AMBC Shareholder/Stockholder Letter Transcript:
SPINE COPY
2023 ANNUAL REPORT
0.00
2021
2022
2023
FINANCIAL HIGHLIGHTS
SHAREHOLDER
EQUITY
ADJUSTED
BOOK VALUE
SHAREHOLDER
EQUITY
$1.36
(in billions) $1.25
1.36
BOOK
VALUE
PER SHARE
1.02dollars) $1.27
(in
(in billions)
OOK VALUE
R SHARE
dollars)
$1.0
1.36
1.02
$28
$22
(in billions)
30.0
$30
$1.25
$1.0
$1.36
22.5
15.0
0.68
2021
2022
2023
0.34
0.00
2021
2022
2023 2021
2022
$28
1.02
0.34
0.68
0.00
0.0
0.00
$23
$23
$4
$20
6.0
4.5
$20
3.0
2021
2022
7
0
2021
2022
2023 2021
$1.27
22.5
0.325
$22
$20
$1.30
-14%
2022
MGA
PARTNERS
2023
1.5
0.0
2022
2021
2023
2022
2022
2021
2022
2023
2021
2022
504
P&C
PREMIUM
PRODUCTION
ADVERSELY CLASSFIED
CREDITS OUTSTANDING
4.5
126
$5
$131
$4
14
0
2021
0
2023
2022
17
$5
$282
2021
2022
+79%
2022
$131
0.0
2023
2021
2023
2021
+59%
2022
2023
2021
EBITDA
$107 MILLION
27.00
27
20.25
27
20.25
8
13.50
2021
6.75
$93 MILLION
17
2022
2023
2022
2023
8
20.25
6.75
13.50
0.00
6.75
0.00
0.00
2021
378
6.75
$4
252
0.00
2022
2023
2022
2023
1.5
2021
Adjusted
Net Income 27.00
13.50
17
13.50
$6
$504
8
3.0
0
2023
27.00
ADVERSELY CLASSFIED
CREDITS
OUTSTANDING
$6
27
(in billions)
20.25
$5
$4504
(in
378 millions)
6.0
252
$282
21
7
2023
(in billions)
(in21billions)
$4 MILLION
27.00
0.325
+2%
28
ADVERSELY
CLASSFIED
CREDITS OUTSTANDING
$504
$6
20230
0.000
MGA
PARTNERS
28
14
0.975
7
2021
2023
2023
$3014
0.650
P&C PREMIUM
PRODUCTION
Net Income
MGA
PARTNERS
$28
0.0
2021
7
21
1.300
15.0
0.000
2022
$3028
$22
$.87
+8%
$28
14
BOOK VALUE
PER SHARE
(in dollars) $28
(in millions)
28
$5
$30
7.5
2023
DVERSELY CLASSFIED
FINANCIAL GUARANTEE
REDITS OUTSTANDING
NET
PAR OUTSTANDING
$28
21
$23
30.0
0.650
$22
2021
0.34
(in billions)
$6
$1.30
$.87
7.5
FINANCIAL GUARANTEE
NET PAR OUTSTANDING
(in billions)
(in billions)
ADJUSTED
BOOK VALUE
(in billions)
0.975
$28
1.300
1.36
0.68
+9%
billions)
BOOK VALUE
PER SHARE
FINANCIAL GUARANTEE
(in dollars)
NET PAR OUTSTANDING
Adversely Classified Credits
26% REDUCTION
126
0
A MESSAGE FROM OUR CEO
Having accomplished our strategic
priorities for 2023 including achieving
profitability in our specialty P&C insurance
segment and launching a process to
explore strategic options for our legacy
financial guarantee business we expect
2024 to be a transformative year for
Ambac as we continue to strive to
enhance long-term shareholder value.
Dear Fellow Shareholders,
2023 was another milestone year for Ambac. Three years ago,
we embarked on a journey to build a specialty property and
casualty insurance platform that included a distribution division
and a specialty program insurance carrier.
Our vision is to create the premier destination for MGA and program operators, and the quick ascent of our P&C
businesses demonstrates that we have built a strong foundation to deliver on that goal. Key to our success is our
people. In 2023 we hired top industry talent to help drive our growth and both Everspan and Cirrata exceeded
their 2023 targets, generating over a half billion dollars of premium production, an 80% increase over 2022.
That accomplishment is a testament to the hard work of the Everspan and Cirrata teams, whose achievements
I will further expound on in the following pages. In 2023, we also added Kristi Matus and Michael Price as
Directors, further bolstering the P&C expertise of our Board.
While our future lies in the property and casualty insurance sector, we remain committed to maximizing the value
of our legacy financial guarantee business. In 2023, we continued to improve the quality of the insured portfolio
through various de-risking initiatives, which for the full year resulted in a reduction in net par outstanding by 14%
and adversely classified credits by 26%. In addition, following the completion of an internal review process and
analysis of the strategic options available for the legacy financial guarantee business, we appointed investment
bank Moelis & Company to explore potential transactions with interested parties.
As I noted in previous letters, Ambac remains committed to sustainability and responsible business practices.
We continue to refine our policies to better reflect how these practices are embedded in our corporate culture,
strategy, and decision-making. As part of our ongoing efforts to improve our disclosures, in 2023 we updated our
Corporate Governance Guidelines and Code of Business Conduct and Ethics, and we published an updated and
amended Corporate Social Responsibility (CSR) report in February 2024.
We are excited about the direction Ambac is headed. As we look to the future, we are well positioned to leverage
the strong growth generated in 2023, and we believe our specialty insurance platform is poised to deliver
significant, incremental value for Ambac s shareholders.
EVERSPAN
SPECIALTY PROGRAM INSURANCE CARRIER
In its second full year of operation, Everspan wrote $273 million of gross premium, achieving profitability in the
second half of the year while establishing itself as a preferred partner of MGAs and reinsurers. Everspan exceeded
its 2023 targets while maintaining its commitment to underwriting excellence and strong program oversight.
Everspan had a very strong year, generating gross
premium written of $273 million, an 87% increase over
2022 and a 9% increase over its 2023 target of $250
million. While we are pleased with those numbers, we
are equally, if not more, focused on combined ratio,
which factors both underwriting results and expense
management, and is a more accurate gauge of an
insurer s performance and profitability. Everspan s
100% combined ratio, reported in the fourth quarter,
demonstrates a positive trend that we aim to
improve in the coming quarters. Everspan s fourth
quarter results marked the fifth consecutive
quarterly improvement for the business, which we
believe has achieved the necessary scale to generate
underwriting profitability. Everspan is now on a
pathway to generating mid-teen ROEs at scale,
over the insurance cycle.
Portfolio diversification was also a key area of focus
for Everspan in 2023, as the business sought to
expand and diversify its MGA program partners. At
year end, Everspan had 23 program partners, up from
14 a year ago. Equally important, its programs spanned
a wide range of business classes, including commercial
auto, excess liability, workers compensation and
$273 MILLION
of GPW in 2023 Up 87%
Combined Ratio
23
MGA Programs
vs
Everspan also aligns interests through its high-touch
engagement model. With two full years of operation
under its belt, it has established a comprehensive
approach to program management, employing
proactive risk management and oversight to achieve
profitability for itself and its partners. We believe
this approach is a strategic differentiator in the
marketplace and a cornerstone to our achievements.
GROSS PREMIUM WRITTEN (GPW)
& NUMBER OF PROGRAMS
(in millions)
$273
$300
$225
Admitted
$146
$123 MILLION
18
$75
12
$13
$0
Shareholders Equity
30
24
$150
2023 GPW
61% E&S 39%
It is important to note that Everspan s growth was
achieved without sacrificing robust underwriting
standards. Everspan accepted less than 5% of the
program submissions it received, which is a testament
to its careful selection methods. Its rigorous review
process is underpinned by robust diligence and a
gross line underwriting approach, meaning it applies
the same evaluation criteria regardless of whether it
retains 30% or very little risk. Uniform application of
underwriting criteria helps keep Everspan s interests
aligned with the interests of its reinsurance partners.
2021
2022
Gross Premium Written
2023
6
# of Programs
(program #)
107%
general liability, among others. Everspan s book is now
more balanced across risk classes, which should have
the long-term benefit of more stable and predictable
underwriting results.
CIRRATA
INSURANCE DISTRIBUTION PLATFORM
With a growing portfolio of distribution businesses, Cirrata has doubled its revenue in the last two years and beat
its growth targets, achieving $231 million in placed premiums for 2023. It continues to attract premier underwriting
teams looking to scale their businesses with Ambac s support.
Cirrata, like Everspan, exceeded its 2023 targets. It
placed $231 million of premium in 2023, an increase of
70% over the prior year and a 15% increase over its 2023
target of $200 million. It also produced over $11 million
of EBITDA. Cirrata s revenue has doubled to $52 million
in the last two years, while its EBITDA margin remains
attractive at 22%.
Cirrata s growth has been fueled by both organic
initiatives and the financial performance of recent
acquisitions. It has acquired and onboarded three
companies over the last 18 months and now operates
four programs across various classes of business,
including specialty commercial auto, professional
liability, inland marine, employer stop loss, and affinity
programs. After purchasing majority stakes in All Trans
Risk Solutions and Capacity Marine Corporation at the
end of 2022, we acquired a majority stake in Riverton
Insurance Agency in August 2023. Xchange Benefits,
our first MGU, rounds out the Cirrata portfolio.
executive management and specialty lines experience,
making him the ideal candidate to expand the Cirrata
platform and build its profile in the specialty property
and casualty insurance market.
In 2023, Cirrata reached the size and scale to
necessitate its own dedicated leadership team, and
in May we appointed industry veteran Naveen Anand
as President of Cirrata Group. Naveen has extensive
We continue to see significant opportunities for growth
at Cirrata, whether across our current businesses,
via organic initiatives, or through additional M&A
transactions and de novo incubations.
$231 MILLION
of Premium Placed Up 71% Over 2022
EBITDA Margin (1) of 22% Generating
of EBITDA in 2023
in 2023
RIVERTON INSURANCE AGENCY CORP.
(in millions)
$60
$12
$50
$52
$40
$8
$30
$20
$6
$31
$4
$26
$10
$0
$2
2021
2022
2023
Acquired August 1
(1) EBITDA/Net Insurance Distribution Revenues
(2) Represents 100% inclusive of non-controlling interests
$10
Revenue
EBITDA
$0
(EBITDA)
$11 MILLION
REVENUE UP 68%
(2)
REVENUE & EBITDA
4/26/2024 Letter Continued (Full PDF)