OCTAVE SPECIALTY GROUP INC

Holding Company Liquidity

OSG is a holding company organized as a legal entity separate and distinct from its operating subsidiaries. OSG’s liquidity is primarily dependent on its net assets, excluding the operating subsidiaries that it owns, totaling $76,484 and $119,214 as of December 31, 2025 and December 31, 2024, respectively, and secondarily on investment income, distributions, tax and expense-sharing payments and third-party capital (e.g. from credit facilities and equity issuance).

(1)Includes minority equity investments in insurance services businesses of $17,517 and $20,618 at December 31, 2025 and December 31, 2024, respectively.

The decrease in OSG net assets, excluding its equity investments in subsidiaries, during the 2025 was driven primarily by net cash outflows from operating expenses, contributions to subsidiaries, open market stock repurchases, and the purchase of ArmadaCorp, partially offset by net proceeds from the sale of AAC, interest income, and distributions received from subsidiaries.

•OSG acquired ArmadaCorp for $250,000 which was funded by cash and $120,000 of loans from a global bank.

•OSG received $420,000 of proceeds from the sale of AAC, plus an additional $4,300, less applicable legal, advisory and other expenses incurred in connection with the Sale.

•In connection with the 2024 Octave Ventures acquisition, Octave Partners incurred $150,000 of debt funded by a global bank. Upon the closing of the sale of AAC in 2025, OSG repaid the $150,000 loan.

•OSG's acquisition of Octave Ventures was partially funded by AAC's co-investment in the amount of $62,000. Upon the close of the AAC sale in 2025, OSG purchased AAC's co-investment at a price resulting in a 7.5% rate of return per annum to AAC.

•OSG repurchased 3.4 million of its common shares for $29,942 under a share repurchase program.

Everspan's ability to make future dividend payments will mostly depend on its future profitability relative to its capital needs to support growth. Everspan did not pay dividends to OSG in 2025 and is not expected to pay dividends in 2026; however, it does make tax payments to OSG in accordance with a Tax Sharing Agreement. For the year ended December 31, 2025, Everspan paid $2,014 in tax payments to OSG.

Octave Partners does not have any regulatory restrictions on its ability to make distributions. OSG received distributions from

Octave Partners of $15,363 and $10,739 during the years ended December 31, 2025 and 2024, respectively.

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 capitalize new and/or existing businesses, including through the acquisition of noncontrolling interests ("NCI") as a result of the exercise of outstanding puts and/or calls, and (iii) making investments in technology and other operational infrastructure to improve the operational effectiveness and efficiency of our business and to support its growth. Funding puts, calls and other capital commitments would require payments from OSG, the magnitude of which will ultimately depend on the performance of the underlying businesses, whether or not the puts or calls are exercised, FX rates and other considerations. OSG would expect the funding requirements for such obligations not to exceed approximately $50,000 in 2026, but such amount could be higher based on those considerations outlined above. In 2026 OSG intends to fund potential NCI puts using additional debt. 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 obligation 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, and stock repurchases. In addition, the value of the NCI 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 the opinion of the Company’s management the net assets and expected funding sources of OSG are currently 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 or other circumstances could require OSG to seek additional capital (e.g. through loans or the issuance of debt, equity, convertible or hybrid securities).

In connection with the ArmadaCorp acquisition on October 31, 2025, the Company borrowed $120,000 in the form of a five-year $100,000 term loan and a five-year $20,000 revolving credit facility (together, the "Credit Facilities"). The Credit Facilities include 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. See Note 12. Debt to the Consolidated Financial Statements included in this Annual Report for further detail about the Credit Facilities.

Operating Companies' Liquidity

Insurance:

Sources of liquidity for Everspan are primarily through 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 $68,440 as of December 31, 2025, including cash of Octave's insurance distribution subsidiaries held in regional banks of $33,263 as of December 31, 2025.

Consolidated Cash Flow Statement Discussion

The following table summarizes the net cash flows for continuing operations for the periods presented.

Operating Activities for Continuing Operations

Operating cash flows during the year ended December 31, 2025 were adversely impacted by transaction-related costs for the acquisition of Octave Ventures and the sale of AAC, together with interest payments on Octave Partners's short-term borrowing.

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 year ended December 31, 2025 included net cash used in the ArmadaCorp acquisition of $217,940 and net cash proceeds from the sale of AAC of $407,300.

Financing Activities for Continuing Operations

Financing activities for the year ended December 31, 2025 included net borrowings of $117,470 under five year credit facilities for the ArmadaCorp acquisition and concurrent with the AAC Sale, repayment $150,000 of short term borrowing, the repurchase of AAC's co-investment used to partially fund the purchase of Octave Ventures for $67,309 and share repurchases of $29,942.

Financing activities for the year ended December 31, 2024 included borrowing of $147,000 under a short-term credit facility, receipt of a $62,000 co-investment from AAC to fund the acquisition of Octave Ventures and share repurchases of $11,698.

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, reporting periods after September 30, 2025 will exclude any discontinued operations activity.