Octave Specialty Group, Inc. · NYSE:OSG
Octave Specialty — Ambac Financial Group — Q4 2019 Earnings Presentation
22 slides from Octave Specialty's earnings presentation, Mar 3, 2020
Slide 1: Investor Presentation Quarterly Highlights Fourth Quarter 2019
Investor Presentation Quarterly Highlights Fourth Quarter 2019 © 2020 2014 Ambac Financial Group, Inc. One OneWorld StateTrade StreetCenter, Plaza, 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. is a financial services holding company whose subsidiaries include Ambac Assurance Corporation, a guarantor of public finance and structured finance obligations in run-off. Ambac's common stock trades on the New York Stock Exchange under the symbo
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 Since June 2013 $ in b
Slide 5: Risk Management - Active De-Risking Contributed to 8.9% Decline in Adversely Classified and Watch List Credit Exposure
RISK MANAGEMENT - ACTIVE DE-RISKING CONTRIBUTED TO 8.9% DECLINE IN ADVERSELY CLASSIFIED AND WATCH LIST CREDIT EXPOSURE IN 4Q2019 • Insured net par reduced by $943 million or 2.4% to $38.0 billion driven by natural runoff and de-risking activities partially offset by foreign exchange gains on interna
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: 4Q2019 Financial Overview
4Q2019 FINANCIAL OVERVIEW • Net loss attributable to common stockholders for the 4Q2019 was $(110) million compared to 3Q2019 Net income of $66 million driven mostly by: ◦ The absence of the impact of the $142 million gain from the recognition in 3Q2019 of the amount awarded to Ambac from the SEC se
Slide 8: 4Q2019 vs 3Q2019 - Key Financial Results
4Q2019 vs 3Q2019 - KEY FINANCIAL RESULTS • Net premiums earned increased $9 million primarily due to a reduction in the allowance for uncollectable premiums partially offset by a continued reduction of the insured portfolio • Net realized investment gains were $9 million consisting mostly of gains f
Slide 9: Incurred (Losses) Benefit by Category - 4Q2019 vs 3Q2019
INCURRED (LOSSES) BENEFIT BY CATEGORY(1) - 4Q2019 vs 3Q2019 • RMBS losses of $40 million in 4Q2019 as a result of loss expenses incurred and a reduction to estimated representation and warranty subrogation recoveries • Domestic Public Finance losses of $54 million were primarily due to an increase i
Slide 10: Gross Loss Reserves by Category
GROSS LOSS RESERVES BY CATEGORY(1) As of December 31, 2019 As of September 30, 2019 ($ in millions) $1,000 $627 $580 $500 $208 $202 $4 $73 $73 $3 $0 -$500 $(482) $(560) -$1,000 -$1,500 $(1,392) $(1,419) -$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 4Q2018 1Q2019 2Q2019 3Q2019 4Q2019 4Q2018 1Q2019 2Q2019 3Q2019 4Q2019 Salaries Incentive Other Other Regulatory • Compensation expense decreased $2 million in 4Q2019
Slide 12: Ambac Consolidated Liability and Capital Summary
AMBAC CONSOLIDATED LIABILITY AND CAPITAL SUMMARY Category ($ in millions) Comments 12/31/19 $1,966 • Before estimated subrogation recoveries, Unearned Premium Revenue Claim Liabilities (“UPR”) and reinsurance • Net of $529 million of principal and interest held at AAC (1) Secured Notes $1,234 • Incl
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 December 31, 2019)
AMBAC VALUE DRIVERS (as of December 31, 2019) Liquidity and Improved Asset Management NOLs Capital Structure • Generating a 4.4% GAAP yield on • $1.2 billion at AFG book value of AAC & subsidiaries • $483 million of net assets at AFG • $2.3 billion at AAC fixed income investment portfolio • Reduced
Slide 15: Non-GAAP Reconciliations
NON-GAAP RECONCILIATIONS 15
Slide 16: Ambac Non-GAAP Financial Data
AMBAC NON-GAAP FINANCIAL DATA Non-GAAP Financial Data Included in this presentation, the Company reports two non-GAAP financial measures: Adjusted Earnings and Adjusted Book Value. A non-GAAP financial measure is a numerical measure of financial performance or financial position that excludes (or in
Slide 17: Ambac Non-GAAP Financial Data (Continued)
AMBAC NON-GAAP FINANCIAL DATA (CONTINUED) Adjusted Book Value (1) The following table reconciles Total Ambac Financial Group, Inc. stockholders’ equity to the non-GAAP measure Adjusted Book Value as of each date presented: December 31, 2019 December 31, 2018 ($ in millions, except per share data) $
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 financial services holding company whose subsidiaries include Ambac Assurance Corporation and Ambac Assurance UK Limited, guarantors of financial obligations in run-off. Ambac’s common stock trades on th
Slide 22: Ambac
Ambac
Ambac Financial Group — Q4 2019 Earnings Presentation on 6ix