Mount Logan Capital Inc. (NEO: MLC) (the “Company” or “Mount
Logan”) announced today its financial results for the fourth
quarter and full year ended December 31, 2022. All amounts are
stated in United States dollars, unless otherwise indicated.
Fourth Quarter 2022
Highlights
- Total revenue for the asset
management segment of the Company of $2.7 million, an
increase of $1.0 million as compared to $1.7 million for the third
quarter of 2022. This increase is primarily related to increase in
management and servicing fees resulting from equity earnings from
Opportunistic Credit Interval Fund (“OCIF”).
- Total revenue for the
insurance segment of the Company of $23.9 million, an
increase of $17.5 million as compared to $6.4 million for the third
quarter of 2022. The increase in total revenue for the insurance
segment of the Company is primarily due to the net unrealized
capital gains driven by a change in market interest rates when
compared to net unrealized capital losses in the prior
quarter.
- Obtained a $7.5 million
loan to support growth of Ability Insurance company,
helping Ability grow investment assets to $884.6 million, an
increase of $50.0 million as compared to $833.6 million of
investment assets in the third quarter of 2022.
- Obtained a receipt for its
final short form base shelf prospectus filed with the securities
commissions or similar authorities in each province of
Canada, enabling the Company to offer and issue up to C$45
million of common shares, subscription receipts, warrants and
units, or any combination thereof.
- Invested an additional $4.0
million into OCIF through the Company’s wholly-owned
subsidiary Mount Logan Management LLC (“ML Management”). The
Company launched and completed a seed investment in OCIF on April
29, 2022, a closed- ended, diversified retail fund with a niche
opportunistic investment strategy.
Full Year 2022 Milestones
- Fee Related Earnings
(“FRE”) for the asset management segment of the Company
was $5.9 million, an increase of $1.8 million as compared to $4.1
million in fiscal 2021.
- Total revenue for the asset
management segment of the Company was $9.4 million, an
increase of $0.6 million as compared to $8.8 million for fiscal
2021. The year-over-year increase is primarily related to the
increases seen in management and servicing fees.
- Fee Related Earnings
(“FRE”) for the insurance segment of the Company was $14.2
million, an increase of $15.2 million as compared to ($1.0) million
in fiscal 2021.
- Total revenue for the
insurance segment of the Company of $21.6 million, an
increase of $18.8 million as compared to $2.8 million for fiscal
2021. The comparative increase is largely due to the fact that
fiscal year 2021 figures only cover the period from acquisition of
Ability by the Company on October 29, 2021 to December 31,
2021.
- Entered into an asset
purchase agreement to acquire the right and interests of Garrison
Laurel Funding LP and Garrison Bluebird Funding LP on
January 1, 2022. This transaction, entered alongside ML Management,
strategically positions the Company’s platform to grow the assets
it manages.
- Entered a strategic
arrangement to provide sub-advisory services to a fund in the
United States on August 17, 2022 that provides
credit-related investment opportunities to retail investors,
further growing our asset management fee base.
- Closed on a reinsurance
agreement of multi-year guaranteed annuities (“MYGA”)
policies for up to $150.0 million on April 1, 2022.
- Closed on an additional
reinsurance agreement of MYGA policies for up to $100.0
million on July 1, 2022.
Subsequent Events
- On January 31, 2023,
entered into a membership interest and asset purchase agreement to
acquire all of the membership interests of Ovation Fund Management
II LLC (“Ovation”) and certain assets from Ovation Partners, LP
(the “Ovation Advisor”), a Texas-based specialty-finance
focused asset manager. Pursuant to the agreement, Mount Logan
Management would become the investment advisor to the platform,
which is focused on investments in commercial lending, real estate
lending, consumer finance and litigation finance. In conjunction
with the closing of this transaction, which remains subject to the
satisfaction of the applicable closing conditions, Mount Logan
expects to establish an office in Austin, TX and retain the
existing Ovation team, further bolstering its presence in the
United States and adding a roster of talented and dedicated
professionals to its team.
- Declared a shareholder
distribution in the amount of C$0.02 per common share for
the first quarter of 2023, payable on April 14, 2023 to
shareholders of record at the close of business on April 4, 2023.
This cash dividend marks the fourteenth consecutive quarter of the
Company issuing a C$0.02 distribution to its shareholders. This
dividend is designated by the Company as an eligible dividend for
the purpose of the Income Tax Act (Canada) and any similar
provincial or territorial legislation. An enhanced dividend tax
credit applies to eligible dividends paid to Canadian
residents.
Management Commentary
- Ted Goldthorpe, Chief Executive
Officer and Chairman of Mount Logan stated, “We are excited about
the progress made in 2022 as our strategic positioning of Mount
Logan across the asset management and insurance solutions verticals
produces results. Revenues in our asset management division were up
significantly and improved performance across our managed
portfolios is supporting growth in fee-related earnings despite
challenging market conditions. On the insurance solutions side,
Ability continued to strengthen its team and infrastructure as we
ramped-up reinsurance activities of fixed annuities, growing total
assets. We look forward to continuing the progress made into
2023.”
Selected Financial
Highlights
- Reported net
income available to holders of common shares for fiscal
2022 was $18.2 million. This compares to reported net income of
$28.7 million for fiscal 2021. This decrease in reported net income
reflects the impact of the non-cash change in insurance contract
liabilities and reinsurance assets.
- Adjusted net
income available to holders of common shares for fiscal
2022 was $12.6 million. This compares to reported net income of
$32.9 million for fiscal 2021. Adjusted net income (loss) in the
current and prior year periods excludes transaction costs,
acquisition-related costs (including integration costs), and
amortization of acquisition-related intangible assets for the asset
management segment and certain market-related impacts and
experience-related items for the insurance segment. This decrease
in adjusted net income reflects the impact of the non-cash change
in insurance contract liabilities and reinsurance assets.
- Reported return on equity
("ROE") and adjusted ROE was 21% and 15%, respectively,
for fiscal 2022, compared with 55% and 63%, respectively, for
fiscal 2021. Reported and adjusted ROE decreased in 2022, primarily
due to lower net income and non-cash change in insurance contract
liabilities and reinsurance assets and higher common equity.
- Total Capital for
fiscal 2022 was $159.0 million as compared to $132.0 for fiscal
2021. Total capital consists of debt obligations and total
shareholders’ equity.
- Basic Earnings per share
(“EPS”) was $0.82 for fiscal 2022, a decrease of $0.73
from $1.55 for fiscal 2021. The decrease in EPS stats across basic
and adjusted presentation is largely due to investing activities
including the non-cash change in insurance contract liabilities and
reinsurance assets.
- Adjusted basic EPS
was $0.57 for fiscal 2022, a decrease of $1.20 from $1.77 for
fiscal 2021.
Results of Operations by Segment
|
($ in Thousands)Years ended December
31 |
2022 |
|
|
2021 |
|
|
2020 |
|
|
Reported Results(1) |
|
|
|
|
|
|
|
|
| Asset
management |
|
|
|
|
|
|
|
|
|
Revenue |
$ |
9,419 |
|
|
$ |
8,772 |
|
|
$ |
3,499 |
|
| Expenses |
|
13,119 |
|
|
|
11,515 |
|
|
|
5,157 |
|
| Net income (loss) - asset
management |
|
(3,700 |
) |
|
|
(2,743 |
) |
|
|
(1,658 |
) |
|
Insurance |
|
|
|
|
|
|
|
|
| Revenue |
|
21,641 |
|
|
|
2,807 |
|
|
|
— |
|
| Expenses |
|
(695 |
) |
|
|
(30,810 |
) |
|
|
— |
|
| Net
income (loss) - insurance |
|
22,336 |
|
|
|
33,617 |
|
|
|
— |
|
|
Income before income taxes |
|
18,636 |
|
|
|
30,874 |
|
|
|
(1,658 |
) |
|
Provision for income taxes |
|
(430 |
) |
|
|
(2,144 |
) |
|
|
(1,147 |
) |
|
Net income (loss) |
|
18,206 |
|
|
|
28,730 |
|
|
|
(2,805 |
) |
| Basic EPS |
$ |
0.82 |
|
|
$ |
1.55 |
|
|
$ |
(0.24 |
) |
| Diluted
EPS |
$ |
0.81 |
|
|
$ |
1.54 |
|
|
$ |
(0.24 |
) |
|
Adjusting Items |
|
|
|
|
|
|
|
|
| Asset
management |
|
|
|
|
|
|
|
|
| Transaction costs(2) |
|
(185 |
) |
|
|
(1,977 |
) |
|
|
(765 |
) |
| Acquisition integration
costs(3) |
|
(1,875 |
) |
|
|
(1,448 |
) |
|
|
— |
|
|
Non-cash items(4) |
|
(559 |
) |
|
|
(787 |
) |
|
|
(95 |
) |
|
Impact of adjusting items on expenses |
|
(2,619 |
) |
|
|
(4,212 |
) |
|
|
(860 |
) |
|
Insurance |
|
|
|
|
|
|
|
|
|
Unrealized gain (loss) on investments classified as FVTPL(5) |
|
(46,122 |
) |
|
|
(356 |
) |
|
|
— |
|
|
Impact of adjusting items on revenue |
|
(46,122 |
) |
|
|
(356 |
) |
|
|
— |
|
|
Direct impact of interest rates and equity markets on the valuation
of insurance contracts |
|
41,029 |
|
|
|
356 |
|
|
|
— |
|
| Impacts of investment activity
on the valuation of insurance contract liabilities |
|
13,894 |
|
|
|
34,644 |
|
|
|
— |
|
|
Assumption update |
|
(611 |
) |
|
|
— |
|
|
|
— |
|
|
Impact of adjusting items on expenses |
|
54,312 |
|
|
|
35,000 |
|
|
|
— |
|
|
Adjusted Results |
|
|
|
|
|
|
|
|
| Asset
management |
|
|
|
|
|
|
|
|
| Revenue |
$ |
9,419 |
|
|
$ |
8,772 |
|
|
$ |
3,499 |
|
| Expenses |
|
10,500 |
|
|
|
7,303 |
|
|
|
4,297 |
|
| Net income (loss) - asset
management |
|
(1,081 |
) |
|
|
1,469 |
|
|
|
(798 |
) |
|
Insurance |
|
|
|
|
|
|
|
|
| Revenue |
|
67,763 |
|
|
|
2,807 |
|
|
|
— |
|
| Expenses |
|
53,617 |
|
|
|
(30,810 |
) |
|
|
— |
|
| Net
income (loss) - insurance |
|
14,146 |
|
|
|
33,617 |
|
|
|
— |
|
|
Income before income taxes |
|
13,065 |
|
|
|
35,086 |
|
|
|
(798 |
) |
|
Provision for income taxes |
|
(430 |
) |
|
|
(2,144 |
) |
|
|
(1,147 |
) |
|
Net income (loss) |
|
12,635 |
|
|
|
32,942 |
|
|
|
(1,945 |
) |
| Basic EPS |
$ |
0.57 |
|
|
$ |
1.77 |
|
|
$ |
(0.17 |
) |
| Diluted
EPS |
$ |
0.56 |
|
|
$ |
1.77 |
|
|
$ |
(0.17 |
) |
| (1) |
Certain
comparative figures have been reclassified to conform with the
current year's presentation, including the reclassification of "Net
realized and unrealized gain (loss)" to "Revenue". |
| (2) |
Transaction costs are related to business acquisitions and
strategic initiatives transacted by the Company. |
| (3) |
Acquisition integration costs are consulting and administration
services fees related to integrating a business into the Company.
Acquisition integration costs are recorded in general,
administrative and other expenses. |
| (4) |
Non-cash items include amortization of acquisition-related
intangible assets and impairment of goodwill, if any. |
| (5) |
Reflects unrealized gains and losses on the investment
portfolio during the period, net of investment held as collateral
under the funds withheld or modified coinsurance ("Modco")
reinsurance agreements. This represents an adjustment made to
arrive at a non-IFRS financial measure. |
Asset Management
Total Revenue – Asset Management
|
($ In Thousands)Years ended December
31, |
2022 |
|
2021 |
|
Management and servicing fees |
$ |
7,196 |
|
$ |
4,741 |
| Interest income |
|
1,225 |
|
|
3,179 |
| Dividend income |
|
276 |
|
|
187 |
|
Net gains (losses) from investment activities |
|
722 |
|
|
665 |
|
Total revenue — asset management |
$ |
9,419 |
|
$ |
8,772 |
Fee Related Earnings (“FRE”)
Fee related earnings ("FRE") is a non-IFRS financial measure
used to assess the asset management segment’s generation of profits
from revenues that are measured and received on a recurring basis
and are not dependent on future realization events. The Corporation
calculates FRE, and reconciles FRE to net income from its asset
management activities, as follows:
|
($ in Thousands)Years ended December
31, |
|
2022 |
|
|
|
2021 |
|
|
Net income (loss) and comprehensive income
(loss) |
$ |
18,206 |
|
|
$ |
28,730 |
|
| |
|
|
|
|
|
| Adjustment to net
income (loss) and comprehensive income (loss): |
|
|
|
|
|
| Total revenue -
insurance (1) |
|
(21,641 |
) |
|
|
(2,807 |
) |
| Total
expenses - insurance |
|
(695 |
) |
|
|
(30,810 |
) |
| Net
income - asset management (2) |
|
(4,130 |
) |
|
|
(4,887 |
) |
| Adjustments to non-fee generating
asset management business and other recurring revenue stream: |
|
|
|
|
|
|
Management fee from Ability |
|
2,356 |
|
|
|
314 |
|
|
Interest income |
|
(138 |
) |
|
|
(2,164 |
) |
|
Dividend income |
|
(276 |
) |
|
|
(187 |
) |
|
Net gains (losses) from investment activities |
|
(722 |
) |
|
|
(665 |
) |
|
Administration fees |
|
782 |
|
|
|
1,140 |
|
|
Transaction costs |
|
185 |
|
|
|
1,977 |
|
|
Amortization of intangible assets |
|
559 |
|
|
|
787 |
|
|
Interest and other credit facility expenses |
|
3,564 |
|
|
|
2,807 |
|
|
General, administrative and other |
|
3,650 |
|
|
|
3,229 |
|
|
Income tax (expense) benefit — asset management |
|
29 |
|
|
|
1,717 |
|
|
Fee Related Earnings |
$ |
5,859 |
|
|
$ |
4,068 |
|
|
(1) |
Includes
add-back of management fees paid to ML Management. On October 29,
2021, the Company completed the acquisition of Ability and ML
Management has been engaged as an investment adviser for a portion
of Ability's assets. |
| (2) |
Represents net for asset income management operating
segment. |
Insurance
Total Revenue - Insurance
|
($ in Thousands)Years ended December
31, |
2022 |
|
|
2021(1) |
|
|
Net premiums |
$ |
30,632 |
|
|
$ |
(2,390 |
) |
| Net investment income |
|
55,058 |
|
|
|
6,532 |
|
| Net gains (losses) from
investment activities |
|
(107,581 |
) |
|
|
(1,811 |
) |
| Realized and unrealized gains
(losses) on embedded derivative — funds withheld |
|
38,575 |
|
|
|
(637 |
) |
|
Other income |
|
4,957 |
|
|
|
1,113 |
|
|
Total revenue — insurance |
$ |
21,641 |
|
|
$ |
2,807 |
|
(1) For the period from October 29, 2021
through December 31, 2021.
Insurance Core Earnings
Insurance Core Earnings ("Core Earnings") is a non-IFRS
financial measure which we use in our insurance segment and which
we believe aids investors in better understanding the long-term
earnings capacity and valuation of the business. Core Earnings
allows investors to focus on the Company’s operating performance by
excluding the direct impact of changes in interest rates and equity
markets, changes in actuarial methods and assumptions as well as a
number of other items, outlined below, that we believe are
material, but do not reflect the underlying earnings capacity of
the business.
|
($ in Thousands)Years ended December
31, |
|
2022 |
|
|
|
2021(1) |
|
|
Net income (loss) and comprehensive income
(loss) |
$ |
18,206 |
|
|
$ |
28,730 |
|
| |
|
|
|
|
|
| Adjustment to net
income (loss) and comprehensive income (loss): |
|
|
|
|
|
| Total revenue - asset
management |
|
(9,419 |
) |
|
|
(8,772 |
) |
| Total expenses - asset
management |
|
13,119 |
|
|
|
11,515 |
|
| Income
tax (expense) benefit — asset management |
|
430 |
|
|
|
2,144 |
|
| Net
income - insurance |
|
22,336 |
|
|
|
33,617 |
|
| Items excluded from
Insurance Core Earnings: |
|
|
|
|
|
| Market-related impacts: |
|
|
|
|
|
|
Unrealized gain (loss) on investments classified as FVTPL(2) |
|
(46,122 |
) |
|
|
(356 |
) |
|
Direct impact of interest rates and equity markets on the valuation
of insurance contracts |
|
41,029 |
|
|
|
356 |
|
| Experience-related items: |
|
|
|
|
|
|
Impacts of investment activity on the valuation of insurance
contract liabilities |
|
13,894 |
|
|
|
34,644 |
|
|
Assumption update |
|
(611 |
) |
|
|
— |
|
|
Total items excluded from Core Earnings |
|
8,190 |
|
|
|
34,644 |
|
|
Insurance Core Earnings |
$ |
14,146 |
|
|
$ |
(1,027 |
) |
| (1) |
For the period
from October 29, 2021 through December 31, 2021. |
| (2) |
Reflects unrealized gains and losses on the investment
portfolio during the period, net of investment held as collateral
under the funds withheld or Modco reinsurance agreements. This
represents an adjustment made to arrive at a non-IFRS financial
measure. |
Our audited and consolidated financial statements for the three
and twelve months ended December 31, 2022 and related management’s
discussion and analysis will be available on the Company’s website
at www.mountlogancapital.ca and on SEDAR (www.sedar.com).
Liquidity and Capital Resources
As of December 31, 2022, the asset management segment of the
Company had $56.0 million (par value) of borrowings outstanding, of
which $26.5 million par value had a fixed rate and $29.5 million
par value had a floating rate. This balance was comprised of $29.5
million of outstanding borrowings under a credit facility of a
wholly-owned subsidiary of the Company, $15.0 million of seller
notes due 2031 from the acquisition of Ability, $7.5 million
borrowed by Lind Bridge L.P., a limited partnership of which MLC
is, directly and indirectly, the sole limited partner and sole
general partner due 2029, and $4.0 million of seller notes from the
acquisition of certain assets from Capitala Investment Advisors,
LLC due 2025. Additionally, in both the years ended December 31,
2022 and December 31, 2021, the insurance segment of the Company
had $2.25 million (par value) of surplus debenture from Sentinel
Security Life Insurance Company due in 2023.
Liquid assets, including high-quality assets
that are marketable, can be pledged as security for borrowings, and
can be converted to cash in a time frame that meets liquidity and
funding requirements. As of December 31, 2022 and December 31,
2021, the total liquid assets of the Company were as follows:
|
($ in Thousands)As at December
31, |
2022 |
|
2021 |
|
Cash and cash equivalents |
$ |
65,898 |
|
$ |
44,166 |
| Investments |
|
692,693 |
|
|
787,872 |
| Management fee receivable |
|
1,385 |
|
|
1,179 |
| Receivable for investments
sold |
|
1,249 |
|
|
8,320 |
| Accrued
interest and dividend receivable |
|
16,157 |
|
|
10,056 |
|
Total liquid assets |
$ |
777,382 |
|
$ |
851,593 |
The Company defines working capital as the sum
of cash, restricted cash, investments that mature within one year
of the reporting date, management fees receivable, receivables for
investments sold, accrued interest and dividend receivables, and
premium receivables, less the sum of debt obligations, payables for
investments purchased, amounts due to affiliates, reinsurance
liabilities, and other liabilities that are payable within one year
of the reporting date.
As of December 31, 2022, the Company has working
capital of $155.8 million, reflecting current assets of $200.6
million, offset by current liabilities of $44.8 million, as
compared with working capital of $109.1 million as at December 31,
2021, reflecting current assets of $134.3 million, offset by
current liabilities of $25.2 million. The increase in working
capital is primarily driven by increased cash in the insurance
segment as a result of premium growth through the reinsurance of
MYGA.
Interest Rate Risk
The Company holds certain debt investments with fixed interest
rates that exposes it to fair value interest rate risk. The Company
also holds debt investments with variable interest rates that
exposes it to cash flow interest rate risk and is partially
mitigated with those debt investments subject to an interest rate
floor. The Company also holds a debt obligation subject to variable
interest rates, which partially mitigates it to cash flow interest
rate risk.
The following table summarizes the potential
annualized impact on net income of hypothetical base rate changes
in interest rates on our debt investments and debt obligations
assuming a parallel shift in the yield curve, with all other
variables remaining constant.
| ($ in
Thousands)As at December 31, |
2022 |
|
|
2021 |
|
|
50 basis point increase(1) |
$ |
4,008 |
|
|
$ |
2,067 |
|
| 50
basis point decrease(1) |
|
(4,390 |
) |
|
|
(2,800 |
) |
(1) Losses are presented in brackets and gains are presented as
positive numbers.
Conference Call
The Company will hold a conference call on Thursday, March 30,
2023 at 10:00 a.m. Eastern Time to discuss the fourth quarter and
full year 2022 financial results. Shareholders, prospective
shareholders, and analysts are welcome to listen to the call. To
join the call, please use the dial-in information below. A
recording of the conference call will be available on our Company’s
website www.mountlogancapital.ca in the ‘Investor Relations’
section under “Events”.
Dial-in Toll Free:
1-833-470-1428International Dial-in:
1-404-975-4839Access Code: 737902
About Mount Logan Capital Inc.
Mount Logan Capital Inc. is an alternative asset management and
insurance solutions company that is focused on public and private
debt securities in the North American market and the reinsurance of
annuity products primarily through its wholly-owned subsidiaries
Mount Logan Management LLC (“ML Management”) and Ability Insurance
Company (“Ability”). The Company also actively sources, evaluates,
underwrites, manages, monitors and primarily invests in loans, debt
securities, and other credit-oriented instruments that present
attractive risk-adjusted returns and present low risk of principal
impairment through the credit cycle.
Ability Insurance is a Nebraska domiciled
insurer and reinsurer of long-term care policies acquired by Mount
Logan in the fourth quarter of fiscal year 2021. Ability is unique
in the insurance industry in that its long-term care portfolio’s
morbidity risk has been largely re-insured to third parties, and
Ability is no longer insuring or re-insuring new long-term care
risk.
Non-IFRS Financial Measures
This press release makes reference to certain non-IFRS financial
measures. These measures are not recognized measures under IFRS, do
not have a standardized meaning prescribed by IFRS and may not be
comparable to similar measures presented by other companies.
Rather, these measures are provided as additional information to
complement IFRS financial measures by providing further
understanding of the Company’s results of operations from
management's perspective. The Company’s definitions of non-IFRS
measures used in this press release may not be the same as the
definitions for such measures used by other companies in their
reporting. Non-IFRS measures have limitations as analytical tools
and should not be considered in isolation nor as a substitute for
analysis of the Company’s financial information reported under
IFRS. The Company believes that securities analysts, investors and
other interested parties frequently use non-IFRS financial measures
in the evaluation of issuers. The Company’s management also uses
non-IFRS financial measures in order to facilitate operating
performance comparisons from period to period.
Cautionary Statement Regarding Forward-Looking
Statements
This press release contains forward-looking statements and
information within the meaning of applicable securities
legislation. Forward-looking statements can be identified by the
expressions "seeks", "expects", "believes", "estimates", "will",
"target" and similar expressions. The forward-looking statements
are not historical facts but reflect the current expectations of
the Company regarding future results or events and are based on
information currently available to it. Certain material factors and
assumptions were applied in providing these forward-looking
statements. The forward-looking statements discussed in this
release include, but are not limited to, statements relating to the
Company’s continued transition to an asset management and insurance
platform business and the entering into of further strategic
transactions to diversify the Company’s business and further grow
recurring management fee and other income; the Company’s plans to
focus Ability's business on the reinsurance of annuity products;
the closing of the Ovation Acquisition (as defined below); and
statements regarding the Company’s plans to establish an office in
Austin, Texas following closing of the Ovation Acquisition and to
retain the existing Ovation employee team; the Company’s business
strategy, model, approach and future activities; portfolio
composition and size, asset management activities and related
income, capital raising activities, future credit opportunities of
the Company, portfolio realizations, the protection of stakeholder
value and the expansion of the Company’s loan portfolio. All
forward-looking statements in this press release are qualified by
these cautionary statements. The Company believes that the
expectations reflected in forward-looking statements are based upon
reasonable assumptions; however, the Company can give no assurance
that the actual results or developments will be realized by certain
specified dates or at all. These forward-looking statements are
subject to a number of risks and uncertainties that could cause
actual results or events to differ materially from current
expectations, including that the Company has a limited operating
history with respect to an asset management oriented business
model; Ability may not generate recurring asset management fees or
strategically benefit the Company as expected; the expected
synergies by combining the business of Mount Logan with the
business of Ability may not be realized as expected; the risk that
the Company may not be successful in integrating the business of
Ability without significant use of the Company’s resources and
management’s attention; the risk that Ability may require a
significant investment of capital and other resources in order to
expand and grow the business; the Company does not have a record of
operating an insurance solutions business and is subject to all the
risks and uncertainties associated with a broadening of the
Company’s business; the risk that the Ovation Acquisition may not
be completed and the matters discussed under "Risks Factors" in the
most recently filed annual information form and management
discussion and analysis for the Company. Readers, therefore, should
not place undue reliance on any such forward-looking statements.
Further, a forward-looking statement speaks only as of the date on
which such statement is made. The Company undertakes no obligation
to publicly update any such statement or to reflect new information
or the occurrence of future events or circumstances except as
required by securities laws. These forward-looking statements are
made as of the date of this press release.
This press release is not, and under no
circumstances is it to be construed as, a prospectus or an
advertisement and the communication of this release is not, and
under no circumstances is it to be construed as, an offer to sell
or an offer to purchase any securities in the Company or in any
fund or other investment vehicle. This press release is not
intended for U.S. persons. The Company’s shares are not and will
not be registered under the U.S. Securities Act of 1933, as
amended, and the Company is not and will not be registered under
the U.S. Investment Company Act of 1940 (the “1940 Act”). U.S.
persons are not permitted to purchase the Company’s shares absent
an applicable exemption from registration under each of these Acts.
In addition, the number of investors in the United States, or which
are U.S. persons or purchasing for the account or benefit of U.S.
persons, will be limited to such number as is required to comply
with an available exemption from the registration requirements of
the 1940 Act.
Contacts:Mount Logan Capital
Inc.365 Bay Street, Suite 800Toronto, ON M5H
2V1info@portmanridge.com
Jason RoosChief Financial
OfficerJason.Roos@mountlogancapital.ca
MOUNT LOGAN CAPITAL
INC.CONSOLIDATED STATEMENT OF FINANCIAL
POSITION(in thousands of United States dollars,
except share and per share amounts)
|
As at |
December 31, 2022 |
|
December 31, 2021 |
|
ASSETS |
|
|
|
|
|
|
|
| Asset
Management: |
|
|
|
|
|
|
|
|
Cash |
$ |
1,525 |
|
|
$ |
14,433 |
|
| Restricted cash |
|
53 |
|
|
|
135 |
|
| Due from affiliates |
|
12 |
|
|
|
— |
|
| Investments |
|
30,605 |
|
|
|
35,209 |
|
| Intangible assets |
|
21,501 |
|
|
|
22,060 |
|
| Other assets |
|
4,792 |
|
|
|
4,180 |
|
|
Total assets — asset management |
|
58,488 |
|
|
|
76,017 |
|
| Insurance: |
|
|
|
|
|
|
|
| Cash and cash equivalents |
|
64,373 |
|
|
|
29,733 |
|
| Investments |
|
884,627 |
|
|
|
881,170 |
|
| Reinsurance assets |
|
253,522 |
|
|
|
329,902 |
|
| Intangible assets |
|
5,490 |
|
|
|
2,504 |
|
| Goodwill |
|
55,015 |
|
|
|
55,015 |
|
| Other assets |
|
27,357 |
|
|
|
18,970 |
|
|
Total assets — insurance |
|
1,290,384 |
|
|
|
1,317,294 |
|
|
Total assets |
$ |
1,348,872 |
|
|
$ |
1,393,311 |
|
| LIABILITIES |
|
|
|
|
|
|
|
| Asset
Management |
|
|
|
|
|
|
|
| Due to affiliates |
$ |
1,110 |
|
|
$ |
3,852 |
|
| Debt obligations |
|
53,172 |
|
|
|
42,708 |
|
| Contingent value rights |
|
3,003 |
|
|
|
4,169 |
|
| Accrued expenses and other
liabilities |
|
2,583 |
|
|
|
3,916 |
|
|
Total liabilities — asset management |
|
59,868 |
|
|
|
54,645 |
|
| Insurance |
|
|
|
|
|
|
|
| Debt obligations |
|
2,250 |
|
|
|
2,250 |
|
| Insurance contract
liabilities |
|
825,940 |
|
|
|
942,865 |
|
| Investment contract
liabilities |
|
89,358 |
|
|
|
— |
|
| Funds held under reinsurance
contracts |
|
231,839 |
|
|
|
291,296 |
|
| Reinsurance liabilities |
|
10,380 |
|
|
|
10,528 |
|
| Accrued expenses and other
liabilities |
|
27,093 |
|
|
|
6,421 |
|
|
Total liabilities — insurance |
|
1,186,860 |
|
|
|
1,253,360 |
|
|
Total liabilities |
|
1,246,728 |
|
|
|
1,308,005 |
|
| EQUITY |
|
|
|
|
|
|
|
| Common shares |
|
108,055 |
|
|
|
108,055 |
|
| Warrants |
|
1,129 |
|
|
|
1,129 |
|
| Contributed surplus |
|
7,240 |
|
|
|
7,240 |
|
| Surplus (Deficit) |
|
7,578 |
|
|
|
(9,260 |
) |
| Cumulative translation
adjustment |
|
(21,858 |
) |
|
|
(21,858 |
) |
|
Total equity |
|
102,144 |
|
|
|
85,306 |
|
|
Total liabilities and equity |
$ |
1,348,872 |
|
|
$ |
1,393,311 |
|
MOUNT LOGAN CAPITAL
INC.CONSOLIDATED STATEMENTS OF COMPREHENSIVE
INCOME (LOSS)(in thousands of United States
dollars, except share and per share amounts)
| |
Twelve Months Ended |
|
|
December 31, 2022 |
|
December 31, 2021 |
|
|
|
|
|
| REVENUE |
|
|
|
| Asset
management |
|
|
|
|
Management and servicing fees |
$ |
7,196 |
|
|
$ |
4,741 |
|
| Interest income |
|
1,225 |
|
|
|
3,179 |
|
| Dividend income |
|
276 |
|
|
|
187 |
|
| Net gains (losses) from
investment activities |
|
722 |
|
|
|
665 |
|
|
Total revenue — asset management |
|
9,419 |
|
|
|
8,772 |
|
| Insurance |
|
|
|
| Premium income |
|
|
|
|
Gross premiums |
|
97,119 |
|
|
|
8,573 |
|
|
Premiums ceded to reinsurers |
|
(66,487 |
) |
|
|
(10,963 |
) |
| Net
premiums |
|
30,632 |
|
|
|
(2,390 |
) |
| Net investment income |
|
55,058 |
|
|
|
6,532 |
|
| Net gains (losses) from
investment activities |
|
(107,581 |
) |
|
|
(1,811 |
) |
| Realized and unrealized gains
(losses) on embedded derivative — funds withheld |
|
38,575 |
|
|
|
(637 |
) |
| Other income |
|
4,957 |
|
|
|
1,113 |
|
|
Total revenue — insurance |
|
21,641 |
|
|
|
2,807 |
|
|
Total revenue |
|
31,060 |
|
|
|
11,579 |
|
| EXPENSES |
|
|
|
| Asset
management |
|
|
|
| Administration fees |
|
1,305 |
|
|
|
1,140 |
|
| Transaction costs |
|
185 |
|
|
|
1,977 |
|
| Amortization of intangible
assets |
|
559 |
|
|
|
787 |
|
| Interest and other credit
facility expenses |
|
3,564 |
|
|
|
2,807 |
|
| General, administrative and
other |
|
7,506 |
|
|
|
4,804 |
|
|
Total expenses — asset management |
|
13,119 |
|
|
|
11,515 |
|
| Insurance |
|
|
|
| Policy benefits and claims: |
|
|
|
|
Gross claims and benefits |
|
105,977 |
|
|
|
18,072 |
|
|
Increase (decrease) in insurance contract liabilities |
|
(116,925 |
) |
|
|
(81,192 |
) |
|
Increase (decrease) in investment contract liabilities |
|
1,274 |
|
|
|
— |
|
|
Benefits and expenses ceded to reinsurers |
|
(97,394 |
) |
|
|
(16,515 |
) |
|
(Increase) decrease in reinsurance assets |
|
88,508 |
|
|
|
46,451 |
|
| Net policy benefits and
claims |
|
(18,560 |
) |
|
|
(33,184 |
) |
| Administration fees |
|
7,555 |
|
|
|
1,354 |
|
| Interest expense |
|
113 |
|
|
|
56 |
|
| Insurance expenses |
|
5,065 |
|
|
|
579 |
|
| Other expenses |
|
5,132 |
|
|
|
385 |
|
|
Total expenses — insurance |
|
(695 |
) |
|
|
(30,810 |
) |
|
Total expenses |
|
12,424 |
|
|
|
(19,295 |
) |
|
Income (loss) before taxes |
|
18,636 |
|
|
|
30,874 |
|
|
Income tax (expense) benefit — asset management |
|
(430 |
) |
|
|
(2,144 |
) |
|
Net income (loss) and comprehensive income
(loss) |
$ |
18,206 |
|
|
$ |
28,730 |
|
| Earnings per
share |
|
|
|
|
Basic |
$ |
0.82 |
|
|
$ |
1.55 |
|
|
Diluted |
$ |
0.81 |
|
|
$ |
1.54 |
|
| Dividends per common
share — USD |
$ |
0.06 |
|
|
$ |
0.06 |
|
| Dividends per common
share — CAD |
$ |
0.08 |
|
|
$ |
0.08 |
|
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