OCTAVE SPECIALTY GROUP INC 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations ($ in thousands) The objectives of our Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) are to provide users of our consolidated financial statements with the following: • A narrative explanation from the perspective of management of our financial condition, results of operations, cash flows, liquidity and certain other factors that may affect future results; • Context to the unaudited consolidated financial statements; and • Information that allows assessment of the likelihood that past performance is indicative of future performance. The following discussion should be read in conjunction with our consolidated financial statements in Part I, Item 1 and the matters described under Part II, Item 1A. Risk Factors in this Quarterly Report and under Item 1A. Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2025. Refer to Item 1. Business and Note 1. Background and Business Description in our Annual Report on Form 10-K for the year ended December 31, 2025, for a description of our business and our key strategies to achieve our primary goal to maximize shareholder value. Unless otherwise noted, this Management's Discussion and Analysis of Financial Condition and Results of Operations relates solely to our continuing operations and does not include the operations of the Legacy Financial Guarantee business. See "Sale of AAC" below and "Sale of Ambac Assurance Corporation" in Note 5. Discontinued Operations of the Notes to Consolidated Financial Statements in the Annual Report on Form 10-K for the year ended December 31, 2025 for additional information about the divestiture of the Legacy Financial Guarantee business. Organization of Information MD&A includes the following sections: Page Strategies to Enhance Shareholder Value 27 Overview 28 Critical Accounting Estimates 29 Results of Operations 29 Liquidity and Capital Resources 32 Balance Sheet 34 Accounting Standards 36 U.S. Insurance Statutory Basis Financial Results 36 Non-GAAP Financial Measures 36 Strategies to Enhance Shareholder Value The Company's primary goal is to maximize long-term shareholder value through the execution of targeted strategies for its Insurance Distribution and Specialty Property and Casualty Insurance businesses. Insurance Distribution and Specialty Property and Casualty Insurance strategic priorities include: • Growing and expanding our Insurance Distribution business based on deep domain knowledge in specialty and niche classes of risk which generate attractive margins at scale. This will be achieved through establishing new businesses “de-novo,” organic growth and diversification, and select acquisitions supported by a centralized technology-led shared services offering; • Growing our Specialty Property and Casualty Insurance business to generate underwriting profits from a diversified portfolio of commercial and personal liability risks accessed primarily through affiliated and non-affiliated program administrators. In addition, we may seek strategic relationships and/or partnerships with unaffiliated parties in order to expand our product offerings, access to reinsurance capacity and other business or operational advantages. Octave continuously evaluates opportunities to acquire businesses and assets for its ID business, some of which may be material to our financial condition and operations and/or may involve raising capital to finance. There can be no assurance that we will agree to acquire any business or assets, or that we can obtain the necessary financing or complete any acquisition in a timely manner or at all. Octave Specialty Group, Inc. 27 First Quarter 2026 Form 10-Q Table of Contents OVERVIEW ($ in thousands) The Company's continuing operations include two segments, financial highlights of which are summarized below along with other recent developments. Three Months Ended March 31, 2026 Three Months Ended March 31, 2025 Reportable Segments Reportable Segments Specialty Property & Casualty Insurance Insurance Distribution Corporate & Other Consolidated Specialty Property & Casualty Insurance Insurance Distribution Corporate & Other Consolidated Premiums placed $ 426,833 $ 426,833 $ 233,186 $ 233,186 Gross premiums written $ 103,716 103,716 $ 86,915 86,915 Net premiums written 32,449 32,449 18,004 18,004 Total revenues 25,299 78,526 $ 345 104,170 21,171 40,998 $ 587 62,756 Total expenses 33,581 61,741 12,192 107,514 19,668 43,241 14,954 77,863 Pretax income (loss) (8,282) 16,785 (11,847) (3,344) 1,503 (2,243) (14,367) (15,107) EBITDA (8,282) 30,817 (11,575) 10,960 1,503 12,083 (14,063) (477) Adjusted EBITDA 1,618 32,995 (6,889) 27,724 1,589 12,112 (9,988) 3,713 Net income (loss) attributable to shareholders (7,690) $ 13,165 $ (12,326) (6,851) 1,425 $ (3,397) $ (14,172) (16,144) EBITDA attributable to shareholders (8,282) 23,467 (11,575) 3,610 1,503 7,083 (14,063) (5,477) Adjusted EBITDA attributable to shareholders $ 1,618 25,340 $ (6,889) 20,069 $ 1,589 7,112 $ (9,988) (1,287) Sale of AAC On September 29, 2025 the Company completed the sale of AAC. Refer to Note 3. Discontinued Operations of the Notes to Consolidated Financial Statements included in this Quarterly Report on Form 10-Q and Note 5. Discontinued Operations of the Notes to Consolidated Financial Statements in the Annual Report on Form 10-K for the year ended December 31, 2025, for further details on the sale of AAC. For all periods leading up to the sale, AAC's results of operations and OSG's loss on sale are reported within Net income (loss) from discontinued operations before tax on the Consolidated Statement of Comprehensive Income (Loss). 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, funded in part by $120,000 of loans obtained under new credit facilities. Refer to Note 4. Business Combinations of the Notes to Consolidated Financial Statements in the Annual Report on Form 10-K for the year ended December 31, 2025, for further details on the acquisition of ArmadaCorp. ArmadaCorp includes an MGA/U that focuses on supplemental health and benefit products for C-suite executives and other key talent. ArmadaCorp creates and distributes supplemental benefit solutions and insurance products. ArmadaCorp's differentiated product offering in the A&H market provides both line of business and product diversification to the Company, while also increasing exposure to non-correlated A&H business lines. ArmadaCorp also provides clients with tools to navigate the healthcare system, including services that help match individuals with physicians suited to their personal needs, and maintains a provider of third-party administration services for insurance carriers that distribute the benefit products and handle claims. Pivix 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 now has an approximately 74% controlling stake in Pivix when combined with its previous 17% minority equity interest, and includes Pivix in its consolidated financial statements. Acquisitions of additional ownership of ID subsidiaries During the first quarter of 2026 certain holders exercised their put options. See Note 1. Background and Business Description - Redeemable Noncontrolling Interest for further information. SEC Final Rules on Climate Related Information On March 6, 2024, the SEC adopted The Enhancement and Standardization of Climate-Related Disclosures for Investors ("Final Rule") , which will require registrants to disclose extensive climate-related information in their Form 10-K annual reports and registration statements. The Final Rule was scheduled to become effective May 28, 2024; however, the SEC has voluntarily stayed the rule’s effective date pending judicial review of legal challenges. In March 2025, the SEC ended its defense of the Final Rule, and in September 2025, the Eighth Circuit ordered that the litigation would be held in abeyance until such time that the SEC reconsiders or renews its defense of the Final Rule. Octave Specialty Group, Inc. 28 First Quarter 2026 Form 10-Q Table of Contents CRITICAL ACCOUNTING ESTIMATES Octave's Unaudited Consolidated Financial Statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”), which require the use of material estimates and assumptions. For a discussion of Octave's critical accounting policies and estimates, see “Critical Accounting Policies and Estimates” in Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in Octave's Annual Report on Form 10-K for the year ended December 31, 2025. Results of Operations Consolidated Results A summary of our financial results is shown below: Three Months Ended March 31, 2026 2025 Gross premiums written $ 103,716 $ 86,915 Net premiums written 32,449 18,004 Revenues: Net premiums earned $ 20,001 $ 15,678 Commissions 68,178 36,771 Servicing and other fees 9,362 4,964 Program fees 3,644 3,652 Investment income 2,355 2,815 Other 630 (1,124) Expenses: Losses and loss adjustment expenses 19,679 10,496 Policy acquisition costs 6,371 3,841 Commissions 14,005 10,365 General and administrative 53,155 38,531 Intangible amortization and depreciation 12,214 9,176 Interest 2,090 5,454 Total expenses 107,514 77,863 Provision (benefit) for income taxes from continuing operations (481) (617) Net income (loss) from continuing operations (2,863) (14,490) Net income (loss) from discontinued operations, net of income taxes — (30,247) Net income (loss) (2,863) (44,737) Net (gain) loss attributable to noncontrolling interest (3,988) (1,654) Net income (loss) attributable to shareholders $ (6,851) $ (46,391) Octave's results for the three months ended March 31, 2026 compared to the three months ended March 31, 2025, were impacted by the following: • Acquisitions within the ID segment have had a significant impact on the comparability of results between 2026 and 2025. • Effective October 31, 2025, Octave acquired 100% of ArmadaCare. • Effective September 1, 2025, Octave exercised its option to convert its $3,500 convertible note investment in Pivix and now owns approximately 74%. • On September 29, 2025, Octave completed the sale of AAC. AAC's results, including Octave's loss on the sale of AAC are reported within discontinued operations. Refer to Note 4. Discontinued Operations of the Notes to Consolidated Financial Statements included in this Quarterly Report on Form 10-Q and Note 5. Discontinued Operations of the Notes to Consolidated Financial Statements in the Annual Report on Form 10-K for the year ended December 31, 2025, and for further details on the sale and results for the three months ended March 31, 2025. As a result of the sale, Octave repaid all of the outstanding debt used to acquire Octave Ventures, amounting to $150,000, and purchased AAC's co-investment in Octave Ventures of $62 million. Concurrent with the sale, OSG entered into a number of transactions as discussed in the Annual Report on Form 10-K for the year ended December 31, 2025, including transactions intended to lower the long term run-rate of corporate operating expenses. The following describes the consolidated results of continuing operations of Octave and its subsidiaries for the three months ended March 31, 2026 and 2025. Gross Premiums Written Gross premiums written increased $16,801 for the three months ended March 31, 2026 compared to the same period in the prior year. The increase is primarily driven by growth in new and existing programs partially offset by the non-renewal of certain programs. Net Premiums Written Net premiums written increased $14,445 for the three months ended March 31, 2026 compared to the same period in the prior year. The increase is primarily driven by growth in new and existing programs, including certain programs with a high retention ratio partially offset by the non-renewal of certain programs. Net Premiums Earned Net premiums earned increased $4,323 for the three months ended March 31, 2026 compared to the same period in the prior year. The increase is primarily driven by growth in new and existing programs, including certain programs with a high retention ratio partially offset by the non-renewal of certain programs. Commission Income and Commission Expense Commission increased $31,407 for the three months ended March 31, 2026 as compared to the same period in the prior year. The increase was primarily due to organic growth in premiums placed as well as the acquisition of ArmadaCare in October of 2025. Commission income included profit commissions (based on underwriting performance) of $6,188 for the three months ended March 31, 2026, and $4,691 for the three months ended March 31, 2025. The increase for the three months ended March 31, 2026, was primarily driven by increase at Octave Ventures and Xchange Benefits. Commission expense increased $3,640 for the three months ended March 31, 2026 as compared to the same period of the prior year. Commission expense represented approximately 22% and 32% of commission income for the three months ended March 31, 2026 and 2025, respectively. The decrease in commission expense relative to commission income in 2026 Octave Specialty Group, Inc. 29 First Quarter 2026 Form 10-Q Table of Contents relative to 2025 is related to the Armada acquisition as majority of their business is produced internally and lower external broker commisison model as well as change in gross to net reporting at Octave Ventures. Because third parties are paid commissions to obtain business, the majority of Octave Ventures' commission income is reported net of any distribution and commission expenses, due to the nature of its program agreements. The majority of the ID segment's other MGA/Us report their commission income gross of distribution and commission expenses. Program Fees Program fee revenues were $3,644 and $3,652 for the three months ended March 31, 2026 and 2025, respectively. Program fee revenues represent the recognition of ceding commissions in excess of direct acquisition costs received from reinsurers and minimum fees received from MGA/Us until related programs reach certain levels of premium ceded. Program fees are charged as a percentage of premiums ceded to reinsurers as a component of total ceding commissions. Program fees for three months ended March 31, 2026 are flat versus the three months ended March 31, 2025, due to growth in existing programs offset by impact of a shift to retained from fronted for certain programs. Net Investment Income Net investment income consists of interest income, including the net effect of discount accretion and premium amortization, from fixed maturity securities classified as available for sale and net gains (losses) on pooled investment funds that are reported under the equity method. These funds and certain other investments are reported in Other investments on the Consolidated Balance Sheets. For further information about investment funds held, refer to Note 4. Investments of the Notes to Consolidated Financial Statements included this Quarterly Report on Form 10-Q. Net investment income decreased $460 for the three months ended March 31, 2026 compared to the same period in the prior year due primarily to lower Corporate short-term investment yields and balances following the acquisition of ArmadaCare and lower average Everspan asset balances. Servicing and Other Fees Servicing and other fees increased $4,398 for the three months ended March 31, 2026. Servicing and other fees include revenues earned for providing operational and administrative services to the Lloyd's syndicates managed by Octave Ventures as well as program administration, health connections, set-up and renewal fees related to ArmadaCare and Pivix. Other Revenues Other revenues includes (i) net investment gains (losses) on securities sold or called, net of investment impairment charges; (ii) foreign exchange gains (losses) from the ID segment; and (iii) net gains (losses) on derivative contracts including FX forward contracts used to manage currency risk within the ID segment. Other revenues for the three months ended March 31, 2026, of $630 and for the three months ended March 31, 2025, of $(1,124) were driven primarily by by foreign exchange gains and (losses) on non-functional currency operations of Octave Ventures, net of the offsetting effects of FX forward contracts. Losses and Loss Adjustment Expenses (Benefit) Loss and loss adjustment expenses incurred increased $9,183 for the three months ended March 31, 2026 compared to the same period in the prior year. The higher loss and loss adjustment expenses is due to the growth in existing and addition of new programs and prior period development primarily related to (i) $2,125 of net losses and $5,787 of LAE (legal expenses) from the settlement of a potential litigation matter related to an insurance claim, and (ii) slight reserve strengthening on an excess liability program and claim fees. General and Administrative Expenses (G&A) The following table provides a summary of G&A expenses for the three months ended March 31, 2026 and 2025: Three Months Ended March 31, 2026 2025 Compensation $ 37,044 $ 22,887 Non-compensation 16,111 15,644 Total G&A expenses $ 53,155 $ 38,531 The increase of $14,157 in compensation expenses during the three months ended March 31, 2026, was driven primarily by higher compensation costs due to (i) the acquisitions of ArmadaCare and Pivix, (ii) changes in performance factors and timing of grants in 2025, (iii) expansion of Octave Venture's managing agency, and (iv) acceleration of RSUs & PSUs of terminated employees, and severance. The increase of $467 in non-compensation G&A expenses for the three months ended March 31, 2026 as compared to the three months ended March 31, 2025, was driven primarily by integration expenses related to the ArmadaCare and Pivix acquisitions and costs associated with the build-out of the Octave Ventures managing agency, partially offset by a reduction in Corporate segment initiatives. Intangible Amortization and Depreciation. The increase in intangible amortization and depreciation of $3,038 for the three months ended March 31, 2026 as compared to the three months ended March 31, 2025, was primarily due to the ArmadaCare acquisition. Interest Expense The decrease in interest expense of $3,364 for the three months ended March 31, 2026 as compared to the three months ended March 31, 2025, was due to a lower loan balance, reduced interest rate, and prior year includes duration fees. Provision for Income Taxes The provision (benefit) for income taxes primarily relates to international operations and was $(481) for the three months ended March 31, 2026 compared to $(617) for the three months ended March 31, 2025. The tax benefit recognized in the current year includes current tax expense associated with Octave Ventures UK operations, partially offset by deferred tax benefit related to the recognition of deferred tax assets generated by Octave Ventures US and amortization of finite-lived intangible assets associated with Octave Ventures UK and US operations. Octave Specialty Group, Inc. 30 First Quarter 2026 Form 10-Q Table of Contents Results of Operations by Segment Insurance Distribution Three Months Ended March 31, 2026 2025 Premiums placed $ 426,833 $ 233,186 Revenues: Commission income $ 68,178 $ 36,771 Commission expense 14,005 10,365 Net commissions 54,173 26,406 Servicing and other fees 9,362 4,964 Investment income 308 376 Other revenue 678 $ (1,113) Expenses: General and administrative 33,704 18,550 EBITDA 30,817 12,083 Interest expense 2,090 5,454 Depreciation 295 109 Intangible amortization 11,647 8,763 Pretax income (loss) $ 16,785 $ (2,243) Octave's stockholders equity (1) $ 519,355 $ 214,431 (1) Represents the share of Octave stockholders equity for each subsidiary within the ID segment, including intercompany eliminations. Octave's ID companies are compensated for their services primarily by commissions paid by insurance carriers for underwriting, structuring and/or administering polices, and in some cases, the managing of claims under an agency agreement. Commission revenues are usually based on a percentage of the premiums placed. In addition, we are eligible to receive profit sharing contingent commissions based on the underwriting results of certain programs underwritten by our MGA/Us. These profit commissions may fluctuate from period to period resulting in some variability in revenue and earnings. Higher premiums placed were driven by the acquisition of ArmadaCare and organic growth. For the three months ended March 31, 2026, the increase in premiums placed and changes to the mix of business written led to the growth in commission income and commission expense of 85% and (35.1)%, respectively. The increase in G&A expenses of $15,154 for the three months ended March 31, 2026 as compared to the three months ended March 31, 2025, was primarily due to the acquisition of ArmadaCare, launch of Pivix as well as increase in staffing for the build out of new businesses at Octave Ventures. ID pretax income for the three months ended March 31, 2026, was $16,785 compared to a loss of $(2,243) for the three months ended March 31, 2025. The higher pretax income for the three months ended March 31, 2026, compared to the prior year period mostly related to higher Net Commissions and Fees related to the ArmadaCare acquisition and organic growth as well as lower interest expense, partially offset by higher intangible amortization. The ID EBITDA for the three months ended March 31, 2026, was $30,817 compared to $12,083 for the three months ended March 31, 2025. The increase was primarily driven by an increase in commission income due to acquisitions and organic growth. ID businesses may experience seasonal impacts on their revenues and net results. For example, our A&H businesses collectively produce the majority of their business in the first quarter of each year resulting in revenue and earnings concentrations in the first quarter. Similar concentrations of production, revenue and earnings also occurs in the fourth quarter, driven by our non-A&H businesses, but generally to a lesser degree. Seasonal impacts on the ID segment, and therefore Octave's results, may increase or decrease and shift over time depending on the relative growth of certain classes of business, impact of acquisitions, impact of de-novo MGAs and market conditions. Specialty Property and Casualty Insurance Three Months Ended March 31, 2026 2025 Gross premiums written $ 103,716 $ 86,915 Net premiums written 32,449 18,004 Revenues: Net premiums earned $ 20,001 $ 15,678 Program fees 3,644 3,652 Investment income 1,649 1,842 Other 5 (1) Total 25,299 21,171 Expenses: Losses and loss adjustment expenses 19,679 10,496 Policy acquisition costs 6,371 3,841 General and administrative 7,532 5,331 Total 33,581 19,668 Pretax income (loss) $ (8,282) $ 1,503 EBITDA (8,282) 1,503 Retention Ratio (1) 31.3% 20.7% Loss and LAE Ratio (2) 98.4% 66.9% Expense Ratio (3) 51.3% 35.2% Combined Ratio (4) 149.7% 102.1% Octave's stockholders equity (5) $ 132,714 $ 137,241 (1) Retention ratio is defined as net premiums written divided by gross premiums written. (2) Loss and LAE ratio is defined as losses and loss expenses incurred divided by net premiums earned. (3) Expense Ratio is defined as acquisition costs and general and administrative expenses, reduced by program fees divided by net premiums earned. (4) Combined ratio is defined as Loss and LAE ratio plus Expense Ratio. (5) Represents Octave stockholders equity in the Specialty Property and Casualty Insurance segment, including intercompany eliminations. The Specialty Property and Casualty Insurance segment has grown significantly since underwriting its first program in May 2021. Twenty-four programs were authorized to issue policies as of March 31, 2026, including Everspan participating in certain programs as a reinsurer. In 2026, Everspan's continues to see its production levels build with growth in new and existing programs. This growth has resulted in an increase in gross and net premiums written, net premiums earned, losses and loss Octave Specialty Group, Inc. 31 First Quarter 2026 Form 10-Q Table of Contents expenses incurred, policy acquisition costs and a shift in Everspan's retention ratio in the three months ended March 31, 2026 compared to the three months ended March 31, 2025. Although losses and loss expenses have increased, the shift in Everspan's net portfolio mix has led to an improved loss ratio on active programs. Consistent with its strategy to generate sustainable and profitable, long-term specialty property and casualty program insurance business with a focus on diverse classes of risks, Everspan may source select programs as a reinsurer. Accessing programs as a reinsurer provides Everspan the ability to diversify its risk profile (temporarily or long-term), efficiently manage its exposure limits and underwrite programs in a cost efficient manner, amongst other benefits. Everspan may participate as a reinsurer on up to 30% of a program, which is in line with its strategy to retain up to 30% per program. Participation as a reinsurer will affect the retention ratio as Everspan's portion of assumed premiums is reflected fully in both Gross and Net premiums written. The change in the Loss and LAE ratio during the three months ended March 31, 2026, was driven by $2,125 of net losses and $5,787 of LAE (legal expenses) from the settlement of a potential litigation matter related to an insurance claim, partially offset by a shirt in business mix. The three months ended March 31, 2026, contained prior years loss strengthening equating to 44.5% of which 39.6% relates this settlement. The remaining amount primarily relates to an excess liability claim and ULAE. The three months ended March 31, 2025, contained minimal prior years loss strengthening equating to 1.1%. Loss and loss adjustment expenses incurred, and Everspan's associated Loss and LAE ratio, may be adversely impacted by economic and social inflation. The impact of inflation on ultimate loss reserves is difficult to estimate, particularly in light of recent disruptions to the judicial system, supply chains and labor markets. Going forward, we may not be able to offset the impact of inflation on our loss costs with sufficient price increases. The estimation of loss reserves may also be more difficult during extreme events, such as a pandemic, or during the persistence of volatile or uncertain economic conditions, due to, amongst other reasons, unexpected changes in behavior of judiciaries, claimants and policyholders, including fraudulent reporting of exposures and/or losses. Due to the inherent uncertainty underlying loss reserve estimates, the final resolution of the estimated liability for loss and loss adjustment expenses will likely be higher or lower than the related loss reserves at the reporting date. In addition, our estimate of losses and loss expenses may change. These additional liabilities or increases in estimates, or a range of either, could vary significantly from period to period. In addition to the increase in the Loss and LAE ratio for the three months ended March 31, 2026, compared to the three months ended March 31, 2025, there was a charge to acquisition costs resulting from sliding scale commission arrangements with program partners. Such charge increased the Specialty Property and Casualty Insurance segment's expense ratio by 1.4% and —% for the three months ended March 31, 2026 and 2025, respectively. Certain Everspan programs were structured to include sliding scale commission arrangements within a loss ratio range. These sliding scale arrangements help mitigate losses, protect underwriting results and limit earnings volatility. The increase in G&A expenses of $2,201 for the three months ended March 31, 2026 as compared to the three months ended March 31, 2025, was primarily due to severance and accelerated incentive compensation in addition to higher premium taxes driven by increased premiums written. Corporate Corporate consists of our holding company and shared services operations ("Corporate"). Corporate provides financial, legal, technological and human resources to Octave's two segments and is responsible for the function of OSG as a publicly-traded company. Corporate revenues totaled $345 and $587 for the three months ended March 31, 2026 and 2025, respectively. Corporate revenue is mostly generated from investment of OSG's liquid resources and investment results from its previously made strategic investments, including certain minority investments in MGA/Us and an insurtech fund. Investment revenues comprised of net investment income and net investment gains (losses), including impairments, were $398 and $597 for the three months ended March 31, 2026 and 2025, respectively. The decline is primarily due to lower average invested assets due to the use of funds for the acquisition of ArmadaCare and share repurchases in the fourth quarter of 2025, as well as lower yields on short-term invested assets in 2026. Corporate expenses were $11,919 and $14,650 for the three months ended March 31, 2026 and 2025 respectively. The decrease is mainly due to cost reduction initiatives, including lower premise expenses following the corporate office re-location, and reduced acquisition-related costs. LIQUIDITY AND CAPITAL RESOURCES Holding Company Liquidity OSG is organized as a legal entity separate and distinct from its operating subsidiaries. OSG's liquidity is dependent on its portfolio of cash and short-term investments totaling $39,155 as of March 31, 2026; investment income; distributions, tax and expense-sharing payments from its operating subsidiaries; sales of other assets; and potential third-party capital (e.g. credit facilities). March 31, 2026 December 31, 2025 Cash and short-term investments $ 39,155 $ 49,471 Other investments (1) 21,620 25,124 Other net (liabilities) assets 135 1,889 Total $ 60,909 $ 76,484 (1) Includes minority investments in insurance services businesses of $17,517 and $17,517 at March 31, 2026 and December 31, 2025, respectively. The decrease in OSG's stand alone net assets, excluding its equity investments in subsidiaries, during the first three months of 2026 was driven primarily by net cash outflows from operating expenses, contributions to subsidiaries related to the acquisition of noncontrolling interests and share repurchases related to the settlement of taxes on equity compensation, partially offset by interest income and distributions received from subsidiaries. Octave Specialty Group, Inc. 32 First Quarter 2026 Form 10-Q Table of Contents Everspan's ability to make dividend payments will depend on its future profitability relative to its capital needs to support its growth. Everspan did not pay dividends to OSG in 2025 and is not expected to pay dividends in 2026. However, Everspan makes tax payments to OSG in accordance with a Tax Sharing Agreement. Octave Partners (i.e. business units within the Insurance Distribution segment) does not have any regulatory restrictions on its ability to make distributions. Our Insurance Distribution segment subsidiaries pay dividends either monthly, quarterly or annually, depending on the timing of their cash flows (which can be impact by seasonality), working capital requirements, and any other cash flow commitments. OSG's principal uses of liquidity are: (i) the payment of G&A expenses, including costs to explore opportunities to grow and diversify Octave, (ii) making capital investments to acquire, grow and/or capitali ze new and/or existing businesses, including through the acquisition of noncontrolling interests as a result of the exercise of outstanding puts and/or calls, (iii) potential capital contributions to subsidiaries to supplement debt service requirements, (iv) making investments in technology and other operational infrastructure to improve the operational effectiveness and e fficiency of our business and to support its growth, and (v) share repurchases and warrant conversions. F unding puts, calls and other capital commitments could require payments from OSG, the magnitude of which will ultimately depend on the performa nce of the underlying businesses, whether or not the puts or calls are exercised, FX rates and other considerations, including whether OSG opts to settle put/call exercises or warrant conversions in its own common shares or cash. Between March 31, 2026 and April 9, 2026, OSG paid $43,869 (including stamp duty) to acquire noncontrolling interests primarily as a result of the exercise of puts. OSG funded these purchases with a combination of cash and incremental Octave Partners debt (refer to Note 9. Debt for details regarding the increase to the Credit Facility). OSG is seeking to fund future NCI puts and calls using internal funding, but may also seek additional debt or other funding sources. OSG may satisfy certain put/call obligations using common equity for up to 35% of the amount of the exercise value. The need for additional capital to fund future NCI puts and calls will depend on a number of considerations, including distribution levels from subsidiaries, the potential for additional acquisitions, other capital investment demands, stock repurchases and warrant conversions. In addition, the value of the noncontrolling interests puts and calls at the time of exercise will also have an impact on our need for additional funding. OSG may also provide short-term financial support, primarily in the form of loans, to its operating subsidiaries to support their operating requirements. In connection with and pursuant to the Purchase Agreement related to the sale of Ambac Assurance Corporation, 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. Effective after March 31, 2026, and during the six months ended September 30, 2026, the warrant holder may convert up to one-third or approximately 1,697,569 of the warrants at the Black-Sholes value. Subsequent to September 30, 2026, an additional third of the warrants may be converted in any three-month period. OSG estimates the Black-Scholes value of the warrants at $2.50 per warrant share as of April 2026. In the opinion of the Company’s management, the net assets and expected funding sources of OSG are sufficient to meet OSG’s current liquidity requirements. However, events, opportunities, acquisitions, the exercise of puts and calls, the need to refinance outstanding debt, share repurchases, warrant conversions or other circumstances could require OSG to seek additional capital (e.g. through loans or the issuance of debt, equity convertible, hybrid or equity securities). The Credit Facility entered into in connection with the 2025 acquisition of ArmadaCare and amended in connection with the 2026 acquisition of NCI includes covenants that restrict our ability to manage capital resources by requiring maintenance of certain financial ratios and restricting indebtedness, liens, mergers, sales of assets, investments, restricted payments (such as dividends), and affiliate transactions, among other restrictions. The Credit Facility also requires the prepayment of the borrowings thereunder with proceeds of certain asset sales, recovery events, issuances of indebtedness and indemnity payments. These requirements will impact our financial and operational flexibility while the Credit Facility remains in place. Operating Companies' Liquidity Insurance Sources of liquidity for Everspan are primarily funds generated from premiums, reinsurance recoveries, fees, investment income and maturities and sales of investments. Cash provided from these sources is used primarily for claim payments, loss expenses, acquisition costs, operating expenses, reinsurance payments and purchases of securities and other investments. Everspan manages its liquidity risk by projecting cash flows and maintaining specified levels of cash and short-term investments at all times. It is the opinion of the Company’s management that the insurance subsidiaries’ near term liquidity needs will be adequately met from the sources described above. Insurance Distribution The liquidity requirements of our ID subsidiaries are met primarily by funds generated from commission (both base and profit commissions) and fees. Base commissions and fees are generally received monthly, whereas profit commissions are received only if the business underwritten is profitable. Cash provided from these sources is used primarily for commissions paid to sub-producers, operating expenses and distributions to OSG and other members. Cash Held at Banks Octave maintains cash and investment accounts, including premium trust accounts, at depository institutions in amounts in excess of the limits insured by the FDIC and in countries other than the U.S. Octave's cash balances held at banks were $93,537 Octave Specialty Group, Inc. 33 First Quarter 2026 Form 10-Q Table of Contents as of March 31, 2026, including cash of Octave's insurance distribution subsidiaries held in regional banks of $22,352 as of March 31, 2026. Consolidated Cash Flow Statement Discussion The following table summarizes the net cash flows for continuing operations for the periods presented. Three Months Ended March 31, 2026 2025 Cash provided by (used in): Operating activities $ (10,079) $ (12,612) Investing activities 37,708 21,339 Financing activities (2,133) (5,436) Foreign exchange impact on cash and cash equivalents (399) 225 Net cash flow $ 25,097 $ 3,516 Operating Activities for Continuing Operations Operating cash flows for the three months ended March 31, 2026, were adversely impacted from the settlement of a potential litigation matter related to an insurance claim and interest payments on long-term debt, partially offset by cash collections from both the specialty P&C and insurance distribution businesses. Future operating cash flows will primarily be impacted by net premium collections, investment coupon receipts, fee and net commission revenues, operating expenses, net claim and loss expense payments and debt interest payments. Investing Activities for Continuing Operations Investing activities for the three months ended March 31, 2026, were primarily driven by changes in short-term investments. Financing Activities for Continuing Operations Financing activities for the three months ended March 31, 2026, included tax payments related to shares withheld for share-based compensation plans, distributions to noncontrolling interest holders, and repayment of long-term debt. Future financing cash flows will be primarily impacted by paydowns and maturities of debt; share repurchases; acquisitions of noncontrolling interest shares; other capital management activity and distributions to noncontrolling interests. Cash Flows from Discontinued Operations Cash flows pertaining to discontinued operations are reported separately on the Consolidated Statements of Cash Flows. The primary driver of the cash flows from discontinued operations was the continued runoff of the financial guarantee business, including the collection of premiums, interest income and subrogation, and the payment of claims, expenses and foreign taxes. Since the agreement to sell AAC, the operations were substantially separated and with the sale having been completed in September 2025, future reporting periods exclude any discontinued operations activity after September 30, 2025. BALANCE SHEET Total assets increased by $43,709 from December 31, 2025 to $2,267,026 at March 31, 2026, primarily due to increase in reinsurance recoverables resulting from growth in the specialty P&C business, together with increase in commission receivable from insurance distribution business. Total liabilities increased by approximately $100,332 from December 31, 2025 to $1,237,483 as of March 31, 2026, primarily due the payable to acquire noncontrolling interests from the exercise of puts and an increase in loss and loss adjustment expense reserve and ceded premium payables from the specialty P&C businesses. As of March 31, 2026, total stockholders’ equity was $712,618, compared with total stockholders’ equity of $715,790 at December 31, 2025. The decrease was primarily the result of the net loss attributable to common stockholders for the three months ended March 31, 2026 of $6,851, partially offset with increase in additional paid-in capital resulting from the acquisition of noncontrolling interests from the exercise of puts. Assets: Investment Portfolio Octave's investment portfolio is managed under established guidelines designed to meet the investment objectives of the Everspan Group and OSG. The ID businesses investments are limited to cash sweep products, treasuries, certificates of deposit and money market funds. Refer to "Description of the Business – Investments and Investment Policy" located in Part I. Item 1 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2025, for further description of Octave's investment policies and applicable regulations. The following table summarizes the composition of Octave's investment portfolio, at carrying value at March 31, 2026 and December 31, 2025: March 31, 2026 December 31, 2025 Specialty Property & Casualty Insurance Insurance Distribution Corporate & Other Consolidated Specialty Property & Casualty Insurance Insurance Distribution Corporate & Other Consolidated Fixed maturity securities $ 136,940 $ — $ 152 $ 137,092 $ 122,142 $ — $ 153 $ 122,295 Short-term 36,980 32,174 23,141 92,295 71,286 35,812 39,344 146,442 Other investments 3,503 21,468 24,971 — — 24,971 24,971 Total investments $ 177,423 $ 32,174 $ 44,761 $ 254,358 $ 193,428 $ 35,812 $ 64,468 $ 293,708 Octave Specialty Group, Inc. 34 First Quarter 2026 Form 10-Q Table of Contents Octave invests in various asset classes in its fixed maturity securities portfolio. Refer to Note 4. Investments of the Notes to Consolidated Financial Statements included in this Quarterly Report on Form 10-Q for information about the composition of fixed maturity securities and other investments by asset class. Premium Receivables Octave's premium receivables increased to $87,653 at March 31, 2026 from $75,085 at December 31, 2025. The increase is primarily due to growth in the Specialty P&C Insurance segment, including receivables related to the programs where Everspan participates as a reinsurer. Commission and Fees Receivable Octave's commission and fee receivables increased to $106,198 at March 31, 2026 from $86,549 at December 31, 2025. The increase is primarily due to growth in the ID segment. Reinsurance Recoverable on Paid and Unpaid Losses Octave has reinsurance in place pursuant to surplus share treaties and facultative agreements. As of March 31, 2026 and December 31, 2025, reinsurance recoverable on paid and unpaid losses were $469,859 and $436,092, respectively, increasing primarily due to growth in the Specialty P&C Insurance Segment. To minimize its exposure to losses from reinsurers, Octave (i) monitors the financial condition of its reinsurers; (ii) is entitled to receive collateral from its reinsurance counterparties under certain reinsurance contracts; and (iii) has certain cancellation rights that can be exercised in the event of rating agency downgrades of a reinsurer (among other events and circumstances). Those reinsurance counterparties that do not currently post collateral are well capitalized, highly rated, authorized capacity providers. Octave benefited from letters of credit and collateral amounting to approximately $80,351 from its reinsurers at March 31, 2026. Additionally, while legacy liabilities from Specialty P&C acquisitions were fully ceded to certain reinsurers, Everspan also benefits from an unlimited, uncapped indemnity from the respective sellers to mitigate any residual risk to these reinsurers. Intangible Assets, net of Accumulated Depreciation At March 31, 2026, intangible assets primarily include (i) intangible assets established as part of acquisitions in the ID business of $447,167 and (ii) indefinite-lived intangible assets in the Specialty P&C business as part of its acquisitions of $11,213. As of March 31, 2026 and December 31, 2025, intangible assets were $458,380 and $474,998, respectively. The decrease is driven by foreign exchange rates (appreciation of the British pound), partially offset by amortization of $11,647. Goodwill As of March 31, 2026 and December 31, 2025, goodwill totaled $533,497 and $540,345 respectively. The decrease is primarily driven by foreign exchange rates (appreciation of the British pound). All of the goodwill was assigned to the ID segment. Liabilities: Loss and Loss Adjustment Expense Reserves Loss and loss adjustment expense reserves are estimates of the ultimate liability for unpaid losses and loss expenses for claims that have been reported and incurred, but not yet reported as of the balance sheet date. Loss and loss adjustment expense reserves by line of business were as follows as of March 31, 2026 and December 31, 2025: March 31, 2026 December 31, 2025 Line Gross Net Gross Net Commercial auto $ 162,853 $ 29,446 $ 159,194 $ 23,062 Excess liability 128,381 18,764 116,610 16,897 General liability 62,391 12,750 63,596 12,572 Workers compensation 19,752 19,752 17,798 17,798 Non-standard personal auto 2,895 2,704 3,826 3,635 Professional liability 48,219 3,388 40,846 2,851 Multi-peril / business owners (BOP) 11,246 2,328 6,185 1,519 Surety 10,767 1,060 12,233 94 Unallocated loss adjustment expense reserves 15,515 5,546 14,869 5,551 Other (1) 25,242 171 24,833 289 Loss and Loss Expense Reserves $ 487,260 $ 95,908 $ 459,990 $ 84,268 (1) Includes $21,273 and $0 loss and loss expense reserves on a gross and net of reinsurance basis, respectively, at March 31, 2026, and $23,530 and $0 loss and loss expense reserves on a gross and net of reinsurance basis, respectively, at December 31, 2025, related 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. The process for determining the level of loss and loss adjustment reserves is subject to certain estimates and judgments. Refer to the "Critical Accounting Policies and Estimates" and “Results of Operations” sections of Management’s Discussion and Analysis of Financial Condition and Results of Operations, in addition to Basis of Presentation and Significant Accounting Policies and Loss Reserves sections included in Note 2. Basis of Presentation and Significant Accounting Policies and Note 8. Insurance Contracts, respectively, to the Consolidated Financial Statements included in Part II, Item 8 in the Company’s Annual Report on Form 10-K for the year ended December 31, 2025, for further information on loss and loss adjustment expenses. Debt In connection with the acquisition of ArmadaCare on October 31, 2025, Octave Partners LLC and certain of its subsidiaries (including ArmadaCare) entered into the 2025 Credit Facility to pay part of the purchase price for ArmadaCare. Refer to Note 10. Debt of the Notes to Consolidated Financial Statements included in this Quarterly Report on Form 10-Q for further information. Commission Payable Commission payables are commissions due to sub-producers for placing insurance contracts on behalf of the MGAs and amounts due to UK Syndicates that provide advanced commissions to fund short term liquidity needs for MGAs. Commission payable at March 31, 2026 and December 31, 2025, was $118,086 and $115,555, respectively. The increase is primarily due to higher advance commissions due to Syndicates. Other Liabilities Octave Specialty Group, Inc. 35 First Quarter 2026 Form 10-Q Table of Contents Other liabilities at March 31, 2026 and December 31, 2025, was $158,458 and $102,771, respectively. The increase in Other liabilities is primarily due to consideration payable of $43,644 for the acquisition of redeemable NCI as a result of the exercise of put options by minority owners of Octave Ventures and of certain Option Shares in March 2026. The liability was settled in cash in April 2026. Redeemable Noncontrolling Interest The minority equity interests of Octave Ventures's majority-owned MGA/Us were classified within nonredeemable NCI at March 31, 2026. Changes to redeemable NCI during the three months ended March 31, 2026, relate primarily to the allocation of financial results to the minority interests, reclassification of certain interests to nonredeemable due to the expiration of related put options, the exercise of certain put options and the impact of foreign currency translation. ACCOUNTING STANDARDS Please refer to Note 1. Business and Basis of Presentation to the Unaudited Consolidated Financial Statements included in Part I, Item 1 in this Form 10-Q for a discussion of the impact of recent accounting pronouncements and the potential impact on Octave's financial condition and results of operations. U.S. STATUTORY BASIS FINANCIAL RESULTS OSG's U.S. insurance subsidiaries prepare financial statements under accounting practices prescribed or permitted by its domiciliary state regulator (“SAP”) for determining and reporting the financial condition and results of operations of an insurance company. The National Association of Insurance Commissioners (“NAIC”) Accounting Practices and Procedures manual (“NAIC SAP”) is adopted as a component of prescribed practices by each domiciliary state. For further information, see "Everspan Indemnity Insurance Company," in Part II, Item 7. "Management's Discussion and Analysis of Financial Condition and Results of Operations," and Note 9. Insurance Regulatory Restrictions to the Consolidated Financial Statements included in Part II, Item 8 in the Company’s Annual Report on Form 10-K for the year ended December 31, 2025. Everspan Indemnity Insurance Company Everspan Indemnity Insurance Company’s (EIIC) statutory policyholder surplus was $113,775 at March 31, 2026, as compared to $128,031 at December 31, 2025. The decrease in surplus was driven by a net loss at Everspan Indemnity Insurance Company, including its subsidiaries, of $14,406 during the three months ended March 31, 2026. The net loss was driven by loss and loss expenses incurred and an increase in commission costs. The increase in commission costs was a function of growth and the underwriting of programs with broad sliding scale commission structures. On a US Statutory basis, commission costs are expensed immediately whereas for US GAAP, such costs are deferred and recognized over the life of the respective policies. Each of Everspan's insurance carriers are a direct or indirect wholly-owned subsidiary of EIIC and therefore are included in EIIC's statutory policyholder surplus. NON-GAAP FINANCIAL MEASURES In addition to reporting the Company’s quarterly financial results in accordance with GAAP, the Company is reporting non-GAAP financial measures: EBITDA, Adjusted EBITDA and Adjusted EBITDA Margin, Organic Revenue Growth Rate (Insurance Distribution segment only), Adjusted Net Income and Adjusted Net Income Margin. These amounts are derived from our consolidated financial information, but are not presented in our consolidated financial results because they are not calculated in accordance with GAAP. We present non-GAAP supplemental financial information because we believe such information is of interest to the investment community, and that it provides greater transparency and enhanced visibility into the underlying drivers and performance of our businesses on a basis that may not be otherwise apparent on a GAAP basis. We view these non-GAAP financial measures as important indicators when assessing and evaluating our performance on a segmented and consolidated basis, and they are presented to improve the comparability of our results between periods by eliminating the impact of the items that may not be representative of our core operating performance. These non-GAAP financial measures are not substitutes for the Company’s GAAP reporting, should not be viewed in isolation, and may differ from similar reporting provided by other companies, which may define non-GAAP measures differently. Beginning December 31, 2024, Octave replaced the non-GAAP measure Adjusted Net Income with new non-GAAP measures Adjusted Net Income and Adjusted Net Income Margin and added Adjusted EBITDA and Adjusted EBITDA Margin to better align with other participants in the Property & Casualty insurance industry, including insurance carriers and other peers in the insurance distribution business. The following paragraphs define each non-GAAP financial measure. A tabular reconciliation of the non-GAAP financial measure to the most comparable GAAP financial measure is also presented below. EBITDA — EBITDA is net income (loss) from continuing operations before interest expense, income taxes, depreciation and amortization of intangible assets. EBITDA Margin — EBITDA divided by total revenues. Adjusted EBITDA and Adjusted EBITDA Margin — We define Adjusted EBITDA as net income (loss) from continuing operations before interest expense, income taxes, depreciation, amortization of intangible assets, change in fair value of contingent consideration and certain items of income and expense, including share-based compensation expense, acquisition and integration related expenses, severance, and other exceptional or non-recurring items, including those related to capital raising. We believe that adjusted EBITDA is an appropriate measure of operating performance because it eliminates the impact of income and expenses that may obfuscate business performance, and that the presentation of this measure enhances an investor's understanding of our financial performance. Octave Specialty Group, Inc. 36 First Quarter 2026 Form 10-Q Table of Contents Three Months Ended March 31, 2026 Three Months Ended March 31, 2025 Specialty Property & Casualty Insurance Insurance Distribution Corporate & Other Total Specialty Property & Casualty Insurance Insurance Distribution Corporate & Other Total Net income (loss) (Continuing Operations) $ (7,690) $ 17,153 $ (12,326) $ (2,863) $ 1,425 $ (1,743) $ (14,172) $ (14,490) Adjustments: Add: Interest expense — 2,090 — 2,090 — 5,454 — 5,454 Add: Income tax expense (benefit) (592) (368) 479 (481) 78 (500) (195) (617) Add: Depreciation expense — 295 272 567 — 109 304 413 Add: Intangible amortization expense — 11,647 — 11,647 — 8,763 — 8,763 EBITDA (8,282) 30,817 (11,575) 10,960 1,503 12,083 (14,063) (477) Add: Impact of noncontrolling interests — (7,350) — (7,350) — (5,000) — (5,000) EBITDA attributable to shareholders (8,282) 23,467 (11,575) 3,610 1,503 7,083 (14,063) (5,477) Net income margin (30.4) % 21.8 % NM (2.7) % 6.7 % (4.3) % NM (23.1) % Net income margin to shareholders (30.4) % 16.8 % NM (6.6) % 6.7 % (8.3) % NM (25.7) % EBITDA margin (32.7) % 39.2 % NM 10.5 % 7.1 % 29.5 % NM (0.8) % EBITDA margin to shareholders (32.7) % 29.9 % NM 3.5 % 7.1 % 17.3 % NM (8.7) % Add: Acquisition and integration-related expenses — 1,404 1,064 2,468 — — 682 682 Add: Equity-based compensation expense 697 774 3,121 4,592 86 — 1,574 1,660 Add: Severance and restructuring expense 1,291 — 419 1,710 — 29 1,819 1,848 Add: Other non-operating (income) losses 7,912 — 82 7,994 — — — — Adjusted EBITDA $ 1,618 $ 32,995 $ (6,889) $ 27,724 $ 1,589 $ 12,112 $ (9,988) $ 3,713 Impact of noncontrolling interest — (7,655) — (7,655) — (5,000) — (5,000) Adjusted EBITDA to shareholders $ 1,618 $ 25,340 $ (6,889) $ 20,069 $ 1,589 $ 7,112 $ (9,988) $ (1,287) Adjusted EBITDA per diluted share — % — % — % — % 3.0 % 26.0 % (21.0) % 8.0 % Adjusted EBITDA shareholders per diluted share 4.0 % 56.0 % (15.0) % 44.0 % 3.0 % 15.0 % (21.0) % (3.0) % Adjusted EBITDA margin 6.4 % 42.0 % NM 26.6 % 7.5 % 29.5 % NM 5.9 % Adjusted EBITDA margin to shareholders 6.4 % 32.3 % NM 19.3 % 7.5 % 17.3 % NM (2.1) % Organic Revenue Growth & Rate (Insurance Distribution Only) — Organic revenue is based on commissions and fees for the relevant period by excluding (i) the first twelve months of commissions and fees generated from acquisitions, (ii) commissions and fees from divestitures and (iii) other items such as contingent commissions, profit commissions and the impact of changes in foreign exchange rates. Organic Revenue Growth is the change in organic revenue period-to-period, with prior period results adjusted to (i) include commissions and fees that were excluded from organic revenue in the prior period and reached the twelve-month owned mark in the current period, and (ii) exclude commissions and fees related to divestitures from organic revenue. Organic Revenue Growth Rate to Total revenue growth rate, the most directly comparable GAAP measure, for each of the periods indicated is as follows (in percentages): Three Months Ended March 31, 2026 2025 % Growth Total Insurance Distribution revenue & growth percentage (1) $ 78,526 $ 40,998 91.5 % Less: Acquired revenues (21,121) — Less: Profit commission and contingent commission income (6,188) (4,691) Less: Other conforming adjustments — (2,233) Less: impact of F.X. rates (1,277) 1,146 Total Organic Revenue & Growth Percentage $ 49,940 $ 35,220 41.8 % (1) Total Insurance Distribution revenue includes investment income. Adjusted Net Income and Adjusted Net Income Margin — We define Adjusted net income as net income (loss) from continuing operations attributable to Ambac adjusted for amortization of intangible assets, change in fair value of contingent consideration and certain items of income and expense, including share-based compensation expense, acquisition and integration related expenses, severance and non-recurring income and loss items that, in the opinion of management, significantly affect the period-over-period assessment of operating results, and the related tax effect of those adjustments. Per share amounts exclude any impact of revaluing non-controlling interests as otherwise reported under GAAP earnings per share. We believe that Octave Specialty Group, Inc. 37 First Quarter 2026 Form 10-Q Table of Contents adjusted net income is an appropriate measure of operating performance because it eliminates the impact of income and expenses that may obfuscate business performance. Three Months Ended March 31, 2026 2025 Specialty Property & Casualty Insurance Insurance Distribution Corporate & Other Total Specialty Property & Casualty Insurance Insurance Distribution Corporate & Other Total Net income (loss) (Continuing Operations) $ (7,690) $ 17,153 $ (12,326) $ (2,863) $ 1,425 $ (1,743) $ (14,172) $ (14,490) Adjustments: Add: Acquisition and integration-related expenses — 1,404 1,064 2,468 — — 682 682 Add: Intangible amortization expense — 11,647 — 11,647 — 8,763 — 8,763 Add: Equity-based compensation expense 697 774 3,121 4,592 86 — 1,574 1,660 Add: Severance and restructuring expense 1,291 — 419 1,710 — 29 1,819 1,848 Add: Other non-operating (income) losses 7,912 — 82 7,994 — — — — Adjusted net income (loss) before tax and NCI 2,210 30,978 (7,640) 25,548 1,511 7,049 (10,097) (1,537) Income tax effects (1,055) (2,229) 1,055 (2,229) — — — — Adjusted net income (loss) before NCI 1,155 28,749 (6,585) 23,319 1,511 7,049 (10,097) (1,537) Net (income) loss attributable to NCI — (6,704) — (6,704) — (4,500) — (4,500) Adjusted net income (loss) to shareholders $ 1,155 $ 22,045 $ (6,585) $ 16,615 $ 1,511 $ 2,549 $ (10,097) $ (6,037) Three Months Ended March 31, 2026 2025 Specialty Property & Casualty Insurance Insurance Distribution Corporate & Other Total Specialty Property & Casualty Insurance Insurance Distribution Corporate & Other Total Net income (loss) margin (30.4) % 21.8 % NM (2.7) % 6.7 % (4.3) % NM (23.1) % Adjusted Net income (loss) attributable to stockholders margin 4.6 % 28.1 % NM 15.9 % 7.1 % 6.2 % NM (9.6) % Item 3. Quantitative and Qualitative Disclosure About Market Risk As of March 31, 2026, there are no material changes in the market risks that the Company is exposed to compared to December 31, 2025.