Octave Specialty Group, Inc. · NYSE:OSG
Octave Specialty — Ambac Financial Group — Q2 2021 Earnings Presentation
25 slides from Octave Specialty's earnings presentation, Aug 6, 2021
Slide 1: Investor Presentation Quarterly Highlights Second Quarter 2021
Investor Presentation Quarterly Highlights Second 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 $679 million market cap (1) MISSION VISION VALUES • Optimize our business and its • Transition to a growth-o
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: Strategic Priorities Progress - 2Q21
STRATEGIC PRIORITIES PROGRESS - 2Q21 RISK MANAGEMENT • Active de-risking transactions accounted for $640 million of the $1.0 billion, or 8%, decline in adversely classified and watch list net par exposure in 2Q2021 • On July 27, 2021, Ambac executed a plan support agreement with the Oversight Board,
Slide 5: 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 6: 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 7: Strategic Priorities Progress - Specialty P&C Insurance Strategy
STRATEGIC PRIORITIES PROGRESS - SPECIALTY P&C INSURANCE STRATEGY Update • First specialty program launched in May 2021 Specialty Program • A significant number of specialty program Property & Casualty submissions under active review PILLAR I Insurance • Form A’s filed to acquire other admitted carri
Slide 8: 2Q21 Financial Review
2Q21 FINANCIAL REVIEW Ambac
Slide 9: 2Q2021 Financial Overview
2Q2021 FINANCIAL OVERVIEW • Net loss attributable to common stockholders for 2Q2021 was $29 million compared to net income of $17 million in 1Q2021 • Adjusted loss for 2Q2021 of $13 million and Adjusted Earnings for 1Q2021 of $41 million excludes insurance intangible asset amortization of $13 millio
Slide 10: 2Q2021 vs 1Q2021 - Key Financial Results
2Q2021 vs 1Q2021 - KEY FINANCIAL RESULTS • 2Q2021 results included a loss and loss expense benefit, compared to loss and loss expense in 1Q2021, more than offset by losses from interest rate derivatives, compared to a gain in 1Q2021, and a higher deferred tax provision • In addition, 1Q2021 results
Slide 11: Net Investment Income (Loss)
NET INVESTMENT INCOME (LOSS) Net investment income in 2Q2021 was $42 million, compared to $49 million for 1Q2021 with returns remaining strong from both the Available-for-sale and Pooled funds investments $60 $40 ($ in millions) $27 $20 $20 $22 $22 $— 2Q2021 1Q2021 Available-for-sale Pooled funds an
Slide 12: Investment Portfolio Components - June 30, 2021
INVESTMENT PORTFOLIO COMPONENTS - June 30, 2021 Gains on pooled and other equity investments represented $20 million of the $42 million of total net investment gains for 2Q2021, driven primarily by continued positive performance in hedge funds and equity market investments Total Portfolio - $3.4 bil
Slide 13: Incurred (Losses) Benefit by Category - 2Q2021 vs 1Q2021
INCURRED (LOSSES) BENEFIT BY CATEGORY(1) - 2Q2021 vs 1Q2021 • Structured Finance benefit of $16 million in 2Q2021 was primarily due to credit improvements and the net positive impact of interest rates • Domestic Public Finance benefit of $11 million in 2Q2021 was primarily related to improved credit
Slide 14: Gross Loss Reserves by Category
GROSS LOSS RESERVES BY CATEGORY (1) June 30, 2021 March 31, 2021 $1,000 $682 $708 $500 $21 $27 $52 $57 ($ in millions) $0 $-500 $(414) $(456) $-1,000 $(1,211) $(1,206) $-1,500 Structured Finance Domestic Public Other Loss Total Finance Expenses (1) Gross loss reserves are net of estimated R&W subrog
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 2Q2020 3Q2020 4Q2020 1Q2021 2Q2021 2Q2020 3Q2020 4Q2020 1Q2021 2Q2021 Salaries Incentive Other MGA/Underwriting Regulatory Other • Compensation expense decreased $1 m
Slide 16: Ambac Consolidated Liability and Capital Summary
AMBAC CONSOLIDATED LIABILITY AND CAPITAL SUMMARY Category ($ in millions) Comments 6/30/21 • Before estimated subrogation, Unearned Premium Revenue (“UPR”) and Claim Liabilities $1,971 reinsurance Secured Notes (2) $1,163 • Excludes $463 million of principal and interest held at AAC (1) • Includes $
Slide 17: Ambac Value Drivers
AMBAC VALUE DRIVERS (as of June 30, 2021 unless noted) Proactive Liability Litigation & Recovery Strategic investments in Management • Aggressively pursuing legal rights in capital light, fee based, • Robust risk mitigation efforts strengthen the BofA / Countrywide, First Franklin growth oriented an
Slide 18: Non-GAAP Reconciliations
NON-GAAP RECONCILIATIONS 18
Slide 19: 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 20: 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: June 30, 2021 March 31, 2021 ($ in millions, except per share data) $ Amount
Slide 21: Appendix
APPENDIX Ambac 21
Slide 22: 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 23: 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 24: About Ambac
ABOUT AMBAC Ambac Financial Group, Inc. (“Ambac” or “AFG”), headquartered in New York City, is a financial services holding company. Ambac's subsidiaries include: Ambac Assurance Corporation and Ambac Assurance UK Limited, financial guarantee insurance companies currently in runoff; Everspan Indemni
Slide 25: Ambac
Ambac
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