32-005 ambc investor presentation 4q17

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Investor PresentationFourth Quarter 2017

INDEX

2

PAGE

Strategic Priorities Scorecard 3Subsequent Event-Conclusion of AAC's Segregated Account's

Rehabilitation 5

4Q2017 Financial and Business Highlights 12

Ambac History and Today 21

Value drivers

AFG 26

AAC 33

APPENDIX 32

STRATEGIC PRIORITIES SCORECARD

Strategic Priorities Accomplishments

Conclude Segregated AccountRehabilitation Exit (see slide 5)

Active Run-off of AmbacAssurance and its subsidiaries thatwe believe will improve our riskprofile; maximizing the risk-adjusted return on invested assets

Loss Recovery through Litigationand Exercise of Contractual LegalRights

Operating and CorporateGovernance Efficiencies

New Strategic Initiatives

3

ü YTD insured portfolio down 21%ü YTD ACCs down 17%ü Executed major de-risking commutations and terminations in the municipal,

structured and international sectors (see slide 4)

ü Segregated Account exit from Rehabilitation successfully completed February 12, 2018ü Proforma Book Value of $38.08 and Adjusted Book Value of $31.90 per share as of

December 31, 2017 ü Future claims paid at 100% in cash

ü Won right to appeal certain rulings of intermediate appellate court to the NY Courtof Appeals in the main Countrywide case

ü Settled Ballantyne JPM litigation realizing a benefit of $145 millionü Progressing other litigation matters including Nomura and First Franklin

ü Headcount reductions of 19%, will reduce compensation expense by approximately20% or $8.5 million annually

ü Reduction of future regulatory costs of approximately $6 million annually ü Streamlined governance structure following Segregated Account Rehabilitation exitü Reduced regulatory oversight following Segregated Account Rehabilitation exit

ü Management actively exploring potential new business initiativesü Targeted business sectors identified and financial criteria established

HIGHLIGHTED ACTIVE RISK MITIGATION ACTIVITIES - 2017

4

• Termination of Augusta Funding Limited IV, a $185 million adversely classified credit,including a swap, resulting in a gain of $43 million;

• Facilitated the refinancing of ₤188 million of insured debt of an international asset-backed issuer, with payment of a termination premium of ₤13 million, resulting inaccelerated premiums earned of $11 million

• Reduced ACCs by $422 million as a result of the termination of certain residentialmortgage backed transactions

• Facilitated the refinancing of a public finance transaction that led to reduction of ACCsby $145 million

• Facilitated the refinancing of the only remaining non-investment grade CDS, reducingACCs by $74 million

AMBAC ANNOUNCES CONCLUSION OF SEGREGATED ACCOUNTREHABILITATION

• On February 12, 2018, Ambac announced the exit from rehabilitation of AAC'sSegregated Account, following the successful completion of the holisticrestructuring transaction (the "Transaction") announced on July 19, 2017

• The Transaction was comprised of 3 key components:◦ Satisfaction and discharge of all outstanding DPOs of the Segregated Account, totaling $3.86

billion, including accretion amounts thereon;

◦ AAC's cancellation of $809.5 million, in principal amount outstanding, plus accrued and unpaidinterest thereon, 5.1% surplus notes due 2020 (the "General Account Surplus Notes"); and

◦ An effective discount of 6.5% on DPOs and the outstanding amount of principal and accrued andunpaid interest on tendered General Account Surplus Notes

• AAC also received $240 million in cash proceeds from the issuance of notessecured by recoveries from RMBS representation and warranty and fraud litigationin excess of $1.6 billion

5

KEY TRANSACTION BENEFITS

Transaction Mechanics Benefits

Material Value Creation andImproved Financial Condition

Improved OperatingEfficiency

Significant Reduction inFuture Operating Expenses

Streamlined CorporateGovernance

6

• Increase of $7.56 in Book Value• Proforma Book Value as of December 31, 2017 is $38.08 and Proforma Adjusted

Book Value is $31.90 per share• Reduction of liabilities while preserving NOLs • Improvement of AAC's statutory surplus

• Removal or modification of certain restrictive Bank Settlement Agreementcovenants associated with General Account Surplus Notes

• Elimination of the Segregated Account • Future claims paid 100% in cash• Reduced regulatory oversight

• Approximately $6 million of anticipated future annual savings of regulatoryexpenses related to the rehabilitation of the Segregated Account

• Resignation of three AAC unaffiliated directors and appointment of additionaldirector to AFG and AAC boards

• Streamlined governance structure, interlocking Board of Directors at AFG and AAC

Pro formaReported Post Restructuring

December 31, 2017 December 31, 2017 Change($ in millions, except per share data) $ Amount Per Share $ Amount Per Share $ Amount Per ShareTotal AFGI Shareholders' Equity $ 1,381 $ 30.52 $ 1,725 $ 38.08 $ 344 $ 7.56

Adjustments:Non-credit impairment unrealized fair value losses

on credit derivatives 1 0.01 1 0.01 — —

Insurance intangible asset (847) (18.71) (847) (18.71) — —Net unearned premiums and fees in excess of

expected losses597 13.20 597 13.20 — —

Net unrealized investment (gains) losses in AOCI (31) (0.68) (31) (0.68) — —Adjusted book value $ 1,101 $ 24.34 $ 1,445 $ 31.90 $ 344 $ 7.56Shares Outstanding (in millions) 45.3 45.3

PRO-FORMA ADJUSTED BOOK VALUE- POST RESTRUCTURING

7

PRO-FORMA AMBAC LIABILITY AND CAPITAL SUMMARY - POSTRESTRUCTURING

Category Comments

Claim Liabilities

Secured Note

5.1% Surplus Notes Par(1)

5.1% Junior Surplus Notes Par

Tier 2 Note

Auction MarketPreferred Shares (AMPS)

Common StockMarket Cap(3)

8

(1) Amounts are net of approximately $102 million of principal and accrued interest held by AFG(2) On August 28, 2014, to help fund the Company’s strategic priorities, AFG monetized 80% of its Segregated Account Junior Surplus Note ($350 million) and

accrued and unpaid interest ($24 million), for net proceeds of approximately $224 million. AFG retained a 20% interest in the Junior Surplus Notes through a$75 million subordinated Owner Trust Certificate

(3) Common Stock Market Cap based on AMBC common shares outstanding at the closing stock price of $15.16 on February 27, 2018 (4) As of December 31, 2017 Ambac has repurchased 985,331 warrants totaling $8.1 million at an average cost of $8.21 per warrant

• Before estimated subrogation recoveries, Unearned Premium Revenue(“UPR”) and reinsurance Includes $320 million of Ambac UK claim liabilities

• General Account Surplus Notes• Does not include $132 million(1) of accrued and unpaid interest

• Includes $350 million par (formerly held by AFG(2))• Does not include $100 million of accrued and unpaid interest

• Liquidation Preference, originally $800 million

• 45,278,480 common shares• 4,053,670 warrants(4)

$2,957

$2,145

$289

$370

$660

($ in millions)Pro-forma

12/31/17

$686

$240

• Includes $764 million owned by Ambac

($ in million)December 31,

2017 Adjustments

Pro formaDecember 31,

2017Assets:

Total non-variable interest entity investments, cash and cash equivalents $ 6,364 $ (1,786) (1) $ 4,578Subrogation recoverable 631 1,312 (2) 1,943Other assets 1,696 (9) (3) 1,687Total VIE assets 14,501 — 14,501

Total assets $ 23,192 $ (483) $ 22,710Liabilities and Stockholders' Equity:Liabilities:

Loss and loss expense reserve $ 4,745 $ (2,555) (2) $ 2,190Long-term debt 992 1,952 (4) 2,944Accrued interest payable 437 (224) (4) 213Other liabilities 1,007 — 1,007Total VIE liabilities 14,366 — 14,366

Total liabilities 21,547 (827) 20,720Stockholders' equity 1,645 344 (2)(5)(6) 1,989Total liabilities and stockholders' equity $ 23,192 $ (483) $ 22,710

SUMMARY PRO-FORMA GAAP BALANCE SHEET - POST RESTRUCTURING

9

SUMMARY PRO-FORMA GAAP BALANCE SHEET - POST RESTRUCTURING(Cont’d) (1) The net cash and investment outflows reflects the distributions under the Rehabilitation Exit Transactions as follows:

(dollars in millions)Cash payment to third parties for settlement of Deferred Amounts and Surplus Notes $ (1,347)Cash payment for unpaid claims presented after record date (30)Cash payment for one-time current interest payment on remaining surplus notes (11)Cash payment for remaining debt issuance costs (8)Receipt of Tier 2 proceeds 240Receipt of Secured Notes issued by Ambac LSNI 764Reduction in value of Ambac-insured RMBS securities held in the investment portfolio (1,394)

$ (1,786)

(2) The transactions pursuant to the Second Amended Plan of Rehabilitation where Ambac is settling its unpaid claims at a discount is being accounted for as anextinguishment, where the discount of approximately $287 is reflected in the pro forma consolidated balance sheet as an increase to Retained Earnings. As aresult of the settlement, future net cash flows on certain policies will become an asset and are reclassified to Subrogation recoverable.

(3) Reflects the reclass of previously capitalized costs directly associated with the issuance of the Ambac Notes or Tier 2 Notes to Long-term debt that will beamortized as part of the effective yield calculation.

(4) The discount received in the other Rehabilitation Exit Transactions are being accounted for as a debt modification since the creditors before and after thediscount remain the same and the change in the terms is not considered substantial. A substantial change is considered to be a change in cash flows of equalto or greater than 10% as a result of the modification of terms. As the change in cash flows is less than 10%, debt modification accounting is appropriate.Under debt modification accounting, no gain or loss is recorded, and a new effective interest rate is established based on the Ambac Note cash flows. Additionally,any consideration paid that is directly related to the issuance of the Ambac Note is capitalized and amortized as part of the effective yield calculation. The netlong-term debt increase reflects the impact of the Rehabilitation Exit Transactions as follows:

10

SUMMARY PRO-FORMA GAAP BALANCE SHEET - POST RESTRUCTURING(Cont’d)

11

(5) As a result of the Rehabilitation Exit Transactions, Ambac will receive settlement of its ownership in Deferred Amounts and would realize a gain of $57 over thecarrying value of the associated Ambac-insured RMBS as of December 31, 2017.

(6) This pro forma information does not incorporate any assumptions regarding taxes.

(4) The discount received in the other Rehabilitation Exit Transactions are being accounted for as a debt modification since the creditors before and after the discountremain the same and the change in the terms is not considered substantial. A substantial change is considered to be a change in cash flows of equal to or greaterthan 10% as a result of the modification of terms. As the change in cash flows is less than 10%, debt modification accounting is appropriate. Under debtmodification accounting, no gain or loss is recorded, and a new effective interest rate is established based on the Ambac Note cash flows. Additionally, anyconsideration paid that is directly related to the issuance of the Ambac Note is capitalized and amortized as part of the effective yield calculation. The net long-term debt increase reflects the impact of the Rehabilitation Exit Transactions as follows:

(dollars in millions)Long-term

Debt

AccruedInterestPayable

Tier 2 Notes issuance $ 240 $ —Ambac Note issuance 2,145 —Cash payment for on-time current interest payment on remaining surplus notes — (11)Deferred loss on Rehabilitation Exit Transactions and debt issuance costs (20) —Reduction in carrying value of Surplus Notes (413) (213)

$ 1,952 $ (224)

• Financial Highlights: ◦ Total revenues increased $56.2 million as a result of higher investment returns, higher income

from VIE entities and greater net gains on interest rate derivatives, partially offset by lowerpremium earned

◦ Total expenses decreased $122.3 million due to lower loss and loss expenses and operatingexpenses

◦ Tax expense was $12.6 million primarily due to Ambac UK current taxes of $8.7 million, $2.0million of state taxes and the net impact of $1.9 million for the implementation of the provisions ofthe Tax Cuts and Jobs Act

4Q2017 FINANCIAL HIGHLIGHTS

($ in millions, except per share amounts) 4Q2017 3Q2017Net income (loss) $ (19) $ (191)Net income (loss) per diluted share $ (0.43) $ (4.20)Adjusted earnings (loss) (1) $ 5 $ (150)Adjusted earnings (loss) per diluted share $ 0.12 $ (3.30)Adjusted book value (1) $ 1,101 $ 1,112Adjusted book value per share $ 24.34 $ 24.56

12

(1) Adjusted earnings and adjusted book value are non-GAAP financial measures of financial performance or financial position that excludes (or includes) amounts that areincluded in (or excluded from) net income attributable to common stockholders for Adjusted Earnings and Total Ambac Financial Group, Inc. stockholders’ equity for AdjustedBook Value. A reconciliation between both financial measures can be found in Ambac’s 4Q2017 Earnings Release included in Ambac’s Current Report on Form 8-K filed withthe SEC on February 28, 2018 and at the end of this document

4Q2017 FINANCIAL HIGHLIGHTS (CONT'D)

13

• INVESTMENT MANAGEMENT:

◦ During the three months ended December 31, 2017, Ambac acquired $302.5 million ofAmbac insured Puerto Rico securities

▪ Ambac currently owns approximately 29% of PRIFA and 58% of COFINA insured bonds

• LOSS MITIGATION ACTIVITY:

◦ Adversely Classified Credits ("ACCs") declined $1.1 billion or 7.5% through natural run-off and active loss mitigation activities

▪ Reduced ACCs by $422 million as a result of the termination of certain residential mortgagebacked transactions

▪ Facilitation of a public finance refinancing transaction, reducing ACCs by $145 million

• Facilitated the refinancing of the only remaining non-investment grade CDS, reducing ACCsby $74 million

4Q2017 vs 3Q2017 - KEY FINANCIAL RESULTS

4Q2017 3Q2017

$125$75$25

-$25-$75

-$125-$175-$225-$275

Netpremiumsearned

Netinvestmentincome

InterestRateDerivativesgains(losses)

Loss and lossexpenses

Operatingexpenses

Interestexpense

Netincome (loss)attributableto CommonStockholders

Adjustedearnings(loss)

$32

$107

$23

$(102)

$(29) $(31) $(19)

$5$53

$87

$4

$(210)

$(34) $(29)

$(191)$(150)

(1) Adjusted earnings (loss) is a non-GAAP financial measure of financial position that excludes (or includes) amounts that are included in (or excluded from) netincome which is presented in accordance with GAAP. A reconciliation between both financial measures can be found in Ambac’s 4Q2017 Earnings Release,included in Ambac’s Current Report on Form 8-K filed with the SEC on February 28, 2018 and at the end of this document

• Net Premiums earned decreased $21.5 million due to the continued runoff of the insured portfolio andthe favorable impact of de-risking activities in 3Q17

• Net investment income increased $19.9 million in 4Q17 primarily from higher discount accretion onAmbac-insured RMBS as a result of the impact of the Segregated Account rehabilitation exittransactions

• Interest rate derivatives gains were $23.0 million, which reflected the impact of the macro hedge due arise in interest rates compared to 3Q2017

14

($ in millions)

(1)

INCURRED (LOSSES) BENEFIT BY CATEGORY(1) - 4Q2017 vs 3Q2017

4Q2017 3Q2017

$100

$50

$0

-$50

-$100

-$150

-$200

-$250

RMBS DomesticPublicFinance

StudentLoans

Ambac UK Other Credits Intereston DeferredAmounts

Total

$(18)$(42)

$(1)

$7

$(3)

$(46)

$(102)

$34

$(213)

$(2)

$13 $2

$(45)

$(210)

(1) Components may not add to total due to rounding

• RMBS loss of $18.2 million in 4Q2017 was driven by excess spread compression and loss expensesincurred, partially offset by a benefit related to transactions terminated during 4Q17

• Domestic public finance losses of $42.2 million in 4Q17 were impacted by adverse developments inPublic Finance, primarily Puerto Rico

• Ambac UK benefit of $7.3 million in 4Q2017 was primarily a result of improved credit performance andforeign exchange gains

15

($ in millions)

GROSS LOSS RESERVES BY CATEGORY(1)

16

(1) Gross loss reserves are net of estimated R&W subrogation recoveries of $1.8 billion as of December 31, 2017 and September 30, 2017, and othersubrogation recoverables of $0.7 billion and $0.8 billion as of December 31, 2017 and September 30, 2017, respectively. Gross loss reserves include $3.9billion and $3.8 billion of unpaid segregated account policy claims and interest as of December 31, 2017 and September 30, 2017, respectively

As of 12/31/17 As of 9/30/17

$5,000

$4,000

$3,000

$2,000

$1,000

$0

RMBS DomesticPublicFinance

StudentLoans

Ambac UK Other Credits LossExpenses

Total

$2,598

$816

$308 $286$17 $89

$4,114

$2,489

$801

$307 $290$14 $99

$4,000

($ in millions)

EXPENSE MANAGEMENT

17

Focus on expense reduction through headcount and operating efficiencies

Compensation Expense

$25

$20

$15

$10

$5

$0

($in

mill

ions

)

3Q 2016 4Q 2016 1Q 2017 2Q 2017 3Q 2017 4Q 2017

• Compensation expense decreased $4.4 million in 4Q2017 from 3Q2017 primarily due to costs related to a corporatereorganization implemented in 3Q2017

• Expenses related to the restructuring transaction amounted to $5.2 million in 4Q2017 and $7.0 million in 3Q2017• Expenses directly related to regulatory oversight, ("OCI") amounted to $5.0 million in 4Q2017 and $2.2 million in 3Q2017

Other OCI Activism

Litigation contingency Restructuring

Non-Compensation Expenses

$25

$20

$15

$10

$5

$0

($in

mill

ions

)

3Q 2016 4Q 2016 1Q 2017 2Q 2017 3Q 2017 4Q 2017

Claims-paying resources (1) of $8.9 billion as of December 31, 2017 Net par outstanding decreased 68% from June 30, 2013

Claims-paying Ratio Net Par Outstanding ($ in billions)

35

30

25

20

15

10

5

0

$220

$200

$180

$160

$140

$120

$100

$80

$60

$40

($in

billi

ons)

06/30/13 12/31/13 06/30/14 12/31/14 06/30/15 12/31/15 06/30/16 12/31/16 12/31/17

31:1

28:126:1 26:1

23:1

19:117:1

14:1

11:1

$196.4

$179.1$167.7

$144.7

$130.0

$108.3$94.4 $79.3

$62.7

STEADY IMPROVEMENT IN CLAIMS-PAYING RATIO AND REDUCTION OFINSURED EXPOSURES

(1) Total claims-paying ratio is net financial guarantees in force divided by total claims-paying resources. Total claims-paying resources quantifies total resourcesavailable to pay claims, including guarantees on subsidiary obligations. The calculation for total claims-paying-resources includes loss and loss adjustmentexpense reserves before the recorded statutory benefit for expected subrogation receipts

(2) Par throughout this presentation includes capital appreciation bonds which are reported at the par amount at the time of issuance of the insurance policy asopposed to the current accreted value of the bonds

18

(1) (2)

AMBAC LIABILITY AND CAPITAL SUMMARY - AS OF 12/31/17

Category Comments

Claim Liabilities

5.1% Surplus Notes Par(1)

5.1% Junior Surplus Notes Par

Auction MarketPreferred Shares (AMPS)

Common StockMarket Cap(3)

19

(1) Amounts are net of approximately $232 million of principal and accrued interest held by AFG, inclusive of Segregated Account surplus notes (2) On August 28, 2014, to help fund the Company’s strategic priorities, AFG monetized 80% of its Segregated Account Junior Surplus Note ($350 million) and

accrued and unpaid interest ($24 million), for net proceeds of approximately $224 million. AFG retained a 20% interest in the Junior Surplus Notes through a$75 million subordinated Owner Trust Certificate

(3) Common Stock Market Cap based on AMBC common shares outstanding at the closing stock price of $15.16 on February 27, 2018 (4) As of December 31, 2017 Ambac has repurchased 985,331 warrants totaling $8.1 million at an average cost of $8.21 per warrant

• Before estimated subrogation recoveries, Unearned Premium Revenue(“UPR”) and reinsurance

• Includes $3,867 million of unpaid claims, including accrued interest onDeferred Amounts (“DPO”) of $840 million

• Includes $320 million of Ambac UK claim liabilities

• Does not include $345 million(1) of accrued and unpaid interest

• Includes $350 million par (formerly held by AFG(2))• Does not include $100 million of accrued and unpaid interest

• Liquidation Preference, originally $800 million

• 45,278,480 common shares• 4,053,670 warrants(4)

$6,824

$755

$370

$660

$686

($ in millions) 12/31/17

Adjusted Book Value/ShareIncrease of $20.57 since June 2013

$50

$40

$30

$20

$10

$0

Jun-13Dec-13

Dec-14Dec-15

Dec-16Dec-17

$3.77$8.32

$15.01

$28.15 $29.48$24.34

Book Value/Share42% CAGR since June 2013

$50

$40

$30

$20

$10

$0

Jun-13Dec-13

Dec-14Dec-15

Dec-16Dec-17

$6.38

$15.62

$31.09

$37.41 $37.94

$30.52

BOOK VALUE AND ADJUSTED BOOK VALUE PER SHARE (1)

Ambac has strengthened book value and adjusted book value since emergence from bankruptcy(2)

20

(1) Adjusted book value is a non-GAAP financial measure of financial position that excludes (or includes) amounts that are included in (or excluded from) TotalAmbac Financial Group, Inc. stockholders’ equity which is presented in accordance with GAAP. A reconciliation between both financial measures can befound in Ambac’s 4Q2017 Earnings Release included in Ambac’s Current Report on Form 8-K filed with the SEC on February 28, 2018 and at the end of thisdocument

(2) Measured from June 30, 2013, the first quarter end after emergence from bankruptcy on May 1, 2013, through 4Q2017 (3) CAGR is Compound Annual Growth Rate

(3)

AMBAC HISTORY AND TODAY

21

AMBAC - A BIT OF HISTORY

22

• Historically a global leader in monolineinsurance ◦ $556 billion of peak insured exposures pre-

financial crisis including public finance, structuredfinance, and international finance

• Adversely impacted by financial crisis◦ Segregated Account of AAC in Rehabilitation

▪ Established in March 2010 to separate most troubledliabilities, including residential mortgage-backedsecurities ("RMBS") and student loan guarantees

▪ Wisconsin Office of the Commissioner of Insurance(“OCI”) as Rehabilitator held ultimate decision-makingauthority over the Segregated Account

▪ Generally paid 45% of permitted policy claims, knownas the Interim Payment Percentage (“IPP”); deferring55%

◦ Bankruptcy of AFG▪ November 2010 - filed for Chapter 11 bankruptcy▪ May 2013 - emerged from bankruptcy with no debt, ~$5

billion of net operating loss carry-forwards (“NOLs”) anda new Board of Directors

Ambac Assurance CorporationSegregated Account

(in Rehabilitation)

Ambac Financial Group, Inc. (Holding Company)

(AFG)$368 million cash & investments;

45 million shares outstanding

Everspan FinancialGuarantee

(Financial Guarantee)$233 million statutory

surplus

Ambac Assurance UK(UK insurance company)

(Ambac UK)$918 million CPR; $16 billion net par

Ambac Assurance Corporation(Financial Guarantee)

(AAC)$7.9 billion CPR; $47 billion net par

GeneralAccount:

60%SegregatedAccount:

15%

Ambac UK:25%

$63 billion net parPortfolio % Breakdown

AFG profile (as of December 31, 2017, unless otherwisenoted)• $368.2 million in cash and investments• $3.7 billion of net operating loss carry-forwards

(“NOLs”)◦ $1.4 billion AFG; $2.3 billion AAC

• No debt at AFG• Equity market capitalization of $686 million as of

February 27, 2018

Investment Portfolioas of December 31, 2017

CorporateObligations:14%

MuniObligations:2%

RMBS-AmbacInsured: 39%

Other: 8%

RMBS/ABS: 6%

Short-term:12%

Non-RMBSAmbac

Inured: 17%

US Gov &Agency

Obligations: 2%

AMBAC TODAY

23

AFG • Financial guarantee holding company• Subsidiaries provide financial guarantees on

municipal bonds, structured securities andother financial instruments

• Principal operating subsidiaries includeAAC, Ambac UK and Everspan

Insured Portfolioas of December 31, 2017

$62.7 billion Net Par

$5.7 billion Fair Value

PublicFinance:

51%

StructuredFinance:

22%

Int'l:27%

Net Income$1.2 billion since emergence

Adjusted Earnings(1)

$2.4 billion since emergence

$1,100

$800

$500

$200

-$100

-$400

May-Dec13

2014 2015 2016 2017

$462

$637

$1,154

$315

$(165)

$1,000

$700

$400

$100

-$200

-$500

May-Dec13

2014 2015 2016 2017

$505 $484 $493

$75

$(329)

EARNINGS GENERATION SINCE EXITING BANKRUPTCY

24

Generated $1.2 billion of net income and $2.4 billion of adjusted earnings(1) since emergence from bankruptcy(2)

($ in millions)

(1) Adjusted Earnings is a non-GAAP financial measure that excludes (or includes) amounts that are included in (or excluded from) net income attributable tocommon stockholders which is presented in accordance with GAAP. A reconciliation to net income attributable to common stockholders, as reported underGAAP, is available at the end of this document and in our most recent SEC filed quarterly or annual report

(2) Measured from June 30, 2013, the first quarter end after emergence from bankruptcy on May 1, 2013 through 4Q2017

($ in millions)

EXECUTING ON STRATEGY SINCE EMERGENCE FROM BANKRUPTCY(2)

25

Generated $1.2 billion of NetIncome

Increased Book Value pershare by $24.14

Executed holistic restructuringtransaction to conclude the

Segregated AccountRehabilitation

Generated $2.4 billion ofAdjusted Earnings (1)

Increased Adjusted BookValue (1) per share by $20.57

Settled JP Morgan RMBSlitigation for $995 million

AAC annualized total return oninvested assets of 6.1%

Reduced net par exposure by68%

Reduced adversely classifiedcredits by 56%

Settled Ballantyne JPMlitigation realizing a total benefit

of $145 million

Cumulative tolling payments andaccruals from AAC to AFG

of $131 million Enhanced governance

(1) Adjusted earnings and adjusted book value are non-GAAP financial measures of financial performance or financial position that excludes (or includes) amounts that are includedin (or excluded from) net income attributable to common stockholders for Adjusted Earnings and Total Ambac Financial Group, Inc. stockholders’ equity for Adjusted Book Value.A reconciliation between both financial measures can be found in Ambac’s 4Q2017 Earnings Release included in Ambac’s Current Report on Form 8-K filed with the SEC onFebruary 28, 2018 and at the end of this document

(2) Ambac emerged from bankruptcy on May 1, 2013

AFG VALUE DRIVERS

26

VALUE DRIVERS OF AFG

27

AFG VALUE DRIVERS – CASH AND INVESTMENTS

28

Cash and investments create flexibility to pursue initiatives to maximize value for shareholders

$368.2 million Cash and Investments at AFG as of December 31, 2017

Cash & Short-termInvestments: 20%

Corporate Obligations: 1%ABS: 5%

RMBS-AAC Insured: 2%

AAC / SegregatedAccount Surplus

Notes: 55%

Corolla EquityInterest: 9%

Corolla Notes: 8%

AFG VALUE DRIVERS - NET OPERATING LOSS CARRY-FORWARD (“NOL”)

• Inter-company tax sharing arrangement requires AAC to pay AFG for using AAC’sallocated NOLs (“Tolling Payments”)

• No Deferred Tax Asset on the balance sheet; NOLs expire 2029 - 2032 • Pursuing selective business transactions that may utilize NOLs

29

$1.4 billionallocatedto AFG

$3.7 billion in NOLs are a considerable asset for our shareholders, and a meaningful lever for future value creation

AFG:38%AAC:

62%

$1.4 billion allocated to AFG$2.3 billion allocated to AAC

AFG VALUE DRIVERS – NOL TOLLING AGREEMENT

• AAC will pay AFG for usage of up to $3.65 billion of NOLs• AAC paid $100.1 million of tolling payments in 2016 & 2017• AAC accrued an additional $31.1 million of tolling payments in 2017

* $30.5 to be paid in May 2018* $0.6 paid in December 2017

• Total potential amount of AFG's net tolling payments remaining is $56 million

30

Tolling agreement provides an opportunity for significant cash to flow up to AFG

Net Tolling Payments ($ in millions)

Utilized

Outstanding

$250

$200

$150

$100

$50

$0

Tier A Tier B Tier C Tier D Ever-to-Date

$20

$111$131

$14

$14 $28

$56

AFG VALUE DRIVERS – CONSIDER SELECTIVE TAX-ADVANTAGED BUSINESS TRANSACTIONS

• Use our balance sheet, substantial tax assets, and robust intellectual capital toexplore avenues to generate favorable tax-advantaged risk-adjusted returns for ourshareholders

• May permit utilization of NOLs◦ AFG can purchase NOLs from AAC in the event AFG utilizes all of its allocated NOLs◦ Improves possibility of recording Deferred Tax Assets

• Attractive risk-adjusted returns • AAC resources

◦ Human capital, including core competencies in risk, credit and asset management◦ Corporate infrastructure that can be leveraged◦ Publicly traded permanent capital structure

• Favorable regulatory environment

31

Selective tax-advantaged business transactions can diversify revenue and leverage infrastructure

AAC VALUE DRIVERS

32

VALUE DRIVERS OF AAC

33

…while strengthening book value and adjusted book value

Adjusted Book Value Per ShareIncreased $20.57 since June 2013

$50$40$30$20$10$0

Jun-13Dec-13

Dec-14Dec-15

Dec-16Dec-17

$3.77$8.32

$15.01

$28.15 $29.48$24.34

Book Value Per Share42% CAGR since June 2013

$50$40$30$20$10$0

Jun-13Dec-13

Dec-14Dec-15

Dec-16Dec-17

$6.38$15.62

$31.09$37.41 $37.94

$30.52

RISK MANAGEMENT – REDUCING INSURED LEGACY EXPOSURES

34

Ambac has realized a significant decrease in its distressed liabilities, a meaningful portion of which was due to de-risking activities…

IA II III IV V

Adversely Classified Credits - Net Par (definitions in Appendix)

$40

$30

$20

$10

$0

2Q13 2013 2014 2015 2016 2017

$ in billions

PF SF Int'l # of Credits(right axis)

Net Par Exposure Reduction Since Emergence

$250$200$150$100$50$0

6,0005,0004,0003,0002,0001,000

2Q13 2013 2014 2015 2016 2017

$ in billions

LOSS MITIGATION – SEGREGATED ACCOUNT

35

Benefiting from recovery in the housing market, lowinterest rates and aggressive Ambac remediationinitiatives, projected RMBS losses have declined

materially since emergence from bankruptcy

Ambac has decreased its student loan exposure by91% (since the Segregated Account entered

rehabilitation) primarily through commutations,restructurings and refinancings

Projected Lifetime RMBS Losses Student Loan Portfolio Reduction

ETD Paid, Net of Subrogation Received ETD, Unpaid Claims

GCL, Before Est. R&Ws ETD Losses + GCL, Net of R&W(right axis)

$10

$8

$6

$4

$2

$0

$6.5

$6.0

$5.5

$5.0

$4.5

$4.0

$3.52013 2014 2015 2016 2017

$ in billions$ in billions $12.6 billion Net Par Reduction

1Q 2010 - 4Q2017

$16

$14

$12

$10

$8

$6

$4

$2

$0Net Par1Q 2010

Commu-tations

Restructuringsand Refinancings

Run-off Net Par4Q 2017

$1.2

$4.5

$3.3

$4.8

$13.8

LOSS MITIGATION – MANAGING KEY LEGACY EXPOSURES - PUERTO RICO

• Leading comprehensive loss mitigation campaign◦ San Juan, Washington DC, New York◦ Focused on constructive restructuring outcomes underpinned by process and fiscal plan

transparency and improvements, spending discipline, economic growth and capital marketaccess

• Litigation outstanding◦ COFINA structure and trustee◦ HTA ◦ FEGP, Fiscal Plan Compliance Law◦ Clawback◦ US Treasury (relating to rum taxes)

• Near-term net principal and interest amortization◦ Net claim payments

▪ $205 million ETD 4Q2017 ◦ ~$340 million of debt service due in 2018-2020

• Domestic Public Finance loss reserves, largely attributable to Puerto Rico, were $816million as of December 31, 2017

36

LOSS MITIGATION – MANAGING KEY LEGACY EXPOSURES - PUERTO RICO (CONTINUED)

(1) (1) (2) (6) (2)(6) (5)

Single Risk Gross Par Net Par

GrossPrincipal &

InterestNet Principal

& Interest

Ever-to-DateNet Claims

PaidRange ofMaturity

CreditClass Rating

General Fund Debt:PR Commonwealth GO $ 56.0 $ 56.0 $ 64.0 $ 64.0 $ 4.1 2019-2023 IV BIGPR Public Buildings Authority Revenue

- GO Guaranty 110.4 110.4 187.0 187.0 37.2 2018-2035 IV BIGSubtotal 166.4 166.4 251.0 251.0 41.3

Revenue Debt:PR Highways and Transp'n 1968

Resolution - Highway Rev (3)(4) 14.4 14.0 21.0 20.4 13.1 2018-2027 IV BIGPR Highways and Transp'n 1998

Resolution - Sr Transp'n (3)(4) 432.8 419.4 771.8 745.6 34.8 2018-2042 IV BIGPR Infrastructure Financing Special Tax

Revenue (Rum Tax) (3) 448.7 438.4 992.7 969.9 104.1 2018-2044 IV BIGConvention Center (Hotel Occupancy

Tax) (3) 125.3 125.3 183.5 183.5 12.0 2018-2031 IV BIGSenior Sales Tax Rev (COFINA) 808.5 804.7 7,355.4 7,321.3 — 2047-2054 III BIG

Subtotal $ 1,829.7 $ 1,801.8 $ 9,324.4 $ 9,240.7 $ 164.0Grand total $ 1,996.1 $ 1,968.2 $ 9,575.4 $ 9,491.7 $ 205.3

37

Ambac Puerto Rico Exposure ($ in millions) as of December 31, 2017

(1) Gross Par and Net Par include capital appreciation bonds (“CABS”) which are reported at the par amount at the time of issuance of the insurance policy. Accretion of the CABS wouldincrease the related gross and net par by $691 million and $683 million, respectively at December 31, 2017

(2) Net Par and Net Principal & Interest are net of reinsurance (3) Subject to Act No. 5-2017, as amended, also known as the Financial Emergency and Fiscal Responsibility Act of 2017, which declares an emergency period that has been subsequently

extended until June 30, 2018. Pursuant to Act 5-2017, all executive orders issued under Act No. 21-2016 (as amended, known as the Puerto Rico Emergency Moratorium and FinancialRehabilitation Act), shall continue in full force and effect until amended, rescinded or superseded. Also subject to the Priority Debt Provision under Section 8 of Article VI of the Constitutionof the Commonwealth of Puerto Rico, commonly known as the "clawback provision"

(4) Certain Pledged Revenues for Highway and Transportation Revenue Bonds such as Toll Revenues and Investment Earnings are not subject to the Priority Debt Provision (5) In January 2018, Ambac made net claim payments totaling $26.1 million on Ambac-insured Bonds, including Rum Tax and GO Bonds ($13.7 million), Highway and Transportation Bonds

($9.3 million), and Convention Center Bonds ($3.1 million) (6) Gross and Net Principal & Interest excludes the effects of a 10% current interest rate on $60 million gross and net par of PR Public Building Authority ("PBA") bonds with a maturity date of

July 1, 2035, resulting from the absence of a remarketing. Should a remarketing not occur before the maturity of the bonds, the Gross and Net Principal & Interest for PBA exposure wouldincrease by $47.4 million

LOSS MITIGATION — LITIGATION AND OTHER RECOVERIES

38

Aggressively pursuing RMBS and other recoveries, through litigation and other meansapproximately $1.6 billion of RMBS-related recoveries ever-to-date

Other Potential Recoveries

Active Litigation

• Countrywide, First Franklin and Nomura◦ Estimated representation and warranty (“R&W”)

subrogation recoveries of $1.8 billion as ofDecember 31, 2017

• Countrywide ◦ Following appellate court decision our putback and

fraud claims remain intact ◦ Pending appeal with NY Court of Appeals on certain

aspects of the intermediate appellate court decision ◦ Additional fraud-only cases relating to Harborview and

Lehman transactions

• First Franklin and Nomura◦ Timing further behind Countrywide case

• U.S. Bank ◦ Seeking redress for trustee's failure to enforce rights

and remedies and its treatment of trust recoveries withrespect to 5 RMBS transactions

• Puerto Rico◦ COFINA structure and trustee◦ HTA ◦ FEGP, Fiscal Plan Compliance Law◦ Clawback◦ US Treasury (relating to rum taxes)

• Citigroup settlement with the SEC◦ Related to a CDO transaction for which Ambac provided credit protection

• Analyzing and pursuing other potential areas for recoveries

ASSET MANAGEMENT

39

$5.7 billion consolidated investment portfolio as of December 31, 2017

(1) Excludes Ambac insured securities that are internally rated investment grade

$6.6 billion consolidated investment portfolio as of June 30, 2013

Optimize investment portfolio; investment strategy included a shift to investments in Ambac insured RMBS and other Ambac insured securities

Own $1.6 billion Deferred Amounts(including interest), or 41%, of total

Deferred Amounts outstanding, as ofDecember 31, 2017

• AAC long-term GAAP book yield◦ 9.4% as of December 31, 2017◦ 3.6% as of June 30, 2013

• Estimated annualized total returns since bankruptcy emergence◦ AAC: 6.1%◦ Ambac UK: 5.2%

CorporateObligations: 15%

MuniObligations:25%

ForeignObligations: 1%


Other: 4%

RMBS/ABS: 20%

Short-term: 9%

Non-RMBS-AmbacInsured (1): 1%

US Gov & Agency: 7%

CorporateObligations: 14%

MuniObligations:2%


Other: 8%

RMBS/ABS: 6%

Short-term: 12%

Non-RMBS AmbacInsured: 17%

US Gov & Agency: 2%

AMBAC UK

40

Long-tailed insured portfolio with accretive opportunities, diverse investment portfolio and improving claims-paying ratio

Ambac UK $15.9 billion net paras of December 31, 2017

Ambac UK $698 million investment portfolioas of December 31, 2017

(1) Total claims-paying ratio is net financial guarantees in force divided by total claims-payingresources. Total claims-paying resources quantifies total resources available to pay claims,including guarantees on subsidiary obligations

Ambac UK Claims-Paying Ratio (1)• Claims-paying resources

◦ $918 million as of December 31, 2017 • Loss reserves

◦ Improved from $601 million as of June 30, 2013 to $286 million asof December 31, 2017, or 52%

• Proactive risk remediation efforts include litigation andcommutations

• Proactive asset management, including investments inAmbac UK insured transactions

Sovereign /sub-sovereign: 35%

Investor Ownedand Public

Utilities: 32%

MBS: 2%

Transportation: 7%

Other: 4%

StructuredInsurance: 6%

ABS: 14% Corporate Obligations: 10%

Non-US Obligations: 4%

Non-RMBS AmbacInsured: 24%

Property: 5%

Equities: 8%Hedge Fund: 8%

High Yield &Loans: 12%

RMBS/ABS: 17%

Insurance-linked: 3%

Short-term: 5%

US Gov & Agency: 4%

40

30

20

10

0Jun-13 Dec-13 Dec-14 Dec-15 Dec-16 Dec-17

33:1 34:1 29:1 26:1 24:1 24:1

APPENDIX

41

RISK ADVERSE CREDIT CLASSIFICATIONS

42

Classification Description

Class I

Survey List

Class IA

Class II

Class III

Class IV

Class V

• Fully Performing – Meets Ambac Criteria with Remote Probability of Claim

• Investigation of Specific Condition or Weakness Underway

• Potential Problem with Risks to be Dimensioned

• Substandard Requiring Intervention

• Doubtful with Clear Potential for Loss

• Imminent Default or Defaulted

• Fully Reserved

OUTSTANDING INSURED DEBT SERVICE(1)

43

$101 billion

(1) Depicts amortization of existing guaranteed portfolio (principal and interest), assuming no advance refundings, as of December 31, 2017. Expectedmaturities will differ from contractual maturities because borrowers may have the right to call or prepay guaranteed obligations

General Account Segregated Account Ambac UK

$25

$20

$15

$10

$5

$0

2018 2019 2020 2021 2022 2023-2027 2028-2032 2033-2037 After 2037

Estimated Insured Net Debt Service Amortization($ in billions)

PUERTO RICO NET PRINCIPAL AND INTEREST(1) AMORTIZATION($ IN MILLIONS) AS OF DECEMBER 31, 2017

(1) Net of reinsurance(2) Certain CUSIPs within this risk pay monthly or quarterly. Such payments are reflected in the next semi-annual payment date.(3) Net Principal and Interest Amortization do not reflect an interest rate increase from 5.5% to 10%, resulting from the lack of a

remarketing, on a $60 million Ambac-insured 7/1/2035 security issued by the PR Public Building Authority. Should a remarketingnot occur before the maturity of the bonds, the Net Principal and Interest Amortization would increase by $47.4 million.

Net Principal and Interest Amortization of Ambac Insured Puerto Rico Exposures by Payment Date

Payment Date Commonwealt

h GO Public Bldg - GO

Guaranteed (3) Senior

Highway (1968)

SeniorTransportation

(1998) (2) Rum Tax

HotelOccupancy

Tax Sales Tax(COFINA) Total P & I

Ending NetDebt ServiceOutstanding

1/1/2018 $ 1.4 $ 3.0 $ 0.3 $ 9 $ 8.6 $ 3.1 $ — $ 25.4 $ 9,466.37/1/2018 1.4 24.7 9.9 32.7 43.5 15.5 — 127.7 9,338.61/1/2019 1.4 2.4 — 9.4 7.6 2.8 — 23.6 9,3157/1/2019 32.7 6.9 — 17.7 7.6 15.8 — 80.7 9,234.31/1/2020 0.6 2.3 — 9.4 7.6 2.5 — 22.4 9,211.97/1/2020 7.2 3.1 — 28.1 7.6 16.1 — 62.1 9,149.81/1/2021 0.4 2.3 — 9.4 7.6 2.2 — 21.9 9,127.97/1/2021 7.4 3.1 1.3 9.9 7.6 2.2 — 31.5 9,096.41/1/2022 0.2 2.3 — 9.4 7.6 2.2 — 21.7 9,074.77/1/2022 7.5 2.3 — 9.4 7.6 2.2 — 29 9,045.71/1/2023 0.1 2.3 — 9.4 7.6 2.2 — 21.6 9,024.17/1/2023 3.7 2.3 — 10.4 53.2 2.2 — 71.8 8,952.31/1/2024 — 2.3 — 9.4 6.4 2.2 — 20.3 8,9327/1/2024 — 2.3 — 9.9 54.5 2.2 — 68.9 8,863.11/1/2025 — 2.3 — 9.4 5 2.2 — 18.9 8,844.27/1/2025 — 2.3 1 10 55.8 2.2 — 71.3 8,772.91/1/2026 — 2.3 — 9.4 3.6 2.2 — 17.5 8,755.47/1/2026 — 2.3 1 11.5 57.2 2.2 — 74.2 8,681.21/1/2027 — 2.3 — 9.3 2.2 2.2 — 16 8,665.27/1/2027 — 2.3 6.9 37.9 58.7 2.2 — 108.0 8,557.21/1/2028 — 2.3 — 9 0.6 2.2 — 14.1 8,543.17/1/2028 — 2.3 — 38.5 60.2 22.2 — 123.2 8,419.91/1/2029 — 2.3 — 8.7 — 1.7 — 12.7 8,407.27/1/2029 — 2.3 — 39.7 68.7 22.7 — 133.4 8,273.81/1/2030 — 2.3 — 7.9 — 1.1 — 11.3 8,262.57/1/2030 — 14 — 67.5 — 23.2 — 104.7 8,157.81/1/2031 — 1.9 — 6.3 — 0.6 — 8.8 8,1497/1/2031 — 12.9 — 88.5 — 23.2 — 124.6 8,024.41/1/2032 — 1.7 — 4.2 — — — 5.9 8,018.57/1/2032 — 1.7 — 4.2 — — — 5.9 8,012.6

44

PUERTO RICO NET PRINCIPAL AND INTEREST(1) AMORTIZATION(CONTINUED)($ IN MILLIONS) AS OF DECEMBER 31, 2017

(1) Net of reinsurance(2) Certain CUSIPs within this risk pay monthly or quarterly. Such payments are reflected in the next semi-annual payment date.(3) Net Principal and Interest Amortization do not reflect an interest rate increase from 5.5% to 10%, resulting from the lack of a

remarketing, on a $60 million Ambac-insured 7/1/2035 security issued by the PR Public Building Authority. Should aremarketing not occur before the maturity of the bonds, the Net Principal and Interest Amortization would increase by $47.4million.

Net Principal and Interest Amortization of Ambac Insured Puerto Rico Exposures by Payment Date

PaymentDate

CommonwealthGO

Public Bldg -GO Guaranteed

(3) Senior

Highway (1968)Senior

Transportation(1998) (2) Rum Tax

HotelOccupancy Tax

Sales Tax(COFINA) Total P & I

Ending NetDebt ServiceOutstanding

1/1/2033 — 1.7 — 4.2 — — — 5.9 8,006.77/1/2033 — 1.7 — 4.2 — — — 5.9 8,000.81/1/2034 — 1.7 — 4.2 — — — 5.9 7,994.97/1/2034 — 28.3 — 4.2 68.7 — — 101.2 7,893.71/1/2035 — 0.9 — 4.2 — — — 5.1 7,888.67/1/2035 — 33.6 — 4.2 68.7 — — 106.5 7,782.11/1/2036 — — — 4.2 — — — 4.2 7,777.97/1/2036 — — — 62.2 68.7 — — 130.9 7,6471/1/2037 — — — 2.6 — — — 2.6 7,644.47/1/2037 — — — 63.7 49.1 — — 112.8 7,531.61/1/2038 — — — 1.0 — — — 1.0 7,530.67/1/2038 — — — 41 — — — 41 7,489.61/1/2039 — — — — — — — — 7,489.67/1/2039 — — — — — — — — 7,489.61/1/2040 — — — — — — — — 7,489.67/1/2040 — — — — — — — — 7,489.61/1/2041 — — — — — — — — 7,489.67/1/2041 — — — — — — — — 7,489.61/1/2042 — — — — — — — — 7,489.67/1/2042 — — — 0.2 — — — 0.2 7,489.41/1/2043 — — — — — — — — 7,489.47/1/2043 — — — — 84.0 — — 84.0 7,405.41/1/2044 — — — — — — — — 7,405.47/1/2044 — — — — 84.1 — — 84.1 7,321.38/1/2047 — — — — — — 786.2 786.2 6,535.18/1/2048 — — — — — — 820.2 820.2 5,714.98/1/2049 — — — — — — 855.5 855.5 4,859.48/1/2050 — — — — — — 892.3 892.3 3,967.18/1/2051 — — — — — — 930.5 930.5 3,036.68/1/2052 — — — — — — 970.3 970.3 2,066.38/1/2053 — — — — — — 1,011.7 1,011.7 1,054.68/1/2054 — — — — — — 1,054.6 1,054.6 —

Grand Total $ 64.0 $ 187.0 $ 20.4 $ 745.6 $ 969.9 $ 183.5 $ 7,321.3 $ 9,491.7 —

45

STATUS OF RMBS LITIGATIONS (1)

46

(1) Information disclosed herein is accurate as of the date indicated. AAC may update the information included in this slide from time to time without notice, but isunder no duty or obligation to do so

Litigation Case Current Status (as of February 28, 2018)

Countrywide Securities Corp., Countrywide Financial Corp. (a.k.a. Bank ofAmerica Home Loans) and Bank of America Corp – New York State SupremeCourt, Index No. 651612/2010 [re CWHEQ 2006-S1, CWHEQ 2006-S4, CWHEQ2006-S6, CWABS 2004-K, CWABS 2004-L, CWABS 2004-M, CWABS 2004-N,CWABS 2004-O, CWABS 2004-T, CWHEQ 2005-F, CWHEQ 2005-L, CWHEQ2006-B, CWHEQ 2006-C, CWABS 2005-16, CWABS 2005-17, CWHEQ2006-11, CWHEQ 2006-13]

• Fact and expert discovery concluded

• Summary judgment motions were filed on May 1, 2015 and the court heardoral argument on July 15, 2015

• On October 27, 2015, the court issued a decision granting in part anddenying in part the parties’ respective summary judgment motions regardingAAC’s claims against Countrywide. Both parties appealed certain rulings

• The Court also granted in its entirety AAC’s partial motion for summaryjudgment and denied Bank of America’s motion for summary judgmentregarding AAC’s successor-liability claims against Bank of America. Bank ofAmerica appealed

• On May 16, 2017, the First Department issued rulings in both appeals,reversing a number of rulings that the trial court had made and affirmingother rulings

• On June 15, 2017, AAC filed a motion with the First Department for leave toappeal certain rulings in the May 16, 2017 decision to the Court of Appeals.Countrywide opposed the motion

• On July 25, 2017, the First Department granted AAC’s motion for leave toappeal certain rulings in the May 16, 2017 decision to the Court of Appeals.The appeal is fully briefed

• Briefing to the Court of Appeals is completed, and oral argument is expectedin 2018

STATUS OF RMBS LITIGATIONS - CONTINUED (1)

47

(1) nformation disclosed herein is accurate as of the date indicated. AAC may update the information included in this slide from time to time without notice, but isunder no duty or obligation to do so

• Complaint for fraudulent-inducement filed on December 30, 2014

• Countrywide filed a motion to dismiss on February 20, 2015 which Bank ofAmerica joined on February 23, 2015, and which plaintiffs opposed. The Courtheard oral argument in November 2015 and denied defendants’ motion todismiss on December 20, 2016

• Fact discovery is ongoing

• Complaint for fraudulent-inducement filed in WI on December 30, 2014

• Defendant filed a motion to dismiss in the Wisconsin Action on February 20,2015, which plaintiffs opposed

• The WI court dismissed the case without prejudice for lack of personaljurisdiction in an order entered on July 2, 2015. Plaintiffs appealed this decisionand on June 23, 2016, the Wisconsin Court of Appeals reversed the dismissal ofthe complaint. The Wisconsin Supreme Court granted defendant’s petition forreview of the June 23, 2016 decision and oral argument was heard on February28, 2017. On June 30, 2017, the Wisconsin Supreme Court reversed thedecision of the Wisconsin Court of Appeals and remanded the case to theWisconsin Court of Appeals for further proceedings. On remand, in December2017 the Court of Appeals dismissed the case on jurisdictional grounds. OnJanuary 16, 2018, the plaintiffs filed a petition with the Wisconsin SupremeCourt for review of the December 2017 decision. Defendant opposed thepetition.

• On June 30, 2015 plaintiffs commenced the New York Action and filed acomplaint for fraudulent-inducement on July 21, 2015. Plaintiffs also filed amotion to stay the New York Action pending resolution of the Wisconsin appeal.On August 10, 2015, defendant filed a motion to dismiss, which plaintiffsopposed. On September 20, 2016, the court granted plaintiffs’ motion to stayand held in abeyance defendant’s motion to dismiss

Countrywide Home Loans, Inc., Countrywide Financial Corp., and Bank ofAmerica Corp. – New York State Supreme Court, Index No. 653979/2014 [reCWALT 2005-81, CWALT 2006-OA19, HVMLT 2005-16, HVMLT 2006-9, LehmanXS 2005-7N, Lehman XS 2006-2N, Lehman XS 2007-7N, and Lehman XS2007-15N]

Countrywide Home Loans, Inc. – Circuit Court, Dane County, Wisconsin, CaseNo. 14CV3511 (Wisconsin Action) and New York State Supreme Court, Index no.652321/2015 (New York Action) [re HVMLT 2005-2, HVMLT 2005-8, HVMLT2005-10, HVMLT 2005-12, and HVMLT 2005-13]


STATUS OF RMBS LITIGATIONS (CONTINUED) (1)

48

(1) Information disclosed herein is accurate as of the date indicated. AAC may update the information included in this slide fromtime to time without notice, but is under no duty or obligation to do so

• On July 18, 2013 the court denied defendants’ motion to dismiss the putbackand fraudulent-inducement claims, but granted the defendants’ motion todismiss the claim for indemnification. The court further ruled that AAC islimited to the sole remedy of repurchase for breaches of representations andwarranties relating to the loan pool but not for breaches of transaction-levelrepresentations and warranties


• On July 12, 2013, defendants filed a motion to dismiss the complaint; oralargument was heard on November 13, 2013

• AAC filed an Amended Complaint on September 22, 2014 adding a fraudulent-inducement claim

• Defendants filed a motion to strike the Amended Complaint on October 31,2014, which AAC opposed and AAC also cross-moved for leave to file anamended complaint

• Defendants also filed a motion to dismiss the fraudulent-inducement claim,which plaintiffs opposed. The court heard oral argument on this motion on April14, 2015

• On June 3, 2015, the court denied defendants’ July 2013 motion to dismissAAC’s claim for breaches of representations and warranties, but granted thedefendants’ motion to dismiss AAC’s claims for breach of the repurchaseprotocol and for alter ego liability against Nomura Holding. Nomura hasappealed the court’s decision denying the motion to dismiss AAC’s claim forbreaches of representations and warranties. On December 7, 2017 the FirstDepartment affirmed the trial court's June 3, 2015 decision

• On December 29, 2016, the court denied defendants’ motions to strike theamended complaint and to dismiss the fraudulent–inducement claim. Nomurafiled a notice of appeal on January 30, 2017


First Franklin Financial Corporation, Bank of America, N.A., Merrill Lynch,Pierce, Fenner & Smith Inc., Merrill Lynch Mortgage Lending, Inc., and MerrillLynch Mortgage Investors, Inc. – New York State Supreme Court, Index No.651217/2012 [re First Franklin Mortgage Loan Trust 2007-FFC]

Nomura Credit & Capital, Inc. and Nomura Holding America Inc. – New YorkState Supreme Court, Index No. 651359/2013 [re Nomura Asset AcceptanceCorporation, Alternative Loan Trust, Series 2007-1 and Nomura Asset AcceptanceCorporation, Alternative Loan Trust, Series 2007-3]


STATUS OF RMBS LITIGATIONS (CONTINUED) (1)

49

(1) Information disclosed herein is accurate as of the date indicated. AAC may update the information included in thisslide from time to time without notice, but is under no duty or obligation to do so

• AAC filed the complaint on January 20, 2017 and a second amendedcomplaint on February 23, 2017 asserting claims for declaratory judgment,breach of contract, breach of fiduciary duty, and violation of the Streit Act (“USBank New York Action I”). On February 23, 2017, AAC also filed a motion for apreliminary injunction, which defendant opposed

• On March 9, 2017, defendant filed a motion to dismiss the second amendedcomplaint, which AAC opposed

• The court heard oral argument on AAC’s motion for a preliminary injunctionand defendant’s motion to dismiss on April 24, 2017. On June 1, 2017, thecourt denied defendant’s motion to dismiss and denied AAC’s motion forpreliminary injunction

• Defendant filed a motion for reconsideration of the court’s decision denying itsmotion to dismiss, which AAC opposed. On December 6, 2017, the courtgranted defendant's motion to dismiss and on January 18, 2018 the courtissued an opinion memorializing the reasons for its decision

• On March 6, 2017, defendant filed a trust instruction proceeding in Minnesotastate court concerning the proposed settlement which is at issue in the USBank New York Action I, captioned, In the matter of HarborView MortgageLoan Trust 2005-10, No. 27-TR-CV-17-32 (the “Minnesota Action”). On April5, 2017, AAC filed a motion to dismiss the Minnesota Action. On June 12,2017, defendant filed an amended petition in the Minnesota Action, and onJuly 7, 2017, AAC filed a renewed motion to dismiss, which US Bankopposed. On November 13, 2017 the court denied the motion to dismiss theproceeding.On February 7, 2018 AAC appealed this dismissal,

• AAC filed the complaint on April 11, 2017 asserting claims for breach ofcontract, breach of fiduciary duty, declaratory judgment, and violation of theStreit Act

• On September 15, 2017, defendant filed a motion to dismiss AAC's complaint,which AAC opposed. Oral argument was heard on November 17, 2017

U.S. Bank, N.A. -- United States District Court, Southern District of New York,Docket No. 17-cv-00446 [re HVMLT 2005-10]

U.S. Bank, N.A. -- United States District Court, Southern District of New York,Docket No. 17-cv-02614 [re HVMLT 2005-2, HVMLT 2005-8, HVMLT 2005-12,HVMLT 2005-13 and HVMLT 2005-16]

Current Status (as of February 28, 2018)

Non-GAAP Financial DataIncluded in this presentation, the Company reports two non-GAAP financial measures: Adjusted Earnings and Adjusted Book Value. A non-GAAPfinancial measure is a numerical measure of financial performance or financial position that excludes (or includes) amounts that are included in (orexcluded from) the most directly comparable measure calculated and presented in accordance with GAAP. We are presenting these non-GAAPfinancial measures because they provide greater transparency and enhanced visibility into the underlying drivers of our business and the impactof certain items that the Company believes will reverse from GAAP book value over time through the GAAP statements of comprehensive income.Adjusted Earnings and Adjusted Book Value are not substitutes for the Company’s GAAP reporting, should not be viewed in isolation and maydiffer from similar reporting provided by other companies, which may define non-GAAP measures differently.

50

AMBAC NON-GAAP FINANCIAL DATA

4Q2017 3Q2017 2Q2017 1Q2017($ in millions, except per share amounts) $ Amount P.D.S. (1) $ Amount P.D.S. (1) $ Amount P.D.S. (1) $ Amount P.D.S. (1)

Net income (loss) attributable to commonshareholders $ (19.5) $ (0.43) $ (190.9) $ (4.20) $ 7.1 $ 0.16 $ (125.4) $ (2.77)

Adjustments:Non-credit impairment fair value (gain) loss on credit

derivatives (7.9) (0.17) (0.1) — (4.6) (0.10) 1.7 0.04Insurance intangible amortization 34.2 0.75 45.7 1.01 33.5 0.73 37.5 0.83Foreign exchange (gains) losses (1.3) (0.03) (4.5) (0.11) (8.5) (0.19) (7.1) (0.16)Fair value (gain) loss on interest rate derivatives from

Ambac CVA — — — — 42.9 0.94 2.0 0.05Adjusted earnings (loss) $ 5.5 $ 0.12 $ (149.8) $ (3.30) $ 70.4 $ 1.54 $ (91.2) $ (2.01)

Adjusted Earnings (2)

The following table reconciles net income attributable to common stockholders to the non-GAAP measure, operating earnings, for the periods listed:

Adjusted Earnings (2)(continued)

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AMBAC NON-GAAP FINANCIAL DATA (CONTINUED)

Year Ended December 31, Eight Months EndedDecember 31, 20132016 2015 2014

($ in millions, except per share amounts) $ Amount P.D.S. (1) $ Amount P.D.S. (1) $ Amount P.D.S. (1) $ Amount P.D.S. (1)

Net income (loss) attributable to commonshareholders $ 74.8 $ 1.64 $ 493.4 $ 10.72 $ 484.1 $ 10.31 $ 505.2 $ 10.91

Adjustments:Non-credit impairment fair value (gain) loss on credit

derivatives (7.5) (0.16) (36.7) (0.80) (17.1) (0.37) (165.9) (3.58)Insurance intangible amortization 174.6 3.82 169.6 3.69 151.8 3.24 99.7 2.15Impairment of goodwill — — 514.5 11.18 — — — —Foreign exchange (gains) losses 39.1 0.86 27.4 0.60 34.6 0.74 (23.6) (0.51)Fair value (gain) loss on interest rate derivatives from

Ambac CVA 33.8 0.73 (14.2) (0.31) (16.1) (0.34) 46.8 1.01Adjusted earnings $ 314.8 $ 6.89 $ 1,154.0 $ 25.08 $ 637.2 $ 13.58 $ 462.1 $ 9.98(1) Per diluted share ("P.D.S.")(2) Numbers may not add due to rounding.

Adjusted Book Value (1)

The following table reconciles Total Ambac Financial Group, Inc. stockholders’ equity to the non-GAAP measure Adjusted Book Value as of eachdate presented:


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December 31, 2017 September 30, 2017 June 30, 2017 March 31, 2017($ in millions, except per share data) $ Amount Per Share $ Amount Per Share $ Amount Per Share $ Amount Per ShareTotal AFGI Shareholders' Equity $ 1,381 $ 30.52 $ 1,508 $ 33.33 $ 1,674 $ 37.00 $ 1,625 $ 35.92Adjustments:

Non-credit impairment fair value losses on creditderivatives 1 0.01 9 0.19 9 0.19 13 0.29

Insurance intangible asset (847) (18.71) (878) (19.41) (912) (20.16) (931) (20.58)Ambac CVA on interest rate derivative liabilities — — — — — — (43) (0.95)Net unearned premiums and fees in excess of

expected losses 597 13.20 625 13.82 665 14.70 701 15.51Net unrealized investment (gains) losses in

Accumulated Other Comprehensive Income (31) (0.68) (152) (3.37) (153) (3.38) (140) (3.10)Adjusted book value $ 1,101 $ 24.34 $ 1,112 $ 24.56 $ 1,283 $ 28.35 $ 1,225 $ 27.09Shares outstanding (in millions) 45.3 45.3 45.3 45.2

Adjusted Book Value (1) (Continued)


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December 31, 2016 September 30, 2016 June 30, 2016 March 31, 2016($ in millions, except per share data) $ Amount Per Share $ Amount Per Share $ Amount Per Share $ Amount Per ShareTotal AFGI Shareholders' Equity $ 1,714 $ 37.94 $ 1,910 $ 42.32 $ 1,796 $ 39.80 $ 1,745 $ 38.73Adjustments:Non-credit impairment fair value losses on credit

derivatives 11 0.25 12 0.27 14 0.31 18 0.39Insurance intangible asset (962) (21.30) (1,023) (22.67) (1,076) (23.84) (1,150) (25.53)Ambac CVA on interest rate derivative liabilities (45) (0.99) (75) (1.65) (89) (1.98) (83) (1.83)Net unearned premiums and fees in excess of

expected losses 732 16.21 805 17.85 863 19.13 884 19.63Net unrealized investment (gains) losses in

Accumulated Other Comprehensive Income (119) (2.63) (184) (4.07) (159) (3.52) (111) (2.46)Adjusted book value $ 1,332 $ 29.48 $ 1,446 $ 32.05 $ 1,349 $ 29.90 $ 1,303 $ 28.93Shares outstanding (in millions) 45.2 45.1 45.1 45.0

Adjusted Book Value (1) (continued)


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December 31, 2015 December 31, 2014 December 31, 2013 June 30, 2013($ in millions, other than per share data) $ Amount Per Share $ Amount Per Share $ Amount Per Share $ Amount Per ShareTotal AFGI Shareholders' Equity $ 1,685 $ 37.41 $ 1,399 $ 31.09 $ 703 $ 15.62 $ 287 $ 6.38Adjustments:Non-credit impairment fair value losses on credit

derivatives 19 0.42 56 1.24 73 1.62 189 4.19Insurance intangible asset (1,212) (26.91) (1,411) (31.35) (1,598) (35.51) (1,622) (36.03)Goodwill — — (515) (11.43) (515) (11.43) (515) (11.43)Ambac CVA on interest rate derivative liabilities (79) (1.75) (65) (1.43) (48) (1.08) (65) (1.44)Net unearned premiums and fees in excess of

expected losses 906 20.11 1,421 31.57 1,718 38.17 1,804 40.08Net unrealized investment (gains) losses in

Accumulated Other Comprehensive Income (51) (1.13) (211) (4.68) 42 0.93 91 2.02Adjusted book value $ 1,268 $ 28.15 $ 675 $ 15.01 $ 374 $ 8.32 $ 170 $ 3.77Shares outstanding (in millions) 45.0 45.0 45.0 45.0

(1) Numbers may not add due to rounding.

Forward Looking StatementIn this presentation, we have included we have included statements that may constitute “forward-looking statements” within the meaning of the safe harbor provisions of the Private Securities LitigationReform 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-lookingstatements 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. Thesestatements 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, possiblymaterially, from those indicated in the forward-looking statements include, among others, those discussed under “Risk Factors” in our most recent SEC filed quarterly or annual report.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’s actual results mayvary 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) thehighly speculative nature of Ambac’s common stock and volatility in the price of Ambac’s common stock; (2) uncertainty concerning the Company’s ability to achieve value for holders of its securities,whether from Ambac Assurance Corporation ("Ambac Assurance) or from transactions or opportunities apart from Ambac Assurance; (3) adverse effects on Ambac’s share price resulting from futureofferings of debt or equity securities that rank senior to Ambac’s common stock; (4) potential of rehabilitation proceedings against Ambac Assurance; (5) dilution of current shareholder value or adverseeffects on Ambac’s share price resulting from the issuance of additional shares of common stock; (6) inadequacy of reserves established for losses and loss expenses and possibility that changes in lossreserves may result in further volatility of earnings or financial results; (7) decisions made by Ambac Assurance's primary insurance regulator for the benefit of policyholders that may result in materialadverse consequences for holders of the Company’s securities or holders of securities issued or insured by Ambac Assurance; (8) increased fiscal stress experienced by issuers of public finance obligationsor an increased incidence of Chapter 9 filings or other restructuring proceedings by public finance issuers; (9) failure to recover claims paid on Puerto Rico exposures or incurrence of losses in amountshigher than expected; (10) the Company’s inability to realize the expected recoveries included in its financial statements; (11) changes in Ambac Assurance’s estimated representation and warrantyrecoveries or loss reserves over time; (12) insufficiency or unavailability of collateral to pay secured obligations; (13) credit risk throughout the Company’s business, including but not limited to credit riskrelated to residential mortgage-backed securities, student loan and other asset securitizations, collateralized loan obligations, public finance obligations and exposures to reinsurers; (14) credit risks relatedto large single risks, risk concentrations and correlated risks; (15) concentration and essentiality risk in connection with Military Housing insured debt; (16) the risk that the Company’s risk managementpolicies and practices do not anticipate certain risks and/or the magnitude of potential for loss; (17) risks associated with adverse selection as the Company’s insured portfolio runs off; (18) adverse effectson operating results or the Company’s financial position resulting from measures taken to reduce risks in its insured portfolio; (19) intercompany disputes or disputes with Ambac Assurance's primaryinsurance regulator; (20) our inability to mitigate or remediate losses, commute or reduce insured exposures or achieve recoveries or investment objectives, or the failure of any transaction intended toaccomplish one or more of these objectives to deliver anticipated results; (21) the Company’s substantial indebtedness could adversely affect its financial condition and operating flexibility; (22) theCompany may not be able to obtain financing or raise capital on acceptable terms or at all due to its substantial indebtedness and financial condition; (23) restrictive covenants in agreements and instrumentsmay impair the Company’s ability to pursue or achieve its business strategies; (24) loss of control rights in transactions for which we provide insurance due to a finding that Ambac Assurance has defaulted,whether due to the Segregated Account rehabilitation proceedings or otherwise; (25) the Company’s results of operation may be adversely affected by events or circumstances that result in the acceleratedamortization of the Company’s insurance intangible asset; (26) adverse tax consequences or other costs resulting from the Segregated Account rehabilitation plan, or from the characterization of theCompany’s surplus notes or other obligations as equity; (27) risks attendant to the change in composition of securities in the Company’s investment portfolio; (28) changes in tax law; (29) changes inprevailing interest rates; (30) changes on inter-bank lending rate reporting practices or the method pursuant to which LIBOR rates are determined; (31) factors that may influence the amount of installmentpremiums paid to the Company, including the Segregated Account rehabilitation proceedings; (32) default by one or more of Ambac Assurance's portfolio investments, insured issuers or counterparties;(33) market risks impacting assets in the Company’s investment portfolio or the value of our assets posted as collateral in respect of interest rate swap transactions; (34) risks relating to determinationsof amounts of impairments taken on investments; (35) the risk of litigation and regulatory inquiries or investigations, and the risk of adverse outcomes in connection therewith, which could have a materialadverse effect on the Company’s business, operations, financial position, profitability or cash flows; (36) actions of stakeholders whose interests are not aligned with broader interests of the Company'sstockholders; (37) the Company’s inability to realize value from Ambac UK or other subsidiaries of Ambac Assurance; (38) system security risks; (39) market spreads and pricing on interest rate derivativeinsured or issued by the Company; (40) the risk of volatility in income and earnings, including volatility due to the application of fair value accounting; (41) changes in accounting principles or practicesthat may impact the Company’s reported financial results; (42) legislative and regulatory developments, including intervention by regulatory authorities; (43) the economic impact of “Brexit” may have anadverse effect on the Company’s insured international portfolio and the value of its foreign investments, both of which primarily reside with its subsidiary Ambac UK; (44) operational risks, including withrespect to internal processes, risk and investment models, systems and employees, and failures in services or products provided by third parties; (45) the Company’s financial position that may promptdepartures of key employees and may impact the Company’s ability to attract qualified executives and employees; (46) implementation of new tax legislation signed into law on December 22, 2017(commonly known as the “Tax Cuts and Jobs Act”) may have unexpected consequences for the Company and the value of its securities, particularly its common shares; (47) implementation of the TaxCuts and Jobs Act may negatively impact the economic recovery of Puerto Rico, which could result in higher loss severities or an extended moratorium on debt service owed on Ambac Assurance-insuredbonds of Puerto Rico and its instrumentalities; (48) implementation of the Tax Cuts and Jobs Act could have a negative impact on municipal issuers of Ambac-insured bonds; and (49) other risks anduncertainties that have not been identified at this time.

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ABOUT AMBAC

Ambac Financial Group, Inc. ("Ambac"), headquartered in New York City, is a holding company whose subsidiaries, including its principaloperating subsidiaries, Ambac Assurance Corporation ("AAC"), Everspan Financial Guarantee Corp. and Ambac Assurance UK Limited("Ambac UK"), provide financial guarantees to clients in both the public and private sectors globally. AAC, is a guarantor of public financeand structured finance obligations. The Amended and Restated Certificate of Incorporation of Ambac contains substantial restrictions onthe ability to transfer Ambac’s common stock. Subject to limited exceptions, any attempted transfer of common stock shall be prohibitedand void to the extent that, as a result of such transfer (or any series of transfers of which such transfer is a part), any person or group ofpersons shall become a holder of 5% or more of Ambac’s common stock or a holder of 5% or more of Ambac's common stock increases itsownership interest. Ambac is committed to providing timely and accurate information to the investing public, consistent with our legal andregulatory obligations. To that end, we use our website to convey information about our businesses, including the anticipated release ofquarterly financial results, quarterly financial, statistical and business-related information, and the posting of updates to the status of certainresidential mortgage backed securities litigations. For more information, please go to www.ambac.com.

ContactLisa A. KampfManaging Director, Investor Relations(212) [email protected]

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32-005 ambc investor presentation 4q17

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