Octave Specialty Group, Inc. · NYSE:OSG
Octave Specialty — Ambac Financial Group — Q3 2021 Earnings Presentation
25 slides from Octave Specialty's earnings presentation, Nov 9, 2021
Slide 1: Investor Presentation Quarterly Highlights Third Quarter 2021
Investor Presentation Quarterly Highlights Third 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 $789 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 - 3Q21
STRATEGIC PRIORITIES PROGRESS - 3Q21 RISK MANAGEMENT • Active de-risking transactions accounted for $338 million of the $0.6 billion, or 5%, decline in adversely classified and watch list net par exposure in 3Q2021 • 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 3Q2021 Update • Cover Whale program launched September 2021 Specialty Program • Admitted carrier, Providence Washington Property & Casualty Insurance Company, acquired October 2021 PILLAR I Insurance • Regulatory approval expected for
Slide 8: 3Q21 Financial Review
3Q21 FINANCIAL REVIEW Ambac
Slide 9: 3Q2021 Financial Overview
3Q2021 FINANCIAL OVERVIEW • Net income attributable to common stockholders for 3Q2021 was $17 million compared to net loss of $29 million in 2Q2021 • Adjusted income for 3Q2021 of $25 million and adjusted loss for 2Q2021 of $(13) million excludes insurance intangible asset amortization of $10 millio
Slide 10: 3Q2021 vs 2Q2021 - Key Financial Results
3Q2021 vs 2Q2021 - KEY FINANCIAL RESULTS Results for 3Q21 were primarily driven by a higher loss and loss expense benefit, gains on interest rate derivatives and a lower provision for income taxes, partially offset by lower net investment income from pooled funds compared to 2Q21 3Q2021 2Q2021 $150
Slide 11: Net Investment Income
NET INVESTMENT INCOME Net investment income in 3Q2021 was $21 million, compared to $42 million for 2Q2021 reflecting lower returns from both available-for-sale and pooled funds investments Net investment income on available-for-sale securities declined to $15 million in 3Q21 from $22 million in 2Q21
Slide 12: Investment Portfolio Components as of September 30, 2021
INVESTMENT PORTFOLIO COMPONENTS AS OF SEPTEMBER 30, 2021 Gains on pooled and other equity investments were $6 million for 3Q21 compared to $20 million in 2Q21 driven by lower but still positive returns in most funds and losses on global equity and emerging market debt funds held in Ambac UK's portfo
Slide 13: Incurred (Losses) Benefit by Category - 3Q2021 vs 2Q2021
INCURRED (LOSSES) BENEFIT BY CATEGORY(1) - 3Q2021 vs 2Q2021 Structured Finance benefit of $21 million in 3Q2021 was primarily due to improved credit dynamics and higher expected recoveries, partially offset by lower estimated R&W subrogation and incremental litigation costs Domestic Public Finance b
Slide 14: Gross Loss Reserves by Category
GROSS LOSS RESERVES BY CATEGORY (1) June 30, 2021 September 30, 2021 $1,000 $682 $606 $500 $21 $16 $52 $46 ($ in millions) $0 $-500 $(456) $(549) $-1,000 $(1,211) $(1,217) $-1,500 Structured Finance Domestic Public Other Loss Total Finance Expenses (1) Gross loss reserves are net of estimated R&W su
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 3Q2020 4Q2020 1Q2021 2Q2021 3Q2021 3Q2020 4Q2020 1Q2021 2Q2021 3Q2021 Salaries Incentive Other MGA/Underwriting Regulatory Other • Compensation expense increased $1 m
Slide 16: Ambac Consolidated Liability and Capital Summary
AMBAC CONSOLIDATED LIABILITY AND CAPITAL SUMMARY Category ($ in millions) Comments 9/30/21 • Before estimated subrogation, Unearned Premium Revenue (“UPR”) and Claim Liabilities $1,865 reinsurance Secured Notes (1) $1,175 • Includes $0.2 million of accrued and unpaid interest 5.1% Surplus Notes $1,3
Slide 17: Ambac Value Drivers
AMBAC VALUE DRIVERS AFG is a financial services holding company • Publicly traded holding company with a market capitalization of $789m(1) Our Vision: A Differentiated P&C Platform • Access to $3.7b of net operating loss carryforwards • Unlevered capital structure Specialty • Management team and boa
Slide 18: Non-GAAP Reconciliations
NON-GAAP RECONCILIATIONS 18
Slide 19: Ambac Non-GAAP Financial Data
AMBAC NON-GAAP FINANCIAL DATA Non-GAAP Financial Data Included in this presentation, the Company reports two non-GAAP financial measures: adjusted earnings and adjusted book value. A non-GAAP financial measure is a numerical measure of financial performance or financial position that excludes (or in
Slide 20: Ambac Non-GAAP Financial Data (Continued)
AMBAC NON-GAAP FINANCIAL DATA (CONTINUED) Adjusted Book Value (1) The following table reconciles Total Ambac Financial Group, Inc. stockholders’ equity to the non-GAAP measure adjusted book value as of each date presented: September 30, 2021 June 30, 2021 ($ in millions, except per share data) $ Amo
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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