The Westaim Corporation Reports Q3 2022 Results
Note: All dollar amounts in this press release are expressed in
The financial results are reported under International Financial Reporting Standards, except as otherwise noted.
Westaim’s adjusted loss1 for Q3 2022 was
At
1 Adjusted profit (loss), adjusted earnings (loss) per share - diluted, and book value per fully diluted share are non-GAAP measures. Refer to the reconciliation of non-GAAP measures below.
________________________________________________________________________
Key Results for Q3 2022
Skyward Specialty *
- Gross written premiums grew 25.6% versus the prior year’s quarter, or 30.2% excluding exited business lines. All eight underwriting divisions contributed double-digit premium growth during the quarter.
- Net written premiums grew 31.1%, driven by the growth in gross written premiums with lower reinsurance costs.
- The combined ratio excluding LPT for Q3 2022 was 93.9%, with a loss ratio excluding LPT of 64.8% (62.0% excluding 2.8% of catastrophe losses) and an expense ratio of 29.1%. This compares to a combined ratio excluding LPT of 94.5% in Q3 2021, with a loss ratio excluding LPT of 69.0% (64.4% excluding 4.6% of catastrophe losses) and an expense ratio of 25.5%.
-
Net investment income of
$6.0 million in Q3 2022 was lower than the$8.1 million in Q3 2021 primarily due to volatile pricing of profitable investments in the opportunistic fixed income portfolio. -
Net loss in Q3 2022 of
$2.4 million includes an after tax charge on the LPT of$7.3 million as compared to Q3 2021 net income of$10.0 with $nil LPT charges. - Q3 2022 annualized return on equity (“ROE”)3 was -2.3%, annualized adjusted ROE4 was 10.4%, and annualized adjusted return on tangible equity (“ROTE”)5 was 13.4%.
-
Skyward Specialty’s US GAAP stockholders’ equity at
September 30, 2022 was$399.8 million and$426.1 million atDecember 31, 2021 , and adjusted stockholders’ equity was$406.7 million , a decline of 6.5% from$435.2 million atDecember 31, 2021 primarily driven by unrealized losses from fixed income and equity securities.
Supplementary financial measures from Skyward Specialty’s financials statements
|
At 100% Share |
Three months ended |
Nine months ended |
||||||||||||||||
|
(millions of |
|
2022 |
|
|
20211 |
|
% Change |
|
2022 |
|
|
20211 |
|
% Change |
||||
|
Gross written premium |
$ |
270.2 |
|
$ |
215.1 |
|
25.6 |
% |
$ |
879.1 |
|
$ |
715.7 |
|
22.8 |
% |
||
|
Combined ratio excluding LPT |
|
93.9 |
% |
|
94.5 |
% |
(0.6 |
%) |
|
92.6 |
% |
|
94.6 |
% |
(2.0 |
%) |
||
|
Net investment income |
$ |
6.0 |
|
$ |
8.1 |
|
(25.9 |
%) |
$ |
31.7 |
|
$ |
20.6 |
|
53.9 |
% |
||
|
Net (loss) income |
($ |
2.4 |
) |
$ |
10.0 |
|
nm |
$ |
19.0 |
|
$ |
37.0 |
|
(48.6 |
%) |
|||
|
Adjusted operating income2 |
$ |
10.6 |
|
$ |
11.0 |
|
(3.6 |
%) |
$ |
46.9 |
|
$ |
28.5 |
|
64.6 |
% |
||
|
|
|
|
|
|||||||||||||||
|
Annualized ROE3 |
|
(2.3 |
%) |
|
9.4 |
% |
|
6.1 |
% |
|
12.0 |
% |
||||||
|
Annualized adjusted ROE4 |
|
10.4 |
% |
|
10.3 |
% |
|
15.2 |
% |
|
9.2 |
% |
||||||
|
Annualized adjusted ROTE5 |
|
13.4 |
% |
|
13.2 |
% |
|
19.4 |
% |
|
11.8 |
% |
||||||
nm: not meaningful
1 Adjusted to conform to the presentation of the current period financial statements including restatement of net income of
2 Adjusted operating income (loss) is defined as net income (loss) excluding the impact of certain items that may not be indicative of underlying business trends, operating results, or future outlook, such as realized gains (losses) on invested assets, unrealized gains (losses) on equity securities, goodwill impairment, other income (expenses), and net impact of certain reinsurance agreements, net of tax impact. Refer to the reconciliation of non-GAAP measures below.
3 Annualized ROE is net income (loss) expressed on an annualized basis as a percentage of average beginning and ending total stockholders’ equity during the period.
4 Annualized adjusted ROE is adjusted operating income (loss) expressed on an annualized basis as a percentage of average beginning and ending total stockholders’ equity during the period.
5 Annualized adjusted ROTE is adjusted operating income (loss) expressed on an annualized basis as a percentage of average beginning and ending tangible stockholders’ equity (refer to the reconciliation of non-GAAP measures below) during the period. Tangible stockholders’ equity is GAAP stockholders’ equity less goodwill and intangible assets at the end of the respective periods.
Westaim’s share of Skyward Specialty’s adjusted operating income was
The carrying value of Westaim’s investment in Skyward Specialty at
Arena FINCOs *
-
Net loss from Arena FINCOs was
$2.6 million (-1.5% net return) for Q3 2022 compared to$0.8 million (-0.4% net return) in Q3 2021. During Q3 2022, the Arena FINCOs were negatively impacted by mark to market valuations, due to volatile markets, of profitable investments. -
Arena FINCOs distributed available accumulated earnings as dividends to
Westaim in Q3 2022 of$2.9 million .
- Arena Investors’ continued to report positive fee related earnings on the solid base of management and asset servicing fees from its fee-paying assets under management (“AUM”) offset by a return of incentive fees from a pull back in fund performance.
-
Committed AUM at
September 30, 2022 was$3.5 billion , increasing from$2.8 billion atDecember 31, 2021 and from$2.6 billion atSeptember 30, 2021 . -
Fee-paying AUM at
September 30, 2022 was$2.6 billion , increasing from$2.4 billion atDecember 31, 2021 and from$2.0 billion atSeptember 30, 2021 . -
Through to
September 30, 2022 ,Arena Investors has deployed$4.4 billion into 345+ privately negotiated transactions since its launch in 2015.
Supplementary financial measures from Arena Investors’ financial statements:
|
At 100% Share |
Three months ended |
Nine months ended |
||||||||||
|
(millions of |
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
|
Management fees |
$ |
8.1 |
|
$ |
6.4 |
|
$ |
23.6 |
|
$ |
16.8 |
|
|
Asset servicing fees |
|
2.9 |
|
|
1.9 |
|
|
8.3 |
|
|
4.9 |
|
|
Net (losses) gains on investments |
|
(0.2 |
) |
|
0.1 |
|
|
(0.1 |
) |
|
0.3 |
|
|
Total recurring revenue |
|
10.8 |
|
|
8.4 |
|
|
31.8 |
|
|
22.0 |
|
|
Operating expenses (excluding incentive fee compensation expense) |
|
(9.5 |
) |
|
(8.8 |
) |
|
(28.3 |
) |
|
(24.6 |
) |
|
Fee related earnings (loss) |
|
1.3 |
|
|
(0.4 |
) |
|
3.5 |
|
|
(2.6 |
) |
|
Incentive fees |
|
(8.9 |
) |
|
5.7 |
|
|
5.5 |
|
|
19.0 |
|
|
Incentive fee compensation expense |
|
(0.2 |
) |
|
(3.0 |
) |
|
(6.5 |
) |
|
(6.9 |
) |
|
Net incentive fees |
|
(9.1 |
) |
|
2.7 |
|
|
(1.0 |
) |
|
12.1 |
|
|
EBITDA |
|
(7.8 |
) |
|
2.3 |
|
|
2.5 |
|
|
9.5 |
|
|
Depreciation |
|
(0.1 |
) |
|
- |
|
|
(0.2 |
) |
|
(0.1 |
) |
|
Revolving loan interest expense paid to the Company |
|
(0.3 |
) |
|
(0.3 |
) |
|
(1.0 |
) |
|
(1.1 |
) |
|
Taxes |
|
- |
|
|
- |
|
|
(0.1 |
) |
|
- |
|
|
(Loss) profit and comprehensive (loss) income |
$ |
(8.2 |
) |
$ |
2.0 |
|
$ |
1.2 |
|
$ |
8.3 |
|
|
Company’s share of (loss) profit and comprehensive (loss) income of |
$ |
(4.2 |
) |
$ |
1.0 |
|
$ |
0.6 |
|
$ |
4.2 |
|
____________________________________________________________________________________
“Against a backdrop of volatility worldwide in the capital markets, Westaim’s businesses have shown resiliency and continued to report strong operating results. The current market turmoil was not unexpected and Skyward Specialty and
“Arena Investors has continued to be selective in its deployment of funds while seeing a sizeable increase in the opportunities to capture attractive returns for the underwritten risks. Accordingly, we congratulate
“Our businesses have continued to prosper due to market opportunities and a strong focus on people and improving operations through the past years,” said
This press release should be read in conjunction with Westaim’s unaudited consolidated financial statements (the “Financial Statements”) and management’s discussion and analysis for the three and nine months ended
* Refer to the Supplementary Financial Measures sections of the MD&A: for Skyward Specialty in section 3.A.(ii), for Arena FINCOs in section 3.B.(ii), and for
Non-GAAP Financial Measures
About
For more information, contact:
[email protected]
(416) 969-3333
Financial Highlights
(millions of
|
Highlights |
Three months ended |
Nine months ended |
||||||||||
|
|
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
|
|
|
|
|
|
||||||||
|
Revenue and net change in unrealized value of investments |
$ |
(15.1 |
) |
$ |
3.8 |
|
$ |
(7.7 |
) |
$ |
27.0 |
|
|
Net expenses |
|
(2.5 |
) |
|
(2.2 |
) |
|
(7.3 |
) |
|
(5.4 |
) |
|
Income tax recovery |
|
0.9 |
|
|
- |
|
|
0.2 |
|
|
- |
|
|
GAAP (loss) profit and comprehensive (loss) income |
$ |
(16.7 |
) |
$ |
1.6 |
|
$ |
(14.8 |
) |
$ |
21.6 |
|
|
Adjusted (loss) profit and comprehensive (loss) income excluding unusual items1 |
$ |
(13.5 |
) |
$ |
1.6 |
|
$ |
(11.6 |
) |
$ |
22.3 |
|
|
|
|
|
|
|
||||||||
|
GAAP (loss) earnings per share – basic and diluted |
$ |
(0.12 |
) |
$ |
0.01 |
|
$ |
(0.10 |
) |
$ |
0.15 |
|
|
Adjusted (loss) earnings per share – diluted1 |
$ |
(0.10 |
) |
$ |
0.01 |
|
$ |
(0.08 |
) |
$ |
0.16 |
|
|
|
|
|
|
|
||||||||
|
|
|
|
|
||
|
Assets |
|
|
|
||
|
Cash |
$ |
2.2 |
$ |
6.6 |
|
|
Income tax receivable |
|
0.1 |
|
- |
|
|
Other assets |
|
0.4 |
|
0.8 |
|
|
Investments |
|
377.0 |
|
394.3 |
|
|
|
$ |
379.7 |
$ |
401.7 |
|
|
|
|
|
|
||
|
Liabilities |
|
|
|
||
|
Accounts payable and accrued liabilities |
$ |
12.7 |
$ |
13.7 |
|
|
Income tax payable |
|
- |
|
0.2 |
|
|
Preferred securities |
|
36.2 |
|
39.5 |
|
|
Derivative warrant liability |
|
0.1 |
|
0.2 |
|
|
Deferred tax liability |
|
0.3 |
|
0.4 |
|
|
|
|
49.3 |
|
54.0 |
|
|
|
|
|
|
||
|
Shareholders’ equity |
|
330.4 |
|
347.7 |
|
|
Total liabilities and shareholders’ equity |
$ |
379.7 |
$ |
401.7 |
|
|
|
|
|
|
||
|
|
|
|
|
||
|
Number of common shares outstanding2 |
|
141,386,718 |
|
142,686,718 |
|
|
Book value per fully diluted share - in US$1 |
$ |
2.33 |
$ |
2.43 |
|
|
Book value per fully diluted share - in C$3 |
$ |
3.22 |
$ |
3.07 |
|
|
|
|
|
|
||
1 Non-GAAP measure. See the reconciliation of Westaim’s non-GAAP measures below or Section 15, Non-GAAP Measures of the MD&A for a reconciliation to the most comparable IFRS figures.
2 At
3 Period end exchange rates of USD to CDN: 1.38135 at
Reconciliation of Westaim’s non-GAAP measures
Book value per share
|
|
|
|
|
||
|
Book value: |
|
|
|
||
|
Shareholders’ equity per IFRS |
|
$ |
330.3 |
$ |
347.7 |
|
Adjustments: |
|
|
|
||
|
RSU liability 1 |
|
|
5.6 |
|
5.9 |
|
Derivative warrant liability 2 |
|
|
0.1 |
|
0.2 |
|
|
|
$ |
336.0 |
$ |
353.8 |
|
Number of Common Shares: |
|
|
|
||
|
Number of Common Shares outstanding |
|
|
141,386,718 |
|
142,686,718 |
|
Adjustments for assumed exercise of: |
|
|
|
||
|
Outstanding RSUs 1 |
|
|
2,975,198 |
|
2,975,198 |
|
Adjusted number of Common Shares 3 |
|
|
144,361,916 |
|
145,661,916 |
|
|
|
|
|
||
|
Book value per share - in US$ |
|
$ |
2.33 |
$ |
2.43 |
|
Book value per share - in C$ 4 |
|
$ |
3.22 |
$ |
3.07 |
1 See Note 11, Share-based Compensation in the Notes to the Financial Statements. Liability related to RSUs converted from C$ to US$ at period end exchange rates. RSUs are exercisable for Common Shares or cash at no cost to the holders. Adjustment made to reflect a reclassification of the RSU liability to shareholders’ equity assuming all outstanding RSUs were exercised for Common Shares.
2 See Note 8, Derivative Warrant Liability in the Notes to the Financial Statements. Derivative warrant liability converted from C$ to US$ at period end exchange rates. Adjustment made as the non-cash fair value change in the derivative warrant liability from period to period is not indicative of the change in the intrinsic value of the Company. Vested Warrants were not included in the adjusted number of Common Shares as none of them were in-the-money at
3 See Note 11, Share-based Compensation in the Notes to the Financial Statements. No adjustments were made for options at
4 Book value per share converted from US$ to C$ at period end exchange rates. Period end exchange rates: 1.38135 at
Adjusted (loss) profit and comprehensive (loss) income excluding unusual items
|
|
Three months ended |
Nine months ended |
|||||||||
|
|
|
2022 |
|
|
2021 |
|
2022 |
|
|
2021 |
|
|
|
|
|
|
|
|||||||
|
The Company’s GAAP (loss) profit and comprehensive (loss) income |
$ |
(16.7 |
) |
$ |
1.6 |
$ |
(14.8 |
) |
$ |
21.6 |
|
|
|
|
|
|
|
|||||||
|
Total of the Company’s share of Skyward Specialty unusual items |
|
(3.2 |
) |
|
- |
|
(3.2 |
) |
|
(0.7 |
) |
|
|
|
|
|
|
|||||||
|
The Company’s adjusted (loss) profit and comprehensive (loss) income excluding unusual items |
$ |
(13.5 |
) |
$ |
1.6 |
$ |
(11.6 |
) |
$ |
22.3 |
|
Adjusted (loss) earnings per share – diluted, excluding unusual items
|
|
Three months ended |
Nine months ended |
||||||||
|
|
|
2022 |
|
|
2021 |
|
2022 |
|
|
2021 |
|
|
|
|
|
|
||||||
|
Adjusted (loss) profit and comprehensive (loss) income excluding unusual items |
$ |
(13.5 |
) |
$ |
1.6 |
$ |
(11.6 |
) |
$ |
22.3 |
|
Dilutive RSU recovery and related changes in foreign exchange 1 |
|
- |
|
|
- |
|
(0.3 |
) |
|
- |
|
Adjusted (loss) profit and comprehensive (loss) income excluding unusual items on a diluted basis |
$ |
(13.5 |
) |
$ |
1.6 |
$ |
(11.9 |
) |
$ |
22.3 |
|
|
|
|
|
|
||||||
|
Weighted average number of Common Shares outstanding |
|
141,386,718 |
|
|
143,186,718 |
|
142,074,996 |
|
|
143,186,718 |
|
Dilutive impact of RSUs 1 |
|
- |
|
|
3,034,261 |
|
2,975,198 |
|
|
- |
|
Weighted average number of Common Shares outstanding on a diluted basis |
|
141,386,718 |
|
|
146,220,979 |
|
145,050,194 |
|
|
143,186,718 |
|
|
|
|
|
|
||||||
|
Adjusted (loss) earnings per share – diluted, excluding unusual items |
$ |
(0.10 |
) |
$ |
0.01 |
$ |
(0.08 |
) |
$ |
0.16 |
1 The RSUs for the three ended
Reconciliation of non-US GAAP measures from Skyward Specialty’s Supplementary Financial Measures
Skyward Specialty - Adjusted operating income (loss)
|
At 100% Share |
Three months ended |
Nine months ended |
||||||||||
|
(millions of |
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
|
Net (loss) income |
$ |
(2.4 |
) |
$ |
10.0 |
|
$ |
19.0 |
|
$ |
37.0 |
|
|
Less: |
|
|
|
|
||||||||
|
Net realized (losses) gains net of tax |
|
(0.7 |
) |
|
- |
|
|
0.1 |
|
|
0.7 |
|
|
Net unrealized (losses) gains on equity securities net of tax |
|
(5.0 |
) |
|
(1.0 |
) |
|
(20.7 |
) |
|
7.2 |
|
|
Impact of LPT net of tax |
|
(7.3 |
) |
|
- |
|
|
(7.3 |
) |
|
- |
|
|
Other net income net of tax |
|
- |
|
|
- |
|
|
- |
|
|
2.8 |
|
|
|
|
- |
|
|
- |
|
|
- |
|
|
(2.2 |
) |
|
Adjusted operating income |
$ |
10.6 |
|
$ |
11.0 |
|
$ |
46.9 |
|
$ |
28.5 |
|
|
|
|
|
|
|
||||||||
Skyward Specialty - Tangible stockholders’ equity
|
At 100% Share |
|
|
|
||
|
(millions of |
|
|
|
||
|
Total stockholders' equity |
$ |
399.8 |
$ |
426.1 |
|
|
Less: |
|
|
|
||
|
|
|
90.2 |
|
91.3 |
|
|
Tangible stockholders’ equity |
$ |
309.6 |
$ |
334.8 |
|
|
|
|
|
|
||
The information provided herein does not constitute an offer or solicitation regarding any investment products offered by
Neither
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For more information, contact:
[email protected]
(416) 969-3333
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