OCTAVE SPECIALTY GROUP INC

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).

(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.

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 capitalize 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 infrastructureto improve the operational effectiveness and efficiency of our business and to support its growth, and (v) share repurchases and warrant conversions. Funding puts, calls and other capital commitments could 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, 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

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.

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.