Investments (Tables)

9 Months Ended

Sep. 30, 2014

Investments, Debt and Equity Securities [Abstract]

Summary of Amortized Cost and Estimated Fair Value of Available-for-Sale Investments, Excluding VIE Investments

The amortized cost and estimated fair value of available-for-sale investments, excluding VIE investments, at September 30, 2014 and December 31, 2013 were as follows:



	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value		Non-credit other- than-temporary Impairments ⁽¹⁾
Successor Ambac - September 30, 2014
Fixed income securities:
Municipal obligations	$	930,171	$	18,611	$	9,340	$	939,442	$	—
Corporate obligations	1,802,775		12,457		9,549		1,805,683		—
Foreign obligations	126,304		1,359		2,550		125,113		—
U.S. government obligations	78,522		478		952		78,048		—
U.S. agency obligations	29,900		12		44		29,868		—
Residential mortgage-backed securities	1,664,096		169,004		8,608		1,824,492		2,476
Collateralized debt obligations	45,876		239		75		46,040		—
Other asset-backed securities	1,263,544		44,073		75		1,307,542		—
	5,941,188		246,233		31,193		6,156,228		2,476
Short-term	550,898		2		—		550,900		—
	6,492,086		246,235		31,193		6,707,128		2,476
Fixed income securities pledged as collateral:
U.S. government obligations	64,323		—		292		64,031		—
Total collateralized investments	64,323		—		292		64,031		—
Total available-for-sale investments	$	6,556,409	$	246,235	$	31,485	$	6,771,159	$	2,476

Successor Ambac - December 31, 2013
Fixed income securities:
Municipal obligations	$	1,405,293	$	857	$	28,427	$	1,377,723	$	—
Corporate obligations	1,508,377		4,886		23,894		1,489,369		—
Foreign obligations	131,709		69		6,901		124,877		—
U.S. government obligations	128,415		9		2,176		126,248		—
U.S. agency obligations	32,214		10		70		32,154		—
Residential mortgage-backed securities	1,516,877		59,853		18,105		1,558,625		852
Collateralized debt obligations	184,118		217		463		183,872		—
Other asset-backed securities	1,020,251		8,795		36,598		992,448		—
	5,927,254		74,696		116,634		5,885,316		852
Short-term	271,118		1		—		271,119		—
	6,198,372		74,697		116,634		6,156,435		852
Fixed income securities pledged as collateral:
U.S. government obligations	126,196		27		—		126,223		—
Total collateralized investments	126,196		27		—		126,223		—
Total available-for-sale investments	$	6,324,568	$	74,724	$	116,634	$	6,282,658	$	852


(1)	Represents the amount of non-credit other-than-temporary impairment losses remaining in accumulated other comprehensive loss on securities that also had a credit impairment. These losses are included in gross unrealized losses as of September 30, 2014 and December 31, 2013.

Summary of Amortized Cost and Estimated Fair Value of Available-for-Sale Investments, Excluding VIE Investments Held by Successor Ambac, by Contractual Maturity

The amortized cost and estimated fair value of available-for-sale investments, excluding VIE investments, at September 30, 2014, by contractual maturity, were as follows:



	Amortized Cost		Estimated Fair Value
Due in one year or less	$	775,041	$	775,139
Due after one year through five years	1,183,781		1,183,703
Due after five years through ten years	1,247,527		1,251,073
Due after ten years	376,544		383,170
	3,582,893		3,593,085
Residential mortgage-backed securities	1,664,096		1,824,492
Collateralized debt obligations	45,876		46,040
Other asset-backed securities	1,263,544		1,307,542
Total	$	6,556,409	$	6,771,159

Summary of Gross Unrealized Losses and Fair Values of Ambac's Available-for-Sale Investments

The following table shows gross unrealized losses and fair values of Ambac’s available-for-sale investments, aggregated by investment category and length of time that the individual securities have been in a continuous unrealized loss position, at September 30, 2014 and December 31, 2013:



	Less Than 12 Months				12 Months or More				Total
	Fair Value		Gross Unrealized Loss		Fair Value		Gross Unrealized Loss		Fair Value		Gross Unrealized Loss
Successor Ambac - September 30, 2014
Fixed income securities:
Municipal obligations	$	67,274	$	1,369	$	155,408	$	7,971	$	222,682	$	9,340
Corporate obligations	474,889		3,419		209,911		6,130		684,800		9,549
Foreign government obligations	32,642		1,109		38,043		1,441		70,685		2,550
U.S. government obligations	9,302		351		14,667		601		23,969		952
U.S. agency obligations	—		—		4,413		44		4,413		44
Residential mortgage-backed securities	200,916		8,508		3,363		100		204,279		8,608
Collateralized debt obligations	5,442		75		—		—		5,442		75
Other asset-backed securities	169,755		75		—		—		169,755		75
	960,220		14,906		425,805		16,287		1,386,025		31,193
Short-term	1,368		—		—		—		1,368		—
	$	961,588	$	14,906	$	425,805	$	16,287	$	1,387,393	$	31,193
Fixed income securities, pledged as collateral:
U.S. government obligations	64,031		292		—		—		64,031		292
Total collateralized investments	64,031		292		—		—		64,031		292
Total temporarily impaired securities	$	1,025,619	$	15,198	$	425,805	$	16,287	$	1,451,424	$	31,485



	Less Than 12 Months⁽¹⁾
	Fair Value		Gross Unrealized Loss
Successor Ambac - December 31, 2013
Fixed income securities:
Municipal obligations	$	437,683	$	28,427
Corporate obligations	877,356		23,894
Foreign government obligations	117,905		6,901
U.S. government obligations	70,044		2,176
U.S. agency obligations	5,834		70
Residential mortgage-backed securities	644,502		18,105
Collateralized debt obligations	137,685		463
Other asset-backed securities	629,957		36,598
	2,920,966		116,634
Short-term	—		—
Total temporarily impaired securities	$	2,920,966	$	116,634


(1)	As a result of the implementation of Fresh Start, amortized cost for available for sale securities were set to equal fair value on April 30, 2013. Accordingly, as of December 31, 2013 Successor Ambac did not have any gross unrealized losses that were in a continuous unrealized loss position for greater than 12 months.

Summary of Amounts Included in Net Realized (Losses) Gains and Other-Than-Temporary Impairments

The following table details amounts included in net realized gains and other-than-temporary impairments included in earnings for the affected periods:



	Period from July 1			Period from July 1
	through			through
	September 30, 2014			September 30, 2013
Gross realized gains on securities	$	7,658		$	3,906
Gross realized losses on securities	(3,908		)	(7,239		)
Foreign exchange gains (losses)	6,295			(6,977		)
Net realized gains (losses)	$	10,045		$	(10,310	)
Net other-than-temporary impairments ⁽¹⁾	$	(5,011	)	$	(38,037	)



	Successor Ambac –						Predecessor Ambac –
	Period from January 1			Period from May 1			Period from January 1
	through			through			through
	September 30, 2014			September 30, 2013			April 30, 2013
Gross realized gains on securities	$	37,355		$	20,518		$	47,448
Gross realized losses on securities	(7,779		)	(8,831		)	(320		)
Foreign exchange (losses) gains	(175		)	(3,525		)	6,177
Net realized gains	$	29,401		$	8,162		$	53,305
Net other-than-temporary impairments ⁽¹⁾	$	(24,157	)	$	(40,039	)	$	(467	)


(1)	Other-than-temporary impairments exclude impairment amounts recorded in other comprehensive income under ASC Paragraph 320-10-65-1, which comprise non-credit related amounts on securities that are credit impaired but which management does not intend to sell and it is not more likely than not that the company will be required to sell before recovery of the amortized cost basis.

Summary of Roll-Forward of Ambac's Cumulative Credit Losses on Debt Securities for Which Portion of Other-than-Temporary Impairment was Recognized in Other Comprehensive Income

The following table presents a roll-forward of Ambac’s cumulative credit losses on debt securities held as of September 30, 2014 and 2013 for which a portion of an other-than-temporary impairment was recognized in other comprehensive income:



	Credit Impairment
Successor Ambac:
Balance as of January 1, 2014	$	1,182
Additions for credit impairments recognized on:
Securities not previously impaired	11,337
Securities previously impaired	—
Reductions for credit impairments previously recognized on:
Securities that matured or were sold during the period	—
Balance as of September 30, 2014	$	12,519

Predecessor Ambac:
Balance as of January 1, 2013	$	183,300
Additions for credit impairments recognized on:
Securities not previously impaired	467
Securities previously impaired	—
Reductions for credit impairments previously recognized on:
Securities that matured or were sold during the period	(183,767		)
Balance as of April 30, 2013	$	—

Successor Ambac:
Balance as of May 1, 2013	$	—
Additions for credit impairments recognized on:
Securities not previously impaired	1,032
Securities previously impaired	—
Reductions for credit impairments previously recognized on:
Securities that matured or were sold during the period	(3		)
Balance as of September 30, 2013	$	1,029

Summary of Sources of Collateral Received and Various Investment Agreement in which Collateral Pledged

The following table presents (i) the sources of collateral either received from various counterparties where Ambac is permitted to sell or re-pledge the collateral or collateral held directly in the investment portfolio and (ii) how that collateral was pledged to various investment agreement, derivative and repurchase agreement counterparties at September 30, 2014 and December 31, 2013:



	Fair Value of Cash and Underlying Securities		Fair Value of Cash and Securities Pledged to Investment Agreement Counterparties		Fair Value of Cash and Securities Pledged to Derivative Counterparties
Successor Ambac - September 30, 2014
Sources of Collateral:
Cash and securities pledged directly from the investment portfolio	$	330,681	$	158,040	$	172,641
Cash and securities pledged from derivative counterparties	—		—		—

Successor Ambac - December 31, 2013
Sources of Collateral:
Cash and securities pledged directly from the investment portfolio	$	500,986	$	371,723	$	129,263
Cash and securities pledged from derivative counterparties	690		—		—

Summary of Fair Value, Including Financial Guarantee, and Weighted-Average Underlying Rating, Excluding Financial Guarantee, of Insured Securities

The following table represents the fair value, including the value of the financial guarantee, and weighted-average underlying rating, excluding the financial guarantee, of the insured securities at September 30, 2014 and December 31, 2013, respectively:



	Municipal obligations		Corporate obligations		Mortgage and asset- backed securities		Short-term		Total		Weighted Average Underlying Rating ⁽¹⁾
Successor Ambac - September 30, 2014:
Ambac Assurance Corporation ⁽²⁾	$	66,213	$	—	$	2,206,828	$	—	$	2,273,041	CCC
Assured Guaranty Municipal Corporation	290,395		78,423		—		—		368,818		A+
National Public Finance Guarantee Corporation	234,577		34,707		—		—		269,284		A+
Assured Guaranty Corporation	—		—		2,639		—		2,639		D
MBIA Insurance Corporation	—		—		—		—		—
Financial Guarantee Insurance Corporation	—		—		—		—		—
Total	$	591,185	$	113,130	$	2,209,467	$	—	$	2,913,782	B

Successor Ambac - December 31, 2013:
Ambac Assurance Corporation ⁽²⁾	$	64,596	$	—	$	1,747,283	$	—	$	1,811,879	CCC
Assured Guaranty Municipal Corporation	372,392		77,163		—		—		449,555		A+
National Public Finance Guarantee Corporation	532,752		37,642		—		—		570,394		AA-
Assured Guaranty Corporation	—		—		2,917		—		2,917		D
MBIA Insurance Corporation	—		17,444		—		—		17,444		BBB-
Financial Guarantee Insurance Corporation	—		—		2,869		—		2,869		D
Total	$	969,740	$	132,249	$	1,753,069	$	—	$	2,855,058	BB-


(1)	Ratings are based on the lower of Standard & Poor’s or Moody’s rating. If unavailable, Ambac’s internal rating is used.


(2)	Includes asset-backed securities with a fair value of $51,395 and $50,953 at September 30, 2014 and December 31, 2013, respectively, insured by Ambac UK.

Summary of Net Investment Income

Net investment income was comprised of the following for the affected periods:



	Period from July 1			Period from July 1
	through			through
	September 30, 2014			September 30, 2013
Fixed income securities	$	84,339		$	53,301
Short-term investments	832			626
Loans	123			109
Investment expense	(2,413		)	(2,260		)
Securities available-for-sale and short-term	82,881			51,776
Other investments	700			350
Total net investment income	$	83,581		$	52,126

- Definition

Tabular disclosure of available-for-sale securities which includes, but is not limited to, changes in the cost basis and fair value, fair value and gross unrealized gain (loss), fair values by type of security, contractual maturity and classification, amortized cost basis, contracts to acquire securities to be accounted for as available-for-sale, debt maturities, transfers to trading, change in net unrealized holding gain (loss) net of tax, continuous unrealized loss position fair value, aggregate losses qualitative disclosures, other than temporary impairment (OTTI) losses or other disclosures related to available for sale securities.

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- Definition

Tabular disclosure of the realized and unrealized gains and losses reported in the statement of income which have resulted from the sale and holding of marketable securities, respectively, as well as the sale or disposal of cost method investments. Such amounts would include realized gains and losses on the sale or disposal of trading, available-for-sale, and held-to-maturity securities, unrealized gains and losses on trading securities, unrealized gains and losses on available-for-sale and held-to-maturity securities transferred to the trading securities category, realized gains and losses on the sale or disposal of cost method investments, and losses recognized for other than temporary impairments (OTTI) of such investments.

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- Definition

Tabular disclosure of investment income, including, but not limited to, interest and dividend income and amortization of discount (premium) derived from debt and equity securities. Excludes realized and unrealized gain (loss) on investments.

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- Definition

Tabular disclosure of the amount of other than temporary impairment (OTTI) related to credit losses recognized in earnings including: (a) the beginning balance of the amount related to credit losses on debt securities held by the investor at the beginning of the period for which a portion of an OTTI was recognized in other comprehensive income; (b) additions for the amount related to the credit loss for which an OTTI was not previously recognized; (c) reductions for securities sold during the period (realized); (d) reductions for securities for which the amount previously recognized in other comprehensive income was recognized in earnings because the investor intends to sell the security or more likely than not will be required to sell the security before recovery of its amortized cost basis; (e) additional increases to the amount related to the credit loss for which an OTTI was previously recognized when the investor does not intend to sell the security and it is not more likely than not that the investor will be required to sell the security before recovery of its amortized cost basis; (f) reductions for increases in cash flows expected to be collected that are recognized over the remaining life of the security; and (g) the ending balance of the amount related to credit losses on debt securities held by the entity at the end of the period for which a portion of an OTTI was recognized in other comprehensive income.

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