What changed in this filing

/stocks — the workspaceLOADING

Item 9A. Controls and Procedures

2022-02-24 compared with 2021-03-01 · 84 added, 104 removed, 397 unchanged (32% of the section changed)

16 unchanged sentences

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

Ambac 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 evaluations, Ambac's management have concluded that, as of December 31, 2021, our internal control over financial reporting was effective based on the criteria articulated in the 2013 Internal Control - Integrated Framework.

2 unchanged sentences

There were no changes in the Company’s internal control over financial reporting that occurred during the fourth quarter of 2021 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 have not experienced any significant change to our internal controls over financial reporting despite the fact that our employees are, at times, 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.

Other Information

Pursuant Ambac’s director compensation program, non-employee directors receive both cash and restricted stock units.

The restricted stock units are awarded on a quarterly basis on or about the second business day following the issuance of the Company quarterly earnings release.

These quarterly grants vest on the one-year anniversary of the grant date, subject to accelerated vesting in certain circumstances.

In February of 2022, the Governance and Nominating Committee recommended, and the Board of Directors approved, a change to fix the quarterly grant dates to be the first business day of each calendar quarter.

This change in the timing of the grant dates will commence on April 1, 2022.

Directors, Executive Officers and Corporate Governance

Information relating to AFG’s executive officers and directors, including its audit committee and audit committee financial experts will be in AFG’s definitive Proxy Statement for its 2022 Annual Meeting of Stockholders which will be filed within 120 days of the end of our fiscal year ended December 31, 2021 (the “2022 Proxy Statement”) and is incorporated herein by reference.

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 “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 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

| Ambac Financial Group, Inc.

139 2021 FORM 10-K |

handling business situations appropriately.

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.

Executive Compensation

35 unchanged sentences

This amount includes 837,070 restricted stock units and 2,082,199 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.

(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.

Maximum number of shares potentially payable under performance awards is 220% of target.

(3) Each restricted stock unit 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.

Stock options represent the right to acquire an equivalent number of shares of AFG common stock at a specified exercise price.

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.

Performance stock units represent the contingent right to receive a number of shares of AFG common stock up 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.

(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.

2 unchanged sentences

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

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140 2021 FORM 10-K |

Certain Relationships and Related Transactions, and Director Independence

2 unchanged sentences

Information relating to principal accountant fees and services will be in the 2022 Proxy Statement and is incorporated herein by reference.

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143 2020 FORM 10-K |

Exhibits, Financial Statement Schedules

21 unchanged sentences

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

4.5 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

5 unchanged sentences

10-Q 11/09/15 4.1

4.9 Indenture (including the form of Notes), dated as of July 6, 2021, between Sitka Holdings, LLC and The Bank of New York Mellon, as trustee and note collateral agent

8-K 07/06/21 4.1

| Ambac Financial Group, Inc.

2 unchanged sentences

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

4.10 Promissory Note and Security Agreem ent issued by Ambac Assurance Corporation in favor of Sitka Holdings, LLC

8-K 07/06/21 4.3

(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

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

20 unchanged sentences

10.10 Ambac Financial Group, Inc.

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

10-Q 05/17/10 10.26

Severance Pay Plan (Applicable to termination on or after December 1 6 , 20 2 1 )

10.11 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

11 unchanged sentences

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

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

1 unchanged sentence

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

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

3 unchanged sentences

10-K 02/28/18 10.39

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142 2021 FORM 10-K |

Incorporated by Reference

Exhibit Description Form Filing Date Exhibit Number Filed Herewith

10.20 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

3 unchanged sentences

10-K 02/28/19 10.37

10.22 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

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

4 unchanged sentences

10-Q 05/09/19 10.2

10.25 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

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

4 unchanged sentences

10-Q 08/08/19 10.2

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

10.28 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

10.29 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

10.30 2020 Incentive Compensation Plan

Def 14A 04/15/20 Ex.

10.31 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

10.32 Form of 20 20 Restricted Stock Unit Award Agreement between Ambac Financial Group, Inc.

1 unchanged sentence

10-Q 05/11/20 10.1

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146 2020 FORM 10-K |

Incorporated by Reference

Exhibit Description Form Filing Date Exhibit Number Filed Herewith

10.33 Form of 20 20 Restricted Stock Unit Award Agreement between Ambac Financial Group, Inc.

1 unchanged sentence

10-Q 05/11/20 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

10.34 Form of 20 20 Performance Stock Unit Award Agreement between Ambac Financial Group, Inc.

LeBlanc, Trick and Ksenak

10-Q 05/11/20 10.3

10.35 Form of 20 20 Performance Stock Unit Award Agreement between Ambac Financial Group, Inc.

Barranco, Eisman, Reilly and Ms.

10-Q 05/11/20 10.4

10.36 Form of 202 1 Restricted Stock Unit Award Agreement between Ambac Financial Group, Inc.

LeBlanc, Trick and Ksenak

10-Q 05/10/21 10.1

10.37 Form of 202 1 Restricted Stock Unit Award Agreement between Ambac Financial Group, Inc.

Barranco, Eisman, Reilly and Ms.

10-Q 05/10/21 10.2

10.38 Form of 202 1 Performance Stock Unit Award Agreement between Ambac Financial Group, Inc.

LeBlanc, Trick and Ksenak

10-Q 05/10/21 10.3

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143 2021 FORM 10-K |

Incorporated by Reference

Exhibit Description Form Filing Date Exhibit Number Filed Herewith

10.39 Form of 202 1 Performance Stock Unit Award Agreement between Ambac Financial Group, Inc.

Barranco, Eisman, Reilly and Ms.

10-Q 05/10/21 10.4

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

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

10.40 Executive Stock Deferral Plan dated June 24, 2021

8-K 06/30/21 10.1

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

10.41 Financial Guaranty Insurance Policy, dated Jul y 6 , 20 2 1 , issued by Ambac Assurance Corporation

8-K 07/06/21 10.1

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

10.42 Collateral Agreement, dated as of July 6 , 20 2 1 , made by Sitka Holdings , LLC in favor of The Bank of New York Mellon, as note collateral agent and trustee

8-K 07/06/21 10.2

38 unchanged sentences

Short-term 520 519 519

Other 507 544 544

Total $ 2,734 $ 2,947 $ 2,955

(1) Excluded from the estimated fair value amount are equity securities with a carrying value of $ 8 as of December 31, 2021, that do not have readily determinable fair values and are carried on the balance sheet at cost, less impairment, and adjusted to fair value when observable price changes in identical or similar investments from the same issuer occur, as permitted under the Investments — Equity Securities Topic of the ASC

| Ambac Financial Group, Inc.

10 unchanged sentences

Other investments 11 54

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

Total investments (net of allowance for credit losses of:

2021— $ 3 and 2020 — $ 2 )

Investment in subsidiaries 769 714

Current taxes receivable (1)

Investment income due and accrued 1 —

Other assets 17 13

20 unchanged sentences

Total liabilities and stockholders’ equity $ 1,041 $ 1,082

(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 $ 10 $ 13 $ 19

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

Other income — (1) (2)

Net investment gains (losses), including impairments ( 5 ) ( 1 ) ( 2 )

Total revenues 5 12 18

2 unchanged sentences

Income (loss) before income taxes and equity in undistributed net loss of subsidiaries

Federal income tax provision (benefit) — ( 5 ) ( 11 )

Income before equity in undistributed net income (loss) of subsidiaries

Equity in undistributed net income (loss) of subsidiaries

( 14 ) ( 7 ) 2

Federal income tax provision (benefit) 2 — ( 5 )

Income (loss) before net income (loss) of subsidiaries ( 16 ) ( 7 ) 7

Net loss of subsidiaries ( 1 ) ( 430 ) ( 223 )

Net income (loss) $ ( 17 ) $ ( 437 ) $ ( 216 )

22 unchanged sentences

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

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

Stock-based compensation 12 — — — — 12 —

1 unchanged sentence

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

Balance at Balance at January 1, 2019 $ 1,592 $ 1,421 $ ( 49 ) $ — $ — $ 219 $ —

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

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

Stock-based compensation 11 — — — — 11 —

1 unchanged sentence

Balance at December 31, 2020 $ 1,080 $ 759 $ 79 $ — $ — $ 242 $ ( 1 )

Balance at January 1, 2018 $ 1,381 $ 1,234 $ ( 52 ) $ — $ — $ 200 $ —

Total comprehensive income (loss) ( 38 ) ( 17 ) ( 21 ) — — — —

Adjustment to initially apply ASU 2016-01 — 3 ( 3 ) — — — —

Stock-based compensation 14 — — — — 14 —

Cost of shares (acquired) issued under equity plan ( 6 ) ( 4 ) — — — — ( 2 )

Issuance of warrants 8 — — — — 8 —

Change in redeemable noncontrolling interest ( 12 ) ( 12 ) — — — — —

Balance at December 31, 2021 $ 1,038 $ 726 $ 58 $ — $ — $ 257 $ ( 3 )

16 unchanged sentences

Share-based compensation 14 11 12

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

(Increase) decrease in other assets and liabilities ( 5 ) ( 1 ) ( 8 )

Distributions received from majority owned subsidiary 6 — —

Other, net ( 6 ) ( 10 ) ( 6 )

1 unchanged sentence

Cash flows from investing activities:

Proceeds from matured bonds 46 86 230

Proceeds from sales and matured bonds 33 46 86

Purchases of bonds ( 34 ) ( 45 ) ( 2 )

2 unchanged sentences

Sale of auction market preferred shares of Ambac Assurance — — 19

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 95 16 ( 22 )

8 unchanged sentences

Income taxes $ — $ — $ 1

Non-cash financing activity:

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

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

13 unchanged sentences

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.

Xchange is a property and casualty Managing General Underwriter focused on accident and health products.

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

4 unchanged sentences

federal loss carryforwards ("NOLs") totaling approximately $ 3,744 , 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, 2021, were $ 1,596 , and begin expiring in 2029 and fully expire in 2033.

16 unchanged sentences

AMBAC FINANCIAL GROUP, INC.

March 1, 2021 By:

February 24, 2022 By:

/S/ DAVID TRICK

3 unchanged sentences

/S/ JEFFREY S.

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

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

STEIN* Chairman of the Board and Director February 24, 2022

/S/ CLAUDE LEBLANC President, Chief Executive Officer and Director February 24, 2022

Claude LeBlanc (Principal Executive Officer)

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

/S/ DAVID TRICK Executive Vice President and Chief Financial Officer February 24, 2022

David Trick (Principal Financial Officer)

/S/ ROBERT B.

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

EISMAN Senior Managing Director and Chief Accounting Officer February 24, 2022

Eisman (Principal Accounting Officer)

/S/ ALEXANDER D.

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

HAFT* Director February 24, 2022

HERZOG* Director February 24, 2022

IGLESIAS* Director February 24, 2022

JAMES PRIEUR* Director February 24, 2022

/S/ JOAN LAMM-TENNANT* Director February 24, 2022

Joan Lamm-Tennant

/S/ STEPHEN M.

KSENAK Attorney-in-fact March 1, 2021

KSENAK Attorney-in-fact February 24, 2022

| 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