v3.22.2
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6 Months Ended |
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| Insurance [Abstract] |
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| 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: | | | | | | | | | | | | | l | Level 1 | | Quoted prices for identical instruments in active markets. Assets and liabilities classified as Level 1 include US Treasury and other foreign government obligations traded in highly liquid and transparent markets, certain highly liquid pooled fund investments, exchange traded futures contracts, variable rate demand obligations and money market funds. | | | | | l | Level 2 | | Quoted 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 representing municipal, asset-backed and corporate obligations, certain interest rate swap contracts and most long-term debt of variable interest entities consolidated under the Consolidation Topic of the ASC. | | | | | l | Level 3 | | Model 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. Assets and liabilities classified as Level 3 include credit derivative contracts, certain warrants, certain uncollateralized interest rate swap contracts, certain equity investments and certain investments in fixed maturity securities. Additionally, Level 3 assets and liabilities generally include loan receivables, and certain long-term debt of variable interest entities consolidated under the Consolidation Topic of the ASC. |
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 June 30, 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: | | June 30, 2022: | | Level 1 | | Level 2 | | Level 3 | | Financial assets: | | | | | | | | | | | | Fixed maturity securities: | | | | | | | | | | | | Municipal obligations | | $ | 60 | | | $ | 60 | | | $ | — | | | $ | 60 | | | $ | — | | | Corporate obligations | | 644 | | | 644 | | | — | | | 633 | | | 11 | | | Foreign obligations | | 81 | | | 81 | | | 81 | | | — | | | — | | | U.S. government obligations | | 62 | | | 62 | | | 62 | | | — | | | — | | | | | | | | | | | | | | Residential mortgage-backed securities | | 197 | | | 197 | | | — | | | 197 | | | — | | | | | | | | | | | | | | Collateralized debt obligations | | 132 | | | 132 | | | — | | | 132 | | | — | | | Other asset-backed securities | | 236 | | | 236 | | | — | | | 166 | | | 69 | | | Fixed maturity securities, pledged as collateral: | | | | | | | | | | | | U.S. government obligations | | 15 | | | 15 | | | 15 | | | — | | | — | | | Short-term | | 70 | | | 70 | | | 70 | | | — | | | — | | | Short term investments | | 452 | | | 452 | | | 450 | | | 2 | | | — | | Other investments (1) | | 598 | | | 590 | | | 72 | | | — | | | — | | | Cash, cash equivalents and restricted cash | | 37 | | | 37 | | | 37 | | | — | | | — | | | Derivative assets: | | | | | | | | | | | | | | | | | | | | | | | Interest rate swaps—asset position | | 39 | | | 39 | | | — | | | 3 | | | 37 | | | | | | | | | | | | | | | | | | | | | | | | | Warrants | | 1 | | | 1 | | | — | | | — | | | 1 | | | | | | | | | | | | | | Other assets-Loans | | 2 | | | 2 | | | — | | | — | | | 2 | | | Variable interest entity assets: | | | | | | | | | | | | | | | | | | | | | | | Fixed maturity securities: Corporate obligations, fair value option | | 2,533 | | | 2,533 | | | — | | | — | | | 2,533 | | | | | | | | | | | | | | Fixed maturity securities: Municipal obligations, available-for-sale | | 109 | | | 109 | | | — | | | 109 | | | — | | | Restricted cash | | 2 | | | 2 | | | 2 | | | — | | | — | | | Loans | | 2,144 | | | 2,144 | | | — | | | — | | | 2,144 | | | | | | | | | | | | | | Derivative assets: Currency swaps-asset position | | 51 | | | 51 | | | — | | | 51 | | | — | | | Total financial assets | | $ | 7,465 | | | $ | 7,458 | | | $ | 789 | | | $ | 1,353 | | | $ | 4,798 | | | Financial liabilities: | | | | | | | | | | | | | | | | | | | | | | | Long term debt, including accrued interest | | $ | 2,748 | | | $ | 2,065 | | | $ | — | | | $ | 2,052 | | | $ | 13 | | | Derivative liabilities: | | | | | | | | | | | | | | | | | | | | | | | Interest rate swaps—asset position | | (1) | | | (1) | | | — | | | (1) | | | — | | | Interest rate swaps—liability position | | 59 | | | 59 | | | — | | | 59 | | | — | | | Futures contracts | | 3 | | | 3 | | | 3 | | | — | | | — | | | | | | | | | | | | | Liabilities for net financial guarantees written (2) | | (968) | | | (348) | | | — | | | — | | | (348) | | | Variable interest entity liabilities: | | | | | | | | | | | Long-term debt (includes $3,184 at fair value) | | 3,340 | | | 3,377 | | | — | | | 3,215 | | | 161 | | | | | | | | | | | | | | Derivative liabilities: Interest rate swaps—liability position | | 1,476 | | | 1,476 | | | — | | | 1,476 | | | — | | | | | | | | | | | | | | Total financial liabilities | | $ | 6,658 | | | $ | 6,632 | | | $ | 3 | | | $ | 6,802 | | | $ | (174) | |
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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-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: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Interest rate swaps—liability position | | 94 | | | 94 | | | — | | | 94 | | | — | | | | | | | | | | | | | | | | | | | | | | | | 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 $518 and $577 as of June 30, 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 June 30, 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. 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, derivative instruments and certain variable interest entity assets and liabilities. Valuation of financial instruments is performed by Ambac’s finance group using methods approved by senior financial management with consultation from risk management and portfolio managers as appropriate. Preliminary valuation results are discussed with portfolio managers quarterly 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, many of the 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 from broker quotes or alternative 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. At June 30, 2022, approximately 6%, 90% and 4% of the fixed maturity investment portfolio (excluding variable interest entity investments) was valued using broker quotes, alternative pricing sources and internal valuation models, respectively. At December 31, 2021, approximately 6%, 90% and 4% of the fixed maturity investment portfolio (excluding variable interest entity investments) was valued using broker quotes, alternative pricing sources and internal valuation models, respectively. 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. Information about the valuation inputs for fixed maturity securities classified as Level 3 is included below: Other asset-backed securities: This security is a subordinated tranche of a securitization collateralized by Ambac-insured military housing bonds. The fair value classified as Level 3 was $69 and $79 at June 30, 2022 and December 31, 2021, respectively. Fair value was calculated using a discounted cash flow approach with expected future cash flows discounted using a yield consistent with the security type and rating. Significant inputs for the valuation at June 30, 2022 and December 31, 2021 include the following: | | | | | | | June 30, 2022: | | a. Coupon rate: | 5.97% | | b. Average Life: | 13.80 years | | c. Yield: | 12.00% | | | | December 31, 2021: | | a. Coupon rate: | 5.97% | | b. Average Life: | 14.14 years | | c. Yield: | 10.20% |
Corporate obligations: This includes certain investments in convertible debt securities. The fair value classified as Level 3 was $11 and $12 at June 30, 2022 and December 31, 2021, respectively. Fair value was calculated by discounting cash flows to average maturity of 2.25 years and yield of 12.7% at June 30, 2022 and average maturity of 2.75 years and yield of 11.6% at December 31, 2021. Yields used are consistent with the security type and rating. 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: Ambac’s derivative instruments primarily comprise interest rate swaps and exchange traded futures contracts. Fair value is determined based upon market quotes from independent sources, when available. When independent quotes are not available, fair value is determined using valuation models. These valuation models require market-driven inputs, including contractual terms, credit spreads, and yield curves. The valuation of certain derivative contracts may require the use of data inputs and assumptions that are determined by management and are not readily observable in the market. Under the Fair Value Measurement Topic of the ASC, Ambac is required to consider its own credit risk when measuring the fair value of derivatives and other liabilities. Factors considered in estimating the amount of any Ambac credit valuation adjustment ("CVA") on such contracts include collateral posting provisions, right of set-off with the counterparty, the period of time remaining on the derivative and the pricing of recent terminations. The aggregate Ambac CVA impact was not significant to the fair value of derivatives at June 30, 2022 or December 31, 2021. Interest rate swaps that are not centrally cleared are valued using vendor-developed models that incorporate interest rates and yield curves that are observable and regularly quoted. These models provide the net present value of the derivatives based on contractual terms and observable market data. Generally, the need for counterparty (or Ambac) CVAs on interest rate derivatives is mitigated by the existence of collateral posting agreements under which adequate collateral has been posted. Certain of these derivative contracts entered into with financial guarantee customers are not subject to collateral posting agreements. Counterparty credit risk related to such customer derivative assets is included in our determination of their fair value. All of Ambac's credit derivatives ("CDS") positions have terminated as of June 30, 2022 and were not significant to Ambac's financial position or results of operations for the periods presented. As of June 30, 2022 Ambac holds warrants to purchase preferred stock of a development stage company. These warrants have a fair value of $1 as of June 30, 2022, determined using a standard warrant valuation model with internally developed input assumptions. Financial Guarantees: Fair value of net financial guarantees written represents our estimate of the cost to Ambac to completely transfer its insurance obligation to another market participant of comparable credit worthiness. In theory, this amount should be the same amount that another market participant of comparable credit worthiness would hypothetically charge in the marketplace, on a present value basis, to provide the same protection as of the balance sheet date. This fair value estimate of financial guarantees is presented on a net basis and includes direct and assumed contracts written, net of ceded reinsurance contracts. Long-term Debt: Long-term debt includes AAC surplus notes, the Sitka AAC Note, Tier 2 Notes issued in connection with the Rehabilitation Exit Transactions and the Ambac UK debt issued in connection with the Ballantyne commutation. The fair values of surplus notes, Sitka AAC Note and Tier 2 Notes are classified as Level 2. The fair value of Ambac UK debt is classified as Level 3. Other Financial Assets and Liabilities: Included in Other assets are loans, the fair values of which are estimated based upon internal valuation models and are classified as Level 3. Variable Interest Entity Assets and Liabilities: The financial assets and liabilities of Legacy Financial Guarantee Insurance VIEs ("FG VIEs") consolidated under the Consolidation Topic of the ASC consist primarily of fixed maturity securities and loans held by the VIEs, derivative instruments and notes issued by the VIEs which are reported as long-term debt. As described in Note 9. Variable Interest Entities, these FG VIEs are securitization entities which have liabilities and/or assets guaranteed by AAC or Ambac UK. The fair values of FG VIE long-term debt are based on price quotes received from independent market sources when available. Such quotes are considered Level 2 and generally consider a variety of factors, including recent trades of the same and similar securities. For those instruments where quotes were not available or cannot be reasonably corroborated, fair values are based on internal valuation models. Comparable to the sensitivities of investments in fixed maturity securities described above, longer (shorter) expected maturities or higher (lower) yields used in the valuation model will, in isolation, result in decreases (increases) in fair value liability measurement for FG VIE long-term debt. FG VIE derivative asset and liability fair values are determined using vendor-developed valuation models, which incorporated observable market data related to specific derivative contractual terms including interest rates, foreign exchange rates and yield curves. The fair value of FG VIE fixed maturity securities and loan assets are generally based on Level 2 market price quotes received from independent market sources when available. When FG VIE asset fair values are not readily available from market quotes, values are estimated internally. Internal valuations of FG VIE’s fixed maturity securities or loan assets are derived from the fair values of the notes issued by the respective VIE and the VIE’s derivatives, determined as described above, adjusted for the fair values of Ambac’s financial guarantees associated with the VIE. The fair value of financial guarantees consist of: (i) estimated future premium cash flows discounted at a rate consistent with that implicit in the fair value of the VIE’s liabilities and (ii) estimates of future claim payments discounted at a rate that includes Ambac’s own credit risk. Estimated future premium payments to be paid by the VIEs were discounted at a weighted average rate of 5.0% and 3.0% at June 30, 2022 and December 31, 2021, respectively. At June 30, 2022, the range of these discount rates was between 4.3% and 7.1%. 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 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 | | Other
Assets | | Derivatives | | Investments | | Loans | | | | Total | | Three Months Ended June 30, 2022: | | | | | | | | | | | | | | Balance, beginning of period | | $ | 86 | | | $ | — | | | $ | 52 | | | $ | 3,131 | | | $ | 2,469 | | | | | $ | 5,738 | | | | | | | | | | | | | | | | | | Total gains/(losses) realized and unrealized: | | | | | | | | | | | | | | | | Included in earnings | | — | | | — | | | (12) | | | (365) | | | (83) | | | | | (460) | | | Included in other comprehensive income | | (5) | | | — | | | — | | | (215) | | | (174) | | | | | (395) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Settlements | | — | | | — | | | (2) | | | (18) | | | (68) | | | | | (88) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Balance, end of period | | $ | 81 | | | $ | — | | | $ | 38 | | | $ | 2,533 | | | $ | 2,144 | | | | | $ | 4,795 | | | 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 | | $ | — | | | $ | — | | | $ | (12) | | | $ | (365) | | | $ | (83) | | | | | $ | (460) | | | 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 | | $ | (5) | | | $ | — | | | $ | — | | | $ | (215) | | | $ | (174) | | | | | $ | (395) | | | | | | | | | | | | | | | | | | Three Months Ended June 30, 2021: | | | | | | | | | | | | | | Balance, beginning of period | | $ | 76 | | | $ | 1 | | | $ | 65 | | | $ | 3,103 | | | $ | 2,948 | | | | | $ | 6,194 | | | | | | | | | | | | | | | | | | Total gains/(losses) realized and unrealized: | | | | | | | | | | | | | | | | Included in earnings | | — | | | — | | | 11 | | | 87 | | | 65 | | | | | 164 | | | Included in other comprehensive income | | 4 | | | — | | | — | | | 5 | | | 5 | | | | | 14 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Settlements | | — | | | (1) | | | (2) | | | (19) | | | (76) | | | | | (98) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Balance, end of period | | $ | 80 | | | $ | — | | | $ | 74 | | | $ | 3,175 | | | $ | 2,943 | | | | | $ | 6,273 | | | 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 | | $ | — | | | $ | — | | | $ | 11 | | | $ | 87 | | | $ | 65 | | | | | $ | 164 | | | 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 | | $ | — | | $ | — | | $ | 5 | | $ | 5 | | | | $ | 14 |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Level 3 - Financial Assets and Liabilities Accounted for at Fair Value | | | | | | | | | | | | | | | VIE Assets | | | | | Investments | | Other
Assets | | Derivatives | | Investments | | Loans | | | | Total | | Six Months Ended June 30, 2022: | | | | | | | | | | | | | | | | Balance, beginning of period | | $ | 91 | | | $ | — | | | $ | 70 | | | $ | 3,320 | | | $ | 2,718 | | | | | $ | 6,199 | | | | | | | | | | | | | | | | | | Total gains/(losses) realized and unrealized: | | | | | | | | | | | | | | | | Included in earnings | | 1 | | | — | | | (29) | | | (458) | | | (178) | | | | | (664) | | | Included in other comprehensive income | | (10) | | | — | | | — | | | (311) | | | (251) | | | | | (572) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Settlements | | (1) | | | — | | | (4) | | | (18) | | | (145) | | | | | (168) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Balance, end of period | | $ | 81 | | | $ | — | | | $ | 38 | | | $ | 2,533 | | | $ | 2,144 | | | | | $ | 4,795 | | | 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 | | | $ | — | | | $ | (29) | | | $ | (458) | | | $ | (178) | | | | | $ | (664) | | | 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 | | $ | (10) | | | $ | — | | | $ | — | | | $ | (311) | | | $ | (251) | | | | | $ | (572) | | | | | | | | | | | | | | | | | | Six Months Ended June 30, 2021: | | | | | | | | | | | | | | | | Balance, beginning of period | | $ | 78 | | | $ | 1 | | | $ | 84 | | | $ | 3,215 | | | $ | 2,998 | | | | | $ | 6,376 | | | | | | | | | | | | | | | | | | Total gains/(losses) realized and unrealized: | | | | | | | | | | | | | | | | Included in earnings | | 1 | | | — | | | (6) | | | (50) | | | 74 | | | | | 18 | | | Included in other comprehensive income | | 3 | | | — | | | — | | | 31 | | | 30 | | | | | 63 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Settlements | | (1) | | | (1) | | | (4) | | | (19) | | | (160) | | | | | (185) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Balance, end of period | | $ | 80 | | | $ | — | | | $ | 74 | | | $ | 3,175 | | | $ | 2,943 | | | | | $ | 6,273 | | | 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 | | | $ | — | | | $ | (6) | | | $ | (50) | | | $ | 74 | | | | | $ | 18 | | | 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 | | | $ | — | | | $ | — | | | $ | 31 | | | $ | 30 | | | | | 63 | | | | | | | | | | | | | | | | |
Invested assets and VIE long-term debt 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: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Net
Investment
Income | | Net Gains
(Losses) on
Derivative
Contracts | | Income
(Loss) on
Variable
Interest
Entities | | Other
Income
or (Expense) | | Three Months Ended June 30, 2022: | | | | | | | | | | Total gains (losses) included in earnings for the period | | $ | — | | | $ | (12) | | | $ | (448) | | | $ | — | | | Changes in unrealized gains (losses) relating to financial instruments still held at the reporting date | | — | | | (12) | | | (448) | | | — | | | | | | | | | | | | Three Months Ended June 30, 2021: | | | | | | | | | | Total gains (losses) included in earnings for the period | | $ | — | | | $ | 11 | | | $ | 152 | | | $ | — | | | Changes in unrealized gains (losses) relating to financial instruments still held at the reporting date | | — | | | 11 | | | 152 | | | — | | | | | | | | | | | | Six Months Ended June 30, 2022: | | | | | | | | | | Total gains or losses included in earnings for the period | | $ | 1 | | | $ | (29) | | | $ | (636) | | | $ | — | | | Changes in unrealized gains or losses included in earnings relating to the assets and liabilities still held at the reporting date | | — | | | (29) | | | (636) | | | — | | | | | | | | | | | | Six Months Ended June 30, 2021: | | | | | | | | | | Total gains or losses included in earnings for the period | | 1 | | | (6) | | | 24 | | | — | | | Changes in unrealized gains or losses included in earnings relating to the assets and liabilities still held at the reporting date | | — | | | (6) | | | 24 | | | — | |
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| X |
- DefinitionThe entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.
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- References
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