Randy Binner • B. Riley Securities

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CEO Thomas Majewski stated that while they have selectively increased European CLO exposure to between 5-10% due to attractive opportunities, it is not a material driver of the overall strategy. He clarified that interest rate changes have little impact on ECC's cash flow, as both assets and liabilities are floating rate. The primary cause of lower effective yields has been significant loan spread compression, which the company actively counteracts by executing CLO resets and refinancings to reduce liability costs.

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CEO Thomas Majewski stated that the Q1 reset/refi activity was actually light and expects the pace to continue, with a significant pipeline of opportunities due to over 36% of their CLOs having wide AAA spreads. CFO Kenneth Onorio clarified that the $190M figure was gross investment, while the $95M was the net figure after accounting for sales of CLO debt during their portfolio rotation and other asset conversions.

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Co-CIO Mark Tecotzky clarified that the most immediate opportunity lies in GSE-eligible loans, like second homes and investor properties, where guarantee fees are priced well above the actual credit risk. He explained that the private label market can securitize these loans more efficiently. This differs from the Non-QM market, which serves borrowers who do not qualify for GSE loans in the first place.

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CFO JR Herlihy stated the capital to be freed from workouts is not quantified but the total investment in delinquent commercial loans and REO is under $100 million. CEO Laurence Penn added the amount is not 'game-changing' but its resolution will remove a drag on ADE. Regarding competition, Penn highlighted Longbridge's work on developing new, related products for seniors, leveraging its compliance and origination platform to expand its moat.

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CFO Andrew Ahlborn confirmed that the Portland asset's negative carry was already factored into the baseline of his EPS walk. He clarified that the $85 million in net proceeds from the loan sale was the cash remaining after paying down approximately $408 million in financing on the assets. Ahlborn also stated that he does not anticipate refinancing 100% of the maturing debt, as some will be paid down using the company's organic liquidity.

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CFO Michael Policarpo clarified that of the $53 million in acquisition-related costs, $26 million were one-time deal expenses that will not recur, while others will decline over several quarters. CEO David Brown expressed strong confidence in the fixed income asset class, highlighting its product diversification and the value of active management, positioning it as a key future growth driver.

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CFO Jordan Licht explained that some legacy funds have not yet hit performance hurdles and noted the strategic focus has been on growing the balance sheet. CEO Christopher Bogart addressed the political climate, stating that opposition is not new and that Burford's value proposition of leveling the legal playing field is ultimately supported by courts and governments.

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CFO Thomas Mayrhofer clarified that the $40 million realized loss stemmed from a previously written-down investment in an InfraBridge fund and that this quarter's event was the final realization, with no new cash flow impact. Regarding capital allocation, Mayrhofer noted that while seeding new investment funds often provides the highest return, the board regularly discusses and evaluates share buybacks for both common and preferred stock as a potential use of cash.

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President and CEO Richard McCathron stated that Hippo does not disclose specific per-event limits but detailed their reinsurance strategy, which includes XOL layers, a corporate catastrophe program over the entire portfolio, and separate reinsurance towers for their MGA partners. CFO Guy Zeltser confirmed the cat loss assumptions for HHIP. McCathron then explained that Hippo resonates with new homeowners and those focused on proactive home maintenance, and that the company's strategy is to build a balanced portfolio to reduce volatility from any single line.

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CEO Matt Ehrlichman explained that the company is benefiting from market dynamics where other carriers are pulling back, such as in Texas, which creates a significant opportunity. He noted their strong underwriting results make their product attractive to agents. CFO Shawn Tabak disclosed that the reciprocal's gross loss ratio was an "exceptional" 34% in Q2, a stark improvement from 117% in the prior-year quarter. Ehrlichman added that the attritional loss ratio also improved significantly to 8%.

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CFO Jim McKinney stated the net investment income guidance is maintained because it already incorporates potential interest rate cuts in the second half of the year. CEO Scott Egan and CFO Jim McKinney detailed that the A&H business is short-tail (2-3 years) and their prudent reserving philosophy involves setting cautious initial reserves and letting older years season, which has resulted in a consistent track record of favorable prior year releases.

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CFO Jim McKinney clarified that the net investment income guidance is largely on plan and incorporates potential interest rate cuts in the second half of the year. CEO Scott Egan and McKinney detailed that the A&H business is short-tail, typically seasoning over two to three years. Their prudent reserving philosophy involves setting cautious initial reserves, which leads to a stable track record of prior year releases as the book matures, a hallmark of their approach.

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President Nicholas Mah acknowledged that Q2 origination volume moderated due to rate volatility but expressed confidence in long-term growth for BPL originations. Regarding leverage, Mah stated it is market-dependent but projected an overall recourse leverage ratio of around 4.5 times if the agency portfolio grows to 50% of equity, while noting flexibility within different asset classes.

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Jerome Baglien, CFO & COO, explained that calling CLOs involves re-levering assets with new debt to unlock liquidity and increase the leverage ratio from 2.2x towards a 2.5x target. He noted the upcoming pro forma financials will guide future reporting structure. Michael Comparato, President, added that potential GSE privatization is unlikely to fundamentally impact the business, as the government will always want to ensure liquidity in the housing sector.

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CEO Mike Mazzei explained the plan for the San Jose Hotel involves addressing deferred maintenance to capitalize on upcoming major events like the Super Bowl, with a potential sale in 2026. President & COO Andrew Witt added that for the multifamily REO assets, the strategy involves CapEx, unit improvements, and lease-ups to drive value, with most expected to be resolved over the next year.

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NewRez President Baron Silverstein attributed the non-agency growth to opportunistic expansion in wholesale and correspondent channels. Chairman, President & CEO Michael Nierenberg clarified the insurance M&A focus is broad (P&C or life and annuities) and aimed at creating a liability funding mechanism. On credit, he stated that mortgage credit remains attractive relative to corporates and the focus is on building out a full suite of credit products.

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Baron Silverstein, President of NewRez, attributed the non-QM growth to opportunistic expansion in wholesale and correspondent channels driven by strong market demand. Michael Nierenberg, Chairman, President & CEO, added that potential insurance M&A would be broad, including P&C or life and annuities, to serve as a liability funding mechanism. Regarding credit, he noted that while corporate spreads are tight, Rithm is focused on building out its offerings, like direct lending, to provide a full suite of products for LPs.

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CEO Brian Harris explained that Ladder is selectively selling securities, viewing them as a source of liquidity to redeploy into higher-yielding loans. He noted that while Q2 loan origination was slow due to timing, Q3 has already surpassed it in the first three weeks. Harris cautioned that loan closings are generally taking longer across the market, but he expects a high conversion rate for the current pipeline, with timing being the main variable.

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CFO Gordon Harper stated that the higher expenses were due to increased professional fees and are not expected to be the new run rate going forward. He confirmed that hedging costs are reported separately under the derivatives line item and not within operating expenses.

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