Annaly Capital Management (NLY) Investor Day 2024 summary

Strategic priorities and business evolution

• Transitioned from a pure Agency mortgage REIT to a diversified capital manager, focusing on Agency MBS, Residential Credit, and MSR, with $82bn in total assets as of Q3 2024 and a 27-year track record.

• Shifted capital allocation from 78% Agency MBS in 2020 to a 60/40 split between Agency and credit/MSR, targeting a long-term 50/50 balance, and reducing leverage and interest rate sensitivity.

• Built a diversified, synergistic housing finance platform with $80+ billion in assets, $7.4 billion in unencumbered assets, and strong liquidity.

• Maintains a stable 13% dividend yield, supported by robust earnings, operational scale, and a focus on efficiency and cost control, with over $12bn in dividends paid since IPO.

• Strategic relationships and operational synergies across origination, servicing, and asset management drive competitive advantages and less correlated returns.

Market outlook and financial guidance

• Agency MBS spreads remain attractive, with expectations for modest tightening as volatility declines, but not returning to pre-COVID levels due to ongoing Fed runoff.

• MSR market remains favorable due to slow prepayments, low delinquencies, and ample supply, with the MSR portfolio well insulated from rate rallies and only 0.8% of loans in the money to refinance.

• Residential credit benefits from GSE footprint reduction and demand for non-agency products, with significant growth in the correspondent channel and securitization.

• Maintains conservative leverage (5.7x at Q3) and capital structure, with preferred/corporate debt at 12–13% of long-term capital, well below sector averages.

• Guidance indicates continued stable dividend, strong earnings power, and readiness to adjust capital allocation based on market valuations and opportunities.

Business model, risk, and competitive advantages

• Diversified model enables rotation between Agency, MSR, and residential credit, capturing alpha and managing spread volatility more effectively than monoline peers.

• Scale provides cost advantages, better execution, and deeper relationships with financial partners, enhancing access to funding and market intelligence.

• Proprietary analytics and integrated risk management support superior prepayment modeling, portfolio construction, and performance.

• Robust risk framework with independent oversight, daily reporting, and stress testing ensures liquidity and capital adequacy through market cycles.

• Flexible funding strategy leverages in-house broker-dealer, diversified counterparties, and committed facilities, maintaining ample liquidity and low funding costs.