Ambac Financial Group, Inc.

Greetings and welcome to the AMBAC Financial Group Inc. Fourth Quarter 2020 earnings call. At this time, all participant lines 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 press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your hosts, Ms. Lisa Kemp, Head of Investor Relations, Claude LeBlanc, Chief Executive Officer, and David Trigg, Chief Financial Officer. I will now turn the call over to Lisa.

Thank you. Good morning, and thank you all for joining today's conference call to discuss AMBAC Financial Group's fourth quarter 2020 financial results and its platform diversification strategy. 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 annual report under management's discussion and analysis of financial condition and results of operations and under risk factors. ANVAC is not under any obligation and expressly disclaims any obligation to update any forward-looking statement, whether as a result of new information, future events, 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 anvac.com. Please note that presentations have been posted to the events and presentation section of our IR website, which support our comments today. I would now like to turn the call over to Mr. Claude LeBlanc.

Thank you, Lisa, and welcome to everyone joining today's call. 2020 was an unprecedented year marked by a global pandemic, volatile financial markets, and political and social unrest, which created significant uncertainty and stress on AMBAC's operations, as well as our insured and investment portfolios. Now with sending these challenges, the dedication and commitment of our employees allowed us to navigate through this period and make material progress across all of our strategic priorities, which I will cover in a moment. For the year ended December 31, 2020, MBAC reported a net loss of $437 million, or $9.47 per diluted share, and an adjusted loss of $378 million or $8.19 per diluted share. For the fourth quarter, AMBAC reported a net loss of $14 million or $0.31 per diluted share and adjusted earnings of $4 million or $0.08 per diluted share. At December 31, 2020, our book value was $1.1 billion or $23.57 per share and adjusted book value was approximately $900 million or $20.05 per share. David will discuss the results in more detail shortly. During the year, we remained focused on executing our strategic priorities, namely one, stabilizing the platform by improving our risk profile. Two, loss recovery through the exercise of our contractual and legal rights. exploring ways to rationalize our capital and liability structure. Four, improving the effectiveness and efficiency of AMBAC's operating platform. And five, advancing our new business and diversification strategies. With regards to our de-risking activities, 2020 was very challenging, particularly during the first two quarters as a result of credit market dislocations. During the first half of the year, our risk and surveillance teams perform comprehensive in-depth reviews on credits most susceptible to COVID disruption and related economic recession. We closely monitored these exposures, moving some to the adversely classified category and, where appropriate, established or increased reserves based on our risk assessments. Notwithstanding the challenging market conditions, We were able to execute a few key transactions during this period, including the refinancing of our last remaining Chicago geo exposure would net par of 171 million. As credit markets stabilize and de-risking opportunities began to open up in the second half of the year, we accelerated various initiatives to reduce exposures and mitigate risks, including developing credits we had identified as being most impacted as a result of the pandemic. Key achievements included, one, the improvement of credit and liquidity protection for key COVID stress exposures, including two of our largest insured exposures. Two, the commutation of an international utility transaction with net par standing of 298 million. Three, the refinancing of an international stadium transaction with net par of 217 million. And four, the commutation refinancing and cancellation of several municipal and structured credit exposures. For the year, these and other transactions combined with portfolio runoff decreased our insured portfolio by 11% from $38 billion to $34 billion as of December 31, 2020. Adversely classified and watchlist credits decreased by a net 8% from $14 billion to $13 billion year over year. notwithstanding material offsets relating to the impact of credits added during the year due to our COVID assessment, and two, an increase of over $150 million to the impact of the pound and euro appreciating versus the dollar. Post-year end, we also closed immaterial quota share reinsurance transaction, not reflected on our 2020 results, involving a portfolio of public finance credits with net outstanding of $823 million as at December 31, 2020. This transaction, that closed in January, included general obligation, lease and tax-backed revenue, higher education, and transportation credits, including $160 million of watch lists and adversely classified credits. And I'm also pleased to report that, to date, AMBAC has not paid any direct COVID-related claims. Turning now to Puerto Rico. We remain optimistic about the island's economic recovery over the short and long term as the flow of vital federal recovery, stimulus, and infrastructure funding improves under new local and federal government leadership. While Puerto Rico's economic picture continues to improve and tax collections repeatedly exceed the oversight board's projections, we continue to believe the collective focus of key stakeholders should be on a near-term global resolution to the bankruptcy process. The Oversight Board recently announced a Plan Support Agreement, or PSA, related to Commonwealth obligations supported by 70% of general obligation and public buildings authority bondholders, including, conditionally, support from Assured Guarantee and MBIA. AMBAC disagrees with the PSA as it still contains many of the flaws of the prior PSA, including being based on a fiscal plan with erroneous and misleading financial projections and providing for the use of money belonging to the secured revenue bond holders. In order to reach a consensual, holistic, and permanent solution, we believe material progress needs to be made with key revenue bond creditors, particularly the model lines, who are not likely to support a PSA that fails to respect their legal rights and financing structures. We also believe there are creative and constructive solutions available that could resolve the revenue bonds and avoid further costly litigation and delays while creating new sources of funding and restoring access to the capital markets for Puerto Rico. We remain willing to engage with the Oversight Board and the Commonwealth on a restructuring plan that respects the property rights and security interests of revenue bondholders. Turning now to our loss recovery efforts. In our main case against Bank of America Countrywide, we await a new trial date after the trial scheduled for February was postponed due to COVID. In the meantime, we are appealing the dismissal of our fraud claim. The timing for the trial will depend on a number of factors, including one, the appointment of a new judge for our case following the retirement of Justice Sherwood, two, the calendar of the new judge, and three, the impact of the pandemic on court proceedings, as well as the status of our fraud appeal. At this point, we believe the trial could take place in the next 12 months, but it could be later based on these and other variables. On a related note, we were pleased to see the trial court's decision in MBIA versus Credit Suisse late last year. We believe the decision strongly validates the strength of RMBS contract claims and the value of free judgment interest. Turning to our efforts to rationalize our capital and liability structure. During the year, we further delivered the balance sheet with additional early redemptions of the secured note by $121 million. which brings our total senior note redemptions to over $500 million. With regards to the investment portfolio during 2020, we progressed our goal to broaden diversification and improve risk adjusted returns. And despite the first quarter market turmoil created by the pandemic and other headwinds, we delivered a total return of approximately 4.1% for 2020, entirely driven by strong performance in the last nine months of the year. Such performance was aided by our ability to reallocate assets to take advantage of opportunities created by the first quarter turmoil. With regards to our operating platform, operating expenses for 2020 decreased $10 million from the prior year, reflecting our focus on reducing core operating expenses and the implementation of sustainable reductions to long-term operating expenses related to our legacy business. We do, however, expect some volatility in expenses and increasing expenses related to our new business operations. In conclusion, I am very pleased with our accomplishments in 2020. We believe that our actions taken in prior years to stabilize our insurance platform, simplify our capital structure, and manage our operating costs favorably positioned us to successfully navigate these challenges. In 2021, we remain committed to all of our strategic priorities as we continue to build on our efforts to enhance long-term shareholder value. I will now turn the call over to David Trick to discuss our financial results for the fourth quarter. After his remarks, I will return to discuss our new business strategy. David.