Investments (Tables)

9 Months Ended

Sep. 30, 2023

Investments, Debt and Equity Securities [Abstract]

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, 2023, by contractual maturity, were as follows:

	Amortized Cost		Estimated Fair Value
Due in one year or less	$	514	$	512
Due after one year through five years	562		529
Due after five years through ten years	292		255
Due after ten years	65		54
	1,432		1,351
Residential mortgage-backed securities	234		227
Commercial mortgage-backed securities	18		18
Collateralized debt obligations	143		142
Other asset-backed securities	273		265
Total	$	2,100	$	2,004

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, which at September 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 September 30, 2023 and December 31, 2022:

	September 30, 2023												December 31, 2022
	Less Than 12 Months				12 Months or More				Total				Less Than 12 Months				12 Months or More				Total
	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	$	50	$	1	$	16	$	2	$	65	$	3	$	21	$	1	$	7	$	1	$	28	$	2
Corporate obligations	150		5		497		60		648		65		280		21		279		42		559		63
Foreign obligations	25		1		52		9		77		9		27		2		47		7		73		9
U.S. government obligations	28		2		37		3		64		4		40		3		19		1		58		4
Residential mortgage-backed securities	58		2		107		25		165		28		132		19		—		—		132		19
Commercial mortgage-backed securities	18		1		—		—		18		1		3		—		—		—		3		—
Collateralized debt obligations	7		—		107		1		114		1		90		3		36		1		126		4
Other asset-backed securities	120		9		34		2		154		11		198		4		5		1		203		5
	456		20		849		102		1,306		122		791		53		392		53		1,183		106
Short-term	19		—		—		—		19		—		78		—		8		—		86		—
Total temporarily impaired securities	$	476	$	20	$	849	$	102	$	1,325	$	122	$	869	$	53	$	400	$	53	$	1,269	$	106

Summary of Amounts Included in Net Realized (Losses) Gains and Other-Than-Temporary Impairments

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

	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Gross realized gains on securities	$	—	$	6	$	1	$	29
Gross realized losses on securities	(1)		(1)		(4)		(17)
Foreign exchange gains (losses)	2		9		(2)		20
Credit impairments	(1)		—		(2)		—
Intent / requirement to sell impairments	—		—		—		—
Net investment gains (losses), including impairments	$	1	$	14	$	(7)	$	31

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 and weighted-average underlying rating of insured securities in Ambac's investment portfolio at September 30, 2023 and December 31, 2022,

respectively: 

	Municipal Obligations		Mortgage and Asset- backed Securities		Total		Weighted Average Underlying Rating (1)
September 30, 2023	$	9	$	419	$	427	B-
December 31, 2022	$	10	$	394	$	403	B

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

Equity Method Investments [Table Text Block]

In addition to these investments, Ambac has unfunded commitments of $48 to private credit and private equity funds at September 30, 2023.

	Fair Value
Class of Funds	September 30, 2023		December 31, 2022		Redemption Frequency	Redemption Notice Period
Hedge funds (1)	$	109	$	186	quarterly or semi-annually	90 days
Private credit (2)	85		84		quarterly if permitted	180 days if permitted
High yields and leveraged loans (3) (10)	78		80		daily	0 - 30 days
Equity market investments (4) (10)	53		64		daily or quarterly	0 - 90 days
Investment grade floating rate income (5)	40		63		weekly	0 days
Private equity (6)	62		47		quarterly if permitted	90 days if permitted
Real estate properties (7)	21		22		see footnote (7)	see footnote (7)
Convertible bonds (8)(10)	—		8		daily	0 days
Insurance-linked investments (9)	1		1		see footnote (9)	see footnote (9)
Total equity investments in pooled funds	$	449	$	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. On October 17, 2023, the fund manager notified investors of its intention to terminate the fund effective December 31, 2023. Beginning December 31, 2023, distributions will be made to investors, pro-rata to the number of fund units held, from available proceeds of property sales as soon as possible following completion of such sales.

(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 $87 and $61 at September 30, 2023 and December 31, 2022, respectively, that are readily determinable and are priced through pricing vendors, including for Equity market investments $53 and $53, High yield and leveraged loans products $35 and $—, and Convertible bonds investments $0 and $8.

Summary of Net Investment Income

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

	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Fixed maturity securities	$	20	$	16	$	55	$	45
Short-term investments	5		3		16		4
Investment expense	(1)		(2)		(4)		(4)
Securities available-for-sale and short-term	24		17		67		44
Fixed maturity securities - trading	—		(1)		5		(22)
Other investments	6		(5)		28		(28)
Total net investment income (loss)	$	30	$	11	$	100	$	(6)

Debt Securities, Available-for-Sale

The amortized cost and estimated fair value of available-for-sale investments, excluding VIE investments, at September 30, 2023 and December 31, 2022, were as follows:

	September 30, 2023:										December 31, 2022:
	Amortized Cost		Allowance for Credit Losses (2)		Gross Unrealized				Estimated Fair Value		Amortized Cost		Allowance for Credit Losses		Gross Unrealized				Estimated Fair Value
					Gains		Losses								Gains		Losses
Fixed maturity securities:
Municipal obligations	$	70	$	—	$	—	$	3	$	67	$	44	—		$	—	$	2	$	43
Corporate obligations	736		—		—		65		671		659		—		1		63		598
Foreign obligations	101		—		—		9		92		85		—		—		9		76
U.S. government obligations	77		—		—		4		73		68		—		—		4		65
Residential mortgage-backed securities	234		2		23		28		227		230		—		28		19		238
Commercial mortgage-backed securities	18		—		—		1		18		15		—		—		—		15
Collateralized debt obligations	143		—		—		1		142		141		—		—		4		137
Other asset-backed securities (1)	273		—		3		11		265		227		—		2		5		224
	1,653		2		27		122		1,556		1,469		—		31		106		1,395
Short-term	421		—		—		—		421		507		—		—		—		507
	2,074		2		27		122		1,977		1,977		—		31		106		1,902
Fixed maturity securities pledged as collateral:
Short-term	27		—		—		—		27		64		—		—		—		64
	27		—		—		—		27		64		—		—		—		64
Total available-for-sale investments	$	2,100	$	2	$	27	$	122	$	2,004	$	2,041	$	—	$	31	$	106	$	1,966

(1)Consists primarily of military housing and student loan securities.

(2)For the three and nine months ended September 30, 2023, the allowance for credit losses increased $1 and $2 on residential mortgage-backed securities on which credit losses were not previously recorded, respectively.