2 unchanged sentences
The primary market risks that would impact the value of Ambac’s financial instruments are interest rate risk, credit spread risk and foreign currency risk.
−Removed: As a result of declines in interest rates and increases in credit spreads during the six months ended June 30, 2020 , related to the impact of the COVID-19 pandemic, along with portfolio adjustments during the period, the sensitivities of Ambac's financial instruments have changed from those disclosed in our Annual Report on Form 10-K for the year ended December 31, 2019.
+Added: As a result of declines in interest rates and increases in credit spreads during the nine months ended September 30, 2020, related to the impact of the COVID-19 pandemic, along with portfolio adjustments during the period, the sensitivities of
+Added: Ambac's financial instruments have changed from those disclosed in our Annual Report on Form 10-K for the year ended December 31, 2019.
Interest Rate Risk:
3 unchanged sentences
Financial instruments of VIEs that are consolidated as a result of Ambac financial guarantees are also excluded from Ambac's measures of interest rate risk.
−Removed: Changes in fair value resulting from changes in interest rates are driven
−Removed: primarily by the impact of interest rate shifts on the fixed income investment portfolio (which produce net fair value losses as rates increase), long-term debt and the interest rate derivatives portfolio (which produce net fair value gains as rates increase).
+Added: Changes in fair value resulting from changes in interest rates are driven primarily by the impact of interest rate shifts on the fixed income investment portfolio (which produce net fair value losses as rates increase), long-term debt and the interest rate derivatives portfolio (which produce net fair value gains as rates increase).
Interest rate increases would also have a negative economic impact on expected future claim payments within the financial guarantee portfolio, primarily related to RMBS and student loan policies.
1 unchanged sentence
These scenario tests include parallel and non-parallel shifts in the benchmark interest rate curve.
+Added: | Ambac Financial Group, Inc.
+Added: 76 2020 Third Quarter FORM 10-Q |
The interest rate derivatives portfolio is managed as a partial economic hedge against the effects of rising interest rates elsewhere in the Company, including on Ambac's financial guarantee exposures (the "macro-hedge").
−Removed: At June 30, 2020 , the interest rate sensitivity of the interest rate derivatives portfolio attributable to the macro-hedge position would produce mark-to-market gains or losses of approximately $0.2 million for a 1 basis point parallel shift in USD benchmark interest rates up or down.
+Added: At September 30, 2020, the interest rate sensitivity of the interest rate derivatives portfolio attributable to the macro-hedge position would produce mark-to-market gains or losses of approximately $0.2 million for a 1 basis point parallel shift in USD benchmark interest rates up or down.
This sensitivity is down from $0.4 million per 1 basis point shift at December 31, 2019.
The following table summarizes the estimated change in fair value (based primarily on the valuation methodology discussed in Note 7.
−Removed: Fair Value Measurements to the Unaudited Consolidated Financial Statements included in Part I, Item 1 in this Form 10-Q) on these financial instruments, assuming immediate changes in interest rates at specified levels at June 30, 2020 :
−Removed: ($ in millions)
−Removed: Estimated Change in Net Fair Value
−Removed: Estimated Net Fair Value
+Added: Fair Value Measurements to the Unaudited Consolidated Financial Statements included in Part I, Item 1 in this Form 10-Q) on these financial instruments, assuming immediate changes in interest rates at specified levels at September 30, 2020:
+Added: ($ in millions) Estimated Change in Net Fair Value Estimated Net Fair Value
300 basis point rise $ 20 $ (620)
5 unchanged sentences
(1) Incorporates an interest rate floor of 0%.
−Removed: Due to the low interest rate environment as of June 30, 2020 , stress scenarios involving interest rate declines greater than 200 basis points are not meaningful to Ambac's portfolios.
−Removed: | Ambac Financial Group, Inc.
−Removed: 74 2020 Second Quarter FORM 10-Q |
+Added: Due to the low interest rate environment as of September 30, 2020, stress scenarios involving interest rate declines greater than 200 basis points are not meaningful to Ambac's portfolios.
Credit Spread Risk
2 unchanged sentences
Market liquidity and prevailing risk premiums demanded by market participants are also reflected in spreads and impact valuations.
−Removed: The following table summarizes the estimated change in fair values on Ambac’s net derivative liabilities assuming immediate parallel shifts in reference obligation credit spreads related to written credit derivatives and counterparty credit spreads related to uncollateralized interest rate derivatives at June 30, 2020 .
+Added: The following table summarizes the estimated change in fair values on Ambac’s net derivative liabilities assuming immediate parallel shifts in reference obligation credit spreads related to written credit derivatives and counterparty credit spreads related to uncollateralized interest rate derivatives at September 30, 2020.
It is more likely that actual changes in credit spreads will vary by obligor:
−Removed: ($ in millions)
−Removed: Estimated Change in Net Fair Value
−Removed: Estimated Net Fair Value
+Added: ($ in millions) Estimated Change in Net Fair Value Estimated Net Fair Value
250 Basis Point Widening $ (22) $ (53)
6 unchanged sentences
Derivative contracts entered into with credit exposure to financial guarantee customers are not typically subject to collateral posting agreements.
−Removed: As a result of runoff of uncollateralized interest rate and credit default swap liabilities, Ambac’s credit valuation adjustment included in the determination of fair value has resulted in $0.1 million reduction to derivative liabilities as of June 30, 2020 .
+Added: As a result of runoff of uncollateralized interest rate and credit default swap liabilities, Ambac’s credit valuation adjustment included in the determination of fair value has resulted in $0.1 million reduction to derivative liabilities as of September 30, 2020.
Refer to Note 7.
3 unchanged sentences
Accordingly such securities are excluded from the company's spread sensitivity measures.
−Removed: The following table summarizes the estimated change in fair values of Ambac’s fixed income investment portfolio assuming immediate shifts in credit spreads across all holdings other than Ambac guaranteed securities at June 30, 2020 .
+Added: The following table summarizes the estimated change in fair values of Ambac’s fixed income investment portfolio assuming immediate shifts in credit spreads across all holdings other than Ambac guaranteed securities at September 30, 2020.
It is more likely that actual changes in credit spreads will vary by security:
−Removed: ($ in millions)
−Removed: Estimated Change in Net Fair Value
−Removed: Estimated Net Fair Value
+Added: ($ in millions) Estimated Change in Net Fair Value Estimated Net Fair Value
250 Basis Point Widening $ (159) $ 1,817
4 unchanged sentences
Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.