Mount Logan Capital reported weaker insurance earnings in the second quarter as higher long-term care (LTC) claims costs and lower investment yields outweighed solid growth in its asset management arm.
For the quarter ended June 30, the company’s insurance segment generated $20.6 million in net investment income, down 12% from the prior year.
Spread-related earnings over the trailing 12 months fell to $4.6 million from $11.6 million, largely due to a $1.8 million in-force update on the Guardian LTC block, increased interest accretion on LTC liabilities and lower returns from the investment portfolio. This compares with a $4.8 million favorable update on the Medico LTC block a year ago.
Ability Insurance Company, managed by Mount Logan, held $1.1 billion in investment assets at quarter-end, essentially flat from the prior year. The insurance portfolio earned a 7.2% yield in the quarter, or 7.4% excluding funds withheld and modified coinsurance arrangements.
From an industry perspective, the results underscore ongoing challenges in the LTC insurance market, where rising care costs, policyholder longevity, and sustained claims inflation continue to pressure margins. For insurers, managing investment yields is also critical, as lower returns on fixed-income assets directly impact the profitability of long-duration products like LTC policies.
While insurance earnings dipped, asset management performance strengthened. Fee Related Earnings rose 19% in the quarter to $1.9 million, with a 28% increase over the trailing 12 months to $8.4 million. The gains were supported by higher management fees, equity investment income, and disciplined expense control.
Chief executive Ted Goldthorpe said the planned all-stock merger with 180 Degree Capital Corp. should provide additional scale, boost both fee and spread-related earnings and position the combined business to better weather volatility in the insurance segment. Shareholders will vote on the transaction at a special meeting on August 22.
Mount Logan also declared its 24th consecutive quarterly dividend of $0.02 per share, payable August 25.
Analysts note that while the company’s insurance operations remain profitable, the segment’s exposure to LTC risk will require close monitoring, particularly if claims severity or frequency continues to rise. The merger could offer diversification benefits, but long-term insurance profitability will still hinge on effective claims management, reinsurance strategy, and investment performance.
