Mount Logan Capital Inc. (Cboe Canada: MLC) (“Mount Logan” or the
“Company”) announced today its financial results for the quarter
ended June 30, 2024. All amounts are stated in United States
dollars, unless otherwise indicated.
Second Quarter 2024
Highlights
- Total revenue for the asset
management segment of the Company of $3.4 million, an
increase of $0.4 million, or 13%, as compared to the second quarter
of 2023. The increase is primarily due to growth in fees
attributable to the increase in SOFIX, CLO and sub-advisory fees,
as well as the increase in Ovation management and incentive fees.
Second quarter asset management revenues exclude $1.5 million of
management fees associated with Mount Logan’s management of the
assets of Ability Insurance Company (“Ability”), a wholly-owned
subsidiary of the Company, during the second quarter of 2024, which
increased by $0.6 million, or 58% as compared to second quarter
2023 of $1.0 million.
- Total net investment income
for the insurance segment was $23.5 million for the three
months ended June 30, 2024, an increase of $2.1million, or 10%, as
compared to the second quarter of 2023, driven by an increase in
total insurance investment assets and improvements in yield across
the investment portfolio attributable to deployment of capital in a
higher rate environment. Excluding the funds withheld under
reinsurance contracts and Modco, Ability’s net investment income
was $14.9 million, an increase of $2.2 million, or 17%, as compared
to the second quarter of 2023.
-
8.2%1 yield on the
insurance investment portfolio as of June 30, 2024, due to
ongoing portfolio and capital optimization across the insurance
solutions portfolio alongside the benefit of higher base rates.
Excluding the funds withheld under reinsurance contracts and Modco,
the yield was 8.5%.
- Ability’s total assets
managed by Mount Logan increased to $636.2 million as of
June 30, 2024, up $198.9 million from second quarter 2023 of $437.3
million. As of June 30, 2024, the insurance segment included $1.1
billion in total investment assets, up $142.0 million or 15% from
second quarter 2023 investment assets of $1.0 billion.
- Book value of the insurance
segment as of June 30, 2024 was $88.8 million, an increase
of $48.6 million as compared to $40.2 million for second quarter
2023, driven by higher insurance net income.
- SRE for the insurance
segment increased to $11.6 million for the trailing twelve
months ended June 30, 2024, up $17.0 million from trailing twelve
months ended June 30, 2023 of ($5.4) million primarily driven by an
increase in net investment income and lower operating expenses,
which was partially offset by increased cost of funds. SRE is a
non-IFRS financial measure used to assess the insurance segment’s
generation of profits excluding the impact of certain market
volatility and other one-time, non-core components of insurance
segment income (loss). The Company believes this measure is useful
to securityholders as it provides additional insight into the
underlying economics of the insurance segment.
- FRE for the asset
management segment was $1.6 million for the three months
ended June 30, 2024, an increase of 6.1% compared to second quarter
2023. FRE was $6.6 million for the trailing twelve months ended
June 30, 2024, an increase of $0.7 million, or 12.2%, compared to
the trailing twelve months ended June 30, 2023 of $5.9 million
primarily driven by the previously mentioned revenue improvements,
as well as roll-off of one-time expenses.
Subsequent Events
- Declared a shareholder
distribution in the amount of C$0.02 per common share for
the quarter ended June 30, 2024, payable on August 30, 2024 to
shareholders of record at the close of business on August 22, 2024.
This cash dividend marks the twentieth 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 to announce our second
quarter 2024 results, which demonstrate the earnings power of both
our asset management and insurance segments. Fee Related Earnings,
or FRE, of the asset management segment was up significantly
year-over-year and highlights the growing profitability of our
asset management business. Additionally, our Spread Related
Earnings, or SRE, highlights the continued profitability of our
insurance segment. The integration of our businesses and focus on
profitability are driving better operating performance.”
_______________________________
1The yield is calculated based on the net investment income
excluding reinsured portfolio income less management fees paid to
Mount Logan divided by the average of investments in financial
assets for the current and prior period, and then is
annualized.
Selected Financial
Highlights
- Total Capital of the
Company was $149.7 million as at June 30, 2024, an
increase of $20.2 million as compared to December 31, 2023. Total
capital consists of debt obligations and total shareholders’
equity.
- Consolidated net income (loss) before taxes
was $3.9 million for the three months ended June 30, 2024, an
increase of $4.8 million from $(0.9) million for second quarter
2023. The increase was primarily attributable to revenue growth in
both the segments, asset management and insurance segment. Asset
management revenue increased due to increase in management fees,
and improvement in insurance segment revenue resulted from better
insurance service results and higher investment income. These
improvements were partially offset by an increase in costs related
to MYGA liabilities due to interest accretion on new MYGA business
assumed which was further offset by reduced administrative
expenses.
- Basic Earnings per share (“EPS”) was $0.14 for
the three months ended June 30, 2024, an increase of $0.17 from
$(0.03) for the second quarter 2023.
- Adjusted basic EPS was $0.15 for the second
quarter 2024, an increase of $0.10 from $0.05 for the second
quarter 2023.
Results of Operations by Segment
($ in Thousands)
| |
Three Months Ended |
|
|
Six Months Ended |
|
|
|
June 30, 2024 |
|
|
March 31, 2024 |
|
|
June 30, 2023 |
|
|
June 30, 2024 |
|
|
June 30, 2023 |
|
|
Reported Results (1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Asset
management |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue |
$ |
3,394 |
|
|
$ |
4,030 |
|
|
$ |
2,996 |
|
|
$ |
7,424 |
|
|
$ |
4,922 |
|
| Expenses |
|
6,651 |
|
|
|
7,615 |
|
|
|
6,133 |
|
|
|
14,266 |
|
|
|
11,973 |
|
| Net income (loss) – asset
management |
|
(3,257 |
) |
|
|
(3,585 |
) |
|
|
(3,137 |
) |
|
|
(6,842 |
) |
|
|
(7,051 |
) |
|
Insurance |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Revenue (2) |
|
15,746 |
|
|
|
17,555 |
|
|
|
9,667 |
|
|
|
33,301 |
|
|
|
19,853 |
|
| Expenses |
|
8,642 |
|
|
|
822 |
|
|
|
7,433 |
|
|
|
9,464 |
|
|
|
42,892 |
|
| Net
income (loss) – insurance |
|
7,104 |
|
|
|
16,733 |
|
|
|
2,234 |
|
|
|
23,837 |
|
|
|
(23,039 |
) |
|
Income before income taxes |
|
3,847 |
|
|
|
13,148 |
|
|
|
(903 |
) |
|
|
16,995 |
|
|
|
(30,090 |
) |
|
Provision for income taxes |
|
(265 |
) |
|
|
(56 |
) |
|
|
248 |
|
|
|
(321 |
) |
|
|
(17 |
) |
|
Net income (loss) |
$ |
3,582 |
|
|
$ |
13,092 |
|
|
$ |
(655 |
) |
|
$ |
16,674 |
|
|
$ |
(30,107 |
) |
| Basic EPS |
$ |
0.14 |
|
|
$ |
0.51 |
|
|
$ |
(0.03 |
) |
|
$ |
0.65 |
|
|
$ |
(1.36 |
) |
| Diluted
EPS |
$ |
0.14 |
|
|
$ |
0.50 |
|
|
$ |
(0.03 |
) |
|
$ |
0.64 |
|
|
$ |
(1.36 |
) |
|
Adjusting Items |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Asset
management |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Transaction costs (3) |
|
— |
|
|
|
(251 |
) |
|
|
(1,278 |
) |
|
|
(251 |
) |
|
|
(1,436 |
) |
| Acquisition integration costs
(4) |
|
— |
|
|
|
(250 |
) |
|
|
(375 |
) |
|
|
(250 |
) |
|
|
(750 |
) |
|
Non-cash items (5) |
|
(346 |
) |
|
|
(346 |
) |
|
|
(140 |
) |
|
|
(692 |
) |
|
|
(280 |
) |
|
Impact of adjusting items on expenses |
|
(346 |
) |
|
|
(847 |
) |
|
|
(1,793 |
) |
|
|
(1,193 |
) |
|
|
(2,466 |
) |
|
Adjusted Results |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Asset
management |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Revenue |
$ |
3,394 |
|
|
$ |
4,030 |
|
|
$ |
2,996 |
|
|
$ |
7,424 |
|
|
$ |
4,922 |
|
| Expenses |
|
6,305 |
|
|
|
6,768 |
|
|
|
4,340 |
|
|
|
13,073 |
|
|
|
9,507 |
|
| Net
income (loss) – asset management |
|
(2,911 |
) |
|
|
(2,738 |
) |
|
|
(1,344 |
) |
|
|
(5,649 |
) |
|
|
(4,585 |
) |
|
Income before income taxes |
|
4,193 |
|
|
|
13,995 |
|
|
|
890 |
|
|
|
18,188 |
|
|
|
(27,624 |
) |
|
Provision for income taxes |
|
(265 |
) |
|
|
(56 |
) |
|
|
248 |
|
|
|
(321 |
) |
|
|
(17 |
) |
|
Net income (loss) |
$ |
3,928 |
|
|
$ |
13,939 |
|
|
$ |
1,138 |
|
|
$ |
17,867 |
|
|
$ |
(27,641 |
) |
| Basic EPS |
$ |
0.15 |
|
|
$ |
0.54 |
|
|
$ |
0.05 |
|
|
$ |
0.69 |
|
|
$ |
(1.25 |
) |
| Diluted
EPS |
$ |
0.15 |
|
|
$ |
0.54 |
|
|
$ |
0.05 |
|
|
$ |
0.69 |
|
|
$ |
(1.25 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Weighted-average number of
common shares outstanding |
|
25,797,739 |
|
|
|
25,745,692 |
|
|
|
22,190,195 |
|
|
|
25,771,715 |
|
|
|
22,192,168 |
|
| Weighted-average number of
diluted common shares outstanding |
|
25,999,552 |
|
|
|
25,949,237 |
|
|
|
22,190,195 |
|
|
|
25,973,528 |
|
|
|
22,192,168 |
|
(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) Insurance Revenue line item is presented net of
insurance service expenses and net expenses from reinsurance
contracts held.(3) Transaction costs are related to business
acquisitions and strategic initiatives transacted by the
Company.(4) 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.(5) Non-cash items include
amortization of acquisition-related intangible assets and
impairment of goodwill, if any.
Asset Management
Total Revenue – Asset Management
| ($ in
Thousands) |
|
Three Months Ended |
|
|
Six Months Ended |
|
|
|
|
June 30, 2024 |
|
|
June 30, 2023 |
|
|
June 30, 2024 |
|
|
June 30, 2023 |
|
|
Management and incentive fee |
|
$ |
3,832 |
|
|
$ |
2,146 |
|
|
$ |
7,326 |
|
|
$ |
3,383 |
|
| Equity investment earning |
|
|
(57 |
) |
|
|
452 |
|
|
|
167 |
|
|
|
920 |
|
| Interest income |
|
|
272 |
|
|
|
271 |
|
|
|
543 |
|
|
|
539 |
|
| Dividend income |
|
|
113 |
|
|
|
109 |
|
|
|
225 |
|
|
|
165 |
|
| Net gains (losses) from
investment activities |
|
|
(766 |
) |
|
|
18 |
|
|
|
(837 |
) |
|
|
(85 |
) |
|
Total revenue — asset management |
|
$ |
3,394 |
|
|
$ |
2,996 |
|
|
$ |
7,424 |
|
|
$ |
4,922 |
|
Quarter Ended Fee Related Earnings (“FRE”)
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 Company
calculates FRE, and reconciles FRE to net income from its asset
management activities, as follows:
| ($ in
Thousands) |
Three Months Ended |
|
|
Six Months Ended |
|
|
|
June 30, 2024 |
|
June 30, 2023 |
|
|
June 30, 2024 |
|
June 30, 2023 |
|
|
Net income (loss) and comprehensive income
(loss) |
|
3,582 |
|
|
(655 |
) |
|
$ |
16,674 |
|
$ |
(30,107 |
) |
| |
|
|
|
|
|
|
|
|
|
| Adjustment to net
income (loss) and comprehensive income (loss): |
|
|
|
|
|
|
|
|
|
| Total revenue – insurance
(1) |
|
(15,746 |
) |
|
(9,667 |
) |
|
|
(33,301 |
) |
|
(19,853 |
) |
| Total
expenses – insurance |
|
8,642 |
|
|
7,433 |
|
|
|
9,464 |
|
|
42,892 |
|
|
Net income – asset management (2) |
|
(3,522 |
) |
|
(2,889 |
) |
|
$ |
(7,163 |
) |
$ |
(7,068 |
) |
| Adjustments to non-fee
generating asset management business and other recurring revenue
stream: |
|
|
|
|
|
|
|
|
|
|
Management fee from Ability |
|
1,529 |
|
|
969 |
|
|
|
2,958 |
|
|
1,792 |
|
|
Interest income |
|
(1 |
) |
|
— |
|
|
|
(1 |
) |
|
— |
|
|
Dividend income |
|
(113 |
) |
|
(109 |
) |
|
|
(225 |
) |
|
(165 |
) |
|
Net gains (losses) from investment activities |
|
766 |
|
|
(18 |
) |
|
|
837 |
|
|
85 |
|
|
Administration and servicing fees |
|
429 |
|
|
313 |
|
|
|
795 |
|
|
487 |
|
|
Transaction costs |
|
— |
|
|
1,278 |
|
|
|
251 |
|
|
1,436 |
|
|
Amortization of intangible assets |
|
346 |
|
|
140 |
|
|
|
692 |
|
|
280 |
|
|
Interest and other credit facility expenses |
|
1,661 |
|
|
1,403 |
|
|
|
3,363 |
|
|
2,657 |
|
|
General, administrative and other |
|
505 |
|
|
422 |
|
|
|
1,738 |
|
|
3,378 |
|
|
Fee Related Earnings |
$ |
1,600 |
|
$ |
1,509 |
|
|
$ |
3,245 |
|
$ |
2,882 |
|
(1) Includes add-back of management fees paid to
ML Management (as defined below).
(2) Represents net income for asset management, as presented in
the Interim Consolidated Statement of Comprehensive Income
(Loss).
The following table presents FRE, the performance measure of our
asset management segment for the trailing twelve month period ended
June 30, 2024 and June 30, 2023 respectively:
Trailing Twelve Month FRE
| ($ in
Thousands) |
Trailing Twelve Months Ended |
|
|
|
June 30, 2024 |
|
June 30, 2023 |
|
|
Net income (loss) and comprehensive income
(loss) |
|
30,325 |
|
|
(10,801 |
) |
| |
|
|
|
|
| Adjustment to net
income (loss) and comprehensive income (loss): |
|
|
|
|
| Total revenue – insurance
(1) |
|
(82,591 |
) |
|
(27,791 |
) |
| Total
expenses – insurance |
|
36,659 |
|
|
28,696 |
|
| Net income – asset management
(2) |
|
(15,607 |
) |
|
(9,896 |
) |
| Adjustments to non-fee
generating asset management business and other recurring revenue
stream: |
|
|
|
|
|
Management fee from Ability |
|
5,413 |
|
|
3,139 |
|
|
Interest income |
|
(1 |
) |
|
(37 |
) |
|
Dividend income |
|
(644 |
) |
|
(165 |
) |
|
Net gains (losses) from investment activities |
|
941 |
|
|
(438 |
) |
|
Administration and servicing fees |
|
1,344 |
|
|
828 |
|
|
Transaction costs |
|
2,536 |
|
|
1,621 |
|
|
Amortization of intangible assets |
|
1,384 |
|
|
441 |
|
|
Interest and other credit facility expenses |
|
6,683 |
|
|
4,694 |
|
|
General, administrative and other |
|
4,565 |
|
|
5,708 |
|
|
Fee Related Earnings |
$ |
6,614 |
|
$ |
5,895 |
|
(1) Includes add-back of management fees paid to ML
Management.
(2) Represents net income for asset management, as presented in
the Interim Consolidated Statement of Comprehensive Income
(Loss).
Insurance
IFRS 17 Insurance Contracts (“IFRS 17”) is
effective for years beginning as of January 1, 2023, and has been
applied retrospectively with a transition date of January 1, 2022.
IFRS 17 does not impact the underlying economics of the business,
nor does it impact the Company’s business strategies.
Total Revenue – Insurance
($ in Thousands)
| |
|
Three Months Ended |
|
|
Six Months Ended |
|
|
|
|
June 30, 2024 |
|
|
June 30, 2023 |
|
|
June 30, 2024 |
|
|
June 30, 2023 |
|
|
Insurance service result |
|
$ |
(2,430 |
) |
|
$ |
(8,728 |
) |
|
$ |
(5,522 |
) |
|
$ |
(13,689 |
) |
| Net investment income |
|
|
23,488 |
|
|
|
21,349 |
|
|
|
45,292 |
|
|
|
41,571 |
|
| Net gains (losses) from
investment activities |
|
|
(1,535 |
) |
|
|
1,568 |
|
|
|
1,131 |
|
|
|
4,177 |
|
| Realized and unrealized gains
(losses) on embedded derivative — funds withheld |
|
|
(3,777 |
) |
|
|
(4,679 |
) |
|
|
(7,606 |
) |
|
|
(12,363 |
) |
| Other
income |
|
|
— |
|
|
|
157 |
|
|
|
6 |
|
|
|
157 |
|
|
Total revenue — net of insurance services expenses and net
expenses from reinsurance |
|
$ |
15,746 |
|
|
$ |
9,667 |
|
|
$ |
33,301 |
|
|
$ |
19,853 |
|
Spread Related
Earnings (“SRE”)
Effective March 31, 2024, the Company has introduced a new
non-IFRS measure, SRE. The Company uses SRE to assess the
performance of the insurance segment, excluding the impact of
certain market volatility and other one-time, non-core components
of insurance segment income (loss). Excluded items under SRE are
investment gains (losses), effects of discount rates and other
financial variables on the value of insurance obligations (which is
a component of “net insurance finance income/(expense)”), other
income and certain general, administrative & other
expenses. The Company believes this measure is useful to
securityholders as it provides additional insight into the
underlying economics of the insurance segment, as further discussed
below.
For the insurance segment, SRE equals the sum of (i) the net
investment income on the insurance segment’s net invested assets
(excluding investment income earned on funds held under reinsurance
contracts) less (ii) cost of funds (as described below) and (iii)
certain operating expenses.
Cost of funds includes the impact of interest accretion on
insurance and investment contract liabilities and amortization of
losses recognized for new insurance contracts that are deemed
onerous at initial recognition. It also includes experience
adjustments which represents the difference between actual and
expected cashflows and includes the impact of certain changes to
non-financial assumptions.
The Company reconciles SRE to net income (loss) before tax from
its insurance segment activities, as follows:
| |
Three Months Ended |
|
|
|
Q2-2024 |
|
Q1-2024 |
|
Q4-2023 |
|
Q3-2023 |
|
Q2-2023 |
|
Q1-2023 |
|
Q4-2022 |
|
Q3-2022 |
|
|
Net income (loss) and comprehensive income (loss) before
tax |
$ |
3,847 |
|
$ |
13,148 |
|
$ |
(1,946 |
) |
$ |
16,243 |
|
$ |
(903 |
) |
$ |
(29,187 |
) |
$ |
4,901 |
|
$ |
14,490 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Adjustment to net
income (loss) and comprehensive income (loss): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total revenue - asset
management (1) |
|
(3,394 |
) |
|
(4,030 |
) |
|
(3,723 |
) |
|
(3,186 |
) |
|
(2,996 |
) |
|
(1,926 |
) |
|
(2,651 |
) |
|
(2,139 |
) |
| Total
expenses - asset management |
|
6,651 |
|
|
7,615 |
|
|
7,839 |
|
|
6,868 |
|
|
6,133 |
|
|
5,840 |
|
|
4,132 |
|
|
3,401 |
|
| Net income - insurance
(2) |
|
7,104 |
|
|
16,733 |
|
|
2,170 |
|
|
19,925 |
|
|
2,234 |
|
|
(25,273 |
) |
|
6,382 |
|
|
15,752 |
|
| Adjustments to Insurance
segment business: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Management fees to ML
Management |
|
(1,529 |
) |
|
(1,429 |
) |
|
(1,345 |
) |
|
(1,110 |
) |
|
(969 |
) |
|
(823 |
) |
|
(740 |
) |
|
(607 |
) |
| Net (gains) losses from
investment activities(3) |
|
887 |
|
|
(2,995 |
) |
|
(10,116 |
) |
|
(2,113 |
) |
|
(1,454 |
) |
|
1,493 |
|
|
(3,418 |
) |
|
12,439 |
|
| Other Income(4) |
|
— |
|
|
— |
|
|
(7,353 |
) |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
| Net insurance finance
(income)/expense(5) |
|
(5,442 |
) |
|
(11,769 |
) |
|
14,399 |
|
|
(17,684 |
) |
|
(5,275 |
) |
|
20,650 |
|
|
(924 |
) |
|
(31,286 |
) |
| Loss on onerous
contracts(6) |
|
945 |
|
|
6,884 |
|
|
286 |
|
|
2,451 |
|
|
4,214 |
|
|
490 |
|
|
— |
|
|
— |
|
|
General, administrative and other(7) |
|
464 |
|
|
447 |
|
|
502 |
|
|
1,289 |
|
|
1,546 |
|
|
144 |
|
|
— |
|
|
— |
|
|
Spread Related Earnings |
$ |
2,429 |
|
$ |
7,871 |
|
$ |
(1,457 |
) |
$ |
2,758 |
|
$ |
296 |
|
$ |
(3,319 |
) |
$ |
1,300 |
|
$ |
(3,702 |
) |
(1) Includes add-back of management fees paid by Ability to ML
Management.
(2) Represents net income for insurance segment, as presented in
the Interim Consolidated Statement of Comprehensive Income
(Loss).
(3) Excludes net (gains) losses from investment activities on
assets retained by the Company under funds withheld arrangement
with Front Street Re and Vista.
(4) Represents non-operating income.
(5) Includes the impact of changes in interest rates and other
financials assumptions and excludes interest accretion on insurance
contract liabilities and reinsurance contract assets.
(6) Represents the unamortized portion of future interest
accretion and ceded commissions paid at the time of issue of new
MYGA insurance contracts. Future interest accretion and ceded
commissions are amortized over the average duration of MYGA
contracts reinsured which aligns with the recognition of insurance
service revenue. Loss on onerous contracts are part of Insurance
service expense.
(7) Represents certain costs incurred by the insurance segment
for purposes of IFRS reporting but not the day to day operations of
the insurance company.The following table presents SRE, the
performance measure of the insurance segment:
($ in Thousands)
| |
Trailing Twelve Months Ended |
|
|
|
June 30,2024 |
|
June 30,2023 |
|
|
Fixed Income and other investment income, net(1) |
$ |
52,118 |
|
$ |
36,780 |
|
| Cost of
funds |
|
(31,272 |
) |
|
(29,765 |
) |
|
Net Investment spread |
|
20,846 |
|
|
7,015 |
|
| Other
operating expenses |
|
(9,245 |
) |
|
(12,441 |
) |
|
Spread Related Earnings |
|
11,601 |
|
|
(5,426 |
) |
|
SRE % of Average Net Investments |
|
1.9 |
% |
|
-1.2 |
% |
(1) Excludes net investment income from investment activities on
assets retained by the Company under funds withheld arrangement
with Front Street Re and Vista Life and Casualty Reinsurance
Company (“Vista”).
SRE was $11.6 million for the trailing twelve
months ended June 30, 2024 compared with ($5.4) million for the
trailing twelve months ended June 30, 2023, an increase of $17.0
million. SRE increased year over year due to increased investment
income, and lower other operating expenses, which was partially
offset by increased cost of funds. Investment income increased
primarily due to an increase in total insurance investment assets
as a result of new MYGA business and improvements in yield across
the investment portfolio attributable to deployment of capital in a
higher rate environment. Cost of funds increased primarily because
of increase in interest accretion on MYGA contract liabilities due
to addition of new MYGA business, partially offset by the one-time
benefit of $4.8 million in the first quarter of 2024 as a result of
an in-force update to Long Term Care business. Other operating
expenses decreased as a result of efforts to reduce overall
operating cost.
SRE as a percentage of average net invested
assets was 1.9% for the trailing twelve months ended June 30, 2024
compared with (1.2)% for the trailing twelve months ended June 30,
2023.
Liquidity and Capital Resources
As of June 30, 2024, the asset management
segment had $71.8 million (par value) of borrowings outstanding, of
which $33.8 million had a fixed rate and $38 million had a floating
rate. As of June 30, 2024, the insurance segment had $14.3 million
(par value) of borrowings outstanding. Liquid assets, including
high-quality assets that are marketable, can be pledged as security
for borrowings, and can be converted to cash in a time frame that
meets liquidity and funding requirements. As of June 30, 2024 and
December 31, 2023, the total liquid assets of the Company were as
follows:
($ in Thousands)
|
As at |
|
June 30, 2024 |
|
|
December 31, 2023 |
|
|
Cash and cash equivalents |
|
$ |
87,701 |
|
|
$ |
90,220 |
|
| Restricted cash posted as
collateral |
|
|
13,324 |
|
|
|
— |
|
| Investments |
|
|
644,503 |
|
|
|
643,578 |
|
| Management fee receivable |
|
|
2,945 |
|
|
|
2,599 |
|
| Receivable for investments
sold |
|
|
352 |
|
|
|
6,511 |
|
| Accrued
interest and dividend receivable |
|
|
20,291 |
|
|
|
19,340 |
|
| Total
liquid assets |
|
$ |
769,116 |
|
|
$ |
762,248 |
|
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 at June 30, 2024, the Company had working
capital of $211.1 million, reflecting current assets of $227.3
million, offset by current liabilities of $16.1 million, as
compared with working capital of $183.4 million as at December 31,
2023, reflecting current assets of $230.8 million, offset by
current liabilities of $47.4 million. The increase in working
capital was driven by settlement of payables related to MYGA
against the new MYGA policies assumed. It is further due to
increased cash in the asset management segment from increased
management and incentive fee receipts and net proceeds from the
issuance of debenture units, as well as a decrease in due to
affiliates in the asset management segment driven by timing of
repayment of operating expenses paid by BC Partners on behalf of
the Company to third-party providers of goods or services and
administrative fees.
Interest Rate Risk
The Company has obligations to policyholders and
other debt obligations that expose it to interest rate risk. The
Company also owns debt assets and interest rate swaps that are
exposed to interest rate risk. The fair value of these obligations
and assets may change if base rate changes in interest rates
occur.
The following table summarizes the potential
impact on net assets of hypothetical base rate changes in interest
rates assuming a parallel shift in the yield curve, with all other
variables remaining constant.
|
As at |
|
June 30, 2024 |
|
|
December 31, 2023 |
|
|
50 basis point increase (1) |
|
$ |
11,269 |
|
|
$ |
20,186 |
|
| 50
basis point decrease (1) |
|
|
(18,265 |
) |
|
|
(21,860 |
) |
(1) Losses are presented in brackets and gains
are presented as positive numbers.
Actual results may differ significantly from
this sensitivity analysis. As such, the sensitivities should only
be viewed as directional estimates of the underlying sensitivities
for the respective factors based on the assumptions outlined
above.
Conference Call
The Company will hold a conference call on
Friday, August 9, 2024 at 12:00 p.m. Eastern Time to discuss the
second quarter 2024 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”.
Canada Dial-in Toll Free: 1-226-828-7575US
Dial-in Toll Free: 1-833-470-1428International Dial-in:
1-929-526-1599Access Code: 563266
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”),
respectively. 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 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.
Opportunistic Credit Interval Fund Important
Disclosures
An investor should consider the investment objectives, risks,
charges, and expenses of SOFIX carefully before investing. To
obtain a copy of the prospectus containing this and other
information, please call (833) 404-4103 or download the file from
www.opportunisticcreditintervalfund.com. Read the prospectus
carefully before you invest.
Investing involves risk. Investment return and the principal
value of an investment will fluctuate, and an Investor’s shares,
when redeemed, may be worth more or less than their original cost.
SOFIX is subject to the general risks associated with investing in
debt and loan instruments, including market, credit, liquidity, and
interest rate risk. The Fund is subject to management and other
expenses, which will be paid by SOFIX. Because of the risks
associated with SOFIX’s ability to use leverage, an investment in
SOFIX should be considered speculative and involving a high degree
of risk, including the risk of a substantial loss of
investment.
There currently is no secondary market for SOFIX 's shares and
SOFIX expects that no secondary market will develop. Shares of
SOFIX will not be listed on any securities exchange, which makes
them inherently illiquid. An investment in SOFIX 's shares is not
suitable for investors who cannot tolerate risk of loss or who
require liquidity, other than the liquidity provided through the
SOFIX 's repurchase policy. Limited liquidity is provided to
shareholders only through SOFIX's quarterly repurchase offers,
regardless of how SOFIX performs. SOFIX 's distributions policy
may, under certain circumstances, have certain adverse consequences
to SOFIX and its shareholders because it may result in a return of
capital, resulting in less of a shareholder's assets being invested
in SOFIX, and, over time, increase SOFIX 's expense ratio. Any
invested capital that is returned to the shareholder will be
reduced by the SOFIX's fees and expenses, as well as the applicable
sales load. Investments in lesser-known, small and medium
capitalization companies may be more vulnerable than larger, more
established organizations. The sales of securities to fund
repurchases could reduce the market price of those securities,
which in turn would reduce the SOFIX's NAV.
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
and increasing Ability’s assets; the Company’s plans to focus
Ability’s business on the reinsurance of annuity products; the
potential benefits of combining Mount Logan’s and Ovation’s
platform including an increase in fee-related earnings as a result
of the acquisition; the decrease in expenses in the asset
management segment; the historical growth in the asset management
segment and insurance segment being an indicator for future growth;
the growth and scalability of the Company’s business 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; the expansion of the Company’s loan portfolio; the ongoing
impact of the implementation of new accounting standards, including
IFRS 17; and the expansion of Mount Logan’s capabilities. 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,
increase its assets 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 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 expected synergies of the acquisition
of Ovation may not be realized as expected 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@mountlogancapital.ca
Nikita KlassenChief Financial
OfficerNiktia.Klassen@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 |
|
Notes |
|
June 30, 2024 |
|
|
December 31, 2023 |
|
| ASSETS |
|
|
|
|
|
|
|
|
| Asset
Management: |
|
|
|
|
|
|
|
|
|
Cash |
|
|
|
$ |
2,868 |
|
|
$ |
990 |
|
| Investments |
|
6 |
|
|
23,923 |
|
|
|
26,709 |
|
| Intangible assets |
|
9 |
|
|
28,087 |
|
|
|
28,779 |
|
| Other
assets |
|
|
|
|
7,361 |
|
|
|
6,593 |
|
|
Total assets — asset management |
|
|
|
|
62,239 |
|
|
|
63,071 |
|
|
Insurance: |
|
|
|
|
|
|
|
|
| Cash and cash equivalents |
|
|
|
|
84,833 |
|
|
|
89,230 |
|
| Restricted cash posted as
collateral |
|
18 |
|
|
13,324 |
|
|
|
- |
|
| Investments |
|
6 |
|
|
1,061,649 |
|
|
|
1,008,637 |
|
| Reinsurance contract
assets |
|
13 |
|
|
412,496 |
|
|
|
442,673 |
|
| Intangible assets |
|
9 |
|
|
2,444 |
|
|
|
2,444 |
|
| Goodwill |
|
9 |
|
|
55,015 |
|
|
|
55,015 |
|
| Other
assets |
|
|
|
|
22,416 |
|
|
|
27,508 |
|
|
Total assets — insurance |
|
|
|
|
1,652,177 |
|
|
|
1,625,507 |
|
|
Total assets |
|
|
|
$ |
1,714,416 |
|
|
$ |
1,688,578 |
|
|
LIABILITIES |
|
|
|
|
|
|
|
|
| Asset
Management |
|
|
|
|
|
|
|
|
| Due to affiliates |
|
10 |
|
$ |
12,822 |
|
|
$ |
12,113 |
|
| Debt obligations |
|
12 |
|
|
66,220 |
|
|
|
62,030 |
|
| Derivatives - debt
warrants |
|
12 |
|
|
279 |
|
|
|
— |
|
| Accrued
expenses and other liabilities |
|
|
|
|
3,533 |
|
|
|
3,494 |
|
|
Total liabilities — asset management |
|
|
|
|
82,854 |
|
|
|
77,637 |
|
|
Insurance |
|
|
|
|
|
|
|
|
| Debt obligations |
|
12 |
|
|
14,250 |
|
|
|
14,250 |
|
| Insurance contract
liabilities |
|
13 |
|
|
1,072,017 |
|
|
|
1,107,056 |
|
| Investment contract
liabilities |
|
14 |
|
|
223,674 |
|
|
|
169,314 |
|
| Derivatives |
|
18 |
|
|
2,459 |
|
|
|
- |
|
| Funds held under reinsurance
contracts |
|
|
|
|
240,121 |
|
|
|
238,253 |
|
| Accrued
expenses and other liabilities |
|
|
|
|
10,883 |
|
|
|
30,116 |
|
|
Total liabilities — insurance |
|
|
|
|
1,563,404 |
|
|
|
1,558,989 |
|
|
Total liabilities |
|
|
|
|
1,646,258 |
|
|
|
1,636,626 |
|
| EQUITY |
|
|
|
|
|
|
|
|
| Common shares |
|
11 |
|
|
115,897 |
|
|
|
115,607 |
|
| Warrants |
|
11 |
|
|
1,129 |
|
|
|
1,129 |
|
| Contributed surplus |
|
|
|
|
7,240 |
|
|
|
7,240 |
|
| Surplus (Deficit) |
|
|
|
|
(34,250 |
) |
|
|
(50,166 |
) |
|
Cumulative translation adjustment |
|
|
|
|
(21,858 |
) |
|
|
(21,858 |
) |
|
Total equity |
|
|
|
|
68,158 |
|
|
|
51,952 |
|
|
Total liabilities and equity |
|
|
|
$ |
1,714,416 |
|
|
$ |
1,688,578 |
|
|
MOUNT LOGAN CAPITAL INC.CONSOLIDATED STATEMENTS OF
COMPREHENSIVE INCOME (LOSS)(in thousands of United States dollars,
except share and per share amounts) |
|
|
| |
|
|
Three months ended |
|
|
Six months ended |
|
|
|
|
Notes |
June 30, 2024 |
|
|
June 30, 2023 |
|
|
June 30, 2024 |
|
|
June 30, 2023 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| REVENUE |
|
|
|
|
|
|
|
|
|
|
|
|
|
| Asset
management |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Management and incentive fee |
|
7 |
$ |
3,832 |
|
|
$ |
2,146 |
|
|
$ |
7,326 |
|
|
$ |
3,383 |
|
| Equity investment earning |
|
|
|
(57 |
) |
|
|
452 |
|
|
|
167 |
|
|
|
920 |
|
| Interest income |
|
|
|
272 |
|
|
|
271 |
|
|
|
543 |
|
|
|
539 |
|
| Dividend income |
|
|
|
113 |
|
|
|
109 |
|
|
|
225 |
|
|
|
165 |
|
| Net
gains (losses) from investment activities |
|
4 |
|
(766 |
) |
|
|
18 |
|
|
|
(837 |
) |
|
|
(85 |
) |
|
Total revenue — asset management |
|
|
|
3,394 |
|
|
|
2,996 |
|
|
|
7,424 |
|
|
|
4,922 |
|
|
Insurance |
|
|
|
|
|
|
|
|
|
|
|
|
|
| Insurance revenue |
|
8 |
|
22,887 |
|
|
|
22,015 |
|
|
|
45,628 |
|
|
|
43,820 |
|
| Insurance service
expenses |
|
8 |
|
(22,007 |
) |
|
|
(22,702 |
) |
|
|
(47,191 |
) |
|
|
(44,388 |
) |
| Net
expenses from reinsurance contracts held |
|
8 |
|
(3,310 |
) |
|
|
(8,041 |
) |
|
|
(3,959 |
) |
|
|
(13,121 |
) |
|
Insurance service result |
|
|
|
(2,430 |
) |
|
|
(8,728 |
) |
|
|
(5,522 |
) |
|
|
(13,689 |
) |
| Net investment income |
|
5 |
|
23,488 |
|
|
|
21,349 |
|
|
|
45,292 |
|
|
|
41,571 |
|
| Net gains (losses) from
investment activities |
|
4 |
|
(1,535 |
) |
|
|
1,568 |
|
|
|
1,131 |
|
|
|
4,177 |
|
| Realized and unrealized gains
(losses) on embedded derivative — funds withheld |
|
|
|
(3,778 |
) |
|
|
(4,679 |
) |
|
|
(7,607 |
) |
|
|
(12,363 |
) |
| Other
income |
|
|
|
— |
|
|
|
157 |
|
|
|
6 |
|
|
|
157 |
|
|
Total revenue, net of insurance service expenses and net
expenses from reinsurance contracts held — insurance |
|
|
|
15,746 |
|
|
|
9,667 |
|
|
|
33,301 |
|
|
|
19,853 |
|
|
Total revenue |
|
|
|
19,140 |
|
|
|
12,663 |
|
|
|
40,725 |
|
|
|
24,775 |
|
|
EXPENSES |
|
|
|
|
|
|
|
|
|
|
|
|
|
| Asset
management |
|
|
|
|
|
|
|
|
|
|
|
|
|
| Administration and servicing
fees |
|
10 |
|
1,953 |
|
|
|
897 |
|
|
|
3,376 |
|
|
|
1,388 |
|
| Transaction costs |
|
|
|
— |
|
|
|
1,278 |
|
|
|
251 |
|
|
|
1,436 |
|
| Amortization of intangible
assets |
|
9 |
|
346 |
|
|
|
140 |
|
|
|
692 |
|
|
|
280 |
|
| Interest and other credit
facility expenses |
|
12 |
|
1,661 |
|
|
|
1,403 |
|
|
|
3,363 |
|
|
|
2,657 |
|
|
General, administrative and other |
|
|
|
2,691 |
|
|
|
2,415 |
|
|
|
6,584 |
|
|
|
6,212 |
|
|
Total expenses — asset management |
|
|
|
6,651 |
|
|
|
6,133 |
|
|
|
14,266 |
|
|
|
11,973 |
|
|
Insurance |
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net insurance finance (income)
expenses |
|
5 |
|
(964 |
) |
|
|
(1,294 |
) |
|
|
(8,216 |
) |
|
|
23,190 |
|
| Increase (decrease) in
investment contract liabilities |
|
14 |
|
2,487 |
|
|
|
1,002 |
|
|
|
4,766 |
|
|
|
2,414 |
|
| (Increase) decrease in
reinsurance contract assets |
|
|
|
4,149 |
|
|
|
4,046 |
|
|
|
7,705 |
|
|
|
9,571 |
|
|
General, administrative and other |
|
|
|
2,970 |
|
|
|
3,679 |
|
|
|
5,209 |
|
|
|
7,717 |
|
|
Total expenses — insurance |
|
|
|
8,642 |
|
|
|
7,433 |
|
|
|
9,464 |
|
|
|
42,892 |
|
|
Total expenses |
|
|
|
15,293 |
|
|
|
13,566 |
|
|
|
23,730 |
|
|
|
54,865 |
|
|
Income (loss) before taxes |
|
|
|
3,847 |
|
|
|
(903 |
) |
|
|
16,995 |
|
|
|
(30,090 |
) |
|
Income tax (expense) benefit — asset management |
|
15 |
|
(265 |
) |
|
|
248 |
|
|
|
(321 |
) |
|
|
(17 |
) |
|
Net income (loss) and comprehensive income
(loss) |
|
|
$ |
3,582 |
|
|
$ |
(655 |
) |
|
$ |
16,674 |
|
|
$ |
(30,107 |
) |
|
Earnings per share |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
$ |
0.14 |
|
|
$ |
(0.03 |
) |
|
$ |
0.65 |
|
|
$ |
(1.36 |
) |
|
Diluted |
|
|
$ |
0.14 |
|
|
$ |
(0.03 |
) |
|
$ |
0.64 |
|
|
$ |
(1.36 |
) |
| Dividends per common
share — USD |
|
|
$ |
0.02 |
|
|
$ |
0.02 |
|
|
$ |
0.03 |
|
|
$ |
0.02 |
|
| Dividends per common
share — CAD |
|
|
$ |
0.02 |
|
|
$ |
0.02 |
|
|
$ |
0.04 |
|
|
$ |
0.02 |
|
Mount Logan Capital (NEO:MLC)
過去 株価チャート
から 7 2024 まで 8 2024
Mount Logan Capital (NEO:MLC)
過去 株価チャート
から 8 2023 まで 8 2024
