OneMain Holdings, Inc.

Welcome to the OneMain Financial First Quarter 2021 Earnings Conference Call and Webcast. Hosting the call today from OneMain is Peter Pouillon, Head of Investor Relations. Today's call is being recorded. At this time, all participants have been placed in a listen-only mode, and the floor will be open for your questions following the presentation. If you would like to ask a question at that time, please press star 1 on your touchtone phone. If at any point your question has been answered, you may remove yourself from the queue by pressing the pound key. We do ask that you limit yourself to one question and one follow-up, and please pick up your handset to allow optimal sound quality. Lastly, if you should require operator assistance, please press star zero. It is now my pleasure to turn the floor over to Peter Poyon to begin. Please go ahead.

Thank you, Maria. Good morning, everyone, and thank you for joining us. Let me begin by directing you to pages two and three of the first quarter 2021 investor presentation, which contains important disclosures concerning forward-looking statements and the use of non-GAAP measures. The presentation can be found in the investor relations section of our website. Our discussion today will contain certain forward-looking statements reflecting management's current beliefs about the company's future, financial performance, and business prospects. and these forward-looking statements are subject to inherent risks and uncertainties and speak only as of today. Factors that could cause actual results to differ materially from these forward-looking statements are set forth in our earnings press release and include the effects of the COVID-19 pandemic on our business, our customers, and the economy in general. We caution you not to place undue reliance on forward-looking statements. If you may be listening to this via replay at some point after today, We remind you that the remarks made herein are as of today, April 27th, and have not been updated subsequent to this call. Our call this morning will include formal remarks from Doug Shulman, our Chairman and Chief Executive Officer, and Micah Conrad, our Chief Financial Officer. After the conclusion of our formal remarks, we will conduct a question and answer session. So now let me turn the call over to Doug.

Thanks, Peter. As most of you know, Peter is our new head of investor relations, and I want to welcome him to the team. Good morning to everybody else who joined the call. We appreciate you joining us today. We're going to cover our first quarter performance on today's call, but I would also like to spend some time reflecting on our performance over the past year and sharing our views on what lies ahead for OneMain in the years to come. Reflecting back on the last several quarters, our business has shown tremendous resilience, record low losses, and significant capital generation, all of which continued into this first quarter. The stability and resiliency of our business model has been validated through this unpredictable market, and we're well positioned for growth as we come out the other side of the pandemic. I want to say again, how proud I am of the one main team in our branches, central, and corporate functions who've shown incredible dedication to our customers and to each other during this difficult past year. In the first quarter, we generated $299 million of capital, $78 million more than the prior year, or up 35%. CNI adjusted earnings per share for the quarter were $3.37 per share. Our credit outlook and recent performance are incredibly strong and continue to benefit from the proactive credit tightening we did at the start of the pandemic, as well as the unprecedented levels of government support. First quarter losses were 4.7%. and we feel confident in strong credit performance for the remainder of the year. Two injections of fiscal stimulus, while a tailwind for credit, created a headwind to originations in the quarter, as consumers received stimulus payments and we required less new borrowing. This was true across the industry. with near prime credit card balances declining 19% year on year, near prime installment loan balances declining 10% year over year, and our own installment loan balances declining 4%. That said, we're already seeing a rebound in originations in the latter part of April, consistent with the rebound in February when originations moved back to 2019 levels. And while we cannot predict the exact timing of economic activity resuming, we expect to see originations improve as fiscal stimulus wanes and the economic reopening continues. This brings me to our future vision and the opportunities we see as we emerge from the pandemic. Over the last several quarters, we've discussed pieces of this vision, but let me spend a few minutes pulling it together in context. Let me take you to page seven of our earnings presentation. Our vision is to be the lender of choice to near-prime consumers, meeting their current needs when they have a mismatch between savings, income, and expenses, but also providing products and services that help them make progress to a better future. Over the next several years, you can expect to see us continue to be the leader in near prime installment lending, but also offer a suite of products, services, and experiences that will deepen our customer relationships, increase engagement, give us more proprietary data, and make it more likely that consumers will choose to get their next lending product from one name. Our foundational strengths include a large customer base, nationwide branch and digital distribution, proprietary data, near-prime underwriting expertise, and mature funding, all of which uniquely position us to be the leading partner for the near prime consumer. Let me elaborate on a few key elements of this vision. As we discussed last quarter, we're developing a credit card product, which will be launched in the second half of the year. A credit card is a natural extension from our loan product and represents a market that is five times the size of the personal loan market. It'll deepen our customer relationships while broadening the aperture to bring in new and different customers into our ecosystem. It will also enhance our proprietary data and underwriting capabilities through access to purchasing behaviors. We're designing a differentiated card product, addressing the needs of the near-prime customers. Incorporating thousands of hours of consumer research and focus groups, our customer-centric design will be digital first and reward consistent payment habits, reinforce credit building behaviors, and help our customers build a more secure future. Over time, we also anticipate developing a new hybrid product, which will merge the best features of cards and loans into one. We've made good progress in terms of building out the infrastructure and team ahead of our second half launch. We've selected MasterCard as the network provider and have contracted other key partners, including a bank partner, issuer platform, and fraud solutions. We expect Card to be a multi-billion dollar receivables product line over the coming years. and are designing the infrastructure and platform to support this growth. As I mentioned earlier, we plan to expand on our suite of products and services that deepen our customer relationships, increase engagement, and give us more proprietary data. Our insurance products and financial education services have always been a core part of our offering and are deeply valued by our customers. Augmenting these existing capabilities, we are excited to announce the acquisition of Trim, a customer-focused financial wellness fintech that provides tools for consumers to save on monthly expenses and analyze their personalized spending data. Trim's subscription monitoring and bill negotiation services offer tangible benefits for customers. generating more than 90 dollars in annual savings per initial bill negotiation trim fits squarely within our mission to help improve the financial well-being of hard-working americans and propels our data and analytics strategy with access to approximately 1 billion customer transactions and over 600 000 users with a linked bank account this acquisition brings a proven team with depth in digital product development and customer engagement, gives our current customers added financial wellness services that we expect will lead to increased loyalty and engagement, and gives us another channel to acquire proprietary data that we can use for underwriting and marketing. As we deepen our customer relationships with new services and channels, we continue to make significant investments in technology and our digital capabilities. These investments have enabled us to supplement our incredibly strong and important branch network with digital capabilities and enabling nearly half our customers to close their loans digitally in the first quarter. As we expand our products, services, and channels, We have a simple goal, to improve the financial well-being of hardworking Americans. We feel confident that our vision for the future of the company will result in robust growth in the years to come. Even with the investments we are making, we continue to generate robust excess capital. To that end, our existing capital allocation framework remains consistent. First, we will invest in disciplined portfolio growth. Second, we will continue to invest in the business. The initiatives that I've discussed today and on previous calls are examples of this. We will also consider inorganic opportunities as they rise, as evidenced by our trend transaction with a bias towards smaller tuck-in transactions. we generate beyond these priorities will be returned to shareholders. Consistent with this framework, but also recognizing the continued evolution of the business, today we are announcing two enhancements to our capital returns. We are increasing our quarterly minimum dividend, or regular dividend, by 56% to $0.70 per share, or $2.80 annually. We're also commencing a programmatic $150 million share repurchase. As we move to a more normalized macro environment this year and with our increased conviction around our company's growth prospects, This is a natural time to institute a repurchase program to drive additional value creation. With that said, we'll continue to have a bias towards dividends and plan to supplement our minimum dividend with increased dividends every first and third quarter as appropriate. These enhancements should provide additional regularity and consistency to our shareholders. without sacrificing the robust yield they have become accustomed to, as we emerge from the pandemic with increased conviction in the stability and resiliency of our business and our growth prospects. The macro environment has greatly improved from the last time we spoke. Most notably, the rollout of COVID vaccines is progressing well and is great news for the reopening of the U.S. economy. We feel confident in the fundamentals of our core business and the strategic pivots we have made to date and plan to make in the near future to position us to serve all of our constituents, our customers, our employees, our communities, and our shareholders. With that, let me turn the call over to Micah to take you through the financial details of the first quarter.