Ambac Financial Group, Inc. (NYSE: AMBC) ("Ambac" or "AFG"), a
financial services holding company, today reported its results for
the fourth quarter and year ended December 31, 2023.
- Net loss of $(16) million or $(0.24) per diluted share and
Adjusted net income of $10 million or $0.32 per diluted share in
the fourth quarter of 2023
- Legacy Financial Guarantee segment generated net loss of $(12)
million in fourth quarter of 2023
- Specialty P&C Insurance ("Everspan") produced its second
consecutive quarterly pre-tax profit and wrote gross premium of $91
million, up 76% from the fourth quarter of 2022
- Insurance Distribution ("Cirrata") premiums placed of $50
million, up 31% from the fourth quarter of 2022
- Book Value per share of $30.13 was up 8% and Adjusted Book
Value per share of $28.74 was up 3% from September 30, 2023
Claude LeBlanc, President and Chief Executive Officer, stated,
"I am pleased to report that for 2023 our specialty P&C
platform exceeded our targets and generated over a half billion
dollars of premium production, a 79% increase over 2022. Moreover,
Everspan produced its second consecutive quarterly profit and
generated positive net income in 2023. Everspan's profitability was
supported by improved underwriting results as it continued to gain
scale, posting a combined ratio of 106.5% for the year, a 50
percentage point improvement over the prior year. Overall, we
remain focused on building the premier destination for MGAs and
program partners and see significant runway ahead."
LeBlanc continued, “Regarding our Legacy Financial Guarantee
Business, working with AAC's regulator, we finalized the capital
model and revised stipulation and order for AAC. In addition, the
strategic review we announced and launched last quarter is
proceeding on plan and we will update the market once we have
something definitive to report. Overall Ambac made significant
progress in 2023 advancing all strategic priorities across our
businesses, and we look forward to building on that momentum in
2024."
Ambac's Fourth Quarter 2023
Summary Results
B (W)
Percent
($ in millions, except per share
data)1
4Q2023
4Q2022
Gross written premium
$
93.1
$
43.7
113
%
Net premiums earned
30.5
17.0
79
%
Commission income
12.2
8.8
38
%
Program fees
2.5
1.4
77
%
Net investment income
40.5
22.6
79
%
Pretax income (loss)
(15.3
)
172.9
(109
)%
Net income (loss) attributable to common
stockholders
(15.7
)
175.2
(109
)%
Net income (loss) attributable to common
stockholders per diluted share2,3
$
(0.24
)
$
3.86
(106
)%
EBITDA2,4
9.3
217.1
(96
)%
Adjusted net income (loss) 2
10.2
182.7
(94
)%
Adjusted net income (loss) per diluted
share 2, 3
$
0.32
$
4.03
(92
)%
Weighted-average diluted shares
outstanding (in millions)
45.6
46.1
1
%
Ambac's Fourth Quarter 2023
Summary Results
December 31,
September 30,
B(W)
($ in millions, except per share
data)1
2023
2023
Amount
Percent
Total Ambac Financial Group, Inc.
stockholders' equity
$
1,361.7
$
1,265.2
$
96.4
8
%
Total Ambac Financial Group, Inc.
stockholders' equity per share
$
30.13
$
28.00
$
2.13
8
%
Adjusted book value1,2
$
1,298.9
$
1,260.5
$
38.3
3
%
Adjusted book value per share 1,2
$
28.74
$
27.90
$
0.84
3
%
(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 $0.4 for the three months ended December
31, 2023 and 2022, respectively.
Ambac's 2023 Full Year Summary
Results
Better (Worse)
($ in millions, except per share
data)
2023
2022
Amount
Percent
Gross written premium
$
288.1
$
126.9
$
161.2
127
%
Net premiums earned
78.0
56.3
21.7
39
%
Net investment income
140.1
16.8
123.3
733
%
Net investment gains (losses), including
impairments
(22.5
)
31.5
(54.0
)
(171
)%
Net gains (losses) on derivative
contracts
(1.0
)
128.6
(129.5
)
(101
)%
Commission income
51.3
30.7
20.6
67
%
Other income
11.2
9.8
1.4
14
%
Net realized gains on extinguishment of
debt
—
81.3
(81.3
)
(100
)%
Litigation recoveries
—
125.9
(125.9
)
(100
)%
Losses and loss adjustment expenses
(32.6
)
(396.5
)
(363.9
)
(92
)%
General and administrative expenses
156.3
141.2
(15.2
)
(11
)%
Commission expense
29.5
17.6
(11.8
)
(67
)%
Interest expense
64.0
168.2
104.1
62
%
Intangible amortization
28.9
46.8
18.0
38
%
Pretax income (loss)
12.4
524.6
(512.2
)
(98
)%
Provision (benefit) for income taxes
7.4
2.5
(5.0
)
(202
)%
Net income (loss) attributable to common
stockholders
3.6
522.4
(518.7
)
(99
)%
Net income (loss) per diluted share
0.18
11.31
(11.13
)
(98
)%
EBITDA
107.0
741.5
(634.6
)
(86
)%
Adjusted net income (loss) 1,2
93.4
495.0
(401.6
)
(81
)%
Adjusted net income (loss) per diluted
share 1,2
2.11
10.72
(8.61
)
(80
)%
Weighted-average diluted shares
outstanding (in millions)
46.5
46.4
—
—
%
(1)
Per diluted share includes the impact of
adjusting redeemable noncontrolling interests to current redemption
value
(2)
See Non-GAAP Financial Data section of
this press release for further information.
(3)
Some financial data in this press release
may not add up due to rounding
Results of Operations by Segment
Specialty Property & Casualty Insurance Segment
Three Months Ended December
31,
Year ended December
31,
($ in millions)
2023
2022
% Change
2023
2022
% Change
Gross premiums written
$
90.7
$
51.7
76
%
$
273.3
$
146.4
87
%
Net premiums written
$
36.7
$
10.0
269
%
$
79.8
$
28.6
180
%
Net premiums earned
$
24.9
$
5.7
341
%
$
51.9
$
13.9
274
%
Program fees earned
$
2.5
$
1.4
77
%
$
8.4
$
3.1
172
%
Losses and loss expense
$
16.8
$
3.7
356
%
$
36.7
$
9.1
83
%
Pretax income (loss)
$
1.1
$
(0.9
)
228
%
$
0.4
$
(6.3
)
97
%
Combined Ratio
100.3
%
124.3
%
2400 bps
106.5
%
156.5
%
5000 bps
- Everspan generated positive pre-tax income in both the fourth
quarter of 2023 and for the full year 2023.
- Gross premium written ("GPW") of $90.7 million in the fourth
quarter of 2023 increased 76% compared to the prior year period as
Everspan continues to grow and diversify its program business
partners.
- Net premium written ("NPW") of $36.7 million in the fourth
quarter of 2023 increased 269% compared to the prior year period.
NPW growth outpaced GPW due to the impact of an assumed reinsurance
transaction closed in the fourth quarter of 2023.
- Net premiums earned of $24.9 million in the fourth quarter of
2023 were up 341% over the fourth quarter of 2022 reflecting NPW
growth and the effects of assumed reinsurance transactions.
- The loss and loss expense ratio for the fourth quarter of 2023
was 67.4% compared to 65.1% for the fourth quarter of 2022. The
loss and loss expense ratio for the 2023 was 70.7% compared to
65.4% for the 2022.
- Expense ratio(1) of 32.9% for the fourth quarter of 2023 was
down from 59.2% in the prior year period. A sliding commission
scale benefit reduced the expense ratio by 1.2% in the fourth
quarter of 2023 compared to 0.2% in the prior year period. For the
full year 2023 the Expense ratio(1) was 35.8%, down from 91.1% in
the prior year period as the expense ratio continues to normalize
from scale.
(1)
Expense Ratio is defined as acquisition costs and general and
administrative expenses, reduced by program fees divided by net
premiums earned
Insurance Distribution Segment
Three Months Ended December
31,
Year ended December
31,
($ in millions)
2023
2022
% Change
2023
2022
% Change
Premiums placed
$
50.2
$
38.3
31
%
$
230.6
$
135.5
70
%
Gross commissions
$
12.2
$
8.8
38
%
$
51.3
$
30.7
67
%
Net commissions
$
4.8
$
3.8
26
%
$
21.8
$
13.1
67
%
General and administrative expenses
$
3.2
$
1.9
65
%
$
10.6
$
6.3
69
%
Pretax income
$
0.6
$
1.2
(50
)%
$
7.3
$
4.5
61
%
EBITDA1
$
1.8
$
2.1
(16
)%
$
11.5
$
7.5
54
%
Pretax income margin2
4.9
%
13.4
%
-850 bps
14.1
%
14.4
%
-30 bps
EBITDA margin 3
14.3
%
23.2
%
-890 bps
22.3
%
23.8
%
-150 bps
(1)
EBITDA is prior to the impact of noncontrolling interests,
relating to subsidiaries where Ambac does not own 100%, of $0.3 and
$0.4 for the three months ended December 31, 2023 and 2022,
respectively, and $2.1 and $1.5 for the years ended December 31,
2023 and 2022, respectively.
(2)
Represents Pretax income divided by total revenues
(3)
See Non-GAAP Financial Data section of this press release for
further information
- Premium placed grew $11.8 million over the fourth quarter of
2022 driven primarily by recent acquisitions and growth initiatives
at existing business.
- Gross commission income, which is generated as a percentage of
premium placed, grew by $3.3 million in the fourth quarter 2023
over the fourth quarter of 2022.
- Net commission income of $4.8 million, which is gross
commission income less sub-producer commissions paid, grew by 26%
over last year; largely in-line with the change in premiums placed,
with some change for business mix.
- General and administrative expenses of $3.2 million in the
fourth quarter of 2023 compared to $1.9 million in the prior year
period, the increase was largely related to recent acquisitions and
growth initiatives at existing business.
- EBITDA of $1.8 million for the quarter was down (16)% over
fourth quarter of 2022; EBITDA Margin of 14.3% for the quarter
compared to 23.2% 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 $141
million in the fourth quarter of 2023, an increase of 57% from the
fourth quarter of 2022.
Specialty P&C Insurance revenues are dependent on gross
premiums written as specialty program insurance companies earn
premiums based on the portion of gross premiums written retained
(i.e. net premiums written) and fees on gross premiums written that
are ceded to reinsurers. Insurance Distribution revenues are
dependent on premium volume as Managing General Agents/Underwriters
and brokers receive commissions based on the amount of premiums
placed (i.e. gross premiums written on behalf of insurance
carriers) with insurance carriers.
Three Months Ended December
31,
Year Ended December
31,
($ in millions)
2023
2022
% Change
2023
2022
% Change
Specialty Property & Casualty
Insurance Gross Premiums Written
$
90.7
$
51.7
76
%
$
273.2
$
146.4
87
%
Insurance Distribution Premiums Placed
50.2
38.3
31
%
230.6
135.5
70
%
Specialty P&C Insurance Production
$
140.9
$
90.0
57
%
$
503.8
$
281.9
79
%
Legacy Financial Guarantee Insurance Segment
Three Months Ended December
31,
Year Ended December
31,
($ in millions)
2023
2022
% Change
2023
2022
% Change
Net premiums earned
$
5.6
$
11.4
(51
)%
$
26.0
$
42.4
(39
)%
Net investment income
$
36.9
$
20.8
77
%
$
127.0
$
12.3
930
%
Losses and loss adjustment expenses
(benefit)
$
1.9
$
(58.7
)
103
%
$
(69.3
)
$
(405.5
)
83
%
General and administrative expenses
$
19.2
$
38.7
(50
)%
$
106.3
$
102.4
4
%
Pretax income (loss)
$
(12.2
)
$
178.0
(107
)%
$
17.2
$
540.1
(97
)%
EBITDA1
$
11.1
$
221.2
(95
)%
$
107.3
$
754.0
(86
)%
(1)
See Non-GAAP Financial Data section of this press release for
further information
- Net premiums earned of $5.6 million in the fourth quarter of
2023 decreased from $11.4 million in the prior year period. This
reduction is mainly the result of proactive de-risking
transactions, lower accelerations and normal run-off of the insured
portfolio.
- Net investment income of $36.9 million increased 77% over
fourth quarter of 2022 on higher yields and stronger alternative
investment performance.
- Losses and loss adjustment expenses for the fourth quarter of
2023 were $1.9 million, compared to a benefit of $58.7 million in
the fourth quarter of 2022, which was favorably impacted by the
litigation settlement with Nomura.
- General and administrative expenses for the fourth quarter of
2023 were down 50% compared to fourth quarter 2022 which included a
$19 million defensive litigation expenses.
- 4Q2023 pre-tax loss includes a net benefit of $13 million in
relation to the commutation of certain student loans exposures,
which included insured bonds held in AAC's investment portfolio
while 4Q22 pre-tax income included a $126 million gain from the
RMBS litigation settlement with Bank of America.
- Watch List and Adversely Classified Credits ("WLACC") decreased
2.2% (3.3%, excluding the impact of FX) to $5.7 billion in fourth
quarter of 2023, from September 30, 2023.
- NPO was $19.5 billion at December 31, 2023 which was in-line
with September 30, 2023, due to the impact of FX rates.
Consolidated Financial Information
Net Premiums Earned
During the fourth quarter of 2023, net premiums earned of $31
million, increased 79% compared to the fourth quarter of 2022.
Significant growth in the Specialty P&C businesses more than
off-set the reduction in the Legacy FG business.
Net Investment Income
Net investment income for the fourth quarter of 2023 was $40
million compared to net investment income of $23 million for the
fourth quarter of 2022.
The increase in net investment income in the fourth quarter of
2023 compared to the fourth quarter of 2022 was driven by higher
yields on the core fixed income portfolio and improved alternative
investment returns.
Losses and Loss Expenses (Benefit)
Incurred Losses (Benefit) for the fourth quarter of 2023 were
$19 million, compared to a $(55) million for the fourth quarter of
2022.
Incurred Losses for the fourth quarter of 2023 were driven by
losses in the Specialty P&C business. The fourth quarter of
2022 loss benefit was driven by the Legacy Financial Guarantee
business litigation settlement with Nomura.
General and Administrative Expenses
General and administrative expenses for the fourth quarter 2023
were $35 million compared to $51 million in the fourth quarter of
2022. The decrease was mostly attributable to higher defensive
litigation related expenses at the Legacy Financial Guarantee
business in the prior year quarter somewhat off-set by increased
headcount associated with growth in the P&C businesses.
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 $211 million as
of December 31, 2023. Assets included cash and liquid securities of
$156 million and other investments of $32 million.
Consolidated Ambac Financial Group, Inc. Stockholders'
Equity
Stockholders’ equity at December 31, 2023, was $1.36 billion, or
$30.13 per share compared to $1.27 billion or $28.00 per share as
of September 30, 2023. The increase was primarily due to net
unrealized investment gains of $69 million and foreign exchange
translation gains of $32 million, somewhat off-set by the net loss
attributable to common shareholders of $16 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 was $10.2 million, or $0.32 per diluted
share, for the fourth quarter 2023 compared to an Adjusted Net
Income of $182.7 million, or $4.03 per diluted share, for the
fourth quarter of 2022.
The following table reconciles net income (loss) attributable to
common stockholders to the non-GAAP measure, Adjusted Net Income
(Loss), for the three-month periods ended December 31, 2023 and
2022, respectively:
Three Months Ended December
31,
2023
2022
($ in millions, other than per share
data)
$ Amount
Per Share
$ Amount
Per Share
Net income (loss) attributable to
common shareholders
$
(15.7
)
$
(0.24
)
$
175.2
$
3.86
Adjustments:
Net investment (gains) losses, including
impairments
15.5
0.34
(0.3
)
(0.01
)
Intangible amortization
8.3
0.18
13.2
0.29
Litigation costs
3.5
0.07
22.5
0.49
Foreign exchange (gains) losses
(0.9
)
(0.02
)
(3.4
)
(0.07
)
Workforce change costs
0.2
—
0.5
0.01
Net (gain) loss on extinguishment of
debt
—
—
(24.3
)
(0.53
)
Pretax adjusted net income
(loss)
10.8
0.33
183.5
4.04
Income tax effects
(0.4
)
(0.01
)
(0.7
)
(0.01
)
Net (gains) attributable to noncontrolling
interests
(0.2
)
—
(0.2
)
—
Adjusted Net Income (Loss)
$
10.2
$
0.32
$
182.7
$
4.03
Weighted-average diluted shares
outstanding (in millions)
46.5
46.1
Year Ended December
31,
2023
2022
($ in millions, other than per share
data)
$ Amount
Per Share
$ Amount
Per Share
Net income (loss) attributable to
common shareholders
$
3.6
$
0.18
$
522.4
$
11.31
Adjustments:
Net investment (gains) losses, including
impairments
22.5
0.49
(31.5
)
(0.68
)
Intangible amortization
28.9
0.62
46.8
1.01
Litigation costs
40.6
0.87
33.1
0.71
Foreign exchange (gains) losses
(0.8
)
(0.02
)
2.7
0.06
Workforce change costs
1.1
0.02
1.3
0.03
Net (gain) loss on extinguishment of
debt
—
—
(81.3
)
(1.75
)
Pretax adjusted net income
(loss)
95.8
2.16
493.6
10.69
Income tax effects
(1.6
)
(0.03
)
2.0
0.04
Net (gains) attributable to noncontrolling
interests
(0.8
)
(0.02
)
(0.6
)
(0.01
)
Adjusted Net Income (Loss)
$
93.4
$
2.11
$
495.0
$
10.72
Weighted average diluted shares
outstanding
46.5
46.4
(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 December 31, 2023
Net income (loss)
$
(12.2
)
$
1.1
$
0.6
$
(5.0
)
$
(15.6
)
Adjustments:
Interest expense
15.9
—
—
—
15.9
Income taxes
—
—
—
0.2
0.3
Depreciation
0.3
—
—
0.2
0.5
Amortization of intangible assets
7.1
—
1.1
—
8.3
EBITDA (2)
$
11.1
$
1.1
$
1.8
$
(4.7
)
$
9.3
Three Months
Ended December 31, 2022
Net income (loss)
$
178.9
$
(0.8
)
$
1.2
$
(5.0
)
$
174.3
Adjustments:
Interest expense
30.4
—
—
—
30.4
Income taxes
(0.9
)
(0.1
)
—
(0.4
)
(1.3
)
Depreciation
0.4
—
—
—
0.5
Amortization of intangible assets
12.4
—
0.9
—
13.2
EBITDA (2)
$
221.2
$
(0.9
)
$
2.1
$
(5.4
)
$
217.1
(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 $0.3 and $0.4 for the three months ended December
31, 2023 and 2022, respectively. These noncontrolling interests are
primarily in the Insurance Distribution segment.
Legacy Financial Guarantee
Insurance
Specialty Property &
Casualty Insurance
Insurance Distribution
Corporate & Other
Consolidated
Year Ended
December 31, 2023
Net income (loss)
$
8.8
$
0.3
$
7.1
$
(11.3
)
$
5.0
Adjustments:
Interest expense
64.0
—
—
—
64.0
Income taxes
8.4
—
0.2
(1.2
)
7.4
Depreciation
1.3
—
—
0.3
1.7
Amortization of intangible assets
24.7
—
4.2
—
28.9
EBITDA
$
107.3
$
0.4
$
11.5
$
(12.2
)
$
107.0
Year Ended
December 31, 2022
Net income (loss)
$
537.2
$
(6.3
)
$
4.5
$
(13.2
)
$
522.1
Adjustments:
Interest expense
168.2
—
—
—
168.2
Income taxes
2.9
—
—
(0.5
)
2.5
Depreciation
1.8
—
—
0.1
2.0
Amortization of intangible assets
43.9
—
2.9
—
46.8
EBITDA
$
754.0
$
(6.3
)
$
7.5
$
(13.6
)
$
741.5
(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 $2.1 and $1.5 for the years ended December 31,
2023 and 2022, respectively. These noncontrolling interests are
primarily in the Insurance Distribution segment.
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 $1.30 billion, or $28.74 per share, at
December 31, 2023, as compared to $1.26 billion, or $27.90 per
share, at September 30, 2023. The increase is primarily as a result
of F(x) translation gains.
The following table reconciles Total Ambac Financial Group, Inc.
stockholders’ equity to the non-GAAP measure adjusted book value as
of each date presented:
December 31, 2023
September 30, 2023
($ in millions, other than per share
data)
$ Amount
Per Share
$ Amount
Per Share
Total AFG Stockholders' Equity
$
1,361.7
$
30.13
$
1,265.2
$
28.00
Adjustments:
Insurance intangible asset
(245.1
)
(5.43
)
(249.1
)
(5.51
)
Net unearned premiums and fees in excess
of expected losses
162.1
3.59
154.5
3.42
Net unrealized investment (gains) losses
in Accumulated Other Comprehensive Income
20.2
0.45
89.9
1.99
Adjusted book value
$
1,298.9
$
28.74
$
1,260.5
$
27.90
Shares outstanding (in millions)
45.2
45.2
Earnings Call and Webcast
On February 28, 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 fourth
quarter 2023 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 March 13, 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
December 31,
Year Ended
($ in millions, except share
data)
2023
2022
2023
2022
Revenues:
Net premiums earned
$
31
$
17
$
78
$
56
Commission income
12
9
51
31
Program fees
2
1
8
3
Net investment income
40
23
140
17
Net investment gains (losses), including
impairments
(16
)
—
(22
)
31
Net gains (losses) on derivative
contracts
(2
)
5
(1
)
129
Net realized gains on extinguishment of
debt
—
24
—
81
Income (loss) on variable interest
entities
4
7
3
21
Other income
4
7
11
10
Litigation recoveries
—
126
—
126
Total revenues and other income
76
219
269
505
Expenses:
Losses and loss adjustment expenses
19
(55
)
(33
)
(396
)
Amortization of deferred acquisition
costs, net
6
1
11
3
Commission expense
7
5
29
18
General and administrative expenses
35
51
156
141
Intangible amortization
8
13
29
47
Interest expense
16
30
64
168
Total expenses
91
46
257
(20
)
Pretax income (loss)
(15
)
173
12
525
Provision (benefit) for income taxes
—
(1
)
7
2
Net income (loss)
(16
)
174
5
522
Less: net (gain) loss attributable to
noncontrolling interest
—
—
(1
)
(1
)
Plus: gain on purchase of auction market
preferred shares
—
1
—
1
Net income (loss) attributable to
common stockholders
$
(16
)
$
175
$
4
$
522
Net income (loss) per basic
share
$
(0.24
)
$
3.93
$
0.18
$
11.48
Net income (loss) per diluted
share
$
(0.24
)
$
3.86
$
0.18
$
11.31
Weighted-average number of common
shares outstanding:
Basic
45,589,451
45,341,861
45,636,649
45,719,906
Diluted
45,589,451
46,078,826
46,540,706
46,414,830
AMBAC FINANCIAL GROUP, INC.
AND SUBSIDIARIES
Consolidated Balance Sheets
(Unaudited)
Year Ended December
31,
($ in millions, except share
data)
2023
2022
Assets:
Investments:
Fixed maturity securities, at fair value
(amortized cost: $1,744 and $1,469)
$
1,710
$
1,395
Fixed maturity securities - trading
27
59
Short-term investments, at fair value
(amortized cost: $426 and $507)
426
507
Short-term investments pledged as
collateral, at fair value (amortized cost: $27 and $64)
27
64
Other investments (includes $463 and $556
at fair value)
475
568
Total investments (net of allowance for
credit losses of $3 and $0)
2,664
2,593
Cash and cash equivalents (including $12
and $14 of restricted cash)
28
44
Premium receivables (net of allowance for
credit losses of $4 and $5)
290
269
Reinsurance recoverable on paid and unpaid
losses (net of allowance for credit losses of $0 and $0)
195
115
Deferred ceded premium
204
124
Deferred acquisition costs
11
3
Subrogation recoverable
137
271
Intangible assets, less accumulated
amortization
307
326
Goodwill
70
61
Other assets
129
112
Variable interest entity assets:
Fixed maturity securities, at fair
value
2,167
1,967
Restricted cash
246
17
Loans, at fair value
1,663
1,829
Derivative and other assets
318
241
Total assets
$
8,428
$
7,973
Liabilities and Stockholders’
Equity:
Liabilities:
Unearned premiums
$
422
$
372
Loss and loss adjustment expense
reserves
893
805
Ceded premiums payable
90
39
Deferred program fees and reinsurance
commissions
6
5
Long-term debt
508
639
Accrued interest payable
475
427
Other liabilities
199
201
Variable interest entity liabilities:
Long-term debt (includes $2,710 and $2,788
at fair value)
2,967
3,107
Derivative liabilities
1,197
1,048
Other liabilities
240
5
Total liabilities
6,997
6,647
Redeemable noncontrolling interest
17
20
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
46,658,990
—
—
Additional paid-in capital
292
274
Accumulated other comprehensive income
(loss)
(160
)
(253
)
Retained earnings
1,246
1,245
Treasury stock, shares at cost: 1,463,774
and 1,685,233
(17
)
(15
)
Total Ambac Financial Group, Inc.
stockholders’ equity
1,362
1,252
Nonredeemable noncontrolling interest
53
53
Total stockholders’ equity
1,415
1,305
Total liabilities, redeemable
noncontrolling interest and stockholders’ equity
$
8,428
$
7,973
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 December 31, 2023
Gross premiums written
$
2.3
$
90.7
$
93.1
Net premiums written
7.3
36.7
44.1
Revenues:
Net premiums earned
5.6
24.9
30.5
Commission income
$
12.2
12.2
Program fees
2.5
2.5
Net investment income
36.9
1.2
0.1
$
2.3
40.5
Net investment gains (losses), including
impairments
(15.5
)
—
—
(15.5
)
Net gains (losses) on derivative
contracts
(2.3
)
0.1
(2.2
)
Net realized gains on extinguishment of
debt
—
—
Other income
7.5
—
0.1
—
7.6
Total revenues and other income
32.2
28.6
12.3
2.4
75.5
Expenses:
Losses and loss adjustment expenses
1.9
16.8
18.7
Commission expense
7.4
7.4
Amortization of deferred acquisition
costs, net
—
5.9
5.8
General and administrative expenses
19.2
4.8
3.2
7.0
34.3
Total expenses included for
EBITDA
21.1
27.5
10.6
7.0
66.2
EBITDA
11.1
1.1
1.8
(4.7
)
9.3
Less: Interest expense
15.9
15.9
Less: Depreciation expense
0.3
—
—
0.2
0.5
Less: Intangible amortization
7.1
1.1
8.3
Pretax income (loss)
(12.2
)
1.1
0.6
(4.9
)
(15.3
)
Income tax expense (benefit)
—
—
—
0.2
0.3
Net income (loss)
$
(12.2
)
$
1.1
$
0.6
$
(5.0
)
$
(15.6
)
Three Months
Ended December 31, 2022
Gross premiums written
$
(8.0
)
$
51.7
$
43.7
Net premiums written
(7.9
)
10.0
2.1
Revenues:
Net premiums earned
11.4
5.7
17.0
Commission income
$
8.8
8.8
Program fees
1.4
1.4
Net investment income
20.8
0.5
$
1.2
22.6
Net investment gains (losses), including
impairments
0.3
—
—
0.3
Net gains (losses) on derivative
contracts
5.0
—
5.0
Net realized gains on extinguishment of
debt
24.3
24.3
Other income
13.7
—
0.2
—
13.9
Litigation recoveries
125.9
125.9
Total revenues and other income
201.3
7.5
9.1
1.2
219.1
Expenses:
Losses and loss adjustment expenses
(58.7
)
3.7
(55.1
)
Amortization of deferred acquisition
costs, net
—
1.1
1.2
Commission expense
5.1
5.1
General and administrative expenses
38.7
3.6
1.9
6.6
50.9
Total expenses included for
EBITDA
(20.0
)
8.4
7.0
6.6
2.1
EBITDA
221.2
(0.9
)
2.1
(5.4
)
217.1
Less: Interest expense
30.4
30.4
Less: Depreciation expense
0.4
—
—
—
0.5
Less: Intangible amortization
12.4
0.9
13.2
Pretax income (loss)
178.0
(0.9
)
1.2
(5.4
)
172.9
Income tax expense (benefit)
(0.9
)
(0.1
)
—
(0.4
)
(1.3
)
Net income (loss)
$
178.9
$
(0.8
)
$
1.2
$
(5.0
)
$
174.3
Results of Operations by Segment (Continued)
Year Ended December 31, 2023
Legacy Financial Guarantee
Insurance
Specialty Property &
Casualty Insurance
Insurance Distribution
Corporate & Other
Consolidated
($ in
millions)
Gross premiums written
$
14.8
$
273.3
$
288.1
Net premiums written
(35.5
)
79.8
44.4
Revenues:
Net premiums earned
26.0
51.9
78.0
Commission income
$
51.3
51.3
Program fees
8.4
8.4
Net investment income
127.0
3.8
0.1
$
9.3
140.1
Net investment gains (losses), including
impairments
(22.5
)
—
0.1
(22.5
)
Net gains (losses) on derivative
contracts
(0.7
)
(0.3
)
(1.0
)
Net realized gains on extinguishment of
debt
—
—
Other income
14.5
—
0.2
—
14.7
Total revenues and other income
144.3
64.1
51.5
9.1
269.1
Expenses:
Losses and loss adjustment expenses
(69.3
)
36.7
(32.6
)
Amortization of deferred acquisition
costs, net
—
10.6
10.6
Commission expense
29.5
29.5
General and administrative expenses
106.3
16.5
10.6
21.3
154.6
Total expenses included for
EBITDA
37.0
63.7
40.1
21.3
162.1
EBITDA
107.3
0.4
11.5
(12.2
)
107.0
Less: Interest expense
64.0
64.0
Less: Depreciation expense
1.3
—
—
0.3
1.7
Less: Intangible amortization
24.7
4.2
28.9
Pretax income (loss)
17.2
0.4
7.3
(12.5
)
12.4
Income tax expense (benefit)
8.4
—
0.2
(1.2
)
7.4
Net income (loss)
$
8.8
$
0.3
$
7.1
$
(11.3
)
$
5.0
Year Ended December 31, 2022
Legacy Financial Guarantee
Insurance
Specialty Property &
Casualty Insurance
Insurance Distribution
Corporate & Other
Consolidated
($ in
millions)
Gross premiums written
$
(19.5
)
$
146.4
$
126.9
Net premiums written
(5.9
)
28.6
22.6
Revenues:
Net premiums earned
42.4
13.9
56.3
Commission income
$
30.7
30.7
Program fees
3.1
3.1
Net investment income
12.3
1.6
$
2.9
16.8
Net investment gains (losses), including
impairments
31.5
—
—
31.5
Net gains (losses) on derivative
contracts
127.6
0.9
128.6
Net realized gains on extinguishment of
debt
81.3
81.3
Other income
30.3
(0.1
)
0.7
(0.1
)
30.8
Litigation recoveries
125.9
125.9
Total revenues
451.3
18.5
31.4
3.7
504.9
Expenses:
Losses and loss adjustment expenses
(405.5
)
9.1
(396.5
)
Amortization of deferred acquisition
costs, net
0.4
2.5
3.0
Commission expense
17.6
17.6
General and administrative expenses
102.4
13.2
6.3
17.3
139.2
Total expenses included for
EBITDA
(302.7
)
24.8
23.9
17.3
(236.7
)
EBITDA
754.0
(6.3
)
7.5
(13.6
)
741.5
Less: Interest expense
168.2
168.2
Less: Depreciation expense
1.8
—
—
0.1
2.0
Less: Intangible amortization
43.9
2.9
46.8
Pretax income (loss)
540.1
(6.3
)
4.5
(13.7
)
524.6
Income tax expense (benefit)
2.9
—
—
(0.5
)
2.5
Net income (loss)
$
537.2
$
(6.3
)
$
4.5
$
(13.2
)
$
522.1
View source
version on businesswire.com: https://www.businesswire.com/news/home/20240227454791/en/
Charles J. Sebaski Managing Director, Investor Relations (212)
208-3222 csebaski@ambac.com
Ambac Financial (NYSE:AMBC)
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