Octave Specialty Group, Inc. · NYSE:OSG
Octave Specialty — Ambac Financial Group — Q3 2019 Earnings Presentation
22 slides from Octave Specialty's earnings presentation, Nov 8, 2019
Slide 1: Investor Presentation Quarterly Highlights Third Quarter 2019
Investor Presentation Quarterly Highlights Third 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 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 NASDAQ Global Select Market under the
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 Drove 8.8% Decline in Adversely Classified and Watch List Credits
RISK MANAGEMENT - ACTIVE DE-RISKING DROVE 8.8% DECLINE IN ADVERSELY CLASSIFIED AND WATCH LIST CREDITS EXPOSURE IN 3Q19 • Adversely Classified and Watch List Credits decreased $1.5 billion or 8.8% in 3Q19 from 2Q19 • Insured net par reduced by $3.2 billion or 7.6% to $39.0 billion • Risk Mitigation A
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: 3Q2019 Financial Overview
3Q2019 FINANCIAL OVERVIEW • Net income attributable to common stockholders for the 3Q2019 was $66 million compared to a 2Q2019 Net loss of $128 million driven mostly by: ◦ A $142.2 million gain from the recognition of the amount awarded to Ambac from the SEC settlement with Citigroup ◦ The absence o
Slide 8: 3Q2019 vs 2Q2019 - Key Financial Results
3Q2019 vs 2Q2019 - KEY FINANCIAL RESULTS • Net premiums earned increased $2.7 million primarily due to 2Q19's inclusion of negative accelerated earnings related to the Ballantyne commutation. 3Q19 includes an increase in uncollectable premiums • Net investment income decreased $42.0 million mostly d
Slide 9: Incurred (Losses) Benefit by Category - 3Q2019 vs 2Q2019
INCURRED (LOSSES) BENEFIT BY CATEGORY(1) - 3Q2019 vs 2Q2019 • RMBS benefit of $24.5 million in 3Q2019 was driven by higher levels of expected excess spread due to lower interest rates • Domestic Public Finance losses of $77.0 million were primarily due to an increase in non-COFINA Puerto Rico reserv
Slide 10: Gross Loss Reserves by Category
GROSS LOSS RESERVES BY CATEGORY(1) As of September 30, 2019 As of June 30, 2019 ($ in millions) $1,000 $580 $603 $500 $202 $222 $73 $83 $4 $5 $0 -$500 $(560) $(491) -$1,000 -$1,500 $(1,419) $(1,404) -$2,000 RMBS Domestic Student Ambac UK Loss Total Public Loans and Other Expenses Finance Credits (1)
Slide 11: Expense Management
EXPENSE MANAGEMENT Compensation Expense Non-Compensation Expenses $20 $20 $15 $15 ($ in millions) ($ in millions) $10 $10 $5 $5 $0 $0 3Q2018 4Q2018 1Q2019 2Q2019 3Q2019 3Q2018 4Q2018 1Q2019 2Q2019 3Q2019 Salaries Incentive Other Other AMPS Exchange Regulatory Restructuring • Compensation expense dec
Slide 12: Ambac Consolidated Liability and Capital Summary
AMBAC CONSOLIDATED LIABILITY AND CAPITAL SUMMARY Category ($ in millions) Comments 9/30/19 $1,939 • Before estimated subrogation recoveries, Unearned Premium Revenue Claim Liabilities (“UPR”) and reinsurance • Excludes $573 million of principal and interest held at AAC (1) Secured Notes $1,339 • Inc
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 September 30, 2019)
AMBAC VALUE DRIVERS (as of September 30, 2019) Liquidity and Improved Asset Management NOLs Capital Structure • Generating a 5.0% GAAP yield on • $1.3 billion at AFG $2.7 billion book value of AAC & • $473 million of cash, investments • $2.1 billion at AAC subsidiaries fixed income and receivables a
Slide 15: Non-GAAP Reconciliations
NON-GAAP RECONCILIATIONS 15
Slide 16: Ambac Non-GAAP Financial Data
AMBAC NON-GAAP FINANCIAL DATA Non-GAAP Financial Data Included in this presentation, the Company reports two non-GAAP financial measures: Adjusted Earnings and Adjusted Book Value. A non-GAAP financial measure is a numerical measure of financial performance or financial position that excludes (or in
Slide 17: Ambac Non-GAAP Financial Data (Continued)
AMBAC NON-GAAP FINANCIAL DATA (CONTINUED) Adjusted Book Value (1) The following table reconciles Total Ambac Financial Group, Inc. stockholders’ equity to the non-GAAP measure Adjusted Book Value as of each date presented: September 30, 2019 December 31, 2018 ($ 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, a guarantor of public finance and structured finance obligations in run-off. Ambac’s common stock trades on the
Slide 22: Ambac
Ambac
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