Greetings, and welcome to the Ambac Financial Group, Inc. Fourth Quarter 2022 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to turn the call over to Charles Sebaski, Head of Investor Relations.

Thank you. Good morning, and welcome to Ambac’s Fourth Quarter 2022 Call to discuss financial results. Speaking today will be Claude LeBlanc, President and CEO; and David Trick, Chief Financial Officer. They will discuss the financial results of our business and the current market environment. And after prepared remarks, we’ll take your questions. Our call today includes forward-looking statements. The company cautions investors that any forward-looking statement involves risks and uncertainties and is not a guarantee of future performance. Actual results may differ materially from those expressed or implied in the forward-looking statements due to a variety of factors. These factors are described under the forward-looking statements in our earnings press release and our most recent 10-Q and 10-K filed with the SEC. We do not undertake any obligation to update forward-looking statements. Also, in our prepared remarks or responses to questions, we may mention some non-GAAP financial measures. Reconciliations to those non-GAAP measures are included in our recent earnings press release, operating supplements and other materials available in the Investor Relations section of our website at ambac.com. I would now like to turn the call over to Mr. Claude LeBlanc.

Thank you, Chuck, and welcome to everyone joining today’s call. Yesterday, we posted a separate presentation to our website that I will be referencing during today’s call entitled 2022 Year-end Review. I’m going to start on Slide 3 of this presentation. 2022 was a transformational year for Ambac, a year during which we resolved a number of our most significant challenges and at the same time, materially progress our new business strategy. Today, I am pleased to report that Ambac is in its strongest financial position since the 2007 financial crisis. In 2022, we successfully resolved all of our remaining legacy RMBS rep and warranty litigations recovering nearly $2 billion through settlements and we completed the restructuring of our largest and most distressed financial guarantee exposures, notably PRIFA, CCDA and HTA, Puerto Rico exposures, amongst others. As a result of these successes, in addition to our active asset liability management activities, which resulted in the capture of over $150 million of discount, we reduced our outstanding debt by $1.8 billion and increased our book value by $214 million or $5.43 per share. In our Specialty P&C businesses, we expanded our platform through both organic growth and acquisitions, producing in excess of $280 million of premiums. Everspan continued to increase its market share, generating gross written premiums of $146 million for the year. In addition, we successfully recruited top industry talent to our businesses, all of which positions Ambac very well for strong future expansion and earnings growth. For the year ending December 31, 2022, Ambac reported net income of $522 million or $11.31 per diluted share, and adjusted earnings of $555 million or $12.01 per diluted share. Ambac ended the year with a book value of $1.25 billion, an increase of 21% and adjusted book value of $1.27 billion, an…

Thank you, Claude, and good morning, everyone. For the fourth quarter of 2022, Ambac reported net income of $175 million or $3.86 per diluted share compared to a net loss of $22 million or $0.42 per diluted share in the fourth quarter of 2021. Adjusted earnings for the fourth quarter of 2022 were $190 million or $4.18 per diluted share compared to an adjusted loss of $10 million or $0.16 per diluted share in the fourth quarter of 2021. Adjusted earnings excluded legacy Financial Guarantee insurance intangible amortization expense of $12 million and unrealized foreign exchange transaction losses of $2 million for the fourth quarter of 2022. The $197 million increase in net income for the fourth quarter of 2022 compared to the fourth quarter of 2021 was driven by several notable items. First, we realized a $121 million net gain from the previously announced settlements of legacy RMBS litigations. $78 million of the $121 million net gain related to the Bank of America settlement and $43 million related to the Nomura settlement. For sake of clarity, I will walk through the various components of the gain and where they are recorded in our financials. As it relates to the net Bank of America gain, $126 million of the gain is recorded as a litigation recovery in our income statement and related specifically to our allocation of a portion of the settlement to the Harborview Ford litigation and $5 million of the gain represents realized gains recorded in realized investment gains on Sitka Notes, we held in the investment portfolio. Netted against these gains was $53 million of Sitka Note call premium and accelerated discount amortization expense recorded through realized gains and losses on extinguishment of debt. As it relates to Nomura litigation, $43 million of net gains were recognized…

2022 was an exciting year with the achievement of meaningful value-enhancing accomplishments. As we look ahead to 2023, our key strategic priorities will focus on: one, growth and diversification of Everspan Group; two, targeted growth at Cirrata both organically and through M&A; and three, as it relates to our legacy business, completing the following: one, the legacy business capital and operating framework; two, our comprehensive review of strategic options for the legacy business ;and three, initiating key strategic steps towards maximizing value for shareholders. We look forward to updating you on our progress in the coming months. Operator, please open the call for questions.

[Operator Instructions] Our first question is from the line of [Paul Devine with C. Devine and Association].

A couple of things. First, I can’t believe, Claude and David will never be talking really about Puerto Rico or BofA or Nomura again. So first off, congratulations to everybody on the team for getting that behind you. But now it’s time to sort of what have you done from you lately and looking forward. And I wonder, Claude, if you can talk a little bit about more granular on the growth plans for Cirrata also Everspan? And then I had one minor question for David. With respect to the unassigned negative surplus in AAC, I know that was down to about $80 million at the end of the third quarter. When do you think that will go positive.

Thanks, Colin. I appreciate the questions, and we’re also happy to [indiscernible] have to talk about Puerto Rico and Nomura going forward. So good point in history. In terms of our go-forward businesses, we are seeing tremendous opportunities at Cirrata both on the de novo side as well as on the strategic or M&A side. I think the offering that we put forward in the market, where we support our MGA, MGU and wholesale businesses through a business service offering, in addition to having the possibility of Everspan as a capacity provider, I think, distinguishes us in a way that has led a lot of -- whether it may be sellers or individuals who are looking to either launch an MGA or take an MGA to the next step, consider us as a true viable option relative to other options in the market. So I think we’ve been very pleased with the types of opportunities we’ve been seeing and we’re seeing more and more as time goes on. And I think we’re very excited about the prospects for growth and scaling of the Cirrata platform. As far as Everspan goes, that is an organic game. So the portfolio there just continues to scale. We have distinguished ourselves coming out of the box by being a party that looks to retain risk. So we -- on the scale of hybrid fronting carriers, we are on the far right where we retain up to 30% of risk. And I think that has distinguished us significantly in the market. And I think the team that we have built with leading underwriters, actuaries, claims people, really distinguishes us in the market as being really a primary platform for the program business relative to peers. So again, we feel very confident that, that business will continue to scale. We are attracting high-quality partners and seeing a very, very deep pipeline of opportunities approaching us in the future. So with that, I’ll turn it over to David on the unsigned surplus.

Sure. Thanks for the question. So unsigned surplus is about $75 million negative at the end of the year. It actually would have been positive had not been for the repurchase of the surplus notes, which are carried on a statutory basis at their par amount, not their par plus accrued amount. So while we don’t provide financial projections of earnings and retained earnings for the future, certainly, our objective is to continue to deleverage and derisk the balance sheet of AAC as part of our broader strategic initiatives. And as certainly as part of that, we would expect to continue to grow both the size and quality of the surplus. And the factors that will go into the timing of that unassigned surplus becoming positive will include, of course, the earnings power of the business but also our capital management activities, including any future debt transactions and derisking transactions. So there’s a bit of timing to the magic of when that number may become positive in the future.

Fair enough. And then Claude, just a follow-up with Cirrata Obviously, you’ve done all trends, you did Capacity Marine and you’re looking at a lot of things. I appreciate it’s hard to say what opportunities you’re seeing, but perhaps are there certain areas where Cirrata is just not interested. What don’t you want to get into as much as what might be attractive?

I think we have a relatively broad appetite at Cirrata and we certainly are focused on MGU, MGA as well as wholesale. We’re not focused, obviously, on the retail brokerage side. But I think fundamentally, what’s core to platforms in Cirrata is really their underwriting performance and distribution performance. We are really looking at each of our MGA partners at Cirrata and that goes as well as program partners for Everspan for platforms that are very strong in the underwriting area that we believe and we can assess the viability, both in the hard markets that we’re in today, but also longer term in the soft market. So we have fundamental criteria we look at that are -- we follow very carefully in evaluating opportunities. And we also look at areas where we see strong synergies as between our MGA partners and distribution partners and also potential synergies with Everspan. So those are other categories and areas that we would focus on in terms of identifying good opportunities at Cirrata.

Thank you. [Operator Instructions] As there are no further questions at this time. This concludes today’s teleconference. We thank you for participating. You may disconnect your lines at this time. Thank you for your participation.