AMBAC FINANCIAL GROUP INC

Holding Company Liquidity

AFG is a holding company 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 $119,214 as of December 31, 2024, and $146,583, as of December 31, 2023, 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).

(1)Includes strategic debt and minority equity investments in insurance services businesses of $20,617 and $26,420 at December 31, 2024 and 2023, respectively.

The decrease in AFG net assets, excluding its equity investments in subsidiaries, during 2024 was driven by net cash outflows for the acquisition of Beat Capital Partners Limited ("Beat"), transaction costs associated with the sale of AAC, and other operating expenses, partially offset by interest income and distributions received from Insurance Distribution 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 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. The Credit Facility includes covenants that restrict our ability to manage capital resources by limiting, among other actions, the issuance of debt or capital stock; the creation of liens; the disposition of assets; engaging in transactions with affiliates; making restricted payments, including dividends

and the purchase or redemption of capital stock; and making acquisitions and other investments. The Credit Facility also requires the prepayment of the borrowings thereunder with proceeds of certain debt or equity issuances and certain asset sales. These requirements will impact our financial and operational flexibility while the Credit Facility remains in place.

•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 the near term.

•Under an inter-company cost allocation agreement, AFG is reimbursed by its subsidiaries, including AAC through the date of its sale, for a portion of certain operating costs and expenses

•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 receipt of regulatory approval and the satisfaction of certain obligations senior to AFG's equity interest.

•Cirrata does not have any regulatory restrictions on its ability to make distributions. AFG received distributions from Cirrata of $10,739 and $8,032 during the years ended December 31, 2024 and 2023.

Subject to the required approvals for the sale of AAC as described in Note 5. Discontinued Operation, AFG will receive proceeds of $420,000. From the proceeds, AFG, is required to purchase AAC's co-investment ($62,000 plus a 7.5% return from the date of funding) in Cirrata V LLC, the holding company established to acquire Beat, repay the Credit Facility ($150,000 plus any accrued and unpaid interest) and pay other transaction expenses.

AFG's principal uses of liquidity are: (i) the payment of operating expenses, including interest on indebtedness and costs to explore opportunities to grow and diversify Ambac and (ii) making capital investments to acquire, grow and/or capitalize new and/or existing businesses; such capital investments include investments in technology to support the efficient operation of our Specialty Property and Casualty Insurance and Insurance Distribution businesses.

•Funding puts, calls and other capital commitments could require payments from AFG, the magnitude of which may depend on the performance of the underlying businesses and other considerations, of approximately $358,000 through 2030.

•AFG may also provide short-term financial support, primarily in the form of loans, to its operating subsidiaries to support their operating requirements. AFG supported the development of the Specialty Property and Casualty Insurance business, and its acquisitions, with cash contributions of $6,000 to the Everspan group of companies during the year ended December 31, 2023.

In the opinion of the Company’s management, the net assets of AFG are currently sufficient to meet AFG’s current liquidity requirements. However, events, opportunities or circumstances could arise that may cause AFG to seek additional capital (e.g. through the issuance of debt, equity or hybrid securities).

Operating Companies' Liquidity

Insurance:

Sources of liquidity for Everspan are primarily through 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.

Consolidated Cash Flow Statement Discussion

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

Operating Activities for Continuing Operations

Operating cash flows during the year ended December 31, 2024 were adversely impacted by transaction related costs for the acquisition of Beat and the sale of AAC, together with interest payments on Cirrata's short term borrowing. Operating cash flows for the year ended December 31, 2023, were lower than 2022 primarily due to the receipt of accrued interest in connection with the sale of AAC surplus note investments during 2022, partially offset by growth in the Everspan and Cirrata businesses.

Future operating cash flows will primarily be impacted by net premium collections, investment coupon receipts, fee and net commission revenues, operating expenses, net claim and loss expense payments and debt interest payments.

Investing Activities for Continuing Operations

Investing activities for the year ended December 31, 2024, included net cash used in the Beat acquisition of $243,776 and net cash proceeds from the sale of CNIC of $14,119.

Investing activities for the years ended December 31, 2023, and December 31, 2022 included net cash used in MGA/U acquisitions of $6,953 and $18,442, respectively.

Financing Activities for Continuing Operations

Financing activities for the year ended December 31, 2024, included borrowing of $147,000 under a short-term credit facility and receipt of a $62,000 co-investment from AAC (discontinued operation) to fund the acquisition of Beat and share repurchases of $11,698. Concurrent with the AAC Sale, AFG will purchase AAC's co-investment for an amount equal to AAC's $62,000 investment plus 7.5% per annum thereon.

Financing activities for the years ended December 31, 2023, and December 31, 2022, included share repurchases of $4,510 and $14,217, respectively.

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. Since the agreement to sell AAC, the operations have been substantially separated and the potential impacts on future liquidity to the continuing operations are expected to be insignificant.