Q1 2024 Ambac Financial Group Inc Earnings Call
Greetings and welcome to the Ambac Financial Group, Inc. First quarter 2024 earnings call.
Operator: Greetings and welcome to the Ambac Financial Group Inc. first quarter 2024 earnings call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. 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 you.
At this time all participants are in a listen only mode.
A brief question and answer session will follow the formal presentation.
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.
Speaker Change: It is now my pleasure to turn the call over to charge the basket head of Investor Relations.
Speaker Change: Thank you good morning, and welcome to Amex first quarter 2024 call to discuss financial results.
Operator: Thank you. Good morning, and welcome to Ambac's first quarter 2024 call to discuss financial results. Speaking today will be Claude 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.
Speaker Change: Speaking today will be global block, President and CEO, and David trick Chief Financial Officer.
Speaker Change: They will discuss the financial results of our business and the current market environment and after prepared remarks, we'll take your questions.
Speaker Change: For those of you following along on the webcast. There are in the prepared remarks, we will be highlighting some slides in the investor presentation, which can be located on our website.
Speaker Change: 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.
Operator: For those of you following along on the webcast, they're in 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 statement due to a variety of factors.
Speaker Change: 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.
Operator: These factors are described in the forward-looking statements in our earnings press release and our most recent 10-Q and 10-K filed with the SEC. We do not undertake any obligation to update these forward-looking statements. 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 release, operating supplement, and other materials available to investors on our website, ambac.com. I would now like to turn the call over to Mr. Claude LeBlanc.
Speaker Change: Do not undertake any obligation to update forward looking statements.
Speaker Change: Also in our prepared remarks or responses to questions. We may mention some non-GAAP financial measures.
Speaker Change: Reconciliation to those non-GAAP measures are included in our recent earnings release operating supplement and other materials available to investors on.
Speaker Change: Our website <unk> dot com.
Speaker Change: I would now like to turn the call over to Mr. Claude Leblanc.
Claude L. LeBlanc: Thank you Chuck and welcome to everyone joining today's call.
Claude L. LeBlanc: Thank you, Chuck, and welcome to everyone joining today's call. I'm pleased to report that for the first quarter, we generated net income of $20 million and adjusted net income of $38 million. Book value per share stands at $30.19. David will discuss our financial results in more detail shortly. Turning to our P&C businesses, a rapidly growing specialty PNC insurance platform generated $187 million in premium for the quarter, a 45% increase over last year
Claude L. LeBlanc: Pleased to report for the first quarter, we generated net income of $20 million and adjusted net income of 38 million book value per.
Claude L. LeBlanc: Share stands at $30 and 19.
Claude L. LeBlanc: David will discuss our financial results in more detail shortly.
Claude L. LeBlanc: Turning to our P&C businesses.
Claude L. LeBlanc: A rapidly growing specialty P&C insurance platform generated $187 million in premium for the quarter, a 45% increase over last year.
Claude L. LeBlanc: We expect the growth of our specialty P&C businesses will continue to be fueled by strong tailwinds supported by the secular shift towards the E&S markets and the expansion in underwriting specialization needed to support complex risks. We believe that being a premier destination for MGAs means offering a specialized and differentiated set of solutions tailored to the specific needs of this rapidly growing segment, which reached nearly $90 billion in premiums for 2023. Our differentiated market offering provides our MGAs with the following key value drivers. First, access to capital, whether it's in the form of risk capital from a rated balance sheet at Everspan or Growth Capital as a portfolio company under Serrata. Second, Leading Risk and Oversight Controls
Claude L. LeBlanc: We expect the growth of our specialty P&C businesses will continue to be fueled by strong tailwind supported by the secular shift towards the E&S markets and expansion in underwriting specialization needed to support complex risks.
Claude L. LeBlanc: We believe that being a premier destination for Mj's means offering a specialized and differentiated set of solutions tailored to the specific needs of this rapidly growing segment, which reached nearly $90 billion in premiums for 2023.
Claude L. LeBlanc: Our differentiated market offering provides <unk> with the following key value drivers burst access to capital whether it's in the form of risk capital from a rated balance sheet at ever span.
Claude L. LeBlanc: Our growth capital as a portfolio company under Cerrado.
Claude L. LeBlanc: Second leading risk and oversight controls.
Claude L. LeBlanc: Third access to reinsurance and other risk transfer solutions.
Claude L. LeBlanc: Third, access to reinsurance and other risk transfer solutions, and fourth, business agility supported by our broad technology-focused shared services. We believe that these differentiated solutions uniquely position us to attract the best MGAs and program partners and, in turn, deliver superior long-term results for our shareholders. Turning to Everspan's results for the quarter, Airspan had a strong start to the year, generating gross written premiums of $96 million, which was up 86% over last year.
Claude L. LeBlanc: And fourth.
Claude L. LeBlanc: There's this agility supported by our broad technology focused shared services.
Claude L. LeBlanc: We believe that these differentiated solutions uniquely positions us to attract the best <unk> and program partners and in turn deliver superior long term results for our shareholders.
Claude L. LeBlanc: Turning to ever spans results for the quarter.
Claude L. LeBlanc: <unk> had a strong start to the year.
Claude L. LeBlanc: Generating gross written premiums of $96 million.
Claude L. LeBlanc: Which was up 86% over last year.
Claude L. LeBlanc: Ever spans book is becoming more diversified and balanced across risk classes or.
Claude L. LeBlanc: Everspan's book is becoming more diversified and balanced across risk classes. For instance, at year-end 2022, commercial auto represented 93% of our net premium written. However, by the first quarter of 2024, commercial auto was down to 8% of net premiums written, and four other lines of business each accounted for over 10% of net premium. We believe that continued diversification in our specialty lines will have the long-term benefit of more stable and predictable underwriting results.
Claude L. LeBlanc: For instance.
Claude L. LeBlanc: And 2022 commercial auto represented 93% of our net premium written however by the first quarter of 2020 for commercial auto was down to 8% of net premiums written and for other lines of business each accounted for over 10% of <unk>.
Claude L. LeBlanc: Net premiums.
Claude L. LeBlanc: We believe that continued diversification in our specialty lines, we will have the long term benefit of more stable and predictable underwriting results.
Claude L. LeBlanc: This quarter ever spent also generated its first underwriting profit with a 98% combined ratio.
Claude L. LeBlanc: This quarter, Everspend also generated its first underwriting profit with a 98% combined ratio, the sixth consecutive quarterly underwriting improvement. And on the business we're writing, we continue to see pricing exceed loss cost trends. Turning to Serrata.
Claude L. LeBlanc: Six consecutive quarterly underwriting improvement.
Claude L. LeBlanc: And on the business, we're writing we continue to see pricing exceed loss cost trends.
Claude L. LeBlanc: Turning to cerrado.
Claude L. LeBlanc: Our insurance distribution business placed over $90 million of premium up 17% over the prior year and generated 5 million of EBITDA for the quarter.
Claude L. LeBlanc: Our insurance distribution business placed over $90 million in premium, up 17% over the prior year, and generated $5 million of EBITDA for the quarter. This was supported by the ongoing benefit of organic growth initiatives and the financial performance of last year's acquisition. Over the last year, we launched several notable expansion efforts within Serrata. These included the Exchange Reprogram and a new Transportation for Hire program at AllTrans. We're also gearing up to launch two new Professional Alliance programs.
Claude L. LeBlanc: This was supported by the ongoing benefit of organic growth initiatives and the financial performance of last year's acquisitions.
Claude L. LeBlanc: Over the last year, we launched several notable expansion efforts within cerrado.
Claude L. LeBlanc: These included the exchange re program, adding new transportation for higher program at all trends.
Claude L. LeBlanc: We're also gearing up to launch two new professional lines programs.
Claude L. LeBlanc: These initiatives, amongst others, are expected to be a catalyst for organic growth during 2024. We're also evaluating a number of strategic opportunities at Serata. Regarding the Legacy Financial Guarantee business, the assessment of strategic options for this business, which we announced late last year, is progressing as planned. Since launching our process, we have continued discussions with a number of interested parties about the business. Consistent with our original expectations, we hope to be in a position to provide you with an update by or before our next earnings call. I will now turn the call over to David to discuss our financial results for the quarter. David
Claude L. LeBlanc: These initiatives amongst others are expected to be a catalyst for organic growth during 2024.
Claude L. LeBlanc: We're also evaluating a number of strategic opportunities at cerrado.
Claude L. LeBlanc: Yes.
Claude L. LeBlanc: Regarding the legacy financial Guaranty business, the assessment of strategic options for this business, which we announced late last year is progressing as planned.
Claude L. LeBlanc: Since launching our process, we have progress discussions with a number of interested parties about the business consistent with our original expectations, we hope to be in a position to provide you with an update by year before our next earnings call.
Claude L. LeBlanc: I will now turn the call over to David to discuss our financial results for the quarter David.
David Trick: Thank you Claude and good morning, everyone.
David Trick: Thank you, Claude, and good morning, everyone. We are pleased to report that for the first quarter of 2024, Ambac generated net income of $20 million, or $0.43 per diluted share, compared to a net loss of $33 million, or $0.73 per diluted share, in the first quarter of 2023. Adjusted net income was $38 million, or $0.82 per diluted share, for the quarter, compared to an adjusted net loss of $14 million, or $0.30 per diluted share, in the first quarter of 2023.
David Trick: The change in net income and adjusted net income was mainly driven by results from our legacy financial guarantee business, as well as the continued growth of our specialty PNC business, Everspan, and our insurance distribution business, Zerada. Everspan's net premiums written in the quarter of $26 million were up 186% over the prior year period. Everspan's retention rate was approximately 27% of gross premiums written of $96 million, compared to 18% of gross premiums written of $52 million last year. Both the growth in net premiums and higher retention levels. They're mostly from workers' compensation and non-standard audit programs written in the back half of 2023 as assumed reinsurance.
David Trick: We're pleased to report that for the first quarter of 2020 for Ambac generated net income of 20 million or <unk> 43 per diluted share.
David Trick: Compared to a net loss of $33 million or <unk> 73 per diluted share in the first quarter of 2023.
David Trick: Adjusted net income was $38 million or <unk> 82 per diluted share for the quarter compared to an adjusted net loss of $14 million or <unk> 30 per diluted share in the first quarter of 2023.
David Trick: The change in net income and adjusted net income was mainly driven by results from our legacy financial Guaranty business as.
David Trick: As well as the continued growth of our specialty P&C business ever spin and our insurance distribution business Corrado.
David Trick: <unk> net premiums written in the quarter of $26 million were up 186% over the prior year period.
David Trick: <unk> retention rate was approximately 27% of gross premiums written of $96 million compared to 18% of gross premiums written of $52 million last year.
David Trick: Both the growth in net premiums and higher retention levels.
David Trick: Yes, mostly from workers' compensation and nonstandard auto programs written in the back half of 2023 as assumed reinsurance.
David Trick: Earned premiums and program fees were $26 million and $2 6 million up 266% and 73% respectively from the first quarter of 2023.
David Trick: Earned premiums and program fees were $26 million and $2.6 million, up 266% and 73%, respectively, from the first quarter of 2023. The loss ratio of 75.7% in the first quarter of 2024 was up from 66.6% last year. The loss ratio included 4.4% of prior accident year development, hire year-over-year loss fix in commercial auto, and some business fix shifts. Losses, including approximately half of the adverse development in the quarter, were partially offset by a sliding-scale commission benefit, which was recorded against acquisition costs and linked to loss performance. For the first quarter of 2024, sliding scale commissions produced a benefit of 6.1% compared to a 0.6% benefit last year.
David Trick: The loss ratio was 75, 7% in the first quarter of 2024.
David Trick: Was up from 66, 6% last year.
David Trick: The loss ratio included four 4% of prior accident year development.
David Trick: Higher year over year loss picks in commercial auto and some business mix shift.
David Trick: Losses, including approximately half of the adverse development in the quarter were partially offset by a sliding scale Commission benefit.
David Trick: Which was recorded against acquisition costs that are linked to loss performance.
David Trick: The first quarter of 2024 sliding scale commissions reduced the benefit of six 1% compared to one 6% benefit last year.
David Trick: The expense ratio was 22, 7% in the first quarter of 2024.
David Trick: The expense ratio was 22.7% in the first quarter of 2024, down from 55.3% in the prior year quarter, benefiting from the overall growth that Everspan experienced. In addition, the expense ratio benefited this quarter from the increase in sliding scale commissions of 550 basis points noted earlier, as well as the reversal of 2023 compensation over accruals for a benefit of 3.4%. The resulting combined ratio for the first quarter was 98.4 percent, an improvement of 23 percentage points from the respective prior period.
David Trick: Down from 55, 3% in the prior year quarter.
David Trick: Benefiting from the overall growth that ever span.
David Trick: In addition, the expense ratio benefited this quarter from the increase in sliding scale commissions of 550 basis points noted earlier as well as the reversal of 2023 compensation over accruals for a benefit of three 4%.
David Trick: The resulting combined ratio for the first quarter was 98, 4% an improvement of 23 percentage points when the respective prior period.
David Trick: In the first quarter, Everspan generated just under $2 million of pre-tax income compared to a loss of less than $1 million for the first quarter of 2023. This is Everspan's third consecutive quarterly profit since its February 2021 loss. Gerada generated revenue of $18 million in the first quarter, up 22% compared to the first quarter of 2023, benefiting from both a recent acquisition and organic growth.
David Trick: For the quarter <unk> generated just under $2 million of pre tax income compared to a loss.
David Trick: Of less than $1 million.
David Trick: For the first quarter of 2023.
David Trick: This is <unk> third consecutive quarterly profit since its February 2021 launch.
David Trick: Corrado generated revenue of $18 million in the first quarter up 22% compared to the first quarter of 2023.
David Trick: If any from both our recent acquisition.
David Trick: Panic growth.
David Trick: Gerardo produced $5 million of EBITDA for the quarter, up 10% from the $4.5 million produced in the first quarter of 2023. The EBITDA margin was 27.9% this quarter compared to 31.3% last year. The margin contraction was largely driven by the acquisition of Riverton last August, from business mix shifts during the quarter, and expenses related to organic growth initiatives and integration costs. Noteworthy is that some of this business mix shift relates to the timing of a large A&H renewal which shifted to the second quarter of 2024 from what would normally be the first quarter. Dorada's full year margins are expected to remain in line with our previously outlined 20% plus for 2024.
David Trick: The router produced $5 million of EBITDA for the quarter.
David Trick: 10% from the $4 5 million produced in the first quarter of 2023.
David Trick: The EBITDA margin of 27, 9% this quarter compared to 31, 3% last year.
David Trick: The margin contraction was largely driven by the acquisition of River 10 last August.
David Trick: This mix shift during the quarter and expenses related to organic growth initiatives and integration costs.
David Trick: Noteworthy is that some of this business mix shift relates to the timing of a large A&H renewal, which shifted to the second quarter of 2024 from what would normally be the first quarter.
David Trick: <unk> full year margins are expected to remain in line with our previously outlined 20% plus for 2024.
David Trick: For the first quarter, the legacy financial Guaranty segment Gen.
David Trick: For the first quarter, the Legacy Financial Guarantee cycle generated net income of $20 million versus a net loss of $36 million in the prior year period. The year-over-year improvement was primarily driven by a favorable change in losses incurred and improved investment results. Consolidated investment income for the first quarter was $42 million, compared to $34 million in the first quarter of 2023. The improvements stem from higher average yields on fixed income securities, which increased nearly 70 basis points over the same time period. Our alternative portfolio contributed just over $15 million to the quarter's solid investment results. Yeah, it's just over 13 million in the first quarter of 2020.
David Trick: Consolidated loss and loss adjustment expenses were a $1 million benefit in the first quarter of 2024, compared to an $18 million expense in the first quarter of 2023. Everspan losses grew by $15 billion compared to the prior year's $19 billion. Legacy Financial Guarantee produced a loss benefit of $21 million, favorably impacted by higher discount rates versus lower discount rates in the prior year and favorable credit development. First quarter 2024 in debt income contributed to shareholders equity of $1.37 billion or $30.19 per share at March 31, 2024, compared to $30.13 per share at December 31st, 2023.
David Trick: <unk> generated net income of $20 million versus a net loss of $36 million in the prior year period.
David Trick: The year over year improvement was primarily driven by a favorable change in losses incurred and improve the investment results.
David Trick: Consolidated investment income for the first quarter was $42 million compared to $34 million in the first quarter of 2023 <unk>.
David Trick: The improvement stemmed from higher average yield on fixed income securities.
David Trick: Which increased nearly 70 basis points over the same time period.
David Trick: Our alternative portfolio contributed just over $15 million this quarter.
David Trick: Solid investment results.
David Trick: Just over $13 million in the first quarter of 2023.
David Trick: Consolidated loss and loss adjustment expenses were a $1 million benefit in the first quarter of 2024.
David Trick: Compared to an $18 million of expense in the first quarter of 2023.
David Trick: A wristband losses grew by 15 billion compared to the prior year to $19 million.
David Trick: Legacy financial Guaranty produced a loss benefit of 21 million favorably impacted by higher discount rates.
David Trick: As lower discount rates in the prior year and favorable credit development.
David Trick: First quarter 2024, net income contributed to shareholders' equity of 137 billion or $30 19 per share.
David Trick: At March 31, 2024, compared to $30 13 per share at December 31, 2023.
David Trick: Net income in the quarter was partially offset by a $7 million increase in unrealized losses on available for sale investments, driven by higher interest rates and foreign exchange translation losses related to AUK of $8 million due to the weakening of the British Pound relative to the dollar. Adjusted book value $1.31 billion with $29.03 per share at March 31st, 2024 was up 1% from $28.74 per share at December 31st, 2023. On March 31st, 2024, AFG on a stand-alone basis, including investments and subsidiaries, had cash, investments, and net receivables at approximately $209 million. $4.63 per share. I will now turn the call back to Claude for some brief closing remarks.
David Trick: Net income in the quarter was partially offset by a $7 million increase to unrealized loss on available for sale investments.
David Trick: Driven by higher interest rates and foreign exchange translation losses related to U K of $8 million due to the weakening of the British pound relative to the dollar.
David Trick: Adjusted book value 131 billion with $29 three per share at March 31, 2024 was up 1% from $28 74 per share at December 31, 2023.
David Trick: At March 31, 2020 for AFG on a stand alone basis.
David Trick: Excluding investments in subsidiaries had cash investments and net receivables of approximately $209 million were $4 63 per share.
David Trick: I will now turn the call back to Claude for some brief closing remarks.
Claude L. LeBlanc: Thank you David.
Claude L. LeBlanc: Ambac had a good start to the year, and I am very encouraged about the number and quality of growth opportunities we are seeing across our specialty PNC platform. As I mentioned last quarter, 2024 is positioned to be a year of transformational change for Ambac, as we progress discussions regarding strategic options for our legacy business and strive towards our three-year goal of scaling production in our PNC business to over 1.5 billion, representing over 100 million in EBITDA.
Claude L. LeBlanc: Ambac had a good start to the year and I am very encouraged about the number and quality of growth opportunities, we are seeing across our specialty P&C platform.
Claude L. LeBlanc: As I mentioned last quarter 2024 is positioned to be a year of transformational change for ambac as we progress discussions regarding strategic options for our legacy business.
Claude L. LeBlanc: And strive towards our three year goal of scaling production.
David Trick: In our P&C business to over $1 5 billion, representing over $100 million in EBITDA.
Claude L. LeBlanc: In support of this goal, we continue to make investments to enhance our specialty P&C capabilities, support our MGA partners, and bolster our long-term growth prospects, which I believe positions us well to meet and potentially exceed our targets. I look forward to updating you on their progress in the coming quarter. Operator, please open the call for questions. Thank you.
David Trick: In support of this goal, we continue to make investments to enhance our specialty P&C capabilities support our MGA partners and bolster our long term growth prospects, which I believe positions us well to meet and potentially exceed our targets.
David Trick: I look forward to updating you on our progress in the coming quarters.
Speaker Change: Operator, please open the call for questions.
Speaker Change: Thank you.
Operator: We will now be conducting a 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 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 start key. One moment, please, for the poll, while we poll for questions. The first question comes from the line of Geoffrey Dunn with Dowling and Partners. Please go ahead.
Speaker Change: We will now be conducting a question and answer session.
Speaker Change: If you would like to ask a question. Please press star one on your telephone keypad.
Speaker Change: A confirmation tone will indicate your line is in the question queue.
Speaker Change: You May press Star two if you would like to remove your question from the queue.
Speaker Change: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.
Speaker Change: One moment please for the poll.
Speaker Change: It might be political questions.
Speaker Change: The first question comes from the line of Geoffrey Dunn with Dowling and partners. Please go ahead.
Geoffrey Murray Dunn: Thanks, Good morning, guys.
Geoffrey Murray Dunn: I had two questions first could you elaborate.
Geoffrey Murray Dunn: Elaborate a little bit on the adverse development it ever spend this quarter and also in conjunction with that how the sliding scale commissions work both in practice and as you enter new lines.
David Trick: Hey, Jeff It's David.
David Trick: Hey, Geoff. It's David.
David Trick: Question, So the <unk>.
David Trick: Adverse development in the quarter most of it related to non standard auto program and I would say that.
David Trick: A good chunk of that relates to this.
David Trick: Thanks for the question. So, the adverse developments in the quarter, most of it related to the nonstandard auto program, and I would say that a good chunk of that related to this delay in some data that we received on the program. That program started in the latter half of 2023. You know, some of that data that we received a little late in the quarter last year, we reflected in the first quarter this year.
David Trick: Delay and some data that.
David Trick: On the program that program started in the latter half of 2023.
David Trick: Hum.
David Trick: Some of that.
David Trick: Data that we received a little late in the quarter last year, we reflected in the first quarter this year.
David Trick: So, we're still very optimistic about the program. It's mostly California exposure, which has seen significant pricing increases in that market. So, we have a very positive outlook on the program and have no real concerns about the program or the development.
David Trick: So we're still very optimistic about the program, it's mostly California exposure, which has got significant pricing increases in that market. So we have already.
David Trick: Positive outlook for the program and I have no real concerns about.
David Trick: Yes.
David Trick: The program or the development.
David Trick: And importantly, you know, the structure of the program is one of the things that we like about it. And, as you noted, it does include a sliding scale. And so, the way that works is that depending on where losses are booked, we're entitled to a change in our acquisition costs against the, you know, the MGA that's underwriting the risk. So, in this quarter, that adverse development was more than offset by a benefit on the sliding scale, which offsets our acquisition costs.
David Trick: And importantly, the structure of the program is one of the things that we like about it and.
David Trick: And as you noted it does include sliding scale.
David Trick: And so the way that works is that depending on where losses are booked we're entitled to a change in our acquisition costs.
David Trick: Against the.
David Trick: MGA that underwriting risk.
David Trick: In this quarter.
David Trick: That.
David Trick: Adverse development it was more than offset by a benefit on the sliding scale, which offsets our acquisition costs.
David Trick: And, you know, generally, we have a number of programs that have sliding scale commissions, and, you know, they all work a little bit differently, but generally, they're structured in a way to give us some protection on the loss ratio, particularly for programs that are newer programs, and there's a little less history of underwriting history for programs where we look to structure the risk in a way that is more palatable for the Ever You know, this way, we get to control the underwriting performance, the impact on our combined ratio, and volatility against our book.
David Trick: Generally we have a number of programs that have sliding scale commissions.
David Trick: They all work a little bit differently.
David Trick: But generally they are structured in a way to give us some protection.
David Trick: On the loss ratio, particularly for programs that are newer.
David Trick: Newer programs and a little less history.
David Trick: Underwriting history or programs, where we look to structure the risk in a way that.
David Trick: As more palatable for the ever spend balance sheet.
David Trick: Equivalent to sort of loss corridor for example.
David Trick: So this way we get to control the underwriting performance.
David Trick: The impact on our combined ratio volatility against our book.
David Trick: How long do those sliding scale Commission.
David Trick: How long do those sliding scale commissions... What structures tend to last on these programs? Is it like the first year out of the gate, or is it a longer period?
David Trick: Structures tend to last on these programs as they break out the first year out of the gate or is it a longer period.
David Trick: Now it's starting to lack the program. Every year, we renew the program. Each program gets renewed every year, and depending on circumstances, we could decide to eliminate a sliding scale, but so far, for each of the programs that we have that include sliding scales and that have been renewed, we've continued those sliding scales. So you could imagine a situation where you have a new program, and over the years, as the history of the program develops, and we can get more comfortable with the ultimate performance of the program, we move away Okay. And then with
David Trick: So it's starting to life the program every year, we renew the program.
David Trick: Each program gets renewed every year and depending on circumstances, we could decide to eliminate.
David Trick: Sliding scale, but so far for each of the programs that we have that includes sliding scales and had been renewed and we've continued those sliding scale. So.
David Trick: You could not envision a situation, where you have a new program and over the years as the history of the program.
David Trick: <unk> and we can get more comfortable with the ultimate performance of the program that we move away from large scale structure, but we find it to be a very helpful tool both from a risk management standpoint.
David Trick: Balance sheet management standpoint.
David Trick: Okay, and then with respect to Derisking on the legacy FTE side. It looks like you were able to resolve your Italian ABS exposure. This quarter can you give any additional detail on how youre able to resolve that.
David Trick: Okay. And then with respect to de-risking on the legacy FG side, it looks like you were able to resolve your Italian ABS exposure this quarter. Can you give any additional detail on how you're able to resolve that? Italian ABF. And it looks like, sequentially, your adverse credit exposure list dropped, and it looked like the Italian sub-sovereign dropped. Yeah, so subs have been dropped. We, we
David Trick: Kalyan ABF.
David Trick: It looks like.
David Trick: Sequentially your adversely credit adverse credit exposure less dropped and it looks like.
David Trick: Sub sovereign dropped.
David Trick: Yeah, so Sub Sovereign dropped, and we upgraded one of our exposures to Italy following upgrades from both S&P and Moody's. The transaction has actually been performing quite fine, in line with our expectations. We probably erred a little bit on the conservative side with that exposure, but nonetheless, the rating agencies have both upgraded the exposure, and we felt comfortable to upgrade it as well.
David Trick: So sub sovereign dropped we upgraded one of our exposure our exposure to Italy.
David Trick: Following both upgrades from both S&P and Moody's.
David Trick: The transaction is actually been performing quite.
David Trick: Buying in line with our expectations.
David Trick: We probably are a little bit on the conservative side with that.
David Trick: But nonetheless.
David Trick: Both upgraded the exposure and.
David Trick: We felt comfortable with upgraded as well.
Speaker Change: Got it okay. Thank you.
David Trick: Sure.
Speaker Change: Thank you.
David Trick: Our next question is from Guiliano below.
Operator: Our next question is from Giuliano Bologna, with Compass Point, Preet Kovai.
David Trick: With Compass point. Please go ahead.
Giuliano Jude Anderes Bologna: Thank you good morning.
Giuliano Jude Anderes Bologna: Thank you all. Good morning. I had a quick question about the [inaudible] Is everyone in the data room at this point, or is there anything, you know, tangible that we can kind of, you know, add on from a timeline perspective and a milestone perspective?
Giuliano Jude Anderes Bologna: Two question around.
Giuliano Jude Anderes Bologna: Strategic alternatives process.
Giuliano Jude Anderes Bologna: It seems like you know in the press release, you expressed some optimism around the timeline.
Giuliano Jude Anderes Bologna: To be able to provide an update.
Giuliano Jude Anderes Bologna: Before second quarter before you report that core earnings I am curious if there are any milestones in the process or any kind of any kind of events along the way and the process gives you increased confidence around the timeline.
Giuliano Jude Anderes Bologna: As I'm sure. It was anyway kind of civil gone through due diligence you know as everyone in the data room at this point or is there anything tangible that we can kind of.
Giuliano Jude Anderes Bologna: How long from a timeline perspective.
Giuliano Jude Anderes Bologna: And my other milestone perspective.
Preet Kovai: Thanks, Giuliano it's clouded.
Claude L. LeBlanc: Thanks, Giuliano. It's Claude.
Speaker Change: We can't say too much about the process, obviously, but I will.
Claude L. LeBlanc: You know kind of reconfirmed that the timelines that we set out initially for the process.
Claude L. LeBlanc: We can't say too much about the process, obviously, but I will kind of reconfirm that the timelines that we set out initially for the process are very much in line with those timelines. And we indicated that the second quarter was likely a time period to allow us to get through a process of this magnitude and complexity. And we feel that we're right on top of that timeline today. I would also indicate that we have some strong interests in the portfolio and the company based on our options that we outlined for strategic options. And we're pleased with the way the process has progressed to date.
Claude L. LeBlanc: We're very much in line with those timelines and we'd indicated.
Claude L. LeBlanc: Second quarter likely being a time period to allow us to get through.
Claude L. LeBlanc: Our process of this magnitude.
Claude L. LeBlanc: Magnitude and complexity and we feel that we're.
Claude L. LeBlanc: We're right on top of that timeline.
Claude L. LeBlanc: Today I would also indicate that we had some strong interest for the.
Claude L. LeBlanc: The portfolio and the company based on our.
Claude L. LeBlanc: Options that we outlined four strategic options and yes.
Claude L. LeBlanc: We're pleased with the way the process has progressed to date.
Speaker Change: That sounds good and then thinking about.
Claude L. LeBlanc: That sounds good. And then, you know, thinking about... the business. In the interim, are there any opportunities for additional risk management or reinsurance opportunities around the portfolio to de-risk or capital structure actions that could create some accretion in the interim, or would it make sense to wait until after the process is completed?
Claude L. LeBlanc: The business kind of in the interim are there any opportunities for additional <unk>.
Claude L. LeBlanc: Listeners are reinsurance opportunities around portfolio de risk or capital structure actions.
Claude L. LeBlanc: Creating accretion interim or would it make sense to wait until then.
Claude L. LeBlanc: After the processes.
Claude L. LeBlanc: Good.
Claude L. LeBlanc: For now, we're business as usual, Giuliano, so I think we are often looking at and progressing de-risking transactions, and we will continue to do that, and I think we're maintaining optionality but progressing our business as usual to continue to improve the quality of our book value and reduce risk and exposures that we view potentially problematic today or in the future.
Speaker Change: For now we're business as usual Giuliano. So I think we are often looking at and progressing derisking transactions and we will continue to do that and I.
Claude L. LeBlanc: We're maintaining optionality, but progressing.
Claude L. LeBlanc: Our our businesses business as usual to continue to improve the quality of our book value and Derisk and exposures that we view potentially problematic today or in the future.
Giuliano: That's helpful. Thank you I appreciate the time and I will jump back in queue.
Giuliano Jude Anderes Bologna: It's helpful. Thank you. I appreciate the time, and I will jump back in the queue. Thanks, Giuliano. Thank you. There are no further questions at this time. This concludes today's teleconference. We thank you for participating. You may disconnect your lines at this time.
Giuliano Jude Anderes Bologna: Thanks Julio.
Giuliano Jude Anderes Bologna: Thank you.
Operator: There are no further questions at this time. This concludes today's teleconference. We thank you for participating. You may disconnect your lines at this time.
Giuliano Jude Anderes Bologna: There are no further questions at this time.
Giuliano Jude Anderes Bologna: This concludes today's teleconference.
Operator: Thank you for participating you may disconnect your lines at this time. Thank you for your participation.
Operator: Okay.
Operator: Yeah.
Operator: Yeah.
Operator: Yeah.
Operator: Yeah.
Operator: [music].
Operator: © BF-WATCH TV 2021 ??? ??? ??? ??? ??? ??? ??? ??? ??? ??? ??? ??? ??? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? © BF-WATCH TV 2021, ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? © BF-WATCH TV 2021, , , , , , , ,
Operator: Yeah.
Operator: Yeah.
Operator: Yeah.
Operator: Sure.
Operator: Yeah.
Operator: Yes.
Operator: Yeah.
Operator: Okay.
Operator: Yeah.
Operator: Yeah.
Operator: [music].
Operator: Okay.
Operator: Yeah.
Operator: Hum.
Operator: Yeah.
Operator: [music].
Operator: Yeah.
Operator: Yeah.
Operator: Okay.
Operator: [music].
Operator: Yeah.
Operator: [music].
Operator: Yeah.
Operator: [music].
Operator: Yes.
Operator: Yeah.
Operator: [music].
Operator: Yeah.
Operator: [music].
Operator: Okay.
Operator: Yeah.
Operator: [music].
Operator: Yes.
Operator: [music].
Operator:
Operator: Yes.
Operator: [music].
Operator: Okay.
Operator: [music].
Operator: Yeah.
Operator: Yeah.
Operator:
Operator: Yes.
Operator: [music].
Operator: Yeah.
Operator: [music].
Operator: Yeah.
Operator: Yeah.
Operator: Yeah.
Operator: [music].
Operator: Sure.
Operator: [music].
Operator: Sure.
Operator: Uh huh.
Operator: [music].
Operator: Yes.
Operator: Uh huh.
Operator: [music].
Operator: Okay.
Operator: Yeah.
Operator: Yeah.
Operator: [music].
Operator: Mhm.
Operator: Yeah.
Operator: Hum.
Operator:
Operator: Uh huh.
Operator: [music].
Operator: Yeah.
Operator: [music].
Operator: Yeah.
Operator: [music].
Operator: Okay.
Operator: [music].