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Fair Value Measurements (Tables) | 3 Months Ended
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Mar. 31, 2022
Fair Value Disclosures [Abstract] |
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, 2022 and December 31, 2021, 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:
March 31, 2022: |  | Level 1 |  | Level 2 |  | Level 3
Financial assets: |  |  |  |  |  |  |  |  |  |
Fixed maturity securities: |  |  |  |  |  |  |  |  |  |
Municipal obligations |  | $ | 188 |  |  | $ | 188 |  |  | $ | — |  |  | $ | 188 |  |  | $ | — |
Corporate obligations |  | 577 |  |  | 577 |  |  | 1 |  |  | 564 |  |  | 12 |
Foreign obligations |  | 88 |  |  | 88 |  |  | 88 |  |  | — |  |  | — |
U.S. government obligations |  | 51 |  |  | 51 |  |  | 51 |  |  | — |  |  | — |
Residential mortgage-backed securities |  | 225 |  |  | 225 |  |  | — |  |  | 225 |  |  | — |
Collateralized debt obligations |  | 120 |  |  | 120 |  |  | — |  |  | 120 |  |  | — |
Other asset-backed securities |  | 252 |  |  | 252 |  |  | — |  |  | 178 |  |  | 74 |
Fixed maturity securities, pledged as collateral: |  |  |  |  |  |  |  |  |  |
U.S. government obligations |  | 15 |  |  | 15 |  |  | 15 |  |  | — |  |  | — |
Short-term |  | 99 |  |  | 99 |  |  | 99 |  |  | — |  |  | — |
Short term investments |  | 540 |  |  | 540 |  |  | 526 |  |  | 13 |  |  | — |
Other investments (1) |  | 660 |  |  | 652 |  |  | 92 |  |  | — |  |  | — |
Cash, cash equivalents and restricted cash |  | 67 |  |  | 67 |  |  | 67 |  |  | — |  |  | — |
Derivative assets: |  |  |  |  |  |  |  |  |  |
Interest rate swaps—asset position |  | 56 |  |  | 56 |  |  | — |  |  | 3 |  |  | 52 |
Other assets-Loans |  | 3 |  |  | 3 |  |  | — |  |  | — |  |  | 3 |
Variable interest entity assets: |  |  |  |  |  |  |  |  |  |
Fixed maturity securities: Corporate obligations, fair value option |  | 3,131 |  |  | 3,131 |  |  | — |  |  | — |  |  | 3,131 |
Fixed maturity securities: Municipal obligation, trading |  | 114 |  |  | 114 |  |  | — |  |  | 114 |  |  | — |
Fixed maturity securities: Municipal obligations, available-for-sale |  | 119 |  |  | 119 |  |  | — |  |  | 119 |  |  | — |
Restricted cash |  | 49 |  |  | 49 |  |  | 49 |  |  | — |  |  | — |
Loans |  | 2,469 |  |  | 2,469 |  |  | — |  |  | — |  |  | 2,469 |
Derivative assets: Currency swaps-asset position |  | 42 |  |  | 42 |  |  | — |  |  | 42 |  |  | — |
Total financial assets |  | $ | 8,864 |  |  | $ | 8,856 |  |  | $ | 988 |  |  | $ | 1,567 |  |  | $ | 5,741 |
Financial liabilities: |  |  |  |  |  |  |  |  |  |
Long term debt, including accrued interest |  | $ | 2,834 |  |  | $ | 2,315 |  |  | $ | — |  |  | $ | 2,296 |  |  | $ | 19 |
Derivative liabilities: |  |  |  |  |  |  |  |  |  |
Credit derivatives |  | 1 |  |  | 1 |  |  | — |  |  | — |  |  | 1 |
Interest rate swaps—liability position |  | 75 |  |  | 75 |  |  | — |  |  | 75 |  |  | — |
Futures contracts |  | 1 |  |  | 1 |  |  | 1 |  |  | — |  |  | — |
Liabilities for net financial guarantees written (2) |  | (970) |  |  | (197) |  |  | — |  |  | — |  |  | (197) |
Variable interest entity liabilities: |  |  |  |  |  |  |  |  |  |
Long-term debt (includes $3,701 at fair value) |  | 4,124 |  |  | 4,161 |  |  | — |  |  | 4,001 |  |  | 160 |
Derivative liabilities: Interest rate swaps—liability position |  | 1,866 |  |  | 1,866 |  |  | — |  |  | 1,866 |  |  | — |
Total financial liabilities |  | $ | 7,930 |  |  | $ | 8,221 |  |  | $ | 1 |  |  | $ | 8,238 |  |  | $ | (17) |
|  | Carrying Amount |  | Total Fair Value |  | Fair Value Measurements Categorized as:
December 31, 2021: |  | Level 1 |  | Level 2 |  | Level 3
Financial assets: |  |  |  |  |  |  |  |  |  |
Fixed maturity securities: |  |  |  |  |  |  |  |  |  |
Municipal obligations |  | $ | 340 |  |  | $ | 340 |  |  | $ | — |  |  | $ | 340 |  |  | $ | — |
Corporate obligations |  | 613 |  |  | 613 |  |  | 1 |  |  | 600 |  |  | 12 |
Foreign obligations |  | 87 |  |  | 87 |  |  | 87 |  |  | — |  |  | — |
U.S. government obligations |  | 45 |  |  | 45 |  |  | 45 |  |  | — |  |  | — |
Residential mortgage-backed securities |  | 252 |  |  | 252 |  |  | — |  |  | 252 |  |  | — |
Collateralized debt obligations |  | 128 |  |  | 128 |  |  | — |  |  | 128 |  |  | — |
Other asset-backed securities |  | 265 |  |  | 265 |  |  | — |  |  | 187 |  |  | 79 |
Fixed maturity securities, pledged as collateral: |  |  |  |  |  |  |  |  |  |
U.S. government obligations |  | 15 |  |  | 15 |  |  | 15 |  |  | — |  |  | — |
Short-term |  | 105 |  |  | 105 |  |  | 105 |  |  | — |  |  | — |
Short term investments |  | 414 |  |  | 414 |  |  | 369 |  |  | 46 |  |  | — |
Other investments (1) |  | 690 |  |  | 683 |  |  | 106 |  |  | — |  |  | — |
Cash, cash equivalents and restricted cash |  | 21 |  |  | 21 |  |  | 21 |  |  | 1 |  |  | — |
Derivative assets: |  |  |  |  |  |  |  |  |  |
Interest rate swaps—asset position |  | 76 |  |  | 76 |  |  | — |  |  | 5 |  |  | 71 |
Other assets - equity in sponsored VIE |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Other assets-loans |  | 3 |  |  | 3 |  |  | — |  |  | — |  |  | 3 |
Variable interest entity assets: |  |  |  |  |  |  |  |  |  |
Fixed maturity securities: Corporate obligations, fair value option |  | 3,320 |  |  | 3,320 |  |  | — |  |  | — |  |  | 3,320 |
Fixed maturity securities: Municipal obligations, available-for-sale |  | 136 |  |  | 136 |  |  | — |  |  | 136 |  |  | — |
Restricted cash |  | 2 |  |  | 2 |  |  | 2 |  |  | — |  |  | — |
Loans |  | 2,718 |  |  | 2,718 |  |  | — |  |  | — |  |  | 2,718 |
Derivative assets: Currency swaps—asset position |  | 38 |  |  | 38 |  |  | — |  |  | 38 |  |  | — |
Total financial assets |  | $ | 9,268 |  |  | $ | 9,261 |  |  | $ | 750 |  |  | $ | 1,732 |  |  | $ | 6,202 |
Financial liabilities: |  |  |  |  |  |  |  |  |  |
Long term debt, including accrued interest |  | $ | 2,806 |  |  | $ | 2,598 |  |  | $ | — |  |  | $ | 2,575 |  |  | $ | 22 |
Derivative liabilities: |  |  |  |  |  |  |  |  |  |
Credit derivatives |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Interest rate swaps—liability position |  | 94 |  |  | 94 |  |  | — |  |  | 94 |  |  | — |
Futures contracts |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Liabilities for net financial guarantees written (2) |  | (866) |  |  | (112) |  |  | — |  |  | — |  |  | (112) |
Variable interest entity liabilities: |  |  |  |  |  |  |  |  |  |
Long-term debt (includes $4,056 at fair value) |  | 4,216 |  |  | 4,255 |  |  | — |  |  | 4,086 |  |  | 169 |
Derivative liabilities: Interest rate swaps—liability position |  | 1,940 |  |  | 1,940 |  |  | — |  |  | 1,940 |  |  | — |
Total financial liabilities |  | $ | 8,190 |  |  | $ | 8,775 |  |  | $ | — |  |  | $ | 8,695 |  |  | $ | 79 |
(1)Excluded from the fair value measurement categories in the table above are investment funds of $560 and $577 as of March 31, 2022 and December 31, 2021, 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 $8 and $8 as of March 31, 2022 and December 31, 2021, 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 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 |  |
|  | Investments(1) |  | Other Assets(2) |  | Derivatives |  | Investments |  | Loans |  |  |  | Total
Three Months Ended March 31, 2022: |  |  |  |  |  |  |  |  |  |  |  |
Balance, beginning of period |  | $ | 91 |  |  | $ | — |  |  | $ | 70 |  |  | $ | 3,320 |  |  | $ | 2,718 |  |  |  |  | $ | 6,199 |
Total gains/(losses) realized and unrealized: |  |  |  |  |  |  |  |  |  |  |  |  |  |
Included in earnings |  | — |  |  | — |  |  | (17) |  |  | (93) |  |  | (96) |  |  |  |  | (204) |
Included in other comprehensive income |  | (4) |  |  | — |  |  | — |  |  | (96) |  |  | (76) |  |  |  |  | (176) |
Purchases |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  |  |  | — |
Settlements |  | (1) |  |  | — |  |  | (2) |  |  | — |  |  | (78) |  |  |  |  | (80) |
Balance, end of period |  | $ | 86 |  |  | $ | — |  |  | $ | 52 |  |  | $ | 3,131 |  |  | $ | 2,469 |  |  |  |  | $ | 5,738 |
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 |  | $ | — |  |  | $ | — |  |  | $ | (17) |  |  | $ | (93) |  |  | $ | (96) |  |  |  |  | $ | (204) |
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 |  | $ | (4) |  |  | $ | — |  |  | $ | — |  |  | $ | (96) |  |  | $ | (76) |  |  |  |  | $ | (176) |
Three Months Ended March 31, 2021: |  |  |  |  |  |  |  |  |  |  |  |
Balance, beginning of period |  | $ | 78 |  |  | $ | 1 |  |  | $ | 84 |  |  | $ | 3,215 |  |  | $ | 2,998 |  |  |  |  | $ | 6,376 |
Total gains/(losses) realized and unrealized: |  |  |  |  |  |  |  |  |  |  |  |  |  |
Included in earnings |  | — |  |  | — |  |  | (17) |  |  | (138) |  |  | 9 |  |  |  |  | (145) |
Included in other comprehensive income |  | (2) |  |  | — |  |  | — |  |  | 26 |  |  | 24 |  |  |  |  | 49 |
Purchases |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  |  |  | — |
Settlements |  | — |  |  | — |  |  | (2) |  |  | — |  |  | (84) |  |  |  |  | (86) |
Balance, end of period |  | $ | 76 |  |  | $ | 1 |  |  | $ | 65 |  |  | $ | 3,103 |  |  | $ | 2,948 |  |  |  |  | $ | 6,194 |
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 |  | $ | — |  |  | $ | — |  |  | $ | (17) |  |  | $ | (138) |  |  | $ | 9 |  |  |  |  | $ | (145) |
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 |  | $ | (2) |  | $ | — |  | $ | — |  | $ | 26 |  | $ | 24 |  |  |  | $ | 49
(1) Investments classified as Level 3 consist of a single other asset-backed security. (2) Other assets carried at fair value and classified as Level 3 relate to an equity interest in an Ambac sponsored VIE.
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 or (Expense)
Three Months Ended March 31, 2022: |  |  |  |  |  |  |  |
Total gains (losses) included in earnings for the period |  | $ | — |  |  | $ | (17) |  |  | $ | (188) |  |  | $ | — |
Changes in unrealized gains (losses) relating to financial instruments still held at the reporting date |  | — |  |  | (17) |  |  | (188) |  |  | — |
Three Months Ended March 31, 2021: |  |  |  |  |  |  |  |
Total gains (losses) included in earnings for the period |  | $ | — |  |  | $ | (17) |  |  | $ | (129) |  |  | $ | — |
Changes in unrealized gains (losses) relating to financial instruments still held at the reporting date |  | — |  |  | (17) |  |  | (129) |  |  | — |

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