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

Lisa Kampf

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

Claude LeBlanc

Lisa, everyone today's Since the to stabilization we our joining to key our and and leading you, Thank priorities welcome of on made earnings call. call, on platforms progress legacy us last material insurance strategic our the a paves Major exposures. Rico's endorsement advancement first, of resolution new the towards Ambac’s Puerto developments quarter insurance all the business. way of of of which agreements, our support specialty include: our P&C for plan further

the continued watch reduction and de-risking portfolio Second, of of significant list par in net credits. and classified insured adversely our the

and pleased which to Third, AAC a progress of receptivity our am specialty board, Fourth, of a program as August industry competencies, strategic with flexibility market her who of experience, director offering, new to submissions. AFG we addition carry. the And closed enhanced a boards welcome Lisa board's appointed Lisa and continue as company holding broaden our was will brings I priorities. very industry of the Lisa which Ms. to X. Iglesias. insurance to post wealth a driving our note robust lower launch successfully with at us as launch this the Everspan’s to financial week, of senior announced providing earlier market strong the a quarter-end, secured finally, pipeline

him his and the Ambac. endeavors. his him. work thank his dedication, the XXXX. I have in to board on would best a a board sincere of of member has We for been it to tremendous and wish throughout since Alex been to board very valued insight, tenure with our the future also guidance I pleasure has like Alex Greene, announced invaluable. His departure contributions my been member Alex

review. Ambac adjusted $X.XX loss June for or quarter was value second more of million per financial XX, second of $XX.XX cents per $XX or the XXXX, share. $XXX will loss share diluted now reported in $XX.XX our At or $XX $X.XX and detail quarter. million our Turning book million per a adjusted share diluted net our David value moment. and per $X.X discuss billion was book results approximately or in a to share

Looking portfolio, X% $XX June March exposure par insured XX. at at our was net from down billion XX,

from importantly, structured last classified of efforts, including decrease infrastructure par of insurance $XX credit credits commutation the was credit. exposure $XXX were to million the down XX, watch June and reduced list at a reinsurance in quarter. proactive to More partial adversely net Ambac’s billion and an de-risking Over tied a our X% of

Puerto now PRIFA a rum On tax our settlement July to insured Ambac reached on Moving exposure. Rico. XX,

collections tax. instrument diversified tax. revenue to for to excess refer cash double-barreled receives the because the one being other Puerto same for agreements use We Commonwealth that HTA bonds. our together party other significant the exposures This GO/PBA, by to CVI arrangement when Oversight a the sales This of and other collections, is also became CVI two entered for previously into following effort tax Ambac Board Puerto to creditors. a years Rico's for And were a single CVI for major flow CCDA revenue Rico's achievement and rum future consensual tax three to consideration the PRIFA holistic of Puerto instrumentalities. value exposure comprised constitute offered tied One, tied contingent the CVIs performance use and enhanced the rum is Puerto Oversight financial components. a second Rico’s of three, a We future our two, Board. with Rico’s or CVI bond and the as recovery a and cash; to agreement arrive at of Settlement as an they sales instrument is opposed

for subject financial double-barreled Rico economy While Rico enhanced guarantors, the of bankruptcy the believe a for adjustment. plan quarter With date to other the instruments sometime this late recoveries proposed and bonds. is XXXX. stabilizes, to our credit, as creditor and hearing the these is provide sometime A and quarter and other broad closer of of first during has structure or value Commonwealth’s fourth of Puerto now we effective FEGP Puerto confirmation November from on joining will begin scheduled the market much CVI Ambac in its possible PRIFA government risks emerges to exiting bankruptcy consensual the been year support with X with

We our greater quarter. the net had of will effect have settlement moves impact visibility Ambac reserve quarters impact bankruptcy the in ultimate coming estimates Puerto process net regarding settlement for the negligible our Rico for a on aggregate the as the forward. The of

On on previously Countrywide. as trial claims of America are against to the team contract Bank trial get we a scheduled to for as prepare possible. eager litigation as our we've soon date front, our stated, continues And

offering our effectively the now structure. secured quarter-end, Turning our to the on secured of and we XXXX seize post market the current capital We management conditions to notes. the senior senior favorable to extend current note XXXX. a refinancing Immediately from take term opportunity of of closed advantage debt

until believed in to will financial do the we was refinancing debt While not the extend tenor certainly additional to prudent to notes provide of expect XXXX, about the our David a flexibility. moment. litigation details we enhanced RMBS provide it last main Ambac

to with rate surplus AFG. now majority has term, its and increases lines P&C Everspan to the believe admitted will industry The authorized states P&C trends in Everspan Insurance, excess in carrier P&C continue healthy business made XX lines and new outpace underwriting for is maintain launch Turning is February. specialty the report Indemnity, that jurisdictions. registry. of in transport out Group, now across with first we seen that surplus team as significant related insurance to writing the our full its to These a improved a approval, at program in and progress Everspan’s carriers near Since program of platform the a minimize encounter And distribution insurance initiatives to business of all states leading following carrier Everspan pricing we chance has white-listed portfolio launch, loss and our to XX The add in our our in quarter. authority medium has addition Form-As estimate or Cardigan that various margins. business. our in of May. build shell most programs classes cost continues pending sources. additional we for non-emergency support the filed acquisitions additional of quarter. launching Form-As are to third robust The Group, The have pipeline and diverse medical coverage in shells further as classes Everspan began fourth partners to Everspan hope to the programs submissions early anticipates business these several and close will on channel platform. regulatory the conflicts. Everspan

of broaden startups. to and grow network opportunities remains further in strategy, program to channels. specialty additional to remain and Xchange the II, outlook Turning continues MGA Pillar in our businesses, active Xchange environment, Xchange. team II MGU distribution fee-based favorable. The actively exploring encompasses which our at Pillar is to sourcing well perform including and acquisitions current carrier and through novo de its opportunities We insurance

Turning III. to Pillar

casualty quarter, businesses. be the our will in synergistic we property made to platforms including investments the and company During insurance insurance related MGU that believe about certain minority MGA, program holding ahead insure platform, tech made for significant David quarter. and we've specialty I'm businesses, and excited to over program the turn results specialty our opportunities strategy. progress to discuss on see the David? to the call will our our we I financial insurance date to advance

David Trick

morning, Thank you, everyone. Claude; good and

was by mostly adjusted quarter adjusted difference or and the of from XXXX, is quarter Compared insurance $X.XX the a The development, per was net income $X.XX share of $X.XX income allowance net per loss. derivative second was to for runoff smaller the produced for in decrease diluted the relates of a surplus compared For highlights which junior between the The the intangible were the Net second the total the compared million approximately for was earned second million the receivable the XXXX. for Ambac Difficulty] earnings roughly amortization million million approximately results quarter, driven Adjusted per alternative remainder share by base. $XX diluted $XX from The deferred changed the in the GAAP million benefit investments. the incurred quarter in $XX or portfolio yield in million million, $XX continued an offset quarter. pools included of on Corolla loss adjusted losses share, from X.X% mostly in $XX first share, compared decrease premiums for investment reduction a favorable exclusion million $X.XX some quarter. X.X% to exchanges, in to quarter. gain million earnings second the $XX in the to a income of net first was first the versus due and turning first but included provision results $XX or loss pools the Briefly insurance $XX down on first of loss increase quarter premiums [Technical the or second and slightly diluted $XX on and the of the quarter interest which taxes. an per quarter, first The rate of million, diluted lower, smaller second to portfolio. partially was to quarter. The reported $X funds quarter second $XX during in note million quarter, return still from to strong

while in and partially and quarter quarter were interest Puerto excess partially Other Puerto in forward development the portfolio quarter million and outlook Everspan driven fund quarter commission lower and first second quarter, lower a interest interest $XX our the certain an $X quarter, for loss securities million exposure finance the planned compared rates. quarter impact of million quarter $X were of compared million the on and our from expenses improved Puerto Positive million costs. in on project, the the a first uncollateralized incurred portfolio, are a Rico available of signing Net The program contracts, positioned were a the exposure economic and expenses rates agreements in revenue compared discount million also Rico the earned in credit benefit to respectively. derivative million of first support income $XX benefit assets which investment sale hedge million the reserves. gains totaled by offset of loss costs the against spread, includes higher $X to a represent public Second the finance million, offset rate lower expense $X as of fees $X contributing which a discount first reserves, $XX impact to the related million driven incremental driven housing was expense a gains $XX Loss second in the public Domestic income, on second credits to by of $XX by guarantee driven partial first contributed for portfolios on first credit loss, an of in the of positive reserve, benefit million quarter. Counterparty pools compared in factors the the positive discount public million negligible by vast expense million by partially million the $XX to of exposed military quarter. structured quarter. adjustment finance COVID quarter. quarter, by $XX financial had incremental to experienced which majority of the rates. resulting second in continued rates. offset by remaining to million derivative Rico totaled The lower income losses negative million, to $XX $XX for for insured Xchange and from about were and impact improved from down generated on second finance $XX increased in million loss an $X $XX and losses benefit insured Operating rates development, first

and The to costs Corolla to these X, for of million its we quarter, April increase first and compared compensation expenses. Collectively, taxes in junior ramp quarter, also higher only enactment provision in end continues first provision to $XX expenses Xchange approximately quarter benefits, tax to of seasonal which and at was effective, up decrease platform. taxes consolidated a of increase note accounted to for related for a include in was expenses from cyclical second million XXXX, mostly related XX% to the The XXXX. which due acquired the costs exchanges. non-recurring the second Everspan items incurred deferred XX% quarter, including consolidate income Notably, from year expenses $X surplus UK the resulting the XX% the and

Turning of $X.XXX Ambac capital of UK. formed LIDAR In amount proceeds in to par the by along billion the secured due LSNI the other liquidity $X.XXX through newly plus $X.X XXXX. the redeem litigation balance temporary sheet. RMBS with of outstanding balance notes were billion to the Ambac These billion and stock Notes. of were of used Proceeds sources secured July, a fully first Assurance offering the issued VIE X.X% senior notes of

litigation Claude we this to given and to to prudent extend the trial don't XXXX, stated, believe As certainty senior billion we to lack but to market us end cost reduce flat RMBS our refinance was expect as of and first of it the flexibility. our XX, secured carry conditions, Shareholders’ per effectively timing of the or XXXX. $XX.XX quarter was which notes, at favorable allowed our increase equity our share, compared June the to $X.X at financial of

net share, receivables basis, premium. By brief Unlike remarks. $XXX value, standalone of for cash call including June Claude ABV $X.XX million. securities from $X.XX loss changes $XX.XX the $XXX net increase quarter of at XXXX. adjusted second impacted back assets. XX, XX, gains decrease will $XX on a million net earned is of driven investments subsidiaries an million, turn June on The $XXX $XX by unrealized million decreased the of now gains to book share loss $XXX share unrealized XX and the or AFG materially per was and had book or closing investments of by some Adjusted to March not and XXXX million $XX.XX offset in losses. was million excluding and in I approximately of per liquid by per This by value approximately

Claude LeBlanc

call and and strategy in Thank success during going will we am year remarks, you, growth the the our very drive This believe our to the and questions. call that with the platform David. open second our the of accomplishments for have developed quarter, prepared strong operator pleased completes the the half momentum I back our I position into turn help second will future. for

Operator

is Thank you. with from a first [Operator Investor. proceed. Instructions] Our Private question – Please Legare Frank

Unidentified Analyst

Rico, after books the are is confirmed relates Puerto said – it of it's reserves we are saying the on as will needed? be both done, and all whenever the to that of Claude, that all

Claude LeBlanc

all is numbers adequately the So relating believe Rico, have saying we we’re to reserved cash, GOs forward CVIs, Tax at the being in for some the HTA, at will – instrumentalities. point, related of the And CVI CCDA, the have the some we as there the consideration the of of put in of we’re is them securities these this different is the depend as case Puerto that value the and separate some I date number a that, that of complexities case each the relating then for on a CVIs what plan actual obviously of reserved see to to plans Rum significant to and bonds in of effective guess, factors of plan, that collection.

in we’re of So that better get the and which the information this reserves. at at terms as will we plan reserved terms, to the the time. in believe realization, information point, the progressing more But adequately view all based we on have of of ultimate a present could the have in adjustments we result securities we the clarification some

Unidentified Analyst

may. Also, just one more I question, if

billion secured of relates litigation, to – see settlement. the it As any so, by that the the new major I first $X.X notes or are

judge be litigation, our thing. all suggested a any lengthy trial can't and resolution? the be a – happens, years circuit? we And experienced What anyone fickle years. expensive litigation. assuming litigation process got bet the Now, get maybe and seems we as to short quicker on a big be it could and But arbitration or get we that to an been in very have Has it's case, all know could anyone very and – awfully in

Claude LeBlanc

Yes.

was this assumption at think nature been things that really appropriate appropriate to resolve on shown typically available. until the any in in as for I is commercial being we various your And wait if think they try the we And these of view pressing been if has at would arbitration ourselves look levels. aggressively why things right. suggest this our can't look that getting individuals you’re – year, has discussions to that time. settlements, point. would get going comment do past that History it I settlement we points for close some there. to think has later year next are to time currently. is to we've I we which been for to be before and I judges settle, hopeful trial But Obviously, potential or have on approach happened trial, or mean, on that won't oftentimes early

Operator

Our is next Bologna proceed. from Compass question Point. Giuliano with Please

Giuliano Bologna

topic, a out opportunities Thank curious side, side, on And debt on those notes you. exactly up moving are the a whether someone any you've of platform, be I And notes. over time? some or preeminent surplus to over I'd settle back if figure it different note on them there any capital your time. way guess, it I and of a will cap forward stack, surplus opportunities on security out obviously largest the slightly that lot there now of that trying looking the to the out initiatives rolling [indiscernible] the or become – be buying guess, either taken there given the it, to when to secured management the comes if

David Trick

more it we where managing thanks. are are past, we capital and comes do it we've when to in Giuliano, And we think But that opportunistic I will one are There I stack. there clearly initiatives we with is liquidity approval on. opportunities the get ongoing that are regulatory And capital the commented think into. transactions, an is issues to complex. context discussions simplify of around into goals more into come surplus capital certainly our specific to we comes – Rico really to strategic focus capital not our Puerto structure. want in getting that obviously When but have the come to management, into area to when deeply it too stated around say go it's continue litigation start considerations play. it – and notes, certainly to play multiple regulatory and regards There does also of

it, we certainly may what I are focused we're like. that that but really more focused than look it's that something notes. particular there's surplus on So but say it gets on, Other can't transaction or specifically to a complex definitely when coming

Giuliano Bologna

a any securities, I of And buy on technicality lot share or there any what capital a kind But restrictions – restrictions, capital separate back or the them? not ability major from of considerations? or securities may settlement obviously, I it or question. want to curious obviously realized there you your if buy there I'm Is have bigger may is are the consideration. to think you more ability outside those those are is to of much there

David Trick

have some be do beyond, approval. capacity. get regulatory we Yes, would I'll to [Audio call which Dip] it required we

Giuliano Bologna

was That great. for that's No, all me.

jump I'll much. the So you queue. Thank in very back

Operator

session. And does We teleconference. you thank today's you. question-and-answer for our Thank conclude this also participating. This concludes

disconnect time your this may at for your You you participation. thank and lines