Ambac Financial Group, Inc. (NYSE: AMBC) ("Ambac" or "AFG"), a
financial services holding company, today reported its results for
the quarter ended September 30, 2024.
Third Quarter 2024 Highlights
- Net loss of $(28) million or $(0.63) per diluted share and
Adjusted net loss of $(19) million or $(0.46) per diluted share
driven by approximately $20 million of transaction costs and
acquisition related short-term interest expense
- Total P&C Premium Production of $260 million, increased 86%
from the third quarter of 2023
- Insurance Distribution ("Cirrata") generated total revenue of
$24 million up 64.0% over last year
- Specialty P&C Insurance ("Everspan") combined ratio
improved by 600 bps to 100.5% and total revenue grew 158% from
third quarter of 2023 to $40 million due to growth in the business
and a $7.5 million gain on sale of CNIC
- Legacy Financial Guarantee segment net loss of $(13) million
driven by changes in discount rates
Claude LeBlanc, President and Chief Executive Officer, stated,
"During the quarter we closed the acquisition of Beat Capital
Partners, which sets the stage for our distribution business to
exceed $1 billion of premium placed in 2025. Further to the Beat
acquisition, we had an extraordinary period with the announcement
of three new MGAs, increasing our total to 19, up from 5 last
quarter, and up from 16 at the close of the Beat acquisition. Since
acquiring Beat, the pipeline for new opportunities has materially
expanded, highlighting the position of our combined platforms as a
premier destination for best in class underwriters and MGAs.
Furthermore, I am pleased with the underwriting trend at Everspan,
which improved its combined ratio by 600 basis points in the
quarter on its way towards achieving an attractive return
profile."
LeBlanc continued, “I am also extremely pleased by the
overwhelming shareholder support we received for the sale of our
Legacy Financial Guarantee business. In addition, with PRA
approving the sale, we have only one remaining necessary regulatory
approval, the Wisconsin OCI, which is expected to happen later this
year or early next year. The Board has also approved an
acceleration of our previously announced $50 million share buy-back
program, in advance of the close of the sale of the Legacy
Financial Guarantee Business, which we will commence immediately. I
am looking forward to 2025 when we emerge as a pure-play P&C
franchise and I am encouraged by the positive feedback we have
received from investors to date."
Ambac's Third Quarter 2024
Summary Results
B (W)
Percent
($ in millions, except per share
data)1
3Q2024
3Q2023
Gross written premium
$
113.6
$
79.6
43
%
Net premiums earned
33.1
18.3
81
%
Commission income
23.1
14.6
58
%
Program fees
3.6
2.4
50
%
Net investment income
38.0
30.4
25
%
Pretax income (loss)
(26.5
)
67.5
(139
)%
Net income (loss) attributable to common
stockholders
(27.5
)
65.9
(142
)%
Net income (loss) attributable to common
stockholders per diluted share2,3
$
(0.63
)
$
1.41
(145
)%
EBITDA2,4
6.3
90.8
(93
)%
Adjusted net income (loss) 2
(19.5
)
93.6
(121
)%
Adjusted net income (loss) per diluted
share 2, 3
$
(0.46
)
$
2.00
(123
)%
Weighted-average diluted shares
outstanding (in millions)
47.7
46.8
(2
)%
(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 $(0.3) and $0.6 for the three months ended
September 30, 2024 and 2023, respectively.
Earnings Call and Webcast
On November 13, 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 third
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 November 27, 2024, and can be
accessed by dialing (Domestic) (844) 512-2921 or (International)
(412) 317-6671; and using ID#13749354
Additional information is included in an operating supplement
and presentations at Ambac's website at www.ambac.com.
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 $260
million in the third quarter of 2024, an increase of 86.2% from the
third quarter of 2023.
Specialty P&C Insurance revenues are dependent on gross
premiums written as specialty program insurance companies earn
premiums based on the portion of gross premiums written retained
(i.e. net premiums written) and fees on gross premiums written that
are ceded to reinsurers. Insurance Distribution revenues are
dependent on premium volume as Managing General Agents/Underwriters
and brokers receive commissions based on the amount of premiums
placed (i.e. gross premiums written on behalf of insurance
carriers) with insurance carriers.
Three Months Ended September
30,
Nine Months Ended September
30,
($ in millions)
2024
2023
% Change
2024
2023
% Change
Specialty Property & Casualty
Insurance Gross Premiums Written
$
115.2
$
77.5
49
%
$
322.8
$
182.6
77
%
Insurance Distribution Premiums Placed
144.9
62.2
133
%
288.5
180.5
60
%
Specialty P&C Insurance Production
$
260.1
$
139.7
86
%
$
611.2
$
363.0
68
%
Results of Operations by Segment
Insurance Distribution Segment
Three Months Ended September
30,
Nine Months Ended September
30,
($ in millions)
2024
2023
% Change
2024
2023
% Change
Total revenues
$
24.0
$
14.6
64
%
$
55.2
$
39.2
41
%
Pretax income
$
(7.9
)
$
2.4
(424
)%
$
(2.8
)
$
6.7
(143
)%
EBITDA1
$
2.4
$
3.5
(31
)%
$
9.8
$
9.7
1
%
Pretax income margin2
(33.1
)%
16.7
%
-4980 bps
(5.2
)%
17.0
%
-2220 bps
EBITDA margin 3
10.2
%
24.1
%
-1390 bps
17.8
%
24.8
%
-700 bps
(1)
EBITDA is prior to the impact of
noncontrolling interests, relating to subsidiaries where Ambac does
not own 100%, of $(0.3) and $0.6 for the three months ended
September 30, 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 revenue grew during the third quarter of
2024 compared to the third quarter of 2023 driven by the inclusion
of 2 months of Beat Capital's results, an additional month of
production from Riverton Insurance Agency (acquired August 1, 2023)
and organic growth.
- EBITDA of $2.4 million for the quarter was down from the $3.5
million in third quarter of 2023; EBITDA margin of 10.2% for the
quarter compared to 24.1% last year was largely due to $1.4 million
of foreign exchange losses, $1.3 million of de-novo/start up costs
and seasonal impacts.
Specialty Property & Casualty Insurance Segment
Three Months Ended September
30,
Nine Months Ended September
30,
($ in millions)
2024
2023
% Change
2024
2023
% Change
Net premiums written
$
32.8
$
24.8
32
%
$
91.3
$
43.1
112
%
Total revenue
$
40.1
$
15.5
158
%
$
101.5
$
35.5
186
%
Losses and loss expense
$
20.4
$
9.5
115
%
$
62.8
$
19.9
215
%
Pretax income (loss)
$
8.9
$
0.1
(6284
)%
$
9.7
$
(0.8
)
1373
%
Combined Ratio
100.5
%
106.5
%
-600 bps
102.8
%
112.3
%
-950 bps
- Gross premium written ("GPW") and Net premium written ("NPW")
grew substantially in the third quarter of 2024 relative to the
third quarter of 2023 as Everspan continues to add new programs and
existing programs scale.
- Combined ratio of 100.5% for the third quarter of 2024 improved
compared to 106.5% in the third quarter of 2023 and 109.4% in the
prior quarter.
- The loss and loss expense ratio for the third quarter of 2024
was 74.4% compared to 78.0% for the third quarter of 2023.
- The expense ratio(1) of 26.1% for the third quarter of 2024 was
down from 28.5% in the prior year period as expenses continue to
normalize on a relative basis. In addition, sliding scale
commissions, linked to loss ratios on certain programs, reduced the
expense ratio by 1.9% in the third quarter of 2024 compared to 8.1%
in the prior year period.
- Everspan realized a net gain of $7.5 million on the sale of
Consolidated National Insurance Company (“CNIC”), a subsidiary
admitted carrier.
(1)
Expense Ratio is defined as acquisition
costs and general and administrative expenses, reduced by program
fees divided by net premiums earned
Legacy Financial Guarantee Insurance Segment
Three Months Ended September
30,
Nine Months Ended September
30,
($ in millions)
2024
2023
% Change
2024
2023
% Change
Net premiums earned
$
5.7
$
6.1
(7
)%
$
18.7
$
20.5
(9
)%
Net investment income
$
34.5
$
26.7
29
%
$
104.9
$
90.1
17
%
Losses and loss adjustment expenses
(benefit)
$
17.2
$
(85.8
)
(120
)%
$
(8.8
)
$
(71.2
)
(88
)%
Pretax income (loss)
$
(9.4
)
$
69.2
114
%
$
28.4
$
29.4
3
%
EBITDA1
$
12.7
$
91.3
(86
)%
$
101.4
$
96.2
5
%
(1)
See Non-GAAP Financial Data section of
this press release for further information
- The Legacy Financial Guarantee Segment experienced a pre-tax
loss of $9.4 million in the third quarter of 2024, primarily as a
result incurred losses driven by a decline in discount rates. The
third quarter of 2023 results were driven by incurred loss benefits
from higher discount rates and a significant increase in RMBS
recoveries.
- Watch List and Adversely Classified Credits ("WLACC") decreased
1.7% (2.9%, excluding the impact of FX) to $5.2 billion in third
quarter of 2024, from June 30, 2024.
- NPO was $18.8 billion at third quarter of 2024 a increase of
0.5% (decrease of 2.0%, excluding the impact of FX) from June 30,
2024, due to the impact of FX rates.
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 $147 million as
of September 30, 2024. Assets included cash and liquid securities
of $97 million and other investments of $32 million.
Consolidated Ambac Financial Group, Inc. Stockholders'
Equity
Stockholders’ equity at September 30, 2024, was $1.47 billion,
or $30.89 per share compared to $1.37 billion or $30.25 per share
as of June 30, 2024. The net loss attributable to common
shareholders of $28 million was offset by net unrealized investment
gains of $37 million, foreign exchange translation gains of $57
million ($11 million of which was attributable to Beat), and $29
million of stock issued in connection with the Beat
acquisition.
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.
Given the changes of our business profile going forward we
expect to revise our non-GAAP financial measures in 2025.
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 $(19.5) million, or $(0.46) per
diluted share, for the third quarter 2024 compared to Adjusted Net
Income (Loss) of $93.6 million, or $2.00 per diluted share, for the
third quarter of 2023.
The following table reconciles net income (loss) attributable to
common stockholders to the non-GAAP measure, Adjusted Net Income
(Loss), for the three-month periods ended September 30, 2024 and
2023, respectively:
Three Months Ended September
30,
2024
2023
($ in millions, other than per share
data)
$ Amount
Per Share
$ Amount
Per Share
Net income (loss) attributable to
common shareholders
$
(27.5
)
$
(0.63
)
$
65.9
$
1.41
Adjustments:
Net investment (gains) losses, including
impairments
1.5
0.03
(0.8
)
(0.02
)
Intangible amortization
12.6
0.27
7.2
0.15
Litigation costs
1.8
0.04
20.6
0.44
Foreign exchange (gains) losses
(4.1
)
(0.09
)
0.5
0.01
Workforce change costs
(0.1
)
—
0.2
—
Pretax adjusted net income
(loss)
(15.8
)
(0.38
)
93.6
1.99
Income tax effects
(1.9
)
(0.04
)
0.3
0.01
Net (gains) attributable to noncontrolling
interests
(1.8
)
(0.04
)
(0.2
)
—
Adjusted Net Income (Loss)
$
(19.5
)
$
(0.46
)
$
93.6
$
2.00
Weighted-average diluted shares
outstanding (in millions)
47.7
46.8
(1)
Per Diluted share includes the impact of
adjusting the Insurance Distribution segment related noncontrolling
interest to current redemption value
Nine Months Ended September
30,
2024
2023
($ in millions, other than per share
data)
$ Amount
Per Share
$ Amount
Per Share
Net income (loss) attributable to
common shareholders
$
(8.2
)
$
(0.23
)
$
19.3
$
0.41
Adjustments:
Net investment (gains) losses, including
impairments
(2.7
)
(0.06
)
7.0
0.15
Intangible amortization
33.2
0.71
20.6
0.44
Litigation costs
12.8
0.27
37.1
0.79
Foreign exchange (gains) losses
(3.4
)
(0.07
)
0.2
—
Workforce change costs
(0.1
)
—
0.9
0.02
Pretax adjusted net income
(loss)
31.7
0.62
85.0
1.81
Income tax effects
(2.3
)
(0.05
)
(1.2
)
(0.03
)
Net (gains) attributable to noncontrolling
interests
(2.2
)
(0.05
)
(0.6
)
(0.01
)
Adjusted Net Income (Loss)
$
27.3
$
0.52
$
83.2
$
1.77
Weighted average diluted shares
outstanding
46.6
46.8
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 September 30, 2024
Net income (loss) (1)
$
(13.1
)
$
8.0
$
(7.1
)
$
(17.1
)
$
(29.3
)
Adjustments:
Interest expense
15.8
—
3.7
—
19.5
Income taxes
3.6
0.9
(0.9
)
(0.9
)
2.8
Depreciation
0.2
—
0.2
0.3
0.7
Amortization of intangible assets
6.2
—
6.4
—
12.6
EBITDA (2)
$
12.7
$
8.9
$
2.4
$
(17.8
)
$
6.3
Three Months
Ended September 30, 2023
Net income (loss) (1)
$
66.2
$
0.1
$
2.4
$
(2.5
)
$
66.3
Adjustments:
Interest expense
15.8
—
—
—
15.8
Income taxes
3.0
—
—
(1.8
)
1.2
Depreciation
0.3
—
—
—
0.3
Amortization of intangible assets
6.1
—
1.1
—
7.2
EBITDA (2)
$
91.3
$
0.1
$
3.5
$
(4.2
)
$
90.8
(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 $(0.3) and $0.6 for the three months ended
September 30, 2024 and 2023, respectively. These noncontrolling
interests are primarily in the Insurance Distribution segment.
Legacy Financial Guarantee
Insurance
Specialty Property &
Casualty Insurance
Insurance Distribution
Corporate & Other
Consolidated
Nine Months Ended
September 30, 2024
Net income (loss) (1)
$
17.7
$
8.6
$
(2.1
)
$
(33.3
)
$
(9.0
)
Adjustments:
Interest expense
47.7
—
3.7
—
51.5
Income taxes
10.8
1.0
(0.8
)
(1.0
)
10.0
Depreciation
0.7
—
0.2
0.9
1.8
Amortization of intangible assets
24.5
—
8.7
—
33.2
EBITDA (2)
$
101.4
$
9.7
$
9.8
$
(33.4
)
$
87.4
Nine Months Ended
September 30, 2023
Net income (loss) (1)
$
21.0
$
(0.8
)
$
6.6
$
(6.3
)
$
20.5
Adjustments:
Interest expense
48.2
—
—
—
48.2
Income taxes
8.4
—
0.1
(1.4
)
7.1
Depreciation
1.1
—
—
0.1
1.2
Amortization of intangible assets
17.6
—
3.0
—
20.6
EBITDA (2)
$
96.2
$
(0.8
)
$
9.7
$
(7.5
)
$
97.6
(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 $1.1 and $1.8 for the nine months ended September
30, 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 $1.39 billion, or $29.28 per share, at
September 30, 2024, as compared to $1.32 billion, or $29.23 per
share, at June 30, 2024.
The following table reconciles Total Ambac Financial Group, Inc.
stockholders’ equity to the non-GAAP measure adjusted book value as
of each date presented:
September 30, 2024
June 30, 2024
($ in millions, other than per share
data)
$ Amount
Per Share
$ Amount
Per Share
Total AFG Stockholders' Equity
$
1,465.3
$
30.89
$
1,368.1
$
30.25
Adjustments:
Insurance intangible asset
(224.0
)
(4.73
)
(226.2
)
(5.00
)
Net unearned premiums and fees in excess
of expected losses
161.3
3.40
156.6
3.46
Net unrealized investment (gains) losses
in Accumulated Other Comprehensive Income
(13.4
)
(0.28
)
23.3
0.52
Adjusted book value
$
1,389.2
$
29.28
$
1,321.8
$
29.23
Shares outstanding (in millions)
47.4
45.2
Share Repurchase Authorization
On November 12, 2024, Ambac’s Board of Directors authorized a
share repurchase program, under which Ambac may opportunistically
repurchase up to $50 million of the Company’s common shares at
management’s discretion over the period ending on December 31,
2026. The Company previously announced that it would initiate a
share repurchase program in the first three months following the
closing of the sale of Ambac Assurance Corporation. The Board of
Directors has now authorized an earlier commencement of the program
based on market conditions and other factors. The Company intends
to repurchase no more than $15 million of the Company’s common
shares prior to the completion of the sale of Ambac Assurance
Corporation, due to contractual restrictions in the Company's
credit agreement entered into in connection with the financing of
the Beat acquisition. Under the share repurchase program, shares
may be repurchased from time to time in the open market or through
negotiated transactions at prevailing market rates, or by other
means in accordance with federal securities laws. There is no
guarantee as to the exact number or value of shares that will be
repurchased by the Company, and the Company may discontinue
repurchases at any time that management determines additional
repurchases are not warranted. The timing and amount of share
repurchases under the share repurchase program will depend on
several factors, including the Company's stock price performance,
ongoing capital planning considerations, general market conditions,
the likelihood of repurchases causing one or more stockholders to
hold 5% or more of the Company’s common stock, and applicable legal
requirements.
About Ambac
Ambac Financial Group, Inc. (“Ambac” or “AFG”) is an insurance
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 guarantee
business in run-off which we have agreed to sell to funds managed
by Oaktree Capital Management pending regulatory and shareholder
approval. 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 and insurance distribution
partners; (6) our inability to effectively reduce insured financial
guarantee exposures or achieve recoveries or investment objectives;
(7) the Company’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) the Company’s
substantial indebtedness could adversely affect the Company’s
financial condition and operating flexibility; (9) the Company may
not be able to obtain financing, refinance its outstanding
indebtedness, 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
or charge rates for insurance 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 the Company’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 the Company’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
portfolios; (24) failure of a financial institution in which we
maintain cash and investment accounts; (25) adverse impacts from
changes in prevailing interest rates; (26) events or circumstances
that result in the impairment of our intangible assets and/or
goodwill that was recorded in connection with Ambac’s acquisitions;
(27) factors that may negatively influence the amount of
installment premiums paid to Ambac; (28) the risk of litigation,
regulatory inquiries, investigations, claims or proceedings, and
the risk of adverse outcomes in connection therewith; (29) the
Company’s ability to adapt to the rapid pace of regulatory change;
(30) actions of stakeholders whose interests are not aligned with
broader interests of Ambac's stockholders; (31) system security
risks, data protection breaches and cyber attacks; (32) 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;
(33) failures in services or products provided by third parties;
(34) political developments that disrupt the economies where the
Company has insured exposures or the markets in which our insurance
programs operate; (35) our inability to attract and retain
qualified executives, senior managers and other employees, or the
loss of such personnel; (36) fluctuations in foreign currency
exchange rates; (37) failure to realize our business expansion
plans, including failure to effectively onboard new program
partners, or failure of such plans to create value; (38) greater
competition for our specialty property and casualty insurance
business and/or our insurance distribution business; (39) loss or
lowering of the AM Best rating for our property and casualty
insurance company subsidiaries; (40) disintermediation within the
insurance industry or greater competition from technology-based
insurance solutions or non-traditional insurance markets; (41)
adverse effects of market cycles in the property and casualty
insurance industry; (42) variations in commision income resulting
from timing of policy renewals and the net effect of new and lost
business production; (43) variations in contingent commissions
resulting from the effects insurance losses; (44) reliance on a
limited number of counterparties to produce revenue in our
specialty property and casualty insurance and insurance
distribution businesses; (45) changes in law or in the functioning
of the healthcare market that impair the business model of our
accident and health managing general underwriter; (46) failure to
consummate the proposed sale of all of the common stock of AAC and
the transactions contemplated by the related stock purchase
agreement (the “Sale Transactions”) in a timely manner or at all;
(47) potential litigation relating to the proposed Sale
Transactions; (48) disruptions from the proposed Sale Transactions
that may harm Ambac’s business, including current plans and
operations; (49) potential adverse reactions or changes to business
relationships resulting from the announcement or completion of the
proposed Sale Transactions; (50) difficulties in identifying
appropriate acquisition or investment targets, properly evaluating
the business and prospects of acquired businesses, businesses in
which we invest, or targets, integrating acquired businesses into
our business or failures to realize expected synergies from
acquisitions or new business investments; (51) failure to realize
expected benefits from investments in technology; (52) harmful acts
and omissions of our business counterparts; and (53) 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
Nine Months Ended
September 30,
September 30,
($ in millions, except share
data)
2024
2023
2024
2023
Revenues:
Net premiums earned
$
33
$
18
$
99
$
47
Commission income
23
15
54
39
Program fees
4
2
10
6
Net investment income
38
30
116
100
Net investment gains (losses), including
impairments
(1
)
1
3
(7
)
Net gains (losses) on derivative
contracts
5
4
7
1
Income (loss) on variable interest
entities
3
1
5
—
Other income
10
2
28
7
Total revenues and other income
114
74
321
194
Expenses:
Losses and loss adjustment expenses
(benefit)
38
(76
)
54
(51
)
Amortization of deferred acquisition
costs, net
6
2
16
5
Commission expense
9
8
27
22
General and administrative expenses
55
49
139
122
Intangible amortization
13
7
33
21
Interest expense
20
16
51
48
Total expenses
141
6
320
166
Pretax income (loss)
(27
)
68
1
28
Provision for income taxes
3
1
10
7
Net income (loss)
(29
)
66
(9
)
21
Less: net (gain) loss attributable to
noncontrolling interest
2
—
1
(1
)
Net income (loss) attributable to
common stockholders
$
(28
)
$
66
$
(8
)
$
19
Net income (loss) per basic
share
$
(0.63
)
$
1.44
$
(0.23
)
$
0.42
Net income (loss) per diluted
share
$
(0.63
)
$
1.41
$
(0.23
)
$
0.41
Weighted-average number of common
shares outstanding:
Basic
47,688,986
45,635,373
46,580,518
45,652,555
Diluted
47,688,986
46,810,735
46,580,518
46,786,443
AMBAC FINANCIAL GROUP, INC. AND
SUBSIDIARIES
Consolidated Balance Sheets
(Unaudited)
($ in millions, except share
data)
September 30,
2024
June 30, 2024
Assets:
Investments:
Fixed maturity securities, at fair value
(amortized cost: $1,737 and $1,737)
$
1,740
$
1,703
Fixed maturity securities pledged as
collateral, at fair value (amortized cost: $27 and $27)
27
25
Fixed maturity securities - trading
—
31
Short-term investments, at fair value
(amortized cost: $305 and $314)
305
314
Other investments (includes $535 and $533
at fair value)
561
558
Total investments (net of allowance for
credit losses of $1 and $3)
2,634
2,632
Cash and cash equivalents (including $16
and $12 of restricted cash)
70
35
Premium receivables (net of allowance for
credit losses of $3 and $4)
342
317
Reinsurance recoverable on paid and unpaid
losses (net of allowance for credit losses of $0 and $0)
311
277
Deferred ceded premium
242
232
Deferred acquisition costs
13
12
Subrogation recoverable
124
128
Intangible assets, less accumulated
amortization
598
285
Goodwill
434
70
Other assets
228
163
Variable interest entity assets:
Fixed maturity securities, at fair
value
2,238
2,101
Restricted cash
47
62
Loans, at fair value
1,651
1,567
Derivative and other assets
326
303
Total assets
$
9,256
$
8,184
Liabilities and Stockholders’
Equity:
Liabilities:
Unearned premiums
$
458
$
445
Loss and loss adjustment expense
reserves
938
890
Ceded premiums payable
165
140
Deferred program fees and reinsurance
commissions
8
7
Deferred taxes
100
20
Short-term debt
148
—
Long-term debt
518
515
Accrued interest payable
515
500
Other liabilities
262
183
Variable interest entity liabilities:
Long-term debt (includes $2,738 and $2,710
at fair value)
2,996
2,853
Derivative liabilities
1,223
1,136
Other liabilities
51
59
Total liabilities
7,383
6,748
Redeemable noncontrolling interest
204
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: 48,875,167 and
46,659,144
—
—
Additional paid-in capital
328
295
Accumulated other comprehensive income
(loss)
(81
)
(175
)
Retained earnings
1,235
1,265
Treasury stock, shares at cost: 1,432,634
and 1,463,774
(17
)
(17
)
Total Ambac Financial Group, Inc.
stockholders’ equity
1,465
1,368
Nonredeemable noncontrolling interest
205
51
Total stockholders’ equity
1,670
1,419
Total liabilities, redeemable
noncontrolling interest and stockholders’ equity
$
9,256
$
8,184
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 September 30, 2024
Gross premiums written
$
(1.6
)
$
115.2
$
113.6
Net premiums written
(1.9
)
32.8
30.8
Revenues:
Net premiums earned
5.7
27.4
33.1
Commission income
$
23.1
23.1
Program fees
3.6
3.6
Net investment income
34.5
1.7
0.3
$
1.5
38.0
Net investment gains (losses), including
impairments
(0.9
)
—
(0.6
)
(1.5
)
Net gains (losses) on derivative
contracts
(1.3
)
4.9
5.2
Other income
6.3
7.4
(1.0
)
—
12.7
Total revenues and other income
44.1
40.1
24.0
5.9
114.1
Expenses:
Losses and loss adjustment expenses
(benefit)
17.2
20.4
37.6
Commission expense
9.5
9.5
Amortization of deferred acquisition
costs, net
—
6.0
6.0
General and administrative expenses
14.2
4.8
12.1
23.7
54.7
Total expenses included for
EBITDA
31.4
31.2
21.6
23.7
107.8
EBITDA
12.7
8.9
2.4
(17.8
)
6.3
Less: Interest expense
15.8
19.5
Less: Depreciation expense
0.2
—
0.2
0.3
0.7
Less: Intangible amortization
6.2
6.4
12.6
Pretax income (loss)
(9.4
)
8.9
(7.9
)
(18.1
)
(26.5
)
Income tax expense (benefit)
3.6
0.9
(0.9
)
(0.9
)
2.8
Net income (loss)
$
(13.1
)
$
8.0
$
(7.1
)
$
(17.1
)
$
(29.3
)
Three Months
Ended September 30, 2023
Gross premiums written
$
2.1
$
77.5
$
79.6
Net premiums written
2.5
24.8
27.2
Revenues:
Net premiums earned
6.1
12.2
18.3
Commission income
$
14.6
14.6
Program fees
2.4
2.4
Net investment income
26.7
1.0
$
2.6
30.4
Net investment gains (losses), including
impairments
0.8
—
—
0.8
Net gains (losses) on derivative
contracts
4.4
—
4.4
Other income
3.0
(0.1
)
0.1
—
3.0
Total revenues and other income
40.9
15.5
14.6
2.6
73.8
Expenses:
Losses and loss adjustment expenses
(benefit)
(85.8
)
9.5
(76.3
)
Amortization of deferred acquisition
costs, net
—
2.0
1.9
Commission expense
8.5
8.5
General and administrative expenses
35.5
3.9
2.6
6.8
48.9
Total expenses included for
EBITDA
(50.4
)
15.4
11.1
6.8
(17.1
)
EBITDA
91.3
0.1
3.5
(4.2
)
90.8
Less: Interest expense
15.8
15.8
Less: Depreciation expense
0.3
—
—
—
0.3
Less: Intangible amortization
6.1
1.1
7.2
Pretax income (loss)
69.2
0.1
2.4
(4.2
)
67.5
Income tax expense (benefit)
3.0
—
—
(1.8
)
1.2
Net income (loss)
$
66.2
$
0.1
$
2.4
$
(2.5
)
$
66.3
View source
version on businesswire.com: https://www.businesswire.com/news/home/20241112924492/en/
Charles J. Sebaski Managing Director, Investor Relations (212)
208-3222 csebaski@ambac.com
Ambac Financial (NYSE:AMBC)
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