Investments (Tables)

9 Months Ended

Sep. 30, 2012

Summary of Amortized Cost and Estimated Fair Value of Investments, Excluding VIE Investments

The amortized cost and estimated fair value of investments, excluding VIE investments, at September 30, 2012 and December 31, 2011 were as follows:

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value		Non-credit other- than-temporary Impairments(1)
September 30, 2012
Fixed income securities:
Municipal obligations	$	1,680,404	$	181,472	$	102	$	1,861,774	$	—
Corporate obligations		1,039,248		92,706		9,870		1,122,084		—
Foreign obligations		66,947		3,448		—		70,395		—
U.S. government obligations		110,945		1,071		430		111,586		—
U.S. agency obligations		79,999		4,024		—		84,023		—
Residential mortgage-backed securities		1,144,258		301,074		36,306		1,409,026		9,463
Collateralized debt obligations		36,814		873		878		36,809		—
Other asset-backed securities		729,069		63,672		47,748		744,993		—
		4,887,684		648,340		95,334		5,440,690		9,463
Short-term		713,137		330		—		713,467		—
Other		100		—		—		100		—
		5,600,921		648,670		95,334		6,154,257		9,463
Fixed income securities pledged as collateral:
U.S. government obligations		285,284		581		5		285,860		—
Residential mortgage-backed securities		—		—		—		—		—
Total collateralized investments		285,284		581		5		285,860		—
Total investments	$	5,886,205	$	649,251	$	95,339	$	6,440,117	$	9,463
December 31, 2011
Fixed income securities:
Municipal obligations	$	1,858,493	$	144,989	$	483	$	2,002,999	$	—
Corporate obligations		1,087,629		63,074		23,203		1,127,500		—
Foreign obligations		89,951		4,844		—		94,795		—
U.S. government obligations		107,717		3,847		2		111,562		—
U.S. agency obligations		80,960		5,911		—		86,871		—
Residential mortgage-backed securities		1,119,517		350,816		57,816		1,412,517		20,907
Collateralized debt obligations		48,686		142		2,591		46,237		—
Other asset-backed securities		953,944		53,965		60,101		947,808		—
		5,346,897		627,588		144,196		5,830,289		20,907
Short-term		783,015		57		1		783,071		—
Other		100		—		—		100		—
		6,130,012		627,645		144,197		6,613,460		20,907
Fixed income securities pledged as collateral:
U.S. government obligations		259,401		1,525		124		260,802		—
Residential mortgage-backed securities		2,557		171		—		2,728		—
Total collateralized investments		261,958		1,696		124		263,530		—
Total investments	$	6,391,970	$	629,341	$	144,321	$	6,876,990	$	20,907

(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 September 30, 2012 and December 31, 2011.

Summary of Amortized Cost and Estimated Fair Value of Investments Excluding VIE Investments by Contractual Maturity

The amortized cost and estimated fair value of investments, excluding VIE investments, at September 30, 2012, by contractual maturity, were as follows:

	Amortized Cost		Estimated Fair Value
Due in one year or less	$	896,968	$	899,698
Due after one year through five years		881,664		933,801
Due after five years through ten years		1,099,250		1,214,631
Due after ten years		1,098,182		1,201,159
		3,976,064		4,249,289
Residential mortgage-backed securities		1,144,258		1,409,026
Collateralized debt obligations		36,814		36,809
Other asset-backed securities		729,069		744,993
	$	5,886,205	$	6,440,117

Summary of Gross Unrealized Losses and Fair Values of Ambac's Investments

The following table shows gross unrealized losses and fair values of Ambac’s investments, aggregated by investment category and length of time that the individual securities have been in a continuous unrealized loss position, at September 30, 2012 and December 31, 2011:

	Less Than 12 Months				12 Months or More				Total
	Fair Value		Gross Unrealized Loss		Fair Value		Gross Unrealized Loss		Fair Value		Gross Unrealized Loss
September 30, 2012:
Fixed income securities:
Municipal obligations	$	27,609	$	65	$	4,294	$	37	$	31,903	$	102
Corporate obligations		64,316		1,329		135,993		8,541		200,309		9,870
U.S. government obligations		26,099		430		64,970		5		91,069		435
Residential mortgage-backed securities		143,641		12,428		112,854		23,878		256,495		36,306
Collateralized debt obligations		260		317		13,780		561		14,040		878
Other asset-backed securities		10,016		3		191,042		47,745		201,058		47,748
		271,941		14,572		522,933		80,767		794,874		95,339
Short-term		2,523		—		—		—		2,523		—
Total temporarily impaired securities	$	274,464	$	14,572	$	522,933	$	80,767	$	797,397	$	95,339

	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, 2011:
Fixed income securities:
Municipal obligations	$	9,359	$	309	$	14,635	$	174	$	23,994	$	483
Corporate obligations		155,528		6,220		178,861		16,983		334,389		23,203
U.S. government obligations		130,422		126		—		—		130,422		126
Residential mortgage-backed securities		125,826		14,495		105,705		43,321		231,531		57,816
Collateralized debt obligations		33,037		840		12,482		1,751		45,519		2,591
Other asset-backed securities		181,792		8,319		204,855		51,782		386,647		60,101
		635,964		30,309		516,538		114,011		1,152,502		144,320
Short-term		5,773		1		—		—		5,773		1
Total temporarily impaired securities	$	641,737	$	30,310	$	516,538	$	114,011	$	1,158,275	$	144,321

Summary of Amounts Included in Net Realized Gains (Losses) 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 three and nine month periods ended September 30, 2012 and 2011:

	Three-months ended September 30,						Nine-months ended September 30,
	2012			2011			2012			2011
Gross realized gains on securities	$	3,492		$	4,085		$	71,997		$	8,340
Gross realized losses on securities		(72	)		(495	)		(963	)		(4,844	)
Foreign exchange gains (losses)		(258	)		1,494			(413	)		1,510
Net realized gains excluding other-than-temporary impairments	$	3,162		$	5,084		$	70,621		$	5,006
Net other-than-temporary impairments(1)	$	(354	)	$	(10,887	)	$	(5,753	)	$	(30,178	)

(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 Impairments that were Recognized in Earnings on Securities Held

The following table presents a roll-forward of Ambac’s cumulative credit impairments that were recognized in earnings on securities held as of September 30, 2012 and 2011:

	Credit Impairment
	2012			2011
Balance as of January 1	$	201,317		$	139,766
Additions for credit impairments recognized on:
Securities not previously impaired		820			27,123
Securities previously impaired		4,933			3,055
Reductions for credit impairments previously recognized on:
Securities that matured or were sold during the period		(24,007	)		—
Balance as of September 30	$	183,063		$	169,944

Summary of Sources of Collateral Received and Various Investment Agreement in which Collateral Pledged

The following table presents (i) the sources of collateral either received from various counterparties where Ambac is permitted to sell or re-pledge or held directly in the investment portfolio and (ii) how that collateral was pledged to various investment agreements, derivative and repurchase agreement counterparties at September 30, 2012 and December 31, 2011:

	Fair Value of Cash and Underlying Securities		Fair Value of Cash and Securities Pledged to Investment and Repurchase Agreement Counterparties		Fair Value of Cash and Securities Pledged to Derivative Counterparties
September 30, 2012:
Sources of Collateral:
Cash and securities pledged directly from the investment portfolio	$	735,229	$	432,592	$	302,637
Cash and securities pledged from derivative counterparties		—		—		—
December 31, 2011:
Sources of Collateral:
Cash and securities pledged directly from the investment portfolio	$	874,987	$	564,036	$	310,951
Cash and securities pledged from derivative counterparties		—		—		—