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Investments (Tables)

12 Months Ended

Dec. 31, 2019

Investments, Debt and Equity Securities [Abstract]

Equity Method Investments [Table Text Block]

Except as noted in the table, fair value as reported is determined using net asset value ("NAV") as a practical expedient. In addition to these investments, Ambac has unfunded commitments at December 31, 2019 of $41 to private credit funds and $48 to a hedge fund.



Class of Funds December 31,	2019		2018		Redemption Frequency	Redemption Notice Period
Real estate properties ⁽¹⁾	$	16	$	16	quarterly	10 business days
Hedge funds ⁽²⁾	65		—		quarterly	90 days
High yield and leveraged loans ^{(3) (8)}	176		114		daily	0 - 30 days
Private credit ⁽⁴⁾	51		84		quarterly	180 days if permitted
Insurance-linked investments ⁽⁵⁾	3		29		fully redeemed	none
Equity market investments ^{(6) (8)}	55		44		daily	0 days
Investment grade floating rate income ⁽⁷⁾	66		63		weekly	0 days
Total equity investments in pooled funds	$	432	$	351


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


(2)	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.


(3)	This class of funds includes investments in a range of instruments including high-yield bonds, leveraged loans, CLOs, ABS and floating rate notes to generate income and capital appreciation.


(4)	This class aims to obtain high long-term return primarily through credit and preferred equity investments with low liquidity and defined term.


(5)	This class seeks to generate returns from insurance markets through investments in catastrophe bonds, life insurance and other insurance linked investments.


(6)	This class of funds includes investments in a range of instruments that include funds that have diversified exposure to global equity market returns through holdings of market index funds.


(7)	This class of funds includes investments in high quality floating rate debt securities including ABS and corporate floating rate notes (FRNs) as well as ultra-short term bonds and money market instruments.

(8)

High yield and leveraged loans products include $81 at December 31, 2019 and $27 at December 31, 2018 and equity market investments include $55 at December 31, 2019 and $44 at December 31, 2018 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 fixed income investments, excluding VIE investments, at December 31, 2019 and 2018 were as follows:



	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value		Non-Credit Other- than-temporary Impairments ⁽¹⁾
December 31, 2019
Fixed income securities:
Municipal obligations	$	194	$	22	$	—	$	215	$	—
Corporate obligations ⁽²⁾	1,396		36		2		1,430		—
Foreign obligations	44		1		—		44		—
U.S. government obligations	157		2		2		156		—
Residential mortgage-backed securities	200		47		—		248		—
Commercial mortgage-backed securities	49		1		—		50		—
Collateralized debt obligations	147		—		1		146		—
Other asset-backed securities	263		24		—		287		—
	2,450		132		5		2,577		—
Short-term	653		—		—		653		—
	3,103		132		5		3,230		—
Fixed income securities pledged as collateral:
Short-term	85		—		—		85		—
Total collateralized investments	85		—		—		85		—
Total available-for-sale investments	$	3,187	$	132	$	5	$	3,314	$	—

December 31, 2018
Fixed income securities:
Municipal obligations	$	883	$	14	$	17	$	880	$	—
Corporate obligations ⁽²⁾	1,289		6		17		1,278		—
Foreign obligations	30		—		—		31		—
U.S. government obligations	94		1		1		94		—
Residential mortgage-backed securities	222		38		1		259		—
Collateralized debt obligations	133		—		2		131		—
Other asset-backed securities	370		73		1		442		—
	3,021		133		38		3,116		—
Short-term	430		—		—		430		—
Total available-for-sale investments	$	3,451	$	133	$	38	$	3,546	$	—

(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 December 31, 2019 and 2018.

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, 2019, by contractual maturity, were as follows:



	Amortized Cost		Estimated Fair Value
Due in one year or less	$	749	$	749
Due after one year through five years	1,157		1,173
Due after five years through ten years	477		501
Due after ten years	145		160
	2,528		2,583
Residential mortgage-backed securities	200		248
Commercial mortgage-backed securities	49		50
Collateralized debt obligations	147		146
Other asset-backed securities	263		287
Total	$	3,187	$	3,314

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 December 31, 2019 and 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
December 31, 2019
Fixed income securities:
Municipal obligations	$	13	$	—	$	10	$	—	$	23	$	—
Corporate obligations	63		2		5		—		68		2
Foreign obligations	20		—		—		—		20		—
U.S. government obligations	36		2		2		—		38		2
Residential mortgage-backed securities	5		—		—		—		5		—
Commercial mortgage-backed securities	7		—		—		—		7		—
Collateralized debt obligations	53		—		63		1		116		1
Other asset-backed securities	2		—		7		—		10		—
	200		4		88		1		288		5
Short-term	201		—		—		—		201		—
Total temporarily impaired securities	$	401	$	4	$	88	$	1	$	489	$	5



	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	$	538	$	16	$	29	$	1	$	566	$	17
Corporate obligations	307		9		190		9		497		17
Foreign obligations	1		—		5		—		6		—
U.S. government obligations	6		—		58		—		64		1
Residential mortgage-backed securities	35		1		—		—		35		1
Collateralized debt obligations	124		2		—		—		124		2
Other asset-backed securities	14		—		77		1		91		1
	1,024		27		360		11		1,384		38
Short-term	115		—		—		—		115		—
Total temporarily impaired securities	$	1,139	$	27	$	360	$	11	$	1,499	$	38

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:



Year Ended December 31,	2019			2018			2017
Gross realized gains on securities	$	64		$	111		$	29
Gross realized losses on securities	(5		)	(7		)	(19		)
Foreign exchange (losses) gains	22			7			(5		)
Net realized gains (losses)	$	81		$	111		$	5
Net other-than-temporary impairments ⁽¹⁾	$	—		$	(3	)	$	(20	)

(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



Year Ended December 31,	2019		2018		2017
Balance, beginning of period	12		67		52
Additions for credit impairments recognized on:
Securities not previously impaired	—		1		3
Securities previously impaired	—		—		12
Reductions for credit impairments previously recognized on:
Securities that matured or were sold during the period	(1	)	(56	)	—
Balance, end of period	12		12		67

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, 2019 and 2018, respectively:



	Municipal Obligations		Corporate Obligations ⁽³⁾		Mortgage and Asset- backed Securities		Total		Weighted Average Underlying Rating ^{(1) (3)}
December 31, 2019:
Ambac Assurance Corporation ⁽²⁾	$	176	$	535	$	442	$	1,153	B-
National Public Finance Guarantee Corporation	11		—		—		11		BBB-
Total	$	187	$	535	$	442	$	1,164	B-

December 31, 2018:
Ambac Assurance Corporation ⁽²⁾	$	833	$	656	$	599	$	2,089	CCC
National Public Finance Guarantee Corporation	16		—		—		16		BBB-
Total	$	849	$	656	$	599	$	2,105	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 $0 and $145 at December 31, 2019 and 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. Ambac LSNI secured notes are insured by Ambac Assurance and are excluded from the calculation of weighted average underlying rating.

Summary of Net Investment Income

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



Year Ended December 31,	2019			2018			2017
Fixed income securities	$	183		$	265		$	337
Short-term investments	17			11			8
Loans	1			1			1
Investment expense	(6		)	(7		)	(8		)
Securities available-for-sale and short-term	196			271			338
Other investments	32			2			23
Total net investment income	$	227		$	273		$	361

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:



Year Ended December 31,	2019		2018			2017
Net gains (losses) recognized during the period on trading securities	$	24	$	(3	)	$	18
Less: net gains (losses) recognized during the reporting period on trading securities sold during the period	7		1			5
Unrealized gains (losses) recognized during the reporting period on trading securities still held at the reporting date	$	17	$	(4	)	$	13