Closes the acquisition of Beat Capital Partners
Ambac Financial Group, Inc. (NYSE: AMBC) ("Ambac" or "AFG"), a
financial services holding company, today reported its results for
the quarter ended June 30, 2024.
Second Quarter 2024 Highlights
- Net loss under $(1) million or $(0.02) per diluted share and
Adjusted net income of $8 million or $0.18 per diluted share
- Insurance Distribution ("Cirrata") generated net income of $1
million and EBITDA of $2 million on $53 million of premiums
placed
- Specialty P&C Insurance ("Everspan") produced Gross Premium
Written of $111 million up 109% from second quarter of 2023
- Total P&C Premium Production of $165 million, an increase
of 75% from the second quarter of 2023
- Legacy Financial Guarantee segment net income of $11
million
- Completed the acquisition of a 60% controlling stake in Beat
Capital Partners, a rapidly expanding U.K. based MGA operator and
incubator for $278 million, effective July 31, 2024
- Agreed to sell the Legacy Financial Guarantee Business for
$420M to Oaktree Capital Management pending regulatory and
shareholder approvals
Claude LeBlanc, President and Chief Executive Officer, stated,
"This quarter we substantially advanced Ambac's transformation into
a pure-play specialty P&C company, a goal we have been working
towards for several years. We are turning the page on our past with
the agreement to sell our Legacy Financial Guarantee Business for
$420 million. We have also set the stage for our future, as a
growth-orientated, capital light, insurance distribution platform
with the acquisition of 60% of Beat Capital Partners for
approximately $278 million. With this acquisition we have cemented
our position to be a premier destination for best-in-class
underwriters and MGAs."
LeBlanc continued, “In connection with these transactions,
following the sale of our Legacy Financial Guarantee Business,
Ambac will initiate a share repurchase program of up to $50
million. This share repurchase program reflects our view that the
current share price of our stock does not capture the go forward
value of our P&C platform post the sale of AAC."
Ambac's Second Quarter 2024
Summary Results
B (W)
Percent
($ in millions, except per share
data)1
2Q2024
2Q2023
Gross written premium
$
113.1
$
54.7
107
%
Net premiums earned
32.6
15.3
113
%
Commission income
13.2
10.0
32
%
Program fees
3.3
2.1
60
%
Net investment income
36.2
35.2
3
%
Pretax income (loss)
2.0
(11.1
)
118
%
Net income (loss) attributable to common
stockholders
(0.7
)
(13.1
)
94
%
Net income (loss) attributable to common
stockholders per diluted share2,3
$
(0.02
)
$
(0.29
)
93
%
EBITDA2,4
26.6
11.8
125
%
Adjusted net income (loss) 2
8.3
3.4
147
%
Adjusted net income (loss) per diluted
share 2, 3
$
0.18
$
0.07
157
%
Weighted-average diluted shares
outstanding (in millions)
46.2
45.8
(1
)%
Ambac's Second Quarter 2024
Summary Results
June 30, 2024
March 31, 2024
B(W)
($ in millions, except per share
data)1
Amount
Percent
Total Ambac Financial Group, Inc.
stockholders' equity
$
1,368.1
$
1,365.2
$
2.9
—
%
Total Ambac Financial Group, Inc.
stockholders' equity per share
$
30.25
$
30.19
$
0.06
—
%
Adjusted book value1,2
$
1,321.8
$
1,313.1
$
8.7
1
%
Adjusted book value per share 1,2
$
29.23
$
29.03
$
0.20
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 $0.4 and $0.3 for
the three months ended June 30, 2024 and 2023, respectively.
Results of Operations by Segment
Specialty Property & Casualty Insurance Segment
Three Months Ended June
30,
Six Months Ended June
30,
($ in millions)
2024
2023
% Change
2024
2023
% Change
Gross premiums written
$
111.2
$
53.2
109
%
$
207.6
$
105.1
98
%
Net premiums written
$
32.3
$
9.1
254
%
$
58.5
$
18.3
220
%
Net premiums earned
$
27.1
$
7.8
248
%
$
52.6
$
14.8
256
%
Program fees earned
$
3.3
$
2.1
60
%
$
5.9
$
3.6
66
%
Losses and loss expense
$
23.0
$
5.7
301
%
$
42.4
$
10.4
308
%
Pretax income (loss)
$
(1.1
)
$
(0.1
)
(831
)%
$
0.7
$
(0.9
)
180
%
Combined Ratio
109.4
%
112.7
%
-330 bps
104.0
%
117.1
%
-1310 bps
- Gross premium written ("GPW") and Net premium written ("NPW")
grew substantially in the second quarter of 2024 relative to the
second quarter of 2023 as Everspan continues to add new programs
and existing programs scale.
- Combined ratio of 109.4% for the second quarter of 2024
compared to 112.7% in the second quarter of 2023 and 98.4% in the
prior quarter.
- The loss and loss expense ratio for the second quarter of 2024
was 85.1% compared to 73.7% for the second quarter of 2023. This
quarter's result include 6.9% of prior accident year development
which was partially offset by a sliding scale benefit recorded as
an offset to acquisition costs. This quarter's loss ratio also
includes a 4.2% true-up from the first quarter of 2024, as elevated
commercial auto frequency led to a reevaluation of loss picks.
- Expense ratio(1) of 24.3% for the second quarter of 2024 was
down from 39.0% 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 5.6% in the second quarter of 2024 compared to
4.2% in the prior year period.
- During the quarter Everspan took several proactive measurers to
address the rising loss trend in commercial auto. These included
placing a moratorium on one commercial auto program for writing new
business.
(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 June
30,
Six Months Ended June
30,
($ in millions)
2024
2023
% Change
2024
2023
% Change
Premiums placed
$
53.4
$
40.9
31
%
$
143.5
$
118.2
21
%
Gross commissions
$
13.2
$
10.0
32
%
$
31.0
$
24.5
26
%
Net commissions
$
5.3
$
4.0
33
%
$
13.2
$
10.9
21
%
General and administrative expenses
$
3.0
$
2.4
25
%
$
6.1
$
4.8
27
%
Pretax income
$
1.3
$
0.7
92
%
$
5.1
$
4.2
21
%
EBITDA1
$
2.4
$
1.6
47
%
$
7.4
$
6.2
20
%
Pretax income margin2
9.5
%
6.5
%
300 bps
16.4
%
17.2
%
-80 bps
EBITDA margin 3
18.1
%
16.3
%
180 bps
23.7
%
25.2
%
-150 bps
(1)
EBITDA is prior to the impact of noncontrolling interests, relating
to subsidiaries where Ambac does not own 100%, of $0.4 and $0.3 for
the three months ended June 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 commission income grew during the second
quarter of 2024 compared to the second quarter of 2023 driven by
the August 2023 acquisition of Riverton Insurance Agency, organic
growth elsewhere, particularly within our specialty commercial auto
platform, and a change in timing related to a renewal at our
A&H platform.
- General and administrative expenses of $3.0 million in the
second 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 $2.4 million for the quarter was up 47.4% over second
quarter of 2023; EBITDA margin of 18.1% for the quarter compared to
16.3% last year was positively 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 $165
million in the second quarter of 2024, an increase of 74.9% from
the second quarter of 2023.
Specialty P&C Insurance revenues are dependent on gross
premiums written as specialty program insurance companies earn
premiums based on the portion of gross premiums written retained
(i.e. net premiums written) and fees on gross premiums written that
are ceded to reinsurers. Insurance Distribution revenues are
dependent on premium volume as Managing General Agents/Underwriters
and brokers receive commissions based on the amount of premiums
placed (i.e. gross premiums written on behalf of insurance
carriers) with insurance carriers.
Three Months Ended June
30,
Six Months Ended June
30,
($ in millions)
2024
2023
% Change
2024
2023
% Change
Specialty Property & Casualty
Insurance Gross Premiums Written
$
111.2
$
53.2
109
%
$
207.6
$
105.1
98
%
Insurance Distribution Premiums Placed
53.4
40.9
31
%
143.5
118.2
21
%
Specialty P&C Insurance Production
$
164.6
$
94.1
75
%
$
351.1
$
223.3
57
%
Legacy Financial Guarantee Insurance Segment
Three Months Ended June
30,
Six Months Ended June
30,
($ in millions)
2024
2023
% Change
2024
2023
% Change
Net premiums earned
$
5.6
$
7.5
(26
)%
$
13.1
$
14.4
(9
)%
Net investment income
$
32.4
$
32.2
1
%
$
70.5
$
63.4
11
%
Losses and loss adjustment expenses
(benefit)
$
(5.3
)
$
1.6
(424
)%
$
(26.0
)
$
14.6
(278
)%
General and administrative expenses
$
22.5
$
23.5
(4
)%
$
43.9
$
51.6
(15
)%
Pretax income (loss)
$
13.1
$
(7.7
)
269
%
$
37.9
$
(39.8
)
195
%
EBITDA1
$
36.3
$
14.2
156
%
$
88.6
$
4.9
1723
%
(1)
See Non-GAAP Financial Data section of this press release for
further information
- Net premiums earned of $5.6 million in the second quarter of
2024 decreased from $7.5 million in the prior year period. This
decrease was a result of organic run-off of the insured portfolio
and the impact of proactive de-risking transactions.
- Watch List and Adversely Classified Credits ("WLACC") decreased
2.3% (2.2%, excluding the impact of FX) to $5.3 billion in second
quarter of 2024, from March 31, 2024.
- NPO was $18.7 billion at second quarter of 2024 a decrease of
1.9% (2.0%, excluding the impact of FX) from March 31, 2024, due to
de-risking, run-off and the impact of FX rates.
- Second quarter of 2024 results included a one time net gain of
$12 million related to the termination of a benefit plan.
Consolidated Financial Information
Net Premiums Earned
During the second quarter of 2024, net premiums earned of $33
million, increased 113.0% compared to the second quarter of 2023,
driven by significant growth in the Specialty P&C
businesses.
Net Investment Income
Net investment income for the second quarter of 2024 was $36
million compared to net investment income of $35 million for the
second quarter of 2023. Higher yields on the available for sale
investment portfolio more than offset lower income from trading and
alternative investments.
Losses and Loss Expenses(Benefit)
Incurred Losses (Benefit) for the second quarter of 2024 were
$18 million, compared to $7 million for the second quarter of
2023.
The Incurred Loss for the second quarter of 2024 was driven by
the growth and reserve development in the Specialty P&C segment
which more than offset the $5 million benefit in the Legacy
Financial Guarantee business.
General and Administrative Expenses
General and administrative expenses for the second quarter 2024
were $47 million compared to $36 million in the second quarter of
2023. The increase was attributable to legal and advisory costs
incurred through the Corporate Segment in connection with the
disposition of the Legacy Financial Guarantee Business and the
acquisition of Beat Capital Partners.
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 $202 million as
of June 30, 2024. Assets included cash and liquid securities of
$171 million and other investments of $32 million.
Consolidated Ambac Financial Group, Inc. Stockholders'
Equity
Stockholders’ equity at June 30, 2024, was $1.37 billion, or
$30.25 per share compared to $1.37 billion or $30.19 per share as
of March 31, 2024. The net loss attributable to common shareholders
of $1 million was partially offset by net unrealized investment
gains of $4 million and foreign exchange translation gains of $1
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 $8.3 million, or $0.18 per
diluted share, for the second quarter 2024 compared to Adjusted Net
Income (Loss) of $3.4 million, or $0.07 per diluted share, for the
second quarter of 2023.
The following table reconciles net income (loss) attributable to
common stockholders to the non-GAAP measure, Adjusted Net Income
(Loss), for the three-month periods ended June 30, 2024 and 2023,
respectively:
Three Months Ended June
30,
2024
2023
($ in millions, other than per share
data)
$ Amount
Per Share
$ Amount
Per Share
Net income (loss) attributable to
common shareholders
$
(0.7
)
$
(0.02
)
$
(13.1
)
$
(0.29
)
Adjustments:
Net investment (gains) losses, including
impairments
(3.6
)
(0.08
)
3.4
0.07
Intangible amortization
8.2
0.18
6.5
0.14
Litigation costs
4.7
0.10
7.6
0.17
Foreign exchange (gains) losses
0.3
0.01
(0.1
)
—
Workforce change costs
(0.1
)
—
(0.1
)
—
Pretax adjusted net income
(loss)
8.7
0.19
4.3
0.09
Income tax effects
(0.2
)
(0.01
)
(0.7
)
(0.02
)
Net (gains) attributable to noncontrolling
interests
(0.2
)
—
(0.2
)
—
Adjusted Net Income (Loss)
$
8.3
$
0.18
$
3.4
$
0.07
Weighted-average diluted shares
outstanding (in millions)
46.2
45.8
(1)
Per Diluted share includes the impact of adjusting the Insurance
Distribution segment related noncontrolling interest to current
redemption value
Six Months Ended June
30,
2024
2023
($ in millions, other than per share
data)
$ Amount
Per Share
$ Amount
Per Share
Net income (loss) attributable to
common shareholders
$
19.3
$
0.41
$
(46.5
)
$
(1.02
)
Adjustments:
Net investment (gains) losses, including
impairments
(4.1
)
(0.09
)
7.8
0.17
Intangible amortization
20.6
0.44
13.4
0.29
Litigation costs
11.0
0.24
16.5
0.36
Foreign exchange (gains) losses
0.7
0.02
(0.4
)
(0.01
)
Workforce change costs
—
—
0.7
0.02
Pretax adjusted net income
(loss)
47.5
1.02
(8.5
)
(0.19
)
Income tax effects
(0.4
)
(0.01
)
(1.5
)
(0.03
)
Net (gains) attributable to noncontrolling
interests
(0.4
)
(0.01
)
(0.4
)
(0.01
)
Adjusted Net Income (Loss)
$
46.7
$
1.00
$
(10.4
)
$
(0.23
)
Weighted average diluted shares
outstanding
46.6
45.7
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 June 30, 2024
Net income (loss) (1)
$
10.5
$
(1.1
)
$
1.3
$
(11.3
)
$
(0.5
)
Adjustments:
Interest expense
16.0
—
—
—
16.0
Income taxes
2.5
—
—
—
2.5
Depreciation
0.2
—
—
0.3
0.5
Amortization of intangible assets
7.0
—
1.1
—
8.2
EBITDA (2)
$
36.3
$
(1.1
)
$
2.4
$
(11.0
)
$
26.6
Three Months
Ended June 30, 2023
Net income (loss) (1)
$
(9.3
)
$
(0.1
)
$
0.6
$
(4.3
)
$
(13.0
)
Adjustments:
Interest expense
16.0
—
—
—
16.0
Income taxes
1.6
—
—
0.4
1.9
Depreciation
0.4
—
—
—
0.4
Amortization of intangible assets
5.5
—
1.0
—
6.5
EBITDA (2)
$
14.2
$
(0.1
)
$
1.6
$
(3.8
)
$
11.8
(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 $0.4 and $0.3 for
the three months ended June 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
Six Months Ended
June 30, 2024
Net income (loss) (1)
$
30.7
$
0.6
$
5.0
$
(16.1
)
$
20.2
Adjustments:
Interest expense
32.0
—
—
—
32.0
Income taxes
7.1
0.1
0.1
(0.1
)
7.2
Depreciation
0.4
—
—
0.6
1.0
Amortization of intangible assets
18.3
—
2.3
—
20.6
EBITDA (2)
$
88.6
$
0.7
$
7.4
$
(15.6
)
$
81.1
Six Months Ended
June 30, 2023
Net income (loss) (1)
$
(45.2
)
$
(0.9
)
$
4.1
$
(3.8
)
$
(45.8
)
Adjustments:
Interest expense
32.4
—
—
—
32.4
Income taxes
5.4
—
0.1
0.4
5.8
Depreciation
0.8
—
—
0.1
0.9
Amortization of intangible assets
11.5
—
1.9
—
13.4
EBITDA (2)
$
4.9
$
(0.9
)
$
6.2
$
(3.4
)
$
6.8
(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 $1.4 and $1.2 for
the six months ended June 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 $1.32 billion, or $29.23 per share, at
June 30, 2024, as compared to $1.31 billion, or $29.03 per share,
at March 31, 2024.
The following table reconciles Total Ambac Financial Group, Inc.
stockholders’ equity to the non-GAAP measure adjusted book value as
of each date presented:
June 30, 2024
March 31, 2024
($ in millions, other than per share
data)
$ Amount
Per Share
$ Amount
Per Share
Total AFG Stockholders' Equity
$
1,368.1
$
30.25
$
1,365.2
$
30.19
Adjustments:
Insurance intangible asset
(226.2
)
(5.00
)
(233.1
)
(5.16
)
Net unearned premiums and fees in excess
of expected losses
156.6
3.46
153.7
3.40
Net unrealized investment (gains) losses
in Accumulated Other Comprehensive Income
23.3
0.52
27.2
0.60
Adjusted book value
$
1,321.8
$
29.23
$
1,313.1
$
29.03
Shares outstanding (in millions)
45.2
45.2
Earnings Call and Webcast
On August 6, 2024, at 8:00am ET, Claude LeBlanc, President and
Chief Executive Officer, and David Trick, Executive Vice President
and Chief Financial Officer, will discuss Ambac's second 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 August 20, 2024, and can be accessed
by dialing (Domestic) (844) 512-2921 or (International) (412)
317-6671; and using ID#13746740
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 specialty
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; (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, 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 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; (41) 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; (42) potential litigation relating to
the proposed Sale Transactions; (43) disruptions from the proposed
Sale Transactions that may harm Ambac’s business, including current
plans and operations; (44) potential adverse reactions or changes
to business relationships resulting from the announcement or
completion of the proposed Sale Transactions; (45) difficulties in
integrating acquired businesses into our business; and (46) other
risks and uncertainties that have not been identified at this
time.
Where to Find Additional Information
This communication does not constitute an offer to sell or the
solicitation of an offer to buy any securities or a solicitation of
any vote or approval. This communication may be deemed to be
solicitation material in respect of the proposed sale of AAC to
Oaktree Capital Management by AFG (the “proposed transaction”). In
connection with the proposed transaction, AFG has filed a
preliminary proxy statement with the SEC. When completed, a
definitive proxy statement and a form of proxy will be mailed to
the stockholders of AFG. INVESTORS AND SECURITY HOLDERS ARE URGED
TO READ ALL RELEVANT DOCUMENTS FILED WITH THE SEC, INCLUDING THE
PROXY STATEMENT AND ANY OTHER RELEVANT DOCUMENTS WHEN THEY BECOME
AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE
PROPOSED TRANSACTION. Investors and security holders may obtain
free copies of the proxy statement (when available) and other
documents filed by AFG with the SEC at http://www.sec.gov. Free
copies of the proxy statement and AFG’s other filings with the SEC
may also be obtained from AFG. Free copies of documents filed with
the SEC by AFG will be made available free of charge on AFG’s
investor relations website at
https://ambac.com/investor-relations/investor-overview/default.aspx.
Participants in the Solicitation
AFG and certain of its directors and executive officers may be
deemed to be participants in the solicitation of proxies in respect
of the proposed transaction. Information about the directors and
executive officers of AFG is set forth in its definitive proxy
statement, which was filed with the SEC on April 26, 2024.
Investors may obtain additional information regarding the interests
of such participants by reading the proxy statement and other
relevant materials regarding the proposed transaction when they
become available.
AMBAC FINANCIAL GROUP, INC.
AND SUBSIDIARIES
Consolidated Statements of
Income (Loss) (Unaudited)
Three Months Ended
Six Months Ended
June 30,
June 30,
($ in millions, except share
data)
2024
2023
2024
2023
Revenues:
Net premiums earned
$
33
$
15
$
66
$
29
Commission income
13
10
31
25
Program fees
3
2
6
4
Net investment income
36
35
78
69
Net investment gains (losses), including
impairments
4
(3
)
4
(8
)
Net gains (losses) on derivative
contracts
—
—
2
(3
)
Income (loss) on variable interest
entities
—
—
2
(1
)
Other income
16
2
18
5
Total revenues and other income
105
62
207
120
Expenses:
Losses and loss adjustment expenses
(benefit)
18
7
16
25
Amortization of deferred acquisition
costs, net
5
1
10
3
Commission expense
8
6
18
14
General and administrative expenses
47
36
83
72
Intangible amortization
8
7
21
13
Interest expense
16
16
32
32
Total expenses
103
73
180
160
Pretax income (loss)
2
(11
)
27
(40
)
Provision for income taxes
2
2
7
6
Net income (loss)
(1
)
(13
)
20
(46
)
Less: net (gain) attributable to
noncontrolling interest
—
—
(1
)
(1
)
Net income (loss) attributable to
common stockholders
$
(1
)
$
(13
)
$
19
$
(47
)
Net income (loss) per basic
share
$
(0.02
)
$
(0.29
)
$
0.42
$
(1.02
)
Net income (loss) per diluted
share
$
(0.02
)
$
(0.29
)
$
0.41
$
(1.02
)
Weighted-average number of common
shares outstanding:
Basic
46,209,250
45,757,234
46,019,145
45,661,288
Diluted
46,209,250
45,757,234
46,568,862
45,661,288
AMBAC FINANCIAL GROUP, INC.
AND SUBSIDIARIES
Consolidated Balance Sheets
(Unaudited)
($ in millions, except share
data)
June 30, 2024
March 31, 2024
Assets:
Investments:
Fixed maturity securities, at fair value
(amortized cost: $1,737 and $1,726)
$
1,703
$
1,687
Fixed maturity securities pledged as
collateral, at fair value (amortized cost: $27 and $27)
25
26
Fixed maturity securities - trading
31
29
Short-term investments, at fair value
(amortized cost: $314 and $382)
314
382
Other investments (includes $533 and $546
at fair value)
558
558
Total investments (net of allowance for
credit losses of $3 and $2)
2,632
2,682
Cash and cash equivalents (including $11
and $12 of restricted cash)
35
44
Premium receivables (net of allowance for
credit losses of $3 and $4)
317
299
Reinsurance recoverable on paid and unpaid
losses (net of allowance for credit losses of $0 and $0)
277
224
Deferred ceded premium
232
217
Deferred acquisition costs
12
12
Subrogation recoverable
128
130
Intangible assets, less accumulated
amortization
285
293
Goodwill
70
70
Other assets
163
129
Variable interest entity assets:
Fixed maturity securities, at fair
value
2,101
2,162
Restricted cash
62
252
Loans, at fair value
1,567
1,604
Derivative and other assets
303
313
Total assets
$
8,184
$
8,429
Liabilities and Stockholders’
Equity:
Liabilities:
Unearned premiums
$
445
$
429
Loss and loss adjustment expense
reserves
890
851
Ceded premiums payable
140
110
Deferred program fees and reinsurance
commissions
7
7
Long-term debt
515
512
Accrued interest payable
500
487
Other liabilities
203
199
Variable interest entity liabilities:
Long-term debt (includes $2,671 and $2,710
at fair value)
2,853
2,925
Derivative liabilities
1,136
1,170
Other liabilities
59
245
Total liabilities
6,748
6,993
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
295
291
Accumulated other comprehensive income
(loss)
(175
)
(175
)
Retained earnings
1,265
1,266
Treasury stock, shares at cost: 1,434,172
and 1,463,774
(17
)
(17
)
Total Ambac Financial Group, Inc.
stockholders’ equity
1,368
1,365
Nonredeemable noncontrolling interest
51
53
Total stockholders’ equity
1,419
1,418
Total liabilities, redeemable
noncontrolling interest and stockholders’ equity
$
8,184
$
8,429
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 June 30, 2024
Gross premiums written
$
1.9
$
111.2
$
113.1
Net premiums written
1.5
32.3
33.8
Revenues:
Net premiums earned
5.6
27.1
32.6
Commission income
$
13.2
13.2
Program fees
3.3
3.3
Net investment income
32.4
1.5
0.1
$
2.2
36.2
Net investment gains (losses), including
impairments
(1.0
)
—
4.5
3.6
Net gains (losses) on derivative
contracts
0.7
(0.4
)
0.2
Other income
15.8
—
—
(0.4
)
15.4
Total revenues and other income
53.5
31.8
13.3
5.9
104.5
Expenses:
Losses and loss adjustment expenses
(benefit)
(5.3
)
23.0
17.8
Commission expense
7.9
7.9
Amortization of deferred acquisition
costs, net
—
5.4
5.4
General and administrative expenses
22.5
4.5
3.0
16.9
46.9
Total expenses included for
EBITDA
17.2
32.9
10.9
16.9
77.9
EBITDA
36.3
(1.1
)
2.4
(11.0
)
26.6
Less: Interest expense
16.0
16.0
Less: Depreciation expense
0.2
—
—
0.3
0.5
Less: Intangible amortization
7.0
1.1
8.2
Pretax income (loss)
13.1
(1.1
)
1.3
(11.3
)
2.0
Income tax expense (benefit)
2.5
—
—
—
2.5
Net income (loss)
$
10.5
$
(1.1
)
$
1.3
$
(11.3
)
$
(0.5
)
Three Months
Ended June 30, 2023
Gross premiums written
$
1.5
$
53.2
$
54.7
Net premiums written
(54.0
)
9.1
(44.9
)
Revenues:
Net premiums earned
7.5
7.8
15.3
Commission income
$
10.0
10.0
Program fees
2.1
2.1
Net investment income
32.2
0.8
$
2.2
35.2
Net investment gains (losses), including
impairments
(3.4
)
—
—
(3.4
)
Net gains (losses) on derivative
contracts
0.6
(0.1
)
0.5
Other income
2.4
0.1
—
—
2.5
Total revenues and other income
39.4
10.7
10.1
2.1
62.2
Expenses:
Losses and loss adjustment expenses
(benefit)
1.6
5.7
7.4
Amortization of deferred acquisition
costs, net
0.1
1.4
1.4
Commission expense
6.0
6.0
General and administrative expenses
23.5
3.8
2.4
5.9
35.6
Total expenses included for
EBITDA
25.2
10.8
8.4
5.9
50.4
EBITDA
14.2
(0.1
)
1.6
(3.8
)
11.8
Less: Interest expense
16.0
16.0
Less: Depreciation expense
0.4
—
—
—
0.4
Less: Intangible amortization
5.5
1.0
6.5
Pretax income (loss)
(7.7
)
(0.1
)
0.7
(3.9
)
(11.1
)
Income tax expense (benefit)
1.6
—
—
0.4
1.9
Net income (loss)
$
(9.3
)
$
(0.1
)
$
0.6
$
(4.3
)
$
(13.0
)
View source
version on businesswire.com: https://www.businesswire.com/news/home/20240805233686/en/
Charles J. Sebaski Managing Director, Investor Relations (212)
208-3222 csebaski@ambac.com
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