Ambac Financial : First Quarter 2024 Highlights

First Quarter 2024

Investor Presentation

Quarterly Highlights

Forward Looking Statement

In this presentation, we have included statements that may constitute "forward-looking statements" within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Words such as "estimate," "project," "plan," "believe," "anticipate," "intend," "planned," "potential" and similar expressions, or future or conditional verbs such as "will," "should," "would," "could," and "may," or the negative of those expressions or verbs, identify forward-looking statements. We caution readers that these statements are not guarantees of future performance. Forward-looking statements are not historical facts but instead represent only our beliefs regarding future events, which may by their nature be inherently uncertain and some of which may be outside our control. These statements may relate to plans and objectives with respect to the future, among other things which may change. We are alerting you to the possibility that our actual results may differ, possibly materially, from the expected objectives or anticipated results that may be suggested, expressed or implied by these forward-looking statements. Important factors that could cause our results to differ, possibly materially, from those indicated in the forward-looking statements include, among others, those discussed under "Risk Factors" .

Any or all of management's forward-looking statements here or in other publications may turn out to be incorrect and are based on management's current belief or opinions. Ambac Financial Group's ("AFG") and its subsidiaries' (collectively, "Ambac" or the "Company") actual results may vary materially, and there are no guarantees about the performance of Ambac's securities. Among events, risks, uncertainties or factors that could cause actual results to differ materially are: (1) the high degree of volatility in the price of AFG's common stock; (2) uncertainty concerning the Company's ability to achieve value for holders of its securities, whether from Ambac Assurance Corporation ("AAC") and its subsidiaries or from the specialty property and casualty insurance business, the insurance distribution business, or related businesses; (3) inadequacy of reserves established for losses and loss expenses and the possibility that changes in loss reserves may result in further volatility of earnings or financial results; (4) potential for rehabilitation proceedings or other regulatory intervention or restrictions against AAC; (5) credit risk throughout Ambac's business, including but not limited to credit risk related to insured residential mortgage-backed securities, student loan and other asset securitizations, public finance obligations (including risks associated with Chapter 9 and other restructuring proceedings), issuers of securities in our investment portfolios, and exposures to reinsurers; (6) our inability to effectively reduce insured financial guarantee exposures or achieve recoveries or investment objectives; (7) AAC's inability to generate the significant amount of cash needed to service its debt and financial obligations, and its inability to refinance its indebtedness; (8) AAC's substantial indebtedness could adversely affect the Company's financial condition and operating flexibility; (9) Ambac may not be able to obtain financing or raise capital on acceptable terms or at all due to its substantial indebtedness and financial condition; (10) greater than expected underwriting losses in the Company's specialty property and casualty insurance business; (11) failure of specialty insurance program partners to properly market, underwrite or administer policies; (12) inability to obtain reinsurance coverage on expected terms; (13) loss of key relationships for production of business in specialty property and casualty and insurance distribution businesses or the inability to secure such additional relationships to produce expected results; (14) the impact of catastrophic public health, environmental or natural events, or global or regional conflicts; (15) credit risks related to large single risks, risk concentrations and correlated risks; (16) risks associated with adverse selection as Ambac's financial guarantee insurance portfolio runs off; (17) the risk that Ambac's risk management policies and practices do not anticipate certain risks and/or the magnitude of potential for loss; (18) restrictive covenants in agreements and instruments that impair Ambac's ability to pursue or achieve its business strategies; (19) adverse effects on operating results or the Company's financial position resulting from measures taken to reduce financial guarantee risks in its insured portfolio; (20) disagreements or disputes with Ambac's insurance regulators; (21) loss of control rights in transactions for which we provide financial guarantee insurance; (22) inability to realize expected recoveries of financial guarantee losses; (23) risks attendant to the change in composition of securities in Ambac's investment portfolio; (24) adverse impacts from changes in prevailing interest rates; (25) events or circumstances that result in the impairment of our intangible assets and/or goodwill that was recorded in connection with Ambac's acquisitions; (26) factors that may negatively influence the amount of installment premiums paid to Ambac; (27) the risk of litigation, regulatory inquiries, investigations, claims or proceedings, and the risk of adverse outcomes in connection therewith; (28) the Company's ability to adapt to the rapid pace of regulatory change; (29) actions of stakeholders whose interests are not aligned with broader interests of Ambac's stockholders; (30) system security risks, data protection breaches and cyber attacks; (31) regulatory oversight of Ambac Assurance UK Limited ("Ambac UK") and applicable regulatory restrictions may adversely affect our ability to realize value from Ambac UK or the amount of value we ultimately realize; (32) failures in services or products provided by third parties; (33) political developments that disrupt the economies where the Company has insured exposures; (34) our inability to attract and retain qualified executives, senior managers and other employees, or the loss of such personnel; (35) fluctuations in foreign currency exchange rates; (36) failure to realize our business expansion plans or failure of such plans to create value; (37) greater competition for our specialty property and casualty insurance business and/or our insurance distribution business; (38) loss or lowering of the AM Best rating for our property and casualty insurance company subsidiaries; (39) disintermediation within the insurance industry or greater competition from technology-based insurance solutions or non-traditional insurance markets; (40) changes in law or in the functioning of the healthcare market that impair the business model of our accident and health managing general underwriter; and (41) other risks and uncertainties that have not been identified at this time.

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Overview

Ambac Financial Group, Inc. (NYSE: AMBC) is a financial services holding company headquartered in New York City with shareholders' equity of $1.37 billion1. Ambac's core operating business is a growing specialty P&C distribution and program underwriting platform. Ambac also has a legacy financial guarantee business in run-off.

	Ambac's Specialty P&C Platform
Everspan	Cirrata	Redgrove	Ambac Assurance and
Specialty Property	Insurance Distribution	Strategic Investments in Insurtech &	Ambac UK
Legacy Financial Guarantee Insurance
& Casualty Insurance		Insurance Services
Specialty Property & Casualty Insurance	Insurance Distribution Segment2	Corporate and Other2	Legacy Financial Guarantee Insurance Segment2
Segment2

1. Ambac common stockholders' equity as of March 31, 2024

• 2. As reported in most recent Form 10-K

Specialty P&C: A Diversified, Capital Light Specialty Platform

• Ambac's growing Specialty P&C Platform includes its program insurer ("Everspan"), specialty program insurance distribution business ("Cirrata") and strategic minority investments ("Redgrove")
• The growth strategy for the Specialty P&C Business is to take advantage of the rapidly expanding U.S. program market in a capital efficient manner
• Everspan's program solutions utilize Managing General Agents ("MGAs") and Managing General Underwriters ("MGUs") as its primary distribution channel
• Cirrata acquires majority stakes in MGA/MGUs and brokers, and incubates de novo MGA/MGUs
• Ambac made strategic investments in several tech-enabled and other insurance distribution businesses which are complimentary and/or synergistic with our Specialty P&C operations. These investments are also expected to provide attractive returns on investment

Everspan

MGA/MGU program underwriting solutions

Specialty P&C

Platform

Creating value at every level of the MGA/MGU value chain

Cirrata

Majority stakes in MGA/MGUs and brokers

Redgrove

Minority stakes in

Insurtech and

insurance related

businesses

4

2024 Strategic Priorities

AFG

Everspan Insurance

Cirrata

Legacy Financial Guarantee

• Grow and maximize shareholder value over medium and long term
• Strategically deploy capital to support and expand the Specialty P&C Platform
• Optimize the strategic value of corporate investments

Increasing Enterprise

Value

• GPW+$400 million forecast in 20241,2
• Target Underwriting profitability
• Target mid-teens ROE at scale and over the cycle1,2
• Mid-singledigit ROE in 20241,2

Compounding Book

Value

• Premiums placed+$300 millionforecast in 20241,2
• Target+$60 million revenue in 20241,2
• Strive for double-digit organic growth
• Target +20%EBITDA margins1

Accelerating EBITDA

Growth

• Moelis & Company engaged to discuss potential transactions with interested 3rd parties
• Continue to de-risk and de-lever the balance sheet
• Source of future growth capital

Maximizing Economic

Value

Delivering Long-Term Value Through Re-deployment of Capital and Profitable Growth

1. Forward looking targets and projections subject to change. Targets and projections may not be realized and are not meant to provide guarantees of performance. Please refer to Ambac's most recent quarterly and annual reports on forms 10-Q and 10-K for more information about Ambac's business and related risk factors
2. Subject to market conditions

5

Select Partnerships and Strategic Investments

Everspan

3Q21	1Q22	2Q22		4Q22	4Q22
3Q22

4Q22

4Q21

4Q22

1Q23

1Q23

2Q23

Cirrata

Strategic Investments

4Q20	4Q22	3Q23

Confidential

MGA

3Q22

4Q22

4Q21

3Q22

3Q22

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Projected MGA/U Growth Provides Compelling Opportunity

Ambac's Specialty P&C Platform is poised to benefit from growth in the MGA/U market

U.S. MGA

$68 bn Market1 14%

U.S. MGA Direct Premium Written

($bn)1

U.S. MGA Premium Distribution by

MGA Size2

2022 DPW

YoY Growth

Historical Trends1,2,3

•	The MGA market nearly doubled in size between 2014-2022
•	Loss ratios for MGAs are consistently lower than P&C insurance carriers

$70								$59	$68
$60
					$48	$51
$50
$38	$40	$39	$43	$44
$40
$30
$20
14	15	16	17	18	19	20	21	22

22.0% 25.0%

12.0%

41.0%

<$100M $100M - $500M $500M - $1B >$1B

• A quarter of the premium placed by MGAs comes from small firms
(those with under $100 million in premium)
• In 2021, the U.S. market was estimated to have over 1,000 MGAs with
700 identified in statutory filings and another 350 estimated to fall below
the filing threshold
1.	AM Best, Delegated Underwriting Authority Enterprise Market Review, Apr 27, 2023
2.	AON, MGAs: a Market on the Move, https://mga.aon.com/2022-mgas-on-the-move/

• 3. Conning, Managing General Agents: Firing on All Cylinders, www.tinyurl.com/2cnbbs8p

MGA Focused and P&C Loss Ratios by Business Line (2010-2020)2

80%							73% 75%	68%69%
			60%	60% 64%				69% 69%	64%64%
60%		55%
39%
40%
29%
20%
Credit,	Property	Professional	A&H	Casualty	Motor	Workers
	Surety,				Liability						Comp
	Bonds
						MGA Focused			P&C Market

Rising Demand for Specialty Risk Coverage

The specialty insurance market continues to be underpinned by macroeconomic factors as alternative risks continue to grow and change

			E&S Industry1
	$99 bn		17%
							5-year CAGR
		2022 DPW

The Excess & Surplus (E&S) specialty market insures difficult or high- risk exposures that traditional carriers do not cover. E&S carriers specialize in a wide range of coverages, each requiring in-depth knowledge of the line of exposure.

The evolution of the U.S. economy across sectors should continue to fuel the need for specialized insurance coverages often best addressed in the E&S market.

Sweeping technological disruption

Innovation brings unforeseen challenges and risks which offer E&S specialists opportunity to develop new product lines

Heightened social inflation Legislative and litigation developments are impacting insurers' legal liabilities and claims costs resulting in taking higher rates

Large, complex and high-hazard risks

CAT weather activity above long- term averages across the United States and the globe

Continued economic investment Infrastructure and economic stimulus is favorable for the E&S market, as large construction projects are insured by E&S providers

Increased cyber threats Prevalence of ransomware creates need for cyber insurance and enhances pricing power

1. AM Best, U.S. Surplus Lines Report, September 13, 2023

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Specialty Insurance Poised for Continued Growth

Ambac's Specialty P&C Platform is well positioned to capitalize on the fast-growing specialty P&C insurance market

Historical E&S Trends1

• 2022 E&S direct premiums written were $99 billion implying a CAGR of 11% since 2012 and 17% since 20171
• 2022 E&S market grew 19% vs 10% for overall P&C1
• E&S market has experienced faster growth than the standard P&C market over the last 20 years
• E&S market has been more profitable than the overall P&C market since 2012
  1. AM Best, U.S. Surplus Lines Report, September 13, 2023

		E&S Industry vs. P&C Industry DPW CAGRs1
12%							11%
10%
8%
6%															5%
4%
2%
0%								2012-2022
						E&S Industry					P&C Industry
		E&S Industry vs. P&C Industry Combined Ratio1
125%
111%							108%	107%104%	105%
103%										103%
			101%		101%						99%	99% 99%	100%99%	100%
100%			96%	97%	98%
	92%												94%	91%
	89%
75%
50%
2012	2013	2014	2015	2016	2017	2018	2019	2020	2021	2022
						E&S Industry					P&C Industry

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Everspan: Specialty P&C Program Insurer

Everspan has assembled a 'Best-in-Class' team of Specialty P&C program insurance executives with deep experience scaling businesses

• $96 million of GPW in 1Q24 up 86% vs. 1Q23

• Quarterly pre-tax profit, $2 million compared to a $(1) million

loss in 1Q23

• 98.4% Combined Ratio in 1Q24 vs. 121.9% in 1Q23

• GPW split E&S vs Admitted

◦ 1Q24: 64% vs 36%; in 2023: 61% vs 39%

• 22 MGA programs including 1 new program signed during

1Q24

	$100
millions)in	$80
$60
(GPW	$40
$20
	$0

Gross Premium Written (GPW) and Number of Programs

							23	22
			20
15		16
1Q2023	2Q2023	3Q2023	4Q2023	1Q2024
		Gross Written Premiums		Number of Programs
		GPW by Line of Business
1Q2024						1Q2023

28
26
24	(Program
20
22
18	#)
16
14

•	Shareholders' Equity: $122 million1
•	Statutory Surplus: $108 million
	1. Ambac Stockholders' Equity as shown on slide 20

13%

8%

11%

7%

32%

12%

17%

Comm'l auto		10%
	2%
liability
Comm'l auto
physical damage
General liability	10%	61%
Excess liability
Workers Compensation
Non-standard auto	9%
Surety		9%

Other

Comm'l auto liability

Comm'l auto physical damage

General liability

Excess liability

Surety

Other

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