Octave Specialty Group, Inc. · NYSE:OSG
Octave Specialty — Ambac Financial Group — AIFA Conference 2024
33 slides from Octave Specialty's conference presentation, March 2024
Slide 1: Specialty P&C Insurance Franchise
AIFA CONFERENCE – MARCH 2024 SPECIALTY P&C INSURANCE FRANCHISE One World Trade Center, 41st Floor, New York, NY 10007 All Rights Reserved | 800-221-1854 | www.ambac.com
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: Our Vision: Create the Premier Destination for MGAs
Our Vision: Create the Premier Destination for MGAs The Goal The Opportunity The Expectation Become the premier Pure-play investment Superior return pure-play MGA into the growing MGA profile compared platform specialist program market to general P&C 2
Slide 4: Ambac (AMBC) – Key Facts & Figures
Ambac (AMBC) – Key Facts & Figures 2023 Financial Highlights Key Investment Differentiators $1.36B $107.0M P&C Program Tax Efficient Book Value EBITDA2 Pure-Play Structure [$30.13 per share] [$2.30 per share] P&C business focused NOLs from legacy purely on attractive business to protect program sect
Slide 5: Successfully Navigating a Transformation to P&C
Successfully Navigating a Transformation to P&C • Our Mission is to become the premier destination for MGAs and program partners to take advantage of the rapidly expanding program market in a capital efficient manner • Everspan is Ambac’s specialty P&C program insurer focused on providing MGAs acces
Slide 6: Select Program Partnerships and Strategic Investments
Select Program Partnerships and Strategic Investments Everspan 3Q21 1Q22 1Q22 1Q22 2Q22 3Q22 4Q22 4Q22 4Q22 4Q21 4Q22 1Q23 1Q23 2Q23 Cirrata Strategic Investments 4Q20 Confidential 4Q22 3Q23 MGA 3Q22 4Q22 4Q21 3Q22 3Q22 5
Slide 7: Differentiated MGA Strategy Drives Long-Term Growth
Differentiated MGA Strategy Drives Long-Term Growth Premium Production 1 (in millions) MGA Programs 2 +50 +$1.5B +30 +$700 27 $504 17 $282 $130 10 2021 2022 2023 2024E 3YR Goal 2021 2022 2023 2024E 3YR Goal 2023 P&C EDITDA 3YR EBITDA Goal 3 $12 MILLION +$100 MILLION 1. Premium production includes Gr
Slide 8: Value Creation - Doubling Enterprise Value in 3 Years
Value Creation - Doubling Enterprise Value in 3 Years Transition to P&C 2 drives improved ~$1.5B valuation 14x EBITDA Experienced +$900 million of $1.6 billion of NOLs ~$750M LFG book value P&C leadership accelerate capital 0.6x BV1 to grow program to redeploy compounding businesses 1. Price to Book
Slide 9: MGA/Program Underwriter
MGA/PROGRAM UNDERWRITER 8
Slide 10: Everspan: Specialty P&C Program Insurer Overview
Everspan: Specialty P&C Program Insurer Overview • Rigorous risk management and oversight of program partners 2023A 2024E • Up to 30% risk retention $273m +$400m • Pathway to mid-teen ROEs at scale GPW GPW • Highly selective ~5% submission acceptance • Management team with a long and successful P&C
Slide 11: Everspan: Diversification Drives Underwriting Stability
Everspan: Diversification Drives Underwriting Stability 2021 2022 2023 Commercial Commercial Non- Auto Commercial Auto standard Liability Auto Liability auto 96% Liability 45% 7% 80% Excess Liability Commercial 15% APD 9% Surety Excess General Other Workers 10% 2% General Liability Liability Comp Li
Slide 12: Everspan: Underwriting Results Improving with Scale
Everspan: Underwriting Results Improving with Scale Everspan’s disciplined underwriting strategy begins with its rigorous program partner selection process • Underwriting philosophy focuses on careful Combined Ratio selection of program partners through robust 180% diligence process 160% 140% • “Gro
Slide 13: Everspan: High-Touch Engagement Model Aligns Interests
Everspan: High-Touch Engagement Model Aligns Interests Everspan takes a comprehensive approach to program management, which helps align interests with reinsurance partners Actuarial Team Claims Team Underwriting Team Monthly actuarial call with MGA Monthly claims call with MGA Monthly underwriting c
Slide 14: MGA/Program Operator
Ambac @Qcirrata MGA/PROGRAM OPERATOR
Slide 15: Cirrata: Insurance Distribution Overview
Cirrata: Insurance Distribution Overview 2023A 2024E • Insurance Distribution platform operates four MGAs built through acquisitions and by sponsoring $231m +$300m new (de novo) startups. Premium Premium • Focused on building a portfolio of specialty distribution businesses, initially targeting spec
Slide 16: Cirrata: Unlocking Value at Portfolio Companies
Cirrata: Unlocking Value at Portfolio Companies Specialty Segment A&H and Benefits Specialty Auto Commercial Marine Professional Liability • Employer Stop Loss • School Buses Professional Liability: • Short Term Medical Distribution platform • Coach • Architects & Engineers Specialty Focus • Supplem
Slide 17: Cirrata: Shared Services Draws MGAs & Supports Margin Expansion
Cirrata: Shared Services Draws MGAs & Supports Margin Expansion We provide a comprehensive and customizable suite of services to help build and manage infrastructure needs, ensuring a smooth implementation with minimal disruption, while driving efficiencies and controlling costs. Select Service Offe
Slide 18: Organizational Overview
Ambac ORGANIZATIONAL OVERVIEW
Slide 19: Ambac Financial Group – Overview
Ambac Financial Group – Overview Ambac Financial Group, Inc. (NYSE: AMBC) is a financial services holding company headquartered in New York City with shareholders’ equity of $1.36 billion3. Ambac’s core operating business is a growing specialty P&C distribution and program underwriting platform. Amb
Slide 20: Ambac's Key Components of Value
Ambac’s Key Components of Value Growing Fee & Underwriting Businesses AFG Everspan Insurance Cirrata Legacy Financial Guarantee • Minority investments in • $273 million of GPW last 4 • $231 million of placed premium • 11 : 1 total claims paying ratio insurance services businesses quarters last 4 qua
Slide 21: Select Financials
Ambac SELECT FINANCIALS
Slide 22: Consolidated Quarterly Comprehensive Income Data
Consolidated Quarterly Comprehensive Income Data Three Months Ended Year Ended December September June 30, March 31, December December December (in millions, except per share data) 31, 2023 30, 2023 2023 2023 31, 2022 31, 2023 31, 2022 Summary GAAP Financial Data: Net premiums earned $ 30.5 $ 18.3 $
Slide 23: Consolidated Quarterly Balance Sheet Data
Consolidated Quarterly Balance Sheet Data December 31, December September June 30, March 31, December (in millions, except per share data) 31, 2023 30, 2023 2023 2023 31, 2022 2021 2020 Summary GAAP Financial Data: Total non-VIE investments $ 2,664.0 $ 2,492.4 $ 2,510.4 $ 2,508.7 $ 2,593.1 $ 2,954.9
Slide 24: 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 December 31, 2023 Gross premiums written $ 2.3 $ 90.7 $ 93.1 Net premiums written 7.3 36.7 44.1 T
Slide 25: Earnings Measures by Reporting Segment (Fourth Quarter 2023)
Earnings Measures by Reporting Segment (Fourth Quarter 2023) The Company reports its results of operations in three segments: Legacy Financial Guarantee Insurance, Specialty Property and Casualty Insurance and Insurance Distribution, separate from Corporate and Other, which is consistent with the ma
Slide 26: Earnings Measures by Reporting Segment (Fourth Quarter 2022)
Earnings Measures by Reporting Segment (Fourth Quarter 2022) Three Months Ended December 31, 2022 ($ in millions) LFG SPC ID CORP CONS ($ in millions) LFG SPC ID CORP CONS Gross premiums written $ (8.0) $ 51.7 $ 43.7 Expenses: Net premiums written (7.9) 10.0 2.1 Losses and loss adjustment expenses $
Slide 27: Earnings Measures by Reporting Segment (2023)
Earnings Measures by Reporting Segment (2023) 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
Slide 28: Earnings Measures by Reporting Segment (2022)
Earnings Measures by Reporting Segment (2022) Year Ended December 31, 2022 ($ in millions) LFG SPC ID CORP CONS ($ in millions) LFG SPC ID CORP CONS Gross premiums written $ (19.5) $ 146.4 $ 126.9 Expenses: Net premiums written (5.9) 28.6 22.6 Losses and loss adjustment expenses $ (405.5) $ 9.1 $ (3
Slide 29: Other Consolidated Non-GAAP Financial Measures
Other Consolidated Non-GAAP Financial Measures(1) Adjusted Net Income (Loss): 4Q2023 3Q2023 2Q2023 1Q2023 4Q2022 Full Year 2023 Full Year 2022 $ Amount P.D.S. (2) (3) $ Amount P.D.S. (2) (3) $ Amount P.D.S. (2) (3) $ Amount P.D.S. (2) (3) $ Amount P.D.S. (2) (3) $ Amount P.D.S. (2) (3) $ Amount P.D.
Slide 30: Other Consolidated Non-GAAP Financial Measures (Continued)
Other Consolidated Non-GAAP Financial Measures(1) (Continued) December 31, 2023 September 30, 2023 June 30, 2023 March 31, 2023 December 31, 2022 Adjusted Book Value: $ P.S. (2) $ P.S. (2) $ P.S. (2) $ P.S. (2) $ P.S. (2) Total Ambac Financial Group, Inc. stockholders' equity $ 1,361.7 $ 30.13 $ 1,2
Slide 31: LFG Segment Non-GAAP Financial Data - Adjusted Book Value
LFG Segment Non-GAAP Financial Data - Adjusted Book Value The following table reconciles Stockholders’ equity of the subsidiaries in the Financial Guarantee Insurance Segment to the non-GAAP measure adjusted book value: ($ in millions) 4Q2023 3Q2023 2Q2023 1Q2023 Ambac’s Shareholders' Equity (Legacy
Slide 32: 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 is a growing Contact specialty P&C distribution and underwriting platform. Ambac also has a legacy financial guaranty business in run off. Ambac’s
Slide 33: Ambac
Ambac