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Investments
 6 Months Ended
Jun. 30, 2023
Investments, Debt and Equity Securities [Abstract]  
Investments
4.    INVESTMENTS
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 the Notes to Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022.
Fixed Maturity Securities:
The amortized cost and estimated fair value of available-for-sale investments, excluding VIE investments, at June 30, 2023 and December 31, 2022, were as follows:
June 30, 2023:December 31, 2022:
Amortized
Cost
Allowance for Credit Losses (2)
Gross UnrealizedEstimated
Fair Value		Amortized
Cost		Allowance for Credit LossesGross UnrealizedEstimated
Fair Value
GainsLossesGainsLosses
Fixed maturity securities:
Municipal obligations$64 $— $— $2 $63 $44 — $— $2 $43 
Corporate obligations736 — — 62 674 659 — 1 63 598 
Foreign obligations94 — — 11 83 85 — — 9 76 
U.S. government obligations75 — — 4 71 68 — — 4 65 
Residential mortgage-backed securities230 1 26 17 238 230 — 28 19 238 
Commercial mortgage-backed securities16 — — — 16 15 — — — 15 
Collateralized debt obligations140 — — 3 138 141 — — 4 137 
Other asset-backed securities (1)
275 — 3 10 268 227 — 2 5 224 
1,632 1 30 109 1,552 1,469 — 31 106 1,395 
Short-term365 — — — 365 507 — — — 507 
1,997 1 30 109 1,917 1,977 — 31 106 1,902 
Fixed maturity securities pledged as collateral:
Short-term36 — — — 36 64 — — — 64 
36 — — — 36 64 — — — 64 
Total available-for-sale investments$2,033 $1 $30 $109 $1,953 $2,041 $— $31 $106 $1,966 
(1)Consists primarily of military housing and student loan securities.
(2)For the three and six months ended June 30, 2023, the allowance for credit losses increased $0 and $1 on residential mortgage-backed securities on which credit losses were not previously recorded, respectively.

The amortized cost and estimated fair value of available-for-sale investments, excluding VIE investments, at June 30, 2023, by contractual maturity, were as follows:
Amortized
Cost		Estimated
Fair Value
Due in one year or less$464 $463 
Due after one year through five years554 518 
Due after five years through ten years291 257 
Due after ten years62 54 
1,371 1,292 
Residential mortgage-backed securities230 238 
Commercial mortgage-backed securities16 16 
Collateralized debt obligations140 138 
Other asset-backed securities275 268 
Total$2,033 $1,953 
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 June 30, 2023 and December 31, 2022, 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 June 30, 2023 and December 31, 2022:
June 30, 2023December 31, 2022
Less Than 12 Months12 Months or MoreTotalLess Than 12 Months12 Months or MoreTotal
Fair 
Value		Gross
Unrealized
Loss		Fair 
Value		Gross
Unrealized
Loss		Fair 
Value		Gross
Unrealized
Loss		Fair 
Value		Gross
Unrealized
Loss		Fair 
Value		Gross
Unrealized
Loss		Fair 
Value		Gross
Unrealized
Loss
Fixed maturity securities:
Municipal obligations$22 $— $16 $2 $38 $2 $21 $1 $7 $1 $28 $2 
Corporate obligations209 9 447 53 656 62 280 21 279 42 559 63 
Foreign obligations36 2 47 9 83 11 27 2 47 7 73 9 
U.S. government obligations27 2 40 2 66 4 40 3 19 1 58 4 
Residential mortgage-backed securities74 2 91 15 165 17 132 19 — — 132 19 
Commercial mortgage-backed securities15 — — — 15 — 3 — — — 3 — 
Collateralized debt obligations— — 117 3 117 3 90 3 36 1 126 4 
Other asset-backed securities173 9 6 1 179 10 198 4 5 1 203 5 
556 24 764 85 1,319 109 791 53 392 53 1,183 106 
Short-term37 — — — 37 — 78 — 8 — 86 — 
Total temporarily impaired securities$593 $24 $764 $85 $1,357 $109 $869 $53 $400 $53 $1,269 $106 

Management has determined that the securities in the above table do not have credit impairment as of June 30, 2023 and December 31, 2022, 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 June 30, 2023, 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.
The declines in fair value and resultant unrealized losses across asset classes as of June 30, 2023, included in the above table resulted from the impact of increasing interest rates and market spreads. Management has determined that the securities with unrealized losses are not credit impaired. Further discussion of management's assessment with respect to security categories with larger unrealized loss balances is below.
Corporate obligations
The gross unrealized losses on corporate obligations as of June 30, 2023, resulted from an increase in interest rates and, to a lesser extent, market spreads since the securities were purchased. Unrealized losses of $61 related to 838 investment grade securities with an average unrealized loss equal to 9% of amortized cost at June 30, 2023. Securities that have below investment grade credit ratings or are unrated comprise $1 of the gross unrealized loss and have an average unrealized loss equal to 6% of amortized cost at June 30, 2023. Management believes that the full and timely receipt of all principal and interest payment on corporate obligations with unrealized losses as of June 30, 2023, is probable.
Residential mortgage-backed securities and Other asset-backed securities
As of June 30, 2023, $17 of the unrealized loss on residential mortgage-backed securities related to 14 Ambac insured securities. Five of these account for $16 of the unrealized loss and have an average unrealized loss equal to 13% of amortized cost. The $10 unrealized loss on other asset backed securities related to 18 Ambac-insured securities that have an average unrealized loss equal to 5% of amortized cost.
The majority of these unrealized losses for both residential mortgage-backed and other asset-backed securities relate to securities with long dated weighted average lives making their fair values more sensitive to interest rate changes. Also, most of these securities have below investment grade credit ratings or are unrated. The unrealized losses on these obligations resulted from adverse market conditions for long dated credit assets. As noted above, expected cash flows used in evaluating credit impairment of Ambac-insured securities contemplate full and timely payment of all principal and interest payments. This assumption is included in the projection of model based cash flows used in evaluating credit impairments on beneficial interests in securitized financial assets, including the residential mortgage backed and student loan asset backed securities included in this group.
Investment Income (Loss)
Net investment income (loss) was comprised of the following for the affected periods:
Three Months Ended June 30,Six Months Ended June 30,
2023202220232022
Fixed maturity securities$19 $13 $35 $28 
Short-term investments5 1 10 1 
Investment expense(1)(1)(3)(3)
Securities available-for-sale and short-term22 13 43 27 
Fixed maturity securities - trading4 (11)5 (21)
Other investments9 (23)22 (23)
Total net investment income (loss)$35 $(21)$69 $(16)
Net investment income (loss) from Other investments primarily represents changes in fair value on equity securities, including certain pooled investment funds, and income from investment limited partnerships and other equity interests accounted for under the equity method.
Net Investments Gains (Losses), including Impairments:
The following table details amounts included in net investment gains (losses) and impairments included in earnings for the affected periods:
Three Months Ended June 30,Six Months Ended June 30,
2023202220232022
Gross realized gains on securities$— $— $1 $23 
Gross realized losses on securities(2)(2)(3)(16)
Foreign exchange gains (losses) (2)8 (4)11 
Credit impairments— — (1)— 
Intent / requirement to sell impairments— — — — 
Net investment gains (losses), including impairments$(3)$7 $(8)$17 
Ambac had an allowance for credit losses of $1 and $0 at June 30, 2023 and 2022, respectively.
Ambac did not purchase any financial assets with credit deterioration for the three and six months ended June 30, 2023 and 2022.
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 $36 and $64 at June 30, 2023 and December 31, 2022, 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 "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 $24 and $23 at June 30, 2023 and December 31, 2022, 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 June 30, 2023 and December 31, 2022, were deposited as security in connection with a letter of credit issued for an office lease.
Guaranteed Securities:
Ambac’s fixed maturity portfolio includes securities covered by guarantees issued by AAC or Ambac UK (“insured securities”). The following table represents the fair value and weighted-average underlying rating of insured securities in Ambac's investment portfolio at June 30, 2023 and December 31, 2022,
respectively: 
Municipal
Obligations		Mortgage
and Asset-
backed
Securities		Total
Weighted
Average
Underlying
Rating (1)
June 30, 2023:
$9$436$446B-
December 31, 2022:
$10$394$403B
(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 $52 to private credit and private equity funds at June 30, 2023.
Fair Value
Class of FundsJune 30,
2023		December 31, 2022Redemption FrequencyRedemption Notice Period
Hedge funds (1)
$172 $186 quarterly or semi-annually90 days
Private credit (2)
85 84 quarterly if permitted180 days if permitted
High yields and leveraged loans (3)
74 80 daily0 - 30 days
Equity market investments (4) (10)
56 64 daily or quarterly0 - 90 days
Investment grade floating rate income (5)
41 63 weekly0 days
Private equity (6)
53 47 quarterly if permitted90 days if permitted
Real estate properties (7)
23 22 
see footnote (7)
see footnote (7)
Convertible bonds (8)(10)
13 8 daily0 days
Insurance-linked investments (9)
1 1 
see footnote (9)
see footnote (9)
Total equity investments in pooled funds$518 $556 
(1)This class seeks to generate superior risk-adjusted returns through selective asset sourcing, active trading and hedging strategies across a range of asset types.
(2)This class aims to obtain high long-term returns primarily through credit and preferred equity investments with low liquidity and defined term.
(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 of funds aim to achieve long term growth through diversified exposure to global equity-markets.
(5)This class of funds includes investments in high quality floating rate debt securities including ABS and corporate floating rate notes.
(6)This class seeks to generate long-term capital appreciation through investments in private equity, equity-related and other instruments.
(7)Investments consist of UK property to generate income and capital growth. In normal conditions, the fund allowed for quarterly redemptions with 10 days notice. The investment is currently restricted in connection with redemptions for a period of 12 months or longer. These restrictions are a result of redemption requests received by the fund in the calendar quarter or in aggregate in any rolling 12 month period, that exceed 10% or 15% of NAV of a portfolio, respectively. Ambac has requested full redemption of its interest in this fund.
(8)This class seeks to generate total returns from portfolios focused primarily on convertible securities.
(9)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.
(10)These categories include fair value amounts totaling $69 and $61 at June 30, 2023 and December 31, 2022, respectively, that are readily determinable and are priced through pricing vendors, including for Equity market investments $56 and $53 and Convertible bonds investments $13 and $8.
Other investments also include preferred equity investments with a carrying value of $12 and $12 as of June 30, 2023 and December 31, 2022, 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.