AMBC

Ambac Financial($AMBC) Executives Deploy $760,000 in Share Purchases Following Record Stock Plunge

05/14/2025 21:57

Executives at Ambac Financial Group Inc ($AMBC) have stepped in with significant share purchases following the stock's plunge to an all-time low. On May 14, 2025, just one day after the company's shares tumbled by as much as 28.3% following disappointing Q1 results, CEO Claude LeBlanc purchased 40,000 shares at an average price of $6.50, while Director Michael Price acquired 76,986 shares at $6.51. These transactions represent a combined investment of approximately $760,000, a substantial commitment given the company's current market capitalization of about $320 million. Ambac Financial Group, originally a municipal bond insurer, has been transitioning its business model toward specialty property and casualty (P&C) insurance in recent years. The company currently operates through two main business segments: Cirrata Group (insurance distribution) and Everspan (specialty P&C insurer). Notably, Ambac is in the process of selling its legacy financial guarantee business to Oaktree Capital Management, a transaction that was recently extended until July 3, 2025. This recent insider buying echoes a similar pattern observed in August 2024, when six executives and directors, including CEO LeBlanc, collectively purchased 149,112 shares worth approximately $1.63 million when the stock traded in the $10-11 range. Director Michael Price was also a significant buyer then, acquiring 89,312 shares. Interestingly, both clusters of insider purchases occurred after substantial declines in the stock price. Looking at recent performance, Ambac reported Q1 2025 results that fell significantly short of expectations. The company posted a loss of 13 cents per share, considerably worse than the 7 cents loss analysts had anticipated. The net loss for the quarter amounted to $16 million, primarily attributed to intangible amortization and interest expenses related to the Beat Capital acquisition. This marked the third consecutive quarter that the company missed earnings estimates, contributing to a 34% year-to-date decline in the stock price. Despite the negative earnings metrics, there are some positive indicators. Ambac's premium production soared 70% in Q1 to $318 million, with insurance distribution premiums at Cirrata jumping 156%. Cirrata's adjusted EBITDA more than doubled year-over-year to $12.1 million. However, Everspan's combined ratio deteriorated to 102.1% due to higher expense ratios. The substantial purchases by CEO LeBlanc and Director Price signal their conviction that the current share price significantly undervalues the company's intrinsic worth. LeBlanc's purchase was executed under a Rule 10b5-1 trading plan, indicating a pre-arranged transaction that reflects confidence in the company's long-term outlook. Additionally, in November 2024, the company approved a $50 million stock repurchase program, further suggesting management's belief that the shares are undervalued. Meanwhile, the market continues to view Ambac's business transition with skepticism. In its Q4 results announced on February 26, 2025, the company reported a $570 million loss related to the sale of its legacy financial guarantee business, which was a major factor in the stock's decline. Additionally, news of its removal from the S&P SmallCap 600 index on March 10 further pressured the share price. Nevertheless, all brokerage firms maintain 'buy' ratings on Ambac, with a median price target of $15, more than double the current share price. Roth Capital Partners noted in a recent analysis that while it's challenging to estimate Ambac's earnings due to business changes, they expect earnings to improve as the company expands in the insurance distribution business. Looking ahead, investors should monitor several potential catalysts. The completion of the legacy financial guarantee business sale to Oaktree Capital Management awaits approval from Wisconsin regulators, expected in Q2 2025. Additionally, the company is targeting long-term adjusted EBITDA of $80-90 million by 2028, suggesting potential for improved profitability over time. In the near term, Ambac likely faces continued volatility due to earnings challenges and uncertainties surrounding its business transition. However, the significant insider buying and premium growth could be positive signals for the long term. Particularly, once the legacy business sale is completed, the company can focus more intensely on the growing specialty P&C market. Investors should also consider several risk factors. The deteriorating combined ratio raises questions about the profitability of the insurance business, and consecutive earnings misses create concerns about the company's financial forecasting abilities. Additionally, changes in the interest rate environment and potential economic slowdowns could pose challenges for the insurance industry as a whole.

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