Fair Value Measurements (Tables)

3 Months Ended

Mar. 31, 2024

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, 2024 and December 31, 2023, 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, 2024										December 31, 2023
	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	$	101	$	101	$	—	$	101	$	—	$	99	$	99	$	—	$	99	$	—
Corporate obligations	765		765		—		746		19		745		745		—		726		19
Foreign obligations	99		99		99		—		—		100		100		100		—		—
U.S. government obligations	98		98		98		—		—		82		82		82		—		—

Residential mortgage-backed securities	253		253		—		253		—		250		250		—		250		—
Commercial mortgage-backed securities	27		27		—		27		—		19		19		—		19		—
Collateralized debt obligations	143		143		—		143		—		139		139		—		139		—
Other asset-backed securities	231		231		—		163		68		303		303		—		235		68
Fixed maturity securities, pledged as collateral:
U.S. government obligations	26		26		26		—		—		—		—		—		—		—
Short-term	—		—		—		—		—		27		27		27		—		—
Short term investments	382		382		379		2		—		426		426		421		5		—
Other investments (1)	558		546		152		—		—		475		463		77		—		—
Cash, cash equivalents and restricted cash	44		44		44		—		—		28		28		27		2		—
Other assets - Derivatives:

Interest rate swaps—asset position	21		21		—		—		21		25		25		—		—		25


Warrants	1		1		—		—		1		1		1		—		—		1

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

Fixed maturity securities: Corporate obligations, fair value option	2,070		2,070		—		—		2,070		2,072		2,072		—		—		2,072

Fixed maturity securities: Municipal obligations, available-for-sale	92		92		—		92		—		95		95		—		95		—
Restricted cash	252		252		252		—		—		246		246		246				—
Loans	1,604		1,604		—		—		1,604		1,663		1,663		—		—		1,663
Derivative assets: Interest rate swaps—asset position	186		186		—		186		—		190		190		—		190		—
Derivative assets: Currency swaps—asset position	35		35		—		35		—		36		36		—		36		—
Total financial assets	$	6,987	$	6,974	$	1,049	$	1,747	$	3,783	$	7,022	$	7,010	$	979	$	1,795	$	3,850
Financial liabilities:

Long term debt, including accrued interest	$	999	$	772	$	—	$	753	$	19	$	983	$	697	$	—	$	679	$	18
Other liabilities - Derivatives:


Interest rate swaps—liability position	29		29		—		29		—		35		35		—		35		—


Liabilities for net financial guarantees written (2)	231		498		—		—		498		292		788		—		—		788
Variable interest entity liabilities:
Long-term debt	2,925		2,920		—		2,718		202		2,967		2,980		—		2,760		220

Derivative liabilities: Interest rate swaps—liability position	1,170		1,170		—		1,170		—		1,197		1,197		—		1,197		—

Total financial liabilities	$	5,354	$	5,388	$	—	$	4,670	$	718	$	5,474	$	5,697	$	—	$	4,671	$	1,026

(1)Excluded from the fair value measurement categories in the table above are investment funds of $394 and $386 as of March 31, 2024 and December 31, 2023, 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 $13 and $13 as of March 31, 2024 and December 31, 2023, 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 2024 and 2023. 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, 2024:
Balance, beginning of period	$	87	$	26	$	2,072	$	1,663	$	3,848

Total gains/(losses) realized and unrealized:
Included in earnings	—		(5)		19		21		35
Included in other comprehensive income	—		—		(21)		(16)		(38)
Purchases	—		—		—		—		—


Settlements	—		—		—		(64)		(64)



Balance, end of period	$	87	$	21	$	2,070	$	1,604	$	3,782
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)	$	19	$	21	$	35
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	$	—	$	—	$	(21)	$	(16)	$	(38)

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

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, 2024								Three Months Ended March 31, 2023
	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)	$	39	$	—	$	—	$	5	$	191	$	—
Changes in unrealized gains (losses) relating to financial instruments still held at the reporting date	—		(5)		39		—		—		5		191		—