Ambac Financial Group, Inc.

Greetings and welcome to AMBAC Financial Group Incorporated's second quarter 2021 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 call is being recorded. It is my pleasure to introduce your host, Ms. Lisa Kemp. 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 AMBAC Financial Group's second 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 limited to new business, credit outlook, 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 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 operations and under risk factors. AMBAC 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 AMBAC.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 us on today's call. Since our last earnings call, we made material progress on our key strategic priorities leading to the further stabilization of our legacy insurance platforms and the advancement of our new specialty P&C insurance business. Major developments for the quarter include, first, AMBAC's endorsement of Puerto Rico's plan support agreements, which paves the way towards a resolution of all of our exposures. Second, the continued reduction in the net par of our insured portfolio and significant de-risking of watch list and adversely classified credits. Third, the launch of a senior secured note offering, which successfully closed post-quarter end, providing us with enhanced financial flexibility at a lower carry. Fourth, the strong market receptivity to Everspan's launch, driving a robust pipeline of specialty program submissions. And finally, as announced earlier this week, the addition of a new director to our holding company board, Ms. Lisa Iglesias. I am very pleased to welcome Lisa, who was appointed to the AFG and AAC boards as of August 4th. Lisa brings with her a wealth of insurance industry experience, which will broaden our board's market and industry competencies as we continue to progress our strategic priorities. We also announced the departure of Alex Green, a member of our board since 2015. Alex has been a valued board member, and it has been my sincere pleasure to work with him. His insight, dedication, and guidance throughout his tenure on the board have been invaluable. I would like to thank Alex for his tremendous contributions to AMBAC and wish him the very best in his future endeavors. Turning now to our second quarter review, AMBAC reported a net loss of $29 million or $0.63 per diluted share and adjusted loss of $13 million or $0.30 per diluted share for the second quarter. At June 30, 2021, AMBAC Our book value was approximately $1.1 billion, or $23.01 per share. And adjusted book value was $889 million, or $19.25 per share. David will discuss our financial results in more detail in a moment. Looking at our insured portfolio, net par exposure was $30 billion at June 30th, down 4% from March 31st. More importantly, AMBAC's watch list and adversely classified credits were reduced to $11 billion at June 30th, down 8% from last quarter. Over $600 million of the decrease in net par exposure was tied to our proactive de-risking efforts, including the partial commutation of an infrastructure credit and the reinsurance of a structured insurance credit. Moving now to Puerto Rico. On July 27th, AMBAC reached a settlement on our insured preferrum tax exposure. We also became a party to agreements for our GO, PBA, HTA, and CCDA exposures that were previously entered into by Puerto Rico's Oversight Board and other major creditors. This is a significant achievement for AMBAC following years of effort to arrive at a holistic, consensual agreement with Puerto Rico's Oversight Board. Settlement consideration for our proof of exposure is comprised of three components. One, cash. Two, a contingent value instrument, or CVI, tied to the future financial performance of Puerto Rico's sales and use tax. This CVI instrument is the same one being offered for the other revenue bond instrumentalities. And three, a second CVI tied to the future collections of Puerto Rico's rum tax. We refer to the two CVIs as a double-barreled arrangement because together they constitute an enhanced and diversified cash flow recovery when the Commonwealth receives excess from tax collections, as opposed to the single sales and use tax CVI for the other revenue bonds. While the value of these instruments is subject to credit, market, and other risks, As Puerto Rico emerges from bankruptcy and its government and economy stabilizes, we believe the double-barreled CVI structure will provide enhanced recoveries for our peripheral bonds. With AMBAC and FIGIC joining the other financial guarantors, Puerto Rico is now much closer to exiting bankruptcy with broad consensual creditor support for the Commonwealth's proposed plan of adjustment. A confirmation hearing has been scheduled to begin on November 8th of this year with a possible effective date sometime late in the fourth quarter or sometime during the first quarter of 2022. We will have greater visibility regarding the ultimate impact of the settlement for AMBAC in the coming quarters as the bankruptcy process moves forward. The net impact of our settlement had a negligible effect on our aggregate Puerto Rico net reserve estimates for the quarter. On the litigation front, our team continues to prepare for trial on our contract claims against Bank of America Countrywide. And as we've previously stated, we are eager to get a trial date scheduled as soon as possible. Turning now to the management of our capital structure. Immediately post-quarter end, we closed on a senior secured debt offering, effectively refinancing our current senior secured notes. We seized the opportunity to take advantage of favorable market conditions and extend the term of the current note from 2023 to 2026. While we certainly do not expect our main RMBS litigation to last until 2026, we believe it was prudent to extend the tenor of the notes to provide AMBAC enhanced financial flexibility. David will provide additional details about the debt refinancing in a moment. Turning now to our new business initiatives at AFG, the P&C industry continues to report healthy rate increases in most classes of business, and we believe that pricing will continue to outpace estimated loss cost trends in the near to medium term, leading to improved underwriting margins. Everspan Group, our specialty P&C insurance platform, has made significant progress following its launch in February. Everspan Insurance, our admitted carrier, now has full PNC authority in 40 jurisdictions. Everspan Indemnity, our surplus lines carrier, is authorized for access and surplus lines in all 50 states and is whitelisted in the majority of the states that maintain your registry. Everspan's first program with Cardigan related to non-emergency medical transport began writing insurance coverage in May. Since its launch, Everspan has seen a robust program pipeline with submissions across various classes of business and distribution sources. The Everspan team anticipates launching additional programs in the third quarter. To further build out Everspan Group, we have filed form A's for several additional shell carriers to add to our platform. These form A's are pending regulatory approval and we hope to close on the acquisitions as early as the fourth quarter. The addition of these shelves will support a diverse portfolio of programs and minimize the chance that our business partners encounter channel conflicts. Turning to Pillar 2 of our specialty program insurance strategy, which encompasses fee-based MGA and MGU businesses, including Exchange. Exchange continues to perform well in the current environment, and our outlook remains favorable. The team at Exchange is actively exploring opportunities to broaden its carrier network and distribution channels. We remain active in sourcing additional opportunities to grow Pillar 2 through further acquisitions and de novo startups. Turning to Pillar 3. During the quarter, the holding company made minority investments in certain insurance-related businesses, including insurtech platforms that we believe will be synergistic to our specialty property and casualty program insurance and MGA-MGU businesses. I am excited about the progress we have made to date on our specialty program insurance platform, and we see significant opportunities ahead to advance our strategy. I will turn the call over to David to discuss our financial results for the quarter. David?