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Share Name | Share Symbol | Market | Type |
---|---|---|---|
Ambac Financial Group Inc | NASDAQ:AMBC | NASDAQ | Common Stock |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
0.00 | 0.00% | 21.43 | 15.00 | 27.00 | 0 | 01:00:00 |
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
|
|
NASDAQ
|
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
|
||||
|
|
6
|
||||
|
|
|
|
|
||
|
|
|||||
|
|
|
|
|
||
|
|
|
|
|
||
|
|
|
|
|
||
|
|
|
|
|
||
|
|
|
|
|
||
|
|
|
|
|
||
|
|
|
|
|
||
|
|
|
|
|
|
September 30,
|
|
December 31,
|
||||
(Dollars in thousands, except share data) (September 30, 2019 (Unaudited))
|
2019
|
|
2018
|
||||
Assets:
|
|
|
|
||||
Investments:
|
|
|
|
||||
Fixed income securities, at fair value (amortized cost of $2,561,278 and $3,020,744)
|
$
|
2,727,305
|
|
|
$
|
3,115,675
|
|
Fixed income securities pledged as collateral, at fair value (amortized cost of $84,948 and $0)
|
84,948
|
|
|
—
|
|
||
Short-term investments, at fair value (amortized cost of $664,423 and $430,405)
|
664,441
|
|
|
430,331
|
|
||
Other investments (includes $418,140 and $351,049 at fair value)
|
462,427
|
|
|
391,217
|
|
||
Total investments
|
3,939,121
|
|
|
3,937,223
|
|
||
Cash and cash equivalents
|
51,951
|
|
|
63,089
|
|
||
Restricted cash
|
12,561
|
|
|
19,405
|
|
||
Premium receivables
|
414,744
|
|
|
495,391
|
|
||
Reinsurance recoverable on paid and unpaid losses
|
26,036
|
|
|
23,133
|
|
||
Deferred ceded premium
|
76,495
|
|
|
61,134
|
|
||
Subrogation recoverable
|
2,082,268
|
|
|
1,932,960
|
|
||
Derivative assets
|
82,162
|
|
|
59,468
|
|
||
Current taxes
|
19,663
|
|
|
47,040
|
|
||
Insurance intangible asset
|
433,524
|
|
|
718,931
|
|
||
Other assets
|
113,189
|
|
|
137,628
|
|
||
Variable interest entity assets:
|
|
|
|
||||
Fixed income securities, at fair value
|
3,158,608
|
|
|
2,737,286
|
|
||
Restricted cash
|
3,168
|
|
|
999
|
|
||
Loans, at fair value
|
2,965,539
|
|
|
4,287,664
|
|
||
Derivative assets
|
67,921
|
|
|
66,302
|
|
||
Other assets
|
4,154
|
|
|
1,058
|
|
||
Total assets
|
$
|
13,451,104
|
|
|
$
|
14,588,711
|
|
Liabilities and Stockholders’ Equity:
|
|
|
|
||||
Liabilities:
|
|
|
|
||||
Unearned premiums
|
$
|
527,771
|
|
|
$
|
629,971
|
|
Loss and loss expense reserves
|
1,522,304
|
|
|
1,826,078
|
|
||
Ceded premiums payable
|
29,950
|
|
|
32,913
|
|
||
Deferred taxes
|
30,150
|
|
|
40,130
|
|
||
Long-term debt
|
2,954,929
|
|
|
2,928,929
|
|
||
Accrued interest payable
|
423,815
|
|
|
375,808
|
|
||
Derivative liabilities
|
103,314
|
|
|
76,699
|
|
||
Other liabilities
|
95,267
|
|
|
63,792
|
|
||
Variable interest entity liabilities:
|
|
|
|
||||
Accrued interest payable
|
2,656
|
|
|
556
|
|
||
Long-term debt (includes $4,151,433 and $5,268,596 at fair value)
|
4,353,171
|
|
|
5,268,596
|
|
||
Derivative liabilities
|
1,779,077
|
|
|
1,712,062
|
|
||
Other liabilities
|
36
|
|
|
30
|
|
||
Total liabilities
|
11,822,440
|
|
|
12,955,564
|
|
||
Commitments and contingencies (See Note 12)
|
|
|
|
||||
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: 45,571,743 and 45,365,170
|
456
|
|
|
454
|
|
||
Additional paid-in capital
|
229,128
|
|
|
219,429
|
|
||
Accumulated other comprehensive income (loss)
|
26,407
|
|
|
(48,715
|
)
|
||
Retained earnings
|
1,313,052
|
|
|
1,421,302
|
|
||
Treasury stock, shares at cost: 20,483 and 28,892
|
(347
|
)
|
|
(473
|
)
|
||
Total Ambac Financial Group, Inc. stockholders’ equity
|
1,568,696
|
|
|
1,591,997
|
|
||
Noncontrolling interest
|
59,968
|
|
|
41,150
|
|
||
Total stockholders’ equity
|
1,628,664
|
|
|
1,633,147
|
|
||
Total liabilities and stockholders’ equity
|
$
|
13,451,104
|
|
|
$
|
14,588,711
|
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
(Dollars in thousands, except share data)
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
Revenues:
|
|
|
|
|
|
|
|
|
||||||||
Net premiums earned
|
|
$
|
10,466
|
|
|
$
|
25,640
|
|
|
$
|
46,057
|
|
|
82,359
|
|
|
Net investment income
|
|
44,537
|
|
|
58,332
|
|
|
185,838
|
|
|
235,234
|
|
||||
Other-than-temporary impairment losses:
|
|
|
|
|
|
|
|
|
||||||||
Total other-than-temporary impairment losses
|
|
(42
|
)
|
|
(266
|
)
|
|
(71
|
)
|
|
(1,617
|
)
|
||||
Portion of other-than-temporary impairment recognized in other comprehensive income
|
|
—
|
|
|
—
|
|
|
—
|
|
|
38
|
|
||||
Net other-than-temporary impairment losses recognized in earnings
|
|
(42
|
)
|
|
(266
|
)
|
|
(71
|
)
|
|
(1,579
|
)
|
||||
Net realized investment gains (losses)
|
|
18,471
|
|
|
30,201
|
|
|
71,564
|
|
|
82,211
|
|
||||
Net gains (losses) on derivative contracts
|
|
(9,890
|
)
|
|
17,583
|
|
|
(61,461
|
)
|
|
51,706
|
|
||||
Net realized gains (losses) on extinguishment of debt
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3,121
|
|
||||
Other income
|
|
141,376
|
|
|
694
|
|
|
133,270
|
|
|
2,676
|
|
||||
Income (loss) on variable interest entities
|
|
11,244
|
|
|
1,831
|
|
|
30,459
|
|
|
2,982
|
|
||||
Total revenues
|
|
216,162
|
|
|
134,015
|
|
|
405,656
|
|
|
458,710
|
|
||||
Expenses:
|
|
|
|
|
|
|
|
|
||||||||
Losses and loss expenses (benefit)
|
|
37,139
|
|
|
33,501
|
|
|
(83,934
|
)
|
|
(181,315
|
)
|
||||
Insurance intangible amortization
|
|
17,421
|
|
|
26,421
|
|
|
279,941
|
|
|
78,299
|
|
||||
Operating expenses
|
|
25,622
|
|
|
28,368
|
|
|
79,627
|
|
|
90,865
|
|
||||
Interest expense
|
|
66,925
|
|
|
65,673
|
|
|
202,284
|
|
|
176,192
|
|
||||
Total expenses
|
|
147,107
|
|
|
153,963
|
|
|
477,918
|
|
|
164,041
|
|
||||
Pre-tax income (loss)
|
|
69,055
|
|
|
(19,948
|
)
|
|
(72,262
|
)
|
|
294,669
|
|
||||
Provision for income taxes
|
|
2,939
|
|
|
2,211
|
|
|
33,252
|
|
|
6,811
|
|
||||
Net income (loss)
|
|
66,116
|
|
|
(22,159
|
)
|
|
(105,514
|
)
|
|
287,858
|
|
||||
Less: loss on exchange of auction market preferred shares
|
|
—
|
|
|
81,686
|
|
|
—
|
|
|
81,686
|
|
||||
Net income (loss) attributable to common stockholders
|
|
$
|
66,116
|
|
|
$
|
(103,845
|
)
|
|
$
|
(105,514
|
)
|
|
$
|
206,172
|
|
Other comprehensive income (loss), after tax:
|
|
|
|
|
|
|
|
|
||||||||
Net income (loss)
|
|
$
|
66,116
|
|
|
$
|
(22,159
|
)
|
|
$
|
(105,514
|
)
|
|
$
|
287,858
|
|
Unrealized gains (losses) on securities, net of income tax provision (benefit) of $777, $(625), $(6,827) and $(1,211)
|
|
31,285
|
|
|
60,807
|
|
|
102,686
|
|
|
183,686
|
|
||||
Gains (losses) on foreign currency translation, net of income tax provision (benefit) of $0, $0, $0 and $0
|
|
(23,570
|
)
|
|
(8,873
|
)
|
|
(27,532
|
)
|
|
(29,806
|
)
|
||||
Credit risk changes of fair value option liabilities, net of income tax provision (benefit) of $(15), $40, $50 and $82
|
|
(74
|
)
|
|
340
|
|
|
245
|
|
|
548
|
|
||||
Changes to postretirement benefit, net of income tax provision (benefit) of $0, $0, $0 and $0
|
|
(322
|
)
|
|
(303
|
)
|
|
(277
|
)
|
|
(1,464
|
)
|
||||
Total other comprehensive income, net of income tax
|
|
7,319
|
|
|
51,971
|
|
|
75,122
|
|
|
152,964
|
|
||||
Less: loss on exchange of auction market preferred shares
|
|
—
|
|
|
81,686
|
|
|
—
|
|
|
81,686
|
|
||||
Total comprehensive income (loss) attributable to common stockholders
|
|
$
|
73,435
|
|
|
$
|
(51,874
|
)
|
|
$
|
(30,392
|
)
|
|
$
|
359,136
|
|
Net income (loss) per share attributable to common stockholders:
|
|
|
|
|
|
|
|
|
||||||||
Basic
|
|
$
|
1.44
|
|
|
$
|
(2.27
|
)
|
|
$
|
(2.30
|
)
|
|
$
|
4.52
|
|
Diluted
|
|
$
|
1.41
|
|
|
$
|
(2.27
|
)
|
|
$
|
(2.30
|
)
|
|
$
|
4.43
|
|
Weighted average number of common shares outstanding:
|
|
|
|
|
|
|
|
|
||||||||
Basic
|
|
45,997,694
|
|
|
45,749,252
|
|
|
45,939,284
|
|
|
45,635,483
|
|
||||
Diluted
|
|
47,020,058
|
|
|
45,749,252
|
|
|
45,939,284
|
|
|
46,510,795
|
|
|
|
|
Ambac Financial Group, Inc.
|
|
|
||||||||||||||||||||||||||
(Dollars in thousands)
|
Total
|
|
Retained
Earnings |
|
Accumulated
Other Comprehensive Income (Loss) |
|
Preferred
Stock |
|
Common
Stock |
|
Additional Paid-in
Capital |
|
Common
Stock Held in Treasury, at Cost |
|
Noncontrolling
Interest |
||||||||||||||||
Balance at June 30, 2019
|
$
|
1,552,916
|
|
|
$
|
1,246,990
|
|
|
$
|
19,088
|
|
|
$
|
—
|
|
|
$
|
456
|
|
|
$
|
226,794
|
|
|
$
|
(380
|
)
|
|
$
|
59,968
|
|
Total comprehensive income
|
73,435
|
|
|
66,116
|
|
|
7,319
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||||
Stock-based compensation
|
2,334
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,334
|
|
|
—
|
|
|
—
|
|
||||||||
Cost of shares (acquired) issued under equity plan
|
(21
|
)
|
|
(54
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
33
|
|
|
—
|
|
||||||||
Balance at September 30, 2019
|
$
|
1,628,664
|
|
|
$
|
1,313,052
|
|
|
$
|
26,407
|
|
|
$
|
—
|
|
|
$
|
456
|
|
|
$
|
229,128
|
|
|
$
|
(347
|
)
|
|
$
|
59,968
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Balance at June 30, 2018
|
$
|
2,063,921
|
|
|
$
|
1,545,702
|
|
|
$
|
45,854
|
|
|
$
|
—
|
|
|
$
|
454
|
|
|
$
|
208,328
|
|
|
$
|
(527
|
)
|
|
$
|
264,110
|
|
Total comprehensive income
|
29,812
|
|
|
(22,159
|
)
|
|
51,971
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||||
Stock-based compensation
|
1,710
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,710
|
|
|
—
|
|
|
—
|
|
||||||||
Exchange of auction market preferred shares
|
(296,634
|
)
|
|
(81,686
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
8,012
|
|
|
—
|
|
|
(222,960
|
)
|
||||||||
Balance at September 30, 2018
|
$
|
1,798,809
|
|
|
$
|
1,441,857
|
|
|
$
|
97,825
|
|
|
$
|
—
|
|
|
$
|
454
|
|
|
$
|
218,050
|
|
|
$
|
(527
|
)
|
|
$
|
41,150
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
|
|
|
Ambac Financial Group, Inc.
|
|
|
||||||||||||||||||||||||||
(Dollars in thousands)
|
Total
|
|
Retained
Earnings |
|
Accumulated
Other Comprehensive Income (Loss) |
|
Preferred
Stock |
|
Common
Stock |
|
Additional Paid-in
Capital |
|
Common
Stock Held in Treasury, at Cost |
|
Noncontrolling
Interest |
||||||||||||||||
Balance at January 1, 2019
|
$
|
1,633,147
|
|
|
$
|
1,421,302
|
|
|
$
|
(48,715
|
)
|
|
$
|
—
|
|
|
$
|
454
|
|
|
$
|
219,429
|
|
|
$
|
(473
|
)
|
|
$
|
41,150
|
|
Total comprehensive income
|
(30,392
|
)
|
|
(105,514
|
)
|
|
75,122
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||||
Stock-based compensation
|
9,699
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
9,699
|
|
|
—
|
|
|
—
|
|
||||||||
Cost of shares (acquired) issued under equity plan
|
(2,610
|
)
|
|
(2,736
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
126
|
|
|
—
|
|
||||||||
Issuance of common stock
|
2
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||||
Re-issuance of Ambac Assurance auction market preferred shares
|
18,818
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
18,818
|
|
||||||||
Balance at September 30, 2019
|
$
|
1,628,664
|
|
|
$
|
1,313,052
|
|
|
$
|
26,407
|
|
|
$
|
—
|
|
|
$
|
456
|
|
|
$
|
229,128
|
|
|
$
|
(347
|
)
|
|
$
|
59,968
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Balance at January 1, 2018
|
$
|
1,645,258
|
|
|
$
|
1,233,845
|
|
|
$
|
(52,239
|
)
|
|
$
|
—
|
|
|
$
|
453
|
|
|
$
|
199,560
|
|
|
$
|
(471
|
)
|
|
$
|
264,110
|
|
Total comprehensive income
|
440,822
|
|
|
287,858
|
|
|
152,964
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||||
Adjustment to initially apply ASU 2016-01
|
—
|
|
|
2,900
|
|
|
(2,900
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||||
Stock-based compensation
|
10,475
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
10,475
|
|
|
—
|
|
|
—
|
|
||||||||
Cost of shares (acquired) issued under equity plan
|
(1,116
|
)
|
|
(1,060
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(56
|
)
|
|
—
|
|
||||||||
Issuance of common stock
|
1
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||||
Exchange of auction market preferred shares
|
(296,634
|
)
|
|
(81,686
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
8,012
|
|
|
—
|
|
|
(222,960
|
)
|
||||||||
Warrants exercised
|
3
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3
|
|
|
—
|
|
|
—
|
|
||||||||
Balance at September 30, 2018
|
$
|
1,798,809
|
|
|
$
|
1,441,857
|
|
|
$
|
97,825
|
|
|
$
|
—
|
|
|
$
|
454
|
|
|
$
|
218,050
|
|
|
$
|
(527
|
)
|
|
$
|
41,150
|
|
|
|
Nine Months Ended September 30,
|
||||||
(Dollars in thousands)
|
|
2019
|
|
2018
|
||||
Cash flows from operating activities:
|
|
|
|
|
||||
Net income (loss) attributable to common stockholders
|
|
$
|
(105,514
|
)
|
|
$
|
206,172
|
|
Exchange for auction market preferred shares
|
|
—
|
|
|
81,686
|
|
||
Net income (loss)
|
|
$
|
(105,514
|
)
|
|
$
|
287,858
|
|
Adjustments to reconcile net income to net cash used in operating activities:
|
|
|
|
|
||||
Depreciation and amortization
|
|
356
|
|
|
531
|
|
||
Amortization of bond premium and discount
|
|
(59,291
|
)
|
|
(120,418
|
)
|
||
Share-based compensation
|
|
9,699
|
|
|
10,475
|
|
||
Deferred income taxes
|
|
(3,292
|
)
|
|
(6,121
|
)
|
||
Current income taxes
|
|
27,849
|
|
|
(20,977
|
)
|
||
Unearned premiums, net
|
|
(118,035
|
)
|
|
(107,114
|
)
|
||
Losses and loss expenses, net
|
|
(460,585
|
)
|
|
(1,559,039
|
)
|
||
Ceded premiums payable
|
|
(2,963
|
)
|
|
(3,570
|
)
|
||
Premium receivables
|
|
81,373
|
|
|
69,827
|
|
||
Accrued interest payable
|
|
64,847
|
|
|
(22,935
|
)
|
||
Amortization of insurance intangible assets
|
|
279,941
|
|
|
78,299
|
|
||
Net mark-to-market (gains) losses
|
|
(1,037
|
)
|
|
609
|
|
||
Net realized investment gains
|
|
(71,564
|
)
|
|
(82,211
|
)
|
||
Other-than-temporary impairment charges
|
|
71
|
|
|
1,579
|
|
||
(Gain) loss on extinguishment of debt
|
|
—
|
|
|
(3,121
|
)
|
||
Variable interest entity activities
|
|
(30,459
|
)
|
|
(2,982
|
)
|
||
Derivative assets and liabilities
|
|
4,958
|
|
|
(38
|
)
|
||
Other, net
|
|
87,415
|
|
|
61,405
|
|
||
Net cash used in operating activities
|
|
(296,231
|
)
|
|
(1,417,943
|
)
|
||
Cash flows from investing activities:
|
|
|
|
|
||||
Proceeds from sales of bonds
|
|
1,051,990
|
|
|
1,091,516
|
|
||
Proceeds from matured bonds
|
|
316,818
|
|
|
292,395
|
|
||
Purchases of bonds
|
|
(866,087
|
)
|
|
(348,682
|
)
|
||
Proceeds from sales of other invested assets
|
|
72,558
|
|
|
111,524
|
|
||
Purchases of other invested assets
|
|
(134,948
|
)
|
|
(93,800
|
)
|
||
Change in short-term investments
|
|
(235,486
|
)
|
|
(4,548
|
)
|
||
Change in cash collateral receivable
|
|
75,018
|
|
|
10,953
|
|
||
Proceeds from paydowns of consolidated VIE assets
|
|
511,931
|
|
|
187,260
|
|
||
Other, net
|
|
(360
|
)
|
|
2,742
|
|
||
Net cash provided by investing activities
|
|
791,434
|
|
|
1,249,360
|
|
||
Cash flows from financing activities:
|
|
|
|
|
||||
Net proceeds from issuance of Tier 2 notes
|
|
—
|
|
|
240,000
|
|
||
Proceeds from issuance of Ambac UK debt
|
|
12,180
|
|
|
—
|
|
||
Proceeds from issuance of surplus notes
|
|
—
|
|
|
17,714
|
|
||
Paydowns of Ambac note
|
|
(28,730
|
)
|
|
(185,738
|
)
|
||
Paydowns of a secured borrowing
|
|
—
|
|
|
(73,993
|
)
|
||
Payments for extinguishment of surplus notes
|
|
—
|
|
|
(191,258
|
)
|
||
Payments for debt issuance costs
|
|
—
|
|
|
(9,221
|
)
|
||
Payments for auction market preferred shares
|
|
—
|
|
|
(11,048
|
)
|
||
Issuance of auction market preferred shares of Ambac Assurance
|
|
18,818
|
|
|
—
|
|
||
Tax payments related to shares withheld for share-based compensation plans
|
|
(2,610
|
)
|
|
(1,116
|
)
|
||
Proceeds from warrant exercises
|
|
—
|
|
|
3
|
|
||
Payments of consolidated VIE liabilities
|
|
(510,228
|
)
|
|
(187,260
|
)
|
||
Net cash used in financing activities
|
|
(510,570
|
)
|
|
(401,917
|
)
|
||
Effect of foreign exchange on cash, cash equivalents and restricted cash
|
|
(446
|
)
|
|
(652
|
)
|
||
Net cash flow
|
|
(15,813
|
)
|
|
(571,152
|
)
|
||
Cash, cash equivalents, and restricted cash at beginning of period
|
|
83,493
|
|
|
624,681
|
|
||
Cash, cash equivalents, and restricted cash at end of period
|
|
$
|
67,680
|
|
|
$
|
53,529
|
|
•
|
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 and its subsidiaries' 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
|
|
Nine Months Ended September 30,
|
||||||
|
|
2019
|
|
2018
|
||||
Cash paid during the period for:
|
|
|
|
|
||||
Income taxes
|
|
$
|
11,387
|
|
|
$
|
31,408
|
|
Interest on long-term debt
|
|
109,527
|
|
|
195,333
|
|
||
Non-cash financing activities:
|
|
|
|
|
||||
Increase in long-term debt in exchange for auction market preferred shares
|
|
$
|
—
|
|
|
$
|
187,220
|
|
Exchange of investments in Puerto Rico COFINA bonds for new bonds issued in the Plan of Adjustment
|
|
$
|
510,215
|
|
|
$
|
—
|
|
Rehabilitation exit transaction discharge of all Deferred Amounts and cancellation of certain General Account Surplus Notes
|
|
—
|
|
|
1,918,561
|
|
||
|
|
|
|
|
||||
|
|
September 30,
|
||||||
|
|
2019
|
|
2018
|
||||
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
|
|
$
|
51,951
|
|
|
$
|
52,505
|
|
Restricted cash
|
|
12,561
|
|
|
—
|
|
||
Variable Interest Entity Restricted cash
|
|
3,168
|
|
|
1,024
|
|
||
Total cash, cash equivalents, and restricted cash shown on the Consolidated Statements of Cash Flows
|
|
$
|
67,680
|
|
|
$
|
53,529
|
|
•
|
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 only 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.
|
•
|
For financial assets measured at amortized cost, the ASU replaces the "incurred loss" model, which generally delayed recognition of the full amount of credit losses until the loss was probable of occurring, with an "expected loss" model, which reflects an entity's current estimate of all expected lifetime credit losses. Expected lifetime credit losses for amortized cost assets will be recorded as a valuation allowance, with subsequent increases or decreases in the allowance reflected in the Consolidated Statements of Total Comprehensive Income each period.
|
•
|
For available-for-sale debt securities, credit losses under the ASU will be measured similarly to current GAAP. However, under the ASU, credit losses for available-for-sale debt securities will be recorded as a valuation allowance (similar to the amortized cost assets approach described above), rather than as a direct write-down of the security as is required under current GAAP. As a result, improvements to estimated credit losses for available-for-sale debt securities will be recognized immediately in the Consolidated Statements of Total Comprehensive Income rather than as interest income over time.
|
•
|
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. FG VIEs which are consolidated may include non-recourse assets or liabilities. FG VIEs' liabilities (and in some cases assets) that are insured by the Company are with recourse, because the Company guarantees the payment of principal and interest. FG VIEs' assets and liabilities that are not insured by the Company are without recourse, because Ambac has not issued a financial guarantee and is under no obligation for the payment of principal and interest of these instruments. The Company’s exposure to consolidated FG VIEs is limited to the
|
•
|
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. The financial liabilities of these FG VIEs consist of long term debt obligations and are carried at par less unamortized discount. Income from the FG VIE's available-for-sale securities (including investment income, realized gains and losses and other-than-temporary impairments as applicable) and interest expense on long term debt are reported within Income (loss) on variable interest entities in the Consolidated Statements of Total Comprehensive Income (Loss).
|
•
|
Upon initial consolidation of a FG VIE, 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
|
•
|
The impact of consolidating such FG VIEs on Ambac’s balance sheet is the elimination of transactions between the consolidated FG VIEs and Ambac’s operating subsidiaries and the inclusion of the FG VIE’s third party assets and liabilities. For a financial guarantee insurance policy issued to a consolidated VIE, Ambac does not reflect the financial guarantee insurance policy in accordance with the related insurance accounting rules under the Financial Services – Insurance Topic of the ASC. Consequently, upon consolidation, Ambac eliminates the insurance assets and liabilities associated with the policy from the Consolidated Balance Sheets. Such insurance assets and liabilities may include premium receivables, reinsurance recoverable, deferred ceded premium, subrogation recoverable, unearned premiums, loss and loss expense reserves, ceded premiums payable and insurance intangible assets. For investment securities owned by Ambac that are debt instruments issued by the VIE, the investment securities balance is eliminated upon consolidation.
|
|
September 30, 2019
|
|
December 31, 2018
|
||||||||||||||||||||
|
Ambac UK
|
|
Ambac Assurance
|
|
Total VIEs
|
|
Ambac UK
|
|
Ambac Assurance
|
|
Total VIEs
|
||||||||||||
Fixed income securities, at fair value:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Corporate obligations, fair value option
|
$
|
2,995,894
|
|
|
$
|
—
|
|
|
$
|
2,995,894
|
|
|
$
|
2,737,286
|
|
|
$
|
—
|
|
|
$
|
2,737,286
|
|
Municipal obligations, available-for-sale (1)
|
—
|
|
|
162,714
|
|
|
162,714
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Total FG VIE fixed income securities, at fair value
|
2,995,894
|
|
|
162,714
|
|
|
3,158,608
|
|
|
2,737,286
|
|
|
—
|
|
|
2,737,286
|
|
||||||
Restricted cash
|
970
|
|
|
2,198
|
|
|
3,168
|
|
|
999
|
|
|
—
|
|
|
999
|
|
||||||
Loans, at fair value (2)
|
2,965,539
|
|
|
—
|
|
|
2,965,539
|
|
|
4,287,664
|
|
|
—
|
|
|
4,287,664
|
|
||||||
Derivative assets
|
67,921
|
|
|
—
|
|
|
67,921
|
|
|
66,302
|
|
|
—
|
|
|
66,302
|
|
||||||
Other assets
|
3,180
|
|
|
974
|
|
|
4,154
|
|
|
1,058
|
|
|
—
|
|
|
1,058
|
|
||||||
Total FG VIE assets
|
$
|
6,033,504
|
|
|
$
|
165,886
|
|
|
$
|
6,199,390
|
|
|
$
|
7,093,309
|
|
|
$
|
—
|
|
|
$
|
7,093,309
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Accrued interest payable
|
$
|
2,656
|
|
|
$
|
—
|
|
|
$
|
2,656
|
|
|
$
|
556
|
|
|
$
|
—
|
|
|
$
|
556
|
|
Long-term debt:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Long-term debt, at fair value (3)
|
4,151,433
|
|
|
—
|
|
|
4,151,433
|
|
|
5,268,596
|
|
|
—
|
|
|
5,268,596
|
|
||||||
Long-term debt, at par less unamortized discount
|
—
|
|
|
201,738
|
|
|
201,738
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Total long-term debt
|
4,151,433
|
|
|
201,738
|
|
|
4,353,171
|
|
|
5,268,596
|
|
|
—
|
|
|
5,268,596
|
|
||||||
Derivative liabilities
|
1,779,077
|
|
|
—
|
|
|
1,779,077
|
|
|
1,712,062
|
|
|
—
|
|
|
1,712,062
|
|
||||||
Other liabilities
|
36
|
|
|
—
|
|
|
36
|
|
|
30
|
|
|
—
|
|
|
30
|
|
||||||
Total FG VIE liabilities
|
$
|
5,933,202
|
|
|
$
|
201,738
|
|
|
$
|
6,134,940
|
|
|
$
|
6,981,244
|
|
|
$
|
—
|
|
|
$
|
6,981,244
|
|
Number of FG VIEs consolidated
|
6
|
|
|
1
|
|
|
7
|
|
|
7
|
|
|
—
|
|
|
7
|
|
(1)
|
Available-for-sale FG VIE fixed income securities consist of municipal obligations with an amortized cost basis of $138,042 and aggregate gross unrealized gains and (losses) of $24,672 at September 30, 2019. All such securities had contractual maturities due after ten years as of September 30, 2019.
|
(2)
|
The unpaid principal balances of loan assets carried at fair value were $2,478,571 as of September 30, 2019 and $3,418,044 as of December 31, 2018.
|
(3)
|
The unpaid principal balances of long-term debt carried at fair value were $3,576,046 as of September 30, 2019 and $4,552,643 as of December 31, 2018.
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
Net change in fair value of VIE assets and liabilities reported under the fair value option
|
|
$
|
2,126
|
|
|
$
|
7
|
|
|
$
|
6,493
|
|
|
$
|
1,158
|
|
Gain (loss) from de-consolidating FG VIEs
|
|
(1,998
|
)
|
|
1,824
|
|
|
(1,998
|
)
|
|
1,824
|
|
||||
Net change in fair value of VIE assets and liabilities reported in earnings
|
|
128
|
|
|
1,831
|
|
|
4,495
|
|
|
2,982
|
|
||||
Investment income on available-for-sale securities
|
|
2,511
|
|
|
—
|
|
|
7,896
|
|
|
—
|
|
||||
Net realized investment gains (losses) on available-for-sale securities
|
|
11,564
|
|
|
—
|
|
|
13,427
|
|
|
—
|
|
||||
Interest expense on long-term debt carried at par less unamortized cost
|
|
(2,840
|
)
|
|
—
|
|
|
(9,285
|
)
|
|
—
|
|
||||
Other expenses
|
|
(119
|
)
|
|
—
|
|
|
(938
|
)
|
|
—
|
|
||||
Gain (loss) from consolidating FG VIEs
|
|
—
|
|
|
—
|
|
|
14,864
|
|
|
—
|
|
||||
Income (loss) on Variable Interest Entities
|
|
$
|
11,244
|
|
|
$
|
1,831
|
|
|
$
|
30,459
|
|
|
$
|
2,982
|
|
|
Carrying Value of Assets and Liabilities
|
||||||||||||||
|
Maximum
Exposure To Loss (1) |
|
Insurance
Assets (2) |
|
Insurance
Liabilities (3) |
|
Net Derivative
Assets (Liabilities) (4) |
||||||||
September 30, 2019:
|
|
|
|
|
|
|
|
||||||||
Global structured finance:
|
|
|
|
|
|
|
|
||||||||
Collateralized debt obligations
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Mortgage-backed—residential
|
5,641,415
|
|
|
1,943,385
|
|
|
547,002
|
|
|
—
|
|
||||
Other consumer asset-backed
|
1,450,873
|
|
|
19,829
|
|
|
210,512
|
|
|
—
|
|
||||
Other commercial asset-backed
|
352,385
|
|
|
6,387
|
|
|
6,209
|
|
|
—
|
|
||||
Other
|
998,018
|
|
|
7,739
|
|
|
19,187
|
|
|
7,934
|
|
||||
Total global structured finance
|
8,442,691
|
|
|
1,977,340
|
|
|
782,910
|
|
|
7,934
|
|
||||
Global public finance
|
23,058,272
|
|
|
317,692
|
|
|
320,883
|
|
|
(422
|
)
|
||||
Total
|
$
|
31,500,963
|
|
|
$
|
2,295,032
|
|
|
$
|
1,103,793
|
|
|
$
|
7,512
|
|
|
|
|
|
|
|
|
|
||||||||
December 31, 2018:
|
|
|
|
|
|
|
|
||||||||
Global structured finance:
|
|
|
|
|
|
|
|
||||||||
Collateralized debt obligations
|
$
|
9,787
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(2
|
)
|
Mortgage-backed—residential
|
6,713,437
|
|
|
1,859,121
|
|
|
546,682
|
|
|
—
|
|
||||
Other consumer asset-backed
|
1,700,984
|
|
|
15,435
|
|
|
238,234
|
|
|
—
|
|
||||
Other commercial asset-backed
|
873,343
|
|
|
20,735
|
|
|
12,264
|
|
|
—
|
|
||||
Other
|
2,122,648
|
|
|
53,462
|
|
|
301,260
|
|
|
7,170
|
|
||||
Total global structured finance
|
11,420,199
|
|
|
1,948,753
|
|
|
1,098,440
|
|
|
7,168
|
|
||||
Global public finance
|
24,145,956
|
|
|
309,071
|
|
|
335,437
|
|
|
(1,457
|
)
|
||||
Total
|
$
|
35,566,155
|
|
|
$
|
2,257,824
|
|
|
$
|
1,433,877
|
|
|
$
|
5,711
|
|
(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 $379,360 and $393,010 at September 30, 2019 and December 31, 2018,
|
•
|
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 September 30, 2019:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Beginning Balance
|
|
$
|
157,304
|
|
|
$
|
8,919
|
|
|
$
|
(145,489
|
)
|
|
$
|
(1,646
|
)
|
|
$
|
19,088
|
|
Other comprehensive income (loss) before reclassifications
|
|
49,714
|
|
|
—
|
|
|
(23,570
|
)
|
|
—
|
|
|
26,144
|
|
|||||
Amounts reclassified from accumulated other comprehensive income (loss)
|
|
(18,429
|
)
|
|
(322
|
)
|
|
—
|
|
|
(74
|
)
|
|
(18,825
|
)
|
|||||
Net current period other comprehensive income (loss)
|
|
31,285
|
|
|
(322
|
)
|
|
(23,570
|
)
|
|
(74
|
)
|
|
7,319
|
|
|||||
Balance at September 30, 2019
|
|
$
|
188,589
|
|
|
$
|
8,597
|
|
|
$
|
(169,059
|
)
|
|
$
|
(1,720
|
)
|
|
$
|
26,407
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Three Months Ended September 30, 2018:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Beginning Balance
|
|
$
|
153,634
|
|
|
$
|
9,479
|
|
|
$
|
(114,567
|
)
|
|
$
|
(2,692
|
)
|
|
$
|
45,854
|
|
Other comprehensive income (loss) before reclassifications
|
|
90,742
|
|
|
—
|
|
|
(8,873
|
)
|
|
—
|
|
|
81,869
|
|
|||||
Amounts reclassified from accumulated other comprehensive income (loss)
|
|
(29,935
|
)
|
|
(303
|
)
|
|
—
|
|
|
340
|
|
|
(29,898
|
)
|
|||||
Net current period other comprehensive income (loss)
|
|
60,807
|
|
|
(303
|
)
|
|
(8,873
|
)
|
|
340
|
|
|
51,971
|
|
|||||
Balance at September 30, 2018
|
|
$
|
214,441
|
|
|
$
|
9,176
|
|
|
$
|
(123,440
|
)
|
|
$
|
(2,352
|
)
|
|
$
|
97,825
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Nine Months Ended September 30, 2019:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Beginning Balance
|
|
$
|
85,903
|
|
|
$
|
8,874
|
|
|
$
|
(141,527
|
)
|
|
$
|
(1,965
|
)
|
|
$
|
(48,715
|
)
|
Other comprehensive income (loss) before reclassifications
|
|
174,179
|
|
|
689
|
|
|
(27,532
|
)
|
|
—
|
|
|
147,336
|
|
|||||
Amounts reclassified from accumulated other comprehensive income (loss)
|
|
(71,493
|
)
|
|
(966
|
)
|
|
—
|
|
|
245
|
|
|
(72,214
|
)
|
|||||
Net current period other comprehensive income (loss)
|
|
102,686
|
|
|
(277
|
)
|
|
(27,532
|
)
|
|
245
|
|
|
75,122
|
|
|||||
Balance at September 30, 2019
|
|
$
|
188,589
|
|
|
$
|
8,597
|
|
|
$
|
(169,059
|
)
|
|
$
|
(1,720
|
)
|
|
$
|
26,407
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Nine Months Ended September 30, 2018:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Beginning Balance
|
|
$
|
30,755
|
|
|
$
|
10,640
|
|
|
$
|
(93,634
|
)
|
|
$
|
—
|
|
|
$
|
(52,239
|
)
|
Adjustments to opening balance, net of taxes (3)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(2,900
|
)
|
|
(2,900
|
)
|
|||||
Adjusted balance, beginning of period
|
|
30,755
|
|
|
10,640
|
|
|
(93,634
|
)
|
|
(2,900
|
)
|
|
(55,139
|
)
|
|||||
Other comprehensive income before reclassifications
|
|
264,318
|
|
|
(556
|
)
|
|
(29,806
|
)
|
|
—
|
|
|
233,956
|
|
|||||
Amounts reclassified from accumulated other comprehensive income
|
|
(80,632
|
)
|
|
(908
|
)
|
|
—
|
|
|
548
|
|
|
(80,992
|
)
|
|||||
Net current period other comprehensive income
|
|
$
|
183,686
|
|
|
$
|
(1,464
|
)
|
|
$
|
(29,806
|
)
|
|
$
|
548
|
|
|
$
|
152,964
|
|
Balance at September 30, 2018
|
|
$
|
214,441
|
|
|
$
|
9,176
|
|
|
$
|
(123,440
|
)
|
|
$
|
(2,352
|
)
|
|
$
|
97,825
|
|
(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.
|
(3)
|
Beginning in 2018, credit risk changes of fair value option liabilities are reflected as a component of Accumulated Other Comprehensive Income pursuant to the adoption of ASU 2016-01.
|
Details about Accumulated
Other Comprehensive
Income Components
|
|
Amount Reclassified from Accumulated Other Comprehensive Income (1)
|
|
Affected Line Item in the
Consolidated Statement of Total Comprehensive Income (Loss) |
||||||||||||||
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
|
||||||||||||||
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
||||||||||
Unrealized Gains (Losses) on Available-for-Sale Securities
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
|
$
|
(19,884
|
)
|
|
$
|
(30,560
|
)
|
|
$
|
(77,460
|
)
|
|
$
|
(81,843
|
)
|
|
Net realized investment gains (losses) and other-than-temporary impairment losses
|
|
|
1,455
|
|
|
625
|
|
|
5,967
|
|
|
1,211
|
|
|
Provision for income taxes
|
||||
|
|
$
|
(18,429
|
)
|
|
$
|
(29,935
|
)
|
|
$
|
(71,493
|
)
|
|
$
|
(80,632
|
)
|
|
Net of tax and noncontrolling interest
|
Amortization of Postretirement Benefit
|
|
|
|
|
|
|
|
|
|
|
||||||||
Prior service cost
|
|
$
|
(241
|
)
|
|
$
|
(241
|
)
|
|
$
|
(722
|
)
|
|
$
|
(723
|
)
|
|
Other income (2)
|
Actuarial (losses)
|
|
(81
|
)
|
|
(62
|
)
|
|
(244
|
)
|
|
(185
|
)
|
|
Other income (2)
|
||||
|
|
(322
|
)
|
|
(303
|
)
|
|
(966
|
)
|
|
(908
|
)
|
|
Total before tax
|
||||
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Provision for income taxes
|
||||
|
|
$
|
(322
|
)
|
|
$
|
(303
|
)
|
|
$
|
(966
|
)
|
|
$
|
(908
|
)
|
|
Net of tax and noncontrolling interest
|
Credit risk changes of fair value option liabilities
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
|
$
|
(89
|
)
|
|
$
|
380
|
|
|
$
|
295
|
|
|
$
|
630
|
|
|
Credit Risk Changes of Fair Value Option Liabilities
|
|
|
15
|
|
|
(40
|
)
|
|
(50
|
)
|
|
(82
|
)
|
|
Provision for income taxes
|
||||
|
|
$
|
(74
|
)
|
|
$
|
340
|
|
|
$
|
245
|
|
|
$
|
548
|
|
|
Net of tax and noncontrolling interest
|
Total reclassifications for the period
|
|
$
|
(18,825
|
)
|
|
$
|
(29,898
|
)
|
|
$
|
(72,214
|
)
|
|
$
|
(80,992
|
)
|
|
Net of tax and noncontrolling interest
|
(1)
|
Amounts in parentheses indicate reductions to Accumulated Other Comprehensive Income with corresponding increases to the affected line items in the Consolidated Statement of Total Comprehensive Income.
|
(2)
|
These accumulated other comprehensive income components are included in the computation of net periodic benefit cost.
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||
Basic weighted average shares outstanding
|
|
45,997,694
|
|
|
45,749,252
|
|
|
45,939,284
|
|
|
45,635,483
|
|
Effect of potential dilutive shares (1):
|
|
|
|
|
|
|
|
|
||||
Stock options
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Warrants
|
|
450,384
|
|
|
—
|
|
|
—
|
|
|
454,150
|
|
Restricted stock units
|
|
78,751
|
|
|
—
|
|
|
—
|
|
|
72,615
|
|
Performance stock units (2)
|
|
493,229
|
|
|
—
|
|
|
—
|
|
|
348,547
|
|
Diluted weighted average shares outstanding
|
|
47,020,058
|
|
|
45,749,252
|
|
|
45,939,284
|
|
|
46,510,795
|
|
Anti-dilutive shares excluded from the above reconciliation:
|
|
|
|
|
|
|
|
|
||||
Stock options
|
|
16,667
|
|
|
126,667
|
|
|
16,667
|
|
|
126,667
|
|
Warrants
|
|
—
|
|
|
4,877,783
|
|
|
4,877,783
|
|
|
—
|
|
Restricted stock units
|
|
—
|
|
|
232,408
|
|
|
249,025
|
|
|
—
|
|
Performance stock units (2)
|
|
—
|
|
|
521,394
|
|
|
748,700
|
|
|
—
|
|
(1)
|
For the three months ended September 30, 2018 and the nine months ended September 30, 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.
|
|
|
Nine Months Ended September 30,
|
||||||
|
|
2019
|
|
2018
|
||||
Beginning premium receivable
|
|
$
|
495,391
|
|
|
$
|
586,312
|
|
Premium receipts
|
|
(36,778
|
)
|
|
(42,660
|
)
|
||
Adjustments for changes in expected and contractual cash flows (1)
|
|
(32,593
|
)
|
|
(34,088
|
)
|
||
Accretion of premium receivable discount
|
|
8,775
|
|
|
11,211
|
|
||
Deconsolidation of certain VIEs
|
|
3,239
|
|
|
—
|
|
||
Changes to uncollectable premiums
|
|
(6,921
|
)
|
|
2,473
|
|
||
Other adjustments (including foreign exchange)
|
|
(16,369
|
)
|
|
(6,051
|
)
|
||
Ending premium receivable (2)
|
|
$
|
414,744
|
|
|
$
|
517,197
|
|
(1)
|
Adjustments for changes in expected and contractual cash flows primarily due to 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 September 30, 2019 and 2018, premium receivables include British Pounds of $124,406 (£101,168) and $136,925 (£104,988), respectively, and Euros of $22,091 (€20,264) and $32,613 (€28,085), respectively.
|
(1)
|
Includes ceded premium activity related to the execution of a reinsurance transaction in the three and nine months ended September 30, 2019.
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
United States
|
$
|
10,588
|
|
|
$
|
19,539
|
|
|
$
|
44,457
|
|
|
$
|
64,009
|
|
United Kingdom
|
4,354
|
|
|
4,523
|
|
|
12,769
|
|
|
14,337
|
|
||||
Other international
|
(4,476
|
)
|
|
1,578
|
|
|
(11,169
|
)
|
|
4,013
|
|
||||
Total
|
$
|
10,466
|
|
|
$
|
25,640
|
|
|
$
|
46,057
|
|
|
$
|
82,359
|
|
|
Future Premiums
to be
Collected (1)
|
|
Future
Premiums to be Earned Net of Reinsurance (1) |
||||
Three months ended:
|
|
|
|
||||
December 31, 2019
|
$
|
11,888
|
|
|
$
|
10,507
|
|
Twelve months ended:
|
|
|
|
||||
December 31, 2020
|
41,442
|
|
|
40,407
|
|
||
December 31, 2021
|
35,601
|
|
|
36,938
|
|
||
December 31, 2022
|
35,292
|
|
|
34,531
|
|
||
December 31, 2023
|
33,792
|
|
|
32,345
|
|
||
Five years ended:
|
|
|
|
||||
December 31, 2028
|
147,828
|
|
|
135,566
|
|
||
December 31, 2033
|
108,291
|
|
|
90,347
|
|
||
December 31, 2038
|
57,282
|
|
|
46,459
|
|
||
December 31, 2043
|
24,772
|
|
|
16,205
|
|
||
December 31, 2048
|
11,298
|
|
|
6,637
|
|
||
December 31, 2053
|
2,251
|
|
|
1,314
|
|
||
December 31, 2058
|
31
|
|
|
20
|
|
||
Total
|
$
|
509,768
|
|
|
$
|
451,276
|
|
(1)
|
Future premiums to be collected are undiscounted and are used to derive the discounted premium receivable asset recorded on Ambac's balance sheet. Future premiums to be earned, net of reinsurance relate to the unearned premiums liability and deferred ceded premium asset recorded on Ambac’s balance sheet. The use of contractual lives for many bond types which do not have homogeneous pools of underlying collateral is required in the calculation of the premium receivable, as further described in Note 2. Basis of Presentation and Significant Accounting Policies in the Notes to Consolidated Financial Statements included in Ambac's Annual Report on Form 10-K for the year ended December 31, 2018. 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.
|
|
|
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
|
|
|
||||||||||
September 30, 2019:
|
|
|
|
|
|
|
|
|
||||||||
Loss and loss expense reserves
|
|
$
|
1,803,743
|
|
|
$
|
(225,967
|
)
|
|
$
|
(55,472
|
)
|
|
$
|
1,522,304
|
|
Subrogation recoverable
|
|
135,599
|
|
|
(2,217,867
|
)
|
|
—
|
|
|
(2,082,268
|
)
|
||||
Totals
|
|
$
|
1,939,342
|
|
|
$
|
(2,443,834
|
)
|
|
$
|
(55,472
|
)
|
|
$
|
(559,964
|
)
|
|
|
|
|
|
|
|
|
|
||||||||
December 31, 2018:
|
|
|
|
|
|
|
|
|
||||||||
Loss and loss expense reserves
|
|
$
|
2,246,335
|
|
|
$
|
(313,595
|
)
|
|
$
|
(106,662
|
)
|
|
$
|
1,826,078
|
|
Subrogation recoverable
|
|
175,694
|
|
|
(2,108,654
|
)
|
|
—
|
|
|
(1,932,960
|
)
|
||||
Totals
|
|
$
|
2,422,029
|
|
|
$
|
(2,422,249
|
)
|
|
$
|
(106,662
|
)
|
|
$
|
(106,882
|
)
|
|
Nine Months Ended September 30,
|
||||||
|
2019
|
|
2018
|
||||
Beginning gross loss and loss expense reserves
|
$
|
(106,882
|
)
|
|
$
|
4,113,802
|
|
Reinsurance recoverable
|
22,623
|
|
|
40,658
|
|
||
Beginning balance of net loss and loss expense reserves
|
(129,505
|
)
|
|
4,073,144
|
|
||
Losses and loss expenses (benefit):
|
|
|
|
||||
Current year
|
659
|
|
|
976
|
|
||
Prior years
|
(84,593
|
)
|
|
(182,291
|
)
|
||
Total (1) (2) (3)
|
(83,934
|
)
|
|
(181,315
|
)
|
||
Loss and loss expenses paid (recovered):
|
|
|
|
||||
Current year
|
32
|
|
|
143
|
|
||
Prior years (3)
|
298,909
|
|
|
3,937,561
|
|
||
Total
|
298,941
|
|
|
3,937,704
|
|
||
Foreign exchange effect
|
(1,174
|
)
|
|
(9,578
|
)
|
||
Ending net loss and loss expense reserves
|
(513,554
|
)
|
|
(55,453
|
)
|
||
Impact of VIE consolidation
|
(72,159
|
)
|
|
—
|
|
||
Reinsurance recoverable (4)
|
25,749
|
|
|
25,326
|
|
||
Ending gross loss and loss expense reserves
|
$
|
(559,964
|
)
|
|
$
|
(30,127
|
)
|
(1)
|
Total losses and loss expenses (benefit) includes $(5,999) and $(123) for the nine months ended September 30, 2019 and 2018, 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 nine months ended September 30, 2019 and 2018 was $15,365 and $56,928, respectively.
|
(3)
|
On February 12, 2018, Deferred Amounts and Interest Accrued on Deferred Amounts in the amount of $3,000,158 and $856,834, respectively were settled in connection with the Rehabilitation Exit Transactions. 2018 includes a $288,204 loss and loss expense benefit on these settled Deferred Amounts.
|
(4)
|
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 $287 and $185 as of September 30, 2019 and 2018, respectively, related to previously presented loss and loss expenses and subrogation.
|
Surveillance Categories as of September 30, 2019
|
|||||||||||||||||||||||||||
|
I
|
|
IA
|
|
II
|
|
III
|
|
IV
|
|
V
|
|
Total
|
||||||||||||||
Number of policies
|
34
|
|
|
20
|
|
|
11
|
|
|
17
|
|
|
136
|
|
|
3
|
|
|
221
|
|
|||||||
Remaining weighted-average contract period (in years) (1)
|
8
|
|
|
18
|
|
|
10
|
|
|
17
|
|
|
15
|
|
|
3
|
|
|
15
|
|
|||||||
Gross insured contractual payments outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Principal
|
$
|
748,982
|
|
|
$
|
649,596
|
|
|
$
|
137,345
|
|
|
$
|
900,525
|
|
|
$
|
3,890,338
|
|
|
$
|
37,962
|
|
|
$
|
6,364,748
|
|
Interest
|
371,462
|
|
|
582,864
|
|
|
74,611
|
|
|
398,722
|
|
|
1,692,337
|
|
|
12,413
|
|
|
3,132,409
|
|
|||||||
Total
|
$
|
1,120,444
|
|
|
$
|
1,232,460
|
|
|
$
|
211,956
|
|
|
$
|
1,299,247
|
|
|
$
|
5,582,675
|
|
|
$
|
50,375
|
|
|
$
|
9,497,157
|
|
Gross undiscounted claim liability
|
$
|
2,037
|
|
|
$
|
53,685
|
|
|
$
|
12,569
|
|
|
$
|
523,533
|
|
|
$
|
1,710,357
|
|
|
$
|
50,343
|
|
|
$
|
2,352,524
|
|
Discount, gross claim liability
|
(144
|
)
|
|
(5,129
|
)
|
|
(894
|
)
|
|
(134,783
|
)
|
|
(343,293
|
)
|
|
(2,090
|
)
|
|
(486,333
|
)
|
|||||||
Gross claim liability before all subrogation and before reinsurance
|
1,893
|
|
|
48,556
|
|
|
11,675
|
|
|
388,750
|
|
|
1,367,064
|
|
|
48,253
|
|
|
1,866,191
|
|
|||||||
Less:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Gross RMBS subrogation (2)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,784,421
|
)
|
|
—
|
|
|
(1,784,421
|
)
|
|||||||
Discount, RMBS subrogation
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
29,477
|
|
|
—
|
|
|
29,477
|
|
|||||||
Discounted RMBS subrogation, before reinsurance
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,754,944
|
)
|
|
—
|
|
|
(1,754,944
|
)
|
|||||||
Less:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Gross other subrogation (3)
|
(21
|
)
|
|
—
|
|
|
—
|
|
|
(41,723
|
)
|
|
(682,464
|
)
|
|
(12,758
|
)
|
|
(736,966
|
)
|
|||||||
Discount, other subrogation
|
2
|
|
|
—
|
|
|
—
|
|
|
3,812
|
|
|
41,743
|
|
|
2,519
|
|
|
48,076
|
|
|||||||
Discounted other subrogation, before reinsurance
|
(19
|
)
|
|
—
|
|
|
—
|
|
|
(37,911
|
)
|
|
(640,721
|
)
|
|
(10,239
|
)
|
|
(688,890
|
)
|
|||||||
Gross claim liability, net of all subrogation and discounts, before reinsurance
|
1,874
|
|
|
48,556
|
|
|
11,675
|
|
|
350,839
|
|
|
(1,028,601
|
)
|
|
38,014
|
|
|
(577,643
|
)
|
|||||||
Less: Unearned premium revenue
|
(1,405
|
)
|
|
(9,307
|
)
|
|
(840
|
)
|
|
(7,902
|
)
|
|
(35,854
|
)
|
|
(164
|
)
|
|
(55,472
|
)
|
|||||||
Plus: Loss expense reserves
|
837
|
|
|
341
|
|
|
975
|
|
|
5,236
|
|
|
65,762
|
|
|
—
|
|
|
73,151
|
|
|||||||
Gross loss and loss expense reserves
|
$
|
1,306
|
|
|
$
|
39,590
|
|
|
$
|
11,810
|
|
|
$
|
348,173
|
|
|
$
|
(998,693
|
)
|
|
$
|
37,850
|
|
|
$
|
(559,964
|
)
|
Reinsurance recoverable reported on Balance Sheet (4)
|
$
|
140
|
|
|
$
|
9,417
|
|
|
$
|
3,962
|
|
|
$
|
23,604
|
|
|
$
|
(11,087
|
)
|
|
$
|
—
|
|
|
$
|
26,036
|
|
(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 $25,749 related to future loss and loss expenses and $287 related to presented loss and loss expenses and subrogation.
|
Surveillance Categories as of December 31, 2018
|
|||||||||||||||||||||||||||
|
I
|
|
IA
|
|
II
|
|
III
|
|
IV
|
|
V
|
|
Total
|
||||||||||||||
Number of policies
|
21
|
|
|
28
|
|
|
18
|
|
|
16
|
|
|
145
|
|
|
3
|
|
|
231
|
|
|||||||
Remaining weighted-average contract period (in years) (1)
|
9
|
|
|
19
|
|
|
9
|
|
|
22
|
|
|
14
|
|
|
3
|
|
|
16
|
|
|||||||
Gross insured contractual payments outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Principal
|
$
|
916,530
|
|
|
$
|
708,249
|
|
|
$
|
622,820
|
|
|
$
|
1,705,464
|
|
|
$
|
5,407,202
|
|
|
$
|
43,140
|
|
|
$
|
9,403,405
|
|
Interest
|
487,702
|
|
|
631,708
|
|
|
293,293
|
|
|
6,979,130
|
|
|
2,177,539
|
|
|
13,401
|
|
|
10,582,773
|
|
|||||||
Total
|
$
|
1,404,232
|
|
|
$
|
1,339,957
|
|
|
$
|
916,113
|
|
|
$
|
8,684,594
|
|
|
$
|
7,584,741
|
|
|
$
|
56,541
|
|
|
$
|
19,986,178
|
|
Gross undiscounted claim liability
|
$
|
4,019
|
|
|
$
|
63,712
|
|
|
$
|
36,000
|
|
|
$
|
992,019
|
|
|
$
|
2,295,968
|
|
|
$
|
56,510
|
|
|
$
|
3,448,228
|
|
Discount, gross claim liability
|
(481
|
)
|
|
(13,008
|
)
|
|
(3,069
|
)
|
|
(433,709
|
)
|
|
(637,548
|
)
|
|
(4,143
|
)
|
|
(1,091,958
|
)
|
|||||||
Gross claim liability before all subrogation and before reinsurance
|
3,538
|
|
|
50,704
|
|
|
32,931
|
|
|
558,310
|
|
|
1,658,420
|
|
|
52,367
|
|
|
2,356,270
|
|
|||||||
Less:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Gross RMBS subrogation (2)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,809,937
|
)
|
|
—
|
|
|
(1,809,937
|
)
|
|||||||
Discount, RMBS subrogation
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
39,391
|
|
|
—
|
|
|
39,391
|
|
|||||||
Discounted RMBS subrogation, before reinsurance
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,770,546
|
)
|
|
—
|
|
|
(1,770,546
|
)
|
|||||||
Less:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Gross other subrogation (3)
|
—
|
|
|
(10,816
|
)
|
|
—
|
|
|
(136,541
|
)
|
|
(624,654
|
)
|
|
(12,880
|
)
|
|
(784,891
|
)
|
|||||||
Discount, other subrogation
|
—
|
|
|
7,318
|
|
|
—
|
|
|
67,008
|
|
|
55,088
|
|
|
3,774
|
|
|
133,188
|
|
|||||||
Discounted other subrogation, before reinsurance
|
—
|
|
|
(3,498
|
)
|
|
—
|
|
|
(69,533
|
)
|
|
(569,566
|
)
|
|
(9,106
|
)
|
|
(651,703
|
)
|
|||||||
Gross claim liability, net of all subrogation and discounts, before reinsurance
|
3,538
|
|
|
47,206
|
|
|
32,931
|
|
|
488,777
|
|
|
(681,692
|
)
|
|
43,261
|
|
|
(65,979
|
)
|
|||||||
Less: Unearned premium revenue
|
(943
|
)
|
|
(10,073
|
)
|
|
(5,085
|
)
|
|
(36,365
|
)
|
|
(53,987
|
)
|
|
(209
|
)
|
|
(106,662
|
)
|
|||||||
Plus: Loss expense reserves
|
1,369
|
|
|
4,253
|
|
|
2,564
|
|
|
(5,926
|
)
|
|
63,499
|
|
|
—
|
|
|
65,759
|
|
|||||||
Gross loss and loss expense reserves
|
$
|
3,964
|
|
|
$
|
41,386
|
|
|
$
|
30,410
|
|
|
$
|
446,486
|
|
|
$
|
(672,180
|
)
|
|
$
|
43,052
|
|
|
$
|
(106,882
|
)
|
Reinsurance recoverable reported on Balance Sheet (4)
|
$
|
367
|
|
|
$
|
7,285
|
|
|
$
|
4,223
|
|
|
$
|
26,096
|
|
|
$
|
(14,838
|
)
|
|
$
|
—
|
|
|
$
|
23,133
|
|
(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 $22,623 related to future loss and loss expenses and $510 related
|
|
Nine Months Ended September 30,
|
||||||
|
2019
|
|
2018
|
||||
Discounted R&W subrogation (gross of reinsurance) at beginning of period
|
$
|
1,770,546
|
|
|
$
|
1,834,387
|
|
Changes recognized during the period:
|
|
|
|
||||
Impact of sponsor actions (1)
|
—
|
|
|
—
|
|
||
All other changes (2)
|
(15,602
|
)
|
|
(58,139
|
)
|
||
Discounted R&W subrogation (gross of reinsurance) at end of period
|
$
|
1,754,944
|
|
|
$
|
1,776,248
|
|
(1)
|
Sponsor actions include loan repurchases, direct payments to Ambac and other contributions from sponsors.
|
(2)
|
All other changes which may impact RMBS R&W subrogation recoveries include changes in actual or projected collateral performance, changes in the creditworthiness of a sponsor and/or the projected timing of recoveries.
|
(1)
|
Future amortization considers the use of contractual lives for many bond types which do not have homogeneous pools of underlying collateral. Actual maturities will differ from contractual maturities because borrowers may have the right to call or prepay certain obligations. If those bonds types are retired early, amortization expense may differ in the period of call or refinancing.
|
l
|
Level 1
|
|
Quoted prices for identical instruments in active markets. Assets and liabilities classified as Level 1 include US Treasury and other foreign government obligations traded in highly liquid and transparent markets, exchange traded futures contracts, variable rate demand obligations and money market funds.
|
|
|
|
|
l
|
Level 2
|
|
Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets. Assets and liabilities classified as Level 2 generally include investments in fixed income securities representing municipal, asset-backed and corporate obligations, certain interest rate swap contracts and most long-term debt of variable interest entities consolidated under the Consolidation Topic of the ASC.
|
|
|
|
|
l
|
Level 3
|
|
Model derived valuations in which one or more significant inputs or significant value drivers are unobservable. This hierarchy requires the use of observable market data when available. Assets and liabilities classified as Level 3 include credit derivative contracts, 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:
|
||||||||||||||
September 30, 2019:
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
||||||||||||||
Financial assets:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Fixed income securities:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Municipal obligations
|
|
$
|
305,128
|
|
|
$
|
305,128
|
|
|
$
|
—
|
|
|
$
|
305,128
|
|
|
$
|
—
|
|
Corporate obligations
|
|
1,469,250
|
|
|
1,469,250
|
|
|
800
|
|
|
1,468,450
|
|
|
—
|
|
|||||
Foreign obligations
|
|
42,488
|
|
|
42,488
|
|
|
42,488
|
|
|
—
|
|
|
—
|
|
|||||
U.S. government obligations
|
|
156,060
|
|
|
156,060
|
|
|
156,060
|
|
|
—
|
|
|
—
|
|
|||||
Residential mortgage-backed securities
|
|
257,340
|
|
|
257,340
|
|
|
—
|
|
|
257,340
|
|
|
—
|
|
|||||
Collateralized debt obligations
|
|
147,835
|
|
|
147,835
|
|
|
—
|
|
|
147,835
|
|
|
—
|
|
|||||
Other asset-backed securities
|
|
349,204
|
|
|
349,204
|
|
|
—
|
|
|
269,783
|
|
|
79,421
|
|
|||||
Fixed income securities, pledged as collateral:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
U.S. government obligations
|
|
84,948
|
|
|
84,948
|
|
|
84,948
|
|
|
—
|
|
|
—
|
|
|||||
Short term investments
|
|
664,441
|
|
|
664,441
|
|
|
603,435
|
|
|
61,006
|
|
|
—
|
|
|||||
Other investments (1)
|
|
462,427
|
|
|
435,820
|
|
|
130,393
|
|
|
—
|
|
|
17,680
|
|
|||||
Cash, cash equivalents and restricted cash
|
|
64,512
|
|
|
64,512
|
|
|
30,596
|
|
|
33,916
|
|
|
—
|
|
|||||
Derivative assets:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Interest rate swaps—asset position
|
|
81,769
|
|
|
81,769
|
|
|
—
|
|
|
8,617
|
|
|
73,152
|
|
|||||
Futures contracts
|
|
393
|
|
|
393
|
|
|
393
|
|
|
—
|
|
|
—
|
|
|||||
Other assets - equity in sponsored VIE
|
|
3,388
|
|
|
3,388
|
|
|
—
|
|
|
—
|
|
|
3,388
|
|
|||||
Other assets-Loans
|
|
9,770
|
|
|
13,032
|
|
|
—
|
|
|
—
|
|
|
13,032
|
|
|||||
Variable interest entity assets:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Fixed income securities: Corporate obligations
|
|
2,995,894
|
|
|
2,995,894
|
|
|
—
|
|
|
—
|
|
|
2,995,894
|
|
|||||
Fixed income securities: Municipal obligations
|
|
162,714
|
|
|
162,714
|
|
|
—
|
|
|
162,714
|
|
|
—
|
|
|||||
Restricted cash
|
|
3,168
|
|
|
3,168
|
|
|
3,168
|
|
|
—
|
|
|
—
|
|
|||||
Loans
|
|
2,965,539
|
|
|
2,965,539
|
|
|
—
|
|
|
—
|
|
|
2,965,539
|
|
|||||
Derivative assets: Currency swaps-asset position
|
|
67,921
|
|
|
67,921
|
|
|
—
|
|
|
67,921
|
|
|
—
|
|
|||||
Total financial assets
|
|
$
|
10,294,189
|
|
|
$
|
10,270,844
|
|
|
$
|
1,052,281
|
|
|
$
|
2,782,710
|
|
|
$
|
6,148,106
|
|
Financial liabilities:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Long term debt, including accrued interest
|
|
$
|
3,378,744
|
|
|
$
|
3,364,780
|
|
|
$
|
—
|
|
|
$
|
2,965,844
|
|
|
$
|
398,936
|
|
Derivative liabilities:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Credit derivatives
|
|
422
|
|
|
422
|
|
|
—
|
|
|
—
|
|
|
422
|
|
|||||
Interest rate swaps—asset position
|
|
(68
|
)
|
|
(68
|
)
|
|
—
|
|
|
(68
|
)
|
|
—
|
|
|||||
Interest rate swaps—liability position
|
|
102,960
|
|
|
102,960
|
|
|
—
|
|
|
102,960
|
|
|
—
|
|
|||||
Liabilities for net financial guarantees
written (2) |
|
(932,517
|
)
|
|
179,352
|
|
|
—
|
|
|
—
|
|
|
179,352
|
|
|||||
Variable interest entity liabilities:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Long-term debt (includes $4,151,433 at fair value)
|
|
4,353,171
|
|
|
4,366,312
|
|
|
—
|
|
|
4,208,107
|
|
|
158,205
|
|
|||||
Derivative liabilities: Interest rate swaps—liability position
|
|
1,779,077
|
|
|
1,779,077
|
|
|
—
|
|
|
1,779,077
|
|
|
—
|
|
|||||
Total financial liabilities
|
|
$
|
8,681,789
|
|
|
$
|
9,792,835
|
|
|
$
|
—
|
|
|
$
|
9,055,920
|
|
|
$
|
736,915
|
|
|
|
Carrying
Amount |
|
Total Fair
Value |
|
Fair Value Measurements Categorized as:
|
||||||||||||||
December 31, 2018:
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
||||||||||||||
Financial assets:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Fixed income securities:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Municipal obligations
|
|
$
|
879,919
|
|
|
$
|
879,919
|
|
|
$
|
—
|
|
|
$
|
879,919
|
|
|
$
|
—
|
|
Corporate obligations
|
|
1,278,122
|
|
|
1,278,122
|
|
|
—
|
|
|
1,278,122
|
|
|
—
|
|
|||||
Foreign obligations
|
|
30,834
|
|
|
30,834
|
|
|
29,922
|
|
|
912
|
|
|
—
|
|
|||||
U.S. government obligations
|
|
94,394
|
|
|
94,394
|
|
|
94,394
|
|
|
—
|
|
|
—
|
|
|||||
Residential mortgage-backed securities
|
|
258,607
|
|
|
258,607
|
|
|
—
|
|
|
258,607
|
|
|
—
|
|
|||||
Collateralized debt obligations
|
|
131,356
|
|
|
131,356
|
|
|
—
|
|
|
131,356
|
|
|
—
|
|
|||||
Other asset-backed securities
|
|
442,443
|
|
|
442,443
|
|
|
—
|
|
|
370,372
|
|
|
72,071
|
|
|||||
Short term investments
|
|
430,331
|
|
|
430,331
|
|
|
304,880
|
|
|
125,451
|
|
|
—
|
|
|||||
Other investments (1)
|
|
391,217
|
|
|
367,315
|
|
|
71,108
|
|
|
—
|
|
|
16,266
|
|
|||||
Cash and cash equivalents and restricted cash
|
|
82,494
|
|
|
82,494
|
|
|
52,661
|
|
|
29,833
|
|
|
—
|
|
|||||
Derivative assets:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Interest rate swaps—asset position
|
|
59,468
|
|
|
59,468
|
|
|
—
|
|
|
12,008
|
|
|
47,460
|
|
|||||
Other assets - equity in sponsored VIE
|
|
4,516
|
|
|
4,516
|
|
|
—
|
|
|
—
|
|
|
4,516
|
|
|||||
Other assets-loans
|
|
9,913
|
|
|
11,620
|
|
|
—
|
|
|
—
|
|
|
11,620
|
|
|||||
Variable interest entity assets:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Fixed income securities: Corporate obligations
|
|
2,737,286
|
|
|
2,737,286
|
|
|
—
|
|
|
—
|
|
|
2,737,286
|
|
|||||
Restricted cash
|
|
999
|
|
|
999
|
|
|
999
|
|
|
—
|
|
|
—
|
|
|||||
Loans
|
|
4,287,664
|
|
|
4,287,664
|
|
|
—
|
|
|
—
|
|
|
4,287,664
|
|
|||||
Derivative assets: Currency swaps—asset position
|
|
66,302
|
|
|
66,302
|
|
|
—
|
|
|
66,302
|
|
|
—
|
|
|||||
Total financial assets
|
|
$
|
11,185,865
|
|
|
$
|
11,163,670
|
|
|
$
|
553,964
|
|
|
$
|
3,152,882
|
|
|
$
|
7,176,883
|
|
Financial liabilities:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Long term debt, including accrued interest
|
|
$
|
3,304,737
|
|
|
$
|
3,259,966
|
|
|
$
|
—
|
|
|
$
|
2,909,272
|
|
|
$
|
350,694
|
|
Derivative liabilities:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Credit derivatives
|
|
1,459
|
|
|
1,459
|
|
|
—
|
|
|
—
|
|
|
1,459
|
|
|||||
Interest rate swaps—liability position
|
|
71,861
|
|
|
71,861
|
|
|
—
|
|
|
71,861
|
|
|
—
|
|
|||||
Futures contracts
|
|
3,379
|
|
|
3,379
|
|
|
3,379
|
|
|
—
|
|
|
|
|
|||||
Liabilities for net financial guarantees written (2)
|
|
(718,388
|
)
|
|
558,824
|
|
|
—
|
|
|
—
|
|
|
558,824
|
|
|||||
Variable interest entity liabilities:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Long-term debt
|
|
5,268,596
|
|
|
5,268,596
|
|
|
—
|
|
|
5,051,504
|
|
|
217,092
|
|
|||||
Derivative liabilities: Interest rate swaps—liability position
|
|
1,712,062
|
|
|
1,712,062
|
|
|
—
|
|
|
1,712,062
|
|
|
—
|
|
|||||
Total financial liabilities
|
|
$
|
9,643,706
|
|
|
$
|
10,876,147
|
|
|
$
|
3,379
|
|
|
$
|
9,744,699
|
|
|
$
|
1,128,069
|
|
(1)
|
Excluded from the fair value measurement categories in the table above are investment funds of $287,748 and $279,941 as of September 30, 2019 and December 31, 2018, 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.
|
December 31, 2018:
|
|
a. Coupon rate:
|
2.20%
|
b. Maturity:
|
18.93 years
|
c. Yield:
|
3.18%
|
(1)
|
Other assets carried at fair value and classified as Level 3 relate to an equity interest in an Ambac sponsored VIE.
|
|
||||||||||||||||||||||||||||
Level 3 - Financial Assets and Liabilities Accounted for at Fair Value
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
|
|
|
|
|
|
|
|
VIE Assets and Liabilities
|
|
|
||||||||||||||||||
|
|
Investments
|
|
Other
Assets |
|
Derivatives
|
|
Investments
|
|
Loans
|
|
Long-term
Debt |
|
Total
|
||||||||||||||
Nine Months Ended September 30, 2019:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Balance, beginning of period
|
|
$
|
72,071
|
|
|
$
|
4,516
|
|
|
$
|
46,001
|
|
|
$
|
2,737,286
|
|
|
$
|
4,287,664
|
|
|
$
|
(217,092
|
)
|
|
$
|
6,930,446
|
|
Total gains/(losses) realized and unrealized:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Included in earnings
|
|
1,301
|
|
|
(1,128
|
)
|
|
30,187
|
|
|
381,716
|
|
|
300,503
|
|
|
(14,603
|
)
|
|
697,976
|
|
|||||||
Included in other comprehensive income
|
|
7,040
|
|
|
—
|
|
|
—
|
|
|
(105,924
|
)
|
|
(150,535
|
)
|
|
8,416
|
|
|
(241,003
|
)
|
|||||||
Purchases
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||||
Issuances
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||||
Sales
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||||
Settlements
|
|
(991
|
)
|
|
—
|
|
|
(3,458
|
)
|
|
(17,184
|
)
|
|
(621,488
|
)
|
|
—
|
|
|
(643,121
|
)
|
|||||||
Deconsolidation of VIEs
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(850,605
|
)
|
|
223,279
|
|
|
(627,326
|
)
|
|||||||
Balance, end of period
|
|
$
|
79,421
|
|
|
$
|
3,388
|
|
|
$
|
72,730
|
|
|
$
|
2,995,894
|
|
|
$
|
2,965,539
|
|
|
$
|
—
|
|
|
$
|
6,116,972
|
|
The amount of total gains/(losses) included in earnings attributable to the change in unrealized gains or losses relating to assets and liabilities still held at the reporting date
|
|
$
|
—
|
|
|
$
|
(1,128
|
)
|
|
$
|
29,911
|
|
|
$
|
381,716
|
|
|
$
|
228,788
|
|
|
$
|
—
|
|
|
$
|
639,287
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Nine Months Ended September 30, 2018:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Balance, beginning of period
|
|
$
|
808,557
|
|
|
$
|
5,979
|
|
|
$
|
60,808
|
|
|
$
|
2,914,145
|
|
|
$
|
11,529,384
|
|
|
$
|
(2,757,688
|
)
|
|
$
|
12,561,185
|
|
Total gains/(losses) realized and unrealized:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Included in earnings
|
|
35,842
|
|
|
(1,092
|
)
|
|
(14,137
|
)
|
|
(80,974
|
)
|
|
(204,561
|
)
|
|
180,314
|
|
|
(84,608
|
)
|
|||||||
Included in other comprehensive income
|
|
(52,804
|
)
|
|
—
|
|
|
—
|
|
|
(97,199
|
)
|
|
(371,610
|
)
|
|
85,837
|
|
|
(435,776
|
)
|
|||||||
Purchases
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||||
Sales
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||||
Settlements
|
|
(714,192
|
)
|
|
—
|
|
|
(4,434
|
)
|
|
(17,595
|
)
|
|
(443,657
|
)
|
|
22,905
|
|
|
(1,156,973
|
)
|
|||||||
Transfers out of Level 3
|
|
(5,309
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(5,309
|
)
|
|||||||
Deconsolidation of VIEs
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(5,946,465
|
)
|
|
2,237,352
|
|
|
(3,709,113
|
)
|
|||||||
Balance, end of period
|
|
$
|
72,094
|
|
|
$
|
4,887
|
|
|
$
|
42,237
|
|
|
$
|
2,718,377
|
|
|
$
|
4,563,091
|
|
|
$
|
(231,280
|
)
|
|
$
|
7,169,406
|
|
The amount of total gains/(losses) included in earnings attributable to the change in unrealized gains or losses relating to assets and liabilities still held at the reporting date
|
|
$
|
—
|
|
|
$
|
(1,092
|
)
|
|
$
|
(14,433
|
)
|
|
$
|
(80,974
|
)
|
|
$
|
(70,659
|
)
|
|
$
|
37,637
|
|
|
$
|
(129,521
|
)
|
Level 3 - Investments by Class:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
|
Three Months Ended September 30, 2019
|
|
Three Months Ended September 30, 2018
|
||||||||||||||||||||
|
|
Other Asset
Backed Securities |
|
Non-Agency
RMBS
|
|
Total
Investments |
|
Other Asset
Backed Securities |
|
Non-Agency
RMBS
|
|
Total
Investments |
||||||||||||
Balance, beginning of period
|
|
$
|
74,318
|
|
|
$
|
—
|
|
|
$
|
74,318
|
|
|
$
|
68,802
|
|
|
$
|
—
|
|
|
$
|
68,802
|
|
Total gains/(losses) realized and unrealized:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Included in earnings
|
|
530
|
|
|
—
|
|
|
530
|
|
|
376
|
|
|
—
|
|
|
376
|
|
||||||
Included in other comprehensive income
|
|
4,926
|
|
|
—
|
|
|
4,926
|
|
|
3,218
|
|
|
—
|
|
|
3,218
|
|
||||||
Purchases
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Issuances
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Sales
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Settlements
|
|
(353
|
)
|
|
—
|
|
|
(353
|
)
|
|
(302
|
)
|
|
—
|
|
|
(302
|
)
|
||||||
Balance, end of period
|
|
$
|
79,421
|
|
|
$
|
—
|
|
|
$
|
79,421
|
|
|
$
|
72,094
|
|
|
$
|
—
|
|
|
$
|
72,094
|
|
The amount of total gains/(losses) included in earnings attributable to the change in unrealized gains or losses relating to assets and liabilities still held at the reporting date
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Level 3 - Investments by Class:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
|
Nine Months Ended September 30, 2019
|
|
Nine Months Ended September 30, 2018
|
||||||||||||||||||||
|
|
Other Asset
Backed Securities |
|
Non-Agency
RMBS |
|
Total
Investments |
|
Other Asset
Backed Securities |
|
Non-Agency
RMBS |
|
Total
Investments |
||||||||||||
Balance, beginning of period
|
|
$
|
72,071
|
|
|
$
|
—
|
|
|
$
|
72,071
|
|
|
$
|
72,540
|
|
|
$
|
736,017
|
|
|
$
|
808,557
|
|
Total gains/(losses) realized and unrealized:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Included in earnings
|
|
1,301
|
|
|
—
|
|
|
1,301
|
|
|
1,115
|
|
|
34,727
|
|
|
35,842
|
|
||||||
Included in other comprehensive income
|
|
7,040
|
|
|
—
|
|
|
7,040
|
|
|
(666
|
)
|
|
(52,138
|
)
|
|
(52,804
|
)
|
||||||
Purchases
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Issuances
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Sales
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Settlements
|
|
(991
|
)
|
|
—
|
|
|
(991
|
)
|
|
(895
|
)
|
|
(713,297
|
)
|
|
(714,192
|
)
|
||||||
Transfers out of Level 3
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(5,309
|
)
|
|
(5,309
|
)
|
||||||
Balance, end of period
|
|
$
|
79,421
|
|
|
$
|
—
|
|
|
$
|
79,421
|
|
|
$
|
72,094
|
|
|
$
|
—
|
|
|
$
|
72,094
|
|
The amount of total gains/(losses) included in earnings attributable to the change in unrealized gains or losses relating to assets and liabilities still held at the reporting date
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Level 3 - Derivatives by Class:
|
|
|
|
|
||||||||||||||||||||
|
|
Three Months Ended September 30, 2019
|
|
Three Months Ended September 30, 2018
|
||||||||||||||||||||
|
|
Interest
Rate Swaps |
|
Credit
Derivatives |
|
Total
Derivatives |
|
Interest
Rate Swaps |
|
Credit
Derivatives |
|
Total
Derivatives |
||||||||||||
Balance, beginning of period
|
|
$
|
63,131
|
|
|
$
|
(861
|
)
|
|
$
|
62,270
|
|
|
$
|
46,939
|
|
|
$
|
(1,326
|
)
|
|
$
|
45,613
|
|
Total gains/(losses) realized and unrealized:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Included in earnings
|
|
11,106
|
|
|
528
|
|
|
11,634
|
|
|
(2,330
|
)
|
|
250
|
|
|
(2,080
|
)
|
||||||
Included in other comprehensive income
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Purchases
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Issuances
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Sales
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Settlements
|
|
(1,085
|
)
|
|
(89
|
)
|
|
(1,174
|
)
|
|
(1,197
|
)
|
|
(99
|
)
|
|
(1,296
|
)
|
||||||
Balance, end of period
|
|
$
|
73,152
|
|
|
$
|
(422
|
)
|
|
$
|
72,730
|
|
|
$
|
43,412
|
|
|
$
|
(1,175
|
)
|
|
$
|
42,237
|
|
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
|
|
$
|
11,106
|
|
|
$
|
437
|
|
|
$
|
11,543
|
|
|
$
|
(2,330
|
)
|
|
$
|
151
|
|
|
$
|
(2,179
|
)
|
Level 3 - Derivatives by Class:
|
|
|
|
|
||||||||||||||||||||
|
|
Nine Months Ended September 30, 2019
|
|
Nine Months Ended September 30, 2018
|
||||||||||||||||||||
|
|
Interest
Rate Swaps |
|
Credit
Derivatives |
|
Total
Derivatives |
|
Interest
Rate Swaps |
|
Credit
Derivatives |
|
Total
Derivatives |
||||||||||||
Balance, beginning of period
|
|
$
|
47,460
|
|
|
$
|
(1,459
|
)
|
|
$
|
46,001
|
|
|
$
|
61,374
|
|
|
$
|
(566
|
)
|
|
$
|
60,808
|
|
Total gains/(losses) realized and unrealized:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Included in earnings
|
|
28,876
|
|
|
1,311
|
|
|
30,187
|
|
|
(13,824
|
)
|
|
(313
|
)
|
|
(14,137
|
)
|
||||||
Included in other comprehensive income
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Purchases
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Issuances
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Sales
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Settlements
|
|
(3,184
|
)
|
|
(274
|
)
|
|
(3,458
|
)
|
|
(4,138
|
)
|
|
(296
|
)
|
|
(4,434
|
)
|
||||||
Balance, end of period
|
|
$
|
73,152
|
|
|
$
|
(422
|
)
|
|
$
|
72,730
|
|
|
$
|
43,412
|
|
|
$
|
(1,175
|
)
|
|
$
|
42,237
|
|
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
|
|
$
|
28,876
|
|
|
$
|
1,035
|
|
|
$
|
29,911
|
|
|
$
|
(13,824
|
)
|
|
$
|
(609
|
)
|
|
$
|
(14,433
|
)
|
|
|
Net
Investment Income |
|
Net Gains
(Losses) on
Derivative
Contracts
|
|
Income
(Loss) on Variable Interest Entities |
|
Other
Income or (Loss) |
||||||||
Three Months Ended September 30, 2019:
|
|
|
|
|
|
|
|
|
||||||||
Total gains or losses included in earnings for the period
|
|
$
|
530
|
|
|
$
|
11,634
|
|
|
$
|
332,782
|
|
|
$
|
(383
|
)
|
Changes in unrealized gains or losses relating to the assets and liabilities still held at the reporting date
|
|
—
|
|
|
11,543
|
|
|
321,066
|
|
|
(383
|
)
|
||||
|
|
|
|
|
|
|
|
|
||||||||
Three Months Ended September 30, 2018:
|
|
|
|
|
|
|
|
|
||||||||
Total gains or losses included in earnings for the period
|
|
$
|
376
|
|
|
$
|
(2,080
|
)
|
|
$
|
(34,149
|
)
|
|
$
|
(368
|
)
|
Changes in unrealized gains or losses relating to the assets and liabilities still held at the reporting date
|
|
—
|
|
|
(2,179
|
)
|
|
(34,149
|
)
|
|
(368
|
)
|
||||
|
|
|
|
|
|
|
|
|
||||||||
Nine Months Ended September 30, 2019:
|
|
|
|
|
|
|
|
|
||||||||
Total gains or losses included in earnings for the period
|
|
$
|
1,301
|
|
|
$
|
30,187
|
|
|
$
|
667,616
|
|
|
$
|
(1,128
|
)
|
Changes in unrealized gains or losses relating to the assets and liabilities still held at the reporting date
|
|
—
|
|
|
29,911
|
|
|
610,504
|
|
|
(1,128
|
)
|
||||
|
|
|
|
|
|
|
|
|
||||||||
Nine Months Ended September 30, 2018:
|
|
|
|
|
|
|
|
|
||||||||
Total gains or losses included in earnings for the period
|
|
$
|
35,842
|
|
|
$
|
(14,137
|
)
|
|
$
|
(105,221
|
)
|
|
$
|
(1,092
|
)
|
Changes in unrealized gains or losses relating to the assets and liabilities still held at the reporting date
|
|
—
|
|
|
(14,433
|
)
|
|
(113,996
|
)
|
|
(1,092
|
)
|
|
|
Amortized
Cost |
|
Gross
Unrealized Gains |
|
Gross
Unrealized Losses |
|
Estimated
Fair Value |
|
Non-credit
Other-than temporary Impairments (1) |
||||||||||
September 30, 2019:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Fixed income securities:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Municipal obligations
|
|
$
|
268,455
|
|
|
$
|
36,953
|
|
|
$
|
280
|
|
|
$
|
305,128
|
|
|
$
|
—
|
|
Corporate obligations (2)
|
|
1,431,002
|
|
|
38,536
|
|
|
288
|
|
|
1,469,250
|
|
|
—
|
|
|||||
Foreign obligations
|
|
41,485
|
|
|
1,005
|
|
|
2
|
|
|
42,488
|
|
|
—
|
|
|||||
U.S. government obligations
|
|
151,744
|
|
|
4,390
|
|
|
74
|
|
|
156,060
|
|
|
—
|
|
|||||
Residential mortgage-backed securities
|
|
206,211
|
|
|
51,187
|
|
|
58
|
|
|
257,340
|
|
|
58
|
|
|||||
Collateralized debt obligations
|
|
148,385
|
|
|
23
|
|
|
573
|
|
|
147,835
|
|
|
—
|
|
|||||
Other asset-backed securities
|
|
313,996
|
|
|
35,259
|
|
|
51
|
|
|
349,204
|
|
|
—
|
|
|||||
|
|
2,561,278
|
|
|
167,353
|
|
|
1,326
|
|
|
2,727,305
|
|
|
58
|
|
|||||
Short-term
|
|
664,423
|
|
|
41
|
|
|
23
|
|
|
664,441
|
|
|
—
|
|
|||||
|
|
3,225,701
|
|
|
167,394
|
|
|
1,349
|
|
|
3,391,746
|
|
|
58
|
|
|||||
Fixed income securities pledged as collateral:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
U.S. government obligations
|
|
84,948
|
|
|
—
|
|
|
—
|
|
|
84,948
|
|
|
—
|
|
|||||
Total fixed income securities pledged as collateral
|
|
84,948
|
|
|
—
|
|
|
—
|
|
|
84,948
|
|
|
—
|
|
|||||
Total available-for-sale investments
|
|
$
|
3,310,649
|
|
|
$
|
167,394
|
|
|
$
|
1,349
|
|
|
$
|
3,476,694
|
|
|
$
|
58
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
December 31, 2018:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Fixed income securities:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Municipal obligations
|
|
$
|
882,631
|
|
|
$
|
14,364
|
|
|
$
|
17,076
|
|
|
$
|
879,919
|
|
|
$
|
5
|
|
Corporate obligations (2)
|
|
1,288,882
|
|
|
6,444
|
|
|
17,204
|
|
|
1,278,122
|
|
|
—
|
|
|||||
Foreign obligations
|
|
30,496
|
|
|
399
|
|
|
61
|
|
|
30,834
|
|
|
—
|
|
|||||
U.S. government obligations
|
|
93,636
|
|
|
1,371
|
|
|
613
|
|
|
94,394
|
|
|
—
|
|
|||||
Residential mortgage-backed securities
|
|
221,825
|
|
|
37,575
|
|
|
793
|
|
|
258,607
|
|
|
27
|
|
|||||
Collateralized debt obligations
|
|
133,075
|
|
|
8
|
|
|
1,727
|
|
|
131,356
|
|
|
—
|
|
|||||
Other asset-backed securities
|
|
370,199
|
|
|
72,868
|
|
|
624
|
|
|
442,443
|
|
|
—
|
|
|||||
|
|
3,020,744
|
|
|
133,029
|
|
|
38,098
|
|
|
3,115,675
|
|
|
32
|
|
|||||
Short-term
|
|
430,405
|
|
|
23
|
|
|
97
|
|
|
430,331
|
|
|
—
|
|
|||||
Total available-for-sale investments
|
|
$
|
3,451,149
|
|
|
$
|
133,052
|
|
|
$
|
38,195
|
|
|
$
|
3,546,006
|
|
|
$
|
32
|
|
(1)
|
Represents the amount of non-credit other-than-temporary impairment losses remaining in accumulated other comprehensive income on securities that also had a credit impairment. These losses are included in gross unrealized losses as of September 30, 2019 and December 31, 2018.
|
(2)
|
Includes Ambac's holdings of the secured notes issued by Ambac LSNI in connection with the Rehabilitation Exit Transactions.
|
|
|
Amortized
Cost |
|
Estimated
Fair Value |
||||
Due in one year or less
|
|
$
|
769,507
|
|
|
$
|
769,767
|
|
Due after one year through five years
|
|
1,202,643
|
|
|
1,221,570
|
|
||
Due after five years through ten years
|
|
443,917
|
|
|
471,856
|
|
||
Due after ten years
|
|
225,990
|
|
|
259,122
|
|
||
|
|
2,642,057
|
|
|
2,722,315
|
|
||
Residential mortgage-backed securities
|
|
206,211
|
|
|
257,340
|
|
||
Collateralized debt obligations
|
|
148,385
|
|
|
147,835
|
|
||
Other asset-backed securities
|
|
313,996
|
|
|
349,204
|
|
||
Total
|
|
$
|
3,310,649
|
|
|
$
|
3,476,694
|
|
|
|
Less Than 12 Months
|
|
12 Months or More
|
|
Total
|
||||||||||||||||||
|
|
Fair Value
|
|
Gross
Unrealized Loss |
|
Fair Value
|
|
Gross
Unrealized Loss |
|
Fair Value
|
|
Gross
Unrealized Loss |
||||||||||||
September 30, 2019:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Fixed income securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Municipal obligations
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
10,436
|
|
|
$
|
280
|
|
|
$
|
10,436
|
|
|
$
|
280
|
|
Corporate obligations
|
|
63,985
|
|
|
267
|
|
|
4,987
|
|
|
21
|
|
|
68,972
|
|
|
288
|
|
||||||
Foreign obligations
|
|
1,122
|
|
|
1
|
|
|
312
|
|
|
1
|
|
|
1,434
|
|
|
2
|
|
||||||
U.S. government obligations
|
|
1,741
|
|
|
61
|
|
|
2,273
|
|
|
13
|
|
|
4,014
|
|
|
74
|
|
||||||
Residential mortgage-backed securities
|
|
4,112
|
|
|
58
|
|
|
—
|
|
|
—
|
|
|
4,112
|
|
|
58
|
|
||||||
Collateralized debt obligations
|
|
99,144
|
|
|
542
|
|
|
2,969
|
|
|
31
|
|
|
102,113
|
|
|
573
|
|
||||||
Other asset-backed securities
|
|
6,067
|
|
|
29
|
|
|
5,181
|
|
|
22
|
|
|
11,248
|
|
|
51
|
|
||||||
|
|
176,171
|
|
|
958
|
|
|
26,158
|
|
|
368
|
|
|
202,329
|
|
|
1,326
|
|
||||||
Short-term
|
|
137,514
|
|
|
23
|
|
|
—
|
|
|
—
|
|
|
137,514
|
|
|
23
|
|
||||||
Total temporarily impaired securities
|
|
$
|
313,685
|
|
|
$
|
981
|
|
|
$
|
26,158
|
|
|
$
|
368
|
|
|
$
|
339,843
|
|
|
$
|
1,349
|
|
|
|
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, 2018:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Fixed income securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Municipal obligations
|
|
$
|
537,904
|
|
|
$
|
15,878
|
|
|
$
|
28,533
|
|
|
$
|
1,198
|
|
|
$
|
566,437
|
|
|
$
|
17,076
|
|
Corporate obligations
|
|
306,506
|
|
|
8,634
|
|
|
190,273
|
|
|
8,570
|
|
|
496,779
|
|
|
17,204
|
|
||||||
Foreign obligations
|
|
1,161
|
|
|
1
|
|
|
5,163
|
|
|
60
|
|
|
6,324
|
|
|
61
|
|
||||||
U.S. government obligations
|
|
5,643
|
|
|
135
|
|
|
58,495
|
|
|
478
|
|
|
64,138
|
|
|
613
|
|
||||||
Residential mortgage-backed securities
|
|
34,852
|
|
|
793
|
|
|
—
|
|
|
—
|
|
|
34,852
|
|
|
793
|
|
||||||
Collateralized debt obligations
|
|
123,848
|
|
|
1,727
|
|
|
—
|
|
|
—
|
|
|
123,848
|
|
|
1,727
|
|
||||||
Other asset-backed securities
|
|
13,813
|
|
|
33
|
|
|
77,479
|
|
|
591
|
|
|
91,292
|
|
|
624
|
|
||||||
|
|
1,023,727
|
|
|
27,201
|
|
|
359,943
|
|
|
10,897
|
|
|
1,383,670
|
|
|
38,098
|
|
||||||
Short-term
|
|
115,374
|
|
|
97
|
|
|
—
|
|
|
—
|
|
|
115,374
|
|
|
97
|
|
||||||
Total temporarily impaired securities
|
|
$
|
1,139,101
|
|
|
$
|
27,298
|
|
|
$
|
359,943
|
|
|
$
|
10,897
|
|
|
$
|
1,499,044
|
|
|
$
|
38,195
|
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
Gross realized gains on securities
|
|
$
|
11,993
|
|
|
$
|
30,909
|
|
|
$
|
46,430
|
|
|
$
|
83,937
|
|
Gross realized losses on securities
|
|
(365
|
)
|
|
(2,171
|
)
|
|
(4,864
|
)
|
|
(5,200
|
)
|
||||
Net foreign exchange (losses) gains
|
|
6,843
|
|
|
1,463
|
|
|
29,998
|
|
|
3,474
|
|
||||
Net realized gains (losses)
|
|
$
|
18,471
|
|
|
$
|
30,201
|
|
|
$
|
71,564
|
|
|
$
|
82,211
|
|
Net other-than-temporary impairments (1)
|
|
$
|
(42
|
)
|
|
$
|
(266
|
)
|
|
$
|
(71
|
)
|
|
$
|
(1,579
|
)
|
(1)
|
Other-than-temporary impairments exclude impairment amounts recorded in other comprehensive income under ASC Paragraph 320-10-65-1, which comprise non-credit related amounts on securities that are credit impaired but which management does not intend to sell and it is not more likely than not that the company will be required to sell before recovery of the amortized cost basis.
|
|
|
Nine Months Ended September 30,
|
||||||
|
|
2019
|
|
2018
|
||||
Balance, beginning of period
|
|
$
|
12,454
|
|
|
$
|
67,085
|
|
Additions for credit impairments recognized on:
|
|
|
|
|
||||
Securities not previously impaired
|
|
—
|
|
|
226
|
|
||
Securities previously impaired
|
|
—
|
|
|
97
|
|
||
Reductions for credit impairments previously recognized on:
|
|
|
|
|
||||
Securities that matured or were sold during the period
|
|
(774
|
)
|
|
(53,222
|
)
|
||
Balance, end of period
|
|
$
|
11,680
|
|
|
$
|
14,186
|
|
|
|
Municipal
Obligations |
|
Corporate
Obligations (3) |
|
Mortgage
and Asset- backed Securities |
|
Total
|
|
Weighted
Average Underlying Rating (1) |
||||||||
September 30, 2019:
|
|
|
|
|
|
|
|
|
|
|
||||||||
Ambac Assurance Corporation (2)
|
|
$
|
172,296
|
|
|
$
|
578,831
|
|
|
$
|
455,455
|
|
|
$
|
1,206,582
|
|
|
CCC-
|
National Public Finance Guarantee Corporation
|
|
11,568
|
|
|
—
|
|
|
—
|
|
|
11,568
|
|
|
BBB-
|
||||
Total
|
|
$
|
183,864
|
|
|
$
|
578,831
|
|
|
$
|
455,455
|
|
|
$
|
1,218,150
|
|
|
CCC-
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
December 31, 2018:
|
|
|
|
|
|
|
|
|
|
|
||||||||
Ambac Assurance Corporation (2)
|
|
$
|
833,241
|
|
|
$
|
656,473
|
|
|
$
|
599,185
|
|
|
$
|
2,088,899
|
|
|
CC
|
National Public Finance Guarantee Corporation
|
|
15,600
|
|
|
—
|
|
|
—
|
|
|
15,600
|
|
|
BBB-
|
||||
Total
|
|
$
|
848,841
|
|
|
$
|
656,473
|
|
|
$
|
599,185
|
|
|
$
|
2,104,499
|
|
|
CC
|
(1)
|
Ratings are based on the lower of Standard & Poor’s or Moody’s rating. If unavailable, Ambac’s internal rating is used.
|
(2)
|
Includes asset-backed securities with a fair value of $0 and $144,672 at September 30, 2019 and December 31, 2018, respectively, insured by Ambac UK.
|
(3)
|
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
|
|
September 30,
2019 |
|
December 31,
2018 |
|
Redemption Frequency
|
|
Redemption Notice Period
|
||||
Real estate properties (1)
|
|
$
|
15,321
|
|
|
$
|
16,123
|
|
|
quarterly
|
|
10 business days
|
Interest rate products (2) (7)
|
|
234,758
|
|
|
177,357
|
|
|
daily, weekly or monthly
|
|
0 - 30 days
|
||
Illiquid investments (3)
|
|
53,445
|
|
|
84,297
|
|
|
quarterly if permitted
|
|
180 days if permitted
|
||
Insurance-linked investments (4)
|
|
3,179
|
|
|
29,318
|
|
|
quarterly
|
|
90-120 days
|
||
Equity market investments (5) (7)
|
|
50,342
|
|
|
43,954
|
|
|
daily
|
|
0 days
|
||
Credit products (6)
|
|
61,095
|
|
|
—
|
|
|
quarterly
|
|
90 days
|
||
Total equity investments in pooled funds
|
|
$
|
418,140
|
|
|
$
|
351,049
|
|
|
|
|
|
(1)
|
Investments consist of UK property to generate income and capital growth.
|
(2)
|
This class of funds includes investments in a range of instruments including leveraged loans, CLOs, asset-backed securities and floating rate notes to generate income and capital appreciation. Funds with less frequent redemption periods limit redemptions to as little as 15% per period. Funds with a same day redemption notice period are redeemable only weekly, while funds that may be redeemed any business day have notice periods of 15-30 days.
|
(3)
|
This class seeks to obtain high long-term total return through investments with low liquidity and defined term. Funds have stated termination dates ranging from 2025 to 2029, subject to earlier distributions at the discretion of the manager. Redemptions are either not permitted, or are permitted subject to the approval of the manager. Certain funds have expected capital distributions to subscribers starting in 2022.
|
(4)
|
This class aims to provide returns from the insurance and reinsurance markets through investments in catastrophe bonds, life insurance and other insurance linked investments. Redemption periods are quarterly, subject to 90-day notice for January/July redemption dates and 120-day notice for April/October redemption dates. Ambac has received all available voluntary redemptions of this class as of September 30, 2019, with the remaining balance representing Ambac's interest in a fund for which the ultimate amount and timing of distributions is pending settlement of past insured events.
|
(5)
|
Investments represent a diversified exposure to global equity market returns through holdings of various regional market index funds.
|
(6)
|
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. Redemptions prior to June 30, 2020, or with 60 days’ notice are subject to a 5% fee. Aggregate fund-level redemptions may be limited to 25% of the fund’s assets per quarter.
|
(7)
|
Interest rate products include $50,342 at September 30, 2019 and $27,154 at December 31, 2018 and equity market investments include $80,050 at September 30, 2019 and $43,954 at December 31, 2018 that have readily determinable fair values priced through pricing vendors.
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
Fixed income securities
|
|
$
|
33,462
|
|
|
$
|
49,372
|
|
|
$
|
151,265
|
|
|
$
|
219,222
|
|
Short-term investments
|
|
4,165
|
|
|
2,395
|
|
|
13,759
|
|
|
7,671
|
|
||||
Loans
|
|
180
|
|
|
185
|
|
|
545
|
|
|
552
|
|
||||
Investment expense
|
|
(1,477
|
)
|
|
(1,967
|
)
|
|
(4,358
|
)
|
|
(5,167
|
)
|
||||
Securities available-for-sale and short-term
|
|
36,330
|
|
|
49,985
|
|
|
161,211
|
|
|
222,278
|
|
||||
Other investments
|
|
8,207
|
|
|
8,347
|
|
|
24,627
|
|
|
12,956
|
|
||||
Total net investment income
|
|
$
|
44,537
|
|
|
$
|
58,332
|
|
|
$
|
185,838
|
|
|
$
|
235,234
|
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
Net gains (losses) recognized during the period on trading securities
|
|
$
|
5,532
|
|
|
$
|
7,014
|
|
|
$
|
19,245
|
|
|
$
|
9,067
|
|
Less: net gains (losses) recognized during the reporting period on trading securities sold during the period
|
|
1,513
|
|
|
612
|
|
|
3,925
|
|
|
(2,067
|
)
|
||||
Unrealized gains (losses) recognized during the reporting period on trading securities still held at the reporting date
|
|
$
|
4,019
|
|
|
$
|
6,402
|
|
|
$
|
15,320
|
|
|
$
|
11,134
|
|
|
Gross
Amounts of Recognized Assets / Liabilities |
|
Gross
Amounts Offset in the Consolidated Balance Sheet |
|
Net Amounts
of Assets/ Liabilities Presented in the Consolidated Balance Sheet |
|
Gross Amount
of Collateral Received / Pledged Not Offset in the Consolidated Balance Sheet |
|
Net
Amount
|
||||||||||
September 30, 2019:
|
|
|
|
|
|
|
|
|
|
||||||||||
Derivative Assets:
|
|
|
|
|
|
|
|
|
|
||||||||||
Interest rate swaps
|
$
|
81,837
|
|
|
$
|
68
|
|
|
$
|
81,769
|
|
|
$
|
—
|
|
|
$
|
81,769
|
|
Futures contracts
|
393
|
|
|
—
|
|
|
393
|
|
|
—
|
|
|
393
|
|
|||||
Total non-VIE derivative assets
|
$
|
82,230
|
|
|
$
|
68
|
|
|
$
|
82,162
|
|
|
$
|
—
|
|
|
$
|
82,162
|
|
Derivative Liabilities:
|
|
|
|
|
|
|
|
|
|
||||||||||
Credit derivatives
|
$
|
422
|
|
|
$
|
—
|
|
|
$
|
422
|
|
|
$
|
—
|
|
|
$
|
422
|
|
Interest rate swaps
|
102,960
|
|
|
68
|
|
|
102,892
|
|
|
102,076
|
|
|
816
|
|
|||||
Total non-VIE derivative liabilities
|
$
|
103,382
|
|
|
$
|
68
|
|
|
$
|
103,314
|
|
|
$
|
102,076
|
|
|
$
|
1,238
|
|
Variable Interest Entities Derivative Assets:
|
|
|
|
|
|
|
|
|
|
||||||||||
Currency swaps
|
$
|
67,921
|
|
|
$
|
—
|
|
|
$
|
67,921
|
|
|
$
|
—
|
|
|
$
|
67,921
|
|
Total VIE derivative assets
|
$
|
67,921
|
|
|
$
|
—
|
|
|
$
|
67,921
|
|
|
$
|
—
|
|
|
$
|
67,921
|
|
Variable Interest Entities Derivative Liabilities:
|
|
|
|
|
|
|
|
|
|
||||||||||
Interest rate swaps
|
$
|
1,779,077
|
|
|
$
|
—
|
|
|
$
|
1,779,077
|
|
|
$
|
—
|
|
|
$
|
1,779,077
|
|
Total VIE derivative liabilities
|
$
|
1,779,077
|
|
|
$
|
—
|
|
|
$
|
1,779,077
|
|
|
$
|
—
|
|
|
$
|
1,779,077
|
|
December 31, 2018:
|
|
|
|
|
|
|
|
|
|
||||||||||
Derivative Assets:
|
|
|
|
|
|
|
|
|
|
||||||||||
Interest rate swaps
|
$
|
59,768
|
|
|
$
|
300
|
|
|
$
|
59,468
|
|
|
$
|
—
|
|
|
$
|
59,468
|
|
Total non-VIE derivative assets
|
$
|
59,768
|
|
|
$
|
300
|
|
|
$
|
59,468
|
|
|
$
|
—
|
|
|
$
|
59,468
|
|
Derivative Liabilities:
|
|
|
|
|
|
|
|
|
|
||||||||||
Credit derivatives
|
$
|
1,459
|
|
|
$
|
—
|
|
|
$
|
1,459
|
|
|
$
|
—
|
|
|
$
|
1,459
|
|
Interest rate swaps
|
72,161
|
|
|
300
|
|
|
71,861
|
|
|
67,126
|
|
|
4,735
|
|
|||||
Futures contracts
|
3,379
|
|
|
—
|
|
|
3,379
|
|
|
3,379
|
|
|
—
|
|
|||||
Total non-VIE derivative liabilities
|
$
|
76,999
|
|
|
$
|
300
|
|
|
$
|
76,699
|
|
|
$
|
70,505
|
|
|
$
|
6,194
|
|
Variable Interest Entities Derivative Assets:
|
|
|
|
|
|
|
|
|
|
||||||||||
Currency swaps
|
$
|
66,302
|
|
|
$
|
—
|
|
|
$
|
66,302
|
|
|
$
|
—
|
|
|
$
|
66,302
|
|
Total VIE derivative assets
|
$
|
66,302
|
|
|
$
|
—
|
|
|
$
|
66,302
|
|
|
$
|
—
|
|
|
$
|
66,302
|
|
Variable Interest Entities Derivative Liabilities:
|
|
|
|
|
|
|
|
|
|
||||||||||
Interest rate swaps
|
$
|
1,712,062
|
|
|
$
|
—
|
|
|
$
|
1,712,062
|
|
|
$
|
—
|
|
|
$
|
1,712,062
|
|
Total VIE derivative liabilities
|
$
|
1,712,062
|
|
|
$
|
—
|
|
|
$
|
1,712,062
|
|
|
$
|
—
|
|
|
$
|
1,712,062
|
|
|
Location of Gain or (Loss)
Recognized in Consolidated
Statements of Total
Comprehensive Income (Loss)
|
|
Amount of Gain or (Loss) Recognized in Consolidated Statement of Total Comprehensive Income (Loss)
|
||||||||||||||||
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
|||||||||||||||
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|||||||||||
Non-VIE derivatives:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Credit derivatives
|
Net gains (losses) on derivative contracts
|
|
$
|
528
|
|
|
$
|
250
|
|
|
$
|
1,311
|
|
|
$
|
(313
|
)
|
||
Interest rate swaps
|
Net gains (losses) on derivative contracts
|
|
(547
|
)
|
|
3,157
|
|
|
(10,656
|
)
|
|
9,320
|
|
||||||
Futures contracts
|
Net gains (losses) on derivative contracts
|
|
(9,871
|
)
|
|
14,176
|
|
|
(52,116
|
)
|
|
42,699
|
|
||||||
Total Non-VIE derivatives
|
|
|
|
|
$
|
(9,890
|
)
|
|
$
|
17,583
|
|
|
(61,461
|
)
|
|
51,706
|
|
||
Variable Interest Entities:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Currency swaps
|
Income (loss) on variable interest entities
|
|
$
|
9,618
|
|
|
$
|
1,140
|
|
|
6,257
|
|
|
6,666
|
|
||||
Interest rate swaps
|
Income (loss) on variable interest entities
|
|
(165,664
|
)
|
|
335,054
|
|
|
(271,875
|
)
|
|
548,092
|
|
||||||
Total Variable Interest Entities
|
|
(156,046
|
)
|
|
336,194
|
|
|
(265,618
|
)
|
|
554,758
|
|
|||||||
Total derivative contracts
|
|
|
$
|
(165,936
|
)
|
|
$
|
353,777
|
|
|
$
|
(327,079
|
)
|
|
$
|
606,464
|
|
|
|
Notional
|
||||||
Type of Derivative
|
|
September 30,
2019 |
|
December 31,
2018 |
||||
Interest rate swaps—receive-fixed/pay-variable
|
|
$
|
337,481
|
|
|
$
|
493,368
|
|
Interest rate swaps—pay-fixed/receive-variable
|
|
1,265,895
|
|
|
1,121,532
|
|
||
US Treasury futures contracts—short
|
|
855,000
|
|
|
1,760,000
|
|
|
|
Notional
|
||||||
Type of VIE Derivative
|
|
September 30,
2019 |
|
December 31,
2018 |
||||
Interest rate swaps—receive-fixed/pay-variable
|
|
$
|
1,103,656
|
|
|
$
|
1,399,532
|
|
Interest rate swaps—pay-fixed/receive-variable
|
|
1,103,199
|
|
|
1,176,748
|
|
||
Currency swaps
|
|
312,264
|
|
|
344,992
|
|
||
Credit derivatives
|
|
8,676
|
|
|
10,254
|
|
Jurisdiction
|
Tax Year
|
United States
|
2010
|
New York State
|
2013
|
New York City
|
2015
|
United Kingdom
|
2015
|
Italy
|
2014
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
U.S.
|
$
|
59,608
|
|
|
$
|
(39,832
|
)
|
|
$
|
(61,204
|
)
|
|
$
|
271,014
|
|
Foreign
|
9,447
|
|
|
19,884
|
|
|
(11,058
|
)
|
|
23,655
|
|
||||
Total
|
$
|
69,055
|
|
|
$
|
(19,948
|
)
|
|
$
|
(72,262
|
)
|
|
$
|
294,669
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
Current taxes
|
|
|
|
|
|
|
|
||||||||
U. S. federal
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
U.S. state and local
|
358
|
|
|
424
|
|
|
(2,884
|
)
|
|
2,106
|
|
||||
Foreign
|
3,951
|
|
|
6,164
|
|
|
38,290
|
|
|
8,669
|
|
||||
Current taxes
|
4,309
|
|
|
6,588
|
|
|
35,406
|
|
|
10,775
|
|
||||
Deferred taxes
|
|
|
|
|
|
|
|
||||||||
Foreign
|
(1,370
|
)
|
|
(4,377
|
)
|
|
(2,154
|
)
|
|
(3,964
|
)
|
||||
Deferred taxes
|
(1,370
|
)
|
|
(4,377
|
)
|
|
(2,154
|
)
|
|
(3,964
|
)
|
||||
Provision for income taxes
|
$
|
2,939
|
|
|
$
|
2,211
|
|
|
$
|
33,252
|
|
|
$
|
6,811
|
|
NOL Usage Tier
|
Allocated NOLs
|
|
Applicable
Percentage
|
|
A
|
The first
|
$479,000
|
|
15%
|
B
|
The next
|
$1,057,000
|
after Tier A
|
40%
|
C
|
The next
|
$1,057,000
|
after Tier B
|
10%
|
D
|
The next
|
$1,057,000
|
after Tier C
|
15%
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||
|
|
September 30, 2019
|
|
September 30, 2019
|
||||
Operating lease cost
|
|
$
|
2,208
|
|
|
$
|
5,822
|
|
Variable Lease Cost
|
|
50
|
|
|
351
|
|
||
Sublease income
|
|
(281
|
)
|
|
(626
|
)
|
||
Total lease cost
|
|
$
|
1,977
|
|
|
$
|
5,547
|
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||
Three Months Ended
|
|
September 30, 2019
|
|
September 30, 2019
|
||||
Cash paid for amounts included in the measurement of operating lease liabilities
|
|
$
|
1,641
|
|
|
$
|
4,927
|
|
Right-of-use assets obtained in exchange for operating lease liabilities (non-cash) (1)
|
|
588
|
|
|
29,887
|
|
(1)
|
Includes new right-of-use assets of $14,360 for the nine months ended September 30, 2019 for leases which existed prior to the New Lease Standard implementation date of January 1, 2019.
|
|
|
September 30, 2019
|
||
Operating leases:
|
|
|
||
Operating lease right of use assets
|
|
$
|
25,906
|
|
Operating lease liabilities
|
|
29,600
|
|
|
Weighted average remaining lease term:
|
|
|
||
Operating leases
|
|
10.0 years
|
|
|
Weighted average discount rate:
|
|
|
||
Operating leases
|
|
7.8
|
%
|
As of 9/30/2019
|
|
Operating Leases
|
||
2019 (three months)
|
|
$
|
1,108
|
|
2020
|
|
4,138
|
|
|
2021
|
|
4,014
|
|
|
2022
|
|
4,014
|
|
|
2023
|
|
4,014
|
|
|
Thereafter
|
|
26,147
|
|
|
Total lease payments
|
|
43,435
|
|
|
Less: imputed interest
|
|
(13,835
|
)
|
|
Total
|
|
$
|
29,600
|
|
As of 9/30/2019
|
|
Operating Leases
|
||
2019 (three months)
|
|
$
|
172
|
|
2020
|
|
1,038
|
|
|
2021
|
|
1,051
|
|
|
2022
|
|
1,078
|
|
|
2023
|
|
1,131
|
|
|
Thereafter
|
|
7,571
|
|
|
Total lease receipts
|
|
$
|
12,041
|
|
•
|
Ambac Assurance Corporation and the Segregated Account of Ambac Assurance Corporation v. Countrywide Home Loans, Inc., Countrywide Securities Corp., Countrywide Financial Corp., and Bank of America Corp. (Supreme Court of the State of New York, County of New York, Case No. 653979/2014, filed on December 30, 2014). Discovery has been completed. The court has not yet set a schedule for summary judgment or for trial.
|
•
|
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). In August and October 2018, Defendants filed pre-trial motions seeking to (1) strike Ambac Assurance’s jury demand for its fraudulent-inducement claim; (2) strike Ambac Assurance’s jury demand for its successor-liability claim; (3) sever the trials for Ambac Assurance’s primary- and successor-liability claims; (4) limit the loans for which Ambac Assurance may seek to recover damages; (5) preclude Ambac Assurance from using sampling to prove liability or damages for breach of contract; and (6) dismiss Ambac Assurance’s fraudulent-inducement claim as duplicative of its contract claim. On December 30, 2018, the court denied all six of these pre-trial motions in their entirety and Defendants appealed. On January 24, 2019, the court ordered that trial be put off until the First Department resolves Defendants’ appeals, provided that Defendants perfected the appeals for the May 2019 Term at the First Department. Defendants perfected their appeals for the May Term by filing their opening appeal briefs in the First Department on February 19, 2019; Ambac Assurance filed its opposition brief on March 20, 2019; and Defendants filed their reply briefs on March 29, 2019. Oral argument on Defendants’ appeals of these six pre-trial motions was held in the First Department on May 2, 2019. On September 17, 2019, the First Department issued a decision
|
•
|
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”)). On February 11, 2019, Ambac Assurance filed a petition for certiorari with the United States Supreme Court for review of the denial of Ambac Assurance’s motion to dismiss the Minnesota Action. On March 21, 2019, the United States Supreme Court directed U.S. Bank to respond to this petition for certiorari, which U.S. Bank did on May 22, 2019. Ambac Assurance filed a reply brief on June 5, 2019. On October 4, 2019, the Supreme Court denied Ambac Assurance’s petition for certiorari. On October 9, 2019, the court in the Minnesota Action set April 27, 2020 as the date for the start of the trial. On July 16, 2019, the court in the SDNY Action granted in part and denied in part U.S. Bank's motion to dismiss Ambac Assurance's claims. The court dismissed Ambac Assurance's breach-of-contract and breach-of-fiduciary-duty claims based on U.S. Bank's acceptance of the settlement; and dismissed Ambac Assurance's declaratory judgment claims regarding the occurrence of an Event of Default and U.S. Bank's future distribution of trust recoveries through the waterfall. The court denied the motion to dismiss Ambac Assurance's breach-of-contract claims based on U.S.
|
•
|
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. In opposing DBNT’s request for an order instructing it to accept the proposed settlement concerning Harborview 2006-9, Ambac Assurance sought a period of discovery before resolution on the merits. Ambac Assurance has issued document requests to DBNT and subpoenas for documents to Countrywide Home Loans and Bank of America N.A. and DBNT has issued document requests to Ambac Assurance. The parties have exchanged documents. DBNT and Ambac Assurance have each served a notice of corporate deposition upon the other. On October 30, 2019, the court ruled that Ambac Assurance does not need to present a witness for deposition. On November 6, 2019, the parties submitted a proposed stipulated case schedule pursuant to which discovery would be completed by March 4, 2020 and merits briefing would be completed by April 8, 2020.
|
Item 2.
|
Management’s Discussion and Analysis of Financial Condition and Results of Operations
|
•
|
The COFINA Plan of Adjustment ("POA"). On February 12, 2019, the POA, including certain related commutation transactions, and subsequent distributions, became effective resulting in a reduction of Ambac Assurance's insured net par exposure to COFINA by approximately 77% or $620 million to $185 million and a reduction in overall Puerto Rico net par exposure from $1.9 billion to $1.3 billion. Subsequent redemptions of obligations of the COFINA Class 2 Trust (as further described in the Financial Guarantees in Force section included in Part II, Item 7 in the Company’s Annual Report on Form 10-K for the year ended December 2018) brought COFINA net par outstanding down to $102 million as of September 30, 2019;
|
•
|
An Irish scheme of arrangement (the "Arrangement") on June 17, 2019, for the restructuring of Ballantyne Re plc ("Ballantyne"). This restructuring allowed for the commutation of $900 million of Ambac UK's net par outstanding. See below under Financial Guarantees in Force for further details of the Arrangement;
|
•
|
Purchasing quota share reinsurance in September 2019 to sculpt the risk profile of the insured portfolio. This included ceding certain public finance exposures totaling $1.2 billion of par exposure (principal and interest of $2.4 billion), which were comprised of lease and tax-backed revenue ($616 million par), general obligation ($374 million par), transportation ($240 million par) and higher education ($4 million par) exposures and included $509 million par of watch list and adversely classified credits;
|
•
|
Completing work in January 2019, with an issuer to refinance two watch list asset-backed lease securitizations with net par outstanding of $95 million at December 31, 2018;
|
•
|
A commutation in February 2019, via a refunding, of an adversely classified public finance transaction with net par outstanding of $350 million at December 31, 2018;
|
•
|
Working closely with servicers and owners of Master Servicing Rights to exercise their clean-up call rights on several watch list and adversely classified RMBS transactions with total net par outstanding of $200 million at December 31, 2018; and
|
•
|
The final paydown, refunding, or partial commutation of various watch list exposures and adversely classified exposures that were subject to risk remediation efforts with total net par outstanding at December 31, 2018 of $332 million.
|
($ in billions)
|
September 30,
2019 |
|
December 31,
2018 |
|
Variance
|
|||||||||
Total
|
$
|
39.0
|
|
|
$
|
46.9
|
|
|
$
|
(8.0
|
)
|
|
(17
|
)%
|
ACC
|
7.7
|
|
|
10.9
|
|
|
(3.1
|
)
|
|
(29
|
)%
|
|||
Watch list
|
8.0
|
|
|
9.0
|
|
|
(1.1
|
)
|
|
(12
|
)%
|
(1)
|
Includes surplus notes (fair value of $62 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 ($31 million), investment income due and accrued and other receivables.
|
(1)
|
A portion of Ambac UK's, and to a lesser extent Ambac Assurance's, assets and liabilities are denominated in currencies other than its
|
($ in millions)
|
September 30,
2019 |
|
December 31,
2018 |
||||
Public Finance (1) (2)
|
$
|
18,760
|
|
|
$
|
23,442
|
|
Structured Finance
|
7,804
|
|
|
9,947
|
|
||
International Finance
|
12,397
|
|
|
13,538
|
|
||
Total net par outstanding
|
$
|
38,960
|
|
|
$
|
46,927
|
|
(1)
|
Includes $5,704 and $5,759 of Military Housing net par outstanding at September 30, 2019 and December 31, 2018, respectively.
|
(2)
|
Includes $1,123 and $1,880 of Puerto Rico net par outstanding at September 30, 2019 and December 31, 2018, 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.
|
•
|
Reductions in public finance net par outstanding included $1,235 million from a quota share reinsurance transaction, $1,116 million from calls of insured exposures, $703 million relating to COFINA, $389 million relating to commutations via refunding of adversely classified public finance general obligations, healthcare and transportation transactions, $60 million relating to remediation related refundings of watch list public finance transportation and stadium transactions, and $1,179 million from scheduled paydown activity.
|
•
|
Reductions in structured finance net par were primarily due to the commutation of Ballantyne, an adversely classified structured insurance transaction, totaling $900 million, RMBS commutations and paydowns of $874 million and refundings of two watch list asset-backed securitizations totaling $95 million.
|
•
|
Decreases in international finance were primarily due to policy runoff including paydowns, including a maturity of an investor owned utility totaling $243 million and a risk remediation related reduction to aircraft asset-backed securitizations totaling $212 million and a decrease in foreign exchange rates of $472 million, primarily related to changes in the British Pound.
|
Currency
(Amounts in millions)
|
|
Net Par Amount
Outstanding in
Base Currency
|
|
Net Par Amount
Outstanding in
U.S. Dollars
|
||||
U.S. Dollars
|
|
$
|
26,967
|
|
|
$
|
26,967
|
|
British Pounds
|
|
£
|
8,064
|
|
|
9,916
|
|
|
Euros
|
|
€
|
1,567
|
|
|
1,709
|
|
|
Australian Dollars
|
|
A$
|
545
|
|
|
368
|
|
|
Total
|
|
|
|
$
|
38,960
|
|
•
|
The Oversight Board;
|
•
|
AAFAF;
|
•
|
The official committee of unsecured creditors;
|
•
|
The official committee of retired employees;
|
•
|
The movants or plaintiffs in each of the adversary proceedings and contested matters that are listed in the appendix attached to the motion, and the applicable defendants and respondents; and
|
•
|
Parties in interest who have appeared in such proceedings to date (or appropriate representatives of such groups).
|
•
|
the novation of the indemnity reinsurance agreement between Ballantyne and SLD dated November 19, 2008 (as amended) to SRLHA (the "Novation");
|
•
|
the disbursement of the assets from Ballantyne's reinsurance trust account to effectuate the Novation and make payment to the holders of Scheme Notes in full and final satisfaction of their claims against Ballantyne; and
|
•
|
the commutation of the obligations of Ambac UK in respect of the Ambac UK Guaranteed Notes.
|
($ in millions)
|
|
Bond Type
|
|
Ambac
Ratings (1)
|
|
Net Par
Outstanding (2) |
|
% of Total
Net Par
Outstanding
|
|||
New Jersey Transportation Trust Fund Authority - Transportation System
|
|
Lease and Tax-backed Revenue
|
|
BBB+
|
|
$
|
778
|
|
|
2.0
|
%
|
Massachusetts Commonwealth - GO
|
|
General Obligation
|
|
AA
|
|
586
|
|
|
1.5
|
%
|
|
Mets Queens Baseball Stadium Project, NY, Lease Revenue
|
|
Stadium
|
|
BBB
|
|
549
|
|
|
1.4
|
%
|
|
Hickam Community Housing LLC
|
|
Housing Revenue
|
|
BBB
|
|
466
|
|
|
1.2
|
%
|
|
Bragg Communities, LLC
|
|
Housing Revenue
|
|
A-
|
|
416
|
|
|
1.1
|
%
|
|
Puerto Rico Highways & Transportation Authority, Transportation Revenue
|
|
Lease and Tax-backed Revenue
|
|
BIG
|
|
409
|
|
|
1.0
|
%
|
|
Puerto Rico Infrastructure Financing Authority, Special Tax Revenue
|
|
Lease and Tax-backed Revenue
|
|
BIG
|
|
403
|
|
|
1.0
|
%
|
|
New Jersey Economic Development Authority - School Facilities Construction
|
|
Lease and Tax-backed Revenue
|
|
BBB+
|
|
400
|
|
|
1.0
|
%
|
|
Monterey Bay, CA - Military Housing
|
|
Housing Revenue
|
|
BBB+
|
|
324
|
|
|
0.8
|
%
|
|
Fort Bliss/White Sand Missile Range Housing LP
|
|
Housing Revenue
|
|
BBB+
|
|
307
|
|
|
0.8
|
%
|
|
Total
|
|
|
|
|
|
$
|
4,638
|
|
|
11.9
|
%
|
(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.
|
($ in millions)
|
|
Bond Type
|
|
Ambac
Rating(1)
|
|
Net Par
Outstanding
|
|
% of Total
Net Par
Outstanding
|
|||
Progress Energy Carolinas, Inc.
|
|
Investor Owned Utility
|
|
A-
|
|
$
|
450
|
|
|
1.2
|
%
|
Timberlake Financial, LLC
|
|
Structured Insurance
|
|
BBB
|
|
414
|
|
|
1.1
|
%
|
|
Wachovia Asset Securitization Issuance II, LLC 2007-HE2
|
|
Mortgage Backed Securities
|
|
BBB
|
|
406
|
|
|
1.0
|
%
|
|
Wachovia Asset Securitization Issuance II, LLC 2007-HE1
|
|
Mortgage Backed Securities
|
|
BBB
|
|
275
|
|
|
0.7
|
%
|
|
Option One Mortgage Loan Trust 2007-FXD1
|
|
Mortgage Backed Securities
|
|
BIG
|
|
215
|
|
|
0.6
|
%
|
|
Terwin Mortgage Trust Asset-Backed Certificates, Series 2006-6
|
|
Mortgage Backed Securities
|
|
BIG
|
|
210
|
|
|
0.5
|
%
|
|
Impac CMB Trust Series 2005-7
|
|
Mortgage Backed Securities
|
|
BIG
|
|
182
|
|
|
0.5
|
%
|
|
Ownit Mortgage Trust 2006-OT1
|
|
Mortgage Backed Securities
|
|
BIG
|
|
180
|
|
|
0.5
|
%
|
|
Countrywide Asset-Backed Certificates Trust 2005-16
|
|
Mortgage Backed Securities
|
|
BIG
|
|
178
|
|
|
0.5
|
%
|
|
Basin Electric Power Cooperative
|
|
Investor Owned Utility
|
|
A-
|
|
168
|
|
|
0.4
|
%
|
|
Total
|
|
|
|
|
|
$
|
2,678
|
|
|
6.9
|
%
|
(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.
|
($ in millions)
|
|
Country-Bond Type
|
|
Ambac
Rating(1)
|
|
Net Par
Outstanding
|
|
% of Total
Net Par
Outstanding
|
|||
Mitchells & Butlers Finance plc-UK Pub Securitisation
|
|
UK-Asset Securitizations
|
|
A+
|
|
$
|
1,246
|
|
|
3.2
|
%
|
Capital Hospitals plc (2)
|
|
UK-Infrastructure
|
|
A-
|
|
834
|
|
|
2.1
|
%
|
|
Aspire Defence Finance plc
|
|
UK-Infrastructure
|
|
BBB+
|
|
804
|
|
|
2.1
|
%
|
|
Anglian Water
|
|
UK-Utility
|
|
A-
|
|
763
|
|
|
2.0
|
%
|
|
National Grid Gas
|
|
UK-Utility
|
|
A-
|
|
704
|
|
|
1.8
|
%
|
|
Posillipo Finance II S.r.l
|
|
Italy-Sub-Sovereign
|
|
BIG
|
|
704
|
|
|
1.8
|
%
|
|
Ostregion Investmentgesellschaft NR 1 SA (2)
|
|
Austria-Infrastructure
|
|
BIG
|
|
666
|
|
|
1.7
|
%
|
|
RMPA Services plc
|
|
UK-Infrastructure
|
|
BBB+
|
|
534
|
|
|
1.4
|
%
|
|
Catalyst Healthcare (Manchester) Financing plc (2)
|
|
UK-Infrastructure
|
|
BBB-
|
|
499
|
|
|
1.3
|
%
|
|
National Grid Electricity Transmission
|
|
UK-Utility
|
|
A-
|
|
474
|
|
|
1.2
|
%
|
|
Total
|
|
|
|
|
|
$
|
7,228
|
|
|
18.6
|
%
|
(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)
|
A portion of this transaction is insured by an insurance policy issued by Ambac Assurance.
|
(1)
|
Internal credit ratings are provided solely to indicate the underlying credit quality of guaranteed obligations based on the view of Ambac. 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)
|
|
September 30,
2019 |
|
December 31,
2018 |
||||
Public Finance:
|
|
|
|
|
||||
Lease and tax-backed (1)
|
|
$
|
1,116
|
|
|
$
|
2,025
|
|
General obligation (1)
|
|
364
|
|
|
434
|
|
||
Housing (2)
|
|
191
|
|
|
314
|
|
||
Transportation
|
|
27
|
|
|
378
|
|
||
Health care
|
|
—
|
|
|
25
|
|
||
Other
|
|
134
|
|
|
146
|
|
||
Total Public Finance
|
|
1,832
|
|
|
3,322
|
|
||
Structured Finance:
|
|
|
|
|
||||
RMBS
|
|
3,507
|
|
|
4,205
|
|
||
Structured Insurance
|
|
—
|
|
|
900
|
|
||
Student loans
|
|
643
|
|
|
714
|
|
||
Other
|
|
33
|
|
|
53
|
|
||
Total Structured Finance
|
|
4,183
|
|
|
5,872
|
|
||
International Finance:
|
|
|
|
|
||||
Other
|
|
1,437
|
|
|
924
|
|
||
Total International Finance
|
|
1,437
|
|
|
924
|
|
||
Total
|
|
$
|
7,452
|
|
|
$
|
10,118
|
|
(1)
|
Lease and tax-backed revenue includes $1,014 and $1,735 of Puerto Rico net par at September 30, 2019 and December 31, 2018, respectively. General obligation includes $109 and $145 of Puerto Rico net par at September 30, 2019 and December 31, 2018, respectively. Components of Puerto Rico net par outstanding includes capital appreciation bonds which are reported at the par amount at the time of issuance of the related insurance policy as opposed to the current accreted value of the bonds.
|
(2)
|
Relates to military housing net par.
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
($ in millions)
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
Revenues:
|
|
|
|
|
|
|
|
|
||||||||
Net premiums earned
|
|
$
|
10
|
|
|
$
|
26
|
|
|
$
|
46
|
|
|
$
|
82
|
|
Net investment income
|
|
45
|
|
|
58
|
|
|
186
|
|
|
235
|
|
||||
Net other-than-temporary impairment losses
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(2
|
)
|
||||
Net realized investment gains (losses)
|
|
18
|
|
|
30
|
|
|
72
|
|
|
82
|
|
||||
Net gains (losses) on derivative contracts
|
|
(10
|
)
|
|
18
|
|
|
(61
|
)
|
|
52
|
|
||||
Net realized gains (losses) on extinguishment of debt
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3
|
|
||||
Other income (expense)
|
|
141
|
|
|
1
|
|
|
133
|
|
|
3
|
|
||||
Income (loss) on variable interest entities
|
|
11
|
|
|
2
|
|
|
30
|
|
|
3
|
|
||||
Expenses:
|
|
|
|
|
|
|
|
|
||||||||
Losses and loss expenses (benefit)
|
|
37
|
|
|
34
|
|
|
(84
|
)
|
|
(181
|
)
|
||||
Insurance intangible amortization
|
|
17
|
|
|
26
|
|
|
280
|
|
|
78
|
|
||||
Operating expenses
|
|
26
|
|
|
28
|
|
|
80
|
|
|
91
|
|
||||
Interest expense
|
|
67
|
|
|
66
|
|
|
202
|
|
|
176
|
|
||||
Provision for income taxes
|
|
3
|
|
|
2
|
|
|
33
|
|
|
7
|
|
||||
Net income (loss)
|
|
66
|
|
|
(22
|
)
|
|
(106
|
)
|
|
288
|
|
||||
Less: exchange of auction market preferred shares
|
|
—
|
|
|
82
|
|
|
—
|
|
|
82
|
|
||||
Net income (loss) attributable to common stockholders
|
|
$
|
66
|
|
|
$
|
(104
|
)
|
|
$
|
(106
|
)
|
|
$
|
206
|
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
($ in millions)
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
Normal Premium Earned:
|
|
|
|
|
|
|
|
|
||||||||
Public finance
|
|
$
|
7
|
|
|
$
|
9
|
|
|
$
|
21
|
|
|
$
|
29
|
|
Structured finance
|
|
2
|
|
|
4
|
|
|
8
|
|
|
14
|
|
||||
International finance
|
|
—
|
|
|
6
|
|
|
9
|
|
|
18
|
|
||||
Total normal premiums earned
|
|
8
|
|
|
19
|
|
|
38
|
|
|
60
|
|
||||
Accelerated Earnings:
|
|
|
|
|
|
|
|
|
||||||||
Public finance
|
|
2
|
|
|
4
|
|
|
23
|
|
|
18
|
|
||||
Structured Finance
|
|
—
|
|
|
2
|
|
|
(7
|
)
|
|
3
|
|
||||
International finance
|
|
—
|
|
|
1
|
|
|
(8
|
)
|
|
1
|
|
||||
Accelerated earnings
|
|
2
|
|
|
7
|
|
|
8
|
|
|
22
|
|
||||
Total net premiums earned
|
|
$
|
10
|
|
|
$
|
26
|
|
|
$
|
46
|
|
|
$
|
82
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
($ in millions)
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
Securities available-for-sale: Ambac-insured (including Secured Notes)
|
$
|
18
|
|
|
$
|
38
|
|
|
$
|
104
|
|
|
$
|
185
|
|
Securities available-for-sale and short-term other than Ambac-insured
|
19
|
|
|
12
|
|
|
57
|
|
|
37
|
|
||||
Other investments (includes trading securities)
|
8
|
|
|
8
|
|
|
25
|
|
|
13
|
|
||||
Net investment income
|
$
|
45
|
|
|
$
|
58
|
|
|
$
|
186
|
|
|
$
|
235
|
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
($ in millions)
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
Net gains on securities sold or called
|
|
$
|
12
|
|
|
$
|
29
|
|
|
$
|
42
|
|
|
$
|
79
|
|
Net foreign exchange gains (losses)
|
|
7
|
|
|
2
|
|
|
30
|
|
|
4
|
|
||||
Total net realized gains (losses)
|
|
$
|
19
|
|
|
$
|
30
|
|
|
$
|
72
|
|
|
$
|
82
|
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
($ in millions)
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
RMBS (1)
|
|
$
|
(25
|
)
|
|
$
|
19
|
|
|
$
|
(133
|
)
|
|
$
|
39
|
|
Domestic Public Finance
|
|
77
|
|
|
9
|
|
|
197
|
|
|
42
|
|
||||
Student Loans
|
|
(16
|
)
|
|
4
|
|
|
(23
|
)
|
|
3
|
|
||||
Ambac UK and Other Credits
|
|
—
|
|
|
1
|
|
|
(125
|
)
|
|
3
|
|
||||
Interest on Deferred Amounts
|
|
—
|
|
|
—
|
|
|
—
|
|
|
21
|
|
||||
Discount on Rehabilitation Exit Transactions
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(288
|
)
|
||||
Totals (2)
|
|
$
|
37
|
|
|
$
|
34
|
|
|
$
|
(84
|
)
|
|
$
|
(181
|
)
|
(1)
|
The losses and loss expense (benefit) associated with changes in estimated representation and warranties was $7 and $15 for the three and nine months ended September 30, 2019, respectively, and $39 and $57 for the three and nine months ended September 30, 2018, respectively.
|
(2)
|
Includes loss expenses incurred (benefit) of $23 and $52 for the three and nine months ended September 30, 2019, respectively, and $53 and $100 for the three and nine months ended September 30, 2018, respectively.
|
•
|
For the nine months ended September 30, 2019, favorable development within Ambac UK and Other Credits primarily due to the Ballantyne commutation completed in June 2019;
|
•
|
Favorable RMBS development as a result of credit improvement, the impact on excess spread from declines in interest rates, and additionally for the nine months ended September 30, 2019, a trustee settlement related to Lehman sponsored transactions partially offset by,
|
•
|
Higher projected losses in domestic public finance driven mostly by a lower discount rates and additions to Puerto Rico loss reserves.
|
•
|
For the nine months ended September 30, 2018, higher projected losses in domestic public finance largely driven by Military Housing loss expenses incurred and additions to Puerto Rico loss reserves;
|
•
|
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 $3 and $10 million in foreign exchange losses for the three and nine months ended September 30, 2018:
|
•
|
For the three and nine months ended September 30, 2018, there was adverse RMBS development as a result of a decrease in R&W subrogation recoveries and loss expenses incurred partially offset by favorable credit developments;
|
•
|
Discount achieved pursuant to the Rehabilitation Exit Transactions for the nine months ended September 30, 2018, partially offset by interest on Deferred Amounts through the Rehabilitation Exit Transactions date.
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
($ in millions)
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
Compensation
|
|
$
|
14
|
|
|
$
|
14
|
|
|
$
|
46
|
|
|
$
|
44
|
|
Non-compensation
|
|
11
|
|
|
14
|
|
|
33
|
|
|
47
|
|
||||
Gross operating expenses
|
|
26
|
|
|
28
|
|
|
80
|
|
|
90
|
|
||||
Reinsurance commissions, net
|
|
—
|
|
|
1
|
|
|
—
|
|
|
1
|
|
||||
Total operating expenses
|
|
$
|
26
|
|
|
$
|
28
|
|
|
$
|
80
|
|
|
$
|
91
|
|
•
|
Higher severance costs resulting from continued right sizing of staffing levels, partially offset by lower salaries as a result of reduced headcount.
|
•
|
Lower non-compensation costs primarily due to (i) $5.9 million of consulting, legal and advisory fees related to the AMPS Exchange incurred during the three months ended September 30, 2018 and (ii) a $0.2 million decrease of legal, consulting and advisory fees in connection with the exit from rehabilitation of the Segregated Account, partially offset by (a) higher strategy and corporate development fees of $1.5 million and (b) higher rent expense of $1.1 million driven by the extinguishment of lease reducing junior surplus notes which previously reduced rent expense. Refer to Note 13. Long-term Debt in the Notes to Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018, for further information on the Junior Surplus Notes.
|
•
|
Higher compensation costs primarily due to increased incentive compensation driven by an improvement in performance metrics, mostly related to Ambac UK incentive compensation, partially offset by (i) lower salaries as a result of reduced headcount and (ii) a decrease of awards granted related to the Rehabilitation Exit Transactions totaling $3.3 million.
|
•
|
Lower non-compensation costs primarily due to (i) $14 million of lower legal, consulting and advisory fees in connection with the exit from rehabilitation of the Segregated Account, of which $5 million relates to advisory services provided for the benefit of OCI and (ii) $8 million of costs associated with the August 2018 AMPS Exchange. These decreases were partially offset by (a) higher legal, consulting and advisory fees associated with various initiatives of $7 million and (b) higher rent expense of $2 million driven by the extinguishment of lease reducing junior surplus notes which previously offset rent expense and the addition of the One World Trade Center lease which became effective in April 2019.
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
($ in millions)
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
Surplus notes (1)
|
|
$
|
25
|
|
|
$
|
20
|
|
|
$
|
73
|
|
|
$
|
57
|
|
Ambac note
|
|
35
|
|
|
40
|
|
|
110
|
|
|
102
|
|
||||
Tier 2 notes (2)
|
|
7
|
|
|
6
|
|
|
19
|
|
|
16
|
|
||||
Other
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1
|
|
||||
Total interest expense
|
|
$
|
67
|
|
|
$
|
66
|
|
|
$
|
202
|
|
|
$
|
176
|
|
(1)
|
The amounts include junior surplus notes.
|
(2)
|
The amounts include unfunded commitment fees applicable prior to the issuance of the Tier 2 notes of $1 million in the nine months ended September 30, 2018.
|
|
Nine Months Ended September 30,
|
||||||
($ in million)
|
2019
|
|
2018
|
||||
Cash provided by (used in):
|
|
|
|
||||
Operating activities
|
$
|
(296
|
)
|
|
$
|
(1,418
|
)
|
Investing activities
|
791
|
|
|
1,249
|
|
||
Financing activities
|
(511
|
)
|
|
(402
|
)
|
||
Foreign exchange impact on cash and cash equivalents
|
—
|
|
|
(1
|
)
|
||
Net cash flow
|
$
|
(16
|
)
|
|
$
|
(571
|
)
|
•
|
During the nine months ended September 30, 2018, the cash outflow from the Rehabilitation Exit Transactions to third parties was $1,354 million of which $1,162 million is included in operating activities and $191 million is included in financing activities as it related to payments for surplus note principal. Refer to Note 1. Background and Business Description in the Notes to Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018 for details regarding the Rehabilitation Exit Transactions.
|
•
|
In September 2019, Ambac Assurance received $142.2 million in connection with an SEC settlement with Citigroup Global Markets Inc.
|
•
|
Cash provided by (used in) operating activities related to interest rate derivatives were $(81) million for the nine months ended September 30, 2019, and $64 million for the nine months ended September 30, 2018.
|
•
|
Cash used in operating activities related to income taxes (primarily in Ambac UK) were $11 million for the nine months ended September 30, 2019 and $31 million for the nine months ended September 30, 2018.
|
•
|
During the nine months ended September 30, 2019, Ambac made payments of interest on long-term debt of $110 million on the Ambac Note. During the nine months ended September 30, 2018, Ambac made payments of interest on long-term debt of $106 million, including $94 million on the Ambac Note, $11 million on surplus notes made in connection with the Rehabilitation Exit Transactions and $2 million on the secured borrowing which has been fully repaid in June 2018.
|
•
|
Net loss and loss expenses paid, including commutation payments, during the nine months ended September 30, 2019 and 2018 are detailed below:
|
|
Nine Months Ended September 30,
|
||||||
($ in million)
|
2019
|
|
2018
|
||||
Net loss and loss expenses paid (recovered):
|
|
|
|
||||
Net losses paid (1)
|
$
|
(398
|
)
|
|
$
|
(319
|
)
|
Net subrogation received (2)
|
142
|
|
|
110
|
|
||
Net loss expenses paid
|
(43
|
)
|
|
(86
|
)
|
||
Net cash flow
|
$
|
(299
|
)
|
|
$
|
(295
|
)
|
(1)
|
Net losses paid include commutation payments of $214 and $87 for the nine months ended September 30, 2019 and 2018, respectively.
|
(2)
|
For the nine months ended September 30, 2019, subrogation received includes $36 of settlement proceeds related to Lehman sponsored RMBS transactions and $23 related to the COFINA Plan of Adjustment.
|
($ in millions)
|
|
September 30,
2019 |
|
December 31,
2018 |
||||
Fixed income securities
|
|
$
|
2,727
|
|
|
$
|
3,116
|
|
Short-term
|
|
664
|
|
|
430
|
|
||
Other investments
|
|
462
|
|
|
391
|
|
||
Fixed income securities pledged as collateral
|
|
85
|
|
|
—
|
|
||
Total investments (1)
|
|
$
|
3,939
|
|
|
$
|
3,937
|
|
(1)
|
Includes investments denominated in non-US dollar currencies with a fair value of £207 ($255) and €0.9 ($1.0) as of September 30, 2019, and £204 ($259) and €14.0 ($16.0) as of December 31, 2018.
|
($ in millions)
|
|
September 30,
2019 |
|
December 31,
2018 |
||||
Residential mortgage-backed securities:
|
|
|
|
|
||||
RMBS—Second Lien
|
|
$
|
140
|
|
|
$
|
136
|
|
RMBS—First-lien—Alt-A
|
|
86
|
|
|
93
|
|
||
RMBS—First Lien—Sub Prime
|
|
31
|
|
|
31
|
|
||
Total residential mortgage-backed securities
|
|
257
|
|
|
259
|
|
||
Other asset-backed securities
|
|
|
|
|
||||
Military Housing
|
|
$
|
248
|
|
|
241
|
|
|
Commercial mortgage-backed
|
|
51
|
|
|
—
|
|
||
Student Loans
|
|
32
|
|
|
32
|
|
||
Credit Cards
|
|
18
|
|
|
5
|
|
||
Auto
|
|
—
|
|
|
20
|
|
||
Structured Insurance
|
|
—
|
|
|
145
|
|
||
Total other asset-backed securities
|
|
349
|
|
|
442
|
|
||
Total (1)
|
|
$
|
606
|
|
|
$
|
701
|
|
(1)
|
Includes investments guaranteed by Ambac Assurance and Ambac UK. Refer to Note 8. Investments to the Unaudited Consolidated Financial Statements included in Part I, Item 1 in this Form 10-Q for further details of Ambac insured securities held in the investment portfolio.
|
(1)
|
Ratings are based on the lower of Moody’s or S&P ratings. If ratings are unavailable from Moody's or S&P, Fitch ratings are used. If guaranteed, rating represents the higher of the underlying or guarantor’s financial strength rating.
|
(2)
|
Below investment grade and not rated bonds insured by Ambac represent 33% and 57% of the 2019 and 2018 combined fixed income portfolio, respectively. The decrease in the percentage of below investment grade and increases in the percentages of AAA-rated holdings since December 31, 2018 were driven by the COFINA restructuring where below investment grade Ambac-insured bonds were exchanged for new COFINA non-rated bonds and cash, with a majority of the new non-rated bonds being sold prior to September 30, 2019. Cash proceeds from the restructuring and sales resulted in the higher percentage of AAA-rated short-term investments at September 30, 2019.
|
Currency
(Amounts in millions) |
|
Premium Receivable in
Payment Currency |
|
Premium Receivable in
U.S. Dollars |
||||
U.S. Dollars
|
|
$
|
268
|
|
|
$
|
268
|
|
British Pounds
|
|
£
|
101
|
|
|
124
|
|
|
Euros
|
|
€
|
20
|
|
|
22
|
|
|
Total
|
|
|
|
$
|
415
|
|
|
|
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)
|
|
|
||||||||||
September 30, 2019:
|
|
|
|
|
|
|
|
|
||||||||
Loss and loss expense reserves
|
|
$
|
1,803
|
|
|
$
|
(226
|
)
|
|
$
|
(55
|
)
|
|
$
|
1,522
|
|
Subrogation recoverable
|
|
136
|
|
|
(2,218
|
)
|
|
—
|
|
|
(2,082
|
)
|
||||
Totals
|
|
$
|
1,939
|
|
|
$
|
(2,444
|
)
|
|
$
|
(55
|
)
|
|
$
|
(560
|
)
|
|
|
|
|
|
|
|
|
|
||||||||
December 31, 2018:
|
|
|
|
|
|
|
|
|
||||||||
Loss and loss expense reserves
|
|
$
|
2,246
|
|
|
$
|
(313
|
)
|
|
$
|
(107
|
)
|
|
$
|
1,826
|
|
Subrogation recoverable
|
|
176
|
|
|
(2,109
|
)
|
|
—
|
|
|
(1,933
|
)
|
||||
Totals
|
|
$
|
2,422
|
|
|
$
|
(2,422
|
)
|
|
$
|
(107
|
)
|
|
$
|
(107
|
)
|
(1)
|
Present value of future recoveries includes R&W subrogation recoveries of $1,755 and $1,771 at September 30, 2019 and December 31, 2018, respectively.
|
|
|
Gross
Par
Outstanding (1)(2)
|
|
Present Value of Expected
Net Cash Flows |
|
Unearned
Premium Revenue |
|
Gross Loss
and Loss Expense Reserves (1)(3) |
||||||||||||
($ in millions)
|
|
|
Claims and
Loss Expenses |
|
Recoveries
|
|
|
|||||||||||||
September 30, 2019:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
RMBS
|
|
$
|
3,136
|
|
|
$
|
670
|
|
|
$
|
(2,075
|
)
|
|
$
|
(14
|
)
|
|
$
|
(1,419
|
)
|
Domestic Public Finance
|
|
2,541
|
|
|
948
|
|
|
(332
|
)
|
|
(36
|
)
|
|
580
|
|
|||||
Student Loans
|
|
485
|
|
|
243
|
|
|
(37
|
)
|
|
(4
|
)
|
|
202
|
|
|||||
Ambac UK and Other Credits
|
|
203
|
|
|
5
|
|
|
—
|
|
|
(1
|
)
|
|
4
|
|
|||||
Loss expenses
|
|
—
|
|
|
73
|
|
|
—
|
|
|
—
|
|
|
73
|
|
|||||
Totals
|
|
$
|
6,365
|
|
|
$
|
1,939
|
|
|
$
|
(2,444
|
)
|
|
$
|
(55
|
)
|
|
$
|
(560
|
)
|
December 31, 2018:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
RMBS
|
|
$
|
3,716
|
|
|
$
|
696
|
|
|
$
|
(1,995
|
)
|
|
$
|
(14
|
)
|
|
$
|
(1,313
|
)
|
Domestic Public Finance
|
|
3,987
|
|
|
1,095
|
|
|
(383
|
)
|
|
(73
|
)
|
|
639
|
|
|||||
Student Loans
|
|
530
|
|
|
271
|
|
|
(39
|
)
|
|
(4
|
)
|
|
228
|
|
|||||
Ambac UK and Other Credits
|
|
1,170
|
|
|
294
|
|
|
(5
|
)
|
|
(16
|
)
|
|
273
|
|
|||||
Loss expenses
|
|
—
|
|
|
66
|
|
|
—
|
|
|
—
|
|
|
66
|
|
|||||
Totals
|
|
$
|
9,403
|
|
|
$
|
2,422
|
|
|
$
|
(2,422
|
)
|
|
$
|
(107
|
)
|
|
$
|
(107
|
)
|
(1)
|
Ceded par outstanding on policies with loss reserves and ceded loss and loss expense reserves are $615 and $26, respectively, at September 30, 2019, and $540 and $23, respectively at December 31, 2018. Ceded loss and loss expense reserves are included in Reinsurance recoverable on paid and unpaid losses.
|
(2)
|
Gross Par Outstanding includes capital appreciation bonds, which are reported at the par amount at the time of issuance of the insurance policy as opposed to the current accreted value of the bond.
|
(3)
|
Loss reserves are included in the balance sheet as Loss and loss expense reserves or Subrogation recoverable dependent on if a policy is in a net liability or net recoverable position.
|
|
|
September 30, 2019
|
|
December 31, 2018
|
||||||||||||
Issuer Type
($ in millions) |
|
Gross Par
Outstanding (1) |
|
Gross Loss
Reserves |
|
Gross Par
Outstanding (1) |
|
Gross Loss
Reserves |
||||||||
Lease and tax-backed
|
|
$
|
1,081
|
|
|
$
|
515
|
|
|
$
|
2,062
|
|
|
$
|
528
|
|
General obligation
|
|
838
|
|
|
(20
|
)
|
|
904
|
|
|
24
|
|
||||
Housing
|
|
441
|
|
|
30
|
|
|
445
|
|
|
26
|
|
||||
Transportation revenue
|
|
88
|
|
|
44
|
|
|
471
|
|
|
49
|
|
||||
Other
|
|
92
|
|
|
10
|
|
|
105
|
|
|
12
|
|
||||
Total
|
|
$
|
2,541
|
|
|
$
|
580
|
|
|
$
|
3,987
|
|
|
$
|
639
|
|
(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)
|
|
September 30,
2019 |
|
December 31, 2018
|
||||
Surplus notes (1)
|
|
$
|
760
|
|
|
$
|
737
|
|
Ambac note
|
|
1,912
|
|
|
1,940
|
|
||
Tier 2 notes
|
|
271
|
|
|
252
|
|
||
Ambac UK debt
|
|
12
|
|
|
—
|
|
||
Total Long-term Debt
|
|
$
|
2,955
|
|
|
$
|
2,929
|
|
(1)
|
Amounts include junior surplus notes.
|
•
|
Surplus benefits for (i) Ambac Assurance's receipt in September 2019, in connection with an SEC action against Citibank Global Markets Inc., of $142.2 million, (ii) the recognition of a previous deferred gain from the 2015 sale of Ballantyne bonds to Ambac UK of $28.1 million and (iii) an increase of $17.4 million in the fair value of investment securities that are recorded at the lower of amortized cost or fair value; partially offset by
|
•
|
Statutory net loss of $67 million for the nine months ended September 30, 2019 primarily due to loss and loss expenses from adverse development on Puerto Rico credits, including the COFINA settlement, partially offset by investment income and premiums earned; and
|
•
|
Contributions to contingency reserves of $29 million;
|
•
|
Non-credit impairment fair value (gain) loss on credit derivatives: Elimination of the non-credit impairment fair value gains (losses) on credit derivatives, which is the amount in excess of the present value of the expected estimated credit losses. Such fair value adjustments are affected by, and in part fluctuate with changes in market factors such as interest rates and credit spreads, including the market’s perception of Ambac’s credit risk (“Ambac CVA”), and are not expected to result in an economic gain or loss. These adjustments allow for all financial guarantee contracts to be accounted for consistent with the Financial Services – Insurance Topic of ASC, whether or not they are subject to derivative accounting rules.
|
•
|
Insurance intangible amortization: Elimination of the amortization of the financial guarantee insurance intangible asset that arose as a result of Ambac’s emergence from bankruptcy and the implementation of Fresh Start reporting. This adjustment ensures that all financial guarantee contracts are accounted for consistent with the provisions of the Financial Services – Insurance Topic of the ASC.
|
•
|
Foreign exchange (gains) losses: Elimination of the foreign exchange gains (losses) on the re-measurement of assets, liabilities and transactions in non-functional currencies. This adjustment eliminates the foreign exchange gains (losses) on all assets, liabilities and transactions in non-functional currencies, which enables users of our financial statements to better view the results without the impact of fluctuations in foreign currency exchange rates and facilitates period-to-period comparisons of Ambac's operating performance.
|
|
Three Months Ended September 30,
|
||||||||||||||
|
2019
|
|
2018
|
||||||||||||
($ in millions, except share data)
|
$ Amount
|
|
Per Diluted Share
|
|
$ Amount
|
|
Per Diluted Share
|
||||||||
Net income (loss) attributable to common stockholders
|
$
|
66
|
|
|
$
|
1.41
|
|
|
$
|
(104
|
)
|
|
$
|
(2.27
|
)
|
Adjustments:
|
|
|
|
|
|
|
|
||||||||
Non-credit impairment fair value (gain) loss on credit derivatives
|
—
|
|
|
(0.01
|
)
|
|
—
|
|
|
—
|
|
||||
Insurance intangible amortization
|
17
|
|
|
0.37
|
|
|
26
|
|
|
0.58
|
|
||||
Foreign exchange (gains) losses
|
(6
|
)
|
|
(0.14
|
)
|
|
2
|
|
|
0.03
|
|
||||
Adjusted earnings (loss)
|
$
|
77
|
|
|
$
|
1.63
|
|
|
$
|
(76
|
)
|
|
$
|
(1.66
|
)
|
|
|
|
|
|
|
|
|
||||||||
|
Nine Months Ended September 30,
|
||||||||||||||
|
2019
|
|
2018
|
||||||||||||
($ in millions, except share data)
|
$ Amount
|
|
Per Diluted Share
|
|
$ Amount
|
|
Per Diluted Share
|
||||||||
Net income (loss) attributable to common stockholders
|
$
|
(106
|
)
|
|
$
|
(2.30
|
)
|
|
$
|
206
|
|
|
$
|
4.43
|
|
Adjustments:
|
|
|
|
|
|
|
|
||||||||
Non-credit impairment fair value (gain) loss on credit derivatives
|
(1
|
)
|
|
(0.02
|
)
|
|
1
|
|
|
0.01
|
|
||||
Insurance intangible amortization
|
280
|
|
|
6.09
|
|
|
78
|
|
|
1.68
|
|
||||
Foreign exchange (gain) loss
|
(19
|
)
|
|
(0.42
|
)
|
|
5
|
|
|
0.12
|
|
||||
Adjusted earnings (loss)
|
$
|
154
|
|
|
$
|
3.35
|
|
|
$
|
290
|
|
|
$
|
6.24
|
|
•
|
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.
|
|
September 30, 2019
|
|
December 31, 2018
|
||||||||||||
($ in millions, except share data)
|
$ Amount
|
|
Per Share
|
|
$ Amount
|
|
Per Share
|
||||||||
Total Ambac Financial Group, Inc. stockholders’ equity
|
$
|
1,569
|
|
|
$
|
34.44
|
|
|
$
|
1,592
|
|
|
$
|
35.12
|
|
Adjustments:
|
|
|
|
|
|
|
|
||||||||
Non-credit impairment fair value losses on credit derivatives
|
—
|
|
|
0.01
|
|
|
1
|
|
|
0.03
|
|
||||
Insurance intangible asset
|
(434
|
)
|
|
(9.52
|
)
|
|
(719
|
)
|
|
(15.87
|
)
|
||||
Net unearned premiums and fees in excess of expected losses
|
434
|
|
|
9.52
|
|
|
462
|
|
|
10.19
|
|
||||
Net unrealized investment (gains) losses in Accumulated Other Comprehensive Income
|
(189
|
)
|
|
(4.14
|
)
|
|
(86
|
)
|
|
(1.89
|
)
|
||||
Adjusted book value
|
$
|
1,381
|
|
|
$
|
30.31
|
|
|
$
|
1,251
|
|
|
$
|
27.58
|
|
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
|
|
$
|
81
|
|
|
$
|
(267
|
)
|
200 basis point rise
|
|
51
|
|
|
(297
|
)
|
||
100 basis point rise
|
|
25
|
|
|
(323
|
)
|
||
Base scenario
|
|
—
|
|
|
(348
|
)
|
||
100 basis point decline(1)
|
|
(24
|
)
|
|
(372
|
)
|
||
200 basis point decline(1)
|
|
(20
|
)
|
|
(368
|
)
|
(1)
|
Incorporates an interest rate floor of 0%.
|
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
|
|
July 2019
|
|
August 2019
|
|
September 2019
|
|
Third Quarter 2019
|
||||||||
Total Shares Purchased (1)
|
54
|
|
|
1,136
|
|
|
—
|
|
|
1,190
|
|
||||
Average Price Paid Per Share
|
$
|
16.85
|
|
|
$
|
18.22
|
|
|
$
|
—
|
|
|
$
|
18.16
|
|
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 September 30, 2019. Ambac does not have a stock repurchase program.
|
Item 3.
|
Defaults Upon Senior Securities — No matters require disclosure.
|
Item 5.
|
Other Information — No matters require disclosure.
|
Item 6.
|
Exhibits
|
Exhibit
Number |
|
Description
|
Other exhibits, filed or furnished, as indicated:
|
||
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:
|
November 7, 2019
|
By:
|
/S/ DAVID TRICK
|
|
|
Name:
|
David Trick
|
|
|
Title:
|
Chief Financial Officer and Treasurer
(Duly Authorized Officer and Principal Financial Officer) |
1 Year Ambac Financial Chart |
1 Month Ambac Financial Chart |
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