid include commutation payments of $2 and $66 for the three months ended March 31, 2020 and 2019, respectively.
|
(2)
|
For the three months ended March 31, 2019, subrogation received includes $23 related to the COFINA Plan of Adjustment.
|
($ in millions)
|
|
March 31,
2020 |
|
December 31,
2019 |
||||
Fixed income securities
|
|
$
|
2,367
|
|
|
$
|
2,577
|
|
Short-term
|
|
586
|
|
|
653
|
|
||
Other investments
|
|
363
|
|
|
478
|
|
||
Fixed income securities pledged as collateral
|
|
85
|
|
|
85
|
|
||
Total investments (1)
|
|
$
|
3,400
|
|
|
$
|
3,792
|
|
(1)
|
Includes investments denominated in non-US dollar currencies with a fair value of £238 ($295) and €28.7 ($31.6) as of March 31, 2020, and £257 ($341) and €2 ($2) as of December 31, 2019.
|
($ in millions)
|
|
March 31,
2020 |
|
December 31,
2019 |
||||
Other asset-backed securities
|
|
|
|
|
||||
Military Housing
|
|
224
|
|
|
237
|
|
||
Student Loans
|
|
27
|
|
|
32
|
|
||
Credit Cards
|
|
24
|
|
|
18
|
|
||
Auto
|
|
8
|
|
|
—
|
|
||
Total other asset-backed securities
|
|
$
|
283
|
|
|
$
|
287
|
|
(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 34% and 33% of the 2020 and 2019 combined fixed income portfolio, respectively.
|
Currency
(Amounts in millions) |
|
Premium Receivable in
Payment Currency |
|
Premium Receivable in
U.S. Dollars |
||||
U.S. Dollars
|
|
$
|
250
|
|
|
$
|
250
|
|
British Pounds
|
|
£
|
103
|
|
|
128
|
|
|
Euros
|
|
€
|
22
|
|
|
24
|
|
|
Total
|
|
|
|
$
|
403
|
|
|
|
Present Value of Expected
Net Cash Flows |
|
Unearned
Premium Revenue |
|
Gross Loss
and Loss Expense Reserves |
||||||||||
($ in millions)
Balance Sheet Line Item |
|
Claims and
Loss Expenses |
|
Recoveries (1)
|
|
|
||||||||||
March 31, 2020:
|
|
|
|
|
|
|
|
|
||||||||
Loss and loss expense reserves
|
|
$
|
2,112
|
|
|
$
|
(245
|
)
|
|
$
|
(70
|
)
|
|
$
|
1,797
|
|
Subrogation recoverable
|
|
135
|
|
|
(2,327
|
)
|
|
—
|
|
|
(2,192
|
)
|
||||
Totals
|
|
$
|
2,247
|
|
|
$
|
(2,572
|
)
|
|
$
|
(70
|
)
|
|
$
|
(395
|
)
|
|
|
|
|
|
|
|
|
|
||||||||
December 31, 2019:
|
|
|
|
|
|
|
|
|
||||||||
Loss and loss expense reserves
|
|
$
|
1,835
|
|
|
$
|
(233
|
)
|
|
$
|
(54
|
)
|
|
$
|
1,548
|
|
Subrogation recoverable
|
|
131
|
|
|
(2,160
|
)
|
|
—
|
|
|
(2,029
|
)
|
||||
Totals
|
|
$
|
1,966
|
|
|
$
|
(2,394
|
)
|
|
$
|
(54
|
)
|
|
$
|
(482
|
)
|
(1)
|
Present value of future recoveries includes R&W subrogation recoveries of $1,764 and $1,727 at March 31, 2020 and December 31, 2019, respectively.
|
|
|
Gross
Par
Outstanding (1)(2)
|
|
Present Value of Expected
Net Cash Flows |
|
Unearned
Premium Revenue |
|
Gross Loss
and Loss Expense Reserves (1)(3) |
||||||||||||
($ in millions)
|
|
|
Claims and
Loss Expenses |
|
Recoveries
|
|
|
|||||||||||||
March 31, 2020:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
RMBS
|
|
$
|
2,871
|
|
|
$
|
728
|
|
|
$
|
(2,183
|
)
|
|
$
|
(13
|
)
|
|
$
|
(1,468
|
)
|
Domestic Public Finance
|
|
2,848
|
|
|
1,176
|
|
|
(353
|
)
|
|
(41
|
)
|
|
783
|
|
|||||
Student Loans
|
|
458
|
|
|
268
|
|
|
(37
|
)
|
|
(4
|
)
|
|
227
|
|
|||||
Ambac UK and Other Credits
|
|
869
|
|
|
20
|
|
|
—
|
|
|
(12
|
)
|
|
8
|
|
|||||
Loss expenses
|
|
—
|
|
|
55
|
|
|
—
|
|
|
—
|
|
|
55
|
|
|||||
Totals
|
|
$
|
7,046
|
|
|
$
|
2,247
|
|
|
$
|
(2,572
|
)
|
|
$
|
(70
|
)
|
|
$
|
(395
|
)
|
December 31, 2019:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
RMBS
|
|
$
|
3,027
|
|
|
$
|
634
|
|
|
$
|
(2,013
|
)
|
|
$
|
(13
|
)
|
|
$
|
(1,392
|
)
|
Domestic Public Finance
|
|
2,398
|
|
|
1,007
|
|
|
(344
|
)
|
|
(36
|
)
|
|
627
|
|
|||||
Student Loans
|
|
472
|
|
|
248
|
|
|
(36
|
)
|
|
(4
|
)
|
|
208
|
|
|||||
Ambac UK and Other Credits
|
|
271
|
|
|
4
|
|
|
—
|
|
|
(1
|
)
|
|
3
|
|
|||||
Loss expenses
|
|
—
|
|
|
73
|
|
|
—
|
|
|
—
|
|
|
73
|
|
|||||
Totals
|
|
$
|
6,168
|
|
|
$
|
1,966
|
|
|
$
|
(2,394
|
)
|
|
$
|
(54
|
)
|
|
$
|
(482
|
)
|
(1)
|
Ceded par outstanding on policies with loss reserves and ceded loss and loss expense reserves are $750 and $35 respectively, at March 31, 2020, and $511 and $26, respectively at December 31, 2019. Ceded loss and loss expense reserves are included in Reinsurance recoverable on paid and unpaid losses.
|
(2)
|
Gross Par Outstanding includes capital appreciation bonds, which are reported at the par amount at the time of issuance of the insurance policy as opposed to the current accreted value of the bond.
|
(3)
|
Loss reserves are included in the balance sheet as Loss and loss expense reserves or Subrogation recoverable dependent on if a policy is in a net liability or net recoverable position.
|
|
|
March 31, 2020
|
|
December 31, 2019
|
||||||||||||
Issuer Type
($ in millions) |
|
Gross Par
Outstanding (1) |
|
Gross Loss
Reserves |
|
Gross Par
Outstanding (1) |
|
Gross Loss
Reserves |
||||||||
Lease and tax-backed
|
|
$
|
1,380
|
|
|
$
|
694
|
|
|
$
|
1,075
|
|
|
$
|
561
|
|
General obligation
|
|
636
|
|
|
(17
|
)
|
|
681
|
|
|
(16
|
)
|
||||
Housing
|
|
456
|
|
|
33
|
|
|
457
|
|
|
29
|
|
||||
Transportation revenue
|
|
232
|
|
|
47
|
|
|
88
|
|
|
42
|
|
||||
Other
|
|
144
|
|
|
26
|
|
|
97
|
|
|
11
|
|
||||
Total
|
|
$
|
2,848
|
|
|
$
|
783
|
|
|
$
|
2,398
|
|
|
$
|
627
|
|
(1)
|
Gross Par Outstanding includes capital appreciation bonds, which are reported at the par amount at the time of issuance of the insurance policy as opposed to the current accreted value of the bond.
|
($ in millions)
|
|
March 31,
2020 |
|
December 31, 2019
|
||||
Surplus notes (1)
|
|
$
|
778
|
|
|
$
|
769
|
|
Ambac note
|
|
1,685
|
|
|
1,763
|
|
||
Tier 2 notes
|
|
284
|
|
|
278
|
|
||
Ambac UK debt
|
|
13
|
|
|
13
|
|
||
Total Long-term Debt
|
|
$
|
2,760
|
|
|
$
|
2,822
|
|
(1)
|
Includes junior surplus notes.
|
•
|
Non-credit impairment fair value (gain) loss on credit derivatives: Elimination of the non-credit impairment fair value gains (losses) on credit derivatives, which is the amount in excess of the present value of the expected estimated credit losses. Such fair value adjustments are affected by, and in part fluctuate with changes in market factors such as interest rates and credit spreads, including the market’s perception of Ambac’s credit risk (“Ambac CVA”), and are not expected to result in an economic gain or loss. These adjustments allow for all financial guarantee contracts to be accounted for consistent with the Financial Services – Insurance Topic of ASC, whether or not they are subject to derivative accounting rules.
|
•
|
Insurance intangible amortization: Elimination of the amortization of the financial guarantee insurance intangible asset that arose as a result of Ambac’s emergence from bankruptcy and the implementation of Fresh Start reporting. This adjustment ensures that all financial guarantee contracts are accounted for consistent with the provisions of the Financial Services – Insurance Topic of the ASC.
|
•
|
Foreign exchange (gains) losses: Elimination of the foreign exchange gains (losses) on the re-measurement of assets, liabilities and transactions in non-functional currencies. This adjustment eliminates the foreign exchange gains (losses) on all assets, liabilities and transactions in non-functional currencies, which enables users of our financial statements to better view the results without the impact of fluctuations in foreign currency exchange rates and facilitates period-to-period comparisons of Ambac's operating performance.
|
|
Three Months Ended March 31,
|
||||||||||||||
|
2020
|
|
2019
|
||||||||||||
($ in millions, except share data)
|
$ Amount
|
|
Per Diluted Share
|
|
$ Amount
|
|
Per Diluted Share
|
||||||||
Net income (loss) attributable to common stockholders
|
$
|
(280
|
)
|
|
$
|
(6.07
|
)
|
|
$
|
(43
|
)
|
|
$
|
(0.94
|
)
|
Adjustments:
|
|
|
|
|
|
|
|
||||||||
Non-credit impairment fair value (gain) loss on credit derivatives
|
2
|
|
|
0.03
|
|
|
—
|
|
|
(0.01
|
)
|
||||
Insurance intangible amortization
|
13
|
|
|
0.29
|
|
|
36
|
|
|
0.79
|
|
||||
Foreign exchange (gains) losses
|
—
|
|
|
—
|
|
|
(2
|
)
|
|
(0.04
|
)
|
||||
Adjusted earnings (loss)
|
$
|
(265
|
)
|
|
$
|
(5.75
|
)
|
|
$
|
(9
|
)
|
|
$
|
(0.20
|
)
|
•
|
Non-credit impairment fair value losses on credit derivatives: Elimination of the non-credit impairment fair value loss on credit derivatives, which is the amount in excess of the present value of the expected estimated economic credit loss. GAAP fair values are affected by, and in part fluctuate with, changes in market factors such as interest rates, credit spreads, including Ambac’s CVA that are not expected to result in an economic gain or loss. These adjustments allow for all financial guarantee contracts to be accounted for within Adjusted Book Value consistent with the provisions of the Financial Services—Insurance Topic of the ASC, whether or not they are subject to derivative accounting rules.
|
•
|
Insurance intangible asset: Elimination of the financial guarantee insurance intangible asset that arose as a result of Ambac’s emergence from bankruptcy and the implementation of Fresh Start reporting. This adjustment ensures that all financial guarantee contracts are accounted for within Adjusted Book Value consistent with the provisions of the Financial Services—Insurance Topic of the ASC.
|
•
|
Net unearned premiums and fees in excess of expected losses: Addition of the value of the unearned premium revenue ("UPR") on financial guarantee contracts, in excess of expected losses, net of reinsurance. This non-GAAP adjustment presents the economics of UPR and expected losses for financial guarantee contracts on a consistent basis. In accordance with GAAP, stockholders’ equity reflects a reduction for expected losses only to the extent they exceed UPR. However, when expected losses are less than UPR for a financial guarantee contract, neither expected losses nor UPR have an impact on stockholders’ equity. This non-GAAP adjustment adds UPR in excess of expected losses, net of reinsurance, to stockholders’ equity for financial guarantee contracts where expected losses are less than UPR.
|
•
|
Net unrealized investment (gains) losses in Accumulated Other Comprehensive Income: Elimination of the unrealized gains and losses on the Company’s investments that are recorded as a component of accumulated other comprehensive income (“AOCI”). The AOCI component of the fair value adjustment on the investment portfolio may differ from realized gains and losses ultimately recognized by the Company based on the Company’s investment strategy. This adjustment only allows for such gains and losses in Adjusted Book Value when realized.
|
|
March 31, 2020
|
|
December 31, 2019
|
||||||||||||
($ in millions, except share data)
|
$ Amount
|
|
Per Share
|
|
$ Amount
|
|
Per Share
|
||||||||
Total Ambac Financial Group, Inc. stockholders’ equity
|
$
|
1,002
|
|
|
$
|
21.88
|
|
|
$
|
1,477
|
|
|
$
|
32.41
|
|
Adjustments:
|
|
|
|
|
|
|
|
||||||||
Non-credit impairment fair value losses on credit derivatives
|
2
|
|
|
0.04
|
|
|
—
|
|
|
0.01
|
|
||||
Insurance intangible asset
|
(406
|
)
|
|
(8.87
|
)
|
|
(427
|
)
|
|
(9.37
|
)
|
||||
Net unearned premiums and fees in excess of expected losses
|
420
|
|
|
9.17
|
|
|
414
|
|
|
9.09
|
|
||||
Net unrealized investment (gains) losses in Accumulated Other Comprehensive Income
|
(5
|
)
|
|
(0.11
|
)
|
|
(151
|
)
|
|
(3.31
|
)
|
||||
Adjusted book value
|
$
|
1,012
|
|
|
$
|
22.11
|
|
|
$
|
1,313
|
|
|
$
|
28.83
|
|
Item 3.
|
Quantitative and Qualitative Disclosures about Market Risk
|
($ in millions)
|
|
Estimated Change in Net Fair Value
|
|
Estimated Net Fair Value
|
||||
300 basis point rise
|
|
$
|
(4
|
)
|
|
$
|
(310
|
)
|
200 basis point rise
|
|
(2
|
)
|
|
(308
|
)
|
||
100 basis point rise
|
|
6
|
|
|
(300
|
)
|
||
Base scenario
|
|
—
|
|
|
(306
|
)
|
||
100 basis point decline(1)
|
|
23
|
|
|
(283
|
)
|
||
200 basis point decline(1)
|
|
47
|
|
|
(259
|
)
|
(1)
|
Incorporates an interest rate floor of 0%.
|
($ in millions)
|
|
Estimated Change in Net Fair Value
|
|
Estimated Net Fair Value
|
||||
250 Basis Point Widening
|
|
$
|
(22
|
)
|
|
$
|
(71
|
)
|
50 Basis Point Widening
|
|
(5
|
)
|
|
(54
|
)
|
||
Base Scenario
|
|
—
|
|
|
(49
|
)
|
||
50 basis Point Narrowing
|
|
5
|
|
|
(44
|
)
|
||
250 basis Point Narrowing
|
|
23
|
|
|
(26
|
)
|
($ in millions)
|
|
Estimated Change in Net Fair Value
|
|
Estimated Net Fair Value
|
||||
250 Basis Point Widening
|
|
$
|
(146
|
)
|
|
$
|
1,998
|
|
50 Basis Point Widening
|
|
(29
|
)
|
|
2,115
|
|
||
Base Scenario
|
|
—
|
|
|
2,144
|
|
||
50 Basis Point Narrowing
|
|
29
|
|
|
2,173
|
|
||
250 Basis Point Narrowing
|
|
129
|
|
|
2,273
|
|
Item 4.
|
Controls and Procedures.
|
Item 1.
|
Legal Proceedings
|
Item 2.
|
Unregistered Sales of Equity Securities and Use of Proceeds
|
(a)
|
Unregistered Sales of Equity Securities — No matters require disclosure.
|
(b)
|
Purchases of Equity Securities By the Issuer and Affiliated Purchasers
|
|
January 2020
|
|
February 2020
|
|
March 2020
|
|
First Quarter 2020
|
||||||||
Total Shares Purchased (1)
|
14,496
|
|
|
—
|
|
|
118,466
|
|
|
132,962
|
|
||||
Average Price Paid Per Share
|
$
|
21.76
|
|
|
$
|
—
|
|
|
$
|
19.81
|
|
|
$
|
20.02
|
|
Total Number of Shares Purchased as Part of Publicly Announced Plan (1)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Maximum Number of Shares That may Yet be Purchased Under the Plan
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
(1)
|
There were no other repurchases of equity securities made during the three months ended March 31, 2020. Ambac does not have a stock repurchase program.
|
Item 6.
|
Exhibits
|
Exhibit
Number |
|
Description
|
Other exhibits, filed or furnished, as indicated:
|
||
10.1+
|
|
|
10.2+
|
|
|
10.3+
|
|
|
10.4+
|
|
|
31.1+
|
|
|
31.2+
|
|
|
32.1++
|
|
|
101.INS
|
|
XBRL Instance Document - the instance document does not appear in the interactive Data File because its XBRL tags are embedded within the Inline XBRL 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.
|
104
|
|
Cover Page Interactive Data File - The cover page interactive data file does not appear in the Interactive Data File because its XBRL tags or embedded within the Inline XBRL document
|
|
|
|
|
|
+ Filed herewith. ++ Furnished herewith.
|
|
|
AMBAC FINANCIAL GROUP, INC.
|
|
|
|
|
|
Dated:
|
May 11, 2020
|
By:
|
/S/ DAVID TRICK
|
|
|
Name:
|
David Trick
|
|
|
Title:
|
Chief Financial Officer and Treasurer
(Duly Authorized Officer and Principal Financial Officer) |
(a)
|
If a dividend with respect to shares of Common Stock is payable in cash, then, as of the applicable dividend payment date, the Participant shall be credited with a right to receive a “Deferred Cash Dividend Equivalent Units” equal to (i) the cash dividend payable with respect to a share of Common Stock, multiplied by (ii) the number of Restricted Stock Units outstanding (i.e., the number of Restricted Stock Units granted hereunder less the number of such Restricted Stock Units that have settled in accordance with Section 6 below) on the applicable dividend record date.
|
(b)
|
If a dividend with respect to shares of Common Stock is payable in shares of Common Stock, then, as of the dividend payment date, the Participant shall be credited with that number of “Dividend Equivalent Units” equal to (i) the number of shares of Common Stock distributed in the dividend with respect to a share of Common Stock, multiplied by (ii) the number of Restricted Stock Units outstanding on the applicable dividend record date plus the number of previously credited Dividend Equivalent Units with respect to such Restricted Stock Units, if any.
|
(a)
|
Notwithstanding the provisions of Section 4, if the Participant’s Termination Date occurs by reason of (1) Disability (as defined in the Employment Agreement referenced in clause (4) of this subsection)), (2) Retirement (as defined in Section 5(b)), (3) involuntary termination by the Company other than for Cause (as defined in the Employment Agreement), (4) as a result of the Company’s failure to extend the term of the Employment Agreement between Ambac, AAC and the Participant, dated as of [Date] (the “Employment Agreement”) pursuant to Section 2 thereof, (5) termination by the Participant for Good Reason (as defined in the Employment
|
(b)
|
For purposes of the Award evidenced by this Agreement, (i) the terms “Cause,” “Disability” and “Good Reason” shall have the meanings specified in the Employment Agreement, and (ii) a Participant’s Termination Date shall be considered to occur on account of “Retirement” if the Participant’s Termination Date occurs on or after the date on which the following conditions have been satisfied and such Termination Date does not occur for any other reason: (x) the Participant has attained age 60; (y) the Participant has provided at least ten (10) years of service to the Company; and (z) the Participant has provided at least 90 days’ prior notice of his or her Termination Date due to retirement from the Company.
|
(a)
|
and if the Participant is a specified employee (within the meaning of section 409A(a)(2)(B) of the Code) and if any such payment or benefit is required to be made or provided prior to the first day of the seventh month following the Participant’s separation from service or termination of employment, such payment or benefit shall be delayed until the first day of the seventh month following the Participant’s separation from service; and
|
(b)
|
the determination as to whether the Participant has had a termination of employment (or separation from service) shall be made in accordance with the provisions of section 409A of the Code and the guidance issued thereunder without application of any alternative levels of reductions of bona fide services permitted thereunder.
|
(a)
|
If a dividend with respect to shares of Common Stock is payable in cash, then, as of the applicable dividend payment date, the Participant shall be credited with a right to receive a “Deferred Cash Dividend Equivalents” equal to (i) the cash dividend payable with respect to a share of Common Stock, multiplied by (ii) the number of Restricted Stock Units outstanding (i.e., the number of Restricted Stock Units granted hereunder less the number of such Restricted Stock Units that have settled in accordance with Section 6 below) on the applicable dividend record date.
|
(b)
|
If a dividend with respect to shares of Common Stock is payable in shares of Common Stock, then, as of the dividend payment date, the Participant shall be credited with that number of “Dividend Equivalent Units” equal to (i) the number of shares of Common Stock distributed in the dividend with respect to a share of Common Stock, multiplied by (ii) the number of Restricted Stock Units outstanding on the applicable dividend record date plus the number of previously credited Dividend Equivalent Units with respect to such Restricted Stock Units, if any.
|
(a)
|
Notwithstanding the provisions of Section 4, if the Participant’s Termination Date occurs by reason of death, Disability (as defined in Section 5(b)), Retirement (as defined in Section 5(b)), or involuntary termination by the Company other than for Cause (as defined in Section 5(b)), all Restricted Stock Units and associated Dividend Equivalents shall vest upon the Participant’s Termination Date.
|
(b)
|
For purposes of the Award evidenced by this Agreement, (i) a Participant’s Termination Date shall be considered to occur by reason of “Disability” if his Termination Date occurs on or after the date on which he is entitled to long-term disability benefits under the Company’s long-term disability plan (or, if the Participant is not eligible for such plan, if the Participant would be entitled to benefits under such plan if he were eligible) and such Termination Date does not occur for any other reason; (ii) a Participant’s Termination Date shall be considered to occur by reason of “Cause” if the Participant’s Termination Date occurs by reason of termination by the Company and is on account of (A) any act or omission by the Participant resulting in, or intending to result in, personal gain at the expense of the Company; (B) the improper disclosure by the Participant of proprietary or confidential information of the Company; or (C) misconduct by the Participant, including, but not limited to, fraud, intentional violation of, or negligent disregard for, the rules and procedures of the Company (including the code of business conduct), theft, violent acts or threats of violence, or possession of controlled substances on the property of the Company; provided, however, that the meaning of “Cause” shall be (1) expanded to include any additional grounds for cause-based termination specified in any contract, policy or plan applicable to the Participant or (2) superseded to the extent expressly provided in such contract, policy or plan; and (iii) a Participant’s Termination Date shall be considered to occur on account of “Retirement” if the Participant’s Termination Date occurs on or after the date on which the following conditions have been satisfied and such Termination Date does not occur for any other reason: (x) the Participant has attained age 60; (y) the Participant has provided at least ten (10) years of service to the Company; and (z) the Participant has provided at least 90 days’ prior notice of his or her Termination Date due to retirement from the Company.
|
(a)
|
and if the Participant is a specified employee (within the meaning of section 409A(a)(2)(B) of the Code) and if any such payment or benefit is required to be made or provided prior to the first day of the seventh month following the Participant’s separation from service or termination of employment, such payment or benefit shall be delayed until the first day of the seventh month following the Participant’s separation from service; and
|
(b)
|
the determination as to whether the Participant has had a termination of employment (or separation from service) shall be made in accordance with the provisions of section 409A of the Code and the guidance issued thereunder without application of any alternative levels of reductions of bona fide services permitted thereunder.
|
Rating
|
Payout Multiple
|
Adjusted Net Asset Value
($mm)
|
WLACC Outstanding ($bn)
|
1
|
2.00
|
(140)
|
9.992
|
2
|
1.00
|
(250)
|
10.727
|
3
|
0.00
|
(450)
|
11.467
|
•
|
impact on Adjusted Net Asset Value shall be neutralized and management shall not be penalized or rewarded if a decision to sell or otherwise dispose of AUK or other disposition structured as an ART Transaction were approved by the AAC Board of Directors, whether at a gain or a loss; and
|
•
|
impact on WLACC Outstanding - management shall receive the full benefit under the WLACC Outstanding metric.
|
RTSR Percentile Ranking
|
RTSR Modifier
|
75th percentile or above
|
110% of overall payout multiple
|
Between 25th and 75th percentile
|
100% of overall payout multiple
|
25th percentile or below
|
90% of overall payout multiple
|
•
|
neutralize the effects of claim payments, ART Transaction payments, loss expense payments, advisor payments and the establishment of loss and loss expense reserves for credits that do not have a GCL, as defined below, at the beginning of the Performance Period;
|
•
|
measure AAC’s foreign subsidiaries utilizing the foreign exchange rate at the beginning of the Performance Period;
|
•
|
add back capital restructuring and ongoing OCI oversight costs during the Measurement Period; and
|
•
|
add back costs of risk remediation activities (including ART Transactions, and any sale of AUK or other disposition which has been structured as an ART Transaction) with respect to credits within WLACC.
|
•
|
add back the following items (i) advisor and costs related to M&A and/or other capital transactions above or below budgeted amounts; (ii) cost of post-employment guarantees; (iii) changes to Board fees and Board imposed expenses; (iv) litigation and defense costs and any potential litigation gains in excess of damages incurred; (v) (cost)/benefit of performance based compensation (above) or below target amounts; and (vi) any other costs as determined in the sole discretion of the Board.
|
•
|
Single Risk ID: 4224 NEW JERSEY TSP TRT FND-TRS SYS
|
Rating
|
Payout Multiple
|
Adjusted Net Asset Value
($mm)
|
WLACC Outstanding ($bn)
|
1
|
2.00
|
(140)
|
9.992
|
2
|
1.00
|
(250)
|
10.727
|
3
|
0.00
|
(450)
|
11.467
|
•
|
impact on Adjusted Net Asset Value shall be neutralized and management shall not be penalized or rewarded if a decision to sell or otherwise dispose of AUK or other disposition structured as an ART Transaction were approved by the AAC Board of Directors, whether at a gain or a loss; and
|
•
|
impact on WLACC Outstanding - management shall receive the full benefit under the WLACC Outstanding metric.
|
RTSR Percentile Ranking
|
RTSR Modifier
|
75th percentile or above
|
110% of overall payout multiple
|
Between 25th and 75th percentile
|
100% of overall payout multiple
|
25th percentile or below
|
90% of overall payout multiple
|
•
|
neutralize the effects of claim payments, ART Transaction payments, loss expense payments, advisor payments and the establishment of loss and loss expense reserves for credits that do not have a GCL, as defined below, at the beginning of the Performance Period;
|
•
|
measure AAC’s foreign subsidiaries utilizing the foreign exchange rate at the beginning of the Performance Period;
|
•
|
add back capital restructuring and ongoing OCI oversight costs during the Measurement Period; and
|
•
|
add back costs of risk remediation activities (including ART Transactions, and any sale of AUK or other disposition which has been structured as an ART Transaction) with respect to credits within WLACC.
|
•
|
add back the following items (i) advisor and costs related to M&A and/or other capital transactions above or below budgeted amounts; (ii) cost of post-employment guarantees; (iii) changes to Board fees and Board imposed expenses; (iv) litigation and defense costs and any potential litigation gains in excess of damages incurred; (v) (cost)/benefit of performance based compensation (above) or below target amounts; and (vi) any other costs as determined in the sole discretion of the Board.
|
•
|
Single Risk ID: 4224 NEW JERSEY TSP TRT FND-TRS SYS
|
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:
|
May 11, 2020
|
By:
|
/s/ Claude LeBlanc
|
|
|
|
Claude LeBlanc
President and Chief Executive Officer
|
1.
|
I have reviewed this Quarterly Report on Form 10-Q of Ambac Financial Group, Inc. (the"registrant");
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a—15(e) and 15d—15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a.
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b.
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c.
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d.
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors:
|
a.
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
b.
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
Dated:
|
May 11, 2020
|
By:
|
/s/ David Trick
|
|
|
|
David Trick
Chief Financial Officer and Treasurer
|
(1)
|
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
(2)
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
|
|
By:
|
/s/ Claude LeBlanc
|
|
|
Name:
|
Claude LeBlanc
|
|
|
Title:
|
President and Chief Executive Officer
|
|
|
By:
|
/s/ David Trick
|
|
|
Name:
|
David Trick
|
|
|
Title:
|
Chief Financial Officer and Treasurer
|
Dated:
|
May 11, 2020
|
|
|