GWG Holdings, Inc. Reports Results for the Three and Nine Months Ended September 30, 2021 and Full Year Ended December 31, 2020
With Financial Filings Current, GWGH Reopens Sales of the L Bond
Company Now in Compliance with Nasdaq SEC Reporting Listing Requirements
DALLAS, Dec. 08, 2021 (GLOBE NEWSWIRE) -- GWG Holdings, Inc. (NASDAQ:GWGH), an innovative financial services firm based in Dallas, Texas that is a leader in providing unique investment solutions and, through its passive investment in The Beneficient Company Group, L.P., unique liquidity solutions and services for the owners of illiquid investments, announced its financial and operating results. The results reflect consolidated accounting and financial reporting of GWGH and The Beneficient Company Group, L.P. and its consolidated subsidiaries (collectively, Beneficient). GWGH and Beneficient are referred to collectively as the Companies.
"It is a new day for GWG Holdings," said Murray Holland, GWGH's Chairman and Chief Executive Officer. "After completing our financial filings to bring us current, and resuming our L Bond offering, we have emerged more determined than ever to fulfill our investors' needs for the products we offer and yield we deliver. It is great to be back."
Recent Corporate Developments
- On July 1, Beneficient received a conditional trust charter from the state of Kansas. Beneficient is operating as the sole pilot in the Technology Enabled Fiduciary Financial Institutions Act (TEFFI), a new Kansas state law that allows for the chartering and creation of trust banks known as TEFFIs, which will finance alternative assets nationally held in Kansas trusts and provide qualified custodial and trustee services within the state.
- With the restatement now completed and financial filings current, in the first week of December GWGH resumed sale of its L Bonds, a publicly registered, non-traded corporate bond issued by GWGH.
- GWGH disclosed a going concern and material weakness in internal controls in its recent financial filings. The going concern disclosure indicates there is substantial doubt about GWGH's ability to meet its financial obligations as they come due over the next 12 months due to GWGH's recent inability to raise capital, recurring losses from operations, and potential negative implications of the ongoing SEC non-public, fact-finding investigation. The internal controls disclosure indicated that management had determined that GWGH's internal controls were not sufficient to ensure amounts recorded and disclosed were fairly stated in accordance with GAAP. GWGH has increased the company's accounting and financial reporting resources and has expended, and will continue to expend, a substantial amount of effort and resources to remediate and improve the internal controls.
- On November 15, 2021, GWGH announced it will hold a combined 2020/2021 Annual Meeting of Stockholders on Friday, December 17, 2021, at 10:00 a.m., Central Time, at the Company's principal executive offices located at 325 North St. Paul Street, Suite 2650, Dallas, Texas 75201, which will complete the last of Nasdaq's outstanding continued listing requirements for GWGH. Stockholders of record on November 10, 2021, the record date for the 2020/2021 Annual Meeting, will be entitled to vote at the 2020/2021 Annual Meeting or any adjournments thereof.
- Also around November 15, 2021, the GWGH and Beneficient Board of Directors approved a series of transactions that resulted in Beneficient becoming an independent company and, based on GWGH's preliminary conclusions, no longer a consolidated subsidiary of GWGH. The amendments are part of an ongoing effort by management and the Board of Directors of GWGH to maximize the value of GWGH's investment in Beneficient. GWGH believes that returning control of Beneficient was a necessary step to maximize the value of its investment in Beneficient by enabling Beneficient's ability as an independent company to, among other things, have broader access to funding sources, have a broader adoption of its liquidity products and related service in its target markets as well as the ability to enter into third-party institutional product arrangements and retail marketing agreements that may have not otherwise be available, and establish an operational TEFFI. These capabilities could positively affect Beneficient's ability to implement its long-term business objectives and, as a result, increase the value of GWGH's investment in Beneficient. The deconsolidation of Beneficient was reported by GWGH in a Form 8-K filed with the SEC on December 3, 2021.
- GWGH and Beneficient also agreed to form a capital advisory and sales administration company, Innovation Capital Solutions, LLC (ICS), which is expected to be a consolidated subsidiary of GWGH led by Merriah Harkins as Chief Executive Officer. ICS will employ current GWGH national securities sales team members and related support members, providing services focused on developing and offering Depository Trust Company-eligible capital solutions, establishing third-party national custodial and clearing relationships, sales operations services, and national account product management services for both GWGH and Beneficient.
1. Financial and Operating Highlights
| Quarter to Date | Year to Date | ||||||||||||||||||||||||||||
| ($ Thousands except per share information) | 3Q21 | 3Q20 | 3Q21 | 3Q20 | FY 2020 | FY 2019 | |||||||||||||||||||||||
| Income Statement | |||||||||||||||||||||||||||||
| Revenues | $ | 33,786 | $ | 68,012 | $ | 37,259 | $ | 119,742 | $ | 124,371 | $ | 92,276 | |||||||||||||||||
| Expenses | 76,269 | 87,111 | 216,464 | 272,149 | 349,281 | 171,873 | |||||||||||||||||||||||
| Net Loss Attributable to Common | (50,578 | ) | (48,898 | ) | (169,881 | ) | (120,475 | ) | (168,545 | ) | 70,471 | ||||||||||||||||||
| Net Loss per diluted common share | (2.44 | ) | (1.60 | ) | (8.18 | ) | (3.95 | ) | (6.01 | ) | 2.06 | ||||||||||||||||||
| Balance Sheet | |||||||||||||||||||||||||||||
| Investment in life insurance policies, at fair value | 761,560 | 787,260 | 761,560 | 787,260 | 791,911 | 796,039 | |||||||||||||||||||||||
| Investments in alternative assets, at fair value | 226,138 | 221,245 | 226,138 | 221,245 | 221,894 | 342,012 | |||||||||||||||||||||||
| Total L Bonds | 1,551,912 | 1,426,623 | 1,551,912 | 1,426,623 | 1,519,006 | 1,293,530 | |||||||||||||||||||||||
| Metrics | |||||||||||||||||||||||||||||
| Capital Raised from L Bonds | — | 114,730 | 155,170 | 317,302 | 440,195 | 403,397 | |||||||||||||||||||||||
| Cash and restricted cash | 67,723 | 115,668 | 67,723 | 115,668 | 124,160 | 115,790 | |||||||||||||||||||||||
| Life Insurance Portfolio2 | 1,801,306 | 1,921,067 | 1,801,306 | 1,921,067 | 1,900,715 | 2,020,973 | |||||||||||||||||||||||
| Face Value of Matured Policies | 43,217 | 39,803 | 104,662 | 105,194 | 125,109 | 125,148 | |||||||||||||||||||||||
| TTM Benefits / Premiums3 (%) | 171.0 | 220.0 | 171.0 | 220.0 | 179.4 | 196.0 | |||||||||||||||||||||||
- Face amount of policy benefits as of the end of the period presented.
- The ratio of policy benefits realized to premiums paid on a trailing twelve-month (TTM) basis.
Third Quarter 2021 vs. 2020:
- Reported third quarter 2021 net loss of $50.6 million, compared to $48.9 million in the third quarter of 2020:
- Third quarter net loss was primarily driven by higher interest expense as result of increased average debt balances and interest rates, combined with a lower gain on life insurance policies as a result of the adjustment to the portfolio mortality multiplier and lower revenue recognized from the change in fair value of life insurance policies
- Continued to realize policy benefits from the life insurance portfolio:
- Realized $43.2 million of face amount of policy benefits from 26 life insurance policies during the third quarter 2021, compared to $39.8 million from 21 life insurance policies during the third quarter of 2020
- Mortality performance continues to perform consistently with the Actual-to-Expected Analysis, using the updated portfolio mortality multiplier established in the second quarter of 2021:
- Third quarter 2021 – $43.2 million actual vs. $36.4 million expected
- TTM policy benefits realized continues to outpace premiums paid
- Investments in alternative assets, at fair value increased $4.9 million compared to the same period of prior year
Nine Months Ended 2021 vs. 2020:
- Reported year to date 2021 net loss of $169.9 million, compared to $120.5 million in the prior year:
- The same factors impacting the quarter to date net loss also drove the net loss for the year to date period
- Continued to realize policy benefits from the life insurance portfolio:
- Realized $104.7 million of face amount of policy benefits from 74 life insurance policies during the nine months ended 2021, compared to $105.2 million from 70 life insurance policies during the prior period
- Mortality performance continues to perform consistently with the Actual-to-Expected Analysis, using the updated portfolio mortality multiplier established in the second quarter of 2021:
- Year to date 2021 – $104.7 million actual vs. $106.9 million expected
- TTM policy benefits realized continues to outpace premiums paid
- Beneficient executed 10 liquidity transactions with an aggregate net asset value of investments in alternative assets of $5.6 million.
Fiscal Year 2020 vs 2019:
- Reported 2020 net loss of $168.5 million, compared to net income of $70.5 million in fiscal year 2019:
- The results of operations for 2020 reflect the consolidation of Beneficient compared to an equity method investment in 2019; the net income for 2019 was primarily driven by a net gain of $243.0 million realized upon the consolidation of Beneficient
- Continued to realize policy benefits from the life insurance portfolio:
- Realized $125.1 million of face amount of policy benefits from 92 life insurance policies during fiscal year 2020, compared to $125.1 million from 78 life insurance policies during the prior year
- Mortality performance performed consistently with the Actual-to-Expected Analysis:
- Fiscal year 2020 – $125.1 million actual vs. $133.8 million expected
- TTM policy benefits realized continues to outpace premiums paid
- Beneficient executed nine liquidity transactions with an aggregate net asset value of investments in alternative assets of $15.1 million.
2. ExAlt Trusts' Investment in Alternative Assets
As of September 30, 2021, Beneficient's loan portfolio had exposure to 111 professionally managed alternative investment funds, comprised of 301 underlying investments, and approximately 99 percent of Beneficient's loan portfolio was collateralized by investments in private companies. Beneficient's loan portfolio diversification spans across these industry sectors and geographic regions:
| September 30, 2021 | December 31, 2020 | |||||||||||||
| Industry Sector | Value | Percent of Total | Value | Percent of Total | ||||||||||
| Software and Services | $ | 30,700 | 13.6 | % | $ | 23,310 | 10.5 | % | ||||||
| Semiconductors and Semiconductor Equipment | 29,656 | 13.1 | % | 21,271 | 9.6 | % | ||||||||
| Diversified Financials | 29,051 | 12.8 | % | 28,462 | 12.8 | % | ||||||||
| Food and Staples Retailing | 26,986 | 11.9 | % | 24,450 | 11.0 | % | ||||||||
| Telecommunication Services | 24,859 | 11.0 | % | 27,401 | 12.3 | % | ||||||||
| Utilities | 23,208 | 10.3 | % | 21,740 | 9.8 | % | ||||||||
| Not Applicable (e.g., Escrow, Earnouts)(1) | 15,524 | 6.9 | % | 18,138 | 8.2 | % | ||||||||
| Health Care Equipment and Services | 12,056 | 5.3 | % | 14,682 | 6.6 | % | ||||||||
| Other(1) | 34,098 | 15.1 | % | 42,440 | 19.2 | % | ||||||||
| Total | $ | 226,138 | 100.0 | % | $ | 221,894 | 100.0 | % | ||||||
| September 30, 2021 | December 31, 2020 | |||||||||||||
| Geography | Value | Percent of Total | Value | Percent of Total | ||||||||||
| North America | $ | 97,182 | 43.0 | % | $ | 96,056 | 43.3 | % | ||||||
| Asia | 48,421 | 21.4 | % | 42,475 | 19.1 | % | ||||||||
| Southern Europe | 30,912 | 13.7 | % | 36,229 | 16.3 | % | ||||||||
| South America | 27,248 | 12.0 | % | 24,767 | 11.2 | % | ||||||||
| Western Europe | 20,773 | 9.2 | % | 21,064 | 9.5 | % | ||||||||
| Other(2) | 1,602 | 0.7 | % | 1,303 | 0.6 | % | ||||||||
| Total | $ | 226,138 | 100.0 | % | $ | 221,894 | 100.0 | % | ||||||
_______________________________________________________________
- Industries in this category each comprise less than 5 percent as of September 30, 2021.
- Locations in this category each comprise less than 5 percent.
Assets in the collateral portfolio consist primarily of interests in alternative investment vehicles (also referred to as funds) that are managed by a group of U.S. and non-U.S. based alternative asset management firms that invest in a variety of financial markets and utilize a variety of investment strategies. The vintages of the funds in the collateral portfolio as of September 30, 2021 ranged from 1993 to 2021.
3. Life Insurance Portfolio Statistics as of September 30, 2021
Portfolio Summary:
| Total life insurance portfolio face value of policy benefits (in thousands) | $ | 1,801,306 | ||
| Average face value per policy (in thousands) | $ | 1,831 | ||
| Average face value per insured life (in thousands) | $ | 1,984 | ||
| Weighted average age of insured (years) | 83.6 | |||
| Weighted average life expectancy estimate (years) | 6.44 | |||
| Total number of policies | 984 | |||
| Number of unique lives | 908 | |||
| Demographics | 74% Male; 26% Female | |||
| Number of smokers | 36 | |||
| Largest policy as % of total portfolio face value | 0.7 | % | ||
| Average policy as % of total portfolio | 0.1 | % | ||
| Average annual premium as % of face value | 4.1 | % | ||
Distribution of Policies and Benefits by Current Age of Insured:
| Percentage of Total | |||||||||||||||||
| Min Age | Max Age | Number of Policies | Policy Benefits | Number of Policies | Policy Benefits | Weighted Average LE (Years) | |||||||||||
| 64 | 69 | 23 | $ | 22,735 | 2.3 | % | 1.2 | % | 11.4 | ||||||||
| 70 | 74 | 168 | 198,473 | 17.1 | % | 11.0 | % | 10.1 | |||||||||
| 75 | 79 | 197 | 340,040 | 20.0 | % | 18.9 | % | 9.3 | |||||||||
| 80 | 84 | 197 | 350,391 | 20.0 | % | 19.5 | % | 7.5 | |||||||||
| 85 | 89 | 210 | 489,899 | 21.3 | % | 27.2 | % | 4.8 | |||||||||
| 90 | 94 | 155 | 334,534 | 15.8 | % | 18.6 | % | 3.1 | |||||||||
| 95 | 101 | 34 | 65,234 | 3.5 | % | 3.6 | % | 2.2 | |||||||||
| Total | 984 | $ | 1,801,306 | 100.0 | % | 100.0 | % | 6.4 | |||||||||
Webcast Details
Management will host a webcast Thursday, December 9, 2021 at 11:00 a.m. EST to discuss financial and operating results. The webcast will give viewers audio and access to PowerPoint slides that illustrate points made during the presentation. To register for the webcast, go to http://get.gwgh.com/q32021webcastinvite.
After the webcast is completed, a replay of it can be accessed at http://get.gwgh.com/q32021webcast.
About GWG Holdings, Inc.
GWG Holdings, Inc. (Nasdaq: GWGH) is an innovative financial services firm based in Dallas, Texas that is a leader in providing unique investment solutions and, through its passive investment in The Beneficient Company Group, L.P., unique liquidity solutions and services for the owners of illiquid investments. The Beneficient Company Group, L.P. has exposure to a diversified and growing portfolio of alternative assets containing 111 professionally managed alternative investment funds as of September 30, 2021.
Through GWGH's subsidiary, GWG Life, LLC, GWGH also owns and manages a diverse portfolio of life insurance policies that, as of September 30, 2021, included $1.8 billion in face value of life insurance policy benefits.
For more information about GWG Holdings, email [email protected] or visit www.gwgh.com. For more information about Beneficient, email [email protected] or visit www.trustben.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 ("SEC"), including our Quarterly Report on Form 10-Q filed with the SEC on November 19, 2021, and Annual Report on Form 10-K filed with the SEC on November 5, 2021. Additional information will also be set forth in our future quarterly reports on Form 10-Q, annual reports on Form 10-K, and other filings that we make with the SEC. We do not intend, and undertake no duty, to release publicly any updates or revisions to any forward-looking statements contained herein.
Media Contact:
Dan Callahan
Director of Communication
GWG Holdings, Inc.
(612) 787-5744
[email protected]
GWG HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(dollars in thousands)
| September 30, 2021 (unaudited) | December 31, 2020 | ||||||||
| ASSETS | |||||||||
| Cash and cash equivalents | $ | 42,207 | $ | 85,249 | |||||
| Restricted cash | 25,516 | 38,911 | |||||||
| Investment in life insurance policies, at fair value | 761,560 | 791,911 | |||||||
| Life insurance policy benefits receivable, net | 33,105 | 14,334 | |||||||
| Investment in alternative assets, at fair value | 226,138 | 221,894 | |||||||
| Equity method investment | 664 | 8,582 | |||||||
| Other assets | 33,256 | 36,326 | |||||||
| Goodwill | 2,367,750 | 2,367,750 | |||||||
| TOTAL ASSETS | $ | 3,490,196 | $ | 3,564,957 | |||||
| LIABILITIES & STOCKHOLDERS' EQUITY | |||||||||
| LIABILITIES | |||||||||
| Senior credit facilities with LNV Corporation and National Founders LP | $ | 327,702 | $ | 193,730 | |||||
| L Bonds | 1,279,808 | 1,246,902 | |||||||
| Seller Trust L Bonds | 272,104 | 272,104 | |||||||
| Debt due to related parties | 77,362 | 76,260 | |||||||
| Interest and dividends payable | 24,440 | 24,080 | |||||||
| Accounts payable and accrued expenses | 30,448 | 26,505 | |||||||
| Deferred tax liability, net | 51,328 | 51,469 | |||||||
| TOTAL LIABILITIES | 2,063,192 | 1,891,050 | |||||||
| Redeemable noncontrolling interests | 1,226,020 | 1,233,093 | |||||||
| STOCKHOLDERS' EQUITY | |||||||||
| Redeemable preferred stock | |||||||||
| (par value $0.001; shares authorized 100,000; shares outstanding 41,681 and 56,855; liquidation preference of $41,925 and $57,187 as of September 30, 2021 and December 31, 2020, respectively) | 31,069 | 46,241 | |||||||
| Series 2 redeemable preferred stock | |||||||||
| (par value $0.001; shares authorized 150,000; shares outstanding 86,707 and 129,887; liquidation preference of $87,212 and $130,645 as of September 30, 2021 and December 31, 2020, respectively) | 67,410 | 110,592 | |||||||
| Common stock | |||||||||
| (par value $0.001; shares authorized 210,000,000; shares issued and outstanding, 33,097,118 and 33,094,664 as of September 30, 2021 and December 31, 2020, respectively) | 33 | 33 | |||||||
| Common stock in treasury, at cost (12,337,264 shares as of both September 30, 2021 and December 31, 2020) | (67,406 | ) | (67,406 | ) | |||||
| Additional paid-in capital | 265,812 | 274,023 | |||||||
| Accumulated deficit | (412,621 | ) | (251,111 | ) | |||||
| TOTAL GWG HOLDINGS STOCKHOLDERS' (DEFICIT) EQUITY | (115,703 | ) | 112,372 | ||||||
| Noncontrolling interests | 316,687 | 328,442 | |||||||
| TOTAL STOCKHOLDERS' EQUITY | 200,984 | 440,814 | |||||||
| TOTAL LIABILITIES & STOCKHOLDERS' EQUITY | $ | 3,490,196 | $ | 3,564,957 | |||||
GWG HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(dollars in thousands)
(unaudited)
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||
| 2021 | 2020 | 2021 | 2020 | ||||||||||||||||
| REVENUE | |||||||||||||||||||
| Gain on life insurance policies, net | $ | 15,484 | $ | 14,122 | $ | 17,923 | $ | 43,355 | |||||||||||
| Investment income, net | 17,554 | 56,705 | 21,417 | 41,590 | |||||||||||||||
| Interest income | 213 | 278 | 835 | 1,293 | |||||||||||||||
| Other income (loss) | 535 | (3,093 | ) | (2,916 | ) | 33,504 | |||||||||||||
| TOTAL REVENUE | 33,786 | 68,012 | 37,259 | 119,742 | |||||||||||||||
| EXPENSES | |||||||||||||||||||
| Interest expense | 45,096 | 40,792 | 128,605 | 113,805 | |||||||||||||||
| Employee compensation and benefits | 14,871 | 33,777 | 43,977 | 123,321 | |||||||||||||||
| Legal and professional fees | 6,650 | 7,830 | 20,832 | 21,636 | |||||||||||||||
| Other expenses | 9,652 | 4,712 | 23,050 | 13,387 | |||||||||||||||
| TOTAL EXPENSES | 76,269 | 87,111 | 216,464 | 272,149 | |||||||||||||||
| LOSS BEFORE INCOME TAXES | (42,483 | ) | (19,099 | ) | (179,205 | ) | (152,407 | ) | |||||||||||
| INCOME TAX EXPENSE (BENEFIT) | 655 | 3,618 | 173 | (14,545 | ) | ||||||||||||||
| NET LOSS BEFORE LOSS FROM EQUITY METHOD INVESTMENT | (43,138 | ) | (22,717 | ) | (179,378 | ) | (137,862 | ) | |||||||||||
| Loss from equity method investment | (4,949 | ) | (1,431 | ) | (11,898 | ) | (4,279 | ) | |||||||||||
| NET LOSS | (48,087 | ) | (24,148 | ) | (191,276 | ) | (142,141 | ) | |||||||||||
| Net (income) loss attributable to noncontrolling interests | (87 | ) | (21,181 | ) | 29,766 | 32,901 | |||||||||||||
| Less: Preferred stock dividends | 2,404 | 3,569 | 8,371 | 11,235 | |||||||||||||||
| NET LOSS ATTRIBUTABLE TO COMMON SHAREHOLDERS | $ | (50,578 | ) | $ | (48,898 | ) | $ | (169,881 | ) | $ | (120,475 | ) | |||||||
| NET LOSS PER COMMON SHARE | |||||||||||||||||||
| Basic | $ | (2.44 | ) | $ | (1.60 | ) | $ | (8.18 | ) | $ | (3.95 | ) | |||||||
| Diluted | $ | (2.44 | ) | $ | (1.60 | ) | $ | (8.18 | ) | $ | (3.95 | ) | |||||||
| WEIGHTED AVERAGE COMMON SHARES OUTSTANDING | |||||||||||||||||||
| Basic | 20,759,854 | 30,477,792 | 20,758,910 | 30,516,331 | |||||||||||||||
| Diluted | 20,759,854 | 30,477,792 | 20,758,910 | 30,516,331 | |||||||||||||||
