Investments (Tables)

3 Months Ended

Mar. 31, 2018

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 March 31, 2018 and December 31, 2017 were as follows:



	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value		Non-credit Other-than temporary Impairments ⁽¹⁾
March 31, 2018:
Fixed income securities:
Municipal obligations	$	853,001	$	14,307	$	11,921	$	855,387	$	109
Corporate obligations ⁽²⁾	1,445,586		12,216		18,809		1,438,993		—
Foreign obligations	26,425		238		268		26,395		—
U.S. government obligations	90,281		119		3,139		87,261		—
Residential mortgage-backed securities	726,998		101,218		4,920		823,296		4,854
Collateralized debt obligations	50,754		204		—		50,958		—
Other asset-backed securities	520,863		69,678		893		589,648		—
	3,713,908		197,980		39,950		3,871,938		4,963
Short-term	321,210		4		95		321,119		—
	4,035,118		197,984		40,045		4,193,057		4,963
Fixed income securities pledged as collateral:
U.S. government obligations	84,240		—		—		84,240		—
Total collateralized investments	84,240		—		—		84,240		—
Total available-for-sale investments	$	4,119,358	$	197,984	$	40,045	$	4,277,297	$	4,963

December 31, 2017:
Fixed income securities:
Municipal obligations	$	845,778	$	3,456	$	69,400	$	779,834	$	—
Corporate obligations	858,774		6,772		5,471		860,075		—
Foreign obligations	26,245		409		111		26,543		—
U.S. government obligations	86,900		261		1,753		85,408		—
Residential mortgage-backed securities	2,214,512		67,303		30,482		2,251,333		23,832
Collateralized debt obligations	50,754		283		—		51,037		—
Other asset-backed securities	531,660		66,899		617		597,942		—
	4,614,623		145,383		107,834		4,652,172		23,832
Short-term	557,476		3		209		557,270		—
	5,172,099		145,386		108,043		5,209,442		23,832
Fixed income securities pledged as collateral:
U.S. government obligations	99,719		—		—		99,719		—
Total collateralized investments	99,719		—		—		99,719		—
Total available-for-sale investments	$	5,271,818	$	145,386	$	108,043	$	5,309,161	$	23,832


(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 March 31, 2018 and December 31, 2017.

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 March 31, 2018, by contractual maturity, were as follows:



	Amortized Cost		Estimated Fair Value
Due in one year or less	$	461,954	$	461,683
Due after one year through five years	1,237,724		1,239,764
Due after five years through ten years	287,768		279,803
Due after ten years	833,297		832,145
	2,820,743		2,813,395
Residential mortgage-backed securities	726,998		823,296
Collateralized debt obligations	50,754		50,958
Other asset-backed securities	520,863		589,648
Total	$	4,119,358	$	4,277,297

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, excluding VIE investments, aggregated by investment category and length of time that the individual securities have been in a continuous unrealized loss position, at March 31, 2018 and December 31, 2017:



	Less Than 12 Months				12 Months or More				Total
	Fair Value		Gross Unrealized Loss		Fair Value		Gross Unrealized Loss		Fair Value		Gross Unrealized Loss
March 31, 2018:
Fixed income securities:
Municipal obligations	$	495,224	$	10,775	$	30,590	$	1,146	$	525,814	$	11,921
Corporate obligations	457,056		13,566		106,696		5,243		563,752		18,809
Foreign obligations	13,806		217		1,736		51		15,542		268
U.S. government obligations	77,446		3,067		3,423		72		80,869		3,139
Residential mortgage-backed securities	13,321		531		101,462		4,389		114,783		4,920
Other asset-backed securities	34,288		123		77,184		770		111,472		893
	1,091,141		28,279		321,091		11,671		1,412,232		39,950
Short-term	120,661		95		—		—		120,661		95
Total temporarily impaired securities	$	1,211,802	$	28,374	$	321,091	$	11,671	$	1,532,893	$	40,045



	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, 2017:
Fixed income securities:
Municipal obligations	$	667,335	$	68,578	$	32,525	$	822	$	699,860	$	69,400
Corporate obligations	292,028		3,377		87,272		2,094		379,300		5,471
Foreign obligations	8,122		81		1,700		30		9,822		111
U.S. government obligations	74,188		1,653		5,525		100		79,713		1,753
Residential mortgage-backed securities	668,524		12,524		418,617		17,958		1,087,141		30,482
Other asset-backed securities	26,655		58		88,023		559		114,678		617
	1,736,852		86,271		633,662		21,563		2,370,514		107,834
Short-term	251,926		209		—		—		251,926		209
Total temporarily impaired securities	$	1,988,778	$	86,480	$	633,662	$	21,563	$	2,622,440	$	108,043

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 March 31,
	2018			2017
Gross realized gains on securities	$	11,054		$	2,659
Gross realized losses on securities	(1,388		)	(9,471		)
Net foreign exchange (losses) gains	(4,804		)	1,916
Net realized gains (losses)	$	4,862		$	(4,896	)
Net other-than-temporary impairments ⁽¹⁾	$	(299	)	$	(3,942	)


(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 March 31, 2018 and 2017 for which a portion of an other-than-temporary impairment was recognized in other comprehensive income:



	Three Months Ended March 31,
	2018			2017
Balance, beginning of period	$	67,085		$	52,070
Additions for credit impairments recognized on:
Securities not previously impaired	226			307
Securities previously impaired	64			1,985
Reductions for credit impairments previously recognized on:
Securities that matured or were sold during the period	(23,742		)	—
Balance, end of period	$	43,633		$	54,362

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 March 31, 2018 and December 31, 2017, respectively:



	Municipal Obligations		Corporate Obligations ⁽³⁾		Mortgage and Asset- backed Securities		Total		Weighted Average Underlying Rating ⁽¹⁾
March 31, 2018:
Ambac Assurance Corporation ⁽²⁾	$	785,791	$	813,720	$	1,283,502	$	2,883,013	CC
National Public Finance Guarantee Corporation	18,913		—		—		18,913		BBB-
Assured Guaranty Municipal Corporation	6,000		—		—		6,000		BBB+
Total	$	810,704	$	813,720	$	1,283,502	$	2,907,926	CC

December 31, 2017:
Ambac Assurance Corporation ⁽²⁾	$	706,715	$	32,660	$	2,702,887	$	3,442,262	CC
National Public Finance Guarantee Corporation	20,733		—		—		20,733		BBB-
Assured Guaranty Municipal Corporation	5,998		—		—		5,998		BBB+
Total	$	733,446	$	32,660	$	2,702,887	$	3,468,993	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 $169,943 and $170,280 at March 31, 2018 and December 31, 2017, respectively, insured by Ambac UK.

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	March 31, 2018		December 31, 2017		Redemption Frequency	Redemption Notice Period
Real estate properties ⁽¹⁾	$	34,752	$	33,154	quarterly	10 business days
Diversified hedge fund strategies ⁽²⁾	56,394		53,054		semi-monthly	15 - 30 days
Interest rate products ^{(3) (7)}	142,856		136,603		daily, weekly or monthly	0 - 30 days
Illiquid investments ⁽⁴⁾	71,366		67,787		quarterly	180 days
Insurance-linked investments ⁽⁵⁾	23,637		22,666		quarterly	90-120 days
Equity market investments ^{(6) (7)}	54,682		53,675		daily	0 days
Total equity investments in pooled funds	$	383,687	$	366,939


(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 $2,853 at March 31, 2018 and $2,823 at December 31, 2017 and equity market investments include $54,682 at March 31, 2018 and $53,675 at December 31, 2017 that have readily determinable fair values priced through pricing vendors.

Summary of Net Investment Income

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



	Three Months Ended March 31,
	2018			2017
Fixed income securities	$	109,351		$	74,069
Short-term investments	2,840			989
Loans	187			89
Investment expense	(1,827		)	(1,997		)
Securities available-for-sale and short-term	110,551			73,150
Other investments	(311		)	8,409
Total net investment income	$	110,240		$	81,559

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 interests 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 March 31,
	2018			2017
Net gains (losses) recognized during the period on trading securities	$	(1,579	)	$	7,211
Less: net gains (losses) recognized during the reporting period on trading securities sold during the period	1,933			1,283
Unrealized gains (losses) recognized during the reporting period on trading securities still held at the reporting date	$	(3,512	)	$	5,928

- 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.

+ References + Details

- 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.

+ References + Details