LINCOLN,
Neb., Nov.14,
2022 /PRNewswire/ -- Midwest Holding Inc. ("Midwest")
(NASDAQ: MDWT), today announced financial results for the third
quarter of 2022.
Third Quarter 2022 Highlights:
- GAAP net income was $7.4 million
compared to a $(3.1) million GAAP net
loss incurred in the third quarter of 2021. GAAP
earnings were $1.96 per share
(diluted) versus the $(0.82)
per-share loss in Q3 2021.
- GAAP total revenue was $19.0
million compared to total revenue of $5.8 million in the third quarter of 2021. Total
revenue was increased by net investment income of $12.9 million compared to $6.2 million in third quarter of 2021, as
invested assets grew to $1.4 billion
as of September 30, 2022, compared
with $942.8 million as of
September 30, 2021. The increase in
investment income was offset by a decline in the market value of
derivatives.
- Annuity direct written premium under statutory accounting
principles ("SAP"), a non-GAAP measure, was $255.5 million, up 63.8% compared to $156.0 million in second quarter of 2022 and up
from $117.9 million in 2021's third
quarter. The mix of our new business was 64.6% Multi-Year
Guaranteed Annuities (MYGA) and 35.4% Fixed Indexed Annuities
(FIA).
- Ceded premiums (SAP) were $113.7
million for the quarter compared with $60.1 million in the third quarter of the prior
year. The cession rate for the quarter, or that portion
of our written premiums that we reinsured, was 44.5% compared with
51% for the same period of 2021.
- A new reinsurance arrangement was executed effective at the end
of the third quarter which provided an additional 10-15% of
capacity for the MYGA product.
- Total expenses benefited from negative interest credited due to
the fall in value of the options embedded in our liabilities and
the gain on mark-to-market value of the options allowance
classified in other operating expenses. Overall, salaries and
benefits were down while other operating expenses, excluding the
gain on the mark-to-market of the options allowance, were up from
continuing to build foundational capabilities to support potential
growth in the business along with costs that are variable with
increased premiums written related to technology support,
distribution, product design and premium taxes.
Georgette Nicholas, CEO of
Midwest noted, "We had another quarter of strong results from the
actions we have taken this year to position the Company for
continued growth. We benefited from strong market trends and
a focus on distribution, pricing and products achieving an increase
in premiums written in the third quarter. We are benefiting
from movements in interest rates, as consumers seek stable returns,
and from the performance of our investment portfolio. We also
executed a new reinsurance arrangement effective at the end of the
third quarter to provide additional capital support on the MYGA
product given the market demand. Overall, the third quarter trends
position us for a strong finish for the year."
Ms. Nicholas concluded: "We have positioned the Company well to
execute on the opportunities before us, which are substantial, and
to build on the value of our platform. The focus of the team
continues to be on the key drivers of growth and profitability:
Deepening distribution relationships, state expansion to support
sales growth, reinsurance, investment management, and operational
readiness and efficiency. With these five keys to our strategy, we
will deliver on our commitment to shareholders to produce strong
growth paired with a high return on capital."
Q3 2022 versus Q3 2021 on a GAAP basis
Midwest reported GAAP net income of $7.4
million in the third quarter of 2022 compared to a
$(3.1) million GAAP net loss
incurred in the third quarter of 2021. On a diluted, per-share
basis, this year's quarterly net income was $1.96 compared with the $(0.82) per-share loss reported in the third
quarter of 2021.
Investment income in 2022's third quarter was $12.9 million compared with $6.2 million in the prior- year's third
quarter. Driving the change was an increase in invested
assets as well as performance on those assets, benefiting from core
capabilities developed around sourcing assets with a higher yield –
generating approximately a 5.5% return on the investment
portfolio.
Amortization of deferred gain on reinsurance reached
$1.2 million in the third quarter of
2022 compared with $662,000 in the
third quarter of 2021 primarily due to growth in the deferred gain
on co-insurance on our balance sheet, which reflects ceding
commissions received on reinsurance of business to third
parties.
Service fee revenue was $118,000
versus $628,000 in the prior year
third quarter. Service fee revenue consists of fee
revenue generated for our asset-management services provided to
third-party clients. Assets under management for third parties was
$494.5 million on September 30, 2022, compared to $471.1 million on June 30,
2022.
Other revenue finished at $569,000
compared with $400,000 in the
prior-year quarter. Other revenue consists primarily of
revenue we generate by providing ancillary services, such as policy
administration, to third parties and policy surrender
charges.
Our total expenses on a GAAP basis were $14.3 million versus $9.2
million in the prior year third quarter. Interest
Credited was up during the quarter due to an increase in the
embedded derivatives of $8.8 million
along with interest earned at $2.6
million. This was offset by the mark-to-market
adjustment of $(5.8) million.
Salaries and benefits were $3.7
million in Q3 2022 compared to $4.0
million in Q3 2021 as we continue to seek operational
improvement and work on technology initiatives.
Guidance
We continue to see intense competition in the fixed annuity
market around pricing and new competitors. We have taken
actions to maintain a competitive position and have seen positive
results from these actions and improved sales momentum in the third
quarter. With the positive market trends and the premium
written so far, we will have a strong finish for the year.
State expansion efforts remain a key priority. We have active
applications in process and will provide updates as they
progress.
Given these dynamics, we are confident in anticipated premiums
written being in the range of $700
million to $750 million (SAP)
for the year. We expect the mix in product sales to be
60% towards MYGA this year, given increasing interest rates and
market volatility and 40% FIA. We would expect that to move back
towards 75% FIA and 25% MYGA in future years.
Given the close of an additional reinsurance arrangement at the
end of the third quarter and the current margins being generated on
retained business, we now anticipate ceding approximately 40% of
new business overall for the year. The goal will be to cede, on
average, approximately 70-90% of our premium in a year to generate
ceded commission fees and manage capital but given the strong
investment performance retaining more at this time drives more
value for the business. Demand from our existing reinsurance
partners is strong and we have capacity in place to cover
anticipated written premium through them with the potential to grow
along with additional potential reinsurance transactions in the
pipeline.
Overall, we have made progress on managing costs and bringing
them in line as we have transitioned through the year. Given
the increase in premiums written expected for the year and the
impact that will have on premium taxes, technology support and
product fees, we now expect general and administrative expenses on
a management basis, a non-GAAP measure, to be within approximately
$31-32 million for the full year
2022.
Q3 2022 Key Performance Indicators and Non-GAAP Financial
Measures
In addition to GAAP measures, Midwest's management utilizes a
series of key performance indicators (KPIs) 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 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 2022, annuity direct written premiums
were $255.5 million compared with
$156.0 million at second quarter of
2022 and up from $117.9 million in
the third quarter of 2021. Ceded premiums were $113.7 million in third quarter of 2022 compared
to $59.9 million in 2022's second
quarter, whereas ceded premiums were $60.1
million in the third quarter of 2021. Of the third
quarter 2022 sales, approximately 64.6% was in the MYGA category
and the remaining 35.4% consisted of sales of FIAs.
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Three months ended
September 30,
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Nine months ended
September 30,
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(In
thousands)
|
2022
|
|
2021
|
|
2022
|
|
2021
|
Annuity Premiums
(SAP)
|
|
|
|
|
|
|
|
|
|
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|
Annuity direct written
premiums
|
$
|
255,515
|
|
$
|
117,926
|
|
$
|
509,660
|
|
$
|
367,446
|
Ceded
premiums
|
|
(113,738)
|
|
|
(60,062)
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|
|
(213,761)
|
|
|
(193,632)
|
Net premiums
retained
|
$
|
141,777
|
|
$
|
57,864
|
|
$
|
295,899
|
|
$
|
173,814
|
Fees Received for Reinsurance (a KPI)
We use this non-GAAP figure to measure our efforts 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 Income (Loss), and
deferred coinsurance ceding commission, which is a line item in our
Consolidated Statements of Cash Flows.
For the third quarter of 2022, fees received for reinsurance
totaled $4.5 million compared with
$3.6 million in the third quarter of
2021.
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Three months ended
September 30,
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Nine months ended
September 30,
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(In
thousands)
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|
2022
|
|
2021
|
|
2022
|
|
2021
|
Fees received for
reinsurance
|
|
|
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|
|
|
|
|
|
|
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|
Fees received for
reinsurance - total
|
|
$
|
4,500
|
|
$
|
3,589
|
|
$
|
10,126
|
|
$
|
11,312
|
General and Administrative 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 expense in the third quarter of 2022 was $9.0 million, up from $7.0
million at second quarter 2022 and compared with
$6.2 million in the prior year third
quarter. Overall, salaries and benefits were
$3.8 million (down from $4.0 million) while other operating expenses,
excluding the gain on the mark-to-market of the options allowance,
were up from building foundational capabilities to support
potential growth in the business along with costs that are variable
with increased premiums written related to technology support,
distribution, product design and premium taxes.
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Three months ended
September 30,
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Nine months ended
September 30,
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|
|
2022
|
|
2021
|
|
2022
|
|
2021
|
G&A
|
|
|
|
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|
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|
|
|
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Salaries and benefits -
GAAP
|
|
$
|
3,751
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|
$
|
4,025
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|
$
|
12,366
|
|
$
|
11,466
|
Other operating
expenses - GAAP
|
|
|
2,317
|
|
|
4,124
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|
|
(1,744)
|
|
|
6,769
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Subtotal
|
|
|
6,068
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|
|
8,149
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|
10,622
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|
|
18,235
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Adjustments:
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|
|
|
|
|
|
|
|
|
|
|
|
Less: Stock-based
compensation
|
|
|
670
|
|
|
(996)
|
|
|
287
|
|
|
(2,765)
|
Less: Mark-to-market
option allowance
|
|
|
2,224
|
|
|
(941)
|
|
|
13,905
|
|
|
1,887
|
G&A
|
|
$
|
8,962
|
|
$
|
6,212
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|
$
|
24,814
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|
$
|
17,357
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Management Expenses (a non-GAAP measure)
We use this metric 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 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.
Management Expenses and non-cash stock-based
compensation
For the three months ended September 30,
2022, the sum of salaries and benefits and other operating
expenses totaled $6.1 million
compared to $8.1 million for the
three months ended September 30,
2021. For the three months ended September 30, 2022, as disclosed above, included
in these expenses is mainly salaries, benefits, and other operating
expenses, along with a benefit of $2.2
million of non-cash mark-to-market option allowance of our
derivative option allowance, which we exclude in our management
G&A.
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Three months ended
September 30,
|
|
Nine months ended
September 30,
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|
|
2022
|
|
2021
|
|
2022
|
|
2021
|
Management
Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
G&A
|
|
$
|
8,962
|
|
$
|
6,212
|
|
$
|
24,814
|
|
$
|
17,357
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Management interest
credited
|
|
|
4,752
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|
|
3,230
|
|
|
10,594
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|
|
6,110
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Amortization of
deferred acquisition costs
|
|
|
1,193
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|
|
753
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|
|
3,095
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|
|
1,780
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Expenses related to
retained business
|
|
|
5,945
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|
|
3,983
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|
|
13,689
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|
|
7,890
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Management expenses -
total
|
|
$
|
14,907
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|
$
|
10,195
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|
$
|
38,503
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|
$
|
25,247
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|
|
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|
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|
|
Three months ended
September 30,
|
|
Nine months ended
September 30,
|
|
|
2022
|
|
2021
|
|
2022
|
|
2021
|
G&A
|
|
|
|
|
|
|
|
|
|
|
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Salaries and benefits -
GAAP
|
|
$
|
3,751
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|
$
|
4,025
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|
$
|
12,366
|
|
$
|
11,466
|
Other operating
expenses - GAAP
|
|
|
2,317
|
|
|
4,124
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|
(1,744)
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|
6,769
|
Subtotal
|
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|
6,068
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8,149
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10,622
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|
18,235
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Adjustments:
|
|
|
|
|
|
|
|
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|
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Less: Stock-based
compensation
|
|
|
670
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|
(996)
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|
287
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|
(2,765)
|
Less: Mark-to-market
option allowance
|
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2,224
|
|
|
(941)
|
|
|
13,905
|
|
|
1,887
|
G&A
|
|
$
|
8,962
|
|
$
|
6,212
|
|
$
|
24,814
|
|
$
|
17,357
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
September 30,
|
|
Nine months ended
September 30,
|
|
|
2022
|
|
2021
|
|
2022
|
|
2021
|
Management Interest
Credited
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest credited -
GAAP
|
|
$
|
5,682
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|
$
|
284
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|
$
|
(6,489)
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|
$
|
1,868
|
Adjustments:
|
|
|
|
|
|
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|
|
|
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|
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Less: FIA interest
credited - GAAP
|
|
|
(3,041)
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|
549
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11,124
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(38)
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Add: FIA options cost -
amortized
|
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|
2,111
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|
|
2,397
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|
|
5,959
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|
|
4,280
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Management interest
credited
|
|
$
|
4,752
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|
$
|
3,230
|
|
$
|
10,594
|
|
$
|
6,110
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
September 30,
|
|
Nine months ended
September 30,
|
|
|
2022
|
|
2021
|
|
2022
|
|
2021
|
Reconciliation -
Management Expenses to GAAP Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
Total expenses -
GAAP
|
|
$
|
14,294
|
|
$
|
9,186
|
|
$
|
9,573
|
|
$
|
21,883
|
Adjustments:
|
|
|
|
|
|
|
|
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|
|
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Less:
Benefits
|
|
|
(1,351)
|
|
|
—
|
|
|
(2,345)
|
|
|
—
|
Less: Stock-based
compensation
|
|
|
670
|
|
|
(996)
|
|
|
287
|
|
|
(2,765)
|
Less: Mark-to-market
option allowance
|
|
|
2,224
|
|
|
(941)
|
|
|
13,905
|
|
|
1,887
|
Less: FIA interest
credited - GAAP
|
|
|
(3,041)
|
|
|
549
|
|
|
11,124
|
|
|
(38)
|
Add: FIA options cost -
amortized
|
|
|
2,111
|
|
|
2,397
|
|
|
5,959
|
|
|
4,280
|
Management expenses -
total
|
|
$
|
14,907
|
|
$
|
10,195
|
|
$
|
38,503
|
|
$
|
25,247
|
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," 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:
- intense competition, including pricing, 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;
- 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 22
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;
- 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.
Earnings Teleconference information and Details
Midwest Holding has announced plans to host a conference call to
discuss financial and operating results for the third quarter of
2022 on November 15, 2022, at
8:30 a.m. Eastern Time. The Company
also posted those results on the investor relations section of its
website at https://ir.midwestholding.com after the close
of the financial markets on November
14, 2022.
To register for this conference call, please use the
following
link:https://www.netroadshow.com/events/login?show=7e33e531&confId=42860.
Registrants will receive a confirmation email with dial-in
details.
The call may also be accessed via webcast at this link:
https://events.q4inc.com/attendee/219439433
A replay of the webcast will be made available after the call on
the Investor Relations page of the Company's website
at https://ir.midwestholding.com
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
|
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|
|
September 30, 2022
|
|
December 31, 2021
|
(In thousands, except
share information)
|
|
|
(Unaudited)
|
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Assets
|
|
|
|
|
|
|
Fixed maturities,
available for sale, at fair value
(amortized cost: $923,063 and $679,921,
respectively)
|
|
$
|
1,048,081
|
|
$
|
683,296
|
Mortgage loans on real
estate, held for investment
|
|
|
204,423
|
|
|
183,203
|
Derivative
instruments
|
|
|
11,840
|
|
|
23,022
|
Equity securities, at
fair value (cost: $12,762 in 2022 and $22,158 in 2021)
|
|
|
9,325
|
|
|
21,869
|
Other invested
assets
|
|
|
78,569
|
|
|
35,293
|
Investment
escrow
|
|
|
344
|
|
|
3,611
|
Federal Home Loan Bank
(FHLB) stock
|
|
|
501
|
|
|
500
|
Preferred
stock
|
|
|
21,579
|
|
|
18,686
|
Notes
receivable
|
|
|
6,189
|
|
|
5,960
|
Policy loans
|
|
|
21
|
|
|
87
|
Total
investments
|
|
|
1,380,872
|
|
|
975,527
|
Cash and cash
equivalents
|
|
|
208,664
|
|
|
142,013
|
Deferred acquisition
costs, net
|
|
|
39,377
|
|
|
24,530
|
Premiums
receivable
|
|
|
364
|
|
|
354
|
Accrued investment
income
|
|
|
23,915
|
|
|
13,623
|
Reinsurance
recoverables
|
|
|
5,791
|
|
|
38,579
|
Intangible
assets
|
|
|
700
|
|
|
700
|
Property and equipment,
net
|
|
|
1,990
|
|
|
386
|
Operating lease right
of use assets
|
|
|
2,179
|
|
|
2,360
|
Receivable for
securities sold
|
|
|
13,026
|
|
|
19,732
|
Other assets
|
|
|
9,190
|
|
|
2,113
|
Total
assets
|
|
$
|
1,686,068
|
|
$
|
1,219,917
|
Liabilities and
Stockholders' Equity
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
Benefit
reserves
|
|
$
|
12,953
|
|
$
|
12,941
|
Policy
claims
|
|
|
2,963
|
|
|
237
|
Deposit-type
contracts
|
|
|
1,537,583
|
|
|
1,075,439
|
Advance
premiums
|
|
|
2
|
|
|
1
|
Deferred gain on
coinsurance transactions
|
|
|
35,464
|
|
|
28,589
|
Lease
liabilities
|
|
|
|
|
|
|
Operating
lease
|
|
|
2,192
|
|
|
2,364
|
Payable for securities
purchased
|
|
|
20,941
|
|
|
5,546
|
Other
liabilities
|
|
|
34,100
|
|
|
9,044
|
Total
liabilities
|
|
|
1,646,198
|
|
|
1,134,161
|
Stockholders'
Equity:
|
|
|
|
|
|
|
Voting common stock,
$0.001 par value; authorized 20,000,000 shares; 3,737,564 shares
issued
and outstanding as of June 30, 2022 and December 31, 2021,
respectively; non-voting common
stock, $0.001 par value, 2,000,000 shares authorized; no shares
issued and outstanding June 30,
2022 and December 31, 2021, respectively
|
|
|
—
|
|
|
—
|
|
|
|
4
|
|
|
4
|
Additional paid-in
capital
|
|
|
138,166
|
|
|
138,452
|
Treasury
stock
|
|
|
(175)
|
|
|
(175)
|
Accumulated
deficit
|
|
|
(53,276)
|
|
|
(70,159)
|
Accumulated other
comprehensive loss (income)
|
|
|
(52,943)
|
|
|
2,634
|
Total Midwest
Holding Inc.'s stockholders' equity
|
|
|
31,776
|
|
|
70,756
|
Noncontrolling
interests
|
|
|
8,094
|
|
|
15,000
|
Total stockholders'
equity
|
|
|
39,870
|
|
|
85,756
|
Total liabilities
and stockholders' equity
|
|
$
|
1,686,068
|
|
$
|
1,219,917
|
Consolidated
Statements of Comprehensive Loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
September 30,
|
|
Nine months ended
September 30,
|
(In thousands, except
per share data)
|
|
2022
|
|
2021
|
|
2022
|
|
2021
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment income, net
of expenses
|
|
$
|
12,938
|
|
$
|
6,196
|
|
$
|
29,721
|
|
$
|
12,303
|
Net realized loss on
investments
|
|
|
4,135
|
|
|
(2,115)
|
|
|
(14,676)
|
|
|
(2,704)
|
Amortization of
deferred gain on reinsurance transactions
|
|
|
1,239
|
|
|
662
|
|
|
3,251
|
|
|
1,711
|
Service fee revenue,
net of expenses
|
|
|
118
|
|
|
628
|
|
|
1,632
|
|
|
1,738
|
Other
revenue
|
|
|
569
|
|
|
400
|
|
|
1,530
|
|
|
1,007
|
Total
revenue
|
|
|
18,999
|
|
|
5,771
|
|
|
21,458
|
|
|
14,055
|
Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
credited
|
|
|
5,682
|
|
|
284
|
|
|
(6,489)
|
|
|
1,868
|
Benefits
|
|
|
1,351
|
|
|
-
|
|
|
2,345
|
|
|
-
|
Amortization of
deferred acquisition costs
|
|
|
1,193
|
|
|
753
|
|
|
3,095
|
|
|
1,780
|
Salaries and
benefits
|
|
|
3,751
|
|
|
4,025
|
|
|
12,366
|
|
|
11,466
|
Other operating
expenses
|
|
|
2,317
|
|
|
4,124
|
|
|
(1,744)
|
|
|
6,769
|
Total
expenses
|
|
|
14,294
|
|
|
9,186
|
|
|
9,573
|
|
|
21,883
|
Net income (loss)
before income tax expense
|
|
|
4,705
|
|
|
(3,415)
|
|
|
11,885
|
|
|
(7,828)
|
Income tax
expense
|
|
|
(1,250)
|
|
|
351
|
|
|
(3,848)
|
|
|
(1,828)
|
Net income (loss)
after income tax expense
|
|
|
3,455
|
|
|
(3,064)
|
|
|
8,037
|
|
|
(9,656)
|
Less: Income
attributable to noncontrolling interest
|
|
|
(3,975)
|
|
|
—
|
|
|
(8,845)
|
|
|
—
|
Net income (loss)
attributable to Midwest Holding Inc.
|
|
|
7,430
|
|
|
(3,064)
|
|
|
16,882
|
|
|
(9,656)
|
Comprehensive (loss)
income:
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized gains
(losses) on investments arising
during the three months ended September 2022
and 2021, net of offsets, net of tax ($2.0 million and
$120,000, respectively); unrealized gains (losses)
on investments arising during the nine months
ended September 2022 and 2021, net of offsets,
net of tax ($4.7 million and $61,000, respectively)
|
|
|
(26,114)
|
|
|
1,085
|
|
|
(55,483)
|
|
|
2,421
|
Unrealized losses on
foreign currency
|
|
|
(951)
|
|
|
(505)
|
|
|
(94)
|
|
|
(1,611)
|
Less:
Reclassification adjustment for net realized
losses on investments, net of offsets during the three
months ended September 2022 and 2021 (net of tax
($2.4 million) and $209,000, respectively);
reclassification adjustment for net realized losses on
investments, net of offsets during the nine months
ended September 2022 and 2021 (net of tax
($5.0 million) and $294,000, respectively)
|
|
|
(27,064)
|
|
|
580
|
|
|
(55,577)
|
|
|
810
|
Comprehensive
loss
|
|
$
|
(19,634)
|
|
$
|
(2,484)
|
|
$
|
(38,695)
|
|
$
|
(8,846)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impairment
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
other-than-temporary impairment
|
|
|
|
|
|
|
|
|
|
|
|
|
Portion of impairment
loss recognized in OCI
|
|
|
346
|
|
|
—
|
|
|
880
|
|
|
—
|
Net
other-than-temporary impairment loss recognized in net
income
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
$
|
346
|
|
$
|
—
|
|
$
|
880
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) per
common share
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
1.99
|
|
$
|
(0.82)
|
|
|
4.52
|
|
|
(2.58)
|
Diluted
|
|
$
|
1.96
|
|
$
|
(0.82)
|
|
$
|
4.45
|
|
$
|
(2.58)
|
CONSOLIDATED
STATEMENTS OF STOCKHOLDERS'
EQUITY (Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
September 30,
|
|
|
|
|
|
|
Additional
|
|
|
|
|
|
|
|
|
|
|
|
|
Treasury
|
|
Common
|
|
Paid-In
|
|
Retained
|
|
|
|
|
Noncontrolling
|
|
Total
|
(In
thousands)
|
|
Stock
|
|
Stock
|
|
Capital
|
|
Earnings
|
|
AOCI*
|
|
Interest
|
|
Equity
|
Balance at March 31,
2022
|
|
$
|
(175)
|
|
$
|
4
|
|
$
|
138,838
|
|
$
|
(60,707)
|
|
$
|
(25,877)
|
|
$
|
12,413
|
|
$
|
64,496
|
Net income
(loss)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
7,431
|
|
|
—
|
|
|
—
|
|
|
7,431
|
Employee stock
options
|
|
|
—
|
|
|
—
|
|
|
(672)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(672)
|
Unrealized gains on
investments, net of taxes
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(27,066)
|
|
|
—
|
|
|
(27,066)
|
Noncontrolling
interest
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(4,319)
|
|
|
(4,319)
|
Balance,
September 30, 2022
|
|
$
|
(175)
|
|
$
|
4
|
|
$
|
138,166
|
|
$
|
(53,276)
|
|
$
|
(52,943)
|
|
$
|
8,094
|
|
$
|
39,870
|
Balance at March 31,
2021
|
|
$
|
(175)
|
|
$
|
4
|
|
$
|
135,233
|
|
$
|
(60,114)
|
|
$
|
6,661
|
|
$
|
—
|
|
$
|
81,609
|
Net income
(loss)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(3,064)
|
|
|
—
|
|
|
—
|
|
|
(3,064)
|
Additional capital
raise related expenses
|
|
|
—
|
|
|
—
|
|
|
7
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
7
|
Employee stock
options
|
|
|
—
|
|
|
—
|
|
|
996
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
996
|
Unrealized gains on
investments, net of taxes
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
580
|
|
|
—
|
|
|
580
|
Balance,
June 30, 2021
|
|
$
|
(175)
|
|
$
|
4
|
|
$
|
136,236
|
|
$
|
(63,178)
|
|
$
|
7,241
|
|
$
|
—
|
|
$
|
80,128
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine months ended
September 30,
|
|
|
|
|
|
|
|
|
Additional
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Treasury
|
|
Common
|
|
Paid-In
|
|
Retained
|
|
|
|
Noncontrolling
|
|
Total
|
(In
thousands)
|
|
Stock
|
|
Stock
|
|
Capital
|
|
Earnings
|
|
AOCI*
|
|
Interest
|
|
Equity
|
Balance,
December 31, 2021
|
|
$
|
(175)
|
|
$
|
4
|
|
$
|
138,452
|
|
$
|
(70,158)
|
|
$
|
2,634
|
|
$
|
15,000
|
|
$
|
85,757
|
Net income
(loss)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
16,882
|
|
|
—
|
|
|
—
|
|
|
16,882
|
Employee stock
options
|
|
|
—
|
|
|
—
|
|
|
(286)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(286)
|
Unrealized gains on
investments, net of taxes
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(55,577)
|
|
|
—
|
|
|
(55,577)
|
Noncontrolling
interest
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(6,906)
|
|
|
(6,906)
|
Balance, June 30,
2022
|
|
$
|
(175)
|
|
$
|
4
|
|
$
|
138,166
|
|
$
|
(53,276)
|
|
$
|
(52,943)
|
|
$
|
8,094
|
|
$
|
39,870
|
Balance at December
31, 2020
|
|
$
|
(175)
|
|
$
|
4
|
|
$
|
133,592
|
|
$
|
(53,522)
|
|
$
|
6,431
|
|
$
|
—
|
|
$
|
86,330
|
Net income
(loss)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(9,656)
|
|
|
—
|
|
|
—
|
|
|
(9,656)
|
Additional capital
raise related expenses
|
|
|
—
|
|
|
—
|
|
|
(121)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(121)
|
Employee stock
options
|
|
|
—
|
|
|
—
|
|
|
2,765
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,765
|
Unrealized losses on
investments, net of taxes
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
810
|
|
|
—
|
|
|
810
|
Balance,
September 30, 2021
|
|
$
|
(175)
|
|
$
|
4
|
|
$
|
136,236
|
|
$
|
(63,178)
|
|
$
|
7,241
|
|
$
|
—
|
|
$
|
80,128
|
Consolidated
Statements of Cash Flows
|
|
|
|
|
|
|
|
|
|
Nine months ended
September 30,
|
(In
thousands)
|
|
2022
|
|
2021
|
Cash Flows from
Operating Activities:
|
|
|
|
|
|
|
Gain (loss)
attributable to Midwest Holding, Inc.
|
|
$
|
16,882
|
|
$
|
(9,656)
|
Adjustments to arrive
at cash provided by operating activities:
|
|
|
|
|
|
|
Net premium and
discount on investments
|
|
|
(6,982)
|
|
|
(1,529)
|
Depreciation and
amortization
|
|
|
229
|
|
|
38
|
Stock
options
|
|
|
(287)
|
|
|
2,765
|
Amortization of
deferred acquisition costs
|
|
|
3,095
|
|
|
1,780
|
Deferred acquisition
costs capitalized
|
|
|
(18,285)
|
|
|
(12,449)
|
Net realized loss on
investments
|
|
|
14,676
|
|
|
2,704
|
Deferred gain on
coinsurance transactions
|
|
|
6,875
|
|
|
9,601
|
Changes in operating
assets and liabilities:
|
|
|
|
|
|
|
Reinsurance
recoverables
|
|
|
33,698
|
|
|
(6,659)
|
Interest and dividends
due and accrued
|
|
|
(10,292)
|
|
|
(5,368)
|
Premiums
receivable
|
|
|
(10)
|
|
|
(20)
|
Deposit-type
liabilities
|
|
|
(17,245)
|
|
|
-
|
Policy
liabilities
|
|
|
2,740
|
|
|
14,763
|
Receivable and payable
for securities
|
|
|
22,100
|
|
|
—
|
Other assets and
liabilities
|
|
|
17,698
|
|
|
4,947
|
Other assets and
liabilities - discontinued operations
|
|
|
—
|
|
|
—
|
Net cash provided by
operating activities
|
|
|
64,892
|
|
|
917
|
Cash Flows from
Investing Activities:
|
|
|
|
|
|
|
Fixed maturities
available for sale:
|
|
|
|
|
|
|
Purchases
|
|
|
(692,348)
|
|
|
(480,700)
|
Proceeds from sale or
maturity
|
|
|
296,179
|
|
|
204,452
|
Mortgage loans on real
estate, held for investment
|
|
|
|
|
|
|
Purchases
|
|
|
(75,985)
|
|
|
(97,075)
|
Proceeds from
sale
|
|
|
58,033
|
|
|
25,749
|
Derivatives
|
|
|
|
|
|
|
Purchases
|
|
|
(22,981)
|
|
|
(14,496)
|
Proceeds from
sale
|
|
|
3,232
|
|
|
4,314
|
Equity
securities
|
|
|
|
|
|
|
Purchases
|
|
|
—
|
|
|
(38,972)
|
Proceeds from
sale
|
|
|
12,772
|
|
|
—
|
Purchase of equity
method securities
|
|
|
|
|
|
|
Other invested
assets
|
|
|
|
|
|
|
Purchases
|
|
|
(48,302)
|
|
|
(58,437)
|
Proceeds from
sale
|
|
|
3,334
|
|
|
34,965
|
Purchase of restricted
common stock in FHLB
|
|
|
(1)
|
|
|
(500)
|
Preferred
stock
|
|
|
(2,893)
|
|
|
(3,128)
|
Notes
receivable
|
|
|
—
|
|
|
—
|
Net change in policy
loans
|
|
|
66
|
|
|
(9)
|
Net purchases of
property and equipment
|
|
|
(1,830)
|
|
|
(54)
|
Net cash used in
investing activities
|
|
|
(470,724)
|
|
|
(423,891)
|
Cash Flows from
Financing Activities:
|
|
|
|
|
|
|
Net transfer to
noncontrolling interest
|
|
|
(6,906)
|
|
|
—
|
Capital
contribution
|
|
|
—
|
|
|
(121)
|
Receipts on
deposit-type contracts
|
|
|
509,660
|
|
|
367,446
|
Withdrawals on
deposit-type contracts
|
|
|
(30,271)
|
|
|
(14,543)
|
Net cash provided by
financing activities
|
|
|
472,483
|
|
|
352,782
|
Net increase
(decrease) in cash and cash equivalents
|
|
|
66,651
|
|
|
(70,192)
|
Cash and cash
equivalents:
|
|
|
|
|
|
|
Beginning
|
|
|
142,013
|
|
|
151,679
|
Ending
|
|
$
|
208,664
|
|
$
|
81,487
|
|
|
|
|
|
|
|
Supplementary
information
|
|
|
|
|
|
|
Cash paid for
taxes
|
|
$
|
2,870
|
|
$
|
3,711
|
View original
content:https://www.prnewswire.com/news-releases/midwest-holding-inc-reports-third-quarter-2022-results-301677365.html
SOURCE Midwest Holding Inc.