What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2025-08-07 compared with 2025-05-12 · 257 added, 170 removed, 370 unchanged (54% of the section changed)

32 unchanged sentences

Ambac Financial Group, Inc.

First Quarter 2025 Form 10-Q

Table f Contents

AFG's subsidiaries/businesses are divided into two reportable segments with results for the three months ended March 31, 2025, and 2024, as follows:

Three Months Ended March 31, 2025 Three Months Ended March 31, 2024

Second Quarter 2025 Form 10-Q

Table o f Contents

AFG's subsidiaries/businesses are divided into two reportable segments with results for the three and six months ended June 30, 2025, and 2024, as follows:

Three Months Ended June 30, 2025 Three Months Ended June 30, 2024

($ in thousands) Specialty Property and Casualty Insurance Insurance

1 unchanged sentence

Distribution Corporate & Other Consoli-dated

Gross premiums written $ 96,247 96,247 $ 111,206 111,206

Net premiums written 15,207 15,207 32,289 32,289

Premiums placed $ 249,912 $ 249,912 $ 53,418 $ 53,418

Total revenues 21,390 33,041 $ 526 54,957 31,828 13,306 $ 5,904 51,037

Total expenses 20,770 43,214 13,949 77,931 32,925 12,049 20,812 65,786

Pretax income (loss) 620 (10,173) (13,423) (22,974) (1,097) 1,257 (14,908) (14,749)

620 4,698 (12,983) (7,663) (1,097) 2,404 (14,441) (13,135)

Adjusted EBITDA 681 4,580 (7,771) (2,508) (1,023) 2,404 (1,562) (182)

Net income (loss) attributable to Ambac shareholders 428 $ (7,738) $ (13,240) (20,548) (1,070) $ 1,035 $ (14,896) (14,932)

EBITDA attributable to Ambac shareholders 620 2,513 (12,983) (9,848) (1,097) 1,974 (14,441) (13,565)

Adjusted EBITDA attributable to Ambac common stockholders $ 681 2,519 $ (7,771) (4,569) $ (1,023) 1,974 $ (1,562) (612)

Six Months Ended June 30, 2025 Six Months Ended June 30, 2024

Specialty Property and Casualty Insurance Insurance

Distribution Corporate & Other Consoli-dated Specialty Property and Casualty Insurance Insurance

Distribution Corporate & Other Consoli-dated

Premiums placed $ 480,518 $ 480,518 $ 143,514 $ 143,514

Gross premiums written $ 183,162 $ 183,162 $ 207,628 $ 207,628

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Adjusted EBITDA attributable to Ambac common stockholders $ 2,270 $ 9,611 $ (17,759) $ (5,876) $ 849 $ 6,176 $ (7,289) $ (228)

On June 4, 2024, AFG entered into a stock purchase agreement with American Acorn Corporation (the “Buyer”), a Delaware corporation owned by funds managed by Oaktree Capital Management, L.P., pursuant to which and subject to the conditions set forth therein, AFG will sell all of the issued and outstanding shares of common stock of AAC, a wholly-owned subsidiary of AFG, to Buyer for aggregate consideration of $420 in cash (the "Sale").

The terms of the Sale as contemplated by the stock purchase agreement provide that, at the closing of the Sale (the “Closing”), Buyer will acquire complete common equity ownership of AAC and all of its wholly owned subsidiaries, including Ambac UK.

In connection with and pursuant to the stock purchase agreement, AFG has agreed to issue to Buyer a warrant exercisable for a number of shares of common stock, par value $0.01, of AFG representing 9.9% of the fully diluted shares of AFG’s common stock as of March 31, 2024, pro forma for the issuance of the warrant The warrant will have an exercise price per share of $18.50 with a six and a half-year term from the date of issuance and will be immediately exercisable.

On June 4, 2024, AFG entered into a stock purchase agreement (the "Purchase Agreement") with American Acorn Corporation (the “Buyer”), a Delaware corporation owned by funds managed by Oaktree Capital Management, L.P., pursuant to which and subject to the conditions set forth therein, AFG will sell all of the issued and outstanding shares of common stock of AAC, a wholly-owned subsidiary of AFG, to Buyer for aggregate consideration of $420 in cash (the "Sale").

The terms of the Sale as contemplated by the Purchase Agreement provide that, at the closing of the Sale (the “Closing”), Buyer will acquire complete common equity ownership of AAC and all of its wholly owned subsidiaries, including Ambac Assurance UK Limited ("Ambac UK").

In connection with and pursuant to the Purchase Agreement, AFG has agreed to issue to Buyer a warrant exercisable for a number of shares of common stock, par value $0.01, of AFG representing 9.9% of the fully diluted shares of AFG’s common stock as of March 31, 2024, pro forma for the issuance of the warrant.

The warrant will have an exercise price per share of $18.50 with a six and a half-year term from the date of issuance and will be immediately exercisable.

Payment of the exercise price may be settled, at AFG’s option, by way of a cash exercise or by net share settlement.

The Buyer continues to pursue the final outstanding regulatory approval for the Sale, which would be received only after a hearing at or prior to which third parties would have an opportunity to object to the Sale.

As a result, consistent with the terms of the purchase agreement, the term of the purchase agreement has been automatically extended from April 4, 2025, to July 3, 2025.

On July 3, 2025, the parties to the Purchase Agreement entered into a letter agreement pursuant

to which, among other things, the parties entered into a new agreement with respect to the warrant and amended certain terms of the Investor Rights Agreement (as defined in the Purchase Agreement).

The Buyer continues to pursue the final outstanding regulatory approval for the Sale, which would be received only after a hearing, currently scheduled for September 3, 2025, at or prior to which third parties would have an opportunity to object to the Sale.

On or prior to August 4, 2025, representatives of certain holders of surplus notes issued by AAC filed motions to intervene in the proceedings.

On July 28, 2025, the OCI staff published a memorandum including its recommendation that the Sale be approved.

On July 3, 2025, AFG and the Buyer entered into an agreement to, among other matters, extend the term of the Purchase Agreement from July 3, 2025 to December 31, 2025 (subject to an automatic 90-day extension if regulatory approvals have not been obtained), to facilitate the timing of the hearing.

The Buyer received approval for the change in control of Ambac UK from the U.K.

Prudential Regulation Authority, which expires on October 24, 2025.

Refer to Note 5.

Discontinued Operation of the Notes to Consolidated Financial Statements in the Annual Report on Form 10-K for the year ended December 31, 2024, for further details on the pending sale of AAC.

The anticipated loss on sale included within Net income (loss) from discontinued operations before tax on the Consolidated Statement of Comprehensive Income (Loss) for the three months ended March 31, 2025 and year ended December 31, 2024, are summarized is $(14,496) and $(570,145), respectively.

Ambac Financial Group, Inc.

Second Quarter 2025 Form 10-Q

Table o f Contents

The anticipated loss on sale included within Net income (loss) from discontinued operations before tax on the Consolidated Statement of Comprehensive Income (Loss) for the six months ended June 30, 2025, and year ended December 31, 2024, was (67,456) and $(570,145), respectively.

Discontinued Operation in this report on Form 10-Q for further information.

At Closing, net income will be impacted by reclassification from Accumulated Other Comprehensive Income (Loss) of net unrealized gains (losses) on available-for-sale investment securities, cumulative foreign currency translation adjustments and cumulative credit risk changes of fair value option liabilities attributable to AAC and subsidiaries, which at March 31, 2025, amounted to $(132,778).

SEC Final Rules on Climate Related Information

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Ambac is reviewing the Final Rule and is currently assessing our related compliance obligations and other effects on our operations.

Ambac Financial Group, Inc.

First Quarter 2025 Form 10-Q

Table f Contents

CRITICAL ACCOUNTING ESTIMATES

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A summary of our financial results is shown below:

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2025 2024 2025 2024

Gross premiums written $ 96,247 $ 111,206 $ 183,162 $ 207,628

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Net premiums earned $ 16,203 $ 27,054 $ 31,881 $ 52,633

Commission income 36,771 17,729

Commissions 30,322 13,221 67,093 30,950

Servicing and other fees 4,472 — 9,436 —

Program fees 3,497 3,328 7,149 5,895

Net investment income 2,815 3,640

Other revenue (1,124) 36

Investment income 2,609 3,763 5,424 7,403

Other (2,146) 3,671 (3,270) 3,707

Losses and loss adjustment expenses 10,978 23,024 21,474 42,379

Policy acquisition costs 3,699 5,399 7,540 9,823

Commission expense 10,365 9,822

General and administrative expenses 38,531 17,575

Commissions 7,403 7,888 17,768 17,710

General and administrative 40,540 27,861 79,071 45,436

Intangible amortization and depreciation 9,741 1,614 18,917 3,228

Interest expense 5,454 —

Interest 5,570 — 11,024 —

Total expenses 77,931 65,786 155,794 118,576

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Net (gain) loss attributable to noncontrolling interest 254 (213) (1,400) (914)

Net income (loss) attributable to Ambac shareholders $ (46,391) $ 20,070

Ambac's results for the three months ended March 31, 2025 compared to the three months ended March 31, 2024 were impacted by the following:

Net income (loss) attributable to shareholders $ (72,699) $ (750) $ (119,090) $ 19,320

Ambac's results for the three and six months ended June 30, 2025, compared to the three and six months ended June 30, 2024 were impacted by the following:

• Ambac's acquisition of its interests in Beat on August 1, 2024.

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Background and Business Description and Note 5.

Discontinued Operation of the Notes to Consolidated Financial Statements in the Annual Report on Form 10-K for the year ended December

31, 2024 and Note 3.

Discontinued Operations to the Unaudited Consolidated Financial Statements in this Quarterly Report on Form 10-Q for further details on the pending sale and results for the three months ended March 31, 2025 and 2024.

The following paragraphs describe the consolidated results of continuing operations of Ambac and its subsidiaries for the three months ended March 31, 2025 and 2024, respectively.

Discontinued Operation of the Notes to Consolidated Financial Statements in the Annual Report on Form 10-K for the year ended December 31, 2024, and Note 3.

Ambac Financial Group, Inc.

Second Quarter 2025 Form 10-Q

Table o f Contents

The following paragraphs describe the consolidated results of continuing operations of Ambac and its subsidiaries for the three and six months ended June 30, 2025, and 2024, respectively.

Gross Premiums Written.

Gross premiums written decreased $11,185 for the three months ended March 31, 2025, compared to the same period in the prior year.

Gross premiums written decreased $14,959 and $24,466 for the three and six months ended June 30, 2025, compared to the same period in the prior year.

The reduction is primarily driven by the non-renewal of certain programs, including the non-renewal of an assumed non-standard personal auto program, partially offset by growth in existing programs and the addition of new programs.

Net Premiums Written.

Net premiums written decreased $8,243 for the three months ended March 31, 2025, compared to the same period in the prior year.

Net premiums written decreased $17,082 and $25,325 for the three and six months ended June 30, 2025, compared to the same period in the prior year.

The reduction is primarily driven by the non-renewal of certain programs, including an assumed non-standard personal auto program, partially offset by growth in existing programs and the addition of new programs.

Net Premiums Earned.

Net premiums earned decreased $9,901 for the three months ended March 31, 2025, compared to the same period in the prior year.

Net premiums earned decreased $10,851 and $20,752 for the three and six months ended June 30, 2025, compared to the same period in the prior year.

The decrease was primarily driven by the non-renewal of certain programs, including an assumed non-standard personal auto program, partially offset by growth in existing programs and the addition of new programs.

Commission Income and Commission Expense.

Commission income for the three months ended March 31, 2025, was $36,771 compared to $17,729 for the three months ended March 31, 2024.

Commission income included profit commissions (based on underwriting performance) of $4,691 for the three months ended March 31, 2025 and $1,182 for the three months ended March 31, 2024 , respectively.

The incr ease was primarily driven by the inclusion of profit commissions earned by Beat following the acquisition in August 2024.

For the three months ended March 31, 2025, commission expense of $10,365 compared to $9,822 in three months ended March 31, 2024, representing approximately 45% and 72% of commission income in each respective period.

Commission income for the three and six months ended June 30, 2025, was $30,322 and $67,093 compared to $13,221 and $30,950 for the three and six months ended June 30, 2024.

Commission income included profit commissions (based on underwriting performance) of $2,266 and $6,957 for the three and six months ended June 30, 2025, and $1,141 $2,323 and for the three and six months ended June 30, 2024, respectively.

The increase was primarily driven by the inclusion of profit commissions earned by Beat following the acquisition in August 2024.

For the three and six months ended June 30, 2025, commission expense of $7,403 and $17,768 compared to $7,888 and $17,710 in three and six months ended June 30, 2024, representing approximately 43% and 74% of commission income in each respective period.

The decrease in commission expense relative to commission income in 2025 relative to 2024 is primarily a result of the acquisition of Beat.

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Program Fees.

Program fee revenues were $3,652 and $2,567 for the three months ended March 31, 2025 and 2024,

Ambac Financial Group, Inc.

First Quarter 2025 Form 10-Q

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respectively.

Program fee revenues represent the recognition of ceding commissions in excess of direct acquisition costs received from reinsurers and minimum fees received from MGA/Us until related programs reach certain levels of premium ceded.

Program fee revenues were $3,497 and $3,328 for the three and six months ended June 30, 2025, and 2024, respectively.

Program fee revenues represent the recognition of ceding commissions in excess of direct acquisition costs received from reinsurers and minimum fees received from MGA/Us until

related programs reach certain levels of premium ceded.

Program fees are charged as a percentage of premiums ceded to reinsurers as a component of total ceding commissions.

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Investments to the Unaudited Consolidated Financial Statements, included in Part I, Item 1 in this Form 10-Q.

Net investment income decreased $825 for the three months ended March 31, 2025 compared to the prior year period due to lower Corporate short-term investment balances resulting primarily from the acquisition of Beat, partially offset by higher investment income on short-term investments at the Cirrata companies with the addition of Beat, and growth of the Everspan investment portfolio.

Net investment income decreased $1,154 and $1,979 for the three and six months ended June 30, 2025 compared to the prior year periods due to lower Corporate short-term investment balances resulting primarily from the acquisition of Beat, partially offset by higher investment income on short-term investments at the Cirrata companies with the addition of Beat, and growth of the Everspan investment portfolio.

Servicing and Other Fees.

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Other Revenues.

Other revenues for the three months ended March 31, 2025 of $(1,124) and 2024 of $36 includes (i) net investment gains (losses) on securities sold or called;

Other revenues includes (i) net investment gains (losses) on securities sold or called;

(ii) investment impairment charges;

(iii) foreign exchange gains (losses) from the Insurance Distribution segment;

(iv) net gains on derivative contracts for the three months periods ended March 31, 2025, resulting from the change in fair value of FX forward contracts used to manage currency risk within the Insurance Distribution segment and (v) fair value changes on warrants to purchase equity of certain development stage companies held by AFG.

The net loss for the three months ended March 31, 2025 was driven primarily by foreign exchange losses on the non-functional currency operations of Beat.

(iv) net gains on derivative contracts resulting from the change in fair value of FX forward contracts used to manage currency risk within the Insurance Distribution segment and (v) fair value changes on warrants to purchas e equity of certain development stage companies held by AFG.

The net loss for the three and six months ended June 30, 2025, of $(2,146) and $(3,270) was driven primarily by foreign exchange losses on non-functional currency operations.

Net gains for the three and six months ended June 30, 2025 w ere driven by gains from the conversion and early settlement of certain convertible notes, including make-whole payments, partially offset by a write-down in carrying value on an investment in preferred securities that are carried at cost less impairments and net foreign exchange losses.

Losses and Loss Adjustment Expenses (Benefit).

Loss and loss expenses incurred decreased $8,859 for the three months ended March 31, 2025, compared to the same period in the prior year.

Loss and loss adjustment expenses incurred decreased $12,046 and $20,905 for the three and six months ended June 30, 2025, compared to the same period in the prior year.

The lower loss and loss adjustment expenses is primarily due to the shift in mix of business driven by the non-renewal of certain programs, including an assumed non-standard personal auto program in which Everspan was a reinsurer and certain commercial auto programs, partially offset by growth in existing programs and the addition of new programs.

Ambac Financial Group, Inc.

Second Quarter 2025 Form 10-Q

Table o f Contents

General and Administrative Expenses (G&A).

The following table provides a summary of G&A expenses for the periods presented:

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2025 2024 2025 2024

Compensation $ 22,782 $ 11,083 $ 45,669 $ 21,630

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Total G&A expenses $ 40,539 $ 27,875 $ 79,070 $ 45,562

The increase in Compensation G&A expenses during the three months ended March 31, 2025, was due to higher compensation costs from a net increase in staffing from the development and growth of the Specialty Property & Casualty Insurance and Insurance Distribution segments, including the effect of Insurance Distribution acquisitions;

offset by lower current year period expenses for severance and incentive compensation.

Variances in Non-Compensation G&A expenses for the three months ended March 31, 2025, as compared to the three months ended March 31, 2024, were driven by integration expenses related to the acquisition of Beat, higher Corporate segment expenses related to M&A transactions and audit fees.

The increase in Compensation G&A expenses during the three and six months ended June 30, 2025, was due to higher compensation costs due to Insurance Distribution acquisitions;

offset by lower current year period expenses for performance incentive compensation.

Non-Compensation G&A expenses for the three and six months ended June 30, 2025, as compared to the three and six months ended June 30, 2024, were driven up by integration expenses related to the acquisition of Beat offset by lower Corporate segment expenses related to M&A transactions.

Cost related to restructuring due to the sale of AAC for the three and six months ended June 30, 2025 were $2,918 and $4,737, respectively, and for the three and six months ended June 30, 2024 were $5,203 and $5,337, respectively.

Intangible Amortization and Depreciation.

Intangible amortization for the three months ended March 31, 2025 and 2024, was $8,763 and $1,139, respectively.

The increase in other intangible amortization for the three months ended March 31, 2025 of $7,624 related to the Beat acquisition.

Intangible amortization for the three and six months ended June 30, 2025, was $9,212 and $17,975 compared to $967 and $2,278 in the comparable prior year periods.

The increase in other intangible amortization for the three and six months ended June 30, 2025 related to the Beat acquisition.

Interest Expense.

Interest expense for the three months ended March 31, 2025 was $5,454, related to the short-term debt used in funding the Beat acquisition, entered into during the third quarter of 2024.

The company had no debt or interest expenses during the three months ended March 31, 2024.

Interest expense for the three and six months ended June 30, 2025 was $5,570 and $11,024, related to the short-term debt used in funding the Beat acquisition, entered into during the third quarter of 2024.

The company had no debt or interest expenses during the three and six months ended June 30, 2024.

Provision for Income Taxes.

The provision for income taxes primarily relates to international operations and was $(617) for the three months ended March 31, 2025, compared to $130 for the three months ended March 31, 2024, a decrease of $747 for the quarter.

Ambac Financial Group, Inc.

First Quarter 2025 Form 10-Q

Table f Contents

The provision (benefit) for income taxes primarily relates to international operations and was $(2,172) and $(2,789) for the three and six months ended June 30, 2025, compared to $(30) and $100 for the three and six months ended June 30, 2024.

Results of Operations by Segment

Specialty Property and Casualty Insurance

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2025 2024 2025 2024

Gross premiums written $ 96,247 $ 111,206 $ 183,162 $ 207,628

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Retention Ratio (1)

15.8% 29.0% 18.1% 28.2%

Loss and LAE Ratio (2)

67.8% 85.1% 67.4% 80.5%

Expense Ratio (3)

38.9% 24.3% 37.1% 23.5%

Combined Ratio (4)

106.7% 109.4% 104.5% 104.0%

Ambac's stockholders equity (5)

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The Specialty Property and Casualty Insurance segment has grown significantly since underwriting its first program in May 2021.

Twenty-six programs were authorized to issue policies as of March 31, 2025, including Everspan participating on certain programs as a reinsurer.

Twenty-four programs were authorized to issue policies as of June 30, 2025, including Everspan participating on certain programs as a reinsurer.

As part of Everspan's focus on improving profitability and capital utilization, Everspan non-renewed certain programs, including a commercial auto program and an assumed non-standard personal auto program in the latter half of 2024, and a commercial auto and a general liability program in 1Q2025.

The non-renewals resulted in a reduction in gross and net written premiums, net premiums earned, losses and loss expenses incurred, and a shift in Everspan's retention ratio in the three months ended March 31, 2025, compared to March 31, 2024.

The non-renewals resulted in a reduction in gross and net written premiums, net premiums earned, losses and loss expenses incurred, and a shift in Everspan's retention ratio in the three and six months ended June 30, 2025, compared to three and six months ended June 30, 2024.

Partially offsetting these non-renewals are the continued growth in existing programs and addition of new programs.

EBITDA and pre-tax income has decreased in the three months ended March 31, 2025 compared to March 31, 2024, primarily due to the reduction in earned premium related to the non-renewal of these programs.

Consistent with its strategy to generate sustainable and profitable, long-term specialty property and casualty program insurance business with a focus on diverse classes of risks, Everspan may source programs as a reinsurer.

EBITDA and pre-tax income increased in the three and six months ended June 30, 2025

Ambac Financial Group, Inc.

Second Quarter 2025 Form 10-Q

Table o f Contents

compared to June 30, 2024, primarily resulting from lower losses incurred due the non-renewal of certain programs in 2025 and lower loss reserve strengthening in 2025 versus 2024.

This is partially offset by a reduction in earned premium related to the non-renewal of these programs.

Accessing programs as a reinsurer provides Everspan the ability to diversify its risk profile (temporarily or long-term), efficiently manage its exposure limits and underwrite programs in a cost efficient manner, amongst other benefits.

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The change in the loss ratio was driven by the shift in mix of business.

The three months ended March 31, 2025, contained minimal prior period loss development of 1.1% whereas the three months ended March 31, 2024, contained prior period development of 4.4%, which was driven by a personal nonstandard auto program (through assumed reinsurance) which has since been non-renewed.

Loss and loss expenses incurred, and Everspans's associated Loss and LAE ratio, may be adversely impacted by economic and social inflation.

The three and six months ended June 30, 2025, contained minimal prior years loss strengthening of 1.0% and 1.0%, respectively driven primarily by excess liability loss experience, whereas the three and six months ended June 30, 2024, contained prior years loss strengthening of 6.9% and 5.7%, respectively, which was primarily driven by commercial auto loss experience on programs which have since been non-renewed.

Loss and loss expenses incurred, and Everspan's associated Loss and LAE ratio, may be adversely impacted by economic and social inflation.

The impact of inflation on ultimate loss reserves is difficult to estimate, particularly in light of recent disruptions to the judicial system, supply chains and labor markets.

In addition, going forward, we may not be able to offset the impact of inflation on our loss costs with sufficient price increases.

The estimation of loss reserves may also be more difficult during extreme events, such as a pandemic, or during the persistence of volatile or uncertain economic conditions, due to, amongst other reasons, unexpected changes in behavior of judicial decisions, claimants and policyholders, including fraudulent reporting of exposures and/or losses.

Going forward, we may not be able to offset the impact of inflation on our loss costs with sufficient price increases.

The estimation of loss reserves may also be more difficult during extreme events, such as a pandemic, or during the persistence of volatile or uncertain economic conditions, due to, amongst other reasons, unexpected changes in behavior of judiciaries, claimants and policyholders, including fraudulent reporting of exposures and/or losses.

Due to the inherent uncertainty underlying loss reserve estimates, the final resolution of the estimated liability for loss and loss adjustment expenses will likely be higher or lower than the related loss reserves at the reporting date.

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These additional liabilities or increases in estimates, or a range of either, could vary significantly from period to period.

In addition to the decrease in the Loss and LAE ratio for the three months ended March 31, 2025, compared to March 31, 2024, there was a decrease in the benefit to acquisition costs resulting from sliding scale commission arrangements with program partners.

Such benefit reduced the Specialty Property and Casualty Insurance segments expense ratio by —% and (6.1)% for the three months ended March 31, 2025 and 2024, respectively.

In addition to the decrease in the Loss and LAE ratio for the three and six months ended June 30, 2025, compared to the three and six months ended June 30, 2024, there was a decrease in the benefit to acquisition costs resulting from sliding scale commission arrangements with program partners.

Such benefit reduced the Specialty Property and Casualty Insurance segments expense ratio by 2.6% and 5.6% for the three months ended June 30, 2025 and 2024, respectively and 1.3% and 5.9% for the six months ended June 30, 2025 and 2024, respectively.

Certain Everspan programs were structured to include sliding scale commission arrangements within a loss ratio range.

These sliding scale arrangements help mitigate losses, protect underwriting results and limit earnings volatility.

General and administrative costs were higher for the three months ended March 31, 2025, relative to the three months ended March 31, 2024, due to impact of changes in short term incentive accruals and performance on long term incentive compensation

Ambac Financial Group, Inc.

First Quarter 2025 Form 10-Q

Table f Contents

General and administrative costs were higher for the three and six months ended June 30, 2025, relative to the three and six months ended June 30, 2024, due to the mix and net increase of headcount movement, the impact of changes to premium tax accruals ($0.9 million for the three and six months ended June 30, 2026) and legal expenses partially offset by reduced performance on long term incentive compensation.

Insurance Distribution

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2025 2024 2025 2024

Premiums placed $ 249,912 $ 53,418 $ 480,518 $ 143,514

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In addition, we are eligible to receive profit sharing contingent commissions on certain programs based on the underwriting results of the policies placed with carriers, which may cause some variability in revenue and earnings.

The Insurance Distribution segment placed premiums for its carriers of approximately $230,606 for the three months ended March 31, 2025, up $140,510 or 156%, respectively, as compared to the three months ended March 31, 2024.

Insurance Distribution pre-tax loss for the three and six months ended June 30, 2025, was $(10,173) and $(12,416) compared to $1,257 and $5,269 for the three and six months ended June 30, 2024.

The decrease was primarily driven by an increase in intangible amortization and interest expense related to the Beat acquisition.

During the three months and six months ended June 30, 2025, Insurance Distribution results were negatively impacted by foreign exchange losses, intangible amortization and interest expense related to the Beat acquisition.

Post the sale of AAC, which is expected to close in the third quarter of 2025, the short-term debt used to partially finance the Beat acquisition will be repaid and the associated interest expense will no longer be incurred.

The Insurance Distribution segment placed premiums for its carriers are shown below:

Ambac Financial Group, Inc.

Second Quarter 2025 Form 10-Q

Table o f Contents

Three Months Ended June 30, Six Months Ended June 30,

2025 2024 2025 2024

Premiums Placed $ 249,912 $ 53,418 $ 480,518 $ 143,514

Increase over prior period $ 196,494 $ 337,004

As a percent 367.8 % 234.8 %

Higher premiums placed were mostly driven by the acquisition of Beat effective July 31, 2024.

The increase in premiums placed and changes to the mix of business written led to the growth in commission income and commission expense of 107% and 6%, respectively.

Business underwritten within our Insurance Distribution business can be seasonal which may result in revenue and earnings concentrations in the first half of the calendar year.

For the three months ended June 30, 2025, the increase in premiums placed and changes to the mix of business written led to the growth in commission income and commission expense of 129% and (6)%, respectively.

Business underwritten within our Insurance Distribution business can be seasonal which may result in revenue and earnings concentrations from period to period.

As the Insurance Distribution business grows, we make additional acquisitions and launch additional de novo underwriting units, revenue and earnings concentrations may increase or may shift, perhaps meaningfully.

G&A expenses for the three months ended March 31, 2025, increased $15,629 as a result of the Beat acquisition in the third quarter of 2024.

G&A expenses for the three and six months ended June 30, 2025, are $20,940 and $39,489 an increase over three and six months ended June 30, 2024 of 17,932 and $33,596, respectively, as a result of the Beat acquisition in the third quarter of 2024.

Corporate consists of our holding company and shared services operations ("Corporate").

Corporate provides financial, technological and human resources to Ambac's two segments and is responsible for the function of AFG as a publicly traded company.

Corporate revenues totaled $587 and $2,145 for the three months ended March 31, 2025 and 2024, respectively.

Corporate revenues totaled $526 and $5,904 for the three months ended June 30, 2025 and 2024, respectively and $1,113 and $8,048 for the six months ended June 30, 2025 and 2024, respectively.

Corporate revenue is mostly generated from investment of AFG's liquid resources and investment results from its previously made strategic investments, including certain minority investments in MGA/Us and an insurtech fund.

Investment revenues comprised of net investment income and net investment gains (losses), including impairments were $597 and $2,192 in 2025 and 2024, respectively.

The decline from 2024 to 2025 is attributable to the use of liquid resources for the acquisition of Beat.

Investment revenues comprised of net investment income and net investment gains (losses), including impairments were $521 and $6,757 for the three months ended June 30, 2025 and 2024, respectively and $1,118 and $8,949 for the six months ended June 30, 2025 and 2024, respectively.

The declines from 2024 to 2025 are attributable to the use of liquid resources for the acquisition of Beat and net investment gains of $4,536 in the three and six months ended June 30, 2024 related to certain of AFG's strategic investments in MGA/Us..

As a result of the Company reporting the results of operations of AAC as discontinued operations, certain corporate costs charged to AAC have been reported in Net income from continuing operations and included in Corporate expenses for all years presented.

Corporate expenses were $14,650 and 10,712 for the three months ended March 31, 2025 and 2024, respectively, up $3,777.

Corporate expenses for the three months ended March 31, 2025 and 2024, included compensation expenses of $5,844 and $6,490 and non-compensation $8,806 and 4,222, respectively.

The increase in non-compensation corporate expenses is mainly related to higher expenses related to corporate development and audit fees.

Corporate expenses were $13,506 and $20,351 for the three months ended June 30, 2025 and 2024, respectively and $28,901 and $32,025 for the six months ended June 30, 2025 and

Corporate expenses were lower for the three and six months ended June 30, 2025 compared to three and six months ended June 30, 2024 mainly due to lower expenses related to corporate development and the sale of AAC.

LIQUIDITY AND CAPITAL RESOURCES

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AFG is organized as a legal entity separate and distinct from its operating subsidiaries.

AFG's liquidity is primarily dependent on its net assets, excluding the operating subsidiaries that it owns, totaling $104,431 as of March 31, 2025, and secondarily on investment income, distributions, tax and expense sharing payments from its operating subsidiaries and third party capital (e.g.

AFG's liquidity is primarily dependent on its net assets, excluding the operating subsidiaries that it owns, totaling $84,922 as of June 30, 2025, and secondarily on investment income, distributions, tax and expense sharing payments from its operating subsidiaries and third party capital (e.g.

from credit facilities and equity issuance).

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Total $ 84,922 $ 119,214

(1) Includes strategic minority investments in insurance services businesses of $20,618 at March 31, 2025 and December 31, 2024..

The decrease in AFG net assets, excluding its equity investments in subsidiaries, during the first quarter of 2025 was driven primarily by net cash outflows from operating and interest expenses in addition to treasury stock purchases, partially offset by interest income and net distributions received from subsidiaries.

(1) Includes strategic minority investments in insurance services businesses of $20,618 at June 30, 2025, and December 31, 2024..

The decrease in AFG net assets, excluding its equity investments in subsidiaries, during the first six months of 2025 was driven primarily by net cash outflows from operating and interest expenses in addition to treasury stock purchases, partially offset by interest income and net distributions received from subsidiaries.

• Effective July 31, 2024, AFG closed the acquisition of a 60% controlling interest in Beat.

In connection with the acquisition, Cirrata incurred $150,000 of debt maturing in

Ambac Financial Group, Inc.

First Quarter 2025 Form 10-Q

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364 days funded by a global bank (the "Credit Facility").

In connection with the acquisition, Cirrata incurred $150,000 of debt maturing in 364 days funded by a global bank (the "Credit Facility").

Repayment of debt under the Credit Facility is guaranteed by AFG.

AFG is required to repay this debt upon the closing of the sale of AAC or otherwise refinance such short-term debt with longer-term debt.

AFG may seek to extend the term of the Credit Facility as a precautionary measure in the event there were delays in the closing of the sale of AAC.

On June 10, 2025, AFG entered into an agreement to extend the maturity date of the Credit Facility from July 31, 2025, to the earlier of (a) December 31, 2025, and (b) the date that is the three-month anniversary of the termination of the Purchase Agreement.

• AFG's acquisition of Beat was partially funded by AAC's co-investment in the amount of $62,000.

Upon the close of the AAC sale, AFG will purchase AAC's co-investment at a price resulting in a 7.5% rate of return per annum to AAC.

• If AFG were to not sell AAC, its ability to receive dividends from AAC and the timing of any such potential dividends would depend on regulatory approval and the satisfaction of certain obligations senior to AFG's equity interest (e.g.

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Discontinued Operation in the Notes to the Consolidated Financial Statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2024, AFG will receive $420,000 of proceeds at closing less applicable legal, advisory and other expenses incurred in connection with the Sale.

Ambac Financial Group, Inc.

Second Quarter 2025 Form 10-Q

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• Everspan's ability to make future dividend payments will mostly depend on its future profitability relative to its capital needs to support growth.

Everspan is not expected to pay dividends in 2025.

Everspan does make tax payments to AFG in accordance with a Tax Sharing Agreement.

For the three months ended March 31, 2025, Everspan paid $1,736 of tax payments to AFG.

Everspan makes tax payments to AFG in accordance with a Tax Sharing Agreement.

For the six months ended June 30, 2025, Everspan paid $1,744 in tax payments to AFG.

• Cirrata does not have any regulatory restrictions on its ability to make distributions.

AFG received distributions from Cirrata of $3,118 and $2,850 during the three months ended March 31, 2025 and 2024, respectively.

AFG received distributions from Cirrata of $3,118 and $4,650 during the six months ended June 30, 2025 and 2024, respectively.

AFG's principal uses of liquidity are:

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In the opinion of the Company’s management the net assets and expected funding sources of AFG are currently sufficient to meet AFG’s current liquidity requirements.

However, events, opportunities, acquisitions, the exercise of puts and calls, the need to refinance outstanding debt, or other circumstances could

require AFG to seek additional capital (e.g.

However, events, opportunities, acquisitions, the exercise of puts and calls, the need to refinance outstanding debt, or other circumstances could require AFG to seek additional capital (e.g.

through the issuance of debt, equity or hybrid securities).

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Ambac maintains cash and investment accounts, including premium trust accounts, at depository institutions in amounts in excess of the limits insured by the FDIC and in countries other than the U.S.

Ambac's cash balances held at banks were $51,660 as of March 31, 2025, including cash of Ambac's insurance distribution subsidiaries held in regional banks of $37,538 as of March 31, 2025.

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First Quarter 2025 Form 10-Q

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Ambac's cash balances held at banks were $36,407 as of June 30, 2025, including cash of Ambac's insurance distribution subsidiaries held in regional banks of $35,085 as of June 30, 2025.

Consolidated Cash Flow Statement Discussion

The following table summarizes the net cash flows for the periods presented.

Three Months Ended March 31, 2025 2024

Six Months Ended June 30, 2025 2024

Cash provided by (used in):

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Operating Activities for Continuing Operations

Operating cash flows during the three months ended March 31, 2025 and 2024, was $(12,612) and $7,071, respectively.

Operating cash flows for the three months ended March 31, 2025 were adversely impacted by G&A expenses paid and interest on short-term borrowing, partially offset by cash collections from both the specialty P&C and insurance distribution businesses.

Operating cash flows during the six months ended June 30, 2025 and 2024, was $(10,463) and $27,481, respectively.

Operating cash flows for the six months ended June 30, 2025, were adversely impacted by G&A expenses paid and interest on short-term borrowing, an increase in reinsurance recoverable, partially offset by cash collections from both the specialty P&C and insurance distribution businesses.

Future operating flows will primarily be impacted by net premium collections, commission and fee income and investment income receipts, G&A expenses, commission expenses, net claim and loss expense payments and interest payments on debt.

Ambac Financial Group, Inc.

Second Quarter 2025 Form 10-Q

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Investing Activities for Continuing Operations

Investing activities for the three months ended March 31, 2025 were primarily driven by changes in short-term investments.

Investing activities for the six months ended June 30, 2025 were primarily driven by changes in short-term investments.

Future investing cash flows will be primarily dependent on the sale of AAC, potential acquisitions, the exercise of puts and calls related to non-controlling interests and the purchase and sale of securities.

Financing Activities for Continuing Operations

Financing activities for the three months ended March 31, 2025, included purchases of common stock held in treasury of $3,122.

Future financing cash flows will be primarily impacted by paydowns and maturities of debt, new borrowings, capital management activity and distribution to noncontrolling interests.

Financing activities for the six months ended June 30, 2025, included purchases of common stock of $3,301.

Future financing cash flows will be primarily impacted by paydowns and maturities of debt, new borrowings, capital management activity and distributions to noncontrolling interests.

Cash Flows from Discontinued Operations

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BALANCE SHEET

Total assets increased by $194,904 from December 31, 2024, to $8,253,282 at March 31, 2025, primarily due to the increase in reinsurance recoverables associated with the growth of in the specialty P&C businesses and the increase in Assets held-for-sale as further described below.

Total liabilities increased by approximately $178,960 from December 31, 2024, to $7,041,817 as of March 31, 2025, primarily due to increase in loss and loss adjustment expense reserve and ceded premium payables from the specialty P&C businesses and liabilities held-for-sale as further described below.

As of March 31, 2025, total Ambac Financial Group stockholders’ equity was $852,221, compared with total stockholders’ equity of $856,906 at December 31, 2024.

The increase is primarily driven by foreign currency translation gains of $36,220, unrealized fixed maturity securities gains of $18,606, offset by net loss of $44,737 and the retained earnings impact from the revaluation of NCI as described in Note 1.

Background and Business Description

Total assets increased by $464,008 from December 31, 2024, to $8,522,386 at June 30, 2025, primarily due to the increase in reinsurance recoverables associated with the growth of the specialty P&C businesses and the increase in Assets held-for-sale as further described below.

Total liabilities increased by approximately $440,821 from December 31, 2024, to $7,303,678 as of June 30, 2025, primarily due to an increase in loss and loss adjustment expense reserve and ceded premium payables from the specialty P&C businesses and liabilities held-for-sale as further described below.

As of June 30, 2025, total Ambac Financial Group stockholders’ equity was $859,839, compared with total stockholders’ equity of $856,906 at December 31, 2024.

The increase was primarily driven by foreign currency translation gains of $107,877 (net of the NCI impact of $25,827) and unrealized fixed maturity securities gains of $13,959, offset by a net loss of $119,090.

Discontinued Operation:

Assets and Liabilities Held-for-Sale.

Assets held-for-sale increased to $6,392,004 at March 31, 2025, from $6,267,200 as December 31, 2024.

The increase is primarily due to the impact of exchange rates as the British Pound Sterling strengthened during the three months ended March 31, 2025 driving an increased value in British Pound Sterling assets partially offset by an increase in the valuation allowance for the loss on disposal of AAC of $14,496.

Liabilities held-for-sale increased to $6,003,908 at March 31, 2025, from $5,887,685 as December 31, 2024, primarily due to a the impact of exchange rates on balances denominated in British Pound Sterling.

Assets held-for-sale increased to $6,592,417 at June 30, 2025, from $6,267,200 as December 31, 2024.

The increase is primarily due to the impact of exchange rates as the British Pound Sterling strengthened driving an increased value in British Pound Sterling assets partially offset by an increase in the valuation allowance for the loss on disposal of AAC of $67,456.

Liabilities held-for-sale increased to $6,213,024 at June 30, 2025, from $5,887,685 as December 31, 2024, primarily due to a the impact of exchange rates on balances denominated in British Pound Sterling.

Continuing Operations:

The following discusses changes in assets, liabilities and stockholders' equity, excluding assets and liabilities held-for-sale related to the pending sale of AAC, as of March 31, 2025, compared to December 31, 2024.

Ambac Financial Group, Inc.

First Quarter 2025 Form 10-Q

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The following discusses changes in assets, liabilities and stockholders' equity, excluding assets and liabilities held-for-sale related to the pending sale of AAC, as of June 30, 2025, compared to December 31, 2024.

Investment Portfolio

Ambac's investment portfolio is managed under established guidelines designed to meet the investment objectives of Everspan Group, each of the Insurance Distribution business units and AFG.

Ambac's investment portfolio is managed under established guidelines designed to meet the investment objectives of Everspan Group and AFG.

The Insurance Distribution businesses investments are limited to money market funds and U.S.

Government Treasury bonds.

Refer to "Description of the Business – Investments and Investment Policy" located in Part I.

Item 1 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2024, for further description of Ambac's investment policies and applicable regulations.

The following table summarizes the composition of Ambac’s investment portfolio, at carrying value at March 31, 2025 and December 31, 2024:

March 31, 2025 December 31, 2024

The following table summarizes the composition of Ambac’s investment portfolio, at carrying value at June 30, 2025, and December 31, 2024:

June 30, 2025 December 31, 2024

Specialty Property & Casualty Insurance Insurance Distribution Corporate & Other Consolidated Specialty Property & Casualty Insurance Insurance Distribution Corporate & Other Consolidated

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Investments to the Unaudited Consolidated Financial Statements included in Part I, Item 1 in this Form 10-Q for information about fixed maturity securities and other investments by asset class.

The following charts provide the ratings distribution of the fixed maturity investment portfolio based on fair value at March 31, 2025 and December 31, 2024.

Ratings represent the lower of

ratings provided by S&P or Moody's when ratings are available from both agencies.

Ambac Financial Group, Inc.

First Quarter 2025 Form 10-Q

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Second Quarter 2025 Form 10-Q

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The following charts provide the ratings distribution of the fixed maturity investment portfolio based on fair value at June 30, 2025, and December 31, 2024.

Ratings represent the lower of ratings provided by S&P and Moody's when ratings are available from both agencies.

Premium Receivables

Ambac's premium receivables increased to $64,563 at March 31, 2025, from $57,222 at December 31, 2024.

Ambac's premium receivables increased to $71,875 at June 30, 2025, from $57,222 at December 31, 2024.

The increase is primarily due to growth in the Specialty P&C Insurance Segment, including receivables related to the programs where Everspan participates as a reinsurer.

Commission and fees receivable

Ambac's commission and fee receivables increased to $72,619 at June 30, 2025, from $55,377 at December 31, 2024.

The increase is primarily due to growth in the Insurance Distribution Segment and the Beat acquisition.

Reinsurance Recoverable on Paid and Unpaid Losses

Ambac has reinsurance in place pursuant to surplus share treaty and facultative agreements.

To minimize its exposure to losses from reinsurers, Ambac (i) monitors the financial condition of its reinsurers;

As of June 30, 2025, and December 31, 2024, reinsurance recoverable on paid and unpaid losses were $376,445 and $306,191, respectively, increasing primarily due to growth in the Specialty P&C Insurance Segment.

To minimize its exposure to losses from reinsurers, Ambac (i) monitors the

financial condition of its reinsurers;

(ii) is entitled to receive collateral from its reinsurance counterparties under certain reinsurance contracts;

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Those reinsurance counterparties that do not currently post collateral are well capitalized, highly rated, authorized capacity providers.

Ambac benefited from letters of credit and collateral amounting to approximately $67 from its reinsurers at March 31, 2025.

Additionally, while legacy liabilities from the recent Specialty P&C acquisitions were fully ceded to certain reinsurers, Everspan also benefits from an unlimited, uncapped indemnity from the respective sellers to mitigate any residual risk to these reinsurers.

As of March 31, 2025 and December 31, 2024, reinsurance recoverable on paid and unpaid losses were $351,110 and $306,191, respectively primarily due to growth in the Specialty P&C Insurance Segment.

Ambac benefited from letters of credit and collateral amounting to approximately $67,265 from its reinsurers at June 30, 2025.

Additionally, while legacy liabilities from Specialty P&C acquisitions were fully ceded to certain reinsurers, Everspan also benefits from an unlimited, uncapped indemnity from the respective sellers to mitigate any residual risk to these reinsurers.

Intangible Assets, net of Accumulated Depreciation

Intangible assets primarily include (i) intangible assets established as part of acquisitions in the Insurance Distribution business of $333,848 at March 31, 2025 and (iii) indefinite-lived intangible assets in the Specialty P&C business as part of its acquisitions of $11,213 at March 31, 2025.

As of March 31, 2025 and December 31, 2024, intangible assets were $345,061 and $344,775, respectively.

Intangible assets primarily include (i) intangible assets established as part of acquisitions in the Insurance Distribution business of $324,636 at June 30, 2025 and (iii) indefinite-lived intangible assets in the Specialty P&C business as part of its acquisitions of $11,213 at June 30, 2025.

As of June 30, 2025, and December 31, 2024, intangible assets were $353,904 and $344,775, respectively.

The increase is driven by foreign exchange rates (appreciation of the British pound), partially offset by amortization of $17,975.

As of March 31, 2025 and December 31, 2024, goodwill totaled $429,314 and $418,234 respectively.

As of June 30, 2025, and December 31, 2024, goodwill totaled $451,808 and $418,234 respectively.

The increase is primarily driven by foreign exchange rates (appreciation of the British pound).

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Loss and loss adjustment expense reserves are estimates of the ultimate liability for unpaid losses and loss expenses for claims that have been reported and claims that have been incurred, but not yet reported as of the balance sheet date.

Loss and loss adjustment expense reserves by line of business were as follows as of March 31, 2025 and December 31, 2024

Loss and loss adjustment expense reserves by line of business were as follows as of June 30, 2025, and December 31, 2024

2025 December 31,

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Loss and Loss Expense Reserves $ 383,969 $ 78,555 $ 349,064 $ 78,980

(1) Includes $34,724 and $0 loss and loss expense reserves on a gross and net of reinsurance basis at March 31, 2025 and $35,146 and $0 loss and loss expense reserves on a gross and net of reinsurance basis at December 31, 2024 related to legacy liabilities obtained from the acquisitions of Providence Washington Insurance Company, Greenwood Insurance Company and Consolidated Specialty Insurance Company.

(1) Includes $27,629 and $0 loss and loss expense reserves on a gross and net of reinsurance basis at June 30, 2025 and $35,146 and $0 loss and loss expense reserves on a gross and net of reinsurance basis at December 31, 2024 related to legacy liabilities obtained from the acquisitions of Providence Washington Insurance Company, Greenwood Insurance Company and Consolidated

Ambac Financial Group, Inc.

Second Quarter 2025 Form 10-Q

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Specialty Insurance Company.

All legacy liabilities remain obligations of affiliates of the sellers through reinsurance.

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Ambac borrowed under a short-term credit facility to provide partial funding of the acquisition of Beat in 2024.

The carrying value of this short term debt is $150,000 as of March 31, 2025 and December 31, 2024.

The carrying value of this short term debt is $150,000 as of June 30, 2025, and December 31, 2024.

This short-term debt will be repaid from the proceeds of the sale of AAC.

Commission Payable

Commission payables are commissions due to sub producers for placing insurance contracts on behalf of the MGAs and amounts due to UK Syndicates that provide advanced commissions to fund short term liquidity needs for MGAs.

The commission payable at March 31, 2025 and December 31, 2024 was $81,017 and $71,431.

Commission payable at June 30, 2025, and December 31, 2024 was $96,875 and $71,431, respectively.

The increase is primarily due to higher advance commissions due to Syndicates.

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As a result, the minority interests were reclassified from nonredeemable to redeemable and remeasured at fair value including the put options, increasing redeemable NCI by $42,180.

Other changes to redeemable NCI during the quarter relate primarily to allocation of results to the minority interests, revaluation to redemption value where applicable, reclassification of certain

Ambac Financial Group, Inc.

First Quarter 2025 Form 10-Q

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interests to nonredeemable due to the expiration of related put options, and the impact of foreign currency translation.

Other changes to redeemable NCI during the three and six months ended June 30, 2025, relate primarily to the allocation of financial results to the minority interests, revaluation to redemption value where applicable, reclassification of certain interests to nonredeemable due to the expiration of related put options, the exercise of certain put options and the impact of foreign currency translation.

ACCOUNTING STANDARDS

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STATUTORY BASIS FINANCIAL RESULTS

insurance subsidiaries prepare financial statements under accounting practices prescribed or permitted by its domiciliary state regulator (“SAP”) for determining and reporting the financial condition and results of operations of an insurance company.

The National Association of Insurance Commissioners (“NAIC”) Accounting Practices and Procedures manual (“NAIC SAP”) is adopted as a component of prescribed practices by each domiciliary state.

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Everspan Indemnity Insurance Company

Everspan Indemnity Insurance Company’s statutory policyholder surplus was $125,672 at March 31, 2025, as compared to $125,202 at December 31, 2024.

The increase in surplus was net income at Everspan Indemnity Insurance Company, including its subsidiaries, of $492 during the three months ended March 31, 2025.

Everspan Indemnity Insurance Company’s (EIIC) statutory policyholder surplus was $126,488 at June 30, 2025, as compared to $125,202 at December 31, 2024.

The increase in surplus was driven by net income at Everspan Indemnity Insurance Company, including its subsidiaries, of $1,093 during the six months ended June 30, 2025.

Each of Everspan's insurance carriers are a direct or indirect wholly-owned subsidiary of EIIC and therefore are included in EIIC's statutory policyholder surplus.

NON-GAAP FINANCIAL MEASURES

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A tabular reconciliation of the non-GAAP financial measure and the most comparable GAAP financial measure is also presented below.

EBITDA — EBITDA is net income (loss) before interest expense, income taxes, depreciation and amortization of intangible assets.

Adjusted EBITDA and Adjusted EBITDA Margin — We define Adjusted EBITDA as net income (loss) from continuing operations before interest expense, income taxes, depreciation, amortization of intangible assets, change in fair value of contingent consideration and certain items of income and expense, including share-based compensation expense, acquisition and integration related expenses, severance, and other exceptional or non-recurring items, including those related to raising capital.

We believe that adjusted EBITDA is an appropriate measure of operating performance because it eliminates the impact of income and expenses that may obfuscate business performance, and that the presentation of this measure enhances an investor's understanding of our financial performance.

Ambac Financial Group, Inc.

First Quarter 2025 Form 10-Q

Table f Contents

Three Months Ended March 31, 2025 Three Months Ended March 31, 2024

Second Quarter 2025 Form 10-Q

Table o f Contents

EBITDA — EBITDA is net income (loss) from continuing operations before interest expense, income taxes, depreciation and amortization of intangible assets.

EBITDA Margin — EBITDA divided by total revenues.

expense, including share-based compensation expense, acquisition and integration related expenses, severance, and other exceptional or non-recurring items, including those related to raising capital.

Three Months Ended June 30, 2025 Three Months Ended June 30, 2024

Specialty Property & Casualty Insurance Insurance Distribution Corporate & Other Consoli-dated Specialty Property & Casualty Insurance Insurance Distribution Corporate & Other Consoli-dated

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Impact of noncontrolling interests — (2,185) — (2,185) — (430) — (430)

Ambac EBITDA 1,503 7,083 (14,063) (5,477) 1,821 4,202 (8,569) (2,547)

EBITDA to shareholders 620 2,513 (12,983) (9,848) (1,097) 1,974 (14,441) (13,565)

Net income margin 2.0 % (24.2) % (2517.1) % (37.9) % (3.4) % 9.4 % (252.3) % (28.8) %

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Equity-based compensation expense 61 67 1,895 2,023 74 — 1,747 1,821

Change in fair value of contingent considerations — — — — — — — —

Restructuring related expense — — — — — — — —

Severance and restructuring expense — 31 2,918 2,949 — — 5,203 5,203

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Adjusted EBITDA Margin to Ambac shareholders 3.2 % 7.6 % (1477.4) % (8.3) % (3.2) % 14.8 % (26.5) % (1.2) %

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Second Quarter 2025 Form 10-Q

Table o f Contents

Six Months Ended June 30, 2025 Six Months Ended June 30, 2024

Specialty Property & Casualty Insurance Insurance Distribution Corporate & Other Consoli-dated Specialty Property & Casualty Insurance Insurance Distribution Corporate & Other Consoli-dated

Net income (loss) (Continuing Operations) $ 1,852 $ (9,735) $ (27,410) $ (35,292) $ 642 $ 5,142 $ (23,871) $ (18,088)

Interest expense — 11,024 — 11,024 — — — —

Income tax expense 270 (2,681) (378) (2,789) 79 127 (106) 100

Depreciation — 109 744 853 — 21 926 947

Intangible amortization — 18,064 — 18,064 — 2,278 — 2,278

EBITDA 2,123 16,781 (27,044) (8,140) 721 7,565 (23,047) (14,762)

Impact of noncontrolling interests — (7,205) — (7,205) — (1,350) — (1,350)

EBITDA to shareholders 2,123 9,576 (27,044) (15,345) 724 6,215 (23,048) (16,112)

Net income margin 4.4 % (13.1) % (2462.9) % (30.0) % 1.0 % 16.5 % (296.6) % (18.0) %

Net income margin to Ambac shareholders 4.4 % (15.0) % (2462.9) % (31.2) % 1.1 % 16.4 % (296.6) % (18.0) %

EBITDA margin 5.0 % 22.7 % (2430.0) % (6.9) % 1.2 % 24.3 % (286.4) % (14.7) %

EBITDA margin to Ambac shareholders 5.0 % 12.9 % (2430.0) % (13.0) % 1.2 % 19.9 % (286.4) % (16.0) %

Acquisition and integration related expenses — 375 1,081 1,456 — — 10,973 10,973

Equity-based compensation expense 147 67 3,469 3,683 125 — 3,876 4,001

Severance and restructuring expense — 60 4,737 4,797 — — 5,337 5,337

Other non-operating (income) losses — (591) — (591) — — (4,427) (4,427)

Adjusted EBITDA $ 2,270 $ 16,692 $ (17,759) $ 1,205 $ 849 $ 7,526 $ (7,289) $ 1,122

Adjusted EBITDA attributable to Ambac shareholders $ 2,270 $ 9,611 $ (17,759) $ (5,876) $ 849 $ 6,176 $ (7,289) $ (228)

Adjusted EBITDA Margin 5.3 % 22.5 % NM (4.6) % 1.4 % 24.1 % NM 1.1 %

Adjusted EBITDA Margin to Ambac shareholders 5.3 % 13.0 % NM (8.3) % 1.4 % 19.8 % NM (0.2) %

Organic Revenue Growth & Rate (Insurance Distribution Only.) — Organic revenue is based on commissions and fees for the relevant period by excluding (i) the first twelve months of commissions and fees generated from acquisitions and (ii) commissions and fees from divestitures (iii) and other items such as contingent commissions and the impact of changes in foreign exchange rates.

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Organic revenue growth rate to Total revenue growth rate, the most directly comparable GAAP measure, for each of the periods indicated is as follows (in percentages):

Three Months Ended March 31, 2025 2024 % Growth

Three Months Ended June 30, 2025 2024 % Growth

Total Insurance Distribution revenue & growth percentage (1)

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Total Organic Revenue & Growth Percentage $ 11,852 $ 12,165 (2.6) %

Six Months Ended June 30, 2025 2024 % Growth

Total Insurance Distribution revenue & growth percentage (1)

$ 74,039 $ 31,171 137.5

Acquired revenues (38,893) —

Profit commission and contingent commission income (6,957) (2,323)

Total Organic Revenue & Growth Percentage $ 28,189 28,848 (2.3) %

(1) Total Insurance Distribution revenue includes investment income.

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Ambac Financial Group, Inc.

First Quarter 2025 Form 10-Q

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Three Months Ended March 31,

Second Quarter 2025 Form 10-Q

Table o f Contents

Three Months Ended June 30,

Specialty Property & Casualty Insurance Insurance Distribution Corporate & Other Consoli-dated Specialty Property & Casualty Insurance Insurance Distribution Corporate & Other Consoli-dated

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Equity-based compensation expense 61 67 1,895 2,023 74 — 1,747 1,821

Change in fair value of contingent considerations — — — — — — — —

Restructuring related expense — — — — — — — —

Severance and restructuring expense — 31 2,918 2,949 — — 5,203 5,203

Other non-operating (income) losses — (591) — (591) — — (4,475) (4,475)

Gain on sale of CNIC — — — — — — — —

Write-down of Majesco — — — — — — — —

(Gains) losses related to minority interest strategy — — — — — — 48 48

{describe} — — — — — — — —

Adjusted net income (loss) before tax and NCI 489 1,191 (8,028) (6,348) (996) 2,387 (2,017) (627)

2 unchanged sentences

Net (income) loss attributable to noncontrolling interest — (2,312) — (2,312) — (430) — (430)

Adjusted net income (loss) attributable to shareholders $ 474 $ (3,013) $ (8,013) $ (10,552) $ (996) $ 1,957 $ (2,017) $ (1,057)

Three Months Ended June 30,

Specialty Property & Casualty Insurance Insurance Distribution Corporate & Other Consoli-dated Specialty Property & Casualty Insurance Insurance Distribution Corporate & Other Consoli-dated

Net income (loss) margin 1.9 % (24.0) % (11927.9) % (37.4) % (3.4) % 9.4 % (252.3) % (28.8) %

Adjusted Net income (loss) attributable to Ambac stockholders margin 2.1 % (9.0) % (7218.9) % (19.0) % (3.1) % 14.7 % (34.2) % (2.1) %

Six Months Ended June 30,

Specialty Property & Casualty Insurance Insurance Distribution Corporate & Other Consoli-dated Specialty Property & Casualty Insurance Insurance Distribution Corporate & Other Consoli-dated

Net income (loss) (Continuing Operations) $ 1,852 $ (9,735) $ (27,410) $ (35,292) $ 642 $ 5,142 $ (23,871) $ (18,088)

Acquisition and integration related expenses — 375 1,081 1,456 — — 10,973 10,973

Intangible amortization — 18,064 — 18,064 — 2,278 — 2,278

Equity-based compensation expense 147 67 3,469 3,683 125 — 3,876 4,001

Severance and restructuring expense — 60 4,737 4,797 — — 5,337 5,337

Other non-operating (income) losses — (591) — (591) — — (4,427) (4,427)

Adjusted net income (loss) before tax and NCI 2,000 8,240 (18,123) (7,883) 770 7,308 (8,113) (36)

Income tax effects (15) (1,892) 15 (1,892) — — — —

Adjusted net income (loss) before NCI 1,985 6,348 (18,108) (9,775) 770 7,308 (8,113) (36)

Net (income) loss attributable to noncontrolling interest — (6,812) — (6,812) — (1,350) — (1,350)

Adjusted net income (loss) attributable to common shareholders $ 1,985 $ (464) $ (18,108) $ (16,587) $ 770 $ 5,958 $ (8,113) $ (1,386)

(1) Other non-operating expense includes one time add-backs related to gain on sale of CNIC, partially offset by losses related to minority interest strategy and write down of certain capitalized software.

Three Months Ended March 31,

Six Months Ended June 30,

Specialty Property & Casualty Insurance Insurance Distribution Corporate & Other Consoli-dated Specialty Property & Casualty Insurance Insurance Distribution Corporate & Other Consoli-dated

2 unchanged sentences

Quantitative and Qualitative Disclosure About Market Risk

As of March 31, 2025, there are no material changes in the market risks that the Company is exposed to compared to December 31, 2024.

As of June 30, 2025, there are no material changes in the market risks that the Company is exposed to compared to December 31, 2024.

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-Q

Item 2. Management’s Discussion and Analysis