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Private and Confidential © 2016 Towergate Insurance Limited
Towergate Insurance 2016 Investor Day
& Full Year 2015 Results
23rd March 2016
Private and Confidential © 2016 Towergate Insurance Limited 2
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Disclaimer
This document and the presentation to which it relates (“Presentation”) do not constitute or form part of, and should not be construed as, an offer to sell or an issue for
sale or subscription of, or solicitation of any offer or invitation to subscribe for, underwrite or otherwise acquire or dispose of, any securities of Towergate Group
(“Towergate”) in the United States or any state or any jurisdiction in which such offer, sale or solicitation would be unlawful nor should they or any part of them form the
basis of, or be relied on in connection with, any contract or commitment whatsoever which may at any time be entered into by the recipient or any other person, nor do
they constitute an invitation or inducement to engage in investment activity under section 21 of the Financial Services and Markets Act 2000 (“FSMA”). This document
and the Presentation do not constitute an invitation to effect any transaction with Towergate or to make use of any services provided by Towergate.
By accepting this document and the Presentation you agree and acknowledge that this document and its contents may contain proprietary information belonging to
Towergate.
This document and the Presentation may contain forward looking statements in relation to certain of Towergate’s plans and current goals and expectations, in particular
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 Towergate’s
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 Towergate, its subsidiaries and affiliates operate. As a result, Towergate’s actual future financial
condition, performance and results may differ materially from the plans, goals and expectations set out in any forward looking statement made by Towergate. Towergate
has no obligation to update any forward looking statement contained in this document or the Presentation or any other document or any other forward looking statement
Towergate may make. All subsequent written or oral forward looking statements attributable to Towergate 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.
Past performance cannot be relied upon as a guide to future performance.
No representation or warranty, express or implied, is or will be made in relation to the accuracy, fairness or completeness of the information or opinions made in this
document and the Presentation, which information and opinions should not be relied or acted on, whether by persons who do not have professional experience in
matters relating to investments or persons who do have such experience. The information and opinions contained in this document and the Presentation have not been
audited or necessarily prepared in accordance with international financial reporting standards and are subject to change without notice. No responsibility or liability
whatsoever is or will be accepted by Towergate, its subsidiaries or affiliates or by any of its officers, directors, employees or agents for any loss howsoever arising,
directly or indirectly, from any use of this document or its contents or attendance at the Presentation.
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 this document and the Presentation, you agree to be bound by the foregoing limitations, undertakings and restrictions.
Private and Confidential © 2016 Towergate Insurance Limited 3
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Janice Deakin Insurance Broking Chief Executive Officer
Presenters
David Ross Chief Executive Officer
Mark Mugge Chief Financial Officer
Adrian Brown Chief Operating Officer &
Underwriting Chief Executive Officer
Steve Wood Paymentshield Chief Executive Officer
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Agenda
1. Introduction
2. Business Segment Highlights
Paymentshield
Underwriting
Insurance Broking
3. Central Segment & Transformation
4. Financial Results
5. Q & A
6. Conclusions
Appendix
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Key Highlights
Last remaining independent UK SME broker of scale focused on specialised product niches with high barriers to entry
Highly profitable, resilient business model affected by legacy issues arising from lack of integration in support functions and poorly executed SBU strategy
Very achievable transformation plan well underway and focused on middle and back office cost savings
Unrelenting focus on driving a people-oriented culture to support best-in-class engagement and retention
Industry leading management team with deep experience in business transformation joined over the last three quarters
Complete alignment between management and core stakeholders
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Industry Leading Management Team
Proven management team with relevant transformation and integration experience
Leading Heath Lambert, Oval, Giles and Noraxis acquisition and integration efforts. Transformed a sub scale London Specialty International Division into a leading UK Broker/MGA
David Ross Chief Executive Officer
25
Centralisation of global accounting and IT at Arthur J. Gallagher including setting up and running India off-shore operations
Mark Mugge Chief Financial Officer
20
Adrian Brown Chief Operating Officer,
Underwriting CEO
26
Nearly doubled GWP at Aviva broker’s private clients business, brought it from loss making to profitable by implementing new trading platform and consolidating operations from small teams across 40 locations to 500 people in two major sites
Janice Deakin Insurance Broking
Chief Executive Officer
15
Name & Title Transformation Experience Years in Industry
Legal entity rationalisation, elimination and associated asset transfers – including client assets. 12 month project at FSA transforming regulatory approach to insurance supervision
Reshaped specialist general insurance business at Ecclesiastical Insurance. Separated FirstAssist from parent into own company; grew healthcare book at RSA by 40% in 3 years
Steve Wood Paymentshield
Chief Executive Officer
34
Integration of Minster Law into BGL’s general insurance group. Large scale centralisation at Barclaycard Europe; integration of Abbey National into Santander
Catherine Lynch HR Director
12
Led the Lloyds-HBOS integration for Lloyds Corporate Bank; led the restructuring of a Retail Bank Lending book to address consumer credit act
Gordon Walters Chief Information Officer
25
Advised on over a hundred corporate transactions (incl. P2P, M&A, IPOs). Lead counsel on >20 M&A transactions in insurance broking including AJG’s acquisitions of Health Lambert, Giles and Oval
Geoff Gouriet General Counsel
18
Sarah Dalgarno Strategic Risk Director
28
In RSA, led £150m cost reduction program with 1,200 FTE reduction and c.£85m IT infrastructure and application outsourcing. Established and led the successful direct business MORE TH>N
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Supportive Shareholder Base
Sponsorship of experienced capital providers with significant experience in insurance sector
(60% ownership)
Founded in 2007
>90 investment professionals globally
$27bn asset under management
Joint owner of Watford Re, global insurance and reinsurance group alongside Arch Insurance
Majority owner of Price Forbes, highly respected, long standing London Market broker
(12% ownership)
Founded in 1976
>370 investment professionals globally
$98bn asset under management
Strong prior knowledge of the insurance sector having previously invested in Willis Group and Alliant Insurance Services
(6% ownership)
Founded in 1998
>110 investment professionals globally
$24bn asset under management
Significant experience in the insurance sector including previous investments in many US mid-market insurance brokers
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Business Highlights
Highly Diversified Business Model and
Deep Product Expertise
Fully Aligned Stakeholder Group
Business Transformation Well Underway
Industry Leading, Proven Management
Team
Attractive Broking Industry Fundamentals
Market Leader in UK SME Insurance
Distribution
Unparalleled Local Footprint
Established End-to-End Insurance Distribution
Platform
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Established Insurance Distribution Platform
Advisory Retail
Market Position Market leading in commercial lines
Market leading in personal specialty lines
Full service MGA, market leading in agriculture and non-standard household
Market leading share of mortgage broking
channel
Market leading provider of outsourced services
Product Focus Speciality, commercial
and personal lines Micro SME and specialist
personal lines
Agriculture, commercial and personal insurance
products
Household insurance
Support and services for independent brokers
Distribution Model
Affiliated and independent insurance
brokers Mortgage brokers
Independent insurance brokers
Direct to client: Face to face (84%) Telephone (15%)
Online (1%)
Direct to client: Online (59%)
Telephone (41%)
37%
24%
14%
4%
21%
% of 2015A Towergate Revenue
High quality, diversified distribution combined with insurer-like underwriting and claims capability
~2.5m customers serviced by our broking and MGA divisions
~£1.1bn GWP distributed through advised, in person sales (~£0.7bn GWP) & online / telephony channels (~£0.4bn GWP)
~£0.6bn underwritten, fully serviced GWP of which >60% from 3rd parties
~£1.8bn GWP distributed by members of Broker Network
(1) Excludes Broker Network
(1)
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End-to-End Insurance Distribution Capabilities
Towergate has a strong presence in all the key segments of the insurance value chain
Insurance Buyer / Policy Holder
Wholesale Broker Retail &
Direct Broker
MGA / MGU
Insurer & Risk Bearing Platforms (Underwriters, Lloyds Syndicates, Insurance Captive)
Reinsurance Broker
Reinsurance Providers (Reinsurance Underwriters, Alternative Capacity Providers)
Brokers play a vital role in the insurance value chain by providing choice and advice to customers
Towergate operates across all the “channels” between customers and insurers
Towergate Presence
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£0
£300
£600
£900
Market Leader in UK SME Insurance Distribution
(1) Insurance Times – Top 50 Brokers 2015. (2) Approximated based Towergate data, external analysis. (3) Towergate analysis.
UK’s largest SME focused insurance broker and top 10 broker overall (1)
(£ in millions)
Towergate is the UK’s largest independent insurance broking platform
Insurance Broking
UK’s largest SME focused broker distributing 3rd party and own branded insurance products
Underwriting
UK’s largest MGA with approximately 15% market share (2)
Paymentshield
UK’s largest provider of property related insurance products via mortgage brokers (3)
Broker Network
UK’s largest provider of support, service and member benefits for independent brokers (3)
Gro
ss W
ritt
en P
rem
ium
s
UK Insurance Broker Rankings by Revenue (1)
UK’s Largest MGA with 15% Market Share (2)
International Broker
Domestic Broker
£0
£200
£400
£600
£800
TWG 2 3 4 5 6 7 8 9 10
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NY008GXJ_774151
Advisory: 81 local offices across the country serving local clients
Underwriting: 14 local offices serving local brokers
Retail: 7 national contact centres each with a product focus online and on the phone
Paymentshield: delivers online and on the phone from one contact centre
Broker Network: supports its independent Brokers from one support centre
National Platform with Unparalleled Local Footprint
Over 4,500(1) staff, based in approximately 100 offices in every corner of the UK
Division
Group
Advisory
Retail
Underwriting
Broker Network
Paymentshield
Ireland
United
Kingdom
(1) Excludes 100 FTEs in India
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1
2
3 4
5 6
7
8 9
Other 19%
16%
12% 8%
7%
4% 4%
2%
1%
27%
Highly diversified business across producer, business line, carrier and region
Highly Diversified Business Model…
Revenue by Producer Gross Written Premiums by Business Line (1)
Gross Written Premiums by 3rd Party Carrier (1) Gross Written Premiums by Region (1,2)
(1) Excludes Broker Network (2) Excludes Paymentshield
Advisory Underwriting
Top 10 Brokers
Top 11-50 Brokers
Other Brokers
11%
10%
79%
Top 10 Top 11-50
Other
4% 12%
84%
Comm'l Property &
Liability
Comm'l Transport
Motor
Comm'l Package
Property Owners
Other Comm'l
Agriculture
Aviation
PI
Motor Trade
Private Home
Private Motor
Other Personal
22%
17%
2% 2%
14%
2% 1%
2%
1%
15%
16%
5%
Commercial Total 64%
Personal Total 36%
South
North
Midlands
London
East
Scotland & Northern Ireland
26%
20%
20%
16%
13%
5%
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Longstanding leadership in high margin specialisms
…and Deep Product Expertise
Selected Examples of Product Specialisms Longevity
SME
Volume & contracted hauliers Est. 2002
Professional risks Est. 1988
Care homes Est. 1982
Therapists and allied professionals Est. 1907
Driving instructors Est. 1964
Photography & video Est. 1991
Spec
ialis
t Pe
rso
nal
Lin
es Military kit Est. 1947
Classic Car Est. 1983
Caravan Est. 1972
Marine Est. 1972
Higher barriers to entry: expertise, specialist knowledge, partnerships
Higher retention: strong customer relationships, stickiness of specialist products
Higher margin: lower competition, specialist products not available from major insurance companies
Specialism Insurance Broking (product & distribution) drives c.60% of Towergate’s GWP
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Attractive Broking Industry Fundamentals
(1) Marketline: Insurance Brokers in the United Kingdom, December 2015.
(£ billions)
P&C products are necessary purchases for companies and individuals alike
Strong recurring revenue base with high retention rates for more specialised products
Highly cash generative due to limited working capital absorption and capital expenditure requirements
Significant leverage over carriers thanks to close proximity to end customers
Compelling consolidation opportunity for larger broking and MGA platforms
Resilient growth profile with UK commercial brokerage revenue expected to continue growing at 2-3% per annum
UK Commercial Brokerage Revenue (1)
Favourable Risk Characteristics Supportive Brokerage Industry Dynamics
£6.4
£7.5 £7.8 £7.9
£8.2 £8.3 £8.5
£5.0
£6.0
£7.0
£8.0
£9.0
£10.0
2012A 2013A 2014A 2015F 2016E 2017E 2018E
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5%
10%
15%
20%
25%
30%
Feb-15 Mar-15 Apr-15 May-15 Jun-15 Jul-15 Aug-15 Sep-15 Oct-15 Nov-15 Dec-15 Jan-16
Extensive site visits by the entire Group Executive, with >80% of staff met over the last 6 months
Open, engaging leadership culture endorsed by staff survey results
Staff turnover has been declining significantly since arrival of the new management team
Turnover largely concentrated in support functions
Much more stable frontline, particularly in Advisory, improving further in H2 2015 when it decreased from circa 14% in H1 to <7% in H2 2015
Unrelenting Focus on Staff Engagement and Retention
New leadership focus on engaging and retaining staff has resulted in circa 50% improvement in turnover
Annualised Voluntary Staff Turnover
Change in Leadership
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Focus on Core: Sale of Majority Stake in Broker Network
Disposal of non strategic and legacy assets allows management to focus time and resources on core broking and MGA operations
Sale of majority stake in Broker Network Limited and Countrywide Limited to Highbridge for consideration of up to £46 million (including earn-out)
No Towergate involvement in day to day management of the business
Minority stake (19.9%) and call option construct provides for potential future upside
Key commercial terms agreed in principle, closing and funding expected in Q2 2016 pending regulatory and other customary approvals
Proceeds will be deployed to accelerate highly accretive strategic investments as part of our transformation plan
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Transformation strategy in place designed to drive efficiencies and support income growth
Business Transformation Underway
Q4 2015
31% total staff turnover
> 175 front end systems
> 1,400 servers
> 200 legal entities
> 550 bank accounts
< 20% total staff turnover
< 10 front end systems
Cloud-based infrastructure
< 20 legal entities
< 80 bank accounts
Phase 1: Design and Start the Transformation
Focus on critical back end fixes
Invest in middle and back office efficiencies
Stabilise income, focus on “quick wins” to boost topline growth
Phase 2: Accelerate the Transformation and Start the Build
Focus on front end growth
Accelerate income through new specialisms and distribution channels
Pursue additional growth through key producer hires and book purchases
Continuous infrastructure improvement becomes “BAU”
Phase 3: Complete the Transformation and Continue the Build
Maximise operating leverage
Finalise build-out of optimised infrastructure
Growth focus embedded at all levels
Q4
Q4
Q1
Q2
Q3
Q1
Q2
Q3
Q1
Q2
Q3
Q4 2016 2017 2018
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Clear Path to Continued Profitable Growth
Highly achievable plan to support profitable organic growth and significant improvement in cash conversion
(£ in millions)
£353
£79
2015
£360
£90
£390
£110
Medium Term Total Income Adjusted EBITDA*
Transformation Plan Underway
Disruption from SBU transition
Impact from financial restructuring
Historical lack of organic growth
No middle & back office integration pressuring EBITDA margin
2-4% organic income growth
25-28% EBITDA margin
> 85% cash conversion
Fully integrated middle and back office, providing scalable foundation
Excluding M&A and other strategic growth opportunities
(1)
(1) Adjusted EBITDA * is defined on page 70 and a reconciliation from Adjusted EBITDA* to EBITDA is on page 67, with a reconciliation to TIG Topco on page 69
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Agenda
1. Introduction
2. Business Segment Highlights
Paymentshield
Underwriting
Insurance Broking
3. Central Segment & Transformation
4. Financial Results
5. Q & A
6. Conclusions
Appendix
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1
2
3
4
5 6
Others
53%
21%
5%
5% 3%
3% 10%
Household insurance (Panel and Classic):
Homeowner’s insurance (buildings and/or contents)
Landlord’s insurance (buildings and/or contents)
Creditor:
Mortgage payment protection insurance (MPPI)
Short term income protection (STIP)
Paymentshield Segment – Overview
Paymentshield is UK’s largest provider of property-related insurance products via mortgage brokers
2015 Gross Written Premiums: £146m
Highlights Business Mix - Carriers
Products
Overview
Dominant position in UK mortgage broker market
New business growth driven by strong Panel proposition (9 insurers, competitive prices, ease of use for brokers through online quote & buy)
Distribution reach, end-customer risk profile and retention rates very attractive to insurers
Retention focus maximises back-book margin
Distribution 3,000 active mortgage broker
agencies
Employees 280 employees; single office
Clients 437k Household & Creditor policies
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£0
£50
£100
£150
£200
£250
£300
2014F 2015F 2016F 2017F 2018F
60% 63%
65%
2014 2015 2016F
Paymentshield Segment – Market Position
The value of the mortgage market grew 20% in 2014 and 7% in 2015
Lending is forecast to grow at 4% per year from 2016 to 2018
Growth linked to loan/property value, rather than number of transactions
Mortgage broker channel continues to increase its dominant position
Broker growth appears resilient to online & direct channels
Household insurance penetration estimated at 25%
Paymentshield has significant share of the mortgage brokered home insurance market
Gross Mortgage Lending (£bn) Brokers Increasing Share of Total Mortgage Market (1)
1. Bank of England, Datamonitor PSL, Halifax.
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Paymentshield Segment – Core Policy Books
Covers mortgage payments if the policyholder is unable to work due to accident, sickness or unemployment
Market appetite suppressed by PPI “bad reputation“ mis-selling in the past – low volumes of new business
High retention and good loss ratios
Standard Buildings & Contents insurance
Effectively closed to new business since Q2 2014
High retention and good loss ratios
MPPI
B&C Panel
“B&C” Classic
Historical Revenue (£ in millions)
Note: Excludes profit share accrual.
Bac
k B
oo
k
Other Books
Buildings & Contents insurance
Low profile launch in 2013; insurers added to panel in 2014 and 2015
Increased focus in 2015 drove significant new business growth
Small/specialist products and acquired books
Includes other miscellaneous products £1 £2 £3
£34 £31 £25
£23 £20
£16
£7
£6
£5
£65 £59
£49
£0
£10
£20
£30
£40
£50
£60
£70
£80
2013A 2014A 2015A
B&C Panel B&C Classic MPPI Other Books
Policy Count (’000)
27 52 92
268 221 181
119 103 91
61 87
74
475 463 437
0
100
200
300
400
500
2013A 2014A 2015A
B&C Panel B&C Classic MPPI Other Books
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£44
£0
£25
£50
£75
2014 AdjustedEBITDA*
One-off items Back Book Decline Panel Uplift Other 2015 AdjustedEBITDA*
Paymentshield Segment – 2014-2015 EBITDA Bridge
(£ in millions)
1 2 3 4
74.1% Margin
2014 included £6.2m of one of accounting estimate changes relating to fee income recognition
Classic book decline of 18% reduced income by £5m. MPPI book decline of 12% and a retail price reduction in Q4 2015 reduced income by £3m, partly offset by a £2m profit share
Panel book growth of 75% and deployment of price optimisation increased income by £1.2m
Investment in specialist resource capacity and capability, including the leadership team, product development and pricing. Partly offset by operational efficiencies and back office productivity gains
Strong growth of B&C Panel offsetting controlled run-off of legacy books
66.4% Margin
1
2
3
4
Adjusted EBITDA * is defined on page 70 and a reconciliation from Adjusted EBITDA* to EBITDA is on page 67, with a reconciliation to TIG Topco on page 69
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Adjusted EBITDA* Margin
Paymentshield Segment – Looking Forward
47% NPS
score
>50% NPS
score
66% Margin
>60% Margin
End 2015 Target
3 Admin
systems
1 System
Secure single-tie deals through 2020/22
Exploit adjacent estate agents and letting agents markets
Launch refreshed Creditor proposition
Sustainable margin from Panel
Broaden capabilities/ expand distribution
Exploit new products/ new markets
Design and Start the
Transformation
Accelerate the Transformation
and Start the Build
Complete the Transformation and Continue
the Build
1
2
3
Total
book
growth
-6%
Total
book
growth
+ 3%
Drive growth in core markets
Refresh Panel proposition
Consolidate administration platforms
Panel
negative
margin
Panel
+20%
margin
Single-tie
deals to
end of
2020/22
Single-tie
deals to
end of
2017
Adjusted EBITDA * is defined on page 70 and a reconciliation from Adjusted EBITDA* to EBITDA is on page 67, with a reconciliation to TIG Topco on page 69
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Agenda
1. Introduction
2. Business Segment Highlights
Paymentshield
Underwriting
Insurance Broking
3. Central Segment & Transformation
4. Financial Results
5. Q & A
6. Conclusions
Appendix
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Underwriting Segment – Overview
Overview
Largest full service MGA in the UK market with a ~15% market share
Three areas of focus: Agriculture, Commercial Lines, Personal Lines
Eight main carriers represent approximately 90% of premiums
Distribution 60% of premiums sourced from
external brokers
Employees 763 employees in 14 offices
Clients >700k policies
Largest full service MGA in the UK and top 25 ‘insurer’ by Gross Written Premiums
Commercial Personal
Agriculture
54% 33%
13%
Highlights Business Mix
Products
Commercial Lines
Commercial Combined
Property Owners
Motor Trade and Fleet
Sports and Leisure
Agriculture
Farm
Motor
Personal Lines
Home and Let
Travel
Private Clients: High Net Worth (HNW) Motor and Household
2015 Gross Written Premiums: £562m
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Underwriting Segment – Insurer Base
Our scale means we are a significant distributor for our partners being in the top 5 for all 8 carriers
Diversified and high quality capacity base with minimal contract renewal exposure
Gross Written Premiums Breakdown by Insurer
1
2
3
4
5
6
7
8
Other
28%
16%
15%
14%
8%
3%
3% 2%
11%
£240m contracts renewed in the last 18 months with 60% increase in commission rates, 30% flat and the remaining 10% reduced
Big enough to matter – significant partner
Long term partners providing the ability to manage the inevitable ups and downs
Providing diversification of risk for our partners
Full insurer infrastructure means lower risk profile than vast majority of MGAs
Only 5% to renew in 2016
47% on contracts in excess of 4 years
37% due within the next 1-3 years
11% on annual contracts – majority of which are subject to long term agreements
Contract Profile
Insurance Partners Highlights
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Underwriting Segment EBITDA Bridge
(£ in millions)
Impact of closing certain businesses which did not meet required returns for the Group
Withdrawal of business from a number of brokers during the 2014-15 financial restructuring
Combination of other one off headwinds stemming from the financial restructuring
Lower costs mainly reflecting annualised savings from middle & back office cost saving initiatives
Strong EBITDA margin of 23%, income headwinds expected to unwind by mid-2016
1
2
3
4
£21
£18 (£3)
(£2) (£2)
(£1) £5
£0
£10
£20
£30
2014 Adjusted EBITDA* Closed Business Lines Withdrawal of Support Other one off items Other Annualised Savings* 2015 Adjusted EBITDA*
1 2 3 4
25.8% Margin
23.5% Margin
Adjusted EBITDA * is defined on page 70 and a reconciliation from Adjusted EBITDA* to EBITDA is on page 67, with a reconciliation to TIG Topco on page 69
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Adjusted EBITDA* Margin
• Enhance existing products and bring new products to market
• Harness our scale and look at new capacity and reinsurance (“RI”) options to enhance margins
HNW Offering
Fragmented
Integrated
HNW Offering
Traditional capacity & RI
Traditional + New
capacity & RI
End 2015 Target
69% Commercial Retention
80% Commercial Retention
29 Systems
3 Core
Platforms
• Invest in marketing and sales capability whilst engaging better with our whole employee base
• Invest in systems and pricing capabilities to protect Agriculture and Household businesses
• Focus on improving retention and New Business
• Integration of Fusion and Arista
• Managing our cost base
• Demonstrate Underwriting and claims excellence
• Use the power of pricing sophistication to grow
Design and Start the
Transformation
1
Accelerate the Transformation
and Start the Build
2
Complete the Transformation and Continue
the Build
3
23.5% 22-27%
Underwriting Segment – Looking Forward
-8% Organic Income Decline
+2-4% Organic Income Growth
Adjusted EBITDA * is defined on page 70 and a reconciliation from Adjusted EBITDA* to EBITDA is on page 67, with a reconciliation to TIG Topco on page 69
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Agenda
1. Introduction
2. Business Segment Highlights
Paymentshield
Underwriting
Insurance Broking
3. Central Segment & Transformation
4. Financial Results
5. Conclusions
6. Q & A
Appendix
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Market leading broking platform focused on SME and specialty personal insurance across multiple channels
Largest UK independent insurance broker, strategically focused on high quality, sticky SME and specialty personal insurance products
The Insurance Broking Division is composed of two primary businesses:
Advisory (£650m GWP) distributes primarily SME commercial insurance through a network of >80 local offices
Retail (£232m GWP) distributes both SME and personal insurance online and over the phone
Advisory Key Themes Retail Key Themes
Advisory
Retail
74%
26%
2015A Gross Written Premiums: £882m
Insurance Broking – Segment Overview
Heavily affected by Change Programme and transition of small business policies to SBU
Revenues now stabilising thanks to resilient population of income producers
Invest in income producers and reduce non-producing staff
Previous consolidation from 18 to 7. Current focus on growing most profitable and resilient product niches
Transformation of SBU call centre already underway under new experienced leadership, with positive development showing in KPIs in early 2016
Further development of digital channel and cross-selling of new products key to future growth
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General Commercial
Commercial Motor
Commercial Property
Private Home
Private Car General Personal Marine
44%
25%
13%
6%
5% 4% 2% 1% Professional Indemnity
Advisory Division – Overview
Market leading SME insurance broker focused on achieving sustainable organic growth
Highlights Business Mix
Overview
Strong, diverse specialist Personal and Commercial lines
Producers close to clients in both SME and specialist personal lines
Business based on local service of advisory clients (two-thirds of clients live/work within 50 miles of their broking branch)
Distribution 84% of policies originate through
face-to-face, 15% over the phone and 1% from the internet
Employees 1,750 employees in 81 offices
2015A Gross Written Premiums: £650m
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Advisory Division – Market Position
Gross Written Premiums by Carrier
1 2
3
4
5
6
7
8 9
10 All Other
5% 5%
4% 4%
3% 3% 3% 3%
3% 3%
64%
Revenue by Office
Broad geographic spread – with a mix of large and small business units across 6 regions
High quality, diversified carrier base and well distributed office footprint
1
2
3 4 5
6 7
8
9
Other 25%
11%
9%
8% 5% 3%
3% 1%
1%
34%
Ireland
United
Kingdom
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Net Commission rates are mostly affected by:
Up-front trading deals signed between 2013 and 2014
Operational complexity linked to the high number of Policy Administration Systems
We are:
Moving away from up-front deals to ensure more sustainable ongoing value
Working on leveraging market relationships
Historical trading deals and operational issues affecting commission rates despite GWP scale
Strategically Moving Away from Trading Deals…
…To Support Normalisation of Net Commission Rates
Advisory Margin Improvement Opportunities
2013 2014 2015
£7.6 £5.1 £2.5
1. Excludes wholesale specialty division.
(£ in millions)
Net
GWP Commission Rate
Retail Direct £186.2 26%
Retail SME £90.1 21%
Broker A (example) £15.2 19%
Advisory(1) £608.2 17%
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Adjusted EBITDA* Margin
• Grow sales footprint and optimise back office
• Drive the transformation of lower performing locations
Target • Retention in place for key producer’s and invest in
recruiting high quality revenue generating staff
• Build client focused culture with sales focused leadership and mid market sales proposition
• Minimise commission erosion by reducing process complexity
• Exercise our leverage with our insurer partners
• Simplify and improve infrastructure
• Drive efficiencies across branch network through common policy admin systems
Advisory Division – Looking Forward
120 systems
65% Client
facing
Ratio
17% Net
Commission
83% Book
Retention
14% New
Business
5 systems
80% Client
facing
Ratio
19% Net
Commission
86% Book
Retention
20% New
Business
End 2015
9.1% 20-25%
Design and Start the
Transformation
1
Accelerate the Transformation
and Start the Build
2
Complete the Transformation and Continue
the Build
3
Adjusted EBITDA * is defined on page 70 and a reconciliation from Adjusted EBITDA* to EBITDA is on page 67, with a reconciliation to TIG Topco on page 69
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Professionals
Classic Car
Medical
Caravan
Non Standard Home
Marine
Military Education Photography
31%
14%
13%
13%
9%
9%
4% 3% 2% 2%
Care Homes
Retail Division – Overview
Highlights Business Mix
Overview
Direct-to-consumer broking business providing specialist and bespoke products for individuals and SMEs
Connects with customers through affinity partners, including Lloyds Bank and comparethemarket.com
Higher margin business due to specialty products
Distribution
41% of the business is originated over the phone
Significant online presence, with 59% originated online
Employees 1,000 employees in 7 offices
2015A Gross Written Premiums: £232m
Highly diversified base of specialty SME and personal products with significant online presence
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SME
Specialist Personal Lines
Caring Professions
SBU
Classic Car
Property
SBU
22%
19%
19%
16%
12%
7%
5%
Retail Division – Market Position
Gross Written Premiums by Carrier Gross Written Premiums by Location
Highly specialised centers of excellence leveraging a diversified carrier base
1
2
3 4
5
6
7
8
Other
19%
17%
12% 11%
10%
5%
4%
2%
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Direct SBU Total Retail
2014 2015 Change 2014 2015 Change 2014 2015 Change
Income £65 £67 £2 £26 £18 (£8) £91 £84 (£7)
Adjusted Contribution*
£23 £23 -- £15 £1 (£14) £38 £24 (£14)
Adjusted EBITDA* £16 £19 £3 £13 (£1) (£14) £29 £17 (£12)
Top Priority: SBU Path to Profitability
SBU lost 40% (£31m) of gross written premiums between 2014 and 2015 and its adjusted contribution deteriorated 90% to £1m (excluding exceptional costs)
Losses caused by mis-managed transition of small business policies from local offices of Manchester SBU call center
Most policies transferred mid-year causing a surge in cancellations, compounded by issues with quality of data
Lack of adequately trained staff in Manchester being addressed only from mid-2015 onwards
Manchester management replaced with highly experienced leadership from Direct business
Early results are encouraging and show drastic improvement in underlying KPIs (e.g., call abandonment rate dropped from 17% to 4%, number of complaints received in any one month between November 2015 and January 2016 more than halved)
SBU transformation well underway with limited exposure to additional downside
(£ in millions)
Retail Income Statement Breakdown
Adjusted EBITDA * is defined on page 70 and a reconciliation from Adjusted EBITDA* to EBITDA is on page 67, with a reconciliation to TIG Topco on page 69
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• Drive digital growth (tactical enhancements and investment in new platform)
• Simplify infrastructure & policy admin system to drive service and efficiency
• Establish new distribution partnerships
• Build new products and specialisms
Target
• Enhance capability of customer facing staff
• Optimise pricing / Top 10 products – improve sales process and conversion
• Invest in specialised product niches
• SBU retention improvement
Retail Division – Looking Forward
End 2015
16% Online
Conversion
21 Systems
38% Offline
Conversion
20% Online
Conversion
2 Systems
45% Offline
Conversion
Design and Start the
Transformation
1
Accelerate the Transformation
and Start the Build
2
Complete the Transformation and Continue
the Build
3
Adjusted EBITDA* Margin
19.5% 25-30%
Adjusted EBITDA * is defined on page 70 and a reconciliation from Adjusted EBITDA* to EBITDA is on page 67, with a reconciliation to TIG Topco on page 69
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£(14)
£(2)
£18
£26
0
5
10
15
20
25
30
35
2014 AdjustedEBITDA
Impact of SBUtransformation
Underlyingperformance
Annualisedsavings*
2015 AdjustedEBITDA*
Insurance Broking Segment - EBITDA Bridge
The business suffered from a number of headwinds in H1 2015 but is showing increasing signs of recovery
(£ in millions)
11.8% Margin
13.2% Margin
SBU change programme had the largest single impact on the business in terms of revenue loss and cost increase
Difficulties experienced by SBU are being offset by cost saving initiatives focused on support functions
Performance to date shows improvements in customer retention and new business, benefiting from contained direct expenses
Overall retention rates are slightly up vs. 2014 and improved by more than 2ppt in H2 2015 vs. prior year
Average net commission rate slightly increasing vs. 2014
New Business in Retail was up vs 2014 by more than 5%
Direct expenses decreased by (1.3%) vs. 2014
Further investment in new hires to support growth in specialist and niche offerings, e.g. HNW
Revenue uplift from new hires in H2 2015 in Advisory expected from mid-2016 onwards
Adjusted EBITDA * is defined on page 70 and a reconciliation from Adjusted EBITDA* to EBITDA is on page 67, with a reconciliation to TIG Topco on page 69
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Agenda
1. Introduction
2. Business Segment Highlights
Paymentshield
Underwriting
Insurance Broking
3. Central Segment & Transformation
4. Financial Results
5. Conclusions
6. Q & A
Appendix
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Central Segment – Division Overview
Outsized central cost base is a key area of focus in Phase 1 of Business Transformation
(£ in millions)
Highlights Gross Central Segment by Division
Key Functional Support Costs
2015A Gross Central Costs: £69m
Overview Support functions to business divisions
Expensive with sub-par service delivery
Employees >500 UK based staff plus c.100 in India
Hubs in Maidstone, Leeds and London
Transformation Initiatives
Finance cost reduction enabled by standardising & automating processes
IT infrastructure upgrade commenced with top quality partners (Accenture, BT, Microsoft)
Property savings through contract renegotiation and footprint reduction
£24 £10
£18
£53
£15
£17 £3
£34
£39
£27 £21
£87
IT Property Finance Addressable Cost Base
Central P&L Divisional P&L
Key functional support cost
IT 35%
Property 15%
Finance 27%
HR 10%
Risk & Compliance
4%
Other 9%
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Functional Run Rate Cost Savings
(£ in millions)
£39
£27
£21
£87
2015 excluding AnnualisedSavings*
Finance
Property
IT
£28
£23
£13
£64
2015 Including AnnualisedSavings*
IT
Property
Finance
% of Revenue
% of Total Cost Base
25% 18%
30% 22%
Change
(£23)
(£8)
(£4)
(£11)
Implementation of cost initiatives starting from largest support functions (30% of total costs)
Each area addressed through a combination of stand alone initiatives
IT infrastructure upgrade using top quality partners (Accenture, BT, Microsoft)
Other functional areas (HR, Legal, Compliance, etc.) to be addressed in the next stage of the transformation plan
(26%)
(38%)
(15%)
(28%)
Adjusted EBITDA * is defined on page 70 and a reconciliation from Adjusted EBITDA* to EBITDA is on page 67, with a reconciliation to TIG Topco on page 69
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Highlights of Transformation Plan
Early focus on middle and back office efficiencies, implementation geared towards minimising disruption of customers and frontline staff
All key stakeholders involved in project design, implementation and monitoring
Each initiative has an Executive sponsor who is responsible for delivery and reports to Executive Committee and Board on a regular basis
IT and Finance cost reductions driven by experienced leaders who have done difficult transformations in the past
Highly experienced Change Director hired from Aviva to coordinate delivery and monitoring of core investment programs, formally reporting to the Board on progress on a monthly basis
Each initiative is articulated across a clear and detailed set of milestones, allowing for consistent monitoring of timing and cost of execution, interim results
Careful implementation of transformation initiatives leveraging considerable management experience
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Summary of Key Cost Initiatives
(£ in millions)
Annualised savings from cost reduction initiatives started in 2015 equal to £23m
Highly attractive aggregate payback time of ~1.2 years
Initiatives focused on core support functions (IT, Finance and Property)
Significant potential for further savings from initiatives to be implemented over next 12-24 months
Division Initiative Adjusted
EBITDA* Benefit Medium Term
Expected Benefit Cost To Deliver
Information Technology
• IT Infrastructure transformation (Accenture, BT, Microsoft)
£4 £14
• Rationalisation of licenses and systems £4 £5
• Staff mix change & capacity planning £2 --
Finance & Treasury
• Simplify, automate and standardise processes • Rationalisation and redeployment of resources
£8 £5
• Cash management optimisation £1 --
Property • Contract rationalisation & footprint changes £4 £3
Total Support Functions £23 £27
Insurance Broking
• Consolidation of policy administration system and claims administration
£2 - £4 £9
• Divisional and local cost savings £4 - £7 --
• Simplification of management structure and footprint optimisation
£6 - £8 --
Underwriting • Tactical cost initiatives £1 - £2 --
Total Divisions £13 - £21 £9
Adjusted EBITDA * is defined on page 70 and a reconciliation from Adjusted EBITDA* to EBITDA is on page 67, with a reconciliation to TIG Topco on page 69
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Agenda
1. Introduction
2. Business Segment Highlights
Paymentshield
Underwriting
Insurance Broking
3. Central Segment & Transformation
4. Financial Results
5. Q & A
6. Conclusions
Appendix
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2015 2014 2015 2014 2015 2014
Advisory 131.5 130.8 12.0 (3.0) 9.1% (2.3%)
Retail 84.3 90.9 16.5 29.1 19.5% 31.9%
Insurance Broking 215.8 221.8 28.5 26.1 13.2% 11.8%
Underwriting 74.8 81.7 17.6 21.1 23.5% 25.8%
Paymentshield 48.9 58.9 32.4 43.7 66.4% 74.1%
Broker Network 13.1 13.7 3.5 4.7 27.0% 34.0%
Central 0.1 0.6 (3.3) (2.3) n/m n/m
Total £352.7 £376.7 £78.7 £93.2 22.3% 24.7%
Total Income Adjusted EBITDA* Adjusted EBITDA* Margin
Group Financial Results
Resilient underlying income significantly affected by SBU transition, run-off from Paymentshield back book and headwinds from financial restructuring impacting Underwriting
Decline in EBITDA driven by revenue decline, offset by reduced operating expenses from cost saving initiatives
Overall margin remains resilient, with improvement in Advisory partly offsetting impact from SBU decline and continued run off of Paymentshield legacy book
Adjusted EBITDA * is defined on page 70 and a reconciliation from Adjusted EBITDA* to EBITDA is on page 67, with a reconciliation to TIG Topco on page 69
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1. Accounting adjustments include changes to trade deal income and a one off change in accounting policy for Paymentshield relating to fee income recognition
2. £9m decline in SBU revenues caused by mismanagement of the transition of policies to Manchester call center
3. Run-off of MPPI book and change in household insurance book mix (Panel vs. Classic) in Paymentshield
4. Underwriting revenue £5m down, impacted by the withdrawal of partner support through the restructure and revenue impact of business closures
£4 (£9) (£5)
(£5) (£10)
£352
£377
£250
£300
£350
£400
2014 Revenue AccountingAdjustments
Impact of SBUTransition
PSL Legacy BookRun-Off
Restructuring andBusiness Closures in
Underwriting
UnderlyingRevenue Decline
2015 Revenue
Resilient Underlying Revenue Performance
(3%) Decline
1 2 3 4
1
2
3
4
Most of income decline caused by 2014/2015 Change Program and Financial Restructuring
(£ in millions)
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Accounting adjustments include changes in treatment for trading deal income, and fee income for Paymentshield
SBU revenue decline compounded by increase in operating costs as the division failed to reach adequate scale
Underwriting impact from revenue decline
Exceptional costs recorded in operational costs in 2015
Annualised savings from projects with identifiable high conviction near term impact / realisation
2014 to 2015 Adjusted EBITDA* Bridge
(£ in millions)
£4 £14 £5
£10 £12
£23
£79
£93
£0
£25
£50
£75
£100
£125
2014 AdjustedEBITDA*
AccountingAdjustments
Impact of SBUTransition
Restructuring andBusiness Closures in
Underwriting
Underlying EBITDADecline
Finance Exceptionals Annualised Savings 2015 AdjustedEBITDA*
1 2 3 4
22.3% Margin
24.7% Margin
1
2
3
4
Adjusted EBITDA margin >22% despite impact of legacy income and cost issues
5
5
Adjusted EBITDA * is defined on page 70 and a reconciliation from Adjusted EBITDA* to EBITDA is on page 67, with a reconciliation to TIG Topco on page 69
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2015 Organic Net Commissions and Fees
Advisory was one of the divisions most impacted by the financial restructuring in H1 2015, however key regions recovered in H2 with retention rates continued to improve in Q4 2015
Within Retail, SBU was the primary reason for the income decline
Underwriting has been impacted by significant headwinds in 2015 due to the financial restructuring. This is expected to continue until mid 2016 at which point the benefits of our initiatives should be felt
Paymentshield back book decline (MPPI and Classic) in Q4 2015 partially offset by Panel growth and price optimisation, with Q4 2014 impacted by over £1m for customer remediation
Q1 Q2 Q3 Q4 FY
- - - - Advisory (8.2%) (6.3%) 1.6% 2.1% (3.1%)0.0% 0.0% 0.0% 0.0%Retail (12.0%) (9.8%) (12.3%) (23.0%) (14.0%)0.0% 0.0% 0.0% 0.0%
Insurance Broking (9.7%) (7.7%) (4.6%) (8.6%) (7.7%)0.0% 0.0% 0.0% 0.0%
Underwriting (10.1%) (6.4%) (20.7%) (15.8%) (13.3%)0.0% 0.0% 0.0% 0.0%
Paymentshield (11.4%) (15.6%) (12.5%) (3.5%) (10.8%)0.0% 0.0% 0.0% 0.0%
Network (12.9%) (4.3%) (8.6%) 5.3% (5.2%)0.0% 0.0% 0.0% 0.0%
Total (10.2%) (8.3%) (9.2%) (8.9%) (9.1%)
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2015
Adjusted EBITDA* 79.5
Annualised Savings* (23.1)
Adjusted EBITDA 56.4
Working Capital Change (One Off) (13.5)
Working Capital Change (BAU) (14.3)
Operating Cash Flow ("OCF") 28.6
Normalised OCF Conversion (%) 82.0%
Capex (6.6)
Group Restructuring Costs (68.0)
Regulatory Costs (4.3)
Other (17.6)
Total Exceptional Costs (90.0)
Tax (0.0)
Acquisitions / Deferred / Minority Buyout / Disposals (0.3)
Restricted Cash (8.4)
Net Interest Cost (35.5)
Other Financing Cash Flows 121.1
Net Cash Flow 9.0
Year End Cash Balance 57.3
Net Leverage (based on Adjusted EBITDA*) 5.3x
Interest Coverage (based on Adjusted EBITDA*) 1.7x
Figures include £8.4m Towergate Financial restricted cash
and pro forma for sale of 80% stake in Broker Network
Full Year
Group Cash Flow and Leverage
(£ in millions)
£8
£65
£57
131
Reported CashBalance 2015
TowergateFinancial
restricted cash
BN stake saleProceeds¹ & otherfunding initiatives
Proforma Cash
Proforma Cash Balance
1 Broker Network (BN) Excluding agreed earn-out
Adjusted EBITDA * is defined on page 70 and a reconciliation from Adjusted EBITDA* to EBITDA is on page 67, with a reconciliation to TIG Topco on page 69
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Agenda
1. Introduction
2. Business Segment Highlights
Paymentshield
Underwriting
Insurance Broking
3. Central Segment & Transformation
4. Financial Results
5. Q & A
6. Conclusions
Appendix
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Q&A
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Agenda
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2. Business Segment Highlights
Paymentshield
Underwriting
Insurance Broking
3. Central Segment & Transformation
4. Financial Results
5. Q & A
6. Conclusions
Appendix
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Pipeline Opportunities
(£ in millions)
Division Initiative Medium Term
Expected Benefit
Advisory
• Margin Rate Increases £7 - £12
• Account Executive / Development Executive Recruitment £3 - £6
Advisory / Underwriting • High Net Worth Proposition £2 - £4
Direct • Broker Product Placement Across Distribution channel £5- £10
Underwriting • Review of Capacity and Distribution Strategy £2 - £4
All • Tactical Income Opportunities £3 - £6
Total Income Initiatives £22 - £42
No benefits arising from income initiatives are included in Adjusted EBITDA*
Significant drivers of medium term income growth are already underway (e.g. margin rate optimisation)
Income initiatives are primarily composed of items which are consistent with ordinary course business targets
Several additional opportunities are currently in the design phase (e.g., London Market broking and MGA opportunities)
Adjusted EBITDA * is defined on page 70 and a reconciliation from Adjusted EBITDA* to EBITDA is on page 67, with a reconciliation to TIG Topco on page 69
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Conclusions
Market leading businesses in UK SME distribution and underwriting
Only privately held independent broker of scale in the UK
Specialise products with high customer loyalty and barriers to entry
Highly resilient business generating >£350m revenues and nearly £80m Adjusted EBITDA* with a >22% margin
Revenue stability underpinned by leadership across all core business segments
Integration and improvement of middle and back office well underway
Proven, industry leading management team with execution and growth experience
Over £130m pro forma cash balance supporting acceleration of strategic investments whilst transforming from legacy cost structure
Complete support from the Board, shareholders and external stakeholders
Adjusted EBITDA * is defined on page 70 and a reconciliation from Adjusted EBITDA* to EBITDA is on page 67, with a reconciliation to TIG Topco on page 69
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1. Introduction
2. Business Segment Highlights
Underwriting
Insurance Broking
Paymentshield
3. Central Segment & Transformation
4. Financial Results
5. Conclusions
6. Appendix
Board and Management Team
Supplemental Financial Data
Agenda
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Management Team Biographies
David Ross Chief Executive Officer
An INSEAD Alumnus, David has spent his entire career on the front line of Broking and Intermediary work in the Insurance industry.
David built his 25 year career at Arthur J Gallagher, having started there as a trainee
He was appointed Managing Director of the North American Division in 1997 then CEO of Global Wholesale & Retail in 2003
In 2005 David was appointed CEO of the International Division where the company underwent a defining period of growth and expansion
Transformation experience: Heath Lambert; Oval; Giles
Mark Mugge Chief Financial Officer
Mark held various senior finance and audit positions at AmerUs Group Co, Grinnell Mutual Reinsurance Company and GuideOne insurance before joining Arthur J Gallagher in 2006 where he was Group Controller until 2010. He then served as the CFO of the international division at Arthur J Gallagher’s from 2011-2015
Mark is a certified internal auditor, earned his CPA at KPMG LLP and served in the United States Marine Corps
As Controller at Arthur J Gallagher, rolled out a global general ledger to over 300 locations, established a financial reporting data warehouse, centralised accounting operations into hubs in India (over 300 FTE)/Chicago (50) and implemented a number of IT and operational initiatives. As CFO , centralised UK finance operations to Scotland, saving millions and establishing a scalable foundation for growth; Oversaw IT who assisted in the consolidation of all offices to a single network, and standardised the broker management systems to core platforms
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Management Team Biographies (Cont’d)
Adrian Brown Chief Operating Officer, Underwriting Chief Executive Officer
Adrian is an industry veteran with extensive expertise having spent 25 years at RSA
He was a main board director and CEO of the UK and Western Europe for 6 years
Previously he was UK COO and established, and led, the successful direct business MORE TH>N
More recently he was executive chairman of underwriting and distribution at Arthur J Gallagher
RSA: £150m cost reduction program with 1,200 FTE reduction and c.£85m IT infrastructure and application outsourcing; New business start up
Janice Deakin Insurance Broking Chief Executive Officer
Janice had a 13 year career at AVIVA, leading the broker business as intermediary and partnerships director from December 2009 until 2013 and prior to that, corporate sales director
Janice then served as the CEO of UK Retail for Arthur J Gallagher, leading a combined business of over 2,000 people, placing in excess of £1billion of gross written premiums on behalf of more than 200,000 commercial insurance customers
Transformation experience: Nearly doubled GWP at Aviva broker’s private clients business and brought it from loss making to profitable by implementing a new trading platform as well as consolidating operations from small teams across 40 locations to 500 people in 2 major sites
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Management Team Biographies (Cont’d)
Steve Wood Paymentshield Chief Executive Officer
Catherine Lynch HR Director
Steve has worked in the insurance industry for over 30 years, including a range of senior executive roles.
Before joining Towergate he spent 8 years as UK Managing Director at Ecclesiastical Insurance Group, strengthening its core market positions and broker relationships
Prior to Ecclesiastical, Steve led the MBO of Royal SunAlliance’s healthcare division, having started his career at Royal Insurance
Transformation experience: Reshaped specialist general insurance business at Ecclesiastical Insurance; separated FirstAssist from parent into own company; grew healthcare book at RSA by 40% in 3 years
Catherine joined Towergate from BGL Group, where she was HR & Communications Director since January 2013
Prior to this she was Head of HR at Barclaycard from June 2011 to December 2012
HR Director at Santander UK for six years from June 2004 Earlier in her career, Catherine held commercial positions at
Sainsbury’s, House of Fraser and Tesco Transformation experience: Integration of Minster Law into
BGL’s general insurance group; large scale centralisation at Barclaycard Europe; integration of Abbey National into Santander
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Management Team Biographies (Cont’d)
Geoff Gouriet General Counsel
Geoff joined Towergate from City law firm Stephenson Harwood LLP where he was Partner in the corporate team
Geoff is the former Head of Corporate at Lawrence Graham LLP, a role he continued to hold in the combined Wragge Lawrence Graham & Co LLP following a merger in May 2014, leading the integration of the two legacy Corporate teams of 60+ lawyers.
Advised on over a hundred corporate transactions including public company takeovers, private company M&A and IPOs. Lead counsel on over 20 M&A transactions in the insurance broking sector including Arthur J Gallagher’s acquisitions of Health Lambert, Giles and Oval
Gordon Walters Chief Information Officer
Gordon Walters was appointed as Chief Information Officer in August 2015
Gordon’s experience spans 25 years leading transformational change across financial services both as a consulting partner in Accenture and Deloitte and as the Chief Operating Officer at Lloyds Corporate Bank where he delivered the Lloyds-HBOS Corporate Integration
Transformation experience: Led the Lloyds-HBOS integration for Lloyds Corporate Bank; led the restructuring of a Retail Bank Lending book to address consumer credit act
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Management Team Biographies (Cont’d)
Sarah Dalgarno Strategic Risk Director
Over 25 years’ industry experience, including six years at the FSA where she was latterly Supervision Manager for Insurance Intermediaries . Prior to joining Towergate, Sarah spent nine years at Arthur J Gallagher International as Chief Risk Officer .
Transformation experience: Legal entity rationalisation, elimination and associated asset transfers – including client assets; books and businesses and associated stakeholder communication. 12 month project at FSA transforming regulatory approach to insurance supervision with specific reference to people and ways of working.
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Board of Directors
* Pending FCA and Shareholder approval
Director Position
Executive Directors
David Ross Chief Executive Officer
Mark Mugge Chief Financial Officer
Investor Directors
Scot French Highbridge, Partner
Oliver Feix Highbridge, Managing Director
Daniel Pietrzac KKR, Managing Director
Independent Non-Executive Directors
John Tiner Chairman of the Board
Christine Dandridge* Director
Patrick Butler Director
Philip Moore Director
Teresa Robson-Capps Director
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1. Introduction
2. Business Segment Highlights
Underwriting
Insurance Broking
Paymentshield
3. Central Segment & Transformation
4. Financial Results
5. Conclusions
6. Appendix
Board and Management Team
Supplemental Financial Data
Agenda
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Segmental Summary by Quarter
(£ in millions)
Q1 Q2 Q3 Q4 FY Q1 Q2 Q3 Q4 FY
Advisory 34.9 37.9 31.1 27.0 130.8 32.6 36.1 32.2 30.6 131.5
Retail 21.9 28.9 26.0 14.0 90.9 19.8 25.0 22.2 17.4 84.3
Insurance Broking 56.8 66.8 57.1 41.0 221.8 52.4 61.0 54.4 48.0 215.8
Underwriting 18.3 23.0 21.7 18.8 81.7 18.9 21.4 17.5 17.0 74.8
Paymentshield 12.9 16.0 15.2 14.9 58.9 11.1 12.3 12.8 12.6 48.9
Broker Network 3.6 3.8 3.1 3.3 13.7 3.1 3.6 2.8 3.5 13.1
Central 1.0 0.9 0.1 (1.4) 0.6 0.0 0.1 0.2 (0.2) 0.1
Total Income £92.5 £110.5 £97.2 £76.5 £376.7 £85.5 £98.4 £87.7 £81.0 £352.7
% Core Commission & Fees Growth (Excl PSL back book) (5.6%) (5.7%) (8.6%) (8.8%)
Advisory 0.4 5.7 (1.6) (7.5) (3.0) 3.0 7.1 2.3 (0.4) 12.0
Retail 6.9 14.3 10.5 (2.6) 29.1 3.7 9.5 4.9 (1.7) 16.5
Insurance Broking 7.3 20.0 8.9 (10.1) 26.1 6.7 16.6 7.2 (2.0) 28.5
Underwriting 4.8 8.2 5.8 2.3 21.1 4.0 6.7 2.8 4.1 17.6
Paymentshield 8.9 12.5 11.5 10.8 43.7 7.3 8.4 8.9 7.8 32.4
Broker Network 1.4 1.7 0.7 0.9 4.7 0.9 1.2 0.5 0.9 3.5
Central 0.3 0.2 (0.7) (2.1) (2.3) (0.8) (0.4) (0.5) (1.5) (3.3)
Adjusted EBITDA* £22.8 £42.6 £26.1 £1.7 £93.2 £18.1 £32.5 £18.9 £9.3 £78.7
Advisory 1.1% 15.1% (5.0%) (27.8%) (2.3%) 9.3% 19.7% 7.0% (1.1%) 9.1%
Retail 31.6% 49.4% 40.2% (18.7%) 31.9% 18.5% 38.2% 22.3% (9.6%) 19.5%
Insurance Broking 12.9% 29.9% 15.6% (24.7%) 11.8% 12.8% 27.2% 13.2% (4.2%) 13.2%
Underwriting 26.5% 35.5% 26.6% 12.1% 25.8% 21.0% 31.3% 15.8% 24.3% 23.5%
Paymentshield 69.4% 77.8% 75.6% 72.8% 74.1% 65.8% 68.4% 69.6% 61.6% 66.4%
Broker Network 39.5% 44.5% 23.2% 26.0% 34.0% 28.9% 33.3% 18.9% 25.4% 27.0%
Adjusted EBITDA Margin* 24.7% 38.5% 26.9% 2.2% 24.7% 21.1% 33.0% 21.5% 11.5% 22.3%
2014 2015
Adjusted EBITDA * is defined on page 70 and a reconciliation from Adjusted EBITDA* to EBITDA is on page 67, with a reconciliation to TIG Topco on page 69
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(£ in millions)
EBITDA Walkthrough
2015 2014
Core Commission & Fees 335.5 371.6
Trade Deal & Other 16.3 4.3
Interest 0.9 0.8
Total Income 352.7 376.7
Staff Related Expenses (197.3) (198.3)
Operating Expenses (76.6) (85.3)
Total Costs (273.9) (283.5)
Adjusted EBITDA* 78.7 93.2
Adjusted EBITDA* Margin 22.3% 24.7%
Annualised Savings* (23.1) -
55.6 93.2
Group Financial Restructuring (41.2) (10.3)
Group Reorganisation (19.7) (42.9)
Regulatory (29.2) (7.1)
Exceptional Costs (90.2) (60.4)
EBITDA (34.6) 32.9
Staff Related Expenses % Income 56.0% 52.6%
Operating Expenses % Income 21.7% 22.6%
Full Year
Adjusted EBITDA * is defined on page 70 and a reconciliation from Adjusted EBITDA* to EBITDA is on page 67, with a reconciliation to TIG Topco on page 69
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Topco Q1 Board Costs
Annualised
Savings*
Excl from EBITDA
In Investor Day
Presentation
Investor Day /
Press Release
Adjusted EBITDA* 56.4 (0.8) 23.1 - 78.7
Annualised Savings* - - (23.1) - (23.1)
Total Exceptionals (99.4) - - 9.3 (90.2)
Loss on disposal of business (0.3) - - 0.3 -
Reduction in value of contingent consideration 1.5 - - (1.5) -
Asset writedowns (0.3) - - 0.3 -
Acquisitions cost (0.0) - - 0.0 -
Other Items 0.8 - - (0.8) -
EBITDA (42.2) (0.8) - 8.4 (34.6)
FY 2015
Topco Reconciliation – 2015
(£ in millions)
1. Pco Board Costs for Q1 2015
2. Includes Gallagher settlement costs £9.3m
1 2
2
1
Adjusted EBITDA * is defined on page 70 and a reconciliation from Adjusted EBITDA* to EBITDA is on page 67, with a reconciliation to TIG Topco on page 69
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Topco Reconciliation – 2015 By Quarter
(£ in millions)
Q1 YTD Q2 YTD Q3 YTD Q4 FY
Topco Adjusted EBITDA as previously published 13.1 39.8 52.9 56.4
Q1 Board costs (Pco) (0.8) (0.8) (0.8) (0.8)
Annualised Savings* 5.8 11.6 17.3 23.1
Adjusted EBITDA* 18.1 50.6 69.4 78.7
2015
Adjusted EBITDA * is defined on page 70 and a reconciliation from Adjusted EBITDA* to EBITDA is on page 67, with a reconciliation to TIG Topco on page 69
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Presentation of Financial and Other Information
These financial results include certain financial measures and ratios, including EBITDA, Adjusted EBITDA*, Adjusted EBITDA* margin and certain other ratios that are not presented in accordance with IFRS. EBITDA In these financial results, references to EBITDA are to profit / (loss) on ordinary activities before interest payable and similar charges, tax, depreciation and amortisation of intangibles. Accordingly, EBITDA can be extracted from the consolidated financial statements of Finco, Topco and TIL by taking profit / (loss) on ordinary activities and adding back interest payable and similar charges, tax, depreciation and amortisation of intangibles. Adjusted EBITDA References to Adjusted EBITDA* represent EBITDA as adjusted for group exceptional costs (financial restructuring costs, group reorganisation costs and regulatory costs) plus annualised savings from cost saving initiatives initiated during the reporting period EBITDA-based measures EBITDA-based measures are not presented as measures of the results of operations. EBITDA-based measures have important limitations as an analytical tool, and should not be considered in isolation or as substitutes for analysis of the Group’s results of operations. Management believes that the presentation of EBITDA-based measures is helpful to investors as a measure of the operating performance and ability to service debt. EBITDA-based measures may not be comparable to similarly titled measures used by other companies. EBITDA, Adjusted ABITDA* and Adjusted EBITDA* margin and certain other ratios are not measurements of financial performance under IFRS and should not be considered as alternatives to other indicators of the Group’s operating performance, cash flows or any other measure of performance derived in accordance with IFRS.
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