TORONTO, Nov. 10, 2022 (GLOBE NEWSWIRE) -- Mount Logan Capital Inc. (NEO: MLC) ("Mount Logan," "our," "we," or the "Company") announces its financial results for the three and nine months ended September 30, 2022. All amounts are stated in United States dollars, unless otherwise indicated.
Business Highlights
- Successfully launched our new retail fund in third quarter 2022 with a niche opportunistic investment strategy, named Opportunistic Credit Interval Fund ("OCIF").
- Entered a strategic arrangement to provide sub-advisory services to a recently launched fund in the United States that provides credit-related investment opportunities to retail investors, further growing our asset management fee base.
- Closed on an additional reinsurance agreement of up to $100.0 million of premium of multi-year guaranteed annuities ("MYGA") policies during the third quarter 2022 and subsequently raised an incremental $7.5 million in debt to support further growth in our insurance segment.
Financial Results Highlights
Third Quarter 2022 Compared With Third Quarter 2021:
- Basic earnings per share for the three months ended September 30, 2022 was $0.88, an increase from $0.03 for the three months ended September 30, 2021.
- Total revenue for the three months ended September 30, 2022 was $6.4 million in the insurance segment, primarily driven by an improvement in net investment income relative to the prior period, as well as new premium growth from the Company's reinsurance of MYGA .
- Total revenue for the three months ended September 30, 2022 was $1.7 million in the asset management segment, a decrease from $3.2 million or (45)% for the three months ended September 30, 2021, which decrease was due, in part, to our on-going transition away from interest bearing assets held within our asset management segment and focus on growing fee-based revenue streams
Year-to-Date 2022 Compared With Year-to-Date 2021:
- Total revenue for the nine months ended September 30, 2022 was $6.7 million in the asset management segment, an increase from $6.3 million or 6.7% for the nine months ended September 30, 2021.
- Total revenue for the nine months ended September 30, 2022 was $(2.3) million in the insurance segment, primarily driven by mark-to-market movement as a result of increases in market interest rates, partially offset by new premium growth.
- Basic earnings per share for the nine months ended September 30, 2022 was $0.55, an increase from $0.03 for the nine months ended September 30, 2021.
For the third quarter ended September 30, 2022, the Company recorded net income of $19.6 million or $0.88 per basic earnings per share and $0.87 per diluted earnings per share.
Ted Goldthorpe, Chief Executive Officer and Chairman of Mount Logan noted, "Despite a challenging market backdrop this quarter, we continued to progress on our business plan. Through the third quarter of 2022, asset management revenues and attributable AUM remain ahead of the prior year. The insurance segment benefited from the higher yield of its investments and a reduction in its reserves during the quarter. We remain focused on growing both the asset management and insurance segments to drive long-term value for our shareholders. We look forward to continuing the progress made as we move into 2023."
Result of Operations by Segment
The Company considers its business within two operating segments: asset management and insurance.
| Q3 | Q2 | Change | YTD | YTD | Change | ||||||||||||||||||
| 2022 | 2022 | (%) | 2022 | 2021 | (%) | ||||||||||||||||||
| Total revenue | |||||||||||||||||||||||
| Asset management | $ | 1,748 | $ | 2,340 | -25 | % | $ | 6,706 | $ | 6,292 | 7 | % | |||||||||||
| Insurance | 6,364 | 3,413 | 86 | % | (2,249 | ) | — | NM | |||||||||||||||
| Total expenses | |||||||||||||||||||||||
| Asset management | 3,010 | 3,096 | -3 | % | 8,925 | 6,257 | 43 | % | |||||||||||||||
| Insurance | (14,337 | ) | (6,490 | ) | -121 | % | (16,761 | ) | — | NM | |||||||||||||
| Net income (loss) before income taxes | |||||||||||||||||||||||
| Asset management | (1,262 | ) | (756 | ) | -67 | % | (2,219 | ) | 35 | -6440 | % | ||||||||||||
| Insurance | 20,701 | 9,903 | 109 | % | 14,512 | — | NM | ||||||||||||||||
Asset management
Total revenue of $1.7 million in the third quarter of 2022 represents a decrease of $0.6 million quarter-over-quarter, partially due to a reduction in interest and dividend income, reduced asset management fees due to a reduction in fees earned from temporary NAV compression, as well as incremental operating costs resulting from the Company's investment in its growing retail platform. Year-to-date total revenue of $6.7 million represents an increase of $0.4 million year-over-year primarily related to the increase in management and servicing fees. Total expenses of $3.0 million in the third quarter of fiscal 2022 represents a decrease of $0.1 million quarter-over-quarter primarily related to the decrease in professional fees partially offset by the increase in interest and other credit facility expenses from increased borrowing and the higher interest rate of new borrowings. Year-to-date total expenses of $8.9 million represents an increase of $2.6 million year-over-year primarily related to increases in professional fees, acquisition integration costs and interest and credit facility expenses from increased average borrowings. Net loss of $(1.3) million in the third quarter of fiscal 2022 was primarily driven by the decrease in management and servicing fees.
Insurance
Analysis of the insurance segment to the same period in the prior year is not relevant given the acquisition of Ability Insurance Company closed in the fourth quarter of fiscal 2021.
Total revenue of $6.4 million in the third quarter of 2022 represents an increase of $3.0 million quarter-over-quarter. The revenue increase is primarily due to an improvement in net investment income relative to the prior period, as well as new premium growth as a result of the Company's reinsurance of MYGA. Total expenses of $(14.3) million and $(16.8) million for the three months and nine months ended September 30, 2022, respectively, were primarily driven by changes in actuarially determined balances.
Our interim consolidated financial statements for the three and nine months ended September 30, 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).
Dividend Declaration
The Board of Directors of the Company (the "Board") declared a cash dividend in the amount of C$0.02 per common share to be paid on December 21, 2022 to shareholders of record on November 21, 2022. This is the sixteenth consecutive dividend Mount Logan has paid to its shareholders since closing its plan of arrangement in the fourth quarter of fiscal 2018. 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.
The declaration and payment by the Company of any future cash dividends, including the amount thereof, will be at the discretion of the Board of Directors of the Company and will depend on, among other things, the financial condition, capital requirements and earnings of the Company.
Outlook for 2022
The Company's financial results in the balance of 2022 are expected to benefit from the addition of new investment advisory agreements that have been entered into during 2022, which have increased our assets under management, and the prior launch of reinsurance of multi-year guaranteed annuity policies in the insurance segment. We continue to assess strategic transactions that will grow our asset management and insurance segments.
Conference Call
We will hold a conference call on Friday, November 11, 2022 at 10:30 a.m. Eastern Time to discuss our third quarter 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: | 1-833-950-0062 |
| International Dial-in Toll Free: | 1-929-526-1599 |
| Access Code: | 978715 |
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 and Ability Insurance Company. 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 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 news 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 news 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 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 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.
For additional information, please contact:
Jason Roos
Chief Financial Officer
Jason.Roos@mountlogancapital.ca
Mount Logan Capital Inc.
365 Bay Street, Suite 800
Toronto, ON M5H 2V1
Consolidated Statement of Financial Position
(in thousands of United States dollars)
| As at | September 30, 2022 | December 31, 2021 | |||||
| ASSETS | |||||||
| Asset Management: | |||||||
| Cash | $ | 6,275 | $ | 14,433 | |||
| Restricted cash | 52 | 135 | |||||
| Due from affiliates | — | — | |||||
| Investments | 26,121 | 35,209 | |||||
| Intangible assets | 21,463 | 22,060 | |||||
| Other assets | 4,685 | 4,180 | |||||
| Total assets — asset management | 58,596 | 76,017 | |||||
| Insurance: | |||||||
| Cash and cash equivalents | 40,933 | 29,733 | |||||
| Investments | 833,603 | 881,170 | |||||
| Reinsurance assets | 243,959 | 329,902 | |||||
| Intangible assets | 4,707 | 2,504 | |||||
| Goodwill | 55,015 | 55,015 | |||||
| Other assets | 40,761 | 18,970 | |||||
| Total assets — insurance | 1,218,978 | 1,317,294 | |||||
| Total assets | $ | 1,277,574 | $ | 1,393,311 | |||
| LIABILITIES | |||||||
| Asset Management | |||||||
| Due to affiliates | $ | 578 | $ | 3,852 | |||
| Debt obligations | 45,996 | 42,708 | |||||
| Contingent value rights | 2,969 | 4,169 | |||||
| Accrued expenses and other liabilities | 1,329 | 3,916 | |||||
| Total liabilities — asset management | 50,872 | 54,645 | |||||
| Insurance | |||||||
| Debt obligations | 2,250 | 2,250 | |||||
| Insurance contract liabilities | 808,318 | 942,865 | |||||
| Investment contract liabilities | 73,456 | — | |||||
| Funds held under reinsurance contracts | 225,343 | 291,296 | |||||
| Reinsurance liabilities | 10,606 | 10,528 | |||||
| Accrued expenses and other liabilities | 10,363 | 6,421 | |||||
| Total liabilities — insurance | 1,130,336 | 1,253,360 | |||||
| Total liabilities | 1,181,208 | 1,308,005 | |||||
| EQUITY | |||||||
| Common shares | 108,055 | 108,055 | |||||
| Warrants | 1,129 | 1,129 | |||||
| Contributed surplus | 7,240 | 7,240 | |||||
| Surplus (Deficit) | 1,800 | (9,260 | ) | ||||
| Cumulative translation adjustment | (21,858 | ) | (21,858 | ) | |||
| Total equity | 96,366 | 85,306 | |||||
| Total liabilities and equity | $ | 1,277,574 | $ | 1,393,311 | |||
Consolidated Statements of Comprehensive Income (loss)
(in thousands of United States dollars, except per share amounts)
| Three Months Ended | Nine Months Ended | ||||||||||||||
| September 30, 2022 | September 30, 2021 | September 30, 2022 | September 30, 2021 | ||||||||||||
| REVENUE | |||||||||||||||
| Asset management | |||||||||||||||
| Management and servicing fees | $ | 980 | $ | 1,902 | $ | 4,822 | $ | 3,052 | |||||||
| Interest income | 311 | 795 | 951 | 2,254 | |||||||||||
| Dividend income | — | 15 | 276 | 152 | |||||||||||
| Net gains (losses) from investment activities | 457 | 473 | 657 | 834 | |||||||||||
| Total revenue — asset management | 1,748 | 3,185 | 6,706 | 6,292 | |||||||||||
| Insurance | |||||||||||||||
| Premium income | |||||||||||||||
| Gross premiums | 26,114 | 74,892 | — | ||||||||||||
| Premiums ceded to reinsurers | (16,747 | ) | (50,137 | ) | — | ||||||||||
| Net premiums | 9,367 | — | 24,755 | — | |||||||||||
| Net investment income | 15,527 | 38,358 | |||||||||||||
| Net gains (losses) from investment activities | (31,596 | ) | (118,166 | ) | |||||||||||
| Realized and unrealized gains (losses) on embedded derivative — funds withheld | 11,898 | 48,959 | |||||||||||||
| Other income | 1,168 | 3,845 | |||||||||||||
| Total revenue — insurance | 6,364 | — | (2,249 | ) | — | ||||||||||
| Total revenue | 8,112 | 3,185 | 4,457 | 6,292 | |||||||||||
| EXPENSES | |||||||||||||||
| Asset management | |||||||||||||||
| Administration fees | 358 | 278 | 983 | 822 | |||||||||||
| Transaction costs | — | 500 | — | 1,005 | |||||||||||
| Amortization of intangible assets | 199 | 202 | 597 | 588 | |||||||||||
| Interest and other credit facility expenses | 867 | 965 | 2,394 | 1,517 | |||||||||||
| General, administrative and other | 1,586 | 1,167 | 4,951 | 2,325 | |||||||||||
| Total expenses — asset management | 3,010 | 3,112 | 8,925 | 6,257 | |||||||||||
| Insurance | |||||||||||||||
| Policy benefits and claims: | |||||||||||||||
| Gross claims and benefits | 24,720 | 79,521 | |||||||||||||
| Increase (decrease) in insurance contract liabilities | (59,020 | ) | (134,547 | ) | |||||||||||
| Increase (decrease) in investment contract liabilities | 324 | 888 | |||||||||||||
| Benefits and expenses ceded to reinsurers | (23,010 | ) | (72,538 | ) | |||||||||||
| (Increase) decrease in reinsurance assets | 37,728 | 96,449 | |||||||||||||
| Net policy benefits and claims | (19,258 | ) | — | (30,227 | ) | — | |||||||||
| Administration fees | 1,745 | 5,634 | |||||||||||||
| Interest expense | — | 56 | |||||||||||||
| Insurance expenses | 1,414 | 3,851 | |||||||||||||
| Other expenses | 1,762 | 3,925 | |||||||||||||
| Total expenses — insurance | (14,337 | ) | — | (16,761 | ) | — | |||||||||
| Total expenses | (11,327 | ) | 3,112 | (7,836 | ) | 6,257 | |||||||||
| Income (loss) before taxes | 19,439 | 73 | 12,293 | 35 | |||||||||||
| Income tax (expense) benefit — asset management | 149 | 406 | (195 | ) | 509 | ||||||||||
| Net income (loss) and comprehensive income (loss) | $ | 19,588 | $ | 479 | $ | 12,098 | $ | 544 | |||||||
| Earnings per share | |||||||||||||||
| Basic | $ | 0.88 | $ | 0.03 | $ | 0.55 | $ | 0.03 | |||||||
| Diluted | $ | 0.87 | $ | 0.02 | $ | 0.54 | $ | 0.03 | |||||||
| Dividends per common share — USD | $ | 0.02 | $ | 0.02 | $ | 0.05 | $ | 0.05 | |||||||
| Dividends per common share — CAD | $ | 0.02 | $ | 0.02 | $ | 0.06 | $ | 0.06 | |||||||
