Filed pursuant to Rule 424(b)(3)

Registration No. 333-214896

PROSPECTUS SUPPLEMENT NO. 5

Supplement to Prospectus dated
February 14, 2017

________________________

GWG HOLDINGS, INC.

________________________

Maximum of 150,000 Shares of Series 2 Redeemable Preferred Stock

This “Prospectus Supplement No. 5 — Supplement to Prospectus dated February 14, 2017,” supplements and amends our prospectus dated February 14, 2017 and our earlier issued Prospectus Supplement No. 1 dated March 15, 2017, Prospectus Supplement No. 2 (sticker) dated March 15, 2017 and filed March 17, 2017, Prospectus Supplement No. 3 (sticker) dated April 3, 2017 and Prospectus Supplement No. 4 dated May 15, 2017 (collectively referred to simply as our “prospectus”). You should read this supplement together with the prospectus since the information contained herein supplements and amends the information contained in the prospectus. Capitalized terms contained in this supplement have the same meanings as in the prospectus unless otherwise stated herein.

RECENT EVENTS

On August 10, 2017, we filed our Quarterly Report on Form 10-Q for the period ended June 30, 2017. This prospectus supplement has been prepared primarily to set forth certain information contained in that report.

NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

This supplement is part of the prospectus and either it or its contents must accompany the prospectus to satisfy the prospectus-delivery requirements under the Securities Act of 1933.

The date of this prospectus supplement is August 10, 2017

 

TABLE OF CONTENTS

 

 

Page

RISK RELATING TO FORWARD-LOOKING STATEMENTS

 

1

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION

 

3

FINANCIAL INFORMATION

 

F-1

____________________

GWG Holdings, Inc.

220 South Sixth Street, Suite 1200

Minneapolis, MN 55402

Tel: (612) 746-1944

Fax: (612) 746-0445

i

RISK RELATING TO FORWARD-LOOKING STATEMENTS

Certain matters discussed in this prospectus supplement contain forward-looking statements. These forward-looking statements are subject to risks, uncertainties and assumptions about our operations and the investments we make, including, among other things, factors discussed under the heading “Risk Factors” in this prospectus supplement and the following:

•         changes in the secondary market for life insurance;

•         changes resulting from the evolution of our business model and strategy with respect to the life insurance industry;

•         our limited operating history;

•         the valuation of assets reflected on our financial statements;

•         the reliability of assumptions underlying our actuarial models, including our life expectancy estimates;

•         our reliance on debt financing;

•         risks relating to the validity and enforceability of the life insurance policies we purchase;

•         risks relating to our ability to license and effectively apply technologies to improve and expand the scope of our business;

•         our reliance on information provided and obtained by third parties;

•         federal, state and FINRA regulatory matters;

•         competition in the secondary market of life insurance;

•         the relative illiquidity of life insurance policies;

•         our ability to satisfy our debt obligations if we were to sell our entire portfolio of life insurance policies;

•         life insurance company credit exposure;

•         cost-of-insurance (premium) increases on our life insurance policies;

•         general economic outlook, including prevailing interest rates;

•         performance of our investments in life insurance policies;

•         financing requirements;

•         risks associated with the merchant cash advance business;

•         the various risks associated with our attempts to commercialize our M-Panel technology;

•         litigation risks;

•         restrictive covenants contained in borrowing agreements; and

•         our ability to make cash distributions in satisfaction of dividend obligations and redemption requests.

Forward-looking statements can be identified by the use of words like “believes,” “could,” “possibly,” “probably,” “anticipates,” “estimates,” “projects,” “expects,” “may,” “will,” “should,” “seek,” “intend,” “plan,” “expect,” or “consider” or the negative of these expressions or other variations, or by discussions of strategy that involves risks and uncertainties. All forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual transactions, results, performance or achievements to be materially different from any future transactions, results, performance or achievements expressed or implied by such forward-looking statements.

We base these forward-looking statements on current expectations and projections about future events and the information currently available to us. Although we believe that the assumptions for these forward-looking statements are reasonable, any of the assumptions could prove to be inaccurate. Consequently, no representation or warranty can be given that the estimates, opinions, or assumptions made in or referenced by this prospectus supplement will prove to be accurate. Some of the risks, uncertainties and assumptions are identified in the discussion entitled “Risk Factors”

1

in the prospectus. We undertake no obligation to update our forward-looking statements. We caution you that the forward-looking statements in (or incorporated by reference into) this prospectus supplement are only estimates and predictions, or statements or current intent. Actual results or outcomes, or actions that we ultimately undertake, could differ materially from those anticipated in the forward-looking statements due to risks, uncertainties or actual events differing from the assumptions underlying these statements. These risks, uncertainties and assumptions include, but are not limited to, those discussed in this prospectus supplement.

2

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

Note: The following discussion and analysis of the financial condition and results of operations of the Company are derived from our Quarterly Report on Form 10-Q for the period ended June 30, 2017, filed with the SEC on August 10, 2017. We have not materially updated this discussion in any way, although it may be presented in a different order than in our Quarterly Report. As indicated in that report, this discussion and analysis is based on the beliefs of our management, as well as assumptions made by, and information currently available to, our management. The statements in this discussion and analysis concerning expectations regarding our future performance, liquidity and capital resources, as well as other non-historical statements in this discussion and analysis, are forward-looking statements. See “Risks Relating to Forward-Looking Statements” above and in the prospectus. These forward-looking statements are subject to numerous risks and uncertainties. Our actual results could differ materially from those suggested or implied by any forward-looking statements.

You should read the following discussion in conjunction with our consolidated financial statements and related notes beginning at page F-1 of this prospectus supplement, as well as our consolidated financial statements and related notes contained within the prospectus.

JOBS Act

On April 5, 2012, the Jumpstart Our Business Startups Act of 2012, or JOBS Act, was enacted. Section 107 of the JOBS Act provides that an “emerging growth company” can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act of 1933 for complying with new or revised accounting standards. This means that an “emerging growth company” can make an election to delay the adoption of certain accounting standards until those standards would apply to private companies. We are an emerging growth company and have elected to delay our adoption of new or revised accounting standards and, as a result, we may not comply with new or revised accounting standards at the same time as other public reporting companies that are not “emerging growth companies.” This exemption will apply for a period of five years following our first sale of common equity securities under an effective registration statement (September 2019) or until we no longer qualify as an “emerging growth company” as defined under the JOBS Act, whichever is earlier.

Overview

We are a financial services company disrupting and transforming the life insurance industry and related industries with innovative products and services. We built our business by creating opportunities for consumers to obtain significantly more value for their life insurance policies as compared to the traditional options offered by the insurance industry by creating a secondary market. We are enhancing and extending these activities through innovation in our products and services, business processes, financing strategies, and advanced epigenetic technologies that we expect will improve insurance predictive underwriting analytics. At the same time, we are creating opportunities for investors to receive income and capital appreciation from our life insurance investment activities and the businesses we create in the life insurance and related industries.

Critical Accounting Policies

Critical Accounting Estimates

The preparation of our consolidated financial statements in accordance with the Generally Accepted Accounting Principles (GAAP) requires us to make significant judgments, estimates, and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. We base our judgments, estimates, and assumptions on historical experience and on various other factors believed to be reasonable under the circumstances. Actual results could differ materially from these estimates. We evaluate our judgments, estimates, and assumptions on a regular basis and make changes accordingly. We believe that the judgments, estimates, and assumptions involved in valuing our investments in life insurance policies have the greatest potential impact on our consolidated financial statements and accordingly believe these to be our critical accounting estimates. Below we discuss the critical accounting policies associated with these estimates as well as certain other critical accounting policies.

3

Ownership of Life Insurance Policies — Fair Value Option

We account for the purchase of life insurance policies in accordance with ASC 325-30, which requires us to use either the investment method or the fair value method. We have elected to account for all of our life insurance policies using the fair value method.

The fair value of our life insurance policies is determined as the net present value of the life insurance portfolio’s future expected cash flows (policy benefits received and required premium payments) that incorporates current life expectancy estimates and discount rate assumptions.

Fair Value Components — Medical Underwriting

Unobservable inputs, as discussed below, are a critical component of our estimate for the fair value of our investments in life insurance policies. We currently use a probabilistic method of estimating and valuing the projected cash flows of our portfolio, which we believe to be the preferred and most prevalent valuation method in the industry. In this regard, the most significant assumptions we make are the life expectancy estimates of the insureds and the discount rate applied to the expected future cash flows to be derived from our portfolio.

The 2015 Valuation Basic Table (“2015 VBT”) finalized by the Society of Actuaries is based on a much larger dataset of insured lives, face amount of policies and more current information compared to the dataset underlying the 2008 Valuation Basic Table. The new 2015 VBT dataset includes 266 million policies compared to the 2008 VBT dataset of 75 million. The experience data in the 2015 VBT dataset includes 2.55 million claims on policies from 51 insurance carriers. Life expectancies implied by the 2015 VBT are generally longer for male and female nonsmokers between the ages of 65 and 80, while smokers and insureds of both genders over the age of 85 have significantly lower life expectancies. We adopted the 2015 VBT in our valuation process in June 2016.

For life insurance policies with face amounts greater than $1 million and that are not pledged under any senior credit facility (approximately 30% of our portfolio by face amount of policy benefits) we attempt to update the independent life expectancy estimates on a continuous rotating three year cycle. For life insurance policies with face amounts greater than $750,000 that are pledged under the LNV senior credit facility (approximately 58% of our portfolio by face amount of policy benefits) we are presently required to update the independent life expectancy estimates every two years.

Our prior experience in updating independent life expectancy estimates has generally resulted in shorter life expectancies of the updated insureds within our portfolio, but often not as short as we had projected. This has resulted in reductions to the fair value of our portfolio in the amounts of $6.7 million and $8.6 million for the three and six months ended June 30, 2017, respectively. As our life insurance portfolio continues to grow, we may experience additional and material adjustments to the fair value of our portfolio due to updating independent life expectancy estimates.

In July 2017, Lincoln National Life Insurance Company announced pending cost-of-insurance rate (i.e., premium) increases for certain life insurance policies which were effected on August 1, 2017. We identified two affected policies in our portfolio. We have requested updated policy illustrations in order to calculate the change in fair value resulting from the expected increased premiums. In August 2017, Transamerica Life Insurance Company announced pending cost-of-insurance rate increases for certain life insurance policies that will be effected on the policy anniversary dates. We identified three affected policies in our portfolio. We are aware of one additional pending cost-of-insurance increase affecting one other policy in our portfolio.

Fair Value Components — Required Premium Payments

We must pay the premiums on the life insurance policies within our portfolio in order to collect the policy benefit. The same probabilistic model and methodologies used to generate expected cash inflows from the life insurance policy benefits over the expected life of the insured are used to estimate cash outflows due to required premium payments. Premiums paid are offset against revenue in the applicable reporting period.

Fair Value Components — Discount Rate

A discount rate is used to calculate the net present value of the expected cash flows. The discount rate used to calculate fair value of our portfolio incorporates the guidance provided by ASC 820.

4

The table below provides the discount rate used to estimate the fair value of our portfolio of life insurance policies for the period ending:

June 30,
2017

 

December 31,
2016

10.81%

 

10.96%

The change in the discount rate incorporates current information about discount rates applied by other reporting companies owning portfolios of life insurance policies, discount rates observed by us in the life insurance secondary market, market interest rates, credit exposure to the issuing insurance companies, and our estimate of the risk premium a purchaser would require to receive the future cash flows derived from our portfolio of life insurance policies. Management has discretion regarding the combination of these and other factors when determining the discount rate. The discount rate we choose assumes an orderly and arms-length transaction (i.e., a non-distressed transaction in which neither seller nor buyer is compelled to engage in the transaction), which is consistent with related GAAP guidance. The carrying value of policies acquired during each quarterly reporting period are adjusted to their current fair value using the fair value discount rate applied to the entire portfolio as of that reporting date.

We engaged Model Actuarial Pricing System, Inc. (“MAPS”) to prepare a calculation of our life insurance portfolio. MAPS owns and maintains the portfolio pricing software we use. MAPS processed policy data, future premium data, life expectancy estimate data, and other actuarial information to calculate a net present value for our portfolio using the specified discount rate of 10.81%. MAPS independently calculated the net present value of our portfolio of 793 policies to be $577.0 million and furnished us with a letter documenting its calculation. A copy of such letter is filed as Exhibit 99.1 to our Quarterly Report on Form 10-Q for the period ended June 30, 2017, filed on August 10, 2017.

Deferred Income Taxes

Under ASC 740, deferred tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. A valuation allowance is established for deferred tax assets that are not considered “more likely than not” to be realized. Realization of deferred tax assets depends upon having sufficient past or future taxable income in periods to which the deductible temporary differences are expected to be recovered or within any applicable carryback or carryforward periods. After assessing the realization of the net deferred tax assets, we believe that it is “more likely than not” that we will be able to realize all of our deferred tax assets other than those which have resulted from capital losses.

Deferred Financing and Issuance Costs

Financing costs, which include issuance costs, sales commissions and other direct expenses incurred under the senior credit facilities, were capitalized and are amortized using the straight-line method over the term of the senior credit facilities. The Series I Secured Note obligations are reported net of financing costs, which are amortized using the interest method over the term of each respective borrowing. The L Bonds are reported net of financing costs, which are amortized using the interest method over the term of each respective borrowing.

Principal Revenue and Expense Items

We earn revenues from the following three primary sources.

•         Life Insurance Policy Benefits Realized. We recognize the difference between the face value of the policy benefits and carrying value when an insured event has occurred and we determine that settlement and collection of the policy benefits is realizable and reasonably assured. Revenue from a transaction must meet both criteria in order to be recognized. We generally collect the face value of the life insurance policy from the insurance company within 45 days of our notification of the insured’s mortality.

•         Change in Fair Value of Life Insurance Policies. We value our portfolio investments for each reporting period in accordance with the fair value principles discussed herein, which reflects the expected receipt of policy benefits in future periods as shown in our consolidated financial statements, net premium costs.

5

•         Sale of a Life Insurance Policy. In the event of a sale of a policy, we recognize gain or loss as the difference between the sale price and the carrying value of the policy on the date of the receipt of payment on such sale.

Our main components of expense are summarized below.

•         Selling, General and Administrative Expenses. We recognize and record expenses incurred in our business operations, including operations related to the purchasing and servicing of life insurance policies. These expenses include salaries and benefits, sales, marketing, occupancy and other expenditures.

•         Interest Expense. We recognize and record interest expenses associated with the costs of financing our life insurance portfolio for the current period. These expenses include interest paid to our senior lenders under our senior credit facilities, interest paid on our L Bonds and other outstanding indebtedness such as our Series I Secured Notes. When we issue debt, we amortize the financing costs associated with such indebtedness over the outstanding term of the financing, and classify it as interest expense.

Results of Operations — Three and Six Months Ended June 30, 2017 Compared to the Same Periods in 2016

The following is our analysis of the results of operations for the periods indicated below. This analysis should be read in conjunction with our consolidated financial statements and related notes.

Revenue.

 

 

Three Months Ended
June 30,

 

Six Months Ended
June 30,

 

 

2017

 

2016

 

2017

 

2016

Revenue recognized from maturities of life insurance contracts

 

 

7,920,000

 

 

 

8,137,000

 

 

 

24,526,000

 

 

 

22,765,000

 

Revenue recognized from change in fair value of life insurance contracts

 

$

15,235,000

 

 

$

21,241,000

 

 

$

29,119,000

 

 

$

32,773,000

 

Premiums and other annual fees

 

 

(11,859,000

)

 

 

(8,995,000

)

 

 

(22,949,000

)

 

 

(17,441,000

)

Gain on life insurance contracts, net

 

$

11,296,000

 

 

$

20,383,000

 

 

$

30,696,000

 

 

$

38,097,000

 

Other income

 

 

372,000

 

 

 

394,000

 

 

 

1,060,000

 

 

 

584,000

 

Total revenue

 

$

11,668,000

 

 

$

20,777,000

 

 

$

31,756,000

 

 

$

38,681,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Number of policies matured

 

 

9

 

 

 

6

 

 

 

19

 

 

 

12

 

Face value of matured policies

 

$

10,935,000

 

 

$

19,238,000

 

 

$

29,910,000

 

 

$

29,067,000

 

The change in fair value related to new policies acquired during the period

 

$

8,044,000

 

 

$

9,822,000

 

 

$

18,645,000

 

 

$

17,841,000

 

____________

(1)      The discount rate applied to estimate the fair value of the portfolio of life insurance policies we own was 10.81% as of June 30, 2017, compared to 10.96% as of December 31, 2016 and 11.05% as of June 30, 2016. The carrying value of policies acquired during each quarterly reporting period is adjusted to current fair value using the fair value discount rate applied to the entire portfolio as of that reporting date.

6

Expenses.

 

 

Three Months Ended
June 30,

 

Six Months Ended
June 30,

 

 

2017

 

2016

 

Increase/
Decrease

 

2017

 

2016

 

Increase/
Decrease

Employee compensation and benefits(1)

 

$

3,741,000

 

$

3,071,000

 

$

670,000

 

$

6,904,000

 

$

5,538,000

 

$

1,366,000

 

Interest expense (including amortization of deferred financing costs)(2)

 

 

12,246,000

 

 

9,765,000

 

 

2,481,000

 

 

25,490,000

 

 

18,914,000

 

 

6,576,000

 

Legal and professional expenses(3)

 

 

1,331,000

 

 

1,304,000

 

 

27,000

 

 

2,277,000

 

 

2,510,000

 

 

(233,000

)

Provision for MCA loans(4)

 

 

878,000

 

 

300,000

 

 

578,000

 

 

878,000

 

 

400,000

 

 

478,000

 

Other expenses(5)

 

 

2,883,000

 

 

2,033,000

 

 

850,000

 

 

5,664,000

 

 

4,345,000

 

 

1,319,000

 

Total expenses

 

$

21,079,000

 

$

16,473,000

 

$

4,606,000

 

$

41,213,000

 

$

31,707,000

 

$

9,506,000

 

____________

(1)      We hired additional members to our sales, marketing and policy acquisition teams. At June 30, 2017 we employed 76 employees and on June 30, 2016, we employed 66 employees.

(2)      Increase in all periods was due to the increase in our average debt outstanding.

(3)      Increase for the three months ended June 30, 2017 over the same period of 2016 is due to increased legal fees associated with MCA collections. Decrease for the six months ended June 30, 2017 over the same period of 2016 is due to fewer SEC filings.

(4)      Increase is due to further impairment of the Nulook loan due to decreased recovery estimates.

(5)      Increase is due to public relations, sales and marketing costs associated with growing and servicing our network of independent financial advisors and appointed agents.

Deferred Income Taxes.

The Company is engaged in acquiring of life insurance policies and holding them to maturity. Due to the nature of holding policies and the aging of the underlying insureds, it will be more likely than not that the Company will recognize taxable income as the policies in our portfolio start maturing at an accelerated rate in the near future. Due to this, we believe that sufficient taxable income will be recognized during the net operating loss carryover period to utilize the reported deferred tax asset, and that no additional valuation allowance, other than that already recorded, is required.

Income Tax Expense. For both the three and six months ended June 30, 2017, we realized income tax benefits of $3.7 million. In the three and six months ended June 30, 2016, we had an income tax expense of $1.8 million and $2.9 million, respectively. The effective tax rate for the three and six months ended June 30, 2017 was 39.5% and 39.3% and for the three and six months ended June 30, 2016, was 42.3% and 41.7%, respectively.

The following table provides a reconciliation of our income tax expense at the statutory federal tax rate to our actual income tax expense:

 

 

Three Months Ended

 

Six Months Ended

 

 

June 30, 2017

 

June 30, 2016

 

June 30, 2017

 

June 30, 2016

Statutory federal income tax (benefit)

 

$

(3,200,000

)

 

34.0

%

 

$

1,463,000

 

34.0

%

 

$

(3,215,000

)

 

34.0

%

 

$

2,371,000

 

34.0

%

State income taxes (benefit), net of federal benefit

 

 

(607,000

)

 

6.5

%

 

 

281,000

 

6.5

%

 

 

(609,000

)

 

6.4

%

 

 

456,000

 

6.5

%

Other permanent differences

 

 

90,000

 

 

(1.0

)%

 

 

78,000

 

1.8

%

 

 

106,000

 

 

(1.1

)%

 

 

80,000

 

1.2

%

Total income tax expense (benefit)

 

$

(3,717,000

)

 

39.5

%

 

$

1,822,000

 

42.3

%

 

$

(3,718,000

)

 

39.3

%

 

$

2.907,000

 

41.7

%

7

The most significant temporary differences between GAAP net income and taxable net income are the treatment of interest costs with respect to the acquisition of the life insurance policies and revenue recognition with respect to the mark-to-market of the life insurance portfolio.

Liquidity and Capital Resources

We finance our business through a combination of life insurance policy benefit receipts, origination fees, equity offerings, debt offerings, and our senior credit facilities. We have used our debt offerings and our senior credit facilities primarily for policy acquisition, policy servicing, and portfolio-related financing expenditures including paying principal and interest.

Under the terms of our senior credit facilities (discussed in Notes 5 and 6), we are required to maintain collection and escrow accounts that are used to fund the acquisition of policies, pay annual policy premiums, pay interest and other charges under the facility, and collect policy benefits. The agents for the lenders authorize disbursements from these accounts. At June 30, 2017 and December 31, 2016, there was a balance of $46,160,000, and $37,827,000, respectively, in these restricted cash accounts.

As of June 30, 2017 and December 31, 2016, we had approximately $105.4 million and $121.7 million, respectively, in combined available cash, cash equivalents, policy benefits receivable, if any, and available borrowing base surplus capacity, if any, under our senior credit facilities for the purpose of purchasing additional life insurance policies, paying premiums on existing policies, paying portfolio servicing expenses, and paying principal and interest on our outstanding financing obligations.

Financings Summary

We had the following outstanding debt balances as of June 30, 2017 and December 31, 2016:

 

 

As of June 30, 2017

 

As of December 31, 2016

Issuer/Borrower

 

Principal
Amount
Outstanding

 

Weighted
Average Interest
Rate

 

Principal
Amount
Outstanding

 

Weighted
Average Interest
Rate

GWG Holdings, Inc. – L Bonds

 

$

407,850,000

 

7.30

%

 

$

387,067,000

 

7.23

%

GWG Life, LLC – Series I Secured Notes

 

 

6,815,000

 

8.72

%

 

 

16,614,000

 

8.68

%

GWG DLP Funding IV, LLC – Senior credit facilities

 

 

155,625,000

 

7.59

%

 

 

162,725,000

 

7.34

%

Total

 

$

570,290,000

 

7.40

%

 

$

566,406,000

 

7.30

%

In November 2009, our wholly owned subsidiary GWG Life began a private placement of Series I Secured Notes to accredited investors only. This offering was closed in November 2011. As of June 30, 2017 and December 31, 2016, we had approximately $6.8 million and $16.6 million, respectively, in principal amount of Series I Secured Notes outstanding. Effective as of the date of this prospectus supplement, we exercised our contractual right to call for the redemption of the Series I Secured Notes. We expect that our redemption of outstanding Series I Secured Notes will occur on or about September 8, 2017 and require us to pay an aggregate of approximately $6.6 million.

In June 2011, we concluded a private placement offering of Series A for new investors, having received an aggregate $24.6 million in subscriptions for our Series A. These subscriptions consisted of $14.0 million in conversions of outstanding Series I Secured Notes and $10.6 million of new investments.

As of both June 30, 2017 and December 31, 2016, we had approximately $19.7 million of Series A stated value outstanding. As of the date of this prospectus supplement, we exercised our contractual right to call for the redemption of the Series A Preferred Stock and all related outstanding warrants. We expect that our redemption of outstanding Series A Preferred Stock and related warrants will occur on or about October 9, 2017 and require us to pay an aggregate of approximately $22.2 million.

In January 2012, we began publicly offering up to $250.0 million in debt securities (initially named “Renewable Secured Debentures” and subsequently renamed “L Bonds”) that was completed in January 2015.

8

On September 24, 2014, we consummated an initial public offering of our common stock resulting in the sale of 800,000 shares of common stock at $12.50 per share and net proceeds of approximately $8.6 million after the deduction of underwriting commissions, discounts and expense reimbursements.

In January 2015, we began publicly offering up to $1.0 billion of L Bonds as a follow-on to our earlier $250.0 million public debt offering. Through June 30, 2017, the total amount of these L Bonds sold, including renewals, was $749.8 million. As of June 30, 2017 and December 31, 2016, respectively, we had approximately $407.9 million and $387.1 million in principal amount of L Bonds outstanding.

In October 2015, we began publicly offering up to 100,000 shares of our RPS at a per-share price of $1,000. As of June 30, 2017, we had issued approximately $99.1 million stated value of RPS. As of June 30, 2017, we no longer offer RPS.

On February 14, 2017, we began publicly offering up to 150,000 shares of RPS 2 at a per-share price of $1,000. As of June 30, 2017, we have issued approximately $22.5 million stated value of RPS 2.

The weighted-average interest rate of our outstanding Series I Secured Notes as of June 30, 2017 and December 31, 2016 was 8.72% and 8.68%, respectively, and the weighted-average maturity at those dates was 1.96 and 1.14 years, respectively. Effective September 1, 2016, we no longer renew the Series I Secured Notes.

The weighted-average interest rate of our outstanding L Bonds as of June 30, 2017 and December 31, 2016 was 7.30% and 7.23%, respectively, and the weighted-average maturity at those dates was 2.27 and 2.13 years, respectively. Our L Bonds have renewal features. Since we first issued our L Bonds, we have experienced $341.9 million in maturities, of which $207.8 million has renewed through June 30, 2017 for an additional term. This has provided us with an aggregate renewal rate of approximately 61% for investments in these securities. Effective September 1, 2016, we discontinued the sales and renewals of 6-month and 1-year L Bonds.

Future contractual maturities of Series I Secured Notes and L Bonds at June 30, 2017 are:

Years Ending December 31,

 

Series I
Secured
Notes

 

L Bonds

 

Total

Six months ending December 31, 2017

 

$

749,000

 

$

47,068,000

 

$

47,817,000

2018

 

 

2,376,000

 

 

108,772,000

 

 

111,148,000

2019

 

 

1,024,000

 

 

116,767,000

 

 

117,791,000

2010

 

 

1,725,000

 

 

49,062,000

 

 

50,787,000

2021

 

 

941,000

 

 

28,753,000

 

 

29,694,000

2022

 

 

—

 

 

24,773,000

 

 

24,773,000

Thereafter

 

 

—

 

 

32,655,000

 

 

32,655,000

 

 

$

6,815,000

 

$

407,850,000

 

$

414,665,000

The L Bonds and Series I Secured Notes are secured by all of our assets, and are subordinate to our senior credit facilities. The L Bonds and Series I Secured Notes are pari passu with respect to a security interest in our assets pursuant to an intercreditor agreement (see Notes 7 and 8).

We maintain a $105 million senior credit facility with Autobahn/DZ Bank through DLP III. The senior credit facility is used to pay the premium expenses related to our portfolio of life insurance policies. As of both June 30, 2017 and December 31, 2016, we had no amounts outstanding under that senior credit facility, no life insurance policies were pledged, and we maintained an available borrowing base of $0 million. On September 14, 2016, we paid off the Autobahn/DZ Bank senior credit facility in full with funds received under a new senior credit facility with LNV Corporation as described in Note 6.

On September 14, 2016, we entered into a $172 million senior credit facility with LNV Corporation in which DLP IV is the borrower. We intend to use the proceeds from this facility to grow and maintain our portfolio of life insurance policies, for liquidity and for general corporate purposes. As of June 30, 2017 we had approximately $155.6 million outstanding under the LNV senior credit facility.

We expect to meet our ongoing operational capital needs through a combination of the receipt of policy benefits from our portfolio of life insurance policies and net proceeds from our L Bonds and RPS 2 offerings. We expect to

9

meet our policy acquisition, servicing, and financing capital needs principally from the receipt of policy benefits from our portfolio of life insurance policies, net proceeds from our offering of L Bonds and RPS 2, and from our senior credit facilities. We estimate that our liquidity and capital resources are sufficient for our current and projected financial needs for at least the next twelve months given current assumptions. However, if we are unable to continue our offerings for any reason (or if we become unsuccessful in selling our securities), and we are unable to obtain capital from other sources, our business will be materially and adversely affected. In addition, our business will be materially and adversely affected if we do not receive the policy benefits we forecast and if holders of our L Bonds or Series I Secured Notes fail to renew with the frequency we have historically experienced. In such a case, we could be forced to sell our investments in life insurance policies to service or satisfy our debt-related and other obligations.

Capital expenditures have historically not been material and we do not anticipate making material capital expenditures in 2017 or beyond.

Debt Financing Summary

The table below reconciles the face amount of our outstanding debt to the carrying value shown on our balance sheet:

 

 

As of
June 30,
2017

 

As of
December 31,
2016

Total senior facilities and other indebtedness

 

 

 

 

 

 

 

 

Face amount outstanding

 

$

155,626,000

 

 

$

162,725,000

 

Unamortized selling costs

 

 

(6,617,000

)

 

 

(6,660,000

)

Carrying amount

 

$

149,009,000

 

 

$

156,065,000

 

 

 

 

 

 

 

 

 

 

Series I Secured Notes:

 

 

 

 

 

 

 

 

Face amount outstanding

 

$

6,815,000

 

 

$

16,614,000

 

Unamortized selling costs

 

 

(134,000

)

 

 

(209,000

)

Carrying amount

 

$

6,681,000

 

 

$

16,405,000

 

 

 

 

 

 

 

 

 

 

L Bonds:

 

 

 

 

 

 

 

 

Face amount outstanding

 

$

407,850,000

 

 

$

387,067,000

 

Subscriptions in process

 

 

6,521,000

 

 

 

5,882,000

 

Unamortized selling costs

 

$

(13,539,000

)

 

$

(11,636,000

)

Carrying amount

 

$

400,832,000

 

 

$

381,313,000

 

Portfolio Assets and Secured Indebtedness

At June 30, 2017, the fair value of our investments in life insurance policies of $577.0 million plus our cash balance of $52.3 million and our restricted cash balance of $46.2 million, plus matured policy benefits receivable of $7.0 million, totaled $682.5 million representing an excess of portfolio assets over secured indebtedness of $105.4 million. At December 31, 2016, the fair value of our investments in life insurance policies of $511.2 million plus our cash balance of $78.5 million and our restricted cash balance of $37.8 million, plus matured policy benefits receivable of $5.3 million, totaled $632.9 million, representing an excess of portfolio assets over secured indebtedness of $66.4 million.

The following forward-looking table seeks to illustrate the impact that a hypothetical sale of our portfolio of life insurance assets at various discount rates would have on our ability to satisfy our debt obligations as of June 30, 2017. In all cases, the sale of the life insurance assets owned by DLP III and DLP IV will be used first to satisfy all amounts owing, if any, under the respective senior credit facilities. The net sale proceeds remaining after satisfying all obligations under the senior credit facilities would be applied to L Bonds and Series I Secured Notes on a pari passu basis.

10

Portfolio Discount Rate

 

10%

 

11%

 

12%

 

13%

 

14%

 

15%

 

16%

Value of portfolio

 

$

599,960,000

 

$

571,539,000

 

$

545,377,000

 

$

521,240,000

 

$

498,920,000

 

$

478,238,000

 

$

459,034,000

 

Cash, cash equivalents and policy benefits receivable

 

 

105,423,000

 

 

105,423,000

 

 

105,423,000

 

 

105,423,000

 

 

105,423,000

 

 

105,423,000

 

 

105,423,000

 

Total assets

 

 

705,383,000

 

 

676,962,000

 

 

650,800,000

 

 

626,663,000

 

 

604,343,000

 

 

583,661,000

 

 

564,457,000

 

Senior credit facilities

 

 

155,625,000

 

 

155,625,000

 

 

155,625,000

 

 

155,625,000

 

 

155,625,000

 

 

155,625,000

 

 

155,625,000

 

Net after senior credit facilities

 

 

549,758,000

 

 

521,337,000

 

 

495,175,000

 

 

471,038,000

 

 

448,718,000

 

 

428,036,000

 

 

408,832,000

 

Series I Secured Notes and
L Bonds

 

 

414,665,000

 

 

414,665,000

 

 

414,665,000

 

 

414,665,000

 

 

414,665,000

 

 

414,665,000

 

 

414,665,000

 

Net after Series I Secured Notes and L Bonds

 

 

135,093,000

 

 

106,672,000

 

 

80,510,000

 

 

56,373,000

 

 

34,053,000

 

 

13,371,000

 

 

(5,833,000

)

Impairment to Series I Secured Notes and
L Bonds

 

 

No impairment

 

 

No impairment

 

 

No impairment

 

 

No impairment

 

 

No impairment

 

 

No impairment

 

 

Impairment

 

The table illustrates that our ability to fully satisfy amounts owing under the L Bonds and Series I Secured Notes would likely be impaired upon the sale of all our life insurance assets at a price equivalent to a discount rate of approximately 15.69% or higher. At December 31, 2016, the likely impairment occurred at a discount rate of approximately 13.94% or higher. The discount rate used to calculate the fair value of our portfolio was 10.81% and 10.96% at June 30, 2017 and December 31, 2016, respectively.

The table does not include any allowance for transactional fees and expenses associated with a portfolio sale (which expenses and fees could be substantial), and is provided to demonstrate how various discount rates used to value our portfolio could affect our ability to satisfy amounts owing under our debt obligations in light of our senior secured lender’s right to priority payments. This table also does not include the yield maintenance fee, which could be substantial, we are required to pay in certain circumstances under our senior credit facility with LNV Corporation. You should read the above table in conjunction with the information contained in other sections of our Quarterly Report on Form 10-Q for the period ended June 30, 2017, filed on August 10, 2017 and this prospectus supplement, including our discussion of discount rates included under the “Critical Accounting Policies — Fair Value Components — Discount Rate” caption above. This discussion and analysis is based on the beliefs of our management, as well as assumptions made by, and information currently available to, our management.

Cash Flows

The payment of premiums and servicing costs to maintain life insurance policies represents our most significant requirement for cash disbursement. When a policy is purchased, we are able to calculate the minimum premium payments required to maintain the policy in-force. Over time as the insured ages, premium payments will increase. Nevertheless, the probability we will actually be required to pay the premiums decreases as mortality becomes more likely. These scheduled premiums and associated probabilities are factored into our expected internal rate of return and cash-flow modeling. Beyond premiums, we incur policy servicing costs, including annual trustee, tracking costs, and debt servicing costs, including principal and interest payments all of which are excluded from our internal rate of return (“IRR”) calculations. Until we receive a sufficient amount of proceeds from the policy benefits, we intend to pay these costs from our senior credit facilities, when permitted, and through the issuance of debt securities, including the L Bonds, and equity securities including our preferred stock offerings.

The amount of payments for anticipated premiums and servicing costs that we will be required to make over the next five years to maintain our current portfolio, assuming no mortalities, is set forth in the table below.

Years Ending December 31,

 

Premiums

 

Servicing

 

Premiums and
Servicing Fees

Six months ending December 31, 2017

 

$

24,455,000

 

$

654,000

 

$

25,109,000

2018

 

 

52,611,000

 

 

654,000

 

 

53,265,000

2019

 

 

58,206,000

 

 

654,000

 

 

58,860,000

2020

 

 

65,722,000

 

 

654,000

 

 

66,376,000

2021

 

 

74,105,000

 

 

654,000

 

 

74,759,000

2022

 

 

83,310,000

 

 

654,000

 

 

83,964,000

 

 

$

358,409,000

 

$

3,924,000

 

$

362,333,000

11

Our anticipated premium expenses are subject to the risk of increased cost-of-insurance charges (i.e., premium charges) for the universal life insurance policies we own. In July 2017, Lincoln National Life Insurance Company announced pending cost-of-insurance rate increases for certain life insurance policies which were effected on August 1, 2017. We identified two affected policies in our portfolio. We have requested updated policy illustrations and in order to calculate the change in fair value resulting from the expected increased premiums. In August 2017, Transamerica Life Insurance Company announced pending cost-of-insurance rate increases for certain life insurance policies that will be effected on the policy anniversary dates. We identified three affected policies in our portfolio. We are aware of one additional pending cost-of-insurance increase affecting one other policy in our portfolio. As a result, we expect that our premium expense will increase and the fair value of the policy and our portfolio will be negatively impacted once the insurer has specified and implemented the proposed increases. Except as noted above, we are not aware of cost-of-insurance increases by other insurers, but we are aware that cost-of-insurance increases have become more prevalent in the industry. Thus, we may see additional insurers implementing cost-of-insurance increases in the future.

For the quarter-end dates set forth below, the following table illustrates the total amount of face value of policy benefits owned, and the trailing 12 months of life insurance policy benefits collected and premiums paid on our portfolio. The trailing 12-month benefits/premium coverage ratio indicates the ratio of policy benefits received to premiums paid over the trailing 12-month period from our portfolio of life insurance policies.

Quarter End Date

 

Portfolio Face
Amount

 

12-Month
Trailing
Benefits
Collected

 

12-Month
Trailing
Premiums Paid

 

12-Month
Trailing
Benefits/
Premium
Coverage Ratio

December 31, 2014

 

779,099,000

 

18,050,000

 

23,265,000

 

77.6

%

March 31, 2015

 

754,942,000

 

46,675,000

 

23,786,000

 

196.2

%

June 30, 2015

 

806,274,000

 

47,125,000

 

24,348,000

 

193.5

%

September 30, 2015

 

878,882,000

 

44,482,000

 

25,313,000

 

175.7

%

December 31, 2015

 

944,844,000

 

31,232,000

 

26,650,000

 

117.2

%

March 31, 2016

 

1,027,821,000

 

21,845,000

 

28,771,000

 

75.9

%

June 30, 2016

 

1,154,798,000

 

30,924,000

 

31,891,000

 

97.0

%

September 30, 2016

 

1,272,078,000

 

35,867,000

 

37,055,000

 

96.8

%

December 31, 2016

 

1,361,675,000

 

48,452,000

 

40,240,000

 

120.4

%

March 31, 2017

 

1,447,558,000

 

48,189,000

 

42,753,000

 

112.7

%

June 30, 2017

 

1,525,363,000

 

49,295,000

 

45,414,000

 

108.5

%

We believe that the portfolio cash flow results set forth above are consistent with our general investment thesis: that the life insurance policy benefits we receive will continue to increase over time in relation to the premiums we are required to pay on the remaining polices in the portfolio. Nevertheless, we expect that our portfolio cash flow on a period-to-period basis will remain inconsistent until such time as we achieve our goal of acquiring a larger, more diversified portfolio of life insurance policies. As our receipt of life insurance policy benefits increases, we expect to use these cash flows to begin paying down our outstanding indebtedness and purchase additional life insurance policies.

Inflation

Changes in inflation do not necessarily correlate with changes in interest rates. We presently do not foresee any material impact of inflation on our results of operations in the periods presented in our consolidated financial statements.

Off-Balance Sheet Arrangements

We are party to an office lease with U.S. Bank National Association as the landlord. On September 1, 2015, we entered into an amendment that expanded the leased space to 17,687 square feet and extended the term through August 31, 2026 (see Note 16).

12

Credit Risk

We review the credit risk associated with our portfolio of life insurance policies when estimating its fair value. In evaluating the policies’ credit risk, we consider insurance company solvency, credit risk indicators, economic conditions, ongoing credit evaluations, and company positions. We attempt to manage our credit risk related to life insurance policies typically by purchasing policies issued only from companies with an investment-grade credit rating by either Standard & Poor’s, Moody’s, or A.M. Best Company. As of June 30, 2017, 96.3% of our life insurance policies, by face value benefits, were issued by companies that maintained an investment-grade rating (BBB or better) by Standard & Poor’s.

Interest Rate Risk

Our senior credit facilities are floating-rate financing. In addition, our ability to offer interest and dividend rates that attract capital (including in our continuous offering of L Bonds and RPS 2) is generally impacted by prevailing interest rates. Furthermore, while our L Bond and RPS 2 offerings provide us with fixed-rate debt and equity financing, our debt coverage ratio is calculated in relation to the interest rate of our debt financing. Therefore, fluctuations in interest rates impact our business by increasing our borrowing costs, and reducing availability under our debt financing arrangements. We calculate our portfolio earnings based upon the spread generated between the return on our life insurance portfolio and the total cost of our financing. As a result, increases in interest rates will reduce the earnings we expect to achieve from our investments in life insurance policies.

Non-GAAP Financial Measures

Non-GAAP financial measures disclosed by our management are provided as additional information to investors in order to provide an alternative method for assessing our financial condition and operating results. These non-GAAP financial measures are not in accordance with GAAP and may be different from non-GAAP measures used by other companies, including other companies within our industry. This presentation of non-GAAP financial information is not meant to be considered in isolation or as a substitute for comparable amounts prepared in accordance with GAAP. See our consolidated financial statements and our financial statements contained herein.

We use non-GAAP financial measures for maintaining compliance with covenants contained in our borrowing agreement with Autobahn/DZ Bank and for management’s assessment of our financial condition and operating results without regard to GAAP fair value standards. The application of current GAAP fair value standards, especially during a period of significant growth of our portfolio and our company may result in current period GAAP financial results that may not be reflective of our long-term earnings potential or overall financial condition. Management believes that our non-GAAP financial measures permit investors to understand long-term earnings performance without regard to the volatility in GAAP financial results that can and does occur during this stage of our portfolio and company growth.

Therefore, in contrast to a GAAP fair valuation (mark-to-market), we seek to measure the accrual of the actuarial gain occurring within the portfolio of life insurance policies at our expected internal rate of return based on statistical mortality probabilities for the insureds (using primarily the insured’s age, sex, health and smoking status). The expected internal rate of return tracks actuarial gain occurring within the policies according to a mortality table as the insureds’ age increases. By comparing the actuarial gain accruing within our portfolio of life insurance policies against our adjusted operating costs during the same period, we can estimate, manage and evaluate the overall financial performance of our business without regard to mark-to-market (fair value) volatility. We use this information to balance our life insurance policy purchasing and manage our capital structure, including the issuance of debt and utilization of our other sources of capital, and to monitor our compliance with borrowing covenants. We believe that these non-GAAP financial measures provide information that is useful for investors to understand period-over-period operating results separate and apart from fair value items that can have a disproportionately positive or negative impact on GAAP results in any particular reporting period.

Our senior credit facility with Autobahn/DZ Bank requires us to maintain a “positive net income” and “tangible net worth,” each of which are calculated on an adjusted non-GAAP basis using the method described below, without regard to GAAP-based fair value measures. In addition, our senior credit facility with Autobahn/DZ Bank requires us to maintain an “excess spread,” which is the difference between (i) the weighted average of our expected internal rate of return of our portfolio of life insurance policies; and (ii) the weighted average of the Autobahn/DZ Bank senior credit facility’s interest rate. These non-GAAP measures (i.e., positive net income, tangible net worth, and an excess spread) are common non-GAAP measures of financial performance and condition in the industry.

13

In addition, the Indenture governing our L Bonds and the note issuance and security agreement governing our Series I Secured Notes require us to maintain a “debt coverage ratio” designed to ensure that the expected cash flows from our portfolio of life insurance policies is reasonably expected to be able to adequately service our total outstanding indebtedness. This ratio is calculated using non-GAAP measures in the method described below, again without regard to GAAP-based fair value measures.

Non-GAAP Investment Cost Basis

 

As of
June 30,
2017

 

As of
December 31,
2016

GAAP fair value

 

$

577,050,000

 

 

$

511,192,000

 

Unrealized fair value gain(A)

 

 

(293,745,000

)

 

 

(264,625,000

)

Adjusted cost basis increase(B)

 

 

281,924,000

 

 

 

248,377,000

 

Non-GAAP investment cost basis(C)

 

$

565,229,000

 

 

$

494,944,000

 

____________

(A)     This represents the reversal of cumulative unrealized GAAP fair value gain of life insurance policies.

(B)     Adjusted cost basis is increased to include interest, premiums and servicing fees that are expensed under GAAP.

(C)     This is the non-GAAP cost basis in life insurance policies from which our expected internal rate of return is calculated.

Excess Spread. Management uses the “total excess spread” to gauge expected profitability of our investments. The expected IRR of our portfolio is based upon future cash flow forecasts derived from a probabilistic analysis of our policy benefits received and policy premiums paid in relation to our non-GAAP investment cost basis (“Expected IRR”).

 

 

As of
June 30,
2017

 

As of
December 31,
2016

Expected IRR

 

11.05

%

 

11.34

%

Total weighted-average interest rate on indebtedness for borrowed money(1)

 

7.40

%

 

7.30

%

Total excess spread(2)

 

3.65

%

 

4.04

%

____________

(1)      Represents the weighted-average interest rate paid on all interest-bearing indebtedness as of the measurement date, determined as follows:

Indebtedness   As of
June 30,
2017		   As of
December 31,
2016
Senior credit facilities   $ 155,626,000   $ 162,725,000
Series I Secured Notes     6,815,000     16,614,000
L Bonds     407,850,000     387,067,000
Total   $ 570,291,000   $ 566,406,000

Interest Rates on Indebtedness            
Senior credit facilities   7.59 %   7.34 %
Series I Secured Notes   8.72 %   8.68 %
L Bonds   7.30 %   7.23 %
Weighted-average interest rates paid on indebtedness   7.40 %   7.30 %

 

(2)    Calculated as the Expected IRR minus the weighted-average interest rate on interest-bearing indebtedness(1).

Adjusted Non-GAAP Net Income. We calculate our adjusted non-GAAP net income by recognizing the actuarial gain accruing within our life insurance portfolio at the Expected IRR against our adjusted cost basis without regard to fair value. We net this actuarial gain against our adjusted operating costs during the same period to calculate our net income on a non-GAAP basis. Our senior credit facility with Autobahn/DZ Bank requires us to maintain a positive net income calculated on an adjusted non-GAAP basis.

14

 

 

Three Months Ended
June 30,

 

Six Months Ended
June 30,

 

 

2017

 

2016

 

2017

 

2016

GAAP net income (loss) attributable to common shareholders

 

$

(7,725,000

)

 

$

1,881,000

 

 

$

(9,638,000

)

 

$

2,956,000

 

Unrealized fair value gain(1)

 

 

(15,235,000

)

 

 

(21,241,000

)

 

 

(29,119,000

)

 

 

(32,773,000

)

Adjusted cost basis increase(2)

 

 

22,739,000

 

 

 

16,373,000

 

 

 

44,461,000

 

 

 

31,740,000

 

Accrual of unrealized actuarial gain(3)

 

 

7,505,000

 

 

 

7,460,000

 

 

 

12,415,000

 

 

 

13,527,000

 

Total adjusted non-GAAP net income (loss)(4)

 

$

7,284,000

 

 

$

4,473,000

 

 

$

18,119,000

 

 

$

15,450,000

 

____________

(1)      Reversal of unrealized GAAP fair value gain of life insurance policies for current period.

(2)      Adjusted cost basis is increased to include interest, premiums and servicing fees that are expensed under GAAP.

(3)      Accrual of actuarial gain at the Expected IRR.

(4)      We must maintain an annual positive consolidated net income, calculated on a non-GAAP basis, to maintain compliance with our senior credit facility with Autobahn/DZ Bank.

Adjusted Non-GAAP Tangible Net Worth. We calculate our adjusted non-GAAP tangible net worth by recognizing the actuarial gain accruing within our life insurance policies at the Expected IRR of the policies we own without regard to fair value. We net this actuarial gain against our costs during the same period to calculate our adjusted tangible net worth on a non-GAAP basis. Our senior credit facility with Autobahn/DZ Bank requires us to maintain a tangible net worth in excess of $45 million calculated on an adjusted non-GAAP basis.

 

 

As of
June 30,
2017

 

As of
December 31,
2016

GAAP net worth

 

$

113,889,000

 

 

$

67,298,000

 

Less intangible assets(1)

 

 

(21,630,000

)

 

 

(19,442,000

)

GAAP tangible net worth

 

 

92,259,000

 

 

 

47,856,000

 

Unrealized fair value gain(2)

 

 

(293,745,000

)

 

 

(264,625,000

)

Adjusted cost basis increase(3)

 

 

281,924,000

 

 

 

248,377,000

 

Accrual of unrealized actuarial gain(4)

 

 

145,223,000

 

 

 

132,808,000

 

Total adjusted non-GAAP tangible net worth

 

$

225,661,000

 

 

$

164,416,000

 

____________

(1)      Unamortized portion of deferred financing costs and pre-paid insurance.

(2)      Reversal of cumulative unrealized GAAP fair value gain on life insurance policies.

(3)      Adjusted cost basis is increased to include interest, premiums and servicing fees that are expensed under GAAP.

(4)      Accrual of cumulative actuarial gain at the Expected IRR.

Debt Coverage Ratio. Our L Bond and Series I Secured Notes borrowing covenants require us to maintain a debt coverage ratio of less than 90%. The debt coverage ratio is calculated by dividing the sum of our total interest-bearing indebtedness by the sum of our cash, cash equivalents, policy benefits receivable, if any, and the net present value of the life insurance portfolio.

 

 

As of
June 30,
2017

 

As of
December 31,
2016

Life insurance portfolio policy benefits(5)

 

$

1,525,363,000

 

 

$

1,361,675,000

 

Discount rate of future cash flows

 

 

7.40

%

 

 

7.30

%

Net present value of life insurance portfolio policy benefits

 

$

686,490,000

 

 

$

614,908,000

 

Cash and cash equivalents

 

 

98,453,000

 

 

 

121,659,000

 

Life insurance policy benefits receivable

 

 

6,970,000

 

 

 

—

 

Total Coverage

 

 

791,913,000

 

 

 

736,567,000

 

 

 

 

 

 

 

 

 

 

Senior credit facilities

 

 

155,626,000

 

 

 

162,725,000

 

Series I Secured Notes

 

 

6,815,000

 

 

 

16,614,000

 

L Bonds

 

 

407,850,000

 

 

 

387,067,000

 

Total Indebtedness

 

$

570,291,000

 

 

$

566,406,000

 

 

 

 

 

 

 

 

 

 

Debt Coverage Ratio

 

 

72.01

%

 

 

76.90

%

____________

(5)      Weighted-average interest rate paid on indebtedness.

15

As of June 30, 2017, we were in compliance with the debt coverage ratio.

Expected Portfolio Internal Rate of Return at Purchase. Expected portfolio IRR at purchase is calculated as the weighted average (by face amount of policy benefits) derived from a probabilistic analysis of policy benefits received and policy premiums paid relative to our purchase price for all life insurance policies in the portfolio. This non-GAAP measure isolates our IRR expectation at purchase utilizing our underwriting life expectancy assumptions at that time. This measure does not change with the passage of time as compared to our non-GAAP investment cost basis that increases with the payment of premiums, financing costs, and the effective life expectancy which changes over time, both of which are used to calculate our Expected IRR.

 

 

As of
June 30,
 2017

 

As of
December 31,
 2016

Life insurance portfolio policy benefits

 

$

1,525,363,000

 

 

$

1,361,675,000

 

Total number of policies

 

 

793

 

 

 

690

 

 

 

 

 

 

 

 

 

 

Non-GAAP Expected Portfolio Internal Rate of Return at Purchase

 

 

15.60

%

 

 

15.64

%

We have in the past reported non-GAAP net asset value among our other non-GAAP financial measures. We have determined, however, to cease reporting this measure primarily because we do not believe that it is sufficiently additive to our existing non-GAAP measures in aiding users of our financial statements and disclosures to measure and evaluate our financial condition or operating results. Moreover, we are not aware of other reporting companies in our industry that use this measure to evaluate their financial condition or operating results.

Portfolio Information

Our portfolio of life insurance policies, owned by our subsidiaries as of June 30, 2017, is summarized below:

Life Insurance Portfolio Summary

Total portfolio face value of policy benefits

 

$

1,525,363,000

 

Average face value per policy

 

$

1,924,000

 

Average face value per insured life

 

$

2,151,000

 

Average age of insured (yrs.)*

 

 

81.5

 

Average life expectancy estimate (yrs.)*

 

 

6.9

 

Total number of policies

 

 

793

 

Number of unique lives

 

 

709

 

Demographics

 

 

74% Males; 26% Females

 

Number of smokers

 

 

30

 

Largest policy as % of total portfolio

 

 

0.87

%

Average policy as % of total portfolio

 

 

0.13

%

Average annual premium as % of face value

 

 

3.21

%

____________

* Averages presented in the table are weighted averages.

16

Our portfolio of life insurance policies, owned by our wholly owned subsidiaries as of June 30, 2017, organized by the insured’s current age and the associated number of policies and policy benefits, is summarized below:

Distribution of Policies and Policy Benefits by Current Age of Insured

 

 

 

 

 

 

 

 

 

 

Percentage of Total

Min Age

 

Max Age

 

Policies

 

Policy Benefits

 

Wtd. Avg.
Life
Expectancy
(yrs.)

 

Number of
Policies

 

Policy
Benefits

95

 

99

 

8

 

$

12,392,000

 

1.1

 

1.0

%

 

0.8

%

90

 

94

 

71

 

$

135,898,000

 

2.9

 

8.9

%

 

8.9

%

85

 

89

 

195

 

$

393,983,000

 

4.7

 

24.6

%

 

25.8

%

80

 

84

 

171

 

$

401,496,000

 

6.3

 

21.6

%

 

26.3

%

75

 

79

 

144

 

$

270,779,000

 

9.0

 

18.2

%

 

17.8

%

70

 

74

 

133

 

$

210,775,000

 

10.2

 

16.8

%

 

13.8

%

60

 

69

 

71

 

$

100,040,000

 

11.3

 

8.9

%

 

6.6

%

Total

 

 

 

793

 

$

1,525,363,000

 

6.9

 

100.0

%

 

100.0

%

Our portfolio of life insurance policies, owned by our wholly owned subsidiaries as of June 30, 2017, organized by the insured’s estimated life expectancy and associated policy benefits, is summarized below:

Distribution of Policies by Current Life Expectancies of Insured

 

 

 

 

 

 

 

 

Percentage of Total

Min LE (Months)

 

Max LE
(Months)

 

Policies

 

Policy Benefits

 

Number of
Policies

 

Policy
Benefits

2

 

47

 

212

 

$

334,511,000

 

26.7

%

 

21.9

%

48

 

71

 

175

 

 

372,072,000

 

22.1

%

 

24.4

%

72

 

95

 

147

 

 

289,037,000

 

18.5

%

 

19.0

%

96

 

119

 

117

 

 

235,105,000

 

14.8

%

 

15.4

%

120

 

143

 

77

 

 

158,601,000

 

9.7

%

 

10.4

%

144

 

199

 

65

 

 

136,037,000

 

8.2

%

 

8.9

%

Total

 

 

 

793

 

$

1,525,363,000

 

100.0

%

 

100.0

%

We track concentrations of pre-existing medical conditions among insured individuals within our portfolio based on information contained in life expectancy reports. We track these medical conditions within the following ten primary categories: (1) cancer, (2) cardiovascular, (3) cerebrovascular, (4) dementia, (5) diabetes, (6) multiple, (7) neurological disorders, (8) no disease, (9) other, and (10) respiratory diseases. Our primary categories are summary generalizations based on the ICD-9 codes we track on each insured individuals within our portfolio. ICD-9 codes, published by the World Health Organization, are used worldwide for medical diagnoses and treatment systems, as well as morbidity and mortality statistics. Currently, the primary disease categories within our portfolio that represent a concentration of over 10% are multiple, cardiovascular, and other which constitute 27.6%, 19.9%, and 12.4%, respectively, of the face amount of insured benefits of our portfolio as at June 30, 2017.

Portfolio Credit Risk Management

We rely on the payment of policy benefit claims by life insurance companies as our most significant source of cash flows. The life insurance assets we own represent obligations of third-party life insurance companies to pay the benefit amount under the relevant policy upon the mortality of the insured. As a result, we manage this credit risk exposure by generally purchasing policies issued by insurance companies with investment-grade ratings from Standard & Poor manage this credit risk exposure by generally purchasing policies issued.

17

Approximately 96.3% of life insurance assets in our portfolio were issued by insurance companies with investment-grade credit ratings from Standard & Poor’s, as of June 30, 2017. Our largest life insurance company credit exposures and the Standard & Poor’s credit rating of their respective financial strength and claims-paying ability is set forth below:

Rank

 

Policy Benefits

 

Percentage of
Policy Benefit
Amount

 

Insurance Company

 

Ins. Co. S&P
Rating

1

 

$

215,471,000

 

14.1

%

 

John Hancock Life Insurance Company (U.S.A.)

 

AA-

2

 

$

193,557,000

 

12.7

%

 

AXA Equitable Life Insurance Company

 

AA-

3

 

$

165,580,000

 

10.9

%

 

Lincoln National Life Insurance Company

 

AA-

4

 

$

157,254,000

 

10.3

%

 

Transamerica Life Insurance Company

 

AA-

5

 

$

103,642,000

 

6.8

%

 

Metropolitan Life Insurance Company

 

AA-

6

 

$

62,293,000

 

4.1

%

 

Massachusetts Mutual Life Insurance Company

 

AA+

7

 

$

61,025,000

 

4.0

%

 

American General Life Insurance Company

 

A+

8

 

$

56,422,000

 

3.7

%

 

Pacific Life Insurance Company

 

AA-

9

 

$

47,390,000

 

3.1

%

 

West Coast Life Insurance Company

 

AA-

10

 

$

45,670,000

 

3.0

%

 

Reliastar Life Insurance Company

 

A

 

 

 

1,108,304,000

 

72.7

%

 

 

 

 

The yield to maturity on bonds issued by life insurance carriers reflects, among other things, the credit risk (risk of default) of such insurance carrier. We follow the yields on certain publicly traded life insurance company bonds since this information is part of the data we consider when valuing our portfolio of life insurance policies for our financial statements.

Name of Bond

 

Maturity

 

YTM

 

Duration
(Years)

 

Bond S&P
Rating

AXA 1.125%

 

5/15/2028

 

1.04

%

 

10.9

 

A

Manulife Finl 4.15%

 

3/4/2026

 

3.18

%

 

8.7

 

A

Lincoln National Corp Ind 3.625%

 

12/12/2026

 

3.68

%

 

9.5

 

A-

Amer Intl Grp 4.875%

 

6/1/2022

 

2.71

%

 

4.9

 

BBB+

Protective Life 7.375%

 

10/15/2019

 

2.31

%

 

2.3

 

A-

Metlife 3.048%

 

12/15/2022

 

2.60

%

 

5.5

 

A-

Prudential Finl Inc Mtns Book 3.5%

 

5/15/2024

 

2.85

%

 

6.9

 

A

Average yield on insurance bonds

 

 

 

2.62

%

 

6.9

 

 

The table above indicates the current yields to maturity (YTM) for the senior bonds of selected life insurance carriers with durations, on average, that are similar to the life expectancy estimates of our life insurance portfolio. As of June 30, 2017, the average yield to maturity of these bonds was 2.62%, which we believe reflects, in part, the financial market’s judgment that credit risk is low with regard to these carriers’ financial obligations. It should be noted that the obligations of life insurance carriers to pay life insurance policy benefits ranks senior to all of their other financial obligations, such as the bonds they issue. This “super senior” priority is not reflected in the yield to maturity in the table and, if considered, would result in a lower yield to maturity all else being equal. Thus, as long as the respective premium payments have been made, it is highly likely that the owner of the insurance policy will collect the insurance policy benefit upon the mortality of the insured.

Value Proposition. We define the value proposition presented by our portfolio of life insurance assets as our ability to earn superior risk-adjusted returns. At any time, we calculate our returns from our life insurance assets based upon (i) our historical results; and (ii) the future cash flows we expect to realize from our statistical forecasts. To forecast our expected future cash flows, we use the probabilistic method of analysis. The actuarial software we use to produce our expected future cash flows and conduct our probabilistic analysis was developed by the actuarial firm Milliman and is now owned by MAPS. The expected internal rate of return of our portfolio is based upon future cash flow forecasts derived from a probabilistic analysis of our policy benefits received and policy premiums paid in relation to our non-GAAP investment cost basis. As of June 30, 2017, the expected internal rate of return on our portfolio of life insurance assets was 11.05% based on our portfolio benefits of $1.525 billion and our non-GAAP investment cost basis of $565.2 million (including purchase price, premiums paid, and financing costs incurred to date).

18

We seek to further enhance our understanding of our expected future cash flow forecast by applying a stochastic analysis, sometimes referred to as a “Monte Carlo simulation,” to provide us with a greater understanding of the variability of our future cash flow projections. The stochastic analysis we perform is built within the MAPS actuarial software and provides internal rate of return calculations for different statistical confidence intervals. The results of our stochastic analysis, in which we run 10,000 random mortality scenarios, demonstrates that the scenario ranking at the 50th percentile of all 10,000 results generates an internal rate of return of 11.01%, which is near to our Expected IRR of 11.05%. The stochastic analysis results also reveal that our portfolio is expected to generate an internal rate of return of 10.49% or better in 75% of all generated scenarios; and an internal rate of return of 10.04% or better in 90% of all generated scenarios. As the portfolio continues to grow, all else equal, the percentage of observations that result in an internal rate of return at or very near 11.01% (currently our median, or 50th percentile, internal rate of return expectation) is expected to increase, thereby lowering future cash flow volatility and potentially justifying our use of lower discount rates to value our portfolio.

In sum, we believe our statistical analyses show that, if we can continue to grow and maintain our investments in life insurance assets, then, in the absence of significant negative events affecting our most significant risks, including but not limited to longevity and credit risk, and interest rate and financing risk, those investments will provide superior risk-adjusted returns for our company and provide us with the means to generate attractive returns for our investors.

19

The complete detail of our portfolio of life insurance policies, owned by our wholly owned subsidiaries as of June 30, 2017, organized by the current age of the insured and the associated policy benefits, sex, estimated life expectancy, issuing insurance carrier, and the credit rating of the issuing insurance carrier, is set forth below.

Life Insurance Portfolio Detail
(as of June 30, 2017)

 

 

Face
Amount

 

Gender

 

Age
(ALB)

 

LE
(mo.)(1)

 

Insurance Company

 

S&P
Rating

1

 

$

8,000,000

 

F

 

99

 

10

 

Massachusetts Mutual Life Insurance Company

 

AA+

2

 

$

184,000

 

M

 

96

 

33

 

Reliastar Life Insurance Company

 

A

3

 

$

219,000

 

M

 

96

 

33

 

Reliastar Life Insurance Company

 

A

4

 

$

1,100,000

 

M

 

96

 

16

 

Reliastar Life Insurance Company

 

A

5

 

$

1,500,000

 

F

 

96

 

19

 

Accordia Life and Annuity Company

 

A-

6

 

$

1,000,000

 

F

 

95

 

20

 

Transamerica Life Insurance Company

 

AA-

7

 

$

264,000

 

F

 

95

 

10

 

Lincoln Benefit Life Company

 

BBB+

8

 

$

125,000

 

F

 

95

 

2

 

Lincoln National Life Insurance Company

 

AA-

9

 

$

250,000

 

M

 

94

 

18

 

North American Company for Life and Health Insurance

 

A+

10

 

$

3,500,000

 

M

 

94

 

25

 

Reliastar Life Insurance Company

 

A

11

 

$

250,000

 

M

 

94

 

5

 

Transamerica Life Insurance Company

 

AA-

12

 

$

572,429

 

F

 

93

 

21

 

Reliastar Life Insurance Company

 

A

13

 

$

3,000,000

 

M

 

93

 

25

 

West Coast Life Insurance Company

 

AA-

14

 

$

500,000

 

F

 

93

 

49

 

John Hancock Life Insurance Company (U.S.A.)

 

AA-

15

 

$

5,000,000

 

F

 

93

 

40

 

American General Life Insurance Company

 

A+

16

 

$

2,000,000

 

F

 

93

 

3

 

Pruco Life Insurance Company

 

AA-

17

 

$

400,000

 

F

 

93

 

52

 

Principal Life Insurance Company

 

A+

18

 

$

500,000

 

F

 

93

 

36

 

Sun Life Assurance Company of Canada (U.S.)

 

AA-

19

 

$

5,000,000

 

F

 

93

 

20

 

John Hancock Life Insurance Company (U.S.A.)

 

AA-

20

 

$

1,000,000

 

F

 

93

 

20

 

Lincoln National Life Insurance Company

 

AA-

21

 

$

300,000

 

F

 

93

 

13

 

West Coast Life Insurance Company

 

AA-

22

 

$

1,682,773

 

F

 

92

 

36

 

Hartford Life and Annuity Insurance Company

 

BBB+

23

 

$

500,000

 

M

 

92

 

34

 

Massachusetts Mutual Life Insurance Company

 

AA+

24

 

$

5,000,000

 

M

 

92

 

19

 

John Hancock Life Insurance Company (U.S.A.)

 

AA-

25

 

$

3,100,000

 

F

 

92

 

20

 

Lincoln Benefit Life Company

 

BBB+

26

 

$

1,500,000

 

F

 

92

 

49

 

Lincoln National Life Insurance Company

 

AA-

27

 

$

3,000,000

 

F

 

92

 

23

 

Lincoln National Life Insurance Company

 

AA-

28

 

$

144,000

 

M

 

92

 

44

 

Lincoln National Life Insurance Company

 

AA-

29

 

$

500,000

 

M

 

92

 

34

 

Reliastar Life Insurance Company

 

A

30

 

$

1,000,000

 

M

 

92

 

6

 

Voya Retirement Insurance and Annuity Company

 

A

31

 

$

1,000,000

 

F

 

92

 

32

 

Pan-American Assurance Company

 

N/A

32

 

$

1,000,000

 

F

 

91

 

35

 

United of Omaha Life Insurance Company

 

AA-

33

 

$

3,500,000

 

F

 

91

 

55

 

John Hancock Life Insurance Company (U.S.A.)

 

AA-

34

 

$

500,000

 

M

 

91

 

33

 

Allianz Life Insurance Company of North America

 

AA

35

 

$

1,200,000

 

F

 

91

 

26

 

Massachusetts Mutual Life Insurance Company

 

AA+

36

 

$

1,200,000

 

F

 

91

 

26

 

Massachusetts Mutual Life Insurance Company

 

AA+

37

 

$

375,000

 

M

 

91

 

26

 

Lincoln National Life Insurance Company

 

AA-

38

 

$

5,000,000

 

M

 

91

 

27

 

John Hancock Life Insurance Company (U.S.A.)

 

AA-

39

 

$

500,000

 

F

 

91

 

22

 

Lincoln National Life Insurance Company

 

AA-

40

 

$

5,000,000

 

F

 

91

 

37

 

Reliastar Life Insurance Company

 

A

41

 

$

5,000,000

 

F

 

91

 

14

 

Lincoln National Life Insurance Company

 

AA-

42

 

$

1,000,000

 

F

 

91

 

56

 

Lincoln National Life Insurance Company

 

AA-

43

 

$

1,203,520

 

M

 

91

 

44

 

Columbus Life Insurance Company

 

AA

20

 

 

Face
Amount

 

Gender

 

Age
(ALB)

 

LE
(mo.)(1)

 

Insurance Company

 

S&P
Rating

44

 

$

1,350,000

 

F

 

91

 

25

 

Lincoln National Life Insurance Company

 

AA-

45

 

$

3,500,000

 

F

 

91

 

27

 

Lincoln National Life Insurance Company

 

AA-

46

 

$

5,000,000

 

F

 

90

 

33

 

Massachusetts Mutual Life Insurance Company

 

AA+

47

 

$

100,000

 

M

 

90

 

22

 

American General Life Insurance Company

 

A+

48

 

$

2,500,000

 

F

 

90

 

33

 

American General Life Insurance Company

 

A+

49

 

$

2,500,000

 

M

 

90

 

38

 

Pacific Life Insurance Company

 

AA-

50

 

$

4,000,000

 

F

 

90

 

55

 

Transamerica Life Insurance Company

 

AA-

51

 

$

5,000,000

 

M

 

90

 

37

 

AXA Equitable Life Insurance Company

 

AA-

52

 

$

1,103,922

 

F

 

90

 

45

 

Sun Life Assurance Company of Canada (U.S.)

 

AA-

53

 

$

1,000,000

 

F

 

90

 

48

 

Transamerica Life Insurance Company

 

AA-

54

 

$

250,000

 

F

 

90

 

48

 

Transamerica Life Insurance Company

 

AA-

55

 

$

500,000

 

F

 

90

 

27

 

Transamerica Life Insurance Company

 

AA-

56

 

$

1,050,000

 

M

 

90

 

29

 

John Hancock Life Insurance Company (U.S.A.)

 

AA-

57

 

$

5,000,000

 

M

 

90

 

36

 

AIG Life Insurance Company

 

A+

58

 

$

3,000,000

 

M

 

90

 

76

 

Transamerica Life Insurance Company

 

AA-

59

 

$

1,000,000

 

M

 

90

 

27

 

AXA Equitable Life Insurance Company

 

AA-

60

 

$

500,000

 

M

 

90

 

46

 

Lincoln National Life Insurance Company

 

AA-

61

 

$

649,026

 

F

 

90

 

54

 

Midland National Life Insurance Company

 

A+

62

 

$

4,785,380

 

F

 

90

 

28

 

John Hancock Life Insurance Company (U.S.A.)

 

AA-

63

 

$

1,803,455

 

F

 

90

 

54

 

Metropolitan Life Insurance Company

 

AA-

64

 

$

1,529,270

 

F

 

90

 

54

 

Metropolitan Life Insurance Company

 

AA-

65

 

$

800,000

 

M

 

90

 

46

 

Lincoln National Life Insurance Company

 

AA-

66

 

$

400,000

 

M

 

90

 

31

 

Lincoln National Life Insurance Company

 

AA-

67

 

$

977,000

 

M

 

90

 

29

 

New York Life Insurance Company

 

AA+

68

 

$

2,000,000

 

M

 

90

 

26

 

John Hancock Life Insurance Company (U.S.A.)

 

AA-

69

 

$

5,000,000

 

M

 

90

 

36

 

John Hancock Life Insurance Company (U.S.A.)

 

AA-

70

 

$

500,000

 

F

 

90

 

20

 

Nationwide Life and Annuity Insurance Company

 

A+

71

 

$

2,225,000

 

F

 

90

 

67

 

Transamerica Life Insurance Company

 

AA-

72

 

$

3,000,000

 

F

 

90

 

64

 

Massachusetts Mutual Life Insurance Company

 

AA+

73

 

$

1,500,000

 

M

 

90

 

31

 

Union Central Life Insurance Company

 

N/A

74

 

$

300,000

 

M

 

90

 

33

 

John Hancock Life Insurance Company (U.S.A.)

 

AA-

75

 

$

3,000,000

 

M

 

90

 

28

 

Lincoln National Life Insurance Company

 

AA-

76

 

$

2,000,000

 

M

 

90

 

31

 

John Hancock Life Insurance Company (U.S.A.)

 

AA-

77

 

$

396,791

 

M

 

90

 

20

 

Lincoln National Life Insurance Company

 

AA-

78

 

$

1,500,000

 

M

 

90

 

85

 

Transamerica Life Insurance Company

 

AA-

79

 

$

1,000,000

 

F

 

90

 

64

 

Lincoln National Life Insurance Company

 

AA-

80

 

$

1,000,000

 

F

 

89

 

38

 

Metropolitan Life Insurance Company

 

AA-

81

 

$

248,859

 

F

 

89

 

19

 

Lincoln National Life Insurance Company

 

AA-

82

 

$

1,000,000

 

F

 

89

 

46

 

General American Life Insurance Company

 

AA-

83

 

$

500,000

 

F

 

89

 

51

 

Sun Life Assurance Company of Canada (U.S.)

 

AA-

84

 

$

5,000,000

 

F

 

89

 

22

 

Transamerica Life Insurance Company

 

AA-

85

 

$

3,000,000

 

M

 

89

 

30

 

Transamerica Life Insurance Company

 

AA-

86

 

$

1,200,000

 

M

 

89

 

55

 

Transamerica Life Insurance Company

 

AA-

87

 

$

1,000,000

 

M

 

89

 

60

 

AXA Equitable Life Insurance Company

 

AA-

88

 

$

250,000

 

M

 

89

 

61

 

Metropolitan Life Insurance Company

 

AA-

89

 

$

6,000,000

 

F

 

89

 

41

 

Sun Life Assurance Company of Canada (U.S.)

 

AA-

90

 

$

330,000

 

M

 

89

 

52

 

AXA Equitable Life Insurance Company

 

AA-

91

 

$

175,000

 

M

 

89

 

52

 

Metropolitan Life Insurance Company

 

AA-

92

 

$

335,000

 

M

 

89

 

52

 

Metropolitan Life Insurance Company

 

AA-

21

 

 

Face
Amount

 

Gender

 

Age
(ALB)

 

LE
(mo.)(1)

 

Insurance Company

 

S&P
Rating

93

 

$

3,000,000

 

M

 

89

 

58

 

AXA Equitable Life Insurance Company

 

AA-

94

 

$

2,000,000

 

F

 

89

 

33

 

Beneficial Life Insurance Company

 

N/A

95

 

$

250,000

 

F

 

89

 

33

 

John Hancock Life Insurance Company (U.S.A.)

 

AA-

96

 

$

1,000,000

 

F

 

89

 

24

 

New York Life Insurance Company

 

AA+

97

 

$

1,250,000

 

M

 

89

 

21

 

Columbus Life Insurance Company

 

AA

98

 

$

300,000

 

M

 

89

 

21

 

Columbus Life Insurance Company

 

AA

99

 

$

10,000,000

 

F

 

89

 

71

 

West Coast Life Insurance Company

 

AA-

100

 

$

2,500,000

 

M

 

89

 

47

 

Transamerica Life Insurance Company

 

AA-

101

 

$

1,000,000

 

F

 

89

 

36

 

West Coast Life Insurance Company

 

AA-

102

 

$

2,000,000

 

F

 

89

 

36

 

West Coast Life Insurance Company

 

AA-

103

 

$

5,000,000

 

M

 

89

 

81

 

West Coast Life Insurance Company

 

AA-

104

 

$

800,000

 

M

 

89

 

39

 

National Western Life Insurance Company

 

A

105

 

$

500,000

 

F

 

89

 

34

 

Transamerica Life Insurance Company

 

AA-

106

 

$

400,000

 

F

 

89

 

34

 

Lincoln Benefit Life Company

 

BBB+

107

 

$

1,269,017

 

M

 

89

 

19

 

Hartford Life and Annuity Insurance Company

 

BBB+

108

 

$

1,500,000

 

F

 

89

 

37

 

Transamerica Life Insurance Company

 

AA-

109

 

$

500,000

 

F

 

89

 

37

 

Transamerica Life Insurance Company

 

AA-

110

 

$

1,000,000

 

M

 

89

 

27

 

Security Life of Denver Insurance Company

 

A

111

 

$

200,000

 

M

 

89

 

33

 

Lincoln Benefit Life Company

 

BBB+

112

 

$

4,445,467

 

M

 

89

 

42

 

Penn Mutual Life Insurance Company

 

A+

113

 

$

7,500,000

 

M

 

89

 

34

 

Lincoln National Life Insurance Company

 

AA-

114

 

$

3,600,000

 

F

 

89

 

50

 

AXA Equitable Life Insurance Company

 

AA-

115

 

$

5,000,000

 

M

 

89

 

62

 

Lincoln National Life Insurance Company

 

AA-

116

 

$

4,513,823

 

F

 

89

 

21

 

Accordia Life and Annuity Company

 

A-

117

 

$

309,000

 

M

 

89

 

21

 

Transamerica Life Insurance Company

 

AA-

118

 

$

100,000

 

F

 

89

 

40

 

American General Life Insurance Company

 

A+

119

 

$

100,000

 

F

 

89

 

40

 

American General Life Insurance Company

 

A+

120

 

$

2,000,000

 

F

 

89

 

58

 

U.S. Financial Life Insurance Company

 

N/A

121

 

$

1,000,000

 

M

 

89

 

26

 

Lincoln National Life Insurance Company

 

AA-

122

 

$

1,000,000

 

M

 

88

 

33

 

John Hancock Life Insurance Company (U.S.A.)

 

AA-

123

 

$

2,000,000

 

M

 

88

 

33

 

John Hancock Life Insurance Company (U.S.A.)

 

AA-

124

 

$

5,000,000

 

M

 

88

 

34

 

Lincoln National Life Insurance Company

 

AA-

125

 

$

1,365,000

 

F

 

88

 

75

 

Transamerica Life Insurance Company

 

AA-

126

 

$

5,000,000

 

F

 

88

 

51

 

Lincoln National Life Insurance Company

 

AA-

127

 

$

250,000

 

M

 

88

 

31

 

Wilton Reassurance Life Insurance Company

 

N/A

128

 

$

1,000,000

 

F

 

88

 

69

 

Security Life of Denver Insurance Company

 

A

129

 

$

200,000

 

F

 

88

 

68

 

Lincoln National Life Insurance Company

 

AA-

130

 

$

1,000,000

 

M

 

88

 

31

 

Sun Life Assurance Company of Canada (U.S.)

 

AA-

131

 

$

1,000,000

 

M

 

88

 

25

 

Massachusetts Mutual Life Insurance Company

 

AA+

132

 

$

1,000,000

 

F

 

88

 

16

 

State Farm Life Insurance Company

 

AA

133

 

$

2,000,000

 

M

 

88

 

77

 

Transamerica Life Insurance Company

 

AA-

134

 

$

209,176

 

M

 

88

 

74

 

Lincoln National Life Insurance Company

 

AA-

135

 

$

8,500,000

 

M

 

88

 

69

 

Massachusetts Mutual Life Insurance Company

 

AA+

136

 

$

1,000,000

 

M

 

88

 

19

 

Transamerica Life Insurance Company

 

AA-

137

 

$

500,000

 

M

 

88

 

63

 

Metropolitan Life Insurance Company

 

AA-

138

 

$

750,000

 

F

 

88

 

63

 

Lincoln National Life Insurance Company

 

AA-

139

 

$

1,500,000

 

F

 

88

 

63

 

Lincoln National Life Insurance Company

 

AA-

140

 

$

400,000

 

F

 

88

 

63

 

Lincoln National Life Insurance Company

 

AA-

141

 

$

1,250,000

 

F

 

88

 

63

 

Lincoln National Life Insurance Company

 

AA-

22

 

 

Face
Amount

 

Gender

 

Age
(ALB)

 

LE
(mo.)(1)

 

Insurance Company

 

S&P
Rating

142

 

$

2,000,000

 

M

 

88

 

34

 

Lincoln National Life Insurance Company

 

AA-

143

 

$

200,000

 

M

 

88

 

54

 

AIG Life Insurance Company

 

A+

144

 

$

500,000

 

F

 

88

 

40

 

Beneficial Life Insurance Company

 

N/A

145

 

$

2,000,000

 

M

 

88

 

64

 

Lincoln National Life Insurance Company

 

AA-

146

 

$

1,800,000

 

M

 

88

 

36

 

John Hancock Life Insurance Company (U.S.A.)

 

AA-

147

 

$

120,500

 

M

 

88

 

23

 

New England Life Insurance Company

 

A+

148

 

$

4,000,000

 

M

 

88

 

34

 

Metropolitan Life Insurance Company

 

AA-

149

 

$

2,000,000

 

M

 

88

 

70

 

Security Life of Denver Insurance Company

 

A

150

 

$

2,000,000

 

M

 

88

 

70

 

Security Life of Denver Insurance Company

 

A

151

 

$

2,000,000

 

M

 

88

 

70

 

Security Life of Denver Insurance Company

 

A

152

 

$

1,500,000

 

M

 

88

 

41

 

AXA Equitable Life Insurance Company

 

AA-

153

 

$

1,500,000

 

M

 

87

 

21

 

Transamerica Life Insurance Company

 

AA-

154

 

$

1,000,000

 

F

 

87

 

55

 

AXA Equitable Life Insurance Company

 

AA-

155

 

$

2,000,000

 

M

 

87

 

37

 

Metropolitan Life Insurance Company

 

AA-

156

 

$

3,000,000

 

M

 

87

 

37

 

Metropolitan Life Insurance Company

 

AA-

157

 

$

1,000,000

 

M

 

87

 

23

 

John Hancock Life Insurance Company (U.S.A.)

 

AA-

158

 

$

2,000,000

 

F

 

87

 

66

 

AXA Equitable Life Insurance Company

 

AA-

159

 

$

5,000,000

 

F

 

87

 

41

 

Security Life of Denver Insurance Company

 

A

160

 

$

3,000,000

 

F

 

87

 

65

 

Sun Life Assurance Company of Canada (U.S.)

 

AA-

161

 

$

125,000

 

M

 

87

 

46

 

Jackson National Life Insurance Company

 

AA

162

 

$

2,500,000

 

M

 

87

 

49

 

Metropolitan Life Insurance Company

 

AA-

163

 

$

1,500,000

 

M

 

87

 

67

 

AXA Equitable Life Insurance Company

 

AA-

164

 

$

1,000,000

 

M

 

87

 

38

 

AXA Equitable Life Insurance Company

 

AA-

165

 

$

2,328,547

 

M

 

87

 

32

 

Metropolitan Life Insurance Company

 

AA-

166

 

$

2,000,000

 

M

 

87

 

32

 

Metropolitan Life Insurance Company

 

AA-

167

 

$

5,000,000

 

M

 

87

 

69

 

Security Life of Denver Insurance Company

 

A

168

 

$

3,000,000

 

F

 

87

 

46

 

Transamerica Life Insurance Company

 

AA-

169

 

$

5,000,000

 

M

 

87

 

54

 

Security Life of Denver Insurance Company

 

A

170

 

$

347,211

 

F

 

87

 

23

 

Pruco Life Insurance Company

 

AA-

171

 

$

1,000,000

 

M

 

87

 

31

 

John Hancock Life Insurance Company (U.S.A.)

 

AA-

172

 

$

500,000

 

M

 

87

 

32

 

New England Life Insurance Company

 

A+

173

 

$

4,000,000

 

F

 

87

 

50

 

Reliastar Life Insurance Company

 

A

174

 

$

284,924

 

M

 

87

 

43

 

Transamerica Life Insurance Company

 

AA-

175

 

$

5,000,000

 

F

 

87

 

73

 

American General Life Insurance Company

 

A+

176

 

$

2,000,000

 

M

 

87

 

45

 

AXA Equitable Life Insurance Company

 

AA-

177

 

$

1,750,000

 

M

 

87

 

45

 

AXA Equitable Life Insurance Company

 

AA-

178

 

$

2,000,000

 

F

 

87

 

69

 

John Hancock Life Insurance Company (U.S.A.)

 

AA-

179

 

$

500,000

 

F

 

87

 

19

 

Transamerica Life Insurance Company

 

AA-

180

 

$

2,000,000

 

M

 

87

 

21

 

Transamerica Life Insurance Company

 

AA-

181

 

$

1,425,000

 

M

 

87

 

40

 

John Hancock Life Insurance Company (U.S.A.)

 

AA-

182

 

$

500,000

 

M

 

87

 

37

 

Hartford Life and Annuity Insurance Company

 

BBB+

183

 

$

800,000

 

M

 

87

 

34

 

Metropolitan Life Insurance Company

 

AA-

184

 

$

5,000,000

 

F

 

86

 

81

 

AXA Equitable Life Insurance Company

 

AA-

185

 

$

1,000,000

 

F

 

86

 

65

 

John Hancock Life Insurance Company (U.S.A.)

 

AA-

186

 

$

694,487

 

M

 

86

 

59

 

Lincoln National Life Insurance Company

 

AA-

187

 

$

6,000,000

 

F

 

86

 

102

 

American General Life Insurance Company

 

A+

188

 

$

1,433,572

 

M

 

86

 

37

 

Security Mutual Life Insurance Company of NY

 

N/A

189

 

$

1,500,000

 

F

 

86

 

109

 

Lincoln Benefit Life Company

 

BBB+

190

 

$

1,000,000

 

F

 

86

 

29

 

Metropolitan Life Insurance Company

 

AA-

23

 

 

Face
Amount

 

Gender

 

Age
(ALB)

 

LE
(mo.)(1)

 

Insurance Company

 

S&P
Rating

191

 

$

1,000,000

 

M

 

86

 

43

 

Columbus Life Insurance Company

 

AA

192

 

$

750,000

 

M

 

86

 

67

 

West Coast Life Insurance Company

 

AA-

193

 

$

4,000,000

 

M

 

86

 

21

 

John Hancock Life Insurance Company (U.S.A.)

 

AA-

194

 

$

1,000,000

 

M

 

86

 

58

 

John Hancock Life Insurance Company (U.S.A.)

 

AA-

195

 

$

2,000,000

 

F

 

86

 

79

 

Lincoln Benefit Life Company

 

BBB+

196

 

$

1,000,000

 

M

 

86

 

37

 

Security Life of Denver Insurance Company

 

A

197

 

$

2,000,000

 

F

 

86

 

55

 

New York Life Insurance Company

 

AA+

198

 

$

5,000,000

 

M

 

86

 

68

 

Lincoln National Life Insurance Company

 

AA-

199

 

$

2,400,000

 

M

 

86

 

21

 

Genworth Life Insurance Company

 

BB-

200

 

$

3,000,000

 

M

 

86

 

71

 

Transamerica Life Insurance Company

 

AA-

201

 

$

600,000

 

M

 

86

 

80

 

AXA Equitable Life Insurance Company

 

AA-

202

 

$

7,600,000

 

F

 

86

 

79

 

Transamerica Life Insurance Company

 

AA-

203

 

$

250,000

 

M

 

86

 

12

 

Midland National Life Insurance Company

 

A+

204

 

$

1,000,000

 

M

 

86

 

47

 

Lincoln National Life Insurance Company

 

AA-

205

 

$

450,000

 

M

 

86

 

47

 

American General Life Insurance Company

 

A+

206

 

$

2,500,000

 

F

 

86

 

58

 

American General Life Insurance Company

 

A+

207

 

$

2,500,000

 

M

 

86

 

42

 

AXA Equitable Life Insurance Company

 

AA-

208

 

$

3,000,000

 

M

 

86

 

42

 

Lincoln National Life Insurance Company

 

AA-

209

 

$

500,000

 

M

 

86

 

27

 

Genworth Life Insurance Company

 

BB-

210

 

$

1,980,000

 

M

 

86

 

34

 

New York Life Insurance Company

 

AA+

211

 

$

3,000,000

 

F

 

86

 

31

 

AXA Equitable Life Insurance Company

 

AA-

212

 

$

2,000,000

 

M

 

86

 

57

 

American National Insurance Company

 

A

213

 

$

250,000

 

M

 

86

 

60

 

Voya Retirement Insurance and Annuity Company

 

A

214

 

$

1,800,000

 

F

 

86

 

43

 

Lincoln National Life Insurance Company

 

AA-

215

 

$

1,703,959

 

M

 

86

 

52

 

Lincoln National Life Insurance Company

 

AA-

216

 

$

2,000,000

 

M

 

86

 

39

 

Metropolitan Life Insurance Company

 

AA-

217

 

$

500,000

 

M

 

86

 

8

 

Great Southern Life Insurance Company

 

N/A

218

 

$

1,000,000

 

M

 

86

 

41

 

Hartford Life and Annuity Insurance Company

 

BBB+

219

 

$

3,500,000

 

F

 

86

 

82

 

Lincoln Benefit Life Company

 

BBB+

220

 

$

1,000,000

 

M

 

86

 

72

 

Lincoln National Life Insurance Company

 

AA-

221

 

$

1,000,000

 

M

 

86

 

42

 

Metropolitan Life Insurance Company

 

AA-

222

 

$

300,000

 

M

 

86

 

43

 

New England Life Insurance Company

 

A+

223

 

$

200,000

 

M

 

85

 

57

 

John Hancock Life Insurance Company (U.S.A.)

 

AA-

224

 

$

10,000,000

 

M

 

85

 

107

 

Pacific Life Insurance Company

 

AA-

225

 

$

80,000

 

F

 

85

 

40

 

Protective Life Insurance Company

 

AA-

226

 

$

1,000,000

 

M

 

85

 

44

 

Texas Life Insurance Company

 

N/A

227

 

$

500,000

 

M

 

85

 

84

 

Metropolitan Life Insurance Company

 

AA-

228

 

$

2,000,000

 

M

 

85

 

46

 

National Life Insurance Company

 

A+

229

 

$

3,000,000

 

M

 

85

 

26

 

U.S. Financial Life Insurance Company

 

N/A

230

 

$

2,147,816

 

F

 

85

 

99

 

John Hancock Life Insurance Company (U.S.A.)

 

AA-

231

 

$

4,200,000

 

F

 

85

 

98

 

Transamerica Life Insurance Company

 

AA-

232

 

$

325,000

 

M

 

85

 

46

 

Genworth Life and Annuity Insurance Company

 

BB-

233

 

$

175,000

 

M

 

85

 

46

 

Genworth Life and Annuity Insurance Company

 

BB-

234

 

$

850,000

 

M

 

85

 

41

 

American General Life Insurance Company

 

A+

235

 

$

1,900,000

 

M

 

85

 

48

 

American National Insurance Company

 

A

236

 

$

500,000

 

M

 

85

 

30

 

New York Life Insurance Company

 

AA+

237

 

$

500,000

 

M

 

85

 

30

 

New York Life Insurance Company

 

AA+

238

 

$

5,000,000

 

M

 

85

 

39

 

AXA Equitable Life Insurance Company

 

AA-

239

 

$

385,000

 

M

 

85

 

55

 

Metropolitan Life Insurance Company

 

AA-

24

 

 

Face
Amount

 

Gender

 

Age
(ALB)

 

LE
(mo.)(1)

 

Insurance Company

 

S&P
Rating

240

 

$

500,000

 

M

 

85

 

55

 

Metropolitan Life Insurance Company

 

AA-

241

 

$

75,000

 

M

 

85

 

34

 

Fidelity and Guaranty Insurance Company

 

BBB-

242

 

$

1,500,000

 

M

 

85

 

63

 

Lincoln National Life Insurance Company

 

AA-

243

 

$

250,000

 

M

 

85

 

35

 

Ohio State Insurance Company

 

N/A

244

 

$

5,000,000

 

M

 

85

 

84

 

Banner Life Insurance Company

 

AA-

245

 

$

3,500,000

 

F

 

85

 

70

 

AXA Equitable Life Insurance Company

 

AA-

246

 

$

1,000,000

 

F

 

85

 

82

 

West Coast Life Insurance Company

 

AA-

247

 

$

8,500,000

 

M

 

85

 

84

 

John Hancock Life Insurance Company (U.S.A.)

 

AA-

248

 

$

3,000,000

 

F

 

85

 

50

 

Metropolitan Life Insurance Company

 

AA-

249

 

$

750,000

 

M

 

85

 

59

 

John Hancock Life Insurance Company (U.S.A.)

 

AA-

250

 

$

4,500,000

 

M

 

85

 

55

 

AXA Equitable Life Insurance Company

 

AA-

251

 

$

250,000

 

M

 

85

 

35

 

Transamerica Life Insurance Company

 

AA-

252

 

$

2,275,000

 

M

 

85

 

73

 

Reliastar Life Insurance Company

 

A

253

 

$

120,000

 

F

 

85

 

73

 

Lincoln National Life Insurance Company

 

AA-

254

 

$

77,000

 

F

 

85

 

73

 

Lincoln National Life Insurance Company

 

AA-

255

 

$

10,000,000

 

M

 

85

 

64

 

AXA Equitable Life Insurance Company

 

AA-

256

 

$

5,000,000

 

M

 

85

 

59

 

Transamerica Life Insurance Company

 

AA-

257

 

$

300,000

 

F

 

85

 

87

 

AXA Equitable Life Insurance Company

 

AA-

258

 

$

500,000

 

F

 

85

 

87

 

AXA Equitable Life Insurance Company

 

AA-

259

 

$

900,000

 

M

 

85

 

56

 

Hartford Life and Annuity Insurance Company

 

BBB+

260

 

$

340,000

 

F

 

85

 

68

 

Jackson National Life Insurance Company

 

AA

261

 

$

2,000,000

 

M

 

85

 

75

 

Pacific Life Insurance Company

 

AA-

262

 

$

3,500,000

 

M

 

85

 

62

 

AXA Equitable Life Insurance Company

 

AA-

263

 

$

6,217,200

 

F

 

85

 

103

 

Phoenix Life Insurance Company

 

BB-

264

 

$

7,600,000

 

M

 

85

 

81

 

Transamerica Life Insurance Company

 

AA-

265

 

$

3,000,000

 

M

 

85

 

44

 

Metropolitan Life Insurance Company

 

AA-

266

 

$

1,275,000

 

M

 

85

 

37

 

General American Life Insurance Company

 

AA-

267

 

$

2,000,000

 

F

 

85

 

79

 

Lincoln National Life Insurance Company

 

AA-

268

 

$

2,247,450

 

F

 

85

 

43

 

Transamerica Life Insurance Company

 

AA-

269

 

$

1,000,000

 

M

 

85

 

35

 

American General Life Insurance Company

 

A+

270

 

$

750,000

 

M

 

85

 

70

 

AXA Equitable Life Insurance Company

 

AA-

271

 

$

500,000

 

F

 

85

 

78

 

Metropolitan Life Insurance Company

 

AA-

272

 

$

400,000

 

M

 

85

 

32

 

Transamerica Life Insurance Company

 

AA-

273

 

$

3,500,000

 

M

 

85

 

46

 

Pacific Life Insurance Company

 

AA-

274

 

$

2,500,000

 

M

 

85

 

46

 

AXA Equitable Life Insurance Company

 

AA-

275

 

$

3,000,000

 

M

 

84

 

50

 

Protective Life Insurance Company

 

AA-

276

 

$

1,500,000

 

M

 

84

 

50

 

American General Life Insurance Company

 

A+

277

 

$

2,000,000

 

F

 

84

 

86

 

Transamerica Life Insurance Company

 

AA-

278

 

$

1,000,000

 

M

 

84

 

52

 

Lincoln National Life Insurance Company

 

AA-

279

 

$

1,500,000

 

M

 

84

 

55

 

Pacific Life Insurance Company

 

AA-

280

 

$

600,000

 

M

 

84

 

54

 

Massachusetts Mutual Life Insurance Company

 

AA+

281

 

$

5,000,000

 

M

 

84

 

90

 

American General Life Insurance Company

 

A+

282

 

$

250,000

 

M

 

84

 

123

 

Reliastar Life Insurance Company

 

A

283

 

$

10,000,000

 

M

 

84

 

55

 

Lincoln National Life Insurance Company

 

AA-

284

 

$

1,000,000

 

M

 

84

 

134

 

Reliastar Life Insurance Company

 

A

285

 

$

1,000,000

 

F

 

84

 

59

 

American General Life Insurance Company

 

A+

286

 

$

2,000,000

 

F

 

84

 

69

 

Lincoln National Life Insurance Company

 

AA-

287

 

$

1,995,000

 

F

 

84

 

63

 

Transamerica Life Insurance Company

 

AA-

288

 

$

838,542

 

M

 

84

 

103

 

Transamerica Life Insurance Company

 

AA-

25

 

 

Face
Amount

 

Gender

 

Age
(ALB)

 

LE
(mo.)(1)

 

Insurance Company

 

S&P
Rating

289

 

$

10,000,000

 

M

 

84

 

62

 

New York Life Insurance Company

 

AA+

290

 

$

1,000,000

 

M

 

84

 

51

 

Hartford Life and Annuity Insurance Company

 

BBB+

291

 

$

1,000,000

 

M

 

84

 

51

 

Jackson National Life Insurance Company

 

AA

292

 

$

417,300

 

M

 

84

 

82

 

Jackson National Life Insurance Company

 

AA

293

 

$

2,300,000

 

M

 

84

 

10

 

American General Life Insurance Company

 

A+

294

 

$

2,500,000

 

F

 

84

 

55

 

Reliastar Life Insurance Company

 

A

295

 

$

5,000,000

 

F

 

84

 

42

 

Massachusetts Mutual Life Insurance Company

 

AA+

296

 

$

5,000,000

 

M

 

84

 

61

 

Transamerica Life Insurance Company

 

AA-

297

 

$

2,000,000

 

M

 

84

 

53

 

Ohio National Life Assurance Corporation

 

A+

298

 

$

1,000,000

 

M

 

84

 

53

 

Ohio National Life Assurance Corporation

 

A+

299

 

$

500,000

 

F

 

84

 

85

 

AXA Equitable Life Insurance Company

 

AA-

300

 

$

2,400,000

 

M

 

84

 

55

 

Phoenix Life Insurance Company

 

BB-

301

 

$

350,000

 

M

 

84

 

22

 

Jackson National Life Insurance Company

 

AA

302

 

$

5,000,000

 

M

 

84

 

74

 

Lincoln National Life Insurance Company

 

AA-

303

 

$

5,000,000

 

F

 

83

 

61

 

Security Mutual Life Insurance Company of NY

 

N/A

304

 

$

5,000,000

 

M

 

83

 

71

 

AXA Equitable Life Insurance Company

 

AA-

305

 

$

6,000,000

 

M

 

83

 

87

 

Transamerica Life Insurance Company

 

AA-

306

 

$

8,000,000

 

M

 

83

 

67

 

AXA Equitable Life Insurance Company

 

AA-

307

 

$

850,000

 

F

 

83

 

81

 

Zurich Life Insurance Company

 

A

308

 

$

550,000

 

M

 

83

 

98

 

Genworth Life Insurance Company

 

BB-

309

 

$

500,000

 

M

 

83

 

47

 

West Coast Life Insurance Company

 

AA-

310

 

$

1,680,000

 

F

 

83

 

53

 

AXA Equitable Life Insurance Company

 

AA-

311

 

$

1,000,000

 

F

 

83

 

74

 

Lincoln National Life Insurance Company

 

AA-

312

 

$

2,000,000

 

M

 

83

 

67

 

New York Life Insurance Company

 

AA+

313

 

$

1,250,000

 

M

 

83

 

83

 

Metropolitan Life Insurance Company

 

AA-

314

 

$

1,000,000

 

M

 

83

 

62

 

AXA Equitable Life Insurance Company

 

AA-

315

 

$

1,000,000

 

M

 

83

 

41

 

American General Life Insurance Company

 

A+

316

 

$

1,600,000

 

M

 

83

 

68

 

John Hancock Life Insurance Company (U.S.A.)

 

AA-

317

 

$

1,700,000

 

M

 

83

 

68

 

John Hancock Life Insurance Company (U.S.A.)

 

AA-

318

 

$

1,000,000

 

M

 

83

 

51

 

AXA Equitable Life Insurance Company

 

AA-

319

 

$

1,500,000

 

M

 

83

 

52

 

Lincoln Benefit Life Company

 

BBB+

320

 

$

10,000,000

 

F

 

83

 

50

 

Transamerica Life Insurance Company

 

AA-

321

 

$

50,000

 

M

 

83

 

69

 

Transamerica Life Insurance Company

 

AA-

322

 

$

3,000,000

 

M

 

83

 

92

 

John Hancock Life Insurance Company (U.S.A.)

 

AA-

323

 

$

10,000,000

 

M

 

83

 

53

 

Hartford Life and Annuity Insurance Company

 

BBB+

324

 

$

1,750,000

 

M

 

83

 

66

 

AXA Equitable Life Insurance Company

 

AA-

325

 

$

5,000,000

 

M

 

83

 

61

 

AXA Equitable Life Insurance Company

 

AA-

326

 

$

300,000

 

F

 

83

 

58

 

Hartford Life and Annuity Insurance Company

 

BBB+

327

 

$

250,000

 

M

 

83

 

80

 

American General Life Insurance Company

 

A+

328

 

$

2,502,000

 

M

 

83

 

128

 

Transamerica Life Insurance Company

 

AA-

329

 

$

170,000

 

F

 

83

 

48

 

Reliastar Life Insurance Company

 

A

330

 

$

240,000

 

M

 

83

 

29

 

Lincoln National Life Insurance Company

 

AA-

331

 

$

10,000,000

 

M

 

83

 

95

 

John Hancock Life Insurance Company (U.S.A.)

 

AA-

332

 

$

10,000,000

 

M

 

83

 

88

 

Pacific Life Insurance Company

 

AA-

333

 

$

1,210,000

 

M

 

83

 

50

 

Lincoln National Life Insurance Company

 

AA-

334

 

$

3,000,000

 

F

 

83

 

89

 

West Coast Life Insurance Company

 

AA-

335

 

$

7,000,000

 

M

 

83

 

69

 

Genworth Life Insurance Company

 

BB-

336

 

$

8,000,000

 

M

 

82

 

109

 

Metropolitan Life Insurance Company

 

AA-

337

 

$

500,000

 

M

 

82

 

39

 

Genworth Life and Annuity Insurance Company

 

BB-

26

 

 

Face
Amount

 

Gender

 

Age
(ALB)

 

LE
(mo.)(1)

 

Insurance Company

 

S&P
Rating

338

 

$

3,000,000

 

M

 

82

 

127

 

Metropolitan Life Insurance Company

 

AA-

339

 

$

300,000

 

F

 

82

 

83

 

Metropolitan Life Insurance Company

 

AA-

340

 

$

600,000

 

M

 

82

 

38

 

Lincoln National Life Insurance Company

 

AA-

341

 

$

800,000

 

M

 

82

 

63

 

North American Company for Life And Health Insurance

 

A+

342

 

$

8,000,000

 

F

 

82

 

90

 

John Hancock Life Insurance Company (U.S.A.)

 

AA-

343

 

$

2,000,000

 

M

 

82

 

17

 

Metropolitan Life Insurance Company

 

AA-

344

 

$

3,000,000

 

F

 

82

 

52

 

AXA Equitable Life Insurance Company

 

AA-

345

 

$

3,000,000

 

F

 

82

 

52

 

AXA Equitable Life Insurance Company

 

AA-

346

 

$

1,000,000

 

F

 

82

 

73

 

Lincoln Benefit Life Company

 

BBB+

347

 

$

1,000,000

 

M

 

82

 

77

 

Penn Mutual Life Insurance Company

 

A+

348

 

$

6,000,000

 

M

 

82

 

106

 

AXA Equitable Life Insurance Company

 

AA-

349

 

$

320,987

 

F

 

82

 

89

 

John Hancock Life Insurance Company (U.S.A.)

 

AA-

350

 

$

130,000

 

M

 

82

 

38

 

Genworth Life Insurance Company

 

BB-

351

 

$

700,000

 

M

 

82

 

84

 

Banner Life Insurance Company

 

AA-

352

 

$

1,000,000

 

M

 

82

 

84

 

John Hancock Life Insurance Company (U.S.A.)

 

AA-

353

 

$

1,000,000

 

M

 

82

 

117

 

Protective Life Insurance Company

 

AA-

354

 

$

2,000,000

 

F

 

82

 

74

 

Pacific Life Insurance Company

 

AA-

355

 

$

2,000,000

 

M

 

82

 

66

 

Metropolitan Life Insurance Company

 

AA-

356

 

$

2,000,000

 

M

 

82

 

66

 

Metropolitan Life Insurance Company

 

AA-

357

 

$

218,362

 

M

 

82

 

113

 

Lincoln National Life Insurance Company

 

AA-

358

 

$

100,000

 

M

 

82

 

69

 

Prudential Insurance Company of America

 

AA-

359

 

$

1,029,871

 

M

 

82

 

124

 

Principal Life Insurance Company

 

A+

360

 

$

2,000,000

 

F

 

82

 

60

 

Transamerica Life Insurance Company

 

AA-

361

 

$

1,500,000

 

F

 

82

 

61

 

Protective Life Insurance Company

 

AA-

362

 

$

3,500,000

 

M

 

82

 

68

 

Metropolitan Life Insurance Company

 

AA-

363

 

$

687,006

 

M

 

82

 

66

 

The State Life Insurance Company

 

AA-

364

 

$

250,000

 

F

 

82

 

86

 

Accordia Life and Annuity Company

 

A-

365

 

$

3,000,000

 

M

 

82

 

106

 

Principal Life Insurance Company

 

A+

366

 

$

200,000

 

M

 

82

 

35

 

Pruco Life Insurance Company

 

AA-

367

 

$

1,700,000

 

M

 

82

 

47

 

Lincoln National Life Insurance Company

 

AA-

368

 

$

180,000

 

F

 

82

 

78

 

Midland National Life Insurance Company

 

A+

369

 

$

500,000

 

M

 

82

 

35

 

Transamerica Life Insurance Company

 

AA-

370

 

$

3,000,000

 

M

 

81

 

30

 

Pacific Life Insurance Company

 

AA-

371

 

$

3,000,000

 

M

 

81

 

30

 

Minnesota Life Insurance Company

 

A+

372

 

$

3,000,000

 

M

 

81

 

30

 

Pruco Life Insurance Company

 

AA-

373

 

$

3,000,000

 

M

 

81

 

75

 

Reliastar Life Insurance Company

 

A

374

 

$

5,000,000

 

M

 

81

 

81

 

Pacific Life Insurance Company

 

AA-

375

 

$

5,000,000

 

M

 

81

 

81

 

Pacific Life Insurance Company

 

AA-

376

 

$

4,000,000

 

M

 

81

 

66

 

Lincoln National Life Insurance Company

 

AA-

377

 

$

250,000

 

M

 

81

 

60

 

United of Omaha Life Insurance Company

 

AA-

378

 

$

3,601,500

 

M

 

81

 

80

 

Transamerica Life Insurance Company

 

AA-

379

 

$

1,000,000

 

M

 

81

 

80

 

Sun Life Assurance Company of Canada (U.S.)

 

AA-

380

 

$

200,000

 

M

 

81

 

58

 

Protective Life Insurance Company

 

AA-

381

 

$

150,000

 

M

 

81

 

58

 

Protective Life Insurance Company

 

AA-

382

 

$

150,000

 

M

 

81

 

58

 

Protective Life Insurance Company

 

AA-

383

 

$

350,000

 

M

 

81

 

58

 

Lincoln National Life Insurance Company

 

AA-

384

 

$

1,187,327

 

M

 

81

 

80

 

Transamerica Life Insurance Company

 

AA-

385

 

$

5,000,000

 

M

 

81

 

112

 

Principal Life Insurance Company

 

A+

386

 

$

150,000

 

M

 

81

 

77

 

MetLife Insurance Company USA

 

A+

27

 

 

Face
Amount

 

Gender

 

Age
(ALB)

 

LE
(mo.)(1)

 

Insurance Company

 

S&P
Rating

387

 

$

500,000

 

M

 

81

 

65

 

American General Life Insurance Company

 

A+

388

 

$

5,000,000

 

M

 

81

 

91

 

John Hancock Life Insurance Company (U.S.A.)

 

AA-

389

 

$

100,000

 

M

 

81

 

95

 

Protective Life Insurance Company

 

AA-

390

 

$

7,000,000

 

M

 

81

 

71

 

Lincoln Benefit Life Company

 

BBB+

391

 

$

100,000

 

M

 

81

 

52

 

North American Company for Life And Health Insurance

 

A+

392

 

$

1,000,000

 

M

 

81

 

99

 

Lincoln National Life Insurance Company

 

AA-

393

 

$

6,799,139

 

M

 

81

 

105

 

AXA Equitable Life Insurance Company

 

AA-

394

 

$

476,574

 

M

 

81

 

58

 

Transamerica Life Insurance Company

 

AA-

395

 

$

250,000

 

M

 

81

 

80

 

AXA Equitable Life Insurance Company

 

AA-

396

 

$

5,500,000

 

M

 

81

 

105

 

Metropolitan Life Insurance Company

 

AA-

397

 

$

2,250,000

 

M

 

81

 

79

 

Massachusetts Mutual Life Insurance Company

 

AA+

398

 

$

4,000,000

 

M

 

81

 

79

 

Lincoln National Life Insurance Company

 

AA-

399

 

$

4,300,000

 

F

 

81

 

94

 

American National Insurance Company

 

A

400

 

$

1,000,000

 

F

 

81

 

107

 

John Hancock Life Insurance Company (U.S.A.)

 

AA-

401

 

$

6,000,000

 

M

 

81

 

103

 

AXA Equitable Life Insurance Company

 

AA-

402

 

$

200,000

 

M

 

81

 

52

 

Kansas City Life Insurance Company

 

N/A

403

 

$

200,000

 

M

 

81

 

43

 

Lincoln National Life Insurance Company

 

AA-

404

 

$

6,000,000

 

M

 

81

 

92

 

AXA Equitable Life Insurance Company

 

AA-

405

 

$

5,000,000

 

F

 

81

 

101

 

Reliastar Life Insurance Company

 

A

406

 

$

750,000

 

M

 

81

 

55

 

Lincoln National Life Insurance Company

 

AA-

407

 

$

3,000,000

 

M

 

81

 

80

 

Principal Life Insurance Company

 

A+

408

 

$

5,000,000

 

M

 

80

 

121

 

Lincoln National Life Insurance Company

 

AA-

409

 

$

3,000,000

 

M

 

80

 

71

 

American General Life Insurance Company

 

A+

410

 

$

70,000

 

M

 

80

 

37

 

Pioneer Mutual Life Insurance Company

 

N/A

411

 

$

800,000

 

F

 

80

 

85

 

Prudential Insurance Company of America

 

AA-

412

 

$

5,000,000

 

M

 

80

 

65

 

John Hancock Life Insurance Company (U.S.A.)

 

AA-

413

 

$

500,000

 

M

 

80

 

54

 

John Hancock Life Insurance Company (U.S.A.)

 

AA-

414

 

$

5,000,000

 

M

 

80

 

74

 

John Hancock Life Insurance Company (U.S.A.)

 

AA-

415

 

$

200,000

 

M

 

80

 

84

 

Lincoln National Life Insurance Company

 

AA-

416

 

$

1,250,000

 

M

 

80

 

83

 

AXA Equitable Life Insurance Company

 

AA-

417

 

$

1,000,000

 

M

 

80

 

107

 

Transamerica Life Insurance Company

 

AA-

418

 

$

800,000

 

M

 

80

 

107

 

Columbus Life Insurance Company

 

AA

419

 

$

3,000,000

 

F

 

80

 

74

 

New York Life Insurance Company

 

AA+

420

 

$

1,009,467

 

M

 

80

 

45

 

John Hancock Life Insurance Company (U.S.A.)

 

AA-

421

 

$

4,000,000

 

M

 

80

 

55

 

Metropolitan Life Insurance Company

 

AA-

422

 

$

2,500,000

 

M

 

80

 

73

 

Massachusetts Mutual Life Insurance Company

 

AA+

423

 

$

2,500,000

 

M

 

80

 

73

 

Massachusetts Mutual Life Insurance Company

 

AA+

424

 

$

5,000,000

 

M

 

80

 

44

 

John Hancock Life Insurance Company (U.S.A.)

 

AA-

425

 

$

1,000,000

 

M

 

80

 

70

 

Transamerica Life Insurance Company

 

AA-

426

 

$

500,000

 

M

 

80

 

96

 

Transamerica Life Insurance Company

 

AA-

427

 

$

500,000

 

F

 

80

 

109

 

Columbus Life Insurance Company

 

AA

428

 

$

775,000

 

M

 

80

 

108

 

Lincoln National Life Insurance Company

 

AA-

429

 

$

929,975

 

M

 

80

 

63

 

Lincoln National Life Insurance Company

 

AA-

430

 

$

1,445,000

 

F

 

80

 

89

 

AXA Equitable Life Insurance Company

 

AA-

431

 

$

1,500,000

 

F

 

80

 

89

 

AXA Equitable Life Insurance Company

 

AA-

432

 

$

1,000,000

 

M

 

80

 

71

 

Lincoln National Life Insurance Company

 

AA-

433

 

$

325,000

 

M

 

80

 

31

 

American General Life Insurance Company

 

A+

434

 

$

3,750,000

 

M

 

80

 

35

 

AXA Equitable Life Insurance Company

 

AA-

435

 

$

1,000,000

 

M

 

80

 

95

 

Metropolitan Life Insurance Company

 

AA-

28

 

 

Face
Amount

 

Gender

 

Age
(ALB)

 

LE
(mo.)(1)

 

Insurance Company

 

S&P
Rating

436

 

$

550,000

 

M

 

80

 

65

 

Pruco Life Insurance Company

 

AA-

437

 

$

300,000

 

M

 

80

 

65

 

Pruco Life Insurance Company

 

AA-

438

 

$

800,000

 

M

 

80

 

85

 

Minnesota Life Insurance Company

 

A+

439

 

$

1,000,000

 

M

 

80

 

87

 

Massachusetts Mutual Life Insurance Company

 

AA+

440

 

$

1,200,000

 

F

 

80

 

97

 

AXA Equitable Life Insurance Company

 

AA-

441

 

$

5,000,000

 

M

 

80

 

161

 

West Coast Life Insurance Company

 

AA-

442

 

$

2,000,000

 

F

 

80

 

45

 

Transamerica Life Insurance Company

 

AA-

443

 

$

1,000,000

 

M

 

80

 

65

 

Ameritas Life Insurance Corporation

 

A+

444

 

$

2,000,000

 

M

 

80

 

65

 

Metropolitan Life Insurance Company

 

AA-

445

 

$

1,358,500

 

M

 

80

 

65

 

Metropolitan Life Insurance Company

 

AA-

446

 

$

500,000

 

M

 

79

 

121

 

Prudential Insurance Company of America

 

AA-

447

 

$

1,000,000

 

M

 

79

 

99

 

Metropolitan Life Insurance Company

 

AA-

448

 

$

1,200,000

 

F

 

79

 

118

 

Athene Annuity & Life Assurance Company

 

A-

449

 

$

2,840,000

 

M

 

79

 

78

 

Transamerica Life Insurance Company

 

AA-

450

 

$

750,000

 

M

 

79

 

75

 

North American Company for Life and Health Insurance

 

A+

451

 

$

1,000,000

 

M

 

79

 

75

 

John Hancock Life Insurance Company (U.S.A.)

 

AA-

452

 

$

500,000

 

M

 

79

 

75

 

North American Company for Life and Health Insurance

 

A+

453

 

$

50,000

 

M

 

79

 

33

 

Lincoln National Life Insurance Company

 

AA-

454

 

$

4,000,000

 

F

 

79

 

79

 

Transamerica Life Insurance Company

 

AA-

455

 

$

1,000,000

 

F

 

79

 

62

 

John Hancock Life Insurance Company (U.S.A.)

 

AA-

456

 

$

2,000,000

 

M

 

79

 

87

 

Lincoln National Life Insurance Company

 

AA-

457

 

$

2,000,000

 

M

 

79

 

87

 

Lincoln National Life Insurance Company

 

AA-

458

 

$

5,000,000

 

M

 

79

 

105

 

Lincoln National Life Insurance Company

 

AA-

459

 

$

4,000,000

 

M

 

79

 

132

 

John Hancock Life Insurance Company (U.S.A.)

 

AA-

460

 

$

300,000

 

M

 

79

 

67

 

Lincoln National Life Insurance Company

 

AA-

461

 

$

1,750,000

 

M

 

79

 

51

 

John Hancock Life Insurance Company (U.S.A.)

 

AA-

462

 

$

5,000,000

 

M

 

79

 

89

 

Transamerica Life Insurance Company

 

AA-

463

 

$

1,000,000

 

M

 

79

 

107

 

Principal Life Insurance Company

 

A+

464

 

$

500,000

 

F

 

79

 

126

 

Ohio National Life Assurance Corporation

 

A+

465

 

$

6,250,000

 

M

 

79

 

176

 

John Hancock Life Insurance Company (U.S.A.)

 

AA-

466

 

$

750,000

 

M

 

79

 

102

 

General American Life Insurance Company

 

AA-

467

 

$

600,000

 

M

 

79

 

71

 

Protective Life Insurance Company

 

AA-

468

 

$

400,000

 

M

 

79

 

105

 

John Hancock Life Insurance Company (U.S.A.)

 

AA-

469

 

$

300,000

 

M

 

78

 

65

 

Penn Mutual Life Insurance Company

 

A+

470

 

$

500,000

 

F

 

78

 

141

 

Accordia Life and Annuity Company

 

A-

471

 

$

5,000,000

 

M

 

78

 

123

 

AXA Equitable Life Insurance Company

 

AA-

472

 

$

1,000,000

 

M

 

78

 

90

 

Accordia Life and Annuity Company

 

A-

473

 

$

3,000,000

 

M

 

78

 

84

 

Pruco Life Insurance Company

 

AA-

474

 

$

3,000,000

 

F

 

78

 

93

 

John Hancock Life Insurance Company (U.S.A.)

 

AA-

475

 

$

200,000

 

F

 

78

 

131

 

West Coast Life Insurance Company

 

AA-

476

 

$

250,000

 

M

 

78

 

121

 

Accordia Life and Annuity Company

 

A-

477

 

$

1,100,000

 

M

 

78

 

125

 

Accordia Life and Annuity Company

 

A-

478

 

$

3,000,000

 

M

 

78

 

91

 

Protective Life Insurance Company

 

AA-

479

 

$

2,000,000

 

F

 

78

 

105

 

Accordia Life and Annuity Company

 

A-

480

 

$

2,200,000

 

F

 

78

 

127

 

Reliastar Life Insurance Company

 

A

481

 

$

4,000,000

 

M

 

78

 

56

 

Massachusetts Mutual Life Insurance Company

 

AA+

482

 

$

10,000,000

 

M

 

78

 

119

 

AXA Equitable Life Insurance Company

 

AA-

483

 

$

2,500,000

 

M

 

78

 

126

 

John Hancock Life Insurance Company (U.S.A.)

 

AA-

484

 

$

2,500,000

 

M

 

78

 

126

 

John Hancock Life Insurance Company (U.S.A.)

 

AA-

29

 

 

Face
Amount

 

Gender

 

Age
(ALB)

 

LE
(mo.)(1)

 

Insurance Company

 

S&P
Rating

485

 

$

1,000,000

 

F

 

78

 

115

 

John Hancock Life Insurance Company (U.S.A.)

 

AA-

486

 

$

1,000,000

 

F

 

78

 

118

 

American General Life Insurance Company

 

A+

487

 

$

7,000,000

 

F

 

78

 

108

 

Pacific Life Insurance Company

 

AA-

488

 

$

100,946

 

F

 

78

 

146

 

Genworth Life and Annuity Insurance Company

 

BB-

489

 

$

2,000,000

 

M

 

78

 

92

 

Genworth Life Insurance Company

 

BB-

490

 

$

350,000

 

M

 

78

 

98

 

AXA Equitable Life Insurance Company

 

AA-

491

 

$

600,000

 

M

 

78

 

98

 

AXA Equitable Life Insurance Company

 

AA-

492

 

$

1,000,000

 

M

 

78

 

71

 

Pacific Life Insurance Company

 

AA-

493

 

$

2,000,000

 

M

 

78

 

105

 

Transamerica Life Insurance Company

 

AA-

494

 

$

200,000

 

M

 

78

 

104

 

Prudential Insurance Company of America

 

AA-

495

 

$

2,000,000

 

F

 

78

 

153

 

Lincoln National Life Insurance Company

 

AA-

496

 

$

150,000

 

M

 

78

 

92

 

Genworth Life Insurance Company

 

BB-

497

 

$

490,620

 

M

 

78

 

74

 

Ameritas Life Insurance Corporation

 

A+

498

 

$

2,000,000

 

M

 

78

 

52

 

Athene Annuity & Life Assurance Company

 

A-

499

 

$

7,097,434

 

M

 

78

 

144

 

Lincoln National Life Insurance Company

 

AA-

500

 

$

5,000,000

 

M

 

78

 

49

 

West Coast Life Insurance Company

 

AA-

501

 

$

1,000,000

 

M

 

77

 

71

 

Metropolitan Life Insurance Company

 

AA-

502

 

$

730,000

 

M

 

77

 

88

 

Transamerica Life Insurance Company

 

AA-

503

 

$

5,000,000

 

M

 

77

 

135

 

Pruco Life Insurance Company

 

AA-

504

 

$

1,000,000

 

M

 

77

 

114

 

Transamerica Life Insurance Company

 

AA-

505

 

$

750,000

 

M

 

77

 

100

 

Protective Life Insurance Company

 

AA-

506

 

$

250,000

 

M

 

77

 

91

 

Midland National Life Insurance Company

 

A+

507

 

$

3,000,000

 

M

 

77

 

46

 

Accordia Life and Annuity Company

 

A-

508

 

$

1,000,000

 

M

 

77

 

135

 

AXA Equitable Life Insurance Company

 

AA-

509

 

$

200,000

 

M

 

77

 

60

 

Reliastar Life Insurance Company

 

A

510

 

$

500,000

 

M

 

77

 

89

 

AXA Equitable Life Insurance Company

 

AA-

511

 

$

3,000,000

 

M

 

77

 

100

 

John Hancock Life Insurance Company (U.S.A.)

 

AA-

512

 

$

5,000,000

 

M

 

77

 

100

 

John Hancock Life Insurance Company (U.S.A.)

 

AA-

513

 

$

1,000,000

 

M

 

77

 

114

 

Security Life of Denver Insurance Company

 

A

514

 

$

5,000,000

 

M

 

77

 

128

 

Massachusetts Mutual Life Insurance Company

 

AA+

515

 

$

5,000,000

 

M

 

77

 

128

 

Massachusetts Mutual Life Insurance Company

 

AA+

516

 

$

8,000,000

 

M

 

77

 

86

 

Metropolitan Life Insurance Company

 

AA-

517

 

$

1,000,000

 

M

 

77

 

82

 

Transamerica Life Insurance Company

 

AA-

518

 

$

1,000,000

 

M

 

77

 

146

 

Security Mutual Life Insurance Company of NY

 

N/A

519

 

$

1,000,000

 

M

 

77

 

91

 

Athene Annuity & Life Assurance Company of New York

 

A-

520

 

$

355,700

 

M

 

77

 

96

 

Security Life of Denver Insurance Company

 

A

521

 

$

6,500,000

 

F

 

77

 

64

 

General American Life Insurance Company

 

AA-

522

 

$

5,000,000

 

M

 

77

 

75

 

Lincoln Benefit Life Company

 

BBB+

523

 

$

250,000

 

M

 

77

 

127

 

West Coast Life Insurance Company

 

AA-

524

 

$

750,000

 

F

 

77

 

72

 

Delaware Life Insurance Company

 

BBB+

525

 

$

1,000,000

 

M

 

77

 

92

 

General American Life Insurance Company

 

AA-

526

 

$

1,000,000

 

M

 

77

 

104

 

Transamerica Life Insurance Company

 

AA-

527

 

$

2,000,000

 

M

 

77

 

138

 

John Hancock Life Insurance Company (U.S.A.)

 

AA-

528

 

$

250,000

 

M

 

76

 

87

 

Lincoln Benefit Life Company

 

BBB+

529

 

$

600,000

 

M

 

76

 

62

 

United of Omaha Life Insurance Company

 

AA-

530

 

$

100,000

 

M

 

76

 

107

 

Transamerica Life Insurance Company

 

AA-

531

 

$

3,000,000

 

F

 

76

 

142

 

Security Life of Denver Insurance Company

 

A

532

 

$

200,000

 

M

 

76

 

59

 

Metropolitan Life Insurance Company

 

AA-

533

 

$

100,000

 

M

 

76

 

59

 

Metropolitan Life Insurance Company

 

AA-

30

 

 

Face
Amount

 

Gender

 

Age
(ALB)

 

LE
(mo.)(1)

 

Insurance Company

 

S&P
Rating

534

 

$

3,172,397

 

M

 

76

 

65

 

Pacific Life Insurance Company

 

AA-

535

 

$

2,000,000

 

M

 

76

 

99

 

Protective Life Insurance Company

 

AA-

536

 

$

1,500,000

 

M

 

76

 

99

 

Protective Life Insurance Company

 

AA-

537

 

$

100,000

 

M

 

76

 

46

 

AXA Equitable Life Insurance Company

 

AA-

538

 

$

500,000

 

M

 

76

 

82

 

AXA Equitable Life Insurance Company

 

AA-

539

 

$

500,000

 

M

 

76

 

96

 

United of Omaha Life Insurance Company

 

AA-

540

 

$

750,000

 

M

 

76

 

22

 

North American Company for Life And Health Insurance

 

A+

541

 

$

4,000,000

 

F

 

76

 

130

 

American General Life Insurance Company

 

A+

542

 

$

300,000

 

M

 

76

 

71

 

AIG Life Insurance Company

 

A+

543

 

$

500,000

 

M

 

76

 

81

 

AIG Life Insurance Company

 

A+

544

 

$

300,000

 

M

 

76

 

30

 

Lincoln National Life Insurance Company

 

AA-

545

 

$

172,245

 

F

 

76

 

48

 

Symetra Life Insurance Company

 

A

546

 

$

5,004,704

 

M

 

76

 

125

 

American General Life Insurance Company

 

A+

547

 

$

2,000,000

 

M

 

76

 

111

 

Pruco Life Insurance Company

 

AA-

548

 

$

415,000

 

M

 

76

 

107

 

AIG Life Insurance Company

 

A+

549

 

$

5,000,000

 

M

 

76

 

121

 

AIG Life Insurance Company

 

A+

550

 

$

4,000,000

 

M

 

76

 

100

 

Security Mutual Life Insurance Company of NY

 

N/A

551

 

$

2,000,000

 

M

 

76

 

92

 

American General Life Insurance Company

 

A+

552

 

$

10,000,000

 

F

 

76

 

126

 

Reliastar Life Insurance Company

 

A

553

 

$

1,000,000

 

F

 

76

 

141

 

John Hancock Life Insurance Company (U.S.A.)

 

AA-

554

 

$

7,500,000

 

F

 

76

 

164

 

Security Life of Denver Insurance Company

 

A

555

 

$

500,000

 

M

 

76

 

65

 

American General Life Insurance Company

 

A+

556

 

$

250,000

 

M

 

76

 

66

 

Genworth Life and Annuity Insurance Company

 

BB-

557

 

$

3,000,000

 

F

 

76

 

103

 

General American Life Insurance Company

 

AA-

558

 

$

300,000

 

F

 

76

 

124

 

Minnesota Life Insurance Company

 

A+

559

 

$

667,738

 

M

 

76

 

77

 

MONY Life Insurance Company of America

 

AA-

560

 

$

370,000

 

F

 

76

 

117

 

Minnesota Life Insurance Company

 

A+

561

 

$

4,547,770

 

F

 

75

 

167

 

Principal Life Insurance Company

 

A+

562

 

$

500,000

 

M

 

75

 

80

 

Protective Life Insurance Company

 

AA-

563

 

$

2,000,000

 

M

 

75

 

101

 

Phoenix Life Insurance Company

 

BB-

564

 

$

1,000,000

 

M

 

75

 

85

 

Security Life of Denver Insurance Company

 

A

565

 

$

500,000

 

M

 

75

 

31

 

Midland National Life Insurance Company

 

A+

566

 

$

1,000,000

 

M

 

75

 

143

 

John Hancock Life Insurance Company (U.S.A.)

 

AA-

567

 

$

750,000

 

M

 

75

 

141

 

Lincoln Benefit Life Company

 

BBB+

568

 

$

150,000

 

M

 

75

 

95

 

Genworth Life Insurance Company

 

BB-

569

 

$

1,000,000

 

M

 

75

 

90

 

Transamerica Life Insurance Company

 

AA-

570

 

$

3,000,000

 

M

 

75

 

65

 

AXA Equitable Life Insurance Company

 

AA-

571

 

$

1,000,000

 

F

 

75

 

135

 

Companion Life Insurance Company

 

AA-

572

 

$

1,000,000

 

M

 

75

 

131

 

John Hancock Life Insurance Company (U.S.A.)

 

AA-

573

 

$

500,000

 

M

 

75

 

54

 

William Penn Life Insurance Company of New York

 

AA-

574

 

$

8,000,000

 

F

 

75

 

122

 

West Coast Life Insurance Company

 

AA-

575

 

$

100,000

 

M

 

75

 

35

 

Voya Retirement Insurance and Annuity Company

 

A

576

 

$

250,000

 

F

 

75

 

147

 

AXA Equitable Life Insurance Company

 

AA-

577

 

$

3,000,000

 

M

 

75

 

104

 

Transamerica Life Insurance Company

 

AA-

578

 

$

500,000

 

M

 

75

 

104

 

New York Life Insurance Company

 

AA+

579

 

$

500,000

 

M

 

75

 

104

 

New York Life Insurance Company

 

AA+

580

 

$

800,000

 

M

 

75

 

114

 

John Hancock Life Insurance Company (U.S.A.)

 

AA-

581

 

$

190,000

 

M

 

75

 

95

 

Protective Life Insurance Company

 

AA-

582

 

$

100,000

 

M

 

75

 

142

 

Protective Life Insurance Company

 

AA-

583

 

$

2,000,072

 

M

 

75

 

159

 

American General Life Insurance Company

 

A+

31

 

 

Face
Amount

 

Gender

 

Age
(ALB)

 

LE
(mo.)(1)

 

Insurance Company

 

S&P
Rating

584

 

$

89,626

 

F

 

75

 

109

 

Union Central Life Insurance Company

 

N/A

585

 

$

400,000

 

M

 

75

 

73

 

Protective Life Insurance Company

 

AA-

586

 

$

500,000

 

M

 

75

 

87

 

Delaware Life Insurance Company

 

BBB+

587

 

$

1,784,686

 

M

 

75

 

145

 

Transamerica Life Insurance Company

 

AA-

588

 

$

100,000

 

M

 

75

 

134

 

Genworth Life Insurance Company

 

BB-

589

 

$

250,000

 

F

 

75

 

163

 

Protective Life Insurance Company

 

AA-

590

 

$

8,000,000

 

M

 

74

 

160

 

Metropolitan Life Insurance Company

 

AA-

591

 

$

500,000

 

M

 

74

 

115

 

Ameritas Life Insurance Corporation

 

A+

592

 

$

370,000

 

M

 

74

 

115

 

Ameritas Life Insurance Corporation

 

A+

593

 

$

1,000,000

 

F

 

74

 

112

 

United of Omaha Life Insurance Company

 

AA-

594

 

$

500,000

 

M

 

74

 

90

 

Lincoln National Life Insurance Company

 

AA-

595

 

$

1,841,877

 

M

 

74

 

112

 

Metropolitan Life Insurance Company

 

AA-

596

 

$

500,000

 

M

 

74

 

98

 

William Penn Life Insurance Company of New York

 

AA-

597

 

$

100,000

 

M

 

74

 

102

 

Protective Life Insurance Company

 

AA-

598

 

$

500,000

 

M

 

74

 

120

 

Metropolitan Life Insurance Company

 

AA-

599

 

$

2,500,000

 

M

 

74

 

96

 

John Hancock Life Insurance Company (U.S.A.)

 

AA-

600

 

$

500,000

 

M

 

74

 

126

 

Pruco Life Insurance Company

 

AA-

601

 

$

1,000,000

 

M

 

74

 

99

 

John Hancock Life Insurance Company (U.S.A.)

 

AA-

602

 

$

500,000

 

M

 

74

 

73

 

Phoenix Life Insurance Company

 

BB-

603

 

$

8,600,000

 

M

 

74

 

143

 

AXA Equitable Life Insurance Company

 

AA-

604

 

$

485,000

 

M

 

74

 

145

 

Metropolitan Life Insurance Company

 

AA-

605

 

$

2,500,000

 

M

 

74

 

97

 

American General Life Insurance Company

 

A+

606

 

$

100,000

 

M

 

74

 

96

 

Transamerica Life Insurance Company

 

AA-

607

 

$

1,500,000

 

M

 

74

 

118

 

Lincoln National Life Insurance Company

 

AA-

608

 

$

1,500,000

 

M

 

74

 

118

 

Lincoln National Life Insurance Company

 

AA-

609

 

$

1,500,000

 

M

 

74

 

118

 

Lincoln National Life Insurance Company

 

AA-

610

 

$

1,500,000

 

M

 

74

 

119

 

American General Life Insurance Company

 

A+

611

 

$

1,500,000

 

M

 

74

 

119

 

American General Life Insurance Company

 

A+

612

 

$

2,000,000

 

M

 

74

 

123

 

John Hancock Life Insurance Company (U.S.A.)

 

AA-

613

 

$

2,500,000

 

M

 

74

 

129

 

Banner Life Insurance Company

 

AA-

614

 

$

800,000

 

M

 

74

 

77

 

Commonwealth Annuity and Life Insurance Company

 

A-

615

 

$

300,000

 

M

 

74

 

103

 

New England Life Insurance Company

 

A+

616

 

$

1,167,000

 

M

 

74

 

44

 

Transamerica Life Insurance Company

 

AA-

617

 

$

3,042,627

 

M

 

74

 

103

 

Massachusetts Mutual Life Insurance Company

 

AA+

618

 

$

450,000

 

M

 

74

 

110

 

Jackson National Life Insurance Company

 

AA

619

 

$

1,500,000

 

M

 

74

 

102

 

Metropolitan Life Insurance Company

 

AA-

620

 

$

10,000,000

 

M

 

74

 

136

 

John Hancock Life Insurance Company (U.S.A.)

 

AA-

621

 

$

10,000,000

 

M

 

74

 

110

 

AXA Equitable Life Insurance Company

 

AA-

622

 

$

2,500,000

 

M

 

73

 

45

 

Transamerica Life Insurance Company

 

AA-

623

 

$

750,000

 

M

 

73

 

122

 

Security Life of Denver Insurance Company

 

A

624

 

$

1,000,000

 

M

 

73

 

95

 

Accordia Life and Annuity Company

 

A-

625

 

$

3,000,000

 

M

 

73

 

152

 

John Hancock Life Insurance Company (U.S.A.)

 

AA-

626

 

$

2,000,000

 

M

 

73

 

93

 

New York Life Insurance Company

 

AA+

627

 

$

2,000,000

 

M

 

73

 

93

 

New York Life Insurance Company

 

AA+

628

 

$

5,000,000

 

M

 

73

 

121

 

John Hancock Life Insurance Company (U.S.A.)

 

AA-

629

 

$

250,000

 

F

 

73

 

101

 

Protective Life Insurance Company

 

AA-

630

 

$

2,500,000

 

M

 

73

 

107

 

Lincoln National Life Insurance Company

 

AA-

631

 

$

2,500,000

 

M

 

73

 

107

 

John Hancock Life Insurance Company (U.S.A.)

 

AA-

632

 

$

2,000,000

 

M

 

73

 

113

 

Voya Retirement Insurance and Annuity Company

 

A

633

 

$

1,500,000

 

M

 

73

 

113

 

Voya Retirement Insurance and Annuity Company

 

A

32

 

 

Face
Amount

 

Gender

 

Age
(ALB)

 

LE
(mo.)(1)

 

Insurance Company

 

S&P
Rating

634

 

$

390,025

 

M

 

73

 

137

 

Genworth Life and Annuity Insurance Company

 

BB-

635

 

$

230,000

 

M

 

73

 

109

 

Transamerica Life Insurance Company

 

AA-

636

 

$

139,398

 

F

 

73

 

18

 

Lincoln National Life Insurance Company

 

AA-

637

 

$

500,000

 

M

 

73

 

29

 

North American Company for Life and Health Insurance

 

A+

638

 

$

600,000

 

M

 

73

 

29

 

West Coast Life Insurance Company

 

AA-

639

 

$

300,000

 

M

 

73

 

107

 

Protective Life Insurance Company

 

AA-

640

 

$

190,000

 

F

 

73

 

183

 

Protective Life Insurance Company

 

AA-

641

 

$

250,000

 

M

 

73

 

61

 

American General Life Insurance Company

 

A+

642

 

$

160,000

 

M

 

73

 

85

 

RiverSource Life Insurance Company

 

AA-

643

 

$

267,988

 

M

 

73

 

46

 

Minnesota Life Insurance Company

 

A+

644

 

$

75,000

 

F

 

73

 

94

 

American General Life Insurance Company

 

A+

645

 

$

600,000

 

M

 

73

 

78

 

AXA Equitable Life Insurance Company

 

AA-

646

 

$

4,000,000

 

M

 

73

 

133

 

MONY Life Insurance Company of America

 

AA-

647

 

$

1,000,000

 

F

 

73

 

151

 

American General Life Insurance Company

 

A+

648

 

$

1,000,000

 

F

 

73

 

136

 

Reliastar Life Insurance Company

 

A

649

 

$

420,000

 

M

 

73

 

114

 

RiverSource Life Insurance Company

 

AA-

650

 

$

4,000,000

 

M

 

73

 

139

 

AXA Equitable Life Insurance Company

 

AA-

651

 

$

250,000

 

M

 

72

 

44

 

Protective Life Insurance Company

 

AA-

652

 

$

650,000

 

F

 

72

 

65

 

Security Life of Denver Insurance Company

 

A

653

 

$

1,000,000

 

M

 

72

 

122

 

AIG Life Insurance Company

 

A+

654

 

$

500,000

 

M

 

72

 

112

 

Ohio National Life Assurance Corporation

 

A+

655

 

$

400,000

 

M

 

72

 

187

 

Protective Life Insurance Company

 

AA-

656

 

$

232,000

 

M

 

72

 

171

 

Protective Life Insurance Company

 

AA-

657

 

$

185,000

 

M

 

72

 

123

 

Genworth Life and Annuity Insurance Company

 

BB-

658

 

$

750,000

 

M

 

72

 

117

 

Transamerica Life Insurance Company

 

AA-

659

 

$

1,350,000

 

M

 

72

 

93

 

Lincoln National Life Insurance Company

 

AA-

660

 

$

1,250,000

 

M

 

72

 

93

 

West Coast Life Insurance Company

 

AA-

661

 

$

5,000,000

 

M

 

72

 

172

 

John Hancock Life Insurance Company (U.S.A.)

 

AA-

662

 

$

1,500,000

 

F

 

72

 

145

 

Pruco Life Insurance Company

 

AA-

663

 

$

5,000,000

 

M

 

72

 

84

 

Transamerica Life Insurance Company

 

AA-

664

 

$

2,400,000

 

M

 

72

 

85

 

Transamerica Life Insurance Company

 

AA-

665

 

$

500,000

 

M

 

72

 

86

 

Transamerica Life Insurance Company

 

AA-

666

 

$

500,000

 

M

 

72

 

86

 

North American Company for Life And Health Insurance

 

A+

667

 

$

10,000,000

 

M

 

72

 

160

 

Principal Life Insurance Company

 

A+

668

 

$

420,000

 

M

 

72

 

123

 

Protective Life Insurance Company

 

AA-

669

 

$

100,000

 

M

 

72

 

39

 

Genworth Life and Annuity Insurance Company

 

BB-

670

 

$

300,000

 

M

 

72

 

39

 

Genworth Life Insurance Company

 

BB-

671

 

$

314,000

 

M

 

72

 

131

 

Genworth Life Insurance Company

 

BB-

672

 

$

250,000

 

M

 

72

 

131

 

Genworth Life Insurance Company

 

BB-

673

 

$

150,000

 

M

 

72

 

28

 

Protective Life Insurance Company

 

AA-

674

 

$

150,000

 

M

 

72

 

28

 

AXA Equitable Life Insurance Company

 

AA-

675

 

$

1,000,000

 

M

 

72

 

48

 

John Hancock Life Insurance Company (U.S.A.)

 

AA-

676

 

$

5,000,000

 

M

 

72

 

107

 

John Hancock Life Insurance Company (U.S.A.)

 

AA-

677

 

$

5,000,000

 

M

 

72

 

107

 

John Hancock Life Insurance Company (U.S.A.)

 

AA-

678

 

$

100,000

 

M

 

72

 

129

 

Protective Life Insurance Company

 

AA-

679

 

$

5,000,000

 

M

 

72

 

143

 

Metropolitan Life Insurance Company

 

AA-

680

 

$

250,000

 

F

 

71

 

113

 

Ohio National Life Assurance Corporation

 

A+

681

 

$

57,500

 

M

 

71

 

87

 

Lincoln National Life Insurance Company

 

AA-

33

 

 

Face
Amount

 

Gender

 

Age
(ALB)

 

LE
(mo.)(1)

 

Insurance Company

 

S&P
Rating

682

 

$

1,000,000

 

M

 

71

 

161

 

Protective Life Insurance Company

 

AA-

683

 

$

6,000,000

 

M

 

71

 

186

 

AXA Equitable Life Insurance Company

 

AA-

684

 

$

1,000,000

 

M

 

71

 

148

 

Transamerica Life Insurance Company

 

AA-

685

 

$

400,000

 

M

 

71

 

153

 

Lincoln National Life Insurance Company

 

AA-

686

 

$

100,000

 

M

 

71

 

93

 

Massachusetts Mutual Life Insurance Company

 

AA+

687

 

$

92,000

 

F

 

71

 

191

 

Protective Life Insurance Company

 

AA-

688

 

$

300,000

 

M

 

71

 

187

 

John Hancock Life Insurance Company (U.S.A.)

 

AA-

689

 

$

2,000,000

 

M

 

71

 

152

 

Hartford Life and Annuity Insurance Company

 

BBB+

690

 

$

1,500,000

 

M

 

71

 

65

 

Lincoln National Life Insurance Company

 

AA-

691

 

$

250,000

 

M

 

71

 

92

 

Massachusetts Mutual Life Insurance Company

 

AA+

692

 

$

500,000

 

M

 

71

 

154

 

Protective Life Insurance Company

 

AA-

693

 

$

250,000

 

M

 

71

 

176

 

Lincoln National Life Insurance Company

 

AA-

694

 

$

1,500,000

 

M

 

71

 

98

 

Midland National Life Insurance Company

 

A+

695

 

$

202,700

 

M

 

71

 

109

 

Farmers New World Life Insurance Company

 

N/A

696

 

$

500,000

 

M

 

71

 

103

 

Lincoln Benefit Life Company

 

BBB+

697

 

$

700,000

 

M

 

71

 

109

 

Massachusetts Mutual Life Insurance Company

 

AA+

698

 

$

3,000,000

 

M

 

70

 

147

 

Guardian Life Insurance Company of America

 

AA+

699

 

$

385,741

 

M

 

70

 

93

 

Security Life of Denver Insurance Company

 

A

700

 

$

750,000

 

M

 

70

 

127

 

North American Company for Life And Health Insurance

 

A+

701

 

$

100,000

 

F

 

70

 

157

 

North American Company for Life and Health Insurance

 

A+

702

 

$

1,532,043

 

M

 

70

 

145

 

John Hancock Life Insurance Company (U.S.A.)

 

AA-

703

 

$

1,000,000

 

M

 

70

 

179

 

AXA Equitable Life Insurance Company

 

AA-

704

 

$

1,000,000

 

M

 

70

 

80

 

AXA Equitable Life Insurance Company

 

AA-

705

 

$

4,000,000

 

M

 

70

 

125

 

MetLife Insurance Company USA

 

A+

706

 

$

1,000,000

 

M

 

70

 

80

 

Protective Life Insurance Company

 

AA-

707

 

$

200,000

 

M

 

70

 

172

 

Protective Life Insurance Company

 

AA-

708

 

$

2,000,000

 

M

 

70

 

164

 

John Hancock Life Insurance Company (U.S.A.)

 

AA-

709

 

$

2,000,000

 

M

 

70

 

106

 

Transamerica Life Insurance Company

 

AA-

710

 

$

1,000,000

 

M

 

70

 

106

 

Genworth Life Insurance Company

 

BB-

711

 

$

5,000,000

 

M

 

70

 

110

 

John Hancock Life Insurance Company (U.S.A.)

 

AA-

712

 

$

4,000,000

 

M

 

70

 

110

 

AXA Equitable Life Insurance Company

 

AA-

713

 

$

175,000

 

F

 

70

 

103

 

Lincoln National Life Insurance Company

 

AA-

714

 

$

1,000,000

 

M

 

70

 

155

 

Accordia Life and Annuity Company

 

A-

715

 

$

1,000,000

 

M

 

70

 

56

 

Protective Life Insurance Company

 

AA-

716

 

$

1,000,000

 

M

 

70

 

123

 

Transamerica Life Insurance Company

 

AA-

717

 

$

1,000,000

 

M

 

70

 

123

 

Protective Life Insurance Company

 

AA-

718

 

$

2,000,000

 

M

 

70

 

74

 

Metropolitan Life Insurance Company

 

AA-

719

 

$

2,000,000

 

M

 

70

 

74

 

Metropolitan Life Insurance Company

 

AA-

720

 

$

1,000,000

 

M

 

70

 

145

 

John Hancock Life Insurance Company (U.S.A.)

 

AA-

721

 

$

400,000

 

F

 

70

 

134

 

AXA Equitable Life Insurance Company

 

AA-

722

 

$

500,000

 

M

 

70

 

152

 

Lincoln National Life Insurance Company

 

AA-

723

 

$

1,000,000

 

M

 

69

 

39

 

AXA Equitable Life Insurance Company

 

AA-

724

 

$

250,000

 

M

 

69

 

142

 

State Farm Life Insurance Company

 

AA

725

 

$

200,000

 

M

 

69

 

142

 

State Farm Life Insurance Company

 

AA

726

 

$

1,200,000

 

M

 

69

 

118

 

Massachusetts Mutual Life Insurance Company

 

AA+

727

 

$

1,000,000

 

M

 

69

 

130

 

Transamerica Life Insurance Company

 

AA-

728

 

$

1,000,000

 

M

 

69

 

151

 

Lincoln National Life Insurance Company

 

AA-

729

 

$

250,000

 

F

 

69

 

68

 

Transamerica Life Insurance Company

 

AA-

730

 

$

2,500,000

 

M

 

69

 

153

 

Pruco Life Insurance Company

 

AA-

34

 

 

Face
Amount

 

Gender

 

Age
(ALB)

 

LE
(mo.)(1)

 

Insurance Company

 

S&P
Rating

731

 

$

2,500,000

 

M

 

69

 

153

 

Pruco Life Insurance Company

 

AA-

732

 

$

3,000,000

 

M

 

69

 

141

 

Genworth Life Insurance Company

 

BB-

733

 

$

1,200,000

 

M

 

69

 

141

 

Genworth Life Insurance Company

 

BB-

734

 

$

500,000

 

M

 

69

 

37

 

Voya Retirement Insurance and Annuity Company

 

A

735

 

$

750,000

 

M

 

69

 

153

 

Northwestern Mutual Life Insurance Company

 

AA+

736

 

$

2,000,000

 

M

 

69

 

164

 

John Hancock Life Insurance Company (U.S.A.)

 

AA-

737

 

$

250,000

 

F

 

69

 

149

 

Protective Life Insurance Company

 

AA-

738

 

$

150,000

 

M

 

69

 

111

 

Protective Life Insurance Company

 

AA-

739

 

$

3,000,000

 

M

 

69

 

139

 

Transamerica Life Insurance Company

 

AA-

740

 

$

100,000

 

M

 

69

 

116

 

Phoenix Life Insurance Company

 

BB-

741

 

$

13,250,000

 

M

 

69

 

199

 

TIAA-CREF Life Insurance Company

 

AA+

742

 

$

500,000

 

M

 

69

 

112

 

Lincoln National Life Insurance Company

 

AA-

743

 

$

156,538

 

F

 

69

 

100

 

New York Life Insurance Company

 

AA+

744

 

$

560,000

 

M

 

69

 

109

 

AXA Equitable Life Insurance Company

 

AA-

745

 

$

1,100,000

 

M

 

69

 

146

 

John Hancock Life Insurance Company (U.S.A.)

 

AA-

746

 

$

3,000,000

 

M

 

69

 

185

 

John Hancock Life Insurance Company (U.S.A.)

 

AA-

747

 

$

300,000

 

M

 

69

 

86

 

Protective Life Insurance Company

 

AA-

748

 

$

400,000

 

M

 

68

 

183

 

Lincoln National Life Insurance Company

 

AA-

749

 

$

3,000,000

 

M

 

68

 

94

 

Reliastar Life Insurance Company

 

A

750

 

$

2,000,000

 

M

 

68

 

94

 

AXA Equitable Life Insurance Company

 

AA-

751

 

$

2,000,000

 

M

 

68

 

94

 

AXA Equitable Life Insurance Company

 

AA-

752

 

$

1,000,000

 

M

 

68

 

43

 

Lincoln National Life Insurance Company

 

AA-

753

 

$

1,000,000

 

M

 

68

 

73

 

Transamerica Life Insurance Company

 

AA-

754

 

$

5,000,000

 

M

 

68

 

97

 

Athene Annuity & Life Assurance Company

 

A-

755

 

$

1,000,000

 

M

 

68

 

141

 

Sun Life Assurance Company of Canada (U.S.)

 

AA-

756

 

$

900,000

 

M

 

68

 

172

 

American General Life Insurance Company

 

A+

757

 

$

846,510

 

M

 

68

 

121

 

Lincoln National Life Insurance Company

 

AA-

758

 

$

846,210

 

M

 

68

 

121

 

Lincoln National Life Insurance Company

 

AA-

759

 

$

5,000,000

 

M

 

68

 

113

 

Lincoln National Life Insurance Company

 

AA-

760

 

$

600,000

 

M

 

68

 

80

 

William Penn Life Insurance Company of New York

 

AA-

761

 

$

229,725

 

F

 

68

 

99

 

Hartford Life and Annuity Insurance Company

 

BBB+

762

 

$

105,798

 

F

 

68

 

127

 

Lincoln Benefit Life Company

 

BBB+

763

 

$

67,602

 

F

 

68

 

127

 

Allstate Life Insurance Company of New York

 

A+

764

 

$

1,000,000

 

M

 

68

 

102

 

The Savings Bank Life Insurance Company of Massachusetts

 

A-

765

 

$

5,616,468

 

M

 

68

 

174

 

John Hancock Life Insurance Company (U.S.A.)

 

AA-

766

 

$

4,383,532

 

M

 

68

 

174

 

John Hancock Life Insurance Company (U.S.A.)

 

AA-

767

 

$

320,000

 

M

 

68

 

154

 

Transamerica Life Insurance Company

 

AA-

768

 

$

250,000

 

M

 

68

 

155

 

Pruco Life Insurance Company

 

AA-

769

 

$

250,000

 

M

 

68

 

190

 

Zurich Life Insurance Company

 

A

770

 

$

750,000

 

M

 

67

 

78

 

Massachusetts Mutual Life Insurance Company

 

AA+

771

 

$

350,000

 

F

 

67

 

79

 

Assurity Life Insurance Company

 

N/A

772

 

$

492,547

 

M

 

67

 

90

 

AXA Equitable Life Insurance Company

 

AA-

773

 

$

320,581

 

M

 

67

 

20

 

American General Life Insurance Company

 

A+

774

 

$

400,000

 

M

 

67

 

125

 

Jackson National Life Insurance Company

 

AA

775

 

$

500,000

 

F

 

67

 

163

 

Banner Life Insurance Company

 

AA-

776

 

$

350,000

 

M

 

67

 

91

 

RiverSource Life Insurance Company

 

AA-

777

 

$

989,361

 

M

 

67

 

142

 

General American Life Insurance Company

 

AA-

778

 

$

200,000

 

M

 

67

 

155

 

Prudential Insurance Company of America

 

AA-

779

 

$

200,000

 

M

 

67

 

155

 

Prudential Insurance Company of America

 

AA-

35

 

 

Face
Amount

 

Gender

 

Age
(ALB)

 

LE
(mo.)(1)

 

Insurance Company

 

S&P
Rating

780

 

$

750,000

 

M

 

67

 

121

 

Pacific Life Insurance Company

 

AA-

781

 

$

500,000

 

F

 

67

 

124

 

AIG Life Insurance Company

 

A+

782

 

$

650,000

 

M

 

67

 

177

 

Lincoln National Life Insurance Company

 

AA-

783

 

$

250,000

 

M

 

66

 

140

 

Conseco Life Insurance Company

 

BBB+

784

 

$

2,000,000

 

F

 

66

 

168

 

Metropolitan Life Insurance Company

 

AA-

785

 

$

250,000

 

F

 

66

 

171

 

Principal Life Insurance Company

 

A+

786

 

$

500,000

 

M

 

66

 

69

 

Transamerica Life Insurance Company

 

AA-

787

 

$

265,000

 

M

 

66

 

151

 

Protective Life Insurance Company

 

AA-

788

 

$

250,000

 

M

 

66

 

113

 

Transamerica Life Insurance Company

 

AA-

789

 

$

10,000,000

 

M

 

66

 

58

 

Lincoln National Life Insurance Company

 

AA-

790

 

$

540,000

 

M

 

66

 

164

 

West Coast Life Insurance Company

 

AA-

791

 

$

350,000

 

M

 

65

 

116

 

Hartford Life and Annuity Insurance Company

 

BBB+

792

 

$

3,500,000

 

M

 

65

 

192

 

Prudential Insurance Company of America

 

AA-

793

 

$

150,000

 

M

 

60

 

90

 

Jackson National Life Insurance Company

 

AA

 

 

$

1,525,362,833

 

 

 

 

 

 

 

 

 

 

____________

(ALB)  Age Last Birthday — the insured’s age is current as of the measurement date.

(1)        The insured’s life expectancy estimate, other than for a small face value insurance policy (i.e., a policy with $1 million in face value benefits or less), is the average of two life expectancy estimates provided by independent third-party medical-actuarial underwriting firms at the time of purchase, actuarially adjusted through the measurement date. Numbers in this column represent months.

36

FINANCIAL INFORMATION

GWG HOLDINGS, INC.

Table of Contents

 

 

Page No.

Condensed Consolidated Balance Sheets as of June 30, 2017, and December 31, 2016

 

F-2

Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2017 and 2016

 

F-3

Condensed Consolidated Statements of Cash Flows for the three and six months ended June 30, 2017 and 2016

 

F-4

Consolidated Statement of Changes in Stockholders’ Equity

 

F-6

Notes to Condensed Consolidated Financial Statements

 

F-7

F-1

GWG HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS

 

 

June 30,
2017 (unaudited)

 

December 31, 2016

ASSETS

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

52,293,472

 

 

$

78,486,982

 

Restricted cash

 

 

46,159,631

 

 

 

37,826,596

 

Investment in life insurance policies, at fair value

 

 

577,049,552

 

 

 

511,192,354

 

Secured MCA advances

 

 

3,525,381

 

 

 

5,703,147

 

Life insurance policy benefits receivable

 

 

6,970,000

 

 

 

5,345,000

 

Deferred taxes, net

 

 

1,620,303

 

 

 

—

 

Other assets

 

 

3,875,810

 

 

 

4,688,103

 

TOTAL ASSETS

 

$

691,494,149

 

 

$

643,242,182

 

 

 

 

 

 

 

 

 

 

LIABILITIES & STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

LIABILITIES

 

 

 

 

 

 

 

 

Senior Credit Facilities

 

$

149,008,826

 

 

$

156,064,818

 

Series I Secured Notes

 

 

6,680,961

 

 

 

16,404,836

 

L Bonds

 

 

400,832,308

 

 

 

381,312,587

 

Accounts payable

 

 

4,160,097

 

 

 

2,226,712

 

Interest payable

 

 

14,387,044

 

 

 

16,160,599

 

Other accrued expenses

 

 

2,535,674

 

 

 

1,676,761

 

Deferred taxes, net

 

 

—

 

 

 

2,097,371

 

TOTAL LIABILITIES

 

 

577,604,910

 

 

 

575,943,684

 

 

 

 

 

 

 

 

 

 

STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CONVERTIBLE PREFERRED STOCK

 

 

 

 

 

 

 

 

(par value $0.001; shares authorized 40,000,000; shares outstanding 2,671,663 and 2,640,521; liquidation preference of $20,037,000 and $19,804,000 as of June 30, 2017 and December 31, 2016, respectively)

 

 

19,732,262

 

 

 

19,701,133

 

 

 

 

 

 

 

 

 

 

REDEEMABLE PREFERRED STOCK

 

 

 

 

 

 

 

 

(par value $0.001; shares authorized 100,000; shares outstanding 99,127 and 59,183; liquidation preference of $99,127,000 and $59,183,000 as of June 30, 2017 and December 31, 2016, respectively)

 

 

97,728,821

 

 

 

59,025,164

 

 

 

 

 

 

 

 

 

 

SERIES 2 REDEEMABLE PREFERRED STOCK

 

 

 

 

 

 

 

 

(par value $0.001; shares authorized 150,000; shares outstanding 22,536 and 0; liquidation preference of $22,536,000 and $0 as of June 30, 2017 and December 31, 2016, respectively)

 

 

20,979,019

 

 

 

—

 

 

 

 

 

 

 

 

 

 

COMMON STOCK

 

 

 

 

 

 

 

 

(par value $0.001: shares authorized 210,000,000; shares issued and outstanding 5,783,555 and 5,980,190 as of June 30, 2017 and December 31, 2016, respectively)

 

 

5,784

 

 

 

5,980

 

Additional paid-in capital

 

 

—

 

 

 

7,383,515

 

Accumulated deficit

 

 

(24,556,647

)

 

 

(18,817,294

)

TOTAL STOCKHOLDERS’ EQUITY

 

 

113,889,239

 

 

 

67,298,498

 

 

 

 

 

 

 

 

 

 

TOTAL LIABILITIES & EQUITY

 

$

691,494,149

 

 

$

643,242,182

 

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

F-2

GWG HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)

 

 

Three Months Ended

 

Six Months Ended

 

 

June 30,
2017

 

June 30,
2016

 

June 30,
2017

 

June 30,
2016

REVENUE

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gain on life insurance policies, net

 

$

11,296,266

 

 

$

20,383,347

 

$

30,696,086

 

 

$

38,097,059

MCA income

 

 

133,583

 

 

 

223,255

 

 

380,159

 

 

 

368,216

Interest and other income

 

 

237,737

 

 

 

170,880

 

 

679,686

 

 

 

216,100

TOTAL REVENUE

 

 

11,667,586

 

 

 

20,777,482

 

 

31,755,931

 

 

 

38,681,375

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EXPENSES

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

 

12,246,025

 

 

 

9,764,657

 

 

25,490,241

 

 

 

18,913,811

Employee compensation and benefits

 

 

3,741,299

 

 

 

3,071,507

 

 

6,904,360

 

 

 

5,537,705

Legal and professional fees

 

 

1,330,589

 

 

 

1,304,353

 

 

2,276,937

 

 

 

2,510,481

Provision for MCA advances

 

 

878,000

 

 

 

300,000

 

 

878,000

 

 

 

400,000

Other expenses

 

 

2,883,098

 

 

 

2,032,685

 

 

5,663,420

 

 

 

4,344,845

TOTAL EXPENSES

 

 

21,079,011

 

 

 

16,473,202

 

 

41,212,958

 

 

 

31,706,842

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

INCOME (LOSS) BEFORE INCOME TAXES

 

 

(9,411,425

)

 

 

4,304,280

 

 

(9,457,027

)

 

 

6,974,533

INCOME TAX EXPENSE (BENEFIT)

 

 

(3,717,174

)

 

 

1,822,030

 

 

(3,717,674

)

 

 

2,906,747

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NET INCOME (LOSS)

 

 

(5,694,251

)

 

 

2,482,250

 

 

(5,739,353

)

 

 

4,067,786

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Preferred stock dividends

 

 

2,031,097

 

 

 

600,924

 

 

3,898,857

 

 

 

1,112,155

NET INCOME (LOSS) ATTRIBUTABLE TO COMMON SHAREHOLDERS

 

$

(7,725,348

)

 

$

1,881,326

 

$

(9,638,210

)

 

$

2,955,631

NET INCOME (LOSS) PER SHARE

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

(1.34

)

 

$

0.32

 

$

(1.69

)

 

$

0.50

Diluted

 

$

(1.34

)

 

$

0.30

 

$

(1.69

)

 

$

0.49

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

WEIGHTED AVERAGE SHARES OUTSTANDING

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

5,777,724

 

 

 

5,967,098

 

 

5,710,909

 

 

 

5,954,944

Diluted

 

 

5,777,724

 

 

 

8,017,349

 

 

5,710,909

 

 

 

8,002,335

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

F-3

GWG HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(unaudited)

 

 

Three Months Ended

 

Six Months Ended

 

 

June 30, 2017

 

June 30, 2016

 

June 30, 2017

 

June 30, 2016

CASH FLOWS FROM OPERATING ACTIVITIES

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss)

 

$

(5,694,251

)

 

$

2,482,250

 

 

$

(5,739,353

)

 

$

4,067,786

 

Adjustments to reconcile net income (loss) to net cash flows from operating activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Change in fair value of life insurance policies

 

 

(15,235,502

)

 

 

(21,241,376

)

 

 

(29,119,335

)

 

 

(32,772,929

)

Amortization of deferred financing and issuance costs

 

 

1,497,948

 

 

 

2,527,974

 

 

 

4,164,151

 

 

 

3,312,162

 

Deferred income taxes

 

 

(3,717,174

)

 

 

1,851,018

 

 

 

(3,717,674

)

 

 

2,906,747

 

Preferred stock dividends payable

 

 

363,959

 

 

 

166,472

 

 

 

700,748

 

 

 

330,049

 

(Increase) decrease in operating assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Life insurance policy benefits receivable

 

 

2,005,000

 

 

 

9,083,817

 

 

 

(1,625,000

)

 

 

(6,829,022

)

Other assets

 

 

(557,988

)

 

 

(1,210,892

)

 

 

868,330

 

 

 

(1,037,466

)

Increase (decrease) in operating liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Due to related party

 

 

(1,970

)

 

 

(1,814,173

)

 

 

(9,785

)

 

 

(101,781

)

Accounts payable and other accrued expenses

 

 

1,038,855

 

 

 

(775,213

)

 

 

2,256,087

 

 

 

1,192,756

 

NET CASH FLOWS USED IN OPERATING ACTIVITIES

 

 

(20,301,123

)

 

 

(8,930,123

)

 

 

(32,221,831

)

 

 

(28,931,698

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CASH FLOWS FROM INVESTING ACTIVITIES

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment in life insurance policies

 

 

(19,432,338

)

 

 

(24,373,714

)

 

 

(42,121,671

)

 

 

(48,700,036

)

Carrying value of matured life insurance policies

 

 

3,014,834

 

 

 

1,691,764

 

 

 

5,383,808

 

 

 

6,302,243

 

Investment in Secured MCA advances

 

 

(39,671

)

 

 

(1,293,829

)

 

 

(39,671

)

 

 

(5,647,414

)

Proceeds from Secured MCA advances

 

 

653,315

 

 

 

907,649

 

 

 

1,423,702

 

 

 

1,025,792

 

NET CASH FLOWS USED IN INVESTING ACTIVITIES

 

 

(15,803,860

)

 

 

(23,068,130

)

 

 

(35,353,832

)

 

 

(47,019,415

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net borrowings on (repayments of) Senior Credit Facilities

 

 

(3,845,037

)

 

 

(3,000,000

)

 

 

(7,099,537

)

 

 

17,000,000

 

Payments for issuance of senior debt

 

 

(1,076,118

)

 

 

—

 

 

 

(1,190,412

)

 

 

—

 

Payments for redemption of Series I Secured Notes

 

 

(4,348,372

)

 

 

(485,350

)

 

 

(9,798,261

)

 

 

(5,722,743

)

Proceeds from issuance of L Bonds

 

 

31,875,811

 

 

 

36,757,771

 

 

 

56,744,470

 

 

 

71,126,660

 

Payments for issuance and redemption of L Bonds

 

 

(15,025,566

)

 

 

(11,753,782

)

 

 

(39,197,163

)

 

 

(22,663,475

)

Transfer from (payments to) restricted cash

 

 

1,931,958

 

 

 

8,667,826

 

 

 

(8,333,035

)

 

 

(8,818,894

)

Issuance (repurchase) of common stock

 

 

4

 

 

 

166,125

 

 

 

(1,603,556

)

 

 

212,670

 

Proceeds from issuance of preferred stock

 

 

34,301,747

 

 

 

9,472,673

 

 

 

61,480,941

 

 

 

10,501,209

 

Payment for issuance and redemption of preferred stock

 

 

(3,318,211

)

 

 

(845,361

)

 

 

(5,722,437

)

 

 

(1,617,914

)

Payment of preferred stock dividends

 

 

(2,031,097

)

 

 

(600,924

)

 

 

(3,898,857

)

 

 

(1,112,155

)

NET CASH FLOWS PROVIDED BY FINANCING ACTIVITIES

 

 

38,465,119

 

 

 

38,378,978

 

 

 

41,382,153

 

 

 

58,905,358

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

 

 

2,360,136

 

 

 

6,380,725

 

 

 

(26,193,510

)

 

 

(17,045,755

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CASH AND CASH EQUIVALENTS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BEGINNING OF PERIOD

 

 

49,933,336

 

 

 

10,998,625

 

 

 

78,486,982

 

 

 

34,425,105

 

END OF PERIOD

 

$

52,293,472

 

 

$

17,379,350

 

 

$

52,293,472

 

 

$

17,379,350

 

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

F-4

GWG HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS – CONTINUED
(unaudited)

 

 

Three Months Ended

 

Six Months Ended

 

 

June 30, 2017

 

June 30, 2016

 

June 30, 2017

 

June 30, 2016

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION

 

 

 

 

 

 

 

 

 

 

 

 

Interest paid

 

$

14,323,000

 

$

10,294,000

 

$

26,548,000

 

$

16,399,000

Premiums paid

 

$

11,646,000

 

$

8,995,000

 

$

22,606,000

 

$

17,441,000

Stock-based compensation

 

$

89,000

 

$

41,000

 

$

406,000

 

$

50,000

 

 

 

 

 

 

 

 

 

 

 

 

 

NON-CASH INVESTING AND FINANCING ACTIVITIES

 

 

 

 

 

 

 

 

 

 

 

 

Series I Secured Notes:

 

 

 

 

 

 

 

 

 

 

 

 

Conversion of accrued interest and commissions payable to principal

 

$

—

 

$

142,000

 

$

—

 

$

187,000

L Bonds:

 

 

 

 

 

 

 

 

 

 

 

 

Conversion of accrued interest and commissions payable to principal

 

$

397,000

 

$

370,000

 

$

905,000

 

$

661,000

Series A Preferred Stock:

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of Series A Preferred Stock in lieu of cash dividends

 

$

166,000

 

$

171,000

 

$

337,000

 

$

339,000

Investment in life insurance policies included in accounts payable

 

$

1,296,000

 

$

780,000

 

$

1,296,000

 

$

780,000

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

F-5

GWG HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY
(unaudited)

 

 

Preferred Stock Shares

 

Preferred Stock

 

Common Shares

 

Common Stock (par)

 

Additional Paid-in
Capital

 

Accumulated
Deficit

 

Total
Equity

Balance, December 31, 2015

 

2,781,735

 

 

$

20,784,841

 

 

5,941,790

 

 

$

5,942

 

 

$

14,563,834

 

 

$

(19,209,203

)

 

$

16,145,414

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss)

 

—

 

 

 

—

 

 

—

 

 

 

—

 

 

 

—

 

 

 

391,909

 

 

 

391,909

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common stock

 

—

 

 

 

—

 

 

36,450

 

 

 

36

 

 

 

244,149

 

 

 

—

 

 

 

244,185

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Redemption of Series A Preferred Stock

 

(239,749

)

 

 

(1,788,451

)

 

1,950

 

 

 

2

 

 

 

19,498

 

 

 

—

 

 

 

(1,768,951

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of Series A Preferred Stock

 

98,535

 

 

 

704,743

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

704,743

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of Redeemable Preferred Stock

 

59,183

 

 

 

59,025,164

 

 

 

 

 

 

 

 

 

 

(4,133,525

)

 

 

 

 

 

 

54,891,639

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Preferred stock dividends

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(3,537,288

)

 

 

 

 

 

 

(3,537,288

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of stock options

 

—

 

 

 

—

 

 

—

 

 

 

—

 

 

 

226,847

 

 

 

—

 

 

 

226,847

 

Balance, December 31, 2016

 

2,699,704

 

 

$

78,726,297

 

 

5,980,190

 

 

$

5,980

 

 

$

7,383,515

 

 

$

(18,817,294

)

 

$

67,298,498

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss)

 

—

 

 

 

—

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(5,739,353

)

 

 

(5,739,353

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Redemption of
common stock

 

—

 

 

 

—

 

 

(200,445

)

 

 

(200

)

 

 

(1,603,360

)

 

 

—

 

 

 

(1,603,560

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Redemption of Series A Preferred Stock

 

(17,033

)

 

 

(126,997

)

 

3,810

 

 

 

4

 

 

 

—

 

 

 

—

 

 

 

(126,993

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of Series A Preferred Stock

 

48,175

 

 

 

210,230

 

 

 

 

 

 

 

 

 

 

—

 

 

 

 

 

 

 

210,230

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of Redeemable Preferred Stock and Series 2 Redeemable Preferred Stock,
net of costs

 

63,041

 

 

 

60,247,764

 

 

 

 

 

 

 

 

 

 

(2,017,487

)

 

 

 

 

 

 

58,230,277

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Redemption of Redeemable Preferred Stock and Series 2 Redeemable Preferred Stock

 

(561

)

 

 

(561,277

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(561,277

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Preferred stock dividends*

 

 

 

 

 

(122,323

)

 

 

 

 

 

 

 

 

 

(3,776,534

)

 

 

 

 

 

 

(3,898,857

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of stock options

 

 

 

 

 

66,408

 

 

 

 

 

 

 

 

 

 

13,866

 

 

 

 

 

 

 

80,274

 

Balance, June 30, 2017

 

2,793,326

 

 

$

138,440,102

 

 

5,783,555

 

 

$

5,784

 

 

$

—

 

 

$

(24,556,647

)

 

$

113,889,239

 

____________

*         Preferred stock dividends were paid from additional paid-in capital until the latter was exhausted in the second quarter of 2017. Subsequent dividends were charged against the carrying values of the respective series of the Company’s preferred stock resulting in a difference between the Company’s preferred stock book balances and liquidation preference of the respective series of preferred stock.

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

F-6

GWG HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

(1) Nature of Business and Summary of Significant Accounting Policies

Nature of Business — We are a financial services company committed to finding new ways of disrupting and transforming the life insurance and related industries. We built our business by creating opportunities for consumers to obtain significantly more value for their life insurance policies as compared to the traditional options offered by the insurance industry by creating a secondary market. We are enhancing and extending these activities through innovation in our products and services, business processes, financing strategies, and advanced epigenetic technologies. At the same time, we are creating opportunities for investors to receive income and capital appreciation from our investment activities in the life insurance and related industries.

GWG Holdings, Inc. and all of its subsidiaries are incorporated and organized in Delaware. Unless the context otherwise requires or we specifically so indicate, all references in these footnotes to “we,” “us,” “our,” “our Company,” “GWG,” or the “Company” refer to GWG Holdings, Inc. and its subsidiaries collectively and on a consolidated basis. References to the full names of particular entities, such as “GWG Holdings, Inc.” or “GWG Holdings,” are meant to refer only to the particular entity referenced.

On December 7, 2015, GWG Holdings formed a wholly owned subsidiary, GWG MCA, LLC. On January 13, 2016, GWG MCA, LLC was converted to a corporation and became GWG MCA Capital, Inc. GWG MCA Capital, Inc. (“GWG MCA”) was formed to provide cash advances to small businesses.

On August 25, 2016, GWG Holdings formed a wholly owned subsidiary, Actüa Life & Annuity Ltd. (“Actüa”), to engage in various life insurance related businesses and activities related to its exclusive license for “DNA Methylation Based Predictor of Mortality” technology.

Use of Estimates — The preparation of our consolidated financial statements in conformity with GAAP requires management to make significant estimates and assumptions affecting the reported amounts of assets and liabilities at the date of the consolidated financial statements, as well as the reported amounts of revenue during the reporting period. We regularly evaluate estimates and assumptions, which are based on current facts, historical experience, management’s judgment, and various other factors that we believe to be reasonable under the circumstances. Our actual results may differ materially and adversely from our estimates. The most significant estimates with regard to these consolidated financial statements relate to (1) the determination of the assumptions used in estimating the fair value of our investments in life insurance policies, and (2) the value of our deferred tax assets and liabilities.

Cash and Cash Equivalents — We consider cash in demand deposit accounts and temporary investments purchased with an original maturity of three months or less to be cash equivalents. We maintain our cash and cash equivalents with highly rated financial institutions. The balances in our bank accounts may exceed Federal Deposit Insurance Corporation limits. We periodically evaluate the risk of exceeding insured levels and may transfer funds as we deem appropriate.

Life Insurance Policies — Accounting Standards Codification 325-30, Investments in Insurance Contracts (“ASC 325-30”), permits a reporting entity to account for its investments in life insurance policies using either the investment method or the fair value method. We elected to use the fair value method to account for our life insurance policies. We initially record our purchase of life insurance policies at the transaction price, which is the amount paid for the policy, inclusive of all external fees and costs associated with the acquisition. At each subsequent reporting period, we re-measure the investment at fair value in its entirety and recognize the change in fair value as unrealized gain (revenue) in the current period, net of premiums paid.

In a case where our acquisition of a policy is not complete as of a reporting date, but we have nonetheless advanced direct costs and deposits for the acquisition, those costs and deposits are recorded as “other assets” on our balance sheet until the acquisition is complete and we have secured title to the policy. On June 30, 2017 and December 31, 2016, a total of $339,000 and $42,000, respectively, of our “other assets” comprised direct costs and deposits that we had advanced for policy acquisitions.

We also recognize realized gain (or loss) from a life insurance policy upon one of the two following events: (1) our receipt of notice or verified mortality of the insured; or (2) our sale of the policy, filing of change-of-ownership forms

F-7

GWG HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

(1) Nature of Business and Summary of Significant Accounting Policies (cont.)

and receipt of payment. In the case of mortality, the gain (or loss) we recognize is the difference between the policy benefits and the carrying values of the policy once we determine that collection of the policy benefits is realizable and reasonably assured. In the case of a policy sale, the gain (or loss) we recognize is the difference between the sale price and the carrying value of the policy on the date we receive sale proceeds.

Other Assets — Actüa is engaged in various life insurance related businesses and activities related to its exclusive license for the “DNA Methylation Based Predictor of Mortality” technology for the life insurance industry. The cost of entering into this license agreement is listed as “other assets.”

Stock-Based Compensation — We measure and recognize compensation expense for all stock-based payments at fair value over the requisite service period. We use the Black-Scholes option pricing model to determine the weighted-average fair value of options. For restricted stock grants, fair value is determined as of the closing price of our common stock on the date of grant. Stock-based compensation expense is recorded in general and administrative expenses based on the classification of the employee or vendor. The determination of fair value of stock-based payment awards on the date of grant using an option-pricing model is affected by our stock price as well as by assumptions regarding a number of subjective variables. These variables include, but are not limited to, the expected stock price volatility over the term of the awards, and actual and projected employee stock option exercise behaviors.

The expected terms of the options are based on evaluations of historical and expected future employee exercise behavior. The risk-free interest rate is based on the U.S. Treasury rates at the date of grant with maturity dates approximately equal to the expected life at grant date. Volatility is based on the standard deviation of the average continuously compounded rate of return of five selected comparable companies over the previous 52 weeks. We have not historically issued any common stock dividends and do not expect to do so in the foreseeable future. Forfeitures for both option and restricted stock grants are estimated at the time of the grant and revised in subsequent periods if actual forfeitures differ from estimates.

Deferred Financing and Issuance Costs — Loans advanced to us under our senior credit facilities, as described in Notes 5 and 6, are reported net of financing costs, including issuance costs, sales commissions and other direct expenses, which are amortized using the straight-line method over the term of the facility. The Series I Secured Notes and L Bonds, as respectively described in Notes 7 and 8, are reported net of financing costs, which are amortized using the interest method over the term of those borrowings. The Series A Convertible Preferred Stock (“Series A”), as described in Note 9, is reported net of financing costs (including the fair value of warrants issued), all of which were fully amortized using the interest method as of June 30, 2017. Selling and issuance costs of Redeemable Preferred Stock (“RPS”) and Series 2 Redeemable Preferred Stock (“RPS 2”), described in Notes 10 and 11, are netted against additional paid-in-capital and against the principal balance of the preferred stock.

Earnings (loss) per Share — Basic earnings (loss) per share attributable to common shareholders are calculated using the weighted-average number of shares outstanding during the reported period. Diluted earnings (loss) per share are calculated based on the potential dilutive impact of our Series A, RPS, RPS 2, warrants and stock options. Due to our net loss for the three and six months ended June 30, 2017, there are no dilutive securities.

Recently Issued Accounting Pronouncements — On April 7, 2015, the FASB issued Accounting Standards Update No. 2015-03, Simplifying the Presentation of Debt Issuance Costs (“ASU 2015-03”), as part of its simplification initiative. ASU 2015-03 changes the presentation of debt issuance costs by presenting those costs in the balance sheet as a direct deduction from the related debt liability. Amortization of the costs is reported as interest expense. We adopted ASU 2015-03 effective January 1, 2016, as required for public reporting entities.

On February 25, 2016, the FASB issued Accounting Standards Update 2016-02 Leases (“ASU 2016-02”). The new guidance is effective for fiscal years beginning after December 15, 2018. ASU 2016-02 provides more transparency and comparability in the financial statements of lessees by recognizing all leases with a term greater than twelve months on the balance sheet. Lessees will also be required to disclose key information about their leases. Early adoption is permitted. We are currently evaluating the impact of the adoption of this pronouncement and have not yet adopted ASU 2016-02 as of June 30, 2017.

F-8

GWG HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

(1) Nature of Business and Summary of Significant Accounting Policies (cont.)

In March 2016, the FASB issued Accounting Standards Update 2016-09 (“ASU 2016-09”) to simplify the accounting for stock compensation related to the following items: income tax accounting, award classification, estimation of forfeitures, and cash flow presentation. The new guidance is effective for fiscal years beginning after December 15, 2016. We are currently in the process of adopting this pronouncement.

(2) Restrictions on Cash

Under the terms of our senior credit facilities (discussed in Notes 5 and 6), we are required to maintain collection and escrow accounts that are used to fund the acquisition of policies, pay annual policy premiums, pay interest and other charges under the facility, and collect policy benefits. The agents for the lenders authorize disbursements from these accounts. At June 30, 2017 and December 31, 2016, there was a balance of $46,160,000, and $37,827,000, respectively, in these restricted cash accounts.

(3) Investment in Life Insurance Policies

Life insurance policies are valued based on unobservable inputs that are significant to their overall fair value. Changes in the fair value of these policies are recorded as gain or loss on life insurance policies, net of premiums paid on those policies, in our consolidated statements of operations. Fair value is determined on a discounted cash flow basis that incorporates life expectancy assumptions generally derived from reports obtained from widely accepted life expectancy providers, other than insured lives covered under small face amount policies (i.e., $1 million in face value benefits or less), assumptions relating to cost-of-insurance (premium) rates and other assumptions. The discount rate we apply incorporates current information about discount rates applied by other reporting companies owning portfolios of life insurance policies, the discount rates observed in the life insurance secondary market, market interest rates, the credit exposure to the insurance companies that issued the life insurance policies and management’s estimate of the risk premium a purchaser would require to receive the future cash flows derived from our portfolio as a whole. Management has discretion regarding the combination of these and other factors when determining the discount rate. As a result of management’s analysis, a discount rate of 10.81% was applied to our portfolio as of June 30, 2017 as compared to 10.96% as of December 31, 2016.

A summary of our policies, organized according to their estimated life expectancy dates as of the reporting date, is as follows:

 

 

As of June 30, 2017

 

As of December 31, 2016

Years Ending December 31,

 

Number of Policies

 

Estimated
Fair Value

 

Face Value

 

Number of Policies

 

Estimated
Fair Value

 

Face Value

2017

 

4

 

$

3,044,000

 

$

3,375,000

 

11

 

$

14,837,000

 

$

16,939,000

2018

 

11

 

 

16,462,000

 

 

20,853,000

 

23

 

 

30,830,000

 

 

42,564,000

2019

 

61

 

 

64,377,000

 

 

92,676,000

 

55

 

 

57,556,000

 

 

88,858,000

2020

 

96

 

 

92,535,000

 

 

159,203,000

 

93

 

 

85,414,000

 

 

159,814,000

2021

 

85

 

 

71,872,000

 

 

142,961,000

 

86

 

 

73,825,000

 

 

158,744,000

2022

 

88

 

 

80,308,000

 

 

184,162,000

 

66

 

 

56,909,000

 

 

147,222,000

2023

 

80

 

 

58,506,000

 

 

166,527,000

 

64

 

 

44,953,000

 

 

128,581,000

Thereafter

 

368

 

 

189,946,000

 

 

755,606,000

 

292

 

 

146,868,000

 

 

618,953,000

Totals

 

793

 

$

577,050,000

 

$

1,525,363,000

 

690

 

$

511,192,000

 

 

1,361,675,000

We recognized life insurance benefits of $10,935,000 and $9,829,000 during the three months ended June 30, 2017 and 2016, respectively, related to policies with a carrying value of $3,014,000 and $1,692,000, respectively, and as a result recorded realized gains of $7,920,000 and $8,137,000, respectively. We recognized life insurance benefits of $29,910,000 and $29,067,000 during the six months ended June 30, 2017 and 2016, respectively, related to policies with a carrying value of $5,384,000 and $6,302,000, respectively, and as a result recorded realized gains of $24,526,000 and $22,765,000, respectively.

F-9

GWG HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

(3) Investment in Life Insurance Policies (cont.)

Reconciliation of gain on life insurance policies:

 

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

 

2017

 

2016

 

2017

 

2016

Change in estimated probabilistic cash flows

 

$

16,446,000

 

 

$

17,972,000

 

 

$

32,849,000

 

 

$

27,425,000

 

Unrealized gain on acquisitions

 

 

8,044,000

 

 

 

9,822,000

 

 

 

18,646,000

 

 

 

17,841,000

 

Premiums and other annual fees

 

 

(11,859,000

)

 

 

(8,995,000

)

 

 

(22,949,000

)

 

 

(17,441,000

)

Change in discount rates(1)

 

 

4,143,000

 

 

 

629,000

 

 

 

4,143,000

 

 

 

838,000

 

Change in life expectancy evaluation(2)

 

 

(6,662,000

)

 

 

(1,545,000

)

 

 

(8,604,000

)

 

 

(914,000

)

Realized gain on maturities

 

 

7,920,000

 

 

 

8,137,000

 

 

 

24,526,000

 

 

 

22,765,000

 

Fair value of matured policies

 

 

(6,736,000

)

 

 

(5,637,000

)

 

 

(17,915,000

)

 

 

(12,417,000

)

Gain on life insurance policies, net

 

$

11,296,000

 

 

$

20,383,000

 

 

$

30,696,000

 

 

$

38,097,000

 

____________

(1)      The discount rate applied to estimate the fair value of the portfolio of life insurance policies we own was 10.81% as of June 30, 2017, compared to 10.96% as of December 31, 2016 and 11.05% as of June 30, 2016. The carrying value of policies acquired during each quarterly reporting period is adjusted to current fair value using the fair value discount rate applied to the entire portfolio as of that reporting date.

(2)      The change in fair value due to updating independent life expectancy estimates on certain life insurance policies in our portfolio.

We currently estimate that premium payments and servicing fees required to maintain our current portfolio of life insurance policies in force for the next five years, assuming no mortalities, are as follows:

Years Ending December 31,

 

Premiums

 

Servicing

 

Premiums and Servicing Fees

Six months ending December 31, 2017

 

$

24,455,000

 

$

654,000

 

$

25,109,000

2018

 

 

52,611,000

 

 

654,000

 

 

53,265,000

2019

 

 

58,206,000

 

 

654,000

 

 

58,860,000

2020

 

 

65,722,000

 

 

654,000

 

 

66,376,000

2021

 

 

74,105,000

 

 

654,000

 

 

74,759,000

2022

 

 

83,310,000

 

 

654,000

 

 

83,964,000

 

 

$

358,409,000

 

$

3,924,000

 

$

362,333,000

Management anticipates funding the premium payments estimated above with proceeds from the receipt of policy benefits from our portfolio of life insurance policies, net proceeds from our offering of L Bonds and RPS 2, and from our senior credit facilities. The proceeds of these capital sources may also be used for the purchase, financing, and maintenance of additional life insurance policies.

(4) Fair Value Definition and Hierarchy

Accounting Standards Codification 820, Fair Value Measurements and Disclosures (“ASC 820”) establishes a hierarchical disclosure framework that prioritizes and ranks the level of market price observability used in measuring assets and liabilities at fair value. Market price observability is affected by a number of factors, including the type of investment, the characteristics specific to the investment and the state of the marketplace, including the existence and transparency of transactions between market participants. Assets and liabilities with readily available and actively quoted prices, or for which fair value can be measured from actively quoted prices in an orderly market, generally will have a higher degree of market price observability and a lesser degree of judgment used in measuring fair value. ASC 820 maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring the use of observable inputs whenever available. Observable inputs are inputs that market participants would use in pricing the asset or liability developed based on market data obtained from independent sources. Unobservable inputs are inputs that reflect assumptions about how market participants price an asset or liability based on the best available information. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (i.e., the “exit price”) in an orderly transaction between market participants at the measurement date.

F-10

GWG HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

(4) Fair Value Definition and Hierarchy (cont.)

The hierarchy is broken down into three levels based on the observability of inputs as follows:

•         Level 1 — Valuations based on quoted prices in active markets for identical assets or liabilities that the Company has the ability to access. Since valuations are based on quoted prices that are readily and regularly available in an active market, valuation of these products does not entail a significant degree of judgment.

•         Level 2 — Valuations based on one or more quoted prices in markets that are not active or for which all significant inputs are observable, either directly or indirectly.

•         Level 3 — Valuations based on inputs that are unobservable and significant to the overall fair value measurement.

The availability of observable inputs can vary by types of assets and liabilities and is affected by a wide variety of factors, including, for example, whether an instrument is established in the marketplace, the liquidity of markets and other characteristics particular to the transaction. To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised by management in determining fair value is greatest for assets and liabilities categorized in Level 3.

Level 3 Valuation Process

The estimated fair value of our portfolio of life insurance policies is determined on a quarterly basis by our portfolio management committee, taking into consideration changes in discount rate assumptions, estimated premium payments and life expectancy estimate assumptions, as well as any changes in economic and other relevant conditions. The discount rate incorporates current information about discount rates applied by other reporting companies owning portfolios of life insurance policies, the discount rates observed in other competitive purchases in the life insurance secondary market, market interest rates, the credit exposure to the insurance company that issued the life insurance policy and management’s estimate of the risk premium a purchaser would require to receive the future cash flows derived from our portfolio as a whole. Management has discretion regarding the combination of these and other factors when determining the discount rate.

These inputs are then used to estimate the discounted cash flows from the portfolio using the Model Actuarial Pricing System probabilistic portfolio price model, which estimates the cash flows using various mortality probabilities and scenarios. The valuation process includes a review by senior management as of each valuation date. We also engage a third-party expert to independently test the accuracy of the valuations using the inputs we provide on a quarterly basis. See Exhibit 99.1 filed with our Quarterly Report on Form 10-Q for the period ended June 30, 2017, filed on August 10, 2017.

The following table reconciles the beginning and ending fair value of our Level 3 investments in our portfolio of life insurance policies for the periods ended June 30, as follows:

 

 

Three months ended June 30,

 

Six months ended June 30,

 

 

2017

 

2016

 

2017

 

2016

Beginning balance

 

$

545,397,000

 

 

$

387,402,000

 

 

$

511,192,000

 

 

$

356,650,000

 

Purchases

 

 

19,432,000

 

 

 

24,869,000

 

 

 

42,122,000

 

 

 

48,700,000

 

Maturities (initial cost basis)

 

 

(3,014,000

)

 

 

(1,692,000

)

 

 

(5,384,000

)

 

 

(6,303,000

)

Net change in fair value

 

 

15,235,000

 

 

 

21,241,000

 

 

 

29,120,000

 

 

 

32,773,000

 

Ending balance

 

$

577,050,000

 

 

$

431,820,000

 

 

$

577,050,000

 

 

$

431,820,000

 

In the past, we periodically updated the independent life expectancy estimates on the insured lives in our portfolio, other than insured lives covered under small face amount policies (i.e., $1 million in face value benefits or less), on a continuous rotating three-year cycle, and through that effort attempted to update life expectancies for approximately one-twelfth of our portfolio each quarter. Currently, however, the terms of our senior credit facility with LNV Corporation require us to attempt to update life expectancies on a rotating two-year cycle.

F-11

GWG HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

(4) Fair Value Definition and Hierarchy (cont.)

The following table summarizes the inputs utilized in estimating the fair value of our portfolio of life insurance policies:

 

 

As of
June 30,
2017

 

As of
December 31, 2016

Weighted-average age of insured, years*

 

 

81.5

 

 

 

81.6

 

Weighted-average life expectancy, months*

 

 

82.6

 

 

 

83.2

 

Average face amount per policy

 

$

1,924,000

 

 

$

1,973,000

 

Discount rate

 

 

10.81

%

 

 

10.96

%

____________

(*)      Weighted average by face amount of policy benefits

Life expectancy estimates and market discount rates are, by their nature, inherently uncertain and the effect of changes in estimates may be significant. For example, if the life expectancy estimates were increased or decreased by four and eight months on each outstanding policy, and the discount rates were increased or decreased by 1% and 2%, while all other variables were held constant, the fair value of our investment in life insurance policies would increase or decrease as summarized below:

Change in Fair Value of the Investment in Life Insurance Policies

 

 

Change in life expectancy estimates

 

 

minus 8 months

 

minus 4 months

 

plus 4 months

 

plus 8 months

June 30, 2017

 

$

78,665,000

 

$

39,075,000

 

$

(38,334,000

)

 

$

(75,932,000

)

December 31, 2016

 

$

69,253,000

 

$

34,601,000

 

$

(33,846,000

)

 

$

(67,028,000

)

 

 

 

Change in discount rate

 

 

minus 2%

 

minus 1%

 

plus 1%

 

plus 2%

June 30, 2017

 

$

60,606,488

 

$

29,002,000

 

$

(26,678,000

)

 

$

(51,277,000

)

December 31, 2016

 

$

53,764,000

 

$

25,728,000

 

$

(23,668,000

)

 

$

(45,491,000

)

Other Fair Value Considerations

The carrying value of receivables, prepaid expenses, accounts payable and accrued expenses approximate fair value due to their short-term maturities and low credit risk. Using the income-based valuation approach, the estimated fair value of our Series I Secured Notes and L Bonds, having a combined aggregate face value of $414,666,000 as of June 30, 2017, is approximately $424,793,000 based on a weighted-average market interest rate of 6.60%. The carrying value of the senior credit facilities reflects interest charged at the commercial paper rate or 12-month LIBOR, as applicable, plus an applicable margin. The margin represents our credit risk, and the strength of the portfolio of life insurance policies collateralizing the debt. The overall rate reflects market, and the carrying value of the facility approximates fair value.

GWG MCA participates in the merchant cash advance industry by directly advancing sums to merchants and lending money, on a secured basis, to companies that advance sums to merchants. Each quarter, we review the carrying value of these advances and loans, and determine if an impairment reserve is necessary. At June 30, 2017 one of our secured loans was potentially impaired. The secured loan to Nulook Capital LLC had an outstanding balance of $2,060,000 and a loan loss reserve of $1,478,000 at June 30, 2017. We deem fair value to be the estimated collectible value on each loan or advance made from GWG MCA. Where we estimate the collectible amount to be less than the outstanding balance, we record a reserve for the difference. We recorded an impairment charge of $870,000 for the quarter ended June 30, 2017.

F-12

GWG HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

(4) Fair Value Definition and Hierarchy (cont.)

The following table summarizes outstanding warrants related to our Series A offering (see Note 9) and the Company’s initial public offering as of June 30, 2017:

Month issued

 

Warrants
issued

 

Fair value
per share

 

Risk free
rate

 

Volatility

 

Term

September 2012

 

2,500

 

$

0.72

 

0.31

%

 

40.49

%

 

5 years

September 2014

 

16,000

 

$

1.26

 

1.85

%

 

17.03

%

 

5 years

 

 

18,500

 

 

 

 

 

 

 

 

 

 

 

 (5) Credit Facility — Autobahn Funding Company LLC

Through GWG DLP Funding III, LLC (“DLP III”) we are party to a $105 million senior credit facility with Autobahn Funding Company LLC (“Autobahn”), with a maturity date of June 30, 2018. The facility is governed by a Credit and Security Agreement (the “Agreement”), and DZ Bank AG Deutsche Zentral-Genossenschaftsbank (“DZ Bank”) acts as the agent for Autobahn under the Agreement. On September 14, 2016, we paid off this senior credit facility in full with funds received from a new senior credit facility with LNV Corporation as described in Note 6.

Advances under the facility bear interest at a commercial paper rate of the lender at the time of the advance, or at the lender’s cost of borrowing plus 4.25%.

The amount outstanding under this facility was $0 at both June 30, 2017 and December 31, 2016, respectively. GWG Holdings is a performance guarantor of the various obligations of GWG Life, as servicer, under the Agreement. Obligations under the facility are secured by our pledge of ownership in our life insurance policies to DZ Bank through an arrangement under which Wells Fargo serves as securities intermediary.

The Agreement has certain financial (as described below) and non-financial covenants, and we were in compliance with these covenants at both June 30, 2017 and December 31, 2016.

We have agreed to maintain (i) a positive consolidated net income on a non-GAAP basis (as defined and calculated under the Agreement) for each complete fiscal year, (ii) a tangible net worth on a non-GAAP basis (again, as defined and calculated under the Agreement) of not less than $45 million, and (iii) cash and eligible investments of $15 million or above.

Consolidated non-GAAP net income and non-GAAP tangible net worth for the four quarters ended and as of June 30, 2017, as calculated under the Agreement, was $29,590,000 and $225,661,000, respectively.

No life insurance policies were pledged and no funds were available for additional borrowings under the facility at June 30, 2017 and December 31, 2016.

(6) Credit Facility — LNV Corporation

On September 14, 2016, we entered into a senior credit facility with LNV Corporation as lender through our subsidiary GWG DLP Funding IV, LLC. The Loan Agreement governing the facility makes available a total of up to $172,300,000 in credit with a maturity date of September 14, 2026. Additional quarterly advances are available under the Loan Agreement at the LIBOR rate as defined in the Loan Agreement. Interest will accrue on amounts borrowed under the Loan Agreement at an annual interest rate, determined as of each date of borrowing or quarterly if there is no borrowing, equal to (A) the greater of 12-month LIBOR or the federal funds rate (as defined in the agreement) plus one-half of one percent per annum, plus (B) 5.75% per annum. The effective rate at June 30, 2017 was 7.59%. Interest payments are made on a quarterly basis.

The amount outstanding under this facility was $155,625,000 at June 30, 2017 and $162,725,000 at December 31, 2016. Obligations under the facility are secured by a security interest in DLP IV’s assets, for the benefit of the lenders under the Loan Agreement, through an arrangement under which Wells Fargo serves as securities intermediary. The

F-13

GWG HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

(6) Credit Facility — LNV Corporation (cont.)

life insurance policies owned by DLP IV do not serve as direct collateral for the obligations of GWG Holdings under its L Bonds or Series I Secured Notes. The difference between the outstanding balance as of June 30, 2017 and the carrying amount relates to unamortized debt issuance costs.

The Loan Agreement requires DLP IV to maintain a reserve account in an amount sufficient to pay 12 months of servicing, administrative and third party expenses identified under the Loan Agreement, and 12 months of debt service as calculated under the Loan Agreement. As of June 30, 2017, the amount set aside in this specific reserve account was $27,523,000.

The Loan Agreement has certain financial and nonfinancial covenants, and we were in compliance with these covenants at June 30, 2017 and December 31, 2016.

No funds were available for additional borrowings under the facility at June 30, 2017.

(7) Series I Secured Notes

Series I Secured Notes (“Series I”) are legal obligations of GWG Life and were privately offered and sold from August 2009 through June 2011. The Series I are secured by the assets of GWG Life and are subordinate to obligations under our senior credit facilities (see Notes 5 and 6). We are party to a Third Amended and Restated Note Issuance and Security Agreement dated November 1, 2011, as amended, under which GWG Life is obligor, GWG Holdings is guarantor, and Lord Securities Corporation serves as trustee of the GWG Life Trust (“Trust”). This agreement contains certain financial and non-financial covenants, and we were in compliance with these covenants at both June 30, 2017 and December 31, 2016.

The Series I were sold with original maturity dates ranging from six months to seven years, and with fixed interest rates varying from 5.65% to 9.55% depending on the term of the note. The Series I have renewal features under which we may elect to permit their renewal, subject to the right of noteholders to elect to receive payment at maturity. Since September 1, 2016, we are no longer renewing the Series I.

Interest on the Series I is payable monthly, quarterly, annually or at maturity depending on the election of the investor. At June 30, 2017 and December 31, 2016, the weighted-average interest rate of our Series I was 8.72% and 8.68%, respectively. The principal amount of Series I outstanding was $6,815,000 and $16,614,000 at June 30, 2017 and December 31, 2016, respectively. The difference between the amount outstanding on the Series I and the carrying amount on our balance sheet is due to netting of unamortized deferred issuance costs and including redemptions in process. Overall, interest expense includes amortization of deferred financing and issuance costs of $29,000 and $74,000 for the three and six months ended June 30, 2017 and $82,000 and $193,000 for the three and six months ended June 30, 2016. Future expected amortization of deferred financing costs is $134,000 in total over the next five years.

Future contractual maturities of Series I payable, and future amortization of their deferred financing costs, at June 30, 2017 are as follows:

Years Ending December 31,

 

Contractual Maturities

 

Amortization of
Deferred Financing
Costs

Six months ending December 31, 2017

 

$

749,000

 

$

3,000

2018

 

 

2,376,000

 

 

25,000

2019

 

 

1,024,000

 

 

17,000

2020

 

 

1,725,000

 

 

41,000

2021

 

 

941,000

 

 

48,000

 

 

$

6,815,000

 

$

134,000

F-14

GWG HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

(8) L Bonds

Our L Bonds are legal obligations of GWG Holdings. Obligations under the L Bonds are secured by the assets of GWG Holdings and by GWG Life, as a guarantor, and are subordinate to the obligations under our senior credit facilities (see Notes 5 and 6). We began publicly offering and selling L Bonds in January 2012 under the name “Renewable Secured Debentures.” These debt securities were re-named “L Bonds” in January 2015. L Bonds are publicly offered and sold on a continuous basis under a registration statement permitting us to sell up to $1.0 billion in principal amount of L Bonds. We are party to an indenture governing the L Bonds dated October 19, 2011, as amended (“Indenture”), under which GWG Holdings is obligor, GWG Life is guarantor, and Bank of Utah serves as indenture trustee. The Indenture contains certain financial and non-financial covenants, and we were in compliance with these covenants at June 30, 2017 and December 31, 2016.

Effective September 1, 2016, we ceased selling 6-month and 1-year L Bonds until further notice. In addition, effective September 1, 2016, the L Bond interest rates that we offer changed to 5.50%, 6.25%, 7.50% and 8.50% for the 2-, 3-, 5- and 7-year L Bonds, respectively. The bonds have renewal features under which we may elect to permit their renewal, subject to the right of bondholders to elect to receive payment at maturity. Interest is payable monthly or annually depending on the election of the investor.

At June 30, 2017 and December 31, 2016, the weighted-average interest rate of our L Bonds was 7.30% and 7.23%, respectively. The principal amount of L Bonds outstanding was $407,850,000 and $387,067,000 at June 30, 2017 and December 31, 2016, respectively. The difference between the amount of outstanding L Bonds and the carrying amount on our balance sheets is due to netting of unamortized deferred issuance costs, cash receipts for new issuances and payments of redemptions in process. Amortization of deferred issuance costs was $927,000 and $2,856,000 for the three and six months ended June 30, 2017 and $1,721,000 and $3,289,000 for the three and six months ended June 30, 2016. Future expected amortization of deferred financing costs as of June 30, 2017 is $13,539,000 in total over the next seven years.

Future contractual maturities of L Bonds, and future amortization of their deferred financing costs, at June 30, 2017 are as follows:

Years Ending December 31,

 

Contractual Maturities

 

Amortization of
Deferred Financing
Costs

Six months ending December 31, 2017

 

$

47,068,000

 

$

353,000

2018

 

 

108,772,000

 

 

2,181,000

2019

 

 

116,767,000

 

 

4,128,000

2020

 

 

49,062,000

 

 

2,147,000

2021

 

 

28,753,000

 

 

1,411,000

Thereafter

 

 

57,428,000

 

 

3,319,000

 

 

$

407,850,000

 

$

13,539,000

 (9) Series A Convertible Preferred Stock

From July 2011 through September 2012, we privately offered shares of Series A of GWG Holdings at $7.50 per share. In the offering, we sold an aggregate of 3,278,000 shares for gross consideration of $24,582,000. Holders of Series A are entitled to cumulative dividends at the rate of 10% per annum, paid quarterly. Dividends on the Series A are accumulating and are recorded as a reduction to additional paid-in capital. Under certain circumstances described in the Certificate of Designation for the Series A, additional Series A shares may be issued in lieu of cash dividends at the rate of $7.00 per share.

Holders of Series A are entitled to a liquidation preference equal to the stated value of their preferred shares (i.e., $7.50 per share) plus accrued but unpaid dividends. Holders of Series A may presently convert each share of their Series A into 0.75 shares of our common stock at a price of $10.00 per share.

F-15

GWG HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

(9) Series A Convertible Preferred Stock (cont.)

As of June 30, 2017, we issued an aggregate of 521,000 shares of Series A in satisfaction of $3,647,000 in dividends on the Series A, and an aggregate of 696,000 shares of Series A were converted into 522,000 shares of our common stock. As of June 30, 2017, we had 2,672,000 Series A shares outstanding with respect to which we incurred aggregate issuance costs of $2,838,000, all of which is included as a component of additional paid-in capital.

Purchasers of Series A in our offering received warrants to purchase an aggregate of 431,954 shares of our common stock at an exercise price of $12.50 per share. The grant date fair value of these warrants was $428,000. As of June 30, 2017, none of these warrants had been exercised and 413,000 warrants have expired. The weighted-average remaining life of these warrants was 1.94 and 0.56 years at June 30, 2017 and December 31, 2016, respectively.

In September 2014, we completed, at our discretion, a public offering of our common stock and, as a result, the Series A was reclassified from temporary equity to permanent equity. We may redeem Series A shares at a price equal to 110% of their liquidation preference ($7.50 per share) at any time. As of June 30, 2017, we have redeemed an aggregate of 439,000 shares of Series A.

(10) Redeemable Preferred Stock

On November 30, 2015, our public offering of up to 100,000 shares of Redeemable Preferred Stock (“RPS”) at $1,000 per share was declared effective. Holders of RPS are entitled to cumulative dividends at the rate of 7% per annum, paid monthly. Dividends on the RPS are recorded as a reduction to additional paid-in capital. Under certain circumstances described in the Certificate of Designation for the RPS, additional shares of RPS may be issued in lieu of cash dividends.

The RPS ranks senior to our common stock and pari passu with our Series A, and entitles its holders to a liquidation preference equal to the stated value per share (i.e., $1,000) plus accrued but unpaid dividends. Holders of RPS may presently convert their RPS into our common stock at a conversion price equal to the volume-weighted average price of our common stock for the 20 trading days immediately prior to the date of conversion, subject to a minimum conversion price of $15.00 and in an aggregate amount limited to 15% of the stated value of RPS originally purchased by such holder from us and still held by such holder.

Holders of RPS may request that we redeem their RPS at a price equal to their stated value plus accrued but unpaid dividends, less an applicable redemption fee, if any. Nevertheless, the Certificate of Designation for RPS permits us complete discretion to grant or decline redemption requests. Subject to certain restrictions and conditions, we may also redeem shares of RPS without a redemption fee upon a holder’s death, total disability or bankruptcy. In addition, after one year from the date of original issuance, we may, at our option, call and redeem shares of RPS at a price equal to their liquidation preference.

As of June 30, 2017, we had sold 99,127 shares of RPS for aggregate gross consideration of $99,127,000, and incurred approximately $7,019,000 of selling costs related to the sale of those shares. On March 31, 2017, we closed the RPS offering to investors.

At the time of its issuance, we determined that the RPS contained two embedded features: (1) optional redemption by the holder and (2) optional conversion by the holder. We determined that each of the embedded features met the definition of a derivative and that the RPS should be considered an equity host for the purposes of assessing the embedded derivatives for potential bifurcation. Based on our assessment under Accounting Standards Codification 470 “Debt” (“ASC 470”) we do not believe bifurcation of either the holder’s redemption or conversion feature is appropriate.

(11) Series 2 Redeemable Preferred Stock

On February 14, 2017, our public offering of up to 150,000 shares of Series 2 Redeemable Preferred Stock (“RPS 2”) at $1,000 per share was declared effective. Holders of RPS 2 are entitled to cumulative dividends at the rate of 7% per annum, paid monthly. Dividends on the RPS 2, when payable, will be recorded as a reduction to additional paid-in

F-16

GWG HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

(11) Series 2 Redeemable Preferred Stock (cont.)

capital. Under certain circumstances described in the Certificate of Designation for the RPS 2, additional shares of RPS 2 may be issued in lieu of cash dividends.

The RPS 2 ranks senior to our common stock and pari passu with our Series A and RPS, and entitles its holders to a liquidation preference equal to the stated value per share (i.e., $1,000) plus accrued but unpaid dividends. Holders of RPS 2 may, less an applicable conversion discount, if any, convert their RPS 2 into our common stock at a conversion price equal to the volume-weighted average price of our common stock for the 20 trading days immediately prior to the date of conversion, subject to a minimum conversion price of $12.75 and in an aggregate amount limited to 10% of the stated value of RPS 2 originally purchased by such holder from us and still held by such holder.

Holders of RPS 2 may request that we redeem their RPS 2 shares at a price equal to their liquidation preference, less an applicable redemption fee, if any. Nevertheless, the Certificate of Designation for RPS 2 permits us complete discretion to grant or decline requests for redemption. Subject to certain restrictions and conditions, we may also redeem shares of RPS 2 without a redemption fee upon a holder’s death, total disability or bankruptcy. In addition, we may, at our option, call and redeem shares of RPS 2 at a price equal to their liquidation preference (subject to a minimum redemption price, in the event of redemptions occurring less than one year after issuance, of 107% of the stated value of the shares being redeemed).

As of June 30, 2017, we had sold 22,536 shares of RPS 2 for aggregate gross consideration of $22,536,000, and incurred approximately $1,078,000 of selling costs related to the sale of those shares.

At the time of its issuance, we determined that the RPS 2 contained two embedded features: (1) optional redemption by the holder and (2) optional conversion by the holder. We determined that each of the embedded features met the definition of a derivative and that the RPS 2 should be considered an equity host for the purposes of assessing the embedded derivatives for potential bifurcation. Based on our assessment under ASC 470 we do not believe bifurcation of either the holder’s redemption or conversion feature is appropriate.

(12) Income Taxes

We had a current income tax liability of $0 as of both June 30, 2017 and December 31, 2016. The components of deferred income tax expense (benefit) for the three and six months ended June 30, 2017 and 2016, respectfully, consisted of the following:

 

 

Three Months Ended

 

Six Months Ended

 

 

June 30,

 

June 30,

 

June 30,

 

June 30,

 

 

2017

 

2016

 

2017

 

2016

Income tax provision (benefit):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Federal

 

$

(27,000

)

 

$

(23,000

)

 

$

—

 

 

$

—

State

 

$

(7,000

)

 

$

(6,000

)

 

$

—

 

 

$

—

Total current tax expense (benefit)

 

 

(34,000

)

 

 

(29,000

)

 

 

 

 

 

 

—

Deferred:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Federal

 

$

(2,798,000

)

 

$

1,397,000

 

 

$

(2,818,000

)

 

$

2,203,000

State

 

$

(885,000

)

 

$

454,000

 

 

$

(900,000

)

 

$

704,000

Total deferred tax expense (benefit)

 

 

(3,683,000

)

 

 

1,851,000

 

 

 

(3,718,000

)

 

 

2,907,000

Total income tax expense (benefit)

 

 

(3,717,000

)

 

 

1,822,000

 

 

 

(3,718,000

)

 

 

2,907,000

We provide for a valuation allowance when it is not considered “more likely than not” that our deferred tax assets will be realized. At both June 30, 2017 and December 31, 2016, based upon all available evidence, we provided a valuation allowance of $2,164,000 against deferred tax assets related to the likelihood of recovering the tax benefit of a capital loss on a note receivable from a related entity and other capital losses.

F-17

GWG HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

(12) Income Taxes (cont.)

The Company is engaged in acquiring of life insurance policies and holding them to maturity. Due to the nature of holding policies and the aging of the underlying insureds, it will be more likely than not that the Company will recognize taxable income as the policies in our portfolio start maturing at an accelerated rate in the near future. Due to this we believe that sufficient taxable income will be recognized during the net operating loss carryover period to utilize the reported deferred tax asset, and that no additional valuation allowance, other than that already recorded, is required.

Accounting Standards Codification 740, Income Taxes (“ASC 740”) requires the reporting of certain tax positions that do not meet a threshold of “more likely than not” to be recorded as uncertain tax benefits. It is management’s responsibility to determine whether it is “more likely than not” that a tax position will be sustained upon examination, including resolution of any related appeals or litigation, based upon the technical merits of the position. Management has reviewed all income tax positions taken or expected to be taken for all open years and determined that the income tax positions are appropriately stated and supported. We do not anticipate that the total unrecognized tax benefits will significantly change prior to June 30, 2017.

Under our accounting policies, interest and penalties on unrecognized tax benefits, as well as interest received from favorable tax settlements, are recognized as components of income tax expense. At June 30, 2017 and December 31, 2016, we recorded no accrued interest or penalties related to uncertain tax positions.

Our income tax returns for tax years ended December 31, 2013, 2014, 2015 and 2016 remain open to examination by the Internal Revenue Service and various state taxing jurisdictions. Our tax return for tax year 2012 has now been examined by the IRS (finalized April of 2015) but is open for examination by various state taxing jurisdictions.

(13) Common Stock

In September 2014, we consummated an initial public offering of our common stock resulting in the sale of 800,000 shares of common stock at $12.50 per share, and net proceeds of approximately $8.6 million after the payment of underwriting commissions, discounts and expense reimbursements. In connection with this offering, we listed our common stock on the Nasdaq Capital Market under the ticker symbol “GWGH.”

(14) Stock Incentive Plan

We adopted our 2013 Stock Incentive Plan in March 2013. The Compensation Committee of our Board of Directors is responsible for the administration of the plan. Participants under the plan may be granted incentive stock options and non-statutory stock options; stock appreciation rights; stock awards; restricted stock; restricted stock units; and performance shares. Eligible participants include officers and employees of GWG Holdings and its subsidiaries, members of our Board of Directors, and consultants. As of June 30, 2017, 3,000,000 common stock options are issuable under the plan.

Stock Options

Through June 30, 2017, we had issued stock options for 1,532,000 shares of common stock to employees, officers, and directors under the plan. Options for 740,000 shares have vested, and the remaining options are scheduled to vest over three years. The options were issued with an exercise price between $6.35 and $10.38 for those beneficially owning more than 10% of our common stock, and between $4.83 and $10.76 for all others, which is equal to the estimated market price of the shares on the date of grant. The expected annualized volatility used in the Black-Scholes model valuation of options issued during the period was 20.0%. The annual volatility rate is based on the standard deviation of the average continuously compounded rate of return of five selected comparable companies over the previous 52 weeks. A forfeiture rate of 15% is based on historical information and expected future trend. As of June 30, 2017, stock options for 679,000 shares had been forfeited and stock options for 70,000 shares had been exercised.

F-18

GWG HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

(14) Stock Incentive Plan (cont.)

On April 17, 2017, GWG Holdings, Inc. entered into a Separation Agreement with Mr. Jon Gangelhoff. Under this agreement, Mr. Gangelhoff retired and resigned his position as Chief Operating Officer. In addition, all of Mr. Gangelhoff’s unvested outstanding common stock options at the time of his separation were vested under the Separation Agreement.

Outstanding stock options:

 

 

Vested

 

Un-vested

 

Total

Balance as of December 31, 2015

 

483,703

 

 

569,912

 

 

1,053,615

 

Granted during the year

 

22,500

 

 

608,350

 

 

630,850

 

Vested during the year

 

251,788

 

 

(251,788

)

 

—

 

Exercised during the year

 

 

 

 

 

 

 

 

 

Forfeited during the year

 

(19,926

)

 

(82,140

)

 

(102,066

)

Balance as of December 31, 2016

 

738,065

 

 

844,334

 

 

1,582,399

 

Granted year-to-date

 

20,100

 

 

213,300

 

 

233,400

 

Vested year-to-date

 

165,783

 

 

(165,783

)

 

—

 

Exercised year-to-date

 

(42,000

)

 

—

 

 

(42,000

)

Forfeited year-to-date

 

(142,119

)

 

(99,415

)

 

(241,534

)

Balance as of June 30, 2017

 

739,829

 

 

792,436

 

 

1,532,265

 

Compensation expense related to unvested options not yet recognized is $541,000. We expect to recognize this compensation expense over the next three years ($89,000 in 2017, $217,000 in 2018, $167,000 in 2019, and $68,000 in 2020).

Stock Appreciation Rights (SARs)

As of June 30, 2017, we have issued SARs for 280,472 shares of common stock to employees. The strike price of the SARs was between $7.84 and $10.38, which was equal to the market price of the common stock at the date of issuance. As of June 30, 2017, 114,031 of the SARs were vested. On June 30, 2017 the market price of GWG’s common stock was $10.58.

Outstanding Stock Appreciation Rights:

 

 

Vested

 

Un-vested

 

Total

Balance as of December 31, 2015

 

—

 

—

 

 

—

Granted during the year

 

106,608

 

133,127

 

 

239,735

Forfeited during the year

 

—

 

—

 

 

—

Balance as of December 31, 2016

 

106,608

 

133,127

 

 

239,735

Granted during the year

 

4,063

 

36,674

 

 

40,737

Vested during the year

 

3,360

 

(3,360

)

 

 

Forfeited during the year

 

—

 

—

 

 

—

Balance as of June 30, 2017

 

114,031

 

166,441

 

 

280,472

A liability for the SARs was recorded on June 30, 2017 in the amount of $316,000 and compensation expense was charged for the amount of $312,000.

Upon the exercise of SARs, the Company is obligated to make cash payment equal to the positive difference between the fair market value of the Company’s common stock on the date of exercise less the fair market value of the common stock on the date of grant.

F-19

GWG HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

(15) Net Loss per Common Share

We have outstanding Series A, RPS and RPS 2, as described in Notes 9, 10 and 11. The Series A, RPS and RPS 2 are anti-dilutive to our net loss or income attributable to common shareholders calculation at both June 30, 2017 and 2016. We also issued warrants to purchase common stock in conjunction with the sale of Series A (see Note 9). Both those warrants and our vested stock options are anti-dilutive at both June 30, 2017 and 2016 and have not been included in the fully diluted net loss per common share calculation.

(16) Commitments

We are party to an office lease with U.S. Bank National Association as the landlord. On September 1, 2015, we entered into an amendment to our original lease that expanded the leased space to 17,687 square feet and extended the term through 2025. Under the amended lease we are obligated to pay base rent plus common area maintenance and a share of building operating costs. Rent expenses under this agreement were $110,000 and $223,000 during the three and six months ended June 30, 2017 and $123,000 and $232,000 for the three and six months ended June 30, 2016.

Minimum lease payments under the amended lease are as follows:

Six months ending December 31, 2017

 

$

90,000

2018

 

 

185,000

2019

 

 

191,000

2020

 

 

198,000

2021

 

 

204,000

2022

 

 

210,000

2023

 

 

217,000

2024

 

 

223,000

2025

 

 

230,000

 

 

$

1,748,000

 (17) Contingencies

Litigation — In the normal course of business, we are involved in various legal proceedings. In the opinion of management, any liability resulting from such proceedings would not have a material adverse effect on our financial position, results of operations or cash flows.

(18) Guarantee of L Bonds

We are publicly offering and selling L Bonds under a registration statement declared effective by the SEC, as described in Note 8. Our obligations under the L Bonds are secured by substantially all the assets of GWG Holdings, a pledge of all our common stock held individually by our largest stockholders, and by a guarantee and corresponding grant of a security interest in substantially all the assets of GWG Life. As a guarantor, GWG Life has fully and unconditionally guaranteed the payment of principal and interest on the L Bonds. Substantially all of our life insurance policies are held by DLP III, DLP IV and the Trust. GWG Life’s equity in DLP III and DLP IV serve as collateral for our L Bond obligations. The policies held by DLP III and DLP IV are not collateral for the L Bond obligations as such policies serve as direct collateral for the senior credit facilities.

The consolidating financial statements are presented in lieu of separate financial statements and other related disclosures of the subsidiary guarantor and issuer because management does not believe that separate financial statements and related disclosures would be material to investors. There are currently no significant restrictions on the ability of GWG Holdings or GWG Life, the guarantor subsidiary, to obtain funds from its subsidiaries by dividend or loan, except as described in these notes. A majority of insurance policies we own are subject to a collateral arrangement with LNV Corporation described in Note 6. Under this arrangement, collection and escrow accounts are used to fund premiums for the insurance policies and to pay interest and other charges under the senior credit facility.

F-20

GWG HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

(18) Guarantee of L Bonds (cont.)

The following represents consolidating financial information as of June 30, 2017 and December 31, 2016, with respect to the financial position, and for the three and six months ended June 30, 2017 and 2016, with respect to results of operations and cash flows of GWG Holdings and its subsidiaries. The parent column presents the financial information of GWG Holdings, the primary obligor for the L Bonds. The guarantor subsidiary column represents the financial information of GWG Life, the guarantor subsidiary of the L Bonds, presenting its investment in DLP III, DLP IV and the Trust under the equity method. The non-guarantor subsidiaries column presents the financial information of all non-guarantor subsidiaries, including DLP III, DLP IV and the Trust.

Condensed Consolidating Balance Sheets

June 30, 2017

 

Parent

 

Guarantor Subsidiary

 

Non-Guarantor Subsidiaries

 

Eliminations

 

Consolidated

ASSETS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

49,632,850

 

 

$

1,451,260

 

 

$

1,209,362

 

$

—

 

 

$

52,293,472

 

Restricted cash

 

 

—

 

 

 

4,454,226

 

 

 

41,705,405

 

 

—

 

 

 

46,159,631

 

Investment in life insurance policies, at fair value

 

 

—

 

 

 

41,720,141

 

 

 

535,329,411

 

 

—

 

 

 

577,049,552

 

Secured MCA advances

 

 

—

 

 

 

—

 

 

 

3,525,381

 

 

—

 

 

 

3,525,381

 

Life insurance policy benefits receivable

 

 

—

 

 

 

—

 

 

 

6,970,000

 

 

—

 

 

 

6,970,000

 

Deferred taxes, net

 

 

1,620,303

 

 

 

—

 

 

 

—

 

 

—

 

 

 

1,620,303

 

Other assets

 

 

3,030,391

 

 

 

1,435,297

 

 

 

352,461

 

 

(942,339

)

 

 

3,875,810

 

Investment in subsidiaries

 

 

473,239,085

 

 

 

429,798,593

 

 

 

—

 

 

(903,037,678

)

 

 

—

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

TOTAL ASSETS

 

$

527,522,629

 

 

$

478,859,517

 

 

$

589,092,020

 

$

(903,980,017

)

 

$

691,494,149

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

LIABILITIES & STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

LIABILITIES

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Senior credit facilities

 

$

—

 

 

$

(1,076,118

)

 

$

150,084,944

 

$

—

 

 

$

149,008,826

 

Series I Secured Notes

 

 

—

 

 

 

6,680,961

 

 

 

—

 

 

—

 

 

 

6,680,961

 

L Bonds

 

 

400,832,308

 

 

 

—

 

 

 

—

 

 

—

 

 

 

400,832,308

 

Accounts payable

 

 

1,166,827

 

 

 

1,377,121

 

 

 

1,616,149

 

 

—

 

 

 

4,160,097

 

Interest and dividends payable

 

 

10,312,340

 

 

 

1,087,782

 

 

 

2,995,669

 

 

(8,747

)

 

 

14,387,044

 

Other accrued expenses

 

 

1,321,915

 

 

 

990,255

 

 

 

1,157,096

 

 

(933,592

)

 

 

2,535,674

 

TOTAL LIABILITIES

 

 

413,633,390

 

 

 

9,060,001

 

 

 

155,853,858

 

 

(942,339

)

 

 

577,604,910

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Member’s capital

 

 

—

 

 

 

469,799,516

 

 

 

433,238,162

 

 

(903,037,678

)

 

 

—

 

Convertible preferred stock

 

 

19,732,262

 

 

 

—

 

 

 

—

 

 

—

 

 

 

19,732,262

 

Redeemable preferred stock and Series 2 redeemable preferred stock

 

 

118,707,840

 

 

 

—

 

 

 

—

 

 

—

 

 

 

118,707,840

 

Common stock

 

 

5,784

 

 

 

—

 

 

 

—

 

 

—

 

 

 

5,784

 

Accumulated deficit

 

 

(24,556,647

)

 

 

—

 

 

 

—

 

 

—

 

 

 

(24,556,647

)

TOTAL STOCKHOLDERS’ EQUITY

 

 

113,889,239

 

 

 

469,799,516

 

 

 

433,238,162

 

 

(903,037,678

)

 

 

113,889,239

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

 

$

527,522,629

 

 

$

478,859,517

 

 

$

589,092,020

 

$

(903,980,017

)

 

$

691,494,149

 

F-21

GWG HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

(18) Guarantee of L Bonds (cont.)

Condensed Consolidating Balance Sheets (continued)

December 31, 2016

 

Parent

 

Guarantor Subsidiary

 

Non-Guarantor Subsidiaries

 

Eliminations

 

Consolidated

ASSETS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

28,481,047

 

 

$

49,360,952

 

$

644,983

 

$

—

 

 

$

78,486,982

 

Restricted cash

 

 

—

 

 

 

2,117,649

 

 

35,708,947

 

 

—

 

 

 

37,826,596

 

Investment in life insurance policies, at fair value

 

 

—

 

 

 

41,277,896

 

 

469,914,458

 

 

—

 

 

 

511,192,354

 

Secured MCA advances

 

 

—

 

 

 

—

 

 

5,703,147

 

 

—

 

 

 

5,703,147

 

Life insurance policy benefits receivable

 

 

—

 

 

 

—

 

 

5,345,000

 

 

—

 

 

 

5,345,000

 

Other assets

 

 

3,854,233

 

 

 

2,056,822

 

 

810,640

 

 

(2,033,592

)

 

 

4,688,103

 

Investment in subsidiaries

 

 

429,971,148

 

 

 

352,337,037

 

 

—

 

 

(782,308,185

)

 

 

—

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

TOTAL ASSETS

 

$

462,306,428

 

 

$

447,150,356

 

$

518,127,175

 

$

(784,341,777

)

 

$

643,242,182

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

LIABILITIES & STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

LIABILITIES

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Senior credit facilities

 

$

—

 

 

$

—

 

$

156,064,818

 

$

—

 

 

$

156,064,818

 

Series I Secured Notes

 

 

—

 

 

 

16,404,836

 

 

—

 

 

—

 

 

 

16,404,836

 

L Bonds

 

 

381,312,587

 

 

 

—

 

 

—

 

 

—

 

 

 

381,312,587

 

Accounts payable

 

 

853,470

 

 

 

731,697

 

 

641,545

 

 

—

 

 

 

2,226,712

 

Interest and dividends payable

 

 

9,882,133

 

 

 

3,743,277

 

 

2,535,189

 

 

—

 

 

 

16,160,599

 

Other accrued expenses

 

 

862,369

 

 

 

544,032

 

 

2,303,952

 

 

(2,033,592

)

 

 

1,676,761

 

Deferred taxes, net

 

 

2,097,371

 

 

 

—

 

 

—

 

 

—

 

 

 

2,097,371

 

TOTAL LIABILITIES

 

 

395,007,930

 

 

 

21,423,842

 

 

161,545,504

 

 

(2,033,592

)

 

 

575,943,684

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Member’s capital

 

 

—

 

 

 

425,726,514

 

 

356,581,671

 

 

(782,308,185

)

 

 

—

 

Convertible preferred stock

 

 

19,701,133

 

 

 

—

 

 

—

 

 

—

 

 

 

19,701,133

 

Redeemable preferred stock

 

 

59,025,164

 

 

 

—

 

 

—

 

 

—

 

 

 

59,025,164

 

Common stock

 

 

5,980

 

 

 

—

 

 

—

 

 

—

 

 

 

5,980

 

Additional paid-in capital

 

 

7,383,515

 

 

 

—

 

 

—

 

 

—

 

 

 

7,383,515

 

Accumulated deficit

 

 

(18,817,294

)

 

 

—

 

 

—

 

 

—

 

 

 

(18,817,294

)

TOTAL STOCKHOLDERS’ EQUITY

 

 

67,298,498

 

 

 

425,726,514

 

 

356,581,671

 

 

(782,308,185

)

 

 

67,298,498

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

 

$

462,306,428

 

 

$

447,150,356

 

$

518,127,175

 

$

(784,341,777

)

 

$

643,242,182

 

F-22

GWG HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

(18) Guarantee of L Bonds (cont.)

Condensed Consolidating Statements of Operations

For the three months ended June 30, 2017

 

Parent

 

Guarantor Subsidiary

 

Non-Guarantor Subsidiaries

 

Eliminations

 

Consolidated

REVENUE

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Policy servicing income

 

$

—

 

 

$

133,250

 

 

$

—

 

$

(133,250

)

 

$

—

 

Gain on life insurance policies, net

 

 

—

 

 

 

201,685

 

 

 

11,094,581

 

 

—

 

 

 

11,296,266

 

MCA income

 

 

—

 

 

 

—

 

 

 

133,583

 

 

—

 

 

 

133,583

 

Interest and other income

 

 

69,221

 

 

 

30,134

 

 

 

164,558

 

 

(26,176

)

 

 

237,737

 

TOTAL REVENUE

 

 

69,221

 

 

 

365,069

 

 

 

11,392,722

 

 

(159,426

)

 

 

11,667,586

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EXPENSES

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Policy servicing fees

 

 

—

 

 

 

—

 

 

 

133,250

 

 

(133,250

)

 

 

—

 

Interest expense

 

 

8,325,874

 

 

 

391,061

 

 

 

3,555,266

 

 

(26,176

)

 

 

12,246,025

 

Employee compensation and benefits

 

 

2,109,562

 

 

 

1,529,188

 

 

 

102,549

 

 

—

 

 

 

3,741,299

 

Legal and professional fees

 

 

284,756

 

 

 

179,461

 

 

 

866,372

 

 

—

 

 

 

1,330,589

 

Provision for MCA advances

 

 

—

 

 

 

—

 

 

 

878,000

 

 

—

 

 

 

878,000

 

Other expenses

 

 

1,885,146

 

 

 

650,320

 

 

 

347,632

 

 

—

 

 

 

2,883,098

 

TOTAL EXPENSES

 

 

12,605,338

 

 

 

2,750,030

 

 

 

5,883,069

 

 

(159,426

)

 

 

21,079,011

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

INCOME (LOSS) BEFORE EQUITY IN INCOME OF SUBSIDIARIES

 

 

(12,536,117

)

 

 

(2,384,961

)

 

 

5,509,653

 

 

—

 

 

 

(9,411,425

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EQUITY IN INCOME OF SUBSIDIARIES

 

 

3,124,692

 

 

 

7,241,779

 

 

 

—

 

 

(10,366,471

)

 

 

—

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

INCOME (LOSS) BEFORE INCOME TAXES

 

 

(9,411,425

)

 

 

4,856,818

 

 

 

5,509,653

 

 

(10,366,471

)

 

 

(9,411,425

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

INCOME TAX BENEFIT

 

 

(3,717,174

)

 

 

—

 

 

 

—

 

 

—

 

 

 

(3,717,174

)

NET INCOME (LOSS)

 

 

(5,694,251

)

 

 

4,856,818

 

 

 

5,509,653

 

 

(10,366,471

)

 

 

(5,694,251

)

Preferred stock dividends

 

 

2,031,097

 

 

 

—

 

 

 

—

 

 

—

 

 

 

2,031,097

 

NET LOSS ATTRIBUTABLE TO COMMON SHAREHOLDERS

 

$

(7,725,348

)

 

$

4,856,818

 

 

$

5,509,653

 

$

(10,366,471

)

 

$

(7,725,348

)

 

For the three months ended June 30, 2016

 

Parent

 

Guarantor Subsidiary

 

Non-Guarantor Subsidiaries

 

Eliminations

 

Consolidated

REVENUE

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Policy servicing income

 

$

—

 

 

$

—

 

 

$

—

 

$

—

 

 

$

—

Gain on life insurance policies, net

 

 

—

 

 

 

—

 

 

 

20,383,347

 

 

—

 

 

 

20,383,347

MCA income

 

 

—

 

 

 

—

 

 

 

223,255

 

 

—

 

 

 

223,255

Interest and other income

 

 

71,222

 

 

 

706

 

 

 

157,927

 

 

(58,975

)

 

 

170,880

TOTAL REVENUE

 

 

71,222

 

 

 

706

 

 

 

20,764,529

 

 

(58,975

)

 

 

20,777,482

EXPENSES

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Policy servicing fees

 

 

—

 

 

 

—

 

 

 

—

 

 

—

 

 

 

—

Interest expense

 

 

7,530,444

 

 

 

644,735

 

 

 

1,648,452

 

 

(58,975

)

 

 

9,764,656

Employee compensation and benefits

 

 

1,638,893

 

 

 

1,283,968

 

 

 

148,646

 

 

—

 

 

 

3,071,507

Legal and professional fees

 

 

783,596

 

 

 

476,505

 

 

 

44,252

 

 

—

 

 

 

1,304,353

Other expenses

 

 

1,519,349

 

 

 

425,354

 

 

 

387,982

 

 

—

 

 

 

2,332,685

TOTAL EXPENSES

 

 

11,472,282

 

 

 

2,830,562

 

 

 

2,229,332

 

 

(58,975

)

 

 

16,473,201

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

INCOME (LOSS) BEFORE EQUITY IN INCOME OF SUBSIDIARIES

 

 

(11,401,060

)

 

 

(2,829,856

)

 

 

18,535,197

 

 

—

 

 

 

4,304,281

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EQUITY IN INCOME OF SUBSIDIARIES

 

 

15,705,341

 

 

 

18,835,036

 

 

 

—

 

 

(34,540,377

)

 

 

—

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

INCOME BEFORE INCOME TAXES

 

 

4,304,281

 

 

 

16,005,180

 

 

 

18,535,197

 

 

(34,540,377

)

 

 

4,340,281

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

INCOME TAX EXPENSE

 

 

1,822,030

 

 

 

—

 

 

 

—

 

 

—

 

 

 

1,822,030

NET INCOME

 

 

2,482,250

 

 

 

16,005,180

 

 

 

18,535,197

 

 

(34,540,377

)

 

 

2,482,250

Preferred stock dividends

 

 

600,924

 

 

 

—

 

 

 

—

 

 

—

 

 

 

600,924

NET INCOME ATTRIBUTABLE TO COMMON SHAREHOLDERS

 

$

1,881,326

 

 

$

16,005,180

 

 

$

18,535,197

 

$

(34,540,377

)

 

$

1,881,326

F-23

GWG HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

(18) Guarantee of L Bonds (cont.)

Condensed Consolidating Statements of Operations (continued)

For the six months ended June 30, 2017

 

Parent

 

Guarantor Subsidiary

 

Non-Guarantor Subsidiaries

 

Eliminations

 

Consolidated

REVENUE

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Policy servicing income

 

$

—

 

 

$

186,275

 

 

$

—

 

$

(186,275

)

 

$

—

 

Gain on life insurance policies, net

 

 

—

 

 

 

1,701,012

 

 

 

28,995,074

 

 

—

 

 

 

30,696,086

 

MCA income

 

 

—

 

 

 

—

 

 

 

380,159

 

 

—

 

 

 

380,159

 

Interest and other income

 

 

154,228

 

 

 

49,010

 

 

 

543,643

 

 

(67,195

)

 

 

679,686

 

TOTAL REVENUE

 

 

154,228

 

 

 

1,936,297

 

 

 

29,918,876

 

 

(253,470

)

 

 

31,755,931

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EXPENSES

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Policy servicing fees

 

 

—

 

 

 

—

 

 

 

186,275

 

 

(186,275

)

 

 

—

 

Interest expense

 

 

17,587,908

 

 

 

677,415

 

 

 

7,292,113

 

 

(67,195

)

 

 

25,490,241

 

Employee compensation and benefits

 

 

4,038,357

 

 

 

2,750,770

 

 

 

115,232

 

 

—

 

 

 

6,904,359

 

Legal and professional fees

 

 

777,571

 

 

 

440,549

 

 

 

1,058,817

 

 

—

 

 

 

2,276,937

 

Provision for MCA advances

 

 

—

 

 

 

—

 

 

 

878,000

 

 

—

 

 

 

878,000

 

Other expenses

 

 

3,548,149

 

 

 

1,533,051

 

 

 

582,221

 

 

—

 

 

 

5,663,421

 

TOTAL EXPENSES

 

 

25,951,985

 

 

 

5,401,785

 

 

 

10,112,658

 

 

(253,470

)

 

 

41,212,958

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

INCOME (LOSS) BEFORE EQUITY IN INCOME OF SUBSIDIARIES

 

 

(25,797,757

)

 

 

(3,465,488

)

 

 

19,806,218

 

 

—

 

 

 

(9,457,027

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EQUITY IN INCOME OF SUBSIDIARIES

 

 

16,340,730

 

 

 

21,305,986

 

 

 

—

 

 

(37,646,716

)

 

 

—

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

INCOME (LOSS) BEFORE INCOME TAXES

 

 

(9,457,027

)

 

 

17,840,498

 

 

 

19,806,218

 

 

(37,646,716

)

 

 

(9,457,027

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

INCOME TAX BENEFIT

 

 

(3,717,674

)

 

 

—

 

 

 

—

 

 

—

 

 

 

(3,717,674

)

NET INCOME (LOSS)

 

 

(5,739,353

)

 

 

17,840,498

 

 

 

19,806,218

 

 

(37,646,716

)

 

 

(5,739,353

)

Preferred stock dividends

 

 

(3,898,857

)

 

 

—

 

 

 

—

 

 

—

 

 

 

(3,898,857

)

NET LOSS ATTRIBUTABLE TO COMMON SHAREHOLDERS

 

$

(9,638,210

)

 

$

17,840,498

 

 

$

19,806,218

 

$

(37,646,716

)

 

$

(9,638,210

)

 

For the six months ended June 30, 2016

 

Parent

 

Guarantor Subsidiary

 

Non-Guarantor Subsidiaries

 

Eliminations

 

Consolidated

REVENUE

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Policy servicing income

 

$

—

 

 

$

13,417

 

 

$

—

 

$

(13,417

)

 

$

—

 

Gain on life insurance policies, net

 

 

—

 

 

 

—

 

 

 

38,097,059

 

 

—

 

 

 

38,097,059

 

MCA income

 

 

—

 

 

 

—

 

 

 

368,216

 

 

—

 

 

 

368,216

 

Interest and other income

 

 

106,019

 

 

 

1,012

 

 

 

198,946

 

 

(89,877

)

 

 

216,100

 

TOTAL REVENUE

 

 

106,019

 

 

 

14,429

 

 

 

38,664,221

 

 

(103,294

)

 

 

38,681,375

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EXPENSES

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Policy servicing fees

 

 

—

 

 

 

—

 

 

 

13,417

 

 

(13,417

)

 

 

—

 

Interest expense

 

 

14,618,037

 

 

 

1,301,971

 

 

 

3,083,680

 

 

(89,877

)

 

 

18,913,811

 

Employee compensation and benefits

 

 

3,175,323

 

 

 

2,113,049

 

 

 

249,333

 

 

—

 

 

 

5,537,705

 

Legal and professional fees

 

 

1,378,335

 

 

 

1,011,155

 

 

 

120,991

 

 

—

 

 

 

2,510,481

 

Other expenses

 

 

2,777,326

 

 

 

1,394,028

 

 

 

573,491

 

 

—

 

 

 

4,744,845

 

TOTAL EXPENSES

 

 

21,949,021

 

 

 

5,820,203

 

 

 

4,040,912

 

 

(103,294

)

 

 

31,706,842

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

INCOME (LOSS) BEFORE EQUITY IN INCOME OF SUBSIDIARIES

 

 

(21,843,002

)

 

 

(5,805,774

)

 

 

34,623,309

 

 

—

 

 

 

6,974,533

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EQUITY IN INCOME OF SUBSIDIARIES

 

 

28,817,535

 

 

 

35,136,402

 

 

 

—

 

 

(63,953,937

)

 

 

—

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

INCOME BEFORE INCOME TAXES

 

 

6,974,533

 

 

 

29,330,628

 

 

 

34,623,309

 

 

(63,953,937

)

 

 

6,974,533

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

INCOME TAX EXPENSE

 

 

2,906,747

 

 

 

—

 

 

 

—

 

 

—

 

 

 

2,906,747

 

NET INCOME

 

 

4,067,786

 

 

 

29,330,628

 

 

 

34,623,309

 

 

(63,953,937

)

 

 

4,067,786

 

Preferred stock dividends

 

 

(1,112,155

)

 

 

—

 

 

 

—

 

 

—

 

 

 

(1,112,155

)

NET INCOME ATTRIBUTABLE TO COMMON SHAREHOLDERS

 

$

2,955,631

 

 

$

29,330,628

 

 

$

34,623,309

 

$

(63,953,937

)

 

$

2,955,631

 

F-24

GWG HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

(18) Guarantee of L Bonds (cont.)

Condensed Consolidating Statements of Cash Flows

For the three months ended June 30, 2017

 

Parent

 

Guarantor Subsidiary

 

Non-Guarantor Subsidiaries

 

Eliminations

 

Consolidated

CASH FLOWS FROM OPERATING ACTIVITIES

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss)

 

$

(5,694,251

)

 

$

4,856,818

 

 

$

5,509,653

 

 

$

(10,366,471

)

 

$

(5,694,251

)

Adjustments to reconcile net income to net cash flows from operating activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity of subsidiaries

 

 

(3,124,692

)

 

 

(7,241,779

)

 

 

—

 

 

 

10,366,471

 

 

 

—

 

Change in fair value of life insurance policies

 

 

—

 

 

 

(134,399

)

 

 

(15,101,103

)

 

 

—

 

 

 

(15,235,502

)

Amortization of deferred financing and issuance costs

 

 

926,816

 

 

 

28,964

 

 

 

542,168

 

 

 

—

 

 

 

1,497,948

 

Deferred income taxes

 

 

(3,717,174

)

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(3,717,174

)

Preferred stock dividends payable

 

 

363,959

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

363,959

 

(Increase) decrease in operating assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Life insurance policy benefits receivable

 

 

—

 

 

 

600,000

 

 

 

1,405,000

 

 

 

—

 

 

 

2,005,000

 

Other assets

 

 

(32,646,205

)

 

 

(23,493,280

)

 

 

(297,040

)

 

 

55,878,537

 

 

 

(557,988

)

Increase (decrease) in operating liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Due to related party

 

 

398,030

 

 

 

—

 

 

 

(400,000

)

 

 

—

 

 

 

(1,970

)

Accounts payable and accrued expenses

 

 

1,213,002

 

 

 

(1,405,114

)

 

 

1,230,967

 

 

 

—

 

 

 

1,038,855

 

NET CASH FLOWS USED IN OPERATING ACTIVITIES

 

 

(42,280,515

)

 

 

(26,788,790

)

 

 

(7,110,355

)

 

 

55,878,537

 

 

 

(20,301,123

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CASH FLOWS FROM INVESTING ACTIVITIES

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment in life insurance policies

 

 

—

 

 

 

—

 

 

 

(19,432,338

)

 

 

—

 

 

 

(19,432,338

)

Carrying value of matured life insurance policies

 

 

—

 

 

 

256,152

 

 

 

2,758,682

 

 

 

—

 

 

 

3,014,834

 

Investment in Secured MCA advances

 

 

—

 

 

 

—

 

 

 

(39,671

)

 

 

—

 

 

 

(39,671

)

Proceeds from Secured MCA advances

 

 

—

 

 

 

—

 

 

 

653,315

 

 

 

—

 

 

 

653,315

 

NET CASH FLOWS USED IN INVESTING ACTIVITIES

 

 

—

 

 

 

256,152

 

 

 

(16,060,012

)

 

 

—

 

 

 

(15,803,860

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net borrowings on senior credit facilities

 

 

—

 

 

 

—

 

 

 

(3,845,037

)

 

 

—

 

 

 

(3,845,037

)

Payments for issuance of senior debt

 

 

—

 

 

 

(1,076,118

)

 

 

—

 

 

 

—

 

 

 

(1,076,118

)

Payments for redemption of Series I Secured Notes

 

 

—

 

 

 

(4,348,372

)

 

 

—

 

 

 

—

 

 

 

(4,348,372

)

Proceeds from issuance of L Bonds

 

 

31,875,811

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

31,875,811

 

Payments for issuance and redemption of L Bonds

 

 

(15,025,566

)

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(15,025,566

)

Payments to restricted cash

 

 

—

 

 

 

(893,893

)

 

 

2,825,851

 

 

 

—

 

 

 

1,931,958

 

Issuance of member capital

 

 

—

 

 

 

31,450,843

 

 

 

24,427,694

 

 

 

(55,878,537

)

 

 

—

 

Issuance of common stock

 

 

4

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

4

 

Proceeds from issuance of preferred stock

 

 

34,301,747

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

34,301,747

 

Payments for issuance and redemption of preferred stock

 

 

(3,318,211

)

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(3,318,211

)

Payments of preferred stock dividends

 

 

(2,031,097

)

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(2,031,097

)

NET CASH FLOWS PROVIDED BY FINANCING ACTIVITIES

 

 

45,802,688

 

 

 

25,132,460

 

 

 

23,408,508

 

 

 

(55,878,537

)

 

 

38,465,119

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

 

 

3,522,173

 

 

 

(1,400,178

)

 

 

238,141

 

 

 

 

 

 

 

2,360,136

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CASH AND CASH EQUIVALENTS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BEGINNING OF THE PERIOD

 

 

46,110,677

 

 

 

2,851,438

 

 

 

971,221

 

 

 

—

 

 

 

49,933,336

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

END OF THE PERIOD

 

$

49,632,850

 

 

$

1,451,260

 

 

$

1,209,362

 

 

$

—

 

 

$

52,293,472

 

F-25

GWG HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

(18) Guarantee of L Bonds (cont.)

Consolidating Statements of Cash Flows (continued)

For the three months ended June 30, 2016

 

Parent

 

Guarantor Subsidiary

 

Non-Guarantor Subsidiaries

 

Eliminations

 

Consolidated

CASH FLOWS FROM OPERATING ACTIVITIES

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

2,482,250

 

 

$

16,005,180

 

 

$

18,535,197

 

 

$

(34,540,377

)

 

$

2,482,250

 

Adjustments to reconcile net loss to net cash flows from operating activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity of subsidiaries

 

 

(15,705,341

)

 

 

(18,835,036

)

 

 

—

 

 

 

34,540,377

 

 

 

—

 

Change in fair value of life insurance policies

 

 

—

 

 

 

—

 

 

 

(21,241,376

)

 

 

—

 

 

 

(21,241,376

)

Amortization of deferred financing and issuance costs

 

 

2,261,032

 

 

 

(282,257

)

 

 

549,199

 

 

 

—

 

 

 

2,527,974

 

Deferred income taxes

 

 

1,851,018

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

1,851,018

 

Preferred stock dividends payable

 

 

166,472

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

166,472

 

(Increase) decrease in operating assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Life insurance policy benefits receivable

 

 

—

 

 

 

—

 

 

 

9,083,817

 

 

 

—

 

 

 

9,083,817

 

Other assets

 

 

(21,796,633

)

 

 

(12,903,506

)

 

 

—

 

 

 

33,489,247

 

 

 

(1,210,892

)

Increase (decrease) in operating liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Due to related party

 

 

(71,975

)

 

 

17,802

 

 

 

(1,760,000

)

 

 

—

 

 

 

(1,814,173

)

Accounts payable and other accrued expenses

 

 

1,458,476

 

 

 

130,596

 

 

 

(2,364,285

)

 

 

—

 

 

 

(775,213

)

NET CASH FLOWS USED IN OPERATING ACTIVITIES

 

 

(29,354,701

)

 

 

(15,867,221

)

 

 

2,802,552

 

 

 

33,489,247

 

 

 

(8,930,123

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CASH FLOWS FROM INVESTING ACTIVITIES

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment in life insurance policies

 

 

—

 

 

 

—

 

 

 

(24,373,714

)

 

 

—

 

 

 

(24,373,714

)

Carrying value of matured life insurance policies

 

 

—

 

 

 

—

 

 

 

1,691,764

 

 

 

—

 

 

 

1,691,764

 

Investment in Secured MCA advances

 

 

—

 

 

 

—

 

 

 

(1,293,829

)

 

 

 

 

 

 

(1,293,829

)

Proceeds from Secured MCA advances

 

 

—

 

 

 

—

 

 

 

907,649

 

 

 

—

 

 

 

907,649

 

NET CASH FLOWS USED IN INVESTING ACTIVITIES

 

 

—

 

 

 

—

 

 

 

(23,068,130

)

 

 

—

 

 

 

(23,068,130

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net repayment of senior credit facilities

 

 

—

 

 

 

—

 

 

 

(3,000,000

)

 

 

 

 

 

 

(3,000,000

)

Payments for redemption of Series I Secured Notes

 

 

—

 

 

 

(485,350

)

 

 

—

 

 

 

—

 

 

 

(485,350

)

Proceeds from issuance of L Bonds

 

 

36,757,771

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

36,757,771

 

Payments for issuance and redemption of L Bonds

 

 

(11,753,782

)

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(11,753,782

)

Payments to restricted cash

 

 

—

 

 

 

(116,672

)

 

 

8,784,498

 

 

 

—

 

 

 

8,667,826

 

Issuance of member capital

 

 

—

 

 

 

18,951,362

 

 

 

14,537,885

 

 

 

(33,489,247

)

 

 

—

 

Issuance of common stock

 

 

166,125

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

166,125

 

Proceeds from issuance of preferred stock

 

 

9,401,118

 

 

 

—

 

 

 

71,555

 

 

 

—

 

 

 

9,472,673

 

Payments for issuance and redemption of preferred stock

 

 

(838,021

)

 

 

—

 

 

 

(7,340

)

 

 

—

 

 

 

(845,361

)

Payments of preferred stock dividends

 

 

(600,924

)

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(600,924

)

NET CASH FLOWS PROVIDED BY FINANCING ACTIVITIES

 

 

33,132,287

 

 

 

18,349,340

 

 

 

20,386,598

 

 

 

(33,489,247

)

 

 

38,378,978

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NET INCREASE IN CASH AND CASH EQUIVALENTS

 

 

3,777,586

 

 

 

2,482,119

 

 

 

121,020

 

 

 

—

 

 

 

6,380,725

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CASH AND CASH EQUIVALENTS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BEGINNING OF THE PERIOD

 

 

6,274,035

 

 

 

4,340,365

 

 

 

384,225

 

 

 

—

 

 

 

10,998,625

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

END OF THE PERIOD

 

$

10,051,621

 

 

$

6,822,484

 

 

$

505,245

 

 

$

—

 

 

$

17,379,350

 

F-26

GWG HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

(18) Guarantee of L Bonds (cont.)

Consolidating Statements of Cash Flows (continued)

For the six months ended June 30, 2017

 

Parent

 

Guarantor Subsidiary

 

Non-Guarantor Subsidiaries

 

Eliminations

 

Consolidated

CASH FLOWS FROM OPERATING ACTIVITIES

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss)

 

$

(5,739,353

)

 

$

17,840,498

 

 

$

19,806,218

 

 

$

(37,646,716

)

 

$

(5,739,353

)

Adjustments to reconcile net loss to net cash flows from operating activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity of subsidiaries

 

 

(16,340,730

)

 

 

(21,305,986

)

 

 

—

 

 

 

37,646,716

 

 

 

—

 

Change in fair value of life insurance policies

 

 

—

 

 

 

(1,193,821

)

 

 

(27,925,514

)

 

 

—

 

 

 

(29,119,335

)

Amortization of deferred financing and issuance costs

 

 

2,855,809

 

 

 

74,384

 

 

 

1,233,958

 

 

 

—

 

 

 

4,164,151

 

Deferred income taxes

 

 

(3,717,674

)

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(3,717,674

)

Preferred stock dividends payable

 

 

700,748

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

700,748

 

(Increase) decrease in operating assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Life insurance policy benefits receivable

 

 

—

 

 

 

—

 

 

 

(1,625,000

)

 

 

—

 

 

 

(1,625,000

)

Other assets

 

 

(27,138,260

)

 

 

(55,534,365

)

 

 

458,179

 

 

 

83,082,776

 

 

 

868,330

 

Increase (decrease) in operating liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Due to related party

 

 

1,089,895

 

 

 

320

 

 

 

(1,100,000

)

 

 

—

 

 

 

(9,785

)

Accounts payable and other accrued expenses

 

 

1,637,970

 

 

 

(1,563,846

)

 

 

2,181,963

 

 

 

—

 

 

 

2,256,087

 

NET CASH FLOWS USED IN OPERATING ACTIVITIES

 

 

(46,651,595

)

 

 

(61,682,816

)

 

 

(6,970,196

)

 

 

83,082,776

 

 

 

(32,221,831

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CASH FLOWS FROM INVESTING ACTIVITIES

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment in life insurance policies

 

 

—

 

 

 

—

 

 

 

(42,121,671

)

 

 

—

 

 

 

(42,121,671

)

Carrying value of matured life insurance policies

 

 

—

 

 

 

751,576

 

 

 

4,632,232

 

 

 

—

 

 

 

5,383,808

 

Investment in Secured MCA advances

 

 

—

 

 

 

—

 

 

 

(39,671

)

 

 

—

 

 

 

(39,671

)

Proceeds from Secured MCA advances

 

 

—

 

 

 

—

 

 

 

1,423,702

 

 

 

—

 

 

 

1,423,702

 

NET CASH FLOWS USED IN INVESTING ACTIVITIES

 

 

—

 

 

 

751,576

 

 

 

(36,105,408

)

 

 

—

 

 

 

(35,353,832

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net repayment of senior credit facilities

 

 

—

 

 

 

—

 

 

 

(7,099,537

)

 

 

—

 

 

 

(7,099,537

)

Payments for issuance of senior debt

 

 

 

 

 

 

(1,076,118

)

 

 

(114,294

)

 

 

—

 

 

 

(1,190,412

)

Payments for redemption of Series I Secured Notes

 

 

—

 

 

 

(9,798,261

)

 

 

—

 

 

 

—

 

 

 

(9,798,261

)

Proceeds from issuance of L Bonds

 

 

56,744,470

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

56,744,470

 

Payments for issuance and redemption of L Bonds

 

 

(39,197,163

)

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(39,197,163

)

Payments to restricted cash

 

 

—

 

 

 

(2,336,577

)

 

 

(5,996,458

)

 

 

—

 

 

 

(8,333,035

)

Issuance of member capital

 

 

—

 

 

 

26,232,504

 

 

 

56,850,272

 

 

 

(83,082,776

)

 

 

—

 

Payments for issuance and redemption of common stock

 

 

(1,603,556

)

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(1,603,556

)

Proceeds from issuance of preferred stock

 

 

61,480,941

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

61,480,941

 

Payments for issuance and redemption of preferred stock

 

 

(5,722,437

)

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(5,722,437

)

Payments of preferred stock dividends

 

 

(3,898,857

)

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(3,898,857

)

NET CASH FLOWS PROVIDED BY FINANCING ACTIVITIES

 

 

67,803,398

 

 

 

13,021,548

 

 

 

43,639,983

 

 

 

(83,082,776

)

 

 

41,382,153

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NET INCREASE IN CASH AND CASH EQUIVALENTS

 

 

21,151,803

 

 

 

(47,909,692

)

 

 

564,379

 

 

 

—

 

 

 

(26,193,510

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CASH AND CASH EQUIVALENTS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BEGINNING OF THE PERIOD

 

 

28,481,047

 

 

 

49,360,952

 

 

 

644,983

 

 

 

—

 

 

 

78,486,982

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

END OF THE PERIOD

 

$

49,632,850

 

 

$

1,451,260

 

 

$

1,209,362

 

 

$

—

 

 

$

52,293,472

 

F-27

GWG HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

(18) Guarantee of L Bonds (cont.)

Consolidating Statements of Cash Flows (continued)

For the six months ended June 30, 2016

 

Parent

 

Guarantor Subsidiary

 

Non-Guarantor Subsidiaries

 

Eliminations

 

Consolidated

CASH FLOWS FROM OPERATING ACTIVITIES

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

4,067,786

 

 

$

29,330,628

 

 

$

34,623,309

 

 

$

(63,953,937

)

 

$

4,067,786

 

Adjustments to reconcile net income to net cash flows from operating activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity of subsidiaries

 

 

(28,817,535

)

 

 

(35,136,402

)

 

 

—

 

 

 

63,953,937

 

 

 

—

 

Change in fair value of life insurance policies

 

 

—

 

 

 

—

 

 

 

(32,772,929

)

 

 

—

 

 

 

(32,772,929

)

Amortization of deferred financing and issuance costs

 

 

3,909,923

 

 

 

(1,446,463

)

 

 

848,702

 

 

 

—

 

 

 

3,312,162

 

Deferred income taxes

 

 

2,906,747

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

2,906,747

 

Preferred stock dividends payable

 

 

330,049

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

330,049

 

(Increase) decrease in operating assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Life insurance policy benefits receivable

 

 

—

 

 

 

—

 

 

 

(6,829,022

)

 

 

 

 

 

 

(6,829,022

)

Other assets

 

 

(60,457,838

)

 

 

(37,895,574

)

 

 

—

 

 

 

97,315,946

 

 

 

(1,037,466

)

Increase in operating liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Due to related party

 

 

(2,802,976

)

 

 

1,195

 

 

 

2,700,000

 

 

 

—

 

 

 

(101,781

)

Accounts payable and accrued expenses

 

 

2,240,523

 

 

 

717,298

 

 

 

(1,765,065

)

 

 

—

 

 

 

1,192,756

 

NET CASH FLOWS USED IN OPERATING ACTIVITIES

 

 

(78,623,321

)

 

 

(44,429,318

)

 

 

(3,195,005

)

 

 

97,315,946

 

 

 

(28,931,698

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CASH FLOWS FROM INVESTING ACTIVITIES

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment in life insurance policies

 

 

—

 

 

 

—

 

 

 

(48,700,036

)

 

 

—

 

 

 

(48,700,036

)

Carrying value of matured life insurance policies

 

 

—

 

 

 

—

 

 

 

6,302,243

 

 

 

—

 

 

 

6,302,243

 

Investment in Secured MCA advances

 

 

—

 

 

 

—

 

 

 

(5,647,414

)

 

 

—

 

 

 

(5,647,414

)

Proceeds from Secured MCA advances

 

 

—

 

 

 

—

 

 

 

1,025,792

 

 

 

—

 

 

 

1,025,792

 

NET CASH FLOWS USED IN INVESTING ACTIVITIES

 

 

—

 

 

 

—

 

 

 

(47,019,415

)

 

 

—

 

 

 

(47,019,415

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net borrowings on senior credit facilities

 

 

—

 

 

 

—

 

 

 

17,000,000

 

 

 

—

 

 

 

17,000,000

 

Payments for redemption of Series I Secured Notes

 

 

—

 

 

 

(5,722,743

)

 

 

—

 

 

 

—

 

 

 

(5,722,743

)

Proceeds from issuance of L Bonds

 

 

71,126,660

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

71,126,660

 

Payments for issuance and redemption of L Bonds

 

 

(22,663,475

)

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(22,663,475

)

Payments to restricted cash

 

 

—

 

 

 

(2,822,051

)

 

 

(5,996,843

)

 

 

—

 

 

 

(8,818,894

)

Issuance of common stock

 

 

212,670

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

212,670

 

Proceeds from issuance of preferred stock

 

 

10,429,654

 

 

 

—

 

 

 

71,555

 

 

 

—

 

 

 

10,501,209

 

Payments for issuance and redemption of preferred stock

 

 

(1,610,574

)

 

 

—

 

 

 

(7,340

)

 

 

—

 

 

 

(1,617,914

)

Payments of preferred stock dividends

 

 

(1,112,155

)

 

 

—

 

 

 

 

 

 

 

—

 

 

 

(1,112,155

)

Issuance of member capital

 

 

—

 

 

 

57,813,874

 

 

 

39,502,072

 

 

 

(97,315,946

)

 

 

—

 

NET CASH FLOWS PROVIDED BY FINANCING ACTIVITIES

 

 

56,382,780

 

 

 

49,269,080

 

 

 

50,569,444

 

 

 

(97,315,946

)

 

 

58,905,358

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NET INCREASE IN CASH AND CASH EQUIVALENTS

 

 

(22,240,541

)

 

 

4,839,762

 

 

 

355,024

 

 

 

—

 

 

 

(17,045,755

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CASH AND CASH EQUIVALENTS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BEGINNING OF THE PERIOD

 

 

32,292,162

 

 

 

1,982,722

 

 

 

150,221

 

 

 

—

 

 

 

34,425,105

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

END OF THE PERIOD

 

$

10,051,621

 

 

$

6,822,484

 

 

$

505,245

 

 

$

—

 

 

$

17,379,350

 

F-28

GWG HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

(19) Concentrations

We purchase life insurance policies written by life insurance companies having investment-grade ratings by independent rating agencies. As a result, there may be certain concentrations of policies with life insurance companies. The following summarizes the face value of insurance policies with specific life insurance companies exceeding 10% of the total face value of our portfolio.

Life insurance company

 

June 30,
 2017

 

December 31,
 2016

John Hancock

 

14.13

%

 

14.36

%

AXA Equitable

 

12.69

%

 

13.42

%

Lincoln National

 

10.86

%

 

11.22

%

Transamerica

 

10.31

%

 

 

*

____________

*         percentage does not exceed 10% of the total face value.

The following summarizes the number of insurance policies held in specific states exceeding 10% of the total face value of our portfolio:

State of Residence

 

June 30,
2017

 

December 31,
2016

Florida

 

20.30

%

 

19.42

%

California

 

19.29

%

 

20.72

%

 (20) Subsequent events

Since June 30, 2017, we have issued approximately $15,789,000 of L Bonds.

Since June 30, 2017, we have issued approximately $12,762,000 of RPS 2.

As of the date of this prospectus supplement, we exercised our contractual rights to call for the redemption of our Series I Secured Notes and our Series A Preferred Stock and all outstanding warrants related to our Series A offering.

F-29

$150,000,000 of Series 2 Redeemable Preferred Stock

(150,000 shares)

GWG HOLDINGS, INC.

__________________________

PROSPECTUS

__________________________

August 10, 2017