Aventus Capital Inc. · TSXV:AVTS
Aventus Capital — The Westaim — Investor Day (September 2020)
62 slides from Aventus Capital's investor day presentation, Sep 22, 2020
Slide 1: Annual Investor Day
Annual Investor Day September 22, 2020
Slide 2: Disclaimer
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: Important Disclosures: Non-GAAP Measures
Important Disclosures Non-GAAP Measures Westaim Westaim uses both international financial reporting standards (as issued by the International Accounting Standards Board) (“IFRS”) and non-GAAP measures to assess performance. Westaim cautions readers about non-GAAP measures that do not have a standard
Slide 4: Important Disclosures
Important Disclosures Arena Investors The following is being provided solely in relation to Arena Investors, LP, its funds, subsidiaries and affiliates: Returns shown are unaudited. Past performance is not indicative or a reliable indicator of future performance. Actual results may vary. The informa
Slide 5: Westaim History: Past 11 Years
Westaim History: Past 11 Years Arena FINCOs New Management team Sold JEVCO in September In August 2015, established and Andrew Robinson appointed 2012 for ~C$530 million capitalized the operations of appointed CEO of HIIG Arena FINCOs and Arena Special distribution of ~C$521 Investors million to sha
Slide 6: Current Portfolio
Current Portfolio Specialty Property Alternative Proprietary Capital and Casualty Investment Invested with Arena Insurance Management Arena FINCOs 6
Slide 7: Breakdown of Westaim's Investments at June 30, 2020
Breakdown of Westaim’s Investments at June 30, 2020 Arena Book Value Investors Investments 3.0% (US$ millions) HIIG $191.0 (44.0% owned by Westaim)(1) HIIG 51.1% Arena FINCOs and LP(2) 171.7 (100% owned by Westaim) Arena Arena Investors FINCOs and LP 11.1 45.9% (51% owned by Westaim)(3) Total $373.8
Slide 8: Book Value per Share and Share Price / BVPS
Book Value per Share ("BVPS") and Share Price / BVPS(1)(2) BVPS Share Price US$ CAGR Since Q2 2014 2.5% -10.7% C$ CAGR Since Q2 2014 6.7% -7.0% 2.80 1.6x Investment in Arena FINCOs 2.60 1.4x and Arena Investors 2.40 (Q3 2015 1.2x – Q4 2016) BVPS (US$) P/BVPS 2.20 1.0x 2.00 0.8x 1.80 0.6x 1.60 0.4x J
Slide 9: Market Statistics
Market Statistics Share Price Ticker: BVPS (Q2 2020)(1): (September 18, 2020): TSXV: WED US$ 2.32 / C$ 3.15 C$ 2.25 Market Capitalization Shares Outstanding: Shareholders' equity (Q2 2020) (September 18, 2020): 143.2 million (millions): US$ 334.3 / C$ 454.2 C$ 322.2 million CAGR(2) 800.0% Westaim ––
Slide 10: New Westaim Directors: Significant Investment Management Experience
New Westaim Directors: Significant Investment Management Experience Ms. Mazzocco has been the Chief Investment Officer at the University of Southern California (“University”) since April 2011. In such role, Ms. Mazzocco is responsible for managing the University’s endowment. Prior to joining the Uni
Slide 11: New HIIG Directors: Extensive P&C Insurance Experience
New HIIG Directors: Extensive P&C Insurance Experience Mr. Hays was born and raised in Minneapolis, Minnesota and attended the University of Minnesota‘s Carlson School of Management, both as an undergraduate and graduate student. Upon completing his MBA in 1980, he joined FM Global. He worked as a b
Slide 12: Significant Increase in Insider Ownership in 2020
Significant Increase in Insider Ownership in 2020 YTD Common Westaim Insider Insider Ownership Shares (as at September 18, 2020)(1) Purchased James C. Hays, Westaim 5,688,386 Insiders Director, HIIG 19% Donald D. Larson, 1,060,511 Director, HIIG Parag Shah, 698,200 MD, Head of Business Development,
Slide 13: Houston International Insurance Group Company Update
Houston International Company Insurance Group Update September 2020 | Page 13
Slide 14: Agenda
Agenda • (Re) Introduction to HIIG • Incisive action to improve results • Strategy and direction to drive towards top quartile performance September 2020 | Page 14
Slide 15: HIIG at a glance
HIIG at a glance Business Overview Key GAAP Financial Metrics • A private, US-based specialty property and Actual Actual YTD Excl. casualty insurer that writes on both an (US$ millions) LPT(1) 2018 2019 6/30/2020 admitted and non-admitted basis Select Income Statement Metrics • Strategy focuses on b
Slide 16: Leadership team of "A" specialty insurance executives
Leadership team of “A” specialty insurance executives Andrew Robinson Mark Haushill Chief Executive Officer Chief Financial Officer Previously President Previously CFO, Argo Group | CFO, Specialty and EVP Corp. American Safety Holdings Development, Hanover Certified Public Accountant Insurance Group
Slide 17: We go to market with eleven specialties
We go to market with eleven specialties(1)(2) 3% 2% 7% 11% Industry Solutions 7% 35% 11% 8% 13% 6% 3% 29% Mining Industry Trucking Industry Construction Industry Pest Control Industry Energy Industry Captives & Programs Commercial Property Accident & Health Professional Liability E&S Brokerage Suret
Slide 18: The business is highly diversified by line and production source
The business is highly diversified by line and production source, and is a balanced mix of admitted and surplus lines Line of Business Mix Gross Written Premium(1)(2) Admitted vs Surplus Lines(1)(2) 17% Short Tail Medium/ Lines Longer Tail 42% 54% 46% 58% 3% 38% 5% Admitted Surplus Lines Distributio
Slide 19: The investment portfolio is conservatively positioned
The investment portfolio is conservatively positioned • The portfolio of $636 million is comprised of core fixed Asset Allocation income and short-term investments, cash & cash equivalents, as at June 30, 2020 equities, and alternative investments(1) 1% • Conservative portfolio duration of approxima
Slide 20: Agenda
Agenda • (Re) Introduction to HIIG • Incisive action to improve results • Strategy and direction to drive towards top quartile performance September 2020 | Page 20
Slide 21: Considerable actions during the past year position us for success
Considerable actions during the past year position us for success • Completed rights offering - raised $100 million • Executed loss portfolio transfer of insurance liabilities primarily for 2017 and prior policy years • Acted to improve performance: • Drove a considerable amount of rate across all b
Slide 22: Decisive action to improve underwriting - Construction Heavy Equipment (1 of 2)
Decisive action has been taken to improve underwriting - Construction Heavy Equipment example (1 of 2) HIIG decided to exit the category entirely starting in Subsequent analysis illustrated that loss experience 1 3 2015. varied materially by customer size… Gross Written Premium Ultimate Loss Ratio M
Slide 23: Decisive action to improve underwriting - Construction Heavy Equipment (2 of 2)
Decisive action has been taken to improve underwriting – Construction Heavy Equipment example (2 of 2) HIIG cautiously re-entered the crane category starting in 2017, with a focus on smaller crane 1 operators. Gross Written Premium ($ in millions) $54.6 $18.1 $13.4 $15.0 $1.0 $4.0 $8.6 2014 2015 201
Slide 24: Business intelligence efforts have armed HIIG with real-time analytics
Business intelligence efforts have armed HIIG’s underwriters, claims professionals and actuaries with powerful real-time analytics September 2020 | Page 24
Slide 25: New growth efforts targeted where we can build defensible positions - Regional Trucking
New growth efforts are targeted where we can build defensible positions - Regional Trucking is one such example Target local and intermediate freight risks with 20-50 power units What We Do Focus principally on Western states and Texas currently; will broaden over time Go to market through strategic
Slide 26: Loss Picks and IBNR are now more conservative
Loss Picks and IBNR are now more conservative More conservative loss picks than in prior years in order to mitigate the risk of adverse development. 62% Segment 1 Loss Picks Example 68% 2020 vs. Policy Year 2015 61% Segment 2 2015 Example 2020 64% IBNR as a pct. of net earned premium is more conserv
Slide 27: Agenda
Agenda • (Re) Introduction to HIIG • Incisive action to improve results • Strategy and direction to drive towards top quartile performance September 2020 | Page 27
Slide 28: The market is disrupted - creating opportunity and demand for new capital
The market is disrupted – creating opportunity and demand for new capital Constrained Capacity + Rate Recalibration for Target Returns Impact of Covid Trapped capital – notably in the retrocession market Leakage on prior year CATs Over $16BN of Equity and Debt Capital into Existing Accelerated socia
Slide 29: We have set in motion our strategy to win
We have set in motion our strategy to win… Rule our niche. We aim to own our specialty segments and leave the elephants to lumber along alone. Winning is not just Fortify our franchise. a set of strategic Our uncommon insight and unique approach to actions. execution make easy substitution impossibl
Slide 30: And have strong prospects for profitable growth
…And have strong prospects for profitable growth • Expand Where Positioned for Growth Mining Surety Professional Lines (management liability, financial institutions, miscellaneous professional) Transactional Property • Add Profitable Adjacencies • Inland Marine and Property in support of ind
Slide 31: We are laser focused on driving significant value
We are laser focused on driving significant value • Execute, execute, execute on our strategy • Drive towards top quartile combined ratio in every segment across all business cycles • Target accretive growth in all facets of our business • Increased risk retention • Organic growth in existing underw
Slide 32: To be the specialty insurance company where great people want to work
We spark potential by shifting specialty risk to a safer place To be the specialty insurance company where great people want to work, the best partners and customers bring their business, and top-tier performance ensues. September 2020 | Page 32
Slide 33: Arena Investors
33 September 2020 www. a r e na co . co m
Slide 34: About Arena Investors
About Arena Investors 34 CLICK HERE TO VIEW www. a r e na co . co m
Slide 35: About Arena Investors
About Arena Investors 35 Arena Investors is an institutional asset manager that provides creative solutions for those seeking capital in special situations. ABOUT ARENA INVESTORS(1) $1.5B Assets Under Management ~$194M Of AUM is employee and related capital 58 Full-time employees Deep, experienced S
Slide 36: Three sources of edge produce a diversified, uncorrelated portfolio
About Arena Investors 36 Three sources of edge produce a highly diversified and uncorrelated portfolio of investments with consistent returns for investors. PROPRIETARY MANDATE FLEXIBILITY SERVICING & SYSTEMS SOURCING Multi-strategy approach to Dan Zwirn (CEO/CIO) has investing that is credit and as
Slide 37: Arena's Core Strategy
Arena’s Core Strategy 37 Six areas of focus that allow Arena to pivot to the most compelling opportunities: CORPORATE PRIVATE CREDIT - e.g., small entrepreneur-owned businesses with protected franchises or hard assets such as receivables, equipment, or energy reserves. REAL ESTATE PRIVATE CREDIT - e
Slide 38: History of Arena Investors
History of Arena Investors 38 $1.5B Launch of AUM(1) Arena Special Opportunities (Cayman) Fund $1B $2B+ Arena Investors AUM(1) capital deployed for offshore opens in New York into 189 illiquid investors. and San Francisco. transactions since inception. Excess Capacity $200M Income Account Vehicle Cr
Slide 39: Arena's Team
Arena’s Team 39 www. a r e na co . co m
Slide 40: Arena's Senior Team
Arena’s Senior Team 40 Years of Name Title Previous Experience Experience Chief Executive Officer, D.B. Zwirn & Co./Highbridge Capital Management, LLC; Daniel Zwirn 26 Chief Investment Officer MSD Capital, L.P.; Davidson Kempner Partners D.B. Zwirn & Co.; Pequot Capital Management; UBS Global Managi
Slide 41: Arena's Senior Team
Arena’s Senior Team 41 Years of Name Title Previous Experience Experience Managing Director, Scott Gold 21 Alcentra Capital; Islanet Head of Corporate Private Credit Managing Director, Global Atlantic; Deutsche Bank; UBS/Dillon Read Capital David Disque 22 Head of Structured Finance Management Manag
Slide 42: Investment Platform
Investment Platform (1) 42 www. a r e na co . co m (1) All vehicles are asset-liability matched with respect to redemptions. (2) Anticipated launch in 3Q 2020.
Slide 43: Arena Investors - Well Positioned to Accelerate Growth
Arena Investors – Well Positioned to Accelerate Growth 43 Platform Fully • Global senior staff in place Constructed • Infrastructure and entities fully established and operational • Platform of product offerings complete • In process to secure appropriate financing for capital pools Proven Performan
Slide 44: Arena Investors - Financial Highlights Through 6/30/2020
Arena Investors – Financial Highlights Through 6/30/2020 44 Recurring revenue growing, while fixed operating expenses are stable given platform has been fully built. With recurring revenue close to exceeding expenses, Arena is now reaching a point where future growth is well positioned to drive sign
Slide 45: Arena's Performance Through 6/30/2020
Arena’s Performance Through 6/30/2020 (1) 45 Arena’s core investment strategy seeks to build a highly diversified and uncorrelated portfolio of investments. Consistent performance including stable performance during COVID-19. Our five- year track record has also outperformed the LSTA Leveraged Loan
Slide 46: Arena's Performance Through 6/30/2020 - Other Time Periods
Arena’s Performance Through 6/30/2020 (1) 46 The same is true over other time periods. YTD 1 Year 6% 8% 1% 3% -4% -2% -9% -7% -14% -12% Jan-20 Jun-20 Jul-19 Jun-20 3 Years 5 Years 40% 35% 30% 25% 20% 15% 10% 5% 0% -5% -10% Jul-17 Feb-18 Sep-18 Apr-19 Nov-19 Jun-20 Oct-15 Dec-16 Feb-18 Apr-19 Jun-20
Slide 47: Arena Investors - Assets Under Management Through 6/30/2020
Arena Investors – Assets Under Management Through 6/30/2020 47 Arena’s assets under management1 have grown at a compound annual rate of 51% from December 2015 through August 2020. The primary growth during Q2 2020 was due to increased commitments for the Arena Closed-End Fund (launched 3/1/2020). Ad
Slide 48: Arena Group - Summary of Changes to AUM Through 6/30/2020
Arena Group – Summary of Changes to AUM Through 6/30/2020 48 In the last twelve months, Arena completed the build-out of its platform of offerings with the addition of a Closed-End Fund and Excess Capacity Funds. Future growth in assets under management will come from scaling these offerings with ex
Slide 49: Dan Zwirn's Outlook
Dan Zwirn’s Outlook 49 www. a r e na co . co m
Slide 50: The Westaim Corporation
A.WESTAINM The Westaim Corporation
Slide 51: Westaim Strategy: Build and Evolve the Platform
Westaim Strategy: Build and Evolve the Platform Invest in businesses with attractive fundamentals and business economics targeting a 15% Opportunistic Investing IRR on invested capital Partnership Approach Partner with aligned and capable management teams Business Building Provide strategic oversigh
Slide 52: Westaim is Entering the Third Inning of a Long-term Game
Westaim is Entering the Third Inning of a Long-term Game ACQUIRE AND BUILD EVOLVE FUND Sourcing platform HIIG: Put in a position to Laser focused on driving acquisitions of HIIG and take advantage of hard operating results Arena market Build out asset Acquiring and structuring Arena: Pla
Slide 53: HIIG: Well Positioned for Increasing Returns
HIIG: Well Positioned for Increasing Returns Goal: Top Quartile Growth in Book Value per Share Underwriting Profitability Capital Efficiency Investment Return Underwriting Profitability Capital Efficiency Investment Return LPT and conservative loss picks Balance use of debt, equity and Challen
Slide 54: Arena FINCOs: Consistent Returns; Solid Performance through Covid-19 Volatility
Arena FINCOs: Consistent Returns; Solid Performance through Covid-19 Volatility December December December YTD June For the year ended and year-to-date 31, 2017 31, 2018 31, 2019 30, 2020 Highlights Excellent historical performance, Investment income $14.8 $18.5 $18.5 $3.6 despite excess cash bala
Slide 55: Permanent Capital: Huge Strategic Advantage to Building an Asset Management Platform
Permanent Capital: Huge Strategic Advantage to Building an Asset Management Platform Access to permanent capital is critical today to support Strategic Opportunities for Westaim’s Permanent Capital with the growth and success of alternative asset managers Arena Investors All Tier One alternative
Slide 56: Arena Investors: Operating Leverage as AUM Grows
Arena Investors: Operating Leverage as AUM Grows Arena Investors’ Illustrative Operating Leverage(1) Third Party AUM Fee Structure EBITDA Margin at Various Levels of Fee-Paying AUM(2)(3) $1.0 $2.0 $3.0 $4.0 $5.0 Billion Billion Billion Billion Billion Founders Class Fee Structure(4) Management Fee 1
Slide 57: Westaim Strategy: Operationally Focused Asset Manager
Westaim Strategy: Operationally Focused Asset Manager Opportunistic Dividends Share Buybacks Invest Opportunistically and Strategically Start / Acquire / Build / Grow Generate Cash Excellent Financial Services Businesses Flow Characteristics: Role of Westaim: Grow fee-based earnings Attractive
Slide 58: Westaim: Path to Creating and Unlocking Embedded Value
Westaim: Path to Creating and Unlocking Embedded Value Objective Valuation Applicable Metrics Top quartile growth in book Multiple of book value per share value Stockholders’ equity $432.6mm Superior underwriting Stock loans receivable $(13.0)mm Leading to multiple expansion Total stockholde
Slide 59: Appendix
A.WESTAINM Appendix
Slide 60: HIIG: Strong Financial Position
HIIG: Strong Financial Position As at December 31, 2019 June 30, 2020 Highlights Investment portfolio $711.4 $636.2 Effective April 1, 2020 HIIG secured an LPT, mitigating development of net reserves from Operating and restricted cash 86.3 103.2 2017 and prior years Insurance related assets 812.0
Slide 61: HIIG: Summary Income Statement
HIIG: Summary Income Statement Annual Year-to-date Underwriting Profitability December 31, December 31, June 30, June 30, Secured LPT to mitigate impact of adverse reserve 2018 2019 2019 2020 development on go forward underwriting results Gross written premium $696.9 $878.3 $460.1 $485.8 In Q2 2
Slide 62: The Westaim Corporation
The Westaim Corporation 70 York Street, Suite 1700 Toronto, Ontario Canada M5J 1S9 www.westaim.com info@westaim.com