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Investments | 9 Months Ended
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Sep. 30, 2011
Investments [Abstract] |
Investments | (9) Investments ASC Topic 320, Investment – Debt and Equity Securities requires that all debt instruments and certain equity instruments be classified in Ambac's Consolidated Balance Sheets according to their purpose and, depending on that classification, be carried at either cost or fair market value. Ambac's investment portfolio is accounted for on a trade-date basis and consists primarily of investments in fixed income securities that are considered available-for-sale as defined by ASC Topic 320. Available-for-sale securities are reported in the financial statements at fair value with unrealized gains and losses, net of deferred taxes, reflected in Accumulated Other Comprehensive Income in Stockholders' Equity and are computed using amortized cost as the basis. Fair value is based primarily on quotes obtained from independent market sources. When quotes are not available, valuation models are used to estimate fair value. These models include estimates, made by management, which utilize current market information. The quotes received or modeled valuations could differ materially from amounts that would actually be realized in the market. For purposes of computing amortized cost, premiums and discounts are accounted for using the effective interest method over the remaining term of the securities. For securities that are not structured securities with a large underlying pool of homogenous loans, such as typical corporate and municipal bonds, premiums and discounts are amortized or accreted over the remaining term of the securities even if they are callable. Premiums and discounts on mortgage-backed and asset-backed securities are adjusted for the effects of actual and anticipated prepayments on a retrospective basis. Realized gains and losses on the sale of investments are determined on the basis of specific identification. VIE investments in fixed income securities are carried at fair value under the fair value option in accordance with ASC Topic 825. For additional information about VIE investments, including fair value by asset-type, see Note 4. The amortized cost and estimated fair value of investments, excluding VIE investments, at September 30, 2011 and December 31, 2010 were as follows:
|  | Amortized Cost |  |  | Gross Unrealized Gains |  |  | Gross Unrealized Losses |  |  | Estimated Fair Value |  |  | Non-credit other- than-temporary Impairments(1) |
September 30, 2011 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Fixed income securities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Municipal obligations |  | $ | 1,868,082 |  |  | $ | 130,920 |  |  | $ | 663 |  |  | $ | 1,998,339 |  |  | $ | — |
Corporate obligations |  |  | 1,077,036 |  |  |  | 61,056 |  |  |  | 20,394 |  |  |  | 1,117,698 |  |  |  | — |
Foreign obligations |  |  | 90,469 |  |  |  | 4,988 |  |  |  | — |  |  |  | 95,457 |  |  |  | — |
U.S. government obligations |  |  | 116,266 |  |  |  | 3,762 |  |  |  | 13 |  |  |  | 120,015 |  |  |  | — |
U.S. agency obligations |  |  | 81,282 |  |  |  | 6,529 |  |  |  | — |  |  |  | 87,811 |  |  |  | — |
Residential mortgage-backed securities |  |  | 1,204,670 |  |  |  | 366,620 |  |  |  | 60,019 |  |  |  | 1,511,271 |  |  |  | 9,236 |
Collateralized debt obligations |  |  | 49,964 |  |  |  | 54 |  |  |  | 3,031 |  |  |  | 46,987 |  |  |  | — |
Other asset-backed securities |  |  | 991,568 |  |  |  | 61,732 |  |  |  | 53,937 |  |  |  | 999,363 |  |  |  | — |
Short-term |  |  | 824,118 |  |  |  | 8 |  |  |  | — |  |  |  | 824,126 |  |  |  | — |
Other |  |  | 100 |  |  |  | — |  |  |  | — |  |  |  | 100 |  |  |  | — |
|  |  | 6,303,555 |  |  |  | 635,669 |  |  |  | 138,057 |  |  |  | 6,801,167 |  |  |  | 9,236 |
Fixed income securities pledged as collateral: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
U.S. government obligations |  |  | 255,135 |  |  |  | 1,885 |  |  |  | 317 |  |  |  | 256,703 |  |  |  | — |
Residential mortgage-backed securities |  |  | 4,991 |  |  |  | 338 |  |  |  | — |  |  |  | 5,329 |  |  |  | — |
Total collateralized investments |  |  | 260,126 |  |  |  | 2,223 |  |  |  | 317 |  |  |  | 262,032 |  |  |  | — |
Total investments |  | $ | 6,563,681 |  |  | $ | 637,892 |  |  | $ | 138,374 |  |  | $ | 7,063,199 |  |  | $ | 9,236 |
December 31, 2010 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Fixed income securities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Municipal obligations |  | $ | 1,878,857 |  |  | $ | 54,093 |  |  | $ | 11,614 |  |  | $ | 1,921,336 |  |  | $ | — |
Corporate obligations |  |  | 897,670 |  |  |  | 44,015 |  |  |  | 23,777 |  |  |  | 917,908 |  |  |  | — |
Foreign obligations |  |  | 113,127 |  |  |  | 5,328 |  |  |  | — |  |  |  | 118,455 |  |  |  | — |
U.S. government obligations |  |  | 153,609 |  |  |  | 3,299 |  |  |  | 35 |  |  |  | 156,873 |  |  |  | — |
U.S. agency obligations |  |  | 81,696 |  |  |  | 6,598 |  |  |  | — |  |  |  | 88,294 |  |  |  | — |
Residential mortgage-backed securities |  |  | 1,239,107 |  |  |  | 300,302 |  |  |  | 40,717 |  |  |  | 1,498,692 |  |  |  | 1,111 |
Collateralized debt obligations |  |  | 40,997 |  |  |  | 391 |  |  |  | 9,132 |  |  |  | 32,256 |  |  |  | — |
Other asset-backed securities |  |  | 1,019,894 |  |  |  | 28,274 |  |  |  | 43,857 |  |  |  | 1,004,311 |  |  |  | — |
Short-term |  |  | 991,567 |  |  |  | — |  |  |  | — |  |  |  | 991,567 |  |  |  | — |
Other |  |  | 100 |  |  |  | — |  |  |  | — |  |  |  | 100 |  |  |  | — |
|  |  | 6,416,624 |  |  |  | 442,300 |  |  |  | 129,132 |  |  |  | 6,729,792 |  |  |  | 1,111 |
Fixed income securities pledged as collateral: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
U.S. government obligations |  |  | 113,232 |  |  |  | 2,170 |  |  |  | — |  |  |  | 115,402 |  |  |  | — |
Residential mortgage-backed securities |  |  | 7,686 |  |  |  | 431 |  |  |  | — |  |  |  | 8,117 |  |  |  | — |
Total collateralized investments |  |  | 120,918 |  |  |  | 2,601 |  |  |  | — |  |  |  | 123,519 |  |  |  | — |
Total investments |  | $ | 6,537,542 |  |  | $ | 444,901 |  |  | $ | 129,132 |  |  | $ | 6,853,311 |  |  | $ | 1,111 |
(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, 2011 and December 31, 2010.
Foreign obligations at September 30, 2011 and December 31, 2010 consist primarily of government issued securities which are denominated in Pounds Sterling and held by Ambac Assurance UK, Limited. The amortized cost and estimated fair value of investments, excluding VIE investments, at September 30, 2011, by contractual maturity, were as follows:
|  | Amortized Cost |  |  | Estimated Fair Value |
Due in one year or less |  | $ | 586,237 |  |  | $ | 588,523 |
Due after one year through five years |  |  | 903,956 |  |  |  | 939,105 |
Due after five years through ten years |  |  | 1,076,104 |  |  |  | 1,136,676 |
Due after ten years |  |  | 1,746,191 |  |  |  | 1,835,945 |
|  |  | 4,312,488 |  |  |  | 4,500,249 |
Residential mortgage-backed securities |  |  | 1,209,661 |  |  |  | 1,516,600 |
Collateralized debt obligations |  |  | 49,964 |  |  |  | 46,987 |
Other asset-backed securities |  |  | 991,568 |  |  |  | 999,363 |
|  | $ | 6,563,681 |  |  | $ | 7,063,199 |
Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. Unrealized Losses: 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, 2011 and December 31, 2010:
|  | 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, 2011: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Fixed income securities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Municipal obligations. |  | $ | 9,210 |  |  | $ | 345 |  |  | $ | 14,498 |  |  | $ | 318 |  |  | $ | 23,708 |  |  | $ | 663 |
Corporate obligations |  |  | 137,536 |  |  |  | 4,765 |  |  |  | 198,921 |  |  |  | 15,629 |  |  |  | 336,457 |  |  |  | 20,394 |
U.S. government obligations |  |  | 133,313 |  |  |  | 330 |  |  |  | — |  |  |  | — |  |  |  | 133,313 |  |  |  | 330 |
Residential mortgage-backed securities |  |  | 213,400 |  |  |  | 14,847 |  |  |  | 105,517 |  |  |  | 45,172 |  |  |  | 318,917 |  |  |  | 60,019 |
Collateralized debt obligations |  |  | 33,693 |  |  |  | 910 |  |  |  | 12,664 |  |  |  | 2,121 |  |  |  | 46,357 |  |  |  | 3,031 |
Other asset-backed securities |  |  | 158,853 |  |  |  | 8,443 |  |  |  | 248,614 |  |  |  | 45,494 |  |  |  | 407,467 |  |  |  | 53,937 |
Total temporarily impaired securities |  | $ | 686,005 |  |  | $ | 29,640 |  |  | $ | 580,214 |  |  | $ | 108,734 |  |  | $ | 1,266,219 |  |  | $ | 138,374 |
December 31, 2010: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Fixed income securities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Municipal obligations. |  | $ | 281,760 |  |  | $ | 7,633 |  |  | $ | 33,946 |  |  | $ | 3,981 |  |  | $ | 315,706 |  |  | $ | 11,614 |
Corporate obligations |  |  | 51,806 |  |  |  | 1,691 |  |  |  | 212,417 |  |  |  | 22,086 |  |  |  | 264,223 |  |  |  | 23,777 |
U.S. government obligations |  |  | 4,981 |  |  |  | 35 |  |  |  | — |  |  |  | — |  |  |  | 4,981 |  |  |  | 35 |
Residential mortgage-backed securities |  |  | 22,180 |  |  |  | 537 |  |  |  | 127,782 |  |  |  | 40,180 |  |  |  | 149,962 |  |  |  | 40,717 |
Collateralized debt obligations |  |  | — |  |  |  | — |  |  |  | 30,433 |  |  |  | 9,132 |  |  |  | 30,433 |  |  |  | 9,132 |
Other asset-backed securities |  |  | 101,950 |  |  |  | 1,515 |  |  |  | 440,731 |  |  |  | 42,342 |  |  |  | 542,681 |  |  |  | 43,857 |
Total temporarily impaired securities |  | $ | 462,677 |  |  | $ | 11,411 |  |  | $ | 845,309 |  |  | $ | 117,721 |  |  | $ | 1,307,986 |  |  | $ | 129,132 |
Ambac has a formal impairment review process for all securities in its investment portfolio. Ambac conducts a review each quarter to identify and evaluate investments that have indications of possible impairment that is other than temporary in accordance with ASC Topic 320. Factors considered when assessing impairment include: (i) fair values that have declined by 20% or more below amortized cost; (ii) market values that have declined by 5% or more but less than 20% below amortized cost for a continuous period of at least six months; (iii) recent downgrades by rating agencies; (iv) the financial condition of the issuer and financial guarantor, as applicable, and an analysis of projected defaults on the underlying collateral; (v) whether scheduled interest payments are past due; and (vi) whether Ambac has the ability and intent to hold the security for a sufficient period of time to allow for anticipated recoveries in fair value. If we believe a decline in the fair value of a particular investment is temporary, we record the decline as an unrealized loss net of tax in Accumulated Other Comprehensive Income in Stockholders' Equity on our Consolidated Balance Sheets. If management either: (i) has the intent to sell its investment in a debt security or (ii) determines that the Company more likely than not will be required to sell the debt security before its anticipated recovery of the amortized cost basis less any current period credit impairment, then an other-than-temporary impairment charge must be recognized in earnings, with the amortized cost of the security being written-down to fair value. If these conditions are not met, but it is determined that a credit loss exists, the credit impairment loss is recognized in earnings, and the other-than-temporary amount related to all other factors is recognized in other comprehensive income. For fixed income securities that have other-than-temporary impairments in a period, the previous amortized cost of the security less the amount of the other-than-temporary impairment recorded through earnings, becomes the investment's new cost basis. Ambac accretes the new cost basis to par or to the estimated future cash flows to be recovered over the expected remaining life of the security using the effective interest rate of the security prior to impairment. Management has determined that the unrealized losses reflected in the table above are temporary in nature as of September 30, 2011 and December 31, 2010 based upon (i) no unexpected principal and interest payment defaults on these securities; (ii) analysis of the creditworthiness of the issuer and financial guarantor, as applicable, and analysis of projected defaults on the underlying collateral; (iii) management has no intent to sell these investments in debt securities; and (iv) it is not more likely than not that Ambac will be required to sell these debt securities before the anticipated recovery of its amortized cost basis. The assessment under (iv) is based on a comparison of future available liquidity from the fixed income investment portfolio against the projected net cash outflow from operating activities and debt service. For purposes of this assessment, available liquidity from the fixed income investment portfolio is comprised of the fair value of securities for which management has asserted its intent to sell plus the scheduled maturities and interest payments from the remaining securities in the portfolio. To the extent that securities that management intends to sell are in an unrealized loss position, they would have already been considered other-than-temporarily impaired with the amortized cost written down to fair value. As of September 30, 2011 and December 31, 2010, management has not asserted an intent to sell any securities in an unrealized loss position from its portfolio. Because the above-described assessment indicates that future available liquidity exceeds projected net cash outflow, it is not more likely than not that we would be required to sell securities before the recovery of their amortized cost basis. In the liquidity assessment described above, principal payments on securities pledged as collateral are not considered to be available for other liquidity needs until the collateralized positions are projected to be settled. Projected interest receipts on securities pledged as collateral generally belong to Ambac and are considered to be sources of available liquidity from the investment portfolio. As of September 30, 2011 and December 31, 2010, for securities that have indications of possible other-than-temporary impairment but which management does not intend to sell and will not more likely than not be required to sell, management compared the present value of cash flows expected to be collected to the amortized cost basis of the securities to assess whether the amortized cost will be recovered. Cash flows were discounted at the effective interest rate implicit in the security at the date of acquisition or for debt securities that are beneficial interests in securitized financial assets, at a rate equal to the current yield used to accrete the beneficial interest. For floating rate securities, future cash flows and the discount rate used were both adjusted to reflect changes in the index rate applicable to each security as of the evaluation date. Of the securities that were in a gross unrealized loss position at September 30, 2011, $293,232 of the total fair value and $48,998 of the unrealized loss related to below investment grade securities and non-rated securities. Of the securities that were in a gross unrealized loss position at December 31, 2010, $110,120 of the total fair value and $31,521 of the unrealized loss related to below investment grade securities and non-rated securities. Corporate obligations: The decrease in gross unrealized losses on corporate obligations during the nine months ended September 30, 2011, is primarily the result of a decrease in credit spreads on life insurers. Of the $15,628 of unrealized losses on corporate obligations greater than 12 months, one security comprises $7,277 of the total. This security, which was purchased in multiple lots, is a closed-block life insurance issuance that is insured by Assured Guaranty Municipal Corporation, has been in an unrealized loss position for 26-45 months. The unrealized loss on this security is the result of general credit spread widening on life insurers and on Assured Guaranty since the date of purchase. Given the insured Moody's rating of Aa3 and investment grade underlying rating, management believes that timely receipt of all principal and interest is probable. Residential mortgage-backed securities: The gross unrealized loss on mortgage-backed securities as of September 30, 2011 is primarily related to Alt-A residential mortgage-backed securities. Of the $45,172 of unrealized losses on mortgage-backed securities for greater than 12 months, $45,151 or 99.95% is attributable to 16 individual Alt-A securities. These individual securities have been in an unrealized loss position for 45 months. Each of these Alt-A securities have very similar characteristics such as vintage of the underlying collateral (2004-2007) and placement in the structure (generally class-A tranche rated triple-A at issuance). The significant declines in fair value relate to the actual and potential effects of declining U.S. housing prices, recent recession and weak economic conditions in general on the performance of collateral underlying residential mortgage backed securities. This has been reflected in decreased liquidity for RMBS securities and increased risk premiums demanded by investors resulting in a required return on investment that is significantly higher than at the time the securities were purchased. As part of the quarterly impairment review process, management estimates expected future cash flows from residential mortgage backed securities, considering the likelihood of a wide dispersion of possible outcomes to develop cash flow scenarios. Management has contracted consultants to model each of the securities in our portfolio. This approach includes the utilization of market accepted software tools in conjunction with detailed data of the historical performance of the collateral pools, which assists in the determination of assumptions such as defaults, severity and voluntary prepayment rates that are largely driven by home price forecasts as well as other macro-economic factors. These assumptions are used to project various future cash flow scenarios for each security. The expected future cash flows used to assess impairment are derived by probability-weighting the various cash flow scenarios. Management considered this analysis in making our determination that non-receipt of contractual cash flows is not probable on these transactions. Other asset-backed securities: The increase in gross unrealized losses on other asset-backed securities during the nine months ended September 30, 2011 is the result of overall risk aversion in the market due to economic uncertainty in the United States and abroad, as well as a flight to higher quality, more liquid investments. As part of the quarterly impairment review process, management monitors each deal's performance metrics and other available qualitative and fundamental information in developing an analytical opinion. Ambac determined that there is sufficient credit enhancement to mitigate current market stresses. Management believes that the timely receipt of all principal and interest from other asset-backed securities is probable. Realized Gains and Losses and Other-Than-Temporary Impairments: The following table details amounts included in net realized investment gains (losses) and other-than-temporary impairments included in earnings for the three and nine months ended September 30, 2011 and 2010:
|  | Three-months ended September 30, |  |  | Nine-months ended September 30, |
|  | 2011 |  |  | 2010 |  |  | 2011 |  |  | 2010 |
Gross realized gains on securities |  | $ | 4,085 |  |  | $ | 1,407 |  |  | $ | 8,340 |  |  | $ | 154,060 |
Gross realized losses on securities |  |  | (495 | ) |  |  | (631 | ) |  |  | (4,844 | ) |  |  | (86,501 | )
Net gains on investment agreement terminations |  |  | — |  |  |  | — |  |  |  | 3,119 |  |  |  | 73,516 |
Foreign exchange gains |  |  | 1,494 |  |  |  | 1,220 |  |  |  | 1,510 |  |  |  | 1,583 |
Net realized gains excluding other-than-temporary impairments |  |  | 5,084 |  |  |  | 1,996 |  |  |  | 8,125 |  |  |  | 142,658 |
Net other-than-temporary impairments(1) |  |  | (10,887 | ) |  |  | (6,584 | ) |  |  | (30,178 | ) |  |  | (48,499 | )
Gain on extinguishment of debt |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 10,693 |
Total net realized (losses) gains and other-than-temporary impairments included in earnings |  | $ | (5,803 | ) |  | $ | (4,588 | ) |  | $ | (22,053 | ) |  | $ | 104,852 |
(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.
Other-than-temporary impairment charges to earnings were $10,887 and $30,178 for the three and nine months ended September 30, 2011, respectively. These losses primarily resulted from adverse changes to projected cash flows on securities guaranteed by Ambac Assurance. As further described in Note 1, on March 24, 2010, the OCI commenced Segregated Account Rehabilitation Proceedings in order to permit the OCI to facilitate an orderly run-off and/or settlement of the liabilities allocated to the Segregated Account. As a result of actions taken by OCI, financial guarantee payments on securities guaranteed by Ambac Assurance which have been allocated to the Segregated Account were suspended in March 2010 and are no longer under the control of Ambac management. Claim payments under Segregated Account policies have remained suspended throughout the first nine months of 2011. Further, changes in the estimated effective date of the Segregated Account Rehabilitation Plan and resumption of claim payments thereunder have resulted in adverse changes in projected cash flows on certain impaired Ambac-wrapped securities during the three and nine months ended September 30, 2011. Other-than-temporary impairment charges were $6,584 and $48,499 for the three and nine months ended September 30, 2010, respectively. Charges in 2010 included $6,584 and $31,352 for the three and nine months ended September 30, respectively, related to credit losses on securities guaranteed by Ambac Assurance arising from the impact of the Segregated Account Rehabilitation Plan on projected cash flows. Additionally, other-than-temporary impairment charges of $0 and $17,147 for the three and nine months ended September 30, 2010, respectively, related to securities that management intended to sell primarily to meet liquidity needs at that time. As of September 30, 2011, management has not asserted an intent to sell any securities in an unrealized loss position from its portfolio. Future changes in our estimated liquidity needs could result in a determination that Ambac no longer has the ability to hold such securities, which could result in additional other-than-temporary impairment charges. 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, 2011:
|  | Credit Impairment |
Balance as of January 1, 2011 |  | $ | 139,766 |
Additions for credit impairments recognized on(1): |  |  |  |
Securities not previously impaired |  |  | 27,123 |
Securities previously impaired |  |  | 3,055 |
Reductions for credit impairments previously recognized on: |  |  |  |
Securities that matured or were sold during the period |  |  | — |
Balance as of September 30, 2011 |  | $ | 169,944 |
(1) | These additions are included in the Financial Guarantee and Financial Services net other-than-temporary impairment losses recognized in earnings of $29,361 and $817 in the Consolidated Statements of Operations.
Collateral and Deposits with Regulators: Ambac routinely pledges and receives collateral related to certain business lines and/or transactions. The following is a description of those arrangements by collateral source:
| (1) | Cash and securities held in Ambac's investment portfolio – Ambac pledges assets it holds in its investment portfolio to investment and payment agreement counterparties, and derivative counterparties. Securities pledged to investment agreement counterparties may not then be re-pledged to another entity. Ambac's counterparties under derivative agreements have the right to pledge or rehypothecate the securities and as such, pledged securities are separately classified on the Consolidated Balance Sheets as "Fixed income securities pledged as collateral, at fair value".
| (2) | Cash and securities pledged to Ambac under derivative agreements – Ambac may re-pledge securities it holds from certain derivative counterparties to other derivative counterparties in accordance with its rights and obligations under those agreements.
The following table presents (i) the sources of collateral either received from various counterparties where Ambac is permitted to sell or re-pledge or directly held in the investment portfolio and (ii) how that collateral was pledged to various investment agreement, derivative and repurchase agreement counterparties at September 30, 2011 and December 31, 2010:
|  | 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 2011: |  |  |  |  |  |  |  |  |  |  |  |
Sources of Collateral: |  |  |  |  |  |  |  |  |  |  |  |
Cash and securities pledged directly from the investment portfolio |  | $ | 919,526 |  |  | $ | 602,674 |  |  | $ | 316,852 |
Cash and securities pledged from its derivative counterparties |  |  | — |  |  |  | — |  |  |  | — |
December 31, 2010: |  |  |  |  |  |  |  |  |  |  |  |
Sources of Collateral: |  |  |  |  |  |  |  |  |  |  |  |
Cash and securities pledged directly from the investment portfolio |  | $ | 962,919 |  |  | $ | 846,124 |  |  | $ | 116,795 |
Cash and securities pledged from its derivative counterparties |  |  | 7,005 |  |  |  | — |  |  |  | 7,005 |
Securities carried at $7,142 and $6,947 at September 30, 2011 and December 31, 2010, respectively, were deposited by Ambac Assurance and Everspan with governmental authorities or designated custodian banks as required by laws affecting insurance companies.

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- Definition Tabular disclosure of investments in certain debt and equity securities (and certain other trading assets) which include all debt and equity securities (other than those equity securities accounted for under the equity or cost methods of accounting) with readily determinable fair values. Other trading assets include assets that are carried on the balance sheet at fair value and held for trading purposes. A debt security represents a creditor relationship with an enterprise that is in the form of a security. Debt securities include, among other items, US Treasury securities, US government securities, municipal securities, corporate bonds, convertible debt, commercial paper, and all securitized debt instruments. An equity security represents an ownership interest in an enterprise or the right to acquire or dispose of an ownership interest in an enterprise at fixed or determinable prices. Equity securities include, among other things, common stock, certain preferred stock, warrant rights, call options, and put options, but do not include convertible debt. An entity may opt to provide the reader with additional narrative text to better understand the nature of investments in debt and equity securities (and other trading assets). + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 320 -SubTopic 10 -Section 50 -Paragraph 10 -URI http://asc.fasb.org/extlink&oid=6872113&loc=d3e27405-111563 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 310 -SubTopic 30 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=6379141&loc=d3e15032-111544 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Glossary Equity Security -URI http://asc.fasb.org/extlink&oid=6511694 -Topic 320 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 320 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=6872113&loc=d3e27161-111563 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Glossary Debt Security -URI http://asc.fasb.org/extlink&oid=6509901 -Topic 320 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 115 -Paragraph 3, 19, 20, 21, 22, 137 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 7: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 320 -SubTopic 10 -Section 50 -Paragraph 5 -URI http://asc.fasb.org/extlink&oid=6872113&loc=d3e27232-111563 Reference 8: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 320 -SubTopic 10 -Section 50 -Paragraph 9 -URI http://asc.fasb.org/extlink&oid=6872113&loc=d3e27357-111563 Reference 9: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 942 -SubTopic 320 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=6957658&loc=d3e62557-112803 Reference 10: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 320 -SubTopic 10 -Section 50 -Paragraph 6 -URI http://asc.fasb.org/extlink&oid=6872113&loc=d3e27290-111563 + Details
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