Usi Corporation · TWSE:1304
Usi — Merrill Lynch Insurance Investor Conference (February 2006)
42 slides from Usi's conference presentation, Feb 15, 2006
Slide 1: USI Holdings Corporation February 2006
February 2006 Exhibit 99.1 USI Holdings Corporation USI Holdings Corporation February 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 25 46 Jeff Jones Chief Marketing Officer 28 51 Bob Schneid
Slide 4: USI Profile: A Market Leader
3 USI Profile A Market Leader 10th largest U.S. Broker based on 2003 revenues (a) Leading Benefits Broker (represents 42% of 2004 total revenues) National Scale with a Local Presence 73 Offices in 19 states 500+ sales professionals More than 60,000 commercial clients Middle Market Focus Approximatel
Slide 5: Historical Perspective
4 Historical Perspective Focus 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 Pursued
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 2004 Revenues = $407 MM Corporate USI Offices *Pro forma for Summit Global Partners & Patterson Smith acquisitions. Revenue Diversity Revenue Diversity Diversified Revenue Mix National Scale and Local Presence* Prop
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 Effective Communication Ineffective Communication 83.6% 25.7% 22.1% 76.2% Percentage of employees responding favo
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 Revenue Growth Client Retention Cross Selling New Business New Producers Acquisition Execution Acquisition Pipeline Acquisition Integration Operating Efficiency
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 Organic Growth (a) Strategy 10% 0% -10% -20% 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 P&C and benefits provide balance Exposure units mitigate fluctuations Current Target C
Slide 15: Renewal Data by Quarter
14 Renewal Data by Quarter Source: Advisen Ltd. 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 10.00 15.00 20.00 25.00 30.
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 6/30/05 Proven Strategy and Opportunity Retirement Core Benefit Enrollme
Slide 18: Cross-Servicing Success
17 Cross-Servicing Success = Increase = Decrease Product Category 2004 Retention 1 92% 2 96% 3 100% 4+ 98% Overall Retention 95% # of Product Categories Sold 2002 2003 2004 2002 2003 2004 1 or more 15 15 15 400 400 400 2+ 10 173 3+ 7 66 4+ 4 25 Top 15 Accounts Top 400 Accounts
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 Margin Expansion 2004A 40% 0% Insurance Brokerage Specialized Benefits Corporate Segment Operating Income 20% 10% 30% Target 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 GAAP Reporting Segments
Slide 21: Operating Income
20 Operating Income 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% 35.0% 2004 Actual 2005 Forecast 2006 Forecast Year Quartile Analysis The top three quartiles of retail brokerage require continual fine tuning, while the bottom quartile requires more significant improvements. Note: 2005 Forecast 17 OpCo’s
Slide 22: Corporate Expense Plans
21 USI Corporate is committed to reducing the corporate expense ratio to achieve our overall efficiency goals. Corporate Expense Plans Corporate Expense Ratio 3.5% 4.0% 4.5% 5.0% 5.5% 6.0% 6.5% 7.0% 2002A 2003A 2004A 2005F Year Corporate Expense Plans 4.8% 5.7% 6.8% 6.0% Public Company Related Expen
Slide 23: Efficiency Initiative Program
22 Efficiency Initiative Program The total efficiency initiative charges represent less than 4.0% of revenue and helped to expand margins by approximately 200 bps YTD in a very challenging market environment. To be determined $1,000,000 $ Estimated 4Q Charge Total Other Severance Producers Real Esta
Slide 24: Disciplined Acquisition Strategy
23 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 25: Due Diligence and Integration Process
24 Due Diligence and Integration Process Comprehensive due diligence process Financial review Operational review Legal review Human resource review Detailed presentation to our Board of Directors Business overview Investment considerations Historical and forecasted results Cash flow and IRR Impact o
Slide 26: 2003-2004 Acquisitions
25 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 27: 2005 Acquisitions
26 2005 Acquisitions 2005 YTD acquisitions ($ millions) Agency Revenue Location Patterson//Smith 11.0 $ Falls Church, VA Expansion of DC Summit Global Partners 66.0 $ TX, FL, IL, CA, other Expansion Texas and Florida Chase Insurance Agency 3.5 $ New York, NY P&C Humanex 2.5 $ San Francisco, CA Emplo
Slide 28: Financial Overview
Financial Overview USI Holdings Corporation USI Holdings Corporation Financial Overview
Slide 29: Historical Operating Performance
28 Historical Operating Performance Revenue Operating Income (2) $ in thousands $ in thousands (2) Please see Appendix for definitions of non-GAAP financial measures used throughout this presentation and related reconciliations to GAAP financial measures. (3) 4Q 2004 excludes $12.4mm in Identified 4
Slide 30: Operating Revenues and Operating Income Summary
29 ($ in millions) Fiscal year First 9 months LTM 2001 2002 2003 2004 2004 2005 9/30/05 Operating Revenues (1) $304.5 $321.4 $345.5 $407.2 $291.9 $374.8 $490.0 Total Operating Expenses 272.7 265.7 272.4 337.8 234.4 310.0 413.4 Depreciation 12.7 11.0 9.5 8.7 6.4 7.2 9.5 Operating Income (2) 41.5 54.5
Slide 31: Credit Ratios
30 2.3x 3.3x 5.3x 9.6x 7.9x 0.0x 2.0x 4.0x 6.0x 8.0x 10.0x 12.0x 2001 2002 2003 2004 Q305 LTM 2.0x 2.0x 1.8x 2.4x 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 Q305 LTM Credit Ratios Debt/Adjusted PF EBITDA (a) EBITDA (b) /Interest expense (c) (a) Represents adjusted pro form
Slide 32: USI Summary Income Statement
31 2005 2004 2004 2003 Total Revenues (b) 374,759 $ 291,970 $ 407,198 $ 345,531 $ Operating Income (c) 72,566 51,217 73,402 64,032 Income from Continuing Operations plus Amortzation of Intangibles (c) 44,634 33,745 47,291 40,492 Fully Diluted Shares 56,303 48,995 49,127 46,028 Per Share: Income from
Slide 33: Capitalization
32 ($ thousands) 9/30/2005 12/31/2004 Operating Cash 30,099 $ 2,887 $ Debt: Term loan & revolver (a) 212,050 $ 128,438 $ Seller notes and other debt 25,900 27,887 Total Debt 237,950 156,324 Total Stockholders’ Equity 404,492 327,565 Total Capitalization 642,442 $ 483,889 $ Leverage: Debt/LTM PF EBIT
Slide 34: Financial Summary
33 Financial Summary Strong overall revenue growth (13.5% CAGR since 2001) Continued improvement in Operating Margin from 13.6% in 2001 to 19.3% for the 9-months ended 9/30/05 Strong growth in operating income (24.6% CAGR since 2001) 14.5% Cash EPS growth YTD 2005 Solid capital structure and prudent
Slide 35: The USI Story
34 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 36: Appendix
Appendix USI Holdings Corporation USI Holdings Corporation Appendix
Slide 37: 3Q & YTD 2005 Reconciliation to GAAP
36 3Q & YTD 2005 Reconciliation to GAAP For the Three Months Ended Sept 30, For the Nine Months Ended Sept 30, 2005 As Reported Identified Adjustments 2005 Excluding Identified Adjustments 2005 As Reported Identified Adjustments 2005 Excluding Identified Adjustments Total revenues 127,267 $ 756 $ 12
Slide 38: 2004 Reconciliation to GAAP
37 2004 Reconciliation to GAAP For the Three Months Ended December 31, For the Twelve Months Ended December 31, 2004 As Reported Identified Fourth Quarter 2004 Excluding Identified Expenses 2004 As Reported Identified Fourth Quarter 2004 Excluding Identified Expenses (Dollars in Thousands) Revenues
Slide 39: Non-GAAP Financial Measures
38 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 40: Reconciliation to GAAP Financial Measures
39 Reconciliation to GAAP Financial Measures LTM 2001 2002 2003 2004 3Q04 3Q05 3Q05 Total Revenues $304.46 $321.43 $345.53 $407.20 $291.97 $371.83 $487.06 Expenses: Compensation and Employee Benefits 197.36 197.37 195.89 237.27 168.37 226.41 295.30 Equity Based Compensation 3.09 (0.68) - 0.42 0.28 1
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) Inclu
Slide 42: USI Holdings Corporation February 2006
February 2006 USI Holdings Corporation USI Holdings Corporation February 2006
USI Holdings — Merrill Lynch Insurance Investor Conference (February 2006) on 6ix