OCTAVE SPECIALTY GROUP INC 10-K

Item 8. Financial Statements and Supplementary Data OCTAVE SPECIALTY GROUP, INC. AND SUBSIDIARIES INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Reports of Independent Registered Public Accounting Firm KPMG LLP , New York, NY , PCAOB ID 185 44 Consolidated Financial Statements Consolidated Balance Sheets 47 Consolidated Statements of Stockholders’ Equity 49 Consolidated Statements of Total Comprehensive Income (Loss) 48 Consolidated Statements of Cash Flows 50 Notes to Consolidated Financial Statements Note 1. Background and Business Description 51 Note 11. Goodwill and Intangible Assets 82 Note 2. Basis of Presentation and Significant Accounting Policies 51 Note 12. Debt 82 Note 3. Segment Information 61 Note 13. Revenues From Contracts with Customers 83 Note 4. Business Combination 64 Note 14. Comprehensive Income (Loss) 84 Note 5. Discontinued Operations 65 Note 15. Net Income Per Share 84 Note 6. Investments 69 Note 16. Income Taxes 85 Note 7. Fair Value Measurements 71 Note 17. Employment Benefit Plans 87 Note 8. Insurance Contracts 74 Note 18. Leases 90 Note 9. Insurance Regulatory Restrictions 79 Note 19. Commitments and Contingencies 91 Note 10. Derivative Instruments 81 Octave Specialty Group, Inc. 43 2025 Form 10-K Table of Contents , Report of Independent Registered Public Accounting Firm To the Stockholders and Board of Directors Octave Specialty Group, Inc.: Opinion on Internal Control Over Financial Reporting We have audited Octave Specialty Group, Inc. and subsidiaries' (the Company) internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2025 and 2024, the related consolidated statements of total comprehensive income (loss), stockholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2025, and the related notes and financial statement schedules I, II and III (collectively, the consolidated financial statements), and our report dated March 4, 2026 expressed an unqualified opinion on those consolidated financial statements. The Company acquired ArmadaCorp Capital, LLC during 2025, and management excluded from its assessment of the effectiveness of the Company’s internal control over financial reporting as of December 31, 2025, ArmadaCorp Capital, LLC's internal control over financial reporting associated with total assets of 2% and total revenues of 2% included in the consolidated financial statements of the Company as of and for the year ended December 31, 2025. Our audit of internal control over financial reporting of the Company also excluded an evaluation of the internal control over financial reporting of ArmadaCorp Capital, LLC. Basis for Opinion The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Definition and Limitations of Internal Control Over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. /s/ KPMG LLP New York, New York March 4, 2026 Octave Specialty Group, Inc. 44 2025 Form 10-K Table of Contents , Report of Independent Registered Public Accounting Firm To the Stockholders and Board of Directors Octave Specialty Group, Inc.: Opinion on the Consolidated Financial Statements We have audited the accompanying consolidated balance sheets of Octave Specialty Group, Inc. and subsidiaries (the Company) as of December 31, 2025 and 2024, the related consolidated statements of total comprehensive income (loss), stockholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2025, and the related notes and financial statement schedules I, II and III (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2025 and 2024, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2025, in conformity with U.S. generally accepted accounting principles. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated March 4, 2026 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting. Basis for Opinion These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matters The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate. Estimate of loss and loss adjustment expense reserves As discussed in Notes 2 and 8 to the consolidated financial statements, the loss and loss adjustment expense reserves (reserves) for Specialty Property and Casualty policies represent the Company’s estimate of the ultimate liability for unpaid losses and loss expenses for claims that have been reported and claims that have been incurred but not yet reported as of the balance sheet date. The reserves are estimated based upon experience and using a variety of actuarial methods. The Company’s reserves balance at December 31, 2025 was $459,990 thousand. We identified the assessment of the estimate of reserves for Specialty Property and Casualty policies as a critical audit matter. The assessment of the Company’s selected methods and key assumptions used to develop the estimate of reserves required complex auditor judgment due to the significant measurement uncertainty. Key assumptions included loss development factors, expected loss ratios, and the weighting of actuarial methods when more than one was used. Specialized actuarial skills and knowledge were required to evaluate the actuarial method or methods and key assumptions used. The following are the primary procedures we performed to address the critical audit matter. With the assistance of actuarial professionals, when appropriate, we evaluated the design and tested the operating effectiveness of certain internal controls over the Company’s reserving process. This included controls over the Company’s process to develop the Company’s estimate of reserves based on actuarial methodologies and key assumptions employed by the Company’s actuaries. We involved actuarial professionals with specialized skills and knowledge, who assisted in: • for certain programs, evaluating the Company’s key assumptions and methods for consistency with actuarial standards of practice • for certain programs, developing an independent range of reserves using methods and assumptions consistent with actuarial standards of practice and comparing it to the Company’s recorded reserves • for certain programs, assessing the position in the range and the year-over-year movements of the Company’s recorded reserves within the independent range of reserves. Octave Specialty Group, Inc. 45 2025 Form 10-K Table of Contents , Valuation of customer relationship intangibles for the ArmadaCorp Capital, LLC reporting unit As discussed in Note 4 to the consolidated financial statements, on October 31, 2025, the Company completed the acquisition of of ArmadaCorp Capital, LLC for a purchase price of $250,000 thousand. The acquisition was accounted for as a business combination using the acquisition method of accounting, which required the Company to allocate the total consideration transferred to the assets acquired and liabilities assumed based on their fair values at the date of acquisition. As part of the transaction, the Company acquired a customer relationships intangible asset with an acquisition date fair value of $138,000 thousand, which was valued using the multi-period excess earnings method. We identified the assessment of the acquisition date fair value of the customer relationships intangible asset as a critical audit matter. Subjective auditor judgment and the involvement of valuation professionals with specialized skills and knowledge were required to assess the discount rate assumption used to estimate the acquisition date fair value for the customer relationships intangible asset due to the degree of measurement uncertainty associated with this assumption. The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls related to the Company’s acquisition date valuation process. This included a control over the development of the discount rate assumption used to value the customer relationships intangible asset. We involved valuation professionals with specialized skills and knowledge, who assisted in evaluating the Company’s discount rate assumption used for the valuation of the customer relationships intangible asset by independently developing a range of discount rates based on publicly available market data for comparable entities and comparing that range to the Company’s discount rate. Fair Value of the Octave Ventures reporting unit As discussed in Notes 2 and 11 to the consolidated financial statements, the Company’s consolidated goodwill balance as of December 31, 2025 was $540,345 thousand, a portion of which relates to the Octave Ventures reporting unit. Goodwill impairment tests are performed annually, as of October 1 of each year, or more frequently, if circumstances indicate possible impairment. The quantitative evaluation compares the estimated fair value using a combination of an income approach and market approach. The income approach uses discounted cash flows which are dependent on subjective factors including the timing of future cash flows, the underlying margin projection assumptions, future growth rates, and the discount rate. The market approach uses valuation multiples and is dependent on subjective factors including the determination of industry market multiples and EBITDA forecasts. We identified the evaluation of fair value for the Octave Ventures reporting unit used to assess goodwill for impairment as a critical audit matter. Subjective and challenging auditor judgment and professionals with specialized skills and knowledge were required to evaluate the discount rate assumption used in the income approach to determine the fair value of Octave Ventures reporting unit due to the degree of measurement uncertainty associated with this assumption. The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls over the Company’s goodwill impairment assessment process for the Octave Ventures reporting unit. This included a control over the development of the discount rate assumption used in the fair value estimate. We involved valuation professionals with specialized skills and knowledge, who assisted in: • Assessing the reasonableness of the Company’s discount rate, including the company-specific risk premium, by comparing it to an independently developed discount rate using publicly available market data • Comparing the Octave Ventures reporting unit fair value estimate to an independently developed range of fair value estimates developed using the Company’s significant assumptions and our independently developed discount rate. /s/ KPMG LLP We have served as the Company’s auditor since 1985. New York, New York March 4, 2026 Octave Specialty Group, Inc. 46 2025 Form 10-K Table of Contents , OCTAVE SPECIALTY GROUP, INC. AND SUBSIDIARIES Consolidated Balance Sheets (Dollars in thousands, except share data) December 31, 2025 2024 Assets: Investments: Fixed maturity securities, at fair value (amortized cost of $ 123,414 and $ 162,124 ) $ 122,295 $ 157,020 Short-term investments, at fair value (amortized cost of $ 146,434 and $ 127,588 ) 146,442 127,601 Other investments (at cost, except for $ 7,454 and $ 7,499 at fair value) 24,971 28,294 Total investments 293,708 312,915 Cash and cash equivalents (including $ 40,754 and $ 17,669 of restricted cash) 68,440 47,275 Premium receivables 75,085 57,222 Commission and fees receivable 86,549 55,377 Reinsurance recoverable on paid and unpaid losses 436,092 306,191 Deferred ceded premium 146,365 148,300 Policy acquisition costs 9,732 8,572 Intangible assets, less accumulated amortization 474,998 344,775 Goodwill 540,345 418,234 Other assets 92,003 92,317 Assets of discontinued operations — 6,267,200 Total assets $ 2,223,317 $ 8,058,378 Liabilities and Stockholders’ Equity: Liabilities: Unearned premiums $ 187,178 $ 182,446 Loss and loss adjustment expense reserves 459,990 349,062 Ceded premiums payable 80,561 53,002 Deferred program fees and reinsurance commissions 6,978 7,500 Commissions payable 115,555 71,431 Deferred taxes 65,217 70,135 Short-term debt — 150,000 Long-term debt 117,558 — Accrued interest payable 1,343 2,560 Other liabilities 102,771 89,036 Liabilities of discontinued operations — 5,887,685 Total liabilities 1,137,151 6,862,857 Commitments and contingencies (See Note 19) Redeemable noncontrolling interest 252,981 199,402 Stockholders’ equity: Preferred stock, par value $ 0.01 per share; 20,000,000 shares authorized shares; issued and outstanding shares— none — — Common stock, par value $ 0.01 per share; 130,000,000 shares authorized; issued shares: 48,876,882 and 48,875,167 489 489 Additional paid-in capital 369,860 331,007 Accumulated other comprehensive income (loss) 8,483 ( 188,436 ) Retained earnings 370,431 683,643 Treasury stock, shares at cost: 3,871,598 and 2,368,194 ( 33,473 ) ( 28,339 ) Total Octave Specialty Group, Inc. stockholders’ equity 715,790 798,364 Nonredeemable noncontrolling interest 117,395 197,755 Total stockholders’ equity 833,185 996,119 Total liabilities, redeemable noncontrolling interest and stockholders’ equity $ 2,223,317 $ 8,058,378 See accompanying Notes to Consolidated Financial Statements Octave Specialty Group, Inc. 47 2025 Form 10-K Table of Contents , OCTAVE SPECIALTY GROUP, INC. AND SUBSIDIARIES Consolidated Statements of Total Comprehensive Income (Loss) (Dollars in thousands, except share data) Year Ended December 31, 2025 2024 2023 Revenues: Commissions $ 143,381 $ 92,023 $ 51,281 Servicing and other fees 20,419 6,353 — Net premiums earned 67,232 99,005 51,911 Program fees 14,322 13,506 8,437 Investment income 10,647 14,448 13,159 Other ( 4,780 ) 10,480 ( 60 ) Total revenues 251,222 235,815 124,728 Expenses: Commissions $ 37,037 $ 40,876 $ 29,465 Losses and loss adjustment expenses 47,193 72,626 36,712 Policy acquisition costs 15,790 23,666 10,557 General and administrative 191,624 129,166 66,985 Intangible amortization and depreciation 41,952 19,947 5,230 Interest 18,640 9,379 — Total expenses 352,236 295,660 148,949 Pretax income (loss) from continuing operations ( 101,014 ) ( 59,845 ) ( 24,221 ) Provision (benefit) for income taxes from continuing operations ( 5,211 ) ( 924 ) ( 989 ) Net income (loss) from continuing operations ( 95,803 ) ( 58,921 ) ( 23,232 ) Net income (loss) from discontinued operations, net of tax (including loss on disposal of $ 117,468 in 2025 and $ 570,145 in 2024) ( 163,288 ) ( 497,167 ) 28,183 Net income (loss) ( 259,091 ) ( 556,088 ) 4,951 Net (gain) loss attributable to noncontrolling interest ( 2,601 ) ( 361 ) ( 1,319 ) Net income (loss) attributable to shareholders $ ( 261,692 ) $ ( 556,449 ) $ 3,632 Net income (loss) attributable to shareholders Continuing operations $ ( 98,404 ) $ ( 59,282 ) $ ( 24,551 ) Discontinued operations ( 163,288 ) ( 497,167 ) 28,183 Total $ ( 261,692 ) $ ( 556,449 ) $ 3,632 Other comprehensive income (loss), after tax Net income (loss) $ ( 259,091 ) $ ( 556,088 ) $ 4,951 Unrealized gains (losses) on securities, net of income tax provision (benefit) of $ 0 , $ 1,295 and $ 2,095 19,643 ( 939 ) 51,184 Gains (losses) on foreign currency translation, net of income tax provision (benefit) of $ 0 , $ 0 and $ 0 201,367 ( 22,156 ) 40,132 Credit risk changes of fair value option liabilities, net of income tax provision (benefit) of $ 0 , $( 118 ) and $ 177 1,108 ( 356 ) ( 88 ) Changes to postretirement benefit, net of income tax provision (benefit) of $ 0 , $ 0 and $ 0 — ( 4,939 ) 1,569 Total other comprehensive income (loss), net of income tax 222,118 ( 28,390 ) 92,797 Total comprehensive income (loss), net of income tax ( 36,973 ) ( 584,478 ) 97,748 Less: net (gain) loss attributable to noncontrolling interest ( 2,601 ) ( 361 ) ( 1,319 ) Less: (gain) loss on foreign currency translation attributable to noncontrolling interest ( 25,200 ) 3,074 — Total comprehensive income (loss) attributable to shareholders $ ( 64,774 ) $ ( 581,765 ) $ 96,429 Net income (loss) from continuing operations per share attributable to stockholders Basic $ ( 2.47 ) $ ( 1.37 ) $ ( 0.43 ) Diluted $ ( 2.47 ) $ ( 1.37 ) $ ( 0.43 ) Net income (loss) from discontinued operations per share attributable to stockholders Basic $ ( 3.46 ) $ ( 10.58 ) $ 0.62 Diluted $ ( 3.46 ) $ ( 10.58 ) $ 0.62 Net income (loss) per share attributable to stockholders Basic $ ( 5.93 ) $ ( 11.96 ) $ 0.18 Diluted $ ( 5.93 ) $ ( 11.96 ) $ 0.18 Weighted average number of common shares outstanding: Basic 47,181,227 46,969,708 45,636,649 Diluted 47,181,227 46,969,708 45,636,649 See accompanying Notes to Consolidated Financial Statements Octave Specialty Group, Inc. 48 2025 Form 10-K Table of Contents , OCTAVE SPECIALTY GROUP, INC. AND SUBSIDIARIES Consolidated Statements of Stockholders’ Equity Years Ended December 31, 2023, 2024 and 2025 Stockholders' Equity Mezzanine Equity Redeemable NCI (1) Octave Specialty Group, Inc. ($ in thousands) Total Preferred Stock Common Stock Additional Paid-in Capital Accumulated Other Comprehensive Income (Loss) Retained Earnings Common Stock Held in Treasury, at Cost Non-redeemable NCI (1) Balance at December 31, 2022 $ 1,305,250 $ — $ 467 $ 274,486 $ ( 252,843 ) $ 1,245,491 $ ( 15,270 ) $ 52,919 $ 19,983 Net income (loss) 3,634 3,632 2 1,317 Total other comprehensive income (loss) 92,797 92,797 Stock-based compensation 17,275 17,275 Cost of shares (acquired) issued under equity plan ( 4,665 ) ( 7,872 ) 3,207 Cost of shares repurchased ( 4,510 ) ( 4,510 ) Changes to noncontrolling interest 4,834 4,797 37 ( 6,671 ) Purchase of All Trans and Capacity Marine 2,450 Balance at December 31, 2023 $ 1,414,615 $ — $ 467 $ 291,761 $ ( 160,046 ) $ 1,246,048 $ ( 16,573 ) $ 52,958 $ 17,079 Net income (loss) ( 554,806 ) ( 556,449 ) 1,643 ( 1,282 ) Total other comprehensive income (loss) ( 28,390 ) ( 28,390 ) — — ( 4,805 ) Stock-based compensation 8,995 8,995 Cost of shares (acquired) issued under equity plan ( 701 ) ( 634 ) ( 67 ) Cost of shares repurchased ( 11,699 ) ( 11,699 ) Changes to noncontrolling interest ( 9,225 ) ( 5,322 ) ( 3,903 ) 2,941 Purchase of Octave Ventures 149,095 149,095 185,469 Acquisition of noncontrolling interest in subsidiary ( 994 ) 1,044 ( 2,038 ) Issuance of common stock in connection with purchase of Octave Ventures 29,229 22 29,207 Balance at December 31, 2024 $ 996,119 $ — $ 489 $ 331,007 $ ( 188,436 ) $ 683,643 $ ( 28,339 ) $ 197,755 $ 199,402 Net income (loss) ( 257,084 ) ( 261,692 ) 4,608 ( 2,007 ) Total other comprehensive income (loss) 206,892 196,919 9,973 15,227 Stock-based compensation 9,707 9,707 Cost of shares (acquired) issued under equity plan ( 8,535 ) ( 33,343 ) 24,808 Cost of shares repurchased ( 29,942 ) ( 29,942 ) Changes to noncontrolling interest ( 50,054 ) 12,146 ( 18,177 ) ( 44,023 ) 39,000 Purchase of Pivix 1,359 Issuance of warrants in connection with sale of AAC 17,000 17,000 Impact of sale of discontinued operations ( 50,918 ) ( 50,918 ) Balance at December 31, 2025 $ 833,185 $ — $ 489 $ 369,860 $ 8,483 $ 370,431 $ ( 33,473 ) $ 117,395 $ 252,981 (1) NCI = Noncontrolling interest See accompanying Notes to Consolidated Financial Statements Octave Specialty Group, Inc. 49 2025 Form 10-K Table of Contents , OCTAVE SPECIALTY GROUP, INC. AND SUBSIDIARIES Consolidated Statements of Cash Flows ($ in thousands) Year Ended December 31, 2025 2024 2023 Cash flows from operating activities: Net income (loss) $ ( 259,091 ) $ ( 556,088 ) $ 4,951 Net income (loss) from discontinued operations ( 163,288 ) ( 497,167 ) 28,183 Net income (loss) from continuing operations ( 95,803 ) ( 58,921 ) ( 23,232 ) Adjustments to reconcile net income to net cash provided by (used in) operating activities: Intangible amortization and depreciation 41,952 19,947 5,230 Share-based compensation 9,707 9,356 12,266 Unearned premiums, net 6,667 ( 10,324 ) 27,913 Losses and loss expenses, net ( 18,973 ) 10,779 23,737 Ceded premiums payable 27,559 23,337 9,721 Premium and commissions receivables ( 49,578 ) ( 11,329 ) ( 30,225 ) Commissions payable 30,743 ( 3,160 ) — Corporate costs reallocated to continuing operations 6,786 14,919 19,367 Other, net ( 11,343 ) 6,158 ( 7,829 ) Net cash provided by (used in) operating activities from continuing operations ( 52,283 ) 762 36,948 Cash flows from investing activities: Proceeds from sales of bonds 27,366 5,994 1,378 Proceeds from matured bonds 37,658 21,580 15,078 Purchases of bonds ( 25,577 ) ( 60,470 ) ( 33,243 ) Proceeds from sales of other invested assets — 625 — Purchases of other investments ( 66 ) ( 2,522 ) ( 2,242 ) Change in short-term investments ( 18,752 ) 101,829 4,157 Acquisitions, net of cash acquired ( 217,940 ) ( 243,776 ) ( 6,953 ) Proceeds from sale of subsidiary 407,300 14,119 — Other, net ( 10,053 ) ( 3,750 ) ( 4,854 ) Net cash provided by (used in) investing activities from continuing operations 199,936 ( 166,371 ) ( 26,679 ) Cash flows from financing activities: Proceeds from long-term debt 117,470 — — Proceeds from short-term debt — 147,000 — Issuance of equity interest in subsidiary — 62,000 — Payments for purchases of common stock held in treasury ( 29,942 ) ( 11,698 ) ( 4,510 ) Payments for extinguishment of short-term debt ( 150,000 ) — — Tax payments related to shares withheld for share-based compensation plans ( 5,307 ) ( 692 ) ( 4,585 ) Issuance of warrants 17,000 — — Distributions to noncontrolling interest holders ( 4,174 ) ( 2,391 ) ( 1,891 ) Acquisitions of noncontrolling interest shares ( 71,345 ) — — Net cash provided by (used in) financing activities from continuing operations ( 126,298 ) 194,219 ( 10,986 ) Net cash provided by (used in) continuing operations 21,355 28,610 ( 717 ) Effect of foreign exchange on cash and cash equivalents - continuing operations 1,460 ( 558 ) — Net cash provided by (used in) continuing operations 22,815 28,052 ( 717 ) Cash, cash equivalents, and restricted cash at beginning of period - continuing operations 47,275 19,223 19,940 Cash, cash equivalents, and restricted cash at end of period - continuing operations $ 70,090 $ 47,275 $ 19,223 Net cash provided by (used in) operating activities from discontinued operations 71,728 33,536 163,376 Net cash provided by (used in) investing activities from discontinued operations 69,712 ( 7,911 ) 461,870 Net cash provided by (used in) financing activities from discontinued operations ( 143,144 ) ( 214,606 ) ( 411,947 ) Net cash provided by (used in) discontinued operations ( 1,704 ) ( 188,981 ) 213,299 Effect of foreign exchange on cash and cash equivalents - discontinued operations — ( 126 ) 529 Net cash provided by (used in) discontinued operations ( 1,704 ) ( 189,107 ) 213,828 Cash, cash equivalents, and restricted cash at beginning of period - discontinued operations 66,076 255,183 41,355 Cash, cash equivalents, and restricted cash at end of period - discontinued operations $ — $ 66,076 $ 255,183 Cash paid during the period for: Interest on debt $ 19,775 $ 3,821 $ — Non-cash investing and financing activities: Octave common stock issued as partial consideration to acquire Octave Ventures — 29,229 — See accompanying Notes to Consolidated Financial Statements Octave Specialty Group, Inc. 50 2025 Form 10-K OCTAVE SPECIALTY GROUP, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Dollar Amounts in Thousands, Except Share Amounts) 1. BACKGROUND AND BUSINESS DESCRIPTION Octave Specialty Group, Inc. (“OSG”), headquartered in New York City, is a financial services holding company incorporated in the state of Delaware on April 29, 1991. OSG is formerly known as Ambac Financial Group, Inc. ("AFG"). In the fourth quarter of 2025 AFG changed its name to OSG in connection with the sale of its legacy financial guarantee business to reflect the Company's position as a P&C only business. References to "Octave," "OSG," the “Company,” “we,” “our,” and “us” are to OSG and its subsidiaries, as the context requires. Octave operates two principal businesses: • Insurance Distribution — Octave's specialty property and casualty ("P&C") insurance underwriting and distribution business, includes Managing General Agents and Underwriters (collectively "MGAs" or "MGA/Us"); an insurance broker; and other distribution, underwriting and related businesses. On October 31, 2025, the Company completed the acquisition of ArmadaCorp Capital, LLC and its subsidiaries (collectively, "ArmadaCorp"), a leading specialty accident and health MGA. Octave's insurance distribution platform operates in the following lines of business: property, niche specialty risk, accident & health, miscellaneous specialty, reinsurance, surety, marine & energy, specialty auto, E&S commercial package, professional lines and Directors & Officers ("D&O"). • Specialty Property & Casualty Insurance — Octave's Specialty Property & Casualty Insurance program insurer business currently includes five carriers (collectively, “Everspan”). Everspan carriers have an A.M. Best rating of 'A-' (Excellent) which was affirmed on July 17, 2025. The Company reports these two business operations as segments; see Note 3. Segment Information for further information. Octave's financial guarantee business, which is being reported as a discontinued operations due to its sale in 2025, includes the activities of Ambac Assurance Corporation ("AAC") and its wholly owned subsidiaries, including Ambac Assurance UK Limited (“Ambac UK”) and Ambac Financial Services LLC ("AFS"). See Note 5. Discontinued Operations for information related to the sale of AAC. Limitations on Voting and Transfer of Common Stock OSG’s Amended and Restated Certificate of Incorporation limits voting and transfer rights of stockholders in significant ways. Article IV contains voting restrictions applicable to any person owning at least 10 % of OSG's common stock so that such person (including any group consisting of such person and any other person with whom such person or any affiliate or associate of such person has any agreement, contract, arrangement or understanding with respect to acquiring, voting, holding or disposing of OSG’s common stock) shall not be entitled to cast votes in excess of one vote less than 10 % of the votes entitled to be cast by all common stock holders, except as otherwise approved by the insurance commissioners of the states of domicile of the insurance companies controlled by OSG. Article XII contains substantial restrictions on the ability to transfer OSG’s common stock. In order to preserve certain tax benefits, subject to limited exceptions, any attempted transfer of common stock shall be prohibited and void to the extent that, as a result of such transfer (or any series of transfers of which such transfer is a part), either (i) any person or group of persons shall become a holder of 5 % or more of OSG’s common stock or (ii) the percentage stock ownership interest in OSG of any holder of 5 % or more of OSG’s common stock shall be increased (a “Prohibited Transfer”). These restrictions shall not apply to an attempted transfer if the transferor or the transferee obtains the written approval of OSG’s Board of Directors prior to such transfer. A purported transferee of a Prohibited Transfer shall not be recognized as a stockholder of OSG for any purpose whatsoever in respect of the securities which are the subject of the Prohibited Transfer (the “Excess Securities”). Until the Excess Securities are acquired by another person in a transfer that is not a Prohibited Transfer, the purported transferee of a Prohibited Transfer shall not be entitled with respect to such Excess Securities to any rights of stockholders of OSG, including, without limitation, the right to vote such Excess Securities and to receive dividends or distributions, whether liquidating or otherwise, in respect thereof, if any. Once the Excess Securities have been acquired in a transfer that is not a Prohibited Transfer, the securities shall cease to be Excess Securities. If the Board determines that a transfer of securities constitutes a Prohibited Transfer then, upon written demand by OSG, the purported transferee shall transfer or cause to be transferred any certificate or other evidence of ownership of the Excess Securities within the purported transferee’s possession or control, together with any distributions paid by OSG with respect to such Excess Securities, to an agent designated by OSG. Such agent shall thereafter sell such Excess Securities and the proceeds of such sale shall be distributed as set forth in the Amended and Restated Certificate of Incorporation. If the purported transferee of a Prohibited Transfer has resold the Excess Securities before receiving such demand, such person shall be deemed to have sold the Excess Securities for OSG’s agent and shall be required to transfer to such agent the proceeds of such sale, which shall be distributed as set forth in the Amended and Restated Certificate of Incorporation. 2. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES Octave’s consolidated financial statements have been prepared on the basis of U.S. generally accepted accounting principles (“GAAP”). The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses and disclosures. There can be no assurance that actual results will conform to such estimates and any future changes in estimates could be material to the financial statements. Octave Specialty Group, Inc. 51 2025 Form 10-K OCTAVE SPECIALTY GROUP, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Dollar Amounts in Thousands, Except Share Amounts) Consolidation The consolidated financial statements include the accounts of OSG and all other entities in which OSG (directly or through its subsidiaries) has a controlling financial interest. All significant intercompany balances have been eliminated. The usual condition for a controlling financial interest is ownership of a majority of the voting interests of an entity. OSG Unconsolidated Financial Information Financial information of OSG is presented in Schedule II in this Annual Report on Form 10-K as of December 31, 2025 and 2024 and for the years ended December 31, 2025, 2024 and 2023. Investments in subsidiaries are accounted for using the equity method of accounting in Schedule II. Discontinued Operations On September 29, 2025, the Company completed the sale of its Legacy Financial Guarantee business, inclusive of Ambac Assurance Corporation ("AAC") and its wholly owned subsidiary Ambac Assurance UK Limited. The results of discontinued operations for all periods to the date of sale are reported separately as Net income (loss) from discontinued operations within the Consolidated Statements of Total Comprehensive Income for the current and prior periods. Assets and liabilities of AAC are presented on the Consolidated Balance Sheet as of December 31, 2024, under Assets of discontinued operations and Liabilities of discontinued operations. AAC's cash flows for all periods to the date of sale are reflected as Net cash provided by (used in) discontinued operations within the Consolidated Statements of Cash Flows. Refer to Sale of Ambac Assurance Corporation in Note 5. Discontinued Operations for further information. Acquisition of ArmadaCorp On October 31, 2025, the Company closed on the acquisition of ArmadaCorp for a purchase price of $ 250,000 . The Company purchased all of the issued and outstanding limited liability company interests in ArmadaCorp from Sirius Re Holdings, Inc. and Sirius Acquisitions Holding Company. Credit Facilities Proceeds from the sale of AAC were used, in part, by the Company to repay the $ 150,000 credit facility that was used to partially finance the acquisition of Octave Specialty Limited ("Octave Ventures") . In connection with the acquisition of ArmadaCorp on October 31, 2025, Octave Partners LLC and certain of its subsidiaries (including ArmadaCorp) entered into a credit facility providing for a $ 100,000 term loan and a $ 20,000 revolving credit facility. The term loan and revolving loans were fully drawn to pay part of the purchase price for ArmadaCorp. Refer to Note 12. Debt for further information regarding these credit facilities. Pivix Conversion Effective September 1, 2025, OSG's wholly owned subsidiary, Octave Partners, LLC ("Octave Partners"), exercised its option to convert its $ 3,500 convertible note investment in Pivix Specialty Insurance Services ("Pivix"), an excess and surplus lines MGA/U, into common stock. As a result, Octave Partners has a 74 % controlling stake in Pivix when combined with its previous 17 % minority equity interest and includes Pivix in its consolidated financial statements. Measurement of Credit Losses on Financial Instruments (CECL) Octave measures credit losses on financial assets that are not accounted for at fair value through net income in accordance with the Current Expected Credit Loss standard or "CECL". The credit loss impairment evaluation process for available-for-sale debt securities is discussed in the Investments sub-section below. CECL does not apply to equity method investments accounted for under ASC 323. Credit loss impairment for amortized cost assets reflect management's current estimate of all expected lifetime credit losses. The estimate of expected lifetime credit losses considers historical information, current information, as well as reasonable and supportable forecasts. Expected lifetime credit losses for amortized cost assets are recorded as an allowance for credit losses, with subsequent increases or decreases in the allowance reflected in net income each period. The credit loss impairment evaluation process for amortized cost assets is addressed in the applicable subsections below. The total allowance for credit losses for amortized cost assets recorded under CECL related to continuing operations was $ 950 at December 31, 2025. Investments The Investments — Debt Securities Topic of the ASC requires that all debt instruments be classified in Octave’s Consolidated Balance Sheets according to their purpose and, depending on that classification, be carried at either cost or fair market value. Octave’s debt investment portfolio is accounted for on a trade-date basis and consists primarily of investments in fixed maturity securities that are either classified as available-for-sale or trading as defined by the Investments - Debt Securities Topic of the ASC. Available-for-sale debt securities are reported in the financial statements at fair value with unrealized gains and losses, net of deferred taxes, reflected in Accumulated Other Comprehensive Income (Loss) in Stockholders’ Equity and computed using amortized cost as the basis. For purposes of computing amortized cost, premiums and discounts are accounted for using the effective interest method over the term of the security. For structured debt securities with a large underlying pool of homogenous loans, such as mortgage-backed and asset-backed securities, premiums and discounts are adjusted for the effects of actual and anticipated prepayments. For other fixed maturity securities, such as corporate and municipal bonds, discounts are amortized or accreted over the remaining term of the securities and premiums are amortized to the earliest call date. Octave Specialty Group, Inc. 52 2025 Form 10-K OCTAVE SPECIALTY GROUP, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Dollar Amounts in Thousands, Except Share Amounts) Short-term investments consist of investments in money market funds, fixed maturity investments having maturities of less than one year and greater than three months when purchased, cash sweep products, and certificates of deposit. Other investments primarily consist of: • Equity interests in limited partnership which are accounted for in accordance with the Investments — Equity Securities Topic of the ASC and reported as Other investments on the Consolidated Balance Sheet with income reported through Net investment income on the Statement of Total Comprehensive Income (Loss). Equity interests in limited partnership are reported using the equity method. • Preferred equity investments that do not have readily determinable fair values are carried at cost, less any impairments as permitted under the Investments — Equity Securities Topic of the ASC. Fair value is based primarily on quotes obtained from independent market sources. When quotes for fixed maturity securities are not available or cannot be reasonably corroborated, valuation models are used to estimate fair value. These models include estimates, made by management, which utilize current market information. When fair value is not readily determinable for pooled investment funds, the investments are valued using net asset value ("NAV") as a practical expedient as permitted under the Fair Value Measurement Topic of the ASC. Investment valuations could differ materially from amounts that would actually be realized in the market. Realized gains and losses on the sale of investments are determined on the basis of specific identification. Refer to Note 7. Fair Value Measurements for further description of the methodologies used to determine the fair value of investments, including model inputs and assumptions where applicable. Octave has a formal impairment review process for fixed maturity available-for-sale securities in its investment portfolio. Octave conducts a review each quarter to identify and evaluate investments that have indications of impairment in accordance with the Investments — Debt Securities Topic of the ASC. If management either: (i) has the intent to sell its investment in an impaired debt security or (ii) determines that the Company more likely than not will be required to sell the debt security before its anticipated recovery of the amortized cost basis less any current period credit impairment, then an impairment charge is recognized in earnings, with the amortized cost of the security written-down to fair value. If management does not intend to sell, or will not be required to sell the debt security, the security is reviewed for credit impairment. Factors considered to identify and assess securities for credit impairment include: (i) fair values that have declined by 20 % or more below amortized cost; (ii) recent downgrades by rating agencies; (iii) the financial condition of the issuer and financial guarantor, as applicable, and an analysis of projected defaults on the underlying collateral; and (iv) whether scheduled interest payments are past due. The recognition of credit impairment losses for available-for-sale debt securities are recorded as an allowance for credit losses with an offsetting charge to net income. Improvements to estimated credit losses for available-for-sale debt securities are recognized immediately in net income. If we believe a decline in the fair value of a particular fixed maturity available-for-sale investment is not credit impaired, we record the decline as an unrealized loss net of tax in Accumulated Other Comprehensive Income (Loss) in Stockholders’ Equity on our Consolidated Balance Sheets. The evaluation of securities for credit impairment is a quantitative and qualitative process, which is subject to risks and uncertainties and is intended to determine whether, and to what extent, declines in the fair value of investments should be recognized in current period earnings. The risks and uncertainties include changes in general economic conditions, the issuer’s or guarantor’s financial condition and/or future prospects, the impact of regulatory actions on the investment portfolio, the performance of the underlying collateral, the effects of changes in interest rates or credit spreads and the expected recovery period. Octave has made certain accounting policy elections related to accrued interest receivable ("AIR") for available-for-sale investments under CECL. Elections include: (i) not measuring AIR for credit impairment, instead AIR is written off when it becomes 90 days past due; (ii) writing off AIR by reversing interest income; (iii) presenting AIR separately in Other Assets on the balance sheet and (iv) excluding AIR from amortized cost balances in required CECL disclosures found in Note 6. Investments . AIR at December 31, 2025 and 2024 was $ 1,432 and $ 1,703 , respectively. Refer to Note 6. Investments for further credit impairment disclosures. Specialty Property and Casualty Insurance Premiums Gross written premiums on insurance policies are recorded at the inception of the policy and can be received on an upfront or installment basis. Certain gross written premiums are written as assumed reinsurance. Assumed reinsurance can attach on a risk-attaching or loss-occurring basis. On risk attaching, assumed written premiums are recorded at the inception of the policy and can be received on an upfront or installment basis. On loss-occurring, assumed written premium includes the transfer of unearned premiums for in-force policies at the effective date of the respective reinsurance agreements and ongoing premium written activity of policies inforce during the respective contract period. At end of the contract period, the remaining unearned premiums of inforce policies are returned to the carrier. Collections of loss occurring assumed written premiums are generally on an installment basis. Ceded premiums written are based on contractual terms applied against related gross written premiums. Premiums, net of reinsurance, are recognized as revenue on a daily pro-rata basis over the term of the insured risk. Unearned premiums and deferred ceded premiums represents the portion of gross and ceded premiums written that relate to unexpired risk, respectively. Premium receivables represent balances currently due and amounts not yet due from policyholders, insurance carriers, managing general agents or producers issuing insurance policies on Everspan's behalf. Premium receivables are reported net of Octave Specialty Group, Inc. 53 2025 Form 10-K OCTAVE SPECIALTY GROUP, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Dollar Amounts in Thousands, Except Share Amounts) an allowance for expected credit losses. The allowance is based upon Everspan's ongoing review of amounts outstanding, including delinquencies and write-offs, and other relevant factors. Credit risk is partially mitigated by the managing general agent's ability to cancel the policy on behalf of Everspan if the policyholder does not pay the premium, thereby reducing the related policy's premium written and Everspan's premium receivable. Derivative Contracts The Company has used derivative contracts to hedge foreign exchange or other economic risks in connection with certain strategic investments. None of Octave’s derivative contracts were designated as hedges under the Derivatives and Hedging Topic of the ASC. All derivatives are recorded on the Consolidated Balance Sheets at fair value and are included in Other assets and Other liabilities, as appropriate. Refer to Note 10. Derivative Instruments for further discussion of the Company’s use of derivative instruments and their impact on the consolidated financial statements. Refer to Note 7. Fair Value Measurements for further description of the methodologies used to determine the fair value of derivative contracts. Deferred Acquisition Costs, Ceding Commissions and Deferred Program Fees The Specialty Property and Casualty Program business defers acquisition costs incurred that are related directly to the successful acquisition of new or renewal insurance contracts, including commissions paid to managing general agents for direct business and paid to insurance carriers when acquired via assumed reinsurance. Ceding commissions received from reinsurers represent a recovery of related acquisition costs. Deferred acquisition costs, net of ceding commissions, are amortized over the related policy period, generally one year, and recognized in amortization of deferred acquisition costs on the Statement of Total Comprehensive Income (Loss). Ceding commissions received in excess of the related direct acquisition costs are deferred and amortized over the related policy period, and recognized as program fees on the Statement of Total Comprehensive Income (Loss). A legal right of offset exists for (i) premiums received and commissions paid to managing general agents on direct business, (ii) premiums received and ceding commission paid on assumed business and (iii) premiums paid and ceding commissions received on ceded business. Goodwill Goodwill is attributable to acquisitions in the ID segment and represents the acquisition cost in excess of the fair value of net assets acquired, including identifiable intangible assets. Goodwill is assigned at acquisition to the applicable reporting unit of the acquired entity giving rise to the goodwill. Goodwill is not amortized but is subject to impairment testing. Goodwill impairment tests are performed annually or more frequently if circumstances indicate a possible impairment. The annual test of goodwill impairment is as of October 1st of each year. The impairment test for each reporting unit may first consider qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. Examples of qualitative factors include macroeconomic conditions, industry and market considerations, cost factors, overall financial performance, entity-specific events, events affecting reporting units and sustained changes in our stock price. If results of the qualitative assessment indicate a more likely than not determination, or if we elect not to perform a qualitative assessment, then a quantitative impairment evaluation is performed as described below. The quantitative evaluation compares the estimated fair value using a combination of an income approach and market approach for each reporting unit with its respective carrying value (including goodwill and identifiable intangible assets). The income approach uses discounted cash flows which are dependent on subjective factors including the timing of future cash flows, the underlying margin projection assumptions, future growth rates and the discount rate. The market approach uses valuation multiples and is dependent on subjective factors including the determination of industry market multiples and EBITDA forecasts. Additionally, to corroborate our estimated fair value, we perform a market capitalization reconciliation to determine if the implied control premium is reasonable. If our assumptions or estimates in our fair value calculations change or if any of the above subjective factors vary from what was expected, this may impact our impairment analysis and result in a decline in fair value that may trigger future impairment charges. Intangible Assets Finite-lived intangibles Octave acquired identifiable intangible assets attributable to the ID segment. The intangible assets primarily relate to distribution relationships, non-compete agreements and trade names, all of which have finite lives and are amortized over their estimated useful lives using the straight-line method. The acquisition date valuation method used to determine the fair value of customer relationships, which were the most significant intangible assets acquired, was the multi period excess earnings method "(MPEEM"), which quantifies the residual (or excess) cash flows generated by the intangible asset and discounts those cash flows to their present value. The significant assumptions used in determining the fair value of customer relationships include estimated revenue growth, customer attrition rates, operating margins, and discount rate. The Company tests finite-lived acquired intangible assets for impairment if certain events occur or circumstances change indicating that the carrying amount of the intangible asset may not be recoverable. The carrying amount of the intangible asset is not recoverable if it exceeds the projected undiscounted cash flows expected to result from the use and eventual disposal of the asset or asset group. If deemed unrecoverable, an impairment loss is recognized for the excess carrying amount over the fair value. There have been no accumulated impairment losses since these finite-lived intangible assets were established. Octave Specialty Group, Inc. 54 2025 Form 10-K OCTAVE SPECIALTY GROUP, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Dollar Amounts in Thousands, Except Share Amounts) Indefinite-lived intangibles Octave acquired identifiable intangible assets attributable to its acquisitions of licensed insurance carriers in both 2021 and 2022, which were accounted for as asset acquisitions (Specialty Property and Casualty Insurance segment). The intangible assets relate to insurance licenses which have indefinite lives and therefore are not amortized. The useful lives are re-evaluated each period to determine whether facts and circumstances continue to support an indefinite life. The Company tests indefinite-lived acquired intangible assets for impairment annually or more frequently if circumstances indicate a possible impairment. Octave tests indefinite-lived intangibles for impairment as of October 1st of each year. If, after assessing qualitative factors, management believes it is more likely than not that the intangible assets are impaired, a quantitative impairment evaluation is performed. Management also has the option to bypass the qualitative evaluation and proceed directly to the quantitative evaluation. The quantitative test compares the estimated fair value of the intangible asset with its carrying value. An impairment is recognized for the excess of the carrying amount of the intangible asset over it estimated fair value. If the asset’s estimated fair value exceeds its carrying value, the intangible asset is not impaired. There have been no accumulated impairment losses since these indefinite-lived intangible assets were established. Cash and Cash Equivalents Cash and cash equivalents principally consist of demand deposits with financial institutions and highly liquid fixed maturity investments having maturities of three months or less when purchased. Restricted Cash including Fiduciary Funds Cash that we do not have the right to use for general purposes is recorded as restricted cash in our consolidated balance sheets. Restricted cash includes fiduciary cash held by Octave's insurance distribution subsidiaries as described below. As an intermediary, we hold funds, generally in a fiduciary capacity, for the account of third parties, typically as the result of premiums received from retail brokers or insureds that are in transit to insurers and claims due that are in transit from insurers. Since fiduciary assets are not available for corporate use, they are shown in the consolidated balance sheets as restricted cash and we present an equal and corresponding fiduciary liability relating to these funds representing amounts or claims or premiums due on our consolidated balance sheets (included in Other liabilities). Fiduciary funds are generally required to be kept in bank accounts subject to guidelines which emphasize capital preservation and liquidity. The Company is entitled to retain investment income earned on certain of these fiduciary funds in accordance with industry custom and practice and, in some cases, as supported by agreements with insureds. Restricted cash for net uncollected premiums and claims and the related fiduciary liabilities were $ 40,754 and $ 17,669 at December 31, 2025 and 2024, respectively. Specialty Property and Casualty Loss and Loss Adjustment Expenses Loss and loss adjustment expense reserves for Specialty Property and Casualty policies represent management's estimate of the ultimate liability for unpaid losses and loss expenses for claims that have been reported and claims that have been incurred but not yet reported ("IBNR") as of the balance sheet date. Loss and loss adjustment expense reserves represent management estimates, primarily utilizing actuarial expertise and projection methods that develop estimates for the ultimate cost of claims and claim adjustment expenses. The reserves are estimated based upon experience and using a variety of actuarial methods. These estimates are reviewed and are subject to the impact of future changes in factors such as claim severity and frequency, underwriting and claims practices, changes in social and economic conditions including the impact of inflation, legal and judicial developments, medical cost trends and upward trends in damage awards. Our actuarial methods may also rely on external data, such as industry loss ratios, loss development factors, or trend factors. Such data, while more mature than Everspan's own data, may not be perfectly representative of the particular business written by Everspan. The ultimate amount for loss and loss adjustment expenses may be in excess, or less than, the amounts recorded on our financial statements. Because the establishment of claims and claim adjustment expense reserves is an inherently uncertain process involving estimates and judgment, currently estimated claims and claim adjustment expense reserves may change. Adjustments will be reflected as part of the net increase or reduction in loss and loss adjustment expense reserves in the periods in which they become known. Cumulative amounts paid and case reserves held as of the balance sheet date are subtracted from the estimate of the ultimate cost of claims and claim adjustment expenses to derive incurred but not reported (IBNR) reserves. There were no changes in methodology in the past year. Detailed claim data is typically insufficient to produce a reliable indication of the initial estimate for ultimate claims and claim adjustment expenses for an accident year. As a result, the initial estimate for an accident year is generally based on an exposure-based method using the loss ratio projection method. The loss ratio projection method develops an initial estimate of ultimate claims and claim adjustment expenses for an accident year by multiplying earned premium for the accident year by a projected loss ratio. The projected loss ratio is determined by analyzing prior period experience, and adjusting for loss cost trends, rate level differences, a mix of business changes and other known or observed factors influencing the accident year relative to prior accident years. The following estimation and analysis methods are principally used by the Company’s actuaries to estimate the ultimate cost of claims and claim adjustment expenses. These estimation and analysis methods are typically referred to as conventional actuarial methods. Octave Specialty Group, Inc. 55 2025 Form 10-K OCTAVE SPECIALTY GROUP, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Dollar Amounts in Thousands, Except Share Amounts) • The paid loss development method assumes that the future change (positive or negative) in cumulative paid losses for a given cohort of claims will occur in a stable, predictable pattern from year-to-year, consistent with the pattern observed in past cohorts. • The case incurred development method is the same as the paid loss development method, but is based on cumulative case-incurred losses rather than paid losses. • The Bornhuetter-Ferguson method uses an initial estimate of ultimate losses for a given product line reserve component, typically expressed as a ratio to earned premium. The method assumes that the ratio of additional claim activity to earned premium for that component is relatively stable and predictable over time and that actual claim activity to date is not a credible predictor of further activity for that component. The method is used most often for more recent accident years where claim data is sparse and/or volatile, with a transition to other methods as the underlying claim data becomes more voluminous and therefore more credible. While these are the principal methods utilized, the Company’s actuaries have available to them the full range of actuarial methods developed by the casualty actuarial profession. Most actuarial methods assume that past patterns demonstrated in the data will repeat themselves in the future. The Company performs a continuing review of its loss and loss adjustment expense reserves, including its reserving techniques and the impact of reinsurance. Since the reserves are based on estimates, the ultimate liability may be more or less than such reserves. Reinsurance Recoverable The Company uses ceded reinsurance to transfer certain insurance risk, along with premiums written and earned, to other insurance carriers that agree to share in such risks. The primary purpose of the reinsurance is to (i) protect the Company, at a cost, from losses in excess of amounts it is willing to accept, (ii) protect the Company's capital, and (iii) to manage the Company's net retention on individual risks and overall exposure to losses while providing the Company the ability to offer policies with sufficient limits to meet policyholder needs. The Company generally enters into quota share reinsurance agreements whereby it cedes to the capacity providers (reinsurers) a substantial amount (generally 70 % or more) of its gross liability under all policies issued by and on behalf of the Company by the MGA/U. Everspan is exposed to the credit risk of the reinsurer, or the risk that one of its reinsurers becomes insolvent or otherwise unable or unwilling to pay policyholder claims. This credit risk is generally mitigated by either selecting well-capitalized, highly rated authorized capacity providers or requiring that the capacity provider post collateral to secure the reinsured risks, which in some instances, exceeds the related reinsurance recoverable. Amounts recoverable from reinsurers are estimated in a manner consistent with the associated loss and loss adjustment expense reserves. The Company reports reinsurance recoverables net of an allowance for amounts that are estimated to be uncollectible. The reinsurance of risk does not legally relieve Everspan of its original liability to its policyholders. In the event that any of Everspan’s reinsurers are unable to meet their obligations under reinsurance contracts, Everspan would, nonetheless, be liable to its policyholders for the full amount of its policy. To minimize credit exposure to losses from reinsurer insolvencies, Everspan (i) is entitled to receive collateral from certain reinsurance counterparties pursuant to the terms of the relevant reinsurance contracts and (ii) has certain cancellation rights that can be exercised by Everspan in the event of rating agency downgrades of a reinsurer (among other events and circumstances). For those reinsurance counterparties that do not currently post collateral, Everspan’s reinsurers are well-capitalized, highly rated, authorized capacity providers. Everspan has a formal quarterly credit impairment review process whereby it has elected to use the practical expedient of considering the fair value of collateral posted by reinsurers when evaluating credit impairment. To determine the total unsecured recoverable to be evaluated for credit impairment, we net the reinsurance recoverable amount by ceded premiums payable and the fair value of collateral posted, if any. The key factors in assessing credit impairment for reinsurance recoverables are independent rating agency credit ratings and loss severities. Management utilizes a probability of default/loss given default ("PD/LGD") approach, which is applied to the net unsecured reinsurance recoverable amount. Refer to Note 8. Insurance Contracts for credit impairment disclosures. Short and Long-term Debt Short and long-term debt are carried at par value less unamortized discount. Accrued interest and discount accretion on short and long-term debt is reported as Interest expense on the Consolidated Statements of Total Comprehensive Income (Loss). Noncontrolling Interests ("NCI") Nonredeemable NCI For Octave Ventures, the Nonredeemable NCI of $ 117,395 and $ 146,837 as of December 31, 2025 and 2024, includes the NCI share in certain operating units which are minority owned by the units' respective management teams that do not have associated put options. As of December 31, 2024, there were no put options associated with any of these minority interests and as such, the aggregate amount was classified as nonredeemable NCI on the balance sheet. During the year ended December 31, 2025, certain NCI shares were reclassified between nonredeemable and redeemable NCI as further described under "Redeemable NCI" below. The acquisition date valuation method to determine the fair value of nonredeemable NCI was the discounted cash flow approach. The significant fair value assumptions used in the model included estimated long term revenue and expense forecasts and the discount rate. When redeemable NCI shares are no longer redeemable, such as when Octave Specialty Group, Inc. 56 2025 Form 10-K OCTAVE SPECIALTY GROUP, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Dollar Amounts in Thousands, Except Share Amounts) put options expire unused, the NCI shares are reclassified to nonredeemable NCI with no change in carrying value. During the year ended December 31, 2025, Octave paid $ 2,967 to purchase certain nonredeemable shares from minority interest owners, resulting in a $ 14,362 decrease to Nonredeemable noncontrolling interest. The difference between the consideration paid and carrying value of the nonredeemable NCI is recorded as an adjustment to additional paid-in capital. Redeemable noncontrolling interests The Xchange, All Trans, Capacity Marine, Riverton, Octave Ventures, and Pivix acquisitions resulted in the ownership percentages of the acquired entities by Octave as shown in the following table Company Ownership Percentage Xchange 80 % All Trans 85 % Capacity Marine 80 % Riverton 80 % Octave Ventures (1) 60 % Pivix 74 % (1) Octave Ventures's majority interests in its underlying MGAs ranges from 60 % to 100 % at December 31, 2025, resulting in Octave's interest ranging from 36 % to 60 % in each underlying MGA/U. Under the terms of applicable agreements, Octave has call options to purchase the remaining interests from the minority owners (i.e., noncontrolling interests) and the minority owners have put options to sell their interests to Octave, which certain put obligations can be settled in equity and up to a maximum of 35 % of the redemption value. Because the exercise of the put options are outside the control of Octave, in accordance with the Distinguishing Liabilities from Equity Topic of the ASC, Octave reports redeemable NCI in the mezzanine section of its consolidated balance sheet. In addition, during the three months ended March 31, 2025, Octave entered into put options with certain minority owners of the MGA/U operating entities that are majority owned by Octave Ventures. These put options are embedded in the associated NCI shares ("Option Shares"), resulting in remeasurement of the shares at fair value inclusive of the put options and reclassification of the Option Shares from nonredeemable NCI to redeemable NCI. The change in carrying value resulting from revaluation of $ 10,276 is recorded as an offset to retained earnings, with a corresponding impact on earnings per share for the year ended December 31, 2025. During the year ended December 31, 2025, Octave paid $ 1,068 as a result of exercise of put options on the Option Shares, acquiring redeemable NCI with a carrying value of $ 1,815 . The difference between the consideration paid and carrying value of the redeemable NCI is recorded as an adjustment to additional paid-in capital. During the three months ended December 31, 2025, there was no activity related the exercise of the put options on the Option Shares. The acquisition date valuation method to determine the fair value of redeemable NCI and related put and call options was Monte Carlo Simulation. The significant fair value assumptions used in the simulation include the exercise thresholds, EBITDA forecasts, discount rate and long-term growth rates. The redeemable NCI is remeasured each period as the greater of: i. the carrying value under ASC 810, which attributes a portion of consolidated net income (loss) to the redeemable NCI, and ii. the redemption value of the put option under ASC 480 as if it were exercisable at the end of the reporting period. Management calculates the redemption value of the put options under ASC 480 on an annual basis. At each reporting period, the redeemable noncontrolling interest increases or decreases due to activity related to net income and distributions. The Company remeasures such interests to redemption value when required based on the terms of the redemption provisions. Where redemption value is determined using prior‑year EBITDA or associated calculations, management evaluates the redemption value and records adjustments only when contractual terms change. Any increase (decrease) in the carrying amount of the redeemable NCI as a result of adjusting to the redemption value of the put option is recorded as an offset to retained earnings. The impact of such differences on earnings per share are presented in Note 15. Net Income Per Share. Following is a rollforward of redeemable NCI. Years ended December 31, 2025 2024 Beginning balance $ 199,402 $ 17,079 Net income (loss) attributable to redeemable noncontrolling interest (ASC 810) ( 2,007 ) ( 1,282 ) Gain (loss) on foreign currency translation attributable to redeemable NCI 15,227 ( 4,805 ) Fair value of acquired redeemable noncontrolling interest at acquisition date 1,359 185,469 Reclassification from nonredeemable noncontrolling interest including remeasurement at fair value 42,180 — Reclassification to nonredeemable noncontrolling interest ( 5,136 ) — Put / call option exercise ( 1,815 ) — Distributions ( 4,128 ) ( 2,391 ) Adjustment to redemption value (ASC 480) 7,899 5,332 Ending Balance $ 252,981 $ 199,402 The following table outlines the aggregate amounts of redeemable NCI according to the next earliest year in which a NCI put option becomes exercisable over the next five years as of December 31, 2025 : 2026 $ 69,387 2027 77,002 2028 55,309 2029 48,833 2030 2,450 Total $ 252,981 Octave Specialty Group, Inc. 57 2025 Form 10-K OCTAVE SPECIALTY GROUP, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Dollar Amounts in Thousands, Except Share Amounts) Per ASC 480, the redeemable NCI is to be recorded as the greater of the carrying value or redemption value, therefore, the options in any issue year could be exercised at a lower amount. Revenue Recognition Revenues for the ID business operations are recognized in accordance with the Revenue from Contracts with Customers Topic of the ASC. The following steps are applied to recognize revenue: (i) identify the contract(s) with the customer, (ii) identify the performance obligations in the contract(s), (iii) determine the transaction price, and (iv) allocate the transaction price to the performance obligations in the contract and recognize revenue when (or as) the entity satisfies a performance obligation. A performance obligation is satisfied either at a point in time or over time depending on the nature of the product or service provided and the specific terms of the contract with customers. Performance obligations consist of underwriting and placing policies with insurers and, for certain products, providing claims servicing. Revenue from employer stop loss policies ("ESL") is apportioned to policy placement and claims servicing based on the relative stand-alone selling price of the respective performance obligations with policy placement revenue recognized upfront while claims servicing revenue is recognized over the claim adjustment period. Revenue from other insurance policies are recognized up front as no further performance obligations exist after policy placement. Revenue consists of base and profit-sharing commissions. • Base commissions, associated with policy placement and claims servicing, are estimated by applying the contractual commission percentages to estimated gross premiums placed. • Profit-sharing commissions represent variable consideration associated with policy placement only and are estimated based on expected loss ratios and the estimated gross premium for base commissions. Base and profit-sharing commissions are estimated with a constraint applied such that a significant reversal of revenue in the future is not probable. Revenue is reported in Commissions income on the Consolidated Statement of Total Comprehensive Income. Contract assets represent the Company's right to future consideration for services it has already transferred to the customer, which is subject to certain contingencies. Once the right to consideration becomes unconditional, it is reported as a receivable. Contract assets are evaluated for credit loss under CECL using a probability of default / loss given default (“PD/LGD”) method which measures credit impairment as the product of the carrying value, default probability and loss given default, considering the asset’s credit rating and average life. Contract liabilities represent the Company's obligation to transfer services for which it has already received consideration from the customer. Contract assets and receivables are reported as other assets, and contract liabilities are reported as other liabilities, on the Consolidated Balance Sheet. The Company’s costs to obtain customer contracts relate to certain commissions paid to independent agents for procuring policies. As these costs relate to the Company’s policy placement performance obligation to its customers, they are expensed as incurred. These costs are reported in Commission expenses on the Consolidated Statement of Total Comprehensive Income (Loss). Incentive Compensation Incentive compensation is a key component of our compensation strategy. Incentive compensation has two components: short-term incentive compensation (consisting of an annual cash bonus) and long-term incentive plan awards (consisting of deferred cash and stock-based awards described further below). Annual decisions with regard to incentive compensation are generally made in the first quarter of each year and are based on the prior year's performance for the Company, the employee and the employee's business unit. In 2024, the Octave 2020 Incentive Compensation Plan (the “2020 Incentive Plan”) was superseded by the 2024 Incentive Compensation Plan ("2024 Incentive Plan"). Both plans allow for the granting of stock options, restricted stock, stock appreciation rights, restricted and performance units and other awards to employees, directors and consultants that are valued or determined by reference to Octave's common stock. Under these plans, Octave has issued both cash and equity awards to US and UK employees and consultants. In connection with the adoption of the 2024 Incentive Plan, all shares reserved but unissued under the 2020 Incentive Plan were transferred to the 2024 Incentive Plan in addition to any shares underlying outstanding awards under the 2020 Incentive Plan as of June 5, 2024, that subsequently terminate by expiration or forfeiture, cancellation, or otherwise are not issued. Under the 2020 and 2024 Incentive Compensation Plans Octave recognizes compensation costs for all equity classified awards granted at fair value, which is measured on the grant date, and records forfeitures for unvested shares only when they occur. For awards that only include service and performance conditions, the fair value is the market price of Octave stock on the grant date. For awards that also contain a market condition, including a total shareholder return ("TSR") modifier or achievement of Octave common stock price hurdles, the fair value is estimated using a Monte Carlo simulation. The types of equity awards granted to employees are as follows: • Restricted stock units — only require future service and accordingly the respective fair value is recognized as compensation expense over the relevant service period. • Performance stock units — require both future service and achieving specified performance targets to vest. Performance stock unit grants also include a market condition TSR modifier that will cause the total payout at the end the performance period to increase or decrease depending on Octave's stock performance relative to a peer group. Compensation costs for all performance stock units are only recognized when the achievement of the Octave Specialty Group, Inc. 58 2025 Form 10-K OCTAVE SPECIALTY GROUP, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Dollar Amounts in Thousands, Except Share Amounts) performance conditions are considered probable. Once deemed probable, such compensation costs are recognized as compensation expense over the relevant service period. Compensation costs are initially based on the probable outcome of the performance conditions and adjusted for subsequent changes in the estimated or actual outcome each reporting period as necessary. Changes in the estimated or actual outcome of a performance condition are recognized by reflecting a retrospective adjustment to compensation cost in the current period. • Performance stock options ("PSOs") — require both future service and achieving specified market price targets to vest. The PSOs vest upon the achievement of an explicit one-year service period from grant and OSG stock reaching specified market price targets. Compensation costs for PSOs are initially recognized over the period from grant date to the end of the derived service period estimated from the Monte Carlo valuation process. If market conditions are achieved prior to the derived service period, the remaining compensation expense is recognized immediately. Operating Leases A contract contains a lease if it conveys the right to control the use of identified property, plant, or equipment for a period of time in exchange for consideration. Octave's evaluation of whether certain contracts contain leases requires judgment regarding what party controls the asset and whether the asset is physically distinct. Octave is the lessee in leases which are classified as operating leases. Octave recognizes a single lease cost, calculated so that the cost is allocated generally on a straight-line basis over the lease term within operating expenses in the Consolidated Statements of Total Comprehensive Income (Loss). The lease term commences on the earlier of the date when we become legally obligated for the rent payments or the date on which we take possession of the property. For such operating leases, Octave recognizes a right-of-use ("ROU") asset and a lease liability, initially measured at the present value of the lease payments. The discount rate used to initially measure the ROU assets and lease liabilities reflects the estimated secured borrowing rate of the applicable Octave subsidiary, which considers the rate of existing or recent debt obligations of the entity. All cash payments are classified within operating activities in the statement of cash flows. For contracts where Octave is the lessee, we have elected the short-term lease recognition exemption for all leases that qualify. For those leases that qualify for that exemption, we will not recognize ROU assets or lease liabilities. For all contracts where Octave is the lessee and lessor, we have also elected the practical expedient to not separate lease and non-lease components. Depreciation and Amortization of Fixed Assets Depreciation of furniture and fixtures, certain information technology development costs and electronic data processing equipment is charged over the estimated useful lives of the respective assets, ranging from three to five years, using the straight-line method. Amortization of leasehold improvements is charged over the remaining term of the respective operating lease using the straight-line method. Changes to estimated useful lives are accounted for prospectively from the period of change. Fixed assets are evaluated for impairment whenever events or changes in circumstances indicate their carrying value may not be recoverable. Foreign Currency Financial statement accounts expressed in foreign currencies are translated into U.S. dollars in accordance with the Foreign Currency Matters Topic of the ASC. The functional currencies of Octave's subsidiaries are the local currencies of the country where the respective subsidiaries are based, which are also the primary operating environments in which the subsidiaries operate. Foreign currency translation: Functional currency assets and liabilities of Octave’s foreign subsidiaries are translated into U.S. dollars using exchange rates in effect at the balance sheet dates and the related translation adjustments, net of deferred taxes, are included as a component of Accumulated Other Comprehensive Income (Loss) in Stockholders' Equity. Functional currency operating results of foreign subsidiaries are translated using average exchange rates. Foreign currency transactions: The impact of non-functional currency transactions and the remeasurement of non-functional currency assets and liabilities into the respective subsidiaries' functional currency (collectively "foreign currency transactions gains/(losses)") are $( 3,864 ), $ 101 and $ 0 for the years ended December 31, 2025, 2024 and 2023, respectively. Foreign currency transaction gains/(losses) are primarily the result of Octave Ventures transactions in currencies (primarily the U.S. dollar) other than its functional currency (the British Pound Sterling). Commitments and Contingencies The Company and its subsidiaries are defendants in or parties to actual, pending and threatened lawsuits and proceedings. A liability is accrued for such contingencies when a loss is both probable and reasonably estimable. If a loss is not "probable and reasonably estimable," but is reasonably possible, disclosure of the contingency and an estimate of the loss or range of loss is required if such an estimate can be determined. Significant management judgment is required to apply this guidance. As a legal contingency develops, the Company, in conjunction with outside counsel, evaluates what level of accrual and/or disclosure is required under the guidance. See Note 19. Commitments and Contingencies for additional information about our legal contingencies and related accounting evaluation. Income Taxes Octave files a consolidated U.S. federal income tax return with its subsidiaries, except for Octave Ventures which files a separate tax return. Octave and its subsidiaries also file separate or combined income tax returns in various states, local and foreign jurisdictions. Current tax assets and liabilities are recognized for taxes refundable or payable for the current year. Octave Specialty Group, Inc. 59 2025 Form 10-K OCTAVE SPECIALTY GROUP, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Dollar Amounts in Thousands, Except Share Amounts) Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on current and deferred tax assets and liabilities of a change in tax rates is recognized in the period that includes the enactment date. The Income Taxes Topic of the ASC requires that companies assess whether valuation allowances should be established against their deferred tax assets based on management's assessment and consideration of all available evidence using a ‘more likely than not' standard. In making such judgments, significant weight is given to evidence that can be objectively verified. The level of deferred tax asset recognition is influenced by management’s assessment of future profitability, which depends on the existence of sufficient taxable income within the carry forward periods available under the tax law. Net Income Per Share Basic net income per share is computed by dividing net income attributable to common stockholders, including the adjustment to redemption value of the redeemable NCI, by the weighted-average number of common shares outstanding and vested restricted stock units (together, "Basic Weighted Average Shares Outstanding"). Diluted net income per share is computed by dividing net income attributable to common stockholders, including the adjustment to redemption value of the redeemable controlling interest, by the Basic Weighted-Average Shares Outstanding plus all potentially dilutive common shares outstanding during the period. All potentially dilutive common shares outstanding consider common stock deliverable pursuant to warrants, unvested restricted stock units and performance stock units granted under existing compensation plans. Immaterial Correction of Prior Period Error The Company identified an immaterial prior period error in the Consolidated Stockholders’ Equity statement related to the redeemable non-controlling interest associated with the redemption value adjustment recorded under ASC 810-10. The Company assessed the materiality of this change in presentation on the prior period consolidated financial statements in accordance with SEC Staff Accounting Bulletin No. 99, “Materiality,” (ASC Topic 250, Accounting Changes and Error Corrections). Based on this assessment, the Company concluded that this error correction in its Consolidated Balance Sheet, Stockholders Equity and Earnings Per share are not material to any previously presented consolidated financial statements. The corrections had no impact any previously presented interim or annual consolidated financial statements. Accordingly, the Company corrected the previously reported immaterial errors for the years ended December 31, 2024, in this Annual Report on Form 10-K. A summary of the immaterial corrections to the Company’s previously reported audited consolidated financial statements follows. Corrected Consolidated Balance Sheet: Year Ended December 31, 2024 As Reported Immaterial Correction As Corrected Redeemable noncontrolling interest $ 140,860 $ 58,542 $ 199,402 Retained earnings 742,185 ( 58,542 ) 683,643 Total liabilities, redeemable noncontrolling interest and stockholders' equity $ 8,058,378 $ — $ 8,058,378 Corrected Consolidated Statement of Stockholders’ Equity: Year Ended December 31, 2024 As Reported Immaterial Correction As Corrected Retained earnings 742,185 ( 58,542 ) 683,643 Corrected Earnings Per Share: Year Ended December 31, 2024 As Reported Immaterial Correction As Corrected Net income (loss) from continuing operations per share attributable to stockholders Basic $ ( 0.13 ) $ ( 1.24 ) $ ( 1.37 ) Diluted $ ( 0.13 ) $ ( 1.24 ) $ ( 1.37 ) Net income (loss) per share attributable to shareholders Basic $ ( 10.71 ) $ ( 1.25 ) $ ( 11.96 ) Diluted $ ( 10.71 ) $ ( 1.25 ) $ ( 11.96 ) Note 2. Basis of Presentation and Significant Accounting Policies Corrected rollforward of redeemable NCI: Year Ended December 31, 2024 As Reported Immaterial Correction As Corrected Beginning balance $ 17,079 $ — $ 17,079 Fair value of redeemable NCI at acquisition date 185,469 — 185,469 Net income attributable to redeemable NCI (ASC 810) ( 1,282 ) — ( 1,282 ) Distributions ( 2,391 ) — ( 2,391 ) Adjustment to redemption value (ASC 480) ( 53,210 ) 58,542 5,332 Foreign exchange ( 4,805 ) — ( 4,805 ) Ending balance $ 140,860 $ 58,542 $ 199,402 Reclassifications and Rounding Reclassifications have been made to prior years' amounts to conform to the current year's presentation. This includes reclassifying held-for-sale assets and liabilities of Octave's financial guarantee business which is being reported as a discontinued operation. Certain amounts and tables in the consolidated financial statements and associated notes may not add due to rounding. Octave Specialty Group, Inc. 60 2025 Form 10-K OCTAVE SPECIALTY GROUP, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Dollar Amounts in Thousands, Except Share Amounts) Adopted Accounting Standards Income Taxes: In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740) - Improvements to Income Tax Disclosures . The enhancements in the ASU include the following: • Within the rate reconciliation table, disclosure of additional categories of information about federal, state, and foreign income taxes and provision of more details about reconciling items in some categories if the items meet a quantitative threshold. • Annual disclosure of income taxes paid (net of refunds received) disaggregated by federal (national), state, and foreign taxes and further disaggregated by jurisdiction based on a quantitative threshold. • Other disclosures include: (i) income (or loss) from continuing operations before income tax expense (or benefit) disaggregated between domestic and foreign amounts and (ii) income tax expense (or benefit) from continuing operations disaggregated by federal (national), state, and foreign. Octave has adopted this ASU prospectively for the annual reporting period ending December 31, 2025. There have been no other new accounting standards adopted during the year ended December 31, 2025. Future Application of Accounting Standards and Required Disclosures Credit Losses for Accounts Receivable and Contract Assets: In July 2025, the FASB issued ASU 2025-05, Financial Instruments— Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets. The amendments in the ASU provide all entities with a practical expedient when estimating expected credit losses for current accounts receivable and current contract assets arising from transactions under Topic 606. The practical expedient allows entities to assume that current conditions as of the balance sheet date do not change for the remaining life of the asset. The ASU is effective for interim and annual periods beginning after December 15, 2025. The standard is not expected to have a material impact on Octave's financial statements. Goodwill and Other — Internal-Use Software In September 2025, the FASB issued ASU 2025-06, Intangibles— Goodwill and Other— Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal Use Software. This standard is intended to increase the operability of the accounting guidance for internal-use software development costs considering the evolution of software development methods. Amendments remove references to prescriptive and sequential project stages, requiring entities to start capitalizing costs when: (i) management has authorized and committed to funding the project and (ii) it is probable that the project will be completed and the software will be used to perform the function intended. The ASU is effective for interim and annual periods beginning after December 15, 2027 with early adoption permitted. Octave has not determined if it will early adopt this ASU and is evaluating its impact on Octave's financial statements. Expense Disaggregation Disclosures: In November 2024, the FASB issued ASU 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40). The enhanced disclosures requirements include the following: • Disclose the amounts of certain expense categories included in each relevant expense caption. Those categories applicable to Octave include employee compensation, depreciation, and intangible asset amortization. A relevant expense caption is an expense caption presented on the face of the income statement within continuing operations that contains any of the expense categories listed above. • Include certain amounts that are already required to be disclosed under current GAAP in the same disclosure as the other disaggregation requirements. • Disclose a qualitative description of the amounts remaining in relevant expense captions that are not separately disaggregated quantitatively. • Disclose the total amount of selling expenses and, in annual reporting periods, an entity’s definition of selling expenses. The ASU is effective for annual periods beginning after December 15, 2026 and for interim reporting periods after December 15, 2027 with early adoption permitted. Octave has not determined if it will early adopt this ASU and is evaluating the impact on Octave's financial statements. Octave Specialty Group, Inc. 61 2025 Form 10-K OCTAVE SPECIALTY GROUP, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Dollar Amounts in Thousands, Except Share Amounts) 3. SEGMENT INFORMATION The Company reports its results of continuing operations in two segments: Specialty Property and Casualty Insurance and ID. These reportable segments offer distinct products and services as further described in Note 1. Background and Business Description. The operating entities within each segment are wholly or majority owned by separate intermediate holding companies: Everspan Holdings, LLC for Specialty Property and Casualty Insurance and Octave Partners LLC for ID. The Company's segments have separate management teams with incentive compensation structures based on segment level performance. Financial reporting for each segment is regularly provided to the Company's Chief Executive Officer, who is the chief operating decision maker ("CODM"), for purposes of monitoring the businesses, assessing performance and allocating resources. The following tables summarize the components of the Company’s total revenues and expenses and pretax income (loss) by reportable business segment. Information provided below for “Corporate and Other” primarily relates to the operations of OSG, which will include investment income on its investment portfolio and costs to maintain the operations of OSG, including public company reporting, capital management and business development costs for the acquisition and development of new business initiatives. As a result of the Company reporting the results of operations of AAC as discontinued operations, certain corporate costs charged to AAC totaling $ 6,786 , $ 14,919 , and $ 19,367 for the years ended December 31, 2025, 2024 and 2023, respectively, have been reported in Net income from continuing operations on the Consolidated Statements of Total Comprehensive Income and included in Corporate and Other in the tables below. Octave Specialty Group, Inc. 62 2025 Form 10-K OCTAVE SPECIALTY GROUP, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Dollar Amounts in Thousands, Except Share Amounts) Year Ended December 31, 2025 Year Ended December 31, 2024 Reportable Segments Reportable Segments Specialty Property & Casualty Insurance Insurance Distribution Corporate & Other Total Specialty Property & Casualty Insurance Insurance Distribution Corporate & Other Total Revenues: Commissions $ 143,381 143,381 $ 92,023 $ 92,023 Servicing and other fees 20,419 20,419 6,353 6,353 Net premiums earned $ 67,232 67,232 $ 99,005 99,005 Program fees 14,322 14,322 13,506 13,506 Investment income 6,811 1,514 $ 2,323 10,647 6,400 787 $ 7,261 14,448 Other 38 ( 1,588 ) ( 3,230 ) ( 4,780 ) 7,409 73 2,998 10,480 Total revenues from Continuing Operations (1) 88,403 163,726 ( 907 ) 251,222 126,320 99,236 10,259 235,815 Less: Commissions 37,037 37,037 40,876 40,876 Loss and loss adjustment expenses 47,193 47,193 72,626 72,626 Policy acquisition costs 15,790 15,790 23,666 23,666 Intangible amortization and depreciation 38,734 3,218 41,952 18,083 1,864 19,947 Interest expense 18,640 18,640 9,379 9,379 Compensation expense 12,245 63,761 33,841 109,847 10,201 28,353 25,791 64,346 Non Compensation expense 9,845 26,010 45,922 81,777 7,605 10,354 46,861 64,820 Total expenses from continuing operations 85,073 184,182 82,981 352,236 114,098 107,045 74,516 295,660 Segment pretax income (loss) 3,330 ( 20,456 ) ( 83,888 ) ( 101,014 ) 12,222 ( 7,809 ) ( 64,257 ) ( 59,845 ) Segment income tax expense (benefit) 374 ( 5,103 ) ( 482 ) ( 5,211 ) 1,753 ( 928 ) ( 1,748 ) ( 924 ) Segment net income (loss) 2,956 ( 15,353 ) ( 83,406 ) ( 95,803 ) 10,469 ( 6,881 ) ( 62,509 ) ( 58,921 ) Segment net (income) loss attributable to NCI — ( 2,601 ) ( 2,601 ) 2 ( 363 ) ( 361 ) Net income (loss) attributable to shareholders $ 2,956 $ ( 17,954 ) $ ( 83,406 ) $ ( 98,404 ) $ 10,471 ( 7,244 ) ( 62,509 ) $ ( 59,282 ) Reconciliation to consolidated net income (loss) attributable to shareholders Discontinued operations ( 163,288 ) ( 497,167 ) Net income (loss) attributable to shareholders $ ( 261,692 ) $ ( 556,449 ) Reconciliation of segment assets to consolidated total assets Total assets $ 894,692 $ 1,243,979 $ 84,646 $ 2,223,317 $ 751,272 $ 900,222 $ 139,684 $ 1,791,178 Discontinued operations $ — $ 6,267,200 Total consolidated assets $ 2,223,317 $ 8,058,378 EBITDA Reconciliation Segment net income (loss) $ 2,956 $ ( 15,353 ) $ ( 83,406 ) $ ( 95,803 ) $ 10,469 $ ( 6,881 ) $ ( 62,509 ) $ ( 58,921 ) Adjustments: Interest expense 18,640 18,640 9,379 9,379 Income taxes 374 ( 5,103 ) ( 482 ) ( 5,211 ) 1,753 ( 928 ) ( 1,748 ) ( 924 ) Depreciation — 690 3,218 3,908 — 481 1,864 2,345 Intangible amortization 38,044 38,044 17,602 17,602 EBITDA 3,330 36,918 ( 80,670 ) ( 40,422 ) 12,222 19,653 ( 62,393 ) ( 30,518 ) Add: Impact of noncontrolling interests ( 14,507 ) ( 14,507 ) ( 6,448 ) ( 6,448 ) EBITDA attributable to shareholders $ 3,330 $ 22,411 $ ( 80,670 ) $ ( 54,929 ) $ 12,222 $ 13,205 $ ( 62,393 ) $ ( 36,966 ) (1) Inter-segment revenues and inter-segment pre-tax income (loss) amounts are insignificant and are not presented separately. Octave Specialty Group, Inc. 63 2025 Form 10-K OCTAVE SPECIALTY GROUP, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Dollar Amounts in Thousands, Except Share Amounts) Year Ended December 31, 2023 Reportable Segments Specialty Property & Casualty Insurance Insurance Distribution Corporate & Other Total Revenues: Commissions $ 51,281 51,281 Net premiums earned $ 51,911 $ 51,911 Program fees 8,437 8,437 Investment income 3,795 64 $ 9,298 13,159 Other ( 42 ) 200 ( 218 ) ( 60 ) Total revenues from continuing operations 64,101 51,546 9,080 124,728 Less: Loss and loss adjustment expenses 36,712 36,712 Policy acquisition costs 10,557 10,557 Commissions 29,465 29,465 Intangible amortization and depreciation 4,194 1,036 5,230 Interest expense — — — Compensation expense 10,853 7,951 29,664 48,468 Non Compensation expense 5,596 2,647 10,274 18,517 Total expenses from Continuing Operations (1) 63,718 44,257 40,974 148,949 Segment pretax income (loss) 383 7,289 ( 31,894 ) ( 24,221 ) Segment income tax expense (benefit) 48 156 ( 1,193 ) ( 989 ) Segment net income (loss) 335 7,133 ( 30,701 ) ( 23,232 ) Segment net (income) loss attributable to NCI ( 1 ) ( 1,318 ) ( 1,319 ) Net income (loss) attributable to shareholders $ 334 $ 5,815 $ ( 30,701 ) $ ( 24,551 ) Reconciliation to consolidated net income (loss) attributable to shareholders Discontinued operations 28,183 Net income (loss) attributable to shareholders $ 3,632 Reconciliation of segment assets to consolidated total assets Total assets 523,179 154,846 233,839 $ 911,864 Discontinued operations 7,516,456 Total consolidated assets $ 8,428,320 Segment net income (loss) $ 335 $ 7,133 $ ( 30,701 ) $ ( 23,232 ) Adjustments: Interest expense — — — — Income taxes 48 156 ( 1,193 ) ( 989 ) Depreciation — 42 1,036 1,078 Intangible amortization — 4,152 — 4,152 EBITDA 383 11,483 ( 30,858 ) ( 18,991 ) Add: Impact of noncontrolling interests ( 2,102 ) ( 2,102 ) EBITDA attributable to shareholders $ 383 $ 9,381 $ ( 30,858 ) $ ( 21,093 ) (1) Inter-segment revenues and inter-segment pre-tax income (loss) amounts are insignificant and are not presented separately. Geographic Information Revenue is primarily recognized based on the country in which the services are performed. The following table shows the geographic breakdown of revenue: Year Ended December 31, 2025 2024 2023 United States $ 172,321 $ 212,605 $ 124,728 United Kingdom 78,901 23,210 — Total revenues $ 251,222 $ 235,815 $ 124,728 4. BUSINESS COMBINATION On October 31, 2025, Octave Specialty Group, (the “Company”) completed its previously announced acquisition of ArmadaCorp Capital, LLC (“ArmadaCorp) pursuant to the Membership Interest Purchase Agreement dated October 31, 2025, for total consideration of approximately $ 250,000 in cash, financed in part with borrowings of $ 120,000 made concurrent with the acquisition (the “Transaction”). The acquisition was accounted for as a business combination using the acquisition method of accounting. The Company has finalized its fair value estimates of the acquired asset and assumed liabilities as of December 31, 2025 and no subsequent adjustments will be made within the permitted measurement period as defined by ASC 805. The following table summarizes the consideration transferred for this acquisition and the estimated fair values of the identified assets acquired and liabilities assumed at the acquisition date: Fair value of consideration transferred: Cash $ 250,000 Less: incentive payments ( 6,491 ) Net cash consideration $ 243,509 Recognized amounts of assets acquired and liabilities assumed: Cash and equivalents $ 27,549 Accounts receivable 6,246 Other assets 4,092 Intangible assets 146,000 Goodwill 94,044 Premium payable ( 16,377 ) Other liabilities ( 18,045 ) Total $ 243,509 Incentive payments represent amounts netted against the purchase prince to fund short-term and long-term incentive compensation and retention payments to the management of ArmadaCare. Goodwill was recorded to reflect the excess purchase consideration over net assets acquired and primarily consists of the future economic benefits that we expect to receive as a result of the acquisition, driven by the value of potential future distribution and carrier relationships and synergies with other Octave business operations. All of the $ 94,044 of goodwill was assigned to the ID segment. The goodwill is deductible for tax purposes over 15 years. Octave Specialty Group, Inc. 64 2025 Form 10-K OCTAVE SPECIALTY GROUP, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Dollar Amounts in Thousands, Except Share Amounts) The fair values assigned to tangible and identifiable intangible assets acquired and liabilities assumed were based on management’s estimates and assumptions at the time of the acquisitions. The following table sets forth the estimated fair values of identifiable intangible assets acquired and their estimated useful lives as of the date of acquisition: Fair Value Useful Life in Years Armada Customer relationships $ 138,000 15.0 Trade names $ 8,000 15.0 Total $ 146,000 The customer relationships intangible represents existing relationships ArmadaCorp maintains with a variety of existing distributors and customers across its product. It excludes the value of potential future distribution relationships that may be developed, which is included in goodwill. The trade name intangible represents the rights to the Armada trade name which is well known in the marketplace in which ArmadaCorp operates. The overall weighted average useful life of the identified amortizable intangible assets acquired is 7.9 years for ArmadaCorp. The acquired business contributed revenues of $ 4,998 and net income of $ 378 to Octave for the period from November 1, 2025, to December 31, 2025. The following unaudited pro forma summary presents consolidated information of Octave as if the business combination had occurred on January 1, 2024. Year Ended December 31, Pro forma (unaudited) 2025 2024 Revenues $ 292,022 $ 274,816 Net (loss) from continuing operations $ ( 50,687 ) $ ( 75,809 ) Octave did not have any material, nonrecurring pro forma adjustments directly attributable to the business combination included in the reported pro forma revenue and net income. These pro forma amounts have been calculated after applying Octave's accounting policies and adjusting the results of the acquired company to reflect amortization that would have been charged assuming the fair value adjustments to intangible assets had been applied from January 1, 2024 with the consequential tax effects. In 2025 and 2024, Octave incurred $ 7,796 and $ 27,388 of acquisition-related costs. These expenses are included in general and administrative expense on Octave's consolidated statement of comprehensive income (loss) for the years ended December 31, 2025 and 2024. In the table above, these expenses are reflected in the pro forma net income for the years ended December 31, 2025 and 2024. 5. DISCONTINUED OPERATIONS Sale of Ambac Assurance Corporation ("AAC") On September 29, 2025, pursuant to the stock purchase agreement dated as of June 4, 2024, as amended by the First Amendment thereto dated as of July 3, 2025, (the "Purchase Agreement") and the Letter Agreements dated July 3, 2025, and September 22, 2025 with American Acorn Corporation (the “Buyer”), a Delaware corporation owned by funds managed by Oaktree Capital Management, L.P., OSG sold all of the issued and outstanding shares of common stock of AAC, a wholly-owned subsidiary of OSG, to the Buyer for $ 420,000 in cash (the "Sale"). The Buyer acquired complete ownership of the common stock of AAC and all of its wholly owned subsidiaries, including Ambac Assurance UK Limited. In connection with and pursuant to the Purchase Agreement, OSG issued to Buyer a warrant exercisable for 5,092,707 shares of common stock, par value $ 0.01 , of OSG. The warrant has an exercise price per share of $ 18.50 and expires March 29, 2032. Under the terms of the Letter Agreement dated July 3, 2025 between the parties to the Purchase Agreement, the Buyer may convert the warrant at a value equal to its Black-Sholes value, over specified time periods, with the conversion value delivered in shares of OSG common stock or cash at OSG's election. In addition, the Buyer made an incremental payment to OSG totaling $ 4,300 to resolve other agreed upon matters. OSG recorded an expected loss on sale in the Statement of Comprehensive Income (Loss) for the year ended December 31, 2024 of $( 570,145 ), equal to the difference between the sale proceeds (net of the value of the warrants to be issued) and the carrying value of AAC's net assets held-for-sale, less expected closing costs. OSG recorded adjustments to the loss on sale of AAC equal to $( 117,468 ) for the year ended December 31, 2025, reflecting remeasurement of net assets held-for-sale, changes in fair value of the warrant issued to Buyer, other agreed upon payments, and re-estimation of closing costs during the periods leading up to the final Sale closing. The loss on sale for the year ended December 31, 2025, included the reclassification of net unrealized gains (losses) on available-for-sale investment securities, cumulative foreign currency translation adjustments and cumulative credit risk changes of fair value option liabilities attributable to AAC and subsidiaries, totaling $( 85,096 ), from Accumulated Other Comprehensive Income (Loss) ("AOCI") to Net income (loss) from discontinued operations at Sale closing. The components of the loss on sale, reflected in the valuation allowance on net assets of discontinued operations as of Octave Specialty Group, Inc. 65 2025 Form 10-K OCTAVE SPECIALTY GROUP, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Dollar Amounts in Thousands, Except Share Amounts) December 31, 2024 and at Sale closing on September 29, 2025, are summarized below: Sale Closing on September 29, 2025 December 31, 2024 Fair value of net consideration to be received $ 407,300 $ 399,727 Less: estimated closing costs 7,098 7,235 400,202 392,492 Carrying amount of net assets held-for-sale 1,002,719 962,637 Reclassification of AOCI $ ( 85,096 ) Loss on disposal $ ( 687,613 ) $ ( 570,145 ) The following table summarizes the major classes of assets and liabilities of discontinued operations on the Consolidated Balance Sheet at December 31, 2024 after elimination of intercompany balances: December 31, 2024 ASSETS: Total investments $ 2,226,505 Cash and equivalents 8,322 Premiums receivable 217,096 Reinsurance recoverable on paid and unpaid losses 25,274 Deferred ceded premiums 79,074 Subrogation recoverable 113,962 Intangible assets 213,457 Other assets, net 49,396 VIE assets (including restricted cash of $ 57,754 ) 3,904,259 Valuation allowance on assets held-for-sale ( 570,145 ) Total assets held-for-sale $ 6,267,200 LIABILITIES: Unearned premiums $ 228,177 Loss and loss adjustment reserves 577,167 Ceded premiums payable 56,404 Long-term debt and accrued interest 1,046,658 Other liabilities, net 105,772 VIE liabilities 3,873,507 Total liabilities held-for-sale $ 5,887,685 The following table summarizes the major line items constituting net income (loss) from discontinued operations reconciled to net income (loss) from discontinued operations presented in the Consolidated Statement of Comprehensive Income (Loss): Year ended December 31, 2025 2024 2023 REVENUES: Net premiums earned $ 15,145 $ 23,879 $ 26,040 Net investment income 100,203 133,933 126,957 Net investment gains (losses), including impairments ( 12,616 ) 4,416 ( 22,507 ) Net gains (losses) on derivative contracts 302 3,958 ( 699 ) Other revenues 18,016 31,096 14,533 Total revenues 121,050 197,282 144,324 EXPENSES: Loss and loss adjustment expenses (benefit) 10,444 ( 45,767 ) ( 69,320 ) Intangible amortization 17,097 30,508 24,736 General & administrative and other expenses 81,034 57,491 88,306 Interest expense 47,617 63,587 64,025 Total expenses 156,192 105,819 107,747 Pretax income (loss) ( 35,142 ) 91,463 36,577 Provision for income taxes 10,678 18,485 8,394 Loss on disposal ( 117,468 ) ( 570,145 ) — Net income (loss) from discontinued operations $ ( 163,288 ) $ ( 497,167 ) $ 28,183 Significant Accounting Policies The held-for-sale assets and liabilities and results of operations were subject to certain additional significant accounting policies to those described in Note 2. Basis of Presentation and Significant Accounting Policies . Fair value of assets held-for-sale: Total assets held-for-sale are carried at fair value as of December 31, 2024. The Fair Value Measurement Topic of the ASC specifies a fair value hierarchy based on whether the inputs to valuation techniques used to measure fair value are observable or unobservable. Measurement of fair value of assets held-for-sale was based on information from the purchase agreement and other unobservable information and was considered by management to be a Level 3 valuation under the Fair Value Measurement Topic of the ASC. Investments: Equity interests in pooled investment funds which are accounted for in accordance with the Investments - Equity Securities Topic of the ASC include equity interests in the form of common stock or in-substance common stock which are classified as trading securities and reported at fair value with changes in fair value reported through income. Investments in fixed maturity securities classified at trading are reported within Assets held-for-sale at fair value with unrealized gains and losses reported through income. Consolidation of Variable Interest Entities: The consolidated financial statements include the accounts of VIEs for which AAC or Ambac UK was deemed the primary beneficiary in accordance with the Consolidation Topic of the ASC. A VIE is an entity: (a) that lacks enough equity investment at risk to permit the entity to finance its activities Octave Specialty Group, Inc. 66 2025 Form 10-K OCTAVE SPECIALTY GROUP, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Dollar Amounts in Thousands, Except Share Amounts) without additional subordinated financial support from other parties; or (b) where the group of equity holders does not have: (1) the power, through voting rights or similar rights, to direct the activities of an entity that most significantly impact the entity’s economic performance; (2) the obligation to absorb the entity’s expected losses; or (3) the right to receive the entity’s expected residual returns. The determination of whether a variable interest holder was the primary beneficiary involved performing a qualitative analysis of the VIE that includes, among other factors, its capital structure, contractual terms including the rights of each variable interest holder, the activities of the VIE, whether the variable interest holder had the power to direct the activities of a VIE that most significantly impact the VIE’s economic performance, whether the variable interest holder had the obligation to absorb losses of the VIE that could potentially be significant to the VIE or the right to receive benefits from the VIE that could potentially be significant to the VIE, related party relationships and the design of the VIE. An entity that was deemed the primary beneficiary of a VIE was required to consolidate the VIE. We determined that AAC or Ambac UK generally had the obligation to absorb a Legacy Financial Guarantee ("LFG") VIE's expected losses given that they had issued financial guarantees supporting certain liabilities (and in some cases certain assets). AAC consolidated certain LFG VIEs in cases where we also have the power to direct the activities that most significantly impact the VIE’s economic performance. A VIE was generally deconsolidated in the period that AAC or Ambac UK no longer had such control rights. The impact of consolidating such LFG VIEs on Octave’s balance sheet was the elimination of transactions between the consolidated LFG VIEs and AAC or Ambac UK and the inclusion of the LFG VIE’s third party assets and liabilities. For a financial guarantee insurance policy issued to a consolidated VIE, Octave did not reflect the financial guarantee insurance policy in accordance with the related insurance accounting rules under the Financial Services — Insurance Topic of the ASC. Consequently, upon consolidation, Octave eliminated the insurance assets and liabilities associated with the policy from the Consolidated Balance Sheets, including premium receivables, unearned premiums, loss and loss expense reserves, and insurance intangible assets. For investment securities owned by AAC or Ambac UK that were debt instruments issued by the VIE, the associated debt and investment balances were eliminated upon consolidation. Generally, AAC had elected the fair value option for consolidated LFG VIE financial assets and financial liabilities, except in cases where AAC or Ambac UK was involved in the design of the VIE and was granted control rights at its inception or when the financial liabilities are primarily supported by non-financial assets. The election to use the fair value option was made on an instrument by instrument basis. In cases where the fair value option had not been elected, the LFG VIE's invested assets were fixed maturity securities and were classified as either available-for-sale or trading as defined by the Investments - Debt Securities Topic of the ASC. When the fair value option was elected for LFG VIE long-term debt, changes in the fair value of the long-term debt was reported in income on the Consolidated Statements of Total Comprehensive Income (Loss), except for the portion of the total change in fair value of financial liabilities caused by changes in the instrument-specific credit risk which was presented separately in Other comprehensive income (loss). In cases where the fair value option was not elected, the LFG VIEs' long-term debt was carried at par less unamortized discount, with interest expense reported in income on the Consolidated Statements of Total Comprehensive Income (Loss). Consolidated VIE assets and liabilities were presented in VIE assets and VIE liabilities in the above table. Results of consolidated VIEs were included in other revenues above. Financial Guarantee Insurance Intangible: Upon Octave's emergence from bankruptcy in 2013, an insurance intangible asset was recorded which represented the difference between the fair value and aggregate carrying value of the financial guarantee insurance and reinsurance assets and liabilities. The carrying values of financial guarantee insurance and reinsurance contracts continue to be reported and measured in accordance with their existing accounting policies. Pursuant to the Financial Services-Insurance Topic of the ASC, the insurance intangible was to be measured on a basis consistent with the related financial guarantee insurance and reinsurance contracts. The initial insurance intangible asset was assigned to groups of insurance and reinsurance contracts with similar characteristics and has been amortized using a level-yield method based on par exposure of the related groups. Legacy Financial Guarantee Loss and Loss Adjustment Expenses: The loss and loss adjustment expense reserve (“loss reserve”) policy related only to Octave’s non-derivative financial guarantee insurance business for insurance policies issued to beneficiaries, including VIEs, for which we do not consolidate the VIE. Losses and loss expenses were based upon estimates of the ultimate aggregate losses inherent in the insured portfolio as of the reporting date. A loss reserve was recorded on the balance sheet on a policy-by-policy basis based upon the present value ("PV") of expected net claim cash outflows or expected net recovery cash inflows, discounted at risk-free rates. The estimate for future net cash flows consider the likelihood of all possible outcomes that may occur from missed principal and/or interest payments on the insured obligation. This estimate also considered future recoveries related to remediation strategies and other contractual or subrogation-related cash flows. ▪ Net claim cash outflow policies represented contracts where the PV of expected cash outflows are greater than the PV of expected recovery cash inflows. For such policies, a “loss and loss adjustment expense reserves” liability was recorded for the excess of the PV of expected net claim cash outflows over the unearned premium revenue. ▪ Net recovery cash inflow policies represented contracts where the PV of expected recovery cash inflows were Octave Specialty Group, Inc. 67 2025 Form 10-K OCTAVE SPECIALTY GROUP, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Dollar Amounts in Thousands, Except Share Amounts) greater than the PV of expected claim cash outflows. For such policies, a “Subrogation recoverable” asset was recorded. The evaluation process for determining expected losses was subject to certain judgments based on our assumptions regarding the probability of default by the issuer of the insured security, probability of settlement outcomes (which may include commutation settlements, refinancing and/or other settlement outcomes) and expected severity of credits for each insurance contract. Octave’s loss reserves are based on management’s ongoing review of the financial guarantee credit portfolio. Active surveillance of the insured portfolio enables Octave’s Risk Management Group ("RMG") to track credit migration of insured obligations from period to period and update internal classifications and credit ratings for each transaction. Non-adversely classified credits are assigned a Class I rating while adversely classified credits are assigned a rating ranging from Class IA (" Potential Problem with Risks to be Dimensioned") through Class V ( “Fully Reserved”) . The criteria for an exposure to be assigned an adversely classified credit rating includes the deterioration of an issuer’s financial condition, underperformance of the underlying collateral (for collateral dependent transactions such as mortgage-backed or student loan securitizations), poor performance by the servicer of the underlying collateral and other adverse economic events or trends. The servicer of the underlying collateral of an insured securitization transaction was a consideration in assessing credit quality because the servicer’s performance can directly impact the performance of the related issue. All credits were assigned risk classifications by RMG using established guidelines. The population of credits evaluated in Octave’s loss reserve process were: (i) all adversely classified credits and (ii) non-adversely classified credits which had an internal Octave rating downgrade since the transaction’s inception. One of two approaches is then utilized to estimate losses to ultimately determine if a loss reserve should be established. ▪ The first approach was a statistical expected loss approach, which considers the likelihood of all possible outcomes. The “base case” statistical expected loss was the product of: (i) the par outstanding on the credit; (ii) internally developed default information (taking into consideration internal ratings and average life of an obligation); (iii) internally developed loss severities; and (iv) a discount factor. The loss severities and default information were based on rating agency information, were specific to each bond type and were established and approved by senior RMG officers. For certain credit exposures, Octave’s additional monitoring, loss remediation efforts and probabilities of potential settlement outcomes may provide information relevant to adjust this estimate of “base case” statistical expected losses. RMG may accept the “base case” statistical expected loss as the best estimate of expected loss or assign multiple probability weighted scenarios to determine an adjusted statistical expected loss that better reflects management’s view of a given transaction’s expected losses, as well as the potential for additional remediation activities (e.g., commutations). ▪ The second approach entails the use of cash-flow based models to estimate expected losses (future claims, net of potential recoveries, expected to be paid to the holder of the insured financial obligation). Octave’s RMG group will consider the likelihood of all possible outcomes and develop appropriate cash flow scenarios. This approach can include the utilization of internal or third party models and tools to project future losses and resultant claim payment estimates. We utilize cash flow models for RMBS, student loans and other exposures. RMBS and student loan models use historical performance of the collateral pools in order to then derive future performance characteristics, such as default and voluntary prepayment rates, which in turn determine projected future claim payments. In other cases, such as many public finance exposures we do not specifically forecast resources available to pay debt service in the cash flow model itself. Rather, we consider the issuers’ overall ability and willingness to pay, including the fiscal, economic, legal and political framework to develop projected future claim payment estimates. In this approach, a probability-weighted expected loss estimate was developed based on assigning probabilities to multiple claim payment scenarios and applying an appropriate discount factor. Additionally, we consider the issuer’s ability to refinance an insured issue, Octave’s ability to execute a potential settlement (i.e., commutation) of the insurance policy, including the impact on future installment premiums, and/or other restructuring possibilities in our scenarios. The commutation scenarios and the related probabilities of occurrence vary by transaction, depending on our view of the likelihood of negotiating such a transaction with issuers and/or investors. The discount factor applied to the statistical expected loss approach was based on a risk-free discount rate corresponding to the remaining expected weighted-average life of the exposure and the exposure currency. For the cash flow scenario approach, discount factors were applied based on a risk-free discount rate term structure and correspond to the date of each respective cash flow payment or recovery and the exposure currency. Discount factors were updated for the current risk-free rate each reporting period. Octave establishes loss expense reserves based on our estimate of expected net cash outflows for loss expenses, such as legal and consulting costs. Long-term Debt Long-term debt issued was carried at par value less unamortized discount. Accrued interest and discount accretion on long-term debt was reported through income on the Consolidated Statements of Total Comprehensive Income (Loss). To the extent Octave repurchases or redeems its long-term debt, such repurchases or redemptions may be settled for an amount different than the carrying value of the obligation. Any difference between the payment and carrying value of the obligation was reported in income on the Consolidated Statements of Total Comprehensive Income (Loss). For surplus note repurchases, the pro-rata purchase price related to principal Octave Specialty Group, Inc. 68 2025 Form 10-K OCTAVE SPECIALTY GROUP, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Dollar Amounts in Thousands, Except Share Amounts) and accrued interest was reported as a financing and operating activity, respectively, on the Statement of Cash Flows. On September 29, 2025, the Company completed the sale of AAC, and accordingly, the Company no longer had surplus notes outstanding as they are obligations of AAC. Ambac UK debt, issued in connection with the commutation of an exposure on June 18, 2019, had a par value of $ 40,600 and a carrying value of $ 18,079 at December 31, 2024. The Ambac UK debt had a legal maturity of May 2, 2036. Interest on the Ambac UK debt was at an annual rate of 0.0 %. The Ambac UK debt was recorded at its fair value at the date of issuance with the discount amortizing at an effective interest rate of 7.4 %. NOL & Investment Interest Carryforward As of December 31, 2024, AAC had (i) $ 1,952,621 of NOLs, which if not utilized will begin expiring in 2030, and will fully expire in 2045, and (ii) $ 110,494 of interest expense tax deduction carryover, which had an indefinite carryforward period but was limited in any particular year based on certain provisions. AAC had maintained a full valuation allowance since 2010. 6. INVESTMENTS Octave’s invested assets are primarily comprised of (i) fixed maturity securities classified as either available-for-sale, (ii) investment in limited partnership which is reported within Other investments on the Consolidated Balance Sheets and (iii) preferred equity investments which are reported within Other investments on the Consolidated Balance Sheets. Interests in pooled investment funds are limited partner interests and are reported using the equity method. Fixed Maturity Securities The amortized cost and estimated fair value of available-for-sale investments, at December 31, 2025 and 2024 were as follows: December 31, 2025 December 31, 2024 Amortized Cost Allowance for Credit Losses Gross Unrealized Estimated Fair Value Amortized Cost Allowance for Credit Losses Gross Unrealized Estimated Fair Value Gains Losses Gains Losses Fixed maturity securities: Municipal obligations $ 11,697 $ — $ 121 $ 228 $ 11,590 $ 14,646 — 7 570 14,083 Corporate obligations 67,881 — 634 1,942 66,573 92,990 — 107 3,905 89,192 U.S. government obligations 35,190 — 365 131 35,424 41,706 — 98 809 40,995 Residential mortgage-backed securities 1,604 — — 7 1,597 2,475 — — 29 2,446 Commercial mortgage-backed securities 3,307 — 42 8 3,341 2,127 — 8 34 2,101 Collateralized debt obligations 1,963 — 12 — 1,975 3,131 — 13 2 3,142 Other asset-backed securities 1,772 — 23 — 1,795 5,049 — 14 2 5,061 123,414 — 1,197 2,316 122,295 162,124 — 247 5,351 157,020 Short-term 146,434 — 8 — 146,442 127,588 — 13 — 127,601 Total available-for-sale investments $ 269,848 $ — $ 1,205 $ 2,316 $ 268,737 $ 289,712 $ — $ 260 $ 5,351 $ 284,621 The amortized cost and estimated fair value of available-for-sale investments, at December 31, 2025, by contractual maturity, were as follows: Amortized Cost Estimated Fair Value Due in one year or less $ 180,013 $ 179,824 Due after one year through five years 32,409 31,588 Due after five years through ten years 47,801 47,619 Due after ten years 979 998 261,202 260,029 Residential mortgage-backed securities 1,604 1,597 Commercial mortgage-backed securities 3,307 3,341 Collateralized debt obligations 1,963 1,975 Other asset-backed securities 1,772 1,795 Total $ 269,848 $ 268,737 Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay certain obligations with or without call or prepayment penalties. Unrealized Losses on Fixed Maturity Securities The following table shows gross unrealized losses and fair values of Octave’s available-for-sale investments, which at December 31, 2025, did not have an allowance for credit losses under the CECL standard. This information is aggregated by investment category and length of time that the individual securities have been in a continuous unrealized loss position, at December 31, 2025 and 2024: Octave Specialty Group, Inc. 69 2025 Form 10-K OCTAVE SPECIALTY GROUP, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Dollar Amounts in Thousands, Except Share Amounts) December 31, 2025 December 31, 2024 Less Than 12 Months 12 Months or More Total Less Than 12 Months 12 Months or More Total Fair Value Gross Unrealized Loss Fair Value Gross Unrealized Loss Fair Value Gross Unrealized Loss Fair Value Gross Unrealized Loss Fair Value Gross Unrealized Loss Fair Value Gross Unrealized Loss Fixed maturity securities: Municipal obligations $ 535 $ 16 $ 5,820 $ 212 $ 6,355 $ 228 6,042 112 6,582 458 $ 12,624 $ 570 Corporate obligations 1,807 10 30,751 1,932 32,558 1,942 23,784 269 46,612 3,636 70,396 3,905 U.S. government obligations 2,206 14 9,491 117 11,697 131 15,919 344 14,818 465 30,737 809 Residential mortgage-backed securities — — 1,596 7 1,596 7 2,446 29 — — 2,446 29 Commercial mortgage-backed securities 763 8 — — 763 8 738 34 — — 738 34 Collateralized debt obligations — — — — — — 655 2 — — 655 2 Other asset-backed securities — — — — — — 1,428 2 — — 1,428 2 Total temporarily impaired securities 5,311 48 47,658 2,268 52,969 2,316 $ 51,012 $ 792 $ 68,012 $ 4,559 $ 119,024 $ 5,351 Management has determined that the securities in the above table do not have credit impairment as of December 31, 2025 and 2024 based upon (i) no actual or expected principal and interest payment defaults on these securities and (ii) analysis of the creditworthiness of the issuer. Octave’s assessment about whether a security is credit impaired reflects management’s current judgment regarding facts and circumstances specific to the security and other factors. If that judgment changes, Octave may record a charge for credit impairment in future periods. The declines in fair value and resultant unrealized losses across asset classes as of December 31, 2025 included in the above table resulted primarily from the impact of increasing interest rates since the securities were purchased. Management has determined that the securities with unrealized losses are not credit impaired. Further discussion of management's assessment with respect to security categories with larger unrealized loss balances is below. Corporate obligations The gross unrealized losses on corporate obligations as of December 31, 2025, resulted primarily from an increase in interest rates since the securities were purchased. Management believes that the full and timely receipt of all principal and interest payment on corporate obligations with unrealized losses as of December 31, 2025, is probable. Investment Income (Loss) Net investment income (loss) was comprised of the following for the affected periods: Year Ended December 31, 2025 2024 2023 Fixed maturity securities $ 5,175 $ 4,895 $ 3,696 Short-term investments 6,014 10,033 9,287 Investment expense ( 273 ) ( 365 ) ( 296 ) Securities available-for-sale and short-term 10,916 14,563 12,687 Other investments ( 269 ) ( 115 ) 472 Total net investment income (loss) $ 10,647 $ 14,448 $ 13,159 Net i nvestment income (loss) from Other investments primarily represents changes in fair value on equity securities including income from investment limited partnership and other equity interests accounted for under the equity method. Net Investments Gains (Losses), including Impairments The following table details amounts included in net investment gains (losses) and impairments included in earnings for the affected periods and are included in Revenues, other on the Statements of Total Comprehensive Income (Loss): Year Ended December 31, 2025 2024 2023 Gross realized gains on securities $ 526 $ 6,068 $ 57 Gross realized losses on securities ( 3 ) ( 47 ) ( 38 ) Credit impairments ( 3,100 ) ( 6,517 ) — Net investment gains (losses), including impairments $ ( 2,577 ) $ ( 496 ) $ 19 Octave had an allowance for credit losses $ 0 and $ 0 at December 31, 2025 and 2024, respectively. Octave did not purchase any financial assets with credit deterioration for the years ended December 31, 2025 and 2024. Deposits with Regulators and Other Restrictions Securities carried at $ 34,016 and $ 22,861 at December 31, 2025 and 2024, respectively, were deposited by Octave's insurance subsidiaries with governmental authorities or designated custodian banks as required by laws affecting insurance companies. Investments in fixed maturity securities of OSG carried at $ 153 as of December 31, 2025, were deposited as security in connection with a letter of credit issued for a corporate office lease. Fiduciary funds held by Octave's insurance distribution subsidiaries, carried at $ 2,656 and $ 2,845 at December 31, 2025 and 2024, respectively, are included in invested assets. Other Investments Octave's investment portfolio includes a limited partnership interest in a private equity fund which seeks to generate long-term capital appreciation through investments in private equity, equity-related and other instruments. The fair value of Octave's investment in the fund was $ 7,454 and $ 7,499 as of December 31, 2025 and 2024, determined using net asset value ("NAV") as a practical expedient. Redemptions may be made quarterly with 90 days notice subject to withdrawal limitations Octave Specialty Group, Inc. 70 2025 Form 10-K OCTAVE SPECIALTY GROUP, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Dollar Amounts in Thousands, Except Share Amounts) and/or redemption fees which vary with the timing and notification of withdrawal provided by the investor. Octave's unfunded commitments total $ 1,501 on this private equity fund at December 31, 2025. Other investments also include preferred equity investments with a carrying value of $ 17,517 and $ 20,618 as of December 31, 2025 and 2024, respectively, that do not have readily determinable fair values and are carried at cost, less any impairments as permitted under the Investments — Equity Securities Topic of the ASC. There were $( 3,100 ), $( 6,517 ), and $ 0 impairments recorded on these investments in the years ended December 31, 2025, 2024 and 2023, respectively. 7. FAIR VALUE MEASUREMENTS The Fair Value Measurement Topic of the ASC establishes a framework for measuring fair value and disclosures about fair value measurements. Fair Value Hierarchy The Fair Value Measurement Topic of the ASC specifies a fair value hierarchy based on whether the inputs to valuation techniques used to measure fair value are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect Company-based assumptions. The fair value hierarchy has three broad levels as follows: l Level 1 Quoted prices for identical instruments in active markets. Assets and liabilities classified as Level 1 include US Treasury and other foreign government obligations traded in highly liquid and transparent markets, and money market funds. l Level 2 Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets. Assets and liabilities classified as Level 2 generally include investments in fixed maturity securities and certain derivatives valued using only market observable data. l Level 3 Model derived valuations in which one or more significant inputs or significant value drivers are unobservable. This hierarchy requires the use of observable market data when available. Financial instruments classified as Level 3 include certain investments in fixed maturity securities, loans and derivatives. The Fair Value Measurement Topic of the ASC permits, as a practical expedient, the estimation of fair value of certain investments in funds using the net asset value per share of the investment or its equivalent (“NAV”). Investments in funds valued using NAV are not categorized as Level 1, 2 or 3 under the fair value hierarchy. The Investments — Equity Securities Topic of the ASC permits the measurement of certain equity securities without a readily determinable fair value at cost, less impairment, and adjusted to fair value when observable price changes in identical or similar investments from the same issuer occur (the "measurement alternative"). The fair values of investments measured under this measurement alternative are not included in the below disclosures of fair value of financial instruments. Octave Specialty Group, Inc. 71 2025 Form 10-K OCTAVE SPECIALTY GROUP, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Dollar Amounts in Thousands, Except Share Amounts) The following table sets forth the carrying amount and fair value of Octave’s financial assets and liabilities as of December 31, 2025 and 2024, including the level within the fair value hierarchy at which fair value measurements are categorized. As required by the Fair Value Measurement Topic of the ASC, financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. December 31, 2025: December 31, 2024: Carrying Amount Total Fair Value Fair Value Measurements Categorized as: Carrying Amount Total Fair Value Fair Value Measurements Categorized as: Level 1 Level 2 Level 3 Level 1 Level 2 Level 3 Financial assets: Fixed maturity securities: Municipal obligations $ 11,590 $ 11,590 $ — $ 11,590 $ — $ 14,083 $ 14,083 $ — $ 14,083 $ — Corporate obligations 66,573 66,573 — 66,573 — 89,192 89,192 — 89,192 — U.S. government obligations 35,424 35,424 35,424 — — 40,995 40,995 40,995 — — Residential mortgage-backed securities 1,597 1,597 — 1,597 — 2,446 2,446 — 2,446 — Commercial mortgage-backed securities 3,341 3,341 — 3,341 — 2,101 2,101 — 2,101 — Collateralized debt obligations 1,975 1,975 — 1,975 — 3,142 3,142 — 3,142 — Other asset-backed securities 1,795 1,795 — 1,795 — 5,061 5,061 — 5,061 — Fixed maturity securities, pledged as collateral: Short term investments 146,442 146,442 146,442 — — 127,601 127,601 127,601 — — Other investments (1) 24,971 7,454 — — — 28,294 7,499 — — — Cash, cash equivalents and restricted cash 68,440 68,440 68,440 — — 47,275 47,275 47,275 — — Other assets-Loans — — — — — 3,434 3,434 — — 3,434 Total financial assets $ 362,148 $ 344,631 $ 250,306 $ 86,871 $ — $ 363,624 $ 342,829 $ 215,871 $ 116,025 $ 3,434 Financial liabilities: Short-term debt, including accrued interest $ — $ — $ — $ — $ — $ 152,560 $ 152,560 $ — $ — $ 152,560 Long term debt, including accrued interest 118,901 121,343 — — 121,343 — — — — — Derivative liabilities: FX forward contracts 8 8 — 8 — 317 317 — 317 — Total financial liabilities $ 118,909 $ 121,351 $ — $ 8 $ 121,343 $ 152,877 $ 152,877 $ — $ 317 $ 152,560 (1) Excluded from the fair value measurement categories in the table above are investment funds of $ 7,454 and $ 7,499 as of December 31, 2025 and 2024, respectively, which are measured using NAV as a practical expedient. Also excluded from the fair value measurements in the table above are equity securities with a carrying value of $ 17,517 and $ 20,618 as of December 31, 2025 and 2024, respectively, that do not have readily determinable fair values and have carrying amounts determined using the measurement alternative. Determination of Fair Value When available, Octave uses quoted active market prices specific to the financial instrument to determine fair value and classifies such items within Level 1. The determination of fair value for financial instruments categorized in Level 2 or 3 involves judgment due to the complexity of factors contributing to the valuation. Third-party sources from which we obtain independent market quotes also use assumptions, judgments and estimates in determining financial instrument values and different third parties may use different methodologies or provide different values for financial instruments. In addition, the use of internal valuation models may require assumptions about hypothetical or inactive markets. As a result of these factors, the actual trade value of a financial instrument in the market, or exit value of a financial instrument position by Octave, may be significantly different from its recorded fair value. Octave’s financial instruments carried at fair value are mainly comprised of investments in fixed maturity securities, equity interests in pooled investment funds, and derivative instruments. Valuation of financial instruments is performed by Octave’s finance group using methods approved by senior financial management with consultation from risk management and third-party portfolio managers as appropriate. Preliminary valuation results are discussed internally and with third-party portfolio managers as necessary quarterly to assess consistency with market transactions and trends as applicable. Market transactions such as trades or negotiated settlements of similar positions, if any, are reviewed to validate fair value model results. However, financial instruments valued using significant unobservable inputs have very little or no observable market activity. Methods and significant inputs and assumptions used to determine fair values across portfolios are reviewed quarterly by senior financial management. Other valuation control procedures specific to particular portfolios are described further below. Fixed Maturity Securities The fair values of fixed maturity investment securities are based primarily on market prices received from independent pricing sources. Because many fixed maturity securities do not trade on a daily basis, pricing sources apply available market information through processes such as matrix pricing to calculate fair value. Such prices generally consider a variety of factors, including recent trades of the same and similar securities. In those cases, the items are classified within Level 2. For those fixed maturity investments where quotes were not available or cannot be reasonably corroborated, fair values are based on internal valuation models. Key inputs to the internal valuation models generally include maturity date, coupon and yield curves for asset-type and credit rating characteristics that closely match those characteristics of the specific investment securities being valued. Items valued using valuation models are classified Octave Specialty Group, Inc. 72 2025 Form 10-K OCTAVE SPECIALTY GROUP, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Dollar Amounts in Thousands, Except Share Amounts) according to the lowest level input or value driver that is significant to the valuation. Thus, an item may be classified in Level 3 even though there may be significant inputs that are readily observable. Longer (shorter) expected maturities or higher (lower) yields used in the valuation model will, in isolation, result in decreases (increases) in fair value. Generally, lower credit ratings or longer expected maturities will be accompanied by higher yields used to value a security. Octave performs various review and validation procedures to quoted and modeled prices for fixed maturity securities, including price variance analyses, missing and static price reviews, overall valuation analysis by portfolio managers and finance managers and reviews associated with our ongoing impairment analysis. Unusual prices identified through these procedures will be evaluated further against alternative third-party quotes (if available), internally modeled prices and/or other relevant data, and the pricing source values will be challenged as necessary. Price challenges generally result in the use of the pricing source’s quote as originally provided or as revised by the source following their internal diligence process. A price challenge may result in a determination by either the pricing source or Octave management that the pricing source cannot provide a reasonable value for a security or cannot adequately support a quote, in which case Octave would resort to using either other quotes or internal models. Results of price challenges are reviewed by portfolio managers and finance managers. Other Investments Other investments includes investments in pooled investment funds carried under the equity method valued using NAV as a practical expedient as permitted under the Fair Value Measurement Topic of the ASC. Refer to Note 6. Investments for additional information about such investments in pooled funds that are reported at fair value using NAV as a practical expedient. Derivative Instruments As of December 31, 2025, Octave has foreign currency forward contracts and holds warrants to purchase preferred stock of a development stage company. The fair value of foreign currency forwards are determined using valuation models with observable market inputs. Fair value of the warrants are determined using a standard warrant valuation model with internally developed input assumptions. Debt Both the long-term and short-term debt as of December 31, 2025 and 2024 consists of SOFR indexed borrowing under credit facilities and are classified as Level 3. Other Financial Assets Included in Other assets are loans carried at amortized cost, the fair values of which are estimated based upon internal valuation models and are classified as Level 3. Additional Fair Value Information for Financial Assets and Liabilities Accounted for at Fair Value The following tables present the changes in the Level 3 fair value category for the periods presented in 2025, 2024 and 2023. Octave classifies financial instruments in Level 3 of the fair value hierarchy when there is reliance on at least one significant unobservable input to the valuation model. In addition to these unobservable inputs, the valuation models for Level 3 financial instruments typically also rely on a number of inputs that are readily observable either directly or indirectly. Thus, the gains and losses presented below include changes in the fair value related to both observable and unobservable inputs. Level-3 Financial Assets and Liabilities Accounted for at Fair Value Year Ended December 31, 2025 December 31, 2024 December 31, 2023 Investments Derivatives Total Investments Derivatives Total Investments Derivatives Total Balance, beginning of period $ — $ — $ — $ 13,920 $ 656 $ 14,576 $ 12,341 $ 935 $ 13,276 Total gains/(losses) realized and unrealized: Included in earnings — — — 6,016 ( 656 ) 5,360 — ( 279 ) ( 279 ) Included in other comprehensive income — — — 125 125 784 — 784 Purchases — — — — — 795 — 795 Issuances — — — — — — — — Sales — — — — — — — — Settlements — — — ( 20,061 ) ( 20,061 ) — — — Balance, end of period $ — $ — $ — $ — $ — $ — $ 13,920 $ 656 $ 14,576 The amount of total gains/(losses) included in earnings attributable to the change in unrealized gains or losses relating to assets and liabilities still held at the reporting date $ — $ — $ — $ — $ ( 656 ) $ ( 656 ) $ — $ ( 279 ) $ ( 279 ) The amount of total gains/(losses) included in other comprehensive income attributable to the change in unrealized gains or losses relating to assets and liabilities still held at the reporting date $ — $ — $ — $ — $ — $ — $ 784 $ — $ 784 Invested assets are transferred into Level 3 when internal valuation models that include significant unobservable inputs are used to estimate fair value. All such securities that have internally modeled fair values have been classified as Level 3. Derivative instruments are transferred into Level 3 when the use of unobservable inputs becomes significant to the overall valuation. There were no transfers of financial instruments into or out of Level 3 in the periods disclosed. Octave Specialty Group, Inc. 73 2025 Form 10-K OCTAVE SPECIALTY GROUP, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Dollar Amounts in Thousands, Except Share Amounts) Gains and losses (realized and unrealized) relating to Level 3 assets and liabilities included in earnings for the affected periods are reported as follows: Net Investment Income Net Gains (Losses) on Derivative Contracts Year Ended December 31, 2025 Total gains (losses) included in earnings for the period $ — $ — Changes in unrealized gains (losses) relating to financial instruments still held at the reporting date — — Year Ended December 31, 2024 Total gains (losses) included in earnings for the period $ 6,016 $ ( 656 ) Changes in unrealized gains (losses) relating to financial instruments still held at the reporting date — ( 656 ) Year Ended December 31, 2023 Total gains (losses) included in earnings for the period $ — $ ( 278 ) Changes in unrealized gains (losses) relating to financial instruments still held at the reporting date — ( 278 ) 8. INSURANCE CONTRACTS Premiums The effect of reinsurance on premiums written and earned was as follows: Year Ended December 31, Direct Assumed Ceded Net Premiums 2025: Written $ 329,089 $ 31,360 $ 286,551 $ 73,898 Earned 325,493 30,225 288,486 67,232 2024: Written $ 334,311 $ 48,459 $ 294,088 $ 88,682 Earned 298,121 57,081 256,197 99,005 2023: Written $ 233,702 $ 39,585 $ 193,462 $ 79,825 Earned 185,470 18,354 151,913 51,911 Premium Receivables, including Credit Impairments Premium receivables at December 31, 2025 and 2024, were $ 75,085 and $ 57,222 , respectively. Management evaluates premium receivables for expected credit losses ("credit impairment") in accordance with the CECL standard, which is further described in Note 2. Basis of Presentation and Significant Accounting Policies . Below is a rollforward of the premium receivable allowance for credit losses as of December 31, 2025 and 2024: Year Ended December 31, 2025 2024 2023 Beginning balance $ 142 $ 69 $ — Current period provision 358 73 69 Write-offs of the allowance — — — Recoveries of previously written-off amounts — — — Ending balance $ 500 $ 142 $ 69 At December 31, 2025 and 2024, $ 6,781 and $ 5,690 of premiums, respectively, were past due. Loss and Loss Adjustment Expense Reserves Below is the loss and loss reserve expense roll-forward, recoverable and reinsurance, for the affected periods. Year Ended December 31, 2025 2024 2023 Beginning gross loss and loss adjustment expense reserves $ 349,062 $ 197,089 $ 89,907 Reinsurance recoverable 270,081 156,301 80,155 Beginning balance of net loss and loss adjustment expense reserves 78,981 40,788 9,752 Losses and loss expenses incurred: Current year 42,242 67,937 36,569 Prior years 4,951 4,689 143 Total (1) 47,193 72,626 36,712 Loss and loss adjustment expenses (recovered) paid: Current year 9,939 16,202 3,798 Prior years 31,967 18,231 1,878 Total 41,906 34,433 5,676 Ending net loss and loss adjustment expense reserves 84,268 78,981 40,788 Reinsurance recoverable (2) 375,722 270,081 156,301 Ending gross loss and loss adjustment expense reserves $ 459,990 $ 349,062 $ 197,089 (1) Total losses and loss expenses (benefit) is net of $( 214,987 ), $( 191,151 ) and $( 113,622 ) for the years ended December 31, 2025, 2024 and 2023, respectively, related to ceded reinsurance. (2) Represents reinsurance recoverable on future loss and loss adjustment expenses. Additionally, the Balance Sheet line "Reinsurance recoverable on paid and unpaid losses" includes reinsurance recoverables of $ 60,470 , $ 36,210 and $ 8,765 as of December 31, 2025, 2024 and 2023, respectively, related to previously paid loss and loss adjustment expenses. Prior accident years losses incurred development for the year ended December 31, 2025, was primarily driven by commercial auto loss experience, primarily related to programs currently in runoff, and excess liability claims activity. Commercial auto prior accident year loss experience primarily relates to 2022 and 2023 accident years, whereas excess liability loss experience primarily relates to claims activity in the 2024 accident year. Prior accident years losses incurred development for the year end December 31, 2024, was primarily driven by commercial auto loss experience and a higher selected loss ratio for programs in runoff. In the fourth quarter of 2024 management decided to set loss reserves for programs that were in runoff at Octave Specialty Group, Inc. 74 2025 Form 10-K OCTAVE SPECIALTY GROUP, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Dollar Amounts in Thousands, Except Share Amounts) the high end of the actuarial loss range, given these program can experience greater loss volatility than active programs. Specialty Property & Casualty Loss Reserves Claims Development The following is a summary of loss and loss adjustment expense reserves, including certain components, for the Company’s major product lines by reporting segment at December 31, 2025 and 2024. December 31, 2025 December 31, 2024 Net Claims and Claim Adjustment Expense Reserves Reinsurance Recoverables on Unpaid Losses Loss and Loss Adjustment Reserves Net Claims and Claim Adjustment Expense Reserves Reinsurance Recoverables on Unpaid Losses Loss and Loss Adjustment Reserves Commercial auto $ 23,062 $ 136,132 $ 159,194 $ 28,720 $ 129,752 $ 158,472 Excess liability 16,897 99,713 116,610 6,571 43,677 50,248 General liability 12,572 51,024 63,596 8,286 26,925 35,211 Workers compensation 17,798 — 17,798 14,465 — 14,465 Non-standard personal auto 3,635 191 3,826 12,185 504 12,689 Professional liability 2,851 37,996 40,846 1,807 15,891 17,698 Multi-peril / business owners (BOP) 1,519 4,666 6,185 43 230 273 Surety 94 12,140 12,233 6 11,211 11,217 Unallocated loss adjustment expense reserves 5,552 9,317 14,869 6,578 5,660 12,238 Other (1) 289 24,544 24,834 320 36,231 36,551 Total $ 84,268 $ 375,722 $ 459,991 $ 78,981 $ 270,081 $ 349,062 (1) Other includes $ 23,530 and $ 35,146 at December 31, 2025 and 2024, respectively, r elated to legacy liabilities obtained from the acquisitions of Providence Washington Insurance Company, Greenwood Insurance Company, and Consolidated Specialty Insurance Company. All legacy liabilities remain obligations of affiliates of the sellers through reinsurance and contractual indemnities. The claim development tables that follow present, by accident year, incurred and cumulative paid claims and allocated claim adjustment expense on a historical basis. This claim development information is presented on an undiscounted, net of reinsurance basis since 2021, Everspan's entry into the Specialty P&C business. The claim development tables also provide the historical average annual percentage payout of incurred claims by age, net of reinsurance, as supplementary information (identified as unaudited in the tables below). The historical average annual percentage payout for incurred claims is subject to variability due to the impact of both large claim activity and subrogation recoveries, among other items. Commercial Auto Incurred Claims and Allocated LAE, Net of Reinsurance Accident Year Year ended December 31, IBNR Reserves at December 31, 2025 Cumulative Number of Reported Claims 2021 2022 2023 2024 2025 Unaudited 2021 $ 432 $ 468 $ 978 $ 962 $ 1,212 $ 88 82 2022 8,225 7,866 9,099 9,832 1,292 1,162 2023 19,459 23,309 25,345 4,279 3,282 2024 15,217 14,851 4,027 3,243 2025 4,783 2,972 1,564 Total $ 56,024 Octave Specialty Group, Inc. 75 2025 Form 10-K OCTAVE SPECIALTY GROUP, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Dollar Amounts in Thousands, Except Share Amounts) Cumulative Paid Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance Accident Year Year ended December 31, Liability for Loss and Loss Adjustment Expenses, Net of Reinsurance 2021 2022 2023 2024 2025 2021 - Before Unaudited 2025 2021 2021 $ 7 $ 45 $ 150 $ 681 $ 1,013 2022 555 2,325 4,701 6,450 2023 3,914 10,984 17,056 2024 3,554 7,885 2025 557 Total $ 32,962 $ 23,062 $ — Total net liability $ 23,062 Average Annual Percentage Payout of Incurred Claims by Age, Net of Reinsurance Unaudited Years 1 2 3 4 5 11.4 % 19.6 % 19.0 % 30.8 % 27.4 % Excess Liability Incurred Claims and Allocated LAE, Net of Reinsurance Accident Year Year ended December 31, IBNR Reserves at December 31, 2025 Cumulative Number of Reported Claims 2021 2022 2023 2024 2025 Unaudited 2021 $ 3 $ 3 $ 13 $ 15 $ 16 2 2 2022 146 129 161 149 58 4 2023 1,579 1,573 1,344 1,162 76 2024 $ 5,285 7,373 4,106 95 2025 10,519 10,098 41 Total $ 19,400 Cumulative Paid Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance Accident Year Year ended December 31, Liability for Loss and Loss Adjustment Expenses, Net of Reinsurance 2021 2022 2023 2024 2025 2021 - Before Unaudited 2025 2021 2021 $ — $ — $ — $ — $ — 2022 — 1 104 104 2023 6 258 158 2024 101 2,079 2025 162 Total $ 2,503 $ 16,897 $ — Total net liability $ 16,897 Average Annual Percentage Payout of Incurred Claims by Age, Net of Reinsurance Unaudited Years 1 2 3 4 5 0.7 % 11.6 % 20.6 % — % — % Octave Specialty Group, Inc. 76 2025 Form 10-K OCTAVE SPECIALTY GROUP, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Dollar Amounts in Thousands, Except Share Amounts) General Liability Incurred Claims and Allocated LAE, Net of Reinsurance Accident Year Year ended December 31, IBNR Reserves at December 31, 2025 Cumulative Number of Reported Claims 2021 2022 2023 2024 2025 Unaudited 2021 $ — $ — $ — $ — $ — — — 2022 223 217 425 374 109 4 2023 2,019 1,328 1,784 886 26 2024 $ 6,915 6,955 5,205 194 2025 5,311 3,996 45 Total $ 14,423 Cumulative Paid Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance Accident Year Year ended December 31, Liability for Loss and Loss Adjustment Expenses, Net of Reinsurance 2021 2022 2023 2024 2025 2021 - Before Unaudited 2025 2021 2021 $ — $ — $ — $ — $ — 2022 — 1 265 266 2023 24 57 791 2024 60 780 2025 15 Total $ 1,852 $ 12,572 $ — Total net liability $ 12,572 Average Annual Percentage Payout of Incurred Claims by Age, Net of Reinsurance Unaudited Years 1 2 3 4 5 0.6 % 4.2 % 55.9 % 0.3 % — % Workers Compensation Incurred Claims and Allocated LAE, Net of Reinsurance Accident Year Year ended December 31, IBNR Reserves at December 31, 2025 Cumulative Number of Reported Claims 2021 2022 2023 2024 2025 Unaudited 2021 $ — $ — $ — $ — $ — $ — — 2022 — — — — — — 2023 6,053 6,056 7,362 2,675 2,384 2024 16,486 15,146 5,150 4,889 2025 $ 16,752 404 4,252 Total $ 39,260 Octave Specialty Group, Inc. 77 2025 Form 10-K OCTAVE SPECIALTY GROUP, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Dollar Amounts in Thousands, Except Share Amounts) Cumulative Paid Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance Accident Year Year ended December 31, Liability for Loss and Loss Adjustment Expenses, Net of Reinsurance 2021 2022 2023 2024 2025 2021 - Before Unaudited 2025 2021 2021 $ — $ — $ — $ — $ — 2022 — — — — 2023 807 3,938 6,230 2024 4,139 10,692 2025 4,541 Total $ 21,463 $ 17,798 $ — Total net liability $ 17,798 Average Annual Percentage Payout of Incurred Claims by Age, Net of Reinsurance Unaudited Years 1 2 3 4 5 21.8 % 42.9 % 31.1 % — % — % Other (1) Incurred Claims and Allocated LAE, Net of Reinsurance Accident Year Year Ended December 31, IBNR Reserves at December 31, 2025 Cumulative Number of Reported Claims 2021 2022 2023 2024 2025 Unaudited 2021 $ — $ — $ — $ — $ — $ — — 2022 1 1 3 1 1 788 2023 6,142 5,907 5,884 2,441 18,743 2024 23,475 24,292 1,513 57,524 2025 3,652 1,595 2,307 Total $ 33,829 Cumulative Paid Claims and Allocated LAE, Net of Reinsurance Accident Year Year Ended December 31, Liability for Loss and Loss Adjustment Expenses, Net of Reinsurance 2021 2022 2023 2024 2025 2021 - Before Unaudited 2025 2021 2021 $ — $ — $ — $ — $ — 2022 — — — — 2023 966 4,342 5,522 2024 10,802 19,489 2025 430 Total $ 25,441 $ 8,388 $ — Total net liability $ 8,388 Average Annual Percentage Payout of Incurred Claims by Age, Net of Reinsurance Unaudited Years 1 2 3 4 5 18.2 % 31.1 % 10.1 % — % — % (1) Other includes non-standard personal auto, professional liability, business owners products, travel and surety Octave Specialty Group, Inc. 78 2025 Form 10-K OCTAVE SPECIALTY GROUP, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Dollar Amounts in Thousands, Except Share Amounts) Methodology for Determining Cumulative Number of Reported Claims A claim file is created when the Company or the third party claims administrator is notified of an actual demand for payment, notified of an event that may lead to a demand for payment or when it is determined that a demand for payment could possibly lead to a future demand for payment on another coverage on the same policy or on another policy. Claim files are generally created at the claimant by coverage type, depending on the particular facts and circumstances of the underlying event. For purposes of the claims development tables above, claims reported for direct business are counted even if they eventually close with no loss payment. Note that claims with zero claim dollars may still generate some level of claim adjustment expenses. Claim counts for assumed business are included only to the extent such counts are available. The methods used to summarize claim counts have not changed significantly over the time periods reported in the tables above. The Company cautions against using the summarized claim count information provided in this disclosure in attempting to project ultimate loss payouts by product line. The Company generally finds claim count data to be useful only on a more granular basis than the aggregated basis disclosed in the claim development tables above, as the risks, average values and other dynamics of the claim process can vary materially by the cause of loss and coverage within product line. Reinsurance Recoverables, Including Credit Impairments: Everspan’s reinsurance assets, including deferred ceded premiums and reinsurance recoverables on losses, amounted to $ 582,457 at December 31, 2025. Credit exposure existed at December 31, 2025, with respect to reinsurance recoverables to the extent that any reinsurer may not be able to reimburse Everspan under the terms of these reinsurance arrangements. At December 31, 2025, there were ceded reinsurance balances payable of $ 80,561 offsetting this credit exposure. Contractually ceded reinsurance payables can only be offset against amounts owed from the same reinsurer in the event that such reinsurer is unable to meet its obligations to reimburse Everspan. To minimize its credit exposure to losses from reinsurer insolvencies, Everspan (i) is entitled to receive collateral from its reinsurance counterparties in certain reinsurance contracts and (ii) has certain cancellation rights that can be exercised by Everspan in the event of rating agency downgrades of a reinsurer (among other events and circumstances). Everspan held letters of credit and collateral amounting to $ 88,732 from its reinsurers at December 31, 2025. For those reinsurance counterparties that do not currently post collateral, Everspan's reinsurers are well-capitalized, highly rated, authorized capacity providers. Additionally, while legacy liabilities from the Providence Washington Insurance Company acquisition and the admitted carriers acquired by Everspan on January 3, 2022, (Greenwood Insurance Company and Consolidated Specialty Insurance Company), were fully ceded to certain reinsurers, Everspan also benefits from an unlimited, uncapped indemnity from Enstar Holdings (US) and 21st Century Premier Insurance Company to mitigate any residual risk to these reinsurers. For 2025, our top five reinsurers represented 54 % our total reinsurance recoverables on paid and unpaid losses. These reinsurance recoverables were primarily from reinsurers with applicable ratings of A or better. The following table sets forth our five most significant reinsurers by amount of reinsurance recoverables as of December 31, 2025. Reinsurers Rating (1) Reinsurance Recoverable (2) Unsecured Recoverable (3) General Reinsurance Company A++ $ 124,602 $ 100,165 Munich Reinsurance Company A+ 57,036 55,196 QBE Insurance Corporation A 19,791 19,791 Everest Reinsurance Company A+ 17,524 17,932 Swiss Reinsurance America Corporation A+ 15,507 14,657 All other reinsurers 201,632 104,054 Total recoverables $ 436,092 $ 311,795 (1) Represents financial strength ratings from AM Best. (2) Represents reinsurance recoverables on paid and unpaid losses. Unsecured amounts from QBE Insurance Corporation is also supported by an unlimited, uncapped indemnity from Enstar Holdings (US). (3) Reinsurance recoverables reduced by ceded premiums payables due to reinsurers, letters of credit, and collateral posted for the benefit of Everspan . Everspan has uncollateralized credit exposure to reinsurers of $ 311,795 and $ 232,310 and has recorded an allowance for credit losses of $ 100 and $ 100 at December 31, 2025 and 2024, respectively. The uncollateralized credit exposure to reinsurers includes legacy liabilities obtained from the acquisitions of Providence Washington Insurance Company and the admitted carriers acquired by Everspan on January 3, 2022, of $ 23,530 and $ 35,146 at December 31, 2025 and 2024, respectively. All legacy liabilities remain with affiliates of the sellers through reinsurance and contractual indemnities. 9. INSURANCE REGULATORY RESTRICTIONS Everspan Indemnity and its wholly owned subsidiary, Everspan Insurance Company ("Everspan Insurance"), as well as Consolidated Specialty Insurance Company, a wholly-owned subsidiary of Everspan Insurance, are domiciled in Arizona and are subject to the insurance laws and regulations of Arizona (the “Arizona Insurance Laws”) and are regulated by the Arizona Department of Insurance and Financial Institutions as domestic insurers. The other subsidiaries of Everspan Insurance, Providence Washington Insurance Company and Greenwood Insurance Company (together with Everspan Insurance, the "Everspan Admitted Carriers") are domiciled in Rhode Island and Pennsylvania, respectively, and are therefore subject to the insurance laws and regulations of their respective States of domicile (together with Arizona Insurance Laws, the “State Insurance Laws”) and regulated by the insurance departments of those States as domestic insurers. In addition, the Everspan Octave Specialty Group, Inc. 79 2025 Form 10-K OCTAVE SPECIALTY GROUP, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Dollar Amounts in Thousands, Except Share Amounts) Admitted Carriers are subject to the insurance laws and regulations of the other jurisdictions in which they are licensed and operate as foreign insurers. Insurance laws and regulations applicable to insurers vary by jurisdiction, but the insurance laws and regulations applicable to our insurance carriers generally require them to maintain minimum standards of business conduct and solvency; to meet certain financial tests; and to file policy forms, premium rate schedules and certain reports with regulatory authorities, including information concerning capital structure, ownership, financial condition (such as risk-based capital), corporate governance and enterprise risk. Regulated insurance companies are also required to file quarterly and annual statutory financial statements in each jurisdiction in which they are licensed. The State Insurance Laws also require prior approval (or non-disapproval) of certain transactions between an insurance carrier and its affiliates. The level of supervisory authority that may be exercised by non-domiciliary insurance regulators varies by jurisdiction. Generally, however, non-domiciliary regulators are authorized to suspend or revoke the insurance license they issued and to impose restrictions on that license in the event that laws or regulations are breached by a regulated insurance company or in the event that continued or unrestricted licensing of the regulated insurance company constitutes a “hazardous condition” (or meets a similar standard) in the opinion of the non-domiciliary regulator. The domiciliary regulators have primary regulatory authority, including with respect to the initiation and administration of rehabilitation or liquidation proceedings. Additionally, the accounts and operations of Everspan Indemnity and the Everspan Admitted Carriers are subject to individual periodic comprehensive financial examinations by their domestic regulators, and may be examined collectively by the lead regulator of the affiliated insurance company group. Everspan Indemnity is a domestic surplus lines insurer and is eligible to write property and casualty insurance as an excess and surplus lines insurance in all states by virtue of the U.S. Nonadmitted and Reinsurance Reform Act of 2010. Everspan Insurance, Greenwood Insurance Company, Consolidated Specialty Insurance Company, and Providence Washington Insurance Company are admitted property and casualty insurers. Collectively, they have broad authority to write property and casualty insurance throughout the United States. Everspan Indemnity and the Everspan Admitted Carriers (collectively, "Everspan") are subject to risk-based capital requirements. All of Octave's insurance subsidiaries are in compliance with the minimum capital and surplus levels required under the State Insurance Laws required to transact all business written to date. Our ID businesses, like some other managing general agents, brokerages and program administrators, may be subject to licensing requirements and regulation by insurance regulators in various regulatory jurisdictions in which they conduct business. The financial statements Everspan are prepared on the basis of accounting practices prescribed or permitted by the State Insurance Laws and the actions of regulatory authorities thereunder. Everspan uses such statutory accounting practices prescribed or permitted by the applicable regulatory authorities for determining and reporting their financial condition and results of operations, including for determining solvency under the State Insurance Laws. The States in which Everspan are domiciled have adopted the National Association of Insurance Commissioners (“NAIC”) accounting practices and procedures manual (“NAIC SAP”) as a component of prescribed practices as codified in each State’s applicable law or regulation. Statutory policyholder surplus differs from stockholder's equity determined under GAAP principally due to statutory accounting rules that treat investments, acquisition costs and consolidation of subsidiaries differently. Everspan Indemnity has statutory policyholder surplus of $ 128,031 as of December 31, 2025, as compared to $ 125,202 as of December 31, 2024. Everspan does not have any permitted or additional prescribed practices at December 31, 2025 or December 31, 2024. Dividend Restrictions, Including Contractual Restrictions United States State Insurance Regulators prescribe rules that determine if Everspan may declare dividends. In addition, Everspan is subject to certain restrictions in their respective articles of incorporation with regards to the payment of dividends. Board action authorizing a distribution by an insurance company must generally be reported to the applicable domiciliary regulator prior to payment. In addition, State Insurance Laws generally require regulatory approval for the payment of extraordinary dividends, which are distributions in amounts that would exceed certain thresholds, such as a percentage of surplus or net income for the prior year or number of years. Everspan does not have sufficient earned surplus at this time to pay ordinary dividends under the State Insurance Laws. Furthermore, certain subsidiaries of Everspan Insurance were restricted from paying dividends to Everspan Insurance until January 1, 2025. Currently, Everspan Insurance’s subsidiaries, other than Greenwood Insurance Company and Providence Washington Insurance Company, do not have sufficient surplus to pay dividends. Octave's MGA/U subsidiaries are not restricted from paying dividends or partner distributions (collectively "Distributions") to their owners or partners, including Octave Partners, which is 100 % owned by OSG. Octave's established MGA/Us historically have paid Distributions equating to the majority of their individual EBITDA, subject to working capital, taxes and other capital needs, on a quarterly basis. Newly formed de-novo MGA/Us are not expected to make regular distributions to their Octave Specialty Group, Inc. 80 2025 Form 10-K OCTAVE SPECIALTY GROUP, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Dollar Amounts in Thousands, Except Share Amounts) partners until they become profitable and generate free cash flow on a steady and/or predictable basis. United Kingdom Octave Ventures's UK subsidiaries are subject to certain restrictions in their articles of association and shareholder agreements with regards to the payment of dividends. The Board of Octave Ventures and each subsidiary can approve the payment of a dividend (subject to repayment of any funding agreements). Octave Ventures and its UK subsidiaries historically have paid Distributions equating to the majority of their distributable reserves, being principally profit after taxation. Bermuda Octave Venture’s Bermuda subsidiary is subject to certain restrictions in their articles of association and shareholder agreements with regards to the payment of dividends. The Board of the Bermuda subsidiary can approve the payment of a dividend (subject to repayment of any funding agreement). The Board of the Bermuda subsidiary historically has paid Distributions equating to the majority of their distributable reserves, being principally profit after taxation. 10. DERIVATIVE INSTRUMENTS The following tables summarize the location and gross fair values of individual derivative instruments and the impact of legal rights of offset as reported in the Consolidated Balance Sheets, as of December 31, 2025 and 2024. December 31, 2025: December 31, 2024: Gross Amounts of Recognized Assets / Liabilities Gross Amounts Offset in the Consolidated Balance Sheet Net Amounts of Assets/ Liabilities Presented in the Consolidated Balance Sheet Gross Amount of Collateral Received / Pledged not Offset in the Consolidated Balance Sheet Net Amount Gross Amounts of Recognized Assets / Liabilities Gross Amounts Offset in the Consolidated Balance Sheet Net Amounts of Assets/ Liabilities Presented in the Consolidated Balance Sheet Gross Amount of Collateral Received / Pledged not Offset in the Consolidated Balance Sheet Net Amount Other assets: Warrants $ — $ — $ — $ — $ — $ — $ — $ — $ — $ — Total derivative assets $ — $ — $ — $ — $ — $ — $ — $ — $ — $ — Other liabilities: FX forwards $ 8 $ — $ 8 $ — $ 8 $ 317 $ — $ 317 $ — $ 317 Total derivative liabilities $ 8 $ — $ 8 $ — $ 8 $ 317 $ — $ 317 $ — $ 317 The following tables summarize the location and amount of gains and losses of derivative contracts in the Consolidated Statements of Total Comprehensive Income (Loss) for the years ended December 31, 2025, 2024 and 2023: Location of Gain (Loss) Recognized in Consolidated Statements of Total Comprehensive Income (Loss) Amount of Gain (Loss) Recognized in Consolidated Statement of Total Comprehensive Income (Loss) – Year Ended December 31, 2025 2024 2023 Derivative type: Warrants Other revenue $ — $ ( 656 ) $ ( 279 ) FX forwards Other revenue 1,019 4,672 — Total derivatives $ 1,019 $ 4,016 $ ( 279 ) Other Derivatives: Octave Ventures utilizes foreign exchange forward contracts to partially hedge its foreign currency exposure. Octave Ventures’s functional currency is the British Pound, but a significant portion of its revenues are generated in currencies other than the British Pound, particularly the US Dollar. Octave Ventures, therefore, typically enters into forward contracts to partially hedge its exposure to fluctuations in exchange rates relative to the British Pound. OSG used FX forward contracts to mitigate British Pound to US Dollar exchange risk leading up to its purchase of Octave Ventures in August 2024. Octave also holds warrants to purchase equity shares of a development stage company and was party to foreign exchange (FX) forward contracts in 2024. Information about FX forward contracts as of December 31, 2025 and December 31, 2024, is summarized below: Derivative Type Weighted Average Remaining Term (years) Face Amount (Buy) Face Amount (Sell) Fair Value Asset (Liability) December 31, 2025 FX Forwards-Buy GBP/Sell USD 1.39 17,876 24,000 ( 6 ) FX Forwards-Buy GBP/Sell CAD 0.73 1,530 2,800 ( 2 ) December 31, 2024 FX Forwards-Buy GBP/Sell USD 0.61 15,720 20,000 ( 317 ) Octave Specialty Group, Inc. 81 2025 Form 10-K OCTAVE SPECIALTY GROUP, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Dollar Amounts in Thousands, Except Share Amounts) 11. GOODWILL AND INTANGIBLE ASSETS The following table presents a rollforward of goodwill at December 31, 2025 and 2024. December 31, 2025 2024 Beginning balance $ 418,234 $ 69,694 Business acquisitions 95,357 357,316 Gain (loss) on foreign currency translation 26,754 ( 8,776 ) Impairments — — Ending balance $ 540,345 $ 418,234 Intangible asset and accumulated amortization are included in the Consolidated Balance Sheets, as shown below. Cost Accumulated Amortization Net Carrying Amount December 31, 2025 Finite-lived Intangible Assets: Customer relationships $ 509,197 $ 62,362 $ 446,835 Non-compete agreements 1,350 1,350 — Trade names 19,383 2,433 16,950 Total finite-lived intangible assets 529,930 66,145 463,785 Indefinite-lived Intangible Assets: Insurance licenses 11,213 — 11,213 Total intangible assets $ 541,143 $ 66,145 $ 474,998 December 31, 2024 Finite-lived Intangible Assets: Customer relationships $ 348,350 $ 24,630 $ 323,720 Non-compete agreements 1,350 1,080 270 Trade names 10,767 1,195 9,572 Total finite-lived intangible assets 360,467 26,905 333,562 Indefinite-lived Intangible Assets: Insurance licenses $ 11,213 $ — $ 11,213 Total intangible assets $ 371,680 $ 26,905 $ 344,775 Amortization Expense: Amortization expense is included in the Consolidated Statements of Total Comprehensive Income (Loss), as shown below. Year ended December 31, 2025 2024 2023 Customer relationships 36,578 16,739 3,622 Non-compete 270 270 270 Trade names 1,196 593 260 Total (1) $ 38,044 $ 17,602 $ 4,152 (1) The weighted-average amortization period is 4.7 years. The estimated future amortization expense for finite-lived intangible assets is as follows: Amortization Expense Total 2026 $ 44,647 2027 44,308 2028 44,308 2029 44,304 2030 43,859 Thereafter 242,359 12. DEBT 2025 Credit Facility In connection with the acquisition of ArmadaCorp on October 31, 2025, Octave Partners LLC (f.k.a. Cirrata Group LLC) and certain of its subsidiaries (including ArmadaCorp) entered into a credit facility providing for a $ 100,000 term loan and a $ 20,000 revolving credit facility (the "2025 Credit Facility"). The term loan and revolving loans were fully drawn as SOFR loans to pay part of the purchase price for ArmadaCorp. The term loan will amortize in equal quarterly installments beginning March 31, 2026, in an aggregate amount equal to 2.5 % per annum of the original principal amount, with the remaining principal balance due October 31, 2030. Unless earlier terminated, the revolver matures October 31, 2030. Optional prepayments are permitted without premium or penalty. Mandatory prepayments will be due with net cash proceeds from certain asset sales, recovery events (such as insurance recoveries), issuances of indebtedness and indemnity payments. As of December 31, 2025, outstanding borrowings under the term loan were $ 100,000 and under the revolving credit facility were $ 20,000 . Borrowings under the Credit Facility bear interest at a rate per annum equal to 3-month term SOFR plus an applicable margin of 2.25 % to 2.75 %. The applicable margin adjusts automatically at the end of each fiscal quarter based on the borrowers’ reported Consolidated Total Net Leverage Ratio for the most recently ended fiscal quarter. The Company's applicable margin in effect as of December 31, 2025, was 2.75 %. Debt issuance costs incurred in connection with the 2025 Credit Facility of $ 2,530 are being amortized to interest expense over the contractual term of the facility and are presented as a reduction to the carrying amount of the borrowings reported within Long-term debt on the Consolidated Balance Sheets. The 2025 Credit Facility includes customary representations and warranties and covenants applicable to the ID businesses, including (without limitation) maintenance of certain financial ratios and limitations on indebtedness, liens, mergers, sales of assets, investments, restricted payments (such as dividends), and affiliate transactions. Pursuant to a separate guaranty and pledge agreement, OSG guarantees the payment and performance of all obligations under the credit agreement and other loan documents and pledges its ownership interest in Octave Partners LLC as collateral. OSG makes customary representations and warranties and covenants and agrees to always maintain minimum cash liquidity of $ 10,000 . Pursuant to a separate guaranty and security agreement, the borrowers and other wholly-owned subsidiaries of Octave Partners LLC guarantee the payment and performance of all obligations under the credit Octave Specialty Group, Inc. 82 2025 Form 10-K OCTAVE SPECIALTY GROUP, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Dollar Amounts in Thousands, Except Share Amounts) agreement and other loan documents and grant security interests in substantially all of the assets of the borrowers and such other subsidiaries, including their respective ownership interests in their subsidiaries, as collateral. These requirements will impact our financial and operational flexibility while the 2025 Credit Facility remains in place. 2024 Credit Facility In the third quarter of 2024, OSG funded a portion of the acquisition of Octave Ventures (f.k.a. Beat) with a $ 150,000 credit facility (the "2024 Credit Facility"). On June 10, 2025, OSG entered into an amendment (the "Amendment") to the $ 150,000 2024 Credit Facility. Pursuant to the Amendment, the maturity date for amounts owed with respect to the loans made under the 2024 Credit Facility was extended from July 31, 2025 to the earlier of (a) December 31, 2025 and (b) the date that is the three-month anniversary of the termination of the Stock Purchase Agreement, dated June 4, 2024, between OSG and American Acorn Corporation. Borrowing under the Credit Facility as amended bears interest at 3-month term SOFR plus a margin initially equal to 4.50 %, increasing to 5.50 % on November 1, 2024, 6.50 % on February 1, 2025, and 7.50 % on May 1, 2025. A duration fee equal to 1.00 % of the then outstanding Credit Facility was due on each of February 1, 2025, and May 1, 2025, to the extent the borrowing under the Credit Facility is not repaid earlier. OSG paid an extension fee in an amount equal to 1.00 % of the aggregate principal amount of loans outstanding under the Credit Agreement on June 10, 2025. The 2024 Credit Facility was repaid in full on September 29, 2025 with a portion of the proceeds from the sale of AAC. Obligations under the 2024 Credit Facility as amended were guaranteed by OSG and were secured on a first-priority basis by (i) a pledge by OSG of all of the capital stock of Everspan Holdings, LLC, a Delaware limited liability company and wholly owned subsidiary of the Company and (ii) a pledge by the Purchaser of all of the capital stock of Octave Ventures held by Purchaser. The 2024 Credit Facility as amended included financial and other covenants that restricted our ability to manage capital resources by limiting, among other actions, the issuance of debt or capital stock; the creation of liens; the disposition of assets; transactions with affiliates; restricted payments, including dividends and the purchase or redemption of capital stock; and acquisitions and other investments. 13. REVENUES FROM CONTRACTS WITH CUSTOMERS As further described in the Revenue Recognition section of Note 2. Basis of Presentation and Significant Accounting Policies, the ID businesses have contracts that are subject to the Revenue from Contracts with Customers Topic of the ASC ("ASC 606"). The following table presents ID commission income recognized disaggregated by policy type for the years ended December 31, 2025, 2024 and 2023: Year ended December 31, 2025 2024 2023 Accident & Health $ 29,640 $ 30,123 $ 32,836 Property 22,565 5,116 — Specialty Auto 17,370 17,851 11,929 Reinsurance 15,713 1,641 147 Other Professional 13,294 10,076 3,097 Niche Specialty Risks 13,263 5,268 — Surety 10,307 2,948 — Professional D&O 6,995 1,422 — Misc. Specialty 5,406 1,696 363 Marine & Energy 4,577 2,829 2,909 Environmental 4,251 13,053 — Total $ 143,381 $ 92,023 $ 51,281 For the years ended December 31, 2025, 2024 and 2023, income of $ 20,419 , $ 6,353 and $ 0 , respectively, was recognized in accordance with ASC 606 and reported as Servicing and other fees on the Consolidated Statement of Comprehensive Income. During the years ended December 31, 2025, 2024 and 2023, the amount of revenue recognized related to performance obligations satisfied in a previous period, inclusive of changes due to estimates was approximately $ 2,984 , $ 5,325 and $ 5,241 , respectively. Receivables, Contract Assets and Liabilities The balances of receivables, contract assets and contract liabilities with customers were as follows: December 31, 2025 2024 Receivables $ 86,609 $ 55,377 Contract assets 31,757 15,967 Contract liabilities 2,954 2,705 Contract assets and Contract liabilities is reported in Other Assets and Other Liabilities on the Balance Sheet Insurance Distribution Contract assets represent estimated future consideration related to base commissions and profit-sharing commissions that were recognized as revenue upon the placement of the policy, but are not yet billable or collectable. The Company does not have the right to bill or collect payment on (i) base commissions until the related premiums from policyholders have been collected nor (ii) profit-sharing commissions until after the contract year is completed. Contract liabilities represent advance consideration received from customers related to Employer stop loss base commissions that will be recognized over time as claims servicing is performed, which typically occurs between 17 and 20 months from contract inception. During the years ended December 31, 2025, 2024 and 2023, the Company recognized revenue that was included in the contract liability balance as of the beginning of the period of $ 679 , $ 479 and $ 583 , respectively. Octave Specialty Group, Inc. 83 2025 Form 10-K OCTAVE SPECIALTY GROUP, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Dollar Amounts in Thousands, Except Share Amounts) 14. COMPREHENSIVE INCOME (LOSS) The following tables detail the changes in the balances of each component of accumulated other comprehensive income for the affected periods: Year Ended December 31, 2025: Year ended December 31, 2024: Unrealized Gains (Losses) on Available- for Sale Securities (1) Amortization of Postretirement Benefit (1) Gain (Loss) on Foreign Currency Translation (1) Credit Risk Changes of Fair Value Option Liabilities (1) (2) Total Unrealized Gains (Losses) on Available- for Sale Securities (1) Amortization of Postretirement Benefit (1) Gain (Loss) on Foreign Currency Translation (1) Credit Risk Changes of Fair Value Option Liabilities (1) (2) Total Beginning Balance $ ( 21,136 ) $ — $ ( 166,191 ) $ ( 1,109 ) $ ( 188,436 ) $ ( 20,197 ) $ 4,939 $ ( 144,035 ) $ ( 753 ) $ ( 160,046 ) Other comprehensive income (loss) before reclassifications 23,259 — 76,812 — 100,071 3,583 ( 67 ) ( 22,156 ) — ( 18,640 ) Amounts reclassified from accumulated other comprehensive income (loss) ( 3,615 ) — 99,354 1,109 96,848 ( 4,522 ) ( 4,872 ) — ( 356 ) ( 9,750 ) Net current period other comprehensive income (loss) 19,643 — 176,166 1,109 196,919 ( 939 ) ( 4,939 ) ( 22,156 ) ( 356 ) ( 28,390 ) Ending balance $ ( 1,493 ) $ — $ 9,975 $ — $ 8,483 $ ( 21,136 ) $ — $ ( 166,191 ) $ ( 1,109 ) $ ( 188,436 ) (1) All amounts are net of tax and NCI. Amounts in parentheses indicate reductions to Accumulated Other Comprehensive Income. (2) Represents the changes in fair value attributable to instrument-specific credit risk of liabilities for which the fair value option is elected. The following table details the significant amounts reclassified from each component of accumulated other comprehensive income, shown in the above rollforward tables, for the affected periods: Details about Accumulated Other Comprehensive Income Components Amount Reclassified from Accumulated Other Comprehensive Income Affected Line Item in the Consolidated Statement of Total Comprehensive Income Year Ended December 31, 2025 2024 Unrealized Gains (Losses) on Available-for-Sale Securities (1) $ 15,193 $ ( 3,919 ) Other income ( 3,851 ) ( 603 ) Provision for income taxes ( 14,957 ) — Net loss on discontinued operations $ ( 3,615 ) $ ( 4,522 ) Net of tax and noncontrolling interest Amortization of Postretirement Benefit Prior service cost $ — $ ( 210 ) Other income Actuarial gains (losses) — ( 67 ) Other income Curtailment gain — ( 4,662 ) Other income — ( 4,939 ) Total before tax — — Provision for income taxes $ — $ ( 4,939 ) Net of tax and noncontrolling interest Gain (loss) on foreign currency translation $ 99,354 $ — Net loss on discontinued operations $ 99,354 $ — Net of tax and noncontrolling interest Credit Risk Changes of Fair Value Option Liabilities $ 590 $ ( 474 ) Credit risk changes of fair value option liabilities ( 179 ) 118 Provision for income taxes 698 — Net loss on discontinued operations 1,109 ( 356 ) Net of tax and noncontrolling interest Total reclassifications for the period $ 96,848 $ ( 9,817 ) Net of tax and noncontrolling interest (1) Net unrealized investment gains (losses) on available-for-sale securities are included in Octave's Consolidated Statements of Comprehensive Income as a component of Accumulated Other Comprehensive Income. Changes in these amounts include reclassification adjustments to exclude from "Other comprehensive income (loss)" those items that are included as part of "Net income" for a period that has been part of "Other comprehensive income (loss)" in earlier periods. 15. NET INCOME PER SHARE As of December 31, 2025, 45,005,284 shares of OSG's common stock (par value $ 0.01 ) and a warrant entitling the holder to acquire up to 5,092,707 shares of common stock at an exercise price of $ 18.50 per share were issued and outstanding. The warrant was issued September 29, 2025, and allows the holder to convert the warrant at its Black-Sholes value, settleable in shares of OSG common stock or cash at OSG's election. Common shares outstanding decreased by 1,501,689 during the year ended December 31, 2025, primarily due to share repurchases partially offset by shares issued in connection with employee stock compensation. Octave Specialty Group, Inc. 84 2025 Form 10-K OCTAVE SPECIALTY GROUP, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Dollar Amounts in Thousands, Except Share Amounts) Share Repurchases On November 12, 2024, Octave’s Board of Directors authorized a share repurchase program, under which Octave may opportunistically repurchase up to $ 50,000 of the Company’s common shares at management’s discretion over the period ending on December 31, 2026. The following table shows shares repurchased by year. ($ in thousands, except per share) Year Ended December 31, 2022 2023 2024 2025 Shares repurchased 1,605,316 325,068 937,141 3,434,745 Total cost $ 14,217 $ 4,510 $ 11,699 $ 29,942 Average purchase price per share $ 8.86 $ 13.88 $ 12.48 $ 8.72 Unused authorization amount $ 8,449 Earnings Per Share Calculation The numerator of the basic and diluted earnings per share computation represents net income (loss) attributable to common stockholders adjusted by the retained earnings impacts of the noncontrolling adjustment to redemption value under ASC 480 or amendments resulting in revaluation to fair value and reclassification of NCI shares to redeemable NCI. Adjustments to the carrying value of redeemable noncontrolling interest are further described in the Redeemable NCI section of Note 2. Basis of Presentation and Significant Accounting Policies . The following table provides a reconciliation of net income (loss) from continuing operations attributable to common stockholders to the numerator in the basic and diluted earnings per share calculation, together with the resulting earnings per share amounts: Year ended December 31, 2025 2024 2023 Net income (loss) attributable to Octave common stockholders $ ( 98,404 ) $ ( 59,282 ) $ ( 24,551 ) Adjustment to redemption value (ASC 480) ( 18,175 ) ( 5,222 ) 4,792 Numerator of basic and diluted EPS $ ( 116,579 ) $ ( 64,504 ) $ ( 19,759 ) Per Share: Basic $ ( 2.47 ) $ ( 1.37 ) $ ( 0.43 ) Diluted $ ( 2.47 ) $ ( 1.37 ) $ ( 0.43 ) The denominator of the basic earnings per share computation represents the daily weighted average common shares outstanding plus vested restricted stock units and performance stock units (together, "Basic Weighted Average Shares Outstanding"). The denominator of diluted earnings per share adjusts the basic weighted average shares outstanding for all potential dilutive common shares outstanding during the period. All potential dilutive common shares outstanding consider common stock deliverable pursuant to warrants, employee options, unvested restricted stock units and unvested performance stock units granted under existing compensation plans. In determining diluted net income (loss) per share, whether net income from continuing operations is positive or negative controls whether dilutive shares are included in the determination. For all periods presented, net income from continuing operations was negative, a net loss. Accordingly, since including dilutive shares would dilute the loss from continuing operations, no dilutive shares are included in any of the per share calculations. The following table provides a reconciliation of the common shares used for basic net income per share to the diluted shares used for diluted net income per share: Year Ended December 31, 2025 2024 2023 Basic weighted average shares outstanding 47,181,227 46,969,708 45,636,649 Effect of potential dilutive shares (1) : Restricted stock units — — — Performance stock units (1) — — — Diluted weighted average shares outstanding 47,181,227 46,969,708 45,636,649 Anti-dilutive shares excluded from the above reconciliation Warrants (2) 1,311,546 — — Options (2) 279,740 — — Restricted stock units 164,101 479,781 550,255 Performance stock units (1) 8,273 817,483 900,964 (1) Performance stock units are reflected based on the performance metrics through the balance sheet date. Vesting of these units is contingent upon meeting certain performance metrics. Although a portion of these performance metrics have been achieved as of the respective period end, it is possible that awards may no longe r meet the metric at the end of the performance period. (2) Options require the OSG's stock price to exceed certain market price hurdles to vest, none of which have been met. Warrants have an exercise price above the market price of OSG stock during the year. Amounts shown reflect the maximum number of shares issuable upon exercise, weighted for the time outstanding during the periods. 16. INCOME TAXES OSG files a consolidated U.S. federal income tax return with its 80% or more owned domestic subsidiaries ("Consolidated Tax Subsidiaries"). Octave Ventures's US subsidiaries file separate U.S. federal income tax returns as they are not directly owned by OSG for tax purposes. OSG and its Consolidated Tax Subsidiaries also file separate or combined income tax returns in various states, local and foreign jurisdictions. The following are the major jurisdictions in which Octave and its subsidiaries, including its foreign subsidiaries, operate and the earliest tax years subject to examination: Jurisdiction Tax Year United States 2009 New York State 2015 New York City 2019 United Kingdom 2021 Octave Specialty Group, Inc. 85 2025 Form 10-K OCTAVE SPECIALTY GROUP, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Dollar Amounts in Thousands, Except Share Amounts) Consolidated Pretax Income (Loss) U.S. and foreign components of pre-tax income (loss) from continuing operations were as follows: Year Ended December 31, 2025 2024 2023 U.S. $ ( 81,400 ) $ ( 58,014 ) $ ( 24,221 ) Foreign ( 19,614 ) ( 1,831 ) — Total $ ( 101,014 ) $ ( 59,845 ) $ ( 24,221 ) Provision (Benefit) for Income Taxes The components of the provision (benefit) for income taxes from continuing operations were as follows: Year Ended December 31, 2025 2024 2023 Current taxes U.S. state and local $ — $ 108 $ — Foreign 5,103 2,090 — Total current taxes 5,103 2,198 431 Deferred taxes U.S. federal ( 2,464 ) ( 633 ) ( 1,509 ) U.S. state and local ( 37 ) — — Foreign ( 7,813 ) ( 2,489 ) — Total deferred taxes $ ( 10,314 ) $ ( 3,122 ) $ ( 1,509 ) Provision for income taxes $ ( 5,211 ) $ ( 924 ) $ ( 989 ) The total effect of income taxes on net income and stockholders’ equity for the years ended December 31, 2025, 2024 and 2023 is as follows: Year Ended December 31, 2025 2024 2023 Total income taxes charged to net income $ ( 5,211 ) $ ( 924 ) $ ( 989 ) Income taxes charged (credited) to stockholders’ equity: Unrealized gains (losses) on investment securities, including foreign exchange ( 867 ) 144 918 Unrealized gains (losses) on foreign currency translations 4,985 ( 1,922 ) — Valuation allowance to equity 867 1,778 ( 918 ) Total charged to stockholders’ equity: 4,985 — — Total effect of income taxes $ ( 226 ) $ ( 924 ) $ ( 989 ) Reconciliation of U.S. Federal Statutory Income Tax Rate to Actual Income Tax Rate The tax provisions for continuing operations in the accompanying Consolidated Statements of Total Comprehensive Income (Loss) reflect effective tax rates differing from prevailing federal corporate income tax rates. As allowed by ASU 2023-09, Improvements to Income Tax Disclosures , Management has elected to apply the enhanced disclosure requirements of the ASU prospectively. This results in non-comparable rate reconciliation disclosures between the current and prior years. Below is a reconciliation of these differences for the year ended December 31, 2025, followed by a reconciliation of these differences for the years ended December 31, 2024 and 2023 : Year Ended December 31, 2025 Tax on income from continuing operations at statutory rate $ ( 21,213 ) 21.0 % Changes in expected tax resulting from: Nondeductible executive compensation 2,939 ( 2.9 ) % Other ( 811 ) 0.8 % Cross-border tax laws 1,286 ( 1.3 ) % Changes in valuation allowance ( 31,790 ) 31.5 % Other Outside basis differences 41,712 ( 41.3 ) % Adjust DTA related to intangibles 1,497 ( 1.5 ) % Other ( 440 ) 0.4 % Domestic state income taxes, net of federal 261 ( 0.3 ) % Foreign jurisdictions United Kingdom Foreign tax effects ( 1,228 ) 1.2 % Change in valuation allowance 4,322 ( 4.3 ) % Other ( 1,746 ) 1.7 % Tax expense on income from continuing operations $ ( 5,211 ) 5.2 % For the year ended December 31, 2025, activity in California, Florida, Illinois, New Jersey, New York state, New York City and New Jersey account for the majority of the amounts in the Domestic state income taxes, net of federal tax effect category. Year Ended December 31, 2024 2023 Tax on income/(loss) at statutory rate $ ( 12,567 ) 21.0 % $ ( 5,086 ) 21.0 % State DTA tax rate change 4,554 ( 7.6 ) % — — % Tax-exempt interest ( 4 ) — % ( 5 ) — % Foreign taxes 787 ( 1.3 ) % — — % State income taxes 79 ( 0.1 ) % 411 ( 1.7 ) % Outside basis differences (1) 21,076 ( 35.2 ) % — — % Acquisition costs 2,017 ( 3.4 ) % 1,497 ( 6.2 ) % Changes in valuation allowance (1) ( 17,044 ) 28.5 % 1,602 ( 6.6 ) % Other 178 ( 0.3 ) % 592 ( 2.4 ) % Tax expense on income from continuing operations $ ( 924 ) 1.5 % $ ( 989 ) 4.1 % (1) These amounts have been revised from the amounts previously disclosed to accurately reflect the outside basis difference in the subsidiary held for sale. Octave Specialty Group, Inc. 86 2025 Form 10-K OCTAVE SPECIALTY GROUP, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Dollar Amounts in Thousands, Except Share Amounts) Unrecognized Tax Positions The Company had no material unrecognized tax positions at December 31, 2025 and 2024. Deferred Income Taxes The tax effects of temporary differences that give rise to significant portions of the deferred tax liabilities and deferred tax assets at December 31, 2025 and 2024, are presented below: December 31, 2025 2024 Deferred tax liabilities: Amortizable intangible $ 69,929 $ 71,414 Deferred acquisition costs 1,871 9,474 Investments — 3,568 Other — 787 Total deferred tax liabilities 71,800 85,243 Deferred tax assets: Federal net operating loss carryforward 356,575 349,931 Outside basis difference (1) — 17,044 Unearned premium reserves 1,714 9,138 Loss reserves 1,400 1,102 State capital loss carryforward 12,813 — State capital loss carryforward 256,665 3,096 Compensation 189 1,423 Investments 1,721 — Foreign net operating loss carryforward 4,322 — Other 1,262 429 Subtotal deferred tax assets 636,661 382,163 Valuation allowance (1) 630,078 367,055 Total deferred tax assets 6,583 15,108 Net deferred tax liability $ 65,217 $ 70,135 (1) These amounts have been revised from the amounts previously disclosed to accurately reflect the outside basis difference in the subsidiary held for sale. The Company has adopted an accounting policy to classify the inside tax basis differences in deferred tax assets and liabilities (i.e., inside basis differences) associated with the disposition of shares of a subsidiary as assets or liabilities held for sale on the Consolidated Balance Sheets. For the year ended December 31, 2024, the Company has included net deferred tax liabilities of $ 20,382 in liabilities held for sale. In accordance with the Income Tax Topic of the ASC, a valuation allowance is recognized if, based on the weight of available evidence, it is more-likely-than-not that some, or all, of the deferred tax asset will not be realized. As a result of the risks and uncertainties associated with future operating results, management believes it is more likely than not that the Company will not generate sufficient U.S. federal, state and/or local taxable income to recover the deferred tax operating assets and therefore maintains a full valuation allowance on OSG's U.S. net deferred tax assets. The remaining net deferred tax liability of $ 65,217 is attributable to the amortizing intangible related to the acquisition of Octave Ventures and is classified in Deferred Taxes on the Consolidated Balance Sheet. Income Taxes Paid, net of Refunds Income taxes paid, net of refunds, exceeds 5% of total income taxes paid, net of refunds, in the following jurisdictions: Year Ended December 31, 2025 2024 2023 State Texas $ 24 $ 18 $ — Foreign United Kingdom 5,528 508 — Total $ 5,552 $ 526 $ — Loss Carryforwards As of December 31, 2025, the Company has $ 1,690,842 of U.S. net operating loss carryforwards ("NOLs") that, if not utilized, will begin expiring in 2030. Of the total NOLs $ 118,910 carry forward indefinitely. The Company has state net operating loss carryforwards of $ 231,347 that begin expiring in 2042. The Company also has $ 3,910,514 of state capital loss carryforwards apportioned to various state jurisdictions primarily resulting from the sale of AAC in 2025. These carryforwards are only available to offset capital gains recognized on state tax returns and, if not utilized, will begin expire in 2026, but the majority will expire in 2030. The Company also has $ 17,286 of foreign (UK) net operating losses that carry forward indefinitely. Tax Legislative Developments On July 4, 2025, President Trump signed into law the 2025 Budget Reconciliation Act ("the Act"). The Act made permanent many of the favorable business tax provisions included in the 2017 Tax Cuts & Jobs Acts ("TCJA"), in addition to several new business tax provisions, the majority of which go into effect for tax years ending after December 31, 2024. This legislation did not have a significant impact on the Company's current operations or financial condition for the year ended December 31, 2025. 17. EMPLOYMENT BENEFIT PLANS Incentive Compensation — Stock Units, Stock Options and Cash Employees, directors and consultants of Octave are eligible to participate in Octave’s 2024 Incentive Plan, which is the successor plan to Octave’s 2020 Incentive Plan and 2013 Incentive Plan, subject to the discretion of the Compensation Committee of Octave’s Board of Directors. There are 4,350,000 , 1,475,000 and 4,000,000 shares of Octave's common stock authorized for awards under the 2024 Plan, 2020 Plan and 2013 Plan, respectively. Awards may also be made under the 2024 Plan with respect to the shares that remained available for grant under the 2020 Plan. In addition, shares subject to outstanding awards granted under the 2020 Plan that subsequently terminate by expiration or forfeiture, cancellation, or otherwise without the issuance of such shares become available for awards under the 2024 Plan. Octave Specialty Group, Inc. 87 2025 Form 10-K OCTAVE SPECIALTY GROUP, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Dollar Amounts in Thousands, Except Share Amounts) On June 24, 2021, the Compensation Committee of Octave's Board of Directors adopted the Octave Specialty Group, Inc. Executive Stock Deferral Plan (the “Stock Deferral Plan”). Under the Stock Deferral Plan, certain executives of OSG and its subsidiaries who are designated by the compensation committee as eligible to participate in the Stock Deferral Plan may elect to defer the settlement of all or a portion of the RSU and PSU (as defined below) awards that are granted to the executives to a future date(s) selected by the executive. Deferred awards under the Stock Deferral Plan (and any related dividend equivalents) will continue to be paid in shares of common stock of OSG, which will be issued under the relevant incentive compensation plan pursuant to which the underlying award was first granted, provided that any dividend equivalents credited on a participant’s deferred awards in respect of cash dividends paid by OSG will be paid to the participant in cash. The sale of AAC triggered a change in control provision under the Stock Deferral Plan and immediately prior to closing all deferred shares were settled in stock. The Stock Deferral Plan is not funded, and deferred awards under the Stock Deferral Plan are not segregated from the Company’s general assets. At the discretion of the Compensation Committee of the Board of Directors, RSU and PSU awards may be settled in cash based on the closing price of OSG's common stock on the last business day prior to the settlement date. The amount of stock-based compensation expense arising from awards under the Incentive Plans and corresponding after-tax expense continuing operations are as follows: Year Ended December 31, 2025 2024 2023 Restricted stock units $ 6,792 $ 3,144 $ 3,462 Performance awards 3,581 6,212 8,804 Performance stock options 303 — — Total stock-based compensation $ 10,676 $ 9,356 $ 12,266 Total stock-based compensation (after-tax) (1) $ 10,676 $ 9,356 $ 12,266 (1) Excludes stock-based compensation expense of $ 36 related to stock options issued by a majority owned subsidiary to buy shares of the subsidiary's stock. Refer to "Other Incentive Plans" below. Restricted Stock Units (“RSUs”) RSUs can be awarded to certain employees for a portion of their STIP compensation, Long-Term Incentive Plan ("LTIP") compensation, sign-on and special awards for exceptional performance or promotion. RSUs can also be awarded to consultants as part of the consideration for their services. The LTIP, sign-on, consultant and special awards generally vest in equal installments over, or cliff-vest at the end of, a two to three year period. Such vesting is expressly conditioned upon continued service with Octave through the applicable vesting date, although vesting may be accelerated in certain circumstances under the awards, including for terminations due to death, disability, eligible retirement, or involuntary termination by Octave other than for cause. As part of our director compensation program, RSUs are granted quarterly and vest one year from the grant date. These RSUs will not settle until the respective director’s termination from the Board of Directors or, if earlier, upon a change in control. All RSUs provide for accelerated vesting upon a change in control, death or disability or involuntary removal other than for cause (not including removal pursuant to a shareholder vote at a regularly scheduled annual meeting of shareholders). The sale of AAC met the requirements for a change in control and immediately prior to closing, unvested shares vested and settled along with all previously deferred shares. Upon termination (other than for cause), the unvested RSUs shall partially vest as of the date of such termination in an amount equal to the number of then outstanding unvested RSUs multiplied by a fraction, the numerator of which shall be the number of calendar days which have lapsed since the grant date and the denominator of which shall be the number of calendar days from the grant date until the next regularly scheduled quarterly grant date pursuant to Octave’s director compensation program. As of December 31, 2025, 1,096,153 RSUs remained outstanding, of which (i) 1,090,076 units required future service as a condition to the delivery of the underlying shares of common stock and (ii) 6,077 units do not require future service and are deferred for future settlement. As of December 31, 2024, 1,075,025 RSUs remained outstanding, of which (i) 467,705 units required future service as a condition to the delivery of the underlying shares of common stock, and (ii) 608,853 units did not require future service and were deferred for future settlement. A summary of RSU activity for 2025 is as follows: Shares Weighted Average Grant Date Fair Value Per Share Outstanding at beginning of period 1,075,025 $ 15.75 Granted 1,134,621 8.34 Delivered or returned to plan (1) ( 1,062,983 ) 11.76 Forfeited ( 50,510 ) 12.37 Outstanding at end of period 1,096,153 $ 7.10 (1) When restricted stock unit awards issued by Octave become taxable compensation to employees, shares may be withheld to cover the employee’s withholding taxes. For the year ended December 31, 2025, Octave withheld 226,045 shares from employees that settled restricted stock units to meet the required tax withholdings. Octave’s closing share price on the grant date was used to estimate the fair value of service condition based RSUs on the grant date. The weighted average grant date fair value per share of RSUs granted during 2025, 2024 and 2023 was $ 8.34 , $ 15.72 and $ 12.48 , respectively. As of December 31, 2025, there was $ 7,395 of total unrecognized compensation costs related to unvested RSUs granted. These costs are expected to be recognized over a weighted average period of 1.5 years. The fair value for RSUs vested and delivered during the year ended December 31, 2025, 2024 and 2023 was $ 4,309 , $ 1,654 and $ 4,646 , respectively. Octave Specialty Group, Inc. 88 2025 Form 10-K OCTAVE SPECIALTY GROUP, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Dollar Amounts in Thousands, Except Share Amounts) Performance Stock Awards ("PSUs") PSUs are awarded to certain employees for a portion of their LTIP compensation and generally vest after 3 years from grant date. The actual number of shares payable at settlement is subject to performance metrics relative to the companies and segments of Octave. Actual payout can range from 0 % to 240 % of the number of units granted. Under currently outstanding award agreements, performance will be evaluated as follows: • In regards to ID business for the 2023 and 2024 PSU awards, (i) cumulative earnings before interest, taxes, depreciation and amortization over the vesting period and (ii) the aggregate of all premiums placed by Octave Partners LLC with any insurance carrier over the vesting period. For the 2025 PSU awards, (i) compounded annual growth rate of cumulative earnings before interest, taxes, depreciation and amortization attributed to Octave shareholders over the vesting period and (ii) Compounded annual growth rate of organic revenues, excluding profit commissions over the vesting period. • In regards to Everspan: (i) for the 2023 and 2024 PSU awards, cumulative earnings before interest, taxes, depreciation and amortization over the vesting period and (ii) cumulative direct or assumed premiums written (including any from Octave Partners) and fronting fees over the vesting period. • In regards to AAC: for the 2023 award, reductions in watch list and adversely classified credits, which is intended to reward participants for de-risking the financial guarantee insured portfolio. • Relative Total Shareholder Return ("rTSR") will cause the payout at the end of the performance period to be increased or decreased 20 % for PSU awards granted 2023, 2024 and 2025, if OSG's stock performance compared to a peer group is at or above the 75 th percentile or at or below the 25 th percentile, respectively . Pursuant to the LTIP award agreements, if (i) a termination occurred prior to the last day of the performance period by reason of disability, an involuntary termination by the Company other than for “cause,” or "retirement," the recipient would be entitled to receive the PSU award at the end of the relevant performance period based on the satisfaction of the performance conditions related to such award at the end of the performance period, and (ii) a termination occurred prior to the last day of the performance period by reason of death, the beneficiaries of the recipient would be entitled to receive the number of PSUs that the recipient would have been entitled to receive at a 100 % overall payout multiple regardless of the outcome of any of the performance conditions. The current performance awards shall be settled within 75 days after the end of the performance period, including those with partial or accelerated vesting, subject to any deferrals made pursuant to the Stock Deferral Plan. A summary of PSU activity for 2025 is as follows: Shares Weighted Average Grant Date Fair Value Per Share Outstanding at beginning of period 1,263,511 $ 17.51 Granted (1) 1,016,230 8.02 Delivered (2) ( 1,046,492 ) 17.60 Forfeited ( 153,169 ) 16.53 Performance adjustment (3) 349,978 14.10 Outstanding at end of period 1,430,058 $ 10.65 (1) Represents performance share units at 100 % of units granted for LTIP Awards. (2) Reflects the number of performance shares attributable to the performance goals attained over the completed performance period and for which service conditions have been met. When performance stock unit awards issued by Octave become taxable compensation to employees, shares may be withheld to cover the employee’s withholding taxes. For the year ended December 31, 2025, Octave withheld 638,388 of shares from employees that settled performance based restricted stock units to meet the required tax withholdings. (3) Represents the number of additional shares issued for awards granted in 2022 and partially for awards in 2023 as a result of actual performance during the performance period. The fair value of PSUs awards are based on the grant date OSG stock price adjusted for the rTSR performance metric using a Monte Carlo simulation of stock performance relative to the peer group over the 3-year performance period. The weighted average grant date fair value per share of PSUs granted during 2025, 2024 and 2023 was $ 8.02 , $ 15.94 and $ 17.72 , respectively. As of December 31, 2025, there was $ 3,175 of total unrecognized compensation costs related to the PSU portion of unvested performance awards. These costs are expected to be recognized over a weighted average period of 1.6 years. The fair value for PSUs vested and delivered during the year ended December 31, 2025, 2024 and 2023 was $ 5,546 , $ 2,663 and $ 7,665 , respectively. Performance Stock Options ("PSOs") PSOs were issued in 2025 to certain executive officers of Octave. PSOs vest upon the achievement of an explicit one-year service period from grant and OSG stock reaching specified market price hurdles. The market price vesting requirement is based on the Company's achievement of the price hurdles related to the shares of Octave common stock, during the 5.0 year period following the grant date as follows: (i) 40 % shall vest on the date on which the sustained stock price first exceeds $ 18.00 per share; (ii) 20 % shall vest on the date on which the sustained stock price first exceeds $ 21.50 per share; (iii) 20 % shall vest on the date on which the sustained stock price first exceeds $ 25.00 per share; and (iv) 20 % shall vest on the date on which the sustained stock price first exceeds $ 30.00 per share. Compensation costs for PSOs are initially recognized over the period from grant date to the end of the derived service period for each price hurdle tranche estimated from valuation process which range from 2.3 to 3.2 years. The PSOs expire 10.0 years from the date of grant. Octave Specialty Group, Inc. 89 2025 Form 10-K OCTAVE SPECIALTY GROUP, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Dollar Amounts in Thousands, Except Share Amounts) The fair value of the PSOs was based on a Monte Carlo simulation of stock performance over the 5-year performance period from date of grant. For each iteration that market condition is met, the option is valued at that time using a Black-Scholes model. Inputs and assumptions to the valuation model include the grant date stock price of $ 8.97 , exercise price of $ 8.97 , OSG stock price volatility of 46.9 %, risk free rate of 3.7 %, and cost of equity 11.8 %. The volatility and risk free rate are both commensurate with the 5-year market performance period. Additionally, a discount for lack of marketability of 10.7 % was applied to the modeled value. A summary of PSO activity for 2025 is as follows: Shares Weighted Average Grant Date Fair Value Outstanding at beginning of period — $ — Granted 1,134,500 8.97 Exercised — — Forfeited or expired — — Outstanding at end of period 1,134,500 $ 8.97 None of the PSOs outstanding are vested or exercisable as of December 31, 2025. The weighted average grant date fair value per share of the options granted in 2025 was $ 2.93 . As of as of December 31, 2025, there was $ 3,025 of total unrecognized compensation cost related to non-vested PSOs which is expected to be recognized over a weighted average period of 2.4 years. Other Incentive Plans Certain of Octave's majority owned Insurance Distribution subsidiaries have incentive plans that include employee incentive stock options to acquire shares of the subsidiary and management units that allow employee holders to participate in profits of their subsidiary over established targets. Stock-based compensation expense arising from subsidiary stock options was $ 36 , $ 0 and $ 0 in 2025, 2024 and 2023, respectively. Profit sharing management units are recognized as cash compensation over the applicable vesting period based on expected payouts. Compensation expense arising from profit sharing units was $ 331 , $ 0 and $ 0 in 2025, 2024 and 2023, respectively. Postemployment Benefits Octave provides discretionary severance benefits. Severance benefits from continuing operations, were $ 5,046 , $ 416 and $ 0 for the years ended December 31, 2025, 2024 and 2023, respectively. Defined Contribution Plans As a result of the acquisitions of All Trans and Capacity Marine effective November 1, 2022, Riverton effective August 1 2023, Octave Ventures effective July 31, 2024, and ArmadaCorp effective October 31, 2025, Octave has multiple savings incentive plans. Substantially all US employees are covered by one of these plans. The Plan sponsored by OSG includes employer matching contributions equal to 100 % of the employees’ contributions, up to 3 % of such participants’ compensation, as defined in the plan, plus 50 % of contributions up to an additional 2 % of compensation, subject to limits set by the Internal Revenue Code. Xchange and Riverton employees moved to this plan from a previous plan (Xchange during 2022 and Riverton during 2023). Employees of All Trans and Capacity Marine are included in a multiple employer plan that has discretionary contributions for which none were made during Octave's ownership of these entities. The plan for US employees of Octave Ventures includes employer matching contributions equal to 100 % of the employees’ contributions, up to 5 % of such participants’ compensation. UK employees of Octave Ventures have a defined contribution pension plan where Octave Ventures contributes 10 % of participants’ compensation and the assets are held separately from those of the group in an independently administrated fund. The plan for employees of ArmadaCorp includes employer matching contributions equal to 100 % of the employees’ contributions, up to 6 % of such participants’ compensation, subject to limits set by the Internal Revenue Code. The plan for employees of Pivix includes employer matching contributions equal to 100 % of the employees’ contributions, up to 4 % of such participants’ compensation, as defined in the plan, plus 50 % of contributions up to an additional 2 % of compensation, subject to limits set by the Internal Revenue Code. The total cost of all the contribution plans were $ 824 , $ 1,945 and $ 676 for the years December 31, 2025, 2024 and 2023, respectively. 18. LEASES Octave is the lessee under certain lease agreements further described below. Lessee information Octave is the lessee in operating leases for corporate offices. Leases in effect at December 31, 2025, have remaining lease terms ranging from under 2 years to 8 years. Certain of these leases include early termination provisions which Octave does not include in the determination of its lease liabilities and right-of-use assets unless exercise is considered reasonably certain. Lease costs are included in operating expenses on the Consolidated Statement of Total Comprehensive Income (Loss). The components of lease costs, net of sub-lessor income, is as follows: Year Ended December 31, 2025 2024 2023 Operating lease cost $ 9,118 $ 4,247 $ 3,904 Short-term lease cost 16 — 52 Variable lease cost 356 437 404 Sublease income 407 ( 1,086 ) ( 1,124 ) Total lease cost $ 9,897 $ 3,598 $ 3,236 Octave is required to make variable lease payments under certain leases which primarily relates to variable costs of the lessor, such as taxes, insurance, maintenance and electricity. During 2025, Octave terminated an operating lease for office space and incurred a termination payment of $ 6,481 , which is included within operating lease cost. Additionally, costs related to a separate operating lease for office space was transferred to AAC prior to completion of sale, lease cost prior to transfer are included within table above. Octave Specialty Group, Inc. 90 2025 Form 10-K OCTAVE SPECIALTY GROUP, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Dollar Amounts in Thousands, Except Share Amounts) Supplemental information related to leases is as follows: Year Ended December 31, 2025 2024 2023 Cash paid for amounts included in the measurement of operating lease liabilities $ 11,060 $ 4,432 $ 4,155 Right-of-use assets obtained in exchange for operating lease liabilities (non-cash) 8,761 2,256 714 Supplemental balance sheet information related to leases is as follows: December 31, 2025 2024 Operating leases: Operating lease right of use assets $ 9,192 $ 18,107 Operating lease liabilities 9,854 21,543 Weighted average remaining lease term: Operating leases 4.6 years 5.1 years Weighted average discount rate: Operating leases 6.3 % 7.8 % Operating lease right of use assets and operating lease liabilities are included in Other assets and Other liabilities, respectively, on the consolidated balance sheet. Future undiscounted lease payments, gross of sublease receipts, to be made are as follows: As of December 31, 2025 Operating Leases 2026 $ 2,523 2027 2,667 2028 2,589 2029 2,096 2030 1,004 Thereafter 463 Total lease payments 11,342 Less: imputed interest ( 1,488 ) Total $ 9,854 19. COMMITMENTS AND CONTINGENCIES The Company periodically receives various regulatory inquiries and requests for information with respect to investigations and inquiries that such regulators are conducting. The Company has complied with all such inquiries and requests for information. The Company is involved from time to time in various routine legal proceedings, including proceedings related to litigation with present or former employees. Although such litigation is routine and incidental to the conduct of its business, such litigation can potentially result in large monetary awards when a civil jury is allowed to determine compensatory and/or punitive damages. Everspan may be subject to disputes with policyholders or other third parties regarding the scope and extent of coverage offered under Everspan's policies, including disputes relating to Everspan’s course of conduct in the handling of claims and settling or failing to settle claims (which can lead to bad faith and other forms of extra-contractual liability); be required to defend claimants in suits against its policyholders for covered liability claims; or enter into commercial disputes with its reinsurers, MGA/Us or third party claims administrators regarding their respective contractual obligations and rights. Under some circumstances, the results of such disputes or suits may lead to liabilities beyond those which are anticipated or reserved, including liabilities in excess of applicable policy limits. Everspan has been, and may from time to time in the future be, threatened with allegations of acting in bad faith in connection with the handling of claims through third-party administrators. Adjudication of any such claims against Everspan could require extensive litigation unless settled or dismissed based on available legal defenses. Damages claimed against Everspan could be material and the outcome of such cases could have an adverse impact on our results of operations and financial condition. In the ordinary course of their businesses, certain of Octave’s subsidiaries assert claims in legal proceedings against third parties to recover losses already paid and/or mitigate future losses. The amounts recovered and/or losses avoided which may result from these proceedings is uncertain, although recoveries and/or losses avoided in any one or more of these proceedings during any quarter or fiscal year could be material to Octave’s results of operations in that quarter or fiscal year. From time to time, Octave is subject to allegations concerning its corporate governance, including the manner in which it exercises control and oversight of its subsidiaries, that may lead to litigation, including derivative litigation. While the monetary impacts of addressing such allegations outside of litigation may not be material, these charges may distract management and the Board of Directors from their principal focus on Octave's business, strategy and objectives. It is not reasonably possible to predict whether suits in addition to those described below will be filed or whether additional inquiries or requests for information will be made, and it is also not possible to predict the outcome of litigation, inquiries or requests for information. It is possible that there could be unfavorable outcomes in these or other proceedings. Legal accruals for litigation against the Company with losses that are probable and reasonably estimable are not material to the operating results or financial position of the Company. For the litigation matters the Company is defending that do not meet the “probable and reasonably estimable” accrual threshold and where no loss estimates have been provided below, management is unable to make a meaningful estimate of the amount or range of loss that could result from unfavorable outcomes. Under some circumstances, adverse results in any such proceedings could be material to our business, operations, financial position, profitability or cash flows. The Company believes that it has substantial defenses to the claims described below and, to the extent that these actions proceed, the Company intends to defend itself vigorously; however, the Company is not able to predict the outcomes of these actions. Octave Specialty Group, Inc. 91 2025 Form 10-K OCTAVE SPECIALTY GROUP, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Dollar Amounts in Thousands, Except Share Amounts) Litigation against Octave Specialty Group, Inc. Dwight Jereczek and Stanley Elliott, individually and on behalf of all others similarly situated v. MBIA Inc., Ambac Financial Group, Inc., Ambac Assurance Corporation, MBIA Insurance Corporation, and National Public Finance Guarantee Corporation (United States District Court for the District of Connecticut, filed on February 12, 2025) (the "COFINA Case"). This putative class action complaint is brought by alleged former holders of bonds issued by the Puerto Rico Sales Tax Financing Corporation (“COFINA”) allegedly insured by defendants under financial guaranty insurance policies. On behalf of themselves and all persons and entities that owned such bonds between October 19, 2018, and February 12, 2019, plaintiffs allege that, in connection with the restructuring of COFINA under Title III of the Puerto Rico Oversight, Management, and Economic Stability Act, defendants orchestrated a scheme to improperly use their role in the Title III process to alter contracts with insured COFINA bondholders, resulting in such bondholders receiving less than what they contracted for under the financial guaranty insurance policies. Plaintiffs assert claims for breach of contract, breach of the implied covenant of good faith and fair dealing, unjust enrichment, and bad faith refusal to pay first-party benefits under an insurance contract. Plaintiffs seek an unspecified amount of damages with interest thereon, disgorgement of profits, a declaratory judgment of plaintiffs’ rights and defendants’ responsibilities, and a permanent injunction against violations of law. On November 14, 2025, the Court found that Defendants were entitled to a stay of discovery. On February 13, 2026, the Court entered an order dismissing Plaintiffs' claims against Ambac Financial Group, Ambac Assurance Corporation, MBIA Insurance Corporation, and National public Finance Guarantee Corporation for lack of personal jurisdiction; Plaintiffs' claims against MBIA Inc. were dismissed for failure to state a claim, with leave to file a second amended complaint on or about March 6, 2026. Litigation in Legacy Financial Guarantee Business AAC is involved in litigation as described in Note 19. Commitments and Contingencies to the Consolidated Financial Statements in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2024, and Note 13. Commitments and Contingencies to the Unaudited Consolidated Financial Statements in the Company's Report on Form 10-Q for the quarterly period ended June 30, 2025. Following completion of the AAC sale, AFG no longer has any exposure to such matters other than the COFINA Case, in which AFG is a named defendant. Octave Specialty Group, Inc. 92 2025 Form 10-K Table of Contents Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure — None.