WI Western Investment Company of Canada Limited

The Western Investment Company of Canada Limited (TSXV: WI) (“Western” or the “Corporation”) today filed Management’s Information Circular (the “Circular”) for its upcoming Annual General and Special Meeting of Shareholders taking place on December 6, 2024 at 11:00 AM Mountain Time (the “Meeting”).

Western shareholders are urged to read and carefully consider the contents of the Circular. The Circular is being mailed to shareholders along with other meeting materials and can also be accessed through Western’s website (www.winv.ca) or Sedar+ (www.sedarplus.ca).

A Letter to Shareholders From Scott Tannas

Dear Fellow Shareholders,

On behalf of Western’s Board of Directors and Management Team, I want to thank you for the overwhelming support we have received to shift your company from a private equity investment platform to a property and casualty insurance and investment holding company. Your support has translated into a very well received Private Placement that was subsequently up-sized to $30 million to drive your company’s growth in the insurance space. Our Rights Offering also appears to be enjoying a strong reception in the market. We are collectively excited about the shareholder value we can create over the long-term as a property and casualty insurance and investment holding company, and the tremendous opportunities this shift will unlock.  

Focusing on What We’re Best AtOur shift towards an insurance focus began with a small company we funded as a private equity investment back in 2019 called the Fortress Insurance Company (“Fortress”). It was a fully licensed, but under-utilized, insurance company doing about $0.4 million per year in business for one client. From there, under Shafeen Mawani’s leadership, Fortress grew its gross written premiums at a compound annual growth rate (“CAGR”) of more than 170% between 2019 and 2023, all while keeping loss ratios low and maintaining very high capital reserves. (Fortress expects the CAGR of its gross written premiums to moderate to 112% for full-year 2024 compared with 2020)

Given the outstanding success of Fortress, our fundamental background in insurance, and all of the strong relationships we have built along the way, about a year ago we decided it was time to focus on what we do best.

Establishing a Controlling Interest in Fortress One of our stated goals was to consolidate Western’s ownership of Fortress to at least 51%. We are particularly gratified that not only have 100% of Fortress shareholders agreed to tender their shares, but the vast majority of them accepted shares in Western. This leaves us with more available cash to build Fortress and pursue other accretive opportunities as we move forward. As of the date of this letter, Western currently owns 83.57% of Fortress with agreements to acquire the remaining 16.43%.

Managing the Float for Enhanced ReturnAt around the same time we decided to focus on insurance, we met Paul Rivett. Paul’s name is familiar to many given his time and success at Fairfax Financial. Paul joined Fairfax in 2003 and served as President between 2013 and 2020. Over this period, Paul established his reputation as a trusted builder of partnerships and relationships with a value investor’s philosophy.

We very quickly began pursuing the idea of teaming up with Paul because of his value focus, conservative float management philosophy, impeccable track record of success, integrity, and how his vision aligned with our aspirations for Western.

The irony to us is that float management seems antithetical to most insurance companies who hand their investment management over to an outside agency despite the significant returns that can be achieved with modest effort, and a highly conservative strategy. That is why several industry leaders have pursued this model. Given their enormous success, it’s puzzling that only a handful of people see that these two separate activities - insurance underwriting and float management - belong in one business. While at Fairfax, Paul was at the center of this approach and their value investing philosophy. He has seen it, knows it, lived it, and succeeded at it. We are confident he can do the same at Western.

Growth Opportunities and Capital Allocation The advantage of being a smaller company is that even modest opportunities can meaningfully increase our earnings and book value per share. In other words, small gains in both investments and acquisitions can substantially increase shareholder value. With our collective years of experience and trusted relationships, we can surface bespoke opportunities that will create considerable shareholder value. We are focused on a mix between prudent organic growth and accretive acquisitions, which we think will grow Fortress to $100 million per annum in written premiums by 2028, while maintaining low loss ratios and excess capital reserves.

We also recognize that there are additional opportunities arising from individuals that can bring specialized expertise and books of business. In recent months we have received a number of calls from established brokers, producers, and underwriters that want to work in, and with, a more entrepreneurial and nimbler group like Western. Hiring additional talent and acquiring books of business will meaningfully contribute to our growth.

Currently, most of the assets we aim to acquire are not “for sale”, but the addressable opportunity set is quite large. Our team is compiling and prioritizing a comprehensive database of potential bespoke opportunities. In Canada, out of approximately 100 small insurers in the market, both domestic and internationally owned, we are conducting a comprehensive 360-degree analysis. We will methodically monitor and maintain detailed proprietary information on these selected targets. At the outset, we are emphasizing a focus on specialty lines of insurance business, $10 to $30 million in annual premiums, with a strategic moat. While these opportunities may fall outside the typical acquisition scope of major insurance firms, they hold significant potential for us. Their smaller size allows for more reasonable valuation multiples. However, we are not interested in underperforming companies or mediocre businesses, even if they are available at substantial discounts. We are only seeking good businesses at fair prices.

Similarly with respect to investing the insurance float, we do not need to pursue overly ambitious goals or speculate on macro-economic trends to achieve successful compound returns. As Paul likes to say, “we’ll keep it on the fairway”. It takes a lot of work to earn a dollar and, when we do, our first priority will be protecting and growing that dollar prudently.

Finally, regarding our other existing private equity investments, while our focus will shift to insurance, our approach is to ensure that our actions do not negatively impact the other investments in our portfolio. We have invested significant effort and resources in guiding these private equity investments through the challenges posed by COVID-19, and we are committed to preserving and building on that progress in order to maximize their value for Western shareholders. We will continue our good stewardship of these outstanding businesses.

While Western’s shift towards insurance is no longer reliant on a vote at the Annual General and Special Meeting, we invite you to exercise your rights as a shareholder and vote your shares on December 6, 2024. Thank you again for your overwhelming support. We are grateful for your trust, and look forward to our shared success.

Sincerely,

Scott Tannas

Meeting DetailsThe Meeting will take place on December 6, 2024 at 11:00 AM Mountain Time at:

The offices of DS Lawyers Canada LLP,Suite 800, Dome Tower, 333 – 7th Avenue S.W., Calgary, Alberta T2P 2Z1

Registered shareholders and duly appointed proxyholders will be able to participate, vote and submit questions at the Meeting.

How to VoteWestern encourages shareholders to vote in advance of the Meeting using either the form of proxy or the voter instruction form that will be mailed to them with the Meeting materials and submitting them by no later than 11:00 a.m., Mountain Time, on December 4, 2024.

About The Western Investment Company of Canada Limited Western is a unique publicly traded, private equity company founded by a group of successful Western Canadian businesspeople, and dedicated to building and maintaining ownership in successful Western Canadian companies, and helping them to grow. Western's shares are traded on the Exchange under the symbol WI.

For more information on Western, please visit its website at www.winv.ca.

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CONTACT INFORMATION - The Western Investment Company of Canada Limited

Scott Tannas President and Chief Executive Officer (403) 652-0408 or stannas@winv.ca  

Advisories

This document contains forward-looking statements. More particularly, this document contains statements concerning: the completion of and potential uses of proceeds from the Private Placement, the Rights Offering, and the future business plans and opportunities of Western, including potential acquisition opportunities. Readers are cautioned that the foregoing list of factors should not be construed as exhaustive.

The forward-looking statements are based on certain key expectations and assumptions made by Western, including expectations and assumptions concerning the ability of Western to successfully implement its strategic plans and initiatives, the timing of receipt of required regulatory approvals (including TSXV approval) and third party consents and the satisfaction of other conditions to the completion of the Private Placement.

Readers should also refer to the forward-looking statements and associated assumptions and risk factors contained in Western's August 30, 2024 news release regarding the Private Placement and the other transactions referred to therein. The transactions referred to in Western's August 30, 2024 news release (including the Rights Offering) remain subject to TSXV approval.

Although Western believes that the expectations and assumptions on which the forward-looking statements made by Western are reasonable, undue reliance should not be placed on the forward-looking statements because no assurance can be provided that they will prove to be correct. Since forward-looking statements address future events and conditions, by their very nature they involve inherent risks and uncertainties. Actual results could differ materially from those currently anticipated due to a number of factors and risks. These include, but are not limited to, risks that required TSXV, regulatory and third party approvals and consents are not obtained on terms satisfactory to the parties within the timelines provided for, or at all, and risks that other conditions to the completion of the Private Placement are not satisfied on the required timelines or at all, the ability of management to execute its business strategy, and the impact of general economic conditions in Canada and the United States. A description of additional assumptions used to develop such forward-looking information and a description of risk factors that may cause actual results to differ materially from forward-looking information can be found in Western's disclosure documents on the SEDAR+ website at www.sedarplus.ca.

The forward-looking statements contained in this news release are made as of the date hereof and Western undertakes no obligation to update publicly or revise any forward-looking statements or information, whether as a result of new information, future events or otherwise, unless so required by applicable securities laws.

This news release also contains Future-oriented Financial Information ("FOFI") about prospective results of operations, including gross written premiums of Fortress, which are subject to the same assumptions, risk factors, limitations, and qualifications as set forth in the above paragraphs. FOFI contained in this news release was made as of the date of this news release to provide information about management's current expectations and plans relating to the future. Readers are cautioned that such information may not be appropriate for any other purpose. Western disclaims any intention or obligation to update or revise any FOFI contained in this news release, whether as a result of new information, future events or otherwise, except as required by applicable law.

This news release shall not constitute an offer to sell or the solicitation of an offer to buy securities in the United States, nor shall there be any sale of the securities in any jurisdiction in which such offer, solicitation or sale would be unlawful. The Warrants and underlying Common Shares and the Common Shares being offered have not been, nor will they be, registered under the 1933 Act or under any U.S. state securities laws, and may not be offered or sold in the United States absent registration or an applicable exemption from the registration requirements of the 1933 Act, as amended, and applicable state securities laws.

"Neither the TSX Venture Exchange nor its Regulatory Services Provider (as that term is defined in policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release."