On this page of StockholderLetter.com we present the 3/8/2024 shareholder letter from AGNC Investment Corp. — ticker symbol AGNC. Reading current and past AGNC letters to shareholders can bring important insights into the investment thesis.
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3/8/2024 Letter Continued (Full PDF)
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3/10/2023 AGNC Stockholder Letter
• 3/7/2025 AGNC Stockholder Letter
• More "REITs" Category Stockholder Letters
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AGNC Benford's Law Stock Score = 79
3/8/2024 Letter Continued (Full PDF)
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3/10/2023 AGNC Stockholder Letter•
3/7/2025 AGNC Stockholder Letter•
More "REITs" Category Stockholder Letters•
AGNC Benford's Law Stock Score = 79AGNC 3/8/2024 Shareholder/Stockholder Letter Transcript:
YEARS THE PREMIER AGENCY RESIDENTIAL MORTGAGE REIT $6.8B May 2008 $60.2B 349% 53 97% MARKET CAPITALIZATION1 INITIAL PUBLIC OFFERING INVESTMENT PORTFOLIO1 TOTAL STOCK RETURN SINCE IPO2 EMPLOYEES1 FIXED RATE AGENCY MBS1 14.7% 1.23% 310,000+ DIVIDEND YIELD1 OPERATING COST STRUCTURE3 HOMES FINANCED4 DEAR FELLOW STOCKHOLDERS: In 2023, we recognized another major milestone in AGNC Investment Corp. s ( AGNC, we, or our ) history our 15-year anniversary, which we celebrated by ringing the Nasdaq opening bell on May 15th. This occasion provided the perfect opportunity to reflect upon our successful long-term track record and the benefits of our focused strategy. AGNC is an internally managed mortgage REIT built with the objective of generating favorable long-term stockholder returns with a substantial yield component through levered investments in Agency residential mortgage-backed securities. THE FIRST 15 YEARS AGNC was formed in May 2008 in the midst of the Great Financial Crisis when our founders saw an opportunity to create a best-in-class investor in Agency mortgage-backed securities ( Agency MBS ) with a differentiated approach. Since our inception, AGNC has generated a total stock return of 349%, or 10.1% on an annualized basis, significantly outperforming the broader Financials and Real Estate sectors, as well as the Mortgage REIT sub-sector.2 Over this time, AGNC has paid over $12 billion in common stock dividends, providing substantial current income for stockholders. Notably, we have achieved these industry-leading results over a period that has included several challenging market cycles particularly across fixed income and numerous exogenous events, highlighting the durability of our business model. AGNC s track record of success is a testament to our team s asset selection expertise, risk management discipline, and unwavering commitment to responsible stewardship of our stockholders capital. At AGNC, Opportunity is an Asset Our business and investment expertise facilitate wealth creation from two perspectives - for our stockholders that benefit from substantial monthly dividend income, and for the homeowners that our investments support. $8.3B STOCKHOLDERS EQUITY1 $12B+ DIVIDENDS PAID SINCE INCEPTION1 Total Stock Return Since IPO2 600% 500% 349% 400% 300% 200% 100% 0% (100%) AGNC Financials Real Estate Mortgage REITs AGNC Investment Corp. 2023 Annual Report 1 2023 IN REVIEW A Turbulent Macroeconomic Climate The last two years have been extremely challenging for investors across the fixed income spectrum. Beginning in early 2022, the Federal Reserve (the Fed ) embarked on an unprecedented dual-track approach to monetary policy tightening, raising the Federal Funds rate by 5.25% while simultaneously reducing its balance sheet by $1.3 trillion. This aggressive monetary policy campaign, along with a host of other macroeconomic factors including persistent inflation, regional bank failures and fears of broader contagion, continued U.S. political uncertainty regarding the debt ceiling and Treasury supply, and significant global geopolitical events led to sharply higher interest rates and interest rate volatility. In the past two years alone, there have been seven distinct episodes in which the 10-year U.S. Treasury yield increased or decreased by more than 75 basis points over a rolling 60-day period. Further, throughout most of this timeframe, the MOVE Index, a broad measure of interest rate volatility, has traded materially above its 10-year historical average. 10 Year U.S. Treasury Yields5 MOVE Index6 6.0% 250 10 Year U.S. Treasury Change > 75 bps Over Rolling 60-Day Period 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% Trailing 2 Year Average: 121 200 150 Trailing 10 Year Average: 75 100 50 0 This challenging interest rate and U.S. Treasury market environment adversely impacted Agency MBS valuations across the coupon stack in 2023. In May and again in October, Agency MBS spreads the difference between Agency MBS yields and benchmark interest rates attained levels previously reached only during significant financial market dislocations, such as the Great Financial Crisis and the peak of the Covid pandemic. Agency MBS Spread to Treasuries7 250 bps 200 bps 150 bps 100 bps 50 bps 0 bps AGNC Investment Corp. 2023 Annual Report 2 10 Year Average (2011-2021): 100 bps A Transformation in the Agency MBS Market Over the last 15 years, the Fed and banks have dominated ownership of Agency MBS, peaking at approximately 70% of the total market in 2021. The Fed s recent reduction in its Agency MBS position during the current quantitative tightening cycle, coupled with banks curtailing their participation in the Agency MBS market as a result of increased regulatory pressures, have led to a dramatic shift in ownership to price-sensitive, indexed-based money managers. While this ownership transition has increased near-term spread volatility, wider spreads offer more attractive return opportunities for Agency MBS investors over the longer term. Agency MBS Ownership Composition8 (% of Agency MBS Outstanding) 100% Fed Banks GSEs Overseas REITs Money Managers 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Our Performance Through the Volatility Despite the extremely volatile macroeconomic backdrop that characterized 2023, AGNC generated a 10.0% total stock return2 and a 3.0% economic return,9 driven by a stable and compelling monthly dividend. In doing so, AGNC materially outperformed our Agency mREIT Peer Group, which produced average total stock2 and economic returns9 of -2.2% and -3.4%, respectively. Our performance in 2023 illustrates the importance of our active portfolio management strategy and disciplined approach to risk management. During the year, we proactively shifted the composition of our asset portfolio away from to-be-announced ( TBA ) securities and lower coupon holdings toward a greater share of higher coupon, highquality specified pools to capitalize on higher yields and wider spreads. In light of the elevated interest rate volatility, we remained disciplined in our risk management actions, maintaining an interest rate hedge position throughout 2023 that averaged over 115% of our repo funding and TBA position. Finally, we continued to prioritize liquidity throughout the year, with our unencumbered cash and Agency MBS position increasing to $5.1 billion, or 66% of our tangible stockholders equity, as of the end of 2023. AGNC Investment Corp. 2023 Annual Report 3