elementcorp.com

A N N UA L G E N E R A L M E E T I N G J U N E 2 6 , 2 0 1 4

elementcorp.com

North American equipment finance experts

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VENDOR FINANCE AVIATION FINANCE

RAILCAR FINANCE FLEET MANAGEMENT

elementcorp.com

North American Equipment Finance Experts

Element Financial – Post PHH Arval

● $10.0 billion total assets

● $3.5 billion market capitalization

● TSX composite index member

● FTSE Global Equity index member

● 1,400 employees

● 86,000+ customers

● Head Office – Toronto, ON

● US – Philadelphia, PA and Sparks, MD

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elementcorp.com

Growth Drivers

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elementcorp.com

Element’s Growth

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● N.A. Capex spending declines in response to the financial crisis

● Equipment leasing volumes decline 30% in the US

● European banks retrench and repatriate capital

● GE refocuses GE Capital on core business

● Recovery in equipment financing takes hold with 16.5% growth in US

● US equipment finance industry posts 10 consecutive quarters of YoY growth

2008 2009 2010 2011 2012

● CIT files for bankruptcy

● April 2009 – Canadian Minister of Finance states “Access to credit and financing is the number one issue facing Canadian businesses” and appoints Advisory Committee on Financing

May 2007 founded as a

private leasing company

elementcorp.com

2014 YTD Milestones

2014

January

February

March

April

May

June

Significant achievements

● Targets $3.8 billion in originations for 2014

● Completed purchase of US$400 million of leased railcars from Trinity

● Announced $997 million of originations for Q4-2013

● Issued $125 million of cumulative 5-year rate rest preferred shares

● EFN added to the FTSE Global Equity Index

● Completed purchase of US$118 million of leased railcars from Trinity

● Entered multi-year equipment financing agreement with US-based Celadon

● Accessed rated ABS market for US$340 million to fund rail assets

● Signed US$220 million transportation equipment financing facility with Dallas-based Bridger

● Signed US$ 1.4 billion agreement to acquire PHH Arval at 1.56 X adjusted book value

● 10+ percent accretive in 2015 and 2016 with leverage at 4:1 on closing

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elementcorp.com

Growth Drivers

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2012 Results 2013A 2014E

2.8% (Real)

2015E 2016E 20127E

US GDP

US Equipment

Investment

Equipment Finance

Volume

8.0% Growth

16.4% Growth

1.9% 2.8% 3.1% 3.1% 2.4%

• Average equipment replacement cycle of 8 years • Growth led by various transportation segments

including Air, Rail & Autos • Propensity to finance increasing with competing

calls on capital US Commercial Finance is one of the fastest

growing financial services sectors

Source: US Federal Reserve Bank of Philadelphia

elementcorp.com

2014 Growth Drivers

• Continued US commercial and industrial recovery

• Demand for energy to fuel US economic growth

• Deep relationships with Trinity Industries, leading NA railcar manufacturer

• Opportunities to acquire third party portfolios

• Continued US commercial and industrial recovery

• Demand for energy to fuel US economic growth

• Retrenchment of key competitors

• Engagement of US-based helicopter team

• Deep relationships with key manufacturers

• Continued US commercial and industrial recovery

• Deferred equipment replacement cycle

• Favourable C$/US$ exchange for Canadian equipment manufacturers

• Deferred vehicle replacement cycle

• Strong growth in 2009/2010 fleet registrations drive 2014 replacements

• Expansion of fleet management services offering

• Continued commercial and industrial recovery in Canada

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COMMERCIAL & VENDOR FINANCE AVIATION FINANCE RAILCAR FINANCE FLEET MANAGEMENT

elementcorp.com

US Commercial & Vendor Originations

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35

64

94

113

160

Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014$ millions

elementcorp.com

Portfolio Quality

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99.6%

0.4%

Current Past Due

Contractual Delinquencies As a % of Finance Receivables March 31, 2014

Allowance for Credit Losses As a % of Finance Receivables

0.71%

0.37%

2012 2013

elementcorp.com

Balance Sheet Capacity

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elementcorp.com

PHH Arval Acquisition

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F L E E T M A N A G E M E N T

elementcorp.com

PHH Arval Transaction

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A North American Fleet Management Leader

● Founded in 1946

● US$4.6 billion in total assets as at March 31, 2014

● US$4 billion net investment in fleet leases

● Annual originations of US$1.7 billion in 2013

● 12% CAGR pre-tax income growth from 2009 to 2013

● Strong management team

● Exceptional customer service culture

● Pristine credit quality

● Efficient established funding sources

elementcorp.com

Accretion Drivers

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1. PHH

Transformative Benefits

2. Investment

Grade Ratings

3. Increased

Balance Sheet Scale

elementcorp.com

1. PHH Delivers Transformative Benefits

● Increased scale

— Establishes Element as a North American $10 billion asset company on closing

— Balance sheet scale allows Element to source/keep larger deals across all verticals

● Adds stability

— North American fleet business delivers long-term stable cash flows

— Visibility on cash flow increases from 3 years to +10 years

● Reduces risk

— North American fleet customers are Fortune 500 credits

— < 3 bps of credit losses over last 10 years

● Accelerates growth

— Delivers minimum 10% accretion on 2015 Operating EPS of $0.88

— No taxes payable until 2030 +

● Improves profitability

— Transaction immediately increases leverage

— Provides documented pathway to investment grade ratings and lower cost of capital (debt and equity

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Transformative benefits… Transformative benefits…

elementcorp.com

1. PHH Delivers Transformative Benefits

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…with some acceptable costs

● Defers achievement of target ROE by 12 months but improves economics on arrival

● Brings convertible debt into the capital structure but minimizes common issuance

● Leverage not immediately optimized but delivers 200% increase on closing and optimizes in 2015

elementcorp.com

1. PHH Delivers Transformative Benefits

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Primary accretion drivers

● $20 million annualized synergies by end of 2014

— Public company costs, corporate allocations and duplication

● 10% increase in finance assets

● Growth of portfolios and increased penetration of card programs

● Significant opportunity to add other assets (material handling equipment/trucks) to PHH client customer base

elementcorp.com

1. PHH Delivers Transformative Benefits

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Added and potential accretion drivers not factored into our model

● Additional cost savings beyond $20 million

● Additional portfolio growth beyond forecast 10% increase

● Expand Chesapeake and FLRT funding

elementcorp.com

2. Investment Grade Rating Impact

Debt Cost of Funds (Spreads)

Before IG After IG Comparables

Bank Lines Fully secured – Borrowing Base +200bps

Unsecured +150bps

AirLease T+100bps

Fleet Securitization 150bps 70 – 80bps PHH Fleet

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Equity (Coupon)

Before IG After IG Comparables

Preferred Shares 6.40% - 6.50% 4.25% - 5.0% (P-3,pfd-3) 3.80% - 4.20% (P-2,pfd-2)

P-3, pfd3 P-2, pfd2

Update unpublished Kroll rating review post Trinity

and PHH

Issue $400 million private placement with

at least NAIC 2 rating

Security release occurs automatically

elementcorp.com

2. Investment Grade Rating Impact

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Common 825,000

Convertible 300,000

Preferred 125,000

Tangible Leverage

Bank Covenant Rating Agencies

Pro Forma March 31, 2014

2.9 3.7

Pro Forma June 30, 2014

3.2 3.9

Pro Forma December 31, 2014

3.4 4.3

Pro Forma December 31, 2015

4.1 5.1

Pro Forma December 31, 2016

4.3 5.5

elementcorp.com

3. Increased Balance Sheet Impact

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Larger scale drives growth across all verticals

● Railcar Finance, Aviation Finance, Vendor Finance to benefit from balance sheet scale

● Raises overall transaction size limits and single obligor limits

● Higher commitment capacity to take deals “off the street” and deliver commitments and advisory services

● More on balance sheet financing with annuity income versus lower up front returns from syndication

Before After

Equity $1.6 billion $2.6 billion

Single Obligor Limit $99mln/name $168mln/name

elementcorp.com

3. Increased Balance Sheet Impact

● Bridger – $220 million driven by railcar expertise

● Celadon – $100 million driven by size, scope and products

● CargoJet – $100 million driven by aviation expertise

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Transaction examples

RAILCAR FINANCE

VENDOR FINANCE

AVIATION FINANCE

elementcorp.com

Deal Structure Leverage and ROE Impact

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Timing of achieving target ROE deferred 12 months

2015 2016 2017 Before 11.0% 13.1% 14.5% After 10.0% 12.6% 14.5% 2015 2016 Pre Tax EPS $1.33 $1.87 Post Tax EPS $0.95 $1.35

However, tax deferral increased to 20+ years

elementcorp.com

2014 Outlook

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elementcorp.com

2014 Originations

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-

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

Fleet Management Aviation Commercial &Vendor

Railcar TOTAL

2013

2014 Outlook

$ millions

elementcorp.com

Growth Trajectory

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Total Assets – $ billions

3.5

12.2

16.9

2013 2014 2015 2016

~ 20.0

$ billions

elementcorp.com

Q U E S T I O N S