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 $23,894 as of September 30, 2026 and cash and short-term investments of its wholly-owned intermediate holding companies totaling $7,599; investment income; distributions, tax and expense-sharing payments from its operating subsidiaries; asset sales; and third-party capital (e.g. credit facilities).

The following summarizes OSG's stand-alone net assets excluding its equity in subsidiaries:

(1)Includes minority investments in insurance services businesses of $16,618 and $17,517 at September 30, 2026 and December 31, 2025, respectively.

The decrease in OSG's stand-alone net assets, excluding its equity investments in subsidiaries and other non-current assets, during the first nine months of 2026 was driven primarily by net cash outflows from operating expenses and the acquisition of a portion of the outstanding equity warrant as a result of the holder's conversion of those warrants at their Black-Scholes value, partially offset by distributions received from its Insurance Distribution subsidiaries.

Everspan's ability to make dividend payments will depend on its future profitability relative to its capital needs to support its growth. Everspan has never paid dividends to OSG and is not expected to pay dividends in 2026 or 2027. However, Everspan continues to make tax and expense sharing payments to OSG in accordance with the associated intercompany agreements.

The operating entities comprising the Insurance Distribution segment do not have any regulatory restrictions on their 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 impacted 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 (primarily through its wholly owned subsidiary Octave Partners LLC) as a result of the exercise of outstanding puts and/or calls or other negotiated transactions, (iii) capital contributions to subsidiaries for debt service requirements, (iv) making investments in technology and other operational infrastructureto improve the operational effectiveness and efficiency of our business and to support growth, and (v) share repurchases and warrant conversions. Funding puts, calls and other capital commitments 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 a portion of the put/call exercises or warrant conversions in its own common shares or cash. During the nine months ended September 30, 2026, OSG paid $43,869 (including stamp duty) to acquire noncontrolling interests primarily as a result of the exercise of puts of Octave Ventures shares. OSG funded these purchases with a combination of cash and incremental Octave Partners LLC 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, asset sales, modification of the puts to permit settlement using alternative resources, additional third-party short or long-term debt and/or other funding sources. Under the terms of the put/call agreements, OSG may also satisfy its 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, asset sales, the potential for additional acquisitions, operating expenses, other capital investment demands and warrant conversions. 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 2025 sale of Ambac Assurance Corporation, OSG issued to the 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-Scholes value, over specified time periods, with the conversion value delivered in shares of OSG common stock or cash at OSG's election. On May 6, 2026, the Buyer converted one-third of the warrant or 1,697,569 warrant shares in exchange for a cash payment of $4,855. Following the conversion, the warrant is exercisable for 3,395,138 shares of OSG common stock. Subsequent to September 30, 2026, an additional third of the original warrant may be converted in any three-month period. OSG estimates the Black-Scholes value of the warrants at $3.20 per warrant share as of mid-October 2026.

In the opinion of the Company’s management, the net assets and expected funding sources of OSG will be sufficient to meet OSG’s current liquidity requirements. However, events, developments, 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, convertibles, 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, received only if the business underwritten is profitable above certain levels, are generally received annually, Cash provided from these sources is used primarily for commissions paid to sub-producers, operating expenses, capital expenditures 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 $79,148 as of September 30, 2026, including cash of Octave's insurance distribution subsidiaries held in regional banks of $36,833 as of September 30, 2026.

Consolidated Cash Flow Statement Discussion

The following table summarizes the net cash flows for continuing operations:

Operating Activities for Continuing Operations

Operating cash flows for the nine months ended September 30, 2026, were adversely impacted from Everspan's settlement of a potential litigation matter related to an insurance claim, the timing of Everspan loss and reinsurance payments, G&A expenses paid and interest on long-term debt, partially offset by cash collections from both the specialty P&C and insurance distribution businesses. Operating cash flows for the nine months ended September 30, 2025, were adversely impacted by G&A expenses paid relating to acquisition and restructuring costs of $9,283 and interest on short-term borrowing, as well as an increase in reinsurance recoverable, 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 commission revenues, net premium collections, investment income and operating expenses, net claim and loss expense payments and debt interest payments.

Investing Activities for Continuing Operations

Investing activities for the nine months ended September 30, 2026, were primarily driven by proceeds from short-term investments, net, partially offset by net purchases of bonds. Investing activities for the nine months ended September 30, 2025, were primarily driven by the proceeds from the sale of AAC and proceeds from short-term investments, net.

Financing Activities for Continuing Operations

Financing activities for the nine months ended September 30, 2026, primarily included acquisitions of noncontrolling interests and the settlement of warrants in cash, partially offset by proceeds from the issuance of long-term debt. See Note 1. Background and Business Description -Warrant Conversion and Redeemable Noncontrolling Interestand Note 9. Debt of the Notes to Consolidated Financial Statements included in this Quarterly Report on Form 10-Q for further information. Financing activities for the nine months ended September 30, 2025, included purchases of common stock of $3,301 and repayment of the Company's short-term borrowing of $150,000.

Future financing cash flows will be primarily impacted by paydowns and maturities of debt; 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 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.