UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (date of earliest event reported): August 5, 2019
GWG Holdings, Inc.
(Exact name of registrant as specified in its charter)
| Delaware | 001-36615 | 26-2222607 | ||
| (State or other jurisdiction of incorporation) |
(Commission File Number) | (IRS Employer Identification No.) |
| 220 South Sixth Street, Suite 1200, Minneapolis, MN | 55402 | |
| (Address of principal executive offices) | (Zip Code) |
(612) 746-1944
(Registrant's telephone number, including area code)
Not applicable
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| ☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| ☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
| Common Stock | GWGH | NASDAQ Capital Market |
Item 2.02 Results of Operations and Financial Condition
On August 5, 2019, GWG Holdings, Inc. issued a press release reporting the financial results for its first fiscal quarter ended March 31, 2019. The full text of the press release is furnished as Exhibit 99.1 to this Form 8-K.
The information in this Current Report on Form 8-K, including the information contained in the press release furnished as Exhibit 99.1, is deemed to be “furnished” and not “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is not otherwise subject to the liabilities of that Section, and shall not be deemed incorporated by reference into any filing under the Exchange Act or the Securities Act of 1933, as amended, regardless of any general incorporation language in such filing.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits.
| Exhibit No. | Description | |
| 99.1 | Press release dated August 5, 2019 (filed herewith) |
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| GWG Holdings, Inc. | ||
| Date: August 5, 2019 | By: | /s/ William Acheson |
| William
Acheson Chief Financial Officer | ||
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EXHIBIT INDEX
| Exhibit No. | Description | |
| 99.1 | Press release dated August 5, 2019 (filed herewith) |
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Exhibit 99.1
GWG HOLDINGS, Inc. ReportS Results for THE FIRST Quarter ENDED
MARCH 31, 2019
MINNEAPOLIS, MN – August 5, 2019 – 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 first quarter ended March 31, 2019.
First Quarter 2019 Financial and Operating Highlights
| ● | Realized a record $30.5 million of face amount of policy benefits from 20 life insurance policies; |
| ● | Reported additional policy realizations of $30.7 million from 25 policies through July 31, 2019, bringing the 2019 total to $61.2 million from 45 policies. This compares to total policy realizations of $71.1 million from 62 policies for the full year of 2018; |
| ● | Acquired $80.2 million of face amount of policy benefits; |
| ● | Ended the quarter with a life insurance portfolio of $2.098 billion in face amount of policy benefits consisting of 1,194 policies; and |
| ● | Reported total assets of $1.6 billion. |
| 1. | Financial & Operating Highlights |
| ($ Thousands except per share information) | Q1 2019 | Q1 2018 | ||||||
| Revenue | $ | 25,217,000 | $ | 14,542,000 | ||||
| Expenses | 37,904,000 | 23,720,000 | ||||||
| Per Share Data1: | ||||||||
| Net Income (Loss)2 | (0.57 | ) | (2.22 | ) | ||||
| Capital Raised | 125,985,000 | 87,526,000 | ||||||
| Liquidity3,4 | 183,896,000 | 141,897,000 | ||||||
| Life Insurance Portfolio5 | 2,098,428,000 | 1,758,066,000 | ||||||
| Life Insurance Acquired5 | 80,211,000 | 94,352,000 | ||||||
| Face Value of Matured Policies | 30,459,000 | 14,504,000 | ||||||
| TTM Benefits / Premiums6 | 154.8 | % | 113.3 | % | ||||
| (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 $51.5 million on July 31, 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 |
First Quarter 2019 vs. First Quarter 2018:
| ● | Total revenue was $25.2 million in the current period, compared to $14.5 million in the prior period primarily due to: |
| ○ | Higher gain from policy benefits due to increased realization of policy benefits – $30.5 million of life insurance policy benefits realized in the current period compared to $14.5 million in the prior period. |
| ● | Total expenses were $37.9 million in the current period, compared to $23.7 million in the prior period primarily due to: |
| ○ | Increased interest expense of $10.9 million; and |
| ○ | Costs of $1.4 million relating to the YouSurance and Life Epigenetics wholly owned insurtech subsidiaries. |
| 3. | Life Insurance Portfolio Statistics |
Portfolio Summary:
| Total life insurance portfolio face value of policy benefits | $ | 2,098,428,000 | ||
| Average face value per policy | $ | 1,757,000 | ||
| Average face value per insured life | $ | 1,885,000 | ||
| Average age of insured (years) | 81.7 | |||
| Average life expectancy estimate (years) | 7.6 | |||
| Total number of policies | 1,194 | |||
| Number of unique lives | 1,113 | |||
| Demographics | 78% Male; 22% Female | |||
| Number of smokers | 53 | |||
| Largest policy as % of total portfolio face value | 0.6 | % | ||
| Average policy as % of total portfolio | 0.1 | % | ||
| Average annual premium as % of face value | 3.0 | % |
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 (yrs.) | ||||||||||||||||
| 95 | 100 | 18 | $ | 29,153,000 | 1.5 | % | 1.4 | % | 2.3 | |||||||||||||
| 90 | 94 | 131 | 254,273,000 | 11.0 | % | 12.1 | % | 3.5 | ||||||||||||||
| 85 | 89 | 252 | 579,409,000 | 21.1 | % | 27.6 | % | 5.3 | ||||||||||||||
| 80 | 84 | 245 | 430,373,000 | 20.5 | % | 20.5 | % | 7.5 | ||||||||||||||
| 75 | 79 | 234 | 409,470,000 | 19.6 | % | 19.5 | % | 10.4 | ||||||||||||||
| 70 | 74 | 227 | 314,465,000 | 19.0 | % | 15.0 | % | 11.3 | ||||||||||||||
| 60 | 69 | 87 | 81,285,000 | 7.3 | % | 3.9 | % | 11.6 | ||||||||||||||
| Total | 1,194 | $ | 2,098,428,000 | 100.0 | % | 100.0 | % | 7.6 | ||||||||||||||
| 4. | Life Insurance Policy Origination |
Life Insurance Portfolio Activity:
| Three Months Ended | ||||||||
| March 31, 2019 | March 31, 2018 | |||||||
| Total policy benefits purchased | $ | 80,211,000 | $ | 94,352,000 | ||||
| Total life insurance policies purchased | 60 | 59 | ||||||
| Average policy benefit purchased | $ | 1,337,000 | $ | 1,599,000 | ||||
| Direct policy benefits purchased | $ | 12,337,000 | $ | 5,000,000 | ||||
| Direct insurance policies purchased | 16 | 11 | ||||||
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| 5. | Additional Information |
Gain (Loss) on Life Insurance Policies:
| Three Months Ended March 31, | ||||||||
| 2019 | 2018 | |||||||
| Change in estimated probabilistic cash flows(1) | $ | 17,131,000 | $ | 19,005,000 | ||||
| Unrealized gain on acquisitions(2) | 4,459,000 | 6,974,000 | ||||||
| Premiums and other annual fees | (15,832,000 | ) | (12,197,000 | ) | ||||
| Change in discount rates(3) | - | - | ||||||
| Change in life expectancy evaluation(4) | - | (4,868,000 | ) | |||||
| Face value of matured policies | 30,459,000 | 14,504,000 | ||||||
| Fair value of matured policies | (14,721,000 | ) | (9,549,000 | ) | ||||
| Gain (loss) on life insurance policies, net | $ | 21,496,000 | $ | 13,869,000 | ||||
| (1) | Change in fair value of expected future cash flows from our life insurance policies not specifically attributable to other factors. |
| (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 both March 31, 2019 and December 31, 2018, and 10.45% at both March 31, 2018 and December 31, 2017. See our Form 10-K filed with the Securities and Exchange Commission (SEC) on July 9, 2019 for important changes to how we estimate the discount rate for fair value purposes. |
| (4) | The change in fair value due to updating life expectancy estimates on certain life insurance policies in our portfolio. See our Form 10-K filed with the SEC on July 9, 2019 for important changes to how we use updated life expectancy reports. |
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 | % | |||||||||||
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Earnings Webcast Details
Information will be forthcoming about an earnings webcast to discuss GWGH’s financial results.
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 $565 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 March 31, 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
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GWG HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
| March 31, 2019 (unaudited) | December 31, 2018 | |||||||
| ASSETS | ||||||||
| Cash and cash equivalents | $ | 154,384,426 | $ | 114,587,084 | ||||
| Restricted cash | 20,311,646 | 10,849,126 | ||||||
| Investment in life insurance policies, at fair value | 782,184,731 | 747,922,465 | ||||||
| Life insurance policy benefits receivable, net | 9,200,000 | 16,460,687 | ||||||
| Financing receivable from affiliate | 186,738,243 | 184,768,874 | ||||||
| Equity method investment | 359,096,434 | 360,841,651 | ||||||
| Other assets | 50,116,768 | 45,437,164 | ||||||
| TOTAL ASSETS | $ | 1,562,032,248 | $ | 1,480,867,051 | ||||
| LIABILITIES & STOCKHOLDERS’ EQUITY | ||||||||
| LIABILITIES | ||||||||
| Senior credit facility with LNV Corporation | $ | 146,868,215 | $ | 148,977,596 | ||||
| L Bonds | 756,397,420 | 651,402,663 | ||||||
| Seller Trust L Bonds | 366,891,940 | 366,891,940 | ||||||
| Accounts payable | 6,079,306 | 9,276,507 | ||||||
| Interest and dividends payable | 18,506,588 | 18,555,293 | ||||||
| Other accrued expenses | 6,030,841 | 4,705,170 | ||||||
| TOTAL LIABILITIES | 1,300,774,310 | 1,199,809,169 | ||||||
| STOCKHOLDERS’ EQUITY | ||||||||
| REDEEMABLE PREFERRED STOCK | ||||||||
| (par value $0.001; shares authorized 100,000; shares outstanding 96,954 and 97,524; liquidation preference of $97,520,000 and $98,093,000 as of March 31, 2019 and December 31, 2018, respectively) | 86,340,335 | 86,910,335 | ||||||
| SERIES 2 REDEEMABLE PREFERRED STOCK | ||||||||
| (par value $0.001; shares authorized 150,000; shares outstanding 148,110 and 148,359; liquidation preference of $148,974,000 and $149,225,000 as of March 31, 2019 and December 31, 2018, respectively) | 128,813,787 | 129,062,704 | ||||||
| COMMON STOCK | ||||||||
| (par value $0.001; shares authorized 210,000,000; shares issued and outstanding 32,992,606 as of March 31, 2019 and 33,018,161 as of December 31, 2018) | 32,993 | 33,018 | ||||||
| Additional paid-in capital | 245,294,858 | 249,662,168 | ||||||
| Accumulated deficit | (199,224,035 | ) | (184,610,343 | ) | ||||
| TOTAL STOCKHOLDERS’ EQUITY | 261,257,938 | 281,057,882 | ||||||
| TOTAL LIABILITIES & EQUITY | $ | 1,562,032,248 | $ | 1,480,867,051 | ||||
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GWG HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
| Three Months Ended | ||||||||
| March 31, 2019 | March 31, 2018 | |||||||
| REVENUE | ||||||||
| Gain (loss) on life insurance policies, net | $ | 21,496,390 | $ | 13,868,745 | ||||
| Interest and other income | 3,720,550 | 672,927 | ||||||
| TOTAL REVENUE | 25,216,940 | 14,541,672 | ||||||
| EXPENSES | ||||||||
| Interest expense | 26,974,988 | 16,063,337 | ||||||
| Employee compensation and benefits | 5,153,984 | 3,742,669 | ||||||
| Legal and professional fees | 2,947,196 | 1,173,629 | ||||||
| Other expenses | 2,827,721 | 2,740,577 | ||||||
| TOTAL EXPENSES | 37,903,889 | 23,720,212 | ||||||
| INCOME (LOSS) BEFORE INCOME TAXES | (12,686,949 | ) | (9,178,540 | ) | ||||
| INCOME TAX EXPENSE (BENEFIT) | - | - | ||||||
| NET INCOME (LOSS) BEFORE EARNINGS FROM EQUITY METHOD INVESTMENT | (12,686,949 | ) | (9,178,540 | ) | ||||
| Earnings (loss) from equity method investment | (1,926,743 | ) | - | |||||
| NET INCOME (LOSS) | (14,613,692 | ) | (9,178,540 | ) | ||||
| Preferred stock dividends | 4,296,314 | 3,704,484 | ||||||
| NET INCOME (LOSS) ATTRIBUTABLE TO COMMON SHAREHOLDERS | $ | (18,910,006 | ) | $ | (12,883,024 | ) | ||
| NET INCOME (LOSS) PER COMMON SHARE | ||||||||
| Basic | $ | (0.57 | ) | $ | (2.22 | ) | ||
| Diluted | $ | (0.57 | ) | $ | (2.22 | ) | ||
| WEIGHTED AVERAGE COMMON SHARES OUTSTANDING | ||||||||
| Basic | 32,984,741 | 5,813,555 | ||||||
| Diluted | 32,984,741 | 5,813,555 | ||||||
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