LINCOLN,
Neb., March 27, 2023 /PRNewswire/ -- Midwest
Holding Inc. ("Midwest") (NASDAQ: MDWT), today announced financial
results for the fourth quarter and full year ended
December 31, 2022.
Fourth Quarter and Full Year 2022 Highlights:
- GAAP net income for the year was $7.1
million compared with a $(16.6)
million net loss recorded in 2021. GAAP earnings were
$1.88 per share (diluted) versus a
($4.45) per share (diluted) loss in
the prior year. For the fourth quarter 2022, a GAAP net loss of
$(9.7) million was incurred compared
to a loss of $(7.0) million in the
prior year fourth quarter driven by lower investment income from
other invested assets and an increase in other expenses related to
legal and other fees paid related to the establishment of the line
of credit and reinsurance in the quarter.
- GAAP total revenue for the year was $30.0 million compared with revenue of
$30.1 million in 2021, driven by an
increase in investment income from growth in invested assets
retained, higher policy administration fees and growing
amortization of deferred ceding commissions, offset by unrealized
losses on derivatives compared to gains in the prior year.
- Annuity direct written premium under statutory accounting
principles ("SAP"), a non-GAAP measure, was up 51.8% to
$715.8 million for 2022 from
$471.6 million in 2021 reflecting
strong growth throughout 2022, from a focus on distribution and
pricing. The mix of new business was 56% Multi-Year Guaranteed
Annuities (MYGA) and 45% Fixed Indexed Annuities (FIA).
- Authority to write business was obtained in Florida and Georgia along with product approvals in
Florida, North and South Dakota.
- Ceded premiums (SAP), a non-GAAP measure, were $311.3 million for 2022 compared to $237.4 million in the prior year. The rate for
the year, or that portion of our written premium that we reinsured,
was 43.5% compared to 50.3% in the prior year.
- Total expenses for 2022 decreased to $21.7 million from $41.9
million in the prior year benefiting from negative interest
credited due to the value of the options embedded in our
liabilities and from a gain on the mark to market value of the
options allowance included in other operating expenses. On a
non-GAAP basis, total expenses have increased from variable costs
associated with increased premiums written related to technology,
distribution, product fees and premium taxes along with expenses
related to state expansion and capital initiatives. Salaries and
benefits increased with the addition, repositioning and retention
of personnel to support growth and manage a tighter labor
market.
- Invested assets grew to $1,615.0
million at year-end 2022 compared with $975.5 million at year- end 2021. The retained
portfolio was $812 million at the end
of December 31, 2022 compared to
$414 million at the end of prior
year. Third-party assets under management were $502 million at year-end compared to $405.0 million in prior year.
- Effective February 28, 2023,
reinsurer American Republic Insurance Company ("AEG") elected not
to extend its commitment period for reinsuring liabilities under
its Modified Coinsurance Agreement (the "AEG Agreement"). AEG had
previously been taking a 20% quota share of certain liabilities
with respect to Midwest's MYGA-5 business as well as a 20% quota
share of certain liabilities with respect to our FIA products and,
as a result of the election, its quota share with respect to both
MYGA and FIA policies is 0% going forward. The AEG Agreement
remains in place, and AEG remains responsible for previously ceded
liabilities.
Georgette Nicholas, CEO of
Midwest noted, "We are excited about the execution and progress we
have made in 2022. The results reflect the actions we took to
position the Company for growth. We have been focusing on
distribution, pricing, products, investment management, and
reinsurance. We are investing in technology and foundational
capabilities to strengthen the business. We continue to see strong
trends in premiums written and are very excited to add Florida and Georgia to our state footprint. We are focused
on continued execution and growth in 2023."
Ms. Nicholas concluded: "Our opportunities are substantial to
build the platform and to deliver on our commitment to deliver
value to shareholders."
Full-Year 2022 versus Full-Year 2021 on a GAAP basis
Midwest reported net income of $7.1
million for 2022. This compares with the $(16.6) million net loss in the prior year. On a
diluted, per-share basis, this year's net income was $1.88 compared with a loss of ($4.45) reported in 2021.
Investment income rose in 2022 to $35.1
million from $15.7 million in
the prior year. Driving the change was an increase in invested
assets as well as performance on those assets, benefiting from
sourcing assets with a higher yield – generating approximately an
8.0% return on the investment portfolio.
Amortization of deferred gain on reinsurance reached
$4.8 million compared with
$3.0 million in 2021 due to growth in
the deferred gain on co-insurance on the balance sheet to
$38.1 million compared to
$28.6 million, which reflects ceding
commission received on reinsurance with third parties.
Service fee revenue was consistent at $2.4 million in 2022 from $2.3 million in 2021. Service fee revenue
consists of fee revenue generated by our wholly owned asset
manager, 1505 Capital, for asset-management services provided to
third-party clients.
Policy administration fee revenue for the year was $2.1 million in 2022 versus $0.8 million in 2021. Policy administration fee
revenue is generated by providing ancillary services, such as
policy administration to third parties, and policy surrender
charges. The increase was correlated with growth in policies
written.
Our expenses were $21.7 million in
the year compared with $41.9 million
in the prior year. Contributing to the decrease was significant
negative interest credited, as well as mark to market expense which
is included in other operating expenses. On a non-GAAP basis, total
expenses have increased from variable costs associated with
increased premiums written related to technology, distribution,
product fees and premium taxes along with expenses related to state
expansion and capital initiatives. Salaries and benefits increased
with the addition, repositioning and retention of personnel to
support growth and manage a tighter labor market.
Q4 2022 versus Q4 2021 on a GAAP basis
Midwest reported GAAP net loss of $(9.7)
million in the fourth quarter of 2022 compared to a
$(7.0) million GAAP net loss
incurred in the fourth quarter of 2021. On a per-share basis, this
year's quarterly net loss was $
(2.62) compared with the $
(0.82) per-share loss reported in the fourth quarter of
2021.
Investment income in 2022's fourth quarter was $5.4 million compared with $3.4 million in the prior year's fourth quarter,
driven by the increase in invested assets and portfolio retained
along with yield improvement from a rising rate environment. We did
see a lower return from other invested assets in the fourth
quarter.
Amortization of deferred gain on reinsurance reached
$1.6 million in the fourth quarter of
2022 compared with $1.3 in the fourth
quarter of 2021 primarily due to growth of the deferred gain on
co-insurance on our balance sheet.
Service fee revenue from assets under management was
$0.7 million versus $0.6 million in the prior fourth
quarter.
Policy charges revenue for the fourth quarter was $0.7 million in 2022 versus less than
$0.1 million in fourth quarter 2021
given growth in policies written.
Our total expenses on a GAAP basis were $12.1 million versus $20.0
million in the prior year fourth quarter. Total expenses
were helped by reduced salaries and benefits expenses, as well as
lower interest credited of negative $(3.7)
million compared to $5.1
million in the prior year. Salaries and benefits were
$3.8 million in Q4 2022 compared to
$5.5 million in Q4 2021 as we
continue to seek operational improvement.
Guidance
We continue to see a growing fixed annuity market with new
competitors and various movement in pricing. Our focus is to
maintain a competitive position on pricing and service to continue
sales momentum in 2023. Given where we are in the first quarter of
2023, we anticipate premiums for the quarter will be consistent
with the fourth quarter of 2022.
State expansion efforts remain a key priority. We are excited to
begin writing business in Florida,
where we were granted approval to conduct business in late December
along with Georgia, where we
received approval at the end of February. We have obtained our
product approvals in Florida and
will be working to obtain those in Georgia. We anticipate that the addition of
these states could add approximately 33% growth to our existing
premium written. We have other active state applications in process
and will provide updates as they progress.
Given our start for 2023, we estimate premiums written for 2023
to be in the range of $800 million to
$850 million (SAP) as of now. As we
begin to get Florida and
Georgia moving, we expect that to
increase depending on how quickly agents begin writing new
business. We are focused on improving our FIA production this year
and expect the mix in product sales to be 60% towards FIA and 40%
MYGA.
The goal is to cede, on average, approximately 70-90% of our
premium in a year to generate ceded commission fees and manage
capital, although through fourth quarter we ceded approximately
47%. We would expect to cede approximately 55-65% in 2023 given the
demand from reinsurance partners is strong. Effective February 28, 2023, AEG elected not to extend its
commitment period for reinsuring liabilities under its Modco AEG
Agreement. As a result, AEG's current quota share with respect to
MYGA and FIA policies is 0% going forward. The AEG Coinsurance
Agreement remains in place, and AEG remains responsible for
previously ceded liabilities. We have capacity in place to cover
anticipated written premium through existing partners along with
additional potential reinsurance transactions in the pipeline.
We continue to focus on expense management, making key
investments to support growth of the business and bring
efficiencies with technology. We anticipate general and
administrative expenses on a management basis, a non-GAAP measure,
to be approximately $30 to
$32 million for the full year
2023.
Q4 2021 Key Performance Indicators and Non-GAAP Financial
Measures
In addition to GAAP measures, Midwest's management utilizes a
series of key performance indicators (KPI's) and non-GAAP measures
to, among other things:
- monitor and evaluate the performance of our business operations
and financial performance;
- facilitate internal comparisons of the historical operating
performance of our business operations;
- review and assess the operating performance of our management
team;
- analyze and evaluate financial and strategic planning decisions
regarding future operations;
- plan for and prepare future annual operating budgets and
determine appropriate levels of operating investments; and
- facilitate comparison of results between periods and to better
understand the underlying historical trends in our business and
prospects.
These non-GAAP measures are not a substitute for GAAP measures;
however, management believes that when used in conjunction with the
GAAP measures, the non-GAAP measures can contribute to investors'
understanding of the progress of our business. Non-GAAP financial
measures used by us may be calculated differently from, and
therefore may not be comparable to, similarly titled measures used
by other companies. These non-GAAP financial measures should be
considered along with, but not as alternatives to, our operating
performance measures as prescribed by GAAP.
Annuity Premiums (a KPI)
For the fourth quarter of 2022, annuity direct written premiums
were $206.2 million compared with
$104.2 million in the fourth quarter
of 2021. Ceded premiums were $97.5
million in 2022's fourth quarter compared to $43.8 million in the fourth quarter of 2021. Of
the fourth-quarter 2022 sales of $206.2
million, 66% was in the MYGA category and the remaining 34%
consisted of sales of Fixed Indexed Annuities.
For the full year 2022, annuity direct written premiums were
$715.8 million up from $471.6 million for 2021, a 52% increase. Ceded
premium was $311.3 million in 2022
compared to $237.4 million in 2021.
Of the 2022 sales of 56% was in the MYGA category and the remaining
45% consisted of sales of Fixed Indexed Annuities.
Fees Received for Reinsurance (a KPI)
We use this non-GAAP figure to measure the progress of our
effort to secure third-party capital to back our reinsurance
programs. Fees Received for Reinsurance sums two components:
Amortization of deferred gain on reinsurance, which is a line item
in our Consolidated Statements of Comprehensive Loss, and deferred
coinsurance ceding commission, which is a line item in our GAAP
consolidated Statement of Cash Flows.
For the fourth quarter of 2022, fees received for reinsurance
totaled $4.2 million compared with
$2.1 million in the fourth quarter of
2021. For the full year 2022, fees received for reinsurance totaled
$14.3 million compared to
$13.4 million in 2021.
General and Administrative Expenses (a non-GAAP
measure)
We monitor this figure to track our overhead. It includes salary
and benefits and other operating expenses; however, it excludes
non-cash stock-based compensation and the non-cash
mark-to-market-adjustment of our option budget allowance.
G&A expense in 2022 rose to $35.0
million from $24.6 million in
the prior year. Total expenses have increased from variable costs
associated with increased premiums written related to technology,
distribution, product fees and premium taxes along with expenses
related to state expansion and capital initiatives. Salaries and
benefits increased with the addition, repositioning and retention
of personnel to support growth and manage a tighter labor
market.
Management Expenses (a non-GAAP measure)
We use this figure to monitor the expenses of our business on a
cash basis. Importantly, we exclude from the calculation of
management expenses the index interest credited related to our
Fixed Indexed Annuities because this expense is fully hedged.
Instead, we add back to Management Expenses the period's
amortization of options previously purchased to provide this hedge.
We view this amortized cost as our true cost of funds. Management
Expenses also excludes the mark-to-market adjustment of our option
budget allowance as that is recorded as a component of other
operating expense.
Management expenses for 2022 were $55.6
million compared with $36.3
million in the prior year. Principal drivers of the increase
were higher interest credited and increases in expenses from
retained premiums along with increase in G&A noted above.
SPECIAL CAUTIONARY NOTE REGARDING FORWARD-LOOKING
STATEMENTS
Certain statements contained or incorporated by reference in
this release constitute forward-looking statements. These
statements are based on management's expectations, estimates,
projections and assumptions. In some cases, you can identify
forward-looking statements by terminology including "could," "may,"
"will," "should," "expect," "plan," "anticipate," "believe,"
"estimate," "predict," "potential," "intend," or "continue," the
negative of these terms, or other comparable terminology used in
connection with any discussion of future operating results or
financial performance. These statements are only predictions and
reflect our management's good faith present expectation of future
events and are subject to a number of important factors and
uncertainties that could cause actual results to differ materially
from those described in the forward-looking statements.
Factors that may cause our actual results to differ materially
from those contemplated or projected, forecast, estimated or
budgeted in such forward-looking statements include among others,
the following possibilities:
- our business plan, particularly including our reinsurance
strategy, may not prove to be successful;
- our reliance on third-party insurance marketing organizations
to market and sell our annuity insurance products through a network
of independent agents;
- adverse changes in our ratings obtained from independent
rating agencies;
- failure to maintain adequate reinsurance;
- our inability to expand our insurance operations outside the 24
states and District of Columbia in
which we are currently licensed;
- our annuity insurance products may not achieve significant
market acceptance;
- we may continue to experience operating losses in the
foreseeable future;
- the possible loss or retirement of one or more of our key
executive personnel;
- intense competition, including the intensification of price
competition, competitive pressures from established insurers with
greater financial resources, the entry of new competitors, and the
introduction of new products by new and existing competitors;
- adverse state and federal legislation or regulation, including
decreases in rates, limitations on premium levels, increases in
minimum capital and reserve requirements, benefit mandates and tax
treatment of insurance products;
- fluctuations in interest rates causing a reduction of
investment income or increase in interest expense and in the market
value of interest-rate sensitive investment;
- failure to obtain new customers, retain existing customers, or
reductions in policies in force by existing customers;
- higher service, administrative, or general expense due to the
need for additional advertising, marketing, administrative or
management information systems expenditures;
- changes in our liquidity due to changes in asset and liability
matching;
- possible claims relating to sales practices for insurance
products; and
- lawsuits in the ordinary course of business.
Earnings Teleconference information and Details
Midwest Holding has announced plans to host a conference call to
discuss financial and operating results for the fourth quarter and
full year 2022 on March 28, 2023, at
8:30 a.m. Eastern Time. The Company
also posted those results on the investor relations section of its
website at https://ir.midwestholding.com after the close
of the financial markets on March 27,
2023.
To register for this conference call, please go to
this link. Registrants will receive confirmation with dial-in
details.
The call may also be accessed via webcast, using this
link.
A replay of the webcast will be made available after the call on
the Investor Relations page of the Company's website
at https://ir.midwestholding.com
About Midwest Holding Inc.
Midwest Holding Inc. is a growing, technology-enabled,
services-oriented annuity platform. Midwest designs and develops
annuity products that are distributed through independent
distribution channels, to a large and growing demographic of U.S.
retirees. Midwest originates, manages and typically transfers these
annuities through reinsurance arrangements to asset managers and
other third-party investors. Midwest also provides the operational
and regulatory infrastructure and expertise to enable asset
managers and third-party investors to form and manage their own
reinsurance capital vehicles.
For more information, please
visit www.midwestholding.com
Investor contact: ir@midwestholding.com
Media inquiries: press@midwestholding.com
Consolidated Balance
Sheets (in thousands)
|
|
|
|
December 31, 2022
|
|
December 31, 2021
|
|
|
|
|
|
|
(In thousands, except
share information)
|
|
|
|
|
|
Assets
|
|
|
|
|
|
Fixed maturities,
available for sale, at fair value
(amortized cost: $1,269,735 and $679,921, respectively) (See Note
3)
|
$
|
1,214,635
|
|
$
|
683,296
|
Mortgage loans on real
estate, held for investment
|
|
227,047
|
|
|
183,203
|
Derivative instruments
(See Note 4)
|
|
15,934
|
|
|
23,022
|
Equity securities, at
fair value (cost: $10,256 in 2022 and $22,158 in 2021)
|
|
5,111
|
|
|
21,869
|
Other invested
assets
|
|
112,431
|
|
|
35,293
|
Preferred
stock
|
|
31,415
|
|
|
18,686
|
Deposits and notes
receivable
|
|
8,359
|
|
|
10,071
|
Policy loans
|
|
25
|
|
|
87
|
Total
investments
|
|
1,614,957
|
|
|
975,527
|
Cash and cash
equivalents
|
|
191,414
|
|
|
142,013
|
Deferred acquisition
costs, net
|
|
43,433
|
|
|
24,530
|
Premiums
receivable
|
|
362
|
|
|
354
|
Accrued investment
income
|
|
25,165
|
|
|
13,623
|
Reinsurance
recoverables (See Note 8)
|
|
20,190
|
|
|
38,579
|
Property and equipment,
net
|
|
1,897
|
|
|
386
|
Receivable for
securities sold
|
|
10,518
|
|
|
19,732
|
Other assets
|
|
12,495
|
|
|
5,173
|
Total
assets
|
$
|
1,920,431
|
|
$
|
1,219,917
|
Liabilities and
Stockholders' Equity
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
Benefit
reserves
|
$
|
12,945
|
|
$
|
12,941
|
Deposit-type contracts
(See Note 6)
|
|
1,743,348
|
|
|
1,075,439
|
Other policy-holder
funds
|
|
4,105
|
|
|
238
|
Notes payable (See Note
7)
|
|
25,000
|
|
|
—
|
Deferred gain on
coinsurance transactions
|
|
38,063
|
|
|
28,589
|
Payable for securities
purchased
|
|
8,872
|
|
|
5,546
|
Other
liabilities
|
|
53,721
|
|
|
11,408
|
Total
liabilities
|
|
1,886,054
|
|
|
1,134,161
|
Stockholders'
Equity:
|
|
|
|
|
|
Preferred stock, $0.001
par value; authorized 2,000,000 shares; no shares issued and
outstanding as of December 31, 2022 or
December 31, 2021
|
|
—
|
|
|
—
|
Voting common stock,
$0.001 par value; authorized 20,000,000 shares; 3,727,976
shares
issued and outstanding as of December 31, 2022 and 3,737,564 at
December 31, 2021,
respectively; non-voting common stock, $0.001 par value, 2,000,000
shares authorized;
no shares issued and
outstanding December 31, 2022 and December 31, 2021,
respectively
|
|
4
|
|
|
4
|
Additional paid-in
capital
|
|
138,482
|
|
|
138,452
|
Treasury
stock
|
|
(175)
|
|
|
(175)
|
Accumulated
deficit
|
|
(63,019)
|
|
|
(70,159)
|
Accumulated other
comprehensive (loss) income
|
|
(51,386)
|
|
|
2,634
|
Total Midwest
Holding Inc.'s stockholders' equity
|
|
23,906
|
|
|
70,756
|
Noncontrolling
interests
|
|
10,471
|
|
|
15,000
|
Total stockholders'
equity
|
|
34,377
|
|
|
85,756
|
Total liabilities
and stockholders' equity
|
$
|
1,920,431
|
|
$
|
1,219,917
|
Consolidated
Statements of Comprehensive Loss (in thousands, except per
share amounts)
|
|
|
|
|
|
Three months ended
December 31,
|
|
Year ended
December 31,
|
|
(In thousands, except
per share data)
|
|
|
2022
|
|
2021
|
|
2022
|
|
2021
|
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment income, net
of expenses
|
|
|
$
|
5,395
|
|
|
3,434
|
|
$
|
35,115
|
|
$
|
15,737
|
|
Net realized (loss)
gain on investments (See Note 3)
|
|
|
|
(203)
|
|
|
10,456
|
|
|
(14,878)
|
|
|
7,752
|
|
Amortization of
deferred gain on reinsurance transactions
|
|
|
|
1,565
|
|
|
1,312
|
|
|
4,816
|
|
|
3,022
|
|
Policy administration
fees
|
|
|
|
732
|
|
|
1
|
|
|
2,130
|
|
|
842
|
|
Service fee revenue,
net of expenses
|
|
|
|
734
|
|
|
605
|
|
|
2,366
|
|
|
2,343
|
|
Other
revenue
|
|
|
|
367
|
|
|
202
|
|
|
500
|
|
|
367
|
|
Total
revenue
|
|
|
|
8,590
|
|
|
16,009
|
|
|
30,049
|
|
|
30,063
|
|
Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
credited
|
|
|
|
(3,704)
|
|
|
5,143
|
|
|
(10,193)
|
|
|
7,012
|
|
Benefits
|
|
|
|
861
|
|
|
5
|
|
|
3,206
|
|
|
6
|
|
Amortization of
deferred acquisition costs
|
|
|
|
1,693
|
|
|
1,106
|
|
|
4,788
|
|
|
2,886
|
|
Salaries and
benefits
|
|
|
|
3,830
|
|
|
5,460
|
|
|
16,196
|
|
|
16,926
|
|
Other operating
expenses
|
|
|
|
9,401
|
|
|
8,335
|
|
|
7,661
|
|
|
15,104
|
|
Total
expenses
|
|
|
|
12,081
|
|
|
20,050
|
|
|
21,658
|
|
|
41,934
|
|
Net income (loss)
before income tax expense
|
|
|
|
(3,491)
|
|
|
(4,041)
|
|
|
8,391
|
|
|
(11,871)
|
|
Income tax expense
(See Note 9)
|
|
|
|
(3,753)
|
|
|
(2,934)
|
|
|
(7,600)
|
|
|
(4,766)
|
|
Net income (loss)
after income tax benefit (expense)
|
|
|
|
(7,244)
|
|
|
(6,975)
|
|
|
791
|
|
|
(16,637)
|
|
Less: Income
attributable to noncontrolling interest
|
|
|
|
2,496
|
|
|
—
|
|
|
(6,349)
|
|
|
—
|
|
Net income (loss)
attributable to Midwest Holding Inc.
|
|
|
|
(9,740)
|
|
|
(6,975)
|
|
|
7,140
|
|
|
(16,637)
|
|
Comprehensive income
(loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized (losses) on
investments arising during the year ended December 31, 2022 and
2021, net of offsets, net of tax ($10.4 million and $0.2 million,
respectively)
|
|
|
|
508
|
|
|
(3,843)
|
|
|
(54,975)
|
|
|
(1,422)
|
|
Less:
Reclassification adjustment for net realized losses on investments,
net of offsets
during the year ended December31, 2022 and 2021 (net of tax ($24.9
million) and $0.4
million, respectively)
|
|
|
|
1,049
|
|
|
(764)
|
|
|
955
|
|
|
(2,375)
|
|
Other comprehensive
loss
|
|
|
|
1,557
|
|
|
(4,607)
|
|
|
(54,020)
|
|
|
(3,797)
|
|
Comprehensive
loss
|
|
|
$
|
(8,183)
|
|
$
|
(11,582)
|
|
$
|
(46,880)
|
|
$
|
(20,434)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impairment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
other-than-temporary impairment
|
|
|
|
881
|
|
|
—
|
|
|
1,415
|
|
|
—
|
|
Net
other-than-temporary impairment loss recognized in net
income
|
|
|
$
|
881
|
|
|
—
|
|
|
1,415
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (Loss) per
common share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
$
|
(2.62)
|
|
$
|
(0.82)
|
|
$
|
1.91
|
|
$
|
(4.45)
|
|
Diluted
|
|
|
$
|
(2.57)
|
|
$
|
(0.82)
|
|
$
|
1.88
|
|
$
|
(4.45)
|
|
Consolidated
Statements of Cash Flows (in thousands)
|
|
|
|
|
|
|
|
|
Year ended
December 31,
|
(In
thousands)
|
|
|
|
|
|
|
2022
|
|
2021
|
Cash Flows from
Operating Activities:
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss)
attributable to Midwest Holding, Inc.
|
|
|
|
|
|
|
$
|
7,140
|
|
$
|
(16,637)
|
Adjustments to arrive
at cash provided by operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
Net premium and
discount on investments
|
|
|
|
|
|
|
|
(11,548)
|
|
|
(1,244)
|
Depreciation and
amortization
|
|
|
|
|
|
|
|
338
|
|
|
50
|
Stock
options
|
|
|
|
|
|
|
|
29
|
|
|
4,981
|
Amortization of
deferred acquisition costs
|
|
|
|
|
|
|
|
4,788
|
|
|
2,886
|
Deferred acquisition
costs capitalized
|
|
|
|
|
|
|
|
(23,857)
|
|
|
(14,018)
|
Net realized loss on
investments
|
|
|
|
|
|
|
|
14,878
|
|
|
(7,752)
|
Deferred gain on
coinsurance transactions
|
|
|
|
|
|
|
|
9,474
|
|
|
10,390
|
Changes in operating
assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
Reinsurance
recoverable
|
|
|
|
|
|
|
|
29,015
|
|
|
(6,434)
|
Interest and dividends
due and accrued
|
|
|
|
|
|
|
|
(11,542)
|
|
|
(6,816)
|
Premiums
receivable
|
|
|
|
|
|
|
|
(8)
|
|
|
(40)
|
Deposit-type
liabilities
|
|
|
|
|
|
|
|
3,431
|
|
|
24,371
|
Policy
liabilities
|
|
|
|
|
|
|
|
3,872
|
|
|
239
|
Receivable and payable
for securities
|
|
|
|
|
|
|
|
12,540
|
|
|
(14,185)
|
Other assets and
liabilities
|
|
|
|
|
|
|
|
34,612
|
|
|
(1,129)
|
Net cash provided by
(used in) operating activities
|
|
|
|
|
|
|
|
73,162
|
|
|
(25,338)
|
Cash Flows from
Investing Activities:
|
|
|
|
|
|
|
|
|
|
|
|
Fixed maturities
available for sale:
|
|
|
|
|
|
|
|
|
|
|
|
Purchases
|
|
|
|
|
|
|
|
(1,060,013)
|
|
|
(660,059)
|
Proceeds from sale or
maturity
|
|
|
|
|
|
|
|
456,615
|
|
|
356,820
|
Mortgage loans on real
estate, held for investment
|
|
|
|
|
|
|
|
|
|
|
|
Purchases
|
|
|
|
|
|
|
|
(110,381)
|
|
|
(160,714)
|
Proceeds from
sale
|
|
|
|
|
|
|
|
69,365
|
|
|
72,064
|
Derivatives
|
|
|
|
|
|
|
|
|
|
|
|
Purchases
|
|
|
|
|
|
|
|
(24,112)
|
|
|
(23,944)
|
Proceeds from
sale
|
|
|
|
|
|
|
|
3,232
|
|
|
14,578
|
Equity
securities
|
|
|
|
|
|
|
|
|
|
|
|
Purchases
|
|
|
|
|
|
|
|
—
|
|
|
(22,097)
|
Proceeds from
sale
|
|
|
|
|
|
|
|
16,986
|
|
|
—
|
Other invested
assets
|
|
|
|
|
|
|
|
|
|
|
|
Purchases
|
|
|
|
|
|
|
|
(84,734)
|
|
|
(95,529)
|
Proceeds from
sale
|
|
|
|
|
|
|
|
3,334
|
|
|
82,272
|
Purchase of restricted
common stock
|
|
|
|
|
|
|
|
(806)
|
|
|
(500)
|
Preferred
stock
|
|
|
|
|
|
|
|
|
|
|
|
Purchases
|
|
|
|
|
|
|
|
—
|
|
|
(14,926)
|
Proceeds from
sale
|
|
|
|
|
|
|
|
23,579
|
|
|
—
|
Net change in policy
loans
|
|
|
|
|
|
|
|
62
|
|
|
(41)
|
Net purchases of
property and equipment
|
|
|
|
|
|
|
|
(1,835)
|
|
|
(331)
|
Net cash used in
investing activities
|
|
|
|
|
|
|
|
(708,708)
|
|
|
(452,407)
|
Cash Flows from
Financing Activities:
|
|
|
|
|
|
|
|
|
|
|
|
Net transfer to
noncontrolling interest
|
|
|
|
|
|
|
|
(4,529)
|
|
|
15,000
|
Proceeds from term
debt
|
|
|
|
|
|
|
|
25,000
|
|
|
—
|
Capital
contribution
|
|
|
|
|
|
|
|
—
|
|
|
(121)
|
Receipts on
deposit-type contracts
|
|
|
|
|
|
|
|
716,083
|
|
|
471,646
|
Withdrawals on
deposit-type contracts
|
|
|
|
|
|
|
|
(51,607)
|
|
|
(18,446)
|
Net cash provided by
financing activities
|
|
|
|
|
|
|
|
684,947
|
|
|
468,079
|
Net increase
(decrease) in cash and cash equivalents
|
|
|
|
|
|
|
|
49,401
|
|
|
(9,666)
|
Cash and cash
equivalents:
|
|
|
|
|
|
|
|
|
|
|
|
Beginning
|
|
|
|
|
|
|
|
142,013
|
|
|
151,679
|
Ending
|
|
|
|
|
|
|
$
|
191,414
|
|
$
|
142,013
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplementary
information
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid for
taxes
|
|
|
|
|
|
|
$
|
2,870
|
|
$
|
6,450
|
Supplemental
Information – Reconciliation – Management Expenses to GAAP
Expenses
(in thousands)
|
|
|
|
Three months ended
December 31,
|
|
Year ended
December 31,
|
|
|
2022
|
|
2021
|
|
2022
|
|
2021
|
Management
Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
G&A
|
|
$
|
10,197
|
|
$
|
7,274
|
|
$
|
35,015
|
|
$
|
24,632
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Management interest
credited
|
|
|
5,217
|
|
|
2,645
|
|
|
15,811
|
|
|
8,757
|
Amortization of
deferred acquisition costs
|
|
|
1,693
|
|
|
1,106
|
|
|
4,788
|
|
|
2,886
|
Expenses related to
retained business
|
|
|
6,910
|
|
|
3,751
|
|
|
20,599
|
|
|
11,643
|
Management expenses -
total
|
|
$
|
17,107
|
|
$
|
11,025
|
|
$
|
55,614
|
|
$
|
36,275
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
December 31,
|
|
Year ended
December 31,
|
|
|
2022
|
|
2021
|
|
2022
|
|
2021
|
G&A
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries and benefits -
GAAP
|
|
$
|
3,830
|
|
$
|
5,460
|
|
$
|
16,196
|
|
$
|
16,926
|
Other operating
expenses - GAAP
|
|
|
9,401
|
|
|
8,335
|
|
|
7,661
|
|
|
15,104
|
Subtotal
|
|
|
13,231
|
|
|
13,795
|
|
|
23,857
|
|
|
32,030
|
Adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
Less: Stock-based
compensation
|
|
|
(316)
|
|
|
(2,216)
|
|
|
(29)
|
|
|
(4,981)
|
Less: Mark-to-market
option allowance
|
|
|
(2,718)
|
|
|
(4,305)
|
|
|
11,187
|
|
|
(2,417)
|
G&A
|
|
$
|
10,197
|
|
$
|
7,274
|
|
$
|
35,015
|
|
$
|
24,632
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
December 31,
|
|
Year ended
December 31,
|
|
|
2022
|
|
2021
|
|
2022
|
|
2021
|
Management Interest
Credited
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest credited -
GAAP
|
|
$
|
(3,704)
|
|
$
|
5,143
|
|
$
|
(10,193)
|
|
$
|
7,012
|
Adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
Less: FIA interest
credited - GAAP
|
|
|
6,047
|
|
|
(4,132)
|
|
|
17,171
|
|
|
(4,169)
|
Add: FIA options cost -
amortized - GAAP
|
|
|
2,874
|
|
|
1,634
|
|
|
8,833
|
|
|
5,914
|
Management interest
credited
|
|
$
|
5,217
|
|
$
|
2,645
|
|
$
|
15,811
|
|
$
|
8,757
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
December 31,
|
|
Year ended
December 31,
|
|
|
2022
|
|
2021
|
|
2022
|
|
2021
|
Reconciliation -
Management Expenses to GAAP Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
Total expenses -
GAAP
|
|
$
|
12,081
|
|
$
|
20,050
|
|
$
|
21,658
|
|
$
|
41,934
|
Adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
Less:
Benefits
|
|
|
(861)
|
|
|
(6)
|
|
|
(3,206)
|
|
|
(6)
|
Less: Stock-based
compensation
|
|
|
(316)
|
|
|
(2,216)
|
|
|
(29)
|
|
|
(4,981)
|
Less: Mark-to-market
option allowance
|
|
|
(2,718)
|
|
|
(4,305)
|
|
|
11,187
|
|
|
(2,417)
|
Less: FIA interest
credited - GAAP
|
|
|
6,047
|
|
|
(4,132)
|
|
|
17,171
|
|
|
(4,169)
|
Add: FIA options cost -
amortized - GAAP
|
|
|
2,874
|
|
|
1,634
|
|
|
8,833
|
|
|
5,914
|
Management expenses -
total
|
|
$
|
17,107
|
|
$
|
11,025
|
|
$
|
55,614
|
|
$
|
36,275
|
View original
content:https://www.prnewswire.com/news-releases/midwest-holding-inc-reports-fourth-quarter-and-full-year-2022-results-301782507.html
SOURCE Midwest Holding Inc.