Ambac(US:AMBC)2025-05-12 20:15markdown [Executive Summary & Highlights](index=1&type=section&id=Executive%20Summary%20%26%20Highlights) [CEO Commentary & Business Outlook](index=1&type=section&id=CEO%20Commentary%20%26%20Business%20Outlook) CEO Claude LeBlanc highlighted a strong start for the P&C business in Q1 2025, with significant premium and revenue growth, partly due to the Beat acquisition, emphasizing a diversified portfolio for long-term growth and resilience, and positive early indications from new MGAs, with the Legacy business sale nearing completion awaiting Wisconsin regulatory approval - P&C business premium production up **70%** to **$318 million** and revenue up **27%** to **$63 million** in Q1 2025, bolstered by Beat acquisition[3](index=3&type=chunk) - Diversified portfolio built for long-term growth and market cyclicality, with new MGAs showing early profitability trends[3](index=3&type=chunk) - Completed pre-closing conditions for Legacy business sale, awaiting Wisconsin regulatory approval[3](index=3&type=chunk) [First Quarter 2025 Key Highlights](index=1&type=section&id=First%20Quarter%202025%20Key%20Highlights) Total revenue from continuing P&C operations increased 27% to $63 million, and total P&C premium production rose 70% to $318 million, with the Insurance Distribution segment seeing revenue grow 129% to $41 million and Adjusted EBITDA increase 136% to $12 million, while the Specialty P&C Insurance segment improved its loss ratio by 880 bps to 66.9%, though its combined ratio increased | Metric | Q1 2025 | Q1 2024 | % Change | | :----------------------------------- | :------ | :------ | :------- | | Total revenue from continuing P&C operations | $63 million | N/A | 27% | | Total P&C premium production | $318 million | N/A | 70% | | **Insurance Distribution (Cirrata):** | | | | | Total revenue | $41 million | N/A | 129% | | Net loss to Shareholders | $(2) million | N/A | (145)% | | Adjusted EBITDA | $12 million | N/A | 136% | | Adjusted EBITDA to Shareholders | $7 million | N/A | 69% | | **Specialty P&C Insurance (Everspan):** | | | | | Loss ratio | 66.9% | N/A | -880 bps | | Combined ratio | 102.1% | N/A | 370 bps | | Net income to Shareholders | >$1 million | N/A | down slightly | | Adjusted EBITDA to Shareholders | <$2 million | N/A | down slightly | [Consolidated Financial Performance](index=2&type=section&id=Consolidated%20Financial%20Performance) [Summary of Continuing Operations](index=2&type=section&id=Summary%20of%20Continuing%20Operations) Total revenue from continuing operations increased 27% to $63 million, primarily due to the Beat Capital acquisition, offsetting reductions at Everspan, while total expenses rose 48% to $78 million, driven by G&A from Beat, transaction-related fees, and intangible amortization, resulting in a significant net loss from continuing operations to shareholders of $(16) million and Adjusted EBITDA to shareholders of $(1) million, impacted by higher holding company expenses despite Cirrata's growth | Metric (in thousands) | Q1 2025 | Q1 2024 | % Change | | :------------------------------------------ | :------ | :------ | :------- | | Total revenues from continuing operations | $62,756 | $49,551 | 27% | | Total expenses from continuing operations | $77,863 | $52,790 | 47% | | Pretax income (loss) from continuing operations | $(15,107) | $(3,239) | 366% | | Net income (loss) from continuing operations attributable to Ambac shareholders | $(16,144) | $(4,070) | 297% | | Adjusted EBITDA to shareholders | $(1,287) | $384 | (435)% | - Revenue increase primarily due to Beat Capital acquisition, offsetting Everspan's managed reduction[6](index=6&type=chunk) - Expense increase driven by G&A from Beat, professional fees, and intangible amortization/interest related to Beat acquisition[7](index=7&type=chunk) [Key Financial Metrics (GAAP & Non-GAAP)](index=2&type=section&id=Key%20Financial%20Metrics%20(GAAP%20%26%20Non-GAAP)) Ambac reported a net loss attributable to shareholders of $(46) million, a significant decrease from a $20 million net income in Q1 2024, with diluted EPS at $(1.22), down from $0.44, and adjusted net loss attributable to shareholders at $(6) million, compared to $(0.3) million in the prior year | Metric (in thousands, except per share) | Q1 2025 | Q1 2024 | % Change | | :------------------------------------------ | :------ | :------ | :------- | | Net income (loss) attributable to Ambac shareholders | $(46,391) | $20,070 | (331)% | | Net income (loss) attributable to common stockholders per diluted share | $(1.22) | $0.44 | (377)% | | Adjusted net income (loss) attributable to shareholders | $(6,037) | $(329) | 1735% | | Adjusted net income (loss) to shareholders per diluted share | $(0.13) | $(0.01) | NM | [Earnings Call Information](index=3&type=section&id=Earnings%20Call%20Information) [Webcast and Replay Details](index=3&type=section&id=Webcast%20and%20Replay%20Details) Ambac will host an earnings call on May 13, 2025, at 8:30 AM ET to discuss Q1 2025 results, with a live audio webcast available on Ambac's investor relations website and a replay accessible until May 27, 2025 - Earnings call on **May 13, 2025**, at **8:30 AM ET**, accessible via webcast on Ambac's investor relations website[11](index=11&type=chunk) - Replay available until **May 27, 2025**, via phone or archived webcast[12](index=12&type=chunk) [Segment Performance Analysis](index=3&type=section&id=Segment%20Performance%20Analysis) [Insurance Distribution Segment (Cirrata)](index=3&type=section&id=Insurance%20Distribution%20Segment%20(Cirrata)) The Insurance Distribution segment experienced substantial growth, with total revenues increasing 129% to $41 million, Adjusted EBITDA to shareholders growing 69% to $7.1 million, and Adjusted EBITDA increasing 136% to $12.1 million, despite reporting a pretax loss to shareholders of $(3.9) million, a significant decline from a $3.3 million pretax income in the prior year, and negative organic growth of (2.1)% | Metric (in thousands) | Q1 2025 | Q1 2024 | % Change | | :-------------------------------- | :------ | :------ | :------- | | Total revenues | $40,998 | $17,865 | 129% | | Pretax income (loss) to shareholders | $(3,897) | $3,270 | (219)% | | Adjusted EBITDA to shareholders | $7,112 | $4,202 | 69% | | Adjusted EBITDA | $12,112 | $5,122 | 136% | | Organic Growth | (2.1)% | 7.7% | N/A | [Specialty Property & Casualty Insurance Segment (Everspan)](index=3&type=section&id=Specialty%20Property%20%26%20Casualty%20Insurance%20Segment%20(Everspan)) The Specialty P&C Insurance segment saw a decrease in gross premiums written by 10% to $86.9 million and net premiums earned by 39% to $15.7 million, with total revenue declining 28% to $21.2 million, yet the loss ratio improved by 880 bps to 66.9%, though the expense ratio increased by 1250 bps, leading to a combined ratio of 102.1% (up 370 bps), and net income from continuing operations decreased 17% to $1.4 million | Metric (in thousands) | Q1 2025 | Q1 2024 | % Change | | :-------------------------------- | :------ | :------ | :------- | | Gross premium written | $86,915 | $96,422 | (10)% | | Net premiums earned | $15,678 | $25,579 | (39)% | | Total revenue | $21,171 | $29,542 | (28)% | | Net income (loss) from continuing operations | $1,425 | $1,715 | (17)% | | Loss Ratio | 66.9% | 75.7% | -880 bps | | Expense Ratio | 35.2% | 22.7% | 1250 bps | | Combined Ratio | 102.1% | 98.4% | 370 bps | [AFG Corporate (Holding Company)](index=3&type=section&id=AFG%20Corporate%20(Holding%20Company)) As of March 31, 2025, AFG Corporate had net assets of $104 million, including $54 million in cash and liquid securities and $29 million in other investments | Metric | March 31, 2025 | | :-------------------------------- | :------------- | | Net assets | $104 million | | Cash and liquid securities | $54 million | | Other investments | $29 million | [Capital & Equity](index=4&type=section&id=Capital%20%26%20Equity) [Capital Activity](index=4&type=section&id=Capital%20Activity) Ambac repurchased 264,791 shares at an average price of $11.79 per share during Q1 2025, with approximately $35.2 million remaining on the current repurchase authorization - Repurchased **264,791 shares** at an average price of **$11.79 per share** in Q1 2025[18](index=18&type=chunk) - Approximately **$35.2 million** remains on the current share repurchase authorization[18](index=18&type=chunk) [Stockholders' Equity](index=4&type=section&id=Stockholders'%20Equity) Stockholders' equity decreased slightly to $852 million ($18.36 per share) at March 31, 2025, from $857 million ($18.43 per share) at December 31, 2024, with the net loss attributable to common shareholders partially offset by net unrealized investment gains and foreign exchange translation gains | Metric | March 31, 2025 | December 31, 2024 | | :-------------------------------- | :------------- | :---------------- | | Stockholders' equity | $852 million | $857 million | | Stockholders' equity per share | $18.36 | $18.43 | - Net loss attributable to common shareholders of **$(46) million** was offset by **$19 million** in net unrealized investment gains and **$36 million** in foreign exchange translation gains[19](index=19&type=chunk) [Earnings Per Share Calculation](index=4&type=section&id=Earnings%20Per%20Share%20Calculation) The diluted EPS calculation for Q1 2025 shows a diluted net loss per share of $(1.22), a significant decline from $0.44 in Q1 2024, including adjustments for redeemable noncontrolling interests | Metric (in thousands, except share data) | Q1 2025 | Q1 2024 | | :------------------------------------------ | :------ | :------ | | Net income (loss) from continuing operations attributable to shareholders | $(16,144) | $(4,070) | | Adjustment for Redeemable NCI | $(11,183) | $53 | | Numerator of diluted EPS (Continuing Ops) | $(27,327) | $(4,017) | | Per Share — Diluted (Continuing Ops) | $(0.58) | $(0.09) | | Net income (loss) attributable to Ambac shareholders | $(46,391) | $20,070 | | Numerator of diluted EPS (Total) | $(57,574) | $20,123 | | Per Share — Diluted (Total) | $(1.22) | $0.44 | | Weighted-average diluted shares outstanding (in millions) | 47,313 | 45,827 | [Consolidated Financial Statements](index=5&type=section&id=Consolidated%20Financial%20Statements) [Consolidated Statements of Income (Loss)](index=5&type=section&id=Consolidated%20Statements%20of%20Income%20(Loss)) The consolidated income statement shows total revenues of $62.8 million for Q1 2025, up from $49.6 million in Q1 2024, with total expenses significantly increasing to $77.9 million from $52.8 million, resulting in a pretax loss from continuing operations of $(15.1) million and a net loss attributable to Ambac shareholders of $(46.4) million, compared to a net income of $20.1 million in the prior year | Metric (in thousands) | Q1 2025 | Q1 2024 | | :-------------------------------- | :------ | :------ | | Net premiums earned | $15,678 | $25,579 | | Commission income | $36,771 | $17,729 | | Total revenues and other income | $62,756 | $49,551 | | Losses and loss adjustment expenses | $10,496 | $19,355 | | General and administrative expenses | $38,531 | $17,575 | | Intangible amortization and depreciation | $9,176 | $1,614 | | Interest expense | $5,454 | — | | Total expenses | $77,863 | $52,790 | | Pretax income (loss) from continuing operations | $(15,107) | $(3,239) | | Net income (loss) from discontinued operations | $(30,247) | $24,140 | | Net income (loss) attributable to Ambac shareholders | $(46,391) | $20,070 | [Consolidated Balance Sheets](index=6&type=section&id=Consolidated%20Balance%20Sheets) As of March 31, 2025, total assets were $8.25 billion, up from $8.06 billion at December 31, 2024, with assets held-for-sale increasing to $6.39 billion, and total liabilities also increasing to $7.04 billion from $6.86 billion, with liabilities held-for-sale remaining constant at $5.89 billion, while stockholders' equity slightly decreased to $852 million | Metric (in thousands) | March 31, 2025 | December 31, 2024 | | :-------------------------------- | :------------- | :---------------- | | Total investments | $291,393 | $312,915 | | Cash and cash equivalents | $51,660 | $47,275 | | Intangible assets, less accumulated amortization | $345,061 | $344,775 | | Goodwill | $429,314 | $418,234 | | Assets held-for-sale | $6,392,004 | $6,267,200 | | Total assets | $8,253,282 | $8,058,378 | | Unearned premiums | $181,387 | $182,446 | | Loss and loss adjustment expense reserves | $373,105 | $349,062 | | Liabilities held-for-sale | $5,887,685 | $5,887,685 | | Total liabilities | $7,041,817 | $6,862,857 | | Total Ambac Financial Group, Inc. stockholders' equity | $852,221 | $856,906 | [Non-GAAP Financial Measures & Reconciliations](index=7&type=section&id=Non-GAAP%20Financial%20Measures%20%26%20Reconciliations) [Non-GAAP Definitions](index=7&type=section&id=Non-GAAP%20Definitions) This section defines key non-GAAP financial measures used by Ambac, including Organic Revenue Growth & Rate (Insurance Distribution Only), Total Specialty P&C Insurance Production, EBITDA, Adjusted EBITDA and Adjusted EBITDA Margin, and Adjusted Net Income and Adjusted Net Income Margin, presented to provide greater transparency into business performance by excluding certain non-core or non-recurring items - Non-GAAP measures like **EBITDA**, **Adjusted EBITDA**, **Adjusted Net Income**, and **Organic Revenue Growth** are used to provide greater transparency and comparability of underlying business performance[25](index=25&type=chunk)[26](index=26&type=chunk) - **Organic Revenue Growth** excludes the first twelve months of acquisition-generated commissions/fees, divestitures, contingent commissions, and foreign exchange impacts[27](index=27&type=chunk)[28](index=28&type=chunk) - **Adjusted EBITDA** excludes interest, taxes, depreciation, amortization, fair value changes of contingent consideration, share-based compensation, acquisition/integration expenses, severance, and other exceptional items[31](index=31&type=chunk) [Segment-wise Non-GAAP Reconciliations](index=8&type=section&id=Segment-wise%20Non-GAAP%20Reconciliations) This section provides detailed reconciliations of GAAP to non-GAAP financial measures for each segment (Specialty P&C Insurance, Insurance Distribution, and Corporate & Other) for Q1 2025 and Q1 2024, covering metrics like Pretax income, Net income, EBITDA, and Adjusted EBITDA [Three Months Ended March 31, 2025](index=8&type=section&id=Three%20Months%20Ended%20March%2031%2C%202025) For Q1 2025, Specialty P&C Insurance reported $1.4 million in net income and $1.6 million in Adjusted EBITDA to shareholders, while Insurance Distribution had a net loss of $(1.7) million but a strong Adjusted EBITDA to shareholders of $7.1 million, and Corporate & Other reported a significant net loss of $(14.2) million and Adjusted EBITDA to shareholders of $(10.0) million | Metric (in thousands) | Specialty P&C Insurance | Insurance Distribution | Corporate & Other | Consolidated | | :------------------------------------------ | :---------------------- | :--------------------- | :---------------- | :----------- | | Net income (loss) from Continuing Operations | $1,425 | $(1,743) | $(14,172) | $(14,490) | | Adjusted EBITDA from Continuing Operations attributable to Ambac shareholders | $1,589 | $7,112 | $(9,988) | $(1,287) | | Adjusted net income (loss) attributable to common shareholders | $1,511 | $2,549 | $(10,097) | $(6,037) | [Three Months Ended March 31, 2024](index=9&type=section&id=Three%20Months%20Ended%20March%2031%2C%202024) In Q1 2024, Specialty P&C Insurance reported $1.7 million in net income and $1.9 million in Adjusted EBITDA to shareholders, while Insurance Distribution had $3.9 million in net income and $4.2 million in Adjusted EBITDA to shareholders, and Corporate & Other reported a net loss of $(8.9) million and Adjusted EBITDA to shareholders of $(5.7) million | Metric (in thousands) | Specialty P&C Insurance | Insurance Distribution | Corporate & Other | Consolidated | | :------------------------------------------ | :---------------------- | :--------------------- | :---------------- | :----------- | | Net income (loss) from Continuing Operations | $1,715 | $3,855 | $(8,938) | $(3,369) | | Adjusted EBITDA from Continuing Operations attributable to Ambac shareholders | $1,872 | $4,202 | $(5,689) | $384 | | Adjusted net income (loss) attributable to common shareholders | $1,766 | $4,001 | $(6,096) | $(329) | [Organic Growth & Specialty P&C Production](index=10&type=section&id=Organic%20Growth%20%26%20Specialty%20P%26C%20Production) Total Insurance Distribution revenue grew 129% to $41 million, but organic revenue growth was negative (2.1)% for Q1 2025, while total Specialty P&C Insurance Production increased 70% to $317.5 million, driven by a 156% increase in Insurance Distribution Premiums Placed, despite a 10% decrease in Specialty P&C Insurance Gross Premiums Written | Metric (in thousands) | Q1 2025 | Q1 2024 | % Growth | | :------------------------------------------ | :------ | :------ | :------- | | Total Insurance Distribution revenue | $40,998 | $17,865 | 129% | | Total Organic Revenue | $16,336 | $16,683 | (2.1)% | | Metric (in thousands) | Q1 2025 | Q1 2024 | % Change | | :------------------------------------------ | :------ | :------ | :------- | | Specialty Property & Casualty Insurance Gross Premiums Written | $86,915 | $96,422 | (10)% | | Insurance Distribution Premiums Placed | $230,606 | $90,096 | 156% | | Specialty P&C Insurance Production | $317,521 | $186,518 | 70% | [Company Information & Disclosures](index=10&type=section&id=Company%20Information%20%26%20Disclosures) [About Ambac](index=10&type=section&id=About%20Ambac) Ambac Financial Group, Inc. is an insurance holding company focused on a growing specialty P&C distribution and underwriting platform, also managing a legacy financial guarantee business in run-off pending sale, with its common stock trading on the NYSE under "AMBC" - Ambac is an insurance holding company with a core business in **specialty P&C distribution and underwriting**[40](index=40&type=chunk) - Legacy financial guarantee business is in run-off and pending sale to **Oaktree Capital Management**[40](index=40&type=chunk) [Stock Transfer Restrictions](index=10&type=section&id=Stock%20Transfer%20Restrictions) Ambac's Certificate of Incorporation includes substantial restrictions on common stock transfers, prohibiting and voiding transfers that would result in any person or group holding 5% or more of Ambac's common stock, or increasing an existing 5% holder's interest, subject to limited exceptions - Ambac's common stock transfers are restricted to prevent any person or group from acquiring or increasing a **5% or more** ownership interest, with limited exceptions[41](index=41&type=chunk) [Forward-Looking Statements & Risk Factors](index=10&type=section&id=Forward-Looking%20Statements%20%26%20Risk%20Factors) The report contains forward-looking statements regarding future performance, which are subject to inherent uncertainties and risks, cautioning readers that actual results may differ materially due to various factors, including those discussed under "Risk Factors" in SEC filings, such as volatility in stock price, failure to consummate the Legacy business sale, inadequacy of loss reserves, credit risk, substantial indebtedness, and greater than expected underwriting losses - Forward-looking statements are not guarantees of future performance and are subject to inherent **uncertainties and risks**[42](index=42&type=chunk) - Important factors that could cause actual results to differ materially include **failure to consummate the Legacy business sale**, **disruptions from the sale**, **uncertainty in achieving value from specialty P&C and insurance distribution**, **inadequacy of loss reserves**, **credit risk**, **substantial indebtedness**, and **greater than expected underwriting losses**[43](index=43&type=chunk)