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AMBAC Financial (AMBC)

Participants
Charles Sebaski Head of Investor Relation
Claude LeBlanc Chief Executive Officer
David Trick Chief Financial Officer
Call transcript
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Operator

Greetings, and welcome to Ambac Financial Group, Inc.

Second 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 call to the turn now will Charles. I over

Charles Sebaski

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

call I Claude like to over turn Now, to would Leblanc. our Mr.

Claude LeBlanc

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

Ambac $X.XX $XXX the diluted of XX, income book share million $X.XX XXXX, adjusted and ending per June million of $XXX $XX or or net adjusted $X and reported quarter per at Book million. share. For was end earnings quarter value was million value diluted

share. shortly. of our During morning. strategic shares at several our like on an the repurchase financial David in would will more results detail repurchased per to under touch our share quarter, we $X.X average I program this performance million stock discuss of highlights and $X.XX common are price There

building quarter, in financial and of continued legacy to leading reducing specialty This advance our we a simultaneously exposure while volatility goals platform, business. guarantee P&C our

key metric insurance had our performing. gross Our by the last $XX of gross be production representing quarter for combined of written second and increase the segment specialty insurance business growing one a year. to the premiums believe Distribution is which P&C is million, the production, Everspan Insurance and placed XXX% gross for business premiums how from We

quarter Turning quarter XX% growth, of to Everspan Group Everspan, during led gross premium production written the our up the with another with from insurance quarter, first strong this over year. of

million. MGA XX our rate of to continues for and specialty quarter. first The $XXX signed robust partners over insurance operating quarter Everspan of three pipeline strong programs new environment see. This has of last currently program an quarter new MGA the and partners, continues from up be to run gross rate $XXX compared supportive this written of has quarter's Everspan represent million run results premiums XX annualized to

and up year-end cost hard decelerating remains XX% moderating continue P&C the growth. increasing, E&S through this year expected XXXX is while strong markets premium commercial QX still above from at favorable trends. market, remain pricing, conditions with loss to although with year-end addition, XX% In of In in

We robust growth is the strong on is The expect focused team existing also profitability expansion these factors, company's of growth opportunities. along with which provide programs supports Everspan strength underwriting discipline, Everspan of panel. with and the key the our to reinsurance and our to

year. an grew now grew part Xchange announced the which Distribution by partner renewal business, X% MGU in in increase our Distribution by placed saw Insurance in its Turning which the also by Insurance acquisition over strong expansion anchored affinity our quarter, prior our $XX bolstered the growth EBU quarter. in to X%, its its X% growth. first Xchange business, business, Cirrata, rights during over continued by million ESL segment both and Xchange, premiums, of last

quarter continued of expansion announced of the program. addition market partner related Xchange also with During a as new and its a ESL Markel the launch new the

growth. in the of prior economy space out success health we human and pleased again. up were and in ground and a our we experience is our this extensive Penny very Parisoff which building This a leader Penny we see experience also poised with market de is from sector. quarter, book and has area ability services in it Penny to sector, novo the announce do are first considered an the this has in for to confident of business MGA

led an we by launch offerings, infrastructure solutions operation, business and significant distribution for Ambac. insurance of our potential the area growth recent see future data to technology of With services our full be

including Carlyle operational seeing estimated growth. outpacing the size recent market XX.X% strong, billion, notable as for with of partners, Insurance out in MGA to the $X.X Interest to that support their Conning is market build acquisition $XX the transactions, of platforms synergies generate of remains evidenced by industry teams services to execution billion. reports P&C MGA was rapid of be for the NSM last several operation de sector business Our growth market this and overall premium total for year, acquired. cost the and whether or expected by the is the distribution and novo expansion developed significant and

financial in and list we legacy our $X.X during component from Puerto by adversely derisking the of reduction or which quarter classified One success in prior our credits our active by watch to the material guarantee the key initiatives Rico our of our billion material business, were XX% the derisking exposure. evidenced reduced as achieved was Turning year-end. reduction

During of expect plan I adjustment the exposure. outcome of activities on look our net for Rico exposure. with the our the in second year effective last to significant meaningful the plan to quarter, later unresolved I million, we paid exposures, a final related by par as of of total reducing which related and last par am confirmation currently become pleased $XXX HGA to our off or our hearing PRIFA HGA only the and we August scheduled the derisking CCDA in The of is and to XX piece HGA, third but a quarter. Puerto beginning which quarter leaves early totals net this this resolution $XXX forward fourth exposure million remaining

consolidated our the derisking financial business, Our AFG's relative we volatility for continued reducing stabilize which term, it legacy our focused accomplishes are guarantee of overall believe will performance initiatives on things to financial term, Ambac. several Near stabilization legacy activities strategic support Longer years. and our we of increase derisking specialty our attractiveness alternatives potential the will platform. several consider as believe growing to we P&C financial last guarantee business the

on we In a conference. Bank May of was affirmed X, beginning Reed main and Justice are actively at our hearing Countrywide on case litigation. Turning to our XX for preparing trial update America, which September by an against

We in strength confident are of pleased claims. our finally the that trial headed case to has this and remain

refer summary to our case. hearing case forward to judgment in looking We our are as also Harborview fraud-only our this which month Countrywide, we later against

While in jury, summary we our out the as will XXXX, front timing financial of and to a of credit case potentially scheduling recognize early prevailing provide statements, as trial Harborview judgment a half remain for us in a path no first control. the of our although on

a working against actively to material litigation Franklin our First also are advance case, America. of Bank We third

As of Countrywide, billion of the discuss our the we're call over financial David? to are over our of our against to I now quarter. sponsors well of last to credit turn active of Ambac's damages recorded and RMBS material litigation mentioned case, sheet will about size balance and $X.X our seeking Franklin, seeking I very are cases $X Harborview than for relative billion. aggregate and David billion. to the more In in quarter, scope Nomura results damages First we all $X

David Trick

Claude, and everyone. you, Thank morning good

specialty, Before results, through property last and I our insurance; quarter of casualty and I'd legacy that discuss our second like remind as insurance; disclosing distribution. to insurance quarter guarantee three financial segments: began everyone results we

macro gain of investment interest of quarter lower income to difference the second $XX share the second million of and million of the of $XX the notable $XX for Ambac share The $XX an to in a the intangible a of income. $XX second debt to to quarter quarter expense. in $XX on net of per net Premiums to or were the $XX $X.XX a were XXXX, diluted in million quarter or earnings somewhat XXXX. from increase XXXX the mostly loss reported extinguishment in adjusted of earned $XX of tax compared $XX million XXXX the for $X of compared offset to quarter million relative per to exclusion million loss million on of share as rate and second quarter and XXXX. hedge. $X.XX related XXXX. net $XX quarter or diluted which a in second loss These to the in includes are insurance variances of XXXX diluted XXXX second XXXX. income million GAAP $X.XX The For compared of second compared period investment quarter in by second between net expense and derivatives, for mostly Other loss the a net benefit $X.XX include diluted earnings related million quarter prior the second Adjusted the second per million XXXX per million a compared lower amortization loss adjusted million our adjusted income of share quarter $XX quarter gain gains or and gain net

trend Everspan of legacy second in this As This growth premiums earned of also in XXXX. will guarantee premium were premiums earned it lower. momentum, continue XXXX, its offset mostly as to Sequentially, up program In first million. nearly proactive in prior the nearly totaled $X.X earned compared zero such $X the from wrote XXX% strategy. accelerated earned our resulting it quarter. legacy of second may to portfolio for May in be quarter net quarter financial premiums, build insured portfolio. derisking by result the earned more for accelerated premium the of trending derisking the Everspan's Everspan's than year in impacted period million the guarantee or positive financial in premium contraction the continues organic segment earned and negative contract runoff Active to

a In which or million the earn the of quarter, earned would approximately also to $X Everspan as XX% highlight next premiums the about funding in Everspan's the it of of collected written will million writes. addition, $X.X strategy and in fees XX%, premium gross hybrid retain up year. over is we to carrier that $XX of the million quarter. Everspan gross $XXX,XXX retained program in

policy our As a to Everspan both to of Cirrata, gross to a premiums programs and reminder, grow program Therefore, continues as earned. program premium earned and fees significantly. fees organically both strategically. segment add continues earn-in written, premium how is grow and also over grow course the distribution will similar

from in were increase the the As a business year. $XX million revenues earned quarter, million the from a as placed commissions Claude noted, placed come premiums X% $XX of percentage distribution placed. last premiums Insurance of

EBITDA quarter, from the X.X% million, slightly million, a quarter commissions $X.X of by gross the prior were Insurance from of million of year the were distribution X% adjustment commissions, the which profit produced XXXX. catch-up For EBITDA and and $X.X period Gross nearly were commissions occurred in to the quarter, for revenues the second prior from $X down quarter period. year up total up XXXX. second impacted second second segment

investment a the was $XX of impacted timing broad in several Investment related the the second for were down the changes second transaction rights of during quarter from second was The items. markets. quarter by expenses in largely million across macro $XX gain on million, addition, quarter loss certain and XXXX, renewal account decrease income to In of differences.

of million million the a $XX a First, XXXX. fund in quarter about generated loss compared second the $XX of to gain quarter in net investments

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

said, in connection notional and received CVI. we are That approximately bonds these rest we of in the first July the HTA Rico, new the XXXX $XXX restructuring As of therefore longer early Puerto with assets. July, all and CVI of monetized quarter amount of in received on no of million

$X prior third in of Thirdly, significant that second Since our secured to the refinancing million securities the fixed occurred represent LSNI will XXXX. for quarter maturity the to the July was compared of down the income period were results. variance refinancing quarter notes due not held in it XXXX, a early of

certainly performance, alternate to would fund have quarter, basis. its preferred on we with positive returns while we were the Regarding produce for a satisfied portfolio the performance relative

loss project, in The down improved $XX which quarter development million During the quarter last to was benefit down XX%, the positive second a broad an which were which certain X.X%, high was the DDD year, by X.X%. favorably military and exposed yield, million spread X% on benefit was equity quarter portfolio the a in which by were year. compared finance outlook expense and of this was down quarter in credits $X prior experienced Loss our the COVID and down the quarter, benefit over housing bolstered of last of alternative $XX compares compared rates credits and loss to million in were portfolio and which was corporates, $XX a by of benefit Public about XXXX expenses markets, Restructured year to over million partially discount to second compared XXXX. of of a $XX compared million to positive a generated million benefit rates. quarter incremental of higher this numerous discount development $XX driven quarter. lower in quarter second offset costs second finance second

related second $XX rate from property, for interest million rep million rates from million resulted expenses. resulting our equity XXXX. $XX the primarily second second financial which $XX to $XX last expenses partial an resulting year expenses credit, increases Losses a plan higher to up compensation offset million sub-producer equating and and a commissions expenses platform, the $X This the guarantee quarter quarter to of discount investment quarter loss and discount the the in were was distribution greater partially were to credit of ratio Operating higher in the compared economic count recoveries, of somewhat million higher hedge The expenses. quarter, specialty gains increase the second loss head improved the in higher a for loss rates was gain of casualty of in litigation. from contracts in against quarter's $XX in and segment million exposure in second from operating benefit XX.X%. factors, portfolios defensive insurance generated incentive benefit which on as that insurance and growth P&C costs, expenses driven higher The Net segment to for stronger by specialty, by was for due legal reduction million the by the quarter incremental loss XXXX. second million are $X derivative offset $XX quarter, and warranty were in a in for positioned

per of foreign $XX of million and share $XXX for losses sheet, value XXXX Turning exchange translation adjusted This $X.XX losses higher primarily per adverse book XX, per from March equity guarantee and on from per share $X.XX to which million of the at is per of the investments to million. to losses was share to XXXX, June The $XX.XX adjusted of installment or the and income were or decrease share to the quarter. decreased share offset effect sale book available repurchases, million PV first due XXXX. XX, due $XXX at financial XX, share decreased June at share premiums, by $XX unrealized partially discount $XX.XX balance net or from rates value. decrease exchange the a related per benefit below $XXX made $XX.XX to the shareholders' million on AUK Adjusted end $X.XX foreign

share, common During $XX $X.XX the the authorized million, shares an to X.X quarter, amount remaining purchase total million. of per repurchased we average million at bringing price almost $XX.X for unused

made In par debt, and current outstanding, surplus which million on notes purchases several of $XX or previously accrued the million addition, interest AAC retirement of gain including principal $XXX million the we to mentioned of amounting generated of debt. $XX

in AFG turn for now million We also are remarks. closing of purchased brief investments balance back on basis, call $X.XX asset excluding which held cash, subsidiaries, At on receivables million to $XX per had of Sitka approximately XX, at Claude standalone $XXX notes share. XXXX, as I investments discount, June will the some and or net an AAC's sheet. a

Claude LeBlanc

we've made significant conclusion, key quarter advancing progress in our In this strategic priorities.

to see capital attractive very in business. to continue We our distribution deploy opportunities insurance

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

we this increasingly platform, we and core business, will segments, insurance be Group, distribution insurance our defined company's Cirrata. our believe P&C value strategic expansion P&C As by specialty the transition the business, continue and of Everspan two the

As a update progress to EBITDA in businesses reminder, by call for open the on the questions. models, these look growth-focused. new forward and coming to capital-light I our please continuing Operator, quarters. managed, you characterized are

Operator

teleconference. thank today's your concludes for This We participation. you

Thank you You may wonderful for disconnect your a lines at and your have this time. participation day.