Investor Presentation

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1 Investor Presentation Third Quarter Ambac Financial Group, Inc. One State Street Plaza, New York, NY All Rights Reserved

2 INDEX PAGE 3Q2017 Financial and Business Highlights... 3 ADDITIONAL INFORMATION Ambac History and Today Value drivers AFG AAC APPENDIX

3 3Q2017 FINANCIAL HIGHLIGHTS ($ in millions, except per share amounts) 3Q2017 2Q2017 Net income (loss) $ (191) $ 7 Net income (loss) per diluted share $ (4.20) $ 0.16 Adjusted earnings (loss) (1) $ (150) $ 70 Adjusted earnings (loss) per diluted share $ (3.30) $ 1.54 Adjusted book value (1) $ 1,112 $ 1,283 Adjusted book value per share $ $ Financial Highlights: Losses and loss expenses incurred of $209.8 million resulted from Public Finance losses, primarily from adverse development in Puerto Rico, and deferred interest accrued partially offset by benefits from RMBS and Ambac U.K. Investment income of $87.2 million was driven by investments in Ambac-insured bonds, including an increasing ownership of Puerto Rico bonds Premiums earned of $53.0 million were driven by an increase in accelerated premiums of $13.0 million offset by a decrease of $3.2 million in normal premiums Operating expenses of $33.8 million included compensation expenses of $4.1 million from the corporate reorganization and restructuring and regulatory costs of $9.2 million (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 included in (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 3Q2017 Earnings Release included in Ambac s Current Report on Form 8-K filed with the SEC on November 8, 2017 and at the end of this document 3

4 LOSS MITIGATION AND ASSET AND LIABILITY MANAGMENT ACTIVITY DURING 3Q17 During the three months ended September 30, 2017, Ambac acquired $70.5 million of Puerto Rico insured securities. Ambac currently owns approximately 24% of PRIFA and 40% of COFINA Ambac insured bonds Working with Ambac UK, an international asset-backed issuer refinanced their million of insured debt and paid Ambac UK a termination premium of 12.6 million, resulting in accelerated premiums earned of $11.2 million Ambac Assurance commuted $44.6 million of net par exposure to a distressed municipality for a small payment Ambac Assurance negotiated with a distressed domestic asset-backed issuer (a VIE, currently consolidated by Ambac) to refinance $30.8 million of Ambac-insured net par exposure and recovered $4.7 million (the transaction closed in October 2017) In connection with the Augusta insured interest rate swap commutation executed in 2Q17, Ambac Assurance terminated $183.2 million of net par exposure in 3Q17 4

5 3Q2017 vs 2Q KEY FINANCIAL RESULTS Net income (loss) and adjusted earnings (loss) were negatively impacted in 3Q2017 by an increase in Public Finance loss and loss expenses Interest rate derivatives gains were $4.0 million which reflected the impact of the macro hedge due a modest rise in interest rates compared to a slight decline in 2Q17. The gain of $34.1 million in 2Q17 was driven by the commutation of the Augusta interest rate swaps ($ in millions) 3Q2017 2Q2017 $125 $75 $25 $53 $43 $87 $85 $4 $34 $7 $70 -$25 -$75 -$125 $(66) $(34) $(31) $(29) $(28) -$175 -$225 -$275 $(210) $(191) $(150) Net premiums earned Net investment income Interest Rate Derivatives gains (losses) Loss and loss expenses Operating expense Interest expense Net income (loss) attributable to Common Stockholders Adjusted earnings (loss) (1) (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) net income which is presented in accordance with GAAP. A reconciliation between both financial measures can be found in Ambac s 3Q2017 Earnings Release, included in Ambac s Current Report on Form 8-K filed with the SEC on November 8, 2017 and at the end of this document 5

6 INCURRED (LOSSES) BENEFIT BY CATEGORY (1) - 3Q2017 vs 2Q2017 RMBS benefit of $34.4 million in 3Q2017 was driven by the impact of a mortgage insurer settlement and improved credit performance in the RMBS portfolio Domestic public finance losses of $212.5 million in 3Q17 were impacted by adverse developments in Public Finance, primarily Puerto Rico Ambac UK benefit of $12.7 million in 3Q2017 was primarily due to foreign exchange gains ($ in millions) $100 3Q2017 2Q2017 $50 $0 -$50 -$100 $34 $16 $(52) $(2) $(20) $13 $35 $2 $ $(45) $(44) $(66) -$150 -$200 -$250 $(213) $(210) RMBS Domestic Public Finance Student Loans Ambac UK Other Credits Interest on Deferred Amounts Total (1) Components may not add to total due to rounding 6

7 GROSS LOSS RESERVES BY CATEGORY (1) ($ in millions) As of 9/30/17 As of 6/30/17 $5,000 $4,000 $4,000 $3,923 $3,000 $2,489 $2,476 $2,000 $1,000 $801 $740 $0 $307 $307 $290 $296 $14 $16 $99 $88 RMBS Domestic Public Finance Student Loans Ambac UK Other Credits Loss Expenses Total (1) Gross loss reserves are net of estimated R&W subrogation recoveries of $1.8 billion and $1.9 billion, and other subrogation recoverables of $0.8 billion and $0.7 billion as of September 30, 2017 and June 30, 2017, respectively. Gross loss reserves include $3.8 billion and $3.7 billion of unpaid segregated account policy claims and interest as of September 30, 2017 and June 30, 2017, respectively 7

8 EXPENSE MANAGEMENT Focus on expense reduction through headcount and operating efficiencies Compensation Expense Non-Compensation Expenses $25 $25 $20 $20 ($ in millions) $15 $10 ($ in millions) $15 $10 $5 $5 $0 2Q Q Q Q Q Q 2017 $0 2Q Q Q Q Q Q 2017 Other OCI Activism Litigation contingency Restructuring Compensation expense increased $4.4 million in 3Q2017 from 2Q2017 primarily due to severance costs related to the corporate reorganization during the quarter Non-compensation expenses for 3Q2017 decreased $1.8 million from 2Q2017 primarily due to a decrease in consulting expenses partially offset by higher legal fees related to the restructuring transaction Expenses related to the restructuring transaction amounted to $7.0 million in 3Q2017 and $9.2 million in 2Q2017 Expenses directly related to OCI amounted to $2.2 million in 3Q2017 and $2.3 million in 2Q2017 8

9 STEADY IMPROVEMENT IN CLAIMS-PAYING RATIO AND REDUCTION OF INSURED EXPOSURES Claims-paying resources (1) of $8.9 billion as of September 30, 2017 Net par outstanding decreased 66% from June 30, :1 $ :1 $ :1 26:1 $167.7 $ :1 $ :1 $ :1 $ :1 $ :1 $66.7 $220 $200 $180 $160 $140 $120 $100 $80 $60 ($ in billions) 0 06/30/13 12/31/13 06/30/14 12/31/14 06/30/15 12/31/15 06/30/16 12/31/16 09/30/17 $40 (1) (2) Claims-paying Ratio Net Par Outstanding ($ in billions) (1) Total claims-paying ratio is net financial guarantees in force divided by total claims-paying resources. Total claims-paying resources quantifies total resources available to pay claims, including guarantees on subsidiary obligations. The calculation for total claims-paying-resources includes loss and loss adjustment expense 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 as opposed to the current accreted value of the bonds 9

10 AMBAC LIABILITY AND CAPITAL SUMMARY Category ($ in millions) 09/30/17 Comments Claim Liabilities 5.1% Surplus Notes Par (1) $6,808 $755 Before estimated subrogation recoveries, Unearned Premium Revenue ( UPR ) and reinsurance Includes $3,802 million of unpaid claims, including accrued interest on Deferred Amounts ( DPO ) of $794 million Includes $328 million of Ambac UK claim liabilities General Account notes Does not include $332 million of accrued interest 5.1% Junior Surplus Notes Par $371 Includes $350 million par (formerly held by AFG (2) ) Does not include $94 million of accrued interest Auction Market Preferred Shares (AMPS) $660 Liquidation Value, originally $800 million Common Stock Market Cap (3) $729 45,251,166 common shares 4,053,670 warrants (4) (1) Surplus Notes Par is reduced by approximately $178 million as a result of surplus notes acquired by AFG (2Q 2015 & 1Q-2Q 2017) and by AAC (1Q-2Q 2016) (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 also retained a 20% interest 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 $16.11 on November 3, 2017 (4) As of September 30, 2017 Ambac has repurchased 985,331 warrants totaling $8.1 million at an average cost of $8.21 per warrant 10

11 ADDITIONAL INFORMATION

12 BOOK VALUE AND ADJUSTED BOOK VALUE PER SHARE (1) Ambac has strengthened book value and adjusted book value since emergence from bankruptcy (2) Book Value/Share (3) 48% CAGR since June 2013 Adjusted Book Value/Share Increase of $20.79 since June 2013 $50 $50 $40 $30 $31.09 $37.41 $37.94 $33.33 $40 $30 $28.15 $29.48 $24.56 $20 $15.62 $20 $15.01 $10 $6.38 $10 $3.77 $8.32 $0 Jun-13 Dec-13 Dec-14 Dec-15 Dec-16 Sep-17 $0 Jun-13 Dec-13 Dec-14 Dec-15 Dec-16 Sep-17 (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) Total Ambac Financial Group, Inc. stockholders equity which is presented in accordance with GAAP. A reconciliation between both financial measures can be found in Ambac s 3Q2017 Earnings Release included in Ambac s Current Report on Form 8-K filed with the SEC on November 8, 2017 and at the end of this document (2) Measured from June 30, 2013, the first quarter end after emergence from bankruptcy on May 1, 2013, through 3Q2017 (3) CAGR is Compound Annual Growth Rate 12

13 AMBAC HISTORY AND TODAY 13

14 AMBAC - A BIT OF HISTORY Historically a global leader in monoline insurance $556 billion of peak insured exposures prefinancial crisis including public finance, structured finance, and international finance Adversely impacted by financial crisis Segregated Account of AAC in Rehabilitation Established in March 2010 to separate most troubled liabilities, including residential mortgage-backed securities ("RMBS") and student loan guarantees Wisconsin Office of the Commissioner of Insurance ( OCI ) as Rehabilitator holds ultimate decision-making authority over the Segregated Account Generally pays 45% of permitted policy claims, known as the Interim Payment Percentage ( IPP ); deferring 55%; while General Account pays 100% of permitted policy claims Bankruptcy of AFG November filed for Chapter 11 bankruptcy May emerged from bankruptcy with no debt, ~$5 billion of net operating loss carry-forwards ( NOLs ) and a new Board of Directors Ambac Financial Group, Inc. (Holding Company) (AFG) $381 million cash & investments; 45 million shares outstanding Everspan Financial Guarantee (Financial Guarantee) $233 million statutory surplus Ambac Assurance Corporation (Financial Guarantee) (AAC) $8.0 billion CPR; $51 billion net par $67 billion net par Portfolio % Breakdown Ambac UK: 24% Segregated Account: 15% Ambac Assurance UK (UK insurance company) (Ambac UK) $890 million CPR; $16 billion net par General Account: 61% Ambac Assurance Corporation Segregated Account (in Rehabilitation) 14

15 AMBAC TODAY AFG Financial guarantee holding company Subsidiaries provide financial guarantees on municipal bonds, structured securities and other financial instruments Principal operating subsidiaries include AAC, Ambac UK and Everspan Insured Portfolio as of September 30, 2017 AFG profile (as of September 30, 2017, unless otherwise noted) $381.1 million in cash and investments $4.2 billion of net operating loss carry-forwards ( NOLs ) $1.4 billion AFG; $2.8 billion AAC No debt at AFG Equity market capitalization of $729 million as of November 3, 2017 Investment Portfolio as of September 30, 2017 US Gov & Agency Obligations: 2% Int'l: 26% $66.7 billion Net Par Public Finance: 52% Shortterm: 13% Non-RMBS Ambac Inured: 12% $6.2 billion Fair Value Corporate Obligations: 20% Muni Obligations: 2% Structured Finance: 22% RMBS/ ABS: 8% RMBS-Ambac Insured: 36% Other: 7% 15

16 EARNINGS GENERATION SINCE EXITING BANKRUPTCY Generated $1.2 billion of net income and $2.4 billion of adjusted earnings (1) since emergence from bankruptcy (2) Net Income $1.2 billion since emergence Adjusted Earnings (1) $2.4 billion since emergence ($ in millions) $1,150 ($ in millions) $1,150 $1,154 $850 $850 $637 $550 $505 $484 $493 $550 $462 $315 $250 $75 $7 $250 $70 -$50 -$50 -$350 $(125) $(191) -$350 $(91) $(150) May - Dec Q17 2Q17 3Q17 May - Dec Q17 2Q17 3Q17 (1) Adjusted Earnings is a non-gaap financial measure that excludes (or includes) amounts that are included in (or excluded from) net income attributable to common stockholders which is presented in accordance with GAAP. A reconciliation to net income attributable to common stockholders, as reported under GAAP, 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 3Q

17 STRATEGIC PRIORITIES Executing on Our Strategic Priorities Working towards clarity around uncertainties Active runoff of Ambac Assurance and its subsidiaries through transaction terminations, policy commutations, settlements and restructurings, with a focus on known and potential future adversely classified credits, that we believe will improve our risk profile, and maximizing the risk-adjusted return on invested assets; Rationalization of Ambac's and its subsidiaries' capital and liability structures, enabling simplification of corporate governance and facilitating the successful rehabilitation of the Segregated Account of Ambac Assurance; Loss recovery through active litigation management and exercise of contractual and legal rights; Ongoing review of organizational effectiveness and efficiency of the operating platform; and Evaluation of opportunities in certain business sectors that meet acceptable criteria that will generate long-term stockholder value with attractive risk-adjusted returns. Managing large, legacy exposures including $2.0 billion net par (1) Puerto Rico exposures, with longdated maturities through 2054 Chicago, New Jersey and other jurisdictions with stressed fiscal conditions RMBS and student loan policies in the Segregated Account $5.8 billion net par of military housing exposures, with long-dated maturities through 2055 Prosecuting our remaining RMBS-related lawsuits Pursuing plan to conclude the rehabilitation of AAC's Segregated Account (remains subject to court approval and other conditions) Optimizing capital allocation in a dynamic environment complicated by the long duration profile of AAC s substantial obligations and the Segregated Account rehabilitation $729 million equity market cap as of November 3, 2017 $67 billion of outstanding insured securities Retaining key employees (1) Net par is net of reinsurance and includes capital appreciation bonds ( CABS ) 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. Accretion of the capital appreciation bonds would increase the related net par by $663 million at September 30,

18 EXECUTING ON STRATEGY SINCE EMERGENCE FROM BANKRUPTCY (2) Generated $1.2 billion of Net Income Increased Book Value per share by $26.95 Announced a holistic restructuring transaction to conclude the Segregated Account Rehabilitation Generated $2.4 billion of Adjusted Earnings (1) Increased Adjusted Book Value (1) per share by $20.79 Settled JP Morgan RMBS litigation for $995 million AAC annualized total return on invested assets of 6.4% Reduced net par exposure by 66% Settled Ballantyne JPM litigation realizing a total benefit of $145 million Reduced adversely classified credits by 53% Cumulative tolling payments made from AAC to AFG of $100 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 included in (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 3Q2017 Earnings Release included in Ambac s Current Report on Form 8-K filed with the SEC on November 8, 2017 and at the end of this document (2) Ambac emerged from bankruptcy on May 1,

19 AMBAC ANNOUNCES RESTRUCTURING TRANSACTION On July 19, 2017, AFG announced that it and its principal operating subsidiary, AAC (AAC together with AFG and its subsidiaries and affiliates, "Ambac" or the "Company") reached definitive agreement on a holistic restructuring transaction (the Transaction ) that is intended to, if consummated, materially improve the financial condition of Ambac, create significant value for all stakeholders and conclude the rehabilitation of the Segregated Account The Transaction is comprised of 3 key components: (1) An Amendment to the Rehabilitation Plan for the Segregated Account (the Amendment ) to satisfy and discharge all DPOs, together with Exchange Offer Transactions (the Exchange ) relating to AAC Surplus Notes due 2020 ( GA SNs ), (2) A fully committed (1) $240 million Tier 2 Note, and (3) Certain regulatory capital accretive transactions On September 25, 2017 the Rehabilitator filed a motion in the Rehabilitation Court seeking entry of an order approving the Amendment. Objections to the motion are due by November 24, 2017, the Rehabilitator s response to any objections shall be filed by December 11, 2017, the Rehabilitator s Pretrial Report shall be filed by December 11, 2017, the Pretrial Conference is scheduled for December 14, 2017, and the evidentiary Confirmation Hearing is scheduled for January 4 and 5, 2018 (2) (1) Subject to definitive documentation (2) See Form 8-Ks filed with the SEC for further information on the conditions precedent to the Transaction 19

20 KEY TRANSACTION BENEFITS Material Value Creation and Improved Financial Condition Increase to Book Value and Adjusted Book Value Reduction of liabilities while preserving NOLs Improved AAC statutory surplus Improved Operating Flexibility Removal or modification of certain restrictive Bank Settlement Agreement covenants associated with GA SNs Elimination of the Segregated Account and most of its related restrictions Streamlined governance structure Significant Reduction in Future Operating Expenses Approximately $6 million of anticipated annual savings of OCI expenses related to the rehabilitation of the Segregated Account (beginning after consummation of the Transaction) Anticipated incremental operating expense savings associated with improved operating flexibility 20

21 ANTICIPATED TRANSACTION TIMELINE (1) There are a number of conditions that must be satisfied to consummate the Amendment and Exchange Transaction and the issuance of the Tier 2 Notes. Set forth below is the anticipated timeline for the closing of the Transaction July August September October November December / 1Q2018 July 19, 2017 Rehabilitator announces approval for plan to support resolution of Segregated Account Exchange Launch Ambac issues press release July 20, 2017 Ambac holds investor call Sept. 25, 2017 Amendment to Segregated Account Rehabilitation Plan filed with Rehabilitation Court Dec. 14, 2017 Pre-trial conference Jan. 4-5, 2018 Rehabilitation Court Hearing Rehabilitation Court Approval Target Deal close and exit from Rehabilitation (1) The timeline above includes anticipated dates only. Ambac makes no assurance as to the ultimate timing of any of the above or as to whether or when the transaction will close. Merger of Segregated Account into General Account 21

22 AFG VALUE DRIVERS 22

23 VALUE DRIVERS OF AFG 23

24 AFG VALUE DRIVERS CASH AND INVESTMENTS Cash and investments create flexibility to pursue initiatives to maximize value for shareholders $381.1 million Cash and Investments at AFG as of September 30, 2017 Corolla Notes: 10% Corolla Equity Interest: 9% Cash & Short-term Investments: 17% Corporate Obligations: 1% ABS: 8% RMBS-AAC Insured: 2% AAC / Segregated Account Surplus Notes: 53% 24

25 AFG VALUE DRIVERS - NET OPERATING LOSS CARRY-FORWARD ( NOL ) $4.2 billion in NOLs are a considerable asset for our shareholders, and a meaningful lever for future value creation AAC: 67% AFG: 33% $1.4 billion allocated $1.4 billion allocated to AFG to $2.8 AFGbillion allocated to AAC Inter-company tax sharing arrangement requires AAC to pay AFG for using AAC s allocated NOLs ( Tolling Payments ) No Deferred Tax Asset on the balance sheet; NOLs expire Pursuing selective business transactions that may utilize NOLs 25

26 AFG VALUE DRIVERS NOL TOLLING AGREEMENT Tolling agreement provides an opportunity for significant cash to flow up to AFG AAC will pay AFG for usage of up to $3.65 billion of NOLs AAC paid $100.1 million of tolling payments (1) in 2016 & 2017 Total potential amount of AFG's net tolling payments remaining is $136 million Through 3Q2017, AAC generated a new post determination date NOL of $254 million, which must be utilized by AAC before further tolling payments accrue $300 Net Tolling Payments ($ in millions) $250 FOOTNOTE: $200 $150 $100 $50 $0 $20 $63 $80 $28 $45 $136 $100 Utilized Outstanding (1) Net Tolling Payment = (Utilized NOL Applicable Percentage 35% Federal Corporate Tax Rate) - credits (2) Tier A, B, and C are each subject to a $5 million credit against tolling payment due AFG (3) Pursuant to IRS closing agreement, IRS receives 12.5% of Tier C (4) Pursuant to IRS closing agreement, IRS receives 17.5% of Tier D Tier A (2) Tier B (2) Tier C (2,3) Tier D (4) Ever-to- Date 26

27 AFG VALUE DRIVERS CONSIDER SELECTIVE TAX-ADVANTAGED BUSINESS TRANSACTIONS Selective tax-advantaged business transactions can diversify revenue and leverage infrastructure Use our balance sheet, substantial tax assets, and robust intellectual capital to explore avenues to generate favorable tax-advantaged risk-adjusted returns for our shareholders May permit utilization of NOLs AFG can purchase NOLs from AAC in the event AFG utilizes 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 27

28 AAC VALUE DRIVERS 28

29 VALUE DRIVERS OF AAC 29

30 RISK MANAGEMENT REDUCING INSURED LEGACY EXPOSURES Ambac has realized a significant decrease in its distressed liabilities, a meaningful portion of which was due to active liability management Adversely Classified Credit - Net Par (definitions in Appendix) $ in billions $40 $30 $20 $10 $0 2Q Q17 $ in billions $250 $200 $150 $100 $50 $0 Net Par Exposure Reduction Since Emergence 2Q Q17 6,000 5,000 4,000 3,000 2,000 1,000 IA II III IV V PF SF Int'l # of Credits (right axis) while strengthening book value and adjusted book value Book Value Per Share 48% CAGR since June 2013 Adjusted Book Value Per Share Increased $20.79 since June 2013 $50 $40 $30 $20 $10 $0 $6.38 Jun-13 $15.62 Dec-13 $31.09 Dec-14 $37.41 $37.94 Dec-15 Dec-16 $33.33 Sep-17 $50 $40 $30 $20 $10 $0 $3.77 Jun-13 $8.32 Dec-13 $28.15 $29.48 $15.01 Dec-14 Dec-15 Dec-16 $24.56 Sep-17 30

31 LOSS MITIGATION SEGREGATED ACCOUNT Benefiting from recovery in the housing market, low interest rates and aggressive Ambac remediation initiatives, projected RMBS losses have declined materially since emergence from bankruptcy Ambac has decreased its student loan exposure by 91% (since the Segregated Account entered rehabilitation) primarily through commutations, restructurings and refinancings Projected Lifetime RMBS Losses Student Loan Portfolio Reduction $ in billions $ in billions $12.5 billion Net Par Reduction 1Q Q2017 $10 $6.5 $16 $8 $6 $4 $2 $0 3Q 13 4Q 13 1Q 14 2Q 14 3Q 14 4Q 14 1Q 15 2Q 15 ETD Paid, Net of Subrogation Received 3Q 15 4Q 15 1Q 16 2Q 16 3Q 16 4Q 16 1Q 17 ETD, Unpaid Claims 2Q 17 3Q 17 $6.0 $5.5 $5.0 $4.5 $4.0 $3.5 $14 $12 $10 $8 $6 $4 $2 $0 $13.8 Net Par 1Q 2010 $4.8 Commutations $3.3 Restructurings and Refinancings $4.4 Run-off $1.3 Net Par 3Q 2017 GCL, Before Est. R&Ws ETD Losses + GCL, Net of R&W (right axis) 31

32 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 market access 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 3Q2017 ~$340 million of debt service due in Domestic Public Finance loss reserves, largely attributable to Puerto Rico, were $801 million as of September 30, 2017 Ambac Puerto Rico Exposure ($ in millions) as of September 30, 2017 (1) (1) (2) (2) (5) Ever-to- Gross Net Date Net Principal Principal Claims Range of Credit Single Risk Gross Par Net Par & Interest & Interest Paid Maturity Class Rating General Fund Debt: 1 PR Commonwealth GO $ 56.0 $ 56.0 $ 64.0 $ 64.0 $ IV BIG 2 PR Public Buildings Authority Revenue - GO Guaranty IV BIG Subtotal Revenue Debt: 3 PR Highways and Transp'n 1968 Resolution - Highway Rev (3)(4) IV BIG 4 PR Highways and Transp'n 1998 Resolution - Sr Transp'n (3)(4) IV BIG 5 PR Infrastructure Financing Special Tax Revenue (Rum Tax) (3) IV BIG 6 Convention Center (Hotel Occupancy Tax) (3) IV BIG 7 Senior Sales Tax Rev (COFINA) , , III BIG Subtotal $ 1,829.7 $ 1,801.8 $ 9,324.6 $ 9,241.0 $ Grand total $ 1,996.1 $ 1,968.2 $ 9,575.6 $ 9,492.0 $ (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 would increase the related gross and net par by $670 million and $663 million, respectively at September 30, 2017 (2) Net Par and Net Principal & Interest are net of reinsurance (3) Subject to Act No. 5 of January 29, 2017, as amended, also known as the Financial Emergency and Fiscal Responsibility Act of 2017, which declares an emergency period until December 31, 2017 and extends the effectiveness of Executive Orders and debt moratorium therein, issued pursuant to Act 21 of April 6, 2016, as amended. Subject to the Priority Debt Provision under Section 8 of Article VI of the Constitution of the Commonwealth of Puerto Rico, commonly known as the "clawback provision" (4) Pledged revenues for Highways and Transportation Revenue Bonds include toll revenues and investment earnings which are subject to the Financial Emergency and Fiscal Responsibility Act of 2017 (5) In the third quarter of 2017, Ambac had net claim payments totaling $127.4 million on Ambac-insured Bonds, including Rum Tax and GO Bonds ($67.9 million), Highway and Transportation Bonds ($47.5 million), and Convention Center Bonds ($12.0 million) 32

33 LOSS MITIGATION LITIGATION AND OTHER RECOVERIES Aggressively pursuing RMBS and other recoveries, through litigation and other means Over $1.5 billion of RMBS-related recoveries ever-to-date Active Litigation Countrywide, First Franklin and Nomura Estimated representation and warranty ( R&W ) subrogation recoveries of $1.8 billion as of September 30, 2017 Countrywide Following appellate court decision our putback and fraud claims remain intact NY Court of Appeals will hear appeal on certain aspects of the previous appellate court decision Additional fraud-only cases relating to Harborview and Lehman transactions First Franklin and Nomura Timing further behind Countrywide case Settled litigation against AAC by California municipal bond issuers U.S. Bank Seeking to prevent trustee from accepting inadequate settlement of claims relating to insured RMBS transaction Also seeking redress for trustee's failure to enforce rights and remedies and its treatment of trust recoveries with respect to 5 RMBS transactions Ambac UK Settled litigation brought on behalf of Ballantyne Puerto Rico COFINA structure and trustee HTA FEGP, Fiscal Plan Compliance Law Clawback US Treasury (relating to rum taxes) Other Potential Recoveries Citigroup settlement with the SEC Related to a CDO transaction for which Ambac provided credit protection Analyzing and pursuing other potential areas for recoveries 33

34 ASSET MANAGEMENT Optimize investment portfolio; investment strategy included a shift to investments in Ambac insured RMBS and other Ambac insured securities $6.6 billion consolidated investment portfolio as of June 30, 2013 $6.2 billion consolidated investment portfolio as of September 30, 2017 US Gov & Agency: 7% Non-RMBS-Ambac Insured (1): 1% Short-term: 9% Corporate Obligations: 15% US Gov & Agency: 2% Non-RMBS Ambac Insured: 12% Corporate Obligations: 20% RMBS/ ABS: 20% Muni Obligations: 25% Short-term: 13% RMBS/ ABS: 8% Muni Obligations: 2% Other: 4% RMBS-Ambac Insured: 18% Foreign Obligations: 1% Other: 7% AAC long-term GAAP book yield 6.9% as of September 30, % as of June 30, 2013 Estimated annualized total returns since bankruptcy emergence AAC: 6.4% Ambac UK: 5.1% RMBS-Ambac Insured: 36% Own $1.6 billion Deferred Amounts (including interest), or 41%, of total Deferred Amounts outstanding, as of September 30, 2017 (1) Excludes Ambac insured securities that are internally rated investment grade 34

35 AMBAC UK Long-tailed insured portfolio with accretive opportunities, diverse investment portfolio and improving claims-paying ratio Ambac UK $15.8 billion net par as of September 30, 2017 Ambac UK $690 million investment portfolio as of September 30, 2017 Structured Insurance: 6% Other: 4% US Gov & Agency: 5% ABS: 14% Corporate Obligations: 12% Short-term: 5% Sovereign /subsovereign: 35% Insurance-linked: 3% RMBS/ABS: 15% Non-US Obligations: 4% Transportation: 7% MBS: 2% Investor Owned and Public Utilities: 32% Claims-paying resources $890 million as of September 30, 2017 Loss reserves Improved from $601 million as of June 30, 2013 to $290 million as of September 30, 2017, or 52% Proactive risk remediation efforts include litigation and commutations Proactive asset management, including investments in Ambac UK insured transactions High Yield & Loans: 12% Hedge Fund: 8% Property: 5% Equities: 6% Ambac UK Claims-Paying Ratio (1) 33:1 34:1 Non-RMBS Ambac Insured: 25% 29:1 26:1 24:1 25:1 Jun-13 Dec-13 Dec-14 Dec-15 Dec-16 Sep-17 (1) Total claims-paying ratio is net financial guarantees in force divided by total claims-paying resources. Total claims-paying resources quantifies total resources available to pay claims, including guarantees on subsidiary obligations 35

36 APPENDIX 36

37 RISK ADVERSE CREDIT CLASSIFICATIONS Classification Class I Description Fully Performing Meets Ambac Criteria with Remote Probability of Claim Survey List Investigation of Specific Condition or Weakness Underway Class IA Potential Problem with Risks to be Dimensioned Class II Substandard Requiring Intervention Class III Doubtful with Clear Potential for Loss Class IV Imminent Default or Defaulted Class V Fully Reserved 37

38 OUTSTANDING INSURED DEBT SERVICE (1) Estimated Insured Net Debt Service Amortization ($ in billions) $107 billion $30 $25 $20 $15 $10 $5 $0 (2) After 2037 General Account Segregated Account Ambac UK (1) Depicts amortization of existing guaranteed portfolio (principal and interest), assuming no advance refundings, as of September 30, Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay guaranteed obligations (2) Includes scheduled runoff for remaining three months of

39 PUERTO RICO NET PRINCIPAL AND INTEREST (1) AMORTIZATION ($ IN MILLIONS) AS OF SEPTEMBER 30, 2017 Payment Date Commonwealth GO Net Principal and Interest Amortization of Ambac Insured Puerto Rico Exposures by Payment Date Senior Public Bldg - Senior Transportation Hotel Sales Tax GO Guaranteed Highway (1968) (1998) (2) Rum Tax Occupancy Tax (COFINA) Total P & I (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. Ending Net Debt Service Outstanding 1/1/2018 $ 1.4 $ 3.0 $ 0.3 $ 9.3 $ 8.6 $ 3.1 $ $ 25.7 $ 9, /1/ , /1/ ,315 7/1/ , /1/ , /1/ , /1/ , /1/ , /1/ , /1/ , /1/ , /1/ , /1/ ,932 7/1/ , /1/ , /1/ , /1/ , /1/ , /1/ , /1/ , /1/ , /1/ , /1/ , /1/ , /1/ , /1/ , /1/ ,149 7/1/ , /1/ , /1/ ,

40 PUERTO RICO NET PRINCIPAL AND INTEREST (1) AMORTIZATION (CONTINUED) ($ IN MILLIONS) AS OF SEPTEMBER 30, 2017 Payment Date Commonwealth GO Net Principal and Interest Amortization of Ambac Insured Puerto Rico Exposures by Payment Date Public Bldg - GO Guaranteed Senior Highway (1968) Senior Transportation (1998) (2) Rum Tax Hotel Occupancy Tax Sales Tax (COFINA) Total P & I (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. Ending Net Debt Service Outstanding 1/1/ , /1/ , /1/ , /1/ , /1/ , /1/ , /1/ , /1/ ,647 1/1/ , /1/ , /1/ , /1/ , /1/2039 7, /1/2039 7, /1/2040 7, /1/2040 7, /1/2041 7, /1/2041 7, /1/2042 7, /1/ , /1/2043 7, /1/ , /1/2044 7, /1/ , /1/ , /1/ , /1/ , /1/ , /1/ , /1/ , /1/2053 1, , , /1/2054 1, ,054.6 Grand Total $ 64.0 $ $ 20.4 $ $ $ $ 7,321.3 $ 9,

41 STATUS OF RMBS LITIGATIONS (1) Litigation Case Current Status (as of November 8, 2017) Countrywide Securities Corp., Countrywide Financial Corp. (a.k.a. Bank of America Home Loans) and Bank of America Corp New York State Supreme Court, Index No /2010 [re CWHEQ 2006-S1, CWHEQ 2006-S4, CWHEQ 2006-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, CWHEQ 2006-B, CWHEQ 2006-C, CWABS , CWABS , CWHEQ , CWHEQ ] Fact and expert discovery concluded Summary judgment motions were filed on May 1, 2015 and the court heard oral argument on July 15, 2015 On October 27, 2015, the court issued a decision granting in part and denying in part the parties respective summary judgment motions regarding AAC s claims against Countrywide. Both parties appealed certain rulings The Court also granted in its entirety AAC s partial motion for summary judgment and denied Bank of America s motion for summary judgment regarding AAC s successor-liability claims against Bank of America. Bank of America s 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 affirming other rulings On June 15, 2017, AAC filed a motion with the First Department for leave to appeal 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 to appeal certain rulings in the May 16, 2017 decision to the Court of Appeals (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 is under no duty or obligation to do so 41

42 STATUS OF RMBS LITIGATIONS - CONTINUED (1) Litigation Case Current Status (as of November 8, 2017) Countrywide Home Loans, Inc., Countrywide Financial Corp., and Bank of America Corp. New York State Supreme Court, Index No /2014 [re CWALT , CWALT 2006-OA19, HVMLT , HVMLT , Lehman XS N, Lehman XS N, Lehman XS N, and Lehman XS N] Countrywide Home Loans, Inc. Circuit Court, Dane County, Wisconsin, Case No. 14CV3511 (Wisconsin Action) and New York State Supreme Court, Index no /2015 (New York Action) [re HVMLT , HVMLT , HVMLT , HVMLT , and HVMLT ] Complaint for fraudulent-inducement filed on December 30, 2014 Countrywide filed a motion to dismiss on February 20, 2015 which Bank of America joined on February 23, 2015, and which plaintiffs opposed. The Court heard oral argument in November 2015 and denied defendants motion to dismiss 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 personal jurisdiction in an order entered on July 2, Plaintiffs appealed this decision and on June 23, 2016, the Wisconsin Court of Appeals reversed the dismissal of the complaint. The Wisconsin Supreme Court granted defendant s petition for review of the June 23, 2016 decision and oral argument was heard on February 28, On June 30, 2017, the Wisconsin Supreme Court reversed the decision of the Wisconsin Court of Appeals and remanded the case to the Wisconsin Court of Appeals for further proceedings On June 30, 2015 plaintiffs commenced the New York Action and filed a complaint for fraudulent-inducement on July 21, Plaintiffs also filed a motion to stay the New York Action pending resolution of the Wisconsin appeal. On August 10, 2015, defendant filed a motion to dismiss, which plaintiffs opposed. On September 20, 2016, the court granted plaintiffs motion to stay and held in abeyance defendant s motion to dismiss (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 is under no duty or obligation to do so 42

43 STATUS OF RMBS LITIGATIONS (CONTINUED) (1) Litigation Case Current Status (as of November 8, 2017) 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. New York State Supreme Court, Index No /2012 [re First Franklin Mortgage Loan Trust 2007-FFC] Nomura Credit & Capital, Inc. and Nomura Holding America Inc. New York State Supreme Court, Index No /2013 [re Nomura Asset Acceptance Corporation, Alternative Loan Trust, Series and Nomura Asset Acceptance Corporation, Alternative Loan Trust, Series ] On July 18, 2013 the court denied defendants motion to dismiss the putback and fraudulent-inducement claims, but granted the defendants motion to dismiss the claim for indemnification. The court further ruled that AAC is limited to the sole remedy of repurchase for breaches of representations and warranties relating to the loan pool but not for breaches of transaction-level representations and warranties Fact discovery is ongoing On July 12, 2013, defendants filed a motion to dismiss the complaint; oral argument was heard on November 13, 2013 AAC filed an Amended Complaint on September 22, 2014 adding a fraudulentinducement 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 an amended complaint Defendants also filed a motion to dismiss the fraudulent-inducement claim, which plaintiffs opposed. The court heard oral argument on this motion on April 14, 2015 On June 3, 2015, the court denied defendants July 2013 motion to dismiss AAC s claim for breaches of representations and warranties, but granted the defendants motion to dismiss AAC s claims for breach of the repurchase protocol and for alter ego liability against Nomura Holding. Nomura is appealing the court s decision denying the motion to dismiss AAC s claim for breaches of representations and warranties and filed its opening appellate brief in the First Department on March 27, Briefing is complete and oral argument is scheduled for November 14, 2017 On December 29, 2016, the court denied defendants motions to strike the amended complaint and to dismiss the fraudulent inducement claim. Nomura filed a notice of appeal on January 30, 2017 Fact discovery is ongoing (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 is under no duty or obligation to do so 43

44 STATUS OF RMBS LITIGATIONS (CONTINUED) (1) Litigation Case Current Status (as of November 8, 2017) U.S. Bank, N.A. -- United States District Court, Southern District of New York, Docket No. 17-cv [re HVMLT ] AAC filed the complaint on January 20, 2017 and a second amended complaint on February 23, 2017 asserting claims for declaratory judgment, breach of contract, breach of fiduciary duty, and violation of the Streit Act ( US Bank New York Action I ). On February 23, 2017, AAC also filed a motion for a preliminary injunction, which defendant opposed On March 9, 2017, defendant filed a motion to dismiss the second amended complaint, which AAC opposed The court heard oral argument on AAC s motion for a preliminary injunction and defendant s motion to dismiss on April 24, On June 1, 2017, the court denied defendant s motion to dismiss and denied AAC s motion for preliminary injunction Defendant filed a motion for reconsideration of the court s decision denying its motion to dismiss, which AAC opposed. The motion is fully briefed On March 6, 2017, defendant filed a trust instruction proceeding in Minnesota state court concerning the proposed settlement which is at issue in the US Bank New York Action I, captioned, In the matter of HarborView Mortgage Loan Trust , No. 27-TR-CV (the Minnesota Action ). On April 5, 2017, AAC filed a motion to dismiss the Minnesota Action. On June 12, 2017, defendant filed an amended petition in the Minnesota Action, and only July 7, 2017, AAC filed a renewed motion to dismiss U.S. Bank, N.A. -- United States District Court, Southern District of New York, Docket No. 17-cv [re HVMLT , HVMLT , HVMLT , HVMLT and HVMLT ] AAC filed the complaint on April 11, 2017 asserting claims for breach of contract, breach of fiduciary duty, declaratory judgment, and violation of the Streit Act On September 15, 2017, defendant filed a motion to dismiss AAC's complaint, which (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 is under no duty or obligation to do so 44

45 AMBAC NON-GAAP FINANCIAL DATA Non-GAAP Financial Data Included in this presentation, the Company reports two non-gaap financial measures: Adjusted Earnings and 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 are presenting these non-gaap financial measures because they provide greater transparency and enhanced visibility into the underlying drivers of our business and the impact of 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 may differ from similar reporting provided by other companies, which may define non-gaap measures differently. Adjusted Earnings (2) The following table reconciles net income attributable to common stockholders to the non-gaap measure, operating earnings, for the periods listed: Year Ended 3Q2017 2Q2017 1Q2017 Dec. 31, 2016 ($ 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 common shareholders $ (190.9) $ (4.20) $ 7.1 $ 0.16 $ (125.4) $ (2.77) $ 74.8 $ 1.64 Adjustments: Non-credit impairment fair value (gain) loss on credit derivatives (0.1) (4.6) (0.10) (7.5) (0.16) Insurance intangible amortization Foreign exchange (gains) losses (4.5) (0.11) (8.5) (0.19) (7.1) (0.16) Fair value (gain) loss on interest rate derivatives from Ambac CVA Adjusted earnings (loss) $ (149.8) $ (3.30) $ 70.4 $ 1.54 $ (91.2) $ (2.01) $ $

46 AMBAC NON-GAAP FINANCIAL DATA (CONTINUED) Adjusted Earnings (2) (continued) Year Ended December 31, Eight Months Ended December 31, 2013 ($ in millions, except per share amounts) $ Amount P.D.S. (1) $ Amount P.D.S. (1) $ Amount P.D.S. (1) Net income (loss) attributable to common shareholders $ $ $ $ $ $ Adjustments: Non-credit impairment fair value (gain) loss on credit derivatives (36.7) (0.80) (17.1) (0.37) (165.9) (3.58) Insurance intangible amortization Impairment of goodwill Foreign exchange (gains) losses (23.6) (0.51) Fair value (gain) loss on interest rate derivatives from Ambac CVA (14.2) (0.31) (16.1) (0.34) Adjusted earnings $ 1,154.0 $ $ $ $ $ 9.98 (1) Per diluted share ("P.D.S.") (2) Numbers may not add due to rounding. 46

47 AMBAC NON-GAAP FINANCIAL DATA (CONTINUED) 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 each date presented: September 30, 2017 June 30, 2017 March 31, 2017 ($ in millions, except per share data) $ Amount Per Share $ Amount Per Share $ Amount Per Share Total AFGI Shareholders' Equity $ 1,508 $ $ 1,674 $ $ 1,625 $ Adjustments: Non-credit impairment fair value losses on credit derivatives Insurance intangible asset (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 Net unrealized investment (gains) losses in Accumulated Other Comprehensive Income (152) (3.37) (153) (3.38) (140) (3.10) Adjusted book value $ 1,112 $ $ 1,283 $ $ 1,225 $ Shares outstanding (in millions)

48 AMBAC NON-GAAP FINANCIAL DATA (CONTINUED) Adjusted Book Value (1) (Continued) 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 Share Total AFGI Shareholders' Equity $ 1,714 $ $ 1,910 $ $ 1,796 $ $ 1,745 $ Adjustments: Non-credit impairment fair value losses on credit derivatives Insurance 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 Net 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 $ $ 1,446 $ $ 1,349 $ $ 1,303 $ Shares outstanding (in millions)