Fair Value Measurements (Tables)

3 Months Ended

Mar. 31, 2023

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 March 31, 2023 and December 31, 2022, 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.


	March 31, 2023										December 31, 2022
	Carrying Amount		Total Fair Value		Fair Value Measurements Categorized as:						Carrying Amount		Total Fair Value		Fair Value Measurements Categorized as:
					Level 1		Level 2		Level 3						Level 1		Level 2		Level 3
Financial assets:
Fixed maturity securities:
Municipal obligations	$	86	$	86	$	—	$	86	$	—	$	102	$	102	$	—	$	102	$	—
Corporate obligations	679		679		—		667		13		598		598		—		585		12
Foreign obligations	79		79		79		—		—		76		76		76		—		—
U.S. government obligations	63		63		63		—		—		65		65		65		—		—

Residential mortgage-backed securities	240		240		—		240		—		238		238		—		238		—
Commercial mortgage-backed securities	15		15		—		15		—		15		15		—		15		—
Collateralized debt obligations	137		137		—		137		—		137		137		—		137		—
Other asset-backed securities	223		223		—		155		69		224		224		—		157		67
Fixed maturity securities, pledged as collateral:

Short-term	61		61		61		—		—		64		64		64		—		—
Short term investments	367		367		359		8		—		507		507		506		1		—
Other investments (1)	557		545		65		—		—		568		556		61		—		—
Cash, cash equivalents and restricted cash	40		40		38		2		—		44		44		43		1		—
Derivative assets:

Interest rate swaps—asset position	30		30		—		1		30		27		27		—		1		26


Warrants	1		1		—		—		1		1		1		—		—		1

Other assets-Loans	2		2		—		—		2		10		10		—		—		10
Variable interest entity assets:

Fixed maturity securities: Corporate obligations, fair value option	2,003		2,003		—		—		2,003		1,828		1,828		—		—		1,828
Fixed maturity securities: Municipal obligation, trading	16		16		—		16		—		43		43		—		43		—
Fixed maturity securities: Municipal obligations, available-for-sale	100		100		—		100		—		96		96		—		96		—
Restricted cash	256		256		256		—		—		17		17		17		—		—
Loans	1,856		1,856		—		—		1,856		1,829		1,829		—		—		1,829
Derivative assets: Interest rate swaps—asset position	198		198		—		198		—		190		190		—		190		—
Derivative assets: Currency swaps—asset position	45		45		—		45		—		49		49		—		49		—
Total financial assets	$	7,056	$	7,045	$	922	$	1,669	$	3,974	$	6,726	$	6,715	$	833	$	1,615	$	3,772
Financial liabilities:

Long term debt, including accrued interest	$	935	$	779	$	—	$	764	$	15	$	1,065	$	878	$	—	$	864	$	14
Derivative liabilities:


Interest rate swaps—liability position	44		44		—		44		—		38		38		—		38		—


Liabilities for net financial guarantees written (2)	318		668		—		—		668		159		476		—		—		476
Variable interest entity liabilities:
Long-term debt	3,060		3,053		—		2,937		116		3,107		3,145		—		2,992		154

Derivative liabilities: Interest rate swaps—liability position	1,174		1,174		—		1,174		—		1,048		1,048		—		1,048		—

Total financial liabilities	$	5,531	$	5,717	$	—	$	4,918	$	799	$	5,418	$	5,586	$	—	$	4,942	$	644

(1)Excluded from the fair value measurement categories in the table above are investment funds of $480 and $494 as of March 31, 2023 and December 31, 2022, respectively, which are measured using NAV as a practical expedient. Also excluded from the fair value amounts in the table above are equity securities with a carrying value of $12 and $12 as of March 31, 2023 and December 31, 2022, respectively, that do not have readily determinable fair values and have carrying amounts determined using the measurement alternative.

(2)The carrying value of net financial guarantees written includes financial guarantee amounts in 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.

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 2023 and 2022. 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
	Investments		Derivatives		Investments		Loans		Total
Three Months Ended March 31, 2023:
Balance, beginning of period	$	79	$	26	$	1,828	$	1,829	$	3,762

Total gains/(losses) realized and unrealized:
Included in earnings	—		5		133		59		196
Included in other comprehensive income	3		—		43		42		87



Settlements	—		—		—		(73)		(74)



Balance, end of period	$	81	$	31	$	2,003	$	1,856	$	3,972
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	$	—	$	5	$	133	$	59	$	196
The amount of total gains/(losses) included in other comprehensive income attributable to the change in unrealized gains or losses relating to assets and liabilities still held at the reporting date	$	3	$	—	$	43	$	42	$	87

Three Months Ended March 31, 2022:
Balance, beginning of period	$	91	$	70	$	3,320	$	2,718	$	6,199

Total gains/(losses) realized and unrealized:
Included in earnings	—		(17)		(93)		(96)		(204)
Included in other comprehensive income	(4)		—		(96)		(76)		(176)



Settlements	(1)		(2)		—		(78)		(80)



Balance, end of period	$	86	$	52	$	3,131	$	2,469	$	5,738
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	$	—	$	(17)	$	(93)	$	(96)	$	(204)
The amount of total gains/(losses) included in other comprehensive income attributable to the change in unrealized gains or losses relating to assets and liabilities still held at the reporting date	$	(4)	$	—	$	(96)	$	(76)	$	(176)

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:


	Three Months Ended March 31, 2023								Three Months Ended March 31, 2022
	Net Investment Income		Net Gains (Losses) on Derivative Contracts		Income (Loss) on Variable Interest Entities		Other Income or (Expense)		Net Investment Income		Net Gains (Losses) on Derivative Contracts		Income (Loss) on Variable Interest Entities		Other Income or (Expense)
Total gains (losses) included in earnings for the period	$	—	$	5	$	191	$	—	$	—	$	(17)	$	(188)	$	—
Changes in unrealized gains (losses) relating to financial instruments still held at the reporting date	—		5		191		—		—		(17)		(188)		—