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Investments (Tables)

9 Months Ended

Sep. 30, 2019

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, 2019 and December 31, 2018 were as follows:



	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value		Non-credit Other-than temporary Impairments ⁽¹⁾
September 30, 2019:
Fixed income securities:
Municipal obligations	$	268,455	$	36,953	$	280	$	305,128	$	—
Corporate obligations ⁽²⁾	1,431,002		38,536		288		1,469,250		—
Foreign obligations	41,485		1,005		2		42,488		—
U.S. government obligations	151,744		4,390		74		156,060		—
Residential mortgage-backed securities	206,211		51,187		58		257,340		58
Collateralized debt obligations	148,385		23		573		147,835		—
Other asset-backed securities	313,996		35,259		51		349,204		—
	2,561,278		167,353		1,326		2,727,305		58
Short-term	664,423		41		23		664,441		—
	3,225,701		167,394		1,349		3,391,746		58
Fixed income securities pledged as collateral:
U.S. government obligations	84,948		—		—		84,948		—
Total fixed income securities pledged as collateral	84,948		—		—		84,948		—
Total available-for-sale investments	$	3,310,649	$	167,394	$	1,349	$	3,476,694	$	58

December 31, 2018:
Fixed income securities:
Municipal obligations	$	882,631	$	14,364	$	17,076	$	879,919	$	5
Corporate obligations ⁽²⁾	1,288,882		6,444		17,204		1,278,122		—
Foreign obligations	30,496		399		61		30,834		—
U.S. government obligations	93,636		1,371		613		94,394		—
Residential mortgage-backed securities	221,825		37,575		793		258,607		27
Collateralized debt obligations	133,075		8		1,727		131,356		—
Other asset-backed securities	370,199		72,868		624		442,443		—
	3,020,744		133,029		38,098		3,115,675		32
Short-term	430,405		23		97		430,331		—
Total available-for-sale investments	$	3,451,149	$	133,052	$	38,195	$	3,546,006	$	32


(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, 2019 and December 31, 2018.

(2)

Includes Ambac's holdings of the secured notes issued by Ambac LSNI in connection with the Rehabilitation Exit Transactions.

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, 2019, by contractual maturity, were as follows:



	Amortized Cost		Estimated Fair Value
Due in one year or less	$	769,507	$	769,767
Due after one year through five years	1,202,643		1,221,570
Due after five years through ten years	443,917		471,856
Due after ten years	225,990		259,122
	2,642,057		2,722,315
Residential mortgage-backed securities	206,211		257,340
Collateralized debt obligations	148,385		147,835
Other asset-backed securities	313,996		349,204
Total	$	3,310,649	$	3,476,694

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 September 30, 2019 and December 31, 2018:



	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, 2019:
Fixed income securities:
Municipal obligations	$	—	$	—	$	10,436	$	280	$	10,436	$	280
Corporate obligations	63,985		267		4,987		21		68,972		288
Foreign obligations	1,122		1		312		1		1,434		2
U.S. government obligations	1,741		61		2,273		13		4,014		74
Residential mortgage-backed securities	4,112		58		—		—		4,112		58
Collateralized debt obligations	99,144		542		2,969		31		102,113		573
Other asset-backed securities	6,067		29		5,181		22		11,248		51
	176,171		958		26,158		368		202,329		1,326
Short-term	137,514		23		—		—		137,514		23
Total temporarily impaired securities	$	313,685	$	981	$	26,158	$	368	$	339,843	$	1,349



	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, 2018:
Fixed income securities:
Municipal obligations	$	537,904	$	15,878	$	28,533	$	1,198	$	566,437	$	17,076
Corporate obligations	306,506		8,634		190,273		8,570		496,779		17,204
Foreign obligations	1,161		1		5,163		60		6,324		61
U.S. government obligations	5,643		135		58,495		478		64,138		613
Residential mortgage-backed securities	34,852		793		—		—		34,852		793
Collateralized debt obligations	123,848		1,727		—		—		123,848		1,727
Other asset-backed securities	13,813		33		77,479		591		91,292		624
	1,023,727		27,201		359,943		10,897		1,383,670		38,098
Short-term	115,374		97		—		—		115,374		97
Total temporarily impaired securities	$	1,139,101	$	27,298	$	359,943	$	10,897	$	1,499,044	$	38,195

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,
	2019			2018			2019			2018
Gross realized gains on securities	$	11,993		$	30,909		$	46,430		$	83,937
Gross realized losses on securities	(365		)	(2,171		)	(4,864		)	(5,200		)
Net foreign exchange (losses) gains	6,843			1,463			29,998			3,474
Net realized gains (losses)	$	18,471		$	30,201		$	71,564		$	82,211
Net other-than-temporary impairments ⁽¹⁾	$	(42	)	$	(266	)	$	(71	)	$	(1,579	)

(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, 2019 and 2018 for which a portion of an other-than-temporary impairment was recognized in other comprehensive income:



	Nine Months Ended September 30,
	2019			2018
Balance, beginning of period	$	12,454		$	67,085
Additions for credit impairments recognized on:
Securities not previously impaired	—			226
Securities previously impaired	—			97
Reductions for credit impairments previously recognized on:
Securities that matured or were sold during the period	(774		)	(53,222		)
Balance, end of period	$	11,680		$	14,186

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, 2019 and December 31, 2018, respectively:



	Municipal Obligations		Corporate Obligations ⁽³⁾		Mortgage and Asset- backed Securities		Total		Weighted Average Underlying Rating ⁽¹⁾
September 30, 2019:
Ambac Assurance Corporation⁽²⁾	$	172,296	$	578,831	$	455,455	$	1,206,582	CCC-
National Public Finance Guarantee Corporation	11,568		—		—		11,568		BBB-
Total	$	183,864	$	578,831	$	455,455	$	1,218,150	CCC-

December 31, 2018:
Ambac Assurance Corporation ⁽²⁾	$	833,241	$	656,473	$	599,185	$	2,088,899	CC
National Public Finance Guarantee Corporation	15,600		—		—		15,600		BBB-
Total	$	848,841	$	656,473	$	599,185	$	2,104,499	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 asset-backed securities with a fair value of $0 and $144,672 at September 30, 2019 and December 31, 2018, respectively, insured by Ambac UK.

(3)

Represents Ambac's holdings of secured notes issued by Ambac LSNI in connection with the Rehabilitation Exit Transactions. These secured notes are insured by Ambac Assurance.

Equity Method Investments [Table Text Block]

unfunded commitments at September 30, 2019 of $9,827 to an investment fund that focuses on middle-market enterprise debt and structured equity and $50,000 to an investment fund that focuses on tactical opportunities across global credit markets.



	Fair Value
Class of Funds	September 30, 2019		December 31, 2018		Redemption Frequency	Redemption Notice Period
Real estate properties⁽¹⁾	$	15,321	$	16,123	quarterly	10 business days
Interest rate products ^{(2) (7)}	234,758		177,357		daily, weekly or monthly	0 - 30 days
Illiquid investments⁽³⁾	53,445		84,297		quarterly if permitted	180 days if permitted
Insurance-linked investments⁽⁴⁾	3,179		29,318		quarterly	90-120 days
Equity market investments^{(5) (7)}	50,342		43,954		daily	0 days
Credit products ⁽⁶⁾	61,095		—		quarterly	90 days
Total equity investments in pooled funds	$	418,140	$	351,049


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

(2)

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.

(3)

This class seeks to obtain high long-term total return through investments with low liquidity and defined term. Funds have stated termination dates ranging from 2025 to 2029, subject to earlier distributions at the discretion of the manager. Redemptions are either not permitted, or are permitted subject to the approval of the manager. Certain funds have expected capital distributions to subscribers starting in 2022.

(4)

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. Ambac has received all available voluntary redemptions of this class as of September 30, 2019, with the remaining balance representing Ambac's interest in a fund for which the ultimate amount and timing of distributions is pending settlement of past insured events.


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

(6)

This class seeks to generate superior risk-adjusted returns through selective asset sourcing, active trading and hedging strategies within structured credit markets, including mortgage-backed securities, commercial real estate securities and loans, CLOs, REITs and asset-backed securities. Redemptions prior to June 30, 2020, or with 60 days’ notice are subject to a 5% fee. Aggregate fund-level redemptions may be limited to 25% of the fund’s assets per quarter.

(7)

Interest rate products include $50,342 at September 30, 2019 and $27,154 at December 31, 2018 and equity market investments include $80,050 at September 30, 2019 and $43,954 at December 31, 2018 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 September 30,						Nine Months Ended September 30,
	2019			2018			2019			2018
Fixed income securities	$	33,462		$	49,372		$	151,265		$	219,222
Short-term investments	4,165			2,395			13,759			7,671
Loans	180			185			545			552
Investment expense	(1,477		)	(1,967		)	(4,358		)	(5,167		)
Securities available-for-sale and short-term	36,330			49,985			161,211			222,278
Other investments	8,207			8,347			24,627			12,956
Total net investment income	$	44,537		$	58,332		$	185,838		$	235,234

Net investment income from Other investments primarily represents changes in fair value on securities classified as trading or under the fair value option, income from investment limited partnerships accounted for under the equity method and the above noted equity interest in an unconsolidated trust accounted for under the equity method.

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,
	2019		2018		2019		2018
Net gains (losses) recognized during the period on trading securities	$	5,532	$	7,014	$	19,245	$	9,067
Less: net gains (losses) recognized during the reporting period on trading securities sold during the period	1,513		612		3,925		(2,067		)
Unrealized gains (losses) recognized during the reporting period on trading securities still held at the reporting date	$	4,019	$	6,402	$	15,320	$	11,134