AMBAC Financial (AMBC)

Lisa Kampf Head-Investor Relations
Claude LeBlanc Chief Executive Officer
David Trick Chief Financial Officer
Call transcript
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Greetings, and welcome to Ambac Financial Group, Incorporated Third Quarter 2021 Earnings Call. At this time, all participants are 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. It is now my pleasure to introduce your host, Miss. 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. line your is on Lisa mute?

Lisa Kampf

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

Claude LeBlanc

joining results in I pleased income Lisa, diluted third primarily call. and $X.XX income for adjusted Net driven public everyone am results, to positive in finance today's or million a $X.XX very which you, quarter quarter finance with our short million welcome and was will diluted us on by and portfolios. our the credit share. development $XX share structured per Thank was moment. detail or in $XX more our financial David per discuss and were

in carrier continued all registry. growth refinancing its carrier surplus progress authorized California. the the P&C P&C of we in for currently financial lines we legacy at and XX and demonstrated and Since P&C or new a Everspan via and now of specialty authority specialty Taking platform, has the of guarantee Pillar the act is significant specialty surplus indemnity XX our our launch casualty strategy. business, facto closer a and in senior of de-risking look notes our our have full and whitelisted Everspan to XX make our states lines material rationalization with capital Everspan of property or de company, all has key including As insurance our I jurisdictions, on have that February, XXXX, expansion excess maintain is states admitted either our continued starting anchors structure business. program which insurance Everspan insurance metrics. value growth new of portfolios, approach real further in the progress end

these to carriers, the oldest the launch develop second which admitted and will various in filed has built classes working in of near launch, currently provide programs, new also additional enhanced provide offerings. We pipeline across admitted relationships the Everspan to program products states term. PWIC and its for and up of multiple prospective most Everspan acquisition minimizing distribution robust Group authority Since partners. is three our of remaining P&C its program through few capabilities has a has writing on are The specialty with secure program business furthers insurance distribution business, multiple Group will leading insurance carriers complex. number sources quarter. the We further program fourth can we recent Form-As the this acquire hope partners. Group additional close its build signed company flexibility United in to a Whale in in focus admitted and foster the additional for being States. strategic innovative Everspan the shell, goal with options partners, is Everspan quarter an a with of or Insurance launch to expanded Cover Everspan carrier to acquisitions purchase on Company provide programs where has PWIC, expand space. also channel Insurtech risk the fourth of admitted additional carrier to Providence poised Washington commercial base the auto quarter. The to

the network their has and team AFG. further million continues channels. to expanded grow our X offerings, favorable. has distributions businesses and XXXX Xchange actively of distribution to and Since what broadened strategy. business we product well are Pillar was will Xchange to remains perform strategy, its business acquisition, the MGA explore to to Turning be its current pillar carrier benefits continues in exchange and our our MGU MGU II Xchange the by A&H, in acquisition of made expanding for several base, at environment, new end expect outlook first second opportunities businesses. carrier distribution the the The of of our

of grow are We Pillar seek opportunities. through opportunities noble to and start-ups, II to continue quality further seeing acquisitions, pipeline to and a growing we

we company strategic capital, MGUs. a differentiated for are MGAs partner and As public a prospective with permanent

of most advanced businesses. We've P&C business technology Ambac our insurance where including investment III progressed technology offers related position Pillar and investments As To Solutions, in our services, executed or full analytics part enhance Cover included will of on II also have believe companies, value a suite opportunities. identified which Pillar three Whale. being segment partners our recent and we also data add, date, the the these have competitive our of we

attractive offering attractive our on risk II of these will strategic broad fundamentals. allow summary, Pillar capital and P&C Pillar we returns strong expect and adjusted synergies investments In returns three generate insurance see businesses. and all for We across across continue our business, attractive to pillars growth specially opportunities I

our positioned our scale and grow take We advantage such efforts to platform. well opportunities to we further advance as are of

XX exposure watch accounted efforts million of million par in net and classified par and Net billion and $XX reduced X% Ambac’s accounted of down decrease Moving from for September closure adverse quarter. of watch and X% down in last $XXX at the billion now $X.X credits at was risking from in and third $X.X classified approximately $XXX to credits XX adversely risking adversely par classified our June legacy financial XX, lists and $XX credits. the quarter de billion XX% XX% from business. year-to-date. efforts net down exposure during decreases for year-end. and down September Proactive Year-to-date, to list guarantee watchlist de billion

and down a Rum our and agreements to exposures. exposure a settlement Puerto PRIFA past Tax Ambac CCDA GO/PBA, on became to for Moving July Rico. HTA party reached This our

of their marked support but HTA proposed Puerto During week, Puerto earlier to plan Rico has settlement Yesterday submitted the hearing creditors bonds. October of Commonwealth the confirmation of Commonwealth start plan elections on all broad our prove bankruptcy eighth bondholders and adjustment The in the the of the amended last the court. Rico. and

of process. plan we plan, approved expect quarter eliminate be objectors exposures ultimate Confirmation Title for by with will by an loss While sometime the our exception effective separate to the addressed XXXX. the will the considerable there first date the plan our Rico as court are of with the HTA experience to be to exposure, uncertainty during adjustment of of the Three which Puerto

We the to following will between DRA and Commonwealth expect recently HTA conclusion to the process Oversight the and announced pursuant adjustment. parties plan Title the DRA move the support HTA parties, quickly of settlement which, the among possible, the Three Board forthcoming other things, as as plan, to

Rico commutation the the which contingent Puerto residual including by on Commonwealth, market includes options settlement bondholders to for issued guarantee reserves and from instruments to value subject and Ambac, loss remain Ambac potential payments Our credit offered risks.

Classified legacy With of September of billion AAC the Adversely financial bankruptcy risking be forward view our to reduced. Rico significantly in We XX. objectives Classified credits as X.X de our conclusion XX% at Rico Puerto accomplishing strategic credits our insight, step at exposure a major business. this and of towards Puerto represent total Adversely total will currently net guaranty risks as par

trial country America turn reasonably conference David? to late the has now set for to Bank judge and as the for will our to quarter. of over financial plan wide I our rep Turning A David November soon been date litigation. as litigation. to a the discuss call now our results ask in to scheduled We warranty possible.

David Trick

Thank you good Claude, and everyone. morning,

XXXX. Income the the earnings Briefly to the adjusted diluted earned and exclusion $XX quarter partially derisking. in by $X.XX net second Ambac for quarter million by but portfolio million loss income the the gains income portfolio $XX compared compared for income of XX of per third quarter. million $XX premiums, offset third at diluted Ambac in exponential of earned was declined reduction in highlights. derivatives proactive the to contributed million portfolio. were to net on some and was turning loss $X.XX income organic modestly guarantee improvements second amortization as provision of share, secured quarter, third sale of per proactive mostly a investment or per investment third quarter, income net quarters. or The loss the million, taxes. rate. greater a available expense net of premium $XX to million of the the quarter. insurance or held an the pooled million the Lower in were $XX result third a earned second LSNI premiums continued to in million of driven financial For or for and $XX compared the redemption normal tangible and the the of second or quarter income. the of was a accelerated driven July second from Adjusted quarter and for in income million, in $XX adjusted quarter the both funds. XXXX These from offset benefit, second interest $X.XX primarily from relates $X.XX third from an and to rate notes the as share, to lower million by share the in loss reported from per Everspan between increase insurance GAAP growth down Premiums Net $XX by Investment income quarter lower $XX related diluted adjusted diluted difference share to

the reduction Excluding from totaled the more reserves, pooled costs. portfolio as million to excluding remainder the to positive benefit at the $XX of quarter. which partially quarter reduction but returns relatively portfolio at a a by development quarter recoveries, other mostly compared the to for pooled impact impact and yield $XX improvements $XX quarter, which the most a includes was a of was driven approximately expense unchanged, higher of Rico funds the $XX the losses improved $X asset Everspan by of few to AACs, in translated in third available in Public representation unchanged third was Income for expenses million funds returns $X was positive million emerging impact exposures, in that to on to X% the gross and experienced RMBS quarter from were warranty Finance in also than a compared sale debt of of the million quarter, third Return the The the million in in redemption, Puerto by by global Loss third second the which close Ambac third AUK. benefit, a LSNI in from was third moderated Total at and the interest loss during a Other plan earned on exceeded and reflecting receivable X.X% second and $XX still income nil a portfolio, quarter, offset forecasted fronting The equity approximately support factors, credit income $X versus unexpected quarter. The quarter. or final subrogation X% was held the the a AAC base. fund $XX U.Ks and result Pooled resulting from incremental million lower million second on portfolio. benefit million move funds the quarter million which resolution. litigation Rico on relatively lower exchange the expenses. second revenue quarter. market reduction LSNI smaller generated of incremental earned from Puerto was commission the funds estimated alongside fees the slightly agreements of reserves we loss in insured in to a to offset closer for as of greater outcomes and resulted benefit clarity notes

compared bonds, mitigation risk factors, liquidity guaranty subrogation, a are timing, rate other future Puerto Net was new expected, higher expenses operating the the $XX the interest derivative third advisor at growing development compensation losses filing in strategic based Rico hedge we to in higher development a ability million due derivative $XX million result XX increase quarter, of expenses performance the confirmation losses reserves in contracts, quarter Rico factors. the to severance Future economic the assets second from in headcount financial Group that the quarter in at our Higher outcomes compensation gains the as quarter. business. for in in for income to U.K. of Exchange were provision third accounted million adverse including tax quarter, by of value reserves a compensation, decrease and a primarily third guarantee as resulting contributed Everspan were and of XX% Puerto development a was well in collectively in quarters. million future up Operating by $X the second increase. for investment of were positioned of a Everspan The occur expense compared costs million compared consolidated Counterparty for of in the the quarter and quarter. also adjustments, gains as influenced plan, to of and currently CVI against on our for higher execute less financial number rates portfolios, While loss credit many incur favorable to our interest result may exposure of quarter. fees. tax million second was quarter, the taxes opportunities, be partial reserves The in to uncollateralized are of driven costs costs second The quarter. Rico in as which deferred $XX expenses. may million of will legacy than due the third benefits from the are favorable Puerto X X approximately second enactment second operating million X

June reduction quarter the of Ambac [ph] balance amount on as $X,XXX of in compared plus a to with call including newly the outstanding Everspan of $XXX notes to issued our translation LIBOR XXXX. interest changes other now transaction, impacted back the million share, of losses. secured exchange, the redeem X.X% VIE I had the investments unrealized and to primarily share million. refinancing Unlike not debt share of September call share, a $X.XX Share-holders effectively savings per assets book receivables basis, losses, by or XX net is outstanding subsidiaries XX million. or to partially income turn excluding foreign per second XX. the compared under $XXX flat remarks. exchange net September at earnings. $X investments and $XXX by assets. share by second and of per gains $XXX equity liquid and Claude offset $XX.XX million, a to approximately from standalone losses and September decreased offset both to decrease AFG X.X than with quarter will at on to AAC of and value, was end more was million or brief investments, some unrealized of translation seeded approximately was XXXX, net million foreign $XX.XX closing third Turning senior and million XX ABV due the AAC The adjusted used cash, exchange July, formed discussed premium this due on of were impact of At million along reinsurance or $XX losses and LSNI million, par The value $XX.XX $XXX sheet, during $X.XX book for over Proceeds XXXX, at Adjusted $X $XX to of which, through billion quarter per liquidity, per a million notes. or of fully in sources a

Claude LeBlanc

In insurance closing, we financial Ambac of continue believe legacy active runoff guarantees well is a program to sustainable P&C David. positioned Thank while our specialty you, progress diversified to platform we businesses. the scale

drivers stabilizing I'm include infrastructure, with providing expand which our surrounding lastly, legacy look ahead financial company, catalysts fee we holding business, remains made of platform resolution optionality the excited call through clarity P&C services capital for unlevered. value our NOLs. have key Ambac’s can our the please us oriented capital and growth to further substantial grow company. leverage base, businesses about the and we business movement open Our with And light, holding greater guarantee the as and future of further our platform. our at the differentiated and progress capital questions. material Operator, and that one; Two, goal encompassing the near-to-midterm


There you. this no are at Thank time. questions concludes conference. This today's

Thank lines. your you your disconnect may You for participation.