GWG Holdings, Inc. Reports Results for the Three and Nine Months Ended September 30, 2021 and Full Year Ended December 31, 2020

Mittwoch, 08. Dezember 2021 15:00

      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 
  1. Face amount of policy benefits as of the end of the period presented.
  2. 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%

_______________________________________________________________

  1. Industries in this category each comprise less than 5 percent as of September 30, 2021.
  2. 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 info@gwgh.com or visit www.gwgh.com. For more information about Beneficient, email askben@beneficient.com 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
dcallahan@gwgh.com


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 cash25,516   38,911  
Investment in life insurance policies, at fair value761,560   791,911  
Life insurance policy benefits receivable, net33,105   14,334  
Investment in alternative assets, at fair value226,138   221,894  
Equity method investment664   8,582  
Other assets33,256   36,326  
Goodwill2,367,750   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 Bonds1,279,808   1,246,902  
Seller Trust L Bonds272,104   272,104  
Debt due to related parties77,362   76,260  
Interest and dividends payable24,440   24,080  
Accounts payable and accrued expenses30,448   26,505  
Deferred tax liability, net51,328   51,469  
TOTAL LIABILITIES2,063,192   1,891,050  
    
Redeemable noncontrolling interests1,226,020   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 capital265,812   274,023  
Accumulated deficit(412,621)  (251,111) 
TOTAL GWG HOLDINGS STOCKHOLDERS’ (DEFICIT) EQUITY(115,703)  112,372  
Noncontrolling interests316,687   328,442  
TOTAL STOCKHOLDERS’ EQUITY200,984   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   $43,355  
Investment income, net17,554   56,705   21,417   41,590  
Interest income213   278   835   1,293  
Other income (loss)535   (3,093)  (2,916)  33,504  
TOTAL REVENUE33,786   68,012   37,259   119,742  
EXPENSES       
Interest expense45,096   40,792   128,605   113,805  
Employee compensation and benefits14,871   33,777   43,977   123,321  
Legal and professional fees6,650   7,830   20,832   21,636  
Other expenses9,652   4,712   23,050   13,387  
TOTAL EXPENSES76,269   87,111   216,464   272,149  
LOSS BEFORE INCOME TAXES(42,483)  (19,099)  (179,205)  (152,407) 
INCOME TAX EXPENSE (BENEFIT)655   3,618   173   (14,545) 
NET LOSS BEFORE LOSS FROM EQUITY METHOD INVESTMENT(43,138)  (22,717)  (179,378)  (137,862) 
Loss from equity method investment(4,949)  (1,431)  (11,898)  (4,279) 
NET LOSS(48,087)  (24,148)  (191,276)  (142,141) 
Net (income) loss attributable to noncontrolling interests(87)  (21,181)  29,766   32,901  
Less: Preferred stock dividends2,404   3,569   8,371   11,235  
NET LOSS ATTRIBUTABLE TO COMMON SHAREHOLDERS$(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       
Basic20,759,854   30,477,792   20,758,910   30,516,331  
Diluted20,759,854   30,477,792   20,758,910   30,516,331  

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