10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended March 31, 2022

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number: 1-10777

AMBAC FINANCIAL GROUP, INC.

(Exact name of Registrant as specified in its charter)

Delaware			13-3621676
(State of incorporation)			(I.R.S. employer identification no.)
One World Trade Center	New York	NY	10007
(Address of principal executive offices)			(Zip code)

	(212)	658-7470
(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:
Title of each class	Trading Symbol	Name of each exchange on which registered
Common stock par value $0.01 per share	AMBC	New York Stock Exchange
Warrants	AMBC WS	New York Stock Exchange

Indicate by check mark whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☒    No  ☐

Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files).    Yes ☒    No  ☐

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company or an emerging growth company. See definition of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act): (Check one):

Large accelerated filer ☒ Accelerated filer ☐ Non-accelerated filer ☐ Smaller reporting company ☐ Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes  ☐    No  ☒

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.    Yes  ☒    No  ☐

As of May 6, 2022, 45,039,916 shares of common stock, par value $0.01 per share, of the Registrant were outstanding.

AMBAC FINANCIAL GROUP, INC. AND SUBSIDIARIES

TABLE OF CONTENTS

Cautionary Statement Pursuant to the Private Securities Litigation Reform Act of 1995					1
Item Number		Page	Item Number		Page
PART I. FINANCIAL INFORMATION			PART I (CONTINUED)
1	Unaudited Consolidated Financial Statements of Ambac Financial Group, Inc. and Subsidiaries			U.S. Insurance Statutory Basis Financial Results	66
	Consolidated Balance Sheets (Unaudited)	3		Ambac Assurance UK Limited Financial Results Under UK Accounting Principles	67
	Consolidated Statements of Total Comprehensive Income (Loss) (Unaudited)	4		Non-GAAP Financial Measures	67
	Consolidated Statements of Stockholders' Equity (Unaudited)	5	3	Quantitative and Qualitative Disclosures About Market Risk	69
	Consolidated Statements of Cash Flows (Unaudited)	6	4	Controls and Procedures	69
	Notes to Unaudited Consolidated Financial Statements	7
2	Management's Discussion and Analysis of Financial Condition and Results of Operations	45	PART II. OTHER INFORMATION
	Executive Summary	45	1	Legal Proceedings	69
	Critical Accounting Policies and Estimates	48	1A	Risk Factors	69
	Financial Guarantees in Force	48	2	Unregistered Sales of Equity Securities and Use of Proceeds	71
	Results of Operations	53	3	Defaults Upon Senior Securities	71
	Liquidity and Capital Resources	58	5	Other Information	72
	Balance Sheet	60	6	Exhibits	71
	Variable Interest Entities	66	SIGNATURES		72
	Accounting Standards	66

| Ambac Financial Group, Inc. i 2022 First Quarter FORM 10-Q |

CAUTIONARY STATEMENT PURSUANT TO THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995

Management has included in Parts I and II of this Quarterly Report on Form 10-Q, including this MD&A, 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” in Part I, Item 1A of the 2021 Annual Report on Form 10-K and in Part II, Item 1A of this quarterly Report on Form 10-Q.

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 highly speculative nature of AFG’s common stock and 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 program insurance business, the distribution business, or related businesses; (3) the inability of AAC to realize the expected recoveries, including RMBS litigation recoveries, included in its financial statements, or changes in estimated RMBS litigation recoveries over time; (4) failure to recover claims paid on Puerto Rico exposures or realization of losses in amounts higher than expected; (5) inadequacy of reserves established for losses and loss expenses and possibility that changes in loss reserves may result in further volatility of earnings or financial results; (6) potential for rehabilitation proceedings or other regulatory intervention against AAC; (7) 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; (8) our inability to effectively reduce insured financial guarantee exposures or achieve recoveries or investment objectives; (9) our inability to generate the significant amount of cash needed to service our debt and financial obligations, including through litigation recoveries or disposition of assets, and our inability to refinance our indebtedness; (10) Ambac’s substantial indebtedness could adversely affect its financial condition and operating flexibility; (11) 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; (12) the impact of catastrophic public health, environmental or natural events, including events like the COVID-19 pandemic, or global or regional conflicts, on significant portions of our insured portfolio; (13) credit risks related to large single risks, risk concentrations and correlated risks; (14) risks associated with adverse selection as Ambac’s financial guarantee insurance portfolio runs

off; (15) the risk that Ambac’s risk management policies and practices do not anticipate certain risks and/or the magnitude of potential for loss; (16) restrictive covenants in agreements and instruments that impair Ambac’s ability to pursue or achieve its business strategies; (17) adverse effects on operating results or the Company’s financial position resulting from measures taken to reduce financial guarantee risks in its insured portfolio; (18) disagreements or disputes with Ambac's insurance regulators; (19) loss of control rights in transactions for which we provide financial guarantee insurance; (20) adverse tax consequences or other costs resulting from the characterization of the AAC’s surplus notes or other obligations as equity; (21) risks attendant to the change in composition of securities in the Ambac’s investment portfolio; (22) adverse impacts from changes in prevailing interest rates; (23) events or circumstances that result in the impairment of our intangible assets and/or goodwill that was recorded in connection with Ambac’s acquisition of 80% of the membership interests of Xchange Benefits, LLC; (24) risks associated with the expected discontinuance of the London Inter-Bank Offered Rate; (25) factors that may negatively influence the amount of installment premiums paid to Ambac; (26) risks relating to determinations of amounts of impairments taken on investments; (27) the risk of litigation and regulatory inquiries or investigations, and the risk of adverse outcomes in connection therewith; (28) actions of stakeholders whose interests are not aligned with broader interests of Ambac's stockholders; (29) system security risks, data protection breaches and cyber attacks; (30) 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; (31) failures in services or products provided by third parties; (32) our inability to attract and retain qualified executives, senior managers and other employees, or the loss of such personnel; (33) fluctuations in foreign currency exchange rates; (34) failure to realize our business expansion plans or failure of such plans to create value; (35) greater competition for our specialty property & casualty program insurance business; (36) loss or lowering of the AM Best rating for our property and casualty insurance company subsidiaries; (37) disintermediation within the insurance industry or greater competition that negatively impacts our managing general agency/underwriting business; (38) 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 (39) other risks and uncertainties that have not been identified at this time.

| Ambac Financial Group, Inc. 1 2022 First Quarter FORM 10-Q |

PART I.    FINANCIAL INFORMATION

Item 1.     Unaudited Financial Statements of Ambac Financial Group, Inc. and Subsidiaries

| Ambac Financial Group, Inc. 2 2022 First Quarter FORM 10-Q |

AMBAC FINANCIAL GROUP, INC. AND SUBSIDIARIES

Consolidated Balance Sheets

	March 31,		December 31,
(Dollars in millions, except share data) (March 31, 2022 (Unaudited))	2022		2021
Assets:
Investments:
Fixed maturity securities - available-for-sale, at fair value (amortized cost of $1,352 and $1,605)	$	1,383	$	1,730
Fixed maturity securities pledged as collateral, at fair value (amortized cost of $15 and $15)	15		15
Fixed maturity securities - trading (includes $119 and $0 at fair value)	119		—
Short-term investments, at fair value (amortized cost of $540 and $415)	540		414
Short-term investments pledged as collateral, at fair value (amortized cost of $99 and $105)	99		105
Other investments (includes $652 and $683 at fair value)	660		690
Total investments (net of allowance for credit losses of $1 and $0)	2,815		2,955
Cash and cash equivalents	60		17
Restricted cash	7		5
Premium receivables (net of allowance for credit losses of $8 and $9)	317		323
Reinsurance recoverable on paid and unpaid losses (net of allowance for credit losses of $0 and $0)	48		55
Deferred ceded premium	100		90
Subrogation recoverable	1,714		2,092
Derivative assets	55		76
Intangible assets	350		362
Goodwill	46		46
Other assets	94		68
Variable interest entity assets:
Fixed maturity securities, at fair value	3,364		3,455
Restricted cash	49		2
Loans, at fair value	2,469		2,718
Derivative assets	42		38
Other assets	1		2
Total assets	$	11,531	$	12,303
Liabilities and Stockholders’ Equity:
Liabilities:
Unearned premiums	$	393	$	395
Loss and loss expense reserves	1,067		1,570
Ceded premiums payable	40		33
Long-term debt	2,242		2,230
Accrued interest payable	593		576
Derivative liabilities	76		95
Other liabilities	135		133
Variable interest entity liabilities:
Long-term debt (includes $3,701 and $4,056 at fair value)	4,124		4,216
Derivative liabilities	1,866		1,940
Other liabilities	3		—
Total liabilities	10,538		11,187
Commitments and contingencies (See Note 14)
Redeemable noncontrolling interest	18		18
Stockholders’ equity:
Preferred stock, par value $0.01 per share;20,000,000 shares authorized shares; issued and outstanding shares—none	—		—
Common stock, par value $0.01 per share; 130,000,000 shares authorized; issued shares: 46,658,990 and 46,477,068	—		—
Additional paid-in capital	262		257
Accumulated other comprehensive income (loss)	(70)		58
Retained earnings	723		726
Treasury stock, shares at cost: 113,758 and 172,929	(2)		(3)
Total Ambac Financial Group, Inc. stockholders’ equity	914		1,038
Nonredeemable noncontrolling interest	60		60
Total stockholders’ equity	974		1,098
Total liabilities, redeemable noncontrolling interest and stockholders’ equity	$	11,531	$	12,303

See accompanying Notes to Unaudited Consolidated Financial Statements

| Ambac Financial Group, Inc. 3 2022 First Quarter FORM 10-Q |

AMBAC FINANCIAL GROUP, INC. AND SUBSIDIARIES

Consolidated Statements of Total Comprehensive Income (Loss) (Unaudited)

	Three Months Ended March 31,
(Dollars in millions, except share data)	2022		2021
Revenues:
Net premiums earned	$	15	$	14
Net investment income	5		49
Net investment gains (losses), including impairments	10		2
Net gains (losses) on derivative contracts	57		25
Net realized gains (losses) on extinguishment of debt	—		33
Commission income	9		7
Other income (expense)	2		(2)
Income (loss) on variable interest entities	22		—
Total revenues	119		129
Expenses:
Losses and loss expenses (benefit)	24		8
Intangible amortization	14		19
Operating expenses	34		33
Interest expense	44		50
Total expenses	116		110
Pre-tax income (loss)	3		19
Provision (benefit) for income taxes	—		2
Net income (loss)	2		17
Less: net (gain) loss attributable to noncontrolling interest	—		—
Net income attributable to common stockholders	$	2	$	17
Other comprehensive income (loss), after tax:
Net income (loss)	$	2	$	17
Unrealized gains (losses) on securities, net of income tax provision (benefit) of $(2)and $(2)	(105)		(24)
Gains (losses) on foreign currency translation, net of income tax provision (benefit) of $— and $—	(23)		6
Credit risk changes of fair value option liabilities, net of income tax provision (benefit) of $— and $—	—		(1)
Changes to postretirement benefit, net of income tax provision (benefit) of $— and $—	—		—
Total other comprehensive income (loss), net of income tax	(127)		(18)
Total comprehensive income (loss)	(125)		(1)
Less: comprehensive (gain) loss attributable to the noncontrolling interest	—		—
Total comprehensive income (loss) attributable to common stockholders	$	(125)	$	(2)
Net income (loss) per share attributable to common stockholders:
Basic	$	0.04	$	0.08
Diluted	$	0.04	$	0.08
Weighted average number of common shares outstanding:
Basic	46,731,459		46,314,049
Diluted	47,359,731		46,858,064

See accompanying Notes to Unaudited Consolidated Financial Statements

| Ambac Financial Group, Inc. 4 2022 First Quarter FORM 10-Q |

AMBAC FINANCIAL GROUP, INC. AND SUBSIDIARIES

Consolidated Statements of Stockholders’ Equity (Unaudited)

Three months ended March 31, 2022 and 2021
			Ambac Financial Group, Inc.
(Dollars in millions)	Total		Retained Earnings		Accumulated Other Comprehensive Income		Preferred Stock		Common Stock		Additional Paid-in Capital		Common Stock Held in Treasury, at Cost		Nonredeemable Noncontrolling Interest
Balance at December 31, 2021	$	1,098	$	726	$	58	$	—	$	—	$	257	$	(3)	$	60
Total comprehensive income (loss)	(125)		2		(127)		—		—		—		—		—
Stock-based compensation	5		—		—		—		—		5		—		—
Cost of shares (acquired) issued under equity plan	(3)		(5)		—		—		—		—		1		—
Changes to Redeemable NCI	—		—		—		—		—		—		—		—
Balance at March 31, 2022	$	974	$	723	$	(70)	$	—	$	—	$	262	$	(2)	$	60
Balance at December 31, 2020	$	1,140	$	759	$	79	$	—	$	—	$	242	$	(1)	$	60
Total comprehensive income (loss)	(2)		17		(18)		—		—		—		—		—
Stock-based compensation	4		—		—		—		—		4		—		—
Cost of shares (acquired) issued under equity plan	(6)		(2)		—		—		—		—		(4)		—
Changes to redeemable NCI	(13)		(13)
Balance at March 31, 2021	$	1,123	$	761	$	61	$	—	$	—	$	246	$	(5)	$	60

See accompanying Notes to Unaudited Consolidated Financial Statements

| Ambac Financial Group, Inc. 5 2022 First Quarter FORM 10-Q |

AMBAC FINANCIAL GROUP, INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows (Unaudited)

	Three Months Ended March 31,
(Dollars in millions)	2022		2021
Cash flows from operating activities:
Net income (loss) attributable to common stockholders	$	2	$	17
Redeemable noncontrolling interest	—		—
Net income (loss)	2		17
Adjustments to reconcile net income to net cash used in operating activities:
Amortization of bond premium and discount	(3)		(3)
Share-based compensation	5		4
Unearned premiums, net	(11)		(22)
Losses and loss expenses, net	(6)		(17)
Ceded premiums payable	7		(2)
Premium receivables	6		14
Accrued interest payable	24		23
Amortization of intangible assets	14		19
Net investment gains (losses), including impairments	(10)		(2)
(Gain) loss on extinguishment of debt	—		(33)
Variable interest entity activities	(22)		—
Derivative assets and liabilities	(46)		(22)
Other, net	48		(16)
Net cash provided by (used in) operating activities	9		(40)
Cash flows from investing activities:
Proceeds from sales of bonds	141		44
Proceeds from matured bonds	20		39
Purchases of bonds	(33)		(128)
Proceeds from sales of other invested assets	45		48
Purchases of other invested assets	(25)		(41)
Change in short-term investments	(114)		94
Change in cash collateral receivable	54		11
Proceeds from paydowns of consolidated VIE assets	47		50
Other, net	—		(1)
Net cash provided by investing activities	136		116
Cash flows from financing activities:
Paydowns of LSNI Ambac Note	—		(16)
Tax payments related to shares withheld for share-based compensation plans	(3)		(6)
Payments of consolidated VIE liabilities	(49)		(48)
Net cash used in financing activities	(52)		(69)
Effect of foreign exchange on cash, cash equivalents and restricted cash	—		—
Net cash flow	93		6
Cash, cash equivalents, and restricted cash at beginning of period	23		35
Cash, cash equivalents, and restricted cash at end of period	$	116	$	42

See accompanying Notes to Unaudited Consolidated Financial Statements

| Ambac Financial Group, Inc. 6 2022 First Quarter FORM 10-Q |

AMBAC FINANCIAL GROUP, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Note 1. Background and Business Description	8	Note 8. Intangible Assets	34
Note 2. Basis of Presentation and Significant Accounting Policies	9	Note 9. Variable Interest Entities	34
Note 3. Segment Information	11	Note 10. Revenues From Contracts with Customers	37
Note 4. Investments	12	Note 11. Comprehensive Income	38
Note 5. Fair Value Measurements	18	Note 12. Net Income Per Share	39
Note 6. Insurance Contracts	24	Note 13. Income Taxes	40
Note 7. Derivative Instruments	32	Note 14. Commitments and Contingencies	40

| Ambac Financial Group, Inc. 7 2022 First Quarter FORM 10-Q |

AMBAC FINANCIAL GROUP, INC. AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements

(Dollar Amounts in Millions, Except Share Amounts)

1.    BACKGROUND AND BUSINESS DESCRIPTION

The following description provides an update of Note 1. Background and Business Description in the Notes 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, 2021, and should be read in conjunction with the complete descriptions provided in the Form 10-K. Capitalized terms used, but not defined herein, and in the other footnotes to the Consolidated Financial Statements included in this Quarterly Report on Form 10-Q shall have the meanings ascribed thereto in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.

Ambac Financial Group, Inc. (“AFG”), headquartered in New York City, is a financial services holding company incorporated in the state of Delaware on April 29, 1991. References to “Ambac,” the “Company,” “we,” “our,” and “us” are to AFG and its subsidiaries, as the context requires. Ambac's business operations include:

•Legacy Financial Guarantee Insurance — Ambac's financial guarantee business includes the activities of Ambac Assurance Corporation ("AAC") and its wholly owned subsidiaries, including Ambac Assurance UK Limited (“Ambac UK”) and Ambac Financial Services LLC ("AFS"). Both AAC and Ambac UK (the "Legacy Financial Guarantee Companies") have financial guarantee portfolios that have been in runoff since 2008. AFS uses derivatives to hedge interest rate risk in AAC's insurance and investment portfolios.

•Specialty Property & Casualty Insurance — Ambac's participatory fronting Specialty Property & Casualty Insurance business. Currently includes five admitted carriers (Everspan Insurance Company, Providence Washington Insurance Company, 21st Century Indemnity Insurance Company, 21st Century Pacific Insurance Company and 21st Century Auto Insurance Company of New Jersey) and an excess and surplus lines (“E&S” or “nonadmitted”) insurer Everspan Indemnity Insurance Company (collectively, “Everspan”). The 21st Century companies were acquired in 2022. Everspan carriers that are part of the intercompany pooling agreement received an AM Best rating of 'A-' (Excellent) in February 2021.

•Insurance Distribution — Ambac's specialty property and casualty ("P&C") insurance distribution business, which could include Managing General Agents and Underwriters (collectively "MGAs"), insurance wholesalers, and other distribution businesses. Currently includes Xchange Benefits, LLC (“Xchange”) a P&C MGA specializing in accident and health products, 80% of which was acquired by AFG on December 31, 2020. Refer to Note 3. Business Combination in the Notes to Consolidated Financial Statements included Part II, Item 8 in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021, for further information relating to this acquisition.

Beginning in the first quarter of 2022, the Company is reporting these three business operations as segments; see Note 3. Segment Information for further information.

Strategies to Enhance Shareholder Value

The Company's primary goal is to maximize shareholder value through the execution of key strategies for both its (i) Specialty P&C Insurance Platform and (ii) Legacy Financial Guarantee Companies.

Specialty P&C Insurance Platform strategic priorities include:

•Growing and diversifying the Specialty Property & Casualty insurance business with existing and new program partners.

•Building a leading insurance Distribution business through additional acquisitions and de novo builds, supported by a centralized business services unit including core technology solutions.

•Making opportunistic investments that are strategic to the overall Specialty P&C Insurance Platform.

Legacy Financial Guarantee Companies’ strategic priorities include:

•Actively managing, de-risking and mitigating insured portfolio risk.

•Pursuing loss recovery through active litigation and other means, particularly residential mortgage back security representation and warranty litigation.

•Improving operating efficiency and optimizing our asset and liability profile.

•Exploring, at the appropriate time, strategic options to further maximize value for AFG.

The execution of Ambac’s strategy to increase the value of its investment in AAC is subject to the restrictions set forth in the Settlement Agreement, dated as of June 7, 2010 (the "Settlement Agreement"), by and among AAC, Ambac Credit Products LLC ("ACP"), AFG and certain counterparties to credit default swaps with ACP that were guaranteed by AAC; as well as the Stipulation and Order among the Office of the Commissioner of Insurance for the State of Wisconsin (“OCI”), AFG and AAC that became effective on February 12, 2018, as amended (the “Stipulation and Order”); and the indenture for the Tier 2 Notes (as defined below), each of which requires OCI and, under certain circumstances, holders of the debt instruments benefiting from such restrictions, to approve certain actions taken by or in respect of AAC. In exercising its approval rights, OCI will act for the benefit of policyholders, and will not take into account the interests of AFG.

Opportunities for remediating losses on poorly performing insured transactions also depend on market conditions, including the perception of AAC’s creditworthiness, the structure of the underlying risk and associated policy as well as other counterparty specific factors. AAC's ability to commute policies or purchase certain investments may also be limited by available liquidity.

| Ambac Financial Group, Inc. 8 2022 First Quarter FORM 10-Q |

AMBAC FINANCIAL GROUP, INC. AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements

(Dollar Amounts in Millions, Except Share Amounts)

2.    BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

The Company has disclosed its significant accounting policies in Note 2. Basis of Presentation and Significant Accounting Policies in the Notes to Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021. The following significant accounting policies provide an update to those included in the Company’s Annual Report on Form 10-K.

Consolidation:

The consolidated financial statements include the accounts of AFG and all other entities in which AFG (directly or through its subsidiaries) has a controlling financial interest, including variable interest entities (“VIEs”) for which AFG or an AFG subsidiary is deemed the primary beneficiary in accordance with the Consolidation Topic of the Accounting Standards Codification ("ASC"). All significant intercompany balances have been eliminated. See Note 9. Variable Interest Entities, for a detailed discussion of Ambac’s involvement in VIEs, Ambac’s methodology for determining whether Ambac is required to consolidate a VIE and the effects of VIEs being consolidated and deconsolidated.

Basis of Presentation:

The accompanying unaudited consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles ("GAAP") for interim financial reporting and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and disclosures required by GAAP for annual periods. These consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Annual Report on Form 10-K for the year ended December 31, 2021. The accompanying consolidated financial statements have not been audited by an independent registered public accounting firm in accordance with the standards of the Public Company Accounting Oversight Board (U.S.), but in the opinion of management such financial statements include all adjustments necessary for the fair presentation of the Company’s consolidated financial position and results of operations. The results of operations for the three months ended March 31, 2022, may not be indicative of the results that may be expected for the year ending December 31, 2022. The December 31, 2021, consolidated balance sheet was derived from audited financial statements.

The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. As additional information becomes available or actual amounts become determinable, the recorded estimates are revised and reflected in operating results.

Foreign Currency:

The impact of non-functional currency transactions and the remeasurement of non-functional currency assets and liabilities into the respective subsidiaries' functional currency (collectively "foreign currency transactions gains/(losses)") are $1 and $(5) for the three months ended March 31, 2022 and 2021, respectively. Foreign currency transactions gains/(losses) are primarily the result of remeasuring Ambac UK's assets and liabilities denominated in currencies other than its functional currency, primarily the U.S. dollar and the Euro.

Redeemable Noncontrolling Interest:

The acquisition by AFG of 80% of the ownership interests of Xchange is further described in Note 3. Business Combinations in the Notes to 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, 2021. Under the terms of the acquisition agreement, Ambac received a call option to purchase the remaining 20% of Xchange from the minority owners (i.e., noncontrolling interests) and the minority owners received a put option to sell the remaining 20% to Ambac. The call and put options are exercisable after different time periods elapse. Because the exercise of the put option is outside the control of Ambac, in accordance with the Distinguishing Liabilities from Equity Topic of the ASC, Ambac reports redeemable noncontrolling interests in the mezzanine section of its consolidated balance sheet.

The redeemable noncontrolling interest is remeasured each period as the greater of:

i.the carrying value under ASC 810, which attributes a portion of consolidated net income (loss) to the redeemable noncontrolling interest; and

ii.the redemption value of the put option under ASC 480 as if it were exercisable at the end of the reporting period.

Any increase (decrease) in the carrying amount of the redeemable noncontrolling interest as a result of adjusting to the redemption value of the put option is recorded as an offset to retained earnings. The impact of such differences on earnings per share are presented in Note 12. Net Income Per Share.

Following is a rollforward of redeemable noncontrolling interest.

Three Months Ended March 31,	2022		2021
Beginning balance	$	18	$	7
Net income attributable to redeemable noncontrolling interest (ASC 810)	—		—
Adjustment to redemption value (ASC 480)	—		13
Ending balance	$	18	$	20

| Ambac Financial Group, Inc. 9 2022 First Quarter FORM 10-Q |

AMBAC FINANCIAL GROUP, INC. AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements

(Dollar Amounts in Millions, Except Share Amounts)

Supplemental Disclosure of Cash Flow Information	Three Months Ended March 31,
	2022		2021
Cash paid during the period for:
Income taxes	$	2	$	8
Interest on long-term debt	15		25
Non-cash investing and financing activities:
Decrease in long-term debt as a result of surplus notes exchanges	$	—	$	71
Exchange of investments in Puerto Rico bonds for new securities issued in the restructuring transactions	185		—
	March 31,
	2022		2021
Reconciliation of cash, cash equivalents, and restricted cash reported within the Consolidated Balance Sheets to the Consolidated Statements of Cash Flows:
Cash and cash equivalents	$	60	$	23
Restricted cash	7		16
Variable Interest Entity restricted cash	49		2
Total cash, cash equivalents, and restricted cash shown on the Consolidated Statements of Cash Flows	$	116	$	42

Reclassifications and Rounding

Reclassifications may have been made to prior years' amounts to conform to the current year's presentation. Certain amounts and tables in the consolidated financial statements and associated notes may not add due to rounding.

Adopted Accounting Standards:

Effective January 1, 2022, the Company adopted the following accounting standard:

Equity-classified Written Call Options

In May 2021, the FASB issued ASU 2021-04, Issuer's Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options. The ASU clarifies and reduces diversity in practice for an issuer's accounting for modifications or exchanges of equity-classified written call options (e.g. warrants) that remain equity-classified after the modification or exchange. The ASU requires an issuer to account for the modification or exchange based on the economic substance of the transaction. For example, if the modification or exchange is related to the issuance of debt or equity, any change in the fair value of the written call option would be accounted for as part of the debt issuance cost in accordance with the debt guidance or equity issuance cost in accordance with the equity guidance, respectively. The ASU did not have a consequential impact on Ambac's financial statements.

Convertible Instruments and Contracts in an Entity's Own Equity

In August 2020, the FASB issued ASU 2020-06, Accounting for Convertible Instruments and Contracts in an Entity's Own Equity. The ASU i) simplifies the accounting for convertible debt and convertible preferred stock by reducing the number of accounting

models, and amends certain disclosures, ii) amends and simplifies the derivative scope exception guidance for contracts in an entity's own equity, including share-based compensation, and iii) amends the diluted earnings per share calculations for convertible instruments and contracts in an entity's own equity. The ASU did not have a consequential impact on Ambac's financial statements.

Future Application of Accounting Standards:

Reference Rate Reform

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848) - Facilitation of the Effects of Reference Rate Reform on Financial Reporting. The ASU provides companies with optional guidance to ease the potential accounting burden related to transitioning away from reference rates, such as LIBOR, that are expected to be discontinued as a result of initiatives undertaken by various jurisdictions around the world. For example, under current GAAP, contract modifications which change a reference rate are required to be evaluated in determining whether the modifications result in the establishment of new contracts or the continuation of existing contracts. The amendments in this ASU provide optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The ASU can be applied prospectively as of the beginning of the interim period that includes or is subsequent to March 12, 2020, or any date thereafter, but does not apply to contract modifications and other transactions entered into or evaluated after December 31, 2022. On April 20, 2022, the FASB issued a proposed ASU that would extend the sunset date to December 31, 2024 and make certain definitional changes, with feedback required by June 6, 2022. Management has not determined when it will adopt this ASU, and the impact on Ambac's financial statements is being evaluated.

| Ambac Financial Group, Inc. 10 2022 First Quarter FORM 10-Q |

AMBAC FINANCIAL GROUP, INC. AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements

(Dollar Amounts in Millions, Except Share Amounts)

3.    SEGMENT INFORMATION

The Company reports its results of operations in three segments: Legacy Financial Guarantee Insurance, Specialty Property and Casualty Insurance and Insurance Distribution, separate from Corporate and Other, which is consistent with the manner in which the Company's chief operating decision maker ("CODM") reviews the business to assess performance and allocate resources. See Note 1. Background and Business Description for a description of each of the Company's business segments.

The following tables summarize the components of the Company’s total revenues and expenses, pretax income (loss), net income (loss), net income (loss) attributable to common shareholders and total assets by reportable business segment. Information provided below for “Corporate and Other” primarily relates to the operations of AFG, which will include investment income on its investment portfolio and costs to maintain the operations of AFG, including public company reporting, and business development costs for the acquisition and development of new business initiatives.

	Legacy Financial Guarantee Insurance		Specialty Property & Casualty Insurance		Insurance Distribution		Corporate & Other		Consolidated (2)
Three Months Ended March 31, 2022
Revenues:
Net premiums earned	$	13	$	1					$	15
Net investment income	5		—				—		5
Net gains on derivative contracts	57								57
Commission income					$	9			9
Other revenues (1)	34		—		—		—		34
Total revenues (2)	109		2		9		—		119
Expenses:
Loss and loss expenses	23		1						24
Operating expenses (3)	21		3		1		3		29
Sub-producer commissions (3)					5				5
Depreciation expense (3)	—		—		—		—		—
Intangible amortization	14				1				14
Interest expense	44								44
Total expenses (2)	102		4		6		3		116
Pretax income (loss)	$	6	$	(2)	$	2	$	(3)	$	3
Total assets (2)	$	11,075	$	191	$	97	$	168	$	11,531

| Ambac Financial Group, Inc. 11 2022 First Quarter FORM 10-Q |

AMBAC FINANCIAL GROUP, INC. AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements

(Dollar Amounts in Millions, Except Share Amounts)

	Legacy Financial Guarantee Insurance		Specialty Property & Casualty Insurance		Insurance Distribution		Corporate & Other		Consolidated (2)
Three Months Ended March 31, 2021
Revenues:
Net premiums earned	$	14	$	—					$	14
Net investment income	49		—				—		49
Net gains on derivative contracts	25								25
Commission income					$	7			7
Other revenues (1)	29		—		—		4		33
Total revenues (2)	118		—		7		4		129
Expenses:
Loss and loss expenses	8		—						8
Operating expenses (3)	17		1		1		10		29
Sub-producer commissions (3)					4				4
Depreciation expense (3)	—		—		—		—		—
Intangible amortization	19				1				19
Interest expense	50								50
Total expenses	94		1		5		10		110
Pretax income (loss) (2)	$	24	$	(1)	$	2	$	(6)	$	19
Total assets (2)	$	12,470	$	108	$	98	$	165	$	12,840

(1)Other revenues include the following line items on the Consolidated Statements of Total Comprehensive Income: Net investment gains (losses), including impairments, Net realized gains (losses) on extinguishment of debt, income (loss) on variable interest entities and other income (expense).

(2)Inter-segment revenues and inter-segment pre-tax income (loss) amounts are insignificant and are not presented separately. Total assets noted in the Corporate and Other Column is net of AFG's investment in surplus notes issued by the Legacy Financial Guarantee Segment with fair values of $77 and $114 at March 31, 2022 and 2021.

(3)The Consolidated Statements of Comprehensive Income presents the sum of these items as Operating Expenses.

4.    INVESTMENTS

Ambac’s non-VIE invested assets are primarily comprised of fixed maturity securities classified as either available-for-sale or trading securities, and interests in pooled investment funds, which are reported within Other investments on the Consolidated Balance Sheets. Interests in pooled investment funds in the form of common stock or in-substance common stock are classified as trading securities, while limited partner interests in such funds are

reported using the equity method. Fixed maturity securities classified as trading are unrated municipal bond obligations of Puerto Rico issuing entities that are part of the the PROMESA restructuring process as described further in Note 6. Insurance Contracts.

| Ambac Financial Group, Inc. 12 2022 First Quarter FORM 10-Q |

AMBAC FINANCIAL GROUP, INC. AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements

(Dollar Amounts in Millions, Except Share Amounts)

Fixed Maturity Securities:

The amortized cost and estimated fair value of available-for-sale investments, excluding VIE investments, at March 31, 2022 and December 31, 2021, were as follows:

	Amortized Cost		Allowance for Credit Losses		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
March 31, 2022:
Fixed maturity securities:
Municipal obligations	$	65	$	—	$	5	$	1	$	69
Corporate obligations	610		1		2		34		577
Foreign obligations	92		—		—		4		88
U.S. government obligations	53		—		—		2		51
Residential mortgage-backed securities	179		—		47		—		225
Collateralized debt obligations	121		—		—		1		120
Other asset-backed securities (1)	232		—		20		—		252
	1,352		1		73		42		1,383
Short-term	540		—		—		—		540
	1,892		1		73		42		1,922
Fixed maturity securities pledged as collateral:
U.S. government obligations	15		—		—		—		15
Short-term	99		—		—		—		99
	114		—		—		—		114
Total available-for-sale investments	$	2,006	$	1	$	73	$	43	$	2,036

December 31, 2021:
Fixed maturity securities:
Municipal obligations	$	315	$	—	$	28	$	3	$	340
Corporate obligations	612		—		10		9		613
Foreign obligations	89		—		—		2		87
U.S. government obligations	45		—		1		1		45
Residential mortgage-backed securities	182		—		70		—		252
Collateralized debt obligations	128		—		—		—		128
Other asset-backed securities (1)	234		—		32		—		265
	1,605		—		141		16		1,730
Short-term	415		—		—		—		414
	2,020		—		141		16		2,145
Fixed maturity securities pledged as collateral:
U.S. government obligations	15		—		—		—		15
Short-term	105		—		—		—		105
	120		—		—		—		120
Total available-for-sale investments	$	2,140	$	—	$	141	$	16	$	2,265

(1)Consists primarily of Ambac's holdings of military housing and student loan securities.

| Ambac Financial Group, Inc. 13 2022 First Quarter FORM 10-Q |

AMBAC FINANCIAL GROUP, INC. AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements

(Dollar Amounts in Millions, Except Share Amounts)

The amortized cost and estimated fair value of available-for-sale investments, excluding VIE investments, at March 31, 2022, by contractual maturity, were as follows:

	Amortized Cost		Estimated Fair Value
Due in one year or less	$	683	$	683
Due after one year through five years	431		416
Due after five years through ten years	317		300
Due after ten years	41		39
	1,472		1,438
Residential mortgage-backed securities	179		225
Collateralized debt obligations	121		120
Other asset-backed securities	232		252
Total	$	2,005	$	2,036

Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay certain obligations with or without call or prepayment penalties.

Unrealized Losses on Fixed Maturity Securities:

The following table shows gross unrealized losses and fair values of Ambac’s available-for-sale investments, excluding VIE investments, which at March 31, 2022 and December 31, 2021, did not have an allowance for credit losses under the CECL standard. This information is aggregated by investment category and length of time that the individual securities have been in a continuous unrealized loss position, at March 31, 2022 and December 31, 2021:

	Less Than 12 Months				12 Months or More				Total
	Fair Value		Gross Unrealized Loss		Fair Value		Gross Unrealized Loss		Fair Value		Gross Unrealized Loss
March 31, 2022:
Fixed maturity securities:
Municipal obligations	$	19	$	1	$	1	$	—	$	19	$	1
Corporate obligations	349		21		117		13		466		34
Foreign obligations	36		1		51		3		87		4
U.S. government obligations	44		1		5		—		49		2
Residential mortgage-backed securities	16		—		1		—		17		—
Collateralized debt obligations	111		1		9		—		120		1
Other asset-backed securities	6		—		—		—		6		—
	580		26		184		16		764		42
Short-term	18		—		12		—		30		—
	598		26		196		17		794		42
Fixed income securities, pledged as collateral:
Short-term	15		—		—		—		15		—
Total collateralized investments	15		—		—		—		15		—
Total temporarily impaired securities	$	613	$	26	$	196	$	17	$	809	$	43

| Ambac Financial Group, Inc. 14 2022 First Quarter FORM 10-Q |

AMBAC FINANCIAL GROUP, INC. AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements

(Dollar Amounts in Millions, Except Share Amounts)

	Less Than 12 Months				12 Months or More				Total
	Fair Value		Gross Unrealized Loss		Fair Value		Gross Unrealized Loss		Fair Value		Gross Unrealized Loss
December 31, 2021:
Fixed maturity securities:
Municipal obligations	$	117	$	3	$	2	$	—	$	118	$	3
Corporate obligations	363		8		17		1		380		9
Foreign obligations	75		2		3		—		78		2
U.S. government obligations	25		—		2		—		27		1
Residential mortgage-backed securities	—		—		1		—		2		—
Collateralized debt obligations	68		—		3		—		71		—
Other asset-backed securities	6		—		—		—		6		—
	654		14		28		1		682		16
Short-term	114		—		13		—		128		—
	768		14		41		1		810		16
Fixed income securities, pledged as collateral:
U. S. government obligations	15		—		—		—		15		—
Total collateralized investments	15		—		—		—		15		—
Total temporarily impaired securities	$	783	$	14	$	41	$	1	$	825	$	16

Management has determined that the securities in the above table do not have credit impairment as of March 31, 2022 and December 31, 2021, based upon (i) no actual or expected principal and interest payment defaults on these securities; (ii) analysis of the creditworthiness of the issuer and financial guarantor, as applicable, and (iii) for debt securities that are non-highly rated beneficial interests in securitized financial assets, analysis of whether there was an adverse change in projected cash flows. Management's evaluation as of March 31, 2022, includes the expectation that all principal and interest payments on securities guaranteed by AAC or Ambac UK will be made timely and in full.

Ambac’s assessment about whether a security is credit impaired reflects management’s current judgment regarding facts and circumstances specific to the security and other factors. If that judgment changes, Ambac may record a charge for credit impairment in future periods.

Investment Income (Loss)

Net investment income (loss) was comprised of the following for the affected periods:

	Three Months Ended March 31,
	2022		2021
Fixed maturity securities	$	15	$	23
Short-term investments	—		—
Investment expense	(1)		(1)
Securities available-for-sale and short-term	14		22
Fixed maturity securities - trading	(9)		—
Other investments	—		27
Total net investment income (loss)	$	5	$	49

Net investment income (loss) from Other investments primarily represents changes in fair value on equity securities, including certain pooled investment funds, and income from investment limited partnerships and other equity interests accounted for under the equity method.

Net Investments Gains (Losses), including Impairments:

The following table details amounts included in net investment gains (losses) and impairments included in earnings for the affected periods:

	Three Months Ended March 31,
	2022		2021
Gross realized gains on securities	$	23	$	7
Gross realized losses on securities	(15)		(1)
Foreign exchange gains (losses)	3		(4)
Credit impairments	(1)		—
Intent / requirement to sell impairments	—		—
Net investment gains (losses), including impairments	$	10	$	2

Ambac had an allowance for credit losses of $1 and $— at March 31, 2022 and 2021, respectively.

Ambac did not purchase any financial assets with credit deterioration for the three months ended March 31, 2022 and 2021.

| Ambac Financial Group, Inc. 15 2022 First Quarter FORM 10-Q |

AMBAC FINANCIAL GROUP, INC. AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements

(Dollar Amounts in Millions, Except Share Amounts)

Counterparty Collateral, Deposits with Regulators and Other Restrictions:

Ambac routinely pledges and receives collateral related to certain transactions. Securities held directly in Ambac’s investment portfolio with a fair value of $114 and $120 at March 31, 2022 and December 31, 2021, respectively, were pledged to derivative counterparties. Ambac’s derivative counterparties have the right to re-pledge the investment securities and as such, these pledged securities are separately classified on the Consolidated Balance Sheets as “Fixed maturity securities pledged as collateral, at fair value” and "Short-term investments pledged as collateral, at fair value." Refer to Note 7. Derivative Instruments for further information on cash collateral. There was no cash or securities received from other counterparties that were re-pledged by Ambac.

Securities carried at $23 and $17 at March 31, 2022 and December 31, 2021, respectively, were deposited by Ambac's insurance subsidiaries with governmental authorities or designated custodian banks as required by laws affecting insurance companies. Invested assets carried at $1 and $1 at March 31, 2022 and December 31, 2021, were deposited as security in connection with a letter of credit issued for an office lease.

Securities with a fair value of $644 and $669 at March 31, 2022 and December 31, 2021, respectively, were held by Ambac UK, the capital stock of which was pledged as collateral for the Sitka AAC Note. Refer to Note 12. Long-term Debt in the Notes 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, 2021 for further information about the Sitka AAC Note.

Guaranteed Securities:

Ambac’s fixed maturity portfolio includes securities covered by guarantees issued by AAC and other financial guarantors (“insured securities”). The published rating agency ratings on these securities reflect the higher of the financial strength rating of the financial guarantor or the rating of the underlying issuer. Rating agencies do not always publish separate underlying ratings (those ratings excluding the insurance by the financial guarantor). In the event these underlying ratings are not available from the rating agencies, Ambac will assign an internal rating. The following table represents the fair value and weighted-average underlying rating of insured securities in Ambac's investment portfolio at March 31, 2022 and December 31, 2021, respectively: 

	Municipal Obligations		Mortgage and Asset- backed Securities		Total		Weighted Average Underlying Rating (1)
March 31, 2022:
Ambac Assurance Corporation	$	47	$	403	$	451	B
Assured Guaranty Municipal Corporation	1		—		1		A
Total	$	48	$	403	$	451	B
December 31, 2021:
Ambac Assurance Corporation	$	316	$	439	$	754	B
National Public Finance Guarantee Corporation	2		—		2		BBB-
Assured Guaranty Municipal Corporation	1		—		1		A-
Total	$	318	$	439	$	757	B

(1)Ratings are based on the lower of Standard & Poor’s or Moody’s rating. If unavailable, Ambac’s internal rating is used.

Other Investments:

Ambac's investment portfolio includes interests in various pooled investment funds. Fair value and additional information about investments in pooled funds, by investment type, is summarized in the table below. Except as noted in the table, fair value as reported is determined using net asset value ("NAV") as a practical expedient. Redemption of certain funds valued using NAV may be subject to withdrawal limitations

| Ambac Financial Group, Inc. 16 2022 First Quarter FORM 10-Q |

AMBAC FINANCIAL GROUP, INC. AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements

(Dollar Amounts in Millions, Except Share Amounts)

and/or redemption fees which vary with the timing and notification of withdrawal provided by the investor. In addition to these investments, Ambac has unfunded commitments of $70 to private credit and private equity funds at March 31, 2022.

	Fair Value
Class of Funds	March 31, 2022		December 31, 2021		Redemption Frequency	Redemption Notice Period
Real estate properties (1)	$	40	$	33	quarterly	10 business days
Hedge funds (2)	196		216		quarterly or semi-annually	90 days
High yields and leveraged loans (3)	88		78		daily	0 - 30 days
Private credit (4)	87		88		quarterly if permitted	180 days if permitted
Insurance-linked investments (5)	1		2		see footnote (9)	see footnote (9)
Equity market investments (6) (10)	91		98		daily or quarterly	0 - 90 days
Investment grade floating rate income (7)	90		107		weekly	0 days
Private equity (8)	41		37		quarterly if permitted	90 days if permitted
Emerging markets debt (9) (10)	17		24		daily	0 days
Total equity investments in pooled funds	$	652	$	683

(1)Investments consist of UK property to generate income and capital growth.

(2)This class seeks to generate superior risk-adjusted returns through selective asset sourcing, active trading and hedging strategies across a range of asset types.

(3)This class of funds includes investments in a range of instruments including high-yield bonds, leveraged loans, CLOs, ABS and floating rate notes to generate income and capital appreciation.

(4)This class aims to obtain high long-term returns primarily through credit and preferred equity investments with low liquidity and defined term.

(5)This class seeks to generate returns from insurance markets through investments in catastrophe bonds, life insurance and other insurance linked investments. This investment is restricted in connection with the unwind of certain insurance linked exposures. Ambac has redeemed its investment to the extent permitted by the fund.

(6)This class of funds aim to achieve long term growth through diversified exposure to global equity-markets.

(7)This class of funds includes investments in high quality floating rate debt securities including ABS and corporate floating rate notes.

(8)This class seeks to generate long-term capital appreciation through investments in private equity, equity-related and other instruments.

(9)This class seeks long-term income and growth through investments in the bonds of issuers in emerging markets.

(10)These categories include fair value amounts totaling $92 and $106 at March 31, 2022 and December 31, 2021, respectively, that are readily determinable and are priced through pricing vendors, including for Equity market investments: $75 and $82; and for Emerging markets debt $17 and $24.

Other investments also includes preferred equity investments with a carrying value of $8 and $8 as of March 31, 2022 and December 31, 2021, respectively, that do not have readily determinable fair values and are carried at cost, less any impairments as permitted under the Investments — Equity Securities Topic of the ASC. There were no impairments recorded on these investments or adjustments to fair value to reflect observable price changes in identical or similar investments from the same issuer during the periods presented.

The portion of net unrealized gains (losses) related to securities classified as trading and equity securities, excluding those reported using the equity method, still held at the end of each period is as follows:

	Three Months Ended March 31,
	2022		2021
Net gains (losses) recognized during the period on trading and equity securities	$	(13)	$	7
Less: net gains (losses) recognized during the reporting period on trading and equity securities sold during the period	(3)		—
Unrealized gains (losses) recognized during the reporting period on trading and equity securities still held at the reporting date	$	(10)	$	6

| Ambac Financial Group, Inc. 17 2022 First Quarter FORM 10-Q |

AMBAC FINANCIAL GROUP, INC. AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements

(Dollar Amounts in Millions, Except Share Amounts)

5.    FAIR VALUE MEASUREMENTS

The Fair Value Measurement Topic of the ASC establishes a framework for measuring fair value and disclosures about fair value measurements.

Fair Value Hierarchy:

The Fair Value Measurement Topic of the ASC specifies a fair value hierarchy based on whether the inputs to valuation techniques used to measure fair value are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect Company-based assumptions. The fair value hierarchy has three broad levels as follows:

l	Level 1	Quoted prices for identical instruments in active markets. Assets and liabilities classified as Level 1 include US Treasury and other foreign government obligations traded in highly liquid and transparent markets, certain highly liquid pooled fund investments, exchange traded futures contracts, variable rate demand obligations and money market funds.
l	Level 2	Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets. Assets and liabilities classified as Level 2 generally include investments in fixed maturity securities representing municipal, asset-backed and corporate obligations, certain interest rate swap contracts and most long-term debt of variable interest entities consolidated under the Consolidation Topic of the ASC.
l	Level 3	Model derived valuations in which one or more significant inputs or significant value drivers are unobservable. This hierarchy requires the use of observable market data when available. Assets and liabilities classified as Level 3 include credit derivative contracts, certain uncollateralized interest rate swap contracts, certain equity investments and certain investments in fixed maturity securities. Additionally, Level 3 assets and liabilities generally include loan receivables, and certain long-term debt of variable interest entities consolidated under the Consolidation Topic of the ASC.

The Fair Value Measurement Topic of the ASC permits, as a practical expedient, the estimation of fair value of certain investments in funds using the net asset value per share of the investment or its equivalent (“NAV”). Investments in funds valued using NAV are not categorized as Level 1, 2 or 3 under the fair value hierarchy. The Investments — Equity Securities Topic of the ASC permits the measurement of certain equity securities without a readily determinable fair value at cost, less impairment, and adjusted to fair value when observable price changes in identical or similar investments from the same issuer occur (the "measurement alternative"). The fair values of investments measured under this measurement alternative are not included in the below disclosures of fair value of financial instruments. The following table sets forth the carrying amount and fair value of Ambac’s financial assets and liabilities as of March 31, 2022 and December 31, 2021, including the level within the fair value hierarchy at which fair value measurements are categorized. As required by the Fair Value Measurement Topic of the ASC, financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.

| Ambac Financial Group, Inc. 18 2022 First Quarter FORM 10-Q |

AMBAC FINANCIAL GROUP, INC. AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements

(Dollar Amounts in Millions, Except Share Amounts)

	Carrying Amount		Total Fair Value		Fair Value Measurements Categorized as:
March 31, 2022:					Level 1		Level 2		Level 3
Financial assets:
Fixed maturity securities:
Municipal obligations	$	188	$	188	$	—	$	188	$	—
Corporate obligations	577		577		1		564		12
Foreign obligations	88		88		88		—		—
U.S. government obligations	51		51		51		—		—
Residential mortgage-backed securities	225		225		—		225		—
Collateralized debt obligations	120		120		—		120		—
Other asset-backed securities	252		252		—		178		74
Fixed maturity securities, pledged as collateral:
U.S. government obligations	15		15		15		—		—
Short-term	99		99		99		—		—
Short term investments	540		540		526		13		—
Other investments (1)	660		652		92		—		—
Cash, cash equivalents and restricted cash	67		67		67		—		—
Derivative assets:
Interest rate swaps—asset position	56		56		—		3		52
Other assets-Loans	3		3		—		—		3
Variable interest entity assets:
Fixed maturity securities: Corporate obligations, fair value option	3,131		3,131		—		—		3,131
Fixed maturity securities: Municipal obligation, trading	114		114		—		114		—
Fixed maturity securities: Municipal obligations, available-for-sale	119		119		—		119		—
Restricted cash	49		49		49		—		—
Loans	2,469		2,469		—		—		2,469
Derivative assets: Currency swaps-asset position	42		42		—		42		—
Total financial assets	$	8,864	$	8,856	$	988	$	1,567	$	5,741
Financial liabilities:
Long term debt, including accrued interest	$	2,834	$	2,315	$	—	$	2,296	$	19
Derivative liabilities:
Credit derivatives	1		1		—		—		1
Interest rate swaps—liability position	75		75		—		75		—
Futures contracts	1		1		1		—		—
Liabilities for net financial guarantees written (2)	(970)		(197)		—		—		(197)
Variable interest entity liabilities:
Long-term debt (includes $3,701 at fair value)	4,124		4,161		—		4,001		160
Derivative liabilities: Interest rate swaps—liability position	1,866		1,866		—		1,866		—
Total financial liabilities	$	7,930	$	8,221	$	1	$	8,238	$	(17)

| Ambac Financial Group, Inc. 19 2022 First Quarter FORM 10-Q |

AMBAC FINANCIAL GROUP, INC. AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements

(Dollar Amounts in Millions, Except Share Amounts)

	Carrying Amount		Total Fair Value		Fair Value Measurements Categorized as:
December 31, 2021:					Level 1		Level 2		Level 3
Financial assets:
Fixed maturity securities:
Municipal obligations	$	340	$	340	$	—	$	340	$	—
Corporate obligations	613		613		1		600		12
Foreign obligations	87		87		87		—		—
U.S. government obligations	45		45		45		—		—
Residential mortgage-backed securities	252		252		—		252		—
Collateralized debt obligations	128		128		—		128		—
Other asset-backed securities	265		265		—		187		79
Fixed maturity securities, pledged as collateral:
U.S. government obligations	15		15		15		—		—
Short-term	105		105		105		—		—
Short term investments	414		414		369		46		—
Other investments (1)	690		683		106		—		—
Cash, cash equivalents and restricted cash	21		21		21		1		—
Derivative assets:
Interest rate swaps—asset position	76		76		—		5		71
Other assets - equity in sponsored VIE	—		—		—		—		—
Other assets-loans	3		3		—		—		3
Variable interest entity assets:
Fixed maturity securities: Corporate obligations, fair value option	3,320		3,320		—		—		3,320
Fixed maturity securities: Municipal obligations, available-for-sale	136		136		—		136		—
Restricted cash	2		2		2		—		—
Loans	2,718		2,718		—		—		2,718
Derivative assets: Currency swaps—asset position	38		38		—		38		—
Total financial assets	$	9,268	$	9,261	$	750	$	1,732	$	6,202
Financial liabilities:
Long term debt, including accrued interest	$	2,806	$	2,598	$	—	$	2,575	$	22
Derivative liabilities:
Credit derivatives	—		—		—		—		—
Interest rate swaps—liability position	94		94		—		94		—
Futures contracts	—		—		—		—		—
Liabilities for net financial guarantees written (2)	(866)		(112)		—		—		(112)
Variable interest entity liabilities:
Long-term debt (includes $4,056 at fair value)	4,216		4,255		—		4,086		169
Derivative liabilities: Interest rate swaps—liability position	1,940		1,940		—		1,940		—
Total financial liabilities	$	8,190	$	8,775	$	—	$	8,695	$	79

(1)Excluded from the fair value measurement categories in the table above are investment funds of $560 and $577 as of March 31, 2022 and December 31, 2021, respectively, which are measured using NAV as a practical expedient. Also excluded from the fair value measurements in the table above are equity securities with a carrying value of $8 and $8 as of March 31, 2022 and December 31, 2021, respectively, that do not have readily determinable fair values and have carrying amounts determined using the measurement alternative.

(2)The carrying value of net financial guarantees written includes financial guarantee amounts in the following balance sheet items: Premium receivables; Reinsurance recoverable on paid and unpaid losses; Deferred ceded premium; Subrogation recoverable; Insurance intangible asset; Unearned premiums; Loss and loss expense reserves; Ceded premiums payable, premiums taxes payable and other deferred fees recorded in Other liabilities.

Determination of Fair Value:

When available, Ambac uses quoted active market prices specific to the financial instrument to determine fair value, and classifies such items within Level 1. The determination of fair value for financial instruments categorized in Level 2 or 3 involves

judgment due to the complexity of factors contributing to the valuation. Third-party sources from which we obtain independent market quotes also use assumptions, judgments and estimates in determining financial instrument values and different third parties may use different methodologies or provide different values for

| Ambac Financial Group, Inc. 20 2022 First Quarter FORM 10-Q |

AMBAC FINANCIAL GROUP, INC. AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements

(Dollar Amounts in Millions, Except Share Amounts)

financial instruments. In addition, the use of internal valuation models may require assumptions about hypothetical or inactive markets. As a result of these factors, the actual trade value of a financial instrument in the market, or exit value of a financial instrument position by Ambac, may be significantly different from its recorded fair value.

Ambac’s financial instruments carried at fair value are mainly comprised of investments in fixed maturity securities, equity interests in pooled investment funds, derivative instruments and certain variable interest entity assets and liabilities. Valuation of financial instruments is performed by Ambac’s finance group using methods approved by senior financial management with consultation from risk management and portfolio managers as appropriate. Preliminary valuation results are discussed with portfolio managers quarterly to assess consistency with market transactions and trends as applicable. Market transactions such as trades or negotiated settlements of similar positions, if any, are reviewed to validate fair value model results. However, many of the financial instruments valued using significant unobservable inputs have very little or no observable market activity. Methods and significant inputs and assumptions used to determine fair values across portfolios are reviewed quarterly by senior financial management. Other valuation control procedures specific to particular portfolios are described further below.

Fixed Maturity Securities:

The fair values of fixed maturity investment securities are based primarily on market prices received from broker quotes or alternative pricing sources. Because many fixed maturity securities do not trade on a daily basis, pricing sources apply available market information through processes such as matrix pricing to calculate fair value. Such prices generally consider a variety of factors, including recent trades of the same and similar securities. In those cases, the items are classified within Level 2. For those fixed maturity investments where quotes were not available or cannot be reasonably corroborated, fair values are based on internal valuation models. Key inputs to the internal valuation models generally include maturity date, coupon and yield curves for asset-type and credit rating characteristics that closely match those characteristics of the specific investment securities being valued. Items valued using valuation models are classified according to the lowest level input or value driver that is significant to the valuation. Thus, an item may be classified in Level 3 even though there may be significant inputs that are readily observable. Longer (shorter) expected maturities or higher (lower) yields used in the valuation model will, in isolation, result in decreases (increases) in fair value. Generally, lower credit ratings or longer expected maturities will be accompanied by higher yields used to value a security. At March 31, 2022, approximately 6%, 90% and 4% of the fixed maturity investment portfolio (excluding variable interest entity investments) was valued using broker quotes, alternative pricing sources and internal valuation models, respectively. At December 31, 2021, approximately 6%, 90% and 4% of the fixed maturity investment portfolio (excluding variable interest entity investments) was valued using broker quotes, alternative pricing sources and internal valuation models, respectively.

Ambac performs various review and validation procedures to quoted and modeled prices for fixed maturity securities, including price variance analyses, missing and static price reviews, overall valuation analysis by portfolio managers and finance managers and reviews associated with our ongoing impairment analysis. Unusual prices identified through these procedures will be evaluated further against alternative third party quotes (if available), internally modeled prices and/or other relevant data, and the pricing source values will be challenged as necessary. Price challenges generally result in the use of the pricing source’s quote as originally provided or as revised by the source following their internal diligence process. A price challenge may result in a determination by either the pricing source or Ambac management that the pricing source cannot provide a reasonable value for a security or cannot adequately support a quote, in which case Ambac would resort to using either other quotes or internal models. Results of price challenges are reviewed by portfolio managers and finance managers.

Information about the valuation inputs for fixed maturity securities classified as Level 3 is included below:

Other asset-backed securities: This security is a subordinated tranche of a securitization collateralized by Ambac-insured military housing bonds. The fair value classified as Level 3 was $74 and $79 at March 31, 2022 and December 31, 2021, respectively. Fair value was calculated using a discounted cash flow approach with expected future cash flows discounted using a yield consistent with the security type and rating. Significant inputs for the valuation at March 31, 2022 and December 31, 2021 include the following:

March 31, 2022:
a. Coupon rate:	5.98%
b. Average Life:	13.97 years
c. Yield:	11.00%
December 31, 2021:
a. Coupon rate:	5.97%
b. Average Life:	14.14 years
c. Yield:	10.20%

Corporate obligations: This includes certain investments in convertible debt securities. The fair value classified as Level 3 was $12 and $12 at March 31, 2022 and December 31, 2021, respectively. Fair value was calculated by discounting cash flows to average maturity of 2.5 years and yield of 9.3% at March 31, 2022 and average maturity of 2.75 years and yield of 7.2% at December 31, 2021. Yields used are consistent with the security type and rating.

Other Investments:

Other investments primarily relate to investments in pooled investment funds. The fair value of pooled investment funds is determined using dealer quotes or alternative pricing sources when such investments have readily determinable fair values. When fair value is not readily determinable, pooled investment

| Ambac Financial Group, Inc. 21 2022 First Quarter FORM 10-Q |

AMBAC FINANCIAL GROUP, INC. AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements

(Dollar Amounts in Millions, Except Share Amounts)

funds are valued using NAV as a practical expedient as permitted under the Fair Value Measurement Topic of the ASC. Refer to Note 4. Investments for additional information about such investments in pooled funds that are reported at fair value using NAV as a practical expedient.

Derivative Instruments:

Ambac’s derivative instruments primarily comprise interest rate swaps, credit default swaps and exchange traded futures contracts. Fair value is determined based upon market quotes from independent sources, when available. When independent quotes are not available, fair value is determined using valuation models. These valuation models require market-driven inputs, including contractual terms, credit spreads and ratings on underlying referenced obligations, yield curves and tax-exempt interest ratios. The valuation of certain derivative contracts also require the use of data inputs and assumptions that are determined by management and are not readily observable in the market. Under the Fair Value Measurement Topic of the ASC, Ambac is required to consider its own credit risk when measuring the fair value of derivatives and other liabilities. Factors considered in estimating the amount of any Ambac credit valuation adjustment ("CVA") on such contracts include collateral posting provisions, right of set-off with the counterparty, the period of time remaining on the derivative and the pricing of recent terminations. The aggregate Ambac CVA impact reduced the fair value of derivative liabilities by less than a million dollars at both March 31, 2022 and December 31, 2021, respectively

Interest rate swaps that are not centrally cleared are valued using vendor-developed models that incorporate interest rates and yield curves that are observable and regularly quoted. These models provide the net present value of the derivatives based on contractual terms and observable market data. Generally, the need for counterparty (or Ambac) CVAs on interest rate derivatives is mitigated by the existence of collateral posting agreements under which adequate collateral has been posted. Certain of these derivative contracts entered into with financial guarantee customers are not subject to collateral posting agreements. Counterparty credit risk related to such customer derivative assets is included in our determination of their fair value.

Ambac's credit derivatives ("CDS") are valued using an internal model that uses traditional financial guarantee CDS pricing to calculate the fair value of the derivative contract based on the reference obligation's current pricing, remaining life and credit rating and Ambac's own credit risk. The model calculates the difference between the present value of the projected fees receivable under the CDS and our estimate of the fees a financial guarantor of comparable credit quality would charge to provide the same protection at the balance sheet date. Unobservable inputs used include Ambac's internal reference obligation credit ratings and remaining life, estimates of fees that would be charged to assume the credit derivative obligation and Ambac's CVA. Ambac is party to only one remaining credit derivative with an internal credit rating of AA at March 31, 2022. Ambac has not made any significant changes to its modeling techniques or related model inputs for the periods presented.

Financial Guarantees:

Fair value of net financial guarantees written represents our estimate of the cost to Ambac to completely transfer its insurance obligation to another market participant of comparable credit worthiness. In theory, this amount should be the same amount that another market participant of comparable credit worthiness would hypothetically charge in the marketplace, on a present value basis, to provide the same protection as of the balance sheet date. This fair value estimate of financial guarantees is presented on a net basis and includes direct and assumed contracts written, net of ceded reinsurance contracts.

Long-term Debt:

Long-term debt includes AAC surplus notes, the Sitka AAC Note, Tier 2 Notes issued in connection with the Rehabilitation Exit Transactions and the Ambac UK debt issued in connection with the Ballantyne commutation. The fair values of surplus notes, Sitka AAC Note and Tier 2 Notes are classified as Level 2. The fair value of Ambac UK debt is classified as Level 3.

Other Financial Assets and Liabilities:

Included in Other assets are loans, the fair values of which are estimated based upon internal valuation models and are classified as Level 3.

Variable Interest Entity Assets and Liabilities:

The financial assets and liabilities of Legacy Financial Guarantee Insurance VIEs ("FG VIEs") consolidated under the Consolidation Topic of the ASC consist primarily of fixed maturity securities and loans held by the VIEs, derivative instruments and notes issued by the VIEs which are reported as long-term debt. As described in Note 9. Variable Interest Entities, these FG VIEs are securitization entities which have liabilities and/or assets guaranteed by AAC or Ambac UK.

The fair values of FG VIE long-term debt are based on price quotes received from independent market sources when available. Such quotes are considered Level 2 and generally consider a variety of factors, including recent trades of the same and similar securities. For those instruments where quotes were not available or cannot be reasonably corroborated, fair values are based on internal valuation models. Comparable to the sensitivities of investments in fixed maturity securities described above, longer (shorter) expected maturities or higher (lower) yields used in the valuation model will, in isolation, result in decreases (increases) in fair value liability measurement for FG VIE long-term debt.

FG VIE derivative asset and liability fair values are determined using vendor-developed valuation models, which incorporated observable market data related to specific derivative contractual terms including interest rates, foreign exchange rates and yield curves.

The fair value of FG VIE fixed maturity securities and loan assets are generally based on Level 2 market price quotes received from independent market sources when available. When FG VIE asset fair values are not readily available from market quotes, values are estimated internally. Internal valuations of FG VIE’s fixed maturity securities or loan assets are derived from the fair values of the notes issued by the respective VIE and the VIE’s

| Ambac Financial Group, Inc. 22 2022 First Quarter FORM 10-Q |

AMBAC FINANCIAL GROUP, INC. AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements

(Dollar Amounts in Millions, Except Share Amounts)

derivatives, determined as described above, adjusted for the fair values of Ambac’s financial guarantees associated with the VIE. The fair value of financial guarantees consist of: (i) estimated future premium cash flows discounted at a rate consistent with that implicit in the fair value of the VIE’s liabilities and (ii) estimates of future claim payments discounted at a rate that

includes Ambac’s own credit risk. Estimated future premium payments to be paid by the VIEs were discounted at a weighted average rate of 3.9% and 3.0% at March 31, 2022 and December 31, 2021, respectively. At March 31, 2022, the range of these discount rates was between 3.2% and 5.3%.

Additional Fair Value Information for Financial Assets and Liabilities Accounted for at Fair Value:

The following tables present the changes in the Level 3 fair value category for the periods presented in 2022 and 2021. Ambac classifies financial instruments in Level 3 of the fair value hierarchy when there is reliance on at least one significant unobservable input to the valuation model. In addition to these unobservable inputs, the valuation models for Level 3 financial instruments typically also rely on a number of inputs that are readily observable either directly or indirectly. Thus, the gains and losses presented below include changes in the fair value related to both observable and unobservable inputs.

Level 3 - Financial Assets and Liabilities Accounted for at Fair Value
							VIE Assets
	Investments(1)		Other Assets(2)		Derivatives		Investments		Loans		Total
Three Months Ended March 31, 2022:
Balance, beginning of period	$	91	$	—	$	70	$	3,320	$	2,718	$	6,199
Total gains/(losses) realized and unrealized:
Included in earnings	—		—		(17)		(93)		(96)		(204)
Included in other comprehensive income	(4)		—		—		(96)		(76)		(176)
Purchases	—		—		—		—		—		—
Settlements	(1)		—		(2)		—		(78)		(80)
Balance, end of period	$	86	$	—	$	52	$	3,131	$	2,469	$	5,738
The amount of total gains/(losses) included in earnings attributable to the change in unrealized gains or losses relating to assets and liabilities still held at the reporting date	$	—	$	—	$	(17)	$	(93)	$	(96)	$	(204)
The amount of total gains/(losses) included in other comprehensive income attributable to the change in unrealized gains or losses relating to assets and liabilities still held at the reporting date	$	(4)	$	—	$	—	$	(96)	$	(76)	$	(176)
Three Months Ended March 31, 2021:
Balance, beginning of period	$	78	$	1	$	84	$	3,215	$	2,998	$	6,376
Total gains/(losses) realized and unrealized:
Included in earnings	—		—		(17)		(138)		9		(145)
Included in other comprehensive income	(2)		—		—		26		24		49
Purchases	—		—		—		—		—		—
Settlements	—		—		(2)		—		(84)		(86)
Balance, end of period	$	76	$	1	$	65	$	3,103	$	2,948	$	6,194
The amount of total gains/(losses) included in earnings attributable to the change in unrealized gains or losses relating to assets and liabilities still held at the reporting date	$	—	$	—	$	(17)	$	(138)	$	9	$	(145)
The amount of total gains/(losses) included in other comprehensive income attributable to the change in unrealized gains or losses relating to assets and liabilities still held at the reporting date	$	(2)	$	—	$	—	$	26	$	24	$	49

(1)     Investments classified as Level 3 consist of a single other asset-backed security.

(2)    Other assets carried at fair value and classified as Level 3 relate to an equity interest in an Ambac sponsored VIE.

Invested assets and VIE long-term debt are transferred into Level 3 when internal valuation models that include significant unobservable inputs are used to estimate fair value. All such securities that have internally modeled fair values have been classified as Level 3. Derivative instruments are transferred into Level 3 when the use of unobservable inputs becomes significant to the overall valuation. There were no transfers of financial instruments into or out of Level 3 in the periods disclosed.

| Ambac Financial Group, Inc. 23 2022 First Quarter FORM 10-Q |

AMBAC FINANCIAL GROUP, INC. AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements

(Dollar Amounts in Millions, Except Share Amounts)

Gains and losses (realized and unrealized) relating to Level 3 assets and liabilities included in earnings for the affected periods are reported as follows:

	Net Investment Income		Net Gains (Losses) on Derivative Contracts		Income (Loss) on Variable Interest Entities		Other Income or (Expense)
Three Months Ended March 31, 2022:
Total gains (losses) included in earnings for the period	$	—	$	(17)	$	(188)	$	—
Changes in unrealized gains (losses) relating to financial instruments still held at the reporting date	—		(17)		(188)		—
Three Months Ended March 31, 2021:
Total gains (losses) included in earnings for the period	$	—	$	(17)	$	(129)	$	—
Changes in unrealized gains (losses) relating to financial instruments still held at the reporting date	—		(17)		(129)		—

6.     INSURANCE CONTRACTS

Amounts presented in this Note relate only to Ambac’s non-derivative insurance business for insurance policies issued to beneficiaries, excluding consolidated VIEs.

Premiums:

The effect of reinsurance on premiums written and earned was as follows:

	Three Months Ended March 31,
	2022				2021
	Written		Earned		Written		Earned
Direct	$	30	$	23	$	(2)	$	17
Assumed	—		—		—		—
Ceded	18		8		7		3
Net premiums	$	12	$	15	$	(9)	$	14

The following table summarizes net premiums earned by location of risk:

	Three Months Ended March 31,
	2022		2021
United States	$	9	$	7
United Kingdom	4		3
Other international	1		3
Total	$	15	$	14

Premium Receivables, including credit impairments:

Premium receivables at March 31, 2022 and December 31, 2021 were $317 and $323, respectively.

•Legacy financial guarantee premium receivables are discounted using an appropriate risk-free rate corresponding to the weighted average life of each policy and currency to discount the future premiums contractually due or expected to be collected. The weighted average risk-free rate at March 31, 2022 and December 31, 2021, was 2.6% and 2.2%, respectively, and the weighted average period of future premiums used to estimate the premium receivable at March 31, 2022 and December 31, 2021, was 8.2 years and 8.0 years, respectively.

•Specialty property and casualty premium receivables are not discounted and are typically paid upfront. Any receivables for such amounts are generally collected in the following period. Non-payment of premium by the policyholder may lead to policy cancellation.

Management evaluates premium receivables for expected credit losses ("credit impairment") in accordance with the CECL standard adopted January 1, 2020, which is further described in Note 2. Basis of Presentation and Significant Accounting Policies in the Notes to Consolidated Financial Statements included in Ambac's Annual Report on Form 10-K for the year ended December 31, 2021. The key indicator management uses to assess the credit quality of the legacy financial guarantee premium receivables is Ambac's internal risk classifications for the insured obligation determined by the Risk Management Group. Below is the amortized cost basis of financial guarantee premium receivables by risk classification code and asset class as of March 31, 2022 and December 31, 2021:

| Ambac Financial Group, Inc. 24 2022 First Quarter FORM 10-Q |

AMBAC FINANCIAL GROUP, INC. AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements

(Dollar Amounts in Millions, Except Share Amounts)

Surveillance Categories as of March 31, 2022
Type of Guaranteed Bond	I		IA		II		III		IV		Total
Public Finance:
Housing revenue	$	147	$	3	$	5	$	—	$	—	$	155
Other	2		—		—		—		—		2
Total Public Finance	149		3		5		—		—		157
Structured Finance:
Mortgage-backed and home equity	1		—		—		2		11		15
Structured insurance	9		—		—		—		—		9
Student loan	1		1		—		8		—		11
Other	6		—		—		—		—		6
Total Structured Finance	18		1		—		11		11		41
International:
Sovereign/sub-sovereign	74		8		—		10		—		92
Investor-owned and public utilities	21		—		—		—		—		21
Other	5		—		—		—		—		5
Total International	100		8		—		10		—		118
Total (1) (2)	$	267	$	12	$	5	$	21	$	11	$	316
Surveillance Categories as of December 31, 2021
Type of Guaranteed Bond	I		IA		II		III		IV		Total
Public Finance:
Housing revenue	$	149	$	3	$	5	$	—	$	—	$	157
Other	2		—		—		—		—		2
Total Public Finance	151		3		5		—		—		159
Structured Finance:
Mortgage-backed and home equity	1		—		1		2		12		16
Student loan	1		1		—		9		—		12
Structured insurance	10		—		—		—		—		10
Other	7		—		—		—		—		7
Total Structured Finance	19		1		1		12		12		45
International:
Sovereign/sub-sovereign	74		8		—		11		—		93
Investor-owned and public utilities	28		—		—		—		—		28
Other	5		—		—		—		—		5
Total International	107		8		—		11		—		125
Total (1) (2)	$	277	$	12	$	6	$	22	$	12	$	329

(1)    Excludes specialty property and casualty premium receivables of $9 and $2 at March 31, 2022 and December 31, 2021, respectively.

(2)    The underwriting origination dates for all policies included are greater than five years prior to the current reporting date.

| Ambac Financial Group, Inc. 25 2022 First Quarter FORM 10-Q |

AMBAC FINANCIAL GROUP, INC. AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements

(Dollar Amounts in Millions, Except Share Amounts)

Below is a rollforward of the premium receivable allowance for credit losses as of March 31, 2022 and 2021:

Three Months Ended March 31,	2022		2021
Beginning balance	$	9	$	17
Current period provision (benefit)	(1)		(4)
Write-offs of the allowance	—		—
Recoveries of previously written-off amounts	—		—
Ending balance (1)	$	8	$	13

(1)At March 31, 2022 and 2021, $1 and $— of premiums were past due.

Legacy Financial Guarantee Premium Receivables:

Gross premiums are received either upfront or in installments. For premiums received upfront, an unearned premium revenue (“UPR”) liability is established, which is initially recorded as the cash amount received. For installment premium policies, a premium receivable asset and offsetting UPR liability is initially established in an amount equal to: (i) the present value of future contractual premiums due (the “contractual” method) or (ii) if the assets underlying the insured obligation are homogenous pools which are contractually prepayable, the present value of premiums to be collected over the expected life of the transaction (the “expected” method).

Below is the gross premium receivable roll-forward (direct and assumed contracts) for the affected periods:

Three Months Ended March 31,	2022		2021
Beginning premium receivable	$	320	$	370
Premium receipts	(15)		(12)
Adjustments for changes in expected and contractual cash flows for contracts (1)	3		(8)
Accretion of premium receivable discount for contracts	2		2
Changes to allowance for credit losses	1		4
Other adjustments (including foreign exchange)	(3)		—
Ending premium receivable (2)	$	308	$	356

(1)    Adjustments for changes in expected and contractual cash flows primarily due to indexation offset by reductions in insured exposure as a result of early policy terminations and unscheduled principal paydowns.

(2)    Premium receivable includes premiums to be received in foreign denominated currencies most notably in British Pounds and Euros. At March 31, 2022 and 2021, premium receivables include British Pounds of $101 (£77) and $122 (£89), respectively, and Euros of $16 (€15) and $21 (€18), respectively.

The following table summarizes the future gross undiscounted premiums to be collected and future premiums earned, net of reinsurance at March 31, 2022:

	Future Premiums to be Collected (1)		Future Premiums to be Earned Net of Reinsurance (2)
Three months ended:
June 30, 2022	$	8	$	6
September 30, 2022	9		6
December 31, 2022	6		6
Twelve months ended:
December 31, 2023	30		24
December 31, 2024	29		23
December 31, 2025	28		22
December 31, 2026	27		22
Five years ended:
December 31, 2031	115		89
December 31, 2036	77		55
December 31, 2041	34		22
December 31, 2046	16		9
December 31, 2051	5		3
December 31, 2056	—		—
Total	$	384	$	288

(1)Future premiums to be collected are undiscounted, gross of allowance for credit losses, and are used to derive the discounted premium receivable asset recorded on Ambac's balance sheet.

(2)Future premiums to be earned, net of reinsurance relate to the unearned premiums liability and deferred ceded premium asset recorded on Ambac’s balance sheet. The use of contractual lives for many bond types which do not have homogeneous pools of underlying collateral is required in the calculation of the premium receivable, as further described in Note 2. Basis of Presentation and Significant Accounting Policies in the Notes to Consolidated Financial Statements included in Ambac's Annual Report on Form 10-K for the year ended December 31, 2021. This results in a different premium receivable balance than if expected lives were considered. If installment paying policies are retired or prepay early, premiums reflected in the premium receivable asset and amounts reported in the above table for such policies may not be collected. Future premiums to be earned also considers the use of contractual lives for many bond types which do not have homogeneous pools of underlying collateral, which may result in different unearned premium than if expected lives were considered. If those bonds types are retired early, premium earnings may be negative in the period of call or refinancing.

| Ambac Financial Group, Inc. 26 2022 First Quarter FORM 10-Q |

AMBAC FINANCIAL GROUP, INC. AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements

(Dollar Amounts in Millions, Except Share Amounts)

Loss and Loss Expense Reserves:

Ambac’s loss and loss expense reserves (“loss reserves”) are based on management’s on-going review of the insured portfolio. Below are the components of the loss and loss expense reserves and the subrogation recoverable asset at at March 31, 2022 and December 31, 2021:

			Legacy Financial Guarantee
	Specialty Property and Casualty		Present Value of Expected Net Cash Flows
Balance Sheet Line Item	Gross Loss and Loss Expense Reserves		Claims and Loss Expenses		Recoveries		Unearned Premium Revenue		Gross Loss and Loss Expense Reserves
March 31, 2022:
Loss and loss expense reserves	$	36	$	1,168	$	(95)	$	(42)	$	1,067
Subrogation recoverable	—		52		(1,766)		—		(1,714)
Totals	$	36	$	1,221	$	(1,861)	$	(42)	$	(647)
December 31, 2021:
Loss and loss expense reserves	$	32	$	1,749	$	(155)	$	(56)	$	1,570
Subrogation recoverable	—		88		(2,180)		—		(2,092)
Totals	$	32	$	1,837	$	(2,335)	$	(56)	$	(522)

Below is the loss and loss reserve expense roll-forward, net of subrogation recoverable and reinsurance, for the affected periods:

Three Months Ended March 31,	2022		2021
Beginning gross loss and loss expense reserves	$	(522)	$	(397)
Reinsurance recoverable	55		33
Beginning balance of net loss and loss expense reserves	(578)		(430)
Losses and loss expenses (benefit):
Current year	1		—
Prior years	23		8
Total (1) (2)	24		8
Loss and loss expenses paid (recovered):
Current year	—		—
Prior years	(150)		25
Total	(150)		25
Foreign exchange effect	(1)		—
Ending net loss and loss expense reserves	(404)		(447)
Impact of VIE consolidation	(292)		—
Reinsurance recoverable (3)	49		33
Ending gross loss and loss expense reserves	$	(647)	$	(414)

(1)Total losses and loss expenses (benefit) includes $(7) and $(1) for the three months ended March 31, 2022 and 2021, respectively, related to ceded reinsurance.

(2)Ambac records the impact of estimated recoveries related to securitized loans in RMBS transactions that breached certain representations and warranties ("R&W's) by transaction sponsors within losses and loss expenses (benefit). The losses and loss expense incurred associated with changes in estimated R&W's for the three months ended March 31, 2022 and 2021, was $224 and $3, respectively.

(3)Represents reinsurance recoverable on future loss and loss expenses. Additionally, the Balance Sheet line "Reinsurance recoverable on paid and unpaid losses" includes reinsurance recoverables (payables) of $0 and $0 as of March 31, 2022 and 2021, respectively, related to previously presented loss and loss expenses and subrogation.

For 2022, the adverse development in prior years was primarily attributable to the reduction in the R&W recoverable partially offset by the positive benefit of the Puerto Rico restructuring.

For 2021, the adverse development in prior years was primarily due to deterioration of Puerto Rico credits.

| Ambac Financial Group, Inc. 27 2022 First Quarter FORM 10-Q |

AMBAC FINANCIAL GROUP, INC. AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements

(Dollar Amounts in Millions, Except Share Amounts)

Legacy Financial Guarantee Loss Reserves:

The tables below summarize information related to policies currently included in Ambac’s loss and loss expense reserves or subrogation recoverable at March 31, 2022 and December 31, 2021, excluding consolidated VIEs. Gross par exposures include capital appreciation bonds which are reported at the par amount at the time of issuance of the insurance policy as opposed to the current accreted value of the bond. The weighted average risk-free rate used to discount loss reserves at March 31, 2022 and December 31, 2021,was 2.4% and 1.2%, respectively.

Surveillance Categories as of March 31, 2022
	I		IA		II		III		IV		V		Total
Number of policies	34		14		8		14		124		5		199
Remaining weighted-average contract period (in years) (1)	9		17		14		15		14		7		14
Gross insured contractual payments outstanding:
Principal	$	1,297	$	305	$	457	$	1,265	$	2,105	$	40	$	5,469
Interest	608		348		308		174		683		22		2,143
Total	$	1,905	$	653	$	766	$	1,439	$	2,788	$	62	$	7,612
Gross undiscounted claim liability	$	8	$	5	$	45	$	572	$	867	$	62	$	1,559
Discount, gross claim liability	(1)		(1)		(5)		(155)		(208)		(7)		(377)
Gross claim liability before all subrogation and before reinsurance	7		5		40		416		659		55		1,182
Less:
Gross RMBS subrogation (2)	—		—		—		—		(1,537)		—		(1,537)
Discount, RMBS subrogation	—		—		—		—		35		—		35
Discounted RMBS subrogation, before reinsurance	—		—		—		—		(1,502)		—		(1,502)
Less:
Gross other subrogation (3)	—		(5)		—		(33)		(350)		(12)		(401)
Discount, other subrogation	—		—		—		4		34		3		41
Discounted other subrogation, before reinsurance	—		(5)		—		(29)		(316)		(10)		(360)
Gross claim liability, net of all subrogation and discounts, before reinsurance	7		—		40		387		(1,159)		45		(680)
Less: Unearned premium revenue	(5)		(3)		(5)		(12)		(16)		(1)		(42)
Plus: Loss expense reserves	1		—		—		3		35		—		39
Gross loss and loss expense reserves	$	3	$	(3)	$	35	$	378	$	(1,140)	$	44	$	(683)
Reinsurance recoverable reported on Balance Sheet (4)	$	1	$	—	$	9	$	22	$	(18)	$	—	$	14

(1)Remaining weighted-average contract period is weighted based on projected gross claims over the lives of the respective policies.

(2)RMBS subrogation represents Ambac’s estimate of subrogation recoveries from RMBS transaction sponsors for representation and warranty ("R&W") breaches.

(3)Other subrogation represents subrogation related to excess spread and other contractual cash flows on public finance and structured finance transactions including RMBS.

(4)Reinsurance recoverable reported on the Balance Sheet includes reinsurance recoverables of $14 related to future loss and loss expenses and $0 related to presented loss and loss expenses and subrogation.

| Ambac Financial Group, Inc. 28 2022 First Quarter FORM 10-Q |

AMBAC FINANCIAL GROUP, INC. AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements

(Dollar Amounts in Millions, Except Share Amounts)

Surveillance Categories as of December 31, 2021
	I		IA		II		III		IV		V		Total
Number of policies	34		15		7		14		130		5		205
Remaining weighted-average contract period (in years) (1)	9		12		14		15		13		7		14
Gross insured contractual payments outstanding:
Principal	$	904	$	840	$	459	$	1,300	$	2,759	$	40	$	6,302
Interest	589		612		308		169		1,284		22		2,984
Total	$	1,493	$	1,452	$	767	$	1,469	$	4,043	$	62	$	9,286
Gross undiscounted claim liability	$	5	$	16	$	45	$	544	$	1,423	$	62	$	2,095
Discount, gross claim liability	—		(1)		(3)		(109)		(185)		(4)		(303)
Gross claim liability before all subrogation and before reinsurance	5		15		42		435		1,238		57		1,792
Less:
Gross RMBS subrogation (2)	—		—		—		—		(1,737)		—		(1,737)
Discount, RMBS subrogation	—		—		—		—		7		—		7
Discounted RMBS subrogation, before reinsurance	—		—		—		—		(1,730)		—		(1,730)
Less:
Gross other subrogation (3)	—		(5)		—		(33)		(583)		(12)		(633)
Discount, other subrogation	—		—		—		2		24		2		28
Discounted other subrogation, before reinsurance	—		(5)		—		(31)		(559)		(10)		(605)
Gross claim liability, net of all subrogation and discounts, before reinsurance	5		10		42		404		(1,051)		47		(543)
Less: Unearned premium revenue	(3)		(10)		(5)		(14)		(24)		(1)		(56)
Plus: Loss expense reserves	1		—		—		4		40		—		45
Gross loss and loss expense reserves	$	3	$	1	$	38	$	394	$	(1,036)	$	46	$	(554)
Reinsurance recoverable reported on Balance Sheet (4)	$	1	$	1	$	10	$	22	$	(11)	$	—	$	23

(1)Remaining weighted-average contract period is weighted based on projected gross claims over the lives of the respective policies.

(2)RMBS subrogation represents Ambac’s estimate of subrogation recoveries from RMBS transaction sponsors for R&W breaches.

(3)Other subrogation represents subrogation related to excess spread and other contractual cash flows on public finance and structured finance transactions, including RMBS.

(4)Reinsurance recoverable reported on the Balance Sheet includes reinsurance recoverables of $24 related to future loss and loss expenses and $0 related to presented loss and loss expenses and subrogation.

COVID-19:

The COVID-19 pandemic had an impact on general economic conditions; including, but not limited to, higher unemployment; volatility in the capital markets; closure or severe curtailment of the operations and, hence, revenues, of many businesses and public and private enterprises to which we are directly or indirectly exposed. While the impact of the pandemic on the economy and markets in general has mostly subsided, there remains lingering effects, such as government relief programs, supply chain disruptions, inflation, and employment shortages, which may continue to adversely impact transactions insured in our legacy financial guarantee business.

In particular, this includes the U.S. government's temporary relief measures that required mortgage loan servicers to offer relief to borrowers who suffer hardship as a result of COVID-19. These relief measures included moratoriums on foreclosures and evictions as well as the expansion of forbearance and subsequent

repayment options. While these relief measures have largely since expired, the resulting delays in starting mortgage foreclosure processes and the impact of potential post-forbearance related mortgage loan modifications may have an adverse impact on our insured RMBS transactions. Consequently, we could experience a modest increase in claim payments for certain of our insured RMBS obligations following the resumption of foreclosure activity and the implementation of post-forbearance mortgage loan modifications.

We are continuously evaluating and updating our view of the macro economic environment as well as our specific credit view of each of our insured exposures considering the significant uncertainties brought upon us by the COVID-19 pandemic. Accordingly, despite the current economic recovery, our loss reserves may be under-estimated as a result of the ultimate scope, duration and magnitude of the effects of COVID-19 pandemic.

| Ambac Financial Group, Inc. 29 2022 First Quarter FORM 10-Q |

AMBAC FINANCIAL GROUP, INC. AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements

(Dollar Amounts in Millions, Except Share Amounts)

Through March 31, 2022, we have not paid any claims related to COVID-19.

Puerto Rico

Ambac has exposure to the Commonwealth of Puerto Rico (the "Commonwealth") and its instrumentalities across several different issuing entities with total net par exposure of $784. Components of Puerto Rico net par outstanding include capital appreciation bonds which are reported at the par amount at the time of issuance of the related insurance policy as opposed to the current accreted value of the bonds. The Commonwealth of Puerto Rico and certain of its instrumentalities have defaulted on their debt service payments, including payments owed on bonds insured by AAC.

We have been paying claims for several years on most of our exposure to Puerto Rico, which consisted of several different issuing entities (all below investment grade). These issuing entities, which have been part of the PROMESA restructuring process that began in 2016, each have their own credit risk profile attributable to discrete revenue sources, direct general obligation pledges, and/or general obligation guarantees. On March 15, 2022, the Eighth Amended Plan Title III Joint Plan of Adjustment for the Commonwealth of Puerto Rico, et al. ("Eighth Amended POA") together with the Qualifying Modifications for PRIFA and CCDA ("PRIFA QM" and "CCDA QM", respectively) became effective and resolved the PROMESA restructuring process for the GO, PBA, PRIFA and CCDA issuing entities that have portions of their bonds insured by AAC.

Ambac insured bond effective date transactions

On March 15, 2022, and pursuant to bondholder elections: (i) all of the remaining outstanding AAC-insured GO and PBA bonds or about 94 were satisfied and eliminated via commutation or acceleration and (ii) about 39% and 19% of the par of AAC's outstanding AAC-insured PRIFA and CCDA bonds, respectively, or about $172, were reduced via commutation. The AAC-insured PRIFA and CCDA bondholders who failed to elect commutation had their bondholders’ respective shares of consideration available under the Commonwealth Plan and the PRIFA QM, or CCDA QM, as applicable, deposited into newly formed trusts. These trusts are being consolidated by Ambac as further discussed in Note 9. Variable Interest Entities. Since the effective date, the remainder of those PRIFA and CCDA bonds belonging to bondholders who elected not to commute their AAC insurance policies and were deposited into trusts together with such policies have all been accelerated, satisfying and eliminating all of the Ambac-insured PRIFA and CCDA bonds.

Puerto Rico Highway and Transportation Authority Bonds

AAC's remaining unrestructured PROMESA Puerto Rico exposure, the Puerto Rico Highway and Transportation Authority ("PRHTA"), is subject to the PRHTA Plan of Adjustment ("PRHTA POA"), which was filed on May 2, 2022. A confirmation hearing for the PRHTA POA is expected to follow later in 2022.

Creditor recoveries under the PRHTA POA are based upon the PRHTA/CCDA PSA. AAC signed a joinder to the PRHTA/

CCDA PSA on July 15, 2021. The PRHTA/CCDA PSA, originally executed on May 5, 2021, provides for certain consideration for holders of bonds issued by certain Commonwealth instrumentalities, PRHTA, and CCDA on account of their claims against the Commonwealth arising from such bonds ("Clawback" claims). Under the PRHTA/CCDA PSA, PRHTA creditors will share $389 of cash proceeds, including a $264 interim distribution, payable once the PRHTA distribution condition has been met pursuant to the Eighth Amended POA. In addition, PRHTA creditors will receive an approximately 69% share, subject to a lifetime nominal cap of $3,698, of the Clawback Creditors' portion of the outperformance of the Commonwealth's sales and use tax ("SUT") relative to the certified 2020 Commonwealth Fiscal Plan's projections (the "Clawback CVI"). The Clawback CVI instrument will be distributed once the PRHTA distribution condition has been met pursuant to the Eighth Amended POA. The PRHTA Clawback CVI is subject to a PRHTA-specific waterfall: holders of PRHTA ’68 bonds will receive the first dollars of Clawback CVI, followed by holders of PRHTA ’98 bonds. The value of the Clawback CVI is highly uncertain, given the contingent, outperformance-driven structure of the instrument. Changes in our assumed values of the Clawback CVI or in the actual performance of the Clawback CVI could cause an adverse change in our reserves, which could be material. As a result, a significant decrease in our assumed values of the Clawback CVI could have a material adverse impact on our results of operations and financial condition. PRHTA bondholders will also receive new PRHTA bonds or cash with a face amount of $1,245. Of the $1,245 in new bonds or cash, approximately $646.4 will be allocated to holders of PRHTA '68 bonds and approximately $598.6 will be allocated to holders of PRHTA '98 bonds. The new PRHTA bonds or cash will be distributed to creditors upon consummation of the PRHTA POA. AAC and other PRHTA creditors will receive restriction fees and consummation costs payable at the effective date of the PRHTA POA.

Puerto Rico Considerations

The Eighth Amended POA and the qualifying modifications for PRIFA and CCDA became effective on March 15, 2022, and on that date and since, AAC-insured Puerto Rico exposures have been significantly reduced via commutation and acceleration. However, uncertainty remains as to our remaining exposures as to (i) the value or perceived value of the consideration provided by or on behalf of the debtors under the Eighth Amended POA, PRIFA QM, and CCDA QM; (ii) the extent to which exposure management strategies, such as commutation and acceleration, will be executed for PRHTA; (iii) the tax treatment of the consideration provided by or on behalf of the debtors under the Eighth Amended POA, PRIFA QM, and CCDA QM; (iv) whether and when the PRHTA POA will be confirmed; and (vii) other factors, including market conditions such as interest rate movements and credit spread changes on the new CVI instruments. Ambac’s loss reserves may prove to be understated or overstated, possibly materially, due to favorable or unfavorable developments or results with respect to these factors.

While our reserving scenarios account for a wide range of possible outcomes, reflecting the significant uncertainty regarding future developments and outcomes, given our significant

| Ambac Financial Group, Inc. 30 2022 First Quarter FORM 10-Q |

AMBAC FINANCIAL GROUP, INC. AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements

(Dollar Amounts in Millions, Except Share Amounts)

exposure to Puerto Rico and the economic, fiscal, legal and political uncertainties associated therewith, our loss reserves may ultimately prove to be insufficient to cover our losses, potentially having a material adverse effect on our results of operations and financial position, and may be subject to material volatility. Conversely, Ambac’s loss reserves may prove to be overstated, possibly materially, due to favorable developments or results with respect to the factors described in the preceding paragraph.

Ambac has considered these developments and other factors in evaluating its Puerto Rico loss reserves. While management believes its reserves are adequate to cover losses in its Public Finance insured portfolio, there can be no assurance that Ambac may not incur additional losses in the future, given the circumstances described herein. Such additional losses may have a material adverse effect on Ambac’s results of operations and financial condition and may result in adverse consequences such as impairing the ability of AAC to honor its financial obligations; the initiation of rehabilitation proceedings against AAC; decreased likelihood of AAC delivering value to Ambac, through dividends or otherwise; and a significant drop in the value of securities issued or insured by Ambac or AAC. For public finance credits, including Puerto Rico, as well as other issuers, for which Ambac has an estimate of expected loss at March 31, 2022, the possible increase in loss reserves under stress or other adverse conditions and circumstances was estimated to be approximately $220. This possible increase in loss reserves under stress or other adverse conditions is significant and if we were to experience such incremental losses, our stockholders’ equity as of March 31, 2022, would decrease from $974 to $754. However, there can be no assurance that losses may not exceed such amount.

Representation and Warranty Recoveries:

Ambac records estimated RMBS R&W subrogation recoveries for breaches of R&W by sponsors of certain RMBS transactions. For a discussion of the approach utilized to estimate RMBS R&W subrogation recoveries, see Note 2. Basis of Presentation and Significant Accounting Policies in the Notes to Consolidated Financial Statements included Part II, Item 8 in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.

Ambac has recorded RMBS R&W subrogation recoveries of $1,502 ($1,480 net of reinsurance) and $1,730 ($1,704 net of reinsurance) at March 31, 2022 and December 31, 2021, respectively. The reduction in recorded RMBS R&W recoveries since December 31, 2021, is primarily attributable to management’s view of the effect on certain of AAC’s R&W litigations of the March 17, 2022 decision of the New York Court of Appeals in the case entitled U.S. Bank National Association v. DLJ Mortgage Capital, Inc. relating to Home Equity Asset Trust 2007-1, a residential mortgage-backed securities trust. The decision is relevant to AAC's breach-of-contract cases relating to its insured RMBS transactions and may affect one of the bases upon which AAC seeks recovery with respect to a significant portion of breaching loans in AAC's RMBS cases. However, management believes there remain other alternative paths to recovery for such breaching loans.

Our ability to realize R&W subrogation recoveries is subject to significant uncertainty, including risks inherent in litigation, including adverse rulings or decisions in our cases or in litigations to which AAC is not a party that set precedents or resolve questions of law that impact our own claims; collectability of such amounts from counterparties (and/or their respective parents and affiliates); timing of receipt of any such recoveries; intervention by OCI, which could impede our ability to take actions required to realize such recoveries; and uncertainty inherent in the assumptions used in estimating such recoveries. Failure to realize R&W subrogation recoveries for any reason or the realization of R&W subrogation recoveries materially below the amount recorded on Ambac's consolidated balance sheet would have a material adverse effect on our results of operations and financial condition. If we were unable to realize R&W subrogation recoveries recorded on Ambac's consolidated balance sheet, our stockholders’ equity as of March 31, 2022, would decrease from $974 to $(505). Additionally, failure to realize R&W subrogation recoveries, or the realization of recoveries significantly below those recorded on the balance sheet, may result in adverse consequences such as impairing the ability of AAC to honor its financial obligations; the initiation of rehabilitation proceedings against AAC; AAC not being able to deliver value to Ambac, through dividends or otherwise; and a significant drop in the value of securities issued or insured by Ambac or AAC.

Reinsurance Recoverables, Including Credit Impairments:

Amounts recoverable from reinsurers are estimated in a manner consistent with the associated loss and loss expense reserves. The Company reports its reinsurance recoverables net of an allowance for amounts that are estimated to be uncollectible.

The allowance for credit losses is based upon Ambac's ongoing review of amounts outstanding. Key indicators management uses to assess the credit quality of reinsurance recoverables are financial performance of the reinsurers, collateral posted by the reinsurers and independent rating agency credit ratings. The evaluation begins with a comparison of the fair value of collateral posted by the reinsurer to the recoverable, net of ceded premiums payable. Any shortfall of collateral posted is evaluated against our assessment of the reinsurer's financial strength, including its credit rating to determine whether an allowance is considered necessary.

Ambac has uncollateralized credit exposure of $30 and $31 and has recorded an allowance for credit losses of less than a million at March 31, 2022 and December 31, 2021. The uncollateralized credit exposure includes legacy liabilities obtained from the acquisitions of PWIC and the 21st Century Companies of $29, which are also supported by an unlimited, uncapped indemnity from Enstar Holdings (US) and 21st Century Premier Insurance Company, respectively.

| Ambac Financial Group, Inc. 31 2022 First Quarter FORM 10-Q |

AMBAC FINANCIAL GROUP, INC. AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements

(Dollar Amounts in Millions, Except Share Amounts)

7.    DERIVATIVE INSTRUMENTS

The following tables summarize the gross fair values of individual derivative instruments and the impact of legal rights of offset as reported in the Consolidated Balance Sheets as of March 31, 2022 and December 31, 2021:

	Gross Amounts of Recognized Assets / Liabilities		Gross Amounts Offset in the Consolidated Balance Sheet		Net Amounts of Assets/ Liabilities Presented in the Consolidated Balance Sheet		Gross Amount of Collateral Received / Pledged Not Offset in the Consolidated Balance Sheet		Net Amount
March 31, 2022:
Derivative Assets:
Interest rate swaps	$	56	$	—	$	55	$	—	$	55
Total non-VIE derivative assets	$	56	$	—	$	55	$	—	$	55
Derivative Liabilities:
Credit derivatives	$	1	$	—	$	1	$	—	$	1
Interest rate swaps	75		—		74		73		2
Futures contracts	1		—		1		—		1
Total non-VIE derivative liabilities	$	76	$	—	$	76	$	73	$	3
Variable Interest Entities Derivative Assets:
Currency swaps	$	42	$	—	$	42	$	—	$	42
Total VIE derivative assets	$	42	$	—	$	42	$	—	$	42
Variable Interest Entities Derivative Liabilities:
Interest rate swaps	$	1,866	$	—	$	1,866	$	—	$	1,866
Total VIE derivative liabilities	$	1,866	$	—	$	1,866	$	—	$	1,866

December 31, 2021:
Derivative Assets:
Interest rate swaps	$	76	$	—	$	76	$	—	$	76
Total non-VIE derivative assets	$	76	$	—	$	76	$	—	$	76
Derivative Liabilities:
Credit derivatives	$	—	$	—	$	—	$	—	$	—
Interest rate swaps	94		—		94		93		1
Futures contracts	—		—		—		—		—
Total non-VIE derivative liabilities	$	95	$	—	$	95	$	93	$	2
Variable Interest Entities Derivative Assets:
Currency swaps	$	38	$	—	$	38	$	—	$	38
Total VIE derivative assets	$	38	$	—	$	38	$	—	$	38
Variable Interest Entities Derivative Liabilities:
Interest rate swaps	$	1,940	$	—	$	1,940	$	—	$	1,940
Total VIE derivative liabilities	$	1,940	$	—	$	1,940	$	—	$	1,940

Amounts representing the right to reclaim cash collateral or the obligation to return cash collateral are not offset against fair value amounts recognized for derivative instruments on the Unaudited Consolidated Balance Sheets. The amounts representing the right to reclaim cash collateral and posted margin, recorded in “Other assets” were $6 and $13 as of March 31, 2022 and December 31, 2021, respectively. There were no amounts held representing an obligation to return cash collateral as of March 31, 2022 and December 31, 2021.

| Ambac Financial Group, Inc. 32 2022 First Quarter FORM 10-Q |

AMBAC FINANCIAL GROUP, INC. AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements

(Dollar Amounts in Millions, Except Share Amounts)

The following tables summarize the location and amount of gains and losses of derivative contracts in the Unaudited Consolidated Statements of Total Comprehensive Income (Loss) for the three months ended March 31, 2022 and 2021:

	Location of Gain (Loss) Recognized in Consolidated Statements of Total Comprehensive Income (Loss)	Amount of Gain (Loss) Recognized in Consolidated Statement of Total Comprehensive Income (Loss)
		Three Months Ended March 31,
		2022		2021
Non-VIE derivatives:
Interest rate swaps	Net gains (losses) on derivative contracts	$	30	$	17
Futures contracts	Net gains (losses) on derivative contracts	27		8
Total Non-VIE derivatives		$	57	$	25
Variable Interest Entities:
Currency swaps	Income (loss) on variable interest entities	$	6	$	(2)
Interest rate swaps	Income (loss) on variable interest entities	5		97
Total Variable Interest Entities		11		96
Total derivative contracts		$	68	$	121

Credit Derivatives:

Credit derivatives, which are privately negotiated contracts, provide the counterparty with credit protection against the occurrence of a specific event such as a payment default or bankruptcy relating to an underlying obligation. Credit derivatives issued are insured by AAC. The outstanding credit derivative transaction at March 31, 2022, does not include ratings-based collateral-posting triggers or otherwise require Ambac to post collateral regardless of Ambac’s ratings or the size of the mark to market exposure to Ambac.

Our credit derivatives were written on a “pay-as-you-go” basis. Similar to an insurance policy, pay-as-you-go provides that Ambac pays interest shortfalls on the referenced transaction as they are incurred on each scheduled payment date, but only pays principal shortfalls upon the earlier of (i) the date on which the assets designated to fund the referenced obligation have been disposed of and (ii) the legal final maturity date of the referenced obligation.

Ambac maintains internal credit ratings on its guaranteed obligations, including credit derivative contracts, solely to indicate management’s view of the underlying credit quality of the guaranteed obligations. The principal notional outstanding for credit derivative contracts was $196 and $201 as of March 31, 2022 and December 31, 2021, respectively, all of which had internal Ambac ratings of AA in both periods.

Interest Rate Derivatives:

Ambac, through its subsidiary Ambac Financial Services (“AFS”), uses interest rate swaps, US Treasury futures contracts and other derivatives, to provide a partial economic hedge against the effects of rising interest rates elsewhere in the Legacy Financial Guarantee Insurance segment, including on Ambac’s financial guarantee exposures. Additionally, AFS provided interest rate swaps to states, municipalities and their authorities, asset-backed issuers and other entities in connection with their financings. As of March 31, 2022 and December 31, 2021, the notional amounts of AFS’s derivatives are as follows:

	Notional
Type of Derivative	March 31, 2022		December 31, 2021
Interest rate swaps—pay-fixed/receive-variable	$	1,262	$	1,275
US Treasury futures contracts—short	470		470
Interest rate swaps—receive-fixed/pay-variable	181		185

Derivatives of Consolidated Variable Interest Entities

Certain VIEs consolidated under the Consolidation Topic of the ASC entered into derivative contracts to meet specified purposes within the securitization structure. The notional for VIE derivatives outstanding as of March 31, 2022 and December 31, 2021, were as follows:

	Notional
Type of VIE Derivative	March 31, 2022		December 31, 2021
Interest rate swaps—receive-fixed/pay-variable	$	1,185	$	1,221
Interest rate swaps—pay-fixed/receive-variable	1,020		1,069
Currency swaps	256		272

Contingent Features in Derivatives Related to Ambac Credit Risk

Ambac’s over-the-counter interest rate swaps are centrally cleared when eligible. Certain interest rate swaps remain with professional swap-dealer counterparties and direct customer counterparties. These non-cleared swaps are generally executed under standardized derivative documents including collateral support and master netting agreements. Under these agreements, Ambac is required to post collateral in the event net unrealized losses exceed predetermined threshold levels. Additionally, given

| Ambac Financial Group, Inc. 33 2022 First Quarter FORM 10-Q |

AMBAC FINANCIAL GROUP, INC. AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements

(Dollar Amounts in Millions, Except Share Amounts)

that AAC is no longer rated by an independent rating agency, counterparties have the right to terminate the swap positions.

As of March 31, 2022 and December 31, 2021, the net liability fair value of derivative instruments with contingent features linked to Ambac’s own credit risk was $73 and $93, respectively, related to which Ambac had posted cash and securities as collateral with a fair value of $87 and $109, respectively. All such ratings-based contingent features have been triggered requiring maximum collateral levels to be posted by Ambac while preserving counterparties’ rights to terminate the contracts. Assuming all such contracts terminated at fair value on March 31, 2022, settlement of collateral balances and net derivative liabilities would result in a net receipt of cash and/or securities by Ambac. If counterparties elect to exercise their right to terminate, the actual termination payment amounts will be determined in accordance with derivative contract terms, which may result in amounts that differ from market values as reported in Ambac’s financial statements.

8.    INTANGIBLE ASSETS

Insurance intangible asset:

The insurance intangible asset and accumulated amortization are included in the Consolidated Balance Sheets, as shown below.

	March 31, 2022		December 31, 2021
Finite-lived Intangible Assets:
Insurance intangible:
Gross carrying value	$	1,264	$	1,278
Accumulated amortization	961		958
Net insurance intangible asset	303		320
Other intangibles:
Gross carrying value	$	36	36
Accumulated amortization	3		3
Net other intangible assets	32		33
Total finite-lived intangible assets	336		353
Indefinite-lived Intangible Assets:
Insurance licenses	14		9
Total intangible assets	$	350	362

Amortization Expense:

Amortization expense is included in the Consolidated Statements of Total Comprehensive Income (Loss), as shown below.

Three Months Ended March 31,	2022		2021
Insurance amortization expense	$	14	$	19
Other amortization expense	1		1
Total	$	14	$	19

The estimated future amortization expense for finite-lived intangible assets is as follows:

Amortization expense	Insurance Intangible Asset (1)		Other Intangible Assets (1)		Total
2022 (Nine months)	$	24	$	2	$	26
2023	30		3		32
2024	27		3		30
2025	25		3		27
2026	22		2		25
Thereafter	176		20		196

(1)The weighted-average insurance intangible amortization and other intangible amortization periods are 7.3 years and 5.8 years, respectively.

9.    VARIABLE INTEREST ENTITIES

Ambac, with its subsidiaries, has engaged in transactions with variable interest entities ("VIEs,") in various capacities.

•AAC and Ambac UK provide financial guarantees for various debt obligations issued by special purpose entities, including VIEs ( i.e. FG VIEs);

•Ambac sponsors special purpose entities that issued notes to investors for various purposes; and

•AAC and Ambac UK invests in collateralized debt obligations, mortgage-backed and other asset-backed securities issued by VIEs and their ownership interest is generally insignificant to the VIE and/or they do not have rights that direct the activities that are most significant to such VIE.

FG VIEs:

AAC and Ambac UK provide financial guarantees in respect of assets held or debt obligations of VIEs. AAC and Ambac UK's primary variable interest exists through this financial guarantee insurance. The transaction structures provide certain financial protection to AAC or Ambac UK. Generally, upon deterioration in the performance of a transaction or upon an event of default as specified in the transaction legal documents, AAC or Ambac UK will obtain certain control rights that enable them to remediate losses. These rights may enable them to direct the activities of the entity that most significantly impact the entity’s economic performance. Under the 2018 Stipulation and Order, AAC is required to obtain OCI approval with respect to the exercise of certain significant control rights in connection with policies that had previously been allocated to the Segregated Account. Accordingly, AAC does not have the right to direct the most significant activities of those FG VIEs.

•We determined that AAC or Ambac UK generally have the obligation to absorb a FG VIE's expected losses given that they have issued financial guarantees supporting certain liabilities (and in some cases certain assets). As further described below, Ambac consolidates certain FG VIEs in cases where we also have the power to direct the activities that most significantly impact the VIE’s economic performance due to one or more of the following: (i) the

| Ambac Financial Group, Inc. 34 2022 First Quarter FORM 10-Q |

AMBAC FINANCIAL GROUP, INC. AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements

(Dollar Amounts in Millions, Except Share Amounts)

transaction experiencing deterioration and breaching performance triggers, giving AAC or Ambac UK the ability to exercise certain control rights, (ii) AAC or Ambac UK being involved in the design of the VIE and receiving control rights from its inception, such as may occur from loss remediation activities, or (iii) the transaction not experiencing deterioration, however due to the passive nature of the VIE, AAC or Ambac UK's contingent control rights upon a future breach of performance triggers is considered to be the power over the most significant activity.

•A VIE is generally deconsolidated in the period that AAC or Ambac UK no longer has such control rights, which could occur in connection with the execution of remediation activities on the transaction or amortization of insured exposure, either of which may reduce the degree of control over a VIE.

•Assets and liabilities of FG VIEs that are consolidated are reported within Variable interest entity assets or Variable interest entity liabilities on the Consolidated Balance Sheets.

•The election to use the fair value option is made on an instrument by instrument basis. Ambac has elected the fair value option for consolidated FG VIE financial assets and financial liabilities, except in cases where AAC or Ambac UK was involved in the design of the VIE and was granted control rights at its inception.

◦When the fair value option is elected, changes in the fair value of the FG VIE's financial assets and liabilities are reported within Income (loss) on variable interest entities in the Consolidated Statements of Total Comprehensive Income (Loss), except for the portion of the total change in fair value of financial liabilities caused by changes in the instrument-specific credit risk which is presented separately in Other comprehensive income (loss).

◦In cases where the fair value option has not been elected, the FG VIE's invested assets are fixed maturity securities and are classified as either available-for-sale or trading as defined by the Investments - Debt Securities Topic of the ASC. Available-for-sale assets are reported in the financial statements at fair value with unrealized gains and losses reflected in Accumulated Other Comprehensive Income (Loss) in Stockholders' Equity. Trading assets are reported at fair value with unrealized gains and losses reflected within net income. The financial liabilities of these FG VIEs consist of long term debt obligations and are carried at par less unamortized discount. Income from the FG VIE's securities (including investment income, realized gains and losses and credit impairments as applicable) and interest expense on long term debt are reported within Income (loss) on variable interest entities in the Consolidated Statements of Total Comprehensive Income (Loss).

•Upon initial consolidation of a FG VIE, Ambac recognizes a gain or loss in earnings for the difference between: (i) the fair value of the consideration paid, the fair value of any non-controlling interests and the reported amount of any

previously held interests and (ii) the net amount, as measured on a fair value basis, of the assets and liabilities consolidated. Upon deconsolidation of a FG VIE, Ambac recognizes a gain or loss for the difference between: (i) the fair value of any consideration received, the fair value of any retained non-controlling investment in the VIE and the carrying amount of any non-controlling interest in the VIE and (ii) the carrying amount of the VIE’s assets and liabilities. Gains or losses from consolidation and deconsolidation that are reported in earnings are reported within Income (loss) on variable interest entities on the Consolidated Statements of Total Comprehensive Income (Loss).

•The impact of consolidating such FG VIEs on Ambac’s balance sheet is the elimination of transactions between the consolidated FG VIEs and AAC or Ambac UK and the inclusion of the FG VIE’s third party assets and liabilities. For a financial guarantee insurance policy issued to a consolidated VIE, Ambac does not reflect the financial guarantee insurance policy in accordance with the related insurance accounting rules under the Financial Services – Insurance Topic of the ASC. Consequently, upon consolidation, Ambac eliminates the insurance assets and liabilities associated with the policy from the Consolidated Balance Sheets. Such insurance assets and liabilities may include premium receivables, reinsurance recoverable, deferred ceded premium, subrogation recoverable, unearned premiums, loss and loss expense reserves, ceded premiums payable and insurance intangible assets. For investment securities owned by AAC or Ambac UK that are debt instruments issued by the VIE, the associated debt and investment balances are eliminated upon consolidation.

FG VIEs which are consolidated may include recourse and non-recourse liabilities. FG VIEs' liabilities that are insured by the AAC or Ambac UK are with recourse, because the AAC or Ambac UK guarantees the payment of principal and interest in the event the issuer defaults. FG VIEs' liabilities that are not insured by the AAC or Ambac UK are without recourse, because AAC or Ambac UK has not issued a financial guarantee and is under no obligation for the payment of principal and interest of these instruments. AAC or Ambac UK's economic exposure to consolidated FG VIEs is limited to the financial guarantees issued for recourse liabilities and any additional variable interests held by them. Additionally, AAC or Ambac UK’s general creditors, other than those specific policy holders which own the VIE debt obligations, do not have rights with regard to the assets of the VIEs. Ambac evaluates the net income effects and earnings per share effects to determine attributions between AAC or Ambac UK and non-controlling interests as a result of consolidating a VIE. Ambac has determined that the net income and earnings per share effect of consolidated FG VIEs are attributable to AAC or Ambac UK's interests through financial guarantee premium and loss payments with the VIE.

| Ambac Financial Group, Inc. 35 2022 First Quarter FORM 10-Q |

AMBAC FINANCIAL GROUP, INC. AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements

(Dollar Amounts in Millions, Except Share Amounts)

The following table summarizes the carrying values of assets and liabilities, along with other supplemental information related to FG VIEs that are consolidated as a result of financial guarantees of Ambac UK and AAC:

	March 31, 2022						December 31, 2021
	Ambac UK		Ambac Assurance		Total VIEs		Ambac UK		Ambac Assurance		Total VIEs
ASSETS:
Fixed maturity securities, at fair value:
Corporate obligations, fair value option	$	3,131	$	—	$	3,131	$	3,320	$	—	$	3,320
Municipal obligations, trading	—		114		114		—		—		—
Municipal obligations, available-for-sale (1)	—		119		119		—		136		136
Total FG VIE fixed maturity securities, at fair value	3,131		233		3,364		3,320		136		3,455
Restricted cash	1		48		49		1		1		2
Loans, at fair value (2)	2,469		—		2,469		2,718		—		2,718
Derivative assets	42		—		42		38		—		38
Other assets	—		1		1		—		2		2
Total FG VIE assets	$	5,643	$	283	$	5,925	$	6,077	$	139	$	6,216
LIABILITIES:
Long-term debt:
Long-term debt, at fair value (3)	$	3,701	$	—	$	3,701	$	4,056	$	—	$	4,056
Long-term debt, at par less unamortized discount	—		422		422		—		160		160
Total long-term debt	3,701		422		4,124		4,056		160		4,216
Derivative liabilities	1,866		—		1,866		1,940		—		1,940
Other liabilities	—		3		3		—		—		—
Total FG VIE liabilities	$	5,568	$	426	$	5,993	$	5,996	$	160	$	6,156
Number of FG VIEs consolidated	5		3		8		5		1		6

(1)Available-for-sale FG VIE fixed maturity securities consist of municipal obligations with an amortized cost basis of $103 and $106, and aggregate gross unrealized gains of $17 and $29 at March 31, 2022 and December 31, 2021, respectively. All such securities had contractual maturities due after ten years as of March 31, 2022.

(2)The unpaid principal balances of loan assets carried at fair value were $2,257 as of March 31, 2022 and $2,363 as of December 31, 2021.

(3)The unpaid principal balances of long-term debt carried at fair value were $3,439 as of March 31, 2022 and $3,579 as of December 31, 2021.

The following schedule details the components of Income (loss) on variable interest entities for the affected periods:

Three Months Ended March 31,	2022		2021
Net change in fair value of VIE assets and liabilities reported under the fair value option	$	(1)	$	(1)
Less: Credit risk changes of fair value option long-term debt reported through other comprehensive income (loss)	(1)		1
Net change in fair value of VIE assets and liabilities reported in earnings under the fair value option	(1)		(1)
Investment income (loss)	(4)		2
Net realized investment gains (losses) on available-for-sale securities	1		1
Interest expense on long-term debt carried at par less unamortized cost	(2)		(1)
Gain (loss) from consolidating VIEs	28		—
Income (loss) on variable interest entities	$	22	$	—

As further discussed in Note 6. Insurance Contracts, on March 17, 2022, in connection with the Puerto Rico restructuring, two new trusts were established. Ambac was required to consolidate these trusts which resulted in a combined gain of $28. Including these new trusts, Ambac consolidated two and zero additional FG VIEs for the three months ended March 31, 2022 and 2021, respectively. Ambac did not deconsolidate any FG VIEs for the three months ended March 31, 2022 and 2021.

The following table displays the carrying amount of the assets, liabilities and maximum exposure to loss of Ambac’s variable interests in non-consolidated VIEs resulting from financial guarantee and derivative contracts by major underlying asset classes, as of March 31, 2022 and December 31, 2021:

| Ambac Financial Group, Inc. 36 2022 First Quarter FORM 10-Q |

AMBAC FINANCIAL GROUP, INC. AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements

(Dollar Amounts in Millions, Except Share Amounts)

	Carrying Value of Assets and Liabilities
	Maximum Exposure To Loss (1)		Insurance Assets (2)		Insurance Liabilities (3)		Net Derivative Assets (Liabilities) (4)
March 31, 2022:
Global structured finance:
Mortgage-backed—residential	$	3,089	$	1,637	$	466	$	—
Other consumer asset-backed	743		16		231		—
Other	775		2		9		3
Total global structured finance	4,608		1,655		706		3
Global public finance	19,910		244		255		(1)
Total	$	24,517	$	1,899	$	962	$	2
December 31, 2021:
Global structured finance:
Mortgage-backed—residential	$	3,265	$	1,929	$	521	$	—
Other consumer asset-backed	788		17		234		—
Other	826		3		10		5
Total global structured finance	4,879		1,949		765		5
Global public finance	20,233		246		257		—
Total	$	25,112	$	2,195	$	1,023	$	5

(1)Maximum exposure to loss represents the maximum future payments of principal and interest on insured obligations and derivative contracts. Ambac’s maximum exposure to loss does not include the benefit of any financial instruments (such as reinsurance or hedge contracts) that Ambac may utilize to mitigate the risks associated with these variable interests.

(2)Insurance assets represent the amount included in “Premium receivables” and “Subrogation recoverable” for financial guarantee insurance contracts on Ambac’s Consolidated Balance Sheets.

(3)Insurance liabilities represent the amount included in “Loss and loss expense reserves” and “Unearned premiums” for financial guarantee insurance contracts on Ambac’s Consolidated Balance Sheets.

(4)Net derivative assets (liabilities) represent the fair value recognized on credit derivative contracts and interest rate swaps on Ambac’s Consolidated Balance Sheets.

Ambac Sponsored Non-consolidated VIEs:

For a full description of Ambac sponsored non-consolidated VIEs, see Note 9. Variable Interest Entities in Part II, Item 8 in the Company's Annual Report on Form 10-K for the year ended December 31, 2021.

On July 6, 2021, Sitka Holdings, LLC ("Sitka"), Ambac's newly formed non-consolidated VIE, issued the Sitka Senior Secured Notes. Ambac's debt obligation to Sitka had a carrying value of $1,155 and $1,154 at March 31, 2022 and December 31, 2021, respectively and is reported within Long-term debt on the Consolidated Balance Sheets.

10.    REVENUES FROM CONTRACTS WITH CUSTOMERS

The following table presents the Insurance Distribution business operations revenues recognized in accordance with the Revenue from Contracts with Customers Topic of the ASC disaggregated by policy type for the affected periods:

Three Months Ended March 31,	Employer Stop Loss		Affinity Products		Other		Total
2022	$	4	$	5	$	—	$	9
2021	$	3	$	4	$	—	$	7

During the three months ended March 31, 2022 and 2021, the amount of revenue recognized related to performance obligations satisfied in a previous period, inclusive of changes due to estimates was approximately $4 and $3, respectively.

Contract Assets and Liabilities

The balances of contract assets and contract liabilities with customers were as follows:

	March 31, 2022		December 31, 2021
Commissions receivable	$	3	$	2
Contract assets	6		4
Contract liabilities	1		1

Contract assets represent estimated future consideration related to base commissions and profit-sharing commissions that were recognized as revenue upon the placement of the policy. The

| Ambac Financial Group, Inc. 37 2022 First Quarter FORM 10-Q |

AMBAC FINANCIAL GROUP, INC. AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements

(Dollar Amounts in Millions, Except Share Amounts)

Company does not have the right to bill or collect payment on i) base commissions until the insurer has collected the related premiums from policyholders nor ii) profit-sharing commissions until after the contract year is completed. The change in contract assets during the three months ended March 31, 2022 and year ended December 31, 2021, is primarily due to reclassification to receivables (unconditional right) and collections.

Contract liabilities represent advance consideration received from customers related to Employer stop loss base commissions that will be recognized over time as claims servicing is performed, which typically occurs between 17 and 20 months from contract inception. During the three months ended March 31, 2022 and 2021, the Company recognized revenue that was included in the contract liability balance as of the beginning of the period of $1.

11.    COMPREHENSIVE INCOME

The following tables detail the changes in the balances of each component of accumulated other comprehensive income for the affected periods:

	Unrealized Gains (Losses) on Available for Sale Securities (1)		Amortization of Postretirement Benefit (1)		Gain (Loss) on Foreign Currency Translation (1)		Credit Risk Changes of Fair Value Option Liabilities (1) (2)		Total
Three Months Ended March 31, 2022:
Beginning Balance	$	154	$	4	$	(100)	$	(1)	$	58
Other comprehensive income (loss) before reclassifications	(104)		—		(23)		—		(127)
Amounts reclassified from accumulated other comprehensive income (loss)	(1)		—		—		—		(1)
Net current period other comprehensive income (loss)	(105)		—		(23)		—		(127)
Balance at March 31, 2022	$	49	$	4	$	(123)	$	(1)	$	(70)
Three Months Ended March 31, 2021:
Beginning Balance	$	166	$	5	$	(92)	$	—	$	79
Other comprehensive income (loss) before reclassifications	(21)		—		6		—		(15)
Amounts reclassified from accumulated other comprehensive income (loss)	(3)		—		—		(1)		(4)
Net current period other comprehensive income (loss)	(24)		—		6		(1)		(18)
Balance at March 31, 2021	$	142	$	5	$	(86)	$	(1)	$	61

(1)All amounts are net of tax and noncontrolling interest. Amounts in parentheses indicate reductions to Accumulated Other Comprehensive Income.

(2)Represents the changes in fair value attributable to instrument-specific credit risk of liabilities for which the fair value option is elected.

| Ambac Financial Group, Inc. 38 2022 First Quarter FORM 10-Q |

AMBAC FINANCIAL GROUP, INC. AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements

(Dollar Amounts in Millions, Except Share Amounts)

The following table details the significant amounts reclassified from each component of accumulated other comprehensive income, shown in the above rollforward tables, for the affected periods:

Details about Accumulated Other Comprehensive Income Components	Amount Reclassified from Accumulated Other Comprehensive Income				Affected Line Item in the Consolidated Statement of Total Comprehensive Income (Loss)
	Three Months Ended March 31,
	2022		2021
Unrealized Gains (Losses) on Available-for-Sale Securities
	$	(1)	$	(2)	Net realized investment gains (losses)
	—		(1)		Provision for income taxes
	$	(1)	$	(3)	Net of tax and noncontrolling interest
Amortization of Postretirement Benefit
Prior service cost	$	—	$	—	Other income
Actuarial (losses)	—		—		Other income
	—		—		Total before tax
	—		—		Provision for income taxes
	$	—	$	—	Net of tax and noncontrolling interest
Credit risk changes of fair value option liabilities
	$	1	$	(1)	Credit risk changes of fair value option liabilities
	—		—		Provision for income taxes
	$	—	$	(1)	Net of tax and noncontrolling interest
Total reclassifications for the period	$	(1)	$	(3)	Net of tax and noncontrolling interest

12.    NET INCOME PER SHARE

As of March 31, 2022, 46,545,232 shares of AFG's common stock (par value $0.01) and warrants entitling holders to acquire up to 4,877,617 shares of new common stock at an exercise price of $16.67 per share were issued and outstanding. Common shares outstanding increased by 241,093 during the three months ended March 31, 2022, primarily due to settlements of employee restricted and performance stock units.

Share Repurchases

On March 29, 2022, AFG's Board of Directors approved a share repurchase program authorizing up to $20 in share repurchases, with an expiration date of March 31, 2024, which may be terminated at any time. As of March 31, 2022, no shares were repurchased under this program. From April 1, 2022, through May 10, 2022, AFG repurchased 1,505,316 shares for $13.2 with an average purchase price of $8.78 per share. On May 5, 2022, the Board of Directors authorized an additional $15 in share repurchase bringing the total unused authorized amount to $21.8.

Earnings Per Share Calculation

The numerator of the basic and diluted earnings per share computation represents net income (loss) attributable to common stockholders adjusted by the retained earnings impact of the noncontrolling adjustment to redemption value under ASC 480. The redemption value adjustment is further described in the Redeemable Noncontrolling Interest section of Note 2. Basis of Presentation and Significant Accounting Policies in the Notes to Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.

The following table provides a reconciliation of net income attributable to common stockholders to the numerator in the basic and diluted earnings per share calculation, together with the resulting earnings per share amounts:

Three Months Ended March 31,	2022		2021
Net income attributable to common stockholders	$	2	$	17
Adjustment to redemption value (ASC 480)	—		(13)
Numerator of basic and diluted EPS	$	2	$	4
Per Share:
Basic	$	0.04	$	0.08
Diluted	$	0.04	$	0.08

The denominator of the basic earnings per share computation represents the weighted average common shares outstanding plus vested restricted stock units (together, "Basic Weighted Average Shares Outstanding"). The denominator of diluted earnings per share adjusts the basic weighted average shares outstanding for all potential dilutive common shares outstanding during the period. All potential dilutive common shares outstanding consider common stock deliverable pursuant to warrants, unvested restricted stock units and performance stock units granted under existing compensation plans.

| Ambac Financial Group, Inc. 39 2022 First Quarter FORM 10-Q |

AMBAC FINANCIAL GROUP, INC. AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements

(Dollar Amounts in Millions, Except Share Amounts)

The following table provides a reconciliation of the weighted average shares denominator used for basic net income per share to the denominator used for diluted net income per share:

Three Months Ended March 31,	2022	2021
Basic weighted average shares outstanding denominator	46,731,459	46,314,049
Effect of potential dilutive shares :
Warrants	—	214,904
Restricted stock units	82,066	121,215
Performance stock units (1)	546,206	207,896
Diluted weighted average shares outstanding denominator	47,359,731	46,858,064
Anti-dilutive shares excluded from the above reconciliation:
Warrants	4,877,617	—
Restricted stock units	253,828	165,529
Performance stock units (2)	—	—

(1)    Performance stock units are reflected based on the performance metrics through the balance sheet date. Vesting of these units is contingent upon meeting certain performance metrics. Although a portion of these performance metrics have been achieved as of the respective period end, it is possible that awards may no longer meet the metric at the end of the performance period.    

13.    INCOME TAXES

AFG files a consolidated Federal income tax return with its subsidiaries. AFG and its subsidiaries also file separate or combined income tax returns in various states, local and foreign jurisdictions. The following are the major jurisdictions in which Ambac and its subsidiaries operate and the earliest tax years subject to examination:

Jurisdiction	Tax Year
United States	2010
New York State	2013
New York City	2017
United Kingdom	2018
Italy	2017

In accordance with the Income Tax Topic of the ASC, a valuation allowance is recognized if, based on the weight of available evidence, it is more-likely-than-not that some, or all, of the deferred tax asset will not be realized. As a result of the risks and uncertainties associated with future operating results, management believes it is more likely than not that the Company will not generate sufficient U.S. federal, state and/or local taxable income to recover its deferred tax operating assets and therefore maintains a full valuation allowance.

Consolidated Pretax Income (Loss)

U.S. and foreign components of pre-tax income (loss) were as follows:

Three Months Ended March 31,	2022		2021
U.S.	$	(1)	$	17
Foreign	4		2
Total	$	3	$	19

Provision (Benefit) for Income Taxes

The components of the provision for income taxes were as follows:

Three Months Ended March 31,	2022		2021
Current taxes
U. S. federal	$	—	$	—
U.S. state and local	—		2
Foreign	1		3
Total Current taxes	2		5
Deferred taxes
Foreign	(1)		(3)
Total Deferred taxes	(1)		(3)
Provision for income taxes	$	—	$	2

14.    COMMITMENTS AND CONTINGENCIES

The following commitments and contingencies provide an update of those discussed in Note 19: Commitments and Contingencies in the Notes to Consolidated Financial Statements included Part II, Item 8 in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021, and should be read in conjunction with the complete descriptions provided in the aforementioned Form 10-K.

Litigation Against Ambac

Monterey Bay Military Housing, LLC, et al. v. Ambac Assurance Corporation, et al. (United States District Court, Southern District of New York, Case No. 1:19-cv-09193-PGG, transferred on October 4, 2019 from the United States District Court, Northern District of California, San Jose Division, Case No. 17-cv-04992-BLF, filed August 28, 2017). Plaintiffs, the corporate developers of various military housing projects, filed an amended complaint on October 27, 2017 against AAC, a former employee of AAC, and certain unaffiliated persons and entities, asserting claims for (i) violation of 18 U.S.C §§ 1962(c) and 1962(d) (civil Racketeer Influenced and Corrupt Organizations Act (“RICO”) and conspiracy to commit civil RICO), (ii) breach of fiduciary duty, (iii) aiding and abetting breach of fiduciary duty, (iv) fraudulent misrepresentation, (v) fraudulent concealment and (vi) conspiracy to commit fraud. (After the case was transferred to the SDNY, the court dismissed the claims against AAC and its former employee for breach of fiduciary duty and for aiding and abetting breach of AAC’s or its former employee’s fiduciary duty; dismissed two plaintiffs’ RICO claims against AAC and its former employee; and in all other respects allowed plaintiffs' claims to go forward.) On April 6, 2022, certain co-defendants filed a motion to sever the plaintiffs’ claims and to dismiss all claims except for claims asserted by the Monterey Bay plaintiffs.

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AMBAC FINANCIAL GROUP, INC. AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements

(Dollar Amounts in Millions, Except Share Amounts)

Financial Oversight and Management Board for Puerto Rico, et al. v. Autonomy Master Fund Limited, et al. (United States District Court, District of Puerto Rico, No. 19-ap-00291, filed May 2, 2019). On May 2, 2019, the Financial Oversight and Management Board for Puerto Rico (the "Oversight Board"), together with the Official Committee of Unsecured Creditors for the Commonwealth (the "Committee") filed an adversary proceeding against certain parties that filed proofs of claim on account of general obligation bonds issued by the Commonwealth of Puerto Rico, including AAC. The complaint seeks declarations that the general obligation bonds are unsecured obligations and, in the alternative, seeks to avoid any security interests that holders of such bonds may have. On June 13, 2019, the District Court stayed the case; the case remained stayed until early 2020. On March 10, 2020, the District Court again ordered that this case remain stayed while the Oversight Board attempted to confirm the a plan of adjustment for the Commonwealth (as amended, the “Commonwealth Plan”). On January 18, 2022, the Court entered an order confirming the Commonwealth Plan. The Commonwealth Plan resolves the issues raised in this adversary proceeding. Several parties appealed the District Court’s confirmation order to the First Circuit, including a number of teachers’ unions (the “Teachers’ Unions”), a number of credit unions (the “Credit Unions”), Suiza Dairy Corporation (“Suiza”), the Oversight Board, and certain individual creditors. On April 26, 2022, the First Circuit rejected the Teachers’ Unions’ challenges to the Commonwealth Plan and affirmed the confirmation order; on May 10, 2022, the Teachers’ Unions petitioned for rehearing en banc. All other appeals remain pending. On May 9, 2022, the Court dismissed this adversary proceeding, subject to a request for reinstatement if and when the First Circuit’s dispositions of the appeals concerning the confirmation order are final.

Financial Oversight and Management Board for Puerto Rico v. Ambac Assurance Corp., et al. (United States District Court, District of Puerto Rico, No. 20-ap-00003, filed Jan. 16, 2020). On January 16, 2020, the Oversight Board filed an adversary proceeding against monoline insurers insuring bonds issued by the Puerto Rico Infrastructure Financing Authority (“PRIFA”) and the PRIFA bond trustee, all of which defendants filed proofs of claim against the Commonwealth relating to PRIFA bonds. The complaint seeks to disallow defendants’ proofs of claim against the Commonwealth in their entirety, including for lack of secured status. On August 3, 2021, the District Court ordered that this case be stayed on the joint motion of the parties as a result of an agreement with the Oversight Board with respect to the treatment of PRIFA bonds (the “PRIFA Settlement”), an agreement with the Oversight Board with respect to the treatment of bonds issued by the Puerto Rico Highways and Transportation Authority (“PRHTA”) and the Puerto Rico Convention Center District Authority (“PRCCDA”) (the “PRHTA/PRCCDA Settlement”), and the settlement related to general obligation and PBA bonds (“GO/PBA Settlement”). On January 18, 2022, the Court entered an order confirming the Commonwealth Plan. The Commonwealth Plan resolves the issues raised in this adversary proceeding. Several parties appealed the District Court’s confirmation order to the First Circuit, including the Teachers’ Unions, the Credit Unions, Suiza, the Oversight Board, and certain individual creditors. On April 26, 2022, the First Circuit

rejected the Teachers’ Unions’ challenges to the Commonwealth Plan and affirmed the confirmation order; on May 10, 2022, the Teachers’ Unions petitioned for rehearing en banc. All other appeals remain pending.

Financial Oversight and Management Board for Puerto Rico v. Ambac Assurance Corp., et al. (United States District Court, District of Puerto Rico, No. 20-ap-00004, filed Jan. 16, 2020). On January 16, 2020, the Oversight Board filed an adversary proceeding against monoline insurers insuring bonds issued by the PRCCDA and the PRCCDA bond trustee, all of which defendants filed proofs of claim against the Commonwealth relating to PRCCDA bonds. The complaint seeks to disallow defendants’ proofs of claim against the Commonwealth in their entirety, including for lack of secured status. On August 3, 2021, the District Court ordered that this case be stayed on the joint motion of the parties as a result of the PRIFA Settlement, the PRHTA/PRCCDA Settlement, and the GO/PBA Settlement. On January 18, 2022, the Court entered an order confirming the Commonwealth Plan. The Commonwealth Plan resolves the issues raised in this adversary proceeding. Several parties appealed the District Court’s confirmation order to the First Circuit, including the Teachers’ Unions, the Credit Unions, Suiza, the Oversight Board, and certain individual creditors. On April 26, 2022, the First Circuit rejected the Teachers’ Unions’ challenges to the Commonwealth Plan and affirmed the confirmation order; on May 10, 2022, the Teachers’ Unions petitioned for rehearing en banc. All other appeals remain pending.

Financial Oversight and Management Board for Puerto Rico v. Ambac Assurance Corp., et al. (United States District Court, District of Puerto Rico, No. 20-ap-00005, filed Jan. 16, 2020). On January 16, 2020, the Oversight Board filed an adversary proceeding against monoline insurers insuring bonds issued by PRHTA, certain PRHTA bondholders, and the PRHTA fiscal agent for bondholders, all of which defendants filed proofs of claim against the Commonwealth relating to PRHTA bonds. The complaint seeks to disallow defendants’ proofs of claim against the Commonwealth in their entirety, including for lack of secured status. On August 3, 2021, the District Court ordered that this case be stayed on the joint motion of the parties as a result of the PRIFA Settlement, the PRHTA/PRCCDA Settlement, and the GO/PBA Settlement. On January 18, 2022, the Court entered an order confirming the Commonwealth Plan. The Commonwealth Plan resolves the issues raised in this adversary proceeding. Several parties appealed the District Court’s confirmation order to the First Circuit, including the Teachers’ Unions, the Credit Unions, Suiza, the Oversight Board, and certain individual creditors. On April 26, 2022, the First Circuit rejected the Teachers’ Unions’ challenges to the Commonwealth Plan and affirmed the confirmation order; on May 10, 2022, the Teachers’ Unions petitioned for rehearing en banc. All other appeals remain pending.

Financial Oversight and Management Board for Puerto Rico v. Ambac Assurance Corp., et al. (United States District Court, District of Puerto Rico, No. 20-ap-00007, filed Jan. 16, 2020). On January 16, 2020, the Oversight Board and the Committee filed an adversary proceeding against monoline insurers insuring bonds issued by PRHTA, certain PRHTA bondholders, and the

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Notes to Unaudited Consolidated Financial Statements

(Dollar Amounts in Millions, Except Share Amounts)

PRHTA fiscal agent for bondholders, all of which defendants filed proofs of claim against PRHTA relating to PRHTA bonds. The complaint seeks to disallow portions of defendants’ proofs of claim against the PRHTA, including for lack of secured status. On August 3, 2021, the District Court ordered that this case be stayed on the joint motion of the parties as a result of the PRIFA Settlement, the PRHTA/PRCCDA Settlement, and the GO/PBA Settlement. On January 18, 2022, the Court entered an order confirming the Commonwealth Plan. On April 14, 2022, the Oversight Board filed a notice that this case has not been resolved by the Commonwealth Plan and should remain pending. On May 2, 2022, the Oversight Board filed a disclosure statement (the “PRHTA DS”) and plan of adjustment (the “PRHTA POA”) for PRHTA; if confirmed, the PRHTA POA would resolve this litigation. A hearing on approval of the PRHTA DS is scheduled for June 17, 2022.

NC Residuals Owners Trust, et al. v. Wilmington Trust Co., et al. (Delaware Court of Chancery, C.A. No. 2019-0880, filed Nov. 1, 2019). On April 1, 2022, the Vice Chancellor entered another thirty-day stay to facilitate good-faith settlement discussions.

AAC’s estimates of projected losses for RMBS transactions consider, among other things, the RMBS transactions’ payment waterfall structure, including the application of interest and principal payments and recoveries, and depend in part on our interpretations of contracts and other bases of our legal rights. From time to time, bond trustees and other transaction participants have employed different contractual interpretations and have commenced, or threatened to commence, litigation to resolve these differences. It is not possible to predict whether additional disputes will arise, nor the outcomes of any potential litigation. It is possible that there could be unfavorable outcomes in this or other disputes or proceedings and that our interpretations may prove to be incorrect, which could lead to changes to our estimate of loss reserves.

AAC has periodically received various regulatory inquiries and requests for information with respect to investigations and inquiries that such regulators are conducting. AAC has complied with all such inquiries and requests for information.

The Company is involved from time to time in various routine legal proceedings, including proceedings related to litigation with present or former employees. Although the Company’s litigation with present or former employees is routine and incidental to the conduct of its business, such litigation can result in large monetary awards when a civil jury is allowed to determine compensatory and/or punitive damages for, among other things, termination of employment that is wrongful or in violation of implied contracts.

From time to time, Ambac is subject to allegations concerning its corporate governance that may lead to litigation, including derivative litigation, and while the monetary impacts may not be material, the matters may distract management and the Board of Directors from their principal focus on Ambac's business, strategy and objectives.

It is not reasonably possible to predict whether additional suits will be filed or whether additional inquiries or requests for

information will be made, and it is also not possible to predict the outcome of litigation, inquiries or requests for information. It is possible that there could be unfavorable outcomes in these or other proceedings. Legal accruals for litigation against the Company which are probable and reasonably estimable, and management's estimated range of loss for such matters, are either not applicable or are not material to the operating results or financial position of the Company. For the litigation matters the Company is defending that do not meet the “probable and reasonably estimable” accrual threshold and where no loss estimates have been provided above, management is unable to make a meaningful estimate of the amount or range of loss that could result from unfavorable outcomes. Under some circumstances, adverse results in any such proceedings could be material to our business, operations, financial position, profitability or cash flows. The Company believes that it has substantial defenses to the claims above and, to the extent that these actions proceed, the Company intends to defend itself vigorously; however, the Company is not able to predict the outcomes of these actions.

Litigation Filed or Joined by Ambac

In the ordinary course of their businesses, certain of Ambac’s subsidiaries assert claims in legal proceedings against third parties to recover losses already paid and/or mitigate future losses. The amounts recovered and/or losses avoided which may result from these proceedings is uncertain, although recoveries and/or losses avoided in any one or more of these proceedings during any quarter or fiscal year could be material to Ambac’s results of operations in that quarter or fiscal year.

Puerto Rico

Financial Oversight and Management Board for Puerto Rico v. Public Buildings Authority (United States District Court, District of Puerto Rico, No. 1:18-ap-00149, filed December 21, 2018). On December 21, 2018, the Oversight Board, together with the Committee, as Plaintiffs, filed a complaint against the Puerto Rico Public Buildings Authority (“PBA”) seeking declaratory judgment that the leases between PBA and its lessees-many of whom are agencies and instrumentalities of the Commonwealth are “disguised financings,” not true leases, and therefore should not be afforded administrative expense priority under the Bankruptcy Code. On July 24, 2019, the District Court stayed the case; on March 10, 2020, the District Court again ordered that this case be stayed while the Oversight Board attempted to confirm the Commonwealth Plan. On January 18, 2022, the Court entered an order confirming the Commonwealth Plan. The Commonwealth Plan resolves this litigation. Several parties appealed the District Court’s confirmation order to the First Circuit, including the Teachers’ Unions, the Credit Unions, Suiza, the Oversight Board, and certain individual creditors. On April 26, 2022, the First Circuit rejected the Teachers’ Unions’ challenges to the Commonwealth Plan and affirmed the confirmation order; on May 10, 2022, the Teachers’ Unions petitioned for rehearing en banc. All other appeals remain pending.

In re Financial Oversight and Management Board for Puerto Rico (United States District Court, District of Puerto Rico, No. 1:17-bk-03283), Omnibus Objection of (I) Financial Oversight and

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(Dollar Amounts in Millions, Except Share Amounts)

Management Board, Acting Through its Special Claims Committee, and (II) Official Committee of Unsecured Creditors, Pursuant to Bankruptcy Code Section 502 and Bankruptcy Rule 3007, to Claims Filed or Asserted by Holders of Certain Commonwealth General Obligation Bonds (Dkt. No. 4784, filed January 14, 2019) (“GO Bond Claim Objection”). On January 14, 2019, the Oversight Board and the Committee filed an omnibus claim objection in the Commonwealth’s Title III case challenging claims arising from certain general obligation bonds issued by the Commonwealth in 2012 and 2014 totaling approximately $6 billion, none of which are held or insured by AAC. On April 11, 2019, AAC filed a notice of participation in support of the objection, advancing the argument, among other things, that the PBA leases are true leases, but the associated debt nonetheless should be included in the Commonwealth’s debt ceiling calculation such that the 2012 and 2014 general obligation bond issuances are null and void and claims arising therefrom should be disallowed. On July 24, 2019, the District Court stayed the case; the case remained stayed until early 2020. On March 10, 2020, the District Court again ordered that this matter remain stayed while the Oversight Board attempted to confirm the Commonwealth Plan. On January 18, 2022, the Court entered an order confirming the Commonwealth Plan. The Commonwealth Plan resolves the GO Bond Claim Objection. Several parties appealed the District Court’s confirmation order to the First Circuit, including the Teachers’ Unions, the Credit Unions, Suiza, the Oversight Board, and certain individual creditors. On April 26, 2022, the First Circuit rejected the Teachers’ Unions’ challenges to the Commonwealth Plan and affirmed the confirmation order; on May 10, 2022, the Teachers’ Unions petitioned for rehearing en banc. All other appeals remain pending.

In re Financial Oversight and Management Board for Puerto Rico (United States District Court, District of Puerto Rico, No. 1:17-bk-03283), Ambac Assurance Corporation's Motion and Memorandum of Law in Support of Its Motion Concerning Application of the Automatic Stay to the Revenues Securing PRIFA Rum Tax Bonds (Dkt. No. 7176, filed May 30, 2019) (“PRIFA Stay Motion”). On May 30, 2019, AAC filed a motion seeking an order that the automatic stay does not apply to certain lawsuits AAC seeks to bring or to continue relating to bonds issued by PRIFA, or, in the alternative, for relief from the automatic stay to pursue such lawsuits or for adequate protection of AAC's collateral. On July 2 and September 9, 2020, the District Court denied the motion to lift the stay. On March 3, 2021, the First Circuit affirmed the District Court’s opinions denying the motion to lift the stay. On August 3, 2021, the District Court ordered that this matter be stayed on the joint motion of the parties as a result of the PRIFA Settlement, the PRHTA/PRCCDA Settlement, and the GO/PBA Settlement. On January 18, 2022, the Court entered an order confirming the Commonwealth Plan; on January 20, 2022, the Court entered an order approving the Title VI Qualifying Modification for PRIFA (the “PRIFA QM”). The Commonwealth Plan and the PRIFA QM resolve the PRIFA Stay Motion. Several parties appealed the District Court’s confirmation order to the First Circuit, including the Teachers’ Unions, the Credit Unions, Suiza, the Oversight Board, and certain individual creditors. On April 26, 2022, the First Circuit rejected the Teachers’ Unions’ challenges to the

Commonwealth Plan and affirmed the confirmation order; on May 10, 2022, the Teachers’ Unions petitioned for rehearing en banc. All other appeals remain pending.

In re Financial Oversight and Management Board for Puerto Rico (United States District Court, District of Puerto Rico, No. 1:17-bk-03283), Motion of Assured Guaranty Corp., Assured Municipal Corp., Ambac Assurance Corporation, National Public Finance Guarantee Corporation, and Financial Guaranty Insurance Company for Relief from the Automatic Stay, or, in the Alternative, Adequate Protection (Dkt. No. 10102, filed January 16, 2020) (“PRHTA Stay Motion”). Pursuant to an order of the District Court setting out an agreed schedule for litigation submitted by the Mediation Team, on January 16, 2020, AAC, together with Assured Guaranty Corp., Assured Municipal Corp., National Public Finance Guarantee Corporation, and Financial Guaranty Insurance Company filed a motion seeking an order that the automatic stay does not apply to movants’ enforcement of the application of pledged revenues to the PRHTA bonds or the enforcement of movants’ liens on revenues pledged to such bonds, or, in the alternative, for adequate protection of movants’ interests in the revenues pledged to PRHTA bonds. On July 2 and September 9, 2020, the District Court denied the motion to lift the stay. On March 3, 2021, the First Circuit affirmed the District Court’s opinions denying the motion to lift the stay. On August 3, 2021, the District Court ordered that this matter be stayed on the joint motion of the parties as a result of the PRIFA Settlement, the PRHTA/PRCCDA Settlement, and the GO/PBA Settlement. On January 18, 2022, the Court entered an order confirming the Commonwealth Plan. The Commonwealth Plan resolves the PRHTA Stay Motion. Several parties appealed the District Court’s confirmation order to the First Circuit, including the Teachers’ Unions, the Credit Unions, Suiza, the Oversight Board, and certain individual creditors. On April 26, 2022, the First Circuit rejected the Teachers’ Unions’ challenges to the Commonwealth Plan and affirmed the confirmation order; on May 10, 2022, the Teachers’ Unions petitioned for rehearing en banc. All other appeals remain pending.

In re Financial Oversight and Management Board for Puerto Rico (United States District Court, District of Puerto Rico, No. 1:17-bk-03283), Ambac Assurance Corporation, Financial Guaranty Insurance Company, Assured Guaranty Corp., Assured Municipal Corp., and the Bank of New York Mellon’s Motion Concerning Application of the Automatic Stay to the Revenues Securing the CCDA Bonds (Dkt. No. 10104, filed January 16, 2020) (“PRCCDA Stay Motion”). Pursuant to an order of the District Court setting out an agreed schedule for litigation submitted by the Mediation Team, on January 16, 2020, AAC, together with Financial Guaranty Insurance Company, Assured Guaranty Corp., Assured Municipal Corp., and the PRCCDA bond trustee, filed a motion seeking an order either (i) that the automatic stay does not apply to movants’ enforcement of their rights to revenues pledged to PRCCDA bonds by bringing an enforcement action against PRCCDA; or, in the alternative, (ii) lifting the automatic stay to enable movants to pursue an enforcement action against PRCCDA; or, in the further alternative, (iii) ordering adequate protection of movants’ interests in the PRCCDA pledged to PRCCDA bonds. On July 2, 2020, the District Court denied the motion to lift the stay on

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(Dollar Amounts in Millions, Except Share Amounts)

certain grounds, but found that the movants had stated a colorable claim that a certain account was the “Transfer Account” on which movants hold a lien. On September 9, 2020, the District Court denied the motion to lift the stay on the additional grounds, and found that a final determination on issues related to the identity of the Transfer Account would be made in the decision on the motions for summary judgment issued in the PRCCDA-related adversary proceeding, No. 20-ap-00004. On August 3, 2021, the District Court ordered that this matter be stayed on the joint motion of the parties as a result of the PRIFA Settlement, the PRHTA/PRCCDA Settlement, and the GO/PBA Settlement. On January 18, 2022, the Court entered an order confirming the Commonwealth Plan; on January 20, 2022, the Court entered an order approving the Title VI Qualifying Modification for PRCCDA (the “PRCCDA QM”). The Commonwealth Plan and the PRCCDA QM resolve the PRCCDA Stay Motion. Several parties appealed the District Court’s confirmation order to the First Circuit, including the Teachers’ Unions, the Credit Unions, Suiza, the Oversight Board, and certain individual creditors. On April 26, 2022, the First Circuit rejected the Teachers’ Unions’ challenges to the Commonwealth Plan and affirmed the confirmation order; on May 10, 2022, the Teachers’ Unions petitioned for rehearing en banc. All other appeals remain pending.

Ambac Assurance Corporation v. Merrill Lynch, Pierce, Fenner & Smith Incorporated, Citigroup Global Markets Inc., Goldman Sachs & Co. LLC, J.P. Morgan Securities LLC, Morgan Stanley & Co. LLC, Oriental Financial Services LLC; Popular Securities LLC; Raymond James & Associates, Inc., RBC Capital Markets LLC; Samuel A. Ramirez & Co. Inc., Santander Securities LLC; UBS Financial Services Inc.; and UBS Securities LLC (Commonwealth of Puerto Rico, Court of First Instance, San Juan Superior Court, Case No. SJ-2020-CV-01505, filed February 19, 2020). On April 27, 2022, the Commonwealth Court of Appeals affirmed the dismissal by the Commonwealth court of AAC’s Amended Complaint.

Ambac Assurance Corporation v. Financial Oversight and Management Board for Puerto Rico (United States District Court, District of Puerto Rico, No. 3:20-ap-00068, filed May 26, 2020). On May 26, 2020, AAC filed an adversary complaint before the Title III Court seeking (i) a declaration that titles I, II, and III of PROMESA are unconstitutional because they violate the Bankruptcy Clause of the U.S. Constitution (which requires all bankruptcy laws to be uniform) and (ii) dismissal of the pending Title III petitions. On August 3, 2021, the District Court ordered that this case be stayed on the joint motion of the parties as a result of the PRIFA Settlement, the PRHTA/PRCCDA Settlement, and the GO/PBA Settlement. On January 18, 2022, the Court entered an order confirming the Commonwealth Plan. The Commonwealth Plan resolves this litigation. Several parties appealed the District Court’s confirmation order to the First Circuit, including the Teachers’ Unions, the Credit Unions, Suiza, the Oversight Board, and certain individual creditors. On April 26, 2022, the First Circuit rejected the Teachers’ Unions’ challenges to the Commonwealth Plan and affirmed the confirmation order; on May 10, 2022, the Teachers’ Unions petitioned for rehearing en banc. All other appeals remain pending.

In re Financial Oversight and Management Board for Puerto Rico (United States District Court, District of Puerto Rico, No. 1:17-bk-03283), Objection of Ambac Assurance Corporation, Pursuant to Bankruptcy Code Section 502 and Bankruptcy Rule 3007, to Claim Asserted by the Official Committee of Retired Employees of the Commonwealth of Puerto Rico Appointed in the Commonwealth’s Title III Case (Dkt. No. 16884, filed June 3, 2021) (“Pension Claim Objection”). On June 3, 2021, AAC filed a claim objection in the Commonwealth’s Title III case challenging the amount of the claim filed by the Retiree Committee against the Commonwealth, which asserted pension liabilities of at least $58.5 billion. AAC contended that this asserted pension liability was overstated by at least $9 billion, and sought disallowance of the Retiree Committee’s proof of claim to the extent of the overstatement. On August 3, 2021, the District Court ordered that this case be stayed on the joint motion of the parties as a result of the PRIFA Settlement, the PRHTA/PRCCDA Settlement, and the GO/PBA Settlement. On January 18, 2022, the Court entered an order confirming the Commonwealth Plan. The Commonwealth Plan resolves this matter. Several parties appealed the District Court’s confirmation order to the First Circuit, including the Teachers’ Unions, the Credit Unions, Suiza, the Oversight Board, and certain individual creditors. On April 26, 2022, the First Circuit rejected the Teachers’ Unions’ challenges to the Commonwealth Plan and affirmed the confirmation order; on May 10, 2022, the Teachers’ Unions petitioned for rehearing en banc. All other appeals remain pending.

In re Financial Oversight and Management Board for Puerto Rico (United States District Court, District of Puerto Rico, No. 1:17- bk-03567). On May 21, 2017, the Oversight Board filed a petition to adjust PRHTA’s debts under Title III of PROMESA, resulting in an automatic stay of litigation against PRHTA. On May 2, 2022, the Oversight Board filed the PRHTA DS and PRHTA POA. A hearing on approval of the PRHTA DS is scheduled for June 17, 2022.

Student Loans Exposure

CFPB v. Nat’l Collegiate Master Student Loan Trust (United States District Court, District of Delaware, Case No. 1:17-cv-01323, filed September 18, 2017). On March 3, 2022, the CFPB filed its opposition to the petition filed on February 21, 2022 by the Trusts and several intervenors, including AAC, for permission to appeal to the Third Circuit the District Court’s order denying their motion to dismiss the amended complaint. On April 29, 2022, the Third Circuit granted the Trusts' and intervenors' petition.

RMBS Litigation

In connection with AAC’s efforts to seek redress for breaches of representations and warranties and fraud related to the information provided by both the underwriters and the sponsors of various transactions and for failure to comply with the obligation by the sponsors to repurchase ineligible loans, AAC has filed various lawsuits:

•    Ambac Assurance Corporation and The Segregated Account of Ambac Assurance Corporation v. First Franklin Financial Corporation, Bank of America, N.A., Merrill Lynch, Pierce,

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Fenner & Smith Inc., Merrill Lynch Mortgage Lending, Inc., and Merrill Lynch Mortgage Investors, Inc. (Supreme Court of the State of New York, County of New York, Case No. 651217/2012, filed April 16, 2012). On March 17, 2022, the New York Court of Appeals decided an appeal in an unrelated RMBS case involving the issue of whether an RMBS sponsor can be held liable for damages for breaching loans that a trustee does not provide specific notice of pre-suit. The decision may affect one of the bases upon which AAC seeks recovery with respect to a significant portion of breaching loans. On April 27, 2022, the parties jointly requested an extension of the deadline for AAC to file a note of issue to June 23, 2022 (from April 28, 2022) and the deadline for summary judgment motions to August 22, 2022 (from June 27, 2022).

•    Ambac Assurance Corporation and The Segregated Account of Ambac Assurance Corporation v. Countrywide Securities Corp., Countrywide Financial Corp. (a.k.a. Bank of America Home Loans) and Bank of America Corp. (Supreme Court of the State of New York, County of New York, Case No. 651612/2010, filed on September 28, 2010). On March 17, 2022, the New York Court of Appeals decided an appeal in an unrelated RMBS case involving the issue of whether an RMBS sponsor can be held liable for damages for breaching loans that a trustee does not provide specific notice of pre-suit. The decision is relevant to this action and may affect one of the bases upon which AAC seeks recovery with respect to a significant portion of breaching loans.

•    Ambac Assurance Corporation and The Segregated Account of Ambac Assurance Corporation v. Nomura Credit & Capital, Inc. and Nomura Holding America Inc. (Supreme Court of the State of New York, County of New York, Case No. 651359/2013, filed on April 15, 2013). On March 21, 2022, each party filed an opposition to the motion for summary judgment filed by the other on December 21, 2021.

• Ambac Assurance Corporation and the Segregated Account of Ambac Assurance Corporation v. Countrywide Home Loans, Inc. (Supreme Court of the State of New York, County of New York, Case No. 652321/2015, filed on June 30, 2015). On March 11, 2022, AAC filed a motion for leave to appeal to the New York Court of Appeals, to which Countrywide filed a response on March 28, 2022.

• Ambac Assurance Corporation and the Segregated Account of Ambac Assurance Corporation v. Countrywide Home Loans, Inc., Countrywide Securities Corp., Countrywide Financial Corp., and Bank of America Corp. (Supreme Court of the State of New York, County of New York, Case No. 653979/2014, filed on December 30, 2014). On April 4, 2022, AAC filed its opposition to the motion for summary judgment that Countrywide filed on February 18, 2022, which was fully submitted as of May 4, 2022.

•    In the matter of HarborView Mortgage Loan Trust 2005-10 (Minnesota state court, Docket No. 27-TR-CV-17-32 (the “Minnesota Action”)). Trial was completed on May 6, 2022. Proposed findings of facts and conclusions of law and post-trial briefs are due on June 30, 2022, and the court will hear oral arguments on July 14, 2022.

•    Ambac Assurance Corporation v. U.S. Bank National Association (United States District Court, Southern District of New York, Docket No. 17-cv-02614, filed April 11, 2017). On March 7, 2022, the court entered a revised stipulated scheduling order whereby, following decision about summary judgment motions in Phase 1 and to the extent necessary, the parties will brief AAC’s proposed use of statistical sampling before proceeding with Phase 2 discovery.

Item 2.     Management’s Discussion and Analysis of Financial Condition and Results of Operations

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 Item 8 of this Report 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, 2021. Refer to Item 1. Business and Note 1. Background and Business Description for a description of our business and our key strategies to achieve our primary goal to maximize shareholder value.

Organization of Information

MD&A includes the following sections:

	Page
Executive Summary	45
Critical Accounting Estimates	48
Financial Guarantees in Force	48
Results of Operations	53
Liquidity and Capital Resources	58
Balance Sheet	60
Variable Interest Entities	66
Accounting Standards	66
U.S. Insurance Statutory Basis Financial Results	66
Ambac UK Financial Results under UK Accounting Principles	67
Non-GAAP Financial Measures	67

EXECUTIVE SUMMARY ($ in millions)

AFG Net Assets

| Ambac Financial Group, Inc. 45 2022 First Quarter FORM 10-Q |

AFG has the following net assets to support the development and growth of its existing subsidiaries and future acquisitions. AFG does not have any capital commitments or other obligations to provide capital or liquidity to AAC whose financial guarantee business has been in run-off since 2008. As of March 31, 2022, net assets of AFG, excluding its equity investments in subsidiaries, were $243.

Cash and short-term investments	$	118
Other investments (1)	113
Other net assets	12
Total	$	243

(1)Includes surplus notes (fair value of $77) issued by AAC that are eliminated in consolidation.

AFG's subsidiaries/businesses are divided into three segments, the key value metrics of which are summarized below along with other recent developments.

Specialty Property and Casualty Insurance Segment

The key value metrics for the Specialty Property and Casualty Insurance segment for the three months ended March 31, 2022 were as follows:

Three Months Ended March 31,	2022
Gross premiums written	$	24
Net premiums written	5
Earnings before interest, taxes, depreciation and amortization	(2)
Pretax income (loss)	$	(2)
Stockholders Equity	$	115

To support expansion of the admitted insurance component of its business, on January 3, 2022, Everspan (rated 'A-' (Excellent) by AM Best) completed the acquisition of the 21st Century Companies (three carriers) from a national insurance group that has a Financial Strength Rating of “A” (Excellent) from AM Best. The 21st Century Companies collectively possess certificates of authority in thirty-nine states. All legacy liabilities remain with affiliates of the sellers through reinsurance and contractual indemnities. The 21st Century Companies will be re-named during 2022. Such acquisitions will enhance Everspan's capabilities to launch new admitted programs, develop innovative products and provide enhanced flexibility to foster strategic relationships with prospective program partners.

For additional information on the Specialty Property and Casualty Insurance Segment see the Results of Operations section below in this Management Discussion and Analysis.

Insurance Distribution Segment

The key value metrics for the Insurance Distribution segment for the three months ended March 31, 2022 were as follows:

Three Months Ended March 31,	2022		2021
Premiums placed	$	45	$	40
Commission income	$	9	$	7
Sub-producer commission expense (1)	5		4
Net commissions	4		3
Earnings before interest, taxes, depreciation and amortization	2		2
Pretax income (loss)	$	2	$	2
Stockholders Equity	$	66

(1)The Consolidated Statements of Comprehensive Income presents this item within Operating Expenses.

For additional information about the Insurance Distribution Segment see the Results of Operations section below in this Management Discussion and Analysis.

Legacy Financial Guarantee Insurance Segment

The key value metrics for the Legacy Financial Guarantee Insurance segment for the three months ended March 31, 2022 were as follows:

Three Months Ended March 31,	2022
Net premiums earned	$	13
Net investment income	5
Loss and loss expenses (benefit)	23
Operating expenses	21
Pretax income (loss)	$	6
Stockholders Equity	$	567
Adversely Classified Credit Net Par Outstanding	$	5,884

A key strategy for Ambac is to increase the value of its investment in AAC by actively managing its assets and liabilities. Asset management primarily entails maximizing the risk-adjusted return on non-VIE invested assets and managing liquidity to help ensure resources are available to meet operational and strategic cash needs. These strategic cash needs include activities associated with Ambac's liability management and loss mitigation programs.

Asset Management

Investment portfolios are subject to internal investment guidelines, as well as limits on the types and quality of investments imposed by insurance laws and regulations. The investment portfolios of AAC and Ambac UK hold fixed maturity securities and various pooled investment funds. Refer to Note 4. Investments to the Unaudited Consolidated Financial Statements, included in Part I, Item 1 in this Form 10-Q for further details of fixed maturity investments by asset category and pooled investment funds by investment type.

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At March 31, 2022, AAC owned $313 of distressed Ambac-insured bonds, including significant concentrations of insured RMBS bonds. As a result of the Puerto Rico restructurings discussed under "Liability and Insured Exposure Management" below, the amount of Ambac-insured Puerto Rico bonds held in the investment portfolio was significantly reduced during the three months ended March 31, 2022. Subject to internal and regulatory guidelines, market conditions and other constraints, Ambac may continue to opportunistically purchase and sell Ambac-insured securities.

Liability and Insured Exposure Management

Ambac's Risk Management Group focuses on the implementation and execution of risk reduction, defeasance and loss recovery strategies. Analysts evaluate the estimated timing and severity of projected policy claims as well as the potential impact of loss mitigation or remediation strategies in order to target and prioritize policies, or portions thereof, for commutation, reinsurance, refinancing, restructuring or other risk reduction strategies. For targeted policies, analysts will engage with issuers, bondholders and other economic stakeholders to negotiate, structure and execute such strategies. Ambac completed risk reduction transactions consisting of refinancings and commutations of $310 of net par exposure for the three months ended March 31, 2022, of which $266 related to the Puerto Rico restructuring. In the second quarter of 2022, the remainder of the PRIFA and CCDA bonds or about $317 belonging to bondholders who elected not to commute their AAC insurance policies (which were deposited into trusts) together with such policies have all been accelerated by Ambac, satisfying and eliminating all of the Ambac-insured PRIFA and CCDA bonds. Refer below to the Financial Guarantees In Force section of the Management Discussion and Analysis for Results of Operations, Financial Guarantees in Force for additional details of the Puerto Rico restructuring. Puerto Rico.

The following table provides a comparison of total, adversely classified ("ACC") and watch list credit net par outstanding in the insured portfolio at March 31, 2022 and December 31, 2021. Net par exposure within the U.S. public finance market includes capital appreciation bonds which are reported at the par amount at the time of issuance of the insurance policy as opposed to the current accreted value of the bonds.

	March 31, 2022		December 31, 2021		Decrease
Total	$	27,118	$	28,020	$	(902)	(3)	%
ACC	5,884		6,361		(477)		(7)	%
Watch list	3,729		3,824		(95)		(2)	%

The decrease in total and ACC credit net par outstanding resulted from the active de-risking noted above, as well as scheduled maturities, amortizations, refundings and calls.

COVID-19

The COVID-19 pandemic had, and to a lesser degree, continues to have, an impact on general economic conditions; including, but not limited to, higher unemployment; volatility in the capital markets; closure or severe curtailment of the operations and,

hence, revenues, of many businesses and public and private enterprises to which we are directly or indirectly exposed.

COVID-19 and the public health responses by the US federal and state governments at the onset of the pandemic resulted in a shut down for several months of significant portions of the US economy, including areas that AAC's insured obligors rely upon to generate the revenues and cash flows necessary to service debts we insure. In the U.S. and Europe, where most of Ambac's financial guaranty exposure is located, significant fiscal stimulus measures, monetary policy actions and other relief measures helped to moderate the negative economic impacts of COVID-19 and supported the economic recovery which began in the second half of 2020 and continues into 2022. As of March 31, 2022, there have been no defaults of Ambac-insured obligations as a result of the COVID-19 pandemic.

Given the economic uncertainties associated with the duration and effects of the COVID-19 pandemic, it is impossible to fully predict all of its long-term consequences and, as a result, it is possible that our future operating results and financial condition may be materially adversely affected by the continuance of the pandemic.

Russia and Ukraine Conflict

The current conflict between Russia and Ukraine and the related sanctions and other penalties imposed by countries across the globe against Russia are creating substantial uncertainty in the global economy. We do not have operations in Russia or Ukraine or any insured exposures in those countries. Ambac's investment portfolio exposure to Russian issuers is not significant. Given our insignificant exposure, we have not experienced, and do not expect this conflict to have, a material adverse impact on our results of operations, financial condition or cash flows. However, as the conflict continues and if it were to escalate, the global economy and capital markets will be adversely impacted in ways that we cannot predict and therefore we are unable to estimate the ultimate impact that this conflict may have on our future financial condition, results of operations, and cash flows.

Financial Statement Impact of Foreign Currency:

The impact of foreign currency as reported in Ambac's Unaudited Consolidated Statement of Total Comprehensive Income for the three months ended March 31, 2022, included the following:

Net income (1)	$	1
Gain (loss) on foreign currency translation (net of tax)	(23)
Unrealized gains (losses) on non-functional currency available-for-sale securities (net of tax)	2
Impact on total comprehensive income (loss)	$	(20)

(1)    A portion of Ambac UK's, and to a lesser extent AAC's, assets and liabilities are denominated in currencies other than its functional currency and accordingly, we recognized net foreign currency transaction gains/(losses) as a result of changes to foreign currency rates through our Unaudited Consolidated Statement of Total Comprehensive Income (Loss).

Future changes to currency rates may adversely affect our financial results. Refer to Part II, Item 7A in the Company’s Annual Report on Form 10-K for the year ended December 31,

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2021, for further information on the impact of future currency rate changes on Ambac's financial instruments.

LIBOR Sunset

Ambac continuously monitors regulatory and industry developments related to the transition from LIBOR to alternative reference rates. In 2021, New York State passed legislation addressing the cessation of U.S. Dollar ("USD") LIBOR and specified a recommended benchmark replacement based on the Secured Overnight Financing Rate ("SOFR") for certain legacy transactions. Similar Federal legislation gained approval in March of 2022. The Alternative Reference Rates Committee, the Federal Reserve Board and several industry associations and groups have expressed support for the new law. While Ambac believes the LIBOR law is generally a positive step, there remains uncertainty about how it will be interpreted or challenged as well as about other aspects of the discontinuance of LIBOR. At the same time, regulatory and governmental authorities continue to promote the creation and functioning of post-LIBOR indices, SOFR in particular. See the Risk Factor entitled "Uncertainties regarding the expected discontinuance of the London Inter-Bank Offered Rate or any other interest rate benchmark could have adverse consequences" found in Part I, Item 1A of Ambac’s Annual Report on Form 10-K for the year ended December 31, 2021. Also, for further background and information about management's evaluation of Ambac's potential exposures to LIBOR transition, see "Executive Summary — LIBOR Sunset" 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, 2021.

SEC Proposed Rules on Climate Related Information

On March 21, 2022, the Securities and Exchange Commission (“SEC”) proposed rule amendments that would require public companies to include certain climate-related information in their periodic reports and registration statements, including oversight and governance, material impacts (operational and financial), risk identification and management, and Scope 1, 2 and 3 emissions (the “Proposed Rule”). For large accelerated filers, such as Ambac, the Scope 1 and 2 emissions disclosures would require attestation from a third party. These new requirements, if adopted, would at the earliest take effect in fiscal year 2023 and begin to apply to SEC filings in 2024. Ambac is reviewing the Proposed Rule and assessing 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, 2021.

FINANCIAL GUARANTEES IN FORCE
($ in millions)

Financial guarantee products were sold in three principal markets: U.S. public finance, U.S. structured finance and international finance. The following table provides a breakdown of guaranteed net par outstanding by market at March 31, 2022 and December 31, 2021. Net par exposures within the U.S. public finance market include capital appreciation bonds which are reported at the par amount at the time of issuance of the insurance policy as opposed to the current accreted value of the bonds. Guaranteed net par outstanding includes the exposures of policies insuring variable interest entities (“VIEs”) consolidated in accordance with the Consolidation Topic of the ASC. Guaranteed net par outstanding excludes the exposures of policies that insure bonds which have been refunded or pre-refunded and excludes exposure of the policies insuring the Sitka Senior Secured Notes as defined in Note 1. Background and Business Description in the Notes 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, 2021:

	March 31, 2022		December 31, 2021
Public Finance (1) (2)	$	11,980	$	12,360
Structured Finance	4,688		4,904
International Finance	10,450		10,756
Total net par outstanding	$	27,118	$	28,020

(1)Includes $5,469 and $5,490 of Military Housing net par outstanding at March 31, 2022 and December 31, 2021, respectively.

(2)Includes $784 and $1,054 of Puerto Rico net par outstanding at March 31, 2022 and December 31, 2021, respectively.

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The table below shows Ambac’s ten largest insured exposures, by repayment source, as a percentage of total financial guarantee net par outstanding at March 31, 2022:

		Risk Name	Country-Bond Type	Ambac Ratings (1)	Ultimate Maturity Year	Net Par Outstanding		% of Total Net Par Outstanding
IF	AUK	Capital Hospitals plc (2)	UK-Infrastructure	A-	2046	$	899	3.3	%
IF	AUK	Anglian Water	UK-Utility	A-	2035	895		3.3	%
IF	AUK	Mitchells & Butlers Finance plc-UK Pub Securitisation	UK-Asset Securitizations	BBB	2033	852		3.1	%
IF	AUK	Aspire Defence Finance plc	UK-Infrastructure	A-	2040	799		2.9	%
IF	AUK	National Grid Gas	UK-Utility	BBB+	2037	783		2.9	%
IF	AUK	Posillipo Finance II S.r.l	Italy-Sub-Sovereign	BIG	2035	643		2.4	%
PF	AAC	New Jersey Transportation Trust Fund Authority - Transportation System	US-Lease and Tax-backed Revenue	BBB-	2036	623		2.3	%
IF	AUK	National Grid Electricity Transmission	UK-Utility	BBB+	2036	551		2.0	%
IF	AUK	RMPA Services plc	UK-Infrastructure	BBB+	2038	524		1.9	%
IF	AUK	Catalyst Healthcare (Manchester) Financing plc (2)	UK-Infrastructure	BBB-	2040	522		1.9	%
Total						$	7,091	26.0	%
PF = Public Finance, SF = Structured Finance, IF = International Finance AAC = Ambac Assurance, AUK = Ambac UK

(1)    Internal credit ratings are provided solely to indicate the underlying credit quality of guaranteed obligations based on the view of Ambac. In cases where Ambac has insured multiple tranches of an issue with varying internal ratings, or more than one obligation of an issuer with varying internal ratings, a weighted average rating is used. Ambac credit ratings are subject to revision at any time and do not constitute investment advice. BIG denotes credits deemed below investment grade.

(2)    A portion of this transaction is insured by an insurance policy issued by AAC. AAC has issued policies for these transactions that will only pay in the event that Ambac UK does not pay under its insurance policies ("second to pay policies").

Net par related to the top ten exposures reduced $234 from December 31, 2021. Exposures are impacted by changes in foreign exchange rates ($189 reduction during the three months ended March 31, 2022), certain indexation rates, reinsurance transactions and scheduled and unscheduled paydowns. As a result of recent increases in inflation, such indexation exposures have increased at a faster pace than they have historically.

The concentration of net par amongst the top ten (as a percentage of net par outstanding) remained unchanged at 26% at March 31, 2022, and December 31, 2021. Excluding the top ten exposures, the remaining insured portfolio of financial guarantees has an average net par outstanding of $32 per single risk, with insured exposures ranging up to $454 and a median net par outstanding of $5.

Given that Ambac has not written any new financial guaranty insurance policies since 2008, the risk exists that the legacy financial guarantee insured portfolio becomes increasingly concentrated to large and/or below investment grade exposures.

Puerto Rico

The following table outlines Ambac's insured net par outstanding to each Commonwealth of Puerto Rico issuer. Each issuing entity has its own credit risk profile attributable to, as applicable, discreet revenue sources, direct general obligation pledges and general obligation guarantees.

Net Par Outstanding ($ in millions)	March 31, 2022		December 31, 2021
PR Highways and Transportation Authority (1998 Resolution - Senior Lien Transportation Revenue)	$	394	$	394
PR Infrastructure Financing Authority (Special Tax Revenue) (1)	247		403
PR Convention Center District Authority (Hotel Occupancy Tax) (2)	70		86
PR Sales Tax Financing Corporation - Senior Sales Tax Revenue (COFINA)	69		73
PR Highways and Transportation Authority (1968 Resolution - Highway Revenue)	4		4
Commonwealth of Puerto Rico - General Obligation Bonds	—		11
PR Public Buildings Authority - Guaranteed by the Commonwealth of Puerto Rico	—		83
Total Net Exposure to The Commonwealth of Puerto Rico and Related Entities	$	784	$	1,054

(1) As of April 29, 2022, all remaining exposure has been called

(2) As of May 2, 2022, all remaining exposure has been called

Commonwealth Plan of Adjustment (Title III Case)

On March 15, 2022, the Eighth Amended Title III Joint Plan of Adjustment of the Commonwealth of Puerto Rico, et al. ("Eighth Amended POA") together with the Qualifying Modifications for PRIFA and CCDA ("PRIFA QM" and "CCDA QM", respectively) became effective, restructuring approximately $33,000 of debt across various Commonwealth instrumentalities,

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including obligations insured by AAC, and approximately $50,000 in pension obligations.

The Eighth Amended POA, among other things, incorporated the settlement reflected in the PRIFA Related Plan Support Agreement (“PRIFA PSA”) that was signed on July 27, 2021, by the Oversight Board, as representative of the Commonwealth of Puerto Rico, AAC, FGIC, and other holders of bonds issued by PRIFA. The Eighth Amended POA also incorporated the settlements reflected in the PRHTA/CCDA Related Plan Support Agreement (“PRHTA/CCDA PSA”) dated May 5, 2021, and the Amended and Restated Plan Support Agreement with the Oversight Board, as representative of the Commonwealth of Puerto Rico, PBA, and the Employee Retirement System of the Government of the Commonwealth of Puerto Rico ("Amended and Restated GO / PBA PSA") dated as of July 12, 2021.

The plan consideration made available to creditors under these plan support agreements on the Eighth Amended POA effective date was as follows:

PRIFA Plan Consideration

PRIFA creditors receive, on account of approximately $1,929 of allowed claims arising from PRIFA bonds, consideration in the form of (i) $193.5 cash and (ii) a contingent value instrument ("CVI") premised on (a) a share of the outperformance of general fund rum tax collections relative to the certified 2021 Commonwealth Fiscal Plan's projections (the "Rum Tax CVI") and (b) an approximately 27% share, subject to a lifetime cap of about $1,302, of the Clawback Creditors' portion of the outperformance of the Commonwealth's sales and use tax ("SUT") relative to the certified 2020 Commonwealth Fiscal Plan's projections (the "Clawback CVI").

CCDA Plan Consideration

CCDA creditors receive, on account of approximately $384 of allowed claims against the Commonwealth arising from CCDA bonds, consideration in the form of (i) $97 cash and (ii) an approximately 4% share, subject to a lifetime cap of about $217, of the Clawback CVI.

GO/PBA Plan Consideration

GO/PBA creditors receive, on account of approximately $18,409 of allowed claims arising from various GO and PBA bonds and other loans, consideration of (i) approximately $7,074 of cash, including plan support fees, (ii) approximately $6,683 of new GO current interest bonds, $1,170 face value of new GO capital appreciation bonds and (iv) GO Bond CVI, subject to a lifetime cap of about $3,500. The GO Bond CVI is intended to provide creditors with additional returns tied to outperformance of the SUT against the certified 2020 Commonwealth Fiscal Plan's projections.

AAC-Insured Bond Effective Date Transactions

GO / PBA

On the Eight Amended POA effective date, AAC-insured GO and PBA bondholders who elected commutation of their insurance received: 1) their respective shares of GO/PBA plan consideration available under the Eighth Amended POA, and 2) cash from

Ambac. Ambac’s obligations to the bondholders under the Ambac insurance policies who elected this option were deemed to be fully satisfied. On the plan effective date, about 50% and 27% of the outstanding par of the Ambac-insured GO and PBA bonds, respectively, totaling about $28 of insured par was commuted. The AAC-insured GO and PBA bondholders who failed to elect commutation received payment, in cash, of the outstanding principal amount of the bondholders’ insured bonds plus the accrued and unpaid interest thereon as of the effective date (the “Ambac Acceleration Price.”). Pursuant to this option, bondholders received the Ambac Acceleration Price in full and final discharge of Ambac’s obligations under the Ambac insurance policies. As of the effective date, all the remaining outstanding AAC-insured GO and PBA bonds totaling about $94 of insured par were satisfied and eliminated via commutation or acceleration.

PRIFA / CCDA

On the Eight Amended POA effective date, AAC-insured PRIFA and CCDA bondholders who elected commutation of their insurance received: 1) their respective shares of PRIFA or CCDA plan consideration available under the Eighth Amended POA and the PRIFA QM, or CCDA QM, as applicable, and 2) cash from Ambac. Ambac’s obligations to the bondholders under the Ambac insurance policies who elected this option were deemed to be fully satisfied. The AAC-insured PRIFA and CCDA bondholders who failed to elect commutation had their bondholders’ respective shares of consideration available under the Commonwealth Plan and the PRIFA QM, or CCDA QM, as applicable, deposited into a trust. On the plan effective date, about 39% and 19% of the outstanding par of the Ambac-insured PRIFA and CCDA bonds, respectively, totaling about $172 of insured par was commuted with the remainder totaling about $317 of insured par deposited into the trusts. Since the effective date, the remainder of those PRIFA and CCDA bonds belonging to bondholders who elected not to commute their AAC Insurance Policies and were deposited into trusts together with such policies have all been accelerated, satisfying and eliminating all of the Ambac-insured PRIFA and CCDA bonds.

Puerto Rico Highway and Transportation Authority (“PRHTA”)

AAC's remaining unrestructured PROMESA Puerto Rico exposure, PRHTA, is subject to the PRHTA Plan of Adjustment ("PRHTA POA"), which was filed on May 2, 2022. A confirmation hearing for the PRHTA POA is expected to follow later in 2022.

PRHTA/CCDA PSA

AAC signed a joinder to the PRHTA/CCDA PSA on July 15, 2021. The PRHTA/CCDA PSA, originally executed on May 5, 2021, provides for certain consideration for holders of bonds issued by certain Commonwealth instrumentalities, PRHTA, and CCDA on account of their claims against the Commonwealth arising from such bonds ("Clawback" claims). Under the PRHTA/CCDA PSA, PRHTA creditors will share $389 of cash proceeds, including a $264 interim distribution, payable once the PRHTA distribution condition has been met pursuant to the Eighth Amended POA. In addition, PRHTA creditors will receive an

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approximately 69% share of the Clawback CVI, subject to a lifetime nominal cap of about $3,698, which is also payable once the PRHTA distribution condition has been met pursuant to the Eighth Amended POA. The PRHTA Clawback CVI is subject to a PRHTA-specific waterfall: holders of PRHTA ’68 bonds will receive the first dollars of Clawback CVI, followed by holders of PRHTA ’98 bonds. The value of the Clawback CVI is highly uncertain, given the contingent, outperformance-driven structure. Changes in our assumed values of the Clawback CVI or in the actual performance of the Clawback CVI could cause an adverse change in our reserves which could be material. As a result, a significant decrease in our assumed values of the Clawback CVI could have a material adverse impact on our results of operations and financial condition. PRHTA bondholders will also receive new PRHTA bonds or cash with a face amount of $1,245. Of the $1,245 in new bonds or cash, approximately $646.4 will be allocated to holders of PRHTA '68 bonds and approximately $598.6 will be allocated to holders of PRHTA '98 bonds. The new PRHTA bonds or cash will be distributed to creditors upon consummation of the PRHTA POA. AAC and other PRHTA creditors will receive restriction fees and consummation costs payable at the effective date of the PRHTA POA.

Puerto Rico Considerations

The Eighth Amended POA and the qualifying modifications for PRIFA and CCDA became effective on March 15, 2022, and on that date and since, AAC-insured Puerto Rico exposures have been significantly reduced via commutation and acceleration. However, uncertainty remains as to our remaining exposures as to (i) the value or perceived value of the consideration provided by or on behalf of the debtors under the Eighth Amended POA, PRIFA QM, and CCDA QM; (ii) the extent to which exposure management strategies, such as commutation and acceleration, will be executed for PRHTA; (iii) the tax treatment of the consideration provided by or on behalf of the debtors under the Eighth Amended POA, PRIFA QM, and CCDA QM; (iv) whether and when the PRHTA POA will be confirmed; and (vii) other factors, including market conditions such as interest rate movements and credit spread changes on the new CVI instruments. Ambac’s loss reserves may prove to be understated or overstated, possibly materially, due to favorable or unfavorable developments or results with respect to these factors. Refer to Management's Discussion and Analysis of Financial Condition and Results of Operations - Balance Sheet to the Unaudited Consolidated Financial Statements included in Part I, Item 2 in this Form 10-Q for the possible increase in loss reserves under stress or other adverse conditions. There can be no assurance that losses may not exceed such estimates.

Ambac Title III Litigation Update

AAC continues to actively participate in PRHTA’s Title III proceedings.

Refer to Note 14. Commitments and Contingencies to the Consolidated Financial Statements included in Part I, Item 1 in this Form 10-Q for further information about Ambac's litigation relating to Puerto Rico.

Summary

Ambac has considered these developments and other factors in evaluating its Puerto Rico loss reserves. While management believes its reserves are adequate to cover losses in its Public Finance insured portfolio, there can be no assurance that Ambac may not incur additional losses in the future. Such additional losses may have a material adverse effect on Ambac’s results of operations and financial condition. Due to uncertainty regarding numerous factors, described above, that will ultimately determine the extent of Ambac's losses, it is also possible that favorable developments and results with respect to such factors may cause losses to be lower than current reserves, possibly materially.

Exposure Currency

The table below shows the distribution by currency of AAC’s insured exposure as of March 31, 2022:

Currency	Net Par Amount Outstanding in Base Currency		Net Par Amount Outstanding in U.S. Dollars
U.S. Dollars	$	16,878	$	16,878
British Pounds	£	6,642	8,725
Euros	€	1,112	1,231
Australian Dollars	A$	380	284
Total			$	27,118

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Ratings Distribution

The following charts provide a rating distribution of net par outstanding based upon internal Ambac credit ratings(1) and a distribution by bond type of Ambac's below investment grade ("BIG") net par exposures at March 31, 2022 and December 31, 2021. BIG is defined as those exposures with an Ambac internal credit rating below BBB-:

Note: AAA is less than 1% in both periods.

(1)Internal credit ratings are provided solely to indicate the underlying credit quality of guaranteed obligations based on the view of Ambac. In cases where Ambac has insured multiple tranches of an issue with varying internal ratings, or more than one obligation of an issuer with varying internal ratings, a weighted average rating is used. Ambac credit ratings are subject to revision at any time and do not constitute investment advice.

Summary of Below Investment Grade Exposure:

	Net Par Outstanding
Bond Type	March 31, 2022		December 31, 2021
Public Finance:
Puerto Rico	$	784	$	1,054
Military Housing	369		370
Other	308		317
Total Public Finance	1,461		1,741
Structured Finance:
RMBS	2,080		2,170
Student loans	293		302
Total Structured Finance	2,373		2,472
International Finance:
Sovereign/sub-sovereign	752		774
Transportation	375		389
Other	59		62
Total International Finance	1,186		1,225
Total	$	5,020	$	5,438

The net decline in below investment grade exposures is primarily due to de-risking activities, including the Puerto Rico restructuring.

Below investment grade exposures could increase as a relative proportion of the guarantee portfolio given that stressed borrowers generally have less ability to prepay or refinance their debt. Accordingly, due to these and other factors, it is not unreasonable to expect the proportion of below investment grade exposure in the guarantee portfolio to increase in the future.

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Results of Operations ($ in millions)

Consolidated Results

A summary of our financial results is shown below:

Three Months Ended March 31,	2022		2021
Gross premiums written	$	30	$	(2)
Revenues:
Net premiums earned	$	15	$	14
Net investment income	5		49
Net investment gains (losses), including impairments	10		2
Net gains (losses) on derivative contracts	57		25
Net realized gains (losses) on extinguishment of debt	—		33
Commission income	9		7
Other income (expense)	2		(2)
Income (loss) on variable interest entities	22		—
Expenses:
Losses and loss expenses (benefit)	24		8
Intangible amortization	14		19
Operating expenses	34		33
Interest expense	44		50
Provision (benefit) for income taxes	—		2
Net income (loss) attributable to common stockholders	$	2	$	17

Ambac's results for the three months ended March 31, 2022 were significantly impacted by the following:

•AAC has successfully implemented the restructuring of a significant portion of its remaining Puerto Rico exposures, following the occurrence of the effective dates for the Plan of Adjustment related to AAC-insured Puerto Rico General Obligation bonds (“GO”) and Public Buildings Authority (“PBA”) bonds, and Qualifying Modifications for AAC-insured Puerto Rico Infrastructure Authority (“PRIFA”) and Convention Center District Authority (“CCDA”) bonds, all effective March 15, 2022. As a result of these successful restructurings, Ambac recorded a gain in the amount of $198 as part of its first quarter 2022 consolidated financial results. This gain includes (i) a net benefit in losses; (ii) gain on the consolidation of newly established variable interest entities; partially offset by losses from sales and changes to the fair value of securities received in the restructuring and amortization of the insurance intangible asset.

•Management recorded a reduction to AAC’s estimated R&W subrogation recoveries in the amount of $224, $186 of which was based on AAC's evaluation of the effect on certain of AAC's R&W litigations of the New York Court of Appeals’ decision in the case entitled U.S. Bank National Association v. DLJ Mortgage Capital, Inc. relating to Home Equity Asset Trust 2007-1 ("HEAT"), a residential mortgage-backed securities trust, and the remainder of which reflects the impact of changes in discount rates and underlying insured RMBS transaction performance. The decision in HEAT is relevant to AAC's breach-of-contract cases relating to its insured RMBS transactions and may affect one of the bases upon which AAC seeks recovery with

respect to a significant portion of breaching loans in AAC's RMBS cases. However, management believes there remain other alternative paths to recovery for such breaching loans. AAC’s ultimate recoveries in its RMBS litigations may be materially higher or lower than its estimated subrogation recoveries based on a number of factors, including those described in Ambac’s Form 10-K for the fiscal year ended December 31, 2021 and elsewhere in this Quarterly Report.

The following paragraphs describe the consolidated results of operations of Ambac and its subsidiaries for the three months ended March 31, 2022 and 2021, respectively.

Gross Premiums Written. Gross premiums written increased $32 for the three months ended March 31, 2022, compared to the same period in the prior year. The increase was driven by the growth in the Specialty Property & Casualty Insurance segment of $24.

Net Premiums Earned. Net premiums earned increased $1 for the three months ended March 31, 2022, compared to the same period in the prior year.

The increase was driven by $1 of specialty property and casualty net premiums earned, partially offset by a slight reduction in legacy financial guarantee premiums earned.

Net Investment Income. Net investment income primarily consists of interest and net discount accretion on fixed maturity securities classified as available-for-sale, interest and changes in fair value of fixed maturity securities classified as trading, and net gains (losses) on pooled investment funds which include changes in fair value of the funds' net assets. Fixed maturity securities include investments in Ambac-insured securities that are made opportunistically based on their risk/reward and asset-liability management characteristics. Investments in pooled investment funds and certain other investments are either classified as trading securities with changes in fair value recognized in earnings or are reported under the equity method. These funds and other investments are reported in Other investments on the Unaudited Consolidated Balance Sheets, which consists primarily of pooled fund investments in diversified asset classes. 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 for the periods presented were driven by the legacy financial guarantee segment; other segments' results were not significant.

Net investment income from Ambac-insured securities; available-for-sale and short-term securities, other than Ambac-insured; and Other investments is summarized in the table below:

| Ambac Financial Group, Inc. 53 2022 First Quarter FORM 10-Q |

	Three Months Ended March 31,
	2022		2021
Securities available-for-sale: Ambac-insured (including LSNI Secured Notes)	$	7	$	15
Securities available-for-sale and short-term other than Ambac-insured	7		7
Other investments (includes trading securities)	(9)		27
Net investment income	$	5	$	49

Net investment income decreased $(44) for the three months ended March 31, 2022, compared to the three months ended March 31, 2021.

•Other investments income (loss) decreased $36 for the three months ended March 31, 2022, compared to the same period in the prior year. The three months ended March 31, 2022, included a loss of $9 on securities received in the Puerto Rico restructuring which are classified as trading. Pooled fund investment returns were lower for most asset classes, particularly equity and hedge funds. Hedge funds had modest positive performance in the three months ended March 31, 2022, while equities experienced losses as global markets declined. Both of these fund categories reported very strong positive performance in the first quarter of 2021. Performance of other fund categories were mixed relative to the prior year period.

•Net investment income from Ambac-insured securities for the three months ended March 31, 2022 decreased $8 compared to the prior year period, due primarily to lower income on LSNI Secured Notes which were redeemed in July 2021. Additionally, continued runoff of insured RMBS and the March 15, 2022, Puerto Rico restructuring both contributed to declines in investment income from Ambac-insured securities.

Net Investment Gains (Losses), including Impairments. The following table provides a breakdown of net investment gains (losses) for the periods presented:

Three months ended March 31	2022		2021
Net gains (losses) on securities sold or called	$	8	$	6
Net foreign exchange gains (losses)	3		(4)
Credit impairments	(1)		—
Intent / requirement to sell impairments	—		—
Total net realized gains (losses)	$	10	$	2

Net gains for the three months ended March 31, 2022, included a recovery of $9 from a class-action settlement relating to certain RMBS securities previously held in the investment portfolio. Net gains for the three months ended March 31, 2021, included a gain of $4 realized on the sale AFG's equity interest in the Corolla Trust in connection with the Corolla Exchange Transaction. Other net realized gains on securities sold or called during both periods were primarily from sales in connection with routine portfolio management.

Credit impairments are recorded as an allowance for credit losses with changes in the allowance recorded through earnings. When

credit impairments are recorded, any non-credit related impairment amounts on the securities are recorded in other comprehensive income. If management either: (i) has the intent to sell its investment in a debt security or (ii) determines that the Company more likely than not will be required to sell the debt security before its anticipated recovery, then the amortized cost of the security is written-down to fair value with a corresponding impairment charge recognized in earnings.

Net Gains (Losses) on Derivative Contracts. Net gains (losses) on derivative contracts include results from the Company's interest rate derivatives portfolio and its runoff credit derivatives portfolio. The interest rate derivatives portfolio is positioned to benefit from rising rates as a partial economic hedge against interest rate exposure in the financial guarantee insurance and investment portfolios. Net gains (losses) on interest rate derivatives generally reflect mark-to-market gains (losses) in the portfolio caused by increases (declines) in forward interest rates during the periods, the carrying cost of the portfolio, and the impact of counterparty credit adjustments as discussed below. Results from credit derivatives were not significant to the periods presented.

Net gains (losses) on interest rate derivatives for the three months ended March 31, 2022, were $57 compared to $25 for the three months ended March 31, 2021. The net gains for both periods reflect changes in fair value from increases in forward interest rates and lower counterparty credit adjustments on certain derivative assets, partially offset by portfolio carrying costs. The higher net gain for the three months ended March 31, 2022, resulted from the significant rate increases in the period combined with favorable portfolio positioning, partially offset by the impact of wider credit spreads described further below.

Counterparty credit adjustments are generally applicable for uncollateralized derivative assets that may not be offset by derivative liabilities under a master netting agreement. Inclusion of counterparty credit adjustments in the valuation of interest rate derivatives resulted in gains (losses) within Net gains (losses) on derivative contracts of $2 and $9 for the three months ended March 31, 2022 and 2021, respectively. In addition to the impact of interest rates on the underlying derivative asset values, the changes in counterparty credit adjustments are driven by movement of credit spreads. Credit spreads widened in the three months ended March 31, 2022 and narrowed in the three months ended March 31, 2021.

Commissions Income. Commission income for the three months ended March 31, 2022 was $9 compared to $7, for the three months ended March 31, 2021. Commissions include both base and profit sharing commissions of the Insurance Distribution segment. The increase is primarily driven by greater premiums placed for the three months ended March 31, 2022. Gross commission income has an accompanying expense, sub-producer commissions (included in Operating Expenses in the Consolidated Statements of Total Comprehensive Income (Loss), which will largely track changes in gross commission. For the three months ended March 31, 2022 Sub-producer commissions of $5 million were up from $4 million in three months ended March 31, 2021.

| Ambac Financial Group, Inc. 54 2022 First Quarter FORM 10-Q |

Net Realized Gains on Extinguishment of Debt. Net realized gains on extinguishment of debt was $33 for the three months ended March 31, 2021, resulting from the first quarter 2021 exchanges of junior surplus notes below their carrying values. Refer to Note 1. Background and Business Description in the Notes to Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021 for further discussion of the 2021 Surplus Notes Exchanges.

Income (Loss) on Variable Interest Entities. Included within Income (loss) on variable interest entities are income statement amounts relating to FG VIEs, consolidated under the Consolidation Topic of the ASC as a result of Ambac's variable interest arising from financial guarantees written by Ambac's subsidiaries, including gains or losses attributable to consolidating or deconsolidating FG VIEs during the periods reported. Generally, the Company’s consolidated FG VIEs are entities for which Ambac has provided financial guarantees on all of or a portion of its assets or liabilities. In consolidation, assets and liabilities of the FG VIEs are initially reported at fair value and the related insurance assets and liabilities are eliminated. However, the amount of FG VIE net assets (liabilities) that remain in consolidation generally result from the net positive (negative) projected cash flows from (to) the FG VIEs which are attributable to Ambac’s insurance subsidiaries in the form of financial guarantee insurance premiums, fees and losses. In the case of FG VIEs with net negative projected cash flows, the net liability is generally to be funded by Ambac’s insurance subsidiaries through insurance claim payments. Differences between the net carrying value of the insurance accounts under the Financial Services—Insurance Topic of the ASC and the carrying value of the consolidated FG VIE’s net assets or liabilities are recorded through income at the time of consolidation. Additionally, terminations or other changes to Ambac's financial guarantee insurance policies that impact projected cash flows between a consolidated FG VIE and Ambac could result in gains or losses, even if such policy changes do not result in deconsolidation of the FG VIE.

Income on variable interest entities was $22 for the three months ended March 31, 2022, compared to income of less than a million for the three months ended March 31, 2021. Results for the three months ended March 31, 2022, were driven by net income of $22 related to two new trusts created in connection with the Puerto Rico restructurings in March 2022, including an initial gain upon consolidation of $28 partially offset by subsequent declines in the fair value of the trusts' assets through March 31, 2022. Income on variable interest entities for the three months ended March 31, 2022 and 2021 both included realized gains of $1 on sales of assets from one FG VIE (the COFINA Trust) offset by declines in the valuation of net assets of other VIEs.

Refer to Note 9. Variable Interest Entities to the Unaudited Consolidated Financial Statements, included in Part I, Item 1 in this Form 10-Q for further information on the accounting for FG VIEs.

Losses and Loss Expenses. Loss and loss expenses increased $16 for the three months ended March 31, 2022, compared to the same period in the prior year. The increase was driven by a

reduction to AAC’s estimated R&W subrogation recoveries in the amount of $224, partially offset by favorable loss development in domestic public finance, primarily due to the Puerto Rico restructuring.

Intangible Amortization. Insurance intangible amortization for the three months ended March 31, 2022 and 2021, was $14 and 19, a decrease of $5 over the three months ended March 31, 2021. The decrease was driven by run-off of the insured portfolio and de-risking activity. Other intangible amortization for the three months ended March 31, 2022 and 2021, was $1 and $1, respectively.

Operating Expenses. Operating expenses consist of gross operating expenses plus reinsurance commissions. The following table provides a summary of operating expenses for the periods presented:

Three Months Ended March 31,	2022		2021
Compensation	$	16	$	16
Non-compensation	18		17
Gross operating expenses	34		33
Reinsurance commissions, net	(1)		—
Total operating expenses	$	34	$	33

Gross operating expenses increased $1 for the three months ended March 31, 2022, respectively, compared to the same periods in the prior year.

The increase in operating expenses during the three months ended March 31, 2022, as compared to the three months ended March 31, 2021, was due to the following:

•Higher compensation costs due to a net increase in staffing resulting from additions in the Specialty Property & Casualty Insurance segment offset by lower incentive compensation expense including the timing of performance factor adjustments.

•Higher non-compensation costs primarily related to sub-producers commissions as part of the Insurance Distribution segment and Legacy Financial Guarantee Insurance legal costs, partially offset by lower transaction driven consulting fees.

Interest Expense. All interest expense relates to the Legacy Financial Guarantee Insurance segment and includes accrued interest on the LSNI Ambac Note, Sitka AAC Note, Tier 2 Notes, surplus notes and other debt obligations. Additionally, interest expense includes discount accretion when the debt instrument carrying value is at a discount to par. The following table provides details by type of obligation for the periods presented:

Three Months Ended March 31,	2022		2021
Surplus notes (1)	$	20	$	18
LSNI Ambac Note	—		25
Sitka AAC note	17		—
Tier 2 Notes	7		7
Other	—		—
Total interest expense	$	44	$	50

(1)Includes junior surplus notes that were acquired and retired in the first quarter of 2021.

| Ambac Financial Group, Inc. 55 2022 First Quarter FORM 10-Q |

The decrease in interest expense for the three months ended March 31, 2022, compared to the three months ended March 31, 2021, was mainly driven by the impact of the Secured Note Refinancing as further described in Note 1. Background and Business Description, in the Notes 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, 2021, partially offset by discount accretion on surplus notes reissued in 2021.

Surplus note principal and interest payments require the approval of OCI. In May 2022, OCI declined the request of AAC to pay the principal amount of the surplus notes, plus all accrued and unpaid interest thereon, on the then next scheduled payment date of June 7, 2022. As a result, the scheduled payment date for interest, and the scheduled maturity date for payment of principal of the surplus notes, shall be extended until OCI grants approval to make the payment. Interest will accrue, compounded on each anniversary of the original scheduled payment date or scheduled maturity date, on any unpaid principal or interest through the actual date of payment, at 5.1% per annum. Holders of surplus notes will have no rights to enforce the payment of the principal of, or interest on, surplus notes in the absence of OCI approval to pay such amount. The interest on the outstanding surplus notes were accrued for and AAC is accruing interest on the interest amounts following each scheduled payment date. Total accrued and unpaid interest for surplus notes outstanding to third parties were $593 at March 31, 2022. Since the issuance of the surplus notes in 2010, OCI has declined to approve regular payments of interest on surplus notes, although the OCI has permitted two exceptional payments.

Provision for Income Taxes. The provision for income taxes for the three months ended March 31, 2022 and 2021, was $0, and $2 a decrease of $1 compared to the provision for income taxes reported for three months ended March 31, 2021.

Results of Operations by Segment

Legacy Financial Guarantee Insurance

Three Months Ended March 31,	2022		2021
Revenues:
Net premiums earned	$	13	$	14
Net investment income	5		49
Net investment gains (losses), including impairments	10		(2)
Net gains on derivative contracts	57		25
Net realized gains on extinguishment of debt	—		33
Other	24		(2)
Total	109		118
Expenses:
Loss and loss expenses (benefit)	23		8
Operating expenses	21		17
Total	44		25
Earnings before interest, taxes, depreciation and amortization	65		93
Interest expense	44		50
Depreciation	—		—
Intangible amortization	14		19
Pretax income (loss)	$	6	$	24
Stockholders equity	$	567	$	727

The Legacy Financial Guarantee Insurance segment is in active runoff. This will generally result in lower premium earnings, investment income, operating expenses and intangible amortization. The variability in the financial results are primarily driven by changes in loss and loss expenses and de-risking transactions. Additionally, the segment results are impacted by changes in interest rates (net gains on derivative contracts and interest expense as the AAC Sitka Note is a floating rate obligation). Key variances not discussed above in the Consolidated Results section are as follows:

Net premiums earned. Net premiums earned decreased $1 for the three months ended March 31, 2022, compared to the same period in the prior year. Net premiums earned were impacted by the runoff of the financial guarantee insured portfolio, including through transaction terminations, calls and scheduled maturities, which reduce current and future net premiums earned and were also impacted by the following:

•Changes to the allowance for credit losses on the premium receivable asset. The positive impact on net premiums earned related to credit losses amounted to $1 and $4 for the for the three months ended March 31, 2022 and 2021.

•Accelerated financial guarantee premium earnings as a result of calls and other accelerations on insured obligations largely due to de-risking activity of $4 and $0 for the for the three months ended March 31, 2022 and 2021.

| Ambac Financial Group, Inc. 56 2022 First Quarter FORM 10-Q |

Losses and Loss Expenses. Losses and loss expenses are based upon estimates of the aggregate losses inherent in the non-derivative portfolio for insurance policies issued to beneficiaries, excluding consolidated VIEs.

Ambac records as a component of its loss reserve estimate subrogation recoveries related to securitized loans in RMBS transactions with respect to which AAC is pursuing claims for breaches of representations and warranties. Ambac does not include potential recoveries attributed solely to fraudulent inducement claims in our litigations in our estimate of subrogation recoveries. Nor does Ambac include potential recoveries attributable to pre-judgment interest in the estimate of subrogation recoveries. Generally, the sponsor of an RMBS transaction provided representations and warranties with respect to the securitized loans, including representations with respect to the loan characteristics, the absence of borrower fraud in the underlying loan pools or other misconduct in the origination process and attesting to the compliance of loans with the prevailing underwriting policies. Ambac has recorded representation and warranty subrogation recoveries, net of reinsurance, of $1,480 and $1,704 at March 31, 2022, and December 31, 2021, respectively. Refer to Note 2. Basis of Presentation and Significant Accounting Policies 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, 2021, for more information regarding the estimation process for R&W subrogation recoveries.

The following provides details for losses and loss expenses (benefit) incurred for the periods presented:

Three Months Ended March 31,	2022		2021
Structured Finance	$	213	$	(8)
Domestic Public Finance	(190)		9
Other	1		6
Totals (1)	$	23	$	8

(1)    Includes loss expenses incurred of $1 and $10 for the three months ended March 31, 2022 and 2021, respectively.

Losses and loss expenses (benefit) for the three months ended March 31, 2022, were driven by a reduction to AAC’s estimated R&W subrogation recoveries in the amount of $224, partially offset by favorable loss development in domestic public finance, primarily due to the Puerto Rico restructuring.

Losses and loss expenses (benefit) for the three months ended March 31, 2021, were driven by higher projected losses in domestic public finance from adverse development related to Puerto Rico, partially offset by the positive impact of higher discount rates.

Operating Expenses. The increase in operating expenses of $4 during the three months ended March 31, 2022, as compared to the three months ended March 31, 2021, is primarily due additional legal fees related to defensive litigation costs. In addition, incentive compensation expense increased due to performance factors, partially offset by lower other compensation costs resulting from a net reduction in headcount within the segment.

Specialty Property and Casualty Insurance

Three Months Ended March 31,	2022			2021
Gross premiums written	$	24		$	—
Net premiums written	5			—
Revenues:
Premiums earned	$	1		$	—
Investment income	—			—
Net investment gains (losses), including impairments	—			—
Other income (program fees)	—			—
Total	2			—
Expenses:
Losses and loss expenses incurred	1			—
Operating expenses	3			1
Other expense	—			—
Total	4			1
Earnings before interest, taxes, depreciation and amortization	(2)			$	(1)
Pretax income (loss)	$	(2)		$	(1)
Loss and LAE Ratio	65.3		%	NM
Combined Ratio	331.9		%	NM
Stockholders Equity	$	115		$	106

The Specialty Property and Casualty Insurance segment has grown significantly since underwriting its first program in May 2021. Ten programs have been signed as of March 31, 2022. The growth in both the number and size of these programs has contributed to the increase in gross and net premiums written, net premiums earned and net loss and loss expenses incurred.

Loss and loss expenses incurred may be adversely impacted by increasing economic and social inflation, particularly within the commercial auto business. The impact of inflation on ultimate loss reserves is difficult to estimate, particularly in light of recent disruptions to the judicial system, supply chain and labor market. In addition to the impact of inflation on reserves, on a going forward basis, 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 claimants and policyholders, including an increase in 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 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.

Segment pre-tax net income was impacted by the growth in operating expenses, including costs associated with the acquisition additional shell insurance companies, as we continue to ramp up Everspan's operations.

| Ambac Financial Group, Inc. 57 2022 First Quarter FORM 10-Q |

Insurance Distribution

Three Months Ended March 31,	2022		2021
Premiums placed	$	45	$	40
Commission income	$	9	$	7
Sub-producer commission expense (1)	5		4
Net commissions	4		3
Expenses:
Other Operating expenses (1)	1		1
Net (gain) attributable to noncontrolling interest	—		—
Earnings before interest, taxes, depreciation and amortization	2		2
Depreciation	—		—
Intangible amortization	1		1
Pretax income (loss)	2		$	2
Stockholders Equity, net of NCI	$	66	$	69

(1)    The Consolidated Statements of Comprehensive Income presents the sum of these items as Operating Expenses.

Ambac's Insurance Distribution segment currently includes Xchange Benefits, a P&C MGA specializing in accident and health products, 80% of which was acquired by AFG on December 31, 2020. Xchange is compensated for its services primarily by commissions paid by insurance carriers for underwriting, structuring and/or administering polices and, in the case of ESL, managing claims under an agency agreement. Commission revenues are usually based on a percentage of the premiums placed. Xchange is also eligible to receive profit sharing contingent commissions on certain of its Affinity programs based on the underwriting results of the policies it places with the carrier, which may cause some variability in revenue and earning recognition.

Xchange underwrote and placed premiums for its carriers of approximately $45 for the three months ended March 31, 2022, an increase of $5 or 12% as compared to the three months ended March 31, 2021. Higher premiums placed were the primary drivers to the increases in both gross and sub-producer commissions.

Employer Stop Loss business underwritten by Xchange has seasonality in January and July, which result in revenue and earnings concentrations in the first and third quarters each calendar year. Employer Stop Loss is Xchange's largest business.

LIQUIDITY AND CAPITAL RESOURCES
($ in millions)

Holding Company Liquidity

AFG is organized as a legal entity separate and distinct from its operating subsidiaries. AFG is a holding company with no outstanding debt. AFG's liquidity is primarily dependent on its net assets, excluding the operating subsidiaries that it owns, totaling $243 as of March 31, 2022, and secondarily on distributions and expense sharing payments from its operating subsidiaries. AFG's investments include securities directly issued

by AAC (i.e. surplus notes), which are eliminated in consolidation. Securities issued by AAC and certain other of AFG's investments are generally less liquid than investment grade and highly traded investments.

•Under an inter-company cost allocation agreement, AFG is reimbursed by AAC for a portion of certain operating costs and expenses and, if approved by OCI, entitled to an additional payment of up to $4 per year to cover expenses not otherwise reimbursed. The $4 reimbursement for 2021 expenses was approved by OCI and paid to AFG in April 2022.

AFG's principal uses of liquidity are: (i) the payment of operating expenses, including costs to explore opportunities to grow and diversify Ambac, (ii) the making of strategic investments, which may include illiquid investments and (iii) making capital investments to acquire, grow and/or capitalize new and/or existing businesses. AFG may also provide short-term financial support, primarily in the form of loans, to its operating subsidiaries to support their operating requirements. AFG supported the development of the Specialty P&C Insurance business, and its acquisitions, by contributing $6 of capital to Everspan Indemnity in first quarter of 2022 and $92 in 2021, respectively.

Xchange currently does not have any regulatory restrictions on its ability to make distributions. AFG received distributions from Xchange of $2 and $- during the three months ended March 31, 2022 and 2021. It is highly unlikely that AAC or Everspan will be able to make dividend payments to AFG for the foreseeable future.

In the opinion of the Company’s management the net assets of AFG are sufficient to meet AFG’s current liquidity requirements. However, events, opportunities or circumstances could arise that may cause AFG to seek additional capital (e.g. through the issuance of debt, equity or hybrid securities or facilities).

Operating Companies' Liquidity

Insurance

The liquidity requirements of the Company’s insurance subsidiaries are met primarily by funds generated from premiums; recoveries on claim payments, including RMBS representation and warranty subrogation recoveries (AAC only); reinsurance recoveries; fees; investment income and maturities and sales of investments.

•AAC's ability to realize RMBS representation and warranty subrogation recoveries is subject to significant uncertainty, including risks inherent in litigation, such as adverse rulings or decisions in our cases or in litigations to which AAC is not a party that set precedents or resolve questions of law that impact our own claims; collectability of such amounts from counterparties (and/or their respective parents and affiliates); timing of receipt of any such recoveries, including due to delays in court proceedings; intervention by the OCI, which could impede our ability to take actions required to realize such recoveries; and uncertainty inherent in the assumptions used in estimating the amount of such

| Ambac Financial Group, Inc. 58 2022 First Quarter FORM 10-Q |

recoveries. The amount of these subrogation recoveries is material and if AAC is unable to recover any amounts or recovers materially less than its estimated recoveries, its future available liquidity to pay claims, debt service and meet other obligations would be materially adversely impacted. See Part I, Item 1A. Risk Factors in AFG's Annual Report on Form 10-K and Part II, Item 1A of this Quarterly Report for more information about risks relating to RMBS R&W subrogation recoveries.

•See Note 6. Insurance Contracts to the Consolidated Financial Statements included in Part II, Item 8, in this Form 10-Q for a summary of future gross financial guarantee premiums to be collected by AAC and Ambac UK. Termination of financial guarantee policies on an accelerated basis may adversely impact AAC’s liquidity.

Cash provided from these sources is used primarily for claim payments and commutations, loss expenses and acquisition costs (Specialty Property & Casualty Insurance segment only), debt service on outstanding debt (AAC only), operating expenses, reinsurance payments and purchases of securities and other investments that may not be immediately converted into cash.

•Interest and principal payments on surplus notes are subject to the approval of OCI, which has full discretion over payments regardless of the liquidity position of AAC. Any such payment on surplus notes would require either payment or collateralization of a portion of the Tier 2 Notes under the terms of the Tier 2 Note indenture. As discussed more fully in "Results of Operations" above in this Management's Discussion and Analysis, OCI declined AAC's request to pay the principal amount of the surplus notes, plus all accrued and unpaid interest thereon, on June 7, 2022. See Note 12. Long-term Debt 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, 2021 for further discussion of the payment terms and conditions of the Tier 2 Notes as well as the aggregate annual maturities of all debt outstanding. In addition to principal amounts of $2,341 as of March 31, 2022, with various maturities as described in Note 12. Long-term Debt 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, 2021, AAC's future interest obligations include $65, subject to changes in interest rates, annually on the Sitka AAC Note through maturity on July 6, 2026, $605 of accrued and unpaid interest that would be payable on surplus notes if approved by OCI on the next scheduled payment date of June 7, 2022, and Tier 2 Note interest that may be paid-in-kind until maturity on February 12, 2055 at which time $5,060 would be due.

•AAC lends its wholly-owned subsidiary, Ambac Financial Services ("AFS") cash to support its operations. AFS uses interest rate derivatives (primarily interest rate swaps and US Treasury futures) as a partial economic hedge against the effects of rising interest rates elsewhere in the legacy financial guarantee segment. AFS's derivatives also include interest rate swaps previously provided to asset-backed issuers and other entities in connection with their financings.

AAC loans cash and securities to AFS as needed to fund payments under these derivative contracts, collateral posting requirements and operating expenses. Intercompany loans are governed by an established lending agreement with defined borrowing limits that has received non-disapproval from OCI.

Insurance subsidiaries manage their liquidity risk by maintaining comprehensive analyses of projected 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 MGA subsidiaries are met primarily by funds generated from commission receipts (both base and profit commissions). Base commissions 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.

Consolidated Cash Flow Statement Discussion.

The following table summarizes the net cash flows for the periods presented.

Three Months Ended March 31,	2022		2021
Cash provided by (used in):
Operating activities	$	9	$	(40)
Investing activities	136		116
Financing activities (1)	(52)		(69)
Foreign exchange impact on cash and cash equivalents	—		—
Net cash flow	$	93	$	6

(1)    During the second quarter of 2022, AAC made $393 of payments in connection with the acceleration of the AAC-insured PRIFA and CCDA bonds that were not commuted during the first quarter of 2022 and were deposited into the respective trusts. As a result of these claim payments and associated full redemption of the trust certificates, the remaining assets of the trusts, valued at $114 at March 31, 2022, were distributed to AAC. Additionally, AAC was the holder of $164 of the PRIFA trust certificates that were fully redeemed. Because these trusts are consolidated VIEs, this activity will be reflected as $221 payments of VIE liabilities in second quarter 2022 financing activities.

Operating activities

The following represents the significant cash operating activity during the three months ended March 31, 2022 and 2021:

•Debt service payments on the Sitka AAC Note were $15 for the three months ended March 31, 2022. Debt service payments on the LSNI Ambac Note were $25 for the three months ended March 31, 2021.

•Payments related to (i) operating expenses were $34 and $31 for the three months ended March 31, 2022 and 2021, respectively; and (ii) reinsurance premiums were $7 and $9

| Ambac Financial Group, Inc. 59 2022 First Quarter FORM 10-Q |

for the three months ended March 31, 2022 and 2021, respectively

•Cash provided by (i) premiums were $28 and $12 for the three months ended March 31, 2022 and 2021, respectively; (ii) interest rate derivatives were $11 and $3 for the three months ended March 31, 2022 and 2021, respectively; (iii) investment portfolio income were $14 and $23 for the three months ended March 31, 2022 and 2021, respectively; and (iv) cash settlements from the Puerto Rico restructuring transactions to the consolidated trusts was $47 for the three months ended March 31, 2022.

•Net Legacy Financial Guarantee Insurance loss and loss expenses paid, including commutation payments, during the three months ended March 31, 2022 and 2021 are detailed below:

Three Months Ended March 31,	2022		2021
Net loss and loss expenses paid (recovered):
Net losses paid	$	213	$	30
Net subrogation received	(177)		(25)
Net loss expenses paid	(8)		20
Net cash flow	$	28	$	25

Future operating flows will primarily be impacted by interest payments on outstanding debt, net claim and expense payments, investment coupon receipts and premium collections.

Financing Activities

Financing activities for the three months ended March 31, 2022, include paydowns and maturities of VIE debt obligations of $49.

Financing activities for the three months ended March 31, 2021, include paydowns of the LSNI Ambac Note of $16 and paydowns and maturities of VIE debt obligations of $48.

Collateral

AFS hedges a portion of the interest rate risk in the Legacy Financial Guarantee Insurance segment financial guarantee and investment portfolios, along with legacy customer interest rate swaps, with standardized derivative contracts, including financial futures contracts, which contain collateral or margin requirements. Under these hedge agreements, AFS is required to post collateral or margin to its counterparties and futures commission merchants to cover unrealized losses. In addition, AFS is required to post collateral or margin in excess of the amounts needed to cover unrealized losses. All AFS derivative contracts containing ratings-based downgrade triggers that could result in collateral or margin posting or a termination have been triggered. If terminations were to occur, AFS would be required to make termination payments but would also receive a return of collateral or margin in the form of cash or U.S. Treasury obligations with market values equal to or in excess of market values of the swaps and futures contracts. AFS may look to re-establish hedge positions that are terminated early, resulting in additional collateral or margin obligations. The amount of additional collateral or margin posted on derivatives contracts will depend on several variables including the degree to which

counterparties exercise their termination rights (or agreements terminate automatically) and the terms on which hedges can be replaced. All collateral and margin obligations are currently met. Collateral and margin posted by AFS totaled a net amount of $119 (cash and securities collateral of $6 and $114, respectively), including independent amounts, under these contracts at March 31, 2022.

Ambac Credit Products (“ACP”) is not required to post collateral under any of its outstanding credit derivative contracts.

BALANCE SHEET ($ in millions)

Total assets decreased by approximately $772 from December 31, 2021, to $11,531 at March 31, 2022, primarily due to payment of loss and loss expenses, interest and operating expenses, lower subrogation recoverables, declines in invested asset values, lower derivative assets caused by rising interest rates, lower consolidated VIE assets and lower premium receivables and intangible assets from the continued runoff of the financial guarantee insurance portfolio.

Total liabilities decreased by approximately $649 from December 31, 2021, to $10,538 as of March 31, 2022, primarily due to the payment of loss and loss expenses, lower VIE long-term debt and lower derivative liabilities caused by rising interest rates.

As of March 31, 2022, total stockholders’ equity was $974, compared with total stockholders’ equity of $1,098 at December 31, 2021. This decrease was primarily due to the changes in unrealized losses on invested assets and losses on foreign currency translation.

Investment Portfolio

Ambac's investment portfolio is managed under established guidelines designed to meet the investment objectives of AAC, Everspan Group, Ambac UK and AFG. 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, 2021, for further description of Ambac's investment policies and applicable regulations.

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 Ambac's consolidated investment portfolio. Ambac's investment policies and objectives do not apply to the assets of VIEs consolidated as a result of financial guarantees written by its insurance subsidiaries.

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The following table summarizes the composition of Ambac’s investment portfolio, excluding VIE investments, at carrying value at March 31, 2022 and December 31, 2021:

	March 31, 2022		December 31, 2021
Fixed maturity securities(1), (2)	$	1,383	$	1,730
Fixed maturity securities - trading	119		—
Short-term(1), (2)	540		414
Other investments(2)	660		690
Fixed maturity securities pledged as collateral	114		120
Total investments (3)	$	2,815	$	2,955

(1)    Includes Specialty Property & Casualty Insurance segment assets held comprising fixed maturity securities of $79 and $72 at March 31, 2022 and December 31, 2021, respectively, and short-term investments of $31 and $32 at March 31, 2022 and December 31, 2021, respectively.

(2)    Includes assets held by AFG comprising fixed maturity securities, short-term and other investments of $24, $113 and $11 as of March 31, 2022, respectively, and fixed maturity securities, short-term and other investments of $28, $124 and $11 as of December 31, 2021, respectively.

(3)    Includes investments denominated in non-US dollar currencies with a fair value of £339 ($445) and €35 ($39) as of March 31, 2022, and £341 ($462) and €38 ($43) as of December 31, 2021.

Ambac invests in various asset classes in its fixed maturity securities portfolio. Other investments primarily consist of diversified interests in pooled funds. 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 pooled funds by asset class.

The following charts provide the ratings(1) distribution of the fixed maturity investment portfolio based on fair value at March 31, 2022 and December 31, 2021:

(1)Ratings are based on the lower of Moody’s or S&P ratings. If ratings are unavailable from Moody's or S&P, Fitch ratings are used. If guaranteed, rating represents the higher of the underlying or guarantor’s financial strength rating.

(2)Below investment grade and not rated bonds insured by Ambac represent 20% and 32% of the March 31, 2022 and December 31, 2021 combined fixed maturity portfolio, respectively. The decrease is primarily due to the impact of the settlement of insured Puerto Rico bonds described above, under Financial Guarantees in Force - AAC-Insured Bond Effective Date Transactions.

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Premium Receivables

Ambac's premium receivables decreased to $317 at March 31, 2022, from $323 at December 31, 2021. As further discussed in Note 6. Insurance Contracts, the decrease is primarily due to activities in the Legacy Financial Guarantee Insurance Segment partially offset by growth in the Specialty P&C Insurance Segment. The Legacy Financial Guarantee Insurance Segment declines are due to premium receipts, partially offset by decreases to the allowance for credit losses and accretion of the premium receivable discount. At March 31, 2022, Legacy Financial Guarantee Insurance and Specialty P&C premiums receivables are $308 and $9, respectively.

Premium receivables by payment currency were as follows:

Currency	Premium Receivable in Payment Currency		Premium Receivable in U.S. Dollars
U.S. Dollars	$	200	$	200
British Pounds	£	77	101
Euros	€	15	16
Total			$	317

Reinsurance Recoverable on Paid and Unpaid Losses

Ambac has reinsurance in place pursuant to surplus share treaty and facultative agreements. 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). For those reinsurance counterparties that do not currently post collateral, Ambac’s reinsurers are well capitalized, highly rated, authorized capacity providers. Ambac benefited from letters of credit and collateral amounting to approximately $106 from its reinsurers at March 31, 2022.  Additionally, while legacy liabilities from the 21st Century Companies and PWIC 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. As of March 31, 2022 and December 31, 2021, reinsurance recoverable on paid and unpaid losses were $48 and $55, respectively. The decrease was primarily a result of favorable development in financial guarantee insured exposures largely related to the Puerto Rico restructuring.

Intangible Assets

Intangible assets includes (i) an insurance intangible asset that was established at AFG's emergence from bankruptcy (Legacy

Financial Guarantee Insurance Segment), representing the difference between the fair value and aggregate carrying value of the financial guarantee insurance and reinsurance assets and liabilities of $303 at March 31, 2022, (ii) intangible assets established as part of the acquisition of Xchange (Insurance Distribution Segment) on December 31, 2020 of $32 at March 31, 2022 and (iii) indefinite-lived intangible assets established as part of the acquisitions of PWIC on October 1, 2021 and the 21st Century Companies on January 3, 2022 (Specialty Property & Casualty Insurance segment) of $14 at March 31, 2022.

As of March 31, 2022 and December 31, 2021, intangible assets were $350 and $362, respectively. The decline is primarily due to amortization partially offset by the new intangible asset acquired with the 21st Century Companies.

Derivative Assets and Liabilities

The interest rate derivative portfolio is positioned to benefit from rising rates as a partial economic hedge against interest rate exposure in the Legacy Financial Guarantee insurance and investment portfolios. Derivative assets decreased from $76 at December 31, 2021, to $55 as of March 31, 2022. Derivative liabilities decreased from $95 at December 31, 2021, to $76 as of March 31, 2022. The net decreases resulted primarily from higher interest rates during the three months ended March 31, 2022.

Loss and Loss Expense Reserves and Subrogation Recoverable

Loss and loss expense reserves are based upon estimates of the ultimate aggregate losses inherent in the non-derivative portfolio for insurance policies issued to beneficiaries, excluding consolidated VIEs.

The evaluation process for determining the level of 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 7. 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, 2021, for further information on loss and loss expenses.

The loss and loss expense reserves, net of subrogation recoverables and before reinsurance as of March 31, 2022 and December 31, 2021, were $(647) and $(522), respectively.

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Loss and loss expense reserves are included in the Unaudited Consolidated Balance Sheets as follows:

	Specialty Property and Casualty		Legacy Financial Guarantee
			Present Value of Expected Net Cash Flows				Unearned Premium Revenue		Gross Loss and Loss Expense Reserves
Balance Sheet Line Item	Gross Loss and Loss Expense Reserves		Claims and Loss Expenses		Recoveries (1)
March 31, 2022:
Loss and loss expense reserves	$	36	$	1,168	$	(95)	$	(42)	$	1,067
Subrogation recoverable	—		52		(1,766)		—		(1,714)
Totals	$	36	$	1,221	$	(1,861)	$	(42)	$	(647)
December 31, 2021:
Loss and loss expense reserves	$	32	$	1,749	$	(155)	$	(56)	$	1,570
Subrogation recoverable	—		88		(2,180)		—		(2,092)
Totals	$	32	$	1,837	$	(2,335)	$	(56)	$	(522)

(1)Present value of future recoveries includes R&W subrogation recoveries of $1,502 and $1,730 at March 31, 2022 and December 31, 2021, respectively.

Legacy Financial Guarantee Insurance:

Ambac has exposure to various bond types issued in the debt capital markets. Our experience has shown that, for the majority of bond types, we have not experienced significant claims. The bond types that have experienced significant claims, including through commutations, are residential mortgage-backed securities (“RMBS”), student loan securities and public finance securities. These bond types represent 93% of our ever-to-date insurance claims recorded, with RMBS comprising 75%. At March 31, 2022, $298 million of gross loss and loss expense reserves were consolidated into a VIE in connection with the Puerto Rico restructuring. The table below indicates gross par outstanding and the components of gross loss and loss expense reserves related to policies in Ambac’s gross loss and loss expense reserves at March 31, 2022 and December 31, 2021: :

	Gross Par Outstanding (1)		Present Value of Expected Net Cash Flows				Unearned Premium Revenue		Gross Loss and Loss Expense Reserves (1)(2)
			Claims and Loss Expenses		Recoveries
March 31, 2022:
Structured Finance	$	2,293	$	782	$	(1,715)	$	(10)	$	(943)
Domestic Public Finance (3)	1,914		365		(141)		(20)		204
Other	1,262		34		(5)		(12)		17
Loss expenses	—		39		—		—		39
Totals	$	5,469	$	1,221	$	(1,861)	$	(42)	$	(683)
December 31, 2021:
Structured Finance	$	2,371	$	852	$	(2,018)	$	(12)	$	(1,178)
Domestic Public Finance	2,742		905		(312)		(31)		562
Other	1,189		35		(5)		(13)		17
Loss expenses	$	—	$	45	$	—	$	—	$	45
Total	$	6,302	$	1,837	$	(2,485)	$	(56)	$	(554)

(1)    Ceded par outstanding on policies with loss reserves and ceded loss and loss expense reserves are $646 and $14 respectively, at March 31, 2022, and $784 and $24, respectively at December 31, 2021. Recoverable ceded loss and loss expense reserves are included in Reinsurance recoverable on paid and unpaid losses on the balance sheet.

(2)    Loss reserves are included in the balance sheet as Loss and loss expense reserves or Subrogation recoverable dependent on if a policy is in a net liability or net recoverable position.

(3)    As a result of the Puerto Rico restructuring and the subsequent consolidation of VIE's gross par outstanding was reduced by $270 and $323, respectively.

Variability of Expected Losses and Recoveries

Ambac’s management believes that the estimated future loss component of loss reserves (present value of expected net cash flows) are adequate to cover future claims presented, but there

can be no assurance that the ultimate liability will not be higher than such estimates.

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It is possible that our estimated future losses for insurance policies discussed above could be understated or that our estimated future recoveries could be overstated. We have attempted to identify possible cash flows related to losses and recoveries using more stressful assumptions than the probability-weighted outcome recorded. The possible net cash flows consider the highest stress scenario that was utilized in the development of our probability-weighted expected loss at March 31, 2022, and assumes an inability to execute any commutation transactions with issuers and/or investors. Such stress scenarios are developed based on management’s view about all possible outcomes relating to losses and recoveries. In arriving at such view, management makes considerable judgments about the possibility of various future events. Although we do not believe it is possible to have stressed outcomes in all cases, it is possible that we could have stress case outcomes in some or even many cases. See “Risk Factors” in Part I, Item 1A as well as the descriptions of "RMBS Variability," "Public Finance Variability," "Student Loan Variability," and "Other Credits, including Ambac UK, Variability" in Part II, Item 7 of the Company's 2021 Annual Report on Form 10-K, and Part II, Item1A "Risk Factors" of this Quarterly Report, for further discussion of the risks relating to future losses and recoveries that could result in more highly stressed outcomes, as well as the descriptions of "Structured Finance Variability," "Domestic Public Finance Variability," "Student Loan Variability," and "Other Variability" appearing below.

The occurrence of these stressed outcomes individually or collectively would have a material adverse effect on our results of operations and financial condition and may result in materially adverse consequence for the Company, including (without limitation) impairing the ability of AAC to honor its financial obligations; the initiation of rehabilitation proceedings against AAC; decreased likelihood of AAC delivering value to AFG, through dividends or otherwise; and a significant drop in the value of securities issued or insured by AFG or AAC.

Structured Finance Variability

RMBS:

Changes to assumptions that could make our reserves under-estimated include an increase in interest rates, deterioration in housing prices, poor servicing, government intervention into the functioning of the mortgage market and the effect of a weakened economy characterized by growing unemployment and wage pressures. We utilize a model to project losses in our RMBS exposures and changes to reserves, either upward or downward, are not unlikely if we used a different model or methodology to project losses. In the case of both first and second-lien exposures, the possible stress case assumes a lower housing price appreciation projection, which in turn drives higher defaults and severities.

We established a representation and warranty subrogation recovery as further discussed in Note 6. Insurance Contracts to the Unaudited Consolidated Financial Statements included in Part I, Item 1 in this Form 10-Q. Our ability to realize RMBS representation and warranty recoveries is subject to significant uncertainty, including due to risks inherent in litigation, including adverse rulings or decisions in our cases or in litigations to which

AAC is not a party that set precedents or resolve questions of law that impact our own claims; collectability of such amounts from counterparties (and/or their respective parents and affiliates); delays in realizing such recoveries, including as a result of trial delays due to court closures related to COVID-19 or other events or circumstances (such as changes in law that affect any basis on which AAC seeks recovery); intervention by the OCI, which could impede our ability to take actions required to realize such recoveries; and uncertainty inherent in the assumptions used in estimating such recoveries. For example, AAC expects the implications of the decision of the New York Court of Appeals in the case entitled U.S. Bank National Association v. DLJ Mortgage Capital, Inc. relating to Home Equity Asset Trust 2007-1, a residential mortgage-backed securities trust, to be the subject of additional arguments, decisions and appeals in certain of its RMBS litigations as well as in unrelated cases. Actions or decisions by trial or appellate courts regarding the implications of HEAT may significantly impact the manner in which AAC presents its case, AAC's ultimate recoveries, or the timing of trials or pre-trial procedures, filings or actions. Additionally, our actual R&W subrogation recoveries could be significantly lower than our estimate of $1,480, net of reinsurance, as of March 31, 2022, if the sponsors of these transactions: (i) fail to honor their obligations to repurchase the mortgage loans, (ii) successfully dispute our breach findings or claims for damages, (iii) no longer have the financial means to fully satisfy their obligations under the transaction documents, or (iv) our pursuit of recoveries is otherwise unsuccessful. Failure to realize R&W subrogation recoveries for any reason or the realization of R&W subrogation recoveries materially below the amount recorded on Ambac's consolidated balance sheet would have a material adverse effect on our results of operations and financial condition.

Student Loans:

Changes to assumptions that could make our reserves under-estimated include, but are not limited to, increases in interest rates, default rates and loss severities on the collateral due to economic or other factors, including the COVID-19 related economic impact. Such factors may include lower recoveries on defaulted loans or additional losses on collateral or trust assets, including as a result of any enforcement actions by the Consumer Finance Protection Bureau.

Structured Finance Variability:

Using the approaches described above, the possible increase in loss reserves for structured finance credits for which we have an estimate of expected loss at March 31, 2022, could be approximately $20. Combined with the absence of any R&W subrogation recoveries, a possible increase in loss reserves for structured finance credits could be approximately $1,500. A loss of this magnitude may render AAC insolvent. Additionally, loss payments are sensitive to changes in interest rates, increasing as interest rates rise. For example, an increase in interest rates of 0.50% could increase our estimate of expected losses by approximately $35. There can be no assurance that losses may not exceed such amounts. Due to the uncertainties related to the economic effects of the COVID-19 pandemic and other risks associated with structured finance credits, there can be no assurance that losses may not exceed our stress case estimates.

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Domestic Public Finance Variability:

Ambac’s U.S. public finance portfolio predominantly consists of municipal bonds such as general and revenue obligations and lease and tax-backed obligations of state and local government entities; however, the portfolio also includes a wide array of non-municipal types of bonds, including financings for not-for-profit entities and transactions with public and private elements, which generally finance infrastructure, housing and other public purpose facilities and interests.

It is possible our loss reserves for public finance credits may be under-estimated if issuers are faced with prolonged exposure to adverse political, judicial, economic, fiscal or socioeconomic events or trends. Additionally, our loss reserves may be under-estimated because of the continuing effects of COVID-19 pandemic.

Our experience with the city of Detroit's bankruptcy and Commonwealth of Puerto Rico's Title III proceedings as well as other municipal bankruptcies demonstrates the preferential treatment of certain creditor classes, especially the public pensions. The cost of pensions and the need to address frequently sizable unfunded or underfunded pensions is often a key driver of stress for many municipalities and their related authorities, including entities to whom we have significant exposure, such as Chicago's school district, the State of New Jersey and many others. Less severe treatment of pension obligations in bankruptcy may lead to worse outcomes for traditional debt creditors.

Variability of outcomes applies to even what are generally considered more secure municipal financings, such as dedicated sales tax revenue bonds that capture sales tax revenues for debt service ahead of any amounts being deposited into the general fund of an issuer. In the case of the Puerto Rico COFINA sales tax bonds that were part of the Commonwealth of Puerto Rico's Title III proceedings, AAC and other creditors agreed to settle at a recovery rate equal to about 93% of pre-petition amounts owed on the Ambac insured senior COFINA bonds. In the COFINA case, the senior bonds still received a reduction or "haircut" despite the existence of junior COFINA bonds, which received a recovery rate equal to about 56% of pre-petition amounts owed.

In addition, municipal entities may be more inclined to use bankruptcy to resolve their financial stresses if they believe preferred outcomes for various creditor groups can be achieved. We expect municipal bankruptcies and defaults to continue to be challenging to project given the unique political, economic, fiscal, legal, governance and public policy differences among municipalities as well as the complexity, long duration and relative infrequency of the cases themselves in forums with a scarcity of legal precedent. Moreover, issuers in Chapter 9 or similar proceedings may obtain judicial rulings and orders that impair creditors' rights or their ability to collect on amounts owed. In certain cases, judicial decisions may be contrary to AAC's expectations or understanding of the law or its rights thereunder, which may lead to worse outcomes in Chapter 9 or similar proceedings than anticipated at the outset.

Another potentially adverse development that could cause the loss reserves on our public finance credits to be underestimated is

deterioration in the municipal bond market, resulting from reduced or limited access to alternative forms of credit (such as bank loans) or other exogenous factors, such as changes in tax law that could reduce certain municipal investors' appetite for tax-exempt municipal bonds or put pressure on issuers in states with high state and local taxes. These factors could deprive issuers access to funding at a level necessary to avoid defaulting on their obligations.

Following the March 15, 2022 consummation of the Eighth Amended POA, the PRIFA QM and the CCDA QM, all of Ambac’s exposures to the Commonwealth of Puerto Rico across various instrumentalities with the exception of PRHTA have now been restructured. PRHTA is subject to a plan support agreement and will be subject to the PRHTA POA that was filed on May 2, 2022, and is expected to be confirmed later in 2022. However, uncertainty remains as to (i) the value or perceived value of the consideration provided by or on behalf of the debtors under the Eighth Amended POA, PRIFA QM, and CCDA QM; (ii) the extent to which exposure management strategies, such as commutation and acceleration, will be executed for PRHTA; (iii) the tax treatment of the consideration provided by or on behalf of the debtors under the Eighth Amended POA, PRIFA QM, and CCDA QM; (iv) whether and when the PRHTA POA will be confirmed; and (vii) other factors, including market conditions such as interest rate movements and credit spread changes on the new CVI instruments. Losses may exceed current reserves in a material manner due to favorable or unfavorable developments or results with respect to these factors. See Note 14. Commitments and Contingencies to the Consolidated Financial Statements in Part I and "Financial Guarantees in Force" section of Management’s Discussion and Analysis of Financial Condition and Results of Operations included in Part II in this Form 10-Q for further updates relating to Puerto Rico.

Material additional losses on our public finance credits caused by the aforementioned factors, including the possibility of a protracted recovery related to the COVID-19 crisis would have a material adverse effect on our results of operations and financial condition. For the public finance credits, including Puerto Rico, for which we have an estimate of expected loss at March 31, 2022, the possible increase in loss reserves could be approximately $220 and there can be no assurance that losses may not exceed our stress case estimates.

Other Variability:

It is possible our loss reserves on other types of credits, including those insured by Ambac UK, may be under-estimated because of various risks that vary widely, including the risk that we may not be able to recover or mitigate losses through our remediation processes. For all other credits, including Ambac UK, for which we have an estimate of expected loss, the sum of all the highest stress case loss scenarios is approximately $345 greater than the loss reserves at March 31, 2022. Additionally, our loss reserves may be under-estimated as a result of the ultimate scope, duration and magnitude of the effects of COVID-19. There can be no assurance that losses may not exceed our stress case estimates.

Long-term Debt

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Long-term debt consists of surplus notes issued by AAC, the Sitka AAC Note, Tier 2 Notes issued in connection with the Rehabilitation Exit Transactions, and Ambac UK debt issued in connection with the 2019 Ballantyne commutation. All long-term debt relates to the Legacy Financial Guarantee Segment.

The carrying value of each of these as of March 31, 2022 and December 31, 2021 is below:

	March 31, 2022		December 31, 2021
Surplus notes	$	732	$	729
Sitka AAC note	1,155		1,154
Tier 2 notes	340		333
Ambac UK debt	15		15
Total Long-term Debt	$	2,242	$	2,230

The increase in long-term debt from December 31, 2021, resulted from accretion on the carrying value of surplus notes, Sitka AAC Note, and Ambac UK debt and paid-in-kind interest on Tier 2 notes.

VARIABLE INTEREST ENTITIES

Please refer to Note 9. Variable Interest Entities to the Unaudited Consolidated Financial Statements included in Part I, Item 1 in this Form 10-Q and Note 2. Basis of Presentation and Significant Accounting Policies and Note 11. Variable Interest Entities 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, 2021, for information regarding variable interest entities.

ACCOUNTING STANDARDS

There are no new accounting standards applicable to Ambac that have been issued but not yet adopted.

Please refer to Note 2. Basis of Presentation and Significant Accounting Policies 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, 2021, and in Part I, Item 1 on this Form 10-Q for a discussion of the impact of other recent accounting pronouncements on Ambac’s financial condition and results of operations.

U.S. INSURANCE STATUTORY BASIS FINANCIAL RESULTS ($ in million)

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 "Ambac Assurance Statutory Basis Financial Results," in Part II, Item 7. "Management's Discussion and Analysis of Financial Condition and Results of Operations," and Note 8. 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, 2021.

Ambac Assurance Corporation

AAC’s statutory policyholder surplus and qualified statutory capital (defined as the sum of policyholders surplus and mandatory contingency reserves) were $805 and $1,378 at March 31, 2022, respectively, as compared to $757 and $1,322 at December 31, 2021, respectively.  As of March 31, 2022, statutory policyholder surplus and qualified statutory capital included $853 principal balance of surplus notes outstanding and $138 liquidation preference of preferred stock outstanding. These surplus notes (in addition to related accrued interest of $644 that is not recorded under statutory basis accounting principles); preferred stock; and all other liabilities, including insurance claims, the Sitka AAC Note and the Tier 2 Notes are obligations that, individually and collectively, have claims on the resources of AAC that are senior to AFG's equity and therefore impede AFG's ability to realize residual value and/or receive dividends from AAC. The driver to the net increase in policyholder surplus is statutory net income of $61 for the three months ended March 31, 2022.

AAC statutory surplus and therefore AFG's ultimate ability to realize residual value and/or dividends from AAC is sensitive to multiple factors, including: (i) loss reserve development, (ii) settlements or other resolutions of representation and warranty breach claims at amounts that differ from amounts recorded, including failures to collect such amounts or receive recoveries sufficient to pay or redeem obligations of AAC, including the Sitka AAC Note and Tier 2 Notes, (iii) approval by OCI of payments on surplus notes, (iv) ongoing interest costs associated with the Sitka AAC Note and Tier 2 Notes, including changes to interest rates as the Sitka AAC Note is a floating rate obligation, (v) deterioration in the financial position of AAC subsidiaries that have their obligations guaranteed by AAC, (vi) first time payment defaults of insured obligations, which increase statutory loss reserves, (vii) commutations of insurance policies or credit derivative contracts at amounts that differ from the amount of liabilities recorded, (viii) reinsurance contract terminations at amounts that differ from net assets recorded, (ix) changes to the fair value of pooled fund and other investments carried at fair value, (x) realized gains and losses, including losses arising from other than temporary impairments of investment securities, and (xi) future changes to prescribed practices.

Everspan Indemnity Insurance Company

Everspan Indemnity Insurance Company’s statutory policyholder surplus was $110 at March 31, 2022, as compared to $106 at December 31, 2021. 

The significant drivers to the increase in policyholder surplus were capital contributions of $13 partially offset by the admitted asset limitation on goodwill within investment in subsidiaries, and operating expenses during the three months ended March 31, 2022.

| Ambac Financial Group, Inc. 66 2022 First Quarter FORM 10-Q |

AMBAC UK FINANCIAL RESULTS UNDER UK ACCOUNTING PRINCIPLES (£ in millions)

Ambac UK is required to prepare financial statements under FRS 102 "The Financial Reporting Standard applicable in the UK and Republic of Ireland." Ambac UK’s shareholder funds under UK GAAP were £449 at March 31, 2022, as compared to £444 at December 31, 2021. At March 31, 2022, the carrying value of cash and investments was £509, an increase from £500 at December 31, 2021. The increase in shareholders’ funds and cash and investments was primarily due to the continued receipt of premiums and foreign exchange gains, partially offset by investment losses, operating expenses and tax payments.

Ambac UK is also required to prepare financial information in accordance with the Solvency II Directive.  The basis of preparation of this information is significantly different from both US GAAP and UK GAAP. Available capital resources under Solvency II were a surplus of £250 at December 31, 2021, the most recently published position, of which £240 were eligible to meet solvency capital requirements. Eligible capital resources at December 31, 2021, were in comparison to regulatory capital requirements of £238. Therefore, Ambac UK had a surplus of capital resources as compared to regulatory capital requirements of £1 at December 31, 2021.

NON-GAAP FINANCIAL MEASURES
($ in millions)

In addition to reporting the Company’s quarterly financial results in accordance with GAAP, the Company currently reports three non-GAAP financial measures: EBITDA, adjusted earnings and adjusted book value. The most directly comparable GAAP measures are pre-tax net income for EBITDA, net income attributable to common stockholders for adjusted earnings and Total Ambac Financial Group, Inc. stockholders’ equity for

adjusted book value. A non-GAAP financial measure is a numerical measure of financial performance or financial position that excludes (or includes) amounts that are included in (or excluded from) the most directly comparable measure calculated and presented in accordance with GAAP. We present such non-GAAP supplemental financial information because we believe such information is of interest to the investment community that provides greater transparency and enhanced visibility into the underlying drivers 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. 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.

Ambac has a significant U.S. tax net operating loss (“NOL”) that is offset by a full valuation allowance in the GAAP consolidated financial statements. As a result of this and other considerations, we utilized a 0% effective tax rate for non-GAAP adjustments for both Adjusted Earnings and Adjusted Book Value; which is subject to change.

The following paragraphs define each non-GAAP financial measure. A reconciliation of the non-GAAP financial measure and the most directly comparable GAAP financial measure is also presented below.

EBITDA. EBITDA is defined as net income before interest expense, income taxes, depreciation and amortization of intangible assets. EBITDA is also adjusted for noncontrolling interests in subsidiaries where Ambac does not own 100%. The following table reconciles pre-tax net income (loss) to the non-GAAP measure, EBITDA on a consolidation and segment basis for all periods presented:

| Ambac Financial Group, Inc. 67 2022 First Quarter FORM 10-Q |

	Legacy Financial Guarantee Insurance		Specialty Property & Casualty Insurance		Insurance Distribution		Corporate & Other		Consolidated
Three Months Ended March 31, 2022
Pretax income (loss) (1)	$	6	$	(2)	$	2	$	(3)	$	3
Adjustments:
Interest expense	44		—		—		—		44
Depreciation	—		—		—		—		—
Amortization of intangible assets	14		—		1		—		14
Net (gain) attributable to noncontrolling interest					(1)				(1)
Earnings before interest, taxes, depreciation and amortization	$	65	$	(2)	$	2	$	(3)	$	61
Three Months Ended March 31, 2021
Pretax income (loss) (1)	$	24	$	(1)	$	2	$	(6)	$	19
Adjustments:
Interest expense	50		—		—		—		50
Depreciation	—		—		—		—		—
Amortization of intangible assets	19		—		1		—		19
Net (gain) attributable to noncontrolling interest					—				—
Earnings before interest, taxes, depreciation and amortization	$	93	$	(1)	$	2	$	(6)	$	88

(1)    Pretax income (loss) is prior to the impact of noncontrolling interests.

Adjusted Earnings (Loss). Adjusted earnings (loss) is defined as net income (loss) attributable to common stockholders, as reported under GAAP, adjusted on an after-tax basis for the following:

•Insurance intangible amortization: Elimination of the amortization of the financial guarantee insurance intangible asset that arose as a result of Ambac’s emergence from bankruptcy and the implementation of Fresh Start reporting. This adjustment ensures that all financial guarantee contracts are accounted for consistent with the provisions of the Financial Services – Insurance Topic of the ASC.

•Foreign exchange (gains) losses: Elimination of the foreign exchange gains (losses) on the re-measurement of assets, liabilities and transactions in non-functional currencies. This adjustment eliminates the foreign exchange gains (losses) on all assets, liabilities and transactions in non-functional currencies, which enables users of our financial statements to better view the results without the impact of fluctuations in foreign currency exchange rates and facilitates period-to-period comparisons of Ambac's operating performance.

The following table reconciles net income (loss) attributable to common stockholders to the non-GAAP measure, Adjusted Earnings (loss) on a dollar amount and per diluted share basis, for all periods presented:

	Three Months Ended March 31,
	2022				2021
($ in millions, except share data)	$ Amount		Per Diluted Share (1)		$ Amount		Per Diluted Share
Net income (loss) attributable to common stockholders	$	2	$	0.04	$	17	$	0.08
Adjustments:
Insurance intangible amortization	14		0.29		19		0.40
Foreign exchange (gains) losses	(2)		(0.03)		5		0.11
Adjusted earnings (loss)	$	14	$	0.30	$	41	$	0.59

(1)    Per Diluted share includes the impact of adjusting redeemable noncontrolling interest to its redemption value

Adjusted Book Value. Adjusted book value is defined as Total Ambac Financial Group, Inc. stockholders’ equity as reported under GAAP, adjusted for after-tax impact of the following:

•Insurance intangible asset: Elimination of the financial guarantee insurance intangible asset that arose as a result of Ambac’s emergence from bankruptcy and the implementation of Fresh Start reporting. This adjustment ensures that all financial guarantee contracts are accounted

for within adjusted book value consistent with the provisions of the Financial Services—Insurance Topic of the ASC.

•Net unearned premiums and fees in excess of expected losses: Addition of the value of the unearned premium revenue ("UPR") on financial guarantee contracts, in excess of expected losses, net of reinsurance. This non-GAAP adjustment presents the economics of UPR and expected losses for financial guarantee contracts on a consistent basis.

| Ambac Financial Group, Inc. 68 2022 First Quarter FORM 10-Q |

In accordance with GAAP, stockholders’ equity reflects a reduction for expected losses only to the extent they exceed UPR. However, when expected losses are less than UPR for a financial guarantee contract, neither expected losses nor UPR have an impact on stockholders’ equity. This non-GAAP adjustment adds UPR in excess of expected losses, net of reinsurance, to stockholders’ equity for financial guarantee contracts where expected losses are less than UPR. This adjustment is only made for financial guarantee contracts since such premiums are non-refundable.

•Net unrealized investment (gains) losses in Accumulated Other Comprehensive Income: Elimination of the unrealized

gains and losses on the Company’s investments that are recorded as a component of accumulated other comprehensive income (“AOCI”). The AOCI component of the fair value adjustment on the investment portfolio may differ from realized gains and losses ultimately recognized by the Company based on the Company’s investment strategy. This adjustment only allows for such gains and losses in adjusted book value when realized.

The following table reconciles Total Ambac Financial Group, Inc. stockholders’ equity to the non-GAAP measure Adjusted Book Value on a dollar amount and per share basis, for all periods presented:

	March 31, 2022				December 31, 2021
($ in millions, except share data)	$ Amount		Per Share		$ Amount		Per Share
Total Ambac Financial Group, Inc. stockholders’ equity	$	914	$	19.65	$	1,038	$	22.42
Adjustments:
Non-credit impairment fair value losses on credit derivatives	—		—		—		0.01
Insurance intangible asset	(303)		(6.52)		(320)		(6.91)
Net unearned premiums and fees in excess of expected losses	279		6.00		310		6.68
Net unrealized investment (gains) losses in Accumulated Other Comprehensive Income	(49)		(1.06)		(154)		(3.32)
Adjusted book value	$	841	$	18.07	$	874	$	18.88

The decrease in Adjusted Book Value was primarily attributable to the adverse effect foreign exchange losses and higher discount rates on the PV of legacy financial guarantee installment premiums partially offset by Adjusted earnings for the three months ended March 31, 2022 (excluding earned premium previously included in Adjusted Book Value).

Factors that impact changes to Adjusted Book Value include many of the same factors that impact Adjusted Earnings, including the majority of revenues and expenses, but generally exclude components of premium earnings since they are embedded in prior period's Adjusted Book Value through the net unearned premiums and fees in excess of expected losses adjustment. Net unearned premiums and fees in excess of expected losses will affect Adjusted Book Value for (i) changes to future premium assumptions (e.g. expected term, interest rates, foreign currency rates, time passage), (ii) changes to expected losses for policies which do not exceed their related unearned premiums and (iii) new reinsurance transactions.

Item 3.    Quantitative and Qualitative Disclosure About Market Risk

As of March 31, 2022, there were no material changes in the market risks that the Company is exposed to since December 31, 2021.

Item 4.     Controls and Procedures

In connection with the preparation of this first 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 March 31, 2022, Ambac’s disclosure controls and procedures were effective.

There were no changes in the Company’s internal control over financial reporting that occurred during the quarter ended March 31, 2022, that materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II.    OTHER INFORMATION

Item 1.    Legal Proceedings

Please refer to Note 14. 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, 2021 for a discussion on legal proceedings against Ambac and its subsidiaries.

Item 1A.    Risk Factors

You should carefully consider the risk factors set forth in the “Risk Factors” section, Item 1A to Part I in our Annual Report on

| Ambac Financial Group, Inc. 69 2022 First Quarter FORM 10-Q |

Form 10-K for the year ended December 31, 2021, which are hereby incorporated by reference. These important factors may cause our actual results to differ materially from those indicated by our forward-looking statements, including those contained in this report. 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. There have been no material changes to the risk factors we have disclosed in the “Risk Factors” section of our aforementioned Annual Report on Form 10-K, except as noted below.

Our inability to realize the expected recoveries included in our financial statements could adversely impact our liquidity, financial condition and results of operations and the value of our securities, including the Sitka Senior Secured Notes and Tier 2 Notes.

AAC is pursuing claims in litigation with respect to certain RMBS transactions that it insured. These claims are based on, among other things, representations with respect to the characteristics of the securitized loans, the absence of borrower misrepresentations in the underlying loan pools or other misconduct in the origination process, the compliance of loans with the prevailing underwriting policies, and compliance of the RMBS transaction counterparties with policies and procedures related to loan origination and securitization. In such cases, where contract claims are being pursued, the sponsor of the transaction is obligated to repurchase, cure or substitute collateral for any loan that breaches the representations and warranties, subject to the terms and conditions of the applicable contracts. However, generally the sponsors have not honored those obligations and have vigorously defended claims brought against them.

As of March 31, 2022, we have estimated RMBS R&W subrogation recoveries of $1,480 (net of reinsurance) included in our financial statements. These estimated recoveries are based on the contractual claims brought in the aforementioned litigations and represent a probability-weighted estimate of amounts we expect to recover under various possible scenarios. The estimated recoveries we have recorded do not represent the best or the worst possible outcomes with respect to any particular transaction or group of transactions.

There can be no assurance that AAC will be successful in prosecuting its claims in the RMBS litigations. The outcome of any litigation, including the RMBS litigations, is inherently unpredictable, including because of risks intrinsic in the adversarial nature of litigation. Motions made to the court, rulings and appeals - in the cases being prosecuted by AAC or in other relevant cases - could delay or otherwise impact any recovery by AAC. Moreover, rulings that may be adverse to AAC (in any of its RMBS litigations, as well as in other RMBS cases in which it is not a party, could adversely affect AAC’s ability to pursue its claims, or the amount or timing of any recovery, or negatively alter settlement dynamics with RMBS litigation defendants. For example, AAC expects the implications of the decision of the New York Court of Appeals’ decision in the case entitled U.S. Bank National Association v. DLJ Mortgage Capital, Inc. relating to Home Equity Asset Trust 2007-1, a residential mortgage-backed securities trust ("HEAT"), to be the subject of additional arguments, decisions and appeals in certain of its RMBS

litigations as well as in unrelated cases. Actions or decisions by trial or appellate courts regarding the implications of HEAT may significantly impact the manner in which AAC presents its case, AAC's ultimate recoveries, or the timing of trials or pre-trial procedures, filings or actions.

Due to the foregoing factors, any litigation award or settlement may be for an amount less than the amount necessary (even when combined with other pledged collateral) to pay the Sitka Senior Secured Notes or the Tier 2 Notes, which could have a material adverse effect on our financial condition or results of operations. Such an award or settlement would also impair AAC’s ability to repay its outstanding surplus notes, on a timely basis or at all. In the event that AAC is unable to satisfy its obligations with respect to the Sitka Senior Secured Notes or the Tier 2 Notes, holders will have the right to foreclose on any available collateral and to sue AAC for failure to make required payments; however, there can be no assurance that the sale of collateral will produce proceeds in an amount sufficient to pay any or all amounts due on the Sitka Senior Secured Notes or the Tier 2 Notes, as the case may be, or that holders will be successful in any litigation seeking payments from AAC.

Even if AAC were to recover the amount of estimated RMBS R&W subrogation recoveries of $1,480 (net of reinsurance) included in our financial statements and pay off or cause to be paid off the Sitka Senior Secured Notes and the Tier 2 Notes (from litigation recoveries or other sources), AAC may still be unable to deliver value to AFG, through dividends or otherwise. In such a scenario, AAC may not have sufficient capital and surplus, or may not be permitted by OCI, to pay off its surplus notes or a substantial portion of them, whether immediately following the resolution of the RMBS litigations or within a reasonable timeframe thereafter. If the surplus notes or a substantial portion of them were to remain outstanding for a significant period of time after the resolution of the RMBS litigations, AAC's obligation to pay interest on the surplus notes would continue to grow, which would diminish AAC's financial flexibility and reduce the likelihood that AAC will be able to pay dividends or otherwise bring value to AFG.

Additionally, while AAC may pursue settlement negotiations, there can be no assurance that any settlement negotiations will materialize or that any settlement agreement can be reached on terms acceptable to AAC, or at all. Depending on the length of time required to resolve these litigations, either through settlement or at trial, AAC could incur greater litigation expenses than currently projected. If a case is brought to trial, AAC’s ultimate recovery would be subject to the additional risks inherent in any trial, including adverse findings or determinations by the trier of fact or the court, which could materially adversely impact the value of our securities, including the Sitka Senior Secured Notes and the Tier 2 Notes.

Any litigation award is subject to risks of recovery, including that a defendant is unable to pay a judgment that AAC may obtain in litigation. In some instances, AAC also has claims against a parent or an acquirer of the counterparty. However, AAC may not be successful in enforcing its claims against any successor entity.

| Ambac Financial Group, Inc. 70 2022 First Quarter FORM 10-Q |

The RMBS litigations could also be adversely affected if AAC does not have sufficient resources to actively prosecute its claims or becomes subject to rehabilitation, liquidation, conservation or dissolution, or otherwise impaired by actions of OCI.

Our ability to realize the estimated RMBS R&W subrogation recoveries included in our financial statements and the timing of the recoveries, if any, is subject to significant uncertainty, including the risks described above and uncertainties inherent in the assumptions used in estimating such recoveries. The amount of these subrogation recoveries is significant and if we were unable to recover all such amounts, our stockholders’ equity as of March 31, 2022, would decrease from $974.4 to $(501.6).

We expect to recover material amounts of claims payments through remediation measures, including the litigation described above, as well as through cash flows in the securitization structures of transactions that AAC insures. Realization of such expected recoveries is subject to various risks and uncertainties, including the rights and defenses of other parties with interests that conflict with AAC’s interests, the performance of the collateral and assets backing the obligations that AAC insures, and the performance of servicers involved in securitizations in which AAC participates as insurer. Additionally, our ability to realize recoveries in insured transactions may be impaired if the continuing orders of the Rehabilitation Court are not effective.

Adverse developments with respect to any of the factors described above may cause our recoveries to fall below expectations, which could have a material adverse effect on our financial condition, including our capital and liquidity, and may result in adverse consequences such as impairing the ability of AAC to honor its financial obligations, particularly its outstanding debt and preferred stock obligations; the initiation of rehabilitation proceedings against AAC; eliminating or reducing the possibility of AAC delivering value to AFG, through dividends or otherwise; diminished business prospects due to third party concerns about our ability to recover losses; and a significant drop in the value of securities issued or insured by AFG or AAC, including the Sitka Senior Secured Notes and the Tier 2 Notes.

Item 2.    Unregistered Sales of Equity Securities and Use of Proceeds

(a)    Unregistered Sales of Equity Securities — No matters require disclosure.

(b)    Purchases of Equity Securities By the Issuer and Affiliated Purchasers

The following table summarizes Ambac's share purchases during the first quarter of 2022. When restricted stock unit awards issued by Ambac vest or settle, they become taxable compensation to employees. For certain awards, shares may be withheld to cover the employee's portion of withholding taxes. In the first quarter of 2022, Ambac purchased shares from employees that settled restricted stock units to meet employee tax withholdings.

On March 30, 2022, our Board of Directors approved a share repurchase program authorizing up to $20 million in share repurchases, with an expiration date of March 31, 2024, which may be terminated at any time. At March 31, 2022, no shares had been repurchased. From April 1, 2022, through May 10, 2022, AFG repurchased 1,505,316 shares for $13.2 million with an average purchase price of $8.78 per share. On May 5, 2022, the Board of Directors authorized an additional $15 million share repurchase bringing the total unused authorized amount to $21.8 million.

	Jan-2022		Feb-2022		Mar-2022		First Quarter 2022
Total Shares Purchased	37,151		—		198,693		235,844
Average Price Paid Per Share	$	16.05	$	—	$	14.04	$	14.36
Total Number of Shares Purchased as Part of Publicly Announced Plan	—		—		—		—
Approximate Dollar Value of Shares That may Yet be Purchased Under the Plan (in millions)	$	—	$	—	$	35

Item 3.    Defaults Upon Senior Securities — No matters require disclosure.

Item 5.    Other Information — No matters require disclosure.

| Ambac Financial Group, Inc. 71 2022 First Quarter FORM 10-Q |

Item 6.    Exhibits

Exhibit Number	Description
Other exhibits, filed or furnished, as indicated:
10.1+	Form of 2022 Restricted Stock Unit Award Agreement between Ambac Financial Group, Inc. and Messrs. LeBlanc, Trick and Ksenak.
10.2+	Form of 2022 Restricted Stock Unit Award Agreement between Ambac Financial Group, Inc. and Messrs. Barranco, Eisman, McGinnis and Ms. Smith.
10.3+	Form of 2022 Performance Stock Unit Award Agreement between Ambac Financial Group, Inc. and Messrs. LeBlanc, Trick and Ksenak.
10.4+	Form of 2022 Performance Stock Unit Award Agreement between Ambac Financial Group, Inc. and Messrs. Barranco, Eisman, McGinnis and Ms. Smith.
31.1+	Certification of Chief Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) Promulgated under the Securities Exchange Act of 1934, as amended.
31.2+	Certification of Chief Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) Promulgated under the Securities Exchange Act of 1934, as amended.
32.1++	Certification of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS	XBRL Instance Document - the instance document does not appear in the interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH	XBRL Taxonomy Extension Schema Document.
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document.
101.LAB	XBRL Taxonomy Extension Label Linkbase Document.
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document.
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document.
104	Cover Page Interactive Data File - The cover page interactive data file does not appear in the Interactive Data File because its XBRL tags or embedded within the Inline XBRL document
	+ Filed herewith. ++ Furnished herewith.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

		AMBAC FINANCIAL GROUP, INC.
Dated:	May 10, 2022	By:	/S/ DAVID TRICK
		Name:	David Trick
		Title:	Chief Financial Officer and Treasurer (Duly Authorized Officer and Principal Financial Officer)

| Ambac Financial Group, Inc. 72 2022 First Quarter FORM 10-Q |

EX-10.1

Exhibit 10.1

AMBAC FINANCIAL GROUP, INC.

RESTRICTED STOCK UNIT AGREEMENT

FOR LONG-TERM INCENTIVE COMPENSATION AWARD

Effective as of February 28, 2022 (the “Grant Date”), [[FIRSTNAME]] [[LASTNAME]] (the “Participant”) has been granted a Full Value Award under the Ambac Financial Group, Inc. 2020 Incentive Compensation Plan (the “Incentive Plan”) in the form of restricted stock units. In addition to the terms and conditions of the Incentive Plan, the Award shall be subject to the following terms and conditions (sometimes referred to as this “Agreement”).

1.Defined Terms. Capitalized terms used in this Agreement which are not otherwise defined herein shall have the meaning specified in the Incentive Plan.

2.Grant of Restricted Stock Units. Subject to the terms of this Agreement and the Incentive Plan, effective as of the Grant Date the Participant is hereby granted [[SHARESGRANTED]] restricted stock units (the “Restricted Stock Units”). This Award contains the right to dividend equivalents (“Dividend Equivalents”) as described in Section 3. Each Restricted Stock Unit shall become vested as described in Section 4 and each vested Restricted Stock Unit shall be settled in accordance with Section 6.

3.Dividend Equivalents. The Participant shall be entitled to Dividend Equivalents, which may consist of Deferred Cash Dividend Equivalents or Dividend Equivalent Units (each as defined below), in accordance with the following:

(a)If a dividend with respect to shares of Common Stock is payable in cash, then, as of the applicable dividend payment date, the Participant shall be credited with a right to receive a “Deferred Cash Dividend Equivalents” equal to (i) the cash dividend payable with respect to a share of Common Stock, multiplied by (ii) the number of Restricted Stock Units outstanding (i.e., the number of Restricted Stock Units granted hereunder less the number of such Restricted Stock Units that have settled in accordance with Section 6 below) on the applicable dividend record date.

(b)If a dividend with respect to shares of Common Stock is payable in shares of Common Stock, then, as of the dividend payment date, the Participant shall be credited with that number of “Dividend Equivalent Units” equal to (i) the number of shares of Common Stock distributed in the dividend with respect to a share of Common Stock, multiplied by (ii) the number of Restricted Stock Units outstanding on the applicable dividend record date plus the number of previously credited Dividend Equivalent Units with respect to such Restricted Stock Units, if any.

Dividend Equivalents shall be subject to the same vesting provisions as the Restricted Stock Units to which they relate and shall be settled in accordance with Section 6.

4.Vesting and Forfeiture of Awards. All Restricted Stock Units and Dividend Equivalents shall be unvested unless and until they become vested and nonforfeitable in accordance with this Section 4. Subject to the Participant’s continuing service as an employee of Ambac Financial Group, Inc. (“Ambac”), or its subsidiaries, through the applicable vesting date, and the terms and conditions of this Agreement and the Incentive Plan, the Restricted Stock Units and associated Dividend Equivalents shall vest in three equal annual installments on

February 28, 2023, February 28, 2024 and February 28, 2025. Except as provided in Section 5(a), if the Participant’s termination of employment with Ambac and its subsidiaries (the “Termination Date”) occurs for any reason prior to a vesting date, all Restricted Stock Units and associated Dividend Equivalent Units which are not vested upon the Participant’s Termination Date shall immediately expire and shall be forfeited and the Participant shall have no further rights with respect to such Restricted Stock Units or associated Dividend Equivalents.

5.Termination of Employment.

(a)Notwithstanding the provisions of Section 4, if the Participant’s Termination Date occurs by reason of (1) Disability (as defined in the Employment Agreement referenced in clause (4) of this subsection)), (2) Retirement (as defined in Section 5(b)), (3) involuntary termination by the Company other than for Cause (as defined in the Employment Agreement), (4) as a result of the Company’s failure to extend the term of the Employment Agreement between Ambac, AAC and the Participant, dated as of [[DATE]] (the “Employment Agreement”) pursuant to Section 2 thereof, (5) termination by the Participant for Good Reason (as defined in the Employment Agreement), or (6) death, all Restricted Stock Units and associated Dividend Equivalents shall vest upon the Participant’s Termination Date. For the avoidance of doubt, if the Participant has an employment agreement which provides that this Agreement will govern if this Agreement provides for greater vesting acceleration upon a Participant’s termination of employment, then all of the provisions (including, but not limited to, terms and timing) of this Section 5(a) shall govern.

(b)For purposes of the Award evidenced by this Agreement, (i) the terms “Cause,” “Disability” and “Good Reason” shall have the meanings specified in the Employment Agreement, and (ii) a Participant’s Termination Date shall be considered to occur on account of “Retirement” if the Participant’s Termination Date occurs on or after the date on which the following conditions have been satisfied and such Termination Date does not occur for any other reason: (x) the Participant has attained age 60; (y) the Participant has provided at least ten (10) years of service to the Company; and (z) the Participant has provided at least 90 days’ prior notice of his or her Termination Date due to retirement from the Company.

6.Settlement. Subject to the terms and conditions of this Agreement, Restricted Stock Units and associated Dividend Equivalents that have become vested in accordance with Section 4 or 5 shall be settled as soon as practicable after the date on which the Restricted Stock Units and associated Dividend Equivalents vest and, in any event, by no later than March 15 of the calendar year following the calendar year in which the Restricted Stock Units and associated Dividend Equivalent Units vest. Settlement of the vested Restricted Stock Units and associated Dividend Equivalent Units shall be made in the form of shares of Common Stock with one share of Common Stock being issued in settlement of each Restricted Stock Unit and associated Dividend Equivalent Unit (any fractional share being rounded up to the next whole unit). Settlement of Earned Deferred Cash Dividend Equivalents on the vesting date of the underlying Restricted Stock Units to which they relate shall be paid in cash. Upon the settlement of any vested Restricted Stock Units and Dividend Equivalent Units, such Restricted Stock Units and Dividend Equivalent Units shall be cancelled.

7.Withholding. All Awards and payments under this Agreement are subject to withholding of all applicable taxes. Such withholding obligations shall be satisfied through amounts that the Participant is otherwise to receive upon settlement.

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8.Transferability. This Award is not transferable except as designated by the Participant by will or by the laws of descent and distribution.

9.Heirs and Successors. If any benefits deliverable to the Participant under this Agreement have not been delivered at the time of the Participant’s death, such rights shall be delivered to the Participant’s estate.

10.Administration. The authority to administer and interpret this Agreement shall be vested in the Committee, and the Committee shall have all the powers with respect to this Agreement as it has with respect to the Incentive Plan. Any interpretation of the Agreement by the Committee and any decision made by it with respect to the Agreement is final and binding on all persons.

11.Adjustment of Award. In the event of a stock dividend, stock split, reverse stock split, extraordinary cash dividend, recapitalization, reorganization, merger, consolidation, split-up, spin-off, exchange of shares, sale of assets or subsidiaries, combination, or other corporate transaction that affects the Common Stock, the Committee shall, in order to preserve the benefits or prevent the enlargement of benefits of this Award, and in the manner it determines equitable in its sole discretion, (a) adjust the number and kind of shares subject to this Award and (b) make any other adjustments that the Committee determines to be equitable (which may include, without limitation, (i) replacement of this Award with other Awards which the Committee determines have comparable value and which are based on stock of a company resulting from the transaction, and (ii) cancellation of this Award in return for cash payment of the then current value of this Award, determined as though this Award is fully vested at the time of payment).

12.Notices. Any notice required or permitted under this Agreement shall be deemed given when delivered personally, through Ambac’s stock compensation administration system or when deposited in a United States Post Office, postage prepaid, addressed, as appropriate, to the Company at its principal offices, to the Participant at the Participant’s address as last known by the Company or, in either case, such other address as one party may designate in writing to the other.

13.Governing Law. The validity, construction and effect of this Agreement shall be determined in accordance with the laws of the State of New York and applicable federal law.

14.Amendments. The Board of Directors may, at any time, amend or terminate the Incentive Plan, and the Board of Directors or the Committee may amend this Agreement, provided that no amendment or termination may, in the absence of written consent to the change by the affected Participant (or, if the Participant is not then living, the affected beneficiary), adversely affect the rights of any Participant or beneficiary under this Agreement prior to the date such amendment or termination is adopted by the Board of Directors or the Committee, as the case may be.

15.Award Not Contract of Employment. The Award does not constitute a contract of employment or continued service, and the grant of the Award will not give the Participant the right to be retained in the employ or service of the Company or any Subsidiary, nor any right or claim to any benefit under the Incentive Plan or this Agreement, unless such right or claim has specifically accrued under the terms of the Incentive Plan and this Agreement.

16.Severability. If a provision of this Agreement is held invalid by a court of competent jurisdiction, the remaining provisions will nonetheless be enforceable according to their terms. Further, if any provision is held to be overbroad as written, that provision shall be amended to narrow its application to the extent necessary to make the provision enforceable according to applicable law and enforced as amended.

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17.Incentive Plan Governs. The Award evidenced by this Agreement is granted pursuant to the Incentive Plan, and the Restricted Stock Units, Dividend Equivalent Units and this Agreement are in all respects governed by the Incentive Plan and subject to all of the terms and provisions thereof, whether such terms and provisions are incorporated in this Agreement by reference or are expressly cited.

18.Special Section 409A Rules. To the fullest extent possible, amounts and other benefits payable under the Agreement are intended to comply with or be exempt from the provisions of section 409A of the Code. This Agreement will be interpreted and administered to the extent possible in a manner consistent with the foregoing statement of intent; provided, however, that the Company does not guarantee the tax treatment of the Award. Notwithstanding any other provision of this Agreement to the contrary, if any payment or benefit hereunder is subject to section 409A of the Code, and if such payment or benefit is to be paid or provided on account of the Participant’s termination of employment (or other separation from service):

(a)and if the Participant is a specified employee (within the meaning of section 409A(a)(2)(B) of the Code) and if any such payment or benefit is required to be made or provided prior to the first day of the seventh month following the Participant’s separation from service or termination of employment, such payment or benefit shall be delayed until the first day of the seventh month following the Participant’s separation from service; and

(b)the determination as to whether the Participant has had a termination of employment (or separation from service) shall be made in accordance with the provisions of section 409A of the Code and the guidance issued thereunder without application of any alternative levels of reductions of bona fide services permitted thereunder.

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EX-10.2

Exhibit 10.2

AMBAC FINANCIAL GROUP, INC.

RESTRICTED STOCK UNIT AGREEMENT

FOR LONG-TERM INCENTIVE COMPENSATION AWARD

Effective as of February 28, 2022 (the “Grant Date”), [[FIRSTNAME]] [[LASTNAME]] (the “Participant”) has been granted a Full Value Award under the Ambac Financial Group, Inc. 2020 Incentive Compensation Plan (the “Incentive Plan”) in the form of restricted stock units. In addition to the terms and conditions of the Incentive Plan, the Award shall be subject to the following terms and conditions (sometimes referred to as this “Agreement”).

1.Defined Terms. Capitalized terms used in this Agreement which are not otherwise defined herein shall have the meaning specified in the Incentive Plan.

2.Grant of Restricted Stock Units. Subject to the terms of this Agreement, and the Incentive Plan, effective as of the Grant Date the Participant is hereby granted [[SHARESGRANTED]] restricted stock units (the “Restricted Stock Units”). This Award contains the right to dividend equivalents (“Dividend Equivalents”) as described in Section 3. Each Restricted Stock Unit shall become vested as described in Section 4 and each vested Restricted Stock Unit shall be settled in accordance with Section 6.

3.Dividend Equivalents. The Participant shall be entitled to Dividend Equivalents, which may consist of Deferred Cash Dividend Equivalents or Dividend Equivalent Units (each as defined below), in accordance with the following:

(a)If a dividend with respect to shares of Common Stock is payable in cash, then, as of the applicable dividend payment date, the Participant shall be credited with a right to receive a “Deferred Cash Dividend Equivalents” equal to (i) the cash dividend payable with respect to a share of Common Stock, multiplied by (ii) the number of Restricted Stock Units outstanding (i.e., the number of Restricted Stock Units granted hereunder less the number of such Restricted Stock Units that have settled in accordance with Section 6 below) on the applicable dividend record date.

(b)If a dividend with respect to shares of Common Stock is payable in shares of Common Stock, then, as of the dividend payment date, the Participant shall be credited with that number of “Dividend Equivalent Units” equal to (i) the number of shares of Common Stock distributed in the dividend with respect to a share of Common Stock, multiplied by (ii) the number of Restricted Stock Units outstanding on the applicable dividend record date plus the number of previously credited Dividend Equivalent Units with respect to such Restricted Stock Units, if any.

Dividend Equivalents shall be subject to the same vesting provisions as the Restricted Stock Units to which they relate and shall be settled in accordance with Section 6.

4.Vesting and Forfeiture of Awards. All Restricted Stock Units and Dividend Equivalents shall be unvested unless and until they become vested and nonforfeitable in accordance with this Section 4. Subject to the Participant’s continuing service as an employee of Ambac Financial Group, Inc. (“Ambac”), or its subsidiaries, through the applicable vesting date, and the terms and conditions of this Agreement and the Incentive Plan, the Restricted Stock Units and associated Dividend Equivalents shall vest in three equal annual installments on February 28, 2023, February 28, 2024 and February 28, 2025. Except as provided in Section 5(a), if the Participant’s termination of employment with Ambac and its subsidiaries (the

“Termination Date”) occurs for any reason prior to a vesting date, all Restricted Stock Units and associated Dividend Equivalent Units which are not vested upon the Participant’s Termination Date shall immediately expire and shall be forfeited and the Participant shall have no further rights with respect to such Restricted Stock Units or associated Dividend Equivalents.

5.Termination of Employment.

(a)Notwithstanding the provisions of Section 4, if the Participant’s Termination Date occurs by reason of death, Disability (as defined in Section 5(b)), Retirement (as defined in Section 5(b)), or involuntary termination by the Company other than for Cause (as defined in Section 5(b)), all Restricted Stock Units and associated Dividend Equivalents shall vest upon the Participant’s Termination Date.

(b)For purposes of the Award evidenced by this Agreement, (i) a Participant’s Termination Date shall be considered to occur by reason of “Disability” if his Termination Date occurs on or after the date on which he is entitled to long-term disability benefits under the Company’s long-term disability plan (or, if the Participant is not eligible for such plan, if the Participant would be entitled to benefits under such plan if he were eligible) and such Termination Date does not occur for any other reason; (ii) a Participant’s Termination Date shall be considered to occur by reason of “Cause” if the Participant’s Termination Date occurs by reason of termination by the Company and is on account of (A) any act or omission by the Participant resulting in, or intending to result in, personal gain at the expense of the Company; (B) the improper disclosure by the Participant of proprietary or confidential information of the Company; or (C) misconduct by the Participant, including, but not limited to, fraud, intentional violation of, or negligent disregard for, the rules and procedures of the Company (including the code of business conduct), theft, violent acts or threats of violence, or possession of controlled substances on the property of the Company; provided, however, that the meaning of “Cause” shall be (1) expanded to include any additional grounds for cause-based termination specified in any contract, policy or plan applicable to the Participant or (2) superseded to the extent expressly provided in such contract, policy or plan; and (iii) a Participant’s Termination Date shall be considered to occur on account of “Retirement” if the Participant’s Termination Date occurs on or after the date on which the following conditions have been satisfied and such Termination Date does not occur for any other reason: (x) the Participant has attained age 60; (y) the Participant has provided at least ten (10) years of service to the Company; and (z) the Participant has provided at least 90 days’ prior notice of his or her Termination Date due to retirement from the Company.

6.Settlement. Subject to the terms and conditions of this Agreement, Restricted Stock Units and associated Dividend Equivalents that have become vested in accordance with Section 4 or 5 shall be settled as soon as practicable after the date on which the Restricted Stock Units and associated Dividend Equivalents vest and, in any event, by no later than March 15 of the calendar year following the calendar year in which the Restricted Stock Units and associated Dividend Equivalent Units vest. Settlement of the vested Restricted Stock Units and associated Dividend Equivalent Units shall be made in the form of shares of Common Stock with one share of Common Stock being issued in settlement of each Restricted Stock Unit and associated Dividend Equivalent Unit (any fractional share being rounded up to the next whole unit). Settlement of Earned Deferred Cash Dividend Equivalents on the vesting date of the underlying Restricted Stock Units to which they relate shall be paid in cash. Upon the settlement of any vested Restricted Stock Units and Dividend Equivalent Units, such Restricted Stock Units and Dividend Equivalent Units shall be cancelled.

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7.Withholding. All Awards and payments under this Agreement are subject to withholding of all applicable taxes. Such withholding obligations shall be satisfied through amounts that the Participant is otherwise to receive upon settlement.

8.Transferability. This Award is not transferable except as designated by the Participant by will or by the laws of descent and distribution.

9.Heirs and Successors. If any benefits deliverable to the Participant under this Agreement have not been delivered at the time of the Participant’s death, such rights shall be delivered to the Participant’s estate.

10.Administration. The authority to administer and interpret this Agreement shall be vested in the Committee, and the Committee shall have all the powers with respect to this Agreement as it has with respect to the Incentive Plan. Any interpretation of the Agreement by the Committee and any decision made by it with respect to the Agreement is final and binding on all persons.

11.Adjustment of Award. In the event of a stock dividend, stock split, reverse stock split, extraordinary cash dividend, recapitalization, reorganization, merger, consolidation, split-up, spin-off, exchange of shares, sale of assets or subsidiaries, combination, or other corporate transaction that affects the Common Stock, the Committee shall, in order to preserve the benefits or prevent the enlargement of benefits of this Award, and in the manner it determines equitable in its sole discretion, (a) adjust the number and kind of shares subject to this Award and (b) make any other adjustments that the Committee determines to be equitable (which may include, without limitation, (i) replacement of this Award with other Awards which the Committee determines have comparable value and which are based on stock of a company resulting from the transaction, and (ii) cancellation of this Award in return for cash payment of the then current value of this Award, determined as though this Award is fully vested at the time of payment).

12.Notices. Any notice required or permitted under this Agreement shall be deemed given when delivered personally, through Ambac’s stock compensation administration system or when deposited in a United States Post Office, postage prepaid, addressed, as appropriate, to the Company at its principal offices, to the Participant at the Participant’s address as last known by the Company or, in either case, such other address as one party may designate in writing to the other.

13.Governing Law. The validity, construction and effect of this Agreement shall be determined in accordance with the laws of the State of New York and applicable federal law.

14.Amendments. The Board of Directors may, at any time, amend or terminate the Incentive Plan, and the Board of Directors or the Committee may amend this Agreement, provided that no amendment or termination may, in the absence of written consent to the change by the affected Participant (or, if the Participant is not then living, the affected beneficiary), adversely affect the rights of any Participant or beneficiary under this Agreement prior to the date such amendment or termination is adopted by the Board of Directors or the Committee, as the case may be.

15.Award Not Contract of Employment. The Award does not constitute a contract of employment or continued service, and the grant of the Award will not give the Participant the right to be retained in the employ or service of the Company or any Subsidiary, nor any right or claim to any benefit under the Incentive Plan or this Agreement, unless such right or claim has specifically accrued under the terms of the Incentive Plan and this Agreement.

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16.Severability. If a provision of this Agreement is held invalid by a court of competent jurisdiction, the remaining provisions will nonetheless be enforceable according to their terms. Further, if any provision is held to be overbroad as written, that provision shall be amended to narrow its application to the extent necessary to make the provision enforceable according to applicable law and enforced as amended.

17.Incentive Plan Governs. The Award evidenced by this Agreement is granted pursuant to the Incentive Plan, and the Restricted Stock Units, Dividend Equivalent Units and this Agreement are in all respects governed by the Incentive Plan and subject to all of the terms and provisions thereof, whether such terms and provisions are incorporated in this Agreement by reference or are expressly cited.

18.Special Section 409A Rules. To the fullest extent possible, amounts and other benefits payable under the Agreement are intended to comply with or be exempt from the provisions of section 409A of the Code. This Agreement will be interpreted and administered to the extent possible in a manner consistent with the foregoing statement of intent; provided, however, that the Company does not guarantee the tax treatment of the Award. Notwithstanding any other provision of this Agreement to the contrary, if any payment or benefit hereunder is subject to section 409A of the Code, and if such payment or benefit is to be paid or provided on account of the Participant’s termination of employment (or other separation from service):

(a)and if the Participant is a specified employee (within the meaning of section 409A(a)(2)(B) of the Code) and if any such payment or benefit is required to be made or provided prior to the first day of the seventh month following the Participant’s separation from service or termination of employment, such payment or benefit shall be delayed until the first day of the seventh month following the Participant’s separation from service; and

(b)the determination as to whether the Participant has had a termination of employment (or separation from service) shall be made in accordance with the provisions of section 409A of the Code and the guidance issued thereunder without application of any alternative levels of reductions of bona fide services permitted thereunder.

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EX-10.3

Exhibit 10.3

AMBAC FINANCIAL GROUP, INC.

PERFORMANCE STOCK UNIT AGREEMENT

FOR LONG-TERM INCENTIVE COMPENSATION AWARD

(Employees with Employment Agreements)

Effective as of February 28, 2022 (the “Grant Date”), [[FIRSTNAME]] [[LASTNAME]] (the “Participant”) has been granted an Award under the Ambac Financial Group, Inc. 2020 Incentive Compensation Plan (the “Incentive Plan”). This Agreement evidences the Award, which shall consist of a Full Value Award in the form of performance stock units (“Performance Stock Units”). In addition to the terms and conditions of the Incentive Plan and the Award shall be subject to the following terms and conditions (sometimes referred to as this “Agreement”).

1.Defined Terms. Capitalized terms used in this Agreement which are not otherwise defined herein shall have the meaning specified in the Incentive Plan.

2.Grant of Performance Stock Units. Subject to the terms of this Agreement, and the Incentive Plan, effective as of the Grant Date the Participant is hereby granted [[SHARESGRANTED]] Performance Stock Units (the “Target Performance Units”). This Award contains the right to dividend equivalents (“Dividend Equivalents”) with respect to Earned Performance Units (as defined in Section 3(a)) as described in Section 4. Each Performance Stock Unit awarded hereunder shall become earned and vested as described in Section 3 and each Earned Performance Unit (and associated Earned Dividend Equivalents thereon as described in Section 4) shall be settled in accordance with Section 5.

3.Earning, Vesting and Forfeiture of Performance Stock Units. The Performance Stock Units shall become earned and vested in accordance with the following:

(a)All Performance Stock Units shall be unearned and unvested unless and until they become earned and vested and nonforfeitable in accordance with this Section 3. The Participant shall have the ability to earn between 0% and 240% of the Target Performance Units, as determined by the Compensation Committee, based on the continuing employment of the Participant during the period beginning on January 1, 2022 and ending on the December 31, 2024 (the “Performance Period”) and satisfaction of the Performance Goals set forth in Exhibit A hereto (which is incorporated into and forms part of this Agreement). Any Performance Stock Units granted pursuant to this Agreement that become earned in accordance with this Agreement shall be referred to herein as “Earned Performance Units”. Except as provided in Section 3(b), if the Participant’s termination of employment or service with the Company (the “Termination Date”) occurs for any reason prior to the last day of the Performance Period, the Participant’s right to all Performance Stock Units (and any associated Dividend Equivalents) awarded or credited to the Participant pursuant to this Agreement shall expire and be forfeited immediately and the Participant shall have no further rights with respect to any of the Performance Stock Units (or associated Dividend Equivalents). The Earned Performance Units (and any associated Earned Dividend Equivalents) shall be settled in accordance with Section 5 hereof.

(b)Notwithstanding the provisions of Section 3(a), (x) if the Participant’s Termination Date occurs prior to the last day of the Performance Period by reason of (1) Disability (as defined in the Employment Agreement referenced in clause (4) of this subsection)), (2) Retirement (as defined in Section 3(c)), (3) involuntary termination by the Company other than for Cause (as defined in the

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Employment Agreement), (4) as a result of the Company’s failure to extend the term of the Employment Agreement between Ambac, AAC and the Participant, dated as of [[Date]] (the “Employment Agreement”) pursuant to Section 2 thereof, or (5) termination by the Participant for Good Reason (as defined in the Employment Agreement), the Participant shall be entitled to receive the number of Earned Performance Units (and any associated Earned Dividend Equivalents) that the Participant would have been entitled to receive had the Termination Date not occurred prior to the end of the Performance Period based on actual satisfaction of the Performance Goals, and (y) if the Participant’s Termination Date occurs prior to the last day of the Performance Period by reason of death, the beneficiaries of Participant shall be entitled to receive the number of Earned Performance Units (and any associated Earned Dividend Equivalents) that the Participant would have been entitled to receive had the Termination Date not occurred prior to the end of the Performance Period at a 100% overall payout multiple regardless of the outcome of the Performance Goals, Total Shareholder Return or Relative Total Shareholder Return (which shall be equal to the number of Target Performance Units plus any Earned Dividend Equivalents). For the avoidance of doubt, if the Participant has an employment agreement which provides that this Agreement will govern if this Agreement provides for greater vesting acceleration upon a Participant’s termination of employment, then all of the provisions (including, but not limited to, terms and timing) of this Section 3(b) shall govern.

(c)For purposes of the Award evidenced by this Agreement, (i) the terms “Cause,” “Disability” and “Good Reason” shall have the meanings specified in the Employment Agreement, and (ii) the Participant’s Termination Date shall be considered to occur on account of “Retirement” if the Participant’s Termination Date occurs on or after the date on which the following conditions have been satisfied and such Termination Date does not occur for any other reason: (x) the Participant has attained age 60; (y) the Participant has provided at least ten (10) years of service to the Company; and (z) the Participant has provided at least 90 days’ prior notice of his or her Termination Date due to retirement from the Company.

4.Dividend Equivalents. The Participant shall be credited with Dividend Equivalents, which may consist of Deferred Cash Dividend Equivalents or Dividend Equivalent Units (each as defined below), as follows:

(a)If, during the Performance Period, a dividend with respect to shares of Common Stock is paid in cash, then as of the dividend payment date, the Participant shall be credited with a right to receive a “Deferred Cash Dividend Equivalent” equal to (i) the cash dividend paid with respect to a share of Common Stock, multiplied by (ii) 240% of the Target Performance Units (the “Maximum Performance Units”).

(b)If, during the Performance Period, a dividend with respect to shares of Common Stock is paid in shares of Common Stock, then as of the dividend payment date the Participant shall be credited with that number of “Dividend Equivalent Units” equal to (i) the number of shares of Common Stock distributed in the dividend with respect to a share of Common Stock, multiplied by (ii)(A) the number of Maximum Performance Units plus (B) the number of previously credited Dividend Equivalent Units with respect to such Performance Stock Units, if any, rounded down to the nearest whole number.

Dividend Equivalents shall be earned on the same basis and to the same extent that the Performance Stock Units to which they relate become Earned Performance Units. Therefore, the

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Participant shall only earn Dividend Equivalents with respect to Earned Performance Units and, to the extent that any Dividend Equivalents are credited to the Participant pursuant to this Section 4 and are not earned in accordance with this Agreement, they shall be forfeited and the Participant shall have no further rights with respect thereto under this Agreement or otherwise. Any Dividend Equivalents credited to the Participant pursuant to this Section 4 that become earned in accordance with this Agreement are sometimes referred to as “Earned Dividend Equivalents.”

5.Settlement. Subject to the terms and conditions of this Agreement, the Earned Performance Units (and associated Earned Dividend Equivalents) shall be settled as soon as practically possible, but not later than March 15 following the end of the Performance Period (the “Settlement Date”) subject to Special Section 409A Rules in Section 18; provided that in the case of death of a Participant, the Settlement Date shall be the Participant’s Termination Date. Settlement of the Earned Performance Units and Earned Dividend Equivalent Units on the Settlement Date shall be made in the form of shares of Common Stock with one share of Common Stock being issued in settlement of each Earned Performance Unit and each Earned Dividend Equivalent Unit, with any fractional shares of Common Stock being rounded up to the nearest whole number. Settlement of Earned Deferred Cash Dividend Equivalents on the Settlement Date shall be paid in cash. Upon the settlement of any Earned Performance Unit and associated Earned Dividend Equivalent Units, such Earned Performance Unit and Earned Dividend Equivalent Units shall be cancelled. Any Performance Stock Units and associated Dividend Equivalents outstanding as of the last day of the Performance Period that do not become Earned Performance Units and associated Earned Dividend Equivalents shall be automatically cancelled as of the last day of the Performance Period.

6.Withholding. The Award and settlement thereof are subject to withholding of all applicable taxes. Such withholding obligations shall be satisfied through amounts that the Participant is otherwise to receive upon settlement.

7.Transferability. The Award is not transferable except as designated by the Participant by will or by the laws of descent and distribution.

8.Heirs and Successors. If any benefits deliverable to the Participant under this Agreement have not been delivered at the time of the Participant’s death, such rights shall be delivered to the Participant’s estate.

9.Administration. The authority to administer and interpret this Agreement shall be vested in the Compensation Committee, and the Compensation Committee shall have all the powers with respect to this Agreement as it has with respect to the Incentive Plan. Any interpretation of the Agreement by the Compensation Committee and any decision made by it with respect to the Agreement is final and binding on all persons.

10.Adjustment of Award. In the event of a stock dividend, stock split, reverse stock split, extraordinary cash dividend, recapitalization, reorganization, merger, consolidation, split-up, spin-off, exchange of shares, sale of assets or subsidiaries, combination, or other corporate transaction that affects the Common Stock, the Compensation Committee shall, in order to preserve the benefits or prevent the enlargement of benefits of this Award, and in the manner it determines equitable in its sole discretion, (a) adjust the number and kind of shares subject to this Award and (b) make any other adjustments that the Compensation Committee determines to be equitable (which may include, without limitation, (i) replacement of this Award with other Awards which the Compensation Committee determines have comparable value and which are based on stock of a company resulting from the transaction, and (ii) cancellation of this Award in return for cash payment of the then current value of this Award, determined as though this Award is fully vested at the time of payment).

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11.Notices. Any notice required or permitted under this Agreement shall be deemed given when delivered personally, through Ambac’s stock compensation administration system or when deposited in a United States Post Office, postage prepaid, addressed, as appropriate, to Ambac at its principal offices, to the Participant at the Participant’s address as last known by the Company or, in either case, such other address as one party may designate in writing to the other.

12.Governing Law. The validity, construction and effect of this Agreement shall be determined in accordance with the laws of the State of New York and applicable federal law.

13.Amendments. The Board of Directors may, at any time, amend or terminate the Incentive Plan, and the Board of Directors or the Compensation Committee may amend this Agreement, provided that no amendment or termination may, in the absence of written consent to the change by the affected Participant (or, if the Participant is not then living, the affected beneficiary), adversely affect the rights of any Participant or beneficiary under this Agreement prior to the date such amendment or termination is adopted by the Board of Directors or the Compensation Committee, as the case may be.

14.Award Not Contract of Employment. The Award does not constitute a contract of employment or continued service, and the grant of the Award will not give the Participant the right to be retained in the employ or service of the Company, nor any right or claim to any benefit under the Incentive Plan, or this Agreement, unless such right or claim has specifically accrued under the terms of the Incentive Plan and this Agreement.

15.Severability. If a provision of this Agreement is held invalid by a court of competent jurisdiction, the remaining provisions will nonetheless be enforceable according to their terms. Further, if any provision is held to be overbroad as written, that provision shall be amended to narrow its application to the extent necessary to make the provision enforceable according to applicable law and enforced as amended.

16.Incentive Plan Governs. The Award evidenced by this Agreement is granted pursuant to the Incentive Plan, and the Performance Stock Units and this Agreement are in all respects governed by the Incentive Plan and subject to all of the terms and provisions thereof, whether such terms and provisions are incorporated in this Agreement by reference or are expressly cited.

17.Special Section 409A Rules. To the fullest extent possible, amounts and other benefits payable under the Agreement are intended to comply with or be exempt from the provisions of section 409A of the Code. This Agreement will be interpreted and administered to the extent possible in a manner consistent with the foregoing statement of intent; provided, however, that the Company does not guarantee the tax treatment of the Award. Notwithstanding any other provision of this Agreement to the contrary, if any payment or benefit hereunder is subject to section 409A of the Code, and if such payment or benefit is to be paid or provided on account of the Participant’s termination of employment (or other separation from service):

(a)and if the Participant is a specified employee (within the meaning of section 409A(a)(2)(B) of the Code) and if any such payment or benefit is required to be made or provided prior to the first day of the seventh month following the Participant’s separation from service or termination of employment, such payment or benefit shall be delayed until the first day of the seventh month following the Participant’s separation from service; and

(b)the determination as to whether the Participant has had a termination of employment (or separation from service) shall be made in accordance with the provisions of section 409A of the Code and the guidance issued thereunder

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without application of any alternative levels of reductions of bona fide services permitted thereunder.

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EXHIBIT A

The Award evidenced by the Agreement shall be earned based on the satisfaction of the Performance Goals described in this Exhibit A (the “Performance Goals”) determined based on the rating calculated pursuant to the following table, subject to the RTSR modifier discussed below:

Rating	Payout Multiple	Cumulative Xchange EBITDA ($mm)	Cumulative Everspan EBITDA ($mm)	WLACC Outstanding ($bn)
1	2.00	33.3	8.5	5.3
2	1.00	26.6	4.5	6.0
3	0.00	20.0	0.0	6.7

Capitalized terms shall have the meanings set forth below.

With respect to the Performance Goals, the applicable rating shall be determined as follows: (i) 20% of the Performance Goals shall be based on the Cumulative Xchange EBITDA; (ii) 20% of the Performance Goals shall be based on the Cumulative Everspan EBITDA; and (iii) 60% of the Performance Goals shall be based on WLACC Outstanding at December 31, 2024. Linear interpolation between payout multiples of Cumulative Xchange EBITDA, Cumulative Everspan EBITDA and the WLACC Outstanding, as applicable, will result in a proportionate number of the Target Performance Units (and associated Dividend Equivalents) becoming Earned Performance Units (and Earned Dividend Equivalents).

All metrics noted in this table shall be neutral to the effects of changes to US GAAP.

Upon a sale of Ambac Assurance UK Limited (“AUK”), or other disposition which has been structured as an ART Transaction, management shall receive the full benefit of the reduction to WLACC Outstanding from such transaction.

All determinations as to whether the Performance Goals have been satisfied will be determined by the Compensation Committee.

Notwithstanding anything in this Exhibit A to the contrary, the number of Target Performance Units (and associated Dividend Equivalents) that become Earned Performance Units (and Earned Dividend Equivalents) based on the level of achievement of the metrics set forth in table above shall be adjusted, either upwards or downwards, based on AFG’s RTSR Percentile Ranking for the Performance Period, in accordance with the table below, as determined by the Compensation Committee. For the avoidance of doubt, in no event shall the Participant earn more than 240% of the Target Performance Units after the RTSR modifier is applied.

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RTSR Percentile Ranking	RTSR Modifier
75th percentile or above	120% of overall payout multiple
Between 25th and 75th percentile	100% of overall payout multiple
25th percentile or below	80% of overall payout multiple

For purposes of this Exhibit A, the following definitions shall apply:

AAC: Ambac Assurance Corporation.

AFG: Ambac Financial Group, Inc.

ART Transactions:Alternative Risk Transfer transactions executed by the Company that reduce/eliminate portfolio risk, including by way of proportional reinsurance (e.g. quota share) or other alternative hedging or risk transfer strategies (e.g. excess of loss reinsurance) the impact of which has been approved by the Committee for purposes of reducing WLACC Outstanding. For purposes of this definition, (i) the impact of an ART Transaction whereby net par is not reduced but a portion of the risk related to a WLACC is defeased or reduced for some or all of the remaining life of the insured exposure shall count towards calculating the reduction in WLACC Outstanding and (ii) the measure of benefit for WLACC Outstanding for an ART Transaction will be calculated as follows (a) the net par balance of the portion of the WLACC exposure affected by the ART Transaction multiplied by (b) the quotient of the ART Transaction coverage period and the remaining expected life of the exposure.  To the extent an ART Transaction is executed that does not conform to the aforementioned example management will propose an alternative calculation to the Compensation Committee to measure the WLACC Outstanding reduction. 

Cumulative Everspan EBITDA: 100% of Everspan Group’s earnings before interest, taxes, depreciation and amortization (calculated in accordance with US GAAP as in effect at beginning of the Performance Period) through the Performance Period. Cumulative Everspan EBITDA shall be adjusted to exclude the impact of any other costs as determined in the sole discretion of the Board.

Cumulative Xchange EBITDA: 100% of Xchange Group’s earnings before interest, taxes, depreciation and amortization (calculated in accordance with US GAAP as in effect at beginning of the Performance Period) through the Performance Period. Cumulative Xchange EBITDA shall be adjusted to exclude the impact of:

•    retention payments to Xchange employees in connection with the acquisition by Ambac;

•    M&A EBITDA or any associated costs; and

•    any other costs as determined in the sole discretion of the Board.

Everspan Group: Everspan Holdings, LLC and its subsidiaries, and any subsidiaries established in the future (collectively, “Everspan”). Additionally, may include any other entities that the Committee shall determine.

Performance Period: period in which the performance metrics are measured will be from 1/1/2022 to 12/31/2024.

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Peer Group: The entities set forth on Exhibit B hereto. However, in the event that, prior to the end of the Performance Period, there occurs: (i) a merger, acquisition or business combination transaction of a Peer Group member with or by another Peer Group member, only the surviving entity shall remain a member of the Peer Group; (ii) a merger, acquisition or business combination of a Peer Group member with an entity that is not a Peer Group member, or the acquisition or business combination transaction by or with a Peer Group member, where such Peer Group member is the surviving entity and remains publicly traded, such Peer Group member shall remain a member of the Peer Group; (iii) a merger or acquisition or business combination transaction of a Peer Group member by or with an entity that is not a Peer Group member or a “going private” transaction involving a Peer Group member where such Peer Group member is not the surviving entity or is otherwise no longer publicly traded, such Peer Group member shall no longer be a member of the Peer Group; (iv) a stock distribution from a Peer Group member consisting of the shares of a new publicly traded company (a “spin-off”), such Peer Group member shall remain a member of the Peer Group, such distribution shall be treated as a dividend from such Peer Group member based on the closing price of the shares of the spun-off company on its first day of trading and the performance of the shares of the spun-off company shall not thereafter be tracked for purposes of calculating Total Shareholder Return; or (v) a bankruptcy or liquidation of a Peer Group member, such Peer Group member will remain a member of the Peer Group and the Total Shareholder Return of such Peer Group member shall equal -100%.

Relative Total Shareholder Return, or RTSR: The percentile rank of the Company’s Total Shareholder Return as compared to the Total Shareholder Returns of all members of the Peer Group, ranked in descending order (including the Company), at the end of the Performance Period.

Total Shareholder Return: With respect to each of the Common Stock and the common stock of each of the members of the Peer Group, a rate of return reflecting stock price appreciation, plus the reinvestment of dividends in additional shares of stock, from the beginning of the Performance Period through the end of the Performance Period. For purposes of calculating Total Shareholder Return for each of AFG and the members of the Peer Group, (i) the beginning stock price will be based on the average of the twenty (20) trading days immediately prior to the first day of the Performance Period on the principal stock exchange on which the stock is then listed or admitted to trading and the ending stock price will be based on the average of the last twenty (20) trading days of the Performance Period on the principal stock exchange on which the stock is then listed or admitted to trading and (ii) reinvestment of dividends shall be assumed to be reinvested on the ex-dividend date using the closing stock price on the ex-dividend date.

WLACC Outstanding: The remaining net par outstanding at December 31, 2024, inclusive of the impact of any ART Transactions executed by the Company during the Performance Period, for watch list and adversely classified credits as identified at the beginning of the Performance Period (“WLACC”) by AFG and its subsidiaries, including AAC and AUK. For purposes of this award, WLACC amounts will exclude new credits added during the Performance Period, including credits added through reinsurance recaptures.

For non-U.S. exposures, the currency exchange rates to be used shall be those beginning on the first day of the Performance Period.

Xchange Group: Xchange Benefits, LLC and its subsidiaries, including Xchange Re Holdings, LLC and any subsidiaries established in the future (collectively, “Xchange”). Additionally, may include any other entities that the Committee shall determine.

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EXHIBIT B

PEER GROUP

Assured Guaranty Ltd. (AGO)

MBIA Inc. (MBI)

MGIC Investment Corporation (MTG)

Radian Group Inc. (RDN)

ECN Capital Corp. (TSX:ECN)

Mr. Cooper Group (COOP)

Navient Corporation (NAVI)

Argo Group International (ARGO)

Randall and Quilter Holding Ltd. (RQIH)

HCI Group (HCI)

White Mountains Insurance Ltd. (WTM)

PRA Group (PRAA)

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EX-10.4

Exhibit 10.4

AMBAC FINANCIAL GROUP, INC.

PERFORMANCE STOCK UNIT AGREEMENT

FOR LONG-TERM INCENTIVE COMPENSATION AWARD

(Employees without Employment Agreements)

Effective as of February 28, 2022 (the “Grant Date”), [[FIRSTNAME]] [[LASTNAME]] (the “Participant”) has been granted an Award under the Ambac Financial Group, Inc. 2020 Incentive Compensation Plan (the “Incentive Plan”). This Agreement evidences the Award, which shall consist of a Full Value Award in the form of performance stock units (“Performance Stock Units”). In addition to the terms and conditions of the Incentive Plan and the Award shall be subject to the following terms and conditions (sometimes referred to as this “Agreement”).

1.Defined Terms. Capitalized terms used in this Agreement which are not otherwise defined herein shall have the meaning specified in the Incentive Plan.

2.Grant of Performance Stock Units. Subject to the terms of this Agreement, and the Incentive Plan, effective as of the Grant Date the Participant is hereby granted [[SHARESGRANTED]] Performance Stock Units (the “Target Performance Units”). This Award contains the right to dividend equivalents (“Dividend Equivalents”) with respect to Earned Performance Units (as defined in Section 3(a)) as described in Section 4. Each Performance Stock Unit awarded hereunder shall become earned and vested as described in Section 3 and each Earned Performance Unit (and associated Earned Dividend Equivalents thereon as described in Section 4) shall be settled in accordance with Section 5.

3.Earning, Vesting and Forfeiture of Performance Stock Units. The Performance Stock Units shall become earned and vested in accordance with the following:

(a)All Performance Stock Units shall be unearned and unvested unless and until they become earned and vested and nonforfeitable in accordance with this Section 3. The Participant shall have the ability to earn between 0% and 240% of the Target Performance Units, as determined by the Compensation Committee, based on the continuing employment of the Participant during the period beginning on January 1, 2022 and ending on the December 31, 2024 (the “Performance Period”) and satisfaction of the Performance Goals set forth in Exhibit A hereto (which is incorporated into and forms part of this Agreement). Any Performance Stock Units granted pursuant to this Agreement that become earned in accordance with this Agreement shall be referred to herein as “Earned Performance Units”. Except as provided in Section 3(b), if the Participant’s termination of employment or service with the Company (the “Termination Date”) occurs for any reason prior to the last day of the Performance Period, the Participant’s right to all Performance Stock Units (and any associated Dividend Equivalents) awarded or credited to the Participant pursuant to this Agreement shall expire and be forfeited immediately and the Participant shall have no further rights with respect to any of the Performance Stock Units (or associated Dividend Equivalents). The Earned Performance Units (and any associated Earned Dividend Equivalents) shall be settled in accordance with Section 5 hereof.

(b)Notwithstanding the provisions of Section 3(a), (x) if the Participant’s Termination Date occurs prior to the last day of the Performance Period by reason of Disability (as defined in Section 3(c)), Retirement (as defined in Section 3(c)), or involuntary termination by the Company other than for Cause (as defined in Section 3(c)), the Participant shall be entitled to receive the number of Earned

Performance Units (and any associated Earned Dividend Equivalents) that the Participant would have been entitled to receive had the Termination Date not occurred prior to the end of the Performance Period based on actual satisfaction of the Performance Goals, and (y) if the Participant’s Termination Date occurs prior to the last day of the Performance Period by reason of death, the beneficiaries of Participant shall be entitled to receive the number of Earned Performance Units (and any associated Earned Dividend Equivalents) that the Participant would have been entitled to receive had the Termination Date not occurred prior to the end of the Performance Period at a 100% overall payout multiple regardless of the outcome of the Performance Goals, Total Shareholder Return or Relative Total Shareholder Return (which shall be equal to the number of Target Performance Units plus any Earned Dividend Equivalents).

(c)For purposes of the Award evidenced by this Agreement, (i) a Participant’s Termination Date shall be considered to occur by reason of “Disability” if his Termination Date occurs on or after the date on which he is entitled to long-term disability benefits under the Company’s long-term disability plan (or, if the Participant is not eligible for such plan, if the Participant would be entitled to benefits under such plan if he were eligible) and such Termination Date does not occur for any other reason; (ii) the Participant’s Termination Date shall be considered to occur by reason of “Cause” if the Participant’s Termination Date occurs by reason of termination by the Company and is on account of (A) any act or omission by the Participant resulting in, or intending to result in, personal gain at the expense of the Company; (B) the improper disclosure by the Participant of proprietary or confidential information of the Company; or (C) misconduct by the Participant, including, but not limited to, fraud, intentional violation of, or negligent disregard for, the rules and procedures of the Company (including the code of business conduct), theft, violent acts or threats of violence, or possession of controlled substances on the property of the Company; provided, however, that the meaning of “Cause” shall be (1) expanded to include any additional grounds for cause-based termination specified in any contract, policy or plan applicable to the Participant or (2) superseded to the extent expressly provided in such contract, policy or plan; and (iii) the Participant’s Termination Date shall be considered to occur on account of “Retirement” if the Participant’s Termination Date occurs on or after the date on which the following conditions have been satisfied and such Termination Date does not occur for any other reason: (x) the Participant has attained age 60; (y) the Participant has provided at least ten (10) years of service to the Company; and (z) the Participant has provided at least 90 days’ prior notice of his or her Termination Date due to retirement from the Company.

4.Dividend Equivalents. The Participant shall be credited with Dividend Equivalents, which may consist of Deferred Cash Dividend Equivalents or Dividend Equivalent Units (each as defined below), as follows:

(a)If, during the Performance Period, a dividend with respect to shares of Common Stock is paid in cash, then as of the dividend payment date, the Participant shall be credited with a right to receive a “Deferred Cash Dividend Equivalent” equal to (i) the cash dividend paid with respect to a share of Common Stock, multiplied by (ii) 240% of the Target Performance Units (the “Maximum Performance Units”).

(b)If, during the Performance Period, a dividend with respect to shares of Common Stock is paid in shares of Common Stock, then as of the dividend payment date the Participant shall be credited with that number of “Dividend

2

Equivalent Units” equal to (i) the number of shares of Common Stock distributed in the dividend with respect to a share of Common Stock, multiplied by (ii)(A) the number of Maximum Performance Units plus (B) the number of previously credited Dividend Equivalent Units with respect to such Performance Stock Units, if any, rounded down to the nearest whole number.

Dividend Equivalents shall be earned on the same basis and to the same extent that the Performance Stock Units to which they relate become Earned Performance Units. Therefore, the Participant shall only earn Dividend Equivalents with respect to Earned Performance Units and, to the extent that any Dividend Equivalents are credited to the Participant pursuant to this Section 4 and are not earned in accordance with this Agreement, they shall be forfeited and the Participant shall have no further rights with respect thereto under this Agreement or otherwise. Any Dividend Equivalents credited to the Participant pursuant to this Section 4 that become earned in accordance with this Agreement are sometimes referred to as “Earned Dividend Equivalents.”

5.Settlement. Subject to the terms and conditions of this Agreement, the Earned Performance Units (and associated Earned Dividend Equivalents) shall be settled as soon as practically possible, but not later than March 15 following the end of the Performance Period (the “Settlement Date”) subject to Special Section 409A Rules in Section 18; provided that in the case of death of a Participant, the Settlement Date shall be the Participant’s Termination Date. Settlement of the Earned Performance Units and Earned Dividend Equivalent Units on the Settlement Date shall be made in the form of shares of Common Stock with one share of Common Stock being issued in settlement of each Earned Performance Unit and each Earned Dividend Equivalent Unit, with any fractional shares of Common Stock being rounded up to the nearest whole number. Settlement of Earned Deferred Cash Dividend Equivalents on the Settlement Date shall be paid in cash. Upon the settlement of any Earned Performance Unit and associated Earned Dividend Equivalent Units, such Earned Performance Unit and Earned Dividend Equivalent Units shall be cancelled. Any Performance Stock Units and associated Dividend Equivalents outstanding as of the last day of the Performance Period that do not become Earned Performance Units and associated Earned Dividend Equivalents shall be automatically cancelled as of the last day of the Performance Period.

6.Withholding. The Award and settlement thereof are subject to withholding of all applicable taxes. Such withholding obligations shall be satisfied through amounts that the Participant is otherwise to receive upon settlement.

7.Transferability. The Award is not transferable except as designated by the Participant by will or by the laws of descent and distribution.

8.Heirs and Successors. If any benefits deliverable to the Participant under this Agreement have not been delivered at the time of the Participant’s death, such rights shall be delivered to the Participant’s estate.

9.Administration. The authority to administer and interpret this Agreement shall be vested in the Compensation Committee, and the Compensation Committee shall have all the powers with respect to this Agreement as it has with respect to the Incentive Plan. Any interpretation of the Agreement by the Compensation Committee and any decision made by it with respect to the Agreement is final and binding on all persons.

10.Adjustment of Award. In the event of a stock dividend, stock split, reverse stock split, extraordinary cash dividend, recapitalization, reorganization, merger, consolidation, split-up, spin-off, exchange of shares, sale of assets or subsidiaries, combination, or other corporate transaction that affects the Common Stock, the Compensation Committee shall, in order to preserve the benefits or prevent the enlargement of benefits of this Award, and in the manner it

3

determines equitable in its sole discretion, (a) adjust the number and kind of shares subject to this Award and (b) make any other adjustments that the Compensation Committee determines to be equitable (which may include, without limitation, (i) replacement of this Award with other Awards which the Compensation Committee determines have comparable value and which are based on stock of a company resulting from the transaction, and (ii) cancellation of this Award in return for cash payment of the then current value of this Award, determined as though this Award is fully vested at the time of payment).

11.Notices. Any notice required or permitted under this Agreement shall be deemed given when delivered personally, through Ambac’s stock compensation administration system or when deposited in a United States Post Office, postage prepaid, addressed, as appropriate, to Ambac at its principal offices, to the Participant at the Participant’s address as last known by the Company or, in either case, such other address as one party may designate in writing to the other.

12.Governing Law. The validity, construction and effect of this Agreement shall be determined in accordance with the laws of the State of New York and applicable federal law.

13.Amendments. The Board of Directors may, at any time, amend or terminate the Incentive Plan, and the Board of Directors or the Compensation Committee may amend this Agreement, provided that no amendment or termination may, in the absence of written consent to the change by the affected Participant (or, if the Participant is not then living, the affected beneficiary), adversely affect the rights of any Participant or beneficiary under this Agreement prior to the date such amendment or termination is adopted by the Board of Directors or the Compensation Committee, as the case may be.

14.Award Not Contract of Employment. The Award does not constitute a contract of employment or continued service, and the grant of the Award will not give the Participant the right to be retained in the employ or service of the Company, nor any right or claim to any benefit under the Incentive Plan, or this Agreement, unless such right or claim has specifically accrued under the terms of the Incentive Plan and this Agreement.

15.Severability. If a provision of this Agreement is held invalid by a court of competent jurisdiction, the remaining provisions will nonetheless be enforceable according to their terms. Further, if any provision is held to be overbroad as written, that provision shall be amended to narrow its application to the extent necessary to make the provision enforceable according to applicable law and enforced as amended.

16.Incentive Plan Governs. The Award evidenced by this Agreement is granted pursuant to the Incentive Plan, and the Performance Stock Units and this Agreement are in all respects governed by the Incentive Plan and subject to all of the terms and provisions thereof, whether such terms and provisions are incorporated in this Agreement by reference or are expressly cited.

17.Special Section 409A Rules. To the fullest extent possible, amounts and other benefits payable under the Agreement are intended to comply with or be exempt from the provisions of section 409A of the Code. This Agreement will be interpreted and administered to the extent possible in a manner consistent with the foregoing statement of intent; provided, however, that the Company does not guarantee the tax treatment of the Award. Notwithstanding any other provision of this Agreement to the contrary, if any payment or benefit hereunder is subject to section 409A of the Code, and if such payment or benefit is to be paid or provided on account of the Participant’s termination of employment (or other separation from service):

(a)and if the Participant is a specified employee (within the meaning of section 409A(a)(2)(B) of the Code) and if any such payment or benefit is required

4

to be made or provided prior to the first day of the seventh month following the Participant’s separation from service or termination of employment, such payment or benefit shall be delayed until the first day of the seventh month following the Participant’s separation from service; and

(b)the determination as to whether the Participant has had a termination of employment (or separation from service) shall be made in accordance with the provisions of section 409A of the Code and the guidance issued thereunder without application of any alternative levels of reductions of bona fide services permitted thereunder.

5

EXHIBIT A

The Award evidenced by the Agreement shall be earned based on the satisfaction of the Performance Goals described in this Exhibit A (the “Performance Goals”) determined based on the rating calculated pursuant to the following table, subject to the RTSR modifier discussed below:

Rating	Payout Multiple	Cumulative Xchange EBITDA ($mm)	Cumulative Everspan EBITDA ($mm)	WLACC Outstanding ($bn)
1	2.00	33.3	8.5	5.3
2	1.00	26.6	4.5	6.0
3	0.00	20.0	0.0	6.7

Capitalized terms shall have the meanings set forth below.

With respect to the Performance Goals, the applicable rating shall be determined as follows: (i) 20% of the Performance Goals shall be based on the Cumulative Xchange EBITDA; (ii) 20% of the Performance Goals shall be based on the Cumulative Everspan EBITDA; and (iii) 60% of the Performance Goals shall be based on WLACC Outstanding at December 31, 2024. Linear interpolation between payout multiples of Cumulative Xchange EBITDA, Cumulative Everspan EBITDA and the WLACC Outstanding, as applicable, will result in a proportionate number of the Target Performance Units (and associated Dividend Equivalents) becoming Earned Performance Units (and Earned Dividend Equivalents).

All metrics noted in this table shall be neutral to the effects of changes to US GAAP.

Upon a sale of Ambac Assurance UK Limited (“AUK”), or other disposition which has been structured as an ART Transaction, management shall receive the full benefit of the reduction to WLACC Outstanding from such transaction.

All determinations as to whether the Performance Goals have been satisfied will be determined by the Compensation Committee.

Notwithstanding anything in this Exhibit A to the contrary, the number of Target Performance Units (and associated Dividend Equivalents) that become Earned Performance Units (and Earned Dividend Equivalents) based on the level of achievement of the metrics set forth in table above shall be adjusted, either upwards or downwards, based on AFG’s RTSR Percentile Ranking for the Performance Period, in accordance with the table below, as determined by the Compensation Committee. For the avoidance of doubt, in no event shall the Participant earn more than 240% of the Target Performance Units after the RTSR modifier is applied.

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RTSR Percentile Ranking	RTSR Modifier
75th percentile or above	120% of overall payout multiple
Between 25th and 75th percentile	100% of overall payout multiple
25th percentile or below	80% of overall payout multiple

For purposes of this Exhibit A, the following definitions shall apply:

AAC: Ambac Assurance Corporation.

AFG: Ambac Financial Group, Inc.

ART Transactions:Alternative Risk Transfer transactions executed by the Company that reduce/eliminate portfolio risk, including by way of proportional reinsurance (e.g. quota share) or other alternative hedging or risk transfer strategies (e.g. excess of loss reinsurance) the impact of which has been approved by the Committee for purposes of reducing WLACC Outstanding. For purposes of this definition, (i) the impact of an ART Transaction whereby net par is not reduced but a portion of the risk related to a WLACC is defeased or reduced for some or all of the remaining life of the insured exposure shall count towards calculating the reduction in WLACC Outstanding and (ii) the measure of benefit for WLACC Outstanding for an ART Transaction will be calculated as follows (a) the net par balance of the portion of the WLACC exposure affected by the ART Transaction multiplied by (b) the quotient of the ART Transaction coverage period and the remaining expected life of the exposure.  To the extent an ART Transaction is executed that does not conform to the aforementioned example management will propose an alternative calculation to the Compensation Committee to measure the WLACC Outstanding reduction. 

Cumulative Everspan EBITDA: 100% of Everspan Group’s earnings before interest, taxes, depreciation and amortization (calculated in accordance with US GAAP as in effect at beginning of the Performance Period) through the Performance Period. Cumulative Everspan EBITDA shall be adjusted to exclude the impact of any other costs as determined in the sole discretion of the Board.

Cumulative Xchange EBITDA: 100% of Xchange Group’s earnings before interest, taxes, depreciation and amortization (calculated in accordance with US GAAP as in effect at beginning of the Performance Period) through the Performance Period. Cumulative Xchange EBITDA shall be adjusted to exclude the impact of:

•    retention payments to Xchange employees in connection with the acquisition by Ambac;

•    M&A EBITDA or any associated costs; and

•    any other costs as determined in the sole discretion of the Board.

Everspan Group: Everspan Holdings, LLC and its subsidiaries, and any subsidiaries established in the future (collectively, “Everspan”). Additionally, may include any other entities that the Committee shall determine.

Performance Period: period in which the performance metrics are measured will be from 1/1/2022 to 12/31/2024.

7

Peer Group: The entities set forth on Exhibit B hereto. However, in the event that, prior to the end of the Performance Period, there occurs: (i) a merger, acquisition or business combination transaction of a Peer Group member with or by another Peer Group member, only the surviving entity shall remain a member of the Peer Group; (ii) a merger, acquisition or business combination of a Peer Group member with an entity that is not a Peer Group member, or the acquisition or business combination transaction by or with a Peer Group member, where such Peer Group member is the surviving entity and remains publicly traded, such Peer Group member shall remain a member of the Peer Group; (iii) a merger or acquisition or business combination transaction of a Peer Group member by or with an entity that is not a Peer Group member or a “going private” transaction involving a Peer Group member where such Peer Group member is not the surviving entity or is otherwise no longer publicly traded, such Peer Group member shall no longer be a member of the Peer Group; (iv) a stock distribution from a Peer Group member consisting of the shares of a new publicly traded company (a “spin-off”), such Peer Group member shall remain a member of the Peer Group, such distribution shall be treated as a dividend from such Peer Group member based on the closing price of the shares of the spun-off company on its first day of trading and the performance of the shares of the spun-off company shall not thereafter be tracked for purposes of calculating Total Shareholder Return; or (v) a bankruptcy or liquidation of a Peer Group member, such Peer Group member will remain a member of the Peer Group and the Total Shareholder Return of such Peer Group member shall equal -100%.

Relative Total Shareholder Return, or RTSR: The percentile rank of the Company’s Total Shareholder Return as compared to the Total Shareholder Returns of all members of the Peer Group, ranked in descending order (including the Company), at the end of the Performance Period.

Total Shareholder Return: With respect to each of the Common Stock and the common stock of each of the members of the Peer Group, a rate of return reflecting stock price appreciation, plus the reinvestment of dividends in additional shares of stock, from the beginning of the Performance Period through the end of the Performance Period. For purposes of calculating Total Shareholder Return for each of AFG and the members of the Peer Group, (i) the beginning stock price will be based on the average of the twenty (20) trading days immediately prior to the first day of the Performance Period on the principal stock exchange on which the stock is then listed or admitted to trading and the ending stock price will be based on the average of the last twenty (20) trading days of the Performance Period on the principal stock exchange on which the stock is then listed or admitted to trading and (ii) reinvestment of dividends shall be assumed to be reinvested on the ex-dividend date using the closing stock price on the ex-dividend date.

WLACC Outstanding: The remaining net par outstanding at December 31, 2024, inclusive of the impact of any ART Transactions executed by the Company during the Performance Period, for watch list and adversely classified credits as identified at the beginning of the Performance Period (“WLACC”) by AFG and its subsidiaries, including AAC and AUK. For purposes of this award, WLACC amounts will exclude new credits added during the Performance Period, including credits added through reinsurance recaptures.

For non-U.S. exposures, the currency exchange rates to be used shall be those beginning on the first day of the Performance Period.

Xchange Group: Xchange Benefits, LLC and its subsidiaries, including Xchange Re Holdings, LLC and any subsidiaries established in the future (collectively, “Xchange”). Additionally, may include any other entities that the Committee shall determine.

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EXHIBIT B

PEER GROUP

Assured Guaranty Ltd. (AGO)

MBIA Inc. (MBI)

MGIC Investment Corporation (MTG)

Radian Group Inc. (RDN)

ECN Capital Corp. (TSX:ECN)

Mr. Cooper Group (COOP)

Navient Corporation (NAVI)

Argo Group International (ARGO)

Randall and Quilter Holding Ltd. (RQIH)

HCI Group (HCI)

White Mountains Insurance Ltd. (WTM)

PRA Group (PRAA)

9

EX-31.1

EXHIBIT 31.1

Ambac Financial Group, Inc.

Certifications

I, Claude LeBlanc, certify that:

1.    I have reviewed this Quarterly Report on Form 10-Q of Ambac Financial Group, Inc. (the "registrant");

2.    Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.    Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.    The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a—15(e) and 15d—15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a.    Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b.    Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c.    Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d.    Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.    The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors:

a.    All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b.    Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated:	May 10, 2022	By:	/s/ Claude LeBlanc
			Claude LeBlanc President and Chief Executive Officer

EX-31.2

EXHIBIT 31.2

Ambac Financial Group, Inc.

Certifications

I, David Trick, certify that:

1.    I have reviewed this Quarterly Report on Form 10-Q of Ambac Financial Group, Inc. (the"registrant");

2.    Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.    Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.    The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a—15(e) and 15d—15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a.    Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b.    Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c.    Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d.    Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.    The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors:

a.    All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b.    Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated:	May 10, 2022	By:	/s/ David Trick
			David Trick Chief Financial Officer and Treasurer

EX-32.1

EXHIBIT 32

Certification of Chief Executive Officer and Chief Financial Officer

Pursuant to 18 U.S.C. Section 1350,

as Adopted Pursuant to

Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the Quarterly Report of Ambac Financial Group, Inc. (the “Company”) on Form 10-Q for the period ended March 31, 2022, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), we, Claude LeBlanc, Chief Executive Officer of the Company, and David Trick, Chief Financial Officer of the Company, hereby certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of their knowledge:

(1)    The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)    The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

By:	/s/ Claude LeBlanc
Name:	Claude LeBlanc
Title:	President and Chief Executive Officer

		By:	/s/ David Trick
		Name:	David Trick
		Title:	Chief Financial Officer and Treasurer
Dated:	May 10, 2022

XML

Document and Entity Information - $ / shares	3 Months Ended
	Mar. 31, 2022	May 06, 2022	Apr. 30, 2013
Entity Information [Line Items]
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	Mar. 31, 2022
Entity Ex Transition Period	false
Entity File Number	1-10777
Entity Registrant Name	AMBAC FINANCIAL GROUP, INC.
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	13-3621676
Entity Address, Address Line One	One World Trade Center
Entity Address, City or Town	New York
Entity Address, State or Province	NY
Entity Address, Postal Zip Code	10007
City Area Code	(212)
Local Phone Number	658-7470
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Large Accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Bankruptcy Proceedings, Reporting Current	true
Entity Common Stock, Shares Outstanding		45,039,916
Common Stock, Par or Stated Value Per Share	$ 0.01		$ 0.01
Amendment Flag	false
Document Fiscal Year Focus	2022
Document Fiscal Period Focus	Q1
Entity Central Index Key	0000874501
Current Fiscal Year End Date	--12-31
Common Stock [Member]
Entity Information [Line Items]
Title of 12(b) Security	Common stock par value $0.01 per share
Trading Symbol	AMBC
Security Exchange Name	NYSE
Warrants [Member]
Entity Information [Line Items]
Title of 12(b) Security	Warrants
Trading Symbol	AMBC WS
Security Exchange Name	NYSE

XML

Consolidated Balance Sheets - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2022	Dec. 31, 2021
Assets:
Fixed maturity securities, at fair value	$ 2,036,000
Total investments (net of allowance for credit losses of $1 and $0)	2,815,000	$ 2,955,000
Cash and cash equivalents	60,000	17,000
Restricted Cash	7,000	5,000
Premiums Receivable, Net	317,000	323,000
Premium Receivable, Allowance for Credit Loss	8,000	9,000
Reinsurance Recoverable, Allowance for Credit Loss	49	10
Reinsurance Recoverables, Including Reinsurance Premium Paid	48,000	55,000
Deferred ceded premium	100,000	90,000
Subrogation recoverable	1,714,000	2,092,000
Derivative assets	55,000	76,000
Intangible assets	350,000	362,000
Goodwill	46,000	46,000
Other assets	94,000	68,000
Total assets	11,531,000	12,303,000
Liabilities:
Unearned premiums	393,000	395,000
Loss and loss expense reserves	1,067,000	1,570,000
Ceded premiums payable	40,000	33,000
Long-term debt	2,242,000	2,230,000
Accrued interest payable	593,000	576,000
Derivative Liability	76,000	95,000
Other liabilities	135,000	133,000
Total liabilities	10,538,000	11,187,000
Liabilities	10,538,000	11,187,000
Stockholders’ equity:
Preferred stock, par value $0.01 per share; 20,000,000 shares authorized; issued and outstanding shares—none	0	0
Common Stock, Value, Issued	0	0
Additional paid-in capital	262,000	257,000
Accumulated other comprehensive income	(70,000)	58,000
Retained earnings	723,000	726,000
Treasury stock, shares at cost: 0 and 8,202	(2,000)	(3,000)
Total Ambac Financial Group, Inc. stockholders’ equity	914,000	1,038,000
Noncontrolling interest	60,000	60,000
Total stockholders’ equity	974,000	1,098,000
Total liabilities and stockholders’ equity	11,531,000	12,303,000
Available-for-sale Securities, Amortized Cost Basis	2,006,000	2,140,000
Debt Securities, Available-for-sale, Allowance for Credit Loss	1,000	0
Debt Securities, Available-for-sale, Amortized Cost	2,005,000
Xchange
Liabilities:
Redeemable Noncontrolling Interest, Equity, Redemption Value	18,000
Redeemable Noncontrolling Interest, Equity, Carrying Amount		18,000
Short-term Investments [Member]
Assets:
Fixed maturity securities, at fair value	540,000	414,000
Stockholders’ equity:
Available-for-sale Securities, Amortized Cost Basis	540,000	415,000
Debt Securities, Available-for-sale, Allowance for Credit Loss	0	0
Variable Interest Entity, Primary Beneficiary [Member]
Assets:
Fixed maturity securities, at fair value	3,364,000	3,455,000
Restricted Cash	49,000	2,000
Derivative assets	42,000	38,000
Other assets	1,000	2,000
Total assets	5,925,000	6,216,000
Liabilities:
Long-term debt	4,124,000	4,216,000
Derivative Liability	1,866,000	1,940,000
Other liabilities	3,000	0
Total liabilities	5,993,000	6,156,000
Liabilities	5,993,000	6,156,000
Stockholders’ equity:
Financing Receivable, after Allowance for Credit Loss	2,469,000	2,718,000
Gross Investment Income, Operating	(4,000)
Fixed Income Securities [Member]
Assets:
Fixed maturity securities, at fair value	1,383,000	1,730,000
Stockholders’ equity:
Available-for-sale Securities, Amortized Cost Basis	1,352,000	1,605,000
Available-for-sale Securities	1,383,000	1,730,000
Debt Securities, Available-for-sale, Allowance for Credit Loss	1,000	0
Short-term Investments [Member]
Stockholders’ equity:
Available-for-sale Securities	540,000	414,000
Gross Investment Income, Operating	0
Other Investments [Member]
Stockholders’ equity:
Available-for-sale Securities	660,000	690,000
Gross Investment Income, Operating	0
Fixed Income Securities, Trading
Stockholders’ equity:
Available-for-sale Securities, Amortized Cost Basis	119,000	0
Available-for-sale Securities	119,000
Gross Investment Income, Operating	(9,000)
Collateral Pledged [Member] | Fixed Income Securities [Member]
Assets:
Fixed maturity securities, at fair value	114,000	120,000
Stockholders’ equity:
Debt Securities, Available-for-sale, Amortized Cost	15,000	15,000
Collateral Pledged [Member] | Fixed Income Securities [Member] | Short-term Investments [Member]
Assets:
Fixed maturity securities, at fair value	99,000	105,000
Stockholders’ equity:
Available-for-sale Securities, Amortized Cost Basis	99,000	105,000
Debt Securities, Available-for-sale, Allowance for Credit Loss	0	0
Collateral Pledged [Member] | Short-term Investments
Stockholders’ equity:
Available-for-sale Securities, Amortized Cost Basis	99,000	105,000
Collateralized Securities | Fixed Income Securities [Member]
Stockholders’ equity:
Available-for-sale Securities	15,000	15,000
Collateralized Securities | Short-term Investments [Member]
Stockholders’ equity:
Available-for-sale Securities	$ 99,000	$ 105,000

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Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Millions	Mar. 31, 2022	Dec. 31, 2021
Debt Securities, Available-for-sale, Amortized Cost	$ 2,005
Debt Securities, Available-for-sale, Allowance for Credit Loss	1	$ 0
Premium Receivable, Allowance for Credit Loss	$ 8	$ 9
Preferred stock, par value	$ 0.01
Preferred stock, shares authorized	20,000,000
Preferred Stock, Shares Issued	0
Common stock, par value	$ 0.01
Common stock, shares authorized	130,000,000
Common stock, shares issued	46,658,990	46,477,068
Common stock, shares outstanding	46,545,232
Treasury stock, shares	113,758	172,929
Equity investments in pooled funds [Member]
Other Investment Not Readily Marketable, Fair Value	$ 652	$ 683
Variable Interest Entity, Primary Beneficiary [Member]
Long-term debt	$ 3,701	$ 4,056

XML

Consolidated Statements of Total Comprehensive Income - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2022	Mar. 31, 2021
Net investment income:
Securities available-for-sale and short-term	$ 14	$ 22
Net investment income	5	49
Realized Investment Gains (Losses)	10	2
Change in fair value of credit derivatives:
Derivative, Gain (Loss) on Derivative, Net	57	25
Net realized gains (losses) on extinguishment of debt	0	33
Insurance Commissions and Fees	9	7
Other Operating Income (Expense), Net	2	(2)
Income (loss) on variable interest entities	22	0
Total revenues	119	129
Expenses:
Losses and loss expenses (benefit)	24	8
Intangible amortization	14	19
Operating expenses	34	33
Interest expense	44	50
Total expenses	116	110
Pre-tax income (loss)	3	19
Provision (benefit) for income taxes	0	2
Net Income (Loss) Attributable to Nonredeemable Noncontrolling Interest	0	0
Net income (loss)	2	17
Net income attributable to common stockholders	2	17
Other comprehensive income (loss), after tax:
Net income (loss)	2	17
Other Comprehensive Income (Loss), Securities, Available-for-Sale, Unrealized Holding Gain (Loss) Arising During Period, after Tax	(105)	(24)
Other Comprehensive Income (Loss), Foreign Currency Transaction and Translation Adjustment, Net of Tax	(23)	6
Other Comprehensive Income (Loss), Financial Liability, Fair Value Option, Unrealized Gain (Loss) Arising During Period, after Tax	0	(1)
Other Comprehensive (Income) Loss, Defined Benefit Plan, after Reclassification Adjustment, after Tax	0	0
Total other comprehensive income (loss), net of income tax	(127)	(18)
Total comprehensive income (loss)	(125)	(1)
Less: comprehensive (gain) loss attributable to the noncontrolling interest
Total comprehensive income (loss) attributable to common stockholders	(125)	(2)
Other Comprehensive Income (Loss), Net of Tax, Portion Attributable to Noncontrolling Interest	$ 0	$ 0
Earnings Per Share, Basic	$ 0.04	$ 0.08
Earnings Per Share, Diluted	$ 0.04	$ 0.08
Weighted Average Number of Shares Outstanding, Basic	46,731,459	46,314,049
Weighted Average Number of Shares Outstanding, Diluted	47,359,731	46,858,064
Unrealized (loss) gain on securities, taxes	$ (2)	$ (2)
Other Comprehensive Income (Loss), Financial Liability, Fair Value Option, Unrealized Gain (Loss) Arising During Period, Tax	0	0
Gain (loss) on foreign currency translation, taxes	0	0
Other Comprehensive Income (Loss), Pension and Other Postretirement Benefit Plans, Plan Amendments, Tax Effect	0	0
Premiums Earned, Net	$ 15	$ 14

XML

Consolidated Statements of Total Comprehensive Income (Parenthetical) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2022	Mar. 31, 2021
Income Statement [Abstract]
Unrealized (loss) gain on securities, taxes	$ (2)	$ (2)
Gain (loss) on foreign currency translation, taxes	0	0
Other Comprehensive Income (Loss), Financial Liability, Fair Value Option, Unrealized Gain (Loss) Arising During Period, Tax	0	0
Other Comprehensive Income (Loss), Pension and Other Postretirement Benefit Plans, Plan Amendments, Tax Effect	$ 0	$ 0

XML

Consolidated Statements of Stockholders' Equity - USD ($) $ in Millions	Total	Retained Earnings [Member]	AOCI Attributable to Parent [Member]	Preferred Stock [Member]	Common Stock [Member]	Additional Paid-in Capital [Member]	Treasury Stock [Member]	Noncontrolling Interest [Member]
Beginning balance at Dec. 31, 2020	$ 1,140	$ 759	$ 79	$ 0	$ 0	$ 242	$ (1)	$ 60
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Total comprehensive income (loss)	(2)	17	(18)	0	0	0	0	0
Stock-based compensation	4	0	0	0	0	4	0	0
Shares Issued, Value, Share-based Payment Arrangement, after Forfeiture	(6)	(2)	0	0	0	0	(4)	0
Ending balance at Mar. 31, 2021	1,123	761	61	0	0	246	(5)	60
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Total comprehensive income (loss)	(1)
Other Comprehensive Income (Loss), Net of Tax, Portion Attributable to Parent	(18)
Noncontrolling Interest, Change in Redemption Value	(13)	(13)
Beginning balance at Dec. 31, 2021	1,098	726	58	0	0	257	(3)	60
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Total comprehensive income (loss)	(125)
Stock-based compensation	5	0	0	0	0	5	0	0
Shares Issued, Value, Share-based Payment Arrangement, after Forfeiture	(3)	(5)	0	0	0	0	1	0
Ending balance at Mar. 31, 2022	974	723	(70)	0	0	262	(2)	60
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Total comprehensive income (loss)	(125)
Other Comprehensive Income (Loss), Net of Tax, Portion Attributable to Parent	(127)	2	$ (127)	$ 0	$ 0	$ 0	$ 0	$ 0
Noncontrolling Interest, Change in Redemption Value	0	$ 0
Public Finance Puerto Rico Net Par Outstanding	$ 784

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Consolidated Statements of Cash Flows - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2022	Mar. 31, 2021
Cash flows from operating activities:
Net income attributable to common shareholders	$ 2	$ 17
Net Income (Loss) Attributable to Nonredeemable Noncontrolling Interest	0	0
Net income (loss)	2	17
Adjustments to reconcile net income to net cash used in operating activities:
Amortization of bond premium and discount	(3)	(3)
Share-based compensation	5	4
Unearned premiums, net	(11)	(22)
Losses and loss expenses, net	(6)	(17)
Ceded premiums payable	7	(2)
Premium receivables	6	14
Accrued interest payable	24	23
Amortization of intangible assets	14	19
Net investment gains (losses), including impairments	(10)	(2)
Net realized gains (losses) on extinguishment of debt	0	(33)
Variable interest entity activities	(22)	0
Derivative assets and liabilities	(46)	(22)
Other, net	48	(16)
Net cash provided by (used in) operating activities	9	(40)
Cash flows from investing activities:
Proceeds from sales of bonds	141	44
Proceeds from matured bonds	20	39
Purchases of bonds	(33)	(128)
Proceeds from sales of other invested assets	45	48
Purchases of other invested assets	(25)	(41)
Change in short-term investments	(114)	94
Change in cash collateral receivable	54	11
Proceeds from paydowns of consolidated VIE assets	47	50
Other, net	0	(1)
Net cash provided by investing activities	136	116
Cash flows from financing activities:
Paydowns of LSNI Ambac Note	0	(16)
Tax payments related to shares withheld for share-based compensation plans	(3)	(6)
Payments of consolidated VIE liabilities	(49)	(48)
Net cash used in financing activities	(52)	(69)
Effect of foreign exchange on cash, cash equivalents and restricted cash	0	0
Net cash flow	93	6
Cash, cash equivalents, and restricted cash at beginning of period	23	35
Cash, cash equivalents, and restricted cash at end of period	$ 116	$ 42

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Background and Business Description

3 Months Ended

Mar. 31, 2022

Accounting Policies [Abstract]

Background and Business Description

1.    BACKGROUND AND BUSINESS DESCRIPTION

The following description provides an update of Note 1. Background and Business Description in the Notes 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, 2021, and should be read in conjunction with the complete descriptions provided in the Form 10-K. Capitalized terms used, but not defined herein, and in the other footnotes to the Consolidated Financial Statements included in this Quarterly Report on Form 10-Q shall have the meanings ascribed thereto in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.

Ambac Financial Group, Inc. (“AFG”), headquartered in New York City, is a financial services holding company incorporated in the state of Delaware on April 29, 1991. References to “Ambac,” the “Company,” “we,” “our,” and “us” are to AFG and its subsidiaries, as the context requires. Ambac's business operations include:

•Legacy Financial Guarantee Insurance — Ambac's financial guarantee business includes the activities of Ambac Assurance Corporation ("AAC") and its wholly owned subsidiaries, including Ambac Assurance UK Limited (“Ambac UK”) and Ambac Financial Services LLC ("AFS"). Both AAC and Ambac UK (the "Legacy Financial Guarantee Companies") have financial guarantee portfolios that have been in runoff since 2008. AFS uses derivatives to hedge interest rate risk in AAC's insurance and investment portfolios.

•Specialty Property & Casualty Insurance — Ambac's participatory fronting Specialty Property & Casualty Insurance business. Currently includes five admitted carriers (Everspan Insurance Company, Providence Washington Insurance Company, 21st Century Indemnity Insurance Company, 21st Century Pacific Insurance Company and 21st Century Auto Insurance Company of New Jersey) and an excess and surplus lines (“E&S” or “nonadmitted”) insurer Everspan Indemnity Insurance Company (collectively, “Everspan”). The 21st Century companies were acquired in 2022. Everspan carriers that are part of the intercompany pooling agreement received an AM Best rating of 'A-' (Excellent) in February 2021.

•Insurance Distribution — Ambac's specialty property and casualty ("P&C") insurance distribution business, which could include Managing General Agents and Underwriters (collectively "MGAs"), insurance wholesalers, and other distribution businesses. Currently includes Xchange Benefits, LLC (“Xchange”) a P&C MGA specializing in accident and health products, 80% of which was acquired by AFG on December 31, 2020. Refer to Note 3. Business Combination in the Notes to Consolidated Financial Statements included Part II, Item 8 in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021, for further information relating to this acquisition.

Beginning in the first quarter of 2022, the Company is reporting these three business operations as segments; see Note 3. Segment Information for further information.

Strategies to Enhance Shareholder Value

The Company's primary goal is to maximize shareholder value through the execution of key strategies for both its (i) Specialty P&C Insurance Platform and (ii) Legacy Financial Guarantee Companies.

Specialty P&C Insurance Platform strategic priorities include:

•Growing and diversifying the Specialty Property & Casualty insurance business with existing and new program partners.

•Building a leading insurance Distribution business through additional acquisitions and de novo builds, supported by a centralized business services unit including core technology solutions.

•Making opportunistic investments that are strategic to the overall Specialty P&C Insurance Platform.

Legacy Financial Guarantee Companies’ strategic priorities include:

•Actively managing, de-risking and mitigating insured portfolio risk.

•Pursuing loss recovery through active litigation and other means, particularly residential mortgage back security representation and warranty litigation.

•Improving operating efficiency and optimizing our asset and liability profile.

•Exploring, at the appropriate time, strategic options to further maximize value for AFG.

The execution of Ambac’s strategy to increase the value of its investment in AAC is subject to the restrictions set forth in the Settlement Agreement, dated as of June 7, 2010 (the "Settlement Agreement"), by and among AAC, Ambac Credit Products LLC ("ACP"), AFG and certain counterparties to credit default swaps with ACP that were guaranteed by AAC; as well as the Stipulation and Order among the Office of the Commissioner of Insurance for the State of Wisconsin (“OCI”), AFG and AAC that became effective on February 12, 2018, as amended (the “Stipulation and Order”); and the indenture for the Tier 2 Notes (as defined below), each of which requires OCI and, under certain circumstances, holders of the debt instruments benefiting from such restrictions, to approve certain actions taken by or in respect of AAC. In exercising its approval rights, OCI will act for the benefit of policyholders, and will not take into account the interests of AFG.

Opportunities for remediating losses on poorly performing insured transactions also depend on market conditions, including the perception of AAC’s creditworthiness, the structure of the underlying risk and associated policy as well as other counterparty specific factors. AAC's ability to commute policies or purchase certain investments may also be limited by available liquidity.

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Basis of Presentation and Significant Accounting Policies (Notes)

3 Months Ended

Mar. 31, 2022

Accounting Policies [Abstract]

Organization, Consolidation and Presentation of Financial Statements Disclosure

2.    BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

The Company has disclosed its significant accounting policies in Note 2. Basis of Presentation and Significant Accounting Policies in the Notes to Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021. The following significant accounting policies provide an update to those included in the Company’s Annual Report on Form 10-K.

Consolidation:

The consolidated financial statements include the accounts of AFG and all other entities in which AFG (directly or through its subsidiaries) has a controlling financial interest, including variable interest entities (“VIEs”) for which AFG or an AFG subsidiary is deemed the primary beneficiary in accordance with the Consolidation Topic of the Accounting Standards Codification ("ASC"). All significant intercompany balances have been eliminated. See Note 9. Variable Interest Entities, for a detailed discussion of Ambac’s involvement in VIEs, Ambac’s methodology for determining whether Ambac is required to consolidate a VIE and the effects of VIEs being consolidated and deconsolidated.

Basis of Presentation:

The accompanying unaudited consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles ("GAAP") for interim financial reporting and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and disclosures required by GAAP for annual periods. These consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Annual Report on Form 10-K for the year ended December 31, 2021. The accompanying consolidated financial statements have not been audited by an independent registered public accounting firm in accordance with the standards of the Public Company Accounting Oversight Board (U.S.), but in the opinion of management such financial statements include all adjustments necessary for the fair presentation of the Company’s consolidated financial position and results of operations. The results of operations for the three months ended March 31, 2022, may not be indicative of the results that may be expected for the year ending December 31, 2022. The December 31, 2021, consolidated balance sheet was derived from audited financial statements.

The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. As additional information becomes available or actual amounts become determinable, the recorded estimates are revised and reflected in operating results.

Foreign Currency:

The impact of non-functional currency transactions and the remeasurement of non-functional currency assets and liabilities into the respective subsidiaries' functional currency (collectively "foreign currency transactions gains/(losses)") are $1 and $(5) for the three months ended March 31, 2022 and 2021, respectively. Foreign currency transactions gains/(losses) are primarily the result of remeasuring Ambac UK's assets and liabilities denominated in currencies other than its functional currency, primarily the U.S. dollar and the Euro.

Redeemable Noncontrolling Interest:

The acquisition by AFG of 80% of the ownership interests of Xchange is further described in Note 3. Business Combinations in the Notes to 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, 2021. Under the terms of the acquisition agreement, Ambac received a call option to purchase the remaining 20% of Xchange from the minority owners (i.e., noncontrolling interests) and the minority owners received a put option to sell the remaining 20% to Ambac. The call and put options are exercisable after different time periods elapse. Because the exercise of the put option is outside the control of Ambac, in accordance with the Distinguishing Liabilities from Equity Topic of the ASC, Ambac reports redeemable noncontrolling interests in the mezzanine section of its consolidated balance sheet.

The redeemable noncontrolling interest is remeasured each period as the greater of:

i.the carrying value under ASC 810, which attributes a portion of consolidated net income (loss) to the redeemable noncontrolling interest; and

ii.the redemption value of the put option under ASC 480 as if it were exercisable at the end of the reporting period.

Any increase (decrease) in the carrying amount of the redeemable noncontrolling interest as a result of adjusting to the redemption value of the put option is recorded as an offset to retained earnings. The impact of such differences on earnings per share are presented in Note 12. Net Income Per Share.

Following is a rollforward of redeemable noncontrolling interest.

Three Months Ended March 31,	2022		2021
Beginning balance	$	18	$	7
Net income attributable to redeemable noncontrolling interest (ASC 810)	—		—
Adjustment to redemption value (ASC 480)	—		13
Ending balance	$	18	$	20

Supplemental Disclosure of Cash Flow Information	Three Months Ended March 31,
	2022		2021
Cash paid during the period for:
Income taxes	$	2	$	8
Interest on long-term debt	15		25
Non-cash investing and financing activities:
Decrease in long-term debt as a result of surplus notes exchanges	$	—	$	71
Exchange of investments in Puerto Rico bonds for new securities issued in the restructuring transactions	185		—
	March 31,
	2022		2021
Reconciliation of cash, cash equivalents, and restricted cash reported within the Consolidated Balance Sheets to the Consolidated Statements of Cash Flows:
Cash and cash equivalents	$	60	$	23
Restricted cash	7		16
Variable Interest Entity restricted cash	49		2
Total cash, cash equivalents, and restricted cash shown on the Consolidated Statements of Cash Flows	$	116	$	42

Reclassifications and Rounding

Reclassifications may have been made to prior years' amounts to conform to the current year's presentation. Certain amounts and tables in the consolidated financial statements and associated notes may not add due to rounding.

Adopted Accounting Standards:

Effective January 1, 2022, the Company adopted the following accounting standard:

Equity-classified Written Call Options

In May 2021, the FASB issued ASU 2021-04, Issuer's Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options. The ASU clarifies and reduces diversity in practice for an issuer's accounting for modifications or exchanges of equity-classified written call options (e.g. warrants) that remain equity-classified after the modification or exchange. The ASU requires an issuer to account for the modification or exchange based on the economic substance of the transaction. For example, if the modification or exchange is related to the issuance of debt or equity, any change in the fair value of the written call option would be accounted for as part of the debt issuance cost in accordance with the debt guidance or equity issuance cost in accordance with the equity guidance, respectively. The ASU did not have a consequential impact on Ambac's financial statements.

Convertible Instruments and Contracts in an Entity's Own Equity

In August 2020, the FASB issued ASU 2020-06, Accounting for Convertible Instruments and Contracts in an Entity's Own Equity. The ASU i) simplifies the accounting for convertible debt and convertible preferred stock by reducing the number of accounting

models, and amends certain disclosures, ii) amends and simplifies the derivative scope exception guidance for contracts in an entity's own equity, including share-based compensation, and iii) amends the diluted earnings per share calculations for convertible instruments and contracts in an entity's own equity. The ASU did not have a consequential impact on Ambac's financial statements.

Future Application of Accounting Standards:

Reference Rate Reform

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848) - Facilitation of the Effects of Reference Rate Reform on Financial Reporting. The ASU provides companies with optional guidance to ease the potential accounting burden related to transitioning away from reference rates, such as LIBOR, that are expected to be discontinued as a result of initiatives undertaken by various jurisdictions around the world. For example, under current GAAP, contract modifications which change a reference rate are required to be evaluated in determining whether the modifications result in the establishment of new contracts or the continuation of existing contracts. The amendments in this ASU provide optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The ASU can be applied prospectively as of the beginning of the interim period that includes or is subsequent to March 12, 2020, or any date thereafter, but does not apply to contract modifications and other transactions entered into or evaluated after December 31, 2022. On April 20, 2022, the FASB issued a proposed ASU that would extend the sunset date to December 31, 2024 and make certain definitional changes, with feedback required by June 6, 2022. Management has not determined when it will adopt this ASU, and the impact on Ambac's financial statements is being evaluated.

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Segment Reporting

3 Months Ended

Mar. 31, 2022

Segment Reporting [Abstract]

Segment Reporting Disclosure

3.    SEGMENT INFORMATION

The Company reports its results of operations in three segments: Legacy Financial Guarantee Insurance, Specialty Property and Casualty Insurance and Insurance Distribution, separate from Corporate and Other, which is consistent with the manner in which the Company's chief operating decision maker ("CODM") reviews the business to assess performance and allocate resources. See Note 1. Background and Business Description for a description of each of the Company's business segments.

The following tables summarize the components of the Company’s total revenues and expenses, pretax income (loss), net income (loss), net income (loss) attributable to common shareholders and total assets by reportable business segment. Information provided below for “Corporate and Other” primarily relates to the operations of AFG, which will include investment income on its investment portfolio and costs to maintain the operations of AFG, including public company reporting, and business development costs for the acquisition and development of new business initiatives.

	Legacy Financial Guarantee Insurance		Specialty Property & Casualty Insurance		Insurance Distribution		Corporate & Other		Consolidated (2)
Three Months Ended March 31, 2022
Revenues:
Net premiums earned	$	13	$	1					$	15
Net investment income	5		—				—		5
Net gains on derivative contracts	57								57
Commission income					$	9			9
Other revenues (1)	34		—		—		—		34
Total revenues (2)	109		2		9		—		119
Expenses:
Loss and loss expenses	23		1						24
Operating expenses (3)	21		3		1		3		29
Sub-producer commissions (3)					5				5
Depreciation expense (3)	—		—		—		—		—
Intangible amortization	14				1				14
Interest expense	44								44
Total expenses (2)	102		4		6		3		116
Pretax income (loss)	$	6	$	(2)	$	2	$	(3)	$	3
Total assets (2)	$	11,075	$	191	$	97	$	168	$	11,531

	Legacy Financial Guarantee Insurance		Specialty Property & Casualty Insurance		Insurance Distribution		Corporate & Other		Consolidated (2)
Three Months Ended March 31, 2021
Revenues:
Net premiums earned	$	14	$	—					$	14
Net investment income	49		—				—		49
Net gains on derivative contracts	25								25
Commission income					$	7			7
Other revenues (1)	29		—		—		4		33
Total revenues (2)	118		—		7		4		129
Expenses:
Loss and loss expenses	8		—						8
Operating expenses (3)	17		1		1		10		29
Sub-producer commissions (3)					4				4
Depreciation expense (3)	—		—		—		—		—
Intangible amortization	19				1				19
Interest expense	50								50
Total expenses	94		1		5		10		110
Pretax income (loss) (2)	$	24	$	(1)	$	2	$	(6)	$	19
Total assets (2)	$	12,470	$	108	$	98	$	165	$	12,840

(1)Other revenues include the following line items on the Consolidated Statements of Total Comprehensive Income: Net investment gains (losses), including impairments, Net realized gains (losses) on extinguishment of debt, income (loss) on variable interest entities and other income (expense).

(2)Inter-segment revenues and inter-segment pre-tax income (loss) amounts are insignificant and are not presented separately. Total assets noted in the Corporate and Other Column is net of AFG's investment in surplus notes issued by the Legacy Financial Guarantee Segment with fair values of $77 and $114 at March 31, 2022 and 2021.

(3)The Consolidated Statements of Comprehensive Income presents the sum of these items as Operating Expenses.

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Investments

3 Months Ended

Mar. 31, 2022

Investments, Debt and Equity Securities [Abstract]

Investments

4.    INVESTMENTS

Ambac’s non-VIE invested assets are primarily comprised of fixed maturity securities classified as either available-for-sale or trading securities, and interests in pooled investment funds, which are reported within Other investments on the Consolidated Balance Sheets. Interests in pooled investment funds in the form of common stock or in-substance common stock are classified as trading securities, while limited partner interests in such funds are

reported using the equity method. Fixed maturity securities classified as trading are unrated municipal bond obligations of Puerto Rico issuing entities that are part of the the PROMESA restructuring process as described further in Note 6. Insurance Contracts.

Fixed Maturity Securities:

The amortized cost and estimated fair value of available-for-sale investments, excluding VIE investments, at March 31, 2022 and December 31, 2021, were as follows:

	Amortized Cost		Allowance for Credit Losses		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
March 31, 2022:
Fixed maturity securities:
Municipal obligations	$	65	$	—	$	5	$	1	$	69
Corporate obligations	610		1		2		34		577
Foreign obligations	92		—		—		4		88
U.S. government obligations	53		—		—		2		51
Residential mortgage-backed securities	179		—		47		—		225
Collateralized debt obligations	121		—		—		1		120
Other asset-backed securities (1)	232		—		20		—		252
	1,352		1		73		42		1,383
Short-term	540		—		—		—		540
	1,892		1		73		42		1,922
Fixed maturity securities pledged as collateral:
U.S. government obligations	15		—		—		—		15
Short-term	99		—		—		—		99
	114		—		—		—		114
Total available-for-sale investments	$	2,006	$	1	$	73	$	43	$	2,036

December 31, 2021:
Fixed maturity securities:
Municipal obligations	$	315	$	—	$	28	$	3	$	340
Corporate obligations	612		—		10		9		613
Foreign obligations	89		—		—		2		87
U.S. government obligations	45		—		1		1		45
Residential mortgage-backed securities	182		—		70		—		252
Collateralized debt obligations	128		—		—		—		128
Other asset-backed securities (1)	234		—		32		—		265
	1,605		—		141		16		1,730
Short-term	415		—		—		—		414
	2,020		—		141		16		2,145
Fixed maturity securities pledged as collateral:
U.S. government obligations	15		—		—		—		15
Short-term	105		—		—		—		105
	120		—		—		—		120
Total available-for-sale investments	$	2,140	$	—	$	141	$	16	$	2,265

(1)Consists primarily of Ambac's holdings of military housing and student loan securities.

The amortized cost and estimated fair value of available-for-sale investments, excluding VIE investments, at March 31, 2022, by contractual maturity, were as follows:

	Amortized Cost		Estimated Fair Value
Due in one year or less	$	683	$	683
Due after one year through five years	431		416
Due after five years through ten years	317		300
Due after ten years	41		39
	1,472		1,438
Residential mortgage-backed securities	179		225
Collateralized debt obligations	121		120
Other asset-backed securities	232		252
Total	$	2,005	$	2,036

Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay certain obligations with or without call or prepayment penalties.

Unrealized Losses on Fixed Maturity Securities:

The following table shows gross unrealized losses and fair values of Ambac’s available-for-sale investments, excluding VIE investments, which at March 31, 2022 and December 31, 2021, did not have an allowance for credit losses under the CECL standard. This information is aggregated by investment category and length of time that the individual securities have been in a continuous unrealized loss position, at March 31, 2022 and December 31, 2021:

	Less Than 12 Months				12 Months or More				Total
	Fair Value		Gross Unrealized Loss		Fair Value		Gross Unrealized Loss		Fair Value		Gross Unrealized Loss
March 31, 2022:
Fixed maturity securities:
Municipal obligations	$	19	$	1	$	1	$	—	$	19	$	1
Corporate obligations	349		21		117		13		466		34
Foreign obligations	36		1		51		3		87		4
U.S. government obligations	44		1		5		—		49		2
Residential mortgage-backed securities	16		—		1		—		17		—
Collateralized debt obligations	111		1		9		—		120		1
Other asset-backed securities	6		—		—		—		6		—
	580		26		184		16		764		42
Short-term	18		—		12		—		30		—
	598		26		196		17		794		42
Fixed income securities, pledged as collateral:
Short-term	15		—		—		—		15		—
Total collateralized investments	15		—		—		—		15		—
Total temporarily impaired securities	$	613	$	26	$	196	$	17	$	809	$	43

	Less Than 12 Months				12 Months or More				Total
	Fair Value		Gross Unrealized Loss		Fair Value		Gross Unrealized Loss		Fair Value		Gross Unrealized Loss
December 31, 2021:
Fixed maturity securities:
Municipal obligations	$	117	$	3	$	2	$	—	$	118	$	3
Corporate obligations	363		8		17		1		380		9
Foreign obligations	75		2		3		—		78		2
U.S. government obligations	25		—		2		—		27		1
Residential mortgage-backed securities	—		—		1		—		2		—
Collateralized debt obligations	68		—		3		—		71		—
Other asset-backed securities	6		—		—		—		6		—
	654		14		28		1		682		16
Short-term	114		—		13		—		128		—
	768		14		41		1		810		16
Fixed income securities, pledged as collateral:
U. S. government obligations	15		—		—		—		15		—
Total collateralized investments	15		—		—		—		15		—
Total temporarily impaired securities	$	783	$	14	$	41	$	1	$	825	$	16

Management has determined that the securities in the above table do not have credit impairment as of March 31, 2022 and December 31, 2021, based upon (i) no actual or expected principal and interest payment defaults on these securities; (ii) analysis of the creditworthiness of the issuer and financial guarantor, as applicable, and (iii) for debt securities that are non-highly rated beneficial interests in securitized financial assets, analysis of whether there was an adverse change in projected cash flows. Management's evaluation as of March 31, 2022, includes the expectation that all principal and interest payments on securities guaranteed by AAC or Ambac UK will be made timely and in full.

Ambac’s assessment about whether a security is credit impaired reflects management’s current judgment regarding facts and circumstances specific to the security and other factors. If that judgment changes, Ambac may record a charge for credit impairment in future periods.

Investment Income (Loss)

Net investment income (loss) was comprised of the following for the affected periods:

	Three Months Ended March 31,
	2022		2021
Fixed maturity securities	$	15	$	23
Short-term investments	—		—
Investment expense	(1)		(1)
Securities available-for-sale and short-term	14		22
Fixed maturity securities - trading	(9)		—
Other investments	—		27
Total net investment income (loss)	$	5	$	49

Net investment income (loss) from Other investments primarily represents changes in fair value on equity securities, including certain pooled investment funds, and income from investment limited partnerships and other equity interests accounted for under the equity method.

Net Investments Gains (Losses), including Impairments:

The following table details amounts included in net investment gains (losses) and impairments included in earnings for the affected periods:

	Three Months Ended March 31,
	2022		2021
Gross realized gains on securities	$	23	$	7
Gross realized losses on securities	(15)		(1)
Foreign exchange gains (losses)	3		(4)
Credit impairments	(1)		—
Intent / requirement to sell impairments	—		—
Net investment gains (losses), including impairments	$	10	$	2

Ambac had an allowance for credit losses of $1 and $— at March 31, 2022 and 2021, respectively.

Ambac did not purchase any financial assets with credit deterioration for the three months ended March 31, 2022 and 2021.

Counterparty Collateral, Deposits with Regulators and Other Restrictions:

Ambac routinely pledges and receives collateral related to certain transactions. Securities held directly in Ambac’s investment portfolio with a fair value of $114 and $120 at March 31, 2022 and December 31, 2021, respectively, were pledged to derivative counterparties. Ambac’s derivative counterparties have the right to re-pledge the investment securities and as such, these pledged securities are separately classified on the Consolidated Balance Sheets as “Fixed maturity securities pledged as collateral, at fair value” and "Short-term investments pledged as collateral, at fair value." Refer to Note 7. Derivative Instruments for further information on cash collateral. There was no cash or securities received from other counterparties that were re-pledged by Ambac.

Securities carried at $23 and $17 at March 31, 2022 and December 31, 2021, respectively, were deposited by Ambac's insurance subsidiaries with governmental authorities or designated custodian banks as required by laws affecting insurance companies. Invested assets carried at $1 and $1 at March 31, 2022 and December 31, 2021, were deposited as security in connection with a letter of credit issued for an office lease.

Securities with a fair value of $644 and $669 at March 31, 2022 and December 31, 2021, respectively, were held by Ambac UK, the capital stock of which was pledged as collateral for the Sitka AAC Note. Refer to Note 12. Long-term Debt in the Notes 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, 2021 for further information about the Sitka AAC Note.

Guaranteed Securities:

Ambac’s fixed maturity portfolio includes securities covered by guarantees issued by AAC and other financial guarantors (“insured securities”). The published rating agency ratings on these securities reflect the higher of the financial strength rating of the financial guarantor or the rating of the underlying issuer. Rating agencies do not always publish separate underlying ratings (those ratings excluding the insurance by the financial guarantor). In the event these underlying ratings are not available from the rating agencies, Ambac will assign an internal rating. The following table represents the fair value and weighted-average underlying rating of insured securities in Ambac's investment portfolio at March 31, 2022 and December 31, 2021, respectively: 

	Municipal Obligations		Mortgage and Asset- backed Securities		Total		Weighted Average Underlying Rating (1)
March 31, 2022:
Ambac Assurance Corporation	$	47	$	403	$	451	B
Assured Guaranty Municipal Corporation	1		—		1		A
Total	$	48	$	403	$	451	B
December 31, 2021:
Ambac Assurance Corporation	$	316	$	439	$	754	B
National Public Finance Guarantee Corporation	2		—		2		BBB-
Assured Guaranty Municipal Corporation	1		—		1		A-
Total	$	318	$	439	$	757	B

(1)Ratings are based on the lower of Standard & Poor’s or Moody’s rating. If unavailable, Ambac’s internal rating is used.

Other Investments:

Ambac's investment portfolio includes interests in various pooled investment funds. Fair value and additional information about investments in pooled funds, by investment type, is summarized in the table below. Except as noted in the table, fair value as reported is determined using net asset value ("NAV") as a practical expedient. Redemption of certain funds valued using NAV may be subject to withdrawal limitations

and/or redemption fees which vary with the timing and notification of withdrawal provided by the investor. In addition to these investments, Ambac has unfunded commitments of $70 to private credit and private equity funds at March 31, 2022.

	Fair Value
Class of Funds	March 31, 2022		December 31, 2021		Redemption Frequency	Redemption Notice Period
Real estate properties (1)	$	40	$	33	quarterly	10 business days
Hedge funds (2)	196		216		quarterly or semi-annually	90 days
High yields and leveraged loans (3)	88		78		daily	0 - 30 days
Private credit (4)	87		88		quarterly if permitted	180 days if permitted
Insurance-linked investments (5)	1		2		see footnote (9)	see footnote (9)
Equity market investments (6) (10)	91		98		daily or quarterly	0 - 90 days
Investment grade floating rate income (7)	90		107		weekly	0 days
Private equity (8)	41		37		quarterly if permitted	90 days if permitted
Emerging markets debt (9) (10)	17		24		daily	0 days
Total equity investments in pooled funds	$	652	$	683

(1)Investments consist of UK property to generate income and capital growth.

(2)This class seeks to generate superior risk-adjusted returns through selective asset sourcing, active trading and hedging strategies across a range of asset types.

(3)This class of funds includes investments in a range of instruments including high-yield bonds, leveraged loans, CLOs, ABS and floating rate notes to generate income and capital appreciation.

(4)This class aims to obtain high long-term returns primarily through credit and preferred equity investments with low liquidity and defined term.

(5)This class seeks to generate returns from insurance markets through investments in catastrophe bonds, life insurance and other insurance linked investments. This investment is restricted in connection with the unwind of certain insurance linked exposures. Ambac has redeemed its investment to the extent permitted by the fund.

(6)This class of funds aim to achieve long term growth through diversified exposure to global equity-markets.

(7)This class of funds includes investments in high quality floating rate debt securities including ABS and corporate floating rate notes.

(8)This class seeks to generate long-term capital appreciation through investments in private equity, equity-related and other instruments.

(9)This class seeks long-term income and growth through investments in the bonds of issuers in emerging markets.

(10)These categories include fair value amounts totaling $92 and $106 at March 31, 2022 and December 31, 2021, respectively, that are readily determinable and are priced through pricing vendors, including for Equity market investments: $75 and $82; and for Emerging markets debt $17 and $24.

Other investments also includes preferred equity investments with a carrying value of $8 and $8 as of March 31, 2022 and December 31, 2021, respectively, that do not have readily determinable fair values and are carried at cost, less any impairments as permitted under the Investments — Equity Securities Topic of the ASC. There were no impairments recorded on these investments or adjustments to fair value to reflect observable price changes in identical or similar investments from the same issuer during the periods presented.

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Fair Value Measurements

3 Months Ended

Mar. 31, 2022

Fair Value Disclosures [Abstract]

Fair Value Measurements

5.    FAIR VALUE MEASUREMENTS

The Fair Value Measurement Topic of the ASC establishes a framework for measuring fair value and disclosures about fair value measurements.

Fair Value Hierarchy:

The Fair Value Measurement Topic of the ASC specifies a fair value hierarchy based on whether the inputs to valuation techniques used to measure fair value are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect Company-based assumptions. The fair value hierarchy has three broad levels as follows:

l	Level 1	Quoted prices for identical instruments in active markets. Assets and liabilities classified as Level 1 include US Treasury and other foreign government obligations traded in highly liquid and transparent markets, certain highly liquid pooled fund investments, exchange traded futures contracts, variable rate demand obligations and money market funds.
l	Level 2	Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets. Assets and liabilities classified as Level 2 generally include investments in fixed maturity securities representing municipal, asset-backed and corporate obligations, certain interest rate swap contracts and most long-term debt of variable interest entities consolidated under the Consolidation Topic of the ASC.
l	Level 3	Model derived valuations in which one or more significant inputs or significant value drivers are unobservable. This hierarchy requires the use of observable market data when available. Assets and liabilities classified as Level 3 include credit derivative contracts, certain uncollateralized interest rate swap contracts, certain equity investments and certain investments in fixed maturity securities. Additionally, Level 3 assets and liabilities generally include loan receivables, and certain long-term debt of variable interest entities consolidated under the Consolidation Topic of the ASC.

The Fair Value Measurement Topic of the ASC permits, as a practical expedient, the estimation of fair value of certain investments in funds using the net asset value per share of the investment or its equivalent (“NAV”). Investments in funds valued using NAV are not categorized as Level 1, 2 or 3 under the fair value hierarchy. The Investments — Equity Securities Topic of the ASC permits the measurement of certain equity securities without a readily determinable fair value at cost, less impairment, and adjusted to fair value when observable price changes in identical or similar investments from the same issuer occur (the "measurement alternative"). The fair values of investments measured under this measurement alternative are not included in the below disclosures of fair value of financial instruments. The following table sets forth the carrying amount and fair value of Ambac’s financial assets and liabilities as of March 31, 2022 and December 31, 2021, including the level within the fair value hierarchy at which fair value measurements are categorized. As required by the Fair Value Measurement Topic of the ASC, financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.

	Carrying Amount		Total Fair Value		Fair Value Measurements Categorized as:
March 31, 2022:					Level 1		Level 2		Level 3
Financial assets:
Fixed maturity securities:
Municipal obligations	$	188	$	188	$	—	$	188	$	—
Corporate obligations	577		577		1		564		12
Foreign obligations	88		88		88		—		—
U.S. government obligations	51		51		51		—		—
Residential mortgage-backed securities	225		225		—		225		—
Collateralized debt obligations	120		120		—		120		—
Other asset-backed securities	252		252		—		178		74
Fixed maturity securities, pledged as collateral:
U.S. government obligations	15		15		15		—		—
Short-term	99		99		99		—		—
Short term investments	540		540		526		13		—
Other investments (1)	660		652		92		—		—
Cash, cash equivalents and restricted cash	67		67		67		—		—
Derivative assets:
Interest rate swaps—asset position	56		56		—		3		52
Other assets-Loans	3		3		—		—		3
Variable interest entity assets:
Fixed maturity securities: Corporate obligations, fair value option	3,131		3,131		—		—		3,131
Fixed maturity securities: Municipal obligation, trading	114		114		—		114		—
Fixed maturity securities: Municipal obligations, available-for-sale	119		119		—		119		—
Restricted cash	49		49		49		—		—
Loans	2,469		2,469		—		—		2,469
Derivative assets: Currency swaps-asset position	42		42		—		42		—
Total financial assets	$	8,864	$	8,856	$	988	$	1,567	$	5,741
Financial liabilities:
Long term debt, including accrued interest	$	2,834	$	2,315	$	—	$	2,296	$	19
Derivative liabilities:
Credit derivatives	1		1		—		—		1
Interest rate swaps—liability position	75		75		—		75		—
Futures contracts	1		1		1		—		—
Liabilities for net financial guarantees written (2)	(970)		(197)		—		—		(197)
Variable interest entity liabilities:
Long-term debt (includes $3,701 at fair value)	4,124		4,161		—		4,001		160
Derivative liabilities: Interest rate swaps—liability position	1,866		1,866		—		1,866		—
Total financial liabilities	$	7,930	$	8,221	$	1	$	8,238	$	(17)

	Carrying Amount		Total Fair Value		Fair Value Measurements Categorized as:
December 31, 2021:					Level 1		Level 2		Level 3
Financial assets:
Fixed maturity securities:
Municipal obligations	$	340	$	340	$	—	$	340	$	—
Corporate obligations	613		613		1		600		12
Foreign obligations	87		87		87		—		—
U.S. government obligations	45		45		45		—		—
Residential mortgage-backed securities	252		252		—		252		—
Collateralized debt obligations	128		128		—		128		—
Other asset-backed securities	265		265		—		187		79
Fixed maturity securities, pledged as collateral:
U.S. government obligations	15		15		15		—		—
Short-term	105		105		105		—		—
Short term investments	414		414		369		46		—
Other investments (1)	690		683		106		—		—
Cash, cash equivalents and restricted cash	21		21		21		1		—
Derivative assets:
Interest rate swaps—asset position	76		76		—		5		71
Other assets - equity in sponsored VIE	—		—		—		—		—
Other assets-loans	3		3		—		—		3
Variable interest entity assets:
Fixed maturity securities: Corporate obligations, fair value option	3,320		3,320		—		—		3,320
Fixed maturity securities: Municipal obligations, available-for-sale	136		136		—		136		—
Restricted cash	2		2		2		—		—
Loans	2,718		2,718		—		—		2,718
Derivative assets: Currency swaps—asset position	38		38		—		38		—
Total financial assets	$	9,268	$	9,261	$	750	$	1,732	$	6,202
Financial liabilities:
Long term debt, including accrued interest	$	2,806	$	2,598	$	—	$	2,575	$	22
Derivative liabilities:
Credit derivatives	—		—		—		—		—
Interest rate swaps—liability position	94		94		—		94		—
Futures contracts	—		—		—		—		—
Liabilities for net financial guarantees written (2)	(866)		(112)		—		—		(112)
Variable interest entity liabilities:
Long-term debt (includes $4,056 at fair value)	4,216		4,255		—		4,086		169
Derivative liabilities: Interest rate swaps—liability position	1,940		1,940		—		1,940		—
Total financial liabilities	$	8,190	$	8,775	$	—	$	8,695	$	79

(1)Excluded from the fair value measurement categories in the table above are investment funds of $560 and $577 as of March 31, 2022 and December 31, 2021, respectively, which are measured using NAV as a practical expedient. Also excluded from the fair value measurements in the table above are equity securities with a carrying value of $8 and $8 as of March 31, 2022 and December 31, 2021, respectively, that do not have readily determinable fair values and have carrying amounts determined using the measurement alternative.

(2)The carrying value of net financial guarantees written includes financial guarantee amounts in the following balance sheet items: Premium receivables; Reinsurance recoverable on paid and unpaid losses; Deferred ceded premium; Subrogation recoverable; Insurance intangible asset; Unearned premiums; Loss and loss expense reserves; Ceded premiums payable, premiums taxes payable and other deferred fees recorded in Other liabilities.

Determination of Fair Value:

When available, Ambac uses quoted active market prices specific to the financial instrument to determine fair value, and classifies such items within Level 1. The determination of fair value for financial instruments categorized in Level 2 or 3 involves

judgment due to the complexity of factors contributing to the valuation. Third-party sources from which we obtain independent market quotes also use assumptions, judgments and estimates in determining financial instrument values and different third parties may use different methodologies or provide different values for

financial instruments. In addition, the use of internal valuation models may require assumptions about hypothetical or inactive markets. As a result of these factors, the actual trade value of a financial instrument in the market, or exit value of a financial instrument position by Ambac, may be significantly different from its recorded fair value.

Ambac’s financial instruments carried at fair value are mainly comprised of investments in fixed maturity securities, equity interests in pooled investment funds, derivative instruments and certain variable interest entity assets and liabilities. Valuation of financial instruments is performed by Ambac’s finance group using methods approved by senior financial management with consultation from risk management and portfolio managers as appropriate. Preliminary valuation results are discussed with portfolio managers quarterly to assess consistency with market transactions and trends as applicable. Market transactions such as trades or negotiated settlements of similar positions, if any, are reviewed to validate fair value model results. However, many of the financial instruments valued using significant unobservable inputs have very little or no observable market activity. Methods and significant inputs and assumptions used to determine fair values across portfolios are reviewed quarterly by senior financial management. Other valuation control procedures specific to particular portfolios are described further below.

Fixed Maturity Securities:

The fair values of fixed maturity investment securities are based primarily on market prices received from broker quotes or alternative pricing sources. Because many fixed maturity securities do not trade on a daily basis, pricing sources apply available market information through processes such as matrix pricing to calculate fair value. Such prices generally consider a variety of factors, including recent trades of the same and similar securities. In those cases, the items are classified within Level 2. For those fixed maturity investments where quotes were not available or cannot be reasonably corroborated, fair values are based on internal valuation models. Key inputs to the internal valuation models generally include maturity date, coupon and yield curves for asset-type and credit rating characteristics that closely match those characteristics of the specific investment securities being valued. Items valued using valuation models are classified according to the lowest level input or value driver that is significant to the valuation. Thus, an item may be classified in Level 3 even though there may be significant inputs that are readily observable. Longer (shorter) expected maturities or higher (lower) yields used in the valuation model will, in isolation, result in decreases (increases) in fair value. Generally, lower credit ratings or longer expected maturities will be accompanied by higher yields used to value a security. At March 31, 2022, approximately 6%, 90% and 4% of the fixed maturity investment portfolio (excluding variable interest entity investments) was valued using broker quotes, alternative pricing sources and internal valuation models, respectively. At December 31, 2021, approximately 6%, 90% and 4% of the fixed maturity investment portfolio (excluding variable interest entity investments) was valued using broker quotes, alternative pricing sources and internal valuation models, respectively.

Ambac performs various review and validation procedures to quoted and modeled prices for fixed maturity securities, including price variance analyses, missing and static price reviews, overall valuation analysis by portfolio managers and finance managers and reviews associated with our ongoing impairment analysis. Unusual prices identified through these procedures will be evaluated further against alternative third party quotes (if available), internally modeled prices and/or other relevant data, and the pricing source values will be challenged as necessary. Price challenges generally result in the use of the pricing source’s quote as originally provided or as revised by the source following their internal diligence process. A price challenge may result in a determination by either the pricing source or Ambac management that the pricing source cannot provide a reasonable value for a security or cannot adequately support a quote, in which case Ambac would resort to using either other quotes or internal models. Results of price challenges are reviewed by portfolio managers and finance managers.

Information about the valuation inputs for fixed maturity securities classified as Level 3 is included below:

Other asset-backed securities: This security is a subordinated tranche of a securitization collateralized by Ambac-insured military housing bonds. The fair value classified as Level 3 was $74 and $79 at March 31, 2022 and December 31, 2021, respectively. Fair value was calculated using a discounted cash flow approach with expected future cash flows discounted using a yield consistent with the security type and rating. Significant inputs for the valuation at March 31, 2022 and December 31, 2021 include the following:

March 31, 2022:
a. Coupon rate:	5.98%
b. Average Life:	13.97 years
c. Yield:	11.00%
December 31, 2021:
a. Coupon rate:	5.97%
b. Average Life:	14.14 years
c. Yield:	10.20%

Corporate obligations: This includes certain investments in convertible debt securities. The fair value classified as Level 3 was $12 and $12 at March 31, 2022 and December 31, 2021, respectively. Fair value was calculated by discounting cash flows to average maturity of 2.5 years and yield of 9.3% at March 31, 2022 and average maturity of 2.75 years and yield of 7.2% at December 31, 2021. Yields used are consistent with the security type and rating.

Other Investments:

Other investments primarily relate to investments in pooled investment funds. The fair value of pooled investment funds is determined using dealer quotes or alternative pricing sources when such investments have readily determinable fair values. When fair value is not readily determinable, pooled investment

funds are valued using NAV as a practical expedient as permitted under the Fair Value Measurement Topic of the ASC. Refer to Note 4. Investments for additional information about such investments in pooled funds that are reported at fair value using NAV as a practical expedient.

Derivative Instruments:

Ambac’s derivative instruments primarily comprise interest rate swaps, credit default swaps and exchange traded futures contracts. Fair value is determined based upon market quotes from independent sources, when available. When independent quotes are not available, fair value is determined using valuation models. These valuation models require market-driven inputs, including contractual terms, credit spreads and ratings on underlying referenced obligations, yield curves and tax-exempt interest ratios. The valuation of certain derivative contracts also require the use of data inputs and assumptions that are determined by management and are not readily observable in the market. Under the Fair Value Measurement Topic of the ASC, Ambac is required to consider its own credit risk when measuring the fair value of derivatives and other liabilities. Factors considered in estimating the amount of any Ambac credit valuation adjustment ("CVA") on such contracts include collateral posting provisions, right of set-off with the counterparty, the period of time remaining on the derivative and the pricing of recent terminations. The aggregate Ambac CVA impact reduced the fair value of derivative liabilities by less than a million dollars at both March 31, 2022 and December 31, 2021, respectively

Interest rate swaps that are not centrally cleared are valued using vendor-developed models that incorporate interest rates and yield curves that are observable and regularly quoted. These models provide the net present value of the derivatives based on contractual terms and observable market data. Generally, the need for counterparty (or Ambac) CVAs on interest rate derivatives is mitigated by the existence of collateral posting agreements under which adequate collateral has been posted. Certain of these derivative contracts entered into with financial guarantee customers are not subject to collateral posting agreements. Counterparty credit risk related to such customer derivative assets is included in our determination of their fair value.

Ambac's credit derivatives ("CDS") are valued using an internal model that uses traditional financial guarantee CDS pricing to calculate the fair value of the derivative contract based on the reference obligation's current pricing, remaining life and credit rating and Ambac's own credit risk. The model calculates the difference between the present value of the projected fees receivable under the CDS and our estimate of the fees a financial guarantor of comparable credit quality would charge to provide the same protection at the balance sheet date. Unobservable inputs used include Ambac's internal reference obligation credit ratings and remaining life, estimates of fees that would be charged to assume the credit derivative obligation and Ambac's CVA. Ambac is party to only one remaining credit derivative with an internal credit rating of AA at March 31, 2022. Ambac has not made any significant changes to its modeling techniques or related model inputs for the periods presented.

Financial Guarantees:

Fair value of net financial guarantees written represents our estimate of the cost to Ambac to completely transfer its insurance obligation to another market participant of comparable credit worthiness. In theory, this amount should be the same amount that another market participant of comparable credit worthiness would hypothetically charge in the marketplace, on a present value basis, to provide the same protection as of the balance sheet date. This fair value estimate of financial guarantees is presented on a net basis and includes direct and assumed contracts written, net of ceded reinsurance contracts.

Long-term Debt:

Long-term debt includes AAC surplus notes, the Sitka AAC Note, Tier 2 Notes issued in connection with the Rehabilitation Exit Transactions and the Ambac UK debt issued in connection with the Ballantyne commutation. The fair values of surplus notes, Sitka AAC Note and Tier 2 Notes are classified as Level 2. The fair value of Ambac UK debt is classified as Level 3.

Other Financial Assets and Liabilities:

Included in Other assets are loans, the fair values of which are estimated based upon internal valuation models and are classified as Level 3.

Variable Interest Entity Assets and Liabilities:

The financial assets and liabilities of Legacy Financial Guarantee Insurance VIEs ("FG VIEs") consolidated under the Consolidation Topic of the ASC consist primarily of fixed maturity securities and loans held by the VIEs, derivative instruments and notes issued by the VIEs which are reported as long-term debt. As described in Note 9. Variable Interest Entities, these FG VIEs are securitization entities which have liabilities and/or assets guaranteed by AAC or Ambac UK.

The fair values of FG VIE long-term debt are based on price quotes received from independent market sources when available. Such quotes are considered Level 2 and generally consider a variety of factors, including recent trades of the same and similar securities. For those instruments where quotes were not available or cannot be reasonably corroborated, fair values are based on internal valuation models. Comparable to the sensitivities of investments in fixed maturity securities described above, longer (shorter) expected maturities or higher (lower) yields used in the valuation model will, in isolation, result in decreases (increases) in fair value liability measurement for FG VIE long-term debt.

FG VIE derivative asset and liability fair values are determined using vendor-developed valuation models, which incorporated observable market data related to specific derivative contractual terms including interest rates, foreign exchange rates and yield curves.

The fair value of FG VIE fixed maturity securities and loan assets are generally based on Level 2 market price quotes received from independent market sources when available. When FG VIE asset fair values are not readily available from market quotes, values are estimated internally. Internal valuations of FG VIE’s fixed maturity securities or loan assets are derived from the fair values of the notes issued by the respective VIE and the VIE’s

derivatives, determined as described above, adjusted for the fair values of Ambac’s financial guarantees associated with the VIE. The fair value of financial guarantees consist of: (i) estimated future premium cash flows discounted at a rate consistent with that implicit in the fair value of the VIE’s liabilities and (ii) estimates of future claim payments discounted at a rate that

includes Ambac’s own credit risk. Estimated future premium payments to be paid by the VIEs were discounted at a weighted average rate of 3.9% and 3.0% at March 31, 2022 and December 31, 2021, respectively. At March 31, 2022, the range of these discount rates was between 3.2% and 5.3%.

Additional Fair Value Information for Financial Assets and Liabilities Accounted for at Fair Value:

The following tables present the changes in the Level 3 fair value category for the periods presented in 2022 and 2021. Ambac classifies financial instruments in Level 3 of the fair value hierarchy when there is reliance on at least one significant unobservable input to the valuation model. In addition to these unobservable inputs, the valuation models for Level 3 financial instruments typically also rely on a number of inputs that are readily observable either directly or indirectly. Thus, the gains and losses presented below include changes in the fair value related to both observable and unobservable inputs.

Level 3 - Financial Assets and Liabilities Accounted for at Fair Value
							VIE Assets
	Investments(1)		Other Assets(2)		Derivatives		Investments		Loans		Total
Three Months Ended March 31, 2022:
Balance, beginning of period	$	91	$	—	$	70	$	3,320	$	2,718	$	6,199
Total gains/(losses) realized and unrealized:
Included in earnings	—		—		(17)		(93)		(96)		(204)
Included in other comprehensive income	(4)		—		—		(96)		(76)		(176)
Purchases	—		—		—		—		—		—
Settlements	(1)		—		(2)		—		(78)		(80)
Balance, end of period	$	86	$	—	$	52	$	3,131	$	2,469	$	5,738
The amount of total gains/(losses) included in earnings attributable to the change in unrealized gains or losses relating to assets and liabilities still held at the reporting date	$	—	$	—	$	(17)	$	(93)	$	(96)	$	(204)
The amount of total gains/(losses) included in other comprehensive income attributable to the change in unrealized gains or losses relating to assets and liabilities still held at the reporting date	$	(4)	$	—	$	—	$	(96)	$	(76)	$	(176)
Three Months Ended March 31, 2021:
Balance, beginning of period	$	78	$	1	$	84	$	3,215	$	2,998	$	6,376
Total gains/(losses) realized and unrealized:
Included in earnings	—		—		(17)		(138)		9		(145)
Included in other comprehensive income	(2)		—		—		26		24		49
Purchases	—		—		—		—		—		—
Settlements	—		—		(2)		—		(84)		(86)
Balance, end of period	$	76	$	1	$	65	$	3,103	$	2,948	$	6,194
The amount of total gains/(losses) included in earnings attributable to the change in unrealized gains or losses relating to assets and liabilities still held at the reporting date	$	—	$	—	$	(17)	$	(138)	$	9	$	(145)
The amount of total gains/(losses) included in other comprehensive income attributable to the change in unrealized gains or losses relating to assets and liabilities still held at the reporting date	$	(2)	$	—	$	—	$	26	$	24	$	49

(1)     Investments classified as Level 3 consist of a single other asset-backed security.

(2)    Other assets carried at fair value and classified as Level 3 relate to an equity interest in an Ambac sponsored VIE.

Invested assets and VIE long-term debt are transferred into Level 3 when internal valuation models that include significant unobservable inputs are used to estimate fair value. All such securities that have internally modeled fair values have been classified as Level 3. Derivative instruments are transferred into Level 3 when the use of unobservable inputs becomes significant to the overall valuation. There were no transfers of financial instruments into or out of Level 3 in the periods disclosed.

Gains and losses (realized and unrealized) relating to Level 3 assets and liabilities included in earnings for the affected periods are reported as follows:

	Net Investment Income		Net Gains (Losses) on Derivative Contracts		Income (Loss) on Variable Interest Entities		Other Income or (Expense)
Three Months Ended March 31, 2022:
Total gains (losses) included in earnings for the period	$	—	$	(17)	$	(188)	$	—
Changes in unrealized gains (losses) relating to financial instruments still held at the reporting date	—		(17)		(188)		—
Three Months Ended March 31, 2021:
Total gains (losses) included in earnings for the period	$	—	$	(17)	$	(129)	$	—
Changes in unrealized gains (losses) relating to financial instruments still held at the reporting date	—		(17)		(129)		—

XML

Insurance Contracts

3 Months Ended

Mar. 31, 2022

Insurance [Abstract]

Fair Value Measurements

5.    FAIR VALUE MEASUREMENTS

The Fair Value Measurement Topic of the ASC establishes a framework for measuring fair value and disclosures about fair value measurements.

Fair Value Hierarchy:

The Fair Value Measurement Topic of the ASC specifies a fair value hierarchy based on whether the inputs to valuation techniques used to measure fair value are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect Company-based assumptions. The fair value hierarchy has three broad levels as follows:

l	Level 1	Quoted prices for identical instruments in active markets. Assets and liabilities classified as Level 1 include US Treasury and other foreign government obligations traded in highly liquid and transparent markets, certain highly liquid pooled fund investments, exchange traded futures contracts, variable rate demand obligations and money market funds.
l	Level 2	Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets. Assets and liabilities classified as Level 2 generally include investments in fixed maturity securities representing municipal, asset-backed and corporate obligations, certain interest rate swap contracts and most long-term debt of variable interest entities consolidated under the Consolidation Topic of the ASC.
l	Level 3	Model derived valuations in which one or more significant inputs or significant value drivers are unobservable. This hierarchy requires the use of observable market data when available. Assets and liabilities classified as Level 3 include credit derivative contracts, certain uncollateralized interest rate swap contracts, certain equity investments and certain investments in fixed maturity securities. Additionally, Level 3 assets and liabilities generally include loan receivables, and certain long-term debt of variable interest entities consolidated under the Consolidation Topic of the ASC.

The Fair Value Measurement Topic of the ASC permits, as a practical expedient, the estimation of fair value of certain investments in funds using the net asset value per share of the investment or its equivalent (“NAV”). Investments in funds valued using NAV are not categorized as Level 1, 2 or 3 under the fair value hierarchy. The Investments — Equity Securities Topic of the ASC permits the measurement of certain equity securities without a readily determinable fair value at cost, less impairment, and adjusted to fair value when observable price changes in identical or similar investments from the same issuer occur (the "measurement alternative"). The fair values of investments measured under this measurement alternative are not included in the below disclosures of fair value of financial instruments. The following table sets forth the carrying amount and fair value of Ambac’s financial assets and liabilities as of March 31, 2022 and December 31, 2021, including the level within the fair value hierarchy at which fair value measurements are categorized. As required by the Fair Value Measurement Topic of the ASC, financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.

	Carrying Amount		Total Fair Value		Fair Value Measurements Categorized as:
March 31, 2022:					Level 1		Level 2		Level 3
Financial assets:
Fixed maturity securities:
Municipal obligations	$	188	$	188	$	—	$	188	$	—
Corporate obligations	577		577		1		564		12
Foreign obligations	88		88		88		—		—
U.S. government obligations	51		51		51		—		—
Residential mortgage-backed securities	225		225		—		225		—
Collateralized debt obligations	120		120		—		120		—
Other asset-backed securities	252		252		—		178		74
Fixed maturity securities, pledged as collateral:
U.S. government obligations	15		15		15		—		—
Short-term	99		99		99		—		—
Short term investments	540		540		526		13		—
Other investments (1)	660		652		92		—		—
Cash, cash equivalents and restricted cash	67		67		67		—		—
Derivative assets:
Interest rate swaps—asset position	56		56		—		3		52
Other assets-Loans	3		3		—		—		3
Variable interest entity assets:
Fixed maturity securities: Corporate obligations, fair value option	3,131		3,131		—		—		3,131
Fixed maturity securities: Municipal obligation, trading	114		114		—		114		—
Fixed maturity securities: Municipal obligations, available-for-sale	119		119		—		119		—
Restricted cash	49		49		49		—		—
Loans	2,469		2,469		—		—		2,469
Derivative assets: Currency swaps-asset position	42		42		—		42		—
Total financial assets	$	8,864	$	8,856	$	988	$	1,567	$	5,741
Financial liabilities:
Long term debt, including accrued interest	$	2,834	$	2,315	$	—	$	2,296	$	19
Derivative liabilities:
Credit derivatives	1		1		—		—		1
Interest rate swaps—liability position	75		75		—		75		—
Futures contracts	1		1		1		—		—
Liabilities for net financial guarantees written (2)	(970)		(197)		—		—		(197)
Variable interest entity liabilities:
Long-term debt (includes $3,701 at fair value)	4,124		4,161		—		4,001		160
Derivative liabilities: Interest rate swaps—liability position	1,866		1,866		—		1,866		—
Total financial liabilities	$	7,930	$	8,221	$	1	$	8,238	$	(17)

	Carrying Amount		Total Fair Value		Fair Value Measurements Categorized as:
December 31, 2021:					Level 1		Level 2		Level 3
Financial assets:
Fixed maturity securities:
Municipal obligations	$	340	$	340	$	—	$	340	$	—
Corporate obligations	613		613		1		600		12
Foreign obligations	87		87		87		—		—
U.S. government obligations	45		45		45		—		—
Residential mortgage-backed securities	252		252		—		252		—
Collateralized debt obligations	128		128		—		128		—
Other asset-backed securities	265		265		—		187		79
Fixed maturity securities, pledged as collateral:
U.S. government obligations	15		15		15		—		—
Short-term	105		105		105		—		—
Short term investments	414		414		369		46		—
Other investments (1)	690		683		106		—		—
Cash, cash equivalents and restricted cash	21		21		21		1		—
Derivative assets:
Interest rate swaps—asset position	76		76		—		5		71
Other assets - equity in sponsored VIE	—		—		—		—		—
Other assets-loans	3		3		—		—		3
Variable interest entity assets:
Fixed maturity securities: Corporate obligations, fair value option	3,320		3,320		—		—		3,320
Fixed maturity securities: Municipal obligations, available-for-sale	136		136		—		136		—
Restricted cash	2		2		2		—		—
Loans	2,718		2,718		—		—		2,718
Derivative assets: Currency swaps—asset position	38		38		—		38		—
Total financial assets	$	9,268	$	9,261	$	750	$	1,732	$	6,202
Financial liabilities:
Long term debt, including accrued interest	$	2,806	$	2,598	$	—	$	2,575	$	22
Derivative liabilities:
Credit derivatives	—		—		—		—		—
Interest rate swaps—liability position	94		94		—		94		—
Futures contracts	—		—		—		—		—
Liabilities for net financial guarantees written (2)	(866)		(112)		—		—		(112)
Variable interest entity liabilities:
Long-term debt (includes $4,056 at fair value)	4,216		4,255		—		4,086		169
Derivative liabilities: Interest rate swaps—liability position	1,940		1,940		—		1,940		—
Total financial liabilities	$	8,190	$	8,775	$	—	$	8,695	$	79

(1)Excluded from the fair value measurement categories in the table above are investment funds of $560 and $577 as of March 31, 2022 and December 31, 2021, respectively, which are measured using NAV as a practical expedient. Also excluded from the fair value measurements in the table above are equity securities with a carrying value of $8 and $8 as of March 31, 2022 and December 31, 2021, respectively, that do not have readily determinable fair values and have carrying amounts determined using the measurement alternative.

(2)The carrying value of net financial guarantees written includes financial guarantee amounts in the following balance sheet items: Premium receivables; Reinsurance recoverable on paid and unpaid losses; Deferred ceded premium; Subrogation recoverable; Insurance intangible asset; Unearned premiums; Loss and loss expense reserves; Ceded premiums payable, premiums taxes payable and other deferred fees recorded in Other liabilities.

Determination of Fair Value:

When available, Ambac uses quoted active market prices specific to the financial instrument to determine fair value, and classifies such items within Level 1. The determination of fair value for financial instruments categorized in Level 2 or 3 involves

judgment due to the complexity of factors contributing to the valuation. Third-party sources from which we obtain independent market quotes also use assumptions, judgments and estimates in determining financial instrument values and different third parties may use different methodologies or provide different values for

financial instruments. In addition, the use of internal valuation models may require assumptions about hypothetical or inactive markets. As a result of these factors, the actual trade value of a financial instrument in the market, or exit value of a financial instrument position by Ambac, may be significantly different from its recorded fair value.

Ambac’s financial instruments carried at fair value are mainly comprised of investments in fixed maturity securities, equity interests in pooled investment funds, derivative instruments and certain variable interest entity assets and liabilities. Valuation of financial instruments is performed by Ambac’s finance group using methods approved by senior financial management with consultation from risk management and portfolio managers as appropriate. Preliminary valuation results are discussed with portfolio managers quarterly to assess consistency with market transactions and trends as applicable. Market transactions such as trades or negotiated settlements of similar positions, if any, are reviewed to validate fair value model results. However, many of the financial instruments valued using significant unobservable inputs have very little or no observable market activity. Methods and significant inputs and assumptions used to determine fair values across portfolios are reviewed quarterly by senior financial management. Other valuation control procedures specific to particular portfolios are described further below.

Fixed Maturity Securities:

The fair values of fixed maturity investment securities are based primarily on market prices received from broker quotes or alternative pricing sources. Because many fixed maturity securities do not trade on a daily basis, pricing sources apply available market information through processes such as matrix pricing to calculate fair value. Such prices generally consider a variety of factors, including recent trades of the same and similar securities. In those cases, the items are classified within Level 2. For those fixed maturity investments where quotes were not available or cannot be reasonably corroborated, fair values are based on internal valuation models. Key inputs to the internal valuation models generally include maturity date, coupon and yield curves for asset-type and credit rating characteristics that closely match those characteristics of the specific investment securities being valued. Items valued using valuation models are classified according to the lowest level input or value driver that is significant to the valuation. Thus, an item may be classified in Level 3 even though there may be significant inputs that are readily observable. Longer (shorter) expected maturities or higher (lower) yields used in the valuation model will, in isolation, result in decreases (increases) in fair value. Generally, lower credit ratings or longer expected maturities will be accompanied by higher yields used to value a security. At March 31, 2022, approximately 6%, 90% and 4% of the fixed maturity investment portfolio (excluding variable interest entity investments) was valued using broker quotes, alternative pricing sources and internal valuation models, respectively. At December 31, 2021, approximately 6%, 90% and 4% of the fixed maturity investment portfolio (excluding variable interest entity investments) was valued using broker quotes, alternative pricing sources and internal valuation models, respectively.

Ambac performs various review and validation procedures to quoted and modeled prices for fixed maturity securities, including price variance analyses, missing and static price reviews, overall valuation analysis by portfolio managers and finance managers and reviews associated with our ongoing impairment analysis. Unusual prices identified through these procedures will be evaluated further against alternative third party quotes (if available), internally modeled prices and/or other relevant data, and the pricing source values will be challenged as necessary. Price challenges generally result in the use of the pricing source’s quote as originally provided or as revised by the source following their internal diligence process. A price challenge may result in a determination by either the pricing source or Ambac management that the pricing source cannot provide a reasonable value for a security or cannot adequately support a quote, in which case Ambac would resort to using either other quotes or internal models. Results of price challenges are reviewed by portfolio managers and finance managers.

Information about the valuation inputs for fixed maturity securities classified as Level 3 is included below:

Other asset-backed securities: This security is a subordinated tranche of a securitization collateralized by Ambac-insured military housing bonds. The fair value classified as Level 3 was $74 and $79 at March 31, 2022 and December 31, 2021, respectively. Fair value was calculated using a discounted cash flow approach with expected future cash flows discounted using a yield consistent with the security type and rating. Significant inputs for the valuation at March 31, 2022 and December 31, 2021 include the following:

March 31, 2022:
a. Coupon rate:	5.98%
b. Average Life:	13.97 years
c. Yield:	11.00%
December 31, 2021:
a. Coupon rate:	5.97%
b. Average Life:	14.14 years
c. Yield:	10.20%

Corporate obligations: This includes certain investments in convertible debt securities. The fair value classified as Level 3 was $12 and $12 at March 31, 2022 and December 31, 2021, respectively. Fair value was calculated by discounting cash flows to average maturity of 2.5 years and yield of 9.3% at March 31, 2022 and average maturity of 2.75 years and yield of 7.2% at December 31, 2021. Yields used are consistent with the security type and rating.

Other Investments:

Other investments primarily relate to investments in pooled investment funds. The fair value of pooled investment funds is determined using dealer quotes or alternative pricing sources when such investments have readily determinable fair values. When fair value is not readily determinable, pooled investment

funds are valued using NAV as a practical expedient as permitted under the Fair Value Measurement Topic of the ASC. Refer to Note 4. Investments for additional information about such investments in pooled funds that are reported at fair value using NAV as a practical expedient.

Derivative Instruments:

Ambac’s derivative instruments primarily comprise interest rate swaps, credit default swaps and exchange traded futures contracts. Fair value is determined based upon market quotes from independent sources, when available. When independent quotes are not available, fair value is determined using valuation models. These valuation models require market-driven inputs, including contractual terms, credit spreads and ratings on underlying referenced obligations, yield curves and tax-exempt interest ratios. The valuation of certain derivative contracts also require the use of data inputs and assumptions that are determined by management and are not readily observable in the market. Under the Fair Value Measurement Topic of the ASC, Ambac is required to consider its own credit risk when measuring the fair value of derivatives and other liabilities. Factors considered in estimating the amount of any Ambac credit valuation adjustment ("CVA") on such contracts include collateral posting provisions, right of set-off with the counterparty, the period of time remaining on the derivative and the pricing of recent terminations. The aggregate Ambac CVA impact reduced the fair value of derivative liabilities by less than a million dollars at both March 31, 2022 and December 31, 2021, respectively

Interest rate swaps that are not centrally cleared are valued using vendor-developed models that incorporate interest rates and yield curves that are observable and regularly quoted. These models provide the net present value of the derivatives based on contractual terms and observable market data. Generally, the need for counterparty (or Ambac) CVAs on interest rate derivatives is mitigated by the existence of collateral posting agreements under which adequate collateral has been posted. Certain of these derivative contracts entered into with financial guarantee customers are not subject to collateral posting agreements. Counterparty credit risk related to such customer derivative assets is included in our determination of their fair value.

Ambac's credit derivatives ("CDS") are valued using an internal model that uses traditional financial guarantee CDS pricing to calculate the fair value of the derivative contract based on the reference obligation's current pricing, remaining life and credit rating and Ambac's own credit risk. The model calculates the difference between the present value of the projected fees receivable under the CDS and our estimate of the fees a financial guarantor of comparable credit quality would charge to provide the same protection at the balance sheet date. Unobservable inputs used include Ambac's internal reference obligation credit ratings and remaining life, estimates of fees that would be charged to assume the credit derivative obligation and Ambac's CVA. Ambac is party to only one remaining credit derivative with an internal credit rating of AA at March 31, 2022. Ambac has not made any significant changes to its modeling techniques or related model inputs for the periods presented.

Financial Guarantees:

Fair value of net financial guarantees written represents our estimate of the cost to Ambac to completely transfer its insurance obligation to another market participant of comparable credit worthiness. In theory, this amount should be the same amount that another market participant of comparable credit worthiness would hypothetically charge in the marketplace, on a present value basis, to provide the same protection as of the balance sheet date. This fair value estimate of financial guarantees is presented on a net basis and includes direct and assumed contracts written, net of ceded reinsurance contracts.

Long-term Debt:

Long-term debt includes AAC surplus notes, the Sitka AAC Note, Tier 2 Notes issued in connection with the Rehabilitation Exit Transactions and the Ambac UK debt issued in connection with the Ballantyne commutation. The fair values of surplus notes, Sitka AAC Note and Tier 2 Notes are classified as Level 2. The fair value of Ambac UK debt is classified as Level 3.

Other Financial Assets and Liabilities:

Included in Other assets are loans, the fair values of which are estimated based upon internal valuation models and are classified as Level 3.

Variable Interest Entity Assets and Liabilities:

The financial assets and liabilities of Legacy Financial Guarantee Insurance VIEs ("FG VIEs") consolidated under the Consolidation Topic of the ASC consist primarily of fixed maturity securities and loans held by the VIEs, derivative instruments and notes issued by the VIEs which are reported as long-term debt. As described in Note 9. Variable Interest Entities, these FG VIEs are securitization entities which have liabilities and/or assets guaranteed by AAC or Ambac UK.

The fair values of FG VIE long-term debt are based on price quotes received from independent market sources when available. Such quotes are considered Level 2 and generally consider a variety of factors, including recent trades of the same and similar securities. For those instruments where quotes were not available or cannot be reasonably corroborated, fair values are based on internal valuation models. Comparable to the sensitivities of investments in fixed maturity securities described above, longer (shorter) expected maturities or higher (lower) yields used in the valuation model will, in isolation, result in decreases (increases) in fair value liability measurement for FG VIE long-term debt.

FG VIE derivative asset and liability fair values are determined using vendor-developed valuation models, which incorporated observable market data related to specific derivative contractual terms including interest rates, foreign exchange rates and yield curves.

The fair value of FG VIE fixed maturity securities and loan assets are generally based on Level 2 market price quotes received from independent market sources when available. When FG VIE asset fair values are not readily available from market quotes, values are estimated internally. Internal valuations of FG VIE’s fixed maturity securities or loan assets are derived from the fair values of the notes issued by the respective VIE and the VIE’s

derivatives, determined as described above, adjusted for the fair values of Ambac’s financial guarantees associated with the VIE. The fair value of financial guarantees consist of: (i) estimated future premium cash flows discounted at a rate consistent with that implicit in the fair value of the VIE’s liabilities and (ii) estimates of future claim payments discounted at a rate that

includes Ambac’s own credit risk. Estimated future premium payments to be paid by the VIEs were discounted at a weighted average rate of 3.9% and 3.0% at March 31, 2022 and December 31, 2021, respectively. At March 31, 2022, the range of these discount rates was between 3.2% and 5.3%.

Additional Fair Value Information for Financial Assets and Liabilities Accounted for at Fair Value:

The following tables present the changes in the Level 3 fair value category for the periods presented in 2022 and 2021. Ambac classifies financial instruments in Level 3 of the fair value hierarchy when there is reliance on at least one significant unobservable input to the valuation model. In addition to these unobservable inputs, the valuation models for Level 3 financial instruments typically also rely on a number of inputs that are readily observable either directly or indirectly. Thus, the gains and losses presented below include changes in the fair value related to both observable and unobservable inputs.

Level 3 - Financial Assets and Liabilities Accounted for at Fair Value
							VIE Assets
	Investments(1)		Other Assets(2)		Derivatives		Investments		Loans		Total
Three Months Ended March 31, 2022:
Balance, beginning of period	$	91	$	—	$	70	$	3,320	$	2,718	$	6,199
Total gains/(losses) realized and unrealized:
Included in earnings	—		—		(17)		(93)		(96)		(204)
Included in other comprehensive income	(4)		—		—		(96)		(76)		(176)
Purchases	—		—		—		—		—		—
Settlements	(1)		—		(2)		—		(78)		(80)
Balance, end of period	$	86	$	—	$	52	$	3,131	$	2,469	$	5,738
The amount of total gains/(losses) included in earnings attributable to the change in unrealized gains or losses relating to assets and liabilities still held at the reporting date	$	—	$	—	$	(17)	$	(93)	$	(96)	$	(204)
The amount of total gains/(losses) included in other comprehensive income attributable to the change in unrealized gains or losses relating to assets and liabilities still held at the reporting date	$	(4)	$	—	$	—	$	(96)	$	(76)	$	(176)
Three Months Ended March 31, 2021:
Balance, beginning of period	$	78	$	1	$	84	$	3,215	$	2,998	$	6,376
Total gains/(losses) realized and unrealized:
Included in earnings	—		—		(17)		(138)		9		(145)
Included in other comprehensive income	(2)		—		—		26		24		49
Purchases	—		—		—		—		—		—
Settlements	—		—		(2)		—		(84)		(86)
Balance, end of period	$	76	$	1	$	65	$	3,103	$	2,948	$	6,194
The amount of total gains/(losses) included in earnings attributable to the change in unrealized gains or losses relating to assets and liabilities still held at the reporting date	$	—	$	—	$	(17)	$	(138)	$	9	$	(145)
The amount of total gains/(losses) included in other comprehensive income attributable to the change in unrealized gains or losses relating to assets and liabilities still held at the reporting date	$	(2)	$	—	$	—	$	26	$	24	$	49

(1)     Investments classified as Level 3 consist of a single other asset-backed security.

(2)    Other assets carried at fair value and classified as Level 3 relate to an equity interest in an Ambac sponsored VIE.

Invested assets and VIE long-term debt are transferred into Level 3 when internal valuation models that include significant unobservable inputs are used to estimate fair value. All such securities that have internally modeled fair values have been classified as Level 3. Derivative instruments are transferred into Level 3 when the use of unobservable inputs becomes significant to the overall valuation. There were no transfers of financial instruments into or out of Level 3 in the periods disclosed.

Gains and losses (realized and unrealized) relating to Level 3 assets and liabilities included in earnings for the affected periods are reported as follows:

	Net Investment Income		Net Gains (Losses) on Derivative Contracts		Income (Loss) on Variable Interest Entities		Other Income or (Expense)
Three Months Ended March 31, 2022:
Total gains (losses) included in earnings for the period	$	—	$	(17)	$	(188)	$	—
Changes in unrealized gains (losses) relating to financial instruments still held at the reporting date	—		(17)		(188)		—
Three Months Ended March 31, 2021:
Total gains (losses) included in earnings for the period	$	—	$	(17)	$	(129)	$	—
Changes in unrealized gains (losses) relating to financial instruments still held at the reporting date	—		(17)		(129)		—

Financial Guarantees In Force

Amounts presented in this Note relate only to Ambac’s non-derivative insurance business for insurance policies issued to beneficiaries, excluding consolidated VIEs.

Premiums:

The effect of reinsurance on premiums written and earned was as follows:

	Three Months Ended March 31,
	2022				2021
	Written		Earned		Written		Earned
Direct	$	30	$	23	$	(2)	$	17
Assumed	—		—		—		—
Ceded	18		8		7		3
Net premiums	$	12	$	15	$	(9)	$	14

The following table summarizes net premiums earned by location of risk:

	Three Months Ended March 31,
	2022		2021
United States	$	9	$	7
United Kingdom	4		3
Other international	1		3
Total	$	15	$	14

Premium Receivables, including credit impairments:

Premium receivables at March 31, 2022 and December 31, 2021 were $317 and $323, respectively.

•Legacy financial guarantee premium receivables are discounted using an appropriate risk-free rate corresponding to the weighted average life of each policy and currency to discount the future premiums contractually due or expected to be collected. The weighted average risk-free rate at March 31, 2022 and December 31, 2021, was 2.6% and 2.2%, respectively, and the weighted average period of future premiums used to estimate the premium receivable at March 31, 2022 and December 31, 2021, was 8.2 years and 8.0 years, respectively.

•Specialty property and casualty premium receivables are not discounted and are typically paid upfront. Any receivables for such amounts are generally collected in the following period. Non-payment of premium by the policyholder may lead to policy cancellation.

Management evaluates premium receivables for expected credit losses ("credit impairment") in accordance with the CECL standard adopted January 1, 2020, which is further described in Note 2. Basis of Presentation and Significant Accounting Policies in the Notes to Consolidated Financial Statements included in Ambac's Annual Report on Form 10-K for the year ended December 31, 2021. The key indicator management uses to assess the credit quality of the legacy financial guarantee premium receivables is Ambac's internal risk classifications for the insured obligation determined by the Risk Management Group. Below is the amortized cost basis of financial guarantee premium receivables by risk classification code and asset class as of March 31, 2022 and December 31, 2021:

Surveillance Categories as of March 31, 2022
Type of Guaranteed Bond	I		IA		II		III		IV		Total
Public Finance:
Housing revenue	$	147	$	3	$	5	$	—	$	—	$	155
Other	2		—		—		—		—		2
Total Public Finance	149		3		5		—		—		157
Structured Finance:
Mortgage-backed and home equity	1		—		—		2		11		15
Structured insurance	9		—		—		—		—		9
Student loan	1		1		—		8		—		11
Other	6		—		—		—		—		6
Total Structured Finance	18		1		—		11		11		41
International:
Sovereign/sub-sovereign	74		8		—		10		—		92
Investor-owned and public utilities	21		—		—		—		—		21
Other	5		—		—		—		—		5
Total International	100		8		—		10		—		118
Total (1) (2)	$	267	$	12	$	5	$	21	$	11	$	316
Surveillance Categories as of December 31, 2021
Type of Guaranteed Bond	I		IA		II		III		IV		Total
Public Finance:
Housing revenue	$	149	$	3	$	5	$	—	$	—	$	157
Other	2		—		—		—		—		2
Total Public Finance	151		3		5		—		—		159
Structured Finance:
Mortgage-backed and home equity	1		—		1		2		12		16
Student loan	1		1		—		9		—		12
Structured insurance	10		—		—		—		—		10
Other	7		—		—		—		—		7
Total Structured Finance	19		1		1		12		12		45
International:
Sovereign/sub-sovereign	74		8		—		11		—		93
Investor-owned and public utilities	28		—		—		—		—		28
Other	5		—		—		—		—		5
Total International	107		8		—		11		—		125
Total (1) (2)	$	277	$	12	$	6	$	22	$	12	$	329

(1)    Excludes specialty property and casualty premium receivables of $9 and $2 at March 31, 2022 and December 31, 2021, respectively.

(2)    The underwriting origination dates for all policies included are greater than five years prior to the current reporting date.

Below is a rollforward of the premium receivable allowance for credit losses as of March 31, 2022 and 2021:

Three Months Ended March 31,	2022		2021
Beginning balance	$	9	$	17
Current period provision (benefit)	(1)		(4)
Write-offs of the allowance	—		—
Recoveries of previously written-off amounts	—		—
Ending balance (1)	$	8	$	13

(1)At March 31, 2022 and 2021, $1 and $— of premiums were past due.

Legacy Financial Guarantee Premium Receivables:

Gross premiums are received either upfront or in installments. For premiums received upfront, an unearned premium revenue (“UPR”) liability is established, which is initially recorded as the cash amount received. For installment premium policies, a premium receivable asset and offsetting UPR liability is initially established in an amount equal to: (i) the present value of future contractual premiums due (the “contractual” method) or (ii) if the assets underlying the insured obligation are homogenous pools which are contractually prepayable, the present value of premiums to be collected over the expected life of the transaction (the “expected” method).

Below is the gross premium receivable roll-forward (direct and assumed contracts) for the affected periods:

Three Months Ended March 31,	2022		2021
Beginning premium receivable	$	320	$	370
Premium receipts	(15)		(12)
Adjustments for changes in expected and contractual cash flows for contracts (1)	3		(8)
Accretion of premium receivable discount for contracts	2		2
Changes to allowance for credit losses	1		4
Other adjustments (including foreign exchange)	(3)		—
Ending premium receivable (2)	$	308	$	356

(1)    Adjustments for changes in expected and contractual cash flows primarily due to indexation offset by reductions in insured exposure as a result of early policy terminations and unscheduled principal paydowns.

(2)    Premium receivable includes premiums to be received in foreign denominated currencies most notably in British Pounds and Euros. At March 31, 2022 and 2021, premium receivables include British Pounds of $101 (£77) and $122 (£89), respectively, and Euros of $16 (€15) and $21 (€18), respectively.

The following table summarizes the future gross undiscounted premiums to be collected and future premiums earned, net of reinsurance at March 31, 2022:

	Future Premiums to be Collected (1)		Future Premiums to be Earned Net of Reinsurance (2)
Three months ended:
June 30, 2022	$	8	$	6
September 30, 2022	9		6
December 31, 2022	6		6
Twelve months ended:
December 31, 2023	30		24
December 31, 2024	29		23
December 31, 2025	28		22
December 31, 2026	27		22
Five years ended:
December 31, 2031	115		89
December 31, 2036	77		55
December 31, 2041	34		22
December 31, 2046	16		9
December 31, 2051	5		3
December 31, 2056	—		—
Total	$	384	$	288

(1)Future premiums to be collected are undiscounted, gross of allowance for credit losses, and are used to derive the discounted premium receivable asset recorded on Ambac's balance sheet.

(2)Future premiums to be earned, net of reinsurance relate to the unearned premiums liability and deferred ceded premium asset recorded on Ambac’s balance sheet. The use of contractual lives for many bond types which do not have homogeneous pools of underlying collateral is required in the calculation of the premium receivable, as further described in Note 2. Basis of Presentation and Significant Accounting Policies in the Notes to Consolidated Financial Statements included in Ambac's Annual Report on Form 10-K for the year ended December 31, 2021. This results in a different premium receivable balance than if expected lives were considered. If installment paying policies are retired or prepay early, premiums reflected in the premium receivable asset and amounts reported in the above table for such policies may not be collected. Future premiums to be earned also considers the use of contractual lives for many bond types which do not have homogeneous pools of underlying collateral, which may result in different unearned premium than if expected lives were considered. If those bonds types are retired early, premium earnings may be negative in the period of call or refinancing.

Loss and Loss Expense Reserves:

Ambac’s loss and loss expense reserves (“loss reserves”) are based on management’s on-going review of the insured portfolio. Below are the components of the loss and loss expense reserves and the subrogation recoverable asset at at March 31, 2022 and December 31, 2021:

			Legacy Financial Guarantee
	Specialty Property and Casualty		Present Value of Expected Net Cash Flows
Balance Sheet Line Item	Gross Loss and Loss Expense Reserves		Claims and Loss Expenses		Recoveries		Unearned Premium Revenue		Gross Loss and Loss Expense Reserves
March 31, 2022:
Loss and loss expense reserves	$	36	$	1,168	$	(95)	$	(42)	$	1,067
Subrogation recoverable	—		52		(1,766)		—		(1,714)
Totals	$	36	$	1,221	$	(1,861)	$	(42)	$	(647)
December 31, 2021:
Loss and loss expense reserves	$	32	$	1,749	$	(155)	$	(56)	$	1,570
Subrogation recoverable	—		88		(2,180)		—		(2,092)
Totals	$	32	$	1,837	$	(2,335)	$	(56)	$	(522)

Below is the loss and loss reserve expense roll-forward, net of subrogation recoverable and reinsurance, for the affected periods:

Three Months Ended March 31,	2022		2021
Beginning gross loss and loss expense reserves	$	(522)	$	(397)
Reinsurance recoverable	55		33
Beginning balance of net loss and loss expense reserves	(578)		(430)
Losses and loss expenses (benefit):
Current year	1		—
Prior years	23		8
Total (1) (2)	24		8
Loss and loss expenses paid (recovered):
Current year	—		—
Prior years	(150)		25
Total	(150)		25
Foreign exchange effect	(1)		—
Ending net loss and loss expense reserves	(404)		(447)
Impact of VIE consolidation	(292)		—
Reinsurance recoverable (3)	49		33
Ending gross loss and loss expense reserves	$	(647)	$	(414)

(1)Total losses and loss expenses (benefit) includes $(7) and $(1) for the three months ended March 31, 2022 and 2021, respectively, related to ceded reinsurance.

(2)Ambac records the impact of estimated recoveries related to securitized loans in RMBS transactions that breached certain representations and warranties ("R&W's) by transaction sponsors within losses and loss expenses (benefit). The losses and loss expense incurred associated with changes in estimated R&W's for the three months ended March 31, 2022 and 2021, was $224 and $3, respectively.

(3)Represents reinsurance recoverable on future loss and loss expenses. Additionally, the Balance Sheet line "Reinsurance recoverable on paid and unpaid losses" includes reinsurance recoverables (payables) of $0 and $0 as of March 31, 2022 and 2021, respectively, related to previously presented loss and loss expenses and subrogation.

For 2022, the adverse development in prior years was primarily attributable to the reduction in the R&W recoverable partially offset by the positive benefit of the Puerto Rico restructuring.

For 2021, the adverse development in prior years was primarily due to deterioration of Puerto Rico credits.

Legacy Financial Guarantee Loss Reserves:

The tables below summarize information related to policies currently included in Ambac’s loss and loss expense reserves or subrogation recoverable at March 31, 2022 and December 31, 2021, excluding consolidated VIEs. Gross par exposures include capital appreciation bonds which are reported at the par amount at the time of issuance of the insurance policy as opposed to the current accreted value of the bond. The weighted average risk-free rate used to discount loss reserves at March 31, 2022 and December 31, 2021,was 2.4% and 1.2%, respectively.

Surveillance Categories as of March 31, 2022
	I		IA		II		III		IV		V		Total
Number of policies	34		14		8		14		124		5		199
Remaining weighted-average contract period (in years) (1)	9		17		14		15		14		7		14
Gross insured contractual payments outstanding:
Principal	$	1,297	$	305	$	457	$	1,265	$	2,105	$	40	$	5,469
Interest	608		348		308		174		683		22		2,143
Total	$	1,905	$	653	$	766	$	1,439	$	2,788	$	62	$	7,612
Gross undiscounted claim liability	$	8	$	5	$	45	$	572	$	867	$	62	$	1,559
Discount, gross claim liability	(1)		(1)		(5)		(155)		(208)		(7)		(377)
Gross claim liability before all subrogation and before reinsurance	7		5		40		416		659		55		1,182
Less:
Gross RMBS subrogation (2)	—		—		—		—		(1,537)		—		(1,537)
Discount, RMBS subrogation	—		—		—		—		35		—		35
Discounted RMBS subrogation, before reinsurance	—		—		—		—		(1,502)		—		(1,502)
Less:
Gross other subrogation (3)	—		(5)		—		(33)		(350)		(12)		(401)
Discount, other subrogation	—		—		—		4		34		3		41
Discounted other subrogation, before reinsurance	—		(5)		—		(29)		(316)		(10)		(360)
Gross claim liability, net of all subrogation and discounts, before reinsurance	7		—		40		387		(1,159)		45		(680)
Less: Unearned premium revenue	(5)		(3)		(5)		(12)		(16)		(1)		(42)
Plus: Loss expense reserves	1		—		—		3		35		—		39
Gross loss and loss expense reserves	$	3	$	(3)	$	35	$	378	$	(1,140)	$	44	$	(683)
Reinsurance recoverable reported on Balance Sheet (4)	$	1	$	—	$	9	$	22	$	(18)	$	—	$	14

(1)Remaining weighted-average contract period is weighted based on projected gross claims over the lives of the respective policies.

(2)RMBS subrogation represents Ambac’s estimate of subrogation recoveries from RMBS transaction sponsors for representation and warranty ("R&W") breaches.

(3)Other subrogation represents subrogation related to excess spread and other contractual cash flows on public finance and structured finance transactions including RMBS.

(4)Reinsurance recoverable reported on the Balance Sheet includes reinsurance recoverables of $14 related to future loss and loss expenses and $0 related to presented loss and loss expenses and subrogation.

Surveillance Categories as of December 31, 2021
	I		IA		II		III		IV		V		Total
Number of policies	34		15		7		14		130		5		205
Remaining weighted-average contract period (in years) (1)	9		12		14		15		13		7		14
Gross insured contractual payments outstanding:
Principal	$	904	$	840	$	459	$	1,300	$	2,759	$	40	$	6,302
Interest	589		612		308		169		1,284		22		2,984
Total	$	1,493	$	1,452	$	767	$	1,469	$	4,043	$	62	$	9,286
Gross undiscounted claim liability	$	5	$	16	$	45	$	544	$	1,423	$	62	$	2,095
Discount, gross claim liability	—		(1)		(3)		(109)		(185)		(4)		(303)
Gross claim liability before all subrogation and before reinsurance	5		15		42		435		1,238		57		1,792
Less:
Gross RMBS subrogation (2)	—		—		—		—		(1,737)		—		(1,737)
Discount, RMBS subrogation	—		—		—		—		7		—		7
Discounted RMBS subrogation, before reinsurance	—		—		—		—		(1,730)		—		(1,730)
Less:
Gross other subrogation (3)	—		(5)		—		(33)		(583)		(12)		(633)
Discount, other subrogation	—		—		—		2		24		2		28
Discounted other subrogation, before reinsurance	—		(5)		—		(31)		(559)		(10)		(605)
Gross claim liability, net of all subrogation and discounts, before reinsurance	5		10		42		404		(1,051)		47		(543)
Less: Unearned premium revenue	(3)		(10)		(5)		(14)		(24)		(1)		(56)
Plus: Loss expense reserves	1		—		—		4		40		—		45
Gross loss and loss expense reserves	$	3	$	1	$	38	$	394	$	(1,036)	$	46	$	(554)
Reinsurance recoverable reported on Balance Sheet (4)	$	1	$	1	$	10	$	22	$	(11)	$	—	$	23

(1)Remaining weighted-average contract period is weighted based on projected gross claims over the lives of the respective policies.

(2)RMBS subrogation represents Ambac’s estimate of subrogation recoveries from RMBS transaction sponsors for R&W breaches.

(3)Other subrogation represents subrogation related to excess spread and other contractual cash flows on public finance and structured finance transactions, including RMBS.

(4)Reinsurance recoverable reported on the Balance Sheet includes reinsurance recoverables of $24 related to future loss and loss expenses and $0 related to presented loss and loss expenses and subrogation.

COVID-19:

The COVID-19 pandemic had an impact on general economic conditions; including, but not limited to, higher unemployment; volatility in the capital markets; closure or severe curtailment of the operations and, hence, revenues, of many businesses and public and private enterprises to which we are directly or indirectly exposed. While the impact of the pandemic on the economy and markets in general has mostly subsided, there remains lingering effects, such as government relief programs, supply chain disruptions, inflation, and employment shortages, which may continue to adversely impact transactions insured in our legacy financial guarantee business.

In particular, this includes the U.S. government's temporary relief measures that required mortgage loan servicers to offer relief to borrowers who suffer hardship as a result of COVID-19. These relief measures included moratoriums on foreclosures and evictions as well as the expansion of forbearance and subsequent

repayment options. While these relief measures have largely since expired, the resulting delays in starting mortgage foreclosure processes and the impact of potential post-forbearance related mortgage loan modifications may have an adverse impact on our insured RMBS transactions. Consequently, we could experience a modest increase in claim payments for certain of our insured RMBS obligations following the resumption of foreclosure activity and the implementation of post-forbearance mortgage loan modifications.

We are continuously evaluating and updating our view of the macro economic environment as well as our specific credit view of each of our insured exposures considering the significant uncertainties brought upon us by the COVID-19 pandemic. Accordingly, despite the current economic recovery, our loss reserves may be under-estimated as a result of the ultimate scope, duration and magnitude of the effects of COVID-19 pandemic.

Through March 31, 2022, we have not paid any claims related to COVID-19.

Puerto Rico

Ambac has exposure to the Commonwealth of Puerto Rico (the "Commonwealth") and its instrumentalities across several different issuing entities with total net par exposure of $784. Components of Puerto Rico net par outstanding include capital appreciation bonds which are reported at the par amount at the time of issuance of the related insurance policy as opposed to the current accreted value of the bonds. The Commonwealth of Puerto Rico and certain of its instrumentalities have defaulted on their debt service payments, including payments owed on bonds insured by AAC.

We have been paying claims for several years on most of our exposure to Puerto Rico, which consisted of several different issuing entities (all below investment grade). These issuing entities, which have been part of the PROMESA restructuring process that began in 2016, each have their own credit risk profile attributable to discrete revenue sources, direct general obligation pledges, and/or general obligation guarantees. On March 15, 2022, the Eighth Amended Plan Title III Joint Plan of Adjustment for the Commonwealth of Puerto Rico, et al. ("Eighth Amended POA") together with the Qualifying Modifications for PRIFA and CCDA ("PRIFA QM" and "CCDA QM", respectively) became effective and resolved the PROMESA restructuring process for the GO, PBA, PRIFA and CCDA issuing entities that have portions of their bonds insured by AAC.

Ambac insured bond effective date transactions

On March 15, 2022, and pursuant to bondholder elections: (i) all of the remaining outstanding AAC-insured GO and PBA bonds or about 94 were satisfied and eliminated via commutation or acceleration and (ii) about 39% and 19% of the par of AAC's outstanding AAC-insured PRIFA and CCDA bonds, respectively, or about $172, were reduced via commutation. The AAC-insured PRIFA and CCDA bondholders who failed to elect commutation had their bondholders’ respective shares of consideration available under the Commonwealth Plan and the PRIFA QM, or CCDA QM, as applicable, deposited into newly formed trusts. These trusts are being consolidated by Ambac as further discussed in Note 9. Variable Interest Entities. Since the effective date, the remainder of those PRIFA and CCDA bonds belonging to bondholders who elected not to commute their AAC insurance policies and were deposited into trusts together with such policies have all been accelerated, satisfying and eliminating all of the Ambac-insured PRIFA and CCDA bonds.

Puerto Rico Highway and Transportation Authority Bonds

AAC's remaining unrestructured PROMESA Puerto Rico exposure, the Puerto Rico Highway and Transportation Authority ("PRHTA"), is subject to the PRHTA Plan of Adjustment ("PRHTA POA"), which was filed on May 2, 2022. A confirmation hearing for the PRHTA POA is expected to follow later in 2022.

Creditor recoveries under the PRHTA POA are based upon the PRHTA/CCDA PSA. AAC signed a joinder to the PRHTA/

CCDA PSA on July 15, 2021. The PRHTA/CCDA PSA, originally executed on May 5, 2021, provides for certain consideration for holders of bonds issued by certain Commonwealth instrumentalities, PRHTA, and CCDA on account of their claims against the Commonwealth arising from such bonds ("Clawback" claims). Under the PRHTA/CCDA PSA, PRHTA creditors will share $389 of cash proceeds, including a $264 interim distribution, payable once the PRHTA distribution condition has been met pursuant to the Eighth Amended POA. In addition, PRHTA creditors will receive an approximately 69% share, subject to a lifetime nominal cap of $3,698, of the Clawback Creditors' portion of the outperformance of the Commonwealth's sales and use tax ("SUT") relative to the certified 2020 Commonwealth Fiscal Plan's projections (the "Clawback CVI"). The Clawback CVI instrument will be distributed once the PRHTA distribution condition has been met pursuant to the Eighth Amended POA. The PRHTA Clawback CVI is subject to a PRHTA-specific waterfall: holders of PRHTA ’68 bonds will receive the first dollars of Clawback CVI, followed by holders of PRHTA ’98 bonds. The value of the Clawback CVI is highly uncertain, given the contingent, outperformance-driven structure of the instrument. Changes in our assumed values of the Clawback CVI or in the actual performance of the Clawback CVI could cause an adverse change in our reserves, which could be material. As a result, a significant decrease in our assumed values of the Clawback CVI could have a material adverse impact on our results of operations and financial condition. PRHTA bondholders will also receive new PRHTA bonds or cash with a face amount of $1,245. Of the $1,245 in new bonds or cash, approximately $646.4 will be allocated to holders of PRHTA '68 bonds and approximately $598.6 will be allocated to holders of PRHTA '98 bonds. The new PRHTA bonds or cash will be distributed to creditors upon consummation of the PRHTA POA. AAC and other PRHTA creditors will receive restriction fees and consummation costs payable at the effective date of the PRHTA POA.

Puerto Rico Considerations

The Eighth Amended POA and the qualifying modifications for PRIFA and CCDA became effective on March 15, 2022, and on that date and since, AAC-insured Puerto Rico exposures have been significantly reduced via commutation and acceleration. However, uncertainty remains as to our remaining exposures as to (i) the value or perceived value of the consideration provided by or on behalf of the debtors under the Eighth Amended POA, PRIFA QM, and CCDA QM; (ii) the extent to which exposure management strategies, such as commutation and acceleration, will be executed for PRHTA; (iii) the tax treatment of the consideration provided by or on behalf of the debtors under the Eighth Amended POA, PRIFA QM, and CCDA QM; (iv) whether and when the PRHTA POA will be confirmed; and (vii) other factors, including market conditions such as interest rate movements and credit spread changes on the new CVI instruments. Ambac’s loss reserves may prove to be understated or overstated, possibly materially, due to favorable or unfavorable developments or results with respect to these factors.

While our reserving scenarios account for a wide range of possible outcomes, reflecting the significant uncertainty regarding future developments and outcomes, given our significant

exposure to Puerto Rico and the economic, fiscal, legal and political uncertainties associated therewith, our loss reserves may ultimately prove to be insufficient to cover our losses, potentially having a material adverse effect on our results of operations and financial position, and may be subject to material volatility. Conversely, Ambac’s loss reserves may prove to be overstated, possibly materially, due to favorable developments or results with respect to the factors described in the preceding paragraph.

Ambac has considered these developments and other factors in evaluating its Puerto Rico loss reserves. While management believes its reserves are adequate to cover losses in its Public Finance insured portfolio, there can be no assurance that Ambac may not incur additional losses in the future, given the circumstances described herein. Such additional losses may have a material adverse effect on Ambac’s results of operations and financial condition and may result in adverse consequences such as impairing the ability of AAC to honor its financial obligations; the initiation of rehabilitation proceedings against AAC; decreased likelihood of AAC delivering value to Ambac, through dividends or otherwise; and a significant drop in the value of securities issued or insured by Ambac or AAC. For public finance credits, including Puerto Rico, as well as other issuers, for which Ambac has an estimate of expected loss at March 31, 2022, the possible increase in loss reserves under stress or other adverse conditions and circumstances was estimated to be approximately $220. This possible increase in loss reserves under stress or other adverse conditions is significant and if we were to experience such incremental losses, our stockholders’ equity as of March 31, 2022, would decrease from $974 to $754. However, there can be no assurance that losses may not exceed such amount.

Representation and Warranty Recoveries:

Ambac records estimated RMBS R&W subrogation recoveries for breaches of R&W by sponsors of certain RMBS transactions. For a discussion of the approach utilized to estimate RMBS R&W subrogation recoveries, see Note 2. Basis of Presentation and Significant Accounting Policies in the Notes to Consolidated Financial Statements included Part II, Item 8 in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.

Ambac has recorded RMBS R&W subrogation recoveries of $1,502 ($1,480 net of reinsurance) and $1,730 ($1,704 net of reinsurance) at March 31, 2022 and December 31, 2021, respectively. The reduction in recorded RMBS R&W recoveries since December 31, 2021, is primarily attributable to management’s view of the effect on certain of AAC’s R&W litigations of the March 17, 2022 decision of the New York Court of Appeals in the case entitled U.S. Bank National Association v. DLJ Mortgage Capital, Inc. relating to Home Equity Asset Trust 2007-1, a residential mortgage-backed securities trust. The decision is relevant to AAC's breach-of-contract cases relating to its insured RMBS transactions and may affect one of the bases upon which AAC seeks recovery with respect to a significant portion of breaching loans in AAC's RMBS cases. However, management believes there remain other alternative paths to recovery for such breaching loans.

Our ability to realize R&W subrogation recoveries is subject to significant uncertainty, including risks inherent in litigation, including adverse rulings or decisions in our cases or in litigations to which AAC is not a party that set precedents or resolve questions of law that impact our own claims; collectability of such amounts from counterparties (and/or their respective parents and affiliates); timing of receipt of any such recoveries; intervention by OCI, which could impede our ability to take actions required to realize such recoveries; and uncertainty inherent in the assumptions used in estimating such recoveries. Failure to realize R&W subrogation recoveries for any reason or the realization of R&W subrogation recoveries materially below the amount recorded on Ambac's consolidated balance sheet would have a material adverse effect on our results of operations and financial condition. If we were unable to realize R&W subrogation recoveries recorded on Ambac's consolidated balance sheet, our stockholders’ equity as of March 31, 2022, would decrease from $974 to $(505). Additionally, failure to realize R&W subrogation recoveries, or the realization of recoveries significantly below those recorded on the balance sheet, may result in adverse consequences such as impairing the ability of AAC to honor its financial obligations; the initiation of rehabilitation proceedings against AAC; AAC not being able to deliver value to Ambac, through dividends or otherwise; and a significant drop in the value of securities issued or insured by Ambac or AAC.

Reinsurance Recoverables, Including Credit Impairments:

Amounts recoverable from reinsurers are estimated in a manner consistent with the associated loss and loss expense reserves. The Company reports its reinsurance recoverables net of an allowance for amounts that are estimated to be uncollectible.

The allowance for credit losses is based upon Ambac's ongoing review of amounts outstanding. Key indicators management uses to assess the credit quality of reinsurance recoverables are financial performance of the reinsurers, collateral posted by the reinsurers and independent rating agency credit ratings. The evaluation begins with a comparison of the fair value of collateral posted by the reinsurer to the recoverable, net of ceded premiums payable. Any shortfall of collateral posted is evaluated against our assessment of the reinsurer's financial strength, including its credit rating to determine whether an allowance is considered necessary.

Ambac has uncollateralized credit exposure of $30 and $31 and has recorded an allowance for credit losses of less than a million at March 31, 2022 and December 31, 2021. The uncollateralized credit exposure includes legacy liabilities obtained from the acquisitions of PWIC and the 21st Century Companies of $29, which are also supported by an unlimited, uncapped indemnity from Enstar Holdings (US) and 21st Century Premier Insurance Company, respectively.

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Derivative Instruments

3 Months Ended

Mar. 31, 2022

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Instruments

7.    DERIVATIVE INSTRUMENTS

The following tables summarize the gross fair values of individual derivative instruments and the impact of legal rights of offset as reported in the Consolidated Balance Sheets as of March 31, 2022 and December 31, 2021:

	Gross Amounts of Recognized Assets / Liabilities		Gross Amounts Offset in the Consolidated Balance Sheet		Net Amounts of Assets/ Liabilities Presented in the Consolidated Balance Sheet		Gross Amount of Collateral Received / Pledged Not Offset in the Consolidated Balance Sheet		Net Amount
March 31, 2022:
Derivative Assets:
Interest rate swaps	$	56	$	—	$	55	$	—	$	55
Total non-VIE derivative assets	$	56	$	—	$	55	$	—	$	55
Derivative Liabilities:
Credit derivatives	$	1	$	—	$	1	$	—	$	1
Interest rate swaps	75		—		74		73		2
Futures contracts	1		—		1		—		1
Total non-VIE derivative liabilities	$	76	$	—	$	76	$	73	$	3
Variable Interest Entities Derivative Assets:
Currency swaps	$	42	$	—	$	42	$	—	$	42
Total VIE derivative assets	$	42	$	—	$	42	$	—	$	42
Variable Interest Entities Derivative Liabilities:
Interest rate swaps	$	1,866	$	—	$	1,866	$	—	$	1,866
Total VIE derivative liabilities	$	1,866	$	—	$	1,866	$	—	$	1,866

December 31, 2021:
Derivative Assets:
Interest rate swaps	$	76	$	—	$	76	$	—	$	76
Total non-VIE derivative assets	$	76	$	—	$	76	$	—	$	76
Derivative Liabilities:
Credit derivatives	$	—	$	—	$	—	$	—	$	—
Interest rate swaps	94		—		94		93		1
Futures contracts	—		—		—		—		—
Total non-VIE derivative liabilities	$	95	$	—	$	95	$	93	$	2
Variable Interest Entities Derivative Assets:
Currency swaps	$	38	$	—	$	38	$	—	$	38
Total VIE derivative assets	$	38	$	—	$	38	$	—	$	38
Variable Interest Entities Derivative Liabilities:
Interest rate swaps	$	1,940	$	—	$	1,940	$	—	$	1,940
Total VIE derivative liabilities	$	1,940	$	—	$	1,940	$	—	$	1,940

Amounts representing the right to reclaim cash collateral or the obligation to return cash collateral are not offset against fair value amounts recognized for derivative instruments on the Unaudited Consolidated Balance Sheets. The amounts representing the right to reclaim cash collateral and posted margin, recorded in “Other assets” were $6 and $13 as of March 31, 2022 and December 31, 2021, respectively. There were no amounts held representing an obligation to return cash collateral as of March 31, 2022 and December 31, 2021.

The following tables summarize the location and amount of gains and losses of derivative contracts in the Unaudited Consolidated Statements of Total Comprehensive Income (Loss) for the three months ended March 31, 2022 and 2021:

	Location of Gain (Loss) Recognized in Consolidated Statements of Total Comprehensive Income (Loss)	Amount of Gain (Loss) Recognized in Consolidated Statement of Total Comprehensive Income (Loss)
		Three Months Ended March 31,
		2022		2021
Non-VIE derivatives:
Interest rate swaps	Net gains (losses) on derivative contracts	$	30	$	17
Futures contracts	Net gains (losses) on derivative contracts	27		8
Total Non-VIE derivatives		$	57	$	25
Variable Interest Entities:
Currency swaps	Income (loss) on variable interest entities	$	6	$	(2)
Interest rate swaps	Income (loss) on variable interest entities	5		97
Total Variable Interest Entities		11		96
Total derivative contracts		$	68	$	121

Credit Derivatives:

Credit derivatives, which are privately negotiated contracts, provide the counterparty with credit protection against the occurrence of a specific event such as a payment default or bankruptcy relating to an underlying obligation. Credit derivatives issued are insured by AAC. The outstanding credit derivative transaction at March 31, 2022, does not include ratings-based collateral-posting triggers or otherwise require Ambac to post collateral regardless of Ambac’s ratings or the size of the mark to market exposure to Ambac.

Our credit derivatives were written on a “pay-as-you-go” basis. Similar to an insurance policy, pay-as-you-go provides that Ambac pays interest shortfalls on the referenced transaction as they are incurred on each scheduled payment date, but only pays principal shortfalls upon the earlier of (i) the date on which the assets designated to fund the referenced obligation have been disposed of and (ii) the legal final maturity date of the referenced obligation.

Ambac maintains internal credit ratings on its guaranteed obligations, including credit derivative contracts, solely to indicate management’s view of the underlying credit quality of the guaranteed obligations. The principal notional outstanding for credit derivative contracts was $196 and $201 as of March 31, 2022 and December 31, 2021, respectively, all of which had internal Ambac ratings of AA in both periods.

Interest Rate Derivatives:

Ambac, through its subsidiary Ambac Financial Services (“AFS”), uses interest rate swaps, US Treasury futures contracts and other derivatives, to provide a partial economic hedge against the effects of rising interest rates elsewhere in the Legacy Financial Guarantee Insurance segment, including on Ambac’s financial guarantee exposures. Additionally, AFS provided interest rate swaps to states, municipalities and their authorities, asset-backed issuers and other entities in connection with their financings. As of March 31, 2022 and December 31, 2021, the notional amounts of AFS’s derivatives are as follows:

	Notional
Type of Derivative	March 31, 2022		December 31, 2021
Interest rate swaps—pay-fixed/receive-variable	$	1,262	$	1,275
US Treasury futures contracts—short	470		470
Interest rate swaps—receive-fixed/pay-variable	181		185

Derivatives of Consolidated Variable Interest Entities

Certain VIEs consolidated under the Consolidation Topic of the ASC entered into derivative contracts to meet specified purposes within the securitization structure. The notional for VIE derivatives outstanding as of March 31, 2022 and December 31, 2021, were as follows:

	Notional
Type of VIE Derivative	March 31, 2022		December 31, 2021
Interest rate swaps—receive-fixed/pay-variable	$	1,185	$	1,221
Interest rate swaps—pay-fixed/receive-variable	1,020		1,069
Currency swaps	256		272

Contingent Features in Derivatives Related to Ambac Credit Risk

Ambac’s over-the-counter interest rate swaps are centrally cleared when eligible. Certain interest rate swaps remain with professional swap-dealer counterparties and direct customer counterparties. These non-cleared swaps are generally executed under standardized derivative documents including collateral support and master netting agreements. Under these agreements, Ambac is required to post collateral in the event net unrealized losses exceed predetermined threshold levels. Additionally, given

that AAC is no longer rated by an independent rating agency, counterparties have the right to terminate the swap positions.

As of March 31, 2022 and December 31, 2021, the net liability fair value of derivative instruments with contingent features linked to Ambac’s own credit risk was $73 and $93, respectively, related to which Ambac had posted cash and securities as collateral with a fair value of $87 and $109, respectively. All such ratings-based contingent features have been triggered requiring maximum collateral levels to be posted by Ambac while preserving counterparties’ rights to terminate the contracts. Assuming all such contracts terminated at fair value on March 31, 2022, settlement of collateral balances and net derivative liabilities would result in a net receipt of cash and/or securities by Ambac. If counterparties elect to exercise their right to terminate, the actual termination payment amounts will be determined in accordance with derivative contract terms, which may result in amounts that differ from market values as reported in Ambac’s financial statements.

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Intangible Assets

3 Months Ended

Mar. 31, 2022

Goodwill and Intangible Assets Disclosure [Abstract]

Intangible Assets Disclosure [Text Block]

8.    INTANGIBLE ASSETS

Insurance intangible asset:

The insurance intangible asset and accumulated amortization are included in the Consolidated Balance Sheets, as shown below.

	March 31, 2022		December 31, 2021
Finite-lived Intangible Assets:
Insurance intangible:
Gross carrying value	$	1,264	$	1,278
Accumulated amortization	961		958
Net insurance intangible asset	303		320
Other intangibles:
Gross carrying value	$	36	36
Accumulated amortization	3		3
Net other intangible assets	32		33
Total finite-lived intangible assets	336		353
Indefinite-lived Intangible Assets:
Insurance licenses	14		9
Total intangible assets	$	350	362

Amortization Expense:

Amortization expense is included in the Consolidated Statements of Total Comprehensive Income (Loss), as shown below.

Three Months Ended March 31,	2022		2021
Insurance amortization expense	$	14	$	19
Other amortization expense	1		1
Total	$	14	$	19

The estimated future amortization expense for finite-lived intangible assets is as follows:

Amortization expense	Insurance Intangible Asset (1)		Other Intangible Assets (1)		Total
2022 (Nine months)	$	24	$	2	$	26
2023	30		3		32
2024	27		3		30
2025	25		3		27
2026	22		2		25
Thereafter	176		20		196

(1)The weighted-average insurance intangible amortization and other intangible amortization periods are 7.3 years and 5.8 years, respectively.

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Revenue Recognition and Deferred Revenue

3 Months Ended

Mar. 31, 2022

Revenue Recognition and Deferred Revenue [Abstract]

Revenue from Contract with Customer

The following table presents the Insurance Distribution business operations revenues recognized in accordance with the Revenue from Contracts with Customers Topic of the ASC disaggregated by policy type for the affected periods:

Three Months Ended March 31,	Employer Stop Loss		Affinity Products		Other		Total
2022	$	4	$	5	$	—	$	9
2021	$	3	$	4	$	—	$	7

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Comprehensive Income

3 Months Ended

Mar. 31, 2022

Equity [Abstract]

Comprehensive Income

11.    COMPREHENSIVE INCOME

The following tables detail the changes in the balances of each component of accumulated other comprehensive income for the affected periods:

	Unrealized Gains (Losses) on Available for Sale Securities (1)		Amortization of Postretirement Benefit (1)		Gain (Loss) on Foreign Currency Translation (1)		Credit Risk Changes of Fair Value Option Liabilities (1) (2)		Total
Three Months Ended March 31, 2022:
Beginning Balance	$	154	$	4	$	(100)	$	(1)	$	58
Other comprehensive income (loss) before reclassifications	(104)		—		(23)		—		(127)
Amounts reclassified from accumulated other comprehensive income (loss)	(1)		—		—		—		(1)
Net current period other comprehensive income (loss)	(105)		—		(23)		—		(127)
Balance at March 31, 2022	$	49	$	4	$	(123)	$	(1)	$	(70)
Three Months Ended March 31, 2021:
Beginning Balance	$	166	$	5	$	(92)	$	—	$	79
Other comprehensive income (loss) before reclassifications	(21)		—		6		—		(15)
Amounts reclassified from accumulated other comprehensive income (loss)	(3)		—		—		(1)		(4)
Net current period other comprehensive income (loss)	(24)		—		6		(1)		(18)
Balance at March 31, 2021	$	142	$	5	$	(86)	$	(1)	$	61

(1)All amounts are net of tax and noncontrolling interest. Amounts in parentheses indicate reductions to Accumulated Other Comprehensive Income.

(2)Represents the changes in fair value attributable to instrument-specific credit risk of liabilities for which the fair value option is elected.

The following table details the significant amounts reclassified from each component of accumulated other comprehensive income, shown in the above rollforward tables, for the affected periods:

Details about Accumulated Other Comprehensive Income Components	Amount Reclassified from Accumulated Other Comprehensive Income				Affected Line Item in the Consolidated Statement of Total Comprehensive Income (Loss)
	Three Months Ended March 31,
	2022		2021
Unrealized Gains (Losses) on Available-for-Sale Securities
	$	(1)	$	(2)	Net realized investment gains (losses)
	—		(1)		Provision for income taxes
	$	(1)	$	(3)	Net of tax and noncontrolling interest
Amortization of Postretirement Benefit
Prior service cost	$	—	$	—	Other income
Actuarial (losses)	—		—		Other income
	—		—		Total before tax
	—		—		Provision for income taxes
	$	—	$	—	Net of tax and noncontrolling interest
Credit risk changes of fair value option liabilities
	$	1	$	(1)	Credit risk changes of fair value option liabilities
	—		—		Provision for income taxes
	$	—	$	(1)	Net of tax and noncontrolling interest
Total reclassifications for the period	$	(1)	$	(3)	Net of tax and noncontrolling interest

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Net Income Per Share

3 Months Ended

Mar. 31, 2022

Earnings Per Share [Abstract]

Net Income Per Share

12.    NET INCOME PER SHARE

As of March 31, 2022, 46,545,232 shares of AFG's common stock (par value $0.01) and warrants entitling holders to acquire up to 4,877,617 shares of new common stock at an exercise price of $16.67 per share were issued and outstanding. Common shares outstanding increased by 241,093 during the three months ended March 31, 2022, primarily due to settlements of employee restricted and performance stock units.

Share Repurchases

On March 29, 2022, AFG's Board of Directors approved a share repurchase program authorizing up to $20 in share repurchases, with an expiration date of March 31, 2024, which may be terminated at any time. As of March 31, 2022, no shares were repurchased under this program. From April 1, 2022, through May 10, 2022, AFG repurchased 1,505,316 shares for $13.2 with an average purchase price of $8.78 per share. On May 5, 2022, the Board of Directors authorized an additional $15 in share repurchase bringing the total unused authorized amount to $21.8.

Earnings Per Share Calculation

The numerator of the basic and diluted earnings per share computation represents net income (loss) attributable to common stockholders adjusted by the retained earnings impact of the noncontrolling adjustment to redemption value under ASC 480. The redemption value adjustment is further described in the Redeemable Noncontrolling Interest section of Note 2. Basis of Presentation and Significant Accounting Policies in the Notes to Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.

The following table provides a reconciliation of net income attributable to common stockholders to the numerator in the basic and diluted earnings per share calculation, together with the resulting earnings per share amounts:

Three Months Ended March 31,	2022		2021
Net income attributable to common stockholders	$	2	$	17
Adjustment to redemption value (ASC 480)	—		(13)
Numerator of basic and diluted EPS	$	2	$	4
Per Share:
Basic	$	0.04	$	0.08
Diluted	$	0.04	$	0.08

The denominator of the basic earnings per share computation represents the weighted average common shares outstanding plus vested restricted stock units (together, "Basic Weighted Average Shares Outstanding"). The denominator of diluted earnings per share adjusts the basic weighted average shares outstanding for all potential dilutive common shares outstanding during the period. All potential dilutive common shares outstanding consider common stock deliverable pursuant to warrants, unvested restricted stock units and performance stock units granted under existing compensation plans.

The following table provides a reconciliation of the weighted average shares denominator used for basic net income per share to the denominator used for diluted net income per share:

Three Months Ended March 31,	2022	2021
Basic weighted average shares outstanding denominator	46,731,459	46,314,049
Effect of potential dilutive shares :
Warrants	—	214,904
Restricted stock units	82,066	121,215
Performance stock units (1)	546,206	207,896
Diluted weighted average shares outstanding denominator	47,359,731	46,858,064
Anti-dilutive shares excluded from the above reconciliation:
Warrants	4,877,617	—
Restricted stock units	253,828	165,529
Performance stock units (2)	—	—

(1)    Performance stock units are reflected based on the performance metrics through the balance sheet date. Vesting of these units is contingent upon meeting certain performance metrics. Although a portion of these performance metrics have been achieved as of the respective period end, it is possible that awards may no longer meet the metric at the end of the performance period.

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Income Taxes

3 Months Ended

Mar. 31, 2022

Income Tax Disclosure [Abstract]

Income Taxes

13.    INCOME TAXES

AFG files a consolidated Federal income tax return with its subsidiaries. AFG and its subsidiaries also file separate or combined income tax returns in various states, local and foreign jurisdictions. The following are the major jurisdictions in which Ambac and its subsidiaries operate and the earliest tax years subject to examination:

Jurisdiction	Tax Year
United States	2010
New York State	2013
New York City	2017
United Kingdom	2018
Italy	2017

In accordance with the Income Tax Topic of the ASC, a valuation allowance is recognized if, based on the weight of available evidence, it is more-likely-than-not that some, or all, of the deferred tax asset will not be realized. As a result of the risks and uncertainties associated with future operating results, management believes it is more likely than not that the Company will not generate sufficient U.S. federal, state and/or local taxable income to recover its deferred tax operating assets and therefore maintains a full valuation allowance.

Consolidated Pretax Income (Loss)

U.S. and foreign components of pre-tax income (loss) were as follows:

Three Months Ended March 31,	2022		2021
U.S.	$	(1)	$	17
Foreign	4		2
Total	$	3	$	19

Provision (Benefit) for Income Taxes

The components of the provision for income taxes were as follows:

Three Months Ended March 31,	2022		2021
Current taxes
U. S. federal	$	—	$	—
U.S. state and local	—		2
Foreign	1		3
Total Current taxes	2		5
Deferred taxes
Foreign	(1)		(3)
Total Deferred taxes	(1)		(3)
Provision for income taxes	$	—	$	2

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Commitments and Contingencies

3 Months Ended

Mar. 31, 2022

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

14.    COMMITMENTS AND CONTINGENCIES

The following commitments and contingencies provide an update of those discussed in Note 19: Commitments and Contingencies in the Notes to Consolidated Financial Statements included Part II, Item 8 in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021, and should be read in conjunction with the complete descriptions provided in the aforementioned Form 10-K.

Litigation Against Ambac

Monterey Bay Military Housing, LLC, et al. v. Ambac Assurance Corporation, et al. (United States District Court, Southern District of New York, Case No. 1:19-cv-09193-PGG, transferred on October 4, 2019 from the United States District Court, Northern District of California, San Jose Division, Case No. 17-cv-04992-BLF, filed August 28, 2017). Plaintiffs, the corporate developers of various military housing projects, filed an amended complaint on October 27, 2017 against AAC, a former employee of AAC, and certain unaffiliated persons and entities, asserting claims for (i) violation of 18 U.S.C §§ 1962(c) and 1962(d) (civil Racketeer Influenced and Corrupt Organizations Act (“RICO”) and conspiracy to commit civil RICO), (ii) breach of fiduciary duty, (iii) aiding and abetting breach of fiduciary duty, (iv) fraudulent misrepresentation, (v) fraudulent concealment and (vi) conspiracy to commit fraud. (After the case was transferred to the SDNY, the court dismissed the claims against AAC and its former employee for breach of fiduciary duty and for aiding and abetting breach of AAC’s or its former employee’s fiduciary duty; dismissed two plaintiffs’ RICO claims against AAC and its former employee; and in all other respects allowed plaintiffs' claims to go forward.) On April 6, 2022, certain co-defendants filed a motion to sever the plaintiffs’ claims and to dismiss all claims except for claims asserted by the Monterey Bay plaintiffs.

Financial Oversight and Management Board for Puerto Rico, et al. v. Autonomy Master Fund Limited, et al. (United States District Court, District of Puerto Rico, No. 19-ap-00291, filed May 2, 2019). On May 2, 2019, the Financial Oversight and Management Board for Puerto Rico (the "Oversight Board"), together with the Official Committee of Unsecured Creditors for the Commonwealth (the "Committee") filed an adversary proceeding against certain parties that filed proofs of claim on account of general obligation bonds issued by the Commonwealth of Puerto Rico, including AAC. The complaint seeks declarations that the general obligation bonds are unsecured obligations and, in the alternative, seeks to avoid any security interests that holders of such bonds may have. On June 13, 2019, the District Court stayed the case; the case remained stayed until early 2020. On March 10, 2020, the District Court again ordered that this case remain stayed while the Oversight Board attempted to confirm the a plan of adjustment for the Commonwealth (as amended, the “Commonwealth Plan”). On January 18, 2022, the Court entered an order confirming the Commonwealth Plan. The Commonwealth Plan resolves the issues raised in this adversary proceeding. Several parties appealed the District Court’s confirmation order to the First Circuit, including a number of teachers’ unions (the “Teachers’ Unions”), a number of credit unions (the “Credit Unions”), Suiza Dairy Corporation (“Suiza”), the Oversight Board, and certain individual creditors. On April 26, 2022, the First Circuit rejected the Teachers’ Unions’ challenges to the Commonwealth Plan and affirmed the confirmation order; on May 10, 2022, the Teachers’ Unions petitioned for rehearing en banc. All other appeals remain pending. On May 9, 2022, the Court dismissed this adversary proceeding, subject to a request for reinstatement if and when the First Circuit’s dispositions of the appeals concerning the confirmation order are final.

Financial Oversight and Management Board for Puerto Rico v. Ambac Assurance Corp., et al. (United States District Court, District of Puerto Rico, No. 20-ap-00003, filed Jan. 16, 2020). On January 16, 2020, the Oversight Board filed an adversary proceeding against monoline insurers insuring bonds issued by the Puerto Rico Infrastructure Financing Authority (“PRIFA”) and the PRIFA bond trustee, all of which defendants filed proofs of claim against the Commonwealth relating to PRIFA bonds. The complaint seeks to disallow defendants’ proofs of claim against the Commonwealth in their entirety, including for lack of secured status. On August 3, 2021, the District Court ordered that this case be stayed on the joint motion of the parties as a result of an agreement with the Oversight Board with respect to the treatment of PRIFA bonds (the “PRIFA Settlement”), an agreement with the Oversight Board with respect to the treatment of bonds issued by the Puerto Rico Highways and Transportation Authority (“PRHTA”) and the Puerto Rico Convention Center District Authority (“PRCCDA”) (the “PRHTA/PRCCDA Settlement”), and the settlement related to general obligation and PBA bonds (“GO/PBA Settlement”). On January 18, 2022, the Court entered an order confirming the Commonwealth Plan. The Commonwealth Plan resolves the issues raised in this adversary proceeding. Several parties appealed the District Court’s confirmation order to the First Circuit, including the Teachers’ Unions, the Credit Unions, Suiza, the Oversight Board, and certain individual creditors. On April 26, 2022, the First Circuit

rejected the Teachers’ Unions’ challenges to the Commonwealth Plan and affirmed the confirmation order; on May 10, 2022, the Teachers’ Unions petitioned for rehearing en banc. All other appeals remain pending.

Financial Oversight and Management Board for Puerto Rico v. Ambac Assurance Corp., et al. (United States District Court, District of Puerto Rico, No. 20-ap-00004, filed Jan. 16, 2020). On January 16, 2020, the Oversight Board filed an adversary proceeding against monoline insurers insuring bonds issued by the PRCCDA and the PRCCDA bond trustee, all of which defendants filed proofs of claim against the Commonwealth relating to PRCCDA bonds. The complaint seeks to disallow defendants’ proofs of claim against the Commonwealth in their entirety, including for lack of secured status. On August 3, 2021, the District Court ordered that this case be stayed on the joint motion of the parties as a result of the PRIFA Settlement, the PRHTA/PRCCDA Settlement, and the GO/PBA Settlement. On January 18, 2022, the Court entered an order confirming the Commonwealth Plan. The Commonwealth Plan resolves the issues raised in this adversary proceeding. Several parties appealed the District Court’s confirmation order to the First Circuit, including the Teachers’ Unions, the Credit Unions, Suiza, the Oversight Board, and certain individual creditors. On April 26, 2022, the First Circuit rejected the Teachers’ Unions’ challenges to the Commonwealth Plan and affirmed the confirmation order; on May 10, 2022, the Teachers’ Unions petitioned for rehearing en banc. All other appeals remain pending.

Financial Oversight and Management Board for Puerto Rico v. Ambac Assurance Corp., et al. (United States District Court, District of Puerto Rico, No. 20-ap-00005, filed Jan. 16, 2020). On January 16, 2020, the Oversight Board filed an adversary proceeding against monoline insurers insuring bonds issued by PRHTA, certain PRHTA bondholders, and the PRHTA fiscal agent for bondholders, all of which defendants filed proofs of claim against the Commonwealth relating to PRHTA bonds. The complaint seeks to disallow defendants’ proofs of claim against the Commonwealth in their entirety, including for lack of secured status. On August 3, 2021, the District Court ordered that this case be stayed on the joint motion of the parties as a result of the PRIFA Settlement, the PRHTA/PRCCDA Settlement, and the GO/PBA Settlement. On January 18, 2022, the Court entered an order confirming the Commonwealth Plan. The Commonwealth Plan resolves the issues raised in this adversary proceeding. Several parties appealed the District Court’s confirmation order to the First Circuit, including the Teachers’ Unions, the Credit Unions, Suiza, the Oversight Board, and certain individual creditors. On April 26, 2022, the First Circuit rejected the Teachers’ Unions’ challenges to the Commonwealth Plan and affirmed the confirmation order; on May 10, 2022, the Teachers’ Unions petitioned for rehearing en banc. All other appeals remain pending.

Financial Oversight and Management Board for Puerto Rico v. Ambac Assurance Corp., et al. (United States District Court, District of Puerto Rico, No. 20-ap-00007, filed Jan. 16, 2020). On January 16, 2020, the Oversight Board and the Committee filed an adversary proceeding against monoline insurers insuring bonds issued by PRHTA, certain PRHTA bondholders, and the

PRHTA fiscal agent for bondholders, all of which defendants filed proofs of claim against PRHTA relating to PRHTA bonds. The complaint seeks to disallow portions of defendants’ proofs of claim against the PRHTA, including for lack of secured status. On August 3, 2021, the District Court ordered that this case be stayed on the joint motion of the parties as a result of the PRIFA Settlement, the PRHTA/PRCCDA Settlement, and the GO/PBA Settlement. On January 18, 2022, the Court entered an order confirming the Commonwealth Plan. On April 14, 2022, the Oversight Board filed a notice that this case has not been resolved by the Commonwealth Plan and should remain pending. On May 2, 2022, the Oversight Board filed a disclosure statement (the “PRHTA DS”) and plan of adjustment (the “PRHTA POA”) for PRHTA; if confirmed, the PRHTA POA would resolve this litigation. A hearing on approval of the PRHTA DS is scheduled for June 17, 2022.

NC Residuals Owners Trust, et al. v. Wilmington Trust Co., et al. (Delaware Court of Chancery, C.A. No. 2019-0880, filed Nov. 1, 2019). On April 1, 2022, the Vice Chancellor entered another thirty-day stay to facilitate good-faith settlement discussions.

AAC’s estimates of projected losses for RMBS transactions consider, among other things, the RMBS transactions’ payment waterfall structure, including the application of interest and principal payments and recoveries, and depend in part on our interpretations of contracts and other bases of our legal rights. From time to time, bond trustees and other transaction participants have employed different contractual interpretations and have commenced, or threatened to commence, litigation to resolve these differences. It is not possible to predict whether additional disputes will arise, nor the outcomes of any potential litigation. It is possible that there could be unfavorable outcomes in this or other disputes or proceedings and that our interpretations may prove to be incorrect, which could lead to changes to our estimate of loss reserves.

AAC has periodically received various regulatory inquiries and requests for information with respect to investigations and inquiries that such regulators are conducting. AAC has complied with all such inquiries and requests for information.

The Company is involved from time to time in various routine legal proceedings, including proceedings related to litigation with present or former employees. Although the Company’s litigation with present or former employees is routine and incidental to the conduct of its business, such litigation can result in large monetary awards when a civil jury is allowed to determine compensatory and/or punitive damages for, among other things, termination of employment that is wrongful or in violation of implied contracts.

From time to time, Ambac is subject to allegations concerning its corporate governance that may lead to litigation, including derivative litigation, and while the monetary impacts may not be material, the matters may distract management and the Board of Directors from their principal focus on Ambac's business, strategy and objectives.

It is not reasonably possible to predict whether additional suits will be filed or whether additional inquiries or requests for

information will be made, and it is also not possible to predict the outcome of litigation, inquiries or requests for information. It is possible that there could be unfavorable outcomes in these or other proceedings. Legal accruals for litigation against the Company which are probable and reasonably estimable, and management's estimated range of loss for such matters, are either not applicable or are not material to the operating results or financial position of the Company. For the litigation matters the Company is defending that do not meet the “probable and reasonably estimable” accrual threshold and where no loss estimates have been provided above, management is unable to make a meaningful estimate of the amount or range of loss that could result from unfavorable outcomes. Under some circumstances, adverse results in any such proceedings could be material to our business, operations, financial position, profitability or cash flows. The Company believes that it has substantial defenses to the claims above and, to the extent that these actions proceed, the Company intends to defend itself vigorously; however, the Company is not able to predict the outcomes of these actions.

Litigation Filed or Joined by Ambac

In the ordinary course of their businesses, certain of Ambac’s subsidiaries assert claims in legal proceedings against third parties to recover losses already paid and/or mitigate future losses. The amounts recovered and/or losses avoided which may result from these proceedings is uncertain, although recoveries and/or losses avoided in any one or more of these proceedings during any quarter or fiscal year could be material to Ambac’s results of operations in that quarter or fiscal year.

Puerto Rico

Financial Oversight and Management Board for Puerto Rico v. Public Buildings Authority (United States District Court, District of Puerto Rico, No. 1:18-ap-00149, filed December 21, 2018). On December 21, 2018, the Oversight Board, together with the Committee, as Plaintiffs, filed a complaint against the Puerto Rico Public Buildings Authority (“PBA”) seeking declaratory judgment that the leases between PBA and its lessees-many of whom are agencies and instrumentalities of the Commonwealth are “disguised financings,” not true leases, and therefore should not be afforded administrative expense priority under the Bankruptcy Code. On July 24, 2019, the District Court stayed the case; on March 10, 2020, the District Court again ordered that this case be stayed while the Oversight Board attempted to confirm the Commonwealth Plan. On January 18, 2022, the Court entered an order confirming the Commonwealth Plan. The Commonwealth Plan resolves this litigation. Several parties appealed the District Court’s confirmation order to the First Circuit, including the Teachers’ Unions, the Credit Unions, Suiza, the Oversight Board, and certain individual creditors. On April 26, 2022, the First Circuit rejected the Teachers’ Unions’ challenges to the Commonwealth Plan and affirmed the confirmation order; on May 10, 2022, the Teachers’ Unions petitioned for rehearing en banc. All other appeals remain pending.

In re Financial Oversight and Management Board for Puerto Rico (United States District Court, District of Puerto Rico, No. 1:17-bk-03283), Omnibus Objection of (I) Financial Oversight and

Management Board, Acting Through its Special Claims Committee, and (II) Official Committee of Unsecured Creditors, Pursuant to Bankruptcy Code Section 502 and Bankruptcy Rule 3007, to Claims Filed or Asserted by Holders of Certain Commonwealth General Obligation Bonds (Dkt. No. 4784, filed January 14, 2019) (“GO Bond Claim Objection”). On January 14, 2019, the Oversight Board and the Committee filed an omnibus claim objection in the Commonwealth’s Title III case challenging claims arising from certain general obligation bonds issued by the Commonwealth in 2012 and 2014 totaling approximately $6 billion, none of which are held or insured by AAC. On April 11, 2019, AAC filed a notice of participation in support of the objection, advancing the argument, among other things, that the PBA leases are true leases, but the associated debt nonetheless should be included in the Commonwealth’s debt ceiling calculation such that the 2012 and 2014 general obligation bond issuances are null and void and claims arising therefrom should be disallowed. On July 24, 2019, the District Court stayed the case; the case remained stayed until early 2020. On March 10, 2020, the District Court again ordered that this matter remain stayed while the Oversight Board attempted to confirm the Commonwealth Plan. On January 18, 2022, the Court entered an order confirming the Commonwealth Plan. The Commonwealth Plan resolves the GO Bond Claim Objection. Several parties appealed the District Court’s confirmation order to the First Circuit, including the Teachers’ Unions, the Credit Unions, Suiza, the Oversight Board, and certain individual creditors. On April 26, 2022, the First Circuit rejected the Teachers’ Unions’ challenges to the Commonwealth Plan and affirmed the confirmation order; on May 10, 2022, the Teachers’ Unions petitioned for rehearing en banc. All other appeals remain pending.

In re Financial Oversight and Management Board for Puerto Rico (United States District Court, District of Puerto Rico, No. 1:17-bk-03283), Ambac Assurance Corporation's Motion and Memorandum of Law in Support of Its Motion Concerning Application of the Automatic Stay to the Revenues Securing PRIFA Rum Tax Bonds (Dkt. No. 7176, filed May 30, 2019) (“PRIFA Stay Motion”). On May 30, 2019, AAC filed a motion seeking an order that the automatic stay does not apply to certain lawsuits AAC seeks to bring or to continue relating to bonds issued by PRIFA, or, in the alternative, for relief from the automatic stay to pursue such lawsuits or for adequate protection of AAC's collateral. On July 2 and September 9, 2020, the District Court denied the motion to lift the stay. On March 3, 2021, the First Circuit affirmed the District Court’s opinions denying the motion to lift the stay. On August 3, 2021, the District Court ordered that this matter be stayed on the joint motion of the parties as a result of the PRIFA Settlement, the PRHTA/PRCCDA Settlement, and the GO/PBA Settlement. On January 18, 2022, the Court entered an order confirming the Commonwealth Plan; on January 20, 2022, the Court entered an order approving the Title VI Qualifying Modification for PRIFA (the “PRIFA QM”). The Commonwealth Plan and the PRIFA QM resolve the PRIFA Stay Motion. Several parties appealed the District Court’s confirmation order to the First Circuit, including the Teachers’ Unions, the Credit Unions, Suiza, the Oversight Board, and certain individual creditors. On April 26, 2022, the First Circuit rejected the Teachers’ Unions’ challenges to the

Commonwealth Plan and affirmed the confirmation order; on May 10, 2022, the Teachers’ Unions petitioned for rehearing en banc. All other appeals remain pending.

In re Financial Oversight and Management Board for Puerto Rico (United States District Court, District of Puerto Rico, No. 1:17-bk-03283), Motion of Assured Guaranty Corp., Assured Municipal Corp., Ambac Assurance Corporation, National Public Finance Guarantee Corporation, and Financial Guaranty Insurance Company for Relief from the Automatic Stay, or, in the Alternative, Adequate Protection (Dkt. No. 10102, filed January 16, 2020) (“PRHTA Stay Motion”). Pursuant to an order of the District Court setting out an agreed schedule for litigation submitted by the Mediation Team, on January 16, 2020, AAC, together with Assured Guaranty Corp., Assured Municipal Corp., National Public Finance Guarantee Corporation, and Financial Guaranty Insurance Company filed a motion seeking an order that the automatic stay does not apply to movants’ enforcement of the application of pledged revenues to the PRHTA bonds or the enforcement of movants’ liens on revenues pledged to such bonds, or, in the alternative, for adequate protection of movants’ interests in the revenues pledged to PRHTA bonds. On July 2 and September 9, 2020, the District Court denied the motion to lift the stay. On March 3, 2021, the First Circuit affirmed the District Court’s opinions denying the motion to lift the stay. On August 3, 2021, the District Court ordered that this matter be stayed on the joint motion of the parties as a result of the PRIFA Settlement, the PRHTA/PRCCDA Settlement, and the GO/PBA Settlement. On January 18, 2022, the Court entered an order confirming the Commonwealth Plan. The Commonwealth Plan resolves the PRHTA Stay Motion. Several parties appealed the District Court’s confirmation order to the First Circuit, including the Teachers’ Unions, the Credit Unions, Suiza, the Oversight Board, and certain individual creditors. On April 26, 2022, the First Circuit rejected the Teachers’ Unions’ challenges to the Commonwealth Plan and affirmed the confirmation order; on May 10, 2022, the Teachers’ Unions petitioned for rehearing en banc. All other appeals remain pending.

In re Financial Oversight and Management Board for Puerto Rico (United States District Court, District of Puerto Rico, No. 1:17-bk-03283), Ambac Assurance Corporation, Financial Guaranty Insurance Company, Assured Guaranty Corp., Assured Municipal Corp., and the Bank of New York Mellon’s Motion Concerning Application of the Automatic Stay to the Revenues Securing the CCDA Bonds (Dkt. No. 10104, filed January 16, 2020) (“PRCCDA Stay Motion”). Pursuant to an order of the District Court setting out an agreed schedule for litigation submitted by the Mediation Team, on January 16, 2020, AAC, together with Financial Guaranty Insurance Company, Assured Guaranty Corp., Assured Municipal Corp., and the PRCCDA bond trustee, filed a motion seeking an order either (i) that the automatic stay does not apply to movants’ enforcement of their rights to revenues pledged to PRCCDA bonds by bringing an enforcement action against PRCCDA; or, in the alternative, (ii) lifting the automatic stay to enable movants to pursue an enforcement action against PRCCDA; or, in the further alternative, (iii) ordering adequate protection of movants’ interests in the PRCCDA pledged to PRCCDA bonds. On July 2, 2020, the District Court denied the motion to lift the stay on

certain grounds, but found that the movants had stated a colorable claim that a certain account was the “Transfer Account” on which movants hold a lien. On September 9, 2020, the District Court denied the motion to lift the stay on the additional grounds, and found that a final determination on issues related to the identity of the Transfer Account would be made in the decision on the motions for summary judgment issued in the PRCCDA-related adversary proceeding, No. 20-ap-00004. On August 3, 2021, the District Court ordered that this matter be stayed on the joint motion of the parties as a result of the PRIFA Settlement, the PRHTA/PRCCDA Settlement, and the GO/PBA Settlement. On January 18, 2022, the Court entered an order confirming the Commonwealth Plan; on January 20, 2022, the Court entered an order approving the Title VI Qualifying Modification for PRCCDA (the “PRCCDA QM”). The Commonwealth Plan and the PRCCDA QM resolve the PRCCDA Stay Motion. Several parties appealed the District Court’s confirmation order to the First Circuit, including the Teachers’ Unions, the Credit Unions, Suiza, the Oversight Board, and certain individual creditors. On April 26, 2022, the First Circuit rejected the Teachers’ Unions’ challenges to the Commonwealth Plan and affirmed the confirmation order; on May 10, 2022, the Teachers’ Unions petitioned for rehearing en banc. All other appeals remain pending.

Ambac Assurance Corporation v. Merrill Lynch, Pierce, Fenner & Smith Incorporated, Citigroup Global Markets Inc., Goldman Sachs & Co. LLC, J.P. Morgan Securities LLC, Morgan Stanley & Co. LLC, Oriental Financial Services LLC; Popular Securities LLC; Raymond James & Associates, Inc., RBC Capital Markets LLC; Samuel A. Ramirez & Co. Inc., Santander Securities LLC; UBS Financial Services Inc.; and UBS Securities LLC (Commonwealth of Puerto Rico, Court of First Instance, San Juan Superior Court, Case No. SJ-2020-CV-01505, filed February 19, 2020). On April 27, 2022, the Commonwealth Court of Appeals affirmed the dismissal by the Commonwealth court of AAC’s Amended Complaint.

Ambac Assurance Corporation v. Financial Oversight and Management Board for Puerto Rico (United States District Court, District of Puerto Rico, No. 3:20-ap-00068, filed May 26, 2020). On May 26, 2020, AAC filed an adversary complaint before the Title III Court seeking (i) a declaration that titles I, II, and III of PROMESA are unconstitutional because they violate the Bankruptcy Clause of the U.S. Constitution (which requires all bankruptcy laws to be uniform) and (ii) dismissal of the pending Title III petitions. On August 3, 2021, the District Court ordered that this case be stayed on the joint motion of the parties as a result of the PRIFA Settlement, the PRHTA/PRCCDA Settlement, and the GO/PBA Settlement. On January 18, 2022, the Court entered an order confirming the Commonwealth Plan. The Commonwealth Plan resolves this litigation. Several parties appealed the District Court’s confirmation order to the First Circuit, including the Teachers’ Unions, the Credit Unions, Suiza, the Oversight Board, and certain individual creditors. On April 26, 2022, the First Circuit rejected the Teachers’ Unions’ challenges to the Commonwealth Plan and affirmed the confirmation order; on May 10, 2022, the Teachers’ Unions petitioned for rehearing en banc. All other appeals remain pending.

In re Financial Oversight and Management Board for Puerto Rico (United States District Court, District of Puerto Rico, No. 1:17-bk-03283), Objection of Ambac Assurance Corporation, Pursuant to Bankruptcy Code Section 502 and Bankruptcy Rule 3007, to Claim Asserted by the Official Committee of Retired Employees of the Commonwealth of Puerto Rico Appointed in the Commonwealth’s Title III Case (Dkt. No. 16884, filed June 3, 2021) (“Pension Claim Objection”). On June 3, 2021, AAC filed a claim objection in the Commonwealth’s Title III case challenging the amount of the claim filed by the Retiree Committee against the Commonwealth, which asserted pension liabilities of at least $58.5 billion. AAC contended that this asserted pension liability was overstated by at least $9 billion, and sought disallowance of the Retiree Committee’s proof of claim to the extent of the overstatement. On August 3, 2021, the District Court ordered that this case be stayed on the joint motion of the parties as a result of the PRIFA Settlement, the PRHTA/PRCCDA Settlement, and the GO/PBA Settlement. On January 18, 2022, the Court entered an order confirming the Commonwealth Plan. The Commonwealth Plan resolves this matter. Several parties appealed the District Court’s confirmation order to the First Circuit, including the Teachers’ Unions, the Credit Unions, Suiza, the Oversight Board, and certain individual creditors. On April 26, 2022, the First Circuit rejected the Teachers’ Unions’ challenges to the Commonwealth Plan and affirmed the confirmation order; on May 10, 2022, the Teachers’ Unions petitioned for rehearing en banc. All other appeals remain pending.

In re Financial Oversight and Management Board for Puerto Rico (United States District Court, District of Puerto Rico, No. 1:17- bk-03567). On May 21, 2017, the Oversight Board filed a petition to adjust PRHTA’s debts under Title III of PROMESA, resulting in an automatic stay of litigation against PRHTA. On May 2, 2022, the Oversight Board filed the PRHTA DS and PRHTA POA. A hearing on approval of the PRHTA DS is scheduled for June 17, 2022.

Student Loans Exposure

CFPB v. Nat’l Collegiate Master Student Loan Trust (United States District Court, District of Delaware, Case No. 1:17-cv-01323, filed September 18, 2017). On March 3, 2022, the CFPB filed its opposition to the petition filed on February 21, 2022 by the Trusts and several intervenors, including AAC, for permission to appeal to the Third Circuit the District Court’s order denying their motion to dismiss the amended complaint. On April 29, 2022, the Third Circuit granted the Trusts' and intervenors' petition.

RMBS Litigation

In connection with AAC’s efforts to seek redress for breaches of representations and warranties and fraud related to the information provided by both the underwriters and the sponsors of various transactions and for failure to comply with the obligation by the sponsors to repurchase ineligible loans, AAC has filed various lawsuits:

•    Ambac Assurance Corporation and The Segregated Account of Ambac Assurance Corporation v. First Franklin Financial Corporation, Bank of America, N.A., Merrill Lynch, Pierce,

Fenner & Smith Inc., Merrill Lynch Mortgage Lending, Inc., and Merrill Lynch Mortgage Investors, Inc. (Supreme Court of the State of New York, County of New York, Case No. 651217/2012, filed April 16, 2012). On March 17, 2022, the New York Court of Appeals decided an appeal in an unrelated RMBS case involving the issue of whether an RMBS sponsor can be held liable for damages for breaching loans that a trustee does not provide specific notice of pre-suit. The decision may affect one of the bases upon which AAC seeks recovery with respect to a significant portion of breaching loans. On April 27, 2022, the parties jointly requested an extension of the deadline for AAC to file a note of issue to June 23, 2022 (from April 28, 2022) and the deadline for summary judgment motions to August 22, 2022 (from June 27, 2022).

•    Ambac Assurance Corporation and The Segregated Account of Ambac Assurance Corporation v. Countrywide Securities Corp., Countrywide Financial Corp. (a.k.a. Bank of America Home Loans) and Bank of America Corp. (Supreme Court of the State of New York, County of New York, Case No. 651612/2010, filed on September 28, 2010). On March 17, 2022, the New York Court of Appeals decided an appeal in an unrelated RMBS case involving the issue of whether an RMBS sponsor can be held liable for damages for breaching loans that a trustee does not provide specific notice of pre-suit. The decision is relevant to this action and may affect one of the bases upon which AAC seeks recovery with respect to a significant portion of breaching loans.

•    Ambac Assurance Corporation and The Segregated Account of Ambac Assurance Corporation v. Nomura Credit & Capital, Inc. and Nomura Holding America Inc. (Supreme Court of the State of New York, County of New York, Case No. 651359/2013, filed on April 15, 2013). On March 21, 2022, each party filed an opposition to the motion for summary judgment filed by the other on December 21, 2021.

• Ambac Assurance Corporation and the Segregated Account of Ambac Assurance Corporation v. Countrywide Home Loans, Inc. (Supreme Court of the State of New York, County of New York, Case No. 652321/2015, filed on June 30, 2015). On March 11, 2022, AAC filed a motion for leave to appeal to the New York Court of Appeals, to which Countrywide filed a response on March 28, 2022.

• Ambac Assurance Corporation and the Segregated Account of Ambac Assurance Corporation v. Countrywide Home Loans, Inc., Countrywide Securities Corp., Countrywide Financial Corp., and Bank of America Corp. (Supreme Court of the State of New York, County of New York, Case No. 653979/2014, filed on December 30, 2014). On April 4, 2022, AAC filed its opposition to the motion for summary judgment that Countrywide filed on February 18, 2022, which was fully submitted as of May 4, 2022.

•    In the matter of HarborView Mortgage Loan Trust 2005-10 (Minnesota state court, Docket No. 27-TR-CV-17-32 (the “Minnesota Action”)). Trial was completed on May 6, 2022. Proposed findings of facts and conclusions of law and post-trial briefs are due on June 30, 2022, and the court will hear oral arguments on July 14, 2022.

•    Ambac Assurance Corporation v. U.S. Bank National Association (United States District Court, Southern District of New York, Docket No. 17-cv-02614, filed April 11, 2017). On March 7, 2022, the court entered a revised stipulated scheduling order whereby, following decision about summary judgment motions in Phase 1 and to the extent necessary, the parties will brief AAC’s proposed use of statistical sampling before proceeding with Phase 2 discovery.

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Basis of Presentation and Significant Accounting Policies (Policies)

3 Months Ended

Mar. 31, 2022

Accounting Policies [Abstract]

Organization, Consolidation, Basis of Presentation, Business Description and Accounting Policies [Text Block]

Consolidation: The consolidated financial statements include the accounts of AFG and all other entities in which AFG (directly or through its subsidiaries) has a controlling financial interest, including variable interest entities (“VIEs”) for which AFG or an AFG subsidiary is deemed the primary beneficiary in accordance with the Consolidation Topic of the Accounting Standards Codification ("ASC"). All significant intercompany balances have been eliminated. See Note 9. Variable Interest Entities, for a detailed discussion of Ambac’s involvement in VIEs, Ambac’s methodology for determining whether Ambac is required to consolidate a VIE and the effects of VIEs being consolidated and deconsolidated.

Basis of Presentation and Significant Accounting Policies [Text Block]

Basis of Presentation:

The accompanying unaudited consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles ("GAAP") for interim financial reporting and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and disclosures required by GAAP for annual periods. These consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Annual Report on Form 10-K for the year ended December 31, 2021. The accompanying consolidated financial statements have not been audited by an independent registered public accounting firm in accordance with the standards of the Public Company Accounting Oversight Board (U.S.), but in the opinion of management such financial statements include all adjustments necessary for the fair presentation of the Company’s consolidated financial position and results of operations. The results of operations for the three months ended March 31, 2022, may not be indicative of the results that may be expected for the year ending December 31, 2022. The December 31, 2021, consolidated balance sheet was derived from audited financial statements.

The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. As additional information becomes available or actual amounts become determinable, the recorded estimates are revised and reflected in operating results.

Foreign Currency Transactions and Translations Policy [Policy Text Block]

Foreign Currency:The impact of non-functional currency transactions and the remeasurement of non-functional currency assets and liabilities into the respective subsidiaries' functional currency (collectively "foreign currency transactions gains/(losses)") are $1 and $(5) for the three months ended March 31, 2022 and 2021, respectively. Foreign currency transactions gains/(losses) are primarily the result of remeasuring Ambac UK's assets and liabilities denominated in currencies other than its functional currency, primarily the U.S. dollar and the Euro.

Noncontrolling Interest Disclosure

Redeemable Noncontrolling Interest:

The acquisition by AFG of 80% of the ownership interests of Xchange is further described in Note 3. Business Combinations in the Notes to 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, 2021. Under the terms of the acquisition agreement, Ambac received a call option to purchase the remaining 20% of Xchange from the minority owners (i.e., noncontrolling interests) and the minority owners received a put option to sell the remaining 20% to Ambac. The call and put options are exercisable after different time periods elapse. Because the exercise of the put option is outside the control of Ambac, in accordance with the Distinguishing Liabilities from Equity Topic of the ASC, Ambac reports redeemable noncontrolling interests in the mezzanine section of its consolidated balance sheet.

The redeemable noncontrolling interest is remeasured each period as the greater of:

i.the carrying value under ASC 810, which attributes a portion of consolidated net income (loss) to the redeemable noncontrolling interest; and

ii.the redemption value of the put option under ASC 480 as if it were exercisable at the end of the reporting period.

Any increase (decrease) in the carrying amount of the redeemable noncontrolling interest as a result of adjusting to the redemption value of the put option is recorded as an offset to retained earnings. The impact of such differences on earnings per share are presented in Note 12. Net Income Per Share.

Following is a rollforward of redeemable noncontrolling interest.

Three Months Ended March 31,	2022		2021
Beginning balance	$	18	$	7
Net income attributable to redeemable noncontrolling interest (ASC 810)	—		—
Adjustment to redemption value (ASC 480)	—		13
Ending balance	$	18	$	20

Reclassifications

Reclassifications and Rounding

Reclassifications may have been made to prior years' amounts to conform to the current year's presentation. Certain amounts and tables in the consolidated financial statements and associated notes may not add due to rounding.

New Accounting Pronouncements, Policy [Policy Text Block]

Adopted Accounting Standards:

Effective January 1, 2022, the Company adopted the following accounting standard:

Equity-classified Written Call Options

In May 2021, the FASB issued ASU 2021-04, Issuer's Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options. The ASU clarifies and reduces diversity in practice for an issuer's accounting for modifications or exchanges of equity-classified written call options (e.g. warrants) that remain equity-classified after the modification or exchange. The ASU requires an issuer to account for the modification or exchange based on the economic substance of the transaction. For example, if the modification or exchange is related to the issuance of debt or equity, any change in the fair value of the written call option would be accounted for as part of the debt issuance cost in accordance with the debt guidance or equity issuance cost in accordance with the equity guidance, respectively. The ASU did not have a consequential impact on Ambac's financial statements.

Convertible Instruments and Contracts in an Entity's Own Equity

In August 2020, the FASB issued ASU 2020-06, Accounting for Convertible Instruments and Contracts in an Entity's Own Equity. The ASU i) simplifies the accounting for convertible debt and convertible preferred stock by reducing the number of accounting

models, and amends certain disclosures, ii) amends and simplifies the derivative scope exception guidance for contracts in an entity's own equity, including share-based compensation, and iii) amends the diluted earnings per share calculations for convertible instruments and contracts in an entity's own equity. The ASU did not have a consequential impact on Ambac's financial statements.

Future Application of Accounting Standards:

Reference Rate Reform

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848) - Facilitation of the Effects of Reference Rate Reform on Financial Reporting. The ASU provides companies with optional guidance to ease the potential accounting burden related to transitioning away from reference rates, such as LIBOR, that are expected to be discontinued as a result of initiatives undertaken by various jurisdictions around the world. For example, under current GAAP, contract modifications which change a reference rate are required to be evaluated in determining whether the modifications result in the establishment of new contracts or the continuation of existing contracts. The amendments in this ASU provide optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The ASU can be applied prospectively as of the beginning of the interim period that includes or is subsequent to March 12, 2020, or any date thereafter, but does not apply to contract modifications and other transactions entered into or evaluated after December 31, 2022. On April 20, 2022, the FASB issued a proposed ASU that would extend the sunset date to December 31, 2024 and make certain definitional changes, with feedback required by June 6, 2022. Management has not determined when it will adopt this ASU, and the impact on Ambac's financial statements is being evaluated.

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Segment Reporting (Policies)	3 Months Ended
	Mar. 31, 2022
Segment Reporting [Abstract]
Segment Reporting, Policy	The Company reports its results of operations in three segments: Legacy Financial Guarantee Insurance, Specialty Property and Casualty Insurance and Insurance Distribution, separate from Corporate and Other, which is consistent with the manner in which the Company's chief operating decision maker ("CODM") reviews the business to assess performance and allocate resources.

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Basis of Presentation and Significant Accounting Policies Supplemental Cash Flow Information (Tables)

3 Months Ended

Mar. 31, 2022

Supplemental Cash Flow Elements [Abstract]

Schedule of Cash Flow, Supplemental Disclosures [Table Text Block]

Supplemental Disclosure of Cash Flow Information	Three Months Ended March 31,
	2022		2021
Cash paid during the period for:
Income taxes	$	2	$	8
Interest on long-term debt	15		25
Non-cash investing and financing activities:
Decrease in long-term debt as a result of surplus notes exchanges	$	—	$	71
Exchange of investments in Puerto Rico bonds for new securities issued in the restructuring transactions	185		—
	March 31,
	2022		2021
Reconciliation of cash, cash equivalents, and restricted cash reported within the Consolidated Balance Sheets to the Consolidated Statements of Cash Flows:
Cash and cash equivalents	$	60	$	23
Restricted cash	7		16
Variable Interest Entity restricted cash	49		2
Total cash, cash equivalents, and restricted cash shown on the Consolidated Statements of Cash Flows	$	116	$	42

Redeemable Noncontrolling Interest

Following is a rollforward of redeemable noncontrolling interest.

Three Months Ended March 31,	2022		2021
Beginning balance	$	18	$	7
Net income attributable to redeemable noncontrolling interest (ASC 810)	—		—
Adjustment to redemption value (ASC 480)	—		13
Ending balance	$	18	$	20

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Segment Reporting (Tables)

3 Months Ended

Mar. 31, 2022

Segment Reporting [Abstract]

Schedule of Segment Reporting Information, by Segment

The following tables summarize the components of the Company’s total revenues and expenses, pretax income (loss), net income (loss), net income (loss) attributable to common shareholders and total assets by reportable business segment. Information provided below for “Corporate and Other” primarily relates to the operations of AFG, which will include investment income on its investment portfolio and costs to maintain the operations of AFG, including public company reporting, and business development costs for the acquisition and development of new business initiatives.

	Legacy Financial Guarantee Insurance		Specialty Property & Casualty Insurance		Insurance Distribution		Corporate & Other		Consolidated (2)
Three Months Ended March 31, 2022
Revenues:
Net premiums earned	$	13	$	1					$	15
Net investment income	5		—				—		5
Net gains on derivative contracts	57								57
Commission income					$	9			9
Other revenues (1)	34		—		—		—		34
Total revenues (2)	109		2		9		—		119
Expenses:
Loss and loss expenses	23		1						24
Operating expenses (3)	21		3		1		3		29
Sub-producer commissions (3)					5				5
Depreciation expense (3)	—		—		—		—		—
Intangible amortization	14				1				14
Interest expense	44								44
Total expenses (2)	102		4		6		3		116
Pretax income (loss)	$	6	$	(2)	$	2	$	(3)	$	3
Total assets (2)	$	11,075	$	191	$	97	$	168	$	11,531

	Legacy Financial Guarantee Insurance		Specialty Property & Casualty Insurance		Insurance Distribution		Corporate & Other		Consolidated (2)
Three Months Ended March 31, 2021
Revenues:
Net premiums earned	$	14	$	—					$	14
Net investment income	49		—				—		49
Net gains on derivative contracts	25								25
Commission income					$	7			7
Other revenues (1)	29		—		—		4		33
Total revenues (2)	118		—		7		4		129
Expenses:
Loss and loss expenses	8		—						8
Operating expenses (3)	17		1		1		10		29
Sub-producer commissions (3)					4				4
Depreciation expense (3)	—		—		—		—		—
Intangible amortization	19				1				19
Interest expense	50								50
Total expenses	94		1		5		10		110
Pretax income (loss) (2)	$	24	$	(1)	$	2	$	(6)	$	19
Total assets (2)	$	12,470	$	108	$	98	$	165	$	12,840

(1)Other revenues include the following line items on the Consolidated Statements of Total Comprehensive Income: Net investment gains (losses), including impairments, Net realized gains (losses) on extinguishment of debt, income (loss) on variable interest entities and other income (expense).

(2)Inter-segment revenues and inter-segment pre-tax income (loss) amounts are insignificant and are not presented separately. Total assets noted in the Corporate and Other Column is net of AFG's investment in surplus notes issued by the Legacy Financial Guarantee Segment with fair values of $77 and $114 at March 31, 2022 and 2021.

(3)The Consolidated Statements of Comprehensive Income presents the sum of these items as Operating Expenses.

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Investments (Tables)

3 Months Ended

Mar. 31, 2022

Investments, Debt and Equity Securities [Abstract]

Summary of Amortized Cost and Estimated Fair Value of Available-for-Sale Investments, Excluding VIE Investments

The amortized cost and estimated fair value of available-for-sale investments, excluding VIE investments, at March 31, 2022 and December 31, 2021, were as follows:

	Amortized Cost		Allowance for Credit Losses		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
March 31, 2022:
Fixed maturity securities:
Municipal obligations	$	65	$	—	$	5	$	1	$	69
Corporate obligations	610		1		2		34		577
Foreign obligations	92		—		—		4		88
U.S. government obligations	53		—		—		2		51
Residential mortgage-backed securities	179		—		47		—		225
Collateralized debt obligations	121		—		—		1		120
Other asset-backed securities (1)	232		—		20		—		252
	1,352		1		73		42		1,383
Short-term	540		—		—		—		540
	1,892		1		73		42		1,922
Fixed maturity securities pledged as collateral:
U.S. government obligations	15		—		—		—		15
Short-term	99		—		—		—		99
	114		—		—		—		114
Total available-for-sale investments	$	2,006	$	1	$	73	$	43	$	2,036

December 31, 2021:
Fixed maturity securities:
Municipal obligations	$	315	$	—	$	28	$	3	$	340
Corporate obligations	612		—		10		9		613
Foreign obligations	89		—		—		2		87
U.S. government obligations	45		—		1		1		45
Residential mortgage-backed securities	182		—		70		—		252
Collateralized debt obligations	128		—		—		—		128
Other asset-backed securities (1)	234		—		32		—		265
	1,605		—		141		16		1,730
Short-term	415		—		—		—		414
	2,020		—		141		16		2,145
Fixed maturity securities pledged as collateral:
U.S. government obligations	15		—		—		—		15
Short-term	105		—		—		—		105
	120		—		—		—		120
Total available-for-sale investments	$	2,140	$	—	$	141	$	16	$	2,265

(1)Consists primarily of Ambac's holdings of military housing and student loan securities.

Summary of Amortized Cost and Estimated Fair Value of Available-for-Sale Investments, Excluding VIE Investments Held by Successor Ambac, by Contractual Maturity

The amortized cost and estimated fair value of available-for-sale investments, excluding VIE investments, at March 31, 2022, by contractual maturity, were as follows:

	Amortized Cost		Estimated Fair Value
Due in one year or less	$	683	$	683
Due after one year through five years	431		416
Due after five years through ten years	317		300
Due after ten years	41		39
	1,472		1,438
Residential mortgage-backed securities	179		225
Collateralized debt obligations	121		120
Other asset-backed securities	232		252
Total	$	2,005	$	2,036

Summary of Gross Unrealized Losses and Fair Values of Ambac's Available-for-Sale Investments

The following table shows gross unrealized losses and fair values of Ambac’s available-for-sale investments, excluding VIE investments, which at March 31, 2022 and December 31, 2021, did not have an allowance for credit losses under the CECL standard. This information is aggregated by investment category and length of time that the individual securities have been in a continuous unrealized loss position, at March 31, 2022 and December 31, 2021:

	Less Than 12 Months				12 Months or More				Total
	Fair Value		Gross Unrealized Loss		Fair Value		Gross Unrealized Loss		Fair Value		Gross Unrealized Loss
March 31, 2022:
Fixed maturity securities:
Municipal obligations	$	19	$	1	$	1	$	—	$	19	$	1
Corporate obligations	349		21		117		13		466		34
Foreign obligations	36		1		51		3		87		4
U.S. government obligations	44		1		5		—		49		2
Residential mortgage-backed securities	16		—		1		—		17		—
Collateralized debt obligations	111		1		9		—		120		1
Other asset-backed securities	6		—		—		—		6		—
	580		26		184		16		764		42
Short-term	18		—		12		—		30		—
	598		26		196		17		794		42
Fixed income securities, pledged as collateral:
Short-term	15		—		—		—		15		—
Total collateralized investments	15		—		—		—		15		—
Total temporarily impaired securities	$	613	$	26	$	196	$	17	$	809	$	43

	Less Than 12 Months				12 Months or More				Total
	Fair Value		Gross Unrealized Loss		Fair Value		Gross Unrealized Loss		Fair Value		Gross Unrealized Loss
December 31, 2021:
Fixed maturity securities:
Municipal obligations	$	117	$	3	$	2	$	—	$	118	$	3
Corporate obligations	363		8		17		1		380		9
Foreign obligations	75		2		3		—		78		2
U.S. government obligations	25		—		2		—		27		1
Residential mortgage-backed securities	—		—		1		—		2		—
Collateralized debt obligations	68		—		3		—		71		—
Other asset-backed securities	6		—		—		—		6		—
	654		14		28		1		682		16
Short-term	114		—		13		—		128		—
	768		14		41		1		810		16
Fixed income securities, pledged as collateral:
U. S. government obligations	15		—		—		—		15		—
Total collateralized investments	15		—		—		—		15		—
Total temporarily impaired securities	$	783	$	14	$	41	$	1	$	825	$	16

Summary of Amounts Included in Net Realized (Losses) Gains and Other-Than-Temporary Impairments

The following table details amounts included in net investment gains (losses) and impairments included in earnings for the affected periods:

	Three Months Ended March 31,
	2022		2021
Gross realized gains on securities	$	23	$	7
Gross realized losses on securities	(15)		(1)
Foreign exchange gains (losses)	3		(4)
Credit impairments	(1)		—
Intent / requirement to sell impairments	—		—
Net investment gains (losses), including impairments	$	10	$	2

Summary of Fair Value, Including Financial Guarantee, and Weighted-Average Underlying Rating, Excluding Financial Guarantee, of Insured Securities

The following table represents the fair value and weighted-average underlying rating of insured securities in Ambac's investment portfolio at March 31, 2022 and December 31, 2021, respectively: 

	Municipal Obligations		Mortgage and Asset- backed Securities		Total		Weighted Average Underlying Rating (1)
March 31, 2022:
Ambac Assurance Corporation	$	47	$	403	$	451	B
Assured Guaranty Municipal Corporation	1		—		1		A
Total	$	48	$	403	$	451	B
December 31, 2021:
Ambac Assurance Corporation	$	316	$	439	$	754	B
National Public Finance Guarantee Corporation	2		—		2		BBB-
Assured Guaranty Municipal Corporation	1		—		1		A-
Total	$	318	$	439	$	757	B

(1)Ratings are based on the lower of Standard & Poor’s or Moody’s rating. If unavailable, Ambac’s internal rating is used.

Equity Method Investments [Table Text Block]

In addition to these investments, Ambac has unfunded commitments of $70 to private credit and private equity funds at March 31, 2022.

	Fair Value
Class of Funds	March 31, 2022		December 31, 2021		Redemption Frequency	Redemption Notice Period
Real estate properties (1)	$	40	$	33	quarterly	10 business days
Hedge funds (2)	196		216		quarterly or semi-annually	90 days
High yields and leveraged loans (3)	88		78		daily	0 - 30 days
Private credit (4)	87		88		quarterly if permitted	180 days if permitted
Insurance-linked investments (5)	1		2		see footnote (9)	see footnote (9)
Equity market investments (6) (10)	91		98		daily or quarterly	0 - 90 days
Investment grade floating rate income (7)	90		107		weekly	0 days
Private equity (8)	41		37		quarterly if permitted	90 days if permitted
Emerging markets debt (9) (10)	17		24		daily	0 days
Total equity investments in pooled funds	$	652	$	683

(1)Investments consist of UK property to generate income and capital growth.

(2)This class seeks to generate superior risk-adjusted returns through selective asset sourcing, active trading and hedging strategies across a range of asset types.

(3)This class of funds includes investments in a range of instruments including high-yield bonds, leveraged loans, CLOs, ABS and floating rate notes to generate income and capital appreciation.

(4)This class aims to obtain high long-term returns primarily through credit and preferred equity investments with low liquidity and defined term.

(5)This class seeks to generate returns from insurance markets through investments in catastrophe bonds, life insurance and other insurance linked investments. This investment is restricted in connection with the unwind of certain insurance linked exposures. Ambac has redeemed its investment to the extent permitted by the fund.

(6)This class of funds aim to achieve long term growth through diversified exposure to global equity-markets.

(7)This class of funds includes investments in high quality floating rate debt securities including ABS and corporate floating rate notes.

(8)This class seeks to generate long-term capital appreciation through investments in private equity, equity-related and other instruments.

(9)This class seeks long-term income and growth through investments in the bonds of issuers in emerging markets.

(10)These categories include fair value amounts totaling $92 and $106 at March 31, 2022 and December 31, 2021, respectively, that are readily determinable and are priced through pricing vendors, including for Equity market investments: $75 and $82; and for Emerging markets debt $17 and $24.

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Fair Value Measurements (Tables)

3 Months Ended

Mar. 31, 2022

Fair Value Disclosures [Abstract]

Summary of Carrying Amount and Fair Value of Ambac's Financial Assets and Liabilities

The following table sets forth the carrying amount and fair value of Ambac’s financial assets and liabilities as of March 31, 2022 and December 31, 2021, including the level within the fair value hierarchy at which fair value measurements are categorized. As required by the Fair Value Measurement Topic of the ASC, financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.

	Carrying Amount		Total Fair Value		Fair Value Measurements Categorized as:
March 31, 2022:					Level 1		Level 2		Level 3
Financial assets:
Fixed maturity securities:
Municipal obligations	$	188	$	188	$	—	$	188	$	—
Corporate obligations	577		577		1		564		12
Foreign obligations	88		88		88		—		—
U.S. government obligations	51		51		51		—		—
Residential mortgage-backed securities	225		225		—		225		—
Collateralized debt obligations	120		120		—		120		—
Other asset-backed securities	252		252		—		178		74
Fixed maturity securities, pledged as collateral:
U.S. government obligations	15		15		15		—		—
Short-term	99		99		99		—		—
Short term investments	540		540		526		13		—
Other investments (1)	660		652		92		—		—
Cash, cash equivalents and restricted cash	67		67		67		—		—
Derivative assets:
Interest rate swaps—asset position	56		56		—		3		52
Other assets-Loans	3		3		—		—		3
Variable interest entity assets:
Fixed maturity securities: Corporate obligations, fair value option	3,131		3,131		—		—		3,131
Fixed maturity securities: Municipal obligation, trading	114		114		—		114		—
Fixed maturity securities: Municipal obligations, available-for-sale	119		119		—		119		—
Restricted cash	49		49		49		—		—
Loans	2,469		2,469		—		—		2,469
Derivative assets: Currency swaps-asset position	42		42		—		42		—
Total financial assets	$	8,864	$	8,856	$	988	$	1,567	$	5,741
Financial liabilities:
Long term debt, including accrued interest	$	2,834	$	2,315	$	—	$	2,296	$	19
Derivative liabilities:
Credit derivatives	1		1		—		—		1
Interest rate swaps—liability position	75		75		—		75		—
Futures contracts	1		1		1		—		—
Liabilities for net financial guarantees written (2)	(970)		(197)		—		—		(197)
Variable interest entity liabilities:
Long-term debt (includes $3,701 at fair value)	4,124		4,161		—		4,001		160
Derivative liabilities: Interest rate swaps—liability position	1,866		1,866		—		1,866		—
Total financial liabilities	$	7,930	$	8,221	$	1	$	8,238	$	(17)

	Carrying Amount		Total Fair Value		Fair Value Measurements Categorized as:
December 31, 2021:					Level 1		Level 2		Level 3
Financial assets:
Fixed maturity securities:
Municipal obligations	$	340	$	340	$	—	$	340	$	—
Corporate obligations	613		613		1		600		12
Foreign obligations	87		87		87		—		—
U.S. government obligations	45		45		45		—		—
Residential mortgage-backed securities	252		252		—		252		—
Collateralized debt obligations	128		128		—		128		—
Other asset-backed securities	265		265		—		187		79
Fixed maturity securities, pledged as collateral:
U.S. government obligations	15		15		15		—		—
Short-term	105		105		105		—		—
Short term investments	414		414		369		46		—
Other investments (1)	690		683		106		—		—
Cash, cash equivalents and restricted cash	21		21		21		1		—
Derivative assets:
Interest rate swaps—asset position	76		76		—		5		71
Other assets - equity in sponsored VIE	—		—		—		—		—
Other assets-loans	3		3		—		—		3
Variable interest entity assets:
Fixed maturity securities: Corporate obligations, fair value option	3,320		3,320		—		—		3,320
Fixed maturity securities: Municipal obligations, available-for-sale	136		136		—		136		—
Restricted cash	2		2		2		—		—
Loans	2,718		2,718		—		—		2,718
Derivative assets: Currency swaps—asset position	38		38		—		38		—
Total financial assets	$	9,268	$	9,261	$	750	$	1,732	$	6,202
Financial liabilities:
Long term debt, including accrued interest	$	2,806	$	2,598	$	—	$	2,575	$	22
Derivative liabilities:
Credit derivatives	—		—		—		—		—
Interest rate swaps—liability position	94		94		—		94		—
Futures contracts	—		—		—		—		—
Liabilities for net financial guarantees written (2)	(866)		(112)		—		—		(112)
Variable interest entity liabilities:
Long-term debt (includes $4,056 at fair value)	4,216		4,255		—		4,086		169
Derivative liabilities: Interest rate swaps—liability position	1,940		1,940		—		1,940		—
Total financial liabilities	$	8,190	$	8,775	$	—	$	8,695	$	79

(1)Excluded from the fair value measurement categories in the table above are investment funds of $560 and $577 as of March 31, 2022 and December 31, 2021, respectively, which are measured using NAV as a practical expedient. Also excluded from the fair value measurements in the table above are equity securities with a carrying value of $8 and $8 as of March 31, 2022 and December 31, 2021, respectively, that do not have readily determinable fair values and have carrying amounts determined using the measurement alternative.

(2)The carrying value of net financial guarantees written includes financial guarantee amounts in the following balance sheet items: Premium receivables; Reinsurance recoverable on paid and unpaid losses; Deferred ceded premium; Subrogation recoverable; Insurance intangible asset; Unearned premiums; Loss and loss expense reserves; Ceded premiums payable, premiums taxes payable and other deferred fees recorded in Other liabilities.

Summary of Changes in Level 3 Fair Value Category

The following tables present the changes in the Level 3 fair value category for the periods presented in 2022 and 2021. Ambac classifies financial instruments in Level 3 of the fair value hierarchy when there is reliance on at least one significant unobservable input to the valuation model. In addition to these unobservable inputs, the valuation models for Level 3 financial instruments typically also rely on a number of inputs that are readily observable either directly or indirectly. Thus, the gains and losses presented below include changes in the fair value related to both observable and unobservable inputs.

Level 3 - Financial Assets and Liabilities Accounted for at Fair Value
							VIE Assets
	Investments(1)		Other Assets(2)		Derivatives		Investments		Loans		Total
Three Months Ended March 31, 2022:
Balance, beginning of period	$	91	$	—	$	70	$	3,320	$	2,718	$	6,199
Total gains/(losses) realized and unrealized:
Included in earnings	—		—		(17)		(93)		(96)		(204)
Included in other comprehensive income	(4)		—		—		(96)		(76)		(176)
Purchases	—		—		—		—		—		—
Settlements	(1)		—		(2)		—		(78)		(80)
Balance, end of period	$	86	$	—	$	52	$	3,131	$	2,469	$	5,738
The amount of total gains/(losses) included in earnings attributable to the change in unrealized gains or losses relating to assets and liabilities still held at the reporting date	$	—	$	—	$	(17)	$	(93)	$	(96)	$	(204)
The amount of total gains/(losses) included in other comprehensive income attributable to the change in unrealized gains or losses relating to assets and liabilities still held at the reporting date	$	(4)	$	—	$	—	$	(96)	$	(76)	$	(176)
Three Months Ended March 31, 2021:
Balance, beginning of period	$	78	$	1	$	84	$	3,215	$	2,998	$	6,376
Total gains/(losses) realized and unrealized:
Included in earnings	—		—		(17)		(138)		9		(145)
Included in other comprehensive income	(2)		—		—		26		24		49
Purchases	—		—		—		—		—		—
Settlements	—		—		(2)		—		(84)		(86)
Balance, end of period	$	76	$	1	$	65	$	3,103	$	2,948	$	6,194
The amount of total gains/(losses) included in earnings attributable to the change in unrealized gains or losses relating to assets and liabilities still held at the reporting date	$	—	$	—	$	(17)	$	(138)	$	9	$	(145)
The amount of total gains/(losses) included in other comprehensive income attributable to the change in unrealized gains or losses relating to assets and liabilities still held at the reporting date	$	(2)	$	—	$	—	$	26	$	24	$	49

(1)     Investments classified as Level 3 consist of a single other asset-backed security.

(2)    Other assets carried at fair value and classified as Level 3 relate to an equity interest in an Ambac sponsored VIE.

Summary of Gains and Losses (Realized and Unrealized) Relating to Level 3 Assets and Liabilities Included in Earnings

Gains and losses (realized and unrealized) relating to Level 3 assets and liabilities included in earnings for the affected periods are reported as follows:

	Net Investment Income		Net Gains (Losses) on Derivative Contracts		Income (Loss) on Variable Interest Entities		Other Income or (Expense)
Three Months Ended March 31, 2022:
Total gains (losses) included in earnings for the period	$	—	$	(17)	$	(188)	$	—
Changes in unrealized gains (losses) relating to financial instruments still held at the reporting date	—		(17)		(188)		—
Three Months Ended March 31, 2021:
Total gains (losses) included in earnings for the period	$	—	$	(17)	$	(129)	$	—
Changes in unrealized gains (losses) relating to financial instruments still held at the reporting date	—		(17)		(129)		—

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Insurance Contracts (Tables)

3 Months Ended

Mar. 31, 2022

Mar. 31, 2021

Insurance [Line Items]

Schedule of Loss And Loss Expense Reserves And Subrogation Recoverable Table [Table Text Block]

Ambac’s loss and loss expense reserves (“loss reserves”) are based on management’s on-going review of the insured portfolio. Below are the components of the loss and loss expense reserves and the subrogation recoverable asset at at March 31, 2022 and December 31, 2021:

			Legacy Financial Guarantee
	Specialty Property and Casualty		Present Value of Expected Net Cash Flows
Balance Sheet Line Item	Gross Loss and Loss Expense Reserves		Claims and Loss Expenses		Recoveries		Unearned Premium Revenue		Gross Loss and Loss Expense Reserves
March 31, 2022:
Loss and loss expense reserves	$	36	$	1,168	$	(95)	$	(42)	$	1,067
Subrogation recoverable	—		52		(1,766)		—		(1,714)
Totals	$	36	$	1,221	$	(1,861)	$	(42)	$	(647)
December 31, 2021:
Loss and loss expense reserves	$	32	$	1,749	$	(155)	$	(56)	$	1,570
Subrogation recoverable	—		88		(2,180)		—		(2,092)
Totals	$	32	$	1,837	$	(2,335)	$	(56)	$	(522)

Schedule of Finite-Lived Intangible Assets, Future Amortization Expense

The estimated future amortization expense for finite-lived intangible assets is as follows:

Amortization expense	Insurance Intangible Asset (1)		Other Intangible Assets (1)		Total
2022 (Nine months)	$	24	$	2	$	26
2023	30		3		32
2024	27		3		30
2025	25		3		27
2026	22		2		25
Thereafter	176		20		196

(1)The weighted-average insurance intangible amortization and other intangible amortization periods are 7.3 years and 5.8 years, respectively.

Premiums Receivable by Risk Classification Code [Table Text Block]

Below is the amortized cost basis of financial guarantee premium receivables by risk classification code and asset class as of March 31, 2022 and December 31, 2021:

Surveillance Categories as of March 31, 2022
Type of Guaranteed Bond	I		IA		II		III		IV		Total
Public Finance:
Housing revenue	$	147	$	3	$	5	$	—	$	—	$	155
Other	2		—		—		—		—		2
Total Public Finance	149		3		5		—		—		157
Structured Finance:
Mortgage-backed and home equity	1		—		—		2		11		15
Structured insurance	9		—		—		—		—		9
Student loan	1		1		—		8		—		11
Other	6		—		—		—		—		6
Total Structured Finance	18		1		—		11		11		41
International:
Sovereign/sub-sovereign	74		8		—		10		—		92
Investor-owned and public utilities	21		—		—		—		—		21
Other	5		—		—		—		—		5
Total International	100		8		—		10		—		118
Total (1) (2)	$	267	$	12	$	5	$	21	$	11	$	316
Surveillance Categories as of December 31, 2021
Type of Guaranteed Bond	I		IA		II		III		IV		Total
Public Finance:
Housing revenue	$	149	$	3	$	5	$	—	$	—	$	157
Other	2		—		—		—		—		2
Total Public Finance	151		3		5		—		—		159
Structured Finance:
Mortgage-backed and home equity	1		—		1		2		12		16
Student loan	1		1		—		9		—		12
Structured insurance	10		—		—		—		—		10
Other	7		—		—		—		—		7
Total Structured Finance	19		1		1		12		12		45
International:
Sovereign/sub-sovereign	74		8		—		11		—		93
Investor-owned and public utilities	28		—		—		—		—		28
Other	5		—		—		—		—		5
Total International	107		8		—		11		—		125
Total (1) (2)	$	277	$	12	$	6	$	22	$	12	$	329

(1)    Excludes specialty property and casualty premium receivables of $9 and $2 at March 31, 2022 and December 31, 2021, respectively.

(2)    The underwriting origination dates for all policies included are greater than five years prior to the current reporting date.

Premium Receivable, Allowance for Credit Loss [Table Text Block]

Below is a rollforward of the premium receivable allowance for credit losses as of March 31, 2022 and 2021:

Three Months Ended March 31,	2022		2021
Beginning balance	$	9	$	17
Current period provision (benefit)	(1)		(4)
Write-offs of the allowance	—		—
Recoveries of previously written-off amounts	—		—
Ending balance (1)	$	8	$	13

(1)At March 31, 2022 and 2021, $1 and $— of premiums were past due.

Summary of Loss Reserve Roll-Forward, Net of Subrogation Recoverable and Reinsurance

Below is the loss and loss reserve expense roll-forward, net of subrogation recoverable and reinsurance, for the affected periods:

Three Months Ended March 31,	2022		2021
Beginning gross loss and loss expense reserves	$	(522)	$	(397)
Reinsurance recoverable	55		33
Beginning balance of net loss and loss expense reserves	(578)		(430)
Losses and loss expenses (benefit):
Current year	1		—
Prior years	23		8
Total (1) (2)	24		8
Loss and loss expenses paid (recovered):
Current year	—		—
Prior years	(150)		25
Total	(150)		25
Foreign exchange effect	(1)		—
Ending net loss and loss expense reserves	(404)		(447)
Impact of VIE consolidation	(292)		—
Reinsurance recoverable (3)	49		33
Ending gross loss and loss expense reserves	$	(647)	$	(414)

(1)Total losses and loss expenses (benefit) includes $(7) and $(1) for the three months ended March 31, 2022 and 2021, respectively, related to ceded reinsurance.

(2)Ambac records the impact of estimated recoveries related to securitized loans in RMBS transactions that breached certain representations and warranties ("R&W's) by transaction sponsors within losses and loss expenses (benefit). The losses and loss expense incurred associated with changes in estimated R&W's for the three months ended March 31, 2022 and 2021, was $224 and $3, respectively.

(3)Represents reinsurance recoverable on future loss and loss expenses. Additionally, the Balance Sheet line "Reinsurance recoverable on paid and unpaid losses" includes reinsurance recoverables (payables) of $0 and $0 as of March 31, 2022 and 2021, respectively, related to previously presented loss and loss expenses and subrogation.

Summary of Information Related to Policies Currently Included in Ambac's Loss Reserves or Subrogation Recoverable

The tables below summarize information related to policies currently included in Ambac’s loss and loss expense reserves or subrogation recoverable at March 31, 2022 and December 31, 2021, excluding consolidated VIEs. Gross par exposures include capital appreciation bonds which are reported at the par amount at the time of issuance of the insurance policy as opposed to the current accreted value of the bond. The weighted average risk-free rate used to discount loss reserves at March 31, 2022 and December 31, 2021,was 2.4% and 1.2%, respectively.

Surveillance Categories as of March 31, 2022
	I		IA		II		III		IV		V		Total
Number of policies	34		14		8		14		124		5		199
Remaining weighted-average contract period (in years) (1)	9		17		14		15		14		7		14
Gross insured contractual payments outstanding:
Principal	$	1,297	$	305	$	457	$	1,265	$	2,105	$	40	$	5,469
Interest	608		348		308		174		683		22		2,143
Total	$	1,905	$	653	$	766	$	1,439	$	2,788	$	62	$	7,612
Gross undiscounted claim liability	$	8	$	5	$	45	$	572	$	867	$	62	$	1,559
Discount, gross claim liability	(1)		(1)		(5)		(155)		(208)		(7)		(377)
Gross claim liability before all subrogation and before reinsurance	7		5		40		416		659		55		1,182
Less:
Gross RMBS subrogation (2)	—		—		—		—		(1,537)		—		(1,537)
Discount, RMBS subrogation	—		—		—		—		35		—		35
Discounted RMBS subrogation, before reinsurance	—		—		—		—		(1,502)		—		(1,502)
Less:
Gross other subrogation (3)	—		(5)		—		(33)		(350)		(12)		(401)
Discount, other subrogation	—		—		—		4		34		3		41
Discounted other subrogation, before reinsurance	—		(5)		—		(29)		(316)		(10)		(360)
Gross claim liability, net of all subrogation and discounts, before reinsurance	7		—		40		387		(1,159)		45		(680)
Less: Unearned premium revenue	(5)		(3)		(5)		(12)		(16)		(1)		(42)
Plus: Loss expense reserves	1		—		—		3		35		—		39
Gross loss and loss expense reserves	$	3	$	(3)	$	35	$	378	$	(1,140)	$	44	$	(683)
Reinsurance recoverable reported on Balance Sheet (4)	$	1	$	—	$	9	$	22	$	(18)	$	—	$	14

(1)Remaining weighted-average contract period is weighted based on projected gross claims over the lives of the respective policies.

(2)RMBS subrogation represents Ambac’s estimate of subrogation recoveries from RMBS transaction sponsors for representation and warranty ("R&W") breaches.

(3)Other subrogation represents subrogation related to excess spread and other contractual cash flows on public finance and structured finance transactions including RMBS.

(4)Reinsurance recoverable reported on the Balance Sheet includes reinsurance recoverables of $14 related to future loss and loss expenses and $0 related to presented loss and loss expenses and subrogation.

Surveillance Categories as of December 31, 2021
	I		IA		II		III		IV		V		Total
Number of policies	34		15		7		14		130		5		205
Remaining weighted-average contract period (in years) (1)	9		12		14		15		13		7		14
Gross insured contractual payments outstanding:
Principal	$	904	$	840	$	459	$	1,300	$	2,759	$	40	$	6,302
Interest	589		612		308		169		1,284		22		2,984
Total	$	1,493	$	1,452	$	767	$	1,469	$	4,043	$	62	$	9,286
Gross undiscounted claim liability	$	5	$	16	$	45	$	544	$	1,423	$	62	$	2,095
Discount, gross claim liability	—		(1)		(3)		(109)		(185)		(4)		(303)
Gross claim liability before all subrogation and before reinsurance	5		15		42		435		1,238		57		1,792
Less:
Gross RMBS subrogation (2)	—		—		—		—		(1,737)		—		(1,737)
Discount, RMBS subrogation	—		—		—		—		7		—		7
Discounted RMBS subrogation, before reinsurance	—		—		—		—		(1,730)		—		(1,730)
Less:
Gross other subrogation (3)	—		(5)		—		(33)		(583)		(12)		(633)
Discount, other subrogation	—		—		—		2		24		2		28
Discounted other subrogation, before reinsurance	—		(5)		—		(31)		(559)		(10)		(605)
Gross claim liability, net of all subrogation and discounts, before reinsurance	5		10		42		404		(1,051)		47		(543)
Less: Unearned premium revenue	(3)		(10)		(5)		(14)		(24)		(1)		(56)
Plus: Loss expense reserves	1		—		—		4		40		—		45
Gross loss and loss expense reserves	$	3	$	1	$	38	$	394	$	(1,036)	$	46	$	(554)
Reinsurance recoverable reported on Balance Sheet (4)	$	1	$	1	$	10	$	22	$	(11)	$	—	$	23

(1)Remaining weighted-average contract period is weighted based on projected gross claims over the lives of the respective policies.

(2)RMBS subrogation represents Ambac’s estimate of subrogation recoveries from RMBS transaction sponsors for R&W breaches.

(3)Other subrogation represents subrogation related to excess spread and other contractual cash flows on public finance and structured finance transactions, including RMBS.

(4)Reinsurance recoverable reported on the Balance Sheet includes reinsurance recoverables of $24 related to future loss and loss expenses and $0 related to presented loss and loss expenses and subrogation.

Summary of Rollforward of RMBS Subrogation, by Estimation Approach

The reduction in recorded RMBS R&W recoveries since December 31, 2021, is primarily attributable to management’s view of the effect on certain of AAC’s R&W litigations of the March 17, 2022 decision of the New York Court of Appeals in the case entitled U.S. Bank National Association v. DLJ Mortgage Capital, Inc. relating to Home Equity Asset Trust 2007-1, a residential mortgage-backed securities trust. The decision is relevant to AAC's breach-of-contract cases relating to its insured RMBS transactions and may affect one of the bases upon which AAC seeks recovery with respect to a significant portion of breaching loans in AAC's RMBS cases. However, management believes there remain other alternative paths to recovery for such breaching loans.

Effects of Reinsurance

The effect of reinsurance on premiums written and earned was as follows:

	Three Months Ended March 31,
	2022				2021
	Written		Earned		Written		Earned
Direct	$	30	$	23	$	(2)	$	17
Assumed	—		—		—		—
Ceded	18		8		7		3
Net premiums	$	12	$	15	$	(9)	$	14

The following table summarizes net premiums earned by location of risk:

	Three Months Ended March 31,
	2022		2021
United States	$	9	$	7
United Kingdom	4		3
Other international	1		3
Total	$	15	$	14

Premiums Receivable for Financial Guarantees

Below is the gross premium receivable roll-forward (direct and assumed contracts) for the affected periods:

Three Months Ended March 31,	2022		2021
Beginning premium receivable	$	320	$	370
Premium receipts	(15)		(12)
Adjustments for changes in expected and contractual cash flows for contracts (1)	3		(8)
Accretion of premium receivable discount for contracts	2		2
Changes to allowance for credit losses	1		4
Other adjustments (including foreign exchange)	(3)		—
Ending premium receivable (2)	$	308	$	356

(1)    Adjustments for changes in expected and contractual cash flows primarily due to indexation offset by reductions in insured exposure as a result of early policy terminations and unscheduled principal paydowns.

(2)    Premium receivable includes premiums to be received in foreign denominated currencies most notably in British Pounds and Euros. At March 31, 2022 and 2021, premium receivables include British Pounds of $101 (£77) and $122 (£89), respectively, and Euros of $16 (€15) and $21 (€18), respectively.

Financial Guarantee Insurance Contracts, Premium Received over Contract Period

The following table summarizes the future gross undiscounted premiums to be collected and future premiums earned, net of reinsurance at March 31, 2022:

	Future Premiums to be Collected (1)		Future Premiums to be Earned Net of Reinsurance (2)
Three months ended:
June 30, 2022	$	8	$	6
September 30, 2022	9		6
December 31, 2022	6		6
Twelve months ended:
December 31, 2023	30		24
December 31, 2024	29		23
December 31, 2025	28		22
December 31, 2026	27		22
Five years ended:
December 31, 2031	115		89
December 31, 2036	77		55
December 31, 2041	34		22
December 31, 2046	16		9
December 31, 2051	5		3
December 31, 2056	—		—
Total	$	384	$	288

(1)Future premiums to be collected are undiscounted, gross of allowance for credit losses, and are used to derive the discounted premium receivable asset recorded on Ambac's balance sheet.

(2)Future premiums to be earned, net of reinsurance relate to the unearned premiums liability and deferred ceded premium asset recorded on Ambac’s balance sheet. The use of contractual lives for many bond types which do not have homogeneous pools of underlying collateral is required in the calculation of the premium receivable, as further described in Note 2. Basis of Presentation and Significant Accounting Policies in the Notes to Consolidated Financial Statements included in Ambac's Annual Report on Form 10-K for the year ended December 31, 2021. This results in a different premium receivable balance than if expected lives were considered. If installment paying policies are retired or prepay early, premiums reflected in the premium receivable asset and amounts reported in the above table for such policies may not be collected. Future premiums to be earned also considers the use of contractual lives for many bond types which do not have homogeneous pools of underlying collateral, which may result in different unearned premium than if expected lives were considered. If those bonds types are retired early, premium earnings may be negative in the period of call or refinancing.

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Derivative Instruments (Tables)

3 Months Ended

Mar. 31, 2022

Summary of Gross Fair Values of Individual Derivative Instruments

The following tables summarize the gross fair values of individual derivative instruments and the impact of legal rights of offset as reported in the Consolidated Balance Sheets as of March 31, 2022 and December 31, 2021:

	Gross Amounts of Recognized Assets / Liabilities		Gross Amounts Offset in the Consolidated Balance Sheet		Net Amounts of Assets/ Liabilities Presented in the Consolidated Balance Sheet		Gross Amount of Collateral Received / Pledged Not Offset in the Consolidated Balance Sheet		Net Amount
March 31, 2022:
Derivative Assets:
Interest rate swaps	$	56	$	—	$	55	$	—	$	55
Total non-VIE derivative assets	$	56	$	—	$	55	$	—	$	55
Derivative Liabilities:
Credit derivatives	$	1	$	—	$	1	$	—	$	1
Interest rate swaps	75		—		74		73		2
Futures contracts	1		—		1		—		1
Total non-VIE derivative liabilities	$	76	$	—	$	76	$	73	$	3
Variable Interest Entities Derivative Assets:
Currency swaps	$	42	$	—	$	42	$	—	$	42
Total VIE derivative assets	$	42	$	—	$	42	$	—	$	42
Variable Interest Entities Derivative Liabilities:
Interest rate swaps	$	1,866	$	—	$	1,866	$	—	$	1,866
Total VIE derivative liabilities	$	1,866	$	—	$	1,866	$	—	$	1,866

December 31, 2021:
Derivative Assets:
Interest rate swaps	$	76	$	—	$	76	$	—	$	76
Total non-VIE derivative assets	$	76	$	—	$	76	$	—	$	76
Derivative Liabilities:
Credit derivatives	$	—	$	—	$	—	$	—	$	—
Interest rate swaps	94		—		94		93		1
Futures contracts	—		—		—		—		—
Total non-VIE derivative liabilities	$	95	$	—	$	95	$	93	$	2
Variable Interest Entities Derivative Assets:
Currency swaps	$	38	$	—	$	38	$	—	$	38
Total VIE derivative assets	$	38	$	—	$	38	$	—	$	38
Variable Interest Entities Derivative Liabilities:
Interest rate swaps	$	1,940	$	—	$	1,940	$	—	$	1,940
Total VIE derivative liabilities	$	1,940	$	—	$	1,940	$	—	$	1,940

Summary of Location and Amount of Gains and Losses of Derivative Contracts

The following tables summarize the location and amount of gains and losses of derivative contracts in the Unaudited Consolidated Statements of Total Comprehensive Income (Loss) for the three months ended March 31, 2022 and 2021:

	Location of Gain (Loss) Recognized in Consolidated Statements of Total Comprehensive Income (Loss)	Amount of Gain (Loss) Recognized in Consolidated Statement of Total Comprehensive Income (Loss)
		Three Months Ended March 31,
		2022		2021
Non-VIE derivatives:
Interest rate swaps	Net gains (losses) on derivative contracts	$	30	$	17
Futures contracts	Net gains (losses) on derivative contracts	27		8
Total Non-VIE derivatives		$	57	$	25
Variable Interest Entities:
Currency swaps	Income (loss) on variable interest entities	$	6	$	(2)
Interest rate swaps	Income (loss) on variable interest entities	5		97
Total Variable Interest Entities		11		96
Total derivative contracts		$	68	$	121

Summary of Notional Amounts of AFS's Trading Derivative Products

As of March 31, 2022 and December 31, 2021, the notional amounts of AFS’s derivatives are as follows:

	Notional
Type of Derivative	March 31, 2022		December 31, 2021
Interest rate swaps—pay-fixed/receive-variable	$	1,262	$	1,275
US Treasury futures contracts—short	470		470
Interest rate swaps—receive-fixed/pay-variable	181		185

Variable Interest Entity, Primary Beneficiary [Member]

Summary of Notional Amounts of AFS's Trading Derivative Products

The notional for VIE derivatives outstanding as of March 31, 2022 and December 31, 2021, were as follows:

	Notional
Type of VIE Derivative	March 31, 2022		December 31, 2021
Interest rate swaps—receive-fixed/pay-variable	$	1,185	$	1,221
Interest rate swaps—pay-fixed/receive-variable	1,020		1,069
Currency swaps	256		272

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Intangible Assets (Tables)

3 Months Ended

Mar. 31, 2022

Finite-Lived Intangible Assets [Line Items]

Finite-lived Intangible Assets Amortization Expense

Amortization expense is included in the Consolidated Statements of Total Comprehensive Income (Loss), as shown below.

Three Months Ended March 31,	2022		2021
Insurance amortization expense	$	14	$	19
Other amortization expense	1		1
Total	$	14	$	19

Schedule of Finite-Lived Intangible Assets, Future Amortization Expense

The estimated future amortization expense for finite-lived intangible assets is as follows:

Amortization expense	Insurance Intangible Asset (1)		Other Intangible Assets (1)		Total
2022 (Nine months)	$	24	$	2	$	26
2023	30		3		32
2024	27		3		30
2025	25		3		27
2026	22		2		25
Thereafter	176		20		196

(1)The weighted-average insurance intangible amortization and other intangible amortization periods are 7.3 years and 5.8 years, respectively.

Insurance Intangible Asset [Member]

Finite-Lived Intangible Assets [Line Items]

Schedule of Finite-Lived Intangible Assets

The insurance intangible asset and accumulated amortization are included in the Consolidated Balance Sheets, as shown below.

	March 31, 2022		December 31, 2021
Finite-lived Intangible Assets:
Insurance intangible:
Gross carrying value	$	1,264	$	1,278
Accumulated amortization	961		958
Net insurance intangible asset	303		320
Other intangibles:
Gross carrying value	$	36	36
Accumulated amortization	3		3
Net other intangible assets	32		33
Total finite-lived intangible assets	336		353
Indefinite-lived Intangible Assets:
Insurance licenses	14		9
Total intangible assets	$	350	362

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Special Purpose Entities, Including Variable Interest Entities (Tables)

3 Months Ended

Mar. 31, 2022

Variable Interest Entity [Line Items]

Components of VIE Gain (Loss) [Table Text Block]

The following schedule details the components of Income (loss) on variable interest entities for the affected periods:

Three Months Ended March 31,	2022		2021
Net change in fair value of VIE assets and liabilities reported under the fair value option	$	(1)	$	(1)
Less: Credit risk changes of fair value option long-term debt reported through other comprehensive income (loss)	(1)		1
Net change in fair value of VIE assets and liabilities reported in earnings under the fair value option	(1)		(1)
Investment income (loss)	(4)		2
Net realized investment gains (losses) on available-for-sale securities	1		1
Interest expense on long-term debt carried at par less unamortized cost	(2)		(1)
Gain (loss) from consolidating VIEs	28		—
Income (loss) on variable interest entities	$	22	$	—

Summary of Carrying Amount of Assets, Liabilities and Maximum Exposure to Loss of Ambac's Variable Interests in Non-Consolidated Variable Interest Entities

The following table displays the carrying amount of the assets, liabilities and maximum exposure to loss of Ambac’s variable interests in non-consolidated VIEs resulting from financial guarantee and derivative contracts by major underlying asset classes, as of March 31, 2022 and December 31, 2021:

	Carrying Value of Assets and Liabilities
	Maximum Exposure To Loss (1)		Insurance Assets (2)		Insurance Liabilities (3)		Net Derivative Assets (Liabilities) (4)
March 31, 2022:
Global structured finance:
Mortgage-backed—residential	$	3,089	$	1,637	$	466	$	—
Other consumer asset-backed	743		16		231		—
Other	775		2		9		3
Total global structured finance	4,608		1,655		706		3
Global public finance	19,910		244		255		(1)
Total	$	24,517	$	1,899	$	962	$	2
December 31, 2021:
Global structured finance:
Mortgage-backed—residential	$	3,265	$	1,929	$	521	$	—
Other consumer asset-backed	788		17		234		—
Other	826		3		10		5
Total global structured finance	4,879		1,949		765		5
Global public finance	20,233		246		257		—
Total	$	25,112	$	2,195	$	1,023	$	5

(1)Maximum exposure to loss represents the maximum future payments of principal and interest on insured obligations and derivative contracts. Ambac’s maximum exposure to loss does not include the benefit of any financial instruments (such as reinsurance or hedge contracts) that Ambac may utilize to mitigate the risks associated with these variable interests.

(2)Insurance assets represent the amount included in “Premium receivables” and “Subrogation recoverable” for financial guarantee insurance contracts on Ambac’s Consolidated Balance Sheets.

(3)Insurance liabilities represent the amount included in “Loss and loss expense reserves” and “Unearned premiums” for financial guarantee insurance contracts on Ambac’s Consolidated Balance Sheets.

(4)Net derivative assets (liabilities) represent the fair value recognized on credit derivative contracts and interest rate swaps on Ambac’s Consolidated Balance Sheets.

Schedule of Variable Interest Entities Assets and Liabilities [Table Text Block]

The following table summarizes the carrying values of assets and liabilities, along with other supplemental information related to FG VIEs that are consolidated as a result of financial guarantees of Ambac UK and AAC:

	March 31, 2022						December 31, 2021
	Ambac UK		Ambac Assurance		Total VIEs		Ambac UK		Ambac Assurance		Total VIEs
ASSETS:
Fixed maturity securities, at fair value:
Corporate obligations, fair value option	$	3,131	$	—	$	3,131	$	3,320	$	—	$	3,320
Municipal obligations, trading	—		114		114		—		—		—
Municipal obligations, available-for-sale (1)	—		119		119		—		136		136
Total FG VIE fixed maturity securities, at fair value	3,131		233		3,364		3,320		136		3,455
Restricted cash	1		48		49		1		1		2
Loans, at fair value (2)	2,469		—		2,469		2,718		—		2,718
Derivative assets	42		—		42		38		—		38
Other assets	—		1		1		—		2		2
Total FG VIE assets	$	5,643	$	283	$	5,925	$	6,077	$	139	$	6,216
LIABILITIES:
Long-term debt:
Long-term debt, at fair value (3)	$	3,701	$	—	$	3,701	$	4,056	$	—	$	4,056
Long-term debt, at par less unamortized discount	—		422		422		—		160		160
Total long-term debt	3,701		422		4,124		4,056		160		4,216
Derivative liabilities	1,866		—		1,866		1,940		—		1,940
Other liabilities	—		3		3		—		—		—
Total FG VIE liabilities	$	5,568	$	426	$	5,993	$	5,996	$	160	$	6,156
Number of FG VIEs consolidated	5		3		8		5		1		6

(1)Available-for-sale FG VIE fixed maturity securities consist of municipal obligations with an amortized cost basis of $103 and $106, and aggregate gross unrealized gains of $17 and $29 at March 31, 2022 and December 31, 2021, respectively. All such securities had contractual maturities due after ten years as of March 31, 2022.

(2)The unpaid principal balances of loan assets carried at fair value were $2,257 as of March 31, 2022 and $2,363 as of December 31, 2021.

(3)The unpaid principal balances of long-term debt carried at fair value were $3,439 as of March 31, 2022 and $3,579 as of December 31, 2021.

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Revenue Recognition and Deferred Revenue (Tables)

3 Months Ended

Mar. 31, 2022

Revenue Recognition and Deferred Revenue [Abstract]

Disaggregation of Revenue

The following table presents the Insurance Distribution business operations revenues recognized in accordance with the Revenue from Contracts with Customers Topic of the ASC disaggregated by policy type for the affected periods:

Three Months Ended March 31,	Employer Stop Loss		Affinity Products		Other		Total
2022	$	4	$	5	$	—	$	9
2021	$	3	$	4	$	—	$	7

Contract with Customer, Contract Asset, Contract Liability, and Receivable

The balances of contract assets and contract liabilities with customers were as follows:

	March 31, 2022		December 31, 2021
Commissions receivable	$	3	$	2
Contract assets	6		4
Contract liabilities	1		1

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Comprehensive Income (Tables)

3 Months Ended

Mar. 31, 2022

Equity [Abstract]

Schedule of Changes in Balances of Each Component of Accumulated Other Comprehensive Income

The following tables detail the changes in the balances of each component of accumulated other comprehensive income for the affected periods:

	Unrealized Gains (Losses) on Available for Sale Securities (1)		Amortization of Postretirement Benefit (1)		Gain (Loss) on Foreign Currency Translation (1)		Credit Risk Changes of Fair Value Option Liabilities (1) (2)		Total
Three Months Ended March 31, 2022:
Beginning Balance	$	154	$	4	$	(100)	$	(1)	$	58
Other comprehensive income (loss) before reclassifications	(104)		—		(23)		—		(127)
Amounts reclassified from accumulated other comprehensive income (loss)	(1)		—		—		—		(1)
Net current period other comprehensive income (loss)	(105)		—		(23)		—		(127)
Balance at March 31, 2022	$	49	$	4	$	(123)	$	(1)	$	(70)
Three Months Ended March 31, 2021:
Beginning Balance	$	166	$	5	$	(92)	$	—	$	79
Other comprehensive income (loss) before reclassifications	(21)		—		6		—		(15)
Amounts reclassified from accumulated other comprehensive income (loss)	(3)		—		—		(1)		(4)
Net current period other comprehensive income (loss)	(24)		—		6		(1)		(18)
Balance at March 31, 2021	$	142	$	5	$	(86)	$	(1)	$	61

(1)All amounts are net of tax and noncontrolling interest. Amounts in parentheses indicate reductions to Accumulated Other Comprehensive Income.

(2)Represents the changes in fair value attributable to instrument-specific credit risk of liabilities for which the fair value option is elected.

Schedule of Amounts Reclassed Out of Each Component of Accumulated Other Comprehensive Income

The following table details the significant amounts reclassified from each component of accumulated other comprehensive income, shown in the above rollforward tables, for the affected periods:

Details about Accumulated Other Comprehensive Income Components	Amount Reclassified from Accumulated Other Comprehensive Income				Affected Line Item in the Consolidated Statement of Total Comprehensive Income (Loss)
	Three Months Ended March 31,
	2022		2021
Unrealized Gains (Losses) on Available-for-Sale Securities
	$	(1)	$	(2)	Net realized investment gains (losses)
	—		(1)		Provision for income taxes
	$	(1)	$	(3)	Net of tax and noncontrolling interest
Amortization of Postretirement Benefit
Prior service cost	$	—	$	—	Other income
Actuarial (losses)	—		—		Other income
	—		—		Total before tax
	—		—		Provision for income taxes
	$	—	$	—	Net of tax and noncontrolling interest
Credit risk changes of fair value option liabilities
	$	1	$	(1)	Credit risk changes of fair value option liabilities
	—		—		Provision for income taxes
	$	—	$	(1)	Net of tax and noncontrolling interest
Total reclassifications for the period	$	(1)	$	(3)	Net of tax and noncontrolling interest

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Net Income Per Share (Tables)

3 Months Ended

Mar. 31, 2022

Earnings Per Share [Abstract]

Reconciliation of Common Shares Used for Basic and Diluted Earnings Per Share

The following table provides a reconciliation of the weighted average shares denominator used for basic net income per share to the denominator used for diluted net income per share:

Three Months Ended March 31,	2022	2021
Basic weighted average shares outstanding denominator	46,731,459	46,314,049
Effect of potential dilutive shares :
Warrants	—	214,904
Restricted stock units	82,066	121,215
Performance stock units (1)	546,206	207,896
Diluted weighted average shares outstanding denominator	47,359,731	46,858,064
Anti-dilutive shares excluded from the above reconciliation:
Warrants	4,877,617	—
Restricted stock units	253,828	165,529
Performance stock units (2)	—	—

(1)    Performance stock units are reflected based on the performance metrics through the balance sheet date. Vesting of these units is contingent upon meeting certain performance metrics. Although a portion of these performance metrics have been achieved as of the respective period end, it is possible that awards may no longer meet the metric at the end of the performance period.

Schedule of Earnings Per Share, Basic and Diluted

The following table provides a reconciliation of net income attributable to common stockholders to the numerator in the basic and diluted earnings per share calculation, together with the resulting earnings per share amounts:

Three Months Ended March 31,	2022		2021
Net income attributable to common stockholders	$	2	$	17
Adjustment to redemption value (ASC 480)	—		(13)
Numerator of basic and diluted EPS	$	2	$	4
Per Share:
Basic	$	0.04	$	0.08
Diluted	$	0.04	$	0.08

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Income Taxes (Tables)

3 Months Ended

Mar. 31, 2022

Income Tax Disclosure [Abstract]

Major Jurisdictions

The following are the major jurisdictions in which Ambac and its subsidiaries operate and the earliest tax years subject to examination:

Jurisdiction	Tax Year
United States	2010
New York State	2013
New York City	2017
United Kingdom	2018
Italy	2017

Schedule of Income before Income Tax, Domestic and Foreign [Table Text Block]

U.S. and foreign components of pre-tax income (loss) were as follows:

Three Months Ended March 31,	2022		2021
U.S.	$	(1)	$	17
Foreign	4		2
Total	$	3	$	19

Schedule of Components of Income Tax Expense (Benefit)

The components of the provision for income taxes were as follows:

Three Months Ended March 31,	2022		2021
Current taxes
U. S. federal	$	—	$	—
U.S. state and local	—		2
Foreign	1		3
Total Current taxes	2		5
Deferred taxes
Foreign	(1)		(3)
Total Deferred taxes	(1)		(3)
Provision for income taxes	$	—	$	2

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Background and Business Description - Additional Information (Details) - USD ($)

3 Months Ended

Mar. 31, 2022

Mar. 31, 2021

Dec. 31, 2021

Background And Basis Of Presentation [Line Items]

Entity Incorporation, Date of Incorporation

Apr. 29, 1991

Net realized gains (losses) on extinguishment of debt

$ 0

$ 33,000,000

Realized Investment Gains (Losses)

10,000,000

$ 2,000,000

Business Acquisition, Percentage of Voting Interests Acquired

80.00%

Long-term debt

$ 2,242,000,000

$ 2,230,000,000

Number of Nonadmitted Carriers Owned

5

Background and Business Description

1.    BACKGROUND AND BUSINESS DESCRIPTION

The following description provides an update of Note 1. Background and Business Description in the Notes 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, 2021, and should be read in conjunction with the complete descriptions provided in the Form 10-K. Capitalized terms used, but not defined herein, and in the other footnotes to the Consolidated Financial Statements included in this Quarterly Report on Form 10-Q shall have the meanings ascribed thereto in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.

Ambac Financial Group, Inc. (“AFG”), headquartered in New York City, is a financial services holding company incorporated in the state of Delaware on April 29, 1991. References to “Ambac,” the “Company,” “we,” “our,” and “us” are to AFG and its subsidiaries, as the context requires. Ambac's business operations include:

•Legacy Financial Guarantee Insurance — Ambac's financial guarantee business includes the activities of Ambac Assurance Corporation ("AAC") and its wholly owned subsidiaries, including Ambac Assurance UK Limited (“Ambac UK”) and Ambac Financial Services LLC ("AFS"). Both AAC and Ambac UK (the "Legacy Financial Guarantee Companies") have financial guarantee portfolios that have been in runoff since 2008. AFS uses derivatives to hedge interest rate risk in AAC's insurance and investment portfolios.

•Specialty Property & Casualty Insurance — Ambac's participatory fronting Specialty Property & Casualty Insurance business. Currently includes five admitted carriers (Everspan Insurance Company, Providence Washington Insurance Company, 21st Century Indemnity Insurance Company, 21st Century Pacific Insurance Company and 21st Century Auto Insurance Company of New Jersey) and an excess and surplus lines (“E&S” or “nonadmitted”) insurer Everspan Indemnity Insurance Company (collectively, “Everspan”). The 21st Century companies were acquired in 2022. Everspan carriers that are part of the intercompany pooling agreement received an AM Best rating of 'A-' (Excellent) in February 2021.

•Insurance Distribution — Ambac's specialty property and casualty ("P&C") insurance distribution business, which could include Managing General Agents and Underwriters (collectively "MGAs"), insurance wholesalers, and other distribution businesses. Currently includes Xchange Benefits, LLC (“Xchange”) a P&C MGA specializing in accident and health products, 80% of which was acquired by AFG on December 31, 2020. Refer to Note 3. Business Combination in the Notes to Consolidated Financial Statements included Part II, Item 8 in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021, for further information relating to this acquisition.

Beginning in the first quarter of 2022, the Company is reporting these three business operations as segments; see Note 3. Segment Information for further information.

Strategies to Enhance Shareholder Value

The Company's primary goal is to maximize shareholder value through the execution of key strategies for both its (i) Specialty P&C Insurance Platform and (ii) Legacy Financial Guarantee Companies.

Specialty P&C Insurance Platform strategic priorities include:

•Growing and diversifying the Specialty Property & Casualty insurance business with existing and new program partners.

•Building a leading insurance Distribution business through additional acquisitions and de novo builds, supported by a centralized business services unit including core technology solutions.

•Making opportunistic investments that are strategic to the overall Specialty P&C Insurance Platform.

Legacy Financial Guarantee Companies’ strategic priorities include:

•Actively managing, de-risking and mitigating insured portfolio risk.

•Pursuing loss recovery through active litigation and other means, particularly residential mortgage back security representation and warranty litigation.

•Improving operating efficiency and optimizing our asset and liability profile.

•Exploring, at the appropriate time, strategic options to further maximize value for AFG.

The execution of Ambac’s strategy to increase the value of its investment in AAC is subject to the restrictions set forth in the Settlement Agreement, dated as of June 7, 2010 (the "Settlement Agreement"), by and among AAC, Ambac Credit Products LLC ("ACP"), AFG and certain counterparties to credit default swaps with ACP that were guaranteed by AAC; as well as the Stipulation and Order among the Office of the Commissioner of Insurance for the State of Wisconsin (“OCI”), AFG and AAC that became effective on February 12, 2018, as amended (the “Stipulation and Order”); and the indenture for the Tier 2 Notes (as defined below), each of which requires OCI and, under certain circumstances, holders of the debt instruments benefiting from such restrictions, to approve certain actions taken by or in respect of AAC. In exercising its approval rights, OCI will act for the benefit of policyholders, and will not take into account the interests of AFG.

Opportunities for remediating losses on poorly performing insured transactions also depend on market conditions, including the perception of AAC’s creditworthiness, the structure of the underlying risk and associated policy as well as other counterparty specific factors. AAC's ability to commute policies or purchase certain investments may also be limited by available liquidity.

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Basis of Presentation and Significant Accounting Policies FX gain (loss) (Details) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2022	Mar. 31, 2021
Foreign Currency Transaction Gain (Loss), before Tax	$ 1	$ (5)
Gain (Loss) on Investments [Member]
Foreign Currency Transaction Gain (Loss), before Tax	$ 3	$ (4)

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Basis of Presentation and Significant Accounting Policies Additional Information (Details) - USD ($)	3 Months Ended
	Mar. 31, 2022	Mar. 31, 2021	Dec. 31, 2021	Dec. 31, 2020
Derivative [Line Items]
Stockholders' Equity Attributable to Noncontrolling Interest	$ 60,000,000		$ 60,000,000
Preferred Stock, Shares Issued	0
Net Income (Loss) Attributable to Redeemable Noncontrolling Interest	$ 0	$ 0
Net Income (Loss) Attributable to Nonredeemable Noncontrolling Interest	0	0
Noncontrolling Interest, Change in Redemption Value	$ 0	$ (13,000,000)
Business Acquisition, Percentage of Voting Interests Acquired			80.00%
Business Combination, Redeemable Noncontrolling Percentage			20.00%
Number of Variable Interest Entities Consolidated During the Period	2	0
Xchange
Derivative [Line Items]
Redeemable Noncontrolling Interest, Equity, Carrying Amount			$ 18,000,000	$ 7,000,000
Redeemable Noncontrolling Interest, Equity, Redemption Value	$ 18,000,000	$ 20,000,000
Retained Earnings [Member]
Derivative [Line Items]
Noncontrolling Interest, Change in Redemption Value	$ 0	$ (13,000,000)

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Basis of Presentation and Significant Accounting Policies Supplemental Cash Flow information (Details) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2022	Mar. 31, 2021	Dec. 31, 2021	Dec. 31, 2020
Reduction in Long-term Debt Through Long-term Debt Exchange	$ 0		$ 71
Exchange of investments in Puerto Rico bonds for new securities issued in the restructuring transactions	185
Income Taxes Paid	2	$ 8
Cash and cash equivalents	60	23	17
Restricted Cash	7	16	5
Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents	116	42	23	$ 35
Long-term Debt [Member]
Interest Paid, Including Capitalized Interest, Operating and Investing Activities	15	25
Variable Interest Entity, Primary Beneficiary [Member]
Restricted Cash	$ 49	$ 2	$ 2

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Segment Reporting (Details) $ in Millions	3 Months Ended
	Mar. 31, 2022 USD ($) level3FinancialInstruments	Mar. 31, 2021 USD ($)	Dec. 31, 2021 USD ($)
Segment Reporting, Revenue Reconciling Item [Line Items]
Number of Reportable Segments | level3FinancialInstruments	3
Revenues	$ 119	$ 129
Income (Loss) from Continuing Operations before Income Taxes, Noncontrolling Interest	3	19
Provision (benefit) for income taxes	0	2
Net Income (Loss), Including Portion Attributable to Noncontrolling Interest	2	17
Premiums Earned, Net	15	14
Net investment income, including realized gains (loss)	5	49
Amortization of intangible assets	14	19
Interest Expense	44	50
Total assets	11,531	12,840	$ 12,303
Premiums Written, Net	12	(9)
Derivative, Gain (Loss) on Derivative, Net	57	25
Insurance Commissions and Fees	9	7
Other revenues, operating	34	33
Losses and loss expenses (benefit)	24	8
Operating Expenses	29	29
Insurance Commissions	5	4
Depreciation	0	0
Benefits, Losses and Expenses	116	110
Net Income (Loss) Attributable to Nonredeemable Noncontrolling Interest	0	0
Net income attributable to common shareholders	2	17
Financial Guarantee
Segment Reporting, Revenue Reconciling Item [Line Items]
Revenues	109	118
Income (Loss) from Continuing Operations before Income Taxes, Noncontrolling Interest	6	24
Premiums Earned, Net	13	14
Net investment income, including realized gains (loss)	5	49
Amortization of intangible assets	14	19
Interest Expense	44	50
Total assets	11,075	12,470
Derivative, Gain (Loss) on Derivative, Net	57	25
Other revenues, operating	34	29
Losses and loss expenses (benefit)	23	8
Operating Expenses	21	17
Depreciation	0	0
Benefits, Losses and Expenses	102	94
Specialty Property & Casualty Program
Segment Reporting, Revenue Reconciling Item [Line Items]
Revenues	2	0
Income (Loss) from Continuing Operations before Income Taxes, Noncontrolling Interest	(2)	(1)
Premiums Earned, Net	1	0
Net investment income, including realized gains (loss)	0	0
Total assets	191	108
Other revenues, operating	0	0
Losses and loss expenses (benefit)	1	0
Operating Expenses	3	1
Depreciation	0	0
Benefits, Losses and Expenses	4	1
Managing General Agency Underwriter
Segment Reporting, Revenue Reconciling Item [Line Items]
Revenues	9	7
Income (Loss) from Continuing Operations before Income Taxes, Noncontrolling Interest	2	2
Amortization of intangible assets	1	1
Total assets	97	98
Insurance Commissions and Fees	9	7
Other revenues, operating	0	0
Operating Expenses	1	1
Insurance Commissions	5	4
Depreciation	0	0
Benefits, Losses and Expenses	6	5
Corporate and Other
Segment Reporting, Revenue Reconciling Item [Line Items]
Revenues	0	4
Income (Loss) from Continuing Operations before Income Taxes, Noncontrolling Interest	(3)	(6)
Net investment income, including realized gains (loss)	0	0
Total assets	168	165
Other revenues, operating	0	4
Operating Expenses	3	10
Depreciation	0	0
Benefits, Losses and Expenses	3	10
Surplus Notes	$ 77	$ 114

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Investments - Summary of Amortized Cost and Estimated Fair Value of Available-for-Sale Investments, Excluding VIE Investments (Details) - USD ($) $ in Millions	Mar. 31, 2022	Dec. 31, 2021	Mar. 31, 2021
Debt Securities, Available-for-sale [Line Items]
Debt Securities, Available-for-sale, Unrealized Loss Position	$ 794	$ 810
Debt Securities, Available-for-sale, Amortized Cost	2,006	2,140
Debt Securities, Available-for-sale, Allowance for Credit Loss	1	0	$ 0
Debt Securities, Available-for-sale, Accumulated Gross Unrealized Gain, before Tax	73	141
Debt Securities, Available-for-sale, Continuous Unrealized Loss Position, Less than 12 Months	598	768
Debt Securities, Available-for-sale, Continuous Unrealized Loss Position, Less than 12 Months, Accumulated Loss	26	14
Debt Securities, Available-for-sale, Continuous Unrealized Loss Position, 12 Months or Longer	196	41
Debt Securities, Available-for-sale, Continuous Unrealized Loss Position, 12 Months or Longer, Accumulated Loss	17	1
Debt Securities, Available-for-sale, Accumulated Gross Unrealized Loss, before Tax	43	16
Available-for-sale Securities, Current	2,036	2,265
Fixed maturity securities, at fair value	2,036
Short-term Investments [Member]
Debt Securities, Available-for-sale [Line Items]
Debt Securities, Available-for-sale, Unrealized Loss Position	30	128
Debt Securities, Available-for-sale, Amortized Cost	540	415
Debt Securities, Available-for-sale, Allowance for Credit Loss	0	0
Debt Securities, Available-for-sale, Accumulated Gross Unrealized Gain, before Tax	0	0
Debt Securities, Available-for-sale, Continuous Unrealized Loss Position, Less than 12 Months	18	114
Debt Securities, Available-for-sale, Continuous Unrealized Loss Position, Less than 12 Months, Accumulated Loss	0	0
Debt Securities, Available-for-sale, Continuous Unrealized Loss Position, 12 Months or Longer	12	13
Debt Securities, Available-for-sale, Continuous Unrealized Loss Position, 12 Months or Longer, Accumulated Loss	0	0
Debt Securities, Available-for-sale, Accumulated Gross Unrealized Loss, before Tax	0	0
Fixed maturity securities, at fair value	540	414
Fixed Income Securities [Member]
Debt Securities, Available-for-sale [Line Items]
Debt Securities, Available-for-sale, Unrealized Loss Position	764	682
Debt Securities, Available-for-sale, Amortized Cost	1,352	1,605
Debt Securities, Available-for-sale, Allowance for Credit Loss	1	0
Debt Securities, Available-for-sale, Accumulated Gross Unrealized Gain, before Tax	73	141
Debt Securities, Available-for-sale, Continuous Unrealized Loss Position, Less than 12 Months	580	654
Debt Securities, Available-for-sale, Continuous Unrealized Loss Position, Less than 12 Months, Accumulated Loss	26	14
Debt Securities, Available-for-sale, Continuous Unrealized Loss Position, 12 Months or Longer	184	28
Debt Securities, Available-for-sale, Continuous Unrealized Loss Position, 12 Months or Longer, Accumulated Loss	16	1
Debt Securities, Available-for-sale, Accumulated Gross Unrealized Loss, before Tax	42	16
Fixed maturity securities, at fair value	1,383	1,730
Fixed Income Securities [Member] | Municipal Bonds [Member]
Debt Securities, Available-for-sale [Line Items]
Debt Securities, Available-for-sale, Unrealized Loss Position	19	118
Debt Securities, Available-for-sale, Amortized Cost	65	315
Debt Securities, Available-for-sale, Allowance for Credit Loss	0	0
Debt Securities, Available-for-sale, Accumulated Gross Unrealized Gain, before Tax	5	28
Debt Securities, Available-for-sale, Continuous Unrealized Loss Position, Less than 12 Months	19	117
Debt Securities, Available-for-sale, Continuous Unrealized Loss Position, Less than 12 Months, Accumulated Loss	1	3
Debt Securities, Available-for-sale, Continuous Unrealized Loss Position, 12 Months or Longer	1	2
Debt Securities, Available-for-sale, Continuous Unrealized Loss Position, 12 Months or Longer, Accumulated Loss	0	0
Debt Securities, Available-for-sale, Accumulated Gross Unrealized Loss, before Tax	1	3
Fixed maturity securities, at fair value	69	340
Fixed Income Securities [Member] | Corporate Debt Securities [Member]
Debt Securities, Available-for-sale [Line Items]
Debt Securities, Available-for-sale, Unrealized Loss Position	466	380
Debt Securities, Available-for-sale, Amortized Cost	610	612
Debt Securities, Available-for-sale, Allowance for Credit Loss	1	0
Debt Securities, Available-for-sale, Accumulated Gross Unrealized Gain, before Tax	2	10
Debt Securities, Available-for-sale, Continuous Unrealized Loss Position, Less than 12 Months	349	363
Debt Securities, Available-for-sale, Continuous Unrealized Loss Position, Less than 12 Months, Accumulated Loss	21	8
Debt Securities, Available-for-sale, Continuous Unrealized Loss Position, 12 Months or Longer	117	17
Debt Securities, Available-for-sale, Continuous Unrealized Loss Position, 12 Months or Longer, Accumulated Loss	13	1
Debt Securities, Available-for-sale, Accumulated Gross Unrealized Loss, before Tax	34	9
Fixed maturity securities, at fair value	577	613
Fixed Income Securities [Member] | Foreign Obligations [Member]
Debt Securities, Available-for-sale [Line Items]
Debt Securities, Available-for-sale, Unrealized Loss Position	87	78
Debt Securities, Available-for-sale, Amortized Cost	92	89
Debt Securities, Available-for-sale, Allowance for Credit Loss	0	0
Debt Securities, Available-for-sale, Accumulated Gross Unrealized Gain, before Tax	0	0
Debt Securities, Available-for-sale, Continuous Unrealized Loss Position, Less than 12 Months	36	75
Debt Securities, Available-for-sale, Continuous Unrealized Loss Position, Less than 12 Months, Accumulated Loss	1	2
Debt Securities, Available-for-sale, Continuous Unrealized Loss Position, 12 Months or Longer	51	3
Debt Securities, Available-for-sale, Continuous Unrealized Loss Position, 12 Months or Longer, Accumulated Loss	3	0
Debt Securities, Available-for-sale, Accumulated Gross Unrealized Loss, before Tax	4	2
Fixed maturity securities, at fair value	88	87
Fixed Income Securities [Member] | US Government Debt Securities [Member]
Debt Securities, Available-for-sale [Line Items]
Debt Securities, Available-for-sale, Unrealized Loss Position	49	27
Debt Securities, Available-for-sale, Amortized Cost	53	45
Debt Securities, Available-for-sale, Allowance for Credit Loss	0	0
Debt Securities, Available-for-sale, Accumulated Gross Unrealized Gain, before Tax	0	1
Debt Securities, Available-for-sale, Continuous Unrealized Loss Position, Less than 12 Months	44	25
Debt Securities, Available-for-sale, Continuous Unrealized Loss Position, Less than 12 Months, Accumulated Loss	1	0
Debt Securities, Available-for-sale, Continuous Unrealized Loss Position, 12 Months or Longer	5	2
Debt Securities, Available-for-sale, Continuous Unrealized Loss Position, 12 Months or Longer, Accumulated Loss	0	0
Debt Securities, Available-for-sale, Accumulated Gross Unrealized Loss, before Tax	2	1
Fixed maturity securities, at fair value	51	45
Fixed Income Securities [Member] | Residential Mortgage-Backed Securities [Member]
Debt Securities, Available-for-sale [Line Items]
Debt Securities, Available-for-sale, Unrealized Loss Position	17	2
Debt Securities, Available-for-sale, Amortized Cost	179	182
Debt Securities, Available-for-sale, Allowance for Credit Loss	0	0
Debt Securities, Available-for-sale, Accumulated Gross Unrealized Gain, before Tax	47	70
Debt Securities, Available-for-sale, Continuous Unrealized Loss Position, Less than 12 Months	16	0
Debt Securities, Available-for-sale, Continuous Unrealized Loss Position, Less than 12 Months, Accumulated Loss	0	0
Debt Securities, Available-for-sale, Continuous Unrealized Loss Position, 12 Months or Longer	1	1
Debt Securities, Available-for-sale, Continuous Unrealized Loss Position, 12 Months or Longer, Accumulated Loss	0	0
Debt Securities, Available-for-sale, Accumulated Gross Unrealized Loss, before Tax	0	0
Fixed maturity securities, at fair value	225	252
Fixed Income Securities [Member] | Collateralized Debt Obligations [Member]
Debt Securities, Available-for-sale [Line Items]
Debt Securities, Available-for-sale, Unrealized Loss Position	120	71
Debt Securities, Available-for-sale, Amortized Cost	121	128
Debt Securities, Available-for-sale, Allowance for Credit Loss	0	0
Debt Securities, Available-for-sale, Accumulated Gross Unrealized Gain, before Tax	0	0
Debt Securities, Available-for-sale, Continuous Unrealized Loss Position, Less than 12 Months	111	68
Debt Securities, Available-for-sale, Continuous Unrealized Loss Position, Less than 12 Months, Accumulated Loss	1	0
Debt Securities, Available-for-sale, Continuous Unrealized Loss Position, 12 Months or Longer	9	3
Debt Securities, Available-for-sale, Continuous Unrealized Loss Position, 12 Months or Longer, Accumulated Loss	0	0
Debt Securities, Available-for-sale, Accumulated Gross Unrealized Loss, before Tax	1	0
Fixed maturity securities, at fair value	120	128
Fixed Income Securities [Member] | Asset-backed Securities [Member]
Debt Securities, Available-for-sale [Line Items]
Debt Securities, Available-for-sale, Unrealized Loss Position	6	6
Debt Securities, Available-for-sale, Amortized Cost	232	234
Debt Securities, Available-for-sale, Allowance for Credit Loss	0	0
Debt Securities, Available-for-sale, Accumulated Gross Unrealized Gain, before Tax	20	32
Debt Securities, Available-for-sale, Continuous Unrealized Loss Position, Less than 12 Months	6	6
Debt Securities, Available-for-sale, Continuous Unrealized Loss Position, Less than 12 Months, Accumulated Loss	0	0
Debt Securities, Available-for-sale, Continuous Unrealized Loss Position, 12 Months or Longer	0	0
Debt Securities, Available-for-sale, Continuous Unrealized Loss Position, 12 Months or Longer, Accumulated Loss	0	0
Debt Securities, Available-for-sale, Accumulated Gross Unrealized Loss, before Tax	0	0
Fixed maturity securities, at fair value	252	265
Fixed Income Investments And Other Investments [Member]
Debt Securities, Available-for-sale [Line Items]
Debt Securities, Available-for-sale, Amortized Cost	1,892	2,020
Debt Securities, Available-for-sale, Allowance for Credit Loss	1	0
Debt Securities, Available-for-sale, Accumulated Gross Unrealized Gain, before Tax	73	141
Debt Securities, Available-for-sale, Accumulated Gross Unrealized Loss, before Tax	42	16
Fixed maturity securities, at fair value	1,922	2,145
Collateral Pledged [Member] | Fixed Income Securities [Member]
Debt Securities, Available-for-sale [Line Items]
Debt Securities, Available-for-sale, Accumulated Gross Unrealized Gain, before Tax	0	0
Debt Securities, Available-for-sale, Accumulated Gross Unrealized Loss, before Tax	0	0
Fixed maturity securities, at fair value	114	120
Collateral Pledged [Member] | Fixed Income Securities [Member] | Short-term Investments [Member]
Debt Securities, Available-for-sale [Line Items]
Debt Securities, Available-for-sale, Amortized Cost	99	105
Debt Securities, Available-for-sale, Allowance for Credit Loss	0	0
Debt Securities, Available-for-sale, Accumulated Gross Unrealized Gain, before Tax	0	0
Debt Securities, Available-for-sale, Accumulated Gross Unrealized Loss, before Tax	0	0
Fixed maturity securities, at fair value	99	105
Collateral Pledged [Member] | Fixed Income Securities [Member] | US Treasury and Government
Debt Securities, Available-for-sale [Line Items]
Debt Securities, Available-for-sale, Amortized Cost	15	15
Debt Securities, Available-for-sale, Allowance for Credit Loss	0	0
Debt Securities, Available-for-sale, Accumulated Gross Unrealized Gain, before Tax	0	0
Fixed maturity securities, at fair value	15	15
Available-for-sale Securities, Accumulated Gross Unrealized Loss, before Tax	0	0
Asset Pledged as Collateral [Member] | Fixed Income Securities [Member]
Debt Securities, Available-for-sale [Line Items]
Debt Securities, Available-for-sale, Amortized Cost	114	120
Debt Securities, Available-for-sale, Allowance for Credit Loss	$ 0	$ 0

XML

Investments - Summary of Amortized Cost and Estimated Fair Value of Available-for-Sale Investments, Excluding VIE Investments Held by Successor Ambac, by Contractual Maturity (Details) - USD ($) $ in Millions	Mar. 31, 2022	Dec. 31, 2021
Debt Securities, Available-for-sale [Line Items]
Debt Securities, Available-for-sale, Amortized Cost	$ 2,005
Fixed maturity securities, at fair value	2,036
Amortized Cost, Due in one year or less	683
Amortized Cost, Due after one year through five years	431
Amortized Cost, Due after five years through ten years	317
Amortized Cost, Due after ten years	41
Amortized Cost, Total	1,472
Estimated Fair Value, Due in one year or less	683
Estimated Fair Value, Due after one year through five years	416
Estimated Fair Value, Due after five years through ten years	300
Estimated Fair Value, Due after ten years	39
Estimated Fair Value due, Total	1,438
Fixed Income Securities [Member]
Debt Securities, Available-for-sale [Line Items]
Fixed maturity securities, at fair value	1,383	$ 1,730
Fixed Income Securities [Member] | Residential Mortgage-Backed Securities [Member]
Debt Securities, Available-for-sale [Line Items]
Debt Securities, Available-for-sale, Amortized Cost	179
Fixed maturity securities, at fair value	225	252
Fixed Income Securities [Member] | Collateralized Debt Obligations [Member]
Debt Securities, Available-for-sale [Line Items]
Debt Securities, Available-for-sale, Amortized Cost	121
Fixed maturity securities, at fair value	120	128
Fixed Income Securities [Member] | Asset-backed Securities [Member]
Debt Securities, Available-for-sale [Line Items]
Debt Securities, Available-for-sale, Amortized Cost	232
Fixed maturity securities, at fair value	$ 252	$ 265

XML

Investments - Summary of Gross Unrealized Losses and Fair Values of Ambac's Available-for-Sale Investments (Details) - USD ($) $ in Millions	Mar. 31, 2022	Dec. 31, 2021
Debt Securities, Available-for-sale [Line Items]
Debt Securities, Available-for-sale, Continuous Unrealized Loss Position, Less than 12 Months	$ 598	$ 768
Debt Securities, Available-for-sale, Continuous Unrealized Loss Position, Less than 12 Months, Accumulated Loss	26	14
Debt Securities, Available-for-sale, Continuous Unrealized Loss Position, 12 Months or Longer	196	41
Debt Securities, Available-for-sale, Continuous Unrealized Loss Position, 12 Months or Longer, Accumulated Loss	17	1
Debt Securities, Available-for-sale, Unrealized Loss Position	794	810
Debt Securities, Available-for-sale, Accumulated Gross Unrealized Loss, before Tax	43	16
Debt Securities , Available for sale, Continuous Unrealized Loss Position,	613	783
Debt Securities, Available for sale, Unrealized Loss Position, Including Pledged Securities	809	825
Short-term Investments [Member]
Debt Securities, Available-for-sale [Line Items]
Debt Securities, Available-for-sale, Continuous Unrealized Loss Position, Less than 12 Months	18	114
Debt Securities, Available-for-sale, Continuous Unrealized Loss Position, Less than 12 Months, Accumulated Loss	0	0
Debt Securities, Available-for-sale, Continuous Unrealized Loss Position, 12 Months or Longer	12	13
Debt Securities, Available-for-sale, Continuous Unrealized Loss Position, 12 Months or Longer, Accumulated Loss	0	0
Debt Securities, Available-for-sale, Unrealized Loss Position	30	128
Debt Securities, Available-for-sale, Accumulated Gross Unrealized Loss, before Tax	0	0
Fixed Income Investments And Other Investments [Member]
Debt Securities, Available-for-sale [Line Items]
Debt Securities, Available-for-sale, Accumulated Gross Unrealized Loss, before Tax	42	16
Fixed Income Securities [Member]
Debt Securities, Available-for-sale [Line Items]
Debt Securities, Available-for-sale, Continuous Unrealized Loss Position, Less than 12 Months	580	654
Debt Securities, Available-for-sale, Continuous Unrealized Loss Position, Less than 12 Months, Accumulated Loss	26	14
Debt Securities, Available-for-sale, Continuous Unrealized Loss Position, 12 Months or Longer	184	28
Debt Securities, Available-for-sale, Continuous Unrealized Loss Position, 12 Months or Longer, Accumulated Loss	16	1
Debt Securities, Available-for-sale, Unrealized Loss Position	764	682
Debt Securities, Available-for-sale, Accumulated Gross Unrealized Loss, before Tax	42	16
Fixed Income Securities [Member] | Municipal Bonds [Member]
Debt Securities, Available-for-sale [Line Items]
Debt Securities, Available-for-sale, Continuous Unrealized Loss Position, Less than 12 Months	19	117
Debt Securities, Available-for-sale, Continuous Unrealized Loss Position, Less than 12 Months, Accumulated Loss	1	3
Debt Securities, Available-for-sale, Continuous Unrealized Loss Position, 12 Months or Longer	1	2
Debt Securities, Available-for-sale, Continuous Unrealized Loss Position, 12 Months or Longer, Accumulated Loss	0	0
Debt Securities, Available-for-sale, Unrealized Loss Position	19	118
Debt Securities, Available-for-sale, Accumulated Gross Unrealized Loss, before Tax	1	3
Fixed Income Securities [Member] | Corporate Debt Securities [Member]
Debt Securities, Available-for-sale [Line Items]
Debt Securities, Available-for-sale, Continuous Unrealized Loss Position, Less than 12 Months	349	363
Debt Securities, Available-for-sale, Continuous Unrealized Loss Position, Less than 12 Months, Accumulated Loss	21	8
Debt Securities, Available-for-sale, Continuous Unrealized Loss Position, 12 Months or Longer	117	17
Debt Securities, Available-for-sale, Continuous Unrealized Loss Position, 12 Months or Longer, Accumulated Loss	13	1
Debt Securities, Available-for-sale, Unrealized Loss Position	466	380
Debt Securities, Available-for-sale, Accumulated Gross Unrealized Loss, before Tax	34	9
Fixed Income Securities [Member] | Debt Security, Government, Non-US [Member]
Debt Securities, Available-for-sale [Line Items]
Debt Securities, Available-for-sale, Continuous Unrealized Loss Position, Less than 12 Months	36	75
Debt Securities, Available-for-sale, Continuous Unrealized Loss Position, Less than 12 Months, Accumulated Loss	1	2
Debt Securities, Available-for-sale, Continuous Unrealized Loss Position, 12 Months or Longer	51	3
Debt Securities, Available-for-sale, Continuous Unrealized Loss Position, 12 Months or Longer, Accumulated Loss	3	0
Debt Securities, Available-for-sale, Unrealized Loss Position	87	78
Debt Securities, Available-for-sale, Accumulated Gross Unrealized Loss, before Tax	4	2
Fixed Income Securities [Member] | US Government Debt Securities [Member]
Debt Securities, Available-for-sale [Line Items]
Debt Securities, Available-for-sale, Continuous Unrealized Loss Position, Less than 12 Months	44	25
Debt Securities, Available-for-sale, Continuous Unrealized Loss Position, Less than 12 Months, Accumulated Loss	1	0
Debt Securities, Available-for-sale, Continuous Unrealized Loss Position, 12 Months or Longer	5	2
Debt Securities, Available-for-sale, Continuous Unrealized Loss Position, 12 Months or Longer, Accumulated Loss	0	0
Debt Securities, Available-for-sale, Unrealized Loss Position	49	27
Debt Securities, Available-for-sale, Accumulated Gross Unrealized Loss, before Tax	2	1
Fixed Income Securities [Member] | US Government Debt Securities [Member] | Asset Pledged as Collateral [Member]
Debt Securities, Available-for-sale [Line Items]
Debt Securities, Available-for-sale, Continuous Unrealized Loss Position, Less than 12 Months	15	15
Debt Securities, Available-for-sale, Continuous Unrealized Loss Position, Less than 12 Months, Accumulated Loss	0	0
Debt Securities, Available-for-sale, Continuous Unrealized Loss Position, 12 Months or Longer	0	0
Debt Securities, Available-for-sale, Continuous Unrealized Loss Position, 12 Months or Longer, Accumulated Loss	0	0
Debt Securities, Available-for-sale, Unrealized Loss Position	15	15
Debt Securities, Available-for-sale, Accumulated Gross Unrealized Loss, before Tax	0	0
Fixed Income Securities [Member] | Residential Mortgage-Backed Securities [Member]
Debt Securities, Available-for-sale [Line Items]
Debt Securities, Available-for-sale, Continuous Unrealized Loss Position, Less than 12 Months	16	0
Debt Securities, Available-for-sale, Continuous Unrealized Loss Position, Less than 12 Months, Accumulated Loss	0	0
Debt Securities, Available-for-sale, Continuous Unrealized Loss Position, 12 Months or Longer	1	1
Debt Securities, Available-for-sale, Continuous Unrealized Loss Position, 12 Months or Longer, Accumulated Loss	0	0
Debt Securities, Available-for-sale, Unrealized Loss Position	17	2
Debt Securities, Available-for-sale, Accumulated Gross Unrealized Loss, before Tax	0	0
Fixed Income Securities [Member] | Collateralized Debt Obligations [Member]
Debt Securities, Available-for-sale [Line Items]
Debt Securities, Available-for-sale, Continuous Unrealized Loss Position, Less than 12 Months	111	68
Debt Securities, Available-for-sale, Continuous Unrealized Loss Position, Less than 12 Months, Accumulated Loss	1	0
Debt Securities, Available-for-sale, Continuous Unrealized Loss Position, 12 Months or Longer	9	3
Debt Securities, Available-for-sale, Continuous Unrealized Loss Position, 12 Months or Longer, Accumulated Loss	0	0
Debt Securities, Available-for-sale, Unrealized Loss Position	120	71
Debt Securities, Available-for-sale, Accumulated Gross Unrealized Loss, before Tax	1	0
Fixed Income Securities [Member] | Asset-backed Securities [Member]
Debt Securities, Available-for-sale [Line Items]
Debt Securities, Available-for-sale, Continuous Unrealized Loss Position, Less than 12 Months	6	6
Debt Securities, Available-for-sale, Continuous Unrealized Loss Position, Less than 12 Months, Accumulated Loss	0	0
Debt Securities, Available-for-sale, Continuous Unrealized Loss Position, 12 Months or Longer	0	0
Debt Securities, Available-for-sale, Continuous Unrealized Loss Position, 12 Months or Longer, Accumulated Loss	0	0
Debt Securities, Available-for-sale, Unrealized Loss Position	6	6
Debt Securities, Available-for-sale, Accumulated Gross Unrealized Loss, before Tax	0	0
Collateral Pledged [Member] | Fixed Income Securities [Member]
Debt Securities, Available-for-sale [Line Items]
Debt Securities, Available-for-sale, Accumulated Gross Unrealized Loss, before Tax	0	0
Collateral Pledged [Member] | Fixed Income Securities [Member] | Short-term Investments [Member]
Debt Securities, Available-for-sale [Line Items]
Debt Securities, Available-for-sale, Accumulated Gross Unrealized Loss, before Tax	$ 0	$ 0

XML

Investments - Additional Information (Details) - USD ($) $ in Millions	Mar. 31, 2022	Dec. 31, 2021	Mar. 31, 2021
Schedule of Investments [Line Items]
Debt Securities, Available-for-sale, Allowance for Credit Loss	$ 1	$ 0	$ 0
Securities fair value	23	17
Interest Rate Contract [Member]
Schedule of Investments [Line Items]
Other investments	88	78
Reported Value Measurement [Member]
Schedule of Investments [Line Items]
Other investments	92	$ 106
Commitments [Member] | Partnership Interest [Member]
Schedule of Investments [Line Items]
Other investments	$ 70

XML

Investments - Summary of Amounts Included in Net Realized (Losses) Gains and Other-Than-Temporary Impairments (Details) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2022	Mar. 31, 2021	Dec. 31, 2021
Investment [Line Items]
Foreign exchange (losses) gains	$ 1	$ (5)
Debt Securities, Available-for-sale, Allowance for Credit Loss, Not to Sell before Recovery, Credit Loss, Previously Recorded, Expense (Reversal)	(1)	0
Debt Securities, Available-for-sale, Allowance for Credit Loss, Sell before Recovery	0	0
Realized Investment Gains (Losses)	10	2
Fair Value of Securities Deposited in Connection wtih Letter of Credit	1		$ 1
Debt Securities, Available-for-sale, Realized Gain	23	7
Debt Securities, Available-for-sale, Realized Loss	15	1
Gain (Loss) on Investments [Member]
Investment [Line Items]
Foreign exchange (losses) gains	$ 3	$ (4)

XML

Investments - Summary of Sources of Collateral Received and Various Investment Agreement in which Collateral Pledged (Details) - USD ($) $ in Millions	Mar. 31, 2022	Dec. 31, 2021
Investment [Line Items]
Fair Value Of Securities Deposited With Governmental Authorities	$ 23	$ 17
Fair Value of Securities Deposited in Connection wtih Letter of Credit	1	1
Fair Value of Securities Held by AmbacUK Where Capital Stock of AUK is Pledged as Collateral for Sitka AAC Note	644	669
Investment Portfolio [Member]
Investment [Line Items]
Fair Value of Cash and Securities Pledged to Derivative Counterparties	114	120
Standard & Poor's, B Rating [Member]
Investment [Line Items]
Investment Owned, at Fair Value	451	757
Standard & Poor's, B Rating [Member] | Municipal Bonds [Member]
Investment [Line Items]
Investment Owned, at Fair Value	48	318
Standard & Poor's, B Rating [Member] | Mortgage And Other Asset Backed Securities [Member]
Investment [Line Items]
Investment Owned, at Fair Value	403	439
Ambac Assurance Corporation [Member] | Standard & Poor's, B Rating [Member]
Investment [Line Items]
Investment Owned, at Fair Value	451	754
Ambac Assurance Corporation [Member] | Standard & Poor's, B Rating [Member] | Municipal Bonds [Member]
Investment [Line Items]
Investment Owned, at Fair Value	47	316
Ambac Assurance Corporation [Member] | Standard & Poor's, B Rating [Member] | Mortgage And Other Asset Backed Securities [Member]
Investment [Line Items]
Investment Owned, at Fair Value	$ 403	439
National Public Finance Guarantee Corporation [Member] | Standard & Poor's, BBB- Rating [Member]
Investment [Line Items]
Investment Owned, at Fair Value		2
National Public Finance Guarantee Corporation [Member] | Standard & Poor's, BBB- Rating [Member] | Municipal Bonds [Member]
Investment [Line Items]
Investment Owned, at Fair Value		$ 2

XML

Investments - Summary of Fair Value, Including Financial Guarantee, and Weighted-Average Underlying Rating, Excluding Financial Guarantee, of Insured Securities (Details) - USD ($) $ in Millions	Mar. 31, 2022	Dec. 31, 2021
Standard & Poor's, B Rating [Member]
Schedule of Investments [Line Items]
Fair value of securities that include benefit of guarantees provided by financial guarantors	$ 451	$ 757
Standard & Poor's, B Rating [Member] | Ambac Assurance Corporation [Member]
Schedule of Investments [Line Items]
Fair value of securities that include benefit of guarantees provided by financial guarantors	451	754
Standard & Poor's, BBB- Rating [Member] | National Public Finance Guarantee Corporation [Member]
Schedule of Investments [Line Items]
Fair value of securities that include benefit of guarantees provided by financial guarantors		2
Standard & Poor's, C Rating | Assured Guaranty Municipal Corporation
Schedule of Investments [Line Items]
Fair value of securities that include benefit of guarantees provided by financial guarantors		1
Standard & Poor's, A Rating | Assured Guaranty Municipal Corporation
Schedule of Investments [Line Items]
Fair value of securities that include benefit of guarantees provided by financial guarantors	1
Municipal Bonds [Member] | Standard & Poor's, B Rating [Member]
Schedule of Investments [Line Items]
Fair value of securities that include benefit of guarantees provided by financial guarantors	48	318
Municipal Bonds [Member] | Standard & Poor's, B Rating [Member] | Ambac Assurance Corporation [Member]
Schedule of Investments [Line Items]
Fair value of securities that include benefit of guarantees provided by financial guarantors	47	316
Municipal Bonds [Member] | Standard & Poor's, BBB- Rating [Member] | National Public Finance Guarantee Corporation [Member]
Schedule of Investments [Line Items]
Fair value of securities that include benefit of guarantees provided by financial guarantors		2
Municipal Bonds [Member] | Standard & Poor's, C Rating | Assured Guaranty Municipal Corporation
Schedule of Investments [Line Items]
Fair value of securities that include benefit of guarantees provided by financial guarantors		1
Municipal Bonds [Member] | Standard & Poor's, A Rating | Assured Guaranty Municipal Corporation
Schedule of Investments [Line Items]
Fair value of securities that include benefit of guarantees provided by financial guarantors	1
Mortgage And Other Asset Backed Securities [Member] | Standard & Poor's, B Rating [Member]
Schedule of Investments [Line Items]
Fair value of securities that include benefit of guarantees provided by financial guarantors	403	439
Mortgage And Other Asset Backed Securities [Member] | Standard & Poor's, B Rating [Member] | Ambac Assurance Corporation [Member]
Schedule of Investments [Line Items]
Fair value of securities that include benefit of guarantees provided by financial guarantors	$ 403	$ 439

XML

Investments - Summary of Fair Value, Including Financial Guarantee, and Weighted-Average Underlying Rating, Excluding Financial Guarantee, of Insured Securities (Phantom) (Details) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2022	Mar. 31, 2021
Investment [Line Items]
Net Realized and Unrealized Gain (Loss) on Trading Securities	$ (13)	$ 7
Investment expense	(1)	(1)
Securities available-for-sale and short-term	14	22
Net investment income	5	49
Gains (losses) on securities held as of reporting date [Member]
Investment [Line Items]
Other Investments Income	(10)	6
Fixed Income Investments [Member]
Investment [Line Items]
Gross Investment Income, Operating	15	23
Short-Term [Member]
Investment [Line Items]
Gross Investment Income, Operating	0	0
Other Investments [Member]
Investment [Line Items]
Gross Investment Income, Operating	$ 0	$ 27

XML

Investments - Summary of Net Investment Income (Details) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2022	Mar. 31, 2021
Investment [Line Items]
Equity Securities, FV-NI, Realized Gain (Loss)	$ (3)	$ 0
Short-term Investments [Member]
Investment [Line Items]
Gross Investment Income, Operating	0	0
Fixed Income Investments [Member]
Investment [Line Items]
Gross Investment Income, Operating	15	$ 23
Fixed Income Securities, Trading
Investment [Line Items]
Gross Investment Income, Operating	$ (9)

XML

Investments Investments - Equity Investments (Details) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2022	Mar. 31, 2021	Dec. 31, 2021
Schedule of Equity Method Investments [Line Items]
Equity Securities Excluded From Fair Value Table	$ 8		$ 8
Equity Securities, FV-NI, Realized Gain (Loss)	(3)	$ 0
Debt Securities, Available-for-sale, Allowance for Credit Loss	1	$ 0	0
Real Estate [Member]
Schedule of Equity Method Investments [Line Items]
Other investments	40		33
Hedge Funds, Multi-strategy [Member]
Schedule of Equity Method Investments [Line Items]
Other investments	196		216
Interest Rate Contract [Member]
Schedule of Equity Method Investments [Line Items]
Other investments	88		78
Illiquid Investments [Member]
Schedule of Equity Method Investments [Line Items]
Other investments	87		88
Insurance Linked [Member]
Schedule of Equity Method Investments [Line Items]
Other investments	1		2
Equity [Member]
Schedule of Equity Method Investments [Line Items]
Other investments	91		98
Credit Index Product [Member]
Schedule of Equity Method Investments [Line Items]
Other investments	90		107
Private Equity Funds [Member]
Schedule of Equity Method Investments [Line Items]
Other investments	41		37
Emerging Market Debt [Member]
Schedule of Equity Method Investments [Line Items]
Other investments	17		24
Equity investments in pooled funds [Member]
Schedule of Equity Method Investments [Line Items]
Other investments	652		683
Equity Securities Excluded From Fair Value
Schedule of Equity Method Investments [Line Items]
Debt Securities, Available-for-sale, Allowance for Credit Loss	0		0
Priced Through Pricing Vendors [Member]
Schedule of Equity Method Investments [Line Items]
Other investments	92		106
Priced Through Pricing Vendors [Member] | Equity [Member]
Schedule of Equity Method Investments [Line Items]
Other investments	75		82
Priced Through Pricing Vendors [Member] | Emerging Market Debt [Member]
Schedule of Equity Method Investments [Line Items]
Other investments	17		$ 24
Commitments [Member] | Partnership Interest [Member]
Schedule of Equity Method Investments [Line Items]
Other investments	$ 70

XML

Fair Value Measurements - Summary of Carrying Amount and Fair Value of Ambac's Financial Assets and Liabilities (Details) - USD ($) $ in Thousands	Mar. 31, 2022	Dec. 31, 2021
Fair Value Of Assets And Liabilities Measured On Non Recurring Basis [Line Items]
Fixed maturity securities, at fair value	$ 2,036,000
Financial assets:
Derivative assets	56,000	$ 76,000
Other assets	0
Long-term Debt	2,242,000	2,230,000
Financial liabilities:
Derivative liabilities	76,000	95,000
Equity Securities Excluded From Fair Value Table	8,000	8,000
Short-term Investments [Member]
Fair Value Of Assets And Liabilities Measured On Non Recurring Basis [Line Items]
Fixed maturity securities, at fair value	540,000	414,000
Total Fair Value [Member]
Financial assets:
Cash	67,000	21,000
Reported Value Measurement [Member]
Financial assets:
Other investments	92,000	106,000
Cash	67,000	21,000
Loans	3,000	3,000
Other assets		0
Total financial assets	8,864,000	9,268,000
Financial liabilities:
Liabilities for net financial guarantees written	(970,000)	(866,000)
Long-term debt	2,834,000	2,806,000
Total financial liabilities	7,930,000	8,190,000
Reported Value Measurement [Member] | Short-term Investments [Member]
Financial assets:
Short term investments	540,000	414,000
Reported Value Measurement [Member] | Other Debt Obligations [Member]
Financial assets:
Other investments	660,000	690,000
Reported Value Measurement [Member] | Future [Member]
Financial liabilities:
Derivative liabilities	1,000	0
Reported Value Measurement [Member] | Interest Rate Swap [Member]
Financial liabilities:
Derivative liabilities	75,000	94,000
Reported Value Measurement [Member] | Other Credit Derivatives [Member]
Financial liabilities:
Derivative liabilities	1,000	0
Other Assets [Member] | Reported Value Measurement [Member] | Interest Rate Swap [Member]
Financial assets:
Derivative assets	56,000	76,000
Level 1 [Member]
Financial assets:
Cash	67,000	21,000
Total financial assets	988,000	750,000
Financial liabilities:
Liabilities for net financial guarantees written	0	0
Long-term debt	0	0
Total financial liabilities	1,000	0
Level 1 [Member] | Short-term Investments [Member]
Financial assets:
Short term investments	526,000	369,000
Level 1 [Member] | Equity Method Investments [Member]
Financial assets:
Other assets		0
Level 1 [Member] | Loans Receivable [Member]
Financial assets:
Loans	0	0
Level 1 [Member] | Other Debt Obligations [Member]
Financial assets:
Other investments	92,000	106,000
Level 1 [Member] | Future [Member]
Financial liabilities:
Derivative liabilities	1,000	0
Level 1 [Member] | Interest Rate Swap [Member]
Financial liabilities:
Derivative liabilities	0	0
Level 1 [Member] | Other Credit Derivatives [Member]
Financial liabilities:
Derivative liabilities	0	0
Level 1 [Member] | Other Assets [Member] | Interest Rate Swap [Member]
Financial assets:
Derivative assets	0	0
Level 2 [Member]
Financial assets:
Cash	0	1,000
Total financial assets	1,567,000	1,732,000
Financial liabilities:
Liabilities for net financial guarantees written	0	0
Long-term debt	2,296,000	2,575,000
Total financial liabilities	8,238,000	8,695,000
Level 2 [Member] | Short-term Investments [Member]
Financial assets:
Short term investments	13,000	46,000
Level 2 [Member] | Equity Method Investments [Member]
Financial assets:
Other assets		0
Level 2 [Member] | Loans Receivable [Member]
Financial assets:
Loans	0	0
Level 2 [Member] | Other Debt Obligations [Member]
Financial assets:
Other investments	0	0
Level 2 [Member] | Future [Member]
Financial liabilities:
Derivative liabilities	0	0
Level 2 [Member] | Interest Rate Swap [Member]
Financial liabilities:
Derivative liabilities	75,000	94,000
Level 2 [Member] | Other Credit Derivatives [Member]
Financial liabilities:
Derivative liabilities	0	0
Level 2 [Member] | Other Assets [Member] | Interest Rate Swap [Member]
Financial assets:
Derivative assets	3,000	5,000
Level 3 [Member]
Financial assets:
Cash	0	0
Total financial assets	5,741,000	6,202,000
Financial liabilities:
Liabilities for net financial guarantees written	(197,000)	(112,000)
Long-term debt	19,000	22,000
Total financial liabilities	(17,000)	79,000
Level 3 [Member] | Short-term Investments [Member]
Financial assets:
Short term investments	0	0
Level 3 [Member] | Equity Method Investments [Member]
Financial assets:
Other assets		0
Level 3 [Member] | Loans Receivable [Member]
Financial assets:
Loans	3,000	3,000
Level 3 [Member] | Other Debt Obligations [Member]
Financial assets:
Other investments	0	0
Level 3 [Member] | Future [Member]
Financial liabilities:
Derivative liabilities	0	0
Level 3 [Member] | Interest Rate Swap [Member]
Financial liabilities:
Derivative liabilities	0	0
Level 3 [Member] | Other Credit Derivatives [Member]
Financial liabilities:
Derivative liabilities	1,000	0
Level 3 [Member] | Other Assets [Member] | Interest Rate Swap [Member]
Financial assets:
Derivative assets	52,000	71,000
Municipal Bonds [Member] | Reported Value Measurement [Member]
Fair Value Of Assets And Liabilities Measured On Non Recurring Basis [Line Items]
Fixed maturity securities, at fair value	188,000	340,000
Corporate Debt Securities [Member] | Reported Value Measurement [Member]
Fair Value Of Assets And Liabilities Measured On Non Recurring Basis [Line Items]
Fixed maturity securities, at fair value	577,000	613,000
Debt Security, Government, Non-US [Member] | Reported Value Measurement [Member]
Fair Value Of Assets And Liabilities Measured On Non Recurring Basis [Line Items]
Fixed maturity securities, at fair value	88,000	87,000
US Government Debt Securities [Member] | Reported Value Measurement [Member]
Fair Value Of Assets And Liabilities Measured On Non Recurring Basis [Line Items]
Fixed maturity securities, at fair value	51,000	45,000
Residential Mortgage-Backed Securities [Member] | Reported Value Measurement [Member]
Fair Value Of Assets And Liabilities Measured On Non Recurring Basis [Line Items]
Fixed maturity securities, at fair value	225,000	252,000
Collateralized Debt Obligations [Member] | Reported Value Measurement [Member]
Fair Value Of Assets And Liabilities Measured On Non Recurring Basis [Line Items]
Fixed maturity securities, at fair value	120,000	128,000
Asset-backed Securities [Member] | Reported Value Measurement [Member]
Fair Value Of Assets And Liabilities Measured On Non Recurring Basis [Line Items]
Fixed maturity securities, at fair value	252,000	265,000
Fair Value, Recurring [Member]
Financial assets:
Total financial assets	8,856,000	9,261,000
Financial liabilities:
Liabilities for net financial guarantees written	(197,000)	(112,000)
Long-term debt	2,315,000	2,598,000
Total financial liabilities	8,221,000	8,775,000
Fair Value, Recurring [Member] | Short-term Investments [Member]
Financial assets:
Short term investments	540,000	414,000
Fair Value, Recurring [Member] | Equity Method Investments [Member]
Financial assets:
Other assets		0
Fair Value, Recurring [Member] | Loans Receivable [Member]
Financial assets:
Loans	3,000	3,000
Fair Value, Recurring [Member] | Other Debt Obligations [Member]
Financial assets:
Other investments	652,000	683,000
Fair Value, Recurring [Member] | Asset-backed Securities [Member]
Fair Value Of Assets And Liabilities Measured On Non Recurring Basis [Line Items]
Fixed maturity securities, at fair value	252,000	265,000
Fair Value, Recurring [Member] | Collateralized Debt Obligations [Member]
Fair Value Of Assets And Liabilities Measured On Non Recurring Basis [Line Items]
Fixed maturity securities, at fair value	120,000	128,000
Fair Value, Recurring [Member] | Residential Mortgage-Backed Securities [Member]
Fair Value Of Assets And Liabilities Measured On Non Recurring Basis [Line Items]
Fixed maturity securities, at fair value	225,000	252,000
Fair Value, Recurring [Member] | US Government Debt Securities [Member]
Fair Value Of Assets And Liabilities Measured On Non Recurring Basis [Line Items]
Fixed maturity securities, at fair value	51,000	45,000
Fair Value, Recurring [Member] | Debt Security, Government, Non-US [Member]
Fair Value Of Assets And Liabilities Measured On Non Recurring Basis [Line Items]
Fixed maturity securities, at fair value	88,000	87,000
Fair Value, Recurring [Member] | Corporate Debt Securities [Member]
Fair Value Of Assets And Liabilities Measured On Non Recurring Basis [Line Items]
Fixed maturity securities, at fair value	577,000	613,000
Fair Value, Recurring [Member] | Municipal Bonds [Member]
Fair Value Of Assets And Liabilities Measured On Non Recurring Basis [Line Items]
Fixed maturity securities, at fair value	188,000	340,000
Fair Value, Recurring [Member] | Future [Member]
Financial liabilities:
Derivative liabilities	1,000	0
Fair Value, Recurring [Member] | Interest Rate Swap [Member]
Financial liabilities:
Derivative liabilities	75,000	94,000
Fair Value, Recurring [Member] | Other Credit Derivatives [Member]
Financial liabilities:
Derivative liabilities	1,000	0
Fair Value, Recurring [Member] | Other Assets [Member] | Interest Rate Swap [Member]
Financial assets:
Derivative assets	56,000	76,000
Fair Value, Recurring [Member] | Level 1 [Member] | Asset-backed Securities [Member]
Fair Value Of Assets And Liabilities Measured On Non Recurring Basis [Line Items]
Fixed maturity securities, at fair value	0	0
Fair Value, Recurring [Member] | Level 1 [Member] | Collateralized Debt Obligations [Member]
Fair Value Of Assets And Liabilities Measured On Non Recurring Basis [Line Items]
Fixed maturity securities, at fair value	0	0
Fair Value, Recurring [Member] | Level 1 [Member] | Residential Mortgage-Backed Securities [Member]
Fair Value Of Assets And Liabilities Measured On Non Recurring Basis [Line Items]
Fixed maturity securities, at fair value	0	0
Fair Value, Recurring [Member] | Level 1 [Member] | US Government Debt Securities [Member]
Fair Value Of Assets And Liabilities Measured On Non Recurring Basis [Line Items]
Fixed maturity securities, at fair value	51,000	45,000
Fair Value, Recurring [Member] | Level 1 [Member] | Debt Security, Government, Non-US [Member]
Fair Value Of Assets And Liabilities Measured On Non Recurring Basis [Line Items]
Fixed maturity securities, at fair value	88,000	87,000
Fair Value, Recurring [Member] | Level 1 [Member] | Corporate Debt Securities [Member]
Fair Value Of Assets And Liabilities Measured On Non Recurring Basis [Line Items]
Fixed maturity securities, at fair value	1,000	1,000
Fair Value, Recurring [Member] | Level 1 [Member] | Municipal Bonds [Member]
Fair Value Of Assets And Liabilities Measured On Non Recurring Basis [Line Items]
Fixed maturity securities, at fair value	0	0
Fair Value, Recurring [Member] | Level 2 [Member] | Asset-backed Securities [Member]
Fair Value Of Assets And Liabilities Measured On Non Recurring Basis [Line Items]
Fixed maturity securities, at fair value	178,000	187,000
Fair Value, Recurring [Member] | Level 2 [Member] | Collateralized Debt Obligations [Member]
Fair Value Of Assets And Liabilities Measured On Non Recurring Basis [Line Items]
Fixed maturity securities, at fair value	120,000	128,000
Fair Value, Recurring [Member] | Level 2 [Member] | Residential Mortgage-Backed Securities [Member]
Fair Value Of Assets And Liabilities Measured On Non Recurring Basis [Line Items]
Fixed maturity securities, at fair value	225,000	252,000
Fair Value, Recurring [Member] | Level 2 [Member] | US Government Debt Securities [Member]
Fair Value Of Assets And Liabilities Measured On Non Recurring Basis [Line Items]
Fixed maturity securities, at fair value	0	0
Fair Value, Recurring [Member] | Level 2 [Member] | Debt Security, Government, Non-US [Member]
Fair Value Of Assets And Liabilities Measured On Non Recurring Basis [Line Items]
Fixed maturity securities, at fair value	0	0
Fair Value, Recurring [Member] | Level 2 [Member] | Corporate Debt Securities [Member]
Fair Value Of Assets And Liabilities Measured On Non Recurring Basis [Line Items]
Fixed maturity securities, at fair value	564,000	600,000
Fair Value, Recurring [Member] | Level 2 [Member] | Municipal Bonds [Member]
Fair Value Of Assets And Liabilities Measured On Non Recurring Basis [Line Items]
Fixed maturity securities, at fair value	188,000	340,000
Fair Value, Recurring [Member] | Level 3 [Member] | Asset-backed Securities [Member]
Fair Value Of Assets And Liabilities Measured On Non Recurring Basis [Line Items]
Fixed maturity securities, at fair value	74,000	79,000
Fair Value, Recurring [Member] | Level 3 [Member] | Collateralized Debt Obligations [Member]
Fair Value Of Assets And Liabilities Measured On Non Recurring Basis [Line Items]
Fixed maturity securities, at fair value	0	0
Fair Value, Recurring [Member] | Level 3 [Member] | Residential Mortgage-Backed Securities [Member]
Fair Value Of Assets And Liabilities Measured On Non Recurring Basis [Line Items]
Fixed maturity securities, at fair value	0	0
Fair Value, Recurring [Member] | Level 3 [Member] | US Government Debt Securities [Member]
Fair Value Of Assets And Liabilities Measured On Non Recurring Basis [Line Items]
Fixed maturity securities, at fair value	0	0
Fair Value, Recurring [Member] | Level 3 [Member] | Debt Security, Government, Non-US [Member]
Fair Value Of Assets And Liabilities Measured On Non Recurring Basis [Line Items]
Fixed maturity securities, at fair value	0	0
Fair Value, Recurring [Member] | Level 3 [Member] | Corporate Debt Securities [Member]
Fair Value Of Assets And Liabilities Measured On Non Recurring Basis [Line Items]
Fixed maturity securities, at fair value	12,000	12,000
Fair Value, Recurring [Member] | Level 3 [Member] | Municipal Bonds [Member]
Fair Value Of Assets And Liabilities Measured On Non Recurring Basis [Line Items]
Fixed maturity securities, at fair value	0	0
Collateral Pledged [Member] | US Government Debt Securities [Member] | Reported Value Measurement [Member]
Fair Value Of Assets And Liabilities Measured On Non Recurring Basis [Line Items]
Fixed maturity securities, at fair value	15,000	15,000
Collateral Pledged [Member] | Short-term Investments [Member] | Reported Value Measurement [Member]
Fair Value Of Assets And Liabilities Measured On Non Recurring Basis [Line Items]
Fixed maturity securities, at fair value	99,000	105,000
Collateral Pledged [Member] | Fair Value, Recurring [Member] | Short-term Investments [Member]
Fair Value Of Assets And Liabilities Measured On Non Recurring Basis [Line Items]
Fixed maturity securities, at fair value	99,000	105,000
Collateral Pledged [Member] | Fair Value, Recurring [Member] | US Government Debt Securities [Member]
Fair Value Of Assets And Liabilities Measured On Non Recurring Basis [Line Items]
Fixed maturity securities, at fair value	15,000	15,000
Collateral Pledged [Member] | Fair Value, Recurring [Member] | Level 1 [Member] | Short-term Investments [Member]
Fair Value Of Assets And Liabilities Measured On Non Recurring Basis [Line Items]
Fixed maturity securities, at fair value	99,000	105,000
Collateral Pledged [Member] | Fair Value, Recurring [Member] | Level 1 [Member] | US Government Debt Securities [Member]
Fair Value Of Assets And Liabilities Measured On Non Recurring Basis [Line Items]
Fixed maturity securities, at fair value	15,000	15,000
Collateral Pledged [Member] | Fair Value, Recurring [Member] | Level 2 [Member] | Short-term Investments [Member]
Fair Value Of Assets And Liabilities Measured On Non Recurring Basis [Line Items]
Fixed maturity securities, at fair value	0	0
Collateral Pledged [Member] | Fair Value, Recurring [Member] | Level 2 [Member] | US Government Debt Securities [Member]
Fair Value Of Assets And Liabilities Measured On Non Recurring Basis [Line Items]
Fixed maturity securities, at fair value	0	0
Collateral Pledged [Member] | Fair Value, Recurring [Member] | Level 3 [Member] | Short-term Investments [Member]
Fair Value Of Assets And Liabilities Measured On Non Recurring Basis [Line Items]
Fixed maturity securities, at fair value	0	0
Collateral Pledged [Member] | Fair Value, Recurring [Member] | Level 3 [Member] | US Government Debt Securities [Member]
Fair Value Of Assets And Liabilities Measured On Non Recurring Basis [Line Items]
Fixed maturity securities, at fair value	0	0
Variable Interest Entity, Primary Beneficiary [Member]
Fair Value Of Assets And Liabilities Measured On Non Recurring Basis [Line Items]
Fixed maturity securities, at fair value	3,364,000	3,455,000
Financial assets:
Loans	2,469,000	2,718,000
Derivative assets	42,000	38,000
Long-term Debt	4,124,000	4,216,000
Financial liabilities:
Derivative liabilities	1,866,000	1,940,000
Long-term debt	3,701,000	4,056,000
Variable Interest Entity, Primary Beneficiary [Member] | Corporate Debt Securities [Member]
Fair Value Of Assets And Liabilities Measured On Non Recurring Basis [Line Items]
Fixed maturity securities, at fair value	3,131,000	3,320,000
Variable Interest Entity, Primary Beneficiary [Member] | Municipal Bonds [Member]
Fair Value Of Assets And Liabilities Measured On Non Recurring Basis [Line Items]
Fixed maturity securities, at fair value	119,000	136,000
Variable Interest Entity, Primary Beneficiary [Member] | US States and Political Subdivisions Debt Securities
Fair Value Of Assets And Liabilities Measured On Non Recurring Basis [Line Items]
Fixed maturity securities, at fair value	114,000	0
Variable Interest Entity, Primary Beneficiary [Member] | Reported Value Measurement [Member]
Financial assets:
Restricted Cash and Cash Equivalents, Current	49,000	2,000
Loans	2,469,000	2,718,000
Financial liabilities:
Long-term debt	4,124,000	4,216,000
Variable Interest Entity, Primary Beneficiary [Member] | Reported Value Measurement [Member] | Corporate Debt Securities [Member]
Fair Value Of Assets And Liabilities Measured On Non Recurring Basis [Line Items]
Fixed maturity securities, at fair value	3,131,000	3,320,000
Variable Interest Entity, Primary Beneficiary [Member] | Reported Value Measurement [Member] | Municipal Bonds [Member]
Fair Value Of Assets And Liabilities Measured On Non Recurring Basis [Line Items]
Fixed maturity securities, at fair value	119,000	136,000
Variable Interest Entity, Primary Beneficiary [Member] | Reported Value Measurement [Member] | Interest Rate Swap [Member]
Financial liabilities:
Derivative liabilities	1,866,000	1,940,000
Variable Interest Entity, Primary Beneficiary [Member] | Reported Value Measurement [Member] | Currency Swaps [Member]
Financial assets:
Derivative assets	42,000	38,000
Variable Interest Entity, Primary Beneficiary [Member] | Reported Value Measurement [Member] | US States and Political Subdivisions Debt Securities
Fair Value Of Assets And Liabilities Measured On Non Recurring Basis [Line Items]
Fixed maturity securities, at fair value	114,000
Variable Interest Entity, Primary Beneficiary [Member] | Level 1 [Member]
Financial assets:
Restricted Cash and Cash Equivalents, Current	49,000	2,000
Loans	0	0
Financial liabilities:
Long-term debt	0	0
Variable Interest Entity, Primary Beneficiary [Member] | Level 1 [Member] | Corporate Debt Securities [Member]
Fair Value Of Assets And Liabilities Measured On Non Recurring Basis [Line Items]
Fixed maturity securities, at fair value	0	0
Variable Interest Entity, Primary Beneficiary [Member] | Level 1 [Member] | Municipal Bonds [Member]
Fair Value Of Assets And Liabilities Measured On Non Recurring Basis [Line Items]
Fixed maturity securities, at fair value	0	0
Variable Interest Entity, Primary Beneficiary [Member] | Level 1 [Member] | Interest Rate Swap [Member]
Financial liabilities:
Derivative liabilities	0	0
Variable Interest Entity, Primary Beneficiary [Member] | Level 1 [Member] | Currency Swaps [Member]
Financial assets:
Derivative assets	0	0
Variable Interest Entity, Primary Beneficiary [Member] | Level 1 [Member] | US States and Political Subdivisions Debt Securities
Fair Value Of Assets And Liabilities Measured On Non Recurring Basis [Line Items]
Fixed maturity securities, at fair value	0
Variable Interest Entity, Primary Beneficiary [Member] | Level 2 [Member]
Financial assets:
Restricted Cash and Cash Equivalents, Current	0	0
Loans	0	0
Financial liabilities:
Long-term debt	4,001,000	4,086,000
Variable Interest Entity, Primary Beneficiary [Member] | Level 2 [Member] | Corporate Debt Securities [Member]
Fair Value Of Assets And Liabilities Measured On Non Recurring Basis [Line Items]
Fixed maturity securities, at fair value	0	0
Variable Interest Entity, Primary Beneficiary [Member] | Level 2 [Member] | Municipal Bonds [Member]
Fair Value Of Assets And Liabilities Measured On Non Recurring Basis [Line Items]
Fixed maturity securities, at fair value	119,000	136,000
Variable Interest Entity, Primary Beneficiary [Member] | Level 2 [Member] | Interest Rate Swap [Member]
Financial liabilities:
Derivative liabilities	1,866,000	1,940,000
Variable Interest Entity, Primary Beneficiary [Member] | Level 2 [Member] | Currency Swaps [Member]
Financial assets:
Derivative assets	42,000	38,000
Variable Interest Entity, Primary Beneficiary [Member] | Level 2 [Member] | US States and Political Subdivisions Debt Securities
Fair Value Of Assets And Liabilities Measured On Non Recurring Basis [Line Items]
Fixed maturity securities, at fair value	114,000
Variable Interest Entity, Primary Beneficiary [Member] | Level 3 [Member]
Financial assets:
Restricted Cash and Cash Equivalents, Current	0	0
Loans	2,469,000	2,718,000
Financial liabilities:
Long-term debt	160,000	169,000
Variable Interest Entity, Primary Beneficiary [Member] | Level 3 [Member] | Corporate Debt Securities [Member]
Fair Value Of Assets And Liabilities Measured On Non Recurring Basis [Line Items]
Fixed maturity securities, at fair value	3,131,000	3,320,000
Variable Interest Entity, Primary Beneficiary [Member] | Level 3 [Member] | Municipal Bonds [Member]
Fair Value Of Assets And Liabilities Measured On Non Recurring Basis [Line Items]
Fixed maturity securities, at fair value	0	0
Variable Interest Entity, Primary Beneficiary [Member] | Level 3 [Member] | Interest Rate Swap [Member]
Financial liabilities:
Derivative liabilities	0	0
Variable Interest Entity, Primary Beneficiary [Member] | Level 3 [Member] | Currency Swaps [Member]
Financial assets:
Derivative assets	0	0
Variable Interest Entity, Primary Beneficiary [Member] | Level 3 [Member] | US States and Political Subdivisions Debt Securities
Fair Value Of Assets And Liabilities Measured On Non Recurring Basis [Line Items]
Fixed maturity securities, at fair value	0
Variable Interest Entity, Primary Beneficiary [Member] | Fair Value, Recurring [Member]
Financial assets:
Restricted Cash and Cash Equivalents, Current	49,000	2,000
Loans	2,469,000	2,718,000
Financial liabilities:
Long-term debt	4,161,000	4,255,000
Variable Interest Entity, Primary Beneficiary [Member] | Fair Value, Recurring [Member] | Corporate Debt Securities [Member]
Fair Value Of Assets And Liabilities Measured On Non Recurring Basis [Line Items]
Fixed maturity securities, at fair value	3,131,000	3,320,000
Variable Interest Entity, Primary Beneficiary [Member] | Fair Value, Recurring [Member] | Municipal Bonds [Member]
Fair Value Of Assets And Liabilities Measured On Non Recurring Basis [Line Items]
Fixed maturity securities, at fair value	119,000	136,000
Variable Interest Entity, Primary Beneficiary [Member] | Fair Value, Recurring [Member] | Interest Rate Swap [Member]
Financial liabilities:
Derivative liabilities	1,866,000	1,940,000
Variable Interest Entity, Primary Beneficiary [Member] | Fair Value, Recurring [Member] | Currency Swaps [Member]
Financial assets:
Derivative assets	42,000	$ 38,000
Variable Interest Entity, Primary Beneficiary [Member] | Fair Value, Recurring [Member] | US States and Political Subdivisions Debt Securities
Fair Value Of Assets And Liabilities Measured On Non Recurring Basis [Line Items]
Fixed maturity securities, at fair value	$ 114,000

XML

Fair Value Measurements - Additional Information (Details) $ in Thousands	Mar. 31, 2022 USD ($) level3FinancialInstruments	Dec. 31, 2021 USD ($)
Fair Value Of Assets And Liabilities Measured On Non Recurring Basis [Line Items]
Derivative Credit Risk Valuation Adjustment, Derivative Liabilities	$ 283	$ 19
Derivative liabilities	$ 76,000	$ 95,000
Weighted average discounted rate of estimated future premium payments to be paid by the VIEs	2.60%	2.20%
Number of Credit Risk Derivatives Held | level3FinancialInstruments	1
Fair Value Measured at Net Asset Value Per Share [Member]
Fair Value Of Assets And Liabilities Measured On Non Recurring Basis [Line Items]
Other investments	$ 560,000	$ 577,000
Fixed Income Securities [Member]
Fair Value Of Assets And Liabilities Measured On Non Recurring Basis [Line Items]
Percentage of investment portfolio valued using dealer quotes	6.00%	6.00%
Minimum [Member] | Fixed Income Securities [Member]
Fair Value Of Assets And Liabilities Measured On Non Recurring Basis [Line Items]
Percentage of investment portfolio valued using internal valuation models	4.00%	4.00%
Maximum [Member] | Fixed Income Securities [Member]
Fair Value Of Assets And Liabilities Measured On Non Recurring Basis [Line Items]
Percentage of investment portfolio valued using external pricing services	90.00%	90.00%
Variable Interest Entity, Primary Beneficiary [Member]
Fair Value Of Assets And Liabilities Measured On Non Recurring Basis [Line Items]
Derivative liabilities	$ 1,866,000	$ 1,940,000
Weighted average discounted rate of estimated future premium payments to be paid by the VIEs	3.90%	3.00%

XML

Fair Value Measurements - Information about Valuation Inputs for Fixed Income Securities Classified as Level 3 (Details) - USD ($) $ in Millions	3 Months Ended		12 Months Ended
	Mar. 31, 2022	Mar. 31, 2021	Dec. 31, 2021	Dec. 31, 2020
Fair Value Inputs, Assets, Quantitative Information [Line Items] (Deprecated 2018-01-31)
Fair Value Inputs Yield Rate	9.30%		7.20%
Asset-backed Securities [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items] (Deprecated 2018-01-31)
Coupon rate	5.98%		5.97%
Fair Value Inputs Maturity	13 years 11 months 19 days		14 years 1 month 20 days
Yield	11.00%		10.20%
Fair Value, Inputs, Level 3 [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items] (Deprecated 2018-01-31)
Fair Value Measurement With Unobservable Inputs Reconciliation Recurring Basis Asset Or Liability	$ 5,738	$ 6,194	$ 6,199	$ 6,376
Fair Value Measurement With Unobservable Inputs Reconciliation Recurring Basis Asset Or Liability Gain Loss Included In Earnings	(204)	(145)
Fair Value Measurement With Unobservable Inputs Reconciliation Recurring Basis Asset Or Liability Gain Loss Included In Other Comprehensive Income Loss	(176)	49
Fair Value Measurement With Unobservable Inputs Reconciliation Recurring Basis Asset Or Liability Settlements	(80)	(86)
Fair Value, Asset (Liability), Recurring Basis, Still Held, Unrealized Gain (Loss)	(204)	(145)
Fair Value, Asset (Liability), Recurring Basis, Still Held, Unrealized Gain (Loss), OCI	(176)	49
Fair Value, Inputs, Level 3 [Member] | Investments [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items] (Deprecated 2018-01-31)
Fair Value Measurement With Unobservable Inputs Reconciliation Recurring Basis Asset Or Liability	86	76	91	78
Fair Value Measurement With Unobservable Inputs Reconciliation Recurring Basis Asset Or Liability Gain Loss Included In Earnings	0	0
Fair Value Measurement With Unobservable Inputs Reconciliation Recurring Basis Asset Or Liability Gain Loss Included In Other Comprehensive Income Loss	(4)	(2)
Fair Value Measurement With Unobservable Inputs Reconciliation Recurring Basis Asset Or Liability Settlements	(1)	0
Fair Value, Asset (Liability), Recurring Basis, Still Held, Unrealized Gain (Loss), OCI	(4)	(2)
Fair Value, Inputs, Level 3 [Member] | Other Assets [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items] (Deprecated 2018-01-31)
Fair Value Measurement With Unobservable Inputs Reconciliation Recurring Basis Asset Or Liability	0	1	$ 0	1
Fair Value Measurement With Unobservable Inputs Reconciliation Recurring Basis Asset Or Liability Gain Loss Included In Earnings	0	0
Fair Value, Asset (Liability), Recurring Basis, Still Held, Unrealized Gain (Loss)	0	0
Fair Value, Asset (Liability), Recurring Basis, Still Held, Unrealized Gain (Loss), OCI	0	$ 0
Corporate Obligations [Member] | Fair Value, Inputs, Level 3 [Member] | Fair Value, Recurring [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items] (Deprecated 2018-01-31)
Fair Value Inputs Maturity		2 years 6 months	2 years 9 months
Derivative Financial Instruments, Liabilities [Member] | Fair Value, Inputs, Level 3 [Member] | Derivative Financial Instruments, Liabilities [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items] (Deprecated 2018-01-31)
Fair Value Measurement With Unobservable Inputs Reconciliation Recurring Basis Asset Or Liability	52	$ 65	$ 70	84
Fair Value Measurement With Unobservable Inputs Reconciliation Recurring Basis Asset Or Liability Gain Loss Included In Earnings	(17)	(17)
Fair Value Measurement With Unobservable Inputs Reconciliation Recurring Basis Asset Or Liability Settlements	(2)	(2)
Fair Value, Asset (Liability), Recurring Basis, Still Held, Unrealized Gain (Loss)	(17)	(17)
Fair Value, Asset (Liability), Recurring Basis, Still Held, Unrealized Gain (Loss), OCI	0	0
Variable Interest Entity, Primary Beneficiary [Member] | Investment Contracts [Member] | Fair Value, Inputs, Level 3 [Member] | Corporate Obligations [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items] (Deprecated 2018-01-31)
Fair Value Measurement With Unobservable Inputs Reconciliation Recurring Basis Asset Or Liability	3,131	3,103	3,320	3,215
Fair Value Measurement With Unobservable Inputs Reconciliation Recurring Basis Asset Or Liability Gain Loss Included In Earnings	(93)	(138)
Fair Value Measurement With Unobservable Inputs Reconciliation Recurring Basis Asset Or Liability Gain Loss Included In Other Comprehensive Income Loss	(96)	26
Fair Value, Asset (Liability), Recurring Basis, Still Held, Unrealized Gain (Loss)	(93)	(138)
Fair Value, Asset (Liability), Recurring Basis, Still Held, Unrealized Gain (Loss), OCI	(96)	26
Variable Interest Entity, Primary Beneficiary [Member] | Loan Origination Commitments [Member] | Fair Value, Inputs, Level 3 [Member] | Loans Receivable [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items] (Deprecated 2018-01-31)
Fair Value Measurement With Unobservable Inputs Reconciliation Recurring Basis Asset Or Liability	2,469	2,948	$ 2,718	$ 2,998
Fair Value Measurement With Unobservable Inputs Reconciliation Recurring Basis Asset Or Liability Gain Loss Included In Earnings	(96)	9
Fair Value Measurement With Unobservable Inputs Reconciliation Recurring Basis Asset Or Liability Gain Loss Included In Other Comprehensive Income Loss	(76)	24
Fair Value Measurement With Unobservable Inputs Reconciliation Recurring Basis Asset Or Liability Settlements	(78)	(84)
Fair Value, Asset (Liability), Recurring Basis, Still Held, Unrealized Gain (Loss)	(96)	9
Fair Value, Asset (Liability), Recurring Basis, Still Held, Unrealized Gain (Loss), OCI	$ (76)	$ 24

XML

Fair Value Measurements - Summary of Information about Described Model Inputs Used to Determine Fair Value of Each Class of Credit Derivatives (Details) - USD ($) $ in Millions	3 Months Ended	12 Months Ended
	Mar. 31, 2022	Dec. 31, 2021
Fair Value Inputs, Assets, Quantitative Information [Line Items] (Deprecated 2018-01-31)
Fair value of derivative liabilities	$ 73
Variable Interest Entity, Primary Beneficiary [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items] (Deprecated 2018-01-31)
Fair value of derivative liabilities	0
Real Estate [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items] (Deprecated 2018-01-31)
Other investments	40	$ 33
Interest Rate Contract [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items] (Deprecated 2018-01-31)
Other investments	88	78
Illiquid Investments [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items] (Deprecated 2018-01-31)
Other investments	$ 87	$ 88
Asset-backed Securities [Member]
Fair Value Inputs, Assets, Quantitative Information [Line Items] (Deprecated 2018-01-31)
Fair Value Inputs Coupon Rate	5.98%	5.97%
Fair Value Inputs Maturity	13 years 11 months 19 days	14 years 1 month 20 days
Fair Value Inputs Yield	11.00%	10.20%

XML

Fair Value Measurements - Information about Valuation Inputs for Variable Interest Entity Assets and Liabilities Classified as Level 3 (Details) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2022	Mar. 31, 2021	Dec. 31, 2021	Dec. 31, 2020
Variable Interest Entity, Primary Beneficiary [Member]
Fair Value Inputs, Liabilities, Quantitative Information [Line Items] (Deprecated 2018-01-31)
Estimated Future Premium Payments Minimum Discounted Rate	3.20%
Estimated Future Premium Payments Maximum Discounted Rate	5.30%
Fair Value, Inputs, Level 3 [Member]
Fair Value Inputs, Liabilities, Quantitative Information [Line Items] (Deprecated 2018-01-31)
Fair Value Measurement With Unobservable Inputs Reconciliation Recurring Basis Asset Or Liability	$ 5,738	$ 6,194	$ 6,199	$ 6,376
Fair Value Measurement With Unobservable Inputs Reconciliation Recurring Basis Asset Or Liability Gain Loss Included In Earnings	(204)	(145)
Fair Value Measurement With Unobservable Inputs Reconciliation Recurring Basis Asset Or Liability Gain Loss Included In Other Comprehensive Income Loss	(176)	49
Fair Value Measurement With Unobservable Inputs Reconciliation Recurring Basis Asset Or Liability Settlements	(80)	(86)
Fair Value, Inputs, Level 3 [Member] | Investments [Member]
Fair Value Inputs, Liabilities, Quantitative Information [Line Items] (Deprecated 2018-01-31)
Fair Value Measurement With Unobservable Inputs Reconciliation Recurring Basis Asset Or Liability	86	76	91	78
Fair Value Measurement With Unobservable Inputs Reconciliation Recurring Basis Asset Or Liability Gain Loss Included In Earnings	0	0
Fair Value Measurement With Unobservable Inputs Reconciliation Recurring Basis Asset Or Liability Gain Loss Included In Other Comprehensive Income Loss	(4)	(2)
Fair Value Measurement With Unobservable Inputs Reconciliation Recurring Basis Asset Or Liability Settlements	(1)	0
Fair Value, Inputs, Level 3 [Member] | Other Assets [Member]
Fair Value Inputs, Liabilities, Quantitative Information [Line Items] (Deprecated 2018-01-31)
Fair Value Measurement With Unobservable Inputs Reconciliation Recurring Basis Asset Or Liability	0	1	0	1
Fair Value Measurement With Unobservable Inputs Reconciliation Recurring Basis Asset Or Liability Gain Loss Included In Earnings	0	0
Loan Origination Commitments [Member] | Fair Value, Inputs, Level 3 [Member] | Loans Receivable [Member] | Variable Interest Entity, Primary Beneficiary [Member]
Fair Value Inputs, Liabilities, Quantitative Information [Line Items] (Deprecated 2018-01-31)
Fair Value Measurement With Unobservable Inputs Reconciliation Recurring Basis Asset Or Liability	2,469	2,948	2,718	2,998
Fair Value Measurement With Unobservable Inputs Reconciliation Recurring Basis Asset Or Liability Gain Loss Included In Earnings	(96)	9
Fair Value Measurement With Unobservable Inputs Reconciliation Recurring Basis Asset Or Liability Gain Loss Included In Other Comprehensive Income Loss	(76)	24
Fair Value Measurement With Unobservable Inputs Reconciliation Recurring Basis Asset Or Liability Settlements	(78)	(84)
Derivative Financial Instruments, Liabilities [Member] | Fair Value, Inputs, Level 3 [Member] | Derivative Financial Instruments, Liabilities [Member]
Fair Value Inputs, Liabilities, Quantitative Information [Line Items] (Deprecated 2018-01-31)
Fair Value Measurement With Unobservable Inputs Reconciliation Recurring Basis Asset Or Liability	52	65	70	84
Fair Value Measurement With Unobservable Inputs Reconciliation Recurring Basis Asset Or Liability Gain Loss Included In Earnings	(17)	(17)
Fair Value Measurement With Unobservable Inputs Reconciliation Recurring Basis Asset Or Liability Settlements	(2)	(2)
Investment Contracts [Member] | Fair Value, Inputs, Level 3 [Member] | Corporate Debt Securities [Member] | Variable Interest Entity, Primary Beneficiary [Member]
Fair Value Inputs, Liabilities, Quantitative Information [Line Items] (Deprecated 2018-01-31)
Fair Value Measurement With Unobservable Inputs Reconciliation Recurring Basis Asset Or Liability	3,131	3,103	$ 3,320	$ 3,215
Fair Value Measurement With Unobservable Inputs Reconciliation Recurring Basis Asset Or Liability Gain Loss Included In Earnings	(93)	(138)
Fair Value Measurement With Unobservable Inputs Reconciliation Recurring Basis Asset Or Liability Gain Loss Included In Other Comprehensive Income Loss	$ (96)	$ 26

XML

Fair Value Measurements - Summary of Changes in Level 3 Fair Value Category (Details) $ in Millions	3 Months Ended
	Mar. 31, 2022 USD ($) level3FinancialInstruments	Mar. 31, 2021 USD ($) level3FinancialInstruments	Dec. 31, 2021 USD ($)	Dec. 31, 2020 USD ($)
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward]
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis Asset or Liability, Transfers into or out of Level 3 | level3FinancialInstruments	0	0
Level 3 [Member]
Fair Value, Net Derivative Asset (Liability) Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Fair Value Measurement With Unobservable Inputs Reconciliation Recurring Basis Asset Or Liability	$ 5,738	$ 6,194	$ 6,199	$ 6,376
Fair Value, Asset (Liability), Recurring Basis, Still Held, Unrealized Gain (Loss)	(204)	(145)
Fair Value, Asset (Liability), Recurring Basis, Still Held, Unrealized Gain (Loss), OCI	(176)	49
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward]
Fair Value Measurement With Unobservable Inputs Reconciliation Recurring Basis Asset Or Liability Gain Loss Included In Earnings	(204)	(145)
Fair Value Measurement With Unobservable Inputs Reconciliation Recurring Basis Asset Or Liability Gain Loss Included In Other Comprehensive Income Loss	(176)	49
Fair Value Measurement With Unobservable Inputs Reconciliation Recurring Basis Asset Or Liability Settlements	(80)	(86)
Level 3 [Member] | Loans Receivable [Member] | Loans [Member] | Variable Interest Entity, Primary Beneficiary [Member]
Fair Value, Net Derivative Asset (Liability) Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Fair Value Measurement With Unobservable Inputs Reconciliation Recurring Basis Asset Or Liability	2,469	2,948	2,718	2,998
Fair Value, Asset (Liability), Recurring Basis, Still Held, Unrealized Gain (Loss)	(96)	9
Fair Value, Asset (Liability), Recurring Basis, Still Held, Unrealized Gain (Loss), OCI	(76)	24
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward]
Fair Value Measurement With Unobservable Inputs Reconciliation Recurring Basis Asset Or Liability Gain Loss Included In Earnings	(96)	9
Fair Value Measurement With Unobservable Inputs Reconciliation Recurring Basis Asset Or Liability Gain Loss Included In Other Comprehensive Income Loss	(76)	24
Fair Value Measurement With Unobservable Inputs Reconciliation Recurring Basis Asset Or Liability Settlements	(78)	(84)
Level 3 [Member] | Investments [Member]
Fair Value, Net Derivative Asset (Liability) Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Fair Value Measurement With Unobservable Inputs Reconciliation Recurring Basis Asset Or Liability	86	76	91	78
Fair Value, Asset (Liability), Recurring Basis, Still Held, Unrealized Gain (Loss), OCI	(4)	(2)
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward]
Fair Value Measurement With Unobservable Inputs Reconciliation Recurring Basis Asset Or Liability Gain Loss Included In Earnings	0	0
Fair Value Measurement With Unobservable Inputs Reconciliation Recurring Basis Asset Or Liability Gain Loss Included In Other Comprehensive Income Loss	(4)	(2)
Fair Value Measurement With Unobservable Inputs Reconciliation Recurring Basis Asset Or Liability Settlements	(1)	0
Level 3 [Member] | Other Assets [Member]
Fair Value, Net Derivative Asset (Liability) Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Fair Value Measurement With Unobservable Inputs Reconciliation Recurring Basis Asset Or Liability	0	1	0	1
Fair Value, Asset (Liability), Recurring Basis, Still Held, Unrealized Gain (Loss)	0	0
Fair Value, Asset (Liability), Recurring Basis, Still Held, Unrealized Gain (Loss), OCI	0	0
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward]
Fair Value Measurement With Unobservable Inputs Reconciliation Recurring Basis Asset Or Liability Gain Loss Included In Earnings	0	0
Level 3 [Member] | Derivative Financial Instruments, Liabilities [Member] | Derivative Financial Instruments, Liabilities [Member]
Fair Value, Net Derivative Asset (Liability) Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Fair Value Measurement With Unobservable Inputs Reconciliation Recurring Basis Asset Or Liability	52	65	70	84
Fair Value, Asset (Liability), Recurring Basis, Still Held, Unrealized Gain (Loss)	(17)	(17)
Fair Value, Asset (Liability), Recurring Basis, Still Held, Unrealized Gain (Loss), OCI	0	0
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward]
Fair Value Measurement With Unobservable Inputs Reconciliation Recurring Basis Asset Or Liability Gain Loss Included In Earnings	(17)	(17)
Fair Value Measurement With Unobservable Inputs Reconciliation Recurring Basis Asset Or Liability Settlements	(2)	(2)
Level 3 [Member] | Corporate Debt Securities [Member] | Investment Contracts [Member] | Variable Interest Entity, Primary Beneficiary [Member]
Fair Value, Net Derivative Asset (Liability) Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Fair Value Measurement With Unobservable Inputs Reconciliation Recurring Basis Asset Or Liability	3,131	3,103	$ 3,320	$ 3,215
Fair Value, Asset (Liability), Recurring Basis, Still Held, Unrealized Gain (Loss)	(93)	(138)
Fair Value, Asset (Liability), Recurring Basis, Still Held, Unrealized Gain (Loss), OCI	(96)	26
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward]
Fair Value Measurement With Unobservable Inputs Reconciliation Recurring Basis Asset Or Liability Gain Loss Included In Earnings	(93)	(138)
Fair Value Measurement With Unobservable Inputs Reconciliation Recurring Basis Asset Or Liability Gain Loss Included In Other Comprehensive Income Loss	$ (96)	$ 26

XML

Fair Value Measurements - Summary of Gains and Losses (Realized and Unrealized) Relating to Level 3 Assets and Liabilities Included in Earnings (Details) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2022	Mar. 31, 2021
Net Investment Income [Member]
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward]
Total gains or losses included in earnings for the period	$ 0	$ 0
Fair Value Asset Or Liability Measured On Recurring Basis Change In Unrealized Gains Losses Still Held	0	0
Gain (Loss) on Derivative Instruments [Member]
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward]
Total gains or losses included in earnings for the period	(17)	(17)
Fair Value Asset Or Liability Measured On Recurring Basis Change In Unrealized Gains Losses Still Held	(17)	(17)
Income Loss On Variable Interest Entities [Member] | Variable Interest Entity, Primary Beneficiary [Member]
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward]
Total gains or losses included in earnings for the period	(188)	(129)
Fair Value Asset Or Liability Measured On Recurring Basis Change In Unrealized Gains Losses Still Held	(188)	(129)
Other Income or (Loss) [Member]
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward]
Total gains or losses included in earnings for the period	0	0
Fair Value Asset Or Liability Measured On Recurring Basis Change In Unrealized Gains Losses Still Held	$ 0	$ 0

XML

Insurance Contracts - Additional Information (Details) $ in Thousands, € in Millions, £ in Millions	3 Months Ended		9 Months Ended	12 Months Ended
	Mar. 31, 2022 USD ($)	Mar. 31, 2021 USD ($)	Sep. 30, 2021	Dec. 31, 2021 USD ($)	Mar. 31, 2022 GBP (£)	Mar. 31, 2022 EUR (€)	Mar. 31, 2021 GBP (£)	Mar. 31, 2021 EUR (€)	Dec. 31, 2020 USD ($)
Insurance [Line Items]
Reinsurance Recoverable Credit Exposure	$ 30,000			$ 31,000
Reinsurance Recoverable, Allowance for Credit Loss	49			10
Public Finance Puerto Rico Net Par Outstanding	784,000
Schedule Of Insured Financial Obligations With Credit Deterioration Reductions Of Gross Claim Liability Rmbs Subrogation	1,502,000			1,730,000
Financial Guarantee Insurance Contracts, Premium Receivable	$ 308,000	$ 356,000		$ 320,000					$ 370,000
Estimated Future Premium Payments Weighted Average Discounted Rate	2.60%			2.20%	2.60%	2.60%
Reinsurance Payable	$ 40,000			$ 33,000
Weighted average period of future premiums	8 years 2 months 12 days			8 years
Uncollectable premium receivables	$ 8,000			$ 9,000
Accelerated premium revenue for retired obligations	0	0
Reinsurance recoveries of losses included in losses and loss expenses	(7,000)	(1,000)
Subrogation recoveries, net of reinsurance	(1,480,000)			(1,704,000)
Amortization of intangible assets	14,000	19,000
Intangible assets	350,000			362,000
Possible Increase in Loss Reserves Related to Puerto Rico	220,000
Stockholders' Equity, Including Portion Attributable to Noncontrolling Interest	974,000	1,123,000		$ 1,098,000					$ 1,140,000
Stockholders Equity After Possible Increase in Domestic Public Finance Loss Reserves	754,000
Stockholders Equity After Possible Inability to Realize R&W Subrogation Recoveries	(505,000)
Uncollateralized Credit Exposure Supported by Unlimited Uncapped Indemnity	29,000
Past Due Premiums	1,000	0
Financial Guaranty
Insurance [Line Items]
Losses and loss expense reserves ceded to reinsurers	$ 14,000
Loss Reserves [Member]
Insurance [Line Items]
Weighted average risk-free rate used to discount loss reserves	2.40%		1.20%
United Kingdom, Pounds
Insurance [Line Items]
Financial Guarantee Insurance Contracts, Premium Receivable	$ 101,000	122,000			£ 77		£ 89
Euro Member Countries, Euro
Insurance [Line Items]
Financial Guarantee Insurance Contracts, Premium Receivable	$ 16,000	$ 21,000				€ 15		€ 18

XML

Financial Guarantee Insurance Contracts - Summary of Gross Premium Receivable Roll-Forward (Direct and Assumed Contracts) (Details) $ in Thousands, € in Millions, £ in Millions	3 Months Ended
	Mar. 31, 2022 USD ($)	Mar. 31, 2022 GBP (£)	Mar. 31, 2022 EUR (€)	Mar. 31, 2021 USD ($)	Mar. 31, 2021 GBP (£)	Mar. 31, 2021 EUR (€)	Dec. 31, 2021 USD ($)	Dec. 31, 2020 USD ($)
Insurance [Line Items]
Allowance for Doubtful Accounts, Premiums and Other Receivables	$ 8,000			$ 13,000			$ 9,000	$ 17,000
Financial Guarantee Insurance Contracts, Accelerated Premium Revenue, Amount	0			0
Past Due Premiums Receivable	19						0
Financial Guarantee Insurance Contracts, Premium Receivable [Roll Forward]
Beginning premium receivable	320,000			370,000
Premium receipts	15,000			12,000
Adjustments for changes in expected and contractual cash flows	3,000			(8,000)
Accretion of premium receivable discount	2,000			2,000
Uncollectable premiums	1,000			4,000
Other adjustments (including foreign exchange)	(3,000)			0
Ending premium receivable	308,000			356,000
Premium Receivable, Allowance for Credit Loss	8,000						9,000
Premium Receivable, Credit Loss Expense (Reversal)	(1,000)			(4,000)
Premium Receivable, Allowance for Credit Loss, Writeoff	0			0
Premium Receivable, Allowance for Credit Loss, Recovery	0			0
Financing Receivable, 90 Days or More Past Due, Still Accruing	14						0
Premiums Receivable, Gross	316,000						329,000
Stockholders' Equity, Including Portion Attributable to Noncontrolling Interest	974,000			1,123,000			1,098,000	$ 1,140,000
Premiums Receivable, Net	317,000						323,000
Specialty Property & Casualty Program
Financial Guarantee Insurance Contracts, Premium Receivable [Roll Forward]
Premiums Receivable, Gross	9,000						2,000
Public Finance [Member]
Financial Guarantee Insurance Contracts, Premium Receivable [Roll Forward]
Premiums Receivable, Gross	157,000						159,000
Structured Finance [Member]
Financial Guarantee Insurance Contracts, Premium Receivable [Roll Forward]
Premiums Receivable, Gross	41,000						45,000
International Finance [Member]
Financial Guarantee Insurance Contracts, Premium Receivable [Roll Forward]
Premiums Receivable, Gross	118,000						125,000
I/SL [Member]
Financial Guarantee Insurance Contracts, Premium Receivable [Roll Forward]
Premiums Receivable, Gross	267,000						277,000
I/SL [Member] | Public Finance [Member]
Financial Guarantee Insurance Contracts, Premium Receivable [Roll Forward]
Premiums Receivable, Gross	149,000						151,000
I/SL [Member] | Structured Finance [Member]
Financial Guarantee Insurance Contracts, Premium Receivable [Roll Forward]
Premiums Receivable, Gross	18,000						19,000
I/SL [Member] | International Finance [Member]
Financial Guarantee Insurance Contracts, Premium Receivable [Roll Forward]
Premiums Receivable, Gross	100,000						107,000
IA [Member]
Financial Guarantee Insurance Contracts, Premium Receivable [Roll Forward]
Premiums Receivable, Gross	12,000						12,000
IA [Member] | Public Finance [Member]
Financial Guarantee Insurance Contracts, Premium Receivable [Roll Forward]
Premiums Receivable, Gross	3,000						3,000
IA [Member] | Structured Finance [Member]
Financial Guarantee Insurance Contracts, Premium Receivable [Roll Forward]
Premiums Receivable, Gross	1,000						1,000
IA [Member] | International Finance [Member]
Financial Guarantee Insurance Contracts, Premium Receivable [Roll Forward]
Premiums Receivable, Gross	8,000						8,000
II [Member]
Financial Guarantee Insurance Contracts, Premium Receivable [Roll Forward]
Premiums Receivable, Gross	5,000						6,000
II [Member] | Public Finance [Member]
Financial Guarantee Insurance Contracts, Premium Receivable [Roll Forward]
Premiums Receivable, Gross	5,000						5,000
II [Member] | Structured Finance [Member]
Financial Guarantee Insurance Contracts, Premium Receivable [Roll Forward]
Premiums Receivable, Gross	0						1,000
II [Member] | International Finance [Member]
Financial Guarantee Insurance Contracts, Premium Receivable [Roll Forward]
Premiums Receivable, Gross	0						0
III [Member]
Financial Guarantee Insurance Contracts, Premium Receivable [Roll Forward]
Premiums Receivable, Gross	21,000						22,000
III [Member] | Public Finance [Member]
Financial Guarantee Insurance Contracts, Premium Receivable [Roll Forward]
Premiums Receivable, Gross	0						0
III [Member] | Structured Finance [Member]
Financial Guarantee Insurance Contracts, Premium Receivable [Roll Forward]
Premiums Receivable, Gross	11,000						12,000
III [Member] | International Finance [Member]
Financial Guarantee Insurance Contracts, Premium Receivable [Roll Forward]
Premiums Receivable, Gross	10,000						11,000
IV [Member]
Financial Guarantee Insurance Contracts, Premium Receivable [Roll Forward]
Premiums Receivable, Gross	11,000						12,000
IV [Member] | Public Finance [Member]
Financial Guarantee Insurance Contracts, Premium Receivable [Roll Forward]
Premiums Receivable, Gross	0						0
IV [Member] | Structured Finance [Member]
Financial Guarantee Insurance Contracts, Premium Receivable [Roll Forward]
Premiums Receivable, Gross	11,000						12,000
IV [Member] | International Finance [Member]
Financial Guarantee Insurance Contracts, Premium Receivable [Roll Forward]
Premiums Receivable, Gross	0						0
United Kingdom, Pounds
Financial Guarantee Insurance Contracts, Premium Receivable [Roll Forward]
Ending premium receivable	101,000	£ 77		122,000	£ 89
Euro Member Countries, Euro
Financial Guarantee Insurance Contracts, Premium Receivable [Roll Forward]
Ending premium receivable	16,000		€ 15	$ 21,000		€ 18
Other Public Finance Sectors [Member] | Public Finance [Member]
Financial Guarantee Insurance Contracts, Premium Receivable [Roll Forward]
Premiums Receivable, Gross	2,000						2,000
Other Public Finance Sectors [Member] | I/SL [Member] | Public Finance [Member]
Financial Guarantee Insurance Contracts, Premium Receivable [Roll Forward]
Premiums Receivable, Gross	2,000						2,000
Other Public Finance Sectors [Member] | IA [Member] | Public Finance [Member]
Financial Guarantee Insurance Contracts, Premium Receivable [Roll Forward]
Premiums Receivable, Gross	0						0
Other Public Finance Sectors [Member] | II [Member] | Public Finance [Member]
Financial Guarantee Insurance Contracts, Premium Receivable [Roll Forward]
Premiums Receivable, Gross	0						0
Other Public Finance Sectors [Member] | III [Member] | Public Finance [Member]
Financial Guarantee Insurance Contracts, Premium Receivable [Roll Forward]
Premiums Receivable, Gross	0						0
Other Public Finance Sectors [Member] | IV [Member] | Public Finance [Member]
Financial Guarantee Insurance Contracts, Premium Receivable [Roll Forward]
Premiums Receivable, Gross	0						0
Other International [Member] | International Finance [Member]
Financial Guarantee Insurance Contracts, Premium Receivable [Roll Forward]
Premiums Receivable, Gross	5,000						5,000
Other International [Member] | I/SL [Member] | International Finance [Member]
Financial Guarantee Insurance Contracts, Premium Receivable [Roll Forward]
Premiums Receivable, Gross	5,000						5,000
Other International [Member] | IA [Member] | International Finance [Member]
Financial Guarantee Insurance Contracts, Premium Receivable [Roll Forward]
Premiums Receivable, Gross	0						0
Other International [Member] | II [Member] | International Finance [Member]
Financial Guarantee Insurance Contracts, Premium Receivable [Roll Forward]
Premiums Receivable, Gross	0						0
Other International [Member] | III [Member] | International Finance [Member]
Financial Guarantee Insurance Contracts, Premium Receivable [Roll Forward]
Premiums Receivable, Gross	0						0
Other International [Member] | IV [Member] | International Finance [Member]
Financial Guarantee Insurance Contracts, Premium Receivable [Roll Forward]
Premiums Receivable, Gross	0						0
Mortgage Backed And Home Equity [Member] | Structured Finance [Member]
Financial Guarantee Insurance Contracts, Premium Receivable [Roll Forward]
Premiums Receivable, Gross	15,000						16,000
Mortgage Backed And Home Equity [Member] | I/SL [Member] | Structured Finance [Member]
Financial Guarantee Insurance Contracts, Premium Receivable [Roll Forward]
Premiums Receivable, Gross	1,000						1,000
Mortgage Backed And Home Equity [Member] | IA [Member] | Structured Finance [Member]
Financial Guarantee Insurance Contracts, Premium Receivable [Roll Forward]
Premiums Receivable, Gross	0						0
Mortgage Backed And Home Equity [Member] | II [Member] | Structured Finance [Member]
Financial Guarantee Insurance Contracts, Premium Receivable [Roll Forward]
Premiums Receivable, Gross	0						1,000
Mortgage Backed And Home Equity [Member] | III [Member] | Structured Finance [Member]
Financial Guarantee Insurance Contracts, Premium Receivable [Roll Forward]
Premiums Receivable, Gross	2,000						2,000
Mortgage Backed And Home Equity [Member] | IV [Member] | Structured Finance [Member]
Financial Guarantee Insurance Contracts, Premium Receivable [Roll Forward]
Premiums Receivable, Gross	11,000						12,000
Structured Insurance [Domain] | Structured Finance [Member]
Financial Guarantee Insurance Contracts, Premium Receivable [Roll Forward]
Premiums Receivable, Gross	9,000						10,000
Structured Insurance [Domain] | I/SL [Member] | Structured Finance [Member]
Financial Guarantee Insurance Contracts, Premium Receivable [Roll Forward]
Premiums Receivable, Gross	9,000						10,000
Structured Insurance [Domain] | IA [Member] | Structured Finance [Member]
Financial Guarantee Insurance Contracts, Premium Receivable [Roll Forward]
Premiums Receivable, Gross	0						0
Structured Insurance [Domain] | II [Member] | Structured Finance [Member]
Financial Guarantee Insurance Contracts, Premium Receivable [Roll Forward]
Premiums Receivable, Gross	0						0
Structured Insurance [Domain] | III [Member] | Structured Finance [Member]
Financial Guarantee Insurance Contracts, Premium Receivable [Roll Forward]
Premiums Receivable, Gross	0						0
Structured Insurance [Domain] | IV [Member] | Structured Finance [Member]
Financial Guarantee Insurance Contracts, Premium Receivable [Roll Forward]
Premiums Receivable, Gross	0						0
Student Loans [Member] | Structured Finance [Member]
Financial Guarantee Insurance Contracts, Premium Receivable [Roll Forward]
Premiums Receivable, Gross	11,000						12,000
Student Loans [Member] | I/SL [Member] | Structured Finance [Member]
Financial Guarantee Insurance Contracts, Premium Receivable [Roll Forward]
Premiums Receivable, Gross	1,000						1,000
Student Loans [Member] | IA [Member] | Structured Finance [Member]
Financial Guarantee Insurance Contracts, Premium Receivable [Roll Forward]
Premiums Receivable, Gross	1,000						1,000
Student Loans [Member] | II [Member] | Structured Finance [Member]
Financial Guarantee Insurance Contracts, Premium Receivable [Roll Forward]
Premiums Receivable, Gross	0						0
Student Loans [Member] | III [Member] | Structured Finance [Member]
Financial Guarantee Insurance Contracts, Premium Receivable [Roll Forward]
Premiums Receivable, Gross	8,000						9,000
Student Loans [Member] | IV [Member] | Structured Finance [Member]
Financial Guarantee Insurance Contracts, Premium Receivable [Roll Forward]
Premiums Receivable, Gross	0						0
Other Structured Finance [Member] | Structured Finance [Member]
Financial Guarantee Insurance Contracts, Premium Receivable [Roll Forward]
Premiums Receivable, Gross	6,000						7,000
Other Structured Finance [Member] | I/SL [Member] | Structured Finance [Member]
Financial Guarantee Insurance Contracts, Premium Receivable [Roll Forward]
Premiums Receivable, Gross	6,000						7,000
Other Structured Finance [Member] | IA [Member] | Structured Finance [Member]
Financial Guarantee Insurance Contracts, Premium Receivable [Roll Forward]
Premiums Receivable, Gross	0						0
Other Structured Finance [Member] | II [Member] | Structured Finance [Member]
Financial Guarantee Insurance Contracts, Premium Receivable [Roll Forward]
Premiums Receivable, Gross	0						0
Other Structured Finance [Member] | III [Member] | Structured Finance [Member]
Financial Guarantee Insurance Contracts, Premium Receivable [Roll Forward]
Premiums Receivable, Gross	0						0
Other Structured Finance [Member] | IV [Member] | Structured Finance [Member]
Financial Guarantee Insurance Contracts, Premium Receivable [Roll Forward]
Premiums Receivable, Gross	0						0
Sovereign And Sub Sovereign [Member] | International Finance [Member]
Financial Guarantee Insurance Contracts, Premium Receivable [Roll Forward]
Premiums Receivable, Gross	92,000						93,000
Sovereign And Sub Sovereign [Member] | I/SL [Member] | International Finance [Member]
Financial Guarantee Insurance Contracts, Premium Receivable [Roll Forward]
Premiums Receivable, Gross	74,000						74,000
Sovereign And Sub Sovereign [Member] | IA [Member] | International Finance [Member]
Financial Guarantee Insurance Contracts, Premium Receivable [Roll Forward]
Premiums Receivable, Gross	8,000						8,000
Sovereign And Sub Sovereign [Member] | II [Member] | International Finance [Member]
Financial Guarantee Insurance Contracts, Premium Receivable [Roll Forward]
Premiums Receivable, Gross	0						0
Sovereign And Sub Sovereign [Member] | III [Member] | International Finance [Member]
Financial Guarantee Insurance Contracts, Premium Receivable [Roll Forward]
Premiums Receivable, Gross	10,000						11,000
Sovereign And Sub Sovereign [Member] | IV [Member] | International Finance [Member]
Financial Guarantee Insurance Contracts, Premium Receivable [Roll Forward]
Premiums Receivable, Gross	0						0
Investor Owned And Public Utilities [Member] | International Finance [Member]
Financial Guarantee Insurance Contracts, Premium Receivable [Roll Forward]
Premiums Receivable, Gross	21,000						28,000
Investor Owned And Public Utilities [Member] | I/SL [Member] | International Finance [Member]
Financial Guarantee Insurance Contracts, Premium Receivable [Roll Forward]
Premiums Receivable, Gross	21,000						28,000
Investor Owned And Public Utilities [Member] | IA [Member] | International Finance [Member]
Financial Guarantee Insurance Contracts, Premium Receivable [Roll Forward]
Premiums Receivable, Gross	0						0
Investor Owned And Public Utilities [Member] | II [Member] | International Finance [Member]
Financial Guarantee Insurance Contracts, Premium Receivable [Roll Forward]
Premiums Receivable, Gross	0						0
Investor Owned And Public Utilities [Member] | III [Member] | International Finance [Member]
Financial Guarantee Insurance Contracts, Premium Receivable [Roll Forward]
Premiums Receivable, Gross	0						0
Investor Owned And Public Utilities [Member] | IV [Member] | International Finance [Member]
Financial Guarantee Insurance Contracts, Premium Receivable [Roll Forward]
Premiums Receivable, Gross	0						0
Housing Revenue [Member] | Public Finance [Member]
Financial Guarantee Insurance Contracts, Premium Receivable [Roll Forward]
Premiums Receivable, Gross	155,000						157,000
Housing Revenue [Member] | I/SL [Member] | Public Finance [Member]
Financial Guarantee Insurance Contracts, Premium Receivable [Roll Forward]
Premiums Receivable, Gross	147,000						149,000
Housing Revenue [Member] | IA [Member] | Public Finance [Member]
Financial Guarantee Insurance Contracts, Premium Receivable [Roll Forward]
Premiums Receivable, Gross	3,000						3,000
Housing Revenue [Member] | II [Member] | Public Finance [Member]
Financial Guarantee Insurance Contracts, Premium Receivable [Roll Forward]
Premiums Receivable, Gross	5,000						5,000
Housing Revenue [Member] | III [Member] | Public Finance [Member]
Financial Guarantee Insurance Contracts, Premium Receivable [Roll Forward]
Premiums Receivable, Gross	0						0
Housing Revenue [Member] | IV [Member] | Public Finance [Member]
Financial Guarantee Insurance Contracts, Premium Receivable [Roll Forward]
Premiums Receivable, Gross	$ 0						$ 0

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Insurance Contracts - Effect of Reinsurance on Premiums Written and Earned (Details) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2022	Mar. 31, 2021
SEC Schedule, 12-17, Insurance Companies, Reinsurance [Line Items]
Direct Premiums Written	$ 30	$ (2)
Assumed Reinsurance Premiums Written	0	0
Ceded Reinsurance Premiums Written	18	7
Premiums written, net of reinsurance	(12)	9
Direct Premiums Earned	23	17
Assumed Reinsurance Premiums Earned	0	0
Ceded Reinsurance Premiums Earned	$ 8	$ 3

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Insurance Contracts - Summarized Future Gross Undiscounted Premiums Expected to be Collected, and Future Expected Premiums Earned, Net of Reinsurance (Details) $ in Millions	Mar. 31, 2022 USD ($)
Future premiums expected to be collected, September 30, 2021	$ 9
Future premiums expected to be collected, December 31, 2021	6
Future premiums expected to be collected, December 31, 2022	30
Future premiums expected to be collected, December 31, 2023	29
Future premiums expected to be collected, December 31, 2024	28
Future premiums expected to be collected, December 31, 2025	27
Future premiums expected to be collected, December 31, 2030	115
Future premiums expected to be collected, December 31, 2035	77
Future premiums expected to be collected, December 31, 2040	34
Future premiums expected to be collected, December 31, 2045	16
Future premiums expected to be collected, December 31, 2050	5
Future premiums expected to be collected, December 31, 2055	0
Future premiums expected to be collected, Total	384
Future expected premiums to be earned, net of reinsurance, June 30, 2021	8
Future expected premiums to be earned, net of reinsurance, September 30, 2021	6
Future expected premiums to be earned, net of reinsurance, December 31, 2021	6
Future expected premiums to be earned, net of reinsurance, December 31, 2022	24
Future expected premiums to be earned, net of reinsurance, December 31, 2023	23
Future expected premiums to be earned, net of reinsurance, December 31, 2024	22
Future expected premiums to be earned, net of reinsurance, December 31, 2025	22
Future expected premiums to be earned, net of reinsurance, December 31, 2030	89
Future expected premiums to be earned, net of reinsurance, December 31, 2035	55
Future expected premiums to be earned, net of reinsurance, December 31, 2040	22
Future expected premiums to be earned, net of reinsurance, December 31, 2045	9
Future expected premiums to be earned, net of reinsurance, December 31, 2050	3
Future expected premiums to be earned, net of reinsurance, December 31, 2055	0
Future expected premiums to be earned, net of reinsurance, Total	288
Financial Guarantee Insurance Contract, Premium Revenue to be Recognized, First Quarter	$ 6

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Insurance Contracts Financial Guarantee Insurance Contracts - Components of Loss and Loss Expense Reserves and Subrogation Recoverable (Details) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2022	Mar. 31, 2021	Dec. 31, 2021	Dec. 31, 2020
Components of Loss and Loss Expense Reserves and Subrogation Recoverable [Line Items]
Ceded Loss And Loss Expenses Paid Not Yet Recovered		$ 0
Policyholder Benefits and Claims Incurred, Ceded	$ 7	1
Subrogation recoverable	(1,714)		$ (2,092)
Claim liability reported on Balance Sheet, before reinsurance	(683)		(554)
Liability for Claims and Claims Adjustment Expense	1,067		1,570
Liability for Claim and Claim Adjustment Expenses Net of Subrogation recoverables	(647)	$ (414)	(522)	$ (397)
Property and Casualty, Commercial Insurance
Components of Loss and Loss Expense Reserves and Subrogation Recoverable [Line Items]
Liability for Claims and Claims Adjustment Expense	36		32
Liability for Claim and Claim Adjustment Expenses Net of Subrogation recoverables	36		32
Present Value of Expected Net Cash Flows- Claims and Loss Expenses [Member]
Components of Loss and Loss Expense Reserves and Subrogation Recoverable [Line Items]
Subrogation recoverable	52		88
Claim liability reported on Balance Sheet, before reinsurance	1,221		1,837
Liability for Claims and Claims Adjustment Expense	1,168		1,749
Present Value of Expected Net Cash Flows-Recoveries [Member]
Components of Loss and Loss Expense Reserves and Subrogation Recoverable [Line Items]
Subrogation recoverable	(1,766)		(2,180)
Claim liability reported on Balance Sheet, before reinsurance	(1,861)		(2,335)
Liability for Claims and Claims Adjustment Expense	(95)		(155)
Unearned Premium Reserve [Member]
Components of Loss and Loss Expense Reserves and Subrogation Recoverable [Line Items]
Subrogation recoverable	0		0
Claim liability reported on Balance Sheet, before reinsurance	(42)		(56)
Liability for Claims and Claims Adjustment Expense	$ (42)		$ (56)

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Insurance Contracts - Summary of Loss Reserve Roll-Forward, Net of Subrogation Recoverable and Reinsurance (Details) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2022	Mar. 31, 2021	Dec. 31, 2021	Dec. 31, 2020
Loss And Loss Adjustment Expense Reserves [Line Items]
Impact of VIE Consolidation on Gross Loss and Loss Reserves	$ (292)	$ 0
Liability for Unpaid Claims and Claims Adjustment Expense [Roll Forward]
Beginning balance of net loss and loss expense reserves	(578)	(430)
Current Year Claims and Claims Adjustment Expense	1	0
Prior Year Claims and Claims Adjustment Expense	23	8
Liability for Unpaid Claims and Claims Adjustment Expense, Incurred Claims	24	8
Claim and loss expense payments, net of subrogation and reinsurance	0	0
Claim and loss expense (payments) recoveries, net of subrogation and reinsurance	150	(25)
Liability for Unpaid Claims and Claims Adjustment Expense, Claims Paid	(150)	25
Liability for Unpaid Claims and Claims Adjustment Expense, Foreign Currency Translation Gain (Loss)	(1)	0
Liability for Unpaid Claims and Claims Adjustment Expense, Net	(404)	(447)	$ (578)	$ (430)
Reinsurance Recoverable for Unpaid Claims and Claims Adjustments	49	33	55	33
Policyholder Benefits and Claims Incurred, Ceded	7	1
Net Incurred RMBS Subrogation Recoveries	(224)	(3)
Ceded Loss And Loss Expenses Paid Not Yet Recovered		0
Liability for Claim and Claim Adjustment Expenses Net of Subrogation recoverables	$ (647)	$ (414)	(522)	$ (397)
Financial Guarantee
Liability for Unpaid Claims and Claims Adjustment Expense [Roll Forward]
Ceded Loss And Loss Expenses Paid Not Yet Recovered			0
Loss Reserves Ceded To Reinsurers			$ 24

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Insurance Contracts - Summary of Information Related to Policies Currently Included in Ambac's Loss Reserves or Subrogation Recoverable (Details) $ in Millions	3 Months Ended	12 Months Ended
	Mar. 31, 2022 USD ($) Policies	Dec. 31, 2021 USD ($) Policies	Mar. 31, 2021 USD ($)
Schedule of Insured Financial Obligations with Credit Deterioration [Line Items]
Ceded Loss And Loss Expenses Paid Not Yet Recovered			$ 0
Number of policies | Policies	199	205
Remaining weighted-average contract period (in years)	14 years	14 years
Gross insured contractual payments outstanding:
Principal	$ 5,469	$ 6,302
Interest	2,143	2,984
Total	7,612	9,286
Gross undiscounted claim liability	1,559	2,095
Discount, gross claim liability	377	303
Gross claim liability before all subrogation and before reinsurance	1,182	1,792
Less:
Gross RMBS subrogation	(1,537)	(1,737)
Discount, RMBS subrogation	35	7
Discounted RMBS subrogation, before reinsurance	(1,502)	(1,730)
Less:
Gross other subrogation	(401)	(633)
Discount, other subrogation	41	28
Discounted other subrogation, before reinsurance	(360)	(605)
Gross claim liability, net of all subrogation and discounts, before reinsurance	(680)	(543)
Less: Unearned premium reserves	(42)	(56)
Plus: Loss adjustment expenses reserves	39	45
Claim liability reported on Balance Sheet, before reinsurance	(683)	(554)
Reinsurance recoverable reported on Balance Sheet	14	23
Financial Guarantee
Schedule of Insured Financial Obligations with Credit Deterioration [Line Items]
Ceded Loss And Loss Expenses Paid Not Yet Recovered	$ 0
Financial Guarantee
Schedule of Insured Financial Obligations with Credit Deterioration [Line Items]
Loss Reserves Ceded To Reinsurers		24
Ceded Loss And Loss Expenses Paid Not Yet Recovered		$ 0
I/SL [Member]
Schedule of Insured Financial Obligations with Credit Deterioration [Line Items]
Number of policies | Policies	34	34
Remaining weighted-average contract period (in years)	9 years	9 years
Gross insured contractual payments outstanding:
Principal	$ 1,297	$ 904
Interest	608	589
Total	1,905	1,493
Gross undiscounted claim liability	8	5
Discount, gross claim liability	1	0
Gross claim liability before all subrogation and before reinsurance	7	5
Less:
Gross RMBS subrogation	0	0
Discount, RMBS subrogation	0	0
Discounted RMBS subrogation, before reinsurance	0	0
Less:
Gross other subrogation	0	0
Discount, other subrogation	0	0
Discounted other subrogation, before reinsurance	0	0
Gross claim liability, net of all subrogation and discounts, before reinsurance	7	5
Less: Unearned premium reserves	(5)	(3)
Plus: Loss adjustment expenses reserves	1	1
Claim liability reported on Balance Sheet, before reinsurance	3	3
Reinsurance recoverable reported on Balance Sheet	$ 1	$ 1
IA [Member]
Schedule of Insured Financial Obligations with Credit Deterioration [Line Items]
Number of policies | Policies	14	15
Remaining weighted-average contract period (in years)	17 years	12 years
Gross insured contractual payments outstanding:
Principal	$ 305	$ 840
Interest	348	612
Total	653	1,452
Gross undiscounted claim liability	5	16
Discount, gross claim liability	1	1
Gross claim liability before all subrogation and before reinsurance	5	15
Less:
Gross RMBS subrogation	0	0
Discount, RMBS subrogation	0	0
Discounted RMBS subrogation, before reinsurance	0	0
Less:
Gross other subrogation	(5)	(5)
Discount, other subrogation	0	0
Discounted other subrogation, before reinsurance	(5)	(5)
Gross claim liability, net of all subrogation and discounts, before reinsurance	0	10
Less: Unearned premium reserves	(3)	(10)
Plus: Loss adjustment expenses reserves	0	0
Claim liability reported on Balance Sheet, before reinsurance	(3)	1
Reinsurance recoverable reported on Balance Sheet	$ 0	$ 1
II [Member]
Schedule of Insured Financial Obligations with Credit Deterioration [Line Items]
Number of policies | Policies	8	7
Remaining weighted-average contract period (in years)	14 years	14 years
Gross insured contractual payments outstanding:
Principal	$ 457	$ 459
Interest	308	308
Total	766	767
Gross undiscounted claim liability	45	45
Discount, gross claim liability	5	3
Gross claim liability before all subrogation and before reinsurance	40	42
Less:
Gross RMBS subrogation	0	0
Discount, RMBS subrogation	0	0
Discounted RMBS subrogation, before reinsurance	0	0
Less:
Gross other subrogation	0	0
Discount, other subrogation	0	0
Discounted other subrogation, before reinsurance	0	0
Gross claim liability, net of all subrogation and discounts, before reinsurance	40	42
Less: Unearned premium reserves	(5)	(5)
Plus: Loss adjustment expenses reserves	0	0
Claim liability reported on Balance Sheet, before reinsurance	35	38
Reinsurance recoverable reported on Balance Sheet	$ 9	$ 10
III [Member]
Schedule of Insured Financial Obligations with Credit Deterioration [Line Items]
Number of policies | Policies	14	14
Remaining weighted-average contract period (in years)	15 years	15 years
Gross insured contractual payments outstanding:
Principal	$ 1,265	$ 1,300
Interest	174	169
Total	1,439	1,469
Gross undiscounted claim liability	572	544
Discount, gross claim liability	155	109
Gross claim liability before all subrogation and before reinsurance	416	435
Less:
Gross RMBS subrogation	0	0
Discount, RMBS subrogation	0	0
Discounted RMBS subrogation, before reinsurance	0	0
Less:
Gross other subrogation	(33)	(33)
Discount, other subrogation	4	2
Discounted other subrogation, before reinsurance	(29)	(31)
Gross claim liability, net of all subrogation and discounts, before reinsurance	387	404
Less: Unearned premium reserves	(12)	(14)
Plus: Loss adjustment expenses reserves	3	4
Claim liability reported on Balance Sheet, before reinsurance	378	394
Reinsurance recoverable reported on Balance Sheet	$ 22	$ 22
IV [Member]
Schedule of Insured Financial Obligations with Credit Deterioration [Line Items]
Number of policies | Policies	124	130
Remaining weighted-average contract period (in years)	14 years	13 years
Gross insured contractual payments outstanding:
Principal	$ 2,105	$ 2,759
Interest	683	1,284
Total	2,788	4,043
Gross undiscounted claim liability	867	1,423
Discount, gross claim liability	208	185
Gross claim liability before all subrogation and before reinsurance	659	1,238
Less:
Gross RMBS subrogation	(1,537)	(1,737)
Discount, RMBS subrogation	35	7
Discounted RMBS subrogation, before reinsurance	(1,502)	(1,730)
Less:
Gross other subrogation	(350)	(583)
Discount, other subrogation	34	24
Discounted other subrogation, before reinsurance	(316)	(559)
Gross claim liability, net of all subrogation and discounts, before reinsurance	(1,159)	(1,051)
Less: Unearned premium reserves	(16)	(24)
Plus: Loss adjustment expenses reserves	35	40
Claim liability reported on Balance Sheet, before reinsurance	(1,140)	(1,036)
Reinsurance recoverable reported on Balance Sheet	$ (18)	$ (11)
V [Member]
Schedule of Insured Financial Obligations with Credit Deterioration [Line Items]
Number of policies | Policies	5	5
Remaining weighted-average contract period (in years)	7 years	7 years
Gross insured contractual payments outstanding:
Principal	$ 40	$ 40
Interest	22	22
Total	62	62
Gross undiscounted claim liability	62	62
Discount, gross claim liability	7	4
Gross claim liability before all subrogation and before reinsurance	55	57
Less:
Gross RMBS subrogation	0	0
Discount, RMBS subrogation	0	0
Discounted RMBS subrogation, before reinsurance	0	0
Less:
Gross other subrogation	(12)	(12)
Discount, other subrogation	3	2
Discounted other subrogation, before reinsurance	(10)	(10)
Gross claim liability, net of all subrogation and discounts, before reinsurance	45	47
Less: Unearned premium reserves	(1)	(1)
Plus: Loss adjustment expenses reserves	0	0
Claim liability reported on Balance Sheet, before reinsurance	44	46
Reinsurance recoverable reported on Balance Sheet	$ 0	$ 0

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Insurance Contracts - Summary of Information Related to Policies Currently Included in Ambac's Loss Reserves or Subrogation Recoverable (Phantom) (Details) - USD ($) $ in Millions	Mar. 31, 2022	Dec. 31, 2021	Mar. 31, 2021
Schedule of Insured Financial Obligations with Credit Deterioration [Line Items]
Loss and loss expense reserves	$ 1,067	$ 1,570
Subrogation recoverable	(1,714)	(2,092)
Liability for Claims	$ 1,067	$ 1,570
Ceded Loss And Loss Expenses Paid Not Yet Recovered			$ 0

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Insurance Contracts - Summary of Balance of RMBS Subrogation Recoveries and Related Claim Liabilities, by Estimation Approach (Details) - USD ($) $ in Millions	Mar. 31, 2022	Dec. 31, 2021
Schedule Of Balance Of Rmbs Subrogation Recoveries And Related Claim Liabilities By Estimation Approach [Line Items]
Balance Of Rmbs Subrogation Recoveries Net Of Reinsurance	$ (1,480)	$ (1,704)
Subrogation recoveries	$ 1,502	$ 1,730

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Insurance Contracts Financial Guarantee Insurance Contracts - Summary of Percentage Ceded to Reinsurers and Reinsurance Recoverable and Rating Levels (Details) $ in Millions	Mar. 31, 2021 USD ($)
Insurance [Abstract]
Ceded Loss And Loss Expenses Paid Not Yet Recovered	$ 0

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Insurance Contracts - Estimated Future Amortization Expense for Insurance Intangible Asset (Details) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2022	Mar. 31, 2021	Dec. 31, 2021
Amortization Of Intangible Assets [Line Items]
Amortization of intangible assets	$ 14	$ 19
2019	26
2020	32
2021	30
2022	27
2023	25
Thereafter	196
Intangible assets	$ 350		$ 362
Insurance Intangible Asset [Member]
Amortization Of Intangible Assets [Line Items]
Acquired Finite-lived Intangible Assets, Weighted Average Useful Life	7 years 3 months 18 days
Amortization of intangible assets	$ 14	$ 19
Intangible Assets, Gross (Excluding Goodwill)	1,264		1,278
Finite-Lived Intangible Assets, Accumulated Amortization	961		958
2019	24
2020	30
2021	27
2022	25
2023	22
Thereafter	176
Intangible assets	$ 303		$ 320

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Insurance - Summary of Percentage Ceded to Reinsurers and Reinsurance Recoverable and Rating Levels (Details) - USD ($) $ in Thousands	Mar. 31, 2022	Dec. 31, 2021	Mar. 31, 2021
Summary of Ceded Par and Net Unsecured Reinsurance Recoverable [Line Items]
Reinsurance Recoverable, Allowance for Credit Loss	$ 49	$ 10
Ceded Loss And Loss Expenses Paid Not Yet Recovered			$ 0

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Insurance Contracts Financial Guarantee Insurance Contracts - Insurance Intangible Asset (Details) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2022	Mar. 31, 2021	Dec. 31, 2021
Intangible assets	$ 350		$ 362
Amortization of intangible assets	$ 14	$ 19

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Insurance Contracts - Premium Earned (Details) - USD ($) $ in Millions	3 Months Ended		12 Months Ended
	Mar. 31, 2022	Mar. 31, 2021	Dec. 31, 2021
Insurance [Line Items]
Premiums Earned, Net	$ 15	$ 14
Direct Premiums Written	30	(2)
Direct Premiums Earned	23	17
Assumed Reinsurance Premiums Written	0	0
Assumed Reinsurance Premiums Earned	0	0
Ceded Premiums Written	18	7
Ceded Reinsurance Premiums Earned	8	3
Premiums Written, Net	12	(9)
Premiums Receivable, Net	$ 317		$ 323
Estimated Future Premium Payments Weighted Average Discounted Rate	2.60%		2.20%
Weighted average period of future premiums	8 years 2 months 12 days		8 years
Reportable Geographical Components [Member] | United States [Member]
Insurance [Line Items]
Premiums Earned, Net	$ 9	7
Reportable Geographical Components [Member] | United Kingdom [Member]
Insurance [Line Items]
Premiums Earned, Net	4	3
Reportable Geographical Components [Member] | Other International [Member]
Insurance [Line Items]
Premiums Earned, Net	$ 1	$ 3

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Insurance Contracts-Puerto Rico	Mar. 15, 2022 USD ($)
Insurance [Line Items]
Percent of Par of AACs Outstanding AAC-Insured PRIFA Eliminated	19.00%
Amount of AAC-Insured Par of PRIFA and CCDA Eliminated	$ 172,000,000
Cash Shared by PRHTA Creditors Under the PRHTA/CCDA/PSA	$ 389,000,000
Percent of Creditor Clawback of SUE, Subject to Lifetime Cap	69.00%
Lifetime Cap of Creditor Clawback of SUI	$ 3,698,000,000
New PRHTA Bonds to be Issued	1,245,000,000
Interim Cash Shared by PRHTA Creditors Under the PRHTA/CCSA/PSA	$ 264,000,000
Percent of Par of AACs Outstanding AAC-Insured PRIFA Eliminated	39.00%
AAC Insured GO / PBA Bonds Satisfied or Eliminated	$ 94
PRHTA 1968 Bonds
Insurance [Line Items]
New PRHTA Bonds to be Issued	646,400,000
PRHTA 1998 Bonds
Insurance [Line Items]
New PRHTA Bonds to be Issued	$ 598,600,000

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Derivative Instruments - Summary of Gross Fair Values of Individual Derivative Instruments (Details) - USD ($) $ in Millions	Mar. 31, 2022	Dec. 31, 2021
Derivatives, Fair Value [Line Items]
Derivative, Collateral, Right to Reclaim Cash	$ 6	$ 13
Net Amounts of Assets Presented in the Consolidated Balance Sheet, Derivative Assets	55	76
Derivative Asset, Fair Value, Amount Not Offset Against Collateral	0	0
Net Amounts of Liabilities Presented in the Consolidated Balance Sheet, Derivative Liabilities	76	95
Derivative Liability, Fair Value, Amount Not Offset Against Collateral	73
Gross Amount of Collateral Received/Pledged Not Offset in the Consolidated Balance Sheet, Derivative Liabilities		93
Net Amount, Derivative Assets	55	76
Derivative Asset, Fair Value, Gross Asset	56	76
Derivative Asset, Fair Value, Amount Offset Against Collateral	0	0
Derivative liabilities	76	95
Derivative Liability, Fair Value, Amount Offset Against Collateral	0	0
Derivative Liabilities Net Amount	3	2
Interest Rate Swap [Member]
Derivatives, Fair Value [Line Items]
Net Amounts of Assets Presented in the Consolidated Balance Sheet, Derivative Assets	55	76
Derivative Asset, Fair Value, Amount Not Offset Against Collateral		0
Net Amounts of Liabilities Presented in the Consolidated Balance Sheet, Derivative Liabilities	74	94
Derivative Liability, Fair Value, Amount Not Offset Against Collateral	73	93
Net Amount, Derivative Assets	55	76
Derivative Asset, Fair Value, Gross Asset	56	76
Derivative Asset, Fair Value, Amount Offset Against Collateral	0	0
Derivative liabilities	75	94
Derivative Liability, Fair Value, Amount Offset Against Collateral	0	0
Derivative Liabilities Net Amount	2	1
Other Credit Derivatives [Member]
Derivatives, Fair Value [Line Items]
Net Amounts of Liabilities Presented in the Consolidated Balance Sheet, Derivative Liabilities	1	0
Derivative liabilities	1	0
Derivative Liability, Fair Value, Amount Offset Against Collateral	0	0
Derivative Liabilities Net Amount	1	0
Variable Interest Entity, Primary Beneficiary [Member]
Derivatives, Fair Value [Line Items]
Net Amounts of Assets Presented in the Consolidated Balance Sheet, Derivative Assets	42	38
Derivative Asset, Fair Value, Amount Not Offset Against Collateral	0	0
Net Amounts of Liabilities Presented in the Consolidated Balance Sheet, Derivative Liabilities	1,866	1,940
Derivative Liability, Fair Value, Amount Not Offset Against Collateral	0
Gross Amount of Collateral Received/Pledged Not Offset in the Consolidated Balance Sheet, Derivative Liabilities		0
Net Amount, Derivative Assets	42	38
Derivative Asset, Fair Value, Gross Asset	42	38
Derivative Asset, Fair Value, Amount Offset Against Collateral	0	0
Derivative liabilities	1,866	1,940
Derivative Liability, Fair Value, Amount Offset Against Collateral	0	0
Derivative Liabilities Net Amount	1,866	1,940
Variable Interest Entity, Primary Beneficiary [Member] | Interest Rate Swap [Member]
Derivatives, Fair Value [Line Items]
Net Amounts of Liabilities Presented in the Consolidated Balance Sheet, Derivative Liabilities	1,866	1,940
Derivative liabilities	1,866	1,940
Derivative Liabilities Net Amount	1,866	1,940
Variable Interest Entity, Primary Beneficiary [Member] | Currency Swaps [Member]
Derivatives, Fair Value [Line Items]
Net Amounts of Assets Presented in the Consolidated Balance Sheet, Derivative Assets	42	38
Derivative Asset, Fair Value, Amount Not Offset Against Collateral		0
Net Amount, Derivative Assets	42	38
Derivative Asset, Fair Value, Gross Asset	42	$ 38
Derivative Asset, Fair Value, Amount Offset Against Collateral	$ 0

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Derivative Instruments - Additional Information (Details) - USD ($)	3 Months Ended
	Mar. 31, 2022	Mar. 31, 2021	Dec. 31, 2021
Schedule Of Loans And Allowance For Loan By Class Individually And Collectively Evaluated For Impairment [Line Items]
Value of right to reclaim cash collateral and posted margin, recorded in Other assets	$ 6,000,000		$ 13,000,000
Value of obligation to return cash collateral, recorded in "Other liabilities"	0
Gains in change in fair value of the call options	57,000,000	$ 25,000,000
Net liability fair value of all derivative instruments linked to Ambac's own credit risk	73,000,000		93,000,000
Fair value of posted assets as collateral	$ 87,000,000		$ 109,000,000

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Derivative Instruments - Summary of Location and Amount of Gains and Losses of Derivative Contracts (Details) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2022	Mar. 31, 2021
Debt and Equity Securities, FV-NI [Line Items]
Derivative, Gain (Loss) on Derivative, Net	$ 57	$ 25
Derivative, Gain (Loss) on Derivatives, Total Net	68	121
Net gains (losses) on derivative contracts [Domain] | Interest Rate Swap [Member]
Debt and Equity Securities, FV-NI [Line Items]
Derivative, Gain (Loss) on Derivative, Net	30	17
Net gains (losses) on derivative contracts [Domain] | Futures Contracts [Member]
Debt and Equity Securities, FV-NI [Line Items]
Derivative, Gain (Loss) on Derivative, Net	27	8
Income Loss On Variable Interest Entities [Member] | Variable Interest Entity, Primary Beneficiary [Member]
Debt and Equity Securities, FV-NI [Line Items]
Derivative, Gain (Loss) on Derivative, Net	11	96
Income Loss On Variable Interest Entities [Member] | Interest Rate Swap [Member] | Variable Interest Entity, Primary Beneficiary [Member]
Debt and Equity Securities, FV-NI [Line Items]
Derivative, Gain (Loss) on Derivative, Net	5	97
Income Loss On Variable Interest Entities [Member] | Currency Swaps [Member] | Variable Interest Entity, Primary Beneficiary [Member]
Debt and Equity Securities, FV-NI [Line Items]
Derivative, Gain (Loss) on Derivative, Net	$ 6	$ (2)

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Derivative Instruments - Summary of Notional Amounts of AFS's Trading Derivative Products (Details) - USD ($) $ in Millions	Mar. 31, 2022	Dec. 31, 2021
AFS [Member] | Interest Rate Swap [Member]
Schedule Of Loans And Allowance For Loan By Class Individually And Collectively Evaluated For Impairment [Line Items]
Derivative products, Notional Amount	$ 181	$ 185
AFS [Member] | Interest Rate Swaps-Pay-Fixed/Receive-Variable [Member]
Schedule Of Loans And Allowance For Loan By Class Individually And Collectively Evaluated For Impairment [Line Items]
Derivative products, Notional Amount	1,262	1,275
AFS [Member] | Futures Contracts [Member]
Schedule Of Loans And Allowance For Loan By Class Individually And Collectively Evaluated For Impairment [Line Items]
Derivative products, Notional Amount	470	470
Variable Interest Entity, Primary Beneficiary [Member] | Interest Rate Swap [Member]
Schedule Of Loans And Allowance For Loan By Class Individually And Collectively Evaluated For Impairment [Line Items]
Derivative products, Notional Amount	1,185	1,221
Variable Interest Entity, Primary Beneficiary [Member] | Interest Rate Swaps-Pay-Fixed/Receive-Variable [Member]
Schedule Of Loans And Allowance For Loan By Class Individually And Collectively Evaluated For Impairment [Line Items]
Derivative products, Notional Amount	1,020	1,069
Other Credit Derivatives [Member]
Schedule Of Loans And Allowance For Loan By Class Individually And Collectively Evaluated For Impairment [Line Items]
Derivative products, Notional Amount	$ 196	$ 201

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Derivative Instruments - Summary of Notional for VIE Derivatives Outstanding (Details) - Variable Interest Entity, Primary Beneficiary [Member] - USD ($) $ in Millions	Mar. 31, 2022	Dec. 31, 2021
Interest Rate Swap [Member]
Schedule Of Loans And Allowance For Loan By Class Individually And Collectively Evaluated For Impairment [Line Items]
Derivative products, Notional Amount	$ 1,185	$ 1,221
Interest Rate Swaps-Pay-Fixed/Receive-Variable [Member]
Schedule Of Loans And Allowance For Loan By Class Individually And Collectively Evaluated For Impairment [Line Items]
Derivative products, Notional Amount	1,020	1,069
Currency Swaps [Member]
Schedule Of Loans And Allowance For Loan By Class Individually And Collectively Evaluated For Impairment [Line Items]
Derivative products, Notional Amount	$ 256	$ 272

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Intangible Assets (Details) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2022	Mar. 31, 2021	Dec. 31, 2021
Intangible assets	$ 350		$ 362
Amortization of intangible assets	14	$ 19
2019	26
2020	32
2021	30
2022	27
2023	25
Thereafter	196
Finite-Lived Intangible Assets, Net	336		353
PWIC
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Intangible Assets, Other than Goodwill	14		9
Insurance Intangible Asset [Member]
Intangible Assets, Gross (Excluding Goodwill)	1,264		1,278
Finite-Lived Intangible Assets, Accumulated Amortization	961		958
Intangible assets	303		320
Amortization of intangible assets	14	19
2019	24
2020	30
2021	27
2022	25
2023	22
Thereafter	$ 176
Acquired Finite-lived Intangible Assets, Weighted Average Useful Life	7 years 3 months 18 days
Other Intangible Assets
Intangible Assets, Gross (Excluding Goodwill)	$ 36		36
Finite-Lived Intangible Assets, Accumulated Amortization	3		3
Intangible assets	32		$ 33
Amortization of intangible assets	1	$ 1
2019	2
2020	3
2021	3
2022	3
2023	2
Thereafter	$ 20
Acquired Finite-lived Intangible Assets, Weighted Average Useful Life	5 years 9 months 18 days

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Special Purpose Entities, Including Variable Interest Entities - Additional Information (Details)	3 Months Ended
	Mar. 31, 2022 USD ($) consolidationVIE Entity	Mar. 31, 2021 USD ($) consolidationVIE	Dec. 31, 2021 USD ($) Entity
Variable Interest Entities [Line Items]
Variable Interest Entity Change in Fair Value of Assets and Liabilities	$ (1,000,000)	$ (1,000,000)
Realized Investment Gains (Losses)	10,000,000	2,000,000
Other Operating Income (Expense), Net	2,000,000	(2,000,000)
Fair value of special purpose entities	0
Variable Interest Entity, Measure of Activity, Income or Loss before Tax	22,000,000	$ 0
Long-term debt	$ 2,242,000,000		$ 2,230,000,000
Number of Variable Interest Entities Consolidated During the Period	2	0
Number of Variable Interest Entities Deconsolidated During Period | consolidationVIE	0	0
Gain (loss) from consolidating VIEs	$ 28,000,000	$ 0
Number of Trusts Established Resulting From Puerto Rico Restructuring Transaction	2
Consolidated Entities [Member]
Variable Interest Entities [Line Items]
Number Of Consolidated Variable Interest Entities | Entity	8		6
Variable Interest Entity, Primary Beneficiary [Member]
Variable Interest Entities [Line Items]
Other Comprehensive Income (Loss), Financial Liability, Fair Value Option, Reclassification Adjustment from AOCI for Derecognition, before Tax	$ (1,000,000)	1,000,000
VIE Change in FV of Assets Liabilities, Net of Credit Risk Change	(1,000,000)	(1,000,000)
Gross Investment Income, Operating	(4,000,000)	2,000,000
Interest Expense, Long-term Debt	(2,000,000)	(1,000,000)
Long-term debt	$ 4,124,000,000		$ 4,216,000,000
Ambac UK [Member] | Consolidated Entities [Member]
Variable Interest Entities [Line Items]
Number Of Consolidated Variable Interest Entities | Entity	5		5
Ambac UK [Member] | Variable Interest Entity, Primary Beneficiary [Member]
Variable Interest Entities [Line Items]
Long-term debt	$ 3,701,000,000		$ 4,056,000,000
Fixed Income Investments [Member] | Variable Interest Entity, Primary Beneficiary [Member]
Variable Interest Entities [Line Items]
Realized Investment Gains (Losses)	$ 1,000,000	$ 1,000,000

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Special Purpose Entities, Including Variable Interest Entities - Summary of Fair Value of Fixed Income Securities, by Asset-Type, Held by Consolidated Variable Interest Entities (Details) - USD ($) $ in Millions	Mar. 31, 2022	Dec. 31, 2021
Variable Interest Entities [Line Items]
Debt Securities, Available-for-sale, Amortized Cost	$ 2,005
Debt Securities, Available-for-sale, Accumulated Gross Unrealized Gain, before Tax	73	$ 141
Debt Securities, Available-for-sale, Accumulated Gross Unrealized Loss, before Tax	43	16
Variable Interest Entity, Primary Beneficiary [Member]
Variable Interest Entities [Line Items]
Loans Unpaid Principal Balance	2,257	2,363
Long Term Debt Unpaid Principal Balance	3,439	3,579
Variable Interest Entity, Primary Beneficiary [Member] | Municipal Bonds [Member]
Variable Interest Entities [Line Items]
Debt Securities, Available-for-sale, Amortized Cost	103	106
Debt Securities, Available-for-sale, Accumulated Gross Unrealized Gain, before Tax	$ 17	$ 29

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Special Purpose Entities, Including Variable Interest Entities - Supplemental Information about Loans Held as Assets and Long-Term Debt Associated with Consolidated Variable Interest Entities (Details) - USD ($) $ in Millions	Mar. 31, 2022	Dec. 31, 2021
Variable Interest Entities [Line Items]
Long-term debt	$ 2,242	$ 2,230
Variable Interest Entity, Primary Beneficiary [Member]
Variable Interest Entities [Line Items]
Long-term debt	4,124	4,216
Long-term debt, Estimated fair value	3,701	4,056
Loans Unpaid Principal Balance	2,257	2,363
Long Term Debt Unpaid Principal Balance	$ 3,439	$ 3,579

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Special Purpose Entities, Including Variable Interest Entities - Summary of Carrying Amount of Assets, Liabilities and Maximum Exposure to Loss of Ambac's Variable Interests in Non-Consolidated Variable Interest Entities (Details) - USD ($) $ in Millions	Mar. 31, 2022	Dec. 31, 2021
Variable Interest Entities [Line Items]
Maximum Exposure To Loss	$ 24,517	$ 25,112
Insurance Assets	1,899	2,195
Insurance Liabilities	962	1,023
Derivative Liabilities	2
Variable Interest Entity, Primary Beneficiary [Member]
Variable Interest Entities [Line Items]
Derivative Liabilities		5
Global Public Finance [Member]
Variable Interest Entities [Line Items]
Maximum Exposure To Loss	19,910	20,233
Insurance Assets	244	246
Insurance Liabilities	255	257
Derivative Liabilities	(1)	0
Global Structured Finance [Member]
Variable Interest Entities [Line Items]
Maximum Exposure To Loss	4,608	4,879
Insurance Assets	1,655	1,949
Insurance Liabilities	706	765
Derivative Liabilities	3	5
Global Structured Finance [Member] | Residential Mortgage-Backed Securities [Member]
Variable Interest Entities [Line Items]
Maximum Exposure To Loss	3,089	3,265
Insurance Assets	1,637	1,929
Insurance Liabilities	466	521
Derivative Liabilities	0	0
Global Structured Finance [Member] | Other Consumer Asset-Backed [Member]
Variable Interest Entities [Line Items]
Maximum Exposure To Loss	743	788
Insurance Assets	16	17
Insurance Liabilities	231	234
Derivative Liabilities	0	0
Global Structured Finance [Member] | Other [Member]
Variable Interest Entities [Line Items]
Maximum Exposure To Loss	775	826
Insurance Assets	2	3
Insurance Liabilities	9	10
Derivative Liabilities	$ 3	$ 5

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Variable Interest Entities Special Purpose Entities, including Variable Interest Entities - Summary of Assets and Liabilities (Details) $ in Millions	Mar. 31, 2022 USD ($) Entity	Dec. 31, 2021 USD ($) Entity	Mar. 31, 2021 USD ($)
Debt Securities, Available-for-sale, Amortized Cost	$ 2,005
Fixed maturity securities, at fair value	2,036
Restricted Cash	7	$ 5	$ 16
Derivative assets	55	76
Other assets	94	68
Total assets	11,531	12,303	12,840
Interest Payable	593	576
Long-term debt	2,242	2,230
Derivative Liability	76	95
Other Liabilities	135	133
Liabilities	10,538	11,187
Debt Securities, Available-for-sale, Accumulated Gross Unrealized Gain, before Tax	73	141
Ambac Assurance Corporation [Member] | Sitka AAC Note
Long-term debt	1,155	1,154
Variable Interest Entity, Primary Beneficiary [Member]
Fixed maturity securities, at fair value	3,364	3,455
Restricted Cash	49	2	$ 2
Financing Receivable, after Allowance for Credit Loss	2,469	2,718
Derivative assets	42	38
Other assets	1	2
Total assets	5,925	6,216
Long-term debt	3,701	4,056
Long-term Debt, at par less amortized discount	422	160
Long-term debt	4,124	4,216
Derivative Liability	1,866	1,940
Other Liabilities	3	0
Liabilities	5,993	6,156
Variable Interest Entity, Primary Beneficiary [Member] | Corporate Debt Securities [Member]
Fixed maturity securities, at fair value	3,131	3,320
Variable Interest Entity, Primary Beneficiary [Member] | Municipal Bonds [Member]
Debt Securities, Available-for-sale, Amortized Cost	103	106
Fixed maturity securities, at fair value	119	136
Debt Securities, Available-for-sale, Accumulated Gross Unrealized Gain, before Tax	17	29
Variable Interest Entity, Primary Beneficiary [Member] | US States and Political Subdivisions Debt Securities
Fixed maturity securities, at fair value	114	0
Variable Interest Entity, Primary Beneficiary [Member] | Ambac UK [Member]
Fixed maturity securities, at fair value	3,131	3,320
Restricted Cash	1	1
Financing Receivable, after Allowance for Credit Loss	2,469	2,718
Derivative assets	42	38
Other assets	0	0
Total assets	5,643	6,077
Long-term debt	3,701	4,056
Long-term Debt, at par less amortized discount	0	0
Long-term debt	3,701	4,056
Derivative Liability	1,866	1,940
Other Liabilities	0	0
Liabilities	5,568	5,996
Variable Interest Entity, Primary Beneficiary [Member] | Ambac UK [Member] | Corporate Debt Securities [Member]
Fixed maturity securities, at fair value	3,131	3,320
Variable Interest Entity, Primary Beneficiary [Member] | Ambac UK [Member] | Municipal Bonds [Member]
Fixed maturity securities, at fair value	0	0
Variable Interest Entity, Primary Beneficiary [Member] | Ambac UK [Member] | US States and Political Subdivisions Debt Securities
Fixed maturity securities, at fair value	0	0
Variable Interest Entity, Primary Beneficiary [Member] | Ambac Assurance [Member]
Fixed maturity securities, at fair value	233	136
Restricted Cash	48	1
Financing Receivable, after Allowance for Credit Loss	0	0
Derivative assets	0	0
Other assets	1	2
Total assets	283	139
Long-term debt	0	0
Long-term Debt, at par less amortized discount	422	160
Long-term debt	422	160
Derivative Liability	0	0
Other Liabilities	3	0
Liabilities	426	160
Variable Interest Entity, Primary Beneficiary [Member] | Ambac Assurance [Member] | Corporate Debt Securities [Member]
Fixed maturity securities, at fair value	0	0
Variable Interest Entity, Primary Beneficiary [Member] | Ambac Assurance [Member] | Municipal Bonds [Member]
Fixed maturity securities, at fair value	119	136
Variable Interest Entity, Primary Beneficiary [Member] | Ambac Assurance [Member] | US States and Political Subdivisions Debt Securities
Fixed maturity securities, at fair value	$ 114	$ 0
Consolidated Entities [Member]
Number Of Consolidated Variable Interest Entities | Entity	8	6
Consolidated Entities [Member] | Ambac UK [Member]
Number Of Consolidated Variable Interest Entities | Entity	5	5
Consolidated Entities [Member] | Ambac Assurance [Member]
Number Of Consolidated Variable Interest Entities | Entity	3	1

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Revenue Recognition and Deferred Revenue (Details) $ in Millions	3 Months Ended
	Mar. 31, 2022 USD ($)	Mar. 31, 2021 USD ($)	Dec. 31, 2021 USD ($)
Contract with Customer, Liability, Revenue Recognized	$ 1
Revenue from Contract with Customer, Excluding Assessed Tax	9	$ 7
Contract with Customer, Receivable, after Allowance for Credit Loss	3		$ 2
Contract with Customer, Asset, after Allowance for Credit Loss	6		4
Contract with Customer, Liability	1		$ 1
Contract with Customer, Performance Obligation Satisfied in Previous Period	4	3
Employer Stop Loss
Revenue from Contract with Customer, Excluding Assessed Tax	4	3
Affinity Products
Revenue from Contract with Customer, Excluding Assessed Tax	5	4
Other Income From Revenue From Contract with Customer
Revenue from Contract with Customer, Excluding Assessed Tax	$ 0	$ 0
Minimum [Member]
Employee Stop Loss Time When Base Commissions Recognized Begin and End In Months	17
Maximum [Member]
Employee Stop Loss Time When Base Commissions Recognized Begin and End In Months	20

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Comprehensive Income - Schedule of Changes in Balances of Each Component of Accumulated Other Comprehensive Income (Details) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2022	Mar. 31, 2021
Changes In Accumulated Other Comprehensive Income [Roll Forward]
Beginning Balance	$ 58	$ 79
Other comprehensive income before reclassifications	127	15
Amounts reclassified from accumulated other comprehensive income	(1)	(4)
Other Comprehensive Income (Loss), Net of Tax, Portion Attributable to Parent	(127)	(18)
Ending Balance	(70)	61
Income Tax Expense (Benefit)	0	2
Unrealized Gains (Losses) on Available-for-Sale Securities [Member]
Changes In Accumulated Other Comprehensive Income [Roll Forward]
Beginning Balance	154	166
Other comprehensive income before reclassifications	104	21
Amounts reclassified from accumulated other comprehensive income	(1)	(3)
Other Comprehensive Income (Loss), Net of Tax, Portion Attributable to Parent	(105)	(24)
Ending Balance	49	142
Accumulated Translation Adjustment [Member]
Changes In Accumulated Other Comprehensive Income [Roll Forward]
Beginning Balance	(100)	(92)
Other comprehensive income before reclassifications	23	(6)
Amounts reclassified from accumulated other comprehensive income	0	0
Other Comprehensive Income (Loss), Net of Tax, Portion Attributable to Parent	(23)	6
Ending Balance	(123)	(86)
Accumulated Gain (Loss), Financial Liability, Fair Value Option, Attributable to Parent [Member]
Changes In Accumulated Other Comprehensive Income [Roll Forward]
Beginning Balance	(1)	0
Other comprehensive income before reclassifications	0	0
Amounts reclassified from accumulated other comprehensive income	0	(1)
Other Comprehensive Income (Loss), Net of Tax, Portion Attributable to Parent	0	(1)
Ending Balance	(1)	(1)
Other Postretirement Benefits Plan [Member]
Changes In Accumulated Other Comprehensive Income [Roll Forward]
Beginning Balance	4	5
Other comprehensive income before reclassifications	0	0
Amounts reclassified from accumulated other comprehensive income	0	0
Other Comprehensive Income (Loss), Net of Tax, Portion Attributable to Parent	0	0
Ending Balance	4	5
Reclassification out of Accumulated Other Comprehensive Income [Member] | Unrealized Gains (Losses) on Available-for-Sale Securities [Member]
Changes In Accumulated Other Comprehensive Income [Roll Forward]
Income Tax Expense (Benefit)	0	(1)
Reclassification out of Accumulated Other Comprehensive Income [Member] | Other Postretirement Benefits Plan [Member]
Accumulated Other Comprehensive Income (Loss) [Line Items]
Other Comprehensive (Income) Loss, Defined Benefit Plan, Prior Service Cost (Credit), Reclassification Adjustment from AOCI, before Tax	0	0
Changes In Accumulated Other Comprehensive Income [Roll Forward]
Amounts reclassified from accumulated other comprehensive income	0	0
Other Comprehensive Income (Loss), Defined Benefit Plan, Gain (Loss), Reclassification Adjustment from AOCI, before Tax	0	0
Income (Loss) from Continuing Operations, Net of Tax, Including Portion Attributable to Noncontrolling Interest	0	0
Income Tax Expense (Benefit)	$ 0	$ 0

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Comprehensive Income - Schedule of Amounts Reclassed Out of Each Component of Accumulated Other Comprehensive Income (Details) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2022	Mar. 31, 2021
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Income tax expense (benefit)	$ 0	$ (2)
Other Comprehensive Income (Loss), Financial Liability, Fair Value Option, Unrealized Gain (Loss) Arising During Period, after Tax	0	(1)
Net of tax and noncontrolling interest	2	4
Reclassification from Accumulated Other Comprehensive Income, Current Period, Net of Tax	(1)	(4)
Unrealized Gains (Losses) on Available-for-Sale Securities [Member]
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Net realized investment gains	(1)	(2)
Net of tax and noncontrolling interest	(1)	(3)
Reclassification from Accumulated Other Comprehensive Income, Current Period, Net of Tax	(1)	(3)
Accumulated Gain (Loss), Financial Liability, Fair Value Option, Attributable to Parent [Member]
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Other Comprehensive Income (Loss), Financial Liability, Fair Value Option, Unrealized Gain (Loss) Arising During Period, after Tax	0	1
Reclassification from Accumulated Other Comprehensive Income, Current Period, Net of Tax	0	(1)
Other Comprehensive Income (Loss), Financial Liability, Fair Value Option, before Tax, after Reclassification Adjustment	1	(1)
Reclassification out of Accumulated Other Comprehensive Income [Member]
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Net of tax and noncontrolling interest	(1)	(3)
Reclassification out of Accumulated Other Comprehensive Income [Member] | Unrealized Gains (Losses) on Available-for-Sale Securities [Member]
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Income tax expense (benefit)	0	1
Reclassification out of Accumulated Other Comprehensive Income [Member] | Accumulated Gain (Loss), Financial Liability, Fair Value Option, Including Portion Attributable to Noncontrolling Interest [Member]
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Income tax expense (benefit)	0	0
Other Postretirement Benefits Plan [Member]
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Reclassification from Accumulated Other Comprehensive Income, Current Period, Net of Tax	0	0
Other Postretirement Benefits Plan [Member] | Reclassification out of Accumulated Other Comprehensive Income [Member]
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Income tax expense (benefit)	0	0
Prior service cost	0	0
Actuarial gains (losses)	0	0
Total before tax	0	0
Reclassification from Accumulated Other Comprehensive Income, Current Period, Net of Tax	$ 0	$ 0

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Net Income Per Share - Additional Information (Details)	1 Months Ended	3 Months Ended
	May 10, 2022 USD ($) $ / shares	Mar. 31, 2022 USD ($) $ / shares shares	Mar. 31, 2021 USD ($) $ / shares	May 05, 2022 USD ($)	May 01, 2013 $ / shares	Apr. 30, 2013 $ / shares
Schedule Of Earnings Per Share [Line Items]
Common stock, shares outstanding | shares		46,545,232
Par value of common stock issued | $ / shares		$ 0.01				$ 0.01
Exercise price of common stock | $ / shares					$ 16.67
Warrants outstanding | shares		4,877,617
Earnings Per Share, Basic | $ / shares		$ 0.04	$ 0.08
Earnings Per Share, Diluted | $ / shares		$ 0.04	$ 0.08
Noncontrolling Interest, Change in Redemption Value		$ 0	$ (13,000,000)
Net Income (Loss) Available to Common Stockholders, Basic		2,000,000	$ 4,000,000
Stock Repurchase Program, Authorized Amount		$ 20,000,000
Stock Repurchased During Period, Shares | shares		0
Subsequent Event | Common Stock Repurchase
Schedule Of Earnings Per Share [Line Items]
Stock Repurchase Program, Authorized Amount				$ 15,000,000
Common Shares, Number Repurchased	1,505,316
Payments for Repurchase of Common Stock	$ 13,200,000
Payments for Common Stock per share | $ / shares	$ 8.78
Common Stock Remaining Repurchase Dollar Amount				$ 21,800,000
Common Stock [Member]
Schedule Of Earnings Per Share [Line Items]
Number of new common stock issued | shares		241,093

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Net Income Per Share - Reconciliation of Common Shares Used for Basic and Diluted Earnings Per Share (Details) - shares	3 Months Ended
	Mar. 31, 2022	Mar. 31, 2021
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Weighted average number of common shares used for basic earnings per share	46,731,459	46,314,049
Effect of potential dilutive shares:
Weighted average number of common shares and potential dilutive shares used for diluted earnings per share	47,359,731	46,858,064
Warrants [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount	4,877,617	0
Restricted Stock Units (RSUs) [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount	253,828	165,529
Performance Shares [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount	0	0
Warrants [Member]
Effect of potential dilutive shares:
Effect of potential dilutive shares	0	214,904
Restricted Stock Units (RSUs) [Member]
Effect of potential dilutive shares:
Effect of potential dilutive shares	82,066	121,215
Performance Shares [Member]
Effect of potential dilutive shares:
Effect of potential dilutive shares	546,206	207,896

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Net Income Per Share Schedule of Basic and Dilutive Securities for EPS (Details) - shares	3 Months Ended
	Mar. 31, 2022	Mar. 31, 2021
Weighted Average Number of Shares Outstanding, Basic	46,731,459	46,314,049
Weighted Average Number of Shares Outstanding, Diluted	47,359,731	46,858,064
Restricted Stock Units (RSUs) [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount	253,828	165,529
Warrants [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount	4,877,617	0
Performance Shares [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount	0	0
Performance Shares [Member]
Weighted Average Number Diluted Shares Outstanding Adjustment	546,206	207,896
Restricted Stock Units (RSUs) [Member]
Weighted Average Number Diluted Shares Outstanding Adjustment	82,066	121,215

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Income Taxes - Additional Information (Details)	3 Months Ended
	Mar. 31, 2022
Minimum [Member]
Tax Credit Carryforward [Line Items]
Operating Loss Carryforwards, Expiration Date	Dec. 31, 2029
Maximum [Member]
Tax Credit Carryforward [Line Items]
Operating Loss Carryforwards, Expiration Date	Dec. 31, 2040

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Income Taxes Income Taxes - Provision for Income Taxes Charged To Income From Continuing Operations (Details) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2022	Mar. 31, 2021
Provision for Income Taxes [Line Items]
Current Federal Tax Expense (Benefit)	$ 0	$ 0
Income (Loss) from Continuing Operations before Income Taxes, Domestic	(1)	17
Current Income Tax Expense (Benefit)	2	5
Deferred Foreign Income Tax Expense (Benefit)	(1)	(3)
Deferred Income Tax Expense (Benefit)	(1)	(3)
Income Tax Expense (Benefit)	0	2
Income (Loss) from Continuing Operations before Income Taxes, Foreign	4	2
Pre-tax income (loss)	3	19
Current State and Local Tax Expense (Benefit)	0	2
Current Foreign Tax Expense (Benefit)	$ 1	$ 3

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Income Taxes Income Taxes - NOL Usage Table (Details)	3 Months Ended
	Mar. 31, 2022
Minimum [Member]
Net Income Loss Reconciliation [Line Items]
Operating Loss Carryforwards, Expiration Date	Dec. 31, 2029
Maximum [Member]
Net Income Loss Reconciliation [Line Items]
Operating Loss Carryforwards, Expiration Date	Dec. 31, 2040

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Income Taxes Schedule of Income Before Income Taxes (Details) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2022	Mar. 31, 2021
Schedule of Income Before Income Tax, Domestic and Foreign [Line Items]
Income (Loss) from Continuing Operations before Income Taxes, Domestic	$ (1)	$ 17
Income (Loss) from Continuing Operations before Income Taxes, Foreign	4	2
Pre-tax income (loss)	$ 3	$ 19