Open Lending Corporation · NASDAQ:LPRO
Open Lending — SPAC Merger (January 2020)
28 slides from Open Lending's SPAC merger presentation, Jan 6, 2020
Slide 1: Open Lending
®penLending ay YES to more automotive loans”
Slide 2: Presentation disclaimer
2 This presentation (this “Presentation”) is provided for informational purposes only and has been prepared to assist intereste d p arties in making their own evaluation with respect to a potential business combination between Open Lending, LLC (“Open Lendi ng” ) and Nebula Acquisition Corporation (
Slide 3: Recession Resilience Overview agenda
3 Insurance Partner Overview OEM Update Consumer Contract Rate Overview Default Frequency Overview Appendix
Slide 4: Used vehicle sales stable through recession
4 43.6 42.7 44.1 42.6 41.4 36.1 35.6 36.9 36.9 37.6 35.8 16.6 16.9 17.0 16.5 16.1 13.2 10.4 11.6 12.7 14.4 15.5 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Used Car Sales New Car Sales Source: Bureau of Economic Analysis, Automotive News, Liveaboutit.com Annual used vehicle sales remained
Slide 5: Resilience of Credit Unions
5 5.8% 10.1% 7.7% 5.8% 8.4% 8.3% (4.0%) 11.3% 9.4% 7.5% 2008 2009 2010 2011 2012 Credit Unions Banks Deposits – YoY Growth Rates 13.1% 1.1% (0.7%) 3.9% 5.1% 0.6% (15.7%) 13.7% 10.3% 4.1% 2008 2009 2010 2011 2012 Credit Unions Banks Net Loans – YoY Growth Rates Credit unions can take advantage of bro
Slide 6: Manheim Used Vehicle Value Index recovery
6 136.9 80 90 100 110 120 130 140 Manheim Used Vehicle Value Manheim Used Vehicle Value Index Lenders’ Protection is designed around an important asset, the automobile, which has a liquid resale market used to payoff all or a majority of loan balances throughout the life of a loan Rapid recovery to
Slide 7: Resilience of Financing Market for the Auto Asset Class
7 Source: S&P Global Ratings U.S. Structured Finance 2017 "Despite unemployment reaching 10%, very few auto loan ABS were downgraded, none defaulted , and none of the subprime auto loan ABS transactions that we rated from 2007 – 2009 experienced losses exceeding our 'BBB' expected loss levels" Auto
Slide 8: Resilience of Insurance Carriers
8 120%+ increase for carriers to suffer a loss August 2019 YTD Loss Ratio of 43.3% -$5 $0 $5 $10 $15 $20 0.9x 1.0x 1.1x 1.2x 1.3x 1.4x 1.5x 1.6x 1.7x 1.8x 1.9x 2.0x 2.1x 2.2x 2.3x Carrier Income per $100mm of Premium Multiplier to Losses Note: Analyzed carrier underwriting profit per $100mm of Earne
Slide 9: Unit economics assuming increase in defaults
9 Revenue Stream Unit Economics Today ($) Unit Economics Assuming ~30% Increase in Defaults % Change Commentary Program Fee ~$470 ~$470 - ▪ Majority of program fee is paid upfront ▪ A minority of the program fee (<25 1 % today) is paid over the first 12 months while the loan is outstanding and could
Slide 10: Insurance Partner Overview agenda
10 Recession Resilience Overview OEM Update Consumer Contract Rate Overview Default Frequency Overview Appendix
Slide 11: Insurer loss ratio comparison
11 43.3% 0.0% 68.4% 69.7% 71.6% 75.4% 66.4% 69.1% 60.4% 72.6% 61.7% LP Program LP Insurer Perspective CNA P&C AmTrust P&C Industry Personal Lines Industry Commercial Lines Allstate Chubb Progressive Travelers Note: Ratios represent 5 year averages from 2013 - 2017 or 2014 - 2018 as available. Indust
Slide 12: Annual Insurer Loss Ratio
12 48.8% 48.0% 46.0% 45.9% 43.3% 43.3% 2014 2015 2016 2017 2018 YTD 2019 Loss ratios are based off ceding statements provided by insurance carriers; reflect the calendar year loss ratio 2019 YTD loss ratio as of August 2019 Source: Insurer Monthly Ceding Statements Annual Loss Ratio Annual Insurer L
Slide 13: Revenue stream fee descriptions per loan
13 (1) Based on ~$23k average loan amount of Open Lending’s portfolio in 2019P for credit unions and banks (2) Based on ASC 606. Unit economics per loan and cash flow timing is based on performance curves forecasted using originatio n c haracteristics from June - December 2018 (3) Program Fee billin
Slide 14: Insurance Underwriting Profit Components
14 (1) Fee based on a % of premium and is contractual (2) Loss ratio is based on Management estimates for 2019E using performance curves based on June - December 2018 actual loan experienc e Based on $22,729 average loan amount of Open Lending’s portfolio in 2019P for credit unions and banks; for il
Slide 15: OEM Update agenda
15 Recession Resilience Overview Insurance Partner Overview Consumer Contract Rate Overview Default Frequency Overview Appendix
Slide 16: High Visibility into 2020E Projections
16 25,480 25,000 - 30,000 45,000 - 50,000 42,700 Nov. '19A RR Dec. '19E RR Jun. '20E 2020E YTD Certs Run-Rate Certs High Visibility into Open Lending’s 2020E Projections • Projections are achievable • Assumes no new OEM clients onboarded in 2020E and all revenue growth is attributable to existing cl
Slide 17: Consumer Contract Rate Overview agenda
17 Recession Resilience Overview Insurance Partner Overview OEM Update Default Frequency Overview Appendix
Slide 18: Illustrative Consumer Contract Rate Waterfall
18 Illustrative Consumer Contract Rate Waterfall Rate Metric Receiver Description 3.0% Target ROA Lender Lender target return 0.8% Cost of Funds Expense Interest paid to Lender depositors 1.1% Servicing Cost Expense Administrative costs associated with servicing loan 4.9% Total Lender Target Yield S
Slide 19: Default Frequency Overview agenda
19 Recession Resilience Overview Insurance Partner Overview OEM Update Consumer Contract Rate Overview Appendix
Slide 20: Cumulative default frequency by annual cohort
20 Note: Cumulative default frequency by month on book is shown above for each annual cohort of loans. The individual loans in e ach annual cohort were modeled using Open Lending’s current risk decisioning and assumed to be originated at the same time for illustrative purposes; actual performance fo
Slide 21: Appendix
Appendix
Slide 22: OEM Captive Use Case Analysis
22 OEM Captive Use Case Analysis ▪ OEM sent ~275k applications to Open Lending for evaluation ▪ Out of this sample ~240k applications were auto loans with criteria that fit Open Lending's underwriting guidelines ▪ ~40k apps were excluded from the analysis due to missing or ineligible data ▪ Open Len
Slide 23: Illustrative Insurer Unit Economics after Tax
23 Illustrative Insurer Unit Economics after Tax Commentary Attractive Economics for the Insurer We estimate insurer return on capital to be high, given the high underwriting profitability and low capital charges associated with Lenders Protection Risk ▪ We estimate the marginal ROE of Lenders Prote
Slide 24: Automotive Lending Competitive Landscape
24 Automotive Lending Competitive Landscape ▪ Depositary financial institutions offering loans to consumers to finance an automobile purchase; work both directly with consumers and through dealerships Prime Bank Lenders ▪ Wholly - owned subsidiaries of auto manufacturers that provide financing to th
Slide 25: Framing the Open Lending Value Proposition
25 Example Sub Prime Lender Example Sub Prime Lender Credit Bureau Score Less than 540 or No Score 30.07% 2.66% 540 – 564 18.17% 2.39% 565 – 599 24.90% 17.59% 600 – 659 22.47% 50.84% 660 and greater 4.39% 26.52% Framing the Open Lending Value Proposition Distribution by APR 6.000% - 8.999% 0.01% 32.
Slide 26: Auto Credit Outperforms During Economic Downturns
26 0 1 2 3 4 5 6 7 8 9 10 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17 (%) Auto Loan First Mortgage Bankcard Auto Credit Outperforms During Economic Downturns… Increase in Consumer Credit Default Rates was Relatively Benign in Auto Loans Through the Great Financial Cr
Slide 27: Credit Unions and Banks Increase Auto Lending During Recessions
27 -40.0% -20.0% 0.0% 20.0% 40.0% 60.0% 80.0% -40.0% -30.0% -20.0% -10.0% 0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Finance / CU & Bank Lending Market Share Auto Loan Origination Growth (YoY) Auto Loan Origination Growth Rate (YoY) Finance Compani
Slide 28: Impact of Default Frequency Increases on Profit Share per Loan
28 Impact of Default Frequency Increases on Profit Share per Loan $616 $537 $460 $385 $310 $237 $165 $94 $25 0% 10% 20% 30% 40% 50% 60% 70% 80% Increase in Default Frequency ~30% increase in defaults during Great Recession 2 All numbers are based on 2019 forecasted numbers Based on ~$23k average loa