Mount Logan Capital Inc (MLCI) 2025 Q3 法說會逐字稿

Good morning, ladies and gentlemen, and thank you for standing by. Welcome to Mount Logan Capital's third-quarter 2025 results conference call.

Before we begin, I'd like to remind listeners that today's discussion will include forward-looking statements. These statements discuss our current expectations and projections relating to our financial position, results of operations, plans, objectives, future performance and business. These statements and other comments are not guarantees of future performance but rather are subject to risk and uncertainty, some of which are beyond our control. These forward-looking statements apply as of today, and you should not rely on them as representing our views in the future. We undertake no obligation to update these statements after this call. For a description of the risks associated with Mount Logan Capital's business please see our most recent filings, the SEC.

In addition, we'll be referring to certain non-GAAP financial measures during this call. Additional details and reconciliations of GAAP to non-GAAP financial measures are in today's earnings release.

This morning's conference call is hosted by Mount Logan's Chairman and Chief Executive Officer Ted Goldthorpe; our Chief Financial Officer, Nikita Klassen; our President, Henry Wang; and the Head of Investor Relations, Scott Chan.

As a reminder, all references to dollar amounts on this call are in US dollars unless otherwise stated.

I now turn the call over to Mr. Goldthorpe. You may begin.

Thank you, everyone. Good morning and thank you everyone for joining us today.

What a year it has been for our company and team. We're incredibly excited to discuss Mount Logan Capital's 3rd quarter with you today, which reflected the culmination of several years of preparation and hard work that enabled us to re-domicile from Canada to the US, translate our financials from IFRS to GAAP, and now trade on the NASDAQ Capital Market under the ticker MLCI.

This year has been the heaviest lift for our team yet, and I'm deeply grateful for everyone's contributions and support to get us here.

A special thank you to our shareholders and board members for supporting our vision for Mount Logan, including the 180 Degree Capital Shareholders, management team and board, which overwhelmingly supported the combination of our respective businesses and specifically the vision we have for growth in 2026 and beyond.

We're excited to welcome everyone to Mount Logan's first earnings call as a US listed alternative asset management platform, and insurance solutions platform.

While we'll spend time discussing our financial results today, given the intra-quarter transaction and related movements on the legacy turn portfolio and transaction expenses, there's some noise in the numbers and therefore I want to spend some additional time today laying out the vision we have for our platform as we look ahead to 2026 and our ambitions for driving significant AUM, FRE, and SRE expansion for the years to come.

We'll also provide a quick update on our capital allocation expectations through year end before we turn the call over to Nikita to review our 3rd quarter financial performance in more detail.

Today, Mount Logan is an alternative asset management and insurance solutions platform that manages in excess of $2 billion of assets for various investment vehicles and accounts. We operate within what we believe to be the most attractive areas in the financial services space private credit and insurance solutions.

Since 2018, we carefully built and shaped the Mount Logan platform with three focuses one, build our FRE and AUM Foundation on permanent and semi-permanent capital for a wide array of investors. Today, Mount Logan has the support of large institutional investors, the retail investor community, and through Ability, an insurance platform.

2, employ rigorous and disciplined process around originating and underwriting the assets and investments we manage on behalf of those same investors, and 3, maintain expansive credit and product capabilities in support of truly differentiated origination funnel, which ensures Mount Logan is not overly reliant or correlated to any single product or market.

Today we have a diverse expertise that spans the credit spectrum and enables us to be truly opportunistic as we seek attractive risk adjusted returns in various market climates on behalf of our investors. We've experienced success scaling our business through organic and inorganic initiatives. As of today, we believe our business has the team, capabilities, and through the merger with Turn capital to drive investment into our business to accelerate growth in 2026 and beyond.

Since the acquisition, we've completed efforts with respect to integrating front, middle, and back office functions. We've already seen the benefits of adding 180 Degree Capital's network and the middle market to ours, which has enabled us to expand the universe of clients we serve within our suite of private credit solutions, now with an improved line into public companies.

With the modest, with a modest integration lift now complete, our focus is on accelerating growth while maintaining stringent discipline on investments and costs.

On the insurance solution side, we see an immediate opportunity to invest capital into ability to increase its capital base, take on additional reinsurance obligations. We've continued to invest in our insurance solutions team and believe we have the policies and procedures in place to grow this business significantly over the coming years.

Our insurance solutions vertical is incredibly strategic to Mount Logan, and we view it as a core vertical for driving growth in our business, as both our ability to manage our policyholder obligations and assets prudently to achieve positive spread earnings is the key to our organic thesis.

On the asset management front, Mount Logan continued to advance its strategy as a leading consolidator in the business development company, or BDC Universe. Our approach centers on building scale and stability through permanent capital vehicles. In July, the merger of Portman Ridge and Logan Ridge was completed, creating what is now called BCP Investment Corporation.

This created a larger, more efficient vehicle with substantial synergies both from a portfolio perspective and given the significant overlap through the elimination of expenses driving improved earnings capacity.

From an economics perspective, Mount Logan will receive increased distributions from Sierra Crest Investment Management and its affiliates, as Sierra Crest will serve as the investment advisor to the significantly larger BDC and BCP Investment Corp.

Mount Logan today maintains a minority stake in Sierra Crest which will continue to benefit Mount Logan as BCP Investment Corporation grows.

In parallel through our minority stake in Runway Growth Finance, we are able to support the recently announced merger of Runway Growth Finance Corporation with STDK Holdings. This combination will expand Runway's capability into healthcare and life sciences lending and demonstrate the continued consolidation taking place across the BDC ecosystem, given the significant benefits that exist for investors in these funds as they scale.

Collectively, these initiatives reinforce Mount Logan's long-term strategy of scaling permanent capital vehicles, diversifying credit capabilities, and driving operating leverage across our platform for the benefit of our investors and policyholders.

While the near term financial benefit to Mount. Logan remains limited, over time, these transactions will accrete to the benefit of Mount Logan and its shareholders as AM and FRE increase.

We enter this next phase of Mount Logan's growth with an incredible amount of momentum. Our platform is now fully equipped to capitalize on opportunities across both asset management and insurance solutions, and we're already seeing an acceleration into year end of actionable opportunities.

Before I hand the call over to Nikita to walk through the results of the quarter, I also want to touch on our capital allocation framework given our strength and balance sheet today.

We expect to remain opportunistic in how we deploy the capital with a focus on balancing growth, reinvestment in our business, and return of capital to our shareholders.

Supporting various initiatives to advance our business is a priority for our team, and we expect AU growth to primarily come from our management of ability, the Opportunistic Credit Interval Fund, or SOFE, and our stakes in BDC managers, Sierra Crest Investment Management, and Runway Group, which support FRE expansion.

We also have a robust pipeline of acquisition opportunities which will scale our existing permanent and semi-permanent capital vehicles, increase our retail product and distribution capabilities, and help us to originate new or differentiated pools of assets for the benefit of our managed vehicles and accounts.

The final component of our capital allocation strategy is centered around both near term liquidity opportunities for our shareholders as outlined as part of the 180 degree capital transaction, along with the implementation of a sustainable vid dividend policy going forward.

Our team remains committed committed to providing up to $25 million for shareholder liquidity at or above the closing merger value over the next 24 months.

We continue to expect to launch a tender for up to $15 million in the weeks to come, which we anticipate will be at or around $9.43 per share, consistent with the valuation close of the merger.

This price represents a premium to our current share price as of yesterday's close. Therefore, we expect to be opportunistic in how we deploy the remaining capital for the coming 24 months.

We hope this commitment supports trading liquidity in our shares as growth initiatives progress over the next 2 years.

To ensure liquidity mechanisms focused on providing value to our shareholders, Mount Logan's management team, board, and affiliate entities will not participate in any tenders or share repurchases associated with the liquidity programs.

This decision reinforces management's confidence in the long-term outlook for Mount Logan and the strength of our business combination.

On the dividend front, Mount Logan was proud to have paid a dividend for the 25th consecutive quarter while listed in Canada. We're excited to announce the board has approved a dividend of $0.03 per share for the quarter.

Our dividend policy is built on the belief that investors should receive direct benefit of our stable deplane earnings model, and we hope today's declaration and our past track record clearly demonstrate our belief in returning capitalist shareholders.

As our platform scales, we hope to grow our dividend while maintaining financial flexibility to reinvest for future expansion.

With that, I will now turn the call over to Nikita to review our 3rd quarter financial performance.

Thanks, T. Good morning, everyone.

Before reviewing our 3rd quarter results, we want to note that as part of the acquisition of 180 Degree Capital, Mount Logan has transitioned its financial reporting from IFRS to US GAAP.

All the financial results discussed on today's call are presented under US GAAP, which, while required as a US registrant, also enhances the transparency and comparability of our financial performance going forward with and with our peers. Further, some results are not directly comparable year over year, as the acquisition of 180 Degree Capital did not close until mid September 2025.

I'll now walk through our 3rd quarter financial highlights.

This quarter was an incredibly transitional quarter, one that reflected substantial integration costs and accounting resets and the investments being made to scale our platform. For the three months ended September 30th, we reported a net loss of $13.4 million compared to a loss of $2.4 million last year, largely related to non-cash items. This loss was driven by a gross $19 million impairment charge tied to the Logan Ridge Investment Management contract, as Logan Ridge completed its merger with Portman Ridge in July, with Portman Ridge being the surviving entity and renamed BC Partners Investment Corporation.

As part of this transaction, Mount Logan recognized a profit sharing interest with an affiliate of Sierra Crest, the advisor of BCIC, which reduced the net impairment by $11.2 million. The company also recognized a $4.5 million gain on acquisition of 180 Degree Capital, as consideration paid, i.e., the shares issued, were less than the fair market value of the net assets acquired. We also recognized an incremental $3 million worth of transaction costs as the transaction was finalized.

Total revenues for the quarter came in at 11.4 million, down 10% year over year, while 99 month ended revenues for 2025 rose 7% to 43.6 million.

On a non-GAAP basis, segment income, which is equal to the sum of fee-related earnings and spread-related earnings, was 3.7 million for the quarter versus 4.7 million last year.

Year-to-date, segnant income was 8.1 million compared to 16.5 million in the prior period, largely due to lower cost of funds in comparison to 2024, primarily due to the one-time benefit of an in-for update to the long-term care business in the first quarter of 2024, which was not present in 2025.

At quarter end, total assets were $1.64 billion up 5% since year end, and shareholders' equity increased to $131 million a 26% increase year-to-date.

In our asset management business, fee related earnings were $2.5 million for the quarter and $7 million year-to-date, roughly flat with the prior year. Management fees were $1.9 million down from $2.8 million last year, mainly due to the Logan Ridge and Portman Ridge merger, which ended our prior advisory contract. We anticipate the profit sharing interest, which added $262,000 to FRE this period, will continue to be accretive to FRE going forward. Additionally, the ovation funds wind down, which began in the 3rd quarter of 2024, has resulted in lower management fees going forward. These headwinds were partially offset by growing fee streams from our Vista Life and Casualty Investment Management mandate and growth in our interval fund SOFix.

Incentive fees were 0.4 million down year over year as the ovation funds continue their wind down and due to voluntary fee waivers at Softix, while equity investment earnings rose to half a million benefiting from stronger results at Sierra Crest after the merger and elimination of expense waivers within this advisor.

On the expenses side, we saw higher transaction and integration costs tied to the 180 degree merger and accelerated stock compensation expense, as all historically issued stock comp vested upon close of the merger. These are both one-time items. FRE excludes these one-time items and also includes other corporate costs that are reported within the asset management segment, such as non-feee related compensation, amortization, and impairment of intangible assets. And interest expense fee generating expenses decreased due to lower lower professional fee spent from disciplined cost control. Overall, FRE margins held steady, supported by recurring management fees, discipline, cost control, and new recurring income from our profit sharing interests with Bercrest.

Turning to insurance solutions, relate earnings were 1.1 million for the quarter compared with $2.2 million a year ago. Our results reflected lower investment yields and higher cost of funds, partially offset by tighter expense management. Net investment income was $17 million down 12% year over year, as lower short-term rates and higher cash balances weighed on floating rate income.

The long-term care block remains stable and I and our multi-year guaranteed annuity or MIGA reinsurance business continues to expand. We added National Security Group as a new treaty partner in the second quarter.

Total assets grew to 1.55 billion within our insurance solution segment with strong credit quality and ample liquidity. The net investment spread was 12 basis points this quarter, or 48 basis points annualized. We expect spreads to build towards 75 to 100 basis point range on an annualized basis as capital is deployed into higher yielding assets than our legacy investment portfolio.

Mount Logan's balance sheet remains conservatively positioned. We ended the quarter with $162 million in cash and cash equivalent, up nearly 43% from a year ago. We continue to monetize the legacy 180 Degree Capital portfolio assets in an orderly fashion and look forward to deploying that capital to fuel growth in our asset management and insurance solutions segments.

We closed the quarter with $22 million in cash and cash equivalents within the asset management and corporate segment which we intend to deploy towards future growth as Ted discussed previously. Total debt stood at $74 million in the asset management segment and $17 million in insurance solutions, 41% debt to capital ratio. Operating cash flow also improved during the quarter as integration costs rolled off.

In closing, this quarter was about completing the transition, aligning our structure, simplifying our reporting, and setting the foundation for growth. We have two complementary engines, a Capital Light asset management platform, and a liability driven insurance solutions business, which designed to generate durable recurring income. Our focus from here is straightforward grow fee revenue, expand spread, and maintain disciplined capital management. We're well capitalized and positioned to compound value for shareholders over time.

And with that, I'll turn the call back over to Ted.

Thank you, Nikita. Overall, we are incredibly excited for Mount. Logan's next phase of growth as we scale our US domiciled asset management and insurance solutions businesses.

We have a fortified balance sheet that provides significant flexibility to invest for the future, and we are well positioned to capitalize on the opportunities we are seeing in the market.

We believe the substantial time and resources invested in our business during 2025 set the stage for meaningful growth in 2026 and 2027, helping to drive long-term value creation for our shareholders.

This concludes our prepared remarks. We would now like to transition the call to Q&A if the operator could please coordinate.

(Operator Instructions) Matthew Lee, Canaccord Genuity.

Hi, morning guys. I just want to talk about the trajectory for both SRE and FRE here. You now have the capital to invest to get the flywheel moving a bit. How should we be thinking about SRE and FRE growth in F26 and, what do you think is the run rate kind of going, for the medium term, just given the capital position you're in right now?

Thanks, Matt. So let's start with FRE. So as we said, FRE was pretty much flat quarter over quarter. In going into 2026, I think that's really where we're going to see things start to ramp up, particularly around, BC Investment Corporation.

This really adds a lot of scale. To our platform, our management fees are expected to increase to about 720k a quarter compared to what we recognized in the prior quarter, and under this new structure they intend to pay incentive fees as well, which will probably yield to us about 500K annually. So this is the upside that we didn't previously had when we have when we were the investment manager to Logan Ridge. Otherwise, again, that the focus is always on cost and really making sure that we can grow these fees without expanding, on the cost side, which we believe we've really invested in that over these past few years. So expect really positive growth from there. Additionally, with softix, our one of our other growth engines, we have waived 415K of incentive fees to date as it continues to scale, so. Expect that vehicle to continue to add to FRE pretty strongly. And then lastly, Ability, our biggest growth engine, it has provided $1.6 million in fees for the quarter and $6.4 million annualized. And so as we continue to manage more of that book of investment and the vehicle continues to scale, expect pretty strong growth there.

On the SRE side, there are things within our control and things that are not within our control, largely related to cost of funds, but what we can control is really looking at, sort of where rates are going and what we can do on the NII side. To control it, we do have a hedge that limits some of our exposure on the downside, that's helping, and then it's really just also looking at the cash drag and being able to find investment opportunities but which is challenging in a in a tight tighter spread environment. So, generally speaking, it's looking, it's looking pretty good, as we mentioned, we're trying to move towards the 75 to 100 basis point margin going into next year. It's really just what we can control there.

Okay, maybe ask a different way. I mean, your FRE is kind of trending towards, $10 million a year at the current run rate. Your SRE is kind of recovering off a low first half. I mean, should we be thinking about this as kind of like, combined 15 to $20 million for 2026, or is it too early for guidance?

I'd say on an organic basis that's fair and then it's really just how we look to deploy the capital from the current transaction and where we can see upside from there.

Yeah, so the, so I think the plan today is, we do have a bunch of cash and we're going to do a couple different things with it. One is we're going to buy back, we're going to do this tender that we've talked about at a big premium to market. We're going to do, we have a really good pipeline of M&A opportunities. And number 3 is put capital into the insurance company.

There is a lag we put money into the insurance company, there is a bit of a lag between capital deployment and SRE benefits, so you should really see real benefit on SRE in the second half of next year.

Got it. And maybe I'll touch on that. You said that you, mentioned M&A opportunities. I mean, 180 is now kind of digested, what sort of opportunities are you seeing in the market?

Yeah, I mean, I'd say this is like the perfect storm in a good way for us, which is number 1 is now because we're listed on the NASdaq, it gives us a currency that is deemed to be more attractive for many shareholders, and number 2 is we're getting size and scale where, people feel like, that works for them.

More importantly, the like scale matters, and I think a lot of the M&A environment tends to ebb and flow a little bit. Our pipeline's never been more robust. We have 3 or 4 really strategic, very creative things in our pipeline that we expect to announce, hopefully some of them by the 1st quarter, that will be real catalysts, I think, for growth for our business. So, again, I think we're combining.

This year was a consolidation year, we kind of merged with Turn, we merged our BDCs, we've kind of like, you've cut some costs.

Next year we really expect to be growing both from an organic and inorganic basis.

Okay, sounds good. Talk. Soon.

(Operator Instructions) Chuck Burns, CIBC.

Good morning, Ted. Congratulations on the taking this over the finish line this year, the transaction. I just have a couple of questions. The US market transition, how is that progressing, with regard to institutional interest and maybe brokerage coverage?

That's a good question actually. So, hey Chuck, how are you? So I would say, we're.

Good. You know this is kind of like we had to get through this last quarter and get this announced, and I think this tender is going to be, obviously a good catalyst for us to engage with the street.

So we are, we we're, we obviously are being very proactive in many different ways of engaging with institutional shareholders and because of this NASDAQ list in our size, it gives us an opportunity to have a more robust dialogue with people than previously.

So I think that's a big focus of ours now that the quarter's out, now the per transaction's closed, and now that, we're going to announce this tender.

Okay, and the second question is, there's been a lot of noise in the markets regarding private credit and the media has been kinda all over that issue. How is that impacting Mount Logan?

A very good question. I would say.

People have been calling for a blow up in private credit since I got in the business like 20 years ago. I mean, I would say the four big recent headlines all have similar things in common, and I'm referring to like First Brands and some other things. First of all, First Brands, most of the capital, only 2% of the capital structure was in private credit hands. Most of that was either syndicated risk or in other channels, and again, Most of the, most of each of these four idiosyncratic situations, Tricolor, that one, generally speaking, were frauds or misappropriation of funds that weren't necessarily tied to a macro theme.

And then secondly, like, our business, Mount Logan's really levered generally speaking towards corporate credit, and we haven't seen a big deterioration in corporate credit at all quite yet. I'm not saying it's not going to happen, we just haven't seen it. The all of these things, the catalyst to cause the stress came out of the asset-based part of their business, and the asset-based finance part of their business, and that's where, that's like we're not really, we're not leverage to those kind of channels.

Okay, thank you very much.

Ben Brostoff, Brostoff Capital.

Hey guys, thanks for taking my question. Wanted to ask about return on equity and whether you're seeing any changes on that because of spread compression or other reasons. I know you had guided to about, called 25 or 25, 6% ROEs in one of the last presentations. Wanted to see if you had any commentary on that guidance either short-term or long-term. Thanks again.

Yeah, I'll answer that. So I would say like if you just take a step back, right? Like there's a couple tailwinds for ROE. One is scale, so like, we have public company costs that we are, advertising over a lower base. Number 2 is obviously our insurance company, is expected to grow, so we have a little bit of a transition period because we're sending a lot of cash post-term merger, but once we kind of fully integrate all of that, there should be some good tailwinds on our, RE.

I don't, but the the the 25% you're referring to is the incremental ROE we get from investing in our insurance company. It doesn't necessarily measure it overall, but we do, we do expect to drive, pretty robust ROEs on a go forward basis.

Awesome, that helps. Thank. You.

Thank you. At this time we currently have no further questions, so I'll hand it back to the management team for any further remarks.

Thank you everyone for your time today. Looking ahead, our focus remains on discipline, execution and delivering measurable milestones that will showcase the strength of the platform we've built.

As always, we are happy to make ourselves available for any questions you may have. We look forward to speaking with you to recap the 4th quarter and full year 2025 results in March of 2026.

Hope everyone has a good weekend and a good American Thanksgiving.

Thank you.

Thank you all for joining today's call. You may now disconnect your lines.