Our next guest, Mr. Bobby Le Blanc, Chief Executive Officer of Onex Corporation. Bobby, thank you- How are you? -and welcome. Good to see you. It's great to see you. Thanks for having us again this year. It's always a great conference. Yeah. It's great to have you. Onex has gone through, I think, a meaningful evolution over the past years, with changes in strategy, capital priorities, and corporate governance. I think in a recent earnings call, you highlighted the progress you made on four priorities. Can we start by maybe outlining those priorities, their importance for the next phase of value creation, and also the results you've realized thus far with the Convex transaction? Sure. First and foremost, we're trying to change the mix of our assets on the balance sheet to be less focused on small pieces in our private equity or credit products, and more lean in on businesses that we want to hold for the long run. Think of Convex and our asset management in that context. Just to put it in context, since the beginning of this year, we've lowered our exposure relative to our overall NAV in PE by 19 points. That shrinks the amount of scrutiny being put on that remaining part of the NAV. It also trades at a crazier discount because it's a smaller one, but we can come back to that later. I think that is part of the longer- term goal, and I think we've made very good progress on that front in the first six months of the year. The second thing we want is a much more efficient balance sheet than we've had historically. Because we were always a huge investor in each one of our funds as an LP and as a GP, but as the LP, we always had to hold a bunch of cash on the balance sheet to be able to get the capital calls going. Today, given that we're moving to a capital-lighter model with the asset management business, I'll come back to that in a second. We're now at a position where all of our dollars are invested. After the Convex transaction, we're in a net debt of zero position, but all the dollars are invested, and we don't have billions of dollars of cash sitting around. We like that profile of a balance sheet better than one that we've had historically. Third is the asset manager, which feeds back into the balance sheet. As you make that an asset- lighter business, the focus becomes more on FRE and carry generation than the compounding of Onex's capital. Still very important to the LPs that you compound capital, and we've been working hard these last few years to get that part of our business profitable, and we're projecting a $35 million profit coming out of that business this year. Those are the big goals coming into the year. If you get those big goals right, it allows you to think about future capital allocation differently. Obviously, we're focused on the next big balance sheet deal for Onex Corp, what comes after Convex, what comes after asset management, and also share buybacks. As part of the Convex deal, we took out a NAV loan to help finance that deal. We rapidly paid it down because we had a lot of DPI come back from private equity, which allowed that 19-point drop in exposure to our PE investments. That's allowed us to be back in the market buying back shares again, which we think are unusually compelling. I guess is the nicest way I can say it. We've been active in the share buyback since the end of the quarter. Excellent. As we think about the main drivers of shareholder value creation, including its Convex, its reorientation of investing capital towards the next one or two balance sheet direct investments, and the asset management business, can you talk about how these pieces fit together and what investors should expect Onex to look like in the next three to five years? Yeah. Hopefully the first big move we made with Convex, it is apparent to people the obvious strategic fit or benefits coming out of that transaction. With AIG coming in as a strategic partner both with Convex and with Onex, that came with $2 billion of assets for our team to manage on behalf of AIG across our entire portfolio. Obviously synergistic to the asset manager as well as just great having them as part of the Onex Corporation. Secondly, Convex will also give us some of their money as part of this deal to manage on behalf of them. Again, good synergy with that part of the business. When you look at the next three to five years, Convex in and of itself is going to be a hugely important part of what we do from this point forward, and we feel really good about where we are positioned in Convex and where they are early in their evolution, and being able to grow into their infrastructure and continue to create very solid earnings growth from this point forward. Then obviously, everybody is focused on what is the next deal on the balance sheet that will help finish creating the strategic construct that we are looking to create. That is probably number one on my mind in terms of mind share, to be able to find that transaction. But within three to five years, hopefully much sooner, we will have that done as wel, and it will make sense. Obviously, given where the asset manager is today, run rate 35 at the end of the year, as I said we are projecting, that has room to grow meaningfully and quickly given the small base it is going from, another big strategic priority. Then of course, it comes back to capital allocation and share buybacks, liquidity building, and things that we need to think about. But in three to five years, we will have gotten that next deal done, the asset manager will have scaled, Convex will begin to grow more into their infrastructure, and have really good earnings growth. All those things combined we are hoping will allow people to look at that business from an earnings or enterprise value perspective relative to a NAV perspective. If I could have one wish when I am up here next year, we are no longer talking about NAV. Maybe it is going to take two. But I think the way we get a re-rate in our stock is to have people focus on the earnings power of the businesses that we own. Those big businesses that we own, we are going to give very good transparency into what those businesses are earning and how they are earning them, so you can evaluate the value of Convex or our asset manager or this next deal independently of how we do it. If I think you get all those things right, the shares begin to reflect intrinsic value. Okay. Again, it's a bit of a follow on that question. You've talked before about this migration from a NAV story to an earnings story. Again, you've talked to investors quite a bit today. I think we've kept you busy. What do you think, again, needs to happen for investors to see it that way and really value Onex based on earnings as opposed to NAV? Yeah. I've been accused of not being the most patient person in the world. So we've only had the Convex deal on the balance sheet for six months. But I think what you have to do in the beginning of a big strategic shift like this is prove out data points, prove out KPIs that you're tracking against the goals that you set out for yourself. Be very transparent about what those goals are, be very transparent about whether you're achieving them. If you are, why? If you're not, what you're doing to fix it? I think the more quarters we have showing that we're doing all of those things, growing the value of Convex, reorienting the balance sheet, getting the asset manager more profitable. The more data points and reps that we have quarter-by-quarter, I think the story will begin to resonate. I keep reminding myself it's only been six months even though it feels like it's a lot longer than that. All right. Well, Convex, I think now accounts for almost 45% of the investing capital, and I think it becomes the largest individual value driver. I think it's in line with the size of your entire private equity holdings. It is. Yeah. Let's focus on that a bit. I guess the question here is what's special about Convex and what differentiates it competitively? First of all, just for those who don't know, we owned Convex in one of our private equity funds for almost seven years before we brought it onto the balance sheet. We went and got LP permission, and that part of the process went very well. It's not often that you can deploy the kind of capital we did with a seven-year due diligence period, which is a good thing from a risk-adjusted point of view. Convex, just to take a step back, Convex is a business that is writing $6 billion of gross written premium, earning $700 million of net income, has a 20+ ROE. The company only has 475 employees. Just think about the insurance industry that you know and all the legacy systems and manual processes and all these other things are going down. What Paul and Stephen Catlin, the co-founders of Convex, did was build a technology-enabled platform that's allowing it to grow and scale and become relevant to its clients in a different way than their traditional industry. I just want to start with that. Obviously, even with a good idea like that, you need the best management team, and Stephen and Paul are legends in the insurance industry. If you go and study it, between their original Catlin and all the things they've done, they were able to attract the right people, and people mean everything in business. They were able to attract the right people to execute on the vision that they had. They also timed it unbelievably well in terms of the market. We get a lot of questions about, "Well, wait a second." You owned it for seven years. For seven years, Onex enjoyed a hard market in the P&C industry. That hard market means rates were going up each year for the same unit of risk. Now you've managed to want to buy it when we have a negative rate environment, and we do. For Convex this year, we were running a -5% rate environment. But what people are missing, I think, is how early on Convex is in its evolution. What do I mean by that? Convex can double the size of its gross written premium without adding any expense or incremental labor, so to speak, other than inflation and things like that from this point forward, given how they've built the infrastructure around the company. Very good operating leverage from this point forward that peers that you might compare us to don't have that luxury for the next five years. We also were very conservatively levered. We didn't put a dime of leverage on Convex when we had it in a PE fund, and the asset leverage was actually quite low. We have another point plus of asset leverage that we can gather. That just means we can continue to grow without putting more capital in, manage those assets, and really accelerate the growth of investment income. Again, the firms that people want to compare us to don't have that luxury as well. Finally, when we did the original deal within the fund, we did nothing with the left side of the balance sheet except put everything in a A A-plus fixed income. We hired JP Morgan and another firm for four basis points, and that's all we did. We didn't try to get fancy. We wanted to focus on getting the liability part of the business right. Now that we're there, we can begin, in a small way, 10%, to look at other things like Onex's products and other things that we do to begin to enhance the investment income line beyond the asset leverage that we just talked about. When you think about all of those things, when you think about the market share gains that Convex is getting because of that technology platform and the relevance that I talked about, all those things combined give us a different look at earnings growth and revenue growth than one might think in a negative rate environment. We think that'll bode well. Now, the wind can still blow, the earth can still shake. Things will happen. We will have events that we haven't had for a little while that impact earnings over time. But on a big picture basis, over the next five years, I see leverage to pull for earnings growth that you normally wouldn't see in a company like this. Again, thinking about protecting the downside or coming into an entry level where you're looking at a business, that when you're comparing it to peers, we have a couple of levers to pull that others don't have. I was with the CEO of Convex the last five days in Monte Carlo, which is the big insurance conference. If I sound a little nasally, I think I got a head cold flying back last night. Paul talked about relevance again. Are you relevant to your customers on top of all these other levers that I'm talking about? Can you help them underwrite more quickly? Can you get their claims paid more quickly? That's a big one, getting claims paid more quickly. Convex, clearly, given how they've grown share in their first seven years of existence, are relevant. He thinks resiliency is something that you need to focus on. If you feel like everybody's making a lot of money because events aren't happening, don't chase that. That's the time to use more reinsurance and to protect the downside and make sure that when something bad happens, you have the balance sheet to pounce and take advantage of the dislocation. So resiliency after relevance. Then efficiency. Can you do those two things and be more efficient and have those efficiency benefit both your shareholders and your clients? Clearly the way Convex is being run today with 475 employees and the kind of ROEs they're generating is quite impressive. The other little hidden positive is if you can double the size of your business without adding more capital to it, that probably means you have excess capital. So that also means that we're more than likely, subject to catastrophes, be a pretty consistent dividend payer out of Convex, back to Onex, AIG, and the management owners. Those are the only owners, by the way, are Convex, AIG, and the management owners. So all those things together, we're really pleased with the first six months of Convex under our ownership. But more importantly, we're really pleased with the first seven years of what Convex has done with Onex. Yeah. Just going to circle back a little bit on some of the comments you made in the introductory remarks on that. Again, just maybe to highlight again, beyond simply participating in the earnings and book value growth, just a bit more discussion on what the transactions delivered strategically. Again, including that synergies of the asset management business and the AIG partnership. Yeah. So obviously the synergies we talked about. The first one is something that I didn't really think enough about when we did the deal. We've always had a really good reputation as investors in financial services, and insurance specifically. But the AIG and Convex partnership has kind of brought that up to a new level in terms of relevance, right? The fact that AIG is a 9.9% shareholder of Onex, and Convex obviously want us to succeed, we're in an ecosystem of idea flow that's even better than it was before we did the deal. I probably didn't give that enough thought or emphasis in my mind when we did the deal, but it's a really neat benefit of the deal that I hadn't really thought about. Obviously, getting the assets in, is always a good thing. Having AIG represented in our boardroom and in Convex's boardroom, I think adds a lot of value. Given how big a part of Onex, Convex is, having an insurance expert in the boardroom, I think is a very good thing for the rest of our directors. So a lot of good has come out of it so far. Okay. So Convex really is the first step in reorienting the balance sheet, and you have around US$5 billion of invested capital to reorient. You've said a few times, you ultimately see one or two additional direct investments alongside Onex and likely in the financial services space. Yeah. What have you learned from Convex that kind of informs what you want the next investment to look like? Yeah, so we certainly don't want it to be a leveraged buyout on the balance sheet. It will be with a partner who thinks about investing over the long term and compounding net worth, not trying to optimize returns through leverage. There are a lot more large opportunities out there that think like that than people realize. They are usually family- owned or in kind of generational shifts. But we have been around and seen those types of deals for years. It obviously should be in an area of financial services where we have a demonstrated track record and a demonstrated network. So it might not be insurance, but clearly insurance would be one of the areas that we are looking into. It will not be something that competes head on with Convex. I don't think that would make sense, but it could be something that would be synergistic to the ecosystem with a Convex if we did. These kind of deals don't happen overnight. You don't deploy $5 billion, and certainly not in something that you have owned for seven years, every day. But we have ideas. Again, that ecosystem that I talked about and the relevance of who we are within the insurance sector has more ideas coming in sooner than I would have guessed. In some cases, with the phone ringing, asking, "How did that work?" and "How were the employees treated?" and things along those lines. But you shouldn't expect it to be next quarter, we are announcing another $5 billion deal. These types of deals, where it is more trust and relationship driven, they take longer to put together because the people on both sides want to make sure the marriage is a good one. Okay. Maybe for point of a clarification, when you think about just infrastructure on the insurance side, we are thinking things like third-party claims management- Could be. -broker distribution. Brokering. Yep. And some technology, which would probably be less so, just given our DNA internally, but there's been a lot of that floating around, like insurance tech, but that'd probably be lower on the list. But yeah, things like that. Excellent. Yep. Could also be other aspects of underwriting that Convex doesn't do. Right? Yep. We will shift a little bit to capital allocation, more in the context of, so monetization proceeds clearly had an obvious destination, right? When you were paying down the NAV loan. Now that balance is relatively small. You have announced buybacks are set to resume. Does every incremental dollar of realized proceeds and dividends that you will eventually receive from Convex, does that face kind of a three-way choice between buybacks, new investments, and retaining liquidity? How do you rank those today? As we sit today, those are probably the three competing priorities. The good news is I think we have plenty of capacity to do all three. Right? Obviously, in the near term, more of the dollars will be earmarked toward the next sizable deal on the balance sheet. In the meantime, just given where we are, there is no reason in the world we cannot meaningfully buy back shares if they become available. We are doing it through the NCIB, but if a big block came around, we would act on it anywhere near the prices we are sitting at today. I think that question gets tougher once the next big deal gets done on the balance sheet. But right now, as we wait for the next deal to happen, putting liquidity aside for a second, because I think we are good at liquidity, I cannot think of a better thing to do with a dollar sitting around than buying back our own shares. Okay. How do you think about the sizing over time of those competing capital? It's really hard to know whether the next deal we find will be $3 billion or $6 billion, whether there will be a partner like AIG that comes into it, and how that will work. But again, we will let the facts dictate that. But if the path we are on does not result in the re-rate we are looking for, share buybacks should obviously quickly become a bigger part of that narrative. Okay. Let's shift gears a little bit and talk about asset management. I think you being clear, Onex is not abandoning private equity. But the role within the company overall is changing as capital is recycled into Convex and potentially other direct investments. So how do you see the platform, say, three to five years from now, and what do you want Onex Partners and ONCAP to contribute to Onex as a whole? Yeah. So in three to five years, I hope we have a business that's meaningfully grown, a PE business that's meaningfully grown their fee-generating Assets Under Management, that has positive FRE with a good growth trajectory behind it, and that continues to generate very good carried interest opportunity. Nobody talks about it, but I will continue to bring it on as a shareholder and continue to generate huge carried interest on behalf of the shareholders. If they get their performance right, all those things should be able to happen, but that's what I would see out of the PE business over the next three to five years. Again, we will be supportive, just up to 10%, but I think the way to drive that FRE is to have more third-party capital that's willing to pay you fees and carry to manage that capital. Okay. Onex Credit, I think, has undergone strong growth, and it's particularly along the structured credit, right? I think now you are almost a top 10 global CLO manager by AUM. First, what do you attribute that success to, and how sustainable is the growth? Also, how has the Onex Credit team been able to avoid some of the challenges that we've seen from other alternative asset managers over the past year? Yeah. I think a little bit of history. We've been in CLOs for two decades, right? But we got into CLOs as the equity provider and a way to put our cash into a higher-yielding position while we were waiting to deploy it into one of our funds. What this senior team has done, Ronnie and the team, has taken that mindset of we're CLO equity providers and looked at that as a business, right, and has created a very profitable business around structured credit. They've done a fabulous job. They've grown that business 2.5 x, and on a dollar basis, Onex has less capital in it than it did before they started that journey. It's just been wonderful. I think people are just kind of not connecting the dots. Structured credit, which includes CLOs and a few other products, did $19 million in FRE in Q2. Right? In Q2. If you just annualize that number and think about the growth rate that they've had in that business, that business is worth a lot of money, and I'm not sure it's getting reflected anywhere in our intrinsic value. We have other businesses that are subscale that we're trying to get to scale. Things like AIG and Convex will help that. But overall, what that management team has done for us is really put a lens on scale, profitability, and having every incremental dollar come in, come in at a higher margin. They've done it relentlessly and religiously, and they've just done a great job doing it. The other thing that they don't get enough credit for is we almost totally avoided direct lending. It's less than 1% of our credit NAV is in direct lending. There is one aspect that you have to understand. You can't put a direct lending loan into a CLO. In a CLO, you have to have an S&P or Moody's rated piece of paper. Whether or not we would've tried to put that stuff into CLOs, we'll never know because it was a rule. But Ronnie and the team were very outspoken about the risks around direct lending well before it became an issue. I give them a lot of credit, and that should give you an idea how that team thinks about investing, not only Onex's capital, but our LP capital. They've done a great job. Let's focus a little bit on the PE business. You do expect, I think, a first close of Onex Partners VI, hopefully later this year. Can you talk a bit about the fundraising environment? Then maybe kind of a follow-up in regards to Onex Partners VI, what are LPs telling you today, and what will determine whether Onex Partners VI is ultimately a successful fundraise? PE fundraising is still difficult relative to what people are used to. There's just no doubt about it. The stat that seems to be most important in this market is return of capital, they call it DPI. For Onex Partners V, we're over a 1.0 DPI. For that vintage, that's well into the first quartile. Right? That stat, along with the good performance that we've had in the opportunities fund in Onex Partners V, puts us in a pretty good position to have a successful Onex Partners VI fundraise. We believe we will. The market is tough, but Tawfiq and the team have really delivered on what the LPs have asked us for before we came back to market. We're hopeful and confident that'll show up in the results of the fundraise. All right. Last question, too, in terms of kind of a wrap-up here. When you look at this, Onex has delivered, I think, on many of the things investors would be looking for, right? You've got a more durable and visible earning stream with Convex, utilizing the balance sheet more efficiently, and substantial realizations along with now, I guess, the resumption of buybacks. Yet shares still trade at this meaningful discount, right? To your view, intrinsic value. What do you think the market still needs to see here, and where's the biggest misconception in your view? I'll give you two answers to that question. The first is if as an investor, you're looking for an asymmetric upside/downside protection, if you believe today that we value Convex properly, and again, remember AIG and senior management invested at the same valuation we did, and you believe a $35 million FRE business growing very quickly from this point forward deserves value at a normal market multiple, the price of the remaining $ 5 billion of assets on a balance sheet is $0.20 on the dollar. Okay? So $1 billion for $5 billion. From a mathematical point of view, a pretty good entry point. But I think the piece that people are missing, and maybe we're not explaining well enough, is we're trying to create optionality for the shareholder. Right? What do I mean by that? As a shareholder today, relative to where we were a year ago, you now own Convex. Right? Or control it. You own 65% of it, but we control it. You obviously control the asset manager, and whatever we do to reorient the last $5 billion of capital will also be separate and in and of itself. So within a reasonable period of time, if the re-rate doesn't occur, there's a sum of the parts analysis that you begin to do, right? And you say, "Do I sell one piece? Do I sell two piece? Do I spin something off? Do I go private?" There are things that you can do, levers that you can pull that weren't there for us a year ago. I think people are missing the fact that these things will be separatable. It's not what we want. It'll be the last thing that we'll want to do, but we'll do it if it's a way to unlock the value over time. I think that's something where, and by the way, we also have an LLC, so if you actually do have to break it up, you can do it very tax- efficiently. Right? I think that is probably something where people are looking at where we are now, they're thinking about NAV, and they're not taking a step back and saying, "If they get this right, what does it actually mean for a re-rate, and what kind of optionality are they creating for our shareholders?" Okay. In terms of just final thoughts, how should the market really be thinking about maybe timing a potential catalyst, and again, levers you can pull that enable that shift towards, again, trading more as an earnings growth story rather than an NAV origin one? I think we're going to just have to perform, again, quarter by quarter every quarter. Be disciplined, not move into a $3 billion - $4 billion or $5 billion balance sheet deal that doesn't make sense. You got to wait for the right pitch to come in. But if I'm still up here two years from now trying to explain to people why there should have been a re-rate, something probably hasn't gone particularly well. I think that the mathematics of getting this right, if we get it right, should take care of itself and should get reflected in the share price. Excellent. Well, listen, it is a great conversation. Thank you. Again, Bobby Le Blanc, we would like to thank you personally for taking the time with us today. Oh, thank you for doing it every year. Appreciate it. And keeping you busy, and continued support. Thank you. Thanks. Appreciate it, Phil. That is good. We are going to take a short break. We will reconvene probably 5-10 minutes, where we will hear from Fiera Capital, Definity Financial Corporation, Trisura Group Ltd, and AGF Management Limited. Thank you.