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Mount Logan Capital Inc. Reports June 2022 Interim Results; Declares Shareholder Distribution

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TORONTO, Aug. 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 six months ended June 30, 2022. All amounts are stated in United States dollars, unless otherwise indicated.

Financial Results Highlights
Second Quarter 2022 Compared With Second Quarter 2021:

  • Total revenue for the three months ended June 30, 2022 was $2.3 million in the asset management segment, an increase from $1.4 million or 62% for the three months ended June 30, 2021.
  • Total revenue for the three months ended June 30, 2022 was $3.4million in the insurance segment, primarily driven by new premium growth as a result of the Company’s reinsurance of multi-year guaranteed annuities (“MYGA”).
  • Basic earnings per share for the three months ended June 30, 2022 was $0.40(1), an increase from $(0.01) for the three months ended June 30, 2021.

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Year-to-Date 2022 Compared With Year-to-Date 2021:

  • Total revenue for the six months ended June 30, 2022 was $5.0 million in the asset management segment, an increase from $3.1 million or 60% for the six months ended June 30, 2021.
  • Total revenue for the six months ended June 30, 2022 was $(8.6) 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 six months ended June 30, 2022 was $(0.34)(1), a decrease from $0.00 for the six months ended June 30, 2021.

(1) Reflects the non-cash change in insurance contract liabilities and reinsurance assets.

For the second quarter ended June 30, 2022, the Company recorded net income of $8.9 million or $0.40 per basic and diluted share.

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Ted Goldthorpe, Chief Executive Officer and Chairman of Mount Logan, noted, “We continued to deliver strong financial performance this quarter, driven by growth in both the asset management and insurance segments, while continuing to invest in future growth. During the quarter, we made significant progress in the ramping of the reinsurance of fixed annuities in our insurance business. We remain focused on the growth of our asset management and insurance segments and look forward to making continued progress in the second half of 2022 as we continue to assess strategic transactions that will grow our asset management and insurance business.”

Result of Operations by Segment
The Company considers its business within two operating segments: asset management and insurance.

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  Q2     Q1     Change     YTD     YTD     Change  
  2022     2022     (%)     2022     2021     (%)  
Total revenue                                  
Asset management $ 2,340     $ 2,618       -11 %   $ 4,958     $ 3,107       60 %
Insurance   3,413       (12,026 )     128 %     (8,613 )         NM  
                                   
Total expenses                                  
Asset management   3,096       2,819       10 %     5,915       3,145       88 %
Insurance   (6,490 )     4,066       -260 %     (2,424 )         NM  
                                   
Net income (loss) before income taxes                                  
Asset management   (756 )     (201 )     -276 %     (957 )     (38 )     -2418 %
Insurance   9,903       (16,092 )     162 %     (6,189 )         NM  

Asset management
Total revenue of $2.3 million in the second quarter of fiscal 2022 represents a decrease of $0.3 million quarter-over-quarter primarily driven by a decrease net realized gains from the disposal of investments. Year-to-date total revenue of $5.0 million represents an increase of $1.9 million year-over-year primarily related to the increase in management and servicing fees. Total expenses of $3.1 million in the second quarter of fiscal 2022 represents an increase of $0.3 million quarter-over-quarter primarily related to the expansion of the Company’s business. Year-to-date total expenses of $5.9 million represents an increase of $2.8 million year-over-year primarily related to increases in professional fees, acquisition integration costs, interest and credit facility expenses, amortization of intangible assets and administration fees. Net loss of $0.8 million in the second quarter of fiscal 2022 was primarily driven by acquisition integration costs and amortization of acquisition-related intangible assets. Adjusted net (loss) income would have been near breakeven, in the second quarter of fiscal 2022, excluding acquisition integration costs and amortization of acquisition-related intangible assets.

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Insurance
Analysis of the insurance segment to the same period in the prior year is not relevant given the acquisition of Ability closed in the fourth quarter of fiscal 2021.

Total revenue of $3.4 million and $(8.6) million for the three months and six months ended June 30, 2022, respectively. The revenue increase quarter over quarter is primarily due to new premium growth as a result of the Company’s reinsurance of multi-year guaranteed annuities (“MYGA”) which was successfully executed during the second quarter. Revenue during the three and six months ended were partially offset as a result of mark-to-market losses on portions of the investment portfolio as a result of increasing market interest rates. Total expenses of $(6.5) million and $(2.4) million for the three months and six months ended June 30, 2022, respectively, were primarily driven by changes in actuarially determined balances.

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Our interim consolidated financial statements for the three and six months ended June 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 CAD$0.02 per common share to be paid on September 23, 2022 to shareholders of record on August 24, 2022. This is the fifteenth 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.

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The declaration and payment by the Company of any future cash dividends, including the amount thereof, will be at the discretion of the Board 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 second-half of 2022 are expected to benefit from the addition of new investment advisory agreements, which will increase our assets under management, and the 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 business.

Conference Call
We will hold a conference call on Thursday, August 11, 2022 at 10:00 a.m. Eastern Time to discuss our second 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.

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Dial-in Toll Free: 1-833-950-0062
International Dial-in Toll Free: 1-929-526-1599
Access Code: 448913

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.

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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.

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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 diversity the Company’s business and further grow recurring management fee and other income; the Company’s plans to decrease Ability’s long-term care exposure and replace and grow assets by focusing the 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.

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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 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.

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For additional information, please contact:

Jason Roos
Chief Financial Officer
[email protected]

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 June 30, 2022   December 31, 2021  
ASSETS        
Asset Management:        
Cash $ 2,827   $ 14,433  
Restricted cash   55     135  
Due from affiliates   158      
Investments   29,273     35,209  
Intangible assets   21,662     22,060  
Other assets   4,267     4,180  
Total assets — asset management   58,242     76,017  
Insurance:        
Cash and cash equivalents   36,415     29,733  
Investments   851,046     881,170  
Reinsurance assets   278,390     329,902  
Intangible assets   3,678     2,504  
Goodwill   55,015     55,015  
Other assets   22,478     18,970  
Total assets — insurance   1,247,022     1,317,294  
Total assets $ 1,305,264   $ 1,393,311  
LIABILITIES        
Asset Management        
Due to affiliates $ 597   $ 3,852  
Debt obligations   41,885     42,708  
Contingent value rights   3,149     4,169  
Accrued expenses and other liabilities   1,513     3,916  
Total liabilities — asset management   47,144     54,645  
Insurance        
Debt obligations   2,250     2,250  
Insurance contract liabilities   867,337     942,865  
Investment contract liabilities   51,777      
Funds held under reinsurance contracts   240,789     291,296  
Reinsurance liabilities   10,521     10,528  
Accrued expenses and other liabilities   8,323     6,421  
Total liabilities — insurance   1,180,997     1,253,360  
Total liabilities   1,228,141     1,308,005  
EQUITY        
Common shares   108,055     108,055  
Warrants   1,129     1,129  
Contributed surplus   7,240     7,240  
Deficit   (17,443 )   (9,260 )
Cumulative translation adjustment   (21,858 )   (21,858 )
Total equity   77,123     85,306  
Total liabilities and equity $ 1,305,264   $ 1,393,311  
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Consolidated Statements of Comprehensive Income (loss)
(in thousands of United States dollars, except per share amounts)

  Three Months Ended   Six Months Ended  
  June 30, 2022   June 30, 2021   June 30, 2022   June 30, 2021  
                 
REVENUE                
Asset management                
Management and servicing fees $ 1,864   $ 584   $ 3,842   $ 1,150  
Interest income   330     807     640     1,459  
Dividend income   155     25     276     137  
Net gains (losses) from investment activities   (9 )   26     200     361  
Total revenue — asset management   2,340     1,442     4,958     3,107  
Insurance                
Premium income                
Gross premiums   35,483         48,778      
Premiums ceded to reinsurers   (16,753 )       (33,390 )    
Net premiums   18,730         15,388      
Net investment income   11,979         22,831      
Net gains (losses) from investment activities   (49,469 )       (86,570 )    
Realized and unrealized gains (losses) on embedded derivative — funds withheld   20,329         37,061      
Other income   1,844         2,677      
Total revenue — insurance   3,413         (8,613 )    
Total revenue   5,753     1,442     (3,655 )   3,107  
EXPENSES                
Asset management                
Administration fees   341     302     625     544  
Transaction costs       389         505  
Amortization of intangible assets   199     196     398     386  
Interest and other credit facility expenses   766     237     1,527     552  
General, administrative and other   1,790     693     3,365     1,158  
Total expenses — asset management   3,096     1,817     5,915     3,145  
Insurance                
Policy benefits and claims:                
Gross claims and benefits   28,176         54,801      
Increase (decrease) in insurance contract liabilities   (65,290 )       (75,527 )    
Increase (decrease) in investment contract liabilities   564         564      
Benefits and expenses ceded to reinsurers   (25,213 )       (49,528 )    
(Increase) decrease in reinsurance assets   50,221         58,721      
Net policy benefits and claims   (11,542 )       (10,969 )    
Administration fees   1,978         3,889      
Interest expense   56         56      
Insurance expenses   1,381         2,437      
Other expenses   1,637         2,163      
Total expenses — insurance   (6,490 )       (2,424 )    
Total expenses   (3,394 )   1,817     3,491     3,145  
Income (loss) before taxes   9,147     (375 )   (7,146 )   (38 )
Income tax (expense) benefit — asset management   (260 )   171     (344 )   103  
Net income (loss) and comprehensive income (loss) $ 8,887   $ (204 ) $ (7,490 ) $ 65  
Earnings per share                
Basic $ 0.40   $ (0.01 ) $ (0.34 ) $ 0.00  
Diluted $ 0.40   $ (0.01 ) $ (0.34 ) $ 0.00  
Dividends per common share — USD $ 0.02   $ 0.02   $ 0.03   $ 0.03  
Dividends per common share — CAD $ 0.02   $ 0.02   $ 0.04   $ 0.04  

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