[Management View]
Ambac Financial Group has transitioned to Octave Specialty Group, establishing a new brand identity as a pure-play specialty P&C insurance platform. Key strategic priorities include capital management through share repurchases, corporate expense reductions, and the sale of the legacy financial guarantee business. The company is focused on organic growth through MGA launches and disciplined M&A activities.

[Outlook]
The company targets approximately $30 million in adjusted corporate expenses for 2026 and expects over $17 million in reported expense savings from ongoing initiatives. Management aims to achieve a $80 million EBITDA target by 2028, supported by organic initiatives and strategic acquisitions. Sufficient capacity is reported for expected growth, with $1.5 billion in third-party capacity excluding new contributions from ArmadaCare and Everspan.

[Financial Performance]
Ambac reported a net loss from continuing operations of $32 million, or $0.67 per diluted share, compared to a loss of $18 million, or $0.43 per share, in 2024. Adjusted EBITDA from continuing operations was a loss of $3 million versus a gain just under $2 million in 2024. Insurance distribution revenue increased by 80% to $43 million, with organic growth at 40%. Everspan premiums were sharply down due to nonrenewals in auto programs.

[Q&A Highlights]
Question 1: The organic growth of 40% in the distribution business is quite strong. Could you talk about what contributed to that? Were there any contingent or performance-based commissions that might be nonrecurring?
Answer: The growth was driven by momentum in the business, with no profit commissions or contingent commissions included in the revenue numbers. Continued momentum in the business was seen, particularly from MGAs started in '23 and '24.

Question 2: How is the third-party capacity shaping up with 40% organic growth? Will more capacity be needed for 2026?
Answer: Sufficient capacity is believed to be in place, with $1.5 billion not including ArmadaCare or Everspan. Interest from capital providers exceeds needs for next year.

Question 3: What is the priority for capital allocation, considering M&A, debt paydown, and share buybacks?
Answer: Strategic launches remain a focus, with potential capital deployment in M&A, though no large M&As are expected soon. Share buybacks are important, especially given current stock prices.

Question 4: What is the timeline and capital involved in the acquisition of noncontrolling interest in MGA?
Answer: The capital commitment is less than double-digit, and decisions will be made collaboratively with the management team.

Question 5: What should we think about the premium outlook for Everspan going into 2026?
Answer: Controlled, modest growth is expected, with a run rate projected at $370 million to $380 million for this year, and modest growth anticipated next year.

Question 6: What is the run rate on interest expense post credit repair?
Answer: Interest expense is expected to decrease materially, with full-year interest expense for 2026 likely at the average quarterly level from 2025.

Question 7: Can you share specific numbers on EBITDA margins relative to written premium?
Answer: Revenue to written premium ratios vary, with an average of 20% of premium production as revenue. Differences are primarily between UK and US businesses.

[Sentiment Analysis]
Analysts showed interest in the company's strategic growth initiatives and capacity management. Management's tone was confident, emphasizing sufficient capacity and strategic focus on organic growth and disciplined capital allocation.

[Quarterly Comparison]
| Metric | Q3 2025 | Q3 2024 |
|-------------------------------|---------|---------|
| Net Loss | $32M | $18M |
| Adjusted EBITDA | -$3M | <$2M |
| Insurance Distribution Revenue| $43M | N/A |
| Everspan Net Written Premium | $18M | $33M |
| Everspan Combined Ratio | 112.9% | 100.5% |

[Risks and Concerns]
The loss ratio increased to 84.5% in 2025 from 74.4% in 2024, citing adverse development in runoff commercial auto programs. The combined ratio for Everspan rose to 112.9% from 100.5%, indicating underwriting deterioration despite lower reported losses and LAE.

[Final Takeaway]
Ambac's transition to Octave Specialty Group marks a significant strategic shift, focusing on specialty P&C insurance. The company is leveraging organic growth through MGA launches and disciplined M&A, with a strong emphasis on capital management and expense reduction. Despite challenges in underwriting performance, management remains optimistic about achieving long-term growth targets, supported by robust capacity and strategic initiatives.