Ambac’s non-VIE invested assets are primarily comprised of fixed maturity securities classified as either available-for-sale or trading securities, and interests in pooled investment funds, which are reported within Other investments on the Consolidated Balance Sheets. Interests in pooled investment funds in the form of common stock or in-substance common stock are classified as trading securities, while limited partner interests in such funds are

reported using the equity method. Fixed maturity securities classified as trading are unrated municipal bond obligations of Puerto Rico issuing entities that are part of the the PROMESA restructuring process as described further in Note 6. Insurance Contracts.

Fixed Maturity Securities:

The amortized cost and estimated fair value of available-for-sale investments, excluding VIE investments, at March 31, 2022 and December 31, 2021, were as follows:


	Amortized Cost		Allowance for Credit Losses		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
March 31, 2022:
Fixed maturity securities:
Municipal obligations	$	65	$	—	$	5	$	1	$	69
Corporate obligations	610		1		2		34		577
Foreign obligations	92		—		—		4		88
U.S. government obligations	53		—		—		2		51

Residential mortgage-backed securities	179		—		47		—		225

Collateralized debt obligations	121		—		—		1		120
Other asset-backed securities (1)	232		—		20		—		252
	1,352		1		73		42		1,383
Short-term	540		—		—		—		540
	1,892		1		73		42		1,922
Fixed maturity securities pledged as collateral:
U.S. government obligations	15		—		—		—		15
Short-term	99		—		—		—		99
	114		—		—		—		114
Total available-for-sale investments	$	2,006	$	1	$	73	$	43	$	2,036



December 31, 2021:
Fixed maturity securities:
Municipal obligations	$	315	$	—	$	28	$	3	$	340
Corporate obligations	612		—		10		9		613
Foreign obligations	89		—		—		2		87
U.S. government obligations	45		—		1		1		45

Residential mortgage-backed securities	182		—		70		—		252

Collateralized debt obligations	128		—		—		—		128
Other asset-backed securities (1)	234		—		32		—		265
	1,605		—		141		16		1,730
Short-term	415		—		—		—		414
	2,020		—		141		16		2,145
Fixed maturity securities pledged as collateral:
U.S. government obligations	15		—		—		—		15
Short-term	105		—		—		—		105
	120		—		—		—		120
Total available-for-sale investments	$	2,140	$	—	$	141	$	16	$	2,265

(1)Consists primarily of Ambac's holdings of military housing and student loan securities.

The amortized cost and estimated fair value of available-for-sale investments, excluding VIE investments, at March 31, 2022, by contractual maturity, were as follows:


	Amortized Cost		Estimated Fair Value
Due in one year or less	$	683	$	683
Due after one year through five years	431		416
Due after five years through ten years	317		300
Due after ten years	41		39
	1,472		1,438
Residential mortgage-backed securities	179		225

Collateralized debt obligations	121		120
Other asset-backed securities	232		252
Total	$	2,005	$	2,036

Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay certain obligations with or without call or prepayment penalties.

Unrealized Losses on Fixed Maturity Securities:

The following table shows gross unrealized losses and fair values of Ambac’s available-for-sale investments, excluding VIE investments, which at March 31, 2022 and December 31, 2021, did not have an allowance for credit losses under the CECL standard. This information is aggregated by investment category and length of time that the individual securities have been in a continuous unrealized loss position, at March 31, 2022 and December 31, 2021:


	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, 2022:
Fixed maturity securities:
Municipal obligations	$	19	$	1	$	1	$	—	$	19	$	1
Corporate obligations	349		21		117		13		466		34
Foreign obligations	36		1		51		3		87		4
U.S. government obligations	44		1		5		—		49		2

Residential mortgage-backed securities	16		—		1		—		17		—

Collateralized debt obligations	111		1		9		—		120		1
Other asset-backed securities	6		—		—		—		6		—
	580		26		184		16		764		42
Short-term	18		—		12		—		30		—
	598		26		196		17		794		42
Fixed income securities, pledged as collateral:
Short-term	15		—		—		—		15		—
Total collateralized investments	15		—		—		—		15		—
Total temporarily impaired securities	$	613	$	26	$	196	$	17	$	809	$	43


	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, 2021:
Fixed maturity securities:
Municipal obligations	$	117	$	3	$	2	$	—	$	118	$	3
Corporate obligations	363		8		17		1		380		9
Foreign obligations	75		2		3		—		78		2
U.S. government obligations	25		—		2		—		27		1

Residential mortgage-backed securities	—		—		1		—		2		—

Collateralized debt obligations	68		—		3		—		71		—
Other asset-backed securities	6		—		—		—		6		—
	654		14		28		1		682		16
Short-term	114		—		13		—		128		—
	768		14		41		1		810		16
Fixed income securities, pledged as collateral:
U. S. government obligations	15		—		—		—		15		—
Total collateralized investments	15		—		—		—		15		—
Total temporarily impaired securities	$	783	$	14	$	41	$	1	$	825	$	16

Management has determined that the securities in the above table do not have credit impairment as of March 31, 2022 and December 31, 2021, based upon (i) no actual or expected principal and interest payment defaults on these securities; (ii) analysis of the creditworthiness of the issuer and financial guarantor, as applicable, and (iii) for debt securities that are non-highly rated beneficial interests in securitized financial assets, analysis of whether there was an adverse change in projected cash flows. Management's evaluation as of March 31, 2022, includes the expectation that all principal and interest payments on securities guaranteed by AAC or Ambac UK will be made timely and in full.

Ambac’s assessment about whether a security is credit impaired reflects management’s current judgment regarding facts and circumstances specific to the security and other factors. If that judgment changes, Ambac may record a charge for credit impairment in future periods.

Investment Income (Loss)

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


	Three Months Ended March 31,
	2022		2021
Fixed maturity securities	$	15	$	23
Short-term investments	—		—

Investment expense	(1)		(1)
Securities available-for-sale and short-term	14		22
Fixed maturity securities - trading	(9)		—
Other investments	—		27
Total net investment income (loss)	$	5	$	49

Net investment income (loss) from Other investments primarily represents changes in fair value on equity securities, including certain pooled investment funds, and income from investment limited partnerships and other equity interests accounted for under the equity method.

Net Investments Gains (Losses), including Impairments:

The following table details amounts included in net investment gains (losses) and impairments included in earnings for the affected periods:


	Three Months Ended March 31,
	2022		2021
Gross realized gains on securities	$	23	$	7
Gross realized losses on securities	(15)		(1)
Foreign exchange gains (losses)	3		(4)
Credit impairments	(1)		—
Intent / requirement to sell impairments	—		—
Net investment gains (losses), including impairments	$	10	$	2

Ambac had an allowance for credit losses of $1 and $— at March 31, 2022 and 2021, respectively.

Ambac did not purchase any financial assets with credit deterioration for the three months ended March 31, 2022 and 2021.

Counterparty Collateral, Deposits with Regulators and Other Restrictions:

Ambac routinely pledges and receives collateral related to certain transactions. Securities held directly in Ambac’s investment portfolio with a fair value of $114 and $120 at March 31, 2022 and December 31, 2021, respectively, were pledged to derivative counterparties. Ambac’s derivative counterparties have the right to re-pledge the investment securities and as such, these pledged securities are separately classified on the Consolidated Balance Sheets as “Fixed maturity securities pledged as collateral, at fair value” and "Short-term investments pledged as collateral, at fair value." Refer to Note 7. Derivative Instruments for further information on cash collateral. There was no cash or securities received from other counterparties that were re-pledged by Ambac.

Securities carried at $23 and $17 at March 31, 2022 and December 31, 2021, respectively, were deposited by Ambac's insurance subsidiaries with governmental authorities or designated custodian banks as required by laws affecting insurance companies. Invested assets carried at $1 and $1 at March 31, 2022 and December 31, 2021, were deposited as security in connection with a letter of credit issued for an office lease.

Securities with a fair value of $644 and $669 at March 31, 2022 and December 31, 2021, respectively, were held by Ambac UK, the capital stock of which was pledged as collateral for the Sitka AAC Note. Refer to Note 12. Long-term Debt in the Notes to the Consolidated Financial Statements included in Part II, Item 8 in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021 for further information about the Sitka AAC Note.

Guaranteed Securities:

Ambac’s fixed maturity portfolio includes securities covered by guarantees issued by AAC and other financial guarantors (“insured securities”). The published rating agency ratings on these securities reflect the higher of the financial strength rating of the financial guarantor or the rating of the underlying issuer. Rating agencies do not always publish separate underlying ratings (those ratings excluding the insurance by the financial guarantor). In the event these underlying ratings are not available from the rating agencies, Ambac will assign an internal rating. The following table represents the fair value and weighted-average underlying rating of insured securities in Ambac's investment portfolio at March 31, 2022 and December 31, 2021, respectively:


	Municipal Obligations		Mortgage and Asset- backed Securities		Total		Weighted Average Underlying Rating (1)
March 31, 2022:
Ambac Assurance Corporation	$	47	$	403	$	451	B

Assured Guaranty Municipal Corporation	1		—		1		A



Total	$	48	$	403	$	451	B

December 31, 2021:
Ambac Assurance Corporation	$	316	$	439	$	754	B
National Public Finance Guarantee Corporation	2		—		2		BBB-
Assured Guaranty Municipal Corporation	1		—		1		A-



Total	$	318	$	439	$	757	B

(1)Ratings are based on the lower of Standard & Poor’s or Moody’s rating. If unavailable, Ambac’s internal rating is used.

Other Investments:

Ambac's investment portfolio includes interests in various pooled investment funds. Fair value and additional information about investments in pooled funds, by investment type, is summarized in the table below. Except as noted in the table, fair value as reported is determined using net asset value ("NAV") as a practical expedient. Redemption of certain funds valued using NAV may be subject to withdrawal limitations

and/or redemption fees which vary with the timing and notification of withdrawal provided by the investor. In addition to these investments, Ambac has unfunded commitments of $70 to private credit and private equity funds at March 31, 2022.


	Fair Value
Class of Funds	March 31, 2022		December 31, 2021		Redemption Frequency	Redemption Notice Period
Real estate properties (1)	$	40	$	33	quarterly	10 business days
Hedge funds (2)	196		216		quarterly or semi-annually	90 days
High yields and leveraged loans (3)	88		78		daily	0 - 30 days
Private credit (4)	87		88		quarterly if permitted	180 days if permitted
Insurance-linked investments (5)	1		2		see footnote (9)	see footnote (9)
Equity market investments (6) (10)	91		98		daily or quarterly	0 - 90 days
Investment grade floating rate income (7)	90		107		weekly	0 days
Private equity (8)	41		37		quarterly if permitted	90 days if permitted
Emerging markets debt (9) (10)	17		24		daily	0 days
Total equity investments in pooled funds	$	652	$	683

(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 across a range of asset types.

(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 returns 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. This investment is restricted in connection with the unwind of certain insurance linked exposures. Ambac has redeemed its investment to the extent permitted by the fund.

(6)This class of funds aim to achieve long term growth through diversified exposure to global equity-markets.

(7)This class of funds includes investments in high quality floating rate debt securities including ABS and corporate floating rate notes.

(8)This class seeks to generate long-term capital appreciation through investments in private equity, equity-related and other instruments.

(9)This class seeks long-term income and growth through investments in the bonds of issuers in emerging markets.

(10)These categories include fair value amounts totaling $92 and $106 at March 31, 2022 and December 31, 2021, respectively, that are readily determinable and are priced through pricing vendors, including for Equity market investments: $75 and $82; and for Emerging markets debt $17 and $24.

Other investments also includes preferred equity investments with a carrying value of $8 and $8 as of March 31, 2022 and December 31, 2021, respectively, that do not have readily determinable fair values and are carried at cost, less any impairments as permitted under the Investments — Equity Securities Topic of the ASC. There were no impairments recorded on these investments or adjustments to fair value to reflect observable price changes in identical or similar investments from the same issuer during the periods presented.