Aventus Capital Inc. · TSXV:AVTS
Aventus Capital — The Westaim — Investor Day (May 2021)
58 slides from Aventus Capital's investor day presentation, May 26, 2021
Slide 1: Investor Day
AWESTAIM Investor Day May 26, 2021
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: Arena Investors
Important Disclosures Arena Investors The following is being provided solely in relation to Arena Investors, its funds and affiliates: Returns shown are unaudited. Past performance is not indicative or a reliable indicator of future performance. Actual results may vary. The information set forth her
Slide 5: The Westaim Corporation
The Westaim Corporation The Westaim Corporation Westaim is a publicly listed (TSXV:WED) investment holding company specializing in providing long-term capital to businesses operating primarily within the global financial services industry. Our focus has been, and continues to be, to seek high qualit
Slide 6: Recent Highlights
Recent Highlights • Skyward Specialty’s Q1 2021 Net Income was $13.6 million with a combined ratio of 93.8% • Introduced name change and branding of Skyward Specialty Skyward Specialty • Several key talent acquisitions to bring leadership and expertise in select specialty lines Insurance Group • Acq
Slide 7: Q1 2021 Quarterly Operating Highlights
Q1 2021 Quarterly Operating Highlights Westaim reports Q1 2021 earnings and growth across all businesses • Skyward Specialty’s Q1 Net Income was $13.6 million compared to Q1 2020 Net Loss of $48.1 million (Q1 2020 excluding unusual items – Net Loss of $13.8 million) • Continued improvement in underw
Slide 8: Westaim Summary Quarterly Operating Results
Westaim Summary Quarterly Operating Results • GAAP profit and comprehensive income in Q1 2021 was Operating result Q1 2021 Q4 2020 Q1 2020 $9.1 million ($0.06 per share) compared to a GAAP loss and comprehensive loss of $14.5 million (adjusted profit Income from investment in Arena FINCOs and ASOF $
Slide 9: Westaim Summary Statement of Financial Position
Westaim Summary Statement of Financial Position • Book value per share increased US$0.07 Q1 2021 or As at March 31, 2021 December 31, 2020 3.1% over Q4 2020 Assets Cash $8.6 $8.7 • In Q1 2021, the fair value of investments increased Income tax receivable 0.1 0.1 $10.1 million, which was $12.1 millio
Slide 10: Westaim Book Value per Share: Three months ended March 31, 2021
Westaim Book Value per Share: Three months ended March 31, 2021 $0.01 ($0.02) $0.05 $2.31 $0.03 $2.24 BVPS Income from Skyward Income from Arena FINCOs Income from Arena Westaim holding company BVPS December 31, 2020 Specialty and ASOF Investors net expenses March 31, 2021 Any terms not defined in t
Slide 11: Significant Increase in Insider Ownership
Significant Increase in Insider Ownership(1) Westaim Insiders 21% Public Shareholders 79% • Insider ownership of Westaim increased to 21% from 14% over the past 12 months • Westaim Board and management are firmly aligned with Westaim’s shareholders to create and build shareholder value (1) Source: S
Slide 12: Westaim Investor Day: Andrew Robinson, CEO Skyward Specialty
WESTAIM INVESTOR DAY May 26, 2021 ANDREW ROBINSON CEO SKYWARD SPECIALTY INSURANCE GROUP
Slide 13: Skyward Specialty at a Glance
SKYWARD SPECIALTY AT A GLANCE Business Overview Select Financial Metrics • A private, US-based specialty property and casualty insurer that (US$ millions) Q1 2021 FY 2020(1) writes on both an admitted and non-admitted basis Select Income Statement Metrics • Strategy focuses on building defensible po
Slide 14: Rule Our Niche
RULE OUR NICHE • Our strategy is to dominate those specialty segments where we choose to compete I. Drive market leading performance through daily excellence and technical mastery of the elements of our business from underwriting to claims II. Activate advanced technology to drive superior outcomes
Slide 15: Leadership Team of "A" Specialty Insurance Executives
LEADERSHIP TEAM OF “A” SPECIALTY INSURANCE EXECUTIVES Andrew Robinson John Burkhart Kirby Hill Chief Executive Officer President Specialty Lines President Industry Solutions & Previously President Specialty Previously SVP & Head of Specialty Programs and EVP Corp. Development, Professional Lines & I
Slide 16: Go to Market with Ten Specialties
GO TO MARKET WITH TEN SPECIALTIES (1) 0% 3% 6% 9% Industry Solutions 14% 26% 9% 6% 8% 13% 32% Construction Energy Specialty Trucking Captives & Programs Global Property Mgmt. & Prof. Liability A&H Surety E&S Brokerage HC Prof. Liab. (1) Net written premiums (“NWP”) for the year ended December 31, 20
Slide 17: Highly Diversified & Balanced Business
HIGHLY DIVERSIFIED & BALANCED BUSINESS Admitted vs Surplus Lines (1) Mix of Business By Line (1) Medium / Long Tail Lines Short Tail Lines 43% 49% 51% 57% Surplus Lines Admitted Lines Distribution Source (2) 26% 41% Property Inland Marine A&H Auto Phys Dam Auto Liability 33% General Liability Worker
Slide 18: Conservative Investment Portfolio
CONSERVATIVE INVESTMENT PORTFOLIO • The total portfolio of approximately $814 million ($823 million net of a $9 million payable for securities sold) is comprised of As at March 31, 2021 core fixed income and short-term investments, cash and cash 1% equivalents, common and preferred equities, and alt
Slide 19: 2020 Is Launchpoint to Top Quartile Performance
2020 IS LAUNCHPOINT TO TOP QUARTILE PERFORMANCE Q1-20 Q2-20 Q3-20 Q4-20 Q1-21 • Executed loss portfolio • Hired Andrew Robinson • Shut down mono-line • Hired Mark Boland and • Hired John Burkhart to transfer as CEO work comp business team - launched lead specialty lines; transactional E&S reorganize
Slide 20: Our Technology DNA Wins: Energy Segment Telematics
OUR TECHNOLOGY DNA WINS ENERGY SEGMENT TELEMATICS • Partnered with eMaxx to establish two group captives serving commercial transport intensive energy segment including fuel distribution/transport, energy construction, renewables servicing • Mandatory use of telematics and dash cameras - data for ri
Slide 21: Our Technology DNA Wins: Specialized Cargo Risk Management
OUR TECHNOLOGY DNA WINS SPECIALIZED CARGO RISK MANAGEMENT WITH IOT DATA • Partnered with Corvus to establish a cargo program to address the unique needs of the pharmaceutical/life sciences and select high value food products during transport and warehousing • Unique approach to address spoilage (rou
Slide 22: Our Business Intelligence Is a Super-Power
OUR BUSINESS INTELLIGENCE IS A SUPER-POWER ASSESS PERFORMANCE ON ANY RISK FACTOR 22
Slide 23: Our Momentum Is Accelerating
OUR MOMENTUM IS ACCELERATING QoQ NWP Growth (1) 25,000 35 30 20,000 25 15,000 20 10,000 15 10 5,000 5 0 0 Q2 2020 Q3 2020 Q4 2020 Q1 2021 -5,000 -5 Growth $K (left axis) Growth % (right axis) (1) Excludes lines of business that were discontinued through to March 31, 2021. 23
Slide 24: Excellent Financial Trajectory
EXCELLENT FINANCIAL TRAJECTORY Combined Ratio Progression (1) Pricing and New Product Momentum 141.9 111.2 96.4 + 10% Rate Change on Renewals (2) 97.5 New Business Differential (3) + 13% 96.2 95.9 95.5 93.8 + 5 New Product Lines Launched Q1 2020 Q2 2020 Q3 2020 Q4 2020 Q1 2021 CR (excl LPT and Unusu
Slide 25: Reserve Position Is Strong and Improving
RESERVE POSITION IS STRONG AND IMPROVING IBNR-Earned Premium Ratio by Policy Year 12, 24 & 36 Month Durations 45% At each duration, the 40% IBNR ratio is higher (more conservative) 35% than in prior years 30% 25% 20% 15% 10% 5% 0% 12 Months 24 Months 36 Months 2017 2018 2019 2020 25
Slide 26: An Engaged Team to Drive Performance
AN ENGAGED TEAM TO DRIVE PERFORMANCE Skyward Employee Engagement Survey Overall Rating 26
Slide 27: Multiple Tracks for Profitable Growth
MULTIPLE TRACKS FOR PROFITABLE GROWTH • Expand Where Positioned for Growth ✓ Construction ✓ Surety ✓ Professional Lines (management liability, financial institutions, miscellaneous professional) ✓ Transactional Property ✓ A&H • Add Profitable Adjacencies ✓ Public D&O (Excess to start) ✓ Broadened ap
Slide 28: Financial Outlook Is Positive
FINANCIAL OUTLOOK IS POSITIVE 1. Excellent position in our chosen segments, many with considerable growth initiatives in place already + Technology DNA that we believe others don’t have 2. Expanding underwriting margins I. Rate in excess of loss cost inflation II. Portfolio actions towards more prof
Slide 29: We're Going Skyward
WE’RE GOING SKYWARD LN
Slide 30: Seeing What's Possible
March 31, 2021 Seeing What’s Possible
Slide 31: About Arena Investors
About Arena 31 • Global originator and underwriter of proprietary investments ABOU T ARENA INV ESTORS seeking to produce consistent and uncorrelated returns • Institutional scale and experience with transaction sizes typically $2.2B between $5 million – $50 million, which avoids competition with Ass
Slide 32: The Arena Sources of Edge
The Arena sources of edge 32 Three sources of edge to produce differentiated returns: MANDATE PROPRIETARY SERVICING & FLEXIBILITY SOURCING SYSTEMS Global diversified investment platform: allows Global network cultivated over decades. Operating a special situations "non-bank" requires Arena to find o
Slide 33: Six Areas of Focus
Six areas of focus 33 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, 1. equipment, or energy reserves. 2. REAL ESTATE PRIVATE CREDIT
Slide 34: Arena's Team
Arena’s team(1) 34 CAMERON MACDONALD Chairman DANIEL ZWIRN LAWRENCE CUTLER Chief Executive Officer, Chief Investment Officer Managing Director, Chief Operating Officer INVESTMENT TEAM FINANCE, ASSET MANAGEMENT, OPERATIONS, TECHNOLOGY AND CLIENT SERVICE, MARKETING, LEGAL & COMPLIANCE CAPITAL MARKETS,
Slide 35: Arena's Senior Team
Arena’s senior team 35 Y E ARS O F NAME TITLE E X P E RI E N C E PREVIOUS EXPERIENCE Chief Executive Officer, D.B. Zwirn & Co./Highbridge Capital Management, LLC; MSD Capital, L.P.; DANIEL ZWIRN Chief Investment Officer 26 Davidson Kempner Partners Managing Director, D.B. Zwirn & Co.; Pequot Capital
Slide 36: Arena's Senior Team (continued)
Arena’s senior team (continued) 36 Y E ARS O F NAME TITLE E X P E RI E N C E PREVIOUS EXPERIENCE Managing Director of European PABLO FRAGA Investments 22 King Street Capital Management; Barclays; Deutsche Pfandbriefbank AG; Citi; Deutsche Bank AG TODD STRATHDEE Consultant, Asia Pacific 22 DB Zwirn;
Slide 37: Arena Investors – Well Positioned to Accelerate Growth
Arena Investors – Well Positioned to Accelerate Growth 37 • Global senior staff in place Platform Fully • Infrastructure and entities fully established and operational Constructed • Platform of product offerings complete • In process to secure appropriate financing for capital pools • ~$2.75 billion
Slide 38: Q1 2021 Quarterly Result Highlights
Q1 2021 Quarterly Result Highlights 38 (dollars in millions) Q1 2020 Q4 2020 Q1 2021 Q1 2021 Results: • Net profit was $2.1 million for Q1 2021, compared to Recurring Income $2.8 million profit in Q4 2020 and a $1.5 million loss Management / Servicing Fees $ 5.0 $ 5.9 $ 6.4 in Q1 2020. Other Income
Slide 39: Arena Fully Diversified Strategy
Investment vehicles(1) 39 $2.2 B UNDER MANAGEMENT, $1.6 B DEPLOYED (1) ARENA FULLY DIVERSIFIED STRATEGY Permanent Capital (Arena FINCOs) EXCESS CAPACITY OPPORTUNITIES • Ar en a F in an c e $0.5 B , $0.2 B DEPLOYED • Ar en a O r ig in atio n $1.6 B , $1.4 B DEPLOYED Arena New Zealand Open-ended Everg
Slide 40: Arena Investors – Performance
Arena Investors – Performance(1) 40 Arena’s core investment strategy seeks to build a highly diversified and uncorrelated portfolio of investments. Consistent performance including stable performance during COVID-19. Since inception, Arena has also outperformed the LSTA Leveraged Loan 100 index on a
Slide 41: Arena Investors – Assets Under Management
Arena Investors – Assets Under Management Through 3/31/2021(1) 41 $ 2,500 mm $130 $57 $2,167 $2,041 Arena Group’s assets $ 2,000 mm ($55) ($6) under management (including undrawn $ 1,500 mm commitments) grew $1,251 modestly over the first $1,024 quarter. $ 1,000 mm $760 From December 31, 2015 to Dec
Slide 42: Dan Zwirn's Outlook
Dan Zwirn’s Outlook 42 Is Graham’s ‘Weighing Modern Graham: Arena's Dan Dan Zwirn Invested Like a “Extend and Pretend”: Moral Zwirn on deep value special Machine’ Approach Out of Crisis Was Coming — And Date? Hazard in the Debt Markets situations with Tobias Carlisle on Then Covid-19 Arrived The Acq
Slide 43: Arena
fs ARENA
Slide 44: Arena FINCOs: Summary of Operating Results
Arena FINCOs: Summary of Operating Results FY 2018 FY 2019 FY 2020 Q1 2021 • Proceeds from the bond offering continue Investment income $18.5 $18.5 $0.2 $1.0 to be invested, with Arena FINCOs total Net gain (losses) on investments 5.2 3.9 3.5 9.1 investments increasing 12% in the quarter Interest ex
Slide 45: Arena FINCOs: Summary of Net Assets
Arena FINCOs: Summary of Net Assets Fair Value March 31, 2021 December 31, 2020 • The Arena FINCOs were able to deploy Cash and cash equivalents $26.5 $21.4 Due from brokers, net (20.3) (5.5) cash to investments in the quarter, but the Investments: cash balance remained high at March 31, Corporate P
Slide 46: Arena FINCOs: Portfolio breakdown as at March 31, 2021
Arena FINCOs: Portfolio breakdown as at March 31, 2021 Equity / Other Debt Corporate REO / Securities 59% Private Credit Hard 27% 26% Assets (1) 41% Consumer Assets 7% Structured Finance Real Estate and Real 3% Estate Private Credit Commercial and 18% Industrial Assets 19% Arena FINCOs held 221 posi
Slide 47: The Westaim Corporation
AWESTAIM The Westaim Corporation
Slide 48: Westaim Strategy: Build and Evolve the Platform
Westaim Strategy: Build and Evolve the Platform Opportunistic Investing Invest in businesses with attractive fundamentals and business economics targeting a 15% IRR on invested capital Partnership Approach Partner with aligned and capable management teams Business Building Provide strategic oversigh
Slide 49: Westaim Strategy: Build and Evolve the Platform
Westaim Strategy: Build and Evolve the Platform ACQUIRE AND FUND BUILD EVOLVE ◼ Sourcing platform acquisitions of ◼ Skyward Specialty: Put in a position ◼ Laser focused on driving operating Skyward Specialty and Arena to take advantage of hard market results ◼ Acquiring and structuring to provide ◼
Slide 50: Westaim Strategy: Operationally Focused Asset Manager
Westaim Strategy: Operationally Focused Asset Manager Dividends Opportunistic Share Buybacks Invest Opportunistically and Strategically Start / Acquire / Build / Grow Excellent Financial Services Businesses Characteristics: Role of Westaim: Generate Cash Flow ◼ Grow fee-based earnings ◼ Attractive e
Slide 51: Arena Investors – Deal Structure Aligns Arena Management and Westaim
Arena Investors – Deal Structure Aligns Arena Management and Westaim • Arena Investors was founded by Dan Zwirn and Westaim in August 2015 under an arrangement designed to align Arena Investors’ senior management interests very tightly with those of Westaim and its shareholders. The principal elemen
Slide 52: Permanent Capital: Huge Strategic Advantage
Permanent Capital: Huge Strategic Advantage to Building an Asset Management Platform • Access to permanent capital is critical today to support the growth and success of Strategic Opportunities for Westaim’s Permanent Capital with alternative asset managers Arena Investors • All Tier One alternative
Slide 53: Westaim: Path to Creating and Unlocking Embedded Value
Westaim: Path to Creating and Unlocking Embedded Value Objective Valuation Applicable Metrics(1) ◼ Top quartile growth in book value per share ◼ Multiple of book value ◼ Adjusted Stockholders’ equity: $414.8mm ◼ Superior underwriting ◼ Multiple of earnings ◼ Net income ◼ Leading to multiple expansio
Slide 54: Appendix A: Skyward Specialty Insurance
SKYWARD SPECIALTY INSURANCE APPENDIX A
Slide 55: Summary Statements of Operations
SUMMARY STATEMENTS OF OPERATIONS Quarter-to-date Q1 2021 Q1 2020 Written Premium Growth • Skyward Specialty is focused on being a disciplined gross line underwriter, Gross written premium (GWP) $237.8 $232.9 Net written premium (NWP) 109.8 99.9 earning an underwriting profit on a gross and net basis
Slide 56: Summary Balance Sheets
SUMMARY BALANCE SHEETS As at March 31, 2021 December 31, 2020 • Adjusted stockholders’ equity increased to $414.8 or 2.3% from Q4 2020 reflecting income of $13.6 million partially offset by $4.4 million of unrealized losses on our fixed Investments $822.5 $764.8 income portfolio recorded in OCI Cash
Slide 57: Adjusted Stockholders' Equity: Three Months Ended March 31, 2021
ADJUSTED STOCKHOLDERS' EQUITY: FOR THE THREE MONTHS ENDED MARCH 31, 2021 (1) $12.2 ($1.6) ($3.6) $0.1 ($4.4) $414.8 $6.6 $405.5 Adjusted stockholders' Underwriting Income Net Investment Interest and Income Tax Expense Employee Share Unrealized Loss on Adjusted stockholders' equity Income Amortizatio
Slide 58: The Westaim Corporation
The Westaim Corporation 70 York Street, Suite 1700 Toronto, Ontario Canada M5J 1S9 www.westaim.com [email protected]