Onex (OTC:ONEXF) reported first-quarter financial results on Friday. The transcript from the company’s first-quarter earnings call has been provided below.
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Access the full call at https://edge.media-server.com/mmc/p/shmxkehr/
Summary
Onex reported a solid first quarter performance despite challenging market conditions, with Convex being the largest contributor to shareholder value.
The strategic partnership with AIG was highlighted, with a $2 billion capital commitment expected to enhance shareholder value and fee-related earnings.
Convex showed strong performance with an 8% adjusted growth in gross premiums and a 24% return on equity over the last 12 months.
Asset management within private equity returned significant capital to limited partners, with expectations for continued realizations and increased DPI.
Convex’s valuation increased to $4 billion, driven by high return on equity and market share gains, with a plan to transition its fixed income portfolio classification to reduce income statement volatility.
Onex’s credit platform continues to expand, with notable CLO issuances and minimal exposure to direct lending, positioning it as a market leader.
The company aims to reorient its balance sheet investments to align with Convex’s strategic goals and asset management growth, with potential for future share buybacks.
Full Transcript
OPERATOR
Welcome to Onyx first quarter 2026 conference call and webcast. During the presentation, all participants will be in a listen only mode. Afterwards, we will conduct a question and answer session with pre qualified analysts at that time. If you have a question, please press star 11 on your telephone keypad. As a reminder, this conference is being recorded. I will now turn the conference over to Jill Humenick, Managing Director, Shareholder Relations and Communications at Onyx. Please go ahead.
Jill Humenick (Managing Director, Shareholder Relations and Communications)
Thank you. Good morning everyone and thanks for joining us. We’re broadcasting this call on our website. Hosting the call today are Bobbi LeBlanc, Onyx’s chief executive officer, and Meg McClellan, our chief financial Officer. Also joining us today for our Q and A session is Paul Brand, Chief Executive Officer of Conduct. Earlier this morning we issued our first quarter 2026 press release, MD&A and Consolidated Financial Statements which are available on the Shareholder section of our website and have also been filed on SEDAR. Our supplemental information package is also available on our website. As a reminder, all references to dollar amounts on this call are in US unless otherwise stated. I must also point everyone to our webcast presentation for our usual disclaimer and cautionary factors relating to any forward looking statements contained in today’s presentation and remarks. With that, I’ll now turn the call over to Bobbi.
Bobbi LeBlanc (Chief Executive Officer)
Happy Friday everyone. First, I’d like to welcome Meg, Onyx’s new CFO and Paul Brand, the CEO of Conduct, to their first Onyx earnings call. Thank you both for being here today. Onyx delivered a solid first quarter despite a challenging market backdrop. We remain focused on executing our strategy to drive long term value creation and earnings growth. Our Conduct private equity and credit platforms are performing well and we are experiencing positive momentum across our investing and asset management activities. As I’ve indicated before, Conduct will be the largest contributor to increasing shareholder value in the near term. In addition, the value of our strategic partnership with AIG should not be overlooked. As a reminder, AIG purchased 7.5 million shares of Onyx for a 9.9% ownership stake and has committed to invest $2 billion in our asset management strategies. We expect AIG’s capital commitment to be accretive to FRE and to shareholder value. We are actively working with AIG to determine how capital will be allocated across Onyx’s private equity and credit products, including Onyx, Partner 6 and ASCO 2. We also believe there could be additional opportunities that arise to collaborate with AIG as we continue to build our relationship. At yesterday’s annual general meeting, we were pleased to welcome AIG’s representative Jay Cohen to our Board of Directors. Jay has more than 30 years of experience across the insurance industry ecosystem, most recently leading the insurance equity research team as Managing Director at Bank of America. We look forward to working with Jay into the expertise and contributions he will bring to our Board discussions. Now let’s turn to Conduct’s performance. Conduct delivered a strong quarter with underwriting performance, profitability and return on equity all improving versus the prior year period. Gross premiums written increased 5% year over year. However, this headline growth rate understates the underlying performance because Q1 of 2025 was an elevated comparison period which included unusually high reinstatement premiums that Conduct received following the California wildfires. Excluding these one times premiums which are paid by clients to restore coverage for a subsequent event following a major loss, GROSS Premiums written grew 8% as we forecasted prior to our acquisition, insurance pricing has softened with year to date rates down 4%. The softest is concentrated in short tail classes of risk such as property. In contrast, there has been rate increases in areas affected by the Middle east conflict and in casualty classes. Conduct generated adjusted net income of $106 million in the quarter which included a $50 million unrealized mark to market loss on Convex’s fixed income portfolio amid rising interest rates due to broader macroeconomic volatility. Excluding this non operational accounting loss, Conduct generated adjusted net income of 156 million. First quarter earnings should also not be viewed as representative of a full year run rate as historically net income in the first quarter of the year is less than we see in other quarters. Convex currently recognizes unrealized changes in the value of its fixed income portfolio through earnings, but plans to transition to an available for sale classification during the second quarter. This revised treatment is in line with peers and will reduce income statement volatility in subsequent periods. Convex delivered a combined ratio of 87% in the quarter and underwriting earnings growth was largely driven by a significant reduction in the loss ratio as first quarter earnings last year were negatively impacted by incurred losses due to the California wildfires. The Middle east conflict has resulted in estimated net losses of 23 million in Q1, which is relatively small compared to our overall earnings. Convex Management is actively monitoring the evolving situation and expects rate increases on new policies written in the region to provide some offset against incurred losses. On a last 12 month basis, adjusted net income was 827 million, an increase from 401 million in the comparable prior year period and from 711 for the full year 2025. The last 12 month combined ratio improved to 83% and ROE increased to 24%. Convex ROE has steadily increased since Onyx’s acquisition, reflecting both stronger earnings and and a lower tangible book value denominator following the repurchase of shares completed as part of the Convex transactions. It should be noted that Convex recorded modest major event losses over the last 12 month period, which has also helped improve Convex’s overall loss ratio. The value of Onix’s investment in Convex increased to 4 billion at the end of the quarter, representing an increase of 4% since the acquisition was closed earlier this year. This valuation is based upon a 2.0 times price to tangible book value supported by Convex’s high return on equity earnings growth and continued market share gains. At this valuation, the implied price to earning multiples are 8.1 times on a last 12 months adjusted net income basis and 10 times on a full year 2025 actual net income basis. Looking ahead, we expect Convex’s earnings to benefit from several structural levers including continued market share gains, prudent growth in asset leverage, improvement in investment portfolio yields and operating leverage as the business continues to scale. We are pleased with Convex’s early results and continue to value our strong working partnership with Paul Brand and the entire Convex team. Now turning to asset management within private equity, our teams made significant progress returning capital to our limited partners. Last year we returned more than 8 billion and this momentum has continued into 2026. ON X Partners recently closed its 1.6 billion multi asset continuation fund, raising capital from some of the world’s leading institutional and sovereign investors, including several that are new to Onyx. And just this past Monday, OP announced a full realization of Emerald with expecting net proceeds to Onyx of $230 million. Importantly, these efforts will bring DPI for Onyx partners 5 to 1.0, making it a positive outlier on this metric relative to other funds of this vintage. Moreover, OP has good visibility into additional realizations and expects DPI to increase by the time Onex Partner 6 has its first close, which is expected later this year. The OP Opportunities Fund has now invested about 70% of its billion dollars in commitments with one investment in each of the four verticals, and has attracted an additional $1 billion in co investment. The fund has performed very well to date, particularly on the strength of his first two investments that we’ve held for over 12 months. Fishbok and Far Sound our credit platform continues to distinguish itself as a market leader and a relative safe haven amidst considerable industry noise. Across the platform. We have been underweight software and AI exposed credits avoided exposure to aggressive PIC loans that have come to market in the past two years and importantly have almost no direct lending retail exposure, which has gotten a lot of attention of late. While the market for new clo issuances in Q1 was more subdued given recent market volatility, the credit team has been actively resetting existing CLOs and opportunistically placing new offerings. Over the first four months of the year, the team raised or extended eight CLOs including three new issuances. Notably, the team recently priced their 50th USCLO. It was just a little bit over three years ago that they issued their 25th USCLO, proof of the team’s ability to steadily scale the platform while maintaining their commitment to investment discipline and performance. And they’ve done so with far greater balance sheet efficiency, with 1x’s 35% share of CLO equity today being half of what it was three years ago. Structured credit, which includes CLOS, OSCO and ONTAP, delivered 15 million in fee related earnings in Q1 and remains positively positioned to grow earnings for the remainder of the year. As I mentioned, with direct lending being a source of concern in the market, it is worth noting that direct lending represents only 1% of Onyx’s credit AUM. …
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