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
selected preliminary financial results for the second quarter ended
June 30, 2019 and disclosed other key matters relating to its
business.
Second Quarter 2019 Selected Financial
Metrics
- The face value of policy benefits realized in the second
quarter was $23 million as compared to $30 million in the first
quarter;
- Total face value of benefits realized from January 1, 2019
through June 30, 2019 was $53 million as compared to $42 million
for the same period in 2018;
- Life insurance policy purchases in the second quarter totaled
$13 million of face value as compared to $80 million in the first
quarter as a result of our previously announced intention to reduce
capital allocated to life insurance policy purchases;
- L Bond sales during the second quarter were $45 million as
compared to $126 million during the first quarter. Sales of GWGH’s
L Bonds were suspended on May 1, 2019 due to delays in filing
various reports with the Securities and Exchange Commission (SEC)
and recommenced on August 8, 2019;
- Ended the second quarter with a life insurance portfolio of
$2.1 billion in face amount of policy benefits consisting of 1,190
policies; and
- Reported total liquidity (combined available cash, cash
equivalents, restricted cash and policy benefits receivable) of $82
million at June 30, 2019 and $51 million at July 31, 2019.
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 |
|
0.63 |
% |
Average policy as % of total
portfolio |
|
0.08 |
% |
Average annual premium as % of
face value |
|
3.1 |
% |
|
|
|
|
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 |
% |
|
|
9.9 |
|
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 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Life
Insurance Policy Origination
Life Insurance Portfolio Activity:
|
|
|
Three Months Ended |
|
|
|
|
June 30, 2019 |
|
|
June 30, 2018 |
|
|
|
|
|
|
|
|
|
Total policy benefits
purchased |
|
$ |
12,955,000 |
|
$ |
118,308,000 |
|
Total life insurance policies purchased |
|
|
15 |
|
|
85 |
|
Average policy benefit purchased |
|
$ |
846,000 |
|
$ |
1,392,000 |
|
Direct policy benefits purchased |
|
$ |
5,755,000 |
|
$ |
8,038,000 |
|
Direct insurance policies purchased |
|
|
8 |
|
|
11 |
|
|
|
|
|
|
|
|
|
Policy Benefits Recognized and Premiums Paid
(TTM):
Quarter End Date |
|
PortfolioFace Amount ($) |
|
|
12-MonthTrailingBenefits
Realized ($) |
|
|
12-MonthTrailingPremiumsPaid($) |
|
|
12-MonthTrailingBenefits/PremiumCoverage
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 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liquidity
As of June 30, 2019 and December 31, 2018, we
had approximately $82 million and $142 million, respectively, in
combined available cash, cash equivalents, restricted cash and
policy benefits receivable. As of July 31, 2019, we had
approximately $51 million in combined available cash, cash
equivalents, restricted cash and policy benefits receivable. The
decrease of approximately $31 million from June 30, 2019 is due, in
part, to the temporary suspension of sales of our L Bonds, which
has only recently recommenced.
Transition of Key Executive
On August 15, 2019, Timothy Evans was appointed
Chief Financial Officer of GWGH, replacing William B. Acheson
(Bill), who has served as GWGH’s Chief Financial Officer since May
2014. Mr. Acheson remains employed by the Company on an
interim basis as an Executive Vice President reporting to the CEO,
to assist in the transition of his prior duties and
responsibilities to Mr. Evans.
Mr. Evans, age 40, joined the Company as Chief
Integration Officer on May 6, 2019. Prior to joining GWG
Holdings, Inc., Mr. Evans was Chief of Staff for The Beneficient
Company Group, L.P. where he had also served as Vice President and
Deputy General Counsel since February 2018. Prior to joining
Beneficient, Mr. Evans was an attorney for the SEC for six years,
where he served as a trial attorney and a counsel to the Director
of Enforcement. Mr. Evans was an associate in the Dallas
office of Thompson & Knight LLP for four years before joining
the SEC. He received his Juris Doctorate, summa cum laude,
from the University of Arkansas School of Law in 2008. Prior
to practicing as an attorney, Mr. Evans was an accountant for three
years with SMG, a public facility management company. He
previously held an Arkansas CPA license but is not currently
licensed by the Arkansas State Board of Public Accountancy.
He graduated from the University of Illinois at
Urbana-Champaign with a Bachelor of Arts – Economics in 2001.
“Tim was extensively involved in developing the
accounting systems and controls of Beneficient, as well as the
production and audit of its financial statements. We believe that
Tim’s prior executive experience with Beneficient, combined with
his recent experience as our Chief Integration Officer, will enable
a smooth transition of Bill’s prior duties and responsibilities.”
said Murray Holland, GWGH’s Chief Executive Officer.
GWGH will provide further information regarding
Mr. Acheson’s transition and Mr. Evans’ appointment in a Current
Report on Form 8-K to be filed within four business days of the
date of this press release.
Change in Independent Registered Public
Accounting Firm and Late Filing of Second Quarter Form
10-Q
On August 5, 2019, GWGH received notice from its
then-independent registered public accounting firm, Baker Tilly
Virchow Krause, LLP, that Baker Tilly would decline to stand for
re-appointment as GWGH’s independent registered public accounting
firm for fiscal year 2019. None of Baker Tilly’s audit reports for
the years ended December 31, 2018 or 2017 contained an adverse
opinion or a disclaimer of opinion, nor was any such report
qualified or modified.
On August 6, 2019, GWGH’s audit committee
engaged Whitley Penn LLP as its new independent auditor for the
year ending December 31, 2019. Beneficient also has recently
engaged Whitley Penn to serve as its independent auditor.
“Due to the significance of Beneficient to our
consolidated financial statements, we and Beneficient’s management
believed it would significantly improve both time and cost
efficiency to have the same independent auditor for both
companies,” said Murray Holland, GWGH’s Chief Executive Officer.
“Having served as the independent auditor for Beneficient in the
past, Whitley Penn has a deep understanding of Beneficient’s
business model and a history of working with Beneficient’s
management team. We believe this arrangement will result in a
better and more comprehensive audit for both companies.”
As a result of the very recent change from Baker
Tilly to Whitley Penn, we were not able to timely file our
Quarterly Report on Form 10-Q for the quarter ended June 30, 2019
with the SEC, which was due on August 14, 2019. Consequently, we
expect to receive a letter from the Listing Qualifications
Department of the Nasdaq Stock Market indicating that we are not in
compliance with Nasdaq’s filing requirements for continued listing
and requiring that we issue a press release regarding such
non-compliance upon receipt of such letter. Under Nasdaq’s
procedures, we expect that we will be given 60 days to submit a
plan to regain compliance with Nasdaq's filing requirements for
continued listing. If we submit an acceptable compliance plan,
Nasdaq is permitted to grant an extension of up to 180 days from
the Form 10-Q filing due date for us to regain compliance with
Nasdaq’s filing requirements for continued listing. We are
working diligently with Whitley Penn to complete this filing as
expeditiously as possible and expect the filing to be made within
any Nasdaq extension period.
Other Matters
Purchase and Contribution Agreement
On April 15, 2019, Jon R. Sabes, GWGH’s former
Chief Executive Officer and a former director, and Steven F. Sabes,
a former GWGH director, entered into a Purchase and Contribution
Agreement with, among others, Beneficient. Under the Purchase and
Contribution Agreement, Jon and Steven Sabes agreed to transfer all
3,952,155 of the shares of GWGH’s outstanding common stock held
directly or indirectly by them to Beneficient Capital Company,
L.L.C., a subsidiary of Beneficient, and AltiVerse Capital Markets,
L.L.C. GWGH was not a party to the Purchase and Contribution
Agreement; however, the closing of the transactions contemplated by
the Purchase and Contribution Agreement was subject to certain
conditions that were dependent upon GWGH taking, or refraining from
taking, certain actions. The closing of the Purchase and
Contribution Transaction occurred on April 26, 2019.
Management is evaluating the accounting
treatment for the Purchase and Contribution Transaction. The
evaluation may result in a conclusion that a change in control
event occurred under ASC 805, Business Combinations. Depending on
the entity deemed to be the accounting acquirer, the transaction
may result in a requirement for GWGH to consolidate Beneficient and
its subsidiaries or vice versa in the second quarter of 2019. If
GWGH is determined to be the accounting acquiree, we will be
required to consider an accounting policy election with regards to
pushdown accounting. If we were to elect to apply pushdown
accounting, our assets and liabilities would be recorded at fair
value as of the transaction date.
If our management concludes that a change of
control event under ASC 805 occurred, the resulting accounting
impact (regardless of which entity is deemed to be the acquiring
party) could have a material impact on our financial statements for
the quarter ended June 30, 2019. While the accounting change
will not affect the accuracy or reliability of the financial
statements included in our Quarterly Report on Form 10-Q for the
first quarter (filed with the SEC on August 5, 2019) and Annual
Report on Form 10-K for fiscal 2018 (filed with the SEC on July 9,
2019), it could affect the comparability of such financial
statements with our financial statements for the quarter ended June
30, 2019 and subsequent periods
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
Disclosure of Financial Results
We have not yet finalized our financial
statement close process for the quarter ended June 30, 2019,
nor have we finalized our assessment of the impact of the Purchase
and Contribution Transaction. As a result, the financial
information as of and for the quarter ended June 30, 2019 in this
press release is preliminary and based upon information available
to us as of the date of this press release. Furthermore, our
preliminary results have been prepared by, and are the
responsibility of, our management and have not been
reviewed or audited or subject to any other procedures by our
new independent registered public accounting firm. Accordingly, our
independent registered public accounting firm does not express an
opinion or any other form of assurance with respect to these
preliminary results. In connection with the finalization process
and the incorporation of the impact of the Purchase and
Contribution Transaction, we may identify items that would require
adjustments to its preliminary financial results announced above.
Our financial results could be different, and those differences
could be material. The preliminary financial information should not
be viewed as a substitute for full financial statements prepared in
accordance with GAAP.
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. Forward-looking statements are subject to risks
and uncertainties, which could cause actual results to differ
materially from such statements, including, but not limited to the
risks that we may not be able to file our Quarterly Report on Form
10-Q for the second quarter within the currently expected
timeframe, risks that we may not regain compliance with NASDAQ
continued listing requirements within the applicable grace period
and risks associated with analysis and determination regarding the
appropriate accounting treatment for the Purchase and Contribution
Transaction, as well as the other risks set forth in our filings
with the SEC. 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 SEC.
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 SEC. 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
CallahanDirector of CommunicationGWG Holdings, Inc.(612)
746-1935dcallahan@gwgh.com
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