Investments (Tables)

9 Months Ended

Sep. 30, 2013

Investments Debt And Equity Securities [Abstract]

Summary of Amortized Cost and Estimated Fair Value of Available-for-Sale Investments, Excluding VIE Investments

The amortized cost and estimated fair value of available-for-sale investments, excluding VIE investments, at September 30, 2013 and December 31, 2012 were as follows:


	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value		Non-credit other- than-temporary Impairments⁽¹⁾
Successor Ambac – September 30, 2013
Fixed income securities:
Municipal obligations	$	1,470,363	$	152	$	26,157	$	1,444,358	$	—
Corporate obligations		1,367,029		1,981		24,324		1,344,686		—
Foreign obligations		127,649		56		5,206		122,499		—
U.S. government obligations		106,605		36		1,381		105,260		—
U.S. agency obligations		35,562		4		77		35,489		—
Residential mortgage-backed securities		1,523,755		52,896		21,039		1,555,612		947
Collateralized debt obligations		91,023		256		224		91,055		—
Other asset-backed securities		1,073,838		9,208		23,340		1,059,706		—

		5,795,824		64,589		101,748		5,758,665		947
Short-term		549,233		1		5		549,229		—

		6,345,057		64,590		101,753		6,307,894		947

Fixed income securities pledged as collateral:
U.S. government obligations		140,216		57		—		140,273		—

Total collateralized investments		140,216		57		—		140,273		—

Total available-for-sale investments	$	6,485,273	$	64,647	$	101,753	$	6,448,167	$	947


Predecessor Ambac – December 31, 2012
Fixed income securities:
Municipal obligations	$	1,662,124	$	187,191	$	383	$	1,848,932	$	—
Corporate obligations		999,554		87,535		9,117		1,077,972		—
Foreign obligations		67,347		2,765		—		70,112		—
U.S. government obligations		127,037		872		626		127,283		—
U.S. agency obligations		79,295		3,240		—		82,535		—
Residential mortgage-backed securities		1,096,202		379,935		20,555		1,455,582		6,892
Collateralized debt obligations		32,855		1,015		528		33,342		—
Other asset-backed securities		687,410		65,733		46,506		706,637		—

		4,751,824		728,286		77,715		5,402,395		6,892
Short-term		661,219		439		—		661,658		—

		5,413,043		728,725		77,715		6,064,053		6,892

Fixed income securities pledged as collateral:
U.S. government obligations		265,517		262		—		265,779		—

Total collateralized investments		265,517		262		—		265,779		—

Total available-for-sale investments	$	5,678,560	$	728,987	$	77,715	$	6,329,832	$	6,892

(1)	Represents the amount of non-credit other-than-temporary impairment losses remaining in accumulated other comprehensive loss on securities that also had a credit impairment. These losses are included in gross unrealized losses as of September 30, 2013 and December 31, 2012.

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 held by Successor Ambac, at September 30, 2013, by contractual maturity, were as follows:


	Amortized Cost		Estimated Fair Value
Due in one year or less	$	549,519	$	549,500
Due after one year through five years		76,880		74,832
Due after five years through ten years		116,964		109,788
Due after ten years		3,053,294		3,007,674

		3,796,657		3,741,794
Residential mortgage-backed securities		1,523,755		1,555,612
Collateralized debt obligations		91,023		91,055
Other asset-backed securities		1,073,838		1,059,706

	$	6,485,273	$	6,448,167

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, aggregated by investment category and length of time that the individual securities have been in a continuous unrealized loss position, at September 30, 2013 and December 31, 2012:


	Less Than 12 Months ⁽¹⁾
	Fair Value		Gross Unrealized Loss
Successor Ambac – September 30, 2013:
Fixed income securities:
Municipal obligations	$	455,719	$	26,157
Corporate obligations		962,892		24,324
Foreign government obligations		114,986		5,206
U.S. government obligations		33,653		1,381
U.S. agency obligations		4,554		77
Residential mortgage-backed securities		580,747		21,039
Collateralized debt obligations		37,018		224
Other asset-backed securities		743,499		23,340

		2,933,068		101,748
Short-term		1,298		5

Total temporarily impaired securities	$	2,934,366	$	101,753

(1)

As a result of the implementation of Fresh Start, amortized cost for available for sale securities were set to equal fair value on April 30, 2013. Accordingly, Successor Ambac does not have any gross unrealized losses that have been in a continuous unrealized loss position for greater than 12 months.


	Less Than 12 Months				12 Months or More				Total
	Fair Value		Gross Unrealized Loss		Fair Value		Gross Unrealized Loss		Fair Value		Gross Unrealized Loss
Predecessor Ambac – December 31, 2012:
Fixed income securities:
Municipal obligations	$	42,503	$	354	$	4,303	$	29	$	46,806	$	383
Corporate obligations		69,727		1,081		132,916		8,036		202,643		9,117
U.S. government obligations		26,081		626		—		—		26,081		626
Residential mortgage-backed securities		88,504		5,319		116,146		15,236		204,650		20,555
Collateralized debt obligations		253		168		13,429		360		13,682		528
Other asset-backed securities		180		3		188,832		46,503		189,012		46,506

		227,248		7,551		455,626		70,164		682,874		77,715
Short-term		1,194		—		—		—		1,194		—

Total temporarily impaired securities	$	228,442	$	7,551	$	455,626	$	70,164	$	684,068	$	77,715

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

The following table details amounts included in net realized (losses) gains and other-than-temporary impairments included in earnings for the affected periods:


	Successor Ambac – Three Months Ended September 30, 2013			Predecessor Ambac – Three Months Ended September 30, 2012
Gross realized gains on securities	$	3,906		$	3,492
Gross realized losses on securities		(7,239	)		(72	)
Foreign exchange losses		(6,977	)		(258	)

Net realized (losses) gains	$	(10,310	)	$	3,162

Net other-than-temporary impairments⁽¹⁾	$	(38,037	)	$	(354	)


	Successor Ambac – Five Months Ended September 30, 2013			Predecessor Ambac – Four Months Ended April 30, 2013			Predecessor Ambac – Nine Months Ended September 30, 2012
Gross realized gains on securities	$	20,518		$	47,448		$	71,997
Gross realized losses on securities		(8,831	)		(320	)		(963	)
Foreign exchange (losses) gains		(3,525	)		6,177			(413	)

Net realized gains	$	8,162		$	53,305		$	70,621

Net other-than-temporary impairments⁽¹⁾	$	(40,039	)	$	(467	)	$	(5,753	)

(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 Losses on Debt Securities for Which Portion of Other-than-Temporary Impairment was Recognized in Other Comprehensive Income

The following table presents a roll-forward of Ambac’s cumulative credit losses on debt securities held as of September 30, 2013 and 2012 for which a portion of an other-than-temporary impairment was recognized in other comprehensive income:


	Credit Impairment
Successor Ambac:
Balance as of May 1, 2013	$	—
Additions for credit impairments recognized on:
Securities not previously impaired		1,032
Securities previously impaired		—
Reductions for credit impairments previously recognized on:
Securities that matured or were sold during the period		(3	)
Securities that no longer have a portion of other-than-temporary impairment in other comprehensive income because of the company’s intent to sell such securities		—

Balance as of September 30, 2013	$	1,029


Predecessor Ambac:
Balance as of January 1, 2013	$	183,300
Additions for credit impairments recognized on:
Securities not previously impaired		—
Securities previously impaired		—
Reductions for credit impairments previously recognized on:
Securities that matured or were sold during the period ⁽¹⁾		(183,300	)

Balance as of April 30, 2013	$	—


	Credit Impairment
Predecessor Ambac:
Balance as of January 1, 2012	$	201,317
Additions for credit impairments recognized on:
Securities not previously impaired		820
Securities previously impaired		4,933
Reductions for credit impairments previously recognized on:
Securities that matured or were sold during the period		(24,007	)

Balance as of September 30, 2012	$	183,063

(1)

Includes reduction made in connection with Fresh Start, under which the cost basis of all invested assets have been set to fair value as of the Fresh Start Reporting Date of April 30, 2013. As described in Note 2, adopting Fresh Start results in a new reporting entity with no beginning retained earnings or accumulated deficit. Therefore cumulative credit impairments for Successor Ambac on May 1, 2013 are $0.

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 the collateral or collateral held directly in the investment portfolio and (ii) how that collateral was pledged to various investment agreement, derivative and repurchase agreement counterparties at September 30, 2013 and December 31, 2012:


	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
Successor Ambac – September 30, 2013:
Sources of Collateral:
Cash and securities pledged directly from the investment portfolio	$	513,285	$	373,012	$	140,273
Cash and securities pledged from derivative counterparties		—		—		—

Predecessor Ambac – December 31, 2012:
Sources of Collateral:
Cash and securities pledged directly from the investment portfolio	$	646,663	$	375,412	$	271,251
Cash and securities pledged from derivative counterparties		—		—		—

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, including the value of the financial guarantee, and weighted-average underlying rating, excluding the financial guarantee, of the insured securities at September 30, 2013 and December 31, 2012, respectively:


	Municipal obligations		Corporate obligations		Mortgage and asset- backed securities		Short-term		Total		Weighted Average Underlying Rating⁽¹⁾
Successor Ambac – September 30, 2013:
Ambac Assurance Corporation ⁽²⁾	$	66,324	$	—	$	1,713,578	$	—	$	1,779,902		CCC+
National Public Finance Guarantee Corporation		543,112		39,247		—		—		582,359		AA-
Assured Guaranty Municipal Corporation		406,181		168,195		—		—		574,376		A
MBIA Insurance Corporation		—		18,418		—		—		18,418		BBB-
Assured Guaranty Corporation		—		—		16,775		—		16,775		D
Financial Guarantee Insurance Corporation		—		—		2,988		—		2,988		D

Total	$	1,015,617	$	225,860	$	1,733,341	$	—	$	2,974,818		BB


Predecessor Ambac – December 31, 2012:
Ambac Assurance Corporation ⁽²⁾	$	66,270	$	4,717	$	1,344,289	$	—	$	1,415,276		B
National Public Finance Guarantee Corporation		720,904		43,010		—		—		763,914		AA-
Assured Guaranty Municipal Corporation		448,241		169,245		4,923		—		622,409		A
MBIA Insurance Corporation		—		19,733		2,143		—		21,876		BBB-
Assured Guaranty Corporation		—		—		14,743		—		14,743		D
Financial Guarantee Insurance Corporation		17,599		—		4,182		—		21,781		A-

Total	$	1,253,014	$	236,705	$	1,370,280	$	—	$	2,859,999		BBB-

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

(2)	Includes asset-backed securities with a fair value of $51,714 and $45,630 at September 30, 2013 and December 31, 2012, respectively, insured by Ambac UK.

Summary of Net Investment Income

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


	Successor Ambac – Three Months Ended September 30, 2013			Predecessor Ambac – Three Months Ended September 30, 2012
Fixed income securities	$	53,301		$	85,364
Short-term investments		626			431
Loans		109			137
Investment expense		(2,260	)		(1,854	)

Securities available-for-sale and short-term		51,776			84,078
Other investments		350			—

Total net investment income	$	52,126		$	84,078


	Successor Ambac – Five Months Ended September 30, 2013			Predecessor Ambac – Four Months Ended April 30, 2013			Predecessor Ambac – Nine Months Ended September 30, 2012
Fixed income securities	$	83,732		$	118,097		$	292,483
Short-term investments		788			677			1,188
Loans		193			146			558
Investment expense		(3,726	)		(2,549	)		(4,198	)

Securities available-for-sale and short-term		80,987			116,371			290,031
Other investments		(2,665	)		369			—

Total net investment income	$	78,322		$	116,740		$	290,031

- Definition

Tabular disclosure of available-for-sale securities which includes, but is not limited to, changes in the cost basis and fair value, fair value and gross unrealized gain (loss), fair values by type of security, contractual maturity and classification, amortized cost basis, contracts to acquire securities to be accounted for as available-for-sale, debt maturities, transfers to trading, change in net unrealized holding gain (loss) net of tax, continuous unrealized loss position fair value, aggregate losses qualitative disclosures, other than temporary impairment (OTTI) losses or other disclosures related to available for sale securities.

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- Definition

Tabular disclosure of the realized and unrealized gains and losses reported in the statement of income which have resulted from the sale and holding of marketable securities, respectively, as well as the sale or disposal of cost method investments. Such amounts would include realized gains and losses on the sale or disposal of trading, available-for-sale, and held-to-maturity securities, unrealized gains and losses on trading securities, unrealized gains and losses on available-for-sale and held-to-maturity securities transferred to the trading securities category, realized gains and losses on the sale or disposal of cost method investments, and losses recognized for other than temporary impairments (OTTI) of such investments.

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- Definition

Tabular disclosure of investment income, including, but not limited to, interest and dividend income and amortization of discount (premium) derived from debt and equity securities. Excludes realized and unrealized gain (loss) on investments.

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- Definition

Tabular disclosure of the amount of other than temporary impairment (OTTI) related to credit losses recognized in earnings including: (a) the beginning balance of the amount related to credit losses on debt securities held by the investor at the beginning of the period for which a portion of an OTTI was recognized in other comprehensive income; (b) additions for the amount related to the credit loss for which an OTTI was not previously recognized; (c) reductions for securities sold during the period (realized); (d) reductions for securities for which the amount previously recognized in other comprehensive income was recognized in earnings because the investor intends to sell the security or more likely than not will be required to sell the security before recovery of its amortized cost basis; (e) additional increases to the amount related to the credit loss for which an OTTI was previously recognized when the investor does not intend to sell the security and it is not more likely than not that the investor will be required to sell the security before recovery of its amortized cost basis; (f) reductions for increases in cash flows expected to be collected that are recognized over the remaining life of the security; and (g) the ending balance of the amount related to credit losses on debt securities held by the entity at the end of the period for which a portion of an OTTI was recognized in other comprehensive income.

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