Ambac(AMBC) - 2025 Q2 - Quarterly Results

Second Quarter 2025 Financial Highlights Ambac's Q2 2025 results show strong P&C premium growth driven by acquisitions, alongside increased net loss from continuing operations Management Commentary and Key Metrics Management highlighted 110% P&C premium growth to over $340 million, driven by the Beat acquisition, while progressing the Legacy Financial Guarantee business sale - P&C premium production increased 110% to over $340 million, and revenue grew 21% to $54 million compared to Q2 2024, driven by the Beat acquisition[3] - Organic growth contracted by 2%, impacted by the Employer Stop Loss business, but including the Beat acquisition, organic growth would have been 12%[3] - The Wisconsin Office of the Commissioner of Insurance (OCI) has recommended approval for the sale of the Legacy Financial Guarantee business (AAC), with a hearing scheduled for September 3, 2025[3][4] Q2 2025 Segment Highlights | Segment | Metric | Value ($ millions) | Change (YoY) | | :--- | :--- | :--- | :--- | | Insurance Distribution (Cirrata) | Total Revenue | $33 | +148% | | | Adjusted EBITDA | $5 | +91% | | Specialty P&C Insurance (Everspan) | Combined Ratio | 107% | -270 bps | | | Loss Ratio | 67.8% | -17 percentage points | Consolidated Financial Performance Q2 2025 total revenue from continuing operations rose 8% to $55 million due to acquisitions, but expenses increased 18%, leading to a wider net loss of $(21) million Q2 2025 Consolidated Financial Results (Continuing Operations) | Metric | Q2 2025 ($ millions) | Q2 2024 ($ millions) | % Change | | :--- | :--- | :--- | :--- | | Total Revenues | $55.0 | $51.0 | 8% | | Total Expenses | $77.9 | $65.8 | 18% | | Net Loss from Continuing Operations | $(20.8) | $(14.7) | (41)% | | Net Loss from Continuing Operations to Shareholders | $(20.5) | $(14.9) | 38% | | Adjusted EBITDA to Shareholders | $(4.6) | $(0.6) | NM | - The increase in revenue was primarily driven by the inclusion of Beat Capital, which offset a managed reduction in earned premium at Everspan and lower corporate investment gains[6] - The rise in expenses was mainly due to increased G&A, intangible amortization, and interest expense related to the Beat acquisition[7] Segment Performance This section details the Q2 2025 financial performance of Ambac's Insurance Distribution, Specialty P&C, and Corporate segments Insurance Distribution Segment (Cirrata) Cirrata's Q2 2025 revenue surged 148% to $33.0 million due to acquisitions, despite a (2.6)% organic growth contraction Insurance Distribution Segment Q2 2025 Performance | Metric | Q2 2025 ($ millions) | Q2 2024 ($ millions) | % Change | | :--- | :--- | :--- | :--- | | Total Revenues | $33.0 | $13.3 | 148% | | Pretax Loss to Shareholders | $(9.9) | $1.0 | (1050)% | | Adjusted EBITDA to Shareholders | $2.5 | $2.0 | 28% | | Organic Growth | (2.6)% | 45.2% | N/A | - The significant increase in revenue and pretax loss is primarily attributable to the inclusion of recent acquisitions, notably Beat Capital[6][7] Specialty Property & Casualty Insurance Segment (Everspan) Everspan's Q2 2025 net premiums earned decreased 40% to $16.2 million due to strategic exits, but underwriting performance improved with a 106.7% combined ratio Specialty P&C Insurance Segment Q2 2025 Performance | Metric | Q2 2025 ($ millions) | Q2 2024 ($ millions) | Change | | :--- | :--- | :--- | :--- | | Gross Premium Written | $96.2 | $111.2 | (13)% | | Net Premiums Earned | $16.2 | $27.1 | (40)% | | Net Income (Loss) | $0.4 | $(1.1) | 140% | | Loss Ratio | 67.8% | 85.1% | -1730 bps | | Combined Ratio | 106.7% | 109.4% | -270 bps | - The reduction in premiums and revenue is a result of a managed exit from several retained programs initiated in the previous year[6][7] AFG Corporate As of June 30, 2025, Ambac Financial Group's standalone holding company held $85 million in net assets, including $45 million in cash and liquid securities - AFG standalone net assets were $85 million as of June 30, 2025[16] - The holding company's assets included $45 million in cash and liquid securities and $30 million in other investments[16] Consolidated Financial Statements This section presents Ambac's Q2 2025 consolidated statements, including stockholders' equity, income, and balance sheet, reflecting the impact of acquisitions and discontinued operations Stockholders' Equity and Earnings Per Share Stockholders' equity per share slightly increased to $18.53, while diluted net loss per share widened to $(1.54) due to discontinued operations - Stockholders' equity attributable to common shareholders was $860 million, or $18.53 per share, at June 30, 2025[17] Q2 2025 Earnings Per Share (Diluted) | Metric | Q2 2025 ($) | Q2 2024 ($) | | :--- | :--- | :--- | | Net Loss from Continuing Operations per Share | $(0.45) | $(0.33) | | Net Loss per Share (Total) | $(1.54) | $(0.02) | Consolidated Statements of Income (Loss) Q2 2025 total revenues increased to $55.0 million, but rising expenses led to a net loss from continuing operations of $(20.8) million and a total net loss of $(72.7) million Q2 2025 vs Q2 2024 Income Statement Highlights (in thousands) | Line Item | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Revenues: | | | | Commissions | $30,322 | $13,221 | | Net premiums earned | $16,203 | $27,054 | | Total revenues | $54,957 | $51,037 | | Expenses: | | | | General and administrative | $40,540 | $27,861 | | Intangible amortization | $9,741 | $1,614 | | Interest | $5,570 | $0 | | Total expenses | $77,931 | $65,786 | | Net loss from continuing operations | $(20,802) | $(14,719) | | Net loss from discontinued operations | $(52,151) | $14,182 | | Net loss attributable to shareholders | $(72,699) | $(750) | Consolidated Balance Sheets As of June 30, 2025, total assets were $8.52 billion and total liabilities $7.30 billion, with significant portions classified as held-for-sale, and total stockholders' equity at $1.03 billion Balance Sheet Summary (in thousands) | Metric | June 30, 2025 | March 31, 2025 | | :--- | :--- | :--- | | Total Assets | $8,522,386 | $8,253,282 | | Assets held-for-sale | $6,592,417 | $6,392,004 | | Total Liabilities | $7,303,678 | $7,041,817 | | Liabilities held-for-sale | $6,213,024 | $6,003,908 | | Total Stockholders' Equity | $1,028,361 | $1,026,048 | Non-GAAP Financial Measures and Reconciliations This section defines and reconciles Ambac's non-GAAP financial measures, including Adjusted EBITDA and Organic Revenue Growth, to provide clearer insights into business performance Definition of Non-GAAP Measures Ambac uses non-GAAP measures like Adjusted EBITDA and Organic Revenue Growth to offer transparent insights into core operating performance by excluding non-recurring items - The company reports non-GAAP measures like EBITDA, Adjusted EBITDA, and Adjusted Net Income to enhance visibility into the underlying drivers of its businesses[23][24] - Adjusted EBITDA is defined as net income from continuing operations adjusted for interest, taxes, depreciation, amortization, share-based compensation, acquisition expenses, and other non-recurring items[29] - Organic Revenue Growth for the Insurance Distribution segment excludes the initial twelve months of revenue from acquisitions and revenue from divestitures to show underlying growth[25] Reconciliation of Non-GAAP Measures by Segment This section provides detailed reconciliations of GAAP net income to non-GAAP EBITDA and Adjusted EBITDA for each segment, with consolidated Adjusted EBITDA to shareholders at $(4.6) million for Q2 2025 Q2 2025 Adjusted EBITDA Reconciliation Summary (in thousands) | Segment | Net Income (Loss) | Adjusted EBITDA | Adjusted EBITDA to Shareholders | | :--- | :--- | :--- | :--- | | Specialty P&C Insurance | $428 | $681 | $681 | | Insurance Distribution | $(7,992) | $4,580 | $2,519 | | Corporate & Other | $(13,240) | $(7,771) | $(7,771) | | Consolidated | $(20,802) | $(2,508) | $(4,569) | Organic Growth and P&C Production While Insurance Distribution organic revenue contracted by 2.6%, total Specialty P&C Insurance Production surged 110% to $346.2 million, driven by distribution premiums Insurance Distribution Organic Growth (Q2) | Metric | 2025 ($ millions) | 2024 ($ millions) | % Growth | | :--- | :--- | :--- | :--- | | Total Organic Revenue | $11.9 | $12.2 | (2.6)% | Total Specialty P&C Insurance Production (Q2, in thousands) | Metric | 2025 | 2024 | % Change | | :--- | :--- | :--- | :--- | | Specialty P&C Gross Premiums Written | $96,247 | $111,206 | (13)% | | Insurance Distribution Premiums Placed | $249,912 | $53,418 | 368% | | Total Production | $346,159 | $164,624 | 110% | Other Information This section provides background on Ambac's business, focusing on its specialty P&C platform and the ongoing sale of its legacy financial guarantee business, along with forward-looking statement disclaimers About Ambac Ambac Financial Group is a New York City-based insurance holding company focused on its specialty P&C platform, currently divesting its legacy financial guarantee business - Ambac's core business is a specialty P&C distribution and underwriting platform[41] - The company has a legacy financial guarantee business in run-off that it has agreed to sell to funds managed by Oaktree Capital Management[41] Forward-Looking Statements This report contains forward-looking statements subject to inherent uncertainties and risks, including the potential failure to complete the AAC sale and various underwriting risks - The report includes forward-looking statements that are not guarantees of future performance and are subject to risks and uncertainties[43] - Key risk factors include the potential failure to complete the sale of the legacy business (AAC), inadequacy of loss reserves, credit risk, and greater than expected underwriting losses[44]