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Fair Value Measurements
 3 Months Ended
Mar. 31, 2025
Fair Value Disclosures [Abstract]  
Fair Value Measurements
5.    FAIR VALUE MEASUREMENTS
The Fair Value Measurement Topic of the ASC establishes a framework for measuring fair value and disclosures about fair value measurements.
Fair Value Hierarchy:
The Fair Value Measurement Topic of the ASC specifies a fair value hierarchy based on whether the inputs to valuation techniques used to measure fair value are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect Company-based assumptions. The fair value hierarchy has three broad levels as follows:
lLevel 1Quoted prices for identical instruments in active markets. Assets and liabilities classified as Level 1 include US Treasury and foreign government obligations traded in highly liquid and transparent markets, and money market funds.
lLevel 2Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets. Assets and liabilities classified as Level 2 generally include investments in fixed maturity securities and certain derivatives valued using only market observable data.
lLevel 3Model derived valuations in which one or more significant inputs or significant value drivers are unobservable. This hierarchy requires the use of observable market data when available. Financial instruments classified as Level 3 include certain investments in fixed maturity securities, loans and derivatives.
The Fair Value Measurement Topic of the ASC permits, as a practical expedient, the estimation of fair value of certain investments in funds using the net asset value per share of the investment or its equivalent (“NAV”). Investments in funds valued using NAV are not categorized as Level 1, 2 or 3 under the fair value hierarchy. The Investments — Equity Securities Topic of the ASC permits the measurement of certain equity securities without a readily determinable fair value at cost, less impairment, and adjusted to fair value when observable price changes in identical or similar investments from the same issuer occur (the "measurement alternative"). The fair values of investments measured under this measurement alternative are not included in the below disclosures of fair value of financial instruments.
The following table sets forth the carrying amount and fair value of Ambac’s financial assets and liabilities as of March 31, 2025 and December 31, 2024, 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, 2025December 31, 2024
Carrying
Amount		Total Fair
Value		Fair Value Measurements Categorized as:Carrying
Amount		Total Fair
Value		Fair Value Measurements Categorized as:
Level 1Level 2Level 3Level 1Level 2Level 3
Financial assets:
Fixed maturity securities:
Municipal obligations$14,305 $14,305 $— $14,305 $— $14,083 $14,083 $— $14,083 $— 
Corporate obligations89,169 89,169 — 89,169 — 89,192 89,192 — 89,192 — 
U.S. government obligations44,860 44,860 44,860 — — 40,995 40,995 40,995 — — 
Residential mortgage-backed securities3,445 3,445 — 3,445 — 2,446 2,446 — 2,446 — 
Commercial mortgage-backed securities2,049 2,049 — 2,049 — 2,101 2,101 — 2,101 — 
Collateralized debt obligations2,954 2,954 — 2,954 — 3,142 3,142 — 3,142 — 
Other asset-backed securities4,787 4,787 — 4,787 — 5,061 5,061 — 5,061 — 
Short term investments101,610 101,610 101,610 — — 127,601 127,601 127,601 — — 
Other investments (1)
28,214 7,420 — — — 28,294 7,499 — — — 
Cash, cash equivalents and restricted cash51,660 51,660 51,660 — — 47,276 47,276 47,276 — — 
Other assets-loans3,406 3,406 — — 3,406 3,434 3,434 — — 3,434 
Other assets - Derivatives:
Warrants— — — — — — — — — — 
FX forward contracts210 210 — 210 — — — — — — 
Total financial assets$346,669 $325,875 $198,130 $116,919 $3,406 $363,625 $342,830 $215,872 $116,025 $3,434 
Financial liabilities:
Short-term debt, including accrued interest$152,695 $152,695 $— $— $152,695 $152,560 $152,560 $— $— $152,560 
Other liabilities - Derivatives:
FX forward contracts— — — — — 317 317 — 317 — 
Total financial liabilities$152,695 $152,695 $— $— $152,695 $152,877 $152,877 $— $317 $152,560 
(1)Excluded from the fair value measurement categories in the table above are investment funds of $7,420 and $7,499 as of March 31, 2025 and December 31, 2024, 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 $20,618 and $20,618 as of March 31, 2025 and December 31, 2024, respectively, that do not have readily determinable fair values and have carrying amounts determined using the measurement alternative, and an equity method investment of $176 and $177 as of March 31, 2025 and December 31, 2024.
Determination of Fair Value:
When available, Ambac uses quoted active market prices specific to the financial instrument to determine fair value, and classifies such items within Level 1. The determination of fair value for financial instruments categorized in Level 2 or 3 involves judgment due to the complexity of factors contributing to the valuation. Third-party sources from which we obtain independent market quotes also use assumptions, judgments and estimates in determining financial instrument values and different third parties may use different methodologies or provide different values for financial instruments. In addition, the use of internal valuation models may require assumptions about hypothetical or inactive markets. As a result of these factors, the actual trade value of a financial instrument in the market, or exit value of a financial instrument position by Ambac, may be significantly different from its recorded fair value.
Ambac’s financial instruments carried at fair value are mainly comprised of investments in fixed maturity securities, equity interests in pooled investment funds, and derivative instruments. Valuation of financial instruments is performed by Ambac’s finance group using methods approved by senior financial management with consultation from third-party portfolio managers as appropriate. Preliminary valuation results are discussed with senior financial management and third-party
portfolio managers as necessary to assess consistency with market transactions and trends as applicable. Market transactions such as trades or negotiated settlements of similar positions, if any, are reviewed to validate fair value model results. However, financial instruments valued using significant unobservable inputs have very little or no observable market activity. Methods and significant inputs and assumptions used to determine fair values across portfolios are reviewed quarterly by senior financial management. Other valuation control procedures specific to particular portfolios are described further below.
Fixed Maturity Securities:
The fair values of fixed maturity investment securities are based primarily on market prices received independent pricing sources. Because many fixed maturity securities do not trade on a daily basis, pricing sources apply available market information through processes such as matrix pricing to calculate fair value. Such prices generally consider a variety of factors, including recent trades of the same and similar securities. In those cases, the items are classified within Level 2. For those fixed maturity investments where quotes were not available or cannot be reasonably corroborated, fair values are based on internal valuation models. Key inputs to the internal valuation models generally include maturity date, coupon and yield curves for asset-type and credit rating characteristics that closely match
those characteristics of the specific investment securities being valued. Items valued using valuation models are classified according to the lowest level input or value driver that is significant to the valuation. Thus, an item may be classified in Level 3 even though there may be significant inputs that are readily observable. Longer (shorter) expected maturities or higher (lower) yields used in the valuation model will, in isolation, result in decreases (increases) in fair value. Generally, lower credit ratings or longer expected maturities will be accompanied by higher yields used to value a security.
Ambac performs various review and validation procedures to quoted and modeled prices for fixed maturity securities, including price variance analyses, missing and static price reviews, overall valuation analysis by portfolio managers and finance managers and reviews associated with our ongoing impairment analysis. Unusual prices identified through these procedures will be evaluated further against alternative third-party quotes (if available), internally modeled prices and/or other relevant data, and the pricing source values will be challenged as necessary. Price challenges generally result in the use of the pricing source’s quote as originally provided or as revised by the source following their internal diligence process. A price challenge may result in a determination by either the pricing source or Ambac management that the pricing source cannot provide a reasonable value for a security or cannot adequately support a quote, in which case Ambac would resort to using either other quotes or internal models. Results of price challenges are reviewed by portfolio managers and finance managers.
Other Investments:
Other investments primarily relate to investments in pooled investment funds. The fair value of pooled investment funds is determined using dealer quotes or alternative pricing sources when such investments have readily determinable fair values. When fair value is not readily determinable, pooled investment funds are valued using NAV as a practical expedient as permitted
under the Fair Value Measurement Topic of the ASC. Refer to Note 4. Investments for additional information about such investments in pooled funds that are reported at fair value using NAV as a practical expedient.
Derivative Instruments:
At March 31, 2025 and December 31, 2024 Ambac has foreign currency forward contracts and holds warrants to purchase preferred stock of a development stage company. The fair value of foreign currency forwards are determined using valuation models with observable market inputs. Fair value of the warrants are determined using a standard warrant valuation model with internally developed input assumptions.
Short-term Debt:
Short-term debt consists of SOFR indexed borrowing used for partial funding of the Beat acquisition and is classified as Level 3.
Other Financial Assets:
Included in Other assets are loans carried at amortized cost, the fair values of which are estimated based upon internal valuation models and are classified as Level 3.
Additional Fair Value Information for Financial Assets and Liabilities Accounted for at Fair Value:
The following tables present the changes in the Level 3 fair value category for the periods presented in 2025 and 2024. 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
InvestmentsDerivativesTotal
Three Months Ended March 31, 2025:
Balance, beginning of period$— $— $— 
Total gains/(losses) realized and unrealized:
Included in earnings— — — 
Included in other comprehensive income— — — 
Purchases— — — 
Settlements— — — 
Balance, end of period$— $— $— 
The amount of total gains/(losses) included in earnings attributable to the change in unrealized gains or losses relating to assets and liabilities still held at the reporting date$— $— $— 
The amount of total gains/(losses) included in other comprehensive income attributable to the change in unrealized gains or losses relating to assets and liabilities still held at the reporting date$— $— $— 
Three Months Ended March 31, 2024:
Balance, beginning of period$13,920 $656 $14,576 
Total gains/(losses) realized and unrealized:
Included in earnings34 (47)(13)
Included in other comprehensive income— — — 
Purchases— — — 
Settlements— — — 
Balance, end of period$13,954 $609 $14,563 
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$34 $(47)$(13)
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$—$—$—
Invested assets are transferred into Level 3 when internal valuation models that include significant unobservable inputs are used to estimate fair value. All such securities that have internally modeled fair values have been classified as Level 3. Derivative instruments are transferred into Level 3 when the use of unobservable inputs becomes significant to the overall valuation. There were no transfers of financial instruments into or out of Level 3 in the periods disclosed.
Gains and losses (realized and unrealized) relating to Level 3 assets and liabilities included in earnings for the affected periods are reported as follows:
Three Months Ended March 31, 2025Three Months Ended March 31, 2024
Net
Investment
Income		Net Gains
(Losses) on
Derivative
Contracts		Other
Income or
(Expense)		Net
Investment
Income		Net Gains
(Losses) on
Derivative
Contracts		Other
Income or
(Expense)
Total gains (losses) included in earnings for the period$—$—$—$34$(47)$—
Changes in unrealized gains (losses) relating to financial instruments still held at the reporting date——————