Octave Specialty Group, Inc. · NYSE:OSG
Octave Specialty — Ambac Financial Group — Q3 2020 Earnings Presentation
23 slides from Octave Specialty's earnings presentation, Nov 10, 2020
Slide 1: Investor Presentation Quarterly Highlights Third Quarter 2020
Investor Presentation Quarterly Highlights Third Quarter 2020 © 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 common stock trades on the New York Stock Exchange under the symbol "AMBC" Ambac Financial Group, Inc. (AFG) (Holding Company) $465 million cash, investments and receivables 46 million shares outstand
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 Net Par Exposure Since June 2013 Appendix) $200 6
Slide 5: 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 6: 3Q2020 Financial Overview
3Q2020 FINANCIAL OVERVIEW • Net loss attributable to common stockholders for 3Q2020 was $108 million compared to $35 million in 2Q2020 ◦ The higher net loss for 3Q2020 compared to 2Q2020 reflects higher loss and loss expense reserves, primarily related to Public Finance and RMBS. Investment and deri
Slide 7: 3Q2020 vs 2Q2020 - Key Financial Results
3Q2020 vs 2Q2020 - KEY FINANCIAL RESULTS • Net premiums earned increased $4 million primarily driven by an increase in accelerated premium from de-risking activity • Net investment income of $37 million included net investment income on available-for-sale securities of $24 million and gains on poole
Slide 8: Investment Portfolio Philosophy and Objectives
INVESTMENT PORTFOLIO PHILOSOPHY AND OBJECTIVES Investment Philosophy • Diversified portfolio Investment Objectives • Active asset and liability management • Optimize risk-adjusted returns AAC & Ambac UK • Achieve highest risk adjusted rate of return on a diversified Total Portfolio - $3.6 billion po
Slide 9: Net Investment Income (Loss)
NET INVESTMENT INCOME (LOSS) Net investment income for 3Q2020 was $37 million, compared to $52 million for 2Q2020 which included gains on pooled investment funds and other of $14 million in 3Q20 compared to $27 million in 2Q20 • Gains on pooled investment funds include continued price recovery on as
Slide 10: Incurred (Losses) Benefit by Category - 3Q2020 vs 2Q2020
INCURRED (LOSSES) BENEFIT BY CATEGORY(1) - 3Q2020 vs 2Q2020 • RMBS losses of $27 million in 3Q2020 were the result of higher expected losses, driven by the global recession as a result of the COVID-19 pandemic, and incremental loss expenses driven by increased R&W litigation costs • Domestic Public
Slide 11: Gross Loss Reserves by Category
GROSS LOSS RESERVES BY CATEGORY(1) September 30, 2020 June 30, 2020 $1,000 $799 $736 $500 $233 $229 $20 $13 $80 $57 $0 ($ in millions) $-500 $(393) $(401) $-1,000 $-1,500 $(1,462) $(1,499) $-2,000 RMBS Domestic Public Student Ambac UK Loss Total Finance Loans and Other Expenses Credits (1) Gross los
Slide 12: Expense Management
EXPENSE MANAGEMENT Compensation Expense Non-Compensation Expenses $20 $20 $15 $15 ($ in millions) ($ in millions) $10 $10 $5 $5 $0 $0 3Q2019 4Q2019 1Q2020 2Q2020 3Q2020 3Q2019 4Q2019 1Q2020 2Q2020 3Q2020 Salaries Incentive Other Other Regulatory • Compensation expense increased $2 million in 3Q2020
Slide 13: Ambac Consolidated Liability and Capital Summary
AMBAC CONSOLIDATED LIABILITY AND CAPITAL SUMMARY Category ($ in millions) Comments 9/30/20 $2,225 • Before estimated subrogation recoveries, Unearned Premium Revenue Claim Liabilities (“UPR”) and reinsurance • Excludes $470 million of principal and interest held at AAC (1) Secured Notes $1,178 • Inc
Slide 14: Looking Ahead: Exploring Growth and Business Diversification
LOOKING AHEAD: EXPLORING GROWTH AND BUSINESS DIVERSIFICATION Ambac is well positioned to deploy capital in a tax efficient way to diversify and grow its platform to enhance long-term shareholder value AMBAC RESOURCES NEW BUSINESS FOCUS • Public company platform ADJACENT SECTORS POSITIONING THE PLATF
Slide 15: Ambac Value Drivers
AMBAC VALUE DRIVERS (as of September 30, 2020) Liquidity and Improved Asset Management NOLs Capital Structure • Generated a 2.4% total return on the • $1.2 billion at AFG investment portfolio in 3Q20 • $465 million of net assets at AFG • $2.5 billion at AAC • Ownership of $603 million of • Reduced o
Slide 16: Non-GAAP Reconciliations
NON-GAAP RECONCILIATIONS 16
Slide 17: Ambac Non-GAAP Financial Data
AMBAC NON-GAAP FINANCIAL DATA Non-GAAP Financial Data Included in this presentation, the Company reports two non-GAAP financial measures: Adjusted Earnings and Adjusted Book Value. A non-GAAP financial measure is a numerical measure of financial performance or financial position that excludes (or in
Slide 18: Ambac Non-GAAP Financial Data (Continued)
AMBAC NON-GAAP FINANCIAL DATA (CONTINUED) Adjusted Book Value (1) The following table reconciles Total Ambac Financial Group, Inc. stockholders’ equity to the non-GAAP measure Adjusted Book Value as of each date presented: September 30, 2020 December 31, 2019 ($ in millions, except per share data) $
Slide 19: Appendix
APPENDIX Ambac 19
Slide 20: 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 21: 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 22: About Ambac
ABOUT AMBAC Ambac Financial Group, Inc. (“Ambac” or “AFG”), headquartered in New York City, is a financial services holding company whose principal subsidiaries, Ambac Assurance Corporation and Ambac Assurance UK Limited, are financial guarantors currently in runoff. Outstanding policies include fin
Slide 23: Ambac
Ambac
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