AMBAC Financial (AMBC)

Charles Sebaski Head of Investor Relation
Claude LeBlanc President & Chief Executive Officer
David Trick Executive Vice President, Chief Financial Officer & Treasurer
David Belport Wells Fargo Advisors
Call transcript
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Greetings and welcome to Ambac Financial Group, Inc.

First Quarter 2022 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. pleasure Relations; your Officer; Claude Trick, Financial my Head Charles and now Chief Investor of LeBlanc, Officer. is to host, introduce Sebaski, David It Chief Executive conference to the turn now will Charles. I over sir. Please go ahead,

Charles Sebaski

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

Claude LeBlanc

Thank everyone you, welcome and today's to Chuck, call. joining

For quarter profit share, reported XX, diluted or $X and per $XX March the adjusted million of earnings ending per XXXX, $X.XX net Ambac $X.XX or share. of diluted million

announced million for per to-date, share. $X.XX repurchased a will began Yesterday, $XX.X In we program or announced share $XX $XX more total and have detail April, the our authorized to addition, in unused results David repurchase million average to bringing the share discuss in just we over price an amount addition we shares shortly. million X.X this of quarter, our of which buyback over program, million.

XXXX with Specialty Insurance shared transition to a and progressed for business we previously become investors, Ambac P&C strategy growth-oriented As company. year as a was launched our our

and XX% both by scaling the last clear is our of distribution early results the shifts supported specialty with of market in XXXX are further year. the by very Specialty participatory across insurance experienced insurance This of the We successes, driven secular and businesses insurance the being Insurance quarter a encouraging. which of new $XX from representing Specialty increase million production market. businesses progressing quarter first our the nearly expansion first a growth favorable of are conditions and platform our Our for P&C growth P&C reflection P&C fronting for total

evolving over Fueling anticipate generating growth XX% the continue is year-over-year which doubled between USDXX MGA trend US. the fronting fronting which the annually estimated by is The of we supports market subject the be growth billion This the and of market last see to the USDXX As XXXX. will the market, continued a rapidly we nearly premium the program decade. in in moderating having billion at conditions. increases have it grew lines rate of business, to relates to years, of coming conditions, pace markets most market continued and to in in dynamic,

For distribution the consolidated P&C segment our on providing [ph], which report which our quarter, report now in our businesses. two segment we reporting, will first are this to we reporting will Group we time Serotta and segment. in addition Insurance operating in Group, insurance our growing traditional Specialty Everspan

a for and generating market service strategy across of written premium in our valued the up programs fronting business, over prospective component XXXX year, other Our quarters our been has the into was launched including grow successful second which business quarter A differentiate model Group our representing strategy and launched our ability Everspan and Insurance second quarter. this the the million the with of programs which is solutions key $XX partners. creates our expands was of the expect as consecutive In quarter, interest three differentiation going with in first this to Specialty differentiate a risk, this of further distinction from XXXX, to XX underwriting strong reinsurance to and Everspan's program businesses. from we rate a million, $XXX alignment to last of P&C retain beginning approximately of in gross willingness leading This XX% ability Everspan to run pipeline administrators. quarter of significant

track Everspan claims. model, at team is business our in aspects leadership represented key by industry actuarial underwriting, of executives Our records all and with proven

the quarter of led for of our represents XX% company. the year, partner Turning insurance record a premium of placed segment profitable Xchange, which having increase first XXXX, to is our business, the distribution $XX prior quarter over nearly distribution growing, and MGU first an for our by over million

company into will Xchange's to expected over network, XX%. to rights announced a be immediately well continue that ESL transactions. distribution is Xchange stop strategic Going expand Recently, its expand self-funded of organically expect renewal business. employer select for entered is $XX we and the and through as by forward, business successfully portfolio earnings a was or as transaction both The accretive premiums ESL million to anticipated to loss transaction we

relationships new and progress, for we ESL very this of has transaction distribution well are businesses we shown believe, Overall, growth open transactions positioned strategic both and quarter importantly, each the core XXXX. will insurance are nationally As with we and our we in pleased continued P&C through believe up Xchange's this organically business.

Turning now to guaranty a business. legacy financial

had During two we the quarter, developments AAC. significant at

exposures by adjustment our XX. Rico, As announced, reduction on the our Puerto Puerto related million. and plan of and March our $XXX which end million, Puerto since interest quarter, further Rico previously PBA This we finalized all of and facilitated PRIFA $XXX exposures. of to eliminating GO the a principal to exposure exposure the have CCDA remaining by reduced was And Rico-insured in our

our remaining which today, Puerto HTA our Ambac's insured gain Puerto is As residual only exposure, a the XX% remaining recognized and Rico reduction exposure to Rico $XXX COFINA. in result, a to represent of exposure led collectively our quarter. These as of transactions in to million

to of become relates Puerto the remaining May Plan expect effective exposure filed HTA it the HTA confirmed was will on of in end before Rico, the X, be year. and Adjustment As our we that it and

final for until outcome. the uncertainty HTA, some the process III However, around exists concluded is Title still

$XX material its approximately from through Ambac's in Looking a down prior insured the billion portfolio to anticipate legacy XX, nearly material uncertainty to the List couple at in from developments year risk portfolios, March XXXX. over this X% billion Ambac has we Credits at March insured lower our or or amount portfolio XX, Classified the X% future volatility. natural $X.X of last to we result balance $X Adversely of Absent of in down runoff. removed $X.X derisking at the reduce billion new and active loss December exposure from were the end. quarters. insured portfolios, Net Overall, billion would portfolios XX, continue reduced Watch was par and

York The to the other as of unrelated ruling AAC related an known development in New RMBS during quarter litigation Appeals Court heat. significant at a

While certain this the various appeals the decision damage of not recoveries in our for to did cases, court any recovery of of involve in our one paths limits our RMBS cases. decision of RMBS

reduced an rep the insured $XX to law, change the in $XXX and this recoverable. of and subrogation reduction contributed overall of rates transaction discount in additional warranty result underlying a million Changes by recoverable AAC As RMBS performance million. its

relates loss it to resolving are of Countrywide, favorably Bank we trial all and rep efforts, are America as warranty our look as our in actively recovery possible. case litigations. for claims against, preparing pursuing forward As to our main our RMBS as we and expeditiously in And claims and

recovery, to of XX filed addressed does we intends paths At Furthermore, ago. in reimbursement, claim letters the interest, years to trial, impact XX which with March primary outside addition on our two, than March that prove believe court has heat. As multiple discovery; counsel, XX payments more our described prejudgment our which began not recover two Ambac case by paths following. and more heat significant the in that to to in neither and was by Ambac accruing one, fully

in the recent to First, discovered multiple we paths, that breaches without through for the decision need heat the prove of intend Countrywide light notice.

securitization of of that against meaning Ambac's preparing that application loans through and our as unique Countrywide years originated. Countrywide space, of outstanding role prove every the litigations. issue planned originated for of the is litigation, the originator a case, its at have discovery approach our notice role in in the loan sponsor been in also loans Countrywide XX% at loans. the We most case at RMBS transactions makes case each the Countrywide in different to discovered employees servicer always the case reviewed discovery Countrywide's trial. issue discovery for also the with Countrywide given with have every breach along and other from markedly breaches approximately transaction as RMBS that

and reps As such, warranties breaches need discovered the notice. Countrywide any without of for

agreements reimbursement has insurance a separate indemnity and claim Ambac Countrywide. with its under Second,

held rights kind is the insurer, alternative has plaintiffs, court of reimbursement in appellate RMBS agreements. not in of to provided an and in recovery. An apply does form As extra remedy repurchase have contractual like what Other which issue has already -- our heat protocol, not do claim. revenues through Ambac sole at protection that path trustees these was an this

intend prove to possession. and we in Countrywide additional materials prevented Third, notices its that by Ambac failing providing from to other provide loan with Ambac files timely

Franklin, that First First Ambac which the we to control quality look case we're Countrywide, a prove divisions against further in across seeking as of fraud-only of refused to to we're respect early against And other To dimensionalize noticed, notices. billion. and that internal $X Nomura, even to other effective hope its our progress number over defective. intend futility as year. Nomura, more damages, cases, loans seeking of providing RMBS fraud-only all cases billion. and to and be all damages fraud repurchase are we though making Countrywide but our acknowledged in the Countrywide our aggregate our With damages own on small $X our also sponsors, next against We cases, as Franklin and progress case we Countrywide trial than of cases well against

them have resolution. to We our fear and confidence intend final vigorously to in claims a pursue

sheet cases for material. the I will on David? breach interest recoverable the both of the or our David recovery financial which claims, include fraud-only to reminder, not of a now our our turn As results over prejudgment does balance for from be discuss call contract to quarter. our any could

David Trick

Thank good everyone. you, Claude morning, and

first we this quarter. two of quarter financial emphasize changes, to our results like the results, our discuss I to I'd presentation Before made

method. sequential presented basis, a rather results a on our on are First, presentation year-over-year being our formal basis than

we to Secondly, runoff of Distribution. Insurance, and Insurance, of Both our begun expansion the segments: and disclosing guaranty are financial these of Specialty legacy through business. Insurance continued changes Guarantee relative Legacy our & of result have Property the growth continued Casualty new businesses results three a the Financial

net gains. insurance the the quarter first For by per million compared $X.XX XXXX the in of $X.XX million million interest income. adjusted debt XXXX. related first million XXXX caused compared higher Ambac in reduction $XX note were first primarily income to income relative quarter $XX in XXXX. quarter the of was diluted exclusion prior of per from quarter income income adjusted for mostly reported and million GAAP gain rate diluted transactions. of the to for diluted on net the for $X.XX first related extinguishment net the exchange of from million first notable loss earnings between and share quarter quarter the XXXX $XX The or derivatives amortization net $X.XX quarter income the of XXXX, of share first and junior by of include surplus quarter $X earnings share in of variances Adjusted first period the or or $XX per as to the to of offset to $XX earnings to loss gains the the higher of per diluted lower Difference first adjusted compared share VIE Other XXXX of higher and intangible expenses investment or

$XX are our premiums P&C part As new we of in of of a and amount several the is insurance now at quarter and compared insurance distribution production. an Gross through gross written segment. will both written upon up at increase a quarter production placed insurance disclosure XXXX. first Everspan fees, XXXX of a segment of totaled the Everspan in earned the P&C for million be million including XX%. the commission referenced, de is reporting as from quarter new $XX XXXX, combination [ph] premiums to written in Claude the million P&C compared the premium metrics, to million and in in business gross production Xx first was the quarter distribution placed first $XX basis our first the generated. over of minimis income which quarter proxy premium fourth in $X program and Premiums

over $XX P&C quarter. XX% up the and quarter, million together, first Xx production the quarter of over last insurance Taken of first the was production in XXXX

continued over as efforts prior largest derisking First earned million business. the of the quarter. earned downward $XX Financial to year insurance compared the first trend just of a was over Premiums seasonally first active although net $X distribution earned portfolio. runoff quarter the nil of of $XX quarter period the for quarter the were quarter quarter in million insured organic million and in modest our is for double contribution to and Everspan's XXXX. for to the result premiums compared guarantee premium, to the as prior the

of quarter written premium, next quarter, also collected million of highlight the were year. gross of we also in in in earned which program the year. million of premiums over $X which $X will of remainder of remainder earn and first the the the that Everspan approximately written In addition, would fees, retained X/X the $XX Everspan the of net million which will earn in over

grow to add premium, as exponentially. both continues programming and each written Everspan grows As programs earned see expect program we'd to gross premium and fees

segment also to continues Distribution Our grow.

in million gross million year XX% year. at the comes $X $X premium $XX from last places. revenue were million million, from Insurance commissions of commissions quarter, increase $X.X $X the first from based the the And gain for generated up quarter XXXX. distribution almost The first XX% were of compared XXXX. net distribution million the over noted, for prior $XX $XX from for XX% the a As placed the amount Investment in to $X premiums to previously was EBITDA first the of of earned of decrease of pooled the from insurance three XXXX. related income period. quarter first million first, items: business quarter quarter first million, produced million in in about in during investments quarter, The quarter, first a investment the up $XX of the first placed quarter down income fund was the million quarter segment

quarter annualized conditions, This X.X% Given of well performance rate. believe first a in approximately extraordinary quarter. or the performed to pooled in we the our fund compares funds market at pooled XX% XXXX

the restructuring quarter. Secondly, represented we as Rico Puerto incurred a overall Puerto from consideration $X million on small plan our of in trading, component Rico the a loss large gain classified which

[indiscernible], portfolio. of owned of in a a we the as large which portion investment million of result $X lost the Thirdly, Ambac we of refinancing income

also a was expense year-over-year. by similar offsetting interest amount and However, down

all $X realized Finance of experienced million will HTA $XX Rico first first solely ability positive of including liquidity confirmation million bonds financial were timing, a investment and quarter, subrogation confirmation in other value formally the a of which from XXXX. legacy RMBS the quarter prior loss was also Future owned a reserves, class the loss we litigation related the execute expenses action of $X to of relate we of risk as During compared first and the of in loss as recorded bonds plan, compared Public gains to our recovery guaranty million to the first opportunities, our Loss factors. CVI and and the portfolios. to HTA quarter to the year, HTA be in in of million by the $XXX mitigation new influenced related now segment driven Puerto in development Puerto exposure factors, development many our by $X million Rico. to quarter which well number

of in currently benefit loss material. to be this reserves the quarter Rico expense may previously of anticipate development loss million significantly the $XXX and quarter of of reduction the to of was credit, a decision. and a from to structured such direct change million rep in The finance mentioned $XXX warranty result compared which Court resulted Puerto first not future $XXX year. do million generated primarily our our occur, While million York we last This Appeals a New portfolio $X of development

financial slight defensive insured rate portfolio The portfolios. the growth-related quarter new by million to million expenses million commissions and the were the to first and expenses the as as a rates from In and on to guarantee was in addition, derivative legacy million interest quarter the hedge transaction $XX insurance up exposure $XX in with guarantee in rates first The derivative offset a for gains in rate corporate which other investment rate first our in underlying financial associated higher discount and due sub-producer a building related $XX segment, $XX to and interest portfolios exposure growing in fees. investment contracts, $XX rising related in operating higher to was quarter and losses. for there Operating increase the lower guarantee hedge Net for legal against expenses benefit reduction first against expenses from reduction XXXX. financial quarter. a advisory compared an partially million partial million, increase designed of economic partial Ambac's are $XX were headcount businesses economic positioned and segment, the distribution gains is consulting in

$X.XX year economic and per due shareholders' losses was decrease currency basis, of March per stand-alone share USDXXX million a decreased XX, XXXX share some primarily for risk Turning to million net investments value million investments back including decreased decrease per or $X.XX future premiums. approximately discount used or This million I billion December USDXX XX, to XXXX. The end subsidiaries receivables to higher to March equity from now losses share, or and translation net $XX.XX due closing translation per on XXXX. $XX.XX in $XXX to foreign the and fee book balance $XXX call to per excluding share was to ASG Adjusted or XX, XXXX, installment XXXX, million at sheet, liquid the impact of the from brief approximately $XXX Claude on $X.X of $X.XX foreign currency share cash, rates at investments and of turn will assets. at million remarks. At losses. $XX.XX share per $XXX XX, March unrealized

Claude LeBlanc

fronting MGA seen and material In we continue growth conclusion, profitability. our platform as progress markets the the show in and strong to growth by excited P&C Specialty we have Insurance and are

strategic deploy and attractive to transactions. our continue in business to distribution in We to insurance order through grow opportunities organically see capital

technology, needs distribution growing across meaningful see through business and partners. also expense distribution and opportunities infrastructure supporting unit, our services our capture existing the of and growth synergies dedicated We future to our businesses

areas our derisking We value recovery companies. key maximizing legacy the continue and options of for will this we'll goal the loss for our efforts also financial guarantee explore time, our strategic with of And business shareholders. at focused in appropriate

believe and segments, Accordingly, businesses evaluating new value individual company's expansion new will EBITDA believe our Ambac These our legacy in our with by include such please better to businesses. characterized are Operator, distribution the separate and coming reflects value models, progress distinct the P&C of we As underlying the company capital We guaranty the P&C to as therefore, we're today look for addition on to driven update we to the intensive capital-light each continuing our our forward call believe our strategic and framework by we value specialty of segment capital continue the on align holding platform, growth-focused. and the We will whole, transition for of and new enterprise. our questions. assessment businesses and open increasingly insurance the business, for in focus from and is financial you be quarters. metrics, the event-driven. further a managed need which


question a have with from Advisors. Wells [Operator the Instructions] line first of Belport Fargo We David

David Belport

or have just potential Has XX-year I possibility warrants as believe these I with time trial. far April extending regarding been any expire the question in whether that are be. as to for warrants XXXX. there is warrants, and Obviously, a and Yes, a should regard discussion delay there talk warrant those XX, wondering there any the of the extending the

David Trick

had discussion, feedback. feedback an your No, appropriate we've the have had you We'll opportunity not with once for suggestion. you it honestly, and review but to consideration under take we certainly thank any provide that


[Operator with the Equities. have Instructions] We Rosen of next [indiscernible] question line from

Unidentified Analyst

language went the actually by stuff was litigation these I press I of followed and of some the when that adjudication the some here, of XXXX, to some was I the back the of release And long to securitizers. claims of incepted. of on conduct some trying with this timeline encouraged pursued saw see originators given XXXX in about in some kind ultimate

able guys you that see into of to some So the being of very I'm trial. some put to interested

So do how to for out need new to there's gauge on judge the basically need of be to many based if these re-underwrite be we that -- for interested the the how -- whether and trial work And to how that I'm loans potential mechanism figure to the we we loans figure that. like time how to a kind of know, I delayed think to DOJ some kind potential appreciate to case. ruling the of these out have you

Claude LeBlanc

website we we section believe the of our our the that we believe that in available extensively developed not investor trial path to to as were as off that should We explained timing market, remarks in other on Bank very our sell to on case and September. that pause in is also to issues the proceed believe other we've side And directions. to why Reed letter, be able going scheduled in US a [ph] my have in as other positioned to described referenced, heat differentiated on our or March our clear a As we have court available in Justice trial on in letter XX It's September. that cases is we is prior and and it well. uniquely there's which our or of trial decision, should the of impact the trial. we any scope in the But

Unidentified Analyst

came a in articulated guys that Makes the has me. letter, case. the that to was it market of situation in to and of of see a sense differentiating of kind and you into of buying lot different your terms also of kind of was contractual and the encouraged rights stock. trustee some that factors aspects ways the relative back to I actually read some kind of good you're kind And I

And remain And the from bit ascribes that or value year, kind AFG barely of -- valuation the of not like in say, that's guys a put AAC the the continue to potential there's you parts you you even the -- medium I'm but But to commitment. to would here, get long buyback to few P&C buyback to I I'm prices important kind a any company the if you could also we're be make you ascribed on the over from in to granular course think very of of some Specialty let's the last that of year? you've add that proceeds term. that more to do re-upped think on if days. also in not wondering, trying the that scope compelling businesses, kind of the illustrated later distributions value I the event-driven that

David Trick

we stock, versus something we stock opportunities where in take new the that opportunities. liquidity into we deployment and can capital market and to try buyback weigh something business to It's opportunistic The basis consideration. on the is will evaluate be a Sure. regular buy versus

a our by it's authorization evaluation where the and continue go one it's evaluate to current evolving year. out as up to of capital see deployment. So weeks recurring capital we and on the course and months of come certainly, deploy the the here opportunities we'll are And and where throughout

So continue to we it's to continue something regularly and we'll evaluate.

Unidentified Analyst

endorse to just strongly. thinking the I'll this point Well,


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

at lines this may your disconnect You time.