Mount Logan Capital Inc. (Cboe Canada: MLC) (“Mount Logan” or the
“Company”) announced today its financial results for the year ended
December 31, 2024.
Fourth Quarter 2024
Highlights
- Total revenue for the asset
management segment of the Company of $4.4 million, an
increase of $0.7 million, or 19%, as compared to the fourth quarter
of 2023. The increase is primarily due to growth in fees
attributable to management of the Opportunistic Credit Interval
Fund ("SOFIX") and higher equity investment earnings on Sierra
Crest Investment Management. Fourth quarter asset management
revenues exclude $1.2 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.
- Total net investment income
for the insurance segment was $23.8 million for the three
months ended December 31, 2024, an increase of $4.5 million, or
23%, as compared to the fourth quarter of 2023, owing to an
increase in the investment portfolio and improvement in investment
income relative to fourth quarter 2023 due to a reversal of an
over-accrual of income in third quarter of 2023. Excluding the
funds withheld under reinsurance contracts and Modco, the insurance
segment’s net investment income was $15.3 million, an increase of
$3.1 million, or 25%, as compared to the fourth quarter of
2023.
Full Year Milestones
- Total revenue for the asset management segment
was $15.7 million, an increase of $3.9 million as compared to $11.8
million in 2023, largely driven by management and incentive fee
growth. Management and incentive fees increased $5.8 million from
the prior year, mainly due to the expiration of fee-sharing
agreements associated with the CLOs in December 2023, higher SOFIX
management and incentive fees due to performance improvement and
increased AUM, a full year of management and incentive fees from
Ovation's managed fund compared to 2023 during which the Ovation
acquisition closed in the third quarter of 2023, and sub-advisory
fees continuing to scale with increased AUM throughout
2024.
- FRE for the asset management segment was $7.5
million, an increase of 36% compared to 2023, due to increased
management and incentive fees as previously discussed.
- Achieved 8.5%1 yield on the insurance investment
portfolio for 2024, due to ongoing portfolio and capital
optimization across the insurance solutions portfolio alongside the
benefit of higher treasury yields. Excluding the funds withheld
under reinsurance contracts and Modco, the yield was 8.8%.
- Ability’s total assets managed by Mount Logan
increased to $620.1 million for 2024, up $83.0 million from 2023
assets of $537.1 million. Mount Logan finished 2024 with $1.05
billion in total investment assets at its insurance segment, up
$36.8 million, or 4%, from 2023 investment assets of $1.01
billion.
- Book value of the insurance segment for 2024
was $88.1 million, an increase of $21.6 million as compared to
$66.5 million for 2023, driven by higher insurance net income.
- SRE for the insurance segment increased to
$15.3 million for 2024, up $17.0 million from 2023 of $(1.7)
million, primarily driven by an increase in net investment income,
and lower cost of funds and operating expenses. 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 shareholders
as it provides additional insight into the underlying economics of
the insurance segment.
Subsequent Events
- Declared a shareholder
distribution in the amount of C$0.02 per common share for
the quarter ended December 31, 2024, payable on April 10, 2025 to
shareholders of record at the close of business on April 3, 2025.
This cash dividend marks the twenty-second 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.
- Announced Mount Logan
entered into a definitive agreement to combine with 180 Degree
Capital Corp. (Nasdaq: TURN) (“180 Degree Capital”), in an
all-stock transaction (the "Business Combination"). The surviving
entity is expected to be a Delaware corporation operating as New
Mount Logan listed on Nasdaq under the symbol MLCI. In connection
with the Business Combination, MLC shareholders will receive
proportionate ownership of New Mount Logan determined by reference
to Mount Logan’s transaction equity value at signing, subject to
certain pre-closing adjustments, relative to 180 Degree Capital's
Net Asset Value ("NAV") at closing. Shareholders holding
approximately 26% of the outstanding shares of Mount Logan and
approximately 20% of the outstanding shares of 180 Degree Capital
signed voting agreements supporting the Business Combination, and
an additional 8% of Mount Logan and 7% of 180 Degree Capital
shareholders, respectively, have provided written non-binding
indications of support for the Business Combination.
- Announced Mount Logan
successfully completed purchase of minority stake in Runway Growth
Capital LLC (“Runway”), an SEC registered investment
adviser, managing approximately $1.4 billion in private credit
assets. Mount Logan acquired the minority stake alongside BC
Partners Credit, who acquired the majority stake in the platform
through private funds managed by BC Partners Credit. There will be
no change to Runway’s management team or day-to-day operations
following close of the transaction.
- Portman Ridge Finance
Corporation (Nasdaq: PTMN) and Logan Ridge Finance Corporation
(Nasdaq: LRFC) announced that they have entered into an agreement
under which LRFC will merge with and into PTMN, subject to
the receipt of certain shareholder approvals and the satisfaction
of other closing conditions. Mount Logan currently earns management
fees from LRFC and has a minority stake in PTMN’s manager, Sierra
Crest Investment Management.
_______________________________
1The yield is calculated based on the net
investment income less management fees paid to Mount Logan divided
by the average of investments in financial assets for the current
year and prior year.
Management Commentary
- Ted Goldthorpe, Chief Executive Officer and Chairman of
Mount Logan stated, “We are pleased to report our strong
fourth quarter and full year 2024 results, reflecting the
sustainable earnings power of our asset management and insurance
platforms. In 2024, we delivered significant growth in both Fee
Related Earnings on the asset management segment, and Spread
Related Earnings in our insurance platform, providing a solid
foundation for continued momentum in 2025. Our focus remains
on driving consistent operating performance improvements, while
advancing our strategic priorities to scale the business through
organic growth and strategic acquisitions, which includes our
recently announced transactions with 180 Degree Capital and
Runway”.
Selected Financial
Highlights
- Total Capital of the
Company was $150.3 million at December 31, 2024, an
increase of $20.8 million as compared to December 31, 2023. Total
capital consists of debt obligations and total shareholders’
equity.
- Consolidated net income
(loss) before taxes was $6.1 million for 2024, an increase
of $21.9 million from ($15.8) million in 2023. The increase was
primarily attributable to the improvement in insurance service
result, decrease in net insurance finance expenses, increase in net
investment income and decline in general, administrative and other
expenses under the insurance segment when compared to 2023.
- Basic Earnings per share
(“EPS”) was $0.22 for 2024, an increase of $0.91 from
$(0.69) for 2023.
- Adjusted basic EPS
was $0.46 for 2024, an increase of $0.90 from $(0.44) for
2023.
Results of Operations by
Segment
($ in Thousands)
| |
Year Ended |
|
|
Year ended December 31, |
2024 |
|
|
2023 |
|
| Reported
Results |
|
|
|
|
|
| Asset
management |
|
|
|
|
|
|
Revenue |
$ |
15,692 |
|
|
$ |
11,831 |
|
| Expenses |
|
35,187 |
|
|
|
26,680 |
|
| Net income (loss) - asset
management |
|
(19,495 |
) |
|
|
(14,849 |
) |
|
Insurance |
|
|
|
|
|
| Revenue (1) |
|
64,155 |
|
|
|
69,143 |
|
| Expenses |
|
38,521 |
|
|
|
70,087 |
|
| Net
income (loss) - insurance |
|
25,634 |
|
|
|
(944 |
) |
| Income before income
taxes |
|
6,139 |
|
|
|
(15,793 |
) |
|
Provision for income taxes |
|
(550 |
) |
|
|
(663 |
) |
| Net income
(loss) |
$ |
5,589 |
|
|
$ |
(16,456 |
) |
| Basic EPS |
$ |
0.22 |
|
|
$ |
(0.69 |
) |
| Diluted
EPS |
$ |
0.20 |
|
|
$ |
(0.69 |
) |
| Adjusting
Items |
|
|
|
|
|
| Asset
management |
|
|
|
|
|
| Transaction
costs (2) |
|
(2,174 |
) |
|
|
(3,721 |
) |
| Acquisition integration
costs (3) |
|
(250 |
) |
|
|
(1,125 |
) |
|
Non-cash items (4) |
|
(3,978 |
) |
|
|
(972 |
) |
| Impact
of adjusting items on expenses |
|
(6,402 |
) |
|
|
(5,818 |
) |
| Adjusted
Results |
|
|
|
|
|
| Asset
management |
|
|
|
|
|
| Revenue |
$ |
15,692 |
|
|
$ |
11,831 |
|
| Expenses |
|
28,785 |
|
|
|
20,862 |
|
| Net
income (loss) - asset management |
|
(13,093 |
) |
|
|
(9,031 |
) |
| Income before income
taxes |
|
12,541 |
|
|
|
(9,975 |
) |
|
Provision for income taxes |
|
(550 |
) |
|
|
(663 |
) |
| Net income
(loss) |
$ |
11,991 |
|
|
$ |
(10,638 |
) |
| Basic EPS |
$ |
0.46 |
|
|
$ |
(0.44 |
) |
| Diluted
EPS |
$ |
0.43 |
|
|
$ |
(0.44 |
) |
| |
|
|
|
|
|
|
|
| (1) |
Insurance
Revenue line item is presented net of insurance service expenses
and net expenses from reinsurance contracts held. |
| (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 and impairment of
acquisition-related intangible assets and impairment of goodwill,
if any. |
| |
|
Asset Management
Total Revenue – Asset Management
($ in Thousands)
| |
|
|
|
Year ended December 31, |
2024 |
|
|
2023 |
|
|
Management and incentive fee |
$ |
15,008 |
|
|
$ |
9,225 |
|
| Equity investment earnings |
|
680 |
|
|
|
1,124 |
|
| Interest income |
|
1,091 |
|
|
|
1,087 |
|
| Dividend income |
|
356 |
|
|
|
584 |
|
|
Net gains (losses) from investment activities |
|
(1,443 |
) |
|
|
(189 |
) |
|
Total revenue — asset management |
$ |
15,692 |
|
|
$ |
11,831 |
|
| |
|
|
|
|
|
|
|
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)
| |
|
|
|
Year ended December 31, |
|
2024 |
|
|
|
2023 (4) |
|
| Net income (loss) and
comprehensive income (loss) |
$ |
5,589 |
|
|
$ |
(16,456 |
) |
| |
|
|
|
|
|
| Adjustment to net
income (loss) and comprehensive income (loss): |
|
|
|
|
|
| Total revenue -
insurance (1) |
|
(64,155 |
) |
|
|
(69,143 |
) |
| Total
expenses - insurance |
|
38,521 |
|
|
|
70,087 |
|
| Net income - asset
management (2) |
$ |
(20,045 |
) |
|
$ |
(15,512 |
) |
| Adjustments to non-fee generating
asset management business and other recurring revenue stream: |
|
|
|
|
|
|
Management fee from Ability |
|
6,025 |
|
|
|
3,848 |
|
|
Interest income |
|
(1 |
) |
|
|
— |
|
|
Dividend income |
|
(498 |
) |
|
|
(584 |
) |
|
Net gains (losses) from investment activities (3) |
|
1,443 |
|
|
|
189 |
|
|
Administration and servicing fees |
|
1,605 |
|
|
|
1,036 |
|
|
Transaction costs |
|
2,174 |
|
|
|
3,721 |
|
|
Amortization of intangible assets |
|
3,978 |
|
|
|
972 |
|
|
Interest and other credit facility expenses |
|
7,935 |
|
|
|
5,977 |
|
|
General, administrative and other |
|
4,931 |
|
|
|
5,924 |
|
|
Fee Related Earnings |
$ |
7,547 |
|
|
$ |
5,571 |
|
| |
|
|
|
|
|
|
|
|
(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). |
|
(3) |
Includes unrealized gains or losses on the debt warrants. |
|
(4) |
FRE for the year ended December 31, 2023 has been recalculated
to conform with improved expense allocation methodologies
implemented for the year ended December 31, 2024. |
|
|
|
Insurance
Total Revenue – Insurance
($ in Thousands)
| |
|
|
|
Year ended December 31, |
2024 |
|
|
2023 |
|
|
Insurance service result |
$ |
(8,379 |
) |
|
$ |
(23,374 |
) |
| Net investment income |
|
92,770 |
|
|
|
87,105 |
|
| Net gains (losses) from
investment activities |
|
(3,719 |
) |
|
|
29,105 |
|
| Realized and unrealized gains
(losses) on embedded derivative — funds withheld |
|
(16,754 |
) |
|
|
(31,403 |
) |
|
Other income |
|
237 |
|
|
|
7,710 |
|
|
Total revenue — net of insurance services expenses and net
expenses from reinsurance |
$ |
64,155 |
|
|
$ |
69,143 |
|
| |
|
|
|
|
|
|
|
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 |
|
|
|
Q4-2024 |
|
Q3-2024 |
|
Q2-2024 |
|
Q1-2024 |
|
Q4-2023 |
|
Q3-2023 |
|
Q2-2023 |
|
Q1-2023 |
|
Q4-2022 |
|
|
Net income (loss) and comprehensive income (loss) before
tax |
$ |
6,522 |
|
$ |
(17,378 |
) |
$ |
3,847 |
|
$ |
13,148 |
|
$ |
(1,946 |
) |
$ |
16,243 |
|
$ |
(903 |
) |
$ |
(29,187 |
) |
$ |
4,901 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Adjustment to net
income (loss) and comprehensive income (loss): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total revenue - asset
management (1) |
|
(4,442 |
) |
|
(3,826 |
) |
|
(3,394 |
) |
|
(4,030 |
) |
|
(3,723 |
) |
|
(3,186 |
) |
|
(2,996 |
) |
|
(1,926 |
) |
|
(2,651 |
) |
| Total
expenses - asset management |
|
13,440 |
|
|
7,481 |
|
|
6,651 |
|
|
7,615 |
|
|
7,839 |
|
|
6,868 |
|
|
6,133 |
|
|
5,840 |
|
|
4,132 |
|
| Net income -
insurance (2) |
|
15,520 |
|
|
(13,723 |
) |
|
7,104 |
|
|
16,733 |
|
|
2,170 |
|
|
19,925 |
|
|
2,234 |
|
|
(25,273 |
) |
|
6,382 |
|
| Adjustments to Insurance segment
business: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Management fees to ML
Management |
|
(1,167 |
) |
|
(1,501 |
) |
|
(1,529 |
) |
|
(1,429 |
) |
|
(1,345 |
) |
|
(1,110 |
) |
|
(969 |
) |
|
(823 |
) |
|
(740 |
) |
| Net (gains) losses from
investment activities (3) |
|
17,681 |
|
|
(13,267 |
) |
|
887 |
|
|
(2,995 |
) |
|
(10,116 |
) |
|
(2,113 |
) |
|
(1,454 |
) |
|
1,493 |
|
|
(3,418 |
) |
| Other Income (4) |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(7,353 |
) |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
| Net insurance finance
(income)/expense (5) |
|
(28,702 |
) |
|
30,940 |
|
|
(5,442 |
) |
|
(11,769 |
) |
|
14,399 |
|
|
(17,684 |
) |
|
(5,275 |
) |
|
20,650 |
|
|
(924 |
) |
| Loss on onerous
contracts (6) |
|
(545 |
) |
|
(822 |
) |
|
945 |
|
|
6,884 |
|
|
286 |
|
|
2,451 |
|
|
4,214 |
|
|
490 |
|
|
— |
|
|
General, administrative and other (7) |
|
338 |
|
|
239 |
|
|
464 |
|
|
447 |
|
|
502 |
|
|
1,289 |
|
|
1,546 |
|
|
144 |
|
|
— |
|
|
Spread Related Earnings |
$ |
3,125 |
|
$ |
1,866 |
|
$ |
2,429 |
|
$ |
7,871 |
|
$ |
(1,457 |
) |
$ |
2,758 |
|
$ |
296 |
|
$ |
(3,319 |
) |
$ |
1,300 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (1) |
Includes
add-back of management fees paid by Ability to ML Management. |
| (2) |
Represents net income before tax for the insurance segment, as
presented in the annual 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)
| |
Year Ended |
|
|
|
December 31,2024 |
|
|
December 31,2023 |
|
|
Fixed Income and other investment income, net (1) |
$ |
53,675 |
|
|
$ |
48,134 |
|
| Cost of
funds |
|
(30,353 |
) |
|
|
(39,032 |
) |
| Net Investment
spread |
|
23,322 |
|
|
|
9,102 |
|
| Other
operating expenses |
|
(8,032 |
) |
|
|
(10,824 |
) |
|
Spread Related Earnings |
$ |
15,290 |
|
|
$ |
(1,722 |
) |
| SRE % of Average Net
Investments |
|
2.5 |
% |
|
|
-0.3 |
% |
| |
|
|
|
|
|
|
|
|
(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”). |
| |
|
Spread related earnings ("SRE") was $15.3
million for 2024 compared with $(1.7) million for 2023, an increase
of $17.0 million. SRE increased year-over-year due to increased
investment income, lower cost of funds, and decline in other
operating expenses. Investment income increased primarily due to
higher total insurance investment assets as a result of new
multi-year guaranteed annuity (“MYGA”) business and improvements in
yield across the investment portfolio attributable to deployment of
capital in a higher rate environment up through the second quarter
of 2024. Cost of funds declined primarily from a decrease in the
amortization of reinsurance contractual service margin (“CSM”) in
the current period due to change in the CSM amortization
methodology, as well as 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 costs.
SRE as a percentage of average net invested
assets was 2.5% for the year ended December 31, 2024 compared with
-0.3% for the year ended December 31, 2023.
Liquidity and Capital
Resources
As of December 31, 2024, the asset management
segment had $77.8 million (par value) of borrowings outstanding, of
which $33.8 million had a fixed rate and $44 million had a floating
rate. As of December 31, 2024, the insurance segment had $14.3
million (par value) of borrowings outstanding. Liquid assets,
including high-quality assets that are marketable, can be pledged
as security for borrowings, and can be converted to cash in a time
frame that meets liquidity and funding requirements. As of December
31, 2024 and December 31, 2023, the total liquid assets of the
Company were as follows:
($ in Thousands)
|
As at |
December 31, 2024 |
|
December 31, 2023 |
|
Cash and cash equivalents |
$ |
85,988 |
|
$ |
90,220 |
| Restricted cash posted as
collateral |
|
15,716 |
|
|
— |
| Investments |
|
639,932 |
|
|
643,578 |
| Management fee receivable |
|
3,268 |
|
|
2,599 |
| Receivable for investments
sold |
|
17,045 |
|
|
6,511 |
| Accrued
interest and dividend receivable |
|
20,489 |
|
|
19,340 |
| Total
liquid assets |
$ |
782,438 |
|
$ |
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 December 31, 2024, the Company had working
capital of $231.2 million, reflecting current assets of $245.3
million, offset by current liabilities of $14.1 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 attributed to an increase in cash within the asset
management business from increased management and incentive fee
receipts, net proceeds from the issuance of debenture units, and
the upsize of the existing credit facility at MLC US Holdings. The
decrease in due to affiliates is driven by paydowns to BC Partners
and a reclassification of the maturity of these balances from
current to unspecified, and the decrease in accrued expenses is
driven by lower transaction costs, transition services agreement
costs, and legal fee accruals also contributed to the increase in
working capital. In the insurance business, the settlement of
payables related to MYGA against the new MYGA policies assumed as
well as an increase in receivables for investments sold contributed
to the increase in working capital.
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 |
December 31, 2024 |
|
|
December 31, 2023 |
|
|
50 basis point increase (1) |
$ |
7,559 |
|
|
$ |
20,186 |
|
| 50
basis point decrease (1) |
|
(18,939 |
) |
|
|
(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, March 14, 2025 at 9:00 a.m. Eastern Time to discuss the
fourth quarter and 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: 1-833-950-0062US
Dial-in Toll Free: 1-833-470-1428International Dial-insAccess Code:
601424
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. Mount Logan
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.
ML Management was organized in 2020 as a
Delaware limited liability company and is registered with the SEC
as an investment adviser under the Investment Advisers Act of 1940,
as amended. The primary business of ML Management is to provide
investment management services to (i) privately offered investment
funds exempt from registration under the Investment Company Act of
1940, as amended (the “1940 Act”) advised by ML Management, (ii) a
non-diversified closed end management investment company that has
elected to be regulated as a business development company, (iii)
Ability, and (iv) non-diversified closed-end management investment
companies registered under the 1940 Act that operate as interval
funds. ML Management also acts as the collateral manager to
collateralized loan obligations backed by debt obligations and
similar assets.
Ability is a Nebraska domiciled insurer and
reinsurer of long-term care policies and annuity products acquired
by Mount Logan in the fourth quarter of fiscal year 2021. Ability
is also 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 about the benefits of the closing of the acquisition of
a minority interest in Runway as well as the proposed transaction
involving the Company and 180 Degree Capital, including future
financial and operating results, the Company’s and 180 Degree
Capital’s plans, objectives, expectations and intentions, the
expected timing and likelihood of completion of the proposed
transaction, the regulatory environment in which the Company
operates, and the results of, or outlook for, the Company’s
operations or for the Canadian and U.S. economies, 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; synergies to
be achieved by both the Company and Runway through the Company’s
strategic minority investment in Runway and the satisfaction of the
conditions upon which closing of the Runway transaction is
conditional; 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; ability to obtain the requisite Company and 180 Degree
Capital shareholder approvals, as well as governmental and
regulatory approvals required for the proposed transaction with 180
Degree Capital, the risk that an event, change or other
circumstance could give rise to the termination of the proposed
transaction with 180 Degree Capital, the risk that a condition to
closing of the proposed transaction with 180 Degree Capital may not
be satisfied, the risk of delays in completing the proposed
transaction with 180 Degree Capital, the risk that the businesses
of the Company and with 180 Degree Capital will not be integrated
successfully, 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
OfficerNikita.Klassen@mountlogancapital.ca
Scott Chan Investor Relations
Scott.Chan@mountlogan.com
| MOUNT LOGAN
CAPITAL INC. |
| CONSOLIDATED
STATEMENT OF FINANCIAL POSITION |
| (in
thousands of United States dollars, except share and per share
amounts) |
| |
|
As at |
|
Notes |
|
December 31, 2024 |
|
|
December 31, 2023 |
|
| ASSETS |
|
|
|
|
|
|
|
|
| Asset
Management: |
|
|
|
|
|
|
|
|
|
Cash |
|
|
|
$ |
8,933 |
|
|
$ |
990 |
|
| Investments |
|
6 |
|
|
21,668 |
|
|
|
26,709 |
|
| Intangible assets |
|
9 |
|
|
24,801 |
|
|
|
28,779 |
|
|
Other assets |
|
|
|
|
8,187 |
|
|
|
6,593 |
|
|
Total assets — asset management |
|
|
|
|
63,589 |
|
|
|
63,071 |
|
| Insurance: |
|
|
|
|
|
|
|
|
| Cash and cash equivalents |
|
|
|
|
77,055 |
|
|
|
89,230 |
|
| Restricted cash posted as
collateral |
|
19 |
|
|
15,716 |
|
|
|
— |
|
| Investments |
|
6 |
|
|
1,045,436 |
|
|
|
1,008,637 |
|
| Reinsurance contract assets |
|
13 |
|
|
392,092 |
|
|
|
442,673 |
|
| Intangible assets |
|
9 |
|
|
2,444 |
|
|
|
2,444 |
|
| Goodwill |
|
9 |
|
|
55,015 |
|
|
|
55,015 |
|
|
Other assets |
|
|
|
|
38,183 |
|
|
|
27,508 |
|
|
Total assets — insurance |
|
|
|
|
1,625,941 |
|
|
|
1,625,507 |
|
|
Total assets |
|
|
|
$ |
1,689,530 |
|
|
$ |
1,688,578 |
|
| LIABILITIES |
|
|
|
|
|
|
|
|
| Asset
Management |
|
|
|
|
|
|
|
|
| Due to affiliates |
|
10 |
|
$ |
10,470 |
|
|
$ |
12,113 |
|
| Debt obligations |
|
12 |
|
|
78,427 |
|
|
|
62,030 |
|
| Derivatives - debt warrants |
|
12 |
|
|
504 |
|
|
|
— |
|
|
Accrued expenses and other liabilities |
|
|
|
|
5,097 |
|
|
|
3,494 |
|
|
Total liabilities — asset management |
|
|
|
|
94,498 |
|
|
|
77,637 |
|
| Insurance |
|
|
|
|
|
|
|
|
| Debt obligations |
|
12 |
|
|
14,250 |
|
|
|
14,250 |
|
| Insurance contract
liabilities |
|
13 |
|
|
1,048,413 |
|
|
|
1,107,056 |
|
| Investment contract
liabilities |
|
14 |
|
|
227,041 |
|
|
|
169,314 |
|
| Derivatives |
|
19 |
|
|
5,192 |
|
|
|
— |
|
| Funds held under reinsurance
contracts |
|
|
|
|
239,918 |
|
|
|
238,253 |
|
|
Accrued expenses and other liabilities |
|
|
|
|
2,995 |
|
|
|
30,116 |
|
|
Total liabilities — insurance |
|
|
|
|
1,537,809 |
|
|
|
1,558,989 |
|
|
Total liabilities |
|
|
|
|
1,632,307 |
|
|
|
1,636,626 |
|
| EQUITY |
|
|
|
|
|
|
|
|
| Common shares |
|
11 |
|
|
116,118 |
|
|
|
115,607 |
|
| Warrants |
|
11 |
|
|
1,129 |
|
|
|
1,129 |
|
| Contributed surplus |
|
|
|
|
7,917 |
|
|
|
7,240 |
|
| Surplus (Deficit) |
|
|
|
|
(46,083 |
) |
|
|
(50,166 |
) |
|
Cumulative translation adjustment |
|
|
|
|
(21,858 |
) |
|
|
(21,858 |
) |
|
Total equity |
|
|
|
|
57,223 |
|
|
|
51,952 |
|
|
Total liabilities and equity |
|
|
|
$ |
1,689,530 |
|
|
$ |
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) |
| |
| |
|
|
Year ended |
|
|
|
|
Notes |
December 31, 2024 |
|
|
December 31, 2023 |
|
|
|
|
|
|
|
|
|
|
| REVENUE |
|
|
|
|
|
|
|
| Asset
management |
|
|
|
|
|
|
|
|
Management and incentive fee |
|
7 |
$ |
15,008 |
|
|
$ |
9,225 |
|
| Equity investment earning |
|
|
|
680 |
|
|
|
1,124 |
|
| Interest income |
|
|
|
1,091 |
|
|
|
1,087 |
|
| Dividend income |
|
|
|
356 |
|
|
|
584 |
|
|
Net gains (losses) from investment activities |
|
4 |
|
(1,443 |
) |
|
|
(189 |
) |
|
Total revenue — asset management |
|
|
|
15,692 |
|
|
|
11,831 |
|
| Insurance |
|
|
|
|
|
|
|
| Insurance revenue |
|
8 |
|
91,602 |
|
|
|
87,806 |
|
| Insurance service expenses |
|
8 |
|
(78,385 |
) |
|
|
(78,155 |
) |
|
Net expenses from reinsurance contracts held |
|
8 |
|
(21,596 |
) |
|
|
(33,025 |
) |
| Insurance service result |
|
|
|
(8,379 |
) |
|
|
(23,374 |
) |
| Net investment income |
|
5 |
|
92,770 |
|
|
|
87,105 |
|
| Net gains (losses) from
investment activities |
|
4 |
|
(3,719 |
) |
|
|
29,105 |
|
| Realized and unrealized gains
(losses) on embedded derivative — funds withheld |
|
|
|
(16,754 |
) |
|
|
(31,403 |
) |
|
Other income |
|
|
|
237 |
|
|
|
7,710 |
|
|
Total revenue, net of insurance service expenses and net
expenses from reinsurance contracts held — insurance |
|
|
|
64,155 |
|
|
|
69,143 |
|
|
Total revenue |
|
|
|
79,847 |
|
|
|
80,974 |
|
| EXPENSES |
|
|
|
|
|
|
|
| Asset
management |
|
|
|
|
|
|
|
| Administration and servicing
fees |
|
10 |
|
5,895 |
|
|
|
2,943 |
|
| Transaction costs |
|
|
|
2,174 |
|
|
|
3,721 |
|
| Amortization and impairment of
intangible assets |
|
9 |
|
3,978 |
|
|
|
972 |
|
| Interest and other credit
facility expenses |
|
12 |
|
7,935 |
|
|
|
5,977 |
|
|
General, administrative and other |
|
|
|
15,205 |
|
|
|
13,067 |
|
|
Total expenses — asset management |
|
|
|
35,187 |
|
|
|
26,680 |
|
| Insurance |
|
|
|
|
|
|
|
| Net insurance finance (income)
expenses |
|
5 |
|
3,490 |
|
|
|
28,871 |
|
| Increase (decrease) in investment
contract liabilities |
|
14 |
|
9,972 |
|
|
|
6,316 |
|
| (Increase) decrease in
reinsurance contract assets |
|
|
|
15,302 |
|
|
|
20,238 |
|
|
General, administrative and other |
|
|
|
9,757 |
|
|
|
14,662 |
|
|
Total expenses — insurance |
|
|
|
38,521 |
|
|
|
70,087 |
|
|
Total expenses |
|
|
|
73,708 |
|
|
|
96,767 |
|
|
Income (loss) before taxes |
|
|
|
6,139 |
|
|
|
(15,793 |
) |
|
Income tax (expense) benefit — asset management |
|
16 |
|
(550 |
) |
|
|
(663 |
) |
|
Net income (loss) and comprehensive income
(loss) |
|
|
$ |
5,589 |
|
|
$ |
(16,456 |
) |
| Earnings per
share |
|
|
|
|
|
|
|
|
Basic |
|
|
$ |
0.22 |
|
|
$ |
(0.69 |
) |
|
Diluted |
|
|
$ |
0.20 |
|
|
$ |
(0.69 |
) |
| Dividends per common
share — USD |
|
|
$ |
0.06 |
|
|
$ |
0.05 |
|
| Dividends per common
share — CAD |
|
|
$ |
0.08 |
|
|
$ |
0.07 |
|
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