Form DEF 14A AMBAC FINANCIAL GROUP For: Dec 31

Form DEF 14A AMBAC FINANCIAL GROUP For: Dec 31

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April 18, 2019 4:39 PM EDT

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549




	SCHEDULE 14A INFORMATION

PROXY STATEMENT PURSUANT TO SECTION 14(A) OF
THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. ____)

Filed by the Registrant x Filed by a Party other than the Registrant ¨



Check the appropriate box:

¨		Preliminary Proxy Statement

¨		Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))

x		Definitive Proxy Statement

¨		Definitive Additional Materials

¨		Soliciting Material Pursuant to §240.14a-12

AMBAC FINANCIAL GROUP, INC.

(Name of Registrant as Specified In Its Charter)

(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)



PAYMENT OF FILING FEE (CHECK THE APPROPRIATE BOX):

x	No fee required.

¨	Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

	(1)	Title of each class of securities to which the transaction applies:
	(2)	Aggregate number of securities to which the transaction applies:
	(3)	Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):
	(4)	Proposed maximum aggregate value of transaction:
	(5)	Total fee paid:

¨	Fee paid previously with preliminary materials.

¨	Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.

	(1)	Amount previously paid:
	(2)	Form, Schedule or Registration Statement No.:
	(3)	Filing Party:
	(4)	Date Filed:

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	2019 NOTICE OF ANNUAL
	MEETING OF STOCKHOLDERS &
	PROXY STATEMENT

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	Ambac Financial Group, Inc. One State Street Plaza New York, NY 10004 Tel: 212.658.7470




	April 18, 2019

	To Our Fellow Stockholders:

	It is our pleasure to invite you to our 2019 Annual Meeting of Stockholders to be held on June 3, 2019 at 11:00 a.m. (Eastern). The meeting will be held at our executive offices in New York City.

	We are taking advantage of the Securities and Exchange Commission (“SEC”) rules that allow companies to furnish proxy materials to stockholders via the internet. This electronic process gives you fast, convenient access to the materials, reduces the impact on the environment and reduces our printing and mailing costs. If you received a Notice Regarding the Availability of Proxy Materials (“Internet Notice”) by mail, you will not receive a printed copy of the proxy materials unless you specifically request them. The Internet Notice instructs you on how to access and review all of the important information contained in this Proxy Statement, as well as how to submit your proxy over the internet. If you want more information, please see the General Information section of this Proxy Statement or visit the Annual Meeting of Stockholders section of our Investor Relations website at http://ir.ambac.com.

	Your vote is important. Whether or not you plan to attend the Annual Meeting, we hope you will vote as soon as possible. You may vote over the internet or by phone or, if you requested to receive printed proxy materials, by mailing a proxy or voting instruction card. Please review the instructions on each of your voting options described in this Proxy Statement, as well as in the Internet Notice you received in the mail.

	Thank you for your interest in Ambac.

	Sincerely,

	Jeffrey S. Stein Chairman		Claude LeBlanc President and Chief Executive Officer

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AMBAC FINANCIAL GROUP, INC.

NOTICE OF 2019 ANNUAL MEETING OF STOCKHOLDERS




	Time and Date		11:00 a.m. (Eastern) on June 3, 2019

	Place		Ambac Financial Group, Inc. One State Street Plaza, 16^th Floor New York, New York 10004

	Items of Business		(1) To elect seven members of the Board of Directors to hold office until the next annual meeting of stockholders or until their respective successors have been elected and qualified.
			(2) To approve, on an advisory basis, the compensation of our named executive officers.
			(3) To ratify the appointment of KPMG LLP as Ambac’s independent registered public accounting firm for the fiscal year ending December 31, 2019.

	Adjournments and Postponements		Any action on the items of business described above may be considered at the Annual Meeting at the time and on the date specified above or at any time and date to which the Annual Meeting may be properly adjourned or postponed.

	Record Date		You are entitled to vote only if you were an Ambac stockholder as of the close of business on April 10, 2019 (Record Date). You will need proof of ownership of our common stock to enter the meeting.

	Voting		Your vote is very important. Whether or not you plan to attend the Annual Meeting, we encourage you to read this Proxy Statement and submit your proxy or voting instructions as soon as possible. For specific instructions on how to vote your shares, please refer to the instructions on the Notice Regarding the Availability of Proxy Materials (“Internet Notice”) you received in the mail, the section titled “General Information - Information About the Annual Meeting and Voting” in this Proxy Statement or, if you requested to receive printed proxy materials, your enclosed proxy or voting instruction card.

			By order of the Board of Directors,

			William J. White
			Corporate Secretary

This notice of Annual Meeting and Proxy Statement and form of proxy are being distributed and made available on or about April 18, 2019.

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Table of Contents
PROXY STATEMENT SUMMARY	1	Compensation Discussion and Analysis	30
GENERAL INFORMATION	7	Compensation Committee Report	50
INCORPORATION BY REFERENCE	14	2018 Summary Compensation Table	51
DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE	15	Grants of Plan-Based Awards in 2018	52
Board of Directors	15	Agreement with Claude LeBlanc	54
Board Leadership Structure	19	Agreements with Other Executive Officers	55
Board Committees	19	Outstanding Equity Awards at 2018 Fiscal Year-End	58
Board’s Role in Risk Oversight	22	Stock Vested in 2018	59
Director Independence	23	Nonqualified Deferred Compensation	59
Compensation Committee Interlocks and Insider Participation	23	Potential Payments Upon Termination or Change-in-Control	60
Consideration of Director Nominees	23	Pay Ratio Disclosure	62
Executive Sessions	24	INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM	63
Outside Advisors	24	THE AUDIT COMMITTEE REPORT	64
Board Effectiveness	24	SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE	65
Code of Business Conduct	25	CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS	65
Board Compensation Arrangements for Non-Employee Directors	25	PROPOSAL NUMBER 1	67
COMMON STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT	27	PROPOSAL NUMBER 2	68
EXECUTIVE COMPENSATION	28	PROPOSAL NUMBER 3	69
Executive Officers	28	Appendix A	A-1

Ambac Financial Group, Inc. | i | 2019 Proxy Statement

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PROXY STATEMENT SUMMARY

Below are the highlights of important information you will find in this Proxy Statement for Ambac Financial Group, Inc. ("Ambac" or the "Company"). As it is only a summary, please review the complete Proxy Statement before you vote.

Ambac Financial Group Fiscal Year 2018 Highlights

Performance Highlights:

The following events summarize our performance highlights for fiscal year 2018:

l Successfully executed a transformational holistic restructuring transaction resulting in the exit of Ambac Assurance Corporation’s (“AAC”) Segregated Account from rehabilitation, increasing book value per share by approximately $7.00.

l Negotiated and executed the Puerto Rico COFINA Plan Support Agreement in 2018 which led to a court-approved Plan of Adjustment, resolving 78% of Ambac's total Puerto Rico exposure and reducing COFINA net par exposure by 75% in the first quarter of 2019

l Executed commutations and terminations in the municipal, structured and international markets

○ Reduced our insured portfolio net par exposure by 25% from $62.7 billion to $46.9 billion at December 31, 2018

○ Decreased Adversely Classified Credits by 23% from $14.1 billion down to $10.9 billion; and

○ Decreased Watch List Credits by 19% from $11.1 billion down to $9.0 billion.

l Executed additional headcount and other cost reductions which, together with measures implemented in late 2017, resulted in a 27% reduction in headcount and a lower run-rate for operating expenses.

l Executed an Auction Market Preferred Shares ("AMPS") exchange transaction, capturing a discount of approximately $250 million to liquidation preference, further simplifying the capital structure.

l Ended 2018 with total Ambac stockholders’ equity (“Book Value“) of $1.6 billion, or $35.12 per share, an increase from $1.4 billion or $30.52 per share at December 31, 2017, and Adjusted Book Value⁽¹⁾ of $1.25 billion, or $27.58 per share, an increase from $1.1 billion or $24.34 per share at December 31, 2017.

l Accrued $14 million of tolling payments resulting from the utilization of Net Operating Losses (“NOLs”) at AAC, bringing Ambac's cash, investments and receivables to $455 million.


⁽¹⁾	Adjusted Book Value is a non-GAAP measure. A reconciliation of this non-GAAP financial measure and the most directly comparable GAAP financial measure is presented in Appendix A. In this Proxy Statement, we refer to Total Ambac Financial Group, Inc. Stockholders' Equity as "Book Value."

In February 2018, we successfully executed a transformational holistic restructuring transaction for the Company, the conclusion of the rehabilitation of AAC’s Segregated Account. The impact of this transaction includes:

l Creation of material value for our shareholders

○ An increase in Book Value of approximately $7.00 per share

l Simplification of our capital structure and greater financial and strategic flexibility

l A financially stronger AAC, making full payment on all policy claims

l Material reduction in ongoing rehabilitation and restructuring costs and other related expenses

l A unified corporate governance structure, allowing for interlocking board of directors at Ambac and AAC

Ambac Financial Group, Inc. | 1 | 2019 Proxy Statement

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Performance Against Compensation Metrics

Performance Against Short Term Incentive Plan Metrics. Short Term Incentive Plan ("STIP") awards for 2018 were determined based on a structured and objective approach in which 60% of an executive officer's annual STIP award was based on the Company’s achievement of pre-established financial performance targets at the Company related to changes in: (i) Watch List and Adversely Classified Credits, (ii) Gross Operating Run Rate Expense, and (iii) Net Asset Value. The remaining 40% of an executive officer's annual STIP award was based on other performance considerations, including business unit results and individual performance. For the 2018 fiscal year, we established the following goals for each of our STIP performance metrics and assigned a weighting factor as follows:



	Weighting Factor	Threshold ($ in millions)	Target ($ in millions)	Maximum ($ in millions)
Watch List and Adversely Classified Credits⁽¹⁾	30%	$22.9	$21.9	$20.9
Gross Operating Run Rate Expenses⁽²⁾	15%	$17.6	$17.0	$16.4
Value creation (Net Asset Value) ⁽³⁾	15%	$(265)	$(230)	$(205)

The following graph/charts shows the Company's 2018 actual performance compared to the threshold, target and maximum achievement levels as established for each of the performance metrics.



Watch List and Adversely Classified Credit Net Par ⁽¹⁾	Gross Operating Run Rate Expenses ⁽²⁾	Net Asset Value ⁽³⁾



Threshold	Target	Maximum	- - - -	Actual


⁽¹⁾	Reductions in Watch List and Adversely Classified Credits as of December 31, 2018 under the STIP were measured against Watch List and Adversely Classified Credits identified as of January 1, 2018.


⁽²⁾	Gross Operating Run Rate Expenses is measured by comparing actual gross operating run rate expenses for the fourth quarter of a fiscal year to performance goals established against budgeted amounts.


⁽³⁾	Net Asset Value is calculated by reducing Assets by Liabilities, determined as of December 31, 2018. See page 39 of this proxy statement for a definition of Assets and Liabilities.

With respect to the Watch List and Adversely Classified Credits Net Par and the Net Asset Value, Ambac exceeded the maximum performance goal set for each of these metrics. Watch List and Adversely Classified Credits were reduced to $19.8 billion net par outstanding and Net Asset Value at year-end was $186.4 million. Gross operating run rate expenses for the fourth quarter of 2018 were $16.9 million, slightly better than target.

Ambac Financial Group, Inc. | 2 | 2019 Proxy Statement

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Performance against 2015 LTIP metrics. In 2015, we established the following three year goals for each of our LTIP performance metrics and assigned weighting factors based on each named executive officer's areas of responsibility.



At AAC the Greater of		At Ambac	Percentage of Target Award Earned
Asset to Liability Ratio¹	Net Asset Value¹($ in millions)	Cumulative EBITDA¹($ in millions)	Percentage of Target Award Earned
100%	$0	$19	200%
95%	$(299)	$16	175%
90%	$(611)	$13	150%
85%	$(940)	$9	125%
80%	$(1,289)	$6	100%
75%	$(1,661)	$3	50%
70%	$(2,061)	$—	0%


⁽¹⁾	Linear interpolation between levels results in a proportionate amount of the Ambac LTIP Target Award becoming earned and vested.

The following graph/charts shows the Company's actual performance over the three year performance period running from January 1, 2015 through December 31, 2017, compared to the achievement levels set forth in the chart above.



	AAC Asset to Liability Ratio		Ambac Cumulative EBITDA

At AAC performance is judged based on the higher of the Asset to Liability Ratio or the Net Asset Value (this dual testing feature was eliminated in 2018). For the three years ended December 31, 2017, the measure of the Asset to Liability Ratio exceeded the measure of Net Asset Value. Therefore using the Asset to Liability Ratio as the metric for judging performance at AAC, management exceeded the target performance goal and achieved an Asset to Liability Ratio equal to approximately 86.34%. With respect to Cumulative EBITDA at Ambac, the Company exceeded the target performance goal and achieved a Cumulative EBITDA of $16.0 million.

Ambac Financial Group, Inc. | 3 | 2019 Proxy Statement

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Corporate Governance:

We are committed to a corporate governance approach that aligns the interests of management, the Board of Directors, and our stockholders. In furtherance of this approach, in 2018 the Chairman of the Board and the Chief Executive Officer, along with the Chairs of the Compensation Committee and the Governance and Nominating Committee solicited feedback from stockholders representing approximately 55% of our outstanding common stock. The discussions involved, among other things, the event driven nature of our business and corporate governance matters. The Board has been proactive responding to shareholder feedback and, following the recommendations of the Governance and Nominating Committee and the Compensation Committee, implemented the following corporate governance changes:

l In 2019, we added a relative Total Shareholder Return ("rTSR") modifier of +/- 10% to our LTIP Awards so that any final performance stock unit ("PSU") award payout at the end of a three year performance period may be increased or reduced by 10% if the Company's stock performance compared to a peer group is at or above the 75th percentile or at or below the 25th percentile, respectively.

l We shifted our Short-Term Incentive Compensation Plan for our executive officers to be more performance-based by establishing financial performance metrics for calculating annual incentive award payouts. Sixty percent of an executive officer's annual incentive award for fiscal year 2018 was calculated based on the achievement of pre-established objective financial performance targets related to (i) Net Asset Value, (ii) reductions in gross operating run rate expense*, and (iii) reductions in Watch List and Adversely Classified Credits*.

l We made reductions to our Watch List and Adversely Classified Credits an additional performance-based financial metric in our Long-Term Incentive Compensation Plan.

l In 2018 we eliminated the "retesting" feature in the Long-Term Incentive Compensation Program that allowed performance at AAC to be measured by the greater of two metrics: an improved asset liability ratio ("ALR") or improved net asset value ("NAV") over a three year performance period. Beginning in 2018, metrics for LTIP awards related to AAC performance will be evaluated based on (i) reductions in Watch List and Adversely Classified Credits, and (ii) improvements in NAV. Ambac performance will continue to be evaluated based on cumulative EBITDA . Watch List credits represent exposures for which there may be heightened potential for future adverse development based on qualitative and quantitative stress assumptions.

l We adopted a recoupment policy (otherwise known as a "claw-back") providing that in the event of a material financial restatement or the imposition of a material financial penalty, the Company may recoup incentive-based compensation received by our executive officers during a three-year look-back period.

l We adopted an Executive Stock Ownership and Retention Policy (“Stock Ownership Policy”) applicable to all of our executive officers.

l Beginning in 2017, we reduced the aggregate value of non-employee director annual cash retainer and equity grants by 33% compared to prior years, which had the effect of increasing the equity component as a percentage of total compensation.


*	Reductions in gross operating run rate expense is measured by comparing actual gross operating run rate expenses for the fourth quarter of a fiscal year to performance goals established against budgeted amounts. Reductions in Watch List and Adversely Classified Credits as of December 31, 2018 under the STIP were measured against Watch List and Adversely Classified Credits as of January 1, 2018.

Ambac Financial Group, Inc. | 4 | 2019 Proxy Statement

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Corporate Governance Practices

Ambac's corporate governance practices drive accountability to shareholders
Independent Oversight and Leadership	ü 6 out of 7 directors independent ü Limited additional current Board obligations (no director sits on more than 3 other public company boards), allowing for focus on the execution of Ambac's strategy ü Separate Chairman and CEO roles ü Average tenure less than 4 years (vs. S&P average of 8.4) ü Added five new independent directors in the last three years with a focus on core skills and experience, as well as diversity and inclusion

Emphasis on Shareholder Rights	ü No classified board - all directors elected annually ü Shareholders can act by written consent and call special meetings ü No shareholder rights plan

Shareholder Engagement	ü Actively engaged with shareholders on corporate governance issues, including Board diversity ü Track record of proactive, ongoing shareholder dialogue

Response to 2018 Say on Pay Vote and Stockholder Outreach

Ambac Financial Group, Inc. | 5 | 2019 Proxy Statement

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Key Features of Our Executive Compensation Program



	Actions
	Aligned Compensation to Market Levels	l The Chief Executive Officer’s total compensation is benchmarked to what the Compensation Committee believes is an appropriate level of compensation compared to peers.

	Rigorous Performance Metrics	l Establishment of rigorous performance goals based on multiple metrics for our short-term incentive program and structured the incentive compensation program for our Chief Executive Officer to align with the incentive compensation program for all of our executive officers.
		Sixty percent of our Chief Executive Officer's annual incentive award is based on the achievement of objective financial performance metrics that have been established by the Compensation Committee pursuant to our Short-Term Incentive Compensation Plan and the remainder of the annual incentive award opportunity is based on discretionary performance goals and objectives.
		The determination of the discretionary portion of the annual incentive award is based on factors, including, but not limited to, evaluation of business unit performance and individual performance. The Compensation Committee believes that it is important to retain a substantial level of discretion with respect to other performance considerations given the Company's continuing exposure to certain events that are outside the control of management and could have a substantial negative impact on our insured obligations and financial performance.

	Short Term Incentive Compensation Plan includes an equity component	l 25% of the annual incentive awards for executive officers are paid in deferred share units (“DSUs”) of Ambac. These DSUs vest immediately, but settlement and conversion into Ambac common stock takes place over a two year period.
		This feature, along with the Stock Ownership Policy, is expected to increase the level of equity ownership among the Company’s senior management.

	Amended the Long Term Incentive Compensation Plan to include a relative TSR modifier and a restricted stock unit component	l In response to stockholder feedback, we added a a relative Total Shareholder Return ("rTSR") modifier of +/- 10% to our LTIP Awards in 2019 so that any final PSU award payout at the end of the three year performance period may be increased or decreased by 10% if the Company's stock performance compared to a peer group is at or above the 75th percentile or at or below the 25th percentile, respectively.

		In order to encourage the retention of our most valued employees and to more closely align their interests with that of our stockholders, beginning in 2018, we included time based restricted stock units ("RSUs") as a component of our LTIP awards, with 67% of the award denominated in performance stock units and 33% in RSUs.

Overall, our current executive compensation program heavily emphasizes performance and equity-based compensation to more closely align management's incentives with stockholder interests, and includes other practices that we believe serve stockholder interests such as not providing tax “gross-up” payments, providing limited perquisites, adopting plan provisions relating to claw-backs of incentive awards and maintaining policies prohibiting the hedging or pledging our Company’s stock.

Ambac Financial Group, Inc. | 6 | 2019 Proxy Statement

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AMBAC FINANCIAL GROUP, INC.
One State Street Plaza
New York, New York 10004

PROXY STATEMENT

GENERAL INFORMATION

INFORMATION ABOUT THE ANNUAL MEETING AND VOTING

Proxy Materials

Why did I receive these Proxy Materials?

The Board of Directors of Ambac Financial Group, Inc. ("Ambac" or the "Company") has made these materials available to you on the internet or, upon your request, has delivered printed proxy materials to you, in connection with the solicitation of proxies for use at Ambac’s 2019 Annual Meeting of Stockholders (the "Annual Meeting"), which will take place on June 3, 2019 at 11:00 a.m. (Eastern). The meeting will be held at our executive offices at One State Street Plaza, New York, New York 10004. As a stockholder, you are invited to attend the Annual Meeting and are requested to vote on the items of business described in this Proxy Statement. This Proxy Statement includes information that we are required to provide to you under SEC rules and that is designed to assist you in voting your shares.

Why did I receive a notice in the mail regarding the internet availability of proxy materials instead of a full set of proxy materials?

In accordance with rules adopted by the SEC, we may furnish proxy materials, including this Proxy Statement and our 2018 Annual Report to Stockholders, to our stockholders by providing access to such documents on the internet instead of mailing printed copies. Stockholders will not receive printed copies of the proxy materials unless they request them. Instead, the Internet Notice, which was mailed to our stockholders, will instruct you as to how you may access and review all of the proxy materials on the internet. The Internet Notice also instructs you as to how you may submit your proxy on the internet, by phone or by mail. If you would like to receive a paper or email copy of our proxy materials, you should follow the instructions for requesting such materials in the Internet Notice.

What is included in the proxy materials?

The proxy materials (collectively, “Proxy Materials”) include:


•	Our Proxy Statement for the 2019 Annual Meeting of Stockholders;


•	Our 2018 Annual Report to Stockholders, which includes our Annual Report on Form 10-K for the fiscal year ended December 31, 2018; and


•	The proxy card or a voting instruction card for the Annual Meeting.

Ambac Financial Group, Inc. | 7 | 2019 Proxy Statement

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How can I access the Proxy Materials over the internet?

The Internet Notice, proxy card or voting instruction card will contain instructions on how to:


•	View our Proxy Materials for the Annual Meeting on the internet and vote your shares; and


•	Instruct us to send our future Proxy Materials to you electronically by email.

Our Proxy Materials are available at www.proxyvote.com.

Choosing to receive your future Proxy Materials by email will save us the cost of printing and mailing documents to you, and will reduce the impact on the environment of printing and mailing these materials. If you choose to receive future Proxy Materials by email, you will receive an email next year with instructions containing a link to those materials and a link to the proxy voting site. Your election to receive Proxy Materials by email will remain in effect until you terminate it.

What information is contained in this Proxy Statement?

The information in this Proxy Statement relates to the proposals to be voted on at the Annual Meeting and details regarding the voting process, the compensation of our directors and certain of our executive officers, corporate governance, and certain other required information.

Why did I only receive one set of materials when there is more than one stockholder at my address?

If two or more stockholders share one address, each such stockholder may not receive a separate copy of our Proxy Materials or Internet Notice. Stockholders who do not receive a separate copy of our Proxy Materials or Internet Notice and want to receive a separate copy may request to receive a separate copy of, or additional copies of, our Proxy Materials or Internet Notice via the internet, phone or email, as outlined above. Upon such request we shall furnish such copy, or additional copies, promptly. Stockholders who share an address and receive multiple copies of our Proxy Materials or Internet Notice may also request to receive a single copy by writing to our Investor Relations Department, Ambac Financial Group, Inc., One State Street Plaza, New York, New York 10004.

Voting Information

What items of business will be voted on at the Annual Meeting?

The items of business scheduled to be voted on at the Annual Meeting are:


•	The election of seven directors to our Board of Directors.


•	To approve, on an advisory basis, the compensation of our named executive officers.


•	The ratification of the appointment of KPMG LLP as Ambac’s independent registered public accounting firm for the fiscal year ending December 31, 2019.

We will also consider any other business that properly comes before the Annual Meeting.

How does the Board of Directors recommend that I vote?

Our Board of Directors recommends that you vote your shares:


ü	"FOR” each of its nominees to the Board of Directors.


ü	"FOR” the approval, on an advisory basis, of the compensation of our named executive officers.


ü	"FOR” the ratification of the appointment of KPMG LLP as our independent registered public accounting firm for the 2019 fiscal year.

Ambac Financial Group, Inc. | 8 | 2019 Proxy Statement

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What shares can I vote?

Each share of Ambac common stock issued and outstanding as of the close of business on the Record Date for the 2019 Annual Meeting of Stockholders is entitled to be voted with respect to all items on which stockholders may vote at the Annual Meeting. You may vote all shares owned by you as of the Record Date, including (i) shares held directly in your name as the stockholder of record, and (ii) shares held for you as the beneficial owner in street name through a broker, bank, trustee, or other nominee. On the Record Date, we had 45,341,834 shares of common stock issued and outstanding.

How many votes am I entitled to per share?

Each holder of shares of common stock is entitled to one vote for each share of common stock held as of the Record Date. The voting rights of certain substantial holders of common stock are restricted. A holder (including any group consisting of such holder and any other person with whom such holder or any affiliate or associate of such holder has any agreement, contract, arrangement or understanding with respect to acquiring, voting, holding or disposing of our common stock) will be entitled to vote only such number of shares that would equal (after giving effect to this restriction) one vote less than 10% of the votes entitled to be cast by all holders of our outstanding common stock. This restriction does not apply if the acquisition or ownership of common stock has been approved, whether before or after such acquisition or first time of ownership, by the Wisconsin Insurance Commissioner. Our certificate of incorporation also restricts the right of certain transferees to vote certain of their shares to the extent that, as a result of a transfer of shares (or any series of transfers of which such transfer is a part), either (i) any person or group of persons shall become a five-percent stockholder or (ii) the percentage stock ownership interest in our shares of any five-percent stockholder (including a group of persons treated as a five-percent stockholder) shall be increased.

What is the difference between holding shares as a stockholder of record and as a beneficial owner?

Most Ambac stockholders hold their shares as a beneficial owner through a broker or other nominee rather than directly in their own name. If your shares are registered directly in your name with our transfer agent, Computershare Inc., you are considered, with respect to those shares, the stockholder of record. If your shares are held in an account at a brokerage firm, bank, broker-dealer, trust, or other similar organization, like the vast majority of our stockholders, you are considered the beneficial owner of shares held in street name.

How can I vote my shares at the Annual Meeting?

Shares held in your name as the stockholder of record or held beneficially in street name may be voted by you in person at the Annual Meeting or by proxy. Even if you plan to attend the Annual Meeting, we recommend that you also submit your proxy or voting instructions as described below so that your vote will be counted if you later decide not to attend the Annual Meeting. If you provide specific instructions with regard to certain items, your shares will be voted as you instruct on such items. If no instructions are indicated, the shares will be voted as recommended by the Board of Directors.

How can I vote my shares without attending the Annual Meeting?

Whether you hold shares directly as the stockholder of record or beneficially in street name, you may direct how your shares are voted without attending the Annual Meeting. You can vote by proxy over the internet or by phone by following the instructions provided in the Internet Notice, or, if you requested to receive printed Proxy Materials, you can also vote by mail pursuant to instructions provided on the proxy card. If you hold shares through a bank or broker, please refer to your proxy card or other information forwarded by your bank or broker to see which voting options are available to you.

Ambac Financial Group, Inc. | 9 | 2019 Proxy Statement

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•

You may submit your proxy by using the internet. The address of the website for submitting your proxy via the Internet is www.proxyvote.com for both registered holders and beneficial owners of our common stock holding in street name. Internet proxy submission is available 24 hours a day and will be accessible until 11:59 p.m. Eastern Time on May 31, 2019. Easy-to-follow instructions allow you to submit your proxy and confirm that your instructions have been properly recorded.


•	You may submit your proxy by calling. The phone number for submitting your proxy by phone is 1-800-690-6903. Submitting your proxy by phone is available 24 hours a day and will be accessible until 11:59 p.m. Eastern Time on May 31, 2019.

•

You may submit your proxy by mail. As a result of implementing “Notice and Access,” you may request to receive printed copies of Proxy Materials by mail or electronically by email by following the instructions provided in the Internet Notice. You may submit your request in writing to our Corporate Secretary at Ambac Financial Group, Inc., One State Street Plaza, New York, New York 10004 (or you can send an email to [email protected]). Once you receive your Proxy Materials, simply mark your proxy card, date and sign it, and return it in the postage-paid envelope.

Can I change my vote or revoke my proxy?

You may change your vote at any time prior to the taking of the vote at the Annual Meeting. You may change your vote by (i) granting a new proxy bearing a later date (which automatically revokes the earlier proxy) using any of the methods described above (until the applicable deadline for each method), (ii) providing a written notice of revocation to Ambac’s Corporate Secretary at Ambac Financial Group, Inc., One State Street Plaza, New York, New York 10004 (and you can send a copy via email to [email protected]), prior to your shares being voted, or (iii) attending the Annual Meeting and voting in person. Attendance at the meeting will not cause your previously granted proxy to be revoked unless you specifically so request or vote in person at the Annual Meeting.

Is my vote confidential?

Proxy instructions, ballots and voting tabulations that identify individual stockholders are handled in a manner that protects your voting privacy. Your vote will not be disclosed to parties other than Ambac, except:


•	As necessary to meet applicable legal requirements;


•	To allow for the tabulation and certification of votes; or


•	To facilitate a proxy solicitation.

How many shares must be present or represented to conduct business at the Annual Meeting?

The presence, in person or by proxy, of the holders of a majority of the voting power of Ambac’s shares of common stock outstanding as of the Record Date will constitute a quorum. Both abstentions and broker non-votes (described below) are counted for the purpose of determining the presence of a quorum.

How may I vote in the election of directors, and how many votes must the nominees receive to be elected?

With respect to the election of directors, you may:


•	vote “FOR” all seven nominees for director;


•	vote “FOR” some of the nominees; or


•	“WITHHOLD” from voting with respect to one or more of the nominees for director.

Our directors are elected by a plurality of the shares of common stock present or represented by proxy and entitled to vote on the election of directors. This means that the seven individuals nominated for election to the Board who receive the most “FOR” votes among votes properly cast will be elected. Only “FOR” or “WITHHELD”

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votes are counted in determining whether a plurality has been cast in favor of a director nominee. A “WITHHELD” vote is not considered a vote cast "FOR" or "AGAINST" a director nominee under a plurality vote standard. You cannot abstain in the election of directors and broker non-votes are not counted. Each holder of our common stock is entitled to one vote for each share held as of the Record Date. There are no cumulative voting rights associated with any of Ambac's common stock.

How may I vote for the non-binding advisory vote approving executive compensation, and how many votes must this proposal receive to pass?

With respect to this proposal, you may:


•	vote “FOR” the approval of the non-binding resolution regarding executive compensation;


•	vote “AGAINST” the approval of the non-binding resolution regarding executive compensation; or


•	"ABSTAIN” from voting on the proposal.

In accordance with applicable law, this vote is “advisory,” meaning it will serve as a recommendation to our Board of Directors, but will not be binding. However, our Board of Directors and the Compensation Committee thereof will consider the outcome of the vote when making future compensation decisions for our executive officers.

How may I vote for the proposal to ratify the appointment of our independent registered public accounting firm, and how many votes must this proposal receive to pass?

With respect to this proposal, you may:


•	vote “FOR” the ratification of the accounting firm;


•	vote “AGAINST” the ratification of the accounting firm; or


•	“ABSTAIN” from voting on the proposal.

In order to pass, the proposal must receive the affirmative vote of a majority of the votes entitled to be cast by holders of our common stock at the Annual Meeting by the holders who are present in person, or by proxy.

What are broker non-votes?

If you hold shares beneficially in street name and do not vote your shares as described in this Proxy Statement, your shares may constitute “broker non-votes.” Broker non-votes occur on a matter when a broker is not permitted to vote on that matter without instructions from the beneficial owner and instructions are not given. These matters are referred to as “non-routine” matters. All of the matters scheduled to be voted on at the Annual Meeting are “non-routine,” except for the proposal to ratify the appointment of KPMG LLP as Ambac’s independent registered public accounting firm for the fiscal year ending December 31, 2019. In tabulating the voting result for any “non-routine” proposal, shares that constitute broker non-votes are not considered voting power present with respect to that proposal. Thus, broker non-votes will not affect the outcome of any “non-routine” matter being voted on at the Annual Meeting, assuming that a quorum is obtained. Abstentions are considered voting power present at the meeting and thus will have the same effect as votes against each of the matters scheduled to be voted on at the Annual Meeting (other than the election of directors).

Brokers may not vote your shares on the election of directors, certain executive compensation matters, or certain corporate governance matters in the absence of your specific instructions as to how to vote, so we encourage you to provide instructions to your broker regarding the voting of your shares.

Who will bear the cost of soliciting votes for the Annual Meeting?

Ambac pays the entire cost of preparing, assembling, printing, mailing, and distributing the Proxy Materials and soliciting votes. If you choose to access the Proxy Materials and/or vote over the internet, you are responsible for

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internet access charges you may incur. If you choose to vote by phone, you are responsible for any phone charges you may incur. In addition to the mailing of these Proxy Materials, the solicitation of proxies or votes may be made in person, by telephone, or by electronic communication by our directors, officers, and employees, who will not receive any additional compensation for such solicitation activities.

What happens if additional matters are presented at the Annual Meeting?

Other than the three items of business described in this Proxy Statement, we are not aware of any other business to be acted upon at the Annual Meeting. If you grant a proxy, the persons named as proxy holders, Stephen M. Ksenak or William J. White, will have the discretion to vote your shares on any additional matters properly presented for a vote at the Annual Meeting. If for any reason, any of the nominees for director included in this Proxy Statement is not available as a candidate for director, the persons named as proxy holders will vote your proxy for such other candidate or candidates as may be nominated by the Board of Directors.

Where can I find the voting results of the Annual Meeting?

We will announce preliminary voting results at the Annual Meeting and publish final voting results in the Annual Meeting of Stockholders section of our Investor Relations website at http://ir.ambac.com. We will also disclose the final voting results on a Current Report on Form 8-K filed with the SEC within four business days following the date on which the Annual Meeting concludes.

Attending the Annual Meeting

How can I attend the Annual Meeting?

Only stockholders, their proxy holders and our guests may attend the Annual Meeting. Verification of ownership will be requested at the admissions desk. If you are a holder of record and plan to attend the Annual Meeting, please indicate this when you vote. When you arrive at the Annual Meeting, you will be asked to present photo identification, such as a driver’s license. If your shares are held in the name of your broker, bank or other nominee, you must bring to the meeting an account statement or letter from the nominee indicating that you were the beneficial owner of the shares on April 10, 2019, the record date for voting. If you want to vote your common stock held in street name in person, you must get a written proxy in your name from the broker, bank or other nominee that holds your shares. If you wish to obtain directions to attend the meeting in person, you may send an email to: [email protected] or call (212) 658-7456.

Do directors attend the Annual Meeting?

It is currently expected that all of our directors will attend our Annual Meeting of Stockholders. All of our directors who were on the Board last year attended the 2018 Annual Meeting of Stockholders.

How can I find out if I am a stockholder of record entitled to vote?

For a period of at least ten days before the Annual Meeting, a complete list of stockholders entitled to vote at the Annual Meeting will be available for inspection by stockholders of record during ordinary business hours at our principal executive offices at One State Street Plaza, New York, New York 10004.

Other Questions Related to the Meeting or Ambac

Who will serve as inspector of elections?

The inspectors of election will be representatives from Broadridge Financial Solutions, Inc.

How can I contact Ambac’s transfer agent?

Contact our transfer agent by either writing to Computershare Inc., PO Box 505000, Louisville, KY 40233, or 462 South 4th Street, Suite 1600, Louisville, KY 40202, by telephoning 1-800-662-7232 or via the web at www.computershare.com/investor.

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Whom should I call if I have any questions?

If you have any questions about the Annual Meeting or voting, please contact William J. White, Corporate Secretary, at (212) 658-7456 or by email at [email protected]. If you have any questions about your investment in Ambac common stock, please contact Lisa Kampf, Managing Director, Investor Relations, at (212) 208-3177 or by email at [email protected].

How can a stockholder communicate directly with our Board?

Stockholders and other interested parties may communicate with Ambac’s Board by writing to Ambac’s Corporate Secretary at Ambac Financial Group, Inc., One State Street Plaza, New York, New York 10004 or by sending an email to Ambac’s Corporate Secretary at [email protected]. Ambac’s Corporate Secretary will then forward your questions or comments directly to the Board.

Please note that material that is directly or indirectly hostile or threatening, illegal or otherwise unsuitable will not be forwarded to our Board. Any communication that is relevant to Ambac’s business and is not forwarded will be retained for one year and will be made available to our independent directors on request. The independent directors grant the Corporate Secretary discretion to decide what correspondence shall be shared with Ambac management and specifically instruct that any personal employee complaints be forwarded to our Human Resources Department.

What is the deadline to propose actions for consideration at next year’s Annual Meeting of Stockholders or to nominate individuals to serve as directors?

For Stockholder Proposals that are to be included in our Proxy Statement under Rule 14a-8. Pursuant to Rule 14a-8 under the Securities Exchange Act of 1934, as amended (“Exchange Act”), if a stockholder wants Ambac to include a proposal in our proxy statement and form of proxy for presentation at our 2020 Annual Meeting of Stockholders (other than a proposal relating to the nomination of a specific individual for election to our Board of Directors), the proposal must be received by us at our principal executive offices at One State Street Plaza, New York, New York 10004, not later than December 20, 2019. The proposal must be sent to the attention of our Corporate Secretary, and must comply with the requirements of Regulation 14A under the Exchange Act (including, but not limited to, Rule 14a-8 or its successor provision).

Other Proposals and Nominations. Our by-laws govern the submission of nominations for director or other business proposals that a stockholder wishes to have considered at a meeting of stockholders, but which are not included in our proxy statement for that meeting. Under our by-laws, nominations for director or other business proposals to be addressed at our next annual meeting may be made by a stockholder entitled to vote who has delivered a notice to the Corporate Secretary of Ambac Financial Group, Inc. no later than the close of business on April 4, 2020, and not earlier than March 5, 2020, except if the date of our next annual meeting is not within 30 days before or after the anniversary of our 2018 Annual Meeting of Stockholders, such notice must be delivered no earlier than the 90^th day before our 2020 Annual Meeting of Stockholders and no later than the later of the 60^th day before our 2020 Annual Meeting of Stockholders and the 15^th day following the day on which public announcement of the date of our 2020 Annual Meeting of Stockholders is first made by the Company. The notice must set forth and describe the information required by Article II of our by-laws.

These advance notice and information requirements are in addition to, and separate from, the requirements that a stockholder must meet in order to have a proposal included in our proxy statement under the rules of the SEC. A proxy granted by a stockholder will give discretionary authority to the proxies to vote on any matters introduced pursuant to the above-referenced by-law provisions, subject to applicable rules of the SEC.

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INCORPORATION BY REFERENCE

To the extent that this Proxy Statement has been or will be specifically incorporated by reference into any other filing of Ambac under the Securities Act of 1933, as amended, or the Exchange Act, the sections of this Proxy Statement titled “Report of the Audit Committee” (to the extent permitted by the rules of the SEC) shall not be deemed to be so incorporated, unless specifically provided otherwise in such filing.

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DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE

Board of Directors

The Board oversees the business of Ambac and monitors the performance of management. Addressing issues following Ambac’s emergence from Chapter 11 and the challenges confronting our principal operating subsidiary, AAC, a financial guarantee insurance company, requires a high level of focus, time commitment and engagement from our directors. The Board meets approximately five times per year in regularly scheduled meetings, but will meet more often, if necessary. The Board met eleven times in 2018. Outside of formal meetings, directors frequently engage with management concerning Ambac’s business and strategies. In 2018, each director attended at least 89% of the total number of meetings of the Board and any committees on which he or she served.

All of our current directors also serve as directors of AAC.

Directors

The names of our directors and their ages, positions, and biographies are set forth below. There are no family relationships among any of our directors or executive officers.



				Committee Membership
Name	Director Since	Age	Independent	Audit	Compensation	Governance and Nominating	Strategy and Risk Policy
Alexander D. Greene	2015	60	l		q	l	l
Director
Ian D. Haft	2016	48	l	l è	l		q
Director
David L. Herzog	2016	59	l	q è			l
Director
Joan Lamm-Tennant	2018	66	l	l			l
Director
Claude LeBlanc	2017	53
President and Chief Executive Officer and Director
C. James Prieur	2016	67	l	l è	l	q
Director
Jeffrey S. Stein	2013	49	l			l
Chairman of the Board
q Chairman l Member è Audit Committee Financial Expert

Alexander D. Greene

Mr. Greene has been a director since April 2, 2015. Mr. Greene has over thirty-five years of corporate finance and private equity experience. From December 2005 to March 2014, he was a Managing Partner and head of U.S. Private Equity at Brookfield Asset Management, a global asset management company. Previously, Mr. Greene was a Managing Director and co-head of Carlyle Strategic Partners, a private equity fund; and a Managing Director and investment banker at Wasserstein Perella & Co., and Whitman Heffernan Rhein & Co. He is a director of Element Fleet Management Corp., GP Natural Resource Partners LLC and USA Truck, Inc. and served as chairman of the Board of Directors of Modular Space Corporation prior to its sale in 2018. He is president of the Armonk Independent Fire Company and serves on the Budget and Finance Advisory Committee for the Town of North Castle, New York. He holds a Bachelor of Business Administration in Finance from George Washington University.

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Experience, Qualifications and Skills:

With over thirty-five years years of corporate finance and private equity experience, Mr. Greene has substantial insight and understanding of the issues affecting Ambac. In particular, his service at Brookfield Asset Management, where he led a team that invested in companies where operational improvement and strategic guidance were primary drivers of value creation, is invaluable to Ambac. He has served as an adviser to boards of directors and other constituencies, focusing on leveraged finance, merger and acquisition and recapitalization transactions. This background, as well as his financial expertise and other board experience, makes Mr. Greene well qualified to serve on our Board of Directors, its Strategy and Risk Policy Committee and Governance and Nominating Committee, and to chair our Compensation Committee.

Ian D. Haft

Mr. Haft has been a director since March 28, 2016. He is the Managing Partner and Chief Executive Officer of Surgis Capital LLC (“Surgis’), an investment manager he founded in 2018. From 2009 until 2017, Mr. Haft was a founding partner and Vice President and Secretary of Cornwall Capital Management LP (“Cornwall”), an investment manager. At Cornwall, Mr. Haft previously held the positions of Chief Financial Officer (until November 2011) and Chief Operating Officer and Chief Compliance Officer (until the end of 2015). Mr. Haft was also a member of Cornwall GP, LLC, the general partner of Cornwall Master LP. Prior to joining Cornwall, Mr. Haft was a Principal at GenNx360 Capital Partners, a private equity fund, from 2008 to 2009. From 2002 to 2008, Mr. Haft was a Senior Associate and then Vice President (from 2004) at ACI Capital Co., LLC, where he focused on middle market leveraged buyouts and growth equity investments on behalf of two private equity funds. Mr. Haft began his career at The Boston Consulting Group in 1993 and was also employed by Merrill Lynch & Co. and The Blackstone Group prior to joining ACI Capital in 2002. Mr. Haft currently serves as Chairman of the Board of Hone Fitness Inc. (since March 2014) and also serves as member of the board of directors of several private companies. Mr. Haft previously served as a director of American Pacific Corporation (NASDAQ: APFC) from March 2013 until February 2014. Mr. Haft graduated magna cum laude with a BA in economics and mathematics from Dartmouth College in 1993 and he received his JD and MBA from Columbia University in 2000. Mr. Haft has extensive experience working with companies of all sizes and identifying, understanding and utilizing areas of value creation.

Experience, Qualifications and Skills:

Mr. Haft has over twenty years of experience working in alternative asset management, investment banking and management consulting. Through this experience, he has developed strong capabilities in business strategy, strategic analysis of industries and companies, mergers and acquisitions, valuation, debt and equity financing, derivatives and hedging, financial controls and regulatory compliance. Mr. Haft’s background and experience make him well-qualified to serve on our Board of Directors and to serve on its Audit Committee and Compensation Committee, and to chair the Strategy and Risk Policy Committee.

David L. Herzog

Mr. Herzog has been a director since March 28, 2016. He was the Chief Financial Officer and Executive Vice President of AIG from October 2008 until his retirement from AIG in April 2016. Mr. Herzog served as Senior Vice President and Comptroller of AIG from June 2005 to October 2008, Chief Financial Officer for worldwide life insurance operations from April 2004 to June 2005 and Vice President, Life Insurance from 2003 to 2004. In addition, Mr. Herzog has served in other senior officer positions for AIG and its subsidiaries, including as the Chief Financial Officer and Chief Operating Officer of American General Life following its acquisition by AIG. Previously, Mr. Herzog served in various executive positions at GenAmerica Corporation and Family Guardian Life, a Citicorp Company, and at a large accounting firm that is now part of PricewaterhouseCoopers LLP. Mr. Herzog currently serves as a member of the Board of Directors of MetLife, Inc., DXC Technology Company and PCCW Ltd. Mr. Herzog received a bachelor's degree in accounting from the University of Missouri-Columbia and a master of business administration in finance and economics from the University of Chicago. In addition, Mr. Herzog holds the designations of Certified Public Accountant and Fellow, Life Management Institute.

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Experience, Qualifications and Skills:

Mr. Herzog was a key member of the AIG restructuring teams that orchestrated the repayment of US Government support provided following the 2008 financial crisis, and the repositioning of AIG’s debt capital structure. Mr. Herzog's financial and management experience in the oversight of AIG and its subsidiaries make him well qualified to serve on our Board of Directors and its Strategy and Risk Policy Committee and to chair the Audit Committee.

Joan Lamm-Tennant

Joan Lamm-Tennant has been a director since March 1, 2018. She is currently the Chief Executive Officer of Blue Marble Microinsurance, a corporation formed by a consortium of eight insurance entities for the purpose of developing service ventures enabling the insurers to enter the microinsurance market. Previously, Ms. Lamm-Tennant was the Global Chief Economist and Risk Strategist of Guy Carpenter & Company, LLC, the reinsurance and risk advisory operating company of Marsh & McLennan Companies. Prior to joining Guy Carpenter in 2007, Ms. Lamm-Tennant was the founding President of General Reinsurance Capital Consultants. She is currently an Adjunct Professor at the Wharton School, University of Pennsylvania and held the Laurence and Susan Hirsch Chair in International Business. She currently serves on the Board of Hamilton Insurance Group and Element Fleet Management Corp. as well as the International Insurance Society. Ms. Lamm-Tennant served on the Board of Selective Insurance Group from 1994 to 2015 and Ivans (an insurance technology provider) from 2001 to 2013. Ms. Lamm-Tennant holds a Ph.D. in Finance and Investments from the University of Texas, Austin; an M.B.A. in Finance from St. Mary's University, San Antonio, Texas and a B.B.A. with Honors in Accounting from St. Mary's University, San Antonio, Texas.

Experience, Qualifications and Skills:

Ms. Lamm-Tennant has over twenty years of finance, and risk management experience in the insurance industry. She served as a risk strategist for Marsh & McLennan and formalized the enterprise wide risk oversight function resulting in the appointment of a Chief Risk Officer and a dedicated Board Risk Committee. Her expertise in emerging market strategy, enterprise risk modeling, implementation of risk-based decision processes and high value strategies resulting in capital efficiencies and profitable growth make her well-qualified to serve on our Board of Directors and its Audit Committee and Strategy and Risk Policy Committee.

Claude LeBlanc

Mr. LeBlanc has served as President and Chief Executive Officer, and director of Ambac Financial Group, Inc. and Ambac Assurance Corporation since January 1, 2017. In this role Mr. LeBlanc is responsible for providing strategic leadership and oversight with regards to Ambac’s strategic priorities and vision with a view towards creating long-term shareholder value. Mr. LeBlanc is also responsible for all day-to-day management decisions and for ensuring the execution of the Company’s short and long term plans. Previously, Mr. LeBlanc was the Chief Financial Officer and Chief Restructuring Officer of Syncora Holdings Ltd., until December 24, 2016. In these roles, which he held since 2010, he actively led global remediation and asset recovery initiatives, evaluated strategic alternatives for Syncora and oversaw all aspects of the finance function. He also served as Special Advisor to Syncora’s Board of Directors beginning in 2008. As Special Advisor, he led the successful restructuring of Syncora during the 2008-2009 financial crisis and again in its 2016 restructuring. Mr. LeBlanc joined Syncora in 2006 as Executive Vice President and was responsible for all corporate development activities, strategic development, capital planning, and management of key bank and rating agency relationships. Prior to joining Syncora, Mr. LeBlanc served as Senior Vice President of Corporate Development and Strategy and as a member of the executive management group for XL Capital Ltd. In this role, he led various global corporate development initiatives, oversaw and managed significant capital market transactions, and, reporting to the Chief Financial Officer and Chief of Staff, was responsible for global strategy development and capital management. Prior to joining XL Capital in 2002, he served as Chief Operating Officer and a member of the executive management team for Transworld Network International, a North American telecommunications group where he led corporate development, financial planning, and certain business operations. Mr. LeBlanc began his career in 1991 at PricewaterhouseCoopers and later served as Vice President of Financial Advisory Services in 1997 when

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he advised on mergers and acquisitions, corporate restructurings, and transaction advisory. Mr. LeBlanc holds a BA in Economics from York University, a BComm from the University of Windsor and an MBA from the Schulich School of Business. He is a Chartered Accountant and Certified Public Accountant.

Experience, Qualifications and Skills:

Mr. LeBlanc has been President and Chief Executive Officer, and a director of Ambac since January 1, 2017. Mr. LeBlanc has twenty-seven years of experience in the financial services sector and over that period has held a number of senior leadership roles overseeing strategy, corporate development, finance and risk. Immediately prior to joining Ambac, Mr. LeBlanc actively led global remediation and asset recovery initiatives at Syncora Holdings Ltd., evaluating strategic alternatives and overseeing all aspects of Syncora's finance function. He also served as Special Advisor to Syncora’s Board of Directors and led the successful restructuring of Syncora during the 2008-2009 financial crisis and again in its 2016 restructuring. Mr. LeBlanc's extensive experience in financial services and insurance, in addition to his substantial insight into the issues affecting Ambac, makes him a valued member of our Board of Directors.

C. James Prieur

Mr. Prieur has been a director since January 5, 2016. Mr. Prieur has over thirty years of finance, investment management, risk management, and international business experience. Mr. Prieur served as Chief Executive Officer and director of CNO Financial Group, Inc. from 2006 until his retirement in 2011. CNO Financial Group is a life insurance holding company focused on the senior middle income market in the U.S. Prior to joining CNO Financial Group, Mr. Prieur had been with Sun Life Financial since 1979. He began his career at Sun Life Financial in Investments, and in 1997 he was named Senior Vice President and General Manager for U.S. operations, and became corporate President and Chief Operating Officer in 1999, a position Mr. Prieur occupied until he left Sun Life Financial to join CNO Financial Group. While at Sun Life Financial, Mr. Prieur managed multiple lines of business, including life, annuities, and health products in the United States, Canada, the United Kingdom and Asia. Mr. Prieur is currently a director of Manulife Financial Corporation. Mr. Prieur is a Chartered Financial Analyst and has a BA from the Royal Military College and a MBA from Western University in Ontario.

Experience, Qualifications and Skills:

Mr. Prieur has over thirty years of finance, investment management, risk management, and international business experience in the insurance industry. He brings a very useful C-suite perspective into the Board room. Mr. Prieur’s experience as a former Chief Executive Officer of CNO Financial Group, Inc. and his knowledge of the insurance industry are highly valued by the Board and management. This background, as well as his financial expertise and other board experience, makes Mr. Prieur well qualified to serve on our Board of Directors and its Audit Committee and Compensation Committee, and to chair its Governance and Nominating Committee.

Jeffrey S. Stein

Mr. Stein has been Chairman of the Board since January 1, 2015 and has served as a director since May 1, 2013. Mr. Stein is Founder and Managing Partner of Stein Advisors LLC, a financial advisory firm that provides consulting services to institutional investors. Mr. Stein is an investment professional with over twenty-seven years of experience in the high yield, distressed debt and special situations equity asset classes who has substantial experience investing in the financial services industry. Previously Mr. Stein was a Co-Founder and Principal of Durham Asset Management LLC, a global event-driven distressed debt and special situations equity asset management firm. From January 2003 through December 2009 Mr. Stein served as the Co-Director of Research at Durham responsible for the identification, evaluation and management of investments for the various Durham portfolios. From July 1997 to December 2002 Mr. Stein served as Co-Director of Research at The Delaware Bay Company, Inc., a boutique research and investment banking firm focused on the distressed debt and special situations equity asset classes. From September 1991 to August 1995, Mr. Stein was an Associate/Assistant Vice President at Shearson Lehman Brothers in the Capital Preservation & Restructuring Group. Mr. Stein currently serves as a board observer on the Board of TORM plc. Mr. Stein previously served as a director

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on the Boards of Westmoreland Coal Company, Dynegy Inc. and MLR Petroleum LLC. Mr. Stein received a B.A. in Economics from Brandeis University and an M.B.A. with Honors in Finance and Accounting from New York University.

Experience, Qualifications and Skills:

Mr. Stein is an investment professional with over twenty-seven years of experience in institutional asset management who has substantial experience investing in the financial services industry. In addition, Mr. Stein has significant experience as a corporate executive and director and in his capacity as such has specifically focused on capital allocation, operating and financial performance, capital structure optimization, asset acquisitions and dispositions, corporate strategy, risk management and investor communications. As a result Mr. Stein has a wealth of knowledge with respect to the financial, institutional and risk management issues currently facing Ambac. His breadth of experience makes Mr. Stein well qualified to be Chairman of our Board, and to serve on the Governance and Nominating Committee.

Board Leadership Structure

The Board does not have a policy on whether or not the roles of Chief Executive Officer and Board Chair should be separate and, if they are to be separate, whether the Chair should be selected from the non-employee directors, an employee or an outsider. The Board believes that it should be free to make this choice in the manner that it deems best for Ambac at any given point in time. While the Board has no fixed policy with respect to combining or separating the offices of Board Chair and Chief Executive Officer, those two positions have been held by separate individuals for the last several years, with the position of Chair of the Board currently being filled by Mr. Stein and the position Chief Executive Officer by Mr. LeBlanc. The Board believes this is the appropriate leadership structure for it at this time.

A majority of our directors are independent, and the Board believes that the independent directors provide effective oversight of management. See “Director Independence.”

Board Committees

The current members of each of the committees of the Board, as well as the current Chairman of each of the committees of the Board, are identified in the following paragraphs. Each of the standing committees operates under a written charter adopted by the Board, which is available in the Corporate Governance section of our Investor Relations website: http://ir.ambac.com/governance.cfm. A copy of each charter is also available to stockholders free of charge on request to our Corporate Secretary, at [email protected].

Audit Committee

The Audit Committee is currently comprised of Messrs. Haft, Herzog (Chairman), Prieur, and Ms. Lamm-Tennant. The main function of our Audit Committee is to oversee our accounting and financial reporting processes. The Audit Committee’s responsibilities include:


•	Selecting and approving the fees and terms of our independent registered public accounting firm's engagement.


•	Approving the audit, non-audit and tax services to be performed by our independent registered public accounting firm.


•	Evaluating the experience, performance, qualifications, and independence of our independent registered public accounting firm.


•	Reviewing the integrity of our financial statements and our compliance with legal and regulatory requirements as they relate to financial statements or accounting matters.

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•	Reviewing the design, operation and effectiveness of our internal controls and our critical accounting policies.


•	Reviewing with management our annual audited financial statements, quarterly financial statements, earnings releases and any other material press releases related to accounting or financial matters announcements.


•	Reviewing with management our major financial risk exposures and the steps that management has taken to monitor and control such exposures.


•	Reviewing and approving the Audit Committee report for inclusion in our annual proxy statement.


•	Reviewing our Regulation FD Policy.


•	Establishing procedures for the confidential and anonymous receipt, retention and treatment of complaints regarding accounting, internal accounting controls or auditing matters.

Our Board has determined that each of the directors serving on our Audit Committee is independent within the meaning of the Listing Rules of NASDAQ. The Board of Directors has determined that, based on each member’s professional qualifications and experience, each of the members of the Audit Committee are financially literate and that Messrs. Haft, Herzog, and Prieur and Ms. Lamm-Tennant qualify as "audit committee financial experts" as defined under the rules and regulations of the SEC. The Audit Committee met eleven times in 2018.

Compensation Committee

The Compensation Committee is currently comprised of Messrs. Greene (Chairman), Haft and Prieur. The purpose of our Compensation Committee is to assist the Board in overseeing our compensation programs. The Compensation Committee’s responsibilities include:


•	Reviewing the overall compensation principles governing the compensation and benefits of our executive officers and other employees.


•	Evaluating the performance of our Chief Executive Officer.


•	Reviewing the procedures for the evaluation of our executive officers, other than our Chief Executive Officer.


•	Reviewing and approving the selection of our peer companies to use as a reference in determining competitive compensation packages.


•	Determining all executive officer compensation (including but not limited to salary, bonus, incentive compensation, equity awards, benefits and perquisites).


•	Reviewing and approving the terms of any employment agreements and severance arrangements, change-in-control agreements, and any special or supplemental compensation and benefits for our executive officers and individuals who formerly served as executive officers.


•	Acting as the administering committee for our stock and bonus plans and for any equity compensation arrangements that may be adopted by Ambac from time to time.


•	Making and approving grants of equity based awards to directors under Ambac’s compensation plans.


•	Reviewing and discussing with management the annual Compensation Discussion and Analysis (CD&A) disclosure, and, based on this review and discussion, making a recommendation to include the CD&A disclosure in our annual proxy statement.


•	Preparing the annual Compensation Committee Report for inclusion in our annual proxy statement.

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Each member of our Compensation Committee is a “non-employee” director within the meaning of Rule 16b-3 of the Exchange Act. Our Board of Directors has determined that each of the directors serving on our Compensation Committee is independent within the meaning of the Listing Rules of NASDAQ. The Compensation Committee met eight times in 2018.

In 2018, the Compensation Committee directly engaged Meridian Compensation Partners, LLC, a nationally recognized independent compensation consulting firm, to assist it with benchmarking and compensation analyses, as well as to provide information and advice on executive compensation practices and determinations, including information on award design for both our Short Term Incentive Plan (“STIP”) and Long Term Incentive Plan (“LTIP”). From time to time, our Chief Executive Officer will attend meetings of the Compensation Committee and express his view on the Company’s overall compensation philosophy. Following year-end, the Chief Executive Officer makes recommendations to the Compensation Committee as to the total compensation package (salary, and STIP and LTIP awards) to be paid to each of our other named executive officers in the Summary Compensation Table. Our Chief of Staff serves as management’s main liaison with the Compensation Committee and assists the Compensation Committee Chairman in setting the annual agenda and gathering the requested supporting material for each Compensation Committee meeting. Our Corporate Secretary serves as secretary to the Compensation Committee.

Governance and Nominating Committee

The Governance and Nominating Committee is currently comprised of Messrs. Greene, Prieur (Chairman) and Stein. Our Governance and Nominating Committee’s purpose is to assist our Board of Directors in identifying individuals qualified to become members of our Board of Directors based on criteria set by our Board of Directors, to oversee the evaluation of the Board of Directors and management, and to develop and update our corporate governance principles. The Governance and Nominating Committee’s responsibilities include:


•	Evaluating the composition, size, organization, and governance of our Board of Directors and its committees, determining future requirements, and making recommendations regarding future planning, the appointment of directors to our committees, and the selection of chairs of these committees.


•	Periodically reviewing the standards for director independence and providing the Board with an assessment of which directors should be deemed independent.


•	Determining the criteria for Board membership.


•	Evaluating the participation of members of the Board in continuing education.


•	Reviewing and recommending to our Board of Directors the compensation of our non-employee directors.


•	Reviewing plans for the succession of our executive officers.


•	Reviewing and approving related party transactions according to our Related Party Transaction Policy.


•	Administering a procedure to consider stockholder recommendations for director nominees.


•	Evaluating and recommending candidates for election or re-election to our Board of Directors, including nominees recommended by stockholders.


•	Reviewing periodically Ambac’s Code of Business Conduct and compliance therewith.

Our Board of Directors has determined that each of the directors serving on our Governance and Nominating Committee is independent within the meaning of the Listing Rules of NASDAQ. The Governance and Nominating Committee met six times in 2018.

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Strategy and Risk Policy Committee

The Strategy and Risk Policy Committee is currently comprised of Messrs. Greene, Haft (Chairman), Herzog and Ms. Lamm-Tennant, and it's responsibilities include:


•	Reviewing and making recommendations to the Board regarding strategic plans and initiatives, including potential material investments in joint ventures, mergers, acquisitions and other business combinations.


•	Consulting with the Audit Committee on key guidelines and policies for risk assessment and risk management.


•	Provide oversight of Ambac's capital structure, financing and treasury matters.


•	Reviewing, evaluating and recommending to the Board the proposed terms of certain financing activities that require Board approval.


•	Reviewing Ambac’s short-term and long-term financial and investment guidelines, plans and strategies.

The Strategy and Risk Policy Committee met five times in 2018.

Board’s Role in Risk Oversight

Among other things, the Board is responsible for understanding the risks to which Ambac is exposed, overseeing management's strategy to manage these risks, and measuring management's performance against the strategy.

Our management team is responsible for managing the risks to which Ambac is exposed and reports on such matters to the Board and committees overseeing risk management.

The Audit Committee oversees the management of risk associated with the integrity of our financial statements and our compliance with legal and regulatory requirements. In addition, the Audit Committee reviews policies and procedures with respect to risk assessment and risk management, including major financial risk exposure and the steps management has taken to monitor and control such exposures. The Audit Committee reviews with management, our internal auditors, and our independent registered public accounting firm the accounting policies, the system of internal controls over financial reporting and the quality and appropriateness of disclosure and content in the financial statements and other external financial communications.

The Compensation Committee oversees the management of risk primarily associated with our ability to attract, motivate and retain high-quality and talented employees, particularly executives; compensation structures that might lead to undue risk taking; and disclosure of our executive compensation philosophies, strategies and activities.

The Governance and Nominating Committee oversees the management of risk primarily associated with our ability to attract, motivate and retain high-quality directors, our corporate governance programs and practices and our compliance therewith. Additionally, the Governance and Nominating Committee establishes a framework for the Board and each of its committees to conduct an annual self evaluation process and ensures that risk management effectiveness is a part of this evaluation. The Governance and Nominating Committee also performs oversight of the business ethics and compliance program by conducting an annual review and assessment of our Code of Business Conduct.

The Strategy and Risk Policy Committee oversees the management of risk and risk appetite primarily with respect to strategic plans and initiatives, oversight of our capital structure, financing and treasury matters and oversight of management's process for the identification, evaluation and mitigation of our financial and commercial-related risks.

The full Board also receives quarterly updates from Board committees and the Board provides guidance to individual committee activities as appropriate.

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Director Independence

The Governance and Nominating Committee annually reviews the relationships that each director has with Ambac. In conducting this review, the Committee considers all relevant facts and circumstances, including any consulting, legal, accounting, charitable and familial relationships and such other criteria as the Governance and Nominating Committee may determine from time to time. Following such annual review, the Committee reports its conclusions to the full Board, and only those directors whom the Board affirmatively determines to have no material relationship with Ambac and otherwise satisfy the criteria for director independence established by the committee are considered independent directors.

Based on the review and recommendation of the Governance and Nominating Committee, the Board has determined that none of Messrs. Greene, Haft, Herzog, Prieur, Stein or Ms. Lamm-Tennant has a relationship that, in the opinion of the Board of Directors, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director and each of them is an independent director as defined in the Listing Rules of NASDAQ. In determining the independence of our directors, the Board of Directors has adopted the independence standards specified by applicable laws and regulations of the SEC and the Listing Rules of NASDAQ.

Compensation Committee Interlocks and Insider Participation

None of the current members of the Compensation Committee has been an officer or employee of Ambac. In 2018, each of Messrs. Greene, Haft, and Prieur served as members of the Compensation Committee. None of our executive officers serves on the board of directors or compensation committee of a company that has an executive officer that serves on our Board of Directors or the Compensation Committee.

Consideration of Director Nominees

Stockholder Recommendations and Nominees

The Governance and Nominating Committee considers properly submitted recommendations for candidates to the Board of Directors from stockholders. In evaluating such recommendations, the Governance and Nominating Committee seeks to achieve a balance of experience, knowledge, expertise, and capability on the Board of Directors and to address the membership criteria set forth under “Director Selection Process and Qualifications” below. There are no differences in the manner in which the Governance and Nominating Committee evaluates nominees for director based on whether the nominee is recommended by a stockholder or otherwise. Any stockholder recommendations for consideration by the Governance and Nominating Committee should be sent, together with the information required by Article II of our by-laws, c/o: Ambac Financial Group, Inc., Attn: Corporate Secretary, One State Street Plaza, New York, New York 10004. Stockholder nominations for directors that a stockholder wishes to have considered at a meeting of stockholders should be made in accordance with the provisions of our by-laws, as described under “Other Questions related to the Meeting or Ambac-What is the deadline to propose actions for consideration at next year’s Annual Meeting of Stockholders or to nominate individuals to serve as directors?” above.

Director Selection Process and Qualifications

Our Governance and Nominating Committee will evaluate and recommend candidates for membership on the Board of Directors consistent with our Corporate Governance Guidelines regarding the selection of director nominees. Pursuant to these guidelines, the Governance and Nominating Committee screens candidates and evaluates the qualifications of the persons nominated by or recommended by our stockholders for membership to our Board. Board diversity is an important consideration in evaluating Board composition. Thus, in assessing potential director candidates for the Board, the Governance and Nominating Committee considers individuals representative of differing perspectives and backgrounds in addition to the following qualities, among others: character, judgment, business experience, diversity and acumen.

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In evaluating non-incumbent candidates for the Board, the Governance and Nominating Committee reviews the composition of the Board as a whole, as well as the committees, and assesses the appropriate knowledge, experience, skills, expertise and diversity in the context of the current make-up and perceived needs of the Board at the time of consideration. Candidates also are evaluated in light of other factors, such as those relating to service on other boards of directors.

The Governance and Nominating Committee also monitors the composition of the Board to determine if it meets the needs of our business. We believe that it is important to have a Board that is reflective of the core values and diversity of our key constituents including our employees, clients and partners and shareholder base, and, in furtherance of this goal, the Governance and Nominating Committee proposes the nomination of directors who are representative of diverse backgrounds and experience for purposes of obtaining the appropriate members and skills. It also reviews the composition of the Board to ensure that it contains at least the minimum number of independent directors required by applicable law and stock exchange listing requirements.

The Governance and Nominating Committee uses a variety of methods for identifying and evaluating nominees for directors. The Committee considers the current directors who have expressed an interest in and that continue to satisfy the criteria for serving on the Board as set forth in our Corporate Governance Guidelines. Other nominees who may be proposed by current directors, members of management or by stockholders are also considered. The Committee may, at Ambac’s expense, engage search firms, consultants and other advisors to identify, screen and/or evaluate candidates.

The Governance and Nominating Committee recommends director nominees who are ultimately approved by the full Board of Directors.

Executive Sessions

Executive sessions of independent directors are held in connection with each regularly scheduled meeting of the Board of Directors and at other times as appropriate. The Board of Directors’ policy is to hold executive sessions without the presence of management, including the Chief Executive Officer and any other non-independent directors.

Outside Advisors

Our Board of Directors and each of its committees may retain outside advisors and consultants of their choosing at our expense. The Board of Directors and its committees need not obtain management’s consent to retain outside advisors.

Board Effectiveness

The effectiveness of the Board as a whole, and each of its individual committees, is assessed against the roles and responsibilities set forth in Ambac's Corporate Governance Guidelines and the relevant committee charters. Matters considered in these evaluations include:


•	the effectiveness of discussion and debate at Board and committee meetings;


•	the effectiveness of Board and committee processes and and relationship with management;


•	the quality and timeliness of Board and committee agendas, and preparation of reference materials to support the Board and committees' decision making process; and


•	the composition of the Board and each committee, focusing on the blend of skills, experience, independence and knowledge of the group and its diversity.

This self-assessment process is managed by the Chair of the Governance and Nominating Committee.

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Code of Business Conduct

Ambac has a Code of Business Conduct which reflects the Board's commitment to maintaining strong standards of integrity for handling business situations appropriately and effectively. The Code of Business Conduct can be found in the Corporate Governance section of Ambac’s Investor Relations website at http://ir.ambac.com/governance.cfm. Ambac will disclose on its website any amendment to, or waiver from, a provision of its Code of Business Conduct that applies to its Chief Executive Officer, Chief Financial Officer or Chief Accounting Officer. Ambac’s Corporate Governance Guidelines and the charters for our Audit Committee, Governance and Nominating Committee, Strategy and Risk Policy Committee and Compensation Committee are also available in the Corporate Governance section of Ambac’s Investor Relations website at http://ir.ambac.com/governance.cfm.

Board Compensation Arrangements for Non-Employee Directors

Ambac's director compensation program is designed to enable continued attraction and retention of highly qualified non-employee directors by ensuring that director compensation is reflective of the time, effort, expertise, and accountability required of board membership. The amount and composition of total compensation paid to our non-employee directors is considered in light of competitive compensation levels for directors in the financial service industry. The Governance and Nominating Committee does not rely on this information to target any specific pay percentile for our directors. Instead, the Committee uses this information to provide a general review of market pay levels and practices and to ensure that it makes informed decisions regarding our non-employee director compensation program. The annual compensation for non-employee directors generally consists of both a cash and equity component. The compensation components are designed to compensate members for their service on the Board of Directors and its committees, to align the interests of directors and stockholders, and to create an incentive for continued service on the Board. Equity awards are granted to our non-employee directors each year in the form of restricted stock units on or about the last business day in April, and vest on the one year anniversary of the grant date. Restricted stock units granted in prior years that have vested will not settle and convert into shares of common stock until the director resigns from, or otherwise ceases to be a member of, the Board of Directors of Ambac.

Within five years of becoming a director, each non-employee director is required to acquire and hold shares of our common stock equal to the lesser of $800,000 in value or 40,000 shares. This requirement may be satisfied by restricted stock unit holdings and other share acquisitions. The Governance and Nominating Committee will review the compensation programs for non-employee directors on an annual basis to assess if such compensation is appropriate in light of directors' time commitments and contributions.

Compensation for Non-Employee Directors in 2018

In 2018 non-employee director compensation was paid as follows:


•	An annual cash retainer of $100,000 and a grant of $200,000 of stock-based compensation, comprised of restricted stock units of Ambac (rounded up to the nearest whole unit), as permitted under Ambac’s 2013 Incentive Compensation Plan;


•	As a non-employee director, our Chairman of the Board received an additional fee of $125,000; the Audit Committee Chair received an additional fee of $35,000; the Compensation Committee Chair received an additional fee of $25,000; and the chairs of each of the Governance and Nominating Committee and the Strategy and Risk Policy Committee received an additional fee of $15,000; and

•

In addition, each non-employee director is also entitled to receive a fee of $2,000 (A) for each Board meeting attended, which shall only apply after he or she attends eight Board meetings in a calendar year, and (B) for each committee meeting attended as a committee member, which shall apply with respect to each committee after he or she attends eight meetings of such committee in a calendar year.

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In addition Ambac reimburses its directors for reasonable out-of-pocket expenses in connection with their Board service, including attendance at Board of Directors and committee meetings. The restricted stock units that were granted to our non-employee directors on April 30, 2018 will vest on April 30, 2019.

The following table summarizes compensation paid to non-employee directors during 2018.



Name	Year	Fees Earned or Paid in Cash⁽¹⁾ ($)	Stock Awards⁽²⁾ ($)	All Other Compensation ($)	Total ($)
Alexander D. Greene	2018	$137,000	$200,000		337,000
Ian D. Haft	2018	$143,000	$200,000		343,000
David L. Herzog	2018	$163,000	$200,000		363,000
Joan Lamm-Tennant	2018	$93,333	$233,334		326,667
C. James Prieur	2018	$147,000	$200,000		347,000
Jeffrey S. Stein	2018	$247,000	$200,000		447,000


⁽¹⁾	Fees earned or paid in cash include annual cash retainer, chairman or committee chair fees and individual meeting fees for Board and committee meetings attended in excess of eight meetings for each of the Board or any of its committees.

⁽²⁾

The value of the restricted stock units (“RSUs”) received in 2018 and reported in the table above is based on the grant date fair value of awards computed in accordance with FASB ASC Topic 718. The number and grant date fair value of RSUs granted on April 30, 2018 (based on the closing price of our common stock on the NASDAQ Stock Market at the time of the grant) were as follows: Mr. Greene, 11,744 RSUs valued at $200,000; Mr. Haft, 11,744 RSUs valued at $200,000; Mr. Herzog, 11,744 RSUs valued at $200,000; Ms. Lamm-Tennant, 11,744 RSUs valued at $200,000; Mr. Prieur, 11,744 RSUs valued at $200,000; and Mr. Stein, 11,744 RSUs valued at $200,000. In addition, Ms. Lamm-Tennant received a grant of 2,209 RSUs valued at $33,334 upon her initial appointment to the Board of Directors on March 2, 2018. The total number of RSUs held by each of the non-employee directors as of December 31, 2018 was as follows: Mr. Greene, 49,128; Mr. Haft, 38,884; Mr. Herzog, 38,884; Ms. Lamm-Tennant, 13,953; Mr. Prieur, 43,494; and Mr. Stein, 74,770.

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COMMON STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table shows the amount of our common stock beneficially owned as of April 10, 2019, by those known to us to beneficially own more than 5% of our common stock, by our directors, director nominees and named executive officers individually and by our directors, director nominees and executive officers as a group.

The percentage of shares outstanding provided in the table is based on 45,341,834 shares of our common stock, par value $0.01 per share, outstanding as of April 10, 2019. Beneficial ownership is determined in accordance with the rules of the SEC and generally includes voting or investment power with respect to securities. The SEC’s rules generally attribute beneficial ownership of securities to each person who possesses, either solely or shared with others, the voting power or investment power, which includes the power to dispose of those securities. The rules also treat as outstanding all shares of capital stock that a person would receive upon exercise of stock options held by that person that are immediately exercisable or exercisable within 60 days. Under these rules, one or more persons may be a deemed beneficial owner of the same securities and a person may be deemed a beneficial owner of securities to which such person has no economic interest.

Except as otherwise indicated in the footnotes to this table, each of the beneficial owners listed has, to our knowledge, sole voting and investment power with respect to the indicated shares of Common Stock. Unless otherwise indicated, the address for each beneficial owner who is also a director or executive officer is c/o Ambac Financial Group, Inc., One State Street Plaza, New York, New York 10004.



	Amount and Nature of Shares Beneficially Owned
Name	Number ⁽¹⁾	Percent of Class ⁽²⁾
5% or Greater Stockholders
BlackRock Inc.⁽³⁾⁽⁵⁾	6,190,576	13.7%
The Vanguard Group⁽⁴⁾⁽⁵⁾	4,654,819	10.3%
Executive Officers and Directors
David Barranco	30,893	*
Stephen M. Ksenak	50,998	*
Claude LeBlanc	149,771	*
David Trick	74,638	*
R. Sharon Smith	25,896	*
Alexander D. Greene	62,128	*
Ian D. Haft	38,884	*
David L. Herzog	51,704	*
Joan Lamm-Tennant	13,953	*
C. James Prieur	58,494	*
Jeffrey S. Stein	98,437	*
All executive officers and directors as a group (13 persons)	718,454	1.6%


*	Beneficial ownership representing less than 1% is denoted with an asterisk (*).

⁽¹⁾

The share ownership listed in the table includes shares of our common stock that are subject to issuance in the future with respect to deferred stock units (“DSUs”), RSUs and vested stock options, in the following aggregate amounts: Mr. Barranco, 14,558 shares; Mr. Ksenak, 18,054 shares; Mr. LeBlanc, 82,646 shares; and Mr. Trick, 23,925 shares; Ms. Smith, 19,190 shares; Mr. Greene, 49,128 shares; Mr. Haft, 38,884 shares; Mr. Herzog, 38,884 shares; Ms. Lamm-Tennant, 13,953 shares; Mr. Prieur, 43,494 shares; and Mr. Stein, 91,437 shares. The RSUs granted to each of our non-executive directors shall not settle and convert into shares of common stock until such director resigns from, or otherwise ceases to be a member of, the Board of Directors of the Company. Each DSU and RSU represents a contingent right to receive one share of the Company’s common stock. RSUs granted to our named executive officers, and RSUs and stock options granted to the directors, that vest more than 60 days after the Record Date for voting at the

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Annual Meeting have not been included in the table above in accordance with SEC rules. DSUs vest immediately and were granted to our executive officers as part of their annual incentive awards.

⁽²⁾

In computing the number of shares of common stock beneficially owned by a person and the percentage ownership of that person, we deemed outstanding shares of common stock subject to options, DSUs, RSUs or warrants held by that person that are currently exercisable or exercisable within 60 days of the Record Date. We did not deem these shares outstanding, however, for the purpose of computing the percentage ownership of any other person. Each holder of common stock is entitled to one vote per share of common stock on all matters submitted to our stockholders for a vote.


⁽³⁾	According to the Schedule 13G filed by on January 10, 2019, BlackRock Inc. beneficially owned 6,190,576 shares of our Common Stock. BlackRock Inc. reported sole voting power with respect to 6,106,878 shares and sole dispositive power with respect to 6,190,576 shares. The address of BlackRock Inc. is 55 East 52nd Street, New York, New York 10055.

⁽⁴⁾

According to the Schedule 13G/A filed on February 13, 2019, The Vanguard Group beneficially owned 4,654,819 shares of our Common Stock. The Vanguard Group reported sole voting power with respect to 48,292 shares, shared voting power with respect to 9,200 shares, sole dispositive power with respect to 4,602,761 shares, and shared dispositive power with respect to 52,058 shares. The address of The Vanguard Group is 100 Vanguard Blvd., Malvern, Pennsylvania 19355.

⁽⁵⁾

See Note 1 to the Consolidated Financial Statements in Part II, Item 8 of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2018 for description of the limitations on voting and transfer of Ambac’s common stock pursuant to Ambac’s Amended and Restated Certificate of Incorporation. Ambac has determined that the holdings described above do not violate the restrictions set forth in its Amended and Restated Certificate of Incorporation.

EXECUTIVE COMPENSATION

Executive Officers

The names of our executive officers and their ages, positions, and biographies as of April 10, 2019 are set forth below. Our executive officers are appointed by, and serve at the discretion of, our Board.



Name	Age	Position with Ambac
Claude LeBlanc	53	President and Chief Executive Officer and Director
David Barranco	48	Senior Managing Director
Robert B. Eisman	51	Senior Managing Director, Chief Accounting Officer and Controller
Stephen M. Ksenak	53	Senior Managing Director and General Counsel
Michael Reilly	62	Senior Managing Director, Chief Administrative Officer and Chief Information Officer
R. Sharon Smith	48	Senior Managing Director, Chief of Staff
David Trick	47	Executive Vice President, Chief Financial Officer and Treasurer

Claude LeBlanc was appointed President and Chief Executive Officer of Ambac effective January 1, 2017. Mr. LeBlanc provides strategic leadership to Ambac by working with the Board and other members of senior management in developing and implementing the Company’s corporate strategies to maximize long-term stockholder value. Mr. LeBlanc actively oversees the Company's overall day to day operations and strategic advancement, including the pursuit of potential new business opportunities that meet acceptable criteria that the Company believes will generate long-term stockholder value with attractive risk-adjusted returns. See full biography under “Board of Directors - Directors” above.

David Barranco has served as Senior Managing Director of Ambac since February 2012. Mr. Barranco is the head of Risk Management, a position he has held since October 2016. Mr. Barranco has executive responsibility for risk remediation, credit risk management, surveillance and other related risk management responsibilities across the insured portfolio. Previously, he was head of the Restructuring Group and had responsibility for corporate development and strategy. Since September 2011, Mr. Barranco has served as Executive Director of Ambac Assurance UK Limited, Ambac’s London-based financial guarantee subsidiary. Mr. Barranco joined Ambac in 1999.

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Robert B. Eisman has served as the Chief Accounting Officer, Controller, and a Senior Managing Director of Ambac since January 2010. Mr. Eisman has responsibility for managing Ambac’s financial reporting in compliance with SEC and U.S. insurance company regulatory requirements. Mr. Eisman is responsible for establishing Ambac’s U.S. GAAP and statutory accounting policies, budgeting and forecasting and providing accounting services to Ambac Assurance UK Limited. From August 2010 through September 2015, Mr. Eisman served as an Executive Director of Ambac Assurance UK Limited. Mr. Eisman joined Ambac in 1995 from KPMG LLP where he was an Audit Manager in the Financial Services group with a specialization in insurance companies.

Stephen M. Ksenak has served as Senior Managing Director and General Counsel of Ambac since July 2011. Mr. Ksenak has executive responsibility for managing Ambac’s legal affairs. Prior to joining Ambac as Vice President and Assistant General Counsel in 2002, Mr. Ksenak practiced at the law firm of King & Spalding LLP.

Michael Reilly has served as Chief Administrative Officer, Chief Information Officer and Senior Managing Director of Ambac since February 2012. Mr. Reilly has executive responsibility for managing Ambac’s Human Resources, Administration, Business Solutions and Information Technology. From October 2009 to January 2012, he was Managing Director with the responsibility for managing Information Technology. Mr. Reilly joined Ambac in 2009.

R. Sharon Smith has served as Chief of Staff and Senior Managing Director of Ambac since May 2017. Ms. Smith has executive responsibility for Ambac's Corporate Services Group which encompasses certain key functions within the Company including, Strategy, Investor Relations, and Model Governance and Analytics, as well as oversight of Internal Audit. Ms. Smith joined Ambac from Syncora Guarantee Inc., ("Syncora"), where she served in numerous capacities during her tenure, including as Associate General Counsel and Head of Investor Relations. Ms. Smith was also General Counsel and Chief Compliance Officer for Camberlink LLC (a wholly owned subsidiary of Syncora). Earlier in her career, Ms. Smith was Vice President and Assistant General Counsel of the Corporate Securities Department of New York Life Investment Management LLC, and an attorney for Clifford Chance; Skadden, Arps, Slate, Meagher & Flom LLP and Weil, Gotshal & Manges LLP.

David Trick was named Executive Vice President of Ambac in November 2016. He has served as Chief Financial Officer of Ambac since January 2010 and as a Senior Managing Director from January 2010 until his appointment as Executive Vice President. Mr. Trick was interim President and Chief Executive Officer of AAC from January 2015 until March 2016. As Chief Financial Officer, Mr. Trick has executive responsibility for managing Ambac’s financial affairs, including financial reporting, asset and liability management, investment management, financial planning, tax strategy, capital resources, operations, capital markets and liquidity. In addition, since May 2006, he has served as Treasurer of Ambac and AAC. Since September 2015, Mr. Trick has served as an Executive Director of Ambac Assurance UK Limited. Mr. Trick joined Ambac in 2005 from The Bank of New York Mellon, where he was a senior banker responsible for delivering strategic solutions to insurance industry clients, including those in the financial guaranty industry, with regard to a broad range of treasury, credit, and capital markets products.

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Compensation Discussion and Analysis

WE ASK THAT YOU VOTE TO APPROVE OUR 2019 SAY ON PAY PROPOSAL

At our 2019 Annual Meeting, our stockholders will again have an opportunity to cast an advisory say on pay vote on the compensation paid to our named executive officers. We ask that our stockholders vote to approve executive officer compensation. Please see “Proposal No. 2-Advisory Vote to Approve Named Executive Officer Compensation.”

This Compensation Discussion and Analysis (“CD&A”) describes our executive compensation program, including important changes the Committee has made since our 2018 annual meeting of stockholders, and decisions relating to the fiscal year 2018 compensation of our named executive officers (“NEOs”), identified in the table below.

Our Named Executive Officers



Claude LeBlanc		Stephen M. Ksenak
President and Chief Executive Officer and Director		Senior Managing Director and General Counsel
David Trick		R. Sharon Smith
Executive Vice President, Chief Financial Officer and Treasurer		Senior Managing Director and Chief of Staff
David Barranco
Senior Managing Director



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Executive Summary	31
2018 Company Performance	31
2018 Pay Decisions	32
2018 Say on Pay Vote and Stockholder Outreach	33
Our Compensation Philosophy and Objectives	33
Elements of Pay	36
Pay Mix	37
Compensation for Each of our Named Executive Officers for 2018	41
Impact of Regulatory Requirements on Compensation	47
Compensation Risk Management	47
Risk Mitigating Policies	48
Conclusion	49

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Executive Summary

Our compensation programs are designed to reward execution and value creation relating to the implementation of our strategies. In 2018, following an engagement campaign in which we solicited feedback from stockholders representing approximately 55% of our outstanding common stock, we made important changes to the design of our Long Term Incentive Program. We added a relative Total Shareholder Return ("rTSR") modifier as an additional metric with respect to our LTIP award payouts. The rTSR modifier will cause any final PSU award payout at the end of a three year performance period to be increased or decreased by 10% if the Company's stock performance compared to a peer group is at or above the 75th percentile or at or below the 25th percentile, respectively. In addition, we eliminated the "retesting" feature in the Long-Term Incentive Compensation Program that allowed performance at AAC to be measured by the greater of two metrics: an improved asset liability ratio ("ALR") or improved net asset value ("NAV") over a three year performance period. In 2018, metrics for LTIP awards related to AAC performance will be measured based on (i) reductions in Watch List and Adversely Classified Credits weighted at 42.5%, and (ii) improvements in NAV weighted at 42.5%. With the implementation of these changes, key features of our compensation program include:


•	Competitive compensation levels and practices;


•	Performance-based incentive plans (annual STIP awards and three year LTIP awards) that are based on quantitative goals and objectives, and aligned with our key business strategies;


•	Greater weighting on equity-based compensation as a component of total compensation, and the existence of an Executive Stock Ownership Policy; and


•	Policies to manage compensation risk and support good governance, including a Recoupment Policy.

2018 Company Performance

Our primary business objective is to maximize stockholder value through the execution of key business strategies. In 2018, we took important steps to enhance the Company’s ability to achieve this objective. Key highlights and results include the following:

l Executed commutations and terminations in the municipal, structured and international sectors

○ Reduced our insured portfolio net par exposure by 25% from $62.7 billion to 46.9 billion at December 31, 2018

○ Decreased Adversely Classified Credits by 23% from $14.1 billion down to $10.9 billion: and

○ Decreased Watch List Credits by 19% from $11.1 billion down to $9.0 billion.

l Executed additional headcount and other cost reductions which, together with measures implemented in late 2017, resulted in a 27% reduction in headcount and a lower run-rate for operating expenses.

l Executed an Auction Market Preferred Shares ("AMPS") exchange transaction, capturing a discount of approximately $250 million to liquidation preference, further simplifying the capital structure.

l Improved Asset Liability Ratio from 75.7% at December 31, 2014 to 86.3% at December 31, 2017


⁽¹⁾	Adjusted Earnings (Loss) and Adjusted Book Value are non-GAAP measures. A reconciliation of these non-GAAP financial measure and the most directly comparable GAAP financial measure is presented in Appendix A. In this Proxy Statement, we refer to Total Ambac Financial Group, Inc. stockholders' equity as "Book Value."

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Early in 2018 we successfully executed a transformational holistic restructuring transaction for the Company, the conclusion of the rehabilitation of AAC’s Segregated Account. We negotiated the terms of such transaction with a group of creditors, took actions to satisfy regulatory capital requirements, negotiated and completed numerous required documents, sought tax opinions and Private Letter Rulings from the IRS, and took numerous other actions and steps to ensure the successful conclusion of the rehabilitation of AAC’s Segregated Account. The impact of this transaction includes:



Benefit	Outcome
● Simplified Capital Structure and Greater Financial and Strategic Flexibility	○ Discharge of all unpaid policy claims (“Deferred Amounts”) of the Segregated Account, totaling approximately $3.9 billion, including accretion
	○ Cancellation of $810 million in principal plus accrued and unpaid interest of AAC general account surplus notes
	○ Receipt of $240 million in new capital via the issuance of a Tier 2 note, backed by certain RMBS representation and warranty litigation recoveries
	○ Merger of AAC’s Segregated Account into its general account
	○ Created approximately $7.00 of Book Value per share
● Greater Financial Strength at AAC	○ Full payment on policy claims following the merger of the Segregated Account into AAC’s general account
● Greater Financial Strength at AAC	○ Realization of an effective discount of 6.5% on the accreted value of Deferred Amounts and the outstanding amount of principal and accrued and unpaid interest on tendered general account surplus notes
● Material Reduction In Ongoing Rehabilitation and Restructuring Costs and Other Related Expenses	○ Regulatory and other costs related to the rehabilitation of the Segregated Account decreased $21 million for the year ended December 31, 2018 from the prior year
● Unified Corporate Governance Structure	○ Interlocking Boards at Ambac and AAC

2018 Pay Decisions

2018 compensation decisions reflect our compensation principles:


•	Link short-term incentives to Company performance;


•	Use long-term incentives to further align the interests of our executives with stockholders by providing that all LTIP awards are denominated in stock units; and


•	Support the retention and attraction of key executive talent.

Base salaries in 2018 for each of our NEOs were reviewed and approved by the Compensation Committee, based on a review of relevant market data and each executive’s performance for the prior year, as well as each executive’s experience, expertise and position. Each of Messrs. LeBlanc, Trick and Ksenak is a party to an employment agreement with the Company that provides for a minimum annual base salary during the term of the respective agreement. See "Agreement with Claude LeBlanc," and “Agreements with Other Executive Officers.” STIP awards for 2018 were determined based on a structured and objective approach in which 60% of an executive officer's annual STIP award was based on the Company’s achievement of pre-established financial performance targets at the Company related to changes in: (i) Net Asset Value, (ii) Gross Operating Run Rate

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Expense ¹, and (iii) Watch List and Adversely Classified Credits ¹. The remaining 40% of an executive officer's annual STIP award was based on other performance considerations, including business unit results and individual performance. In an effort to increase the equity ownership of each of our NEOs, 25% of the annual STIP awards were paid in common stock units of Ambac with a deferred settlement provision ("DSUs"), and the remainder was paid in cash. These DSUs will settle and convert into Ambac common stock annually over a two-year period; 50% on March 4, 2020 and the remaining 50% on March 4, 2021, unless settled earlier due to an employee’s departure from the Company.

Long-term incentive awards granted in early 2018 were also reviewed and approved by the Compensation Committee, based on a review of relevant market data and each executive’s performance for the prior year. The long term incentive awards include restricted stock units (33% of total long term incentive award) which vest annually over a three year period from grant date and performance stock units (67% of total long term incentive award), which reflect the long term goals that the Compensation Committee believes will drive shareholder value over a three year period.

2018 Say on Pay Vote and Stockholder Outreach

At our 2018 annual meeting, stockholders representing approximately 91% of our common stock present, in person or by proxy, at the meeting voted to approve, on an advisory basis, the compensation of our named executive officers described in our 2018 proxy statement. We greatly appreciate the affirmative support of our stockholders with regard to our executive compensation program. We are committed to a corporate governance approach that aligns the interest of management, the Board of Directors and our stockholders. In pursuit of this approach, in the fall of 2018 the Chairman of the Board and the Chief Executive Officer, along with the Chairs of the Compensation Committee and the Governance and Nominating Committee solicited feedback from our stockholders representing approximately 55% of our outstanding common stock. The discussions involved, among other things, the event driven nature of our business and corporate governance matters. These stockholders provided critical feedback concerning our executive compensation program. While the feedback on our executive compensation program was very favorable, a number of stockholders expressed the view that the Company should consider adding a relative total shareholder return metric to our Long Term Incentive Plan awards. After review and deliberation on the matter, the Compensation Committee decided to add a relative Total Shareholder Return ("rTSR") modifier to our 2019 LTIP Awards.

Our Compensation Philosophy and Objectives

Our executive compensation program is designed to support achievement of our key business objectives. The Compensation Committee monitors and oversees all facets of the program, including incentive plan design, benchmarking, the performance goal-setting process, and approves executive pay programs that tie a substantial portion of compensation to goal achievement. The Compensation Committee also retains the authority to make discretionary adjustments to further recognize overall Company performance and enhance alignment with stockholders, and is committed to monitoring and adapting to evolving compensation standards. Specifically, our executive compensation program has the following objectives:

¹Gross Operating Run Rate Expense is measured by comparing actual gross operating run rate expenses to performance goals established against budgeted amounts. Reductions in Watch List and Adversely Classified Credits as of December 31, 2018 under the STIP were measured against Watch List and Adversely Classified Credits as of January 1, 2018.

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Objectives	Details
Attract, retain and motivate executives and professionals of the highest quality and effectiveness	l Provide compensation opportunities, contingent upon performance, that are competitive with practices of other similar financial services organizations operating within the same marketplace for executive talent.
Align pay with performance	l A substantial portion of each executive’s total compensation is variable and performance-based. l The design of our incentive plans focus on rewarding performance aligned with our key business strategies.
Further align our executives’ long-term interests with those of our stockholders	l Balance use of cash and equity based compensation and short and long-term incentives that further align management's interests with those of our stakeholders and support retention.
Discourage excessive risk taking	l Maintain policies that support good governance practices and mitigate against excessive risk taking.

Determining Executive Compensation

The Compensation Committee bases current pay levels on numerous factors, including competitive pay practices in the financial services industry, the scope and complexity of the functions of each NEO’s role, the contribution of those functions to our overall performance, individual experience and capabilities, and individual performance. Any variations in compensation among our NEOs reflect differences in these factors. The Compensation Committee monitors the effectiveness of our compensation programs throughout the year and performs an annual reassessment of the programs at the beginning of the year in connection with year-end compensation decisions and future goal settings.

Compensation Consultants

The Compensation Committee has authority to retain compensation consulting firms to assist it in the evaluation of executive officer and employee compensation and benefit programs. The Compensation Committee retained Meridian Compensation Partners, LLC (“Meridian”), as its independent compensation consultant, to advise on the 2018 compensation cycle, which included year-end compensation decisions made in the first quarter of 2019. Meridian provides an objective perspective as to the reasonableness of our executive compensation programs and practices and their effectiveness in supporting our business and compensation objectives. Specifically, Meridian advised the Compensation Committee with respect to compensation trends and best practices, incentive plan design, competitive pay levels, and individual pay decisions with respect to our NEOs. The Compensation Committee has assessed the independence of Meridian pursuant to applicable SEC rules and concluded that no conflict of interests exists that would prevent Meridian from independently advising the Compensation Committee.

Competitive Compensation Considerations

Because the competition to attract and retain high performing executives and professionals in the financial services industry is intense, the amount and composition of total compensation paid to our executives must be considered in light of competitive compensation levels. However, we do not rely on this information to target any specific pay percentile for our NEOs. Instead, we use this information to provide a general review of market pay levels and practices and to ensure that we make informed decisions regarding our executive pay programs.

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To help the Compensation Committee determine compensation levels for the NEOs, Meridian prepared an analysis that compared the level of compensation for our NEOs and compensation paid to officers at comparable positions across an industry comparator group. In the 2018 compensation cycle, we revised the list of peer companies to be more reflective of Ambac's size and the event driven nature of our business. The companies that comprise the comparator group were selected because we compete in the same marketplace with these companies for highly qualified and talented financial service professionals.

The table below provides summary financial information regarding Ambac and the comparator group used for the 2018 compensation cycles.



Comparator Group used for 2018 Compensation Cycle	Market Capitalization ($ in millions)	Assets ($ in millions)	Book Value ($ in millions)
Assured Guaranty Ltd.	4,284	13,739	6,583
ECN Capital Corp.	686	2,421	1,108
Element Fleet Management Corp.	2,333	13,546	2,145
Enstar Group Limited	3,822	15,121	3,505
MBIA Inc.	872	8,361	1,108
MGIC Investment Corporation	4,435	5,678	3,582
Navient Corporation	2,816	104,176	3,519
The Navigators Group, Inc.	2,078	5,548	1,232
Syncora Holdings Ltd.	335	1,979	648
Radian Group Inc.	4,105	6,315	3,489
Mr. Cooper Group Inc. (fka WMIH Corp.)	1,398	17,728	2,078
Ambac Financial Group, Inc. ⁽¹⁾	858	15,093	1,758
Percentile Rank vs. Peer Group	19%	80%	36%
Note: Financial data reflects information available as of February 8, 2019.
Source: S&P Capital IQ


⁽¹⁾	Assets include $7,347 of assets relating to Variable Interest Entities for which Ambac or its subsidiaries are required to consolidate as a result of its financial guarantee insurance policies.

The Role of Management in Determining Pay

Generally, our Chief Executive Officer reviews the competitive compensation data for each of the other NEOs, considers both individual and Company performance, measured against performance metrics established at the beginning of the year, and makes a recommendation to the Compensation Committee for base salary, annual short- and long-term incentive awards. The Chief Executive Officer typically participates in Compensation Committee meetings at the Compensation Committee’s request to provide background information regarding the Company’s strategic objectives and to evaluate the performance of and compensation recommendations for the other executive officers.

The Committee utilizes the information provided along with input from the compensation consultant and the knowledge and experience of the Committee’s members in making compensation decisions. Executive officers do not propose or seek approval for their own compensation. The Chairman of the Compensation Committee, with input from the Chairman of the Board of Directors, recommends the Chief Executive Officer’s compensation to the Compensation Committee. See "Directors, Executive Officers, and Corporate Governance"

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Elements of Pay

Compensation for each of our NEOs is viewed on a total compensation basis and comprised of the following elements of pay:



Compensation Element	Purpose
Base Salary	l Provides a minimum, fixed level of cash compensation to compensate executive officers for services rendered during the fiscal year that is competitive with organizations operating within the same marketplace for executive talent.
Short Term Incentive Awards	l Drive achievement of annual corporate goals, including key financial and operating results by setting pre-established financial performance targets at the Company. Annual STIP awards are paid 75% in cash and 25% in deferred stock units.
Long-Term Incentives	l Further align executive officers’ interests with the interests of stockholders by rewarding increases in the value of our share price, and tying long-term incentive compensation to performance metrics that we believe to be important value-drivers for our stockholders. LTIP awards are strictly equity based and denominated in PSUs and RSUs.
Post-Employment Benefits	l Provide certain severance benefits to our executive officers. See “--Post-Employment Benefits” and for a description of post-employment benefits payable to Messrs. LeBlanc, Trick and Ksenak, see “Agreement with Claude LeBlanc,” and “Agreements with Other Executive Officers."
Perquisites	l Provide a limited number of perquisites to all our employees, including our executive officers.

Before any year-end compensation decisions are made, the Compensation Committee undertakes a comprehensive review of all elements of each executive officer’s compensation. This review includes information on cash and non-cash compensation for the past four fiscal years (including current and prior year base salaries, short-term and long-term incentive awards and other awards), the value of benefits and other perquisites paid to our executive officers, and the value of unrealized gains/losses on prior equity-based awards held by our executive officers, as well as potential amounts to be delivered under all post-employment scenarios. This comprehensive review is designed to ensure that each member of the Compensation Committee has a complete picture of the compensation and benefits paid to each of our executive officers.

The following table shows the base salary and incentive compensation paid to Messrs. LeBlanc, Trick, Barranco, Ksenak, and Ms. Smith for their performance in 2018 in the manner it was considered by the Compensation Committee. This presentation differs from that contained in the Summary Compensation Table by showing the full grant date value of the STIP and LTIP stock unit awards at target on March 4, 2019, which were awarded based on 2018 performance but are not reflected in the Summary Compensation Table because of SEC rules on proxy statement disclosure.



			Short Term Incentive Plan		Long Term Incentive Plan
Name	Year	Salary ($)	Cash Incentive Award ($)	DSU Awards ($)	PSU Awards ($)	RSU Awards ($)	Total ($)
Claude LeBlanc	2018	900,000	1,170,000	390,000	1,809,000	891,000	5,160,000
David Trick	2018	750,000	433,500	144,500	318,250	156,750	1,803,000
David Barranco	2018	500,000	270,000	90,000	318,250	156,750	1,335,000
Stephen M. Ksenak	2018	600,000	298,500	99,500	268,000	132,000	1,398,000
R. Sharon Smith	2018	450,000	237,750	79,250	268,000	132,000	1,167,000

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Pay Mix

A substantial portion of target total compensation is delivered through variable performance or equity based incentives that are at risk. As reflected in the table above and the graphs below, variable performance or equity based incentives constitute 83% of our CEO compensation mix and 60% of our NEO compensation mix.



CEO Total Direct Compensation		CEO Performance/Equity Based Incentive Compensation



Other NEOs Total Direct Compensation		Other NEOs Performance/Equity Based Incentive Compensation

Base Salary. Base salaries are intended to reflect the experience, skill and knowledge of our executive officers and other senior professionals in their particular roles and responsibilities, while retaining the flexibility to appropriately compensate for fluctuations in performance, both of the Company and the individual. Base salaries for our executive officers and any subsequent adjustments thereto are reviewed and approved by the Compensation Committee annually, based on a review of relevant market data and each executive’s performance for the prior year, as well as each executive’s experience, expertise and position. The base salaries paid in 2018 to each of our NEOs was: $900,000 to Mr. LeBlanc; $750,000 to Mr. Trick; $500,000 to Mr. Barranco; $600,000 to Mr. Ksenak; and $450,000 to Ms. Smith.

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Incentive Compensation. Incentive compensation is a key component of our executive compensation strategy. Our incentive compensation awards generally have two components: short term incentive compensation (consisting of an annual cash incentive award and deferred stock units or DSUs) and Long Term Incentive Plan awards. Annual decisions with regard to incentive compensation are generally made in February of each year, following Compensation Committee meetings in December and January. Incentive compensation payouts can be highly variable from year to year.

Short Term Incentive Compensation. Annual incentives for our NEOs are meant to reward performance. Sixty percent of our short term incentive compensation awards are measured against pre-established financial performance targets at the Company related to: (i) increases in net asset value, (ii) reductions in gross operating run rate expenses, and (iii) reductions in Watch List and Adversely Classified Credits. These metrics were chosen because the Compensation Committee believes they are key drivers of stockholder value. The remaining forty percent of the short term incentive compensation award is based on other performance considerations, including business unit results and individual performance. The Compensation Committee believes that it is important to retain a substantial level of discretion with respect to other performance considerations because of the uncertainties associated with our main operating subsidiary, AAC, which is not writing new business. Our inability to pay discretionary annual incentive awards could have a material adverse impact on our ability to attract, motivate and retain high-quality and talented executives. The Compensation Committee assigns to each NEO an annual target incentive opportunity, expressed as a percentage of eligible earnings (base salary amount paid during the year), which is based on the executive’s position and the scope of responsibilities. Target annual incentives (as a percent of base salary) for the NEOs are set as follows: 100% for the Chief Executive Officer; 55% for the Chief Financial Officer; and 50% for each of the other NEOs. Actual incentive payouts can range from 0% to 200% of target for the Chief Executive Officer, and from 0% to 150% of target for the other NEOs based on the Compensation Committee’s review of overall corporate performance and individual and business unit achievement relative to the pre-established goals and objectives set forth above.

In order to increase equity ownership levels among our NEOs and to further align management and stockholder interests, 25% of the annual STIP awards are paid in vested common stock units of Ambac with a deferred settlement provision, and the remainder is paid in cash. The DSUs granted as part of the year-end 2018 STIP Awards will settle and convert into Ambac common stock annually over a two-year period; 50% in March 2020 and the remaining 50% in March 2021, unless settled earlier due to an employee’s departure from the Company.

Long Term Incentive Compensation. Our LTIP awards focus on the attainment of long term performance goals and objectives, which are deemed instrumental in creating long term value for stockholders and long term retention incentives for our executives. The Compensation Committee reviews the LTIP targets each year for competitive alignment. The Compensation Committee also reviews market trends related to the award mix and determines the appropriate mix of equity instruments considering market benchmark data.

In the first quarter of each year, LTIP compensation awards (which related to the prior year's performance) are granted to our NEOs. In 2018, we eliminated the "retesting" feature in the Long-Term Incentive Compensation Program that allowed performance at AAC to be measured by the greater of two metrics: an improved asset liability ratio ("ALR") or improved net asset value ("NAV") over a three year performance period. LTIP awards granted in 2018 that relate to AAC performance will be measured based on (i) reductions in Watch List and Adversely Classified Credits weighted at 42.5% and (ii) improvements in NAV weighted at 42.5%. The portion of the 2018 LTIP award that relates to Ambac performance will be measured based on the achievement of a certain level Cumulative EBITDA and weighted at 15%. LTIP awards in 2018 were denominated 67% in performance stock units (“PSUs") and 33% in restricted stock units ("RSUs"). PSUs represent a promise to deliver, within 75 days after the end of a three-year performance period, a number of shares of Ambac’s common stock ranging from 0% to 200% of the amount of the initial grant, depending on the achievement by either Ambac or its principal operating subsidiary, AAC, of financial performance objectives determined by the Compensation Committee at the time of the grant. The RSUs are time based awards and were granted in order to encourage the retention of our most valued employees. The RSUs granted as part of the 2018 LTIP awards represent the right to

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receive an equivalent number of shares of Ambac’s common stock and will vest and settle in three equal annual installments in March of 2019, 2020, and 2021.

The Compensation Committee determined the target value of the 2018 LTIP awards granted to Messrs. Trick, Barranco, Ksenak, and Ms. Smith based on the Company’s overall results, the individual executive’s contribution to overall performance, external market benchmark data and the proportion of total compensation comprised of LTIP awards. In addition, in setting target value of the 2018 LTIP awards granted to Messrs. Trick and Ksenak, the Committee considered the terms and conditions set forth in their respective employment agreements. See "Agreements with Other Executive Officers.”

For each of our NEOs, the Compensation Committee determined to weight the LTIP awards granted in March 2018 as follows: 85% of the award based on performance at AAC (an “AAC LTIP Target Award”) and 15% of the award based on performance at Ambac (an “Ambac LTIP Target Award”).

Key Changes to Long Term Incentive Program: In 2019, we added a relative Total Shareholder Return ("rTSR") modifier as an additional metric with respect to our LTIP award payouts. The rTSR modifier will cause any final PSU award payout at the end of a three year performance period to be increased or decreased by 10% if the Company's stock performance compared to a peer group is at or above the 75th percentile or at or below the 25th percentile, respectively.

AAC LTIP Metric. The metrics used to judge performance at AAC for LTIP awards granted in March 2018 are reductions in Watch List and Adversely Classified Credits and an improved net asset value ("NAV") over a three-year performance period which runs from January 1, 2018 until December 31, 2020 (the “Performance Period”). Within the AAC performance metrics, each individual metric is weighted at 42.5% and is intended to reward participants for reductions in AAC's Watch List and Adversely Classified Credits and increases in the value of AAC's net assets. Watch List credits represent credits that demonstrate heightened potential for future adverse development based on qualitative and quantitative stress assumptions.

The NAV is calculated by reducing Assets by Liabilities, determined as of the last day of the performance period.

•

For purposes of the NAV calculation, “Assets” shall mean the sum of (i) cash, (ii) invested assets at fair value (except for Ambac-insured investments which will be measured at amortized cost and excluding the Secured Note issued in 2018 in connection with AAC's restructuring as it is included in liabilities), (iii) loans, (iv) investment income due and accrued, (v) net receivables (payables) for security sales (purchases), (vi) tax tolling payments or dividends made by AAC to Ambac during the Performance Period, (vii) cash pledged as collateral to derivative counterparties, and (viii) other receivables; and

•

“Liabilities” shall mean the sum of the following: (i) the present value of future probability weighted financial guarantee claims and CDS payments reduced by recoveries, including probability weighted estimated subrogation recoveries and reinsurance recoverables, using discount rates in accordance with GAAP ("Gross Claim Liability" or "GCL"), (ii) fair value of all interest rate derivatives (prior to any AAC credit valuation adjustments), (iii) par value and accrued interest of all outstanding surplus notes of AAC (including junior surplus notes), (iv) par value and accrued interest on the Ambac Note and Tier 2 debt issued in 2018 in connection with AAC's restructuring (net of par value and accrued interest on AAC's holdings of the Secured Note), (v) the liquidation value of outstanding preferred stock, and (vi) the GAAP carrying value of RMBS secured borrowings, and any such similar borrowings of AAC.

•

Additionally, the Net Asset Value will: (i) neutralize the effects of claim payments, loss expense payments, advisor payments and the establishment of loss and loss expense reserves for credits that do not have a GCL, (ii) measure AAC's foreign subsidiaries utilizing the foreign exchange rate at the beginning of the performance period, (iii) add back costs related to AAC restructuring or ongoing OCI oversight during performance period, and (iv) add back direct costs of risk remediation activities with respect to credits within Watch List or Adversely Classified Credits.

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The following table sets forth the percentage of the AAC LTIP Target Award that each of our named executive officers could earn under the 2018 LTIP awards based on improvements in NAV and on reductions in Watch List and Adversely Classified Credits determined as of the last day of the Performance Period.



Percentage of AAC LTIP Target Award Earned	NAV ($ in millions)⁽¹⁾	Watch List and Adversely Classified Credits ($ in billions)⁽¹⁾
200%	$(300)	$15.50
100%	$(500)	$16.60
0	$(650)	$18.80
⁽¹⁾ Linear interpolation between levels of NAV and Watch List and Adversely Classified Credits will result in a proportionate amount of the AAC LTIP Target Award becoming earned and vested.

Ambac LTIP Metric. The metric used to judge performance at Ambac for LTIP awards granted in March 2018 is Cumulative EBITDA over the Performance Period. Ambac’s "Cumulative EBITDA" means Ambac’s earnings before interest, taxes, depreciation, amortization, and non-controlling interests (as determined under GAAP) for the Performance Period. The choice of the Cumulative EBITDA metric is intended to reward participants on generating income from all of Ambac's subsidiaries excluding AAC and its subsidiaries.

Cumulative EBITDA shall be adjusted for the effects of: (i) advisor and deal/transaction related costs related to capital and/or merger and acquisition transactions above budgeted amounts, (2) cost of post-employment guarantees, (iii) cost and impact of AAC and Ambac share repurchases, (iv) changes to Board fees and Board imposed expenses, (v) litigation and defense costs and any potential litigation gains in excess of damages incurred, (vi) (cost)/benefit of performance based compensation (above) or below target amounts, and (vii) any other costs as determined in the sole discretion of the Board.

The following table sets forth the percentage of the Ambac LTIP Target Award that each of our NEOs could earn under the 2018 LTIP awards based on the Cumulative EBITDA achieved over the Performance Period, determined as of the last day of the Performance Period.



Ambac’s Cumulative EBITDA ($ in millions) ⁽¹⁾	Percentage of Ambac LTIP Target Award Earned
$30.0	200%
$17.0	100%
$0	0%
⁽¹⁾ Linear interpolation between levels of Cumulative EBITDA will result in a proportionate amount of the Ambac LTIP Target Award becoming earned and vested.

Following the end of the Performance Period, the Compensation Committee will determine the extent to which each participant’s LTIP award has been earned and the amount payable. The Compensation Committee may in the exercise of its discretion reduce the amount of any LTIP award that otherwise would have been earned based on the satisfaction of the performance metrics, but may not increase the size of any LTIP award.

The purpose of the LTIP awards is to further align the long-term interests of our NEOs with those of our stockholders. We believe we have achieved this by making the vesting of the LTIP awards conditional upon Ambac and AAC achieving certain milestones that the Company believes will have a positive effect on the future value of our common stock. In addition, the ultimate value of the PSUs and RSUs directly depends on the value of our common stock at the time of vesting. Each individual who receives a PSU or RSU becomes, economically, a long-term stockholder of the Company, with the same interests as our other stockholders. As a result, we believe our NEOs have a demonstrable and significant interest in increasing stockholder value over the long term.

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Compensation for Each of Our Named Executive Officers in 2018

Our Chief Executive Officer

Mr. LeBlanc. Effective January 1, 2017, Claude LeBlanc was appointed President and Chief Executive Officer of Ambac and AAC. The Board believed that Mr. LeBlanc's significant experience and success over his career holding senior leadership functions overseeing strategy, corporate development, finance and risk, as well as his prior role actively leading the global remediation and asset recovery initiatives at Syncora Holdings Ltd., evaluating strategic alternatives and overseeing all aspects of Syncora's finance function, made him uniquely qualified to lead Ambac. Following extensive negotiations, the Compensation Committee, which received input and advice from its nationally recognized independent compensation consultant, Meridian Compensation Partners, LLC, authorized the Company to enter into an employment agreement with Mr. LeBlanc on December 8, 2016. Pursuant to the employment agreement, Mr. LeBlanc was paid an annual base salary of $900,000, and his target and maximum annual STIP award amounts were set at 100% and 200% of base salary, respectively, as determined in the discretion of the Compensation Committee. STIP awards consist of an annual cash incentive award and a deferred stock unit (“DSU”) grant determined in the discretion of the Compensation Committee. Sixty percent of the STIP award paid to Mr. LeBlanc for 2018 was based on the achievement of the financial performance goals set forth below that were established by the Compensation Committee at the beginning of 2018. The relative weighting for each of these financial performance metrics was as follows: improvements in Net Asset Value 15%; reductions in gross operating run rate expenses 15%; and reductions in Watch List and Adversely Classified Credits 30%.

Performance Against STIP Metrics. For the 2018 fiscal year, we established the following goals for each of our STIP performance metrics and assigned a weighting factor as follows:



($ in millions)	Weighting Factor	Threshold	Target	Maximum
Watch List and Adversely Classified Credits	30%	$22.9	$21.9	$20.9
Gross Operating Run Rate Expenses	15%	$17.6	$17.0	$16.4
Net Asset Value	15%	$(265)	$(230)	$(205)

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The following graph/charts shows the Company's 2018 actual performance compared to the threshold, target and maximum achievement levels as established for each of the performance metrics.



Watch List and Adversely Classified Credit Net Par	Gross Operating Run Rate Expenses	Net Asset Value



Threshold	Target	Maximum	- - - -	Actual

With respect to the reductions in Watch List and Adversely Classified Credits and improvements in Net Asset Value, under Mr. LeBlanc's leadership in 2018, Ambac exceeded the maximum performance goal set for each of these metrics. Credits that were on the watch list or adversely classified at the beginning of the performance period were reduced to $19.8 billion net par outstanding, and Net Asset Value at year-end was was $186.3 million. Reductions in gross operating run rate expenses for the fourth quarter of 2018 were reduced to $16.9 million. Applying the appropriate weighting to each performance metric as set forth above and using the the appropriate payout levels for STIP awards under Mr. LeBlanc's employment agreement, the Committee assigned a 1.795 multiplier to the financial performance portion of Mr. LeBlanc's 2018 STIP award.

Other Performance Considerations. In determining the other forty percent of Mr. LeBlanc's 2018 STIP award, the Compensation Committee gave consideration to the following performance goals and objectives, which were communicated to Mr. LeBlanc in the first quarter of 2018:


•	Pursue ongoing rationalization of Ambac's and its subsidiaries' capital and liability structures;


•	Effective management of loss recovery through active litigation and exercise of contractual and legal rights;


•	Continue to increase organizational effectiveness, efficiency of the operating platform and simplification of business controls, policies and procedures without increasing operational risk; and


•	Develop structured process to pursue opportunities in certain business sectors; source and evaluate potential new business opportunities for Ambac.

In reviewing each of these performance goals and objectives the Committee considered the following individual achievements in determining the amount of Mr. LeBlanc's 2018 STIP Award:


•	Successful runoff of AAC and its subsidiaries through active and material transaction terminations, policy commutations, execution of reinsurance transactions, settlements and restructurings;


•	Consolidated net par reduction of 25% or $15.8 billion in 2018 to $46.9 billion as of December 31, 2018;


•	Adversely Classified and Watch List Credit reduction of 21% in 2018 from $25.2 billion to $19.9 billion as of December 31, 2018;

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•	Entered into two significant reinsurance transactions reinsuring $1.6 billion in aggregate of AAC’s insured portfolio;


•	Resolution of Military Housing dispute via execution of Settlement Agreement for several key exposures;


•	Execution of Plan Support Agreement to resolve COFINA Title III case; COFINA was Ambac’s largest exposure in Puerto Rico;


•	Successfully executed the Auction Market Preferred Shares exchange transaction resulting in a discount capture of 45% or approximately $250 million;


•	Executed additional headcount and other cost reductions which, together with measures implemented in late 2017, resulted in a 27% reduction in headcount and a lower run-rate for operating expenses;


•	Completed the restructuring of two centers of excellence with Risk Management and Surveillance groups across both Ambac US and Ambac UK working collaboratively and in an integrated structure to develop and execute targeted strategies to address known and potential future loss transactions;


•	Established highly functioning Corporate Development Group to evaluate new business opportunities; and


•	Identified and filled key corporate development line functions and created informal advisory group.

The Committee considered each of the performance goals and objectives in evaluating Mr. LeBlanc's overall performance and concluded that on an aggregate basis he had exceeded target expectations and assigned a 1.640 multiplier to the discretionary performance portion of Mr. LeBlanc's 2018 STIP award. On a blended basis weighting the discretionary performance metrics at 40% and financial performance metrics at 60%, Mr. LeBlanc's STIP award multiplier was set at 1.733 x target, and he was granted a 2018 STIP award of $1.56 million, consisting of a cash incentive award of $1,170,000 and a DSU award of valued at $390,000. In addition, Mr. LeBlanc received an LTIP award with an aggregate target value of $2.7 million (the maximum award in accordance with his employment agreement) primarily reflecting Mr. LeBlanc's outstanding performance in, among other things, concluding the exit of AAC's segregated account from rehabilitation, further rationalization of the Company's capital and liability structure through the execution of the Auction Market Preferred Shares exchange transaction and leading the Ambac management team in significantly de-risking the insured portfolio as exemplified in the resolution of the COFINA Title III case. The Compensation Committee believes it struck the right balance between paying for current performance, on the one hand, and the desire to keep Mr. LeBlanc focused on the Company’s long-term performance and continued growth, on the other hand.

Other Named Executive Officers

Performance Against STIP Performance Metrics and Other Performance Considerations.

The Committee reviewed the Company's actual performance against each of the performance metrics set forth above, and after applying the appropriate weighting to each metric, the Committee assigned a 1.398 multiplier to the financial performance portion of each NEOs 2018 STIP award (other than Mr. LeBlanc). In determining the other forty percent of the 2018 STIP award for each of the NEOs (other than Mr. LeBlanc), Mr. LeBlanc reviewed with the Compensation Committee the performance of each of the other NEOs individually and their overall contribution to the Company in 2018. Based on the recommendation of Mr. LeBlanc, the Committee approved the 2018 STIP awards and 2019 LTIP awards granted to each of Messrs. Trick, Barranco, Ksenak, and Ms. Smith. In addition, the Committee approved an increase effective January 1, 2019 in Ms. Smith's annual base salary from $450,000 to $500,000.

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Performance against 2015 LTIP metrics.

In 2015, we established the following three year goals for each of our LTIP performance metrics and assigned weighting factors based on each NEOs areas of responsibility.



At AAC the Greater of		At Ambac	Percentage of Target Award Earned
Asset to Liability Ratio ⁽¹⁾	Net Asset Value ⁽¹⁾ ($ in millions)	Cumulative EBITDA ⁽¹⁾ ($ in millions)	Percentage of Target Award Earned
100%	$0	$19	200%
95%	$(299)	$16	175%
90%	$(611)	$13	150%
85%	$(940)	$9	125%
80%	$(1,289)	$6	100%
75%	$(1,661)	$3	50%
70%	$(2,061)	$—	0%


(1)	Linear interpolation between levels results in a proportionate amount of the Ambac LTIP Target Award becoming earned and vested.

At AAC performance is judged based on the higher of the Asset to Liability Ratio or the Net Asset Value (this dual testing feature was eliminated in 2018). For the three years ended December 31, 2017, the measure of the Asset to Liability Ratio exceeded the measure of Net Asset Value. The following graph/charts shows the Company's actual performance over the three year performance period running from January 1, 2015 through December 31, 2017, compared to the achievement levels set forth in the chart above.



	AAC Asset to Liability Ratio		Ambac Cumulative EBITDA

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The following table shows shows the grant date value of the 2015 LTIP awards granted to each of our NEOs (other than Mr. LeBlanc and Ms. Smith, who were not employees of Ambac at that time) and the amounts realized upon vesting and settlement.



Named Executive Officer	Grant Date Award at Target		Weighting between AAC/Ambac	Payout Percentage	Vesting and Settlement
Named Executive Officer	PSU Award #	Cash Incentive Award	Weighting between AAC/Ambac	Payout Percentage	Shares Acquired #	Cash Incentive Payout
David Trick	10,138	$250,000	80%/20%	140.41%	14,234	$351,026
David Barranco	4,056	$100,000	50%/50%	153.5%	6,225	$153,500
Stephen M. Ksenak	4,056	$100,000	80%/20%	140.41%	5,695	$140,410

The Committee considered the Company's actual performance against each of the LTIP metrics for AAC and Ambac for each of the NEOs (other than Mr. LeBlanc and Ms. Smith, who were not employees of Ambac at that time) and determined that the Asset to Liability Ratio at AAC had exceeded target expectations at a payout percentage of 131.7% for the AAC portion of the 2015 LTIP award. With respect to Ambac, the Company achieved a Cumulative EBITDA of $16.0 million exceeding target expectations at a payout percentage of 175.3% for the Ambac portion of the 2015 LTIP award. Weighting the AAC performance metric at 80% and Ambac performance metric at 20%, for each of Messrs. Trick and Ksenak, the 2015 LTIP percentage payout on a blended basis was set at 140.41% of the target award. Due to Mr. Barranco's focus on business development at Ambac at the date of grant, the weighting of his performance metrics were set at 50% each for Ambac and AAC, and the 2015 LTIP percentage payout was therefore higher on a blended basis at 153.50%.

Special Awards following the exit of AAC's Segregated Account from Rehabilitation. The exit of the Segregated Account from rehabilitation was a major milestone for the Company. Execution of that transaction allows for more efficient, cost-effective management of AAC, permits a better integration of corporate governance best practices at Ambac and AAC, and has added incremental adjusted book value of approximately $7 per share to Ambac through the settlement at a discount of deferred payment obligations. The exit from rehabilitation required extensive negotiations with multiple parties who had varying interests, required regulatory and court approval, and was successfully completed on February 12, 2018. With respect to both the 2015 LTIP awards (with the three year performance period ending December 31, 2017) and the 2017 annual STIP awards, there were certain performance factors that were impacted by the timing of the Segregated Account's exit from rehabilitation, principally the adjusted book value for the 2017 STIP and the ALR / net asset value for the 2015 LTIP of the Company. While the Segregated Account's exit from rehabilitation concluded before the filing of Ambac’s Annual Report on Form 10-K for the year ended December 31, 2017, under U.S. GAAP accounting rules, the Company was unable to reflect the benefits of the transaction in its audited consolidated financial statements for 2017. As a result, for the executive management team, the Board decided that payouts under the LTIP and STIP programs would be determined in accordance with the year-end U.S. GAAP financial statements. However, following the filing of the quarterly report on Form 10-Q for the three months ended March 31, 2018 (including the quarterly financial statements) with the SEC, the Committee determined that it was appropriate to make an additional off-cycle award for Mr. LeBlanc and other members of the executive team in 2018 after the benefits of the conclusion of the Segregated Account rehabilitation exit transactions were fully reflected in the first quarter 2018 financial statements. The Committee reviewed the benefits conferred upon the Company and the impact that the transaction would have had on the 2017 STIP and 2015 LTIP performance metrics if the transaction were concluded in the fourth quarter of 2017. The Committee concluded that a special incentive award payment should be made to members of the executive management team in the form of restricted stock units reflecting: (i) the extraordinary effort and achievement demonstrated by the executive management team in bringing the Segregated Account rehabilitation to a successful conclusion, and (ii) the differential in payout that would have been made under the 2017 STIP program and 2015 LTIP program, after giving pro forma effect to the impact on the related performance metrics as if the conclusion of the Segregated Account's exit from rehabilitation had occurred in the fourth quarter of 2017.

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The following table reflects the special awards granted to each of our NEOs following the exit of AAC's Segregated Account from rehabilitation.



Name	Grant Date	Special RSU Awards (#)⁽¹⁾	Grant Date Fair Value of Special RSU Awards ($)⁽²⁾
Claude LeBlanc	May 16, 2018	55,173	1,056,000
David Trick	May 16, 2018	13,062	250,000
David Barranco	May 16, 2018	7,837	150,000
Stephen M. Ksenak	May 16, 2018	10,450	200,000
R. Sharon Smith	May 16, 2018	7,837	150,000


⁽¹⁾	RSUs granted to each of the NEOs listed above will settle and be converted into Ambac common stock as follows: 50% on May 16, 2019, and the remaining 50% on May 16, 2020 (unless settled earlier due to an executive’s departure from the Company).


⁽²⁾	As required under SEC rules for compensation disclosure, the value of the RSUs reported in the table above is (i) based on the grant date fair value of awards in the fiscal year actually granted and (ii) computed in accordance with FASB ASC Topic 718.

Following the grant of these special off-cycle awards to the senior management team, the Committee reset the performance metrics for the 2018 STIP and LTIP programs so that management's performance targets assumed that the 2018 restructuring and the exit of the Segregated Account from rehabilitation was fully accounted for in the prior period.

Perquisites. The Company provided a limited number of perquisites to all our employees, including our executive officers. For Messrs. Trick and Barranco, perquisites included payments for tax preparation services as a result of their roles as executive directors of Ambac UK.

Employment Agreements. Certain of our active NEOs have entered into employment agreements with the Company which provide for certain compensation and benefits, including, severance benefits in certain circumstances. In December 2016, we entered into an employment agreement with our CEO, Claude LeBlanc, in connection with his appointment, which took effect on January 1, 2017. We also entered into an employment agreement with Mr. Trick in November of 2016, and Mr. Ksenak in January 2017. While the Compensation Committee considers employment agreements customary for the chief executive officer, the Committee believed it was important to execute an employment agreement with each of Messrs. Trick and Ksenak to retain their services to Ambac for the foreseeable future. (See “Agreement with Claude LeBlanc”, and “Agreements with Other Executive Officers” below). Severance Agreements have been entered into with various executive officers when the Compensation Committee believes it is in the best interest of the Company to secure an orderly separation between such officers and the Company, which typically include certain continuing obligations from the departing executive.

Post-Employment Benefits. Pursuant to Ambac's Severance Pay Plan, to provide protection in the event of an involuntary termination, each of our current executive officers (other than Messrs. LeBlanc, Trick and Ksenak) is entitled to receive a severance payment equal to 52 weeks of such executive officer's weekly base salary at the time of termination of his employment by Ambac as the result of (i) a job elimination, job discontinuation, office closing, reduction in force, business restructuring, redundancy, or such other circumstances as the Company deems appropriate for the payment of severance or (ii) a “termination by mutual agreement” (as defined in the Severance Pay Plan). In addition to this severance payment, each of our current NEOs (other than Messrs. Trick and Ksenak) would be entitled to receive reimbursement for a portion of the premiums paid for COBRA continuation coverage under the Company's group health plan for the first twelve months following his or her termination of employment. The portion of the premiums to be paid by the Company will be the same as the amount paid by the Company for the same group health insurance coverage for active employees. For a description of post-employment benefits payable to Messrs. LeBlanc, Trick and Ksenak, see “Agreement with Claude LeBlanc,” and “Agreements with Other Executive Officers."

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The 2018 LTIP awards consisted of both PSUs and RSUs. The PSU and RSU award agreements for our NEOs each provided that if a termination occurs for any reason prior to June 30, 2018 with respect to the PSUs, or September 2, 2018 with respect to the RSUs, the entire grant of PSUs or RSUs would expire and be forfeited immediately. The PSU award agreements for our NEOs provide that if a termination occurs on or after June 30, 2018 by reason of death, disability, an involuntary termination other than for “cause,” or retirement, the recipient would be entitled to receive a prorated portion of the PSU award which would only be payable at the end of the performance period provided that the performance conditions related to the award were satisfied. The PSU award would then be pro-rated to reflect the NEO’s actual service plus twelve (12) months during the performance period. Comparable provisions are included in the 2016 and 2017 PSU award agreements, without the benefit of the additional twelve (12) months of credited service. The 2018 RSU award agreements for our NEOs generally provide that if a termination occurs on or after September 2, 2018 other than for “cause,” the entire grant of RSUs shall vest on the termination date.

Impact of Regulatory Requirements on Compensation

Effective for tax years beginning on January 1, 2018 or later, The Tax Cut and Jobs Act repealed the performance-based compensation and commission exceptions to the Section 162(m) $1 million deduction limitation paid to covered employees. The definition of covered employees was modified to include the Chief Financial Officer as well as the Chief Executive Officer and officers whose total compensation is required to be disclosed to shareholders by reason of them being amongst the three highest paid officers. Additionally, any individual who is a covered employee for any taxable year beginning after December 31, 2016 will continue to be a covered employee for all subsequent taxable years, including years after the death of the individual.

Our compensation programs are structured to support organizational goals and priorities and stockholder interests. We do not make compensation determinations based on the income tax treatment of any particular type of award.

Compensation Risk Management

Risks Related to Compensation Policies. In keeping with our risk management framework, we consider risks not only in the abstract, but also risks that might hinder the achievement of a particular objective. We have identified two primary risks relating to compensation: the risk that compensation will be insufficient to retain talent and the risk that compensation strategies might result in unintended incentives. To combat the first risk, as noted above, the compensation of employees throughout the Company is benchmarked against comparative compensation data, permitting us to set compensation levels that we believe contribute to low rates of employee attrition. Further, LTIP awards granted to our NEOs and other senior professionals are subject to vesting over a three-year period. We believe both the levels of compensation and the structure of the LTIP awards have had the effect of retaining key personnel.

With respect to the second risk, our Company-wide year-end compensation program is designed to reflect the performance of the Company, the performance of the business unit in which the employee works and the performance of the individual employee, and is designed not to encourage excessive risk taking. For example, the performance metrics used in our 2018 Short Term Incentive Plan (Net Asset Value, gross operating run rate expenses and Watch List and Adversely Classified Credits), are designed to encourage prudent management of the business. In addition, we pay a significant portion of our year-end incentive compensation in the form of LTIP awards that vest over a three-year period, which makes each of our NEOs and other senior professionals sensitive to long-term risk outcomes, as the value of their awards increase or decrease with the price of our common stock. Further, performance criteria for the PSUs granted as part of the LTIP awards include reductions in Watch List and Adversely Classified Credits and an increase in net asset value, all of which we believe provide our employees additional incentives to prudently manage the wide range of risks inherent in the Company’s business. We are not aware of any employee behavior motivated by our compensation policies and practices that create increased risks for our stockholders or other constituents.

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The Compensation Committee has performed a review of compensation policies and practices for all of our employees and has concluded that our compensation policies and practices are not reasonably likely to have a material adverse impact on the Company.

Risk Mitigating Policies

Stock Ownership Policy. Effective January 1, 2017, all of our executive officers became subject to our Executive Stock Ownership and Retention Policy. The Chief Executive Officer is required to own Ambac common stock equal in value to at least six times his annual base salary, the Chief Financial Officer is required to own Ambac common stock equal in value to at least three times his annual base salary and each other executive officer is required to own Ambac common stock equal in value to at least two times their annual base salary.



Stock Ownership Requirement
Name	Position with Ambac	Shares Valued at $
Claude LeBlanc	President and Chief Executive Officer and Director	$5.4 million
David Trick	Executive Vice President, Chief Financial Officer and Treasurer	$2.25 million
David Barranco	Senior Managing Director	$1.0 million
Stephen M. Ksenak	Senior Managing Director, and General Counsel	$1.2 million
R. Sharon Smith	Senior Managing Director, and Chief of Staff	$1.0 million

There is no required time period within which these executive officers must attain the applicable stock ownership level under the Stock Ownership Policy and nothing in the Stock Ownership Policy requires executive officers to meet their applicable stock ownership levels through open market purchases of Company common stock. Until a covered executive complies with the Stock Ownership Policy, the covered executive is required to retain 100% of net profit shares (which excludes shares withheld to cover applicable taxes) from any compensatory stock award on exercise, vesting or earn-out. A copy of the Stock Ownership Policy was filed with the SEC as Exhibit 99.2 to the Company’s Current Report on Form 8-K filed on December 1, 2016.

Recoupment Policy. Effective January 1, 2017, the Board has adopted a Recoupment Policy. Pursuant to the Recoupment Policy, in the event of a “material financial restatement” or the imposition of a “material financial penalty,” the Company will require, to the fullest extent permitted by applicable law, that a covered employee forfeit and/or reimburse the Company for all or such portion (if any) of the covered employee’s “recoverable compensation” as determined in the sole and absolute discretion of the Board, in accordance with the guidelines set forth in the Recoupment Policy. A “material financial restatement” means the restatement of one or more previously issued financial statements of the Company, for any period ending after December 1, 2016, due to a material error or a series of immaterial errors which could be considered material when viewed in the aggregate of any applicable financial reporting requirements under the securities laws. “Material financial penalty” means a penalty, fine, or other monetary sanction levied against the Company after December 1, 2016, by a regulator or other Federal or state governmental authority in an amount deemed material by the Board of Directors in its sole and absolute discretion. “Recoverable compensation” means certain incentive-based compensation received during a three year look-back period during which (i) the financial reporting measure specified in the applicable award was attained or (ii) the conduct giving rise to the imposition of a material financial penalty against the Company took place. If the grant or earning of an award is based, either wholly or in part, on satisfaction of a financial reporting measure, the award would be deemed received in the fiscal period when that measure was satisfied, in each case without regard to any ongoing service-based vesting requirements. Furthermore, if an award is granted or earned upon satisfaction of financial reporting measures that are based on multiple fiscal years (e.g., a three-year average), the whole award would be deemed Recoverable Compensation for purposes of this Policy if any single fiscal year of the performance period occurs during the three year look-back period. A complete copy of the Recoupment Policy is attached as Exhibit 99.1 to the Company’s Current Report on Form 8-K filed on December 1, 2016.

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Prohibition on Pledging and Hedging and Restrictions on Other Transactions involving Common Stock. Our Insider Trading Policy prohibits our executive officers and Board members from pledging Ambac common stock or using Ambac common stock as collateral for any margin loan. In addition, the Insider Trading Policy contains the following restrictions:


•	Executive officers and Board members are prohibited from engaging in transactions (such as trading in options) designed to hedge against the value of the Ambac common stock, which would eliminate or limit the risks and rewards of the common stock ownership;


•	Executive officers and Board members are prohibited from short-selling Ambac common stock, buying or selling puts and calls on Ambac common stock, or engaging in any other transaction that reflects speculation about the price of Ambac common stock or that might place their financial interests against the financial interests of the Company;


•	Executive officers and Board members are prohibited from entering into securities trading plans pursuant to SEC Rule 10b5-1 without pre-approval; further, no Board member or any NEO may trade in our Common Stock without pre-approval; and


•	Executive officers and Board members may trade in Common Stock only during open window periods, and only after they have pre-cleared transactions.

Conclusion

Our compensation program is designed to permit the Company to provide our named executive officers with total compensation that is competitive, linked to our performance and reinforces the alignment of employee and stockholder interests. At the same time, it is intended to provide us with sufficient flexibility to assure that such compensation is appropriate to attract and retain employees who are vital to the continued success of the Company and to drive outstanding individual and institutional performance. We believe the program met these objectives in 2018.

We are asking our stockholders to indicate their support for our named executive officer compensation as described in this Proxy Statement. This proposal, commonly known as a “say on pay” proposal, gives our stockholders the opportunity to express their views on our named executive officers’ compensation. This vote is not intended to address any specific item of compensation, but rather the overall compensation of our named executive officers and the philosophy, policies and practices described in this Proxy Statement. Accordingly, we will ask our stockholders to vote “FOR” the following resolution at the Annual Meeting:

“RESOLVED, that the stockholders approve, on an advisory basis, the compensation of the named executive officers, as disclosed in the Company’s Proxy Statement for the 2019 Annual Meeting of Stockholders pursuant to the compensation disclosure rules of the Securities and Exchange Commission, including the Summary Compensation Table and the other related tables and disclosure.”

The say on pay vote is advisory, and therefore not binding on Ambac, the Compensation Committee or our Board of Directors. Our Board of Directors and our Compensation Committee value the opinions of our stockholders and to the extent there is any significant vote against the named executive officer compensation as disclosed in this Proxy Statement, we will consider our stockholders’ concerns and the Compensation Committee will evaluate whether any actions are necessary to address those concerns.

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Compensation Committee Report

The Compensation Committee of the Company has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K with management and, based on such review and discussions, the Compensation Committee recommended to the Board that the Compensation Discussion and Analysis be included in this proxy statement.

Compensation Committee

Alexander D. Greene (Chair), Ian D. Haft and C. James Prieur

April 15, 2019

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2018 Summary Compensation Table

The table below provides information concerning the compensation of our President and Chief Executive Officer, Chief Financial Officer, and our three most highly compensated executive officers who were executive officers as of December 31, 2018.



Name and Principal Position	Year	Salary ($)	Stock Awards ($)⁽¹⁾	Non-Equity Incentive Plan Compensation ($)⁽²⁾	All Other Compensation ($)⁽³⁾	Total ($)
Claude LeBlanc	2018	900,000	4,117,020	1,170,000	15,987	6,203,007
President and Chief Executive Officer	2017	900,000	—	1,081,000	5,898	1,986,898
President and Chief Executive Officer
David Trick	2018	750,000	791,762	784,526	12,750	2,339,038
Executive Vice President, Chief Financial Officer and Treasurer	2017	750,000	420,017	573,088	12,849	1,755,954
	2016	770,192⁽⁴⁾	312,504	450,000	13,808	1,546,504
David Barranco	2018	500,000	536,004	423,500	12,800	1,472,304
Senior Managing Director	2017	500,000	242,522	313,440	11,175	1,067,137
Senior Managing Director	2016	425,000	65,626	187,500	12,133	690,259
Stephen M. Ksenak	2018	600,000	628,021	438,910	11,950	1,678,881
Senior Managing Director and General Counsel	2017	600,000	325,023	397,703	11,550	1,334,276
Senior Managing Director and General Counsel	2016	525,000	301,260	300,000	11,308	1,137,568
R. Sharon Smith	2018	450,000	700,504	237,750	28,305	1,416,559
Senior Managing Director and Chief of Staff	2017	273,460	—	226,500	10,306	510,266
Senior Managing Director and Chief of Staff

⁽¹⁾

In 2018, each of our NEOs received deferred stock units (DSUs") pursuant to the Short Term Incentive Plan (the "STIP") and performance stock units (“PSUs”) and restricted stock units ("RSUs") pursuant to Ambac’s Long Term Incentive Plan (the "LTIP"), which are sub-plans of the 2013 Incentive Compensation Plan. In addition, in May of 2018, in recognition of the executive management team's efforts to successfully execute a holistic restructuring transaction, including the exit of the Segregated Account of AAC from rehabilitation, a special off-cycle RSU award was granted to each of our NEOs. In 2017, each of our NEOs received DSUs granted pursuant to the STIP, and Messrs. Trick, Barranco, and Ksenak also received PSUs granted in 2017 and 2016 pursuant to the LTIP. As required by Item 402(c)(2) of Regulation S-K, the value of the DSUs, PSUs and RSUs reported in the Summary Compensation Table is (i) based on the grant date fair value of awards in the fiscal year actually granted and (ii) computed in accordance with FASB ASC Topic 718 based on the probable outcome of performance conditions being achieved, if any, without regard to estimated forfeitures. For a discussion of the assumptions made in the valuation see footnote 2, Basis of Presentation and Significant Accounting Policies, to Ambac’s consolidated financial statements for the year-ended December 31, 2018. Each of our NEOs received DSUs in 2018 as part of their STIP award grant as follows: for Mr. LeBlanc, 23,924 DSUs valued at $361,000; for Mr. Trick, 9,394 DSUs valued at $141,750; for Mr. Barranco, 5,700 DSUs valued at $86,000; for Mr. Ksenak, 6,826 DSUs valued at $103,000; and for Ms. Smith, 16,602 DSUs valued at $250,500; and in 2017 DSUs were issued as part of the STIP in the following amounts: for Mr. Trick, 6,712 DSUs valued at $150,000; for Mr. Barranco, 2,797 DSUs valued at $62,500; and for Mr. Ksenak, 4,475 DSUs valued at $100,000. DSUs represent vested common stock units of Ambac with a deferred settlement provision. These DSUs will settle and convert into Ambac common stock annually over a two-year period; 50% on the first anniversary of the grant date and the remaining 50% on the second anniversary of the grant date (unless settled earlier due to an executive’s departure from the Company). The value of the PSUs listed in the table above is based on a grant date fair value and computed in accordance with FASB ASC Topic 718 based on the probable outcome of performance conditions being achieved. The value of PSUs awarded in 2018 to each of our NEOs, assuming the maximum payout level would have been as follows: for Mr. LeBlanc, $3,600,000; for Mr. Trick, $533,340; for Mr. Barranco, $400,006; for Mr. Ksenak, $433,324; and for Ms. Smith, $400,006. The value of PSUs awarded in 2017 to Messrs. Trick, Barranco and Ksenak assuming the maximum payout level would have been as follows: for Mr. Trick, $600,008; for Mr. Barranco, $400,020; and for Mr. Ksenak, $500,014. The value of the PSUs awarded in 2016 to Messrs. Trick, Barranco, and Ksenak assuming the maximum payout level would have been as follows: for Mr. Trick, $249,996; for Mr. Barranco, $175,004; and for Mr. Ksenak, $225,009. Each of our NEOs received RSUs on March 2, 2018 as part of their 2018 LTIP award grant. These RSUs vest in three equal annual installments on March 2^nd, 2019, 2020, and 2021. Each of Messrs. Trick and Ksenak also received a one-time grant of 12,887 RSUs on February 22, 2016 under the 2013 Incentive Compensation Plan that vested in three equal annual installments on February 21, 2017, 2018 and 2019.

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⁽²⁾

The amount included in the "Non-Equity Incentive Plan Compensation " column above includes cash incentive award payments pursuant to the Company's year-end 2018, 2017 and 2016 STIP program and cash incentive award payments pursuant to the settlement of 2014 and 2015 LTIP awards, in each case, as approved by the Compensation Committee following the conclusion of the relevant performance period for each award.

⁽³⁾

All Other Compensation” for each of our named executive officers in 2018 includes, among other things, contributions by Ambac to the AAC Savings Incentive Plan, as well as a portion of the life insurance premiums paid. In addition for Mr. LeBlanc and Ms. Smith, the amount reported also includes reimbursement from Ambac for certain commuting expenses, and for Messrs. Trick and Barranco, includes payments for tax preparation services received as a result of services rendered to Ambac Assurance UK Limited ("Ambac UK").


⁽⁴⁾	In 2016, Mr. Trick received supplemental payments of $15,000 per month, which were included as part of his salary, for his service as interim President and Chief Executive officer of AAC until the appointment of Nader Tavakoli as President and Chief Executive officer of AAC in March 2016.

Grants of Plan-Based Awards in 2018

The following table contains information on the grants of plan-based awards made to each of our named executive officers in 2018 with respect to our STIP and LTIP programs which are administered pursuant to Ambac’s 2013 Incentive Compensation Plan. In 2018, Ambac's LTIP awards granted to our NEOs were denominated 67% in PSUs and 33% in RSUs. Similarly, Ambac's STIP awards granted to our NEOs in 2018 were denominated 75% in incentive cash awards and 25% in DSUs. The terms and conditions of these awards are described in the footnotes and narrative following this table.



		Estimated Future Payouts Under Non-Equity Incentive Plan Awards⁽¹⁾			Estimated Future Payouts Under Equity Incentive Plan Awards					Grant Date Fair Value of Stock Unit Awards ($) ⁽⁴⁾
					PSU Awards⁽²⁾			RSU Awards # ⁽²⁾	DSU Awards # ⁽³⁾
Name and Principal Position	Grant Date	Threshold ($)	Target ($)	Maximum ($)	Threshold (#)	Target (#)	Maximum (#)	RSU Awards # ⁽²⁾	DSU Awards # ⁽³⁾
Claude LeBlanc		$450,000	$900,000	$1,800,000	—	—	—	—	—	—
Claude LeBlanc	March 2, 2018	—	—	—	59,642	119,284	238,568		—	$1,799,996
	March 2, 2018	—	—	—	—	—	—	59,643	—	900,013
	March 2, 2018	—	—	—	—	—	—		23,924	361,000
	May 16, 2018	—	—	—	—	—	—	55,173	—	1,056,011
David Trick		$206,250	$412,500	$618,750	—	—	—	—	—	—
	March 2, 2018	—	—	—	8,836	17,672	35,344	—	—	$266,670
	March 2, 2018	—	—	—	—	—	—	8,836	—	133,335
	March 2, 2018	—	—	—	—	—	—	—	9,394	141,750
	May 16, 2018	—	—	—	—	—	—	13,062	—	250,007
David Barranco		$125,000	$250,000	$375,000	—	—	—	—	—	—
David Barranco	March 2, 2018	—	—	—	6,627	13,254	26,508	—	—	$200,003
	March 2, 2018	—	—	—	—	—	—	6,627	—	100,001
	March 2, 2018	—	—	—	—	—	—	—	5,700	86,000
	May 16, 2018	—	—	—	—	—	—	7,837	—	150,000
Stephen M. Ksenak		$150,000	$300,000	$450,000	—	—	—	—	—	—
Stephen M. Ksenak	March 2, 2018	—	—	—	7,179	14,358	28,716	—	—	$216,662
	March 2, 2018	—	—	—	—	—	—	7,180	—	108,346
	March 2, 2018	—	—	—	—	—	—	—	6,826	103,000
	May 16, 2018	—	—	—	—	—	—	10,450	—	200,013
R. Sharon Smith		$112,500	$225,000	$337,500	—	—	—	—	—	—
R. Sharon Smith	March 2, 2018	—	—	—	6,627	13,254	26,508	—	—	$200,003
	March 2, 2018	—	—	—	—	—	—	6,627	—	100,001
	March 2, 2018	—	—	—	—	—	—	—	16,602	250,500
	May 16, 2018	—	—	—	—	—	—	7,837	—	150,000

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⁽¹⁾

STIP target annual incentives are set as a percentage of base salary for each of our NEOs as follows: 100% for the Chief Executive Officer; 55% for the Chief Financial Officer; and 50% for each of the other NEOs. Actual incentive payouts can range from 0% to 200% of target for the Chief Executive Officer, and from 0% to 150% of target for the other NEOs based on the Compensation Committee’s review of overall corporate performance and individual and business unit achievement relative to the pre-established goals and objectives.

⁽²⁾

Each of our NEOs received PSUs and RSUs on March 2, 2018 pursuant to Ambac’s LTIP. The RSUs granted as part of the 2018 LTIP award will vest in three equal annual installments on each of March 2, 2019, March 2, 2020, and March 2, 2021.On May 16, 2018, in recognition of the executive management team's efforts to bring about the successful exit of the Segregated Account of AAC from Rehabilitation, a special off-cycle RSU award was granted to each of our NEOs. The RSUs granted on May 16, 2018, will vest and settle in two equal annual installments on each of May 16, 2019, and May 16, 2020.


⁽³⁾	DSUs were granted to each of the NEOs listed above and constituted 25% of their 2017 STIP award. Of these DSUs, 50% settled and converted into Ambac common stock on March 2, 2019, and the remaining 50% will settle and convert into Ambac common stock on March 2, 2020 (unless settled earlier due to an executive’s departure from the Company).


⁽⁴⁾	As required under SEC rules for compensation disclosure, the value of the PSUs, RSUs and DSUs reported in the table above is (i) based on the grant date fair value of awards in the fiscal year actually granted and (ii) computed in accordance with FASB ASC Topic 718.

STIP Awards

STIP awards included in the table above are denominated 75% in incentive cash awards and 25% in vested common stock units of Ambac with a deferred settlement provision (“DSUs”). STIP awards are annual incentives awards meant to reward performance. The DSUs granted as part of the year-end 2018 STIP Awards will settle and convert into Ambac common stock annually over a two-year period; 50% in March 2020 and the remaining 50% in March 2021, unless settled earlier due to an employee’s departure from the Company. For a more detailed description of our STIP program, see "Pay Mix -- Short Term Incentive Compensation" in the "Compensation Discussion and Analysis" section of this Proxy Statement.

LTIP Awards

The PSUs and RSUs included in the table above and awarded on March 2, 2018 were granted pursuant to the LTIP and represent a promise to deliver, within 75 days after the end of the performance period, a number of shares of Ambac’s common stock. The RSUs will vest on a one for one basis in three equal annual installments on each of March 2, 2019, March 2, 2020, and March 2, 2021. For the PSUs the number of shares of Ambac’s common stock that may be acquired can range from 0% to 200% of the target award, depending on the achievement by either Ambac or its principal operating subsidiary, AAC, of a three-year financial performance objective determined by the Compensation Committee. For a more detailed description of our LTIP program, see "Pay Mix -- Long Term Incentive Compensation" in the "Compensation Discussion and Analysis" section of this Proxy Statement.

Special Off-Cycle Award

The Committee concluded that a special off-cycle award should be made to members of the executive management team in the form of restricted stock units reflecting: (i) the extraordinary effort and achievement demonstrated by the executive management team in successfully executing a holistic restructuring transaction, including the exit of the Segregated Account of AAC from rehabilitation, and (ii) the differential in payout that would have been made under the 2017 STIP program and 2015 LTIP program, after giving pro forma effect to the the impact on the related performance metrics as if the conclusion of the Segregated Account rehabilitation had occurred in the fourth quarter of 2017. See "Special Awards following the exit of AAC's Segregated Account from Rehabilitation" in the "Compensation Discussion and Analysis" section of this Proxy Statement.

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Agreement with Claude LeBlanc

The Boards of Directors of Ambac and AAC appointed Claude LeBlanc President and Chief Executive Officer as of January 1, 2017. Ambac and AAC have entered into an Employment Agreement with Mr. LeBlanc (the “LeBlanc Employment Agreement”). The agreement had an initial term of one (1) year, and will automatically renew for successive one (1) year terms unless either party notifies the other that it does not wish to renew the agreement at least 90 days before the end of the then-current term (the initial one year period of employment under the LeBlanc Employment Agreement and any successor period is known as the “employment period”). Under the LeBlanc Employment Agreement, Mr. LeBlanc is entitled to an annual base salary of no less than $900,000 and, for each calendar year that ends during the employment period starting with the 2017 calendar year, he shall be eligible to receive an annual bonus pursuant to the Company’s annual bonus plan for senior executives, a portion of which, not to exceed 50%, may be awarded in the form of equity grants as determined in the discretion of the Compensation Committee of the Board of Directors of Ambac (the “Compensation Committee”). The amount of any such annual bonus paid to Mr. LeBlanc during the employment period shall be based on the achievement of performance goals that are established by the Compensation Committee. Mr. LeBlanc’s target annual incentive award amount shall be 100% of base salary and his maximum annual incentive award shall be 200% of base salary, as determined by the Compensation Committee, in its discretion. In addition, Mr. LeBlanc is eligible to participate in Ambac’s incentive compensation plan, or any successor or additional plan, subject to the terms of such plan, as determined by the Compensation Committee, in its discretion. With respect to each calendar year that ends during the employment period starting with the 2017 calendar year, Mr. LeBlanc’s target annual LTIP award amount shall be no less than 150% of base salary and Mr. LeBlanc’s maximum annual LTIP award amount shall be 300% of base salary, as determined by the Compensation Committee in its discretion.

During the employment period, Mr. LeBlanc shall be entitled to participate in all employee benefit plans, practices and programs maintained by the Company, as in effect from time to time, that are generally made available to senior executives of the Company. Any compensation paid to Mr. LeBlanc pursuant to the LeBlanc Employment Agreement or any other agreement or arrangement with the Company shall be subject to mandatory repayment by Mr. LeBlanc to the Company to the extent any such compensation paid to Mr. LeBlanc is, or in the future becomes, subject to (i) the Company’s Recoupment Policy as in effect from time to time, or (ii) any Federal or state law, rule or regulation which imposes mandatory recoupment. Mr. LeBlanc shall be required to hold shares of the Company’s common stock as set forth in, and subject to the terms of, Ambac’s Stock Ownership Policy as in effect from time to time. The Stock Ownership Policy generally requires that Mr. LeBlanc hold shares of the Company’s common stock equal in value to six times his base salary.

If Mr. LeBlanc’s employment is terminated due to death or disability, he would receive (i) his base salary and any accrued benefits (as defined in the LeBlanc Employment Agreement) through the date of termination, and (ii) an annual bonus for the year of termination, based on actual full-year performance (with any individual factor being rated at 100%), pro-rated to reflect the time of service for such year through the date of termination.

If Mr. LeBlanc’s employment is terminated by the Company for “cause” (as defined in the LeBlanc Employment Agreement), or if he resigns without “good reason” (as defined in the LeBlanc Employment Agreement), or his employment is terminated due to the non-renewal of the LeBlanc Employment Agreement by Mr. LeBlanc, he would receive his base salary and any accrued benefits through the date of termination; provided that his accrued benefits shall not include any earned but unpaid annual incentive award for the year preceding the year of termination unless otherwise determined by the Compensation Committee.

If Mr. LeBlanc’s employment is terminated by the Company other than for “cause” or if he resigns for “good reason,” or his employment is terminated due to the non-renewal of the Agreement by the Company, Mr. LeBlanc would be entitled to (i) receive his base salary and any accrued benefits through the date of termination, (ii) receive a lump sum payment equal to two (2) times the sum of (a) one year’s base salary and (b) the amount of the annual target incentive award for the calendar year in which the date of termination occurs (“Target Bonus”), and

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(iii) receive a lump sum payment equal to the Target Bonus pro-rated to reflect the time of service for such year through the date of termination, and (iv) for up to twelve (12) months following the date of termination, receive customary outplacement services provided to senior executives of the Company. To the extent that Mr. LeBlanc properly elects to continue health care coverage under COBRA, he and his eligible dependents would also continue to participate in the Company’s basic medical and life insurance programs for twelve months (subject to earlier discontinuation in certain circumstances). Furthermore, Mr. LeBlanc shall receive twelve (12) months of vesting acceleration on all of his then-outstanding time-based equity awards or, if vesting is less frequent than annually, a pro rata portion in an amount determined by multiplying the total number of shares or units covered by the applicable award by a fraction where the numerator is the number of days that have elapsed from the most recent vesting date (or, if none, the grant date) and the denominator is the total number of days covered by the vesting schedule starting from the grant date and ending on the final scheduled vesting date, and, with respect to Mr. LeBlanc’s then-outstanding performance-based equity awards, Mr. LeBlanc shall be deemed to have satisfied the service-based component of such awards and shall be eligible to receive a portion of each such award based on actual performance through the end of the applicable performance period, pro-rated to reflect his actual service plus twelve (12) months during each performance period. If Mr. LeBlanc's employment is terminated by the Company other than for “cause” or if he resigns for “good reason,” in either case in contemplation of and no more than 120 days prior to, or within twelve (12) months following, a change in control (as defined in the LeBlanc Employment Agreement), he would be entitled to receive the same compensation described above in this paragraph; provided, that with respect to all of Mr. LeBlanc’s outstanding equity awards, (x) all of the time-based equity awards shall become immediately vested and (y) with respect to the performance-based equity awards, Mr. LeBlanc shall be eligible to vest in each such award based on actual performance through the end of the applicable performance period.

Severance payments made to Mr. LeBlanc in connection with his termination of employment are subject to his delivery of a general release of claims and his material compliance with the restrictive covenants set forth in the LeBlanc Employment Agreement. The LeBlanc Employment Agreement contains restrictive covenants relating to the non-disclosure of confidential information, non-competition (which runs for 12 months following Mr. LeBlanc’s termination of employment), non-solicitation (or hiring) of employees (which runs for 12 months following Mr. LeBlanc’s termination of employment), mutual non-disparagement, and cooperation on certain matters (which runs for 60 months following Mr. LeBlanc’s termination of employment).

The preceding summary of the LeBlanc Employment Agreement contained in this Proxy Statement is qualified in its entirety by reference to the full text of the LeBlanc Employment Agreement which is filed as Exhibit 10.1 to Ambac’s Current Report on Form 8-K dated December 13, 2016, as though it were fully set forth herein.

Agreements with Other Executive Officers

David Trick

On November 1, 2016 (the “effective date”), Ambac and its principal subsidiary, AAC, entered into an Employment Agreement (the “Trick Employment Agreement”) with David Trick, pursuant to which Mr. Trick will continue to serve as Chief Financial Officer and Treasurer of both companies, and was given the additional title of Executive Vice President. The Trick Employment Agreement has an initial term of one (1) year and will automatically renew for successive one (1) year terms unless either party notifies the other that it does not wish to renew the Agreement at least 120 days before the end of the then-current term (the initial one year period of employment under the Agreement and any successor period is known as the “employment period”).

Under the Trick Employment Agreement, Mr. Trick is entitled to an annual base salary of no less than $750,000, commencing as of March 7, 2016, and is eligible for an annual incentive award pursuant to the Company’s annual incentive award plan for senior executives. A portion of Mr. Trick’s annual incentive award may be awarded in the form of vested equity grants with deferred settlement (not to exceed 40% of his annual incentive award amount for any calendar year), as determined in the discretion of the Compensation Committee. The amount of any

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annual incentive award paid to Mr. Trick during the employment period shall be based on the achievement of pre-established performance goals that are established by the Compensation Committee. Mr. Trick’s target annual incentive award shall be set at no less than 55% of base salary.

Stephen M. Ksenak

On January 4, 2017 (the “effective date”), Ambac and its principal subsidiary, AAC, entered into an Employment Agreement (the “Ksenak Employment Agreement”) with Stephen M. Ksenak, pursuant to which Mr. Ksenak will continue to serve as Senior Managing Director and General Counsel of both companies. The Ksenak Employment Agreement has an initial term of one (1) year and will automatically renew for successive one (1) year terms unless either party notifies the other that it does not wish to renew the Agreement at least 90 days before the end of the then-current term (the initial one year period of employment under the Ksenak Employment Agreement and any successor period is known as his “employment period”).

Under the Ksenak Employment Agreement, Mr. Ksenak is entitled to an annual base salary of no less than $600,000, commencing as of January 1, 2017, and is eligible for an annual incentive award pursuant to the Company’s annual incentive award plan for senior executives. A portion of Mr. Ksenak’s annual incentive award may be awarded in the form of vested equity grants with deferred settlement (not to exceed 25% of his annual incentive award amount for any calendar year), as determined in the discretion of the Compensation Committee. The amount of any annual annual incentive award paid to Mr. Ksenak during his employment period shall be based on the achievement of pre-established performance goals that are established by the Compensation Committee. Mr. Ksenak’s target annual incentive award shall be set at no less than 50% of base salary.

Terms and Conditions of the Trick and Ksenak Employment Agreements

Each of the Trick Employment Agreement and the Ksenak Employment Agreement provides that during the employment period, Messrs. Trick and Ksenak will be eligible to participate in Ambac’s incentive compensation plan, or any successor or additional plan, subject to the terms of any such plan, as determined in the discretion the Compensation Committee. Equity awards granted to Messrs. Trick and Ksenak under Ambac’s incentive compensation plan shall be similar in form and shall have similar terms and conditions (other than amount) as equity awards granted to other senior executives of the Company. With respect to each calendar year that ends during the respective employment periods, the target annual long-term incentive award amounts for each of Mr. Trick and Mr. Ksenak shall be no less than $250,000, and $225,000, respectively, each as determined by the Compensation Committee in its discretion.

If the Company terminates employment of either Mr. Trick or Mr. Ksenak other than for “Cause” (including notice of non-renewal by the Company) or Mr. Trick or Mr. Ksenak terminates his own employment with “Good Reason” (as each such term is defined in the respective employment agreement), the Company will pay to such executive his base salary due through the date of termination, any unpaid annual incentive award earned with respect to any fiscal year ending on or preceding the date of termination and any other accrued benefits to which he is entitled as of the date of termination. In addition, such executive will be entitled to receive the following severance payments and benefits: (a) a lump sum payment equal to 1.5 times the sum of (i) base salary and (ii) the amount of target annual incentive award, (b) a lump sum payment equal to target annual incentive award for the year in which the termination occurs pro-rated to reflect the time of service for such year through the date of termination, and (c) such executive and his eligible dependents will be entitled to continue to participate in such basic medical and life insurance programs of the Company as are in effect from time to time, on the same terms and conditions as applicable to active senior executives of the Company, for twelve months or, if earlier, until the date said executive becomes eligible to receive coverage from another employer or is otherwise no longer eligible to receive COBRA continuation coverage. With respect to all of the outstanding equity awards granted to such executive on and after the effective date of his employment agreement, (i) such executive will receive 12 months of vesting acceleration on his then-outstanding awards or, if vesting is less frequent than annually, a pro rata portion, with the period from the last vesting date (or, if none, the grant date) as the numerator and the period

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from such last vesting date (or grant date) to the next vesting date as the denominator, and (ii) with respect to such executive's then-outstanding performance-based equity awards, such executive will be deemed to have satisfied the service-based component of such awards and will be eligible to receive a portion of each such award based on actual performance through the end of the applicable performance period, pro-rated to reflect his actual service plus 12 months during each performance period.

If the Company terminates either Mr. Trick's or Mr. Ksenak's employment other than for Cause (including notice of non-renewal by the Company) or either Mr. Trick or Mr. Ksenak terminates his employment for Good Reason, in each case in contemplation of and no more than 90 days prior to, or one year following the occurrence of, a “Change in Control” (as defined in the respective employment agreements), then, the multiplier used to determine the severance payments that such executive would otherwise be entitled to receive, as described in clause (a) of the immediately preceding paragraph, shall be 2.0 instead of 1.5, and (i) all of such executive’s then-outstanding time-based equity awards granted on or after the effective date of his employment agreement will become immediately vested and (ii) with respect to his then-outstanding performance-based equity awards granted on or after the effective date of his employment agreement, such executive will be eligible to vest in each such award based on actual performance through the end of the applicable performance period.

Severance payments made to each of Messrs. Trick and Ksenak in connection with their termination of employment are subject to their delivery of a general release of claims and material compliance with the restrictive covenants set forth in their respective employment agreements. Each of the Trick Employment Agreement and the Ksenak Employment Agreement contains restrictive covenants relating to the non-disclosure of confidential information, non-competition (which runs for 12 months following each executive’s termination of employment), non-solicitation (or hiring) of employees (which runs for 12 months following each executive’s termination of employment), mutual non-disparagement (which runs for three years following each executive’s termination of employment), and cooperation on certain matters (which runs for 12 months following each executive’s termination of employment). Each of the Trick Employment Agreement and the Ksenak Employment Agreement also sets forth certain stock ownership guidelines that apply to each of Messrs. Trick and Ksenak, respectively. The guidelines generally require that Messrs. Trick and Ksenak hold shares of the Company’s common stock equal in value to three times base salary for Mr. Trick and two times base salary for Mr. Ksenak. Each of the Trick Employment Agreement and the Ksenak Employment Agreement provides that the compensation of each Messrs. Trick and Ksenak will be subject to claw-back or recoupment to the extent required by Company policy or applicable law.

If employment of either Mr. Trick or Mr. Ksenak terminates due to death or “Disability” (as defined in the respective employment agreements), during the employment period, then such executive (or his representative or estate) will be entitled to receive his base salary through the date of termination, any unpaid annual incentive awards earned with respect to any fiscal year ending on or preceding the date of termination, and an annual annual incentive award for the year of termination based on actual full-year performance (with any individual factor being rated at 100%), pro-rated to reflect the time of service for such year through the date of termination, and any other accrued benefits to which said executive is entitled as of the date of termination. With respect to all of such executive’s outstanding equity awards granted on and after the effective date of his employment agreement, (i) such executive will receive 12 months of vesting acceleration on his then-outstanding awards or, if vesting is less frequent than annually, a pro rata portion, with the period from the last vesting date (or, if none, the grant date) as the numerator and the period from such last vesting date (or grant date) to the next vesting date as the denominator, and (ii) with respect to the then-outstanding performance-based equity awards of such executive, he will be deemed to have satisfied the service-based component of such awards and will be eligible to receive a portion of each such award based on actual performance through the end of the applicable performance period, pro-rated to reflect their actual service plus 12 months during each performance period.

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The preceding summary of each of the Trick Employment Agreement and Ksenak Employment Agreement contained in this Proxy Statement is qualified in its entirety by reference to the full text of the Trick Employment Agreement which is filed as Exhibit 10.2 to Ambac’s Quarterly Report on Form 10-Q for the period ending September 30, 2016, and the full text of the Ksenak Employment Agreement which is filed as Exhibit 10.1 to Ambac’s Current Report on Form 8-K dated January 4, 2017, each as though it were fully set forth herein.

Outstanding Equity Awards at 2018 Fiscal Year-End

The following table provides information about the number and value of DSUs, RSUs and PSUs granted under Ambac’s 2013 Incentive Compensation Plan (which includes the LTIP and STIP) that have not settled or converted into shares of Ambac common stock (“vested”) and are held by our named executive officers as of December 31, 2018. The market value of the DSUs, RSUs and PSUs was calculated based on the closing price of Ambac’s common stock on the NASDAQ Stock Market on December 31, 2018 ($17.24).



Named Executive Officer	Number of Deferred Stock and Restricted Stock Units That Have Not Vested (#) ⁽¹⁾	Market Value of Deferred Stock and Restricted Stock Units That Have Not Vested ($)	Equity Incentive Plan Awards: Number of Unearned Performance Stock Units That Have Not Vested (#) ⁽²⁾	Equity Incentive Plan Awards: Market or Payout Value of Unearned Performance Stock Units that Have not Vested ($)
Claude LeBlanc	135,033	$2,327,969	119,284	$2,056,456
David Trick	37,829	$652,172	39,149	$674,929
David Barranco	20,940	$361,006	27,841	$479,979
Stephen M. Ksenak	30,163	$520,010	32,793	$565,351
R. Sharon Smith	29,819	$514,080	13,254	$228,499

⁽¹⁾

The DSUs held by each of our NEOs vest in two equal annual installments on the first and second anniversaries of their grant date. The DSUs granted on March 2, 2018, 50% vest on March 2, 2019 and the remaining 50% vest on March 2, 2020. With respect to the DSU granted on March 2, 2017, the remaining 50% vest on March 2, 2019. RSUs granted to our NEOs on May 16, 2018 vest 50% on May 16, 2019, and 50% on May 16, 2020. RSUs granted on March 2, 2018, vest in three equal annual installments on March 2, 2019, 2020, and 2021. The RSUs granted to Messrs. Trick and Ksenak on February 22, 2016 vest in equal annual installments with the final vesting date on February 21, 2019.

⁽²⁾

PSUs granted to our NEOs under Ambac's LTIP Plan on, February 22, 2016, March 2, 2017, and March 2, 2018, have a three year Performance Period and will vest within 60 days (for the March 22, 2016 awards) and 75 days (for the March 2, 2017, and March 2, 2018 awards) after the last day of the respective Performance Period occurring on December 31 of 2018, 2019, and 2020, respectively. The number of PSUs reported assumes that a target level of performance will be achieved over the Performance Period.

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Stock Vested in 2018

The following table sets forth certain information concerning DSUs, RSUs and PSUs held by the named executive officers listed below that vested (i.e., settled or converted into shares of Ambac common stock) in 2018. The value realized on vesting and settlement for each of our named executive officers was calculated based on the closing price of our common stock on the NASDAQ Stock Market on each of February 21, 2018, February 26, 2018, March 2, 2018 and May 16, 2018. The closing price of our common stock on the NASDAQ Stock Market on February 21, 2018 was $15.84, on February 26, 2018 was $15.72, on March 2, 2018 was $15.09 and May 16, 2018 was $19.14.



	Stock Awards
Named Executive Officer	Number of Shares Acquired on Vesting (#)	Value Realized on Vesting ($)
Claude LeBlanc	3,707	$66,627
David Trick	22,717	$357,318
David Barranco	8,146	$128,189
Stephen M. Ksenak	12,866	$202,752
R. Sharon Smith	1,247	$20,162

Nonqualified Deferred Compensation

The Company's annual incentive program provides that 25% of the annual incentive awards for executive officers are paid in common stock units of Ambac with a deferred settlement provision (net of certain payroll taxes), and the remainder is paid in cash. These DSUs will settle and convert into Ambac common stock annually over a two-year period; 50% on the first anniversary of the grant date and the remaining 50% on the second anniversary of the grant date (unless settled earlier due to an employee’s departure from the Company). The following table reports the value of the DSUs received by each of our named executive officers in lieu of cash.



Name of Executive Officers	Executive Contributions in 2018 $	Registrant Contributions in 2018 ⁽¹⁾ $	Aggregate Earnings in 2018 $	Aggregate Withdrawals/ Distributions $	Aggregate Balance in 2018 ⁽²⁾ $
Claude LeBlanc	—	$344,897	—	—	$344,897
David Trick	—	135,750	—	—	207,583
David Barranco	—	82,376	—	—	112,526
Stephen M. Ksenak	—	98,643	—	—	146,539
R. Sharon Smith	—	236,717	—	—	236,717


⁽¹⁾	Amounts reported in this column are also included in the “Stock Awards” column in the 2018 Summary Compensation Table.


⁽²⁾	Amounts reported in this column include the aggregate value of DSUs as of their grant date that were awarded in 2018 and 2017 that have not settled and converted into shares of Ambac common stock.

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Potential Payments Upon Termination or Change-in-Control

The following table shows the potential payments that would be made by the Company to each of the named executive officers assuming that such officer's employment with the Company was terminated on December 31, 2018 under the circumstances outlined in the table. For purposes of this table, the per share price of the Company's common stock is assumed to be $17.24, which was the closing price on December 31, 2018.



	Prior to a Change of Control						In Connection with a Change of Control
Named Executive Officer	Death or Disability		Involuntary Termination without "Cause" or by Executive for "Good Reason"		Voluntary Resignation		Death or Disability		Involuntary Termination without "Cause" or by Executive for "Good Reason"		Voluntary Resignation
Claude LeBlanc
Severance payment ⁽¹⁾	$	—	$	4,500,000	$	—	$	—	$	4,500,000	$	—
RSU settlement ⁽²⁾	1,933,931		1,933,931		905,686		1,933,931		1,933,931		905,686
DSU settlement ⁽³⁾	394,037		394,037		394,037		394,037		394,037		394,037
Pro-rata Annual STIP Award⁽⁴⁾	900,000		900,000		—		900,000		900,000		—
Benefits ⁽⁵⁾	—		17,059		—		—		17,059		—
Total	$	3,227,968	$	7,745,027	$	1,299,723	$	3,227,968	$	7,745,027	$	1,299,723
David Trick
Severance payment ⁽¹⁾	$	—	$	1,743,750	$	—	$	—	$	2,325,000	$	—
RSU settlement ⁽²⁾	441,672		367,609		215,276		441,672		441,672		289,339
DSU settlement ⁽³⁾	210,500		210,500		210,500		210,500		210,500		210,500
Pro-rata Annual STIP Award⁽⁴⁾	412,500		412,500		—		412,500		412,500		—
Benefits ⁽⁵⁾	—		31,210		—		—		31,210		—
Total	$	1,064,672	$	2,765,569	$	425,776	$	1,064,672	$	3,420,882	$	499,839
David Barranco
Severance payment ⁽¹⁾	$	—	$	500,000	$	—	$	—	$	500,000	$	—
RSU settlement ⁽²⁾	243,636		243,636		129,386		243,636		243,636		129,386
DSU settlement ⁽³⁾	117,370		117,370		117,370		117,370		117,370		117,370
Benefits ⁽⁵⁾	—		26,544		—		—		26,544		—
Total	$	361,006	$	887,550	$	246,756	$	361,006	$	887,550	$	246,756
Stephen M. Ksenak
Severance payment ⁽¹⁾	$	—	$	1,350,000	$	—	$	—	$	1,800,000	$	—
RSU settlement ⁽²⁾	370,367		296,304		172,521		370,367		370,367		246,584
DSU settlement ⁽³⁾	149,643		149,643		149,643		149,643		149,643		149,643
Pro-rata Annual STIP Award⁽⁴⁾	300,000		300,000		—		300,000		300,000		—
Benefits ⁽⁵⁾	—		33,456		—		—		33,456		—
Total	$	820,010	$	2,129,403	$	322,164	$	820,010	$	2,653,466	$	396,227
R. Sharon Smith
Severance payment ⁽¹⁾	$	—	$	450,000	$	—	$	—	$	450,000	$	—
RSU settlement ⁽²⁾	243,636		243,636		129,386		243,636		243,636		129,386
DSU settlement ⁽³⁾	270,444		270,444		270,444		270,444		270,444		270,444
Benefits ⁽⁵⁾	—		26,544		—		—		26,544		—
Total	$	514,080	$	990,624	$	399,830	$	514,080	$	990,624	$	399,830

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⁽¹⁾

Pursuant to the employment agreements between Ambac and each of Messrs. LeBlanc, Trick and Ksenak, each of Messrs. LeBlanc, Trick and Ksenak are entitled to receive the severance payments listed above if terminated “without cause”, or if he resigns for “good reason”. See "Agreement with Claude LeBlanc," and “Agreements with Other Executive Officers.” Pursuant to Ambac's Severance Pay Plan, as described below, each of Mr. Barranco, and Ms. Smith is entitled to receive the severance payments listed above if terminated “without cause” (or “Just Cause,” as that term is used in the Severance Pay Plan).

⁽²⁾

Each of our named executive officers received RSUs grants on March 2, 2018 and May 16, 2018. The March 2, 2018, RSU awards vest and settle in three equal annual installments on March 2, 2019, 2020, and 2021. The May 16, 2018, RSU awards vest and settle in two equal annual installments on May 16, 2019, and 2020; provided, that if the recipient’s employment with the Company is terminated for any reason, all of the RSUs granted on May 16, 2018 would vest and settle immediately. Messrs. Trick and Ksenak also received an RSU grant on February 22, 2016, which vested and settled in three equal annual installments. The final tranche of those RSUs vested and converted into shares of Ambac common stock on February 21, 2019. Valuation of all RSU awards is based upon the closing price of our common stock on December 31, 2018.


⁽³⁾	DSUs awards settle and convert into Ambac common stock annually over a two-year period; 50% on the first anniversary of the grant date and the remaining 50% on the second anniversary of the grant date (unless settled earlier due to an executive’s departure from the Company). Valuation of all DSU awards is based upon the closing price of our common stock on December 31, 2018.

⁽⁴⁾

Pursuant to the terms of the employment agreements for each of Messrs. LeBlanc, Trick, and Ksenak, each of these executive officers is entitled receive a pro-rated portion of the annual STIP award that he would have received in the absence of such termination. Assuming a December 31, 2018 termination, each of Messrs. LeBlanc, Trick and Ksenak were assumed to have received their target STIP award for 2018 (annual cash incentive award plus value of DSU award) as set forth in their respective employment agreements.

⁽⁵⁾

Messrs. LeBlanc, Trick and Ksenak and their eligible dependents will be entitled to continue to participate in such basic medical and life insurance programs of the Company as are in effect from time to time, on the same terms and conditions as applicable to active senior executives of the Company, for twelve months or, if earlier, until the date said executive becomes eligible to receive coverage from another employer or is otherwise no longer eligible to receive COBRA continuation coverage. Pursuant to Ambac's Severance Pay Plan, in addition to the severance payments listed, Mr. Barranco and Ms. Smith would be entitled to receive reimbursement for a portion of the premiums paid for COBRA continuation coverage in the same amount as was previously paid by the Company for the same group health insurance coverage under the Company's group health plan for the first twelve months following their termination of employment. The amounts included in the table reflect the cost of COBRA benefit continuation coverage under the plan in which the particular executive is enrolled, less the monthly active employee cost of these benefits, as well as for Messrs. LeBlanc, Trick and Ksenak the cost of continued life insurance coverage for the 12 month severance period.

Each of our named executive officers received an LTIP agreement in connection with their LTIP awards in 2018, and Messrs. Trick, Barranco, and Ksenak also received an LTIP agreement in connection with their LTIP awards in 2016 and 2017. In general, those agreements provide that unvested cash incentive awards (only applicable to the 2016 LTIP awards), PSUs and RSUs are forfeited on termination of employment, except in limited cases such as death, disability, an involuntary termination by the Company other than for “cause,” or Retirement (as defined in the relevant LTIP agreement) and the termination occurs (i) on or after January 1, 2017 with respect to the 2016 LTIP Award, or (ii) on or after January 1, 2018 with respect to the 2017 LTIP Award, or (iii) on or after June 30, 2018 with respect to the 2018 LTIP Award, but prior to the last day of the respective Performance Period. If a termination occurs on or after one of the dates described in the preceding sentence by reason of death, disability, an involuntary termination by the Company other than for “cause,” or Retirement, the recipient would be entitled to receive a prorated portion of the respective LTIP award which would only be payable at the end of the relevant performance period (December 31, 2018 with respect to the 2016 LTIP Award; December 31, 2019 with respect to the 2017 LTIP Award; and December 31, 2020 with respect to the 2018 LTIP Award) provided that the performance conditions related to each award were satisfied. Because performance will not be determined until the end of the performance period, no amounts are included in the table above with respect to any of the 2016, 2017, or 2018 LTIP awards.

As of December 31, 2018, Ambac did not have any contracts, agreements, plans or arrangements that provided for a payment to a named executive officer solely upon a change-in control of Ambac, other than a legacy RSU agreement used for a special RSU grant to each of Messrs. Trick and Ksenak in February 2016 that provided for accelerated vesting upon a change-in control.

Severance Pay Plan

Pursuant to Ambac’s Severance Pay Plan, each of our executive officers (other than Messrs. LeBlanc, Trick and Ksenak) is entitled to receive a severance payment equal to 52 weeks of such executive officer’s weekly base salary at the time of termination of his or her employment by Ambac as the result of (i) a job elimination, job

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discontinuation, office closing, reduction in force, business restructuring, redundancy, or such other circumstances as the Company deems appropriate for the payment of severance or (ii) a “termination by mutual agreement” (as defined in the Severance Pay Plan).

The severance benefits payable under the Severance Pay Plan are conditioned upon the applicable named executive officer executing and delivering an agreement and general release of claims in favor of the Company. With respect to a termination for "Cause" (or “Just Cause,” as that term is used in the Severance Pay Plan) the term generally means any one of the following reasons for the discharge or other separation of a named executive officer from employment with the Company: (a) any act or omission by the named executive officer resulting or intended to result in personal gain at the expense of the Company; (b) the improper disclosure by the named executive officer of proprietary or confidential information or trade secrets of the Company, including, without limitation, client lists; or (c) misconduct by the named executive officer, including, but not limited to, fraud, intentional violation of or negligent disregard for the rules and procedures of the Company (including a violation of the Company's code of business conduct), theft, violent acts or threats of violence, or possession of alcohol or controlled substances on the property of the Company.

Pay Ratio Disclosure

Presented below is the ratio of annual total compensation of our CEO to the median of the annual total compensation of all our employees (excluding our CEO). The ratio presented below is a reasonable estimate calculated in a manner consistent with Item 402(u) of Regulation S-K under the Securities Exchange Act of 1934.

In identifying our median employee, we calculated the annual total compensation of each employee for the twelve month period that ended on December 31, 2018. Total compensation for these purposes included base salary, annual cash incentive award, and any equity awards granted or issued in 2018 and was calculated using internal payroll/tax records. We did not apply any cost-of-living adjustments as part of the calculation.

We selected the median employee based on the 123 full-time and part-time workers who were employed as of December 31, 2018, including independent contractors that we determined were our employees exclusively for the purpose complying with SEC reporting on “Pay Ratio Disclosure.” We did not exclude any non-U.S. employees using the SEC’s permitted exclusions under Item 402(u) of Regulation S-K.

The 2018 annual total compensation as determined under Item 402 of Regulation S-K for our CEO was $6,203,007. The 2018 annual total compensation as determined under Item 402 of Regulation S-K for our median employee was $248,724. The ratio of our CEO’s annual total compensation to the median of the annual total compensation of all our employees (excluding our CEO) for fiscal year 2018 is 25 to 1.

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INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Principal Accounting Fees and Services

Audit and All Other Fees

The following table presents fees for professional audit services rendered by KPMG LLP for the integrated audit of Ambac's consolidated financial statements and internal control over financial reporting for the years ended December 31, 2018 and 2017, and fees billed for other services rendered by KPMG LLP during those periods. All of the fees for calendar years 2018 and 2017 presented below were approved by the Audit Committee.



Audit Related Expenses	2018		2017
Audit Fees ⁽¹⁾	$	3,244,318	$	3,635,564
Audit Related Fees ⁽²⁾	84,500		80,500
Tax Fees ⁽³⁾	70,883		48,545
All Other Fees ⁽⁴⁾	—		—
Total	$	3,399,701	$	3,764,609


⁽¹⁾	Audit fees consisted of audit work performed in connection with the annual and quarterly financial statements, as well as work generally only the independent registered public accounting firm can reasonably be expected to provide, such as statutory audits, consents, comfort letters and attestation services.

⁽²⁾

Audit related fees are for services traditionally performed by the independent registered public accounting firm, including due diligence related to mergers and acquisitions, employee benefit plan audits, agreed upon procedures and certain consultation regarding financial accounting and/or reporting standards. In 2018 and 2017, these fees consisted principally of (i) audits of employee benefit plans and (ii) accounting and consultations regarding accounting standards.

⁽³⁾

Tax fees consist principally of tax compliance services and tax advice to Ambac. Of the total amount of tax fees for 2018, $70,833 related to tax compliance and $0 related to tax advice. Of the total amount of tax fees for 2017, $36,098 related to tax compliance and $12,447 related to tax advice. Compliance-related tax fees were for professional services rendered in connection with the preparation of the federal and foreign tax returns.


⁽⁴⁾	Other fees are those associated with services not captured in the other categories. Ambac generally does not request such services from the independent registered public accounting firm.

Policy on Audit Committee Pre-Approval of Audit and Permissible Non-Audit Services of Independent Registered Public Accounting Firm

Consistent with SEC policies regarding auditor independence, the Audit Committee has responsibility for appointing, setting compensation, and overseeing the work of our independent registered public accounting firm. In recognition of this responsibility, the Audit Committee has established a policy to pre-approve all audit and permissible non-audit services provided by our independent registered public accounting firm.

Prior to engagement of the independent registered public accounting firm for the next year’s audit, management and/or the independent registered public accounting firm will submit to the Audit Committee for approval a summary of services expected to be rendered during that year for each of the categories of services.

Prior to engagement, the Audit Committee pre-approves these services by category of service. The Audit Committee requires the independent registered public accounting firm and management to report actual fees versus the budget periodically throughout the year by category of service. During the year, circumstances may arise when it may become necessary to engage the independent registered public accounting firm for additional services not contemplated in the original pre-approval. In those instances, any services provided by the independent registered public accounting firm will be pre-approved by the Audit Committee or, if between meetings of the Audit Committee, by its Chairman pursuant to authority delegated by the Audit Committee. The Chairman reports all pre-approval decisions made by him at the next meeting of the Audit Committee, and he has undertaken to confer with the Audit Committee to the extent that any engagement for which his pre-approval is sought is expected to generate fees for the independent registered public accounting firm in excess of $100,000.

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THE AUDIT COMMITTEE REPORT

The Audit Committee of Ambac is responsible for providing independent, objective oversight of Ambac’s accounting functions, internal controls and risk management. The Audit Committee selects the independent registered public accounting firm. As of the date of this report, the Audit Committee was composed of four directors, each of whom is independent within the meaning of the rules of the SEC and the Listing Rules of NASDAQ. In accordance with Section 407 of the Sarbanes-Oxley Act of 2002, Ambac has determined that three members of the Audit Committee, Messrs. Herzog, Haft and Prieur, are “audit committee financial experts" as that term is defined in the rules and regulations of the SEC.

The Audit Committee operates under a written charter adopted by the Board. A copy of the charter is available at Ambac’s website: http://ir.ambac.com/corporate-governance-0. The Audit Committee regularly reviews its charter to ensure that it is meeting all relevant Audit Committee policy requirements of the SEC and the NASDAQ Stock Exchange.

Management is responsible for the preparation, presentation and integrity of Ambac’s financial statements, accounting and financial reporting principles, the establishment and effectiveness of internal controls (including internal control over financial reporting) and procedures designed to assure compliance with accounting standards and applicable laws and regulations. The independent registered public accounting firm is responsible for performing an independent audit of Ambac’s consolidated financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States) ("PCAOB"), expressing an opinion, based on their audit, as to whether the financial statements fairly present, in all material respects, the financial position, results of operations and cash flows of Ambac in conformity with generally accepted accounting principles and auditing the effectiveness of internal control over financial reporting. The Audit Committee’s responsibility is to monitor and oversee these processes. However, none of the members of the Audit Committee is professionally engaged in the practice of accounting or auditing. The Audit Committee relies, without independent verification, upon the information provided to it and on the representations made by management and the independent registered public accounting firm.

In 2018, the Audit Committee held eleven meetings. The meetings were designed, among other things, to facilitate and encourage communication among the Audit Committee, management, our internal auditors and our independent registered public accounting firm, KPMG LLP. The Audit Committee discussed with our internal auditors and KPMG LLP the overall scope and plans for their respective audits. The Audit Committee met with the internal auditors and KPMG LLP, with and without management present, to discuss the results of their examinations and their evaluations of Ambac’s internal controls. The Audit Committee also met with the Chief Financial Officer, with and without other members of management present, to discuss matters relating to financial reporting and internal controls.

The Audit Committee has reviewed and discussed the audited consolidated financial statements for the year ended December 31, 2018, with management, our internal auditors and KPMG LLP. The Audit Committee also discussed with management and KPMG LLP the process used to support certifications by Ambac’s Chief Executive Officer and Chief Financial Officer that are required by the SEC and the Sarbanes-Oxley Act of 2002 to accompany Ambac’s periodic filings with the SEC.

The Audit Committee also discussed with KPMG LLP matters required to be discussed with audit committees under auditing standards, including, among other things, matters related to the conduct of the audit of Ambac’s consolidated financial statements and the matters required to be discussed by Auditing Standard No. 1301, Communication with Audit Committees (AS 1301).

KPMG LLP also provided to us the written disclosures regarding their independence required by PCAOB Ethics and Independence Rule 3526, Communication with Audit Committees Concerning Independence, and the Audit Committee discussed with them their independence from Ambac. When determining KPMG LLP’s independence, the Committee considered, among other matters, information provided by KPMG regarding

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PCAOB inspections, and whether KPMG’s provision of services to Ambac beyond those rendered in connection with their audit of Ambac’s consolidated financial statements and reviews of Ambac’s consolidated financial statements included in its Quarterly Reports on Form 10-Q was compatible with maintaining their independence. The Audit Committee also reviewed, among other things, the audit, non-audit and tax services performed by, and the amount of fees paid for such services to, KPMG LLP. The Audit Committee concluded that KPMG LLP, an independent registered public accounting firm, is independent from Ambac and its management.

Based upon the review and discussions referred to above, the Audit Committee recommended to the Board that Ambac’s audited financial statements for the year ended December 31, 2018 be included in Ambac’s Annual Report on Form 10-K for the year ended December 31, 2018 for filing with the SEC. The Audit Committee also selected KPMG LLP as Ambac’s independent registered public accounting firm for 2019.

The Audit Committee

David L. Herzog (Chairman), Ian D. Haft, Joan Lamm-Tennant and C. James Prieur

February 25, 2019

SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Exchange Act requires our directors and executive officers, and persons who own more than 10% of a registered class of the Company’ equity securities (collectively, our “insiders”), to file reports with the SEC on their initial beneficial ownership of Ambac common stock and any subsequent changes in their ownership. Our insiders must also provide us with copies of all Section 16(a) forms they file. We reviewed copies of all reports furnished to us and obtained written representations from our insiders that all transactions have been reported to us. To the Company’s knowledge, based solely on a review of the copies of such reports furnished to the Company and written representations from the Company’s officers and directors, all Section 16(a) filing requirements applicable to our insiders were complied with during 2018.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Related Party Transactions Policy and Procedure

Our Related Party Transactions Policy provides that Ambac will only enter into or ratify a related party transaction when our Board of Directors, acting through the Governance and Nominating Committee, determines that the related party transaction is in the best interests of Ambac and our stockholders.

For the purposes of this policy,


•	a “related party” means:


◦	a member of the Board of Directors (or a nominee to the Board of Directors);


◦	an executive officer;


◦	any person who is known by Ambac to be the beneficial owner of more than 5% of our common stock; or


◦	any person known by Ambac to be an immediate family member of any of the persons listed above; and


•	a “related party transaction” means a transaction (and/or amendment thereto) with a related party occurring since the beginning of our last fiscal year, or any currently proposed transaction, involving Ambac where the amount exceeds $120,000 and in which any related party had or will have a direct or indirect interest.

Each of our directors and executive officers is required to bring potential related party transactions to the attention of Ambac and are periodically required to confirm and provide details of such transactions. Our legal staff, in consultation with management and with outside counsel, as appropriate, determines whether any transaction or relationship brought to Ambac’s attention does, in fact, constitute a related party transaction requiring compliance with our Related Party Transactions Policy.

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If our legal department determines that a transaction is a related party transaction, the Governance and Nominating Committee must review the transaction and either approve or disapprove it. A related party transaction entered into without pre-approval of the Committee will not be deemed to violate the Related Party Transactions Policy, or be invalid or unenforceable, so long as the transaction is brought to the Governance and Nominating Committee as promptly as reasonably practical after it is entered into or after it becomes reasonably apparent that the transaction is covered by our Related Party Transactions Policy. In determining whether to approve or ratify a transaction with a related party, the Governance and Nominating Committee will take into account all of the relevant facts and circumstances available to it, including, among any other factors it deems appropriate:


•	whether the terms of the related party transaction are fair to Ambac and on the same basis as would apply if the transaction did not involve a related party;


•	whether there are business reasons for Ambac to enter into the related party transaction;


•	whether the related party transaction would impair the independence of an outside director; and

•

whether the related party transaction would present an improper conflict of interests for any director or executive officer of Ambac, taking into account the size of the transaction, the overall financial position of the director, executive officer or other related party, the direct or indirect nature of the director's, executive officer's or other related party's interest in the transaction and the ongoing nature of any proposed relationship, and any other factors the Governance and Nominating Committee deems relevant.

Any member of the Governance and Nominating Committee who is a related party with respect to a transaction under review may not vote on the approval of the transaction but may, if so requested by the Chair of the Committee, participate in some or all of the Committee's discussions of the related party transaction.

No related party transactions were identified by the Board or the Governance and Nominating Committee in 2018.

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PROPOSAL NUMBER 1

ELECTION OF DIRECTORS

Nominees

The Governance and Nominating Committee has recommended, and the Board of Directors has nominated:



ü	Alexander D. Greene	ü	C. James Prieur

ü	Ian D. Haft	ü	Jeffrey S. Stein

ü	David L. Herzog	ü	Joan Lamm-Tennant

ü	Claude LeBlanc

as nominees for election as members of our Board of Directors at the Annual Meeting. At the Annual Meeting, seven directors will be elected to the Board of Directors.

Except as set forth below, unless otherwise instructed, the persons appointed in the accompanying form of proxy will vote the proxies received by them for these nominees, who are all presently directors of Ambac. In the event that any nominee becomes unavailable or unwilling to serve as a member of our Board of Directors, the proxy holders will vote in their discretion for a substitute nominee. The term of office for each person elected as a director will continue until our next annual meeting or until a successor has been elected and qualified, or until the director’s earlier death, resignation, or removal.

The sections titled “Board of Directors” and “Director Selection Process and Qualifications” in this Proxy Statement contain more information about the leadership skills and other experiences that led our Governance and Nominating Committee and our Board of Directors to recommend each as a nominee for director.

Required Vote

The seven nominees receiving the highest number of affirmative “FOR” votes shall be elected as directors. Unless marked to the contrary, proxies received will be voted “FOR” these nominees.

Ambac Recommendation



þ		Our Board of Directors recommends a vote “FOR” the election to the Board of Directors of each of the above mentioned nominees.

* * * * *

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PROPOSAL NUMBER 2

ADVISORY VOTE TO APPROVE OUR

NAMED EXECUTIVE OFFICERS COMPENSATION

We are asking our stockholders to vote to approve, on an advisory (non-binding) basis, the compensation of our named executive officers as disclosed in this Proxy Statement in accordance with Item 402 of Regulation S-K, which is the SEC’s rule setting forth executive compensation disclosure requirements.

Our executive compensation program is designed to attract, motivate, and retain our executive officers, who are critical to our success. See “Executive Compensation — Compensation Discussion and Analysis” for additional information.

We believe that our executive compensation programs are structured to support our Company and our business objectives. We are asking our stockholders to indicate their support for our named executive officer compensation as described under “Executive Compensation”. This proposal, commonly known as a “say on pay” proposal, gives our stockholders the opportunity to express their views on our named executive officers’ compensation. This vote is not intended to address any specific item of compensation, but rather the overall compensation of our named executive officers and the philosophy, policies and practices described in this Proxy Statement. Accordingly, we will ask our stockholders to vote “FOR” the following resolution at the Annual Meeting of Stockholders:

RESOLVED, that the stockholders approve, on an advisory basis, the compensation of the named executive officers, as disclosed in the Company’s Proxy Statement for the 2019 Annual Meeting of Stockholders pursuant to the compensation disclosure rules of the Securities and Exchange Commission, including the Summary Compensation Table and the other related tables and disclosure.

The say on pay vote is advisory, and therefore not binding on our Company, the Compensation Committee or the Board of Directors. However, the Board of Directors and the Compensation Committee value the opinions of our stockholders and will review the voting results carefully.

Ambac Recommendation



þ		The Board of Directors recommends a vote FOR the approval of executive compensation.

* * * * *

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PROPOSAL NUMBER 3

Ratification Of Appointment Of

Independent Registered Public Accounting Firm

The Audit Committee of the Board of Directors has selected KPMG LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2019 and recommends that our stockholders vote for ratification of such selection. During the fiscal year ended December 31, 2018, KPMG LLP served as our independent registered public accounting firm and also provided certain tax related and consulting services. See the section titled “Independent Registered Public Accounting Firm” in this Proxy Statement. Notwithstanding its selection, the Audit Committee, in its discretion, may appoint another independent registered public accounting firm at any time during the year if the Audit Committee believes that such a change would be in the best interests of Ambac and our stockholders. If the appointment is not ratified by our stockholders, the Audit Committee may reconsider whether it should appoint another independent registered public accounting firm. Representatives of KPMG LLP are expected to attend the Annual Meeting, where they will be available to respond to appropriate questions and, if they desire, to make a statement.

Required Vote

Ratification of the appointment of KPMG LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2019 requires the affirmative “FOR” vote of the holders of a majority of the voting power of Ambac’s shares of common stock present or represented by proxy at the Annual Meeting and entitled to vote thereon, voting together as a single class. Unless marked to the contrary, proxies received will be voted “FOR” ratification of the appointment of KPMG LLP.

Ambac Recommendation



þ		Our Board of Directors recommends a vote FOR the ratification of the appointment of KPMG LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2018.

* * * * *

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Appendix A

NON-GAAP FINANCIAL MEASURES

In the Proxy Statement Summary, under the caption “Performance Highlights,” and in the Compensation Discussion and Analysis section of this Proxy Statement, under the captions "2018 Company Performance Highlights," and “2018 Annual Incentives,” the Company reports two non-GAAP financial measures: Adjusted Earnings and Adjusted Book Value. The most directly comparable GAAP measures are net income attributable to common stockholders for Adjusted earnings and Total Ambac Financial Group, Inc. stockholders’ equity for Adjusted Book value. A non-GAAP financial measure is a numerical measure of financial performance or financial position that excludes (or includes) amounts that are included in (or excluded from) the most directly comparable measure calculated and presented in accordance with GAAP. We are presenting these non-GAAP financial measures because they provide greater transparency and enhanced visibility into the underlying drivers of our business. 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.

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

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

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


•	Non-credit impairment fair value (gain) loss on credit derivatives: Elimination of the non-credit

impairment fair value gains (losses) on credit derivatives, which is the amount in excess of the present value of the expected estimated credit losses. Such fair value adjustments are affected by, and in part fluctuate with, changes in market factors such as interest rates and credit spreads, including the market’s perception of Ambac’s credit risk (“Ambac CVA”), and are not expected to result in an economic gain or loss. These adjustments allow for all financial guarantee contracts to be accounted for consistent with the Financial Services – Insurance Topic of ASC, whether or not they are subject to derivative accounting rules.


•	Insurance intangible amortization: Elimination of the amortization of the financial guarantee insurance intangible asset that arose as a result of the implementation of Fresh Start reporting. These adjustments ensure that all financial guarantee contracts are accounted for consistent with the provisions of the Financial Services – Insurance Topic of the ASC.

•

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


•	Fair value (gain) loss on interest rate derivative from Ambac CVA: Elimination of the gains (losses) relating to Ambac’s CVA on interest rate derivative contracts. Similar to credit derivatives, fair values include the market’s perception of Ambac’s credit risk and this adjustment only allows for such gain or loss when realized.

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



	2018				2017						2016
($ in millions, except per share data) Year Ended December 31,	$ Amount		Per Diluted Share		$ Amount			Per Diluted Share			$ Amount			Per Diluted Share
Net income (loss) attributable to common shareholders	$	186	$	3.99	$	(329	)	$	(7.25	)	$	75		$	1.64
Adjustments:
Non-credit impairment fair value (gain) loss on credit derivatives	1		0.02		(11		)	(0.24		)	(8		)	(0.16		)
Insurance intangible amortization	107		2.30		151			3.33			175			3.82
Foreign exchange (gains) losses	7		0.16		(21		)	(0.47		)	39			0.86
Fair value (gain) loss on derivative products from Ambac CVA	—		—		45			0.99			34			0.73
Adjusted Earnings (Loss)	$	301	$	6.47	$	(165	)	$	(3.64	)	$	315		$	6.89

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

•

Non-credit impairment fair value losses on credit derivatives: Elimination of the non-credit impairment fair value loss on credit derivatives, which is the amount in excess of the present value of the expected estimated economic credit loss. GAAP fair values are affected by, and in part fluctuate with, changes in market factors such as interest rates, credit spreads, including Ambac’s CVA that are not expected to result in an economic gain or loss. These adjustments allow for all financial guarantee contracts to be accounted for within Adjusted Book Value consistent with the provisions of the Financial Services—Insurance Topic of the ASC, whether or not they are subject to derivative accounting rules.


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


•	Ambac CVA on interest rate derivative liabilities: Elimination of the gain relating to Ambac’s CVA on interest rate derivative contracts. Similar to credit derivatives, fair values include the market’s

perception of Ambac’s credit risk and this adjustment only allows for such gain when realized.

•

Net unearned premiums and fees in excess of expected losses: Addition of the value of the unearned premium revenue ("UPR") on financial guarantee contracts, in excess of expected losses, net of reinsurance. This non-GAAP adjustment presents the economics of UPR and expected losses for financial guarantee contracts on a consistent basis. In accordance with GAAP, stockholders’ equity reflects a reduction for expected losses only to the extent they exceed UPR. However, when expected losses are less than UPR for a financial guarantee contract, neither expected losses nor UPR have an impact on stockholders’ equity. This non-GAAP adjustment adds UPR in excess of expected losses, net of reinsurance, to stockholders’ equity for financial guarantee contracts where expected losses are less than UPR.

•

Net unrealized investment (gains) losses in Accumulated Other Comprehensive Income: Elimination of the unrealized gains and losses on the Company’s investments that are recorded as a component of accumulated other comprehensive income (“AOCI”). The AOCI component of the fair value adjustment on the investment portfolio may differ from realized gains and losses ultimately recognized by the Company based on the Company’s investment strategy. This adjustment only allows for such gains and losses in Adjusted Book Value when realized.

Ambac Financial Group, Inc. | A-2 | 2018 Proxy Statement

Table of Contents

The following table reconciles Total Ambac Financial Group, Inc. Stockholders’ Equity per Share to the non-GAAP measure Adjusted Book Value per Share, for all periods presented:



	June 30, 2013			December 31,
	June 30, 2013			2013			2014			2015			2016			2017			2018
Total Ambac Financial Group, Inc. stockholders’ equity	$	6.38		$	15.62		$	31.09		$	37.41		$	37.94		$	30.52		$	35.12
Adjustments:
Non-credit impairment fair value losses on credit derivatives	4.19			1.62			1.24			0.42			0.25			0.01			0.03
Insurance intangible asset	(36.03		)	(35.51		)	(31.35		)	(26.91		)	(21.30		)	(18.71		)	(15.87		)
Goodwill	(11.43		)	(11.43		)	(11.43		)	—			—			—			—
Ambac CVA on derivative product liabilities (excluding credit derivatives)	(1.44		)	(1.08		)	(1.43		)	(1.75		)	(0.99		)	—			—
Net unearned premiums and fees in excess of expected losses	40.08			38.17			31.57			20.11			16.21			13.20			10.19
Net unrealized investment (gains) losses in Accumulated Other Comprehensive Income	2.02			0.93			(4.68		)	(1.13		)	(2.63		)	(0.68		)	(1.89		)
Adjusted Book Value	$	3.77		$	8.32		$	15.01		$	28.15		$	29.48		$	24.34		$	27.58

Factors that impact changes to Adjusted Book Value include many of the same factors that impact Adjusted Earnings, including the majority of revenues and expenses, but generally exclude components of premium earnings since they are embedded in prior period's Adjusted Book Value through the net unearned premiums and fees in excess of expected losses adjustment. Net unearned premiums and fees in excess of expected losses will affect Adjusted Book Value for (i) changes to future premium assumptions (e.g. expected term, interest rates, foreign currency rates, time passage) and (ii) changes to expected losses for policies which do not exceed their related unearned premiums. The Adjusted Book Value increase from December 31, 2017 to December 31, 2018 was primarily driven by Adjusted earnings.

Ambac Financial Group, Inc. | A-3 | 2018 Proxy Statement



	VOTE BY INTERNET	www.proxyvote.com
	Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 P.M. Eastern Time, on June 2, 2019, the day before the meeting date. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form.

	VOTE BY PHONE	1-800-690-6903
	Use any touch-tone telephone to transmit your voting instructions up until 11:59 p.m. ET, on June 2, 2019. Have your proxy card in hand when you call and then follow the instructions.

	VOTE BY MAIL
	Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717.

	If you vote your proxy by Internet or by telephone, you do NOT need to mail back your proxy card. Your internet or telephone vote authorizes the named proxies to vote your shares in the same manner as if you marked, signed and returned your proxy card.

	ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALS
	If you would like to reduce the costs incurred by Ambac Financial Group, Inc. in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and annual reports electronically via email or the Internet. To sign up for electronic delivery, please follow the instructions above to vote using the Internet and, when prompted, indicate that you agree to receive or access stockholder communications electronically in future years.

	CONTROL NUMBER



TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:		KEEP THIS PORTION FOR YOUR RECORDS

É THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED		DETACH AND RETURN THIS PORTION ONLY Ê



The Board of Directors recommends a vote "FOR" EACH OF THE NOMINEES IN PROPOSAL 1.



Proposal 1 Election of Director Nominees
(01) Alexander D. Greene	(02) Ian D. Haft	(03) David L. Herzog	(04) Joan Lamm-Tennant
(05) Claude LeBlanc	(06) C. James Prieur	(07) Jeffrey S. Stein



FOR ALL q	WITHHOLD ALL q	FOR ALL EXCEPT q
To withhold your vote for any individual nominee(s), mark "For All Except" box and write the numbers(s) of the nominee(s) on the line below.



The Board of Directors recommends a vote "FOR" PROPOSAL 2 AND "FOR" PROPOSAL 3.
	For	Against	Abstain
Proposal 2 To approve, on a non-binding advisory basis, the compensation for our named executive officers.	q	q	q
Proposal 3 To ratify the appointment of KPMG as Ambac's independent registered public accounting firm for the fiscal year ending December 31, 2019	q	q	q

NOTE: Any action on the items of business described above may be considered at the Annual Meeting at the time and on the date specified above or at any time and date to which the Annual Meeting may be properly adjourned or postponed.
	Yes	No
Please indicate if you plan to attend this meeting	q	q

PROXY CARD

YOUR VOTE IS IMPORTANT. PLEASE VOTE TODAY.

We encourage you to take advantage of Internet or telephone voting.

Both are available 24 hours a day, 7 days a week.

IF YOU HAVE NOT VOTED BY INTERNET OR TELEPHONE, PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY PROMPTLY. YOUR VOTE, WHETHER BY INTERNET OR TELEPHONE, MUST BE RECEIVED NO LATER THAN 11:59 P.M. EASTERN TIME,

June 2, 2019, TO BE INCLUDED IN THE VOTING RESULTS.

IF YOU PLAN TO ATTEND THE ANNUAL MEETING IN PERSON. PLEASE BRING:

(1) Valid photo identification, such as a driver's license or passport; and (2) Stockholders holding their shares through a broker, bank, trustee, or nominee will need to bring proof of beneficial ownership as of the Record Date of Aprril 10, 2019, such as their most recent account statement reflecting their stock ownership prior to April 10, 2019, a copy of the voting instruction card provided by their broker, bank, trustee, or nominee, or similar evidence of ownership.

Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting:

The Annual Report, Notice & Proxy Statement are available at www.proxyvote.com.




		AMBAC FINANCIAL GROUP, INC.

		THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS

		ANNUAL MEETING OF STOCKHOLDERS
		June 3, 2019


	The stockholder(s) hereby appoint(s) each of Stephen M. Ksenak and William J. White, as proxies and hereby authorize(s) either of them to vote, as designated on the reverse side of this proxy card, all of the shares of common stock of AMBAC FINANCIAL GROUP, INC. that the stockholder(s) is/are entitled to vote at the Annual Meeting 11:00 AM, Eastern Time on June 3, 2019, and any adjournment or postponement thereof as described herein and, in their discretion, upon such other matters as may properly come before the meeting. The undersigned hereby revokes all proxies previously given.

	The undersigned acknowledges receipt of the Notice of Annual Meeting of Stockholders and the Proxy Statement, each dated April 18, 2019

	The shares represented by this Proxy will be voted in accordance with the specification made on the other side. If this Proxy is signed but no specification is made, the shares represented by this Proxy will be voted "FOR" each of the Board of Directors' nominees, "FOR" Proposal 2 and "FOR" Proposal 3. Stephen M. Ksenak and William J. White and each of them individually, in their discretion and judgment, are authorized to vote upon any other matters that may come before the Annual Meeting.

	This proxy, when properly executed, will be voted in the manner directed herein. If no such direction is made, this proxy will be voted in accordance with the Board of Director's recommendations.

	By executing this Proxy, the undersigned hereby revokes all prior proxies that the undersigned has given with respect to the Annual Meeting and any adjournment or postponement thereof.

	CONTINUED, AND TO BE SIGNED AND DATED ON THE REVERSE SIDE.

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