What changed in this filing

/stocks — the workspaceLOADING

Item 9A. Controls and Procedures

2023-03-01 compared with 2022-02-24 · 93 added, 97 removed, 384 unchanged (33% of the section changed)

3 unchanged sentences

Ambac’s Disclosure Committee assists the CEO and CFO in their responsibilities to design, establish, maintain and evaluate the effectiveness of disclosure controls and procedures.

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.

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 rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) as of December 31, 2022 and, the CEO and CFO have concluded that at that date Ambac’s disclosure controls and procedures were effective at the reasonable assurance level.

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The effectiveness of our internal control over financial reporting as of December 31, 2022 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.

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133 2022 FORM 10-K

Changes in Internal Control Over Financial Reporting.

There were no changes in the Company’s internal control over financial reporting that occurred during the fourth quarter of 2022 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, 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

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.

On February 22, 2023, Mr.

James Prieur resigned as a member of the Board of Directors of each of Ambac Financial Group, Inc.

and Ambac Assurance Corporation.

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 2023 Annual Meeting of Stockholders which will be filed within 120 days of the end of our fiscal year ended December 31, 2022 (the “2023 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

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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 has a Code of Business Conduct and Ethics 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 and Ethics 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.

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Third Column)

Equity compensation plans approved by security holders

2013 Incentive

Equity compensation plans approved by security holders 2013 Incentive

Compensation Plan (1)

2 unchanged sentences

2,755,432 $0.00 74,907 (4)

Equity compensation plans not approved by security holders

None --- --- ---

Equity compensation plans not approved by security holders None --- --- ---

Total 3,825,071 (2) (3)

1,255,643 (4)

(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.

3 unchanged sentences

Refer to Note 18.

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.

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

This amount includes 983,016 restricted stock units and 2,842,055 performance stock units which are based on the maximum number of shares potentially payable under the awards.

2 unchanged sentences

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.

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.

Performance stock units represent the contingent right to receive a number of shares of AFG common stock up to 240%

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134 2022 FORM 10-K

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.

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 2,691,618.

The number of securities remaining available for future issuance under compensation plans assuming the probable number of shares are issued on settlement of performance stock units would be 1,145,243 .

(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.

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140 2021 FORM 10-K |

Certain Relationships and Related Transactions, and Director Independence

10 unchanged sentences

Schedule II — Condensed Financial Information of Registrant (Parent Company Only)

Schedule IV — Reinsurance

Schedule I II — Supplementary Insurance Information

Incorporated by Reference

3 unchanged sentences

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:

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

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135 2022 FORM 10-K

Incorporated by Reference

Exhibit Description Form Filing Date Exhibit Number Filed Herewith

4.7 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

4 unchanged sentences

8-K 07/06/21 4.1

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141 2021 FORM 10-K |

Incorporated by Reference

Exhibit Description Form Filing Date Exhibit Number Filed Herewith

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

4.10 Promissory Note and Security Agreement 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 Ambac Financial, Group, Inc.’s Incentive Compensation Plan

DEF 14A 11/08/13 A

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

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and their respective subsidiaries and affiliates

8-K 09/27/11 10.2

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

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Severance Pay Plan (Applicable to termination on or after December 16, 2021)

10-K 02/24/22 10.10

10.10 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

6 unchanged sentences

8-K 01/06/17 10.1

10.15 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

10.16 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

10.17 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

10.14 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

10.16 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

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2 unchanged sentences

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

10-K 02/28/18 10.40

10.17 Amendment No.

4 unchanged sentences

8-K 06/25/18 10.1

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

LeBlanc, Trick and Ksenak

10-Q 05/09/19 10.1

10.24 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

10.25 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.

LeBlanc, Trick and Ksenak

10-Q 08/08/19 10.1

10.27 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

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

29 unchanged sentences

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

10.30 Form of 2021 Performance Stock Unit Award Agreement between Ambac Financial Group, Inc.

3 unchanged sentences

8-K 06/30/21 10.1

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

10.32 Financial Guaranty Insurance Policy, dated July 6, 2021, issued by Ambac Assurance Corporation

8-K 07/06/21 10.1

1 unchanged sentence

8-K 07/06/21 10.2

10.34 Settlement Agreement and Release dated as of October 6, 2022 by and among Bank of America Corporation and certain affiliates and Ambac Assurance Corporation (Portions of this exhibit have been omitted in reliance on Regulation S-K Item 601(b)(10)(iv))

10.35 Settlement Agreement and Release dated as of December 29, 2022 by and among Nomura Credit & Capital, Inc.

and Ambac Assurance Corporation.

(Portions of this exhibit have been omitted in reliance on Regulation S-K Item 601(b)(10)(iv))

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137 2022 FORM 10-K

Incorporated by Reference

Exhibit Description Form Filing Date Exhibit Number Filed Herewith

10.36 Form of 2022 Restricted Stock Unit Award Agreement between Ambac Financial Group, Inc.

LeBlanc, Trick and Ksenak

10-Q 05/10/22 10.1

10.37 Form of 2022 Restricted Stock Unit Award Agreement between Ambac Financial Group, Inc.

Barranco, Eisman, McGinnis and Ms.

10-Q 05/10/22 10.2

10.38 Form of 2022 Performance Stock Unit Award Agreement between Ambac Financial Group, Inc.

LeBlanc, Trick and Ksenak

10-Q 05/10/22 10.3

10.39 Form of 2022 Performance Stock Unit Award Agreement between Ambac Financial Group, Inc.

Barranco, Eisman, McGinnis and Ms.

10-Q 05/10/22 10.4

(99) Additional exhibits

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AND SUBSIDIARIES

SCHEDULE I — SUMMARY OF INVESTMENTS

Summary of Investments

Other Than Investments in Related Parties

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Residential mortgage-backed securities 230 238 238

Commercial mortgage-backed securities 15 15 15

Collateralized debt obligations 141 137 137

1 unchanged sentence

Short-term 572 572 572

Fixed income - trading 60 59 59

Total $ 2,630 $ 2,581 $ 2,593

(1) Excluded from the estimated fair value amount are equity securities with a carrying value of $ 12 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

See the Report of Independent Registered Public Accounting Firm.

| Ambac Financial Group, Inc.

2 unchanged sentences

AND SUBSIDIARIES

SCHEDULE II— CONDENSED FINANCIAL INFORMATION

Condensed Financial Information

Of Registrant (Parent Company Only)

1 unchanged sentence

($ in millions, except share data) December 31, 2022 2021

Fixed maturity securities, at fair value (amortized cost:

2021—$ 130 and 2020—$ 76 )

Short-term investments, at cost (approximates fair value) 124 229

Fixed maturity securities, at fair value (amortized cost of $ 13 and $ 130 )

Short-term investments, at fair value (amortized cost of $ 175 and $ 124 )

Other investments 16 11

Total investments (net of allowance for credit losses of:

2021— $ 3 and 2020 — $ 2 )

Total investments (net of allowance for credit losses of $ 0 and $ 3 )

Investment in subsidiaries 1,029 769

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

See the Report of Independent Registered Public Accounting Firm.

| Ambac Financial Group, Inc.

2 unchanged sentences

AND SUBSIDIARIES

SCHEDULE II— CONDENSED FINANCIAL INFORMATION

Condensed Financial Information

Of Registrant (Parent Company Only)

3 unchanged sentences

Other income — — —

Net gains on derivative contracts 1 — —

Net investment gains (losses), including impairments ( 14 ) ( 5 ) ( 1 )

Total revenues ( 2 ) 5 12

Operating expenses 19 19 16

General and administrative expenses 17 19 19

Total expenses 17 19 19

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

( 14 ) ( 7 ) 2

Income (loss) before income taxes and equity in undistributed net gain (loss) of subsidiaries ( 20 ) ( 14 ) ( 7 )

Federal income tax provision (benefit) — 2 —

Income (loss) before net income (loss) of subsidiaries ( 19 ) ( 16 ) ( 7 )

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

Net gain (loss) of subsidiaries 542 ( 1 ) ( 430 )

Net income (loss) $ 522 $ ( 17 ) $ ( 437 )

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Unrealized gains (losses) on securities, net of income tax provision (benefit) of $( 6 ), $( 2 ) and $ 1

( 225 ) ( 12 ) 15

Gains (losses) on foreign currency translation, net of income tax provision (benefit) of $ — , $ — and $ —

( 85 ) ( 8 ) 23

Credit risk changes of fair value option liabilities, net of income tax provision (benefit) of $ — , $ — and $ —

5 unchanged sentences

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

See the Report of Independent Registered Public Accounting Firm.

| Ambac Financial Group, Inc.

2 unchanged sentences

AND SUBSIDIARIES

SCHEDULE II— CONDENSED FINANCIAL INFORMATION

Condensed Financial Information

Of Registrant (Parent Company Only)

2 unchanged sentences

Comprehensive

Income (Loss)

Additional Paid-in

1 unchanged sentence

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

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

Stock-based compensation 11 — — — — 11 —

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

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

Stock-based compensation 14 — — — — 14 —

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

Changes to redeemable noncontrolling interest ( 12 ) ( 12 ) — — — — —

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

2 unchanged sentences

Cost of shares (acquired) issued under equity plan ( 4 ) ( 5 ) — — — — 2

Cost of shares repurchased ( 14 ) — — — — — ( 14 )

Change in redeemable noncontrolling interest 3 3 — — — — —

Purchase of Ambac Assurance auction market preferred shares 1 1 — — — — —

Balance at December 31, 2022 $ 1,252 $ 1,245 $ ( 253 ) $ — $ — $ 274 $ ( 15 )

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

See the Report of Independent Registered Public Accounting Firm.

| Ambac Financial Group, Inc.

2 unchanged sentences

AND SUBSIDIARIES

SCHEDULE II— CONDENSED FINANCIAL INFORMATION

Condensed Financial Information

Of Registrant (Parent Company Only)

4 unchanged sentences

Adjustments to reconcile net income loss to net cash used in operating activities:

Equity in undistributed net (income) loss of subsidiaries 1 423 223

Net (income) loss of subsidiaries ( 542 ) 1 423

Amortization of bond premium and discount ( 7 ) ( 9 ) ( 6 )

Net realized gains 5 1 2

Net investment gains (losses), including impairments 14 5 1

Increase (decrease) in current income taxes payable ( 1 ) 1 30

9 unchanged sentences

Change in other investments ( 4 ) ( 8 ) —

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

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

Acquisitions, net of cash acquired — — ( 74 )

Net cash provided by (used in) investing activities 12 95 16

1 unchanged sentence

Capital contribution to subsidiaries ( 42 ) ( 92 ) ( 29 )

Cost of shares acquired ( 14 ) — —

Net cash (used in) financing activities ( 57 ) ( 92 ) ( 29 )

6 unchanged sentences

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

See the Report of Independent Registered Public Accounting Firm.

| Ambac Financial Group, Inc.

2 unchanged sentences

AND SUBSIDIARIES

SCHEDULE II— CONDENSED FINANCIAL INFORMATION

Condensed Financial Information

Of Registrant (Parent Company Only)

5 unchanged sentences

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

Business Combination

Business Combinations

Effective November 1, 2022, Ambac completed the acquisition of 85 % of All Trans Risk Solutions, LLC ("All Trans") and 80 % of Capacity Marine Corporation ("Capacity Marine") for a combined purchase price of $ 26 in cash.

All Trans is a full service managing general underwriter specializing in commercial automobile insurance for specific "for-hire" auto classes, and (iii) Capacity Marine is a wholesale retail brokerage and reinsurance intermediary specializing in marine and international risk.

Based on the acquisition date and the complexity of the underlying valuation work, certain amounts included in the Company's Consolidated Financial Statements may be provisional and thus subject to further adjustments within the permitted measurement period as defined by ASC 805.

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 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.

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

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

1 unchanged sentence

AFG and its subsidiaries also file separate or combined income tax returns in various states, local and foreign jurisdictions.

As of December 31, 2021, Ambac had consolidated U.S.

federal loss carryforwards ("NOLs") totaling approximately $ 3,744 , which, if not utilized, will begin expiring in 2029, and will fully expire in 2041.

As of December 31, 2022, the Company has (i) $ 3,454 of NOLs, which if not utilized will begin expiring in 2030, and will fully expire in 2043, and (ii) $ 314 of interest expense tax deduction carryover, which has an indefinite carryforward period but is limited in any particular year based on certain provisions.

The NOLs allocated to AFG as of December 31, 2022, were $ 1,630 , and begin expiring in 2030 and fully expire in 2043.

3 unchanged sentences

AND SUBSIDIARIES

SCHEDULE IV— REINSURANCE

Years Ended December 31, 2021, 2020 and 2019

Insurance Premiums Written

($ in millions)

Ceded to Other

Percentage of

Year Ended December 31, 2021 $ 2 $ 35 $ — $ ( 33 ) — %

Year Ended December 31, 2020 ( 1 ) ( 1 ) $ — — — %

Year Ended December 31, 2019 ( 28 ) 31 — ( 60 ) — %

Supplementary Insurance Information

(Dollar Amounts in Millions)

Segment Deferred Acquisition Costs Loss and Loss Adjustment Expense Reserves Unearned Premium Earned Premiums Net Investment Income Loss and Loss Adjustment Expenses (Benefit) Amortization of Deferred Amortization Costs Other Operating Expenses Net Written Premiums

Legacy Financial Guarantee Insurance $ — $ 715 $ 287 $ 42 $ 12 $ ( 406 ) $ — $ 104 $ ( 6 )

Specialty Property and Casualty Insurance 3 90 85 14 2 9 3 13 29

Legacy Financial Guarantee Insurance $ — $ 1,538 $ 385 46 $ 138 $ ( 89 ) $ — $ 78 $ ( 35 )

Specialty Property and Casualty Insurance — 32 10 1 1 — — 9 3

See the Report of Independent Registered Public Accounting Firm.

| Ambac Financial Group, Inc.

19 unchanged sentences

IGLESIAS* Director February 28, 2023

JAMES PRIEUR* Director February 24, 2022

/S/ JOAN LAMM-TENNANT* Director February 28, 2023

5 unchanged sentences

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