Results from Life Expectancy Providers Announced Updates and Changes
Significantly Improves Actual-to-Expected Predictive Power
Implementation Results in a Non-Cash, Non-Recurring Charge of $84 million in Q4 2018
MINNEAPOLIS, April 16, 2019 (GLOBE NEWSWIRE) -- GWG Holdings, Inc. (Nasdaq: GWGH) today announced that it has adopted a new life expectancy methodology going forward based upon using the longest life expectancy report received from the life expectancy providers used for pricing at the time a life insurance policy is purchased.
The change results from updates announced by two of the Company’s and the industry’s primary life expectancy providers - ITM TwentyFirst, LLC and AVS, LLC. The Company, along with other major secondary market participants, has noted the frequent changes in methodologies made by the life expectancy providers over the years that, short of purchasing revised life expectancy reports at a substantial cost, have lacked detailed information about the impact of these changes on individual policy values.
As a result, the Company undertook a comprehensive study to determine a more accurate, transparent and cost-effective method of pricing, valuing, and modeling the performance of its portfolio of life insurance. The Company’s goal was to incorporate life expectancy estimates from life expectancy providers, the historical experience of the portfolio, the diversification and mortality factors of the portfolio, and relevant market-based observations and inputs.
The Company believes it has succeeded in creating and validating such an approach which is referred to as the “Longest Life Expectancy” method.
After extensive research and modelling, the Company found that the Longest Life Expectancy methodology was highly predictive of the actual experience of its portfolio of life insurance policies as compared to its historical methodology that has in the past been typically based upon the average of two life expectancy reports received from Life Expectancy Providers (Average Life Expectancy).
The tables to the right compare the actual-to-expected mortality cash flow experience of our life insurance portfolio using Average Life Expectancy and Longest Life Expectancy.
A photo accompanying this announcement is available at http://www.globenewswire.com/NewsRoom/AttachmentNg/f1ca77a1-dc14-4c88-8bd4-e1182669cf2b
While implementation of the Longest Life Expectancy methodology will require the Company to take a non-cash, non-recurring charge of $84 million, reflecting a decrease in the fair market value of the portfolio at December 31, 2018 (or approximately 10 percent of the fair market value of the portfolio prior to adjustment), the Company believes that a Longest Life Expectancy should minimize future fluctuations of valuation, decrease its reliance on Life Expectancy Providers for updated life expectancy reports, and improve its ability to finance and forecast future revenues and earnings.
Additional details regarding the information about this change will be filed on a Form 8-K with the Securities and Exchange Commission.
About GWG Holdings, Inc.
GWG Holdings, Inc. (Nasdaq: GWGH), is the parent company of GWG Life, Life Epigenetics and YouSurance. GWG Life is a leading provider of liquidity to owners of life insurance in the secondary market. GWGH owns a portfolio of alternative life insurance assets equaling $1.96 billion in face value of policy benefits as of September 30, 2018. Life Epigenetics is commercializing epigenetic technology for the longevity life insurance industry and other industries. YouSurance is a digital life insurance agency working to embed epigenetic testing into life insurance products to provide consumers a value-added ecosystem that supports their health and wellness. For more information about GWG, visit www.gwgh.com.
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For GWG Holdings
Source: GWG Holdings, Inc.