Sagicor Financial Co. Ltd. Class A · TSX:SFC
Sagicor Financial Co. Ltd. Class A — SPAC Merger (May 2019)
42 slides from Sagicor Financial Co. Ltd. Class A's SPAC merger presentation, May 2019
Slide 1: Sagicor Financial Corporation Investor Presentation
SAGICOR FINANCIAL CORPORATION Investor Presentation May 2019 0
Slide 2: Disclaimer
DISCLAIMER GENERAL This presentation is qualified in its entirety by reference to, and must be read in conjunction with, the information to be contained in a final prospectus which will be prepared by Alignvest Acquisition II Corporation (“Alignvest”) in connection with its proposed acquisition of S
Slide 3: Disclaimer (Cont'd)
DISCLAIMER (CONT’D) highly dependent upon economic, political and other conditions and developments in Barbados, Jamaica, Trinidad and Tobago, the United States and the other jurisdictions in which it operates; New Sagicor’s financial condition and operating results may be adversely affected by fore
Slide 4: Disclaimer (Cont'd)
DISCLAIMER (CONT’D) ▪ For the purpose of this earnings analysis, we assume that SLTT and SJLIC Acquisitions close at the end of 2019. The completion of these transactions is not cross-conditional on each other, but are conditional on the close of the acquisition of Sagicor. These closing dates are s
Slide 5: Today's Presenters
TODAY’S PRESENTERS ▪ Managing Partner of Alignvest Management Corporation Timothy Hodgson ▪ Former Special Advisor to Governor Mark Carney at the Bank of Canada from 2010 to 2012 ▪ Former Chief Executive Officer of Goldman Sachs Canada BCom, MBA, CPA, CA ▪ Currently Board Director and Investment Com
Slide 6: Transaction Update
TRANSACTION UPDATE ▪ Transaction announced November 27, 2018 ▪ AQY secured US$120 million additional private placement from affiliates of Highgate, a strategic partner of Alignvest and investor in prior private placement, on April 10 ▪ This private placement means aggregate US$240 million of capital
Slide 7: Q1 2019 Update
Q1 2019 UPDATE ▪ Meaningful book value growth means transaction now valued at 0.97x book value ▪ Strong net income ▪ Net income attributable to shareholders from continuing operations was $15.1 million, compared to $19.4 million in Q1 2018 (Q1 2018 included $5.3 million acquisition gain) ▪ Total com
Slide 8: Transaction Overview
TRANSACTION OVERVIEW ▪ Sagicor Financial Corporation Limited (“SFC” or “Sagicor”) is a leading insurer and asset manager in the Caribbean with a growing presence in the United States and Central America About SFC ▪ Sagicor was founded in 1840, is domiciled in Bermuda, and is headquartered in Barbado
Slide 9: Updated Transaction Steps / Timeline
UPDATED TRANSACTION STEPS / TIMELINE ▪ April 22nd: Voting record date ▪ April 26th: Amended proxy circular filed ▪ May 16th: Redemption deposit deadline for AQY Class A Shareholders ▪ May 23rd: Alignvest shareholder meeting ▪ Q3 2019: Expected transaction close 8
Slide 10: Financial Summary and Illustrative Pro Forma Ownership
FINANCIAL SUMMARY AND ILLUSTRATIVE PRO FORMA OWNERSHIP Sources & Uses Commentary Sources of Funds (US$ mm) 100% Redemptions No Redemptions AQY Cash -- 309 ▪ AQY cash employed to provide liquidity to small Cash from Forward Purchasers Cash from Initial Private Placement 85 38 85 38 shareholders (if d
Slide 11: Valuation – A Compelling Opportunity
VALUATION – A COMPELLING OPPORTUNITY ▪ Sagicor valuation at a substantial discount to peers on both a P/B and P/E basis ▪ Targeted 2019E ROE of 12%, anticipated to expand to 14% – 15% in 2020 as capital from AQY is employed with upside potential through enhanced capital management ▪ Pro forma equity
Slide 12: Company Overview
COMPANY OVERVIEW 11
Slide 13: Investment Highlights
INVESTMENT HIGHLIGHTS ▪ Stable and growing business lines: 56% individual life, health & annuity, 25% group life & benefits administration, Established 13% banking & investment management 1 175+ Year ▪ 50%+ market share in core markets; strong growth in net income and book value Franchise ▪ Core ope
Slide 14: SFC: Building the Market Leader
SFC: BUILDING THE MARKET LEADER Acquisition of Island Life in Acquisition of RBC Jamaica and Nationwide Jamaica was Insurance Co of Trinidad and completed and operations Tobago rebranded as Sagicor Bank Completed Acquisition of shares in Life redomiciliation of Jamaica to Bermuda Acquisition of Laur
Slide 15: SFC: Strategic Pillars
SFC: STRATEGIC PILLARS Achieved Market Implemented Best Optimized Capital Expanded Leadership 1 Practices 2 Structure 3 Internationally 4 Strategic Implemented Progressive Enhanced Capital Built Strong Platform Acquisitions Governance Framework Flexibility for Growth ▪ Jamaica: Island Life ▪ Adopted
Slide 16: SFC: Well-Positioned with Diversified Mix
SFC: WELL-POSITIONED WITH DIVERSIFIED MIX Key Highlights Diversified Business Mix and Geography ▪ Successful 175+ year history built on customer P&C Other Banking & 3% 2% Investment focus and strategic acquisitions Mgmt. 12% ▪ Core market leadership with attractive organic 2018 growth and U.S. expan
Slide 17: SFC: Three Core Segments
SFC: THREE CORE SEGMENTS Key Operating Segments Leading Market Positioning Sagicor Financial Corporation Rank Market Share 2017 Net Income(1): US$62.3mm 2018 Net Income(1): US$36.5mm ▪ 61% Individual Life(6) ▪ 71% Group Life(6) 1st 2019E Net Income(1): US$77.0mm 2017 S/H Equity: US$625mm ▪ 60% Pensi
Slide 18: SFC: Leading Market Position in Caribbean
SFC: LEADING MARKET POSITION IN CARIBBEAN ▪ Leading position in multiple Caribbean countries ▪ IMF projects ~4% growth in Caribbean region in 2019 ▪ Median population ages of 26 – 40 is well below Canadian median age of 42, suggesting better long- term demand for insurance driven by demographics Eas
Slide 19: Sagicor Jamaica: Leading Financial Services Provider in Jamaica
SAGICOR JAMAICA: LEADING FINANCIAL SERVICES PROVIDER IN JAMAICA Key Highlights Consistent Growth and Profitability Revenue (US$ mm)(1)(2) ▪ SFC has 49% ownership in Sagicor Group Revenue (J$ mm) Average ROE of 590 596 Jamaica 21% since 2009 524 69,732 70,657 511 ▪ Consistently outstanding ROE perfor
Slide 20: Sagicor Life: Market Leading Caribbean Player
SAGICOR LIFE: MARKET LEADING CARIBBEAN PLAYER Key Highlights Consistent Growth and Profitability (1) Revenue (US$ mm) ▪ Leading regional financial services company in Average ROE of 13% since 2009 the Southern Caribbean $379 $399 $408 $409 $339 $354 $332 ▪ Strong brand and customer loyalty $304 $307
Slide 21: Sagicor USA: Strong Growth Opportunities
SAGICOR USA: STRONG GROWTH OPPORTUNITIES Key Highlights Steps to Improve Returns ▪ Award-winning, simple, “easy-to-buy” life and ▪ Increased production helps covers excess annuity products targeting familiar customer expenses profile ▪ Retaining 100% of gross premiums improves ▪ State-of-the-art and
Slide 22: SFC: Prudent Canadian Reserving Philosophy Ensures Resilience
SFC: PRUDENT CANADIAN RESERVING PHILOSOPHY ENSURES RESILIENCE Provision for adverse development (PfAD) consistently 10% - 12% of net reserves through economic cycles (US$ millions) Best Estimate Reserves Provisions for Adverse Deviations $2,288 $2,208 $2,092 $2,063 11.7% $2,039 $2,031 $1,984 11.6% 1
Slide 23: SFC: Overview of Invested Assets
SFC: OVERVIEW OF INVESTED ASSETS ▪ Jamaica – de-risked by successful debt and economic restructuring; credit spread <1% ▪ Barbados – fully provisioned for and poised for recovery ▪ Lending portfolio is recourse and fully-collateralized Investment Portfolio Breakdown (2018) Other Financial Assets 7%
Slide 24: Initiatives to Grow Earnings
INITIATIVES TO GROW EARNINGS ▪ Purchase of life insurance operations of Scotiabank in Jamaica and Trinidad & Tobago ▪ 20 year bancassurance agreement to exclusively market insurance to bank customers ▪ US$240 million purchase price SLTT & SJLIC ▪ Targeted funding sources of US$140 million of growth
Slide 25: Scotiabank Bancassurance: Scope to Improve Penetration
SCOTIABANK BANCASSURANCE: SCOPE TO IMPROVE PENETRATION Commentary SJLIC/SLTT – Sagicor Product Comparison ▪ The Caribbean’s leading life insurer and bank, SJLIC/SLTT Sagicor Sagicor and Scotiabank will enter into a 20-year bancassurance agreement Individual Creditor ✓ ✓ ▪ An enhanced suite of insura
Slide 26: Financial Overview
FINANCIAL OVERVIEW 25
Slide 27: SFC De-Consolidated – ROE Breakdown
SFC DE-CONSOLIDATED – ROE BREAKDOWN ▪ Management estimates 2018 return on equity would have been 12.4% excluding Barbados debt restructuring ▪ In 2017, the last unaffected year, the core Caribbean segments delivered 17% unlevered ROE ▪ Sagicor USA ROE improved from 3.8% to 6.4% in 2018 and has posit
Slide 28: Standalone Net Income to Shareholders from Continuing Operations
STANDALONE NET INCOME TO SHAREHOLDERS FROM CONTINUING OPERATIONS Barbados Debt Net Provision (US$ mm) $85.0 Net Income (US$ mm) $75.7 $77.0 $62.3 $60.3 $56.3 $53.7 $39.2 $39.1 $36.5 (1)(2) (1) 2013 2014 2015 2016 2017 2018 2019E 2020E 1. Reflects targeted figures. 2. Excluding one-time transaction c
Slide 29: Pro Forma Targets Bridges
PRO FORMA TARGETS BRIDGES ▪ 2019 excludes any income from the SJLIC & SLTT acquisitions, which may close in H2 2019 and H1 2020, respectively, subject to regulatory approval Pro Forma Net Income Bridge(1) (US$ millions) $115.0 $30.0 $85.0 $77.0 $8.0 (2) 2019 Baseline Net Income Organic Growth 2020 B
Slide 30: Unlocking Undervalued Asset Creates Investor Upside
UNLOCKING UNDERVALUED ASSET CREATES INVESTOR UPSIDE Core Earnings Potential + Balance Sheet Optimization + Upside = Value Creation Illustrative Value Creation Opportunity for Significant Share Price Value Creation Baseline Growth EPS Accretion: EPS Accretion: in Business 0% - 10%+ 0% - 4%+ EPS Accre
Slide 31: At Transaction Price, Implied Value of Sagicor Life Is Attractive
AT TRANSACTION PRICE, IMPLIED VALUE OF SAGICOR LIFE IS ATTRACTIVE Implied value of Sagicor Life is nominal after subtracting fair value for Jamaica, USA (US$ millions) Sagicor Financial Corporation 2019 Net Book Market Price / Price / Income Value Value Earnings Book The unlevered P/B multiple of SF
Slide 32: Investment Highlights
INVESTMENT HIGHLIGHTS ▪ Stable and growing business lines: 56% individual life, health & annuity, 25% group life & benefits administration, Established 13% banking & investment management 1 175+ Year ▪ 50%+ market share in core markets; strong growth in net income and book value Franchise ▪ Core ope
Slide 33: Company Supplement
COMPANY SUPPLEMENT 32
Slide 34: Overall Corporate Strategy
OVERALL CORPORATE STRATEGY ▪ Identified opportunities to consolidate Jamaica, Trinidad & Tobago, and the Eastern Caribbean Drive Further 1 ▪ Sagicor is well-positioned to consolidate within its home markets given its M&A execution Consolidation capabilities and experience Continue to ▪ Drive economi
Slide 35: Insurance Expertise + Corporate Development Acumen
INSURANCE EXPERTISE + CORPORATE DEVELOPMENT ACUMEN ▪ President and CEO since 2002, with more than 30 years experience in banking, insurance and financial industries Dodridge D. Miller ▪ Obtained an MBA from the University of Wales and Manchester Business School; also holds an LLM in Corporate FCCA,
Slide 36: Insurance Expertise + Corporate Development Acumen (Cont'd)
INSURANCE EXPERTISE + CORPORATE DEVELOPMENT ACUMEN (CONT’D) ▪ Previously at ▪ Joined Sagicor in ▪ CRO since 2001, ▪ Previously at Crown Desnoes & Geddes, 2005, when the with prior role as Life, Canada Life, ATL Group, Air predecessor of Resident Actuary TD Life Insurance, Jamaica Sagicor Life and ov
Slide 37: Proposed Board Members
PROPOSED BOARD MEMBERS ▪ Currently a Consultant on Dodridge D. Miller Monish Dutt Emerging Markets ▪ President and CEO of Sagicor FCCA, MBA, LLM, LLD (Hon) BA, MBA, CPA ▪ Former Chief Credit Officer for since 2002 Global Financial Institutions & Group President & CEO Director Private Equity Funds at
Slide 38: AIM Portfolio Management Expertise to Create Value
AIM PORTFOLIO MANAGEMENT EXPERTISE TO CREATE VALUE Overview of Alignvest Investment Management AIM Senior Investment Team Credentials ▪ Offers multi-asset class solutions and Don ▪ Chair of the AIM Investment Committee ▪ Former Chief Investment Strategist and customized institutional advisory mandat
Slide 39: Valuation Supplement
VALUATION SUPPLEMENT 38
Slide 40: North American Insurance Trading Comparables
NORTH AMERICAN INSURANCE TRADING COMPARABLES ($ in USD millions) % of 52 Week High Price / ROE Market Share Tangible 2019E 2020E Dividend Div. Payout Company Cap ($mm) Price High Low BV BV EPS EPS 2019E 2020E Yield Ratio Sagicor (Pro Forma) $959 $7.50 n.a. n.a. 0.97x 1.07x 7.9x(1) 6.5x(1) 12.2% 15.0
Slide 41: Caribbean Financial Trading Comparables
CARIBBEAN FINANCIAL TRADING COMPARABLES ($ in USD millions) % of 52 Week Price as a Multiple of: ROE Market Cap Implied '19E Implied '20E 3 Month Company Domicile ($mm) Share Price High Low BV Tangible BV EPS(1) EPS(1) LTM ADTV (000s) (2) Sagicor (Pro Forma) Bermuda $959 $7.50 n.a. n.a. 0.97x 1.07x
Slide 42: Sagicor P/B vs. ROE Regression
SAGICOR P/B VS. ROE REGRESSION ROE Regression (2020E) 4.00x y = 9.1622x + 0.0056 3.75x R² = 0.8539 3.50x AMP 3.25x 3.00x 2.75x Price to Book (x) 2.50x 2.25x 2.00x TMK 1.75x GWO-CA 1.50x AFL IAG-CA SLF-CA 1.25x PFG (1) Sagicor (Pro Forma) 1.00x RGA AEL MFC-CA VOYA LNC ATH 0.75x CNO METUNM PRU 0.50x 6