Fair Value Measurements (Tables)

6 Months Ended

Jun. 30, 2016

Fair Value Of Investments Measured At NAV As Practical Expedient [Table Text Block]

Below is additional information about such investments in pooled funds that are reported at fair value using NAV as a practical expedient. There are no unfunded commitments applicable to any of these investments for the periods disclosed.

Fair Value

Class of Funds

June 30,
2016

December 31,
2015

Redemption Frequency

Redemption Notice Period

Real estate properties ¹

42,985

59,719

quarterly

10 business days

Diversified hedge fund strategies ²

43,860

35,464

semi-monthly

15 - 30 days

Credit products ³

206,381

99,579

daily, weekly or monthly

0 - 30 days

Illiquid investments ⁴

40,222

44,754

quarterly

180 days

Summary of Carrying Amount and Fair Value of Ambac's Financial Assets and Liabilities

The following table sets forth the carrying amount and fair value of Ambac’s financial assets and liabilities as of June 30, 2016 and December 31, 2015, including the level within the fair value hierarchy at which fair value measurements are categorized. As required by the Fair Value Measurement Topic of the ASC financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.



	Carrying Amount			Total Fair Value			Fair Value Measurements Categorized as:
June 30, 2016:							Level 1		Level 2			Level 3
Financial assets:
Fixed income securities:
Municipal obligations	$	375,652		$	375,652		$	—	$	375,652		$	—
Corporate obligations	1,730,703			1,730,703			—		1,730,703			—
Foreign obligations	75,390			75,390			60,649		14,741			—
U.S. government obligations	34,369			34,369			34,369		—			—
U.S. agency obligations	4,148			4,148			—		4,148			—
Residential mortgage-backed securities	2,270,543			2,270,543			—		1,619,693			650,850
Collateralized debt obligations	104,562			104,562			—		104,562			—
Other asset-backed securities	1,114,097			1,114,097			—		1,042,277			71,820
Fixed income securities, pledged as collateral:
U.S. government obligations	65,068			65,068			65,068		—			—
Short term investments	336,222			336,222			331,347		4,875			—
Other investments ⁽²⁾	410,727			394,273			49,659		—			11,166
Cash and cash equivalents	23,044			23,044			23,044		—			—
Loans	4,615			4,464			—		—			4,464
Derivative assets:
Interest rate swaps—asset position	104,353			104,353			—		23,431			80,922
Other assets	8,687			8,687			—		—			8,687
Variable interest entity assets:
Fixed income securities:
Corporate obligations	2,577,293			2,577,293			—		—			2,577,293
Restricted cash	5,461			5,461			5,461		—			—
Loans	11,074,772			11,074,772			—		—			11,074,772
Total financial assets	$	20,319,706		$	20,303,101		$	569,597	$	4,920,082		$	14,479,974
Financial liabilities:
Obligations under investment agreements	$	82,358		$	82,682		$	—	$	—		$	82,682
Long term debt, including accrued interest	1,493,020			1,374,646			—		1,093,436			281,210
Derivative liabilities:
Credit derivatives	18,207			18,207			—		—			18,207
Interest rate swaps—asset position	(99,841		)	(99,841		)	—		(99,841		)	—
Interest rate swaps—liability position	517,441			517,441			—		350,694			166,747
Futures contracts	1,356			1,356			1,356		—			—
Liabilities for net financial guarantees written ⁽¹⁾	2,911,854			3,873,330			—		—			3,873,330
Variable interest entity liabilities:
Long-term debt	11,444,892			11,444,892			—		9,186,883			2,258,009
Derivative liabilities:
Interest rate swaps—liability position	2,124,045			2,124,045			—		2,124,045			—
Currency swaps—asset position	(63,167		)	(63,167		)	—		(63,167		)	—
Total financial liabilities	$	18,430,165		$	19,273,591		$	1,356	$	12,592,050		$	6,680,185



	Carrying Amount			Total Fair Value			Fair Value Measurements Categorized as:
December 31, 2015:							Level 1		Level 2			Level 3
Financial assets:
Fixed income securities:
Municipal obligations	$	420,770		$	420,770		$	—	$	420,770		$	—
Corporate obligations	1,593,669			1,593,669			—		1,593,669			—
Foreign obligations	96,306			96,306			87,808		8,498			—
U.S. government obligations	26,687			26,687			26,687		—			—
U.S. agency obligations	4,212			4,212			—		4,212			—
Residential mortgage-backed securities	1,977,338			1,977,338			—		1,488,454			488,884
Collateralized debt obligations	84,267			84,267			—		84,267			—
Other asset-backed securities	840,527			840,527			—		840,527			—
Fixed income securities, pledged as collateral:
U.S. government obligations	64,555			64,555			64,555		—			—
Short term investments	225,789			225,789			197,398		28,391			—
Other investments ⁽²⁾	310,600			298,095			45,745		—			12,834
Cash and cash equivalents	35,744			35,744			35,744		—			—
Loans	5,206			5,128			—		—			5,128
Derivative assets:
Interest rate swaps—asset position	84,886			84,886			—		21,848			63,038
Futures contracts	109			109			109		—			—
Other assets	8,696			8,696			—		—			8,696
Variable interest entity assets:
Fixed income securities:
Corporate obligations	2,588,556			2,588,556			—		—			2,588,556
Restricted cash	5,822			5,822			5,822		—			—
Loans	11,690,324			11,690,324			—		—			11,690,324
Total financial assets	$	20,064,063		$	20,051,480		$	463,868	$	4,490,636		$	14,857,460
Financial liabilities:
Obligations under investment agreements	$	100,358		$	101,400		$	—	$	—		$	101,400
Long term debt, including accrued interest	1,481,045			1,235,721			—		132,837			1,102,884
Derivative liabilities:
Credit derivatives	34,543			34,543			—		—			34,543
Interest rate swaps—asset position	(52,128		)	(52,128		)	—		(52,128		)	—
Interest rate swaps—liability position	370,943			370,943			—		243,256			127,687
Futures contracts	—			—			—		—			—
Other contracts	—			—			—		—			—
Liabilities for net financial guarantees written ⁽¹⁾	2,033,484			2,325,859			—		—			2,325,859
Variable interest entity liabilities:
Long-term debt	12,327,960			12,327,960			—		9,147,790			3,180,170
Derivative liabilities:
Interest rate swaps—liability position	1,965,265			1,965,265			—		1,965,265			—
Currency swaps—liability position	(36,862		)	(36,862		)	—		(36,862		)	—
Total financial liabilities	$	18,224,608		$	18,272,701		$	—	$	11,400,158		$	6,872,543

(1)

The carrying value of net financial guarantees written includes the following balance sheet items: Premium receivables; Reinsurance recoverable on paid and unpaid losses; Deferred ceded premium; Subrogation recoverable; Insurance intangible asset; Unearned premiums; Loss and loss expense reserves; Ceded premiums payable, premiums taxes payable and other deferred fees recorded in Other liabilities.


(2)	Excluded from the fair value measurement categories in the table above are investments funds of $333,448 and $239,516 as of June 30, 2016 and December 31, 2015, respectively, which are measured using NAV per share as a practical expedient.

Information about Valuation Inputs for Variable Interest Entity Assets and Liabilities Classified as Level 3

Information about the above described model inputs used to determine the fair value of each class of credit derivatives, including the CVA as a percentage of the gross mark-to-market liability before considering Ambac credit risk (“CVA percentage”), as of June 30, 2016 and December 31, 2015 is summarized below:



	June 30, 2016						December 31, 2015
	CLOs			Other			CLOs			Other ⁽¹⁾
Notional outstanding	$	231,376		$	630,135		$	295,253		$	617,148
Weighted average reference obligation price	98.9			90.9			98.4			85.2
Weighted average life (WAL) in years	0.9			6.4			1.1			6.1
Weighted average credit rating	AA			BBB+			AA			BBB+
Weighted average relative change ratio	36.5		%	31.5		%	36.3		%	33.3		%
CVA percentage	6.72		%	17.97		%	8.34		%	23.34		%
Fair value of derivative liabilities	$	878		$	17,329		$	1,837		$	32,697

(1)

Excludes contract for which fair values are based on credit derivative quotes rather than reference obligations quotes. As of December 31, 2015, these contracts had a combined notional outstanding of $58,482, WAL of 0.2 years and liability fair value of $9. Other inputs to the valuation of these transactions at December 31, 2015 include weighted average quotes of less than 1% of notional, weighted average rating of A+ and Ambac CVA percentage of 0.09%.

Summary of Changes in Level 3 Fair Value Category

The following tables present the changes in the Level 3 fair value category for the periods presented in 2016 and 2015. Ambac classifies financial instruments in Level 3 of the fair value hierarchy when there is reliance on at least one significant unobservable input to the valuation model. In addition to these unobservable inputs, the valuation models for Level 3 financial instruments typically also rely on a number of inputs that are readily observable either directly or indirectly. Thus, the gains and losses presented below include changes in the fair value related to both observable and unobservable inputs.



Level 3 - Financial Assets and Liabilities Accounted for at Fair Value
										VIE Assets and Liabilities
	Investments			Other assets			Derivatives			Investments			Loans			Long-term debt			Total
Three Months Ended June 30, 2016:
Balance, beginning of period	$	711,490		$	8,411		$	(109,894	)	$	2,622,723		$	11,516,241		$	(2,788,416	)	$	11,960,555
Total gains/(losses) realized and unrealized:
Included in earnings	14,616			276			(3,047		)	171,325			516,091			(332,605		)	366,656
Included in other comprehensive income	(4,783		)	—			—			(216,755		)	(895,557		)	233,100			(883,995		)
Purchases	17			—			—			—			—			—			17
Issuances	—			—			—			—			—			—			—
Sales	—			—			—			—			—			—			—
Settlements	(4,913		)	—			8,909			—			(62,003		)	106,663			48,656
Transfers into Level 3	6,243			—			—			—			—			—			6,243
Transfers out of Level 3	—			—			—			—			—			523,249			523,249
Balance, end of period	$	722,670		$	8,687		$	(104,032	)	$	2,577,293		$	11,074,772		$	(2,258,009	)	$	12,021,381
The amount of total gains/(losses) included in earnings attributable to the change in unrealized gains or losses relating to assets and liabilities still held at the reporting date	$	—		$	276		$	(3,280	)	$	171,325		$	516,091		$	(332,605	)	$	351,807

Three Months Ended June 30, 2015:
Balance, beginning of period	$	262,732		$	10,036		$	(230,201	)	$	2,704,657		$	12,789,201		$	(2,032,099	)	$	13,504,326
Total gains/(losses) realized and unrealized:
Included in earnings	6,908			(332		)	14,489			(117,260		)	(453,769		)	(23,091		)	(573,055		)
Included in other comprehensive income	(38,617		)	—			—			159,784			722,169			(111,636		)	731,700
Purchases	150,348			—			—			—			—			—			150,348
Issuances	—			—			—			—			—			—			—
Sales	—			—			—			—			—			—			—
Settlements	(1,039		)	—			8,185			—			(52,385		)	—			(45,239		)
Transfers into Level 3	—			—			88,218			—			—			—			88,218
Transfers out of Level 3	—			—			—			—			—			—			—
Balance, end of period	$	380,332		$	9,704		$	(119,309	)	$	2,747,181		$	13,005,216		$	(2,166,826	)	$	13,856,298
The amount of total gains/(losses) included in earnings attributable to the change in unrealized gains or losses relating to assets and liabilities still held at the reporting date	$	—		$	(332	)	$	14,081		$	(117,260	)	$	(453,769	)	$	(23,091	)	$	(580,371	)



Level 3 - Financial Assets and Liabilities Accounted for at Fair Value
										VIE Assets and Liabilities
	Investments			Other assets			Derivatives			Investments			Loans			Long-term debt			Total
Six Months Ended June 30, 2016:
Balance, beginning of period	$	488,884		$	8,696		$	(99,192	)	$	2,588,556		$	11,690,324		$	(3,180,170	)	$	11,497,098
Total gains/(losses) realized and unrealized:
Included in earnings	27,019			(9		)	(11,030		)	264,592			676,632			(334,557		)	622,647
Included in other comprehensive income	23,236			—			—			(275,855		)	(1,163,959		)	305,960			(1,110,618		)
Purchases	91,892			—			—			—			—			—			91,892
Issuances	—			—			—			—			—			—			—
Sales	—			—			—			—			—			—			—
Settlements	(9,159		)	—			6,190			—			(128,225		)	212,860			81,666
Transfers into Level 3	100,798			—			—			—			—			—			100,798
Transfers out of Level 3	—			—			—			—			—			737,898			737,898
Balance, end of period	$	722,670		$	8,687		$	(104,032	)	$	2,577,293		$	11,074,772		$	(2,258,009	)	$	12,021,381
The amount of total gains/(losses) included in earnings attributable to the change in unrealized gains or losses relating to assets and liabilities still held at the reporting date	$	—		$	(9	)	$	(11,525	)	$	264,592		$	676,632		$	(334,557	)	$	595,133

Six Months Ended June 30, 2015:
Balance, beginning of period	$	198,201		$	12,036		$	(215,346	)	$	2,743,050		$	12,371,177		$	(1,263,664	)	$	13,845,454
Total gains/(losses) realized and unrealized:
Included in earnings	12,637			(627		)	568			(25,140		)	657,158			(863,089		)	(218,493		)
Included in other comprehensive income	(44,323		)	—			—			29,271			159,548			(44,011		)	100,485
Purchases	234,852			—			—			—			—			—			234,852
Issuances	—			—			—			—			—			—			—
Sales	—			—			—			—			—			—			—
Settlements	(21,035		)	(1,705		)	7,251			—			(182,667		)	3,938			(194,218		)
Transfers in Level 3	—			—			88,218			—			—			—			88,218
Transfers out of Level 3	—			—			—			—			—			—			—
Balance, end of period	$	380,332		$	9,704		$	(119,309	)	$	2,747,181		$	13,005,216		$	(2,166,826	)	$	13,856,298
The amount of total gains/(losses) included in earnings attributable to the change in unrealized gains or losses relating to assets and liabilities still held at the reporting date	$	—		$	(627	)	$	(1,933	)	$	(25,140	)	$	657,158		$	(863,089	)	$	(233,631	)

The tables below provide roll-forward information by class of investments and derivatives measured using significant unobservable inputs.



Level 3 - Investments by Class:
	Other Asset Backed Securities			Corporate Obligations		Non-Agency RMBS			Total Investments
Three Months Ended June 30, 2016:
Balance, beginning of period	$	71,786		$	—	$	639,704		$	711,490
Total gains/(losses) realized and unrealized:
Included in earnings	272			—		14,344			14,616
Included in other comprehensive income	20			—		(4,803		)	(4,783		)
Purchases	—			—		17			17
Issuances	—			—		—			—
Sales	—			—		—			—
Settlements	(258		)	—		(4,655		)	(4,913		)
Transfers into Level 3	—			—		6,243			6,243
Transfers out of Level 3	—			—		—			—
Balance, end of period	$	71,820		$	—	$	650,850		$	722,670
The amount of total gains/(losses) included in earnings attributable to the change in unrealized gains or losses relating to assets and liabilities still held at the reporting date	$	—		$	—	$	—		$	—

Three Months Ended June 30, 2015:
Balance, beginning of period	$	—		$	—	$	262,732		$	262,732
Total gains/(losses) realized and unrealized:
Included in earnings	—			—		6,908			6,908
Included in other comprehensive income	—			—		(38,617		)	(38,617		)
Purchases	—			—		150,348			150,348
Issuances	—			—		—			—
Sales	—			—		—			—
Settlements	—			—		(1,039		)	(1,039		)
Transfers into Level 3	—			—		—			—
Transfers out of Level 3	—			—		—			—
Balance, end of period	$	—		$	—	$	380,332		$	380,332
The amount of total gains/(losses) included in earnings attributable to the change in unrealized gains or losses relating to assets and liabilities still held at the reporting date	$	—		$	—	$	—		$	—



Level 3 - Investments by Class:
	Other Asset Backed Securities			Corporate Obligations			Non-Agency RMBS			Total Investments
Six Months Ended June 30, 2016:
Balance, beginning of period	$	—		$	—		$	488,884		$	488,884
Total gains/(losses) realized and unrealized:
Included in earnings	561			—			26,458			27,019
Included in other comprehensive income	1,065			—			22,171			23,236
Purchases	—			—			91,892			91,892
Issuances	—			—			—			—
Sales	—			—			—			—
Settlements	(513		)	—			(8,646		)	(9,159		)
Transfers into Level 3	70,707			—			30,091			100,798
Transfers out of Level 3	—			—			—			—
Balance, end of period	$	71,820		$	—		$	650,850		$	722,670
The amount of total gains/(losses) included in earnings attributable to the change in unrealized gains or losses relating to assets and liabilities still held at the reporting date	$	—		$	—		$	—		$	—

Six Months Ended June 30, 2015:
Balance, beginning of period	$	—		$	3,808		$	194,393		$	198,201
Total gains/(losses) realized and unrealized:
Included in earnings	—			(19		)	12,656			12,637
Included in other comprehensive income	—			(286		)	(44,037		)	(44,323		)
Purchases	—			—			234,852			234,852
Issuances	—			—			—			—
Sales	—			—			—			—
Settlements	—			(3,503		)	(17,532		)	(21,035		)
Transfers into Level 3	—			—			—			—
Transfers out of Level 3	—			—			—			—
Balance, end of period	$	—		$	—		$	380,332		$	380,332
The amount of total gains/(losses) included in earnings attributable to the change in unrealized gains or losses relating to assets and liabilities still held at the reporting date	$	—		$	—		$	—		$	—



Level 3 - Derivatives by Class:
	Three Months Ended June 30, 2016:									Three Months Ended June 30, 2015:
	Interest Rate Swaps			Credit Derivatives			Total Derivatives			Interest Rate Swaps			Credit Derivatives			Total Derivatives
Balance, beginning of period	$	(87,965	)	$	(21,929	)	$	(109,894	)	$	(153,824	)	$	(76,377	)	$	(230,201	)
Total gains/(losses) realized and unrealized:
Included in earnings	(7,002		)	3,955			(3,047		)	4,195			10,294			14,489
Included in other comprehensive income	—			—			—			—			—			—
Purchases	—			—			—			—			—			—
Issuances	—			—			—			—			—			—
Sales	—			—			—			—			—			—
Settlements	9,142			(233		)	8,909			8,592			(407		)	8,185
Transfers into Level 3	—			—			—			88,218			—			88,218
Transfers out of Level 3	—			—			—			—			—			—
Balance, end of period	$	(85,825	)	$	(18,207	)	$	(104,032	)	$	(52,819	)	$	(66,490	)	$	(119,309	)
The amount of total gains/(losses) included in earnings attributable to the change in unrealized gains or losses relating to assets and liabilities still held at the reporting date	$	(7,002	)	$	3,722		$	(3,280	)	$	4,195		$	9,886		$	14,081



Level 3 - Derivatives by Class:
	Six Months Ended June 30, 2016:									Six Months Ended June 30, 2015:
	Interest Rate Swaps			Credit Derivatives			Total Derivatives			Interest Rate Swaps			Credit Derivatives			Total Derivatives
Balance, beginning of period	$	(64,649	)	$	(34,543	)	$	(99,192	)	$	(141,887	)	$	(73,459	)	$	(215,346	)
Total gains/(losses) realized and unrealized:
Included in earnings	(27,851		)	16,821			(11,030		)	(7,227		)	7,795			568
Included in other comprehensive income	—			—			—			—			—			—
Purchases	—			—			—			—			—			—
Issuances	—			—			—			—			—			—
Sales	—			—			—			—			—			—
Settlements	6,675			(485		)	6,190			8,077			(826		)	7,251
Transfers into Level 3	—			—			—			88,218			—			88,218
Transfers out of Level 3	—			—			—			—			—			—
Balance, end of period	$	(85,825	)	$	(18,207	)	$	(104,032	)	$	(52,819	)	$	(66,490	)	$	(119,309	)
The amount of total gains/(losses) included in earnings attributable to the change in unrealized gains or losses relating to assets and liabilities still held at the reporting date	$	(27,851	)	$	16,336		$	(11,515	)	$	(7,227	)	$	5,294		$	(1,933	)

Summary of Gains and Losses (Realized and Unrealized) Relating to Level 3 Assets and Liabilities Included in Earnings

Gains and losses (realized and unrealized) relating to Level 3 assets and liabilities included in earnings for the affected periods are reported as follows:



	Net investment income		Realized gains or (losses) and other settlements on credit derivative contracts		Unrealized gains or (losses) on credit derivative contracts		Derivative products revenues (interest rate swaps)			Income (loss) on variable interest entities			Other income or (loss)
Three Months Ended June 30, 2016:
Total gains or losses included in earnings for the period	$	14,616	$	233	$	3,722	$	(7,002	)	$	354,811		$	276
Changes in unrealized gains or losses relating to the assets and liabilities still held at the reporting date	—		—		3,722		(7,002		)	354,811			276

Three Months Ended June 30, 2015:
Total gains or losses included in earnings for the period	$	6,908	$	407	$	9,886	$	4,195		$	(594,120	)	$	(332	)
Changes in unrealized gains or losses relating to the assets and liabilities still held at the reporting date	—		—		9,886		4,195			(594,120		)	(332		)

Six Months Ended June 30, 2016:
Total gains or losses included in earnings for the period	$	27,019	$	485	$	16,336	$	(27,851	)	$	606,667		$	(9	)
Changes in unrealized gains or losses relating to the assets and liabilities still held at the reporting date	—		—		16,326		(27,851		)	606,667			(9		)

Six Months Ended June 30, 2015:
Total gains or losses included in earnings for the period	$	12,637	$	826	$	6,968	$	(7,227	)	$	(231,071	)	$	(627	)
Changes in unrealized gains or losses relating to the assets and liabilities still held at the reporting date	—		—		5,294		(7,227		)	(231,071		)	(627		)