Octave Specialty Group, Inc. · NYSE:OSG
Octave Specialty — Ambac Financial Group — Q1 2019 Earnings Presentation
22 slides from Octave Specialty's earnings presentation, May 10, 2019
Slide 1: Investor Presentation Quarterly Highlights First Quarter 2019
Investor Presentation Quarterly Highlights First Quarter 2019 © 2019 2014 Ambac Financial Group, Inc. One State Street Plaza, New York, NY 10004 All Rights Reserved | 800-221-1854 | www.ambac.com
Slide 2: Ambac - Company Overview
AMBAC - COMPANY OVERVIEW Ambac Financial Group, Inc., is a holding company whose subsidiaries, Ambac Assurance Corporation, Everspan MISSION Financial Guarantee Corp., and Ambac Assurance UK • Optimize our business and its Limited, provide financial guarantees to clients in both the components to ac
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 Reduction Since Emerge
Slide 5: Risk Management - Active De-Risking Drove Decline in Adversely Classified and Watch List Credits
RISK MANAGEMENT - ACTIVE DE-RISKING DROVE DECLINE IN ADVERSELY CLASSIFIED AND WATCH LIST CREDITS EXPOSURE IN 1Q2019 The COFINA Plan of Adjustment, including certain related commutation transactions and subsequent distributions, resulted in a reduction of net par exposure to COFINA by approximately 7
Slide 6: 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 $1.6 billion of RMBS-related recoveries ever-to-date Active Litigation • Countrywide, First Franklin and Nomura • U.S. Bank ◦ Estimated repre
Slide 7: 1Q2019 Financial Overview
1Q2019 FINANCIAL OVERVIEW ($ in millions, except per share amounts) 1Q2019 4Q2018 Net income (loss) attributable to common stockholders $ (43) $ (20) Net income (loss) per diluted share $ (0.94) $ (0.45) Adjusted earnings (loss) (1) $ (9) $ 11 Adjusted earnings (loss) per diluted share $ (0.20) $ 0.
Slide 8: 1Q2019 vs 4Q2018 - Key Financial Results
1Q2019 vs 4Q2018 - KEY FINANCIAL RESULTS • Net investment income increased $17.3 million primarily due to net gains on invested assets classified as trading primarily due to gains in the equity and credit markets • Net investment gains of $17.2 million include $19 million of net gains related to the
Slide 9: Incurred (Losses) Benefit by Category - 1Q2019 vs 4Q2018
INCURRED (LOSSES) BENEFIT BY CATEGORY(1) - 1Q2019 vs 4Q2018 ◦ RMBS benefit of $38.6 million in 1Q2019 was driven by favorable credit performance and higher levels of expected excess spread due to lower interest rates, partially offset by an increase in loss expenses ◦ Domestic Public Finance losses
Slide 10: Gross Loss Reserves by Category
GROSS LOSS RESERVES BY CATEGORY(1) As of March 31, 2019 As of December 31, 2018 ($ in millions) $1,000 $639 $562 $500 $226 $228 $258 $273 $83 $66 $0 $(107) $(222) -$500 -$1,000 -$1,500 $(1,351) $(1,313) -$2,000 RMBS Domestic Student Ambac UK Loss Total Public Loans and Other Expenses Finance Credits
Slide 11: Expense Management
EXPENSE MANAGEMENT Compensation Expense Non-Compensation Expenses $20 $20 $15 $15 ($ in millions) ($ in millions) $10 $10 $5 $5 $0 $0 2Q 2018 3Q 2018 4Q 2018 1Q 2019 2Q 2018 3Q 2018 4Q 2018 1Q 2019 Salaries Incentive Other Other AMPS Exchange OCI Restructuring • Compensation expense increased $3.0 m
Slide 12: Ambac Consolidated Liability and Capital Summary
AMBAC CONSOLIDATED LIABILITY AND CAPITAL SUMMARY Category ($ in millions) Comments 3/31/19 • Before estimated subrogation recoveries, Unearned Premium Revenue Claim Liabilities $2,221 (“UPR”) and reinsurance • Includes $276 million of Ambac UK claim liabilities • Excludes $578 million of principal a
Slide 13: 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 14: Ambac Value Drivers (as of March 31, 2019)
AMBAC VALUE DRIVERS (as of March 31, 2019) Liquidity and Improved Asset Management NOLs Capital Structure • Generating a 5.3% GAAP yield on • $1.3 billion at AFG $3.6 billion book value of AAC & • $469 million of cash, investments • $2.3 billion at AAC subsidiaries investment portfolio and receivabl
Slide 15: Non-GAAP Reconciliations
NON-GAAP RECONCILIATIONS 15
Slide 16: Ambac Non-GAAP Financial Data
AMBAC NON-GAAP FINANCIAL DATA Non-GAAP Financial Data Included in this presentation, the Company reports two non-GAAP financial measures: Adjusted Earnings and Adjusted Book Value. A non-GAAP financial measure is a numerical measure of financial performance or financial position that excludes (or in
Slide 17: Ambac Non-GAAP Financial Data (Continued)
AMBAC NON-GAAP FINANCIAL DATA (CONTINUED) Adjusted Book Value (1) The following table reconciles Total Ambac Financial Group, Inc. stockholders’ equity to the non-GAAP measure Adjusted Book Value as of each date presented: March 31, 2019 December 31, 2018 ($ in millions, except per share data) $ Amo
Slide 18: Appendix
APPENDIX Ambac 18
Slide 19: 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 20: 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 21: About Ambac
ABOUT AMBAC Ambac Financial Group, Inc. (“Ambac” or “AFG”), headquartered in New York City, is a holding company whose subsidiaries, including its principal operating subsidiaries, Ambac Assurance Corporation (“Ambac Assurance or AAC”), Everspan Financial Guarantee Corp. and Ambac Assurance UK Limit
Slide 22: Ambac
Ambac
Ambac Financial Group — Q1 2019 Earnings Presentation on 6ix