AMBAC FINANCIAL GROUP INC

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.

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:

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.

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

(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.

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.