The Westaim Corporation Reports Q1 2025 Results

First Quarter Report to Shareholders for the quarter ended March 31, 2025

TABLE OF CONTENTS

1. THE COMPANY

2. OVERVIEW OF PERFORMANCE

3. INVESTMENTS

4. ANALYSIS OF FINANCIAL RESULTS

5. ANALYSIS OF FINANCIAL POSITION

6. SUBSEQUENT EVENT - CLOSING OF THE PROPOSED TRANSACTIONS

   

7. OUTLOOK

8. LIQUIDITY AND CAPITAL RESOURCES

9. RELATED PARTY TRANSACTIONS

10. MATERIAL ACCOUNTING ESTIMATES AND ASSUMPTIONS

11. MATERIAL ACCOUNTING POLICIES AND RECENTLY ADOPTED AND PENDING ACCOUNTING PRONOUNCEMENTS

12. QUARTERLY FINANCIAL INFORMATION

13. RISKS

14. ADDITIONAL ARENA FINCOS INVESTMENT SCHEDULES

15. NON-GAAP MEASURES

16. 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 months ended March 31, 2025 and 2024 as set out on pages 29 to 50 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 months ended March 31, 2025 and financial condition as at March 31, 2025. 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 May 14, 2025. Additional information relating to the Company is available on SEDAR+ at https://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 15, Non-GAAP Measures of this MD&A.

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, 2024 and the unaudited consolidated financial statements of Arena FINCOs and Arena for the three months ended March 31, 2025 and 2024, 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, (as same may be modified or superseded by a subsequently filed Annual Information Form) and the Company's management information circular dated November 19, 2024, both of which are available on SEDAR+ at https://www.sedarplus.ca. Please refer to Section 16, Cautionary Note Regarding Forward-Looking Information of this MD&A.

1. THE COMPANY

   The Westaim Corporation (TSXV: WED) is a United States 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.

   On October 9, 2024, the Company, Wembley Group Partners, LP (the "Investor") (an affiliate of CC Capital Partners, LLC ("CC Capital")), Arena (as defined hereinafter), Daniel Zwiand Lawrence Cutler entered into an investment agreement (as amended on November 15, 2024) (the "Investment Agreement"). Pursuant to the Investment Agreement, among other things, the Investor agreed to make a $250.0 investment in the Company via a private placement (the "Private Placement") to acquire common shares of the Company ("Common Shares") and warrants to purchase Common Shares. The proposed transactions included in the Investment Agreement (the "Proposed Transactions") had not closed as of March 31, 2025, but subsequently closed as disclosed in Note 15, Subsequent Events in the Notes to the Financial Statements.

   On December 31, 2024, the Company completed a statutory plan of arrangement under the Business Corporations Act (Alberta) (the "Plan of Arrangement") pursuant to which, among other things, it has consolidated its Common Shares on the basis of one post-consolidation Common Share for every six pre-consolidation Common Shares and changed its jurisdiction of incorporation from the Province of Alberta in Canada to the State of Delaware in the United States (the "Redomiciliation"). Unless otherwise indicated all references to Common Shares herein are after giving effect to the Share Consolidation.

   On February 4, 2025 (the "MAIC Closing Date"), the Company completed the acquisition of ManhattanLife of America Insurance Company ("MAIC") in connection with the Proposed Transactions. The Company made an initial capital contribution of $36.5 into Salem Group Partners, LP ("Salem Group" or the "Partnership") a partnership of which it holds 100% of the pecuniary limited partnership interests. Salem Group acquired Salem Holdco (Bermuda) Ltd. and its subsidiaries (including Salem Group Holdings, LLC, the direct acquiror of MAIC) from an affiliate of CC Capital in exchange for a $14.6 promissory note back to the CC Capital affiliate. Salem Group then completed its acquisition of MAIC for a total purchase price of $29.2. MAIC holds insurance licenses in 46 states including the District of Columbia. MAIC was subsequently renamed to Ceres Life Insurance Company ("Ceres"). This investment represents a key step in executing the Company's previously announced strategy to build an integrated insurance and asset management platform in partnership with CC Capital. See section 6, Subsequent Event - Closing of the Proposed Transactions of this MD&A and note 15 of the financial statements for further discussion on the closing of the Proposed Transactions.

   The Company's principal investments consist of the Salem Group, Arena FINCOs and Arena. See discussion in Section 3, Investments of this MD&A for additional information on these investments.

2. OVERVIEW OF PERFORMANCE

Highlights Three months ended March 31

Income taxes recovery (expense) 1.9 (3.7)

(Loss) profit and comprehensive (loss) income $ (7.4) $ 23.3

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 15,Non-GAAP Measuresof this MD&A.

3 Period end exchange rates: 1.43755 at March 31, 2025 and 1.35400 at March 31, 2024.

1. OVERVIEW OF PERFORMANCE (continued)

   Three months ended March 31, 2025 and 2024

   The Company reported a (loss) profit and comprehensive (loss) income of $(7.4) and $23.3 for the three months ended March 31, 2025 and 2024, respectively.

   Revenue and net change in value of investments was a net decrease of $4.7 for the three months ended March 31, 2025 (2024 - an increase of

   $28.8), and consisted of interest income of $3.8 (2024 - $2.2), dividend income paid to the Company from the Arena FINCOs of $nil (2024 - $nil), advisory fees of $nil (2024 - $0.1), an increase of $nil in the value of the investment in Skyward Specialty Insurance Group, Inc. ("Skyward Specialty") (2024 - $24.6), a decrease of $0.1 in the value of the investments in the Arena FINCOs (2024 -increase of $1.3 in the value of the investments in the Arena FINCOs), the Company's share of Arena's comprehensive loss of $0.8 (2024 - share of Arena's comprehensive income of $0.6), an increase in the value of the Company's investment in Arena Special Opportunities Fund, LP ("ASOF LP") of a nominal amount (2024 - increase of a nominal amount) and decrease in the value of the Company's investment in Salem Group of $7.7 (2024 - $nil).

   Net expenses for the three months ended March 31, 2025 of $4.6 (2024 - $1.8) consisted of salaries and benefits of $1.1 (2024 - $1.6), general, administrative and other expenses of $0.4 (2024 - $0.3), professional fees of $2.4 (2024 - $0.3), share-based compensation expense $0.7 (2024 -recovery of $0.1), and a foreign exchange loss of a nominal amount (2024 - gain of $0.3).

   The Company reported income taxes recovery for the three months ended March 31, 2025 of $1.9 (2024 - income tax expense of $3.7).

2. INVESTMENTS

The Company's principal investments consist of its investments in Arena FINCOs, Arena, and Salem Group.

1 The Company is the sole holder of all of the pecuniary limited partnership interests in Salem Group.

Skyward Specialty

The Company had 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. During the year ended December 31, 2024, the Company fully divested its remaining investment in Skyward Specialty which was recorded under investments in the Company's consolidated financial statements.

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 consolidated financial statements. Arena FINCOs refers to WOH, AF (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

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Disclaimer

The Westaim Corporation published this content on May 14, 2025, and is solely responsible for the information contained herein. Distributed via Public Technologies (PUBT), unedited and unaltered, on May 14, 2025 at 21:00 UTC.