ONEX Corporation

Welcome to ONIX's first quarter 2026 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-qualified 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 Homenick, 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, Onyx's Chief Executive Officer, and Meg McClellan, our Chief Financial Officer. Also joining us today for our Q&A session is Paul Brand, Chief Executive Officer of Conduct. Earlier this morning, we issued our first quarter 2026 press release, MD&A, and consolidated financial statements which are available on the shareholder 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.

Happy Friday, everyone. First, I'd like to welcome Meg Onyx's new CFO and Paul Brand, the CEO of Convex, to their first Onyx earnings call. Thank you both for being here today. Onyx delivered a solid first quarter, despite a challenging market backdrop. We remain focused on executing our strategy to drive long-term value creation and earnings growth. Our convex private equity and credit platforms are performing well, and we are experiencing positive momentum across our investing and asset management activities. As I've indicated before, convex will be the largest contributor to increasing shareholder value in the near term. In addition, the value of our strategic partnership with AIG should not be overlooked. As a reminder, AIG purchased 7.5 million shares of ONIX for a 9.9% ownership stake and has committed to invest $2 billion in our asset management strategies. We expect AIG's capital commitment to be accretive to FRE and to shareholder value. We are actively working with AIG to determine how capital will be allocated across ONIX's private equity and credit products including ONIX Partner 6 and OSCO 2. We also believe there could be additional opportunities that arise to collaborate with AIG as we continue to build our relationship. At yesterday's Annual General Meeting, we were pleased to welcome AIG's representative, Jay Cullen, to our Board of Directors. Jay has more than 30 years of experience across the insurance industry ecosystem, most recently leading the insurance equity research team as managing director at Bank of America. We look forward to working with Jay and to the expertise and contributions he will bring to our board discussions. Now let's turn to Convex's performance. Convex delivered a strong quarter with underwriting performance, profitability, and return on equity all improving versus the prior year period. Gross premiums written increased 5% year over year. However, this headline growth rate understates the underlying performance because Q1 of 2025 was an elevated comparison period, which included unusually high reinstatement premiums that convex received following the California wildfires. Excluding these one-times premiums, which are paid by clients to restore coverage for a subsequent event following a major loss, gross premiums written grew 8%. As we forecasted prior to our acquisition, insurance pricing has softened with year-to-date rates down 4%. The softness is concentrated in short-tail classes of risk, such as property. In contrast, there has been rate increases in areas affected by the Middle East conflict and in casualty classes. Convex generated adjusted net income of $106 million in the quarter, which included a $50 million unrealized mark-to-market loss on Convex's fixed income portfolio amid rising interest rates due to broader macroeconomic volatility. Excluding this non-operational accounting loss, Convex generated adjusted net income of $156 million. First quarter earnings should also not be viewed as representative of a full year run rate, as historically net income in the first quarter of the year is less than we see in other quarters. Convex currently recognizes unrealized changes in the value of its fixed income portfolio through earnings for plans to transition to an available for sale classification during the second quarter. This revised treatment is in line with peers and will reduce income statement volatility in subsequent periods. Convex delivered a combined ratio of 87% in the quarter, and underwriting earnings growth was largely driven by a significant reduction in the loss ratio, as first quarter earnings last year were negatively impacted by incurred losses due to the California wildfires. The Middle East conflict has resulted in estimated net losses of $23 million in Q1, which is relatively small compared to our overall earnings. Convex management is actively monitoring the evolving situation and expects rate increases on new policies written in the region to provide some offset against incurred losses. On a last 12-month basis, adjusted net income was $827 million, an increase from $401 million in the comparable per year period and from $711 for the full year 2025. The last 12-month combined ratio improved to 83% and ROE increased to 24%. Convex's ROE has steadily increased since Onix's acquisition, reflecting both stronger earnings and a lower tangible book value denominator following the repurchase of shares completed as part of the convex transactions. It should be noted that convex recorded modest major event losses over the last 12-month period, which has also helped improve convex's overall loss ratio. The value of Onix's investment in Convex increased to $4 billion at the end of the quarter, representing an increase of 4% since the acquisition was closed earlier this year. This valuation is based upon a 2.0 times price to tangible book value supported by Convex's high return on equity, earnings growth, and continued market share gains. At this valuation, the implied price-to-earning multiples are 8.1 times on a last 12 months adjusted net income basis and 10 times on a full year 2025 actual net income basis. Looking ahead, we expect Convex's earnings to benefit from several structural levers, including continued market share gains, prudent growth and asset leverage, improvement in investment portfolio yields, and operating leverage, as the business continues to scale. We are pleased with Convex's early results and continue to value our strong working partnership with Paul Brand and the entire Convex team. Now turning to asset management. Within private equity, our teams made significant progress returning capital to our limited partners last year. We returned more than $8 billion and this momentum has continued into 2026. Onyx Partners recently closed its $1.6 billion multi-asset continuation fund, raising capital from some of the world's leading institutional and sovereign investors, including several that are new to Onyx. And just this past Monday, OP announced a full realization of Emerald with expecting net proceeds to Onyx of $230 million. Importantly, These efforts will bring DPI for Onyx Partners 5 to 1.0, making it a positive outlier on this metric relative to other funds of its vintage. Moreover, OP has good visibility into additional realizations and expects DPI to increase by the time Onyx Partners 6 has its first close, which is expected later this year. The OP Opportunities Fund has now invested about 70% of its billion dollars in commitments, with one investment in each of the four verticals, and has attracted an additional $1 billion in co-investment. The fund has performed very well to date, particularly on the strength of its first two investments that we've held for over 12 months, Fischbach and Farsound. Our credit platform continues to distinguish itself as a market leader and a relative safe haven amidst considerable industry noise. Across the platform, we have been underweight software and AI-exposed credits, avoided exposure to aggressive PIC loans that have come to market in the past two years, and importantly, have almost no direct lending retail exposure, which has gotten a lot of attention, I believe. While the market for new CLO issuances in Q1 was more subdued, given recent market volatility, The credit team has been actively resetting existing CLOs and opportunistically placing new offerings. Over the first four months of the year, the team raised or extended eight CLOs, including three new issuances. Notably, the team recently priced their 50th US CLO. It was just a little bit over three years ago that they issued their 25th US CLO. proof of the team's ability to steadily scale the platform while maintaining their commitment to investment discipline and performance. And they've done so with far greater balance sheet efficiency, with Onyx's 35% share of CLO equity today being half of what it was three years ago. Structured credit, which includes CLOs, OSCO, and ONTAP, delivered $15 million in fee-related earnings in Q1, and remains positively positioned to grow earnings for the remainder of the year. As I mentioned, with direct lending being a source of concern in the market, it is worth noting that direct lending represents only 1% of ONIX's credit AUM. Moreover, our offerings are focused on liquid, structured, and multi-asset credit strategies which benefit from a sophisticated institutional client base and a proven track record of performance across economic cycles. Consequently, we continue to benefit from the quality and strength of our credit platform, which is showing up in the form of both new and repeat investors. Finally, let me turn to our liquidity and capital allocation priorities. As I outlined in our last call, we intend to reorient realized proceeds from our legacy investments into one or two direct balance sheet investments that ideally have a good strategic fit with Convex and or our asset management business. These investments will use lower leverage and have attracted risk-adjusted return profiles to drive earnings growth and enterprise value for ONIX shareholders. And of course, as we get closer to fully paying down the NAV loan, share buybacks will once again be considered as part of our future capital allocation decisions. I am confident that the combination of earnings growth from Convex, future realizations from our PE portfolio, and the reorientation of that capital, and the growing profitability of our asset management business will drive substantial long-term value creation. I'll now turn the call over to Meg.