AMBC - Earnings call 3 2023 | Ambac Financial Group, Inc.

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Operator

Ladies and gentlemen, good morning, and welcome to the Ambac Financial Group Third Quarter 2023 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Charles Sebaski, Head of Investor Relations. Please go ahead.

Charles Sebaski

Thank you. to Quarter welcome discuss Call and results. financial morning, Ambac's XXXX Third to Good

be President questions. the Claude David will remarks, current today Speaking LeBlanc, after And Financial our and prepared They market of environment. Trick, take and Officer. will results discuss your financial we'll business the Chief and CEO;

investor remarks, be highlighting website. some For those on along on will following can the webcast, located from we our presentation, of you during which be the prepared slides our

in recent implied The filed a in statements. under statement expressed forward-looking of SEC. to may cautions investors uncertainties our includes is forward-looking the today call XX-Q from with guarantee or release the results factors. statements company variety that any earnings our and and performance. involves statements and are press These XX-K those most Our differ materially forward-looking Actual and due factors risks forward-looking described the of not a future

forward-looking I or We Also, non-GAAP do not statements. Mr. in non-GAAP now the operating mention Reconciliations earnings to we press financial ambac.com. prepared responses other to and measures in our like Investors measures. Claude some to in may undertake included any those questions, obligation to are update to LeBlanc. recent section our call website, supplement over our turn on our materials release, would remarks

Claude LeBlanc

We was stated achieving second strategic profitability by results of all to goals, including strong for business this achieve quarter. time, call. pleased options recorded to the our am Financial third our results our Guarantee I XXXX the very report across track the and financial core today's had in the of franchise Chuck, P&C and on joining you, The year. Ambac a everyone generated same Legacy squarely half Thank very to welcome evaluation the that initial at strategic Everspan completed businesses. of strong

$XX net financial third $XX results quarter the adjusted net of income and consolidated income million million. of Our for included

would provide over the update on results achievements XXX,XXX will regulator, additional shortly. to like just discuss with business. on capital Wisconsin for new repurchases now completed I an common substantially Guarantee for our model regulatory starting complete. Legacy David Financial our for our financial information detail some with more first, in also We AAC Working quarter is shares. the our But

As result were and OCI, progress review complete able analysis internal I our a of previously options strategic of our with for we the the discussed business. also Legacy to

goal engaged value potential to parallel, with Moelis certain And along from & further basis. the pursue realization from actively risk-adjusted maximize value advisers this both the to same, certain the discussions external our options we on other remains time Legacy prioritized company. transactions commence to business. of and our formally assess and to parties The maximize of have the business now continue to value enhance Legacy process In with Company interested we

respective to progress. bottom additional Everspan significant with P&C shareholders as their information, expected business to we record including We an line frame expect top Specialty core platforms. and Cirrata With update respect business, to and as our growth scale continue time we

over premium This $XXX exceeded platforms production combined representing increase over production, prior a approximate million million, the quarter, an $XXX XXX% premium has quarter. last on of XX% over Year-to-date, generated same year's basis, these increase period year. a the

income businesses the addition, for quarter. In positive net generated both

on million for margins. have $XXX over basis, P&C our are Cirrata, now For Everspan combined XXXX, premium production we guidance a where businesses, we provided and with our preliminary of attractive forecasting

future not acquisitions or any a start-ups this previously reminder, announced. excludes As

year. XXX% over of the business $XX prior to its was Everspan. Turning premium The quarter the upward trajectory million, which generating of continued gross written third up

its to programs a XX, at stand from up partners, MGA continues program year and company currently ago. The expand XX diversify which

is reinsurance a We assumed business. business an to took opportunity compensation additions quarter partner workers' third from Everspan profitability program. diversification as industry-leading attractive views is an workers' line program our quarter to of a compensation perspective. write the of of One advantage in the with Workers' and compensation partner

to assumed We the expertise intends where natural to more retain should write reinsurance the programs given to be our benefit across for more become predictable stable as book and risk additions, conditions classes, long-term pricing and this diversify. believe has which we and see some Everspan's Everspan Everspan fit limited continued attractive. results. of the desire a given program program underwriting risk have balanced to new terms,

in E&S growth on perspective, overall transitioning business E&S more market remains industry an of and for Everspan, out markets. a non-EBITDA with of particularly the Demand markets forward continued programs the robust our rigid at capacity From we moving basis. believe supportive admitted conditions remain many

to this of $XXX premiums trend expect to in Everspan approximately XXXX. We target generate gross is continue on XXXX. for million

targeting now to XXXX, we And conditions. ROE mid-teen a mid-single-digit Everspan for for premiums course, gross XXXX. subject, market we million of forecasted are still At scale, forecasting close ROEs for $XXX to with are of

we frequency recent cost experienced in trend in still This exceeding which as the push trend saw market elevated rate. We of auto a uptick loss have quarters. quarter, cost particularly continuation classes, loss commercial trends, continues the pricing to certain see

through be ratios. premium loss before However, there timing effect may comes of and the some full earned differences pricing hence

EBITDA, which premium, strong growth and million had benefit ongoing year, to initiatives. generating XXX% produced Turning quarter $X which of the a We prior $XX up acquisitions quarter, reflects of of all from nearly million the prior over Cirrata.

our opportunities or to across for M&A continue whether additional businesses expansion Cirrata through We via product significant transactions. see current

and gross $XX is track maintaining while XXXX exceed target margins. attractive Cirrata on of $XXX its to revenue, of premium billion million

million the results the XX% premium now of revenue, while $XXX acquisitions, to we the gross over any addition without discuss plus maintaining David ahead quarter. and of to of our I targeting margins. to our million call financial will $XX for are over David? XXXX, EBITDA Looking turn

David Trick

and morning, good Claude, you, Thank everyone.

XXXX. per million of the diluted per or to per share million diluted of is million was income income $XX share XXXX, income an the third third For income diluted compared $X.XX quarter in $X.XX in Ambac diluted per Adjusted of net the share $X.XX net XXXX. to quarter to share net compared or million or or report $X $XX happy quarter of of of adjusted net third $XXX $XXX

change quarter in the to RMBS million and Bank America the of XXXX income The income of the $XXX by net period. recognized for gain third compared to was related net prior of driven in third quarter year the settlement with adjusted XXXX mainly the litigation

written this Guarantee results and segment driven Property Casualty Legacy favorable discount well quarter RMBS improved programs Financial as higher loss segment. from Specialty premiums of our recoveries and $XX by the Everspan's million Our period. for our distribution significant in advance. the the favorable existing of net new year results, over in quarter within up were addition as the emanating accounted and rates Insurance Growth and reserve programs were investment XXX% and prior growth

XXXX. higher rate claim of last year. up quarter within was driven the quarter of auto gross XX.X% was XXX%, prior $X written $XX period to Claude Earned XXX% stemmed XX% third in commercial compared of as third The compared quarter last assumed a respectively frequency. by ratio from premiums compensation The quarter's X.X% XXXX this from program, mostly retention Included approximately to of XX% and the development. retention in which premium increased Everspan's The was loss and loss million, respectively, and million increase year. XX% primarily program levels were ratio the reinsurance. mentioned, of new workers' fees

guidance, compared our increase by acquisition previous partially program loss benefit costs. was of sliding modest mitigated the profit to with XXXX. quarter net to a The commissions through to in Consistent loss quarter a $X.X in pretax losses Everspan for third third recognized a million tied scale the of ratios generated

of see to ROEs course momentum, date, with our made to for has set continues cycle. to on a ROE a opportunities. combined next progress to steady the path Everspan and mid-teen Everspan generate over This the year evaluate mid-single-digit stream the

million $XX The $X.X quarter third million both were up for the XXXX. Distribution organic produced third quarter segment quarter, Insurance growth. EBITDA of produced placed up million XXX% premiums third to the benefiting the from the of of compared the of from acquisitions and Cirrata in XXXX, $X.X quarter recent in

margin and margin at the expansion by recent margin acquisitions. EBITDA last increase XX% largely On businesses of XX.X% year. The impact is some of the existing driven versus

Financial benefit Legacy liability asset management. active segment Guarantee and from continued Our to

Legacy period. The consolidated generated year the the net quarter, by the solid of RMBS investment sector results. review income the our For $XX million broader business performance with prior in third this recoveries strong of results, Legacy primarily million I'll $XXX driven versus which and was quarter

last on third increased third in of quarter investment The compared year. quarter average XXX in quarter million improvements from higher the securities, for points compared the fixed the third income was of XXXX $XX to income to million stemmed Consolidated XXXX. which basis yields $XX

portfolio, generated in Supplementing the results, of fixed the adjustment alternative million a and income third which benefit core XXXX. strong expenses was quarter loss increase yield third million leading $XXX quarter an million our $XX XXXX. to to benefit the quarter, were compared $XX our produced Loss third over a portfolio in of of by the investment

rate grew $X recoveries by a last of incremental $XX higher benefit driven from year. Our business RMBS million Legacy discount Guarantee Financial million Everspan losses and produced benefit The a from rates.

our in broader to segments. defensive million XXXX. million headcount administrative $XX strategic Guarantee advisory in increases litigation a increase million the driven operating third growth The continued offset lower the reductions of by more for AAC, other higher and segment, These the headcount $XX third increase quarter, in expenses cost reductions. due from cost and quarter was General at were than in Legacy Financial in costs fees up expenses $XX and

offset XXXX, at was significant AAC. in of expense third was XX, following approximately was per quarter. remaining note foreign up losses interest. June XX, the Shareholders' of September net slightly equity The partially by driven of exchange Interest to surplus September AAC's of the unrealized of $XX $XX translation from accrued $XXX was on unpaid and $X.XX million as and for in the related XXXX, by increase quarter of XX, million XXXX. million, $XX XXXX, sale income, debt $XX from $XX down share losses per $XX million, of investments increase or share million billion deleveraging $XX.XX inclusive million AUK available a to at

XX, $XX.XX value per share XXXX, Adjusted billion September up per from was $XX.XX $X.XX of X% or June XX, at over share at XXXX. book

basis, investments closing receivables price remarks. employee average combined or XXX,XXX when some per At I we compensation. to back of stand-alone million share. cash, a for an and other year, investments brief will largely at Claude $XX.XX call on the in XXXX at During repurchased Board September $XXX which the XX, shares AFG, issued with quarter, in share, the repurchases of offset per in member XXXX, now turn shares approximately $X.XX subs excluding and net from

Claude LeBlanc

you, Thank David.

to optimal positioned be options engage significant value well to Looking Ambac expect that to Company, with will parties, ahead maximize who I next our & with to very path Legacy interested able Working dialogue chart will business. formal the we year, believe to is Moelis value forward precise from Guarantee for shareholders. generate I now Financial in

million are $XXX targeting Additionally, we XXXX. scaling both supported of Everspan rapidly, the premium production by and Cirrata are in

I'm near-term and long-term made to and our encouraged significant forward progress insurance contribution by have their profitability. in P&C businesses both look we ongoing the Specialty to

in We updating steadfast open have you I questions. please for for and long-term in Operator, our focus value coming look the to the to our call generate been quarters. forward shareholders,

Operator

question first Bologna of from [Operator line the Compass Instructions] Our Point. Giuliano is from

Giuliano Anderes-Bologna

been already I there potential that different and related any in of that, you're you already the going Moelis. related curious hypothetical you're interested a everything a and forms “ could process. quarter with is kind asking to already transaction One A there's a sense contacted forward and fairly at and of lines Wisconsin discussions, progress And Moelis. long to a thing lot or be hiring you're point. everything process performance I'm if obviously if now then if moving potential different to through time -- about of starting was if I care. this this with engaging else has -- of buyers good to lot actually milestones realize curious take

Claude LeBlanc

we've think are as we I parties, conversations process had interested Moelis say Yes, we lead for Giuliano. but certain with will that can mentioned, a Thanks, some that limited us. formal I commencing,

the discussions of broaden So in parties coming to I weeks and number other a the months. with expect

risk looking evaluate time-adjusted our where aggressively this with and will various engaging to outlined basis, both are and be we've the options for value perspective, And our and in the options time we parties a that for we we that can we've believe maximize shareholders. considering interested it over line and -- the we is intent, a over said at this company, on from

Giuliano Anderes-Bologna

That's the I'm then going onetime topic. should this about and if maybe there's defensive There's episodic quarter. or kind about run think that quarter's a rate of litigation great. in curious trajectory And obviously on of anything some costs how slightly different we forward. then expense the

David Trick

doing It's we're engaged of quarter quarter predictive wouldn't not this Giuliano. say Yes, quarters. that We're historically in of rate from in, about go-forward period. have terms as I predictive I The future and of trying not It's take manage -- would anything litigation quarters. difficult as a consider that to very and is David. any this to what of what future we've for this comment done but we litigation, done exit run form quarter I litigation view or would

Operator

Dennis with of Repertoire next is LLP. Partners the Our from Chua question line

Dennis Chua

X questions. David, on great congrats progress Claude, have quarter. I the this

buybacks. First question on

bit more forward you've the think about quarter, although not buybacks whether restriction. a But was talk understand and of bigger a there that that you this maybe like admittedly something trying do some I explored is can you great buyback. a little the And it's that it So did expect small. X% in buybacks shareholder the going can folks or some that ways we and is to

kind And at related what the of to was LFG milestones on process. line Giuliano's question question second time the

think, I you you to said time responded adjusted. when that, Claude,

that, the that later LFG those a preference because I sooner NOL at So clarify so rather big asset obviously ask I a want than -- means questions. that outcomes. there's are just yes, X to for And

David Trick

year we've shares that's XXX,XXX and bought buybacks, of this to shares over just in back year-to-date, terms XXX,XXX relative issued to date compensation. -- related to of So

average member we about shares, that to million $XX put And on about about dilutive So place, back accomplished is we've million program Board and what issuances. $X.XX. we've of effects X.X I the dilution the is think cash help price minimize bought our employee in since in -- of spent and

continue you as to the of stock do really shareholders. always So I think said And capital to continue Specialty we've our and has allocate buying implemented there restrictions, We the going against program before, the pointed we've objectives against effective. the to within we're deploy been the build out also franchise. to But to that. are evaluate X% opportunities back opportunities as P&C

commented explored of alternative types programs, And a time it's we try And in I spent think delicate on past, to that this we've so balance end, and we on the buyback have which strike. to lot internally. some we've that a of

you to amount And that buybacks. talked to advisers other come direct an able not point, advisers, legal up outside We've have of been financial tax this advisers, resource, unfortunately, kind than of about and behind it. put alternative if with program fair at human will, we a

long-term against our what think, So terms and business. limitation in we'll continue do -- going selective to of balancing shareholder again, I buybacks well value forward we can P&C to as build as through the the shareholder be, X% value desires

Claude LeBlanc

asking the comment time-adjusted question. and your the second value. to We And thanks time is really around the value for destroys clarify on Dennis, question see

it the as our but certain interpreted sooner better, be the of think also around considering execution should I risk the options. So

place we eager in than sooner So later we believe rather AFG. and will execute that are those maximize to that value will believe and to we put transactions be

Operator

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

disconnect may lines. You now your

Ambac Financial (AMBC) 8 Nov 232023 Q3 Earnings call transcript