KIRS Investor Presentation. 09 May 2017

Transcription

1 KIRS Investor Presentation 09 May 2017

2 Disclaimer This document and the presentation to which it relates ( Presentation ) do not constitute or form part of, and should not be construed as, an offer to sell or an issue for sale or subscription of, or solicitation of any offer or invitation to subscribe for, underwrite or otherwise acquire or dispose of, any securities of TIG Topco Limited (to be renamed KIRS Group Limited ( KIRS )) or any of its subsidiaries in the United States or any state or any jurisdiction in which such offer, sale or solicitation would be unlawful nor should they or any part of them form the basis of, or be relied on in connection with, any contract or commitment whatsoever which may at any time be entered into by the recipient or any other person, nor do they constitute an invitation or inducement to engage in investment activity under section 21 of the Financial Services and Markets Act 2000 ( FSMA ). This document and the Presentation do not constitute an invitation to effect any transaction with KIRS or to make use of any services provided by KIRS. By accepting this document and the Presentation you agree and acknowledge that this document and its contents may contain proprietary information belonging to KIRS. This document and the Presentation may contain forward looking statements in relation to certain of KIRS plans and current goals and expectations, in particular but not limited to its future financial condition, performance and results. These forward looking statements can be identified by the use of forward looking terminology, including the words aims, believes, estimates, anticipates, expects, intends, may, will, plans, predicts, assumes, shall, continue or should or, in each case, their negative or other variations or comparable terminology or by discussions of strategies, plans, objectives, targets, goals, future events or intentions. By their very nature, all forward looking statements involve risk and uncertainty because they relate to future events and circumstances which are beyond KIRS control, including but not limited to insurance pricing, interest and exchange rates, inflation, competition and market structure, acquisitions and disposals, and regulation, tax and other legislative changes in those jurisdictions in which KIRS, its subsidiaries and affiliates operate. As a result, KIRS actual future financial condition, performance and results may differ materially from the plans, goals and expectations set out in any forward looking statement made by KIRS. KIRS has no obligation to update any forward looking statement contained in this document or the Presentation or any other document or any other forward looking statement KIRS may make. All subsequent written or oral forward looking statements attributable to KIRS or to persons acting on its behalf should be interpreted as being qualified by the cautionary statements included herein. As a result, undue reliance on these forward looking statements should not be placed. Past performance cannot be relied upon as a guide to future performance. The financial results in this document and the Presentation include certain financial measures and ratios, including EBITDA, Pro Forma Adjusted EBITDA and certain other ratios that are not presented in accordance with IFRS and are unaudited. The financial information included in this Presentation only includes 9 months of audited information from the year ended December 31, 2015 for Towergate. Towergate s Q financial results are unaudited and unreviewed and may not reflect what Towergate results would have been had the current group structure and management been in place from January 1, No representation or warranty, express or implied, is or will be made by any person in relation to the accuracy, fairness or completeness of the information or opinions made in this document and the Presentation, which information and opinions should not be relied or acted on, whether by persons who do not have professional experience in matters relating to investments or persons who do have such experience. The information and opinions contained in this document and the Presentation have not been audited or necessarily prepared in accordance with international financial reporting standards and are subject to change without notice. No responsibility or liability whatsoever is or will be accepted by KIRS, its shareholders, subsidiaries or affiliates or by any of their respective officers, directors, employees or agents for any loss howsoever arising, directly or indirectly, from any use of this document or its contents or attendance at the Presentation. This document is for distribution only in the United Kingdom and the Presentation is being made only in the United Kingdom to persons falling within Articles 19, 43, 47 and 49 of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (as amended), to persons who have professional experience in matters relating to investments or to persons in the United Kingdom to whom this document may otherwise be lawfully distributed. This document is being supplied and the Presentation made to you solely in that capacity for your information. This document may not be reproduced, redistributed or passed on to any other person, nor may it be published in whole or in part, for any purpose. By accepting this document and the Presentation, you agree to be bound by the foregoing limitations, undertakings and restrictions. 2

3 Agenda 14:30 14:35 Introduction 14:35 14:40 Investment Thesis 14:40 15:10 KIRS Strategy and Business Highlights 15:10 15:25 KIRS Financial Highlights 15:25-15:30 Conclusion 15:30 16:00 Q&A 3

4 Investment Thesis

5 Investment Thesis KIRS will be the leading diversified independent insurance intermediary group in the UK 1 2 KIRS (1) will be the result of a carefully targeted acquisition and hiring strategy in the UK insurance market Towergate, Autonet (2)(3), Price Forbes (2)(3), Direct Group (2)(3) and Chase Templeton (2)(3) were specifically targeted due to: A. Strong management teams B. Leading position in their respective market segments C. Significant organic growth and acquisition opportunities D. Ability to create additional value from portfolio effect without disruption or integration of underlying businesses Presence across the entire insurance value chain will allow KIRS to optimise service to customers and maximise commission capture KIRS will be the leading diversified independent insurance intermediary group in the UK and is positioned to capitalise on the significant benefits of scale across all its segments Highly resilient and profitable business model with significant cash flow generation capabilities 5 (1) Represents the Project Name for the creation of the new group. The final group name will be published in due course when trademark process is finalised. (2) Price Forbes, Chase Templeton, Autonet and Direct Group transactions are signed and completion is subject to regulatory approval. (3) Majority ownership.

6 Significant Strategic Investment By Core Shareholders KIRS is the result of a carefully crafted acquisition strategy executed over the last 24 months HPS investment in Towergate Creation of Nevada and acquisition of majority stake in Price Forbes Acquisition of majority stake in Broker Network MDP investment in Towergate and Nevada Acquisition of majority stake in Autonet Acquisition of majority stake in Direct Group (1) Acquisition of majority stake in Chase Templeton (1) Apr Dec Jun Q3 Q4 Nov ~ 680m Total Investment by Core Shareholders to Support the Creation of KIRS 6 (1) Completion subject to regulatory and other customary approvals.

7 Dedicated Shareholder Base Key shareholders have invested ~ 680m in the development of KIRS and will own >95% of group equity Founded in 2007 >100 investment professionals globally $39bn (1) asset under management Joint owner of Watford Re, global insurance and reinsurance group, alongside Arch Capital and second largest shareholder in NFP Corp. Founded in investment professionals $12.5bn (2) asset under management Largest shareholder of NFP Corp., a leading US insurance broker Founded in 1976 >370 investment professionals globally $98bn asset under management Strong prior knowledge of the insurance sector having invested in Willis Group, Alliant Insurance Services and USI Founded in 1998 >110 investment professionals globally $24bn asset under management Significant experience in the insurance sector, including investments in many US mid-market insurance brokers 7 (1) As of April 1, (2) As of March 31, 2017 SEC filing.

8 KIRS Vision and Key Highlights

9 Highly Supportive Market Backdrop KIRS is ideally positioned to capitalise on latest market trends Phase 1 First period of consolidation Phase 2 Financial crisis Phase 3 Consolidation of the consolidators & increased focus on innovation First wave of consolidation Clear consolidation opportunity in a highly fragmented market c. 150 consolidator transactions backed by 17bn of private equity capital and cheap leverage Insurer funding providing additional firepower to consolidators Credit crisis causes significant slowdown in acquisitions Consolidation significantly slowed down Focus on new avenues of organic growth (new products and channels) 31 Total Number of Large Broker Acquisitions Today Historical consolidators being acquired, new leaders emerge Oval and Giles acquired by AJ Gallagher, Jelf and Bluefin acquired by Marsh New consolidators emerge backed by fresh private equity capital Latest transaction multiples reflect highly attractive opportunity in the sector Focus on integration across the value chain development of strong technology / digital footprint

10 Personal Small & Medium Commercial CAPITAL Large Corporate Complex KIRS Guiding Principle: Maximise Presence Across Value Chain Collectively we have created significant opportunities to disrupt the traditional value chain, and realise value across multiple channels and verticals Market Characteristics Customer Characteristics High / Policy Low Volume Consultant e.g. American Airlines, Exxon MGA London Wholesale Broker MGA International Wholesale Broker Wholesale Broker Reg Broker Reg Broker Reg Broker Reg Broker CUSTOMER MGA Online Broker MGA Retail Broker Aggregator Retail Broker Affinity partner Low / Policy High Volume Services (Policy Administration, Claims, Renewals) e.g. Private Motor, Home 10

11 Multiple Avenues to Capture Incremental Commission Integration across the value chain gives KIRS the opportunity to maximise commission per policy Illustrative purposes only Distribution Underwriting Wholesale Services Other Income Premium to Carrier Advisory Wholesale Digital Car & Van Underwriting Specialty MGA Underwriting International Advisory Commerical Combined Retail Household KIRS Economics

12 KIRS Resulted from Highly Selective Investment Strategy Carefully structured acquisition plan executed in parallel with execution of Fix / Build / Grow plan in Towergate Grow Build Fix Dec Apr Jun Q3 Q4 Nov (3) (1)(2) (1)(2) (1)(2) (1)(2) 12 (1) Price Forbes, Chase Templeton, Autonet and Direct Group transactions are signed and completion is subject to regulatory approval. (2) Majority ownership. (3) 20% ownership.

13 KIRS Operating Framework Highly diversified and integrated insurance distribution, underwriting and services company Distribution Wholesale Underwriting Leading UK insurance broker with strong online presence, extensive local footprint and high margin specialist brands Digital / Direct (1)(2) Advisory (1)(2) International insurance and reinsurance broker with a diverse international income stream London Market International Leading MGA in the UK with diversified product focus (1)(2) GEO Services Leading UK broker services network and leading claims management and TPA platform (1) (2) (3) 13 Note: Financial metrics reflect 2016A exclude unallocated Pro Forma Adjusted EBITDA of ( 3m). (1) Price Forbes, Chase Templeton, Autonet and Direct Group transactions are signed and completion is subject to regulatory approval. (2) Majority Ownership. (3) 20% ownership.

14 KIRS Company Highlights 1. Leading diversified independent UK insurance intermediary group 2. Extensive local footprint combined with global reach 3. Large and diversified earnings base 4. Highly scalable operating platform 5. Stable and cash generative business model 6. Early and continued engagement with the FCA 7. Market leading, highly experienced management team 14

15 1. Leading Diversified Independent UK Insurance Intermediary Group Leading diversified independent broker and top 10 broker overall in the UK market with c. 2.8bn GWP ( in millions) UK Insurance Broker Rankings by Income (1) KIRS has a strong position in the UK insurance intermediary market International Personal Commercial London Leading independent SME and specialty personal lines-focused UK broker, distributing 3 rd party and own branded insurance products UK s leading provider of property related insurance products via mortgage brokers Leading van broker in the UK with significant share Strong provider of Buildings & Contents (B&C) and Mortgage Payment Protection Insurance Leading private medical insurance intermediary in the UK 15 Distribution (1) Source: Insurance Times Top 50 Brokers (2) Income is pro forma for Bluefin and Jelf acquisitions. (3) Managing General Agents Association. Underwriting UK s leading MGA with approximately 10% market share (3) Services UK s leading broker services network and leading claims management platform Wholesale Price Forbes is a top five independent London and international wholesale broker (1)

16 2. Extensive Local Footprint Coupled with Global Reach Extensive UK distribution network linked to international capital markets Key Distribution Wholesale Underwriting Services Wholesale Markets Ireland United Kingdom 16 Distribution 7 national contact centers each with a product focus online and on the phone 81 local offices across the country serving local clients Underwriting 9 local offices serving local brokers Highly efficient operations centre in Doncaster Services Primary operations in Doncaster and Preston Wholesale London headquartered, in close proximity to Lloyd s and London market 97% of premium in respect of non-uk risks sourced from an extensive network of global brokers

17 3. Large and Diversified Earnings Base No meaningful concentration by income producer, carrier, distribution channel or product Highly Diversified Business Model 2016 Pro Forma Income (1) No material GWP or income concentration around key producers Underwriting Services 2% Call centre and online operations naturally diversified 18% Digital Stability of frontline staff further underpinned by a comprehensive retention strategy, including long-term incentive plans for top performers, focus on culture change and integrated CRM systems Wholesale 16% 34% Strong retention figures for 2016 across the business No material income concentration on any specific customer 30% Advisory No more than 11% of total GWP written by a single carrier 17 Top 5 carriers all A -rated or above Long term relationships with all key carriers, underpinned by recently renewed capacity agreements (1) Pro Forma Income means the combined income of Towergate, Price Forbes (FX adjusted), Autonet, Direct Group and Chase Templeton (annualised) for the year ended December 31, 2015 and 2016, as applicable.

18 3. With Numerous Niche Specialisms A depth of specialist knowledge built-up over many years Expertise Specialist knowledge Partnerships Van Examples of Specialisms Haulage Classic Car Healthcare Est Est Est Est Strong customer relationships Marine Property Medical Est Est Est Stickiness of specialist products 18

19 4. Highly Scalable Operating Platform Significant investments made across all KIRS businesses since early 2016 to optimise operating infrastructure and prepare the group for the next phase of growth Distribution Wholesale Underwriting Services Highly scalable, well invested online platform Fast growing home insurance panel Broad IT investment programme to upgrade and upscale existing infrastructure Multiple investments underway focused on improving pricing capabilities and speed of product launches Well-invested Claims and TPA platforms with significant spare capacity in existing systems Significant investment in new, consolidated front-end system Middle and Back Office Capabilities Key Programmes Include: Premium and policy management Renewals and administrative services Offline sales and servicing Coverage of the complete claims lifecycle Platform provision Optimisation of support functions (e.g. Finance, HR) Key Areas of Focus: IT Transformation Programme: 19m investment completing in Q2 17 to create fit for purpose IT infrastructure Finance Transformation Programme: 21m ongoing investment to maximise efficiency and integration vs. front end systems Implementation of automated solutions in low complexity / high volume processes Consolidation and simplification of property footprint and procurement function 19

20 5. Highly Stable and Cash Generative Business Model ( in millions) Strong foundation, poised to achieve substantial growth and rapid organic deleveraging Pro Forma Income (1) Targeted Net Debt / Pro Forma Adjusted EBITDA x Rapid organic deleveraging driven by cost reduction plans well under-way 2015A 2016A Pro Forma Adjusted EBITDA (2) A 2016A % Margin 24% 27% Opening 20 Note: The financial information included in this Presentation only includes 9 months of audited information from the year ended December 31, 2015 for Towergate. Towergate s Q financial results are unaudited and unreviewed and may not reflect what Towergate results would have been had the current group structure and management been in place from January 1, (1) Pro Forma Income means the combined income of Towergate, Price Forbes (FX adjusted), Autonet, Direct Group and Chase Templeton (annualised) for the year ended December 31, 2015 and 2016, as applicable. (2) Pro Forma Adjusted EBITDA means Towergate EBITDA, Autonet EBITDA, Price Forbes EBITDA, Direct Group EBITDA and Chase Templeton EBITDA, as adjusted for certain run rate cost savings and other exceptional items as determined by management.

21 6. Early and Continued Engagement with the FCA The FCA has been supportive of the development of KIRS The FCA has been involved from the outset of the process, and remains supportive of the proposed new group We have engaged with the FCA with full transparency and acted swiftly and appropriately when required We continue to liaise with the FCA as the KIRS management team remains highly focused on completing the implementation of best in class risk and compliance policies and improvement of legacy operations 21

22 7. Market Leading, Highly Experienced Management Team KIRS has attracted an experienced best of breed management team with a high profile in the market Corporate Management David Ross +26 years experience Mark Mugge +20 years experience Adrian Brown +28 years experience Antony Erotocritou +15 years experience Geoff Gouriet +20 years experience Sarah Dalgarno +25 years experience Kay Martin +25 years experience Distribution Management Janice Deakin +16 years experience Ian Donaldson +20 years experience Craig Ball +10 years experience Steve Anson +20 years experience Joe Thelwell +15 years experience Warren Dickinson +25 years experience Wholesale Management Michael Donegan +35 years experience James Masterton +25 years experience David Baxter +40 years experience Gordon Newman +50 years experience Neil Pearce +20 years experience Underwriting and Services Management Paul Dilley +25 years experience Andy Baughan +30 years experience David Leatham +30 years experience Andrew Bell +20 years experience David Bruce +30 years experience Derek Coles +25 years experience Scott Hough +20 years experience 22

23 KIRS Financial Highlights

24 Strong EBITDA Growth Strong EBITDA growth driven by efficiency improvements and income growth in Nevada ( in millions) Pro Forma Income (1) Growth 2015 (2) 2016 % Towergate ( 15) (4%) Nevada % KIRS Group ( 3) (1%) Pro Forma Adjusted EBITDA (3) Growth 2015 (2) 2016 % Towergate % Nevada % KIRS Group % 24 Pro Forma Adjusted EBITDA Margin 2015 (2) 2016 Growth Towergate 22% 26% +4% Nevada 30% 31% +1% KIRS Group 24% 27% +3% (1) Pro Forma Income means the combined income of Towergate, Price Forbes (FX adjusted), Autonet, Direct Group and Chase Templeton (annualised) for the year ended December 31, 2015 and 2016, as applicable. (2) The financial information included in this Presentation only includes 9 months of audited information from the year ended December 31, 2015 for Towergate. Towergate s Q financial results are unaudited and unreviewed and may not reflect what Towergate results would have been had the current group structure and management been in place from January 1, (3) Pro Forma Adjusted EBITDA means Towergate EBITDA, Autonet EBITDA, Price Forbes EBITDA, Direct Group EBITDA and Chase Templeton EBITDA, as adjusted for certain run rate cost savings and other exceptional items as determined by management.

25 Towergate: Very Positive Income and Expense Trends Second quarter of sustainable income growth and third quarter of EBITDA (1) growth ( in millions) Income vs. Prior Year 5% 0% 2% 1% Quarter (5%) (10%) 10% 5% 0% (5%) (10%) 5% (7%) (7%) (5%) Q1'16 Q2'16 Q3'16 Q4'16 Q1'17 5% Expenses vs. Prior Year 5% 3% New management team: expense savings started (3%) (0%) (6%) (8%) (4%) Q1'15 Q2'15 Q3'15 Q4'15 Q1'16 Q2'16 Q3'16 Q4'16 Q1'17 Growth % Income % Staff costs ( 46) ( 40) 6 14% Op expenses (17) (19) (1) (8%) Total expenses ( 63) ( 59) % EBITDA (1) % Margin 18% 25% +7% 25 Note: The financial information included in this Presentation only includes 9 months of audited information from the year ended December 31, 2015 for Towergate. Towergate s Q financial results are unaudited and unreviewed and may not reflect what Towergate results would have been had the current group structure and management been in place from January 1, (1) Pro Forma Adjusted EBITDA - Pro Forma Adjusted EBITDA means Towergate EBITDA, Autonet EBITDA, Price Forbes EBITDA, Direct Group EBITDA and Chase Templeton EBITDA, as adjusted for certain run rate cost savings and other exceptional items as determined by management.

26 Towergate: Extensive Cost Reduction Programme 56m cost savings identified and committed (20% reduction in 2015 cost base) with circa 1 year average payback 61% complete at end March 2017 Initiative IT Transformation 6m 7m 7m 19m Finance Transformation annualised Savings to end Q1 17 4m annualised Savings to end m Total Medium- Term Savings 14m Total One-off Costs 21m Progress to Date programme essentially completed in Q1 17 Including server migration to Azure Cloud Improvements to networks and telephony Over 4,000 users upgraded to Windows 10 Contract signed with Accenture Investment in robotics and process automation started Completed initial process engineering activities SBU Turnaround 7m 7m 7m 4m Closed Milton Keynes and Manchester locations Property Cost Reduction 4m 5m 5m 1m Footprint reduced by 21% with locations reduced from 140 to 98 (Jan 15 to date) Consolidated suppliers across cleaning, waste, repairs & maintenance and security Operational Efficiency 13m 16m 18m 2m Back office operational process efficiency Reduced reliance on agency and temporary staff Commenced supplier rationalisation and procurement programme using external parties Broker Systems Consolidation m 12m Detailed implementation planning for consolidation of broker systems completed First roll-outs commenced in 2017 Total 34m 56m 59m 48m Programme = 20% reduction in 2015 cost base 26 13m cost savings already achieved in 2016 in-year result, 50% one-off spend paid before March 17

27 Additional Benefits Not Included in 134m EBITDA (1) ( in millions) Medium-term identified and committed cost savings of 8m, signed contracts resulting in 6m uplift in profitability and near-term revenue synergies of 2m have been excluded from EBITDA (1) Signed contracts resulting in profitability step-change in 2017 Near-term identified and committed revenue synergies 2 Additional savings 6 Medium-term identified and committed cost savings (1) Pro Forma Adjusted EBITDA - Pro Forma Adjusted EBITDA means Towergate EBITDA, Autonet EBITDA, Price Forbes EBITDA, Direct Group EBITDA and Chase Templeton EBITDA, as adjusted for certain run rate cost savings and other exceptional items as determined by management.

28 Highly Cash Generative Business Model Nevada is highly cash generative Towergate capex and exceptional spend expected to reduce significantly post completion of the ongoing Transformation Programme 2016 Operating Cash Conversion (1) 63% 90% 76% Towergate Nevada KIRS Group 28 (1) Operating Cash Conversion defined as Operating and Investing Cash Flow (Adjusted EBITDA less Working Capital Movement and Maintenance Capex) over Adjusted EBITDA and excludes capex and exceptional costs related to cost reduction initiatives and other one-off costs.

29 Indicative Capitalisation and Leverage ( in millions) KIRS Group is expected to support circa 800m gross debt, with a net leverage of circa 5.7x, organically de-leveraging rapidly we are exploring different financing options Indicative Capitalisation & Leverage 2016A Pro Forma Adjusted EBITDA (1) Towergate 84 Nevada 50 Total KIRS Group 134 Estimated Gross Debt 800 Estimated Cash (40) Indicative Net Debt 760 Indicative Net Leverage 5.7x Implied Transaction Equity Value (2) (1) Pro Forma Adjusted EBITDA means Towergate EBITDA, Autonet EBITDA, Price Forbes EBITDA, Direct Group EBITDA and Chase Templeton EBITDA, as adjusted for certain run rate cost savings and other exceptional items as determined by management. (2) Based on third party fairness opinion supporting Nevada roll-over contribution and price of Towergate's most recent rights issue.

30 KIRS Group Financial Targets 1 Mid-single digit income growth, underpinned by market growth and investments made in income producers EBITDA margin in 25-35% range 3 Project Capex and exceptional costs relating to transformation programme largely complete by Operating cash conversion (1) 80-90% 5 Rapid organic deleveraging 30 (1) Operating Cash Conversion defined as Operating and Investing Cash Flow (Adjusted EBITDA less Working Capital Movement and Maintenance Capex) over Adjusted EBITDA and excludes capex and exceptional costs related to cost reduction initiatives and other one-off costs.

31 Conclusion

32 Conclusions KIRS will be the leading diversified independent insurance intermediary group in the UK 1 We are creating KIRS to capitalise on highly supportive market tailwinds in a structurally attractive sector 2 Transactions completed to date will combine into the largest independent player in the market, an ideal platform for future growth 3 Strong combination of market leading management teams, deep product expertise and wide presence across entire value chain 4 Highly resilient business model with great cash flow generation capabilities 5 HPS and MDP share management vision and are fully committed to supporting its implementation 32

33 Q&A