Fair Value Measurements (Tables)

9 Months Ended

Sep. 30, 2016

Fair Value Of Investments Measured At NAV As Practical Expedient [Table Text Block]

Below is additional information about such investments in pooled funds that are reported at fair value using NAV as a practical expedient. There are no unfunded commitments applicable to any of these investments for the periods disclosed.

Fair Value

Class of Funds

September 30,
2016

December 31,
2015

Redemption Frequency

Redemption Notice Period

Real estate properties ⁽¹⁾

34,412

59,719

quarterly

10 business days

Diversified hedge fund strategies ⁽²⁾

55,884

35,464

semi-monthly

15 - 30 days

Credit products ⁽³⁾

182,391

99,579

daily, weekly or monthly

0 - 30 days

Illiquid investments ⁽⁴⁾

39,816

44,754

quarterly

180 days

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 September 30, 2016 and December 31, 2015, 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.



	Carrying Amount			Total Fair Value			Fair Value Measurements Categorized as:
September 30, 2016:							Level 1		Level 2			Level 3
Financial assets:
Fixed income securities:
Municipal obligations	$	399,522		$	399,522		$	—	$	399,522		$	—
Corporate obligations	1,872,756			1,872,756			—		1,872,756			—
Foreign obligations	56,923			56,923			56,365		558			—
U.S. government obligations	33,425			33,425			33,425		—			—
U.S. agency obligations	4,106			4,106			—		4,106			—
Residential mortgage-backed securities	2,387,531			2,387,531			—		1,707,956			679,575
Collateralized debt obligations	106,844			106,844			—		106,844			—
Other asset-backed securities	1,129,290			1,129,290			—		1,056,391			72,899
Fixed income securities, pledged as collateral:
U.S. government obligations	64,972			64,972			64,972		—			—
Short term investments	130,732			130,732			130,732		—			—
Other investments ⁽²⁾	419,885			403,414			78,572		—			12,339
Cash and cash equivalents	21,218			21,218			21,218		—			—
Loans	4,513			4,467			—		—			4,467
Derivative assets:
Interest rate swaps—asset position	103,373			103,373			—		21,340			82,033
Other assets	7,729			7,729			—		—			7,729
Variable interest entity assets:
Fixed income securities:
Corporate obligations	2,828,685			2,828,685			—		—			2,828,685
Restricted cash	5,477			5,477			5,477		—			—
Loans	11,476,766			11,476,766			—		—			11,476,766
Derivative assets:
Currency swaps—asset position	68,676			68,676			—		68,676			—
Total financial assets	$	21,122,423		$	21,105,906		$	390,761	$	5,238,149		$	15,164,493
Financial liabilities:
Obligations under investment agreements	$	82,358		$	82,541		$	—	$	—		$	82,541
Long term debt, including accrued interest	1,510,529			1,422,602			—		1,121,249			301,353
Derivative liabilities:
Credit derivatives	16,700			16,700			—		—			16,700
Interest rate swaps—asset position	(97,964		)	(97,964		)	—		(97,964		)	—
Interest rate swaps—liability position	516,638			516,638			—		332,199			184,439
Futures contracts	36			36			36		—			—
Liabilities for net financial guarantees written ⁽¹⁾	2,787,131			4,175,019			—		—			4,175,019
Variable interest entity liabilities:
Long-term debt	11,930,434			11,930,434			—		9,347,134			2,583,300
Derivative liabilities:
Interest rate swaps—liability position	2,304,789			2,304,789			—		2,304,789			—
Total financial liabilities	$	19,050,651		$	20,350,795		$	36	$	13,007,407		$	7,343,352



	Carrying Amount			Total Fair Value			Fair Value Measurements Categorized as:
December 31, 2015:							Level 1		Level 2			Level 3
Financial assets:
Fixed income securities:
Municipal obligations	$	420,770		$	420,770		$	—	$	420,770		$	—
Corporate obligations	1,593,669			1,593,669			—		1,593,669			—
Foreign obligations	96,306			96,306			87,808		8,498			—
U.S. government obligations	26,687			26,687			26,687		—			—
U.S. agency obligations	4,212			4,212			—		4,212			—
Residential mortgage-backed securities	1,977,338			1,977,338			—		1,488,454			488,884
Collateralized debt obligations	84,267			84,267			—		84,267			—
Other asset-backed securities	840,527			840,527			—		840,527			—
Fixed income securities, pledged as collateral:
U.S. government obligations	64,555			64,555			64,555		—			—
Short term investments	225,789			225,789			197,398		28,391			—
Other investments ⁽²⁾	310,600			298,095			45,745		—			12,834
Cash and cash equivalents	35,744			35,744			35,744		—			—
Loans	5,206			5,128			—		—			5,128
Derivative assets:
Interest rate swaps—asset position	84,886			84,886			—		21,848			63,038
Futures contracts	109			109			109		—			—
Other assets	8,696			8,696			—		—			8,696
Variable interest entity assets:
Fixed income securities:
Corporate obligations	2,588,556			2,588,556			—		—			2,588,556
Restricted cash	5,822			5,822			5,822		—			—
Loans	11,690,324			11,690,324			—		—			11,690,324
Total financial assets	$	20,064,063		$	20,051,480		$	463,868	$	4,490,636		$	14,857,460
Financial liabilities:
Obligations under investment agreements	$	100,358		$	101,400		$	—	$	—		$	101,400
Long term debt, including accrued interest	1,481,045			1,235,721			—		132,837			1,102,884
Derivative liabilities:
Credit derivatives	34,543			34,543			—		—			34,543
Interest rate swaps—asset position	(52,128		)	(52,128		)	—		(52,128		)	—
Interest rate swaps—liability position	370,943			370,943			—		243,256			127,687
Futures contracts	—			—			—		—			—
Liabilities for net financial guarantees written ⁽¹⁾	2,033,484			2,325,859			—		—			2,325,859
Variable interest entity liabilities:
Long-term debt	12,327,960			12,327,960			—		9,147,790			3,180,170
Derivative liabilities:
Interest rate swaps—liability position	1,965,265			1,965,265			—		1,965,265			—
Currency swaps—liability position	(36,862		)	(36,862		)	—		(36,862		)	—
Total financial liabilities	$	18,224,608		$	18,272,701		$	—	$	11,400,158		$	6,872,543

(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; Loss and loss expense reserves; Ceded premiums payable, premiums taxes payable and other deferred fees recorded in Other liabilities.


(2)	Excluded from the fair value measurement categories in the table above are investments funds of $312,503 and $239,516 as of September 30, 2016 and December 31, 2015, respectively, which are measured using NAV per share as a practical expedient.

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 September 30, 2016 and December 31, 2015 is summarized below:



	September 30, 2016						December 31, 2015
	CLOs			Other			CLOs			Other ⁽¹⁾
Notional outstanding	$	176,384		$	644,604		$	295,253		$	617,148
Weighted average reference obligation price	99.3			92.2			98.4			85.2
Weighted average life (WAL) in years	0.7			6.2			1.1			6.1
Weighted average credit rating	AA			BBB+			AA			BBB+
Weighted average relative change ratio	36.6		%	31.0		%	36.3		%	33.3		%
CVA percentage	5.93		%	14.37		%	8.34		%	23.34		%
Fair value of derivative liabilities	$	399		$	16,301		$	1,837		$	32,697

(1)

Excludes contract for which fair values are based on credit derivative quotes rather than reference obligations quotes. As of December 31, 2015, these contracts had a combined notional outstanding of $58,482, WAL of 0.2 years and liability fair value of $9. Other inputs to the valuation of these transactions at December 31, 2015 include weighted average quotes of less than 1% of notional, weighted average rating of A+ and Ambac CVA percentage of 0.09%.

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 2016 and 2015. 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
	Investments			Other assets			Derivatives			Investments			Loans			Long-term debt			Total
Three Months Ended September 30, 2016:
Balance, beginning of period	$	722,670		$	8,687		$	(104,032	)	$	2,577,293		$	11,074,772		$	(2,258,009	)	$	12,021,381
Total gains/(losses) realized and unrealized:
Included in earnings	15,804			(958		)	(12,220		)	307,147			690,431			(378,139		)	622,065
Included in other comprehensive income	12,334			—			—			(55,755		)	(221,934		)	49,126			(216,229		)
Purchases	7,126			—			—			—			—			—			7,126
Issuances	—			—			—			—			—			—			—
Sales	—			—			—			—			—			—			—
Settlements	(5,460		)	—			(2,854		)	—			(66,503		)	3,722			(71,095		)
Balance, end of period	$	752,474		$	7,729		$	(119,106	)	$	2,828,685		$	11,476,766		$	(2,583,300	)	$	12,363,248
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	$	—		$	(958	)	$	(12,450	)	$	307,147		$	690,431		$	(378,139	)	$	606,031

Three Months Ended September 30, 2015:
Balance, beginning of period	$	380,332		$	9,704		$	(119,309	)	$	2,747,181		$	13,005,216		$	(2,166,826	)	$	13,856,298
Total gains/(losses) realized and unrealized:
Included in earnings	8,429			(382		)	20,073			39,630			44,404			(59,760		)	52,394
Included in other comprehensive income	(4,288		)	—			—			(106,916		)	(471,321		)	79,314			(503,211		)
Purchases	28			—			—			—			—			—			28
Issuances	—			—			—			—			—			—			—
Sales	—			—			—			—			—			—			—
Settlements	(712		)	—			(2,822		)	—			(70,115		)	3,740			(69,909		)
Deconsolidation of VIEs	$	—		$	—		$	—		$	—		$	(325,123	)	$	—		$	(325,123	)
Balance, end of period	$	383,789		$	9,322		$	(102,058	)	$	2,679,895		$	12,183,061		$	(2,143,532	)	$	13,010,477
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	$	—		$	(382	)	$	(12,285	)	$	39,630		$	102,901		$	(107,567	)	$	22,297



Level 3 - Financial Assets and Liabilities Accounted for at Fair Value
										VIE Assets and Liabilities
	Investments			Other assets			Derivatives			Investments			Loans			Long-term debt			Total
Nine Months Ended September 30, 2016:
Balance, beginning of period	$	488,884		$	8,696		$	(99,192	)	$	2,588,556		$	11,690,324		$	(3,180,170	)	$	11,497,098
Total gains/(losses) realized and unrealized:
Included in earnings	42,823			(967		)	(23,250		)	571,739			1,367,063			(712,696		)	1,244,712
Included in other comprehensive income	35,570			—			—			(331,610		)	(1,385,893		)	355,086			(1,326,847		)
Purchases	99,018			—			—			—			—			—			99,018
Issuances	—			—			—			—			—			—			—
Sales	—			—			—			—			—			—			—
Settlements	(14,619		)	—			3,336			—			(194,728		)	216,582			10,571
Transfers into Level 3	100,798			—			—			—			—			—			100,798
Transfers out of Level 3	—			—			—			—			—			737,898			737,898
Balance, end of period	$	752,474		$	7,729		$	(119,106	)	$	2,828,685		$	11,476,766		$	(2,583,300	)	$	12,363,248
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	$	—		$	(967	)	$	(24,026	)	$	571,739		$	1,367,063		$	(712,696	)	$	1,201,113

Nine Months Ended September 30, 2015:
Balance, beginning of period	$	198,201		$	12,036		$	(215,346	)	$	2,743,050		$	12,371,177		$	(1,263,664	)	$	13,845,454
Total gains/(losses) realized and unrealized:
Included in earnings	21,066			(1,009		)	20,640			14,490			701,562			(922,849		)	(166,100		)
Included in other comprehensive income	(48,611		)	—			—			(77,645		)	(311,773		)	35,303			(402,726		)
Purchases	234,880			—			—			—			—			—			234,880
Issuances	—			—			—			—			—			—			—
Sales	—			—			—			—			—			—			—
Settlements	(21,747		)	(1,705		)	4,430			—			(252,782		)	7,678			(264,126		)
Transfers in Level 3	—			—			88,218			—			—			—			88,218
Deconsolidation of VIEs	—			—			—			—			(325,123		)	—			(325,123		)
Balance, end of period	$	383,789		$	9,322		$	(102,058	)	$	2,679,895		$	12,183,061		$	(2,143,532	)	$	13,010,477
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	$	—		$	(1,009	)	$	(20,081	)	$	14,490		$	760,059		$	(970,656	)	$	(217,197	)

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



Level 3 - Investments by Class:
	Other Asset Backed Securities			Corporate Obligations		Non-Agency RMBS			Total Investments
Three Months Ended September 30, 2016:
Balance, beginning of period	$	71,820		$	—	$	650,850		$	722,670
Total gains/(losses) realized and unrealized:
Included in earnings	999			—		14,805			15,804
Included in other comprehensive income	336			—		11,998			12,334
Purchases	—			—		7,126			7,126
Issuances	—			—		—			—
Sales	—			—		—			—
Settlements	(256		)	—		(5,204		)	(5,460		)
Balance, end of period	$	72,899		$	—	$	679,575		$	752,474
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	$	—		$	—	$	—		$	—

Three Months Ended September 30, 2015:
Balance, beginning of period	$	—		$	—	$	380,332		$	380,332
Total gains/(losses) realized and unrealized:
Included in earnings	—			—		8,429			8,429
Included in other comprehensive income	—			—		(4,288		)	(4,288		)
Purchases	—			—		28			28
Issuances	—			—		—			—
Sales	—			—		—			—
Settlements	—			—		(712		)	(712		)
Balance, end of period	$	—		$	—	$	383,789		$	383,789
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:
	Other Asset Backed Securities			Corporate Obligations			Non-Agency RMBS			Total Investments
Nine Months Ended September 30, 2016:
Balance, beginning of period	$	—		$	—		$	488,884		$	488,884
Total gains/(losses) realized and unrealized:
Included in earnings	1,560			—			41,263			42,823
Included in other comprehensive income	1,401			—			34,169			35,570
Purchases	—			—			99,018			99,018
Issuances	—			—			—			—
Sales	—			—			—			—
Settlements	(769		)	—			(13,850		)	(14,619		)
Transfers into Level 3	70,707			—			30,091			100,798
Balance, end of period	$	72,899		$	—		$	679,575		$	752,474
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	$	—		$	—		$	—		$	—

Nine Months Ended September 30, 2015:
Balance, beginning of period	$	—		$	3,808		$	194,393		$	198,201
Total gains/(losses) realized and unrealized:
Included in earnings	—			(19		)	21,085			21,066
Included in other comprehensive income	—			(286		)	(48,325		)	(48,611		)
Purchases	—			—			234,880			234,880
Issuances	—			—			—			—
Sales	—			—			—			—
Settlements	—			(3,503		)	(18,244		)	(21,747		)
Balance, end of period	$	—		$	—		$	383,789		$	383,789
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:
	Three Months Ended September 30, 2016:									Three Months Ended September 30, 2015:
	Interest Rate Swaps			Credit Derivatives			Total Derivatives			Interest Rate Swaps			Credit Derivatives			Total Derivatives
Balance, beginning of period	$	(85,825	)	$	(18,207	)	$	(104,032	)	$	(52,819	)	$	(66,490	)	$	(119,309	)
Total gains/(losses) realized and unrealized:
Included in earnings	(13,953		)	1,733			(12,220		)	(16,879		)	36,952			20,073
Included in other comprehensive income	—			—			—			—			—			—
Purchases	—			—			—			—			—			—
Issuances	—			—			—			—			—			—
Sales	—			—			—			—			—			—
Settlements	(2,628		)	(226		)	(2,854		)	(2,473		)	(349		)	(2,822		)
Balance, end of period	$	(102,406	)	$	(16,700	)	$	(119,106	)	$	(72,171	)	$	(29,887	)	$	(102,058	)
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	$	(13,953	)	$	1,503		$	(12,450	)	$	(16,879	)	$	4,594		$	(12,285	)



Level 3 - Derivatives by Class:
	Nine Months Ended September 30, 2016:									Nine Months Ended September 30, 2015:
	Interest Rate Swaps			Credit Derivatives			Total Derivatives			Interest Rate Swaps			Credit Derivatives			Total Derivatives
Balance, beginning of period	$	(64,649	)	$	(34,543	)	$	(99,192	)	$	(141,887	)	$	(73,459	)	$	(215,346	)
Total gains/(losses) realized and unrealized:
Included in earnings	(41,804		)	18,554			(23,250		)	(24,106		)	44,746			20,640
Included in other comprehensive income	—			—			—			—			—			—
Purchases	—			—			—			—			—			—
Issuances	—			—			—			—			—			—
Sales	—			—			—			—			—			—
Settlements	4,047			(711		)	3,336			5,604			(1,174		)	4,430
Transfers into Level 3	—			—			—			88,218			—			88,218
Balance, end of period	$	(102,406	)	$	(16,700	)	$	(119,106	)	$	(72,171	)	$	(29,887	)	$	(102,058	)
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	$	(41,804	)	$	17,778		$	(24,026	)	$	(24,106	)	$	4,025		$	(20,081	)

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)			Income (loss) on variable interest entities			Other income or (loss)
Three Months Ended September 30, 2016:
Total gains or losses included in earnings for the period	$	15,804	$	226	$	1,507	$	(13,953	)	$	619,439		$	(958	)
Changes in unrealized gains or losses relating to the assets and liabilities still held at the reporting date	—		—		1,503		(13,953		)	619,439			(958		)

Three Months Ended September 30, 2015:
Total gains or losses included in earnings for the period	$	8,429	$	1,693	$	35,259	$	(16,879	)	$	24,724		$	(382	)
Changes in unrealized gains or losses relating to the assets and liabilities still held at the reporting date	—		—		4,594		(16,879		)	34,964			(382		)

Nine Months Ended September 30, 2016:
Total gains or losses included in earnings for the period	$	42,823	$	711	$	17,843	$	(41,804	)	$	1,226,106		$	(967	)
Changes in unrealized gains or losses relating to the assets and liabilities still held at the reporting date	—		—		17,778		(41,804		)	1,226,106			(967		)

Nine Months Ended September 30, 2015:
Total gains or losses included in earnings for the period	$	21,066	$	2,519	$	42,227	$	(24,106	)	$	(206,797	)	$	(1,009	)
Changes in unrealized gains or losses relating to the assets and liabilities still held at the reporting date	—		—		4,025		(24,106		)	(196,107		)	(1,009		)