Octave Specialty Group, Inc. · NYSE:OSG
Octave Specialty — Ambac Financial Group — Q1 2024 Earnings Presentation
32 slides from Octave Specialty's earnings presentation, May 7, 2024
Slide 1: First Quarter 2024 Investor Presentation
First 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 financial services 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 fin
Slide 4: Specialty P&C: A Diversified, Capital Light Specialty Platform
Specialty P&C: A Diversified, Capital Light Specialty Platform • Ambac’s growing Specialty P&C Platform includes its program insurer (“Everspan”), Everspan MGA/MGU specialty program insurance distribution business (“Cirrata”) and strategic minority program investments (“Redgrove”) underwriting solut
Slide 5: 2024 Strategic Priorities
2024 Strategic Priorities AFG Everspan Insurance Cirrata Legacy Financial Guarantee • Grow and maximize • GPW +$400 million forecast in • Premiums placed +$300 million • Moelis & Company engaged to shareholder value over medium 20241,2 forecast in 20241,2 discuss potential transactions and long term
Slide 6: Select Partnerships and Strategic Investments
Select Partnerships and Strategic Investments Everspan 3Q21 1Q22 2Q22 3Q22 4Q22 4Q22 4Q22 4Q21 4Q22 1Q23 1Q23 2Q23 Cirrata Strategic Investments 4Q20 Confidential 4Q22 3Q23 MGA 3Q22 4Q22 4Q21 3Q22 3Q22 6
Slide 7: Projected MGA/U Growth Provides Compelling Opportunity
Projected MGA/U Growth Provides Compelling Opportunity Ambac’s Specialty P&C Platform is poised to benefit from growth in the MGA/U market U.S. MGA U.S. MGA Direct Premium Written U.S. MGA Premium Distribution by Market1 ($bn)1 MGA Size2 $68 bn 14% $70 $68 2022 DPW YoY Growth $60 $59 22.0% 25.0% $51
Slide 8: Rising Demand for Specialty Risk Coverage
Rising Demand for Specialty Risk Coverage The specialty insurance market continues to be underpinned by macroeconomic factors as alternative risks continue to grow and change E&S Industry1 Sweeping technological Continued economic investment disruption Infrastructure and economic $99 bn 17% Innovati
Slide 9: Specialty Insurance Poised for Continued Growth
Specialty Insurance Poised for Continued Growth Ambac’s Specialty P&C Platform is well positioned to capitalize on the fast-growing specialty P&C insurance market Historical E&S Trends1 E&S Industry vs. P&C Industry DPW CAGRs1 12% 11% • 2022 E&S direct premiums written were $99 billion implying 10%
Slide 10: 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 • $96 million of GPW in 1Q24 up 86% vs. 1Q23 Gross Premium Written (GPW) and Number of Programs $100 28 • Quarterly pre-tax prof
Slide 11: Everspan: Underwriting Strategy
Everspan: Underwriting Strategy Everspan’s disciplined underwriting strategy begins with its rigorous program partner selection process • Combined Ratio of 98.4% improved from 121.9% in 1Q23 Combined Ratio driven by the continued benefit of expense normalization from 180% scale and the positive impa
Slide 12: Everspan: Diverse Product Line & Risk Appetite
Everspan: Diverse Product Line & Risk Appetite Active risk management Disciplined underwriting approach Strategic partners focused on value creation Continuity, consistency and stability are critical to an Led by a well-seasoned underwriting team, Everspan is Everspan takes an active role in oversee
Slide 13: Cirrata: Insurance Distribution via Majority Owned MGAs
Cirrata: Insurance Distribution via Majority Owned MGAs High margin businesses that generate predictable recurring fee-based income • $90 million of premium placed in 1Q24 an increase of 17% over 1Q23 Premium Placed by Line ($ in millions) driven by the August 2023 acquisition of Riverton Insurance
Slide 14: Cirrata: MGA/U Distribution and Product Development
Cirrata: MGA/U Distribution and Product Development Cirrata’s growth roadmap will be achieved through strategic acquisitions and organic expansion Two Key Growth Drivers Opportunistic Acquisitions De Novo Startups & Organic Expansion • Provide immediate scale, diversification and potential • Partner
Slide 15: Building an MGU with Cirrata
Building an MGU with Cirrata AFG's Business Services Business Model Cirrata’s 22° Business Services unit offers distribution partners a comprehensive suite of business services, led by a differentiated technology solution to support their growth, operations, and risk management Value Drivers • Techn
Slide 16: Legacy FG Run-Off Subsidiaries: Ambac Assurance & Ambac UK
Legacy FG Run-Off Subsidiaries: Ambac Assurance & Ambac UK Segment Overview Adversely Classified Credits - Net Par (definitions in Appendix) $10 • Moelis & Company exploring potential strategic transactions with ($ in billions) interested 3rd parties for Legacy Financial Guarantee $5 1 • Book Value
Slide 17: 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 • $318 million of GPW last 4 • $243 million of placed premium • 11 : 1 total claims paying ratio insurance services businesses quarters last 4 qua
Slide 18: 1Q24 Financial Review
Ambac 1Q24 Financial Review
Slide 19: 1Q24 Consolidated Financial Overview
1Q24 Consolidated Financial Overview Net income attributable to common stockholders for 1Q24 was $20.1 million Adjusted net income for 1Q24 of $38.5 million compared to an adjusted net loss for compared to net loss of $(33.4) million in 1Q23 mainly from the legacy financial 1Q23 of $(13.8) million;
Slide 20: Ambac's Operating Segment Highlights
Ambac’s Operating Segment Highlights Legacy Specialty Financial Property & Guarantee Casualty Insurance Corporate & ($ in millions) Insurance Insurance Distribution Other Consolidated Three Months Ended March 31, 2024 Gross premiums written $ 1.7 $ 96.4 $ 98.1 Net premiums written 1.5 26.2 27.8 Tota
Slide 21: 1Q24 vs 1Q23 - Key Consolidated Financial Metrics
1Q24 vs 1Q23 - Key Consolidated Financial Metrics $50 $42 $38 $33 $34 $20 $14 (in millions) $1 $1 $2 $— $(4) $(4) $(14) $(16) $(16) $(18) $(33) $(36) $(36) $(50) Net premiums Net investment Net investment Loss and expense Net gains (losses) on General and Interest expense Net income (loss) Adjusted
Slide 22: Net Investment Income & Invested Assets as of March 31, 2024
Net Investment Income & Invested Assets as of March 31, 2024 Net Investment Income Total Portfolio — $2.7 billion Other Investments — $558 million (Loss) $50 $40 MBS and ABS 35% 1% 24% ($ in millions) U.S. Government $30 obligations Alternative fixed income Short-term & hedge funds 14% 21% Municipal
Slide 23: 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 $18.0 $30.0 $16.4 $16.5 $16.0 $25.0 $14.0 $20.0 $19.2 ($ 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 $— $— 1Q2023 2Q2023 3Q2
Slide 24: Non-GAAP Reconciliations
Ambac Non-GAAP Reconciliations
Slide 25: Ambac Non-GAAP Financial Data
Ambac Non-GAAP Financial Data Non-GAAP Financial Data In addition to reporting the Company’s quarterly financial results in accordance with GAAP, the Company is reporting non-GAAP financial measures: EBITDA, Adjusted Net Income and Adjusted Book Value. These amounts are derived from our consolidated
Slide 26: Ambac Non-GAAP Financial Data - Adjusted Net Income (Loss)
Ambac Non-GAAP Financial Data - Adjusted Net Income (Loss) The following table reconciles net income attributable to common stockholders to the non-GAAP measure, adjusted net income (loss), for the periods listed: ($ in millions, except per share amounts) 1Q2024 4Q2023 3Q2023 2Q2023 1Q2023 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 March 31, 2024 Net in
Slide 28: 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: March 31, 2024 December 31, 2023 September 30, 2023 June 30, 2023 March 31, 2023 ($ in mill
Slide 29: 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) 1Q2024 4Q2023 3Q2023 2Q2023 Ambac’s Shareholders' Equity (Legacy
Slide 30: Appendix
Ambac Appendix
Slide 31: Risk Adverse Credit Classifications
Risk Adverse Credit Classifications Classification Description Class IA Potential Problem with Risks to be Dimensioned Class II Substandard Requiring Intervention Adversely Classified Class III Doubtful with Clear Potential for Loss Credits Class IV Imminent Default or Defaulted Class V Fully Reserv
Slide 32: 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 Contact distribution and underwriting platform. Ambac also has a legacy financial guaranty business in run off. Ambac’s
Ambac Financial Group — Q1 2024 Earnings Presentation on 6ix