Octave Specialty Group, Inc. · NYSE:OSG
Octave Specialty — Ambac Financial Group — Q2 2020 Earnings Presentation
23 slides from Octave Specialty's earnings presentation, Aug 7, 2020
Slide 1: Investor Presentation Quarterly Highlights Second Quarter 2020
Investor Presentation Quarterly Highlights Second Quarter 2020 © 2020 2014 Ambac Financial Group, Inc. One OneWorld StateTrade StreetCenter, Plaza, 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. is a financial services holding company whose subsidiaries include Ambac Assurance Corporation, a guarantor of public finance and structured finance obligations in run-off. AFG's common stock trades on the New York Stock Exchange under the symbol
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: Risk Management – Reducing Insured Legacy Exposures
RISK MANAGEMENT – REDUCING INSURED LEGACY EXPOSURES Natural run-off of exposure is complemented by proactive de-risking activities focused on reducing Adversely Classified and Watch List Credits… Adversely Classified Credits - Net Par (definitions in Appendix) Net Par Exposure Since June 2013 $ in b
Slide 5: Loss Mitigation — Litigation and Other Recoveries
LOSS MITIGATION — 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 ◦ Estimated repre
Slide 6: 2Q2020 Financial Overview
2Q2020 FINANCIAL OVERVIEW • Net loss attributable to common stockholders for the 2Q2020 was $(35) million compared to $(280) million in 1Q2020 ◦ The lower net loss for the 2Q20 compared to the 1Q20 included lower loss and loss expenses and reflected the impact of the partial reversal of the 1Q20 fin
Slide 7: 2Q2020 vs 1Q2020 - Key Financial Results
2Q2020 vs 1Q2020 - KEY FINANCIAL RESULTS • Net investment gains were $52 million, driven by mark-to-market gains within Ambac's pooled investment funds and investment income from available-for-sale securities • Net realized investment gains were $10 million for the 2Q20 and $8 million for 1Q20 prima
Slide 8: Investment Portfolio Philosophy and Objectives
INVESTMENT PORTFOLIO PHILOSOPHY AND OBJECTIVES Investment Philosophy Investment Objectives • Diversified portfolio • Active asset and liability management AAC & Ambac UK • Optimize risk-adjusted returns • Achieve highest risk adjusted rate of return on a diversified Total Portfolio - $3.5 billion po
Slide 9: Net Investment Income (Loss)
NET INVESTMENT INCOME (LOSS) Net investment income for 2Q20 was $52 million, compared to a loss of $(21) million for 1Q20 • Gains on pooled investment funds of $27 million in 2Q20 compared to a loss of $(52) million in 1Q20 were driven by the partial recovery of fair value losses reported in 1Q20 •
Slide 10: Incurred (Losses) Benefit by Category - 2Q2020 vs 1Q2020
INCURRED (LOSSES) BENEFIT BY CATEGORY(1) - 2Q2020 vs 1Q2020 • RMBS benefit of $35 million in 2Q2020 was a result of the favorable impact of lower interest rates on expected excess spread and better than forecasted credit factors, partially offset by higher loss expenses • Domestic Public Finance los
Slide 11: Gross Loss Reserves by Category
GROSS LOSS RESERVES BY CATEGORY(1) As of June 30, 2020 As of March 31, 2020 ($ in millions) $1,500 $1,000 $799 $783 $500 $229 $227 $13 $8 $57 $55 $0 -$500 $(401) $(395) -$1,000 -$1,500 $(1,499) $(1,468) -$2,000 RMBS Domestic Student Ambac UK Loss Total Public Loans and Other Expenses Finance Credits
Slide 12: Expense Management
EXPENSE MANAGEMENT Compensation Expense Non-Compensation Expenses $20 $20 $15 $15 ($ in millions) ($ in millions) $10 $10 $5 $5 $0 $0 2Q2019 3Q2019 4Q2019 1Q2020 2Q2020 2Q2019 3Q2019 4Q2019 1Q2020 2Q2020 Salaries Incentive Other Other Regulatory • Compensation expense decreased $3.4 million in 2Q202
Slide 13: Ambac Consolidated Liability and Capital Summary
AMBAC CONSOLIDATED LIABILITY AND CAPITAL SUMMARY Category ($ in millions) Comments 6/30/20 $2,254 • Before estimated subrogation recoveries, Unearned Premium Revenue Claim Liabilities (“UPR”) and reinsurance • Net of $473 million of principal and interest held at AAC (1) Secured Notes $1,187 • Inclu
Slide 14: Looking Ahead: Exploring Growth and Capital Deployment Opportunities
LOOKING AHEAD: EXPLORING GROWTH AND CAPITAL DEPLOYMENT OPPORTUNITIES Materialization of key catalysts have improved Ambac’s fundamentals, to allow for the deployment of capital in a tax efficient way to diversify the platform in a manner intended to enhance long-term shareholder value AMBAC RESOURCE
Slide 15: Ambac Value Drivers
AMBAC VALUE DRIVERS (as of June 30, 2020) Liquidity and Improved Asset Management NOLs Capital Structure • Generating a 3.6% GAAP yield on • $1.3 billion at AFG book value of AAC & subsidiaries • $481 million of net assets at AFG • $2.4 billion at AAC fixed income investment portfolio • Reduced outs
Slide 16: Non-GAAP Reconciliations
NON-GAAP RECONCILIATIONS 16
Slide 17: Ambac Non-GAAP Financial Data
AMBAC NON-GAAP FINANCIAL DATA Non-GAAP Financial Data Included in this presentation, the Company reports two non-GAAP financial measures: Adjusted Earnings and Adjusted Book Value. A non-GAAP financial measure is a numerical measure of financial performance or financial position that excludes (or in
Slide 18: Ambac Non-GAAP Financial Data (Continued)
AMBAC NON-GAAP FINANCIAL DATA (CONTINUED) Adjusted Book Value (1) The following table reconciles Total Ambac Financial Group, Inc. stockholders’ equity to the non-GAAP measure Adjusted Book Value as of each date presented: June 30, 2020 December 31, 2019 ($ in millions, except per share amounts) $ A
Slide 19: Appendix
APPENDIX Ambac 19
Slide 20: Adversely Classified Credits
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 21: 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 22: About Ambac
ABOUT AMBAC Ambac Financial Group, Inc. (“Ambac” or “AFG”), headquartered in New York City, is a financial services holding company whose principal subsidiaries, Ambac Assurance Corporation and Ambac Assurance UK Limited, are financial guarantee insurance companies currently in runoff. Outstanding p
Slide 23: Ambac
Ambac
Ambac Financial Group — Q2 2020 Earnings Presentation on 6ix