A cloud-based identity and access management service for securing user authentication and resource access
You cannot edit Microsoft-managed Conditional Access policies the same way you edit your own custom policies. Even with Global Administrator and Conditional Access Administrator, Microsoft-managed policies have locked scopes. That is why the “Users and groups” section is disabled and why saving fails when you try to exclude someone.
To adjust them, you only have two supported options:
Turn the Microsoft-managed policy off.
Create your own custom Conditional Access policy that replaces it, where you control the assignments and exclusions.
You cannot change the user or group assignments inside a Microsoft-managed CA policy.
The UI is locked by design, so the error you see is expected behavior and not a permissions issue.