Octave Specialty Group, Inc. · NYSE:OSG
Octave Specialty — Ambac Financial Group — Q4 2021 Earnings Presentation
24 slides from Octave Specialty's earnings presentation, Feb 25, 2022
Slide 1: Investor Presentation Quarterly Highlights Fourth Quarter 2021
Investor Presentation Quarterly Highlights Fourth 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 $671 million market cap (1) Access to $3.7b of net operating loss carryforwards MISSION VISION VALUES • Opti
Slide 3: Strategic Priorities
STRATEGIC PRIORITIES Ambac's primary goal is to maximize shareholder value through the execution of key strategies for both its Specialty P&C Insurance Platform and Financial Guarantee Insurance companies Specialty P&C Insurance Platform strategic priorities: • Growing and diversifying the participa
Slide 4: Strategic Priorities Progress - 2021: Specialty P&C Program Insurance Platform
STRATEGIC PRIORITIES PROGRESS - 2021 SPECIALTY P&C PROGRAM INSURANCE PLATFORM Participatory • Everspan entities received an AM Best Financial Strength Rating of ‘A-’ (Excellent) in February of Fronting Insurance Everspan 2021 • Nine program partners signed to date • Platform expanded with the acquis
Slide 5: Strategic Priorities Progress - 2021: Financial Guarantee Insurance Companies
STRATEGIC PRIORITIES PROGRESS - 2021 FINANCIAL GUARANTEE INSURANCE COMPANIES Actively managing, de-risking and mitigating insured portfolio risk • Active de-risking transactions accounted for $3 billion of the $6 billion reduction in net par in 2021 and $2 billion of the $3 billion reduction in adve
Slide 6: 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 7: 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 8: 4Q21 Financial Review
4Q21 FINANCIAL REVIEW Ambac
Slide 9: 4Q2021 Financial Overview
4Q2021 FINANCIAL OVERVIEW • Net loss attributable to common stockholders for 4Q2021 was $22 million compared to net income of $17 million in 3Q2021 • Adjusted loss for 4Q2021 of $10 million and adjusted earnings for 3Q2021 of $25 million excludes insurance intangible asset amortization of $11 millio
Slide 10: 4Q2021 vs 3Q2021 - Key Financial Results
4Q2021 vs 3Q2021 - KEY FINANCIAL RESULTS Results for 4Q21 were primarily driven by lower benefit from loss and loss expense 3Q2021 4Q2021 $150 $100 $55 $50 $27 $25 $21 ($ millions) $11 $11 $15 $17 $5 $3 $0 $(2) $(3) $(10) $-50 $(22) $(44) $(44) $-100 $-150 Net premiums Net investment Gain (loss) on
Slide 11: Net Investment Income
NET INVESTMENT INCOME Net investment income in 4Q2021 was $27 million, compared to $21 million for 3Q2021 primarily driven higher income from pooled funds investments $40 ($ in millions) $20 $13 $6 $15 $14 $— 3Q2021 4Q2021 Fixed maturity Pooled funds and other 11
Slide 12: Investment Portfolio Components as of December 31, 2021
INVESTMENT PORTFOLIO COMPONENTS AS OF DECEMBER 31, 2021 Gains on pooled and other equity investments were $13 million for 4Q2021 compared to $6 million in 3Q2021 driven by higher gains from equities, real estate and private credit, partially offset by lower returns on hedge funds Total Portfolio - $
Slide 13: Incurred (Losses) Benefit by Category - 4Q2021 vs 3Q2021
INCURRED (LOSSES) BENEFIT BY CATEGORY (1) - 4Q2021 vs 3Q2021 Structured Finance losses of $24 million in 4Q2021 was primarily driven by incremental litigation costs and lower estimated recoveries related to a single RMBS transaction Domestic Public Finance benefit of $41 million in 4Q2021 was primar
Slide 14: Financial Guarantee Gross Loss Reserves by Category
FINANCIAL GUARANTEE GROSS LOSS RESERVES BY CATEGORY (1) September 30, 2021 December 31, 2021 $1,000 $606 $562 $500 $16 $17 $46 $45 ($ in millions) $0 $-500 $(549) $(554) $-1,000 $(1,217) $(1,178) $-1,500 Structured Finance Domestic Public Other Loss Total Finance Expenses (1) Gross loss reserves are
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 4Q2020 1Q2021 2Q2021 3Q2021 4Q2021 4Q2020 1Q2021 2Q2021 3Q2021 4Q2021 Salaries Incentive Other MGA/Underwriting Regulatory Other • Operating expenses were $33 million
Slide 16: Ambac Consolidated Liability and Capital Summary
AMBAC CONSOLIDATED LIABILITY AND CAPITAL SUMMARY Category ($ in millions) Comments 12/31/21 • Before estimated subrogation, Unearned Premium Revenue (“UPR”) and Claim Liabilities $1,869 reinsurance Secured Notes (1) $1,175 • Includes $0.2 million of accrued and unpaid interest 5.1% Surplus Notes $1,
Slide 17: Non-GAAP Reconciliations
NON-GAAP RECONCILIATIONS 17
Slide 18: Ambac Non-GAAP Financial Data
AMBAC NON-GAAP FINANCIAL DATA Non-GAAP Financial Data Included in this presentation, the Company reports two non-GAAP financial measures: adjusted earnings and adjusted book value. A non-GAAP financial measure is a numerical measure of financial performance or financial position that excludes (or in
Slide 19: Ambac Non-GAAP Financial Data (Continued)
AMBAC NON-GAAP FINANCIAL DATA (CONTINUED) Adjusted Book Value (1) The following table reconciles Total Ambac Financial Group, Inc. stockholders’ equity to the non-GAAP measure adjusted book value as of each date presented: December 31, 2021 September 30, 2021 ($ in millions, except per share data) $
Slide 20: Appendix
APPENDIX Ambac 20
Slide 21: 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 22: 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 23: 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 business is a growing specialty P&C distribution and underwriting platform with a legacy financial guaranty business in run off. Ambac’s common stock trades
Slide 24: Ambac
Ambac
Ambac Financial Group — Q4 2021 Earnings Presentation on 6ix