Arlington Asset Investment Corp. (NYSE:AI) Q4 2019 Earnings Conference Call - Final Transcript

Feb 18, 2020 • 10:00 am ET


Arlington Asset Investment Corp. (NYSE:AI) Q4 2019 Earnings Conference Call - Final Transcript


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Richard Konzmann

returns on invested capital combined with a reduction in the overall corporate leverage by almost two turns since the beginning of the fourth quarter with this prospect of potential further reductions in leverage as mortgage credit investments expand. The Company is optimistic about the return opportunities available to shareholders from a prudently executed shift to a broader and more active investment strategy, which now includes a discriminate focus on mortgage credit investments as well as agency MBS. In summary, the Company's initial disciplined investments in mortgage credit opportunities totaled 14% of investable capital with ROEs expected of 11% to 16% and attractive credit characteristics. Second, Arlington has sourced or co-invested in these initial investments with a number of premier partners and is currently in discussions with additional potential partners for direct originations of credit assets. Third, observed returns on invested capital have increased and overall leverage is down by nearly two turns following the Company's initial mortgage credit investments. Fourth, agency MBS spreads are currently attractive with spreads wider than historical averages. In addition, federal reserve actions to cut interest rates and provide liquidity to the repo markets have significantly lowered the Company's current funding costs and a supportive economic landscape should be a tailwind for our mortgage credit investment strategy. And finally, cost efficiencies are available in 2020 to reduce the expense burden on capital and enhance the Company's returns to shareholders. In summary, the Company is positioned to benefit from improvements in current net interest spread returns in agency MBS, as well as opportunistically investing in selective mortgage credit investments at potentially incrementally higher relative returns, which should allow the Company to deliver attractive returns to its shareholders. Operator, I would now like to open the call for questions.