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GWG Holdings, Inc. Reports Results for the Second Quarter Ended June 30, 2019
September 3, 2019 at 8:25 AM EDT

MINNEAPOLIS, Sept. 03, 2019 (GLOBE NEWSWIRE) -- GWG Holdings, Inc. (Nasdaq: GWGH), a financial services holding company committed to transforming the alternative asset industry through innovative liquidity products and related services for the owners of illiquid alternative investments, today announced its financial and operating results for the second quarter ended June 30, 2019.

Second Quarter 2019 Financial and Operating Highlights

  • Realized $23.0 million of face amount of policy benefits from 19 life insurance policies.
  • Reported additional policy realizations of $18.0 million from 16 policies through August 29, 2019, bringing the 2019 total to $71.4 million from 55 policies. This exceeds the face amount of policy benefits realized of $71.1 million for the entire year of 2018.
  • Acquired $13.0 million of face amount of policy benefits.
  • Ended the quarter with a life insurance portfolio of $2.1 billion in face amount of policy benefits consisting of 1,190 policies.
  • Hired Jenniffer Daigle, an executive with extensive experience in alternative investment distribution, as Senior Vice President of Business Development.
  • Reported total assets of $1.5 billion

1.  Financial & Operating Highlights

($ Thousands except per share information)   Q2 2019   Q2 2018   YTD Q2 2019   YTD Q2 2018
Revenue   $ 24,010     $ 24,315     $ 49,227     $ 38,857  
Expenses     45,941       24,372       83,845       48,092  
Per Share Data1:                                
Net Income (Loss)2     (0.78 )     (0.76 )     (1.35 )     (2.97 )
Capital Raised (L Bonds)     45,241       74,909       171,227       153,436  
Liquidity3,4     82,461       158,131       82,461       158,131  
Life Insurance Portfolio5     2,088,445       1,849,079       2,088,445       1,849,079  
Life Insurance Acquired5     12,955       118,308       93,166       212,660  
Face Value of Matured Policies     22,998       27,623       53,457       42,127  
TTM Benefits / Premiums6     138.6 %     142.8 %     138.6 %     142.8 %

(1)   Attributable to common shareholders
(2)   Per basic and fully diluted share outstanding
(3)   Includes cash, restricted cash and policy benefits receivable
(4)   Cash, restricted cash and policy benefits receivable totaled $62.3 million on August 29, 2019
(5)   Face amount of policy benefits
(6)   The ratio of policy benefits recognized to premiums paid on a trailing twelve month (TTM) basis
             
2.  Revenue and Expense Discussion

Second Quarter 2019 vs. Second Quarter 2018:

  • Total revenue was $24.0 million in the current period, compared to $24.3 million in the prior period primarily due to:
    • Net revenue recognized at matured policy event was $4.0 million higher, unrealized gain on acquisition was $3.9 million lower and change in estimated probabilistic cash flows net of premium and fees was $3.6 million lower. Interest income on our commercial loan to The Beneficient Company Group, L.P. (BEN) was $2.4 million higher. Other interest income increased $0.7 million.
  • Total expenses were $45.9 million in the current period, compared to $24.4 million in the prior period primarily due to:
    • Interest and fees increased by $11.3 million. This was driven by increased interest on L Bonds of $5.3 million as a result of additional amounts outstanding; Seller Trust L Bonds, which were issued in August 2018, increased interest expense by $6.8 million; and senior credit facility interest decreased by $0.8 million.
    • Operating expenses increased by $10.2 million. Compensation and professional expenses increased by $3.5 million and $3.6 million, respectively, primarily resulting from performance share unit expense, legal, audit and other professional fees resulting from the Purchase and Contribution transaction. Other expenses increased by $3.1 million due to business insurance purchased in connection with the Purchase and Contribution (previously disclosed) transaction.

Second Quarter Year to Date 2019 vs. Second Quarter Year to Date 2018:

  • Total revenue was $49.2 million in the current period, compared to $38.9 million in the prior period primarily due to:
    • Net revenue recognized at matured policy event was $14.8 million higher, unrealized gain on acquisition was $6.5 million lower than the previous year; and a change in estimated probabilistic cash flows net of premiums and fees and change in life expectancy had a net impact of ($4.1 million). In addition, increases resulted from interest income from the BEN commercial loan of $4.8 million and an increase in other income of $1.3 million.
  • Total expenses were $83.8 million in the current period, compared to $48.1 million in the prior period primarily due to:
    • Interest and fees increased by $22.3 million year over year. Outstanding L Bonds increased over this time period resulting in $11.4 million of additional interest expense, Seller Trust L Bonds, which were issued in August 2018, increased interest expense by $13.8 million, and interest expense on the senior credit facility decreased by $2.9 million
    • Operating expenses increased by $13.5 million. Compensation and professional expenses increased by $5.0 million and $5.3 million, respectively, primarily resulting from performance share unit expense, retention incentives, and legal and professional fees resulting from the Purchase and Contribution transaction. Other expenses also increased by $3.2 million primarily driven by an increase in business insurance purchased in connection with the Purchase and Contribution (previously disclosed) transaction.

3.  Life Insurance Portfolio Statistics

Portfolio Summary:

Total life insurance portfolio face value of policy benefits   $ 2,088,445,000  
Average face value per policy   $ 1,755,000  
Average face value per insured life   $ 1,885,000  
Average age of insured (years) *     82.0  
Average life expectancy estimate (years) *     7.4  
Total number of policies     1,190  
Number of unique lives     1,108  
Demographics     77% Male
23% Female
 
Number of smokers     50  
Largest policy as % of total portfolio face value     0.63 %
Average policy as % of total portfolio face value     0.08 %
Average annual premium as % of face value     3.1 %

* Averages presented in the table are weighted averages.

 
Distribution of Policies and Benefits by Current Age of Insured:
                    Percentage of Total        
Min Age   Max Age   Number
of
Policies
    Policy
Benefits
    Number of
Policies
    Policy
Benefits
    Wtd.
Avg. LE
(Years)
 
95   101     20     $ 34,983,000       1.7 %     1.7 %     2.2  
90   94     137       264,706,000       11.5 %     12.7 %     3.4  
85   89     254       591,398,000       21.3 %     28.3 %     5.2  
80   84     251       454,671,000       21.1 %     21.8 %     7.8  
75   79     227       371,066,000       19.1 %     17.8 %     10.0  
70   74     224       297,229,000       18.8 %     14.2 %     11.3  
60   69     77       74,392,000       6.5 %     3.5 %     11.6  
Total         1,190     $ 2,088,445,000       100.0 %     100.0 %     7.4  


4.  Life Insurance Policy Origination

Life Insurance Portfolio Activity:

      Three Months Ended     Six Months Ended  
      June 30, 2019     June 30, 2018     June 30, 2019     June 30, 2018  
                           
Total policy benefits purchased   $ 12,955,000   $ 118,308,000   $ 93,166,000   $ 212,660,000  
Total life insurance policies purchased     15     85     75     144  
Average policy benefit purchased   $ 846,000   $ 1,392,000   $ 1,242,000   $ 1,477,000  
Direct policy benefits purchased   $ 5,755,000   $ 8,038,000   $ 18,092,000   $ 13,038,000  
Direct insurance policies purchased     8     11     24     22  
                           

5.  Additional Information     

Gain (Loss) on Life Insurance Policies:

    Three Months Ended
June 30
    Six Months Ended
June 30
 
    2019     2018     2019     2018  
Change in estimated probabilistic cash flows(1)   $ 17,122,000     $ 17,409,000     $ 34,253,000     $ 36,414,000  
Unrealized gain on acquisitions(2)     1,844,000       5,795,000       6,303,000       12,769,000  
Premiums and other annual fees     (16,004,000 )     (12,708,000 )     (31,836,000 )     (24,906,000 )
Change in discount rates(3)     -       -       -       -  
Change in life expectancy evaluation(4)     -       (95,000 )     -       (4,963,000 )
Face value of matured policies     22,998,000       27,623,000       53,457,000       42,127,000  
Fair value of matured policies     (6,030,000 )     (14,684,000 )     (20,751,000 )     (24,233,000 )
Gain (loss) on life insurance policies, net   $ 19,930,000     $ 23,340,000     $ 41,426,000     $ 37,208,000  

(1)  Change in fair value of expected future cash flows relating to our investment in life insurance policies that are not specifically attributable to changes in life expectancy, discount rate changes or policy maturity events.
(2)  Gain resulting from fair value in excess of the purchase price for life insurance policies acquired during the reporting period.
(3) The discount rate applied to estimate the fair value of the portfolio of life insurance policies we own was 8.25% at June 30 and March 31, 2019 and December 31, 2018, and was 10.45% at June 30 and March 31, 2018 and December 31, 2017.
(4)  The change in fair value due to updating life expectancy estimates on certain life insurance policies in our portfolio.  

 
Policy Benefits Recognized and Premiums Paid (TTM):
 
Quarter End Date   Portfolio
Face Amount ($)
    12-Month
Trailing
Benefits
Realized
($)
    12-Month
Trailing
Premiums
Paid ($)
    12-Month
Trailing
Benefits/Premium
Coverage
Ratio
June 30, 2015     806,274,000       47,125,000       24,348,000       193.5 %
September 30, 2015     878,882,000       44,482,000       25,313,000       175.7 %
December 31, 2015     944,844,000       31,232,000       26,650,000       117.2 %
March 31, 2016     1,027,821,000       21,845,000       28,771,000       75.9 %
June 30, 2016     1,154,798,000       30,924,000       31,891,000       97.0 %
September 30, 2016     1,272,078,000       35,867,000       37,055,000       96.8 %
December 31, 2016     1,361,675,000       48,452,000       40,239,000       120.4 %
March 31, 2017     1,447,558,000       48,189,000       42,753,000       112.7 %
June 30, 2017     1,525,363,000       49,295,000       45,414,000       108.5 %
September 30, 2017     1,622,627,000       53,742,000       46,559,000       115.4 %
December 31, 2017     1,676,148,000       64,719,000       52,263,000       123.8 %
March 31, 2018     1,758,066,000       60,248,000       53,169,000       113.3 %
June 30, 2018     1,849,079,000       76,936,000       53,886,000       142.8 %
September 30, 2018     1,961,598,000       75,161,000       55,365,000       135.8 %
December 31, 2018     2,047,992,000       71,090,000       52,675,000       135.0 %
March 31, 2019     2,098,428,000       87,045,000       56,227,000       154.8 %
June 30, 2019     2,088,445,000       82,421,000       59,454,000       138.6 %
                                 

About GWG Holdings, Inc. 

GWG Holdings, Inc. (Nasdaq: GWGH), the parent company of GWG Life, Life Epigenetics and YouSurance, is a leading provider of liquidity to consumers owning life insurance policies, an owner of a portfolio of alternative assets, and the developer of epigenetic technology for the life insurance and related industries. GWG Life provides value to consumers owning illiquid life insurance products across America, delivering $568 million more for their policies since 2006 than the cash surrender value on those policies. GWG Life owns a life insurance policy portfolio of $2.1 billion in face value of policy benefits as of June 30, 2019. Life Epigenetics is working to commercialize epigenetic technology for the life insurance and related industries. YouSurance, a digital life insurance agency, is working to embed epigenetic testing into life insurance purchasing to provide consumers a value-added ecosystem that supports their health and wellness while reducing the cost of their insurance. GWGH also has a strategic investment in The Beneficient Company Group, L.P., a financial services company providing proprietary liquidity solutions to owners of alternative assets.

For more information about GWG Holdings, email info@gwgh.com or visit www.gwgh.com.

Cautionary Statement Regarding Forward-Looking Statements

This press release contains forward-looking statements that involve substantial risks and uncertainties. All statements, other than statements of historical facts, included in this press release regarding our strategy, future operations, future financial position, future revenue, projected costs, prospects, plans and objectives of management are forward-looking statements. The words "anticipate," "believe," "estimate," "expect," "intend," "may," "plan," "would," "target" and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. These forward-looking statements include, among other things, statements about our estimates regarding future revenue and financial performance. We may not actually achieve the expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the expectations disclosed in the forward-looking statements that we make. More information about potential factors that could affect our business and financial results is contained in our filings with the Securities and Exchange Commission. Additional information will also be set forth in our future quarterly reports on Form 10-Q, annual reports on Form 10-K and other filings that we make with the Securities and Exchange Commission. We do not intend, and undertake no duty, to release publicly any updates or revisions to any forward-looking statements contained herein.

Media Contact:
Dan Callahan
Director of Communication
GWG Holdings, Inc.
(612) 746-1935
dcallahan@gwgh.com


GWG HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

    June 30
2019
(unaudited)
    December 31,
2018
 
ASSETS            
Cash and cash equivalents   $ 71,548,248     $ 114,587,084  
Restricted cash     5,336,425       10,849,126  
Investment in life insurance policies, at fair value     799,266,174       747,922,465  
Life insurance policy benefits receivable, net     5,576,397       16,460,687  
Financing receivable from affiliate     238,678,993       184,768,874  
Equity method investment     369,696,377       360,841,651  
Other assets     51,121,238       45,437,164  
TOTAL ASSETS   $ 1,541,223,852     $ 1,480,867,051  
                 
LIABILITIES & STOCKHOLDERS’ EQUITY                
LIABILITIES                
Senior credit facility with LNV Corporation   $ 129,936,091     $ 148,977,596  
L Bonds     782,447,640       651,402,663  
Seller Trust L Bonds     366,891,940       366,891,940  
Accounts payable     3,910,742       9,276,507  
Interest and dividends payable     17,632,911       18,555,293  
Other accrued expenses     6,870,823       4,705,170  
TOTAL LIABILITIES     1,307,690,147       1,199,809,169  
                 
STOCKHOLDERS’ EQUITY                
                 
REDEEMABLE PREFERRED STOCK                
(par value $0.001; shares authorized 100,000; shares outstanding 94,803 and
97,524; liquidation preference of $95,355,000 and $98,093,000 as of June 30,
2019 and December 31, 2018, respectively)
    84,188,835       86,910,335  
SERIES 2 REDEEMABLE PREFERRED STOCK                
(par value $0.001; shares authorized 150,000; shares outstanding 147,845 and
148,359; liquidation preference of $148,708,000 and $149,225,000 as of June
30, 2019 and December 31, 2018, respectively)
    128,548,958       129,062,704  
COMMON STOCK                
(par value $0.001; shares authorized 210,000,000; shares issued and outstanding
33,033,416 as of June 30, 2019 and 33,018,161 as of December 31, 2018)
    33,033       33,018  
Additional paid-in capital     241,317,803       249,662,168  
Accumulated deficit     (220,554,924 )     (184,610,343 )
TOTAL STOCKHOLDERS’ EQUITY     233,533,705       281,057,882  
                 
TOTAL LIABILITIES & EQUITY   $ 1,541,223,852     $ 1,480,867,051  
                 
                 

GWG HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)

    Three Months Ended     Six Months Ended  
    June 30,
2019
    June 30,
2018
    June 30,
2019
    June 30,
2018
 
REVENUE                        
Gain (loss) on life insurance policies, net   $ 19,929,818     $ 23,339,750     $ 41,426,208     $ 37,208,495  
Interest and other income     4,080,557       975,198       7,801,107       1,648,125  
TOTAL REVENUE     24,010,375       24,314,948       49,227,315       38,856,620  
                                 
EXPENSES                                
Interest expense     28,486,953       17,147,850       55,461,941       33,211,187  
Employee compensation and benefits     6,794,009       3,235,699       11,947,997       6,978,368  
Legal and professional fees     4,721,568       1,155,728       7,668,763       2,329,357  
Other expenses     5,938,445       2,832,777       8,766,169       5,573,354  
TOTAL EXPENSES     45,940,975       24,372,054       83,844,864       48,092,266  
                                 
INCOME (LOSS) BEFORE INCOME TAXES     (21,930,600 )     (57,106 )     (34,617,549 )     (9,235,646 )
INCOME TAX EXPENSE (BENEFIT)     -       -       -       -  
                                 
NET INCOME (LOSS) BEFORE EARNINGS (LOSS) FROM EQUITY METHOD INVESTMENT     (21,930,600 )     (57,106 )     (34,617,549 )     (9,235,646 )
                                 
Earnings (loss) from equity method investment     599,711       -       (1,327,032 )     -  
                                 
NET INCOME (LOSS)     (21,330,889 )     (57,106 )     (35,944,581 )     (9,235,646 )
                                 
Preferred stock dividends     4,278,218       4,338,487       8,574,532       8,042,971  
NET INCOME (LOSS) ATTRIBUTABLE TO COMMON SHAREHOLDERS   $ (25,609,107 )   $ (4,395,593 )   $ (44,519,113 )   $ (17,278,617 )
NET INCOME (LOSS) PER COMMON SHARE                                
Basic   $ (0.78 )   $ (0.76 )   $ (1.35 )   $ (2.97 )
Diluted   $ (0.78 )   $ (0.76 )   $ (1.35 )   $ (2.97 )
                                 
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING                                
Basic     33,011,603       5,813,555       32,998,246       5,813,555  
Diluted     33,011,603       5,813,555       32,998,246       5,813,555  

GWG logo.jpg

Source: GWG Holdings, Inc.