OCTAVE SPECIALTY GROUP INC 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations ($ in thousands) The objectives of our Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) are to provide users of our consolidated financial statements with the following: • A narrative explanation from the perspective of management of our financial condition, results of operations, cash flows, liquidity and certain other factors that may affect future results; • Context to the unaudited consolidated financial statements; and • Information that allows assessment of the likelihood that past performance is indicative of future performance. The following discussion should be read in conjunction with our consolidated financial statements in Part I, Item 1 and the matters described under Part II, Item 1A. Risk Factors in this Quarterly Report and under Item 1A. Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2024. Refer to Item 1. Business and Note 1. Background and Business Description in our Annual Report on Form 10-K for the year ended December 31, 2024, for a description of our business and our key strategies to achieve our primary goal to maximize shareholder value. Unless otherwise noted, this Management's Discussion and Analysis of Financial Condition and Results of Operations relates solely to our continuing operations and does not include the operations of the Legacy Financial Guarantee business. See "Sale of AAC" below and "Sale of Ambac Assurance Corporation" in 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 additional information about the divestiture of the Legacy Financial Guarantee business. Organization of Information MD&A includes the following sections: Page Strategies to Enhance Shareholder Value 31 Overview 32 Critical Accounting Estimates 33 Results of Operations 33 Liquidity and Capital Resources 37 Balance Sheet 39 Accounting Standards 42 U.S. Insurance Statutory Basis Financial Results 42 Non-GAAP Financial Measures 42 Strategies to Enhance Shareholder Value The Company's primary goal is to maximize long-term shareholder value through the execution of targeted strategies for its Insurance Distribution and Specialty Property and Casualty Insurance businesses. Insurance Distribution and Specialty Property and Casualty Insurance strategic priorities include: • Expanding our Insurance Distribution business based on deep domain knowledge in specialty and niche classes of risk which generate attractive margins at scale. This will be achieved through acquisitions, strategic investments, establishing new businesses “de-novo,” and organic growth and diversification supported by a centralized technology led shared services offering • Growing our Specialty Property and Casualty Insurance business to generate underwriting profits from a diversified portfolio of commercial and personal liability risks accessed primarily through program administrators. Ambac continuously evaluates opportunities to acquire businesses and assets for its Insurance Distribution business. These acquisitions may be material to our business, financial condition and operations and may involve raising capital to finance the acquisition(s). There can be no assurance that we will agree to acquire any business or assets, or that we can obtain the necessary financing or complete any acquisition in a timely manner or at all. Ambac Financial Group, Inc. 31 Third Quarter 2025 Form 10-Q Table of Contents OVERVIEW AFG's subsidiaries/businesses are divided into two reportable segments with results for the three and nine months ended September 30, 2025, and 2024, as follows: Three Months Ended September 30, 2025 Three Months Ended September 30, 2024 Reportable Segments Reportable Segments ($ in thousands) Specialty Property & Casualty Insurance Insurance Distribution Corporate & Other Consoli-dated Specialty Property & Casualty Insurance Insurance Distribution Corporate & Other Consoli-dated Gross premiums written $ 97,185 $ 97,185 $ 115,154 $ 115,154 Net premiums written 17,777 17,777 32,754 32,754 Premiums placed $ 245,394 245,394 $ 144,949 144,949 Total revenues 22,774 43,222 $ 610 66,606 40,132 23,995 $ 5,878 70,005 Total expenses 22,819 48,969 26,897 98,685 31,198 31,944 27,620 90,762 Pretax income (loss) (45) (5,747) (26,287) (32,079) 8,934 (7,949) (21,742) (20,757) EBITDA (2) (45) 9,855 (25,958) (16,148) 8,934 2,425 (21,267) (9,908) Adjusted EBITDA 49 9,955 (8,893) 1,111 1,591 2,673 (1,802) 2,462 Net income (loss) attributable to Ambac shareholders (53) $ (5,398) $ (26,279) (31,730) 7,990 $ (5,293) $ (20,814) (18,117) EBITDA attributable to Ambac shareholders (45) 5,928 (20,075) (20,075) 8,934 1,868 (21,267) (10,465) Adjusted EBITDA attributable to Ambac common stockholders $ 49 5,988 $ (8,893) (2,856) $ 1,591 2,116 $ (1,802) 1,905 Nine Months Ended September 30, 2025 Nine Months Ended September 30, 2024 Reportable Segments Reportable Segments Specialty Property & Casualty Insurance Insurance Distribution Corporate & Other Consoli-dated Specialty Property & Casualty Insurance Insurance Distribution Corporate & Other Consoli-dated Premiums placed $ 728,493 $ 728,493 $ 288,463 $ 288,463 Gross premiums written $ 280,347 280,347 $ 322,782 322,782 Net premiums written 50,988 50,988 91,290 91,290 Total revenues 65,335 117,261 $ 1,723 184,319 101,502 55,166 $ 13,925 170,593 Total expenses 63,258 135,420 55,801 254,479 91,847 58,017 59,474 209,338 Pretax income (loss) 2,077 (18,159) (54,078) (70,160) 9,655 (2,851) (45,549) (38,745) EBITDA (2) 2,077 26,640 (53,004) (24,286) 9,655 9,825 (44,146) (24,666) Adjusted EBITDA 2,319 26,647 (26,652) 2,314 2,439 10,067 (8,921) 3,585 Net income (loss) attributable to Ambac shareholders 1,799 (16,529) (53,692) (68,422) 8,634 (1,238) (44,515) (37,119) EBITDA attributable to Ambac shareholders 2,077 15,508 (53,004) (35,418) 9,655 7,918 (44,146) (26,573) Adjusted EBITDA attributable to Ambac common stockholders $ 2,319 $ 15,599 $ (26,652) $ (8,734) $ 2,439 $ 8,160 $ (8,921) $ 1,678 Sale of AAC On September 29, 2025 the Company completed the sale of AAC pursuant to the June 4, 2024, 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 AFG sold all of the issued and outstanding shares of common stock of AAC, a whol ly-owned subsidiary of AFG, to Buyer for $420,000 in c ash (the "Sale"). The Buyer also made an additional payment to AFG in an amount of $4,300. In the Sale, Buyer acquired complete common equity ownership of AAC and all of its wholly owned subsidiaries, including Ambac Assurance UK Limited. In connection with and pursuant to the Purchase Agreement, AFG issued to Buyer a warrant exercisable for 5,092,707 shares of common stock, par value $0.01, of AFG. Refer to Note 3. Discontinued Operation of the Notes to Consolidated Financial Statements in this Quarterly Report on Form 10-Q 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, for further details on the sale of AAC. For all periods leading up to the Sale, AAC's results of operations and AFG's loss on sale are reported within Net income (loss) from discontinued operations before tax on the Consolidated Statement of Comprehensive Income (Loss). See Note 3. Discontinued Operation in this report on Form 10-Q for further information. Acquisition of ArmadaCare On October 31, 2025, the Company closed on the acquisition of ArmadaCare for a purchase price of $250,000. The Company purchased all of the issued and outstanding limited liability company interests in ArmadaCare from Sirius Re Holdings, Inc. and Sirius Acquisitions Holding Company, funded in part by $120,000 of loans obtained under new credit facilities. See Note 1. Business and Basis of Presentation to the Consolidated Financial Statements included in this Quarterly Report for further detail about the credit facility. ArmadaCare includes an MGA/U that focuses on supplemental health and benefit products for C-suite executives and other key talent. ArmadaCare creates and distributes supplemental benefit solutions and insurance products. ArmadaCare's differentiated product offering in the A&H market will provide both line of business and product diversification to the Company, while also increasing exposure to non-correlated A&H business lines. ArmadaCare also provides clients with tools to navigate the healthcare system and finds physicians to match personal needs, Ambac Financial Group, Inc. 32 Third Quarter 2025 Form 10-Q Table of Contents and include a provider of third-party administration services for insurance carriers that distribute the benefit products and handle claims. Pivix Effective September 1, 2025, AFG's wholly owned subsidiary, Cirrata Group, LLC ("Cirrata Group"), exercised its option to convert its $3,500 convertible note investment in Pivix Specialty Insurance Services ("Pivix"), an excess and surplus lines MGA/U, into common stock. As a result, Cirrata Group now has an approximately 74% controlling stake in Pivix when combined with its previous 17% minority equity interest and includes Pivix in its consolidated financial statements. SEC Final Rules on Climate Related Information On March 6, 2024, the U.S. Securities and Exchange Commission (“SEC”) adopted The Enhancement and Standardization of Climate-Related Disclosures for Investors ("Final Rule") , which will require registrants to disclose extensive climate-related information in their Form 10-K annual reports and registration statements. The Final Rule was scheduled to become effective May 28, 2024; however, the SEC has voluntarily stayed the rule’s effective date pending judicial review of legal challenges. In March 2025, the SEC ended its defense of the Final Rule, though judicial review of legal challenges continues. The compliance dates for accelerated filers for annual reports or registration statements that include financial statements for the year ending December 31 are phased in from 2026 through 2031. Depending on when the legal challenges are resolved, the compliance dates may be retained or delayed. Ambac is reviewing the Final Rule and is currently assessing our related compliance obligations and other effects on our operations. CRITICAL ACCOUNTING ESTIMATES Ambac’s Unaudited Consolidated Financial Statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”), which require the use of material estimates and assumptions. For a discussion of Ambac’s critical accounting policies and estimates, see “Critical Accounting Policies and Estimates” in Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in Ambac’s Annual Report on Form 10-K for the year ended December 31, 2024. Results of Operations Consolidated Results A summary of our financial results is shown below: Three Months Ended September 30, Nine Months Ended September 30, 2025 2024 2025 2024 Gross premiums written $ 97,185 $ 115,154 $ 280,347 $ 322,782 Net premiums written 17,777 32,754 50,988 91,290 Revenues: Net premiums earned $ 17,027 $ 27,441 $ 48,908 $ 80,074 Commissions 36,059 23,064 103,152 54,014 Servicing and other fees 4,855 2,266 14,291 2,266 Program fees 3,590 3,622 10,739 9,517 Investment income 2,666 3,488 8,090 10,891 Other 2,408 10,124 (862) 13,831 Expenses: Losses and loss adjustment expenses 14,386 20,421 35,860 62,800 Policy acquisition costs 3,491 5,993 11,031 15,816 Commissions 11,167 9,499 28,935 27,209 General and administrative 53,710 44,000 132,781 89,436 Intangible amortization and depreciation 9,746 7,104 28,663 10,332 Interest 6,185 3,745 17,209 3,745 Total expenses 98,685 90,762 254,479 209,338 Provision (benefit) for income taxes from continuing operations (1,241) (867) (4,030) (767) Net income (loss) from continuing operations (30,838) (19,890) (66,130) (37,978) Net income (loss) from discontinued operations, net of income taxes (80,890) (9,386) (163,288) 28,936 Net income (loss) (111,728) (29,276) (229,418) (9,042) Net (gain) loss attributable to noncontrolling interest (892) 1,773 (2,292) 859 Net income (loss) attributable to shareholders $ (112,620) $ (27,503) $ (231,710) $ (8,183) Ambac's results for the three and nine months ended September 30, 2025, compared to the three and nine months ended September 30, 2024, were impacted by the following: • Ambac's acquisition of its interests in Beat Capital Partners Limited ("Beat") on August 1, 2024. Ambac's results for the three months ended September 30, 2024 included two months of Beat's results whereas our results for the three months ended September 30, 2025, include a full quarter of Beat results. • On September 29, 2025, Ambac completed the sale of AAC. AAC's results, including Ambac's loss on the sale of AAC are reported within discontinued operations. Refer to Note 1. 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 Sale and results for the three and nine months ended September 30, 2025, and 2024. As a Ambac Financial Group, Inc. 33 Third Quarter 2025 Form 10-Q Table of Contents result of the Sale, Ambac repaid all of the outstanding debt used to acquire Beat, amounting to $150,000, and purchased AAC's co-investment in Beat of $62 million. Concurrent with the Sale, AFG entered into a number of transactions as discussed herein, including transactions intended to lower the long term run-rate of corporate operating expenses. The following paragraphs describe the consolidated results of continuing operations of Ambac and its subsidiaries for the three and nine months ended September 30, 2025, and 2024, respectively. Gross Premiums Written Gross premiums written decreased $17,969 and $42,435 for the three and nine months ended September 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 $14,977 and $40,302 for the three and nine months ended September 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 $10,414 and $31,166 for the three and nine months ended September 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 and nine months ended September 30, 2025, was $36,059 and $103,152 compared to $23,064 and $54,014 for the three and nine months ended September 30, 2024. The increase was primarily driven by the inclusion of an additional month (July) of Beat's results and organic growth, including from the launch of new de-novo MGAs. Commission income included profit commissions (based on underwriting performance) of $1,940 and $8,896 for the three and nine months ended September 30, 2025, and $1,319 and $3,641 and for the three and nine months ended September 30, 2024, respectively. The increase for the three months ended September 30, 2025, was driven by higher A&H profit commissions earned and for the nine months ended September 30, 2025, was driven by the acquisition of Beat in August 2024. For the three and nine months ended September 30, 2025, commission expense of $11,167 and $28,935 compared to $9,499 and $27,209 in three and nine months ended September 30, 2024, representing approximately 50% and 72% 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. When third parties are paid commissions to obtain business, the majority of Beat's commission income is reported net of any distribution and commission expenses, due to the nature of its program agreements. The majority of the Insurance Distribution Segment's other MGA/Us report their commission income gross of distribution and commission expenses. Program Fees Program fee revenues were $3,590 and $3,622 for the three months ended September 30, 2025 and 2024, respectively, and $10,739 and $9,517 for the nine months ended September 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. The growth for the nine months ended September 30, 2025 as compared to the nine months ended September 30, 2024 is driven by a shift in mix of premium written and related premium ceded to reinsurers. Net Investment Income Net investment income consists of interest income, including the net effect of discount accretion and premium amortization, from fixed maturity securities classified as available-for-sale and net gains (losses) on pooled investment funds which are reported under the equity method. These funds and certain other investments are reported in Other investments on the Consolidated Balance Sheets. For further information about investment funds held, refer to Note 4. Investments to the Unaudited Consolidated Financial Statements, included in Part I, Item 1 in this Form 10-Q. Net investment income decreased $822 and $2,801 for the three and nine months ended September 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, for the nine months ended September 30, 2025, growth of the Everspan investment portfolio. Servicing and Other Fees Servicing and Other Fees increased $2,589 and $12,025 for the three and nine months ended September 30, 2025. Servicing and Other Fees includes revenues earned for providing operational and administrative services to the Lloyd's syndicates managed by Beat as well as certain policy and brokerage fees. Other Revenues Other revenues includes (i) net investment gains (losses) on securities sold or called, net of investment impairment charges; (ii) foreign exchange gains (losses) from the Insurance Distribution segment; and (iii) net gains on derivative contracts including FX forward contracts used to manage currency risk within the Insurance Distribution segment. Other revenues for the three and nine months ended September 30, 2025, of $2,408 and $(862) was driven primarily by foreign exchange gains (losses) including on the FX forward contracts. The decreases in Other revenue compared to the three and nine months ended September 30, 2024, resulted primarily from Ambac Financial Group, Inc. 34 Third Quarter 2025 Form 10-Q Table of Contents certain items impacting the 2024 periods, including: gains on FX forward contracts used by Ambac to mitigate currency risk leading up to the acquisition of Beat, and a gain on Everspan's sale of one of its shell insurance companies and its licenses. The nine months ended September 30, 2024, also benefited from Corporate gains related to 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. Losses and Loss Adjustment Expenses (Benefit) Loss and loss adjustment expenses incurred decreased $6,035 and $26,940 for the three and nine months ended September 30, 2025, compared to the same period in the prior year. The lower loss and loss adjustment expenses is primarily due to lower net retained premiums and the shift in mix of business retained 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 the growth in existing and addition of new programs and reserve strengthening primarily related to commercial auto liability loss experience and increased loss costs related to excess liability exposures. General and Administrative Expenses (G&A) The following table provides a summary of G&A expenses for the periods presented: Three Months Ended September 30, Nine Months Ended September 30, 2025 2024 2025 2024 Compensation $ 33,129 $ 18,195 $ 78,798 $ 39,824 Non-compensation 20,581 23,923 53,982 47,855 Total G&A expenses $ 53,710 $ 42,118 $ 132,780 $ 87,679 The increase in Compensation G&A expenses during the three and nine months ended September 30, 2025, was largely driven by higher compensation costs due to inclusion of Beat expenses for only two months in the 2024 periods. In addition, for the three months and nine months ended September 2025, compensation expense was increased due to the impact of severance, special one-time cash and equity awards and accelerated equity compensation totaling $6,764 all of which were incurred in connection with the sale of AAC. Non-Compensation G&A expenses for the three and nine months ended September 30, 2025, as compared to the three and nine months ended September 30, 2024, were driven by integration expenses related to the acquisition of Beat, lease termination costs related to our former corporate headquarters, and the write off of certain capitalized legacy software costs; offset by lower Corporate segment expenses related to M&A transactions. Ambac has also provided notice of early termination of its current corporate headquarters, the associated expenses for which will be recognized in the fourth quarter of 2025. Restructuring costs related to the sale of AAC for the three and nine months ended September 30, 2025, were $778 and $5,162, respectively, and for the three and nine months ended September 30, 2024, were $1,653 and $13,980, respectively. Intangible Amortization and Depreciation. Intangible amortization and depreciation for the three and nine months ended September 30, 2025, was $9,746 and $28,663 compared to $7,104 and $10,332 in the comparable prior year periods. The increases are due to intangible amortization for the three and nine months ended September 30, 2025 related to the Beat acquisition. Interest Expense Interest expense for the three and nine months ended September 30, 2025 was $6,185 and $17,209, compared to $3,745 and $3,745 for the three and nine months ended September 30, 2024, which was primarily related to the short-term debt used in funding the Beat acquisition, entered into during the third quarter of 2024. This debt was repaid on September 29, 2025. Provision for Income Taxes The provision (benefit) for income taxes primarily relates to international operations and was $(1,241) and $(4,030) for the three and nine months ended September 30, 2025, compared to $(867) and $(767) for the three and nine months ended September 30, 2024. The tax benefit recognized in the current year includes current tax expense associated with Beat UK operations offset by deferred tax benefit related to the recognition of deferred tax assets generated by Beat US and amortization of finite lived intangible assets associated with Beat UK and US operations. Results of Operations by Segment Insurance Distribution Three Months Ended September 30, Nine Months Ended September 30, 2025 2024 2025 2024 Premiums placed $ 245,394 $ 144,949 $ 728,493 $ 288,463 Commission income $ 36,059 $ 23,064 $ 103,152 $ 54,014 Commission expense 11,167 9,499 28,935 8,701 Net commissions 24,892 13,565 74,217 45,313 Servicing and other fees 4,855 2,266 14,291 2,266 Investment income 401 300 1,117 427 Other revenue 1,906 (1,635) -1541 Expenses: General and administrative expenses 22,197 12,065 61,686 18,132 EBITDA 9,858 2,431 26,640 9,825 Interest expense 6,185 — 17,209 — Depreciation 145 212 8 — Intangible amortization 9,272 6,423 27,247 4,665 Pretax income (loss) $ (5,747) $ (7,949) $ (18,159) $ 7,283 Ambac's stockholders equity (1) $ 447,327 $ 410,997 (1) Represents the share of Ambac stockholders equity for each subsidiary within the Insurance Distribution segment, including intercompany eliminations. Ambac's Insurance Distribution businesses are compensated for their services primarily by commissions paid by insurance carriers for underwriting, structuring and/or administering polices. Commission revenues are usually based on a percentage of the premiums placed. 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 and Ambac Financial Group, Inc. 35 Third Quarter 2025 Form 10-Q Table of Contents other capacity providers, which may cause some variability in revenue and earnings. Insurance Distribution pre-tax loss for the three and nine months ended September 30, 2025, was $(5,747) and $(18,159) compared to $(7,949) and $(2,851) for the three and nine months ended September 30, 2024. The lower pre-tax loss for the three months ended September 30, 2025, compared to 2024 mostly related to the acquisition of and organic growth at Beat. The higher pre-tax loss for the nine months ended September 30, 2025, compared to September 30, 2024, higher general and administrative expenses, intangible amortization and interest expense related to Beat acquisition. In connection with the AAC sale, on September 29, 2025, the short-term debt used to partially finance the Beat acquisition was repaid, therefore the associated interest expense will no longer be incurred. The Insurance Distribution segment placed premiums for its carriers are shown below: Three Months Ended September 30, Nine Months Ended September 30, 2025 2024 2025 2024 Premiums Placed $ 245,394 $ 144,949 $ 728,493 $ 288,463 Increase over prior period 100,445 440,030 As a percent 69.3 % 152.5 % Higher premiums placed were mostly driven by the acquisition of Beat, effective August 1, 2024, the inclusion of an additional month of Beat's production and growth of Beat's business. For the three months ended September 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 56% and (18)%, 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 and nine months ended September 30, 2025, were $22,197 and $61,686 an increase over three and nine months ended September 30, 2024 of $10,132 and $43,554, respectively, as a result of the Beat acquisition in the third quarter of 2024 as well as increase in staffing for the build out of new business. Specialty Property and Casualty Insurance Three Months Ended September 30, Nine Months Ended September 30, 2025 2024 2025 2024 Gross premiums written $ 97,185 $ 115,154 $ 280,347 $ 322,782 Net premiums written 17,777 32,754 50,988 91,290 Revenues: Net premiums earned $ 17,027 $ 27,441 $ 48,908 $ 80,074 Program fees 3,590 3,622 10,739 9,517 Investment income 1,648 1,672 5,238 4,536 Other income 509 7,397 450 7,375 Total 22,774 40,132 65,335 101,502 Expenses: Losses and loss expenses incurred 14,386 20,421 35,860 62,800 Amortization of deferred acquisition costs, net 3,491 5,993 11,031 15,816 General and administrative expenses 4,942 4,784 16,367 13,231 Total 22,819 31,198 63,258 91,847 EBITDA $ (45) $ 8,934 $ 2,077 $ 9,655 Pretax income (loss) $ (45) $ 8,934 $ 2,077 $ 9,655 Retention Ratio (1) 18.3% 28.4% 18.2% 28.3% Loss and LAE Ratio (2) 84.5% 74.4% 73.3% 78.4% Expense Ratio (3) 28.4% 26.1% 34.1% 24.4% Combined Ratio (4) 112.9% 100.5% 107.4% 102.8% Ambac's stockholders equity (5) $ 139,575 $ 133,882 (1) Retention ratio is defined as net premiums written divided by gross premiums written (2) Loss and LAE ratio is defined as losses and loss expenses incurred divided by net premiums earned (3) Expense Ratio is defined as acquisition costs and general and administrative expenses, reduced by program fees divided by net premiums earned (4) Combined ratio is defined as Loss and LAE ratio plus Expense Ratio (5) Represents Ambac stockholders equity in the Specialty Property and Casualty Insurance segment, including intercompany eliminations. The Specialty Property and Casualty Insurance segment has grown significantly since underwriting its first program in May 2021. Twenty-five programs were authorized to issue policies as of September 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, nominal losses and loss expenses incurred, and a shift in Everspan's retention ratio in the three and nine months ended September 30, 2025, compared to three and nine months ended September 30, 2024. Partially offsetting these non-renewals was the continued growth in existing programs and addition of new programs. EBITDA and pre-tax income decreased in the three and nine months ended September 30, 2025 compared to September 30, 2024, primarily due to the gain related to the sale of Consolidated Ambac Financial Group, Inc. 36 Third Quarter 2025 Form 10-Q Table of Contents National Insurance Company recognized in 3Q2024, a reduction in earned premium related to program non-renewals and adverse prior period reserve development in 2025 versus 2024, partially offset by lower losses incurred due the program non-renewals. 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 select programs as a reinsurer. 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. Everspan may participate as a reinsurer on up to 30% of a program, which is in line with its strategy to retain up to 30% per program. Participation as a reinsurer will affect the retention ratio as Everspan's portion of assumed premiums is reflected fully in both Gross and Net Premiums Written. The change in the loss ratio was driven by the shift in mix of business in addition to reserve strengthening. The three and nine months ended September 30, 2025, contained prior years loss strengthening equating to 23.2% and 8.8%, respectively, driven primarily by commercial auto liability loss experience on programs which are in runoff, and excess liability loss experience, whereas the three and nine months ended September 30, 2024, contained prior years loss strengthening equating to 0.2% and 3.8%, 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. 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. In addition, our estimate of losses and loss expenses may change. These additional liabilities or increases in estimates, or a range of either, could vary significantly from period to period. In addition to the increase in the Loss and LAE ratio for the three and nine months ended September 30, 2025, compared to the three and nine months ended September 30, 2024, there was a 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 6.9% and 1.9% for the three months ended September 30, 2025 and 2024, respectively and 3.3% and 4.5% for the nine months ended September 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 and nine months ended September 30, 2025, relative to the three and nine months ended September 30, 2024, due to a net increase in headcount and in legal expenses, partially offset by reduced performance on long term incentive compensation. Corporate Corporate consists of our holding company and shared services operations ("Corporate"). Corporate provides financial, legal, 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 $610 and $5,878 for the three months ended September 30, 2025 and 2024, respectively and $1,723 and $13,925 for the nine months ended September 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 $617 and $938 for the three months ended September 30, 2025 and 2024, respectively and $1,735 and $5,928 for the nine months ended September 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 third quarter 2024 gains on FX forward contracts used to mitigate currency risk leading up to the acquisition of Beat. The decline for the nine month period also reflected net investment gains of $3,958 in the nine months ended September 30, 2024 primarily related to 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 impairment. 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 $26,571 and $27,151 for the three months ended September 30, 2025 and 2024, respectively and $55,801 and $59,474 for the nine months ended September 30, 2025 and 2024. Corporate expenses were lower for the three and nine months ended September 30, 2025 compared to three and nine months ended September 30, 2024 mainly due to lower expenses related to corporate development and the sale of AAC. LIQUIDITY AND CAPITAL RESOURCES Holding Company Liquidity 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 $255,951 as of September 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). Ambac Financial Group, Inc. 37 Third Quarter 2025 Form 10-Q Table of Contents September 30, 2025 December 31, 2024 Cash and short-term investments $ 226,931 $ 53,726 Other investments (1) 29,759 29,487 Other net (liabilities) assets (740) 21,218 Total $ 255,951 $ 104,431 (1) Includes strategic minority investments in insurance services businesses of $20,618 at September 30, 2025, and December 31, 2024.. The increase in AFG net assets, excluding its equity investments in subsidiaries, during the first nine months of 2025 was driven primarily by net cash received at the closing of the sale of AAC on September 29, 2025 and related transactions. Additionally, AFG's change in assets reflects 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. • AFG received $420,000 of proceeds from the sale of AAC, plus an additional $4,300, less applicable legal, advisory and other expenses incurred in connection with the Sale. • In connection with the Beat acquisition, Cirrata incurred $150,000 of debt funded by a global bank. Upon the closing of the sale of AAC, AFG repaid the $150,000 loan. • 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 purchased AAC's co-investment at a price resulting in a 7.5% rate of return per annum to AAC. 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 makes tax payments to AFG in accordance with a Tax Sharing Agreement. For the nine months ended September 30, 2025, Everspan paid $2,014 in tax payments to AFG. Cirrata does not have any regulatory restrictions on its ability to make distributions. AFG received distributions from Cirrata of $5,536 and $7,354 during the nine months ended September 30, 2025 and 2024, respectively. AFG's principal uses of liquidity are: (i) the payment of G&A expenses, including costs to explore opportunities to grow and diversify Ambac, (ii) making capital investments to acquire, grow and/or capitalize new and/or existing businesses, including through the acquisition of noncontrolling interests as a result of the exercise of outstanding puts and/or calls, and (iii) making investments in technology and other operational infrastructure to improve the operational effectiveness and efficiency of our business and to support its growth. Funding puts, calls and other capital commitments would require payments from AFG, the magnitude of which will ultimately depend on the performance of the underlying businesses, whether or not the puts or calls are exercised, FX rates and other considerations. AFG would expect the funding requirements for such obligations not to exceed approximately $50,000 in 2026, but such amount could be higher based on those considerations outlined above. AFG seeks to fund these potential puts and calls from internal resources, but may seek to raise additional short-term or long-term funding or capital sources depending on a number of considerations, including distribution levels from subsidiaries, the potential for additional acquisitions, other capital investment demands, stock repurchases and other considerations. AFG may also provide short-term financial support, primarily in the form of loans, to its operating subsidiaries to support their operating requirements. 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, share repurchases or other circumstances could require AFG to seek additional capital (e.g. through the issuance of debt, equity or hybrid securities). In connection with the ArmadaCare acquisition on October 31, 2025, the Company borrowed $120,000 in the form of a five-year $100,000 term loan and a five-year $20,000 revolving credit facility (together, the "Credit Facilities"). The Credit Facilities include covenants that restrict our ability to manage capital resources by requiring maintenance of certain financial ratios and restricting indebtedness, liens, mergers, sales of assets, investments, restricted payments (such as dividends), and affiliate transactions, among other restrictions. The Credit Facility also requires the prepayment of the borrowings thereunder with proceeds of certain asset sales, recovery events, issuances of indebtedness and indemnity payments. These requirements will impact our financial and operational flexibility while the Credit Facility remains in place. See Note 1. Business and Basis of Presentation to the Consolidated Financial Statements included in this Quarterly Report for further detail about the Credit Facilities. Operating Companies' Liquidity Insurance Sources of liquidity for Everspan are primarily funds generated from premiums, reinsurance recoveries, fees, investment income and maturities and sales of investments. Cash provided from these sources is used primarily for claim payments, loss expenses, acquisition costs, operating expenses, reinsurance payments and purchases of securities and other investments. Everspan manages its liquidity risk by projecting cash flows and maintaining specified levels of cash and short-term investments at all times. It is the opinion of the Company’s management that the insurance subsidiaries’ near term liquidity needs will be adequately met from the sources described above. Insurance Distribution The liquidity requirements of our Insurance Distribution subsidiaries are met primarily by funds generated from commission (both base and profit commissions) and fees. Base commissions and fees are generally received monthly, whereas profit commissions are received only if the business underwritten is profitable. Cash provided from these sources is used primarily for commissions paid to sub-producers, operating expenses and distributions to AFG and other members. Cash Held at Banks 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 Ambac Financial Group, Inc. 38 Third Quarter 2025 Form 10-Q Table of Contents than the U.S. Ambac's cash balances held at banks were $51,767 as of September 30, 2025, including cash of Ambac's insurance distribution subsidiaries held in regional banks of $17,002 as of September 30, 2025. Consolidated Cash Flow Statement Discussion The following table summarizes the net cash flows for the periods presented. Nine Months Ended September 30, 2025 2024 Cash provided by (used in): Operating activities $ (51,617) $ 76,394 Investing activities 265,371 (245,673) Financing activities (210,726) 206,832 Foreign exchange impact on cash and cash equivalents — 425 Net cash flow $ 3,028 $ 37,978 Operating Activities for Continuing Operations Operating cash flows during the nine months ended September 30, 2025 and 2024, was $(51,617) and $76,394, respectively. Operating cash flows for the nine months ended September 30, 2025, were adversely impacted by G&A expenses paid relating to acquisition and restructuring costs of $9,283 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, offset by G&A expenses, commission expenses, net claim and loss expense payments and interest payments on debt. Investing Activities for Continuing Operations Investing activities for the nine months ended September 30, 2025 were primarily driven by the proceeds from the sale of AAC and changes in short-term investments. Future investing cash flows will be primarily dependent on acquisition activity and the purchase and sale of securities. Financing Activities for Continuing Operations Financing activities for the nine months ended September 30, 2025, included purchases of common stock of $3,301 and repayment of the Company's short-term borrowing of $150,000. Future financing cash flows will be primarily impacted by financing for the ArmadaCare acquisition, which closed in October 2025; new debt or other capital raising activity; paydowns and maturities of debt; share repurchases, including those executed in October 2025; acquisitions of noncontrolling interest shares; other capital management activity and distributions to noncontrolling interests. Cash Flows from Discontinued Operations Cash flows pertaining to discontinued operations are reported separately on the Consolidated Statements of Cash Flows. The primary driver of the cash flows from discontinued operations was the continued run-off of the financial guarantee business, including the collection of premiums, interest income and subrogation, and the payment of claims, expenses and foreign taxes. Since the agreement to sell AAC, the operations were substantially separated and with the Sale having been completed in September 2025 future reporting period will exclude any discontinued operations activity after September 30, 2025. BALANCE SHEET Total assets decreased by $5,910,488 from December 31, 2024, to $2,147,890 at September 30, 2025, primarily due to the closing of the sale of AAC on September 29, 2025, including net cash consideration received and repayment of the Company's short-term debt. Additionally, reinsurance recoverables increased due to growth and loss reserve strengthening in the specialty P&C business. Total liabilities decreased by approximately $5,862,388 from December 31, 2024, to $1,000,469 as of September 30, 2025, primarily due to the closing of the sale of AAC, repayment the Company's short-term debt, partially offset by an increase in loss and loss adjustment expense reserve and ceded premium payables from the specialty P&C businesses. As of September 30, 2025, total Ambac Financial Group stockholders’ equity was $843,384, compared with total stockholders’ equity of $856,906 at December 31, 2024. The decrease was primarily driven by a total comprehensive loss of $31,495 partially offset by the impact of the issuance of warrants in connection with the sale of AAC. Discontinued Operation: Assets and Liabilities Held-for-Sale. Assets held-for-sale decreased to $— at September 30, 2025, from $6,267,200 as December 31, 2024 as a result of the closing of the Sale. Liabilities held-for-sale increased to $— at September 30, 2025, from $5,887,685 as December 31, 2024 also as a result of the closing of the Sale. 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 September 30, 2025, compared to December 31, 2024. Ambac Financial Group, Inc. 39 Third Quarter 2025 Form 10-Q Table of Contents Investment Portfolio Ambac's investment portfolio is managed under established guidelines designed to meet the investment objectives of the 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 September 30, 2025, and December 31, 2024: September 30, 2025 December 31, 2024 Specialty Property & Casualty Insurance Insurance Distribution Corporate & Other Consolidated Specialty Property & Casualty Insurance Insurance Distribution Corporate & Other Consolidated Fixed maturity securities $ 129,644 $ — $ 1,457 $ 131,101 $ 157,020 $ — $ — $ 157,020 Short-term 42,848 37,055 215,922 295,825 35,727 27,435 64,439 127,601 Other investments — — 28,302 28,302 — 177 28,117 28,294 Total investments $ 172,492 $ 37,055 $ 245,681 $ 455,228 $ 192,247 $ 27,612 $ 92,556 $ 312,915 Ambac invests in various asset classes in its fixed maturity securities portfolio. Refer to Note 4. 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 September 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. Ambac Financial Group, Inc. 40 Third Quarter 2025 Form 10-Q Table of Contents Premium Receivables Ambac's premium receivables increased to $74,760 at September 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 $75,480 at September 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. As of September 30, 2025, and December 31, 2024, reinsurance recoverable on paid and unpaid losses were $440,462 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; and (iii) has certain cancellation rights that can be exercised in the event of rating agency downgrades of a reinsurer (among other events and circumstances). 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 $72,454 from its reinsurers at September 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 $327,986 at September 30, 2025 and (iii) indefinite-lived intangible assets in the Specialty P&C business as part of its acquisitions of $11,213 at September 30, 2025. As of September 30, 2025, and December 31, 2024, intangible assets were $339,197 and $344,775, respectively. The increase is driven by foreign exchange rates (appreciation of the British pound), partially offset by amortization of $27,247. Goodwill As of September 30, 2025, and December 31, 2024, goodwill totaled $445,382 and $418,234 respectively. The increase is primarily driven by foreign exchange rates (appreciation of the British pound). All of the goodwill was assigned to the Insurance Distribution segment. Liabilities Loss and Loss Adjustment Expense Reserves 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 September 30, 2025, and December 31, 2024 September 30, 2025 December 31, 2024 Line Gross Net Gross Net Commercial auto $ 159,820 $ 24,961 $ 158,472 $ 28,720 Excess liability 97,111 14,025 50,248 6,571 General liability 55,136 10,961 35,211 8,286 Workers compensation 18,086 18,086 14,465 14,465 Non-standard personal auto 5,390 5,195 12,689 12,185 Professional Liability 38,365 2,892 17,698 1,807 Surety 15,210 (6) 11,217 6 Unallocated loss adjustment expense reserves 15,638 5,672 12,238 6,578 Other (1) 32,783 978 36,826 363 Loss and Loss Expense Reserves $ 437,539 $ 82,764 $ 349,064 $ 78,980 (1) Includes $28,999 and $0 loss and loss expense reserves on a gross and net of reinsurance basis at September 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 Specialty Insurance Company. All legacy liabilities remain obligations of affiliates of the sellers through reinsurance. The process for determining the level of loss and loss adjustment reserves is subject to certain estimates and judgments. Refer to the "Critical Accounting Policies and Estimates" and “Results of Operations” sections of Management’s Discussion and Analysis of Financial Condition and Results of Operations, in addition to Basis of Presentation and Significant Accounting Policies and Loss Reserves sections included in Note 2. Basis of Presentation and Significant Accounting Policies and Note 8. Insurance Contracts, respectively, of the Consolidated Financial Statements included in Part II, Item 8 in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024, for further information on loss and loss expenses. Short and Long-term Debt Ambac borrowed under a short-term credit facility to provide partial funding of the acquisition of Beat in 2024. This short-term debt was repaid from the proceeds of the sale of AAC in the amount of $150,000. In connection with the acquisition of ArmadaCare on October 31, 2025, Cirrata Group LLC and certain of its subsidiaries (including ArmadaCare) entered into the Credit Facilities, which were fully drawn to pay part of the purchase price for ArmadaCare. See Note 1. Background and Business Description to the Consolidated Financial Statements included in this Quarterly Report for further detail about the Credit Facilities. 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. Commission payable at September 30, 2025, and December 31, 2024 was $109,317 and $71,431, respectively. The increase is primarily due to higher advance commissions due to Syndicates. Ambac Financial Group, Inc. 41 Third Quarter 2025 Form 10-Q Table of Contents Redeemable Noncontrolling Interest (NCI) The minority equity interests of Beat's majority owned MGA/Us were classified within nonredeemable NCI at December 31, 2024. During the three months ended March 31, 2025, Ambac entered into put options on certain of these minority interests that are embedded in the underlying equity instruments. 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 three and nine months ended September 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 Please refer to Note 1. Business and Basis of Presentation to the Unaudited Consolidated Financial Statements included in Part I, Item 1 in this Form 10-Q for a discussion of new accounting pronouncements and the potential impact on Ambac’s financial condition and results of operations. U.S. STATUTORY BASIS FINANCIAL RESULTS AFG's U.S. 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. For further information, see "Everspan Indemnity Insurance Company," in Part II, Item 7. "Management's Discussion and Analysis of Financial Condition and Results of Operations," and Note 9. Insurance Regulatory Restrictions to the Consolidated Financial Statements included in Part II, Item 8 in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024. Everspan Indemnity Insurance Company Everspan Indemnity Insurance Company’s (EIIC) statutory policyholder surplus was $126,460 at September 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 $1,163 during the nine months ended September 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 In addition to reporting the Company’s quarterly financial results in accordance with GAAP, the Company is reporting non-GAAP financial measures: EBITDA, Adjusted EBITDA and Adjusted EBITDA Margin, Organic Revenue Growth Rate (Insurance Distribution segment only), Adjusted Net Income and Adjusted Net Income Margin. These amounts are derived from our consolidated financial information, but are not presented in our consolidated financial results. We present non-GAAP supplemental financial information because we believe such information is of interest to the investment community, and that it provides greater transparency and enhanced visibility into the underlying drivers and performance of our businesses on a basis that may not be otherwise apparent on a GAAP basis. We view these non-GAAP financial measures as important indicators when assessing and evaluating our performance on a segmented and consolidated basis and they are presented to improve the comparability of our results between periods by eliminating the impact of the items that may not be representative of our core operating performance. These non-GAAP financial measures are not substitutes for the Company’s GAAP reporting, should not be viewed in isolation and may differ from similar reporting provided by other companies, which may define non-GAAP measures differently. Beginning December 31, 2024, Ambac replaced the non-GAAP measure Adjusted Net Income with new non-GAAP measures Adjusted Net Income and Adjusted Net Income Margin and added Adjusted EBITDA and Adjusted EBITDA Margin to better align with other participants in the Property & Casualty insurance industry, including insurance carriers and other peers in the insurance distribution business. The following paragraphs define each non-GAAP financial measure. 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) from continuing operations before interest expense, income taxes, depreciation and amortization of intangible assets. EBITDA Margin — EBITDA divided by total revenues. 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. 42 Third Quarter 2025 Form 10-Q Table of Contents Three Months Ended September 30, 2025 Three Months Ended September 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) $ (53) $ (4,506) $ (26,279) $ (30,838) $ 7,990 $ (7,066) $ (20,814) $ (19,890) Adjustments: Add: Interest expense — 6,185 — 6,185 — 3,745 — 3,745 Add: Income tax expense 8 (1,241) (8) (1,241) 944 (883) (928) (867) Add: Depreciation — 145 329 474 — 206 475 681 Add: Intangible amortization — 9,272 — 9,272 — 6,423 — 6,423 EBITDA (45) 9,855 (25,958) (16,148) 8,934 2,425 (21,267) (9,908) Add: Impact of noncontrolling interests — (3,927) — (3,927) — (557) — (557) EBITDA attributable to shareholders (45) 5,928 (25,958) (20,075) 8,934 1,868 (21,267) (10,465) Net income margin (0.2) % (10.4) % NM (46.3) % 19.9 % (29.4) % NM (28.4) % Net income margin attributable to shareholders (0.2) % (12.5) % NM (47.6) % 19.9 % (22.1) % NM (25.9) % EBITDA margin (0.2) % 22.8 % NM (24.2) % 22.3 % 10.1 % NM (14.2) % EBITDA margin attributable to shareholders (0.2) % 13.7 % NM (30.1) % 22.3 % 7.8 % NM (14.9) % Add: Acquisition and integration related expenses — — 229 229 — — 14,854 14,854 Add: Equity-based compensation expense 94 100 5,953 6,147 157 — 2,376 2,533 Add: Severance and restructuring expense — — 8,875 8,875 — 248 1,653 1,901 Add: Other non-operating (income) losses — — 2,008 2,008 (7,500) — 582 (6,918) Adjusted EBITDA $ 49 $ 9,955 $ (8,893) $ 1,111 $ 1,591 $ 2,673 $ (1,802) $ 2,462 Adjusted EBITDA attributable to shareholders $ 49 $ 5,988 $ (8,893) $ (2,856) $ 1,591 $ 2,116 $ (1,802) $ 1,905 Adjusted EBITDA Margin 0.2 % 23.0 % NM 1.7 % 4.0 % 11.1 % NM 3.5 % Adjusted EBITDA Margin attributable to shareholders 0.2 % 13.9 % NM (4.3) % 4.0 % 8.8 % NM 2.7 % Nine Months Ended September 30, 2025 Nine Months Ended September 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) $ 1,799 $ (14,237) $ (53,692) $ (66,129) $ 8,632 $ (2,095) $ (44,513) $ (37,976) Adjustments: Add: Interest expense — 17,209 — 17,209 — 3,745 — 3,745 Add: Income tax expense 278 (3,922) (386) (4,030) 1,023 (756) (1,034) (767) Add: Depreciation — 343 1,074 1,417 — 230 1,401 1,631 Add: Intangible amortization — 27,247 — 27,247 — 8,701 — 8,701 EBITDA 2,077 26,640 (53,004) (24,286) 9,655 9,825 (44,146) (24,666) Add: Impact of noncontrolling interests — (11,132) — (11,132) — (1,907) — (1,907) EBITDA attributable to shareholders 2,077 15,508 (53,004) (35,418) 9,655 7,918 (44,146) (26,573) Net income margin 2.8 % (12.1) % NM (35.9) % 8.5 % (3.8) % NM (22.3) % Net income margin attributable to shareholders — % — % NM — % 8.5 % (2.2) % NM (21.8) % EBITDA margin 3.2 % 22.7 % NM (13.2) % 9.5 % 17.8 % NM (14.5) % EBITDA margin attributable to shareholders 3.2 % 13.2 % NM (19.2) % 9.5 % 14.4 % NM (15.6) % Add: Acquisition and integration related expenses — 375 1,310 1,685 — — 25,827 25,827 Add: Equity-based compensation expense 241 167 9,422 9,830 282 — 6,252 6,534 Add: Severance and restructuring expense — 60 13,612 13,672 — 248 6,990 7,238 Add: Other non-operating (income) losses — (591) 2,008 1,417 (7,500) — (3,845) (11,345) Adjusted EBITDA $ 2,319 $ 26,647 $ (26,652) $ 2,314 $ 2,439 $ 10,067 $ (8,921) $ 3,585 Adjusted EBITDA attributable to shareholders $ 2,319 $ 15,599 $ (26,652) $ (8,734) $ 2,439 $ 8,160 $ (8,921) $ 1,678 Adjusted EBITDA Margin 3.5 % 22.7 % NM 1.3 % 2.4 % 18.2 % NM 2.1 % Adjusted EBITDA Margin attributable to shareholders 3.5 % 13.3 % NM (4.7) % 2.4 % 14.8 % NM 1.0 % 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. Organic revenue growth is the change in organic revenue period-to-period, with prior period results adjusted to (i) include Ambac Financial Group, Inc. 43 Third Quarter 2025 Form 10-Q Table of Contents commissions and fees that were excluded from organic revenue in the prior period and reached the twelve-month owned mark in the current period, and (ii) exclude commissions and fees related to divestitures from organic revenue. 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 September 30, 2025 2024 % Growth Total Insurance Distribution revenue & growth percentage (1) $ 43,222 $ 23,995 80.1 % Less: Acquired revenues (6,206) — Less: Profit commission and contingent commission income (1,940) (1,319) Less: impact of F.X. rates (1,041) 1,636 Total Organic Revenue & Growth Percentage $ 34,035 $ 24,312 40.0 % Nine Months Ended September 30, 2025 2024 % Growth Total Insurance Distribution revenue & growth percentage (1) $ 117,261 $ 55,166 112.6 Less: Acquired revenues (43,955) — Less: Profit commission and contingent commission income (8,897) (3,642) Less: impact of F.X. rates 2,643 1,636 Total Organic Revenue & Growth Percentage $ 67,052 53,160 26.1 % (1) Total Insurance Distribution revenue includes investment income. Adjusted Net Income and Adjusted Net Income Margin — We define Adjusted net income as net income (loss) from continuing operations attributable to Ambac adjusted for 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 non-recurring income and loss items that, in the opinion of management, significantly affect the period-over-period assessment of operating results, and the related tax effect of those adjustments. Per share amounts exclude any impact of revaluing non-controlling interests as otherwise reported under GAAP earnings per share. We believe that adjusted net income is an appropriate measure of operating performance because it eliminates the impact of income and expenses that may obfuscate business performance. Three Months Ended September 30, 2025 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) $ (53) $ (4,506) $ (26,279) $ (30,838) $ 7,990 $ (7,066) $ (20,814) $ (19,890) Adjustments: Add: Acquisition and integration related expenses — — 229 229 — — 14,854 14,854 Add: Intangible amortization — 9,272 — 9,272 — 6,423 — 6,423 Add: Equity-based compensation expense 94 100 5,953 6,147 157 — 2,376 2,533 Add: Severance and restructuring expense — — 8,875 8,875 — 248 1,653 1,901 Add: Other non-operating (income) losses — — 2,008 2,008 (7,500) — 582 (6,918) Adjusted net income (loss) before tax and NCI 41 4,866 (9,214) (4,307) 647 (395) (1,349) (1,097) Income tax effects — (2,067) — (2,067) — — — — Adjusted net income (loss) before NCI 41 2,799 (9,214) (6,374) 647 (395) (1,349) (1,097) Net (income) loss attributable to noncontrolling interest — (3,583) — (3,583) — (557) — (557) Adjusted net income (loss) attributable to shareholders $ 41 $ (784) $ (9,214) $ (9,957) $ 647 $ (952) $ (1,349) $ (1,654) Three Months Ended September 30, 2025 2024 Specialty Property & Casualty Insurance Insurance Distribution Corporate & Other Consoli-dated Specialty Property & Casualty Insurance Insurance Distribution Corporate & Other Consoli-dated Net income (loss) margin (0.2) % (10.4) % NM (46.3) % 19.9 % (29.4) % NM (28.4) % Adjusted Net income (loss) attributable to Ambac stockholders margin 0.2 % (1.8) % NM (14.9) % 1.6 % (4.0) % NM (2.4) % Ambac Financial Group, Inc. 44 Third Quarter 2025 Form 10-Q Table of Contents Nine Months Ended September 30, 2025 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) $ 1,800 $ (14,241) $ (53,691) $ (66,132) $ 8,634 $ (2,095) $ (44,516) $ (37,977) Adjustments: Add: Acquisition and integration related expenses — 375 1,310 1,685 — — 25,827 25,827 Add: Intangible amortization — 27,336 — 27,336 — 8,701 — 8,701 Add: Equity-based compensation expense 241 167 9,422 9,830 282 — 6,252 6,534 Add: Severance and restructuring expense — 60 13,612 13,672 — 248 6,990 7,238 Add: Other non-operating (income) losses — (591) 2,008 1,417 (7,500) — (3,845) (11,345) Adjusted net income (loss) before tax and NCI 2,041 13,106 (27,339) (12,192) 1,416 6,854 (9,292) (1,022) Income tax effects (15) (3,959) 15 (3,959) — — — — Adjusted net income (loss) before NCI 2,026 9,147 (27,324) (16,151) 1,416 6,854 (9,292) (1,022) Net (income) loss attributable to noncontrolling interest — (10,395) — (10,395) — (1,907) — (1,907) Adjusted net income (loss) attributable to common shareholders $ 2,026 $ (1,248) $ (27,324) $ (26,546) $ 1,416 $ 4,947 $ (9,292) $ (2,929) Nine Months Ended September 30, 2025 2024 Specialty Property & Casualty Insurance Insurance Distribution Corporate & Other Consoli-dated Specialty Property & Casualty Insurance Insurance Distribution Corporate & Other Consoli-dated Net income (loss) margin 7.9 % (32.9) % NM (99.3) % 8.5 % (3.8) % NM (22.3) % Adjusted Net income (loss) attributable to Ambac stockholders margin 8.9 % (2.9) % NM (39.9) % 1.4 % 9.0 % NM (1.7) % Item 3. Quantitative and Qualitative Disclosure About Market Risk As of September 30, 2025, there are no material changes in the market risks that the Company is exposed to compared to December 31, 2024.