Ambac Financial Group, Inc. to Acquire Majority Stake in Beat Capital Partners
Ambac Financial Group has signed an agreement to acquire 60% of Beat Capital Partners for around $282 million, with up to $40 million paid in Ambac shares. The deal is expected to close in Q3 2024, pending regulatory approvals and will be financed through available cash and committed financing. Beat, based in London, is a leading insurance underwriting and MGA incubation platform. This acquisition aims to enhance Ambac's specialty program insurance market position and accelerate its goal of generating over $100 million in annual EBITDA. Beat's management and Bain Capital will retain 20% stakes in Beat.
- Ambac acquires 60% stake in Beat for $282 million, potentially boosting its market position.
- The acquisition is projected to help Ambac achieve over $100 million in annual EBITDA.
- Beat produced $533 million in combined gross premiums and $17 million in EBITDA in 2023.
- The acquisition increases Ambac's specialty property and casualty insurance platform's projected gross written premiums to over $1.4 billion in 2024.
- Beat's management and Bain Capital retain equity stakes, ensuring alignment of interests.
- The transaction is subject to regulatory approvals, which may delay the closing.
- Significant acquisition costs totaling $282 million, impacting cash reserves and requiring additional financing.
- Up to $40 million of the acquisition cost will be paid in shares, potentially diluting existing shareholder value.
Insights
Ambac's acquisition of a majority stake in Beat Capital Partners is a significant strategic move aimed at strengthening its position in the specialty program insurance market. By acquiring a 60% stake for approximately
This acquisition is expected to yield immediate scale and contribute to Ambac's projected combined gross written premiums of over
However, investors should remain cautious of potential integration challenges and regulatory hurdles that might delay the expected closing in Q3 2024. Additionally, the significant cash outlay and the issuance of stock might dilute existing shareholders' equity in the short term. Overall, the pros of this acquisition, such as revenue growth and market position strengthening, outweigh the cons, making this a positive development for Ambac.
From an industry standpoint, Ambac's acquisition of Beat Capital Partners is a strategic alignment that positions Ambac as a top-tier player in the specialty program insurance market. Beat's reputation for successfully launching and managing MGAs, coupled with its management rights at Lloyd's and a unique capacity relationship with Bermuda reinsurer Cadenza Re, provides Ambac with immediate access to well-established underwriting capabilities and premium growth avenues.
Beat's track record, with $533 million in gross premiums and $17 million in EBITDA in 2023, reflects significant operational efficiency and profitability. The acquisition will enable Ambac to expand its footprint in the UK, US and Bermudan markets, enhancing its geographical diversification and reducing market-specific risks. Additionally, the management’s focus on underwriting profit rather than merely top-line growth is a prudent approach that should lead to sustainable profitability and resilience against market cycles.
However, integration risks and maintaining the delicate balance of underwriting performance while pursuing aggressive growth could pose challenges. Moreover, regulatory approvals are a critical factor, particularly given the cross-border nature of the deal. Ultimately, this acquisition solidifies Ambac's strategic direction and growth prospects in the specialty insurance sector.
Acquisition of
Ambac President and Chief Executive Officer Claude LeBlanc (Photo: Business Wire)
Pursuant to the agreement, Ambac will purchase
“This is a monumental day for Ambac,” said Claude LeBlanc, President and Chief Executive Officer of Ambac. “The acquisition of Beat, which is one of the largest
“This acquisition propels Ambac to the forefront of the specialty program insurance market,” LeBlanc continued. “We are not simply acquiring a leading specialty underwriting platform; we are aligning with a team that has proven ability to build and launch profitable de novo MGAs, which is a core pillar of our growth strategy. Adding Beat to our platform gives us immediate scale and a strong pipeline to fuel future growth.”
John Cavanagh, Partner and Chairman of Beat, added: “This is a transformational partnership for Beat. Ambac’s well-established MGA incubation and carrier capabilities and its outstanding leadership team is a perfect fit with Beat’s existing platform and team. This joint enterprise now represents one of the foremost global platforms for MGAs and Underwriting Franchises, with a significant footprint in the US,
“The Beat team have built an incredible franchise over the past seven years by balancing exceptional growth with a ceaseless focus on underwriting performance. We are fortunate to be part of their journey,” said Matt Cannan, Partner of Bain Capital. “We believe partnering with Ambac perfectly complements Beat’s capabilities and creates an outstanding global specialty insurance destination for top-tier underwriters.”
Cavanagh, an industry veteran and former Global CEO of Willis Re (now Gallagher Re), will continue to manage the business as part of the senior Beat leadership team. Beat provides underwriters with a full range of services including access to capacity, infrastructure, and partnership with its experienced team, which guides new businesses through the start-up phase and provides ongoing oversight and support.
Since its inception in 2017, Beat has launched 13 Underwriting Franchises and MGAs. In addition, it has certain management rights for Syndicates 4242 and 1416 at Lloyd’s and an exclusive capacity relationship with a
With the addition of Beat, Ambac’s specialty property and casualty insurance platform is projected to generate in excess of
Ambac’s specialty property and casualty platform includes Everspan Group, comprised of several insurance carriers rated A- (Excellent) by AM Best, and Cirrata Group, an insurance distribution business with several best-in-class MGAs and a wholesale broker.
UBS Investment Bank served as Ambac’s financial advisor and Debevoise & Plimpton LLP served as legal counsel to Ambac. Evercore served as Beat’s financial advisor and RPC served as legal counsel to Beat and Bain Capital.
Conference Call
Ambac Chief Executive Officer Claude LeBlanc and Chief Financial Officer David Trick, along with Beat senior management, will hold a conference call for Ambac investors on Wednesday, June 5, 2024, at 8:30 a.m. ET. A live audio webcast of the call will be available through the Investor Relations section of Ambac’s website, https://ambac.com/investor-relations/events-and-presentations/. Participants may also listen via telephone by dialing (877) 407-9716 (Domestic) or (201) 493-6779 (International).
About Ambac
Ambac Financial Group, Inc. (“Ambac”) is a financial services holding company headquartered in
The Amended and Restated Certificate of Incorporation of Ambac contains substantial restrictions on the ability to transfer Ambac’s common stock. Subject to limited exceptions, any attempted transfer of common stock shall be prohibited and void to the extent that, as a result of such transfer (or any series of transfers of which such transfer is a part), any person or group of persons shall become a holder of
About Beat Capital Partners
Beat Capital Partners is a long duration venture capital investor exclusively focused on the insurance industry, offering the right individuals and teams start-up funding, infrastructure, risk capital, and highly rated paper, alongside experienced guidance and support. Beat has launched eight businesses since its founding in 2017, which will collectively write gross premiums of an estimated US
Non-GAAP Financial Reporting
In addition to reporting the Company’s quarterly financial results in accordance with GAAP, the Company is reporting non-GAAP financial measures: EBITDA, Adjusted Net Income and Adjusted Book Value. These amounts are derived from our consolidated financial information, but are not presented in our consolidated financial statements prepared in accordance with GAAP. We present non-GAAP supplemental financial information because we believe such information is of interest to the investment community, and that it provides greater transparency and enhanced visibility into the underlying drivers and performance of our businesses on a basis that may not be otherwise apparent on a GAAP basis. We view these non-GAAP financial measures as important indicators when assessing and evaluating our performance on a segmented and consolidated basis and they are presented to improve the comparability of our results between periods by eliminating the impact of the items that may not be representative of our core operating performance. These non-GAAP financial measures are not substitutes for the Company’s GAAP reporting, should not be viewed in isolation and may differ from similar reporting provided by other companies, which may define non-GAAP measures differently.
Forward Looking Statements
In this press release, statements that may constitute “forward-looking statements” within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Words such as “estimate,” “project,” “plan,” “believe,” “anticipate,” “intend,” “planned,” “potential” and similar expressions, or future or conditional verbs such as “will,” “should,” “would,” “could,” and “may,” or the negative of those expressions or verbs, identify forward-looking statements. We caution readers that these statements are not guarantees of future performance. Forward-looking statements are not historical facts but instead represent only our beliefs regarding future events, which may by their nature be inherently uncertain and some of which may be outside our control. These statements may relate to plans and objectives with respect to the future, among other things which may change. We are alerting you to the possibility that our actual results may differ, possibly materially, from the expected objectives or anticipated results that may be suggested, expressed or implied by these forward-looking statements. Important factors that could cause our results to differ, possibly materially, from those indicated in the forward-looking statements include, among others, those discussed under “Risk Factors” in our most recent SEC filed quarterly or annual report.
Any or all of management’s forward-looking statements here or in other publications may turn out to be incorrect and are based on management’s current belief or opinions. Ambac Financial Group’s (“AFG”) and its subsidiaries’ (collectively, “Ambac” or the “Company”) actual results may vary materially, and there are no guarantees about the performance of Ambac’s securities. Among events, risks, uncertainties or factors that could cause actual results to differ materially are: (1) the occurrence of any event, change or other circumstances that could give rise to the right of one or both of the parties to terminate the share purchase agreement by and among AFG, Cirrata V LLC (the “Purchaser”) and certain sellers set forth therein; (2) the outcome of any legal proceedings that may be instituted against the parties to the transaction; (3) the failure to obtain necessary regulatory approvals (and the risk that such approvals may result in the imposition of conditions that could adversely affect the combined company or the expected benefits of the transaction) or to satisfy any of the other conditions to the transaction on a timely basis or at all; (4) the possibility that the transaction may be more expensive to complete than anticipated, including as a result of unexpected factors or events; (5) diversion of management’s attention from ongoing business operations and opportunities; (6) potential adverse reactions or changes to business or employee relationships, including those resulting from the announcement or completion of the transaction; (7) the ability of the parties to consummate the transaction and the timing of the transaction; (8) the high degree of volatility in the price of AFG’s common stock; and (9) other risks and uncertainties that have not been identified at this time.
View source version on businesswire.com: https://www.businesswire.com/news/home/20240605921875/en/
Investors:
Charles J. Sebaski
Managing Director, Investor Relations
(212) 208-3177
csebaski@ambac.com
Media:
Kate Smith
Director, Corporate Communications
(212) 208-3452
ksmith@ambac.com
Source: Ambac Financial Group, Inc.
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