Investments (Tables)

12 Months Ended

Dec. 31, 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 December 31, 2014 and 2013 were as follows:



	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value		Non-credit other- than-temporary Impairments ⁽¹⁾
Successor Ambac - December 31, 2014
Fixed income securities:
Municipal obligations	$	523,019	$	9,769	$	6,996	$	525,792	$	—
Corporate obligations	1,382,195		12,815		9,416		1,385,594		—
Foreign obligations	126,041		3,060		1,344		127,757		—
U.S. government obligations	42,328		1,078		427		42,979		—
U.S. agency obligations	29,524		—		38		29,486		—
Residential mortgage-backed securities	1,557,059		167,396		13,500		1,710,955		7,773
Collateralized debt obligations	21,346		50		274		21,122		—
Other asset-backed securities	833,366		48,794		159		882,001		—
	4,514,878		242,962		32,154		4,725,686		7,773
Short-term	360,069		—		4		360,065		—
	4,874,947		242,962		32,158		5,085,751		7,773
Fixed income securities pledged as collateral:
U.S. government obligations	64,378		—		111		64,267		—
Total collateralized investments	64,378		—		111		64,267		—
Total available-for-sale investments	$	4,939,325	$	242,962	$	32,269	$	5,150,018	$	7,773

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 December 31, 2014 and 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 December 31, 2014, by contractual maturity, were as follows:



	Amortized Cost		Estimated Fair Value
Due in one year or less	$	551,712	$	551,618
Due after one year through five years	845,986		846,430
Due after five years through ten years	931,471		935,797
Due after ten years	198,385		202,095
	2,527,554		2,535,940
Residential mortgage-backed securities	1,557,059		1,710,955
Collateralized debt obligations	21,346		21,122
Other asset-backed securities	833,366		882,001
Total	$	4,939,325	$	5,150,018

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 December 31, 2014 and 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
December 31, 2014
Fixed income securities:
Municipal obligations	$	77,788	$	1,244	$	135,076	$	5,752	$	212,864	$	6,996
Corporate obligations	453,504		4,998		172,045		4,418		625,549		9,416
Foreign government obligations	20,827		748		14,277		596		35,104		1,344
U.S. government obligations	7,223		154		14,735		273		21,958		427
U.S. agency obligations	25,039		2		4,378		36		29,417		38
Residential mortgage-backed securities	413,203		12,391		10,076		1,109		423,279		13,500
Collateralized debt obligations	5,012		274		—		—		5,012		274
Other asset-backed securities	248,823		155		68		4		248,891		159
	1,251,419		19,966		350,655		12,188		1,602,074		32,154
Short-term	8,803		4		—		—		8,803		4
	$	1,260,222	$	19,970	$	350,655	$	12,188	$	1,610,877	$	32,158
Fixed income securities, pledged as collateral:
U. S. government obligations	64,267		111		—		—		64,267		111
Total collateralized investments	64,267		111		—		—		64,267		111
Total temporarily impaired securities	1,324,489		20,081		350,655		12,188		1,675,144		32,269



	Less Than 12 Months⁽¹⁾
	Fair Value		Gross Unrealized Loss
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:



	Successor Ambac						Predecessor Ambac
				Period from May 1			Period from January 1
	Year Ended			through			through			Year Ended
	December 31, 2014			December 31, 2013			April 30, 2013			December 31, 2012
Gross realized gains on securities	$	63,366		$	22,983		$	47,448		$	73,404
Gross realized losses on securities	(9,824		)	(10,347		)	(320		)	(1,128		)
Foreign exchange (losses) gains	5,235			(8,169		)	6,177			(175		)
Net realized gains	$	58,777		$	4,467		$	53,305		$	72,101
Net other-than-temporary impairments ⁽¹⁾	$	(25,794	)	$	(46,764	)	$	(467	)	$	(5,990	)


(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 December 31, 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	12,873
Securities previously impaired	7
Reductions for credit impairments previously recognized on:
Securities that matured or were sold during the period	—
Securities that no longer have a portion of other-than-temporary impairment in other comprehensive income because of Ambac's intent to sell such securities	—
Balance as of December 31, 2014	$	14,062

Successor Ambac:
Balance as of May 1, 2013	$	—
Additions for credit impairments recognized on:
Securities not previously impaired	1,185
Securities previously impaired	—
Reductions for credit impairments previously recognized on:
Securities that matured or were sold during the period	(3		)
Balance as of December 31, 2013	$	1,182

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

Predecessor Ambac:
Balance as of January 1, 2012	$	201,317
Additions for credit impairments recognized on:
Securities not previously impaired	824
Securities previously impaired	5,166
Reductions for credit impairments previously recognized on:
Securities that matured or were sold during the period	(24,007		)
Balance as of December 31, 2012	$	183,300

(1)

Includes reductions made in connection with Fresh Start, under which the cost basis of all invested assets were set to fair value as of the Fresh Start Reporting Date. As described in Note 3. Special Purpose Entities, including Variable Interest Entities, adopting Fresh Start results in a new reporting entity with no beginning retained earnings or accumulated deficit. Therefore cumulative credit impairments for Successor Ambac on May 1, 2013 are $0.

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 December 31, 2014 and 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
December 31, 2014:
Sources of Collateral:
Cash and securities pledged directly from the investment portfolio	$	379,423	$	156,916	$	222,507
Cash and securities pledged from derivative counterparties	—		—		—

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 December 31, 2014 and 2013, respectively:



	Municipal obligations		Corporate obligations		Mortgage and asset- backed securities		Short-term		Total		Weighted Average Underlying Rating ⁽¹⁾
December 31, 2014:
Ambac Assurance Corporation ⁽²⁾	$	53,164	$	—	$	2,146,555	$	—	$	2,199,719	CCC-
Assured Guaranty Municipal Corporation	119,492		—		—		—		119,492		A
National Public Finance Guarantee Corporation	67,895		—		—		—		67,895		A-
MBIA Insurance Corporation	—		32,460		—		—		32,460		A+
Assured Guaranty Corporation	—		—		—		—		—
Financial Guarantee Insurance Corporation	—		—		—		—		—
Total	$	240,551	$	32,460	$	2,146,555	$	—	$	2,419,566	CCC

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		—		—		—		532,752		AA-
MBIA Insurance Corporation	—		55,086		—		—		55,086		A-
Assured Guaranty Corporation	—		—		2,917		—		2,917		D
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 December 31, 2014 and 2013, respectively, insured by Ambac UK.

Summary of Net Investment Income

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



	Successor Ambac						Predecessor Ambac
				Period from May 1			Period from January 1
	Year Ended			through			through			Year Ended
	December 31, 2014			December 31, 2013			April 30, 2013			December 31, 2012
Fixed income securities	$	299,694		$	147,014		$	118,097		$	386,385
Short-term investments	3,092			1,528			677			1,405
Loans	529			306			146			714
Investment expense	(10,477		)	(5,982		)	(2,549		)	(5,602		)
Securities available-for-sale and short-term	292,838			142,866			116,371			382,902
Other investments	8,108			3,580			369			—
Total net investment income	$	300,946		$	146,446		$	116,740		$	382,902

Net investment income from Other investments primarily represents changes in fair value on securities classified as trading or under the fair value option. The portion of net gains related to such securities still held at the end of each period is as follows:



	Successor Ambac					Predecessor Ambac
				Period from May 1		Period from January 1
	Year Ended			through		through		Year Ended
	December 31, 2014			December 31, 2013		April 30, 2013		December 31, 2012
Net gains recognized during the period on trading securities	$	6,713		$	3,580	$	369	$	—
Less: net gains and (losses) recognized during the reporting period on trading securities sold during the period	(487		)	1,702		—		—
Unrealized gains and (losses) recognized during the reporting period on trading securities still held at the reporting date	$	7,200		$	1,878	$	369	$	—

- 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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