Ambac Financial Group, Inc. (NASDAQ:AMBC) Q3 2019 Earnings Conference Call Transcript

Nov 08, 2019 • 08:30 am ET

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Ambac Financial Group, Inc. (NASDAQ:AMBC) Q3 2019 Earnings Conference Call Transcript

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Presentation
Operator
Operator

Greetings, and welcome to the Ambac Financial Group, Inc. Third Quarter 2019 Earnings Call. [Operator Instructions]

It is now my pleasure to introduce your hosts, Ms. Lisa Kampf, Head of Investor Relations, Claude LeBlanc, Chief Executive Officer and David Trick, Chief Financial Officer. I will now turn the call over to Lisa.

Executive
Lisa Kampf

Thank you. Good morning, and thank you all for joining today's conference call to discuss Ambac Financial Group's third quarter 2019 financial results.

We'd like to remind you that today's presentation may contain forward-looking statements, which are based on management's current expectations and are subject to uncertainty and changes in circumstances. Any forward-looking statements are not guarantees of future performance of events.

Actual performance and events may differ, possibly materially from such forward-looking statements. Factors that could cause this include the factors described in our most recent SEC filed quarterly or annual reports under Management's Discussion and Analysis of Financial Condition and Results of Operation and under Risk Factors. Ambac is not under any obligation and expressly disclaims any obligation to update any forward-looking statements, whether as a result of new information, future event or otherwise.

Today's presentation contains non-GAAP financial measures. The reconciliations of such measures to the most comparable GAAP figures are included in our earnings press release, which is available on our website at ambac.com. Please note that presentations have been posted to the Events and Presentations section of our IR website, which support our comments today.

I would now like to turn the call over to Mr. Claude LeBlanc.

Executive
Claude LeBlanc

Thank you, Lisa, and welcome to everyone joining today's call.

Yesterday, Ambac reported net income of $66.1 million, or $1.41 per diluted share, and an increase in book value per share of $1.66 to $34.44 as at September 30th. Adjusted earnings were $76.8 million, or $1.63 per diluted share for the third quarter, resulting in an increase in adjusted book value per share of $0.74 to $30.31 as at September 30th.

This quarter's favorable results include the realization and recognition of a $142 million cash settlement in connection with the SEC action against Citigroup, which drove our third quarter net income. All proceeds received from the settlement will be used to pay down the secured notes issued in connection with our holistic restructuring transaction. The payment, which will be applied on the next scheduled payment date will allow us to further delever our balance sheet and reduce future interest costs. David Trick will speak to the financial results in greater detail in a moment.

During the quarter, we continued to make significant progress in the de-risking of our insured portfolio. Our insured net par was reduced by approximately $3.2 billion to $39 billion, with $1.5 billion of that decline representing adversely classified and watch list credits. Active de-risking has been the primary driver of the accelerated decline of our insured portfolio, which stands at 17% year-to-date on the overall portfolio and approximately 21% year-to-date on adversely classified and watch list credits.

One of our key de-risking