Usi Corporation · TWSE:1304
Usi — Investor Presentation (June 2006)
42 slides from Usi's investor presentation, Jun 8, 2006
Slide 1: USI Holdings Corporation June 2006
June 2006 Exhibit 99.1 USI Holdings Corporation USI Holdings Corporation June 2006
Slide 2: About Forward-Looking Statements
1 About Forward-Looking Statements This document and the related oral presentation include forward-looking statements that are subject to a number of risks and uncertainties, many of which are beyond the control of USI Holdings Corporation, which may include statements about: its business strategy;
Slide 3: USI Senior Management Team
2 USI Senior Management Team Experience with 200+ acquisitions sourced, completed, and integrated Team has worked together in USI and other brokers for many years Name Position Industry Experience Age David Eslick Chairman, President and CEO 26 47 Jeff Jones Chief Marketing Officer 29 51 Bob Schneid
Slide 4: USI Profile
3 USI Profile A Market Leader 10th largest U.S. Broker based on 2004 revenues (a) Leading Benefits Broker (represents 43% of 2005 total revenues) National Scale with a Local Presence 68 Offices in 19 states Approximately 500 sales professionals More than 60,000 commercial clients Middle Market Focus
Slide 5: Historical Perspective
4 Historical Perspective Focused on consolidation and integration efforts while reducing acquisition activity Improved operating and financial reporting standards Strengthened internal controls Standardized technology platforms Reduced staff headcount; restructured select employment agreements Pursu
Slide 6: Earnings Levers
5 Earnings Levers through all market and economic cycles Diversified revenue mix Proven, proactive cross-selling capability Focused strategy for Operating Augment growth with Management directly aligned with shareholders’ interest Substantial % of personal net worth is in USI equity 5+% of USI fully
Slide 7: Revenue Diversity
6 Revenue Diversity Diversified Revenue Mix National Scale and Local Presence* Total 2005 Revenue = $508 MM Corporate USI Offices * Represents USI’s retail brokerage geographic distribution capability. Revenue Diversity Revenue Diversity Diversified Revenue Mix National Scale and Local Presence* Pro
Slide 8: Distribution Diversity
7 Distribution Diversity Retail Insurance Brokerage Alternative Distribution & Other Products Property and Casualty General Commercial Liability Workers' Compensation Fidelity and Surety Bonds Professional Liability Personal Lines (Auto, Home, etc.) Workplace Benefits Core Benefits Voluntary Benefit
Slide 9: USI Workplace Benefits
8 USI Workplace Benefits Voluntary Benefits is a large and growing market Largest Independent Distributor of Voluntary Products in the Industry Industry’s most recognized proprietary technology platform (ResourceOne) Industry’s largest call center operation Regional Sales Model with national network
Slide 10: Meeting the Needs of a Growing Marketplace: Voluntary Benefits
9 $1.5 $2.0 $2.5 $3.0 $3.5 $4.0 $4.5 $5.0 1997 1998 1999 2000 2001 2002 2003 2004 2005 Meeting the Needs of a Growing Marketplace: Voluntary Benefits Source: 2005 US Worksite Study, Eastbridge Consulting. Total Voluntary Benefit Sales (in billions) Total Voluntary Benefit Sales (in billions) Meeting
Slide 11: Enhancing Benefit Education
10 Enhancing Benefit Education Above-Average Benefits Below-Average Benefits WorkUSA 2004/2005 Watson Wyatt Study: Effective Employees Drive Financial Results Enhancing Benefit Education Enhancing Benefit Education Effective Communication Ineffective Communication 83.6% 25.7% 22.1% 76.2% Percentage
Slide 12: Documented Best Practices
11 Documented Best Practices USI has documented the best practices for each functional area of retail brokerage. Documented Best Practices Documented Best Practices Revenue Growth Client Retention Cross Selling New Business New Producers Revenue Growth Client Retention Cross Selling New Business New
Slide 13: Organic Revenue Growth
12 Organic Revenue Growth Client retention Client-centric focus Renewal strategies Stewardship process Cross-selling Continued focus, training, measurement and incentives Increase from 20% of total sales to 30% New business production Standardized bi-weekly sales meetings across all offices New prod
Slide 14: Organic Growth Strategy
13 -25% -20% -15% -10% -5% 0% 5% 10% 15% 20% 25% Organic Growth Strategy Lost Business Non-Recurring Gross New Rate / Exp. Formal stewardship process for all accounts over $50,000 Increase penetration of cross selling across product lines 2005 Target Consistent and aggressive sales management nation
Slide 15: Renewal Data by Quarter
14 Renewal Data by Quarter Source: Advisen Ltd. Renewal Data by Quarter 100.00 110.00 120.00 130.00 140.00 150.00 160.00 (20.00) (15.00) (10.00) (5.00) - 5.00 10.00 15.00 20.00 25.00 30.00 35.00 Index % Change 100.00 110.00 120.00 130.00 140.00 150.00 160.00 (20.00) (15.00) (10.00) (5.00) - 5.00 10.
Slide 16: Cross-Selling Strategy and Benefits
15 Increases Organic Revenue Growth, Improves Client Retention and Perpetuates Revenue Diversification Cross-Selling Strategy and Benefits Single distribution point for multiple products and services Definition of cross-sell must be across five broad product categories Compensation and recognition p
Slide 17: Proven Strategy and Opportunity
16 Proven Strategy and Opportunity Top 15 clients ranked by revenues Cross-Sell / Cross-Service Matrix Sold business or currently being provided to client Proposed and pending Blocked or proposed; did not sell the account As of 12/31/05 Proven Strategy and Opportunity Retirement Core Benefit Enrollm
Slide 18: Cross-Servicing Success
17 # of Product Categories Sold Cross-Servicing Success = Increase = Decrease Product Category 2005 Retention 1 94% 2 98% 3 98% 4+ 99% Overall Retention 96% 2002 2003 2004 2005 2002 2003 2004 2005 1 or more 15 15 15 15 400 400 400 400 2+ 10 173 3+ 7 66 4+ 4 25 Top 15 Accounts Top 400 Accounts Cross-
Slide 19: Operations Summary
18 Operations Summary Organizational structure in place and scalable as USI grows Proactive regional oversight and communication Flash Calls – first week of every month CEO Calls – third week of every month Executive Board – every quarter Regional Reviews – every quarter Expenses are tracked and com
Slide 20: Margin Expansion
19 0% 5% 10% 15% 20% 25% 30% 35% 40% Insurance Brokerage Specialized Benefits Corporate Segment Operating Income 2004A 2005A Target Margin Expansion Our goal is to achieve a mid-20’s Operating Income margin by driving field margins to 30.0% and corporate expense to 5.0% of revenue. Note: Current GAA
Slide 21: Quartile Analysis
20 Operating Income Margin 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% 35.0% 2004 A 2005 A 2006 B 1st Quartile 2nd Quartile 3rd Quartile 4th Quartile Quartile Analysis The top three quartiles of retail brokerage require continual fine tuning, while the bottom quartile requires more significant improveme
Slide 22: Corporate Expense Plans
21 2% 3% 4% 5% 6% 7% 8% USI Corporate is committed to reducing the corporate expense ratio to achieve our overall efficiency goals. Corporate Expense Plans Corporate Expense Ratio 2002A 2003A 2004A 2005A Year Corporate Expense Plans Corporate Expense Plans 4.8% 5.7% 6.8% 6.1% Public Company Related
Slide 23: Disciplined Acquisition Strategy
22 Disciplined Acquisition Strategy Highly fragmented industry with over 13,000 agencies between $0.5 - $10.0 million in revenue, for a combined $20.0 billion in total revenue Average age of agency owner is 59 versus 53 in the early 90’s per survey of U.S. agencies by the Agency Consulting Group Dis
Slide 24: 2003-2004 Acquisitions
23 2003-2004 Acquisitions Agency Revenue Location Guild Agency 2.4 $ Westbury, NY Not for Profit Hastings Tapley 11.8 $ Boston, Mass Entry into Boston market BMI Insurance 4.5 $ Long Beach, CA Property O'Leary-Kientz 4.1 $ Cincinnati, OH Construction Benefits Team 1.9 $ Houston, TX Employee Benefits
Slide 25: 2005 Acquisitions
24 2005 Acquisitions 2005 acquisitions ($ millions) Agency Revenue Location Patterson//Smith 11.0 $ Falls Church, VA Expansion in DC Summit Global Partners 66.0 $ TX, FL, IL, CA, other Expansion in Texas and Florida Chase Insurance Agency 3.5 $ New York, NY Employee Benefits/P&C Humanex 2.5 $ San Fr
Slide 26: Financial Overview
Financial Overview USI Holdings Corporation USI Holdings Corporation Financial Overview
Slide 27: Historical Financial Results
26 (1) 2005 Revenue excludes $6.7 million adjustment related to a change in an accounting estimate. (2) Operating Income is defined as Operating Revenues minus Compensation and Employee Benefits, Equity Based Compensation, Other Operating Expenses and Depreciation; excludes certain identified expens
Slide 28: Operating Highlights
27 Operating Highlights Proven track record of consistently growing Revenue and Operating Income Revenue increased at CAGR of 14.4% from 2001 to 1Q 2006 Operating Income increased at a 24.6% CAGR from 2001 to 1Q 2006 Improved operating efficiency evidenced by increase in Operating margin from 13.5%
Slide 29: USI Summary Income Statement
28 USI Summary Income Statement (a) (a) Please see Appendix for definitions of non-GAAP financial measures used throughout this presentation and related reconciliations to GAAP financial measures. (b) 2005 Revenue excludes a $6.7mm adjustment related to a change in an accounting estimate. (c) 4Q 200
Slide 30: Capitalization
29 Capitalization (a) As of 3/31/06, there was $73.8 million available under the revolver. (b) LTM PF EBITDA adjusted to reflect Pro Forma EBITDA from acquisitions completed to date. (see Appendix for definitions of non- GAAP financial measures used throughout this presentation and related reconcili
Slide 31: Credit Ratios
30 2.3x 3.3x 5.3x 9.6x 7.2x 7.4x 0.0x 2.0x 4.0x 6.0x 8.0x 10.0x 12.0x 2001 2002 2003 2004 2005 1Q 06 2.0x 2.0x 1.8x 2.3x 2.0x 0.0x 0.5x 1.0x 1.5x 2.0x 2.5x 3.0x 3.5x 4.0x 4.5x 5.0x 2002 2003 2004 2005 1Q 06 Credit Ratios Debt/Adjusted PF EBITDA (1) EBITDA (2) /Interest expense (3) (1) Represents adj
Slide 32: Financial Summary
31 Financial Summary Strong overall revenue growth (14.4% CAGR since 2001) Continued improvement in Operating Margin from 13.5% in 2001 to 19.3% in 2005 Strong growth in operating income (24.6% CAGR since 2001) 15.4% Cash EPS growth in 2005 Solid capital structure and prudent use of leverage Financi
Slide 33: The USI Story
32 The USI Story Organic Revenue Growth Revenue diversification Cross-selling Sales management Margin Expansion Opportunity Acquisition Opportunities Growing high quality pipeline Disciplined approach USI story is attractive to target companies Motivated and Focused Management Team Aligned goals and
Slide 34: Appendix
Appendix USI Holdings Corporation USI Holdings Corporation Appendix
Slide 35: Non-GAAP Financial Measures
34 Non-GAAP Financial Measures Operating Income is defined as revenues, less compensation and employee benefits, stock-based compensation, other operating expenses and depreciation. Compensation and employee benefits and other operating expenses are adjusted to exclude expenses related to USI's marg
Slide 36: 1Q 2006 Reconciliation to GAAP
35 1Q 2006 Reconciliation to GAAP For the Three Months Ended March 31, 2006 As Reported Identified Adjustments 2006 Excluding Identified Adjustments (Dollars in Thousands) Revenues 136,628 $ - $ 136,628 $ Compensation and employee benefits 75,491 - 75,491 Non-cash stock-based compensation: Restricte
Slide 37: 1Q 2005 Reconciliation to GAAP
36 1Q 2005 Reconciliation to GAAP For the Three Months Ended March 31, 2005 As Reported Identified Adjustments 2005 Excluding Identified Adjustments Total revenues 122,012 $ - $ 122,012 $ Compensation and employee benefits 68,782 - 68,782 Non-cash stock-based compensation, restricted stock awards 31
Slide 38: 2005 Reconciliation to GAAP
37 2005 Reconciliation to GAAP December 31, 2005 As Reported Identified Adjustments 2005 Excluding Identified Adjustments Total revenues 508,284 $ 6,667 $ 514,951 $ Compensation and employee benefits 287,807 567 288,374 Non-cash stock-based compensation 2,579 - 2,579 Other operating expenses 115,198
Slide 39: 2004 Reconciliation to GAAP
38 2004 Reconciliation to GAAP December 31, 2004 As Reported Identified Adjustments 2004 Excluding Identified Adjustments Revenues 403,214 $ - $ 403,214 $ Compensation and employee benefits 228,211 - 228,211 Non-cash stock-based compensation 417 - 417 Other operating expenses 93,006 - 93,006 Depreci
Slide 40: Reconciliation to GAAP Financial Measures
39 Reconciliation to GAAP Financial Measures ($ in millions) 2001 2002 2003 2004 2005 2005 2006 Total Revenues $299.21 $316.33 $341.00 $403.21 $508.28 $122.01 $136.63 Expenses: Compensation and Employee Benefits 194.17 195.06 192.95 234.76 304.19 80.94 75.49 Equity Based Compensation 3.09 (1.73) - 0
Slide 41: Reconciliation to GAAP Financial Measures (cont'd)
40 Reconciliation to GAAP Financial Measures (cont’d) (1) Includes charges relating to elimination of redundant positions, renegotiating sales professionals’ and executives’ contracts, early termination of lease commitments and relocation of corporate offices from San Francisco to New York. (2) Incl
Slide 42: USI Holdings Corporation June 2006
June 2006 USI Holdings Corporation USI Holdings Corporation June 2006