SEC Info℠ | Home | Search | My Interests | Help | Sign In | Please Sign In | ||||||||||||||||||||
As Of Filer Filing For·On·As Docs:Size 8/06/20 Ambac Financial Group Inc. 10-Q 6/30/20 99:27M |
Document/Exhibit Description Pages Size 1: 10-Q Quarterly Report HTML 3.20M 2: EX-10.1 Material Contract HTML 51K 3: EX-10.2 Material Contract HTML 125K 4: EX-31.1 Certification -- §302 - SOA'02 HTML 39K 5: EX-31.2 Certification -- §302 - SOA'02 HTML 39K 6: EX-32.1 Certification -- §906 - SOA'02 HTML 36K 13: R1 Document and Entity Information HTML 97K 14: R2 Consolidated Balance Sheets HTML 135K 15: R3 Consolidated Balance Sheets (Parenthetical) HTML 63K 16: R4 Consolidated Statements of Total Comprehensive HTML 127K Income 17: R5 Consolidated Statements of Total Comprehensive HTML 44K Income (Parenthetical) 18: R6 Consolidated Statements of Stockholders' Equity HTML 64K 19: R7 Consolidated Statements of Cash Flows HTML 130K 20: R8 Background and Business Description HTML 45K 21: R9 Basis of Presentation and Significant Accounting HTML 92K Policies (Notes) 22: R10 Special Purpose Entities, Including Variable HTML 243K Interest Entities 23: R11 Comprehensive Income HTML 227K 24: R12 Net Income Per Share HTML 76K 25: R13 Financial Guarantee Insurance Contracts HTML 582K 26: R14 Fair Value Measurements HTML 740K 27: R15 Investments HTML 461K 28: R16 Derivative Instruments HTML 213K 29: R17 Income Taxes HTML 97K 30: R18 Commitments and Contingencies HTML 78K 31: R19 Basis of Presentation and Significant Accounting HTML 96K Policies (Policies) 32: R20 Basis of Presentation and Significant Accounting HTML 57K Policies Supplemental Cash Flow Information (Tables) 33: R21 Special Purpose Entities, Including Variable HTML 428K Interest Entities (Tables) 34: R22 Comprehensive Income (Tables) HTML 229K 35: R23 Net Income Per Share (Tables) HTML 73K 36: R24 Financial Guarantee Insurance Contracts (Tables) HTML 581K 37: R25 Fair Value Measurements (Tables) HTML 706K 38: R26 Investments (Tables) HTML 463K 39: R27 Derivative Instruments (Tables) HTML 210K 40: R28 Income Taxes (Tables) HTML 99K 41: R29 Background and Business Description - Additional HTML 34K Information (Detail) 42: R30 Basis of Presentation and Significant Accounting HTML 35K Policies FX gain (Loss) (Details) 43: R31 Basis of Presentation and Significant Accounting HTML 40K Policies Additional Information (Details) 44: R32 Basis of Presentation and Significant Accounting HTML 50K Policies Supplemental Cash Flow information (Details) 45: R33 Special Purpose Entities, Including Variable HTML 112K Interest Entities - Additional Information (Detail) 46: R34 Special Purpose Entities, Including Variable HTML 42K Interest Entities - Summary of Fair Value of Fixed Income Securities, by Asset-Type, Held by Consolidated Variable Interest Entities (Detail) 47: R35 Special Purpose Entities, Including Variable HTML 41K Interest Entities - Supplemental Information about Loans Held as Assets and Long-Term Debt Associated with Consolidated Variable Interest Entities (Detail) 48: R36 Special Purpose Entities, Including Variable HTML 64K Interest Entities - Summary of Carrying Amount of Assets, Liabilities and Maximum Exposure to Loss of Ambac's Variable Interests in Non-Consolidated Variable Interest Entities (Detail) 49: R37 Variable Interest Entities Special Purpose HTML 98K Entities, including Variable Interest Entities - Summary of Assets and Liabilities (Details) 50: R38 Comprehensive Income - Schedule of Changes in HTML 93K Balances of Each Component of Accumulated Other Comprehensive Income (Detail) 51: R39 Comprehensive Income - Schedule of Amounts HTML 79K Reclassed Out of Each Component of Accumulated Other Comprehensive Income (Detail) 52: R40 Net Income Per Share - Additional Information HTML 46K (Detail) 53: R41 Net Income Per Share - Reconciliation of Common HTML 64K Shares Used for Basic and Diluted Earnings Per Share (Detail) 54: R42 Net Income Per Share Schedule of Basic and HTML 53K Dilutive Securities for EPS (Details) 55: R43 Financial Guarantee Insurance Contracts - HTML 110K Additional Information (Detail) 56: R44 Financial Guarantee Insurance Contracts - Summary HTML 270K of Gross Premium Receivable Roll-Forward (Direct and Assumed Contracts) (Detail) 57: R45 Financial Guarantee Insurance Contracts - Effect HTML 55K of Reinsurance on Premiums Written and Earned (Detail) 58: R46 Financial Guarantee Insurance Contracts - HTML 97K Summarized Future Gross Undiscounted Premiums Expected to be Collected, and Future Expected Premiums Earned, Net of Reinsurance (Detail) 59: R47 Financial Guarantee Insurance Contracts Financial HTML 61K Guarantee Insurance Contracts - Components of Loss and Loss Expense Reserves and Subrogation Recoverable (Details) 60: R48 Financial Guarantee Insurance Contracts - Summary HTML 69K of Loss Reserve Roll-Forward, Net of Subrogation Recoverable and Reinsurance (Detail) 61: R49 Financial Guarantee Insurance Contracts - Summary HTML 171K of Information Related to Policies Currently Included in Ambac's Loss Reserves or Subrogation Recoverable (Detail) 62: R50 Financial Guarantee Insurance Contracts - Summary HTML 45K of Information Related to Policies Currently Included in Ambac's Loss Reserves or Subrogation Recoverable (Phantom) (Detail) 63: R51 Financial Guarantee Insurance Contracts - Summary HTML 42K of Balance of RMBS Subrogation Recoveries and Related Claim Liabilities, by Estimation Approach (Detail) 64: R52 Financial Guarantee Insurance Contracts - Summary HTML 42K of Rollforward of RMBS Subrogation, by Estimation Approach (Detail) 65: R53 Financial Guarantee Insurance Contracts Financial HTML 36K Guarantee Insurance Contracts - Summary of Percentage Ceded to Reinsurers and Reinsurance Recoverable and Rating Levels (Details) 66: R54 Financial Guarantee Insurance Contracts - HTML 59K Estimated Future Amortization Expense for Insurance Intangible Asset (Detail) 67: R55 Financial Guarantee Insurance Contracts Earned HTML 42K Premiums by Geographic Location (Details) 68: R56 Financial Guarantee Insurance Contracts Financial HTML 41K Guarantee Insurance Contracts - Insurance Intangible Asset Details (Details) 69: R57 Fair Value Measurements - Summary of Carrying HTML 259K Amount and Fair Value of Ambac's Financial Assets and Liabilities (Detail) 70: R58 Fair Value Measurements - Additional Information HTML 68K (Detail) 71: R59 Fair Value Measurements - Information about HTML 214K Valuation Inputs for Fixed Income Securities Classified as Level 3 (Detail) 72: R60 Fair Value Measurements - Summary of Information HTML 54K about Described Model Inputs Used to Determine Fair Value of Each Class of Credit Derivatives (Detail) 73: R61 Fair Value Measurements - Information about HTML 106K Valuation Inputs for Variable Interest Entity Assets and Liabilities Classified as Level 3 (Detail) 74: R62 Fair Value Measurements - Summary of Changes in HTML 164K Level 3 Fair Value Category (Detail) 75: R63 Fair Value Measurements - Summary of Gains and HTML 57K Losses (Realized and Unrealized) Relating to Level 3 Assets and Liabilities Included in Earnings (Detail) 76: R64 Investments - Summary of Amortized Cost and HTML 147K Estimated Fair Value of Available-for-Sale Investments, Excluding VIE Investments (Detail) 77: R65 Investments - Summary of Amortized Cost and HTML 77K Estimated Fair Value of Available-for-Sale Investments, Excluding VIE Investments Held by Successor Ambac, by Contractual Maturity (Detail) 78: R66 Investments - Summary of Gross Unrealized Losses HTML 101K and Fair Values of Ambac's Available-for-Sale Investments (Detail) 79: R67 Investments - Additional Information (Detail) HTML 51K 80: R68 Investments - Summary of Amounts Included in Net HTML 55K Realized (Losses) Gains and Other-Than-Temporary Impairments (Detail) 81: R69 Investments - Summary of Roll-Forward of Ambac's HTML 40K Cumulative Credit Losses on Debt Securities for Which Portion of Other-than-Temporary Impairment was Recognized in Other Comprehensive Income (Detail) 82: R70 Investments - Summary of Sources of Collateral HTML 74K Received and Various Investment Agreement in which Collateral Pledged (Detail) 83: R71 Investments - Summary of Fair Value, Including HTML 42K Financial Guarantee, and Weighted-Average Underlying Rating, Excluding Financial Guarantee, of Insured Securities (Detail) 84: R72 Investments - Summary of Fair Value, Including HTML 57K Financial Guarantee, and Weighted-Average Underlying Rating, Excluding Financial Guarantee, of Insured Securities (Phantom) (Detail) 85: R73 Investments Investments - Equity Investments HTML 66K (Details) 86: R74 Derivative Instruments - Summary of Gross Fair HTML 86K Values of Individual Derivative Instruments (Detail) 87: R75 Derivative Instruments - Additional Information HTML 46K (Detail) 88: R76 Derivative Instruments - Summary of Location and HTML 65K Amount of Gains and Losses of Derivative Contracts (Detail) 89: R77 Derivative Instruments - Summary of Notional HTML 44K Amounts of AFS's Trading Derivative Products (Detail) 90: R78 Derivative Instruments - Summary of Notional for HTML 44K VIE Derivatives Outstanding (Detail) 91: R79 Income Taxes - Additional Information (Detail) HTML 42K 92: R80 Income Taxes Income Taxes - Provision for Income HTML 59K Taxes Charged To Income From Continuing Operations (Details) 93: R81 Income Taxes Income Taxes - NOL Usage Table HTML 71K (Details) 94: R82 Income Taxes Schedule of Income Before Income HTML 40K Taxes (Details) 95: R9999 Uncategorized Items - a02-021ambcx2q20x10q.htm HTML 48K 97: XML IDEA XML File -- Filing Summary XML 196K 12: XML XBRL Instance -- a02-021ambcx2q20x10q_htm XML 8.96M 96: EXCEL IDEA Workbook of Financial Reports XLSX 195K 8: EX-101.CAL XBRL Calculations -- ambc-20200630_cal XML 328K 9: EX-101.DEF XBRL Definitions -- ambc-20200630_def XML 2.05M 10: EX-101.LAB XBRL Labels -- ambc-20200630_lab XML 2.90M 11: EX-101.PRE XBRL Presentations -- ambc-20200630_pre XML 2.26M 7: EX-101.SCH XBRL Schema -- ambc-20200630 XSD 299K 98: JSON XBRL Instance as JSON Data -- MetaLinks 541± 957K 99: ZIP XBRL Zipped Folder -- 0000874501-20-000116-xbrl Zip 743K
Document |
FORM | i 10-Q |
i ☒ | QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
i ☐ | TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Commission File Number: | i 1-10777 |
i AMBAC
FINANCIAL GROUP INC |
i (212) | i 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 | ||
i Common
stock par value $0.01 per share | i AMBC | i New York Stock Exchange | ||
i Warrants | i AMBC
WS | i New York Stock Exchange |
i Large accelerated filer | ☒ | Accelerated
filer | ☐ | Non-accelerated filer | ☐ | Smaller reporting company | i ☐ | Emerging growth company | i ☐ |
Item Number | Page | Item Number | Page | |||
PART I. FINANCIAL INFORMATION | PART I (CONTINUED) | |||||
1 | Unaudited
Consolidated Financial Statements of Ambac Financial Group, Inc. and Subsidiaries | 3 | ||||
4 | ||||||
PART II. OTHER INFORMATION | ||||||
1 | ||||||
1A | ||||||
2 | 2 | |||||
3 | ||||||
5 | Other
Information | |||||
6 | Exhibits | |||||
June 30, | December
31, | ||||||
(Dollars in millions, except share data) (June 30, 2020 (Unaudited)) | 2020 | 2019 | |||||
Assets: | |||||||
Investments: | |||||||
Fixed
income securities, at fair value (amortized cost of $2,126 and $2,450) | $ | i 2,218 | $ | i 2,577 | |||
Short-term
investments pledged as collateral, at fair value (amortized cost of $155 and $85) | i 155 | i 85 | |||||
Short-term
investments, at fair value (amortized cost of $691 and $653) | i 692 | i 653 | |||||
Other
investments (includes $352 and $432 at fair value) | i 401 | i 478 | |||||
Total
investments (net of allowance for credit losses of $0 at June 30, 2020) | i 3,466 | i 3,792 | |||||
Cash
and cash equivalents | i 17 | i 24 | |||||
Restricted
cash | i 15 | i 55 | |||||
Premium
receivables (net of allowance for credit losses of $16 at June 30, 2020) | i 392 | i 416 | |||||
Reinsurance
recoverable on paid and unpaid losses (net of allowance for credit losses of $0 at June 30, 2020) | i 36 | i 26 | |||||
Deferred
ceded premium | i 75 | i 82 | |||||
Subrogation
recoverable | i 2,215 | i 2,029 | |||||
Derivative
assets | i 97 | i 75 | |||||
Current
taxes | i 18 | i 11 | |||||
Insurance
intangible asset | i 392 | i 427 | |||||
Other
assets | i 145 | i 95 | |||||
Variable
interest entity assets: | |||||||
Fixed income securities, at fair value | i 3,041 | i 3,121 | |||||
Restricted
cash | i 2 | i 2 | |||||
Loans,
at fair value | i 2,787 | i 3,108 | |||||
Derivative
assets | i 61 | i 52 | |||||
Other
assets | i 2 | i 3 | |||||
Total
assets | $ | i 12,761 | $ | i 13,320 | |||
Liabilities
and Stockholders’ Equity: | |||||||
Liabilities: | |||||||
Unearned premiums | $ | i 492 | $ | i 518 | |||
Loss
and loss expense reserves | i 1,814 | i 1,548 | |||||
Ceded
premiums payable | i 27 | i 29 | |||||
Deferred
taxes | i 24 | i 32 | |||||
Long-term
debt | i 2,749 | i 2,822 | |||||
Accrued
interest payable | i 474 | i 441 | |||||
Derivative
liabilities | i 134 | i 90 | |||||
Other
liabilities | i 83 | i 93 | |||||
Variable
interest entity liabilities: | |||||||
Accrued interest payable | i — | i 1 | |||||
Long-term
debt (includes $3,953 and $4,351 at fair value) | i 4,125 | i 4,554 | |||||
Derivative
liabilities | i 1,709 | i 1,657 | |||||
Total
liabilities | i 11,632 | i 11,783 | |||||
Commitments
and contingencies (See Note 11) | |||||||
Stockholders’ equity: | |||||||
Preferred stock, par value $0.01 per share; 20,000,000 shares authorized shares; issued and outstanding shares—none | i — | i — | |||||
Common
stock, par value $0.01 per share; 130,000,000 shares authorized; issued shares: 45,865,081 and 45,571,743 | i — | i — | |||||
Additional
paid-in capital | i 237 | i 232 | |||||
Accumulated
other comprehensive income (loss) | ( i 48 | ) | i 42 | ||||
Retained
earnings | i 881 | i 1,203 | |||||
Treasury
stock, shares at cost: 56,825 and 16,343 | ( i 1 | ) | i — | ||||
Total
Ambac Financial Group, Inc. stockholders’ equity | i 1,069 | i 1,477 | |||||
Noncontrolling
interest | i 60 | i 60 | |||||
Total
stockholders’ equity | i 1,129 | i 1,536 | |||||
Total
liabilities and stockholders’ equity | $ | i 12,761 | $ | i 13,320 |
Three
Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
(Dollars in millions, except share data) | 2020 | 2019 | 2020 | 2019 | ||||||||||||
Revenues: | ||||||||||||||||
Net
premiums earned | $ | i 11 | $ | i 8 | $ | i 21 | i 36 | |||||||||
Net
investment income | i 52 | i 86 | i 31 | i 141 | ||||||||||||
Net
realized investment gains (losses) | i 10 | i 36 | i 18 | i 53 | ||||||||||||
Net
gains (losses) on derivative contracts | i 2 | ( i 35 | ) | ( i 68 | ) | ( i 52 | ) | |||||||||
Other
income (expense) | i — | ( i 9 | ) | i — | ( i 8 | ) | ||||||||||
Income
(loss) on variable interest entities | i — | i 3 | i 3 | i 19 | ||||||||||||
Total
revenues | i 75 | i 89 | i 6 | i 189 | ||||||||||||
Expenses: | ||||||||||||||||
Losses
and loss expenses (benefit) | i 16 | ( i 133 | ) | i 132 | ( i 121 | ) | ||||||||||
Insurance
intangible amortization | i 14 | i 226 | i 27 | i 263 | ||||||||||||
Operating
expenses | i 21 | i 29 | i 44 | i 54 | ||||||||||||
Interest
expense | i 58 | i 67 | i 122 | i 135 | ||||||||||||
Total
expenses | i 108 | i 189 | i 325 | i 331 | ||||||||||||
Pre-tax
income (loss) | ( i 33 | ) | ( i 100 | ) | ( i 320 | ) | ( i 141 | ) | ||||||||
Provision
(benefit) for income taxes | i 2 | i 28 | ( i 4 | ) | i 30 | |||||||||||
Net
income (loss) attributable to common stockholders | $ | ( i 35 | ) | $ | ( i 128 | ) | $ | ( i 315 | ) | $ | ( i 172 | ) | ||||
Other
comprehensive income (loss), after tax: | ||||||||||||||||
Net income (loss) | $ | ( i 35 | ) | $ | ( i 128 | ) | $ | ( i 315 | ) | $ | ( i 172 | ) | ||||
Unrealized
gains (losses) on securities, net of income tax provision (benefit) of $1, $(7), $1 and $(8) | i 104 | i 15 | ( i 42 | ) | i 71 | |||||||||||
Gains
(losses) on foreign currency translation, net of income tax provision (benefit) of $0, $0, $0 and $0 | ( i 2 | ) | ( i 19 | ) | ( i 48 | ) | ( i 4 | ) | ||||||||
Credit
risk changes of fair value option liabilities, net of income tax provision (benefit) of $(0), $0, $0 and $0 | ( i 1 | ) | i — | i 2 | i — | |||||||||||
Changes
to postretirement benefit, net of income tax provision (benefit) of $0, $0, $0 and $0 | i — | i — | ( i 2 | ) | i — | |||||||||||
Total
other comprehensive income (loss), net of income tax | i 100 | ( i 3 | ) | ( i 90 | ) | i 68 | ||||||||||
Total
comprehensive income (loss) attributable to common stockholders | $ | i 65 | $ | ( i 132 | ) | $ | ( i 405 | ) | $ | ( i 104 | ) | |||||
Net
income (loss) per share attributable to common stockholders: | ||||||||||||||||
Basic | $ | ( i 0.77 | ) | $ | ( i 2.79 | ) | $ | ( i 6.83 | ) | $ | ( i 3.74 | ) | ||||
Diluted | $ | ( i 0.77 | ) | $ | ( i 2.79 | ) | $ | ( i 6.83 | ) | $ | ( i 3.74 | ) | ||||
Weighted
average number of common shares outstanding: | ||||||||||||||||
Basic | i 46,166,666 | i 45,986,043 | i 46,113,495 | i 45,909,595 | ||||||||||||
Diluted | i 46,166,666 | i 45,986,043 | i 46,113,495 | i 45,909,595 |
Ambac
Financial Group, Inc. | |||||||||||||||||||||||||||||||
(Dollars in millions) | Total | Retained Earnings | Accumulated Other Comprehensive Income (Loss) | Preferred Stock | Common Stock | Additional
Paid-in Capital | Common Stock Held in Treasury, at Cost | Noncontrolling Interest | |||||||||||||||||||||||
Balance at March 31, 2020 | $ | i 1,062 | $ | i 917 | $ | ( i 149 | ) | $ | i — | $ | i — | $ | i 235 | $ | ( i 2 | ) | $ | i 60 | |||||||||||||
Total
comprehensive income (loss) | i 65 | ( i 35 | ) | i 100 | i — | i — | i — | i — | i — | ||||||||||||||||||||||
Stock-based
compensation | i 3 | i — | i — | i — | i — | i 3 | i — | i — | |||||||||||||||||||||||
Cost
of shares (acquired) issued under equity plan | i — | ( i 1 | ) | i — | i — | i — | i — | i 1 | i — | ||||||||||||||||||||||
Balance
at June 30, 2020 | $ | i 1,129 | $ | i 881 | $ | ( i 48 | ) | $ | i — | $ | i — | $ | i 237 | $ | ( i 1 | ) | $ | i 60 | |||||||||||||
Balance
at March 31, 2019 | $ | i 1,666 | $ | i 1,376 | $ | i 23 | $ | i — | $ | i — | $ | i 224 | $ | ( i 1 | ) | $ | i 44 | ||||||||||||||
Total
comprehensive income (loss) | ( i 132 | ) | ( i 128 | ) | ( i 3 | ) | i — | i — | i — | i — | i — | ||||||||||||||||||||
Stock-based
compensation | i 3 | i — | i — | i — | i — | i 3 | i — | i — | |||||||||||||||||||||||
Cost
of shares (acquired) issued under equity plan | i — | ( i 1 | ) | i — | i — | i — | i — | i — | i — | ||||||||||||||||||||||
Re-issuance
of Ambac Assurance auction market preferred shares | i 16 | i — | i — | i — | i — | i — | i — | i 16 | |||||||||||||||||||||||
Balance
at June 30, 2019 | $ | i 1,553 | $ | i 1,247 | $ | i 19 | $ | i — | $ | i — | $ | i 227 | $ | i — | $ | i 60 |
Ambac
Financial Group, Inc. | |||||||||||||||||||||||||||||||
(Dollars in millions) | Total | Retained Earnings | Accumulated Other Comprehensive Income (Loss) | Preferred Stock | Common Stock | Additional
Paid-in Capital | Common Stock Held in Treasury, at Cost | Noncontrolling Interest | |||||||||||||||||||||||
Balance at January 1, 2020 | $ | i 1,536 | $ | i 1,203 | $ | i 42 | $ | i — | $ | i — | $ | i 232 | $ | i — | $ | i 60 | |||||||||||||||
Total
comprehensive income (loss) | ( i 405 | ) | ( i 315 | ) | ( i 90 | ) | i — | i — | i — | i — | i — | ||||||||||||||||||||
Adjustment
to initially apply ASU 2016-13 | ( i 4 | ) | ( i 4 | ) | i — | — | — | — | — | — | |||||||||||||||||||||
Stock-based
compensation | i 6 | i — | i — | i — | i — | i 6 | i — | i — | |||||||||||||||||||||||
Cost
of shares (acquired) issued under equity plan | ( i 3 | ) | ( i 2 | ) | i — | i — | i — | i — | ( i 1 | ) | i — | ||||||||||||||||||||
Balance
at June 30, 2020 | $ | i 1,129 | $ | i 881 | $ | ( i 48 | ) | $ | i — | $ | i — | $ | i 237 | $ | ( i 1 | ) | $ | i 60 | |||||||||||||
Balance
at January 1, 2019 | $ | i 1,633 | $ | i 1,421 | $ | ( i 49 | ) | $ | i — | $ | i — | $ | i 219 | $ | i — | $ | i 41 | ||||||||||||||
Total
comprehensive income (loss) | ( i 104 | ) | ( i 172 | ) | i 68 | i — | i — | i — | i — | i — | |||||||||||||||||||||
Stock-based
compensation | i 7 | i — | i — | i — | i — | i 7 | i — | i — | |||||||||||||||||||||||
Cost
of shares (acquired) issued under equity plan | ( i 3 | ) | ( i 3 | ) | i — | i — | i — | i — | i — | i — | |||||||||||||||||||||
Issuance
of common stock | i — | i — | i — | i — | i — | i — | i — | i — | |||||||||||||||||||||||
Exchange
of auction market preferred shares | i 19 | i — | i — | i — | i — | i — | i — | i 19 | |||||||||||||||||||||||
Balance
at June 30, 2019 | $ | i 1,553 | $ | i 1,247 | $ | i 19 | $ | i — | $ | i — | $ | i 227 | $ | i — | $ | i 60 |
Six
Months Ended June 30, | ||||||||
(Dollars in millions) | 2020 | 2019 | ||||||
Cash flows from operating activities: | ||||||||
Net income (loss) | $ | ( i 315 | ) | $ | ( i 172 | ) | ||
Adjustments
to reconcile net income to net cash used in operating activities: | ||||||||
Amortization of bond premium and discount | ( i 8 | ) | ( i 55 | ) | ||||
Share-based
compensation | i 6 | i 7 | ||||||
Deferred
income taxes | ( i 8 | ) | ( i 1 | ) | ||||
Current
income taxes | ( i 7 | ) | i 33 | |||||
Unearned
premiums, net | ( i 19 | ) | ( i 68 | ) | ||||
Losses
and loss expenses, net | i 71 | ( i 388 | ) | |||||
Ceded
premiums payable | ( i 2 | ) | ( i 2 | ) | ||||
Premium
receivables | i 24 | i 54 | ||||||
Accrued
interest payable | i 46 | i 42 | ||||||
Amortization
of insurance intangible assets | i 27 | i 263 | ||||||
Net
mark-to-market (gains) losses | i 1 | ( i 1 | ) | |||||
Net
realized investment gains | ( i 18 | ) | ( i 53 | ) | ||||
Variable
interest entity activities | ( i 3 | ) | ( i 19 | ) | ||||
Derivative
assets and liabilities | i 21 | ( i 1 | ) | |||||
Other,
net | i 72 | i 95 | ||||||
Net
cash used in operating activities | ( i 112 | ) | ( i 265 | ) | ||||
Cash
flows from investing activities: | ||||||||
Proceeds from sales of bonds | i 876 | i 689 | ||||||
Proceeds
from matured bonds | i 75 | i 274 | ||||||
Purchases
of bonds | ( i 685 | ) | ( i 427 | ) | ||||
Proceeds
from sales of other invested assets | i 361 | i 48 | ||||||
Purchases
of other invested assets | ( i 401 | ) | ( i 117 | ) | ||||
Change
in short-term investments | ( i 38 | ) | ( i 342 | ) | ||||
Change
in cash collateral receivable | ( i 13 | ) | i 65 | |||||
Proceeds
from paydowns of consolidated VIE assets | i 98 | i 122 | ||||||
Other,
net | ( i 2 | ) | i — | |||||
Net
cash provided by (used in) investing activities | i 270 | i 313 | ||||||
Cash
flows from financing activities: | ||||||||
Proceeds from issuance of Ambac UK debt | i — | i 12 | ||||||
Paydowns
of Ambac note | ( i 103 | ) | ( i 22 | ) | ||||
Issuance
of auction market preferred shares of Ambac Assurance | i — | i 19 | ||||||
Tax
payments related to shares withheld for share-based compensation plans | ( i 3 | ) | ( i 2 | ) | ||||
Payments
of consolidated VIE liabilities | ( i 99 | ) | ( i 92 | ) | ||||
Net
cash used in financing activities | ( i 205 | ) | ( i 85 | ) | ||||
Effect
of foreign exchange on cash, cash equivalents and restricted cash | i — | i — | ||||||
Net
cash flow | ( i 47 | ) | ( i 37 | ) | ||||
Cash,
cash equivalents, and restricted cash at beginning of period | i 81 | i 83 | ||||||
Cash,
cash equivalents, and restricted cash at end of period | $ | i 34 | $ | i 46 |
• | Active
runoff of Ambac Assurance and its subsidiaries through transaction terminations, policy commutations, reinsurance, settlements and restructurings, with a focus on our watch list credits and known and potential future adversely classified credits, that we believe will improve our risk profile, and maximizing the risk-adjusted return on invested assets; |
• | Ongoing rationalization of Ambac's capital and liability structures; |
• | Loss
recovery through active litigation management and exercise of contractual and legal rights; |
• | Ongoing review of the effectiveness and efficiency of Ambac's operating platform; and |
• | Evaluation of opportunities in certain business sectors that meet acceptable criteria that will generate long-term stockholder value with attractive risk-adjusted returns. |
Supplemental
Disclosure of Cash Flow Information | Six Months Ended June 30, | |||||||
2020 | 2019 | |||||||
Cash paid during the period for: | ||||||||
Income
taxes | $ | i 11 | $ | i 1 | ||||
Interest
on long-term debt | i 58 | i 74 | ||||||
Non-cash
financing activities: | ||||||||
Exchange of investments in Puerto Rico COFINA bonds for new bonds issued in the Plan of Adjustment | $ | — | $ | i 510 | ||||
2020 | 2019 | |||||||
Reconciliation
of cash, cash equivalents, and restricted cash reported within the Consolidated Balance Sheets to the Consolidated Statements of Cash Flows: | ||||||||
Cash and cash equivalents | $ | i 17 | $ | i 18 | ||||
Restricted
cash | i 15 | i — | ||||||
Variable
Interest Entity Restricted cash | i 2 | i 29 | ||||||
Total
cash, cash equivalents, and restricted cash shown on the Consolidated Statements of Cash Flows | $ | i 34 | $ | i 46 |
• | Removals: 1) Amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy, 2) Policy for timing of transfers between levels, and 3) Valuation processes for Level 3 fair value measurements. |
• | Modifications:
1) For investments in certain entities that calculate net asset value, disclosures are required for the timing of liquidation of an investee's assets and the date when restrictions from redemption might lapse, only if the investee has communicated the timing to the reporting entity or publicly announced it and 2) Clarification that the measurement uncertainty disclosure is to communicate information about the uncertainty in measurement as of the reporting date and not possible future changes. |
• | Additions: 1) Changes in unrealized gains and losses for the period included in other comprehensive income for recurring Level 3 fair value measurements held at the end of the reporting period and 2) Range and weighted average
of significant unobservable inputs used to develop Level 3 fair value measurements. Alternatively, an entity may disclose other quantitative information (such as the median or arithmetic average) if it determines that it is a more reasonable and rational method to reflect the distribution of unobservable inputs used. |
• | Ambac provides financial guarantees, including credit derivative contracts, for various debt obligations issued by special purpose entities, including VIEs ("FG VIEs"); |
• | Ambac
sponsors special purpose entities that issued notes to investors for various purposes; and |
• | Ambac is an investor in collateralized debt obligations, mortgage-backed and other asset-backed securities issued by VIEs and its ownership interest is generally insignificant to the VIE and/or Ambac does not have rights that direct the activities that are most significant to such VIE. |
• | We determined that Ambac’s subsidiaries generally have the obligation to absorb a FG VIE's expected losses given that they have issued financial guarantees supporting certain liabilities (and in some cases certain assets). As further described below, Ambac consolidates certain FG VIEs in cases where we also have the power to direct the activities that most significantly impact the VIE’s economic performance due to one or more of the following: (i) the transaction experiencing deterioration and breaching performance triggers, giving Ambac the ability to exercise certain control rights, (ii) Ambac being involved in the
design of the VIE and receiving control rights from its inception, such as may occur from loss remediation activities, or (iii) the transaction not experiencing deterioration, however due to the passive nature of the VIE, Ambac's contingent control rights upon a future breach of performance triggers is considered to be the power over the most significant activity. |
• | A VIE is deconsolidated in the period that Ambac no longer has such control rights, which could occur in connection with the execution of remediation activities on the transaction or amortization of insured exposure, either of which may reduce the degree of Ambac’s control over a VIE. |
• | Assets
and liabilities of FG VIEs that are consolidated are reported within Variable interest entity assets or Variable interest entity liabilities on the Consolidated Balance Sheets. |
• | The election to use the fair value option is made on an instrument by instrument basis. Ambac has elected the fair value option for consolidated FG VIE financial assets and financial liabilities, except in cases where Ambac was involved in the design of the VIE and was granted control rights at its inception. |
◦ | When the fair value
option is elected, changes in the fair value of the FG VIE's financial assets and liabilities are reported within Income (loss) on variable interest entities in the Consolidated Statements of Total Comprehensive Income (Loss), except for the portion of the total change in fair value of financial liabilities caused by changes in the instrument-specific credit risk which is presented separately in Other comprehensive income (loss). |
◦ | In cases where the fair value option has not been elected, the FG VIE's invested assets are fixed income securities and are considered available-for-sale as defined by the Investments - Debt Securities Topic of the ASC. These assets are reported in the financial statements at fair value with unrealized gains
and losses reflected in Accumulated Other Comprehensive Income in Stockholders' Equity. |
• | Upon initial consolidation of a FG VIE, Ambac recognizes a gain or loss in earnings for the difference between: (i) the fair value of the consideration paid, the fair value of any non-controlling interests and the reported amount of any previously held interests and (ii) the net amount, as measured on a fair value
basis, of the assets and liabilities consolidated. Upon deconsolidation of a FG VIE, we recognize a gain or loss for the difference between: (i) the fair value of any consideration received, the fair value of any retained non-controlling investment in the VIE and the carrying amount of any non-controlling interest in the VIE and (ii) the carrying amount of the VIE’s assets and liabilities. Gains or losses from consolidation and deconsolidation that are reported in earnings are reported within Income (loss) on variable interest entities on the Consolidated Statements of Total Comprehensive Income (Loss). |
• | The impact of consolidating such FG VIEs on Ambac’s balance sheet is the elimination of transactions between the consolidated FG VIEs and
Ambac’s operating subsidiaries and the inclusion of the FG VIE’s third party assets and liabilities. For a financial guarantee insurance policy issued to a consolidated VIE, Ambac does not reflect the financial guarantee insurance policy in accordance with the related insurance accounting rules under the Financial Services – |
Ambac UK | Ambac Assurance | Total VIEs | Ambac UK | Ambac Assurance | Total
VIEs | ||||||||||||||||||
Fixed income securities, at fair value: | |||||||||||||||||||||||
Corporate obligations,
fair value option | $ | i 2,907 | $ | i — | $ | i 2,907 | $ | i 2,957 | $ | i — | $ | i 2,957 | |||||||||||
Municipal
obligations, available-for-sale (1) | i — | i 134 | i 134 | i — | i 164 | i 164 | |||||||||||||||||
Total
FG VIE fixed income securities, at fair value | i 2,907 | i 134 | i 3,041 | i 2,957 | i 164 | i 3,121 | |||||||||||||||||
Restricted
cash | i 1 | i 1 | i 2 | i 1 | i 1 | i 2 | |||||||||||||||||
Loans,
at fair value (2) | i 2,787 | i — | i 2,787 | i 3,108 | i — | i 3,108 | |||||||||||||||||
Derivative
assets | i 61 | i — | i 61 | i 52 | i — | i 52 | |||||||||||||||||
Other
assets | i — | i 2 | i 2 | i 1 | i 2 | i 3 | |||||||||||||||||
Total
FG VIE assets | $ | i 5,756 | $ | i 138 | $ | i 5,893 | $ | i 6,119 | $ | i 167 | $ | i 6,286 | |||||||||||
Accrued
interest payable | $ | i — | $ | i — | $ | i — | $ | i 1 | $ | i — | $ | i 1 | |||||||||||
Long-term
debt: | |||||||||||||||||||||||
Long-term debt, at fair value (3) | i 3,953 | i — | i 3,953 | i 4,351 | i — | i 4,351 | |||||||||||||||||
Long-term
debt, at par less unamortized discount | i — | i 173 | i 173 | i — | i 203 | i 203 | |||||||||||||||||
Total
long-term debt | i 3,953 | i 173 | i 4,125 | i 4,351 | i 203 | i 4,554 | |||||||||||||||||
Derivative
liabilities | i 1,709 | i — | i 1,709 | i 1,657 | i — | i 1,657 | |||||||||||||||||
Total
FG VIE liabilities | $ | i 5,662 | $ | i 173 | $ | i 5,835 | $ | i 6,009 | $ | i 203 | $ | i 6,212 | |||||||||||
Number
of FG VIEs consolidated | i 5 | i 1 | i 6 | i 6 | i 1 | i 7 |
(1) | Available-for-sale
FG VIE fixed income securities consist of municipal obligations with an amortized cost basis of $ i 116 and $ i 139,
and aggregate gross unrealized gains of $ i 18 and $ i 25
at June 30, 2020 and December 31, 2019, respectively. All such securities had contractual maturities due after ten years as of June 30, 2020. |
(2) | The unpaid principal balances of loan assets carried at fair value were $ i 2,399
as of June 30, 2020 and $ i 2,618 as of December 31, 2019. |
(3) | The
unpaid principal balances of long-term debt carried at fair value were $ i 3,506 as of June 30, 2020 and $ i 3,800
as of December 31, 2019. |
Three
Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||||||
Net change in fair
value of VIE assets and liabilities reported under the fair value option | $ | ( i 2 | ) | $ | i 3 | $ | ( i 2 | ) | $ | i 5 | ||||||
Less: Credit
risk changes of fair value option long-term debt reported through other comprehensive income (loss) | i 1 | i — | ( i 3 | ) | i — | |||||||||||
Net
change in fair value of VIE assets and liabilities reported in earnings | ( i 1 | ) | i 3 | ( i 5 | ) | i 4 | ||||||||||
Investment
income on available-for-sale securities | i 2 | i 4 | i 3 | i 5 | ||||||||||||
Net
realized investment gains (losses) on available-for-sale securities | i — | i 2 | i 8 | i 2 | ||||||||||||
Interest
expense on long-term debt carried at par less unamortized cost | ( i 1 | ) | ( i 4 | ) | ( i 3 | ) | ( i 6 | ) | ||||||||
Other
expenses | i — | ( i 1 | ) | i — | ( i 1 | ) | ||||||||||
Gain
(loss) from consolidating FG VIEs | i — | i — | i — | i 15 | ||||||||||||
Gain
(loss) from de-consolidating FG VIEs | — | — | — | — | ||||||||||||
Income (loss) on variable
interest entities | $ | i — | $ | i 3 | $ | i 3 | $ | i 19 |
Carrying Value of Assets and Liabilities | |||||||||||||||
Maximum Exposure To Loss (1) | Insurance Assets (2) | Insurance Liabilities (3) | Net Derivative Assets (Liabilities) (4) | ||||||||||||
Global
structured finance: | |||||||||||||||
Mortgage-backed—residential | $ | i 4,764 | $ | i 2,099 | $ | i 603 | $ | i — | |||||||
Other
consumer asset-backed | i 1,189 | i 28 | i 237 | i — | |||||||||||
Other
commercial asset-backed | i 93 | i 3 | i 2 | i — | |||||||||||
Other | i 1,006 | i 6 | i 16 | i 9 | |||||||||||
Total
global structured finance | i 7,053 | i 2,136 | i 858 | i 9 | |||||||||||
Global
public finance | i 22,373 | i 282 | i 325 | ( i 1 | ) | ||||||||||
Total | $ | i 29,426 | $ | i 2,417 | $ | i 1,182 | $ | i 8 | |||||||
Global structured finance: | |||||||||||||||
Mortgage-backed—residential | $ | i 5,373 | $ | i 1,913 | $ | i 523 | $ | i — | |||||||
Other
consumer asset-backed | i 1,373 | i 31 | i 216 | i — | |||||||||||
Other
commercial asset-backed | i 314 | i 9 | i 6 | i — | |||||||||||
Other | i 1,107 | i 7 | i 18 | i 8 | |||||||||||
Total
global structured finance | i 8,165 | i 1,961 | i 762 | i 8 | |||||||||||
Global
public finance | i 23,341 | i 287 | i 321 | i — | |||||||||||
Total | $ | i 31,506 | $ | i 2,247 | $ | i 1,083 | $ | i 7 |
(1) | Maximum
exposure to loss represents the maximum future payments of principal and interest on insured obligations and derivative contracts. Ambac’s maximum exposure to loss does not include the benefit of any financial instruments (such as reinsurance or hedge contracts) that Ambac may utilize to mitigate the risks associated with these variable interests. |
(2) | Insurance assets represent the amount included in “Premium receivables” and “Subrogation recoverable” for financial guarantee insurance contracts
on Ambac’s Consolidated Balance Sheets. |
(3) | Insurance liabilities represent the amount included in “Loss and loss expense reserves” and “Unearned premiums” for financial guarantee insurance contracts on Ambac’s Consolidated Balance Sheets. |
(4) | Net derivative
assets (liabilities) represent the fair value recognized on credit derivative contracts and interest rate swaps on Ambac’s Consolidated Balance Sheets. |
• | Total principal amount of debt outstanding was $ i 377
and $ i 403 at June 30, 2020 and December 31, 2019, respectively. In each case, Ambac sold assets to this entity, which are composed of utility obligations with a weighted average rating of i BBB+
at June 30, 2020 and weighted average life of i 0.6 years. The purchase by this entity of financial assets was financed through the issuance of MTNs, which are cross-collateralized by the purchased assets. The MTNs have the same expected weighted average life as the purchased assets. Derivative contracts
(interest rate swaps) are used within the entity for economic |
• | 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 June 30, 2020: | ||||||||||||||||||||
Beginning
Balance | $ | i 5 | $ | i 6 | $ | ( i 162 | ) | $ | i 2 | $ | ( i 149 | ) | ||||||||
Other
comprehensive income (loss) before reclassifications | i 114 | i — | ( i 2 | ) | i — | i 111 | ||||||||||||||
Amounts
reclassified from accumulated other comprehensive income (loss) | ( i 10 | ) | i — | i — | ( i 1 | ) | ( i 11 | ) | ||||||||||||
Net
current period other comprehensive income (loss) | i 104 | i — | ( i 2 | ) | ( i 1 | ) | i 100 | |||||||||||||
Balance
at June 30, 2020 | $ | i 109 | $ | i 6 | $ | ( i 164 | ) | $ | i — | $ | ( i 48 | ) | ||||||||
Three
Months Ended June 30, 2019: | ||||||||||||||||||||
Beginning Balance | $ | i 142 | $ | i 9 | $ | ( i 127 | ) | $ | ( i 2 | ) | $ | i 23 | ||||||||
Other
comprehensive income (loss) before reclassifications | i 51 | i — | ( i 19 | ) | i — | i 33 | ||||||||||||||
Amounts
reclassified from accumulated other comprehensive income (loss) | ( i 36 | ) | i — | i — | i — | ( i 36 | ) | |||||||||||||
Net
current period other comprehensive income (loss) | i 15 | i — | ( i 19 | ) | i — | ( i 3 | ) | |||||||||||||
Balance
at June 30, 2019 | $ | i 157 | $ | i 9 | $ | ( i 145 | ) | $ | ( i 2 | ) | $ | i 19 |
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 | ||||||||||||||||
Six
Months Ended June 30, 2020: | ||||||||||||||||||||
Beginning Balance | $ | i 151 | $ | i 8 | $ | ( i 116 | ) | $ | ( i 2 | ) | $ | i 42 | ||||||||
Adjustment
to opening balance, net of taxes (3) | — | — | — | i — | i — | |||||||||||||||
Adjusted
balance, beginning of period | i 151 | i 8 | ( i 116 | ) | ( i 2 | ) | i 42 | |||||||||||||
Other
comprehensive income (loss) before reclassifications | ( i 25 | ) | ( i 2 | ) | ( i 48 | ) | i — | ( i 75 | ) | |||||||||||
Amounts
reclassified from accumulated other comprehensive income (loss) | ( i 17 | ) | i — | i — | i 2 | ( i 15 | ) | |||||||||||||
Net
current period other comprehensive income (loss) | ( i 42 | ) | ( i 2 | ) | ( i 48 | ) | i 2 | ( i 90 | ) | |||||||||||
Balance
at June 30, 2020 | $ | i 109 | $ | i 6 | $ | ( i 164 | ) | $ | i — | $ | ( i 48 | ) | ||||||||
Six
Months Ended June 30, 2019: | ||||||||||||||||||||
Beginning Balance | $ | i 86 | $ | i 9 | $ | ( i 142 | ) | $ | ( i 2 | ) | $ | ( i 49 | ) | |||||||
Adjustments
to opening balance, net of taxes (3) | — | — | — | i — | i — | |||||||||||||||
Adjusted
balance, beginning of period | i 86 | i 9 | ( i 142 | ) | ( i 2 | ) | ( i 49 | ) | ||||||||||||
Other
comprehensive income before reclassifications | i 124 | i 1 | ( i 4 | ) | i — | i 121 | ||||||||||||||
Amounts
reclassified from accumulated other comprehensive income | ( i 53 | ) | ( i 1 | ) | i — | i — | ( i 53 | ) | ||||||||||||
Net
current period other comprehensive income | $ | i 71 | $ | i — | $ | ( i 4 | ) | $ | i — | $ | i 68 | |||||||||
Balance
at June 30, 2019 | $ | i 157 | $ | i 9 | $ | ( i 145 | ) | $ | ( i 2 | ) | $ | i 19 |
(1) | All
amounts are net of tax and noncontrolling interest. Amounts in parentheses indicate reductions to Accumulated Other Comprehensive Income. |
(2) | Represents the changes in fair value attributable to instrument-specific credit risk of liabilities for which the fair value option is elected. |
Details about Accumulated Other Comprehensive Income Components | Amount Reclassified from Accumulated
Other Comprehensive Income | Affected Line Item in the Consolidated Statement of Total Comprehensive Income (Loss) | ||||||||||||||||
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||||||||
Unrealized
Gains (Losses) on Available-for-Sale Securities | ||||||||||||||||||
$ | ( i 10 | ) | $ | ( i 41 | ) | $ | ( i 18 | ) | $ | ( i 58 | ) | Net
realized investment gains (losses) and other-than-temporary impairment losses | ||||||
i 1 | i 5 | i 1 | i 5 | Provision
for income taxes | ||||||||||||||
$ | ( i 10 | ) | $ | ( i 36 | ) | $ | ( i 17 | ) | $ | ( i 53 | ) | Net
of tax and noncontrolling interest | ||||||
Amortization of Postretirement Benefit | ||||||||||||||||||
Prior service cost | $ | i — | $ | i — | $ | i — | $ | i — | Other
income | |||||||||
Actuarial (losses) | i — | i — | i — | i — | Other
income | |||||||||||||
i — | i — | i — | ( i 1 | ) | Total
before tax | |||||||||||||
i — | i — | i — | i — | Provision
for income taxes | ||||||||||||||
$ | i — | $ | i — | $ | i — | $ | ( i 1 | ) | Net
of tax and noncontrolling interest | |||||||||
Credit risk changes of fair value option liabilities | ||||||||||||||||||
$ | ( i 1 | ) | $ | i — | $ | i 3 | $ | i — | Credit
Risk Changes of Fair Value Option Liabilities | |||||||||
i — | i — | i — | i — | Provision
for income taxes | ||||||||||||||
$ | ( i 1 | ) | $ | i — | $ | i 2 | $ | i — | Net
of tax and noncontrolling interest | |||||||||
Total reclassifications for the period | $ | ( i 11 | ) | $ | ( i 36 | ) | $ | ( i 15 | ) | $ | ( i 53 | ) | Net
of tax and noncontrolling interest |
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||
Basic
weighted average shares outstanding | i 46,166,666 | i 45,986,043 | i 46,113,495 | i 45,909,595 | ||||||||
Effect
of potential dilutive shares (1): | ||||||||||||
Stock options | i — | i — | i — | i — | ||||||||
Warrants | i — | i — | i — | i — | ||||||||
Restricted
stock units | i — | i — | i — | i — | ||||||||
Performance
stock units (2) | i — | i — | i — | i — | ||||||||
Diluted
weighted average shares outstanding | i 46,166,666 | i 45,986,043 | i 46,113,495 | i 45,909,595 | ||||||||
Anti-dilutive
shares excluded from the above reconciliation: | ||||||||||||
Stock options | i 16,667 | i 16,667 | i 16,667 | i 16,667 | ||||||||
Warrants | i 4,877,749 | i 4,877,783 | i 4,877,757 | i 4,877,783 | ||||||||
Restricted
stock units | i 288,562 | i 263,151 | i 262,395 | i 244,202 | ||||||||
Performance
stock units (2) | i 997,841 | i 699,038 | i 929,057 | i 651,310 |
(1) | For
the three and six months ended June 30, 2020, and the three and six months ended June 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. |
Six Months Ended June 30, | ||||||||
2020 | 2019 | |||||||
Beginning
premium receivable | $ | i 416 | $ | i 495 | ||||
Adjustment
to initially apply ASU 2016-13 | ( i 3 | ) | — | |||||
Premium
receipts | ( i 22 | ) | ( i 26 | ) | ||||
Adjustments
for changes in expected and contractual cash flows (1) | i 9 | ( i 22 | ) | |||||
Accretion
of premium receivable discount | i 5 | i 6 | ||||||
Changes
to allowance for credit losses | ( i 4 | ) | ( i 1 | ) | ||||
Other
adjustments (including foreign exchange) | ( i 8 | ) | ( i 11 | ) | ||||
Ending
premium receivable (2) | $ | i 392 | $ | i 442 |
(1) | Adjustments
for changes in expected and contractual cash flows primarily due to changes in indexation rates on certain UK transactions partially offset by reductions in insured exposure as a result of early policy terminations and unscheduled principal paydowns. |
(2) | Premium receivable includes premiums to be received in foreign denominated currencies most notably in British Pounds and Euros. At June 30, 2020 and 2019, premium receivables
include British Pounds of $ i 127 (£ i 103)
and $ i 137 (£ i 108),
respectively, and Euros of $ i 22 (€ i 19)
and $ i 28 (€ i 25),
respectively. |
Three Months Ended June 30, | |||||||||||||||
2020 | 2019 | ||||||||||||||
Written | Earned | Written | Earned | ||||||||||||
Direct | $ | ( i 1 | ) | $ | i 14 | $ | ( i 21 | ) | $ | i 10 | |||||
Assumed | i — | i — | i — | i — | |||||||||||
Ceded | i — | i 3 | i — | i 2 | |||||||||||
Net
premiums | $ | i — | $ | i 11 | $ | ( i 20 | ) | $ | i 8 | ||||||
Six
Months Ended June 30, | |||||||||||||||
2020 | 2019 | ||||||||||||||
Written | Earned | Written | Earned | ||||||||||||
Direct | $ | i 10 | $ | i 27 | $ | ( i 17 | ) | $ | i 40 | ||||||
Assumed | i — | i 1 | i — | i — | |||||||||||
Ceded | ( i 1 | ) | i 6 | ( i 1 | ) | i 4 | |||||||||
Net
premiums | $ | i 11 | $ | i 21 | $ | ( i 16 | ) | $ | i 36 |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||
United
States | $ | i 8 | $ | i 6 | $ | i 15 | $ | i 34 | |||||||
United
Kingdom | i 4 | i 4 | i 8 | i 8 | |||||||||||
Other
international | ( i 1 | ) | ( i 2 | ) | ( i 1 | ) | ( i 7 | ) | |||||||
Total | $ | i 11 | $ | i 8 | $ | i 21 | $ | i 36 |
Future Premiums to be Collected (1) | Future Premiums to be Earned Net of Reinsurance (2) | ||||||
Three months ended: | |||||||
$ | i 12 | $ | i 10 | ||||
i 10 | i 10 | ||||||
Twelve
months ended: | |||||||
i 36 | i 36 | ||||||
i 35 | i 34 | ||||||
i 33 | i 32 | ||||||
i 32 | i 30 | ||||||
Five
years ended: | |||||||
i 140 | i 124 | ||||||
i 104 | i 82 | ||||||
December 31,
2039 | i 52 | i 38 | |||||
December 31,
2044 | i 23 | i 14 | |||||
December 31,
2049 | i 9 | i 5 | |||||
December 31,
2054 | i 1 | i 1 | |||||
Total | $ | i 488 | $ | i 416 |
(1) | Future
premiums to be collected are undiscounted, gross of allowance for credit losses, and are used to derive the discounted premium receivable asset recorded on Ambac's balance sheet. |
(2) | Future premiums to be earned, net of reinsurance relate to the unearned premiums liability and deferred ceded premium asset recorded on Ambac’s balance sheet. The use of contractual lives for many bond types which do not have homogeneous pools of underlying collateral is required
in the calculation of the premium receivable, as further described in Note 2. Basis of Presentation and Significant Accounting Policies in the Notes to Consolidated Financial Statements included in Ambac's Annual Report on Form 10-K for the year ended December 31, 2019. This results in a different premium receivable balance than if expected lives were considered. If installment paying policies are retired or prepay early, premiums reflected in the premium receivable asset and amounts reported in the above table for such policies may not be collected. Future premiums to be earned also considers the use of contractual lives for many bond types which do not have homogeneous pools of underlying collateral, which may result in different unearned premium than if expected lives were considered. If those bonds types are retired
early, premium earnings may be negative in the period of call or refinancing. |
Surveillance
Categories as of June 30, 2020 | |||||||||||||||||||||||
Type of Guaranteed Bond | I | IA | II | III | IV | Total | |||||||||||||||||
Public
Finance: | |||||||||||||||||||||||
Housing revenue | $ | i 160 | $ | i 13 | $ | i — | $ | i — | $ | i — | $ | i 173 | |||||||||||
Other | i 2 | i 13 | i — | i — | i — | i 16 | |||||||||||||||||
Total
Public Finance | i 162 | i 26 | i — | i — | i — | i 189 | |||||||||||||||||
Structured
Finance: | |||||||||||||||||||||||
Mortgage-backed and home equity | i 3 | i — | i 1 | i 3 | i 17 | i 25 | |||||||||||||||||
Structured
insurance | i 17 | i — | i — | i — | i — | i 17 | |||||||||||||||||
Student
loan | i 3 | i — | i 2 | i 12 | i — | i 18 | |||||||||||||||||
Other | i 6 | i — | i — | i — | i — | i 6 | |||||||||||||||||
Total
Structured Finance | i 29 | i — | i 4 | i 15 | i 17 | i 65 | |||||||||||||||||
International: | |||||||||||||||||||||||
Sovereign/sub-sovereign | i 87 | i 12 | i — | i 14 | i — | i 113 | |||||||||||||||||
Investor-owned
and public utilities | i 28 | i — | i — | i — | i — | i 28 | |||||||||||||||||
Other | i 13 | i — | i — | i — | i — | i 13 | |||||||||||||||||
Total
International | i 128 | i 12 | i — | i 14 | i — | i 154 | |||||||||||||||||
Total (1) | $ | i 320 | $ | i 39 | $ | i 4 | $ | i 29 | $ | i 17 | $ | i 408 |
(1) | The
underwriting origination dates for all policies included are greater than five years prior to the current reporting date. |
Three
Months Ended June 30, 2020 | Six Months Ended June 30, 2020 | |||||||
Beginning balance (1) | $ | i 14 | $ | i 9 | ||||
Current
period provision (2) | i 2 | i 7 | ||||||
Write-offs
of the allowance | i — | i — | ||||||
Recoveries
of previously written-off amounts | i — | i — | ||||||
Ending
balance | $ | 16 | $ | i 16 |
(1) | At
December 31, 2019, $ i 9 of premiums receivable were deemed uncollectible as determined under prior GAAP rules. |
(2) |
Present Value of Expected Net Cash Flows | Unearned Premium Revenue | Gross Loss and Loss Expense Reserves | Present
Value of Expected Net Cash Flows | Unearned Premium Revenue | Gross Loss and Loss Expense Reserves | |||||||||||||||||||||||||||
Balance Sheet Line Item | Claims and Loss Expenses | Recoveries | Claims
and Loss Expenses | Recoveries | ||||||||||||||||||||||||||||
Loss and loss expense reserves | $ | i 2,134 | $ | ( i 238 | ) | $ | ( i 82 | ) | $ | i 1,814 | $ | i 1,835 | $ | ( i 233 | ) | $ | ( i 54 | ) | $ | i 1,548 | ||||||||||||
Subrogation
recoverable | i 120 | ( i 2,336 | ) | i — | ( i 2,215 | ) | i 131 | ( i 2,160 | ) | i — | ( i 2,029 | ) | ||||||||||||||||||||
Totals | $ | i 2,254 | $ | ( i 2,573 | ) | $ | ( i 82 | ) | $ | ( i 401 | ) | $ | i 1,966 | $ | ( i 2,394 | ) | $ | ( i 54 | ) | $ | ( i 482 | ) |
Six Months Ended June 30, | |||||||
2020 | 2019 | ||||||
Beginning gross
loss and loss expense reserves | $ | ( i 482 | ) | $ | ( i 107 | ) | |
Reinsurance
recoverable | i 26 | i 23 | |||||
Beginning
balance of net loss and loss expense reserves | ( i 508 | ) | ( i 130 | ) | |||
Losses
and loss expenses (benefit): | |||||||
Current year | i 16 | i 1 | |||||
Prior
years | i 116 | ( i 122 | ) | ||||
Total
(1) (2) | i 132 | ( i 121 | ) | ||||
Loss
and loss expenses paid (recovered): | |||||||
Current year | i — | i — | |||||
Prior
years | i 61 | i 194 | |||||
Total | i 61 | i 194 | |||||
Foreign
exchange effect | i — | ( i 1 | ) | ||||
Ending
net loss and loss expense reserves | ( i 437 | ) | ( i 446 | ) | |||
Impact
of VIE consolidation | i — | ( i 72 | ) | ||||
Reinsurance
recoverable (3) | i 35 | i 27 | |||||
Ending
gross loss and loss expense reserves | $ | ( i 401 | ) | $ | ( i 491 | ) |
(1) | Total
losses and loss expenses (benefit) includes $( i 11) and $( i 6)
for the six months ended June 30, 2020 and 2019, respectively, related to ceded reinsurance. |
(2) | Ambac records the impact of estimated recoveries related to securitized loans in RMBS transactions that breached certain representations and warranties ("R&W"s) by transaction sponsors within losses and loss expenses (benefit). The losses and loss expense (benefit) incurred associated with changes in estimated R&Ws for the six months ended June 30, 2020 and 2019,
was $( i 30) and $ i 8, respectively. |
(3) | Represents
reinsurance recoverable on future loss and loss expenses. Additionally, the Balance Sheet line "Reinsurance recoverable on paid and unpaid losses" includes reinsurance recoverables (payables) of $ i 1 and $ i 0
as of June 30, 2020 and 2019, respectively, related to previously presented loss and loss expenses and subrogation. |
Surveillance Categories as of June 30, 2020 | |||||||||||||||||||||||||||
I | IA | II | III | IV | V | Total | |||||||||||||||||||||
Number
of policies | i 49 | i 29 | i 15 | i 16 | i 135 | i 3 | i 247 | ||||||||||||||||||||
Remaining
weighted-average contract period (in years) (1) | i 10 | i 19 | i 9 | i 16 | i 15 | i 3 | i 15 | ||||||||||||||||||||
Gross
insured contractual payments outstanding: | |||||||||||||||||||||||||||
Principal | $ | i 973 | $ | i 1,159 | $ | i 621 | $ | i 1,503 | $ | i 3,536 | $ | i 32 | $ | i 7,824 | |||||||||||||
Interest | i 314 | i 1,112 | i 506 | i 275 | i 1,538 | i 10 | i 3,753 | ||||||||||||||||||||
Total | $ | i 1,287 | $ | i 2,271 | $ | i 1,126 | $ | i 1,778 | $ | i 5,074 | $ | i 41 | $ | i 11,577 | |||||||||||||
Gross
undiscounted claim liability | $ | i 4 | $ | i 56 | $ | i 42 | $ | i 527 | $ | i 1,784 | $ | i 41 | $ | i 2,454 | |||||||||||||
Discount,
gross claim liability | i — | ( i 2 | ) | ( i 1 | ) | ( i 70 | ) | ( i 184 | ) | i — | ( i 257 | ) | |||||||||||||||
Gross
claim liability before all subrogation and before reinsurance | i 4 | i 54 | i 41 | i 457 | i 1,601 | i 41 | i 2,198 | ||||||||||||||||||||
Less: | |||||||||||||||||||||||||||
Gross
RMBS subrogation (2) | i — | i — | i — | i — | ( i 1,761 | ) | i — | ( i 1,761 | ) | ||||||||||||||||||
Discount,
RMBS subrogation | i — | i — | i — | i — | i 4 | i — | i 4 | ||||||||||||||||||||
Discounted
RMBS subrogation, before reinsurance | i — | i — | i — | i — | ( i 1,757 | ) | i — | ( i 1,757 | ) | ||||||||||||||||||
Less: | |||||||||||||||||||||||||||
Gross
other subrogation (3) | i — | i — | i — | ( i 38 | ) | ( i 785 | ) | ( i 13 | ) | ( i 836 | ) | ||||||||||||||||
Discount,
other subrogation | i — | i — | i — | i 1 | i 18 | i 1 | i 20 | ||||||||||||||||||||
Discounted
other subrogation, before reinsurance | i — | i — | i — | ( i 37 | ) | ( i 768 | ) | ( i 11 | ) | ( i 816 | ) | ||||||||||||||||
Gross
claim liability, net of all subrogation and discounts, before reinsurance | i 4 | i 54 | i 41 | i 420 | ( i 924 | ) | i 30 | ( i 376 | ) | ||||||||||||||||||
Less:
Unearned premium revenue | ( i 3 | ) | ( i 22 | ) | ( i 5 | ) | ( i 18 | ) | ( i 33 | ) | i — | ( i 82 | ) | ||||||||||||||
Plus:
Loss expense reserves | i — | i 1 | i 1 | i 4 | i 51 | i — | i 57 | ||||||||||||||||||||
Gross
loss and loss expense reserves | $ | i 1 | $ | i 32 | $ | i 37 | $ | i 406 | $ | ( i 907 | ) | $ | i 30 | $ | ( i 401 | ) | |||||||||||
Reinsurance
recoverable reported on Balance Sheet (4) | $ | i — | $ | i 6 | $ | i 9 | $ | i 27 | $ | ( i 6 | ) | $ | i — | $ | i 36 |
(1) | Remaining
weighted-average contract period is weighted based on projected gross claims over the lives of the respective policies. |
(2) | RMBS subrogation represents Ambac’s estimate of subrogation recoveries from RMBS transaction sponsors for R&W breaches. |
(3) | Other subrogation represents subrogation related to excess spread and other contractual cash flows on public finance and structured finance transactions, including RMBS. |
(4) | Reinsurance
recoverable reported on the Balance Sheet includes reinsurance recoverables of $ i 35 related to future loss and loss expenses and $ i 1
related to presented loss and loss expenses and subrogation. |
Surveillance
Categories as of December 31, 2019 | |||||||||||||||||||||||||||
I | IA | II | III | IV | V | Total | |||||||||||||||||||||
Number
of policies | i 34 | i 18 | i 11 | i 16 | i 139 | i 3 | i 221 | ||||||||||||||||||||
Remaining
weighted-average contract period (in years) (1) | i 8 | i 21 | i 9 | i 17 | i 14 | i 3 | i 15 | ||||||||||||||||||||
Gross
insured contractual payments outstanding: | |||||||||||||||||||||||||||
Principal | $ | i 668 | $ | i 510 | $ | i 277 | $ | i 857 | $ | i 3,819 | $ | i 37 | $ | i 6,168 | |||||||||||||
Interest | i 340 | i 507 | i 128 | i 366 | i 1,678 | i 11 | i 3,029 | ||||||||||||||||||||
Total | $ | i 1,007 | $ | i 1,016 | $ | i 404 | $ | i 1,223 | $ | i 5,498 | $ | i 48 | $ | i 9,197 | |||||||||||||
Gross
undiscounted claim liability | $ | i 2 | $ | i 44 | $ | i 21 | $ | i 541 | $ | i 1,778 | $ | i 48 | $ | i 2,434 | |||||||||||||
Discount,
gross claim liability | i — | ( i 5 | ) | ( i 1 | ) | ( i 152 | ) | ( i 381 | ) | ( i 2 | ) | ( i 541 | ) | ||||||||||||||
Gross
claim liability before all subrogation and before reinsurance | i 2 | i 39 | i 20 | i 389 | i 1,397 | i 46 | i 1,893 | ||||||||||||||||||||
Less: | |||||||||||||||||||||||||||
Gross
RMBS subrogation (2) | i — | i — | i — | i — | ( i 1,777 | ) | i — | ( i 1,777 | ) | ||||||||||||||||||
Discount,
RMBS subrogation | i — | i — | i — | i — | i 49 | i — | i 49 | ||||||||||||||||||||
Discounted
RMBS subrogation, before reinsurance | i — | i — | i — | i — | ( i 1,727 | ) | i — | ( i 1,727 | ) | ||||||||||||||||||
Less: | |||||||||||||||||||||||||||
Gross
other subrogation (3) | i — | i — | i — | ( i 41 | ) | ( i 666 | ) | ( i 13 | ) | ( i 720 | ) | ||||||||||||||||
Discount,
other subrogation | i — | i — | i — | i 4 | i 47 | i 3 | i 53 | ||||||||||||||||||||
Discounted
other subrogation, before reinsurance | i — | i — | i — | ( i 37 | ) | ( i 620 | ) | ( i 10 | ) | ( i 666 | ) | ||||||||||||||||
Gross
claim liability, net of all subrogation and discounts, before reinsurance | i 2 | i 39 | i 20 | i 353 | ( i 950 | ) | i 36 | ( i 501 | ) | ||||||||||||||||||
Less:
Unearned premium revenue | ( i 1 | ) | ( i 9 | ) | ( i 1 | ) | ( i 7 | ) | ( i 35 | ) | i — | ( i 54 | ) | ||||||||||||||
Plus:
Loss expense reserves | i 1 | i 1 | i 1 | i 4 | i 67 | i — | i 73 | ||||||||||||||||||||
Gross
loss and loss expense reserves | $ | i 1 | $ | i 30 | $ | i 20 | $ | i 349 | $ | ( i 918 | ) | $ | i 36 | $ | ( i 482 | ) | |||||||||||
Reinsurance
recoverable reported on Balance Sheet (4) | $ | i — | $ | i 6 | $ | i 7 | $ | i 24 | $ | ( i 10 | ) | $ | i — | $ | i 26 |
(1) | Remaining
weighted-average contract period is weighted based on projected gross claims over the lives of the respective policies. |
(2) | RMBS subrogation represents Ambac’s estimate of subrogation recoveries from RMBS transaction sponsors for R&W breaches. |
(3) | Other subrogation represents subrogation related to excess spread and other contractual cash flows on public finance and structured finance transactions, including RMBS. |
(4) | Reinsurance
recoverable reported on Balance Sheet includes reinsurance recoverables of $ i 26 related to future loss and loss expenses and $ i 0
related to presented loss and loss expenses and subrogation. |
Six Months Ended June 30, | |||||||
2020 | 2019 | ||||||
Discounted R&W subrogation (gross of reinsurance)
at beginning of period | $ | i 1,727 | $ | i 1,771 | |||
All
other changes (1) | i 30 | ( i 8 | ) | ||||
Discounted
R&W subrogation (gross of reinsurance) at end of period | $ | i 1,757 | $ | i 1,762 |
(1) | 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. |
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||||||
Insurance
amortization expense | $ | i 14 | $ | i 226 | $ | i 27 | $ | i 263 |
Gross
carrying value of insurance intangible asset | $ | i 1,260 | $ | i 1,273 | ||||
Accumulated
amortization of insurance intangible asset | i 868 | i 847 | ||||||
Net
insurance intangible asset | $ | i 392 | $ | i 427 |
Amortization expense (1) (2) | ||||
2020 (six months) | $ | i 21 | ||
2021 | i 38 | |||
2022 | i 35 | |||
2023 | i 32 | |||
2024 | i 29 | |||
Thereafter | i 237 |
(1)
| The insurance intangible asset will be amortized using a level-yield method based on par exposure of the related financial guarantee insurance or reinsurance contracts. Future amortization considers the use of contractual lives for many bond types which do not have homogeneous pools of underlying collateral. Actual maturities will differ from contractual maturities because borrowers may have the right to call or prepay certain obligations. If those bonds types are retired early, amortization expense may differ in the period of call or refinancing. |
(2) | The
weighted-average amortizations period is i 7.6 years. |
l | Level 1 | Quoted
prices for identical instruments in active markets. Assets and liabilities classified as Level 1 include US Treasury and other foreign government obligations traded in highly liquid and transparent markets, certain highly liquid pooled fund investments, exchange traded futures contracts, variable rate demand obligations and money market funds. | |
l | Level 2 | Quoted prices for similar instruments in active markets;
quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets. Assets and liabilities classified as Level 2 generally include investments in fixed income securities representing municipal, asset-backed and corporate obligations, certain interest rate swap contracts and most long-term debt of variable interest entities consolidated under the Consolidation Topic of the ASC. | |
l | Level 3 | Model
derived valuations in which one or more significant inputs or significant value drivers are unobservable. This hierarchy requires the use of observable market data when available. Assets and liabilities classified as Level 3 include credit derivative contracts, certain uncollateralized interest rate swap contracts, equity interests in Ambac sponsored special purpose entities and certain investments in fixed income securities. Additionally, Level 3 assets and liabilities generally include loan receivables, and certain long-term debt of variable interest entities consolidated under the Consolidation Topic of the ASC. |
Carrying Amount | Total
Fair Value | Fair Value Measurements Categorized as: | ||||||||||||||||||
Level 1 | Level 2 | Level 3 | ||||||||||||||||||
Financial assets: | ||||||||||||||||||||
Fixed
income securities: | ||||||||||||||||||||
Municipal obligations | $ | i 330 | $ | i 330 | $ | i — | $ | i 330 | $ | i — | ||||||||||
Corporate
obligations | i 1,037 | i 1,037 | i 2 | i 1,035 | i — | |||||||||||||||
Foreign
obligations | i 75 | i 75 | i 75 | i — | i — | |||||||||||||||
U.S.
government obligations | i 123 | i 123 | i 123 | i — | i — | |||||||||||||||
Residential
mortgage-backed securities | i 291 | i 291 | i — | i 291 | i — | |||||||||||||||
Collateralized
debt obligations | i 73 | i 73 | i — | i 73 | i — | |||||||||||||||
Other
asset-backed securities | i 288 | i 288 | i — | i 222 | i 66 | |||||||||||||||
Fixed
income securities, pledged as collateral: | ||||||||||||||||||||
Short-term | i 155 | i 155 | i 155 | i — | i — | |||||||||||||||
Short
term investments | i 692 | i 692 | i 636 | i 56 | i — | |||||||||||||||
Other
investments (1) | i 401 | i 387 | i 53 | i — | i 35 | |||||||||||||||
Cash,
cash equivalents and restricted cash | i 32 | i 32 | i 28 | i 5 | i — | |||||||||||||||
Derivative
assets: | ||||||||||||||||||||
Interest rate swaps—asset position | i 97 | i 97 | i — | i 10 | i 87 | |||||||||||||||
Other
assets - equity in sponsored VIE | i 2 | i 2 | i — | i — | i 2 | |||||||||||||||
Other
assets-Loans | i 9 | i 11 | i — | i — | i 11 | |||||||||||||||
Variable
interest entity assets: | ||||||||||||||||||||
Fixed income securities: Corporate obligations | i 2,907 | i 2,907 | i — | i — | i 2,907 | |||||||||||||||
Fixed
income securities: Municipal obligations | i 134 | i 134 | i — | i 134 | i — | |||||||||||||||
Restricted
cash | i 2 | i 2 | i 2 | i — | i — | |||||||||||||||
Loans | i 2,787 | i 2,787 | i — | i — | i 2,787 | |||||||||||||||
Derivative
assets: Currency swaps-asset position | i 61 | i 61 | i — | i 61 | i — | |||||||||||||||
Total
financial assets | $ | i 9,497 | $ | i 9,485 | $ | i 1,074 | $ | i 2,217 | $ | i 5,895 | ||||||||||
Financial
liabilities: | ||||||||||||||||||||
Long term debt, including accrued interest | $ | i 3,223 | $ | i 2,976 | $ | i — | $ | i 2,603 | $ | i 372 | ||||||||||
Derivative
liabilities: | ||||||||||||||||||||
Credit derivatives | i 1 | i 1 | i — | i — | i 1 | |||||||||||||||
Interest
rate swaps—liability position | i 133 | i 133 | i — | i 133 | i — | |||||||||||||||
Liabilities
for net financial guarantees written (2) | ( i 756 | ) | i 417 | i — | i — | i 417 | ||||||||||||||
Variable
interest entity liabilities: | ||||||||||||||||||||
Long-term debt (includes $3,953 at fair value) | i 4,125 | i 4,136 | i — | i 3,977 | i 160 | |||||||||||||||
Derivative
liabilities: Interest rate swaps—liability position | i 1,709 | i 1,709 | i — | i 1,709 | i — | |||||||||||||||
Total
financial liabilities | $ | i 8,436 | $ | i 9,373 | $ | i — | $ | i 8,422 | $ | i 951 |
Carrying Amount | Total
Fair Value | Fair Value Measurements Categorized as: | ||||||||||||||||||
Level 1 | Level 2 | Level 3 | ||||||||||||||||||
Financial assets: | ||||||||||||||||||||
Fixed
income securities: | ||||||||||||||||||||
Municipal obligations | $ | i 215 | $ | i 215 | $ | i — | $ | i 215 | $ | i — | ||||||||||
Corporate
obligations | i 1,430 | i 1,430 | i — | i 1,430 | i — | |||||||||||||||
Foreign
obligations | i 44 | i 44 | i 44 | i — | i — | |||||||||||||||
U.S.
government obligations | i 156 | i 156 | i 156 | i — | i — | |||||||||||||||
Residential
mortgage-backed securities | i 248 | i 248 | i — | i 248 | i — | |||||||||||||||
Commercial
mortgage-backed securities | i 50 | i 50 | i — | i 50 | i — | |||||||||||||||
Collateralized
debt obligations | i 146 | i 146 | i — | i 146 | i — | |||||||||||||||
Other
asset-backed securities | i 287 | i 287 | i — | i 215 | i 72 | |||||||||||||||
Fixed
income securities, pledged as collateral: | ||||||||||||||||||||
Short-term | i 85 | i 85 | i 85 | i — | i — | |||||||||||||||
Short
term investments | i 653 | i 653 | i 598 | i 55 | i — | |||||||||||||||
Other
investments (1) | i 478 | i 493 | i 136 | i — | i 61 | |||||||||||||||
Cash
and cash equivalents and restricted cash | i 79 | i 79 | i 70 | i 9 | i — | |||||||||||||||
Derivative
assets: | ||||||||||||||||||||
Interest rate swaps—asset position | i 75 | i 75 | i — | i 8 | i 67 | |||||||||||||||
Other
assets - equity in sponsored VIE | i 3 | i 3 | i — | i — | i 3 | |||||||||||||||
Other
assets-loans | i 10 | i 13 | i — | i — | i 13 | |||||||||||||||
Variable
interest entity assets: | ||||||||||||||||||||
Fixed income securities: Corporate obligations | i 2,957 | i 2,957 | i — | i — | i 2,957 | |||||||||||||||
Fixed
income securities: Municipal obligations | i 164 | i 164 | i — | i 164 | i — | |||||||||||||||
Restricted
cash | i 2 | i 2 | i 2 | i — | i — | |||||||||||||||
Loans | i 3,108 | i 3,108 | i — | i — | i 3,108 | |||||||||||||||
Derivative
assets: Currency swaps—asset position | i 52 | i 52 | i — | i 52 | i — | |||||||||||||||
Total
financial assets | $ | i 10,242 | $ | i 10,260 | $ | i 1,091 | $ | i 2,593 | $ | i 6,281 | ||||||||||
Financial
liabilities: | ||||||||||||||||||||
Long term debt, including accrued interest | $ | i 3,262 | $ | i 3,274 | $ | i — | $ | i 2,829 | $ | i 445 | ||||||||||
Derivative
liabilities: | ||||||||||||||||||||
Interest rate swaps—liability position | i 89 | i 89 | i — | i 89 | i — | |||||||||||||||
Liabilities
for net financial guarantees written (2) | ( i 863 | ) | i 284 | i — | i — | i 284 | ||||||||||||||
Variable
interest entity liabilities: | ||||||||||||||||||||
Long-term debt (includes $4,351 at fair value) | i 4,554 | i 4,567 | i — | i 4,408 | i 159 | |||||||||||||||
Derivative
liabilities: Interest rate swaps—liability position | i 1,657 | i 1,657 | i — | i 1,657 | i — | |||||||||||||||
Total
financial liabilities | $ | i 8,699 | $ | i 9,872 | $ | i — | $ | i 8,983 | $ | i 889 |
(1) | Excluded
from the fair value measurement categories in the table above are investment funds of $ i 299 and $ i 296
as of June 30, 2020 and December 31, 2019, respectively, which are measured using NAV as a practical expedient. |
(2) | The carrying value of net financial guarantees written includes the following balance sheet items: Premium receivables; Reinsurance recoverable on paid and unpaid losses; Deferred ceded premium; Subrogation recoverable; Insurance intangible asset; Unearned premiums; Loss and loss expense reserves; Ceded premiums payable, premiums taxes payable and other deferred fees recorded in Other liabilities. |
a. Coupon rate: | i 5.97% |
b. Average
Life: | i 15.18 years |
c. Yield: | i 13.10% |
a. Coupon rate: | i 5.97% |
b. Average Life: | i 15.58
years |
c. Yield: | i 11.75% |
Level
3 - Financial Assets and Liabilities Accounted for at Fair Value | ||||||||||||||||||||||||||||
VIE
Assets and Liabilities | ||||||||||||||||||||||||||||
Investments | Other Assets(1) | Derivatives | Investments | Loans | Long-term Debt | Total | ||||||||||||||||||||||
Three
Months Ended June 30, 2020: | ||||||||||||||||||||||||||||
Balance,
beginning of period | $ | i 66 | $ | i 3 | $ | i 77 | $ | i 2,806 | $ | i 2,932 | $ | i — | $ | i 5,884 | ||||||||||||||
Total
gains/(losses) realized and unrealized: | ||||||||||||||||||||||||||||
Included
in earnings | i — | i — | i 11 | i 128 | ( i 67 | ) | i — | i 72 | ||||||||||||||||||||
Included
in other comprehensive income | i — | — | — | ( i 11 | ) | ( i 11 | ) | i — | ( i 22 | ) | ||||||||||||||||||
Purchases | — | — | — | — | — | — | — | |||||||||||||||||||||
Issuances | — | — | — | — | — | — | — | |||||||||||||||||||||
Sales | — | — | — | — | — | — | — | |||||||||||||||||||||
Settlements | i — | — | ( i 2 | ) | ( i 17 | ) | ( i 67 | ) | i — | ( i 86 | ) | |||||||||||||||||
Balance,
end of period | $ | i 66 | $ | i 2 | $ | i 86 | $ | i 2,907 | $ | i 2,787 | $ | i — | $ | i 5,848 | ||||||||||||||
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 | $ | — | $ | i — | $ | i 10 | $ | i 128 | $ | ( i 67 | ) | $ | i — | $ | i 71 | |||||||||||||
The
amount of total gains/(losses) included in other comprehensive income attributable to the change in unrealized gains or losses relating to assets and liabilities still held at the reporting date | $ | i — | $ | i — | $ | i — | $ | ( i 11 | ) | $ | ( i 11 | ) | $ | i — | $ | ( i 22 | ) | |||||||||||
Three
Months Ended June 30, 2019: | ||||||||||||||||||||||||||||
Balance,
beginning of period | $ | i 72 | $ | i 4 | $ | i 53 | $ | i 2,858 | $ | i 4,376 | $ | ( i 224 | ) | $ | i 7,139 | |||||||||||||
Total
gains/(losses) realized and unrealized: | ||||||||||||||||||||||||||||
Included
in earnings | i — | i — | i 10 | i 109 | i 86 | ( i 12 | ) | i 193 | ||||||||||||||||||||
Included
in other comprehensive income | i 2 | — | — | ( i 68 | ) | ( i 102 | ) | i 5 | ( i 163 | ) | ||||||||||||||||||
Purchases | — | — | — | — | — | — | — | |||||||||||||||||||||
Issuances | — | — | — | — | — | — | — | |||||||||||||||||||||
Sales | — | — | — | — | — | — | — | |||||||||||||||||||||
Settlements | i — | — | ( i 1 | ) | ( i 17 | ) | ( i 70 | ) | i — | ( i 89 | ) | |||||||||||||||||
Balance,
end of period | $ | i 74 | $ | i 4 | $ | i 62 | $ | i 2,882 | $ | i 4,289 | $ | ( i 231 | ) | $ | i 7,080 | |||||||||||||
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 | $ | — | $ | i — | $ | i 10 | $ | i 109 | $ | i 86 | $ | ( i 12 | ) | $ | i 193 |
(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 | ||||||||||||||||||||||
Six
Months Ended June 30, 2020: | ||||||||||||||||||||||||||||
Balance,
beginning of period | $ | i 72 | $ | i 3 | $ | i 66 | $ | i 2,957 | $ | i 3,108 | $ | i — | $ | i 6,207 | ||||||||||||||
Total
gains/(losses) realized and unrealized: | ||||||||||||||||||||||||||||
Included
in earnings | i 1 | ( i 1 | ) | i 23 | i 158 | i 20 | i — | i 201 | ||||||||||||||||||||
Included
in other comprehensive income | ( i 6 | ) | i — | i — | ( i 192 | ) | ( i 201 | ) | i — | ( i 398 | ) | |||||||||||||||||
Purchases | i — | i — | i — | i — | i — | i — | i — | |||||||||||||||||||||
Issuances | i — | i — | i — | i — | i — | i — | i — | |||||||||||||||||||||
Sales | i — | i — | i — | i — | i — | i — | i — | |||||||||||||||||||||
Settlements | ( i 1 | ) | i — | ( i 3 | ) | ( i 17 | ) | ( i 141 | ) | i — | ( i 162 | ) | ||||||||||||||||
Balance,
end of period | $ | i 66 | $ | i 2 | $ | i 86 | $ | i 2,907 | $ | i 2,787 | $ | i — | $ | i 5,848 | ||||||||||||||
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 | $ | i — | $ | ( i 1 | ) | $ | i 23 | $ | i 158 | $ | i 20 | $ | i — | $ | i 201 | |||||||||||||
The
amount of total gains/(losses) included in other comprehensive income attributable to the change in unrealized gains or losses relating to assets and liabilities still held at the reporting date | $ | ( i 6 | ) | $ | i — | $ | i — | $ | ( i 192 | ) | $ | ( i 201 | ) | $ | i — | $ | ( i 398 | ) | ||||||||||
Six
Months Ended June 30, 2019: | ||||||||||||||||||||||||||||
Balance,
beginning of period | $ | i 72 | $ | i 5 | $ | i 46 | $ | i 2,737 | $ | i 4,288 | $ | ( i 217 | ) | $ | i 6,930 | |||||||||||||
Total
gains/(losses) realized and unrealized: | ||||||||||||||||||||||||||||
Included
in earnings | i 1 | ( i 1 | ) | i 19 | i 175 | i 174 | ( i 15 | ) | i 353 | |||||||||||||||||||
Included
in other comprehensive income | i 2 | i — | i — | ( i 14 | ) | ( i 17 | ) | i 1 | ( i 28 | ) | ||||||||||||||||||
Purchases | i — | i — | i — | i — | i — | i — | i — | |||||||||||||||||||||
Issuances | i — | i — | i — | i — | i — | i — | i — | |||||||||||||||||||||
Sales | i — | i — | i — | i — | i — | i — | i — | |||||||||||||||||||||
Settlements | ( i 1 | ) | i — | ( i 2 | ) | ( i 17 | ) | ( i 156 | ) | i — | ( i 176 | ) | ||||||||||||||||
Balance,
end of period | $ | i 74 | $ | i 4 | $ | i 62 | $ | i 2,882 | $ | i 4,289 | $ | ( i 231 | ) | $ | i 7,080 | |||||||||||||
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 | $ | i — | $ | ( i 1 | ) | $ | i 18 | $ | i 175 | $ | i 174 | $ | ( i 15 | ) | $ | i 352 |
Level
3 - Derivatives by Class: | ||||||||||||||||||||||||
Three Months Ended June 30, 2020 | Three Months Ended June 30, 2019 | |||||||||||||||||||||||
Interest
Rate Swaps | Credit Derivatives | Total Derivatives | Interest Rate Swaps | Credit Derivatives | Total Derivatives | |||||||||||||||||||
Balance, beginning of period | $ | i 79 | $ | ( i 2 | ) | $ | i 77 | $ | i 54 | $ | ( i 1 | ) | $ | i 53 | ||||||||||
Total
gains/(losses) realized and unrealized: | ||||||||||||||||||||||||
Included in earnings | i 10 | i 1 | i 11 | i 10 | i — | i 10 | ||||||||||||||||||
Included
in other comprehensive income | i — | i — | i — | i — | i — | i — | ||||||||||||||||||
Purchases | i — | i — | i — | i — | i — | i — | ||||||||||||||||||
Issuances | i — | i — | i — | i — | i — | i — | ||||||||||||||||||
Sales | i — | i — | i — | i — | i — | i — | ||||||||||||||||||
Settlements | ( i 2 | ) | i — | ( i 2 | ) | ( i 1 | ) | i — | ( i 1 | ) | ||||||||||||||
Balance,
end of period | $ | i 87 | $ | ( i 1 | ) | $ | i 86 | $ | i 63 | $ | ( i 1 | ) | $ | i 62 | ||||||||||
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 | $ | i 10 | $ | i 1 | $ | i 10 | $ | i 10 | $ | i — | $ | i 10 |
Level
3 - Derivatives by Class: | ||||||||||||||||||||||||
Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | |||||||||||||||||||||||
Interest
Rate Swaps | Credit Derivatives | Total Derivatives | Interest Rate Swaps | Credit Derivatives | Total Derivatives | |||||||||||||||||||
Balance, beginning of period | $ | i 67 | $ | i — | $ | i 66 | $ | i 47 | $ | ( i 1 | ) | $ | i 46 | |||||||||||
Total
gains/(losses) realized and unrealized: | ||||||||||||||||||||||||
Included in earnings | i 23 | ( i 1 | ) | i 23 | i 18 | i 1 | i 19 | |||||||||||||||||
Included
in other comprehensive income | i — | i — | i — | i — | i — | i — | ||||||||||||||||||
Purchases | i — | i — | i — | i — | i — | i — | ||||||||||||||||||
Issuances | i — | i — | i — | i — | i — | i — | ||||||||||||||||||
Sales | i — | i — | i — | i — | i — | i — | ||||||||||||||||||
Settlements | ( i 3 | ) | i — | ( i 3 | ) | ( i 2 | ) | i — | ( i 2 | ) | ||||||||||||||
Balance,
end of period | $ | i 87 | $ | ( i 1 | ) | $ | i 86 | $ | i 63 | $ | ( i 1 | ) | $ | i 62 | ||||||||||
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 | $ | i 23 | $ | ( i 1 | ) | $ | i 23 | $ | i 18 | $ | i 1 | $ | i 18 |
Net Investment Income | Net Gains (Losses) on Derivative | Income (Loss) on Variable Interest Entities | Other Income or (Loss) | |||||||||||||
Three Months Ended June 30, 2020: | ||||||||||||||||
Total
gains or losses included in earnings for the period | $ | i — | $ | i 11 | $ | i 61 | $ | i — | ||||||||
Changes
in unrealized gains or losses included in earnings relating to the assets and liabilities still held at the reporting date | i — | i 10 | i 61 | i — | ||||||||||||
Three
Months Ended June 30, 2019: | ||||||||||||||||
Total gains or losses included in earnings for the period | $ | i — | $ | i 10 | $ | i 183 | $ | i — | ||||||||
Changes
in unrealized gains or losses included in earnings relating to the assets and liabilities still held at the reporting date | i — | i 10 | i 183 | i — | ||||||||||||
Six
Months Ended June 30, 2020: | ||||||||||||||||
Total gains or losses included in earnings for the period | $ | i 1 | $ | i 23 | $ | i 179 | $ | ( i 1 | ) | |||||||
Changes
in unrealized gains or losses relating to the assets and liabilities still held at the reporting date | i — | i 22 | i 179 | ( i 1 | ) | |||||||||||
Six
Months Ended June 30, 2019: | ||||||||||||||||
Total gains or losses included in earnings for the period | i 1 | i 19 | i 335 | ( i 1 | ) | |||||||||||
Changes
in unrealized gains or losses relating to the assets and liabilities still held at the reporting date | i — | i 18 | i 335 | ( i 1 | ) |
Amortized Cost | Allowance
for Credit Losses | Gross Unrealized Gains in AOCI | Gross Unrealized Losses in AOCI | Estimated Fair Value | ||||||||||||||||
Fixed
income securities: | ||||||||||||||||||||
Municipal obligations | $ | i 317 | $ | i — | $ | i 17 | $ | i 3 | $ | i 330 | ||||||||||
Corporate
obligations (1) | i 1,010 | i — | i 34 | i 7 | i 1,037 | |||||||||||||||
Foreign
obligations | i 74 | i — | i 1 | i — | i 75 | |||||||||||||||
U.S.
government obligations | i 118 | i — | i 6 | i — | i 123 | |||||||||||||||
Residential
mortgage-backed securities | i 258 | i — | i 34 | i 1 | i 291 | |||||||||||||||
Commercial
mortgage-backed securities | i — | i — | i — | i — | i — | |||||||||||||||
Collateralized
debt obligations | i 74 | i — | i — | i 2 | i 73 | |||||||||||||||
Other
asset-backed securities | i 275 | i — | i 20 | i 7 | i 288 | |||||||||||||||
i 2,126 | i — | i 112 | i 20 | i 2,218 | ||||||||||||||||
Short-term | i 691 | i — | i — | i — | i 692 | |||||||||||||||
i 2,817 | i — | i 113 | i 20 | i 2,910 | ||||||||||||||||
Fixed
income securities pledged as collateral: | ||||||||||||||||||||
Short-term | i 155 | i — | i — | i — | i 155 | |||||||||||||||
Total
collateralized investments | i 155 | i — | i — | i — | i 155 | |||||||||||||||
Total
available-for-sale investments | $ | i 2,972 | $ | i — | $ | i 113 | $ | i 20 | $ | i 3,065 |
Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Estimated Fair Value | Non-credit Other-than temporary Impairments (2) | ||||||||||||||||
Fixed
income securities: | ||||||||||||||||||||
Municipal obligations | $ | i 194 | $ | i 22 | $ | i — | $ | i 215 | $ | i — | ||||||||||
Corporate
obligations (1) | i 1,396 | i 36 | i 2 | i 1,430 | i — | |||||||||||||||
Foreign
obligations | i 44 | i 1 | i — | i 44 | i — | |||||||||||||||
U.S.
government obligations | i 157 | i 2 | i 2 | i 156 | i — | |||||||||||||||
Residential
mortgage-backed securities | i 200 | i 47 | i — | i 248 | i — | |||||||||||||||
Commercial
mortgage-backed securities | i 49 | i 1 | i — | i 50 | i — | |||||||||||||||
Collateralized
debt obligations | i 147 | i — | i 1 | i 146 | i — | |||||||||||||||
Other
asset-backed securities | i 263 | i 24 | i — | i 287 | i — | |||||||||||||||
i 2,450 | i 132 | i 5 | i 2,577 | i — | ||||||||||||||||
Short-term | i 653 | i — | i — | i 653 | i — | |||||||||||||||
i 3,103 | i 132 | i 5 | i 3,230 | i — | ||||||||||||||||
Fixed
income securities pledged as collateral: | ||||||||||||||||||||
Short-term | i 85 | i — | i — | i 85 | i — | |||||||||||||||
Total
collateralized investments | i 85 | i — | i — | i 85 | i — | |||||||||||||||
Total
available-for-sale investments | $ | i 3,187 | $ | i 132 | $ | i 5 | $ | i 3,314 | $ | i — |
(1) | Includes
Ambac's holdings of the secured notes issued by Ambac LSNI in connection with the Rehabilitation Exit Transactions. |
(2) | At December 31, 2019, represents the amount of non-credit other-than-temporary impairment losses remaining in accumulated other comprehensive income on securities that also had a credit impairment. These losses are included in gross unrealized losses at December 31, 2019. |
Amortized Cost | Estimated Fair Value | |||||||
Due
in one year or less | $ | i 862 | $ | i 863 | ||||
Due
after one year through five years | i 912 | i 923 | ||||||
Due
after five years through ten years | i 408 | i 432 | ||||||
Due
after ten years | i 182 | i 196 | ||||||
i 2,365 | i 2,413 | |||||||
Residential
mortgage-backed securities | i 258 | i 291 | ||||||
Collateralized
debt obligations | i 74 | i 73 | ||||||
Other
asset-backed securities | i 275 | i 288 | ||||||
Total | $ | i 2,972 | $ | i 3,065 |
Less
Than 12 Months | 12 Months or More | Total | ||||||||||||||||||||||
Fair Value | Gross Unrealized Loss | Fair Value | Gross Unrealized Loss | Fair
Value | Gross Unrealized Loss | |||||||||||||||||||
Fixed
income securities: | ||||||||||||||||||||||||
Municipal obligations | $ | i 114 | $ | i 3 | $ | i 8 | $ | i — | $ | i 123 | $ | i 3 | ||||||||||||
Corporate
obligations | i 508 | i 7 | i — | i — | i 508 | i 7 | ||||||||||||||||||
U.S.
government obligations | i 7 | i — | i — | i — | i 7 | i — | ||||||||||||||||||
Residential
mortgage-backed securities | i 70 | i 1 | i — | i — | i 70 | i 1 | ||||||||||||||||||
Collateralized
debt obligations | i 60 | i 1 | i 13 | i — | i 73 | i 2 | ||||||||||||||||||
Other
asset-backed securities | i 87 | i 6 | i 3 | i 1 | i 90 | i 7 | ||||||||||||||||||
i 846 | i 18 | i 25 | i 2 | i 870 | i 20 | |||||||||||||||||||
Short-term | i 75 | i — | i — | i — | i 75 | i — | ||||||||||||||||||
Total
securities | $ | i 921 | $ | i 18 | $ | i 25 | $ | i 2 | $ | i 945 | $ | i 20 |
Less
Than 12 Months | 12 Months or More | Total | ||||||||||||||||||||||
Fair Value | Gross Unrealized Loss | Fair Value | Gross Unrealized Loss | Fair
Value | Gross Unrealized Loss | |||||||||||||||||||
Fixed
income securities: | ||||||||||||||||||||||||
Municipal obligations | $ | i 13 | $ | i — | $ | i 10 | $ | i — | $ | i 23 | $ | i — | ||||||||||||
Corporate
obligations | i 63 | i 2 | i 5 | i — | i 68 | i 2 | ||||||||||||||||||
Foreign
obligations | i 20 | i — | i — | i — | i 20 | i — | ||||||||||||||||||
U.S.
government obligations | i 36 | i 2 | i 2 | i — | i 38 | i 2 | ||||||||||||||||||
Residential
mortgage-backed securities | i 5 | i — | i — | i — | i 5 | i — | ||||||||||||||||||
Commercial
mortgage-backed securities | i 7 | i — | i — | i — | i 7 | i — | ||||||||||||||||||
Collateralized
debt obligations | i 53 | i — | i 63 | i 1 | i 116 | i 1 | ||||||||||||||||||
Other
asset-backed securities | i 2 | i — | i 7 | i — | i 10 | i — | ||||||||||||||||||
i 200 | i 4 | i 88 | i 1 | i 288 | i 5 | |||||||||||||||||||
Short-term | i 201 | i — | i — | i — | i 201 | i — | ||||||||||||||||||
Total
securities | $ | i 401 | $ | i 4 | $ | i 88 | $ | i 1 | $ | i 489 | $ | i 5 |
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||||||
Gross
realized gains on securities | $ | i 20 | $ | i 10 | $ | i 27 | $ | i 34 | ||||||||
Gross
realized losses on securities | ( i 11 | ) | i — | ( i 11 | ) | ( i 4 | ) | |||||||||
Net
foreign exchange (losses) gains | i 1 | i 26 | i 3 | i 23 | ||||||||||||
Credit
impairments (1) | i — | i — | i — | i — | ||||||||||||
Intent
/ requirement to sell impairments (2) | i — | i — | i — | i — | ||||||||||||
Net
realized gains (losses) | $ | i 10 | $ | i 36 | $ | i 18 | $ | i 53 |
(1) | Includes
securities which management does not intend to sell and it is not more likely than not that the Company will be required to sell before recovery of the amortized cost basis. |
(2) | Includes securities which management either intends sell or it is more likely than not that the Company will be required to sell before recovery of the amortized cost basis. |
Balance, beginning of period | $ | i 12 | ||
Reductions
for credit impairments previously recognized on: | ||||
Securities that matured or were sold during the period | ( i 1 | ) | ||
Balance,
end of period | $ | i 12 |
Municipal Obligations | Corporate Obligations (2) | Mortgage and Asset- backed Securities | Total | Weighted Average Underlying Rating (1) | ||||||||||||||
Ambac
Assurance Corporation | $ | i 294 | $ | i 467 | $ | i 458 | $ | i 1,220 | CCC+ | |||||||||
National
Public Finance Guarantee Corporation | i 8 | i — | — | i 8 | BBB- | |||||||||||||
Total | $ | i 303 | $ | i 467 | $ | i 458 | $ | i 1,228 | B- | |||||||||
Ambac Assurance Corporation | $ | i 176 | $ | i 535 | $ | i 442 | $ | i 1,153 | B- | |||||||||
National
Public Finance Guarantee Corporation | i 11 | i — | — | i 11 | BBB- | |||||||||||||
Total | $ | i 187 | $ | i 535 | $ | i 442 | $ | i 1,164 | B- |
(1) | Ratings
are based on the lower of Standard & Poor’s or Moody’s rating. If unavailable, Ambac’s internal rating is used. |
(2) | Represents Ambac's holdings of secured notes issued by Ambac LSNI in connection with the Rehabilitation Exit Transactions. These secured notes are insured by Ambac Assurance. |
Fair Value | ||||||||||||
Class
of Funds | Redemption Frequency | Redemption Notice Period | ||||||||||
Real estate properties (1) | $ | i 15 | $ | i 16 | quarterly | 10
business days | ||||||
Hedge funds (2) | i 100 | i 65 | quarterly | 90
days | ||||||||
High yields and leveraged loans (3) (10) | i 49 | i 176 | daily | 0
- 30 days | ||||||||
Private credit (4) | i 56 | i 51 | quarterly | 180
days if permitted | ||||||||
Insurance-linked investments (5) | i 3 | i 3 | fully
redeemed | none | ||||||||
Equity market investments (6) (10) | i 40 | i 55 | daily | 0
days | ||||||||
Investment grade floating rate income (7) | i 66 | i 66 | weekly | 0
days | ||||||||
Private equity (8) | i 4 | i — | quarterly | 90
days if permitted | ||||||||
Emerging markets debt (9) (10) | i 17 | i — | daily
| 0 days | ||||||||
Total equity investments in pooled funds | $ | i 350 | $ | i 432 |
(1) | Investments
consist of UK property to generate income and capital growth. |
(2) | This class seeks to generate superior risk-adjusted returns through selective asset sourcing, active trading and hedging strategies within structured credit markets, including mortgage-backed securities, commercial real estate securities and loans, CLOs, REITs and asset backed securities. |
(3) | This class of funds includes investments in a range of instruments including high-yield bonds, leveraged loans, CLOs, ABS and floating rate notes to generate income
and capital appreciation. |
(4) | This class aims to obtain high long-term return primarily through credit and preferred equity investments with low liquidity and defined term. |
(5) | This class seeks to generate returns from insurance markets through investments in catastrophe bonds, life insurance and other insurance linked investments. |
(6) | This
class of funds aim to achieve long term growth through diversified exposure to global equity markets. |
(7) | This class of funds includes investments in high quality floating rate debt securities including ABS and corporate floating rate notes as well as ultra-short term bonds and money market instruments. |
(8) | This class seeks to generate long-term capital appreciation through investments in private equity, equity-related and other instruments. |
(9) | This
class seeks long-term income and growth through investments in the bonds of issuers in emerging markets. |
(10) | These categories include fair value amounts totaling $ i 50 and $ i 136
at June 30, 2020 and December 31, 2019, respectively, that are readily determinable and are priced through pricing vendors, including for High yield and leveraged loans products: $ i 3 and $ i 81;
for Equity market investments: $ i 30 and $ i 55;
and for Emerging markets debt $ i 17 and $ i 0
|
Three
Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||||||
Fixed income securities | $ | i 26 | $ | i 74 | $ | i 55 | $ | i 118 | ||||||||
Short-term
investments | i 1 | i 5 | i 4 | i 10 | ||||||||||||
Investment
expense | ( i 1 | ) | ( i 1 | ) | ( i 3 | ) | ( i 3 | ) | ||||||||
Securities
available-for-sale and short-term | i 26 | i 78 | i 57 | i 125 | ||||||||||||
Other
investments | i 27 | i 8 | ( i 25 | ) | i 16 | |||||||||||
Total
net investment income (loss) | $ | i 52 | $ | i 86 | $ | i 31 | $ | i 141 |
Three
Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||||||
Net gains (losses)
recognized during the period on trading securities | $ | i 17 | $ | i 7 | $ | ( i 16 | ) | $ | i 14 | |||||||
Less:
net gains (losses) recognized during the reporting period on trading securities sold during the period | i 5 | i 3 | ( i 19 | ) | i 4 | |||||||||||
Unrealized
gains (losses) recognized during the reporting period on trading securities still held at the reporting date | $ | i 12 | $ | i 4 | $ | i 4 | $ | i 10 |
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 | |||||||||||||||
Derivative Assets: | |||||||||||||||||||
Interest
rate swaps | $ | i 97 | $ | i — | $ | i 97 | $ | — | $ | i 97 | |||||||||
Total
non-VIE derivative assets | $ | i 97 | $ | i — | $ | i 97 | $ | i — | $ | i 97 | |||||||||
Derivative
Liabilities: | |||||||||||||||||||
Credit derivatives | $ | i 1 | $ | i — | $ | i 1 | $ | — | $ | i 1 | |||||||||
Interest
rate swaps | i 133 | i — | i 133 | i 132 | i 1 | ||||||||||||||
Total
non-VIE derivative liabilities | $ | i 134 | $ | i — | $ | i 134 | $ | i 132 | $ | i 2 | |||||||||
Variable
Interest Entities Derivative Assets: | |||||||||||||||||||
Currency swaps | $ | i 61 | $ | i — | $ | i 61 | $ | — | $ | i 61 | |||||||||
Total
VIE derivative assets | $ | i 61 | $ | i — | $ | i 61 | $ | i — | $ | i 61 | |||||||||
Variable
Interest Entities Derivative Liabilities: | |||||||||||||||||||
Interest rate swaps | $ | i 1,709 | $ | — | $ | i 1,709 | $ | — | $ | i 1,709 | |||||||||
Total
VIE derivative liabilities | $ | i 1,709 | $ | i — | $ | i 1,709 | $ | i — | $ | i 1,709 |
Derivative Assets: | |||||||||||||||||||
Interest
rate swaps | $ | i 75 | $ | i — | $ | i 75 | $ | i — | $ | i 75 | |||||||||
Total
non-VIE derivative assets | $ | i 75 | $ | i — | $ | i 75 | $ | i — | $ | i 75 | |||||||||
Derivative
Liabilities: | |||||||||||||||||||
Credit derivatives | $ | i — | $ | i — | $ | i — | $ | — | $ | i — | |||||||||
Interest
rate swaps | i 89 | i — | i 90 | i 89 | i 1 | ||||||||||||||
Total
non-VIE derivative liabilities | $ | i 90 | $ | i — | $ | i 90 | $ | i 89 | $ | i 1 | |||||||||
Variable
Interest Entities Derivative Assets: | |||||||||||||||||||
Currency swaps | $ | i 52 | $ | — | $ | i 52 | $ | i — | $ | i 52 | |||||||||
Total
VIE derivative assets | $ | i 52 | $ | i — | $ | i 52 | $ | i — | $ | i 52 | |||||||||
Variable
Interest Entities Derivative Liabilities: | |||||||||||||||||||
Interest rate swaps | $ | i 1,657 | $ | — | $ | i 1,657 | $ | — | $ | i 1,657 | |||||||||
Total
VIE derivative liabilities | $ | i 1,657 | $ | i — | $ | i 1,657 | $ | i — | $ | i 1,657 |
Location
of Gain or (Loss) Recognized in Consolidated Statements of Total Comprehensive Income (Loss) | Amount of Gain or (Loss) Recognized in Consolidated Statement of Total Comprehensive Income (Loss) | ||||||||||||||||||
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||||||
Non-VIE
derivatives: | |||||||||||||||||||
Credit derivatives | Net gains (losses) on derivative contracts | $ | i 1 | $ | i — | $ | ( i 1 | ) | $ | i 1 | |||||||||
Interest
rate swaps | Net gains (losses) on derivative contracts | i 2 | ( i 7 | ) | ( i 26 | ) | ( i 10 | ) | |||||||||||
Futures
contracts | Net gains (losses) on derivative contracts | ( i 1 | ) | ( i 28 | ) | ( i 41 | ) | ( i 42 | ) | ||||||||||
Total
Non-VIE derivatives | $ | i 2 | $ | ( i 35 | ) | ( i 68 | ) | ( i 52 | ) | ||||||||||
Variable
Interest Entities: | |||||||||||||||||||
Currency swaps | Income (loss) on variable interest entities | $ | i 1 | $ | i 4 | i 17 | ( i 3 | ) | |||||||||||
Interest
rate swaps | Income (loss) on variable interest entities | ( i 106 | ) | ( i 36 | ) | ( i 173 | ) | ( i 106 | ) | ||||||||||
Total
Variable Interest Entities | ( i 105 | ) | ( i 33 | ) | ( i 156 | ) | ( i 110 | ) | |||||||||||
Total
derivative contracts | $ | ( i 103 | ) | $ | ( i 68 | ) | $ | ( i 224 | ) | $ | ( i 161 | ) |
Notional | ||||||||
Type of Derivative | ||||||||
Interest rate swaps—receive-fixed/pay-variable | $ | i 244 | $ | i 332 | ||||
Interest
rate swaps—pay-fixed/receive-variable | i 1,065 | i 1,261 | ||||||
US
Treasury futures contracts—short | i 240 | i 755 |
Notional | ||||||||
Type of VIE Derivative | ||||||||
Interest rate swaps—receive-fixed/pay-variable | $ | i 1,117 | $ | i 1,194 | ||||
Interest
rate swaps—pay-fixed/receive-variable | i 1,074 | i 1,176 | ||||||
Currency
swaps | i 293 | i 329 | ||||||
Credit
derivatives | i — | i 9 |
Jurisdiction | Tax Year |
United States | 2010 |
New York State | 2013 |
New York City | 2015 |
United Kingdom | 2016 |
Italy | 2015 |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||
U.S. | $ | ( i 50 | ) | $ | ( i 57 | ) | $ | ( i 306 | ) | $ | ( i 121 | ) | |||
Foreign | i 17 | ( i 43 | ) | ( i 13 | ) | ( i 21 | ) | ||||||||
Total | $ | ( i 33 | ) | $ | ( i 100 | ) | $ | ( i 320 | ) | $ | ( i 141 | ) |
Three
Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||
Current taxes | |||||||||||||||
U.
S. federal | $ | i — | $ | i — | $ | i — | $ | i — | |||||||
U.S.
state and local | i — | i — | i — | ( i 3 | ) | ||||||||||
Foreign | i 3 | i 28 | i 1 | i 34 | |||||||||||
Current
taxes | i 3 | i 28 | i 1 | i 31 | |||||||||||
Deferred
taxes | |||||||||||||||
Foreign | ( i 1 | ) | i — | ( i 6 | ) | ( i 1 | ) | ||||||||
Deferred
taxes | ( i 1 | ) | i — | ( i 6 | ) | ( i 1 | ) | ||||||||
Provision
for income taxes | $ | i 2 | $ | i 28 | $ | ( i 4 | ) | $ | i 30 |
NOL Usage Tier | Allocated NOLs | Applicable Percentage | ||
A | The first | $ i 479 | i 15% | |
B | The
next | $ i 1,057 | after Tier A | i 40% |
C | The
next | $ i 1,057 | after Tier B | i 10% |
D | The
next | $ i 1,057 | after Tier C | i 15% |
• | Ambac
Assurance Corporation and The Segregated Account of Ambac Assurance Corporation v. Countrywide Securities Corp., Countrywide Financial Corp. (a.k.a. Bank of America Home Loans) and Bank of America Corp. (Supreme Court of the State of New York, County of New York, Case No. 651612/2010, filed on September 28, 2010). Ambac Assurance’s Second Amended Complaint, filed on May 28, 2013, asserted claims against Countrywide and Bank of America (as successor to Countrywide’s liabilities) for, among other things, breach of contract and fraudulent inducement. In August and October 2018, Defendants filed various pre-trial motions. On December 30, 2018, the court denied all of these pre-trial motions
in their entirety and Defendants appealed. On September 17, 2019, the First Department affirmed in part and reversed in part the trial court’s rulings. On October 17, 2019, Countrywide filed a motion for leave to appeal certain issues to the New York Court of Appeals and for reargument or leave to appeal certain other issues. On January 16, 2020, the First Department recalled and vacated its September 17, 2019 decision and order and substituted a new decision and order. |
• | Ambac
Assurance Corporation v. U.S. Bank National Association (United States District Court, Southern District of New York, Docket No. 18-cv-5182 (LGS), filed June 8, 2018 (the “SDNY Action”)); In the matter of HarborView Mortgage Loan Trust 2005-10 (Minnesota state court, Docket No. 27-TR-CV-17-32 (the “Minnesota Action”)). These two actions relate to U.S. Bank National Association’s (“U.S. Bank”) acceptance of a proposed settlement in a separate litigation that U.S. Bank is prosecuting, as trustee, related to the Harborview Mortgage Loan Trust, Series 2005-10 (“Harborview 2005-10”), a residential mortgage-backed securitization for which Ambac Assurance issued an insurance policy. On March 6, 2017, U.S. Bank filed a petition commencing the Minnesota Action, a trust instruction
proceeding in Minnesota state court concerning the proposed settlement, and on June 12, 2017, U.S. Bank filed an amended petition. Ambac Assurance filed a motion to dismiss the Minnesota Action, which was denied on November 13, 2017, and the denial was affirmed on appeal. On September 6, 2018, U.S. Bank filed its Second Amended Petition, and Ambac Assurance and certain other certificateholders objected to, or otherwise responded to, the petition. Discovery in the Minnesota Action is ongoing, and the court has set October 14, 2020 as the date for the start of the trial. On June 8, 2018, Ambac Assurance filed the SDNY Action asserting claims arising out of U.S. Bank’s acceptance
of the proposed settlement and treatment of trust recoveries. Ambac Assurance asserted claims for declaratory judgment, breach of contract, and breach of fiduciary duty. On July 16, 2019, 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. Bank's past distribution of trust recoveries
through the waterfall. On January 17, 2020, U.S. Bank moved for summary judgment regarding the remaining claim relating to distributions. On February 7, 2020, Ambac Assurance cross-moved for summary judgment. These summary judgment motions are fully briefed. |
• | In re application of Deutsche Bank National Trust Company as Trustee of the Harborview Mortgage Loan Trust Mortgage Loan Pass-Through Certificates, Series 2006-9 (Supreme Court of the State of New York, County of New York, No. 654208/2018), filed August 23, 2018 (the “Trust Instruction |
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
• | A commutation in January 2020, via a refunding, of a watch list public finance transaction with net
par outstanding of $171 million at December 31, 2019; |
• | A refinancing in February 2020 of an adversely classified asset-backed leasing transaction with net par outstanding of $86 million at December 31, 2019; and |
• | Purchasing quota share reinsurance in June 2020 on a transportation revenue credit with net par outstanding of $33 million at December
31, 2019. |
($
in millions) | Variance | |||||||||||||
Total | $ | 35,276 | $ | 38,018 | $ | (2,742 | ) | (7 | )% | |||||
ACC | 8,756 | 7,535 | 1,221 | 16 | % | |||||||||
Watch
list | 5,238 | 6,752 | (1,514 | ) | (22 | )% |
• | Ambac’s
insurance policies will be drawn in the event that the issuers of insured obligations do not make payments on their obligations when due. As a result of the COVID-19 related economic impact on issuers and markets where Ambac provides financial guarantees; including lower tax, project, and business revenues and increases in forbearances or delinquencies on mortgage and student loan payments, we have increased our loss reserves and may further increase them in the future depending on the duration and severity of the crisis. The crisis may also impair certain issuers' ability to pay premiums owed to Ambac; however, we believe such issuers currently have the ability to continue to pay such premiums timely, but this is subject to change. |
• | Ambac
has exposure to reinsurance counterparties for their portions of future claim payments. Ambac has reinsured approximately 13.5% of its gross par outstanding to four reinsurance counterparties. Each of these reinsurance counterparties is experienced in the business of reinsuring and/or writing financial guaranty insurance. All have current ratings of A+ (by S&P) or better and have sufficient collateralization or replacement triggers upon downgrade. Ambac actively monitors each of these reinsurance entities and currently believes they have the ability to perform under their respective reinsurance policies, but this is subject to change. |
• | Ambac is exposed to the risk that contractual counterparties (including those under our RMBS litigations
and derivative counterparties) may default in their financial obligations, whether as the result of insolvency, lack of liquidity, operational failure, fraud or other reasons. At present, Ambac has no concerns about the ability of our contractual counterparties, which include certain regulated exchanges in the case of interest rate swaps and futures, to perform under their contracts, but this is subject to change. |
• | Asset prices declined substantially during the first quarter, particularly in directly affected industries such as tourism, airlines, hospitality, commercial real estate and manufacturing. While Ambac does not have significant investments
in these asset classes, we did experience a negative total return for the investment portfolio of approximately (4.4)% during the three month period ending March 31, 2020. We evaluated and did not recognize credit impairments on the investment portfolio as of such date. However, in early April 2020, we monetized a material portion of our investments in certain assets classes; including corporate securities rated below the 'A' rated category, all directly owned CMBS (other than Military Housing bonds), and approximately 50% of all CLOs (all rated investment grade). While these positions were sold at a net gain, future investment losses and impairments may be possible. Asset prices partially recovered during the second quarter of 2020. Ambac recognized a total return for the investment portfolio of approximately 4.7% during the three months ended June 30, 2020. |
($
in millions) | ||||
Cash and short-term investments | $ | 328 | ||
Other investments (1) | 116 | |||
Other net assets (2) | 37 | |||
Total | $ | 481 |
(1) | Includes
surplus notes (fair value of $57 million) issued by Ambac Assurance that are eliminated in consolidation. |
(2) | Includes accruals for tolling payments from Ambac Assurance in accordance with the Amended Tax Sharing Agreement of $28 million. Refer to Note 10. Income Taxes for discussion over the timing of collection. |
($ in millions) | ||||
Net income (1) | $ | 3 | ||
Gain (loss) on foreign currency translation (net
of tax) | (48 | ) | ||
Unrealized gains (losses) on non-functional currency available-for-sale securities (net of tax) | 11 | |||
Impact on total comprehensive income (loss) | $ | (34 | ) |
(1) | A
portion of Ambac UK's, and to a lesser extent Ambac Assurance's, assets and liabilities are denominated in currencies other than its functional currency and accordingly, we recognized net foreign currency transaction gains/(losses) as a result of changes to foreign currency rates through our Unaudited Consolidated Statement of Total Comprehensive Income (Loss). Refer to Note 2. Basis of Presentation and Significant Accounting Policies to the Unaudited |
($
in millions) | |||||||
Public Finance (1) (2) | $ | 16,473 | $ | 17,653 | |||
Structured
Finance | 6,877 | 7,508 | |||||
International Finance | 11,926 | 12,857 | |||||
Total net par outstanding | $ | 35,276 | $ | 38,018 |
(1) | Includes
$5,615 and $5,654 of Military Housing net par outstanding at June 30, 2020 and December 31, 2019, respectively. |
(2) | Includes $1,105 and $1,123 of Puerto Rico net par outstanding at June 30, 2020 and December 31, 2019, respectively. Components of Puerto Rico net
par outstanding include capital appreciation bonds which are reported at the par amount at the time of issuance of the related insurance policy as opposed to the current accreted value of the bonds. |
($
in millions) | Risk Name | Country-Bond Type | Ambac Ratings (1) | Net Par Outstanding (2) | % of Total Net Par Outstanding | ||||||||
IF | AUK | Mitchells
& Butlers Finance plc-UK Pub Securitisation | UK-Asset Securitizations | BBB | $ | 938 | 2.7 | % | |||||
IF | AUK | Capital
Hospitals plc (3) | UK-Infrastructure | A- | 828 | 2.3 | % | ||||||
IF | AUK | Aspire Defence
Finance plc | UK-Infrastructure | A- | 799 | 2.3 | % | ||||||
PF | AAC | New Jersey Transportation Trust Fund Authority - Transportation
System | US-Lease and Tax-backed Revenue | BBB- | 772 | 2.2 | % | ||||||
IF | AUK | Anglian Water | UK-Utility | A- | 770 | 2.2 | % | ||||||
IF | AUK | National
Grid Gas | UK-Utility | A- | 711 | 2.0 | % | ||||||
IF | AUK | Posillipo Finance II S.r.l | Italy-Sub-Sovereign | BIG | 698 | 2.0 | % | ||||||
IF | AUK | Ostregion
Investmentgesellschaft NR 1 SA (3) | Austria-Infrastructure | BIG | 663 | 1.9 | % | ||||||
PF | AAC | Mets
Queens Baseball Stadium Project, NY, Lease Revenue | US-Stadium Financing | BIG | 540 | 1.5 | % | ||||||
IF | AUK | RMPA Services plc | UK-Infrastructure | BBB+ | 529 | 1.5 | % | ||||||
Total | $ | 7,248 | 20.6 | % | |||||||||
PF
= Public Finance, SF = Structured Finance, IF = International Finance AAC = Ambac Assurance, AUK = Ambac UK |
(1) | Internal credit ratings are provided solely to indicate the underlying credit quality of guaranteed obligations based on the view of Ambac. In cases where Ambac has insured
multiple tranches of an issue with varying internal ratings, or more than one obligation of an issuer with varying internal ratings, a weighted average rating is used. Ambac credit ratings are subject to revision at any time and do not constitute investment advice. BIG denotes credits deemed below investment grade. |
(2) | Net Par includes capital appreciation bonds, which are reported at the par amount at the time of issuance of the insurance policy as opposed to the current accreted value of the bonds. |
(3) | A portion
of this transaction is insured by an insurance policy issued by Ambac Assurance. Ambac Assurance has issued policies for these transactions that will only pay in the event that Ambac UK does not pay under its insurance policies ("second to pay policies"). |
• | A program for direct lending, loans, loan guarantees and investments to eligible businesses, states and municipalities, including to passenger airlines and cargo airlines; |
• | A program for small business loans (Paycheck Protection Program, as amended by the Paycheck Protection Program and Health Care Enhancement Act (“PPP & HCE Act”)); |
• | Business tax breaks, including payroll tax deferral |
• | An
allocation of direct aid to state and local governments to reimburse them for the costs of dealing with COVID-19; |
• | The Public Health and Social Services Fund for distribution of grants to healthcare providers and hospitals (as amended by the PPP & HCE Act); |
• | Grants for transit agencies; |
• | Grants
for airport authorities; and |
• | Direct payments to households and for unemployment insurance. |
• | $500 billion for the Municipal Liquidity Facility; |
• | $750 billion for the Primary Market Corporate Credit Facility and Secondary Market Corporate Credit Facility; and |
• | $100 billion in loans for the Term Asset-backed Securities
Facility |
($ in millions) Market / Sector | Total NPO | Total Debt Service Due Next Twelve Months | ||||
Hotels / Convention Centers | $ | 257 | $ | 37.3 | ||
Stadiums | 634 | 41.7 | ||||
Airports | 124 | 22.0 | ||||
Dedicated
Tax | 410 | 78.0 | ||||
Higher Education Auxiliary | 252 | 26.9 | ||||
Rail / Mass Transit | 328 | 30.1 | ||||
Toll
Roads / Bridges | 469 | 35.8 | ||||
Total Public Finance | $ | 2,474 | $ | 271.8 |
($
in millions) Market / Sector | Total NPO | Total Debt Service Due for Twelve Months | ||||
Stadiums | $ | 203 | $ | 23.6 | ||
Higher Education | 161 | 8.7 | ||||
Airports | 192 | 6.0 | ||||
Asset
Securitizations | 938 | 78.9 | ||||
Toll Roads / Bridges | 719 | 57.0 | ||||
Total | $ | 2,213 | $ | 174.2 |
• | the fiscal and monetary policies of the federal government which will shape the trajectory of the U.S. economy; |
• | the
speed and efficacy of targeted federal aid packages to (1) help Puerto Rico address the negative economic effects of the pandemic and (2) rebuild better and more resilient infrastructure post-Hurricanes Irma and Maria in 2017 and earthquakes in 2020; |
• | supplemental Medicaid funding relief; and |
• | the willingness and ability of the Commonwealth government to implement much needed fiscal and structural reforms. |
Currency (Amounts
in millions) | Net Par Amount Outstanding in Base Currency | Net Par Amount Outstanding in U.S. Dollars | ||||||
U.S. Dollars | $ | 23,734 | $ | 23,734 | ||||
British
Pounds | £ | 7,636 | 9,458 | |||||
Euros | € | 1,520 | 1,708 | |||||
Australian
Dollars | A$ | 545 | 376 | |||||
Total | $ | 35,276 |
(1) | Internal credit ratings are provided solely to indicate the underlying credit quality of guaranteed obligations based on the view of Ambac. In cases where Ambac has insured multiple tranches of an issue with varying internal ratings, or more than one obligation of an issuer with varying internal ratings, a weighted average rating is used. Ambac credit ratings are subject to revision at any time and do not constitute investment advice. |
Net Par Outstanding | ||||||||
Summary of Below Investment Grade Exposure ($ in millions) | ||||||||
Public Finance: | ||||||||
Lease and tax-backed (1) | $ | 1,235 | $ | 1,109 | ||||
General
obligation (1) | 346 | 525 | ||||||
Housing (2) | 310 | 311 | ||||||
Stadium | 540 | — | ||||||
Transportation | 41 | 27 | ||||||
Other | 41 | 42 | ||||||
Total
Public Finance | 2,513 | 2,014 | ||||||
Structured Finance: | ||||||||
RMBS | 3,081 | 3,362 | ||||||
Student
loans | 566 | 620 | ||||||
Other | 10 | 33 | ||||||
Total
Structured Finance | 3,657 | 4,015 | ||||||
International Finance: | ||||||||
Other | 1,480 | 1,455 | ||||||
Total
International Finance | 1,480 | 1,455 | ||||||
Total | $ | 7,650 | $ | 7,484 |
(1) | Lease
and tax-backed revenue includes $996 and $1,014 of Puerto Rico net par at June 30, 2020 and December 31, 2019, respectively. General obligation includes $109 and $109 of Puerto Rico net par at June 30, 2020 and December 31, 2019, respectively. Components of Puerto Rico net par outstanding includes capital appreciation bonds which are reported at the par amount at the time of issuance of the related insurance policy as opposed to the current accreted value of the bonds. |
(2) | Relates
to military housing net par. |
Three
Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
($ in millions) | 2020 | 2019 | 2020 | 2019 | ||||||||||||
Revenues: | ||||||||||||||||
Net
premiums earned | $ | 11 | $ | 8 | $ | 21 | $ | 36 | ||||||||
Net
investment income | 52 | 86 | 31 | 141 | ||||||||||||
Net realized investment gains (losses) | 10 | 36 | 18 | 53 | ||||||||||||
Net
gains (losses) on derivative contracts | 2 | (35 | ) | (68 | ) | (52 | ) | |||||||||
Income
(loss) on variable interest entities | — | 3 | 3 | 19 | ||||||||||||
Expenses: | ||||||||||||||||
Losses
and loss expenses (benefit) | 16 | (133 | ) | 132 | (121 | ) | ||||||||||
Insurance intangible amortization | 14 | 226 | 27 | 263 | ||||||||||||
Operating
expenses | 21 | 29 | 44 | 54 | ||||||||||||
Interest expense | 58 | 67 | 122 | 135 | ||||||||||||
Provision
for income taxes | 2 | 28 | (4 | ) | 30 | |||||||||||
Net income (loss) attributable to common stockholders | $ | (35 | ) | $ | (128 | ) | $ | (315 | ) | $ | (172 | ) |
Three
Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
($ in millions) | 2020 | 2019 | 2020 | 2019 | ||||||||||||
Normal premiums earned | ||||||||||||||||
Public
finance | $ | 5 | $ | 7 | $ | 10 | $ | 15 | ||||||||
Structured
finance | 2 | 3 | 4 | 6 | ||||||||||||
International finance | 3 | 4 | 6 | 10 | ||||||||||||
Total
normal premiums earned | 10 | 14 | 20 | 30 | ||||||||||||
Accelerated earnings | 1 | (6 | ) | 1 | 6 | |||||||||||
Total
net premiums earned | $ | 11 | $ | 8 | $ | 21 | $ | 36 |
Three
Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
($ in millions) | 2020 | 2019 | 2020 | 2019 | |||||||||||
Securities available-for-sale: Ambac-insured (including Secured Notes) | $ | 16 | $ | 58 | $ | 32 | $ | 87 | |||||||
Securities
available-for-sale and short-term other than Ambac-insured | 10 | 20 | 25 | 38 | |||||||||||
Other investments (includes trading securities) | 27 | 8 | (25 | ) | 16 | ||||||||||
Net
investment income | $ | 52 | $ | 87 | $ | 32 | $ | 141 |
Three Months Ended June 30, | Six
Months Ended June 30, | |||||||||||||||
($ in millions) | 2020 | 2019 | 2020 | 2019 | ||||||||||||
Net gains (losses) on securities sold or called | $ | 9 | $ | 10 | $ | 16 | $ | 30 | ||||||||
Net
foreign exchange gains (losses) | 1 | 26 | 3 | 23 | ||||||||||||
Credit impairments | — | — | — | — | ||||||||||||
Intent
/ requirement to sell impairments | — | — | — | — | ||||||||||||
Total net realized gains (losses) | $ | 10 | $ | 36 | $ | 18 | $ | 53 |
Three
Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
($ in millions) | 2020 | 2019 | 2020 | 2019 | ||||||||||||
RMBS | $ | (35 | ) | $ | (69 | ) | $ | (118 | ) | $ | (108 | ) | ||||
Domestic
Public Finance | 42 | 50 | 220 | 120 | ||||||||||||
Student Loans | 4 | (4 | ) | 18 | (7 | ) | ||||||||||
Ambac
UK and Other Credits | 5 | (111 | ) | 12 | (125 | ) | ||||||||||
Totals (1) | $ | 16 | $ | (134 | ) | $ | 132 | $ | (121 | ) |
(1) | Includes
loss expenses incurred (benefit) of $34 and $37 for the three and six months ended June 30, 2020, respectively, and ($1) and $28 for the three and six months ended June 30, 2019, respectively. |
• | Higher projected losses in domestic public finance driven mostly by lower discount
rates (primarily relating to Puerto Rico) and incurred losses related to transactions directly impacted by the economic impact from COVID-19; and |
• | An increase in student loan losses as a result of lower discount rates and the impact from COVID-19; partially offset by |
• | Favorable RMBS development as a result of the positive impact of lower interest rates on excess spread, reduced by the negative impact of lower discount rates and expected losses from COVID-19 related
delinquencies/defaults. |
• | Favorable development within Ambac UK and Other Credits primarily due to the Ballantyne commutation; |
• | Favorable RMBS development as a result of credit improvement, a trustee settlement related to Lehman sponsored
transactions of $19 million and the impact on excess spread from declines in interest rates; partially offset by, |
• | Higher projected losses in domestic public finance driven mostly by lower discount rates and additions to Puerto Rico loss reserves. |
Three
Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
($ in millions) | 2020 | 2019 | 2020 | 2019 | ||||||||||||
Compensation | $ | 11 | $ | 17 | $ | 25 | $ | 32 | ||||||||
Non-compensation | 10 | 12 | 19 | 22 | ||||||||||||
Gross
operating expenses | 20 | 29 | 44 | 54 | ||||||||||||
Reinsurance commissions, net | — | — | — | — | ||||||||||||
Total
operating expenses | $ | 21 | $ | 29 | $ | 44 | $ | 54 |
• | Lower compensation costs primarily related to lower salaries resulting from continued right sizing of staffing levels and incentive compensation costs related to changes in performance metrics primarily impacted by the Ballantyne restructuring and |
• | Lower non-compensation costs primarily due to reduced legal and consulting services. |
• | Lower compensation costs primarily due to lower salaries resulting from continued right sizing of staffing levels and incentive compensation costs related to changes in performance metrics primarily impacted by the Ballantyne restructuring and |
• | Lower non-compensation
costs primarily due to a UK Value Added Tax (VAT) refund recognized in the six months ended June 30, 2020, and reduced consulting services. |
Three
Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
($ in millions) | 2020 | 2019 | 2020 | 2019 | ||||||||||||
Surplus notes (1) | $ | 24 | $ | 24 | $ | 50 | $ | 48 | ||||||||
Ambac
note | 27 | 37 | 58 | 74 | ||||||||||||
Tier 2 notes | 7 | 6 | 14 | 13 | ||||||||||||
Other | — | — | — | — | ||||||||||||
Total
interest expense | $ | 58 | $ | 67 | $ | 122 | $ | 135 |
(1) | Includes
junior surplus notes |
• | Pursuant to the amended and restated tax sharing agreement among AFG, Ambac Assurance and certain affiliates (the "Amended TSA"), Ambac Assurance is required to make payments ("tolling payments") to AFG with respect to the utilization of net operating loss carry-forwards (“NOLs”). AFG has accrued $28 million of tolling payments based on NOLs used by Ambac Assurance in 2017. In May 2018, AFG executed a waiver under the intercompany tax sharing agreement pursuant to which Ambac Assurance was relieved of the requirement to make this payment by June 1, 2018. AFG also agreed
to defer the tolling payment for the use of net operating losses by Ambac Assurance in 2017 until such time as OCI consents to the payment. |
• | Under an inter-company cost allocation agreement, AFG is reimbursed by Ambac Assurance for a portion of certain operating costs and expenses and, if approved by OCI, entitled to an additional payment of up to $4 million per year to cover expenses not otherwise reimbursed. OCI approved this $4 million reimbursement for 2019 expenses, which was paid in March 2020. |
• | The COVID-19 pandemic has had a negative impact on Ambac's available liquidity as a consequence of the adverse reaction of the capital markets, which led to a reduction in the value and marketability of our invested assets; derivative losses, which required either timely settlement or additional collateral posting; and higher credit risk within the insured
portfolio, as further described below. Nevertheless, Ambac has not yet experienced incremental demands on its liquidity, from higher claims or expenses, other than the aforementioned impact of derivatives. |
• | Claim payments may increase during the global recession and COVID-19 pandemic as issuers, particularly those with revenues that will be interrupted by the effects of the pandemic, including social distancing, other restrictions on activities and the increase in unemployment, may not have sufficient cash inflows to pay debt service on Ambac-insured debt. Refer to "Financial Guarantees in Force" in this Management's Discussion and Analysis for further discussion of the potential impact of the COVID-19 pandemic on claim payments. |
• | Interest
and principal payments on surplus notes are subject to the approval of OCI, which has full discretion over payments regardless of the liquidity position of Ambac Assurance. Any such payment on surplus notes would require either payment or collateralization of a portion of the Tier 2 Notes under the terms of the Tier 2 Note indenture. See Note 13. Long-term Debt in the Notes to Consolidated Financial Statements, included in Part II, Item 8, in the Company's Annual Report on Form 10-K for the year ended December 31, 2019 for further discussion of the payment terms and conditions of the Tier 2 Notes. As discussed more fully in "Results of Operations" above in this Management's Discussion and Analysis, OCI declined Ambac Assurance's request
to pay the principal amount of the surplus notes, plus all accrued and unpaid interest thereon, on June 7, 2020. |
Six
Months Ended June 30, | |||||||
($ in million) | 2020 | 2019 | |||||
Cash provided by (used in): | |||||||
Operating activities | $ | (112 | ) | $ | (265 | ) | |
Investing
activities | 270 | 313 | |||||
Financing activities | (205 | ) | (85 | ) | |||
Foreign exchange impact on cash and cash equivalents | — | — | |||||
Net
cash flow | $ | (47 | ) | $ | (37 | ) |
• | Cash used in operating activities relating to debt service on the Ambac Note was $58 million and $74 million for the six months ended June 30, 2020 and 2019, respectively. |
• | Cash
used in operating activities related to interest rate derivatives was $19 million and $51 million for the six months ended June 30, 2020 and 2019, respectively. |
• | Cash used by operating activities relating to operating expenses was $44 million and $46 million for the six months ended June 30, 2020 and 2019, respectively. |
• | Cash
provided by operating activities relating to the investment portfolio was $58 million and $73 million for the six months ended June 30, 2020 and 2019, respectively. |
• | Net loss and loss expenses paid, including commutation payments, during the six months ended June 30, 2020 and 2019 are detailed below: |
Six
Months Ended June 30, | |||||||
($ in million) | 2020 | 2019 | |||||
Net loss and loss expenses paid (recovered): | |||||||
Net losses paid (1) | $ | 64 | $ | 298 | |||
Net
subrogation received (2) | (56 | ) | (114 | ) | |||
Net loss expenses paid | 53 | 10 | |||||
Net cash flow | $ | 61 | $ | 194 |
(1) | Net
losses paid include commutation payments of $2 and $213 for the six months ended June 30, 2020 and 2019, respectively. |
(2) | For or the six months ended June 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) | ||||||||
Fixed income securities | $ | 2,218 | $ | 2,577 | ||||
Short-term | 692 | 653 | ||||||
Other
investments | 401 | 478 | ||||||
Fixed income securities pledged as collateral | 155 | 85 | ||||||
Total
investments (1) | $ | 3,466 | $ | 3,792 |
(1) | Includes investments denominated in non-US dollar currencies with a fair value of £278
($344) and €28.3 ($31.8) as of June 30, 2020, and £257 ($341) and €2 ($2) as of December 31, 2019. |
($
in millions) | ||||||||
Other asset-backed securities | ||||||||
Military Housing | $ | 228 | $ | 237 | ||||
Other | 60 | 50 | ||||||
Total
other asset-backed securities | $ | 288 | $ | 287 |
(1) | Ratings are based on the lower of Moody’s or S&P ratings. If ratings
are unavailable from Moody's or S&P, Fitch ratings are used. If guaranteed, rating represents the higher of the underlying or guarantor’s financial strength rating. |
(2) | Below investment grade and not rated bonds insured by Ambac represent 38% and 33% of the June 30, 2020 and December 31, 2019 combined fixed income portfolio, respectively. |
Currency (Amounts in millions) | Premium Receivable in Payment Currency | Premium Receivable in U.S. Dollars | ||||||
U.S. Dollars | $ | 243 | $ | 243 | ||||
British
Pounds | £ | 103 | 127 | |||||
Euros | € | 19 | 22 | |||||
Total | $ | 392 |
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) | ||||||||||||||
Loss and loss expense reserves | $ | 2,134 | $ | (238 | ) | $ | (82 | ) | $ | 1,814 | ||||||
Subrogation
recoverable | 120 | (2,336 | ) | — | (2,215 | ) | ||||||||||
Totals | $ | 2,254 | $ | (2,573 | ) | $ | (82 | ) | $ | (401 | ) | |||||
Loss and loss expense reserves | $ | 1,835 | $ | (233 | ) | $ | (54 | ) | $ | 1,548 | ||||||
Subrogation
recoverable | 131 | (2,160 | ) | — | (2,029 | ) | ||||||||||
Totals | $ | 1,966 | $ | (2,394 | ) | $ | (54 | ) | $ | (482 | ) |
(1) | Present
value of future recoveries includes R&W subrogation recoveries of $1,757 and $1,727 at June 30, 2020 and December 31, 2019, respectively. |
Gross Par Outstanding
(1)(2) | Present Value of Expected Net Cash Flows | Unearned Premium Revenue | Gross Loss and Loss Expense Reserves (1)(3) | |||||||||||||||||
($ in millions) | Claims and Loss Expenses | Recoveries | ||||||||||||||||||
RMBS | $ | 2,769 | $ | 707 | $ | (2,193 | ) | $ | (13 | ) | $ | (1,499 | ) | |||||||
Domestic
Public Finance | 3,714 | 1,197 | (344 | ) | (54 | ) | 799 | |||||||||||||
Student
Loans | 445 | 269 | (36 | ) | (4 | ) | 229 | |||||||||||||
Ambac
UK and Other Credits | 896 | 24 | — | (11 | ) | 13 | ||||||||||||||
Loss
expenses | — | 57 | — | — | 57 | |||||||||||||||
Totals | $ | 7,824 | $ | 2,254 | $ | (2,573 | ) | $ | (82 | ) | $ | (401 | ) |
RMBS | $ | 3,027 | $ | 634 | $ | (2,013 | ) | $ | (13 | ) | $ | (1,392 | ) | |||||||
Domestic
Public Finance | 2,398 | 1,007 | (344 | ) | (36 | ) | 627 | |||||||||||||
Student
Loans | 472 | 248 | (36 | ) | (4 | ) | 208 | |||||||||||||
Ambac
UK and Other Credits | 271 | 4 | — | (1 | ) | 3 | ||||||||||||||
Loss
expenses | — | 73 | — | — | 73 | |||||||||||||||
Totals | $ | 6,168 | $ | 1,966 | $ | (2,394 | ) | $ | (54 | ) | $ | (482 | ) |
(1) | Ceded
par outstanding on policies with loss reserves and ceded loss and loss expense reserves are $866 and $35 respectively, at June 30, 2020, and $511 and $26, respectively at December 31, 2019. Ceded loss and loss expense reserves are included in Reinsurance recoverable on paid and unpaid losses. |
(2) | Gross Par Outstanding includes capital appreciation bonds, which are reported at the par amount at the time of issuance of the insurance policy as opposed to the current accreted value of the bond. |
(3) | Loss
reserves are included in the balance sheet as Loss and loss expense reserves or Subrogation recoverable dependent on if a policy is in a net liability or net recoverable position. |
Issuer Type ($ in millions) | Gross Par Outstanding (1) | Gross Loss Reserves | Gross Par Outstanding (1) | Gross Loss Reserves | ||||||||||||
Lease
and tax-backed | $ | 1,468 | $ | 729 | $ | 1,075 | $ | 561 | ||||||||
General
obligation | 614 | (20 | ) | 681 | (16 | ) | ||||||||||
Housing | 456 | 28 | 457 | 29 | ||||||||||||
Transportation
revenue | 231 | 48 | 88 | 42 | ||||||||||||
Other | 945 | 14 | 97 | 11 | ||||||||||||
Total | $ | 3,714 | $ | 799 | $ | 2,398 | $ | 627 |
(1) | Gross
Par Outstanding includes capital appreciation bonds, which are reported at the par amount at the time of issuance of the insurance policy as opposed to the current accreted value of the bond. |
($
in millions) | ||||||||
Surplus notes (1) | $ | 785 | $ | 769 | ||||
Ambac
note | 1,659 | 1,763 | ||||||
Tier 2 notes | 292 | 278 | ||||||
Ambac
UK debt | 13 | 13 | ||||||
Total Long-term Debt | $ | 2,749 | $ | 2,822 |
(1) | Includes
junior surplus notes. |
• | Non-credit impairment fair value (gain) loss on credit derivatives: Elimination of the non-credit impairment fair value gains (losses) on credit derivatives, which is the amount in excess of the present value of the expected estimated
credit losses. Such fair value adjustments are affected by, and in part fluctuate with changes in market factors such as interest rates and credit spreads, including the market’s perception of Ambac’s credit risk (“Ambac CVA”), and are not expected to result in an economic gain or loss. These adjustments allow for all financial guarantee contracts to be accounted for consistent with the Financial Services – Insurance Topic of ASC, whether or not they are subject to derivative accounting rules. |
• | Insurance intangible amortization: Elimination of the amortization of the financial guarantee insurance
intangible asset that arose as a result of Ambac’s emergence from bankruptcy and the implementation of Fresh Start reporting. This adjustment ensures that all financial guarantee contracts are accounted for consistent with the provisions of the Financial Services – Insurance Topic of the ASC. |
• | Foreign exchange (gains) losses: Elimination of the foreign exchange gains (losses) on the re-measurement of assets, liabilities and transactions in non-functional currencies. This adjustment eliminates the foreign exchange gains (losses) on all assets, liabilities and transactions in non-functional currencies,
which enables users of our financial statements to better view the results without the impact of fluctuations in foreign currency exchange rates and facilitates period-to-period comparisons of Ambac's operating performance. |
Three
Months Ended June 30, | |||||||||||||||
2020 | 2019 | ||||||||||||||
($ in millions, except share data) | $ Amount | Per Diluted Share | $ Amount | Per
Diluted Share | |||||||||||
Net income (loss) attributable to common stockholders | $ | (35 | ) | $ | (0.77 | ) | $ | (128 | ) | $ | (2.79 | ) | |||
Adjustments: | |||||||||||||||
Non-credit
impairment fair value (gain) loss on credit derivatives | (1 | ) | (0.01 | ) | — | — | |||||||||
Insurance intangible amortization | 14 | 0.30 | 226 | 4.92 | |||||||||||
Foreign
exchange (gains) losses | (2 | ) | (0.04 | ) | (11 | ) | (0.25 | ) | |||||||
Adjusted earnings (loss) | $ | (24 | ) | $ | (0.52 | ) | $ | 86 | $ | 1.88 | |||||
Six
Months Ended June 30, | |||||||||||||||
2020 | 2019 | ||||||||||||||
($ in millions, except share data) | $ Amount | Per Diluted Share | $ Amount | Per
Diluted Share | |||||||||||
Net income (loss) attributable to common stockholders | $ | (315 | ) | $ | (6.83 | ) | $ | (172 | ) | $ | (3.74 | ) | |||
Adjustments: | |||||||||||||||
Non-credit
impairment fair value (gain) loss on credit derivatives | 1 | 0.02 | (1 | ) | (0.01 | ) | |||||||||
Insurance intangible amortization | 27 | 0.58 | 263 | 5.72 | |||||||||||
Foreign
exchange (gain) loss | (2 | ) | (0.04 | ) | (13 | ) | (0.29 | ) | |||||||
Adjusted earnings (loss) | $ | (289 | ) | $ | (6.27 | ) | $ | 77 | $ | 1.68 |
• | 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. |
($ in millions, except share data) | $ Amount | Per Share | $ Amount | Per Share | |||||||||||
Total Ambac Financial Group, Inc. stockholders’ equity | $ | 1,069 | $ | 23.34 | $ | 1,477 | $ | 32.41 | |||||||
Adjustments: | |||||||||||||||
Non-credit
impairment fair value losses on credit derivatives | 1 | 0.03 | — | 0.01 | |||||||||||
Insurance intangible asset | (392 | ) | (8.57 | ) | (427 | ) | (9.37 | ) | |||||||
Net
unearned premiums and fees in excess of expected losses | 396 | 8.63 | 414 | 9.09 | |||||||||||
Net unrealized investment (gains) losses in Accumulated Other
Comprehensive Income | (109 | ) | (2.38 | ) | (151 | ) | (3.31 | ) | |||||||
Adjusted book value | $ | 965 | $ | 21.06 | $ | 1,313 | $ | 28.83 |
Item 3. | Quantitative and Qualitative Disclosures about Market Risk |
($ in millions) | Estimated
Change in Net Fair Value | Estimated Net Fair Value | ||||||
300 basis point rise | $ | 18 | $ | (503 | ) | |||
200 basis point rise | 17 | (504 | ) | |||||
100
basis point rise | 15 | (506 | ) | |||||
Base scenario | — | (521 | ) | |||||
100
basis point decline(1) | 2 | (519 | ) | |||||
200 basis point decline(1) | 5 | (516 | ) |
(1) | Incorporates
an interest rate floor of 0%. |
($ in millions) | Estimated Change in Net Fair Value | Estimated Net Fair Value | ||||||
250 Basis Point Widening | $ | (24 | ) | $ | (61 | ) | ||
50
Basis Point Widening | (6 | ) | (43 | ) | ||||
Base Scenario | — | (37 | ) | |||||
50
basis Point Narrowing | 5 | (32 | ) | |||||
250 basis Point Narrowing | 25 | (12 | ) |
($ in millions) | Estimated Change in Net Fair Value | Estimated Net Fair Value | ||||||
250
Basis Point Widening | $ | (134 | ) | $ | 1,895 | |||
50 Basis Point Widening | (27 | ) | 2,002 | |||||
Base
Scenario | — | 2,029 | ||||||
50 Basis Point Narrowing | 25 | 2,054 | ||||||
250
Basis Point Narrowing | 75 | 2,104 |
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 |
April
2020 | May 2020 | June 2020 | Second Quarter 2020 | ||||||||||||
Total Shares Purchased (1) | — | 22,579 | — | 22,579 | |||||||||||
Average
Price Paid Per Share | $ | — | $ | 13.67 | $ | — | $ | 13.67 | |||||||
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 June 30, 2020. Ambac does not have a stock repurchase program. |
Item 3. | Defaults Upon Senior Securities — No matters require disclosure. |
Item
5. | Other Information |
Item 6. | Exhibits |
Exhibit Number | Description | |
Other exhibits, filed
or furnished, as indicated: | ||
10.1+ | ||
10.2+ | ||
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: | By: | /S/ DAVID TRICK | |
Name: | |||
Title: | Chief Financial Officer and Treasurer (Duly Authorized Officer and Principal Financial Officer) |
This ‘10-Q’ Filing | Date | Other Filings | ||
---|---|---|---|---|
12/31/34 | ||||
12/31/29 | ||||
12/31/24 | ||||
12/31/23 | ||||
12/31/22 | ||||
12/31/21 | ||||
2/22/21 | ||||
1/1/21 | ||||
12/31/20 | 10-K, 8-K, DEF 14A | |||
12/15/20 | ||||
10/19/20 | ||||
10/14/20 | ||||
9/30/20 | 10-Q | |||
9/23/20 | ||||
9/11/20 | ||||
9/9/20 | ||||
9/8/20 | ||||
8/31/20 | ||||
8/28/20 | ||||
8/20/20 | ||||
8/17/20 | ||||
Filed on: | 8/6/20 | 8-K | ||
8/5/20 | ||||
8/3/20 | ||||
8/1/20 | ||||
7/20/20 | ||||
7/15/20 | ||||
7/10/20 | ||||
7/8/20 | ||||
7/7/20 | ||||
7/4/20 | ||||
7/3/20 | ||||
7/2/20 | ||||
7/1/20 | ||||
For Period end: | 6/30/20 | |||
6/26/20 | ||||
6/25/20 | ||||
6/23/20 | ||||
6/16/20 | ||||
6/15/20 | ||||
6/11/20 | ||||
6/10/20 | ||||
6/7/20 | ||||
6/1/20 | ||||
5/31/20 | ||||
5/27/20 | ||||
5/26/20 | ||||
4/20/20 | ||||
4/1/20 | ||||
3/31/20 | 10-Q | |||
3/27/20 | ||||
3/20/20 | ||||
3/19/20 | ||||
3/13/20 | ||||
3/12/20 | ||||
3/10/20 | ||||
2/28/20 | ||||
2/19/20 | ||||
2/13/20 | ||||
2/9/20 | ||||
2/7/20 | ||||
2/5/20 | ||||
1/31/20 | ||||
1/30/20 | 8-A12B, CERT | |||
1/21/20 | ||||
1/17/20 | ||||
1/16/20 | ||||
1/14/20 | ||||
1/13/20 | ||||
1/1/20 | ||||
12/31/19 | 10-K | |||
11/1/19 | ||||
10/17/19 | ||||
9/27/19 | ||||
9/17/19 | ||||
9/1/19 | ||||
7/24/19 | ||||
7/16/19 | ||||
6/30/19 | 10-Q | |||
6/25/19 | ||||
6/17/19 | ||||
6/16/19 | ||||
6/13/19 | ||||
6/12/19 | ||||
5/30/19 | 4, 4/A | |||
5/2/19 | ||||
4/25/19 | ||||
4/11/19 | ||||
3/31/19 | 10-Q | |||
3/26/19 | ||||
3/12/19 | ||||
2/12/19 | ||||
1/14/19 | ||||
1/1/19 | ||||
12/31/18 | 10-K, DEF 14A | |||
12/30/18 | ||||
12/21/18 | ||||
11/2/18 | ||||
10/19/18 | ||||
9/6/18 | ||||
8/23/18 | ||||
6/8/18 | ||||
6/1/18 | ||||
2/12/18 | 8-K | |||
11/13/17 | 4 | |||
9/20/17 | ||||
9/18/17 | ||||
6/12/17 | ||||
3/6/17 | 4 | |||
8/28/14 | 8-K | |||
5/28/13 | ||||
9/30/11 | 10-Q | |||
9/28/10 | ||||
6/7/10 | 8-K | |||
List all Filings |