Slide 1: Investor Presentation First Quarter 2016
© 2014 Ambac Financial Group, Inc. One State Street Plaza, New York, NY 10004 All Rights Reserved | 800-221-1854 | www.ambac.com 6 INVESTOR PRESENTATION FIRST QUARTER 2016
Slide 2: Table of Contents
AMBAC OVERVIEW I STRATEGIC PRIORITIES FINANCIAL AND OPERATING RESULTS APPENDIX TABLE OF CONTENTS II III 1
Slide 3: Section I: Ambac Overview
SECTION I AMBAC OVERVIEW
Slide 4: Ambac Today and Progress Since Emergence from Bankruptcy
Progress Since Emergence from Bankruptcy(5) 6/30/13 (6) 3/31/16 Change Book Value / Share $6.38 $38.73 +507% Adj. Book Value / Share(2) ($7.23) $29.10 +$36.33 Net Par Outstanding ($bn) $196 $101 (48%) Claims Paying Ratio 31:1 18:1 (13:1) AMBAC TODAY Ambac Financial Group, Inc. (“AFG”) is a Nasdaq-li
Slide 5: Insured Portfolio – $101 Billion as of March 31, 2016
INSURED PORTFOLIO – $101 BILLION AS OF MARCH 31, 2016 4 Public Finance 60% Structured Finance 20% Int'l 20% Sector % Breakdown General Account 69% Segregated Account 14% Ambac UK 17% Portfolio % Breakdown Investment Grade 82% Below Investment Grade 18% Ambac Rating % Breakdown IA 14% II 25% III 14%
Slide 6: Ambac Capital Summary
AMBAC CAPITAL SUMMARY Category ($ in millions) 3/31/16 Comments Claim Liabilities $6,807 ► Before estimated subrogation recoveries, Unearned Premium Revenue (“UPR”) and reinsurance ► Includes $3,517 million of unpaid claims, including accrued interest on Deferred Payment Obligations (“DPO”) of $533
Slide 7: Key Milestones
KEY MILESTONES 2010 2013 2016 2014 2015 6 March 25, 2010 Ambac establishes Segregated Account Ambac has made substantial progress since emergence from bankruptcy on May 1, 2013 May 1, 2013 Ambac emerges from bankruptcy and announces the completion of its financial restructuring; re-lists equity on N
Slide 8: Book Value and Adjusted Book Value per Share
BOOK VALUE AND ADJUSTED BOOK VALUE PER SHARE(2) Ambac has delivered substantial book value and adjusted book value growth since emergence from bankruptcy(5) 7 ($7.23) ($1.11) $7.50 $24.78 $29.10 ($10) ($5) $0 $5 $10 $15 $20 $25 $30 $35 Jun-2013 Dec-2013 Dec-2014 Dec-2015 Mar-2016 $6.38 $15.62 $31.09
Slide 9: Management Team
Robert B. Eisman Senior Managing Director, Chief Accounting Officer and Controller ► Served as Chief Accounting Officer since November 2009 and as a Senior Managing Director since January 2010; was also formerly a Manager at KPMG LLP Stephen M. Ksenak Senior Managing Director and General Counsel ► J
Slide 10: Section II: Strategic Priorities
SECTION II STRATEGIC PRIORITIES
Slide 11: Executing Our Strategy to Maximize Shareholder Value
EXECUTING OUR STRATEGY TO MAXIMIZE SHAREHOLDER VALUE – WHILE MANAGING CHALLENGES AND UNCERTAINTIES 10 Our Strategic Priorities ► Furthering our collaboration with the OCI to enhance our ability to maximize the value of AAC • Moving toward potential emergence of the Segregated Account from Rehabilita
Slide 12: Enhancing Regulatory Relationship, Strong Earnings, Tolling Payments
Enhancing Regulatory Relationship ► Substantially improved relationship with the OCI ► Our collaborative relationship with the OCI has enhanced our ability to maximize the value of AAC • Favorable JP Morgan RMBS litigation settlement that exceeded expectations • Flexibility to pursue highly accretiv
Slide 13: Active Liability Management: Reduced Risk Exposure
Active Liability Management: Reduced High Risk Exposure ► Commuted and terminated over $1.4 billion(13) of student loan exposures; total student loan exposure down by ~65% to $1.7 billion ► Effectively defeased 93% of total outstanding LIM exposures ► Reduced adversely classified credits by 41% sinc
Slide 14: Expense Management and Corporate Governance Enhancements
Expense Management: Reduced Cost Base ► Reduced headcount by 21% since emergence from bankruptcy(13) ► Operating expenses for the first quarter of 2016 were $28.0 million, compared to $27.3 million for the fourth quarter of 2015. ► Increase was driven by costs associated with the ongoing proxy conte
Slide 15: Section III: Financial and Operating Results
SECTION III FINANCIAL AND OPERATING RESULTS
Slide 16: Strong Earnings Generation
STRONG EARNINGS GENERATION $203 $193 $292 $177 ($113) $143 $477 $248 $266 $171 $481 $218 $(200) $- $200 $400 $600 May - June 2013 3Q 2013 4Q 2013 1Q 2014 3Q 2014 4Q 2014 1Q 2015 2Q 2015 3Q 2015 4Q 2015 1Q 2016 2Q 2014(17) Ambac has delivered positive operating earnings in 10 out of the last 11 quart
Slide 17: Reduced Insured Portfolio by 49% Since 2Q 2013
REDUCED INSURED PORTFOLIO BY 49% SINCE 2Q 2013 16 - 2,000 4,000 6,000 $- $50 $100 $150 $200 $250 2Q 2013 3Q 2013 4Q 2013 1Q 2014 2Q 2014 3Q 2014 4Q 2014 1Q 2015 2Q 2015 3Q 2015 4Q 2015 1Q 2016 $ in billions PF SF Int'l # of Credits (right axis) # of Credits Net Par Exposure since 2Q 2013
Slide 18: Steady Improvement in Claims-Paying Ratio
STEADY IMPROVEMENT IN CLAIMS-PAYING RATIO 17 31:1 28:1 26:1 26:1 23:1 19:1 18:1 Jun-2013 Dec-2013 Jun-2014 Dec-2014 Jun-2015 Dec-2015 Mar-2016 Claims-Paying Ratio(14, 20)
Slide 19: Insured Portfolio – Adverse Credit Classification
$0 $10 $20 $30 $40 $50 $60 $70 $80 2009 2010 2011 2012 2Q 2013 2013 2014 2015 1Q 2016 $ in billions Adversely Classified Credit – Net Par V IV III II IA INSURED PORTFOLIO – ADVERSE CREDIT CLASSIFICATION(7) 18 Adversely classified credits (“ACC”) declined 41% since emergence from bankruptcy(13), 7% s
Slide 20: Progress in Reducing Distressed Liabilities
-38% -44% -37% -65% $0 $10 $20 $30 BIG Seg Acct RMBS Student Loans $ in billions Net Par (21) 2Q 2013 1Q 2016 PROGRESS IN REDUCING DISTRESSED LIABILITIES 19 (6) Ambac has realized a significant decrease in its distressed liabilities (22)
Slide 21: Projected Lifetime RMBS Losses
PROJECTED LIFETIME RMBS LOSSES(23) $0.0 $1.0 $2.0 $3.0 $4.0 $5.0 $6.0 $7.0 $8.0 $9.0 $10.0 2Q'13 3Q'13 4Q'13 1Q'14 2Q'14 3Q'14 4Q'14 1Q'15 2Q'15 3Q'15 4Q'15 1Q'16 $ in billions ETD Paid, Net of Subrogation Received ETD Unpaid Claims GCL, Before Estimated Representations & Warranties ETD Losses + GCL
Slide 22: Student Loan Portfolio Reduction
$1.7 $4.0 $3.3 $4.8 $13.8 $- $4 $8 $12 $16 Net Par 1Q 2010 Commutations Restructurings and Refinancings Run-off Net Par 1Q 2016 $ in billions $12.1 billion Net Par Reduction 1Q 2010 – 1Q 2016 STUDENT LOAN PORTFOLIO REDUCTION 21 Ambac has decreased its student loan exposure by $12.1 billion, primaril
Slide 23: Outstanding Debt Service
OUTSTANDING DEBT SERVICE(19) 22 $0 $5 $10 $15 $20 $25 $30 $35 $40 2016 2017 2018 2019 2020 2021 2022 - 2026 2027 - 2031 2032 - 2036 After 2036 $ in billions Estimated Net Debt Service Amortization General Account Segregated Account Ambac UK $160 billion (18)
Slide 24: Appendix
y APPENDIX Ambac
Slide 25: Key Terms Used to Describe Our Business
KEY TERMS USED TO DESCRIBE OUR BUSINESS Term Description Segregated Account ► Established in March 2010 by AAC to separate certain of AAC’s most troubled liabilities – RMBS, student loans and other structured products ► Currently in rehabilitation, overseen and controlled by the OCI (see below) Wisc
Slide 26: Simplified Corporate Structure
SIMPLIFIED CORPORATE STRUCTURE Ambac Financial Group (Holding Company) (AFG) Ambac Capital Corporation (Investment Agreement Operations) $100M IAs Outstanding Everspan Financial Guarantee (Financial Guarantee) $224M Statutory Surplus Ambac Assurance UK (UK insurance company) (Ambac UK) $1.0B CPR; $1
Slide 27: AAC / Segregated Account Structure
S egrega ted A ccoun t C la im s AAC / SEGREGATED ACCOUNT STRUCTURE AAC (Insurance Subsidiary) ~$5 billion liabilities and associated subrogation claims Segregated Account Cooperation agreement(27) Excess of loss reinsurance agreement(27) Management services agreement G enera l A ccoun t C la im s P
Slide 28: Value Components
VALUE COMPONENTS 27 Ambac Financial Group (Holding Company) ($272 million Cash and Securities(28)) Ambac Assurance Corp(29) (Insurance Subsidiary) E qu it y E xpens e S har in g N O L T o lli ng o n $ 3 .65 b ill ion N O L $1.4 billion NOL Corolla Trust(9) $75 million Subordinated Owner Trust Certif
Slide 29: Risk Adverse Credit Classifications
RISK ADVERSE CREDIT CLASSIFICATIONS(7) 28 Classification Description Class I ► Fully Performing – Meets Ambac Criteria with Remote Probability of Claim Survey List ► Investigation of Specific Condition or Weakness Underway Class IA ► Potential Problem with Risks to be Dimensioned Class II ► Substand
Slide 30: Non-GAAP Financial Data
Non-GAAP Financial Data Included in this presentation, the Company reports two non-GAAP financial measures: Operating Earnings and Adjusted Book Value. A non-GAAP financial measure is a numerical measure of financial performance or financial position that excludes (or includes) amounts that are incl
Slide 31: Adjusted Book Value Reconciliation
Adjusted Book Value The following table reconciles Total Ambac Financial Group, Inc. stockholders’ equity to the non-GAAP measure Adjusted Book Value as of each date presented: 30 AMBAC NON-GAAP FINANCIAL DATA ($ in millions, other than per share data) $ Amount Per Share $ Amount Per Share $ Amount
Slide 32: Footnotes
FOOTNOTES 1) Operating 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, a
Slide 33: Footnotes (Cont'd)
FOOTNOTES (CONT’D) 20) The calculation for Total Claims-Paying-Resources includes loss and loss adjustment expense reserves before the recorded Statutory benefit for expected subrogation receipts 21) Insured exposure may be reported in more than one bucket 22) BIG represents below investment grade i
Slide 34: Forward Looking Statement
FORWARD LOOKING STATEMENT In this presentation, we have included statements that may constitute “forward-looking statements” within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Words such as “estimate,” “project,” “plan,” “believe,” “anticipate,”
Slide 35: Important Information
Important Information Ambac Financial Group, Inc., ("Ambac") filed a definitive proxy statement with the Securities and Exchange Commission ("SEC") on April 20, 2016 in connection with its 2016 Annual Meeting. STOCKHOLDERS ARE URGED TO READ THIS PROXY STATEMENT, THE ACCOMPANYING WHITE PROXY CARD AND
Slide 36: Ambac contact information
© 2014 Ambac Financial Group, Inc. One State Street Plaza, New York, NY 10004 All Rights Reserved | 800-221-1854 | www.ambac.com 6