PROSPECTUS GREENSTONE LIMITED. Initial Public Offering ACN Joint Lead Managers. Co-Lead Managers

Transcription

1 PROSPECTUS GREENSTONE LIMITED Initial Public Offering ACN Joint Lead Managers Co-Lead Managers

2 ii Important information Greenstone Limited Prospectus IMPORTANT INFORMATION Offer The Offer contained in this Prospectus is an invitation for you to apply for fully paid ordinary shares (Shares) in Greenstone Ltd (ACN ) (the Company or Greenstone). This Prospectus is issued by the Company and Greenstone SaleCo Pty Ltd (ACN ) (SaleCo) under the Corporations Act 2001 (Cth) (Corporations Act). Lodgement and Listing This Prospectus is dated 25 May 2015 and was lodged with the Australian Securities and Investments Commission (ASIC) on that date. Greenstone will apply to the Australian Securities Exchange (ASX) within seven days after the date of this Prospectus (Prospectus Date) for admission of the Company to the Official List and quotation of the Shares on the ASX (Listing). Neither ASIC nor the ASX takes any responsibility for the content of this Prospectus or for the merits of the investment to which this Prospectus relates. Expiry Date This Prospectus expires on the date which is 13 months after the Prospectus Date (Expiry Date) and no shares will be issued or transferred on the basis of this Prospectus after the Expiry Date. Note to Applicants The information contained in this Prospectus is not financial product advice and does not take into account the investment objectives, financial situation or particular needs (including financial and tax issues) of any prospective investor. It is important that you read this Prospectus carefully and in its entirety before deciding whether to invest in the Company. In particular, in considering the prospects of the Company, you should consider the risk factors that could affect the performance of the Company. You should carefully consider these risks in light of your investment objectives, financial situation and particular needs (including financial and tax issues) and seek professional guidance from your stockbroker, solicitor, accountant, financial adviser or other independent professional adviser before deciding whether to invest in the Shares. Some of the key risk factors that should be considered by prospective investors are set out in Section 1.4 and Section 5. There may be risk factors in addition to these that should be considered in light of your personal circumstances. You should also consider the best estimate assumptions underlying the Forecast Financial Information, set out in Section 4, and the risk factors set out in Section 5, that could affect the Company s business, financial condition and results of operations. No person named in this Prospectus, nor any other person, guarantees the performance of the Company, the repayment of capital by the Company or the payment of a return on the Shares. Important notice to New Zealand Investors The offer to New Zealand investors is a regulated offer made under Australian and New Zealand law. In Australia, this is Chapter 8 of the Corporations Act 2001 (Aust) and the regulations made under that Act. In New Zealand, this is subpart 6 of Part 9 of the Financial Markets Conduct Act 2013 and Part 9 of the Financial Markets Conduct Regulations This offer and the content of the offer document are principally governed by Australian rather than New Zealand law. In the main, the Corporations Act 2001 (Aust) and the regulations made under that Act set out how the offer must be made. There are differences in how financial products are regulated under Australian law. For example, the disclosure of fees for managed investment schemes is different under the Australian regime. The rights, remedies, and compensation arrangements available to New Zealand investors in Australian financial products may differ from the rights, remedies, and compensation arrangements for New Zealand financial products. Both the Australian and New Zealand financial products regulators have enforcement responsibilities in relation to this offer. If you need to make a complaint about this offer, please contact the Financial Markets Authority, New Zealand ( The Australian and New Zealand regulators will work together to settle your complaint. The taxation treatment of Australian financial products is not the same as for New Zealand financial products. If you are uncertain about whether this investment is appropriate for you, you should seek the advice of an appropriately qualified financial adviser. The offer may involve a currency exchange risk. The currency for the financial products is not New Zealand dollars. The value of the financial products will go up or down according to changes in the exchange rate between that currency and New Zealand dollars. These changes may be significant. If you expect the financial products to pay any amounts in a currency that is not New Zealand dollars, you may incur significant fees in having the funds credited to a bank account in New Zealand in New Zealand dollars. If the financial products are able to be traded on a financial products market and you wish to trade the financial products through that market, you will have to make arrangements for a participant in that market to sell the financial products on your behalf. If the financial products market does not operate in New Zealand, the way in which the market operates, the regulation of participants in that market, and the information available to you about the financial products and trading may differ from financial products markets that operate in New Zealand. Exposure Period The Corporations Act prohibits the Company and SaleCo from processing applications to subscribe for, or acquire, Shares offered under this Prospectus (Applications) in the seven day period after lodgement of this Prospectus with ASIC (Exposure Period). This Exposure Period may be extended by ASIC by up to a further seven days. The purpose of the Exposure Period is to enable this Prospectus to be examined by market participants prior to the raising of funds. The examination may result in the identification of deficiencies in this Prospectus, in which case any Application may need to be dealt with in accordance with section 724 of the Corporations Act. Applications received during the Exposure Period will not be processed until after the expiry of the Exposure Period. No preference will be conferred on any Applications received during the Exposure Period. During the Exposure Period, this Prospectus will be made available to Australian and New Zealand residents, without the Application Form, at the Company s offer website, Photographs and diagrams Photographs and diagrams used in this Prospectus that do not have descriptions are for illustration only and should not be interpreted to mean that any person shown in them endorses this Prospectus or its contents or that the assets shown in them are owned by the Company. Diagrams used in this Prospectus are illustrative only and may not be drawn to scale. Disclaimer and forward looking statements No person is authorised to give any information or make any representation in connection with the Offer which is not contained in this Prospectus. Any information or representation not so contained may not be relied on as having been authorised by the Company s or SaleCo s directors or any other person in connection with the Offer. You should rely only on information in this Prospectus. Except as required by law, and only to the extent so required, none of the Company, SaleCo or any other person warrants or guarantees the future performance of the Company, or any return on any investment made pursuant to this Prospectus.

3 Greenstone Limited Prospectus Important information iii This Prospectus contains forward looking statements which are statements that may be identified by words such as may, could, believes, estimates, expects, intends and other similar words that involve risks and uncertainties. The Forecast Financial Information is an example of forward looking statements. These statements are based on an assessment of present economic and operating conditions and on a number of best estimate assumptions regarding future events and actions that, at the Prospectus Date, are expected to take place (including the key assumptions set out in Section 4.8.2). The Company has no intention to update or revise forward looking statements, or to publish prospective financial information in the future, regardless of whether new information, future events or any other factors affect the information contained in this Prospectus, other than to the extent required by law. Such forward looking statements are not guarantees of future performance and involve known and unknown risks, uncertainties, assumptions and other important factors, many of which are beyond the control of the Company, the directors of the Company and SaleCo, and management. Forward looking statements should therefore be read in conjunction with, and are qualified by reference to, Section 1.4 and Section 4, and other information in this Prospectus. The Company cannot and does not give any assurance that the results, performance or achievements expressed or implied by the forward looking statements contained in this Prospectus will actually occur and investors are cautioned not to place undue reliance on these forward looking statements. This Prospectus, including the industry overview in Section 2, uses market data, industry forecasts and projections. The Company has obtained significant portions of this information from market research prepared by third parties. There is no assurance that any of the forecasts contained in the reports, surveys and research of such third parties that are referred to in this Prospectus will be achieved. The Company has not independently verified this information. Estimates involve risks and uncertainties and are subject to change based on various factors, including the risk factors in Section 5. As set out in Section , it is expected that the Shares will be quoted on the ASX initially on a conditional and deferred settlement basis. The Company, SaleCo, Link Market Services Ltd ABN (Share Registry) and the Joint Lead Managers disclaim all liability, whether in negligence or otherwise, to persons who trade Shares before receiving their holding statement. Statements of past performance This Prospectus includes information regarding the past performance of the Company. Investors should be aware that past performance should not be relied upon as being indicative of future performance. Financial information presentation All references to FY13, FY14, FY15 and FY16 appearing in this Prospectus are to the financial years ended or ending 30 June 2013, 30 June 2014, 30 June 2015 and 30 June 2016 respectively, unless otherwise indicated. All references to 1H14 and 1H15 appearing in this Prospectus are to the half financial years ended 31 December 2013 and 31 December All financial amounts contained in this Prospectus are expressed in Australian dollars unless otherwise stated. Any discrepancies between totals and sums and components in tables, figures and diagrams contained in this Prospectus are due to rounding. Section 4 sets out in detail the Financial Information referred to in this Prospectus. The basis of preparation of the Financial Information is set out in Section 4.2. The Financial Information in this Prospectus is presented in abbreviated form insofar as it does not include all of the presentation disclosures, statements or comparative information required by the Australian Accounting Standards (AAS) (as issued by the Australian Accounting Standards Board (AASB)), applicable to annual financial reports prepared in accordance with the Corporations Act. The Historical Financial Information has been prepared and presented in accordance with the recognition and measurement principles of AAS which are consistent with International Financial Reporting Standards and interpretations issued by the International Accounting Standards Board. This Prospectus includes Forecast Financial Information that has been prepared by the Directors based on an assessment of current economic and operating conditions and the Directors best estimate of general and specific assumptions regarding future actions and events as set out in Section and Section The basis of preparation and presentation of the Forecast Financial Information, to the extent relevant, is consistent with the basis of preparation and presentation for the Historical Financial Information. The Forecast Financial Information presented in this Prospectus is unaudited. The Financial Information in this Prospectus should be read in conjunction with, and it is qualified by reference to, the information contained in Section 4 and Appendix A and in the case of the Forecast Financial Information, the general and specific best estimate assumptions, sensitivity analysis, the risk factors in Section 5 and the additional information in Section 8. Pet insurance market information This Prospectus contains statistics, data and other information relating to the pet insurance industry in Australia that is based on data provided by PetSure Australia Pty Ltd (PetSure). While this information is based on information reasonably believed by PetSure in good faith to be reliable, PetSure cannot give any assurances as to the accuracy and completeness of the statements relating to the broader Australian pet insurance market and industry data contained in this Prospectus and extracted or derived from data provided by PetSure. Accordingly, the accuracy and completeness of such information is not guaranteed. Investors should note that market data and statistics are inherently predictive and subject to uncertainty and not necessarily reflective of actual market conditions. Obtaining a copy of this Prospectus A hard copy of this Prospectus is available free of charge during the Offer Period to any person in Australia or New Zealand by calling the Greenstone Offer Information Line on (toll free within Australia) or (outside Australia) between 8.30am and 5.30pm Australian Eastern Standard Time (AEST), Monday to Friday. This Prospectus is also available in electronic form to Australian and New Zealand residents on the Company s offer website, The Offer constituted by this Prospectus in electronic form is available only to Australian and New Zealand residents accessing the website within Australia. Hard copy and electronic versions of this Prospectus are not available to persons in other jurisdictions, including the United States. Persons who access the electronic version of this Prospectus should ensure that they download and read the entire Prospectus. Persons who have received a copy of this Prospectus in its electronic form may, during the Offer Period, obtain a hard copy of this Prospectus by calling the Greenstone Offer Information Line on (toll free within Australia) or (outside Australia) between 8.30am and 5.30pm (AEST), Monday to Friday. Applications for Shares may only be made on the Application Form attached to, or accompanying, this Prospectus in its hard copy form, or in its soft copy form available online at together with an electronic copy of this Prospectus. By making an Application, you declare that you were given access to this Prospectus, together with an Application Form. The Corporations Act prohibits any person from passing the Application Form on to another person unless it is attached to, or accompanied by, this Prospectus in its paper copy form or the complete and unaltered electronic version of this Prospectus. Refer to Section 8 for further information.

4 iv Important information Greenstone Limited Prospectus Cooling off rights do not apply to an investment in Shares pursuant to the Offer. This means that, in most circumstances, you cannot withdraw your Application once it has been accepted. No offering where illegal This Prospectus does not constitute an offer or invitation in any place in which, or to any person to whom, it would not be lawful to make such an offer or invitation. No action has been taken to register or qualify the Shares or the Offer, or to otherwise permit a public offering of the Shares in any jurisdiction outside Australia and New Zealand. The distribution of this Prospectus (including in electronic form) outside Australia and New Zealand may be restricted by law and persons who come into possession of this Prospectus outside Australia should seek advice on and observe any such restrictions. Any failure to comply with such restrictions may constitute a violation of applicable securities laws. This Prospectus may not be distributed to, or relied upon, by any person in the United States unless accompanied by the Institutional Offering Memorandum as part of the Institutional Offer. This Prospectus does not constitute an offer to sell, or a solicitation of any offer to buy, securities in the United States. This Prospectus has been prepared for publication in Australia and New Zealand. The Shares to be offered under the Offer have not been, and will not be, registered under the U.S. Securities Act of 1933, as amended (US Securities Act) or the securities laws of any state or other jurisdiction in the United States, and may not be offered or sold, directly or indirectly, in the United States, unless the Shares are registered under the US Securities Act or are offered and sold pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the US Securities Act and applicable US state securities laws. The Offer is not being extended to any investor outside Australia and New Zealand, other than to certain Institutional Investors as part of the Institutional Offer. See Section 8.15 for more detail on selling restrictions that apply to the Offer and sale of Shares in jurisdictions outside Australia and New Zealand. Privacy By completing an Application Form, you are providing personal information to the Company and SaleCo through the Company s service provider, the Share Registry, which is contracted by the Company to manage Applications. The Company and SaleCo, and the Share Registry on their behalf, may collect, hold and use that personal information to process your Application, service your needs as a Shareholder, provide facilities and services that you request and carry out appropriate administration. If you do not provide the information requested in the Application Form, the Company, SaleCo and the Share Registry may not be able to process or accept your Application. Once you become a Shareholder, the Corporations Act and Australian taxation legislation require information about you (including your name, address and details of the Shares you hold) to be included on the Share register. In accordance with the requirements of the Corporations Act, information on the Share register will be accessible by members of the public. The information must continue to be included on the Share register if you cease to be a Shareholder. The Company, SaleCo and the Share Registry may disclose your personal information for purposes related to your investment to their agents and service providers including those listed below or as otherwise authorised under the Privacy Act 1988 (Cth): the Share Registry for ongoing administration of the Share register; the Joint Lead Managers in order to assess your Application; printers and other companies for the purposes of preparation and distribution of documents and for handling mail; market research companies for the purpose of analysing the Company s shareholder base; and legal and accounting firms, auditors, management consultants and other advisers for the purpose of administering, and advising on, the Shares and for associated actions. The Company s agents and service providers may be located outside Australia where your personal information may not receive the same level of protection as that afforded under Australian law. You may request access to your personal information held by or on behalf of the Company and SaleCo. You may be required to pay a reasonable charge to the Share Registry in order to access your personal information. You can request access to your personal information or obtain further information about the Company s privacy practices by contacting the Share Registry as follows: Telephone: (toll free within Australia) (outside Australia) Address: Link Market Services Ltd Level 12, 680 George Street Sydney NSW 2000 Australia. The Company aims to ensure that the personal information it retains about you is accurate, complete and up-to-date. To assist with this, please contact the Company or the Share Registry if any of the details you have provided change. Offer management The Offer is being arranged and managed by Goldman Sachs Australia Pty Ltd and Macquarie Capital (Australia) Limited. Financial Services Guide The provider of the independent review of the Financial Information is required to provide Australian retail clients with a Financial Services Guide in relation to that review under the Corporations Act. The Financial Services Guide is provided in Section 9 and Section 10. Company website Any references to documents included on the Company s website are provided for convenience only, and none of the documents or other information on the Company s website, or any other website referred in this Prospectus, is incorporated in this Prospectus by reference. Defined terms and abbreviations Defined terms and abbreviations used in this Prospectus, unless specified otherwise, have the meaning given in the glossary in Appendix B. Unless otherwise stated or implied, references to times in this Prospectus are to AEST. Unless otherwise stated or implied, references to dates or years are calendar year references. Questions If you have any questions in relation to the Offer, contact the Greenstone Offer Information Line on (toll free within Australia) or (outside Australia) between 8.30am and 5.30pm (AEST), Monday to Friday. This document is important and should be read in its entirety. If you have any questions about whether to invest in Greenstone, you should seek professional advice from your accountant, financial adviser, stockbroker, lawyer or other professional adviser before deciding whether to invest in Greenstone.

5 Greenstone Limited Prospectus Table of contents 1 TABLE OF CONTENTS Important information ii Key dates 2 Key Offer information 3 Chairman s letter 4 1. Investment overview 6 2. Industry overview Company overview Financial information Key risks Key people, interests and benefits The Offer Additional information Investigating Accountant s Report on Historical Financial Information Investigating Accountant s Report on Forecast Financial Information Consulting Actuary s Report 185 Appendix A Significant accounting policies 190 Appendix B Glossary 196 Application form 205

6 2 Key dates Greenstone Limited Prospectus KEY DATES Prospectus lodgement date 25 May 2015 Retail Offer opens 2 June 2015 Retail Offer closes 10 June 2015 Bookbuild to determine the Final Price 11 June 12 June 2015 Final Price and Share allocation announcement 15 June 2015 Commencement of trading on ASX on a conditional and deferred settlement basis 16 June 2015 Settlement of the Offer 18 June 2015 Issue and Transfer of Shares under the Offer 19 June 2015 Shares commence trading on the ASX on an unconditional and deferred settlement basis 19 June 2015 Expected despatch of holding statements 22 June 2015 Shares commence trading on the ASX on a normal settlement basis 23 June 2015 Note: This timetable is indicative only and may be subject to change. Unless otherwise indicated, all times are stated in AEST. Greenstone, in consultation with the Joint Lead Managers, reserves the right to vary any and all of the above dates and times without notice (including, subject to the ASX Listing Rules and the Corporations Act, to close the Offer early, to extend the Closing Date, or to accept late applications, either generally or in particular cases, or to cancel or withdraw the Offer before completion, in each case without notifying any recipient of this Prospectus or Applicants). If the Offer is cancelled or withdrawn before the issue and transfer of Shares, then all amounts accompanying an application form will be refunded in full (without interest) as soon as possible in accordance with the requirements of the Corporations Act. Investors are encouraged to submit their Applications as soon as possible after the Offer opens. The quotation and commencement of trading of the Shares is subject to confirmation from the ASX.

7 Greenstone Limited Prospectus Key Offer information 3 KEY OFFER INFORMATION Indicative Price Range 1 Total number of Shares to be issued or transferred under the Offer 2 $2.00 $2.50 per Share million Total Shares to be issued or transferred under the Offer as a percentage of 57.7% total Shares on issue at Completion of the Offer 3 Maximum number of shares that can be over-allocated 4 Total number of Shares on issue at Completion of the Offer 5 Market capitalisation at the Indicative Price Range 6 Pro forma net debt (as at 31 December 2014) 7 Enterprise value million million $1,396.1 $1,713.5 million $103.8 million $1,499.9 $1,817.3 million Enterprise value/pro forma FY16 forecast EBITDA x 13.2x Market Capitalisation at the Indicative Price Range/FY16 NPAT per Share x 19.0x Gross proceeds from the Offer 11 $809.7 $984.2 million Forecast dividend yield for final FY16 dividend % 3.6% Note: 1. In the Institutional Offer, the Final Price may be set below, within or above the Indicative Price Range. All Successful Applicants under the Offer will pay the Final Price. 2. Comprises the Shares issued or transferred under the Institutional Offer, the Broker Firm Offer and the Priority Offer, assuming the mid-point of the Indicative Price Range and assuming no Shares are over-allocated. See Section Assuming the mid-point of the Indicative Price Range and assuming no Shares are over-allocated. See Section Refer to Section 7.8 for further information. 5. Assuming the mid-point of the Indicative Price Range. 6. Calculated as the total number of Shares on issue following the Offer multiplied by the Indicative Price Range. 7. Pro forma net debt is calculated as the sum of senior debt less upfront fees paid and cash and cash equivalents as at 31 December Enterprise value is calculated as the indicative market capitalisation of $1,396.1 to $1,713.5 million (based on the Indicative Price Range), plus pro forma net debt of $103.8 million as at 31 December This ratio is commonly referred to as an EV/EBITDA ratio. The EV/EBITDA ratio is calculated as the enterprise value (based on the Indicative Price Range) divided by its forecast annual EBITDA. 10. This ratio is commonly referred to as a forward price to earnings ratio, or forward PE ratio. A forward PE ratio is a company s share price divided by its forecast annual earnings per share. 11. Assuming no Shares are over-allocated. See Section Indicative dividend yield is calculated as the implied dividend based on Greenstone s target dividend payout ratio range of 40% 55% and the Pro Forma FY16 NPAT, divided by the Indicative Price Range. The low end of the range is calculated on the basis of a dividend payout ratio of 40% at the high end of the Indicative Price Range. The high end of the range is calculated on the basis of a dividend payout ratio of 55% at the low end of the Indicative Price Range. Refer to Section 4.10 for further details of Greenstone s dividend policy.

8 4 Chairman s letter Greenstone Limited Prospectus CHAIRMAN S LETTER 25 May 2015 Dear Investor, On behalf of the Board of Directors (the Board), I am pleased to offer you the opportunity to become a Shareholder in Greenstone Ltd. Greenstone specialises in the design, marketing, distribution and administration of personal insurance products. Since its formation in 2007, Greenstone has focussed on developing simple and affordable direct insurance product offerings for retail customers in the mass market, leveraging technology to improve convenience for customers and building a low cost and efficient distribution model. During this time Greenstone has expanded its insurance product offering to include term life, funeral, income protection and pet insurance products. These insurance products are distributed through Greenstone s Proprietary Brands (Real Insurance, Australian Seniors Insurance Agency, Guardian Insurance and Prime Pet Insurance) and Affinity Brands (Medibank, Woolworths and RSPCA). In addition, Greenstone also distributes its proprietary and affinity products as well as third party insurance products, namely private health, car and home & contents insurance products, through its online comparison website, Choosi. Between 2009 and 2014, Greenstone experienced significant growth across its brands and distribution channels, with annual new sales of insurance policies growing at a compound annual growth rate (CAGR) of more than 15%, total Gross Written Premium (GWP) growing at a CAGR of more than 30% and an increase in the agency revenue receivable asset (ARRA) at a CAGR of more than 50%. Today, Greenstone is known for outstanding value and leading customer satisfaction and has one of the most recognised brands in the Australian life insurance market, Real Insurance. Greenstone believes that it has a top two market share in the Australian direct life insurance distribution market and the leading market share in the Australian pet insurance distribution market and is a direct beneficiary of the high premium growth experienced in these respective markets. From 2009 to 2014, the Australian direct life insurance in-force market grew at a CAGR of 13.2% 1 driven primarily by customers seeking convenient, simple and affordable life insurance products and increasing willingness of customers to transact over the phone and the internet. This growth has materially outpaced the total life insurance market, which grew at a CAGR of 10.9% over the same period 2 and is forecast to grow at a CAGR of 11.0% from 2014 to In 1H15, life insurance (term life, funeral and income protection insurance) accounted for 61% of Greenstone s total GWP. The Australian pet insurance market also grew rapidly between 2009 and 2014 at an estimated CAGR of 48.4%. 4 With approximately 7.5 million pets in Australia 5 and only an estimated 4% 6 of these pets presently covered by pet insurance, Greenstone believes that there is significant further growth potential for this market. In 1H15, pet insurance accounted for 22% of Greenstone s total GWP. Additionally, through Choosi, Greenstone is also well placed to benefit from the growing propensity of consumers to use comparison websites to easily and quickly compare insurance products. Greenstone s key product offering on Choosi, private health insurance, accounted for 17% of Greenstone s GWP in 1H15. Central to Greenstone s success is its simple, focussed business model. Greenstone is not an insurance company and does not have any prudential regulatory capital requirements. All claims risk associated with its insurance product offering is underwritten by third parties, Hannover Re, Swiss Re and Hollard. 7 Greenstone operates from a single location, with its call centre supported by online and over the phone underwriting processes. Combined with proprietary data analytical capabilities to optimise marketing spend and prioritise inbound calls to maximise return on investment, Greenstone has developed an efficient, low cost model to distribute insurance products across Australia. Underpinned by strong positions in high growth markets, Greenstone believes that it is well placed to deliver growth by focussing on optimising its three core commercial disciplines of cost per lead, lead conversion and customer retention.

9 Greenstone Limited Prospectus Chairman s letter 5 As with all companies, there are a number of risks associated with an investment in Greenstone, which investors should consider as they may materially adversely affect Greenstone s financial performance and Share price. These include: lower than expected cash receipts, heightened competition, a decline in demand for insurance products, changes in the effectiveness of marketing, technological disruption, regulatory risk, counterparty risk, interest rate fluctuations and contract renewal risk. Investors should refer to Section 5 for further information. Greenstone s Listing on the ASX will allow the Company s existing shareholder, Hollard Investments B.V., to realise a portion of its investment, fund the acquisition of options or rights over shares in Greenstone s most significant subsidiary (held by a co-founder and former CEO of Greenstone Financial Services Pty Ltd), provide the Company with access to capital markets and an opportunity for others to invest in Greenstone. At the time of Listing, Hollard Investments B.V. and the Casey Trust will collectively hold between and million Shares, representing 42.0% to 42.6% of the outstanding Shares, and will enter into voluntary escrow agreements in respect of those Shares until two business days following the release of the Company s FY16 results. Hollard Investments B.V. intends to be a long term shareholder of Greenstone and has confirmed that it intends to retain its Shares until at least two business days following the release of the Company s FY17 results, subject to any exceptions set out in the voluntary escrow deed as if it applied until that date. Hollard Investments B.V. remains a strong supporter of Greenstone and is represented on the Board. Existing key executives will hold between 2.5 and 3.1 million Shares and will enter into voluntary escrow agreements in respect of those Shares under which the Shares will be released from escrow on a pro rata basis over periods of one, three or five years. Before deciding whether to invest in Greenstone, you should read this Prospectus carefully and consult with your solicitor, stockbroker, accountant or other independent and qualified professional adviser. On behalf of my fellow Directors, I look forward to welcoming you as a Shareholder of Greenstone. Yours sincerely, Rick Lee Chairman, Greenstone 1. Plan for Life Direct Life Insurance Report DEXX&R Market Projections Report, November DEXX&R Market Projections Report, November Forecasts have been made at both an overall and individual company level, taking into account past statistical data, performance and capacity of each insurer to achieve ongoing sales and maintain in-force business. The results have been prepared as a Standard or Central Model, which is effectively a best estimate based on information known at the time of preparing the forecast. Two other models a Low and a High are also prepared and provided as a means of gauging a reasonable range of lower and higher performance. The forecasts are not to be regarded as absolute and definitive statistics as to future Company and industry performance, but rather as reasonable estimates which are intended to assist the Company in its future planning, especially the next three years where the forecasts have the greatest likelihood of occurring. 4. Based on the policy growth of PetSure, the leading underwriter of pet insurance in Australia with a dominant market share. 5. Estimated in 2013 by the Animal Health Alliance (Pet Ownership in Australia 2013). 6. Determined using PetSure data and total estimate for number of pets by Animal Health Alliance (Pet Ownership in Australia 2013). 7. Some legacy product remains in-force which has been underwritten by AIA and St Andrews. All new business is underwritten by Hannover Re, Swiss Re or Hollard. 8. Based on the Indicative Price Range and assuming no Shares are over-allocated. See Section 7.8.

10 INVESTMENT OVERVIEW 01

11 Greenstone Limited Prospectus Section 01 Investment overview 7 INVESTMENT OVERVIEW 1.1 Introduction to Greenstone Topic Who is Greenstone? Summary Greenstone Ltd (Greenstone or the Company) designs, prices markets, distributes and administers personal insurance products. Greenstone operates from a single location, with its call centre supported by online and over the phone underwriting processes. Combined with proprietary data analytical capabilities to optimise marketing spend and prioritise inbound calls to maximise return on investment, Greenstone has developed an efficient and low cost business model to distribute insurance products across Australia. Greenstone is not an insurance company. All claims risk associated with the policies it sells are underwritten by third party insurers (Insurance Carriers) (Hannover Re, Swiss Re and Hollard). Greenstone had more than 350,000 in-force policies and 310,000 individual Australian customers as at 31 December Greenstone is currently owned by Hollard Investments B.V. (Netherlands). For more information Section 3.1 What products does Greenstone sell? Greenstone has focussed on developing simple and affordable direct insurance product offerings, targeting retail, mass market customers: These insurance products primarily include term life, funeral, income protection and pet insurance. Greenstone also distributes these insurance products and private health, car and home & contents insurance products through its 100% owned online comparison website, Choosi. Section 3

12 8 Section 01 Investment overview Greenstone Limited Prospectus Topic Summary For more information How does Greenstone distribute its products? Greenstone distributes insurance products directly to retail customers through brands developed or acquired by Greenstone (Proprietary Brands): Real Insurance 1, Guardian Insurance, Prime Pet Insurance and Australian Seniors Insurance Agency 2. Greenstone also distributes products under brands (Affinity Brands) belonging to corporate partners of Greenstone (Affinity Brand Partners) which include Medibank, Woolworths and the Royal Society for the Prevention of Cruelty to Animals (RSPCA). Greenstone is able to utilise the strength of the Affinity Brands to sell Greenstone products either direct to market (in the case of RSPCA) or to the partners existing customer base (in the case of Medibank and Woolworths). Greenstone primarily distributes its insurance products through its single location, in-house call centre in Sydney. Greenstone also distributes products through an online comparison website, Choosi. These products include both Greenstone s proprietary-branded insurance products and additional third party products in categories including term life, funeral, income protection, pet, health, car and home & contents insurance. Since its launch in 2011, Choosi has quickly established itself as a strong online comparison website with an average of 33,000 visitors per month. Section 3.4 Does Greenstone bear any claims risk? No. Greenstone is not an insurance company. All claims risk associated with the policies it sells is underwritten by third party Australian licenced insurers. Greenstone has strong and long term relationships with its three Insurance Carriers: Hannover Re, Swiss Re and Hollard. Greenstone will continue to be entitled to the agency revenue if the distribution agreement with an Insurance Carrier is terminated or not renewed, as agency revenue survives termination of these agreements. Section The Real Insurance brand is owned by Hollard. Greenstone has an exclusive perpetual licence to use the Real Insurance brand for term life, income protection and funeral insurance. Hollard continues to use the brand for other insurance products. See Section for further details. 2. Greenstone has entered into a binding share purchase agreement to acquire Australian Seniors Insurance Agency Pty Ltd, which owns the Australian Seniors Insurance Agency brand. The share purchase agreement is unconditional and the transfer will occur on 30 June See Section 8.4 for further details.

13 Greenstone Limited Prospectus Section 01 Investment overview 9 Topic Summary For more information What is Greenstone s business model? Greenstone is remunerated through agency payments and administration fees received over the life of the policy by its Insurance Carriers. These payments and fees reflect the services provided by Greenstone, which include (depending on the product) product design, pricing, marketing, distribution and administration. Life products: Greenstone designs, markets, distributes and administers term life, funeral and income protection insurance products under both its Proprietary Brands (Real Insurance, Guardian Insurance and Australian Seniors Insurance Agency) and Affinity Brands (Medibank, Woolworths and ACE Ltd (ACE)). Greenstone receives agency revenue and administration fees for the period the policy remains in-force. Pet products: Greenstone designs, markets and distributes pet insurance products under both its Proprietary Brands (Real Insurance, Guardian Insurance, and Prime Pet Insurance) and an Affinity Brand (RSPCA). Greenstone receives agency revenue from Hollard for distributing this product for the period the policy remains in-force. Agency payments for pet policies are predominantly flat over the lives of the policies. Online comparison website: For third party insurance products (including private health insurance) sold through the Choosi platform, Greenstone typically receives a one-off upfront payment. As agency payments are generally received over the life of the policy, Greenstone has negotiated with some of its Insurance Carriers a provision that allows Greenstone to elect to receive a higher proportion of agency payments upfront to help cover the upfront costs associated with the sale of insurance products (e.g. marketing and employee costs). This limits the future working capital constraints on the business as it grows. Under these arrangements, cash flows from policies sold in FY16 (including both agency and administration fee payments) are expected to cover approximately 90% of Greenstone s FY16 forecast total expenses. In the case of products marketed under brands owned by Affinity Brand Partners, Greenstone either remits a portion of the annual revenue attributable to that brand or pays a fixed annual fee to the Affinity Brand Partner. Section 3.3

14 10 Section 01 Investment overview Greenstone Limited Prospectus Topic Summary For more information How does Greenstone account for its revenue and expenses? Agency payments (depending on the product) are generally received over the life of the policy. This differs from the way the agency payments are accounted for, whereby new business revenue is recognised at the time of sale. As required under AASB 118 Revenue, the new business revenue for a policy is recognised based upon the estimated net present value of all future expected agency payments including an allowance for future expected Affinity Brand Partner payments. All agency revenue cash flows not yet received are recognised on the balance sheet as an agency revenue receivable asset (ARRA). All costs associated with new business such as marketing, loyalty incentives and employment expenses, are expensed at the time of sale. Administration revenue is also recognised for the provision of policy and claims administration services provided to customers on behalf of various Insurance Carriers for life insurance products. Administration revenue is recognised in the period in which the services are provided. All costs associated with the provision of administration services as well as service and retention activities are expensed as incurred. Section 4.3.1, Section 4.5 and Appendix A Who are Greenstone s competitors? Greenstone has a top two market share in the Australian direct life insurance distribution market and a leading market share for new business in the Australian pet insurance distribution market. 3 Greenstone s key competitor across term life, funeral insurance and income protection insurance is TAL s direct life insurance business, InsuranceLine. There are a number of other competitors in the Australian direct life insurance market including OnePath (owned by ANZ), CommInsure (owned by CBA), Macquarie, Allianz, Hallmark, MLC, Suncorp, St Andrew s, AIA and BT. The key brands under which pet insurance is distributed in Australia are RSPCA, Prime Pet Insurance, Real Insurance and Guardian Insurance (all controlled by Greenstone), Medibank and Woolworths (underwritten by Hollard and administered by PetSure) and PetPlan (underwritten by Allianz). Choosi s key competitors are iselect and Compare the Market, who Greenstone estimates are the leading online comparison websites in Australia. Section and Section Direct life insurance market share based on Greenstone management estimates and available industry data of GWP. Estimated gross written premium for the Australian direct life market is only for products that Greenstone offers. Pet insurance market share estimated based on Greenstone s share of PetSure premiums.

15 Greenstone Limited Prospectus Section 01 Investment overview 11 Topic Summary For more information How is Greenstone regulated? Greenstone is not authorised or regulated as an insurer in Australia. Accordingly, Greenstone is not subject to Australian Prudential Regulation Authority (APRA) prudential regulation and is not required to meet minimum prudential regulatory capital requirements. Two of Greenstone s wholly-owned operating subsidiaries (Greenstone Financial Services Pty Ltd (Greenstone Financial Services) and Choosi Pty Ltd) hold Australian financial services licences and compliance with these licences is regulated by the Australian Securities and Investments Commission (ASIC). Greenstone is also subject to consumer protection regulation and ASIC reviews of insurance products distributed in Australia, including product disclosure and sales procedures. Section Key strengths of Greenstone s business Highlight Summary For more information Leading positions in attractive and high growth markets Greenstone is well positioned in highly attractive insurance markets. Greenstone believes that it has a top two market share in Australian direct life insurance distribution and the leading market share in the Australian pet insurance distribution market. Greenstone also has a significant presence in the online comparison website sector, within which private health insurance is the most significant product sold. From 2009 to 2014, the direct life insurance in-force market in Australia grew at a CAGR of 13.2% 4 driven by factors including customers seeking convenient, simple and affordable life insurance products and increasing receptiveness of customers to transact directly over the phone and the internet. This growth has materially outpaced growth in the broader life insurance market, which grew at a CAGR of 10.9% from 2009 to and is forecast to grow at a CAGR of 11.0% from 2014 to In 1H15, life insurance accounted for 61% of Greenstone s total GWP. The Australian pet insurance market has also grown rapidly between 2009 and 2014 at an estimated CAGR of 48.4%. 7 With approximately 7.5 million pets in Australia and only an estimated 4% of these pets presently covered by pet insurance, Greenstone believes that there is significant further growth potential for this market. In 1H15, pet insurance accounted for 22% of Greenstone s total GWP. Additionally, through Choosi, Greenstone believes that it is also well placed to benefit from the growing propensity of consumers to use comparison websites to easily and quickly compare insurance products. Greenstone s key product offering on Choosi, private health insurance, accounted for 17% of Greenstone s total GWP in 1H15. Section 2 4. Plan for Life Direct Life Insurance Report DEXX&R Market Projections Report, November DEXX&R Market Projections Report, November Based on the policy growth of PetSure Australia Pty Ltd (PetSure), the leading underwriter of pet insurance in Australia with a dominant market share.

16 12 Section 01 Investment overview Greenstone Limited Prospectus Highlight Focussed and differentiated business model Summary Greenstone s focussed approach to the distribution of life insurance is differentiated from traditional models. Simple and affordable products: Greenstone is focussed on leveraging technology and using its single location call centre to improve convenience for customers and build a low cost, efficient distribution model with no dispersed advisor footprint. Scalable channel: Greenstone is focussed on leveraging technology and using its single location call centre to improve convenience for customers and build a low cost, efficient distribution model. Unlike traditional distribution models it does not rely on a dispersed network of advisors. Automated systems and data intelligence: Greenstone has an automated work flow process and a disciplined application of data intelligence. Focussed value proposition: Greenstone carries no underwriting risk and as such can focus solely on design, pricing, distribution, marketing and administration. It is not required to manage appropriate reserving or asset/liability management. Specialist focus on mass market: Greenstone targets mass market customers, who are typically interested in insurance products that have lower policy premiums than those products typically recommended by financial advisers to high net worth clients through indirect channels. Given the costs associated with providing personalised advice in the indirect channel, particularly life insurance, financial advisers are less incentivised to recommend simpler insurance products with lower policy premiums that typically appeal to the mass market customer. For more information Section 3.3 Strong growth and high margins Greenstone commenced operations in 2007 and had more than 350,000 in-force policies and 310,000 individual Australian customers as at 31 December Underlying pro forma EBITDA is forecast to grow by 25.6% from FY15 to FY16 excluding increases due to new business revenue derived from increases in future expected agency payments as a result of new contractual terms with Insurance Carriers and the impact of the Australian Seniors Insurance Agency brand acquisition. 8 Greenstone is forecast to have a pro forma FY16 EBITDA margin of 47%. Section 4.8 Low cost and efficient distribution model Greenstone leverages technology to build a low-cost, efficient distribution model. Greenstone operates in one location, with one call centre and is supported by one call optimisation model. This allows Greenstone to rapidly expand with limited additional fixed costs. Greenstone is not an insurance company and therefore does not have prudential regulatory capital requirements. Section While these items are expected to be sustainable in future periods, the enhanced growth that is generated by these items from FY15 to FY16 is not expected to be recurring.

17 Greenstone Limited Prospectus Section 01 Investment overview Key financial information and dividend policy Topic What is Greenstone s historical and forecast income statement? Summary Pro forma historical Pro forma forecast Pro forma historical $m FY13 FY14 FY15 FY16 1H14 1H15 Agency revenue Administration revenue Other revenue Total revenue Marketing and (95.3) (75.9) (90.5) (92.1) (39.5) (40.7) distribution expenses Employment (43.8) (37.9) (53.3) (51.0) (18.0) (23.5) expenses Occupancy and (8.9) (12.4) (10.8) (12.0) (5.1) (5.4) other expenses Total expenses (148.0) (126.2) (154.6) (155.1) (62.6) (69.6) EBITDA NPAT Note: Refer to Section 4.2 for additional information on the basis of preparation of pro forma historical and forecast information and reconciliations. For more information Section 4.3

18 14 Section 01 Investment overview Greenstone Limited Prospectus Topic What is Greenstone s historical and forecast cash flow statement? What are Greenstone s key performance metrics? Summary Pro forma historical Pro forma forecast Pro forma historical $m FY13 FY14 FY15 FY16 1H14 1H15 EBITDA Movement in (45.4) (47.9) (94.4) (60.1) (24.9) (55.2) the ARRA Movement in other (0.1) (2.7) (8.0) (4.3) (0.1) 4.5 net working capital items Non-cash items in EBITDA Operating free (8.4) cash flow before capital expenditure Total capital (0.1) (3.3) (2.1) (4.0) (1.6) (0.3) expenditure Cash flow before (10.5) financing and tax Interest and other (6.7) costs paid on financial debt Income tax paid (10.8) Repayment of (5.0) existing debt Net cash flow before dividend 47.9 Pro forma historical Pro forma forecast Pro forma historical FY13 FY14 FY15 FY16 1H14 1H15 Gross Written Premium (GWP) ($m) Policies sold ( 000) Retention rate 78.8% 79.8% 80.9% 80.4% 79.5% 80.9% Cost per acquisition ($) Agency revenue na (8%) 27% 18% na 24% growth EBITDA margin 31% 37% 38% 47% 40% 45% EBITDA growth na 13% 26% 47% na 37% NPAT growth na 25% 34% 50% na 46% For more information Section 4.6 Section 3.7 and Section 4.3

19 Greenstone Limited Prospectus Section 01 Investment overview 15 Topic Summary For more information What is Greenstone s dividend policy? The payment of a dividend by Greenstone is subject to the discretion of the Directors and will be a function of a number of factors including the general business environment, the operating results, cash flows and the financial condition of Greenstone, future funding requirements, capital management initiatives, taxation considerations (including the level of Australian franking credits), any contractual, legal or regulatory restrictions on the payment of dividends by Greenstone and any other factors the Directors may consider relevant. The Directors intend to target a payout ratio of 40% to 55% of Adjusted NPAT, which is a measure of reported NPAT adjusted for non-cash basis changes and price adjustment revenue as well as certain other non-recurring items. However, the level of payout ratio is expected to vary between periods depending on the factors above. No assurances can be given by any person, including the Directors, about the payment of any dividends and the level of franking on any such dividends. It is the current intention of the Directors to pay interim dividends in respect of half years ending 31 December and final dividends in respect of half years ending 30 June each year. It is anticipated that interim dividends will be paid in April and final dividends will be paid in October following the relevant financial period. The Board intends to weight dividend payments towards the final dividend. The Directors current intention is that the interim and half year dividends will be franked with Australian tax credits to the maximum extent possible. No assurance can be provided about the level of future dividends or the extent to which any of the dividends will be franked. The Directors intend to have the capacity to implement a dividend reinvestment plan to provide flexibility in the future. Section 4.10 When will the first dividend be paid? The Directors anticipate Greenstone s first dividend will be the interim dividend in respect to the half year ending 31 December 2015 and therefore expect Greenstone s first dividend to be paid in April For the interim and final dividends relating to FY16, the dividends may be franked at less than 100% depending on the franking capacity at that time, recognising that income for tax purposes is expected to be lower than income under accounting principles. Section Summary of key risks The business, assets and operations of Greenstone are subject to certain key risk factors that have the potential to influence operating and financial performance in the future. These risks may impact the value of an investment in Greenstone. Some risks are unforeseeable and accordingly the extent to which these risks can be effectively managed may be limited.

20 16 Section 01 Investment overview Greenstone Limited Prospectus Set out below is a summary of specific key risks to which the Company is exposed. Further detail and additional risks are outlined in Section 5.2. Other general risks associated with an investment in Greenstone are outlined in Section 5.3. Topic Summary For more information Lower than expected future cash receipts derived from the ARRA The ARRA, which had a pro forma book value of $494.5 million as at 31 December 2014, represents the present value of future expected agency payments on all insurance policies in-force based upon multiple actuarially validated assumptions. Actual cash receipts in relation to the ARRA may have a lower value than presently expected, due to nominal cash receipts being lower than forecast. The key assumptions that impact the calculation of the ARRA include, but are not limited to, retention rates, the discount rate and projection periods. Adverse changes in these underlying assumptions could adversely impact the valuation of the ARRA and subsequently Greenstone s revenue, profitability and balance sheet. Section Greenstone is exposed to potential breaches of data security Through the ordinary course of business, Greenstone collects a wide range of personal and financial data from consumers and Affinity Brand Partners. This includes information such as personal contact details as well as payment information and credit card details. There is a risk that the measures taken by Greenstone to prevent any potential data security will be insufficient to detect or prevent breaches. There is a risk that any data security breaches or Greenstone s failure to protect confidential information could result in the loss of information integrity, breaches of Greenstone s obligations under applicable privacy laws, litigation and liability for damages under customer agreements, Affinity Brand Partner agreements and other third party agreements and website and system outages, each of which may potentially adversely impact Greenstone s reputation, revenue and profitability. Section Heightened competition from existing or new competitors The industries in which Greenstone operates are highly competitive and Greenstone actively competes with numerous companies for customers. Heightened competition from new or existing competitors (including comparison websites) could adversely affect Greenstone s revenue or profitability in a number of ways, including but not limited to offering lower prices than Greenstone, building more effective marketing models or outspending Greenstone on marketing to drive leads and market share, having greater brand recognition and therefore larger customer bases, introducing new insurance products that are more attractive to Greenstone s customers or responding to changes in regulations, new technologies or customer preferences or requirements faster and more effectively than Greenstone. Section 5.2.3