ladies and gentlemen good morning and welcome to the ambac financial group fourth quarter 2024 earnings conference 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 signal the operator by pressing star and zero on your telephone keypad as a reminder this conference is being recorded It is now my pleasure to introduce your host, Charles Zabasky, Head of Investor Relations. Please go ahead.

Good morning, and welcome to AMBAC's fourth 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, will take your questions. For those of you following along on the webcast during prepared remarks, we will 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. Those factors are described under forward-looking statements in our earnings press release and our most recent 10Q and 10K filed with the SEC. We do not undertake any obligation to update forward-looking statements. Also, in 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, or other materials in the investor section of our website, ambac.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 in anchoring our market positioning as a leading growth-focused MGA and delegated authority. Consolidated basis, our PNC business generated nearly $900 million of premiums from 2023 and produced $236 million of revenue, which was up 89% due to the tremendous progress of the acquisition of BEAT. This was a trend. BEAT has proven capabilities and a solid track record as an MGA incubator. The experience of the BEAT leadership team, combined with Serrata's U.S. specialty business expertise, is expected to deliver into the future. Guarantee business to $120 million. This was a monumental effort that provides us the opportunity to accelerate the scale of key priorities out of the outcome we provide the last remaining closing condition, receipt of rents we anticipate this quarter, or investing in and preparing the business, investing in technology and talent to ensure the continued success of our platform. In addition, we have substantially completed the separation of our legacy and PNC businesses, financial and technology platforms, as well as personnel, in preparation for the specialty PNC business and delivering value within a market environment where, broadly speaking, we continue to see the overall E&S market performance and E&S business continues across our industry and that speciality market. We continue to experience rate increases in the U.S. casual to double-digit rate increases. In the property market, we have seen some softening in the fourth quarter and through January 1 renewals, but terms and conditions are market conditions. Professional and financial lines continue to see softness, especially in large account and public market D&O. Smaller account and management liability are holding up much better. Specialty and E&S commercial insurance market conditions remain broadly supportive. Turning to our distribution business, $100 million in revenue for 2024, up 93% and earned approximately $20 million of adjusted EBITDA and $13 million of adjusted EBITDA to AMBAC common share. The adjusted EBITDA margin for 2024 on a consolidated basis is in headwinds as we scale. In addition, longer term, we expect to make meaningful advancements to the adjusted EBITDA margin from organic growth, technology-led efficiencies, and business synergy. For the year, organic growth was fly particularly well and more than offsetting some headwinds in our ESL and short-term medical business. We view organic growth to be a core KPI of the business. for the inclusion of BEAT in the organic revenue base later this year may result in some volatility. One key element for supporting the growth in MGA businesses is the availability of managed capacity. That is why we believe having a strategic difference. Managed capacity enables us to leverage less markets as well as a duration. While this is not something we will be reporting on every quarter, we thought it would be helpful for 2025 has more than 1.5 billion of committed third underwriting profitability and 80 million full year combined ratio over 2023 spent ended 2020 with a 96.5 which was down 380 basis points the underwriting performance was a result of every market conditions and rebalance future business growth of internal and external program opportunities which we believe will further our goals to diversify the and deliver strong We'll now turn the call over.

Thank you, Claude, and good morning, everyone. As Claude mentioned, we had notable changes to our reporting this quarter, which impacted our results in several areas. Following the successful shareholder vote of the sale of the legacy financial guarantee business, we are now reporting that segment as discontinued operations. With that, we recorded a $570 million loss on sale. Second, the effect of moving to discontinued operations for the legacy business means the go-forward PNC segments and holding company will be reported as continuing operations. And lastly, as I indicated last quarter, we have changed our non-GAAP metrics this quarter as we more closely align with our insurance distribution and underwriting peers and no longer as a financial guarantee business. This quarter, we introduced a revised adjusted net income, a new adjusted EBITDA, a new organic growth metric, and finally, eliminated adjusted book value. We recognize there are a lot of changes in new metrics this period as we make this transition, so we wanted to briefly highlight how we are thinking about the performance of the business going forward. First, we are driving total revenue growth as well as organic revenue growth. Organic growth measures the ability of our business to grow revenue, absent acquisitions, and will be driven by Danilo's and other growth initiatives, such as expanding distribution and product over time. Secondly, as it relates to earnings power and operating performance, we appoint investors to consolidated and segment level adjusted EBITDA and margin, which includes NCI. This captures how each business is performing regardless of our ownership percentage. And lastly, as it relates to earnings power to investors as shareholders, we would point to aggregate and segment level adjusted EBITDA to AMBAC common shareholders. This identifies what belongs to shareholders. Over time, based on how we have structured our acquisitions to date, consolidated adjusted EBITDA and adjusted EBITDA to AMBAC common shareholders are likely to converge hopefully this helps clarify how we are viewing the business going forward with that said for the fourth quarter of 2024 ambac generated a net loss of 548 million or ten dollars and 23 cents per diluted share compared to a net loss of 16 million or 24 cents per diluted share in the fourth quarter of 2023 net loss from continuing operations attributable to ambac common shareholders was 22 million or a positive 70 cents per share compared to 9 million or 10 cents per share lost in the fourth quarter of 2023 eps was positive in the fourth quarter of 24 even though we recorded a net loss due to the impact of lowering the carrying value of redeemable NCI upon remeasurement using the redemption value method. Such change is not reported through P&L but represents a benefit to AMBAC common shareholders that is required to be reflected in EPS. Consolidated adjusted net loss was $6 million or 12 cents per diluted share for the fourth quarter compared to adjusted net income of $4 million or 10 cents per deluded share in the fourth quarter of 2023 our results for the fourth quarter of 2024 were impacted by several notable items including at serrata approximately 9 million of intangible amortization up from 1 million largely an account of the bead acquisition at afg 8 million of other non-operating losses and acquisition related expenses incurred at afg including the write down of a minority investment and some capitalized software expenses. And at Serrata, $6 million of interest expense on short-term debt related to the acquisition of BEAT that will be repaid from the proceeds of the sale of the legacy financial guarantee The majority of these items were incurred in connection with the continued expansion and growth in our specialty P&C business. Dorada Premium's place grew 309% to $205 million, and total revenue increased by 257% to $44 million, compared to the fourth quarter of 2023. For the year, total revenues grew to $99 million, or 93%, compared to 2023. The growth in the quarter was driven primarily by the acquisition of B Capital and strength in specialty commercial auto, partially offset by some softness in A&H. The consolidated adjusted EBITDA margin before the impact of non-controlling interest was 22.3% and 19.8% for the quarter and year respectively, compared to 14.2% and 22.3% for the fourth quarter and full year of 2023, respectively. As previously outlined, adjusted EBITDA, a new non-GAAP metric, adjusts EBITDA for acquisition expenses, equity compensation, severance and restructuring costs, along with other non-operating items. After the impact of non-controlling interest, adjusted EBITDA to MBAC common shareholders represents the current earnings power to investors, which was $5.3 million and $13.2 million for the quarter and year, respectively, compared to $1.4 million and $9.4 million for the fourth quarter and full year of 2023, respectively. If looked at on a margin basis, adjusted EBITDA to AMBAC common shareholders will be lowered by the impact of non-controlling interest. So, for instance, the full year 2024 adjusted EBITDA margin was 19.8%, while the adjusted EBITDA margin to common shareholders was 13.5%. We understand that this can risk leading to some confusion. However, we believe there is sufficient value in recognizing these distinctions. This quarter's insurance distribution segment results were affected by several items worth highlighting. During the quarter, de novo startup expenses impacted adjusted EBITDA by approximately $3.8 million and adjusted EBITDA to common shareholders by $2.4 million. While these losses suppress earnings in the short term, they are an investment which will help drive future organic growth. There will be variability in these startup expenses, but they will diminish relative to overall results as we continue to grow. We incurred $1.5 million of net foreign exchange gains as BEAT's functional currency is the pound. Since BEAT does a significant amount of business in U.S. dollars and other currencies, we will experience foreign exchange gains and losses associated with the value of the pound. BEAT historically hedges approximately 50% of its estimated exposure. Everspan's net premiums written were at negative $3 million in the quarter, down from $37 million in the prior year period due to the non-renewal of a Personal Alliance NSA reinsurance program triggering return premiums of $19 million and the shift of the commercial auto program from a net retained to a fully fronted program. For the year, gross and net premium written were $383 million and $89 million, up 40% and 11% respectively. Earned premium and program fees were $19 million and $4 million, down 24% and up 62% respectively from the fourth quarter of 2023, resulting from the shift in program dynamics I noted earlier. The loss ratio of 51.9% in the fourth quarter of 2024 improved from 67.4% in the fourth quarter of 2023. three the quarter benefited from favorable development across a number of programs and improved diversity in the net retained book despite this improvement the result included prior accident year development in the quarter of 8.6 percent with approximately 3.3 percentage points of that stemming from a management decision to reserve to the high end of the actuarial range on runoff programs. Runoff programs can be more volatile than active programs and therefore management believes that this decision was prudent. The total impact for the quarter of this reserve shift was 1 million or 5.4 points of loss ratio. The expense ratio of 44.6 percent in the fourth quarter of 2024 was up from 32.9 percent in the prior year quarter with the increase mostly driven by changes to sliding scale commissions which are recorded against acquisition costs and linked to loss performance for the fourth quarter of 2024 sliding scale commissions produced an expense ratio charge of 14.9 compared to a benefit of 1.2 percent last year the resulting combined ratio for the fourth quarter was 96.5 percent an improvement of 380 basis points from the respective prior year period. The year-to-date combined ratio of 101.6% is down 490 basis points from 106.5% last year to date. For the quarter, Everspan produced just under $3 million of adjusted EBITDA to common stockholders, compared to just over $1 million for the fourth quarter of 2023. For the year, Everspan produced over $5 million of adjusted EBITDA to common stockholders compared to just under 1 million for 2023. As previously mentioned, we switched to health for sale accounting for the legacy business in the fourth quarter. For the quarter and year, the net loss from discontinued operations totaled 526 million and 497 million, respectively. During the fourth quarter of 2024, our discontinued operations produced a net profit of 44 million, which was mostly driven by higher discount rates, favorably impacting incurred losses, which partially offset the $570 million estimated loss on sale. AFG, on a standalone basis, excluding investments in subsidiaries, had cash, investments, and net receivables of approximately $119 million, or $2.56 per share, as of the end of the fourth quarter. I will now turn the call back to Claude for some closing remarks.

Thank you, David. As we reflect on 2024 and look ahead to 2025 and beyond, I am proud of what our team has accomplished and even more excited by the, I believe AMBAC offers a unique value proposition in the market to both our MGA partners and to investors alike, being a business dedicated to the specialty MGA and delegated authority program space. We expect that this differentiation with the separation of our legacy financial guarantee business. Given the timing for the close of our legacy business, we will be revisiting our 2025 guidance. We remain focused and believe on track towards achieving our long-term goals of strong organic growth and generating 80 to 90 million of adjusted EBITDA to AMBAC common shareholders in 2028. I look forward to updating you on our progress in the coming quarters.

Thank you. Ladies and gentlemen, we will now begin the question and answer session. If you would like to ask a question, please press star and one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star and two 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 keys. Ladies and gentlemen, we will wait for a moment while we poll for questions. The first question comes from the line of Deepak Salpangal from Repertor Partners. Please go ahead.

Hey, Claude. Hey, David. Two questions, one on the distribution side and one on the specialty PNC side. On the distribution business, you called out a couple of specific lines in the market, short-term medical and another one that were weaker. Do you expect that to persist, and how should we think about the prospects for that? Is that temporary? Is that going to be offset, et cetera? And then my question on the specialty PNC side was, I was quite positively surprised by the kind of continued progress there and the combined ratio. Is that expected to be sustainable or how do you expect the combined ratio to evolve there? It seemed like really great progress recently, but is there anything temporary there or how should that look going forward?

Good morning, Deepak. It's Claude here. Thanks for your questions. Starting with the distribution, the softening and some contraction based on market conditions were employer stop loss and short-term medical. And in the employer stop loss area, we've seen a lot of deterioration in that sector of the A&H market. And it's been pretty widespread, so we could consider that more of a macro trend. But we do believe that there could be some stabilization coming in the near future. So that's something that we're keeping an eye on. But staying disciplined in terms of the selection of risk and the pricing of risk in that segment. In terms of short-term medical, that's an area that had some challenges around the past administration. but we do believe it's one that will revert back to a more steady state in the coming quarters with the new administration in place. So I think we feel pretty positive on that one. But overall, on the A&H segment, I'd just like to say various areas in A&H, it's really the ESL that's been the biggest team in the marketplace. I'll let David handle the second question.

Thanks, Deepak. So in terms of Everest really is on profitability of that business, you know, growth is important, but profit is our focus. And, you know, for the quarter there was, you know, certainly some programs we saw improvement on. There were some programs, as I mentioned in some of the remarks, that we saw a deterioration on, and that's ultimately what a balanced book, you know, normally would, how it normally behaved. So I think when we look at our effective loss ratios, looking through what we've booked to in the quarter and what we experience in terms of sliding scales and the like, which offsets some of the benefit on the loss ratio, looking at effective loss ratios in the mid-60s, and that's very much in line with our long-term goals for Everspan, so we view that as something that we're shooting for. There's always going to be some variability based on developments in the markets and whether there is certain losses that are incurred, but over the long-term, the performance of the quarter is consistent with our long-term objectives of the business.

Got it. Thanks. Looking forward to the final close of the legacy business sale, as I suspect you are as well.

Well, Deepak.

Sounds great.

Thank you.

Thank you. Ladies and gentlemen, as there are no further questions, that concludes the question and answer session, and also the conference of AMBAC Financial Group has now concluded. Thank you for your participation. You may now disconnect your lines.