Aventus Capital Inc. · TSXV:AVTS
Aventus Capital — The Westaim — Corporate Update (November 2017)
45 slides from Aventus Capital's corporate update, November 2017
Slide 1: Corporate Update
Corporate Update November 2017
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”), Ho
Slide 3: Disclosure Related to Arena Group
Disclaimer Disclosure Related to Arena Group Arena Special Opportunities Fund, LP Fund performance returns presented herein are unaudited. The returns are calculated net of management fees of 2% and an incentive fee of 20%, which represent the highest fees that may be charged to investors in the Fun
Slide 4: Agenda
Agenda 1 Overview 2 Houston International Insurance Group, Ltd. (“HIIG”) Overview Industry Environment Business Results and Outlook 3 Arena Group Overview Current Environment and Opportunity Origination and Deployment Performance 4 Conclusion 5 Questions and Answers 4
Slide 5: Westaim
| AWESTAIM
Slide 6: The Westaim Corporation - Overview
The Westaim Corporation - Overview The Westaim Corporation Structure Alternative Investment Management Specialty Property and Casualty Insurance and Specialty Finance Market Statistics Ticker TSXV:WED Share price (November 10, 2017) C$ 3.05 Shares outstanding (millions) 143.2 Market capitalization C
Slide 7: Breakdown of BVPS at September 30, 2017 – Significant Embedded Value
The Westaim Corporation - Overview Breakdown of BVPS at September 30, 2017 – Significant Embedded Value BVPS BVPS Entity (US$) (C$) Arena HIIG Origination $1.02 $1.27 (43.9% owned by Westaim)(1)(2) 10.1% Arena Group Arena Finance 1.03 1.28 (100% owned by Westaim)(2) HIIG Arena Origination 44.8% 0.23
Slide 8: Houston International Insurance Group
Houston INTERNATIONAL INSURANCE GROUP
Slide 9: Overview
Industry Business Results Overview Environment and Outlook
Slide 10: HIIG - Overview
HIIG - Overview Business Description Executive management with Diversified specialty 4 subsidiary P&C significant industry experience Insurance Holding insurance companies (Chairman and CEO: Company and an underwriting agency Stephen L. Way) Investments, Cash and Trailing Twelve Months Cash Equivale
Slide 11: Industry Environment
Industry Business Results Overview Environment and Outlook
Slide 12: HIIG - Industry Environment: Current Industry Environment
HIIG - Industry Environment Current Industry Environment P & C insurance market has experienced soft conditions over the last several years ‒ Excess capital in the primary and reinsurance markets, including from alternative providers (Cat bonds, ILS, ILW, etc.) – increased competition ‒ Lack of ca
Slide 13: HIIG - Industry Environment: Executive Commentary
HIIG - Industry Environment Current Industry Environment “I believe we are at the beginning of a firming price environment, driven by years of soft pricing that has resulted in inadequate rates in many classes. The magnitude of this year’s CAT losses, which on a worldwide aggregate basis was between
Slide 14: Recent P&C Industry Transactions
HIIG - Industry Environment Recent P&C Industry Transactions(1) Date: May 22, 2017(2) Date: May 2, 2017(2) Date: December 18, 2016(2) Transaction Value: $890 Transaction Value: $1,700 Transaction Value: $4,900 P / EPS: 16.4x P / EPS: 18.0x P / EPS: 16.5x Price / BV: 2.8x Price / BV: 1.7x Price / BV:
Slide 15: Business Results and Outlook
Industry Business Results Overview Environment and Outlook
Slide 16: HIIG - Gross and Net Premiums Written Breakdown
HIIG - Business Results and Outlook Gross Written Premium(1)(2) Net Premiums Written(1)(2) For the Trailing Twelve Month Period Ended For the Trailing Twelve Month Period Ended September 30, 2017 September 30, 2017 A&H Commercial A&H Commercial 14.4% 16.8% 12.7% 18.3% MGU MGU Partners Partners Speci
Slide 17: HIIG - Financial Highlights
HIIG - Business Results and Outlook Financial Highlights Three and Nine Months Ended September 30, 2017 Income Statement Information Q3 2017 Q3 2016 YTD 2017 YTD 2016 Gross Written Premium $144.1 $133.9 $431.9 $407.0 Net Premiums Written 61.6 71.3 193.7 218.9 Net Premiums Earned 66.5 77.9 200.8 239.
Slide 18: HIIG - Activity in 2017
HIIG - Business Results and Outlook Activity in 2017 Q3 2017 ‒ Our extensive use of reinsurance allowed us to largely avoid losses from the catastrophes in the quarter –$2.0 million net pre-tax loss (~$40.0 million gross) in the quarter 2016 – 2017 has seen significant improvement in the HIIG pl
Slide 19: Arena
| “iN ARENA
Slide 20: Overview
Current Origination Environment Overview and Performance and Deployment Opportunity
Slide 21: Arena Group - Overview
Arena Group - Overview Overview Alternative Investment Global Commercial Specialty Finance Company Management Arena Finance Arena Origination Arena Investors Global specialty finance Specialty finance originator Global investment Participates in highly Fair value: ~$34 million management c
Slide 22: Investment Team
Arena Group - Overview Investment Team Daniel B. Zwirn CEO and CIO CORPORATE REAL ESTATE STRUCTURED CORPORTE PRIVATE CREDIT PRIVATE CREDIT FINANCE SECURITIES David Disque John Eck Shahid Ramzan Scott Gold Don Moses MD, Structured MD, Structured MD, Corporate MD, Corporate MD, Real Estate Finance Fin
Slide 23: Key Senior Investment Team - Donald H. Moses
Arena Group - Overview Key Senior Investment Team Donald H. Moses Managing Director, Real Estate 2006 - 2015 Founder and Principal 2009 - 2010 Managing Director 2007 - 2009 Managing Director, Portfolio Manager, Domestic Private Real Estate 2001 - 2006 Director 1992 - 2001 Principal, Senior Vice Pres
Slide 24: Key Senior Investment Team - Gold and Ramzan
Arena Group - Overview Key Senior Investment Team Scott Gold Shahid Ramzan Managing Director, Corporate Private Credit Managing Director, Liquid Credit 2007 - 2017 2007 - 2013 Fortensa subsidiary of SVP and Founding & IC Member, Principal Private Lending Group 2003 - 2007 1998 - 2007 Managing Direct
Slide 25: Key Senior Investment Team - Eck and Disque
Arena Group - Overview Key Senior Investment Team John Eck David Disque Managing Director, Structured Finance Managing Director, Structured Finance 2006 - 2012 2013 - 2016 Managing Director, ABS Trading Portfolio Manager 2001 - 2006 2010 - 2012 Director, Asset-Backed Finance Risk Trader, Credit Solu
Slide 26: Current Environment and Opportunity
Current Origination Environment Overview and Performance and Deployment Opportunity
Slide 27: Decline in Bank Funding to Leveraged Loan Market
Arena Group – Environment and Opportunity Decline in Bank Funding to Leveraged Loan Market(1) 100.0% 80.0% 60.0% 40.0% 20.0% 0.0% 1994 2000 2006 2012 2013 2014 2015 2016 Foreign/Domestic Banks Finance Companies and Insurance CLOs, Loan Funds and High-Yield Funds Securities Firm Diminished availabili
Slide 28: The Opportunity
Arena Group – Environment and Opportunity The Opportunity Businesses Applying to Banks for Financing Businesses able to Secure Financing from (2008-2016)(1) Traditional Sources (2008-2016)(1) Rejected Unable to 82% secure financing 64% Successful in securing financing Approved 36% 18% Total reductio
Slide 29: The Arena Group Advantage
Arena Group – Environment and Opportunity The Arena Group Advantage(1) Multi-Capabilities Single Strategy $10 million $50 million $100+ million Average Investment Size Arena Group provides access to credit to businesses who are underserviced and often ignored Note: Logos, trademarks and copyrights i
Slide 30: How is Arena different?
Arena Group – Environment and Opportunity How is Arena different? Agnostic to asset class, industry, and geography; rather than operate under institutional Mandate boundaries, Arena Group encourage flexibility in our mandates Flexibility Avoids the largest risk in specialty finance – moral hazar
Slide 31: Origination and Deployment
Current Origination Environment Overview and Performance and Deployment Opportunity
Slide 32: AUM and Commitments
Arena Group – Origination and Deployment AUM and Commitments(1) $800 $745 $700 $625 AUM and Commitments ($ millions) $600 $500 $448 $400 $380 $347 $347 $348 $300 $217 $200 $100 $0 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Arena Finance and Arena Origination Arena Investors Comm
Slide 33: Deployment in Illiquids - Arena Finance and Arena Origination
Arena Group – Origination and Deployment Deployment - Arena Finance and Arena Origination(1) 100% 80% 80% 76% 72% Deployment in Illiquids 63% (% of NAV(1))) 60% 43% 40% 29% 29% 20% 16% 0% Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 (1) Deployment in illiquids was calculated as ag
Slide 34: Deployment in Illiquids - Arena Investors
Arena Group – Origination and Deployment Deployment - Arena Investors 100% 89% 86% 85% 82% 80% 75% Deployment in Illiquids (% of NAV(1)) 60% 54% 40% 40% 33% 20% 0% Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 (1) Deployment in illiquids was calculated as loans divided by the NAV o
Slide 35: Arena Group - Portfolio Composition
Arena Group – Origination and Deployment Arena Group - Portfolio Composition (September 30, 2017) Cash / Others Corporate 11.3% Private Corporate Credit Securities 20.0% 3.3% Real Estate Structured Private Credit Finance(1) 29.7% 35.7% Portfolio diversified across 123 active positions (1) Structured
Slide 36: Performance
Current Origination Environment Overview and Performance and Deployment Opportunity
Slide 37: Characteristics of Private Loans and Credit Investments
Arena Group – Performance Actual Underwritten Characteristics of Private Loans and Credit Investments (September 30, 2017) Corporate Real Estate Commercial & Structured Consumer Overall Private Credit Credit(1) Industrial Finance Assets Total Coupon 13.2% 11.5% 13.9% 16.0% 15.7% 13.0% (incl. PIK) Un
Slide 38: Net Unlevered Return to Investors
Arena Group – Performance Net Unlevered Return to Investors Arena Special Opportunities Fund, LP Year Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec YTD 2017 0.3% 0.7% 0.8% 0.8% 0.7% 0.6% 1.3% 1.4% 2.9% 9.8% 2016 0.1% 0.1% 0.3% 0.2% 0.1% (0.2%) 0.4% 0.1% 0.3% 0.2% 0.3% 0.7% 2.6% 2015 0.0% 0.1% 0.0%
Slide 39: Net Income (Loss) - Arena Finance, Origination and Investors
Arena Group – Performance Net Income (Loss) Arena Finance and Arena Origination(1)(2) $6.0 $4.5 $4.0 $3.0 ($ millions) $2.8 Net Income $1.4 (Loss) $2.0 $0.6 $0.0 ($2.0) $(0.8) $(0.5) ($4.0) $(2.5) Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Arena Investors(3)(4) $0.0 ($ millions)
Slide 40: Net Income - Arena Group
Arena Group – Performance Net Income - Arena Group(1)(2)(3)(4) $4.0 $3.3 $3.0 Net Income (Loss) ($ millions) $2.0 $1.7 $1.5 $1.0 $0.2 $0.0 $(0.2) ($1.0) ($2.0) $(1.9) $(2.1) ($3.0) ($4.0) $(3.5) Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Figures in US$ (value in millions) (1) Ca
Slide 41: Westaim
| AWESTAIM
Slide 42: Opportunities for Building Value at Westaim
The Westaim Corporation - Overview Opportunities for Building Value at Westaim Profitable underwriting and controlled growth Optimize capital structure Improving industry environment Deliver investment performance and build out the business and Arena Consider opportunities to raise additio
Slide 43: Westaim - Conclusion: Share Price Performance
The Westaim Corporation - Conclusion Share Price Performance(1) 800.0% CAGR(2) 700.0% Westaim ––– 24.0% 674.9% S&P Total Return Index ––– 14.6% 600.0% TSX Total Return Index ––– 9.6% 500.0% % Gain 400.0% 334.9% 300.0% 225.0% 200.0% 100.0% 0.0% Jan-09 Oct-10 Jul-12 Apr-14 Jan-16 Nov-17 Westaim S&P To
Slide 44: Questions and Answers
[| Questions and Answers
Slide 45: The Westaim Corporation contact details
The Westaim Corporation 70 York Street, Suite 1700 Toronto, Ontario Canada M5J 1S9 www.westaim.com info@westaim.com