Ambac Financial Group, Inc. (NYSE: AMBC) ("Ambac" or "AFG"), a
financial services holding company, today reported its results for
the quarter ended March 31, 2024.
First Quarter 2024 Highlights
- Net income of $20 million or $0.43 per diluted share and
Adjusted net income of $38 million or $0.82 per diluted share
- Legacy Financial Guarantee segment generated net income of $20
million
- Specialty P&C Insurance ("Everspan") produced a 98.4%
combined ratio compared to 121.9% in the first quarter of 2023
- Insurance Distribution ("Cirrata") generated net income of $3
million and EBITDA of $5 million on $90 million of premiums
placed
- Total P&C Premium Production of $187 million, an increase
of 45% from the first quarter of 2023
- Book Value per share of $30.19 and Adjusted Book Value per
share of $29.03 were up marginally from the prior quarter
Claude LeBlanc, President and Chief Executive Officer, stated,
"Ambac had a solid start to 2024, with all three business segments
generating positive net income for the quarter. Our specialty
P&C platform continues to deliver on its vision to be the
premier destination for MGAs and program partners, as evidenced by
the 45% growth in premium production over the prior year. This
growth has not been at the expense of disciplined underwriting, and
I am pleased to report that Everspan produced its first quarterly
underwriting profit with a 98.4% combined ratio."
LeBlanc continued, “Regarding our Legacy Financial Guarantee
Business, our strategic review is proceeding as planned. During the
quarter we have been in active discussions with interested parties
and we hope to be in a position to provide an update on our process
on or before our 2nd quarter reporting."
Ambac's First Quarter 2024
Summary Results
B (W)
Percent
($ in millions, except per share
data)1
1Q2024
1Q2023
Gross written premium
$
98.1
$
60.7
62
%
Net premiums earned
33.1
13.9
139
%
Commission income
17.7
14.5
22
%
Program fees
2.6
1.5
73
%
Net investment income
41.7
34.1
22
%
Pretax income (loss)
25.5
(28.8
)
189
%
Net income (loss) attributable to common
stockholders
20.1
(33.4
)
160
%
Net income (loss) attributable to common
stockholders per diluted share2,3
$
0.43
$
(0.73
)
159
%
EBITDA2,4
54.5
(5.1
)
1,179
%
Adjusted net income (loss) 2
38.5
(13.8
)
379
%
Adjusted net income (loss) per diluted
share 2, 3
$
0.82
$
(0.30
)
373
%
Weighted-average diluted shares
outstanding (in millions)
46.3
45.6
(2
)%
Ambac's First Quarter 2024
Summary Results
March 31, 2024
December 31, 2023
B(W)
($ in millions, except per share
data)1
Amount
Percent
Total Ambac Financial Group, Inc.
stockholders' equity
$
1,365.2
$
1,361.7
$
3.6
—
%
Total Ambac Financial Group, Inc.
stockholders' equity per share
$
30.19
$
30.13
$
0.06
—
%
Adjusted book value1,2
$
1,313.1
$
1,298.9
$
14.2
1
%
Adjusted book value per share 1,2
$
29.03
$
28.74
$
0.29
1
%
(1)
Some financial data in this press release may not add up due to
rounding
(2)
See Non-GAAP Financial Data section of this press release for
further information
(3)
Per diluted share includes the impact of adjusting redeemable
noncontrolling interests to current redemption value
(4)
EBITDA is prior to the impact of noncontrolling interests, relating
to subsidiaries where Ambac does not own 100%, of $0.9 and $0.9 for
the three months ended March 31, 2024 and 2023, respectively.
Results of Operations by Segment
Specialty Property & Casualty
Insurance Segment
Three Months Ended March
31,
($ in millions)
2024
2023
% Change
Gross premiums written
$
96.4
$
51.8
86
%
Net premiums written
$
26.2
$
9.2
186
%
Net premiums earned
$
25.6
$
7.0
266
%
Program fees earned
$
2.6
$
1.5
73
%
Losses and loss expense
$
19.4
$
4.7
315
%
Pretax income (loss)
$
1.8
$
(0.8
)
333
%
Combined Ratio
98.4
%
121.9
%
-2350
bps
- Gross premium written ("GPW") and Net premium written ("NPW")
grew substantially in the first quarter of 2024 relative to the
first quarter of 2023 as Everspan continues to add new programs and
existing programs scale; Net premiums earned ("NPE") growth
outpaced that of NPW as a result of the impact of assumed
reinsurance transactions closed in the second half of 2023.
- Combined ratio of 98.4% for the first quarter of 2024 compared
to 121.9% in the first quarter of 2023 and 100.3% in the prior
quarter.
- The loss and loss expense ratio for the first quarter of 2024
was 75.7% compared to 66.6% for the first quarter of 2023. This
quarter's result include 4.4% of prior accident year development
which is largely off-set from a economic perspective by a sliding
scale benefit recorded as an offset to acquisition costs.
- Expense ratio(1) of 22.7% for the first quarter of 2024 was
down from 55.3% in the prior year period as expenses continue to
normalize on a relative basis. In addition, a sliding scale
commission benefit reduced the expense ratio by 6.1% in the first
quarter of 2024 compared to 0.6% in the prior year period. The
first quarter 2024 expense ratio also included a 3.4% benefit from
a reduction of 2023 compensation accruals.
(1)
Expense Ratio is defined as acquisition costs and general and
administrative expenses, reduced by program fees divided by net
premiums earned
Insurance Distribution Segment
Three Months Ended March
31,
($ in millions)
2024
2023
% Change
Premiums placed
$
90.1
$
77.1
17
%
Gross commissions
$
17.7
$
14.5
22
%
Net commissions
$
7.9
$
6.9
15
%
General and administrative expenses
$
3.1
$
2.4
29
%
Pretax income
$
3.8
$
3.6
7
%
EBITDA1
$
5.0
$
4.5
10
%
Pretax income margin2
21.5
%
24.6
%
-310
bps
EBITDA margin 3
27.9
%
31.3
%
-340
bps
(1)
EBITDA is prior to the impact of noncontrolling interests, relating
to subsidiaries where Ambac does not own 100%, of $0.9 and $0.9 for
the three months ended March 31, 2024 and 2023, respectively.
(2)
Represents Pretax income divided by total revenues
(3)
See Non-GAAP Financial Data section of this press release for
further information
- Premiums placed and commission income grew meaningfully during
the first quarter of 2024 compared to the first quarter of 2023
driven by the August 2023 acquisition of Riverton Insurance Agency
and organic growth elsewhere, particularly within our specialty
commercial auto platform. Growth in A&H was impacted by the
timing of certain renewals shifting to second quarter.
- General and administrative expenses of $3.1 million in the
first quarter of 2024 compared to $2.4 million in the prior year
period, the increase was largely related to recent acquisitions and
growth initiatives at existing business.
- EBITDA of $5.0 million for the quarter was up 9.6% over first
quarter of 2023; EBITDA margin of 27.9% for the quarter compared to
31.3% last year was negatively impacted by business mix changes and
growth initiatives.
Total Specialty P&C Insurance Production
Specialty P&C Insurance production, which includes gross
premiums written by Ambac's Specialty P&C Insurance segment and
premiums placed by the Insurance Distribution segment, totaled $187
million in the first quarter of 2024, an increase of 44.7% from the
first quarter of 2023.
Specialty P&C Insurance revenues are dependent on gross
premiums written as specialty program insurance companies earn
premiums based on the portion of gross premiums written retained
(i.e. net premiums written) and fees on gross premiums written that
are ceded to reinsurers. Insurance Distribution revenues are
dependent on premium volume as Managing General Agents/Underwriters
and brokers receive commissions based on the amount of premiums
placed (i.e. gross premiums written on behalf of insurance
carriers) with insurance carriers.
Three Months Ended March
31,
($ in millions)
2024
2023
% Change
Specialty Property & Casualty
Insurance Gross Premiums Written
$
96.4
$
51.8
86
%
Insurance Distribution Premiums Placed
90.1
77.1
17
%
Specialty P&C Insurance Production
$
186.5
$
128.9
45
%
Legacy Financial Guarantee Insurance
Segment
Three Months Ended March
31,
($ in millions)
2024
2023
% Change
Net premiums earned
$
7.5
$
6.9
9
%
Net investment income
$
38.0
$
31.2
22
%
Losses and loss adjustment expenses
(benefit)
$
(20.7
)
$
13.0
(259
)%
General and administrative expenses
$
21.4
$
28.1
(24
)%
Pretax income (loss)
$
24.8
$
(32.1
)
177
%
EBITDA1
$
52.4
$
(9.3
)
663
%
(1)
See Non-GAAP Financial Data section of this press release for
further information
- Net premiums earned of $7.5 million in the first quarter of
2024 increased slightly from $6.9 million in the prior year period.
This increase was a result of the favorable impact of proactive
de-risking transactions in the quarter on both normal and
accelerated premiums earned more than offsetting the impact of
insured portfolio run-off.
- Net investment income of $38.0 million increased 21.9% over
first quarter of 2023 on higher yields and gains on securities
classified as trading.
- Losses and loss adjustment expenses for the first quarter of
2024 were a $20.7 million benefit, compared to a $13.0 million loss
in the first quarter of 2023. The improvement was driven mainly by
higher discount rates. The first quarter of 2024 also benefited
from favorable credit developments.
- General and administrative expenses for the first quarter of
2024 were down 24.0% compared to the first quarter 2023 driven by
reduced legal expenses and timing of intercompany cost allocations,
partially offset by costs associated with the ongoing strategic
review.
- Watch List and Adversely Classified Credits ("WLACC") decreased
4.0% (3.6%, excluding the impact of FX) to $5.5 billion in first
quarter of 2024, from December 31, 2023.
- NPO was $19.0 billion at first quarter of 2023 a decrease of
2.6% (2.1%, excluding the impact of FX) from December 31, 2023, due
to de-risking, run-off and the impact of FX rates.
Consolidated Financial Information
Net Premiums Earned
During the first quarter of 2024, net premiums earned of $33
million, increased 138.6% compared to the first quarter of 2023,
driven by significant growth in the Specialty P&C
businesses.
Net Investment Income
Net investment income for the first quarter of 2024 was $42
million compared to net investment income of $34 million for the
first quarter of 2023. The increase was driven by higher yields on
the core fixed income portfolio and higher net gains on assets held
as trading.
Losses and Loss Expenses(Benefit)
Incurred Losses (Benefit) for the first quarter of 2024 were
$(1) million, compared to $18 million for the first quarter of
2023.
The Incurred Benefit for the first quarter of 2024 was driven by
a $14 million favorable impact from discount rate increases and
approximately a $7 million benefit from assumption changes in the
Legacy Financial Guarantee business, which more than off-set the
incurred losses in the Specialty P&C segment.
General and Administrative Expenses
General and administrative expenses for the first quarter 2024
were $36 million compared to $36 million in the first quarter of
2023. During the quarter expenses associated with P&C growth
initiatives largely off-set expense reductions elsewhere.
AFG (holding company only) Assets
AFG on a standalone basis, excluding its ownership interests in
its Specialty P&C Insurance, Insurance Distribution, and Legacy
Financial Guarantee subsidiaries, had net assets of $209 million as
of March 31, 2024. Assets included cash and liquid securities of
$153 million and other investments of $33 million.
Consolidated Ambac Financial Group, Inc. Stockholders'
Equity
Stockholders’ equity at March 31, 2024, was $1.37 billion, or
$30.19 per share compared to $1.36 billion or $30.13 per share as
of December 31, 2023. The net income attributable to common
shareholders of $20 million was partially off-set by net unrealized
investment losses of $7 million and foreign exchange translation
losses of $8 million.
Non-GAAP Financial Data
In addition to reporting the Company’s quarterly financial
results in accordance with GAAP, the Company is reporting non-GAAP
financial measures: EBITDA, Adjusted Net Income, Adjusted Book
Value and EBITDA Margin. These amounts are derived from our
consolidated financial information, but are not presented in our
consolidated financial statements prepared in accordance with
GAAP.
We present non-GAAP supplemental financial information because
we believe such information is of interest to the investment
community, and that it provides greater transparency and enhanced
visibility into the underlying drivers and performance of our
businesses on a basis that may not be otherwise apparent on a GAAP
basis. We view these non-GAAP financial measures as important
indicators when assessing and evaluating our performance on a
segmented and consolidated basis and they are presented to improve
the comparability of our results between periods by eliminating the
impact of the items that may not be representative of our core
operating performance. These non-GAAP financial measures are not
substitutes for the Company’s GAAP reporting, should not be viewed
in isolation and may differ from similar reporting provided by
other companies, which may define non-GAAP measures
differently.
Adjusted Net Income (Loss) —
We define Adjusted Net Income (Loss) as net income (loss)
attributable to common stockholders adjusted to reflect the
following items: (i) net investment (gains) losses, including
impairments; (ii) amortization of intangible assets; (iii)
litigation costs, including attorneys fees and other expenses to
defend litigation against the Company, excluding loss adjustment
expenses; (iv) foreign exchange (gains) losses; (v) workforce
change costs, which primarily include severance and other costs
related to employee terminations; and (vi) net (gain) loss on
extinguishment of debt. Adjusted Net Income is also adjusted for
the effect of the above items on both income taxes and
noncontrolling interests. The income tax effects are determined by
applying the statutory tax rate in each jurisdiction that generate
these adjustments. The noncontrolling interest adjustments relate
to subsidiaries where Ambac does not own 100%
Adjusted Net Income (Loss) was $38.5 million, or $0.82 per
diluted share, for the first quarter 2024 compared to Adjusted Net
Income (Loss) of $(13.8) million, or $(0.30) per diluted share, for
the first quarter of 2023.
The following table reconciles net income (loss) attributable to
common stockholders to the non-GAAP measure, Adjusted Net Income
(Loss), for the three-month periods ended March 31, 2024 and 2023,
respectively:
Three Months Ended March
31,
2024
2023
($ in millions, other than per share
data)
$ Amount
Per Share
$ Amount
Per Share
Net income (loss) attributable to
common shareholders
$
20.1
$
0.43
$
(33.4
)
$
(0.73
)
Adjustments:
Net investment (gains) losses, including
impairments
(0.6
)
(0.01
)
4.4
0.10
Intangible amortization
12.5
0.26
6.9
0.15
Litigation costs
6.3
0.13
8.8
0.19
Foreign exchange (gains) losses
0.4
0.01
(0.3
)
(0.01
)
Workforce change costs
0.1
—
0.8
0.02
Pretax adjusted net income
(loss)
38.8
0.82
(12.8
)
(0.28
)
Income tax effects
(0.1
)
—
(0.8
)
(0.02
)
Net (gains) attributable to noncontrolling
interests
(0.2
)
—
(0.2
)
—
Adjusted Net Income (Loss)
$
38.5
$
0.82
$
(13.8
)
$
(0.30
)
Weighted-average diluted shares
outstanding (in millions)
46.3
45.6
(1)
Per Diluted share includes the impact of adjusting the Insurance
Distribution segment related noncontrolling interest to current
redemption value
EBITDA — We define EBITDA as
net income (loss) before interest expense, income taxes,
depreciation and amortization of intangible assets.
The following table reconciles net income (loss) attributable to
common shareholders to the non-GAAP measure, EBITDA on a
consolidation and segment basis.
Legacy Financial Guarantee
Insurance
Specialty Property &
Casualty Insurance
Insurance Distribution
Corporate & Other
Consolidated
Three Months
Ended March 31, 2024
Net income (loss)
$
20.2
$
1.7
$
3.7
$
(4.9
)
$
20.8
Adjustments:
Interest expense
16.0
—
—
—
16.0
Income taxes
4.6
0.1
0.1
(0.1
)
4.8
Depreciation
0.2
—
—
0.3
0.5
Amortization of intangible assets
11.3
—
1.1
—
12.5
EBITDA (2)
$
52.4
$
1.8
$
5.0
$
(4.7
)
$
54.5
Three Months
Ended March 31, 2023
Net income (loss)
$
(35.9
)
$
(0.8
)
$
3.5
$
0.4
$
(32.7
)
Adjustments:
Interest expense
16.4
—
—
—
16.4
Income taxes
3.8
—
0.1
—
3.9
Depreciation
0.4
—
—
—
0.5
Amortization of intangible assets
5.9
—
1.0
—
6.9
EBITDA (2)
$
(9.3
)
$
(0.8
)
$
4.5
$
0.5
$
(5.1
)
(1)
Net income (loss) is prior to the impact of noncontrolling
interests.
(2)
EBITDA is prior to the impact of noncontrolling interests, relating
to subsidiaries where Ambac does not own 100%, of $0.9 and $0.9 for
the three months ended March 31, 2024 and 2023, respectively. These
noncontrolling interests are primarily in the Insurance
Distribution segment.
(3)
EBITDA margin — We define EBITDA margin as EBITDA divided by total
revenues. We report EBITDA margin for the Insurance Distribution
segment only.
Adjusted Book Value.
Adjusted book value is defined as Total Ambac Financial Group, Inc.
stockholders’ equity as reported under GAAP, adjusted for after-tax
impact of the following:
- Insurance intangible asset: Elimination of the financial
guarantee insurance intangible asset that arose as a result of
Ambac’s emergence from bankruptcy and the implementation of Fresh
Start reporting. This adjustment ensures that all financial
guarantee contracts are accounted for within adjusted book value
consistent with the provisions of the Financial Services—Insurance
Topic of the ASC.
- Net unearned premiums and fees in excess of expected losses:
Addition of the value of the unearned premium revenue ("UPR") on
financial guarantee contracts, in excess of expected losses, net of
reinsurance. This non-GAAP adjustment presents the economics of UPR
and expected losses for financial guarantee contracts on a
consistent basis. In accordance with GAAP, stockholders’ equity
reflects a reduction for expected losses only to the extent they
exceed UPR. However, when expected losses are less than UPR for a
financial guarantee contract, neither expected losses nor UPR have
an impact on stockholders’ equity. This non-GAAP adjustment adds
UPR in excess of expected losses, net of reinsurance, to
stockholders’ equity for financial guarantee contracts where
expected losses are less than UPR. This adjustment is only made for
financial guarantee contracts since such premiums are
non-refundable.
- Net unrealized investment (gains) losses in Accumulated Other
Comprehensive Income: Elimination of the unrealized gains and
losses on the Company’s investments that are recorded as a
component of accumulated other comprehensive income (“AOCI”), net
of income taxes.
Ambac has a significant U.S. tax net operating loss (“NOL”) that
is offset by a full valuation allowance in the GAAP consolidated
financial statements. As a result of this, tax planning strategies
and other considerations, we utilized a 0% effective tax rate for
non-GAAP operating adjustments to Adjusted Book.
Adjusted book value was $1.31 billion, or $29.03 per share, at
March 31, 2024, as compared to $1.30 billion, or $28.74 per share,
at December 31, 2023.
The following table reconciles Total Ambac Financial Group, Inc.
stockholders’ equity to the non-GAAP measure adjusted book value as
of each date presented:
March 31, 2024
December 31, 2023
($ in millions, other than per share
data)
$ Amount
Per Share
$ Amount
Per Share
Total AFG Stockholders' Equity
$
1,365.2
$
30.19
$
1,361.7
$
30.13
Adjustments:
Insurance intangible asset
(233.1
)
(5.16
)
(245.1
)
(5.43
)
Net unearned premiums and fees in excess
of expected losses
153.7
3.40
162.1
3.59
Net unrealized investment (gains) losses
in Accumulated Other Comprehensive Income
27.2
0.60
20.2
0.45
Adjusted book value
$
1,313.1
$
29.03
$
1,298.9
$
28.74
Shares outstanding (in millions)
45.2
45.2
Earnings Call and Webcast
On May 7, 2024, at 8:30am ET, Claude LeBlanc, President and
Chief Executive Officer, and David Trick, Executive Vice President
and Chief Financial Officer, will discuss Ambac's first quarter
2024 results during a conference call. A live audio webcast of the
call will be available through the Investor Relations section of
Ambac’s website,
https://ambac.com/investor-relations/events-and-presentations/.
Participants may also listen via telephone by dialing (877)
407-9716 (Domestic) or (201) 493-6779 (International).
The webcast will be archived on Ambac's website. A replay of the
call will be available through May 21, 2024, and can be accessed by
dialing (Domestic) (844) 512-2921 or (International) (412)
317-6671; and using ID#13744126
Additional information is included in an operating supplement
and presentations at Ambac's website at www.ambac.com.
About Ambac
Ambac Financial Group, Inc. (“Ambac” or “AFG”) is a financial
services holding company headquartered in New York City. Ambac’s
core business is a growing specialty P&C distribution and
underwriting platform. Ambac also has a legacy financial guaranty
business in run off. Ambac’s common stock trades on the New York
Stock Exchange under the symbol “AMBC”. Ambac is committed to
providing timely and accurate information to the investing public,
consistent with our legal and regulatory obligations. To that end,
we use our website to convey information about our businesses,
including the anticipated release of quarterly financial results,
quarterly financial, statistical and business-related information.
For more information, please go to www.ambac.com.
The Amended and Restated Certificate of Incorporation of Ambac
contains substantial restrictions on the ability to transfer
Ambac’s common stock. Subject to limited exceptions, any attempted
transfer of common stock shall be prohibited and void to the extent
that, as a result of such transfer (or any series of transfers of
which such transfer is a part), any person or group of persons
shall become a holder of 5% or more of Ambac’s common stock or a
holder of 5% or more of Ambac’s common stock increases its
ownership interest.
Forward-Looking Statements
In this press release, statements that may constitute
“forward-looking statements” within the meaning of the safe harbor
provisions of the Private Securities Litigation Reform Act of 1995.
Words such as “estimate,” “project,” “plan,” “believe,”
“anticipate,” “intend,” “planned,” “potential” and similar
expressions, or future or conditional verbs such as “will,”
“should,” “would,” “could,” and “may,” or the negative of those
expressions or verbs, identify forward-looking statements. We
caution readers that these statements are not guarantees of future
performance. Forward-looking statements are not historical facts
but instead represent only our beliefs regarding future events,
which may by their nature be inherently uncertain and some of which
may be outside our control. These statements may relate to plans
and objectives with respect to the future, among other things which
may change. We are alerting you to the possibility that our actual
results may differ, possibly materially, from the expected
objectives or anticipated results that may be suggested, expressed
or implied by these forward-looking statements. Important factors
that could cause our results to differ, possibly materially, from
those indicated in the forward-looking statements include, among
others, those discussed under “Risk Factors” in our most recent SEC
filed quarterly or annual report.
Any or all of management’s forward-looking statements here or in
other publications may turn out to be incorrect and are based on
management’s current belief or opinions. Ambac Financial Group’s
(“AFG”) and its subsidiaries’ (collectively, “Ambac” or the
“Company”) actual results may vary materially, and there are no
guarantees about the performance of Ambac’s securities. Among
events, risks, uncertainties or factors that could cause actual
results to differ materially are: (1) the high degree of volatility
in the price of AFG’s common stock; (2) uncertainty concerning the
Company’s ability to achieve value for holders of its securities,
whether from Ambac Assurance Corporation (“AAC”) and its
subsidiaries or from the specialty property and casualty insurance
business, the insurance distribution business, or related
businesses; (3) inadequacy of reserves established for losses and
loss expenses and the possibility that changes in loss reserves may
result in further volatility of earnings or financial results; (4)
potential for rehabilitation proceedings or other regulatory
intervention or restrictions against AAC; (5) credit risk
throughout Ambac’s business, including but not limited to credit
risk related to insured residential mortgage-backed securities,
student loan and other asset securitizations, public finance
obligations (including risks associated with Chapter 9 and other
restructuring proceedings), issuers of securities in our investment
portfolios, and exposures to reinsurers; (6) our inability to
effectively reduce insured financial guarantee exposures or achieve
recoveries or investment objectives; (7) AAC’s inability to
generate the significant amount of cash needed to service its debt
and financial obligations, and its inability to refinance its
indebtedness; (8) AAC’s substantial indebtedness could adversely
affect the Company’s financial condition and operating flexibility;
(9) Ambac may not be able to obtain financing or raise capital on
acceptable terms or at all due to its substantial indebtedness and
financial condition; (10) greater than expected underwriting losses
in the Company’s specialty property and casualty insurance
business; (11) failure of specialty insurance program partners to
properly market, underwrite or administer policies; (12) inability
to obtain reinsurance coverage on expected terms; (13) loss of key
relationships for production of business in specialty property and
casualty and insurance distribution businesses or the inability to
secure such additional relationships to produce expected results;
(14) the impact of catastrophic public health, environmental or
natural events, or global or regional conflicts; (15) credit risks
related to large single risks, risk concentrations and correlated
risks; (16) risks associated with adverse selection as Ambac’s
financial guarantee insurance portfolio runs off; (17) the risk
that Ambac’s risk management policies and practices do not
anticipate certain risks and/or the magnitude of potential for
loss; (18) restrictive covenants in agreements and instruments that
impair Ambac’s ability to pursue or achieve its business
strategies; (19) adverse effects on operating results or the
Company’s financial position resulting from measures taken to
reduce financial guarantee risks in its insured portfolio; (20)
disagreements or disputes with Ambac's insurance regulators; (21)
loss of control rights in transactions for which we provide
financial guarantee insurance; (22) inability to realize expected
recoveries of financial guarantee losses; (23) risks attendant to
the change in composition of securities in Ambac’s investment
portfolio; (24) adverse impacts from changes in prevailing interest
rates; (25) events or circumstances that result in the impairment
of our intangible assets and/or goodwill that was recorded in
connection with Ambac’s acquisitions; (26) factors that may
negatively influence the amount of installment premiums paid to
Ambac; (27) the risk of litigation, regulatory inquiries,
investigations, claims or proceedings, and the risk of adverse
outcomes in connection therewith; (28) the Company’s ability to
adapt to the rapid pace of regulatory change; (29) actions of
stakeholders whose interests are not aligned with broader interests
of Ambac's stockholders; (30) system security risks, data
protection breaches and cyber attacks; (31) regulatory oversight of
Ambac Assurance UK Limited (“Ambac UK”) and applicable regulatory
restrictions may adversely affect our ability to realize value from
Ambac UK or the amount of value we ultimately realize; (32)
failures in services or products provided by third parties; (33)
political developments that disrupt the economies where the Company
has insured exposures; (34) our inability to attract and retain
qualified executives, senior managers and other employees, or the
loss of such personnel; (35) fluctuations in foreign currency
exchange rates; (36) failure to realize our business expansion
plans or failure of such plans to create value; (37) greater
competition for our specialty property and casualty insurance
business and/or our insurance distribution business; (38) loss or
lowering of the AM Best rating for our property and casualty
insurance company subsidiaries; (39) disintermediation within the
insurance industry or greater competition from technology-based
insurance solutions or non-traditional insurance markets; (40)
changes in law or in the functioning of the healthcare market that
impair the business model of our accident and health managing
general underwriter; and (41) other risks and uncertainties that
have not been identified at this time.
AMBAC FINANCIAL GROUP, INC.
AND SUBSIDIARIES
Consolidated Statements of
Income (Loss) (Unaudited)
Three Months Ended
March 31,
($ in millions, except share
data)
2024
2023
Revenues:
Net premiums earned
$
33
$
14
Commission income
18
14
Program fees
3
1
Net investment income
42
34
Net investment gains (losses), including
impairments
1
(4
)
Net gains (losses) on derivative
contracts
2
(4
)
Income (loss) on variable interest
entities
3
(1
)
Other income
3
3
Total revenues and other income
103
58
Expenses:
Losses and loss adjustment expenses
(benefit)
(1
)
18
Amortization of deferred acquisition
costs, net
4
1
Commission expense
10
8
General and administrative expenses
36
36
Intangible amortization
12
7
Interest expense
16
16
Total expenses
77
86
Pretax income (loss)
26
(29
)
Provision for income taxes
5
4
Net income (loss)
21
(33
)
Less: net (gain) attributable to
noncontrolling interest
(1
)
(1
)
Net income (loss) attributable to
common stockholders
$
20
$
(33
)
Net income (loss) per basic
share
$
0.44
$
(0.73
)
Net income (loss) per diluted
share
$
0.43
$
(0.73
)
Weighted-average number of common
shares outstanding:
Basic
45,827,076
45,564,276
Diluted
46,348,776
45,564,276
AMBAC FINANCIAL GROUP, INC.
AND SUBSIDIARIES
Consolidated Balance Sheets
(Unaudited)
($ in millions, except share
data)
March 31, 2024
December 31,
2023
Assets:
Investments:
Fixed maturity securities, at fair value
(amortized cost: $1,726 and $1,744)
$
1,687
$
1,710
Fixed maturity securities pledged as
collateral, at fair value (amortized cost: $27 and $0)
26
—
Fixed maturity securities - trading
29
27
Short-term investments, at fair value
(amortized cost: $382 and $426)
382
426
Short-term investments pledged as
collateral, at fair value (amortized cost: $0 and $27)
—
27
Other investments (includes $546 and $463
at fair value)
558
475
Total investments (net of allowance for
credit losses of $2 and $3)
2,682
2,664
Cash and cash equivalents (including $11
and $12 of restricted cash)
44
28
Premium receivables (net of allowance for
credit losses of $3 and $4)
299
290
Reinsurance recoverable on paid and unpaid
losses (net of allowance for credit losses of $0 and $0)
224
195
Deferred ceded premium
217
204
Deferred acquisition costs
12
11
Subrogation recoverable
130
137
Intangible assets, less accumulated
amortization
293
307
Goodwill
70
70
Other assets
129
129
Variable interest entity assets:
Fixed maturity securities, at fair
value
2,162
2,167
Restricted cash
252
246
Loans, at fair value
1,604
1,663
Derivative and other assets
313
318
Total assets
$
8,429
$
8,428
Liabilities and Stockholders’
Equity:
Liabilities:
Unearned premiums
$
429
$
422
Loss and loss adjustment expense
reserves
851
893
Ceded premiums payable
110
90
Deferred program fees and reinsurance
commissions
7
6
Long-term debt
512
508
Accrued interest payable
487
475
Other liabilities
259
199
Variable interest entity liabilities:
Long-term debt (includes $2,671 and $2,710
at fair value)
2,925
2,967
Derivative liabilities
1,170
1,197
Other liabilities
245
240
Total liabilities
6,993
6,997
Redeemable noncontrolling interest
17
17
Stockholders’ equity:
Preferred stock, par value $0.01 per
share; 20,000,000 shares authorized shares; issued and outstanding
shares—none
—
—
Common stock, par value $0.01 per share;
130,000,000 shares authorized; issued shares: 46,659,144 and
46,659,144
—
—
Additional paid-in capital
291
292
Accumulated other comprehensive income
(loss)
(175
)
(160
)
Retained earnings
1,266
1,246
Treasury stock, shares at cost: 1,434,172
and 1,463,774
(17
)
(17
)
Total Ambac Financial Group, Inc.
stockholders’ equity
1,365
1,362
Nonredeemable noncontrolling interest
53
53
Total stockholders’ equity
1,418
1,415
Total liabilities, redeemable
noncontrolling interest and stockholders’ equity
$
8,429
$
8,428
The following table presents segment financial results and
includes the non-GAAP measure, EBITDA on a segment and consolidated
basis.
($ in millions)
Legacy Financial Guarantee
Insurance
Specialty Property &
Casualty Insurance
Insurance Distribution
Corporate & Other
Consolidated
Three Months
Ended March 31, 2024
Gross premiums written
$
1.7
$
96.4
$
98.1
Net premiums written
1.5
26.2
27.8
Revenues:
Net premiums earned
7.5
25.6
33.1
Commission income
$
17.7
17.7
Program fees
2.6
2.6
Net investment income
38.0
1.4
0.1
$
2.2
41.7
Net investment gains (losses), including
impairments
0.6
—
—
0.6
Net gains (losses) on derivative
contracts
1.8
—
1.7
Other income
5.2
—
0.1
—
5.3
Total revenues and other income
53.1
29.5
17.9
2.1
102.6
Expenses:
Losses and loss adjustment expenses
(benefit)
(20.7
)
19.4
(1.4
)
Commission expense
9.8
9.8
Amortization of deferred acquisition
costs, net
—
4.4
4.4
General and administrative expenses
21.4
3.9
3.1
6.8
35.2
Total expenses included for
EBITDA
0.7
27.7
12.9
6.8
48.1
EBITDA
52.4
1.8
5.0
(4.7
)
54.5
Less: Interest expense
16.0
16.0
Less: Depreciation expense
0.2
—
—
0.3
0.5
Less: Intangible amortization
11.3
1.1
12.5
Pretax income (loss)
24.8
1.8
3.8
(5.0
)
25.5
Income tax expense (benefit)
4.6
0.1
0.1
(0.1
)
4.8
Net income (loss)
$
20.2
$
1.7
$
3.7
$
(4.9
)
$
20.8
Three Months
Ended March 31, 2023
Gross premiums written
$
8.9
$
51.8
$
60.7
Net premiums written
8.8
9.2
18.0
Revenues:
Net premiums earned
6.9
7.0
13.9
Commission income
$
14.5
14.5
Program fees
1.5
1.5
Net investment income
31.2
0.8
$
2.1
34.1
Net investment gains (losses), including
impairments
(4.5
)
—
0.1
(4.4
)
Net gains (losses) on derivative
contracts
(3.4
)
(0.2
)
(3.6
)
Other income
1.6
—
—
—
1.7
Litigation recoveries
—
—
Total revenues and other income
31.8
9.2
14.5
2.0
57.5
Expenses:
Losses and loss adjustment expenses
(benefit)
13.0
4.7
17.7
Amortization of deferred acquisition
costs, net
—
1.4
1.4
Commission expense
7.6
7.6
General and administrative expenses
28.1
4.0
2.4
1.5
36.0
Total expenses included for
EBITDA
41.1
10.0
10.0
1.5
62.6
EBITDA
(9.3
)
(0.8
)
4.5
0.5
(5.1
)
Less: Interest expense
16.4
16.4
Less: Depreciation expense
0.4
—
—
—
0.5
Less: Intangible amortization
5.9
1.0
6.9
Pretax income (loss)
(32.1
)
(0.8
)
3.6
0.4
(28.8
)
Income tax expense (benefit)
3.8
—
0.1
—
3.9
Net income (loss)
$
(35.9
)
$
(0.8
)
$
3.5
$
0.4
$
(32.7
)
View source
version on businesswire.com: https://www.businesswire.com/news/home/20240506208670/en/
Charles J. Sebaski Managing Director, Investor Relations (212)
208-3222 csebaski@ambac.com
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