Fair Value Measurements (Tables)

12 Months Ended

Dec. 31, 2013

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, 2013 and December 31, 2012, 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.


	Successor Ambac
	Carrying Amount			Total Fair Value			Fair Value Measurements Categorized as:
	Carrying Amount			Total Fair Value			Level 1		Level 2			Level 3
December 31, 2013
Financial assets:
Fixed income securities:
Municipal obligations	$	1,377,723		$	1,377,723		$	—	$	1,377,723		$	—
Corporate obligations		1,489,369			1,489,369			—		1,485,867			3,502
Foreign obligations		124,877			124,877			—		124,877			—
U.S. government obligations		126,248			126,248			126,248		—			—
U.S. agency obligations		32,154			32,154			—		31,946			208
Residential mortgage-backed securities		1,558,625			1,558,625			—		1,558,625			—
Collateralized debt obligations		183,872			183,872			—		183,872			—
Other asset-backed securities		992,448			992,448			—		928,375			64,073
Fixed income securities, pledged as collateral:
U.S. government obligations		126,223			126,223			126,223		—			—
Short term investments		271,119			271,119			267,612		3,507			—
Other investments		241,069			241,069			—		240,969			100
Cash		77,370			77,370			77,370		—			—
Loans		6,179			6,238			—		—			6,238
Derivative assets:
Interest rate swaps—asset position		76,631			76,631			—		76,631			—
Interest rate swaps—liability position		(1,257	)		(1,257	)		—		(1,257	)		—
Futures contracts		2,337			2,337			2,337		—			—
Other assets		13,384			13,384			—		—			13,384
Variable interest entity assets:
Fixed income securities:
Corporate obligations		2,475,182			2,475,182			—		—			2,475,182
Restricted cash		17,498			17,498			17,498		—			—
Loans		13,398,895			13,398,895			—		—			13,398,895

Total financial assets	$	22,589,946		$	22,590,005		$	617,288	$	6,011,135		$	15,961,582

Financial liabilities:
Obligations under investment and repurchase agreements	$	359,070		$	360,506		$	—	$	—		$	360,506
Long term debt, including accrued interest		1,256,602			1,215,029			—		—			1,215,029
Derivative liabilities:
Credit derivatives		94,322			94,322			—		—			94,322
Interest rate swaps—asset position		(55,619	)		(55,619	)		—		(55,619	)		—
Interest rate swaps—liability position		215,030			215,030			—		122,418			92,612
Other contracts		165			165			—		165			—
Liabilities for net financial guarantees written⁽¹⁾		4,509,539			4,876,617			—		—			4,876,617
Variable interest entity liabilities:
Long-term debt		14,091,753			14,091,753			—		12,577,148			1,514,605
Derivative liabilities:
Interest rate swaps—liability position		1,680,834			1,680,834			—		1,680,834			—
Currency swaps—liability position		91,472			91,472			—		91,472			—

Total financial liabilities	$	22,243,168		$	22,570,109		$	—	$	14,416,418		$	8,153,691

(1)

The carrying value of net financial guarantees written includes the following balance sheet items: Premium receivables; Reinsurance recoverable on paid and unpaid losses; Deferred ceded premium; Subrogation recoverable; Insurance intangible asset; Unearned premiums; Losses and loss expense reserve; Ceded premiums payable, premiums taxes payable and other deferred fees recorded in Other liabilities.


	Predecessor Ambac
	Carrying Amount			Total Fair Value			Fair Value Measurements Categorized as:
	Carrying Amount			Total Fair Value			Level 1		Level 2			Level 3
December 31, 2012
Financial assets:
Fixed income securities:
Municipal obligations	$	1,848,932		$	1,848,932		$	—	$	1,848,932		$	—
Corporate obligations		1,077,972			1,077,972			—		1,074,316			3,656
Foreign obligations		70,112			70,112			—		70,112			—
U.S. government obligations		127,283			127,283			127,283		—			—
U.S. agency obligations		82,535			82,535			—		82,535			—
Residential mortgage-backed securities		1,455,582			1,455,582			—		1,455,582			—
Collateralized debt obligations		33,342			33,342			—		26,860			6,482
Other asset-backed securities		706,637			706,637			—		656,373			50,264
Fixed income securities, pledged as collateral:
U.S. government obligations		265,779			265,779			265,779		—			—
Short term investments		661,658			661,658			657,886		3,772			—
Other investments		100			100			—		—			100
Cash		43,837			43,837			43,837		—			—
Loans		9,203			7,387			—		—			7,387
Derivative assets:
Interest rate swaps—asset position		124,853			124,853			—		124,853			—
Interest rate swaps—liability position		—			—			—		—			—
Futures contracts		1,253			1,253			1,253		—			—
Other assets		14,557			14,557			—		—			14,557
Variable interest entity assets:
Fixed income securities:
Corporate obligations		2,261,294			2,261,294			—		—			2,261,294
Restricted cash		2,290			2,290			2,290		—			—
Loans		15,568,711			15,560,051			—		200,978			15,359,073

Total financial assets	$	24,355,930		$	24,345,454		$	1,098,328	$	5,544,313		$	17,702,813

Financial liabilities:
Obligations under investment and repurchase agreements	$	362,017		$	361,905		$	—	$	—		$	361,905
Liabilities subject to compromise		1,690,312			434,823			—		434,823			—
Long term debt, including accrued interest		377,524			801,277			—		—			801,277
Derivative liabilities:
Credit derivatives		213,585			213,585			—		—			213,585
Interest rate swaps—asset position		(73,264	)		(73,264	)		—		(73,264	)		—
Interest rate swaps—liability position		390,774			390,774			—		282,022			108,752
Other contracts		220			220			—		220			—
Liabilities for net financial guarantees written		7,074,808			3,091,257			—		—			3,091,257
Variable interest entity liabilities:
Long-term debt		15,436,008			15,414,233			—		12,457,732			2,956,501
Derivative liabilities:
Interest rate swaps—liability position		2,131,315			2,131,315			—		2,131,315			—
Currency swaps—liability position		90,466			90,466			—		90,466			—

Total financial liabilities	$	27,693,765		$	22,856,591		$	—	$	15,323,314		$	7,533,277

Information about Valuation Inputs for Fixed Income Securities Classified as Level 3

Corporate obligations: These securities represent interest only strips of investment grade corporate obligations. The fair value of such securities classified as Level 3 was $3,502 and $3,656 at December 31, 2013 and December 31, 2012, respectively. Fair value was calculated using a discounted cash flow approach with the discount rate determined from the yields of corporate bonds from the same issuers. Significant inputs for the interest only strips valuation at December 31, 2013 and December 31, 2012 include the following weighted averages:

Successor Ambac— December 31, 2013

Coupon rate: 0.345%

Maturity: 20.14 years

Yield: 6.30%

Predecessor Ambac—December 31, 2012

Coupon rate: 0.345%

Maturity: 21.14 years

Yield: 6.08%

U.S. agency obligations: These notes are secured by separate lease rental agreements with the U.S. Government acting through the General Services Administration. The fair value of such securities classified as Level 3 was $208 and $0 at December 31, 2013 and December 31, 2012, respectively. Fair value was calculated using a discounted cash flow approach with the yield based on comparable U.S. agency securities. Significant inputs for the valuation at December 31, 2013 include the following weighted averages:

Successor Ambac— December 31, 2013

Coupon rate: 6.98%

Maturity: 1.37 years

Yield: 0.39%

Collateralized debt obligations (“CDO”): These securities are floating rate senior notes where the underlying securities of the CDO consist of subordinated bank perpetual preferred securities. The fair value of such securities classified as Level 3 was $0 and $6,482 at December 31, 2013 and December 31, 2012, respectively. Fair value was calculated using a discounted cash flow approach with expected future cash flows discounted using a yield curve consistent with the security type and rating. Significant inputs for the valuation at December 31, 2012 include the following weighted averages:

Predecessor Ambac—December 31, 2012

Coupon rate: 1.05%

Maturity: 1.51 years

Yield: 5.92%

Other asset-backed securities: These securities are floating rate investment grade notes collateralized by various asset types. The fair value of such securities classified as Level 3 was $64,073 and $50,264 at December 31, 2013 and December 31, 2012, respectively. Fair value was calculated using a discounted cash flow approach with expected future cash flows discounted using a yield curve consistent with the security type and rating. Significant inputs for the valuation at December 31, 2013 and December 31, 2012 include the following weighted averages:

Successor Ambac— December 31, 2013

Coupon rate: 0.64%

Maturity: 7.15 years

Yield: 2.34%

Predecessor Ambac—December 31, 2012

Coupon rate: 0.71%

Maturity: 7.86 years

Yield: 7.50%

Information about Valuation Inputs for Variable Interest Entity Assets and Liabilities Classified as Level 3

Information about the above described model inputs used to determine the fair value of each class of credit derivatives, including the CVA as a percentage of the gross mark-to-market liability before considering Ambac credit risk (“CVA percentage”), as of December 31, 2013 and December 31, 2012 is summarized below:


Successor Ambac – As of December 31, 2013
	CLOs			Other⁽¹⁾
Notional outstanding	$	1,337,737		$	1,291,371
Weighted average reference obligation price		98.0			85.7
Weighted average life (WAL) in years		2.1			5.4
Weighted average credit rating		AA			BBB-
Weighted average relative change ratio		35.3	%		43.1	%
CVA percentage		13.7	%		30.7	%
Fair value of derivative liabilities	$	(7,993	)	$	(84,780	)


Predecessor Ambac – As of December 31, 2012
	CLOs			Other⁽¹⁾
Notional outstanding	$	6,155,767		$	3,701,387
Weighted average reference obligation price		96.5			86.9
Weighted average life (WAL) in years		2.2			4.2
Weighted average credit rating		AA-			A
Weighted average relative change ratio		34.4	%		38.2	%
CVA percentage		55.0	%		55.0	%
Fair value of derivative liabilities	$	(34,645	)	$	(116,086	)

(1)

Excludes contracts for which fair values are based on credit derivative quotes rather than reference obligation quotes. Such contracts have a combined notional outstanding of $146,995, WAL of 1.0 years and liability fair value of ($1,549) as of December 31, 2013. Other inputs to the valuation of these transactions at December 31, 2013 include weighted average quotes of 1% of notional, weighted average rating of A+ and Ambac CVA percentage of 8.7%. As of December 31, 2012, these contracts had a combined notional outstanding of $1,424,623, WAL of 7.9 years and liability fair value of ($62,854). Other inputs to the valuation of these transactions at December 31, 2012 include weighted average quotes of 10% of notional, weighted average rating of A and Ambac CVA percentage of 55.0%.

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 2013 and 2012. 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
Successor Ambac – Eight Months Ended December 31, 2013	Investments			Other assets			Derivatives			Investments			Loans			Long-term debt			Total
Balance, beginning of period	$	69,412		$	14,061		$	(415,360	)	$	2,500,565		$	14,752,053		$	(1,750,372	)	$	15,170,359
Additions of VIEs consolidated		—			—			—			—			—			—			—
Total gains/(losses) realized and unrealized:
Included in earnings		1,870			(677	)		217,666			(178,322	)		(455,231	)		(2,490	)		(417,184	)
Included in other comprehensive income		7,184			—			—			152,939			873,986			(79,063	)		955,046
Purchases		—			—			—			—			—			—			—
Issuances		—			—			—			—			—			—			—
Sales		(4,528	)		—			—			—			—			—			(4,528	)
Settlements		(6,428	)		—			10,760			—			(219,909	)		173,196			(42,381	)
Transfers in Level 3		273			—			—			—			—			(220,922	)		(220,649	)
Transfers out of Level 3		—			—			—			—			—			365,046			365,046
Deconsolidation of VIEs		—			—			—			—			(1,552,004	)		—			(1,552,004	)

Balance, end of period	$	67,783		$	13,384		$	(186,934	)	$	2,475,182		$	13,398,895		$	(1,514,605	)	$	14,253,705

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	$	—		$	(677	)	$	91,436		$	(178,322	)	$	(475,152	)	$	(2,490	)	$	(545,123	)


										VIE Assets and Liabilities
Predecessor Ambac – Four Months Ended April 30, 2013	Investments			Other assets			Derivatives			Investments			Loans			Long-term debt			Total
Balance, beginning of period	$	60,402		$	14,557		$	(322,337	)	$	2,261,294		$	15,359,073		$	(2,956,501	)	$	14,416,488
Additions of VIEs consolidated		—			—			—			—			—			(409,300	)		(409,300	)
Total gains/(losses) realized and unrealized:
Included in earnings		(33	)		(496	)		(88,546	)		328,768			956,402			(138,914	)		1,057,181
Included in other comprehensive income		12,329			—			—			(89,497	)		(849,833	)		150,987			(776,014	)
Purchases		—			—			—			—			—			—			—
Issuances		—			—			—			—			—			—			—
Sales		—			—			—			—			—			—			—
Settlements		(3,286	)		—			(4,477	)		—			(713,589	)		4,864			(716,488	)
Transfers in Level 3		—			—			—			—			—			—			—
Transfers out of Level 3		—			—			—			—			—			1,598,492			1,598,492

Balance, end of period	$	69,412		$	14,061		$	(415,360	)	$	2,500,565		$	14,752,053		$	(1,750,372	)	$	15,170,359

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	$	—		$	(496	)	$	(92,002	)	$	328,768		$	956,402		$	(138,914	)	$	1,053,758


										VIE Assets and Liabilities
Predecessor Ambac – Year Ended December 31, 2012	Investments			Other assets			Derivatives			Investments			Loans			Long-term debt			Total
Balance, beginning of period	$	97,522		$	16,779		$	(486,775	)	$	2,199,338		$	14,126,994		$	(1,934,642	)	$	14,019,216
Additions of VIEs consolidated		—			—			—			—			—			—			—
Total gains/(losses) realized and unrealized:
Included in earnings		(3	)		(2,222	)		21,076			(41,289	)		952,463			(208,678	)		721,347
Included in other comprehensive income		7,485			—			—			103,245			637,954			(98,311	)		650,373
Purchases		—			—			—			—			—			—			—
Issuances		—			—			—			—			—			(162,460	)		(162,460	)
Sales		—			—			—			—			—			—			—
Settlements		(97,206	)		—			(48,886	)		—			(358,338	)		64,781			(439,649	)
Transfers in Level 3		58,905			—			—			—			—			(1,875,121	)		(1,816,216	)
Transfers out of Level 3		(6,301	)		—			192,248			—			—			1,257,930			1,443,877

Balance, end of period	$	60,402		$	14,557		$	(322,337	)	$	2,261,294		$	15,359,073		$	(2,956,501	)	$	14,416,488

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	$	—		$	(2,222	)	$	(113,836	)	$	(41,289	)	$	952,944		$	(208,678	)	$	587,983

The tables below provide roll-forward information by class of investments and derivatives measured using significant unobservable inputs.

Level-3 Investments by class


Successor Ambac – Eight Months Ended December 31, 2013	Collateralized Debt Obligations			Other Asset Backed Securities			Corporate Obligations			U.S. Agency Obligations			Total Investments
Balance, beginning of period	$	3,949		$	61,782		$	3,681		$	—		$	69,412
Total gains/(losses) realized and unrealized:
Included in earnings		25			1,912			(62	)		(5	)		1,870
Included in other comprehensive income		(19	)		7,315			(117	)		5			7,184
Purchases		—			—			—			—			—
Issuances		—			—			—			—			—
Sales		—			(4,528	)		—			—			(4,528	)
Settlements		(3,955	)		(2,408	)		—			(65	)		(6,428	)
Transfers in Level 3		—			—			—			273			273
Transfers out of Level 3		—			—			—			—			—

Balance, end of period	$	—		$	64,073		$	3,502		$	208		$	67,783

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	$	—		$	—		$	—		$	—		$	—


Predecessor Ambac – Four Months Ended April 30, 2013	Collateralized Debt Obligations			Other Asset Backed Securities			Corporate Obligations			U.S. Agency Obligations		Total Investments
Balance, beginning of period	$	6,482		$	50,264		$	3,656		$	—	$	60,402
Additions of VIEs consolidated		—			—			—			—		—
Total gains/(losses) realized and unrealized:
Included in earnings		(6	)		—			(27	)		—		(33	)
Included in other comprehensive income		160			12,117			52			—		12,329
Purchases		—			—			—			—		—
Issuances		—			—			—			—		—
Sales		—			—			—			—		—
Settlements		(2,687	)		(599	)		—			—		(3,286	)
Transfers in Level 3		—			—			—			—		—
Transfers out of Level 3		—			—			—			—		—

Balance, end of period	$	3,949		$	61,782		$	3,681		$	—	$	69,412

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	$	—		$	—		$	—		$	—	$	—

Level-3 Investments by class


Predecessor Ambac – Year Ended December 31, 2012	Collateralized Debt Obligations			Other Asset Backed Securities			Corporate Obligations			U.S. Agency Obligations			Total Investments
Balance, beginning of period	$	12,482		$	75,886		$	7,930		$	1,224		$	97,522
Additions of VIEs consolidated		—			—			—			—			—
Total gains/(losses) realized and unrealized:
Included in earnings		(5	)		—			4			(2	)		(3	)
Included in other comprehensive income		646			7,051			(203	)		(9	)		7,485
Purchases		—			—			—			—			—
Issuances		—			—			—			—			—
Sales		—			—			—			—			—
Settlements		(6,641	)		(85,741	)		(4,075	)		(749	)		(97,206	)
Transfers in Level 3		—			53,068			5,837			—			58,905
Transfers out of Level 3		—			—			(5,837	)		(464	)		(6,301	)

Balance, end of period	$	6,482		$	50,264		$	3,656		$	—		$	60,402

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	$	—		$	—		$	—		$	—		$	—

Level-3 Derivatives by class


Successor Ambac – Eight Months Ended December 31, 2013	Interest Rate Swaps			Credit Derivatives			Call Options on Long- term debt		Total Derivatives
Balance, beginning of period	$	(137,947	)	$	(277,413	)	$	—	$	(415,360	)
Additions of VIEs consolidated
Total gains/(losses) realized and unrealized:
Included in earnings		24,797			192,869			—		217,666
Included in other comprehensive income		—			—			—		—
Purchases		—			—			—		—
Issuances		—			—			—		—
Sales		—			—			—		—
Settlements		20,538			(9,778	)		—		10,760
Transfers in Level 3		—			—			—		—
Transfers out of Level 3		—			—			—		—
Deconsolidation of VIEs		—			—			—		—

Balance, end of period	$	(92,612	)	$	(94,322	)	$	—	$	(186,934	)

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	$	24,797		$	66,639		$	—	$	91,436

Level-3 Derivatives by class


Predecessor Ambac – Four Months Ended April 30, 2013	Interest Rate Swaps			Credit Derivatives			Call Options on Long- term debt		Total Derivatives
Balance, beginning of period	$	(108,752	)	$	(213,585	)	$	—	$	(322,337	)
Additions of VIEs consolidated		—			—			—		—
Total gains/(losses) realized and unrealized:
Included in earnings		(28,162	)		(60,384	)		—		(88,546	)
Included in other comprehensive income		—			—			—		—
Purchases		—			—			—		—
Issuances		—			—			—		—
Sales		—			—			—		—
Settlements		(1,033	)		(3,444	)		—		(4,477	)
Transfers in Level 3		—			—			—		—
Transfers out of Level 3		—			—			—		—
Deconsolidation of VIEs		—			—			—		—

Balance, end of period	$	(137,947	)	$	(277,413	)	$	—	$	(415,360	)

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	$	(28,162	)	$	(63,840	)	$	—	$	(92,002	)


Predecessor Ambac – Year Ended December 31, 2012	Interest Rate Swaps			Credit Derivatives			Call Options on Long- term debt			Total Derivatives
Balance, beginning of period	$	(302,177	)	$	(190,653	)	$	6,055		$	(486,775	)
Additions of VIEs consolidated		—			—			—			—
Total gains/(losses) realized and unrealized:
Included in earnings		(70,415	)		(9,219	)		100,710			21,076
Included in other comprehensive income		—			—			—			—
Purchases		—			—			—			—
Issuances		—			—			—			—
Sales		—			—			—			—
Settlements		71,592			(13,713	)		(106,765	)		(48,886	)
Transfers in Level 3		—			—			—			—
Transfers out of Level 3		192,248			—			—			192,248
Deconsolidation of VIEs		—			—			—			—

Balance, end of period	$	(108,752	)	$	(213,585	)	$	—		$	(322,337	)

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	$	(78,505	)	$	(35,331	)	$	—		$	(113,836	)

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			Realized gains or (losses) and other settlements on credit derivative contracts		Unrealized gains or (losses) on credit derivative contracts			Derivative products revenues (interest rate swaps)			(Loss) income on variable interest entities			Other income
Successor Ambac:
Eight Months Ended December 31, 2013
Total gains or losses included in earnings for the period	$	1,870		$	9,778	$	183,091		$	24,797		$	(636,043	)	$	(677	)
Changes in unrealized gains or losses relating to the assets and liabilities still held at the reporting date		—			—		66,639			24,797			(655,964	)		(677	)

Predecessor Ambac:
Four Months Ended April 30, 2013
Total gains or losses included in earnings for the period	$	(33	)	$	3,444	$	(63,828	)	$	(28,162	)	$	1,146,256		$	(496	)
Changes in unrealized gains or losses relating to the assets and liabilities still held at the reporting date		—			—		(63,840	)		(28,162	)		1,146,256			(496	)

Predecessor Ambac:
Year Ended December 31, 2012
Total gains or losses included in earnings for the period	$	(3	)	$	13,713	$	(22,932	)	$	(70,415	)	$	702,496		$	98,488
Changes in unrealized gains or losses relating to the assets and liabilities still held at the reporting date		—			—		(35,331	)		(78,505	)		702,977			(2,222	)

Variable Interest Entities [Member]

Information about Valuation Inputs for Variable Interest Entity Assets and Liabilities Classified as Level 3

European ABS transactions: The fair value of such obligations classified as Level 3 was $1,329,985 and $2,956,501 at December 31, 2013 and December 31, 2012, respectively. Fair values were calculated by using a discounted cash flow approach. The discount rates used were based on the rates implied from the third party quoted values (Level 2) for comparable notes from the same securitization. Significant inputs for the valuation at December 31, 2013 and December 31, 2012 include the following weighted averages:

Successor Ambac—December 31, 2013

Coupon rate: 0.72%

Maturity: 17.86 years

Yield: 1.10%

Predecessor Ambac—December 31, 2012

Coupon rate: 1.64%

Maturity: 12.34 years

Yield: 4.02%

US Commercial ABS transaction: The fair value of such obligations classified as Level 3 was $184,620 at December 31, 2013. Fair values were calculated as the sum of expected future cash flows sourced from the underlying operating assets plus the fair value of the related Ambac financial guarantee cash flows. Expected cash flows were internally modeled in using probability weighted assumptions about future operating cash flows available to fund the debt service. The discount rates applied to cash flows sourced from operating assets were based on interest rates for similar obligations. The fair value of financial guarantee cash flows include internal estimates of future loss payments by Ambac discounted at a rate that incorporates Ambac’s own credit risk. Significant inputs for the valuation at December 31, 2013 include the following weighted averages (there is no comparable Level 3 in this category for December 31, 2012):

Successor Ambac—December 31, 2013

Coupon rate: 6.11%

Maturity: 6.83 years

Yield: 11.95%

- Definition

Tabular disclosure of the fair value of financial instruments, including financial assets and financial liabilities, and the measurements of those instruments, assets, and liabilities.

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