Investments (Tables)

6 Months Ended

Jun. 30, 2015

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 June 30, 2015 and December 31, 2014 were as follows:



	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value		Non-credit other- than-temporary Impairments ⁽¹⁾
June 30, 2015
Fixed income securities:
Municipal obligations	$	455,279	$	4,935	$	10,871	$	449,343	$	—
Corporate obligations	1,635,662		9,134		19,905		1,624,891		—
Foreign obligations	112,875		1,279		4,132		110,022		—
U.S. government obligations	58,527		469		683		58,313		—
U.S. agency obligations	4,327		—		9		4,318		—
Residential mortgage-backed securities	1,881,009		127,506		45,107		1,963,408		13,726
Collateralized debt obligations	86,834		122		329		86,627		—
Other asset-backed securities	578,673		16,892		66		595,499		—
	4,813,186		160,337		81,102		4,892,421		13,726
Short-term	197,070		—		—		197,070		—
	5,010,256		160,337		81,102		5,089,491		13,726
Fixed income securities pledged as collateral:
U.S. government obligations	34,732		171		—		34,903		—
Total collateralized investments	34,732		171		—		34,903		—
Total available-for-sale investments	$	5,044,988	$	160,508	$	81,102	$	5,124,394	$	13,726

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


(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 June 30, 2015 and December 31, 2014.

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 June 30, 2015, by contractual maturity, were as follows:



	Amortized Cost		Estimated Fair Value
Due in one year or less	$	365,867	$	365,798
Due after one year through five years	915,796		912,985
Due after five years through ten years	1,024,407		1,012,146
Due after ten years	192,402		187,931
	2,498,472		2,478,860
Residential mortgage-backed securities	1,881,009		1,963,408
Collateralized debt obligations	86,834		86,627
Other asset-backed securities	578,673		595,499
Total	$	5,044,988	$	5,124,394

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 June 30, 2015 and December 31, 2014:



	Less Than 12 Months				12 Months or More				Total
	Fair Value		Gross Unrealized Loss		Fair Value		Gross Unrealized Loss		Fair Value		Gross Unrealized Loss
June 30, 2015
Fixed income securities:
Municipal obligations	$	122,509	$	2,608	$	121,066	$	8,263	$	243,575	$	10,871
Corporate obligations	808,225		17,497		96,735		2,408		904,960		19,905
Foreign obligations	59,822		2,395		14,400		1,737		74,222		4,132
U.S. government obligations	11,534		536		10,739		147		22,273		683
U.S. agency obligations	—		—		4,318		9		4,318		9
Residential mortgage-backed securities	840,225		44,291		10,975		816		851,200		45,107
Collateralized debt obligations	72,200		329		—		—		72,200		329
Other asset-backed securities	90,358		64		8,999		2		99,357		66
	2,004,873		67,720		267,232		13,382		2,272,105		81,102
Short-term	301		—		—		—		301		—
	2,005,174		67,720		267,232		13,382		2,272,406		81,102
Fixed income securities, pledged as collateral:
U. S. government obligations	—		—		—		—		—		—
Total collateralized investments	—		—		—		—		—		—
Total temporarily impaired securities	$	2,005,174	$	67,720	$	267,232	$	13,382	$	2,272,406	$	81,102



	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 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

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:



	Three Months Ended June 30,						Six Months Ended June 30,
	2015			2014			2015			2014
Gross realized gains on securities	$	3,488		$	10,120		$	54,142		$	29,697
Gross realized losses on securities	(1,232		)	(2,742		)	(4,969		)	(3,871		)
Foreign exchange (losses)	(7,609		)	(4,311		)	(425		)	(6,470		)
Net realized (losses) gains	$	(5,353	)	$	3,067		$	48,748		$	19,356
Net other-than-temporary impairments ⁽¹⁾	$	(1,020	)	$	(8,754	)	$	(4,139	)	$	(19,146	)


(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 Ambac 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 June 30, 2015 and 2014 for which a portion of an other-than-temporary impairment was recognized in other comprehensive income:



	Six Months Ended June 30,
	2015		2014
Balance, beginning of period	$	14,062	$	1,182
Additions for credit impairments recognized on:
Securities not previously impaired	1,456		9,696
Securities previously impaired	2,282		—
Reductions for credit impairments previously recognized on:
Securities that matured or were sold during the period	—		—
Balance, end of period	$	17,800	$	10,878

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 June 30, 2015 and December 31, 2014:



	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
June 30, 2015:
Sources of Collateral:
Cash and securities pledged directly from the investment portfolio	$	311,016	$	108,469	$	202,547

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

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 June 30, 2015 and December 31, 2014, respectively:



	Municipal obligations		Corporate obligations		Mortgage and asset- backed securities		Total		Weighted Average Underlying Rating ⁽¹⁾
June 30, 2015:
Ambac Assurance Corporation ⁽²⁾	$	53,347	$	—	$	2,194,673	$	2,248,020	CCC-
Assured Guaranty Municipal Corporation	84,710		—		—		84,710		A
National Public Finance Guarantee Corporation	51,718		—		—		51,718		A-
MBIA Insurance Corporation	—		31,873		—		31,873		A+
Total	$	189,775	$	31,873	$	2,194,673	$	2,416,321	CCC

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+
Total	$	240,551	$	32,460	$	2,146,555	$	2,419,566	CCC


(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 $57,037 and $51,395 at June 30, 2015 and December 31, 2014, insured by Ambac UK.

Summary of Net Investment Income

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



	Three Months Ended June 30,						Six Months Ended June 30,
	2015			2014			2015			2014
Fixed income securities	$	64,627		$	78,554		$	130,213		$	149,539
Short-term investments	60			865			101			1,168
Loans	93			175			225			292
Investment expense	(2,502		)	(2,712		)	(4,929		)	(5,310		)
Securities available-for-sale and short-term	62,278			76,882			125,610			145,689
Other investments	2,475			3,211			12,126			5,205
Total net investment income	$	64,753		$	80,093		$	137,736		$	150,894

Net investment income from Other investments primarily represents changes in fair value on securities classified as trading or under the fair value option plus, for periods after August 28, 2014, income from Ambac's equity interest in an unconsolidated trust created in connection with its sale of Segregated Account junior surplus notes on that date. The portion of net unrealized gains related to trading securities still held at the end of each period is as follows:



	Three Months Ended June 30,						Six Months Ended June 30,
	2015			2014			2015		2014
Net gains recognized during the period on trading securities	$	1,419		$	3,211		$	10,042	$	5,205
Less: net gains (losses) recognized during the reporting period on trading securities sold during the period	3,069			(6		)	5,453		(431		)
Unrealized (losses) gains recognized during the reporting period on trading securities still held at the reporting date	$	(1,650	)	$	3,217		$	4,589	$	5,636

- 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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