Octave Specialty Group Inc: Form 10-Q for the period ended Sep 30, 2025

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:

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.

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:

($ in thousands)

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 wholly-owned subsidiary of AFG, to Buyer for $420,000 in cash (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, 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:

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

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 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:

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

(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 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:

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

(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

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).

(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.

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.

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.

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.

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 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):

(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.

Ambac Financial Group, Inc. 44 Third Quarter 2025 Form 10-Q

Item 5. Other Information — In the last fiscal quarter, none of our directors or executive officers adopted, terminated, or modified any Rule 10b5-1 trading arrangement, or any non-Rule 10b5-1 trading arrangement.

At the 2025 Annual Meeting of Stockholders held on May 28, 2025, the Company's stockholders recommended, by a non-binding advisory vote, that a stockholder vote to approve the compensation of our named executive officers should occur every year. In accordance with the stockholders' recommendation, the Company has determined that an advisory vote on the compensation of our named executive officers will be conducted every year, until the next required vote on the frequency of stockholder votes on the compensation of our named executive officers.

No other matters require disclosure.

In connection with the preparation of this third quarter Form 10-Q, an evaluation was carried out by Ambac’s management, with the participation of Ambac’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of Ambac’s disclosure controls and procedures (as defined in rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) as of the end of the period covered by this Quarterly Report on Form 10-Q. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives. Based on its evaluation, Ambac’s Chief Executive Officer and Chief Financial Officer have concluded that, as of September 30, 2025, Ambac’s disclosure controls and procedures were effective.

Management has formally incorporated Beat Capital Partners Limited into Ambac's program for internal control over financial reporting effective August 1, 2025. Accordingly, Beat is included in the scope of management's control assessments beginning with the third quarter of 2025.

The Company completed the sale of AAC on September 29, 2025 (refer to Sale of AAC in the Overview section of Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations). Subsequent to the Sale, AAC continued to perform certain services for the Company under a transition support agreement between the parties. These services included certain accounting and information technology activities

that supported the preparation of the Company's Unaudited Consolidated Financial Statements included in Part 1 of this Form 10-Q.

Effective January 1, 2025, Ambac Financial Group, Inc. changed the general ledger and consolidation system and certain related processes used for a substantial portion of its continuing operations. Additional entities comprising AFG's continuing operations will be converting onto the new general ledger system in 2025 and 2026. As part of its implementation, the Company evaluated the impact of this new system on its internal control over financial reporting and made changes to controls and procedures where necessary.

There were no other changes in our internal control over financial reporting during the first nine months of 2025 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Subsequent to the sale of Ambac's Legacy Financial Guarantee Insurance business on September 29, 2025, the Company revised the Risk Factors presented in Item 1A to Part I in our Annual Report on Form 10-K for the year ended December 31, 2024, to represent the Risk Factors applicable to the Company as of September 30, 2025. Please also see the section entitled “Cautionary Statement Pursuant to the Private Securities Litigation Reform Act of 1995” in this quarterly report on Form 10-Q.

Our risk factors are organized in the following sections:

Risks Related to AFG Common Shares

The price per share of AFG's common stock may be subject to a high degree of volatility, including significant price declines.

Although AFG's common stock is listed on the New York Stock Exchange ("NYSE"), there can be no assurance as to the liquidity of the trading market or the price at which such shares can be sold. The price of the shares may decline substantially in response to a number of events or circumstances, including but not limited to:

• adverse developments in our financial condition or results of operations;
• changes to regulatory status;
• changes in investors’ or analysts’ valuation measures for our stock;
• adverse changes in analysts’ recommendations regarding our stock;
• market perceptions of our success, or lack thereof, in building and managing our Specialty Property and Casualty Insurance and Insurance Distribution businesses and our business strategy and tactics more generally;
• the impact or perceived impact of any acquisition, disposition or other strategic transaction, including entry into a new line of business or the value or long-term prospects of the Company;
• adverse developments in the industries and markets in which we operate, including the property and casualty insurance, underwriting and brokerage industries, or the fixed income and equity capital markets;
• adverse market and/or economic conditions, such as those caused by a recession or inflation, which increase our risk of loss on insurance policies and depress the value and/or liquidity of our investments and other assets;
• adverse developments in current or future litigations; and
• results and actions of other participants in our industries.

The price of AFG's shares may also be affected by the risks described below. Investments in AFG's common stock may be subject to a high degree of volatility.

Ambac is planning to further develop and expand its Specialty Property and Casualty Insurance and Insurance Distribution businesses; however, such plans may not be realized, or if realized, may not create value and may negatively impact our financial results.

Ambac is planning to further develop and expand its Specialty Property and Casualty Insurance and Insurance Distribution businesses. Such plans may involve additional acquisitions of assets or existing businesses and the development of businesses through new or existing subsidiaries. Currently, it is not possible to fully predict the future prospects or other characteristics of such businesses. We may not be able to successfully identify opportunities, attract specialized underwriting and other talent, and operationalize new businesses in a timely or cost-efficient manner. While we expect to conduct business, financial and legal due diligence in connection with the evaluation of any future business or acquisition opportunities, there can be no assurance our due diligence will identify every matter that could have a material adverse effect on us. Efforts to pursue or develop certain business opportunities may be unsuccessful or require significant financial or other resources, which could have a negative impact on our growth plans, operating results and financial condition. To implement our growth strategy, we must be able to meet our capital needs, expand and refine our systems and our internal controls effectively, allocate our human resources optimally, identify and hire qualified employees and effectively integrate any acquisitions we make in our effort to achieve growth. No assurance can be given that Ambac will successfully execute its plans for new business, generate any earnings or value from new businesses or be able to successfully integrate any such business into our current operating structure. The failure to manage our growth effectively could have a material adverse effect on our business, financial condition and results of operations.

Our inability to successfully manage ongoing organizational changes could adversely impact our business results. We may experience higher levels of costs or disruption in managing these changes, which may cause the benefits derived from our business development strategy to be less than we originally expect.

Should changes in Ambac’s circumstances or financial condition or in the political, economic and/or legal environment occur, there can be no assurance that all or any part of our strategy and/or initiatives will not be abandoned or adjusted to take account of such changes. Any such adjustment or abandonment may have a material adverse effect on our securities.

Risks Related to the Company's Business

We are subject to reputational harm if companies with which we do business engage in negligent or fraudulent behaviors and damage to our reputation could materially adversely impact our business.

Our business depends on contractual and working relationships with insurance distribution partners, insurance carriers, reinsurers, policyholders and beneficiaries, third party administrators, and other agents and counterparties. We could suffer material financial loss, reputational harm and/or a loss of business prospects if a business partner, agent or counterparty engages in negligent or fraudulent conduct, whether directly in our relationship with them or indirectly as a result of their conduct in other business relationships.

Ambac may be adversely impacted by P&C industry market cycles.

Ambac’s P&C businesses are subject to market cycles. Premium pricing in the commercial property and casualty insurance markets has been historically based on underwriting capacity of insurance carriers, general economic conditions, inflation, and other factors. In recent years, we have been in a “hard” market whereby carriers have been raising rates. However, we have observed that in certain lines of business the rate of pricing increase has slowed or begun to decrease. If carriers lower premium rates more broadly this would be referred to as a “softening” or “soft” market. Given that Ambac generates revenue from both insurance premiums and commissions that are based on insurance premiums, our revenues are affected by the cyclicality of the markets in which we operate. If we enter a soft market, absent mitigating factors, we may experience a reduction in revenues and profits.

Catastrophic events may cause volatility of net income and comprehensive income primarily through changes to loss reserves, which may not be adequate to cover potential losses, and declines in revenues. Revenue may be adversely impacted by reduced business activity and lower sliding scale and profit commissions.

Catastrophic events, whether natural or man-made, including natural disasters and environmental and public health events that result in material disruption of economic activity, loss of human life or significant property damage, can have a materially negative impact on our financial and operational performance. Such stresses could result in liquidity strains or permanent losses.

Everspan may be exposed to losses arising out of unpredictable catastrophic events. These include natural catastrophes and other disasters, such as hurricanes, earthquakes, windstorms, floods, wildfires, and severe winter weather. Catastrophes can also include man-made disasters, such as terrorist attacks and other destructive acts, war, political unrest, explosions, cyber-attacks, nuclear, biological, chemical or radiological events and infrastructure failures. A severe catastrophe or a series of catastrophes could result in losses exceeding Everspan’s reinsurance protection and may have a material adverse impact on our results of operations or financial condition.

Changing weather patterns and climate change have added to the unpredictability, frequency and severity of weather-related catastrophes incurred by the property and casualty insurance industry in recent years. These changing weather patterns make it more difficult to predict and model catastrophic events, reducing our ability to accurately price exposure to such events and mitigate its risks.

Catastrophic events may cause significant volatility in the markets in which we operate. Disruptions to these markets could result in a decline in business activity, increased claims, reduced underwriting capacity from insurance companies, reinsurers and other capital providers upon which our P&C businesses are reliant. Catastrophic events may also interrupt the operations of

our agents and business partners that distribute our P&C insurance products. Profit commissions and contingent commissions related to certain of our P&C business lines may also be adversely impacted by catastrophic losses. Individually and/or collectively, these results may have a material adverse impact on our results of operations and financial condition.

Further, we use internally developed and third-party vendor tools and models to assess exposure to losses, including catastrophic losses. The models assume various conditions and probability scenarios and may not accurately predict future losses or measure losses currently incurred. Limitations in these tools and models may adversely affect our results of operations and financial condition.

The ultimate impact of a catastrophic event on insurers and their obligations, and the economy in general, is by its very nature uncertain, and will be determined by a number of factors including, but not limited to, the depth and duration of a particular crisis; the extent to which affected consumers, businesses, municipal entities and other debtors or sources of revenues recover from depressed economic circumstances, and the timelines for such recoveries; the level and efficacy of government intervention or support for affected persons or entities and the financial markets via emergency relief measures; the availability of insurance; the availability of cost-effective financing; management of public health crisis remediation efforts; the effectiveness of other public or private crisis management efforts, mitigation measures or support; and certain socio-economic variables, such as unemployment levels. Consequently, if following such catastrophic events we do not have sufficient resources or financial flexibility, receive adequate measures of support or realize the appropriate level of economic recovery, our ultimate ability to operate could be materially impaired and we could suffer material permanent losses and therefore may have an adverse effect on our results of operations and financial condition. Counterparties that service aspects of our business may be similarly impacted and, if their operations are impaired due to a catastrophe, it may be difficult or costly to us to find alternatives to such servicing capabilities.

We could realize losses from our cash and investment accounts if one of the financial institutions we use fail or is taken over by regulators.

We maintain cash and investment accounts, including premium trust accounts, at depository institutions in amounts in excess of the limits insured by the FDIC. If one or more of these institutions were to fail or be taken over by federal regulators, our access to these funds could be limited and we could experience liquidity problems and potential financial losses.

Our risk management policies and practices may not adequately identify significant risks.

As described in Part I, Item 1, “Risk Management” in our Annual Report on Form 10-K for the year ended December 31, 2024, we have established risk management policies and practices which seek to mitigate our exposure to a variety of risks. These policies and practices in the past have not insulated us from risks that were unforeseen and which had unanticipated loss severity, and such policies and practices may not do so in the future. There can be no assurance that these policies and practices will be adequate to avoid future losses. If we are not able to identify significant risks, we may not be able to timely mitigate such risks, thereby increasing the amount of losses to which we are exposed. An inability to identify significant risks could also result in the failure to timely establish loss reserves that are sufficient in relation to such risks.

We operate within an enterprise risk management (“ERM”) framework designed to assess and monitor risks. However, no assurance can be given that we will effectively identify, review, monitor or manage all relevant risks. Nor can we provide assurance that our ERM framework will result in us accurately identifying all risks and adequately limiting our exposures based on our assessments. Any ineffectiveness in our controls or procedures or failure to manage these risks may have an adverse effect on our results of operations and financial condition.

We are subject to the risk of litigation and the outcome of proceedings we are or may become involved in could have a material adverse effect on our business, operations, financial position, profitability or cash flows.

Please refer to Note 13. Commitments and Contingencies of the Unaudited Consolidated Financial Statements located in Part I, Item 1 in this Form 10-Q and Note 19: Commitments and Contingencies in Part II, Item 8 in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024, for a discussion on legal proceedings against Ambac and its subsidiaries.

It is not possible to predict the extent to which litigation against AFG or one or more subsidiaries will be filed, and it is also not possible to predict the outcome of litigation. It is possible that there could be unfavorable outcomes in existing or future proceedings. Management may be unable to make meaningful or reasonable estimates of the amount or range of losses that could result from unfavorable outcomes or of the expenses that will be incurred in connection with such lawsuits. Under some circumstances, adverse results in any such proceedings and/or the incurring of significant litigation or other expenses could be material to our business, operations, financial position, profitability or cash flows.

Everspan may be subject to disputes with policyholders regarding the scope and extent of coverage offered under Everspan's policies; be required to defend claimants in suits against its policyholders for covered liability claims; face allegations of improper claims handling; or enter into commercial disputes with its reinsurers, MGA/Us or TPAs regarding their respective contractual obligations and rights. Under some circumstances, the results of such disputes or suits may lead to liabilities beyond those which are anticipated or reserved, including liabilities in excess of policy limits.

Political developments may materially adversely affect our business.

Our Specialty Property and Casualty Insurance subsidiaries are highly regulated as insurance carriers in the States of their domicile and the jurisdictions in which they are licensed. Our owned MGA/Us and insurance brokerage subsidiaries are also required to maintain certain entity-level licenses in those jurisdictions and/or the international countries in which they operate, as well as licenses of individual officers or representatives that are essential to their ability to conduct

business. Each of the foregoing must also comply with laws generally applicable to insurance entities, including those relating to governance, capital, and operational requirements.

Government laws and regulations applicable to our businesses develop and change rapidly in response to consumer demands and public policies. State legislatures and insurance departments place increasing burdens on insurance carriers and producers with respect to matters such as cybersecurity, data privacy, management of technology, corporate governance, environmental and social issues, and enterprise risk management. Such laws and regulations require substantial resources to ensure that the Company has appropriate and effective compliance programs in place. If we are unable to keep pace with changes in applicable law and regulations, or if we otherwise fail in our compliance efforts, the Company may be subject to fines, sanctions, governmental orders or modifications to business practices that individually or collectively impair our business or increase our costs, possibly materially.

In addition, the Company from time to time receives various regulatory inquiries and requests for information, and its insurance carrier subsidiaries are subject to examination by regulatory authorities. It is not possible to predict the extent to which additional regulatory inquiries or requests for information will be made, nor the outcome of inquiries, requests for information or examination, which exposes the Company to potential fines, sanctions, governmental orders or modifications to business practices that individually or collectively impair our business or increase our costs, possibly materially.

Everspan may not be successful in executing its business plans or may experience greater than expected insurance underwriting losses and/or reinsurance counterparty losses, which could result in losses material to Everspan's capital position, a downgrade of its AM Best rating and a loss of its franchise value. Such events could have a material adverse impact on the value of AFG's shares.

Everspan is in the early stage of developing a portfolio of specialty insurance program business. Its business plan entails establishing programs with program administrators, MGA/Us, with claims handled by TPAs. The success of these programs is dependent upon the quality of insurance risk underwritten by the MGA/Us, the quality of underwriting and operational performance, as well as oversight, of the MGA/Us and TPAs by Everspan, the quality and creditworthiness of reinsurance obtained with respect to the underlying risks, loss experience over time, premium levels, competition and other factors, some of which are outside Everspan's control. Should Everspan fail in executing its business plans or experience greater than expected losses due to operational issues, poor risk selection, default or failure to perform by reinsurers, failure to timely realize ultimate loss exposure, a departure of qualified MGA/Us from the industry, enhanced scrutiny from regulators or ratings agencies specific to the program business model, failure to collect amounts due to it or other factors, Everspan may suffer losses that are material to its capital position, a downgrade in its AM Best rating and/or a loss of its franchise value. Any such outcomes could have a material adverse impact on the value of AFG's shares.

A downgrade in the AM Best financial strength rating of Everspan may negatively affect our business.

The financial strength of Everspan is evaluated by AM Best, which issues an "FSR," an important factor in establishing the competitive position of Everspan. The FSR reflects AM Best’s opinion of Everspan's financial strength, operating performance, strategic position and ability to meet obligations to policyholders, and are not evaluations directed to investors. Everspan's FSR is subject to periodic review, and the criteria used in the rating methodologies are subject to change. All of the insurance companies that comprise Everspan are rated "A-" (Excellent). A downgrade in Everspan's FSR could make it more difficult to sell insurance policies and Everspan's distribution channels may cease to transact with them, which would adversely affect our business, financial condition and results of operations.

Failure of Everspan's Program Partners to properly market, underwrite or administer policies could adversely affect us.

The marketing, underwriting, administration and servicing of policies in our Specialty Property and Casualty Insurance business have been contracted to the MGA/Us with which Everspan transacts. Any failure by the MGA/Us or TPAs to properly handle these functions could result in liability to us. Even though the MGA/Us and TPAs with which Everspan transacts may be required to indemnify Everspan for any such liability or monetary losses, there are risks for which indemnity may be insufficient or entirely unavailable if, for example, the relevant program partner becomes insolvent or is otherwise unable to pay us. Furthermore, any failure to properly handle the marketing, underwriting, administration and servicing of policies in our Specialty Property and Casualty Insurance business could also create regulatory issues or harm our reputation, which could materially and adversely affect our business, financial condition and results of operations.

If in our Specialty Property and Casualty Insurance business we are unable to accurately underwrite risks and charge competitive yet profitable rates to our clients and policyholders, our business, financial condition and results of operations may be adversely affected.

In general, the premiums for our Specialty Property and Casualty Insurance policies are established at the time a policy is issued and, therefore, before all of our underlying costs are known. Like other property and casualty insurance companies, Everspan relies on estimates and assumptions in setting its premium rates. Establishing adequate premium rates is necessary, together with investment income, to generate sufficient revenue to offset losses, loss adjustment expenses, acquisition costs and general and administrative expenses in order to earn a profit. The rate environment is also subject to market cycles, which can be difficult to predict and make it difficult to adequately price risk. If Everspan does not accurately assess the risks that it assumes, it may not charge adequate premiums to cover its losses and expenses, which would adversely affect our results of operations and our profitability. Alternatively, Everspan could set its premiums too high, which could reduce its competitiveness and lead to lower policyholder retention, resulting in lower revenues. Pricing is a highly complex exercise involving the acquisition and analysis of historical loss data and the projection of future trends, loss costs, expenses, and inflation trends, among other factors, for each of Everspan's products in multiple risk tiers and many

different markets. Everspan seeks to implement its pricing accurately in accordance with its assumptions. Everspan's ability to undertake these efforts successfully and, as a result, to accurately price its policies, is subject to a number of risks and uncertainties, including insufficient or unreliable data; incorrect or incomplete analysis of available data; uncertainties generally inherent in estimates and assumptions; failure to implement appropriate actuarial projections and ratings formulas or other pricing methodologies; regulatory constraints on rate increases; failure to accurately estimate investment yields and the duration of liabilities for losses and loss adjustment expenses; disagreements with reinsurers or the MGA/Us with whom Everspan transacts as to the adequacy of pricing assumptions; and unanticipated court decisions, legislation or regulatory action.

If Everspan is unable to obtain reinsurance coverage at reasonable prices or on terms that adequately protect it, we may be required to bear increased risks or reduce the level of our underwriting commitments.

Everspan purchases reinsurance as part of its overall risk management strategy. While reinsurance does not discharge our insurance subsidiaries from their obligations to pay claims for losses insured under their insurance policies, it does make the reinsurer liable to them for the reinsured portion of the risk. At the inception of a new program, Everspan generally acts as an issuing carrier and reinsures a majority of such risk to third parties in contracts that are generally subject to term limitations or termination rights. Everspan may be unable to maintain its current reinsurance arrangements or to obtain other reinsurance in adequate amounts and at favorable rates, particularly if reinsurers become unwilling or unable to support our specialty property and casualty business in the future. Additionally, market conditions beyond our control may impact the availability and cost of reinsurance and could have an adverse effect on our business, financial condition and results of operations. A decline in the availability of reinsurance may increase the cost of reinsurance and materially and adversely affect our business prospects. Everspan may, at certain times, be forced to incur additional costs for reinsurance or may be unable to obtain sufficient reinsurance on acceptable terms or from reinsurers which satisfy Everspan's criteria as acceptable security. In the latter case, Everspan would have to accept an increase in exposure to risk, reduce the amount of business written by it or seek alternatives in line with Everspan's risk limits, all of which could adversely affect our business, financial condition and results of operations.

Our insurance carriers are subject to reinsurance counterparty credit risk. Their reinsurers may not pay on losses in a timely fashion, or at all.

Our insurance carrier subsidiaries purchase reinsurance to transfer part of the risk they have underwritten to reinsurance companies in exchange for part of the premium they receive in connection with the risk. Although reinsurance makes reinsurers liable to our carriers for the risk transferred or ceded to the reinsurers, it does not relieve our insurance carrier subsidiaries of their liabilities to policyholders. Accordingly, our insurance carrier subsidiaries are exposed to credit risk with respect to their reinsurers, especially to the extent reinsurance receivables are not sufficiently secured by collateral or do not benefit from other credit enhancements. Our insurance carrier subsidiaries also bear the risk that they are unable to receive, or there is a substantial delay in receiving, the reinsurance recoverable for any reason, including that the terms of the reinsurance contract do not reflect the intent of the parties to the contract; there is a disagreement between the parties as to their intent; the terms of the contract cannot be legally enforced; the terms of the contract are interpreted by a court or arbitration panel differently than intended by our insurance carrier subsidiaries; the reinsurance transaction performs differently than our insurance carrier subsidiaries anticipated due to a flawed design of the reinsurance structure, terms or conditions; or changes in law and regulation, or in the interpretation of laws and regulations, affects a reinsurance transaction. These risks may be exacerbated to the extent that our insurance carrier subsidiaries' reinsurance recoverables are overly concentrated with one or a small subset of reinsurers.

The insolvency of one or more of our insurance carrier subsidiaries' reinsurers, or their inability or unwillingness to make timely payments if and when required under the terms of reinsurance contracts, could adversely affect our business, financial condition and results of operations.

Everspan’s insurance carriers may be subject to counterparty credit risk associated with its MGA/U distribution partners.

Everspan may be subject to the risk that its MGA/U program partners fail to meet their financial obligations to Everspan or policyholders as it relates to premiums payable, return premiums, sliding scale commissions and return commissions. This risk may be exacerbated to the extent that Everspan has financial obligations to its reinsurers under reinsurance agreements that do not absolve Everspan of for credit risk or non-payment by the MGA/U program partner.

The insolvency of one or more of our MGA/U program partners, or their inability or unwillingness to make timely payments if and when required under the terms of program agreements, could adversely affect our business, financial condition and results of operations.

If actual claims exceed loss and loss adjustment expense reserves for Everspan, or if changes in the estimated level of loss and loss adjustment expense reserves are necessary, including as a result of, among other things, changes in the legal/tort, regulatory and economic environments in which Everspan operates, our financial results could be materially and adversely affected.

The objective of establishing loss reserve estimates is not to, and our loss reserves do not, reflect worst possible outcomes. While our reserving is estimated based on experience and using various actuarial methods and assumptions, our loss reserves may change materially based on future developments. As a result of inherent uncertainties in the estimates and judgments made to determine loss reserves, there can be no assurance that actual losses will not exceed such reserves or that our reserves will not materially change over time as circumstances, events, our assumptions, or our models change.

Loss and loss adjustment expense reserves represent management estimates of what the ultimate settlement and administration of claims will cost. These estimates are developed using common and industry accepted actuarial techniques. Nevertheless, the process of estimating loss and loss adjustment expense reserves involves a high degree of judgment and is subject to a number of

variables, which can be affected by internal and external events, such as changes in claims handling, changes in loss cost trends, catastrophic events and social inflation.

Elevated social inflation trends are likely to continue. Social inflation, which includes increased litigation, partially supported by access to litigation financing; changes in social norms; an erosion of the public sentiment towards insurers’ interpretation of coverage levels and limits; and increased damage awards by juries, may make it difficult for Everspan to estimate loss reserves, establish adequate product pricing, and maintain a strong competitive position with consumers.

Moreover, the impact of catastrophic events may not be adequately reflected in claims reserves and, accordingly, could adversely impact results. Catastrophic losses are caused by wind and hail, wildfires, tornadoes, hurricanes, tropical storms, earthquakes, severe freeze events, volcanic eruptions, terrorism, cyber attacks, civil unrest, and industrial accidents and other such natural and man made events.

We also face potential exposure to various types of new and emerging tort claims which were not known or anticipated when our insurance products were originally priced.

The impact of many of these items on ultimate costs for claims and claim adjustment expense reserves could be material and is difficult to estimate.

Our ability to grow Everspan will depend in part on the addition of new Program Partners, and our ability to effectively onboard such new Program Partners could have an adverse effect on our business, financial condition and results of operations.

Our ability to grow Everspan will depend in part on the addition of new MGA/U partners. If Everspan does not effectively and timely source, evaluate and onboard new MGA/Us, including assisting such MGA/Us to quickly resolve any post-onboarding matters and provide effective ongoing support, Everspan's ability to add new MGA/Us and its relationships with its existing Program Partners could be adversely affected. Additionally, Everspan's reputation with potential new MGA/Us could be damaged if it fails to effectively onboard MGA/Us with whom it has signed definitive legal agreements. Such reputational damage could make it more difficult for Everspan to attract new and retain existing program partners, which could have an adverse effect on our business, financial condition and results of operations.

We compete with a large number of companies in the property and casualty insurance industry for underwriting premium.

We compete with a large number of companies in the property and casualty insurance industry for underwriting premium. During periods of intense competition for premium, in particular, our Specialty Property and Casualty Insurance and Insurance Distribution businesses may be challenged to maintain competitiveness with other companies that may seek to write policies without the same regard for risk and profitability targeted by our Specialty Property and Casualty Insurance and Insurance Distribution businesses. During these times, it may be difficult for Everspan or our MGA/Us to grow or maintain premium volume without the unattractive options of lowering underwriting standards, sacrificing income, or both.

In addition, our Specialty Property and Casualty Insurance and Insurance Distribution businesses face competition from a wide range of specialty insurance companies, underwriting agencies and intermediaries, as well as diversified financial services companies that are significantly larger than our Specialty Property and Casualty Insurance and Insurance Distribution businesses are and that have significantly larger financial, marketing, management and other resources. Some of these competitors also have longer standing and better established market recognition than Ambac's group companies. The greater resources or market presence that these competitors possess may enable them to avoid or defray particular costs, employ greater pricing flexibility, have a higher tolerance for risk or loss, or exploit other advantages that may make it more difficult for us to compete. We may incur increased costs in competing for underwriting revenues in this environment. If we are unable to compete effectively in the markets in which our Specialty Property and Casualty Insurance and Insurance Distribution businesses operate or expand into, our underwriting revenues may decline, as well as overall business results.

Other competitive concerns include the entrance of technology companies into the insurance distribution business and the direct-to-consumer insurance carriers that do not utilize third party agents and brokers as production sources. Additionally, the insurance industry may experience consolidation, and therefore we may experience increased competition from insurance companies and the financial services industry, as a growing number of larger financial institutions increasingly, and aggressively, offer a wider variety of financial services, including insurance distribution services. While we collaborate and compete in these segments on a fee-for-service basis, we cannot be certain that such alternative markets will provide the same level of insurance coverage or profitability as traditional insurance markets.

Technological changes to the way insurance is distributed, underwritten, and administered also present competitive risks. For example, our competitive position could be impacted if we are unable to cost-effectively deploy technology, such as machine learning and artificial intelligence, which collects and analyzes large sets of data to make underwriting or other decisions, or if our competitors collect and use data which we do not have the ability to access or use. In addition, usage-based methods of determining premiums (e.g., telematics) can impact product pricing and design and are becoming an increasingly important competitive factor. The landscape of law and regulation governing these areas presents additional risk to the extent we are unable to timely adapt to ensure compliance.

We may be adversely affected by failures in services or products provided by third parties.

We outsource and may further outsource certain technology and business process functions, and rely upon third-party vendors, agents and contractual counterparties for other essential services and information. Outsourcing functions to third parties exposes us to increased risk related to service disruptions. If we do not effectively develop, implement and monitor our vendor, agency and contractual counterparty relationships and the financial condition of such third parties, if third party providers do not perform as anticipated, if we experience technological or other problems, or if vendor, agency or other contractual relationships

relevant to our business process functions are terminated, we may not realize expected productivity improvements or cost efficiencies and may experience operational difficulties, increased costs and a loss of business. Further, we may suffer financial losses if a counterparty defaults on a financial obligation to us, including with respect to insurance agency commissions which adjust over time. Moreover, policyholders and claimants may suffer delays or lapses in service levels which may create extra-contractual exposures. The increased risks identified above could expose us to disruption of service, monetary and reputational damages, competitive disadvantage and significant increases in compliance costs. A material failure by an external service provider, information provider, agent or counterparty, or a material defect or default in the products, services or information provided thereby, could adversely affect our financial condition and results of operations.

Our outsourcing of certain technology and business process functions to third parties may expose us to increased risk related to data security, service disruptions or the effectiveness of our control system. These risks could increase as vendors increasingly offer cloud-based software services rather than software services which can be run within our data centers or as we choose to move additional functions to the cloud.

Impairment of intangible assets and goodwill, resulting from acquisitions, could adversely affect our results of operations.

In connection with Ambac’s acquisition of insurance distribution businesses (MGA/Us and brokers), Ambac recorded the fair value of identifiable intangible assets (primarily related to distribution relationships) and goodwill. The intangible assets will be amortized over their remaining useful lives. The Company will test intangible assets for impairment if certain events occur or circumstances change indicating that the carrying amount of the intangible asset may not be recoverable. Goodwill will be tested for impairment annually or whenever events occur or circumstances change that may indicate impairment. Intangible asset and goodwill impairments are driven by a variety of factors, which could include, among other things, declining future cash flows of the acquired business as addressed in other risk factors related to the Insurance Distribution Business. Any intangible asset or goodwill impairment could adversely affect the Company's operating results and financial condition.

Our Insurance Distribution businesses derive a significant portion of their commission revenues from a limited number of insurance companies and Lloyd's syndicates, the loss of any of which could result in lower commissions or loss of business production.

The commissions of our MGA/Us and insurance broker are derived from insurance policies underwritten on behalf of a limited number of capacity providers, including insurance and reinsurance companies, Lloyd’s syndicates and other capital providers. Should one or more of these capacity providers terminate its arrangements with our Insurance Distribution businesses or otherwise decrease the amount of capacity provided, we may lose significant commission revenues or lose significant business production while seeking other sources of capacity.

A number of our MGA/Us have material relationships with Lloyd’s Syndicates 4242, and to a lesser extent Cadenza Re

Limited, which are risk carriers that are serviced by Ambac group entities. A reduction in scale and/or appetite of these carriers whether in response to underwriting performance, regulatory considerations, availability of underwriting capital support, or otherwise may result in a loss of significant commission revenues. Furthermore, these carriers form the cornerstone capacity for some of our MGA/Us new launches and hence a deterioration in their activities will further inhibit new MGA/U launches.

Our Insurance Distribution businesses, results of operations, financial condition and liquidity may be materially adversely affected by certain potential claims or proceedings.

Our owned MGA/Us and insurance brokerage operating subsidiaries are subject to various potential claims and other proceedings, including those relating to alleged errors and omissions in connection with the placement or servicing of insurance and/or the provision of services in the ordinary course of business, of which we cannot, and likely will not be able to, predict the outcome with certainty. Because our MGA/Us and insurance brokerage operating subsidiaries often assist customers with matters involving substantial amounts of money, including the placement of insurance and the handling of related claims that customers may assert, errors and omissions, claims against it may arise alleging potential liability for all or part of the amounts in question. Also, the failure of an insurer with whom our MGA/Us and insurance brokerage operating subsidiaries place business could result in errors and omissions claims against it by its customers, which could adversely affect Ambac’s results of operations and financial condition. Claimants may seek large damage awards, and these claims may involve potentially significant legal costs and damages. In addition, regardless of monetary costs, these matters could have a material adverse effect on our reputation and cause harm to carrier, customer or employee relationships, or divert personnel and management resources.

Acquiring new MGA/Us is core to our Insurance Distribution business strategy. Risks associated with such endeavors could adversely affect our growth and results of operations.

Acquisitions have been an important contributor of growth in the Insurance Distribution business and we believe that additional acquisitions will be important to future growth, building further operational scale and diversifying our sources of revenue. Failure to successfully identify and complete acquisitions likely would result in us achieving slower growth and less operating scale. Moreover, the failure of acquisition targets to achieve anticipated revenue and earnings levels could result in slower than anticipated growth and result in intangible asset or goodwill impairment charges.

Future growth of our Insurance Distribution business is highly dependent upon, amongst other items, our ability to launch de novo MGA/MGUs, which is highly dependent on our ability to attract insurance talent, operationalize new MGA/MGUs and compete for business.

The market for insurance underwriting talent and MGA/MGU leadership talent has become increasingly competitive. If we are not able to attract and/or retain such talent to launch and maintain de novo MGA/MGUs, our ability to grow may be materially constrained and the intangible and goodwill assets we recorded in

connection with the acquisition of Beat may become impaired. Any such impairment could be materially adverse to our results of operations and financial condition. Even if we are able to attract underwriting and leadership talent to launch de novo MGA/MGUs, there can be no guarantees that each de novo MGA/MGU will be successful or that we will be able to operationalize each business. Product and technological complexity have increased the challenges of starting de novo MGA/MGUs and could in the future increase the launch time and investment needed to improve the chances of success. Competition for premium has also increased, particularly as market conditions have begun to soften in certain segments. If markets continue to soften or such conditions spread to a broader set of risk classes, competition for premiums may increase further, making the launch of de novo MGA/MGU more challenging. While Ambac has access to managed capacity, de novo MGA/MGUs rely on access to insurance capacity for the risks they write. If Ambac were not able to source the capital needed to support the insurance risk underwritten by de novo MGA/MGUs, we would not be able to generate revenues to offset the expenses incurred to establish such de novo MGA/MGUs and we may experience losses.

Ambac may not be able to realize expected synergies from acquisitions.

Ambac’s assessment of acquisitions often includes an estimate of the value of revenue, expense and operating synergies that may be created from the acquisition. If due to market, economic, technological, cultural, regulatory or other reasons Ambac is not able to fully realize expected synergies or its valuation of such synergies otherwise proves incorrect, we may not realize the full expected value of an acquisition, which in turn may lead to lower than expected profits, material adverse results from operations and/or a weakened financial condition.

Changes in law or in the functioning of the healthcare market could significantly impair our Accident & Health insurance business and therefore negatively impact Ambac’s financial condition and results of operations.

Adoption of a single payer healthcare system or a public health insurance option would likely adversely impact the entire healthcare industry. While our Accident & Health insurance business has historically demonstrated an ability to adjust its products to major changes in the healthcare industry, such business would likely be adversely impacted by such a material change in the U.S. healthcare system particularly if private health insurance is eliminated, materially limited, or is rendered noncompetitive. Material adverse developments to our Accident & Health insurance business would have a negative impact on Ambac's financial condition and results of operations which could be material.

Our Insurance Distribution businesses and their results of operations and financial condition may be adversely affected by conditions that result in reduced insurance capacity.

Our Insurance Distribution business results of operations depend on the capacity of insurance carriers (including Lloyd’s of London), reinsurers and other capital providers to assume risk and provide coverage. Capacity among insurance carriers, reinsurers and other capital providers may diminish because of our performance or due to factors outside our control. For example, capacity could be reduced by insurance companies failing or withdrawing from writing certain coverages that our Insurance Distribution businesses offer to their customers. To the extent that reinsurance becomes less widely available or significantly more expensive, we may not be able to procure the amount or types of coverage that our customers desire and the coverage we are able to procure for our customers may be more expensive or limited.

Variations in commission income that results from the timing of policy renewals and the net effect of new and lost business production may have unexpected effects on our results of operations.

Commission income can vary quarterly or annually due to the timing of policy renewals and the net effect of new and lost business production. We do not solely control the factors that cause these variations. Specifically, customers’ demand for insurance products can influence the timing of renewals, new business and lost business (which includes policies that are not renewed), and cancellations. Quarterly and annual fluctuations in revenues based upon increases and decreases associated with the timing of new business, policy renewals and payments from insurance companies may adversely affect our financial condition, results of operations and cash flows.

Variations in contingent commissions that results from the effects of insurance loss activity on portfolios may result in significant variations in revenues.

Profit-sharing contingent commissions are paid by insurance companies based upon the profitability of the business placed with such companies. In the past these commissions have accounted for a significant amount of total commissions and fees. Due to, among other things, the inherent uncertainty of loss and changes in underwriting criteria by insurance companies, there will be a level of uncertainty related to the payment of profit-sharing contingent commissions.

System security risks, data protection breaches and cyber-attacks could adversely affect our business and results of operations.

We and our vendors and contractual counterparties rely on our information technology systems for many enterprise-critical functions and a prolonged failure or interruption of these systems for any reason could cause significant disruption to our operations and have a material adverse effect on our business, financial condition and operating results. Our information technology and application systems, as well as those of our vendors and contractual counterparties, may be vulnerable to threats from computer viruses, natural disasters, unauthorized access, cyber-attack and other similar disruptions. Computer hackers may be able to penetrate our network’s system security, or the network's security system of a vendor or contractual counterparty, and misappropriate or compromise confidential information, create system disruptions or cause shutdowns. The ability of hackers to infiltrate and compromise our and our vendors' and contractual counterparties' information systems or the contents thereof may be enhanced by generative artificial intelligence, which may be more difficult to detect and defend. In addition to our own confidential information, we and our vendors and contractual counterparties sometimes receive and are required to protect confidential information obtained from third parties (including us in the case of a vendor or contractual counterparty) and

personally identifiable information of individuals. To the extent any disruption or security breach results in a loss or damage to our data (or the data of a vendor or contractual counterparty on which we rely), or inappropriate disclosure of our confidential information or that of others, or personally identifiable information of individuals, it could cause significant financial losses that are either not, or not fully, insured against, cause damage to our reputation, affect our relationships with third parties, lead to claims against us, result in regulatory action, or otherwise have a material adverse effect on our business or results of operations. In addition, we may be required to incur significant costs to mitigate the damage caused by any security breach, or to protect against future damage. Moreover, although we have incident response, disaster recovery and business continuity plans in place, we may not be able to adequately execute these plans in a timely fashion in the event of a disruption to our information technology and application systems. Additionally, we are an acquisitive organization and the process of integrating the information systems of the businesses we acquire is complex and exposes us to additional risk as we might not adequately identify weaknesses in the targets’ information systems, which could expose us to unexpected liabilities or make our own systems more vulnerable to attack.

The application of innovative and solution-based technology is required to facilitate effective operations and to realize internal efficiencies; however, the investment required in technology may not yield sufficient returns and the implementation of new or modified technology may be a material distraction to management.

Our business performance and growth plans could be negatively affected if we are not able to, among other things, gain internal efficiencies through the application of effective technology across our businesses, integrate operations, and/or innovate product and operational solutions. Conversely, investments in internal systems or innovative product offerings may fail to yield sufficient return to cover their investment. To the extent our investments in technology fail to provide sufficient returns or achieve their stated business objectives, we may experience lower productivity and/or operational effectiveness, which could adversely impact our financial results and prevent us from meeting our strategic objectives.

Our ability to attract and retain qualified executives, senior managers and other employees or the loss of any of these personnel could negatively impact our business.

Our ability to execute on our business strategies depends on the retention and recruitment of qualified executives and other professionals. We rely substantially upon the services of our current executive and senior management teams. In addition to these officers, we rely on key staff with insurance, underwriting, business development, credit, risk management, investment, accounting, finance, legal, technology and other technical and specialized skills. The market for qualified executives, senior managers and other employees has become very competitive. As a result of competition for talent we may experience higher employee turnover and finding qualified replacements may be more difficult. The loss of the services of members of our executive and/or senior management teams, our inability to hire and retain other talented personnel and/or the absence of effective management succession plans could delay or prevent us from succeeding in executing our strategies, which could negatively impact our business.

Our business could be negatively affected by actions of stakeholders whose interests may not be aligned with the broader interests of our stockholders.

Ambac could be negatively affected as a result of actions by stakeholders whose interests may not be aligned with the broader interests of our stockholders, and responding to any such actions could be costly and time-consuming, disrupt operations and divert the attention of management and employees. Such activities could interfere with our ability to execute on our strategic plans.

We are exposed to foreign exchange risk, which may adversely affect our financial condition and results of operation.

A significant portion of our Insurance Distribution business is operated out of the U.K where our functional currency is the British pound (“GBP”). However, the majority of our revenues are generated in U.S. dollars (“USD”). As a result, movements in the rate of exchange between GBP and USD may materially distort our financial results and cause losses that are not attributable to the underlying business. We frequently hedge this foreign exchange risk through forward contracts; however, these hedges may not completely negate the adverse impact of foreign exchange movements.

Our P&C businesses rely on a limited number of retail and wholesale brokers to generate revenue and the loss of one or more of these key partners could adversely impact our results of operations and growth objectives.

Our relationship with retail and wholesale brokers and other trading partners (collectively, “Brokers”) are nonexclusive and may be discontinued at any time by either party. In addition, any of these parties may change the terms of our relationship which would cause our commission expense to increase.

The loss of a Broker could reduce the number of submissions we receive which could result in reduced commission revenue. Our business could also be harmed if we fail to develop relationships with new Brokers or other sources of business.

A reduction in the number of Brokers, whether as a result of the termination of relationships, consolidation or otherwise, may leave us more vulnerable to adverse changes in our relationships with other Brokers, particularly in geographies or lines of business where we offer insurance products through a relatively small number of Brokers.

Risks Related to Capital, Liquidity and Credit Markets

AFG and the Insurance Distribution business have substantial indebtedness, resulting from the acquisition of ArmadaCare on October 31, 2025, which could adversely affect our financial condition, operational flexibility and our ability to obtain financing in the future.

The Company funded a significant portion of the purchase price of ArmadaCorp Capital, LLC and its subsidiaries through new term loan and revolving credit facilities (the "Credit Facilities"). The Credit Facilities are secured by substantially all of the assets of, and the Company's ownership interests in, our Insurance Distribution businesses, and guaranteed by AFG.

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 Facilities also require 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 Facilities remains in place.

The Company’s substantial indebtedness could have other significant consequences for our financial condition and operational flexibility. For example, it could:

• increase our vulnerability to general adverse economic, competitive and industry conditions;
• limit our ability to obtain additional financing in the future for working capital, capital expenditures, acquisitions, general corporate purposes or other purposes on satisfactory terms or at all;
• require the Company to dedicate a substantial portion of its cash flow from operations to the payment of interest on its indebtedness, thereby reducing the funds available for operations and to fund the execution of key strategies;
• limit or restrict the Company from making strategic acquisitions or cause us to make non-strategic divestitures;
• limit the Company's ability, or increase the costs, to refinance its indebtedness or repay indebtedness due to ongoing interest payment obligations; and
• limit our ability to attract and retain key employees.

While restrictive covenants in the Credit Facilities may limit the amount of additional indebtedness the Company may incur, we may obtain waivers of those restrictions and incur additional indebtedness in the future. In addition, our ability to make scheduled payments on, or refinance, any such indebtedness may depend on the ability of our subsidiaries to make distributions or pay dividends, which in turn will depend on their future operating performance and applicable contractual, legal and regulatory restrictions on the payment of distributions or dividends. There can be no assurance that any such dividends or distributions would be made. This could further exacerbate the risks associated with the Company’s substantial leverage.

The Company intends to service indebtedness under the Credit Facilities from earnings and cash flow generated by the Insurance Distribution businesses. In the event the Insurance Distribution businesses fail to produce sufficient earnings and cash flow to pay the Company's indebtedness when due, the Company would need to seek to modify the terms of the Credit Facilities, refinance or restructure its indebtedness, or raise additional capital. There can be no assurance that the Company will be able to adequately address a shortfall in its debt-servicing capacity through such measures on commercially reasonable terms or at all. Moreover, if the Company were able to address a shortfall in its debt servicing capacity through one or more of these measures, it may incur substantial additional costs or burdens, including additional collateral or restrictions on its business, which could cause a material adverse impact on the Company's results of operations and financial condition.

Furthermore, raising additional capital to pay down debt through the issuance of equity or other debt would depend on market and economic conditions, may dilute the ownership of existing stockholders and potentially diminish the ability of the Company to access the capital markets in the future. Moreover, raising additional capital through the sale of assets would depend on market and economic conditions; the availability of buyers; the requirements and conditions of local law, including regulatory restrictions; and other factors that may result in the Company or a party enforcing rights against the Company to be unable to receive proceeds sufficient to discharge the Company’s obligations. Because of these and other factors beyond our control, the Company may be unable to pay or discharge the principal or interest on its indebtedness on economic terms or at all, which would materially impair the value of the Company.

We may have future capital needs and may not be able to obtain third-party financing or raise additional third-party capital on acceptable terms, or at all.

An inability to obtain third-party debt financing or raise additional third-party capital, when required by us or when business conditions warrant, could have a material adverse effect on our business, financial condition and results of operations, and could adversely impact our ability to achieve our strategic objectives. Our financial condition, the Risk Factors described elsewhere herein, as well as other factors, may constrain our financing abilities. Our ability to secure third-party financing will depend upon our future operating performance, regulatory conditions, the availability of credit generally, economic conditions and financial, business and other factors, many of which are beyond our control. The market conditions and the macroeconomic conditions that affect our business could have a material adverse effect on our ability to secure third-party financing on favorable terms, if at all.

If third-party financing is not available when needed, or is available on unfavorable terms, we may be unable to take advantage of business opportunities, respond to competitive pressures or effectively and efficiently manage our balance sheet, any of which could have a material adverse effect on our business, financial condition and results of operations.

Ambac has significant obligations as the counterparty to several put contracts related to redeemable minority interests in our Insurance Distribution business. Obligations under these put contracts may be material and may require Ambac to raise third party capital to fund.

If a counterparty exercises a put right, we would be required to make a cash payment, which could be substantial, at a time when we may not have sufficient cash resources to fund all or a portion of such obligation. As a result, we may be required to raise additional capital or liquidity to fund these obligations. Raising additional capital or liquidity may be dilutive to shareholders or may be otherwise very expensive. As a result, raising the capital or liquidity to fund these obligations may have a material adverse effect on our results of operations and financial condition. Alternatively, to fund the put payment, we may be forced to liquidate other assets, which may be less liquid exposing us to the risk of loss. Our ability raise capital or liquidity would depend on

market conditions at the time and there can be no assurance that we will be able to raise the capital necessary to fund these put obligations. .

Changes in prevailing interest rate levels and market conditions could adversely impact our business results and prospects.

Increases in prevailing interest rate levels can adversely affect the value of our investment portfolio and, therefore, our financial strength. In the event that investments must be sold in order to pay claims, to pay debt obligations, to meet collateral posting requirements or to meet other liquidity needs, such investments would likely be sold at discounted prices.

Our risk to changes in interest rates and market conditions could be magnified in the event that the US or UK were to enter into an economic recession. While interest rates may decline during a recession, credit and liquidity risks would be expected to increase which may cause us to experience losses in our investment portfolios. These losses may have a material adverse affect on our results of operations and financial condition, particularly if any economic rescission were prolonged.