Ambac(AMBC) - 2024 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - For Q3 2024, the company reported a net loss of $28 million or$0.63 per diluted share, compared to a net income of $66 million or$1.41 per diluted share in Q3 2023 [22] - Adjusted net loss was $19 million or$0.46 per diluted share for the quarter, down from adjusted net income of $94 million or$2 per diluted share in the same quarter last year [23] - Total premium production for the third quarter reached $260 million, an 86$611 million, a 68% increase [17][18] Business Line Data and Key Metrics Changes - The acquisition of Beat Capital contributed $64 million in premiums placed during Q3 2024 [18] - Dorada Premiums grew by 133$145 million, and total revenue increased by 64% to $24 million compared to Q3 2023 [26] - Everspan's net premiums written in the quarter were$33 million, up 32% year-over-year, with a retention rate of approximately 28% of gross written premiums [31] Market Data and Key Metrics Changes - The overall commercial insurance market conditions remain favorable, particularly in US Casualty lines, with rate increases keeping pace with loss cost trends [13] - Property market pricing has softened but is expected to stabilize due to the effects of Hurricanes Milton and Helene [14] Company Strategy and Development Direction - The company is focused on becoming a pure play P&C business, with organic growth as a key strategic focus alongside acquisitions [7][9] - The company plans to launch a 50 million share buyback program immediately [8][43] - The anticipated sale of the Legacy Financial Guarantee business is expected to close in Q4 2024, completing the transformation into a specialty P&C franchise [15][16] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the future, highlighting strong shareholder support for strategic changes and the favorable market conditions for their business [15][43] - The company aims to achieve an EBITDA goal of 70 million to $80 million by 2028, driven primarily by organic growth [45][60] Other Important Information - The company incurred approximately$17 million in legal and advisory expenses related to the acquisition of Beat and the pending sale of AEC [23] - The Legacy Financial Guarantee segment reported a net loss of 13 million, primarily due to lower discount rates [38] Q&A Session Summary Question: Everspan's combined ratio target - Management indicated a short-term goal to keep the combined ratio below 100, with a long-term target closer to 90, translating to mid-teen ROEs [47] Question: Guidance on gross written premiums and program fees - Management confirmed they are tracking well to previous guidance, with some moderation expected in Q4 due to seasonality [56] Question: Buyback program decision - The board decided to accelerate the buyback program due to the dislocation between the perceived value of the platform and the current stock price [59] Question: Long-term EBITDA target - Management stated the 70 million to $80 million target is not a stretch goal, with organic growth being the primary driver [60] Question: Partnerships with Mike Miller and Beat Capital - Management highlighted the strength of their model and the alignment of interests as key factors in attracting top talent and partnerships [66][68]