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KIRS Non Deal Roadshow
May 2017
Disclaimer
This presentation (the “Presentation”) has been prepared by KIRS Group Limited (“KIRS”) and is its sole responsibility. For purposes hereof, the Presentation shall mean and include the slides that follow, any oral presentation by KIRS or any person on its behalf, any question-and-answer session that may follow the oral presentation, and any materials distributed at, or in connection with, any of the above.
The information contained in the Presentation has not been independently verified and some of the information is in summary form. No representation or warranty, express or implied, is or will be made by any person as to, and no reliance should be placed on, the accuracy, fairness or completeness of the information or opinions expressed in the Presentation. 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 the Presentation or its contents or attendance at the Presentation.
KIRS cautions that the Presentation may contain forward looking statements in relation to certain of KIRS’ business, plans and current goals and expectations, including, 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 of operations may differ materially from the plans, goals and expectations set out in any forward looking statement made by KIRS. 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.
The information and opinions contained in the Presentation have not been audited or necessarily prepared in accordance with international financial reporting standards and are subject to change without notice. The financial results in this document and the Presentation include certain financial measures and ratios, including EBITDA, ProForma Adjusted EBITDA and certain other related measures that are not presented in accordance with IFRS and are unaudited. These measures may not be comparable to those of other companies. Reference to these non-IFRS financial measures should be considered in addition to IFRS financial measures, but should not be considered a substitute for results that are presented in accordance with IFRS. The financial information included in this Presentation only includes nine months of audited information from the year ended December 31, 2015 for TIG Finco plc and its subsidiaries (“Towergate”). Towergate’s financial results as of and for the first quarter of 2015 are unaudited and unreviewed and may not reflect what Towergate’s results would have been had the current group structure and management been in place on January 1, 2015.
The information contained in the Presentation, including but not limited to any forward-looking statements, is provided as of the date hereof and is not intended to give any assurance as to future results. No person is under the obligation to update, complete, revise or keep current the information contained in the Presentation, whether as a result of new information, future events or results or otherwise. The information contained in the Presentation may be subject to change without notice and will not be relied on for any purpose.
The Presentation is solely for informational purposes and does not constitute or form part of, and should not be construed as, an offer to sell or issue securities or otherwise constitute an invitation or inducement to any person to purchase, underwrite, subscribe to or otherwise acquire securities in KIRS or any of its subsidiaries nor does it constitute an invitation or inducement to engage in investment activity under section 21 of the Financial Services and Markets Act 2000 (“FSMA”). The Presentation does not constitute an invitation to effect any transaction with KIRS or to make use of any services provided by KIRS.
The distribution of the Presentation in certain jurisdictions may be restricted by law. Recipients of the Presentation should inform themselves about and observe such restrictions. KIRS disclaims any liability for the distribution of the Presentation by any of its recipients. 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 the Presentation, you agree and acknowledge (i) that the Presentation and its contents may contain proprietary information belonging to KIRS and (ii) to be bound by the foregoing limitations, undertakings and restrictions.
2
Agenda
3
Introduction
Investment Thesis
KIRS Strategy and Business Highlights
Update on Key Strategic Initiatives
KIRS Financial Highlights
Conclusion
Q&A
KIRS has appointed Bank of America Merrill Lynch to organise a series of investor meetings in Europe and the US, GBP, EUR and / or USD bond / loan offerings may follow subject to market conditions
Investment Thesis
Investment Thesis
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 a 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 business model with significant cash flow generation capabilities
5
1
2
3
4
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.
KIRS will be the leading diversified independent insurance intermediary group in the UK
Significant Strategic Investment By Core Shareholders
6
2015 2016Jun NovApr Dec
2017 2018Q3 – Q4
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 Chase Templeton(1)
Acquisition of majority stake
in Direct Group(1)
Acquisition of majority stake in
Autonet
HPS investment in
Towergate
~£680m Total Investmentby Core Shareholders to Support
the Creation of KIRS
KIRS is the result of a carefully crafted acquisition strategy executed over the last 24 months
(1) Completion subject to regulatory and other customary approvals.
Dedicated Shareholder Base
7
Key shareholders have invested ~£680m in the development of KIRS and will own >95% of group equity
(1) As of April 1, 2017.(2) As of March 31, 2017 SEC filing.
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 1992
41 investment professionals
$12.5bn(2) asset under management
Largest shareholder of NFP Corp., a leading US insurance broker
Founded in 1976
Over 390 investment professionals globally
Approximately $138bn 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
$33bn asset under management
Significant experience in the insurance sector, including investments in many US mid-market insurance brokers
KIRS Vision and Key Highlights
Highly Supportive Market Backdrop
9
Phase 1First period of consolidation
Phase 2 Financial crisis
Phase 3 Consolidation of the consolidators & increased focus on innovation
2008 – 2011
Credit crisis causes significant slowdown in acquisitions
Total Number of Large Broker Acquisitions
2005 – 2008
First wave of consolidation
2012 – Today
“Historical” consolidators being acquired, new leaders emerge
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
Consolidation significantly slowed down
Focus on new avenues of organic growth (new products and channels)
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
KIRS is ideally positioned to capitalise on latest market trends
31
59
14
2008 2009 2010 2011
KIRS Resulted from Highly Selective Investment Strategy
10
2015 2016Jun Nov
Apr
Dec2017 2018
Q3 – Q4
Carefully structured acquisition plan executed in parallel with execution of Fix / Build / Grow plan in Towergate
Build
(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.
(3)
(1)(2)(1)(2)(1)(2)(1)(2)
Grow
Fix
11
KIRS is a multi-faceted insurance intermediary powerhouse with best-in-class capabilities across all parts of the insurance value chain
UK Broking & Underwriting Foundation
Broad UK coverage and expertise
Traditional & select digital distribution
Specialised underwriting capability
SME & consumer focused
Complex risks
Leading independent Lloyd’s broker
Blue chip brand
Recruiting top industry talent
Leading digital van broker
Premier digital platform Built for scale
Highly Efficient Service Platform
Leading service offering
Scale claims operations
Complementary underwriting capabilities
Attractive specialist proposition
Leading independent UK PMI provider
Growth engine
Proven acquisition platform
KIRS
Leading diversified independent UK insurance intermediary group
Extensive local footprint combined with global reach
Large and diversified earnings base
Highly scalable operating platform
Stable and cash generative business model
Early and continued engagement with the FCA
Market leading, highly experienced management team
Digital Market Leader
Health Care Market Leader
InternationalWholesale
KIRS Strategic Vision
KIRS Guiding Principle: Maximise Presence Across Value Chain
12
e.g. American Airlines, Exxon
e.g. Private Motor, Home
Customer Characteristics
CU
STOM
ER
Services (Policy Administration, Claims, Renewals)
Pe
rso
nal
Smal
l &
Me
diu
m
Co
mm
erci
al
Larg
e C
orp
ora
teC
om
ple
x
Aggregator
Affinity partner
Consultant
Reg Broker
Reg Broker
MGAInternational
Wholesale Broker
Reg Broker
MGA
LondonWholesale Broker
Reg Broker
Online Broker
MGA Retail Broker
Retail Broker
Wholesale BrokerMGA
High £ / Policy Low Volume
Low £/ Policy High Volume
Market Characteristics
CA
PIT
AL
Collectively we have created significant opportunities to disrupt the “traditional” value chain, and realise value across multiple channels and verticals
Multiple Avenues to Capture Incremental Commission
13
£100 £100 £100 £100 £100 £100
AdvisoryWholesale
DigitalCar & Van
UnderwritingSpecialty MGA
UnderwritingInternational
AdvisoryCommericalCombined Retail Household
Distribution Underwriting Wholesale
Services Other Income Premium to Carrier
KIRSEconomics
£15 £25 £30 £35 £40 £50
Illustrative purposes only
Integration across the value chain gives KIRS the opportunity to maximise commission per policy
Cost savings with a 12 month average payback period are being executed ahead of plan, providing a platform for growth
14
Total 24 cost savings initiatives within the programme
─ 8 initiatives complete as of end Q1‘17
─ Significant progress on all key projects
Key Programs include:
Fix
─ IT infrastructure and cost base
─ Finance transformation
─ Turnaround Small Business Unit
─ Property space and supplier consolidation
Operational Effectiveness
─ Various staff saving initiatives
─ Robotics opportunity analysis underway
Build
─ Broker system consolidation
Synergies
─ From acquisitions – Direct Group and Chase Templeton
£13m actual cost savings delivered in 2016 and £21m additional annual savings from activities already completed at end Q1’17
Cost Initiatives Growth Initiatives
2 major income uplift initiatives completed
─ New contract with premium financing counterparty
─ Fee for service agreements with strategic insurance partners
Investment in income initiatives to drive organic growth include:
─ Strategic income hires across businesses particularly in Wholesale and Underwriting
─ Hires to drive organic growth in Advisory
─ Broadening product offerings in Autonet, Paymentshield, and Underwriting
─ Acquisitions bring cross-sell opportunities (e.g., Chase Templeton, Direct Group and Autonet)
Investment in Change Management
Dedicated Change team with considerable large scale change experience
Change governance in place for all major programs to coordinate investment control, delivery assurance and benefit realisation
─ Change Director report progress to Executive Committee, Board and Regulator on a regular basis
Key business stakeholders involved in project design, implementation and monitoring
Partnered with global market leaders to assure execution and outcomes
Continued Execution of Strategic Initiatives
KIRS Operating Framework
15
Distribution Wholesale Underwriting (4)
Services
Leading UK broker services network and leading claims management and TPA platform
Leading UK insurance broker with strong online presence, extensive local
footprint and high margin specialist brands
International insurance and reinsurance broker with a diverse
international income stream
Leading MGA in the UK with diversified product focus
Digital / Direct Advisory
GEO
(3)(1) (2)
(1)(2)
London Market International(1)(2)
(1)(2)
(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.(3) KIRS Group does not incur any of the ultimate underwriting or principal risk in relation to any of the services or products that we provide and therefore we neither provide capital nor assume any responsibility for
insurance claims costs.
Highly diversified and integrated insurance distribution, underwriting and services company with a diverse portfolio of leading brands
16
Product Focus
Distribution Model
Market Position
2016 PF(1)
Income(Total: £487m)
2016A PF Adj. EBITDA
(Total: £134m)(2) (3)
Van
Property insurance via mortgage brokers
Specialist and bespoke products
Online (direct and price comparison websites (‘PCW’))
Direct via phone
Mortgage brokers
Leading UK broker in van
Leading distributor of property insurance via mortgage brokers
One of the top UK SME broker via PCW
£311m £79m
£93m £18m
AdvisoryDigital Underwriting
WholesaleSegment Services
Distribution Segment
(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) Includes £3m in KIRS group costs.(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.
£97m
£25m
2016A GWP
(Total: £2.8bn)£1,230m £950m £625m
General insurance
Health (Private Medical Insurance (‘PMI’) broker to SMEs)
Face-to-face broking
Direct via phone and call centres
Leading independent General Insurance and PMI broker in the UK
Large and complex specialty risk
Design and placement of risks from all major international insurance and reinsurance markets in London, Bermuda and Europe
Leading Top 5 independent wholesale broker
Commercial Lines
Specialty Personal Lines
Specialty Lines
Agriculture
Motor
Premium sourced from external and internal brokers
Global capability
Leading full service MGA in Europe
Post-sales servicing
End-to-end claims management
Insurers, corporates and affinities
Carriers, underwriters and brokers
Leading provider of claims management and post-sales servicing in the UK
Underwriting and Services Segment
Overview of KIRS Segments
KIRS Company Highlights
1. Leading diversified independent UK insurance intermediary group
17
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
1. Leading Diversified Independent UK Insurance Intermediary Group
18
UK’s leading MGA
Underwriting
Wholesale
Price Forbes is a top five independent London and international wholesale broker(1)
Services
UK’s leading broker services network and leading claims management platform
(£ in millions)
UK Insurance Broker Rankings by Income (1)
Leading independent SME and specialty personal lines-focused UK broker, distributing 3rd 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
Distribution
KIRS has a strong position in the UK insurance intermediary market
Leading diversified independent broker and top 10 broker overall in the UK market with c.£2.8bn GWP
(1) Source: Insurance Times Top 50 Brokers 2016.(2) Income is pro forma for Bluefin and Jelf acquisitions.(3) Pro Forma Income.
£953
£866
£758
£650£601
£507 £487
£387
£285£243 £229 £223 £219
£146 £131 £117 £109£75 £69 £64 £63 £62 £61 £56 £55 £55 £41 £40 £38 £36 £36 £35 £32
International
Personal
Commercial
London
(3)
2. Extensive Local Footprint Coupled with Global Reach
19
Distribution
Wholesale
Underwriting
Services
Key
Distribution
Underwriting
Wholesale
Services
9 local offices serving local brokers
Highly efficient operations centre in Doncaster
Primary operations in Doncaster and Preston
7 national contact centers each with a product focus online and on the phone
81 local offices across the country serving local clients
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
IrelandUnited
Kingdom
Extensive UK distribution network linked to international capital markets
Wholesale Markets
3. Large and Diversified Earnings Base…
No material GWP or income concentration around key producers
Call centre and online operations naturally diversified
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
Strong retention figures for 2016 across the business
No material income concentration on any specific customer
No more than 11% of total GWP written by a single carrier
Top 5 carriers all “A”-rated or above
Long term relationships with all key carriers, underpinned by recently renewed capacity agreements
20
Highly Diversified Business Model 2016 Pro Forma Income(1)
Digital
Advisory
Wholesale
Underwriting
Services
34%
30%
16%
18%
2%
No meaningful concentration by income producer, carrier, distribution channel or product
(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.
ExpertSpecialist knowledge
Partnerships
Strong customer relationships
“Stickiness” of specialist products
3. …With Numerous Niche Specialisms
21
A depth of specialist knowledge built-up over many years
Examples of Specialties
Est. 1990
Property
Est. 1982
Marine
Est. 1998
Van
Est. 1907
Healthcare
Est. 2002
Medical
Est. 1983
Haulage
Est. 1985
Classic Car
4. Highly Scalable Operating Platform
22
Significant investments made across all KIRS businesses since early 2016 to optimise operating infrastructure and prepare the group for the next phase of growth
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
Middle and Back Office Capabilities
Well-invested Claims and TPA platforms with significant spare capacity in existing systems
Services
Multiple investments underway focused on improving pricing capabilities and speed of product launches
Underwriting
Broad IT investment programme to upgrade and upscale existing infrastructure
Wholesale
Highly scalable, well invested online platform
Fast growing home insurance panel
Significant investment in new, consolidated front-end system
Distribution
5. Highly Diversified, Stable, and Cash Generative Business Model
23
Pro Forma Income(1)
Strong foundation, poised to achieve substantial growth and rapid organic deleveraging
Pro Forma Adjusted EBITDA(2)
% Margin 27%
5.7x
Opening
£134
2016A
£487
2016A
Rapid organic deleveraging driven by cost reduction
plans well under-way
(£ in millions)
Targeted Net Debt / Pro Forma Adjusted EBITDA
(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.
Distribution: £311m
Wholesale: £79m
Underwriting: £97m
Towergate: strong continuing trend of organic quarter-on-quarter PF Adj. EBITDA growth
Nevada: track record of organic EBITDA growth with strong cash flow conversion
6. Early and Continued Engagement with the FCA
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
24
The FCA has been supportive of the development of KIRS
7. Market Leading, Highly Experienced Management Team
25
KIRS has attracted an experienced best of breed management team with a high profile in the market
Distribution Management
Wholesale Management
Underwriting and Services Management
Paul Dilley+25 years experience
Derek Coles+25 years experience
David Leatham+30 years experience
Andy Baughan+30 years experience
Andrew Bell+20 years experience
David Bruce+30 years experience
Scott Hough+20 years experience
Michael Donegan+35 years experience
David Baxter+40 years experience
Neil Pearce+20 years experience
James Masterton+25 years experience
Gordon Newman+50 years experience
Steve Anson+20 years experience
Joe Thelwell+15 years experience
Warren Dickinson+25 years experience
Craig Ball+10 years experience
Corporate Management
Kay Martin+25 years experience
Geoff Gouriet+20 years experience
Sarah Dalgarno+25 years experience
Antony Erotocritou+15 years experience
David Ross+26 years experience
Mark Mugge+20 years experience
Adrian Brown+28 years experience
Janice Deakin+16 years experience
Ian Donaldson+20 years experience
Update on Key Strategic Initiatives
Towergate: Extensive Cost Reduction Programme
27
£56m cost savings identified and committed (20% reduction in 2015 cost base) with circa 1 yearaverage payback – 61% complete at end March 2017
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
Closed Milton Keynes and Manchester locations
Footprint reduced by 21% with locations reduced from 140 to 98 (Jan‘15 to date)
Consolidated suppliers across cleaning, waste, repairs & maintenance and security
Back office operational process efficiency
Reduced reliance on agency and temporary staff
Commenced supplier rationalisation and procurement programme using external parties
Detailed implementation planning for consolidation of broker systems completed
First roll-outs commenced in 2017£5m
Total
IT Transformation £19m£7m
Finance Transformation
£21m£14m
SBU Turnaround £4m£7m
Property Cost Reduction
£1m£5m
InitiativeTotal One-off
Costs
Total Medium-
Term SavingsProgress to Date
Operational Efficiency
£2m£18m
Broker Systems Consolidation
£12m
£56m £59m
£6m
£4m
£7m
£4m
AnnualisedSavings toend Q1’17
£13m
--
£34m
£7m
£13m
£7m
£5m
AnnualisedSavings to end 2017
£16m
--
£48m Programme = 20% reduction in 2015 cost base
£13m cost savings already achieved in 2016 in-year result, 50% one-off spend paid before March’17
Additional Benefits Not Included in £134m Pro Forma Adjusted EBITDA(1)
28
Medium-term identified cost savings of £8m, signed contracts resulting in £6muplift in profitability and near-term revenue synergies of £2m have been excluded from Pro Forma Adjusted EBITDA(1)
£8
Medium-term identified and committed cost savings
£6
Signed contracts resulting in profitability
step-change in 2017£2
Near-term identified and committed revenue
synergies
£16
Potential additional savings
(£ in millions)
(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.
No cost to achieve additional benefits
KIRS Financial Highlights
Strong Income and EBITDA Growth Potential
30
Strong Pro Forma Adjusted EBITDA growth driven by efficiency improvements and income growth in Nevada
Growth
2015 2016 £ %
Towergate N.A. £84(3) N.A. N.A.
Nevada £46 £50(4) £4 +10%
KIRS Group N.A. £134 N.A. N.A.
Pro Forma Income(1)
Pro Forma Adjusted EBITDA(2)
2015 2016 Growth
Towergate N.A. 26% N.A.
Nevada 30% 31% +1%
KIRS Group N.A. 27% N.A.
Pro Forma Adjusted EBITDA Margin
(£ in millions)
Growth
2015 2016 £ %
Towergate N.A. £325 N.A. N.A.
Nevada £151 £163 £12 +8%
KIRS Group N.A £487 N.A. N.A.
(1) “Pro Forma Income” means the combined adjusted 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.
(3) Includes £35m of Pro Forma adjustments for Towergate related to the cost reduction initiatives as set out on page 27.(4) Includes £13m of net Pro Forma adjustments primarily consisting of FX and expected cost synergies.
Towergate: Very Positive Income and Expense Trends
31
Income vs. Prior Year
Expenses vs. Prior Year
Second quarter of sustainable income growth and third quarter of Pro Forma Adjusted EBITDA(1) growth
(7%) (7%)(5%)
2%
1%
(10%)
(5%)
0%
5%
Q1'16 Q2'16 Q3'16 Q4'16 Q1'17
5% 5% 5%
3%
(3%)
(0%)
(6%)(8%)
(4%)
(10%)
(5%)
0%
5%
10%
Q1'15 Q2'15 Q3'15 Q4'15 Q1'16 Q2'16 Q3'16 Q4'16 Q1'17
Quarter 1 2017
Growth
2016 2017 £ %
Income £77 £78 +£1 +1%
Staff costs (£46) (£40) £6 14%
Op expenses (17) (19) (1) (8%)
Total expenses (£63) (£59) +£5 +8%
PF Adj. EBITDA(1) £14 £19 +£6 +42%
Margin 18% 25% +7%
New management team: expense savings started
(£ in millions)
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 Q1 2015 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, 2015.(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.
Nevada: A Continuing Trend of Income Growth
32
Source: Autonet, Price Forbes, Direct Group and Chase Templeton: Reported revenues as per statutory accounts.(1) Price Forbes, Chase Templeton, Autonet and Direct Group transactions are signed and completion is subject to regulatory approval.(2) Majority Ownership.
KIRS Resulted from Highly Selective Investment Strategy
Chase Templeton (1) (2)Direct Group (1) (2)
Autonet (1) (2) Price Forbes(1) (2)Nevada Pro Forma Adjusted Income
8%
1.9% 9.3%
16.4% 31.5%
Nevada Portfolio Comprises Strong Organically Growing Businesses (£ in millions)
£140
£155
£11
£8
£151
£163
2015 2016
Reported Income Pro Forma Adjustment
£41.5 £42.3
2015 2016
Reported Income
£61.6£67.3
2015 2016
Reported Income
£12.7£16.7
2015 2016Reported Income
£24.4£28.4
2015 2016
Reported Income
Highly Cash Generative Business Model
33
Nevada is highly cash generative – Towergate capex and exceptional spend expected to reduce significantly post completion of the ongoing Transformation Programme
63%
90%
76%
Towergate Nevada KIRS Group
(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. Typical maintenance capex is c.2% of income.
2016 Operating Cash Conversion(1)
Indicative Capitalisation and Leverage
34
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) £655
(£ in millions)
(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.
Proceeds of any potential financing to be used to refinance existing debt, finance the acquisitions of Direct Group, and Chase Templeton, pay fees and expenses, and cash on Balance Sheet
KIRS Group Financial Targets
Mid-single digit income growth, underpinned by market growth and investments made in income producers
2019 EBITDA margin in 25-35% range
Operating cash conversion(1) 80-90%
Project Capex and exceptional costs largely complete by 2018, £45-55m spend expected through 2018
ETV: Gross £45-65m before any insurance, vendor or asset recoveries (estimated to be c.£12m)
Positive levered free cash flow expected for 2018
Rapid organic deleveraging
35
1
2
3
4
5
(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. Typical maintenance Capex is c.2% of Income.
6
7
Conclusion
Conclusions
We are creating KIRS to capitalise on highly supportive market tailwinds in a structurally attractive sector
Transactions completed to date will combine into one of the largest independent players in the market, an ideal platform for future growth
Strong combination of market leading management teams, deep product expertise and wide presence across entire value chain
Highly resilient business model with great cash flow generation capabilities
HPS and MDP share management vision and are fully committed to supporting its implementation
37
1
2
3
4
5
KIRS will be a leading diversified independent insurance intermediary group in the UK
Q&A
Appendix
40
Description
Highlights & Strategy
Create leading online distributor of SME and niche personal lines insurance, with competitive advantage in scale, technology and pricing insight Combination of Autonet (a leading van provider)
and Towergate’s SME online business (#2 SME provider) creates a dominant online player transacting £100m van and SME GWP online
Extend pricing and risk expertise combining technology and data insight of both businesses
Build online scale in Home (Paymentshield) and niche products using market position, brand and expertise e.g., Classic Car
Utilise Direct Group to drive further efficiencies, and invest savings in driving growth of high margin niches
2016A GWP: c. £480m
Products: Blend of volume and niche General Insurance products (SME, Van, Home, Caravan, Marine, Medical, Excess)
Channels: Online direct, online price comparison websites, mortgage brokers, affinities and wholesale
FTEs: c. 1,800
Locations: Stoke, Southport, Oxted, Stevenage, Dudley, Cheltenham, Colchester
Home
SME
Car
Van
Medical
Non-Standard Property
CaravanCare Homes
Marine Other
Direct
Aggregator
Mortgage Broker
Partner
Overview 2016A Business Mix by GWP
2016A Distribution Mix by GWP
Distribution – Digital Overview
Relentlessly focused on expanding Digital across new products and channels
Description
41
Unique market position as the only scale independent General Insurance and Health business in the UK through a combination of the leading independent regional SME and Healthcare brokers £600m General Insurance Premium + £160m API
in Health Cross-sell across combined client base of 800k
customers 400 strong, dedicated and expert sales force
Significant synergy opportunity between Chase Templeton and existing Healthcare / PMI offering in Advisory
Expand product offering off the back of ongoing roll-out of single, improved front end system
2016A GWP: c. £750m
Products: General insurance (including Commercial Motor, Commercial Property, Private Home, Professional Indemnity, Private Car, General Personal, Marine) and Health
Channels: Face-to-face broking, telephone
FTEs: c. 1,800
Locations: 9 national contact centres and 67 local offices
Highlights & Strategy
General Commercial
Commercial Motor
Commercial Property
Private Home
Professional Indemnity
Other GI
Corporate PMI
Individual PMIOther PMI
Carrier A
Carrier B
Carrier CCarrier DCarrier E
Carrier FCarrier G
Other
Distribution – Advisory Overview
Overview 2016A Business Mix by GWP
New producer hires and commission monetization have positioned Advisory for growth
2016A Carrier Mix by GWP(1)
(1) Excludes Chase Templeton.
42
Description
Highlights & Strategy
Wholesale – Overview
Price Forbes is a top five independent London wholesale broker
Strong presence in major international markets
Diversified mix of business with growth in Non-Marine business over recent years
Focus on large and more complex risks
Investment in Bishopsgate will create a new growth vehicle that has been untapped to date
Large scale recruitment of new producers to date will establish a robust growth platform
Continued recruitment will drive growth in new products and capabilities
Significant cross-sell opportunity with Advisory and Underwriting
Key segments: Marine, Energy, Natural Resources and Non-Marine (including Aviation, Cargo, Financial Products, Health, Property and Specie)
Channels: Insurance and reinsurance markets in London, retail brokers and direct to policyholders
FTEs: c. 400
Locations: London headquarters, in close proximity to Lloyd’s market
Non-Marine -International
Non-Marine -North America
Marine, Energy & Natural
Resources -International
Marine, Energy & Natural
Resources -North America
Other
Bishopsgate New Hires
Role / Product Line Key Hire(1) (Joining date)
Executive Chairman Gordon Newman (Jul-17)
Professional Indemnity Emma Lucas (Feb-17)
Confidential appointment (Apr-17)
International Property / Canadian / Australian
Matt Edwards (Dec-16)
International Binders Simon Allport (Jan-17)
Personal Accident Confidential appointment (May-17)
UK Binders Confidential appointment (Jul-17)
Wholesale – Overview
Overview Price Forbes 2016A Business Mix by Income
Leading Wholesale franchise continues to expand with new business and new hires
(1) Name provided where individual has already joined. All other names withheld but employment contracts have been signed.
Description
Highlights & Strategy
Underwriting – Overview
43
The combined Towergate Underwriting and Direct Group is the largest full service MGA in Europe
Significant improvement in Towergate loss ratios in 2016 creating a stable platform for sustainable profitable growth
Strong relationships and long-term commitments with eight main carriers
Good growth opportunities to expand internationally and to create a London Market MGA
Direct Group organic growth and new business capabilities are highly accretive to current franchise
Four pillar strategy to access UK, London and International markets
2016A GWP: c. £625m
Products: Commercial, Household, Specialty Personal Lines and Agriculture
Channels: External and internal insurance brokers
FTEs: c. 800
Locations: Offices throughout the UK and three European locations
Underwriting – Overview
Overview 2016A Business Mix by GWP
Combination of Towergate Underwriting and Direct Group creates leading MGA platform
2016A Carrier Mix by GWP
Commercial
Personal
Agriculture
Household
Other
Carrier 1
Carrier 2
Carrier 3Carrier 4
Carrier 5
Carrier 6
Carrier 7
Carrier 8
Others
Description
Highlights & Strategy
Services – Overview
44
Direct Group is a leading outsourcing partner to the UK insurance industry
More than 2,000 active broker relationships with over 225,000 claims handled in 2016
Provides services to UK General Insurers representing almost 87% of total UK GWP
Strong growth trajectory across all business lines expected to continue, driven by high retention and highly executable new business pipeline (new client wins already secured in Q1’17)
Products: Post sales administration outsourcing on behalf of insurers, corporate and affinities and front and back-office outsourcing
Channels: Provide services to 14 of the 20 largest UK General Insurers
FTEs: c. 540
Locations: Primary operations in Doncaster and Preston
TPA Services
Claims Management Services
Overview Selected Trading Relationships
Leading claims management and TPA services offering