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Fair Value Measurements (Tables)

6 Months Ended

Jun. 30, 2024

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 June 30, 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.

						June 30, 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						742						742						—						742						—						745						745						—						726						19
Foreign obligations						105						105						105						—						—						100						100						100						—						—
U.S. government obligations						105						105						105						—						—						82						82						82						—						—
Residential mortgage-backed securities						253						253						—						253						—						250						250						—						250						—
Commercial mortgage-backed securities						46						46						—						46						—						19						19						—						19						—
Collateralized debt obligations						141						141						—						141						—						139						139						—						139						—
Other asset-backed securities						241						241						—						164						77						303						303						—						235						68
Fixed maturity securities, pledged as collateral:
U.S. government obligations						25						25						25						—						—						—						—						—						—						—
Short-term						—						—						—						—						—						27						27						27						—						—
Short term investments						314						314						313						1						—						426						426						421						5						—
Other investments (1)						558						533						153						—						—						475						463						77						—						—
Cash, cash equivalents and restricted cash						35						35						35						—						—						28						28						27						2						—
Other assets - Derivatives:
Interest rate swaps—asset position						18						18						—						—						18						25						25						—						—						25
Warrants						1						1						—						—						1						1						1						—						—						1
Other assets-Loans						2						1						—						—						1						2						2						—						—						2
Variable interest entity assets:
Fixed maturity securities: Corporate obligations, fair value option						2,010						2,010						—						—						2,010						2,072						2,072						—						—						2,072
Fixed maturity securities: Municipal obligations, available-for-sale						91						91						—						91						—						95						95						—						95						—
Restricted cash						62						62						62						—						—						246						246						246												—
Loans						1,567						1,567						—						—						1,567						1,663						1,663						—						—						1,663
Derivative assets: Interest rate swaps—asset position						174						174						—						174						—						190						190						—						190						—
Derivative assets: Currency swaps—asset position						34						34						—						34						—						36						36						—						36						—
Total financial assets						$	6,626					$	6,600					$	797					$	1,748					$	3,675					$	7,022					$	7,010					$	979					$	1,795					$	3,850
Financial liabilities:
Long term debt, including accrued interest						$	1,015					$	772					$	—					$	753					$	19					$	983					$	697					$	—					$	679					$	18
Other liabilities - Derivatives:
Interest rate swaps—liability position						25						25						—						25						—						35						35						—						35						—
FX forward						—						—						—						—						—						—						—						—						—						—
Liabilities for net financial guarantees written (2)						229						488						—						—						488						292						788						—						—						788
Variable interest entity liabilities:
Long-term debt						2,853						2,852						—						2,646						205						2,967						2,980						—						2,760						220
Derivative liabilities: Interest rate swaps—liability position						1,136						1,136						—						1,136						—						1,197						1,197						—						1,197						—
Total financial liabilities						$	5,258					$	5,273					$	—					$	4,561					$	712					$	5,474					$	5,697					$	—					$	4,671					$	1,026

(1)Excluded from the fair value measurement categories in the table above are investment funds of $380 and $386 as of June 30, 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 $26 and $13 as of June 30, 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 June 30, 2024:
Balance, beginning of period						$	87											$	21					$	2,070					$	1,604											$	3,782
Total gains/(losses) realized and unrealized:
Included in earnings						7												(3)						(51)						29												(19)
Included in other comprehensive income						9												—						3						3												15
Settlements						(26)												—						(12)						(68)												(106)
Balance, end of period						$	77											$	18					$	2,010					$	1,567											$	3,672
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						$	7											$	(3)					$	(51)					$	29											$	(19)
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						$	9											$	—					$	3					$	3											$	15
Three Months Ended June 30, 2023:
Balance, beginning of period						$	81											$	31					$	2,003					$	1,856											$	3,972
Total gains/(losses) realized and unrealized:
Included in earnings						—												(5)						(53)						(66)												(124)
Included in other comprehensive income						—												—						14						50												64
Settlements						—												—						(12)						(69)												(81)
Balance, end of period						$	81											$	25					$	1,952					$	1,772											$	3,831
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)					$	(53)					$	(66)											$	(124)
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						$	—											$	—					$	14					$	50											$	64

Level 3 - Financial Assets and Liabilities Accounted for at Fair Value
																								VIE Assets
						Investments												Derivatives						Investments						Loans												Total
Six Months Ended June 30, 2024:
Balance, beginning of period						$	87											$	26					$	2,072					$	1,663											$	3,848
Additions of VIEs consolidated																																										—
Total gains/(losses) realized and unrealized:
Included in earnings						7												(8)						(32)						49												16
Included in other comprehensive income						9												—						(18)						(14)												(23)
Purchases						—												—						—						—												—
Settlements						(27)												—						(12)						(132)												(170)
Balance, end of period						$	77											$	18					$	2,010					$	1,567											$	3,672
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						$	7											$	(8)					$	(32)					$	49											$	16
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						$	9											$	—					$	(18)					$	(14)											$	(23)
Six Months Ended June 30, 2023:
Balance, beginning of period						$	79											$	26					$	1,828					$	1,829											$	3,762
Additions of VIEs consolidated						—												—						—						—												—
Total gains/(losses) realized and unrealized:
Included in earnings						1												—						80						(7)												73
Included in other comprehensive income						3												—						57						92												152
Purchases						—												—						—						—												—
Settlements						(1)												—						(12)						(141)												(155)
Balance, end of period						$	81											$	25					$	1,952					$	1,772											$	3,831
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											$	—					$	80					$	(7)											$	73
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											$	—					$	57					$	92											152

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 June 30, 2024																								Three Months Ended June 30, 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						$	7					$	(3)					$	(22)					$	—					$	—					$	(5)					$	(119)					$	—
Changes in unrealized gains (losses) relating to financial instruments still held at the reporting date						9						(3)						(22)						—						—						(5)						(119)						—
						Six Months Ended June 30, 2024																								Six Months Ended June 30, 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 or losses included in earnings for the period						$	7					$	(8)					$	17					$	—					$	1					$	—					$	72					$	—
Changes in unrealized gains or losses included in earnings relating to the assets and liabilities still held at the reporting date						9						(8)						17						—						—						—						72						—

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Tabular presentation of Fair value assets and liabilities measured on recurring basis unobservable input reconciliation.

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