Ambac Financial Group, Inc. (AMBC) Q2 2025 Earnings Call Transcript

Access earnings results, analyst expectations, report, slides, earnings call, and transcript.

Overview

The earnings call summary shows strong premium growth and successful MGA startups, despite a small adjusted EBITDA loss. The Q&A highlights management's optimism for future quarters, especially with seasonal strengths in Q1 and Q4. The lack of specific guidance might concern some, but the overall positive outlook, including expected market conditions and strategic focus areas, suggests a potential stock price increase.

Key Financial Performance

Premium $346 million, up 110% year-over-year. The increase was driven by strong growth in operating businesses.

Revenue $54 million, up 20% year-over-year. Growth attributed to the performance of operating businesses.

Cirrata Premium $250 million, up 368% year-over-year. Growth driven by organic expansion via new MGAs and scaling of recently launched MGAs.

Net Loss from Continuing Operations $21 million, compared to a loss of $15 million in Q2 2024. The higher loss was due to a $14 million combined increase in intangible amortization and interest expense related to the July 2024 acquisition of Beat.

Adjusted EBITDA from Continuing Operations Loss of $5 million, compared to a sub $1 million loss in Q2 2024. The reduction was due to lower investment income and lower net cost reimbursements despite improvements in business segments.

Total Revenues from Continuing Operations $55 million, up 8% year-over-year. Growth driven by the acquisition of Beat, offset by a reduction in earned premium at Everspan.

Insurance Distribution Revenue $33 million, up 148% year-over-year. Growth driven by the acquisition of Peak Capital, partially offset by contraction in ESL and short-term medical.

Everspan Gross Premium Production $96 million, down 13% year-over-year. Decline due to underwriting decisions made in the prior year.

Everspan Loss Ratio 67.8%, improved from 85.1% in Q2 2024. Improvement attributed to underwriting actions.

Everspan Expense Ratio 38.9%, up from 24.3% in Q2 2024. Increase driven by lower earned premium base and reduced sliding scale commission benefits.

Everspan Combined Ratio 106.7%, down 270 basis points from 109.4% in Q2 2024. Improvement due to better underwriting performance.

You have reached the limit. Sign up to access full content

Get started

Operating Highlights

Hammurabi AI acquisition: Ambac secured a controlling interest in Hammurabi, a San Francisco-based AI business, to enhance A&H product growth and performance. The technology has received favorable market reactions and will begin binding business in Q4 2025.

Cirrata MGA expansion: Cirrata generated $250 million in premium for Q2 2025, up 368%. Organic growth is driven by new MGAs and scaling of recently launched MGAs. Two of six 2024 de novo MGAs achieved profitability within 12 months.

Expense realignment and operational efficiencies: Ambac plans to implement a new target operating model to improve organizational efficiencies and reduce expenses within 120 days post-sale of its Legacy business.

Everspan underwriting improvements: Everspan's loss ratio improved to 67.8% in Q2 2025 from 85.1% in Q2 2024 due to underwriting actions. The combined ratio also improved to 106.7%.

Sale of Legacy financial guaranty business: The Wisconsin OCI recommended approval for the sale of Ambac's Legacy financial guaranty business, with a hearing set for September 3, 2025. This sale is a key step in the company's transformation.

Strategic initiatives post-sale: Ambac plans to rebrand, realign expenses, invest in data and AI technologies, and execute on strategic opportunities to accelerate growth of its P&C business into 2026.

You have reached the limit. Sign up to access full content

Get started

Risk or Challenges

Regulatory Approval Delays: The sale of the Legacy financial guaranty business is contingent on final approval from the Wisconsin OCI. Any delays or failure to secure this approval could hinder the company's strategic initiatives and transformation plans.

Earnings Volatility: The company expects continued volatility in earnings due to expenses related to the separation from the legacy business and repositioning of operations for a leaner future state.

Foreign Exchange Losses: The company experienced $2.5 million in foreign exchange losses due to U.S. dollar-based assets on Beat's balance sheet, which could impact financial performance if such losses persist.

Expense Ratio Challenges: Everspan's expense ratio increased to 38.9% from 24.3% in the prior year, driven by lower earned premium and other expenses, which could pressure profitability if not managed effectively.

Market Turbulence in ESL and Short-Term Medical: The company faced contraction in the ESL and short-term medical markets, which impacted revenue. Although signs of stabilization are emerging, continued turbulence could affect growth.

Start-Up Expenses Drag: Start-up expenses related to new MGAs created a $2.1 million drag on margins, impacting short-term profitability.

Interest Expense Increase: Interest expenses increased by $6 million due to short-term financing, which could strain financials until repaid with proceeds from the legacy business sale.

Underwriting Challenges at Everspan: Everspan's gross premium production declined by 13% year-over-year due to underwriting decisions and rebalancing of capital allocation, which could limit growth if not addressed.

You have reached the limit. Sign up to access full content

Get started

Guidance & Outlook

Organizational Rebrand: The company plans to rebrand itself within the first 120 days following the close of the AAC sale.

Executive Compensation Program: A new executive compensation program aligned with the new business structure will be implemented.

Expense Realignment: Corporate expenses will be realigned to improve efficiency and reduce costs.

Target Operating Model: A new operating model will be implemented to enhance organizational efficiencies and reduce expenses.

Capital Management Plan: The company will progress its capital management plan to optimize financial resources.

Investment in Data and AI Technologies: Continued investment in data and AI technologies to drive growth and operational improvements.

Strategic Opportunities: Execution on a strong pipeline of organic and strategic opportunities, many of which are well advanced.

Growth of P&C Business: The company expects material acceleration in the growth of its P&C business into 2026.

New MGAs Profitability: New MGAs are expected to achieve profitability within 18 to 24 months, with 4 out of 6 2024 start-ups projected to be profitable in 2025.

ESL Market Stabilization: The ESL markets are beginning to stabilize and show early signs of improvement.

A&H Sector Growth: The A&H sector is expected to continue its strong performance and growth.

Hammurabi AI Technology: The proprietary technology from Hammurabi is anticipated to enhance growth and performance in the A&H businesses, with new capacity to begin binding business in Q4 2025.

Everspan Underwriting Performance: Everspan is expected to benefit from underwriting actions and capital management improvements, with new programs anticipated to be accretive to both Everspan and Cirrata MGAs.

Expense Ratio Improvement: The expense ratio is expected to improve as earned premium and fee-based income expand.

Long-term Adjusted EBITDA Goal: The company targets $80 million to $90 million of adjusted EBITDA to Ambac common shareholders by 2028.

You have reached the limit. Sign up to access full content

Get started

Shareholder Return Plan

The selected topic was not discussed during the call.

You have reached the limit. Sign up to access full content

Get started

Key Q&A

Q:Within Everspan, you talked about some movement there, a shift out of certain assumed programs, the nonstandard auto, the GL that put some pressure on premium in the quarter. Last year, you did close to $400 million. Do you anticipate that this kind of -- the runoff is going to have a similar impact in coming quarters? Does that stabilize? Is there any kind of goal for 2025 we should think about in terms of gross written at Everspan?

A:David Trick stated that the priority for Everspan is profitability, with growth being a key component. They estimate around $400 million of gross premium for this year and do not plan to push beyond that unless they are satisfied with the programs and expected loss ratios. The gross premium is expected to stabilize around $400 million for the year.

Q:How about net? Net to gross was bit lower this quarter, I think, 16%. Last year, you've been running in kind of the low 20s. Is that just a seasonal effect? Or is this a good number on a go-forward basis?

A:David Trick explained that the net to gross ratio was impacted by assumed programs with 100% net to gross. Going forward, net retention levels are expected to average between 15% and 20%, with no hard target but within the range of 0% to 30%.

Q:In the distribution business, the gross premium is placed obviously up sharply with Beat acquisition. Commission income relative to gross premiums placed. Your premiums placed were up sequentially, then the commission income was down sequentially. What drives that? And is that also -- or is that potentially a seasonal issue?

A:David Trick attributed the variation to seasonality and differences in reporting frameworks. Beat reports commissions on a net basis, unlike other businesses that report on a gross basis. The mix of business between Beat and non-Beat businesses also contributes to variations in commission levels.

Q:The organic growth, obviously, with Beat and Beat on its own generating very good organic, the reported kind of down 2 to 3. I hear what you're saying on the medical, A&H and that's stabilizing, getting better. Is that going to kind of flip in the fourth quarter? How do you think about Q3? Is it still feel likely to be under a little bit of pressure?

A:Claude L. LeBlanc noted stabilization in the A&H space and mentioned seasonality and business mix impacting growth. The third and fourth quarters are expected to be strong, with the first and fourth quarters historically being the strongest.

Q:The property business within the distribution that was what may be about 1/3, a little less than 1/3 of the total premiums placed. How is your experience kind of within property given that's been a softer market. I wonder if you could kind of characterize what kind of end markets you're focused on within that property and then how that might have performed year-over-year, understanding this was kind of the first year with that line, I think, within distribution?

A:Claude L. LeBlanc stated that they focus on non-cat-exposed property and smaller property markets, avoiding large property markets with significant price pressures. Declines in property premiums have been mid-single-digit on average, with diversification in other lines like Specialty and Casualty offsetting these pressures.

Q:I appreciate the progress on all the fronts. Just wanted to make sure I understood some of the call-outs you had on the onetime items on FX and start-up losses. So $2.5 million of FX translation losses and then $2.1 million of start-up losses. And then can you remind me, last quarter for Q1, what the amounts were for those in the numbers? I think it was sort of a little bit lower in each of those.

A:David Trick confirmed that startup costs in Q1 were about $800,000 and FX losses were $1.4 million, both lower than the current quarter's $2.5 million FX losses and $2.1 million startup losses.

Q:If I look at that like if I kind of add those back in adjusted EBITDA, you kind of have $5 million of EBITDA going to on an adjusted basis, $9 million for this quarter and then in Q1 $12 million that's kind of more like $14 million. That's on a pre- noncontrolling interest basis. And then, of course, if that kind of take pro rata, the impact of the noncontrolling interest, the EBITDA to stockholders would seemingly be for this quarter, we had $2.4 million, which is kind of more like $4.8 million adjusted. And then last quarter, $7.1 million that I guess would be more like $8.4 million. So I guess for the first half of this year on an adjusted basis, have got EBITDA to stockholders that's more like a little above $13 million. And then I know there's seasonality where Q1 and Q4 are typically the strongest quarters and then it's lighter in Q2 and Q3. Is Q4 expected to be typically stronger than Q1? Now that you have Beat, which I think has a different seasonality profile?

A:David Trick agreed that seasonality impacts quarters, with Q4 expected to be the strongest quarter for the year. He acknowledged the analysis but refrained from confirming specific guidance.

Q:So kind of it would be a reasonable expectation to think on an adjusted basis, we have kind of a little above $13 million in the first half, a little above $13 million in the second half given the seasonality at the minimum. So we're kind of talking about closer to $30 million on an adjusted basis for the full year and then presumably kind of double-digit organic growth once you incorporate Beat. So something north of that going forward. Is that fair?

A:David Trick acknowledged the analysis as reasonable but reiterated that no specific guidance has been provided.

Q:Review of Unclear Management Responses

A:Management avoided providing specific guidance on future financial performance, including adjusted EBITDA and organic growth projections, despite acknowledging the reasonableness of the analyses presented by analysts.

You have reached the limit. Sign up to access full content

Get started

Earnings Word Cloud

The most frequently occurring keywords in this quarter's earning call

AMBC Transcript

Ambac Financial Group, Inc. (AMBC) Q3 2025 Earnings Call Transcript

Unknown11-11

The earnings call presents a mixed picture: strong growth in the Insurance Distribution segment and share repurchases are positive, while increased losses and declining Everspan premiums are negative. The Q&A reveals confidence in capacity and strategic growth, but management's vague responses about capital allocation and premium projections may raise concerns. Overall, strong growth in some areas is offset by financial losses and uncertainties, leading to a neutral sentiment.

Ambac Financial Group, Inc. (AMBC) Q2 2025 Earnings Call Transcript

Positive8-8

Ambac Financial Group, Inc. (AMBC) Q1 2025 Earnings Call Transcript

Unknown5-13

Despite strong revenue growth driven by acquisitions, Ambac faces challenges including increased net losses, rising expenses, and competitive pressures. The lack of a share repurchase program and unclear management responses in the Q&A section add to investor concerns. The absence of guidance revisiting and significant financial instability further contribute to a negative sentiment. These factors, along with the market risks and regulatory uncertainties, suggest a likely negative stock price movement in the short term.

Ambac Financial Group, Inc. (AMBC) Q4 2024 Earnings Call Transcript

Unknown2-27

The earnings call presents mixed signals: strong revenue growth due to acquisitions and improved underwriting performance, but also significant net losses and increased expenses. The Q&A reveals uncertainties in market conditions and management's vague responses, which may concern investors. The accelerated share buyback program is a positive, but the lack of explicit shareholder return plans and unclear guidance on future profitability contribute to a neutral sentiment. The stock's reaction is likely to be muted in the absence of a market cap context.

AMBC Slides

Ambac Q2 2025 slides: Premium growth surges 110% amid ongoing transformation

2025-08-07

AMBC Report

AMBAC FINANCIAL GROUP INC 10-Q

10-Q

2024-11-12

AMBAC FINANCIAL GROUP INC 10-Q

10-Q

2024-08-05

AMBAC FINANCIAL GROUP INC 10-Q

10-Q

2024-05-06

AMBAC FINANCIAL GROUP INC 10-K

10-K

2024-02-27

Frequently Asked Questions

Where does this earnings call transcript come from?

All transcripts are sourced directly from the official live webcast or the company’s official investor relations website. We use the exact words spoken during the call with no paraphrasing of the core discussion.

How soon is the transcript available after the earnings call ends?

Full verbatim transcripts are typically published within 4–12 hours after the call ends. Same-day availability is guaranteed for all S&P 500 and most mid-cap companies.

Is the transcript edited or altered in any way?

No material content is ever changed or summarized in the “Full Transcript” section. We only correct obvious spoken typos (e.g., “um”, “ah”, repeated 10 times”, or clear misspoken ticker symbols) and add speaker names/titles for readability. Every substantive sentence remains 100% as spoken.

Why do some answers appear as “Unclear” or “Inaudible”?

When audio quality is poor or multiple speakers talk over each other, we mark the section instead of guessing. This ensures complete accuracy rather than introducing potential errors.

Who creates the AI Summary and Key Q&A highlights shown above the transcript?

They are generated by a specialized financial-language model trained exclusively on 15+ years of earnings transcripts. The model extracts financial figures, guidance, and tone with 97%+ accuracy and is regularly validated against human analysts. The full raw transcript always remains available for verification.