Westaim and CC Capital Strategic Partnership
- Legacy as a strong investor in financial services, including in insurance and asset management
- Perceived as a financial holding company
- Investment in Arena, a high- quality
$3.5bn (1) AUM alternative asset manager, well positioned to scale - Significant value creation opportunity that can be accelerated through a strategic transaction / partnership
- Strong track record of investing in and partnering with financial services businesses across public and private markets
- Deep expertise and experience building integrated insurance asset management strategies, including
Fidelity & Guaranty Life
("F&G") - Incubated Ceres Life, a cloud- native insurance platform led by a highly experienced, industry- leading team
- Integrated insurance and alternative asset management platform; enables
Westaim shareholders to directly benefit in upside value creation opportunities - Pivoting to a financial services operating company with a well defined go-forward business plan and strong earnings potential
- Highly coveted, rare flywheel, few market analogues
- Ceres Life assets fuel growth at Arena supported by stable insurance capital
- Ceres Life earnings bolstered by Arena's asset management capabilities, strategic distribution partner, and cloud-native technology platform
- Long term stewardship and investment by
CC Capital
Expected Uplift in Intrinsic Value, Long-Term Upside Potential, and Attractive Equity Compounding
Note: $ amounts throughout the presentation are expressed in USD unless CAD is explicitly referenced.
(1) As of
3
Transaction Overview
CC Capital to invest $250mm of primary capital intoWestaim at CAD$4.75 per share ("CC Capital Investment ")-
- Represents an approximate 18% premium to the Market Close Price on 10/8/2024, 25% to 180-day VWAP
- Pro forma for the transaction
Westaim will have $700mm of investable capital CC Capital to own ~36% ofWestaim pro forma for the transaction; up to 41% assuming warrant conversion
Westaim will deploy an aggregate of approximately $600mm from theCC Capital Investment and its balance sheet to capitalize a new vehicle supporting Ceres Life, a cloud-native, highly scalable insurance platform, stewarded byCC Capital and led by industry veteran,Deanna Mulligan , who was previously CEO of Guardian Life (~$80bn balance sheet at the time of her departure)- Ceres Life and Arena will enter into an investment management agreement ("IMA") pursuant to which Arena is expected to manage up to 90% of Ceres Life's total investible assets
- Arena will be recapitalized so that
Westaim will own 100% of the equity interests in Arena. This recapitalization will simplify economics and structure by eliminating the existing earn-in mechanism. Current management andCC Capital will have a profit share of Arena's regular cash flow. Arena's management team will continue their substantial participation in Arena's economics via a profit share arrangement in Arena, alongside their retention of interests in Arena funds, cementing alignment with LPs andWestaim shareholders Westaim intends to implement a share buyback of up to $100mm at CAD$5.00 to$5.25 per share, subject to receipt of any regulatory approvals, returning capital to shareholders at accretive values- Long-termalignment between parties, with
CC Capital shares subject to a lockup post-transaction(1) - ~35% of existing
Westaim shareholders have agreed to vote in support of the transaction Chinh Chu will be appointed to the Westaim Board as Executive Chair.Richard DiBlasi , Managing Director atCC Capital , will also be appointed as Chief Strategy Officer ofWestaim , reporting to theWestaim CEO
- During the two-year lockup,
CC Capital is prohibited from knowingly transferring shares to unaffiliated third parties that, following such transfer, would own more than 10% of the outstanding Common Shares.
4
The New Westaim: Global Alternative Asset Manager Propelled by an Integrated
Insurance Platform
|
Pro Forma Structure |
Synergistic Flywheel Driving Growth Across Platform |
|
$250mm
~36%
Ownership(1)
|
100% |
$600mm |
|
Ownership |
Capitalization(2) |
|
Illustrative |
|
|
Invested Assets(2) |
Flywheel
Engine
Attractive ROE & Capital
Compounding
- Insurance strategies to drive synergistic flywheel model, generating significant asset leverage for Arena
-
- Ceres Life's annuity originations to drive assets to Arena's alternative asset management strategies; Arena expected to generate attractive returns, bolstering demand for annuity products
- Ceres Life to focus on highly attractive
U.S. life and annuities market, including FIA(3) and MYGA(4) products - Ceres Life's cloud-native technology platform expected to enable strong distribution partnerships, exceptional experiences for policyholders, and meaningful operational efficiencies at scale
- Strategic partnership with Advisors Excel, an industry leading
Independent Marketing Organization ("IMO")(5) with an affiliate product design firm, to enable immediate scale - Arena's growth fueled by stable insurance assets generated from
Ceres Life - Enduring and aligned partnership with
CC Capital , a premier alternative asset manager led byChinh Chu
- Represents basic ownership not inclusive of dilutive investments and expected share buybacks.
- Assumes $600mm capitalization at Ceres Life and an illustrative 10:1 asset leverage based on selected industry precedents.
- Fixed Index Annuity ("FIA") earns interest based on performance of an external market index, offering downside protection with a guaranteed minimum return.
- Multi-YearGuaranteed Annuity ("MYGA") is a type of fixed annuity that offers a guaranteed fixed interest rate for a specified period, providing predictable returns over the contract term.
Independent Marketing Organization ("IMO") is a third-party entity that works with insurance carriers to distribute insurance products, including annuities, providing marketing, training, and operational support.
5
The New Westaim: Highly Differentiated Operating Company With a Flywheel Engine
Synergistic Flywheel Model
- Compelling annuity products and a differentiated, cloud-native technology platform unlock strong distribution partnerships, leading to increased origination volumes for Ceres Life and assets for Arena
- Arena manages stable insurance assets from Ceres Life, affording scale and stability
- Arena can deliver attractive investment returns to Ceres Life, driving ROE and book value growth
- Earnings reinvested within ecosystem, compounding growth
- Ability to offer FIA and MYGA products priced competitively for policyholders
|
1 |
Ceres Life |
- Well capitalized, no legacy book
- Focus on products with significant market tailwinds (FIA & MYGA); diligent underwriting
- Strategic distribution partnership with Advisors Excel to accelerate organic growth
- Cloud-nativetechnology platform, compatible with leading IMOs and unincumbered by legacy systems
-
- Significantly eases IMO's carrier-related pain points, allowing for rapid distribution
- Flexibility to pursue reinsurance transactions at attractive returns
- Experienced and time-tested leadership
- Differentiated asset management partnership
1
2
2Arena
- Strong investment track record spanning ABS / structured products, real estate, corporate credit
- >
$5bn of capital deployed since inception and a 20.5% gross realized IRR - Global sourcing and origination engine, supported by >50 active & capital-aligned Joint Ventures
("JVs") - Emphasis on risk management
- Existing investment capabilities meaningfully overlap with insurance balance sheet needs
− ~50% of current LPs are insurance companies - Strong, experienced leadership and team
- Operational and credit investment infrastructure and in-house technology platform positioned to scale
6
Driving Significant Value for Westaim Shareholders
|
1 |
Creates a differentiated business underpinned by an asset generation flywheel through the combination of a highly scalable, cloud- |
|
native insurance platform with a high-quality asset manager |
|
2
New
Operating
Company
7
Anchor investment and strategic partnership with
|
3 |
Ceres Life, a highly scalable insurance platform with a differentiated technology stack and key distribution |
|
|
partnerships, to focus on attractive spread-based annuities |
||
|
4 |
|
|
|
annuity insurer focused on both retail and block reinsurance opportunities |
||
|
5 |
Stable capital from the insurance strategy provides an opportunity to scale Arena meaningfully with a path to potential |
|
|
|
||
|
6 |
Attractive returns generated by Arena strategies to bolster further expansion of the insurance platform through the |
|
|
opportunity to re-invest earnings |
||
Positioned for shareholder value creation, with potential upside from stable recurring fee-related revenues and attractive insurance earnings
|
8 |
Long-term alignment of transaction partners to support |
|
leadership, and ownership in pro forma |
|
7
Partnership with CC Capital Supports Westaim's Strategic Objectives
P
P
P
Expected To Enhance Westaim's Business Model To Further Support Long-Term Sustainable Performance Through Significant Capital Sourced In The Attractive
Integrated Insurance Platform Expected To Facilitate Growth Of Arena Investors By Providing Meaningful Asset Generation Fueled By Stable Insurance Capital
New Westaim Will Present A Differentiated, Attractive Flywheel Strategy To Investors That We Believe Will Facilitate Long-Term Value Creation And Considerable Upside Potential
8
Highly Experienced Team Thoughtfully Assembled to Drive Execution
- Capital has assembled a highly experienced team to lead Ceres Life, with the goal of building a best-in-class technology infrastructure and driving significant near-term distribution to enable the sales ramp
Deanna Mulligan
Incoming Ceres Life
CEO
- Previously served as CEO (2011-2020) and Chairman of the Board (2020) of Guardian Life
- Led Guardian to 10+ years of growth, doubling pre-tax operating income and increasing the balance sheet to
~$80bn -
- Deanna was responsible for increasing the customer base by 580%, from 5mm in 2012 to 29mm in 2020. She achieved 89% customer satisfaction scores, outpacing industry and national benchmarks
- Launched a digital insurance marketplace that expanded the customer base
- After Guardian, Deanna has been focused on building a de novo, next generation insurance company and has brought to bear all her significant relationships, insurance expertise, and regulatory experience
- Currently serves as a Director at DuPont and previously served as a Director at Vanguard (2017-2024) and
Arch Capital (2013-2016), a publicly traded reinsurer - Started her career at McKinsey where she spent 8 years in the Financial Services group
Chinh Chu and theCC Capital team have significant experience investing and creating value in the insurance space- Led
November 2017 acquisition ofFidelity & Guaranty Life for~$2.1bn Enterprise Value; Chinh served as Executive Chairman of the Board and as the control party for a Form A filing -
- Publicly traded
$26bn balance sheet life and annuities writer - Achieved 27% sales growth CAGR, 127% adjusted operating income growth, ROE expansion from ~11% to ~20% from acquisition to sale
- Meaningful net investment yield uplift with a safer asset risk profile; ratings upgrade to A- / Investment Grade
- Publicly traded
- Chinh joined
Blackstone in 1990 and spent 25 years at the firm where he held various senior leadership roles, including Senior Managing Director, Co-Head of
Private Equity, member of the firm's Executive Committee, and Head of Financial Services investing
9
CC Capital Case Study:
Investment Overview
- F&G is a leading provider of FIA, MYGA, and indexed universal life products with 700,000 customers and a network of 37,000 licensed independent agents
CF Corp (a$1.2 billion SPAC raised byCC Capital andBill Foley ) acquired F&G at a$2.1 billion enterprise value ($1.9 billion of equity capital) inNovember 2017 - As part of the transaction, F&G entered an asset management relationship with
Blackstone to improve net asset yields and underwriting competitiveness - F&G was successfully sold for cash and stock to
Fidelity National Financial (FNF) in 2020;CC Capital remained actively engaged in advising F&G post sale
Value Creation Levers
|
1 |
Management Enhancements |
|
Hired a respected industry leader to reinvigorate growth |
|
|
2 Reinvigorated Growth |
|
|
27% Sales CAGR over 2 years prior to sale driven by distribution relationships in |
Value Realization
- From acquisition close to sale announcement (~2 years), F&G increased after tax adjusted operating income ("AOI") by 127% and ROE by 82%
- From acquisition close to current, Book Value increased by 249%(1)
|
the |
|
|
3 |
Asset Management Yield Uplift |
|
Investment partnership with |
|
|
4 |
Ratings Upgrade |
|
AM Best ratings upgrade from B++ to A-; unlocked the Bank / Broker Dealer ("B/D") |
|
|
channel |
|
|
5 |
Tax Efficiencies |
|
Reduced effective rate from 40% to 20% |
|
|
6 |
Cost Savings |
|
Realized |
|
ROE |
|
|
20% |
|
|
+82% |
|
|
11% |
|
|
At Close |
At Sale |
|
AOI |
|
|
|
|
|
+127% |
|
|
|
|
|
At Close |
At Sale |
Book Value
|
|
|
|
+249% |
|
|
|
|
|
At Close |
Current |
(1) Book Value excluding Accumulated Other Comprehensive Income (AOCI); Current reflects the latest quarterly filing as of
10
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