Release Date: November 13, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Ambac Financial Group Inc (AMBC, Financial) reported a significant increase in premium production, with a 68% rise over the prior year period, totaling $611 million for the first three quarters.
- The acquisition of Beat contributed positively, adding $64 million in premiums to the third quarter results.
- Everspan's underwriting profitability improved, with a focus on scale diversification and proactive underwriting actions.
- The company is launching a $50 million share buyback program, indicating confidence in its financial position.
- Ambac Financial Group Inc (AMBC) is on track to transform into a specialty P&C franchise, with the sale of its legacy financial guarantee business nearing completion.
Negative Points
- Ambac Financial Group Inc (AMBC) reported a net loss of $28 million for the third quarter of 2024, compared to a net income of $66 million in the same period of 2023.
- The results were impacted by $17 million in legal and advisory expenses related to acquisitions and pending sales.
- The legacy financial guarantee business generated a net loss of $13 million, primarily due to lower loss reserve discount rates.
- Short-term financing costs and startup expenses further affected the financial results, with $3.8 million and $1.3 million incurred respectively.
- Foreign exchange losses amounted to $1.4 million, impacting the overall financial performance.
Q & A Highlights
Q: For your Everspan business, you talked about the combined ratio being a little above 100. Is your goal to keep that below 100, and what does that translate into in terms of returns, ROE within Everspan?
A: Thanks, Mark. In the short term, we're looking to get that combined ratio below 100. Longer term, we're aiming for a combined ratio closer to 90, which should translate to mid-teen ROEs.
Q: Regarding your longer-term objective of the $70 to $80 million goal, is there a rough split between Serata and Everspan?
A: The split is not really a split. The distribution business will be the predominant growth engine, with Everspan being a strategic component. The growth, whether it's 85% or 90% plus, will be attributable to the distribution side.
Q: As you're launching these MGAs, how do you find the appetite in terms of carrier capital support compared to 6-12 months ago?
A: We have access to multiple sources of capacity, including Everspan, Lloyd Syndicates, and our Bermuda reinsurer Cadenza. Capacity tends not to be an issue for launches or acquisitions. As portfolios mature, we expand into new market sources, typically third-party sources.
Q: On the buyback, what changed in the last couple of months that led the board to start it immediately?
A: We committed to launching a program post-sale of the legacy business. Given our progress, including the shareholder vote and PRA approval, and the attractive opportunity presented by the current stock price, the board decided it was a good time to proceed.
Q: The $70 to $80 million long-term EBITDA target, is that a stretch goal or more conservative? What is the biggest driver for surpassing that number?
A: It's not a stretch goal. The biggest driver is organic growth, supported by acquisitions and startups. We are optimistic about the business plans of our startups and expect Everspan to continue growing, focusing on profitability and ROE.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
