LINCOLN,
Neb., May 15, 2023 /PRNewswire/ -- Midwest
Holding Inc. ("Midwest") (NASDAQ: MDWT), today announced financial
results for the quarter ended March 31, 2023.
First Quarter 2023 Highlights:
- GAAP net income for the quarter was $3.8
million compared with $0.2
million recorded in the first quarter of 2022. GAAP earnings
were $1.01 per share (diluted) versus
$0.05 per share (diluted) in Q1
2022.
- GAAP total revenue in Q1 2023 was $38.5
million compared with revenue of $2.6
million in the first quarter of 2022, driven by an increase
in investment income from growth in invested assets retained,
higher policy administration fees, and growing amortization of
deferred ceding commissions. The mark-to-market change in
derivatives also generated a gain in the quarter compared to a loss
in the same quarter in the prior year.
- Annuity direct written premium under statutory accounting
principles ("SAP"), a non-GAAP measure, was up 98.4% to
$194.6 million in the first three
months of the year from $98.1 million
in Q1 2022, due to a focus on distribution and pricing. The mix of
new business in the quarter was 69% Multi-Year Guaranteed Annuities
(MYGA) and 31% Fixed Indexed Annuities (FIA).
- Ceded premiums (SAP), a non-GAAP measure, were $102.1 million in Q1 2023 compared to
$40.1 million in the first quarter of
the prior year. The cession rate for the current period, or that
portion of our written premium that we reinsured, was 52% compared
to 41% in the same period last year.
- Total expenses for the quarter increased to $29.8 million from $(3.3)
million in the first quarter of last year resulting from
interest credited being treated as an expense (impacted by the
change in value of the options embedded in our liabilities),
compared to negative interest credited in the first quarter of the
prior year, and from an expense related to the mark-to-market value
of the options allowance included in other operating expenses,
compared to a gain in the same period of the prior year. Total
expenses have increased from variable costs associated with
increased premiums written related to technology, distribution,
product fees, and premium taxes along with expenses related to
state expansion and capital initiatives. Salaries and benefits
increased with the addition, repositioning, and retention of
personnel to support growth and manage a tighter labor market.
- Invested assets grew to $1,832.9
million at March 31, 2023
compared with $1,615.0 million at
December 31, 2022. The retained
portfolio was $945.1 million as of
March 31, 2023, compared to
$812.2 million at the end of last
year. Third-party assets under management were $828.6 million at quarter-end compared to
$501.9 million at December 31, 2022.
- Effective February 28, 2023,
reinsurer American Republic Insurance Company ("AEG") elected not
to extend its commitment period for reinsuring liabilities under
its Modified Coinsurance Agreement (the "AEG Agreement"). AEG had
previously been taking a 20% quota share of certain liabilities
with respect to Midwest's MYGA-5 business as well as a 20% quota
share of certain liabilities with respect to our FIA products and,
as a result of the election, its quota share with respect to both
MYGA and FIA policies is 0% going forward. The AEG Agreement
remains in place, and AEG remains responsible for previously ceded
liabilities.
- On April 30, 2023, Midwest
Holding Inc. entered into an Agreement and Plan of Merger with
affiliates of Antarctica Capital, LLC, whereby an affiliate of
Antarctica will acquire Midwest in
an all-cash transaction valued at approximately $100 million.
Georgette Nicholas, CEO of
Midwest noted, "We are excited about the execution and progress of
the business. The results for the quarter reflect the continued
focus on distribution, pricing, products, investment management,
and reinsurance to position the Company for further growth. "
Q1 2023 versus Q1 2022 on a GAAP basis
Midwest reported net income of $3.8
million for Q1 2023; this compares with $0.2 million in the first quarter of the prior
year. On a diluted, per-share basis, this quarter's net income was
$1.01 compared with $0.05 reported in Q1 2022.
Investment income rose in the first quarter of 2023 to
$19.2 million from $6.2 million in the same period for the prior
year. Driving the change was an increase in invested assets as well
as performance on those assets, benefiting from sourcing
investments with a higher yield.
Amortization of deferred gain on reinsurance reached
$1.6 million this quarter compared
with $1.0 million in Q1 2022. This
was due to growth in the deferred gain on co-insurance on the
balance sheet to $40.0 million
compared to $38.1 million a year ago,
which reflects ceding commission received on reinsurance with third
parties.
Service fee revenue was at $0.7
million in Q1 2023 although down from $1.1 million in Q1 2022, as the prior period
included a performance fee received on the payoff of a mortgage.
Service fee revenue consists of fee revenue generated by our wholly
owned asset manager, 1505 Capital LLC, for asset management
services provided to third-party clients.
Policy administration fee revenue for the quarter was
$0.6 million versus $0.3 million in the same period in 2022. Policy
administration fee revenue is generated by providing ancillary
services, such as policy administration, to third parties as well
as collecting policy surrender charges. The increase was correlated
with the growth in policies written and ceded to reinsurance
partners.
Our expenses were $29.8 million in
the first quarter of 2023 compared with $(3.3) million in the first quarter of the prior
year. Contributing to the increase was interest credited expense,
compared to negative interest credited in the prior period, as well
as mark-to-market expense which is included in other operating
expenses. Total expenses have increased from variable costs
associated with increased premiums written related to technology,
distribution, product fees, and premium taxes along with expenses
related to state expansion and capital initiatives. Salaries and
benefits increased with the addition, repositioning, and retention
of personnel to support growth and manage a tighter labor
market.
Guidance
We continue to see a growing fixed annuity market with new
competitors and various movements in pricing. Our focus is to
maintain a competitive position on pricing and service to continue
sales momentum in 2023. Given where we are in the second quarter of
2023, we anticipate growth in premiums for the quarter with the
approval to write new business in both Florida and Georgia.
State expansion efforts remain a key priority. We are excited to
begin writing business in Florida
and Georgia, where we were granted
approval to conduct business and obtained our product approvals. We
anticipate that the addition of these states could add
approximately 33% growth to our existing premium written. We have
other active state applications in process and will provide updates
as they progress.
Given our start for 2023, we estimate that premiums written for
2023 will be in the range of $800
million to $850 million (SAP)
as of now. As we begin to get Florida and Georgia moving, we expect that to increase
depending on how quickly agents begin writing new business.
The goal is to cede, on average, approximately 70-90% of our
premium in a year to generate ceded commission fees and manage
capital, although through first quarter we ceded approximately 52%.
We expect to cede approximately 55-65% in 2023 given that the
demand from reinsurance partners is strong. We have capacity in
place to cover anticipated written premium through existing
partners along with additional potential reinsurance transactions
in the pipeline.
We continue to focus on expense management, making key
investments to support growth of the business and bring
efficiencies with technology. We anticipate general and
administrative expenses on a management basis, a non-GAAP measure,
to be approximately $30 to
$32 million for the full year
2023.
Q1 2023 Key Performance Indicators and Non-GAAP Financial
Measures
In addition to GAAP measures, Midwest's management utilizes a
series of key performance indicators (KPI's) and non-GAAP measures
to, among other things:
- monitor and evaluate the performance of our business operations
and financial performance;
- facilitate internal comparisons of the historical operating
performance of our business operations;
- review and assess the operating performance of our management
team;
- analyze and evaluate financial and strategic planning decisions
regarding future operations;
- plan for and prepare future annual operating budgets and
determine appropriate levels of operating investments; and
- facilitate comparison of results between periods and to better
understand the underlying historical trends in our business and
prospects.
These non-GAAP measures are not a substitute for GAAP measures;
however, management believes that when used in conjunction with the
GAAP measures, the non-GAAP measures can contribute to investors'
understanding of the progress of our business. Non-GAAP financial
measures used by us may be calculated differently from, and
therefore may not be comparable to, similarly titled measures used
by other companies. These non-GAAP financial measures should be
considered along with, but not as alternatives to, our operating
performance measures as prescribed by GAAP.
Annuity Premiums (a KPI)
For the first quarter of 2023, annuity direct written premiums
were $194.6 million compared with
$98.1 million in the first quarter of
2022. Ceded premiums were $102.1
million in 2023's first quarter compared to $40.1 million in the first quarter of 2022. Of
the first quarter 2023 sales of $194.6
million, 69% was in the MYGA category and the remaining 31%
consisted of sales of FIA.
Fees Received for Reinsurance (a KPI)
Fees received for reinsurance amounted to $3.5 million in the quarter compared to
$2.4 million in the prior year first
quarter. We use this non-GAAP figure to measure the progress of our
effort to secure third-party capital to back our reinsurance
programs. Fees received for reinsurance sums two components:
Amortization of deferred gain on reinsurance, which is a line item
in our Consolidated Statements of Comprehensive Loss, and deferred
coinsurance ceding commission, which is a line item in our GAAP
Consolidated Statements of Cash Flows.
General and Administrative ("G&A") Expenses (a non-GAAP
measure)
We monitor this figure to track our overhead. It includes salary
and benefits and other operating expenses; however, it excludes
non-cash stock-based compensation and the non-cash
mark-to-market-adjustment of our option budget allowance.
G&A expenses in Q1 2023 have risen to $11.5 million from $8.9
million at the same point in the prior year. Total expenses
have increased from variable costs associated with increased
premiums written related to technology, distribution, product fees,
and premium taxes along with expenses related to state expansion
and capital initiatives. Salaries and benefits increased with the
addition, repositioning, and retention of personnel to support
growth and manage a tighter labor market.
Management Expenses (a non-GAAP measure)
We use this figure to monitor the expenses of our business on a
cash basis. Importantly, we exclude from the calculation of
management expenses the index interest credited related to our FIAs
because this expense is fully hedged. Instead, we add back to
Management Expenses the period's amortization of options previously
purchased to provide this hedge. We view this amortized cost as our
true cost of funds. Management Expenses also excludes the
mark-to-market adjustment of our option budget allowance, as that
is recorded as a component of other operating expense.
Management expenses for the first quarter of 2023 were
$16.9 million compared with
$12.7 million in the same period of
the prior year. Principal drivers of the increase were higher
interest credited and increases in expenses from retained premiums
along with the increase in G&A noted above.
SPECIAL CAUTIONARY NOTE REGARDING FORWARD-LOOKING
STATEMENTS
Certain statements contained or incorporated by reference in
this release constitute forward-looking statements. These
statements are based on management's expectations, estimates,
projections and assumptions. In some cases, you can identify
forward-looking statements by terminology including "could," "may,"
"will," "should," "expect," "plan," "anticipate," "believe,"
"estimate," "predict," "potential," "intend," "target,"
"contemplate," "project," or "continue," the negative of these
terms, or other comparable terminology used in connection with any
discussion of future operating results or financial performance.
These statements are only predictions and reflect our management's
good faith present expectation of future events and are subject to
a number of important factors and uncertainties that could cause
actual results to differ materially from those described in the
forward-looking statements.
Factors that may cause our actual results to differ materially
from those contemplated or projected, forecast, estimated or
budgeted in such forward-looking statements include among others,
the following possibilities:
- our business plan, particularly including our reinsurance
strategy, may not prove to be successful;
- our reliance on third-party insurance marketing organizations
to market and sell our annuity insurance products through a network
of independent agents;
- adverse changes in our ratings obtained from independent
rating agencies;
- failure to maintain adequate reinsurance;
- our inability to expand our insurance operations outside the 24
states and District of Columbia in
which we are currently licensed;
- our annuity insurance products may not achieve significant
market acceptance;
- we may continue to experience operating losses in the
foreseeable future;
- the possible loss or retirement of one or more of our key
executive personnel;
- intense competition, including the intensification of price
competition, competitive pressures from established insurers with
greater financial resources, the entry of new competitors, and the
introduction of new products by new and existing competitors;
- adverse state and federal legislation or regulation, including
decreases in rates, limitations on premium levels, increases in
minimum capital and reserve requirements, benefit mandates and tax
treatment of insurance products;
- fluctuations in interest rates causing a reduction of
investment income or increase in interest expense and in the market
value of interest-rate sensitive investment;
- failure to obtain new customers, retain existing customers, or
reductions in policies in force by existing customers;
- higher service, administrative, or general expense due to the
need for additional advertising, marketing, administrative or
management information systems expenditures;
- changes in our liquidity due to changes in asset and liability
matching;
- possible claims relating to sales practices for insurance
products; and
- lawsuits in the ordinary course of business.
In addition, this communication and any documents referred to in
this communication contain certain forward-looking statements
within the meaning of the federal securities laws with respect to
the proposed acquisition of Midwest Holding Inc. (the "Company") by
an affiliate of Antarctica Capital, LLC, including, but not limited
to, statements regarding the anticipated timing of the closing of
the proposed transaction. These forward-looking statements
generally are identified by the words "may," "will," "should,"
"expect," "plan," "anticipate," "believe," "estimate," "predict,"
"potential," "intend," "target," "contemplate," "project," and
similar expressions. Forward-looking statements are predictions,
projections, and other statements about future events that are
based on current expectations and assumptions and, as a result, are
subject to risks and uncertainties. Many factors could cause actual
future events to differ materially from the forward-looking
statements in this communication, including but not limited to: (i)
the risk that the proposed transaction may not be completed in a
timely manner or at all, (ii) the failure to satisfy the conditions
to the consummation of the proposed transaction, including approval
of the proposed transaction by the stockholders of the Company and
the receipt of necessary regulatory approvals, (iii) the occurrence
of any event, change or other circumstance that could give rise to
the termination of the proposed transaction, (iv) the effect of the
announcement or pendency of the proposed transaction on the
Company's business relationships, operating results, and business
generally, including the termination of any business contracts, (v)
risks that the proposed transaction disrupts current plans and
operations of the Company and potential difficulties in hiring and
retaining key personnel as a result of the proposed transaction,
(vi) risks related to diverting management's attention from the
Company's ongoing business operations, (vii) risks that any
announcements related to the proposed transaction could have
adverse effects on the Company's stock price, credit ratings, or
operating results, (viii) the outcome of any legal proceedings that
may be instituted related to the Merger Agreement or the proposed
transaction and (ix) the significant transactions costs that the
parties will incur in connection with the proposed transaction. The
risks and uncertainties may be amplified by economic, market,
business, or geopolitical conditions or competition, or changes in
such conditions, negatively affecting the Company's business,
operations, and financial performance. The foregoing list of
factors is not exhaustive. You should carefully consider the
foregoing factors and the other risks and uncertainties that affect
the Company's business as described in the "Risk Factors" section
of the Company's Annual Report on Form 10-K, Quarterly Reports on
Form 10-Q and other documents filed from time to time with the SEC.
These filings identify and address other important risks and
uncertainties that could cause actual events and results to differ
materially from those contained in the forward-looking statements.
Forward-looking statements speak only as of the date they are made.
Readers are cautioned not to put undue reliance on forward-looking
statements, and the Company assumes no obligation to, and does not
intend to, update or revise these forward-looking statements,
whether as a result of new information, future events, or
otherwise, unless required by law.
Additional Information Regarding the Proposed Transaction and
Where to Find It
In connection with the proposed transaction, the Company will be
filing documents with the Securities and Exchange Commission
("SEC"), including preliminary and definitive proxy statements
relating to the proposed transaction. A definitive proxy statement
will be mailed or otherwise made available to the Company's
stockholders in connection with the proposed transaction. This
communication is not a substitute for the proxy statement or any
other document that may be filed by the Company with the SEC.
BEFORE MAKING ANY VOTING DECISION, INVESTORS AND SECURITY HOLDERS
ARE URGED TO READ THE DEFINITIVE PROXY STATEMENT (INCLUDING ANY
SUPPLEMENTS THERETO) AND ANY OTHER RELEVANT DOCUMENTS TO BE FILED
WITH THE SEC IN CONNECTION WITH THE PROPOSED TRANSACTION, OR
DOCUMENTS INCORPORATED BY REFERENCE IN THE PROXY STATEMENT WHEN
THEY BECOME AVAILABLE, BECAUSE THEY WILL CONTAIN IMPORTANT
INFORMATION ABOUT THE PROPOSED TRANSACTION. Any vote in respect of
resolutions to be proposed at the Company's stockholder meeting to
approve the proposed transaction or other responses in relation to
the proposed transaction should be made only on the basis of the
information contained in the Company's proxy statement. Investors
and security holders may obtain free copies of these documents
(when they are available) and other related documents filed with
the SEC at the SEC's website at www.sec.gov or on the Company's
website at www.ir.midwestholding.com.
Participants in the Solicitation Regarding the Proposed
Transaction
The Company and certain of its directors, executive officers,
and employees may be considered participants in the solicitation of
proxies from the Company's stockholders in connection with the
proposed transaction. Information regarding the persons who, under
the rules of the SEC, may be considered participants in the
solicitation of proxies in connection with the proposed
transaction, including the interests of the Company directors and
executive officers in the transaction, will be set forth in the
preliminary and definitive proxy statements that will be filed with
the SEC relating to the transaction. Additional information
regarding the Company's directors and executive officers, including
a description of their direct interests, by security holdings or
otherwise, is contained in the Company's proxy statement for its
2023 annual meeting of stockholders, which was filed with the SEC
on April 24, 2023. These documents
are available free of charge at the SEC's website at www.sec.gov
and on Company's website at www.ir.midwestholding.com.
About Midwest Holding Inc.
Midwest Holding Inc. is a growing, technology-enabled,
services-oriented annuity platform. Midwest designs and develops
annuity products that are distributed through independent
distribution channels, to a large and growing demographic of U.S.
retirees. Midwest originates, manages, and typically transfers
these annuities through reinsurance arrangements to asset managers
and other third-party investors. Midwest also provides the
operational and regulatory infrastructure and expertise to enable
asset managers and third-party investors to form and manage their
own reinsurance capital vehicles.
For more information, please
visit www.midwestholding.com
Investor contact: ir@midwestholding.com
Media inquiries: press@midwestholding.com
Consolidated Balance
Sheets (in thousands)
|
|
|
|
|
|
|
|
|
|
March 31, 2023
|
|
December 31, 2022
|
(In thousands, except
share information)
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
Fixed maturities,
available for sale, at fair value
(amortized cost: $1,417,548 in 2023, and $1,269,735 in 2022.
Allowance for credit losses of $10,314 in 2023 and $12,943 in
2022.) (See Note 2)
|
|
$
|
1,343,668
|
|
$
|
1,214,635
|
Mortgage loans on real
estate, held for investment (Allowance for credit losses of $2,709
in
2023 and $2,024 in 2022)
|
|
|
333,466
|
|
|
227,047
|
Derivative instruments
(See Note 3)
|
|
|
23,814
|
|
|
15,934
|
Equity securities, at
fair value (cost: $5,592 in 2023 and $5,592 in 2022)
|
|
|
5,178
|
|
|
5,111
|
Other invested assets
(Allowance for credit losses of $1,173 in 2023 and $1,703 in
2022)
|
|
|
83,580
|
|
|
112,431
|
Preferred
stock
|
|
|
32,714
|
|
|
31,415
|
Deposits and notes
receivable
|
|
|
10,447
|
|
|
8,359
|
Policy loans
|
|
|
23
|
|
|
25
|
Total
investments
|
|
|
1,832,890
|
|
|
1,614,957
|
Cash and cash
equivalents
|
|
|
170,073
|
|
|
191,414
|
Deferred acquisition
costs, net
|
|
|
48,150
|
|
|
43,433
|
Premiums
receivable
|
|
|
368
|
|
|
362
|
Accrued investment
income
|
|
|
31,590
|
|
|
25,165
|
Reinsurance
recoverables (See Note 7)
|
|
|
55,202
|
|
|
20,190
|
Property and equipment,
net
|
|
|
1,805
|
|
|
1,897
|
Receivable for
securities sold
|
|
|
-
|
|
|
10,518
|
Other assets
|
|
|
4,397
|
|
|
12,495
|
Total
assets
|
|
$
|
2,144,475
|
|
$
|
1,920,431
|
Liabilities and
Stockholders' Equity
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
Benefit
reserves
|
|
$
|
12,739
|
|
$
|
12,945
|
Deposit-type contracts
(See Note 5)
|
|
|
1,963,786
|
|
|
1,743,348
|
Other policy-holder
funds
|
|
|
9,267
|
|
|
4,105
|
Notes payable (See Note
6)
|
|
|
25,000
|
|
|
25,000
|
Deferred gain on
coinsurance transactions
|
|
|
39,952
|
|
|
38,063
|
Payable for securities
purchased
|
|
|
22,677
|
|
|
8,872
|
Other
liabilities
|
|
|
46,204
|
|
|
53,721
|
Total
liabilities
|
|
|
2,119,625
|
|
|
1,886,054
|
Stockholders'
Equity:
|
|
|
|
|
|
|
Preferred stock, $0.001
par value; authorized 2,000,000 shares; no shares issued and
outstanding as of March 31, 2023 or
December 31, 2022
|
|
|
—
|
|
|
—
|
Voting common stock,
$0.001 par value; authorized 20,000,000 shares; 3,728,601
shares
issued and outstanding as of March 31, 2023, and 3,727,976 as of
December 31, 2022,
respectively; non-voting common stock, $0.001 par value, 2,000,000
shares authorized; no
shares issued and outstanding March 31, 2023 and December 31, 2022,
respectively
|
|
|
4
|
|
|
4
|
Additional paid-in
capital
|
|
|
138,789
|
|
|
138,482
|
Treasury
stock
|
|
|
(175)
|
|
|
(175)
|
Accumulated
deficit
|
|
|
(63,863)
|
|
|
(63,019)
|
Accumulated other
comprehensive (loss)
|
|
|
(61,928)
|
|
|
(51,386)
|
Total Midwest
Holding Inc.'s stockholders' equity
|
|
|
12,827
|
|
|
23,906
|
Noncontrolling
interests
|
|
|
12,023
|
|
|
10,471
|
Total stockholders'
equity
|
|
|
24,850
|
|
|
34,377
|
Total liabilities
and stockholders' equity
|
|
$
|
2,144,475
|
|
$
|
1,920,431
|
Consolidated
Statements of Comprehensive Loss (in thousands, except per
share amounts)
|
|
|
|
|
|
|
|
|
|
|
Three months ended
March 31,
|
|
(In thousands, except
per share data)
|
|
2023
|
|
2022
|
|
Revenues
|
|
|
|
|
|
|
|
Investment income, net
of expenses
|
|
$
|
19,193
|
|
$
|
6,242
|
|
Net realized gain
(loss) on investments (See Note 2)
|
|
|
16,287
|
|
|
(6,175)
|
|
Amortization of
deferred gain on reinsurance transactions
|
|
|
1,573
|
|
|
970
|
|
Policy administration
fees
|
|
|
639
|
|
|
348
|
|
Service fee revenue,
net of expenses
|
|
|
654
|
|
|
1,098
|
|
Other
revenue
|
|
|
106
|
|
|
100
|
|
Total
revenue
|
|
|
38,452
|
|
|
2,583
|
|
Expenses
|
|
|
|
|
|
|
|
Interest
credited
|
|
|
7,689
|
|
|
(6,674)
|
|
Benefits
|
|
|
958
|
|
|
-
|
|
Amortization of
deferred acquisition costs
|
|
|
1,703
|
|
|
851
|
|
Salaries and
benefits
|
|
|
5,503
|
|
|
4,318
|
|
Other operating
expenses
|
|
|
13,912
|
|
|
(1,822)
|
|
Total
expenses
|
|
|
29,765
|
|
|
(3,327)
|
|
Net income before
income tax expense
|
|
|
8,687
|
|
|
5,910
|
|
Income tax expense
(See Note 8)
|
|
|
(2,907)
|
|
|
(4,722)
|
|
Net income after
income tax expense
|
|
|
5,780
|
|
|
1,188
|
|
Less: Income
attributable to noncontrolling interest
|
|
|
1,951
|
|
|
1,001
|
|
Net income
attributable to Midwest Holding Inc.
|
|
|
3,829
|
|
|
187
|
|
Comprehensive
loss:
|
|
|
|
|
|
|
|
Unrealized losses on
investments arising during the three months ended March 31,
2023 and 2022, net of offsets, (tax ($10,300) and ($2,600),
respectively)
|
|
|
(10,552)
|
|
|
(9,703)
|
|
Less: Reclassification
adjustment for net realized losses on investments, net of
offsets (net of tax ($2,700) and ($136), respectively)
|
|
|
10
|
|
|
(512)
|
|
Other comprehensive
loss
|
|
|
(10,542)
|
|
|
(10,215)
|
|
Comprehensive
loss:
|
|
$
|
(6,713)
|
|
$
|
(10,028)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income per common
share
|
|
|
|
|
|
|
|
Basic
|
|
$
|
1.03
|
|
$
|
0.05
|
|
Diluted
|
|
$
|
1.01
|
|
$
|
0.05
|
|
Consolidated
Statements of Cash Flows (in thousands)
|
|
|
|
|
|
|
|
|
|
Three months ended
March 31,
|
(In
thousands)
|
|
2023
|
|
2022
|
Cash Flows from
Operating Activities:
|
|
|
|
|
|
|
Income attributable to
Midwest Holding Inc.
|
|
$
|
3,829
|
|
$
|
187
|
Adjustments to arrive
at cash provided by operating activities:
|
|
|
|
|
|
|
Net premium and
discount on investments
|
|
|
9,253
|
|
|
(639)
|
Depreciation and
amortization
|
|
|
95
|
|
|
11
|
Stock
options
|
|
|
307
|
|
|
32
|
Amortization of
deferred acquisition costs
|
|
|
4,788
|
|
|
851
|
Deferred acquisition
costs capitalized
|
|
|
(9,912)
|
|
|
(4,464)
|
Net realized (loss)
gain on investments
|
|
|
(16,287)
|
|
|
6,175
|
Deferred gain on
coinsurance transactions
|
|
|
1,889
|
|
|
1,460
|
Changes in operating
assets and liabilities:
|
|
|
|
|
|
|
Reinsurance
recoverable
|
|
|
(27,809)
|
|
|
5,316
|
Interest and dividends
due and accrued
|
|
|
(6,425)
|
|
|
418
|
Premiums
receivable
|
|
|
(6)
|
|
|
(10)
|
Deposit-type
liabilities
|
|
|
56,963
|
|
|
(16,151)
|
Policy
liabilities
|
|
|
4,955
|
|
|
897
|
Receivable and payable
for securities
|
|
|
24,323
|
|
|
11,702
|
Other assets and
liabilities
|
|
|
437
|
|
|
4,522
|
Net cash provided by
operating activities
|
|
|
46,400
|
|
|
10,307
|
Cash Flows from
Investing Activities:
|
|
|
|
|
|
|
Fixed maturities
available for sale:
|
|
|
|
|
|
|
Purchases
|
|
|
(193,329)
|
|
|
(226,416)
|
Proceeds from sale or
maturity
|
|
|
50,382
|
|
|
140,758
|
Mortgage loans on real
estate, held for investment
|
|
|
|
|
|
|
Purchases
|
|
|
(131,820)
|
|
|
(19,699)
|
Proceeds from
sale
|
|
|
22,108
|
|
|
30,835
|
Derivatives
|
|
|
|
|
|
|
Purchases
|
|
|
(3,716)
|
|
|
(4,691)
|
Proceeds from
sale
|
|
|
4,197
|
|
|
1,388
|
Equity
securities
|
|
|
|
|
|
|
Purchases
|
|
|
(68)
|
|
|
-
|
Proceeds from
sale
|
|
|
-
|
|
|
142
|
Other invested
assets
|
|
|
|
|
|
|
Purchases
|
|
|
-
|
|
|
(23,768)
|
Proceeds from
sale
|
|
|
22,202
|
|
|
3,334
|
Purchase of restricted
common stock
|
|
|
(1,425)
|
|
|
-
|
Preferred
stock
|
|
|
|
|
|
|
Purchases
|
|
|
(1,299)
|
|
|
(1,549)
|
Net change in policy
loans
|
|
|
2
|
|
|
(3)
|
Net purchases of
property and equipment
|
|
|
-
|
|
|
(195)
|
Net cash used in
investing activities
|
|
|
(232,766)
|
|
|
(99,864)
|
Cash Flows from
Financing Activities:
|
|
|
|
|
|
|
Net transfer to
noncontrolling interest
|
|
|
1,552
|
|
|
3,432
|
Receipts on
deposit-type contracts
|
|
|
194,551
|
|
|
98,111
|
Withdrawals on
deposit-type contracts
|
|
|
(31,078)
|
|
|
(9,315)
|
Net cash provided by
financing activities
|
|
|
165,025
|
|
|
92,228
|
Net (decrease)
increase in cash and cash equivalents
|
|
|
(21,341)
|
|
|
2,671
|
Cash and cash
equivalents:
|
|
|
|
|
|
|
Beginning
|
|
|
191,414
|
|
|
142,013
|
Ending
|
|
$
|
170,073
|
|
$
|
144,684
|
|
|
|
|
|
|
|
Supplementary
information
|
|
|
|
|
|
|
Cash paid for
taxes
|
|
$
|
-
|
|
$
|
250
|
Supplemental
Information – Reconciliation – Management Expenses to GAAP
Expenses
(in thousands)
|
|
|
|
|
|
|
|
|
|
Three months ended
March 31,
|
|
|
2023
|
|
2022
|
Management
Expenses
|
|
|
|
|
|
|
G&A
|
|
$
|
11,519
|
|
$
|
8,850
|
|
|
|
|
|
|
|
Management interest
credited
|
|
|
3,663
|
|
|
3,043
|
Amortization of
deferred acquisition costs
|
|
|
1,703
|
|
|
851
|
Expenses related to
retained business
|
|
|
5,366
|
|
|
3,894
|
Management expenses -
total
|
|
$
|
16,885
|
|
$
|
12,744
|
|
|
|
|
|
|
|
|
|
Three months ended
March 31,
|
|
|
2023
|
|
2022
|
G&A
|
|
|
|
|
|
|
Salaries and benefits -
GAAP
|
|
$
|
5,503
|
|
$
|
4,318
|
Other operating
expenses - GAAP
|
|
|
13,912
|
|
|
(1,822)
|
Subtotal
|
|
|
19,415
|
|
|
2,496
|
Adjustments:
|
|
|
|
|
|
|
Less: Stock-based
compensation
|
|
|
(307)
|
|
|
(32)
|
Less: Mark-to-market
option allowance
|
|
|
(7,589)
|
|
|
6,386
|
G&A
|
|
$
|
11,519
|
|
$
|
8,850
|
|
|
|
|
|
|
|
|
|
Three months ended
March 31,
|
|
|
2023
|
|
2022
|
Management Interest
Credited
|
|
|
|
|
|
|
Interest credited -
GAAP
|
|
$
|
7,689
|
|
$
|
(6,674)
|
Adjustments:
|
|
|
|
|
|
|
Less: FIA interest
credited - GAAP
|
|
|
(6,328)
|
|
|
7,764
|
Add: FIA options cost -
amortized - GAAP
|
|
|
2,302
|
|
|
1,953
|
Management interest
credited
|
|
$
|
3,663
|
|
$
|
3,043
|
|
|
|
|
|
|
|
|
|
Three months ended
March 31,
|
|
|
2023
|
|
2022
|
Reconciliation -
Management Expenses to GAAP Expenses
|
|
|
|
|
|
|
Total expenses -
GAAP
|
|
$
|
29,765
|
|
$
|
(3,327)
|
Adjustments:
|
|
|
|
|
|
|
Less:
Benefits
|
|
|
(958)
|
|
|
—
|
Less: Stock-based
compensation
|
|
|
(307)
|
|
|
(32)
|
Less: Mark-to-market
option allowance
|
|
|
(7,589)
|
|
|
6,386
|
Less: FIA interest
credited - GAAP
|
|
|
(6,328)
|
|
|
7,764
|
Add: FIA options cost -
amortized - GAAP
|
|
|
2,302
|
|
|
1,953
|
Management expenses -
total
|
|
$
|
16,885
|
|
$
|
12,744
|
View original
content:https://www.prnewswire.com/news-releases/midwest-holding-inc-reports-first-quarter-2023-results-301825086.html
SOURCE Midwest Holding Inc.