Ambac’s non-VIE invested assets are primarily comprised of fixed maturity securities classified as either available-for-sale or trading securities, and interests in pooled investment funds, which are reported within Other investments on the Consolidated Balance Sheets. Interests in pooled investment funds in the form of common stock or in-substance common stock are classified as trading securities, while limited partner interests in such funds are reported using the equity method. Fixed maturity securities

classified as trading are unrated municipal bond obligations of Puerto Rico issuing entities that are part of the the PROMESA restructuring process as described further in the Notes to Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023.


	June 30, 2024:										December 31, 2023:
	Amortized Cost		Allowance for Credit Losses (2)		Gross Unrealized				Estimated Fair Value		Amortized Cost		Allowance for Credit Losses	Gross Unrealized				Estimated Fair Value
					Gains		Losses							Gains		Losses
Fixed maturity securities:
Municipal obligations	$	71	$	—	$	1	$	2	$	71	$	72	—	$	1	$	1	$	72
Corporate obligations	786		—		2		46		742		785		—	4		44		745
Foreign obligations	111		—		—		7		105		105		—	1		6		100
U.S. government obligations	108		—		—		4		105		85		—	1		4		82

Residential mortgage-backed securities	240		3		28		13		253		239		3	28		14		250
Commercial mortgage-backed securities	46		—		—		—		46		19		—	—		—		19
Collateralized debt obligations	141		—		1		—		141		139		—	1		1		139
Other asset-backed securities (1)	234		—		12		5		241		301		—	3		1		303
	1,737		3		45		77		1,703		1,744		3	40		71		1,710
Short-term	314		—		—		—		314		426		—	—		—		426
	2,051		3		45		77		2,017		2,170		3	40		71		2,135
Fixed maturity securities pledged as collateral:
U.S. government obligations	27		—		—		1		25		—		—	—		—		—
Short-term	—		—		—		—		—		27		—	—		—		27
	27		—		—		1		25		27		—	—		—		27
Total available-for-sale investments	$	2,078	$	3	$	45	$	78	$	2,043	$	2,197	3	$	40	$	71	$	2,162

The amortized cost and estimated fair value of available-for-sale investments, excluding VIE investments, at June 30, 2024, by contractual maturity, were as follows:


	Amortized Cost		Estimated Fair Value
Due in one year or less	$	439	$	437
Due after one year through five years	543		521
Due after five years through ten years	304		279
Due after ten years	132		124
	1,418		1,361
Residential mortgage-backed securities	240		253
Commercial mortgage-backed securities	46		46
Collateralized debt obligations	141		141
Other asset-backed securities	234		241
Total	$	2,078	$	2,043

Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay certain obligations with or without call or prepayment penalties.

Unrealized Losses on Fixed Maturity Securities:

The following table shows gross unrealized losses and fair values of Ambac’s available-for-sale investments, excluding VIE investments, which at June 30, 2024 and December 31, 2023, did not have an allowance for credit losses This information is aggregated by investment category and length of time that the individual securities have been in a continuous unrealized loss position, at June 30, 2024 and December 31, 2023:


	June 30, 2024												December 31, 2023
	Less Than 12 Months				12 Months or More				Total				Less Than 12 Months				12 Months or More				Total
	Fair Value		Gross Unrealized Loss		Fair Value		Gross Unrealized Loss		Fair Value		Gross Unrealized Loss		Fair Value		Gross Unrealized Loss		Fair Value		Gross Unrealized Loss		Fair Value		Gross Unrealized Loss
Fixed maturity securities:
Municipal obligations	$	21	$	—	$	15	$	1	$	35	$	2	$	7	$	—	$	16	$	1	$	23	$	1
Corporate obligations	125		3		493		43		618		46		75		2		509		43		584		44
Foreign obligations	25		—		55		7		80		7		8		—		56		6		64		6
U.S. government obligations	58		1		37		3		95		4		27		1		37		2		63		4

Residential mortgage-backed securities	16		—		113		13		129		13		6		—		98		14		104		14
Commercial mortgage-backed securities	17		—		—		—		17		—		3		—		—		—		3		—
Collateralized debt obligations	18		—		3		—		22		—		1		—		93		1		95		1
Other asset-backed securities	45		1		72		4		117		5		57		1		35		1		92		1
	326		5		787		71		1,113		77		184		4		844		68		1,028		71
Short-term	46		—		—		—		46		—		4		—		—		—		4		—
	372		5		787		71		1,159		77		187		4		844		68		1,032		71

U. S. government obligations	25		1		—		—		25		1		—		—		—		—		—		—

Total collateralized investments	25		1		—		—		25		1		—		—		—		—		—		—
Total temporarily impaired securities	$	398	$	7	$	787	$	71	$	1,184	$	78	$	187	$	4	$	844	$	68	$	1,032	$	71

Management has determined that the securities in the above table do not have credit impairment as of June 30, 2024 and December 31, 2023, based upon (i) no actual or expected principal and interest payment defaults on these securities; (ii) analysis of the creditworthiness of the issuer and financial guarantor, as applicable, and (iii) for debt securities that are non-highly rated beneficial interests in securitized financial assets, analysis of whether there was an adverse change in projected cash flows. Management's evaluation as of June 30, 2024, includes the expectation that all principal and interest payments on securities guaranteed by AAC or Ambac UK will be made timely and in full.

Ambac’s assessment about whether a security is credit impaired reflects management’s current judgment regarding facts and circumstances specific to the security and other factors. If that judgment changes, Ambac may record a charge for credit impairment in future periods.

The declines in fair value and resultant unrealized losses across asset classes as of June 30, 2024, included in the above table resulted from the impact of increasing interest rates and market spreads. Management has determined that the securities with unrealized losses are not credit impaired. Further discussion of management's assessment with respect to security categories with larger unrealized loss balances is below.

Corporate obligations

The gross unrealized losses on corporate obligations as of June 30, 2024, resulted primarily from an increase in interest rates since the securities were purchased. Unrealized losses of $45 related to 733 investment grade securities with an average unrealized loss equal to 7% of amortized cost at June 30, 2024. Securities that have below investment grade credit ratings or are unrated comprise less than a million of the gross unrealized loss and have an average unrealized loss equal to 8% of amortized cost at June 30, 2024. Management believes that the full and timely receipt of all principal and interest payment on corporate

obligations with unrealized losses as of June 30, 2024, is probable.

Residential mortgage-backed securities and Other asset-backed securities

As of June 30, 2024, $13 of the unrealized loss on residential mortgage-backed securities related to 15 Ambac insured securities. Five of these account for $13 of the unrealized loss and have an average unrealized loss equal to 12% of amortized cost. The $5 unrealized loss on other asset backed securities related primarily to 13 Ambac-insured securities that have an average unrealized loss equal to 5% of amortized cost.

The majority of these unrealized losses for both residential mortgage-backed and other asset-backed securities relate to securities with long dated weighted average lives making their fair values sensitive to interest rate changes. Also, most of these securities have below investment grade credit ratings or are unrated. The unrealized losses on these obligations resulted from adverse market conditions for long dated credit assets. As noted above, expected cash flows used in evaluating credit impairment of Ambac-insured securities contemplate full and timely payment of all principal and interest payments. This assumption is included in the projection of model based cash flows used in evaluating credit impairments on beneficial interests in securitized financial assets, including the residential mortgage backed and student loan asset backed securities included in this group.

Investment Income (Loss)

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


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Fixed maturity securities	$	22	$	19	$	45	$	35
Short-term investments	5		5		10		10

Investment expense	(1)		(1)		(3)		(3)
Securities available-for-sale and short-term	26		22		52		43
Fixed maturity securities - trading	2		4		4		5
Other investments	8		9		21		22
Total net investment income (loss)	$	36	$	35	$	78	$	69

Net investment income (loss) from Other investments primarily represents changes in fair value on equity securities, including certain pooled investment funds, and income from investment limited partnerships and other equity interests accounted for under the equity method.

Net Investments Gains (Losses), including Impairments:

The following table details amounts included in net investment gains (losses) and impairments included in earnings for the affected periods:


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Gross realized gains on securities	$	7	$	—	$	7	$	1
Gross realized losses on securities	(1)		(2)		(1)		(3)
Foreign exchange gains (losses)	(1)		(2)		—		(4)
Credit impairments	(2)		—		(1)		(1)
Intent / requirement to sell impairments	—		—		—		—
Net investment gains (losses), including impairments	$	4	$	(3)	$	4	$	(8)

Ambac had an allowance for credit losses of $3 and $1 at June 30, 2024 and 2023, respectively.

Ambac did not purchase any financial assets with credit deterioration for the three and six months ended June 30, 2024 and 2023.

Counterparty Collateral, Deposits with Regulators and Other Restrictions:

Ambac routinely pledges and receives collateral related to certain transactions. Securities held directly in Ambac’s investment portfolio with a fair value of $25 and $27 at June 30, 2024 and December 31, 2023, respectively, were pledged to derivative counterparties. Ambac’s derivative counterparties have the right to re-pledge the investment securities and as such, these pledged securities are separately classified on the Consolidated Balance Sheets as either "Fixed maturity securities pledged as collateral, at fair value" or "Short-term investments pledged as collateral, at fair value." Refer to Note 6. Derivative Instruments for further information on cash collateral. There was no cash or securities received from other counterparties that were re-pledged by Ambac.

Securities carried at $29 and $24 at June 30, 2024 and December 31, 2023, respectively, were deposited by Ambac's insurance subsidiaries with governmental authorities or designated custodian banks as required by laws affecting insurance companies. Invested assets carried at $1 and $1 at June 30, 2024 and December 31, 2023, were deposited as security in connection with a letter of credit issued for an office lease. Fiduciary funds held by Ambac's insurance distribution subsidiaries, carried at $2 and $2 at June 30, 2024 and December 31, 2023, respectively, are included in the invested assets.

Guaranteed Securities:

Ambac’s fixed maturity portfolio includes securities covered by guarantees issued by AAC or Ambac UK (“insured securities”). The following table represents the fair value and weighted-average underlying rating of insured securities in Ambac's investment portfolio at June 30, 2024 and December 31, 2023,

respectively:


	June 30, 2024		December 31, 2023
Municipal obligations	$	8	$	9
Mortgage-backed securities	244		240
Asset-backed securities	151		232
Total	$	403	482
Weighted average underlying rating	B-		B-

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

(1)This class seeks to generate superior risk-adjusted returns through selective asset sourcing, active trading and hedging strategies across a range of asset types.

(2)This class aims to obtain high long-term returns primarily through credit and preferred equity investments with low liquidity and defined term.

(3)This class of funds includes investments in a range of instruments including high-yield bonds, leveraged loans, CLOs, ABS and floating rate notes to generate income and capital appreciation.

(4)This class of funds aim to achieve long term growth through diversified exposure to global equity-markets.

(5)This class of funds includes investments in high quality floating rate debt securities including ABS and corporate floating rate notes.

(6)This class seeks to generate long-term capital appreciation through investments in private equity, equity-related and other instruments.

(7)Investments consisted of UK property to generate income and capital growth. The fund in which Ambac was invested has terminated on May 30, 2024 and is in the process of distributing remaining capital. Amounts owed Ambac from the fund are included in Other assets on the Consolidated Balance Sheet as of June 30, 2024.

(8)This class seeks to generate total returns from portfolios focused primarily on convertible securities.

(9)This class seeks to generate returns from insurance markets through investments in catastrophe bonds, life insurance and other insurance linked investments. This investment was restricted in connection with the unwind of certain insurance linked exposures. Ambac's investment was fully redeemed by March 31, 2024.

(10)These categories include fair value amounts totaling $153 and $77 at June 30, 2024 and December 31, 2023, respectively, that are readily determinable and are priced through pricing vendors, including for Equity market investments $40 and $38, High yield and leveraged loans products $89 and $39, and Convertible bonds investments $23 and $0.