Annaly Capital Management Inc. · NYSE:NLY
Annaly Capital Management — Investor Presentation (October 2016)
28 slides from Annaly Capital Management's investor presentation, October 2016
Slide 1: Investor Presentation October 2016
Investor Presentation October 2016
Slide 2: Safe Harbor Notice
Safe Harbor Notice This presentation, other written or oral communications and our public documents to which we refer contain or incorporate by reference certain forward-looking statements which are based on various assumptions (some of which are beyond our control) and may be identified by referenc
Slide 3: The Case for Owning Annaly
The Case for Owning Annaly Relative Valuation More Attractive than Size and Other Yield Sectors Given 15x Size of Median mREIT Performance / Liquidity Favorable Performance, Yield and Valuation Leverage Profile Four Distinct Operating Recent Hatteras Acquisition Diversification Businesses De
Slide 4: Annaly's Diversification Strategy Now Has Scale
Annaly’s Diversification Strategy Now Has Scale As Annaly Has Continued its Diversification Effort across Asset Classes, the Credit-Focused Business Lines are Now of Meaningful Size in Their Respective Industries $12,000 #1 Annaly MML now larger than 26 publicly 5,000 traded BDCs $11,000 4,500 Curre
Slide 5: Sum of the Parts Capital Diversification
Sum of the Parts Capital Diversification Annaly is Positioned as a Permanent Capital Solution for the Redistribution of MBS, Residential Credit, Commercial Real Estate Assets and Institutional Loans Commercial Real Middle Market Agency Residential Credit Estate Lending $ Amount / % of Total $10.1bn
Slide 6: Diversification Strategy Also Provides Significant Financing Advantages
Diversification Strategy Also Provides Significant Financing Advantages Annaly Has a Variety of Potential Financing Sources for Each Asset Class in which the Company Invests Agency Commercial Real Resi Credit Middle MMLMarket Agency Residential Credit Estate Lending Securitization Potential Repo
Slide 7: Evolution of Annaly's Agency MBS Strategy
Evolution of Annaly’s Agency MBS Strategy… Since the Beginning of 2014, Annaly Has Established an Agency Portfolio with a Long-Term Perspective to Enhance its Risk-Adjusted Return 2014 2015 2016 Q1 - Added Leverage, Increased Duration Q1 – Rebalanced Hedges to Include Q2 - Opportunistically In
Slide 8: Augmented by Capital Allocation into Complementary Credit Businesses
…Augmented by Capital Allocation into Complementary Credit Businesses Multiple Investment Options Allow for Flexibility to Rotate into Sectors When Relative Returns are Attractive Pre-2015 2015 2016 Chimera - Gained Exposure to and Additions to Agency, Commercial, and MML and Resi Credit Teams
Slide 9: Stability of Core Earnings
Stability of Core Earnings Composition of Annaly’s EPS is Comprised of Balanced Despite Volatile Markets, Annaly Has Generated Stable, Instruments Consistent Core Earnings 140% Agency Assets Credit Assets Fixed Rate Floating Rate 130% Securities Securities Asset Yield 120% Relative Change (%) Higher
Slide 10: Durability of Book Value
Durability of Book Value Since 2013, Annaly’s Book Value has Been 36% Less Durability of Annaly’s Book Value is Supported by Both Volatile than the 10-Year Note and Most Bond Fund Asset Selection, Hedges and Lower Leverage Strategies 6% 4% Assets Hedges 2% Percent Change (%) Credit Diversification
Slide 11: Liquidity is Paramount to the Annaly Model
Liquidity is Paramount to the Annaly Model… Annaly is a Liquid Alternative Asset Management Company Liquidity of Company Liquidity of Underlying Assets Unencumbered Assets 10.8x Larger than the Median Agency MBS Market is Fixed Income’s Second Most Market Cap of mREITs(1) Liquid Market, Only Beh
Slide 12: Providing One of the Most Liquid Yield Investment Options in the Market
…Providing One of the Most Liquid Yield Investment Options in the Market Annaly’s Average Daily Trading Volume Represents ~20% of Total mREIT Daily Traded Volume Average Daily Trading Volume ($mm) Liquidity as a % of Market Cap $102 $93 0.96% $91 0.85% Liquidity as % of Market Cap 0.76% 0.72% ADTV (
Slide 13: Diversification and Liquidity Results in Outperformance in Volatile Times
Diversification and Liquidity Results in Outperformance in Volatile Times Annaly Has Demonstrated Significant Outperformance During Periods of Heightened Market Volatility China Stock 1Q’16 Financial Crisis US Credit Market Market Brexit Downgrade Turbulence Sell-Off 200% 90 80 150% 70 100% 60 Total
Slide 14: Study Highlights Return / Fee Imbalance of Certain Investment Vehicles
Study Highlights Return / Fee Imbalance of Certain Investment Vehicles Independent Report Summarizes Average Annual Net Returns and Expenses for 12 Asset Classes, Highlighting Disconnect Between Performance and Fees Average Annual Net Returns and Expenses 1998-2014 12% 10% 8% 6% 4% 2% 0% Listed Equi
Slide 15: Compared to Industry Peers, Annaly is More Efficient
Compared to Industry Peers, Annaly is More Efficient Annaly’s Scale Allows the Company to Operate More Efficiently than Industry Peers Sector Average as % of Average Equity NLY Dedicated Equity Mgmt. Fees / General & Total Relative (1) Sector Compensation Administrative Operating Exp. $MM % Industry
Slide 16: Annaly vs. Other Yield Investments – Total Return
Annaly vs. Other Yield Investments – Total Return Annaly’s Current Investment Team Has Outperformed All Other Yield Options Since 2014 60% 44.3% 40% 37.6% 28.7% 20% 24.0% Total Return (%) – 8.9% 1.0% (20%) (18.8%) (40%) (60%) Annaly mREITs MLPs Utilities Asset Managers Banks S&P Note: Market data fr
Slide 17: Annaly vs. Other Yield Investments – Relative Valuation
Annaly vs. Other Yield Investments – Relative Valuation Annaly’s Performance, Leverage and Yield Profiles are Superior to Other Yield Asset Classes, yet Valuation Still Lags the Other Yield Sectors Total Return 44.3% 28.7% (18.8%) 37.6% 1.0% 8.9% 24.0% Since 2014 : 12.0x 12.0% 10.3% 10.1x 9.8% 10.0x
Slide 18: Industry Performance Analysis – Dividends Paid
Industry Performance Analysis – Dividends Paid Industry Leading Dividends Paid and Dividends Per Employee Among the Top 15 S&P Financial Companies and REITs Rankings of the Top 15 Public Financial Companies in the S&P 500, Property REITs and Mortgage REITs IPO Market Cap 5-Year Dividends Number of 2
Slide 19: Mortgage REIT Industry Consolidation - September 2015 vs. Today
Mortgage REIT Industry Consolidation - September 2015 vs. Today 20% Fewer Mortgage REITs with $4.2 Billion Higher Industry Market Capitalization $12 Total number of mREITs decreased to 33 from 41 Annaly represents ~20.2% of total mREIT $9 market cap 5 M&A deals in sector for ~$2.3 bn Market Ca
Slide 20: Prominent Institutional Ownership
Prominent Institutional Ownership Institutional Shareholder Base Has Continued to Grow and Now Stands at 60% 65% “I like mortgage REITS…We are talking about Annaly…They buy government guaranteed mortgage paper, they finance it at 1%, and they earn 3%, they lever 6x and that is why you can get an 11%
Slide 21: Top Management Stock Purchases – "Ownership Culture"
Top Management Stock Purchases – “Ownership Culture” Annaly Management Purchases Since 2011 Purchase Shares Purchase Filing Date Holder Price Per Purchased (1) Value Share (1) 8/7/2015 Kevin G. Keyes - CEO and President; Director 300,000 $10.08 $3,024,000 8/21/2013 Wellington J. Denahan - Executive
Slide 22: The Annaly Track Record
The Annaly Track Record Annaly Has Paid Out Over $14.0 Billion in Dividends since IPO 700% Price Total Dividends Appreciation Return Annaly (15%) 672% 657% 600% MSCI US REIT Index 48% 90% 138% Berkshire Hathaway 373% 0% 373% Gold 188% (3%) 185% 500% S&P 500 124% 95% 219% S&P Financials 16% 56% 72% 4
Slide 23: Business Line Overview and Non-GAAP Reconciliation
Business Line Overview and Non-GAAP Reconciliation 23 23
Slide 24: Agency MBS Portfolio Update
Agency MBS Portfolio Update As of Q2 2016, the market value of Agency portfolio was approximately $93.9 billion in assets, inclusive of the TBA position Approximately 92% of the portfolio is positioned in securities with prepayment protection MBS performed well over the course of Q2 2016 in li
Slide 25: Residential Credit Portfolio Update
Residential Credit Portfolio Update As of Q2 2016, the portfolio grew to just over $2.1 billion in assets and is comprised of the following sectors: Credit Risk Transfer (CRT): Expect supply to remain in line with expectations in coming months and pick up modestly in Q4/early 2017 as faster prep
Slide 26: Commercial Real Estate Portfolio Update
Commercial Real Estate Portfolio Update As of Q2 2016, the commercial real estate portfolio was approximately $2.5 billion in assets(1) The combination of a significant decline in new acquisition activity by sponsors, a volatile marketplace and a cautious stance on credit led us to slow originat
Slide 27: Middle Market Lending Portfolio Update
Middle Market Lending Portfolio Update As of Q2 2016, the middle market lending portfolio grew to approximately $700 million in assets A combination of repeat sponsor business, sectors of origination focus and larger ownership positions have garnered demonstrably increased new deal flow during t
Slide 28: Non-GAAP Reconciliations
Non-GAAP Reconciliations Unaudited, dollars in thousands except per share amounts For the quarters ended June 30, March 31, Dec. 31, Sept. 30, June 30, March 31, Dec. 31, Sept. 30, June 30, March 31, 2016 2016 2015 2015 2015 2015 2014 2014 2014 2014 GAAP to Core Reconciliation GAAP net income (loss)
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