OCTAVE SPECIALTY GROUP INC

The following is a discussion and analysis of the Company’s financial condition and results of operations for the years ended December 31, 2025 and 2024, including year-to-year comparisons between 2025 and 2024. Year-to-year comparisons between 2024 and 2023 have been omitted from this Form 10-K, but may be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2024.

Net loss from continuing operations for the years ended December 31, 2025 and 2024, was $95,803 and $58,921, respectively. The net loss variance in 2025 compared to 2024 was primarily driven by: (i) higher restructuring costs of $15,524, (ii) higher intangible amortization of $20,442, (iii) higher interest expense on short-term debt of $9,261, and (iv) lower foreign exchange gains of $6,717, partially offset by lower acquisition costs of $19,213, investment impairments of $3,416, gains on sale of subsidiaries of $7,504, and higher ID revenue due to acquisitions and continuing growth of the business.

A summary of our financial results is shown below:

Octave's results for the year ended December 31, 2025 compared to the year ended December 31, 2024, were impacted by the following:

•Acquisitions within the ID segment have had a significant impact on the comparability of results between 2025 and 2024.

–Effective October 31, 2025, Octave acquired 100% of ArmadaCorp.

–Effective September 1, 2025, Octave exercised its option to convert its $3,500 convertible note investment in Pivix and now owns approximately 74%.

–Effective July 31, 2024, Octave acquired 60% of Octave Ventures.

•The sale of AAC on September 29, 2025. AAC's results, including Octave's loss on the sale of AAC are reported within discontinued operations. Refer to Note 1. Background and Business Description and Note 5. Discontinued Operations of the Notes to Consolidated Financial Statements in this Annual Report on Form 10-K for further details on the Sale and results for the years ended December 31, 2025 and 2024. 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 $62,000. Concurrent with the Sale, OSG entered into a number of transactions as discussed herein, 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 2025 and 2024.

Gross Premiums Written. Gross premiums written decreased $(22,322) for the year ended December 31, 2025, and increased $109,484 for the year ended December 31, 2024, compared to the comparable prior year periods, as shown below.

Changes are primarily driven by the number and size of active programs. As of December 31, 2025 and 2024 we had 25 and 27 programs, respectively, across approximately ten lines of business, with a focus on the casualty sector and minimal property exposure. The decline in active programs from 2024 was a strategic decision to improve capital allocation and return on capital.

Net Premiums Written. Net premiums written decreased $(14,784) for the year ended December 31, 2025, and increased $8,858 for the year ended December 31, 2024, compared to the comparable prior year periods, as shown below:

The decline in net premiums written will typically track gross premiums written but will also be impacted by the percentage of each program Everspan retains. Everspan typically retains up to 30% of each program. For the years ended December 31, 2025 and 2024, Everspan retained 20.5% and 23.2% of gross written premiums, respectively. The reduced retention rate in 2025 compared to 2024 was primarily driven by the managed non-renewal of certain programs.

Net Premiums Earned. Net premiums earned for the year ended December 31, 2025, decreased by $(31,773) or (32.1)% and increased by $47,094 or 90.7% for the year ended December 31, 2024, compared to the comparable prior year periods, as shown below.

The decrease in net premiums earned in 2025 compared to 2024 was driven by the changes in net premiums written and the managed non-renewal of certain programs.

Commission Income and Commission Expense. The ID business earns commission income as a percentage of the premium it places with insurance, reinsurance and other capacity providers. In some cases, the ID business will also earn profit commissions based on the underwriting performance of the business that it underwrites. Profit commissions by their nature may be volatile whereas base commissions tend to be more steady.

Commission income was $130,982 and $82,992 for the years ended December 31, 2025 and 2024, respectively. The increase was driven by organic growth in premiums placed as well as the acquisition of Octave Ventures in July 2024 and ArmadaCorp in October of 2025. Commission expense will largely track changes in gross commission.

Profit commissions were $12,400 and $9,031 for the years ended December 31, 2025 and 2024, respectively. The increase in profit commissions was due to the acquisitions of Octave Ventures and ArmadaCorp, offset by contraction at Xchange.

For the December 31, 2025 and 2024 commission expense was $37,037 and $40,876, respectively, representing approximately 26% and 43% of commission income in each respective period. The decrease in commission expense compared to commission income in 2025 relative to 2024 is primarily a result of the acquisition of Octave Ventures. Because third parties are paid commissions to obtain business, the majority of Octave Ventures's 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 $14,322 and $13,506 for the years ended December 31, 2025 and 2024, 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. The growth is a function of premiums ceded to reinsurers; driven by changes in direct premiums written.

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 which 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 6. Investments to the Consolidated Financial Statements, included in Part II, Item 8 in this Annual Report on Form 10-K.

Net investment income was $10,647 and $14,448 for the years ended December 31, 2025 and 2024, respectively. The decline is due to lower Corporate short-term yields and lower average investment balances resulting primarily from assets used for the acquisition of Octave Ventures, partially offset by the impact of higher average investment balances in the Insurance Distribution segment and at Everspan.

Servicing and Other Fees. Servicing and Other Fees increased $14,066 for the year ended December 31, 2025. Servicing and Other Fees include revenues earned for providing operational and administrative services to the Lloyd's syndicates managed by Octave Ventures, and its Managing Agency (Statera Managing Agency Limited). This was previously managed by a third party managing agency and as of December 31, 2025 it is now managed by Statera Managing Agency Limited. Other policy and brokerage fees are also included relating to the MGAs within Octave Ventures. Servicing and other fees also include program administration (TPA), health connections, set-up and renewal fees related to ArmadaCorp.

Other Revenues. Other revenues include (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 on derivative contracts, including FX forward contracts used to manage currency risk within the ID segment. Other revenues for the years ended December 31, 2025 and 2024, was $(4,780) compared to $10,480 in the prior year. The decrease in Other revenue resulted primarily from higher foreign exchange losses from the ID segment, together with certain items impacting the 2024 results including gains on FX forward contracts used by Octave to mitigate currency risk leading up to the acquisition of Octave Ventures, a gain on Everspan's sale of one of its shell insurance companies and its licenses, and a realized gain on conversion of notes receivable to a preferred stock position at Corporate. The decrease was partially offset by reduction in Corporate investment impairment charges.

Losses and Loss Adjustment Expenses (Benefit). Losses and loss adjustment expenses decreased $25,433 for the year ended December 31, 2025, compared to December 31, 2024. The decrease was primarily due to the reduction in premium related to non-renewal of certain programs. Everspan's loss and loss adjustment expense ("LAE") ratio was 70.2% and 73.4% for the years ended December 31, 2025 and 2024, respectively, inclusive of prior years' adverse development of 7.4% and 4.7%, respectively. Excluding prior period development, Everspan's loss and LAE ratio were 62.8% and 68.6%, respectively. The shift in the overall loss and LAE and the loss and LAE ratios, excluding prior period development, was primarily due to the managed non-renewal of certain programs.

Prior year adverse development was driven primarily by higher excess liability and commercial auto loss experience in the prior accident years for year ended December 31, 2025, whereas the year ended December 31, 2024, included higher commercial auto loss experience in the prior accident years and a higher selected loss ratio for programs in runoff. Additionally, in 2024 management set loss reserves for programs that are runoff at the high end of the actuarial loss range, given these programs can experience greater loss volatility than active programs. This change to set runoff reserves at the high end of the range resulted in a 1 percentage point increase in the loss and LAE ratio for the year ended December 31, 2024.

Everspan's loss and LAE ratio will vary based on changes in the lines of business underwritten and retained, loss reserving policy, loss development trends, inflation rates and other economic and industry specific factors.

The decrease in the loss and LAE ratio for the year ended December 31, 2025, compared to December 31, 2024, additionally had further improvement driven by benefits within acquisition costs as a result of sliding scale commission arrangements with program partners. Certain Everspan programs were structured to include sliding scale commission arrangements within a loss ratio range. These sliding scale arrangements help to partially mitigate net income volatility. Such benefit reduced the Specialty Property and Casualty Insurance segments expense ratio by 2.1% and 0.8% for the years ended December 31, 2025 and 2024.

Everspan's insurance risk is primarily concentrated via casualty insurance, primarily related to commercial auto, workers compensation, excess and general liability lines of business. Everspan continuously monitors its diversification in lines of business and manages its concentration via MGA/U program oversight of policy limits and premium caps and via reinsurance to third parties. Loss and loss adjustment expenses incurred may be adversely impacted by increasing economic and social inflation, particularly within the commercial auto business. The impact of inflation on ultimate loss reserves is difficult to estimate, particularly in light of recent disruptions to the judicial system, supply chain, labor markets and the potential impact of the imposition of trade tariffs. In addition, 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 judicial decisions, claimants and policyholders, including fraudulent reporting of exposures and/or losses. Additionally, Everspan may be subject to disputes with policyholders regarding the scope and extent of coverage offered under Everspan's policies or may be subject to disputes which may lead to liabilities beyond those which are anticipated or reserved, including liabilities in excess of policy limits. 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.

General and Administrative Expenses ("G&A"). The following table provides a summary of G&A expenses for the periods presented:

The increase in 2025 compared to 2024 was primarily due to the following:

•Higher compensation costs of $45,501 were primarily due to (i) the acquisition of ArmadaCare as well we the launch of new (de-novo) MGAs such as Pivix (ii) the inclusion of a full year of Octave Ventures in 2025 compared to a partial year in 2024, and (iii) severance and accelerated incentive compensation expenses incurred in relation to the sale of AAC.

•Higher non-compensation costs of $16,957, driven primarily by higher restructuring costs of $15,524 in relation to the sale of AAC, the inclusion of a full year of Octave Ventures in 2025 and the acquisition of ArmadaCorp in 2025, partially offset by decrease in Corporate costs associated with acquisitions of $17,906.

Intangible Amortization and Depreciation. Intangible amortization and depreciation for the years ended December 31, 2025 and 2024 was $41,952 compared to $19,947 in the prior year. The increases are due to intangible amortization for the year ended December 31, 2025, related to the ArmadaCorp and Octave Ventures acquisition.

Interest Expense. Interest expense for the years ended December 31, 2025 and 2024 was $18,640 and $9,379, respectively, due to higher average debt outstanding in 2025. Octave borrowed under a credit facility to partially fund the Octave Ventures acquisition in the third quarter of 2024. This debt was repaid on September 29, 2025. Octave borrowed under a new credit facility, at a lower rate, on October 31, 2025, to partially fund the ArmadaCorp acquisition.

Provision for Income Taxes. The provision for income tax (benefit) for the years ended December 31, 2025 and 2024, was $(5,211) and $(924), respectively. The tax benefit recognized in the current year includes current tax expense associated with Octave Ventures operations in the U.K. offset by deferred tax benefits related to the recognition of deferred tax assets generated by Octave Ventures operations in the U.S. and amortization of finite-lived intangible assets associated with Octave Ventures operations both in the U.K. and U.S.

At December 31, 2025, the OSG had approximately $1,690,842 of U.S. federal net ordinary operating loss carryforwards.

Results of Operations by Segment

(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 ("Profit 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.

The ID segment placed premiums for were approximately $951,781 for the year ended December 31, 2025, up $458,409 or 93% as compared to the year ended December 31, 2024. The increase was primarily driven by the inclusion of a full year of Octave Ventures, the acquisition of ArmadaCorp and organic growth.

The ID pretax loss for the year ended December 31, 2025 and 2024, was $(20,456) and $(7,809), respectively, up $(12,647) or 162%, compared to year ended December 31, 2024. The increase was primarily driven by higher intangible amortization and interest expense related to acquisitions.

The ID EBITDA for the years ended December 31, 2025 and 2024 was $36,918 and $19,653, respectively, up $17,265 or 88%. The increase was primarily driven by increase in commission income due to acquisitions and organic growth.

ID businesses may experience seasonal impacts on their revenues and net results. For example, Employer Stop Loss business and other A&H lines produce the majority of their business in January and July, which results in revenue and earnings concentrations in the first and third quarters of each calendar year. 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 as well as the impact of acquisitions.

G&A Expenses G&A expenses for the year ended December 31, 2025, were $89,771 compared to the year ended December 31, 2024, of $38,707 For the current year, compensation expense increased by $35,408 and non-compensation expenses increased by $15,656 primarily due to the addition of the operating expenses of ArmadaCorp and Octave Ventures, which were acquired in October 2025 and July 2024, respectively, and the consolidation of Pivix in September 2025.

(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-five programs were authorized to issue policies as of December 31, 2025, a decrease compared to twenty-seven as of December 31, 2024. Program counts and premium production, including gross and net premiums written and net premiums earned declined in 2025 from 2024 primarily due to

managed non-renewals of certain programs to improve capital allocation and return on capital. Partially offsetting this decline in premium production is lower losses and LAE and lower policy acquisition costs. Additionally, EBITDA and pre-tax income has decreased as compared to year ended December 31, 2024. This is primarily due to the gain on sale of CNIC recognized in 2024 of approximately $7,500. The combined ratio increased in 2025 versus 2024 due to higher general and administrative expenses as Everspan continues to build out its staffing and operations combined with the impact of the lower net premiums earned base. Lower premiums earned results in greater sensitivity to changes in losses and expenses.

G&A Expenses G&A costs increased for the year ended December 31, 2025, relative to the year ended December 31, 2024, primarily due to net growth in Everspan's staffing, outside services and expanded business operations.

Corporate

Corporate consists of our holding company and shared services operations ("Corporate"). Corporate provides financial, 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 $(907) and $10,259 for the years ended December 31, 2025 and 2024, respectively.

Investment income decreased for the year ended December 31, 2025, relative to year ended December 31, 2024, primarily due to lower average invested assets due to the use of funds for the (i) acquisition of Octave Ventures in the third quarter 2024, (ii) the acquisition of ArmadaCorp in the fourth quarter of 2025, and (iii) the repurchase of our stock in October 2025, as well as lower yields on short-term invested assets in 2025.

Both years included write-downs in the carrying value on investments in preferred securities that are carried at cost less impairment.

Corporate revenues in 2024 included net derivative gains related to FX hedging of the purchase price of Octave Ventures, together with realized gains from the conversion and early settlement of certain convertible notes, including make-whole payments, which are included in Other revenue.

Corporate expenses were $82,981 for the year ended December 31, 2025, up $8,465 from the year ended December 31, 2024. Corporate expenses for the years ended December 31, 2025 and 2024 included compensation expenses of $33,841 and $25,791, respectively, and non-compensation expense of $49,140 and $48,725, respectively. Compensation expense is higher mostly due to (i) impact of incentive costs for $5,079 related to compensation restructuring and (ii) severance costs of $4,878. Non-compensation expenses were relatively flat but included increases of $6,481 from an early lease termination payment, restructuring fees of $15,712 from the sale of AAC and disposal of software of $1,017, offset by decreases in acquisition costs of $18,282 and franchise tax expense of $1,323.