Statement of Financial Position, Unclassified - Insurance Based Operations

9 Months Ended

Sep. 30, 2025

Statement of Financial Position [Abstract]

Disposal Groups, Including Discontinued Operations, Disclosure

3. DISCONTINUED OPERATION

Sale of Ambac Assurance Corporation ("AAC")

On September 29, 2025, pursuant to the stock purchase agreement dated as of June 4, 2024, as amended by the First Amendment thereto dated as of July 3, 2025 (the "Purchase Agreement") and the Letter Agreements dated July 3, 2025 and September 22, 2025, with American Acorn Corporation (the “Buyer”), a Delaware corporation owned by funds managed by Oaktree Capital Management, L.P., AFG sold all of the issued and outstanding shares of common stock of AAC, a wholly-owned subsidiary of AFG, to the Buyer for $420,000 in cash (the "Sale"). The Buyer acquired complete ownership of the common stock of AAC and all of its wholly owned subsidiaries, including

Ambac Assurance UK Limited. In connection with and pursuant to the Purchase Agreement, AFG issued to Buyer a warrant exercisable for 5,092,707 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 has an exercise price per share of $18.50 and expires March 29, 2032. Under terms of the Letter Agreement dated July 3, 2025, between the parties to the Purchase Agreement, the Buyer may convert the warrant at a value equal to its Black-Scholes value, over specified time periods, with the conversion value delivered in shares of AFG common stock or cash at AFG's election. In addition, the Buyer made an incremental payment to AFG totalling $4,300 to resolve other agreed upon matters. 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 adjustments to the loss on sale of AAC equal to $(50,012) and $(117,468) in the three and nine months ended September 30, 2025, reflecting remeasurement of net assets held-for-sale, changes in fair value of the warrant issued to Buyer, other agreed upon payments, and reestimation of closing costs during the periods up the final Sale closing. The loss on sale for the three and nine months ended September 30, 2025 also included the reclassification 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, totaling $(85,096), from Accumulated Other Comprehensive Income (Loss) ("AOCI") to Net income (loss) from discontinued operation at Sale closing.

The components of the loss on sale, reflected in the valuation allowance on net assets of discontinued operations as of December 31, 2024, and at Sale closing on September 29, 2025, are summarized below:


	Sale Closing on September 29, 2025		December 31, 2024
Fair value of net consideration	$	407,300	$	399,727
Less: estimated closing costs	7,098		7,235
	400,202		392,492
Carrying amount of net assets of discontinued operations	1,002,719		962,637
Reclassification of AOCI	(85,096)
Loss on disposal	$	(687,613)	$	(570,145)

The following table summarizes the major classes of assets and liabilities of discontinued operations on the Consolidated Balance

Sheet at December 31, 2024 after elimination of intercompany balances:


	December 31, 2024
ASSETS:
Total investments	2,226,505
Cash and equivalents	8,322
Premiums receivable	217,096
Reinsurance recoverable on paid and unpaid losses	25,274
Deferred ceded premiums	79,074
Subrogation recoverable	113,962
Intangible assets	213,457
Other assets, net	49,396
VIE assets (including restricted cash of $57,755)	3,904,259

Valuation allowance on assets held-for-sale	(570,145)
Total assets held-for-sale	$	6,267,200
LIABILITIES:
Unearned premiums	$	228,177
Loss and loss adjustment reserves	577,167
Ceded premiums payable	56,404
Long-term debt and accrued interest	1,046,658
Other liabilities, net	105,772
VIE liabilities	3,873,507
Total liabilities held-for-sale	$	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 September 30,				Nine Months Ended September 30,
	2025		2024		2025		2024
REVENUES:
Net premiums earned	$	5,183	$	5,660	$	15,145	$	18,715
Net investment income	43,396		34,497		100,203		104,947
Net investment gains (losses), including impairments	5,852		(920)		(12,616)		(1,308)
Net gains (losses) on derivative contracts	9,669		(1,349)		302		1,127


Other revenues	1,355		6,253		18,016		27,206
Total revenues	65,455		44,141		121,050		150,687
EXPENSES:
Loss and loss adjustment expenses (benefit)	2,366		17,210		10,444		(8,768)
Intangible amortization	5,909		6,194		17,097		24,535
General & administrative and other expenses	64,427		10,756		81,034		47,488
Interest expense	15,723		15,766		47,617		47,732
Other expenses	—		(20)		—		(1)
Total expenses	88,425		49,906		156,192		110,986
Pretax income (loss)	(22,970)		(5,765)		(35,142)		39,701
Provision (benefit) for income taxes	7,908		3,621		10,678		10,765
Loss on disposal	(50,012)		—		(117,468)		—


Net income (loss) from discontinued operations	$	(80,890)	$	(9,386)	$	(163,288)	$	28,936