Onex Corp. is accelerating a strategic pivot away from its net asset value narrative toward an earnings-focused valuation framework, reducing its private equity exposure by 19 percentage points since January 2024 to reshape how investors price the diversified financier.
Bobby Le Blanc, chief executive officer, told attendees of Scotiabank's 27th Annual Financials Summit on Thursday that the company aims to complete the transition within roughly two years.
"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," Le Blanc said. "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."
Central to the shift is Convex Holdings, which represents approximately 45% of Onex's investing capital and now stands as the largest single contributor to enterprise value. The insurance venture, co-founded by Paul and Stephen Catlin, generates $6 billion in annual gross written premiums, $700 million in net income and more than 20% return on equity from a workforce of 475 employees. After starting the 2024 rate cycle in a negative 5% environment with an AA-plus fixed-income portfolio managed by JPMorgan and another firm for 4 basis points, Convex has grown into a self-sustaining platform.
Le Blanc said Convex could double its gross written premium without adding meaningful expense or headcount beyond inflation, a capacity he attributed to infrastructure already in place.
The transaction also delivered a clean balance sheet. Onex exited with zero net debt following the Convex restructuring, while AIG took a 9.9% strategic stake in Onex with board representation at both the parent and Convex levels. AIG contributed CAD 2 billion of assets under management to the relationship.
Elsewhere in the portfolio, Onex Credit generated CAD 19 million in fee-related earnings in the second quarter of 2024 and has grown 2.5 times while reducing direct capital commitments. The unit maintains direct lending exposure below 1% of credit NAV and ranks among the top 10 global collateralized loan obligation managers by assets under management, with two decades of CLO experience. Onex Partners V posted a distributions-to-paid-in-capital ratio above 1.0 and sits in the first quartile for its vintage.
Looking ahead, Le Blanc said Onex plans to execute one or two additional balance-sheet direct investments over the next three to five years, targeting financial services segments including third-party claims management, broker distribution, alternative underwriting and insurance technology. Roughly $5 billion remains available for deployment. Onex Partners VI is expected to reach its first close later in 2024.
Asset management is projected to contribute CAD 35 million in fee-related earnings for the full year. Non-Convex, non-asset-management holdings are valued by the market at approximately $1 billion, or $0.20 on the dollar, against roughly $5 billion of available capital.
"From a mathematical point of view, a pretty good entry point," Le Blanc said of the residual asset base.
Onex shares closed at $77.66 on Thursday, down from $79.53 the prior session, leaving the stock below its 52-week high of $95.15. The company trades at a price-to-book ratio of 0.62 and an earnings multiple of 11.55, with return on equity over the past twelve months at 5%.
A broad range of firms participated in the summit discussion, including ONCAP, Fiera Capital, Definity, Trisura Group Ltd. and AGF Management Limited.
