Octave Specialty Group, Inc. · NYSE:OSG
Octave Specialty — Ambac Financial Group — Q2 2024 Earnings Presentation
32 slides from Octave Specialty's earnings presentation, Aug 6, 2024
Slide 1: Second Quarter 2024 Investor Presentation
Second Quarter 2024 Investor Presentation Quarterly Highlights
Slide 2: 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 3: Overview
Overview Ambac Financial Group, Inc. (NYSE: AMBC) is a specialty insurance holding company headquartered in New York City with shareholders’ equity of $1.37 billion1. Ambac’s core operating business is a growing specialty P&C distribution and program underwriting platform. Ambac also has a legacy fi
Slide 4: Our Vision: Create the Premier Destination for MGAs
Our Vision: Create the Premier Destination for MGAs Goal Opportunity Outcome Become the premier pure- Direct exposure into the Superior return profile play MGA platform growing and dynamic compared to general P&C specialist attracting high global MGA and E&S quality, entrepreneurial program market t
Slide 5: Well Positioned to Compete in the Program & MGA Sector
Well Positioned to Compete in the Program & MGA Sector Strengthened capital and strategic position supports profile as an attractive destination for MGAs/MGUs Private Equity Large, Publicly Large Private Roll-ups Traded Brokers Consolidators Permanent Capital Partnership Model MGA/Program Pure-Play
Slide 6: 2024 Strategic Priorities
2024 Strategic Priorities AFG Everspan Insurance Cirrata Legacy Financial Guarantee • Grow and maximize • GPW +$400 million forecast in • Premiums placed +$300 million shareholder value over medium 20241,2 forecast in 20241,2 and long term • Complete the sale to Oaktree • Target Underwriting profita
Slide 7: Ambac Acquired Beat Capital Partners effective July 31, 2024
Ambac Acquired Beat Capital Partners effective July 31, 2024 Acquired a 60% controlling interest in Beat from Bain Capital and Beat Management for $278M Insurance Distribution A Leading London-Based $68M Revenue in ’24E1 Underwriting & MGA Platform $13M of EBITDA1,4 $90M Revenue1,2,3 in ’24E $27M of
Slide 8: Beat Capital has a Strong Performance History
Beat Capital has a Strong Performance History Beat’s track record on Gross Written Premium (“GWP”), revenue, and EBITDA has demonstrated strong, consistent growth EBITDA CAGR from 2021 to 2023 Stated Non-FX Adjusted EBITDA1,2,3: ~19.4% ~25.6% EBITDA1,2,3 ex- ~26.5% ~33.3% startup costs: • Anticipate
Slide 9: Cirrata: Insurance Distribution
Cirrata: Insurance Distribution Majority owned MGAs are high margin businesses that generate predictable recurring fee-based income • Closed the Beat Capital acquisition effective July 31, 2024 Premium Placed by Line ($ in millions) $300 • With the addition of Beat operating 16 MGAs, with a ~$1 bill
Slide 10: Cirrata's 16 Operating MGAs
Cirrata’s 16 Operating MGAs Financial & Professional Accident & Health Specialty Commercial Auto Marine Professional Liability Liability USA Property, Liability, Property, Liability NA Property Energy / Property Multiline P&C Accident & Health Motor Upstream / Credit & Risk Transfer Professional Ind
Slide 11: Everspan: Specialty P&C Program Insurer
Everspan: Specialty P&C Program Insurer Everspan has assembled a ‘Best-in-Class’ team of Specialty P&C program insurance executives with deep experience scaling businesses • $111 million of GPW in 2Q24 up 109% vs. 2Q23 Gross Premium Written (GPW) and Number of Programs $350 23 23 28 • GPW split E&S
Slide 12: Everspan's Select Program Partnerships
Everspan’s Select Program Partnerships 3Q21 4Q21 1Q22 2Q22 3Q22 4Q22 4Q22 4Q22 4Q22 1Q23 1Q23 2Q23 12
Slide 13: Everspan: Underwriting Strategy
Everspan: Underwriting Strategy Everspan’s disciplined underwriting strategy begins with its rigorous program partner selection process • Combined Ratio of 104.0% improved from 117.1% in 1H23 driven by the continued benefit of expense normalization from Combined Ratio scale and the positive impact o
Slide 14: AAC Sale Key Transaction Details
AAC Sale Key Transaction Details Overview Financial Impact Use of Proceeds Selling 100% of AAC to Oaktree Repay all or a portion of the Beat AFG Pro-forma Book Value $849M1, 2 acquisition Funding $420M cash sale price with potential Consolidated leverage reduced by $1,015M of long-term debt3 + Costs
Slide 15: Estimated Sources and Uses of Funds Summary
Estimated Sources and Uses of Funds Summary (in millions) Sources Notes SOURCES • AFG is committed to maximizing long- term shareholder value through AFG Cash and Short-Term Investments 06/30/24 $171 prudent capital management. As a AAC sale proceeds $420 Assumes sale of AAC closes 12/31/24 growth c
Slide 16: Ambac's Key Components of Value
Ambac’s Key Components of Value Growing Fee & Underwriting Businesses AFG Everspan Insurance Cirrata Legacy Financial Guarantee • Minority investments in • $376 million of GPW TTM • $256 million of TTM placed insurance services businesses premium • 23 programs including 1 new • $1.6b of NOLs program
Slide 17: 2Q24 Financial Review
Ambac 2Q24 Financial Review
Slide 18: 2Q24 Consolidated Financial Overview
2Q24 Consolidated Financial Overview Year Ended December 31, ($ in millions, except per share amounts) 2Q2024 2Q2023 2023 2022 Net income (loss) attributable to common stockholders $ (0.7) $ (13.1) $ 3.6 $ 522.4 Net income (loss) per diluted share (1) (0.02) (0.29) 0.18 11.31 Adjusted net income (lo
Slide 19: Ambac's Operating Segment Highlights
Ambac’s Operating Segment Highlights Legacy Specialty Financial Property & Guarantee Casualty Insurance Corporate & ($ in millions) Insurance Insurance Distribution Other Consolidated Three Months Ended June 30, 2024 Gross premiums written $ 1.9 $ 111.2 $ 113.1 Net premiums written 1.5 32.3 33.8 Tot
Slide 20: 2Q24 vs 2Q23 - Key Consolidated Financial Metrics
2Q24 vs 2Q23 - Key Consolidated Financial Metrics $50 $36 $35 $33 $15 $13 $8 $5 $4 $4 $3 $— $— $(1) $(3) $(7) (in millions) $(13) $(18) $(16) $(16) $(36) $(50) $(47) $(100) Net premiums Net Net investment Net investment Net gain on Loss and expense General and Interest Net income (loss) Adjusted net
Slide 21: Net Investment Income & Invested Assets as of June 30, 2024
Net Investment Income & Invested Assets as of June 30, 2024 Net Investment Income Total Portfolio — $2.6 billion Other Investments — $558 million (Loss) $50 $40 MBS and ABS 35% 1% 25% ($ in millions) U.S. Government $30 obligations Alternative fixed income Short-term & hedge funds 12% 21% Municipal,
Slide 22: General And Administrative Expenses
General And Administrative Expenses Compensation Expense Non-Compensation Expense $22.0 $21.1 $35.0 $20.0 $31.5 $17.6 $17.7 $30.0 $18.0 $17.4 $30.0 $16.5 $16.0 $25.0 $14.0 $19.2 ($ in millions) ($ in millions) $20.0 $18.4 $12.0 $10.0 $15.0 $13.6 $8.0 $10.0 $6.0 $4.0 $5.0 $2.0 $— $— 2Q2023 3Q2023 4Q2
Slide 23: Pro-forma Impact of AAC Sale
Pro-forma Impact of AAC Sale Ambac’s balance sheet will materially de-risk post AAC sale; will complete shift to a capital-light business (in millions) 2Q24 Actual 2Q24 Pro-Forma3 % Change Total assets $8,184 $1,505 (82)% Loss and loss adjustment expense reserves $890 $286 (68)% Long-term debt $1,01
Slide 24: Non-GAAP Reconciliations
Ambac Non-GAAP Reconciliations
Slide 25: Ambac Non-GAAP Financial Data
Ambac Non-GAAP Financial Data Non-GAAP Financial Data In addition to reporting the Company’s quarterly financial results in accordance with GAAP, the Company is reporting non-GAAP financial measures: EBITDA, Adjusted Net Income and Adjusted Book Value. These amounts are derived from our consolidated
Slide 26: Ambac Non-GAAP Financial Data - Adjusted Net Income (Loss)
Ambac Non-GAAP Financial Data - Adjusted Net Income (Loss) The following table reconciles net income attributable to common stockholders to the non-GAAP measure, adjusted net income (loss), for the periods listed: ($ in millions, except per share amounts) 2Q2024 1Q2024 4Q2023 3Q2023 2Q2023 FY2023 FY
Slide 27: EBITDA Reconciliation
EBITDA Reconciliation The following table reconciles Net income (loss) to the non-GAAP measure EBITDA as of each date presented: Legacy Specialty Financial Property & Guarantee Casualty Insurance Corporate & Insurance Insurance Distribution Other Consolidated Three Months Ended June 30, 2024 Net inc
Slide 28: Beat EBITDA Reconciliation
Beat EBITDA Reconciliation US/GBP Converstion Rate 1.24364 1.23756 1.37576 2023 2022 2021 Net income (loss) (1) £ 8,963 £ 7,997 £ 25,914 Adjustments: Interest expense 245 — — Income taxes 4,220 3,655 1,979 Depreciation 100 60 — Amortization of intangible assets 255 — — P&L on Disposal of operations
Slide 29: Ambac Non-GAAP Financial Data - Adjusted Book Value
Ambac Non-GAAP Financial Data - Adjusted Book Value 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, 2024 March 31, 2024 December 31, 2023 September 30, 2023 June 30, 2023 ($ in milli
Slide 30: LFG Segment Non-GAAP Financial Data - Adjusted Book Value
LFG Segment Non-GAAP Financial Data - Adjusted Book Value The following table reconciles Stockholders’ equity of the subsidiaries in the Financial Guarantee Insurance Segment to the non-GAAP measure adjusted book value: ($ in millions) 2Q2024 1Q2024 4Q2023 3Q2023 Ambac’s Shareholders' Equity (Legacy
Slide 31: Additional Information
Additional Information Where to Find Additional Information This communication does not constitute an offer to sell or the solicitation of an offer to buy any securities or a solicitation of any vote or approval. This communication may be deemed to be solicitation material in respect of the proposed
Slide 32: About Ambac
About Ambac Ambac Financial Group, Inc. (“Ambac” or “AFG”) is a specialty insurance holding company headquartered in New York City. Ambac’s core business is a growing specialty Contact P&C distribution and underwriting platform. Ambac also has a legacy financial guarantee business in run-off which w
Ambac Financial Group — Q2 2024 Earnings Presentation on 6ix