ONEX Corporation

Welcome to ONIX's third quarter 2025 conference call and webcast. During the presentation, all participants will be in a listen-only mode. Afterwards, we will conduct a question and answer session with pre-qualifying analysts. At that time, if you have a question, please press star 1-1 on your telephone keypad. As a reminder, this conference is being recorded. I will now turn the conference over to Jill Hominick, Managing Director, Shareholder Relations and Communications at ONIX. Please go ahead.

Thank you. Good morning, everyone, and thanks for joining us. We're broadcasting this call on our website. Hosting the call today are Bobby LeBlanc, ONIX's chief executive officer, and Chris Govan, our chief financial officer. Earlier this morning, we issued our third quarter 2025 press release, MD&A, and consolidated financial statements, which are available on the shareholders section of our website and have also been filed on CDAR. Our supplemental information package is also available on our website. As a reminder, all references to dollar amounts on this call are in U.S. unless otherwise stated. I must also point everyone to our webcast presentation for our usual disclaimer and cautionary factors relating to any forward-looking statements contained in today's presentation and remarks. With that, I'll now turn the call over to Bobby.

Good morning, everyone. Before providing my comments on the quarter, I wanted to provide some thoughts on our pending acquisition of Convex and new strategic relationship with AIG. These transactions are a transformational step forward for ONIX with the potential to meaningfully enhance long-term shareholder value. Since becoming CEO, one of my main priorities beyond optimizing the business and focusing on those areas where we have a right to compete has been to identify opportunities to deploy our balance sheet to create enterprise value. I truly believe these relationships with Convex and AIG to industry leading organizations that are well aligned with our own culture and principles is one of these opportunities. In Convex, we are not only acquiring an outstanding organization and proven leader in the insurance industry, we are strategically and intentionally leaning into a business and ecosystem that we know extremely well. and where we have been able to generate outsized returns. In just six years from its inception, the business has delivered well beyond expectations and still has excellent growth prospects. Further, the informational advantage we have built up related to Convex puts us in a far superior position with much lower risk than if we were acquiring a business we didn't know as well. What Steven Catlin and Paul Brand have achieved to date with Convex is truly remarkable. We'd like to thank Steven and Paul and the rest of the employees at Convex for their efforts and results. They are one of the most talented teams in the industry and we're delighted to remain their long-term partners. In addition to the strength of the team, Convex has built a differentiated underwriting platform, one that has grown gross written premium by 22% annually since 2022. Profitability has also improved steadily with recent combined ratios in the high 80s to low 90s as the business continues to scale into its expense base. Convex has also demonstrated prudent underwriting and has had consistent, favorable prior year reserve development since 2022. Importantly, it carries no legacy insurance liabilities having been established as a de novo insurer in 2019 with the support of ONIX and our LPs. Convex's efficient cost structure with no legacy technology burden and a focus on outsourcing non-core functions should allow for meaningful incremental operating leverage as the business continues to grow. As we highlighted in the investor presentation available on our website, Convex's key performance indicators clearly position it ahead of its peers, particularly on an organic growth basis. At our entry price of 1.9 times Q3 tangible book value, we see meaningful upside as Convex continues to compound tangible book value to disciplined underwriting and retained earnings. As we have consistently outlined to our shareholders, we only want to deploy capital in areas where Onyx has deep domain expertise and a clear right to compete. We spent decades building experience and relationships across the insurance sector and convex is a great example of our deep domain expertise. Owning a property cash insurer gives us two powerful engines of value creation. First from through cycle underwriting profits, which can be reinvested back into the business or become available for future dividend distribution. Second, As Convex's investment portfolio, which is currently around $8 billion, grows, allocation to alternative assets will grow with it, which will include Onyx's own private equity and credit funds. This should drive incremental AUM growth and fee-related earnings for our asset management business. While the P&C market is not immune to cyclicality, we're comfortable with that risk given we expect to be a long-term owner of the business and Convex is still in the early stage of its growth trajectory. The business has significant opportunity to capture additional market share underpinned by its high-quality relationships and reputations with brokers and clients. The combination of best-in-class growth and high-quality underwriting should allow Convex to compound its equity value at attractive rates through the cycle. We see that growth as a meaningful driver of Onyx's future shareholder returns and a key contributor to the ongoing expansion of our net asset value over time. Turning to AIG's investment, this new relationship with one of the world's largest and most sophisticated insurance companies is an incredibly positive development for Onyx. Their $2 billion commitment to our private equity and credit funds will contribute an incremental $15 to $20 million of fee-related earnings, more than offsetting the impact of dilution. Moreover, this opens the door to a number of other benefits, including the potential to collaborate on future investments and a range of other initiatives that could prove significant over time. Overall, our relationship with AIG not only reflects a shared perspective on both the upfront value and long-term prospects of Convex, but is also an endorsement of the Onyx platform and our ability to create future shareholder value. Across our existing businesses, we are also thinking strategically about how to best enhance enterprise value. Upon closing, Convex will account for 42% of our balance sheet. With the remaining $5 billion of investing capital, we will continue to grow it and deploy it through two carriers, First, by allocating up to 10% per fund into our own strategies while relying increasingly on third-party fundraising to scale FGAUM and the related FRE. Second, by pursuing direct on-balance sheet investments. These would be in areas where we have a clear right to compete. But with differing risk-adjusted return, holding period, and leverage parameters, so as not to conflict with OP and on-cap opportunities. Added to this will be a continued focus on growing fee-related earnings. We have made significant gains on FRE throughout 2025, in large part due to the work of our credit team, and we are now positioned to exit the year with a positive total FRE run rate that is ahead of plan. This growth will be accelerated by AIG's commitment to our alternative asset strategies, as well as the additional future investment into these strategies by Convex. As we work towards our objective of closing the transaction in the first quarter of 2026, we will keep shareholders updated on key developments and will continue to look for opportunities to provide the appropriate information to understand and value this transaction. including why we believe convex deserves to be recognized at a premium valuation within our overall NAV. And now a few comments on a quarter. Again, credit continues to outperform our expectations this year, led by the ongoing momentum in structured credit. The team priced 22 CLO transactions through October, raising or extending $10.7 billion of fee-generating assets across our structured credit and tactical allocation platforms. The performance of our CLO portfolio continues to be top tier across important risk metrics. Our private equity teams continue to be active in Q3 with both realizations and deployments, ensuring that we continue to return capital to our limited partners while putting new investment money to work and opportunities that align with our chosen sectors. Onyx Partners announced a sale of approximately 55% of its investment in One Digital. and a transaction that values the business at more than $7 billion, which was completed at a valuation almost on top of our Q2 mark. In addition, we successfully closed the sale of our 25% stake in WestJet at more than a 40% premium to our mark. Including these two transactions and pro forma for the closing of the convex transaction, Onyx Partners 5 will have reached EPI 0.7 times, a strong achievement relative to the average DPI of comparable funds in its vintage. Following a sale of Precision Concepts in Q2, the OnCap team successfully closed their sixth investment in Fund 5, which is now approximately 50% invested. On the human capital front, we announced that Meg McClellan will join Onyx as our new CFO, following Chris's decision to step down from the role he has held since 2015. We are looking forward to welcoming Meg, who will assume the CFO responsibilities following our year-end call. I'm pleased that Chris has agreed to stay on in a leadership capacity to help ensure a smooth transition and provide continued guidance and support. I also want to acknowledge Topic Papatia's confirmation as head of Onyx Partners. Topic has always shown great leadership and strong investment acumen and is a true ambassador of the Onyx culture and entrepreneurial spirit. Finally, I want to thank everyone for their condolences and support following Nigel Wright's passing. Onyx lost a friend and colleague. Nigel was a gentleman in the truest sense of the word. I'll now turn it over to Chris.