🧾 What This Document Is

This is a Definitive Proxy Statement (DEF 14A) for Octave Specialty Group, Inc. (OSG). Think of it as a detailed instruction manual and report for shareholders ahead of the company's annual meeting. It explains what will be voted on, provides background on the company and its leaders, and discloses how much top executives are paid. Its main purpose is to give shareholders the information they need to vote on key issues.

🏢 What The Company Does

👉 In simple terms, Octave Specialty Group is now a "pure-play" specialty insurance company after a major transformation. It used to be involved in complex financial guarantee insurance, but in 2025, it sold that old business.

Today, it operates in two main areas:

Insurance Distribution: This is its biggest growth engine. It runs Managing General Agents (MGAs) and brokers that sell specialty insurance policies. They just bought ArmadaCorp Capital for $250 million to boost their Accident & Health offerings.
Specialty Property & Casualty Insurance: Through its Everspan carriers (rated A- "Excellent"), it provides the actual insurance policies, mainly to other insurers.

Its rebrand from Ambac to Octave Specialty Group signals this complete strategic shift.

💰 Financial Highlights (2025 Performance)

The company's transformation is showing up in the numbers:

Revenue: Total revenue from continuing operations grew 6.5% to $251 million.
Premium Growth: Total premiums produced soared 50% to $1.312 billion. This was driven almost entirely by the Insurance Distribution segment, where premiums produced were up 93%.
Profitability (Adjusted Metric): The GAAP pre-tax loss was $23.1 million. However, the company focuses on Adjusted EBITDA (a cash flow proxy). For the Insurance Distribution business, Adjusted EBITDA to common stockholders was $22.5 million, up 68% from the prior year.
Share Buybacks: The company is actively buying back its own stock, repurchasing over 3.4 million shares at an average price of $8.72, totaling nearly $30 million.

👉 Why it matters: The heavy investment in growth (via acquisitions like ArmadaCorp) is costing money in the short term (hence the GAAP loss), but the soaring premium production and rising Adjusted EBITDA show the new business model is gaining traction.

🚀 Key Strategic Moves

2025 was a pivotal year for reshaping the company:

Exit the Past: Sold the Legacy Financial Guarantee business to Oaktree for $420 million + $4.3M adjustment. This was the final step in its transformation.
Invest in the Future: Acquired ArmadaCorp Capital for $250 million, significantly expanding its specialty insurance distribution and Accident & Health capabilities.
Consolidate a Partner: Converted a $3.5 million convertible note into equity in Pivix, giving it majority ownership (~74%) of this Managing General Agent.
Cut Costs: Reduced holding company expenses, including executive and board compensation, staff levels, and moved its New York headquarters.
Reward Shareholders: Repurchased ~$30 million of its own stock.

👥 Board & Governance

The board provides oversight for the new company direction.

Size & Independence: The board has 7 nominees, 6 of whom are independent. It separates the Chairman (Jeffrey S. Stein) and CEO (Claude LeBlanc) roles.
Skills Matrix: Directors bring a mix of expertise crucial for an insurance turnaround: CEO experience, CFO skills, insurance knowledge, risk management, and investment/restructuring experience.
Diversity: The nominees include three women and one person who self-identifies as Hispanic.
Engagement: In Fall 2025, the board reached out to stockholders representing ~44% of the company to get feedback on executive pay and governance.

💼 Executive Compensation Philosophy

The pay program is designed to align executives with shareholder success during this growth phase.

Short-Term Incentives (STIP): In 2025, 100% of the annual bonus was tied to new financial metrics for the specialty business:
- Adjusted EBITDA Margin (40% weight)
- Revenue Growth (40% weight)
- Everspan Net Combined Ratio (20% weight - a measure of underwriting profitability).
Result: Executives earned 84% of their target bonus. They crushed the EBITDA margin goal (16% vs. 15% target), but missed the combined ratio target.
Long-Term Incentives (LTIP): Awards are a mix of 70% Performance Stock Units (PSUs) and 30% Restricted Stock Units (RSUs).
- PSUs are earned based on 3-year Adjusted EBITDA Growth (70%) and Organic Revenue Growth (30%), with a modifier based on how the stock performs vs. peers (TSR).
- RSUs vest over three years to encourage retention.

👉 Why it matters: Pay is heavily tied to the metrics of the new, go-forward company. Executives don't get paid simply for showing up; they are rewarded for growing revenue and EBITDA profitably and for the stock's long-term performance.

📦 What's Next & Voting Items

Shareholders will vote at the Virtual Annual Meeting on May 28, 2026. The Board recommends voting FOR all proposals:

Proposal 1 - Elect Directors: Vote on the 7 board nominees.
Proposal 2 - Advisory Vote on Executive Compensation: A "Say-on-Pay" vote. While non-binding, it signals shareholder sentiment on the pay practices described above.
Proposal 3 - Ratify Auditors: Approve Ernst & Young LLP as the company's accounting firm for 2026.
Proposal 4 - Approve the 2026 Incentive Compensation Plan: A new plan to issue equity awards (like PSUs and RSUs) to employees, replacing the old plan. This is essential for continuing to attract and retain talent with aligned incentives.

⚖️ Big Picture: Strengths & Risks

👍 Strengths:

Clear strategic focus on a growing specialty insurance market.
Strong premium growth demonstrates market traction.
Active capital management (buybacks, disciplined M&A).
Compensation structure is tightly linked to new business performance.

⚠️ Risks:

Integration & Execution Risk: Successfully integrating large acquisitions like ArmadaCorp and growing the Everspan platform is complex.
Profitability Pressure: Investing for growth is currently leading to GAAP losses. The transition from "growth at all costs" to sustained profitability is the next hurdle.
Market & Underwriting Risk: As a specialty insurer, it is exposed to large, unpredictable claims (e.g., catastrophes) that could hurt Everspan's combined ratio.

🧠 The Analogy

Think of Octave Specialty Group like a restaurant that completely changed its concept. It used to be a fancy, slow-paced French bistro (Financial Guarantee). Now, it's a trendy, fast-casual Asian fusion spot (Specialty Insurance). The proxy tells the story of that renovation: selling the old furniture (legacy business), buying new kitchen equipment (ArmadaCorp), hiring a new chef (CEO and team), and setting bonuses based on how many bowls they sell and how happy the customers are (EBITDA Margin & Revenue Growth). The shareholders are the owners deciding if they approve the new menu (Incentive Plan) and are happy with how the renovation is going.

🧩 Final Takeaway

This proxy tells the story of a company that has decisively turned the page on its past. Octave Specialty Group is now a focused, growth-oriented specialty insurer. The key for shareholders is to evaluate whether the aggressive investments and compensation plans are yielding the promised growth in a sustainable, profitable way. Your vote approves the roadmap and incentives for that journey.

OSG Shareholders to Vote on $250M ArmadaCorp Acquisition