What changed in this filing

/stocks — the workspaceLOADING

Item 9A. Controls and Procedures

2021-03-01 compared with 2020-03-02 · 156 added, 140 removed, 345 unchanged (46% of the section changed)

4 unchanged sentences

The Disclosure Committee is responsible for, among other things, the oversight, maintenance and implementation of the disclosure controls and procedures, subject to the supervision and oversight of the CEO and CFO.

Ambac’s management, with the participation of its CEO and CFO, has evaluated the effectiveness of Ambac’s disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934) as of December 31, 2019 and, the CEO and CFO have concluded that at that date Ambac’s disclosure controls and procedures were effective at the reasonable assurance level.

Ambac’s management, with the participation of its CEO and CFO, has evaluated 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 December 31, 2020 and, the CEO and CFO have concluded that at that date Ambac’s disclosure controls and procedures were effective at the reasonable assurance level.

Management’s Report on Internal Control Over Financial Reporting .

6 unchanged sentences

and (iii) provide reasonable assurance regarding the prevention or timely detection and remediation of unauthorized acquisition, use or disposition of Ambac’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.

Because of its inherent limitations, internal controls over financial reporting may not prevent or detect misstatements.

Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Ambac management conducted an assessment of the effectiveness of Ambac’s internal control over financial reporting based on the criteria established in the Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

Ambac management has concluded that, as of December 31, 2019 , our internal control over financial reporting was effective based on the criteria articulated in the 2013 Internal Control - Integrated Framework.

Ambac management recognizes that any controls and procedures, no matter how well operated, can provide only reasonable assurance of achieving their objectives.

Based on its evaluations, Ambac's management have concluded that, as of December 31, 2020, our internal control over financial reporting was effective based on the criteria articulated in the 2013 Internal Control - Integrated Framework.

The effectiveness of our internal control over financial reporting as of December 31, 2020 has been audited by KPMG LLP, an independent registered public accounting firm, as stated in their report, which expressed an unqualified opinion on the effectiveness of Ambac’s internal control over financial reporting.

Changes in Internal Control Over Financial Reporting.

There were no changes in the Company’s internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fourth quarter of 2019 that have materially affected, or are reasonably likely to materially affect, Ambac's internal control over financial reporting.

Other Information

Compensatory Arrangements of Certain Officers

On February 26, 2020, the Compensation Committee of the AFG Board approved certain amendments to the employment agreement of Claude LeBlanc to provide that Mr.

LeBlanc would be eligible to receive (i) a target annual bonus amount of no less than 100% of his base salary;

and (ii) a target annual long-term incentive award of no less than 150% of his base salary.

The amendments removed clauses that set maximums, as a percentage of base salary, on annual bonus amounts and long-term incentive award amounts.

Additional minor amendments and conforming changes were made that do not materially affect the substance of Mr.

LeBlanc’s employment agreement.

The foregoing description of the amendments to Mr.

LeBlanc’s employment agreement is only a summary, does not purport to be complete, and is qualified in its entirety by reference to the full text of the Amended and Restated Employment Agreement dated as of February 27, 2020 by and among AFG, AAC and Claude LeBlanc, which is filed as Exhibit 10.46 to this Annual Report on Form 10-K and is incorporated into this filing by reference.

Amended and Restated Bylaws

On February 27, 2020, the Board of Directors of AFG approved certain amendments to AFG’s By-laws of (the “By-laws”), effective as of that date.

The amendments are set forth in Amended and Restated Bylaws approved by the Board and filed as an exhibit to this Annual Report on Form 10-K.

The amendments contained in the Amended and Restated Bylaws relate to the execution and delivery of notices, waivers of notice, proxies, and actions by consent, including by electronic means, and are intended to comport with recent changes to the Delaware General Corporation Law (“DGCL”).

In particular, the changes to the By-laws include:

The provisions of the By-laws governing notices of meetings of stockholders and directors were amended to address providing notice (and the waiver of notice) by electronic transmission, including electronic mail.

The provisions of the By-laws regarding proxies, stockholder action by consent in lieu of a meeting, and director action by consent in lieu of a meeting, were also amended to conform to the current provisions of the DGCL regarding those matters as they relate to granting proxies and acting by consent via electronic transmission.

| Ambac Financial Group, Inc.

134 2019 FORM 10-K |

The provision of the By-laws regarding stockholder addresses was also amended to specifically address stockholder electronic mail addresses.

In connection with these amendments, the definition of “electronic transmission” in the By-laws was amended to comport with the current definition of that term in the DGCL, and definitions of the terms “electronic mail,” “electronic mail address,” and “document” were added (again tracking the similar definitions of those terms in the DGCL).

Additional minor amendments and conforming changes were made that do not materially affect the substance of the By-laws.

The foregoing description of the amendments to AFG’s By-laws is only a summary, does not purport to be complete, and is qualified in its entirety by reference to the full text of the Amended and Restated Bylaws, which are filed as Exhibit 3.2 to this Annual Report on Form 10-K and are incorporated into this filing by reference.

| Ambac Financial Group, Inc.

135 2019 FORM 10-K |

There were no changes in the Company’s internal control over financial reporting that occurred during the fourth quarter of 2020 that materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.

We have not experienced any significant change to our internal controls over financial reporting despite the fact that our employees are working remotely due to the COVID-19 pandemic.

We are continually monitoring and assess the COVID-19 situation on our internal controls to minimize the impact on their design and operating effectiveness.

Other Information — No matters require disclosure.

Directors, Executive Officers and Corporate Governance

1 unchanged sentence

Ambac has a Code of Business Conduct which promotes management’s commitment to integrity and expresses Ambac’s standards for ethical behavior by providing guidelines for handling business situations appropriately.

This code can be found on

Ambac’s website at www.ambac.com on the “Investor Relations” page under “Corporate Governance.” Ambac will disclose on its website any amendment to, or waiver from, a provision of its Code of Business Conduct that applies to its Chief Executive Officer, Chief Financial Officer or Chief Accounting Officer.

Ambac’s corporate governance guidelines and the charters for the committees of the Board of Directors are also available on our website under the “Corporate Governance” page.

This code can be found on Ambac’s website at www.ambac.com on the “Environmental, Social & Governance” page under "Governance Documents".

Ambac will disclose on its website any amendment to, or waiver from, a provision of its Code of Business Conduct that applies to its Chief Executive Officer, Chief Financial Officer or Chief Accounting Officer.

Ambac’s corporate governance guidelines and the charters for the committees of the Board of Directors are also available on our website under the “Governance Documents” page.

| Ambac Financial Group, Inc.

142 2020 FORM 10-K |

Executive Compensation

3 unchanged sentences

Equity Compensation Plan Information

The following table provides information as of December 31, 2019 regarding securities issued under our 2013 Incentive Compensation Plan.

The following table provides information as of December 31, 2020, regarding securities issued under our 2013 Incentive Compensation Plan and 2020 Incentive Compensation Plan.

Number of Securities

15 unchanged sentences

Compensation Plan (1)

2,065,150 (2) (3)

2020 Incentive

Compensation Plan (1)

85,706 $0.00 2,096,092 (4)

Equity compensation plans not approved by security holders

None --- --- ---

Total 2,573,616 (2) (3)

2,096,092 (4)

Our 2013 Incentive Compensation Plan was approved by the stockholders of AFG on December 18, 2013.

The total number of shares of AFG common stock available for issuance under the 2013 Incentive Compensation Plan is 4,000,000.

Represents, as of December 31, 2019 , the number of outstanding restricted stock unit awards, stock options and the maximum number of performance stock units that may be issued if certain performance goals are achieved.

(1) Our 2020 Incentive Compensation Plan ("2020 Plan") was approved by the stockholders of AFG on June 2, 2020 as a successor to our 2013 Incentive Compensation Plan ("2013 Plan") which was approved on December 18, 2013.

Effective June 2, 2020, awards may no longer be granted under the 2013 Plan;

authorized and unissued shares under the 2013 Plan are available for issuance under the 2020 Plan.

(2) Represents, as of December 31, 2020, the number of outstanding restricted stock unit awards and the maximum number of performance stock units that may be issued if certain performance goals are achieved.

Refer to Note 15.

Employment Benefit Plans to the Consolidated Financial Statements included in Part II, Item 8 in this Form 10-K for a description of the grants made under the 2013 Incentive Compensation Plan.

This amount includes 702,579 restricted stock units, 16,667 options and 1,345,904 performance stock units which are based on the maximum number of shares potentially payable under the awards.

Employment Benefit Plans to the Consolidated Financial Statements included in Part II, Item 8 in this Form 10-K for a description of the grants made under our 2013 and 2020 Incentive Compensation Plans.

This amount includes 773,657 restricted stock units and 1,799,959 performance stock units which are based on the maximum number of shares potentially payable under the awards.

Maximum number of shares potentially payable under performance awards range from 200% to 220% of target.

Each restricted stock unit, stock option and performance stock unit awarded under our 2013 Incentive Compensation Plan was granted at no cost to the persons receiving them.

(3) Each restricted stock unit, stock option and performance stock unit awarded under our 2013 and 2020 Incentive Compensation Plans was granted at no cost to the persons receiving them.

Restricted stock units represent the contingent right to receive the equivalent number of shares of AFG common stock and may vest after the passage of time.

1 unchanged sentence

Performance stock units granted pursuant to the Company's Long Term Incentive Plan represent the contingent right to receive a number of shares of AFG common stock ranging from 0% to 220% of the number of units granted depending upon the achievement of certain company-wide performance goals at the end of a specified performance period.

Reflects the weighted-average price of all outstanding options that had been granted but not forfeited, expired or exercised.

Performance shares and restricted stock units are not included in determining the weighted-average price as they have no exercise price.

The number of securities remaining available for future issuance under compensation plans considering the target number of performance stock units are 2,079,181.

(4) Represents the number of securities remaining available for future issuance under compensation plans assuming the maximum number of shares are issued on settlement of performance stock units.

The number of securities remaining available for future issuance under compensation plans assuming the target number of shares are issued on settlement of performance stock units would be 3,058,603.

(5) There are no outstanding options as of December 31, 2020.

Performance shares and restricted stock units are not included in determining weighted-average price as they have no exercise price.

Certain Relationships and Related Transactions, and Director Independence

5 unchanged sentences

Exhibits, Financial Statement Schedules

Documents filed as a part of this report:

(a) Documents filed as a part of this report:

Financial Statements

6 unchanged sentences

Incorporated by Reference

Exhibit Description

Exhibit Number

Filed Herewith

Exhibit Description Form Filing Date Exhibit Number Filed Herewith

(3) Articles of Incorporation and bylaws:

1 unchanged sentence

3.2 Amended By-Laws of Ambac Financial Group, Inc.

10-K 03/02/20 3.2

(4) Instruments defining the rights of security holders, including indentures:

1 unchanged sentence

4.2 Specimen form of common stock certificate

8-A 05/01/13 4.1

4.3 Warrant Agreement between Ambac Financial Group, Inc.

and Computershare Inc.

8-A 05/01/13 4.2

4.4 Specimen form of warrant certificate (included in Exhibit 4.2)

4.5 Junior Note Fiscal Agency Agreement, dated as of April 30, 2013, by and between the Segregated Account of Ambac Assurance Corporation and The Bank of New York Mellon, as fiscal agent

10-K 03/03/14 4.5

4.6 5.1% Junior Surplus Note due June 7, 2020 in the aggregate amount of $350 million issued by the Segregated Account of Ambac Assurance Corporation pursuant to the Junior Note Fiscal Agency Agreement, dated as of April 30, 2013

10-K 03/03/14 4.6

4.7 Form of 5.1% Non-Reducing Junior Surplus Note due June 7, 2020 issued by the Segregated Account of Ambac Assurance Corporation

10-K 03/03/14 4.7

4.8 Form of 5.1% Bankruptcy Reducing Junior Surplus Note due June 7, 2020 issued by the Segregated Account of Ambac Assurance Corporation

10-K 03/03/14 4.8

4.9 Form of 5.1% Reducing Junior Surplus Note due June 7, 2020, issued by the Segregated Account of Ambac Assurance Corporation

10-K 03/03/14 4.9

4.10 Fiscal Agency Agreement, dated as of July 19, 2010, by and between the Segregated Account of Ambac Assurance Corporation and The Bank of New York Mellon, as fiscal agent

10-K 03/03/14 4.10

4.11 Form of Surplus Note due June 7, 2020 issued by the Segregated Account of Ambac Assurance Corporation.(included in Exhibit 4.9)

4.12 Fiscal Agency Agreement, dated as of June 7, 2010, by and between Ambac Assurance Corporation and The Bank of New York Mellon, as fiscal agent

8-K 06/08/10 10.3

4.13 Amendment dated as of October 3, 2014 to Fiscal Agency Agreement dated as of June 7, 2010 by and between Ambac Assurance Corporation and The Bank of New York Mellon, as fiscal agent

Indenture (including the form of Notes), dated as of February 12, 2018, between Ambac LSNI, LLC and The Bank of New York Mellon, as trustee and note collateral agent, providing for the issuance of insured secured notes

10-Q 11/09/15 4.1

| Ambac Financial Group, Inc.

1 unchanged sentence

Incorporated by Reference

Exhibit Description

Exhibit Number

Filed Herewith

Exhibit Description Form Filing Date Exhibit Number Filed Herewith

4.14 Indenture (including the form of Notes), dated as of February 12, 2018, between Ambac LSNI, LLC and The Bank of New York Mellon, as trustee and note collateral agent, providing for the issuance of insured secured notes

8-K 02/15/18 4.1

4.15 Indenture (including the form of Notes), dated as of February 12, 2018, between Ambac Assurance Corporation and The Bank of New York Mellon, as trustee and note collateral agent providing for the issuance of senior notes secured by certain interests in proceeds of certain RMBS litigation

8-K 02/15/18 4.3

4.16 Supplemental Fiscal Agency Agreement, dated as of February 12, 2018, among the Segregated Account of Ambac Assurance Corporation, Ambac Assurance Corporation and The Bank of New York Mellon, as fiscal agent

8-K 02/15/18 4.4

4.17 Promissory Note and Security Agreement dated as of February 12, 2018, of Ambac Assurance Corporation in favor of Ambac LSNI, LLC

10-K 02/28/19 4.16

(10) Material contract and management compensation plans and arrangements:

10.1 Amended and Restated Trust Agreement dated as of August 28, 2014, among Ambac Financial Group, Inc., The Bank of New York Mellon, and Wilmington Trust, National Association

8-K 08/28/14 99.2

10.2 Ambac Financial, Group, Inc.’s Incentive Compensation Plan

DEF 14A 11/08/13 A

10.3 Ambac Financial Group, Inc.'s Long-Term Incentive Compensation Plan

10-Q 08/11/14 10.1

10.4 Form of Amended and Restated Restricted Stock Unit Award Letter for executive officers

10-K 03/03/14 10.4

10.5 Form of Equity Award Letter for directors

10-K 03/03/14 10.5

10.6 Closing Agreement between Ambac Financial, Group, Inc.

and Commissioner of Internal Revenue, dated April 30, 2013

Amendment No.

1, dated April 29, 2013, to the Amended and Restated Tax Sharing Agreement among Ambac Financial Group, Inc.

and certain of its affiliates

Tax Sharing Agreement dated March 14, 2012 among Ambac Financial Group, Inc.

and certain of its affiliates

Form of Amendment No.

1 to Cooperation Agreement between the Segregated Account of Ambac Assurance Corporation and Ambac Assurance Corporation

8-K 05/03/13 10.2

10.7 Form of Expense Sharing and Cost Allocation Agreement among Ambac Assurance Corporation, Ambac Financial Group, Inc.

and their respective subsidiaries and affiliates

8-K 09/27/11 10.2

10.8 Lease, dated as of March 1, 2011, by and between One State Street, LLC and Ambac Assurance Corporation

10-K 03/16/11 10.34

10.9 Settlement, Discontinuance and Release Agreement, dated as of March 1, 2011, by and among One State Street, LLC, Ambac Financial Group, Inc., Ambac Assurance Corporation and the Segregated Account of Ambac Assurance Corporation

10-K 03/16/11 10.33

10.10 Settlement Agreement, dated as of June 7, 2010, by and among Ambac Assurance Corporation, Ambac Credit Products LLC, Ambac Financial Group, Inc.

and the parties listed on Schedule A thereto

10-Q 11/15/10 10.1

10.11 Ambac Financial Group, Inc.

Severance Pay Plan (Applicable to termination on or after January 1, 2010)

Cooperation Agreement, dated as of March 24, 2010, by and between the Segregated Account of Ambac Assurance Corporation and Ambac Assurance Corporation

10-Q 05/17/10 10.26

10.12 Lease Modification dated as of September 8, 2015 to the Lease dated as of March 1, 2011, by and between One State Street, LLC and Ambac Assurance Corporation

Form of 2017 Long-Term Incentive Compensation Agreement between Ambac Financial Group, Inc.

and each of the Company's executive officers

| Ambac Financial Group, Inc.

138 2019 FORM 10-K |

Incorporated by Reference

Exhibit Description

Exhibit Number

Filed Herewith

Voting Support Settlement Agreement, dated as of March 28, 2016, by and between Ambac Financial Group, Inc.

and Cornwall Master LP

10-K 02/29/16 10.27

10.13 Employment Agreement dated as of November 1, 2016 by and among Ambac Financial Group, Inc., Ambac Assurance Corporation and David Trick

10-Q 11/03/16 10.2

10.14 Employment Agreement dated as of December 8, 2016, by and among Ambac Financial Group, Inc., Ambac Assurance Corporation and Claude LeBlanc

8-K 12/13/16 10.1

10.15 Employment Agreement dated as of January 4, 2017 by and among Ambac Financial Group, Inc., Ambac Assurance Corporation and Stephen Ksenak

8-K 01/06/17 10.1

10.16 Rehabilitation Exit Support Agreement, by and among Ambac Assurance Corporation, Ambac Financial Group, Inc.

and certain holders of Ambac Assurance Corporation’s 5.1% Surplus Notes due 2020 and certain holders of Ambac Assurance Corporation’s deferred payment obligations, dated as of July 19, 2017

8-K 07/20/17 10.1

10.17 Tier 2 Commitment Letter, dated as of July 19, 2017 from funds affiliated with or managed by investors party thereto

8-K 07/20/17 10.2

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145 2020 FORM 10-K |

Incorporated by Reference

Exhibit Description Form Filing Date Exhibit Number Filed Herewith

10.18 First Amendment to the Rehabilitation Exit Support Agreement, by and among Ambac Assurance Corporation, Ambac Financial Group, Inc.

and certain holders of Ambac Assurance Corporation’s 5.1% Surplus Notes due 2020 and certain holders of Ambac Assurance Corporation’s deferred payment obligations, dated as of September 21, 2017

8-K 09/26/17 10.1

10.19 Financial Guaranty Insurance Policy, dated February 12, 2018, issued by Ambac Assurance Corporation

8-K 02/15/18 10.1

10.20 Collateral Agreement, dated as of February 12, 2018, made by Ambac LSNI, LLC in favor of The Bank of New York Mellon, as note collateral agent, trustee and paying agent for the secured parties

8-K 02/15/18 10.2

10.21 Pledge Agreement, dated as of February 12, 2018, made by Ambac Assurance Corporation in favor of The Bank of New York Mellon, as note collateral agent, trustee and paying agent

8-K 02/15/18 10.3

10.22 Collateral Agreement, dated as of February 12, 2018, made by Ambac Assurance Corporation in favor of The Bank of New York Mellon, as note collateral agent, trustee and paying agent for the secured parties

8-K 02/15/18 10.4

10.23 Waiver and Amendment, dated as of February 12, 2018, among Ambac Assurance Corporation, Ambac Credit Products, LLC, Ambac Financial Group, Inc.

and the other signatories party thereto

8-K 02/15/18 10.5

10.24 Second Amended Plan of Rehabilitation of the Segregated Account of Ambac Assurance Corporation dated September 25, 2017, and effective as of February 12, 2018

10-K 02/28/18 10.38

10.25 Order Granting the Rehabilitator’s Motion to Further Amend the Plan of Rehabilitation and confirming the Second Amended Plan of Rehabilitation, as amended, Case No.

10-CV-1576 (Dane County, Wisconsin) dated January 22, 2018

10-K 02/28/18 10.39

10.26 Stipulation and Order - Office of the Commissioner of Insurance of the State of Wisconsin, in the Matter of the Rehabilitation of the Segregated Account of Ambac Assurance Corporation effective as of February 12, 2018

10-K 02/28/18 10.40

10.27 Amendment No.

1 to the Stipulation and Order - Office of the Commissioner of Insurance of the State of Wisconsin, in the Matter of the Rehabilitation of the Segregated Account of Ambac Assurance Corporation effective as of February 12, 2018

10-K 02/28/19 10.37

10.28 Form of 2018 Restricted Stock Unit Award Agreement between Ambac Financial Group, Inc.

LeBlanc, Trick and Ksenak

10-Q 05/09/18 10.1

10.29 Form of 2018 Restricted Stock Unit Award Agreement between Ambac Financial Group, Inc.

Barranco, Eisman, Reilly and Ms.

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139 2019 FORM 10-K |

Incorporated by Reference

Exhibit Description

Exhibit Number

Filed Herewith

10-Q 05/09/18 10.2

10.30 Form of 2018 Performance Stock Unit Award Agreement between Ambac Financial Group, Inc.

LeBlanc, Trick and Ksenak

10-Q 05/09/18 10.3

10.31 Form of 2018 Performance Stock Unit Award Agreement between Ambac Financial Group, Inc.

Barranco, Eisman, Reilly and Ms.

10-Q 05/09/18 10.4

10.32 Form of 2018 Deferred Stock Unit Award Agreement between Ambac Financial Group, Inc.

and each of the Company’s executive officers

10-Q 05/09/18 10.5

10.33 Preferred Stock Repurchase and Support Agreement dated as of June 22, 2018, by and among Ambac Assurance Corporation (“AAC”), Ambac Financial Group, Inc.

and the holders of one or more series of the AAC’s outstanding Auction Market Preferred Shares

8-K 06/25/18 10.1

10.34 Form of 2019 Restricted Stock Unit Award Agreement between Ambac Financial Group, Inc.

LeBlanc, Trick and Ksenak

10-Q 05/09/19 10.1

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146 2020 FORM 10-K |

Incorporated by Reference

Exhibit Description Form Filing Date Exhibit Number Filed Herewith

10.35 Form of 2019 Restricted Stock Unit Award Agreement between Ambac Financial Group, Inc.

Barranco, Eisman, Reilly and Ms.

10-Q 05/09/19 10.2

10.36 Form of 2019 Deferred Stock Unit Award Agreement between Ambac Financial Group, Inc.

and each of the Company’s executive officers

10-Q 05/09/19 10.5

10.37 Form of 2019 Performance Stock Unit Award Agreement between Ambac Financial Group, Inc.

LeBlanc, Trick and Ksenak

10-Q 08/08/19 10.1

10.38 Form of 2019 Performance Stock Unit Award Agreement between Ambac Financial Group, Inc.

Barranco, Eisman, Reilly and Ms.

10-Q 08/08/19 10.2

10.39 SUBLEASE dated as of January 30, 2019, between Advance Magazine Publishers Inc.

(D/B/A CONDE NAST), and Ambac Assurance Group Corporation

10-K 03/02/20 10/45

10.40 Amended and Restated Employment Agreement dated as of February 27, 2020, by and among Ambac Financial Group, Inc., Ambac Assurance Corporation and Claude LeBlanc

10-K 03/02/20 10.46

10.41 2020 Incentive Compensation Plan

Def 14A 04/15/20 Ex.

10.42 Purchase Agreement, by and among, Ambac Assurance Corporation, Ambac Financial Group, Inc.

and certain funds or accounts affiliated with or managed by CVC Credit Partners, LLC, CVC Credit Partners Investment Management Limited and EJF Capital LLC, dated as of January 19, 2021

8-K 01/25/21 10.1

(99) Additional exhibits

Amendment dated as June 12, 2014 to the Plan of Rehabilitation of the Segregated Account of Ambac Assurance Corporation

99.1 Second Modified Fifth Amended Plan of Reorganization of Ambac Financial Group, Inc., effective as of May 1, 2013

Plan of Rehabilitation of the Segregated Account of Ambac Assurance Corporation

Plan of Operation of the Segregated Account of Ambac Assurance Corporation

10-K 03/03/14 99.3

Other exhibits, filed or furnished, as indicated:

6 unchanged sentences

Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

XBRL Instance Document.

XBRL Taxonomy Extension Schema Document.

XBRL Taxonomy Extension Calculation Linkbase Document.

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140 2019 FORM 10-K |

Incorporated by Reference

Exhibit Description

Exhibit Number

Filed Herewith

XBRL Taxonomy Extension Label Linkbase Document.

XBRL Taxonomy Extension Presentation Linkbase Document.

XBRL Taxonomy Extension Definition Linkbase Document.

101.INS XBRL Instance 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

9 unchanged sentences

($ in millions)

Cost Estimated

Amount at Which

5 unchanged sentences

Residential mortgage-backed securities 256 302 302

Commercial mortgage-backed securities

Collateralized debt obligations 74 74 74

Other asset-backed securities 263 303 303

Short-term 617 617 617

Other 507 544 544

Total $ 2,847 $ 3,028 $ 3,028

| Ambac Financial Group, Inc.

6 unchanged sentences

($ in millions, except share data) December 31, 2020 2019

Fixed income securities, at fair value (amortized cost:

Fixed maturity securities, at fair value (amortized cost:

2020—$ 76 and 2019—$ 71 )

1 unchanged sentence

Other investments 54 46

Total investments

Total investments (net of allowance for credit losses of $ 2 at December 31, 2020)

Investment in subsidiaries 714 993

Investment income due and accrued

Current taxes receivable (1)

Other assets 13 12

Total assets $ 1,082 $ 1,478

Liabilities and Stockholders' Equity:

Current taxes $ — $ —

Accounts payable and other liabilities

16 unchanged sentences

Total liabilities and stockholders’ equity $ 1,082 $ 1,478

May not add due to rounding

As of December 31, 2019, and December 31, 2018, $ 28 and $ 44 , respectively, relate to receivables from the Registrant's wholly-owned subsidiary, Ambac Assurance Corporation, pursuant to the intercompany tax sharing agreement, with the remainder being state income taxes.

(1) As of December 31, 2019, $ 28 relates to receivables from the Registrant's wholly-owned subsidiary, Ambac Assurance Corporation, pursuant to the intercompany tax sharing agreement, with the remainder being state income taxes.

The condensed financial statements should be read in conjunction with the consolidated financial statements and notes thereto and the following notes.

8 unchanged sentences

Investment income $ 13 $ ( 1 ) $ ( 2 )

Other than temporary impairments

Net realized gains (losses) ( 1 ) ( 2 ) ( 2 )

6 unchanged sentences

Equity in undistributed net income (loss) of subsidiaries

( 430 ) ( 223 ) 157

Net income (loss) $ ( 437 ) $ ( 216 ) $ 186

5 unchanged sentences

Changes to postretirement benefit, net of income tax provision (benefit) of $ 0 , $ 0 and $ 0

( 3 ) ( 1 ) ( 2 )

Total other comprehensive income (loss) 37 91 6

Total comprehensive income (loss) attributable to Ambac Financial Group, Inc.

May not add due to rounding

$ ( 400 ) $ ( 125 ) $ 192

The condensed financial statements should be read in conjunction with the consolidated financial statements and notes thereto and the following notes.

6 unchanged sentences

Condensed Statement of Stockholders' Equity

($ in millions)

($ in millions) Total Retained

Comprehensive

2 unchanged sentences

Total comprehensive income (loss) ( 400 ) ( 437 ) 37 — — — —

Adjustment to initially apply ASU 2016-13 ( 4 ) ( 4 ) — — — — —

Stock-based compensation 11 — — — — 11 —

3 unchanged sentences

Total comprehensive income (loss) ( 125 ) ( 216 ) 91 — — — —

Adjustment to initially apply ASU 2016-01

Stock-based compensation 12 — — — — 12 —

Cost of shares (acquired) issued under equity plan ( 3 ) ( 3 ) — — — — —

Issuance of warrants

Balance at December 31, 2019 $ 1,477 $ 1,203 $ 42 $ — $ — $ 232 $ —

4 unchanged sentences

Cost of shares (acquired) issued under equity plan ( 1 ) ( 1 ) — — — — —

Issuance of warrants 8 — — — — 8 —

Balance at December 31, 2018 $ 1,592 $ 1,421 $ ( 49 ) $ — $ — $ 219 $ —

May not add due to rounding

The condensed financial statements should be read in conjunction with the consolidated financial statements and notes thereto and the following notes.

12 unchanged sentences

Amortization of bond premium and discount ( 6 ) ( 6 ) ( 7 )

Other-than-temporary impairment charges

Net realized gains (losses)

Net realized gains 1 2 2

Increase (decrease) in current income taxes payable 30 15 ( 15 )

1 unchanged sentence

(Increase) decrease in other assets ( 1 ) ( 8 ) 12

Other, net ( 10 ) ( 6 ) —

Net cash provided by (used in) operating activities 11 16 32

6 unchanged sentences

Purchase of auction market preferred shares of Ambac Assurance — — ( 11 )

Acquisition of Xchange, net of cash acquired ( 74 ) — —

Other, net — — ( 5 )

Net cash provided by (used in) investing activities 16 ( 22 ) ( 21 )

Cash flows from financing activities:

Capital contribution to subsidiaries ( 29 ) — —

Net cash (used in) financing activities (29) — —

Net cash flow ( 2 ) ( 6 ) 11

3 unchanged sentences

Cash paid during the period for:

Income taxes $ — $ 1 $ 4

Non-cash financing activity:

Issuance of warrants in connection with purchase of auction market preferred shares of Ambac Assurance $ — $ — $ 8

May not add due to rounding

The condensed financial statements should be read in conjunction with the consolidated financial statements and notes thereto and the following notes.

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AFG, headquartered in New York City, is a financial services holding company incorporated in the state of Delaware on April 29, 1991 .

Business Combination

On December 31, 2020, Ambac completed the acquisition of 80 % of the membership interests of Xchange for a purchase price of $ 81 in cash.

Xchange, whose management principals retained the remaining 20 % of the company, will continue operating under its existing brand as it seeks to expand its underwriting partnership with its key carriers in connection with its planned growth strategy.

Business Combination to the Consolidated Financial Statements included in Part II, Item 8 in this Form 10-K for further information.

AFG files a consolidated Federal income tax return with its U.S.

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As of December 31, 2020, Ambac had consolidated U.S.

federal loss carryforwards ("NOLs") totaling $ 3,535 , which, if not utilized, will begin expiring in 2029 , and will fully expire in 2040 .

Pursuant to the intercompany tax sharing agreement, taxable income generated by Ambac Assurance after September 30, 2011, is offset by $ 3,650 of NOLs allocated to Ambac Assurance.

However, as Ambac Assurance utilizes these $ 3,650 of NOLs it is obligated to make payments (“Tolling Payments”), subject to certain credits, to AFG in accordance with a four tier (A through D) NOL usage table.

NOLs in excess of the allocated $ 3,650 may be utilized by Ambac Assurance, subject to AFG's consent for a payment of 25 % of the benefit received.

Any NOLs generated by Ambac Assurance after September 30, 2011, must be utilized prior to any allocated NOLs for which Tolling Payments will be due.

federal loss carryforwards ("NOLs") totaling approximately $ 3,639 , which, if not utilized, will begin expiring in 2029, and will fully expire in 2041.

Pursuant to an intercompany tax sharing agreement, taxable income generated by AAC after September 30, 2011, is offset by $ 3,440 of NOLs allocated to AAC.

In December 2020, AFG and certain affiliates amended their existing tax sharing agreement (the "Third TSA Amendment").

Under the Third TSA Amendment, AAC and AFG agreed to reallocate $ 210 of net operating loss carry-forwards (“NOLs”) from AAC to AFG and to eliminate AAC's requirement to make future payments based on its utilization of NOLs ("tolling payments") for any taxable year beginning on or after January 1, 2019.

In connection with the Third TSA Amendment, AAC paid to AFG approximately $ 28 of accrued tolling payments based on NOLs used by AAC in 2017.

For the year ended December 31, 2020, the AAC sub-group generated an NOL of $ 270 , that will expire in 2041.

The NOLs allocated to AFG as of December 31, 2020, were $ 1,457 , and begin expiring in 2029 and fully expire in 2033.

Through December 31, 2018 , Ambac Assurance generated cumulative taxable income of $ 1,508 , utilizing all post September 30, 2011, NOLs as of such date.

For the year ended December 31, 2019 , the Ambac Assurance sub-group generated an NOL of $ 143 , that will expire in 2040 and will need to be utilized before any new Tolling Payments will be generated.

Through December 31, 2019 , Ambac Assurance generated Tolling Payments, net of applicable credits, of $ 147 , of which $ 119 was paid to AFG through December 31, 2019 .

In May 2018 AFG executed a waiver under the intercompany tax sharing agreement pursuant to which Ambac Assurance was relieved of the requirement to make the 2017 tax year Tolling Payment of $ 28 payment by June 1, 2018.

AFG has also agreed to continue to defer the Tolling Payment for the use of net operating losses by Ambac Assurance in 2017 until such time as OCI consent to the payment.

The Registrant's tax positions are subject to review by the OCI, which may lead to the adoption of positions that reduce the amount of tolling payments otherwise available to the Registrant.

| Ambac Financial Group, Inc.

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AMBAC FINANCIAL GROUP, INC.

March 2, 2020

March 1, 2021 By:

/S/ DAVID TRICK

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Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

Signature Title Date

/S/ JEFFREY S.

Chairman of the Board and Director

March 2, 2020

/S/ CLAUDE LEBLANC

President, Chief Executive Officer and Director

March 2, 2020

Claude LeBlanc

(Principal Executive Officer)

/S/ DAVID TRICK

Executive Vice President and Chief Financial Officer

March 2, 2020

(Principal Financial Officer)

STEIN* Chairman of the Board and Director March 1, 2021

/S/ CLAUDE LEBLANC President, Chief Executive Officer and Director March 1, 2021

Claude LeBlanc (Principal Executive Officer)

/S/ DAVID TRICK Executive Vice President and Chief Financial Officer March 1, 2021

David Trick (Principal Financial Officer)

/S/ ROBERT B.

Senior Managing Director and Chief Accounting Officer

March 2, 2020

(Principal Accounting Officer)

EISMAN Senior Managing Director and Chief Accounting Officer March 1, 2021

Eisman (Principal Accounting Officer)

/S/ ALEXANDER D.

March 2, 2020

JAMES PRIEUR*

March 2, 2020

/S/ JOAN LAMM-TENNANT*

March 2, 2020

GREENE* Director March 1, 2021

HAFT* Director March 1, 2021

HERZOG* Director March 1, 2021

JAMES PRIEUR* Director March 1, 2021

/S/ JOAN LAMM-TENNANT* Director March 1, 2021

Joan Lamm-Tennant

/S/ STEPHEN M.

Attorney-in-fact

March 2, 2020

KSENAK Attorney-in-fact March 1, 2021

| Ambac Financial Group, Inc.

1 unchanged sentence

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 9A. Controls and Procedures