Fair Value Measurements (Tables)

12 Months Ended

Dec. 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 December 31, 2023 and 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.


	December 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	$	99	$	99	$	—	$	99	$	—	$	102	$	102	$	—	$	102	$	—
Corporate obligations	745		745		—		726		19		598		598		—		585		12
Foreign obligations	100		100		100		—		—		76		76		76		—		—
U.S. government obligations	82		82		82		—		—		65		65		65		—		—

Residential mortgage-backed securities	250		250		—		250		—		238		238		—		238		—
Commercial mortgage-backed securities	19		19		—		19		—		15		15		—		15		—
Collateralized debt obligations	139		139		—		139		—		137		137		—		137		—
Other asset-backed securities	303		303		—		235		68		224		224		—		157		67
Fixed maturity securities, pledged as collateral:

Short-term	27		27		27		—		—		64		64		64		—		—
Short term investments	426		426		421		5		—		507		507		506		1		—
Other investments (1)	475		463		77		—		—		568		556		61		—		—
Cash, cash equivalents and restricted cash	28		28		27		2		—		44		44		43		1		—

Other assets - Derivatives:

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	2,072		2,072		—		—		2,072		1,828		1,828		—		—		1,828
Fixed maturity securities: Municipal obligation, trading	—		—		—		—		—		43		43		—		43		—
Fixed maturity securities: Municipal obligations, available-for-sale	95		95		—		95		—		96		96		—		96		—
Restricted cash	246		246		246				—		17		17		17		—		—
Loans	1,663		1,663		—		—		1,663		1,829		1,829		—		—		1,829
Derivative assets: Interest rate swaps—asset position	190		190		—		190		—		190		190		—		190		—
Derivative assets: Currency swaps—asset position	36		36		—		36		—		49		49		—		49		—
Total financial assets	$	7,022	$	7,010	$	979	$	1,795	$	3,850	$	6,726	$	6,715	$	833	$	1,615	$	3,772
Financial liabilities:

Long term debt, including accrued interest	$	983	$	697	$	—	$	679	$	18	$	1,065	$	878	$	—	$	864	$	14
Other liabilities - Derivatives:


Interest rate swaps—liability position	35		35		—		35		—		38		38		—		38		—


Liabilities for net financial guarantees written (2)	292		788		—		—		788		159		476		—		—		476
Variable interest entity liabilities:
Long-term debt (includes $2,710 and $2,788 at fair value)	2,967		2,980		—		2,760		220		3,107		3,145		—		2,992		154

Derivative liabilities: Interest rate swaps—liability position	1,197		1,197		—		1,197		—		1,048		1,048		—		1,048		—

Total financial liabilities	$	5,474	$	5,697	$	—	$	4,671	$	1,026	$	5,418	$	5,586	—		4,942		644

(1)Excluded from the fair value measurement categories in the table above are investment funds of $386 and $494 as of December 31, 2023 and 2022, respectively, which are measured using NAV as a practical expedient. Also excluded from the fair value measurements in the table above are equity securities with a carrying value of $13 and $12 as of December 31, 2023 and 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 adjustment 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, 2022 and 2021. 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
Year ended December 31, 2023	Investments		Derivatives		Investments		Loans		Total
Balance, beginning of period	$	79	$	26	$	1,828	$	1,829	$	3,762

Total gains/(losses) realized and unrealized:
Included in earnings	1		—		200		142		343
Included in other comprehensive income	3		—		68		100		170
Purchases	6		—		—		—		6
Issuances	—		—		—		—		—
Sales	—		—		—		—		—
Settlements	(2)		—		(24)		(274)		(300)



Balance, end of period	$	87	$	26	$	2,072	$	1,663	$	3,848
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	$	—	$	200	$	142	$	343
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	$	—	$	68	$	100	$	170


Level-3 Financial Assets and Liabilities Accounted for at Fair Value
					VIE Assets and Liabilities
Year Ended December 31, 2022	Investments		Derivatives		Investments		Loans		Total
Balance, beginning of period	$	91	$	70	$	3,320	$	2,718	$	6,199

Total gains/(losses) realized and unrealized:
Included in earnings	1		(38)		(789)		(333)		(1,160)
Included in other comprehensive income	(12)		—		(353)		(279)		(644)
Purchases	—		—		—		—		—
Issuances	—		—		—		—		—
Sales	—		—		—		—		—
Settlements	(1)		(6)		(349)		(278)		(633)



Balance, end of period	$	79	$	26	$	1,828	$	1,829	$	3,762
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	$	(38)	$	(789)	$	(333)	$	(1,160)
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	$	(12)	$	—	$	(353)	$	(279)	$	(644)


Level-3 Financial Assets and Liabilities Accounted for at Fair Value
			Other Assets				VIE Assets and Liabilities
Year Ended December 31, 2021	Investments				Derivatives		Investments		Loans		Total
Balance, beginning of period	$	78	$	1	$	84	$	3,215	$	2,998	$	6,376

Total gains/(losses) realized and unrealized:
Included in earnings	1		—		(6)		176		59		230
Included in other comprehensive income	1		—		—		(32)		(26)		(58)
Purchases	13		—		—		—		—		13
Issuances	—		—		—		—		—		—
Sales	—		—		—		—		—		—
Settlements	(2)		(1)		(8)		(38)		(313)		(362)



Balance, end of period	$	91	$	—	$	70	$	3,320	$	2,718	$	6,199
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)	$	—	$	(6)	$	176	$	59	$	227
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	$	(1)	$	—	$	—	$	(32)	$	(26)	$	(59)

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		Net Gains (Losses) on Derivative Contracts		Income (Loss) on Variable Interest Entities		Other Income (Expense)
Year Ended December 31, 2023
Total gains (losses) included in earnings for the period	$	1	$	—	$	341	$	—
Changes in unrealized gains (losses) relating to financial instruments still held at the reporting date	—		—		341		—

Year Ended December 31, 2022
Total gains (losses) included in earnings for the period	$	1	$	(38)	$	(1,123)	$	—
Changes in unrealized gains (losses) relating to financial instruments still held at the reporting date	1		(39)		(1,123)		—

Year Ended December 31, 2021
Total gains (losses) included in earnings for the period	$	1	$	(6)	$	235	$	—
Changes in unrealized gains (losses) relating to financial instruments still held at the reporting date	1		(6)		235		—