Navient : J.P. Morgan Global High Yield & Leveraged Finance Conference (PDF, 562 KB)

J.P. Morgan Global High Yield & Leveraged Finance Conference

February 26, 2019

Forward-Looking Statements; Non-GAAP Financial Measures

The following information is current as of December 31, 2018 (unless otherwise noted) and should be read in connection with Navient Corporation's (Navient) Annual Report on Form 10-K for the year ended

December 31, 2017 (the "2017 Form 10-K"), filed by Navient with the Securities and Exchange Commission (the "SEC") on February 26, 2018 and subsequent reports filed by Navient with the SEC. Definitions for capitalized terms in this presentation not defined herein can be found in our 2017 Form 10-K. This presentation contains "forward-looking" statements and other information that is based on management's current expectations as of the date of this presentation. Statements that are not historical facts, including statements about the company's beliefs, opinions or expectations and statements that assume or are dependent upon future events, are forward-looking statements and often contain words such as "expect," "anticipate," "intend," "plan," "believe," "seek," "see," "will," "would," or "target." Forward-looking statements are subject to risks, uncertainties, assumptions and other factors that may cause actual results to be materially different from those reflected in such forward-looking statements.

For Navient, these factors include, among others, the risks and uncertainties associated with:

• • increases in financing costs;

• • the availability of financing or limits on our liquidity resulting from disruptions in the capital markets or other factors;

• • unanticipated increases in costs associated with compliance with federal, state or local laws and regulations;

• • changes in the demand for asset management and business processing solutions or other changes in marketplaces in which we compete (including increased competition);

• • changes in accounting standards including but not limited to changes pertaining to loan loss reserves and estimates or other accounting standards that may impact our operations;

• • adverse outcomes in any significant litigation to which the company is a party;

• • credit risk associated with the company's underwriting standards or exposure to third parties, including counterparties to the hedging transactions; and

• • changes in the terms of education loans and the educational credit marketplace generally (including changes resulting from new laws and the implementation of existing laws).

The company could also be affected by, among other things:

• • unanticipated repayment trends on loans including prepayments or deferrals in our securitization trusts that could accelerate or delay repayment of the bonds;

• • reductions to our credit ratings, the credit ratings of asset-backed securitizations we sponsor or the credit ratings of the United States of America;

• • failures of our operating systems or infrastructure or those of third-party vendors;

• • risks related to cybersecurity including the potential disruption of our systems or those of our third-party vendors or customers or potential disclosure of confidential customer information;

• • damage to our reputation resulting from cyber-breaches, litigation, the politicization of student loan servicing or other actions or factors;

• • failure to successfully implement cost-cutting initiatives and adverse effects of such initiatives on our business;

• • failure to adequately integrate acquisitions or realize anticipated benefits from acquisitions including delays or errors in converting portfolio acquisitions to our servicing platform;

• • changes in law and regulations whether new laws or regulations or new interpretations of existing laws and regulations applicable to any of our businesses or activities or those of our vendors, suppliers or customers;

• • changes in the general interest rate environment, including the availability of any relevant money market index rate, including LIBOR, or the relationship between the relevant money-market index rate and the rate at which our assets are priced;

• • our ability to successfully effectuate any acquisitions and other strategic initiatives;

• • changes in general economic conditions; and

• • the other factors that are described in the "Risk Factors" section of Navient's Annual Report on Form 10-K and in our other reports filed with the SEC.

The preparation of the company's consolidated financial statements also requires management to make certain estimates and assumptions including estimates and assumptions about future events. These estimates or assumptions may prove to be incorrect and actual results could differ materially. All forward-looking statements contained in this release are qualified by these cautionary statements and are made only as of the date of this presentation. The company does not undertake any obligation to update or revise these forward-looking statements except as required by law.

Navient reports financial results on a GAAP basis and also provides certain non-GAAP performance measures, including Core Earnings, Tangible Net Asset Ratio, and various other non-GAAP financial measures derived from Core Earnings. When compared to GAAP results, Core Earnings exclude the impact of: (1) mark-to-market gains/losses on derivatives; and (2) goodwill and acquired intangible asset amortization and impairment. Navient provides Core Earnings measures because this is what management uses when making management decisions regarding Navient's performance and the allocation of corporate resources. Navient Core Earnings are not defined terms within GAAP and may not be comparable to similarly titled measures reported by other companies. For additional information, see Core Earnings in Navient's fourth quarter earnings release and pages 15 & 16 of this presentation for a further discussion and a complete reconciliation between GAAP net income and Core Earnings.

• • Navient is a leading provider of educational loan management and business processing solutions for education, healthcare, and government clients at the federal, state and local levels. We help our clients and millions of Americans achieve financial success through our services and support.

  • - Industry leading student loan servicer supporting the educational and economic development of our approximately 12 million customers

  • - Offering products that are focused on helping consumers refinance their education loans at the lower rates they have earned

  • - Providing business processing services for healthcare and non-education related government clients

Highlights

• ✓ High-quality loan portfolio generates predictable cash flows, projected to total ~$24 billion over next 20 years

  - PV of cash flows, less unsecured debt, well in excess of current market cap

• ✓ Optimized capital structure and conservative funding approach that ensures excess capital is returned to shareholders

  - Since separation 1, 121% of net income has been returned in dividends and share repurchases

• ✓ Consistent track record of improving operating efficiency and aggressively managing expenses

• ✓ Have successfully leveraged existing infrastructure to generate incremental value with portfolio acquisitions

1 As of June 30, 2014

Education Loan Portfolio Projected to Generate ~$24 Billion In Cash Flows Over Next ~20 Years

Projected Life of Loan Cash Flows over ~20 Years

Enhancing Cash Flows

($'s in Billions)	12/31/18
Total FFELP Cash Flows	$10.2
Total Private Education Cash Flows	$13.8
Combined Cash Flows	$24.0
Unsecured Debt (par value)	$11.6

✓

Numerous improvements in financing efficiencies have minimized the impact from the amortization of the portfolio:

• ‒ Active optimization of facility financing capacity

• ‒ Effective hedging strategies implemented to reduce LIBOR basis risk

• ‒ Innovative financing structures

• ‒ Managing unsecured debt maturities through repurchases and refinancing

✓ Acquired $3.6 billion of student loans in 2018

✓

Generated $2.6 billion of cash flows in 2018

These projections are based on internal estimates and assumptions and are subject to ongoing review and modification. These projections may prove to be incorrect