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AMBAC Financial (AMBC)

Participants
Lisa Kampf Head-Investor Relations
Claude LeBlanc Chief Executive Officer
David Trick Chief Financial Officer
Giuliano Bologna Compass Point
Call transcript
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Operator

Greetings, and welcome to the Ambac Financial Group Inc.

First Quarter 2021 Earnings Call. At this time, all participants are placed in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. pleasure your my Ms. now is to host, introduce It LeBlanc, Investor Officer; Officer. Lisa of Claude Chief Financial Kampf, Head Chief Relations; Executive Trick, and David will to call turn I Lisa. now the over

Lisa Kampf

returns not or current for market such include but morning, These expectations factors may contain about could thank outlooks, discuss website Good Please or business, under of the events. condition of forward-looking the posted Events guarantees credit Financial our call quarter our Any to statements results and such turn included We’d and first not our our financial which management’s new Mr. statements subject management’s ratings, section discussion a of LeBlanc. any on that financial figures The cause are and obligation financial reports Group’s conference forward-looking this future Today’s whether circumstances. credit release, to IR uncertainty been today’s most is now future remind may you. Thank from to of are you any in Ambac ambac.com. quarterly to performance other you results. contains materially all items our that performance limited statements, measures under differ, call our that possibly today. comparable spreads, joining and note otherwise. under our changes press of to, Presentations in and forward-looking like to Actual on conditions, events comments are SEC which are I analysis events the presentation reserves, recovery, to Factors new results. to like GAAP have statements including support mitigation, loss over XXXX that based as the statements. of business, reconciliations Claude would earnings in available investment affect website, presentations today’s of presentation most the result operation may forward-looking at described loss and recent annual and is and expressly disclaims filed or risk non-GAAP information, and financial not obligation factors, and any to measures. future loss update

Claude LeBlanc

to $XX share. Lisa, you, diluted value diluted on adjusted net or million per the billion and for Ambac quarter. us XX, book welcome of share and million or per $XX.XX share March and This our everyone was $XX today’s or joining $X.XX book first value was adjusted Thank reported call. million of earnings share, income $X.XX per $XX.XX per $XXX At or $X.X morning

quarter results first million new and the were strategic MGU exchange. progress Our junior $XX realized inclusion results material by our of from priorities, surplus our note from positively platform including operating gains our transaction on of impacted

ceded GDP at of regained or momentum Classified transactions Notable a well transactions higher tax lease included and quarter. the at the finance and certain par accounted outstanding of also education We specialty year-end as $XXX decline from back Adversely XX. Active in material of XX, and one, and $XXX activities, progressed obligation, December de-risking million our List include; billion insurance XX, exposures, from significant $XX.X our billion property for materially quarter with approximately the down during million. approximately And driving stimulus, and execution Starting the net in experiencing were exposure refinancing revenue, successful strong general COVID expected Watch March casualty net economy with The review XXXX credits for strong Mets reinsurance sales, quarter. transportation lastly, and completed XX% par net total the $XXX and the of exposure de-risking monetary the output credits X% including at as retail was transaction million public Par $XX par down manufacturing March de-risking slated by strategy. $XXX is X% a with exit and reinsurance recovery. of credits. Higher credit Adversely billion exposure. governments, Adversely and Queens Baseball trillion Classified Two, state government and annualized Rescue the stimulus fiscal credit largest List transaction. U.S. AUK’s and Classified to for X% Act increased exposure, an for first liquidity rate a economic the grown Watch improvements American the the of together have negotiation $X.X year-to-date, Stadium with affected local U.S. recovery at our and of in quota Plan additional of other share with are

Jobs Additional XXXX. American for the projected stimulus in budget trillion $X.X could the in come and U.S. spending plan from discretionary

economic strong these continue insured the improve, optimistic outlook portfolio, particularly continue believe our rates cautiously conditions, we which for about vaccination we to Given will to remain increase. as

Puerto Turning Rico. now to

X, creditors. This May the and bond with our revenue two on Board plan amongst and Oversight MBIA other CCDA. reported exposures, impacts agreement As a Assured Guaranty HGA support has of reached agreement

the plan to Rico agreement. However, a does PRIFA, our the support is signatory not largest agreement Puerto not Ambac remaining include exposure.

continue the to its rights that interests and of and pursue of a at remedies Borrowings bankruptcy Puerto as all a the negotiated in Rico’s of property to continue legal to consensual believe resolution security respects is we that such a the revenue rights bond best Commonwealth. arrive global However, to of settlement holders. Ambac resolution settlement, interest leading will

to be serve paying to revenue of suffer are reasonable who Puerto and lengthy and had has on on a debt way bankruptcy capacity impinge outcome residents opinion can economically the that structure This this Commonwealth’s would through to costly We not firmly its in process. a the bonds. to ample achieved Rico ability flourish the

against April recovery a Bank our Department appeal fraud loss First Countrywide of argued months. case expect of the next in Regarding main our efforts, from decision our within we in the America couple was and

trial preparing are to a with or case. We go to without fraud

the a to the second hope we Reed, Justice, regards trial of management capital appointed case, or Assuming developments this our year Robert schedule the for the impact of or With XXXX. that no recently timing change date initiatives, will half our a the transaction exchange or the in interest. acquisition all during early case, that of could resulting to notes $XX nature speak our moment. accrued in junior surplus note in executed detail exchange in extinguishment debt outstanding in and issuance resulted we will of David quarter, This to a surplus million for more notes. in transactions of these

and at trends, that February. continue to across We our as P&C the now ramp loss significant pricing returns specialty business industry report leading of ratios believe initiatives continues combined Group underwriting generate tremendous industry will its The Turning we to launch increases to expect made margins. rate outpace has healthy improvements cost new estimated progress improved to to we Everspan the risk-adjusted rapidly the in present following strong our up P&C and opportunity Everspan in progress a business. AFG.

programs Services, the launched full Our general services. our majority for Group, Everspan has program recognized registry. a now license and a and whitelisted was has Venbrook XX of report Insurance, is XX Everspan’s all or excess is carrier lines indemnity General the states jurisdictions. for managing in Cardigan to that recently pleased and materially nationally focuses specialty and subsidiary in and Insurance of admitted a specialty that progressed surplus authority I’m agency expansion that on with Everspan maintain first initiatives also authorized surplus states P&C in Everspan carrier lines

Everspan enhance about specialty state Cardigan excited the We and product diversify Cardigan transportation our partnership, footprint. offering are which to allow their very

panel. program also first Our reinsurance strong by highly and was backed rated

provide under Our submissions has management team’s review quarters. the active expertise a of expect continued robust positively a has for we and coming structuring market. the pipeline been significant approach favorable that Everspan number conditions Everspan collaborative program will deal received market in in and

number additional long-term carriers support objectives. strategic including short and initiatives, Everspan’s We potential are also acquisition exploring a of to of shelf the

we Consistent team’s product revenue expansion revenue to first now pursuing businesses, the strong diversification coming With well-positioned the business, opportunities during are Loss insurance accretive growing is Xchange. of Pillar The to as its II, strategy, and and well Affinity in renewals sources. the fee-based develop business of for Stop Xchange relationships encompasses its generation Xchange which results the growth MGA under is as its quarter for opportunities pleased care in with team quarters. our panel with on quarter. additional Employer Turning our and acquisition performance was strong to of MGU and

grow Pillar the strategies. establishment our We’re as MGA, to as MGU exploring explore in of modeling investment management are to actively now the II also I call program With opportunities to financial III, targeted turn Pillar in quarter, to David David? to business. business the well de lines I MGA complementary and/or continue the we for to results partnerships, discuss of and actively novo businesses Pillar opportunities P&C acquisitions our over which via additional various specialty will regards

David Trick

morning, good and everyone. Claude, Thank you,

For This The and $X.XX and earnings $X.XX of of and $XX of per net per fourth or exclusion the adjusted XXXX. diluted in share. were which quarter. or to $X per compares Adjusted to intangible diluted GAAP share Ambac quarter the the $X.XX to per the million amounted first million or $X.XX net quarter to reported fourth for amortization, between or the first of quarter $XX mostly million of diluted million loss compared the variance share, of XXXX, share a adjusted diluted first income earnings in insurance quarter. earnings $XX $XX million in income relates

continued a of being investment number to of reflect transactions, all GAAP realized strategic in Our and of debt efforts capital most gain To extinguished a and deleverage notes, the $XX first our from simplify of $X which surplus surplus structure. for notes million and we results that of million. our extinguishment quarter results a net combined our gain notably, advancement junior two executed end, initiatives, exchange

proactive the accelerated credit, of accelerated for In on first was in investments result the $X offset as favorably XXXX, incremental of reduction to reserves Rico. million quarter of the during partially by which driven by in turning interest earned strategy partially allowance quarter. an million of from The Premiums a our million to first as produced addition, receivable decrease some and of quarter. diversification offset more fourth a the gains compared first inclusion quarter were in earned international premium continued quarter of by premium result impacted the premium were a the taken time, first on in exchanges results lower premiums the in our specifics. fourth normal the first in increase rate to $XX the de-risking quarter by $XX strong results Briefly derivatives, Puerto results

$XX which of were months quarter on in of securities million the total funds offset $XX Although sale compared slightly, at emerging issued $XX included strong partially equities compared by of losses the pooled by first available quarter. in continued from quarter. Other in were $XX for sub up Operating VIE. rate. higher Loss credit exchange offset and increased as were $XX Performance resulting Puerto results foreign certificates and the was the income return first the $X $X Trust the were offset $X debt to in book, discount in from developments, benefit million, first revenue finance recent a of from and AAC by income for from solid fourth compared the investment in income million the of Trust developments, impact insured markets the partially million Rico in and of to and positive discount pooled down hedge by Puerto to the the compared reserves loss exchange Domestic fourth quarter. to Included and fourth to just losses commission stemming related lower part respectively. $XX $X $XX driven million funds, million costs. related fourth the remained million the inclusion of million, costs from surplus fourth of The Claude led the public to commission’s incurred quarter, $XX note Corolla junior X.X% quarter. rates and quarter, in in in notes was quarter the for expenses seasonal partially surplus X.X% Corolla notes million active by quarter expenses cost, partially reserves. the Rico reflected by and the in in junior higher an to management offset general, $X of related benefit the operating discussed, income AFG at funds million income investment the million incurred producers sold compensation quarter fourth losses in to the Investments and exchange. increase certificate. consolidated of favorable surplus gains million, the from million exchange certain first from increase expenses for of The $X Xchange’s exchange

which operating strategic by Ambac Xchange prudently long-term increase both driven the objectives, the expenses the of of the advancement increased value. on other quarter, and across remain expenses generate the cost all inclusion of While we Nevertheless, of non-recurring primarily focused this and platform. including was near-term entirety will managing

Turning sheet. to the balance

AFG AFG this investment AAC notes par million interest, in notes a its several in Trust. million result junior $XX exchange transactions surplus lowering debt which surplus the associated interest, notes par of The which $XXX accrued equity of and issuance, $XX eliminated related of exchange to surplus Corolla both in million. with $XXX the As of were interest of are outstanding interest accrued exchange by million all outstanding AAC $XX transaction, ways. issued and million, Out with of eliminated beneficial for consolidation accrued in its

improved and cash further expense approximately equity equity. equity for Corolla $XX accrued the and Through $X exceeded duration received also the structure capital and a its of by surplus the AFG, expected have deleveraging liquidity its simplified to exchange reduced For duration of value shorter the AAC. value debt And beneficiary Corolla the in AAC, interest basis AAC, carrying of outstanding the relative outlay annual investment than the AAC’s fair is exchange interest in of residual Corolla outstanding no the notes and reduced million, the on AFG debt. investment million, lowered by an in the the

the portion AAC of March million first at at through billion exchanges secured translation gains. net $XX.XX losses securities and million share The $XXX expected securities million gains due for March million secured $XX to XXXX. to ballpark of non-controlling by $X.XX Adjusted interests, and increase redeemed the Claude $XX approximately XX, book partially we the premium cost at per Shareholders’ and remarks. of Unlike decrease decreased of exchange interest sale call value at of the impacted debt. by the levels as a liquid unrealized market income including to $XX December and a $XX non-controlling per $XX.XX $XXX million will of or of was the XX, $X value from million capitalization by per $X.XX of from early $X.XX turn the below The to XX, of some increase March or net the collateral value quarter, million decrease or XXXX, of receivables another reinsurance million assets During $XX share of million to by of now equity in driven mostly XX of The $X.XX assets. net the changes million $XX.XX mostly of or in loss. decreased cash Everspan. the was $XX impact approximately was from million on to million notes, AFG back on of also the on share $X.X investments brief adjusted or offset excluding investments the XX, the offset partially subsidiaries redemption foreign share $XX per XXXX XXXX. decrease the redemption share per December transaction adjusted to a book exchanges I $XXX earnings. share related stand-alone Queens in approximately closing book de-risking, $XXX future and not unrealized Mets value, value is basis, and per

Claude LeBlanc

the the in quarters. I’m we remain first all our focused for questions. you, quarter the Operator, momentum continue our of strategic priorities very progress Thank our pleased please to expect the call of accomplishments on We David. coming with and efforts open during XXXX. as

Operator

Thank you.

conducting Instructions] question-and-answer be a you. Thank session. will We [Operator now

Point. Bologna comes Compass with the your with proceed Please question. question of line Giuliano from first Our

Giuliano Bologna

morning. Good

didn’t analysis for there developments, the quarter? the that reserves are some we quarter. you’re I touch loss the new rolling Is think during to think look you When the scenario of second in obviously positive. using quarter included Rico to getting the in bills first on related announced anything is on or and Puerto is the first in those, the that kind of methodology side the losses at transactions

David Trick

And you We announcement think for incorporated may the came we analyze that through, release on David the everything scheduled our Hi, process into but and consider, thanks on Giuliano. Trick. I May question. was as we learned that’s why given X It’s reserving announcement to we recall, were to and to the Thursday, that earnings wanted delayed earnings fully out we fully today.

we So through our know and of we of the everything scenario incorporated analysis X. that into as

Giuliano Bologna

thinking then can Are anything in the you be which of REC there margin or terms on in potentially coming about that near-term will litigation and focused the any And and good. case sounds we hearings it. That the big about primary center there, up milestones largest there?

Claude LeBlanc

to case, two as the this following or could back just take Justice, which it the So through, to year the as hoping hope could from appeal date, meet come that as on opportunity few that this week we’re will we’re next trial soon that, point at fraud Reed we’ll have And early to the the later be in Department a of or we or expect could our XXXX. early – and then hear months. as be a with waiting First hopefully we next establish

Giuliano Bologna

that? there to the lines to one, other more liquidity for you’re to where out. of Then building one in keep is usage about Or you thinking do manage of good. business business some any transactions need adding you of beyond and side how the you of there capital how plan some you’re final just new and that the currently that capitalize looking Or on lines. about, excess may Obviously, think very assets, holding sounds That terms expansion that? company’s want is more liquid

David Trick

II it. on other touched de of in sort of other investments things, sort external I as capitalized most the set. But well potential at A Pillar of is in I are in Everspan But pretty addition regularly. novo couple There transactions say that, or some And this call looking sort that transactions standpoint, may from Giuliano. think a think at there. sector. terms talked There of think capitalization particularly is I Everspan, we’re looking of I Sure, we it really about make should we’ve operating Everspan of you at point. and to we’re transactions,

and looking transactions, opportunities, in of those would So types toward that allocate capital to that’s start-up be the novo, it’s future. really we – acquisitions third-party all other the de

Giuliano Bologna

And good. in queue. sounds That I appreciate it. back jump I’ll the

Claude LeBlanc

Giuliano. Thanks,

Operator

are Thank concludes no There thank you conference. for you. at further today’s time. This questions this participating. We

You may now disconnect your Thank lines. you.