Octave Specialty Group, Inc. · NYSE:OSG
Octave Specialty — Ambac Financial Group — Q1 2022 Earnings Presentation
24 slides from Octave Specialty's earnings presentation, May 11, 2022
Slide 1: First Quarter 2022 Investor Presentation
First Quarter 2022 Investor Presentation Quarterly Highlights
Slide 2: 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 3: Overview
Overview Ambac Financial Group, Inc. (NYSE: AMBC) is a financial services holding company headquartered in New York City. Ambac’s core business is a high growth specialty P&C distribution and underwriting platform. Ambac also has a legacy financial guarantee business in run off. (1) Shareholders’ Eq
Slide 4: Ambac: A Diversified, Capital Light Specialty P&C Platform
Ambac: A Diversified, Capital Light Specialty P&C Platform • Ambac’s Specialty P&C Platform includes its high growth specialty P&C participatory fronting business (Everspan), the insurance Everspan distribution segment (Cirrata), and the strategic investments division (Redgrove). Ambac also has a le
Slide 5: Everspan Group: Specialty P&C Participatory Fronting Insurer
Everspan Group: Specialty P&C Participatory Fronting Insurer • Everspan Group entered the P&C insurance program marketplace in February 2021, as a disciplined, underwriting-profit oriented, specialty lines participatory fronting carrier • AM Best Financial Strength Rating of ‘A-’ (Excellent) and Fin
Slide 6: Cirrata: Insurance Distribution via Majority Owned MGAs
Cirrata: Insurance Distribution via Majority Owned MGAs • Partner model targeting control positions (51-80%) in MGA/ MGUs with significant medium to long-term management ownership (20-49%) • High margin businesses that generate fee-based income • Growth model is based on acquisitions, organic growth
Slide 7: Legacy FG: Ambac Assurance & Ambac UK Run-off Subsidiaries
Legacy FG: Ambac Assurance & Ambac UK Run-off Subsidiaries Segment Overview RMBS Litigation Overview • Active de-risking of legacy financial guarantee • Countrywide, First Franklin and Nomura • Estimated GAAP gross subrogation related to representation and insured portfolios towards stable run-off w
Slide 8: Ambac's Key Components of Value
Ambac’s Key Components of Value Growing Fee & Underwriting Businesses • Minority Investments in • Growing specialty • Profitable and rapidly • 8:1 AAC total claims paying insurance services participatory fronting expanding commission ratio businesses, e.g. Cover Whale insurer and fee income • De-ris
Slide 9: Ambac Financial Review
Ambac Financial Review 1Q21
Slide 10: 1Q2022 Consolidated Financial Overview
1Q2022 Consolidated Financial Overview Net income attributable to common stockholders for 1Q2022 was $2 Adjusted earnings for 1Q2022 of $14 million and adjusted earnings for million compared to net income of $17 million in 1Q2021 1Q2021 of $41 million excludes insurance intangible asset amortization
Slide 11: Ambac's Operating Segment Highlights
Ambac’s Operating Segment Highlights Legacy Specialty Financial Property & Guarantee Casualty Insurance Corporate & ($ in millions) Insurance Insurance Distribution Other Consolidated Three Months Ended March 31, 2022 Gross premiums written $ 6 $ 24 $ 30 Net premiums written 7 5 12 Total revenues 10
Slide 12: 1Q2022 vs 1Q2021 - Key Consolidated Financial Metrics
1Q2022 vs 1Q2021 - Key Consolidated Financial Metrics Results for 1Q2022 were primarily driven by lower net investment income from pooled funds and higher incurred loss and loss expenses; partially offset by gains on interest rate derivatives and higher investment related gains as compared to 1Q2021
Slide 13: N.I.I. & Investment Portfolio Components as of March 31, 2022
N.I.I. & Investment Portfolio Components as of March 31, 2022 Net investment income in 1Q2022 was $5 million, compared to $49 million for 1Q2021 reflecting lower returns from both pooled fund and available-for- sale investments. Investment income from pooled fund and other equity investments was les
Slide 14: Incurred Losses (Benefit) by Category - 1Q2022 vs 1Q2021
(1) Incurred Losses (Benefit) by Category - 1Q2022 vs 1Q2021 Structured Finance loss of $213 million in 1Q2022 was primarily due Domestic Public Finance benefit of $(190) million in 1Q2022 was to a reduction in estimated R&W subrogation recoveries primarily driven by the March 2022 Puerto Rico restr
Slide 15: Expense Management
Expense Management Compensation Expense Non-Compensation Expense $18 $18 $16 $16 $14 $14 $12 $12 ($ in millions) ($ in millions) $10 $10 $8 $8 $6 $6 $4 $4 $2 $2 $— $— $(2) 1Q2021 2Q2021 3Q2021 4Q2021 1Q2022 1Q2021 2Q2021 3Q2021 4Q2021 1Q2022 Legacy Financial Guarantee Specialty P&C Insurance Legacy
Slide 16: Legacy Financial Guarantee Liability and Capital Summary
Legacy Financial Guarantee Liability and Capital Summary (in millions) Category 03/31/22 Comments Claim liabilities $1,221 Before estimated subrogation, Unearned Premium Revenue ("UPR") and reinsurance Secured notes $1,175 Includes $0.2 million of accrued and unpaid interest 5.1% Surplus notes $1,37
Slide 17: Non-GAAP Reconciliations
Ambac Non-GAAP RECONCILIATIONS
Slide 18: Ambac Non-GAAP Financial Data
Ambac Non-GAAP Financial Data Non-GAAP Financial Data the Company currently reports three non-GAAP financial measures: EBITDA, adjusted earnings and adjusted book value. The most directly comparable GAAP measures are pre-tax net income for EBITDA, net income attributable to common stockholders for a
Slide 19: EBITDA Reconciliation
EBITDA Reconciliation Legacy Specialty Financial Property & Guarantee Casualty Insurance Corporate & Insurance Insurance Distribution Other Consolidated Three Months Ended March 31, 2022 Pretax income (loss) $ 6 $ (2) $ 2 $ (3) $ 3 Adjustments: Interest expense 44 — — — 44 Depreciation — — — — — Amo
Slide 20: Ambac Non-GAAP Financial Data - Earnings
Ambac Non-GAAP Financial Data - Earnings (1) (2) Adjusted Earnings The following table reconciles net income attributable to common stockholders to the non-GAAP measure, adjusted earnings, for the periods listed: 1Q2022 4Q2021 3Q2021 2Q2021 1Q2021 (1)(3) (1)(3) (1)(3) (1)(3) (1)(3) ($ in millions, e
Slide 21: Ambac Non-GAAP Financial Data - Book Value
Ambac Non-GAAP Financial Data - Book Value (1) Adjusted Book Value The following table reconciles Total Ambac Financial Group, Inc. stockholders’ equity to the non-GAAP measure adjusted book value as of each date presented: March 31, 2022 December 31, 2021 September 30, 2021 June 30, 2021 March 31,
Slide 22: Appendix
Ambac Appendix
Slide 23: Risk Adverse Credit Classifications
Risk Adverse Credit Classifications Classification Description Class I 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 • Watch list - credits t
Slide 24: About Ambac
About Ambac Ambac Financial Group, Inc. (“Ambac” or “AFG”) is a financial services holding company headquartered in New York City. Ambac’s core business Contact is a growing specialty P&C distribution and underwriting platform. Ambac also has a legacy financial guaranty business in run off. Ambac’s
Ambac Financial Group — Q1 2022 Earnings Presentation on 6ix