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Financial Guarantee Insurance Contracts (Tables)

6 Months Ended

Jun. 30, 2020

Schedule of Loss And Loss Expense Reserves And Subrogation Recoverable Table [Table Text Block]

Below are the components of the loss reserves liability and the Subrogation recoverable asset at June 30, 2020 and December 31, 2019:



	June 30, 2020:											December 31, 2019:
	Present Value of Expected Net Cash Flows					Unearned Premium Revenue			Gross Loss and Loss Expense Reserves			Present Value of Expected Net Cash Flows					Unearned Premium Revenue			Gross Loss and Loss Expense Reserves
Balance Sheet Line Item	Claims and Loss Expenses		Recoveries			Unearned Premium Revenue			Gross Loss and Loss Expense Reserves			Claims and Loss Expenses		Recoveries			Unearned Premium Revenue			Gross Loss and Loss Expense Reserves
Loss and loss expense reserves	$	2,134	$	(238	)	$	(82	)	$	1,814		$	1,835	$	(233	)	$	(54	)	$	1,548
Subrogation recoverable	120		(2,336		)	—			(2,215		)	131		(2,160		)	—			(2,029		)
Totals	$	2,254	$	(2,573	)	$	(82	)	$	(401	)	$	1,966	$	(2,394	)	$	(54	)	$	(482	)

Summary of Gross Premium Receivable Roll-Forward (Direct and Assumed Contracts)

Below is the gross premium receivable roll-forward for the respective periods, net of allowance for credit losses:



	Six Months Ended June 30,
	2020			2019
Beginning premium receivable	$	416		$	495
Adjustment to initially apply ASU 2016-13	(3		)	—
Premium receipts	(22		)	(26		)
Adjustments for changes in expected and contractual cash flows ⁽¹⁾	9			(22		)
Accretion of premium receivable discount	5			6
Changes to allowance for credit losses	(4		)	(1		)
Other adjustments (including foreign exchange)	(8		)	(11		)
Ending premium receivable⁽²⁾	$	392		$	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 $127 (£103) and $137 (£108), respectively, and Euros of $22 (€19) and $28 (€25), respectively.

Effect of Reinsurance on Premiums Written and Earned

The effect of reinsurance on premiums written and earned for the respective periods was as follows:



	Three Months Ended June 30,
	2020					2019
	Written			Earned		Written			Earned
Direct	$	(1	)	$	14	$	(21	)	$	10
Assumed	—			—		—			—
Ceded	—			3		—			2
Net premiums	$	—		$	11	$	(20	)	$	8

	Six Months Ended June 30,
	2020					2019
	Written			Earned		Written			Earned
Direct	$	10		$	27	$	(17	)	$	40
Assumed	—			1		—			—
Ceded	(1		)	6		(1		)	4
Net premiums	$	11		$	21	$	(16	)	$	36

Schedule of Revenue from External Customers Attributed to Foreign Countries by Geographic Area [Table Text Block]

The following table summarizes net premiums earned by location of risk for the respective periods:



	Three Months Ended June 30,						Six Months Ended June 30,
	2020			2019			2020			2019
United States	$	8		$	6		$	15		$	34
United Kingdom	4			4			8			8
Other international	(1		)	(2		)	(1		)	(7		)
Total	$	11		$	8		$	21		$	36

Summarized Future Gross Undiscounted Premiums Expected to be Collected and Future Expected Premiums Earned, Net of Reinsurance

The table below summarizes the future gross undiscounted premiums to be collected and future premiums earned, net of reinsurance at June 30, 2020:



	Future Premiums to be Collected ⁽¹⁾		Future Premiums to be Earned Net of Reinsurance ⁽²⁾
Three months ended:
September 30, 2020	$	12	$	10
December 31, 2020	10		10
Twelve months ended:
December 31, 2021	36		36
December 31, 2022	35		34
December 31, 2023	33		32
December 31, 2024	32		30
Five years ended:
December 31, 2029	140		124
December 31, 2034	104		82
December 31, 2039	52		38
December 31, 2044	23		14
December 31, 2049	9		5
December 31, 2054	1		1
Total	$	488	$	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

Premiums Receivable by Risk Classification Code [Table Text Block]

Below is the amortized cost basis of premium receivables by risk classification code and asset class as of June 30, 2020:



Surveillance Categories as of June 30, 2020
Type of Guaranteed Bond	I		IA		II		III		IV		Total
Public Finance:
Housing revenue	$	160	$	13	$	—	$	—	$	—	$	173
Other	2		13		—		—		—		16
Total Public Finance	162		26		—		—		—		189

Structured Finance:
Mortgage-backed and home equity	3		—		1		3		17		25
Structured insurance	17		—		—		—		—		17
Student loan	3		—		2		12		—		18
Other	6		—		—		—		—		6
Total Structured Finance	29		—		4		15		17		65

International:
Sovereign/sub-sovereign	87		12		—		14		—		113
Investor-owned and public utilities	28		—		—		—		—		28
Other	13		—		—		—		—		13
Total International	128		12		—		14		—		154
Total⁽¹⁾	$	320	$	39	$	4	$	29	$	17	$	408

(1)

The underwriting origination dates for all policies included are greater than five years prior to the current reporting date.

Premium Receivable, Allowance for Credit Loss [Table Text Block]

Below is a rollforward of the premium receivable allowance for credit losses as of June 30, 2020:



	Three Months Ended June 30, 2020		Six Months Ended June 30, 2020
Beginning balance ⁽¹⁾	$	14	$	9
Current period provision ⁽²⁾	2		7
Write-offs of the allowance	—		—
Recoveries of previously written-off amounts	—		—
Ending balance	$	16	$	16


(1)	At December 31, 2019, $9 of premiums receivable were deemed uncollectible as determined under prior GAAP rules.

(2)

The six months ended June 30, 2020, includes $3 from the adoption of CECL.

Summary of Loss Reserve Roll-Forward, Net of Subrogation Recoverable and Reinsurance

Below is the loss reserves roll-forward, net of subrogation recoverable and reinsurance, for the affected periods:



	Six Months Ended June 30,
	2020			2019
Beginning gross loss and loss expense reserves	$	(482	)	$	(107	)
Reinsurance recoverable	26			23
Beginning balance of net loss and loss expense reserves	(508		)	(130		)
Losses and loss expenses (benefit):
Current year	16			1
Prior years	116			(122		)
Total ^{(1) (2)}	132			(121		)
Loss and loss expenses paid (recovered):
Current year	—			—
Prior years	61			194
Total	61			194
Foreign exchange effect	—			(1		)
Ending net loss and loss expense reserves	(437		)	(446		)
Impact of VIE consolidation	—			(72		)
Reinsurance recoverable ⁽³⁾	35			27
Ending gross loss and loss expense reserves	$	(401	)	$	(491	)


(1)	Total losses and loss expenses (benefit) includes $(11) and $(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 $(30) and $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 $1 and $0 as of June 30, 2020 and 2019, respectively, related to previously presented loss and loss expenses and subrogation.

Summary of Information Related to Policies Currently Included in Ambac's Loss Reserves or Subrogation Recoverable

The tables below summarize information related to policies currently included in Ambac’s loss reserves or subrogation recoverable at June 30, 2020 and December 31, 2019. Gross par exposures include 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. The weighted average risk-free rate used to discount loss reserves at June 30, 2020 and December 31, 2019,was 0.9% and 2.1%, respectively.



Surveillance Categories as of June 30, 2020
	I			IA			II			III			IV			V			Total
Number of policies	49			29			15			16			135			3			247
Remaining weighted-average contract period (in years) ⁽¹⁾	10			19			9			16			15			3			15
Gross insured contractual payments outstanding:
Principal	$	973		$	1,159		$	621		$	1,503		$	3,536		$	32		$	7,824
Interest	314			1,112			506			275			1,538			10			3,753
Total	$	1,287		$	2,271		$	1,126		$	1,778		$	5,074		$	41		$	11,577
Gross undiscounted claim liability	$	4		$	56		$	42		$	527		$	1,784		$	41		$	2,454
Discount, gross claim liability	—			(2		)	(1		)	(70		)	(184		)	—			(257		)
Gross claim liability before all subrogation and before reinsurance	4			54			41			457			1,601			41			2,198
Less:
Gross RMBS subrogation⁽²⁾	—			—			—			—			(1,761		)	—			(1,761		)
Discount, RMBS subrogation	—			—			—			—			4			—			4
Discounted RMBS subrogation, before reinsurance	—			—			—			—			(1,757		)	—			(1,757		)
Less:
Gross other subrogation⁽³⁾	—			—			—			(38		)	(785		)	(13		)	(836		)
Discount, other subrogation	—			—			—			1			18			1			20
Discounted other subrogation, before reinsurance	—			—			—			(37		)	(768		)	(11		)	(816		)
Gross claim liability, net of all subrogation and discounts, before reinsurance	4			54			41			420			(924		)	30			(376		)
Less: Unearned premium revenue	(3		)	(22		)	(5		)	(18		)	(33		)	—			(82		)
Plus: Loss expense reserves	—			1			1			4			51			—			57
Gross loss and loss expense reserves	$	1		$	32		$	37		$	406		$	(907	)	$	30		$	(401	)
Reinsurance recoverable reported on Balance Sheet ⁽⁴⁾	$	—		$	6		$	9		$	27		$	(6	)	$	—		$	36


(1)	Remaining weighted-average contract period is weighted based on projected gross claims over the lives of the respective policies.


(2)	RMBS subrogation represents Ambac’s estimate of subrogation recoveries from RMBS transaction sponsors for R&W breaches.


(3)	Other subrogation represents subrogation related to excess spread and other contractual cash flows on public finance and structured finance transactions, including RMBS.


(4)	Reinsurance recoverable reported on the Balance Sheet includes reinsurance recoverables of $35 related to future loss and loss expenses and $1 related to presented loss and loss expenses and subrogation.



Surveillance Categories as of December 31, 2019
	I			IA			II			III			IV			V			Total
Number of policies	34			18			11			16			139			3			221
Remaining weighted-average contract period (in years) ⁽¹⁾	8			21			9			17			14			3			15
Gross insured contractual payments outstanding:
Principal	$	668		$	510		$	277		$	857		$	3,819		$	37		$	6,168
Interest	340			507			128			366			1,678			11			3,029
Total	$	1,007		$	1,016		$	404		$	1,223		$	5,498		$	48		$	9,197
Gross undiscounted claim liability	$	2		$	44		$	21		$	541		$	1,778		$	48		$	2,434
Discount, gross claim liability	—			(5		)	(1		)	(152		)	(381		)	(2		)	(541		)
Gross claim liability before all subrogation and before reinsurance	2			39			20			389			1,397			46			1,893
Less:
Gross RMBS subrogation ⁽²⁾	—			—			—			—			(1,777		)	—			(1,777		)
Discount, RMBS subrogation	—			—			—			—			49			—			49
Discounted RMBS subrogation, before reinsurance	—			—			—			—			(1,727		)	—			(1,727		)
Less:
Gross other subrogation ⁽³⁾	—			—			—			(41		)	(666		)	(13		)	(720		)
Discount, other subrogation	—			—			—			4			47			3			53
Discounted other subrogation, before reinsurance	—			—			—			(37		)	(620		)	(10		)	(666		)
Gross claim liability, net of all subrogation and discounts, before reinsurance	2			39			20			353			(950		)	36			(501		)
Less: Unearned premium revenue	(1		)	(9		)	(1		)	(7		)	(35		)	—			(54		)
Plus: Loss expense reserves	1			1			1			4			67			—			73
Gross loss and loss expense reserves	$	1		$	30		$	20		$	349		$	(918	)	$	36		$	(482	)
Reinsurance recoverable reported on Balance Sheet⁽⁴⁾	$	—		$	6		$	7		$	24		$	(10	)	$	—		$	26


(1)	Remaining weighted-average contract period is weighted based on projected gross claims over the lives of the respective policies.


(2)	RMBS subrogation represents Ambac’s estimate of subrogation recoveries from RMBS transaction sponsors for R&W breaches.


(3)	Other subrogation represents subrogation related to excess spread and other contractual cash flows on public finance and structured finance transactions, including RMBS.

(4)

Reinsurance recoverable reported on Balance Sheet includes reinsurance recoverables of $26 related to future loss and loss expenses and $0 related to presented loss and loss expenses and subrogation.

Summary of Rollforward of RMBS Subrogation, by Estimation Approach

Below is the rollforward of R&W subrogation for the affected periods:



	Six Months Ended June 30,
	2020		2019
Discounted R&W subrogation (gross of reinsurance) at beginning of period	$	1,727	$	1,771
All other changes ⁽¹⁾	30		(8		)
Discounted R&W subrogation (gross of reinsurance) at end of period	$	1,757	$	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.

Intangible Assets Disclosure [Text Block]

The insurance intangible amortization expense is included in the Consolidated Statements of Total Comprehensive Income (Loss), as shown below.



	Three Months Ended June 30,				Six Months Ended June 30,
	2020		2019		2020		2019
Insurance amortization expense	$	14	$	226	$	27	$	263

The insurance intangible asset and accumulated amortization are included in the Consolidated Balance Sheets, as shown below.



	June 30, 2020		December 31, 2019
Gross carrying value of insurance intangible asset	$	1,260	$	1,273
Accumulated amortization of insurance intangible asset	868		847
Net insurance intangible asset	$	392	$	427

Insurance Intangible Asset [Member]

Insurance [Line Items]

Schedule of Finite-Lived Intangible Assets, Future Amortization Expense [Table Text Block]

The estimated future amortization expense for the net insurance intangible asset is as follows:



Amortization expense ^{(1) (2)}
2020 (six months)	$	21
2021	38
2022	35
2023	32
2024	29
Thereafter	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 7.6 years.