OneMain Holdings, Inc. · NYSE:OMF
OneMain — Debt Investor Presentation (February 2020)
54 slides from OneMain's debt investor presentation, February 2020
Slide 1: ABS Investor Presentation
ABS Investor Presentation February 2020
Slide 2: Cautionary Note Regarding Forward-looking Statements
Cautionary Note Regarding Forward-looking Statements This presentation contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are not statements of historical fact but instead represent only management’s current be
Slide 3: Cautionary Note Regarding Forward-looking Statements
Cautionary Note Regarding Forward-looking Statements to support our businesses; increased competition, or changes in customer responsiveness to our distribution channels, the ability of our competitors to offer a more attractive range of personal loan products than we offer; changes in federal, stat
Slide 4: ABS program highlights
ABS program highlights Credit ‒ Structuring to worst case pool provides ~8pts of additional enhancement vs. actual pool Enhancement1 ‒ Actual WAC ~350bps higher and remaining term ~10 months lower than worst case pool Rapid ‒ Rapid deleveraging through fixed dollar overcollateralization once amortiz
Slide 5: OneMain ABS superior relative value
OneMain ABS superior relative value Long Operating History 100+ years in business Local Presence 1,500+ branches Secured Lending ~50% of loans are secured Deep Customer Relationships 50% repeat business (resulting in lower loss) Custom budget determines if borrower can afford Ability To Pay Underwri
Slide 6: Company Overview
Company Overview
Slide 7: Key takeaways
Key takeaways 1 4 We have unique competitive We are continuously enhancing advantages to serve the non-prime our core business with customer, including capital, scale technology and analytics and a nationwide branch network capabilities 2 5 Our business is specifically Our responsible lending design
Slide 8: Meet OneMain
Meet OneMain People: 1,500+ – Rooted in local communities (44 states) Branches – Highly experienced (branch managers average 13 years) Scale: $18.4B – Largest branch-based installment lender in the U.S. Net finance receivables – 89% of Americans within 25 miles of a OneMain branch Customers: – Perso
Slide 9: We operate nationally, with a local focus
We operate nationally, with a local focus 7 Minneapolis, MN th Largest branch Central Underwriting network 1 Evansville, IN Special Servicing 89% London, KY of Americans live Collections, Recovery within 25 miles of a OneMain branch 2 Fort Mill, SC Collections, Sales ~13 Branch manager Tempe, AZ For
Slide 10: Products designed to address our customers' needs
Products designed to address our customers’ needs Collateralizes Collateralizes OMFIT ODART Secured loan Direct auto Unsecured loan Optional products Key Stats (FY19): 10+ year auto age 0-10 year auto age2 Avg. loan size ~$8k ~$10k ~$15k Credit Life, Disability, Involuntary Avg. APR ~29% ~27% ~22% U
Slide 11: Our typical customer is the average American
Our typical customer is the average American Target market is ~100MM Americans1, though not all have current needs or pass our underwriting Our customers… …have stable credit attributes… …and financial needs Reasons for loan3 OneMain borrower profile Other 15% ~11 years ~$45,000 Family Related In sa
Slide 12: We work closely with customers to develop best solutions
We work closely with customers to develop best solutions Ability-to-pay evaluation can generate options that increase net disposable income Verification Budget worksheet1 Purpose Bill Consolidation ✓ 100% income ✓ Take home pay (net Loan option 1 Loan option 2 verification income) Type Unsecured Typ
Slide 13: Deep customer relationships drive better outcomes
Deep customer relationships drive better outcomes Better application to book rate 2.4MM customer accounts ~2x greater ~12MM former customers 1 New customers Current & former customers ~50% of current and former customers do Better credit performance business with us at least twice ~20% lower losses
Slide 14: We are committed to helping our customers and supporting our communities
We are committed to helping our customers and supporting our communities Leader in Responsible Credit Environmental Sustainability Philanthropy & Community ✓ $95B+ lending to 10MM customers since ✓ Founding investor in Blackrock’s LEAF ✓ Corporate philanthropy program focused 2010, much of which sup
Slide 15: Strong corporate health provides for continued investment
Strong corporate health provides for continued investment to make our business better C&I FY191,2 Yield 24.1% ✓ Marketing and customer acquisition Other net revenue 2.5% ✓ Technology and automation Net charge-offs (6.0%) ✓ Omni-channel customer Operating expense (7.5%) experience Interest expense (5
Slide 16: Underwriting & Servicing
Underwriting & Servicing
Slide 17: The U.S. consumer remains strong
The U.S. consumer remains strong Lowest unemployment rate since 19691 Job openings outstripping unemployed1,2 — Unemployed persons — Job Openings 11% 16 10% 14 9% 12 8% 10 7% 8 6% 6 5% 4% 4 3% 2 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2005 2006 2007 2008 2009 2010
Slide 18: How we make and service loans
How we make and service loans Marketing Direct-mail, credit aggregators, email, partnerships and web searches Customer has liquidity need (e.g. unexpected repair bill) and often an interest in debt Customer Need consolidation to simplify their finances or reduce number of monthly debt payments Onlin
Slide 19: Disciplined framework for lending decisions
Disciplined framework for lending decisions Policy FY2019 Objective Target Risk Appetite C&I net charge- offs1 6-7% 6.0% Stability through a cycle >4.5% 5.4% C&I return on receivables1 Portfolio profitability, Consistent Returns even under severe stress3 Loan level hurdle1 >20% ROTCE Business contin
Slide 20: A deep history with non-prime customers
A deep history with non-prime customers Secured lending and ability-to-pay underwriting Non-prime customer performance typically less lowers losses and dampens volatility through volatile through economic cycle economic cycles Legacy Leaf vs industry charge-off performance1 Credit Card balances roll
Slide 21: Our results compare favorably across consumer finance
Our results compare favorably across consumer finance Deep underwriting and servicing… …drive superior performance Process Yield 24.1% 26.7% 15.1% 16.9% 3.8% 13.1% ✓ Proprietary data from 100+ year history and $95B of originations in last Risk-adjusted yield 10 years 18.1% ✓ Machine learning and AI
Slide 22: Our decisioning is driven by proprietary data and superior underwriting
Our decisioning is driven by proprietary data and superior underwriting Underwriting model predictive power 1 165% 158% Note: Percentages indexed to FICO 138% 126% 100% FICO 2016 2017 2018 2019 OneMain model Legacy credit models Updated regression Machine learning models Alternative models data ~100
Slide 23: Repeat customers are a core part of business strategy
Repeat customers are a core part of business strategy Strong payment track record Only performing customers eligible Repeat borrowers fully with OneMain may qualify customer for loan renewals1 re-underwritten for larger loan renewal Income re-verified Ability-to-pay recalculated Household budget ref
Slide 24: Secured lending performance driven by frequency of default
Secured lending performance driven by frequency of default 2016 Cumulative unit loss %1 “Frequency” of loss is primary driver of materially 20% stronger secured loan loss performance 15% ‒ Lower unit defaults reflect borrowers’ need of their 10% vehicles to live/work and prioritization of their car
Slide 25: We are better positioned today than 10 years ago
We are better positioned today than 10 years ago Today, we are very well positioned for any macroeconomic scenario 2009 pro forma 2 2019 Portfolio secured mix Portfolio secured mix Improved Improved payment product mix (C&I) 1 32% 52% hierarchy 2Y CAGR of unsecured portfolio 2Y CAGR of unsecured por
Slide 26: We regularly conduct portfolio stress testing
We regularly conduct portfolio stress testing Granular analysis segmented by product, customer type, FICO, loan amount, and term Cumulative C&I gross charge-offs by yearly vintage 1 1.58x 10.4% 9.7% 8.9% 6.6% 5.4% 5.6% 5.0% 2006 2007 2008 2009 2010 2011 2012 1. Represents the cumulative C&I gross ch
Slide 27: Even in a severe recession, we expect to remain profitable
Even in a severe recession, we expect to remain profitable Ample cushion against potential losses Estimated C&I* peak net charge-offs 2 C&I FY191 Annual C&I net charge-offs Yield 24.1% Other net revenue 2.5% Base outlook (6.0 – 6.5%) Operating expense (7.5%) Interest expense (5.5%) Mild recession (‘
Slide 28: Extensive servicing resources, especially critical in downturn
Extensive servicing resources, especially critical in downturn Delinquency timeline Branch Centralized 1 payment 2 payments Current 3 to 6 payments past due Charge-off Recovery past due past due Days Past Due 1 - 29 30 - 59 60 - 179 180+ Branch Central Operations1 Impact # of locations 1,500+ 5 High
Slide 29: Servicing model can quickly respond to a changing economic environment
Servicing model can quickly respond to a changing economic environment All servicing in-house, on-shore by our team members; critical to control servicing capacity in a downturn Differentiator: we can double collections capacity by shifting ~1,400 team members within 48 hours1 Time allocation of bra
Slide 30: Strong compliance culture & controls
Strong compliance culture & controls Seasoned regulatory and compliance teams and strong culture consistent with legacy bank ownership 3 Lines of defense ~6,500 branch team members responsible for day-to-day risk mitigation through: – Identification of operational risk Business – Establishing compli
Slide 31: Securitization Programs
Securitization Programs “OMFIT” & “ODART”
Slide 32: Funding and liquidity strengthened since merger
Funding and liquidity strengthened since merger Interest expense & debt mix1,3 12/31/2015 12/31/2019 Unsecured Secured Asset-Backed Securities • ABS Transactions 10 26 $17.6 • Top ABS Rating A+ AAA $15.4 $15.5 • Direct Auto Program No Yes $14.3 • Class A Spreads 183bps 85bps $7.7 Unsecured Debt1 $7.
Slide 33: ABS funding
ABS funding Funding & Liquidity/ Personal Loan ABS Direct Auto ABS Collateral Conduits Program (“OMFIT”) Program (“ODART”) Securitization a 36 months of forward 21 Personal Loan 5 Direct Auto securitizations critical component of liquidity1 covering all cash securitizations since 20132 since 2016 Co
Slide 34: Best in class investor transparency
Best in class investor transparency Investor friendly resources Quick reference landing page – Pool balances – Key metrics – Tranche balances – Credit enhancement Full monthly servicer report history Private Placement Memorandums Latest ABS investor presentation Trust data summaries to simplify surv
Slide 35: Secured & Unsecured Personal Loans
Secured & Unsecured Personal Loans “OMFIT” Program
Slide 36: U.S. Consumer Loan ABS
U.S. Consumer Loan ABS Consumer Loan ABS new issue supply (2013–2019)1 ✓ Issuer of26 ABS transactions 14 12 42 36 ✓ Top tranche rating of AAA 10 30 Issuance ($bn) # of Deals 8 24 ✓ Issued $1.7B 7 year revolving in 2019 6 18 4 12 ✓ Planned programmatic issuance of 2, 3, 5, 7 2 6 year revolving transa
Slide 37: Personal loan cumulative net loss
Personal loan cumulative net loss OneMain vintage CNL performance well below All vintages a fraction of rating agency class D worst Financial Crisis vintage (2008) (BBB-) 34% Stress first dollar loss scenario1 OneMain combined PL annual vintage cumulative net loss2 35.0% 34.3% OMFIT 2019-2 Rating Ag
Slide 38: OneMain performance vs Fintech/MPL
OneMain performance vs Fintech/MPL Our much deeper Loss performance OMFIT AAA bond would underwriting with thorough comparable to prime require cumulative net loss to verification of income & borrowers and significantly exceed ~56% for principal employment combined vs better than non-prime loss1 ins
Slide 39: Consumer Loan ABS comps
Consumer Loan ABS comps OneMain’s focus on ability-to-pay-underwriting, thorough verification, secured lending, lower-loss repeat customers, and high-impact servicing are key differentiators Branch Based Lender Non-prime Prime OMFIT OPTN LFT MFIT RMIT AVNT CLUB LP CLUB SCLP PMIT MFT 2019-2 2019-A 20
Slide 40: OMFIT 2019-2 overview
OMFIT 2019-2 overview Capital structure OMFIT 2019-2 represents the 14th transaction from the OMFIT shelf since the program’s inception in 2014 First OneMain deal utilizing a horizontal residual interest for US Risk Retention and compliant with new EU Risk Retention requirements1 The Notes issued fr
Slide 41: Direct Auto Loans
Direct Auto Loans “ODART” Program
Slide 42: Unique direct-to-consumer auto product
Unique direct-to-consumer auto product Direct Auto product an Payment history with extension of our successful Over $11B in originations former lender is an important Secured Personal Loan since 20141 underwriting consideration / product, offering borrowers a loss predictor lower rate, larger loan o
Slide 43: Direct Auto cumulative net loss performance
Direct Auto cumulative net loss performance OneMain performance highly consistent across All vintages substantially below rating agency class vintages D (BBB) 14.5% stress first dollar loss scenario1 OneMain combined DA annual vintage cumulative net loss2,3 16.0% 14.5% 14.0% ODART 2019-1 12.0% Ratin
Slide 44: OneMain Direct Auto vs other auto issuers
OneMain Direct Auto vs other auto issuers Significant percent of lower- Robust customer relationships ODART AAA would require loss, return customers and no with servicing done in-house cumulative gross loss to dependencies on dealer data by our team members exceed ~57% for principal accuracy loss1 S
Slide 45: U.S. non-prime auto industry comps
U.S. non-prime auto industry comps OneMain Direct Auto is unique in the predominantly indirect non-prime auto industry ODART AFIN CPS CRVNA AMCAR FCAT FIAOT DRIVE SDART 2019-11 2018-2 2020-A 2019-4 2019-3 2020-1 2019-2 2020-1 2019-3 Origination Channel Direct 100.0% 0.0% 0.0% 0.0% 0.0% 21.2% 43.2% 0
Slide 46: ODART 2019-1 overview
ODART 2019-1 overview Capital structure ODART 2019-1 represented the 5th transaction from the ODART shelf since the program’s inception in 2016 Class A $533,250,000 71.10% Notes issued from a discrete trust, with a 5-year revolving period • Concentration limits govern loan eligibility Credit enhance
Slide 47: Data Supplement
Data Supplement
Slide 48: OMFIT key performance metrics
OMFIT key performance metrics 3 month net annualized loss1 Monthly payment rate2 16.0% 10.0% 14.0% 8.0% With 12.0% Renewals 10.0% 6.0% 8.0% 6.0% 4.0% 4.0% 2.0% Without 2.0% Renewals 0.0% 0.0% 1 4 7 10 13 16 19 22 25 28 31 34 37 40 43 46 49 52 55 58 Jan-16 Jul-16 Jan-17 Jul-17 Jan-18 Jul-18 Jan-19 Ju
Slide 49: SLFT key performance metrics
SLFT key performance metrics 3 month net annualized loss1 Monthly payment rate2 14.0% 10.0% With 12.0% Renewals 8.0% 10.0% 6.0% 8.0% 6.0% 4.0% 4.0% 2.0% Without 2.0% Renewals 0.0% 0.0% 1 4 7 10 13 16 19 22 25 28 31 34 37 40 43 46 49 52 55 58 Jan-15 Jul-15 Jan-16 Jul-16 Jan-17 Jul-17 Jan-18 Jul-18 Ja
Slide 50: ODART key performance metrics
ODART key performance metrics 3 month net annualized loss1 Monthly payment rate2 5.0% 10.0% 9.0% With 4.0% 8.0% Renewals 7.0% 3.0% 6.0% 5.0% 2.0% 4.0% 3.0% 1.0% 2.0% Without 1.0% Renewals 0.0% 0.0% 1 4 7 10 13 16 19 22 25 28 31 34 Jan-18 May-18 Sep-18 Jan-19 May-19 Sep-19 Jan-20 2017-1 2017-2 2018-1
Slide 51: Personal Loan 30+ day delinquency outcomes
Personal Loan 30+ day delinquency outcomes1 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Dec-18 Jan-19 Feb-19 Mar-19 Apr-19 May-19 Jun-19 Jul-19 Aug-19 Sep-19 Oct-19 Nov-19 Dec-19 Roll Worse 3.1% 3.0% 2.9% 2.9% 2.9% 3.0% 3.2% 3.3% 3.4% 3.5% 3.5% 3
Slide 52: Direct Auto 30+ day delinquency outcomes
Direct Auto 30+ day delinquency outcomes1 2.5% 2.0% 1.5% 1.0% 0.5% 0.0% Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Dec-18 Jan-19 Feb-19 Mar-19 Apr-19 May-19 Jun-19 Jul-19 Aug-19 Sep-19 Oct-19 Nov-19 Dec-19 Roll Worse 0.8% 0.8% 0.8% 0.8% 0.8% 0.8% 0.8% 0.9% 0.9% 1.0% 1.0% 0.9% 0.9
Slide 53: Borrower assistance programs
Borrower assistance programs Description Criteria % of UPB1 Delay of monthly payment Deferral due date or final payment date No more than 3 in a rolling 12 months 1.8% by one month; resolves a Must make at least a partial payment short term cash flow issue Temporary modification: Provides relief to
Slide 54: Combined portfolio performance history by product type
Combined portfolio performance history by product type $ in m illions 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Origination Volume $12,056 $13,767 $16,137 $14,395 $8,318 $6,688 $7,218 $7,206 $8,653 $9,430 $10,585 $9,455 $10,537 $11,923 $13,803 Total OMH FICO of Origi
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