AMBAC FINANCIAL GROUP INC

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).

(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

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.

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.