AMBAC FINANCIAL GROUP INC

Consolidated Results

A summary of our financial results is shown below:

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:

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

•In the fourth quarter of 2024, the pending sale of AAC was determined to qualify for discontinued operations presentation, resulting in its results being 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 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.

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.

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.

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.

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 thethree 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. 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 $3,652 and $2,567 for the three months ended March 31, 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 is a function of growth of business and related premiums 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 $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.

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 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; (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.

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.

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.

General and Administrative Expenses (G&A). The following table provides a summary of G&A expenses for the periods presented:

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.

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.

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.

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.

Results of Operations by Segment

(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-six programs were authorized to issue policies as of March 31, 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. 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. 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 generally 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. 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 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. 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 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. 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

(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, 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. 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. 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.

Corporate

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 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.

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.