Ambac Financial Group, Inc. (NYSE: AMBC) ("Ambac" or "AFG"), a financial services holding company, today reported its results for the second quarter ended June 30, 2023.
- Net loss of $(13) million or $(0.29) per diluted share and Adjusted net income of $3 million or $0.07 per diluted share
- Specialty P&C Insurance ("Everspan") gross written premium of $53 million, up 30% from the second quarter of 2022
- Insurance Distribution ("Cirrata") premiums placed of $41 million, up 71% from the second quarter of 2022
- Legacy Financial Guarantee Net Par Outstanding ("NPO") reduced 9.3%; Watch List and Adversely Classified Credits ("WLACC") reduced 19.6%
- Book Value per share of $27.59 was relatively unchanged from March 31, 2023, and Adjusted Book Value per share of $26.97 was down 3% on account of a significant reinsurance de-risking transaction
Claude LeBlanc, President and Chief Executive Officer, stated, “This quarter we continued to make great strides in our P&C business growth strategy. Everspan and Cirrata's combined premium production grew by 45% over last year to $94 million in the quarter and premium production has now exceeded $370 million over the last four quarters. Our growth is supported by the overall pricing increase in U.S. casualty insurance which is keeping up with loss cost trends in the lines we are writing and is supportive of strong growth in the program sector."
LeBlanc continued, "During the quarter, we also made significant progress towards de-risking the Legacy Financial Guarantee business through a reinsurance transaction that reduced net par by over 9% and WLACC by nearly 20%. We also met with AAC's insurance regulator to help support the development of a revised operating and capital framework for Ambac Assurance, a process which has materially advanced and is expected to be completed in the near term. In parallel, we continue to progress our review of strategic options for the legacy business and have initiated discussions with key stakeholders in order to begin our preliminary evaluation."
Ambac's Second Quarter 2023 Summary Results | |||||||||||
B (W) Percent | |||||||||||
($ in millions, except per share data)1 | 2Q2023 | 2Q2022 | |||||||||
Gross written premium | $ | 54.7 | $ | 36.6 | 49 | % | |||||
Net premiums earned | 15.3 | 13.8 | 11 | % | |||||||
Commission income | 10.0 | 6.2 | 61 | % | |||||||
Program fees | 2.1 | 0.5 | 301 | % | |||||||
Net investment income (loss) | 35.2 | (21.4 | ) | 264 | % | ||||||
Pretax income (loss) | (11.1 | ) | 6.3 | NA | |||||||
Net income (loss) attributable to common stockholders | (13.1 | ) | 5.2 | NA | |||||||
Net income (loss) attributable to common stockholders per diluted share2,3 | $ | (0.29 | ) | $ | 0.11 | NA | |||||
EBITDA2,4 | 11.8 | 65.3 | (82 | )% | |||||||
Adjusted net income (loss) 2 | 3.4 | (38.0 | ) | NA | |||||||
Adjusted net income (loss) per diluted share 2, 3 | $ | 0.07 | $ | (0.84 | ) | NA | |||||
Weighted-average diluted shares outstanding (in millions) | 45.8 | 45.7 | — | % | |||||||
June 30, 2023 | March 31, 2023 | B(W) | |||||||||||
Amount | Percent | ||||||||||||
Total Ambac Financial Group, Inc. stockholders' equity | $ | 1,249.9 | $ | 1,253.6 | $ | (3.6 | ) | — | % | ||||
Total Ambac Financial Group, Inc. stockholders' equity per share | $ | 27.59 | $ | 27.66 | $ | (0.07 | ) | — | % | ||||
Adjusted book value1,2 | $ | 1,222.0 | $ | 1,264.2 | $ | (42.2 | ) | (3 | )% | ||||
Adjusted book value per share 1,2 | $ | 26.97 | $ | 27.89 | $ | (0.92 | ) | (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 $0.2 for the three months ended June 30, 2023 and 2022, respectively. |
Results of Operations by Segment | |||||||||||
Specialty Property & Casualty Insurance Segment | |||||||||||
Three Months Ended June 30, | |||||||||||
($ in millions) | 2023 | 2022 | % Change | ||||||||
Gross premiums written | $ | 53.2 | $ | 40.9 | 30 | % | |||||
Net premiums written | $ | 9.1 | $ | 8.1 | 13 | % | |||||
Net premiums earned | $ | 7.8 | $ | 2.8 | 173 | % | |||||
Program fees earned | $ | 2.1 | $ | 0.6 | 250 | % | |||||
Losses and loss expense | $ | 5.7 | $ | 1.9 | 203 | % | |||||
Pretax income (loss) | $ | (0.1 | ) | $ | (1.5 | ) | 92 | % | |||
EBITDA | $ | (0.1 | ) | $ | (1.5 | ) | 92 | % | |||
- MGA programs partners increased to 16 from 15 in the first quarter of 2023 and 11 in second quarter of 2022.
- Gross premium written of $53.2 million in the second quarter of 2023 increased 30% compared to the prior year period as the size and number of program partners continues to expand.
- Net premiums earned of $7.8 million in the second quarter of 2023 was up 173% over the second quarter of 2022 reflecting the net premium written growth at Everspan over the last year.
- The losses and loss expense ratio for the second quarter of 2023 was 73.7% compared to 66.5% for the second quarter of 2022. This increase stemmed from both an increase to Everspan's selected loss ratio for the second quarter to approximately 69% (including ULAE) and a catch up for prior periods to the revised selected loss ratio. The increase in the loss ratio for the quarter was almost entirely offset by a change to sliding scale commissions recognized as a benefit through acquisition costs.
- Expense ratio of 51.8% for the second quarter of 2023 was down from 95.2% in the prior year period. Expenses continue to normalize as net premium earned grows as the business scales.
Insurance Distribution Segment | |||||||||||
Three Months Ended June 30, | |||||||||||
($ in millions) | 2023 | 2022 | % Change | ||||||||
Premiums placed | $ | 40.9 | $ | 23.9 | 72 | % | |||||
Gross commissions | $ | 10.0 | $ | 6.2 | 61 | % | |||||
Net commissions | $ | 4.0 | $ | 2.4 | 70 | % | |||||
General and administrative expenses | $ | 2.4 | $ | 1.6 | 53 | % | |||||
Pretax income | $ | 0.7 | $ | 0.3 | 116 | % | |||||
EBITDA1 | $ | 1.6 | $ | 1.0 | 64 | % | |||||
Pretax income margin2 | 6.6 | % | 4.9 | % | 1.70 bps | ||||||
EBITDA margin 3 | 16.3 | % | 15.5 | % | 0.80 bps | ||||||
- Premium placed of $40.9 million grew 72% over the second quarter of 2022 driven by the inclusion of All Trans and Capacity Marine (which were acquired effective November 1, 2022) and growth at Xchange.
- Gross commission income, which is generated as a percentage of premium placed, grew 61% in the second quarter 2023 to $10.0 million from $6.2 million in the second quarter of 2022.
- Net commission income, which is gross commission income less sub-producer commissions paid, grew 70% over last year to $4.0 million; largely in-line with the change in premiums placed.
- General and administrative expenses of $2.4 million in the second quarter of 2023 compared to $1.6 million in the prior year period. The change between the periods is largely due to the acquisitions of All Trans and Capacity Marine and other new product related investments.
- EBITDA of $1.6 million for the quarter was up 64% over second quarter of 2022; EBITDA Margin of 16.3% for the quarter compared to 15.5% last year. The increase in EBITDA compared to the same period last year is primarily attributable to the acquisition of All Trans and Capacity Marine in the fourth quarter of 2022. The increase in EBITDA margin compared to the second quarter of 2022 related to change in business mix.
(1) | EBITDA is prior to the impact of noncontrolling interests, relating to subsidiaries where Ambac does not own 100%, of $0.3 and $0.2 for the three months ended June 30, 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 |
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 $94 million in the second quarter of 2023, an increase of 45% from the second quarter of 2022.
Specialty P&C Insurance revenues are dependent on gross premiums written as specialty program insurance companies earn premiums based on the portion of gross premiums written retained (i.e. net premiums written) and fees on gross premiums written that are ceded to reinsurers. Insurance Distribution revenues are dependent on premium volume as Managing General Agents/Underwriters and brokers receive commissions based on the amount of premiums placed (i.e. gross premiums written on behalf of insurance carriers) with insurance carriers.
Three Months Ended June 30, | |||||||||
($ in millions) | 2023 | 2022 | Change | ||||||
Specialty Property & Casualty Insurance Gross Premiums Written | $ | 53.2 | $ | 40.9 | 30 | % | |||
Insurance Distribution Premiums Placed | 40.9 | 23.9 | 72 | % | |||||
Specialty P&C Insurance Production | $ | 94.1 | $ | 64.8 | 45 | % | |||
Legacy Financial Guarantee Insurance Segment
Three Months Ended June 30, | |||||||||||
($ in millions) | 2023 | 2022 | % Change | ||||||||
Normal Net Premiums Earned | $ | 7.5 | $ | 8.6 | (13 | )% | |||||
Accelerated Net Premiums Earned | $ | — | $ | 2.3 | (100 | )% | |||||
Net premiums earned | $ | 7.5 | $ | 11.0 | (31 | )% | |||||
Net investment income | $ | 32.2 | $ | (22.3 | ) | 244 | % | ||||
Losses and loss adjustment expenses | $ | 1.6 | $ | (13.9 | ) | (112 | )% | ||||
General and administrative expenses | $ | 23.5 | $ | 23.4 | — | % | |||||
Pretax income (loss) | $ | (7.7 | |||||||||
