GWG Holdings Announces Third Quarter Financial Results
GWG Holdings Inc. (NASDAQ: GWGH), a specialty finance company and sponsor of non-traded alternative offerings, announced financial results for the three and nine months ending September 30, 2015.
“Since launching our common stock initial public offering in September 2014, our goal has been to put into place key initiatives that lead to an exciting growth phase for the company in the development of the life insurance secondary market. These initiatives include building out an experienced leadership team, creating direct policy origination and processing capabilities, and continuing the development of our capital markets activities,” stated Jon Sabes, GWG Holdings chief executive officer.
He continued, “Like many things in life, these initiatives have proven more challenging than anticipated, taken longer than desired, and cost more than expected; however, that said, we see many reasons to be more excited and confident about our future growth prospects than ever before in the history of the company.”
Third Quarter Highlights and Recent Accomplishments
Gross revenue for the quarter ended September 30, 2015 was $8.3 million representing an increase of 61 percent versus the same period in 2014, “a result driven primarily by the unrealized gain associated with new life insurance policy purchases and a decline in the discount rate used to value the company’s portfolio of life insurance.”
Total expenses for the quarter ending September 30, 2015 were $14 million versus $10.4 million for the same period one year ago. According to GWG, “the increase was driven by increased interest expense on higher outstanding debt balances, increased sales and marketing expenses attributable to engaging and managing a rapidly growing base of financial professionals approved to sell the company’s financial products, and continued investment in the human capital and technology infrastructure necessary to accommodate the company’s growth.”
Total net loss attributable to common shareholders was $3.3 million, or $0.55 per basic and fully diluted share, for the three months ended September 30, 2015, compared to a net loss of $1.6 million, or $0.27 per basic and fully diluted share, for the same period in 2014. The weighted-average basic and fully diluted shares outstanding for the quarter ending September 30, 2015 was 5.9 million.
Total liquidity position was $76 million (cash, cash equivalents and policy benefits receivable plus amounts available on the company’s senior credit facility).
Adjusted non-GAAP income was $4.4 million, or $0.74 per basic share; and non-GAAP net asset value was $79.3 million, or $13.36 per basic share.
GWG raised $30 million via the sale of a high yield, non-correlated L bond offering, a record quarter for the company.
The company’s $100 million offering of redeemable preferred stock became effective on October 30, 2015, representing a key strategy to further strengthen the balance sheet.
Net portfolio growth was $73 million in face value of policy benefits for the quarter ended September 30, 2015.
The total expected internal rate of return performance on the portfolio, considering historical returns realized and forward return projections, was 19.05 percent at September 30, 2015.
The number of life insurance policies purchased in the company’s direct channels represented 30 percent of total purchases for the quarter compared to nil for the same period one year ago.
Trailing 12-month insurance policy benefits received was 175 percent, nearly double the amount required to pay policy premiums over the same trailing 12-month period.
“Industry developments over the past quarter – including increased investor capital as well as state legislative initiatives that inform seniors about the secondary market for life insurance – all point to the growth and confidence of this market,” said Michael Freedman, GWG Holdings president. “GWG is reframing this market by highlighting the availability of post-retirement financial solutions for financial professionals and seniors.”
Freedman also noted that “GWG has expanded its reach by obtaining new licenses in Colorado, Utah, and West Virginia, and now holds licenses in 35 states.”
GWG Holdings Inc. is a specialty finance company in the life insurance secondary market. GWG, through its subsidiaries, purchases life insurance policies from seniors who no longer want, need or can afford their policies. Since 2006, GWG has purchased more than $1.7 billion in life insurance policy benefits and paid seniors in excess of $283 million for their policies – approximately $266 million more than the surrender or lapse value offered by insurance carriers.
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