LINCOLN, Neb., Aug. 12, 2021 /PRNewswire/ -- Midwest Holding
Inc. ("Midwest") (NASDAQ: MDWT), today announced financial results
for its second quarter ended June 30,
2021.
Second Quarter 2021 Highlights
- GAAP revenue was $8.9 million
in the second quarter of 2021, compared to negative $12.5 million in the second quarter of
2020
- GAAP net (loss) income was a net loss of $5.0 million in the second quarter of 2021,
compared to a net loss of $16.6
million in the second quarter of 2020
- Annuity direct written premiums under statutory accounting
principles (non-GAAP) grew 26% to $125.9
million in the second quarter of 2021, compared to
$99.7 million in the second quarter
of 2020
- Non-GAAP management revenue grew 184% to $9.1 million in the second quarter of 2021,
compared to $3.2 million in the
second quarter of 2020
- Non-GAAP management operating income (loss) available to
common stockholders was income of $0.8
million in the second quarter of 2021, compared to a loss of
$0.6 million in the second quarter of
2020
From Co-Chief Executive Officer A.
Michael Salem
This was a solid quarter for Midwest, and we continue to execute
on our plan and strengthen our position as an industry leader.
On a macro level, our opportunity remains as strong as ever: the
U.S. wealth management and financial services value chain continues
to be under flux. Asset managers are becoming insurance companies,
traditional insurers are divesting assets, private equity is
aggregating, technology is circling. We expect this industry
realignment to continue for some time – with the true winners to be
determined in decades not years.
Midwest is, in fact, built for this environment – from the
ground up – as a technology-enabled life and annuity company. At
the forefront of our vision is our commitment to driving value to
our customers and partners. We do this as an open architecture
product developer. Our platform allows us to aggregate and curate
alternative asset management that we repackage and distribute to
individuals seeking to fund their retirement and institutions
seeking unique, uncorrelated returns. Our business is positioned to
be aligned with these key stakeholders by connecting them to
attractive products with top customer service, all powered by
information and technology. We believe we have the people, the
platform, and the vision to be a long-term winner in this
market.
In the past quarter, we solidly executed in pursuit of our
opportunity.
- Importantly, we advanced our reinsurance pipeline, including
closing a key transaction that helped to drive our financial
results. As we've said before, these pipes take time to build but
we are building them to support long-term sustainable growth
- Additionally, we advanced our technology and operating
infrastructure - crucially positioning us for long-term
scalability
- And we also expanded our distribution efforts, notably adding
Nate Thompson with over two decades
of experience, to spearhead this important area of our growth
Q2 2021 Key Performance Indicators and Non-GAAP Financial
Measures
Annuity Premiums*
For the second quarter of 2021, annuity direct written premiums
(statutory non-GAAP) grew 26% to $125.9
million, compared to $99.7
million in the second quarter of 2020. Ceded premiums for
the second quarter of 2021, decreased 3% to $86.1 million, compared to $88.7 million in the second quarter of
2020.
MYGA and FIA direct written premiums accounted for 21% and 79%,
respectively, of total annuity direct written premiums in the
second quarter of 2021.
* Non-GAAP; see discussion below for a reconciliation to
GAAP.
Management Revenue*
For the second quarter of 2021, management revenue (a non-GAAP
measure) was $9.1 million, an
increase of 184% compared to $3.2
million in the second quarter of 2020. The components of
management revenue in the second quarter of 2021 include:
- $4.9 million of net revenue on
reinsurance, primarily ceding commissions
- $3.2 million of investment
income, net of expenses
- $0.7 million service fee revenue,
net of expenses
- $0.4 million of other
revenue
*Non-GAAP; see discussion below for a reconciliation to
GAAP.
Management Operating Income (Loss) Available to Common
Shareholders*
For the second quarter of 2021, management operating income
(loss) available to common shareholders increased to income of
$0.8 million in the second quarter of
2021, compared to a loss of $0.6
million in the second quarter of 2020.
* Non-GAAP; see discussion below for a reconciliation to
GAAP.
General & Administrative Expenses
For the second quarter of 2021, general and administrative or
"G&A" expenses totaled $5.9
million compared to $3.7
million in the second quarter of 2020. G&A expenses
include salaries, benefits and other operating expenses, while
excluding $1.5 million of non-cash
stock-based compensation and $1.3
million of non-cash mark-to-market of our derivative option
allowance.*
* Non-GAAP; see discussion below for a reconciliation to
GAAP.
Explanation of Non-GAAP Financial Measures
We have discussed above below certain non-GAAP financial
measures that our management uses in conjunction with GAAP
financial measures as an integral part of managing our business and
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; and
- plan for and prepare future annual operating budgets and
determine appropriate levels of operating investments.
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 - SAP
Annuity premiums, also referred to as sales or direct written
premiums, do not correspond to revenues under GAAP, but are
relevant metrics to understand our business performance. Under
statutory accounting practices, or SAP, our annuity premiums
received are treated as premium revenue. Our premium metrics
include all sums paid into an individual annuity in a given period.
We typically transfer all or a substantial portion of the premium
and policy obligations to reinsurers. Ceded premium represents the
premium we transfer to reinsurers in a given period. Retained
premium represents the portion of premium received during a given
period that was not ceded to reinsurers and will either be
reinsured in a subsequent period or retained by us. We typically
retain premiums prior to transferring them to reinsurers to
facilitate block and other reinsurance transactions involving
portfolios of annuity premiums.
Management Revenue
In addition to total revenue, we have consistently utilized
management revenue as an economic measure to evaluate our financial
performance. Management revenue consists of GAAP revenue excluding
the impact of items that fluctuate from quarter to quarter in a
manner unrelated to our core operations, which we believe are
useful in analyzing operating trends. The most significant
adjustments to arrive at management revenue eliminate the impact of
net realized gains or losses on investments. These adjustments
include the elimination of net realized gains or losses on
investments related to the fair value accounting for derivatives
used to hedge the fixed indexed annuity ("FIA") index credits and
mark-to-market change in the FIA embedded derivative liability. We
believe the combined presentation and evaluation of total revenue
together with management revenue provides information that can
enhance an investor's understanding of our underlying operating
results.
Net Revenue on Reinsurance
We have consistently utilized net revenue on reinsurance, a
component of management revenue, as an economic measure to evaluate
our financial performance. Net revenue earned on reinsurance
represents ceding commissions and other reinsurance-related fees
paid to us during the period.
Management Expenses
In addition to total expenses, we have consistently utilized
management expenses as an economic measure to evaluate our
financial performance. Management expenses consist of total GAAP
expenses adjusted to eliminate items that fluctuate from quarter to
quarter in a manner unrelated to core operations, which we believe
are useful in analyzing operating trends. The most significant
adjustments to arrive at management expenses include the use of
management interest credited (as discussed below), the exclusion of
stock-based compensation and the exclusion of the mark-to-market
option allowance expense (included in other operating expenses)
payable to reinsurers to cover their obligations under FIA policies
we have reinsured with them. We believe the combined presentation
and evaluation of total expenses together with management expenses
provides information that can enhance an investor's understanding
of our underlying operating results.
Management Interest Credited
We have consistently utilized management interest credited, a
component of management expenses, as an economic measure to
evaluate our financial performance. GAAP interest credited contains
significant technical considerations related to fair value
accounting with respect to the mark-to-market change in the FIA
embedded derivative liability and change in actuarial valuation of
the FIA reserve, both of which are sensitive to changes in the
market as well as changes in actuarial assumptions. Due to these
technical considerations that we believe are largely unhelpful to
management and investors, we exclude the GAAP interest credited
expense related to our FIA products and include the amortized cost
of options we purchase to service our FIA policy obligations. The
sum of GAAP interest credited related to our multi-year guaranteed
annuity ("MYGA") products and the amortized cost of options we
purchase to service our FIA products constitutes management
interest credited.
Management Operating Income (Loss) Available to Common
Stockholders
In addition to net income (loss), we have consistently utilized
management operating income (loss) available to common stockholders
as an economic measure to evaluate our financial performance.
Management operating income (loss) available to common stockholders
consists of management revenue (discussed above) net of management
expenses (discussed above) and then tax-effected at 21% assumed tax
rate.
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:
- 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 21
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;
- intense competition, including the intensification of price
competition, 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;
- 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
The Company will host a conference call to discuss financial and
operating results for the second quarter 2021 on Friday, August 13, 2021, at 12:00 p.m. Eastern Time. The Company also plans
to release its second quarter 2021 results on the investor
relations section of its website at https://ir.midwestholding.com
after the close of the financial markets on Thursday, August 12, 2021.
CONFERENCE CALL DETAILS
To pre-register for this call,
please go to the following link (you will receive your access
details via email):
https://www.incommglobalevents.com/registration/q4inc/8368/midwest-holding-inc-q-22021/
WEBCAST DETAILS (Audience)
Use this link to access the
audience view of the webcast.
https://event.on24.com/wcc/r/3196018/ECFF30E8A916B80EF3703FA822982247
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
Midwest Holding Inc. is a rapidly growing, technology-enabled,
services-oriented annuity platform. Midwest designs and develops
in-demand annuity products that are distributed through independent
distribution channels, to a large and growing demographic of U.S.
retirees. Midwest originates, manages and transfers these annuities
through reinsurance arrangements to asset managers and other
third-party investors, who are actively seeking these financially
attractive products. Midwest also provides the operational and
regulatory infrastructure and expertise to enable asset managers
and third-party investors to form, capitalize 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
|
|
|
June 30, 2021
|
|
December 31, 2020
|
|
(Unaudited)
|
|
|
|
Assets
|
|
|
|
|
|
|
Fixed maturities,
available for sale, at fair value
(amortized cost: $580,914,162 and $369,156,068,
respectively)
|
$
|
|
588,861,261
|
|
$
|
377,163,358
|
Mortgage loans on real
estate, held for investment
|
|
|
130,372,068
|
|
|
94,989,970
|
Derivative
instruments
|
|
|
16,422,394
|
|
|
11,361,034
|
Equity securities, at
fair value (cost: $46,887,832 in 2021 and zero in 2020)
|
|
|
46,924,170
|
|
|
—
|
Other invested
assets
|
|
|
40,813,176
|
|
|
21,897,130
|
Investment
escrow
|
|
|
—
|
|
|
3,174,047
|
Federal Home Loan Bank
(FHLB) stock
|
|
|
500,000
|
|
|
—
|
Preferred
stock
|
|
|
4,728,375
|
|
|
3,897,980
|
Notes
receivable
|
|
|
5,810,328
|
|
|
5,665,487
|
Policy loans
|
|
|
51,529
|
|
|
45,573
|
Total
investments
|
|
|
834,483,301
|
|
|
518,194,579
|
Cash and cash
equivalents
|
|
|
70,278,979
|
|
|
151,679,274
|
Deferred acquisition
costs, net
|
|
|
21,419,245
|
|
|
13,456,303
|
Premiums
receivable
|
|
|
333,835
|
|
|
313,601
|
Accrued investment
income
|
|
|
10,448,869
|
|
|
6,806,836
|
Reinsurance
recoverables
|
|
|
45,237,046
|
|
|
32,146,042
|
Intangible
assets
|
|
|
700,000
|
|
|
700,000
|
Property and equipment,
net
|
|
|
114,434
|
|
|
103,964
|
Operating lease right
of use assets
|
|
|
287,660
|
|
|
348,198
|
Other assets
|
|
|
3,114,239
|
|
|
1,533,179
|
Assets associated with
business held for sale
|
|
|
1,058,180
|
|
|
1,118,783
|
Total
assets
|
$
|
|
987,475,788
|
|
$
|
726,400,759
|
Liabilities and
Stockholders' Equity
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
Benefit
reserves
|
$
|
|
12,477,017
|
|
$
|
12,775,773
|
Policy
claims
|
|
|
159,118
|
|
|
161,703
|
Deposit-type
contracts
|
|
|
848,714,996
|
|
|
597,868,472
|
Advance
premiums
|
|
|
422
|
|
|
2,541
|
Deferred gain on
coinsurance transactions
|
|
|
24,872,873
|
|
|
18,198,757
|
Lease
liabilities:
|
|
|
|
|
|
|
Operating
lease
|
|
|
331,350
|
|
|
396,911
|
Other
liabilities
|
|
|
18,260,351
|
|
|
9,552,791
|
Liabilities associated
with business held for sale
|
|
|
1,053,226
|
|
|
1,114,312
|
Total
liabilities
|
|
|
905,869,353
|
|
|
640,071,260
|
Contingencies and
Commitments
|
|
|
|
|
|
|
Stockholders'
Equity:
|
|
|
|
|
|
|
Preferred stock, $0.001
par value; authorized 2,000,000 shares; no shares issued and
outstanding as of June 30, 2021 or
December 31, 2020
|
|
|
—
|
|
|
—
|
Voting common stock,
$0.001 par value; authorized 20,000,000 shares; 3,737,564 shares
issued and outstanding as of June 30, 2021 and December 31, 2020,
respectively; non-voting common stock, $0.001 par value, 2,000,000
shares authorized; no shares issued and outstanding June 30, 2021
and December 31, 2020, respectively
|
|
|
3,738
|
|
|
3,738
|
Additional paid-in
capital
|
|
|
135,232,817
|
|
|
133,592,605
|
Treasury
stock
|
|
|
(175,333)
|
|
|
(175,333)
|
Accumulated
deficit
|
|
|
(60,115,614)
|
|
|
(53,522,078)
|
Accumulated other
comprehensive income
|
|
|
6,660,827
|
|
|
6,430,567
|
Total stockholders'
equity
|
|
|
81,606,435
|
|
|
86,329,499
|
Total liabilities
and stockholders' equity
|
$
|
|
987,475,788
|
|
$
|
726,400,759
|
|
|
|
Consolidated
Statements of Comprehensive Loss
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
June 30,
|
|
Six months ended
June 30,
|
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
Premiums
|
$
|
—
|
|
$
|
30
|
|
$
|
—
|
|
$
|
51
|
|
Investment income, net
of expenses
|
|
3,220,026
|
|
|
(397,842)
|
|
|
6,107,389
|
|
|
843,136
|
|
Net realized gain
(loss) on investments
|
|
4,059,926
|
|
|
(12,819,871)
|
|
|
(589,179)
|
|
|
9,780,139
|
|
Amortization of
deferred gain on reinsurance
|
|
587,737
|
|
|
338,269
|
|
|
1,048,593
|
|
|
520,707
|
|
Service fee revenue,
net of expenses
|
|
671,804
|
|
|
385,674
|
|
|
1,109,950
|
|
|
765,892
|
|
Other
revenue
|
|
357,814
|
|
|
10,387
|
|
|
606,783
|
|
|
20,213
|
|
Total revenue
(loss)
|
|
8,897,307
|
|
|
(12,483,353)
|
|
|
8,283,536
|
|
|
11,930,138
|
|
Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
credited
|
|
3,931,216
|
|
|
(128,052)
|
|
|
1,584,813
|
|
|
83,150
|
|
Benefits
|
|
—
|
|
|
4,016
|
|
|
79
|
|
|
(3,087)
|
|
Amortization of
deferred acquisition costs
|
|
524,336
|
|
|
100,388
|
|
|
1,027,073
|
|
|
140,897
|
|
Salaries and
benefits
|
|
4,513,944
|
|
|
1,354,934
|
|
|
7,441,171
|
|
|
2,179,830
|
|
Other operating
expenses
|
|
4,174,196
|
|
|
2,305,687
|
|
|
2,644,899
|
|
|
3,630,800
|
|
Total
expenses
|
|
13,143,692
|
|
|
3,636,973
|
|
|
12,698,035
|
|
|
6,031,590
|
|
(Loss) income
continuing from operations before taxes
|
|
(4,246,385)
|
|
|
(16,120,326)
|
|
|
(4,414,499)
|
|
|
5,898,548
|
|
Income tax
expense
|
|
(746,689)
|
|
|
(479,513)
|
|
|
(2,179,037)
|
|
|
(887,429)
|
|
Net (loss) income
attributable to Midwest Holding, Inc.
|
|
(4,993,074)
|
|
|
(16,599,839)
|
|
|
(6,593,536)
|
|
|
5,011,119
|
|
Comprehensive income
(loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized gains
(losses) on investments arising during the three months ended June
2021 and 2020, net of offsets, net of tax ($119,677 and $4.9
million, respectively); unrealized gains (losses) on investments
arising during the six months ended June 2021 and 2020, net of
offsets, net of tax ($61,207 and $1.6 million,
respectively)
|
|
373,392
|
|
|
6,673,662
|
|
|
1,336,272
|
|
|
2,502,690
|
|
Unrealized losses on
foreign currency
|
|
—
|
|
|
(976)
|
|
|
—
|
|
|
(406,255)
|
|
Less:
Reclassification adjustment for net realized gains on investments,
net of tax for the three months ended June 20, 2021 and 2020
($208,655 and $216,772, respectively), and net of tax for the six
months ended June 20, 2021 and 2020 ($294,004 and $242,962,
respectively)
|
|
(784,942)
|
|
|
12,819,871
|
|
|
(1,106,012)
|
|
|
(9,780,139)
|
|
Other comprehensive
(loss) income
|
|
(411,550)
|
|
|
19,492,557
|
|
|
230,260
|
|
|
(7,683,704)
|
|
Comprehensive
(loss) income
|
$
|
(5,404,624)
|
|
$
|
2,892,718
|
|
$
|
(6,363,276)
|
|
$
|
(2,672,585)
|
|
Earnings (loss)
income per common share
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
$
|
(1.34)
|
|
$
|
(6.53)
|
|
$
|
(1.76)
|
|
$
|
2.19
|
|
Diluted
|
$
|
(1.34)
|
|
$
|
(6.53)
|
|
$
|
(1.76)
|
|
$
|
2.18
|
|
|
|
|
|
|
|
|
|
|
Consolidated
Statements of Cash Flows
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
Six months ended
June 30,
|
|
|
2021
|
|
2020
|
Cash Flows from
Operating Activities:
|
|
|
|
|
|
|
|
|
|
Net (loss) income
attributable to Midwest Holding, Inc.
|
|
|
|
|
|
$
|
(6,593,536)
|
|
$
|
5,011,119
|
Adjustments to arrive
at cash provided by operating activities:
|
|
|
|
|
|
|
|
|
|
|
Net premium and
discount on investments
|
|
|
|
|
|
|
(438,382)
|
|
|
104,947
|
Depreciation and
amortization
|
|
|
|
|
|
|
25,405
|
|
|
804,289
|
Stock
options
|
|
|
|
|
|
|
1,769,567
|
|
|
25,022
|
Amortization of
deferred acquisition costs
|
|
|
|
|
|
|
1,027,073
|
|
|
140,897
|
Deferred acquisition
costs capitalized
|
|
|
|
|
|
|
(9,041,477)
|
|
|
(4,118,436)
|
Net realized losses
(gains) on investments
|
|
|
|
|
|
|
589,179
|
|
|
(9,780,139)
|
Deferred coinsurance
ceding commission
|
|
|
|
|
|
|
6,674,116
|
|
|
3,908,889
|
Changes in operating
assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|
Reinsurance
recoverables
|
|
|
|
|
|
|
(13,529,299)
|
|
|
(4,304,381)
|
Interest and dividends
due and accrued
|
|
|
|
|
|
|
(3,642,033)
|
|
|
(1,960,229)
|
Premiums
receivable
|
|
|
|
|
|
|
(20,234)
|
|
|
6,310
|
Policy
liabilities
|
|
|
|
|
|
|
7,333,531
|
|
|
3,958,101
|
Other assets and
liabilities
|
|
|
|
|
|
|
7,121,121
|
|
|
8,678,265
|
Other assets and
liabilities - discontinued operations
|
|
|
|
|
|
|
(483)
|
|
|
6,280
|
Net cash (used
for) provided by operating activities
|
|
|
|
|
|
|
(8,725,452)
|
|
|
2,480,934
|
Cash Flows from
Investing Activities:
|
|
|
|
|
|
|
|
|
|
|
Fixed maturities
available for sale:
|
|
|
|
|
|
|
|
|
|
|
Purchases
|
|
|
|
|
|
|
(342,717,164)
|
|
|
(107,759,107)
|
Proceeds from sale or
maturity
|
|
|
|
|
|
|
132,752,125
|
|
|
18,409,038
|
Mortgage loans on real
estate, held for investment
|
|
|
|
|
|
|
|
|
|
|
Purchases
|
|
|
|
|
|
|
(51,978,684)
|
|
|
(35,531,866)
|
Proceeds from
sale
|
|
|
|
|
|
|
16,596,586
|
|
|
2,069,950
|
Derivatives
|
|
|
|
|
|
|
|
|
|
|
Purchases
|
|
|
|
|
|
|
(9,850,552)
|
|
|
(2,643,989)
|
Proceeds from
sale
|
|
|
|
|
|
|
3,062,687
|
|
|
—
|
Purchase of equity
securities
|
|
|
|
|
|
|
(46,924,170)
|
|
|
—
|
Other invested
assets
|
|
|
|
|
|
|
|
|
|
|
Purchases
|
|
|
|
|
|
|
(32,291,974)
|
|
|
(7,011,102)
|
Proceeds from
sale
|
|
|
|
|
|
|
16,915,404
|
|
|
5,612,112
|
Purchase of restricted
common stock in FHLB
|
|
|
|
|
|
|
(500,000)
|
|
|
—
|
Preferred
stock
|
|
|
|
|
|
|
(778,681)
|
|
|
—
|
Notes
receivable
|
|
|
|
|
|
|
—
|
|
|
(5,488,101)
|
Net change in policy
loans
|
|
|
|
|
|
|
(5,956)
|
|
|
(35,158)
|
Net purchases of
property and equipment
|
|
|
|
|
|
|
(34,642)
|
|
|
(45,513)
|
Net cash used in
investing activities
|
|
|
|
|
|
|
(315,755,021)
|
|
|
(132,423,736)
|
Cash Flows from
Financing Activities:
|
|
|
|
|
|
|
|
|
|
|
Finance
lease
|
|
|
|
|
|
|
—
|
|
|
(111)
|
Capital
contribution
|
|
|
|
|
|
|
(129,355)
|
|
|
14,941,533
|
1505 Capital LLC
purchase
|
|
|
|
|
|
|
—
|
|
|
(500,000)
|
Receipts on
deposit-type contracts
|
|
|
|
|
|
|
249,519,268
|
|
|
147,486,013
|
Withdrawals on
deposit-type contracts
|
|
|
|
|
|
|
(6,309,735)
|
|
|
(658,936)
|
Net cash provided
by financing activities
|
|
|
|
|
|
|
243,080,178
|
|
|
161,268,499
|
Net (decrease)
increase in cash and cash equivalents
|
|
|
|
|
|
|
(81,400,295)
|
|
|
31,325,697
|
Cash and cash
equivalents:
|
|
|
|
|
|
|
|
|
|
|
Beginning
|
|
|
|
|
|
|
151,679,274
|
|
|
43,716,205
|
Ending
|
|
|
|
|
|
$
|
70,278,979
|
|
$
|
75,041,902
|
|
|
|
|
|
|
|
|
|
|
|
Supplementary
information
|
|
|
|
|
|
|
|
|
|
|
Cash paid for
taxes
|
|
|
|
|
|
$
|
1,500,000
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental
Information – Annuity Premiums (SAP);
|
Reconciliation –
Management Revenue to GAAP Revenue
|
(Unaudited)
|
|
|
Three months ended
June 30,
|
|
Six months ended
June 30,
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
Annuity Premiums
(SAP)
|
|
|
|
|
|
|
|
|
|
|
|
MYGA direct written
premiums
|
$
|
26,191,111
|
|
$
|
27,400,367
|
|
$
|
35,560,073
|
|
$
|
58,965,873
|
FIA direct written
premiums
|
|
99,674,226
|
|
|
72,270,636
|
|
|
213,959,195
|
|
|
88,520,140
|
Annuity direct
written premiums
|
|
125,865,337
|
|
|
99,671,003
|
|
|
249,519,268
|
|
|
147,486,013
|
Ceded
premiums
|
|
86,105,933
|
|
|
88,717,954
|
|
|
133,570,212
|
|
|
114,446,652
|
|
|
|
|
|
|
|
|
|
|
|
|
Annuity Premiums
Statistics
|
|
|
|
|
|
|
|
|
|
|
|
Premiums ceded
%
|
|
68%
|
|
|
89%
|
|
|
54%
|
|
|
78%
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct written
premiums growth y-o-y %:
|
|
|
|
|
|
|
|
|
|
|
|
MYGA
|
|
(4%)
|
|
|
(9%)
|
|
|
(40%)
|
|
|
54%
|
FIA
|
|
38%
|
|
|
NMF
|
|
|
142%
|
|
|
NMF
|
Total
|
|
26%
|
|
|
233%
|
|
|
69%
|
|
|
286%
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct written
premiums composition %:
|
|
|
|
|
|
|
|
|
|
|
|
MYGA
|
|
21%
|
|
|
27%
|
|
|
14%
|
|
|
40%
|
FIA
|
|
79%
|
|
|
73%
|
|
|
86%
|
|
|
60%
|
Total
|
|
100%
|
|
|
100%
|
|
|
100%
|
|
|
100%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
June 30,
|
|
Six months ended
June 30,
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
Management
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
Net revenue on
reinsurance
|
$
|
4,863,927
|
|
$
|
3,213,218
|
|
$
|
7,722,709
|
|
$
|
4,429,596
|
Investment income,
net of expenses
|
|
3,220,026
|
|
|
(397,842)
|
|
|
6,107,389
|
|
|
843,136
|
Service fee revenue,
net of expenses
|
|
671,804
|
|
|
385,674
|
|
|
1,109,950
|
|
|
765,892
|
Other
revenue
|
|
357,814
|
|
|
10,387
|
|
|
606,783
|
|
|
20,213
|
Management revenue -
total
|
$
|
9,113,571
|
|
$
|
3,211,437
|
|
$
|
15,546,831
|
|
$
|
6,058,837
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
June 30,
|
|
Six months ended
June 30,
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
Net Revenue on
Reinsurance
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of
deferred gain on reinsurance
|
$
|
587,737
|
|
$
|
338,269
|
|
$
|
1,048,593
|
|
$
|
520,707
|
Adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
Add: Deferred
coinsurance ceding commission
|
|
4,276,190
|
|
|
2,874,949
|
|
|
6,674,116
|
|
|
3,908,889
|
Net revenue on
reinsurance
|
$
|
4,863,927
|
|
$
|
3,213,218
|
|
$
|
7,722,709
|
|
$
|
4,429,596
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
June 30,
|
|
Six months ended
June 30,
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
Reconciliation -
Management Revenue to GAAP Revenue
|
|
|
|
|
|
|
|
|
Total revenue -
GAAP
|
$
|
8,897,307
|
|
$
|
(12,483,353)
|
|
$
|
8,283,536
|
|
$
|
11,930,138
|
Adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
Less:
Premiums
|
|
—
|
|
|
(30)
|
|
|
—
|
|
|
(51)
|
Less: Net realized
gains on investments
|
|
(4,059,926)
|
|
|
12,819,871
|
|
|
589,179
|
|
|
(9,780,139)
|
Add: Deferred
coinsurance ceding commission
|
|
4,276,190
|
|
|
2,874,949
|
|
|
6,674,116
|
|
|
3,908,889
|
Management revenue -
total
|
$
|
9,113,571
|
|
$
|
3,211,437
|
|
$
|
15,546,831
|
|
$
|
6,058,837
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental
Information – Reconciliation – Management Expenses to GAAP
Expenses
|
(Unaudited)
|
|
|
Three months ended
June 30,
|
|
Six months ended
June 30,
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
Management
Expenses
|
|
|
|
|
|
|
|
|
|
|
|
G&A
|
$
|
5,893,361
|
|
$
|
3,722,329
|
|
$
|
1,144,452
|
|
$
|
5,860,404
|
|
|
|
|
|
|
|
|
|
|
|
|
Management interest
credited
|
|
1,739,682
|
|
|
172,677
|
|
|
2,882,091
|
|
|
215,928
|
Amortization of
deferred acquisition costs
|
|
524,336
|
|
|
100,388
|
|
|
1,027,073
|
|
|
140,897
|
Expenses related to
retained business
|
|
2,264,018
|
|
|
273,065
|
|
|
3,909,164
|
|
|
356,825
|
Management expenses -
total
|
$
|
8,157,379
|
|
$
|
3,995,394
|
|
$
|
15,053,616
|
|
$
|
6,217,229
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
June 30,
|
|
Six months ended
June 30,
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
G&A
|
|
|
|
|
|
|
|
|
|
|
|
Salaries and benefits
- GAAP
|
$
|
4,513,944
|
|
$
|
1,354,934
|
|
$
|
7,441,171
|
|
$
|
2,179,830
|
Other operating
expenses - GAAP
|
|
4,174,196
|
|
|
2,305,687
|
|
|
2,644,899
|
|
|
3,630,800
|
Subtotal
|
|
8,688,140
|
|
|
3,660,621
|
|
|
10,086,070
|
|
|
5,810,630
|
Adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
Less: Stock-based
compensation
|
|
(1,508,227)
|
|
|
(13,088)
|
|
|
(1,769,567)
|
|
|
(25,022)
|
Less: Mark-to-market
option allowance
|
|
(1,286,552)
|
|
|
74,796
|
|
|
2,827,949
|
|
|
74,796
|
G&A
|
$
|
5,893,361
|
|
$
|
3,722,329
|
|
$
|
11,144,452
|
|
$
|
5,860,404
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
June 30,
|
|
Six months ended
June 30,
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
Management
Interest Credited
|
|
|
|
|
|
|
|
|
|
|
|
Interest credited -
GAAP
|
$
|
3,931,216
|
|
$
|
(128,052)
|
|
$
|
1,584,813
|
|
$
|
83,150
|
Adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
Less: FIA interest
credited - GAAP
|
|
(3,404,569)
|
|
|
200,463
|
|
|
(586,063)
|
|
|
6,201
|
Add: FIA options cost
- amortized
|
|
1,213,035
|
|
|
100,266
|
|
|
1,883,341
|
|
|
126,577
|
Management interest
credited
|
$
|
1,739,682
|
|
$
|
172,677
|
|
$
|
2,882,091
|
|
$
|
215,928
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
June 30,
|
|
Six months ended
June 30,
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
Reconciliation -
Management Expenses to GAAP Expenses
|
|
|
|
|
|
|
|
Total revenue -
GAAP
|
$
|
13,143,692
|
|
$
|
3,636,973
|
|
$
|
12,698,035
|
|
$
|
6,031,590
|
Adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
Less:
Benefits
|
|
—
|
|
|
(4,016)
|
|
|
(79)
|
|
|
3,087
|
Less: Stock-based
compensation
|
|
(1,508,227)
|
|
|
(13,088)
|
|
|
(1,769,567)
|
|
|
(25,022)
|
Less: Mark-to-market
option allowance
|
|
(1,286,552)
|
|
|
74,796
|
|
|
2,827,949
|
|
|
74,796
|
Less: FIA interest
credited - GAAP
|
|
(3,404,569)
|
|
|
200,463
|
|
|
(586,063)
|
|
|
6,201
|
Add: FIA options cost
- amortized
|
|
1,213,035
|
|
|
100,266
|
|
|
1,883,341
|
|
|
126,577
|
Management expenses -
total
|
$
|
8,157,379
|
|
$
|
3,995,394
|
|
$
|
15,053,616
|
|
$
|
6,217,229
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental
Information – Reconciliation – Management Operating Income
(Loss) Available to Common Stockholders to GAAP Net Loss
Attributable to Midwest Holding Inc.
|
(Unaudited)
|
|
|
Three months ended
June 30,
|
|
Six months ended
June 30,
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
Reconciliation
from Net Loss Attributable to Midwest Holding Inc. - GAAP to
Management Operating Income Available to Common
Stockholders
|
Net loss attributable
to Midwest Holding Inc. - GAAP
|
$
|
(4,993,074)
|
|
$
|
(16,599,839)
|
|
$
|
(6,593,536)
|
|
$
|
5,011,119
|
Adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
Less:
Premiums
|
|
—
|
|
|
(30)
|
|
|
—
|
|
|
(51)
|
Less: Net realized
gains on investments
|
|
(4,059,926)
|
|
|
12,819,871
|
|
|
589,179
|
|
|
(9,780,139)
|
Add: Deferred
coinsurance ceding commission
|
|
4,276,190
|
|
|
2,874,949
|
|
|
6,674,116
|
|
|
3,908,889
|
Less:
Benefits
|
|
—
|
|
|
4,016
|
|
|
79
|
|
|
(3,087)
|
Less: Stock-based
compensation
|
|
1,508,227
|
|
|
13,088
|
|
|
1,769,567
|
|
|
25,022
|
Less: Mark-to-market
option allowance
|
|
1,286,552
|
|
|
(74,796)
|
|
|
(2,827,949)
|
|
|
(74,796)
|
Less: FIA interest
credited - GAAP
|
|
3,404,569
|
|
|
(200,463)
|
|
|
586,063
|
|
|
(6,201)
|
Add: FIA options cost
- amortized
|
|
(1,213,035)
|
|
|
(100,266)
|
|
|
(1,883,341)
|
|
|
(126,577)
|
Less: Income tax
expense - GAAP
|
|
746,689
|
|
|
479,513
|
|
|
2,179,037
|
|
|
887,429
|
Add: Effective tax
expense at 21% assumed tax rate
|
|
(200,800)
|
|
|
164,631
|
|
|
(103,575)
|
|
|
33,262
|
Total
adjustments
|
|
5,748,466
|
|
|
15,980,513
|
|
|
6,983,176
|
|
|
(5,136,249)
|
Management operating
income (loss) available to common stockholders
|
$
|
755,392
|
|
$
|
(619,326)
|
|
$
|
389,640
|
|
$
|
(125,130)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Management operating
income (loss) available to common stockholders per common
share
|
|
|
|
|
|
Basic
|
$
|
0.20
|
|
$
|
(0.24)
|
|
$
|
0.10
|
|
$
|
(0.05)
|
Diluted
|
$
|
0.20
|
|
$
|
(0.24)
|
|
$
|
0.10
|
|
$
|
(0.05)
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average
shares outstanding - basic
|
|
3,737,564
|
|
|
2,540,588
|
|
|
3,737,564
|
|
|
2,291,629
|
Weighted average
shares outstanding - diluted
|
|
3,776,169
|
|
|
2,542,482
|
|
|
3,776,169
|
|
|
2,293,523
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental
Information – Retained and Reinsurance Balance Sheets
(GAAP)
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2021
|
|
December 31, 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retained
|
|
Reinsurance
|
|
Consolidated
|
|
Retained
|
|
Reinsurance
|
|
Consolidated
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
investments
|
$
|
378,874,422
|
|
$
|
455,608,879
|
|
$
|
834,483,301
|
|
$
|
185,367,430
|
|
$
|
332,827,149
|
|
$
|
518,194,579
|
Cash and cash
equivalents
|
|
30,530,673
|
|
|
39,748,306
|
|
|
70,278,979
|
|
|
102,334,579
|
|
|
49,344,695
|
|
|
151,679,274
|
Accrued investment
income
|
|
3,378,438
|
|
|
7,070,431
|
|
|
10,448,869
|
|
|
1,955,938
|
|
|
4,850,898
|
|
|
6,806,836
|
Deferred acquisition
costs, net
|
|
21,419,245
|
|
|
—
|
|
|
21,419,245
|
|
|
13,456,303
|
|
|
—
|
|
|
13,456,303
|
Reinsurance
recoverables
|
|
—
|
|
|
45,237,046
|
|
|
45,237,046
|
|
|
—
|
|
|
32,146,042
|
|
|
32,146,042
|
Other assets
|
|
4,143,746
|
|
|
1,464,602
|
|
|
5,608,348
|
|
|
2,685,341
|
|
|
1,432,384
|
|
|
4,117,725
|
Total
assets
|
$
|
438,346,524
|
|
$
|
549,129,264
|
|
$
|
987,475,788
|
|
$
|
305,799,591
|
|
$
|
420,601,168
|
|
$
|
726,400,759
|
Liabilities and
Stockholders' Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Policyholder
liabilities
|
$
|
308,727,024
|
|
$
|
552,624,529
|
|
$
|
861,351,553
|
|
$
|
191,887,322
|
|
$
|
418,921,167
|
|
$
|
610,808,489
|
Deferred gain on
coinsurance transactions
|
|
24,872,873
|
|
|
—
|
|
|
24,872,873
|
|
|
18,198,757
|
|
|
—
|
|
|
18,198,757
|
Other
liabilities
|
|
23,140,192
|
|
|
(3,495,265)
|
|
|
19,644,927
|
|
|
9,384,013
|
|
|
1,680,001
|
|
|
11,064,014
|
Total
liabilities
|
$
|
356,740,089
|
|
$
|
549,129,264
|
|
$
|
905,869,353
|
|
$
|
219,470,092
|
|
$
|
420,601,168
|
|
$
|
640,071,260
|
Stockholders'
Equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Voting common
stock
|
|
3,738
|
|
|
—
|
|
|
3,738
|
|
|
3,738
|
|
|
—
|
|
|
3,738
|
Additional paid-in
capital
|
|
135,057,484
|
|
|
—
|
|
|
135,057,484
|
|
|
133,417,272
|
|
|
—
|
|
|
133,417,272
|
Accumulated
deficit
|
|
(60,115,614)
|
|
|
—
|
|
|
(60,115,614)
|
|
|
(53,522,078)
|
|
|
—
|
|
|
(53,522,078)
|
Accumulated other
comprehensive income
|
|
6,660,827
|
|
|
—
|
|
|
6,660,827
|
|
|
6,430,567
|
|
|
—
|
|
|
6,430,567
|
Total Midwest
Holding Inc.'s stockholders' equity
|
$
|
81,606,435
|
|
$
|
—
|
|
$
|
81,606,435
|
|
$
|
86,329,499
|
|
$
|
—
|
|
$
|
86,329,499
|
Total liabilities
and stockholders' equity
|
$
|
438,346,524
|
|
$
|
549,129,264
|
|
$
|
987,475,788
|
|
$
|
305,799,591
|
|
$
|
420,601,168
|
|
$
|
726,400,759
|
|
Note: 1505 Capital
had approximately $388 million of total third-party assets under
management as of June 30, 2021.
|
View original content to download
multimedia:https://www.prnewswire.com/news-releases/midwest-holding-inc-reports-second-quarter-2021-results-301354719.html
SOURCE Midwest Holding Inc.