Investments (Tables)

9 Months Ended

Sep. 30, 2016

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, 2016 and December 31, 2015 were as follows:



	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value		Non-credit other-than temporary Impairments ⁽¹⁾
September 30, 2016:
Fixed income securities:
Municipal obligations	$	389,573	$	14,700	$	4,751	$	399,522	$	—
Corporate obligations	1,821,981		52,436		1,661		1,872,756		—
Foreign obligations	53,431		3,498		6		56,923		—
U.S. government obligations	30,638		2,810		23		33,425		—
U.S. agency obligations	4,108		—		2		4,106		—
Residential mortgage-backed securities	2,323,156		109,663		45,288		2,387,531		35,594
Collateralized debt obligations	106,582		521		259		106,844		—
Other asset-backed securities	1,077,480		52,477		667		1,129,290		—
	5,806,949		236,105		52,657		5,990,397		35,594
Short-term	130,732		—		—		130,732		—
	5,937,681		236,105		52,657		6,121,129		35,594
Fixed income securities pledged as collateral:
U.S. government obligations	64,777		195		—		64,972		—
Total collateralized investments	64,777		195		—		64,972		—
Total available-for-sale investments	$	6,002,458	$	236,300	$	52,657	$	6,186,101	$	35,594

December 31, 2015:
Fixed income securities:
Municipal obligations	$	424,048	$	4,910	$	8,188	$	420,770	$	—
Corporate obligations	1,610,912		7,089		24,332		1,593,669		—
Foreign obligations	96,638		1,491		1,823		96,306		—
U.S. government obligations	26,086		789		188		26,687		—
U.S. agency obligations	4,239		—		27		4,212		—
Residential mortgage-backed securities	1,942,285		99,670		64,617		1,977,338		41,673
Collateralized debt obligations	85,706		42		1,481		84,267		—
Other asset-backed securities	802,842		41,177		3,492		840,527		—
	4,992,756		155,168		104,148		5,043,776		41,673
Short-term	225,789		1		1		225,789		—
	5,218,545		155,169		104,149		5,269,565		41,673
Fixed income securities pledged as collateral:
U.S. government obligations	64,612		—		57		64,555		—
Total collateralized investments	64,612		—		57		64,555		—
Total available-for-sale investments	$	5,283,157	$	155,169	$	104,206	$	5,334,120	$	41,673


(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, 2016 and December 31, 2015.

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, 2016, by contractual maturity, were as follows:



	Amortized Cost		Estimated Fair Value
Due in one year or less	$	201,230	$	201,995
Due after one year through five years	1,204,340		1,228,927
Due after five years through ten years	909,093		940,582
Due after ten years	180,577		190,932
	2,495,240		2,562,436
Residential mortgage-backed securities	2,323,156		2,387,531
Collateralized debt obligations	106,582		106,844
Other asset-backed securities	1,077,480		1,129,290
Total	$	6,002,458	$	6,186,101

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, 2016 and December 31, 2015:



	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, 2016:
Fixed income securities:
Municipal obligations	$	35,192	$	1,410	$	103,482	$	3,341	$	138,674	$	4,751
Corporate obligations	201,291		1,611		9,937		50		211,228		1,661
Foreign obligations	2,604		6		—		—		2,604		6
U.S. government obligations	1,883		18		5,070		5		6,953		23
U.S. agency obligations	—		—		4,106		2		4,106		2
Residential mortgage-backed securities	388,104		10,199		517,756		35,089		905,860		45,288
Collateralized debt obligations	7,409		26		29,459		233		36,868		259
Other asset-backed securities	354,221		641		25,813		26		380,034		667
	990,704		13,911		695,623		38,746		1,686,327		52,657
Short-term	—		—		—		—		—		—
	990,704		13,911		695,623		38,746		1,686,327		52,657
Fixed income securities, pledged as collateral:
U. S. government obligations	—		—		—		—		—		—
Total collateralized investments	—		—		—		—		—		—
Total temporarily impaired securities	$	990,704	$	13,911	$	695,623	$	38,746	$	1,686,327	$	52,657



	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, 2015:
Fixed income securities:
Municipal obligations	$	117,008	$	2,070	$	114,708	$	6,118	$	231,716	$	8,188
Corporate obligations	938,916		21,331		92,581		3,001		1,031,497		24,332
Foreign obligations	34,904		1,018		8,584		805		43,488		1,823
U.S. government obligations	2,938		18		10,658		170		13,596		188
U.S. agency obligations	—		—		4,212		27		4,212		27
Residential mortgage-backed securities	584,699		53,367		213,303		11,250		798,002		64,617
Collateralized debt obligations	77,538		1,481		—		—		77,538		1,481
Other asset-backed securities	450,690		3,456		19,274		36		469,964		3,492
	2,206,693		82,741		463,320		21,407		2,670,013		104,148
Short-term	9,982		1		—		—		9,982		1
	2,216,675		82,742		463,320		21,407		2,679,995		104,149
Fixed income securities, pledged as collateral:
U. S. government obligations	64,555		57		—		—		64,555		57
Total collateralized investments	64,555		57		—		—		64,555		57
Total temporarily impaired securities	$	2,281,230	$	82,799	$	463,320	$	21,407	$	2,744,550	$	104,206

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

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



	Three Months Ended September 30,						Nine Months Ended September 30,
	2016			2015			2016			2015
Gross realized gains on securities	$	3,912		$	343		$	10,391		$	54,484
Gross realized losses on securities	(561		)	(2,463		)	(4,673		)	(7,431		)
Net foreign exchange gains	8,398			4,226			22,030			3,801
Net realized gains	$	11,749		$	2,106		$	27,748		$	50,854
Net other-than-temporary impairments ⁽¹⁾	$	(2,853	)	$	(9,150	)	$	(19,628	)	$	(13,289	)


(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 Ambac 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, 2016 and 2015 for which a portion of an other-than-temporary impairment was recognized in other comprehensive income:



	Nine Months Ended September 30,
	2016		2015
Balance, beginning of period	$	31,176	$	14,062
Additions for credit impairments recognized on:
Securities not previously impaired	2,257		7,172
Securities previously impaired	16,672		4,059
Balance, end of period	$	50,105	$	25,293

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 agreements, derivative and repurchase agreement counterparties at September 30, 2016 and December 31, 2015:



	Fair Value of Cash and Underlying Securities		Fair Value of Cash and Securities Pledged to Investment Agreement Counterparties		Fair Value of Cash and Securities Pledged to Derivative Counterparties
September 30, 2016:
Sources of Collateral:
Cash and securities pledged directly from the investment portfolio	$	370,964	$	88,933	$	282,031

December 31, 2015:
Sources of Collateral:
Cash and securities pledged directly from the investment portfolio	$	338,007	$	108,379	$	229,628

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, 2016 and December 31, 2015, respectively:



	Municipal obligations		Corporate obligations		Mortgage and asset- backed securities		Total		Weighted Average Underlying Rating ⁽¹⁾
September 30, 2016:
Ambac Assurance Corporation ⁽²⁾	$	90,503	$	—	$	2,772,240	$	2,862,743	CC
National Public Finance Guarantee Corporation	39,561		—		—		39,561		A-
Assured Guaranty Municipal Corporation	29,774		—		—		29,774		AA
MBIA Insurance Corporation	—		23,085		—		23,085		AA-
Total	$	159,838	$	23,085	$	2,772,240	$	2,955,163	CCC-

December 31, 2015:
Ambac Assurance Corporation ⁽²⁾	$	60,836	$	—	$	2,216,317	$	2,277,153	CC
National Public Finance Guarantee Corporation	47,846		—		—		47,846		A-
Assured Guaranty Municipal Corporation	57,715		—		—		57,715		A+
MBIA Insurance Corporation	—		25,645		—		25,645		A+
Total	$	166,397	$	25,645	$	2,216,317	$	2,408,359	CCC-


(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 $120,028 and $119,802 at September 30, 2016 and December 31, 2015, insured by Ambac UK.

Summary of Net Investment Income

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



	Three Months Ended September 30,						Nine Months Ended September 30,
	2016			2015			2016			2015
Fixed income securities	$	81,831		$	67,293		$	207,358		$	197,506
Short-term investments	194			85			1,124			186
Loans	97			113			273			338
Investment expense	(2,592		)	(1,872		)	(6,875		)	(6,801		)
Securities available-for-sale and short-term	79,530			65,619			201,880			191,229
Other investments	11,387			(1,424		)	20,616			10,702
Total net investment income	$	90,917		$	64,195		$	222,496		$	201,931

Net investment income from Other investments primarily represents changes in fair value on securities classified as trading or under the fair value option plus income from Ambac's equity interest in an unconsolidated trust created in connection with its sale of Segregated Account junior surplus notes. The portion of net unrealized gains (losses) related to trading securities still held at the end of each period is as follows:



	Three Months Ended September 30,					Nine Months Ended September 30,
	2016		2015			2016		2015
Net gains (losses) recognized during the period on trading securities	$	10,197	$	(2,549	)	$	17,145	$	7,493
Less: net gains (losses) recognized during the reporting period on trading securities sold during the period	1,859		933			5,268		7,534
Unrealized gains (losses) recognized during the reporting period on trading securities still held at the reporting date	$	8,338	$	(3,482	)	$	11,877	$	(41	)

- 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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