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

TORONTO, May 11, 2022 (GLOBE NEWSWIRE) — Mount Logan Capital Inc. (NEO: MLC) (“Mount Logan,” “our,” “we,” or the “Company”) announces its financial results for the quarter ended March 31, 2022. All amounts are stated in United States dollars, unless otherwise indicated.

First quarter highlights:

  • Total revenue for the three months ended March 31, 2022 was $2.6 million in the asset management segment, an increase from $1.7 million or 57% for the three months ended March 31, 2021.
  • Total revenue for the three months ended March 31, 2022 was $(12.0) million in the insurance segment, primarily driven by mark-to-market movement as a result of increases in market interest rates offset by the projected timing of reinvestment of cash flows.
  • Shareholders’ equity as at March 31, 2022 of $68.6 million.
  • Basic earnings per share for the three months ended March 31, 2022 was $(0.72)(1), a decrease from $0.02 for the three months ended March 31, 2021.
  • Dividend of CAD$0.02 per common share declared to be paid on April 8, 2022 to shareholders of record on March 31, 2022.

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

Ted Goldthorpe, Chief Executive Officer and Chairman of Mount Logan, noted, “We continue to build on our operating momentum and delivered another quarter of strong earnings in the asset management segment, driven by growth in our attributable assets under management. The insurance segment experienced a negative quarter primarily due to the impact of rising market interest rates and its implied impact on the valuation of the investment portfolio. We remain focused on the growth of our asset management and insurance segments and the ramping of the reinsurance of fixed annuities that was initiated after quarter end. We look forward to making continued progress in 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.

    Q1     Q4     Change     YTD     YTD     Change  
    2022     2021     (%)     2022     2021     (%)  
Total revenue                                    
Asset management   $ 2,618     $ 2,480       6 %   $ 2,618     $ 1,665       57 %
Insurance     (12,026 )     2,807     NM       (12,026 )         NM  
                                     
Total expenses                                    
Asset management     2,819       5,258       -46 %     2,819       1,328       112 %
Insurance     4,066       (30,810 )   NM       4,066           NM  
                                     
Net income (loss) before income taxes                                    
Asset management     (201 )     (2,778 )     -93 %     (201 )     337       -160 %
Insurance     (16,092 )     33,617     NM       (16,092 )         NM  

Asset management
Total revenue of $2.6 million in the first quarter of fiscal 2022 represents an increase of $0.1 million quarter-over-quarter. Year-to-date total revenue of $2.6 million represents an increase of $1.0 million year-over-year primarily related to the increase in management and servicing fees. Total expenses of $2.8 million in the first quarter of fiscal 2022 represents a decrease of $2.4 million quarter-over-quarter primarily related to decrease in professional fees incurred during the fourth quarter of fiscal 2021 in connection with the expansion of the Company’s business into an asset management and insurance platform. Year-to-date total expenses of $2.8 million represents an increase of $1.5 million year-over-year primarily related to increases in professional fees, interest and credit facility expenses, amortization of intangible assets and administration fees. Net loss of $0.2 million in the first quarter of fiscal 2022 was primarily driven by amortization of acquisition-related intangible assets. Adjusted net (loss) income would have been $nil, or breakeven, in the first quarter of fiscal 2022, excluding amortization of acquisition-related intangible assets.

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 $(12.0) million for the three months ended March 31, 2022 was primarily due to realized and unrealized investment losses during the period driven by increasing market interest rates, partially offset by investment income generated on assets supporting insurance contract liabilities, net of investment activity attributable to collateral under funds withheld reinsurance. Total expenses of $4.1 million for the three months ended March 31, 2022 was primarily driven by administration fees and insurance expenses.

Our interim consolidated financial statements for the three months ended March 31, 2022 and related management’s discussion and analysis will be available on the Company’s website at www.mountlogancapital.ca and on SEDAR (www.sedar.com).

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 June 24, 2022 to shareholders of record on May 27, 2022. This is the fourteenth 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 and will depend on, among other things, the financial condition, capital requirements and earnings of the Company.

Officer Appointment
On May 10, 2022, the Board appointed David Held as the Company’s Chief Compliance Officer.

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 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 Tuesday, May 17, 2022 at 10:00 a.m. Eastern Time to discuss our first 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: 535492

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 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.

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.

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       March 31, 2022     December 31, 2021  
ASSETS                
Asset Management:                
Cash       $ 10,690     $ 14,433  
Restricted cash         1,025       135  
Investments         34,416       35,209  
Intangible assets         21,861       22,060  
Other assets         3,747       4,180  
Total assets — asset management         71,739       76,017  
Insurance:                
Cash and cash equivalents         11,364       29,733  
Investments         847,608       881,170  
Reinsurance assets         325,496       329,902  
Intangible assets         2,576       2,504  
Goodwill         55,015       55,015  
Other assets         18,878       18,970  
Total assets — insurance         1,260,937       1,317,294  
Total assets       $ 1,332,676     $ 1,393,311  
LIABILITIES                
Asset Management                
Due to affiliates       $ 928     $ 3,852  
Debt obligations         42,140       42,708  
Contingent value rights         4,217       4,169  
Accrued expenses and other liabilities         3,357       3,916  
Total liabilities — asset management         50,642       54,645  
Insurance                
Debt obligations         2,250       2,250  
Insurance contract liabilities         932,628       942,865  
Funds held under reinsurance contracts         264,639       291,296  
Reinsurance liabilities         10,545       10,528  
Accrued expenses and other liabilities         3,395       6,421  
Total liabilities — insurance         1,213,457       1,253,360  
Total liabilities         1,264,099       1,308,005  
EQUITY                
Common shares         108,055       108,055  
Warrants         1,129       1,129  
Contributed surplus         7,240       7,240  
Deficit         (25,989 )     (9,260 )
Cumulative translation adjustment         (21,858 )     (21,858 )
Total equity         68,577       85,306  
Total liabilities and equity       $ 1,332,676     $ 1,393,311  

Consolidated Statements of Comprehensive Income (loss)
(in thousands of United States dollars, except per share amounts)

For the three months ended March 31       2022     2021  
REVENUE                
Asset management                
Management and servicing fees       $ 1,978     $ 566  
Interest income         310       652  
Dividend income         121       112  
Net gains (losses) from investment activities         209       335  
Total revenue — asset management         2,618       1,665  
Insurance                
Premium income                
Gross premiums         13,295        
Premiums ceded to reinsurers         (16,637 )      
Net premiums         (3,342 )      
Net investment income         10,852        
Net gains (losses) from investment activities         (37,101 )      
Realized and unrealized gains (losses) on embedded derivative — funds withheld         16,732        
Other income         833        
Total revenue — insurance         (12,026 )      
Total revenue         (9,408 )     1,665  
EXPENSES                
Asset management                
Administration fees         284       242  
Transaction costs               116  
Amortization of intangible assets         199       190  
Interest and other credit facility expenses         761       315  
General, administrative and other         1,575       465  
Total expenses — asset management         2,819       1,328  
Insurance                
Policy benefits and claims:                
Gross claims and benefits         26,625        
Increase (decrease) in insurance contract liabilities         (10,237 )      
Benefits and expenses ceded to reinsurers         (24,315 )      
(Increase) decrease in reinsurance assets         8,500        
Net policy benefits and claims         573        
Administration fees         1,911        
Interest expense                
Insurance expenses         1,056        
Other expenses         526        
Total expenses — insurance         4,066        
Total expenses         6,885       1,328  
Income (loss) before taxes         (16,293 )     337  
Income tax (expense) benefit — asset management         (84 )     (68 )
Income tax (expense) benefit — insurance                
Net income (loss) and comprehensive income (loss)       $ (16,377 )   $ 269  
Earnings per share                
Basic       $ (0.74 )   $ 0.02  
Diluted       $ (0.74 )   $ 0.02  
Dividends per common share — USD       $ 0.02     $ 0.01  
Dividends per common share — CAD       $ 0.02     $ 0.02  


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