Q4 2023 Ambac Financial Group Inc Earnings Call
Greetings and welcome to the Ambac Financial Group, Inc. Fourth quarter 2023 earnings call. At this time all participants are in a listen only mode. A brief question and answer session will follow the formal presentation.
Operator: Greetings and welcome to the Ambac Financial Group 4th Quarter 2023 Earnings Call. At this time, all participants are in a listen-only mode. This brief question and answer session will follow the formal If anyone should require operator assistance during the conference call, please call 1-866-433-4232, press star zero on your telephone. As a reminder, this conference is being recorded. It is now my pleasure to turn the call over to Charles Sebaski, Head of Investment. Thank you.
If anyone should require operator assistance during the conference. Please press star zero on your telephone keypad as a reminder, this conference is being recorded.
It is now my pleasure to turn the call over to Charles the basket head of Investor Relations.
Thank you.
Charles Joseph Sebaski: Good morning, and welcome to Ambac's fourth quarter 2023 call to discuss financial results. Speaking today will be Cleb LeBlanc, President and CEO, and David Trick, Chief Financial Officer. They will discuss the financial results of our business and the current market environment, and after prepared remarks, we'll take your questions. For those of you following along on the webcast, during the prepared remarks, we'll be highlighting some slides from the investor presentation, which can be found on our website. Our call today includes forward-looking statements. The company cautions investors that any forward-looking statement involves risks and uncertainties and is not a guarantee of future performance. Actual results may differ materially from those expressed or implied in the forward-looking statements due to a variety of factors. These factors are described in the forward-looking statements in our earnings press release and our most recent 10-Q and 10-K filing with the SEC. We do not undertake any obligation to update forward-looking statements.
Good morning, and welcome to Amdocs fourth quarter 2023 call to discuss financial results.
Today, we'll be double block, president and CEO, and David trick Chief Financial Officer.
They will discuss the financial results of our business and the current market environment and after prepared remarks, we'll take your questions for those of you following along on the webcast during the prepared remarks, well be highlighting some slides from the investor presentation, which can be located on our website.
Our call today includes forward looking statements the company cautions investors that any forward looking statement involves risks and uncertainties and is not a guarantee of future performance.
Actual results may differ materially from those expressed or implied in the forward looking statements due to a variety of factors.
These factors are described under the forward looking statements in our earnings press release, and our most recent 10-Q and 10-K filed with the SEC we.
We do not undertake any obligation to update forward looking statements.
Charles Joseph Sebaski: Also, in our prepared remarks or responses to questions, we may mention some non-GAAP financial measures. Reconciliation to those non-GAAP measures is included in our recent earnings press release, operating supplement, and other materials available in the investor relations section of our website, ambac.com. I would now like to turn the call over to Mr. Claude LeBlanc.
Also in our prepared remarks or responses to questions. We may mention some non-GAAP financial measures.
Reconciliation to those non-GAAP measures are included in our recent earnings press release operating supplement and other materials available in the Investor Relations section of our website <unk> Dot com.
I would now like to turn the call over to Mr. Claude Leblanc.
Thank you Chuck and welcome to everyone joining today's call.
Claude LeBlanc: Thank you, Chuck, and welcome to everyone joining today's call. On a consolidated basis for the full year 2023, we generated net income of $4 million and adjusted net income of $93 million. The web value per share stands at $30.13, up 8% from the start of the year. David will discuss our fourth quarter financial results shortly. Turning to our strategic priorities for 2023, our focus during the year was two-fold: one, scaling our specialty PNC insurance platform, and two, progressing additional value-enhancing initiatives for our legacy financial guarantee business. With regard to our Specialty P&C Insurance platform, I am pleased to report that we exceeded our strategic objectives for 2023, including generating over a half a billion dollars of premium for the year, a 79% increase over 2022. Our results were driven by our Specialty P&C Insurance franchises, Everspan, and Serata. Each platform produced positive net income for the quarter and year, in line with our projections. And while it's early days, both are on target to deliver strong results in 2024.
On a consolidated basis for the full year 2023, we generated net income of $4 million and adjusted net income of 93 million.
Book value per share stands at $30.13 up 8% from the start of the year.
David will discuss our fourth quarter financial results shortly.
Turning to our strategic priorities for 2023.
Our focus during the year was twofold, one scaling our specialty P&C insurance platform.
Two the blessing additional value enhancing initiatives or legacy financial Guaranty business.
What's your go extra, especially P&C insurance platform I am pleased to report that we exceeded our strategic objectives for 2023, including generating over a half a billion dollars of premium for the year is 79% increase over 2020 to.
Our results were driven by our specialty P&C insurance franchises ever span and swap.
Each platform produced positive net income for the quarter and year in line with our projections.
While it's early days both are on target to deliver strong results in 2024.
As we look ahead to the future we are well positioned to leverage the strong growth generated in 2023, and we believe that our specialty insurance platform is poised to deliver significant incremental value for ambac shareholders.
Claude LeBlanc: As we look ahead to the future, we are well-positioned to leverage the strong growth generated in 2023, and we believe that our specialty insurance platform is poised to deliver significant incremental value for Ambac shareholders. Our vision is to create the premier destination for MGAs and program operators, and I believe we have built a strong foundation to deliver on that goal. The MGA program market remains attractive to us for a number of reasons. Firstly, the MGA market has nearly doubled in size over the last 5 years, meaningfully outgrowing the PNC market at large. Forecasts predict the specialty market to nearly double in size again to $160 billion by 2030.
Our vision is to create the premier destination MGH and program operators.
And I believe we have built a strong foundation to deliver on that goal.
Hey, Andrea program market remains attractive to us for a number of reasons firstly yeah.
The market has nearly doubled in size over the last five years meaningfully outgrowing the P&C market at large.
Forecasts predict especially market to nearly double in size again to 160 billion by 2030.
Claude LeBlanc: Secondly, MGAs are more aligned with the E&S market, which has been generating superior underwriting results compared to the standard P&C market. The E&S market's loss ratio has diverged from the standard market in each year since 2020. And, most importantly, these strong results point to what we view as a secular shift towards specialization within the insurance industry as the risk landscape becomes more complex. Our PNC franchise is well equipped to effectively underwrite and support specialized risk. Ambac's differentiated offering addresses distribution and risk assumption needs in the following ways. We provide capital, whether it is risk capital in the form of a rate of balance sheet at Everspan or growth capital as a portfolio company under Serrata. We provide our MGAs and program partners with leading risk and oversight controls. We facilitate reinsurance for our MGAs and program partners. We support our partners with a broad technology-focused shared service offering, and we provide our partners with business agility solutions to rapidly react to changing business or market conditions.
Secondly, M g's or more aligned with the E&S market, which has been generating superior underwriting results compared to the standard P&C market.
The E&S markets loss ratio has diverged from the standard market and each year since 2020 and in 2022, E&S posted a 91% combined ratio, which was 12% lower than the standard market.
Lastly, and most importantly, these strong results point towards what we view as a secular shift towards specialization within the insurance industry as a risk landscape becomes more complex.
Our P&C franchise is well equipped to effectively underwrite and support specialized risks.
<unk> differentiated offering addresses distribution and risk assumption needs and the falling waste.
We provide capital whether it is risk capital in the form of a rated balance sheet I'd ever span or growth capital, that's a portfolio company under cirrhotic.
We provide a M. Jason program partners with leading risk and oversight controls.
Sellotape reinsurance or M T H scanned program partners.
We support our partners with the broad technology focus shared service offering.
And we provide our partners with business agility solutions rapidly react to changing business for market conditions.
As we laid out last quarter, we now forecast our P&C business ever spanned out cerrado did generate on a combined basis over 700 billion of premium production in 2020 for setting aside any future acquisitions.
Claude LeBlanc: As we laid out last quarter, we now forecast our PNC business, Everspan, and Serrata, to generate on a combined basis over $700 million of premium production in 2024, setting aside any future acquisitions. That implies growth of over 40% from 2023 while maintaining very attractive margins. Turning now to Everspan's results for 2023, Everspan had a very strong year, generating gross premium written of $273 million, which is up 87% over 2022. The business continues to diversify its program partners, which currently stand at 23, up from 14 programs a year ago, and includes, among other classes, commercial auto, access liabilities, workers comp, and general liability programs. Overall, Everspan's book is more balanced across risk classes, which should have the long-term benefit of more stable and predictable underwriting results.
That implies growth of over 40% from 2023, while maintaining a very attractive margins.
Turning now to ever spans results for 2023.
Ever spend had a very strong year generating gross premium written of 273 million, which was up 87% over 2022.
The business continues to diversify its program partners, which currently stand at 23 up from 14 programs a year ago and includes among other classes commercial auto excess liabilities workers' comp and general liability programs.
Overall ever spans book is more balanced across risk classes, which should have the long term benefit of more stable and predictable underwriting ourselves.
Following its launch in 2021 ever span has now achieved the necessary scale to start generating underwriting profits.
Claude LeBlanc: Following its launch in 2021, Everspant has now achieved the necessary scale to start generating underwriting profits, reporting a 100% combined ratio for the fourth quarter, the fifth consecutive quarterly improvement. We are now on a pathway to generating mid-team ROEs at scale over the cycle. Dorada had similarly strong performance in 2023, generating $231 million of premium, up 70% over the prior period, while producing over $11 million of EBITDA, supported by the ongoing benefit of organic growth initiatives and the financial performance of last year's acquisition. After onboarding three partners over the last 15 months, we now operate four programs at Serata across various classes of business, including specialty commercial auto, professional liability, inland marine, importer stop loss, and affinity
Courting a 100% combined ratio for the fourth quarter, the fifth consecutive quarterly improvement.
We are now on a pathway to generating mid teen roe's that scale over the cycle.
<unk> had some really strong performance in 2023.
Generating 231 million of premium up 70% over the prior period, well producing over $11 million of EBITDA supported by the ongoing benefit of organic growth initiatives and the financial performance of last year's acquisitions.
After Onboarding three partners over the last 15 months, we now operate four programs at strata across various classes of business, including specialty commercial auto professional liability inland marine employer stop loss and affinity programs, we continue to see significant opportunities for <unk>.
Claude LeBlanc: We continue to see significant opportunities for growth at Serata, whether through product expansion across our current businesses or through additional M&A transactions. We have exceeded our 2023 targets of $200 million of place premium, $45 million of gross revenue, with in excess of 20% EBITDA margins. We now have our sights set on our 2024 business plan, forecasting over $300 million of premium and $60 million of gross revenue while maintaining our plus 20% EBITDA margin. These figures exclude potential M&A opportunities, which could materially and favorably impact our results.
Growth at strata, whether via product expansion across our current businesses through additional M&A transactions.
Having exceeded our 2023 targets up $200 million of placed Permian 45 million of gross revenue.
In excess of 20% EBITDA margins.
Now have our sights set on our 2024 business plan forecasting over 300 million of premium at $60 million of gross revenue, while maintaining our plus 20% EBITDA margins.
These figures exclude potential M&A opportunities, which could materially and favorably impact our results.
Claude LeBlanc: Regarding the Legacy Financial Guarantee business, late last week, the OCI finalized AEC's new stipulation and order, which includes the OCI capital model, which provides us with a new regulatory framework and clarity on the capital requirements at AEC. In addition, the assessment of strategic options for this business, which we announced last quarter, is progressing as planned. We look forward to updating the market once there is something definitive to report.
Regarding the legacy financial Guaranty business late last week, the OCI finalize a CS new stipulation and order, which includes the OCI capital model, which provides us with a new regulatory framework and clarity on the capital requirements at AC.
In addition, the assessment of strategic options for this business, which we announced last quarter is progressing as planned we look forward to updating the market once there's something definitive to report.
And advancing the preparation for our strategic review in 2023, we continue to improve the quality of the insured portfolio through various derisking initiatives.
David: In advancing the preparation for our strategic review in 2023, we continue to improve the quality of the insured portfolio through various de-risking initiatives, which for the full year saw net par outstanding reduced by 14% and adversely classified credits reduced by 26%. I will now turn the call over to David to discuss our financial results for the quarter.
For the full year saw net par outstanding reduced by 14% and adversely classified credits reduced by 26%.
I'll turn the call over to David to discuss our financial results for the quarter David.
Thank you Claude and good morning, everyone, but the first quarter of 2023.
David: Thank you, Claude. Good morning, everyone. For the first quarter of 2023, Ambac reported a net loss of $16 million, or $0.24 per diluted share, compared to net income of $175 million, or $3.86 per diluted share in the fourth quarter of 2022. Adjusted net income was $10 million, or $0.32 per diluted share, compared to adjusted net income of $183 million, or $4.03 per diluted share in the fourth quarter of 2022. The change in net income and adjusted net income was mainly driven by $193 million of gains related to the Bank of America and Nomura Farm BS litigation settlement recognized in the fourth quarter of 2022. EverSpan's net premiums written in the quarter of $37 million were up 269% over the prior year period.
Ambac reported a net loss of 16 million or 24 cents per diluted share.
Compared to net income of 175 million.
$3.86 per diluted share in the fourth quarter of 2022.
Adjusted net income was 10 million or 32 cents per diluted share.
<unk> to adjusted net income of 183 million or $4.03 per diluted share in the fourth quarter of 2022.
The change in net income and adjusted net income was mainly driven by a $193 million of gains related to the bank of America and Nomura O M. P. S litigation settlement recognized in the fourth quarter of 2022 92.
Alright spans net premiums written in the quarter, a 37 million were up 269% over the prior year period.
David: Growth in existing programs and the addition of new programs, including assumed reinsurance programs, accounted for the significant advance. Everspan's retention rate was approximately 40% of gross premium compared to 19% last year. The increased retention level stems mostly from workers' compensation in non-standard auto programs written in the third and fourth quarters, respectively, has assumed reinsurance.
Growth in existing programs and the addition of new programs, including assumed reinsurance programs kind of for the significant advance.
However spans retention rate was approximately 40% of gross pan compared to 19% last year.
The increase retention level stemmed, mostly from workers' compensation and nonstandard auto programs written in the third and fourth quarters, respectively as assumed reinsurance.
Earned premiums and program fees are 25 million and 2.5 milligram.
David: Earned premiums and program fees were $25 million and $2.5 million, up 341% and 77%, respectively, from the fourth quarter of 2022. The loss ratio of 67.4% in the fourth quarter of 2023 was up from 65.1% last year. The increase was primarily driven by higher commercial auto liability claim frequency in 2023.
341% and 77% respectively from the fourth quarter of 2022.
The loss ratio of 67, 4% in the fourth quarter of 2023 is up from 65, 1% last year.
The increase was primarily driven by higher commercial auto liability claim frequency in 2023.
For the full year 2023, the loss ratio was 77% compared to 65, 4% for 2022.
David: For the full year 2023, the loss ratio was 70.7% compared to 65.4% for 2022. The increase for 2023 is entirely related to the 2023 losses, particularly commercial auto liability frequency, as previously noted, as well as the addition of the assumed non-standard order program. Several of our programs benefit from a sliding-scale commission structure, which helps moderate loss activity within certain ranges.
The increase for 2023 and totally related to the 2023 losses, particularly commercial auto liability frequency as previously noted.
As well as the addition of the assumed nonstandard auto program.
So several of our programs benefit from a sliding scale commission structure, which helps moderate loss activity within certain ranges.
Fourth quarter and full year of 2023 sliding scale benefit recorded through acquisition cost was one 2% and three 2% respectively.
Our loss ratios.
Putting scale benefit was 66, 2% and 67, 5% respectively.
David: In the fourth quarter of the full year of 2023, the sliding scale benefit recorded through acquisition costs was 1.2% and 3.2%, respectively. Our loss ratios, net of the sliding scale benefit, were 66.2% and 67.5%, respectively. The expense ratio was 32.9% in the fourth quarter of 2023, down from 59.2% in the prior year quarter. It was driven lower mostly due to the scaling of the business. Combined ratio for fourth quarter 2023 to full year 2023 was 100.3% and 106.5%, respectively, an improvement of 24 and 50 percentage points from their respective prior periods. For the quarter, Everspan generated just over a $1 million pre-tax profit compared to a loss of less than $1 million for the fourth quarter of 2022. Everspan was profitable for the full year 2023. Everspan continues to see and evaluate a steady stream of submissions but remains highly selective and focused on maintaining underwriting profitability.
The expense ratio was 32, 9% in the fourth quarter 2023.
From 59, 2% in the prior year quarter.
Was driven lower mostly due to the scaling of the business.
Combined ratio for fourth quarter 2023.
Full year 2023 was 103% 106, 5% respectively.
And it's 24 and 50 percentage points when their respective prior periods.
For the quarter, a wristband generated just over $1 million pretax profit compared to a loss of less than 1 million for the fourth quarter of 2022.
Spain was profitable for full year 2023.
Let me spend continues to see and evaluate a steady stream of submit submissions.
Remains highly selective and focused on maintaining underwriting profitability.
We continue to expect ever spent to generate a mid single digit or are we in 2024.
Nevada, our insurance distribution platform generated revenue of 12 million in the fourth quarter up 38% compared to the fourth quarter of 2022 benefit.
Benefiting from recent acquisitions and organic growth.
Insurance distribution segment produced nearly 2 million of EBITDA for the fourth quarter down slightly from the fourth quarter of 2022.
EBITDA margin of 14, 3% this quarter compared to 23, 2% last year.
David: We continue to expect Everspan to generate a mid-single-digit ROE in 2024. Serata, our insurance distribution platform, generated revenue of $12 million in the fourth quarter, up 38% compared to the fourth quarter of 2022, benefiting from both recent acquisitions and organic growth. The Insurance distribution segment produced nearly $2 million of EBITDA for the fourth quarter, down slightly from the fourth quarter of 2022. The EBITDA margin of 14.3% this quarter compared to 23.2% last year. The margin contraction was largely driven by the impact of recent acquisitions, some business makes during the quarter, and expenses related to organic growth initiatives and integration costs. It is worth noting that the fourth quarter is a seasonally light quarter for the segment, and Surrata's full year margin of 22.3% is on plan and in line with our 20% plus margin expectation for 2024. The Legacy Financial Guarantee segment generated a net loss of $12 million versus a net income of $180 million in the prior year period.
Margin contraction was largely largely driven by the impact of recent acquisitions, some business mix shift during the quarter and expenses related to organic growth initiatives and integration cost.
It's worth noting that the fourth quarter is a seasonally light quarter for the segment. That's a rod is full year margin of 22, 3%.
Unplanned and inline with our 20% plus margin expectation for 2024.
For the fourth quarter.
The legacy financial Guaranty segment generated a net loss of 12 million versus net income of $180 million in the prior year period.
Year over year change was primarily driven by the previously mentioned net gains related to our M. B S litigation settlements in the prior quarter.
Consolidated investment income for the fourth quarter was $40 million compared to 23 million in the fourth quarter of 2022.
Proven stem from higher average yield on fixed income securities, which increased nearly 90 basis points in the fourth quarter 2023 compared to last year.
Supplementing the yield generated by our core fixed income portfolio was it $10 million increase in alternative investments compared to the fourth quarter of 2022.
David: The year-over-year change was primarily driven by the previously mentioned net gains related to RMBF litigation settlements in the prior quarter. Consolidated investment income for the fourth quarter was $40 million, compared to $23 million in the fourth quarter of 2022. The improvements stem from higher average yields on fixed income securities, which increased nearly 90 basis points in the fourth quarter of 2023 compared to last year. Supplementing the yield generated by our core fixed income portfolio was a $10 million increase in alternative investments compared to the fourth quarter of 2022.
Separately during the fourth quarter.
We realized a $12 million and tend to sell charge on owned AAC insured student loan bonds related to our recently completed a mutation of the associated insured obligations.
Consolidated loss and loss adjustment expenses were $19 million in the fourth quarter of 2023 compared to $55 million benefit in the fourth quarter of 2022.
Never spend losses grew by 13 million compared to the prior year to $17 million in line with its larger earned premium base.
David: Separately, during the fourth quarter, we realized a $12 million intent to sell charge on owned AAC insured student loan bonds related to our recently completed commutation of the associated insured obligation. Consolidated loss and loss adjustment expenses were $19 million in the fourth quarter of 2023, compared to a $55 million benefit in the fourth quarter of 2022. EverSpend losses grew by $13 million compared to the prior year to $17 million, in line with its larger earned premium base.
Legacy financial Guaranty losses, 2 million were favorably impacted by a benefit from the student loan commutation.
Hi, R M B S recoveries, but adversely impacted by lower discount rates.
Comparison legacy financial Guaranty losses benefited from a $43 million gain from the Nomura settlement during the fourth quarter of 2022.
General and administrative expenses were 35 million for the fourth quarter down from 51 million in the fourth quarter of 2022.
David: Legacy financial guarantee losses of $2 million were favorably impacted by a benefit from student loan commutations and HIA RMBS Recovery, but adversely impacted by lower discount rates. By comparison, legacy financial guarantee losses benefited from a $43 million gain from the Nomura settlement during the fourth quarter of 2022. General and administrative expenses were $35 million for the fourth quarter, down from $51 million in the fourth quarter of 2022. The improvement in operating expenses was largely due to over $20 million of reduced defensive litigation and other non-compensation costs at AAC compared to the fourth quarter of 2022. These savings are partially offset by growth in our P&T businesses and performance compensation adjustments.
The improvement in operating expenses was largely due to over 20 million with reduced defensive litigation and other non compensation costs at AAC compared to the fourth quarter of 2022.
These savings are partially offset by growth in our P&C businesses.
For them its compensation adjustment.
Interest expense is approximately $16 million down from 30 million in the fourth quarter of 2022, following the significant deleveraging of basi.
He sees remaining surplus no debt as of December 31st 2020, 3990, 4 million lucid and accrued and unpaid interest.
As it relates to the balance sheet.
Shareholders' equity the 1.36 billion a $30 13 per share at December 31st 2023 was up from $28 per share.
David: Interest expense is approximately $16 million, down from $30 million in the fourth quarter of 2022 following the significant deleveraging of AEC. AAC's remaining surplus note debt as of December 31st, 2023 was $994 million, inclusive of accrued and unpaid interest, as it relates to the balance sheet. Shareholders' equity of $1.36 billion, or $30.13 per share, at December 31, 2023, was up from $28 per share, that is, September 30th, 2023. The increase was driven by a $69 million increase in unrealized gains on available for sale investments.
At September 30th 2023, the increase.
It was driven by a $69 million increase unrealized gains on available for sale investments.
Foreign exchange translation gains related to a U K a $32 million.
Somewhat offset by the $16 million net loss in the quarter.
Adjusted book value of $1 3 billion with $28.74 per share at December 31st 2023, It was up over 3% from $27 90 per share at September 30th 2023.
At December 31st 2000, and twenty-three AFG on a stand alone basis, excluding investments in subsidiaries had cash investments and net receivables.
David: Foreign Exchange Translation Gains Related to AUK of $32 million, somewhat offset by the $16 million net loss in the quarter. Adjusted book value of $1.3 billion for $28.74 per share at December 31st, 2023 was up over 3% from $27.90 per share at September 30th, 2023. At December 31st, 2023, AFG, on a standalone basis, excluding investments and subsidiaries, had cash investments in net receivables of approximately $211 million, $4.68 per share. I will now turn the call back to Claude for some brief closing remarks. Thank you, David. I am very excited about our prospects for 2024.
Approximately 211 billion $4 68 per share.
I will now turn the call back to Claude for some brief closing remarks.
Thank you David.
I am very excited about our prospects for 2024 for our specialty P&C insurance business, we remain focused on delivering strong earnings growth in coming periods.
Our three year plan aims to scale, our Permian production to over $1 5 billion with over $100 million of EBITDA on a combined basis from ever span answer on it we are well positioned to meet our goals with the strong foundation, we have built a leadership talent we continue to attract.
We are also laser focused on progressing the legacy business strategic review process launched in December and we will update you when we have more information to share.
'twenty 'twenty four is positioned to be a year of transformational change for Ambac and I look forward to updating you on our progress in the coming quarters.
Claude LeBlanc: For our specialty P&C insurance business, we remain focused on delivering strong earnings growth in coming periods. Our three-year plan aims to scale our premium production to over $1.5 billion with over $100 million of EBITDA on a combined basis from Everspan and Serrata. We are well positioned to meet our goals with the strong foundation we have built and the leadership talent we continue to attract. We are also laser focused on progressing the legacy business strategic review process launched in December, and we will update you when we have more information to share. 2024 is positioned to be a year of transformational change for Ambac, and I look forward to updating you on our progress in the coming quarters. Operator, please open the call to questions.
Operator, please open the call for questions.
Thank you we will now be conducting our question and answer session. If you would like to ask a question. Please press star one on your telephone keypad. The confirmation tone will indicate that your line is in the question queue. You May press star two if he would like to remove your question from the queue.
For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.
One moment please poll for questions.
Thank you. Our first question is coming from the line of Dennis with repertoire partners. Please proceed with your question.
Hey, Claude congrats on the great quarter.
And the great execution on both of these items.
Yeah.
P&C businesses.
Claude LeBlanc: Thank you. We will now be conducting our question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate that your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key.
And you know I think we were and I was thinking an update on our E. C U E.
But looking forward to that on the OCI process. It sounds like the capital model framework all the capital model itself is finalized and maybe help us think about whether the OCI approved contingent reserves the lease at AC has any impact on.
Thinking about distributions from issue.
Yes.
Thanks, Dennis I'll I'll pass that whenever it's David.
Operator: One moment, please, while we pull for questions. Thank you. Our first question is coming from the line of Dennis Chua with Repertoire Partners. Please proceed with your question. Hey, Claude, congrats on the great quarter and the great execution by both of you guys by PNC Businesses. I think we weren't expecting an update on the AAC review, but I'm looking forward to that. On the OCI process, it sounds like the capital model framework or the capital model itself is finalized, and maybe it can help us think about whether the OCI-approved contingency reserve release at AAC has any impact on thinking about distribution from AAC. Thanks Dennis. I'll pass that one over to David. Dennis, thanks for the question. So the impact of the contingency reserves is really not on the capital model. So the capital model is quite comprehensive and factored in. Those contingency reserves, as part of the, you know, capital structure of AAC, I think, you know, the contingency reserve release for us does a couple things. It, you know, helps.
Dennis Thanks for the question. So the impact of the contingency reserve is really is not on the capital models of the capital model is quite.
Quite comprehensive and factored in.
Those contingency reserves are as part of the capital structure of E C.
You know the contingency reserve release for US there's a couple of things that you know helps progressed the cleanup of the balance sheet at a C. It also is indicative of I believe our recognition that we see is recognition of the derisking of AAC is balance sheet.
They get partner puts us a little simpler position from our understanding of our statutory statements Oh.
And also we also don't expect to be contributing.
Two additional contingency reserves in the future. So overall I think it's a it's a positive for us but it was has been factored into the OCI a contingency.
David: Douglas G. Long, Chief Financial Officer of forgivenessandrefinancymal.com, And also, we also don't expect to be contributing to additional contingency reserves in the future. So, overall, I think it's a positive for us, but it was, and has been factored into the OCI contingency capital model, so it doesn't have a direct impact on distributions in the short term. www.ambacfin As a reminder, ladies and gentlemen, if you would like to ask a question at this time, please press star 1 on your telephone's keypad. Please hold while we pull for additional questions. Thank you. There are no further questions at this time. This concludes today's teleconference. We thank you for your... You may disconnect your lines at this time. www.ambac.com www.ambacfinancial.com www.ambac.com www.ambacfinancial.com www.ambac.com www.ambacfinancial.com www.ambac.com www.ambacfinancial.com www.ambac.com www.ambacf Thanks for watching. I'll see you next time on www.ambac.com
Capital models, it doesn't have a direct impact on us.
Distributions and in the short term.
Yes.
Yeah.
Thank you as a reminder, ladies and gentlemen, if you would like to ask a question at this time. Please press star one on your telephone keypad. Please hold while we poll for additional questions.
Thank you there are no further questions at this time. This concludes today's teleconference. We thank you for your participation.
You may disconnect your lines at this time.
Oh.
[music].
Mhm.
Hum.
Mhm.
[music].
Hum.
Uh-huh.
[music].
Hum.