Ambac Financial Group, Inc.

Greetings and welcome to the AMBAC Financial Group Inc. fourth quarter 2021 earnings call. At this time, all participants 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 host, Ms. Lisa Kempf, Head of Investor Relations, Claude LeBlanc, Chief Executive Officer, and and David Church, Chief Financial Officer. I'll now turn the call over to Lisa.

Good morning, and thank you all for joining today's conference call to discuss AMBAC Financial Group's fourth 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 recoveries, 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 do not guarantee the 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 annual report 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 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 section 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 today's call. For the year ending December 31, 2021, AMBAC reported a net loss of $17 million, or $0.61 per diluted share, and adjusted earnings of $43 million or $0.66 per diluted share. For the fourth quarter, AMBAC reported a net loss of $22 million or $0.42 per diluted share and adjusted loss of $10 million or $0.16 per diluted share. David will discuss the results in more detail shortly. 2021 was a transitional year for AMBAC. Against the backdrop of a rapidly growing programs market in the U.S., and healthy rate increases across the P&C industry in most classes of business, we launched and maturely advanced our specialty P&C insurance platform at AFG. When we introduced this new business strategy to you last year, we classified each component into separate pillars. Each pillar has since evolved into three distinct operating units under the following names. Pillar 1, our participatory fronting insurance platform, is branded under Everspanwork. Pillar 2, our Product Development and Distribution Partner Division, will operate under Serata Group. And Pillar 3, our Strategic Investment Unit, will fall under Red Grove Capital Group. Everspan Group was launched in the first quarter of 2021 with an A- rating and Class 8 designation from AM Best. At launch, the platform consisted of Everspan Indemnity Insurance, our Surplus Lines Insurer, and Everspan Insurance Company are admitted insured. Everspan Group expanded this platform during the latter half of 2021 with the purchase of Providence Washington Insurance Company and in early 2022 acquired three additional admitted carrier shells. With these acquisitions, Everspan Group has multiple active certificates of authority in all 50 states and is well positioned as a differentiated platform greater optionality for its program partners. Since its launch, Everspan has seen a robust program pipeline across various classes of business from multiple distribution sources. To date, Everspan has signed nine program partners and has a strong pipeline going into 2022. Everspan's differentiated business plan provides for up to 30% retention of underwriting risk, distinguishing Everspan from its competitors and creating significant alignment of interests with Everspan's reinsurance partners. The company's leadership team consists of industry veterans in underwriting, programs and claims administration, as well as regulatory and compliance. We believe the platform is positioned well for strong growth in 2022. Turning to our product development and distribution partner division, Serata Group. our first MGU partner was onboarded at the beginning of 2021. Exchange successfully expanded its distribution network, diversified its business model, and had a strong finish to the year. Exchange distributed $7.4 million in 2021, 80% of which was paid to AMBAC. We are actively pursuing new M&A and de novo opportunities to grow Serata's partner platform supported by centralized business service offering, including core P&C technology solutions that we believe will enhance our distribution partners' competitive positions. The last pillar of our strategy, Red Grove Capital Group, was established as our strategic investment division to make investments that we believe will further enhance the value of Everspan and Serata. We made three investments in 2021 including investments in companies involved in data analytics and insurance technology, all with attractive target returns on capital. Overall, we are very pleased with the progress we made in 2021, and we believe we are well-positioned to expand and grow our specialty P&C insurance platform in 2022. Turning now to an update on our legacy financial guarantee business and our accomplishments for the year. We continue to reduce risk in the insurance portfolio through active de-risking and natural portfolio runoff. Net par exposure was $28 billion at December 31, down approximately $6 billion, or 17%, from December 31, 2020. AMBAC's watch lists and adversely classified credits were reduced to $10 billion at December 31, down approximately $3 billion, or 23%, from the prior year end. Proactive de-risking efforts accounted for decreases of approximately $3 billion in net per exposure and $2 billion in watch list and adversely classified credits during 2021. As it relates to our largest at-risk exposure, Puerto Rico, AMBAC continues to make substantial progress. Significant milestones were recently reached in January with the bankruptcy court approval of a plan of reorganization related to our GEO and PBA exposures. and qualifying modifications for our PRISA and CCDA exposures. AMBAC and other relevant parties have been working on finalizing necessary documentation that we anticipate will lead to effective dates for those reorganizations in mid-March. AMBAC insured bondholder elections have been received and tabulated, which, once effective, will significantly reduce our insured GEO, PBA, PRIFA, and CCDA liabilities through commutations and acceleration options, consistent with the court-approved plan and qualifying modifications. Once these plans are effective, AMBAC will reduce its insured principal and interest exposure to Puerto Rico by approximately $450 million. And when combined with the 2019 casino restructuring, will reflect the elimination of approximately 85% of our total Puerto Rico exposure. Later this year, AMBAC expects that HTA will complete its Title III bankruptcy process on terms consistent with the plan support agreement that we joined in the summer of 2021. We anticipate that a plan of adjustment for HTA should be available for consideration in the coming weeks. The range of uncertainty around our Puerto Rico exposure continues to reduce, and loss reserve levels have been reduced commensurately in line with current proceedings. Ultimate loss experience on Puerto Rico remains dependent on the conclusion of the bankruptcy process and the realized market value of planned consideration. Additionally, the economic performance of Puerto Rico over the long term will impact final AMBAC losses for those exposures not otherwise settled through commutation and acceleration. Turning now to our loss recovery efforts. In regards to our Bank of America countrywide litigation presided over by Justice Reed, all parties that agree to an in-person trial date of September 7, 2022. We are pleased to have established a trial date and look forward to resolving our claims as favorably and expeditiously as possible. We are also making material progress on our fraud-only case against Countrywide, where we expect to conclude the summary judgment phase of the case in the coming months and proceed to trial next year. Similarly, we are working to get through the summary judgment phases for our cases against First Franklin and Amura and hope to get to trial on one or both of those cases next year. Turning to our efforts to rationalize our capital and liability structure. During 2021, we executed two key transactions leading to material benefits across our capital and liability structures. This included the junior surplus note exchange transaction resulting in the extinguishment of 76 million in debt and accrued interest. Second, the issuance of new senior secured notes by AAC through a newly formed VIE, proceeds of which, along with other sources of liquidity, were used to fully redeem the outstanding AMBAC LS&I notes. The benefit of this refinancing are lower net interest carry costs and an extended debt maturity date to 2026. We believe the extended maturity period will provide increased financial flexibility during dependency of our RMBS litigations. We are pleased with the market receptivity that allowed us to execute on these transactions and continue to evaluate additional means to further simplify and streamline our capital and liability structure. I will now turn the call over to David to discuss our financial results for the quarter. David.