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Investments (Tables)

3 Months Ended

Mar. 31, 2019

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 March 31, 2019 and December 31, 2018 were as follows:



	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value		Non-credit Other-than temporary Impairments ⁽¹⁾
March 31, 2019:
Fixed income securities:
Municipal obligations	$	406,315	$	20,356	$	1,787	$	424,884	$	—
Corporate obligations ⁽²⁾	1,223,640		14,312		4,408		1,233,544		—
Foreign obligations	30,719		599		26		31,292		—
U.S. government obligations	99,808		1,185		564		100,429
Residential mortgage-backed securities	216,904		39,504		123		256,285		123
Collateralized debt obligations	133,736		28		787		132,977		—
Other asset-backed securities	369,410		71,623		633		440,400		—
	2,480,532		147,607		8,328		2,619,811		123
Short-term	908,209		43		17		908,235		—
	3,388,741		147,650		8,345		3,528,046		123
Fixed income securities pledged as collateral:
U.S. government obligations	83,901		—		—		83,901		—
Total fixed income securities pledged as collateral	83,901		—		—		83,901		—
Total available-for-sale investments	$	3,472,642	$	147,650	$	8,345	$	3,611,947	$	123

December 31, 2018:
Fixed income securities:
Municipal obligations	$	882,631	$	14,364	$	17,076	$	879,919	$	5
Corporate obligations ⁽²⁾	1,288,882		6,444		17,204		1,278,122		—
Foreign obligations	30,496		399		61		30,834		—
U.S. government obligations	93,636		1,371		613		94,394		—
Residential mortgage-backed securities	221,825		37,575		793		258,607		27
Collateralized debt obligations	133,075		8		1,727		131,356		—
Other asset-backed securities	370,199		72,868		624		442,443		—
	3,020,744		133,029		38,098		3,115,675		32
Short-term	430,405		23		97		430,331		—
Total available-for-sale investments	$	3,451,149	$	133,052	$	38,195	$	3,546,006	$	32


(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 March 31, 2019 and December 31, 2018.

(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 March 31, 2019, by contractual maturity, were as follows:



	Amortized Cost		Estimated Fair Value
Due in one year or less	$	1,076,361	$	1,076,545
Due after one year through five years	999,235		1,006,812
Due after five years through ten years	316,441		323,494
Due after ten years	360,555		375,434
	2,752,592		2,782,285
Residential mortgage-backed securities	216,904		256,285
Collateralized debt obligations	133,736		132,977
Other asset-backed securities	369,410		440,400
Total	$	3,472,642	$	3,611,947

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 March 31, 2019 and December 31, 2018:



	Less Than 12 Months				12 Months or More				Total
	Fair Value		Gross Unrealized Loss		Fair Value		Gross Unrealized Loss		Fair Value		Gross Unrealized Loss
March 31, 2019:
Fixed income securities:
Municipal obligations	$	20,997	$	951	$	25,865	$	836	$	46,862	$	1,787
Corporate obligations	39,639		550		256,406		3,858		296,045		4,408
Foreign obligations	401		4		3,980		22		4,381		26
U.S. government obligations	12,793		360		53,861		204		66,654		564
Residential mortgage-backed securities	4,375		122		243		1		4,618		123
Collateralized debt obligations	101,939		787		—		—		101,939		787
Other asset-backed securities	3,840		9		83,645		624		87,485		633
	183,984		2,783		424,000		5,545		607,984		8,328
Short-term	99,429		17		—		—		99,429		17
Total temporarily impaired securities	$	283,413	$	2,800	$	424,000	$	5,545	$	707,413	$	8,345



	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, 2018:
Fixed income securities:
Municipal obligations	$	537,904	$	15,878	$	28,533	$	1,198	$	566,437	$	17,076
Corporate obligations	306,506		8,634		190,273		8,570		496,779		17,204
Foreign obligations	1,161		1		5,163		60		6,324		61
U.S. government obligations	5,643		135		58,495		478		64,138		613
Residential mortgage-backed securities	34,852		793		—		—		34,852		793
Collateralized debt obligations	123,848		1,727		—		—		123,848		1,727
Other asset-backed securities	13,813		33		77,479		591		91,292		624
	1,023,727		27,201		359,943		10,897		1,383,670		38,098
Short-term	115,374		97		—		—		115,374		97
Total temporarily impaired securities	$	1,139,101	$	27,298	$	359,943	$	10,897	$	1,499,044	$	38,195

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 March 31,
	2019			2018
Gross realized gains on securities	$	24,219		$	11,054
Gross realized losses on securities	(4,288		)	(1,388		)
Net foreign exchange (losses) gains	(2,698		)	(4,804		)
Net realized gains (losses)	$	17,233		$	4,862
Net other-than-temporary impairments ⁽¹⁾	$	(29	)	$	(299	)

(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 March 31, 2019 and 2018 for which a portion of an other-than-temporary impairment was recognized in other comprehensive income:



	Three Months Ended March 31,
	2019			2018
Balance, beginning of period	$	12,454		$	67,085
Additions for credit impairments recognized on:
Securities not previously impaired	—			226
Securities previously impaired	—			64
Reductions for credit impairments previously recognized on:
Securities that matured or were sold during the period	(49		)	(23,742		)
Balance, end of period	$	12,405		$	43,633

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 March 31, 2019 and December 31, 2018, respectively:



	Municipal Obligations		Corporate Obligations ⁽³⁾		Mortgage and Asset- backed Securities		Total		Weighted Average Underlying Rating ⁽¹⁾
March 31, 2019:
Ambac Assurance Corporation ⁽²⁾	$	166,770	$	583,550	$	599,512	$	1,349,832	CCC-
National Public Finance Guarantee Corporation	13,839		—		—		13,839		BBB-
Total	$	180,609	$	583,550	$	599,512	$	1,363,671	CCC-

December 31, 2018:
Ambac Assurance Corporation ⁽²⁾	$	833,241	$	656,473	$	599,185	$	2,088,899	CC
National Public Finance Guarantee Corporation	15,600		—		—		15,600		BBB-
Total	$	848,841	$	656,473	$	599,185	$	2,104,499	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 $144,530 and $144,672 at March 31, 2019 and December 31, 2018, respectively, insured by Ambac UK.

(3)

Represents Ambac's holdings of 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	March 31, 2019		December 31, 2018		Redemption Frequency	Redemption Notice Period
Real estate properties ⁽¹⁾	$	16,150	$	16,123	quarterly	10 business days
Interest rate products ^{(2) (6)}	207,704		177,357		daily, weekly or monthly	0 - 30 days
Illiquid investments ⁽³⁾	85,323		84,297		quarterly	180 days
Insurance-linked investments ⁽⁴⁾	28,746		29,318		quarterly	90-120 days
Equity market investments ^{(5) (6)}	49,122		43,954		daily	0 days
Total equity investments in pooled funds	$	387,045	$	351,049


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

(2)

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.


(3)	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 in the second half of 2019 and 2023.


(4)	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.


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

(6)

Interest rate products include $53,135 at March 31, 2019 and $27,154 at December 31, 2018 and equity market investments include $49,122 at March 31, 2019 and $43,954 at December 31, 2018 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 March 31,
	2019			2018
Fixed income securities	$	43,666		$	109,351
Short-term investments	4,113			2,840
Loans	184			187
Investment expense	(1,411		)	(1,827		)
Securities available-for-sale and short-term	46,552			110,551
Other investments	8,290			(311		)
Total net investment income	$	54,842		$	110,240

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 the above noted equity interests in an unconsolidated trust. 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 March 31,
	2019		2018
Net gains (losses) recognized during the period on trading securities	$	6,947	$	(1,579	)
Less: net gains (losses) recognized during the reporting period on trading securities sold during the period	631		1,933
Unrealized gains (losses) recognized during the reporting period on trading securities still held at the reporting date	$	6,316	$	(3,512	)