Aventus Capital Inc. · TSXV:AVTS
Aventus Capital — The Westaim — Investor Day (May 2024)
59 slides from Aventus Capital's investor day presentation, May 16, 2024
Slide 1: 2024 Investor Day
2024 Investor Day May 16, 2024
Slide 2: Disclaimer: Safe Harbour Statement
Disclaimer Safe Harbour Statement This document and its contents are proprietary information and may not be reproduced or otherwise disseminated in whole or in part either directly or indirectly without the prior written consent of each of The Westaim Corporation (“Westaim” or the “Corporation” or t
Slide 3: Disclaimer: Safe Harbour Statement
Disclaimer Safe Harbour Statement Supplementary financial measures concerning the Arena FINCOs and Arena (the “Arena Supplementary Financial Measures”) contained in this presentation are unaudited and have been derived from the unaudited consolidated financial statements of Arena FINCOs and Arena fo
Slide 4: Important Disclosures: Non-GAAP Measures
Important Disclosures Non-GAAP Measures Westaim Westaim reports its interim consolidated financial statements using Generally Accepted Accounting Principles (“GAAP”) and accounting policies consistent with IFRS. Westaim uses both IFRS and non-generally accepted accounting principles (“non-GAAP”) mea
Slide 5: Important Disclosures
Important Disclosures Arena With respect to the section on Arena the information therein is being provided solely in relation to the management company and the investment manager, including their funds, subsidiaries and affiliates. Returns shown are unaudited. Past performance is not indicative or a
Slide 6: Agenda
Agenda Description Page The Westaim Corporation - Introduction 7 Arena 13 ► About Arena Investors Group Holdings 15 ► Environment 18 ► Arena Investors 23 ► Arena Investors: Strategy 29 ► Arena Institutional Services: Strategy 39 ► Financials 44 The Westaim Corporation – Looking Ahead 46 Questions an
Slide 7: Westaim at a Glance
Westaim at a Glance Westaim is a Canadian investment holding company specializing in providing long-term capital to businesses operating primarily within the global financial services industry INSTITUTIONAL SERVICES 7
Slide 8: FY 2023 Highlights: Excellent Operating Performance
FY 2023 Highlights: Excellent Operating Performance Gross written premium increased Committed AUM: $3.2 billion Fair value: FDBVPS increased to 27.6% to $1.5 billion $147.2 million at Q4 2023 49.6% to $3.83 (C$5.08)(3) Fee-Paying AUM: $2.5 billion Adjusted combined ratio: 90.9% Shareholders' equity:
Slide 9: Westaim Summary Q1 2024 Operating Results
Westaim Summary Q1 2024 Operating Results Three months Skyward Specialty delivered excellent Q1 Results vs. ended March 31 prior year: (Amounts in millions of US$ except per share data) 2024 2023 • Adjusted Combined Ratio of 89.7% vs. 90.3% Income from investment in Skyward Specialty $24.6 $100.1 •
Slide 10: Westaim Summary Q1 2024 Statement of Financial Position
Westaim Summary Q1 2024 Statement of Financial Position As at March 31, 2024 December 31, 2023 Cash was $115.5 million at quarter end, but (Amounts in millions of US$ except per share data) increased to over $289 million post-Skyward Assets Cash $115.5 $135.0 Specialty secondary offering in May 2024
Slide 11: Westaim Diluted Earnings per Share: Three months ended March 31, 2024
Westaim Diluted Earnings per Share (US$): Three months ended March 31, 2024 $0.01 - - ($0.02) $0.18 $0.17 Income from Skyward Income from Arena FINCOs Income from Westaim's net holding Income tax expense Fully diluted EPS Specialty and ASOF Arena Investors company expenses three months ended March (
Slide 12: Westaim Book Value per Share: Three months ended March 31, 2024
Westaim Book Value per Share (US$): Three months ended March 31, 2024 $0.18 $0.01 - - ($0.02) $0.02 $4.02 $3.83 Fully diluted BVPS Income from Income from Income from Westaim holding Income tax Favorable impact Fully diluted BVPS December 31, 2023 Skyward Arena FINCOs Arena company net expenses expe
Slide 13: AIGH global financial institution: 150+ people, 8 offices, 20 countries
All data is as March 31, 2024 unless otherwise specified AIGH, including its joint ventures and affiliates, is a global financial institution with over 150+ people across 8 global offices and operating in over 20 countries
Slide 14: Contents
Contents 14 1 ABOUT ARENA INVESTORS GROUP HOLDINGS 2 ENVIRONMENT 3 ARENA INVESTORS 4 AI: STRATEGY 5 AIS: STRATEGY 6 FINANCIALS
Slide 15: About Arena Investors Group Holdings
15 ABOUT ARENA INVESTORS GROUP HOLDINGS
Slide 16: About Arena Investors Group Holdings
About Arena Investors Group Holdings (“AIGH” or “Arena”) 16 Arena Investors Group Holdings ("AIGH") is a global alternative investment firm managing assets on behalf of institutional and private investors through two core business units: Arena Investors ("AI"), a multi-strategy credit investment pla
Slide 17: About AIGH: Financials
About Arena Investors Group Holdings (“AIGH”) 17 AI and AIS both contribute meaningfully to AIGH EBITDA. Q1 2024 EBITDA — $1.8M 2023 EBITDA — $10.1M 2022 EBITDA — $3.3M Arena Institutional Services Q1 2024 EBITDA — $1.1M Q1 2024 EBITDA — $1.4M 2023 EBITDA — $6.5M 2023 EBITDA — $5.7M 2022 EBITDA — $6
Slide 18: Environment
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Slide 19: Arena Investors – Environment / Outlook: How we got here
Arena Investors – Environment / Outlook 19 How we got here
Slide 20: Arena Investors – Environment / Outlook
Arena Investors – Environment / Outlook 20 The most unprecedented creation of assets in history… …with the yield of everything in reference to zero… …mixed with lots of even more crazy (e.g., crypto, NFTs, r/WallStreetBets)… …leading to the largest asset bubble in history + inflation… … which is now
Slide 21: Arena Investors – Environment / Outlook: Where we are today
Arena Investors – Environment / Outlook 21 Where we are today
Slide 22: Illustration of barbell opportunity
Arena Investors – Environment / Outlook 22 Illustration of barbell opportunity Scalable, homogenous Special situations / opportunities Distress Examples Examples Venture / SaaS Lending Growth Credit -- -- CRE Lending European Distressed -- Real Estate Corporate Cash Flow and Asset-Based -- Lending (
Slide 23: Arena Investors
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Slide 24: About Arena Investors: investors migrating to Arena's approach
About Arena Investors (“AI”) 24 Investors are increasingly migrating to Arena Investors’ approach, which is opportunistic, diversifying to traditional undifferentiated private credit and “direct lending” to financial sponsors, and has not exposed investors to the many investment-types that are now f
Slide 25: Arena Investors – Key Highlights
Arena Investors – Key Highlights 25 • ~$5.4 billion deployed into 380+ privately negotiated transactions. Average position size of approximately 70 basis points. • 218 exited privately negotiated transactions with 198 exited multi-strategy investments having a Investing & realized IRR of 20.5% gross
Slide 26: Arena Investors – Key Highlights
Arena Investors – Key Highlights 26 A successful and compelling investing platform. $5B deployed since 20% $315M gross IRR on exited Raised in last 12 months(3) inception transactions(1)(2) 1) In addition to exited investments in Arena’s multi-strategy (excluding Excess Capacity and Stable Income),
Slide 27: Arena Investors – Capital Formation: Committed AUM
Arena Investors – Capital Formation: Committed AUM 27 Arena’s AUM (including undrawn commitments) were $3.4B at March 31, 2024. From December 31, 2015, to March 31, 2024, AUM has grown at a CAGR of about 40%. AUM temporarily decreased due to the return of capital from vehicles that are in their rede
Slide 28: Arena Investors – Investment vehicles
Arena Investors – Investment vehicles (1) 28 $ 3 . 4 B AU M (2) Permanent Capital (Arena FINCOs) E X C E S S C A PAC I T Y O P P O R T U N I T I ES • Arena Finance $1.0B A R E N A F U L LY D I V E R S I F I E D • Arena Origination Company Open-ended Evergreen Funds New Zealand Real Estate Credit S T
Slide 29: AI: Strategy
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Slide 30: Arena Investors – Arena's Edge
Arena Investors – Arena’s Edge 30 Arena’s multi-strategy approach: Arena seeks to create Arena looks for outsized Arena’s premium unlevered Arena’s process is private investment compensation in these risk-adjusted returns are repeatable based on three opportunities where: (1) We situations, based on
Slide 31: Arena Investors – Mandate Flexibility
Arena Investors – Mandate Flexibility 31 Moral Hazard /môrəl hazərd/ noun Lack of incentive to guard against risk, or inclination to take risks that benefit one party in the detriment of another. For centuries, moral hazard has repeatedly produced full-cycle results that have ranged from poor to cat
Slide 32: Arena Investors – Mandate Flexibility
Arena Investors – Mandate Flexibility 32 Having mandate flexibility is risk-reducing because it allows one to: Clearly see the dispersion of risk/reward across the investible universe and identify that which is attractive and that which is obviously unattractive – rather than “being able to do anyth
Slide 33: Arena Investors – Proprietary Sourcing
Arena Investors – Proprietary Sourcing 33 Arena’s global origination network has been built over 25+ years. By proprietary sourcing we Arena’s in-house business …while also being All multi-strategy mean being “in the streets” units are led by professionals complemented by joint opportunities compete
Slide 34: Arena Investors – Proprietary Sourcing
Arena Investors – Proprietary Sourcing 34 Arena combines the mandate flexibility of a larger institution with the knowledge and agility of a specialist investor across 8 strategic platforms, enabling coverage across the major asset and credit-oriented opportunity sets globally. These 8 business unit
Slide 35: Arena Investors – Proprietary Sourcing
Arena Investors – Proprietary Sourcing 35 Arena’s proprietary sourcing infrastructure, which includes its joint venture partners, allows the firm to review a large number of opportunities and allocate resources to investments that are the most compelling on a risk-adjusted basis. . . . Note: Approxi
Slide 36: Arena Investors – Proprietary Sourcing
Arena Investors – Proprietary Sourcing 36 In addition to having decades of experience among each of the investment teams’ Managing Directors, Arena has several hundred additional people amongst several dozen relationships to supplement sourcing and servicing capabilities.. Arena office JV
Slide 37: Uniquely scaled infrastructure and asset servicing capabilities
Arena Investors – Uniquely scaled infrastructure and asset servicing capabilities support Arena’s investing acumen 37 Arena leverages internal capabilities and external partnerships to manage proprietary investments. Arena Investors’ internal servicing entities • In-house asset management team, prov
Slide 38: Proprietary IT platform built over 15+ years
Arena Investors – Proprietary IT platform that has been built up and continuously improved over the past 15+ years 38 1 The proprietary IT platform serves as a critical competitive advantage by systematizing a custom investment process into a technology solution, ensuring world- class efficiency, sc
Slide 39: AIS: Strategy
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Slide 40: AIS – Infrastructure and capabilities support third-party service offering
AIS – Arena’s infrastructure and capabilities support AIS’s third-party service offering 40 Arena acts as a merchant owner, financier, or trusted trading counterparty as needed. Arena Institutional Services (third-party services entities) Strategic management of companies & assets Capital market ser
Slide 41: AIS – Arena's Ecosystem is self-reinforcing
AIS – Arena’s Ecosystem is self-reinforcing 41 By virtue of being a practitioner, in addition to having low marginal costs for third-party business, AIS is a self-reinforcing ecosystem. Each situation we involve ourselves with adds to our capability set – now at 400+ transactions and over $5 billion
Slide 42: AIS – Opportunities for ABS and QCM
AIS – Opportunities for ABS and QCM 42 Huge volume of microcap listed companies (circa 8,000 Private deal sizes only moving away from the lower- globally) with increasing retrenchment of PE and other middle market leaving a service provider “void” for capital solutions given “institutionalization” o
Slide 43: AIS – Opportunity for QCG
AIS – Opportunity for QCG 43 Default rates increasing dramatically (with far more in volume than pre-Great Financial Crisis, 2008): U.S Speculative-Grade Default Rate Pre-GFC Post-GFC 2022 Current — — — — <1.5% 12%+ <1.5% 4.5% and rising Real estate only beginning to emerge, though is ahead of corpo
Slide 44: Financials
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Slide 45: Arena Investors Group Holdings – Q1 2024 Quarterly Result Highlights
Arena Investors Group Holdings – Financials: Q1 2024 Quarterly Result Highlights 45 Three months ended March 31, (dollars in millions) 2024 2023 Q1 2024 Results: Arena Investors • Net income for Q1 2024 was $1.2 million (Q1 2023: Management fees $ 7.3 $ 7.8 Asset servicing fees 2.9 2.7 $2.0 million)
Slide 46: The Westaim Corporation – Looking Ahead
The Westaim Corporation – Looking Ahead
Slide 47: Westaim Strategy: Source, Build, Unlock and Repeat
Westaim Strategy: Source, Build, Unlock and Repeat Opportunistic Partnership Business Investing Approach Building Invest in businesses with attractive Partner with aligned and capable Provide strategic oversight, capital allocation fundamentals and business economics management teams discipline and
Slide 48: Westaim Strategy: Operationally Focused Asset Manager
Westaim Strategy: Operationally Focused Asset Manager Opportunistic Special Dividends Share Buybacks Invest Opportunistically and Strategically Source / Build Unlock Value Created for Shareholders Excellent Financial Services Businesses • Grow distributable cash flow Characteristics: Role of Westaim
Slide 49: Report Card on Realizing and Unlocking Value from 2023 Investor Day
Westaim Strategy: Report Card on Realizing and Unlocking Value from 2023 Investor Day Target Actions in 2023-2024 • Completed IPO of Skyward Specialty in January 2023 Opportunistically and strategically • June 2023: Secondary Offering of 4.0 million shares for net proceeds of $87.4 million monetize
Slide 50: Source, Build, Unlock: Jevco
Source, Build, Unlock: JEVCO Background Key Metrics • In 2010, an opportunistic purchase of a 100% interest in Jevco for ~C$260 million • Initial Investment: C$261.4 million • In the fall of 2012, after two and a half years of ownership, Westaim responded to an • Proceeds of Sale: C$530.0 million un
Slide 51: Source, Build, Unlock: Skyward Specialty
Source, Build, Unlock: Skyward Specialty Background Key Metrics • In 2014, Westaim acquired an interest in Houston International Insurance Group, Ltd • Initial Investment $ 75.7 million Realized and Unrealized Gain (US$)(2) 161.6% (“HIIG”) (rebranded to Skyward Specialty Insurance Group, Inc.) for $
Slide 52: 2023 Insurance IPO Performance to Date
2023 Insurance IPO Performance to Date Indexed Performance Since IPO 1-Day 30-Day 90-Day Current 175% +27.3% +38.6% +43.3% +149.1% (7.9%) (0.8%) +4.4% +32.0% 150% 0.0% +0.8% (2.7%) +6.8% +149% 125% 100% 75% 50% +32% 25% 0% (25%) +7% (50%) Jan-23 Mar-23 May-23 Jul-23 Sep-23 Nov-23 Jan-24 Mar-24 May-2
Slide 53: Performance Since IPO – 2023 IPOs
Performance Since IPO(1) – 2023 IPOs(2) Offer/Current +259% +149% +113% +76% +73% +57% +32% +26% +18% +16% +7% +6% +6% +3% +1% (1%) (7%) (18%) (21%) (24%) (25%) (74%) CAVA SKWD ARM NXT KGS ATMU FIHL AESI VTMX CART HG ODD MNR TXO ENLT BIRK KVUE ATS KVYO SVV ZKH HSAI First Specialty P&C Westaim Execut
Slide 54: Source, Build, Unlock: Arena Investors and Arena FINCOs
Source, Build, Unlock: Arena Investors and Arena FINCOs Background Key Metrics • In August 2015, Westaim partnered with Dan Zwirn to build Arena Investors, LP, an investment management firm and Arena FINCOs, specialty finance companies(1)(2) Capital Raised (2015) ~$180 million • Arena Investors: Ope
Slide 55: Solid Excellent Share Price Performance
Since 2019, Westaim has Solid Excellent Share Price Performance … 900.0% 869.6% 800.0% 700.0% 600.0% % Gain 500.0% 502.8% 400.0% 300.0% 300.6% 200.0% 100.0% 0.0% Jan-09 Jul-10 Jan-12 Aug-13 Feb-15 Sep-16 Mar-18 Oct-19 Apr-21 Oct-22 May-24 CAGR(1)(2)(3) Westaim 15.1% Russell 2000 (Total Return) Index
Slide 56: FDBVPS and Share Price
… and since 2014, we believe considerable progress has been achieved in growing value for Westaim shareholders … Share Price and Fully Diluted Book Value Per Share (“FDBVPS”)(1) Q2 2014 to Q1 2024 (CAGR) Intrinsic Value C$6.00 FDBVPS (US$) 7.4% Share Price (US$) -0.9% FDBVPS and Share Price FDBVPS (
Slide 57: Price-to-Book Ratio
… however, our WED share price has not reflected this value creation – and we are taking action Price-to-Book Ratio (“P/FDBVPS”) 1.60x June 30, 2014: 1.5x 1.40x 1.20x P/BV 1.00x 0.80x 0.60x March 31, 2024: 0.7x 0.40x 0.20x 0.00x Mar-14 Mar-15 Mar-16 Mar-17 Mar-18 Mar-19 Mar-20 Mar-21 Mar-22 Mar-23 M
Slide 58: Capital Allocation Alternatives: Westaim Ideally Positioned
Capital Allocation Alternatives: Westaim is Ideally Positioned in the Current Environment The Current Environment is positioned to present very attractive opportunities for Westaim • Rapidly increasing interest rates are exposing slow moving cracks throughout the economy, and we expect that acquisit
Slide 59: Q&A
4.WESTAIM Q&A