XML 26 R10.htm IDEA: XBRL DOCUMENT v3.24.2.u1
Investments
 6 Months Ended
Jun. 30, 2024
Investments, Debt and Equity Securities [Abstract]  
Investments
3.    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, 2023.
Fixed Maturity Securities:
The amortized cost and estimated fair value of available-for-sale investments, excluding VIE investments, at June 30, 2024 and December 31, 2023, were as follows:
June 30, 2024:December 31, 2023:
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$71 $— $1 $2 $71 $72 — $1 $1 $72 
Corporate obligations786 — 2 46 742 785 — 4 44 745 
Foreign obligations111 — — 7 105 105 — 1 6 100 
U.S. government obligations108 — — 4 105 85 — 1 4 82 
Residential mortgage-backed securities240 3 28 13 253 239 3 28 14 250 
Commercial mortgage-backed securities46 — — — 46 19 — — — 19 
Collateralized debt obligations141 — 1 — 141 139 — 1 1 139 
Other asset-backed securities (1)
234 — 12 5 241 301 — 3 1 303 
1,737 3 45 77 1,703 1,744 3 40 71 1,710 
Short-term314 — — — 314 426 — — — 426 
2,051 3 45 77 2,017 2,170 3 40 71 2,135 
Fixed maturity securities pledged as collateral:
U.S. government obligations27 — — 1 25 — — — — — 
Short-term— — — — — 27 — — — 27 
27 — — 1 25 27 — — — 27 
Total available-for-sale investments$2,078 $3 $45 $78 $2,043 $2,197 3 $40 $71 $2,162 
(1)Consists primarily of military housing and student loan securities.
(2)For the three and six months ended June 30, 2024, the allowance for credit losses changed by $0 on residential mortgage-backed securities for which credit losses were not previously recorded.

The amortized cost and estimated fair value of available-for-sale investments, excluding VIE investments, at June 30, 2024, by contractual maturity, were as follows:
Amortized
Cost		Estimated
Fair Value
Due in one year or less$439 $437 
Due after one year through five years543 521 
Due after five years through ten years304 279 
Due after ten years132 124 
1,418 1,361 
Residential mortgage-backed securities240 253 
Commercial mortgage-backed securities46 46 
Collateralized debt obligations141 141 
Other asset-backed securities234 241 
Total$2,078 $2,043 
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, 2024 and December 31, 2023, did not have an allowance for credit losses 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, 2024 and December 31, 2023:
June 30, 2024December 31, 2023
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$21 $— $15 $1 $35 $2 $7 $— $16 $1 $23 $1 
Corporate obligations125 3 493 43 618 46 75 2 509 43 584 44 
Foreign obligations25 — 55 7 80 7 8 — 56 6 64 6 
U.S. government obligations58 1 37 3 95 4 27 1 37 2 63 4 
Residential mortgage-backed securities16 — 113 13 129 13 6 — 98 14 104 14 
Commercial mortgage-backed securities17 — — — 17 — 3 — — — 3 — 
Collateralized debt obligations18 — 3 — 22 — 1 — 93 1 95 1 
Other asset-backed securities45 1 72 4 117 5 57 1 35 1 92 1 
326 5 787 71 1,113 77 184 4 844 68 1,028 71 
Short-term46 — — — 46 — 4 — — — 4 — 
372 5 787 71 1,159 77 187 4 844 68 1,032 71 
U. S. government obligations25 1 — — 25 1 — — — — — — 
Total collateralized investments25 1 — — 25 1 — — — — — — 
Total temporarily impaired securities$398 $7 $787 $71 $1,184 $78 $187 $4 $844 $68 $1,032 $71 

Management has determined that the securities in the above table do not have credit impairment as of June 30, 2024 and December 31, 2023, 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, 2024, 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, 2024, 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, 2024, resulted primarily from an increase in interest rates since the securities were purchased. Unrealized losses of $45 related to 733 investment grade securities with an average unrealized loss equal to 7% of amortized cost at June 30, 2024. Securities that have below investment grade credit ratings or are unrated comprise less than a million of the gross unrealized loss and have an average unrealized loss equal to 8% of amortized cost at June 30, 2024. Management believes that the full and timely receipt of all principal and interest payment on corporate
obligations with unrealized losses as of June 30, 2024, is probable.
Residential mortgage-backed securities and Other asset-backed securities
As of June 30, 2024, $13 of the unrealized loss on residential mortgage-backed securities related to 15 Ambac insured securities. Five of these account for $13 of the unrealized loss and have an average unrealized loss equal to 12% of amortized cost. The $5 unrealized loss on other asset backed securities related primarily to 13 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 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,
2024202320242023
Fixed maturity securities$22 $19 $45 $35 
Short-term investments5 5 10 10 
Investment expense(1)(1)(3)(3)
Securities available-for-sale and short-term26 22 52 43 
Fixed maturity securities - trading2 4 4 5 
Other investments8 9 21 22 
Total net investment income (loss)$36 $35 $78 $69 
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,
2024202320242023
Gross realized gains on securities$7 $— $7 $1 
Gross realized losses on securities(1)(2)(1)(3)
Foreign exchange gains (losses) (1)(2)— (4)
Credit impairments(2)— (1)(1)
Intent / requirement to sell impairments— — — — 
Net investment gains (losses), including impairments$4 $(3)$4 $(8)
Ambac had an allowance for credit losses of $3 and $1 at June 30, 2024 and 2023, respectively.
Ambac did not purchase any financial assets with credit deterioration for the three and six months ended June 30, 2024 and 2023.
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 $25 and $27 at June 30, 2024 and December 31, 2023, 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 either "Fixed maturity securities pledged as collateral, at fair value" or "Short-term investments pledged as collateral, at fair value." Refer to Note 6. 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 $29 and $24 at June 30, 2024 and December 31, 2023, 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, 2024 and December 31, 2023, were deposited as security in connection with a letter of credit issued for an office lease. Fiduciary funds held by Ambac's insurance distribution subsidiaries, carried at $2 and $2 at June 30, 2024 and December 31, 2023, respectively, are included in the invested assets.
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, 2024 and December 31, 2023,
respectively: 
June 30, 2024December 31, 2023
Municipal obligations$8 $9 
Mortgage-backed securities244 240 
Asset-backed securities151 232 
Total$403 482 
Weighted average underlying ratingB-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 $30 to private credit and private equity funds at June 30, 2024.
Fair Value
Class of FundsJune 30,
2024		December 31, 2023Redemption FrequencyRedemption Notice Period
Hedge funds (1)
$117 $112 quarterly or semi-annually90 days
Private credit (2)
83 84 quarterly if permitted180 days if permitted
High yields and leveraged loans (3) (10)
137 85 daily0 - 30 days
Equity market investments (4) (10)
40 38 daily0 days
Investment grade floating rate income (5)
53 52 weekly0 days
Private equity (6)
79 70 quarterly if permitted90 days if permitted
Real estate properties (7)
— 21 
see footnote (7)
see footnote (7)
Convertible bonds (8)(10)
23 — daily0 days
Insurance-linked investments (9)
— 1 
see footnote (9)
see footnote (9)
Total equity investments in pooled funds$533 $463 
(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 consisted of UK property to generate income and capital growth. The fund in which Ambac was invested has terminated on May 30, 2024 and is in the process of distributing remaining capital. Amounts owed Ambac from the fund are included in Other assets on the Consolidated Balance Sheet as of June 30, 2024.
(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 was restricted in connection with the unwind of certain insurance linked exposures. Ambac's investment was fully redeemed by March 31, 2024.
(10)These categories include fair value amounts totaling $153 and $77 at June 30, 2024 and December 31, 2023, respectively, that are readily determinable and are priced through pricing vendors, including for Equity market investments $40 and $38, High yield and leveraged loans products $89 and $39, and Convertible bonds investments $23 and $0.
Other investments also include preferred equity investments with a carrying value of $26 and $13 as of June 30, 2024 and December 31, 2023, 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. Impairments of $1 were recorded on these investments in the three and six months ended June 30, 2024. There were no adjustments to fair value to reflect observable price changes in identical or similar investments from the same issuer during the three and six months ended June 30, 2023.