elementcorp.com

INVESTOR  PRESENTAT IONJ U LY   2 0 1 4

elementcorp.com

North American  equipment finance experts

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VENDOR FINANCEAVIATION FINANCERAILCAR FINANCE

FLEET MANAGEMENT

elementcorp.com

North American Equipment Finance Experts

Element Financial – Post PHH Arval

● $10.0 billion total assets ● $3.5 billion market capitalization● TSX composite index member● FTSE Global Equity index member● 1,400 employees● 86,000+ customers● Head Office – Toronto, ON

● US – Philadelphia, PA and Sparks, MD

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elementcorp.com

Growth Drivers

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elementcorp.com

Element’s Growth

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PHH Pro Forma$10 Billion

2013$1.8 Billion

– Nexcap Finance

– EFN added to the TSX Composite Index

– GE Capital Canadian Fleet Services

– Bush Truck Leasing

– GE Capital Helicopter Portfolio

– Trinity Industries Alliance

2012$428 Million

– GE Capital Aerospace Team

– TLS Fleet

– Co‐Active Capital Partners

2011$47 Million

– Toronto Stock Exchange listing under EFN

– Alter Moneta

2014$4.2 Billion

– EFN added to the FTSE Global Equity Index

– Trinity Industries Alliance expansion

– Celadon Group

– Bridger

– CargoJet

– PHH Arval

Total Assets

elementcorp.com

2014 YTD Milestones

2014January

February

March

April

May

June

Significant achievements● Targets $3.8 billion in originations for 2014

● Completed purchase of  US$400 million of leased railcars from Trinity

● Announced $997 million of originations for Q4‐2013

● Issued $125 million of cumulative 5‐year rate rest preferred shares 

● EFN added to the FTSE Global Equity Index

● Completed purchase of US$118 million of leased railcars from Trinity

● Entered multi‐year equipment financing agreement with US‐based Celadon

● Accessed rated ABS market for US$340 million to fund rail assets

● Signed US$220 million transportation equipment financing facility with Dallas‐based Bridger

● Signed US$ 1.4 billion agreement to acquire PHH Arval at 1.56 X adjusted book value

● 10+ percent accretive in 2015 and 2016 with leverage at 4:1 on closing

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elementcorp.com

Growth Drivers

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2012 Results 2013A 2014E

2.8% (Real)

2015E 2016E 20127E

US GDP

US Equipment Investment

Equipment Finance Volume

8.0% Growth

16.4% Growth

1.9% 2.8% 3.1% 3.1% 2.4%

• Average equipment replacement cycle of 8 years• Growth led by various transportation segments 

including Air, Rail & Autos• Propensity to finance increasing with competing 

calls on capital US Commercial Finance is one of the fastest 

growing financial services sectors

Source: US Federal Reserve Bank of Philadelphia

elementcorp.com

2014 Growth Drivers

• Continued US commercial and industrial recovery

• Demand for energy to fuel US economic growth

• Deep relationships with Trinity Industries, leading NA railcar manufacturer

• Opportunities to acquire third party portfolios

• Continued US commercial and industrial recovery

• Demand for energy to fuel US economic growth

• Retrenchment of key competitors

• Engagement of US‐based helicopter team

• Deep relationships with key manufacturers

• Continued US commercial and industrial recovery

• Deferred equipment replacement cycle

• Favourable C$/US$ exchange for Canadian equipment manufacturers

• Deferred vehicle replacement cycle

• Strong growth in 2009/2010 fleet registrations drive 2014 replacements

• Expansion of fleet management services offering

• Continued commercial and industrial recovery in Canada

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COMMERCIAL & VENDOR FINANCE AVIATION FINANCE RAILCAR FINANCE FLEET MANAGEMENT

elementcorp.com

2014 Growth Drivers

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COMMERCIAL & VENDOR FINANCE AVIATION FINANCE RAILCAR FINANCE FLEET MANAGEMENT

* Prior to PHH Arval Acquisition

elementcorp.com

US Commercial & Vendor Originations

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35 

64 

94 

113 

160 

Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014$ millions

elementcorp.com

Portfolio Quality

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99.6%

0.4%

Current Past Due

Contractual DelinquenciesAs a % of Finance Receivables March 31, 2014

Allowance for Credit LossesAs a % of Finance Receivables

0.71%

0.37%

2012 2013

elementcorp.com

Balance Sheet Capacity

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elementcorp.com

PHH Arval Acquisition

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F L E E T  MANAG EM EN T

elementcorp.com

PHH Arval Transaction

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A North American Fleet Management Leader

● Founded in 1946 

● US$4.6 billion in total assets as at March 31, 2014

● US$4 billion net investment in fleet leases

● Annual originations of US$1.7 billion in 2013

● 12% CAGR pre‐tax income growth from 2009 to 2013

● Strong management team

● Exceptional customer service culture

● Pristine credit quality

● Efficient established funding sources

elementcorp.com

Transaction Highlights

● Increased scale— Establishes Element as a North American 

$10 billion asset company on closing— Balance sheet scale allows Element to 

source/keep larger deals across all verticals● Adds stability

— North American fleet business delivers long‐term stable cash flows

— Visibility on cash flow increases from 3 years to +10 years

● Reduces risk— North American fleet customers are Fortune 

500 credits— < 3 bps of credit losses over last 10 years

● Accelerates growth— Delivers minimum 10% accretion on 2015 

Operating EPS of $0.88— No taxes payable until 2030 +

● Improves profitability— Transaction immediately increases leverage— Provides documented pathway to investment 

grade ratings and lower cost of capital (debt and equity

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Transformative benefits…Transformational Benefits

elementcorp.com16

…with some acceptable costs

● Defers achievement of target ROE by 12 months but improves economics on arrival

● Brings convertible debt into the capital structure but minimizes common issuance

● Leverage not immediately optimized but delivers 200% increase on closing and optimizes in 2015

Transaction Highlights

elementcorp.com

Three Accretion Drivers

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1.PHH ArvalAcquisition

3.Investment 

Grade Ratings

2.Increased 

Balance Sheet Scale

= LeverageROA ROE

elementcorp.com

1. PHH Arval Acquisition

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Identified accretion drivers

● $20 million annualized synergies by end of 2014

— Public company costs, corporate allocations and Canadian duplication

● 10% increase in finance assets

● Growth of portfolios and increased penetration of card programs

● Significant opportunity to add other assets (material handling equipment/trucks) to PHH client customer base

elementcorp.com19

Added and potential accretion drivers not factored into our model

● Additional cost savings beyond $20 million

● Additional portfolio growth beyond forecast 10% increase

● Expand Chesapeake and FLRT funding

1. PHH Arval Acquisition

elementcorp.com

2. Increased Balance Sheet Scale

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Larger scale drives growth across all verticals

● Railcar Finance, Aviation Finance, Vendor Finance to benefit from balance sheet scale

● Raises overall transaction size limits and single obligor limits

● Higher commitment capacity to take deals “off the street” and deliver commitments and advisory services

● More on balance sheet financing with annuity income versus lower up front returns from syndication

* Excludes overallotment option 

Before After

Equity $1.6 billion $2.8 billion *

Single Obligor Limit $99mln/name $168mln/name

elementcorp.com

2. Increased Balance Sheet Scale

● Bridger – $220 million driven by railcar expertise

● Celadon – $100 million driven by size, scope and products

● CargoJet – $100 million driven by aviation expertise

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Transaction examples

RAILCAR FINANCE

VENDOR FINANCE

AVIATION FINANCE

elementcorp.com

3. Investment Grade Ratings

Debt Cost of Funds(Spreads)

Before IG After IG Comparables

Bank Lines Fully secured – Borrowing Base+200bps

Unsecured+150bps

AirLeaseT+100bps

Fleet Securitization 150bps  70 – 80bps PHH Fleet

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Equity(Coupon)

Before IG After IG Comparables

Preferred Shares 6.40% ‐ 6.50% 4.25% ‐ 5.0% (P‐3,pfd‐3)3.80% ‐ 4.20% (P‐2,pfd‐2)

P‐3, pfd3P‐2, pfd2

Update unpublished Kroll rating review post Trinity 

and PHH 

Issue $400 million private placement with at least NAIC 2 rating 

Security release occurs automatically 

elementcorp.com

3. Investment Grade Ratings

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Common 825,000

Convertible 300,000

Preferred 125,000

Tangible Leverage

Bank Covenant Rating Agencies

Pro Forma March 31, 2014

2.9 3.7

Pro Forma June 30, 2014

3.2 3.9

Pro Forma December 31, 2014

3.4 4.3

Pro Forma December 31, 2015

4.1 5.1

Pro Forma December 31, 2016

4.3 5.5

elementcorp.com

ROE & EPS Impact

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Timing of achieving target ROE deferred 12 months

2015 2016 2017Before 11.0% 13.1% 14.5%After 10.0% 12.6% 14.5%

2015 2016Pre Tax EPS $1.33 $1.87Post Tax EPS $0.95 $1.35

However, tax deferral increased to 20+ years

elementcorp.com

Leverage & ROA Drives ROE

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Annual Return on Average Assets

Leverage

9.2% 10.0% 11.0%

11.5% 12.5% 13.8%

13.8% 15.0% 16.5%

16.1% 17.5% 19.3%

3:1

4:1

5:1

6:1

2.3% 2.5% 2.75%

elementcorp.com

2014 Outlook

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elementcorp.com

2014 Originations

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 ‐

 500

 1,000

 1,500

 2,000

 2,500

 3,000

 3,500

 4,000

 4,500

Fleet Management Aviation Commercial &Vendor

Railcar TOTAL

2013

2014 Outlook* Prior to PHH ArvalAcquisition

$ millions

elementcorp.com

North American Portfolio Distribution

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Canada USA

Portfolio Mix

2012 Actual 81% 19%

2013 Actual 74% 26%

2014 Outlook* 58% 42%

Originations

2012 Actual 98% 2%

2013 Actual 69% 31%

2014 Outlook* 50% 50%* Prior to PHH Arval Acquisition

elementcorp.com

Growth Trajectory

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Total Assets – $ billions 

3.5

12.2

16.9

2013 2014 2015 2016

~ 20.0

$ billions

elementcorp.com

Key Performance Indicators

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Financial Revenue

Financial Expense

Operating Expense

PipelineAviation & Rail

Total Originations

Average Net Financial Margin

879 bps

238 bps

265 bps

$1.8 billion

Q2‐2013

$397.9 million

640 bps

857 bps

269 bps

249 bps

$2.0 billion

Q3‐2013

$410.4 million

588 bps

Q4‐2013

830 bps

272 bps

558 bps

226 bps

$997.2 million

$2.0+ billion 

Q1‐2014

790 bps

255 bps

535 bps

222 bps

$1.1 billion

$2.4 billion 

elementcorp.com

QUEST IONS