Octave Specialty Group, Inc. · NYSE:OSG
Octave Specialty — Ambac Financial Group — Merger or Acquisition (June 2024)
26 slides from Octave Specialty's merger presentation, Jun 5, 2024
Slide 1: Ambac Strategic Update
• June 5, 2024 AMBAC STRATEGIC UPDATE ADVANCING CAPITAL-LIGHT, HIGH-GROWTH INSURANCE DISTRIBUTION PLATFORM Ambac Financial Group One World Trade Center, 41st Floor, New York, NY 10007 All Rights Reserved | 800-221-1854 | www.ambac.com
Slide 2: Disclaimers
Disclaimers Forward Looking Statements 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,”
Slide 3: Disclaimers (continued)
Disclaimers (continued) (39) regulatory oversight of Ambac Assurance UK Limited (“Ambac UK”) and applicable regulatory restrictions may adversely affect our ability to realize value from Ambac UK or the amount of value we ultimately realize; (40) failures in services or products provided by third pa
Slide 4: Key Presenters
Key Presenters Claude LeBlanc John Cavanagh President and Chief Executive Officer Co-Founder and Chairman of Beat of Ambac David Trick Paul Rayner EVP, Chief Financial Officer and Managing Partner of Beat Treasurer of Ambac Naveen Anand Tim Shelley President of Cirrata Group Partner of Beat PAGE 3
Slide 5: What We're Announcing
What We’re Announcing & Divesting the Legacy Financial Guarantee Acquiring a (60%) business via a (100%) sale to controlling interest in for for $420M + warrants $282M The sale of AAC & AUK provides for the The acquisition of Beat aligns with our crystallization of value from our Legacy vision of be
Slide 6: Sale of Legacy Financial Guarantee Business
SALE OF LEGACY FINANCIAL GUARANTEE BUSINESS AMBAC HAS SIGNED A DEFINITIVE AGREEMENT TO SELL 100% OWNERSHIP IN AMBAC ASSURANCE CORPORATION AND AMBAC UK (“AAC”), TO FUNDS MANAGED BY OAKTREE CAPITAL MANAGEMENT, L.P. (“OAKTREE”)
Slide 7: Strategic Rationale for the Sale of the Legacy Financial Guarantee Business
Strategic Rationale for the Sale of the Legacy Financial Guarantee Business Highest return on a time & risk adjusted basis Maximizes long-term value creation potential Reduces earnings volatility and uncertainty Cements Ambac as a pure-play Specialty P&C company Simplifies & clarifies Ambac’s go-for
Slide 8: Key Transaction Details
Key Transaction Details Overview Financial Impact Use of Proceeds Selling 100% of LFG business to Pro-forma Book Value Cirrata M&A Oaktree $857M opportunities $420M sale price with potential $983 million of surplus note debt Everspan capacity upward performance eliminated] expansion to support adjus
Slide 9: Pro-forma Financial Impact of AAC Sale
Pro-forma Financial Impact1 of AAC Sale (in millions) 1Q24 Actual 1Q24 Pro-Forma Total assets $8,429 $1,396 Loss and loss adjustment expense reserves $851 $237 Long-term debt $999 $0.0 Insured net par outstanding “NPO” $19,031 $0.0 Book value $1,365 $857 Ambac’s balance sheet materially de-risked po
Slide 10: Ambac Redefined
Ambac Redefined Improved Financial • Sale of LFG should reduce Ambac’s earnings volatility Certainty • Simplifies and improves financial transparency Premier Destination • Facilitates scale and diversity of Ambac’s Specialty P&C business for MGAs/Programs • Advances Ambac’s position as a Premier Des
Slide 11: Ambac Financial Group – Future State
Ambac Financial Group – Future State NYSE: AMBC Program Insurer Insurance Distribution $400M of GPW1 in ’24E $150M Revenue1,3,4 in 2024E $122M of Book Value2 $40M of EBITDA1,3,4 1. Based on management expectations and subject to change 2. Book Value represents Ambac’s Stockholders’ interest in Evers
Slide 12: Ambac Acquiring Beat Capital Partners
AMBAC ACQUIRING BEAT CAPITAL PARTNERS AMBAC HAS SIGNED A DEFINITIVE AGREEMENT TO ACQUIRE A 60% STAKE IN BEAT CAPITAL PARTNERS (“BEAT”), A LONDON-BASED UNDERWRITING FRANCHISE AND MANAGING GENERAL AGENCY (MGA) PLATFORM
Slide 13: Ambac Acquiring Beat Capital
Ambac Acquiring Beat Capital Ambac Financial Group ("AFG") to acquire a controlling interest in Beat Capital Partners (“Beat”) from Bain Capital and Beat Management Insurance Distribution A Leading London-Based $68M Revenue in ’24E2 Underwriting & MGA Platform $13M of EBITDA2 $90M Revenue1,2,3 in ’2
Slide 14: Transaction Summary
Transaction Summary Terms Financing Acquiring 60% of Beat a premier Funded with a mix of cash, committed underwriting platform for $282M financing, and up to $40M of AFG common stock to Bain Capital and Beat Management Beat Management & Bain Capital each Multi-year put/call structure aligns for a re
Slide 15: Beat Capital Partners Business Overview
Beat Capital Partners Business Overview • Established in 2017 $534M1 & $733M1,2 ~$90M1,2 Revenue GWP in 2023A & 2024E 2024E • Backs leading specialty underwriters to establish their own underwriting franchises • Pursues a partnership model with underwriting FY21 – FY23 GWP ’23 EBITDA3 CAGR ~20% Marg
Slide 16: Connecting Risk to Capital
Connecting Risk to Capital Oversight Underwriting Management Access to Capital Underwriting Franchises Managed Portfolios Long-term Capital Partners Including: London / Bermuda • Global (Re)insurers Syndicates 4242 & 1416 • ILS Managers • HNW Investors • Private Equity Strategic Capital Partners • P
Slide 17: Leading Management to Fuel Growth
Leading Management to Fuel Growth Strong Culture Across the Business John Cavanagh 40+ Tom Milligan 30+ Co-Founder & Chairman Co-Founder & Partner • 40+ years in the global insurance market • 30+ years in the global insurance market Performance Focused • Retired as Global CEO of Willis Re in 2017 •
Slide 18: Strategic Rationale for Beat Acquisition
Strategic Rationale for Beat Acquisition Scales and diversifies Cirrata into a leading MGA platform Accelerates our 3-year goal of +$100M of EBITDA Beat platform and leadership team are an MGA growth engine Strong strategic and cultural alignment Opportunity for operational and business synergies PA
Slide 19: Ambac's Cirrata + Beat Capital Overview
Ambac’s Cirrata + Beat Capital Overview 2024E 2023A1 2024E1 Combined2,3,4 • Cirrata and Beat both employ a partnership model to align interests $231M Premium +$300M Premium ~$1B Premium • Cirrata and Beat offer the potential for revenue, capital, and expense synergies • Cirrata is focused on buildin
Slide 20: Cirrata + Beat = Well Diversified Portfolio with Attractive Margins
Cirrata + Beat = Well Diversified Portfolio with Attractive Margins Beat Portfolio (2024E1 GWP of ~$733M) + Cirrata Portfolio (2024E1 GWP of ~$300M) Beat by Risk Type Cirrata by Risk Type2 Cirrata + Beat by Risk Type 4% 3% 3% 1% 5% 5% 4% 2% 16% 6% 21% 8% 4% 6% 5% 33% 5% 7% 14% 5% 7% 18% 27% 6% 11% 1
Slide 21: A Compelling Long-term Opportunity for Cirrata
A Compelling Long-term Opportunity for Cirrata Premium Production1 Revenue (in millions, unless otherwise noted) $1.3B (in millions) $196 $359 $80 1 1,2,3 1 1,2,3 Cirrata '25E Combined '25E Cirrata '25E Combined '25E EBITDA EBITDA (AFG’s Interest) (in millions) (in millions) $58 $31 $13 $16 1 1,2,3
Slide 22: Beat Significantly Advances Ambac's 3YR P&C Goal
Beat Significantly Advances Ambac’s 3YR P&C Goal Premium Production1 (in millions, unless otherwise noted) MGA Programs2 +$1.5B +50 30 30 27 $700 $700 10 17 $504 $282 $130 3 3 3 3 3 3 2021 2022 2023 2024E 2024E 3YR Goal 2021 2022 2023 2024E 2024E 3YR Goal Combined Combined 2023 P&C EBITDA 3YR EBITDA
Slide 23: Strengthens Position as a Leading Global MGA Platform
Strengthens Position as a Leading Global MGA Platform Advances insurance Creates global specialty MGA Provides immediate scale and underwriting and distribution platform, expanding access to diversification to the Cirrata strategy and improves margin capital platform while supporting profile future
Slide 24: Q&A
Ambac Q&A
Slide 25: Reconciliation of Non-GAAP Earnings Measures by Reporting Segment (2023)
Reconciliation of Non-GAAP Earnings Measures by Reporting Segment (2023) Year Ended December 31, 2023 ($ in millions) LFG SPC ID CORP CONS ($ in millions) LFG SPC ID CORP CONS Gross premiums written $ 14.8 $ 273.3 $ 288.1 Expenses: Net premiums written (35.5) 79.8 44.4 Losses and loss adjustment exp
Slide 26: About Ambac
About Ambac Ambac Financial Group, Inc. (“Ambac” or “AFG”) is a financial services holding company headquartered in New York City. Ambac’s core Contact business is a growing specialty P&C distribution and underwriting platform. Ambac also has a legacy financial guaranty business in run off. Ambac’s
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