Ambac Financial Group, Inc.

Greetings and welcome to the AMBAC Financial Group, Inc. First Quarter 2021 Earnings Call. At this time, all participants are placed 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 Kumpf, Head of Investor Relations, Claude LeBlanc, Chief Executive Officer, and David Trick, 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 ANVAC Financial Group's first quarter 2021 financial results. We'd like to remind you that today's presentation may contain forward-looking statements about our business, including but not unlimited to new business, credit outlooks, market conditions, credit spreads, financial ratings, loss reserves, loss mitigation, loss recovery, investment returns, or other items that may affect our future results. These statements 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 in 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 report under management discussion and analysis of financial conditions and results of operations and under first 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 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 ambac.com. Please note that presentations have been posted to the events and presentation sections of our IR website, which support our comments today. I would now like to turn the call over to Mr. Claude LeBlanc.

Claude LeBlanc Thank you, Lisa, and welcome to everyone joining us on today's call. This morning, AMBAC reported net income of $17 million or $0.08 for diluted share and adjusted earnings of $41 million or $0.59 per diluted share for the first quarter. At March 31, our book value was $1.1 billion, or $23.02 per share, and adjusted book value was $908 million, or $19.66 per share. Our first quarter results were positively impacted by material progress on our strategic priorities, including gains of $37 million realized from our junior surplus note transaction and the inclusion of operating results from our new MGU platform exchange. We also regained significant de-risking momentum during the quarter and maturely progressed our specialty property and casualty insurance strategy. Starting with a review of our de-risking activities, net power exposure was $31.4 billion at March 31, down 7% from year-end, and watchlist and adverse declassified credits were $12 billion at March 31, down 8% from December 31. Active de-risking transactions accounted for 56% of the total decline in net par exposure for the quarter. Notable transactions completed include, one, the execution of a material reinsurance transaction for certain public finance credits with net par outstanding of approximately $823 million. Parse seated included general obligation, lease and tax back revenue, higher education and transportation exposures, as well as $158 million of watch lists and adversely classified credits. Two, the successful exit of our Mets-Queens baseball stadium exposure, a $540 million adversely classified credit via the refinancing and quota share reinsurance transaction. And lastly, the negotiation of additional credit and liquidity improvements for AUK's largest COVID-affected exposure. The U.S. economy is experiencing a strong recovery year-to-date, with U.S. GDP expected to have grown at an annualized rate of approximately 9% in the first quarter. Higher retail sales, increased manufacturing output, and government stimulus, including the $1.9 trillion American Rescue Plan Act, with $350 billion slated for state and local governments, together with other fiscal and monetary stimulus in 2020, are driving the strong economic recovery. Additional stimulus could come from the American Jobs Plan and $1.5 trillion projected in discretionary spending in the U.S. budget for 2022. Given these strong economic conditions, we remain cautiously optimistic about the outlook for our insured portfolio, which we believe will continue to improve, particularly as vaccination rates continue to increase. Turning now to Puerto Rico. As reported on May 5th, the Oversight Board has reached a plan support agreement with Assured Guarantee and MBIA, amongst other creditors. This agreement impacts two of our revenue bond exposures, HTA and CCDA. However, the agreement does not include PRIFA, our largest remaining Puerto Rico exposure. AMBAC is not a signatory to the plan support agreement. However, we continue to believe that a consensual negotiated settlement leading to a global resolution of Puerto Rico's bankruptcy is in the best interest of the Commonwealth. Barring such a settlement, AMBAC will continue to pursue all of its legal rights and remedies to arrive at a resolution that respects the property rights and security interests of revenue bondholders. We are firmly of the opinion that Puerto Rico has ample debt-paying capacity to structure a reasonable outcome on revenue bonds. This can be achieved in a way that would not impinge on the Commonwealth's ability to flourish economically and to serve its residents who have had to suffer through this lengthy and costly bankruptcy process. Regarding our loss recovery efforts, our fraud appeal in our main case against Bank of America Countrywide was argued in April, and we expect a decision from the First Department within the next couple of months. We are preparing to go to trial with or without our fraud case. Assuming no change or developments that could impact the timing or nature of our case, we hope that Justice Robert Reid, recently appointed to our case, will schedule a trial date for the second half of this year or early 2022. With regards to our capital management initiatives, during the quarter, We executed a note exchange transaction resulting in the acquisition of all outstanding junior surplus notes in exchange for the issuance of surplus notes. This resulted in the extinguishment of $76 million in debt and accrued interest. David will speak to these transactions in more detail in a moment. Turning now to our new business initiatives at AFG. The P&C industry continues to report healthy rate increases, and we expect pricing will continue to outpace estimated lost cost trends, leading to improved underwriting margins. We believe that the improvements in combined ratios across the industry present a tremendous opportunity to generate strong risk-adjusted returns as we rapidly progress the ramp-up of Everspan and our P&C specialty business. Everspan Group has made significant progress following its launch in February. Our license expansion initiatives for Everspan Insurance, our specialty admitted carrier, has progressed materially, and Everspan now has full P&C authority in 26 jurisdictions. Everspan Indemnity, our surplus lines carrier, is authorized for excess and surplus lines in all 50 states and is whitelisted in a majority of the states that maintain a registry. I'm also pleased to report that Everspan's first program was recently launched with Cardigan General Insurance Services, a subsidiary of Venbro Group, and a nationally recognized managing general agency that focuses on specialty programs and services. We are very excited about the Everspan-Cardigan partnership, which will allow Cardigan to enhance their specialty transportation product offering and diversify their state footprint. Our first program was also backed by a strong and highly rated reinsurance panel. Our management team's expertise and collaborative field structuring approach has been positively received in the market. Everspan has a significant number of submissions under active review, and we expect that continued favorable market conditions will provide a robust program pipeline for Everspan in the coming quarters. We are also exploring a number of strategic initiatives, including the potential acquisition of additional shell carriers to support Everspan's short- and long-term objectives. Turning now to Exchange. The acquisition of Exchange under Pillar 2, which encompasses fee-based MGA and MGU businesses, was accretive to our first quarter results, and we were pleased with our team's performance during the quarter. With strong renewals on its employer stop-loss business and growing revenue generation in its affinity business, Exchange is well positioned for growth in the coming quarters. Consistent with its strategy, the team is pursuing opportunities for product diversification and expansion of its strong panel of insurance care relationships, as well as opportunities to develop additional revenue sources. We're also actively exploring opportunities to grow the MGA-MGU program manager business via additional acquisitions and or partnerships, as well as the establishment of de novo model line MGAs in targeted specialty P&C lines of business. With regards to Pillar 3, we continue to actively explore various investment opportunities in businesses which are complementary to our Pillar 1 and Pillar 2 strategies. I will now turn the call over to David to discuss our financial results for the quarter. David?