Greetings! And welcome to the Ambac Financial Group, Inc., First Quarter 2025 Earnings Call. At this time all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to turn the call over to Charles Sebaski, Head of Investor Relations.

Thank you. Good morning and welcome to Ambac's first quarter 2025 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. For those of you following along on the webcast, during the prepared remarks, we'll be highlighting some slides from our 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 do not undertake any obligation to update 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 earnings press release, operating supplement, and other materials in the Investor Section on our website.

Thank you, Chuck. And welcome to everyone joining today's call. Ambac's Insurance Distribution and Specialty Program business got off to a very strong start in 2025, producing $318 million of premium, up 70%, and generating $63 million of revenue, up 27%, both from the prior period last year. This growth was primarily attributable to our Beat acquisition, which alone contributed over $20 million of revenue in the quarter, representing growth of approximately 40% from Beat's results in the first quarter of 2024. Looking at our Distribution business segment, Cirrata generated over $230 million of premium for the quarter, up 156%. We are starting 2025 with a much larger stable of startup MGAs than anticipated due to the successful launch of six new MGAs during 2024, which we believe will support strong organic growth into the future. While we expect new MGAs to attain profitability in 18 months to 24 months on average, two of the six Class of 2024 startups achieved profitability in the first 12 months. For the first quarter, organic growth, excluding the Beat acquisition, had a bit of headwind, contracting 2%, primarily driven by our pullback in ESL and short-term medical business due to the continued industry turbulence, which we outlined last quarter. Excluding our pullback in these two lines of business, our organic growth for the quarter would have been almost 12%. I would also like to point out that these figures are measured on a subset of MGAs, given that we do not include organic growth for 12 months post an acquisition. If Beat had been included in the organic growth computation this quarter, our consolidated organic growth would have been approximately 17% across all lines. One of our key strategic tenets is maintaining profitable underwriting results for our capacity and capital providers throughout market cycles. While the market has seen challenges in ESL, we believe market conditions are stabilizing and beginning to turn favorable for growth. A&H lines of business are very diversified as a class and less correlated to the broader P&C market, which makes them an attractive revenue and earnings diversifier to our overall portfolio. Beyond MGA startups, the other areas of focus that we believe will further materially enhance the organic growth of our platform include; one, enhancement of risk capacity for our syndicates and our portfolio companies; two, product expansion and diversification; three, distribution expansion to drive synergies across our platform. Relative to some of our competitors, we have enormous white space to fill, and in line with the growth we have experienced to date, we see a lot of runway ahead of us for future growth, whether that is in the form of organic, inorganic, or product expansion from within our portfolio. In addition, we have a unique business model which we believe positions us well to attract top industry talent to our platform well into the future. Turning now to Everspan's results for the quarter, Everspan continues to manage through the underwriting decisions made last year, with a team focused on rebalancing capital allocation for expanding primary affiliate and market opportunities, with a de-emphasis on assumed programs. As a result, Everspan's gross premiums written were approximately $87 million, down 10% from the prior year, while our loss ratio improved nearly 9%, or 880 basis points. This reduction in premium written increased Everspan's expense ratio, resulting in a combined ratio of 102% for the quarter. We believe the expense ratio will begin to trend more favorably in coming quarters as we migrate the portfolio and further scale our business. Turning to our legacy business. While outside of our control, the OCI approval process for the sale of our legacy business continues, and we look forward to the completion of the sale to effectuate our transformation to a pure play specialty P&C insurance business.

Thank you, Claude. And good morning, everyone. For the first quarter of 2025, Ambac generated a net loss from continuing operations to shareholders of $16 million, or $0.58 per share, compared to a loss of $4 million, or $0.09 per share, in the first quarter of 2024. This continued operations produced a net loss of $30 million, or $0.64 per share, in the first quarter of 2025. As a reminder, the financial performance of our Legacy Financial Guarantee business reported through discontinued operations has no impact on the economics of the pending sale transaction despite its inclusion in our consolidated financial results. This quarter, EPS included approximately $0.23 per share of headwind from the change in carrying value of redeemable non-controlling interest as a result of the execution of option agreements with regards to certain of the minority interests underlying the Beat, MGA. Adjusted EBITDA from continuing operations to stockholders was a loss of $1 million compared to a slight profit in the first quarter of 2024. Total revenues from continuing operations were up 27% to $63 million in the first quarter compared to the first quarter of 2024, driven primarily by the acquisition of Beat. Total expenses from continuing operations of $78 million compared to $53 million in the first quarter of 2024. Compared to last year, the increase in expenses was driven by a $21 million increase in general and administrative expenses, including $15.5 million related to the acquisition of Beat and transactional expenses. An $8 million increase in intangible amortization related to the Beat acquisition and interest expense of $5 million related to the short-term Beat financing that would be repaid with the proceeds from the sale of the legacy business. These increases were partially offset by lower losses incurred by Everspan. The Cirrata revenue increased by 129% compared to the first quarter of 2024 to $41 million. The growth was driven primarily by the acquisition of Beat Capital and strength in specialty commercial auto, partially offset by headwinds in certain A&H lines and deceleration in property line pricing. On an operating basis, that is before the impact of non-controlling interest, Cirrata produced $12 million of adjusted EBITDA on a 29.5% margin compared to $5 billion on a 28.7% margin in the first quarter of 2024. The Cirrata contributed adjusted EBITDA to shareholders of $7.1 million for the quarter at a 17.3% margin, up 69% compared to $4.2 million at a 23.5% margin for the first quarter of 2024. The lower margin in first quarter of 2025 versus first quarter of 2024 related to the impact of non-controlling interest in Beat. The impact of non-controlling interest on bottom line margins may flex a bit quarter-to-quarter depending on the relative performance of each underlying MGA compared to our ownership level. But will converge over time with margins on an operating basis as we buy in portions of the non-controlling interest. Everspan's net written and net earned premiums in the quarter were $18 million and $16 million, down from $26 million and $26 million respectively from the prior year period due to the previously announced non-renewal of a personal alliance NSA reinsurance program and step back from a certain commercial auto program. The loss ratio of 66.9% in the first quarter of 2025 improved from 75.7% in the first quarter of 2024. The quarter benefited from these underwriting actions and is performing more in line with our longer-term expectations. The expense ratio of 35.2% in the first quarter of 2025 was up from 22.7% in the prior year quarter. This increase was driven by the prior year period having a 6% benefit from sliding scale commissions compared to no benefit this quarter and the lower earned premium base. The resulting combined ratio for the first quarter of 102.1% is up 370 basis points from 98.4% last year to date. For the quarter, Everspan produced under $2 million of adjusted EBITDA to stockholders, slightly less than the result for the first quarter of 2024. AFG on a standalone basis, excluding investments and subsidiaries, had cash, investments and net receivables of approximately $104 million or $2.25 per share.

Thank you, David. As we wait for final regulatory approval for the sale of our legacy business, we have set our sights squarely on the growth of our Specialty P&C business where market conditions present significant opportunities to scale our platform. We believe the unique value proposition of our platform, which includes; one, access to managed capacity; two, permanent capital with access to future growth capital; three, an aligned partnership model; and four, a technology-focused shared service model committed to the development of strong data and AI capabilities and providing key risk and underwriting oversight to our MGA businesses, not only strengthen our position in the market, but also enhances our appeal to MGA partners and capacity providers. The overall attractiveness of this value proposition was evidenced by our ability to launch six new MGAs last year, led by recognized industry leaders, each of whom had many options and partners to build their businesses. As I've noted previously, we are building our business for the long term, and as our business model continues to resonate in the specialty MGA and delegated authority program space, I believe we are well-positioned to achieve our long-term goals of generating $80 million to $90 million of adjusted EBITDA to Ambac's common shareholders in 2028. I look forward to updating you on our progress in the coming quarters.

Thank you. We will now be conducting a question-and-answer session. One moment, please, while we poll for questions. The first question we have is from Maxwell Fritscher of Truist Securities. Please go ahead.

Hi, good morning. I'm on from Mark Hughes. When you're ramping up these MGAs, how important is staffing to the top-line growth? And then off that, what are you seeing in the market in terms of recruiting, hiring, and retaining experienced people?

Thanks for the question, Mark, and good morning. Yes, staffing is something that we look at for individual MGAs, but we're also exploring it, again, depending on the niche and the specialization of the MGA on a shared service basis. So it's something that we look at both holistically and for individual MGAs. And I would say the opportunities for staffing and growth are significant. I think the attractiveness of our business model, which I outlined a few minutes ago, along with a strong recruitment effort for top talent, has served us well, both for producers as well as strong underwriting talent. And we see a deep pipeline of those opportunities in our queue.

Understood. And then could you provide an update on your mix of property versus casualty and how that's impacting the outlook for growth? And anywhere you're seeing more opportunity?

Sure, Max. So property is a critical part of the platform. Most of our property business comes out of the Beat platform. So I would say that going forward, the liability side of the book is going to be the primary source of growth. That's our casualty-focused business. We're certainly focused on diversifying the book continuously. We still find attractive the property side of the business. As you know, pricing has started to soften a bit in that sector, but we still find the returns there are very attractive. So the key has been to diversify different segments of the property space that we're operating in. The other area that we find particularly attractive as well is the A&H space, which is an important component of the platform going forward.

Got it. Thank you. And then just more broadly, can you comment on the competitive environment?

The competition is certainly out there and I'd say growing in certain areas of the market. But again, we believe that our differentiation with our capacity relationships and access to managed capacity, and our differentiators on our model allows us to attract top talent in our business. The competition with other business models, again, we do see it and it is more frequent and it is something that we're keeping a close eye on.

Great. Thank you for taking my questions. There are no further questions at this time. And this concludes today's teleconference. We thank you for participating. You may disconnect your lines at this time. Thank you.