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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM |  | 10-Q

☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended March 31, 2025

☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number: |  | 1-10777

AMBAC FINANCIAL GROUP, INC.

(Exact name of Registrant as specified in its charter)

Delaware |  | 13-3621676
(State of incorporation) |  | (I.R.S. employer identification no.)
One World Trade Center | New York | NY |  | 10007
(Address of principal executive offices) |  | (Zip code)

| (212) | 658-7470 |
(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act: |  |
Title of each class |  | Trading Symbol |  | Name of each exchange on which registered
Common stock par value $0.01 per share |  | AMBC |  | New York Stock Exchange

Indicate by check mark whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company or an emerging growth company. See definition of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act): (Check one):

Large accelerated filer | ☐ | Accelerated filer | ☒ | Non-accelerated filer | ☐ | Smaller reporting company | ☐ | Emerging growth company | ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes ☒ No ☐
As of May 9, 2025, 46,427,421 shares of common stock, par value $0.01 per share, of the Registrant were outstanding.

AMBAC FINANCIAL GROUP, INC. AND SUBSIDIARIES
TABLE OF CONTENTS

Cautionary Statement Pursuant to the Private Securities Litigation Reform Act of 1995 | 1
Item Number | Page |  | Item Number | Page
PART I. FINANCIAL INFORMATION |  |  | PART I (CONTINUED) |
1 | Unaudited Consolidated Financial Statements of Ambac Financial Group, Inc. and Subsidiaries |  |  |  | U.S. Insurance Statutory Basis Financial Results | 37
| Consolidated Balance Sheets (Unaudited) | 2 |  |  | Non-GAAP Financial Measures | 37
| Consolidated Statements of Total Comprehensive Income (Loss) (Unaudited) | 3 |  | 3 | Quantitative and Qualitative Disclosures About Market Risk | 39
| Consolidated Statements of Stockholders' Equity (Unaudited) | 4 |  | 4 | Controls and Procedures | 39
| Consolidated Statements of Cash Flows (Unaudited) | 5 |  |  |  |
| Notes to Unaudited Consolidated Financial Statements | 6 |  | PART II. OTHER INFORMATION |
2 | Management's Discussion and Analysis of Financial Condition and Results of Operations | 27 |  | 1 | Legal Proceedings | 40
| Overview | 28 |  | 1A | Risk Factors | 40
| Critical Accounting Policies and Estimates | 29 |  | 2 | Unregistered Sales of Equity Securities and Use of Proceeds | 40
| Results of Operations | 29 |  | 3 | Defaults Upon Senior Securities | 40
| Liquidity and Capital Resources | 32 |  | 5 | Other Information | 41
| Balance Sheet | 34 |  | 6 | Exhibits | 40
| Accounting Standards | 37 |  | SIGNATURES | 41

Ambac Financial Group, Inc. | i | First Quarter 2025 Form 10-Q

Table of Contents
CAUTIONARY STATEMENT PURSUANT TO THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
Management has included in Parts I and II of this Quarterly Report on Form 10-Q, statements that may constitute “forward-looking statements” within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Words such as “estimate,” “project,” “plan,” “believe,” “anticipate,” “intend,” “planned,” “potential” and similar expressions, or future or conditional verbs such as “will,” “should,” “would,” “could,” and “may,” or the negative of those expressions or verbs, identify forward-looking statements. We caution readers that these statements are not guarantees of future performance. Forward-looking statements are not historical facts, but instead represent only our beliefs regarding future events, which may by their nature be inherently uncertain and some of which may be outside our control. These statements may relate to plans and objectives with respect to the future, among other things which may change. We are alerting you to the possibility that our actual results may differ, possibly materially, from the expected objectives or anticipated results that may be suggested, expressed or implied by these forward-looking statements. Important factors that could cause our results to differ, possibly materially, from those indicated in the forward-looking statements include, among others, those discussed under “Risk Factors” in Part I, Item 1A of the 2023 Annual Report on Form 10-K and in Part II, Item 1A of this quarterly Report on Form 10-Q.
Any or all of management’s forward-looking statements here or in other publications may turn out to be incorrect and are based on management’s current belief or opinions. Ambac Financial Group’s (“AFG”) and its subsidiaries’ (collectively, “Ambac” or the “Company”) actual results may vary materially, and there are no guarantees about the performance of Ambac’s securities. Among events, risks, uncertainties or factors that could cause actual results to differ materially are: (1) the high degree of volatility in the price of AFG’s common stock; (2) failure to consummate the proposed sale of all of the common stock of Ambac Assurance Corporation (“AAC”) and the transactions contemplated by the related stock purchase agreement (the “Sale Transactions”) in a timely manner or at all; (3) disruptions from the proposed Sale Transactions, including from litigation, that may harm Ambac’s business, including current plans and operations; (4) potential adverse reactions or changes to business relationships resulting from the announcement or completion of the proposed Sale Transactions; (5) uncertainty concerning the Company’s ability to achieve value for holders of its securities from the specialty property and casualty insurance business, the insurance distribution business, or related businesses; (6) inadequacy of reserves established for losses and loss expenses and the possibility that changes in loss reserves may result in further volatility of earnings or financial results; (7) risks historically reported by the Company with respect to the legacy financial guarantee business, which may continue to affect the Company if the Sale Transactions are not consummated; (8) credit risk throughout Ambac’s business, including but not limited to exposures to reinsurers and insurance distribution partners; (9) the Company’s inability to generate the significant amount of cash needed to service its debt and financial obligations, and its inability to refinance its indebtedness; (10) the Company’s substantial indebtedness could adversely affect the Company’s financial condition and operating flexibility; (11) the Company may not be able to obtain financing, refinance its outstanding indebtedness, or raise capital on acceptable terms or at all due to its substantial indebtedness and financial condition; (12) greater than expected underwriting losses in the Company’s specialty property and casualty insurance business; (13) failure of specialty insurance program partners to properly market, underwrite or administer policies; (14) inability to obtain reinsurance coverage or charge rates for insurance on expected terms; (15) loss of key relationships for production of business in specialty property and casualty and insurance distribution businesses or the inability to secure
such additional relationships to produce expected results; (16) the impact of catastrophic public health, environmental or natural events, or global or regional conflicts; (17) the risk that the Company’s risk management policies and practices do not anticipate certain risks and/or the magnitude of potential for loss; (18) restrictive covenants in agreements and instruments that impair Ambac’s ability to pursue or achieve its business strategies; (19) disagreements or disputes with the Company’s insurance regulators; (20) failure of a financial institution in which we maintain cash and investment accounts; (21) adverse impacts from changes in prevailing interest rates; (22) events or circumstances that result in the impairment of our intangible assets and/or goodwill that was recorded in connection with Ambac’s acquisitions; (23) the risk of litigation, regulatory inquiries, investigations, claims or proceedings, and the risk of adverse outcomes in connection therewith; (24) the Company’s ability to adapt to the rapid pace of regulatory change; (25) actions of stakeholders whose interests are not aligned with broader interests of Ambac's stockholders; (26) system security risks, data protection breaches and cyber attacks; (27) failures in services or products provided by third parties; (28) political developments that disrupt the economies where the Company has insured exposures or the markets in which our insurance programs operate; (29) our inability to attract and retain qualified executives, senior managers and other employees, or the loss of such personnel; (30) fluctuations in foreign currency exchange rates; (31) failure to realize our business expansion plans, including failure to effectively onboard new program partners, or failure of such plans to create value; (32) greater competition for our specialty property and casualty insurance business and/or our insurance distribution business; (33) loss or lowering of the AM Best rating for our property and casualty insurance company subsidiaries; (34) disintermediation within the insurance industry or greater competition from technology-based insurance solutions or non-traditional insurance markets; (35) adverse effects of market cycles in the property and casualty insurance industry; (36) variations in commission income resulting from timing of policy renewals and the net effect of new and lost business production; (37) variations in contingent commissions resulting from the effects insurance losses; (38) reliance on a limited number of counterparties to produce revenue in our specialty property and casualty insurance and insurance distribution businesses; (39) changes in law or in the functioning of the healthcare market that impair the business model of our accident and health managing general underwriter; (40) difficulties in identifying appropriate acquisition or investment targets, properly evaluating the business and prospects of acquired businesses, businesses in which we invest, or targets, integrating acquired businesses into our business or failures to realize expected synergies from acquisitions or new business investments; (41) failure to realize expected benefits from investments in technology; (42) harmful acts and omissions of our business counterparts; and (43) other risks and uncertainties that have not been identified at this time.

Ambac Financial Group, Inc. | 1 | First Quarter 2025 Form 10-Q

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PART I. FINANCIAL INFORMATION
Item 1. Unaudited Financial Statements of Ambac Financial Group, Inc. and Subsidiaries
AMBAC FINANCIAL GROUP, INC. AND SUBSIDIARIES
Consolidated Balance Sheets

| March 31, |  | December 31,
(Dollars in thousands, except share data) (March 31, 2025 (Unaudited)) | 2025 |  | 2024
Assets: |  |  |
Investments: |  |  |
Fixed maturity securities - available-for-sale, at fair value (amortized cost of $164,688 and $162,124) | $ | 161,569 |  |  | $ | 157,020 |
Short-term investments, at fair value (amortized cost of $101,604 and $127,588) | 101,610 |  |  | 127,601 |
Other investments (includes $7,420 and $7,499 at fair value) | 28,214 |  |  | 28,294 |
Total investments (net of allowance for credit losses of $0 and $0) | 291,393 |  |  | 312,915 |
Cash and cash equivalents (including $17,596 and $17,669 of restricted cash) | 51,660 |  |  | 47,275 |
Premium receivables (net of allowance for credit losses of $142 and $142) | 64,563 |  |  | 57,222 |
Commission and fees receivable | 65,819 |  |  | 55,377 |
Reinsurance recoverable on paid and unpaid losses (net of allowance for credit losses of $100 and 100) | 351,110 |  |  | 306,191 |
Deferred ceded premium | 144,914 |  |  | 148,300 |
Deferred acquisition costs | 9,615 |  |  | 8,572 |
Intangible assets, less accumulated amortization | 345,061 |  |  | 344,775 |
Goodwill | 429,314 |  |  | 418,234 |
Other assets | 107,829 |  |  | 92,317 |
Assets held-for-sale | 6,392,004 |  |  | 6,267,200 |
Total assets | $ | 8,253,282 |  |  | $ | 8,058,378 |
Liabilities and Stockholders’ Equity: |  |  |
Liabilities: |  |  |
Unearned premiums | $ | 181,387 |  |  | $ | 182,446 |
Loss and loss adjustment expense reserves | 373,105 |  |  | 349,062 |
Ceded premiums payable | 81,358 |  |  | 53,002 |
Deferred program fees and reinsurance commissions | 7,176 |  |  | 7,500 |
Commissions payable | 81,017 |  |  | 71,431 |
Deferred taxes | 69,742 |  |  | 70,135 |
Short-term debt | 150,000 |  |  | 150,000 |
Accrued interest payable | 2,695 |  |  | 2,560 |
Other liabilities | 91,429 |  |  | 89,036 |
Liabilities held-for-sale | 6,003,908 |  |  | 5,887,685 |
Total liabilities | 7,041,817 |  |  | 6,862,857 |
Commitments and contingencies (See Note 13) |  |  |
Redeemable noncontrolling interest | 185,417 |  |  | 140,860 |
Stockholders’ equity: |  |  |
Preferred stock, par value $0.01 per share;20,000,000 shares authorized shares; issued and outstanding shares—none | — |  |  | — |
Common stock, par value $0.01 per share; 130,000,000 shares authorized; issued shares: 48,875,167 and 48,875,167 | 489 |  |  | 489 |
Additional paid-in capital | 333,356 |  |  | 331,007 |
Accumulated other comprehensive income (loss) | (133,168) |  |  | (188,436) |
Retained earnings | 681,489 |  |  | 742,185 |
Treasury stock, shares at cost: 2,447,746 and 2,368,194 | (29,945) |  |  | (28,339) |
Total Ambac Financial Group, Inc. stockholders’ equity | 852,221 |  |  | 856,906 |
Nonredeemable noncontrolling interest | 173,827 |  |  | 197,755 |
Total stockholders’ equity | 1,026,048 |  |  | 1,054,661 |
Total liabilities, redeemable noncontrolling interest and stockholders’ equity | $ | 8,253,282 |  |  | $ | 8,058,378 |

See accompanying Notes to Unaudited Consolidated Financial Statements

Ambac Financial Group, Inc. | 2 | First Quarter 2025 Form 10-Q

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AMBAC FINANCIAL GROUP, INC. AND SUBSIDIARIES
Consolidated Statements of Total Comprehensive Income (Loss) (Unaudited)

|  | Three Months Ended March 31, |  |
(Dollars in thousands, except share data) |  | 2025 |  | 2024 |  |  |  |
Revenues: |  |  |  |  |  |  |  |
Net premiums earned |  | $ | 15,678 |  |  | $ | 25,579 |  |  |  |  |
Commission income |  | 36,771 |  |  | 17,729 |  |  |  |  |
Program fees |  | 3,652 |  |  | 2,567 |  |  |  |  |
Servicing and other fees |  | 4,964 |  |  | — |  |  |  |  |
Net investment income |  | 2,815 |  |  | 3,640 |  |  |  |  |
Other revenue |  | (1,124) |  |  | 36 |  |  |  |  |
Total revenues and other income |  | 62,756 |  |  | 49,551 |  |  |  |  |
Expenses: |  |  |  |  |  |  |  |
Losses and loss adjustment expenses |  | 10,496 |  |  | 19,355 |  |  |  |  |
Policy acquisition costs |  | 3,841 |  |  | 4,424 |  |  |  |  |
Commission expense |  | 10,365 |  |  | 9,822 |  |  |  |  |
General and administrative expenses |  | 38,531 |  |  | 17,575 |  |  |  |  |
Intangible amortization and depreciation |  | 9,176 |  |  | 1,614 |  |  |  |  |
Interest expense |  | 5,454 |  |  | — |  |  |  |  |
Total expenses |  | 77,863 |  |  | 52,790 |  |  |  |  |
Pretax income (loss) from continuing operations |  | (15,107) |  |  | (3,239) |  |  |  |  |
Provision (benefit) for income taxes from continuing operations |  | (617) |  |  | 130 |  |  |  |  |
Net income (loss) from continuing operations |  | (14,490) |  |  | (3,369) |  |  |  |  |
Net income (loss) from discontinued operations, net of tax (including loss on disposal of $14,496 in 2025) |  | (30,247) |  |  | 24,140 |  |  |  |  |
Net income (loss) |  | (44,737) |  |  | 20,771 |  |  |  |  |
Less: net (gain) loss attributable to noncontrolling interest |  | (1,654) |  |  | (701) |  |  |  |  |
Net income (loss) attributable to Ambac shareholders |  | $ | (46,391) |  |  | $ | 20,070 |  |  |  |  |
Net income (loss) attributable to Ambac shareholders |  |  |  |  |  |  |  |
Continuing operations |  | $ | (16,144) |  |  | $ | (4,070) |  |  |  |  |
Discontinued operations |  | (30,247) |  |  | 24,140 |  |  |  |  |
Total |  | $ | (46,391) |  |  | $ | 20,070 |  |  |  |  |
Other comprehensive income (loss), after tax |  |  |  |  |  |  |  |
Net income (loss) |  | $ | (44,737) |  |  | $ | 20,771 |  |  |  |  |
Unrealized gains (losses) on securities, net of income tax provision (benefit) of $645 and $611 |  | 18,606 |  |  | (7,017) |  |  |  |  |
Gains (losses) on foreign currency translation, net of income tax provision (benefit) of $0 and $0 |  | 36,220 |  |  | (7,770) |  |  |  |  |
Credit risk changes of fair value option liabilities, net of income tax provision (benefit) of $147 and $(84) |  | 442 |  |  | (253) |  |  |  |  |
Changes to postretirement benefit, net of income tax provision (benefit) of $0 and $0 |  | — |  |  | (380) |  |  |  |  |
Total other comprehensive income (loss), net of income tax |  | 55,268 |  |  | (15,420) |  |  |  |  |
Total comprehensive income, net of income tax |  | 10,531 |  |  | 5,351 |  |  |  |  |
Less: net (gain) loss attributable to noncontrolling interest |  | (1,654) |  |  | (701) |  |  |  |  |
Less: (gain) loss on foreign currency translation attributable to noncontrolling interest |  | (4,252) |  |  | — |  |  |  |  |
Total comprehensive income attributable to shareholders |  | $ | 4,625 |  |  | $ | 4,650 |  |  |  |  |
Net income (loss) from continuing operations per share attributable to Ambac shareholders |  |  |  |  |  |  |  |
Basic |  | $ | (0.58) |  |  | $ | (0.09) |  |  |  |  |
Diluted |  | $ | (0.58) |  |  | $ | (0.09) |  |  |  |  |
Net income (loss) from discontinued operations per share attributable to Ambac shareholders |  |  |  |  |  |  |  |
Basic |  | $ | (0.64) |  |  | $ | 0.53 |  |  |  |  |
Diluted |  | $ | (0.64) |  |  | $ | 0.53 |  |  |  |  |
Net income (loss) per share attributable to Ambac shareholders |  |  |  |  |  |  |  |
Basic |  | $ | (1.22) |  |  | $ | 0.44 |  |  |  |  |
Diluted |  | $ | (1.22) |  |  | $ | 0.44 |  |  |  |  |
Weighted average number of common shares outstanding: |  |  |  |  |  |  |  |
Basic |  | 47,313,012 |  |  | 45,827,076 |  |  |  |  |
Diluted |  | 47,313,012 |  |  | 45,827,076 |  |  |  |  |

See accompanying Notes to Unaudited Consolidated Financial Statements

Ambac Financial Group, Inc. | 3 | First Quarter 2025 Form 10-Q

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AMBAC FINANCIAL GROUP, INC. AND SUBSIDIARIES
Consolidated Statements of Stockholders’ Equity (Unaudited)

Three months ended March 31, 2025 and 2024
|  |  | Ambac Financial Group, Inc. |  |
(Dollars in thousands) | Total |  | Preferred Stock |  | Common Stock |  | Additional Paid-in Capital |  | Accumulated Other Comprehensive Income |  | Retained Earnings |  | Common Stock Held in Treasury, at Cost |  | Nonredeemable Noncontrolling Interest
Balance at December 31, 2024 | $ | 1,054,661 |  |  | $ | — |  |  | $ | 489 |  |  | $ | 331,007 |  |  | $ | (188,436) |  |  | $ | 742,185 |  |  | $ | (28,339) |  |  | $ | 197,755 |
Total comprehensive income (loss) | 8,877 |  |  | — |  |  | — |  |  | — |  |  | 55,268 |  |  | (46,391) |  |  | — |  |  | — |
Stock-based compensation | 2,349 |  |  |  |  |  |  | 2,349 |  |  |  |  |  |  |  |  |
Cost of shares repurchased | (3,122) |  |  |  |  |  |  |  |  |  |  |  |  | (3,122) |  |  |
Cost of shares (acquired) issued under equity plan | (1,605) |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (3,121) |  |  | 1,516 |  |  | — |
Changes to noncontrolling interest (1) | (35,112) |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (11,184) |  |  | — |  |  | (23,928) |
Balance at March 31, 2025 | $ | 1,026,048 |  |  | $ | — |  |  | $ | 489 |  |  | $ | 333,356 |  |  | $ | (133,168) |  |  | $ | 681,489 |  |  | $ | (29,945) |  |  | $ | 173,827 |
Balance at December 31, 2023 | $ | 1,414,615 |  |  | $ | — |  |  | $ | 467 |  |  | $ | 291,761 |  |  | $ | (160,046) |  |  | $ | 1,246,048 |  |  | $ | (16,573) |  |  | $ | 52,958 |
Total comprehensive income (loss) | 4,650 |  |  | — |  |  | — |  |  | — |  |  | (15,420) |  |  | 20,070 |  |  | — |  |  | — |
Stock-based compensation | (463) |  |  |  |  |  |  | (463) |  |  |  |  |  |  |  |  |
Cost of shares (acquired) issued under equity plan | (682) |  |  | — |  |  | — |  |  |  |  | — |  |  | (594) |  |  | (88) |  |  |
Changes to noncontrolling interest | 45 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 47 |  |  | — |  |  | (2) |
Balance at March 31, 2024 | $ | 1,418,165 |  |  | $ | — |  |  | $ | 467 |  |  | $ | 291,298 |  |  | $ | (175,466) |  |  | $ | 1,265,571 |  |  | $ | (16,661) |  |  | $ | 52,956 |

See accompanying Notes to Unaudited Consolidated Financial Statements

Ambac Financial Group, Inc. | 4 | First Quarter 2025 Form 10-Q

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AMBAC FINANCIAL GROUP, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows (Unaudited)

|  | Three Months Ended March 31,
(Dollars in thousands) |  | 2025 |  | 2024
Cash flows from operating activities: |  |  |  |
Net income (loss) |  | $ | (44,737) |  |  | $ | 20,771 |
Net income (loss) from discontinued operations |  | (30,247) |  |  | 24,140 |
Net income (loss) from continuing operations |  | (14,490) |  |  | (3,369) |
Adjustments to reconcile net income to net cash provided by (used in) operating activities: |  |  |  |
Intangible amortization and depreciation |  | 9,176 |  |  | 1,614 |
Amortization of bond premium and discount |  | (63) |  |  | (83) |
Share-based compensation |  | 2,349 |  |  | (463) |
Unearned premiums, net |  | 2,327 |  |  | 668 |
Losses and loss expenses, net |  | (20,876) |  |  | 6,941 |
Ceded premiums payable |  | 28,356 |  |  | 20,928 |
Premium receivables |  | (18,813) |  |  | (15,916) |
Corporate costs reallocated to continuing operations |  | 2,763 |  |  | 3,944 |
Other, net |  | (3,341) |  |  | (7,193) |
Net cash provided by (used in) operating activities from continuing operations |  | (12,612) |  |  | 7,071 |
Cash flows from investing activities: |  |  |  |
Proceeds from sales of bonds |  | — |  |  | (467) |
Proceeds from matured bonds |  | 8,488 |  |  | 8,460 |
Purchases of bonds |  | (10,990) |  |  | (22,077) |
Purchases of other investments |  | — |  |  | (474) |
Change in short-term investments |  | 25,972 |  |  | 14,435 |
Other, net |  | (2,131) |  |  | (149) |
Net cash provided by (used in) investing activities from continuing operations |  | 21,339 |  |  | (272) |
Cash flows from financing activities: |  |  |  |
Payments for purchases of common stock held in treasury |  | (3,122) |  |  | — |
Tax payments related to shares withheld for share-based compensation plans |  | (1,606) |  |  | (682) |
Distributions to noncontrolling interest holders |  | (708) |  |  | (650) |
Net cash provided by (used in) financing activities from continuing operations |  | (5,436) |  |  | (1,332) |
Effect of foreign exchange on cash and cash equivalents - continuing operations |  | 1,094 |  |  | — |
Net cash provided by (used in) continuing operations |  | 4,385 |  |  | 5,467 |
Cash, cash equivalents, and restricted cash at beginning of period - continuing operations |  | 47,275 |  |  | 19,223 |
Cash, cash equivalents, and restricted cash at end of period - continuing operations |  | 51,660 |  |  | 24,690 |
Net cash provided by (used in) operating activities from discontinued operations |  | 43,904 |  |  | 10,446 |
Net cash provided by (used in) investing activities from discontinued operations |  | 13,150 |  |  | 50,960 |
Net cash provided by (used in) financing activities from discontinued operations |  | (48,369) |  |  | (45,558) |
Effect of foreign exchange on cash and cash equivalents - discontinued operations |  | 225 |  |  | (104) |
Net cash provided by (used in) discontinued operations |  | 8,910 |  |  | 15,744 |
Cash, cash equivalents, and restricted cash at beginning of period - discontinued operations |  | 66,077 |  |  | 255,183 |
Cash, cash equivalents, and restricted cash at end of period - discontinued operations |  | 74,987 |  |  | 270,927 |

See accompanying Notes to Unaudited Consolidated Financial Statements

Ambac Financial Group, Inc. | 5 | First Quarter 2025 Form 10-Q

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AMBAC FINANCIAL GROUP, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Note 1. Background and Business Description |  | 7 |  | Note 8. Goodwill and Intangible Assets |  | 21
Note 2. Segment Information |  | 10 |  | Note 9. Revenues From Contracts with Customers |  | 21
Note 3. Discontinued Operation |  | 11 |  | Note 10. Comprehensive Income (Loss) |  | 22
Note 4. Investments |  | 13 |  | Note 11. Net Income Per Share |  | 23
Note 5. Fair Value Measurements |  | 15 |  | Note 12. Income Taxes |  | 24
Note 6. Insurance Contracts |  | 19 |  | Note 13. Commitments and Contingencies |  | 24
Note 7. Derivative Instruments |  | 20 |  |  |  |

Ambac Financial Group, Inc. | 6 | First Quarter 2025 Form 10-Q

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Notes to Unaudited Consolidated Financial Statement s
Ambac Financial Group, Inc. and Subsidiaries
(Dollar Amounts in Thousands, Except Per Share Amounts)
1. BACKGROUND AND BUSINESS DESCRIPTION
Business
The following description provides an update of Note 1. Background and Business Description and Note 2. Basis of Presentation and Significant Accounting Policies in the Notes to the Consolidated Financial Statements included in Part II, Item 8 in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024, and should be read in conjunction with the complete descriptions provided in the Form 10-K. Capitalized terms used, but not defined herein, and in the other footnotes to the Consolidated Financial Statements included in this Quarterly Report on Form 10-Q shall have the meanings ascribed thereto in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024.
Ambac Financial Group, Inc. (“AFG”), headquartered in New York City, is an insurance holding company incorporated in the state of Delaware on April 29, 1991. References to “Ambac,” the “Company,” “we,” “our,” and “us” are to AFG and its subsidiaries, as the context requires. Ambac's principal businesses include:
•Insurance Distribution — Ambac's specialty property and casualty ("P&C") insurance underwriting and di stribution business, includes Managing General Agents and Underwriters (collectively "MGAs" or "MGA/Us"), an insurance broker, and other distribution and underwriting businesses. Insurance Distribution includes Beat Capital Partners Limited, which was acquired on July 31, 2024. At March 31, 2025, Ambac's insurance distribution platform operates in the following lines of business: property, niche specialty risk, accident & health, miscellaneous specialty, reinsurance, marine & energy, specialty auto, other professional and professional Directors & Officers ("D&O") .
•Specialty Property & Casualty Insurance — Ambac's Specialty Property & Casualty Insurance program business currently includes five carriers (collectively, “Everspan”). Everspan carriers have an A.M. Best rating of 'A-' (Excellent) which was last affirmed on June 13, 2024.
The Company reports these two business operations as segments; see Note 2. Segment Information for further information.
Basis of Presentation
The Company has disclosed its significant accounting policies in the Notes to Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024. The following significant accounting policies provide an update to those included in the Company’s Annual Report on Form 10-K.
The accompanying unaudited consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles ("GAAP") for interim financial reporting and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and disclosures required by GAAP for annual periods. These consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Annual Report on Form 10-K for the year ended December 31, 2024. The accompanying consolidated financial statements have not been audited by an independent registered public accounting firm in accordance with the standards of the Public Company Accounting Oversight Board (U.S.), but in the opinion of management such financial statements include all adjustments necessary for the fair presentation of the Company’s consolidated financial position and results of operations. The results of operations for the three months ended March 31, 2025, may not be indicative of the results that may be expected for the year ending December 31, 2025. The December 31, 2024, consolidated balance sheet was derived from audited financial statements.
The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. As additional information becomes available or actual amounts become determinable, the recorded estimates are revised and reflected in operating results.
Consolidation
The consolidated financial statements include the accounts of AFG and all other entities in which AFG (directly or through its subsidiaries) has a controlling financial interest. All significant intercompany balances have been eliminated. The usual condition for a controlling financial interest is ownership of a majority of the voting interests of an entity.
Held for Sale and Discontinued Operations
The Company has separately classified the assets and liabilities of AAC as held for sale as a result of AAC's pending sale and meeting specified accounting criteria. Assets and liabilities held for sale are presented separately within the Consolidated Balance Sheets with any adjustments necessary to measure the disposal group at the lower of its carrying value or fair value less costs to sell. The stockholders' equity section of the Consolidated Balance Sheet continues to be reported on an aggregate basis; equity components (including nonredeemable NCI) solely attributable to AAC are not presented separately.
The Company reports the results of operations of AAC as discontinued operations since the pending sale also represents a strategic shift that will have a major effect on the Company's operations and financial results. The results of discontinued operations are reported separately as Net income (loss) from discontinued operations within the Consolidated Statements of Total Comprehensive Income for the current and prior periods. AAC cash flows are reflected as Net cash provided by (used in) discontinued operations within the Consolidated Statements of Cash Flows for each period presented.
Refer to Sale of Ambac Assurance Corporation ("AAC") in Note 3. Discontinued Operation for further information.

Ambac Financial Group, Inc. | 7 | First Quarter 2025 Form 10-Q

Table of Contents
Notes to Unaudited Consolidated Financial Statement s
Ambac Financial Group, Inc. and Subsidiaries
(Dollar Amounts in Thousands, Except Per Share Amounts)
Foreign Currency
The impact of non-functional currency transactions and the remeasurement of non-functional currency assets and liabilities into the respective subsidiaries' functional currency (collectively "foreign currency transactions gains/(losses)") are $(1,582) and $0 for the three months ended March 31, 2025 and 2024, respectively. Foreign currency transaction gains/(losses) are primarily the result of Beat's transactions in currencies (primarily the U.S. dollar) other than its functional currency (the British Pound Sterling).
Noncontrolling Interests ("NCI")
Nonredeemable NCI
Nonredeemable NCI of $122,909 and $146,837 as of March 31, 2025 and December 31, 2024 includes the NCI share in certain operating units which are minority owned by the units' respective management teams that do not have associated put options. As of December 31, 2024, there were no put options associated with any of these minority interests and as such, the aggregate amount was classified as nonredeemable NCI on the balance sheet. During the three months ended March 31, 2025, certain NCI shares were reclassified between nonredeemable and redeemable NCI as further described under "Redeemable NCI" below. The acquisition date valuation method to determine the fair value of nonredeemable NCI was the discounted cash flow approach. The significant fair value assumptions used in the model included estimated long term revenue and expense forecasts and the discount rate. When redeemable NCI shares are no longer redeemable, such as when put options expire unused, the NCI shares are reclassified to nonredeemable NCI with no change in carrying value.
At March 31, 2025, and December 31, 2024, AAC had 4,596 shares of issued and outstanding Auction Market Preferred Shares ("AMPS") with a liquidation preference of $114,900 relative to Ambac common shareholders (reported as nonredeemable noncontrolling interest of $50,918 on Ambac's balance sheet). See Note 5. Discontinued Operation in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024. for further discussion of the AMPS.
Redeemable Noncontrolling Interest
The Xchange, All Trans, Capacity Marine, Riverton and Beat acquisitions resulted in a majority ownership of the acquired entities by Ambac. Under the terms of all the acquisition
agreements, Ambac has call options to purchase the remaining interests from the minority owners (i.e., noncontrolling interests) and the minority owners have put options to sell their interests to Ambac. Because the exercise of the put options are outside the control of Ambac, in accordance with the Distinguishing Liabilities from Equity Topic of the ASC, Ambac reports redeemable NCI in the mezzanine section of its consolidated balance sheet. In addition, during the three months ended March 31, 2025, Ambac entered into put options with certain minority owners of the MGA/U operating entities that are majority owned by Beat. These put options are embedded in the associated NCI shares ("Option Shares"), resulting in remeasurement of the shares at fair value inclusive of the put options, and reclassification of the Option Shares from nonredeemable NCI to redeemable NCI. The change in carrying value resulting from revaluation of $10,276 is recorded as an offset to retained earnings, with a corresponding impact on earnings per share.
The redeemable noncontrolling interest is remeasured on an annual basis as the greater of:
i.the carrying value under ASC 810, which attributes a portion of consolidated net income (loss) to the redeemable noncontrolling interest, and
ii.the redemption value of the put option under ASC 480 as if it were exercisable at the end of the reporting period.
Any increase (decrease) in the carrying amount of the redeemable noncontrolling interest as a result of adjusting to the redemption value of the put option is recorded as an offset to retained earnings. The impact of such differences on earnings per share are presented in Note 11. Net Income Per Share.
Following is a rollforward of redeemable noncontrolling interest.

Three Months Ended March 31, |  | 2025 |  | 2024
Beginning balance |  | $ | 140,860 |  |  | $ | 17,079 |
Reclassification from nonredeemable noncontrolling interest including remeasurement at fair value |  | 42,180 |  |  | — |
Reclassification to nonredeemable noncontrolling interest |  | (1,877) |  |  | — |
Net income (loss) attributable to redeemable noncontrolling interest (ASC 810) |  | 258 |  |  | 703 |
Distributions |  | (708) |  |  | (650) |
Adjustment to redemption value (ASC 480) |  | 907 |  |  | (53) |
Foreign exchange |  | 3,797 |  |  | — |
Ending balance |  | $ | 185,417 |  |  | $ | 17,079 |

Ambac Financial Group, Inc. | 8 | First Quarter 2025 Form 10-Q

Table of Contents
Notes to Unaudited Consolidated Financial Statement s
Ambac Financial Group, Inc. and Subsidiaries
(Dollar Amounts in Thousands, Except Per Share Amounts)

Supplemental Disclosure of Cash Flow Information |  | Three Months Ended March 31,
|  | 2025 |  | 2024
Cash paid during the period for: |  |  |  |
Income taxes |  | $ | 6,834 |  |  | $ | 2,122 |
Interest on debt |  | 3,819 |  |  | — |
Non-cash investing and financing activities: |  |  |  |
Securities acquired (transferred) in connection with financial guarantee commutations |  | — |  |  | (65,000) |
|  | March 31,
|  | 2025 |  | 2024
Reconciliation of cash, cash equivalents, and restricted cash reported within the Consolidated Balance Sheets to the Consolidated Statements of Cash Flows: |  |  |  |
Cash and cash equivalents |  | $ | 34,064 |  |  | $ | 13,753 |
Restricted cash |  | 17,596 |  |  | 10,937 |
Total cash, cash equivalents, and restricted cash shown on the Consolidated Statements of Cash Flows |  | $ | 51,660 |  |  | $ | 24,690 |

Restricted cash is cash that we do not have the right to use for general purposes and includes fiduciary cash held by Ambac's insurance distribution subsidiaries, consolidated variable interest entity cash to support the obligations of the consolidated VIEs and cash received as collateral under their derivatives agreements.
Reclassifications and Rounding
Reclassifications may have been made to prior years' amounts to conform to the current year's presentation. Certain amounts and tables in the consolidated financial statements and associated notes may not add due to rounding.
Adopted Accounting Standards
There have been no new accounting standards adopted during the three months ended March 31, 2025.
Future Application of Accounting Standards and Required Disclosures
Income Taxes:
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740) - Improvements to Income Tax Disclosures. The enhancements in the ASU include the following:
•Within the rate reconciliation table, disclosure of additional categories of information about federal, state and foreign income taxes and providing more details about the reconciling items in some categories if the items meet a quantitative threshold.
•Annual disclosure of income taxes paid (net of refunds received) disaggregated by federal (national), state and foreign taxes and disaggregation of the information by jurisdiction based on a quantitative threshold.
•Other disclosures include: i) income (or loss) from continuing operations before income tax expense (or benefit) disaggregated between domestic and foreign and ii) income tax expense (or benefit) from continuing operations disaggregated by federal (national), state, and foreign.
The ASU is effective for annual periods beginning after December 15, 2024, with early adoption permitted. Ambac will
adopt this ASU for the annual reporting period ending December 31, 2025. The standard is not expected to have a consequential impact on Ambac's financial statements.
Expense Disaggregation Disclosures:
In November 2024, the FASB issued ASU 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40). The enhanced disclosures requirements include the following:
•Disclose the amounts of certain expense categories included in each relevant expense caption. Those categories applicable to Ambac include employee compensation, depreciation, and intangible asset amortization. A relevant expense caption is an expense caption presented on the face of the income statement within continuing operations that contains any of the expense categories listed above.
•Include certain amounts that are already required to be disclosed under current GAAP in the same disclosure as the other disaggregation requirements.
•Disclose a qualitative description of the amounts remaining in relevant expense captions that are not separately disaggregated quantitatively.
•Disclose the total amount of selling expenses and, in annual reporting periods, an entity’s definition of selling expenses.
The ASU is effective for annual periods beginning after December 15, 2026 and for interim reporting periods after December 15, 2027 with early adoption permitted. Ambac has not determined if it will early adopt this ASU and is evaluating the impact on Ambac's financial statements.

Ambac Financial Group, Inc. | 9 | First Quarter 2025 Form 10-Q

Table of Contents
Notes to Unaudited Consolidated Financial Statement s
Ambac Financial Group, Inc. and Subsidiaries
(Dollar Amounts in Thousands, Except Per Share Amounts)
2. SEGMENT INFORMATION
The Company reports its results of continuing operations in two segments: Specialty Property and Casualty Insurance and Insurance Distribution. These reportable segments offer distinct products and services as further described in Note 1. Background and Business Description. The operating entities within each segment are wholly or majority owned by separate intermediate holding companies: Everspan Holdings, LLC for Specialty Property and Casualty Insurance and Cirrata Group, LLC for Insurance Distribution. The Company's segments have separate management teams with incentive compensation structures based on segment level performance. Financial reporting for each segment is regularly provided to the Company's Chief Executive Officer, who is the chief operating decision maker ("CODM") for purposes of monitoring the businesses, assessing performance and allocating resources.
The following tables summarize the components of the Company’s total revenues and expenses, and pretax income (loss) by reportable business segment. Information provided below for “Corporate and Other” primarily relates to the operations of AFG, which will include investment income on its investment portfolio and costs to maintain the operations of AFG, including public company reporting, capital management and business development costs for the acquisition and development of new business initiatives. As a result of the Company reporting the results of operations of AAC as discontinued operations, certain corporate costs charged to AAC totaling $2,763 for the three months ended March 31, 2025 and $3,944, for the three months ended March 31, 2024, have been reported in Net income from continuing operations on the Consolidated Statements of Total Comprehensive Income and included in Corporate and Other in the tables below.

Ambac Financial Group, Inc. | 10 | First Quarter 2025 Form 10-Q

Table of Contents
Notes to Unaudited Consolidated Financial Statement s
Ambac Financial Group, Inc. and Subsidiaries
(Dollar Amounts in Thousands, Except Per Share Amounts)

|  | Three Months Ended March 31, 2025 |  | Three Months Ended March 31, 2024
|  | Reportable Segments |  |  |  |  |  |  |  | Reportable Segments |  |  |  |  |  |
|  | Specialty Property & Casualty Insurance |  | Insurance Distribution |  | Corporate & Other |  |  |  | Total |  | Specialty Property & Casualty Insurance |  | Insurance Distribution |  | Corporate & Other |  |  |  | Total
Revenues: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Net premiums earned |  | $ | 15,678 |  |  |  |  |  |  |  |  | $ | 15,678 |  |  | $ | 25,579 |  |  |  |  |  |  |  |  | $ | 25,579 |
Commission income |  |  |  | $ | 36,771 |  |  |  |  |  |  | 36,771 |  |  |  |  | $ | 17,729 |  |  |  |  |  |  | 17,729 |
Servicing and other fees |  |  |  | 4,964 |  |  |  |  |  |  | 4,964 |  |  |  |  | — |  |  |  |  |  |  | — |
Program fees |  | 3,652 |  |  |  |  |  |  |  |  | 3,652 |  |  | 2,567 |  |  |  |  |  |  |  |  | 2,567 |
Net investment income |  | 1,842 |  |  | 376 |  |  | 597 |  |  |  |  | 2,815 |  |  | 1,399 |  |  | 50 |  |  | $ | 2,192 |  |  |  |  | 3,640 |
Other income (expense) |  | (1) |  |  | (1,113) |  |  | (10) |  |  |  |  | (1,124) |  |  | (3) |  |  | 86 |  |  | (47) |  |  |  |  | 36 |
Total revenues from continuing operations (1) |  | 21,171 |  |  | 40,998 |  |  | 587 |  |  |  |  | 62,756 |  |  | 29,542 |  |  | 17,865 |  |  | 2,145 |  |  |  |  | 49,551 |
Less: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Losses and loss adjustment expenses |  | 10,496 |  |  |  |  |  |  |  |  | 10,496 |  |  | 19,355 |  |  |  |  |  |  |  |  | 19,355 |
Policy acquisition costs |  | 3,841 |  |  |  |  |  |  |  |  | 3,841 |  |  | 4,424 |  |  |  |  |  |  |  |  | 4,424 |
Commission expenses |  |  |  | 10,365 |  |  |  |  |  |  | 10,365 |  |  |  |  | 9,822 |  |  |  |  |  |  | 9,822 |
Intangible amortization and depreciation |  | — |  |  | 8,872 |  |  | 304 |  |  |  |  | 9,176 |  |  | — |  |  | 1,149 |  |  | 465 |  |  |  |  | 1,614 |
Interest expense |  |  |  | 5,454 |  |  |  |  |  |  | 5,454 |  |  |  |  | — |  |  |  |  |  |  | — |
Compensation expense |  | 3,510 |  |  | 13,533 |  |  | 5,844 |  |  |  |  | 22,887 |  |  | 1,760 |  |  | 2,296 |  |  | 6,490 |  |  |  |  | 10,546 |
Non Compensation expense |  | 1,821 |  |  | 5,017 |  |  | 8,806 |  |  |  |  | 15,644 |  |  | 2,182 |  |  | 625 |  |  | 4,222 |  |  |  |  | 7,029 |
Total expenses from continuing operations |  | 19,668 |  |  | 43,241 |  |  | 14,954 |  |  |  |  | 77,863 |  |  | 27,721 |  |  | 13,892 |  |  | 11,177 |  |  |  |  | 52,790 |
Segment pretax income (loss) |  | 1,503 |  |  | (2,243) |  |  | (14,367) |  |  |  |  | (15,107) |  |  | 1,821 |  |  | 3,973 |  |  | (9,032) |  |  |  |  | (3,239) |
Segment income tax expense (benefit) |  | 78 |  |  | (500) |  |  | (195) |  |  |  |  | (617) |  |  | 106 |  |  | 118 |  |  | (94) |  |  |  |  | 130 |
Segment net income (loss) |  | 1,425 |  |  | (1,743) |  |  | (14,172) |  |  |  |  | (14,490) |  |  | 1,715 |  |  | 3,855 |  |  | (8,938) |  |  |  |  | (3,369) |
Segment net (income) loss attributable to noncontrolling interest |  | — |  |  | (1,654) |  |  |  |  |  |  | (1,654) |  |  | 2 |  |  | (703) |  |  |  |  |  |  | (701) |
Segment net income (loss) attributable to Ambac shareholders |  | $ | 1,425 |  |  | $ | (3,397) |  |  | $ | (14,172) |  |  |  |  | (16,144) |  |  | $ | 1,713 |  |  | $ | 3,152 |  |  | $ | (8,938) |  |  |  |  | (4,070) |
Reconciliation to consolidated net income (loss) attributable to Ambac stockholders |  |  |  |  |  |  |  |  |  |  |  |  |  |
Discontinued operations |  |  |  |  |  |  |  |  |  | (30,247) |  |  |  |  |  |  |  |  |  |  | 24,140 |
Net income (loss) attributable to Ambac shareholders |  |  |  |  |  |  |  |  |  | $ | (46,391) |  |  |  |  |  |  |  |  |  |  | $ | 20,070 |
Reconciliation of segment assets to consolidated total assets |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Total assets |  | $ | 802,856 |  |  | $ | 929,172 |  |  | $ | 129,250 |  |  |  |  | $ | 1,861,278 |  |  | $ | 608,006 |  |  | $ | 155,722 |  |  | $ | 210,671 |  |  |  |  | $ | 974,399 |
Discontinued operations |  |  |  |  |  |  |  |  |  | 6,392,004 |  |  |  |  |  |  |  |  |  |  | 7,454,216 |
Total consolidated assets |  |  |  |  |  |  |  |  |  | $ | 8,253,282 |  |  |  |  |  |  |  |  |  |  | $ | 8,428,615 |
EBITDA Reconciliation |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Segment net income (loss) |  | $ | 1,425 |  |  | $ | (1,743) |  |  | $ | (14,172) |  |  |  |  | $ | (14,490) |  |  | $ | 1,715 |  |  | $ | 3,855 |  |  | $ | (8,938) |  |  |  |  | $ | (3,369) |
Adjustments: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Interest expense |  | — |  |  | 5,454 |  |  | — |  |  |  |  | 5,454 |  |  | — |  |  | — |  |  | — |  |  |  |  | — |
Income taxes |  | 78 |  |  | (500) |  |  | (195) |  |  |  |  | (617) |  |  | 106 |  |  | 118 |  |  | (94) |  |  |  |  | 130 |
Depreciation |  | — |  |  | 109 |  |  | 305 |  |  |  |  | 413 |  |  | — |  |  | 10 |  |  | 465 |  |  |  |  | 475 |
Intangible amortization |  | — |  |  | 8,763 |  |  | — |  |  |  |  | 8,763 |  |  | — |  |  | 1,139 |  |  | — |  |  |  |  | 1,139 |
EBITDA |  | 1,503 |  |  | 12,083 |  |  | (14,062) |  |  |  |  | (477) |  |  | 1,821 |  |  | 5,122 |  |  | (8,567) |  |  |  |  | (1,625) |
Add: Impact of noncontrolling interests |  |  |  | (5,000) |  |  |  |  |  |  | (5,000) |  |  | 2 |  |  | (920) |  |  |  |  |  |  | (920) |
Ambac EBITDA |  | $ | 1,503 |  |  | $ | 7,083 |  |  | $ | (14,063) |  |  |  |  | $ | (5,477) |  |  | $ | 1,823 |  |  | $ | 4,202 |  |  | $ | (8,567) |  |  |  |  | $ | (2,545) |

(1)Inter-segment revenues and inter-segment pre-tax income (loss) amounts are insignificant and are not presented separately.
3. DISCONTINUED OPERATION
Sale of Ambac Assurance Corporation ("AAC")
On June 4, 2024, AFG entered into a stock purchase agreement (the "Purchase Agreement") with American Acorn Corporation (the “Buyer”), a Delaware corporation owned by funds managed by Oaktree Capital Management, L.P., pursuant to which and subject to the conditions set forth therein, AFG will sell all of the
issued and outstanding shares of common stock of AAC, a wholly-owned subsidiary of AFG, to the Buyer for aggregate consideration of $420,000 in cash (the "Sale"). The terms of the Sale as contemplated by the Purchase Agreement provide that, at the closing of the Sale (the “Closing”), Buyer will acquire complete ownership of the common stock of AAC and all of its wholly owned subsidiaries, including Ambac UK. In connection with and pursuant to the Purchase Agreement, AFG has agreed to issue to Buyer a warrant exercisable for a number of shares of

Ambac Financial Group, Inc. | 11 | First Quarter 2025 Form 10-Q

Table of Contents
Notes to Unaudited Consolidated Financial Statement s
Ambac Financial Group, Inc. and Subsidiaries
(Dollar Amounts in Thousands, Except Per Share Amounts)
common stock, par value $0.01, of AFG representing 9.9% of the fully diluted shares of AFG’s common stock as of March 31, 2024, pro forma for the issuance of the warrant. The warrant will have an exercise price per share of $18.50 with a 6.5-year term from the date of issuance and will be immediately exercisable. The Buyer continues to pursue the final outstanding regulatory approval, which would be received only after a hearing at or prior to which third parties would have an opportunity to object to the Sale. As a result, consistent with the terms of the Purchase Agreement, the term of the Purchase Agreement has been automatically extended from April 4, 2025, to July 3, 2025. See Note 5. Discontinued Operation in the Notes to Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024, for further information regarding the Sale.
AFG recorded an expected loss on sale in the Statement of Comprehensive Income (Loss) for the year ended December 31, 2024 of $(570,145) equal to the difference between the sale proceeds (net of the value of the warrants to be issued) and the carrying value of AAC's net assets held-for-sale, less expected closing costs. AFG recorded an additional loss of $(14,496) in the three months ended March 31, 2025, reflecting remeasurement of net assets held-for-sale and the change in fair value of the warrant to be issued to Buyer during the period, bringing valuation allowance on held-for-sale assets to $(584,642) as of March 31, 2025. The carrying value of held-for-sale assets and liabilities, and consequently the expected loss on disposal, are subject to variability through the closing date of the Sale. Changes to the carrying value of held-for-sale assets and liabilities could arise from changes in estimates of financial guarantee losses and loss adjustment expense reserves, including subrogation recoverable; changes in the valuation of invested assets and other financial instruments carried at fair value; adverse or favorable litigation outcomes; and other operating results of AAC and its subsidiaries, including consolidated variable interest entities (“VIEs”). Additionally, at closing, net income will be impacted by the reclassification from Accumulated Other Comprehensive Income (Loss) of net unrealized gains (losses) on available-for-sale investment securities, cumulative foreign currency translation adjustments and cumulative credit risk changes of fair value option liabilities attributable to AAC and subsidiaries, which at March 31, 2025, amounted to $(132,778).
The carrying value of held-for-sale assets and liabilities could also be impacted by payments on AAC's outstanding surplus notes. Surplus note principal and interest payments require the approval of OCI. Since the issuance of the surplus notes in 2010, OCI has declined to approve regular payments of interest on surplus notes, including AAC's request to pay full or partial interest on, and full or partial principal of, surplus notes on the next scheduled payment date of June 9, 2025, although the OCI has permitted two exceptional payments. As a result, the scheduled payment date for interest, and the scheduled maturity date for payment of principal of the surplus notes are extended until OCI grants approval to make the payment. Interest will accrue, compounded on each anniversary of the original scheduled payment date or scheduled maturity date, on any unpaid principal or interest through the actual date of payment, at 5.1% per annum. The interest on the outstanding surplus notes
were accrued for and AAC is accruing interest on the interest amounts following each scheduled payment date.
The components of the anticipated loss on sale, reflected in the valuation allowance on assets held-for-sale as of March 31, 2025 and December 31, 2024, are summarized below:

|  | March 31, 2025 |  | December 31, 2024
Fair value of net consideration to be received |  | $ | 409,759 |  |  | $ | 399,727 |
Less: estimated closing costs |  | (7,535) |  |  | (7,235) |
|  | 402,224 |  |  | 392,492 |
Carrying amount of net assets held-for-sale |  | 986,866 |  |  | 962,637 |
Loss on disposal |  | $ | (584,642) |  |  | $ | (570,145) |

The following table summarizes the major classes of assets and liabilities held-for-sale on the Consolidated Balance Sheets after elimination of intercompany balances:

|  | March 31, 2025 |  | December 31, 2024
ASSETS: |  |  |  |
Total investments |  | $ | 2,286,236 |  |  | $ | 2,226,505 |
Cash and equivalents |  | 14,394 |  |  | 8,322 |
Premiums receivable |  | 218,049 |  |  | 217,096 |
Reinsurance recoverable on paid and unpaid losses |  | 25,918 |  |  | 25,274 |
Deferred ceded premiums |  | 76,681 |  |  | 79,074 |
Subrogation recoverable |  | 113,636 |  |  | 113,962 |
Intangible assets |  | 209,677 |  |  | 213,457 |
Other assets, net |  | 42,632 |  |  | 49,396 |
VIE assets (including restricted cash of $60,593 and 57,754) |  | 3,989,423 |  |  | 3,904,259 |
Valuation allowance on assets held-for-sale |  | (584,642) |  |  | (570,145) |
Total assets held-for-sale |  | $ | 6,392,004 |  |  | $ | 6,267,200 |
LIABILITIES: |  |  |  |
Unearned premiums |  | $ | 229,035 |  |  | $ | 228,177 |
Loss and loss adjustment reserves |  | 601,411 |  |  | 577,167 |
Ceded premiums payable |  | 55,571 |  |  | 56,404 |
Long-term debt and accrued interest |  | 1,062,616 |  |  | 1,046,658 |
Other liabilities, net |  | 100,988 |  |  | 105,772 |
VIE liabilities |  | 3,954,287 |  |  | 3,873,507 |
Total liabilities held-for-sale |  | $ | 6,003,908 |  |  | $ | 5,887,685 |

Ambac Financial Group, Inc. | 12 | First Quarter 2025 Form 10-Q

Table of Contents
Notes to Unaudited Consolidated Financial Statement s
Ambac Financial Group, Inc. and Subsidiaries
(Dollar Amounts in Thousands, Except Per Share Amounts)
The following table summarizes the major line items constituting net income (loss) from discontinued operations reconciled to net income (loss) from discontinued operations presented in the Consolidated Statement of Comprehensive Income (Loss):

|  | Three Months Ended March 31,
|  | 2025 |  | 2024
REVENUES: |  |  |  |
Net premiums earned |  | $ | 4,763 |  |  | $ | 7,486 |
Net investment income |  | 20,700 |  |  | 38,031 |
Net investment gains (losses), including impairments |  | (5,954) |  |  | 568 |
Net gains (losses) on derivative contracts |  | (533) |  |  | 1,533 |
Other revenues |  | 7,821 |  |  | 5,440 |
Total revenues |  | 26,797 |  |  | 53,058 |
EXPENSES: |  |  |  |
Loss and loss adjustment expenses (benefit) |  | 10,735 |  |  | (20,708) |
Intangible amortization |  | 5,826 |  |  | 11,327 |
General & administrative and other expenses |  | 9,082 |  |  | 17,693 |
Interest expense |  | 15,951 |  |  | 15,980 |
Total expenses |  | 41,594 |  |  | 24,292 |
Pretax income (loss) |  | (14,797) |  |  | 28,766 |
Provision (benefit) for income taxes |  | 953 |  |  | 4,626 |
Loss on disposal |  | (14,497) |  |  | — |
Net income (loss) from discontinued operations |  | $ | (30,247) |  |  | $ | 24,140 |

4. INVESTMENTS
Ambac’s invested assets are primarily comprised of of (i) fixed maturity securities classified as either available-for-sale, (ii) interests in pooled investment funds which are reported within Other investments on the Consolidated Balance Sheets and (iii)
preferred equity investments which are reported within Other investments on the Consolidated Balance Sheets. Interests in pooled investment funds are limited partner interests and are reported using the equity method.
Fixed Maturity Securities:
The amortized cost and estimated fair value of available-for-sale investments, at March 31, 2025 and December 31, 2024, were as follows:

|  | March 31, 2025: |  | December 31, 2024:
|  | Amortized Cost |  | Allowance for Credit Losses |  | Gross Unrealized |  | Estimated Fair Value |  | Amortized Cost |  | Allowance for Credit Losses |  | Gross Unrealized |  | Estimated Fair Value
|  |  |  | Gains |  | Losses |  |  |  |  | Gains |  | Losses |
Fixed maturity securities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Municipal obligations |  | $ | 14,660 |  |  | $ | — |  |  | $ | 53 |  |  | $ | 408 |  |  | $ | 14,305 |  |  | $ | 14,646 |  |  | — |  |  | $ | 7 |  |  | $ | 570 |  |  | $ | 14,083 |
Corporate obligations |  | 91,979 |  |  | — |  |  | 343 |  |  | 3,153 |  |  | 89,169 |  |  | 92,990 |  |  | — |  |  | 107 |  |  | 3,905 |  |  | 89,192 |
U.S. government obligations |  | 44,821 |  |  | — |  |  | 429 |  |  | 390 |  |  | 44,860 |  |  | 41,706 |  |  | — |  |  | 98 |  |  | 809 |  |  | 40,995 |
Residential mortgage-backed securities |  | 3,447 |  |  | — |  |  | 16 |  |  | 18 |  |  | 3,445 |  |  | 2,475 |  |  | — |  |  | — |  |  | 29 |  |  | 2,446 |
Commercial mortgage-backed securities |  | 2,067 |  |  | — |  |  | 4 |  |  | 22 |  |  | 2,049 |  |  | 2,127 |  |  | — |  |  | 8 |  |  | 34 |  |  | 2,101 |
Collateralized debt obligations |  | 2,941 |  |  | — |  |  | 14 |  |  | 1 |  |  | 2,954 |  |  | 3,131 |  |  | — |  |  | 13 |  |  | 2 |  |  | 3,142 |
Other asset-backed securities |  | 4,773 |  |  | — |  |  | 16 |  |  | 2 |  |  | 4,787 |  |  | 5,049 |  |  | — |  |  | 14 |  |  | 2 |  |  | 5,061 |
|  | 164,688 |  |  | — |  |  | 875 |  |  | 3,994 |  |  | 161,569 |  |  | 162,124 |  |  | — |  |  | 247 |  |  | 5,351 |  |  | 157,020 |
Short-term |  | 101,604 |  |  | — |  |  | 6 |  |  | — |  |  | 101,610 |  |  | 127,588 |  |  | — |  |  | 13 |  |  | — |  |  | 127,601 |
Total available-for-sale investments |  | $ | 266,292 |  |  | $ | — |  |  | $ | 881 |  |  | $ | 3,994 |  |  | $ | 263,179 |  |  | $ | 289,712 |  |  | — |  |  | $ | 260 |  |  | $ | 5,351 |  |  | $ | 284,621 |

Ambac Financial Group, Inc. | 13 | First Quarter 2025 Form 10-Q

Table of Contents
Notes to Unaudited Consolidated Financial Statement s
Ambac Financial Group, Inc. and Subsidiaries
(Dollar Amounts in Thousands, Except Per Share Amounts)
The amortized cost and estimated fair value of available-for-sale investments, at March 31, 2025, by contractual maturity, were as follows:

|  | Amortized Cost |  | Estimated Fair Value
Due in one year or less |  | $ | 135,653 |  |  | $ | 135,297 |
Due after one year through five years |  | 58,649 |  |  | 57,690 |
Due after five years through ten years |  | 57,785 |  |  | 55,980 |
Due after ten years |  | 977 |  |  | 977 |
|  | 253,064 |  |  | 249,944 |
Residential mortgage-backed securities |  | 3,447 |  |  | 3,445 |
Commercial mortgage-backed securities |  | 2,067 |  |  | 2,049 |
Collateralized debt obligations |  | 2,941 |  |  | 2,954 |
Other asset-backed securities |  | 4,773 |  |  | 4,787 |
Total |  | $ | 266,292 |  |  | $ | 263,179 |

Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay certain obligations with or without call or prepayment penalties.
Unrealized Losses on Fixed Maturity Securities:
The following table shows gross unrealized losses and fair values of Ambac’s available-for-sale investments, which at March 31, 2025 and December 31, 2024, did not have an allowance for credit losses. This information is aggregated by investment category and length of time that the individual securities have been in a continuous unrealized loss position, at March 31, 2025 and December 31, 2024:

|  | March 31, 2025 |  | December 31, 2024
|  | Less Than 12 Months |  | 12 Months or More |  | Total |  | Less Than 12 Months |  | 12 Months or More |  | Total
|  | Fair Value |  | Gross Unrealized Loss |  | Fair Value |  | Gross Unrealized Loss |  | Fair Value |  | Gross Unrealized Loss |  | Fair Value |  | Gross Unrealized Loss |  | Fair Value |  | Gross Unrealized Loss |  | Fair Value |  | Gross Unrealized Loss
Fixed maturity securities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Municipal obligations |  | $ | 2,070 |  |  | $ | 35 |  |  | $ | 6,660 |  |  | $ | 373 |  |  | $ | 8,730 |  |  | $ | 408 |  |  | $ | 6,042 |  |  | $ | 112 |  |  | $ | 6,582 |  |  | $ | 458 |  |  | $ | 12,624 |  |  | $ | 570 |
Corporate obligations |  | 9,782 |  |  | 135 |  |  | 42,021 |  |  | 3,018 |  |  | 51,803 |  |  | 3,153 |  |  | 23,784 |  |  | 269 |  |  | 46,612 |  |  | 3,636 |  |  | 70,396 |  |  | 3,905 |
Foreign obligations |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
U.S. government obligations |  | 6,704 |  |  | 46 |  |  | 12,148 |  |  | 344 |  |  | 18,852 |  |  | 390 |  |  | 15,919 |  |  | 344 |  |  | 14,818 |  |  | 465 |  |  | 30,737 |  |  | 809 |
Residential mortgage-backed securities |  | 1,899 |  |  | 18 |  |  | — |  |  | — |  |  | 1,899 |  |  | 18 |  |  | 2,446 |  |  | 29 |  |  | — |  |  | — |  |  | 2,446 |  |  | 29 |
Commercial mortgage-backed securities |  | 750 |  |  | 22 |  |  | — |  |  | — |  |  | 750 |  |  | 22 |  |  | 738 |  |  | 34 |  |  | — |  |  | — |  |  | 738 |  |  | 34 |
Collateralized debt obligations |  | 654 |  |  | 1 |  |  | — |  |  | — |  |  | 654 |  |  | 1 |  |  | 655 |  |  | 2 |  |  | — |  |  | — |  |  | 655 |  |  | 2 |
Other asset-backed securities |  | 848 |  |  | 2 |  |  | — |  |  | — |  |  | 848 |  |  | 2 |  |  | 1,428 |  |  | 2 |  |  | — |  |  | — |  |  | 1,428 |  |  | 2 |
Total temporarily impaired securities |  | $ | 24,475 |  |  | $ | 259 |  |  | $ | 60,829 |  |  | $ | 3,735 |  |  | $ | 85,304 |  |  | $ | 3,994 |  |  | $ | 51,012 |  |  | $ | 792 |  |  | $ | 68,012 |  |  | $ | 4,559 |  |  | $ | 119,024 |  |  | $ | 5,351 |

Management has determined that the securities in the above table do not have credit impairment as of March 31, 2025 and December 31, 2024, based upon (i) no actual or expected principal and interest payment defaults on these securities; (ii) analysis of the creditworthiness of the issuer.
Ambac’s assessment about whether a security is credit impaired reflects management’s current judgment regarding facts and circumstances specific to the security and other factors. If that judgment changes, Ambac may record a charge for credit impairment in future periods.
The declines in fair value and resultant unrealized losses across asset classes as of March 31, 2025, included in the above table resulted from the impact of increasing interest rates since the securities were purchased. Management has determined that the securities with unrealized losses are not credit impaired. Further discussion of management's assessment with respect to security categories with larger unrealized loss balances is below.
Corporate obligations
The gross unrealized losses on corporate obligations as of March 31, 2025, resulted primarily from an increase in interest rates since the securities were purchased. Unrealized losses of $3,153 related to 136 investment grade securities with an average unrealized loss equal to 6% of amortized cost at March 31, 2025. Management believes that the full and timely receipt of all principal and interest payment on corporate obligations with unrealized losses as of March 31, 2025, is probable.
Investment Income (Loss)
Net investment income (loss) was comprised of the following for the affected periods:

Three Months Ended March 31, |  | 2025 |  | 2024 |  |  |  |
Fixed maturity securities |  | $ | 1,400 |  |  | $ | 1,170 |  |  |  |  |
Short-term investments |  | 1,457 |  |  | 2,590 |  |  |  |  |
Loans |  | 35 |  |  | — |  |  |  |  |
Investment expense |  | 2 |  |  | (90) |  |  |  |  |
Securities available-for-sale and short-term |  | 2,894 |  |  | 3,670 |  |  |  |  |
Other investments |  | (79) |  |  | (30) |  |  |  |  |
Total net investment income (loss) |  | $ | 2,815 |  |  | $ | 3,640 |  |  |  |  |

Net investment income (loss) from Other investments primarily represents income from investment limited partnerships and other equity interests accounted for under the equity method.

Ambac Financial Group, Inc. | 14 | First Quarter 2025 Form 10-Q

Table of Contents
Notes to Unaudited Consolidated Financial Statement s
Ambac Financial Group, Inc. and Subsidiaries
(Dollar Amounts in Thousands, Except Per Share Amounts)
Net Investments Gains (Losses), including Impairments:
The following table details amounts included in net investment gains (losses) and impairments included in earnings for the affected periods:

Three Months Ended March 31, |  | 2025 |  | 2024 |  |  |  |
Gross realized gains on securities |  | $ | — |  |  | $ | 4 |  |  |  |  |
Gross realized losses on securities |  | (3) |  |  | (3) |  |  |  |  |
Foreign exchange gains (losses) |  | — |  |  | — |  |  |  |  |
Credit impairments |  | — |  |  | — |  |  |  |  |
Intent / requirement to sell impairments |  | — |  |  | — |  |  |  |  |
Net investment gains (losses), including impairments |  | $ | (3) |  |  | $ | 1 |  |  |  |  |

Ambac had an allowance for credit losses of $0 and $0 at March 31, 2025 and 2024, respectively.
Ambac did not purchase any financial assets with credit deterioration for the three months ended March 31, 2025 and 2024.
Deposits with Regulators and Other Restrictions:
Securities carried at $23,628 and $22,861 at March 31, 2025 and December 31, 2024, respectively, were deposited by Ambac's insurance subsidiaries with governmental authorities or designated custodian banks as required by laws affecting insurance companies. Invested assets carried at $761 and $800 at March 31, 2025 and December 31, 2024, were deposited as security in connection with a letter of credit issued for an office lease. Fiduciary funds held by Ambac's insurance distribution
subsidiaries, carried at $2,210 and $2,845 at March 31, 2025 and December 31, 2024, respectively, are included in invested assets.
Other Investments:
Ambac's investment portfolio includes a limited partnership interest in a private equity fund which seeks to generate long-term capital appreciation through investments in private equity, equity-related and other instruments. The fair value of Ambac's investment in the fund was $7,420 and $7,499 as of March 31, 2025 and December 31, 2024, determined using net asset value ("NAV") as a practical expedient. Redemptions may be made quarterly with 90 days notice subject to withdrawal limitations and/or redemption fees which vary with the timing and notification of withdrawal provided by the investor. Ambac's unfunded commitments total $1,724 on this private equity fund at March 31, 2025.
Other investments also include preferred equity investments with a carrying value of $20,618 and $20,618 as of March 31, 2025 and December 31, 2024, respectively, that do not have readily determinable fair values and are carried at cost, less any impairments as permitted under the Investments — Equity Securities Topic of the ASC. Impairments of $0 and $0 respectively, were recorded on these investments in the three months ended March 31, 2025 and 2024. There were no adjustments to fair value to reflect observable price changes in identical or similar investments from the same issuer during the three months ended March 31, 2025 and 2024.
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 foreign government obligations traded in highly liquid and transparent markets, 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 and certain derivatives valued using only market observable data.
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. Financial instruments classified as Level 3 include certain investments in fixed maturity securities, loans and derivatives.

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.

Ambac Financial Group, Inc. | 15 | First Quarter 2025 Form 10-Q

Table of Contents
Notes to Unaudited Consolidated Financial Statement s
Ambac Financial Group, Inc. and Subsidiaries
(Dollar Amounts in Thousands, Except Per Share Amounts)
The following table sets forth the carrying amount and fair value of Ambac’s financial assets and liabilities as of March 31, 2025 and December 31, 2024, 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.

|  | March 31, 2025 |  | December 31, 2024
|  | 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 |  | $ | 14,305 |  |  | $ | 14,305 |  |  | $ | — |  |  | $ | 14,305 |  |  | $ | — |  |  | $ | 14,083 |  |  | $ | 14,083 |  |  | $ | — |  |  | $ | 14,083 |  |  | $ | — |
Corporate obligations |  | 89,169 |  |  | 89,169 |  |  | — |  |  | 89,169 |  |  | — |  |  | 89,192 |  |  | 89,192 |  |  | — |  |  | 89,192 |  |  | — |
U.S. government obligations |  | 44,860 |  |  | 44,860 |  |  | 44,860 |  |  | — |  |  | — |  |  | 40,995 |  |  | 40,995 |  |  | 40,995 |  |  | — |  |  | — |
Residential mortgage-backed securities |  | 3,445 |  |  | 3,445 |  |  | — |  |  | 3,445 |  |  | — |  |  | 2,446 |  |  | 2,446 |  |  | — |  |  | 2,446 |  |  | — |
Commercial mortgage-backed securities |  | 2,049 |  |  | 2,049 |  |  | — |  |  | 2,049 |  |  | — |  |  | 2,101 |  |  | 2,101 |  |  | — |  |  | 2,101 |  |  | — |
Collateralized debt obligations |  | 2,954 |  |  | 2,954 |  |  | — |  |  | 2,954 |  |  | — |  |  | 3,142 |  |  | 3,142 |  |  | — |  |  | 3,142 |  |  | — |
Other asset-backed securities |  | 4,787 |  |  | 4,787 |  |  | — |  |  | 4,787 |  |  | — |  |  | 5,061 |  |  | 5,061 |  |  | — |  |  | 5,061 |  |  | — |
Short term investments |  | 101,610 |  |  | 101,610 |  |  | 101,610 |  |  | — |  |  | — |  |  | 127,601 |  |  | 127,601 |  |  | 127,601 |  |  | — |  |  | — |
Other investments (1) |  | 28,214 |  |  | 7,420 |  |  | — |  |  | — |  |  | — |  |  | 28,294 |  |  | 7,499 |  |  | — |  |  | — |  |  | — |
Cash, cash equivalents and restricted cash |  | 51,660 |  |  | 51,660 |  |  | 51,660 |  |  | — |  |  | — |  |  | 47,276 |  |  | 47,276 |  |  | 47,276 |  |  | — |  |  | — |
Other assets-loans |  | 3,406 |  |  | 3,406 |  |  | — |  |  | — |  |  | 3,406 |  |  | 3,434 |  |  | 3,434 |  |  | — |  |  | — |  |  | 3,434 |
Other assets - Derivatives: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Warrants |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
FX forward contracts |  | 210 |  |  | 210 |  |  | — |  |  | 210 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Total financial assets |  | $ | 346,669 |  |  | $ | 325,875 |  |  | $ | 198,130 |  |  | $ | 116,919 |  |  | $ | 3,406 |  |  | $ | 363,625 |  |  | $ | 342,830 |  |  | $ | 215,872 |  |  | $ | 116,025 |  |  | $ | 3,434 |
Financial liabilities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Short-term debt, including accrued interest |  | $ | 152,695 |  |  | $ | 152,695 |  |  | $ | — |  |  | $ | — |  |  | $ | 152,695 |  |  | $ | 152,560 |  |  | $ | 152,560 |  |  | $ | — |  |  | $ | — |  |  | $ | 152,560 |
Other liabilities - Derivatives: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
FX forward contracts |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 317 |  |  | 317 |  |  | — |  |  | 317 |  |  | — |
Total financial liabilities |  | $ | 152,695 |  |  | $ | 152,695 |  |  | $ | — |  |  | $ | — |  |  | $ | 152,695 |  |  | $ | 152,877 |  |  | $ | 152,877 |  |  | $ | — |  |  | $ | 317 |  |  | $ | 152,560 |

(1)Excluded from the fair value measurement categories in the table above are investment funds of $7,420 and $7,499 as of March 31, 2025 and December 31, 2024, 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 $20,618 and $20,618 as of March 31, 2025 and December 31, 2024, respectively, that do not have readily determinable fair values and have carrying amounts determined using the measurement alternative, and an equity method investment of $176 and $177 as of March 31, 2025 and December 31, 2024.
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, and derivative instruments. Valuation of financial instruments is performed by Ambac’s finance group using methods approved by senior financial management with consultation from third-party portfolio managers as appropriate. Preliminary valuation results are discussed with senior financial management and third-party
portfolio managers as necessary 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, 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 independent 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

Ambac Financial Group, Inc. | 16 | First Quarter 2025 Form 10-Q

Table of Contents
Notes to Unaudited Consolidated Financial Statement s
Ambac Financial Group, Inc. and Subsidiaries
(Dollar Amounts in Thousands, Except Per Share Amounts)
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.
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.
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:
At March 31, 2025 and December 31, 2024 Ambac has foreign currency forward contracts and holds warrants to purchase preferred stock of a development stage company. The fair value of foreign currency forwards are determined using valuation models with observable market inputs. Fair value of the warrants are determined using a standard warrant valuation model with internally developed input assumptions.
Short-term Debt:
Short-term debt consists of SOFR indexed borrowing used for partial funding of the Beat acquisition and is classified as Level 3.
Other Financial Assets:
Included in Other assets are loans carried at amortized cost, the fair values of which are estimated based upon internal valuation models and are classified as Level 3.
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 2025 and 2024. 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.

Ambac Financial Group, Inc. | 17 | First Quarter 2025 Form 10-Q

Table of Contents
Notes to Unaudited Consolidated Financial Statement s
Ambac Financial Group, Inc. and Subsidiaries
(Dollar Amounts in Thousands, Except Per Share Amounts)

Level 3 - Financial Assets and Liabilities Accounted for at Fair Value
|  | Investments |  | Derivatives |  | Total
Three Months Ended March 31, 2025: |  |  |  |
Balance, beginning of period |  | $ | — |  |  | $ | — |  |  | $ | — |
Total gains/(losses) realized and unrealized: |  |  |  |  |  |
Included in earnings |  | — |  |  | — |  |  | — |
Included in other comprehensive income |  | — |  |  | — |  |  | — |
Purchases |  | — |  |  | — |  |  | — |
Settlements |  | — |  |  | — |  |  | — |
Balance, end of period |  | $ | — |  |  | $ | — |  |  | $ | — |
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 |  | $ | — |  |  | $ | — |  |  | $ | — |
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 |  | $ | — |  |  | $ | — |  |  | $ | — |
Three Months Ended March 31, 2024: |  |  |  |
Balance, beginning of period |  | $ | 13,920 |  |  | $ | 656 |  |  | $ | 14,576 |
Total gains/(losses) realized and unrealized: |  |  |  |  |  |
Included in earnings |  | 34 |  |  | (47) |  |  | (13) |
Included in other comprehensive income |  | — |  |  | — |  |  | — |
Purchases |  | — |  |  | — |  |  | — |
Settlements |  | — |  |  | — |  |  | — |
Balance, end of period |  | $ | 13,954 |  |  | $ | 609 |  |  | $ | 14,563 |
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 |  | $ | 34 |  |  | $ | (47) |  |  | $ | (13) |
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 |  | $ | — |  | $ | — |  | $ | —

Invested assets 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:

|  | Three Months Ended March 31, 2025 |  | Three Months Ended March 31, 2024
|  | Net Investment Income |  | Net Gains (Losses) on Derivative Contracts |  | Other Income or (Expense) |  | Net Investment Income |  | Net Gains (Losses) on Derivative Contracts |  | Other Income or (Expense)
Total gains (losses) included in earnings for the period |  | $ | — |  | $ | — |  | $ | — |  | $ | 34 |  | $ | (47) |  | $ | —
Changes in unrealized gains (losses) relating to financial instruments still held at the reporting date |  | — |  | — |  | — |  | — |  | — |  | —

Ambac Financial Group, Inc. | 18 | First Quarter 2025 Form 10-Q

Table of Contents
Notes to Unaudited Consolidated Financial Statement s
Ambac Financial Group, Inc. and Subsidiaries
(Dollar Amounts in Thousands, Except Per Share Amounts)
6. INSURANCE CONTRACTS
Amounts presented in this Note relate only to Ambac’s continuing operations.
Premiums:
The effect of reinsurance on premiums written and earned was as follows:

| Three Months Ended March 31,
| 2025 |  | 2024
| Written |  | Earned |  | Written |  | Earned
Direct | $ | 77,191 |  |  | $ | 80,446 |  |  | $ | 79,234 |  |  | $ | 61,336 |
Assumed | 9,724 |  |  | 7,529 |  |  | 17,188 |  |  | 15,523 |
Ceded | 68,911 |  |  | 72,297 |  |  | 70,175 |  |  | 51,280 |
Net premiums | $ | 18,004 |  |  | $ | 15,678 |  |  | $ | 26,247 |  |  | $ | 25,579 |

Premium Receivables, including credit impairments:
Premium receivables at March 31, 2025 and December 31, 2024 were $64,563 and $57,222, respectively. Management evaluates premium receivables for expected credit losses ("credit impairment") in accordance with the CECL standard, which is further described in Note 2. Basis of Presentation and Significant Accounting Policies in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024.
Below is a rollforward of the premium receivable allowance for credit losses for the periods presented.

Three Months Ended March 31, | 2025 |  | 2024
Beginning balance | $ | 142 |  |  | $ | — |
Current period provision | — |  |  | — |
Write-offs of the allowance | — |  |  | — |
Recoveries of previously written-off amounts | — |  |  | — |
Ending balance | $ | 142 |  |  | $ | — |

At March 31, 2025 and December 31, 2024, $6,357 and $5,690 of premiums were past due.
Loss and Loss Adjustment Expense Reserves
Below is the loss and loss reserve expense roll-forward, net of subrogation recoverable and reinsurance, for the affected periods:

Three Months Ended March 31, | 2025 |  | 2024
Beginning gross loss and loss expense reserves | $ | 349,062 |  |  | $ | 197,089 |
Reinsurance recoverable | 270,081 |  |  | 156,232 |
Beginning balance of net loss and loss expense reserves | 78,981 |  |  | 40,857 |
Losses and loss expenses: |  |  |
Current year | 10,325 |  |  | 18,230 |
Prior years | 171 |  |  | 1,125 |
Total (1) | 10,496 |  |  | 19,355 |
Loss and loss expenses paid (recovered): |  |  |
Current year | 1,120 |  |  | 1,056 |
Prior years | 10,172 |  |  | 5,034 |
Total | 11,292 |  |  | 6,090 |
Ending net loss and loss expense reserves | 78,185 |  |  | 54,122 |
Reinsurance recoverable (2) | 294,920 |  |  | 182,892 |
Ending gross loss and loss expense reserves | $ | 373,105 |  |  | $ | 237,014 |

(1)Total losses and loss adjustment expenses is net of $45,778 and $34,411 for the three months ended March 31, 2025 and 2024, respectively, related to ceded reinsurance.
(2)Represents reinsurance recoverable on future loss and loss expenses. Additionally, the Balance Sheet line "Reinsurance recoverable on paid and unpaid losses" includes reinsurance recoverables (payables) of $56,190 and $15,088 as of March 31, 2025 and 2024, respectively, related to previously presented loss and loss expenses and subrogation.
Prior accident years losses incurred development for the three months ended March 31, 2025 was nominal, whereas prior accident years looses incurred development for the three months ended March 31, 2024 was primarily driven by increased commercial and personal auto claim activity.
Specialty Property & Casualty Loss Reserves
Claims Development
The following is a summary of loss and loss adjustment expense reserves, including certain components, for the Company’s major product lines by reporting segment at March 31, 2025.

March 31, 2025 | Net Loss and Loss Adjustment Expense Reserves |  | Reinsurance Recoverables on Unpaid Losses (1) |  | Loss and Loss Adjustment Reserves (1)
Commercial auto | $ | 27,608 |  |  | $ | 127,775 |  |  | $ | 155,383 |
Excess liability | 9,070 |  |  | 56,775 |  |  | 65,845 |
General liability | 9,051 |  |  | 35,157 |  |  | 44,208 |
Workers compensation | 14,602 |  |  | — |  |  | 14,602 |
Non-standard personal auto | 8,753 |  |  | 396 |  |  | 9,149 |
Professional Liability | 1,812 |  |  | 21,561 |  |  | 23,373 |
Surety | — |  |  | 10,558 |  |  | 10,558 |
Unallocated loss adjustment expense reserves | 6,491 |  |  | 6,668 |  |  | 13,159 |
Other | $ | 798 |  |  | $ | 36,030 |  |  | $ | 36,828 |
Total | $ | 78,185 |  |  | $ | 294,920 |  |  | $ | 373,105 |

Ambac Financial Group, Inc. | 19 | First Quarter 2025 Form 10-Q

Table of Contents
Notes to Unaudited Consolidated Financial Statement s
Ambac Financial Group, Inc. and Subsidiaries
(Dollar Amounts in Thousands, Except Per Share Amounts)
(1)Other includes $34,724 related to legacy liabilities obtained from the acquisitions of Providence Washington Insurance Company, Greenwood Insurance Company, and Consolidated Specialty Insurance Company. All legacy liabilities remain obligations of affiliates of the sellers through reinsurance and contractual indemnities.
Reinsurance Recoverables, Including Credit Impairments:
Everspan’s reinsurance assets, including deferred ceded premiums and reinsurance recoverables on losses amounted to $496,024 at March 31, 2025. Credit exposure existed at March 31, 2025, with respect to reinsurance recoverables to the extent that any reinsurer may not be able to reimburse Everspan under the terms of these reinsurance arrangements. At March 31, 2025, there were ceded reinsurance balances payable of $81,358 offsetting this credit exposure. Contractually ceded reinsurance payables can only be offset against amounts owed from the same reinsurer in the event that such reinsurer is unable to meet its obligations to reimburse Everspan.
To minimize its credit exposure to losses from reinsurer insolvencies, Everspan (i) is entitled to receive collateral from its reinsurance counterparties in certain reinsurance contracts and (ii) has certain cancellation rights that can be exercised by Everspan in the event of rating agency downgrades of a reinsurer (among other events and circumstances). Everspan held letters of credit and collateral amounting to $66,954 from its reinsurers at March 31, 2025. For those reinsurance counterparties that do not currently post collateral, Everspan's reinsurers are well capitalized, highly rated, authorized capacity providers. Additionally, while legacy liabilities from the Providence Washington Insurance Company acquisition and the admitted carriers previously acquired by Everspan (Greenwood Insurance Company and Consolidated Specialty Insurance Company), were fully ceded to certain reinsurers, Everspan also benefits from an unlimited, uncapped indemnity from Enstar Holdings (US) and 21st Century Premier Insurance Company, respectively, to mitigate any residual risk to these reinsurers.
At March 31, 2025, our top five reinsurers represented 68.0% of our total reinsurance recoverables on paid and unpaid losses. These reinsurance recoverables were primarily from reinsurers with applicable ratings of A or better. The following table sets forth our five most significant reinsurers by amount of reinsurance recoverable as of March 31, 2025.

Reinsurers |  |  | Rating (1) |  | Reinsurance Recoverable (2) |  | Unsecured Recoverable (3)
General Reinsurance Company |  |  | A++ |  | $ | 150,484 |  |  | $ | 129,496 |
QBE Insurance Corporation |  |  | A |  | 31,002 |  |  | 31,002 |
Munich Reinsurance Company |  |  | A+ |  | 28,184 |  |  | 18,894 |
Swiss Reinsurance America Corporation |  |  | A+ |  | 17,147 |  |  | 15,732 |
Guaranty Captive Insurance Company |  |  | NR |  | 11,796 |  |  | — |
All other reinsurers |  |  |  |  | 112,497 |  |  | 47,489 |
Total recoverables |  |  |  | $ | 351,110 |  |  | $ | 242,613 |

(1)Represents financial strength ratings from AM Best for P&C reinsurers.
(2)Represents reinsurance recoverables on paid and unpaid losses. Unsecured amounts from QBE Insurance Corporation are also supported by an unlimited, uncapped indemnity from Enstar Holdings (US).
(3)Reinsurance recoverables reduced by ceded premiums payables due to reinsurers, letters of credit, and collateral posted for the benefit of Ambac.
Everspan has uncollateralized credit exposure of $242,613 and $232,310 and has recorded an allowance for credit losses of less than a million at March 31, 2025 and December 31, 2024. The uncollateralized credit exposure includes legacy liabilities obtained from the acquisitions of PWIC and the 21st Century Companies of $34,724 and $35,146 at March 31, 2025 and December 31, 2024, respectively. All legacy liabilities, which are fully ceded to reinsurers, also benefit from an unlimited, uncapped indemnity from the respective sellers to mitigate the Company from any residual risk from these reinsurers.
7. DERIVATIVE INSTRUMENTS
The following tables summarize the gross fair values of individual derivative instruments and the impact of legal rights of offset as reported in the Consolidated Balance Sheets as of March 31, 2025 and December 31, 2024:

| March 31, 2025 |  | December 31, 2024
| Gross Amounts of Recognized Assets / Liabilities |  | Gross Amounts Offset in the Consolidated Balance Sheet |  | Net Amounts of Assets/ Liabilities Presented in the Consolidated Balance Sheet |  | Gross Amount of Collateral Received / Pledged Not Offset in the Consolidated Balance Sheet |  | Net Amount |  | Gross Amounts of Recognized Assets / Liabilities |  | Gross Amounts Offset in the Consolidated Balance Sheet |  | Net Amounts of Assets/ Liabilities Presented in the Consolidated Balance Sheet |  | Gross Amount of Collateral Received / Pledged Not Offset in the Consolidated Balance Sheet |  | Net Amount
Other assets: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
FX forwards | 210 |  |  | — |  |  | 210 |  |  | — |  |  | 210 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Total derivative assets | $ | 210 |  |  | $ | — |  |  | $ | 210 |  |  | $ | — |  |  | $ | 210 |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |
Other liabilities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
FX forwards | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 317 |  |  | — |  |  | 317 |  |  | — |  |  | 317 |
Total derivative liabilities | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 317 |  |  | $ | — |  |  | $ | 317 |  |  | $ | — |  |  | $ | 317 |

Ambac Financial Group, Inc. | 20 | First Quarter 2025 Form 10-Q

Table of Contents
Notes to Unaudited Consolidated Financial Statement s
Ambac Financial Group, Inc. and Subsidiaries
(Dollar Amounts in Thousands, Except Per Share Amounts)
The following tables summarize the location and amount of gains and losses of derivative contracts in the Unaudited Consolidated Statements of Total Comprehensive Income (Loss) for the three months ended March 31, 2025 and 2024:

| Location of Gain (Loss) Recognized in Consolidated Statements of Total Comprehensive Income (Loss) |  | Amount of Gain (Loss) Recognized in Consolidated Statement of Total Comprehensive Income (Loss)
|  | Three Months Ended March 31, |  |
|  | 2025 |  | 2024 |  |  |  |
Derivatives: |  |  |  |  |  |  |  |  |
Warrants | Net gains (losses) on derivative contracts |  | — |  |  | (48) |  |  |  |  |
FX forwards | Net gains (losses) on derivative contracts |  | 427 |  |  | — |  |  |  |  |
Total derivatives |  |  | $ | 427 |  |  | $ | (48) |  |  |  |  |

Ambac holds warrants to purchase equity shares of a development stage company and US dollar/British pound sterling foreign exchange (FX) forward contracts.
Beat utilizes foreign exchange forward contracts to partially hedge its foreign currency exposure. Beat’s functional currency is the British Pound, but a significant portion of its revenues are generated in currencies other then the British Pound, particularly the US Dollar. Beat, therefore, typically enters into forward contracts to partially hedge its exposure to fluctuations in exchange rates relative to the British Pound. In connection with our acquisition of Beat and the growth profile of its business, we will be re-evaluating our exposure to foreign currency exchange rates and related hedging strategy.
Information about FX forward contracts as of March 31, 2025 and December 31, 2024, is summarized below:

Derivative Type |  | Weighted Average Remaining Term (years) |  | Face Amount (Buy) |  | Face Amount (Sell) |  | Fair Value Asset (Liability)
March 31, 2025 |  |  |  |  |  |  |  |
FX Forwards-Buy GBP/Sell USD |  | 0.56 |  | 11,784 |  |  | 15,000 |  |  | 200 |
FX Forwards-Buy GBP/Sell CAD |  | 0.74 |  | 2,457 |  |  | 4,500 |  |  | 10 |
December 31, 2024 |  |  |  |  |  |  |  |
FX Forwards-Buy GBP/Sell USD |  | 0.61 |  | 15,720 |  |  | 20,000 |  |  | (317) |
FX Forwards-Buy USD/Sell GBP |  | 0.00 |  | — |  |  | — |  |  | — |
FX Forwards-Buy GBP/Sell CAD |  | 0.00 |  | — |  | — |  | —

8. GOODWILL AND INTANGIBLE ASSETS
The following table presents the Company's goodwill asset.

|  | March 31, 2025 |  | December 31, 2024
Beginning balance |  | $ | 418,234 |  |  | $ | 69,694 |
Business acquisitions |  | — |  |  | 357,316 |
Foreign exchange |  | 11,080 |  |  | (8,776) |
Impairments |  | — |  |  | — |
Ending balance |  | $ | 429,314 |  |  | $ | 418,234 |

Intangible assets and accumulated amortization are included in the Consolidated Balance Sheets, as shown below.

|  | Gross Carrying Amount |  | Accumulated Amortization |  | Net
March 31, 2025 |  |  |  |  |  |
Finite-lived Intangible Assets: |  |  |  |  |  |
Customer relationships |  | $ | 357,998 |  |  | $ | 33,659 |  |  | $ | 324,339 |
Non-compete agreements |  | 1,350 |  |  | 1,148 |  |  | 202 |
Trade name |  | 10,767 |  |  | 1,460 |  |  | 9,307 |
Total finite lived intangible assets |  | 370,115 |  |  | 36,267 |  |  | 333,848 |
Indefinite lived intangible assets: |  |  |  |  |  |
Licenses |  | 11,213 |  |  | — |  |  | 11,213 |
Total intangible assets |  | 381,328 |  |  | 36,267 |  |  | 345,061 |
December 31, 2024 |  |  |  |  |  |
Finite-lived Intangible Assets: |  |  |  |  |  |
Customer relationships |  | $ | 348,350 |  |  | $ | 24,630 |  |  | $ | 323,720 |
Non-compete agreements |  | 1,350 |  |  | 1,080 |  |  | 270 |
Trade name |  | 10,767 |  |  | 1,195 |  |  | 9,572 |
Total finite lived intangible assets |  | 360,467 |  |  | 26,905 |  |  | 333,562 |
Indefinite lived intangible assets: |  |  |  |  |  |
Licenses |  | 11,213 |  |  | — |  |  | 11,213 |
Total intangible assets |  | 371,680 |  |  | 26,905 |  |  | 344,775 |

9. REVENUES FROM CONTRACTS WITH CUSTOMERS
As further described in the Revenue Recognition section of Note 2. Basis of Presentation and Significant Accounting Policies in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024, the Insurance Distribution businesses have contracts that are subject to the Revenue from Contracts with Customers Topic of the ASC ("ASC 606").
The following table presents Insurance Distribution commission income recognized disaggregated by policy type for the periods presented.

Ambac Financial Group, Inc. | 21 | First Quarter 2025 Form 10-Q

Table of Contents
Notes to Unaudited Consolidated Financial Statement s
Ambac Financial Group, Inc. and Subsidiaries
(Dollar Amounts in Thousands, Except Per Share Amounts)

Three Months Ended March 31, | 2025 |  | 2024 |  |  |  |
Accident & Health | $ | 8,151 |  |  | $ | 10,354 |  |  |  |  |
Specialty Auto | 5,172 |  |  | 3,807 |  |  |  |  |
Other Professional | 3,223 |  |  | 2,243 |  |  |  |  |
Marine & Energy | 1,848 |  |  | 1,133 |  |  |  |  |
Niche Specialty Risks | 4,027 |  |  | — |  |  |  |  |
Property | 5,184 |  |  | — |  |  |  |  |
Reinsurance | 4,116 |  |  | 113 |  |  |  |  |
Environmental | 1,560 |  |  | — |  |  |  |  |
Professional D&O | 1,527 |  |  | — |  |  |  |  |
Misc. Specialty | 1,963 |  |  | 79 |  |  |  |  |
Total | $ | 36,771 |  |  | $ | 17,729 |  |  |  |  |

For the three months ended March 31, 2025 and 2024, income of $4,964 and $—, respectively, was recognized in accordance with ASC 606 and reported in Servicing and other fees on the Consolidated Statement of Comprehensive Income (Loss).
During the three months ended March 31, 2025 and 2024, the amount of revenue recognized related to performance obligations satisfied in a previous period, inclusive of changes due to estimates was approximately $1,981 and $3,364, respectively.
Contract Assets and Liabilities
The balances of contract assets and contract liabilities with customers were as follows:

| March 31, 2025 |  | December 31, 2024
Contract assets | $ | 20,685 |  |  | $ | 15,967 |
Contract liabilities | 3,491 |  |  | 2,705 |

Insurance Distribution
Contract assets represent estimated future consideration related to base commissions and profit-sharing commissions that were recognized as revenue upon the placement of the policy, but are not yet due. The Company does not have the right to bill or collect payment on i) base commissions until the related premiums from policyholders has been collected nor ii) profit-sharing commissions until after the contract year is completed.
Contract liabilities represent advance consideration received from customers related to employer stop loss base commissions that will be recognized over time as claims servicing is performed, which typically occurs between 17 and 20 months from contract inception. During the three months ended March 31, 2025 and 2024, the Company recognized revenue that was included in the contract liability balance as of the beginning of the period of $182 and $479, respectively.
10. COMPREHENSIVE INCOME (LOSS)
The following tables detail the changes in the balances of each component of accumulated other comprehensive income for the affected periods:

|  | Three Months Ended March 31, 2025: |  | Three Months Ended March 31, 2024:
|  | Unrealized Gains (Losses) on Available for Sale Securities (1) |  | Amortization of Postretirement Benefit (1) |  | Gain (Loss) on Foreign Currency Translation (1) |  | Credit Risk Changes of Fair Value Option Liabilities (1) (2) |  | Total |  | Unrealized Gains (Losses) on Available for Sale Securities (1) |  | Amortization of Postretirement Benefit (1) |  | Gain (Loss) on Foreign Currency Translation (1) |  | Credit Risk Changes of Fair Value Option Liabilities (1) (2) |  | Total
Beginning Balance |  | $ | (21,136) |  | $ | — |  | $ | (166,191) |  | $ | (1,109) |  | $ | (188,436) |  | $ | (20,196) |  | $ | 4,939 |  | $ | (144,036) |  | $ | (753) |  | $ | (160,046)
Other comprehensive income (loss) before reclassifications |  | 14,147 |  | — |  | 36,220 |  | — |  | 50,367 |  | (6,434) |  | (67) |  | (7,770) |  | — |  | (14,271)
Amounts reclassified from accumulated other comprehensive income (loss) |  | 4,459 |  | — |  | — |  | 442 |  | 4,901 |  | (583) |  | (313) |  | — |  | (253) |  | (1,149)
Net current period other comprehensive income (loss) |  | 18,606 |  | — |  | 36,220 |  | 442 |  | 55,268 |  | (7,017) |  | (380) |  | (7,770) |  | (253) |  | (15,420)
Ending Balance |  | $ | (2,530) |  | $ | — |  | $ | (129,971) |  | $ | (667) |  | $ | (133,168) |  | $ | (27,213) |  | $ | 4,559 |  | $ | (151,806) |  | $ | (1,006) |  | $ | (175,466)

(1)All amounts are net of tax and NCI. Amounts in parentheses indicate reductions to Accumulated Other Comprehensive Income.
(2)Represents the changes in fair value attributable to instrument-specific credit risk of liabilities for which the fair value option is elected.

Ambac Financial Group, Inc. | 22 | First Quarter 2025 Form 10-Q

Table of Contents
Notes to Unaudited Consolidated Financial Statement s
Ambac Financial Group, Inc. and Subsidiaries
(Dollar Amounts in Thousands, Except Per Share Amounts)
The following table details the significant amounts reclassified from each component of accumulated other comprehensive income, shown in the above rollforward tables, for the affected periods:

Details about Accumulated Other Comprehensive Income Components |  | Amount Reclassified from Accumulated Other Comprehensive Income |  | Affected Line Item in the Consolidated Statement of Total Comprehensive Income (Loss)
| Three Months Ended March 31, |  |  |
| 2025 |  | 2024 |  |  |  |  |
Unrealized Gains (Losses) on Available-for-Sale Securities (1) |  |  |  |  |  |  |  |  |  |
|  | $ | 5,957 |  | $ | (568) |  |  |  |  |  |  | Net realized investment gains (losses)
|  | (1,498) |  | (15) |  |  |  |  |  |  | Provision for income taxes
|  | $ | 4,459 |  | $ | (583) |  |  |  |  |  |  | Net of tax and noncontrolling interest
Amortization of Postretirement Benefit |  |  |  |  |  |  |  |  |  |
Prior service cost |  | $ | — |  | $ | (210) |  |  |  |  |  |  | Other income
Actuarial (losses) |  | — |  | (103) |  |  |  |  |  |  | Other income
|  | — |  | (313) |  |  |  |  |  |  | Total before tax
|  | — |  | — |  |  |  |  |  |  | Provision for income taxes
|  | $ | — |  | $ | (313) |  |  |  |  |  |  | Net of tax and noncontrolling interest
Credit Risk Changes of Fair Value Option Liabilities |  |  |  |  |  |  |  |  |  |
|  | $ | 589 |  | $ | (337) |  |  |  |  |  |  | Credit risk changes of fair value option liabilities
|  | (147) |  | 84 |  |  |  |  |  |  | Provision for income taxes
|  | $ | 442 |  | $ | (253) |  |  |  |  |  |  | Net of tax and noncontrolling interest
Total reclassifications for the period |  | $ | 4,901 |  | $ | (1,149) |  |  |  |  |  |  | Net of tax and noncontrolling interest

(1) Net unrealized investment gains (losses) on available for sale securities are included in Ambac's Consolidated Statements of Comprehensive Income (Loss) as a component of Accumulated Other Comprehensive Income (Loss). Changes in these amounts include reclassification adjustments to exclude from "Other Comprehensive Income (Loss)" those items that are included are part or ":Net income for a period that has been par of "Other comprehensive income *loss) in earlier periods.
11. NET INCOME PER SHARE
As of March 31, 2025, 46,427,421 shares of AFG's common stock (par value $0.01) were issued and outstanding. Common shares outstanding decreased by 79,552 during the three months ended March 31, 2025, primarily due to share repurchases partially offset by shares issued in connection with employee stock compensation.
Share Repurchases
On March 29, 2022, AFG's Board of Directors approved a share repurchase program authorizing up to $20,000 in share repurchases. On May 5, 2022, the Board of Directors authorized an additional $15,000 in share repurchase. This program expired on March 31, 2024.
On November 12, 2024, Ambac’s Board of Directors authorized a share repurchase program, under which Ambac may opportunistically repurchase up to $50,000 of the Company’s common shares at management’s discretion over the period ending on December 31, 2026.
The following table shows shares repurchased by year.

($ in thousands, except per share) |  | Year Ended December 31, |  | YTD 2025
| 2022 |  | 2023 |  | 2024 |
Shares repurchased |  | 1,605,316 |  | 325,068 |  | 937,141 |  | 264,791
Total cost |  | $ | 14,217 |  |  | $ | 4,510 |  |  | $ | 11,698 |  |  | $ | 3,122 |
Average purchase price per share |  | $ | 8.86 |  |  | $ | 13.88 |  |  | $ | 12.48 |  |  | $ | 11.79 |
Unused authorization amount |  |  |  |  |  | $ | 35,179 |

Earnings Per Share Calculation
The numerator of the basic and diluted earnings per share computation represents net income (loss) attributable to common stockholders adjusted by the retained earnings impacts of the noncontrolling adjustment to redemption value under ASC 480, or amendments resulting in revaluation to fair value and reclassification of NCI shares to redeemable NCI. Adjustments to the carrying value of redeemable noncontrolling interest are further described in the Redeemable NCI section of Note 1. Background and Business Description.
The following table provides a reconciliation of net income attributable to common stockholders to the numerator in the basic and diluted earnings per share calculation, together with the resulting earnings per share amounts:

Three Months Ended March 31, |  | 2025 |  | 2024 |  |  |  |
Net income (loss) attributable to common stockholders |  | $ | (46,391) |  |  | $ | 20,070 |  |  |  |  |
Adjustment of NCI to fair value |  | (10,276) |  |  | — |  |  |  |  |
Adjustment to redemption value (ASC 480) |  | (907) |  |  | 53 |  |  |  |  |
Numerator of basic and diluted EPS |  | $ | (57,574) |  |  | $ | 20,123 |  |  |  |  |
Per Share: |  |  |  |  |  |  |  |
Basic |  | $ | (1.22) |  |  | $ | 0.44 |  |  |  |  |
Diluted |  | $ | (1.22) |  |  | $ | 0.44 |  |  |  |  |

The denominator of the basic earnings per share computation represents the weighted average common shares outstanding plus vested performance and restricted stock units (together, "Basic Weighted Average Shares Outstanding"). The denominator of diluted earnings per share adjusts the Basic Weighted Average Shares Outstanding for all potential dilutive common shares

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Notes to Unaudited Consolidated Financial Statement s
Ambac Financial Group, Inc. and Subsidiaries
(Dollar Amounts in Thousands, Except Per Share Amounts)
outstanding during the period. All potential dilutive common shares outstanding consider common stock deliverable pursuant to warrants, unvested restricted stock units and performance stock units granted under existing compensation plans. Additionally, as further described in the Redeemable NCI section of Note 1, the acquisition agreements and other agreements related to certain majority-owned subsidiaries include call and put options that, if exercised, would result in Ambac purchasing all or a portion of the remaining interests from the minority owners. Under the terms of certain of those agreements, Ambac may elect to settle a portion of its purchase with Ambac shares, which have also been considered in potential dilutive common shares outstanding.
The following table provides a reconciliation of the weighted average shares denominator used for basic net income per share to the denominator used for diluted net income per share:

Three Months Ended March 31, |  | 2025 |  | 2024 |  |  |  |
Basic weighted average shares outstanding denominator |  | 47,313,012 |  |  | 45,827,076 |  |  |  |  |
Effect of potential dilutive shares : |  |  |  |  |  |  |  |
Restricted stock units |  | — |  |  | — |  |  |  |  |
Performance stock units (1) |  | — |  |  | — |  |  |  |  |
Diluted weighted average shares outstanding denominator |  | 47,313,012 |  |  | 45,827,076 |  |  |  |  |
Anti-dilutive shares excluded from the above reconciliation: |  |  |  |  |  |  |  |
Restricted stock units |  | 411,433 |  |  | 88,468 |  |  |  |  |
Performance stock units (1) |  | 145,197 |  |  | — |  |  |  |  |

(1) Performance stock units are reflected based on the performance metrics through the balance sheet date. Vesting of these units is contingent upon meeting certain performance metrics. Although a portion of these performance metrics have been achieved as of the respective period end, it is possible that awards may no longer meet the metric at the end of the performance period.
12. INCOME TAXES
AFG files a consolidated U.S. Federal income tax return with its 80% or more owned domestic subsidiaries ("Consolidated Tax Subsidiaries"). Beat's US subsidiaries file separate U.S. Federal income tax returns as they are not directly 80% owned by AFG for tax purposes. AFG and its Consolidated Tax Subsidiaries also file separate or combined income tax returns in various states, local and foreign jurisdictions. The following are the major jurisdictions in which Ambac and its subsidiaries, including it foreign subsidiaries, operate and the earliest tax years subject to examination:

Jurisdiction | Tax Year
United States | 2010
New York State | 2015
New York City | 2018
United Kingdom | 2021

In accordance with the Income Tax Topic of the ASC, a valuation allowance is recognized if, based on the weight of available evidence, it is more-likely-than-not that some, or all, of the deferred tax asset will not be realized. As a result of the risks and uncertainties associated with future operating results, management believes it is more likely than not that the Company will not generate sufficient U.S. federal, state and/or local taxable
income to recover its deferred tax operating assets and therefore maintains a full valuation allowance.
Consolidated Pretax Income (Loss)
U.S. and foreign components of pre-tax income (loss) were as follows:

| Three Months Ended March 31, |  |
| 2025 |  | 2024 |  |  |  |
U.S. | $ | (11,153) |  |  | $ | (3,239) |  |  |  |  |
Foreign | (3,954) |  |  | — |  |  |  |  |
Total | $ | (15,107) |  |  | $ | (3,239) |  |  |  |  |

Provision (Benefit) for Income Taxes
The components of the provision for income taxes were as follows:

Three Months Ended March 31, | 2025 |  | 2024 |  |  |  |
Current taxes |  |  |  |  |  |  |
U.S. state and local | $ | — |  |  | $ | 100 |  |  |  |  |
Foreign | 1,154 |  |  | — |  |  |  |  |
Total Current taxes | 1,154 |  |  | 100 |  |  |  |  |
Deferred taxes |  |  |  |  |  |  |
U.S.federal | (1,042) |  |  | 30 |  |  |  |  |
Foreign | (729) |  |  | — |  |  |  |  |
Total Deferred taxes | (1,771) |  |  | 30 |  |  |  |  |
Provision (benefit) for income taxes | $ | (617) |  |  | $ | 130 |  |  |  |  |

As of March 31, 2025, the Company has approximately (i) $1,670,035 of federal net operating loss carryforwards, which if not utilized will begin expiring in 2030. Of this amount, $158,663 will carryforward indefinitely.
13. COMMITMENTS AND CONTINGENCIES
The Company periodically receives various regulatory inquiries and requests for information with respect to investigations and inquiries that such regulators are conducting. The Company has complied with all such inquiries and requests for information.
The Company is involved from time to time in various routine legal proceedings, including proceedings related to litigation with present or former employees. Although such litigation is routine and incidental to the conduct of its business, such litigation can potentially result in large monetary awards when a civil jury is allowed to determine compensatory and/or punitive damages.
Everspan may be subject to disputes with policyholders or other third parties regarding the scope and extent of coverage offered under Everspan's policies, including disputes relating to Everspan’s course of conduct in the handling of claims and settling or failing to settle claims (which can lead to bad faith and other forms of extra-contractual liability); be required to defend claimants in suits against its policyholders for covered liability claims; or enter into commercial disputes with its reinsurers, MGA/Us or third party claims administrators regarding their respective contractual obligations and rights. Under some circumstances, the results of such disputes or suits may lead to liabilities beyond those which are anticipated or reserved, including liabilities in excess of applicable policy limits.

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Notes to Unaudited Consolidated Financial Statement s
Ambac Financial Group, Inc. and Subsidiaries
(Dollar Amounts in Thousands, Except Per Share Amounts)
In the ordinary course of their businesses, certain of Ambac’s subsidiaries assert claims in legal proceedings against third parties to recover losses already paid and/or mitigate future losses. The amounts recovered and/or losses avoided which may result from these proceedings is uncertain, although recoveries and/or losses avoided in any one or more of these proceedings during any quarter or fiscal year could be material to Ambac’s results of operations in that quarter or fiscal year.
From time to time, Ambac is subject to allegations concerning its corporate governance, including the manner in which it exercises control and oversight of its subsidiaries, that may lead to litigation, including derivative litigation. While the monetary impacts of addressing such allegations outside of litigation may not be material, these charges may distract management and the Board of Directors from their principal focus on Ambac's business, strategy and objectives.
It is not reasonably possible to predict whether suits in addition to those described below will be filed or whether additional inquiries or requests for information will be made, and it is also not possible to predict the outcome of litigation, inquiries or requests for information. It is possible that there could be unfavorable outcomes in these or other proceedings. Legal accruals for litigation against the Company with losses that are probable and reasonably estimable are not material to the operating results or financial position of the Company. For the litigation matters the Company is defending that do not meet the “probable and reasonably estimable” accrual threshold and where no loss estimates have been provided below, management is unable to make a meaningful estimate of the amount or range of loss that could result from unfavorable outcomes. Under some circumstances, adverse results in any such proceedings could be material to our business, operations, financial position, profitability or cash flows. The Company believes that it has substantial defenses to the claims described below and, to the extent that these actions proceed, the Company intends to defend itself vigorously; however, the Company is not able to predict the outcomes of these actions.
Current Litigation
Dwight Jereczek and Stanley Elliott, individually and on behalf of all others similarly situated v. MBIA Inc., Ambac Financial Group, Inc., Ambac Assurance Corporation, MBIA Insurance Corporation, and National Public Finance Guarantee Corporation (United States District Court for the District of Connecticut, filed on February 12, 2025) (the "COFINA Case"). This putative class action complaint is brought by alleged former holders of bonds issued by the Puerto Rico Sales Tax Financing Corporation (“COFINA”) allegedly insured by defendants under financial guaranty insurance policies. On behalf of themselves and all persons and entities that owned such bonds between October 19, 2018, and February 12, 2019, plaintiffs allege that, in connection with the restructuring of COFINA under Title III of the Puerto Rico Oversight, Management, and Economic Stability Act, defendants orchestrated a scheme to improperly use their role in the Title III process to alter contracts with insured COFINA bondholders, resulting in such bondholders receiving less than what they contracted for under the financial guaranty insurance policies. Plaintiffs assert claims for breach of contract, unjust
enrichment, and bad faith refusal to pay first-party benefits under an insurance contract. Plaintiffs seek an unspecified amount of damages with interest thereon, disgorgement of profits, a declaratory judgment of plaintiffs’ rights and defendants’ responsibilities, and a permanent injunction against violations of law. Plaintiffs filed an amended complaint on May 6, 2025. The amended complaint includes an additional claim against Ambac for breach of the implied covenant of good faith and fair dealing, and seeks punitive damages from all defendants. On May 8, 2025, the summons and amended complaint were served on Ambac.
CQS (UK) LLP, CQS (US), LLC, Deutsche Bank Securities Inc., FFI Fund Ltd., FYI Fund Ltd., Intermarket Corporation, Deltroit Asset Management (UK) LLP, Mudrick Stressed Credit Master Fund, L.P., Olifant Fund, Ltd., Shenkman Tactical Credit Master Fund LP, Shenkman Opportunistic Credit Master Fund LP, Four Points Multi-Strategy Master Fund, Inc., Shenkman Multi-Asset Credit Select Master Fund LP, and Three Court Master, LP v. Ambac Assurance Corporation and Ambac Financial Group, Inc. (Supreme Court of the State of New York, County of New York, Index No. 651400/2025, filed March 12, 2025) (the "Surplus Note Case"). Plaintiffs, purported owners of surplus notes issued by AAC, filed a complaint alleging that AAC and AFG breached the Settlement Agreement because AAC co-invested in Cirrata V LLC, the acquisition vehicle for Beat, without approval of the OCI. Plaintiffs seek damages in an unspecified amount allegedly sustained as a result of AAC's and AFG's breaches of the Settlement Agreement. On April 7, 2025, defendants filed a motion to dismiss the claims with prejudice. In response to defendants’ motion, the plaintiffs sought leave from the court to amend their complaint, and the amended complaint was filed on April 23, 2025. On May 7, 2025, defendants again filed a motion to dismiss the claims with prejudice. Plaintiffs’ opposition to the motion to dismiss is due May 21, 2025 and defendants' reply is due on May 30, 2025. The court has scheduled oral arguments for June 5, 2025.
Monterey Bay Military Housing, LLC, et al. v. Ambac Assurance Corporation, et al. (United States District Court, Southern District of New York, Case No. 1:19-cv-09193-PGG, transferred on October 4, 2019 from the United States District Court, Northern District of California, San Jose Division, Case No. 17-cv-04992-BLF, filed August 28, 2017). Plaintiffs, the corporate developers of various military housing projects, filed an amended complaint on October 27, 2017 against AAC, a former employee of AAC, and certain unaffiliated persons and entities, asserting claims for (i) violation of 18 U.S.C §§ 1962(c) and 1962(d) (civil Racketeer Influenced and Corrupt Organizations Act (“RICO”) and conspiracy to commit civil RICO), (ii) breach of fiduciary duty, (iii) aiding and abetting breach of fiduciary duty, (iv) fraudulent misrepresentation, (v) fraudulent concealment and (vi) conspiracy to commit fraud. The claims relate to bonds and debt certificates (insured by AAC) that were issued to finance the renovation and construction of housing at certain military bases. Plaintiffs allege that defendants secretly conspired to overcharge plaintiffs for the financing of the projects and directed the excess profits to themselves. Plaintiffs allege defendants generated these excess profits by supposedly charging inflated interest rates, manipulating “shadow ratings,” charging unnecessary fees, and hiding evidence of their alleged wrongdoing. Plaintiffs seek,

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Notes to Unaudited Consolidated Financial Statement s
Ambac Financial Group, Inc. and Subsidiaries
(Dollar Amounts in Thousands, Except Per Share Amounts)
among other things, compensatory damages, disgorgement of profits and fees, punitive damages, trebled damages and attorneys’ fees. AAC and the other defendants filed motions to dismiss the amended complaint on November 13, 2017. On July 17, 2018, the court granted AAC’s and the other defendants’ motion to dismiss the first amended complaint without prejudice. On December 17, 2018, Plaintiffs filed a second amended complaint. On February 15, 2019, AAC and the other defendants filed a motion to dismiss the second amended complaint. On September 26, 2019, the court issued a decision denying defendants’ motion to dismiss and sua sponte reconsidering its previous denial of defendants’ motion to transfer venue to the Southern District of New York (“SDNY”). On October 10, 2019, after the case was transferred to the SDNY, the defendants filed motions to vacate or reconsider the decision by the Northern District of California on the defendants’ motion to dismiss. On March 31, 2021, the court granted defendants’ motions for reconsideration and, upon reconsideration, dismissed the claims against AAC and its former employee for breach of fiduciary duty and for aiding and abetting breach of AAC’s or its former employee’s fiduciary duty; dismissed two plaintiffs’ RICO claims against AAC and its former employee; and in all other respects denied defendants’ motions. Defendants served answers to the second amended complaint on April 21, 2021, asserting several affirmative defenses, including a defense for unclean hands focused on the plaintiffs’ failure to maintain the project properties and falsification of maintenance records. On May 24, 2021, plaintiffs moved to strike defendants’ unclean hands defenses. On September 14, 2021, Magistrate Judge Sarah L. Cave, to whom plaintiffs’ motion to strike was referred for a Report and Recommendation, issued an opinion and order denying plaintiffs’ motion. On April 6, 2022, certain co-defendants filed a motion to sever the plaintiffs’ claims and to dismiss all claims except for claims asserted by the Monterey Bay plaintiffs. On January 26, 2024, the court granted the parties leave to file motions for summary judgment; opening briefs were due March 22, 2024, while oppositions are due May 31, 2024 and replies on July 12, 2024. On February 29, 2024, the court denied co-defendants’ motion to sever plaintiffs’ claims. On March 22, 2024, defendants served opening motions for summary judgment against plaintiffs’ claims in their entirety on multiple grounds, and plaintiffs served cross-motions for summary judgment on defendants’ unclean hands defenses. The parties’ summary judgment motions were fully briefed as of July 12, 2024 and are currently awaiting a decision from the Court. On December 11, 2024, the Court denied Plaintiffs’ motion for oral argument on Defendants’ motions for summary judgment, stating that it would “notify the parties if it concludes that oral argument concerning the motions for summary judgment would be productive.”
In re National Collegiate Student Loan Trusts Litigation (Delaware Court of Chancery, Consolidated C.A. No. 12111, filed November 1, 2019). On November 1, 2019, AAC became aware of a new declaratory judgment action filed by certain residual equity interest holders (“NC Owners” or “Plaintiffs”) in fourteen National Collegiate Student Loan Trusts (the “Trusts”) against Wilmington Trust Company, the Owner Trustee for the Trusts; U.S. Bank National Association, the Indenture Trustee; GSS Data Services, Inc., the Administrator; and AAC. Through this action, Plaintiffs seek a number of judicial determinations.
On January 21, 2020, the presiding Vice Chancellor entered an order consolidating the action with previously filed litigation relating to the Trusts. On February 13, 2020, AAC, the Owner Trustee, the Indenture Trustee, and other parties filed declaratory judgment counterclaims. Several parties, including Plaintiffs and AAC, filed motions for judgment on the pleadings in support of their requested judicial determinations. On August 27, 2020, the Vice Chancellor issued an opinion addressing all of the pending motions for judgment on the pleadings, which granted certain of the parties’ requested judicial determinations and denied others. He deferred judgment on still other declarations pending further factual development. The Vice Chancellor entered a series of stays to facilitate good-faith settlement discussions, the most recent of which was entered on May 2, 2023, and stayed the matter through May 5, 2023. On April 9, 2025, the Administrator filed a status report stating that certain parties continue to negotiate a resolution to some of the pending claims.
Potential Litigation
AAC’s estimates of projected losses for RMBS transactions consider, among other things, the RMBS transactions’ payment waterfall structure, including the application of interest and principal payments and recoveries, and depend in part on our interpretations of contracts and other bases of our legal rights. From time to time, bond trustees and other transaction participants have employed different contractual interpretations and have commenced, or threatened to commence, litigation to resolve these differences. From time to time AAC is also subject to allegations that it has failed to fulfill a contractual obligation or duty in respect of securities that it has issued. It is not possible to predict whether additional disputes will arise, nor the outcomes of any potential litigation. It is possible that there could be unfavorable outcomes in these or other disputes or proceedings and that our interpretations may prove to be incorrect, which could lead to changes to our estimate of loss reserves.
In the ordinary course of its businesses, AAC asserts claims in legal proceedings against third parties to recover losses already paid and/or mitigate future losses. The amounts recovered and/or losses avoided which may result from these proceedings is uncertain, although recoveries and/or losses avoided in any one or more of these proceedings during any quarter or fiscal year could be material to Ambac’s results of operations in that quarter or fiscal year.
Impact of the AAC Sale on Litigation
AAC is involved in litigation as described above. These actual and potential cases may continue after the AAC Sale is completed. Following completion of the AAC Sale, AFG will no longer have any exposure to these matters other than those in which it is a named defendant, currently the COFINA Case and the Surplus Note Case so long as it remains a defendant.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations ($ and £ in thousands)
The objectives of our Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) are to provide users of our consolidated financial statements with the following:
•A narrative explanation from the perspective of management of our financial condition, results of operations, cash flows, liquidity and certain other factors that may affect future results;
•Context to the unaudited consolidated financial statements; and
•Information that allows assessment of the likelihood that past performance is indicative of future performance.
The following discussion should be read in conjunction with our consolidated financial statements in Part I, Item 1 and the matters described under Part II, Item 1A Risk Factors in this Quarterly Report and under Item 1A. Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2024. Refer to Item 1. Business and Note 1. Background and Business Description in our Annual Report on Form 10-K for the year ended December 31, 2024 for a description of our business and our key strategies to achieve our primary goal to maximize shareholder value.
Unless otherwise noted, this Management's Discussion and Analysis of Financial Condition and Results of Operations relates solely to our continuing operations and does not include the operations of the Legacy Financial Guarantee business. See "Sale of AAC" below and "Sale of Ambac Assurance Corporation" in Note 5. Discontinued Operation of the Notes to Consolidated Financial Statements in the Annual Report on Form 10-K for the year ended December 31, 2024 for additional information about the divestiture of the Legacy Financial Guarantee business.
Organization of Information
MD&A includes the following sections:

| Page
Strategies to Enhance Shareholder Value | 27
Overview | 28
Critical Accounting Estimates | 29
Results of Operations | 29
Liquidity and Capital Resources | 32
Balance Sheet | 34
Accounting Standards | 37
U.S. Insurance Statutory Basis Financial Results | 37
Non-GAAP Financial Measures | 37

Strategies to Enhance Shareholder Value
The Company's primary goal is to maximize long-term shareholder value through the execution of targeted strategies for its Insurance Distribution and Specialty Property and Casualty Insurance businesses.
Insurance Distribution and Specialty Property and Casualty Insurance strategic priorities include:
•Expanding our Insurance Distribution business based on deep domain knowledge in specialty and niche classes of risk which generate attractive margins at scale. This will be achieved through acquisitions, strategic investments, establishing new businesses “de-novo,” and organic growth and diversification supported by a centralized technology led shared services offering
•Growing our Specialty Property and Casualty Insurance business to generate underwriting profits from a diversified portfolio of commercial and personal liability risks accessed primarily through program administrators.
Ambac continuously evaluates, and is currently evaluating, opportunities to acquire businesses and assets for its Insurance Distribution business, and is currently in ongoing discussions to potentially acquire one or more businesses. These acquisitions may be material to our business, financial condition and operations and may involve raising capital to finance the acquisition(s). There can be no assurance, including with respect to the acquisitions under discussion, that we will agree to acquire any business or assets, obtain necessary financing or complete any acquisition in a timely manner or at all.

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OVERVIEW
AFG's subsidiaries/businesses are divided into two reportable segments with results for the three months ended March 31, 2025, and 2024, as follows:

|  | Three Months Ended March 31, 2025 |  | Three Months Ended March 31, 2024
($ in thousands) |  | Specialty Property and Casualty Insurance |  | Insurance Distribution |  | Corporate & Other |  |  |  | Consoli-dated |  | Specialty Property and Casualty Insurance |  | Insurance Distribution |  | Corporate & Other |  |  |  | Consoli-dated
Premiums placed |  |  |  | $ | 230,606 |  |  |  |  |  |  | $ | 230,606 |  |  |  |  | $ | 90,096 |  |  |  |  |  |  | $ | 90,096 |
Gross premiums written |  | $ | 86,915 |  |  |  |  |  |  |  |  | 86,915 |  |  | $ | 96,422 |  |  |  |  |  |  |  |  | 96,422 |
Net premiums written |  | 18,005 |  |  |  |  |  |  |  |  | 18,005 |  |  | 26,247 |  |  |  |  |  |  |  |  | 26,247 |
Total revenues |  | 21,171 |  |  | 40,998 |  |  | $ | 587 |  |  |  |  | 62,756 |  |  | 29,542 |  |  | 17,865 |  |  | $ | 2,145 |  |  |  |  | 49,551 |
Total expenses |  | 19,668 |  |  | 43,241 |  |  | 14,954 |  |  |  |  | 77,863 |  |  | 27,721 |  |  | 13,892 |  |  | 11,177 |  |  |  |  | 52,790 |
Pretax income (loss) |  | 1,503 |  |  | (2,243) |  |  | (14,367) |  |  |  |  | (15,107) |  |  | 1,821 |  |  | 3,973 |  |  | (9,032) |  |  |  |  | (3,239) |
EBITDA(2) |  | 1,503 |  |  | 12,083 |  |  | (14,063) |  |  |  |  | (477) |  |  | 1,821 |  |  | 5,122 |  |  | (8,567) |  |  |  |  | (1,625) |
Adjusted EBITDA |  | 1,589 |  |  | 12,112 |  |  | (9,988) |  |  |  |  | 3,713 |  |  | 1,872 |  |  | 5,122 |  |  | (5,689) |  |  |  |  | 1,304 |
Net income (loss) attributable to Ambac shareholders |  | 1,425 |  |  | $ | (3,397) |  |  | $ | (14,172) |  |  |  |  | (16,144) |  |  | 1,713 |  |  | $ | 3,152 |  |  | $ | (8,938) |  |  |  |  | (4,070) |
EBITDA attributable to Ambac shareholders |  | 1,589 |  |  | 12,112 |  |  | (9,988) |  |  |  |  | 3,713 |  |  | 1,872 |  |  | 5,122 |  |  | (5,689) |  |  |  |  | 1,304 |
Adjusted EBITDA attributable to Ambac common stockholders |  | $ | 1,589 |  |  | 12,112 |  |  | $ | (9,988) |  |  |  |  | 3,713 |  |  | $ | 1,872 |  |  | 5,122 |  |  | $ | (5,689) |  |  |  |  | 1,304 |

Sale of AAC
On June 4, 2024, AFG entered into a stock purchase agreement with American Acorn Corporation (the “Buyer”), a Delaware corporation owned by funds managed by Oaktree Capital Management, L.P., pursuant to which and subject to the conditions set forth therein, AFG will sell all of the issued and outstanding shares of common stock of AAC, a wholly-owned subsidiary of AFG, to Buyer for aggregate consideration of $420 in cash (the "Sale"). The terms of the Sale as contemplated by the stock purchase agreement provide that, at the closing of the Sale (the “Closing”), Buyer will acquire complete common equity ownership of AAC and all of its wholly owned subsidiaries, including Ambac UK. In connection with and pursuant to the stock purchase agreement, AFG has agreed to issue to Buyer a warrant exercisable for a number of shares of common stock, par value $0.01, of AFG representing 9.9% of the fully diluted shares of AFG’s common stock as of March 31, 2024, pro forma for the issuance of the warrant The warrant will have an exercise price per share of $18.50 with a six and a half-year term from the date of issuance and will be immediately exercisable. Payment of the exercise price may be settled, at AFG’s option, by way of a cash exercise or by net share settlement. The Buyer continues to pursue the final outstanding regulatory approval for the Sale, which would be received only after a hearing at or prior to which third parties would have an opportunity to object to the Sale. As a result, consistent with the terms of the purchase agreement, the term of the purchase agreement has been automatically extended from April 4, 2025, to July 3, 2025. Refer to Note 5. Discontinued Operation of the Notes to Consolidated Financial Statements in the Annual Report on Form 10-K for the year ended December 31, 2024 for further details on the pending sale of AAC.
The anticipated loss on sale included within Net income (loss) from discontinued operations before tax on the Consolidated Statement of Comprehensive Income (Loss) for the three months ended March 31, 2025 and year ended December 31, 2024, are summarized is $(14,496) and $(570,145), respectively. See Note 3. Discontinued Operation in this report on Form 10-Q for further information.
At Closing, net income will be impacted by reclassification from Accumulated Other Comprehensive Income (Loss) of net unrealized gains (losses) on available-for-sale investment securities, cumulative foreign currency translation adjustments and cumulative credit risk changes of fair value option liabilities attributable to AAC and subsidiaries, which at March 31, 2025, amounted to $(132,778).
SEC Final Rules on Climate Related Information
On March 6, 2024, the U.S. Securities and Exchange Commission (“SEC”) adopted The Enhancement and Standardization of Climate-Related Disclosures for Investors ("Final Rule"), which will require registrants to disclose extensive climate-related information in their Form 10-K annual reports and registration statements. The Final Rule was scheduled to become effective May 28, 2024; however, the SEC has voluntarily stayed the rule’s effective date pending judicial review of legal challenges. In March 2025, the SEC ended its defense of the Final Rule, though judicial review of legal challenges continues.
The compliance dates for accelerated filers for annual reports or registration statements that include financial statements for the year ending December 31 are phased in from 2026 through 2031. Depending on when the legal challenges are resolved, the compliance dates may be retained or delayed.
Ambac is reviewing the Final Rule and is currently assessing our related compliance obligations and other effects on our operations.

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CRITICAL ACCOUNTING ESTIMATES
Ambac’s Unaudited Consolidated Financial Statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”), which require the use of material estimates and assumptions. For a discussion of Ambac’s critical accounting policies and estimates, see “Critical Accounting Policies and Estimates” in Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in Ambac’s Annual Report on Form 10-K for the year ended December 31, 2024.
Results of Operations
Consolidated Results
A summary of our financial results is shown below:

|  | Three Months Ended March 31, |  |
|  | 2025 |  | 2024 |  |  |  |
Gross premiums written |  | $ | 86,915 |  |  | $ | 96,422 |  |  |  |  |
Net premiums written |  | 18,005 |  |  | 26,247 |  |  |  |  |
Revenues: |  |  |  |  |  |  |  |
Net premiums earned |  | $ | 15,678 |  |  | $ | 25,579 |  |  |  |  |
Commission income |  | 36,771 |  |  | 17,729 |  |  |  |  |
Servicing and other fees |  | 4,964 |  |  | — |  |  |  |  |
Program fees |  | 3,652 |  |  | 2,567 |  |  |  |  |
Net investment income |  | 2,815 |  |  | 3,640 |  |  |  |  |
Other revenue |  | (1,124) |  |  | 36 |  |  |  |  |
Expenses: |  |  |  |  |  |  |  |
Losses and loss adjustment expenses |  | 10,496 |  |  | 19,355 |  |  |  |  |
Policy acquisition costs |  | 3,841 |  |  | 4,424 |  |  |  |  |
Commission expense |  | 10,365 |  |  | 9,822 |  |  |  |  |
General and administrative expenses |  | 38,531 |  |  | 17,575 |  |  |  |  |
Intangible amortization and depreciation |  | 9,176 |  |  | 1,614 |  |  |  |  |
Interest expense |  | 5,454 |  |  | — |  |  |  |  |
Total expenses |  | 77,863 |  |  | 52,790 |  |  |  |  |
Provision (benefit) for income taxes from continuing operations |  | (617) |  |  | 130 |  |  |  |  |
Net income (loss) from continuing operations |  | (14,490) |  |  | (3,369) |  |  |  |  |
Net income (loss) from discontinued operations, net of income taxes |  | (30,247) |  |  | 24,140 |  |  |  |  |
Net income (loss) |  | (44,737) |  |  | 20,771 |  |  |  |  |
Less: net (gain) loss attributable to noncontrolling interest |  | (1,654) |  |  | (701) |  |  |  |  |
Net income (loss) attributable to Ambac shareholders |  | $ | (46,391) |  |  | $ | 20,070 |  |  |  |  |

Ambac's results for the three months ended March 31, 2025 compared to the three months ended March 31, 2024 were impacted by the following:
•Ambac's acquisition of its interests in Beat on August 1, 2024.
•In the fourth quarter of 2024, the pending sale of AAC was determined to qualify for discontinued operations presentation, resulting in its results being reported within discontinued operations. Refer to Note 1. Background and Business Description and Note 5. Discontinued Operation of the Notes to Consolidated Financial Statements in the Annual Report on Form 10-K for the year ended December
31, 2024 and Note 3. Discontinued Operations to the Unaudited Consolidated Financial Statements in this Quarterly Report on Form 10-Q for further details on the pending sale and results for the three months ended March 31, 2025 and 2024.
The following paragraphs describe the consolidated results of continuing operations of Ambac and its subsidiaries for the three months ended March 31, 2025 and 2024, respectively.
Gross Premiums Written. Gross premiums written decreased $11,185 for the three months ended March 31, 2025, compared to the same period in the prior year.
The reduction is primarily driven by the non-renewal of certain programs, including the non-renewal of an assumed non-standard personal auto program, partially offset by growth in existing programs and the addition of new programs.
Net Premiums Written. Net premiums written decreased $8,243 for the three months ended March 31, 2025, compared to the same period in the prior year.
The reduction is primarily driven by the non-renewal of certain programs, including an assumed non-standard personal auto program, partially offset by growth in existing programs and the addition of new programs.
Net Premiums Earned. Net premiums earned decreased $9,901 for the three months ended March 31, 2025, compared to the same period in the prior year.
The decrease was primarily driven by the non-renewal of certain programs, including an assumed non-standard personal auto program, partially offset by growth in existing programs and the addition of new programs.
Commission Income and Commission Expense. Commission income for the three months ended March 31, 2025, was $36,771 compared to $17,729 for the three months ended March 31, 2024. Commission income included profit commissions (based on underwriting performance) of $4,691 for the three months ended March 31, 2025 and $1,182 for the three months ended March 31, 2024, respectively. The incr ease was primarily driven by the inclusion of profit commissions earned by Beat following the acquisition in August 2024.
For the three months ended March 31, 2025, commission expense of $10,365 compared to $9,822 in three months ended March 31, 2024, representing approximately 45% and 72% of commission income in each respective period. The decrease in commission expense relative to commission income in 2025 relative to 2024 is primarily a result of the acquisition of Beat. When third parties are paid commissions to obtain business, the majority of Beat's commission income is reported net of any distribution and commission expenses, due to the nature of its program agreements. The majority of the Insurance Distribution Segment's other MGA/Us report their commission income gross of distribution and commission expenses.
Program Fees. Program fee revenues were $3,652 and $2,567 for the three months ended March 31, 2025 and 2024,

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respectively. Program fee revenues represent the recognition of ceding commissions in excess of direct acquisition costs received from reinsurers and minimum fees received from MGA/Us until related programs reach certain levels of premium ceded. Program fees are charged as a percentage of premiums ceded to reinsurers as a component of total ceding commissions. The growth is a function of growth of business and related premiums ceded to reinsurers.
Net Investment Income. Net investment income consists of interest income, including the net effect of discount accretion and premium amortization, from fixed maturity securities classified as available-for-sale and net gains (losses) on pooled investment funds which are reported under the equity method. These funds and certain other investments are reported in Other investments on the Consolidated Balance Sheets. For further information about investment funds held, refer to Note 4. Investments to the Unaudited Consolidated Financial Statements, included in Part I, Item 1 in this Form 10-Q.
Net investment income decreased $825 for the three months ended March 31, 2025 compared to the prior year period due to lower Corporate short-term investment balances resulting primarily from the acquisition of Beat, partially offset by higher investment income on short-term investments at the Cirrata companies with the addition of Beat, and growth of the Everspan investment portfolio.
Servicing and Other Fees. Includes revenues earned for providing operational and administrative services to the Lloyd's syndicates managed by Beat as well as certain policy and brokerage fees.
Other Revenues. Other revenues for the three months ended March 31, 2025 of $(1,124) and 2024 of $36 includes (i) net investment gains (losses) on securities sold or called; (ii) investment impairment charges; (iii) foreign exchange gains (losses) from the Insurance Distribution segment; (iv) net gains on derivative contracts for the three months periods ended March 31, 2025, resulting from the change in fair value of FX forward contracts used to manage currency risk within the Insurance Distribution segment and (v) fair value changes on warrants to purchase equity of certain development stage companies held by AFG. The net loss for the three months ended March 31, 2025 was driven primarily by foreign exchange losses on the non-functional currency operations of Beat.
Losses and Loss Adjustment Expenses (Benefit). Loss and loss expenses incurred decreased $8,859 for the three months ended March 31, 2025, compared to the same period in the prior year.
The lower loss and loss adjustment expenses is primarily due to the shift in mix of business driven by the non-renewal of certain programs, including an assumed non-standard personal auto program in which Everspan was a reinsurer and certain commercial auto programs, partially offset by growth in existing programs and the addition of new programs.
General and Administrative Expenses (G&A). The following table provides a summary of G&A expenses for the periods presented:

|  | Three Months Ended March 31, |  |
|  | 2025 |  | 2024 |  |  |  |
Compensation |  | $ | 22,887 |  |  | $ | 10,546 |  |  |  |  |
Non-compensation |  | 15,644 |  |  | 7,140 |  |  |  |  |
Total G&A expenses |  | $ | 38,531 |  |  | $ | 17,686 |  |  |  |  |

The increase in Compensation G&A expenses during the three months ended March 31, 2025, was due to higher compensation costs from a net increase in staffing from the development and growth of the Specialty Property & Casualty Insurance and Insurance Distribution segments, including the effect of Insurance Distribution acquisitions; offset by lower current year period expenses for severance and incentive compensation.
Variances in Non-Compensation G&A expenses for the three months ended March 31, 2025, as compared to the three months ended March 31, 2024, were driven by integration expenses related to the acquisition of Beat, higher Corporate segment expenses related to M&A transactions and audit fees.
Intangible Amortization and Depreciation. Intangible amortization for the three months ended March 31, 2025 and 2024, was $8,763 and $1,139, respectively. The increase in other intangible amortization for the three months ended March 31, 2025 of $7,624 related to the Beat acquisition.
Interest Expense. Interest expense for the three months ended March 31, 2025 was $5,454, related to the short-term debt used in funding the Beat acquisition, entered into during the third quarter of 2024. The company had no debt or interest expenses during the three months ended March 31, 2024.
Provision for Income Taxes. The provision for income taxes primarily relates to international operations and was $(617) for the three months ended March 31, 2025, compared to $130 for the three months ended March 31, 2024, a decrease of $747 for the quarter.

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Results of Operations by Segment

Specialty Property and Casualty Insurance
|  | Three Months Ended March 31, |  |
|  | 2025 |  | 2024 |  |  |  |
Gross premiums written |  | $ | 86,915 |  |  | $ | 96,422 |  |  |  |  |
Net premiums written |  | 18,005 |  |  | 26,247 |  |  |  |  |
Revenues: |  |  |  |  |  |  |  |
Net premiums earned |  | $ | 15,678 |  |  | $ | 25,579 |  |  |  |  |
Program fees |  | 3,652 |  |  | 2,567 |  |  |  |  |
Investment income |  | 1,842 |  |  | 1,399 |  |  |  |  |
Other income |  | (1) |  |  | (3) |  |  |  |  |
Total |  | 21,171 |  |  | 29,542 |  |  |  |  |
Expenses: |  |  |  |  |  |  |  |
Losses and loss expenses incurred |  | 10,496 |  |  | 19,355 |  |  |  |  |
Amortization of deferred acquisition costs, net |  | 3,841 |  |  | 4,424 |  |  |  |  |
General and administrative expenses |  | 5,331 |  |  | 3,942 |  |  |  |  |
Total |  | 19,668 |  |  | 27,721 |  |  |  |  |
EBITDA |  | 1,503 |  |  | $ | 1,821 |  |  |  |  |
Pretax income (loss) |  | $ | 1,503 |  |  | $ | 1,139 |  |  |  |  |
Retention Ratio (1) |  | 20.7% |  | 27.2% |  |  |  |
Loss and LAE Ratio (2) |  | 66.9% |  | 75.7% |  |  |  |
Expense Ratio (3) |  | 35.2% |  | 22.7% |  |  |  |
Combined Ratio (4) |  | 102.1% |  | 98.4% |  |  |  |
Ambac's stockholders equity (5) |  | $ | 137,241 |  |  | $ | 121,889 |  |  |  |  |

(1)Retention ratio is defined as net premiums written divided by gross premiums written
(2)Loss and LAE ratio is defined as losses and loss expenses incurred divided by net premiums earned
(3)Expense Ratio is defined as acquisition costs and general and administrative expenses, reduced by program fees divided by net premiums earned
(4)Combined ratio is defined as Loss and LAE ratio plus Expense Ratio
(5)Represents Ambac stockholders equity in the Specialty Property and Casualty Insurance segment, including intercompany eliminations.
The Specialty Property and Casualty Insurance segment has grown significantly since underwriting its first program in May 2021. Twenty-six programs were authorized to issue policies as of March 31, 2025, including Everspan participating on certain programs as a reinsurer. As part of Everspan's focus on improving profitability and capital utilization, Everspan non-renewed certain programs, including a commercial auto program and an assumed non-standard personal auto program in the latter half of 2024, and a commercial auto and a general liability program in 1Q2025. The non-renewals resulted in a reduction in gross and net written premiums, net premiums earned, losses and loss expenses incurred, and a shift in Everspan's retention ratio in the three months ended March 31, 2025, compared to March 31, 2024. Partially offsetting these non-renewals are the continued growth in existing programs and addition of new programs. EBITDA and pre-tax income has decreased in the three months ended March 31, 2025 compared to March 31, 2024, primarily due to the reduction in earned premium related to the non-renewal of these programs.
Consistent with its strategy to generate sustainable and profitable, long-term specialty property and casualty program insurance business with a focus on diverse classes of risks, Everspan may source programs as a reinsurer. Accessing programs as a reinsurer provides Everspan the ability to diversify its risk profile (temporarily or long-term), efficiently manage its exposure limits and underwrite programs in a cost efficient manner, amongst other benefits. Everspan may participate as a reinsurer on up to 30% of a program, which is in line with its strategy to generally retain up to 30% per program. Participation as a reinsurer will affect the retention ratio as Everspan's portion of assumed premiums is reflected fully in both Gross and Net Premiums Written.
The change in the loss ratio was driven by the shift in mix of business. The three months ended March 31, 2025, contained minimal prior period loss development of 1.1% whereas the three months ended March 31, 2024, contained prior period development of 4.4%, which was driven by a personal nonstandard auto program (through assumed reinsurance) which has since been non-renewed.
Loss and loss expenses incurred, and Everspans's associated Loss and LAE ratio, may be adversely impacted by economic and social inflation. The impact of inflation on ultimate loss reserves is difficult to estimate, particularly in light of recent disruptions to the judicial system, supply chains and labor markets. In addition, going forward, we may not be able to offset the impact of inflation on our loss costs with sufficient price increases. The estimation of loss reserves may also be more difficult during extreme events, such as a pandemic, or during the persistence of volatile or uncertain economic conditions, due to, amongst other reasons, unexpected changes in behavior of judicial decisions, claimants and policyholders, including fraudulent reporting of exposures and/or losses. Due to the inherent uncertainty underlying loss reserve estimates, the final resolution of the estimated liability for loss and loss adjustment expenses will likely be higher or lower than the related loss reserves at the reporting date. In addition, our estimate of losses and loss expenses may change. These additional liabilities or increases in estimates, or a range of either, could vary significantly from period to period.
In addition to the decrease in the Loss and LAE ratio for the three months ended March 31, 2025, compared to March 31, 2024, there was a decrease in the benefit to acquisition costs resulting from sliding scale commission arrangements with program partners. Such benefit reduced the Specialty Property and Casualty Insurance segments expense ratio by —% and (6.1)% for the three months ended March 31, 2025 and 2024, respectively. Certain Everspan programs were structured to include sliding scale commission arrangements within a loss ratio range. These sliding scale arrangements help mitigate losses, protect underwriting results and limit earnings volatility.
General and administrative costs were higher for the three months ended March 31, 2025, relative to the three months ended March 31, 2024, due to impact of changes in short term incentive accruals and performance on long term incentive compensation

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Insurance Distribution
|  | Three Months Ended March 31, |  |
|  | 2025 |  | 2024 |  |  |  |
Premiums placed |  | $ | 230,606 |  |  | $ | 90,096 |  |  |  |  |
Commission income |  | $ | 36,771 |  |  | $ | 17,729 |  |  |  |  |
Commission expense |  | 10,365 |  |  | 9,822 |  |  |  |  |
Net commissions |  | 26,406 |  |  | 7,907 |  |  |  |  |
Servicing and other fees |  | 4,964 |  |  | — |  |  |  |  |
Investment income |  | 376 |  |  | 50 |  |  |  |  |
Other revenue |  | (1,113) |  |  | 86 |  |  |  |  |
Expenses: |  |  |  |  |  |  |  |
General and administrative expenses |  | 18,550 |  |  | 2,921 |  |  |  |  |
EBITDA |  | 12,083 |  |  | 5,122 |  |  |  |  |
Interest expense |  | 5,454 |  |  | — |  |  |  |  |
Depreciation |  | 109 |  |  | 10 |  |  |  |  |
Intangible amortization |  | 8,763 |  |  | 1,139 |  |  |  |  |
Pretax income (loss) |  | $ | (2,243) |  |  | $ | 3,973 |  |  |  |  |
Ambac's stockholders equity (1) |  | $ | 274,472 |  |  | $ | 105,565 |  |  |  |  |

(1) Represents the share of Ambac stockholders equity for each subsidiary within the Insurance Distribution segment, including intercompany eliminations.
Ambac's Insurance Distribution businesses are compensated for their services primarily by commissions paid by insurance carriers for underwriting, structuring and/or administering polices. Commission revenues are usually based on a percentage of the premiums placed. In addition, we are eligible to receive profit sharing contingent commissions on certain programs based on the underwriting results of the policies placed with carriers, which may cause some variability in revenue and earnings.
The Insurance Distribution segment placed premiums for its carriers of approximately $230,606 for the three months ended March 31, 2025, up $140,510 or 156%, respectively, as compared to the three months ended March 31, 2024. Higher premiums placed were mostly driven by the acquisition of Beat effective July 31, 2024. The increase in premiums placed and changes to the mix of business written led to the growth in commission income and commission expense of 107% and 6%, respectively.
Business underwritten within our Insurance Distribution business can be seasonal which may result in revenue and earnings concentrations in the first half of the calendar year. As the Insurance Distribution business grows, we make additional acquisitions and launch additional de novo underwriting units, revenue and earnings concentrations may increase or may shift, perhaps meaningfully.
G&A expenses for the three months ended March 31, 2025, increased $15,629 as a result of the Beat acquisition in the third quarter of 2024.
Corporate
Corporate consists of our holding company and shared services operations ("Corporate"). Corporate provides financial, technological and human resources to Ambac's two segments and is responsible for the function of AFG as a publicly traded company.
Corporate revenues totaled $587 and $2,145 for the three months ended March 31, 2025 and 2024, respectively. Corporate revenue is mostly generated from investment of AFG's liquid resources and investment results from its previously made strategic investments, including certain minority investments in MGA/Us and an insurtech fund. Investment revenues comprised of net investment income and net investment gains (losses), including impairments were $597 and $2,192 in 2025 and 2024, respectively. The decline from 2024 to 2025 is attributable to the use of liquid resources for the acquisition of Beat.
As a result of the Company reporting the results of operations of AAC as discontinued operations, certain corporate costs charged to AAC have been reported in Net income from continuing operations and included in Corporate expenses for all years presented. Corporate expenses were $14,650 and 10,712 for the three months ended March 31, 2025 and 2024, respectively, up $3,777. Corporate expenses for the three months ended March 31, 2025 and 2024, included compensation expenses of $5,844 and $6,490 and non-compensation $8,806 and 4,222, respectively. The increase in non-compensation corporate expenses is mainly related to higher expenses related to corporate development and audit fees.
LIQUIDITY AND CAPITAL RESOURCES
Holding Company Liquidity
AFG is organized as a legal entity separate and distinct from its operating subsidiaries. AFG's liquidity is primarily dependent on its net assets, excluding the operating subsidiaries that it owns, totaling $104,431 as of March 31, 2025, and secondarily on investment income, distributions, tax and expense sharing payments from its operating subsidiaries and third party capital (e.g. from credit facilities and equity issuance).

|  | March 31, 2025 |  | December 31, 2024
Cash and short-term investments |  | $ | 53,726 |  |  | $ | 74,423 |
Other investments (1) |  | 29,487 |  |  | 28,117 |
Other net (liabilities) assets |  | 21,218 |  |  | 16,674 |
Total |  | $ | 104,431 |  |  | $ | 119,214 |

(1)Includes strategic minority investments in insurance services businesses of $20,618 at March 31, 2025 and December 31, 2024..
The decrease in AFG net assets, excluding its equity investments in subsidiaries, during the first quarter of 2025 was driven primarily by net cash outflows from operating and interest expenses in addition to treasury stock purchases, partially offset by interest income and net distributions received from subsidiaries.
•Effective July 31, 2024, AFG closed the acquisition of a 60% controlling interest in Beat. In connection with the acquisition, Cirrata incurred $150,000 of debt maturing in

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364 days funded by a global bank (the "Credit Facility"). Repayment of debt under the Credit Facility is guaranteed by AFG. AFG is required to repay this debt upon the closing of the sale of AAC or otherwise refinance such short-term debt with longer-term debt. AFG may seek to extend the term of the Credit Facility as a precautionary measure in the event there were delays in the closing of the sale of AAC.
•If AFG were to not sell AAC, its ability to receive dividends from AAC and the timing of any such potential dividends would depend on regulatory approval and the satisfaction of certain obligations senior to AFG's equity interest (e.g. surplus notes).
•Subject to the satisfaction of the conditions required for the sale of AAC as described in Note 5. Discontinued Operation in the Notes to the Consolidated Financial Statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2024, AFG will receive $420,000 of proceeds at closing less applicable legal, advisory and other expenses incurred in connection with the Sale.
•Everspan's ability to make future dividend payments will mostly depend on its future profitability relative to its capital needs to support growth. Everspan is not expected to pay dividends in 2025. Everspan does make tax payments to AFG in accordance with a Tax Sharing Agreement. For the three months ended March 31, 2025, Everspan paid $1,736 of tax payments to AFG.
•Cirrata does not have any regulatory restrictions on its ability to make distributions. AFG received distributions from Cirrata of $3,118 and $2,850 during the three months ended March 31, 2025 and 2024, respectively.
AFG's principal uses of liquidity are: (i) the payment of G&A expenses, including costs to explore opportunities to grow and diversify Ambac, (ii) making capital investments to acquire, grow and/or capitalize new and/or existing businesses, including through the acquisition of noncontrolling interests as a result of the exercise of outstanding puts and/or calls, and (iii) making investments in technology and other operational infrastructure to improve the operational effectiveness and efficiency of our business and to support its growth. Funding puts, calls and other capital commitments could require payments from AFG, the magnitude of which will ultimately depend on the performance of the underlying businesses, whether or not the puts or calls are exercised, FX rates and other considerations of approximately $350,000 through 2030. AFG seeks to fund these potential puts and calls from internal resources, but may seek to raise additional short-term or long-term funding or capital sources depending on a number of considerations, including distribution levels from subsidiaries, the potential for additional acquisitions, other capital investment demands, and other considerations. AFG may also provide short-term financial support, primarily in the form of loans, to its operating subsidiaries to support their operating requirements.
In the opinion of the Company’s management the net assets and expected funding sources of AFG are currently sufficient to meet AFG’s current liquidity requirements. However, events, opportunities, acquisitions, the exercise of puts and calls, the need to refinance outstanding debt, or other circumstances could
require AFG to seek additional capital (e.g. through the issuance of debt, equity or hybrid securities).
The Credit Facility includes covenants that restrict our ability to manage capital resources by limiting, among other actions, the issuance of debt or capital stock; the creation of liens; the disposition of assets; engaging in transactions with affiliates; making restricted payments, including dividends and the purchase or redemption of capital stock; and making acquisitions and other investments. The Credit Facility also requires the prepayment of the borrowings thereunder with proceeds of certain debt or equity issuances and certain asset sales. These requirements will impact our financial and operational flexibility while the Credit Facility remains in place.
Operating Companies' Liquidity
Insurance
Sources of liquidity for Everspan are primarily through funds generated from premiums, reinsurance recoveries, fees, investment income and maturities and sales of investments.
Cash provided from these sources is used primarily for claim payments, loss expenses, acquisition costs, operating expenses, reinsurance payments and purchases of securities and other investments.
Everspan manages its liquidity risk by projecting cash flows and maintaining specified levels of cash and short-term investments at all times. It is the opinion of the Company’s management that the insurance subsidiaries’ near term liquidity needs will be adequately met from the sources described above.
Insurance Distribution
The liquidity requirements of our Insurance Distribution subsidiaries are met primarily by funds generated from commission (both base and profit commissions) and fees. Base commissions and fees are generally received monthly, whereas profit commissions are received only if the business underwritten is profitable. Cash provided from these sources is used primarily for commissions paid to sub-producers, operating expenses and distributions to AFG and other members.
Cash Held at Banks
Ambac maintains cash and investment accounts, including premium trust accounts, at depository institutions in amounts in excess of the limits insured by the FDIC and in countries other than the U.S. Ambac's cash balances held at banks were $51,660 as of March 31, 2025, including cash of Ambac's insurance distribution subsidiaries held in regional banks of $37,538 as of March 31, 2025.

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Consolidated Cash Flow Statement Discussion
The following table summarizes the net cash flows for the periods presented.

Three Months Ended March 31, | 2025 |  | 2024
Cash provided by (used in): |  |  |
Operating activities | $ | (12,612) |  |  | $ | 7,071 |
Investing activities | 21,339 |  |  | (272) |
Financing activities | (5,436) |  |  | (1,332) |
Foreign exchange impact on cash and cash equivalents | 225 |  |  | (104) |
Net cash flow | $ | 3,516 |  |  | $ | 5,363 |

Operating Activities for Continuing Operations
Operating cash flows during the three months ended March 31, 2025 and 2024, was $(12,612) and $7,071, respectively. Operating cash flows for the three months ended March 31, 2025 were adversely impacted by G&A expenses paid and interest on short-term borrowing, partially offset by cash collections from both the specialty P&C and insurance distribution businesses.
Future operating flows will primarily be impacted by net premium collections, commission and fee income and investment income receipts, G&A expenses, commission expenses, net claim and loss expense payments and interest payments on debt.
Investing Activities for Continuing Operations
Investing activities for the three months ended March 31, 2025 were primarily driven by changes in short-term investments.
Future investing cash flows will be primarily dependent on the sale of AAC, potential acquisitions, the exercise of puts and calls related to non-controlling interests and the purchase and sale of securities.
Financing Activities for Continuing Operations
Financing activities for the three months ended March 31, 2025, included purchases of common stock held in treasury of $3,122.
Future financing cash flows will be primarily impacted by paydowns and maturities of debt, new borrowings, capital management activity and distribution to noncontrolling interests.
Cash Flows from Discontinued Operations
Cash flows pertaining to discontinued operations are reported separately on the Consolidated Statements of Cash Flows. The primary driver of the cash flows from discontinued operations was the continued run-off of the financial guarantee business.
Since the agreement to sell AAC, the operations have been substantially separated and the potential impacts on future liquidity to the continuing operations are expected to be insignificant.
BALANCE SHEET
Total assets increased by $194,904 from December 31, 2024, to $8,253,282 at March 31, 2025, primarily due to the increase in reinsurance recoverables associated with the growth of in the specialty P&C businesses and the increase in Assets held-for-sale as further described below.
Total liabilities increased by approximately $178,960 from December 31, 2024, to $7,041,817 as of March 31, 2025, primarily due to increase in loss and loss adjustment expense reserve and ceded premium payables from the specialty P&C businesses and liabilities held-for-sale as further described below.
As of March 31, 2025, total Ambac Financial Group stockholders’ equity was $852,221, compared with total stockholders’ equity of $856,906 at December 31, 2024. The increase is primarily driven by foreign currency translation gains of $36,220, unrealized fixed maturity securities gains of $18,606, offset by net loss of $44,737 and the retained earnings impact from the revaluation of NCI as described in Note 1. Background and Business Description
Discontinued Operation:
Assets and Liabilities Held-for-Sale. Assets held-for-sale increased to $6,392,004 at March 31, 2025, from $6,267,200 as December 31, 2024. The increase is primarily due to the impact of exchange rates as the British Pound Sterling strengthened during the three months ended March 31, 2025 driving an increased value in British Pound Sterling assets partially offset by an increase in the valuation allowance for the loss on disposal of AAC of $14,496. Liabilities held-for-sale increased to $6,003,908 at March 31, 2025, from $5,887,685 as December 31, 2024, primarily due to a the impact of exchange rates on balances denominated in British Pound Sterling.
Continuing Operations:
The following discusses changes in assets, liabilities and stockholders' equity, excluding assets and liabilities held-for-sale related to the pending sale of AAC, as of March 31, 2025, compared to December 31, 2024.

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Investment Portfolio
Ambac's investment portfolio is managed under established guidelines designed to meet the investment objectives of Everspan Group, each of the Insurance Distribution business units and AFG. Refer to "Description of the Business – Investments and Investment Policy" located in Part I. Item 1 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2024, for further description of Ambac's investment policies and applicable regulations.
The following table summarizes the composition of Ambac’s investment portfolio, at carrying value at March 31, 2025 and December 31, 2024:

|  |  | March 31, 2025 |  |  |  | December 31, 2024
|  |  |  | Specialty Property & Casualty Insurance |  | Insurance Distribution |  | Corporate & Other |  | Consolidated |  |  |  | Specialty Property & Casualty Insurance |  | Insurance Distribution |  | Corporate & Other |  | Consolidated
Fixed maturity securities |  |  |  | $ | 160,120 |  |  | $ | — |  |  | $ | 1,449 |  |  | $ | 161,569 |  |  |  |  | $ | 157,020 |  |  | $ | — |  |  | $ | — |  |  | $ | 157,020 |
Short-term |  |  |  | 31,675 |  |  | 28,693 |  |  | 41,241 |  |  | 101,609 |  |  |  |  | 35,727 |  |  | 27,435 |  |  | 64,439 |  |  | 127,601 |
Other investments |  |  |  | — |  |  | 176 |  |  | 28,038 |  |  | 28,214 |  |  |  |  | — |  |  | 176 |  |  | 28,117 |  |  | 28,293 |
Total investments |  |  |  | $ | 191,795 |  |  | $ | 28,869 |  |  | $ | 70,728 |  |  | $ | 291,392 |  |  |  |  | $ | 192,247 |  |  | $ | 27,611 |  |  | $ | 92,556 |  |  | $ | 312,914 |

Ambac invests in various asset classes in its fixed maturity securities portfolio. Refer to Note 4. Investments to the Unaudited Consolidated Financial Statements included in Part I, Item 1 in this Form 10-Q for information about fixed maturity securities and other investments by asset class.
The following charts provide the ratings distribution of the fixed maturity investment portfolio based on fair value at March 31, 2025 and December 31, 2024. Ratings represent the lower of
ratings provided by S&P or Moody's when ratings are available from both agencies.

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Premium Receivables
Ambac's premium receivables increased to $64,563 at March 31, 2025, from $57,222 at December 31, 2024. The increase is primarily due to growth in the Specialty P&C Insurance Segment, including receivables related to the programs where Everspan participates as a reinsurer.
Reinsurance Recoverable on Paid and Unpaid Losses
Ambac has reinsurance in place pursuant to surplus share treaty and facultative agreements. To minimize its exposure to losses from reinsurers, Ambac (i) monitors the financial condition of its reinsurers; (ii) is entitled to receive collateral from its reinsurance counterparties under certain reinsurance contracts; and (iii) has certain cancellation rights that can be exercised in the event of rating agency downgrades of a reinsurer (among other events and circumstances). Those reinsurance counterparties that do not currently post collateral are well capitalized, highly rated, authorized capacity providers. Ambac benefited from letters of credit and collateral amounting to approximately $67 from its reinsurers at March 31, 2025. Additionally, while legacy liabilities from the recent Specialty P&C acquisitions were fully ceded to certain reinsurers, Everspan also benefits from an unlimited, uncapped indemnity from the respective sellers to mitigate any residual risk to these reinsurers. As of March 31, 2025 and December 31, 2024, reinsurance recoverable on paid and unpaid losses were $351,110 and $306,191, respectively primarily due to growth in the Specialty P&C Insurance Segment.
Intangible Assets, net of Accumulated Depreciation
Intangible assets primarily include (i) intangible assets established as part of acquisitions in the Insurance Distribution business of $333,848 at March 31, 2025 and (iii) indefinite-lived intangible assets in the Specialty P&C business as part of its acquisitions of $11,213 at March 31, 2025.
As of March 31, 2025 and December 31, 2024, intangible assets were $345,061 and $344,775, respectively. The increase is driven by foreign exchange rates (appreciation of the British pound), partially offset by amortization of $8,763.
Goodwill
As of March 31, 2025 and December 31, 2024, goodwill totaled $429,314 and $418,234 respectively. The increase is primarily driven by foreign exchange rates (appreciation of the British pound). All of the goodwill was assigned to the Insurance Distribution segment.
Liabilities
Loss and Loss Adjustment Expense Reserves
Loss and loss adjustment expense reserves are estimates of the ultimate liability for unpaid losses and loss expenses for claims that have been reported and claims that have been incurred, but not yet reported as of the balance sheet date.
Loss and loss adjustment expense reserves by line of business were as follows as of March 31, 2025 and December 31, 2024

| March 31, 2025 |  | December 31, 2024
Line | Gross | Net |  | Gross | Net
Commercial auto | $ | 155,383 |  | $ | 27,608 |  |  | $ | 158,472 |  | $ | 28,720 |
Excess liability | 65,845 |  | 9,070 |  |  | 50,248 |  | 6,571 |
General liability | 44,208 |  | 9,051 |  |  | 35,211 |  | 8,286 |
Workers compensation | 14,602 |  | 14,602 |  |  | 14,465 |  | 14,465 |
Non-standard personal auto | 9,149 |  | 8,753 |  |  | 12,689 |  | 12,185 |
Professional Liability | 23,373 |  | 1,812 |  |  | 17,698 |  | 1,807.00 |
Surety | 10,558 |  | — |  |  | 11,217 |  | 6.00 |
Unallocated loss adjustment expense reserves | 13,159 |  | 6,491 |  |  | 12,238 |  | 6,578 |
Other (1) | 36,828 |  | 798 |  |  | 36,826 |  | 363 |
Loss and Loss Expense Reserves | $ | 373,105 |  | $ | 78,185 |  |  | $ | 349,064 |  | $ | 78,980 |

(1)Includes $34,724 and $0 loss and loss expense reserves on a gross and net of reinsurance basis at March 31, 2025 and $35,146 and $0 loss and loss expense reserves on a gross and net of reinsurance basis at December 31, 2024 related to legacy liabilities obtained from the acquisitions of Providence Washington Insurance Company, Greenwood Insurance Company and Consolidated Specialty Insurance Company. All legacy liabilities remain obligations of affiliates of the sellers through reinsurance.
The process for determining the level of loss and loss adjustment reserves is subject to certain estimates and judgments. Refer to the "Critical Accounting Policies and Estimates" and “Results of Operations” sections of Management’s Discussion and Analysis of Financial Condition and Results of Operations, in addition to Basis of Presentation and Significant Accounting Policies and Loss Reserves sections included in Note 2. Basis of Presentation and Significant Accounting Policies and Note 8. Insurance Contracts, respectively, of the Consolidated Financial Statements included in Part II, Item 8 in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024, for further information on loss and loss expenses.
Short and Long-term Debt
Ambac borrowed under a short-term credit facility to provide partial funding of the acquisition of Beat in 2024. The carrying value of this short term debt is $150,000 as of March 31, 2025 and December 31, 2024.
Commission Payable
Commission payables are commissions due to sub producers for placing insurance contracts on behalf of the MGAs and amounts due to UK Syndicates that provide advanced commissions to fund short term liquidity needs for MGAs. The commission payable at March 31, 2025 and December 31, 2024 was $81,017 and $71,431. The increase is primarily due to higher advance commissions due to Syndicates.
Redeemable Noncontrolling Interest (NCI)
The minority equity interests of Beat's majority owned MGA/Us were classified within nonredeemable NCI at December 31, 2024. During the three months ended March 31, 2025, Ambac entered into put options on certain of these minority interests that are embedded in the underlying equity instruments. As a result, the minority interests were reclassified from nonredeemable to redeemable and remeasured at fair value including the put options, increasing redeemable NCI by $42,180. Other changes to redeemable NCI during the quarter relate primarily to allocation of results to the minority interests, revaluation to redemption value where applicable, reclassification of certain

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interests to nonredeemable due to the expiration of related put options, and the impact of foreign currency translation.
ACCOUNTING STANDARDS
Please refer to Note 1. Business and Basis of Presentation to the Unaudited Consolidated Financial Statements included in Part I, Item 1 in this Form 10-Q for a discussion of new accounting pronouncements and the potential impact on Ambac’s financial condition and results of operations.
U.S. STATUTORY BASIS FINANCIAL RESULTS
AFG's U.S. insurance subsidiaries prepare financial statements under accounting practices prescribed or permitted by its domiciliary state regulator (“SAP”) for determining and reporting the financial condition and results of operations of an insurance company. The National Association of Insurance Commissioners (“NAIC”) Accounting Practices and Procedures manual (“NAIC SAP”) is adopted as a component of prescribed practices by each domiciliary state. For further information, see "Everspan Indemnity Insurance Company," in Part II, Item 7. "Management's Discussion and Analysis of Financial Condition and Results of Operations," and Note 9. Insurance Regulatory Restrictions to the Consolidated Financial Statements included in Part II, Item 8 in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024.
Everspan Indemnity Insurance Company
Everspan Indemnity Insurance Company’s statutory policyholder surplus was $125,672 at March 31, 2025, as compared to $125,202 at December 31, 2024. The increase in surplus was net income at Everspan Indemnity Insurance Company, including its subsidiaries, of $492 during the three months ended March 31, 2025.
NON-GAAP FINANCIAL MEASURES
In addition to reporting the Company’s quarterly financial results in accordance with GAAP, the Company is reporting non-GAAP financial measures: EBITDA, Adjusted EBITDA and Adjusted EBITDA Margin, Organic Revenue Growth Rate (Insurance Distribution segment only), Adjusted Net Income and Adjusted Net Income Margin. These amounts are derived from our consolidated financial information, but are not presented in our consolidated financial results.
We present non-GAAP supplemental financial information because we believe such information is of interest to the investment community, and that it provides greater transparency and enhanced visibility into the underlying drivers and performance of our businesses on a basis that may not be otherwise apparent on a GAAP basis. We view these non-GAAP financial measures as important indicators when assessing and evaluating our performance on a segmented and consolidated basis and they are presented to improve the comparability of our results between periods by eliminating the impact of the items that may not be representative of our core operating performance. These non-GAAP financial measures are not substitutes for the Company’s GAAP reporting, should not be viewed in isolation and may differ from similar reporting provided by other companies, which may define non-GAAP measures differently.
Beginning December 31, 2024, Ambac replaced the non-GAAP measure Adjusted Net Income with new non-GAAP measures Adjusted Net Income and Adjusted Net Income Margin and added Adjusted EBITDA and Adjusted EBITDA Margin to better align with other participants in the Property & Casualty insurance industry, including insurance carriers and other peers in the insurance distribution business.
The following paragraphs define each non-GAAP financial measure. A tabular reconciliation of the non-GAAP financial measure and the most comparable GAAP financial measure is also presented below.
EBITDA — EBITDA is net income (loss) before interest expense, income taxes, depreciation and amortization of intangible assets.
Adjusted EBITDA and Adjusted EBITDA Margin — We define Adjusted EBITDA as net income (loss) from continuing operations before interest expense, income taxes, depreciation, amortization of intangible assets, change in fair value of contingent consideration and certain items of income and expense, including share-based compensation expense, acquisition and integration related expenses, severance, and other exceptional or non-recurring items, including those related to raising capital. We believe that adjusted EBITDA is an appropriate measure of operating performance because it eliminates the impact of income and expenses that may obfuscate business performance, and that the presentation of this measure enhances an investor's understanding of our financial performance.

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|  | Three Months Ended March 31, 2025 |  | Three Months Ended March 31, 2024
|  | Specialty Property & Casualty Insurance |  | Insurance Distribution |  | Corporate & Other |  |  |  | Consoli-dated |  | Specialty Property & Casualty Insurance |  | Insurance Distribution |  | Corporate & Other |  |  |  | Consoli-dated
Net income (loss) (Continuing Operations) |  | $ | 1,425 |  |  | $ | (1,743) |  |  | $ | (14,172) |  |  |  |  | $ | (14,490) |  |  | $ | 1,715 |  |  | $ | 3,855 |  |  | $ | (8,938) |  |  |  |  | $ | (3,369) |
Adjustments: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Add: Interest expense |  | — |  |  | 5,454 |  |  | — |  |  |  |  | 5,454 |  |  | — |  |  | — |  |  | — |  |  |  |  | — |
Add: Income tax expense |  | 78 |  |  | (500) |  |  | (195) |  |  |  |  | (617) |  |  | 106 |  |  | 118 |  |  | (93) |  |  |  |  | 131 |
Add: Depreciation |  | — |  |  | 109 |  |  | 304 |  |  |  |  | 413 |  |  | — |  |  | 10 |  |  | 462 |  |  |  |  | 472 |
Add: Intangible amortization |  | — |  |  | 8,763 |  |  | — |  |  |  |  | 8,763 |  |  | — |  |  | 1,139 |  |  | — |  |  |  |  | 1,139 |
EBITDA |  | 1,503 |  |  | 12,083 |  |  | (14,063) |  |  |  |  | (477) |  |  | 1,821 |  |  | 5,122 |  |  | (8,569) |  |  |  |  | (1,627) |
Add: Impact of noncontrolling interests |  | — |  |  | (5,000) |  |  | — |  |  |  |  | (5,000) |  |  | — |  |  | (920) |  |  | — |  |  |  |  | (920) |
Ambac EBITDA |  | 1,503 |  |  | 7,083 |  |  | (14,063) |  |  |  |  | (5,477) |  |  | 1,821 |  |  | 4,202 |  |  | (8,569) |  |  |  |  | (2,547) |
Net income margin |  | 6.7 | % |  | (4.3) | % |  | (2414.3) | % |  |  |  | (23.1) | % |  | 5.8 | % |  | 21.6 | % |  | (416.9) | % |  |  |  | (6.8) | %
Net income margin to Ambac shareholders |  | 6.7 | % |  | (8.3) | % |  | (2414.3) | % |  |  |  | (25.7) | % |  | 5.8 | % |  | 17.6 | % |  | (416.9) | % |  |  |  | (8.2) | %
EBITDA margin |  | 7.1 | % |  | 29.5 | % |  | (2395.7) | % |  |  |  | (0.8) | % |  | 6.2 | % |  | 28.7 | % |  | (399.7) | % |  |  |  | (3.3) | %
EBITDA margin to Ambac shareholders |  | 7.1 | % |  | 17.3 | % |  | (2395.7) | % |  |  |  | (8.7) | % |  | 6.2 | % |  | 23.5 | % |  | (399.7) | % |  |  |  | (5.1) | %
Add: Acquisition and integration related expenses |  | — |  |  | — |  |  | 682 |  |  |  |  | 682 |  |  | — |  |  | — |  |  | 569 |  |  |  |  | 569 |
Add: Equity-based compensation expense |  | 86 |  |  | — |  |  | 1,574 |  |  |  |  | 1,660 |  |  | 51 |  |  | — |  |  | 2,129 |  |  |  |  | 2,180 |
Add: Change in fair value of contingent considerations |  | — |  |  | — |  |  | — |  |  |  |  | — |  |  | — |  |  | — |  |  | — |  |  |  |  | — |
Add: Restructuring related expense |  | — |  |  | — |  |  | — |  |  |  |  | — |  |  | — |  |  | — |  |  | — |  |  |  |  | — |
Add: Severance and restructuring expense |  | — |  |  | 29 |  |  | 1,819 |  |  |  |  | 1,848 |  |  | — |  |  | — |  |  | 134 |  |  |  |  | 134 |
Add: Other non-operating (income) losses |  | — |  |  | — |  |  | — |  |  |  |  | — |  |  | — |  |  | — |  |  | 48 |  |  |  |  | 48 |
Adjusted EBITDA |  | $ | 1,589 |  |  | $ | 12,112 |  |  | $ | (9,988) |  |  |  |  | $ | 3,713 |  |  | $ | 1,872 |  |  | $ | 5,122 |  |  | $ | (5,689) |  |  |  |  | $ | 1,304 |
Adjusted EBITDA attributable to Ambac shareholders |  | $ | 1,589 |  |  | $ | 7,112 |  |  | $ | (9,988) |  |  |  |  | $ | (1,287) |  |  | $ | 1,872 |  |  | $ | 4,202 |  |  | $ | (5,689) |  |  |  |  | $ | 384 |
Adjusted EBITDA Margin |  | 7.5 | % |  | 29.5 | % |  | (1701.5) | % |  |  |  | 5.9 | % |  | 6.3 | % |  | 28.7 | % |  | (265.3) | % |  |  |  | 2.6 | %
Adjusted EBITDA Margin to Ambac shareholders |  | 7.5 | % |  | 17.3 | % |  | (1701.5) | % |  |  |  | (2.1) | % |  | 6.3 | % |  | 23.5 | % |  | (265.3) | % |  |  |  | 0.8 | %

Organic Revenue Growth & Rate (Insurance Distribution Only.) — Organic revenue is based on commissions and fees for the relevant period by excluding (i) the first twelve months of commissions and fees generated from acquisitions and (ii) commissions and fees from divestitures (iii) and other items such as contingent commissions and the impact of changes in foreign exchange rates.
Organic revenue growth is the change in organic revenue period-to-period, with prior period results adjusted to (i) include commissions and fees that were excluded from organic revenue in the prior period and reached the twelve-month owned mark in the current period, and (ii) exclude commissions and fees related to divestitures from organic revenue.
Organic revenue growth rate to Total revenue growth rate, the most directly comparable GAAP measure, for each of the periods indicated is as follows (in percentages):

Three Months Ended March 31, |  | 2025 |  | 2024 |  | % Growth |  |  |  |  |
Total Insurance Distribution revenue & growth percentage (1) |  | $ | 40,998 |  |  | $ | 17,865 |  |  | 129.5 | % |  |  |  |  |
Less: Acquired revenues |  | (19,971) |  |  |  |  |  |  |  |  |  |
Less: Profit commission and contingent commission income |  | (4,691) |  |  | (1,182) |  |  |  |  |  |  |  |
Total Organic Revenue & Growth Percentage |  | $ | 16,336 |  |  | $ | 16,683 |  |  | (2.1) | % |  |  |  |  |

(1)Total Insurance Distribution revenue includes investment income.
Adjusted Net Income and Adjusted Net Income Margin — We define Adjusted net income as net income (loss) from continuing operations attributable to Ambac adjusted for amortization of intangible assets, change in fair value of contingent consideration and certain items of income and expense, including share-based compensation expense, acquisition and integration related expenses, severance and non-recurring income and loss items that, in the opinion of management, significantly affect the period-over-period assessment of operating results, and the related tax effect of those adjustments. Per share amounts exclude any impact of revaluing non-controlling interests as otherwise reported under GAAP earnings per share. We believe that adjusted net income is an appropriate measure of operating performance because it eliminates the impact of income and expenses that may obfuscate business performance.

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|  | Three Months Ended March 31,
|  | 2025 |  | 2024
|  | Specialty Property & Casualty Insurance |  | Insurance Distribution |  | Corporate & Other |  | Consoli-dated |  | Specialty Property & Casualty Insurance |  | Insurance Distribution |  | Corporate & Other |  | Consoli-dated
Net income (loss) (Continuing Operations) |  | $ | 1,425 |  |  | $ | (1,743) |  |  | $ | (14,172) |  |  | $ | (14,490) |  |  | $ | 1,715 |  |  | $ | 3,782 |  |  | $ | (8,976) |  |  | $ | (3,479) |
Adjustments: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Add: Acquisition and integration related expenses |  | — |  |  | — |  |  | 682 |  |  | 682 |  |  | — |  |  | — |  |  | 569 |  |  | 569 |
Add: Intangible amortization |  | — |  |  | 8,763 |  |  | — |  |  | 8,763 |  |  | — |  |  | 1,139 |  |  | — |  |  | 1,139 |
Add: Equity-based compensation expense |  | 86 |  |  | — |  |  | 1,574 |  |  | 1,660 |  |  | 51 |  |  | — |  |  | 2,129 |  |  | 2,180 |
Add: Change in fair value of contingent considerations |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Add: Restructuring related expense |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Add: Severance and restructuring expense |  | — |  |  | 29 |  |  | 1,819 |  |  | 1,848 |  |  | — |  |  | — |  |  | 134 |  |  | 134 |
Add: Other non-operating (income) losses |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 48 |  |  | 48 |
Gain on sale of CNIC |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Write-down of Majesco |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
(Gains) losses related to minority interest strategy |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 48 |  |  | 48 |
{describe} |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
{describe} |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Adjusted net income (loss) before tax and NCI |  | 1,511 |  |  | 7,049 |  |  | (10,097) |  |  | (1,537) |  |  | 1,766 |  |  | 4,921 |  |  | (6,096) |  |  | 591 |
Income tax effects |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Adjusted net income (loss) before NCI |  | 1,511 |  |  | 7,049 |  |  | (10,097) |  |  | (1,537) |  |  | 1,766 |  |  | 4,921 |  |  | (6,096) |  |  | 591 |
Net (income) loss attributable to noncontrolling interest |  | — |  |  | (4,500) |  |  | — |  |  | (4,500) |  |  | — |  |  | (920) |  |  | — |  |  | (920) |
Adjusted net income (loss) attributable to common shareholders |  | $ | 1,511 |  |  | $ | 2,549 |  |  | $ | (10,097) |  |  | $ | (6,037) |  |  | $ | 1,766 |  |  | $ | 4,001 |  |  | $ | (6,096) |  |  | $ | (329) |

(1)Other non-operating expense includes one time add-backs related to gain on sale of CNIC, partially offset by losses related to minority interest strategy and write down of certain capitalized software. costs.

|  | Three Months Ended March 31,
|  | 2025 |  | 2024
|  | Specialty Property & Casualty Insurance |  | Insurance Distribution |  | Corporate & Other |  | Consoli-dated |  | Specialty Property & Casualty Insurance |  | Insurance Distribution |  | Corporate & Other |  | Consoli-dated
Net income (loss) margin |  | 6.7 | % |  | (4.3) | % |  | (2414.3) | % |  | (23.1) | % |  | 5.8 | % |  | 21.2 | % |  | (418.7) | % |  | (7.0) | %
Adjusted Net income (loss) attributable to Ambac stockholders margin |  | 7.1 | % |  | 17.2 | % |  | (1720.1) | % |  | (2.4) | % |  | 6.0 | % |  | 27.5 | % |  | (284.3) | % |  | 1.2 | %

Item 3. Quantitative and Qualitative Disclosure About Market Risk
As of March 31, 2025, there are no material changes in the market risks that the Company is exposed to compared to December 31, 2024.
Item 4. Controls and Procedures
In connection with the preparation of this first quarter Form 10-Q, an evaluation was carried out by Ambac’s management, with the participation of Ambac’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of Ambac’s disclosure controls and procedures (as defined in rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) as of the end of the period covered by this Quarterly Report on Form 10-Q. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives. Based on its evaluation, Ambac’s Chief Executive Officer and Chief Financial Officer have concluded that, as of March 31, 2025, Ambac’s disclosure controls and procedures were effective.
Under guidelines established by the SEC, companies are permitted to exclude certain acquisitions from their first assessment of internal control over financial reporting following the date of acquisition. Based on those guidelines, management’s assessment of the effectiveness of Ambac Financial Group Inc.'s
internal control over financial reporting at March 31, 2025, excluded certain processes of Beat Capital Partners Limited which were not integrated into the Company’s existing internal control over financial reporting environment at March 31, 2025. The excluded Beat Capital Partners Limited processes represented approximately 7% of the Company’s total assets at March 31, 2025 and approximately 40% of the Company’s total revenue for the three months ended March 31, 2025. Management is progressing its efforts to incorporate Beat into Ambac's program for internal control over financial reporting and expects Beat to be in the scope of management's assessment beginning within the third quarter of 2025.
Effective January 1, 2025, Ambac Financial Group, Inc. changed the general ledger and consolidation system and certain related processes used for a substantial portion of its continuing operations. As part of its implementation, the Company evaluated the impact of this new system on its internal control over financial reporting and made changes to controls and procedures where necessary. There were no other changes in our internal control over financial reporting during the first quarter of 2025 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION

Item 1. Legal Proceedings
Please refer to Note 13. Commitments and Contingencies of the Unaudited Consolidated Financial Statements located in Part I, Item 1 in this Form 10-Q and Note 19: Commitments and Contingencies in Part II, Item 8 in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024 for a discussion on legal proceedings against Ambac and its subsidiaries.
Item 1A. Risk Factors
You should carefully consider the risk factors set forth in the “Risk Factors” section, Item 1A to Part I in our Annual Report on Form 10-K for the year ended December 31, 2024, which is hereby incorporated by reference. These important factors may cause our actual results to differ materially from those indicated by our forward-looking statements, including those contained in this report. Please also see the section entitled “Cautionary Statement Pursuant to the Private Securities Litigation Reform Act of 1995” in this quarterly report on Form 10-Q. There have been no material changes to the risk factors we have disclosed in the “Risk Factors” section of our aforementioned Annual Report on Form 10-K.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
(a) Unregistered Sales of Equity Securities — No matters require disclosure.
(b) Purchases of Equity Securities By the Issuer and Affiliated Purchasers
When restricted stock unit awards issued by Ambac vest or settle, they become taxable compensation to employees. Shares may be withheld to cover the employee's portion of withholding taxes. In the first quarter of 2025, Ambac purchased shares from employees that settled restricted stock units to meet employee tax withholdings.

| Jan-2025 |  | Feb-2025 |  | Mar-2025 |  | First Quarter 2025
Total Shares Purchased (1) | — |  |  | — |  |  | 173,424 |  |  | 173,424 |
Average Price Paid Per Share | $ | — |  |  | $ | — |  |  | $ | 9.26 |  |  | $ | 9.26 |
Total Number of Shares Purchased as Part of Publicly Announced Plan | — |  |  | — |  |  | 264,791 |  |  | 264,791 |
Maximum Dollar Value That may Yet be Purchased Under the Plan | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 35,179 |

On March 29, 2022, our Board of Directors approved a share repurchase program authorizing up to $20 million in share repurchases, and on May 5, 2022, the Board of Directors authorized an additional $15 million share repurchase. This program expired on March 31, 2024.
On November 12, 2024, Ambac’s Board of Directors authorized a share repurchase program, under which Ambac may opportunistically repurchase up to $50,000 of the Company’s common shares at management’s discretion over the period ending on December 31, 2026.
The following table shows shares repurchased by year.

($ in thousands, except per share) |  | Year Ended December 31, |  | YTD 2025
| 2022 |  | 2023 |  | 2024 |
Shares repurchased |  | 1,605,316 |  |  | 325,068 |  | 937,141 |  | 264,791
Total cost |  | $ | 14.2 |  |  | $ | 4.5 |  |  | $ | 11.7 |  |  | $ | 3.1 |
Average purchase price per share |  | $ | 8.86 |  |  | $ | 13.88 |  |  | $ | 12.48 |  |  | $ | 11.79 |
Unused authorization amount |  |  |  |  |  |  |  | $ | 35,179 |

Item 3. Defaults Upon Senior Securities — No matters require disclosure.
Item 5. Other Information — In the last fiscal quarter, none of our directors or executive officers adopted, terminated, or modified any Rule 10b5-1 trading arrangement, or any non-Rule 10b5-1 trading arrangement. No other matters require disclosure.

Ambac Financial Group, Inc. | 40 | First Quarter 2025 Form 10-Q

Table f Contents
Item 6. Exhibits

Exhibit Number |  | Description
Other exhibits, filed or furnished, as indicated:
31.1+ |  | Certification of Chief Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) Promulgated under the Securities Exchange Act of 1934, as amended.
31.2+ |  | Certification of Chief Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) Promulgated under the Securities Exchange Act of 1934, as amended.
32.1++ |  | Certification of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS |  | XBRL Instance Document - the instance document does not appear in the interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH |  | XBRL Taxonomy Extension Schema Document.
101.CAL |  | XBRL Taxonomy Extension Calculation Linkbase Document.
101.LAB |  | XBRL Taxonomy Extension Label Linkbase Document.
101.PRE |  | XBRL Taxonomy Extension Presentation Linkbase Document.
101.DEF |  | XBRL Taxonomy Extension Definition Linkbase Document.
104 |  | Cover Page Interactive Data File - The cover page interactive data file does not appear in the Interactive Data File because its XBRL tags or embedded within the Inline XBRL document
|  | + Filed herewith. ++ Furnished herewith.

SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

|  | AMBAC FINANCIAL GROUP, INC.
Dated: | May 12, 2025 | By: | /s/ DAVID TRICK
|  | Name: | David Trick
|  | Title: | Chief Financial Officer and Treasurer (Duly Authorized Officer and Principal Financial Officer)

Ambac Financial Group, Inc. | 41 | First Quarter 2025 Form 10-Q