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Statement of Financial Position, Unclassified - Insurance Based Operations | 6 Months Ended
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Jun. 30, 2025
Statement of Financial Position [Abstract] |
Disposal Groups, Including Discontinued Operations, Disclosure | 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 Assurance UK Limited ("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 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. On July 3, 2025, the parties to the Purchase Agreement entered into a letter agreement pursuant to which, among other things, the parties entered into a new agreement with respect to the warrant and amended certain terms of the Investor Rights Agreement (as defined in the Purchase Agreement). The Buyer continues to pursue the final outstanding regulatory approval from the Wisconsin Office of the Commissioner of Insurance ("OCI"), which would be received only after a hearing, which has been scheduled for September 3, 2025, at or prior to which third parties would have an opportunity to object to the Sale. On or prior to August 4, 2025, representatives of certain holders of surplus notes issued by AAC filed motions to intervene in the proceedings. On July 28, 2025, the OCI staff published a memorandum including its recommendation that the Sale be approved. On July 3, 2025, AFG and the Buyer entered into an agreement to, among other matters, extend the term of the Purchase Agreement from July 3, 2025, to December 31, 2025 (subject to an automatic 90-day extension if regulatory approvals have not been obtained), to facilitate the timing of the hearing. The Buyer received approval for the change in control of Ambac UK from the U.K. Prudential Regulation Authority, which expires on October 24, 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 losses of $(52,960) and $(67,456) in the three and six months ended June 30, 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 the valuation allowance on held-for-sale assets to $(637,601) as of June 30, 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 June 30, 2025, amounted to $(86,828). 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 scheduled payment date of June 9, 2025, although the OCI has permitted two exceptional payments in the past. 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 June 30, 2025 and December 31, 2024, are summarized below:
|  | June 30, 2025 |  | December 31, 2024
Fair value of net consideration to be received |  | $ | 402,239 |  |  | $ | 399,727 |
Less: estimated closing costs |  | 7,535 |  |  | 7,235 |
|  | 394,704 |  |  | 392,492 |
Carrying amount of net assets held-for-sale |  | 1,032,305 |  |  | 962,637 |
Loss on disposal |  | $ | (637,601) |  |  | $ | (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:
|  | June 30, 2025 |  | December 31, 2024
ASSETS: |  |  |  |
Total investments |  | $ | 2,321,619 |  |  | $ | 2,226,505 |
Cash and equivalents |  | 13,023 |  |  | 8,322 |
Premiums receivable |  | 218,780 |  |  | 217,096 |
Reinsurance recoverable on paid and unpaid losses |  | 26,359 |  |  | 25,274 |
Deferred ceded premiums |  | 74,180 |  |  | 79,074 |
Subrogation recoverable |  | 110,838 |  |  | 113,962 |
Intangible assets |  | 208,424 |  |  | 213,457 |
Other assets, net |  | 71,572 |  |  | 49,396 |
VIE assets (including restricted cash of $57,754 and 246,031) |  | 4,185,223 |  |  | 3,904,259 |
Valuation allowance on assets held-for-sale |  | (637,601) |  |  | (570,145) |
Total assets held-for-sale |  | $ | 6,592,417 |  |  | $ | 6,267,200 |
LIABILITIES: |  |  |  |
Unearned premiums |  | $ | 227,968 |  |  | $ | 228,177 |
Loss and loss adjustment reserves |  | 600,916 |  |  | 577,167 |
Ceded premiums payable |  | 54,712 |  |  | 56,404 |
Long-term debt and accrued interest |  | 1,078,551 |  |  | 1,046,658 |
Other liabilities, net |  | 105,346 |  |  | 105,772 |
VIE liabilities |  | 4,145,531 |  |  | 3,873,507 |
Total liabilities held-for-sale |  | $ | 6,213,024 |  |  | $ | 5,887,685 |
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 June 30, |  | Six Months Ended June 30,
|  | 2025 |  | 2024 |  | 2025 |  | 2024
REVENUES: |  |  |  |  |  |  |  |
Net premiums earned |  | $ | 5,199 |  |  | $ | 5,569 |  |  | $ | 9,962 |  |  | $ | 13,055 |
Net investment income |  | 36,107 |  |  | 32,419 |  |  | 56,807 |  |  | 70,450 |
Net investment gains (losses), including impairments |  | (12,514) |  |  | (956) |  |  | (18,468) |  |  | (388) |
Net gains (losses) on derivative contracts |  | (8,834) |  |  | 461 |  |  | (9,367) |  |  | 1,994 |
Other revenues |  | 8,840 |  |  | 15,995 |  |  | 16,661 |  |  | 21,435 |
Total revenues |  | 28,798 |  |  | 53,488 |  |  | 55,595 |  |  | 106,546 |
EXPENSES: |  |  |  |  |  |  |  |
Loss and loss adjustment expenses (benefit) |  | (2,657) |  |  | (5,270) |  |  | 8,078 |  |  | (25,978) |
Intangible amortization |  | 5,362 |  |  | 7,014 |  |  | 11,188 |  |  | 18,341 |
General & administrative and other expenses |  | 7,523 |  |  | 19,063 |  |  | 16,607 |  |  | 36,732 |
Interest expense |  | 15,943 |  |  | 15,986 |  |  | 31,894 |  |  | 31,966 |
Other expenses |  | — |  |  | (5) |  |  | — |  |  | 19 |
Total expenses |  | 26,171 |  |  | 36,788 |  |  | 67,767 |  |  | 61,080 |
Pretax income (loss) |  | 2,627 |  |  | 16,700 |  |  | (12,172) |  |  | 45,466 |
Provision (benefit) for income taxes |  | 1,818 |  |  | 2,518 |  |  | 2,770 |  |  | 7,144 |
Loss on disposal |  | (52,960) |  |  | — |  |  | (67,456) |  |  | — |
Net income (loss) from discontinued operations |  | $ | (52,151) |  |  | $ | 14,182 |  |  | $ | (82,398) |  |  | $ | 38,322 |

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- Definition The entire disclosure related to a disposal group. Includes, but is not limited to, a discontinued operation, disposal classified as held-for-sale or disposed of by means other than sale or disposal of an individually significant component. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Topic 205 -SubTopic 20 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org/205-20/tableOfContent Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Topic 360 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org/360/tableOfContent + Details
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