GWG Holdings, Inc. (Nasdaq:GWGH), the parent company of GWG Life, a
financial services company committed to transforming the life
insurance industry through disruptive and innovative products and
services, today announced its financial results for the quarter
ended March 31, 2017.
Highlights for the Three Months Ended March
31, 2017
- GAAP Financial Information° Total revenue of $20.1
million, up 12% from the prior year° Net loss attributable to
common shareholders of $1.9 million, or ($0.32) per basic and fully
diluted share
- Adjusted Non-GAAP Financial Information1° Non-GAAP income
attributable to common shareholders of $10.8 million, or $1.83 per
basic and fully diluted share2
- Increased the number of financial advisors able to sell our
investment products to 5,309 – the largest network of advisors in
the Company’s history
- Raised $56 million of capital from investment product offerings
– our second highest quarterly amount on record
- Sold out the $100 million 7% Redeemable Preferred Stock (RPS)
offering
- Commenced $150 million 7% Series 2 Redeemable Preferred Stock
(RPS2) offering April 3, 2017
- Increased the number of financial advisors and life insurance
agents able to source life insurance policies through GWG Life’s
Appointed Agent Program to 3,787 – the largest network of insurance
agents in the Company’s history
- Purchased $105 million in face value of policy benefits, the
fifth consecutive quarter of purchases exceeding $100
million
- 27% of policy purchases were directly through independent
financial advisors and life insurance agents, as compared to 13% in
the first quarter of 2016
- Recognized $19 million in policy benefits from ten life
insurance policies during the quarter, and an additional $9 million
in policy benefits from three policies since quarter end
- Reported a portfolio of $1.45 billion in face value of life
insurance policy benefits, covering 675 unique lives; representing
a net year-over-year growth of $420 million or 41%
- Announced the appointment of Chris Orestis, former Chief
Executive Officer of Life Care Funding, as EVP of Life Insurance
Secondary Markets.
- Reported a total liquidity position of $107 million at March
31, 20173
“This was another strong quarter for us, one in
which we made significant progress on several important corporate
initiatives that we expect will lead to significant growth
opportunities almost immediately and in the quarters to come,” said
Jon Sabes, Chairman and Chief Executive Officer. “We closed out our
$100 million Redeemable Preferred Stock (RPS) offering and
introduced a new $150 million Series 2 Redeemable Preferred Stock
(RPS2) offering that continues to see growing acceptance as
broker-dealers, financial advisors, and investors better understand
our business and its potential.”
“On the life insurance secondary market front, we
hired as Executive Vice President Chris Orestis who brings decades
of experience creating innovative long-term care and life insurance
products for seniors. With Chris’s leadership, we are participating
in a national rollout campaign to develop insurance professionals
into Care Funding Specialists who focus on long-term care
solutions. And we are supporting this campaign with a new product
suite called the LifeCare Exchange that seeks to give seniors more
options to exchange their life insurance to meet their long-term
care and other post-retirement needs.”
“On the M-Panel technology front, we completed our
exclusive license with UCLA for use of Dr. Horvath’s epigenetic
methylation biomarker technology that are a predictive of
individual all-cause mortality. In layman’s terms, this technology
measures epigenetic methylation changes that occur from a wide
range of environmental factors such as smoking and air pollution to
diet and exercise, and impact our gene expression. In order
to assess and better understand our commercial opportunities with
M-Panel technology, we retained a global consultancy firm to assist
us in the development of a report to quantify the value of
epigenetic methylation technology to the life insurance and annuity
industries. We are excited that this report shows us to be at the
forefront of an emerging technology whose applications were not
even imagined a year ago.”
“In the first quarter of 2017, we continued
attracting record numbers of independent financial advisors to sell
our non-correlated income and growth investment products, which are
the primary engine of our growth,” said William Acheson, Chief
Financial Officer. “Likewise, we have attracted a record
number of independent insurance agents to fuel the growth of our
direct policy acquisitions which, we believe will be a key
differentiator for us and a source of shareholder value once
operating at scale,” Acheson continued. “This progress,
combined with the steadily rising cash flows realized from our
portfolio of life insurance policies, signals success in the
execution of our growth strategy.”
First Quarter 2017 Financial
Summary
Total revenue for the quarter ended March 31, 2017
was $20.1 million, as compared to $17.9 million for the same period
in 2016. Realized gain from policy benefits for the first quarter
was $16.6 million, as compared to $14.6 million for the same period
in 2016. The Company recognized $19.0 million of life insurance
policy benefits during the quarter, as compared to $19.2 million
for the same period in 2016. Total unrealized gain from policy
acquisitions during the first quarter was $10.6 million, as
compared to $8.0 million for the same period in 2016.
Total expenses for the first quarter of 2017 were
$20.1 million, as compared to $15.2 million for the same period in
2016. As in prior quarters, increased expenses versus the prior
year period were directly related to our growth in headcount,
infrastructure, financing and operating costs as we continue to
execute our growth strategy. The rate of increase in our total
expenses is declining, however, as evidenced by sequential growth
in total expenses of approximately 2% for the first quarter of
2017. We are, however, prepared to continue investing in the
resources necessary to support our growth plans and the opportunity
we see in the life insurance markets.
(1) See non-GAAP Financial Measures below.(2)
We calculate adjusted non-GAAP net income by recognizing the
actuarial gain accruing within our life insurance policies at the
expected internal rate of return of the policies we own without
regard to fair value measurements required by GAAP. We net this
actuarial gain against our adjusted costs during the same period to
calculate adjusted non-GAAP net income.(3) Includes cash,
restricted cash, policy benefits receivable, if any, and amounts
available, if any, on our senior credit facilities.
Other Financial Information
Reconciliation of Gain on Life Insurance
Policies
|
|
|
Three Months Ended |
|
|
|
|
March 31, 2017 |
|
|
March 31, 2016 |
|
Change in est.
probabilistic cash flows |
|
$ |
16,543,000 |
|
$ |
9,394,000 |
|
Premiums and other fees paid |
|
|
(11,090,000 |
) |
|
(8,445,000 |
) |
Fair
value of matured policies |
|
|
(11,178,000 |
) |
|
(6,780,000 |
) |
Change in life expectancy evaluation |
|
|
(2,083,000 |
) |
|
722,000 |
|
Change in discount rates |
|
|
- |
|
|
177,000 |
|
Unrealized gain on acquisitions |
|
|
10,602,000 |
|
|
8,019,000 |
|
Realized gain on maturities |
|
|
16,606,000 |
|
|
14,627,000 |
|
Gain
on life insurance policies |
|
$ |
19,400,000 |
|
$ |
17,714,000 |
|
|
|
|
|
|
|
|
|
Life Insurance
Portfolio Summary
Total portfolio face
value of policy benefits |
|
$ |
1,447,558,000 |
|
Average face value per
policy |
|
$ |
1,922,000 |
|
Average face value per
insured life |
|
$ |
2,145,000 |
|
Average age of insured
(yrs.) |
|
|
81.5 |
|
Average life expectancy
estimate (yrs.) |
|
|
6.9 |
|
Total number of
policies |
|
|
753 |
|
Number of unique
lives |
|
|
675 |
|
Demographics |
|
|
73% Males; 27% Females |
|
Number of smokers |
|
|
29 |
|
Largest policy as % of
total portfolio |
|
|
0.92 |
% |
Average policy as % of
total portfolio |
|
|
0.13 |
% |
Average annual premium
as % of face value |
|
|
3.28 |
% |
Distribution of Policies
and Policy Benefits by Current Age of Insured
Min Age |
|
Max Age |
|
Policy Benefits |
|
|
Weighted AverageLife
Expectancy (yrs.) |
|
Percentage of Total Policy
Benefits |
90 |
|
96 |
|
$ |
141,855,000 |
|
|
|
2.7 |
|
|
|
9.8 |
% |
|
85 |
|
89 |
|
$ |
361,613,000 |
|
|
|
4.8 |
|
|
|
25.0 |
% |
|
80 |
|
84 |
|
$ |
396,772,000 |
|
|
|
6.3 |
|
|
|
27.4 |
% |
|
75 |
|
79 |
|
$ |
263,357,000 |
|
|
|
9.2 |
|
|
|
18.2 |
% |
|
70 |
|
74 |
|
$ |
178,541,000 |
|
|
|
10.1 |
|
|
|
12.3 |
% |
|
60 |
|
69 |
|
$ |
105,420,000 |
|
|
|
11.1 |
|
|
|
7.3 |
% |
|
Total |
|
|
|
$ |
1,447,558,000 |
|
|
|
6.9 |
|
|
|
100.0 |
% |
|
Life Insurance Portfolio
Activity
|
|
|
Three Months Ended |
|
|
|
|
March 31, 2017 |
|
|
March 31, 2016 |
|
|
|
|
|
|
|
|
|
Total face value of
policy benefits purchased |
|
$ |
104,755,000 |
|
$ |
102,214,000 |
|
Total
number of life insurance policies purchased |
|
|
73 |
|
|
75 |
|
Average face value of policy benefit purchased |
|
$ |
1,435,000 |
|
|
1,363,000 |
|
Face
value of policy benefits directly purchased |
|
$ |
23,504,700 |
|
|
3,409,000 |
|
Number of life insurance policies directly purchased |
|
|
20 |
|
|
10 |
|
Trailing 12 Month Policy Benefits
Recognized and Premiums Paid
Quarter End Date |
|
PortfolioFace Amount
($) |
|
|
12-MonthTrailingBenefits
Collected ($) |
|
|
12-MonthTrailing Premiums Paid
($) |
|
|
12-MonthTrailingBenefits/PremiumCoverage
Ratio |
December 31, 2014 |
|
|
779,099,000 |
|
|
|
18,050,000 |
|
|
|
23,265,000 |
|
|
|
77.6 |
% |
March
31, 2015 |
|
|
754,942,000 |
|
|
|
46,675,000 |
|
|
|
23,786,000 |
|
|
|
196.2 |
% |
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 |
|
|
|
40,240,000 |
|
|
|
120.4 |
% |
March
31, 2017 |
|
|
1,447,558,000 |
|
|
|
48,189,000 |
|
|
|
42,753,000 |
|
|
|
112.7 |
% |
Conference Call Details
Management will host a conference call today at
4:00 pm Eastern Time to discuss the Company's financial results.
The conference call number for U.S. participants is (844) 423-9895
and the conference call number for participants outside the U.S. is
(716) 247-5865. The conference ID number for both conference call
numbers is 13478244. The call may also be accessed via webcast on
the Company’s website at investors.gwglife.com.
A replay of the call will be available through May
17, 2017 by dialing (855) 859-2056 (U.S.) or (404) 537-3406
(international), using the passcode 13478244.
About GWG Holdings, Inc.
GWG Holdings, Inc. (Nasdaq:GWGH) the parent company
of GWG Life, is a financial services company committed to
transforming the life insurance industry through disruptive and
innovative products and services. Already a recognized disruptor in
the life insurance secondary market, GWG Life seeks to further
transform the industry by continuing to create innovative products
and services. As of March 31, 2017, GWG Life’s growing portfolio
consisted of over $1.45 billion in face value of policy benefits.
Since 2006, GWG Life has purchased over $2.41 billion in life
insurance policy benefits and paid seniors more than $418.4 million
for their life insurance.
For more information about GWG Holdings, email
info@gwglife.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 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.
GWG HOLDINGS, INC. AND
SUBSIDIARIES |
CONSOLIDATED BALANCE SHEETS |
|
|
|
March 31, 2017 |
|
|
December 31, 2016 |
|
|
|
(unaudited) |
|
|
|
|
A S S E T S |
|
Cash
and cash equivalents |
|
$ |
49,933,336 |
|
|
$ |
78,486,982 |
|
Restricted cash |
|
|
48,091,589 |
|
|
|
37,826,596 |
|
Investment in life insurance policies, at fair value |
|
|
545,396,546 |
|
|
|
511,192,354 |
|
Secured MCA advances |
|
|
5,005,400 |
|
|
|
5,703,147 |
|
Life
insurance policy benefits receivable |
|
|
8,975,000 |
|
|
|
5,345,000 |
|
Other
assets |
|
|
3,317,692 |
|
|
|
4,688,103 |
|
TOTAL
ASSETS |
|
$ |
660,719,563 |
|
|
$ |
643,242,182 |
|
|
|
|
|
|
|
|
|
|
L I A B I L I T I E S & S T O C K H O L D E R S’ E
Q U I T Y |
|
LIABILITIES |
|
|
|
|
|
|
|
|
Senior credit facilities |
|
$ |
153,387,813 |
|
|
$ |
156,064,818 |
|
Series I Secured Notes |
|
|
11,000,368 |
|
|
|
16,404,836 |
|
L
Bonds |
|
|
383,315,514 |
|
|
|
381,312,587 |
|
Accounts payable |
|
|
2,684,919 |
|
|
|
2,226,712 |
|
Interest and dividends payable |
|
|
16,287,918 |
|
|
|
16,160,599 |
|
Other
accrued expenses |
|
|
1,991,281 |
|
|
|
1,676,761 |
|
Deferred taxes, net |
|
|
2,096,871 |
|
|
|
2,097,371 |
|
TOTAL LIABILITIES |
|
$ |
570,764,684 |
|
|
$ |
575,943,684 |
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS’ EQUITY |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CONVERTIBLE PREFERRED STOCK – Series A |
|
|
|
|
|
|
|
|
(par
value $0.001; shares authorized 40,000,000; shares outstanding
2,651,565 and 2,640,521; liquidation preference of $19,887,000 and
$19,804,000 as of March 31, 2017 and December 31, 2016,
respectively) |
|
|
19,771,744 |
|
|
|
19,701,133 |
|
|
|
|
|
|
|
|
|
|
REDEEMABLE PREFERRED STOCK – RPS |
|
|
|
|
|
|
|
|
(par
value $0.001; shares authorized 100,000; shares outstanding 87,131
and 59,183 as of March 31, 2017 and December 31, 2016,
respectively) |
|
|
87,130,977 |
|
|
|
59,025,164 |
|
|
|
|
|
|
|
|
|
|
COMMON STOCK |
|
|
|
|
|
|
|
|
Common stock (par value $0.001: shares authorized 210,000,000;
shares issued and outstanding 5,779,745 and 5,980,190 as of March
31, 2017 and December 31, 2016, respectively) |
|
|
5,780 |
|
|
|
5,980 |
|
Additional paid-in
capital |
|
|
1,908,774 |
|
|
|
7,383,515 |
|
Accumulated
deficit |
|
|
(18,862,396 |
) |
|
|
(18,817,294 |
) |
TOTAL STOCKHOLDERS’ EQUITY |
|
|
89,954,879 |
|
|
|
67,298,498 |
|
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES & STOCKHOLDERS’ EQUITY |
|
$ |
660,719,563 |
|
|
$ |
643,242,182 |
|
GWG HOLDINGS, INC. AND
SUBSIDIARIES |
CONSOLIDATED STATEMENTS OF
OPERATIONS |
(unaudited) |
|
|
|
Three Months Ended |
|
|
|
March 31, 2017 |
|
|
March 31, 2016 |
|
REVENUE |
|
|
|
|
|
|
Gain
on life insurance policies, net |
|
$ |
19,399,819 |
|
|
$ |
17,713,712 |
|
MCA
income |
|
|
246,577 |
|
|
|
144,961 |
|
Interest and other income |
|
|
441,949 |
|
|
|
45,220 |
|
TOTAL
REVENUE |
|
|
20,088,345 |
|
|
|
17,903,893 |
|
|
|
|
|
|
|
|
|
|
EXPENSES |
|
|
|
|
|
|
|
|
Interest expense |
|
|
13,244,215 |
|
|
|
9,149,155 |
|
Employee compensation and benefits |
|
|
3,163,062 |
|
|
|
2,466,197 |
|
Legal
and professional fees |
|
|
946,348 |
|
|
|
1,206,128 |
|
Other
expenses |
|
|
2,780,322 |
|
|
|
2,412,160 |
|
TOTAL
EXPENSES |
|
|
20,133,947 |
|
|
|
15,233,640 |
|
|
|
|
|
|
|
|
|
|
INCOME
(LOSS) BEFORE INCOME TAXES |
|
|
(45,602 |
) |
|
|
2,670,253 |
|
Income
tax expense (benefit) |
|
|
(500 |
) |
|
|
1,084,717 |
|
|
|
|
|
|
|
|
|
|
NET
INCOME (LOSS) |
|
|
(45,102 |
) |
|
|
1,585,536 |
|
Preferred stock dividends |
|
|
1,867,760 |
|
|
|
511,231 |
|
NET
INCOME (LOSS) ATTRIBUTABLE TO COMMON SHAREHOLDERS |
|
$ |
(1,912,862 |
) |
|
$ |
1,074,305 |
|
|
|
|
|
|
|
|
|
|
NET
INCOME (LOSS) PER COMMON SHARE ATTRIBUTABLE TO COMMON
SHAREHOLDERS |
|
|
|
|
|
|
|
|
Basic |
|
$ |
(0.32 |
) |
|
$ |
0.18 |
|
Diluted |
|
$ |
(0.32 |
) |
|
$ |
0.18 |
|
|
|
|
|
|
|
|
|
|
WEIGHTED AVERAGE SHARES OUTSTANDING |
|
|
|
|
|
|
|
|
Basic |
|
|
5,912,946 |
|
|
|
5,942,790 |
|
Diluted |
|
|
5,912,946 |
|
|
|
5,942,790 |
|
Non-GAAP Financial Measures
The Company uses non-GAAP financial measures for
evaluating financial results, planning and forecasting, and
maintaining compliance with covenants contained in borrowing
agreements. The application of current GAAP standards during a
period of significant growth in the Company’s business, in which
period the Company is building a large and actuarially diverse
portfolio of life insurance, results in current period operating
performance that may not be reflective of the Company’s long-term
earnings potential. Management believes that the Company’s non-GAAP
financial measures permit investors to better focus on this
long-term earnings performance without regard to the volatility in
GAAP financial results that can occur during this phase of our
growth.
These Non-GAAP financial measures are disclosed to
investors to provide an alternative method for assessing our
financial condition and operating results. These non-GAAP financial
measures are not in accordance with GAAP and may be different from
non-GAAP measures used by other companies, including other
companies within our industry. The presentation of non-GAAP
financial information is not meant to be considered in isolation or
as a substitute for comparable amounts prepared in accordance with
GAAP. A reconciliation of GAAP to the non-GAAP financial measures
described above can be found below.
Adjusted Non-GAAP Net Income. Our
DZ Bank/Autobahn senior revolving credit facility requires us to
maintain a positive net income calculated on an adjusted non-GAAP
basis. We calculate the adjusted net income by recognizing the
actuarial gain accruing within our life insurance policies at the
expected internal rate of return of the policies we own without
regard to fair value. We net this actuarial gain against our
adjusted costs during the same period to calculate our net income
on a non-GAAP basis.
|
Three Months Ended |
|
|
March 31, 2017 |
|
|
March 31, 2016 |
|
GAAP
net (loss) income |
$ |
(45,102 |
) |
|
$ |
1,585,536 |
|
Unrealized fair value gain (1) |
|
(13,883,833 |
) |
|
|
(11,531,553 |
) |
Adjusted cost basis increase (2) |
|
21,721,077 |
|
|
|
15,367,047 |
|
Accrual of unrealized actuarial gain (3) |
|
4,910,182 |
|
|
|
6,065,733 |
|
Total
adjusted non-GAAP income (4) |
$ |
12,702,324 |
|
|
$ |
11,486,763 |
|
Preferred stock dividends |
|
(1,867,760 |
) |
|
|
(511,231 |
) |
Non-GAAP income attributable to common shareholders |
|
10,834,564 |
|
|
|
10,975,532 |
|
Non-GAAP net income per share: |
|
|
|
|
|
|
|
Basic |
|
1.83 |
|
|
|
1.85 |
|
Diluted |
|
1.25 |
|
|
|
1.37 |
|
Average shares outstanding: |
|
|
|
|
|
|
|
Basic |
|
5,912,946 |
|
|
|
5,942,790 |
|
Diluted |
|
8,689,649 |
|
|
|
7,987,321 |
|
(1) Reversal of GAAP unrealized fair value
gain of life insurance policies.(2) Adjusted cost basis is
increased to include those acquisition, financing and servicing
expenses that are not capitalized under GAAP (non-GAAP Investment
Cost Basis)(3) Accrual of actuarial gain at the expected
internal rate of return based on the non-GAAP Investment Cost Basis
for the applicable period.(4) We must maintain an annual
positive consolidated adjusted non-GAAP income to maintain
compliance with our DZ Bank/Autobahn revolving credit facility.
Media Contact:
Dan Callahan
Director of Communication
GWG Holdings, Inc.
(612) 746-1935
dcallahan@gwglife.com
GWG (NASDAQ:GWGH)
Historical Stock Chart
From Mar 2024 to Apr 2024
GWG (NASDAQ:GWGH)
Historical Stock Chart
From Apr 2023 to Apr 2024