Ambac Financial (AMBC) 13 Nov 242024 Q3 Earnings call transcript

Greetings, and welcome to Ambac Financial Group, Inc.

Third Quarter 2024 Earnings Conference Call. [Operator instructions] As a reminder, this conference is being recorded. It is now my pleasure to turn the call over to Charles Sebaski, Head of Investor Relations. Please go ahead.

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

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

included not company in are non-GAAP update our Reconciliation The do mention to some not in cautions that factors those Our and our future undertake financial call statements. earnings of or forward-looking today obligation XX-K to remarks We due questions, and may to measures non-GAAP most materially prepared is SEC. responses to our the we includes any factors. recent Also, the statement measures. forward-looking and performance. statements. XX-Q differ risks forward-looking a are investors involves a those with or may forward-looking the These the any in the under our and Mr. section LeBlanc. of variety earnings expressed from our ambac.com. supplement to website, Investors like would I now of call materials available in over press implied release, described and Actual uncertainties filed turn operating results other release recent to statements on Claude statements guarantee forward-looking press

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

the after launches. Beat The we which the quarter will materially our business of the as becoming reflected announcement market acceleration pure-play we $XX advanced announced commence million multiple behind of very the program, new Last MGA was growth our for Capital. immediately. with buyback our towards of third a a Ambac also strong with close, share The businesses also organic strategy P&C quarter quarter milestone acquisition night,

distribution Turning to business. our

a leading towards destination further we Beat, lead growth. underwriting With talent, which advanced will for we believe of our and have long-term the MGA becoming goal acquisition exceptional to

our our some one professional organic technical Beat remain starting new in distribution in The and during cover a focus liability, liability, including the will exceptional come property will have franchises is industry, business. expansion, in broad including including future to as pathway October. Global and growth best we classes, year, AIG, These management significant acquisitions credit. quarter this amongst Cirrata, X FM like X strategic X these While names organic casualty, others. E&S launched from These drive new leadership and our Nationwide, and of commercial with for X X new the Hiscox, the programs we growth expand of Between MGAs our business of the pedigree set key Arch, future XXXX. help risk MGAs

As our timing, start-up will of There we volatility novos. providing is costs the and likely profitability also as launching business opportunity de to be each the the scales, expenses be these to fluctuates. associated new to pathway some size with

$X.X approximately X to reasonable overall to each launch. the results X we million expenses about However, grow. de incurring to start-up typically expenses million relative as to diminish over spread to it These is will think from continue $X.X novo of quarters

start-up regarding We will provide quarters. additional the details expenses in coming

softened. optimistic lines also property and auto and trends. keeping remain markets, certain a With on, professional keeping are U.S. remain market subclasses on believe pricing cost eye we focused us quite as conditions, increases rate up target. the favorable loss the markets that the on speaking, close are casualty lines we or exceeding with respect we based commercial We're to for As for has broadly in

to the secular expansion. the stabilize our and effects effect including However, towards year, overall see start insurance so commercial whereas do risk limited. the and E&S market pricing summary, the conditions, unexpected. non-property into to on not insurance and trends expect continued conducive of lines the to levels property In specialization we We is as supportive Helene peak going coming it was Hurricanes off XXXX, multiyear Milton

has Commissioner remaining a business. As report happy received also for P&C approval ahead the our Office now the only look platform, from shareholder overwhelming our with to of the the sale, Guaranty extremely approval the sale I'm Oaktree we await to of that Insurance. Financial pleased future am received support we pure-play as specialty the we I for and Wisconsin PRA of legacy

quarter continue first of the or fourth next to this quarter anticipate in transaction year. the We closing

on control. is As regulatory prior stated we the process our calls, have outside of

our with $XXX to to production last results, XX% an consolidated P&C strong Specialty year. now third continued million our generate quarter over platform Turning premium, increase in insurance

generated The production. Over EBITDA. on quarters, over our our production for Beat X quarter contributed placed the $XXX XX% prior total period million third and pace premiums $XX an premium approximately first of million million year $XX acquisition businesses of our million, totaled combined of the this year. date, increase P&C of To to $XXX

is has state to in detail Beat. towards which now depth distribution early profitability, We've a improved proactive underwriting the to of realize effect.  Looking desirable scale, The destination on set environment quarter Everspan for few production of combined both of a continue to results broader synergies relationships, actions minutes. had business' in efforts for capacity underwriting diversification a results this channels the quarterly in the and year-to-date synergies and reduce diversify already our the of we we for Everspan's the that confident benefits disproportionate and as And are portfolio, focus our on pleased highly a XXXX, David the day been the take and our over believe premier quarter, the external significant deliver progress integration a continues David maintains will the able call grow.  I platform combined to identify to I our be discuss growth, underwriting strong I and number and strong ability operational am makes results to pipeline in of ratios which a our top our month a and of results a will to progress on we will talent.  Turning report in quarter. breadth relatively XX. ROEs. can our to and future goal financial our program Ambac impact integration confidently a David? quarter. For quarter. discuss support Everspan the Beat, to strong internal July continues July opportunities, quarter. turn given now on third strong further as our make more consequently, close it to

Claude, morning, good and you, everyone. Thank

or of or generated third loss third diluted share quarter the the compared per XXXX.  Adjusted the share income in million income a net net was For million $XX million per or $X.XX share of adjusted third $X.XX XXXX, of of per of loss diluted $X.XX to in $XX Ambac $XX quarter quarter net to $XX million compared share XXXX. quarter the diluted net diluted or for $X per of

mostly to Beat. financing of loss related Our costs at related $XX the and Cirrata lower $X Beat third quarter million.  These loss at incurred by acquisition pound $X.X of were million partially start-up of of million expenses net business, AAC, reserve $XX gain of Financial losses million discount at and million for of including carrier the $X.X a notable expenses the Beat of the sale expenses a and results XXXX rates; on advisory the driven offset million the legacy pending $X.X a acquisition, with AFG Guarantee approximately legal several of $X.X an Everspan of the impacted FX net the associated short-term price Cirrata of admitted to million by gain British sale were by CNIC, and purchase hedging items,

of to to respectively, to revenue P&C results $X.X month driven $X.X after $X.X $X.X total quarter third revenue we in $XX businesses. continued less equaling quarter, non-controlling in the resulting premiums Growth interest EBITDA experience 'XX. third of to $XX XX.X% of quarter XXXX.  The acquisition and Cirrata expansion. of by growth by quarter compared was third by Capital, Specialty XXXX.  Net the was EBITDA the commission quarter million XXX% organic margin million quarter of non-controlling an XX.X% after to million before grew third the impact and the compared increased this XXX% for to million, the interest, million in additional of the expense of of XXXX. million total third compared to reduced Beat Riverton quarter to revenue meaningful Compared During grew non-controlling the $XXX interest million, our was XXXX. third XX%

affected This worth were insurance several distribution by results highlighting. quarter's items segment

During the $X.X expenses. de of novo incurred we million quarter, start-up

to volatility help diminish overall drive suppress earnings the an in they investment we are but grow. there exchange the expenses functional its other we expenses, growth.  As incurred as hedges short We will these term, relative Claude Beat's continue exposure. depreciates. organic million currency dollars be $X.X losses noted, future will Since the While to XX% Beat business start-up of will to results will as and foreign is amount does estimated they foreign the significant pound historically U.S. experience Beat losses a currencies, in of when exchange approximately net of pound. which

a about placed, quarter addition $X million $XX exit gross the premiums August premiums X of up and XX%, XXX% The new of contributing approximately compares programs.  Earned by the results gross evenly.  For expenses of the revenue incurred in to programs $XX or of quarter written about based of in our disproportionate million from to offset over and quarter XXXX. ratio a were of amounting quarter, contributed related XX% prior to occurs on retention XXXX. a of quarter prior a relatively $X.X premium of at Beat's of There third and mostly quarter of XX.X% commercial rate the third $XXX,XXX. approximately down X as aforementioned $XX a third and prior date. July existing XX% while written ratio premium, retention we compared premiums year The of XX $X net loss benefiting million, fees program million XXXX improved quarter, from XX.X% of was auto the respectively, from the programs, the quarter, million and Everspan. third of the reduction million the X.X% premiums prior from of stem of items. $XX in the year in was of year. September, gross the a million up mostly was were XX.X% last growth given XXXX, impacted million development accident resulting This expense $XX the from year in rate in amount from premiums XX% of slight of overall to $XXX quarter minor period July Everspan's results the The million.  This over months period XX% from growth in in close quarterly to $XX included written net million are Timing revenue loss the

of One to sliding is recorded the costs ways which manages acquisition scale loss performance. commissions, linked risk through Everspan against and are

scale improvement XXX.X% the of basis commissions last for X.X% XXX.X% year respective X.X% year. quarter down of benefit a from For XXX.X%, the produced year-to-date. combined was third an is benefit XXXX, compared XXX period. The The quarter basis ratio third to sliding resulting ratio the year-to-date prior of from combined last XXX points of points

to During to ratio, on the our on are short-term which our some consistently expense to help October These retaining third loss the exposure XXX%. designed be effective remains have auto stopped we Nevertheless, will a revenue, below program impact nonstandard ratio. any exited ratio will down objective commercial the impact auto combined X, one program. and quarter, drive drive but net moves

bolstered $X previously quarter, XXXX.  As of to the just $X.X a produced noted, for sale this breakeven the million Everspan million For of were net third by the compared quarter's income of gain result the on pretax results quarter under roughly CNIC.

a the in anticipate third Guarantee versus XX, loss quarter.  As or in positive a period. recording reduction quarter, legacy recoveries shareholder prior net economics in vote buyer Shareholders' million third billion loss noteworthy to XXXX, of to in XX, of a driven XX, per $XX.XX a from sale investments the XXXX. would whether share. on will RMBS year value by sale the The change book lower excluding switching $XX successful support higher in that share at the elevated in billion on the of per Financial we or share would $XXX that million discount at had June $XXX basis, Guarantee of the effective period. $XX.XX quarter $X.XX from the rates XX, is the segment $XX and of we million was the XXXX. Legacy up accounting was approximately accounting approximately share or XXXX, Financial result, this and Legacy cash, rates of was to recorded of June September business $XX.XX the share primarily be business. With the a we for a XX, legacy September reside Adjusted the to with we net loss up year-over-year of year generated October will a XXXX per and have stand-alone discount XXXX. at at subsidiaries, It income million. of negative, the have the receivables If book quarter, be prior For investments we held-for-sale fourth or held-for-sale million $X.XXX equity changed net value business, AFG, of $XXX business, per per March compared $X.XXX in $XX.XX

distribution transition the introduce non-GAAP to we to pure-play measures turn brief that back better P&C quarter insurance fourth remarks. held-for-sale to and go-forward our a business. our I accounting expect also addition the with to insurance Claude in closing align call with and will some platform, for consistent In now new

you, Thank David.

towards term and of future Ambac's the and XXXX, our of term. value, head the near excited very we create to long by I shareholder end both prospects am ability As

the deliver and three, One, few sale Operator, share XXXX insurance into that financial Ambac's of business, commence diversify launching and which which solidly items are P&C results. reported $XX strategically. of immediately; the business.  As million closing feel the the XXXX sale Here previously specialty franchise rebranding materially guarantee these are to of an have of organically business, capital our legacy distribution in questions. program, and and our EBITDA we both horizon. we a following on our million scale lastly, notable $XX to anticipated will to company for our our sights our on replenishes a we please our completes two, And buyback call transformation continuing September, legacy resources; I on our positioned $XX open in goal delivering on set million

of Truist The first the line Instructions] Securities. Mark [Operator Hughes question from comes with

Your combined XXX%. little Everspan the bit business, you about a ratio above talked

a achieve? you XXX%. there into your longer-term return terms does to target? of ROE think that Is that suggested combined was the that to Everspan? Is what you'd in goal keep below And translate ratio I like within

looking as the we're get term, term. short the ROEs, Appreciate ratio looking I before see mean, Thanks, we're below closer Mark. to long to combined terms indicated at It's ROEs. mid-teen question. ratio absolutely, David Trick. Longer in we've a to term, that that of XX% translating combined XXX%. that And in we

And think when laid Cirrata objective, million split and should a is the or than guidance there balanced longer-term be million your be to a $XX will Or between rough goal, model? and you $XX other? out you one of your do more kind the significant Everspan

Claude. Mark, this is

strategic distribution our is business, of other a component split is a managed engine with. the capacity Everspan really the growth be the predominant yes, behind So work is really as It's we that our which relationships platform. split. not will that

really to think of the XX% growth of or I it's and should distribution side. you really whether So the plus being growth earnings the XX% attributable think

And if could one I in more. squeeze

you're how would appetite XX you in of that these there carrier As be X, now some capital MGAs, Just do straightforward? versus contrast the launching thoughts fairly support, helpful. months terms maybe ago? Is find

Sure.

de managed our -- to back UK we or the multiple in Bermuda capacity start-ups have through capacity, we access of relates with reinsurer, addition it sorry, -- to our novo, that sources through convergence or as our be components Lloyd's strategic Everspan third-party these capacity. have of our to now to syndicates having So again, it going whether [indiscernible],

third-party the and casualty tends a On into a large on not take portion not capacity issue of challenges some look but we opportunities we evaluation launches. market part not date, But some the acquisitions in really that given mature of for and some as issue teams, we as Clearly, the our the on been for issue. to -- be start-ups. management expand and an of factor to strategy. typically much the launches, is the growth pending or as see typically sources that there's capacity diversify, new an of portfolios of start-ups, lines So then XXX% to the sources our it's and

Dennis line comes question Chua Next with from the Partners. of Repertoire

on close the had on the great seems there's of on quarter. questions. for Congrats like hurdle Congrats more the one and Beat sale I two it just AAC.

I say immediately. couple decision tracking I the $XXX and the think towards of, program was So guide you year, Noticed the in buyback And was And tracking QX for the on the it really are pulling to premiums bit mid-teens weaker? near- that that do for question $XXX written on had last starting are a of gross just the such year-to-date little previous and months that the to Board one on your we that that? then decided million the Would a gross year. we Everspan. to what written in like think decision. ahead is was fees fees it seasonally Or ahead was for we're of good million buyback, mid-term? the But $XX Obviously, changed track now? million it premiums ROE the second on program that forward of

Yes.

be I long-term terms with I think, overall, I we combined I calls our programs to in we're some align and and fourth think seasonality. exiting moderation goals the are that long-term well So a bit ratio of on our that a prior in mentioned, tracking outlined as bit, quarter, ROE. But of guidance. this in will the certain don't previous There call little before

from but level we'll for year. quarter, fourth standpoint, be around I full the in a noise the be some guidance think production be -- there'll our So we'll

us, commit program that, feel approval, of approval program, highly confident in a being over. have acceleration the which, is But being launching But or in and control close that PRA the Yes. the our shareholder process an where down in vote it not-too-distant of get And given think we did coming to the post business. Wisconsin hand, future. we to behind are we a back the on we to again, really don't will terms the legacy to the of timing imminent the progress sale we

the platform I the one stock. near trading anywhere the presents the of And our factor. believe what opportunity true very dislocation think to current simply a certainly between of that stock value was attractive relative values price continued is we just current our

So the Board press to forward, we move was time it decided to thought earlier. that's good a and forward why

Makes long-term I conservative million you So sense. number? for the a Can stretch say $XX the is if -- squeeze one biggest side? that mind? EBITDA you you do what the is think the or in more, target, more would And $XX million, on don't surpassing that's goal driver

is Yes, absolutely the on. I it's get a focused organic driver we're there certainly is wouldn't something It to goal. say the And stretch biggest growth.

and the will have that and XXXX launched business start-ups that this year of basis, well been As as we Claude is a we we big that to at the that continue of the our are driving $XX those and recently of about then that mentioned, of that and year that it's growth excited Claude And contributor Everspan towards profitability a million businesses mentioned, guidance. acquisitions as big to established really organic as $XX the terms part, aspirations ROE good optimistic and million pursuing. be of focus that for to now them that drive we underlying start-up and grow on for I were entities some to as really continue the this some existing it to in we've of very guidance. play successful looked will forecast guided And plans plans, our a launched but we to. a focus number business expect clearly components secondly, mentioned, very will be those business

on we combination guidance about the and the track, right we of clearly is be continue those the to provided. So optimistic

it's our the just really key And buying will is that we but add, of one control under the of a Dennis, that is meaningful our control around we to something interest a And large I'd this, component point is that of a non-controlling MGAs. degree. constitute really portion and vary, course, one that and component have could, other other that also part, it

confidence So great in gives our of numbers. that to also us getting a terms of deal

from with the Harry comes MKM. Fong question of ROTH Next line

the has I lot new he in sort that Mike Claude, along same but the player can good just had Beat potential the to had terms able I'm with quick Ambac. Ambac to partners? and Beat of with was could E&S Mike a Similarly, partner question thing with of other Scottsdale. relationships with, growth. up have a prior the in in both Mike market, when to question, How of pleased teamed very, a you part thought other potential very they Miller well Miller, selected He's insurance the partners up in follow-on of he of visible you President and formerly Capital. sure is partnership team. extremely very likely to long-term are his U.K. about say of market. many Beat convince see

underwriting model well that true would with start-ups. It's and as Thanks, now for model strategy really MGAs as interest that I we quartile. years partnership a X MGA our strong model that's partners, our Harry. back performance predicated think the have on top be having Yes, of with that also we was alignment going acquisitions a where outlined and was our in

expect that there's the hope the to be hard would that Beat of and we of as to to to And So a market. they're lot capital I'd important to And John the many. A capacity looking to the also for permanent are businesses platform and company capital next breadth and strong participants, of as their other the of think We're our continue in I support stability and having very they case very, successful of grow. that just operations also stage a is and strength and these be to the aspect launching what they're both the permanent whether cover Mike team. or they his the is they're bring to look other comparatives vehicle. the with we we that team to MGAs cultural we distribution of the matter, and that with mix.  There aren't say for our fact, that the for, also John and we're fit proud identify we that brought most impressed that and to find that have the very in probably course, factor offering as and Mike bring able to relationships the were into relationships part And family. taking

So partner we more we're of in pleased these a as be many be impressive. we come again, teams leading will family very think that marketplace, equally that, part with we have pipeline will the that excellent growing able the also X were to in will number the but to and

it that. you guess I'd leave So unless other questions. at Harry, I have

M&A How organic guess hit into be make it a be now to numbers I contributor an is for looking do need X related XXXX? these 'XX, inorganic 'XX? to for you XXXX question to to David are or do will Group might EBITDA numbers Well, to as follow-on to the it by the easy XXXX, companies your Yes. by go growth growth. viewed Miller But be distribution What we as Beat this. Obviously, in likely Mike business. and

Good question, Harry.

organic growth Beat them So acquired XX. will I XXXX I mean, contribute 'XX would obviously as growth-wise, we to organic effective and in say, July

organic we're ground. and on organic an business really Beat is business start-up because And So as capitalizing that Mike's will it as latter include getting the it off pave a basis. the of 'XX part

I in both So went acquisitions and mind. a partnerships investments we into with these think plan and

And think so reflected the is given. we've I plan that guidance in

pointed I of as to it's with plan. have have don't special confidence these in And anything on went the outside backgrounds industry-leading people plan are space. their in they'll that. and mentioned, we as strong utmost and deliver a with you the more their plans. that I we place, they experience think hit So out, And in,

bring And outside and again, capacity with and behind we of shared I to get getting ramp-ups Beat but is providing in we assistance also the to, critical, our obviously, expansion into about offering start-ups the support be that's talk And U.S., Harry, that which behind a but a expertise. them I great start-ups, also have will distribution even that want the their platforms help something where be a service these coming this, and plans of the component significant case these have the key that we its and of at they where the lot we of will expand tools with X. of critical think pace I we them meet scale even and platforms and terms manage in basket think or they to and the in to expansions plans feel of exceed their year and think,

talking to their make than one Wisconsin more more to And review, -- it. likely Oaktree I the With to in may Got know guarantee Oaktree not the as of financial to you right respect be ask question. if point is the sure regulator, rightful I that that they're business. this owner at

might Oaktree regulator related review? heard or the to you from there have stage the anything the final to be either So any that regulatory issues of suggest

any but heard dialogue issues, of right. And to not at this issues, we mean a things lot between I is and of and We we understand of We're any the stage. regulators progress. you're heard continue our have have Harry. kept Oaktree not informed,

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

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