LINCOLN,
Neb., Nov. 13, 2023 /PRNewswire/ -- Midwest
Holding Inc. ("Midwest") (NASDAQ: MDWT), today announced financial
results for the quarter and nine months ended
September 30, 2023.
Highlights for the third quarter of 2023:
- GAAP net income for the quarter was $0.4
million compared with $7.4
million for the third quarter of 2022. GAAP earnings were
$0.10 per share (diluted) versus
$1.96 per share (diluted) for the
third quarter of 2022.
- GAAP total revenue was $16.4
million compared with revenue of $19.0 million in the third quarter of 2022,
driven by an increase in investment income from growth in invested
assets retained, higher service fees, and growing amortization of
deferred ceding commissions. The mark-to-market change in
derivatives also generated a loss in the quarter compared to a gain
in the same quarter in the prior year.
- Annuity direct written premium under statutory accounting
principles ("SAP"), a non-GAAP measure, was up 1.3% to $258.8 million for the quarter from $255.5 million in the same period of 2022. The
mix of new business in the quarter was 50% Multi-Year Guaranteed
Annuities (MYGA) and 50% Fixed Indexed Annuities (FIA).
- Ceded premiums (SAP), a non-GAAP measure, were $59.1 million in the third quarter of the current
year compared to $113.7 million in
the third quarter of the prior year. The cession rate for the
current period, or that portion of our written premium that we
reinsured, was 20% compared to 45% in the same period last
year.
- Total expenses decreased to $9.0
million from $14.3 million in
the third quarter of last year resulting from lower interest
credited impacted by the change in value of the options embedded in
our liabilities, and from a benefit related to the mark-to-market
value of the options allowance included in other operating
expenses. Other 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 remained constant with the addition, repositioning, and
retention of personnel to support growth and manage a tighter labor
market.
- Invested assets grew to $2,268.3
million at September 30, 2023
compared with $1,615.0 million at
December 31, 2022. The retained
portfolio was $1,213.0 million as of
September 30, 2023 compared to
$812.2 million at December 31, 2022. Third-party assets under
management were $531.6 million at
September 30, 2023, compared to
$501.9 million at December 31, 2022.
- On April 30, 2023, Midwest
Holding Inc. entered into an Agreement and Plan of Merger with
affiliates of Antarctica Capital, LLC, whereby an affiliate of
Antarctica will acquire Midwest in
an all-cash transaction valued at approximately $100 million. The transaction was approved by
stockholders on July 26, 2023, and
has been approved by the Vermont Department of Financial
Regulation. The merger is still subject to the approval of the
Nebraska Department of Insurance. We continue to work with
Antarctica to provide all
information requested by the Nebraska Department of Insurance
(NDOI). Upon completion of the NDOI review, a public NDOI hearing
will be required before final regulatory approval is received to
proceed with closing the merger. We still anticipate closing the
transaction shortly after the hearing and by year-end.
Highlights for the nine months ended September 30, 2023:
- GAAP net income for the nine months ended September 30, 2023 was $0.3 million compared with $16.9 million in the same period in the prior
year. GAAP earnings were $0.09 per
share (diluted) versus $4.45 per
share (diluted) in the prior year.
- GAAP total revenue for the nine months ended September 30, 2023 was $83.9 million compared with $21.5 million in the same period in the prior
year. The increase included additional investment income from
growth in invested assets retained, higher policy administration
fees, and growing amortization of deferred ceding commissions. The
mark-to-market change in derivatives also generated a gain in the
nine months compared to a loss in the same period in the prior
year.
- Annuity direct written premium under statutory accounting
principles ("SAP"), a non-GAAP measure, was up 40.6% to
$716.5 million in the first nine
months of 2023 from $509.7 million in
the same nine months of 2022, due to a focus on distribution and
pricing. The mix of new business for the nine months ended
September 30, 2023 was 58% Multi-Year
Guaranteed Annuities (MYGA) and 42% Fixed Indexed Annuities
(FIA).
- Ceded premiums (SAP), a non-GAAP measure, were $277.5 million in the first nine months of 2023
compared to $213.8 million in the
same nine months of the prior year. The cession rate for the
period, or that portion of our written premium that we reinsured,
was 39% compared to 42% in the same period last year.
- Total expenses for the first nine months of 2023 increased to
$65.3 million from $9.6 million in the first nine months of last
year resulting from interest credited as an expense (impacted by
the change in value of the options embedded in our liabilities),
compared to negative interest credited in the first nine months of
the prior year, and from a benefit related to the mark-to-market
value of the options allowance included in other operating
expenses. Other 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.
Georgette Nicholas, CEO of
Midwest noted, "Midwest is focused on executing our business
strategy and positioning the Company for further growth. We are
actively working with Antarctica
to close the merger transaction by year-end."
Q3 2023 versus Q3 2022 on a GAAP basis
Midwest reported net income of $0.4
million for the third quarter of the current year; this
compares with income of $7.4 million
in the third quarter of the prior year. On a diluted,
per-share basis, net income was $0.10
in the third quarter, compared with $1.96 reported in the third quarter of 2022.
Investment income rose in the third quarter of 2023 to
$20.8 million from $12.9 million in the same period for the prior
year. Driving the change was an increase in invested assets
as well as performance on those assets, benefiting from sourcing
investments with a higher yield.
Amortization of deferred gain on reinsurance reached
$1.4 million this quarter compared
with $1.2 million in Q3 2022.
This was due to growth in the deferred gain on co-insurance
on the balance sheet to $44.1 million
compared to $38.1 million at year
end, which reflects ceding commission received on reinsurance with
third parties.
Service fee revenue was at $2.3
million in the third quarter of 2023, up from $0.1 million in the third quarter of 2022.
Service fee revenue consists of fee revenue generated by our wholly
owned asset manager, 1505 Capital LLC, for asset management
services provided to third-party clients.
Policy administration fee revenue for the quarter was
$0.9 million, up from $0.5 million in the same period in 2022. Policy
administration fee revenue is generated by providing ancillary
services, such as policy administration, to third parties as well
as collecting policy surrender charges. The increase was correlated
with the growth in policies written and ceded to reinsurance
partners.
Our expenses were $9.0 million in
the third quarter of 2023 compared with $14.3 million in the third quarter of the prior
year. Contributing to the decrease was reduced interest
credited expense as well as mark-to-market benefit which is
included in other operating expenses. 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.
Nine Months Ended September 30,
2023 versus Nine Months Ended September 30, 2022 on a GAAP basis
Midwest reported net income of $0.3
million for the nine months ended September 30, 2023; this compares with income of
$16.9 million in the same period of
the prior year. On a diluted, per-share basis, this year's to
date net income was negative $0.09
compared with $4.45 reported at
September 30, 2022.
Investment income rose in the first nine months of 2023 to
$64.2 million from $29.7 million in the same period for the prior
year. Driving the change was an increase in invested assets
as well as performance on those assets, benefiting from sourcing
investments with a higher yield.
Amortization of deferred gain on reinsurance reached
$4.5 million for the first nine
months of 2023 compared with $3.3
million in the same period of 2022. This was due to
growth in the deferred gain on co-insurance on the balance sheet to
$44.1 million compared to
$38.1 million at year end, which
reflects ceding commission received on reinsurance with third
parties.
Service fee revenue was at $3.6
million in the first nine months of 2023, up from
$1.6 million in the same period of
2022. Service fee revenue consists of fee revenue generated by our
wholly owned asset manager, 1505 Capital LLC, for asset management
services provided to third-party clients.
Policy administration fee revenue for the first nine months of
2023 was $2.0 million versus
$1.4 million in the same period in
2022. Policy administration fee revenue is generated by providing
ancillary services, such as policy administration, to third parties
as well as collecting policy surrender charges. The increase was
correlated with the growth in policies written and ceded to
reinsurance partners.
Our expenses were $65.3 million in
the first three quarters of 2023 compared with $9.6 million in the first three quarters of the
prior year. Contributing to the increase was interest
credited expense as well as mark-to-market expense which is
included in other operating expenses. Other 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.
Key Performance Indicators and Non-GAAP Financial Measures
for the Three and Nine Months Ended September 30, 2023
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 third quarter of 2023, annuity direct written premiums
were $258.8 million compared with
$255.5 million in the third quarter
of 2022. Ceded premiums were $59.1 million in 2023's third quarter compared to
$113.7 million in the third quarter
of 2022. Of the third quarter 2023 sales of $258.8 million, 50% was in the MYGA category and
the remaining 50% consisted of sales of FIA.
For the first nine months of 2023, annuity direct written
premiums were $716.5 million compared
with $509.7 million in the same
period of 2022. Ceded premiums were $277.5 million in 2023's first nine months
compared to $213.8 million in the
first nine months of 2022. Of the 2023 year to date sales of
$716.5 million, 58% was in the MYGA
category and the remaining 42% consisted of sales of FIA.
Fees Received for Reinsurance (a KPI)
Fees received for reinsurance amounted to $2.3 million in the third quarter compared to
$4.5 million in the prior year third
quarter. Fees received for reinsurance for the nine months ending
September 30, 2023 were $10.5 million compared to $10.1 million in the same nine months of the
prior year. 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 Statements of Cash Flows.
General and Administrative ("G&A") 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 expenses in Q3 2023 have increased to $10.5 million from $9.0
million at the same point in the prior year. For the
nine months ended September 30, 2023
expenses rose to $34.6 million
compared to $24.8 million for the
nine months ended September 30,
2022.
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 FIAs 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 the third quarter of 2023 were
$23.2 million compared with
$14.9 million in the same period of
the prior year. Management expenses for the nine months ended
September 30, 2023 were $59.3 million compared to $38.5 million for the same nine months in 2022.
Principal drivers of the increase were higher interest credited and
increases in expenses from retained premiums along with the
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," "target,"
"contemplate," "project," 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.
In addition, this communication and any documents referred to in
this communication contain certain forward-looking statements
within the meaning of the federal securities laws with respect to
the proposed acquisition of Midwest Holding Inc. (the "Company") by
an affiliate of Antarctica Capital, LLC, including, but not limited
to, statements regarding the anticipated timing of the closing of
the proposed transaction. These forward-looking statements
generally are identified by the words "may," "will," "should,"
"expect," "plan," "anticipate," "believe," "estimate," "predict,"
"potential," "intend," "target," "contemplate," "project," and
similar expressions. Forward-looking statements are predictions,
projections, and other statements about future events that are
based on current expectations and assumptions and, as a result, are
subject to risks and uncertainties. Many factors could cause actual
future events to differ materially from the forward-looking
statements in this communication, including but not limited to: (i)
the risk that the proposed transaction may not be completed in a
timely manner or at all, (ii) the failure to satisfy the conditions
to the consummation of the proposed transaction, including approval
of the proposed transaction by the stockholders of the Company and
the receipt of necessary regulatory approvals, (iii) the occurrence
of any event, change or other circumstance that could give rise to
the termination of the proposed transaction, (iv) the effect of the
announcement or pendency of the proposed transaction on the
Company's business relationships, operating results, and business
generally, including the termination of any business contracts, (v)
risks that the proposed transaction disrupts current plans and
operations of the Company and potential difficulties in hiring and
retaining key personnel as a result of the proposed transaction,
(vi) risks related to diverting management's attention from the
Company's ongoing business operations, (vii) risks that any
announcements related to the proposed transaction could have
adverse effects on the Company's stock price, credit ratings, or
operating results, (viii) the outcome of any legal proceedings that
may be instituted related to the Merger Agreement or the proposed
transaction and (ix) the significant transactions costs that the
parties will incur in connection with the proposed transaction. The
risks and uncertainties may be amplified by economic, market,
business, or geopolitical conditions or competition, or changes in
such conditions, negatively affecting the Company's business,
operations, and financial performance. The foregoing list of
factors is not exhaustive. You should carefully consider the
foregoing factors and the other risks and uncertainties that affect
the Company's business as described in the "Risk Factors" section
of the Company's Annual Report on Form 10-K, Quarterly Reports on
Form 10-Q and other documents filed from time to time with the SEC.
These filings identify and address other important risks and
uncertainties that could cause actual events and results to differ
materially from those contained in the forward-looking statements.
Forward-looking statements speak only as of the date they are made.
Readers are cautioned not to put undue reliance on forward-looking
statements, and the Company assumes no obligation to, and does not
intend to, update or revise these forward-looking statements,
whether as a result of new information, future events, or
otherwise, unless required by law.
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)
|
|
|
|
September 30, 2023
|
|
December 31, 2022
|
(In thousands, except
share information)
|
|
(Unaudited)
|
|
|
|
Assets
|
|
|
|
|
|
|
Fixed maturities,
available for sale, at fair value
(amortized cost: $1,717,921 in 2023, and $1,269,735 in 2022.
Allowance for credit losses of $8,917 in 2023.) (See Note
3)
|
|
$
|
1,643,832
|
|
$
|
1,214,635
|
Mortgage loans on real
estate, held for investment (Allowance for credit losses of $1,577
in
2023.)
|
|
|
421,232
|
|
|
227,047
|
Derivative instruments
(See Note 4)
|
|
|
26,559
|
|
|
15,934
|
Equity securities, at
fair value (cost: $5,592 in 2023 and $5,592 in 2022)
|
|
|
5,112
|
|
|
5,111
|
Other invested assets
(Allowance for credit losses of $1,600 in 2023.)
|
|
|
126,777
|
|
|
112,431
|
Preferred
stock
|
|
|
33,926
|
|
|
31,415
|
Deposits and notes
receivable
|
|
|
10,774
|
|
|
8,359
|
Policy loans
|
|
|
83
|
|
|
25
|
Total
investments
|
|
|
2,268,295
|
|
|
1,614,957
|
Cash and cash
equivalents
|
|
|
197,804
|
|
|
191,414
|
Deferred acquisition
costs, net
|
|
|
69,470
|
|
|
43,433
|
Premiums
receivable
|
|
|
63
|
|
|
362
|
Accrued investment
income
|
|
|
44,694
|
|
|
25,165
|
Reinsurance
recoverables (See Note 8)
|
|
|
27,870
|
|
|
20,190
|
Property and equipment,
net
|
|
|
1,721
|
|
|
1,897
|
Receivable for
securities sold
|
|
|
-
|
|
|
10,518
|
Other assets
|
|
|
14,335
|
|
|
12,495
|
Total
assets
|
|
$
|
2,624,252
|
|
$
|
1,920,431
|
Liabilities and
Stockholders' Equity
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
Benefit
reserves
|
|
$
|
11,532
|
|
$
|
12,945
|
Deposit-type contracts
(See Note 6)
|
|
|
2,453,282
|
|
|
1,743,348
|
Other policy-holder
funds
|
|
|
4,530
|
|
|
4,105
|
Notes payable (See Note
7)
|
|
|
25,000
|
|
|
25,000
|
Deferred gain on
coinsurance transactions
|
|
|
44,140
|
|
|
38,063
|
Payable for securities
purchased
|
|
|
27,029
|
|
|
8,872
|
Other
liabilities
|
|
|
36,786
|
|
|
53,721
|
Total
liabilities
|
|
|
2,602,299
|
|
|
1,886,054
|
Stockholders'
Equity:
|
|
|
|
|
|
|
Preferred stock, $0.001
par value; authorized 2,000,000 shares; no shares issued and
outstanding as of September 30, 2023 or
December 31, 2022
|
|
|
—
|
|
|
—
|
Voting common stock,
$0.001 par value; authorized 20,000,000 shares; 3,744,645
shares
issued and outstanding as of September 30, 2023, and 3,727,976 as
of December 31, 2022,
respectively; non-voting common stock, $0.001 par value, 2,000,000
shares authorized; no
shares issued and outstanding September 30, 2023 and December 31,
2022, respectively
|
|
|
4
|
|
|
4
|
Additional paid-in
capital
|
|
|
138,122
|
|
|
138,482
|
Treasury
stock
|
|
|
(175)
|
|
|
(175)
|
Accumulated
deficit
|
|
|
(67,361)
|
|
|
(63,019)
|
Accumulated other
comprehensive loss
|
|
|
(66,886)
|
|
|
(51,386)
|
Total Midwest
Holding Inc.'s stockholders' equity
|
|
|
3,704
|
|
|
23,906
|
Noncontrolling
interests
|
|
|
18,249
|
|
|
10,471
|
Total stockholders'
equity
|
|
|
21,953
|
|
|
34,377
|
Total liabilities
and stockholders' equity
|
|
$
|
2,624,252
|
|
$
|
1,920,431
|
|
|
|
Consolidated
Statements of Comprehensive Loss (in thousands, except per
share amounts)
|
|
(Unaudited)
|
|
|
|
Three months ended
September 30,
|
|
Nine months ended
September 30,
|
(In thousands, except
per share data)
|
|
2023
|
|
2022
|
|
2023
|
|
2022
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment income, net
of expenses
|
|
$
|
20,796
|
|
|
12,938
|
|
$
|
64,237
|
|
$
|
29,721
|
Net realized (loss)
gain on investments
|
|
|
(8,946)
|
|
|
4,135
|
|
|
9,427
|
|
|
(14,676)
|
Amortization of
deferred gain on reinsurance
transactions
|
|
|
1,392
|
|
|
1,239
|
|
|
4,463
|
|
|
3,251
|
Policy administration
fees
|
|
|
874
|
|
|
536
|
|
|
1,992
|
|
|
1,398
|
Service fee revenue,
net of expenses
|
|
|
2,298
|
|
|
118
|
|
|
3,582
|
|
|
1,632
|
Other
revenue
|
|
|
5
|
|
|
33
|
|
|
235
|
|
|
132
|
Total
revenue
|
|
|
16,419
|
|
|
18,999
|
|
|
83,936
|
|
|
21,458
|
Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
credited
|
|
|
2,524
|
|
|
5,682
|
|
|
22,803
|
|
|
(6,489)
|
Benefits
|
|
|
(526)
|
|
|
1,351
|
|
|
1,638
|
|
|
2,345
|
Amortization of
deferred acquisition costs
|
|
|
2,215
|
|
|
1,193
|
|
|
5,832
|
|
|
3,095
|
Salaries and
benefits
|
|
|
3,805
|
|
|
3,751
|
|
|
15,124
|
|
|
12,366
|
Other operating
expenses
|
|
|
956
|
|
|
2,317
|
|
|
19,869
|
|
|
(1,744)
|
Total
expenses
|
|
|
8,974
|
|
|
14,294
|
|
|
65,266
|
|
|
9,573
|
Net income before
income tax expense
|
|
|
7,445
|
|
|
4,705
|
|
|
18,670
|
|
|
11,885
|
Income tax expense
(See Note 9)
|
|
|
(4,606)
|
|
|
(1,250)
|
|
|
(10,482)
|
|
|
(3,848)
|
Net income after
income tax expense
|
|
|
2,839
|
|
|
3,455
|
|
|
8,188
|
|
|
8,037
|
Less: Income (loss)
attributable to
noncontrolling interest
|
|
|
2,454
|
|
|
(3,976)
|
|
|
7,856
|
|
|
(8,846)
|
Net income
attributable to Midwest
Holding Inc.
|
|
|
385
|
|
|
7,431
|
|
|
332
|
|
|
16,883
|
Comprehensive
loss:
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized losses on investments arising
during the three months ended September
2023 and 2022, net of offsets, net of tax
($2.1 million and $5.4 million,
respectively);
Unrealized losses on investments arising
during the nine months ended September
2023 and 2022, net of offsets, net of tax
($3.4 million and $10.4 million,
respectively)
|
|
|
(9,937)
|
|
|
(26,114)
|
|
|
(16,167)
|
|
|
(55,483)
|
Less:
Reclassification adjustment for net
realized gains (losses) on investments, net
of offsets during the three months ended
September 2023 and 2022 (net of tax less
than $(0.1) million and $(19.9) million
respectively);
Reclassification adjustment for net realized
gains (losses) on investments, net of offsets
during the nine months ended September
2023 and 2022 (net of tax $(0.2) million
and $(24.9) million respectively)
|
|
|
484
|
|
|
(952)
|
|
|
667
|
|
|
(94)
|
Other comprehensive
loss
|
|
|
(9,453)
|
|
|
(27,066)
|
|
|
(15,500)
|
|
|
(55,577)
|
Comprehensive
loss:
|
|
$
|
(9,068)
|
|
$
|
(19,635)
|
|
$
|
(15,168)
|
|
$
|
(38,694)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impairment
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
other-than-temporary impairment
|
|
|
-
|
|
|
346
|
|
|
-
|
|
|
880
|
Net
other-than-temporary impairment loss
recognized in net income
|
|
$
|
-
|
|
|
346
|
|
$
|
-
|
|
|
880
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income per common
share
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.10
|
|
$
|
1.99
|
|
$
|
0.09
|
|
$
|
4.52
|
Diluted
|
|
$
|
0.10
|
|
$
|
1.96
|
|
$
|
0.09
|
|
$
|
4.45
|
|
|
|
Consolidated
Statements of Cash Flows
(Unaudited)
|
|
|
|
Nine months ended
September 30,
|
(In
thousands)
|
|
2023
|
|
2022
|
Cash flows from
operating activities:
|
|
|
|
|
|
|
Income attributable to
Midwest Holding Inc.
|
|
$
|
332
|
|
$
|
16,883
|
Adjustments to arrive
at cash provided by operating activities:
|
|
|
|
|
|
|
Net premium and
discount on investments
|
|
|
(16,055)
|
|
|
(6,982)
|
Depreciation and
amortization
|
|
|
281
|
|
|
229
|
Stock
options
|
|
|
691
|
|
|
(287)
|
Amortization of
deferred acquisition costs
|
|
|
5,832
|
|
|
3,095
|
Deferred acquisition
costs capitalized
|
|
|
(32,425)
|
|
|
(18,285)
|
Net realized (loss)
gain on investments
|
|
|
(5,950)
|
|
|
14,676
|
Allowance for Credit
Losses
|
|
|
4,751
|
|
|
-
|
Deferred gain on
coinsurance transactions
|
|
|
6,077
|
|
|
6,875
|
Changes in operating
assets and liabilities:
|
|
|
|
|
|
|
Reinsurance
recoverable
|
|
|
(3,679)
|
|
|
33,698
|
Interest and dividends
due and accrued
|
|
|
(19,530)
|
|
|
(10,292)
|
Premiums
receivable
|
|
|
299
|
|
|
(10)
|
Deposit-type
liabilities
|
|
|
92,184
|
|
|
(17,245)
|
Policy
liabilities
|
|
|
(989)
|
|
|
2,740
|
Receivable and payable
for securities
|
|
|
28,673
|
|
|
22,100
|
Other assets and
liabilities
|
|
|
(21,186)
|
|
|
17,697
|
Net cash provided by
operating activities
|
|
|
39,306
|
|
|
64,892
|
Cash flows from
investing activities:
|
|
|
|
|
|
|
Fixed maturities
available for sale:
|
|
|
|
|
|
|
Purchases
|
|
|
(576,960)
|
|
|
(692,348)
|
Proceeds from sale or
maturity
|
|
|
147,965
|
|
|
296,179
|
Mortgage loans on real
estate, held for investment
|
|
|
|
|
|
|
Purchases
|
|
|
(306,010)
|
|
|
(75,985)
|
Proceeds from
sale
|
|
|
110,785
|
|
|
58,033
|
Derivatives
|
|
|
|
|
|
|
Purchases
|
|
|
(22,249)
|
|
|
(22,981)
|
Proceeds from
sale
|
|
|
12,730
|
|
|
3,232
|
Equity
securities
|
|
|
|
|
|
|
Purchases
|
|
|
(1)
|
|
|
-
|
Proceeds from
sale
|
|
|
-
|
|
|
12,772
|
Other invested
assets
|
|
|
|
|
|
|
Purchases
|
|
|
(88,825)
|
|
|
(48,302)
|
Proceeds from
sale
|
|
|
69,639
|
|
|
3,334
|
Purchase of restricted
common stock
|
|
|
(1,700)
|
|
|
(1)
|
Preferred
stock
|
|
|
|
|
|
|
Purchases
|
|
|
(2,511)
|
|
|
(2,893)
|
Net change in policy
loans
|
|
|
(58)
|
|
|
66
|
Net purchases of
property and equipment
|
|
|
(102)
|
|
|
(1,830)
|
Net cash used in
investing activities
|
|
|
(657,297)
|
|
|
(470,724)
|
Cash flows from
financing activities:
|
|
|
|
|
|
|
Net transfer to
noncontrolling interest
|
|
|
7,682
|
|
|
(6,906)
|
Dividends
Paid
|
|
|
(1,051)
|
|
|
-
|
Receipts on
deposit-type contracts
|
|
|
716,540
|
|
|
509,660
|
Withdrawals on
deposit-type contracts
|
|
|
(98,790)
|
|
|
(30,271)
|
Net cash provided by
financing activities
|
|
|
624,381
|
|
|
472,483
|
Net increase in cash
and cash equivalents
|
|
|
6,390
|
|
|
66,651
|
Cash and cash
equivalents:
|
|
|
|
|
|
|
Beginning
|
|
|
191,414
|
|
|
142,013
|
Ending
|
|
$
|
197,804
|
|
$
|
208,664
|
|
|
|
|
|
|
|
Supplementary
information
|
|
|
|
|
|
|
Cash paid for
taxes
|
|
$
|
9,682
|
|
$
|
2,870
|
|
|
|
Supplemental
Information – Reconciliation – Management Expenses to
GAAP Expenses
(in thousands)
|
|
|
|
Three months
ended
September 30,
|
|
Nine months
ended
September 30,
|
|
|
2023
|
|
2022
|
|
2023
|
|
2022
|
Management
Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
G&A
|
|
$
|
10,522
|
|
$
|
8,962
|
|
$
|
34,553
|
|
$
|
24,814
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Management interest
credited
|
|
|
10,461
|
|
|
4,752
|
|
|
18,888
|
|
|
10,594
|
Amortization of
deferred acquisition costs
|
|
|
2,215
|
|
|
1,193
|
|
|
5,832
|
|
|
3,095
|
Expenses related to
retained business
|
|
|
12,676
|
|
|
5,945
|
|
|
24,720
|
|
|
13,689
|
Management expenses -
total
|
|
$
|
23,198
|
|
$
|
14,907
|
|
$
|
59,273
|
|
$
|
38,503
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months
ended
September 30,
|
|
Nine months
ended
September 30,
|
|
|
2023
|
|
2022
|
|
2023
|
|
2022
|
Management
G&A
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries and benefits -
GAAP
|
|
$
|
3,805
|
|
$
|
3,751
|
|
$
|
15,124
|
|
$
|
12,366
|
Other operating
expenses - GAAP
|
|
|
956
|
|
|
2,317
|
|
|
19,869
|
|
|
(1,744)
|
Subtotal
|
|
|
4,761
|
|
|
6,068
|
|
|
34,993
|
|
|
10,622
|
Adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
Less: Stock-based
compensation
|
|
|
(88)
|
|
|
670
|
|
|
(691)
|
|
|
287
|
Less: Mark-to-market
option allowance
|
|
|
5,849
|
|
|
2,224
|
|
|
251
|
|
|
13,905
|
Management
G&A
|
|
$
|
10,522
|
|
$
|
8,962
|
|
$
|
34,553
|
|
$
|
24,814
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months
ended
September 30,
|
|
Nine months
ended
September 30,
|
|
|
2023
|
|
2022
|
|
2023
|
|
2022
|
Management Interest
Credited
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest credited -
GAAP
|
|
$
|
2,524
|
|
$
|
5,682
|
|
$
|
22,803
|
|
$
|
(6,489)
|
Adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
Less: FIA interest
credited - GAAP
|
|
|
4,252
|
|
|
(3,041)
|
|
|
(10,689)
|
|
|
11,124
|
Add: FIA options cost -
amortized - GAAP
|
|
|
3,685
|
|
|
2,111
|
|
|
6,774
|
|
|
5,959
|
Management interest
credited
|
|
$
|
10,461
|
|
$
|
4,752
|
|
$
|
18,888
|
|
$
|
10,594
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months
ended
September 30,
|
|
Nine months
ended
September 30,
|
|
|
2023
|
|
2022
|
|
2023
|
|
2022
|
Reconciliation -
Management Expenses to GAAP Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
Total expenses -
GAAP
|
|
$
|
8,974
|
|
$
|
14,294
|
|
$
|
65,266
|
|
$
|
9,573
|
Adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
Less:
Benefits
|
|
|
526
|
|
|
(1,351)
|
|
|
(1,638)
|
|
|
(2,345)
|
Less: Stock-based
compensation
|
|
|
(88)
|
|
|
670
|
|
|
(691)
|
|
|
287
|
Less: Mark-to-market
option allowance
|
|
|
5,849
|
|
|
2,224
|
|
|
251
|
|
|
13,905
|
Less: FIA interest
credited - GAAP
|
|
|
4,252
|
|
|
(3,041)
|
|
|
(10,689)
|
|
|
11,124
|
Add: FIA options cost -
amortized - GAAP
|
|
|
3,685
|
|
|
2,111
|
|
|
6,774
|
|
|
5,959
|
Management expenses -
total
|
|
$
|
23,198
|
|
$
|
14,907
|
|
$
|
59,273
|
|
$
|
38,503
|
View original
content:https://www.prnewswire.com/news-releases/midwest-holding-inc-reports-third-quarter-2023-results-301986426.html
SOURCE Midwest Holding Inc.