Octave Specialty Group, Inc. · NYSE:OSG
Octave Specialty — Ambac Financial Group — KBW Insurance Conference 2024
33 slides from Octave Specialty's conference presentation, Sep 4, 2024
Slide 1: Investor Presentation - KBW Insurance Conference
Ambac Financial Group One World Trade Center, 41st Floor, New York, NY 10007 All Rights Reserved | 800-221-1854 | www.ambac.com September 4-5, 2024 INVESTOR PRESENTATION KBW INSURANCE CONFERENCE Filed by Ambac Financial Group, Inc. pursuant to Rule 14a-12 under the Securities Exchange Act of 1934 Su
Slide 2: Forward Looking Statements Disclaimers
PAGE 1 Forward Looking Statements Disclaimers 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,” “bel
Slide 3: Presentation of Financial Information
PAGE 2 Presentation of Financial Information Financial amounts for Beat Capital Partners presented in this investor presentation have been converted from British pounds to U.S. Dollars. Financial information identified in this offering circular as “combined” is the arithmetic sum of the historical r
Slide 4: Ambac is a Leading Specialty Insurance Risk Distributor and Underwriting Manager
PAGE 3 • A pure-play P&C business focused on the dynamic Managing General Agent and Managing General Underwriter ("MGA") sector following the completion of the sale of Legacy Financial Guarantee business • Positioned to be a premier destination for specialty programs & MGAs • Over ~$1.4 billion1 of
Slide 5: Evolution into a Property & Casualty Insurance Platform
PAGE 4 Evolution into a Property & Casualty Insurance Platform 2007 2008 2019 Ambac is the world’s 2nd-largest Financial Guarantor 2021 2022 U.S. housing crisis materially impacts Ambac’s business Claude LeBlanc named CEO P&C market roadmap announced Everspan launched First MGU, Xchange Benefits, ac
Slide 6: Leadership Team with Expertise to Execute Strategic Vision
PAGE 5 Leadership Team with Expertise to Execute Strategic Vision Performance Focused Strategic plan designed to create long-term shareholder value Leadership focused on generating attractive returns on a risk-adjusted basis Targeting organic and inorganic growth opportunities Incentivized for
Slide 7: Historical Trends: U.S. MGA Market
PAGE 6 Historical Trends1 • The MGA market more than doubled in size between 2014-2023 supported by the strong growth of the Excess & Surplus (E&S) insurance market • Premium growth has been driven primarily by MGAs unaffiliated with an insurance carrier • In 2023, the U.S. market was estimated to h
Slide 8: MGA Economic Profile
PAGE 7 MGA Economic Profile Premium Placed MGA EBITDA Waterfall MGA EBITDA is Not Exposed to Balance Sheet Risk • MGAs generate recurring revenue and earnings based on a percentage of the insurance premium (“Premium Placed”) they underwrite on behalf of insurance carriers – Some MGAs may also be ent
Slide 9: Well Positioned to Compete in Program & MGA Sector
PAGE 8 Strategic Operator Partnership Model MGA Program Pure-Play Shared Services Platform Aligned Capacity Private Equity Roll-ups Large, Publicly Traded Brokers Large Private Consolidators Well Positioned to Compete in Program & MGA Sector Strategic Position Supports Profile as an Attractive Desti
Slide 10: EBITDA by Operating Segment
PAGE 9 EBITDA by Operating Segment 1. Excludes Holding Company Net Expense 2. Represents management forecasts, which are subject to market conditions, risk factors described in Ambac's Annual Report on Form 10-K filed with the SEC on February 27, 2024, and subsequent SEC filings, and changes in the
Slide 11: Ambac Consolidated EBITDA Bridge
PAGE 10 Ambac Consolidated EBITDA Bridge 1. Reconciliation of Non-GAAP measure on slide 30 2. Represents management forecasts, which are subject to market conditions, risk factors described in Ambac's Annual Report on Form 10-K filed with the SEC on February 27, 2024, and subsequent SEC filings, and
Slide 12: Cirrata Group Insurance Distribution Platform
CIRRATA GROUP INSURANCE DISTRIBUTION PLATFORM
Slide 13: Cirrata Overview
PAGE 12 1. Represents management forecasts, which are subject to market conditions, risk factors described in Ambac's Annual Report on Form 10-K filed with the SEC on February 27, 2024 and subsequent SEC filings, and changes in the views of management. Actual results may differ materially. 2. Reconc
Slide 14: Cirrata Value Drivers
PAGE 13 Cirrata Value Drivers Attribute Cirrata Approach MGA View Strategic Operator Permanent capital platform with broad industry distribution and capacity relationships Principals don't have to be concerned with future changes in ownership and can focus on leveraging broad industry relationships
Slide 15: Growing & Diversified Portfolio with Attractive Margins
PAGE 14 25% 8% 14% 10% 7% 7% 16% 13% Property Reinsurance A&H Professional Lines Marine & Energy Specialty Auto Niche Specialty Risks Misc. Specialty 1. Represents management forecasts, which are subject to market conditions, risk factors described in Ambac's Annual Report on Form 10-K filed with th
Slide 16: De Novo Framework
PAGE 15 • Teams with a strong cultural fit and operational skills to develop the platform • Management teams with a strong track record of underwriting profitability and reinsurance following • Specialist product focus with a market relevant value proposition and distribution support • Scalable oppo
Slide 17: Robust Acquisition Pipeline to Support Growth Globally
PAGE 16 Diversified Sourcing Strategy Management Team Outreach Direct Relationships Investment Banks Brokers Conferences Senior Advisors Robust Acquisition Pipeline to Support Growth Globally Pipeline Overview LTM Q3 2024 40 targets evaluated 18 targets diligenced 15 prospects currently being tracke
Slide 18: Connecting Risk to Capital
PAGE 17 Connecting Risk to Capital London / Bermuda USA Strategic Capital Partners Syndicates 4242 & 1416 Third-party Carriers Ownership of majority stakes in individual MGA franchises Rated insurance paper, both Ambac managed and third party, empowers MGAs to issue policies on their behalf Cirrata
Slide 19: Beat and Cirrata Synergies
PAGE 18 CATEGORY DESCRIPTION OF BENEFIT HOW SYNERGY ARISES TIMING Sales & Marketing • Stronger distribution relationships (e.g. brokers) through combined sales and marketing efforts Beat and Cirrata have limited overlap of distribution relationships due to their differing geographies and product-set
Slide 20: Everspan Group Specialty P&C Program Insurer
EVERSPAN GROUP SPECIALTY P&C PROGRAM INSURER
Slide 21: Everspan: Specialty P&C Program Insurer Overview
PAGE 20 • Established in 2021 • Expanding support of Cirrata MGAs & Programs • Capital light platform with fee focus and limited risk retention • +20 Programs and MGA partners • Growing program fees are highly accretive • Everspan reached initial profitability in 3Q23 and focused on increasing long-
Slide 22: Everspan Hybrid Fronting Carrier
PAGE 21 As part of Ambac’s focus on providing paper to its expanding Cirrata business and support select U.S. specialty programs, Everspan provides both admitted and E&S capacity backed by a panel of leading global reinsurers. Everspan brings deep expertise in the U.S. specialty markets and is recog
Slide 23: Premium Written by Line of Business
PAGE 22 Premium Written by Line Of Business as of 2Q24 Scale and Diversification Should Improve Underwriting Performance $0 $50 $100 $150 $200 $250 $300 2022 2023 1H24 M illi on s Gross Commercial Auto Liability Commercial APD General Liability Excess Liability Personal Auto Workers Comp Surety Othe
Slide 24: Diversification & Scale Improves Underwriting
PAGE 23 1Q2022 2Q2022 3Q2022 4Q2022 1Q2023 2Q2023 3Q2023 4Q2023 1Q2024 2Q2024 Expense Ratio 266.6% 94.3% 82.6% 59.2% 55.1% 39.0% 28.5% 32.9% 22.7% 24.3% Total Net Loss Ratio 65.3% 66.5% 65.2% 65.1% 66.6% 73.7% 78.0% 67.4% 75.7% 85.1% Combined Ratio 331.9% 160.8% 147.8% 124.3% 121.7% 112.7% 106.5% 10
Slide 25: Conclusion
CONCLUSION Ambac
Slide 26: Preliminary 2025 Guidance and 3-5 Year Outlook
PAGE 25 8-10 5-10 40% +15% De Novo Start Ups Acquisitions EBITDA CAGR Annual Organic Growth Where we see ourselves over next 3 to 5 years1 Preliminary 2025 Guidance1 1. Represents management preliminary forecasts, which are subject to market conditions, risk factors described in Ambac's Annual Repor
Slide 27: Select Public Peer Benchmarks
PAGE 26 TWFG BWIN GOOSEHEAD TRADITIONAL INSURANCE BROKERS1 IPO Date 7/17/2024 10/24/2019 4/27/2018 2024E Revenue ($bn)1 $0.2 $1.4 $0.3 $13.2 2024E EBITDA ($m)1 $39 $319 $70 $4.0 Revenue CAGR2 ~15% ~70% ~30% ~10% Organic growth expectations1 Mid-teens Mid-teens >20% Mid-single digits EBITDA Margin1 ~
Slide 28: Financial Appendix
FINANCIAL APPENDIX Ambac
Slide 29: Estimated Sources and Uses of Funds Post AAC Sale
PAGE 28 (in millions) Sources Notes SOURCES AFG Cash and Short-Term Investments 06/30/24 $171 AAC sale proceeds $420 Assumes sale of AAC closes 12/31/24 Debt facility and Co-Investment Proceeds $212 Total Sources $803 USES Beat acquisition ($249) Closed 8/1/24, effective 7/31/24 Debt and Co-investme
Slide 30: EBITDA Reconciliation by Segment, Year Ended December 31, 2023
PAGE 29 Year Ended December 31, 2023 ($ in millions) LFG SPC ID CORP CONS ($ in millions) LFG SPC ID CORP CONS Gross premiums written $ 14.8 $ 273.3 $ 288.1 Expenses: Net premiums written (35.5) 79.8 44.4 Losses and loss adjustment expenses $ (69.3) $ 36.7 $ (32.6) Net premiums placed $ 230.6 230.6
Slide 31: Key Transaction Details of AAC Sale
PAGE 30 Key Transaction Details of AAC Sale Selling 100% of legacy financial guarantee business to Oaktree $420M sale price with potential upward adjustments 100% cash consideration + 9.9% equity warrants priced at $18.50 Estimated closing 4Q24 or 1Q25 Pro-forma Book Value $849M $983M of surplus not
Slide 32: Pro-forma Impact of AAC Sale
PAGE 31 1. Excludes any impact related to the acquisition of Beat Capital 2. Excludes impact of transaction expenses 3. Preliminary estimate subject to change 4. Bases on a 45.2 million share count as of June 30, 2024 (in millions) 2Q24 Actual 2Q24 Pro-Forma3 % Change Total assets $8,184 $1,505 (82)
Slide 33: About Ambac Financial Group, Inc.
PAGE 32 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 distribution and underwriting platform. Ambac also has a legacy financial guaranty business in run off. Ambac’s common stock
Ambac Financial Group — KBW Insurance Conference 2024 on 6ix