Octave Specialty Group, Inc. · NYSE:OSG
Octave Specialty — Ambac Financial Group — Q1 2021 Earnings Presentation
25 slides from Octave Specialty's earnings presentation, May 10, 2021
Slide 1: Investor Presentation Quarterly Highlights First Quarter 2021
Investor Presentation Quarterly Highlights First Quarter 2021 © 2014 Ambac Ambac Financial Financial Group, Group Inc. One World Trade One State Center, 41stPlaza, Street Floor, New York, NY 10007 10004 All Rights Reserved | 800-221-1854 | www.ambac.com
Slide 2: Ambac - Company Overview
AMBAC - COMPANY OVERVIEW Ambac Financial Group, Inc., (AFG) is a financial services holding company whose common stock trades on the New York Stock Exchange under the symbol "AMBC" NYSE: AMBC $817 million market cap (1) MISSION VISION VALUES • Optimize our business and its • Transition to a growth-o
Slide 3: Ambac Strategic Priorities
AMBAC STRATEGIC PRIORITIES Active runoff of Ambac Assurance and its subsidiaries through transaction terminations, policy commutations, reinsurance, settlements and restructurings, with a focus on our watch list credits and known and potential future Adversely Classified Credits ("ACC"), that we bel
Slide 4: Strategic Priorities Progress - 1Q21
STRATEGIC PRIORITIES PROGRESS - 1Q21 RISK MANAGEMENT - Active de-risking drove an 8% decline in adversely classified and watch list credits exposure in 1Q2021 • Reinsurance of public finance credits of approximately $0.8 billion ($0.2 billion relate to watch list and adversely classified credits) •
Slide 5: Strategic Priorities Progress – Reducing Insured Legacy Financial Guarantee Exposures
STRATEGIC PRIORITIES PROGRESS – REDUCING INSURED LEGACY FINANCIAL GUARANTEE EXPOSURES Natural run-off of exposure is complemented by proactive de-risking activities focused on reducing Adversely Classified and Watch List Credits… Net Par Exposure Since 2013 Adversely Classified Credits - Net Par (de
Slide 6: Strategic Priorities Progress — Litigation and Other Recoveries
STRATEGIC PRIORITIES PROGRESS — LITIGATION AND OTHER RECOVERIES Aggressively pursuing RMBS and other recoveries, through litigation and other means - Achieved approximately $1.6 billion of RMBS-related recoveries ever-to-date Active Litigation • Countrywide, First Franklin and Nomura • U.S. Bank ◦ E
Slide 7: Strategic Priorities Progress - Specialty P&C Insurance Strategy
STRATEGIC PRIORITIES PROGRESS - SPECIALTY P&C INSURANCE STRATEGY 1Q2021 Update Specialty Program • Received an 'A-' AM Best Rating • Class VIII AM Best designation, with over PILLAR I Property & Casualty Insurance $100 million in capital and surplus • Capital light • A significant number of specialt
Slide 8: 1Q21 Financial Review
1Q21 FINANCIAL REVIEW Ambac
Slide 9: 1Q2021 Financial Overview
1Q2021 FINANCIAL OVERVIEW • Net income attributable to common stockholders for 1Q2021 was $17 million compared to a net loss of $14 million in 4Q2020 • Adjusted Earnings for 1Q2021 and 4Q2020 of $41 million and $4 million excludes insurance intangible asset amortization of $19 million and $16 millio
Slide 10: 1Q2021 vs 4Q2020 - Key Financial Results
1Q2021 vs 4Q2020 - KEY FINANCIAL RESULTS • 1Q2021 results were impacted by gains recognized from the junior surplus note exchange transactions and net gains on derivative contracts primarily from the impact of higher forward interest rates • Results for 1Q2021 were also favorably impacted by the inc
Slide 11: Net Investment Income (Loss)
NET INVESTMENT INCOME (LOSS) Net investment income in 1Q2021 was $49 million, compared to $53 million for 4Q2020 with returns remaining strong from both the Available-for-sale and Pooled funds investments $60 $40 $31 ($ in millions) $27 $20 $23 $22 $— 4Q2020 1Q2021 Available-for-sale Pooled funds an
Slide 12: Investment Portfolio Components - March 31, 2021
INVESTMENT PORTFOLIO COMPONENTS - MARCH 31, 2021 Gains on pooled and other equity investments represented $27 million of the $49 million of total net investment gains for 1Q2021, driven by strong performance in hedge funds and equity market investments Total Portfolio - $3.5 billion Other Investment
Slide 13: Incurred (Losses) Benefit by Category - 1Q2021 vs 4Q2020
INCURRED (LOSSES) BENEFIT BY CATEGORY(1) - 1Q2021 vs 4Q2020 • RMBS benefit of $8 million in 1Q2021 was primarily due to the favorable impact of higher discount rates and credit improvements • Domestic Public Finance losses of $9 million in 1Q2021 was primarily due to an increase in Puerto Rico reser
Slide 14: Gross Loss Reserves by Category
GROSS LOSS RESERVES BY CATEGORY(1) March 31, 2021 December 31, 2020 $1,000 $708 $724 $500 $235 $234 $27 $23 $57 $68 $0 ($ in millions) $-500 $(414) $(397) $-1,000 $-1,500 $(1,441) $(1,446) $-2,000 RMBS Domestic Public Student Ambac UK Loss Total Finance Loans and Other Expenses Credits (1) Gross los
Slide 15: Expense Management
EXPENSE MANAGEMENT Compensation Expense Non-Compensation Expenses $20 $20 $15 $15 ($ in millions) ($ in millions) $10 $10 $5 $5 $0 $0 1Q2020 2Q2020 3Q2020 4Q2020 1Q2021 1Q2020 2Q2020 3Q2020 4Q2020 1Q2021 Salaries Incentive Other MGA/Underwriting Regulatory Other • Compensation expense increased $2 m
Slide 16: Ambac Consolidated Liability and Capital Summary
AMBAC CONSOLIDATED LIABILITY AND CAPITAL SUMMARY Category ($ in millions) Comments 3/31/21 • Before estimated subrogation, Unearned Premium Revenue (“UPR”) and Claim Liabilities $1,929 reinsurance Secured Notes $1,163 • Excludes $463 million of principal and interest held at AAC (1) • Includes $0.2
Slide 17: Ambac Value Drivers (as of March 31, 2021)
AMBAC VALUE DRIVERS (as of March 31, 2021) Proactive Liability Litigation & Recovery Strategic investments in Management • Aggressively pursuing legal rights in capital light, fee based, • Robust risk mitigation efforts the BofA / Countrywide, First Franklin growth oriented and Nomura cases strength
Slide 18: Non-GAAP Reconciliations
NON-GAAP RECONCILIATIONS 18
Slide 19: Ambac Non-GAAP Financial Data
AMBAC NON-GAAP FINANCIAL DATA Non-GAAP Financial Data Included in this presentation, the Company reports two non-GAAP financial measures: Adjusted Earnings and Adjusted Book Value. A non-GAAP financial measure is a numerical measure of financial performance or financial position that excludes (or in
Slide 20: Ambac Non-GAAP Financial Data (Continued)
AMBAC NON-GAAP FINANCIAL DATA (CONTINUED) Adjusted Book Value (1) The following table reconciles Total Ambac Financial Group, Inc. stockholders’ equity to the non-GAAP measure Adjusted Book Value as of each date presented: March 31, 2021 December 31, 2020 ($ in millions, except per share data) $ Amo
Slide 21: Appendix
APPENDIX Ambac 21
Slide 22: Risk Adverse Credit Classifications
RISK ADVERSE CREDIT CLASSIFICATIONS Classification Description • Fully Performing – Meets Ambac Criteria with Remote Probability of Claim and includes: ◦ Survey List - credits that may lack information or demonstrate a weakness but further deterioration is not expected Class I ◦ Watch list - credits
Slide 23: Forward Looking Statement
Forward Looking Statement In this presentation, we have included 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,”
Slide 24: About Ambac
ABOUT AMBAC Ambac Financial Group, Inc. (“Ambac” or “AFG”), headquartered in New York City, is a financial services holding company. Ambac's subsidiaries include: Ambac Assurance Corporation and Ambac Assurance UK Limited, financial guarantee insurance companies currently in runoff; Everspan Indemni
Slide 25: Ambac
Ambac
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