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1、2All Constituents Do Not Necessarily Share a Point of View of Franchise Value Grow and maximize shareholder value over medium and long term Predictability of performance is a key towards value maximization Time to realization matters Platform needs to allow for accomplishment of goals Expect higher

2、income year-over-year The Brand they are employed by matters Not necessarily accountable to shareholders Protect the capital base from tail events Ensure business continuity of operations Time is less of a factor than certainty Not accountable to investors Protect the organizational reputation from

3、business outcome and litigations Aligning management compensation to relative performance Accountable to investorsFranchise Value Conflicting Points of ViewInvestorsRegulator/Rating AgencyEmployeesBoard of DirectorsIncreasing Enterprise ValueProtect Capital&Policy HoldersCompensation&BenefitsRelativ

4、e Value&Reputational Risk3OpportunitiesRecognizing How Management is Judged-Over-time public company management teams will be judged both by the absolute and relative value they created for shareholders Connected Decision Making Need to connect decision making back to core organizational value drive

5、rs Accepting Trade-offs-Properly understanding the trade-offs between cost and opportunity not only at the transaction level,but how the transaction integrates to the company level result Challenges Timeline Reporting periods and value creation periods are often mis-aligned,which can lead to sun-opt

6、imal decision making Communication As it relates to public company valuation investors are limited to what a company reports,however,the attributes of individual transactions can be obscured Conflicting Priorities Even within smaller organizations differences in expectations and incentives can lead

7、to conflicts about what is most important Aspects to ConsiderGenerating long-term shareholder value is core deliverable for management teams of public companies Franchise Value a Management PerspectiveValuation Considerations:Public vs PrivateFactors Affecting Public and Private Business Valuations

8、Public ConsiderationsPrivate ConsiderationsRevenue TrendsReoccurring revenue growth is a key consideration as companies who demonstrate consistent and historic revenue growth will be valued at a higher EBITDA multiple compared to the companies with below average,flat revenue growth or only a one tim

9、e revenue spikeDividendsDividends can be an important component of equity performance,and provide year-to-year indications of a companys growth and profitability,outside of the up-and-down movements that occur in a public companys stock price throughout the yearReturn on EquityA companys Return on E

10、quity(ROE)is an indication of whether a company is earning profits without putting new equity capital into the business.An increasing ROE is a representation of management effectively using investors capital as well as giving shareholder more for their moneyMarket PerceptionA companys market percept

11、ion plays a key role in a companys valuation in addition to a companys long term success.Companys with a positive market perception are perceived to offer quality,high-value products and services thus they garner a higher valuation,but companys with a negative market perception do not receive as fav

12、orable valuations Macroeconomic VariablesPublic companies may be affected by changes in the macroeconomic environment,such as interest rates or currency rates.Since the macro economic environment rapidly changes,this encourages public companies to operate on a shorter time horizon as a public compan

13、y share price ties to quarterly resultsMarketingCompanies with successful marketing strategies can build brand awareness with not only consumers but also investors.Well known brands may generate more interest and create an increase in value Profit MarginsCompanies with high gross profit margins comm

14、and a higher valuation premium as high gross profit margins are indicative of a company possessing competitive advantages through differentiated offerings,unique distribution channels,or enhanced production capabilities which usually lead to a high EBITDA multiple as wellUnique DistributionCompanies

15、 with access to business not readily available to traditional insurance companies are garnered at a higher valuation premium.A unique business is always seen as more valuable than standard product lines.Competitive AdvantagesSustainable competitive advantages are necessary to protect a business from

16、 potential intrusion of competitors,which helps reduce business risk and increase growth prospects.Companies with intellectual property,technology,unique capabilities/services,or proprietary process can boost their premium multipleIndustry ConcentrationCompanies with revenues concentrated in a parti

17、cular part of the market are at greater risk to the impact of sector variables,such as cyclical nature,the introduction of new regulations,increased competition,etc.However,in certain situations industry concentration can be viewed positively if the part of the market the company serves is growing f

18、aster than the GDPConsumer ConcentrationThe magnitude or absence of customer concentration can significantly effect a companies enterprise value.Companies with significant customer concentration command lower than average EBITDA multiples than industry peers with equal revenues and profitability wit

19、h a more diverse customer baseStrength&Depth of Management TeamThe market is more likely to grant a higher value to companies possessing a more complete management team with talented individuals leading the key functional areas such as Finance,Operations,and Sales&Marketing rather than a company ove

20、rly dependent on it CEOM&A ValuationsA Company is Worth What Another Company is Willing to Pay When valuing an insurance company,the first,and often easiest,place to start is by using financial metrics.However,valuations based on financials alone will exclude key benefits that both the buyer and tar

21、get will realize post acquisition.In essence,traditional valuation metrics are merely guidelinesNon-Financial MetricCommentarySynergiesThe most obvious reason for companies to increase their valuations beyond normal metrics.Potential savings can be factored into models post transaction to justify ov

22、erpaying.Examples including staff savings,reduction in rental/office costs,reinsurance pricing decreases,and reduction of system costs and general overheadGrowthMost companies are under pressure to grow but some more than others.Particularly private equity owed companies.Missing out on a prior deal

23、may also cause undue pressure or a determination to pay whatever it takesDistributionThe attraction of new markets or cross sell opportunities may increase the valueNicheA unique or niche book of business creates interest and desire.For public companies this can be reflected in the valuation but for

24、 private companies it is hard to understand the magnitude of the uplift.Separately from that more standard companies or undesirable lines of business may be undervalued.Despite making profits there may be no active buyers for companies where organic growth is achievableMarket Perception/News CycleDe

25、cent companies can be impacted by the market they are in and vice versa.Recently we have seen underperforming insurtechs ride the wave up and decent performing ones ride the wave down.The Florida homeowners market is another market recently impacted by negative pressMarket TrendsTrends in markets ch

26、ange.Once sought after companies or products can become undesirable overnight.A recent example has been the move towards ESG.Insurance companies writing coal insurance will now find good valuations hard to come by no matter how profitable the book of business is.On the other hand,ESG compliant compa

27、nies may attract a premiumRelationship Between PartiesSometimes it just comes down to two management teams knowing each other and liking the idea of collaborating.That may just be the incentive to pay a little moreFinancial Buyers vs.Strategic BuyersMotivations are different.Financial buyers tend to

28、 be driven more by metrics and returns.Strategics are more inclined to think about softer issuesCase StudiesA Company is Worth What Another Company is Willing to Pay Acquired byRelationship Between Companies Similar to Berkshire Hathaway and Alleghany operates a set of unintegrated(re)insurance busi

29、nesses Joe Brandon,CEO of Alleghany,formerly worked for Berkshire Hathaway a chairman and CEO of Berkshires subsidiary General Re between 2001 and 2008 The deal came only months after Joe Brandon formerly took over as CEO of Alleghany following the retirement of longtime Alleghany CEO Weston HicksAc

30、quired byAcquired by$740M$250MDiversification Acquisition served as a means of geographic diversification and source of growth along the Eastern Seaboard The acquisition created new distribution channels and relationships Significant reinsurance savings enabled the group to get a higher valuationPro

31、tecting Capacity Spinnaker previously served as Hippos capacity for several years Hippo was the largest MGA on Spinnakers paper When Spinnaker decided to run a sale process Hippos relationship could have been under threat It made sense that Hippo would become he highest bidderIn State Merger Acciden

32、t Fund acquired AmeriTrust in early 2023 The closeness of both businesses in terms of location and relationships made sense Office buildings in Michigan were close to each other creating obvious synergies.AF Group further protected its status as a major player in Michigan$91MAcquired by$11,600M%of Q

33、uarters with CAT-R Over 10%20 Qtrs.(Left)Untangling market behavior analyticallyThe search for quantitative measures of how insurance performance metrics influence valuation0.0 x0.5x1.0 x1.5x2.0 x2.5x3.0 x3.5x0%5%10%15%20%Price/BookConsensus Forecast ROE0246810120.0 x0.5x1.0 x1.5x2.0 x2.5x3.0 x3.5x#

34、EPS Misses Last 20QPrice/BookR2=0.63R2=0.400.000.050.100.150.200.250.300.350.400.450%3%6%9%12%15%18%21%24%R2Margin of EPS miss vs.ExpectationsWhat are the sources of volatility?Impact of VolatilityWhen does volatility matter?Impact of ReturnValuation is to complex to ascribe to any single variable0%

35、2%4%6%8%10%0%10%20%30%40%50%ABCDEFGHIJStDev of CAT RatioCAT Ratio&FrequencyCAT-R 20 Qtr.Avg.(Left)CAT-R 20 Qtr.StDev(Right)Peak Quarterly Cat Ratio(Left)The ChallengeDevelop quantitative measures of how key insurance metrics influence valuationReduce uncertainty around critical questions like how mu

36、ch CAT-related income volatility is acceptable,or how markets are likely to react to shifts in premium growth vs.lossesHow much CAT volatility is too much?Do markets care about small movements in Expense Ratio?Is premium growth rewarded?Discoveries and next stepsInvestor treatment of valuation varie

37、s widelyNot all sources of profit or volatility are treated equallyTraditional analysis cannot fully account for the innumerable complex interactions that add up to value creation or destructionConventional Wisdom Risk vs.ReturnStarted with the common convention of valuation in context of risk(volat

38、ility)and returnSurveyed commentary from professional investors and sell-side analysts for anecdotal accounts of how key market participants approach valuationUsed conventional tools like linear regression to confirm that many factors influence valuationGC ValueSight:a snapshot of the model8Predicti

39、ve analytics for reinsurance decisionsExplains how simultaneous changes to drivers of return and volatility impact price to book ratioUses big data and machine learning to enable what-if testing of solutions(including reinsurance)that can improve franchise valueInputsBase variablesTransformations 24

40、 reported company metrics 30 macro&environmental 8 broad market Absolute Volatility measures Relative to Average Trend Actual vs Expected Machine learning matrixc800,000 data points from 10-years worth of quarterly performance dataOutputUseValueSightPortfolio ManagementReinsurance DecisionsRisk Tole

41、rancesActionable insights on CAT,Underwriting&Reserving risk Top Drivers of P/B ChangeP/B Forecast AlgorithmOptimized Metric Position P/B stands for Price to Book ratioModel predicted P/B ratio 1 year forward within+/-20%pts of the actual ending ratio 89%of the timeHow is ValueSight different?holist

42、ic and agile9Holistic&agile:uses big data and machine learning for a superior identification of what drives valuation Evaluates large data sets and dynamic interactions between variables Produces a holistic understanding of valuation Identifies the performance metrics management may influence to max

43、imize value over time.Advanced predictive modeling evaluates the dynamic interrelationships between numerous data elementsValueSightThis allows us to objectively compare the importance of the“usual suspects”examine how market perception of key metrics is evolving over time and identify metrics that

44、investors may be watching as red flagsPenalizedRewardedIn The PackPenalizedGC ValueSight in action Insights on CAT management10Both higher and lower cat loss ratio volatility lead to decreases in P/B MultiplesIndustry ObservationsBoth low and high outliers are negatively impacted A range around aver

45、age volatility is a safe zoneSlightly lower than average CAT loss ratio volatility is the optimal spot with the benefit dropping when volatility is too lowCompany X ObservationsCompany Xs relative CAT volatility suggests that it has c3%pts of upward wiggle room on its volatility vs.peers.Reducing re

46、lative volatility by just 1%pts may build value over timeCAT Loss Ratio VolatilityLower than averageHigher than averageDecreasing P/BIncreasing P/B=Company X positionNote:this is a relative volatility comparison,reflecting the importance of not just managing CAT vol,but ensuring that company results

47、 are not outlier vs.peers.11Forward Looking StatementIn this presentation,we have included statements that may constitute“forward-looking statements”within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.Words such as“estimate,”“project,”“plan,”“beli

48、eve,”“anticipate,”“intend,”“planned,”“potential”and similar expressions,or future or conditional verbs such as“will,”“should,”“would,”“could,”and“may,”or the negative of those expressions or verbs,identify forward-looking statements.We caution readers that these statements are not guarantees of futu

49、re performance.Forward-looking statements are not historical facts but instead represent only our beliefs regarding future events,which may by their nature be inherently uncertain and some of which may be outside our control.These statements may relate to plans and objectives with respect to the fut

50、ure,among other things which may change.We are alerting you to the possibility that our actual results may differ,possibly materially,from the expected objectives or anticipated results that may be suggested,expressed or implied by these forward-looking statements.Important factors that could cause

51、our results to differ,possibly materially,from those indicated in the forward-looking statements include,among others,those discussed under“Risk Factors”.Any or all of managements forward-looking statements here or in other publications may turn out to be incorrect and are based on managements curre

52、nt belief or opinions.Ambac Financial Groups(“AFG”)and its subsidiaries(collectively,“Ambac”or the“Company”)actual results may vary materially,and there are no guarantees about the performance of Ambacs securities.Among events,risks,uncertainties or factors that could cause actual results to differ

53、materially are:(1)the high degree of volatility in the price of AFGs common stock;(2)uncertainty concerning the Companys ability to achieve value for holders of its securities,whether from Ambac Assurance Corporation(“AAC”)and its subsidiaries or from the specialty property and casualty insurance bu

54、siness,the insurance distribution business,or related businesses;(3)inadequacy of reserves established for losses and loss expenses and the possibility that changes in loss reserves may result in further volatility of earnings or financial results;(4)potential for rehabilitation proceedings or other

55、 regulatory intervention or restrictions against AAC;(5)credit risk throughout Ambacs business,including but not limited to credit risk related to insured residential mortgage-backed securities,student loan and other asset securitizations,public finance obligations(including risks associated with Ch

56、apter 9 and other restructuring proceedings),issuers of securities in our investment portfolios,and exposures to reinsurers;(6)our inability to effectively reduce insured financial guarantee exposures or achieve recoveries or investment objectives;(7)our inability to generate the significant amount

57、of cash needed to service our debt and financial obligations,and our inability to refinance our indebtedness;(8)Ambacs substantial indebtedness could adversely affect its financial condition and operating flexibility;(9)Ambac may not be able to obtain financing or raise capital on acceptable terms o

58、r at all due to its substantial indebtedness and financial condition;(10)greater than expected underwriting losses in the Companys specialty property and casualty insurance business;(11)failure of specialty insurance program partners to properly market,underwrite or administer policies;(12)inability

59、 to obtain reinsurance coverage on expected terms;(13)loss of key relationships for production of business in specialty property and casualty and insurance distribution businesses or the inability to secure such additional relationships to produce expected results;(14)the impact of catastrophic publ

60、ic health,environmental or natural events,or global or regional conflicts,on significant portions of our insured portfolio;(15)credit risks related to large single risks,risk concentrations and correlated risks;(16)risks associated with adverse selection as Ambacs financial guarantee insurance portf

61、olio runs off;(17)the risk that Ambacs risk management policies and practices do not anticipate certain risks and/or the magnitude of potential for loss;(18)restrictive covenants in agreements and instruments that impair Ambacs ability to pursue or achieve its business strategies;(19)adverse effects

62、 on operating results or the Companys financial position resulting from measures taken to reduce financial guarantee risks in its insured portfolio;(20)disagreements or disputes with Ambacs insurance regulators;(21)loss of control rights in transactions for which we provide financial guarantee insur

63、ance;(22)inability to realize expected recoveries of financial guarantee losses;(23)risks attendant to the change in composition of securities in the Ambacs investment portfolio;(24)adverse impacts from changes in prevailing interest rates;(25)events or circumstances that result in the impairment of

64、 our intangible assets and/or goodwill that was recorded in connection with Ambacs acquisitions;(26)risks associated with the expected discontinuance of the London Inter-Bank Offered Rate;(27)factors that may negatively influence the amount of installment premiums paid to Ambac;(28)the risk of litig

65、ation and regulatory inquiries or investigations,and the risk of adverse outcomes in connection therewith;(29)the Companys ability to adapt to the rapid pace of regulatory change;(30)actions of stakeholders whose interests are not aligned with broader interests of Ambacs stockholders;(31)system secu

66、rity risks,data protection breaches and cyber attacks;(32)regulatory oversight of Ambac Assurance UK Limited(“Ambac UK”)and applicable regulatory restrictions may adversely affect our ability to realize value from Ambac UK or the amount of value we ultimately realize;(33)failures in services or prod

67、ucts provided by third parties;(34)political developments that disrupt the economies where the Company has insured exposures;(35)our inability to attract and retain qualified executives,senior managers and other employees,or the loss of such personnel;(36)fluctuations in foreign currency exchange ra

68、tes;(37)failure to realize our business expansion plans or failure of such plans to create value;(38)greater competition for our specialty property and casualty insurance business and/or our insurance distribution business;(39)loss or lowering of the AM Best rating for our property and casualty insu

69、rance company subsidiaries;(40)disintermediation within the insurance industry or greater competition from technology-based insurance solutions;(41)changes in law or in the functioning of the healthcare market that impair the business model of our accident and health managing general underwriter;and

70、(42)other risks and uncertainties that have not been identified at this time.12Ambac Financial Group,Inc.(“Ambac”or“AFG”)is a financial services holding company headquartered in New York City.Ambacs core business is a growing specialty P&C distribution and underwriting platform.Ambac also has a lega

71、cy financial guaranty business in run off.Ambacs common stock trades on the New York Stock Exchange under the symbol“AMBC”.Ambac is committed to providing timely and accurate information to the investing public,consistent with our legal and regulatory obligations.To that end,we use our website to co

72、nvey information about our businesses,including the anticipated release of quarterly financial results,quarterly financial,statistical and business-related information.For more information,please go to .The Amended and Restated Certificate of Incorporation of Ambac contains substantial restrictions

73、on the ability to transfer Ambacs common stock.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),any person or group of persons shall become a

74、holder of 5%or more of Ambacs common stock or a holder of 5%or more of Ambacs common stock increases its ownership interest.ContactCharles J.SebaskiManaging Director,Investor Relations(212)208-About AmbacA business of Marsh McLennanImportant DisclosureGuy Carpenter&Company,LLC provides this document

75、 for general information only.The information and data contained herein is based on sources we believe reliable,but we do not guarantee its accuracy,and it should be understood to be general insurance/reinsurance information only.Guy Carpenter&Company,LLC makes no representations or warranties,expre

76、ss or implied.The information is not intended to be taken as advice with respect to any individual situation and cannot be relied upon as such.Please consult your insurance/reinsurance advisors with respect to individual coverage issues.Readers are cautioned not to place undue reliance on any calcul

77、ation or forward-looking statements.Guy Carpenter&Company,LLC undertakes no obligation to update or revise publicly any data,or current or forward-looking statements,whether as a result of new information,research,future events or otherwise.The rating agencies referenced herein reserve the right to

78、modify company ratings at any time.Statements concerning tax,accounting or legal matters should be understood to be general observations based solely on our experience as reinsurance brokers and risk consultants and may not be relied upon as tax,accounting,regulatory or legal advice,which we are not

79、 authorized to provide.All such matters should be reviewed with your own qualified advisors in these areas.This document or any portion of the information it contains may not be copied or reproduced in any form without the permission of Guy Carpenter&Company,LLC,except that clients of Guy Carpenter&

80、Company,LLC need not obtain such permission when using this report for their internal purposes.The trademarks and service marks contained herein are the property of their respective owners.2023 Guy Carpenter&Company,LLCAll Rights ReservedAntitrust Notice The Casualty Actuarial Society is committed t

81、o adhering strictly to the letter and spirit of the antitrust laws.Seminars conducted under the auspices of the CAS are designed solely to provide a forum for the expression of various points of view on topics described in the programs or agendas for such meetings.Under no circumstances shall CAS se

82、minars be used as a means for competing companies or firms to reach any understanding expressed or implied that restricts competition or in any way impairs the ability of members to exercise independent business judgment regarding matters affecting competition.It is the responsibility of all seminar participants to be aware of antitrust regulations,to prevent any written or verbal discussions that appear to violate these laws,and to adhere in every respect to the CAS antitrust compliance policy.