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Investments (Tables)

9 Months Ended

Sep. 30, 2018

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, 2018 and December 31, 2017 were as follows:

		Amortized Cost				Gross Unrealized Gains				Gross Unrealized Losses				Estimated Fair Value				Non-credit Other-than temporary Impairments (1)
September 30, 2018:
Fixed income securities:
Municipal obligations		$	858,255			$	114,008			$	1,799			$	970,464			$	—
Corporate obligations (2)		1,324,241				12,077				16,950				1,319,368				—
Foreign obligations		34,045				220				258				34,007				—
U.S. government obligations		93,574				413				1,780				92,207
Residential mortgage-backed securities		230,473				48,350				48				278,775				—
Collateralized debt obligations		87,642				83				4				87,721				—
Other asset-backed securities		373,202				66,280				723				438,759				—
		3,001,432				241,431				21,562				3,221,301				—
Short-term		562,111				5				56				562,060				—
		3,563,543				241,436				21,618				3,783,361				—
Fixed income securities pledged as collateral:
U.S. government obligations		84,186				—				—				84,186				—
Total fixed income securities pledged as collateral		84,186				—				—				84,186				—
Total available-for-sale investments		$	3,647,729			$	241,436			$	21,618			$	3,867,547			$	—
December 31, 2017:
Fixed income securities:
Municipal obligations		$	845,778			$	3,456			$	69,400			$	779,834			$	—
Corporate obligations		858,774				6,772				5,471				860,075				—
Foreign obligations		26,245				409				111				26,543				—
U.S. government obligations		86,900				261				1,753				85,408				—
Residential mortgage-backed securities		2,214,512				67,303				30,482				2,251,333				23,832
Collateralized debt obligations		50,754				283				—				51,037				—
Other asset-backed securities		531,660				66,899				617				597,942				—
		4,614,623				145,383				107,834				4,652,172				23,832
Short-term		557,476				3				209				557,270				—
		5,172,099				145,386				108,043				5,209,442				23,832
Fixed income securities pledged as collateral:
U.S. government obligations		99,719				—				—				99,719				—
Total fixed income securities pledged as collateral		99,719				—				—				99,719				—
Total available-for-sale investments		$	5,271,818			$	145,386			$	108,043			$	5,309,161			$	23,832

(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, 2018 and December 31, 2017.

(2)

Includes Ambac's holdings of the secured notes issued by Ambac LSNI in connection with the Rehabilitation Exit Transactions.

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, 2018, by contractual maturity, were as follows:

		Amortized Cost				Estimated Fair Value
Due in one year or less		$	724,270			$	723,823
Due after one year through five years		1,139,043				1,142,011
Due after five years through ten years		288,308				283,434
Due after ten years		804,791				913,024
		2,956,412				3,062,292
Residential mortgage-backed securities		230,473				278,775
Collateralized debt obligations		87,642				87,721
Other asset-backed securities		373,202				438,759
Total		$	3,647,729			$	3,867,547

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, excluding VIE investments, aggregated by investment category and length of time that the individual securities have been in a continuous unrealized loss position, at September 30, 2018 and December 31, 2017:

		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, 2018:
Fixed income securities:
Municipal obligations		$	33,030			$	346			$	27,415			$	1,453			$	60,445			$	1,799
Corporate obligations		418,960				11,456				105,164				5,494				524,124				16,950
Foreign obligations		16,769				91				6,332				167				23,101				258
U.S. government obligations		22,855				1,084				52,693				696				75,548				1,780
Residential mortgage-backed securities		1,035				48				—				—				1,035				48
Collateralized debt obligations		2,996				4				—				—				2,996				4
Other asset-backed securities		9,974				25				79,442				698				89,416				723
		505,619				13,054				271,046				8,508				776,665				21,562
Short-term		201,107				56				—				—				201,107				56
Total temporarily impaired securities		$	706,726			$	13,110			$	271,046			$	8,508			$	977,772			$	21,618

		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, 2017:
Fixed income securities:
Municipal obligations		$	667,335			$	68,578			$	32,525			$	822			$	699,860			$	69,400
Corporate obligations		292,028				3,377				87,272				2,094				379,300				5,471
Foreign obligations		8,122				81				1,700				30				9,822				111
U.S. government obligations		74,188				1,653				5,525				100				79,713				1,753
Residential mortgage-backed securities		668,524				12,524				418,617				17,958				1,087,141				30,482
Other asset-backed securities		26,655				58				88,023				559				114,678				617
		1,736,852				86,271				633,662				21,563				2,370,514				107,834
Short-term		251,926				209				—				—				251,926				209
Total temporarily impaired securities		$	1,988,778			$	86,480			$	633,662			$	21,563			$	2,622,440			$	108,043

Summary of Amounts Included in Net Realized (Losses) Gains 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 affected periods:

		Three Months Ended September 30,								Nine Months Ended September 30,
		2018				2017				2018				2017
Gross realized gains on securities		$	30,909			$	14,430			$	83,937			$	25,374
Gross realized losses on securities		(2,171		)		(4,932		)		(5,200		)		(16,160		)
Net foreign exchange (losses) gains		1,463				(3,348		)		3,474				(3,780		)
Net realized gains (losses)		$	30,201			$	6,150			$	82,211			$	5,434
Net other-than-temporary impairments (1)		$	(266	)		$	(13,510	)		$	(1,579	)		$	(19,215	)

(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, 2018 and 2017 for which a portion of an other-than-temporary impairment was recognized in other comprehensive income:

		Nine Months Ended September 30,
		2018				2017
Balance, beginning of period		$	67,085			$	52,070
Additions for credit impairments recognized on:
Securities not previously impaired		226				3,274
Securities previously impaired		97				11,596
Reductions for credit impairments previously recognized on:
Securities that matured or were sold during the period		(53,222		)		—
Balance, end of period		$	14,186			$	66,940

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, 2018 and December 31, 2017, respectively: 

		Municipal Obligations				Corporate Obligations (3)				Mortgage and Asset- backed Securities				Total				Weighted Average Underlying Rating (1)
September 30, 2018:
Ambac Assurance Corporation (2)		$	915,525			$	714,004			$	612,587			$	2,242,116			CC
National Public Finance Guarantee Corporation		16,306				—				—				16,306				BBB-
Assured Guaranty Municipal Corporation		5,998				—				—				5,998				BBB+
Total		$	937,829			$	714,004			$	612,587			$	2,264,420			CC
December 31, 2017:
Ambac Assurance Corporation (2)		$	706,715			$	32,660			$	2,702,887			$	3,442,262			CC
National Public Finance Guarantee Corporation		20,733				—				—				20,733				BBB-
Assured Guaranty Municipal Corporation		5,998				—				—				5,998				BBB+
Total		$	733,446			$	32,660			$	2,702,887			$	3,468,993			CC

 

(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 corporate obligations and asset-backed securities with a fair value of $141,373 and $170,280 at September 30, 2018 and December 31, 2017, respectively, insured by Ambac UK.

(3)

2018 includes Ambac's holdings of the secured notes issued by Ambac LSNI in connection with the Rehabilitation Exit Transactions. These secured notes are insured by Ambac Assurance.

Equity Method Investments [Table Text Block]

There are no unfunded commitments applicable to any of these investments for the periods disclosed.

		Fair Value
Class of Funds		September 30, 2018				December 31, 2017				Redemption Frequency		Redemption Notice Period
Real estate properties (1)		$	33,030			$	33,154			quarterly		10 business days
Diversified hedge fund strategies (2)		—				53,054				semi-monthly		15 - 30 days
Interest rate products (3) (7)		179,856				136,603				daily, weekly or monthly		0 - 30 days
Illiquid investments (4)		66,922				67,787				quarterly		180 days
Insurance-linked investments (5)		32,360				22,666				quarterly		90-120 days
Equity market investments (6) (7)		60,605				53,675				daily		0 days
Total equity investments in pooled funds		$	372,773			$	366,939

(1) Investments consist of UK property to generate income and capital growth.

(2) Investments seek diversified exposure to hedge fund core strategies to produce high risk-adjusted returns, with low long-term correlation to traditional markets and with targeted volatility levels. Funds may have the right to defer redemptions under certain circumstances.

(3) This class of funds includes investments in a range of instruments including leveraged loans, CLOs, asset-backed securities and floating rate notes to generate income and capital appreciation. Funds with less frequent redemption periods limit redemptions to as little as 15% per period. Funds with a same day redemption notice period are redeemable only weekly, while funds that may be redeemed any business day have notice periods of 15-30 days.

(4) This class seeks to obtain high long-term total return through investments with low liquidity and defined term, resulting in expected capital distributions to subscribers between 2020 and 2023. Redemptions were restricted prior to the expiration of the investment lock-up period in May 2018.

(5) This class aims to provide returns from the insurance and reinsurance markets through investments in catastrophe bonds, life insurance and other insurance linked investments. Redemption periods are quarterly, subject to 90-day notice for January/July redemption dates and 120-day notice for April/October redemption dates with redemptions greater than 3.5% during the first five years following share issuance subject to redemption fees.

(6) Investments represent a diversified exposure to global equity market returns through holdings of various regional market index funds.

(7)

Interest rate products include $2,914 at September 30, 2018 and $2,823 at December 31, 2017 and equity market investments include $60,605 at September 30, 2018 and $53,675 at December 31, 2017 that have readily determinable fair values priced through pricing vendors.

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,
		2018				2017				2018				2017
Fixed income securities		$	49,372			$	81,054			$	219,222			$	236,876
Short-term investments		2,395				1,986				7,671				4,124
Loans		185				187				552				361
Investment expense		(1,967		)		(2,228		)		(5,167		)		(6,269		)
Securities available-for-sale and short-term		49,985				80,999				222,278				235,092
Other investments		8,347				6,178				12,956				18,804
Total net investment income		$	58,332			$	87,177			$	235,234			$	253,896

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 interests 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,
		2018				2017				2018				2017
Net gains (losses) recognized during the period on trading securities		$	7,014			$	4,919			$	9,067			$	15,130
Less: net gains (losses) recognized during the reporting period on trading securities sold during the period		612				5,024				(2,067		)		8,140
Unrealized gains (losses) recognized during the reporting period on trading securities still held at the reporting date		$	6,402			$	(105	)		$	11,134			$	6,990

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