Mount Logan Capital (MLCI) Q2 2026 Earnings Call Transcript

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DATE

Wednesday, August 12, 2026 at 10:00 a.m. ET

CALL PARTICIPANTS

• Chairman and Chief Executive Officer - Edward Joseph Goldthorpe
• President - Henry Wang
• Chief Financial Officer - Brandon Satoren
• Executive Vice President and Chief Operating Officer - Jordan Mangum
• Head of Investor Relations - Scott Chan

TAKEAWAYS

• Segment Income -- $4.3 million, an increase from $3.3 million in the first quarter of 2026.
• Fee Related Earnings -- $1.4 million, representing a sequential increase from $1.2 million.
• Spread Related Earnings -- $2.9 million, reflecting a $900,000 increase from the first quarter of 2026 driven by a favorable Guardian reserve assumption update and lower cost of funds.
• Net Loss -- $4.2 million, an improvement from a $6 million net loss in the first quarter of 2026 due to lower expenses.
• Total Revenue -- $8.7 million, including $2.3 million from the Asset Management segment and $6.5 million from Insurance Solutions.
• Insurance Solutions Net Investment Income -- $18.5 million, including income from consolidated variable interest entities.
• Total Assets Under Management -- $2.0 billion as of June 30, 2026, inclusive of insurance assets managed by the company.
• Insurance Assets Managed -- $953 million, representing an increase of $126 million from the second quarter of 2025.
• Insurance Investment Portfolio Yield -- 6.2%, or 6.6% when excluding funds withheld assets and modified coinsurance arrangements.
• Yieldstreet Transaction Guidance -- $2.8 million in expected annual run-rate fee-related earnings, following the anticipated closing in the third quarter of 2026.
• SOFIX Net Asset Growth -- $100 million in expected additional assets from the Yieldstreet acquisition, nearly doubling the fund's net assets.
• SOFIX Performance -- 8% return over the trailing 12 months ended June 30, 2026, and 2.5% year to date.
• BCP Investment Corporation Nonaccruals -- 5.7% of the portfolio at amortized cost, down from 6.2% in the prior quarter.
• BCP Investment Corporation Portfolio Yield -- 12% weighted average yield, excluding nonaccruals and collateralized loan obligation income.
• Debt Portfolio Diversification -- 71 portfolio companies across 33 industries, with 63% concentrated in first lien senior secured loans.
• Cash and Equivalents -- $92.3 million as of June 30, 2026, including restricted cash and variable interest entities.
• Total Capital -- $171.1 million, comprising debt obligations and total shareholders' equity.
• Quarterly Distribution -- $0.03 per share, marking the 28th consecutive quarter of dividends for the company.
• Asset Management Debt -- $98.1 million as of June 30, 2026, compared to $76.3 million at the end of 2025.
• Insurance Solutions Debt -- $12 million, a decrease from $17.3 million at the end of 2025.
• Future Policy Benefits Liability -- $756.3 million, a decrease from $781.9 million as of December 31, 2025.
• Interest Sensitive Contract Liabilities -- $357.1 million, down from $364 million at the end of 2025.
• Managed Assets Agreement -- $120 million in additional managed assets from an existing relationship announced in the first quarter.
• Asset Management Incentive Fees -- $419,000 for the second quarter, compared to $478,000 in the prior year's quarter.

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RISKS

• CFO Satoren identified the legacy long-term care book as a source of volatility in spread-related earnings. Satoren stated, "I think long term, it is critical that we grow the insurance business and, frankly, decrease or shrink the attribution to SRE from our long term care book, which is where the volatility comes from."

SUMMARY

Mount Logan Capital Inc. (NASDAQ:MLCI) reported an increase in segment income and advanced strategic growth initiatives across its integrated asset management and insurance platform. Management highlighted the receipt of an investment-grade rating for its Ability Insurance subsidiary and the launch of proprietary annuity products as primary catalysts for the second half of 2026. The company confirmed that shareholders approved a merger to add over $100 million in assets to its credit interval fund, with the transaction expected to close in the third quarter of 2026. Leadership stated that investments in retail distribution and infrastructure are intended to accelerate earnings power in 2027 while maintaining cost discipline and operational efficiency.

• CEO Goldthorpe announced the launch of Reliability-branded multiyear guaranteed annuities in three, five, seven, and 10-year terms to initiate direct origination.
• Management confirmed that AM Best assigned a financial strength rating of B+ to Ability Insurance, providing third-party validation to support the distribution of insurance products.
• Goldthorpe stated that the M&A pipeline "has never been larger" as the company evaluates opportunities involving smaller managers and public vehicles.
• The company integrated a third-party distribution partner and expanded its internal sales team to broaden the reach of the SOFIX interval fund.
• CFO Satoren noted that core management fee growth was offset by the wind-down of noncore legacy vehicles and managed CLOs.
• CEO Goldthorpe stated, "Software exposure across our managed portfolios remains concentrated in mission critical vertically specialized businesses, with proprietary data embedded workflows, high switching costs, and first lien seniority."
• The Yieldstreet transaction is expected to be immediately accretive to earnings per share upon closing, contributing approximately 30% growth over the 2025 run-rate fee-related earnings.

INDUSTRY GLOSSARY

• FRE (Fee Related Earnings): A non-GAAP measure used to assess profits from recurring revenue streams such as management and incentive fees.
• SRE (Spread Related Earnings): A non-GAAP measure used to assess profits from the difference between investment income and the cost of insurance liabilities.
• SOFIX (Opportunistic Credit Interval Fund): A Mount Logan-managed fund that invests in various credit assets including privately originated loans and asset-based investments.
• MYGA (Multiyear Guaranteed Annuity): A type of fixed annuity that provides a guaranteed interest rate for a specific number of years.
• First Lien Senior Secured Loans: Debt instruments that have the highest priority of repayment in the event of a borrower's bankruptcy.
• Ceding Commission: A fee paid by a reinsurer to a primary insurance company to cover administrative and acquisition costs.
• Nonaccruals: Loans that are no longer generating interest income because the borrower is behind on payments.
• Modified Coinsurance (Modco): A reinsurance arrangement where the ceding company retains the assets and reserves while the reinsurer shares in the risks and profits.
• Variable Interest Entities (VIEs): Legal structures where a company has a controlling financial interest despite not having a majority of voting rights.

Full Conference Call Transcript

Operator: Good morning, ladies and gentlemen. And thank you for standing by. Welcome to Mount Logan Capital Second Quarter 26 Results Conference Call. Before we begin, I would like to remind listeners that today's discussion will include forward-looking statements. These statements discuss our current expectations and are 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 risk with Mount Logan's Capital business, please see our most recent filings with the SEC. In addition, we will 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; president, Henry Wang; chief financial officer, Brandon Satoren, Executive Vice President and Chief Operating Officer Jordan Mangum. And head of investor relations, Scott Chan. I will now turn the call over to Mr. Goldthorpe. You may begin.

Edward Joseph Goldthorpe: Thank you, and good morning, everyone. Thank you for joining us today. The second quarter represented another step forward in our effort to build a larger and more durable earnings base around Mount Logan's integrated asset management and insurance platform. Segment income increased to $4.3 million up from $3.3 million in the first quarter. Fee related earnings increased sequentially to $1.4 million while spread related earnings increased to $2.9 million, up $900 thousand from the first quarter of 2026 and up $3 million as compared to the prior year's quarter. These results reflect continued improvement in the profitability of our base of business, a positive indicator as we execute against the strategic initiatives we outlined in the first quarter.

Which we expect to convert into increased earnings power during the second half of 2026 and into 2027. After quarter end, we achieved 3 significant milestones against our stated strategic initiatives. Including the receipt of 8 Ability B plus financial strength rating a BBB- long term issuer credit rating from AM Best. Which was a process spanning several quarters is a key catalyst for growth in our insurance segment. Building directly on that rating, this morning, Ability announced the launch of its initial suite of multiyear guaranteed annuity products, on its flagship Reliability brand, marking our ability to enter into direct origination of retirement solutions, and an important inflection point for our insurance segment.

Additionally, Yieldstreet shareholders recently approved the proposed merger of more than $100 million of assets into SOFIX, from its alternative income fund. The vote was overwhelmingly positive and we achieved over 50% of the vote in less than 4 weeks from the release date of the Yieldstreet proxy. We currently expect the Yieldstreet transaction will close during the third quarter. Also pleased to announce that we are maintaining our quarterly distribution of $0.03 per share marking the 4th consecutive quarterly dividend following the completion of our business combination. Further extending Mount Logan's long standing dividend record.

Before reviewing our strategic growth initiatives in more detail, I want to review the performance across our core managed portfolios which provides the foundation for our business. We built our private credit franchise with a goal of being able to invest across all market cycles, and environments, and we believe performance within the vehicles we manage reflect that. Within Insurance Solutions, the investment portfolio generated a yield of 6.2% during the second quarter or 6.6% excluding funds withheld and Modco assets. Spread related earnings increased by $900 thousand sequentially to $2.9 million The improvement was driven primarily by a favorable Guardian reserve assumption update. And lower all in cost of funds.

Opportunistic credit interval fund or SOFIX generated a return of 8% over the trailing 12 months ended 06/30/2026, and 2.5% year to date. SOFIX remains a differentiated interval fund that invests in a broad range of credit assets such as privately originated loans, asset based investments, dislocated credit, and other such situations. Which gives the fund flexibility to opportunistically deploy capital across all market cycles. At BCP Investment Corporation, managed by Sierra Crest Investment Management, in which Mount Logan holds a 24.99% interest. Portfolio quality remained resilient during the second quarter. Debt investments on non accruals improved to 5.7% of the portfolio at amortized cost, down from 6.2% in the prior quarter.

The debt portfolio remains highly diversified across 71 portfolio companies, and 33 industries, with approximately 63% in first lien senior secured loans and a weighted average yield of 12% excluding nonaccruals and CLO income. The broader private credit market remained resilient during the quarter. Though transaction volumes were lower and remained selective across the opportunities we saw in the market. Software credit spreads widened further, and now sit several hundred basis points wide of the broader single b rated loan index. Reflecting sector specific sentiment around AI disruption rather than broad based credit deterioration.

Software exposure across our managed portfolios remains concentrated in mission critical vertically specialized businesses, with proprietary data embedded workflows, high switching costs, and first lien seniority, underlying portfolio companies continue to perform. We view the current environment as 1 that rewards discipline and selectivity, and believe any further dislocation should create attractive deployment opportunities for our credit strategies. The same discipline also informs how we are thinking about inorganic growth. And the Yieldstreet transaction is a clear example of a unique opportunity for our business. As we announced in March, 1 of our core asset management vehicles, SOFIX, entered into a definitive agreement to acquire the assets of Yieldstreet Alternative Income Fund managed by Willow, Wealth.

As of July 31, I am pleased to report that over 50% of Yieldstreet shareholders have voted to approve the transaction. As a result, we believe the transaction will close during the third quarter with benefits beginning to accrue in the fourth quarter and ramping into 2027. The addition of Yieldstreet is expected to nearly double SOFIX net assets adding over $100 million to the fund. Continue to believe this transaction will unlock at least $2.8 million of run rate FRE annually to Mount Logan represents approximately 30% growth over our 2025 run-rate FRE. The transaction is expected to be immediately accretive to our earnings per share once closed.

We believe this is an important step in scaling our asset management platform and increasing our recurring fee related earnings. As mentioned, the current environment in private credit is creating additional opportunities for disciplines well capitalized companies like Mount Logan to acquire strategic assets at attractive valuations. We are pursuing an active pipeline of potential opportunities and we look forward to updating investors on the progress we are making executing against our M&A growth strategy. Another important component of our strategy for SOFIX is improving the fund's retail distribution. which will be a larger fund with broader appeal following the close of the Yieldstreet transaction.

We have recently added a third party distribution partner and through our staffing and servicing agreement with BC Partners, have made an internal investment to expand the sales team that Mount Logan leverages. We believe the combination of select third party relationships and targeted internal sales resources provides a balanced structure that broadens our reach while maintaining our cost discipline. Over time, we believe our investment in distribution will drive additional fundraising, increased assets under management, and support growth and recurring fee related earnings. The last initiative I want to review today is our focus on unlocking organic growth within our insurance segment. And its permanent capital base.

In July, we announced that AM Best, a leading global credit agency, specializing in the insurance industry, assigned an investment grade rating to our wholly owned life and annuity subsidiary. Ability Insurance Company. This was a significant milestone for Mount Logan and Ability providing an independent third party validation of Ability's financial position. Investment grade credit rating underscores the strength of Ability's financial profile, and reflects the significant capital we have invested since we acquired it in 2021. We believe AM Best's rating is key to unlocking the full earnings potential of our platform and supports future distribution of Ability's insurance products.

On the receipt of Ability's rating this morning, we announced the next step in our insurance journey by officially launching Ability's initial suite of multiyear guaranteed annuity products. Available in 3, 5, 7, and 10 year terms. To support this distribution, Ability is partnered with 1 of the nation's leading independent marketing organizations and is initially able to write across our existing multistate license footprint with plans to expand into additional states over the coming quarters.

Direct origination gives us greater control over product design, pricing, and the pace of liability generation, And importantly, every incremental dollar of retained liabilities has a potential to generate both spread related earnings within ABILITY and management fees at Mount Logan Management, the flywheel we have been investing towards. We view the controlled liability origination and product innovation as core to building durable spread related earnings. We cannot understand understate the significance of this launch, which we believe will drive a meaningful step up in the long term earnings power and outlook for the insurance segment, as well as drive increases in fees earned by Mount Logan management for its efforts managing Ability's investment portfolio.

I turn the call over to Brandon, wanna emphasize the progress we are making against several key strategic initiatives across the Mount Logan platform. During the first half of 2026, we solidified our insurance growth strategy progressed the inorganic expansion of our managed AUM, strengthened SOFIX distribution capabilities, all while working towards the completion of the Yieldstreet transaction. All of these initiatives are designed to increase our scale, expand recurring revenue, enhance the earnings power of our asset management and insurance solutions businesses. Further enhancing our businesses foundation underpinning future durable long term organic growth. We are encouraged by the momentum already reflected in our results, particularly the continued growth in segment income and the increasing contribution from insurance solutions.

At the same time, many of our most important initiatives remain in the early stages contributing to our reported financial results. As we continue to execute, we expect these efforts to drive further momentum during the balance of 2026 with their financial impacts becoming more meaningful in 2027. With that, I will turn the call to Brandon who will walk through our financial results in more detail.

Brandon Satoren: Thanks, Ted. Good morning, everyone. The second quarter of 2026, total revenue was $8.7 million and the company reported a net loss of approximately $4.2 million which represents an improvement of $1.8 million from the $6 million net loss reported in the prior quarter. The sequential improvement in the company's net loss was primarily driven by lower expenses. Against that backdrop, segment income increased to $4.3 million in the second quarter of 2026 from $3.2 million in the prior quarter driven by sequential improvement in both FRE and SRE Looking at our segment results, asset management revenue for the second quarter of 2026 was $2.3 million compared to $2.5 million in the first quarter of 2026.

Near term, we expect core management fee streams to increase but to be partially offset by the wind down of certain nonlegacy noncore legacy fee vehicles, including the Ovation alternative income fund, and our Mount Logan managed CLOs. Importantly, we are beginning to replace legacy revenues from noncore vehicles with newer, more scalable, and recurring fee streams as well as by growing our existing core revenues. Stream. This includes our profit sharing arrangement with the majority owner of Sierra Crest Investment Management, the expected addition of over $100 million of assets in SOFIX from its acquisition of the Yieldstreet Alternative Income Fund which is expected to close in the third quarter.

The benefit of $120 million of managed assets from an existing relationship as well as higher transaction and advisory fees. We are beginning to see contributions from these initiatives, and we expect their impact to become more visible as they scale. Turning to insurance solutions. Net investment income including net investment income from our consolidated variable interest entities, was $18.5 million for the second quarter of 2026, a decrease of $1.7 million or 8% from the first quarter of 2026. Excluding funds withheld, and including intercompany elimination of management fees, net investment income for the second quarter of 2026 was $13 million, a decrease of $1.6 million or 11% compared to the first quarter of 2026.

The investment portfolio generated a 6.2% yield or 6.6% excluding funds withheld and our insurance AUM increased to almost $1 billion. An increase of $126 million from the same period in the prior year. This growth reflects the agreement announced during the first quarter of 20 to manage an additional $120 million of assets. Benefiting fee related earnings. During the quarter, we continued to focus on optimizing and high grading the insurance portfolio through disciplined portfolio rotation and deployment. While maintaining a high level of invested assets to support spread earnings. Over time, direct origination has the potential to meaningfully increase the earnings power of our insurance solutions business while also supporting growth in asset management fees.

As the investment portfolio expands. Looking at core earnings, fee related earnings or FRE were $1.4 million for the second quarter of 2026 compared to $1.2 million in the first quarter of 2026. Importantly, we continue to make progress towards improving the mix and durability of our fee related earnings. Management fees, incentive fees, and equity invest equity investment earnings and other fee income totaled approximately $4.3 million before intercompany elimination, and were broadly unchanged sequentially. The benefit of the Vista mandate was offset by lower fees from BCIC ABILITY, and non core vehicles. Additionally, we did not earn advisory or transaction fees during the quarter compared with approximately $100 thousand earned in the first quarter.

Looking ahead, we expect FRE to continue to improve as the strategic initiatives Ted discussed begin to contribute more meaningfully. Spread related earnings or SRE increased to $2.9 million for the second quarter of 2026 from $2 million in the first quarter. The quarter benefited from the favorable Guardian block assumption update lower general and administrative expenses, and lower interest expense. Beyond the assumption update, we continue to benefit from the actions we have taken to lower financing costs and improve the underlying economics of the insurance platform. Finally, moving to our balance sheet. Mount Logan's capital position remains strong with approximately $92.3 million of cash restricted cash, and cash equivalents including VIEs, with limited near term debt maturities.

Finally, as Ted mentioned earlier, the board approved a dividend of $0.03 per share for the quarter. Continuing our 28th consecutive quarter dividend track record. Looking ahead, expense discipline and operational efficiency remain priorities across the platform. More specifically, our priorities remain prudent and disciplined expense management, driving operational excellence, continued growth in recurring fee related earnings, and increase and increasing the contribution from insurance solutions to MLC's p and L. Several of the initiatives Ted discussed are just beginning to or have not yet started flowing through our financials.

As we continue to execute against our growth, strategy and in turn grow our fee earning AUM, and continue to scale our new and core revenue streams, we expect their income their impact to be more visible through the second half of 2026 and into 2027. With that, I will turn the call back over to Ted.

Edward Joseph Goldthorpe: Thank you, Brandon. Before we open the call for questions, I want to reemphasize the durability of the model we are building. Mount Logan operates as an integrated platform across a scalable asset management business. With disciplined private credit franchise and a permanent insurance platform and capital base. The business is designed to compound recurring earnings across market cycles. We believe progress today is underway to drive further momentum through balance sheet through the balance of 2026, and a more meaningful acceleration in earnings and value creation in 2027 and beyond. This concludes our prepared remarks. Operator, if you could please open the call for questions.

Operator: Thank you. A question, please press 11 on your telephone and wait for your name to be announced. To withdraw your question, press 11 again. And our first question will come from the line of Matthew Lee with Canaccord Genuity. Your line is open.

Sam Finkelman: Hi, there. Hi, sir. Thanks for taking my call. I have a couple of kind of quick questions. I guess the first 1 would be how should we think about the outlook for the second half of this year and going into next year? And I guess kind of a follow-up on that is once the Yieldstreet transaction closes, is M&A still a big priority for you guys? Thanks.

Edward Joseph Goldthorpe: Thanks, Matt. Yes. I would say 2 things. 1 is, we do expect our FRE to begin to inflect. Yes. The Yieldstreet streak transaction is expected to close this quarter as we mentioned. Which will add some earnings. And, again, as we direct write for Ability, which we just launched today, you will begin to see some ceding commissions as well as growth in AUM. So really like, you know, we really spent the last 6 to 9 months in an investment phase. And you should see the results of that, you know, come through in the fourth quarter and next year. In terms of M&A, you know, listen. Our M&A pipeline has never been larger.

You know, with the volatility around private credit. there is 2 things going on. Some very large managers are exiting smaller vehicles, particularly public vehicles, just because it is a you know, distraction for their core franchise. And the second thing is smaller managers are just having a hard time raising money and growing their platform and getting it to scale. So I would expect us to be very active on the M&A front over the next you know, 6 to 12 months.

Sam Finkelman: Okay. that is great. Thanks.

Edward Joseph Goldthorpe: Thank you. Thank you.

Operator: 1 moment for our next question. And that will come from the line of Ben Brockhoff with Lucid Capital Markets. Line is open.

Justin Marco: Hey, guys. Good morning. Just a follow-up on the Yieldstreet transaction. Are there any other regulatory or other approvals required for the deal to close?

Edward Joseph Goldthorpe: No, we got through the we have we have gone through the SEC process, and we have now got the shareholder vote. So it was just a matter of getting it closed.

Justin Marco: Okay, great. Great. And then another follow-up on the M&A conversation. what is your process like for sourcing new opportunities? Is it you know, these smaller managers that are struggling that are coming to you guys? Or do you have a dedicated team that is focused on outreach?

Edward Joseph Goldthorpe: I would say it is multifold. I think, yes, we are in constant dialogue with a lot of our peers around doing things together. So a lot of it is social slash, you know, productive sourcing. And then, you know, listen. We have been a big consolidator in the middle market, the lower to middle market. We typically get introduced to a lot of people who are looking for strategic alternatives. So I think it is, you know, combination of people know that we are the acquirer. You know, again, the big guys have obviously know, made a series of acquisitions. But in our space, we really are the only ones.

So I think it is a combination of, like, we get the first phone call just given we have been the biggest acquirer. Coupled with the fact that coupled with the fact that we are in constant proactive dialogue with a lot of people.

Justin Marco: Got it. Okay. Thanks. And then switching to the insurance side. Congrats on the rollout of Reliabililty. You know, as you ramp directly writing policies, is your intent to eventually replace the policies you have reinsured with the ones that you are directly writing and then, and, you know, longer term, do you have plans to expand the product set beyond the MYGAs?

Edward Joseph Goldthorpe: Good question. On the first part, direct writing, you control your own destiny a little bit better in terms of, like, you know, predictability around flows. And, theoretically, we should be able to source liabilities for cheaper. And, again, that is super accretive for ROE. that is why it is so important to us. We are not gonna stop reinsuring other people's policies because, again, it diversifies our funding sources and still economic for us to do so. So I think I think we will continue to kind of do both and then sorry. What was your second question?

Justin Marco: Just, you know, sort of longer term plans. On the product. Do you have any yeah, other products outside of the MYGAs?

Edward Joseph Goldthorpe: Yeah. My bad. Sorry. I mean, the answer is yes. I mean, the answer is that the market continues to evolve. The annuity space is a very competitive space and it is become more so. So, you know, we have had to be a lot more thoughtful on the asset side. Because, you know, liability costs are have been, you know, a little bit more elevated than they have been versus history. I think what we will do is I think we are going to--I would not be surprised to see us do other products But all that being said, I mean, really, our goal is to take risk on the asset side, not the liability side.

So it is always been our business model. And I think we will kind of stick to that. So, like, minimal insurance risk and we would prefer to kind of make or break ourselves on the investment side. And I would just add that ability to direct write opens all of those doors, though. We will certainly look at and consider other products FIA, RILA, etc., to the extent they work for our current cost of capital. But, again, direct writing is the panacea. You know, now that we can directly distribute insurance through our third party marketing organization. We can sell you know, again, all the full suite of insurance products. That the market is looking for. Okay, great.

Brandon Satoren: And last 1 for me, maybe this is for Brandon on fee related earnings. Was there any specific driver to the quarter over quarter increase in other fee related income? So that is our profit share interest. So that is and it is largely driven by incentive fees, which can ebb and flow. So I would say nothing in particular. This quarter, it just had there was a true up from the prior quarter that did flow through the current period across the chair. But, again, it was not--it was a couple hundred thousand dollars. It was over $200 thousand I believe.

Justin Marco: Okay, great. Great. that is all for me today. Thanks, guys.

Edward Joseph Goldthorpe: Thank you. Thank you.

Operator: As a reminder, if you would like to ask a question, please press 11. Our next question will come from the line of Charles Burns with CIBC. Your line is open.

Charles Burns: Good morning, Ted. Good to hear the update this morning. Just I just had a couple questions. The first 1 is with the AM Best rating, and the regular recent regulatory approval to write direct business. Can you elaborate on the opportunities this creates?

Edward Joseph Goldthorpe: Yes. It definitely allows us--it does a couple things for 1 is, it allows us to control our own destiny and control, you know, the flows a little bit better so we can kinda take in flows as we see the investment opportunity evolve. You know? So if there is good opportunities, we can ramp it up and down. And also, like, flexibility around pricing. Know, it also allows us to, you know, look at new products. Like preneed and some other things we have been looking at. Basically expand our product set versus just taking what the market's given us.

So I think it gives us a lot more flexibility and, you know, hopefully, and, we think practically cheaper liabilities. So, you know, it does not and insurance, the leverage embedded in the model, you know, small savings in liabilities lead to big changes in ROE. So we are hoping this drives, you know, AUM and ROE for us.

Charles Burns: Okay. Second question is why is direct writing more economic economically better than reinsurance?

Edward Joseph Goldthorpe: Oh, yeah. The answer for that is, you know, typically, when we reinsure from another provider, we pay them a ceding commission. So we generally speaking, we pay people you know, some kind of commission for them to originate for us. Versus when we originate ourselves, you know, obviously, the origination costs are lower. As we mentioned earlier, you know, we are generally speaking using a third party to distribute our products. So, obviously, we have an economic arrangement with them. It tends to be more economic from a seating perspective than just pure reinsurance.

Charles Burns: Oh, I guess you have to share with other you share less, I guess. that is bottom line. Yes. that is that is a good way to say. And I guess the final thing, asset managers has had a pretty rough go in 2026, but recently, there is been, it seems, like a reasonable rebound in the numbers then. Why do you think Mount Logan stock has lagged relative to these other asset managers recently.

Edward Joseph Goldthorpe: Yeah. I think I think the answer to that question is, you know, generally speaking, anytime there is a big sell up in the market, and I have just followed this for the last my whole career, generally, the things that come back first are the larger, most liquid you know, in this case, asset managers, but it could be the same as said the same thing for other asset classes as well. So generally speaking, when there is a rebound in asset management, you know, you will have the big guys rally first, and then we kind of get dragged up after. So I you know, again, I think our stock does not reflect fair market value.

You know, I bought stock last quarter, and, you know, I will buy stock this quarter as well. And, you know, we will just keep buying stock until the price reflects, you know, fair market value.

Charles Burns: Okay. And I guess the final question is the interest rate backdrop. I mean, it seems like interest rates are more or less on hold. Is that although they backed up, since the war started, Is the current interest rate environment a positive or a negative for you guys?

Edward Joseph Goldthorpe: I mean, it is definitively positive. I mean, like, higher rates always the question's always like, why are rates higher? And, you know, we are levered to short term rates. So, you know, most of our assets are floating rate risk. So short-dated rates are actually higher rates are just good for us. We just can make more money. And generally speaking, you know, we are paying out a mixture of fixed and floating on our liabilities. So higher is better for us. All depends on what that does to credit. But, again, you know, you can see, you know, economic strength. I mean, the economy is doing really well in The US.

Which is about really what we are levered to. And you know, credit is still pretty benign. There has not been a lot of defaults. So higher rates in a good economy are good for us. You know, higher rates that cause credit issues are not as good for us, but, yeah, higher for longer is good.

Charles Burns: Okay. Okay. Thanks very much.

Edward Joseph Goldthorpe: Thank you.

Operator: 1 moment for our next question. And that will come from the line of Jonathan Ross Schild. Your line is open.

Jonathan Ross schild: Hi. I would like to know something about executive compensation, how many employees you have, and what is the structure of your compensation relative to stock and cash?

Edward Joseph Goldthorpe: Yeah. Okay. So, you know, I take all of my compensation in stock as does, you know, most of the management team. Sorry. as is all the management team. And the way that, you know, it works is BCP, which provides a lot of the support for the vehicle, gets you know, a basis point fee, but it is a very, very low below market fee. it is really just to cover costs. So we, you know, we do not take cash comp. We do not you know, and we are aligned with shareholders. Just the way we get you know, we get RSUs in stock.

Jonathan Ross schild: And what do you have incentive options, or is it based on the spread and profitability? Is it a commission based compensation? What is the structure?

Edward Joseph Goldthorpe: I mean, you could--it is all in our proxy. Basically, it is all--we do not get paid in options. We do not get paid commissions. it is generally speaking, in stock grants. Yeah. Service based vesting conditions, so time. Okay. And So we all get we all get stock. It vests over time. You know, as long as we are you know, still here. And so and, again, we do not take cash comp.

Jonathan Ross schild: Okay. And in the last call, yes, you said you were not able to tap the $10 million buyback. Is that calendar changing in any way?

Edward Joseph Goldthorpe: No. it is always something that we are considering. And we weigh it versus buying stock personally and buying stock you know, in our funds and everything else. But, you know, we are very committed to you know, invest in the stock price at these kinds of levels. Okay.

Jonathan Ross schild: Thank you.

Edward Joseph Goldthorpe: Thanks. Thank you.

Operator: 1 moment for our next question. That will come from the line of Matthew Lee with Canaccord Genuity. Your line is open.

Richie Munjal: Thanks, operator. Sorry we had some difficulty queuing our questions. I am filling in for Matt. And a couple of questions. First, on FRE. it is improved sequentially. Could you walk us through what specifically needs to change to drive the inflection Is it going to be a function of fundraising, fee rate mix, or just expense discipline, please?

Brandon Satoren: Yeah. I would say Q2 FRE increased to $1.4 million from $1.2 million in the prior quarter. That said, we agree there is considerably more work to do there as we continue to execute on our strategic initiatives and scale the business. So I would say all of the above in response specifically to your question. We absolutely need to grow our fee earning AUM high grade our portfolios to optimize earnings, and then expense discipline is also, in my personal opinion, a huge catalyst. for that, I mean. The scale is paramount.

Richie Munjal: that is helpful. And the second 1 on SRE. How much of the improvement would you categorize as a sustainable versus driven by the favorable Guardian reserve adjustment? Just trying to get a sense of the going-forward claim base going forward.

Brandon Satoren: Yeah. So I think long term, it is critical that we grow the insurance business and, frankly, decrease or shrink the attribution to SRE from our long term care book, which is where the volatility comes from. In our insurance business and our SRE metric. So there are a couple of gives and takes in the quarter. I would say there is about a net $600 thousand benefit to SRE this quarter, $600 thousand or $700 thousand from the Guardian up assumption update offset by other nonrecurring items in SRE that were addressed as well. That said, we are, you know, the assumption update comes with the insurance risk. We hold today from our legacy long term care blocks.

And, again, the goal is to continue to minimize their significance. To our overall P and L.

Richie Munjal: Great. Thank you. that is it for me. that is very helpful. Thank you so much.

Edward Joseph Goldthorpe: Thank you.

Operator: I am showing no further questions in the queue at this time. I would now like to turn the call back over to management for any closing remarks.

Edward Joseph Goldthorpe: Thank you all for your time today. As always, please feel free to reach out to us with any questions. We are always happy to discuss. Look forward to speaking to you again in November when we announce our third quarter 26 results. Thank you so much, and have a great rest of your week.

Operator: This concludes today's program. Thank you all for participating. You may now disconnect.

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