Investments (Tables)

9 Months Ended

Sep. 30, 2017

Investments, Debt and Equity Securities [Abstract]

Equity Method Investments [Table Text Block]

There are no unfunded commitments applicable to any of these investments for the periods disclosed.



	Fair Value
Class of Funds	September 30, 2017		December 31, 2016		Redemption Frequency	Redemption Notice Period
Real estate properties ⁽¹⁾	$	32,138	$	33,303	quarterly	10 business days
Diversified hedge fund strategies ⁽²⁾	52,324		53,985		semi-monthly	15 - 30 days
Interest rate products ^{(3) (7)}	151,650		261,315		daily, weekly or monthly	0 - 30 days
Illiquid investments ⁽⁴⁾	66,283		39,068		quarterly	180 days
Insurance-linked investments ⁽⁵⁾	23,308		—		quarterly	90-120 days
Equity market investments ^{(6) (7)}	40,557		32,633		daily	0 days
Total equity investments in pooled funds	$	366,260	$	420,304


(1)	Investments consist of UK property to generate income and capital growth.


(2)	Investments seek diversified exposure to hedge fund core strategies to produce high risk-adjusted returns, with low long-term correlation to traditional markets and with targeted volatility levels. Funds may have the right to defer redemptions under certain circumstances.

(3)

This class of funds includes investments in a range of instruments including leveraged loans, CLOs, asset-backed securities and floating rate notes to generate income and capital appreciation. Funds with less frequent redemption periods limit redemptions to as little as 15% per period. Funds with a same day redemption notice period are redeemable only weekly, while funds that may be redeemed any business day have notice periods of 15-30 days.


(4)	This class seeks to obtain high long-term total return through investments with low liquidity and defined term, resulting in expected capital distributions to subscribers between 2020 and 2023. Redemptions cannot occur prior to the expiration of the investment lock-up period in May 2018.

(5)

This class aims to provide returns from the insurance and reinsurance markets through investments in catastrophe bonds, life insurance and other insurance linked investments. Redemption periods are quarterly, subject to 90-day notice for January/July redemption dates and 120-day notice for April/October redemption dates with redemptions greater than 3.5% during the first five years following share issuance subject to redemption fees.


(6)	Investments represent a diversified exposure to global equity market returns through holdings of various regional market index funds.


(7)	Interest rate products include $27,761 at September 30, 2017 and $51,158 at December 31, 2016 and equity market investments include $40,557 at September 30, 2017 and $32,633 at December 31, 2016 that have readily determinable fair values priced through pricing vendors.

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, 2017 and December 31, 2016 were as follows:



	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value		Non-credit other-than temporary Impairments ⁽¹⁾
September 30, 2017:
Fixed income securities:
Municipal obligations	$	537,068	$	10,827	$	8,641	$	539,254	$	—
Corporate obligations	1,278,995		12,804		6,331		1,285,468		—
Foreign obligations	29,863		510		163		30,210		—
U.S. government obligations	90,960		519		1,655		89,824		—
U.S. agency obligations	—		—		—		—		—
Residential mortgage-backed securities	2,197,085		101,487		18,933		2,279,639		16,481
Collateralized debt obligations	90,556		369		—		90,925		—
Other asset-backed securities	601,028		69,882		8,112		662,798		—
	4,825,555		196,398		43,835		4,978,118		16,481
Short-term	716,666		10		160		716,516		—
	5,542,221		196,408		43,995		5,694,634		16,481
Fixed income securities pledged as collateral:
Short-term	99,424		—		—		99,424		—
Total collateralized investments	99,424		—		—		99,424		—
Total available-for-sale investments	$	5,641,645	$	196,408	$	43,995	$	5,794,058	$	16,481

December 31, 2016:
Fixed income securities:
Municipal obligations	$	376,064	$	5,509	$	7,205	$	374,368	$	—
Corporate obligations	1,803,136		19,589		20,560		1,802,165		—
Foreign obligations	41,932		1,303		100		43,135		—
U.S. government obligations	33,732		2,551		97		36,186		—
U.S. agency obligations	4,063		—		3		4,060		—
Residential mortgage-backed securities	2,284,425		110,955		43,785		2,351,595		35,232
Collateralized debt obligations	113,650		493		220		113,923		—
Other asset-backed securities	778,383		58,028		7,628		828,783		—
	5,435,385		198,428		79,598		5,554,215		35,232
Short-term	430,827		5		44		430,788		—
	5,866,212		198,433		79,642		5,985,003		35,232
Fixed income securities pledged as collateral:
U.S. government obligations	64,833		72		—		64,905		—
Total collateralized investments	64,833		72		—		64,905		—
Total available-for-sale investments	$	5,931,045	$	198,505	$	79,642	$	6,049,908	$	35,232


(1)	Represents the amount of non-credit other-than-temporary impairment losses remaining in accumulated other comprehensive income on securities that also had a credit impairment. These losses are included in gross unrealized losses as of September 30, 2017 and December 31, 2016.

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, 2017, by contractual maturity, were as follows:



	Amortized Cost		Estimated Fair Value
Due in one year or less	$	928,100	$	928,060
Due after one year through five years	771,616		775,497
Due after five years through ten years	544,655		546,607
Due after ten years	508,605		510,532
	2,752,976		2,760,696
Residential mortgage-backed securities	2,197,085		2,279,639
Collateralized debt obligations	90,556		90,925
Other asset-backed securities	601,028		662,798
Total	$	5,641,645	$	5,794,058

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, 2017 and December 31, 2016:



	Less Than 12 Months				12 Months or More				Total
	Fair Value		Gross Unrealized Loss		Fair Value		Gross Unrealized Loss		Fair Value		Gross Unrealized Loss
September 30, 2017:
Fixed income securities:
Municipal obligations	$	305,343	$	7,848	$	18,144	$	793	$	323,487	$	8,641
Corporate obligations	347,247		4,696		55,831		1,635		403,078		6,331
Foreign obligations	12,179		141		1,029		22		13,208		163
U.S. government obligations	81,227		1,655		—		—		81,227		1,655
U.S. agency obligations	—		—		—		—		—		—
Residential mortgage-backed securities	270,691		5,447		436,052		13,486		706,743		18,933
Collateralized debt obligations	—		—		—		—		—		—
Other asset-backed securities	97,058		108		66,981		8,004		164,039		8,112
	1,113,745		19,895		578,037		23,940		1,691,782		43,835
Short-term	290,938		160		—		—		290,938		160
Total temporarily impaired securities	$	1,404,683	$	20,055	$	578,037	$	23,940	$	1,982,720	$	43,995



	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, 2016:
Fixed income securities:
Municipal obligations	$	98,147	$	2,045	$	122,928	$	5,160	$	221,075	$	7,205
Corporate obligations	963,513		20,232		6,492		328		970,005		20,560
Foreign obligations	5,063		100		—		—		5,063		100
U.S. government obligations	6,037		93		5,045		4		11,082		97
U.S. agency obligations	4,060		3		—		—		4,060		3
Residential mortgage-backed securities	226,889		7,201		550,807		36,584		777,696		43,785
Collateralized debt obligations	6,986		23		25,780		197		32,766		220
Other asset-backed securities	115,622		203		77,712		7,425		193,334		7,628
	1,426,317		29,900		788,764		49,698		2,215,081		79,598
Short-term	65,176		44		—		—		65,176		44
Total temporarily impaired securities	$	1,491,493	$	29,944	$	788,764	$	49,698	$	2,280,257	$	79,642

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

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



	Three Months Ended September 30,						Nine Months Ended September 30,
	2017			2016			2017			2016
Gross realized gains on securities	$	14,430		$	3,912		$	25,374		$	10,391
Gross realized losses on securities	(4,932		)	(561		)	(16,160		)	(4,673		)
Net foreign exchange (losses) gains	(3,348		)	8,398			(3,780		)	22,030
Net realized gains (losses)	$	6,150		$	11,749		$	5,434		$	27,748
Net other-than-temporary impairments ⁽¹⁾	$	(13,510	)	$	(2,853	)	$	(19,215	)	$	(19,628	)


(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 September 30, 2017 and 2016 for which a portion of an other-than-temporary impairment was recognized in other comprehensive income:



	Nine Months Ended September 30,
	2017		2016
Balance, beginning of period	$	52,070	$	31,176
Additions for credit impairments recognized on:
Securities not previously impaired	3,274		2,257
Securities previously impaired	11,596		16,672
Balance, end of period	$	66,940	$	50,105

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 investment agreement and derivative counterparties at September 30, 2017 and December 31, 2016:



	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
September 30, 2017:
Cash and securities pledged directly from the investment portfolio	$	123,985	$	—	$	123,985

December 31, 2016:
Cash and securities pledged directly from the investment portfolio	$	291,545	$	88,940	$	202,605

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, 2017 and December 31, 2016, respectively:



	Municipal obligations		Corporate obligations		Mortgage and asset- backed securities		Total		Weighted Average Underlying Rating ⁽¹⁾
September 30, 2017:
Ambac Assurance Corporation ⁽²⁾	$	465,075	$	32,073	$	2,731,184	$	3,228,332	CC
National Public Finance Guarantee Corporation	21,395		—		—		21,395		BBB
Assured Guaranty Municipal Corporation	6,058		—		—		6,058		BBB+
MBIA Insurance Corporation	—		—		—		—
Total	$	492,528	$	32,073	$	2,731,184	$	3,255,785	CC

December 31, 2016:
Ambac Assurance Corporation ⁽²⁾	$	81,651	$	—	$	2,739,073	$	2,820,724	CC
National Public Finance Guarantee Corporation	38,687		—		—		38,687		A-
Assured Guaranty Municipal Corporation	25,660		—		—		25,660		AA
MBIA Insurance Corporation	—		2,630		—		2,630		BBB+
Total	$	145,998	$	2,630	$	2,739,073	$	2,887,701	CC


(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 corporate obligations and asset-backed securities with a fair value of $171,034 and $118,813 at September 30, 2017 and December 31, 2016, respectively, insured by Ambac UK.

Summary of Net Investment Income

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



	Three Months Ended September 30,						Nine Months Ended September 30,
	2017			2016			2017			2016
Fixed income securities	$	81,054		$	81,831		$	236,876		$	207,358
Short-term investments	1,986			194			4,124			1,124
Loans	187			97			361			273
Investment expense	(2,228		)	(2,592		)	(6,269		)	(6,875		)
Securities available-for-sale and short-term	80,999			79,530			235,092			201,880
Other investments	6,178			11,387			18,804			20,616
Total net investment income	$	87,177		$	90,917		$	253,896		$	222,496

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



	Three Months Ended September 30,					Nine Months Ended September 30,
	2017			2016		2017		2016
Net gains (losses) recognized during the period on trading securities	$	4,919		$	10,197	$	15,130	$	17,145
Less: net gains (losses) recognized during the reporting period on trading securities sold during the period	5,024			1,859		8,140		5,268
Unrealized gains (losses) recognized during the reporting period on trading securities still held at the reporting date	$	(105	)	$	8,338	$	6,990	$	11,877