2024 Second Quarter Report

The Westaim Corporation

Management's Discussion and Analysis

Three and six months ended June 30, 2024

(Currency amounts in millions of United States dollars except per share data, unless otherwise indicated)

TABLE OF CONTENTS

1. THE COMPANY
2. OVERVIEW OF PERFORMANCE
3. INVESTMENTS
4. ANALYSIS OF FINANCIAL RESULTS
5. ANALYSIS OF FINANCIAL POSITION
6. OUTLOOK
7. LIQUIDITY AND CAPITAL RESOURCES
8. RELATED PARTY TRANSACTIONS
9. MATERIAL ACCOUNTING ESTIMATES AND ASSUMPTIONS
10. MATERIAL ACCOUNTING POLICIES AND RECENTLY ADOPTED AND PENDING ACCOUNTING PRONOUNCEMENTS
11. QUARTERLY FINANCIAL INFORMATION
12. RISKS
13. ADDITIONAL ARENA FINCOS INVESTMENT SCHEDULES
14. NON-GAAPMEASURES
15. CAUTIONARY NOTE REGARDING FORWARD-LOOKING INFORMATION

The "Company" in this Management's Discussion and Analysis ("MD&A") refers to The Westaim Corporation ("Westaim") on a consolidated basis. This MD&A, which has been approved by the Board of Directors of Westaim, should be read in conjunction with the Company's unaudited interim consolidated financial statements including notes for the three and six months ended June 30, 2024 and 2023 as set out on pages 31 to 54 of this quarterly report ("Financial Statements"). Financial data in this MD&A has been derived from the Financial Statements and is intended to enable the reader to assess the Company's results of operations for the three and six months ended June 30, 2024 and financial condition as at June 30, 2024. The Company reports its consolidated Financial Statements using generally accepted accounting principles ("GAAP") and accounting policies consistent with International Financial Reporting Standards ("IFRS"). All currency amounts are in United States dollars ("US$"), the functional and presentation currency of the Company, unless otherwise indicated. Canadian dollars are referenced as C$. The following commentary is current as of August 13, 2024. Additional information relating to the Company is available on SEDAR+ at www.sedarplus.ca. Certain comparative figures have been reclassified to conform to the presentation of the current year, and certain totals, subtotals and percentages may not reconcile due to rounding.

IFRS for Investment Entities

The Company qualifies as an investment entity under IFRS and uses fair value as the key measure to monitor and evaluate its primary investments. The Company reports its financial results in accordance with IFRS applicable to investment entities.

Functional and Presentation Currency

The US$ is the functional and presentation currency of the Company. International Accounting Standard 21 "The Effects of Changes in Foreign Exchange Rates" describes functional currency as the currency of the primary economic environment in which an entity operates. A significant majority of the Company's revenues and costs are earned and incurred in US$, respectively.

Non-GAAP Measures

The Company uses both IFRS and non-generally accepted accounting principles ("non-GAAP") measures to assess performance. The Company cautions readers about non-GAAP measures that do not have a standardized meaning under IFRS and are unlikely to be comparable to similar measures used by other companies. Management believes these measures allow for a more complete understanding of the underlying business. These measures are used to monitor the Company's results and should not be viewed as a substitute for those determined in accordance with IFRS. Reconciliations of such measures to the most comparable IFRS figures are contained in Section 14, Non-GAAPMeasures of this MD&A.

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The Westaim Corporation

Management's Discussion and Analysis

Three and six months ended June 30, 2024

(Currency amounts in millions of United States dollars except per share data, unless otherwise indicated)

Cautionary Statement Regarding the Valuation of Investments in Private Entities

In the absence of an active market for its investments in private entities, fair values for these investments are determined by management using the appropriate valuation methodologies after considering the history and nature of the business, operating results and financial conditions, outlook and prospects, general economic, industry and market conditions, capital market and transaction market conditions, contractual rights relating to the investment, public market comparables, net asset value, discounted cash flow analysis, comparable recent arm's length transactions, private market transaction multiples and, where applicable, other pertinent considerations. The process of valuing investments for which no active market exists is inevitably based on inherent uncertainties and the resulting values may differ from values that would have been used had an active market existed. The amounts at which the Company's investments in private entities could be disposed of may differ from the fair value assigned and the differences could be material.

Cautionary Statement Regarding Financial Information of the Arena FINCOs and Arena

Supplementary financial measures concerning the Arena FINCOs (as hereinafter defined) and Arena (as hereinafter defined) (the "Arena Supplementary Financial Measures") contained in this MD&A are unaudited and have been derived from the audited consolidated financial statements of the Arena FINCOs and Arena for the year ended December 31, 2023 and the unaudited consolidated financial statements of Arena FINCOs and Arena for the three and six months ended June 30, 2024 and 2023, which have been prepared in accordance with either IFRS or US GAAP. Such statements are the responsibility of the management of the Arena FINCOs and Arena. The Arena Supplementary Financial Measures, including any Arena FINCOs and Arena non-GAAP measures contained therein, may not be reconciled to IFRS and so may not be comparable to the financial information of issuers that present their financial information in accordance with IFRS.

The Arena Supplementary Financial Measures should be read in conjunction with the Company's historical financial statements including the notes thereto and the related MD&A as well as the Company's other public filings.

The Arena Supplementary Financial Measures have been primarily provided by the management of the Arena FINCOs and Arena. Although Westaim has no knowledge that would indicate that any of the Arena Supplementary Financial Measures contained herein are untrue or otherwise misleading, neither Westaim nor any of its directors or officers assumes any responsibility for the accuracy or completeness of such information, or for any failure by the Arena FINCOs and Arena to disclose to Westaim events or facts which may have occurred or which may affect the significance or accuracy of any such financial information but which are unknown to Westaim.

Westaim disclaims and excludes all liability (to the extent permitted by law), for losses, claims, damages, demands, costs and expenses of whatever nature arising in any way out of or in connection with the Arena Supplementary Financial Measures, its accuracy, completeness or by reason of reliance by any person on any of it.

Forward-Looking Information

This MD&A may contain forward-looking statements that involve risks and uncertainties. The Company's actual results could differ materially from these forward-looking statements as a result of various factors, including those discussed hereinafter, and in the Company's Annual Information Form for its fiscal year ended December 31, 2023, which is available on SEDAR+ at www.sedarplus.ca, as same may be modified or superseded by a subsequently filed Annual Information Form. Please refer to Section 15, Cautionary Note RegardingForward-LookingInformation of this MD&A.

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The Westaim Corporation

Management's Discussion and Analysis

Three and six months ended June 30, 2024

(Currency amounts in millions of United States dollars except per share data, unless otherwise indicated)

1. THE COMPANY
   The Westaim Corporation (TSXV: WED) is a Canadian investment company specializing in providing long-term capital to businesses operating primarily within the global financial services industry. The Company invests, directly and indirectly, through acquisitions, joint ventures and other arrangements, with the objective of providing its shareholders with capital appreciation and real wealth preservation. Westaim's strategy is to pursue investment opportunities with a focus towards the global financial services industry and grow shareholder value over the long term.
   The Company's principal investments consist of Skyward Specialty Insurance Group, Inc. ("Skyward Specialty"), the Arena FINCOs and Arena. See discussion in Section 3, Investments of this MD&A for additional information on these investments.
2. OVERVIEW OF PERFORMANCE

1. Westaim's common shares ("Common Shares") are listed and posted for trading on the TSX Venture Exchange ("TSXV") under the symbol "WED".
2. See Section 14,Non-GAAPMeasures of this MD&A.
3. Period end exchange rates: 1.36875 at June 30, 2024 and 1.32395 at June 30, 2023.

Three months ended June 30, 2024 and 2023

The Company reported a (loss) profit and comprehensive (loss) income of $(17.1) and $31.3 for the three months ended June 30, 2024 and 2023, respectively.

Revenue and net change in value of investments was a net decrease of $2.7 for the three months ended June 30, 2024 (2023 - increase of $35.9), and consisted of interest income of $3.4 (2023 - $0.7), dividend income paid to the Company from the Arena FINCOs of $nil (2023 - $2.5), advisory fees of $0.1 (2023 - $0.1), a decrease of $14.3 in the value of the investment in Skyward Specialty (2023 - increase of $37.6), an increase of $4.9 in the value of the investments in the Arena FINCOs (2023 - decrease of $5.8, which was a decrease of $3.3 before dividends paid of $2.5), the Company's share of Arena's comprehensive income of $3.1 (2023 - $0.8) and an increase in the value of the Company's investment in Arena Special Opportunities Fund, LP ("ASOF LP") of $0.1 (2023 - decrease of a nominal amount).

Net expenses for the three months ended June 30, 2024 of $18.2 (2023 - $4.7) consisted of salaries and benefits of $14.0 (2023 - $1.3), general, administrative and other expenses of $0.2 (2023 - $0.2), professional fees of $1.0 (2023 - $0.3), share-based compensation expense $3.1 (2023 - $2.4), a foreign exchange gain of $0.1 (2023 - loss of $0.2), interest on preferred securities of $nil (2023 - $0.4) an unrealized gain resulting from a change in the fair value of the vested Warrants (as hereinafter defined) of $nil (2023 - $0.1).

The Company reported income taxes expense recovery for the three months ended June 30, 2024 of $3.8 (2023 - $0.1).

Six months ended June 30, 2024 and 2023

The Company reported a profit and comprehensive income of $6.2 and $125.8 for the six months ended June 30, 2024 and 2023, respectively.

Revenue and net change in value of investments was a net increase of $26.1 for the six months ended June 30, 2024 (2023 - $134.7), and consisted of interest income of $5.6 (2023 - $1.1), dividend income paid to the Company from the Arena FINCOs of $nil (2023 - $4.4), advisory fees of $0.2 (2023 - $0.3), an increase of $10.3 in the value of the investment in Skyward Specialty (2023 - $137.7), an increase of $6.2 in the value of the investments in the Arena FINCOs (2023 - decrease of $10.4, which was a decrease of $6.0 before dividends paid of $4.4), the Company's share of

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The Westaim Corporation

Management's Discussion and Analysis

Three and six months ended June 30, 2024

(Currency amounts in millions of United States dollars except per share data, unless otherwise indicated)

1. OVERVIEW OF PERFORMANCE (continued)
   Arena's comprehensive income of $3.7 (2023 - $1.8) and an increase in the value of the Company's investment in Arena Special Opportunities Fund, LP ("ASOF LP") of $0.1 (2023 - decrease of $0.1).
   Net expenses for the six months ended June 30, 2024 of $20.0 (2023 - $8.7) consisted of salaries and benefits of $15.6 (2023 - $2.6), general, administrative and other expenses of $0.5 (2023 - $0.5), professional fees of $1.3 (2023 - $0.5), share-based compensation expense $3.0 (2023 - $3.7), a foreign exchange gain of $0.4 (2023 - loss of $0.6), interest on preferred securities of $nil (2023 - $0.9) and an unrealized gain resulting from a change in the fair value of the vested Warrants (as hereinafter defined) of $nil (2023 - $0.1)
   The Company reported income taxes expense recovery for the six months ended June 30, 2024 of $0.1 (2023 - expense of $0.2).
2. INVESTMENTS
   The Company's principal investments consist of its investments in Skyward Specialty, the Arena FINCOs and Arena.

For additional information on the Company's corporate structure, see the Company's Annual Information Form for its fiscal year ended December 31, 2023, which is available on SEDAR+ at www.sedarplus.ca, as same may be modified or superseded by a subsequently filed Annual Information Form.

Skyward Specialty

The Company has an ownership interest in Skyward Specialty (NASDAQ: SKWD), a U.S. based publicly traded diversified specialty property & casualty insurance holding company that underwrites select property, casualty, surety, and accident and health insurance coverages through its insurance and reinsurance subsidiaries. The Company's investment in Skyward Specialty is recorded under investments in the Company's interim consolidated financial statements. For additional information on Skyward Specialty, see Electronic Data Gathering, Analysis, and Retrieval ("EDGAR") filings at www.sec.gov/edgar/search-and-access.

Arena FINCOs

The Arena FINCOs are private companies which include specialty finance companies that primarily purchase fundamentals-based,asset-oriented credit and other investments for their own account and a company that primarily facilitates the origination of fundamentals-based,asset-oriented credit investments for its own account and/or possible future sale to specialty finance companies, clients of Arena Investors and/or other third parties. Fundamentals-based,asset-oriented credit investments refer to loans or credit arrangements which are generally secured by assets. Fundamentals- based, asset-oriented lenders and investors manage their risk and exposure by carefully assessing the value of the assets securing the loan or investment, receiving periodic and frequent reports on collateral value and the status of those assets, and tracking the financial performance of borrowers. The Company's investments in the Arena FINCOs are recorded under investments in the Company's interim consolidated financial statements. Arena FINCOs refers to WOH, AFHC (as each is defined hereinafter) and each of their respective subsidiaries.

Arena

Arena Investors Group Holdings, LLC ("AIGH" or "Arena"), is a private company, through its wholly-owned subsidiaries and subsidiaries which Arena has a controlling interest. Arena consists of two main business lines, Arena Investors and Arena Institutional Services ("AIS"). Arena Investors operates as a global investment manager offering third-party clients, including the Arena FINCOs, access to fundamentals-based, credit and asset- oriented investments that aim to deliver above-market returns with low volatility. Arena Investors provides investment services primarily to institutional third-party clients consisting of, but not limited to, insurance companies, endowments, foundations, pensions, sovereign funds and other pooled investment vehicles or private investment funds. AIS leverages certain intellectual property to offer third-party services to other entities to assist in the management of their investments.

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The Westaim Corporation

Management's Discussion and Analysis

Three and six months ended June 30, 2024

(Currency amounts in millions of United States dollars except per share data, unless otherwise indicated)

3. INVESTMENTS (continued)

The Company's investment in Arena is accounted for using the equity method and consists of investments in corporations or limited partnerships where the Company has significant influence and is recorded under investments in the Company's interim consolidated financial statements.

The following chart illustrates a simplified organizational structure of Arena and the Arena FINCOs:

The Westaim Corporation

("Westaim")

1 Legal equity ownership and profit percentage are 51%. Ownership and profit percentage are subject to change over time pursuant to the earn-in rights granted to BP LLC described under "Investment in Arena".

For a detailed discussion of the business of Arena and the Arena FINCOs, see the Company's Annual Information Form for its fiscal year ended December 31, 2023, which is available on SEDAR+ at www.sedarplus.ca,as same may be modified or superseded by a subsequently filed Annual Information Form.

Accounting for the Company's Investments

The Company qualifies as an investment entity under IFRS and uses fair value as the key measure to monitor and evaluate its primary investments. Accordingly, the Company's investments in Skyward Specialty, the Arena FINCOs and ASOF LP are accounted for at fair value through profit or loss ("FVTPL"). The Company's investment in Arena is accounted for using the equity method since the Company does not exercise control but exercises significant influence over Arena. For a detailed description of the accounting and valuation of the Company's investments, see Note 4, Investments in the Notes to the Financial Statements.

Dividend income from investments in private entities are reported under "Revenue" in the interim consolidated statements of profit and comprehensive income. Changes in the fair value of the Company's investments in Skyward Specialty, the Arena FINCOs and ASOF LP and the Company's share of Arena's comprehensive income are reported under "Net results of investments" in the interim consolidated statements of profit and comprehensive income.

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The Westaim Corporation

Management's Discussion and Analysis

Three and six months ended June 30, 2024

(Currency amounts in millions of United States dollars except per share data, unless otherwise indicated)

3. INVESTMENTS (continued)

without limitation, equipment leases, auto loans, commercial mortgage-backed securities, residential mortgage-backed securities, collateralized loan obligations, collateralized debt obligations, other structured credits and consumer-related assets, aviation and other leased asset securitizations, esoteric asset securitization, revenue interests, synthetics, and catastrophe bonds. Auto and title loans, credit cards, consumer installment loans, charged-off consumer obligations, consumer bills, consumer receivables, product-specific purchase finance, residential mortgages, tax liens, real estate owned homes, other consumer-related assets, retail purchase loans and unsecured consumer loans as well as distressed or charged-off obligations of all of these types, peer-to-peer originated loans of all types, manufactured housing, and municipal consumer obligations.

Corporate and Other Securities

Positions in asset-backed securities, collateralized debt obligations, collateralized loan obligations, residential mortgage backed securities, commercial mortgage backed securities, other securitized bonds or non-bond tranches and liquid positions including, hedged and unhedged investments in public securities (including, without limitation, public real estate and special purpose acquisition companies ("SPACs")), preferred stock, common stock, municipal bonds, senior public corporate debt, other industry relative value, merger arbitrage in transactions such as mergers, hedged investments in regulated utilities, integrated utilities, merchant energy providers, acquisitions, tender offers, spin-offs, recapitalizations and Dutch auctions, limited partnership interests, interests in fund start-ups and investment managers, event-driven relative value equity investments in transactions such as corporate restructurings, strategic block, other clearly defined events, high-yield bonds, credit arbitrage and convertible bond arbitrage, in/post-bankruptcy equities, demutualizations, liquidations and litigation claims, real estate securities, business development companies, master limited partnership interests, royalty trusts, publicly traded partnerships, options and other equity derivatives.

Before acquiring or originating any such loans or other investments, the Arena FINCOs review the nature of the loan, the creditworthiness of the borrower, the nature and extent of any collateral and the expected retuon such loan or investment. The Arena FINCOs originate and/or acquire such loans or investments based on their assessment of the fair market value of the investment at the time of purchase.

The primary revenue of the Arena FINCOs consists of interest income, dividend income and investment-related fees earned on the investments that it originates or acquires. The operating results of the Arena FINCOs also include gains and losses on their investments.

1. Accounting for the Arena FINCOs

The Company's investment in the Arena FINCOs is accounted for at FVTPL. Using net asset value as the primary valuation technique, management determined that 1.0x the book value, or 100% of the shareholder's equity of the Arena FINCOs at June 30, 2024, in the amount of $153.4 approximated the fair value of the Company's investments in the Arena FINCOs. See Note 4, Investments in the Arena FINCOs in the Notes to the Financial Statements.

The fair value of the Company's investment in the Arena FINCOs was determined to be $153.4 and $147.2 at June 30, 2024 and December 31, 2023, respectively.

The Company recorded an increase in the value of its investments in the Arena FINCOs of $4.9 and $6.2 in the three and six months ended June 30, 2024, respectively, a decrease in the value of its investments in the Arena FINCOs of $5.8, which was a decrease of $3.3 before dividends paid to the Company of $2.5 in the three months ended June 30, 2023, and a decrease in the value of its investments in the Arena FINCOs of $10.4, which was a decrease of $6.0 before dividends paid to the Company of $4.4 in the six months ended June 30, 2023. In addition, the Arena FINCOs returned capital to the Company of $nil and $2.5 in the three and six months ended June 30, 2023, respectively. There was no capital returned to the Company in the three and six months ended June 30, 2024.

1. Arena FINCOs Supplementary Financial Measures for the three and six months ended June 30, 2024 and 2023

The Company considers certain financial results of the Arena FINCOs to be important measures in assessing the Company's financial position and performance, in particular, the net assets which can be invested to generate investment income, and operating expenses. Supplementary Financial Measures related to the Arena FINCOs set out below is unaudited and has been derived from the unaudited financial statements of WOH and AFHC, the audited financial statements of AOC and the audited consolidated financial statements of AF and its subsidiaries for the year ended December 31, 2023, and the unaudited financial statements of WOH, AFHC, AOC, and consolidated AF and its subsidiaries for the three and six months ended June 30, 2024 and 2023, which have been prepared in accordance with IFRS or US GAAP. AOC financial statements and AF consolidated financial statements are the responsibility of the management of the Arena FINCOs. Readers are cautioned that the financial information has not been reconciled to IFRS and so may not be comparable to the financial information of issuers that present their financial information in accordance with IFRS.

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The Westaim Corporation

Management's Discussion and Analysis

Three and six months ended June 30, 2024

(Currency amounts in millions of United States dollars except per share data, unless otherwise indicated)

3. INVESTMENTS (continued)

A summary of the net assets of the Arena FINCOs is as follows:

Due from brokers consists of cash balances as well as net amounts due from brokers for unsettled securities transactions. Investment securities are net of short positions. In the normal course of the Arena FINCOs' operations, the Arena FINCOs enter into US$ currency hedges to reduce its non-US$ currency exposure.

Arena Finance II LLC ("AFII"), one of the Arena FINCOs, has a private placement of $45.0 of 6.75% senior secured notes payable to improve net returns by leveraging invested assets. AFII incurred issuance costs relating to the notes of $1.7 which is recorded as a discount to the net proceeds received and is amortized over the life of the notes. The net proceeds received from these notes are being used by the Arena FINCOs in accordance with its investment objectives.

AFII has a revolving credit facility with third party lenders with a commitment amount of $25.0 expiring on September 30, 2024. Unpaid principal amounts under the revolving credit facility will bear interest at the 3-month Secured Overnight Finance Rate ("SOFR") plus 3.06161%. Additionally, an unused facility fee accrues at a rate of 0.50% per annum and is payable monthly in arrears. There were draws of $16.5 and $19.5 outstanding at June 30, 2024 and December 31, 2023, respectively. The loan is secured by AFII's equity interests in its subsidiaries, carries a parental guarantee from AF, and ranks senior to AFII's senior secured notes payable. The net proceeds received under the revolving credit facility are intended to be used as working capital and liquidity support in lieu of maintaining cash reserves and therefore are expected to keep AFII's equity and term debt capital fully invested.

For additional information on the investments of the Arena FINCOs, see Section 13, Additional Arena FINCOs Investment Schedules of this MD&A.

A summary of the operating results of the Arena FINCOs attributable to the Company is as follows:

The Net Retuon the investment portfolios of the Arena FINCOs was +3.4% and +4.3% for the three and six months ended June 30, 2024, respectively, and -2.1% and -3.8% for the three and six months ended June 30, 2023, respectively. See Section 14, Non-GAAPMeasures of this MD&A.

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