Octave Specialty Group, Inc. · NYSE:OSG
Octave Specialty — Ambac Financial Group — Q1 2020 Earnings Presentation
23 slides from Octave Specialty's earnings presentation, May 12, 2020
Slide 1: Investor Presentation Quarterly Highlights First Quarter 2020
Investor Presentation Quarterly Highlights First 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 subsidiaries include Ambac Assurance Corporation, a guarantor of public finance and structured finance obligations in run-off. Ambac's common stock trades on the New York Stock Exchange under the symbo
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: 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: 1Q2020 Financial Overview
1Q2020 FINANCIAL OVERVIEW • Net loss attributable to common stockholders for the 1Q2020 was $(280) million compared to 4Q2019 ◦ The economic and financial markets disruption caused by the COVID-19 pandemic contributed heavily to Ambac's financial results for the first quarter of 2020 ◦ Lower interes
Slide 7: 1Q2020 vs 4Q2019 - Key Financial Results
1Q2020 vs 4Q2019 - KEY FINANCIAL RESULTS • Net premiums earned decreased $10 million primarily due to a reduction in the credit allowance for premium receivables in the fourth quarter and continued reduction of the insured portfolio • Net investment losses were $21 million, driven by mark-to-market
Slide 8: Investment Portfolio Philosophy and Objectives
INVESTMENT PORTFOLIO PHILOSOPHY AND OBJECTIVES Investment Philosophy Investment Objectives • Diversified portfolio • Active asset and liability management AAC & Ambac UK • Optimize Risk Adjusted Return • Achieve highest risk adjusted rate of return on a diversified Total Portfolio - $3.4 billion por
Slide 9: Net Investment Income (Loss)
NET INVESTMENT INCOME (LOSS) Net investment loss for the first quarter of 2020 of $21 million, compared to income of $42 million for the fourth quarter of 2019, was primarily driven by unrealized mark-to-market losses within Ambac's pooled investment funds $60 $40 $7.2 $20 $34.4 $30.8 $ (Millions) $
Slide 10: Incurred (Losses) Benefit by Category - 1Q2020 vs 4Q2019
INCURRED (LOSSES) BENEFIT BY CATEGORY(1) - 1Q2020 vs 4Q2019 • RMBS benefit of $83 million in 1Q2020 was a result of the favorable impact of lower interest rates on expected excess spread and estimated representation and warranty subrogation recoveries, partially offset by the impact of lower discoun
Slide 11: Gross Loss Reserves by Category
GROSS LOSS RESERVES BY CATEGORY(1) As of March 31, 2020 As of December 31, 2019 ($ in millions) $1,500 $1,000 $783 $627 $500 $227 $208 $8 $3 $55 $73 $0 -$500 $(395) $(482) -$1,000 -$1,500 $(1,468) $(1,392) -$2,000 RMBS Domestic Student Ambac UK Loss Total Public Loans and Other Expenses Finance Cred
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 1Q2019 2Q2019 3Q2019 4Q2019 1Q2020 1Q2019 2Q2019 3Q2019 4Q2019 1Q2020 Salaries Incentive Other Other Regulatory • Compensation expense increased $2.1 million in 1Q202
Slide 13: Ambac Consolidated Liability and Capital Summary
AMBAC CONSOLIDATED LIABILITY AND CAPITAL SUMMARY Category ($ in millions) Comments 3/31/20 $2,247 • Before estimated subrogation recoveries, Unearned Premium Revenue Claim Liabilities (“UPR”) and reinsurance • Net of $480 million of principal and interest held at AAC (1) Secured Notes $1,205 • Inclu
Slide 14: 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 15: Ambac Value Drivers
AMBAC VALUE DRIVERS (as of March 31, 2020) Liquidity and Improved Asset Management NOLs Capital Structure • Generating a 4.3% GAAP yield on • $1.2 billion at AFG book value of AAC & subsidiaries • $482 million of net assets at AFG • $2.5 billion at AAC fixed income investment portfolio • Reduced out
Slide 16: Non-GAAP Reconciliations
NON-GAAP RECONCILIATIONS 16
Slide 17: Ambac Non-GAAP Financial Data
AMBAC NON-GAAP FINANCIAL DATA Non-GAAP Financial Data Included in this presentation, the Company reports two non-GAAP financial measures: Adjusted Earnings and Adjusted Book Value. A non-GAAP financial measure is a numerical measure of financial performance or financial position that excludes (or in
Slide 18: Ambac Non-GAAP Financial Data (Continued)
AMBAC NON-GAAP FINANCIAL DATA (CONTINUED) Adjusted Book Value (1) The following table reconciles Total Ambac Financial Group, Inc. stockholders’ equity to the non-GAAP measure Adjusted Book Value as of each date presented: March 31, 2020 December 31, 2019 ($ in millions, except per share amounts) $
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 subsidiaries include Ambac Assurance Corporation and Ambac Assurance UK Limited, guarantors of financial obligations in run-off. Ambac’s common stock trades on th
Slide 23: Ambac
Ambac
Ambac Financial Group — Q1 2020 Earnings Presentation on 6ix