Fair Value Measurements (Tables)

6 Months Ended

Jun. 30, 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 June 30, 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.


	June 30, 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	$	90	$	90	$	—	$	90	$	—	$	102	$	102	$	—	$	102	$	—
Corporate obligations	674		674		—		662		13		598		598		—		585		12
Foreign obligations	83		83		83		—		—		76		76		76		—		—
U.S. government obligations	71		71		71		—		—		65		65		65		—		—

Residential mortgage-backed securities	238		238		—		238		—		238		238		—		238		—
Commercial mortgage-backed securities	16		16		—		16		—		15		15		—		15		—
Collateralized debt obligations	138		138		—		138		—		137		137		—		137		—
Other asset-backed securities	268		268		—		200		69		224		224		—		157		67
Fixed maturity securities, pledged as collateral:

Short-term	36		36		36		—		—		64		64		64		—		—
Short term investments	365		365		358		7		—		507		507		506		1		—
Other investments (1)	530		518		69		—		—		568		556		61		—		—
Cash, cash equivalents and restricted cash	43		43		43		—		—		44		44		43		1		—
Derivative assets:

Interest rate swaps—asset position	25		25		—		—		25		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	1,952		1,952		—		—		1,952		1,828		1,828		—		—		1,828
Fixed maturity securities: Municipal obligation, trading	—		—		—		—		—		43		43		—		43		—
Fixed maturity securities: Municipal obligations, available-for-sale	104		104		—		104		—		96		96		—		96		—
Restricted cash	266		266		266		—		—		17		17		17		—		—
Loans	1,772		1,772		—		—		1,772		1,829		1,829		—		—		1,829
Derivative assets: Interest rate swaps—asset position	185		185		—		185		—		190		190		—		190		—
Derivative assets: Currency swaps—asset position	39		39		—		39		—		49		49		—		49		—
Total financial assets	$	6,899	$	6,887	$	926	$	1,679	$	3,833	$	6,726	$	6,715	$	833	$	1,615	$	3,772
Financial liabilities:

Long term debt, including accrued interest	$	951	$	773	$	—	$	757	$	16	$	1,065	$	878	$	—	$	864	$	14
Derivative liabilities:


Interest rate swaps—liability position	37		37		—		37		—		38		38		—		38		—


Liabilities for net financial guarantees written (2)	311		727		—		—		727		159		476		—		—		476
Variable interest entity liabilities:
Long-term debt	2,956		2,957		—		2,832		125		3,107		3,145		—		2,992		154

Derivative liabilities: Interest rate swaps—liability position	1,106		1,106		—		1,106		—		1,048		1,048		—		1,048		—

Total financial liabilities	$	5,361	$	5,600	$	—	$	4,732	$	868	$	5,418	$	5,586	$	—	$	4,942	$	644

(1)Excluded from the fair value measurement categories in the table above are investment funds of $449 and $494 as of June 30, 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 June 30, 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 June 30, 2023:
Balance, beginning of period	$	81	$	31	$	2,003	$	1,856	$	3,972

Total gains/(losses) realized and unrealized:
Included in earnings	—		(5)		(53)		(66)		(124)
Included in other comprehensive income	—		—		14		50		64



Settlements	—		—		(12)		(69)		(81)



Balance, end of period	$	81	$	25	$	1,952	$	1,772	$	3,831
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)	$	(53)	$	(66)	$	(124)
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	$	—	$	—	$	14	$	50	$	64

Three Months Ended June 30, 2022:
Balance, beginning of period	$	86	$	52	$	3,131	$	2,469	$	5,738

Total gains/(losses) realized and unrealized:
Included in earnings	—		(12)		(365)		(83)		(460)
Included in other comprehensive income	(5)		—		(215)		(174)		(395)



Settlements	—		(2)		(18)		(68)		(88)



Balance, end of period	$	81	$	38	$	2,533	$	2,144	$	4,795
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	$	—	$	(12)	$	(365)	$	(83)	$	(460)
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	$	(5)	$	—	$	(215)	$	(174)	$	(395)



Level 3 - Financial Assets and Liabilities Accounted for at Fair Value
							VIE Assets
	Investments		Other Assets		Derivatives		Investments		Loans		Total
Six Months Ended June 30, 2023:
Balance, beginning of period	$	79	$	—	$	26	$	1,828	$	1,829	$	3,762

Total gains/(losses) realized and unrealized:
Included in earnings	1		—		—		80		(7)		73
Included in other comprehensive income	3		—		—		57		92		152



Settlements	(1)		—		—		(12)		(141)		(155)



Balance, end of period	$	81	$	—	$	25	$	1,952	$	1,772	$	3,831
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	$	1	$	—	$	—	$	80	$	(7)	$	73
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	$	—	$	—	$	57	$	92	$	152

Six Months Ended June 30, 2022:
Balance, beginning of period	$	91	$	—	$	70	$	3,320	$	2,718	$	6,199

Total gains/(losses) realized and unrealized:
Included in earnings	1		—		(29)		(458)		(178)		(664)
Included in other comprehensive income	(10)		—		—		(311)		(251)		(572)



Settlements	(1)		—		(4)		(18)		(145)		(168)



Balance, end of period	$	81	$	—	$	38	$	2,533	$	2,144	$	4,795
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	$	1	$	—	$	(29)	$	(458)	$	(178)	$	(664)
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	$	(10)	$	—	$	—	$	(311)	$	(251)	(572)

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 June 30, 2023								Three Months Ended June 30, 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)	$	(119)	$	—	$	—	$	(12)	$	(448)	$	—
Changes in unrealized gains (losses) relating to financial instruments still held at the reporting date	—		(5)		(119)		—		—		(12)		(448)		—

	Six Months Ended June 30, 2023								Six Months Ended June 30, 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 or losses included in earnings for the period	$	1	$	—	$	72	$	—	$	1	$	(29)	$	(636)	$	—
Changes in unrealized gains or losses included in earnings relating to the assets and liabilities still held at the reporting date	—		—		72		—		—		(29)		(636)		—