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Segment Information
 9 Months Ended
Sep. 30, 2012
Segment Information

13. Segment Information

Ambac has two reportable segments, as follows: (1) Financial Guarantee, which provided financial guarantees (including credit derivatives) for public finance, structured finance and other obligations; and (2) Financial Services, which provided investment agreements, funding conduits, interest rate and currency swaps, principally to clients of the financial guarantee business. Ambac’s reportable segments were strategic business units that offer different products and services. They are managed separately because each business required different marketing strategies, personnel skill sets and technology.

 

Ambac Assurance guarantees the swap and investment agreement obligations of its Financial Services affiliates. Premiums paid under these agreements are determined as if they were paid by third parties, that is, at current market prices. Additionally, Ambac Assurance provides loans to the Financial Services businesses. Inter-segment revenues include the premiums and investment income earned under those loan agreements.

Information provided below for “Corporate and Other” primarily relates to corporate activities, including interest income on the investment portfolio. Corporate and Other intersegment revenue relates to receipts under the Mediation Agreement between Ambac Financial Group and Ambac Assurance. The following table is a summary of financial information by reportable segment as of and for the three and nine months ended September 30, 2012 and 2011:

 

Three months ended September 30,

    Financial
Guarantee		     Financial
Services		     Corporate
and Other		     Intersegment
Eliminations		     Total
Consolidated		  

2012:

           

Revenues:

           

Unaffiliated customers

    $ 230,014      $ (33,021 )    $ 169      $ —        $ 197,162   

Intersegment

      1,244        (1,197 )      —          (47 )      —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total revenues

    $ 231,258      $ (34,218 )    $ 169      $ (47 )    $ 197,162   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Pre-tax loss from continuing operations:

           

Unaffiliated customers

    $ 196,302      $ (35,434 )    $ (2,828 )    $ —        $ 158,040   

Intersegment

      2,530        (1,897 )      (633 )      —          —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Pre-tax loss from continuing operations

    $ 198,832      $ (37,331 )    $ (3,461 )    $ —        $ 158,040   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total assets

    $ 26,206,822      $ 703,945      $ 37,125      $ —        $ 26,947,892   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

2011:

           

Revenues:

           

Unaffiliated customers

    $ 232,845      $ (207,190 )    $ 62      $ —        $ 25,717   

Intersegment

      1,088        (1,022 )      2,883        (2,949 )      —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total revenues

    $ 233,933      $ (208,212 )    $ 2,945      $ (2,949 )    $ 25,717   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Pre-tax loss from continuing operations:

           

Unaffiliated customers

    $ 221,612      $ (211,852 )    $ (10,258 )    $ —        $ (498 ) 

Intersegment

      (3,660 )      (465 )      3,955        170        —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Pre-tax loss from continuing operations

    $ 217,952      $ (212,317 )    $ (6,303 )    $ 170      $ (498 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total assets

    $ 26,349,572      $ 1,220,087      $ 56,923      $ —        $ 27,626,582   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

Nine months ended September 30,

    Financial
Guarantee		     Financial
Services		     Corporate
and Other		     Intersegment
Eliminations		     Total
Consolidated		  

2012:

           

Revenues:

           

Unaffiliated customers

    $ 587,506      $ (72,451 )    $ 282      $ —        $ 515,337   

Intersegment

      4,140        (3,986 )      645        (799 )      —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total revenues

    $ 591,646      $ (76,437 )    $ 927      $ (799 )    $ 515,337   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Pre-tax loss from continuing operations:

           

Unaffiliated customers

    $ (314,598 )    $ (80,021 )    $ (7,280 )    $ —        $ (401,899 ) 

Intersegment

      2,845        (3,681 )      836        —          —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Pre-tax loss from continuing operations

    $ (311,753 )    $ (83,702 )    $ (6,444 )    $ —        $ (401,899 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total assets

    $ 26,206,822      $ 703,945      $ 37,125      $ —        $ 26,947,892   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

2011:

           

Revenues:

           

Unaffiliated customers

    $ 610,945      $ (233,961 )    $ 211      $ —        $ 377,195   

Intersegment

      25,174        (24,963 )      2,883        (3,094 )      —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total revenues

    $ 636,119      $ (258,924 )    $ 3,094      $ (3,094 )    $ 377,195   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Pre-tax loss from continuing operations:

           

Unaffiliated customers

    $ (628,260 )    $ (248,159 )    $ (42,851 )    $ —        $ (919,270 ) 

Intersegment

      17,971        (22,619 )      4,648        —          —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Pre-tax loss from continuing operations

    $ (610,289 )    $ (270,778 )    $ (38,203 )    $ —        $ (919,270 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total assets

    $ 26,349,572      $ 1,220,087      $ 56,923      $ —        $ 27,626,582   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Included in the table above are revenues from unaffiliated customers for the three and nine months ended September 30, 2012 relating to net investment income of $81,037 and $276,251 for Financial Guarantee, respectively; $2,986 and $13,611 for Financial Services, respectively; and $55 and $169 for Corporate and Other, respectively, compared with $81,588 and $241,217 for Financial Guarantee, respectively; $9,040 and $21,369 for Financial Services, respectively; and $71 and $220 for Corporate and Other, respectively, for the three and nine months ended September 30, 2011. Included in the line item pre-tax loss from continuing operations—unaffiliated customers for the three and nine month quarters of 2012 is interest expense, of which $23,269 and $83,966 is for Financial Guarantee, respectively; $1,556 and $4,996 for Financial Services; respectively; and $0 and $0 for Corporate and Other, respectively, compared to the three and nine month quarters of 2011, of which $31,131 and $88,846 is for Financial Guarantee, respectively; $1,943 and $6,158 for Financial Services; respectively; and $0 and $0 for Corporate and Other, respectively. Interest expense for Financial Guarantee relates to the interest accrued on surplus notes and interest from a secured borrowing on a variable interest entity, and Financial Services relates to the interest on investment agreements.

 

The following tables summarize gross premiums written, net premiums earned and the net change in fair value of credit derivatives included in the Financial Guarantee segment, by location of risk for the three and nine months ended September 30, 2012 and 2011:

 

     Three Months Ended September 30, 2012     Three Months Ended September 30, 2011  
     Gross
Premiums
Written		     Net Premiums
Earned		      Net Change in
Fair Value of
Credit
Derivatives		     Gross
Premiums
Written		     Net
Premiums
Earned		      Net Change
in Fair Value
of Credit
Derivatives		  

United States

    $ (40,748 )    $ 92,132       $ 15,845      $ 26,998      $ 82,291       $ 3,223   

United Kingdom

      (1,060 )      14,763         716        187,895        12,220         (602 ) 

Other international

      (13,502 )      6,179         10,879        27,680        7,544         1,884   
  

 

 

    

 

 

     

 

 

    

 

 

    

 

 

     

 

 

  

Total

    $ (55,310 )    $ 113,074       $ 27,440      $ 242,573      $ 102,055       $ 4,505   
  

 

 

    

 

 

     

 

 

    

 

 

    

 

 

     

 

 

  
     Nine Months Ended September 30, 2012     Nine Months Ended September 30, 2011  
     Gross
Premiums
Written		     Net Premiums
Earned		      Net Change in
Fair Value of
Credit
Derivatives		     Gross
Premiums
Written		     Net
Premiums
Earned		      Net Change
in Fair Value
of Credit
Derivatives		  

United States

    $ (165,408 )    $ 235,672       $ 7,577      $ (328,181 )    $ 232,420       $ 13,741   

United Kingdom

      11,325        55,355         (3,721 )      198,778        35,006         251   

Other international

      (21,694 )      20,039         8,947        3,691        25,699         5,897   
  

 

 

    

 

 

     

 

 

    

 

 

    

 

 

     

 

 

  

Total

    $ (175,777 )    $ 311,066       $ 12,803      $ (125,712 )    $ 293,125       $ 19,889