U.S. Markets closed
  • S&P 500

    4,482.73
    -50.03 (-1.10%)
     
  • Dow 30

    34,715.39
    -313.21 (-0.89%)
     
  • Nasdaq

    14,154.02
    -186.28 (-1.30%)
     
  • Russell 2000

    2,024.04
    -38.74 (-1.88%)
     
  • Crude Oil

    86.29
    -0.61 (-0.70%)
     
  • Gold

    1,839.50
    -3.10 (-0.17%)
     
  • Silver

    24.42
    -0.30 (-1.20%)
     
  • EUR/USD

    1.1307
    -0.0010 (-0.0905%)
     
  • 10-Yr Bond

    1.8330
    +0.0060 (+0.33%)
     
  • Vix

    25.59
    +1.74 (+7.30%)
     
  • GBP/USD

    1.3588
    -0.0013 (-0.0924%)
     
  • USD/JPY

    113.8580
    -0.2420 (-0.2121%)
     
  • BTC-USD

    41,037.46
    -789.03 (-1.89%)
     
  • CMC Crypto 200

    969.07
    -26.19 (-2.63%)
     
  • FTSE 100

    7,585.01
    -4.65 (-0.06%)
     
  • Nikkei 225

    27,208.58
    -564.32 (-2.03%)
     

GWG Holdings, Inc. Reports Results for the Second Quarter Ended June 30, 2019

  • Oops!
    Something went wrong.
    Please try again later.
In this article:
  • Oops!
    Something went wrong.
    Please try again later.
  • GWGH

MINNEAPOLIS, Sept. 03, 2019 (GLOBE NEWSWIRE) -- GWG Holdings, Inc. (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

Portfolio
Face Amount ($)

12-Month
Trailing
Benefits
Realized
($)

12-Month
Trailing
Premiums
Paid ($)

12-Month
Trailing
Benefits/Premium
Coverage
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 Callahan
Director of Communication
GWG Holdings, Inc.
(612) 746-1935
dcallahan@gwgh.com


GWG HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED 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 SUBSIDIARIES
CONSOLIDATED 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