GWGH GWG Holdings Inc

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		PortfolioFace Amount ($)				12-MonthTrailingBenefits Realized ($)				12-MonthTrailing Premiums Paid ($)				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	%

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 CallahanDirector of CommunicationGWG Holdings, Inc.(612) 746-1935dcallahan@gwgh.com

GWG HOLDINGS, INC. AND SUBSIDIARIESCONSOLIDATED 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 SUBSIDIARIESCONSOLIDATED 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