Hi Everyone Currently sunning it up in Bonbeach and was pleased to get the announcement this morning. Following are notes from Investor Call which covered IFP and Carlisle investments and the FUM announcement today:
Elaborated on IFP investment reasoning
proven business model
PAC investment will be used to improve technology platform - creating a leading broker platform for Investment Advisers
Real growth occurs once IFP moves to new tech platform - first quarter (some news articles have reported April 1)
Diversifies investments into Retail FUM/AUM market
Investment can grow from 10% to 25%
Long term contributor to bottom line
Carlisle investment reasoning:
Carlisle FUM returns have been on average of 20% over the last ten years (publicly available)
Fund economics, base fees on average are 1.75% and performance fees are charged at 20% for greater than an 8% return
Back of envelope calculations discussed in call are:
$US24 Million in management fees, roughly $US4 Million per annum to PAC from today
Performance share is forecast to be $US2 Million, however if fund performs the same as this year then we are looking at up to $US7 Million
What is Carlisle's competitive advantage?
Excel at finding good deals
Above average returns
Efficient process of assessment (high complex rules associated with purchasing Life Policies). Carlisle know these very well.
Carlisle outsource policy risk analysis (assume this is health assessment)
Why is Carlisle partnering with PAC?
Note, PAC weren't the highest bidder
PAC investment aligned philosophically with Carlisle management team
Enables distribution expansion into the Australian Market
Who are Carlisle's investors? Currently majority high net worth investors, increasingly Institutional investors (some made up of Sovereign Wealth funds)
Carlisle's average policy purchased is from an 80 to 82 year old with a life expectancy of approximately 7 years in the US. They are purchased through a network of brokers that is critical to Carlisle's success. Life Insurance policies are used to avoid death taxes in the US (I have summarised) and recent Trump tax changes encourage elderly holders of policies to cash in prior to death, tax thresholds have been increased. Cash from policy sale will not be impacted by death tax.
Carlisle market share is high, they are number two in the market. Policies for sale are likely to increase over the next few years due to tax changes.
New growth in FUM for Carlisle is estimated to be north of $US1 Billion in two years (likely to double contribution from $US6-$US7 Million to $US12 - $US14 Million - but be careful of extrapolation and future fund performance)
Carlisle regulation is low as the Life Insurance Admin/Brokers are regulated to ensure they sell policies aligned with client requirements.
There was a question around Revenue Management approach versus earnings approach. Didn't quite get the answer, if someone wants to fill in the blank here please do so. The valuation approach was driven by Carlisle Management.
Further IFP information:
Currently has $US40 Billion in AUM (not FUM) where IFP will have a competitive advantage due to improved technology platform
PAC is looking for synergies with current boutiques owned and to utilise the new platform
Comments on FUM:
PAC board very pleased to see an increase of 4.1% in the last quarter where the overall market was sharply down
Reinforces stability of investment strategy, proving good mix of boutiques in Closed and Open end funds
Good FUM growth from ROC, GQG and Victory Park offsetting smaller boutique FUM decreases
Last but the greatest point, $A35-$A40 Million resides in cash and the board is yet to make a decision on whether an interim dividend will be paid
In summary, this with Victory Park Capital will more than cover loss in earnings from Investors Mutual, RARE, Aperio and PAC board has a lot of spare capital to make further acquisitions increasing revenue and earnings in the future. Possible interim dividend is a high probability given the continuing uplift in income generated.
Anyone else who attended, feel free to correct any of the above.
Best of Luck Lost
PAC Price at posting:
$5.53 Sentiment: Buy Disclosure: Held
(20min delay)