Filed pursuant to Rule 424(b)(3)

Registration No. 333-206626

PROSPECTUS SUPPLEMENT NO. 4

Supplement to Prospectus dated
April 12, 2016

________________________

GWG HOLDINGS, INC.

________________________

Maximum of 100,000 Shares of Redeemable Preferred Stock

This “Prospectus Supplement No. 4 — Supplement to Prospectus dated April 12, 2016,” supplements and amends our prospectus dated April 12, 2016, as earlier supplemented by prospectus sticker supplement no. 1 dated April 26, 2016 (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. For clarity, this supplement supersedes and replaces prospectus supplement no. 2 dated May 16, 2016 and prospectus supplement no. 3 dated August 12, 2016. Capitalized terms contained in this supplement have the same meanings as in the prospectus unless otherwise stated herein.

RECENT EVENTS

On November 10, 2016, we filed our Quarterly Report on Form 10-Q for the period ended September 30, 2016. 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 November 10, 2016

 

TABLE OF CONTENTS

 

 

Page

RISK RELATING TO FORWARD-LOOKING STATEMENTS

 

1

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

 

2

OTHER INFORMATION   30
RISK FACTOR UPDATE   31

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 the prospectus and the following:

         changes in the secondary market for life insurance;

         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;

         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;

         general economic outlook, including prevailing interest rates;

         performance of our investments in life insurance policies;

         financing requirements;

         litigation risks;

         restrictive covenants contained in borrowing agreements;

         increases in the cost of premiums charged by insurers for the policies we own; 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 involve 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” in this prospectus supplement. We caution you that the forward-looking statements in 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.

1

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 September 30, 2016, filed with the SEC on November 10, 2016. 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 condensed 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.

Overview

GWG Holdings, Inc. is a financial services company participating in the life insurance secondary market. We create opportunities for consumers owning life insurance to obtain significant value for their contracts as compared to the traditional options offered by insurance companies. We also create opportunities for investors to participate in the life insurance alternative investment asset class, not correlated to traditional financial markets. In so doing, we enable investors to take advantage of financial opportunities dominated by banks prior to the 2008 credit crisis.

We seek to build a profitable and large portfolio of life insurance assets that are well diversified in terms of insurance companies and insureds. We believe that diversification is a key risk mitigation strategy to provide consistent cash flows and reliable investment returns from our portfolio. To grow our portfolio and achieve diversification, we offer investors the opportunity to participate in the yield potentially generated by our portfolio of life insurance assets through a variety of financings and securities offerings. We believe we are well positioned to continue providing investors with yield participation opportunities from the life insurance alternative asset class.

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 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 contracts 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.

Ownership of Life Insurance Contracts — Fair Value Option

We account for the purchase of life insurance contracts in accordance with ASC 325-30, Investments in Insurance Contracts, 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 contracts using the fair value method.

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

2

We initially record our purchase of life insurance contracts at the transaction price, which is the amount paid for the contract, inclusive of all external fees and costs associated with the acquisition. The fair value of our investment in our portfolio of insurance contracts is evaluated at the end of each subsequent reporting period. Changes in the fair value of our portfolio are based on periodic evaluations and are recorded in our consolidated and combined statement of operations as changes in fair value of life insurance contracts.

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 contracts. 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 Society of Actuaries recently finalized the 2015 Valuation Basic Table (“2015 VBT”). The 2015 VBT is based on a much larger dataset of insured lives, face amount of contracts and more current information compared to the dataset underlying the 2008 Valuation Basic Table. The new 2015 VBT dataset includes 266 million contracts compared to the 2008 VBT dataset of 75 million. The experience data in the 2015 VBT dataset includes 2.55 million claims on contracts 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.

In September 2015, Equitable Life Insurance Company (“AXA”) announced pending cost-of-insurance rate increases for certain universal life contracts which were effected on March 1, 2016. We identified 14 affected contracts in our portfolio. In April 2016, we received updated contract illustrations from AXA and calculated the change in the fair value of our portfolio resulting from the increased premiums to be a reduction of $2,395,000. This reduction was reflected in our balance sheet as of March 31, 2016. Our review of AXA’s cost-of-insurance rate increases is complete as of September 30, 2016.

We are aware of additional pending cost of insurance increases affecting approximately 1.1% of our portfolio by face amount of benefits. We will adjust our premium schedules and resultant valuation when we have received the required information from the related carriers.

Fair Value Components — Required Premium Payments

We must pay the premiums on the life insurance contracts within our portfolio in order to collect the contract benefit. The same probabilistic model and methodologies used to generate expected cash inflows from the life insurance contract 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 represents the internal rate of return we expect to earn on investments in a contract or in the portfolio as a whole at the stated fair value. The discount rate used to calculate fair value of our portfolio incorporates the guidance provided by ASC 820, Fair Value Measurements and Disclosures.

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

September 30, 2016

 

December 31, 2015

11.07%

 

 

11.09%

 

The change in the discount rate incorporates current information about discount rates applied by other reporting companies owning portfolios of life insurance contracts, 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 contracts. Because we use the discount rate to arrive at the fair value of our portfolio, the rate we choose necessarily assumes an orderly and arms-length transaction (i.e., a non-distressed transaction in which neither seller nor buyer is compelled to

3

engage in the transaction). The carrying value of contracts 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 Systems (“MAPS”), to prepare a calculation of our life insurance portfolio. MAPS owns and maintains the portfolio pricing software we use. MAPS processed contract 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 11.07%. MAPS independently calculated the net present value of our portfolio of 625 contracts to be $477.6 million and furnished us with a letter documenting its calculation. A copy of such letter is filed as Exhibit 99.1 to this report.

Deferred Income Taxes

Under ASC 740, Income Taxes, 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 are expected to result in a capital loss.

Deferred Financing and Issuance Costs

Financing costs 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 issuance costs, sales commissions, and other direct expenses, which are amortized using the interest method over the term of each respective borrowing. The L Bonds are reported net of issuance costs, sales commissions, and other direct expenses, which are amortized using the interest method over the term of each respective borrowing. The Series A, as described in Note 9, was reported net of issuance costs, sales commissions, including the fair value of warrants issued, and other direct expenses, which were amortized using the interest method as interest expense over a three-year redemption period. As of December 31, 2015, these costs have been fully amortized. Selling and issuance costs of RPS and MCA Preferred Stock, described in Notes 10 and 11, are netted against additional paid-in-capital.

Principal Revenue and Expense Items

We earn revenues from the following three primary sources.

         Life Insurance Contract Benefits Realized. We recognize the difference between the face value of the contract benefits and carrying value when an insured’s mortality event occurs. We generally collect the face value of the life insurance contract benefit from the insurance company within 45 days of recognizing the revenue.

         Change in Fair Value of Life Insurance Contracts. We value our portfolio investments for each reporting period in accordance with the fair value principles discussed herein, which includes the expected payment of premiums for future periods as shown in our consolidated financial statements net premium costs.

         Sale of a Life Insurance Contract. In the event of a sale of a contract, we recognize gain or loss as the difference between the sale price and the carrying value of the contract 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 contracts. These expenses include salaries and benefits, sales, marketing, occupancy and other expenditures.

4

         Interest and Dividends. 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 lender under our senior credit facilities, interest paid on our L Bonds and other outstanding indebtedness such as our Series I Secured Notes, and dividends on our Series A and our RPS. When we issue debt, we amortize the issuance costs associated with such indebtedness over the outstanding term of the financing, and classify it as interest expense.

Results of Operations — Three and Nine Months Ended September 30, 2016 Compared to the Same Periods in 2015

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
September 30,

 

Nine Months Ended
September 30,

 

 

2016

 

2015

 

2016

 

2015

Revenue recognized from the receipt of contract benefits

 

$

4,221,000

 

$

277,000

 

$

26,986,000

 

$

25,909,000

Revenue (expense) recognized from the change in fair value of life insurance contracts, net of premiums and carrying costs(1)

 

 

9,289,000

 

 

7,912,000

 

 

24,621,000

 

 

7,538,000

Gain on life insurance contracts, net

 

$

13,510,000

 

$

8,189,000

 

$

51,607,000

 

$

33,447,000

Number of contracts matured

 

 

4

 

 

1

 

 

16

 

 

8

The change in fair value related to new contracts acquired

 

$

11,668,000

 

$

7,423,000

 

$

29,509,000

 

$

12,546,000

____________

(1)      The discount rate applied to estimate the fair value of the portfolio of life insurance contracts we own was 11.07% as of both September 30, 2016 and September 30, 2015. The carrying value of contracts 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 (see Note 4 to our condensed consolidated financial statements).

Expenses.

 

 

Three Months Ended September 30,

 

Nine Months Ended September 30,

 

 

2016

 

2015

 

Increase (Decrease)

 

2016

 

2015

 

Increase

Employee compensation and benefits(1)

 

$

2,912,000

 

$

2,308,000

 

$

604,000

 

 

$

8,450,000

 

$

6,181,000

 

$

2,269,000

Interest expense (including amortization of deferred financing costs and preferred stock dividends)(2)

 

 

11,984,000

 

 

8,650,000

 

 

3,334,000

 

 

 

32,010,000

 

 

23,149,000

 

 

8,861,000

Legal and professional expenses(3)

 

 

587,000

 

 

822,000

 

 

(235,000

)

 

 

3,097,000

 

 

1,988,000

 

 

1,109,000

Other expenses(4)

 

 

2,863,000

 

 

2,232,000

 

 

631,000

 

 

 

7,608,000

 

 

5,646,000

 

 

1,962,000

Total expenses

 

$

18,346,000

 

$

14,012,000

 

$

4,334,000

 

 

$

51,165,000

 

$

36,964,000

 

$

14,201,000

____________

(1)      We hired additional members to our sales, marketing, legal and information technology teams. At the end of 2015 we employed approximately 50 employees, and at September 30, 2016 we employed approximately 67 employees.

(2)      The increase in the current period was due to the increase in our average debt outstanding.

(3)      Increase is due to SEC filings and other costs related to securities offerings and on-going compliance.

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

5

Income Tax Expense.

The following table reconciles our income tax expense at the statutory federal tax rate to our actual income tax expense:

 

 

Three Months Ended

 

Nine Months Ended

 

 

September 30,
2016

 

September 30,
2015

 

September 30,
2016

 

September 30,
2015

Statutory federal income tax (benefit)

 

$

(1,561,000

)

 

34.0

%

 

$

(1,948,000

)

 

34.0

%

 

$

489,000

 

34.0

%

 

$

1,117,000

 

 

34.0

%

State income taxes (benefit), net of federal benefit

 

 

(227,000

)

 

4.9

%

 

 

(334,000

)

 

5.8

%

 

 

240,000

 

16.7

%

 

 

(105,000

)

 

3.2

%

Series A preferred stock dividends

 

 

354,000

 

 

(7.7

)%

 

 

175,000

 

 

(3.1

)%

 

 

732,000

 

51.0

%

 

 

526,000

 

 

16.0

%

Other permanent differences

 

 

15,000

 

 

(0.3

)%

 

 

9,000

 

 

(0.1

)%

 

 

18,000

 

1.3

%

 

 

31,000

 

 

1.0

%

Total income tax expense (benefit)

 

$

(1,419,000

)

 

30.9

%

 

$

(2,098,000

)

 

36.6

%

 

$

1,479,000

 

102.9

%

 

$

665,000

 

 

20.2

%

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 contracts and revenue recognition with respect to the fair value of life insurance portfolio.

The primary permanent difference between our effective tax rate and the statutory federal rate are the accrual of preferred stock dividend expense, state income taxes, and other non-deductible expenses. The dividends charged to interest expense were $1.0 million and $0.5 million during the three months ended September 30, 2016 and 2015, respectively, and $2.2 million and $1.5 million during the nine months ended September 30, 2016 and 2015, respectively.

Liquidity and Capital Resources

We finance our business through a combination of life insurance contract 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 contract acquisition, contract servicing, and portfolio-related financing expenditures including paying principal and interest.

As of September 30, 2016 and December 31, 2015, we had approximately $117.2 million and $74.4 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 contracts, paying premiums on existing contracts, paying portfolio servicing expenses, and paying principal and interest on our outstanding financing obligations.

Debt Financings Summary

We had the following outstanding debt balances as of September 30, 2016 and December 31, 2015:

 

 

As of September 30, 2016

 

As of December 31, 2015

Issuer/Borrower

 

Principal
Amount
Outstanding

 

Weighted
Average Interest
Rate

 

Principal
Amount
Outstanding

 

Weighted
Average Interest
Rate

GWG Holdings, Inc. – L Bonds

 

$

384,586,000

 

7.16

%

 

$

282,171,000

 

7.18

%

GWG Life, LLC – Series I Secured Notes

 

 

17,830,000

 

8.63

%

 

 

23,578,000

 

8.47

%

Credit Facility – Autobahn Funding Company LLC (See Note 5 to our consolidated financial statements)

 

 

 

 

 

 

65,011,000

 

5.58

%

Credit Facility – LNV Corporation (See Note 6 to our consolidated financial statements)

 

 

71,250,000

 

6.45

%

 

 

 

 

Total

 

$

473,666,000

 

7.10

%

 

$

370,760,000

 

6.98

%

Our total senior credit facilities and other indebtedness balance as of September 30, 2016 and December 31, 2015 was $473.7 million and $370.8 million, respectively. At September 30, 2016, the total outstanding face amount of our Series I Secured Notes outstanding was $17.8 million, less unamortized selling costs of $0.3 million, resulting in a carrying amount of $17.5 million. At December 31, 2015, the total outstanding face amount of our Series I

6

Secured Notes outstanding was $23.6 million, less unamortized selling costs of $0.3 million, resulting in a carrying amount of $23.3 million. At September 30, 2016, the total outstanding face amount of L Bonds was $384.6 million plus $6.9 million of subscriptions in process, less unamortized selling costs of $11.6 million resulting in a carrying amount of $379.9 million. At December 31, 2015, the total outstanding face amount of L Bonds was $282.2 million plus $3.0 million of subscriptions in process, less unamortized selling costs of $8.2 million resulting in a carrying amount of $277.0 million.

The weighted-average interest rate of our outstanding Series I Secured Notes as of September 30, 2016 and December 31, 2015 was 8.63% and 8.47%, respectively, and the weighted-average maturity at those dates was 1.31 and 1.06 years, respectively. The Series I Secured Notes have renewal features. Since we first issued our Series I Secured Notes, we experienced $165.1 million in maturities, of which $125.0 million renewed for an additional term as of September 30, 2016. This provided us with an aggregate renewal rate of approximately 76% for investments in these securities. 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 September 30, 2016 and December 31, 2015 was 7.16% and 7.18%, respectively, and the weighted-average maturity at those dates was 2.10 and 2.02 years, respectively. Our L Bonds have renewal features. As of September 30, 2016, $252.4 million in aggregate principal amount of our L Bonds had matured since issuance, of which $168.3 million renewed for an additional term. The aggregate renewal rate is approximately 67% for investments in these securities.

Future contractual maturities of Series I Secured Notes and L Bonds at December 31, 2016 are:

Years Ending December 31,

 

Series I
Secured Notes

 

L Bonds

 

Total

2016

 

$

1,177,000

 

$

23,548,000

 

$

24,725,000

2017

 

 

10,522,000

 

 

112,987,000

 

 

123,509,000

2018

 

 

2,401,000

 

 

101,130,000

 

 

103,531,000

2019

 

 

1,023,000

 

 

78,098,000

 

 

79,121,000

2020

 

 

1,766,000

 

 

19,291,000

 

 

21,057,000

Thereafter

 

 

941,000

 

 

49,532,000

 

 

50,473,000

 

 

$

17,830,000

 

$

384,586,000

 

$

402,416,000

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 to our consolidated financial statements).

We maintain a $105 million revolving senior credit facility with Autobahn/DZ Bank through DLP III. The revolving senior credit facility is used to pay the premium expenses related to our portfolio of life insurance contracts. As of September 30, 2016 and December 31, 2015, we had approximately $0 million and $65.0 million, respectively, outstanding under the revolving senior credit facility, and maintained an available borrowing base surplus of $76.6 million and $40.0 million, respectively.

On September 14, 2016, we entered into a $172 million senior secured term loan with LNV Corp. through GWG Funding DLP IV. We intend to use the proceeds from this facility primarily to grow and maintain our portfolio of life insurance contracts, for liquidity and for general corporate purposes. As of September 30, 2016 we had approximately $71.2 million outstanding under the senior credit facility.

Capital expenditures have historically not been material and we do not anticipate making material capital expenditures in 2016 or beyond.

Corporate Financing History

In November 2009, our wholly owned subsidiary GWG Life offered Series I Secured Notes in a private placement to accredited investors only. This offering was closed in November 2011. As of September 30, 2016 and December 31, 2015, we had approximately $17.8 million and $23.6 million, respectively, in principal amount of Series I Secured Notes outstanding.

7

In September 2011, we concluded a private placement offering of Series A, 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 September 30, 2016 and December 31, 2015, respectively, we had approximately $19.8 million and $20.8 million stated value of Series A outstanding.

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.

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 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 offering to our earlier $250.0 million public debt offering. Through September 30, 2016, the total amount of these L Bonds sold, including renewals, was $637.1 million. As of September 30, 2016 and December 31, 2015, respectively, we had approximately $384.6 million and $282.2 million, respectively, 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 September 30, 2016 we had issued approximately $33.2 million stated value of RPS.

Portfolio Assets and Secured Indebtedness

At September 30, 2016, the fair value of our investments in life insurance contracts of $477.6 million plus our cash balance of $18.8 million, our restricted cash balance of $15.7 million and our life insurance contract benefits receivable of $6.1 million, totaled $518.2 million, representing an excess of portfolio assets over secured indebtedness of $44.5 million. At December 31, 2015, the fair value of our investments in life insurance contracts of $356.6 million plus our cash balance of $34.4 million and our restricted cash balance of $2.3 million, totaled $393.3 million, representing an excess of portfolio assets over secured indebtedness of $22.5 million. 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.

The following forward-looking table seeks to illustrate the impact of the sale of our portfolio of life insurance assets at various discount rates in order to satisfy our debt obligations as of September 30, 2016. 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 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.

Portfolio Discount Rate

 

10%

 

11%

 

12%

 

13%

 

14%

Value of portfolio

 

$

503,331,000

 

$

479,200,000

 

$

456,979,000

 

$

436,470,000

 

$

417,501,000

 

Cash, cash equivalents and life insurance contract benefits receivable

 

 

40,591,000

 

 

40,591,000

 

 

40,591,000

 

 

40,591,000

 

 

40,591,000

 

Total assets

 

 

543,922,000

 

 

519,791,000

 

 

497,570,000

 

 

477,061,000

 

 

458,092,000

 

Revolving senior credit facility

 

 

71,250,000

 

 

71,250,000

 

 

71,250,000

 

 

71,250,000

 

 

71,250,000

 

Net after revolving senior credit facility

 

 

472,672,000

 

 

448,541,000

 

 

426,320,000

 

 

405,811,000

 

 

386,842,000

 

Series I Secured Notes and L Bonds

 

 

402,416,000

 

 

402,416,000

 

 

402,416,000

 

 

402,416,000

 

 

402,416,000

 

Net after Series I Secured Notes and
L Bonds

 

 

70,256,000

 

 

46,125,000

 

 

23,904,000

 

 

3,395,000

 

 

(15,574,000

)

Impairment to Series I Secured Notes and L Bonds

 

 

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 of our life insurance assets at a price equivalent to a discount rate of approximately 13.18% or higher. At December 31, 2015, the impairment occurred at a discount rate of approximately 12.58% or higher. The discount rates used to calculate the fair value of our portfolio were 11.07% and 11.09% as of September 30, 2016 and December 31, 2015, 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

8

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. You should read the above table in conjunction with the information contained in other sections of this report, 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 significant assumptions made by, and information currently available to, our management.

Cash Flows

The payment of premiums and servicing costs to maintain life insurance contracts represents our most significant requirement for cash disbursement. When a contract is purchased, we are able to calculate the minimum premium payments required to maintain the contract in-force. As the insured ages, premium payments increase (see Note 3 to our consolidated financial statements). Nevertheless, the probability of actually needing to pay the premiums decreases as the probability of mortality increases. These scheduled premiums and associated probabilities are factored into our expected internal rate of return and cash-flow modeling. Beyond premiums, we incur contract 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 calculations. Until we receive a stable amount of proceeds from the contract 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 RPS.

The amount of payments for anticipated premiums and servicing costs (excluding debt 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

Three months ending December 31, 2016

 

$

10,449,000

 

$

188,000

 

$

10,637,000

2017

 

 

43,155,000

 

 

750,000

 

 

43,905,000

2018

 

 

46,847,000

 

 

750,000

 

 

47,597,000

2019

 

 

50,813,000

 

 

750,000

 

 

51,563,000

2020

 

 

56,633,000

 

 

750,000

 

 

57,383,000

2021

 

 

63,222,000

 

 

750,000

 

 

63,972,000

 

 

$

271,119,000

 

$

3,938,000

 

$

275,057,000

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

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, 2013

 

740,648,000

 

16,600,000

 

21,733,000

 

76.4

%

March 31, 2014

 

771,940,000

 

12,600,000

 

21,930,000

 

57.5

%

June 30, 2014

 

784,652,000

 

6,300,000

 

22,598,000

 

27.9

%

September 30, 2014

 

787,964,000

 

4,300,000

 

23,121,000

 

18.6

%

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

 

193.6

%

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

%

9

We believe that the portfolio cash flow results set forth above are consistent with our general investment thesis: that the life insurance contract 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 results 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 contracts. As our receipt of life insurance contract benefits increases, we expect to increasingly use these cash flows to begin paying down our outstanding indebtedness and purchase additional life insurance contracts.

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

GWG Holdings is party to an office lease with U.S. Bank National Association as the landlord. Effective September 1, 2015, GWG Holdings entered into a second amendment to the lease with U.S. Bank National Association (Second Amendment to Lease). The Second Amendment to Lease increases the office space area to 17,687 square feet and extends the lease expiration date by approximately ten years (see Note 16 to our consolidated financial statements).

Credit Risk

We review the credit risk associated with our portfolio of life insurance contracts when estimating its fair value. In evaluating the contracts’ 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 contracts by generally purchasing life insurance contracts issued only from companies with an investment-grade credit rating by Standard & Poor’s, Moody’s, or A.M. Best Company. See “Portfolio Credit Risk Management” below.

Interest Rate Risk

Our senior credit facilities are floating-rate financing. In addition, our ability to offer interest rates that attract capital (including in our continuous offering of L Bonds) is generally impacted by prevailing interest rates. Furthermore, while our other indebtedness provides us with fixed-rate financing, our debt coverage ratio is calculated in relation to our total cost of financing. Therefore, rising interest rates could materially impact our business by increasing our borrowing costs, and reducing availability under our debt financing arrangements. Furthermore, we calculate our portfolio earnings based upon the spread generated between the return on our life insurance portfolio and the 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 contracts.

Non-GAAP Financial Measures

Non-GAAP financial measures disclosed by 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. Please see our financial statements and related notes contained herein.

We use non-GAAP financial measures for maintaining compliance with covenants contained in our borrowing agreements and for planning and forecasting purposes. The application of current GAAP standards during a period of significant growth in our business, in which period we are building a large and actuarially diverse portfolio of life insurance, results in current period operating performance that may not be reflective of our long-term earnings potential. Management believes that our non-GAAP financial measures permit investors to better focus on this long-term earnings performance without regard to the volatility in GAAP financial results that can occur during this phase of growth.

10

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 contracts 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 contracts according to a mortality table as the insureds’ age increases. By comparing the actuarial gain accruing within our portfolio of life insurance contracts against our adjusted costs during the same period, we can estimate, manage and evaluate the overall financial profitability of our business without regard to mark-to-market volatility. We use this information to balance our life insurance contract 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 could have a disproportionately positive or negative impact on GAAP results in any particular 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 above, without regard to GAAP-based fair value measures. In addition, our revolving 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 contracts and (ii) the weighted average of our senior credit facility’s interest rate. These calculations are made using non-GAAP measures in the method described below, without regard to GAAP-based fair value measures.

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 contracts is 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.

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

 

 

Three Months Ended
September 30,

 

Nine Months Ended
September 30,

 

 

2016

 

2015

 

2016

 

2015

GAAP net income (loss)

 

$

(2,997,000

)

 

$

(3,631,000

)

 

$

(42,000

)

 

$

(2,620,000

)

Unrealized fair value gain(1)

 

 

(21,073,000

)

 

 

(14,517,000

)

 

 

(53,846,000

)

 

 

(26,651,000

)

Adjusted cost basis increase(2)

 

 

19,948,000

 

 

 

13,345,000

 

 

 

51,689,000

 

 

 

37,988,000

 

Accrual of unrealized actuarial gain(3)

 

 

11,769,000

 

 

 

9,201,000

 

 

 

29,339,000

 

 

 

21,417,000

 

Total adjusted non-GAAP net income(4)

 

$

7,647,000

 

 

$

4,398,000

 

 

$

27,140,000

 

 

$

30,134,000

 

____________

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

(2)      Adjusted cost basis is increased to include interest, premiums and servicing fees which are not capitalized under GAAP (non-GAAP cost basis).

(3)      Accrual of actuarial gain at expected internal rate of return based on the non-GAAP cost basis for the period.

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

11

Adjusted Non-GAAP Tangible Net Worth. Our revolving 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. We calculate the adjusted tangible net worth by recognizing the actuarial gain accruing within our life insurance contracts at the expected internal rate of return of the contracts we own without regard to fair value. We net this actuarial gain against our adjusted costs during the same period to calculate our tangible net worth on a non-GAAP basis.

 

 

As of
September 31,
2016

 

As of
December 31, 2015

GAAP net worth

 

$

46,345,000

 

 

$

16,145,000

 

Less intangible assets(1)

 

 

(20,320,000

)

 

 

(11,562,000

)

GAAP tangible net worth

 

 

26,025,000

 

 

 

4,583,000

 

Unrealized fair value gain(2)

 

 

(247,889,000

)

 

 

(194,043,000

)

Adjusted cost basis increase(3)

 

 

230,532,000

 

 

 

190,645,000

 

Accrual of unrealized actuarial gain(4)

 

 

140,693,000

 

 

 

111,355,000

 

Total adjusted non-GAAP tangible net worth

 

$

149,361,000

 

 

$

112,540,000

 

____________

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

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

(3)      Adjusted cost basis is increased to include interest, premiums and servicing fees, which are not capitalized under GAAP.

(4)      Accrual of cumulative actuarial gain at expected internal rate of return based the non-GAAP cost basis.

Excess Spread. Our revolving senior credit facility with Autobahn/DZ Bank requires us to maintain a 2.00% “excess spread” between our weighted-average expected internal rate of return of our portfolio of life insurance contracts and the revolving senior credit facility’s interest rate. The expected internal rate of return on the portfolio is the rate of return the portfolio would earn if all future cash flows occurred over time in proportion to the likelihood of their projected occurrence. Expected future cash flows represent the size of each potential payment (premiums and contract benefits), multiplied by the probability of that particular payment occurring. This calculation is known as the “probabilistic expectation” and it is based on actuarial estimations of life expectancy. For instance, a required premium payment of $10,000 might be projected for a given contract at a date five years from now. If there is a 50% chance of survival for the next five years, then that particular expected cash-outflow is calculated at $5,000. Similarly, if the contract benefit amount on the same contract is $1 million, then during the next five years, the probable expected cash-inflow of contract benefits will total $500,000 with the other $500,000 projected to occur over the remaining life of the insured. The rate of return generated by the net of all such future expected cash flows for the portfolio is thus the expected IRR for the portfolio.

A presentation of our excess spread and our total excess spread is set forth below. Management uses the “total excess spread” to gauge expected profitability of our investments, and uses the “excess spread” to monitor compliance with our borrowing.

 

 

As of
September 30,
2016

 

As of
December 31,
2015

Weighted-average expected IRR(1)

 

11.65

%

 

11.11

%

Weighted-average senior credit facility interest rate(2)

 

6.45

%

 

5.58

%

Excess spread

 

5.20

%

 

5.53

%

Total weighted-average interest rate on indebtedness for borrowed money(3)

 

7.10

%

 

6.98

%

Total excess spread(4)

 

4.55

%

 

4.13

%

____________

(1)      This represents the weighted-average expected internal rate of return of the life insurance contracts as of the measurement date based upon our non-GAAP cost basis of the insurance contracts and the expected cash flows from the life insurance portfolio.

12

Investment Cost Basis

 

As of
September 30,
2016

 

As of
December 31,
2015

GAAP fair value

 

$

477,585,000

 

 

$

356,650,000

 

Unrealized fair value gain(A)

 

 

(247,889,000

)

 

 

(194,043,000

)

Adjusted cost basis increase(B)

 

 

230,532,000

 

 

 

190,645,000

 

Investment cost basis(C)

 

$

460,228,000

 

 

$

353,252,000

 

____________

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

(B)     Adjusted cost basis is increased to include interest, premiums and servicing fees which are not capitalized under GAAP.

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

(2)      This is the weighted-average interest rate for both senior credit facilities as of the measurement date.

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

Indebtedness

 

As of
September 30,
2016

 

As of
December 31,
2015

Senior credit facilities

 

$

71,250,000

 

$

65,011,000

Series I Secured Notes

 

 

17,830,000

 

 

23,578,000

L Bonds

 

 

384,586,000

 

 

282,171,000

Total

 

$

473,666,000

 

$

370,760,000

 

Interest Rates on Indebtedness

 

 

 

 

Senior credit facilities

 

6.45

%

 

5.58

%

Series I Secured Notes

 

8.63

%

 

8.47

%

L Bonds

 

7.16

%

 

7.18

%

Weighted-average interest rates paid on indebtedness

 

7.10

%

 

6.98

%

 (4)    Calculated as the weighted-average expected IRR (1) minus the weighted-average interest rate on interest-bearing indebtedness (3).

Debt Coverage Ratio and Subordination 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 and cash equivalents and the net present value of the life insurance portfolio. The “subordination ratio” for our L Bonds is calculated by dividing the total interest-bearing indebtedness that is senior to L Bonds and Series I Secured Notes by the sum of the company’s cash and cash equivalents and the net present value of the life insurance portfolio. The “subordination ratio” must be less than 50%. For purposes of both ratio calculations, the net present value of the life insurance portfolio is calculated using a discount rate equal to the weighted average interest rate paid on all indebtedness. As of the date of this report, the subordination ratio provisions under the Indenture have expired.

 

 

As of
September 30,
2016

 

As of
December 31,
2015

Life insurance portfolio contract benefits

 

$

1,272,078,000

 

 

$

944,844,000

 

Discount rate of future cash flows

 

 

7.10

%

 

 

6.98

%

Net present value of Life insurance portfolio contract benefits

 

$

586,332,000

 

 

$

435,738,000

 

Cash and cash equivalents

 

 

34,462,000

 

 

 

36,767,000

 

Life insurance contract benefits receivable

 

 

6,129,000

 

 

 

 

Total Coverage

 

 

626,923,000

 

 

 

472,505,000

 

 

 

 

 

 

Senior credit facilities

 

 

71,250,000

 

 

 

65,011,000

 

Series I Secured Notes

 

 

17,830,000

 

 

 

23,578,000

 

L Bonds

 

 

384,586,000

 

 

 

282,171,000

 

Total Indebtedness

 

$

473,666,000

 

 

$

370,760,000

 

 

 

 

 

 

 

 

 

 

Debt Coverage Ratio

 

 

75.55

%

 

 

78.47

%

Subordination Ratio

 

 

11.36

%

 

 

13.76

%

13

As of September 30, 2016, we were in compliance with both the debt coverage ratio and the subordination ratio.

Non-GAAP Expected Portfolio Internal Rate of Return at Purchase. The non-GAAP expected portfolio internal rate of return (IRR) at purchase is calculated as the weighted average (by face amount of contract benefits) of the IRR expected at the time of purchase for all life insurance contracts in the portfolio. This non-GAAP measure isolates our IRR expectation at purchase and utilizes our underwriting life expectancy assumptions at the time. This measure does not change with the passage of time as compared to our non-GAAP 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 portfolio IRR.

 

 

As of
September 30,
2016

 

As of
December 31,
2015

Life insurance portfolio contract benefits

 

$

1,272,078,000

 

 

$

944,844,000

 

Total number of polices

 

 

625

 

 

 

396

 

 

 

 

 

 

Non-GAAP Expected Portfolio Internal Rate of Return at Purchase

 

 

15.70

%

 

 

15.71

%

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 contracts, owned by our subsidiaries as of September 30, 2016, is summarized below:

Life Insurance Portfolio Summary

Total portfolio face value of contract benefits

 

$

1,272,078,000

 

Average face value per contract

 

$

2,035,000

 

Average face value per insured life

 

$

2,263,000

 

Weighted average age of insured (yrs.)*

 

 

81.8

 

Weighted average life expectancy estimate (yrs.)*

 

 

6.8

 

Total number of contracts

 

 

625

 

Number of unique lives

 

 

562

 

Demographics

 

 

73% Males; 27% Females

 

Number of smokers

 

 

24

 

Largest contract as % of total portfolio

 

 

0.79

%

Average contract as % of total portfolio

 

 

0.16

%

Average annual premium as % of face value

 

 

3.33

%

____________

* Averages presented in the table are weighted averages.

14

Our portfolio of life insurance contracts, owned by our wholly owned subsidiaries as of September 30, 2016, organized by the insured’s current age and the associated number of contracts and contract benefits, is summarized below:

Distribution of Contracts and Contract Benefits by Current Age of Insured

 

 

 

 

 

 

 

 

Wtd. Avg. Life

 

Percentage of Total

Min Age

 

Max Age

 

Contracts

 

Contract
Benefits

 

Expectancy
(yrs.)

 

Number of Contracts

 

Contract Benefits

90

 

96

 

55

 

$

105,815,000

 

2.4

 

8.8

%

 

8.3

%

85

 

89

 

155

 

$

331,989,000

 

4.8

 

24.8

%

 

26.1

%

80

 

84

 

152

 

$

385,904,000

 

6.7

 

24.3

%

 

30.3

%

75

 

79

 

115

 

$

251,466,000

 

9.2

 

18.4

%

 

19.8

%

70

 

74

 

87

 

$

120,791,000

 

9.8

 

13.9

%

 

9.5

%

65

 

69

 

61

 

$

76,113,000

 

10.1

 

9.8

%

 

6.0

%

Total

 

 

 

625

 

$

1,272,078,000

 

6.8

 

100.0

%

 

100.0

%

Our portfolio of life insurance contracts, owned by our wholly owned subsidiaries as of September 30, 2016, organized by the insured’s estimated life expectancy estimates and associated contract benefits, is summarized below:

Distribution of Contracts by Current Life Expectancies of Insured

 

 

 

 

 

 

 

 

Percentage of Total

Min LE
(Months)

 

Max LE (Months)

 

Contracts

 

Contract Benefits

 

Number of
Contracts

 

Contract
Benefits

6

 

47

 

160

 

$

275,036,000

 

25.6

%

 

21.6

%

48

 

71

 

145

 

 

300,501,000

 

23.2

%

 

23.6

%

72

 

95

 

112

 

 

249,118,000

 

17.9

%

 

19.6

%

96

 

119

 

97

 

 

223,012,000

 

15.5

%

 

17.6

%

120

 

143

 

63

 

 

134,822,000

 

10.1

%

 

10.6

%

144

 

202

 

48

 

 

89,589,000

 

7.7

%

 

7.0

%

Total

 

 

 

625

 

$

1,272,078,000

 

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 disease 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 disease 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 only primary disease category within our portfolio that represents a concentration of over 10% is cardiovascular, which constitutes 21.25% of the value of our portfolio.

Portfolio Credit Risk Management

We rely on the payment of life insurance contract benefit claims by life insurance companies as our most significant source of cash flow. The life insurance assets we own represent obligations of third-party life insurance companies to pay face value of the life insurance contract benefits. As a result, we manage this credit risk exposure by generally purchasing contracts issued by insurance companies with investment-grade ratings from Standard & Poor’s, and diversifying our portfolio among a number of insurance companies.

15

As of September 30, 2016, 97.0% of our life insurance contracts, by face value benefits, were issued by insurance companies that maintained an investment-grade rating (BBB- or better) by Standard & Poor’s. Our largest life insurance company credit exposures and their respective Standard & Poor’s credit rating of their respective financial strength and claims paying ability is set forth below:

Rank

 

Contract Benefits

 

Percentage of
Contract
Benefit
Amount

 

Insurance Company

 

Ins. Co. S&P Rating

1

 

$

182,494,000

 

14.3

%

 

AXA Equitable Life Insurance Company

 

A+

2

 

$

165,255,000

 

13.0

%

 

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

 

AA-

3

 

$

145,721,000

 

11.5

%

 

Lincoln National Life Insurance Company

 

AA-

4

 

$

129,116,000

 

10.1

%

 

Transamerica Life Insurance Company

 

AA-

5

 

$

89,806,000

 

7.1

%

 

Metropolitan Life Insurance Company

 

A+

6

 

$

57,250,000

 

4.5

%

 

Massachusetts Mutual Life Insurance Company

 

AA+

7

 

$

50,975,000

 

4.0

%

 

American General Life Insurance Company

 

A+

8

 

$

48,095,000

 

3.8

%

 

Pacific Life Insurance Company

 

A+

9

 

$

45,300,000

 

3.6

%

 

Reliastar Life Insurance Company

 

A

10

 

$

44,990,000

 

3.5

%

 

West Coast Life Insurance Company

 

AA-

 

 

 

959,002,000

 

75.4

%

 

 

 

 

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 track the yields on certain publicly traded life insurance company bonds as this information is part of the data we consider when valuing our portfolio of life insurance contracts for our financial statements according to GAAP. Also we believe that these yields provide investors a market-based perspective on the financial strength of the largest life insurance companies backing our portfolio.

Name of Bond

 

Maturity

 

YTM

 

Duration
(Years)

 

Bond S&P Rating

AXA 7.125%

 

12/15/2020

 

1.54

%

 

4.2

 

BBB

Manulife Finl 4.15%

 

3/4/2026

 

2.83

%

 

9.4

 

A

Lincoln National Corp Ind 3.35%

 

3/9/2025

 

3.05

%

 

8.7

 

A-

Amer Intl Grp 4.875%

 

6/1/2022

 

2.48

%

 

5.7

 

A-

Protective Life 7.375%

 

10/15/2019

 

2.18

%

 

3.0

 

A-

Metro Life Gbl Fd1 4.75%

 

9/17/2021

 

3.01

%

 

5.0

 

AA-

Prudential Finl Inc Mtns Book 4.5%

 

5/15/2024

 

2.97

%

 

7.9

 

A

Average yield on insurance bonds

 

 

 

2.58

%

 

6.3

 

 

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 our life insurance portfolio. The average yield to maturity of these bonds was 3.02%, which, we believe, reflects in part the financial market’s judgement 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 contract benefits is senior in rank to any other obligation. 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. As such, as long as the respective premium payments have been made, it is highly likely that the owner of the life insurance contract will collect the insurance contract benefit upon the mortality of the insured.

16

The complete detail of our portfolio of life insurance contracts, owned by our wholly owned subsidiaries as of September 30, 2016, organized by the current age of the insured and the associated contract 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 September 30, 2016)

 

 

Face
Amount

 

Gender

 

Age
(ALB)(1)

 

LE
(mo.)(2)

 

Insurance Company

 

S&P
Rating

1

 

$

1,100,000

 

Male

 

96

 

17

 

Reliastar Life Insurance Company

 

A

2

 

$

184,000

 

Male

 

95

 

38

 

Reliastar Life Insurance Company

 

A

3

 

$

219,000

 

Male

 

95

 

38

 

Reliastar Life Insurance Company

 

A

4

 

$

8,000,000

 

Female

 

95

 

14

 

Massachusetts Mutual Life Insurance Company

 

AA+

5

 

$

4,000,000

 

Male

 

95

 

25

 

Metropolitan Life Insurance Company

 

A+

6

 

$

1,500,000

 

Female

 

95

 

24

 

Accordia Life and Annuity Company

 

A-

7

 

$

3,200,000

 

Male

 

95

 

15

 

West Coast Life Insurance Company

 

AA-

8

 

$

1,000,000

 

Female

 

94

 

22

 

Transamerica Life Insurance Company

 

AA-

9

 

$

250,000

 

Male

 

94

 

23

 

North American Company for Life and Health Insurance

 

A+

10

 

$

264,000

 

Female

 

94

 

11

 

Lincoln Benefit Life Company

 

BBB+

11

 

$

125,000

 

Female

 

94

 

6

 

Lincoln National Life Insurance Company

 

AA-

12

 

$

3,500,000

 

Male

 

93

 

29

 

Reliastar Life Insurance Company

 

A

13

 

$

500,000

 

Male

 

93

 

7

 

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

 

AA-

14

 

$

2,000,000

 

Female

 

93

 

7

 

Pruco Life Insurance Company

 

AA-

15

 

$

500,000

 

Female

 

93

 

41

 

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

 

AA-

16

 

$

250,000

 

Male

 

93

 

7

 

Transamerica Life Insurance Company

 

AA-

17

 

$

1,682,773

 

Female

 

92

 

40

 

Hartford Life and Annuity Insurance Company

 

BBB+

18

 

$

572,429

 

Female

 

92

 

26

 

Reliastar Life Insurance Company

 

A

19

 

$

3,000,000

 

Male

 

92

 

31

 

West Coast Life Insurance Company

 

AA-

20

 

$

500,000

 

Female

 

92

 

55

 

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

 

AA-

21

 

$

5,000,000

 

Female

 

92

 

43

 

American General Life Insurance Company

 

A+

22

 

$

400,000

 

Female

 

92

 

59

 

Principal Life Insurance Company

 

A+

23

 

$

5,000,000

 

Female

 

92

 

23

 

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

 

AA-

24

 

$

1,000,000

 

Female

 

92

 

26

 

Lincoln National Life Insurance Company

 

AA-

25

 

$

300,000

 

Female

 

92

 

17

 

West Coast Life Insurance Company

 

AA-

26

 

$

3,845,000

 

Female

 

92

 

36

 

Pacific Life Insurance Company

 

A+

27

 

$

500,000

 

Male

 

91

 

40

 

Massachusetts Mutual Life Insurance Company

 

AA+

28

 

$

5,000,000

 

Male

 

91

 

23

 

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

 

AA-

29

 

$

500,000

 

Female

 

91

 

15

 

Lincoln National Life Insurance Company

 

AA-

30

 

$

3,500,000

 

Female

 

91

 

62

 

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

 

AA-

31

 

$

3,100,000

 

Female

 

91

 

25

 

Lincoln Benefit Life Company

 

BBB+

32

 

$

1,500,000

 

Female

 

91

 

54

 

Lincoln National Life Insurance Company

 

AA-

33

 

$

3,000,000

 

Female

 

91

 

25

 

Lincoln National Life Insurance Company

 

AA-

34

 

$

5,000,000

 

Female

 

91

 

31

 

Reliastar Life Insurance Company

 

A

35

 

$

5,000,000

 

Female

 

91

 

12

 

Lincoln National Life Insurance Company

 

AA-

36

 

$

500,000

 

Male

 

91

 

41

 

Reliastar Life Insurance Company

 

A

37

 

$

1,000,000

 

Male

 

91

 

7

 

Voya Retirement Insurance and Annuity Company

 

A

38

 

$

1,203,520

 

Male

 

91

 

33

 

Columbus Life Insurance Company

 

AA

39

 

$

1,350,000

 

Female

 

91

 

27

 

Lincoln National Life Insurance Company

 

AA-

40

 

$

600,000

 

Female

 

91

 

15

 

Columbus Life Insurance Company

 

AA

41

 

$

5,000,000

 

Female

 

90

 

38

 

Massachusetts Mutual Life Insurance Company

 

AA+

42

 

$

2,500,000

 

Female

 

90

 

38

 

American General Life Insurance Company

 

A+

43

 

$

2,500,000

 

Male

 

90

 

45

 

Pacific Life Insurance Company

 

A+

44

 

$

1,000,000

 

Female

 

90

 

40

 

United of Omaha Life Insurance Company

 

AA-

17

 

 

Face
Amount

 

Gender

 

Age
(ALB)(1)

 

LE
(mo.)(2)

 

Insurance Company

 

S&P
Rating

45

 

$

375,000

 

Male

 

90

 

33

 

Lincoln National Life Insurance Company

 

AA-

46

 

$

1,103,922

 

Female

 

90

 

51

 

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

 

AA-

47

 

$

1,000,000

 

Female

 

90

 

54

 

Transamerica Life Insurance Company

 

AA-

48

 

$

250,000

 

Female

 

90

 

54

 

Transamerica Life Insurance Company

 

AA-

49

 

$

500,000

 

Female

 

90

 

34

 

Transamerica Life Insurance Company

 

AA-

50

 

$

2,500,000

 

Female

 

90

 

4

 

AXA Equitable Life Insurance Company

 

A+

51

 

$

2,500,000

 

Female

 

90

 

4

 

AXA Equitable Life Insurance Company

 

A+

52

 

$

500,000

 

Female

 

90

 

27

 

Nationwide Life and Annuity Insurance Company

 

A+

53

 

$

715,000

 

Female

 

90

 

45

 

Lincoln National Life Insurance Company

 

AA-

54

 

$

2,225,000

 

Female

 

90

 

74

 

Transamerica Life Insurance Company

 

AA-

55

 

$

3,500,000

 

Female

 

90

 

32

 

Lincoln National Life Insurance Company

 

AA-

56

 

$

1,000,000

 

Female

 

89

 

45

 

Metropolitan Life Insurance Company

 

A+

57

 

$

248,859

 

Female

 

89

 

25

 

Lincoln National Life Insurance Company

 

AA-

58

 

$

500,000

 

Female

 

89

 

57

 

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

 

AA-

59

 

$

250,000

 

Male

 

89

 

60

 

Metropolitan Life Insurance Company

 

A+

60

 

$

4,000,000

 

Female

 

89

 

61

 

Transamerica Life Insurance Company

 

AA-

61

 

$

5,000,000

 

Male

 

89

 

42

 

AXA Equitable Life Insurance Company

 

A+

62

 

$

1,200,000

 

Male

 

89

 

42

 

Massachusetts Mutual Life Insurance Company

 

AA+

63

 

$

1,200,000

 

Male

 

89

 

42

 

Massachusetts Mutual Life Insurance Company

 

AA+

64

 

$

1,050,000

 

Male

 

89

 

34

 

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

 

AA-

65

 

$

3,000,000

 

Male

 

89

 

85

 

Transamerica Life Insurance Company

 

AA-

66

 

$

1,000,000

 

Male

 

89

 

44

 

AXA Equitable Life Insurance Company

 

A+

67

 

$

500,000

 

Male

 

89

 

52

 

Lincoln National Life Insurance Company

 

AA-

68

 

$

4,785,380

 

Female

 

89

 

32

 

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

 

AA-

69

 

$

1,803,455

 

Female

 

89

 

55

 

Metropolitan Life Insurance Company

 

A+

70

 

$

1,529,270

 

Female

 

89

 

55

 

Metropolitan Life Insurance Company

 

A+

71

 

$

800,000

 

Male

 

89

 

54

 

Lincoln National Life Insurance Company

 

AA-

72

 

$

5,000,000

 

Male

 

89

 

41

 

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

 

AA-

73

 

$

500,000

 

Female

 

89

 

41

 

Transamerica Life Insurance Company

 

AA-

74

 

$

400,000

 

Female

 

89

 

41

 

Lincoln Benefit Life Company

 

BBB+

75

 

$

3,000,000

 

Female

 

89

 

70

 

Massachusetts Mutual Life Insurance Company

 

AA+

76

 

$

200,000

 

Male

 

89

 

40

 

Lincoln Benefit Life Company

 

BBB+

77

 

$

4,445,467

 

Male

 

89

 

47

 

Penn Mutual Life Insurance Company

 

A+

78

 

$

1,500,000

 

Male

 

89

 

35

 

Union Central Life Insurance Company

 

A+

79

 

$

7,500,000

 

Male

 

89

 

39

 

Lincoln National Life Insurance Company

 

AA-

80

 

$

3,600,000

 

Female

 

89

 

54

 

AXA Equitable Life Insurance Company

 

A+

81

 

$

3,000,000

 

Male

 

89

 

33

 

Lincoln National Life Insurance Company

 

AA-

82

 

$

2,000,000

 

Male

 

89

 

36

 

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

 

AA-

83

 

$

100,000

 

Female

 

89

 

46

 

American General Life Insurance Company

 

A+

84

 

$

100,000

 

Female

 

89

 

46

 

American General Life Insurance Company

 

A+

85

 

$

396,791

 

Male

 

89

 

26

 

Lincoln National Life Insurance Company

 

AA-

86

 

$

1,500,000

 

Male

 

89

 

93

 

Transamerica Life Insurance Company

 

AA-

87

 

$

1,000,000

 

Male

 

88

 

45

 

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

 

AA-

88

 

$

2,000,000

 

Male

 

88

 

45

 

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

 

AA-

89

 

$

5,000,000

 

Male

 

88

 

41

 

Lincoln National Life Insurance Company

 

AA-

90

 

$

5,000,000

 

Female

 

88

 

27

 

Transamerica Life Insurance Company

 

AA-

91

 

$

3,000,000

 

Male

 

88

 

36

 

Transamerica Life Insurance Company

 

AA-

92

 

$

1,200,000

 

Male

 

88

 

62

 

Transamerica Life Insurance Company

 

AA-

93

 

$

6,000,000

 

Female

 

88

 

46

 

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

 

AA-

18

 

 

Face
Amount

 

Gender

 

Age
(ALB)(1)

 

LE
(mo.)(2)

 

Insurance Company

 

S&P
Rating

94

 

$

250,000

 

Male

 

88

 

40

 

Wilton Reassurance Life Insurance Company

 

N/A

95

 

$

330,000

 

Male

 

88

 

60

 

AXA Equitable Life Insurance Company

 

A+

96

 

$

175,000

 

Male

 

88

 

60

 

Metropolitan Life Insurance Company

 

A+

97

 

$

335,000

 

Male

 

88

 

60

 

Metropolitan Life Insurance Company

 

A+

98

 

$

3,000,000

 

Male

 

88

 

65

 

AXA Equitable Life Insurance Company

 

A+

99

 

$

2,000,000

 

Female

 

88

 

40

 

Beneficial Life Insurance Company

 

N/A

100

 

$

250,000

 

Female

 

88

 

40

 

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

 

AA-

101

 

$

1,000,000

 

Female

 

88

 

30

 

New York Life Insurance Company

 

AA+

102

 

$

1,250,000

 

Male

 

88

 

27

 

Columbus Life Insurance Company

 

AA

103

 

$

300,000

 

Male

 

88

 

27

 

Columbus Life Insurance Company

 

AA

104

 

$

10,000,000

 

Female

 

88

 

61

 

West Coast Life Insurance Company

 

AA-

105

 

$

2,500,000

 

Male

 

88

 

37

 

Transamerica Life Insurance Company

 

AA-

106

 

$

8,500,000

 

Male

 

88

 

68

 

Massachusetts Mutual Life Insurance Company

 

AA+

107

 

$

1,000,000

 

Female

 

88

 

41

 

West Coast Life Insurance Company

 

AA-

108

 

$

2,000,000

 

Female

 

88

 

41

 

West Coast Life Insurance Company

 

AA-

109

 

$

500,000

 

Female

 

88

 

45

 

Beneficial Life Insurance Company

 

N/A

110

 

$

800,000

 

Male

 

88

 

44

 

National Western Life Insurance Company

 

A

111

 

$

1,269,017

 

Male

 

88

 

25

 

Hartford Life and Annuity Insurance Company

 

BBB+

112

 

$

5,000,000

 

Male

 

88

 

68

 

Lincoln National Life Insurance Company

 

AA-

113

 

$

4,513,823

 

Female

 

88

 

18

 

Accordia Life and Annuity Company

 

A-

114

 

$

2,000,000

 

Male

 

88

 

78

 

Security Life of Denver Insurance Company

 

A

115

 

$

2,000,000

 

Male

 

88

 

78

 

Security Life of Denver Insurance Company

 

A

116

 

$

2,000,000

 

Male

 

88

 

78

 

Security Life of Denver Insurance Company

 

A

117

 

$

309,000

 

Male

 

88

 

27

 

Transamerica Life Insurance Company

 

AA-

118

 

$

2,000,000

 

Female

 

88

 

64

 

U.S. Financial Life Insurance Company

 

A+

119

 

$

1,365,000

 

Female

 

87

 

82

 

Transamerica Life Insurance Company

 

AA-

120

 

$

1,000,000

 

Female

 

87

 

76

 

Security Life of Denver Insurance Company

 

A

121

 

$

200,000

 

Female

 

87

 

75

 

Lincoln National Life Insurance Company

 

AA-

122

 

$

1,000,000

 

Male

 

87

 

38

 

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

 

AA-

123

 

$

1,000,000

 

Male

 

87

 

29

 

Massachusetts Mutual Life Insurance Company

 

AA+

124

 

$

1,000,000

 

Female

 

87

 

19

 

State Farm Life Insurance Company

 

AA-

125

 

$

2,000,000

 

Male

 

87

 

85

 

Transamerica Life Insurance Company

 

AA-

126

 

$

209,176

 

Male

 

87

 

81

 

Lincoln National Life Insurance Company

 

AA-

127

 

$

2,328,547

 

Male

 

87

 

34

 

Metropolitan Life Insurance Company

 

A+

128

 

$

2,000,000

 

Male

 

87

 

34

 

Metropolitan Life Insurance Company

 

A+

129

 

$

1,000,000

 

Male

 

87

 

23

 

Transamerica Life Insurance Company

 

AA-

130

 

$

500,000

 

Male

 

87

 

69

 

Metropolitan Life Insurance Company

 

A+

131

 

$

750,000

 

Female

 

87

 

71

 

Lincoln National Life Insurance Company

 

AA-

132

 

$

1,500,000

 

Female

 

87

 

71

 

Lincoln National Life Insurance Company

 

AA-

133

 

$

400,000

 

Female

 

87

 

71

 

Lincoln National Life Insurance Company

 

AA-

134

 

$

1,250,000

 

Female

 

87

 

71

 

Lincoln National Life Insurance Company

 

AA-

135

 

$

2,000,000

 

Male

 

87

 

50

 

Lincoln National Life Insurance Company

 

AA-

136

 

$

3,000,000

 

Female

 

87

 

54

 

Transamerica Life Insurance Company

 

AA-

137

 

$

347,211

 

Male

 

87

 

30

 

Pruco Life Insurance Company

 

AA-

138

 

$

1,800,000

 

Male

 

87

 

41

 

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

 

AA-

139

 

$

2,000,000

 

Male

 

87

 

51

 

AXA Equitable Life Insurance Company

 

A+

140

 

$

1,750,000

 

Male

 

87

 

51

 

AXA Equitable Life Insurance Company

 

A+

141

 

$

4,000,000

 

Male

 

87

 

41

 

Metropolitan Life Insurance Company

 

A+

142

 

$

2,000,000

 

Male

 

87

 

25

 

Transamerica Life Insurance Company

 

AA-

19

 

 

Face
Amount

 

Gender

 

Age
(ALB)(1)

 

LE
(mo.)(2)

 

Insurance Company

 

S&P
Rating

143

 

$

1,425,000

 

Male

 

87

 

63

 

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

 

AA-

144

 

$

1,500,000

 

Male

 

87

 

48

 

AXA Equitable Life Insurance Company

 

A+

145

 

$

1,500,000

 

Male

 

86

 

27

 

Transamerica Life Insurance Company

 

AA-

146

 

$

1,500,000

 

Female

 

86

 

96

 

Lincoln Benefit Life Company

 

BBB+

147

 

$

3,750,000

 

Male

 

86

 

63

 

AXA Equitable Life Insurance Company

 

A+

148

 

$

2,000,000

 

Male

 

86

 

43

 

Metropolitan Life Insurance Company

 

A+

149

 

$

3,000,000

 

Male

 

86

 

43

 

Metropolitan Life Insurance Company

 

A+

150

 

$

1,000,000

 

Male

 

86

 

29

 

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

 

AA-

151

 

$

2,000,000

 

Female

 

86

 

73

 

AXA Equitable Life Insurance Company

 

A+

152

 

$

1,000,000

 

Male

 

86

 

43

 

Security Life of Denver Insurance Company

 

A

153

 

$

3,000,000

 

Female

 

86

 

71

 

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

 

AA-

154

 

$

125,000

 

Male

 

86

 

53

 

Jackson National Life Insurance Company

 

AA

155

 

$

1,500,000

 

Male

 

86

 

66

 

AXA Equitable Life Insurance Company

 

A+

156

 

$

1,000,000

 

Male

 

86

 

45

 

AXA Equitable Life Insurance Company

 

A+

157

 

$

5,000,000

 

Male

 

86

 

75

 

Security Life of Denver Insurance Company

 

A

158

 

$

1,500,000

 

Male

 

86

 

38

 

Reliastar Life Insurance Company

 

A

159

 

$

1,500,000

 

Male

 

86

 

38

 

Reliastar Life Insurance Company

 

A

160

 

$

5,000,000

 

Male

 

86

 

60

 

Security Life of Denver Insurance Company

 

A

161

 

$

500,000

 

Male

 

86

 

31

 

Genworth Life Insurance Company

 

BB

162

 

$

1,980,000

 

Male

 

86

 

40

 

New York Life Insurance Company

 

AA+

163

 

$

1,000,000

 

Male

 

86

 

36

 

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

 

AA-

164

 

$

500,000

 

Male

 

86

 

39

 

New England Life Insurance Company

 

AA-

165

 

$

4,000,000

 

Female

 

86

 

41

 

Reliastar Life Insurance Company

 

A

166

 

$

284,924

 

Male

 

86

 

51

 

Transamerica Life Insurance Company

 

AA-

167

 

$

5,000,000

 

Female

 

86

 

80

 

American General Life Insurance Company

 

A+

168

 

$

500,000

 

Female

 

86

 

25

 

Transamerica Life Insurance Company

 

AA-

169

 

$

3,500,000

 

Female

 

86

 

95

 

Lincoln Benefit Life Company

 

BBB+

170

 

$

800,000

 

Male

 

86

 

40

 

Metropolitan Life Insurance Company

 

A+

171

 

$

5,000,000

 

Female

 

85

 

88

 

AXA Equitable Life Insurance Company

 

A+

172

 

$

1,000,000

 

Female

 

85

 

71

 

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

 

AA-

173

 

$

6,000,000

 

Female

 

85

 

98

 

American General Life Insurance Company

 

A+

174

 

$

5,000,000

 

Male

 

85

 

53

 

AXA Equitable Life Insurance Company

 

A+

175

 

$

1,433,572

 

Male

 

85

 

44

 

Security Mutual Life Insurance Company of NY

 

N/A

176

 

$

2,000,000

 

Male

 

85

 

42

 

National Life Insurance Company

 

A

177

 

$

1,000,000

 

Female

 

85

 

34

 

Metropolitan Life Insurance Company

 

A+

178

 

$

2,147,816

 

Female

 

85

 

107

 

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

 

AA-

179

 

$

4,200,000

 

Female

 

85

 

105

 

Transamerica Life Insurance Company

 

AA-

180

 

$

750,000

 

Male

 

85

 

75

 

West Coast Life Insurance Company

 

AA-

181

 

$

4,000,000

 

Male

 

85

 

26

 

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

 

AA-

182

 

$

1,000,000

 

Male

 

85

 

65

 

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

 

AA-

183

 

$

2,000,000

 

Female

 

85

 

86

 

Lincoln Benefit Life Company

 

BBB+

184

 

$

2,000,000

 

Female

 

85

 

62

 

New York Life Insurance Company

 

AA+

185

 

$

5,000,000

 

Male

 

85

 

62

 

Lincoln National Life Insurance Company

 

AA-

186

 

$

2,400,000

 

Male

 

85

 

27

 

Genworth Life Insurance Company

 

BB

187

 

$

3,000,000

 

Male

 

85

 

80

 

Transamerica Life Insurance Company

 

AA-

188

 

$

8,500,000

 

Male

 

85

 

93

 

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

 

AA-

189

 

$

600,000

 

Male

 

85

 

88

 

AXA Equitable Life Insurance Company

 

A+

190

 

$

7,600,000

 

Female

 

85

 

85

 

Transamerica Life Insurance Company

 

AA-

191

 

$

250,000

 

Male

 

85

 

18

 

Midland National Life Insurance Company

 

A+

20

 

 

Face
Amount

 

Gender

 

Age
(ALB)(1)

 

LE
(mo.)(2)

 

Insurance Company

 

S&P
Rating

192

 

$

250,000

 

Male

 

85

 

41

 

Transamerica Life Insurance Company

 

AA-

193

 

$

2,500,000

 

Female

 

85

 

58

 

American General Life Insurance Company

 

A+

194

 

$

2,500,000

 

Male

 

85

 

47

 

AXA Equitable Life Insurance Company

 

A+

195

 

$

3,000,000

 

Male

 

85

 

47

 

Lincoln National Life Insurance Company

 

AA-

196

 

$

2,000,000

 

Male

 

85

 

73

 

Pacific Life Insurance Company

 

A+

197

 

$

7,600,000

 

Male

 

85

 

89

 

Transamerica Life Insurance Company

 

AA-

198

 

$

3,000,000

 

Female

 

85

 

36

 

AXA Equitable Life Insurance Company

 

A+

199

 

$

250,000

 

Male

 

85

 

68

 

Voya Retirement Insurance and Annuity Company

 

A

200

 

$

1,800,000

 

Female

 

85

 

50

 

Lincoln National Life Insurance Company

 

AA-

201

 

$

1,703,959

 

Male

 

85

 

58

 

Lincoln National Life Insurance Company

 

AA-

202

 

$

3,000,000

 

Male

 

85

 

49

 

Metropolitan Life Insurance Company

 

A+

203

 

$

500,000

 

Male

 

85

 

11

 

Great Southern Life Insurance Company

 

N/A

204

 

$

2,247,450

 

Female

 

85

 

49

 

Transamerica Life Insurance Company

 

AA-

205

 

$

1,000,000

 

Male

 

85

 

46

 

Hartford Life and Annuity Insurance Company

 

BBB+

206

 

$

400,000

 

Male

 

85

 

39

 

Transamerica Life Insurance Company

 

AA-

207

 

$

1,000,000

 

Male

 

85

 

81

 

Lincoln National Life Insurance Company

 

AA-

208

 

$

1,000,000

 

Male

 

85

 

51

 

Metropolitan Life Insurance Company

 

A+

209

 

$

3,500,000

 

Male

 

85

 

54

 

Pacific Life Insurance Company

 

A+

210

 

$

2,500,000

 

Male

 

85

 

54

 

AXA Equitable Life Insurance Company

 

A+

211

 

$

10,000,000

 

Male

 

84

 

116

 

Pacific Life Insurance Company

 

A+

212

 

$

87,677

 

Female

 

84

 

47

 

Protective Life Insurance Company

 

AA-

213

 

$

1,000,000

 

Male

 

84

 

51

 

Texas Life Insurance Company

 

N/A

214

 

$

500,000

 

Male

 

84

 

92

 

Metropolitan Life Insurance Company

 

A+

215

 

$

1,000,000

 

Male

 

84

 

57

 

Lincoln National Life Insurance Company

 

AA-

216

 

$

3,000,000

 

Male

 

84

 

30

 

U.S. Financial Life Insurance Company

 

A+

217

 

$

325,000

 

Male

 

84

 

53

 

Genworth Life and Annuity Insurance Company

 

BB

218

 

$

175,000

 

Male

 

84

 

53

 

Genworth Life and Annuity Insurance Company

 

BB

219

 

$

850,000

 

Male

 

84

 

48

 

American General Life Insurance Company

 

A+

220

 

$

600,000

 

Male

 

84

 

61

 

Massachusetts Mutual Life Insurance Company

 

AA+

221

 

$

1,900,000

 

Male

 

84

 

54

 

American National Insurance Company

 

A

222

 

$

500,000

 

Male

 

84

 

35

 

New York Life Insurance Company

 

AA+

223

 

$

500,000

 

Male

 

84

 

35

 

New York Life Insurance Company

 

AA+

224

 

$

5,000,000

 

Male

 

84

 

46

 

AXA Equitable Life Insurance Company

 

A+

225

 

$

385,000

 

Male

 

84

 

62

 

Metropolitan Life Insurance Company

 

A+

226

 

$

500,000

 

Male

 

84

 

62

 

Metropolitan Life Insurance Company

 

A+

227

 

$

75,000

 

Male

 

84

 

39

 

Fidelity and Guaranty Insurance Company

 

BBB-

228

 

$

10,000,000

 

Male

 

84

 

62

 

Lincoln National Life Insurance Company

 

AA-

229

 

$

1,500,000

 

Male

 

84

 

67

 

Lincoln National Life Insurance Company

 

AA-

230

 

$

250,000

 

Male

 

84

 

41

 

The Ohio State Life Insurance Company

 

N/A

231

 

$

3,500,000

 

Female

 

84

 

77

 

AXA Equitable Life Insurance Company

 

A+

232

 

$

1,000,000

 

Female

 

84

 

89

 

West Coast Life Insurance Company

 

AA-

233

 

$

1,000,000

 

Female

 

84

 

66

 

American General Life Insurance Company

 

A+

234

 

$

5,000,000

 

Female

 

84

 

65

 

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

 

AA-

235

 

$

3,000,000

 

Female

 

84

 

57

 

Metropolitan Life Insurance Company

 

A+

236

 

$

750,000

 

Male

 

84

 

67

 

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

 

AA-

237

 

$

4,500,000

 

Male

 

84

 

61

 

AXA Equitable Life Insurance Company

 

A+

238

 

$

1,250,000

 

Female

 

84

 

51

 

Columbus Life Insurance Company

 

AA

239

 

$

2,275,000

 

Male

 

84

 

80

 

Reliastar Life Insurance Company

 

A

240

 

$

10,000,000

 

Male

 

84

 

72

 

AXA Equitable Life Insurance Company

 

A+

21

 

 

Face
Amount

 

Gender

 

Age
(ALB)(1)

 

LE
(mo.)(2)

 

Insurance Company

 

S&P
Rating

241

 

$

340,000

 

Female

 

84

 

75

 

Jackson National Life Insurance Company

 

AA

242

 

$

2,300,000

 

Male

 

84

 

13

 

American General Life Insurance Company

 

A+

243

 

$

3,500,000

 

Male

 

84

 

60

 

AXA Equitable Life Insurance Company

 

A+

244

 

$

6,217,200

 

Female

 

84

 

94

 

Phoenix Life Insurance Company

 

B+

245

 

$

2,500,000

 

Female

 

84

 

62

 

Reliastar Life Insurance Company

 

A

246

 

$

5,000,000

 

Female

 

84

 

48

 

Massachusetts Mutual Life Insurance Company

 

AA+

247

 

$

1,275,000

 

Male

 

84

 

44

 

General American Life Insurance Company

 

A+

248

 

$

2,000,000

 

Female

 

84

 

86

 

Lincoln National Life Insurance Company

 

AA-

249

 

$

1,000,000

 

Male

 

84

 

41

 

American General Life Insurance Company

 

A+

250

 

$

750,000

 

Male

 

84

 

78

 

AXA Equitable Life Insurance Company

 

A+

251

 

$

5,000,000

 

Male

 

84

 

71

 

Lincoln National Life Insurance Company

 

AA-

252

 

$

3,000,000

 

Male

 

83

 

56

 

Protective Life Insurance Company

 

AA-

253

 

$

1,500,000

 

Male

 

83

 

56

 

American General Life Insurance Company

 

A+

254

 

$

2,000,000

 

Female

 

83

 

94

 

Transamerica Life Insurance Company

 

AA-

255

 

$

1,500,000

 

Male

 

83

 

61

 

Pacific Life Insurance Company

 

A+

256

 

$

2,000,000

 

Male

 

83

 

75

 

New York Life Insurance Company

 

AA+

257

 

$

5,000,000

 

Male

 

83

 

97

 

American General Life Insurance Company

 

A+

258

 

$

250,000

 

Male

 

83

 

132

 

Reliastar Life Insurance Company

 

A

259

 

$

1,995,000

 

Female

 

83

 

69

 

Transamerica Life Insurance Company

 

AA-

260

 

$

4,000,000

 

Male

 

83

 

46

 

Lincoln National Life Insurance Company

 

AA-

261

 

$

10,000,000

 

Male

 

83

 

69

 

New York Life Insurance Company

 

AA+

262

 

$

1,000,000

 

Male

 

83

 

59

 

Hartford Life and Annuity Insurance Company

 

BBB+

263

 

$

1,000,000

 

Male

 

83

 

59

 

Jackson National Life Insurance Company

 

AA

264

 

$

417,300

 

Male

 

83

 

90

 

Jackson National Life Insurance Company

 

AA

265

 

$

5,000,000

 

Male

 

83

 

68

 

Transamerica Life Insurance Company

 

AA-

266

 

$

2,000,000

 

Male

 

83

 

59

 

Ohio National Life Assurance Corporation

 

AA-

267

 

$

1,000,000

 

Male

 

83

 

59

 

Ohio National Life Assurance Corporation

 

AA-

268

 

$

500,000

 

Female

 

83

 

92

 

AXA Equitable Life Insurance Company

 

A+

269

 

$

350,000

 

Male

 

83

 

26

 

Jackson National Life Insurance Company

 

AA

270

 

$

5,000,000

 

Female

 

82

 

68

 

Security Mutual Life Insurance Company of NY

 

N/A

271

 

$

5,000,000

 

Male

 

82

 

80

 

AXA Equitable Life Insurance Company

 

A+

272

 

$

6,000,000

 

Male

 

82

 

96

 

Transamerica Life Insurance Company

 

AA-

273

 

$

8,000,000

 

Male

 

82

 

73

 

AXA Equitable Life Insurance Company

 

A+

274

 

$

850,000

 

Female

 

82

 

89

 

Zurich Life Insurance Company

 

AA-

275

 

$

550,000

 

Male

 

82

 

106

 

Genworth Life Insurance Company

 

BB

276

 

$

500,000

 

Male

 

82

 

54

 

West Coast Life Insurance Company

 

AA-

277

 

$

1,680,000

 

Female

 

82

 

59

 

AXA Equitable Life Insurance Company

 

A+

278

 

$

1,000,000

 

Female

 

82

 

86

 

Lincoln National Life Insurance Company

 

AA-

279

 

$

1,250,000

 

Male

 

82

 

89

 

Metropolitan Life Insurance Company

 

A+

280

 

$

3,000,000

 

Female

 

82

 

61

 

AXA Equitable Life Insurance Company

 

A+

281

 

$

1,000,000

 

Male

 

82

 

55

 

AXA Equitable Life Insurance Company

 

A+

282

 

$

1,250,000

 

Female

 

82

 

75

 

Principal Life Insurance Company

 

A+

283

 

$

1,000,000

 

Male

 

82

 

47

 

AXA Equitable Life Insurance Company

 

A+

284

 

$

1,500,000

 

Male

 

82

 

60

 

Lincoln Benefit Life Company

 

BBB+

285

 

$

700,000

 

Male

 

82

 

91

 

Banner Life Insurance Company

 

AA-

286

 

$

3,000,000

 

Male

 

82

 

88

 

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

 

AA-

287

 

$

10,000,000

 

Male

 

82

 

60

 

Hartford Life and Annuity Insurance Company

 

BBB+

288

 

$

1,750,000

 

Male

 

82

 

72

 

AXA Equitable Life Insurance Company

 

A+

289

 

$

5,000,000

 

Male

 

82

 

62

 

AXA Equitable Life Insurance Company

 

A+

22

 

 

Face
Amount

 

Gender

 

Age
(ALB)(1)

 

LE
(mo.)(2)

 

Insurance Company

 

S&P
Rating

290

 

$

300,000

 

Female

 

82

 

64

 

Hartford Life and Annuity Insurance Company

 

BBB+

291

 

$

250,000

 

Male

 

82

 

70

 

American General Life Insurance Company

 

A+

292

 

$

3,500,000

 

Male

 

82

 

76

 

Metropolitan Life Insurance Company

 

A+

293

 

$

2,502,000

 

Male

 

82

 

136

 

Transamerica Life Insurance Company

 

AA-

294

 

$

10,000,000

 

Male

 

82

 

102

 

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

 

AA-

295

 

$

250,000

 

Female

 

82

 

93

 

Accordia Life and Annuity Company

 

A-

296

 

$

3,000,000

 

Male

 

82

 

115

 

Principal Life Insurance Company

 

A+

297

 

$

1,700,000

 

Male

 

82

 

54

 

Lincoln National Life Insurance Company

 

AA-

298

 

$

1,210,000

 

Male

 

82

 

56

 

Lincoln National Life Insurance Company

 

AA-

299

 

$

3,000,000

 

Female

 

82

 

96

 

West Coast Life Insurance Company

 

AA-

300

 

$

7,000,000

 

Male

 

82

 

76

 

Genworth Life Insurance Company

 

BB

301

 

$

8,000,000

 

Male

 

81

 

118

 

Metropolitan Life Insurance Company

 

A+

302

 

$

3,000,000

 

Male

 

81

 

81

 

Reliastar Life Insurance Company

 

A

303

 

$

4,000,000

 

Male

 

81

 

72

 

Lincoln National Life Insurance Company

 

AA-

304

 

$

500,000

 

Male

 

81

 

46

 

Genworth Life and Annuity Insurance Company

 

BB

305

 

$

3,000,000

 

Male

 

81

 

136

 

Metropolitan Life Insurance Company

 

A+

306

 

$

300,000

 

Female

 

81

 

90

 

Metropolitan Life Insurance Company

 

A+

307

 

$

200,000

 

Male

 

81

 

64

 

Protective Life Insurance Company

 

AA-

308

 

$

150,000

 

Male

 

81

 

64

 

Protective Life Insurance Company

 

AA-

309

 

$

150,000

 

Male

 

81

 

64

 

Protective Life Insurance Company

 

AA-

310

 

$

350,000

 

Male

 

81

 

64

 

Lincoln National Life Insurance Company

 

AA-

311

 

$

1,187,327

 

Male

 

81

 

88

 

Transamerica Life Insurance Company

 

AA-

312

 

$

5,000,000

 

Male

 

81

 

99

 

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

 

AA-

313

 

$

800,000

 

Male

 

81

 

70

 

North American Company for Life And Health Insurance

 

A+

314

 

$

2,000,000

 

Male

 

81

 

20

 

Metropolitan Life Insurance Company

 

A+

315

 

$

1,000,000

 

Female

 

81

 

80

 

Lincoln Benefit Life Company

 

BBB+

316

 

$

6,000,000

 

Male

 

81

 

113

 

AXA Equitable Life Insurance Company

 

A+

317

 

$

320,987

 

Female

 

81

 

96

 

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

 

AA-

318

 

$

130,000

 

Male

 

81

 

43

 

Genworth Life Insurance Company

 

BB

319

 

$

5,500,000

 

Male

 

81

 

113

 

Metropolitan Life Insurance Company

 

A+

320

 

$

1,000,000

 

Male

 

81

 

114

 

Protective Life Insurance Company

 

AA-

321

 

$

2,000,000

 

Female

 

81

 

80

 

Pacific Life Insurance Company

 

A+

322

 

$

4,000,000

 

Male

 

81

 

87

 

Lincoln National Life Insurance Company

 

AA-

323

 

$

2,000,000

 

Male

 

81

 

74

 

Metropolitan Life Insurance Company

 

A+

324

 

$

2,000,000

 

Male

 

81

 

74

 

Metropolitan Life Insurance Company

 

A+

325

 

$

4,300,000

 

Female

 

81

 

101

 

American National Insurance Company

 

A

326

 

$

200,000

 

Male

 

81

 

59

 

Kansas City Life Insurance Company

 

N/A

327

 

$

2,000,000

 

Female

 

81

 

67

 

Transamerica Life Insurance Company

 

AA-

328

 

$

1,500,000

 

Female

 

81

 

68

 

Protective Life Insurance Company

 

AA-

329

 

$

1,000,000

 

Male

 

81

 

49

 

Pacific Life Insurance Company

 

A+

330

 

$

200,000

 

Male

 

81

 

40

 

Pruco Life Insurance Company

 

AA-

331

 

$

500,000

 

Male

 

81

 

40

 

Transamerica Life Insurance Company

 

AA-

332

 

$

3,000,000

 

Male

 

80

 

35

 

Pacific Life Insurance Company

 

A+

333

 

$

3,000,000

 

Male

 

80

 

35

 

Minnesota Life Insurance Company

 

A+

334

 

$

3,000,000

 

Male

 

80

 

35

 

Pruco Life Insurance Company

 

AA-

335

 

$

5,000,000

 

Male

 

80

 

89

 

Pacific Life Insurance Company

 

A+

336

 

$

5,000,000

 

Male

 

80

 

89

 

Pacific Life Insurance Company

 

A+

337

 

$

3,601,500

 

Male

 

80

 

85

 

Transamerica Life Insurance Company

 

AA-

338

 

$

1,000,000

 

Male

 

80

 

87

 

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

 

AA-

23

 

 

Face
Amount

 

Gender

 

Age
(ALB)(1)

 

LE
(mo.)(2)

 

Insurance Company

 

S&P
Rating

339

 

$

5,000,000

 

Male

 

80

 

80

 

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

 

AA-

340

 

$

5,000,000

 

Male

 

80

 

120

 

Principal Life Insurance Company

 

A+

341

 

$

150,000

 

Male

 

80

 

85

 

MetLife Insurance Company USA

 

A+

342

 

$

1,009,467

 

Male

 

80

 

51

 

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

 

AA-

343

 

$

7,000,000

 

Male

 

80

 

77

 

Lincoln Benefit Life Company

 

BBB+

344

 

$

100,000

 

Male

 

80

 

57

 

North American Company for Life And Health Insurance

 

A+

345

 

$

1,000,000

 

Male

 

80

 

108

 

Lincoln National Life Insurance Company

 

AA-

346

 

$

5,000,000

 

Male

 

80

 

49

 

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

 

AA-

347

 

$

6,799,139

 

Male

 

80

 

114

 

AXA Equitable Life Insurance Company

 

A+

348

 

$

476,574

 

Male

 

80

 

64

 

Transamerica Life Insurance Company

 

AA-

349

 

$

2,250,000

 

Male

 

80

 

85

 

Massachusetts Mutual Life Insurance Company

 

AA+

350

 

$

775,000

 

Male

 

80

 

115

 

Lincoln National Life Insurance Company

 

AA-

351

 

$

1,000,000

 

Female

 

80

 

115

 

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

 

AA-

352

 

$

6,000,000

 

Male

 

80

 

111

 

AXA Equitable Life Insurance Company

 

A+

353

 

$

1,445,000

 

Female

 

80

 

97

 

AXA Equitable Life Insurance Company

 

A+

354

 

$

1,500,000

 

Female

 

80

 

97

 

AXA Equitable Life Insurance Company

 

A+

355

 

$

1,000,000

 

Male

 

80

 

78

 

Lincoln National Life Insurance Company

 

AA-

356

 

$

200,000

 

Male

 

80

 

50

 

Lincoln National Life Insurance Company

 

AA-

357

 

$

1,000,000

 

Male

 

80

 

102

 

Metropolitan Life Insurance Company

 

A+

358

 

$

6,000,000

 

Male

 

80

 

98

 

AXA Equitable Life Insurance Company

 

A+

359

 

$

5,000,000

 

Female

 

80

 

108

 

Reliastar Life Insurance Company

 

A

360

 

$

750,000

 

Male

 

80

 

61

 

Lincoln National Life Insurance Company

 

AA-

361

 

$

5,000,000

 

Male

 

80

 

170

 

West Coast Life Insurance Company

 

AA-

362

 

$

3,000,000

 

Male

 

80

 

87

 

Principal Life Insurance Company

 

A+

363

 

$

5,000,000

 

Male

 

79

 

129

 

Lincoln National Life Insurance Company

 

AA-

364

 

$

3,000,000

 

Male

 

79

 

78

 

American General Life Insurance Company

 

A+

365

 

$

5,000,000

 

Male

 

79

 

71

 

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

 

AA-

366

 

$

500,000

 

Male

 

79

 

60

 

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

 

AA-

367

 

$

1,000,000

 

Male

 

79

 

106

 

Metropolitan Life Insurance Company

 

A+

368

 

$

1,250,000

 

Male

 

79

 

91

 

AXA Equitable Life Insurance Company

 

A+

369

 

$

3,000,000

 

Female

 

79

 

81

 

New York Life Insurance Company

 

AA+

370

 

$

4,000,000

 

Male

 

79

 

43

 

Metropolitan Life Insurance Company

 

A+

371

 

$

2,500,000

 

Male

 

79

 

79

 

Massachusetts Mutual Life Insurance Company

 

AA+

372

 

$

2,500,000

 

Male

 

79

 

79

 

Massachusetts Mutual Life Insurance Company

 

AA+

373

 

$

500,000

 

Female

 

79

 

108

 

Columbus Life Insurance Company

 

AA

374

 

$

4,000,000

 

Female

 

79

 

86

 

Transamerica Life Insurance Company

 

AA-

375

 

$

4,000,000

 

Male

 

79

 

140

 

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

 

AA-

376

 

$

325,000

 

Male

 

79

 

36

 

American General Life Insurance Company

 

A+

377

 

$

1,750,000

 

Male

 

79

 

56

 

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

 

AA-

378

 

$

5,000,000

 

Male

 

79

 

96

 

Transamerica Life Insurance Company

 

AA-

379

 

$

3,750,000

 

Male

 

79

 

52

 

AXA Equitable Life Insurance Company

 

A+

380

 

$

550,000

 

Male

 

79

 

72

 

Pruco Life Insurance Company

 

AA-

381

 

$

300,000

 

Male

 

79

 

72

 

Pruco Life Insurance Company

 

AA-

382

 

$

2,000,000

 

Female

 

79

 

50

 

Transamerica Life Insurance Company

 

AA-

383

 

$

1,200,000

 

Female

 

78

 

126

 

Athene Annuity & Life Assurance Company

 

A-

384

 

$

1,000,000

 

Male

 

78

 

98

 

Accordia Life and Annuity Company

 

A-

385

 

$

2,840,000

 

Male

 

78

 

91

 

Transamerica Life Insurance Company

 

AA-

386

 

$

750,000

 

Male

 

78

 

82

 

North American Company for Life and Health Insurance

 

A+

387

 

$

1,000,000

 

Male

 

78

 

82

 

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

 

AA-

24

 

 

Face
Amount

 

Gender

 

Age
(ALB)(1)

 

LE
(mo.)(2)

 

Insurance Company

 

S&P
Rating

388

 

$

500,000

 

Male

 

78

 

82

 

North American Company for Life and Health Insurance

 

A+

389

 

$

50,000

 

Male

 

78

 

40

 

Lincoln National Life Insurance Company

 

AA-

390

 

$

4,000,000

 

Male

 

78

 

62

 

Massachusetts Mutual Life Insurance Company

 

AA+

391

 

$

1,000,000

 

Female

 

78

 

68

 

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

 

AA-

392

 

$

1,000,000

 

Female

 

78

 

123

 

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

 

AA-

393

 

$

2,000,000

 

Male

 

78

 

94

 

Lincoln National Life Insurance Company

 

AA-

394

 

$

2,000,000

 

Male

 

78

 

94

 

Lincoln National Life Insurance Company

 

AA-

395

 

$

5,000,000

 

Male

 

78

 

113

 

Lincoln National Life Insurance Company

 

AA-

396

 

$

1,000,000

 

Male

 

78

 

115

 

Principal Life Insurance Company

 

A+

397

 

$

2,000,000

 

Male

 

78

 

100

 

Genworth Life Insurance Company

 

BB

398

 

$

6,250,000

 

Male

 

78

 

185

 

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

 

AA-

399

 

$

490,620

 

Male

 

78

 

80

 

Ameritas Life Insurance Corporation

 

A+

400

 

$

600,000

 

Male

 

78

 

77

 

Protective Life Insurance Company

 

AA-

401

 

$

400,000

 

Male

 

78

 

113

 

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

 

AA-

402

 

$

730,000

 

Male

 

77

 

96

 

Transamerica Life Insurance Company

 

AA-

403

 

$

5,000,000

 

Male

 

77

 

142

 

Pruco Life Insurance Company

 

AA-

404

 

$

300,000

 

Male

 

77

 

73

 

Penn Mutual Life Insurance Company

 

A+

405

 

$

5,000,000

 

Male

 

77

 

131

 

AXA Equitable Life Insurance Company

 

A+

406

 

$

3,000,000

 

Male

 

77

 

91

 

Pruco Life Insurance Company

 

AA-

407

 

$

3,000,000

 

Female

 

77

 

101

 

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

 

AA-

408

 

$

5,000,000

 

Male

 

77

 

136

 

Massachusetts Mutual Life Insurance Company

 

AA+

409

 

$

5,000,000

 

Male

 

77

 

136

 

Massachusetts Mutual Life Insurance Company

 

AA+

410

 

$

200,000

 

Female

 

77

 

139

 

West Coast Life Insurance Company

 

AA-

411

 

$

1,100,000

 

Male

 

77

 

133

 

Accordia Life and Annuity Company

 

A-

412

 

$

3,000,000

 

Male

 

77

 

97

 

Protective Life Insurance Company

 

AA-

413

 

$

2,000,000

 

Female

 

77

 

113

 

Accordia Life and Annuity Company

 

A-

414

 

$

10,000,000

 

Male

 

77

 

127

 

AXA Equitable Life Insurance Company

 

A+

415

 

$

2,500,000

 

Male

 

77

 

134

 

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

 

AA-

416

 

$

2,500,000

 

Male

 

77

 

134

 

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

 

AA-

417

 

$

1,000,000

 

Male

 

77

 

98

 

Athene Annuity & Life Assurance Company of New York

 

A-

418

 

$

7,000,000

 

Female

 

77

 

116

 

Pacific Life Insurance Company

 

A+

419

 

$

100,946

 

Female

 

77

 

154

 

Genworth Life and Annuity Insurance Company

 

BB

420

 

$

350,000

 

Male

 

77

 

106

 

AXA Equitable Life Insurance Company

 

A+

421

 

$

600,000

 

Male

 

77

 

106

 

AXA Equitable Life Insurance Company

 

A+

422

 

$

1,000,000

 

Male

 

77

 

77

 

Pacific Life Insurance Company

 

A+

423

 

$

2,000,000

 

Male

 

77

 

113

 

Transamerica Life Insurance Company

 

AA-

424

 

$

200,000

 

Male

 

77

 

111

 

Prudential Insurance Company of America

 

AA-

425

 

$

2,000,000

 

Female

 

77

 

162

 

Lincoln National Life Insurance Company

 

AA-

426

 

$

150,000

 

Male

 

77

 

99

 

Genworth Life Insurance Company

 

BB

427

 

$

2,000,000

 

Male

 

77

 

58

 

Athene Annuity & Life Assurance Company

 

A-

428

 

$

7,097,434

 

Male

 

77

 

153

 

Lincoln National Life Insurance Company

 

AA-

429

 

$

5,000,000

 

Male

 

77

 

54

 

West Coast Life Insurance Company

 

AA-

430

 

$

1,000,000

 

Male

 

76

 

122

 

Transamerica Life Insurance Company

 

AA-

431

 

$

750,000

 

Male

 

76

 

107

 

Protective Life Insurance Company

 

AA-

432

 

$

250,000

 

Male

 

76

 

98

 

Midland National Life Insurance Company

 

A+

433

 

$

3,000,000

 

Male

 

76

 

51

 

Accordia Life and Annuity Company

 

A-

434

 

$

200,000

 

Male

 

76

 

65

 

Reliastar Life Insurance Company

 

A

435

 

$

500,000

 

Male

 

76

 

96

 

AXA Equitable Life Insurance Company

 

A+

436

 

$

3,000,000

 

Male

 

76

 

108

 

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

 

AA-

25

 

 

Face
Amount

 

Gender

 

Age
(ALB)(1)

 

LE
(mo.)(2)

 

Insurance Company

 

S&P
Rating

437

 

$

5,000,000

 

Male

 

76

 

108

 

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

 

AA-

438

 

$

8,000,000

 

Male

 

76

 

94

 

Metropolitan Life Insurance Company

 

A+

439

 

$

100,000

 

Male

 

76

 

53

 

AXA Equitable Life Insurance Company

 

A+

440

 

$

4,000,000

 

Female

 

76

 

137

 

American General Life Insurance Company

 

A+

441

 

$

500,000

 

Male

 

76

 

88

 

AIG Life Insurance Company

 

A+

442

 

$

1,000,000

 

Male

 

76

 

155

 

Security Mutual Life Insurance Company of NY

 

N/A

443

 

$

355,700

 

Male

 

76

 

103

 

Security Life of Denver Insurance Company

 

A

444

 

$

5,000,000

 

Male

 

76

 

54

 

Lincoln Benefit Life Company

 

BBB+

445

 

$

250,000

 

Male

 

76

 

135

 

West Coast Life Insurance Company

 

AA-

446

 

$

1,000,000

 

Male

 

76

 

112

 

Transamerica Life Insurance Company

 

AA-

447

 

$

2,000,000

 

Male

 

76

 

146

 

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

 

AA-

448

 

$

7,500,000

 

Female

 

76

 

173

 

Security Life of Denver Insurance Company

 

A

449

 

$

3,000,000

 

Female

 

76

 

110

 

General American Life Insurance Company

 

A+

450

 

$

100,000

 

Male

 

76

 

67

 

Transamerica Life Insurance Company

 

AA-

451

 

$

300,000

 

Female

 

76

 

133

 

Minnesota Life Insurance Company

 

A+

452

 

$

250,000

 

Male

 

76

 

88

 

United of Omaha Life Insurance Company

 

AA-

453

 

$

600,000

 

Male

 

75

 

69

 

United of Omaha Life Insurance Company

 

AA-

454

 

$

500,000

 

Male

 

75

 

87

 

Protective Life Insurance Company

 

AA-

455

 

$

1,000,000

 

Male

 

75

 

93

 

Security Life of Denver Insurance Company

 

A

456

 

$

1,000,000

 

Male

 

75

 

96

 

Transamerica Life Insurance Company

 

AA-

457

 

$

500,000

 

Male

 

75

 

89

 

AXA Equitable Life Insurance Company

 

A+

458

 

$

500,000

 

Male

 

75

 

103

 

United of Omaha Life Insurance Company

 

AA-

459

 

$

750,000

 

Male

 

75

 

27

 

North American Company for Life And Health Insurance

 

A+

460

 

$

8,000,000

 

Female

 

75

 

131

 

West Coast Life Insurance Company

 

AA-

461

 

$

250,000

 

Female

 

75

 

155

 

AXA Equitable Life Insurance Company

 

A+

462

 

$

300,000

 

Male

 

75

 

36

 

Lincoln National Life Insurance Company

 

AA-

463

 

$

172,245

 

Female

 

75

 

54

 

Symetra Life Insurance Company

 

A

464

 

$

5,004,704

 

Male

 

75

 

133

 

American General Life Insurance Company

 

A+

465

 

$

2,000,000

 

Male

 

75

 

119

 

Pruco Life Insurance Company

 

AA-

466

 

$

190,000

 

Male

 

75

 

103

 

Protective Life Insurance Company

 

AA-

467

 

$

100,000

 

Male

 

75

 

151

 

Protective Life Insurance Company

 

AA-

468

 

$

5,000,000

 

Male

 

75

 

129

 

AIG Life Insurance Company

 

A+

469

 

$

4,000,000

 

Male

 

75

 

108

 

Security Mutual Life Insurance Company of NY

 

N/A

470

 

$

89,626

 

Female

 

75

 

117

 

Union Central Life Insurance Company

 

A+

471

 

$

2,000,000

 

Male

 

75

 

94

 

American General Life Insurance Company

 

A+

472

 

$

10,000,000

 

Female

 

75

 

134

 

Reliastar Life Insurance Company

 

A

473

 

$

1,000,000

 

Female

 

75

 

150

 

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

 

AA-

474

 

$

500,000

 

Male

 

75

 

72

 

American General Life Insurance Company

 

A+

475

 

$

250,000

 

Male

 

75

 

73

 

Genworth Life and Annuity Insurance Company

 

BB

476

 

$

500,000

 

Male

 

75

 

95

 

Delaware Life Insurance Company

 

BBB+

477

 

$

370,000

 

Female

 

75

 

125

 

Minnesota Life Insurance Company

 

A+

478

 

$

500,000

 

Male

 

74

 

33

 

Midland National Life Insurance Company

 

A+

479

 

$

3,000,000

 

Male

 

74

 

71

 

AXA Equitable Life Insurance Company

 

A+

480

 

$

500,000

 

Male

 

74

 

61

 

William Penn Life Insurance Company of New York

 

AA-

481

 

$

2,500,000

 

Male

 

74

 

103

 

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

 

AA-

482

 

$

500,000

 

Male

 

74

 

134

 

Pruco Life Insurance Company

 

AA-

483

 

$

8,600,000

 

Male

 

74

 

152

 

AXA Equitable Life Insurance Company

 

A+

484

 

$

3,000,000

 

Male

 

74

 

103

 

Transamerica Life Insurance Company

 

AA-

485

 

$

800,000

 

Male

 

74

 

122

 

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

 

AA-

26

 

 

Face
Amount

 

Gender

 

Age
(ALB)(1)

 

LE
(mo.)(2)

 

Insurance Company

 

S&P
Rating

486

 

$

1,500,000

 

Male

 

74

 

126

 

Lincoln National Life Insurance Company

 

AA-

487

 

$

1,500,000

 

Male

 

74

 

126

 

Lincoln National Life Insurance Company

 

AA-

488

 

$

1,500,000

 

Male

 

74

 

126

 

Lincoln National Life Insurance Company

 

AA-

489

 

$

2,500,000

 

Male

 

74

 

136

 

Banner Life Insurance Company

 

AA-

490

 

$

400,000

 

Male

 

74

 

80

 

Protective Life Insurance Company

 

AA-

491

 

$

10,000,000

 

Male

 

74

 

144

 

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

 

AA-

492

 

$

1,784,686

 

Male

 

74

 

153

 

Transamerica Life Insurance Company

 

AA-

493

 

$

250,000

 

Female

 

74

 

171

 

Protective Life Insurance Company

 

AA-

494

 

$

500,000

 

Male

 

73

 

122

 

Ameritas Life Insurance Corporation

 

A+

495

 

$

370,000

 

Male

 

73

 

122

 

Ameritas Life Insurance Corporation

 

A+

496

 

$

750,000

 

Male

 

73

 

130

 

Security Life of Denver Insurance Company

 

A

497

 

$

1,000,000

 

Female

 

73

 

120

 

United of Omaha Life Insurance Company

 

AA-

498

 

$

500,000

 

Male

 

73

 

106

 

William Penn Life Insurance Company of New York

 

AA-

499

 

$

250,000

 

Male

 

73

 

18

 

Security Life of Denver Insurance Company

 

A

500

 

$

100,000

 

Male

 

73

 

110

 

Protective Life Insurance Company

 

AA-

501

 

$

500,000

 

Male

 

73

 

128

 

Metropolitan Life Insurance Company

 

A+

502

 

$

2,000,000

 

Male

 

73

 

120

 

Voya Retirement Insurance and Annuity Company

 

A

503

 

$

1,500,000

 

Male

 

73

 

120

 

Voya Retirement Insurance and Annuity Company

 

A

504

 

$

300,000

 

Male

 

73

 

114

 

Protective Life Insurance Company

 

AA-

505

 

$

250,000

 

Male

 

73

 

68

 

American General Life Insurance Company

 

A+

506

 

$

2,500,000

 

Male

 

73

 

104

 

American General Life Insurance Company

 

A+

507

 

$

2,000,000

 

Male

 

73

 

131

 

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

 

AA-

508

 

$

800,000

 

Male

 

73

 

84

 

Commonwealth Annuity and Life Insurance Company

 

A-

509

 

$

267,988

 

Male

 

73

 

52

 

Minnesota Life Insurance Company

 

A+

510

 

$

300,000

 

Male

 

73

 

111

 

New England Life Insurance Company

 

AA-

511

 

$

1,167,000

 

Male

 

73

 

50

 

Transamerica Life Insurance Company

 

AA-

512

 

$

1,500,000

 

Male

 

73

 

108

 

Metropolitan Life Insurance Company

 

A+

513

 

$

1,000,000

 

Female

 

73

 

144

 

Reliastar Life Insurance Company

 

A

514

 

$

10,000,000

 

Male

 

73

 

118

 

AXA Equitable Life Insurance Company

 

A+

515

 

$

1,000,000

 

Male

 

72

 

130

 

AIG Life Insurance Company

 

A+

516

 

$

2,500,000

 

Male

 

72

 

51

 

Transamerica Life Insurance Company

 

AA-

517

 

$

400,000

 

Male

 

72

 

195

 

Protective Life Insurance Company

 

AA-

518

 

$

3,000,000

 

Male

 

72

 

75

 

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

 

AA-

519

 

$

2,000,000

 

Male

 

72

 

100

 

New York Life Insurance Company

 

AA+

520

 

$

2,000,000

 

Male

 

72

 

100

 

New York Life Insurance Company

 

AA+

521

 

$

5,000,000

 

Male

 

72

 

128

 

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

 

AA-

522

 

$

250,000

 

Female

 

72

 

108

 

Protective Life Insurance Company

 

AA-

523

 

$

2,500,000

 

Male

 

72

 

114

 

Lincoln National Life Insurance Company

 

AA-

524

 

$

2,500,000

 

Male

 

72

 

114

 

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

 

AA-

525

 

$

1,350,000

 

Male

 

72

 

100

 

Lincoln National Life Insurance Company

 

AA-

526

 

$

230,000

 

Male

 

72

 

117

 

Transamerica Life Insurance Company

 

AA-

527

 

$

139,398

 

Female

 

72

 

23

 

Lincoln National Life Insurance Company

 

AA-

528

 

$

190,000

 

Female

 

72

 

191

 

Protective Life Insurance Company

 

AA-

529

 

$

420,000

 

Male

 

72

 

131

 

Protective Life Insurance Company

 

AA-

530

 

$

75,000

 

Female

 

72

 

102

 

American General Life Insurance Company

 

A+

531

 

$

600,000

 

Male

 

72

 

84

 

AXA Equitable Life Insurance Company

 

A+

532

 

$

4,000,000

 

Male

 

72

 

141

 

MONY Life Insurance Company of America

 

A+

533

 

$

420,000

 

Male

 

72

 

122

 

RiverSource Life Insurance Company

 

A+

534

 

$

100,000

 

Male

 

72

 

137

 

Protective Life Insurance Company

 

AA-

27

 

 

Face
Amount

 

Gender

 

Age
(ALB)(1)

 

LE
(mo.)(2)

 

Insurance Company

 

S&P
Rating

535

 

$

250,000

 

Male

 

71

 

50

 

Protective Life Insurance Company

 

AA-

536

 

$

650,000

 

Female

 

71

 

72

 

Security Life of Denver Insurance Company

 

A

537

 

$

500,000

 

Male

 

71

 

120

 

Ohio National Life Assurance Corporation

 

AA-

538

 

$

232,000

 

Male

 

71

 

179

 

Protective Life Insurance Company

 

AA-

539

 

$

185,000

 

Male

 

71

 

131

 

Genworth Life and Annuity Insurance Company

 

BB

540

 

$

40,000

 

Male

 

71

 

31

 

Banner Life Insurance Company

 

AA-

541

 

$

750,000

 

Male

 

71

 

125

 

Transamerica Life Insurance Company

 

AA-

542

 

$

1,250,000

 

Male

 

71

 

99

 

West Coast Life Insurance Company

 

AA-

543

 

$

1,500,000

 

Female

 

71

 

153

 

Pruco Life Insurance Company

 

AA-

544

 

$

5,000,000

 

Male

 

71

 

91

 

Transamerica Life Insurance Company

 

AA-

545

 

$

500,000

 

Male

 

71

 

92

 

Transamerica Life Insurance Company

 

AA-

546

 

$

500,000

 

Male

 

71

 

92

 

North American Company for Life And Health Insurance

 

A+

547

 

$

300,000

 

Male

 

71

 

195

 

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

 

AA-

548

 

$

100,000

 

Male

 

71

 

44

 

Genworth Life and Annuity Insurance Company

 

BB

549

 

$

150,000

 

Male

 

71

 

34

 

Protective Life Insurance Company

 

AA-

550

 

$

150,000

 

Male

 

71

 

34

 

AXA Equitable Life Insurance Company

 

A+

551

 

$

1,000,000

 

Male

 

71

 

54

 

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

 

AA-

552

 

$

202,700

 

Male

 

71

 

117

 

Farmers New World Life Insurance Company

 

N/A

553

 

$

5,000,000

 

Male

 

71

 

151

 

Metropolitan Life Insurance Company

 

A+

554

 

$

250,000

 

Female

 

70

 

120

 

Ohio National Life Assurance Corporation

 

AA-

555

 

$

2,000,000

 

Male

 

70

 

172

 

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

 

AA-

556

 

$

400,000

 

Male

 

70

 

161

 

Lincoln National Life Insurance Company

 

AA-

557

 

$

100,000

 

Male

 

70

 

101

 

Massachusetts Mutual Life Insurance Company

 

AA+

558

 

$

92,000

 

Female

 

70

 

199

 

Protective Life Insurance Company

 

AA-

559

 

$

175,000

 

Female

 

70

 

111

 

Lincoln National Life Insurance Company

 

AA-

560

 

$

1,500,000

 

Male

 

70

 

71

 

Lincoln National Life Insurance Company

 

AA-

561

 

$

250,000

 

Male

 

70

 

184

 

Lincoln National Life Insurance Company

 

AA-

562

 

$

1,500,000

 

Male

 

70

 

105

 

Midland National Life Insurance Company

 

A+

563

 

$

500,000

 

Male

 

70

 

111

 

Lincoln Benefit Life Company

 

BBB+

564

 

$

700,000

 

Male

 

70

 

116

 

Massachusetts Mutual Life Insurance Company

 

AA+

565

 

$

750,000

 

Male

 

69

 

134

 

North American Company for Life And Health Insurance

 

A+

566

 

$

1,000,000

 

Male

 

69

 

191

 

AXA Equitable Life Insurance Company

 

A+

567

 

$

1,200,000

 

Male

 

69

 

126

 

Massachusetts Mutual Life Insurance Company

 

AA+

568

 

$

2,500,000

 

Male

 

69

 

161

 

Pruco Life Insurance Company

 

AA-

569

 

$

2,500,000

 

Male

 

69

 

161

 

Pruco Life Insurance Company

 

AA-

570

 

$

4,000,000

 

Male

 

69

 

133

 

MetLife Insurance Company USA

 

A+

571

 

$

500,000

 

Male

 

69

 

42

 

Voya Retirement Insurance and Annuity Company

 

A

572

 

$

1,000,000

 

Male

 

69

 

87

 

Protective Life Insurance Company

 

AA-

573

 

$

2,000,000

 

Male

 

69

 

113

 

Transamerica Life Insurance Company

 

AA-

574

 

$

1,000,000

 

Male

 

69

 

113

 

Genworth Life Insurance Company

 

BB

575

 

$

250,000

 

Female

 

69

 

158

 

Protective Life Insurance Company

 

AA-

576

 

$

1,000,000

 

Male

 

69

 

163

 

Accordia Life and Annuity Company

 

A-

577

 

$

1,000,000

 

Male

 

69

 

61

 

Protective Life Insurance Company

 

AA-

578

 

$

1,000,000

 

Male

 

69

 

131

 

Transamerica Life Insurance Company

 

AA-

579

 

$

1,000,000

 

Male

 

69

 

131

 

Protective Life Insurance Company

 

AA-

580

 

$

156,538

 

Female

 

69

 

107

 

New York Life Insurance Company

 

AA+

581

 

$

2,000,000

 

Male

 

69

 

51

 

Metropolitan Life Insurance Company

 

A+

582

 

$

2,000,000

 

Male

 

69

 

51

 

Metropolitan Life Insurance Company

 

A+

583

 

$

1,000,000

 

Male

 

69

 

153

 

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

 

AA-

28

 

 

Face
Amount

 

Gender

 

Age
(ALB)(1)

 

LE
(mo.)(2)

 

Insurance Company

 

S&P
Rating

584

 

$

400,000

 

Female

 

69

 

142

 

AXA Equitable Life Insurance Company

 

A+

585

 

$

300,000

 

Male

 

69

 

90

 

Protective Life Insurance Company

 

AA-

586

 

$

1,000,000

 

Male

 

68

 

138

 

Transamerica Life Insurance Company

 

AA-

587

 

$

250,000

 

Female

 

68

 

75

 

Transamerica Life Insurance Company

 

AA-

588

 

$

750,000

 

Male

 

68

 

161

 

Northwestern Mutual Life Insurance Company

 

AA+

589

 

$

2,000,000

 

Male

 

68

 

173

 

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

 

AA-

590

 

$

150,000

 

Male

 

68

 

117

 

Protective Life Insurance Company

 

AA-

591

 

$

600,000

 

Male

 

68

 

88

 

William Penn Life Insurance Company of New York

 

AA-

592

 

$

5,616,468

 

Male

 

68

 

180

 

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

 

AA-

593

 

$

1,100,000

 

Male

 

68

 

156

 

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

 

AA-

594

 

$

3,000,000

 

Male

 

68

 

193

 

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

 

AA-

595

 

$

400,000

 

Male

 

67

 

191

 

Lincoln National Life Insurance Company

 

AA-

596

 

$

3,000,000

 

Male

 

67

 

100

 

Reliastar Life Insurance Company

 

A

597

 

$

2,000,000

 

Male

 

67

 

100

 

AXA Equitable Life Insurance Company

 

A+

598

 

$

2,000,000

 

Male

 

67

 

100

 

AXA Equitable Life Insurance Company

 

A+

599

 

$

1,000,000

 

Male

 

67

 

48

 

Lincoln National Life Insurance Company

 

AA-

600

 

$

1,000,000

 

Male

 

67

 

78

 

Transamerica Life Insurance Company

 

AA-

601

 

$

350,000

 

Female

 

67

 

85

 

Assurity Life Insurance Company

 

N/A

602

 

$

5,000,000

 

Male

 

67

 

105

 

Athene Annuity & Life Assurance Company

 

A-

603

 

$

1,000,000

 

Male

 

67

 

149

 

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

 

AA-

604

 

$

800,000

 

Male

 

67

 

129

 

Lincoln National Life Insurance Company

 

AA-

605

 

$

800,000

 

Male

 

67

 

129

 

Lincoln National Life Insurance Company

 

AA-

606

 

$

229,725

 

Female

 

67

 

107

 

Hartford Life and Annuity Insurance Company

 

BBB+

607

 

$

490,000

 

Male

 

67

 

97

 

AXA Equitable Life Insurance Company

 

A+

608

 

$

220,581

 

Male

 

67

 

25

 

American General Life Insurance Company

 

A+

609

 

$

1,000,000

 

Male

 

67

 

109

 

The Savings Bank Life Insurance Company of Massachusetts

 

A-

610

 

$

320,000

 

Male

 

67

 

162

 

Transamerica Life Insurance Company

 

AA-

611

 

$

250,000

 

Male

 

67

 

163

 

Pruco Life Insurance Company

 

AA-

612

 

$

125,000

 

Male

 

67

 

50

 

Genworth Life and Annuity Insurance Company

 

BB

613

 

$

250,000

 

Male

 

67

 

199

 

Zurich Life Insurance Company

 

AA-

614

 

$

650,000

 

Male

 

67

 

185

 

Lincoln National Life Insurance Company

 

AA-

615

 

$

400,000

 

Male

 

66

 

132

 

Jackson National Life Insurance Company

 

AA

616

 

$

500,000

 

Female

 

66

 

171

 

Banner Life Insurance Company

 

AA-

617

 

$

350,000

 

Male

 

66

 

97

 

RiverSource Life Insurance Company

 

A+

618

 

$

200,000

 

Male

 

66

 

163

 

Prudential Insurance Company of America

 

AA-

619

 

$

200,000

 

Male

 

66

 

163

 

Prudential Insurance Company of America

 

AA-

620

 

$

750,000

 

Male

 

66

 

128

 

Pacific Life Insurance Company

 

A+

621

 

$

500,000

 

Male

 

66

 

136

 

Transamerica Life Insurance Company

 

AA-

622

 

$

500,000

 

Female

 

66

 

132

 

AIG Life Insurance Company

 

A+

623

 

$

265,000

 

Male

 

65

 

159

 

Protective Life Insurance Company

 

AA-

624

 

$

10,000,000

 

Male

 

65

 

65

 

Lincoln National Life Insurance Company

 

AA-

625

 

$

540,000

 

Male

 

65

 

172

 

West Coast Life Insurance Company

 

AA-

 

 

$

1,272,077,891

 

 

 

 

 

 

 

 

 

 

____________

(1)      Person’s age on last birthday (ALB)

(2)      The insured’s life expectancy estimate, other than for a small face value insurance contract (i.e., a contract 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.

29

OTHER INFORMATION

 

Origination, Underwriting and Technology

 

We focus on purchasing high quality life insurance assets through our origination practices and underwriting procedures. In general, these practices and procedures strive to meet published guidelines for rated securitizations of life insurance portfolios. At the same time, we seek innovative value-added tools, services, and methodologies to improve both the accuracy and efficiency with which we evaluate and acquire life insurance assets.

 

Since 2013, we have focused on developing our direct origination channels through which we may purchase life insurance policies without the involvement of a life settlement broker, thereby eliminating commission costs and timing delays in the acquisition. We expect to continue allocating considerable resources towards developing our direct origination channels, primarily by outreach and relationship building with financial advisors (who may also sell our investment securities), life insurance agents, and consumers.

 

Our success in direct origination has presented us with the opportunity to purchase a greater number of “small face” life insurance policies with a face value benefit of $1,000,000 or less. We believe this opportunity is meaningful since the majority of life insurance policies outstanding are small face policies, and policy diversification is critical in obtaining normalized actuarial performance. Historically, however, small face policies have not been available to purchasers of life insurance contracts because the secondary market industry participants have significantly relied on life settlement brokers who are paid a commission determined as a percentage of the face value benefit of the purchased policy, to present purchase opportunities. Not surprisingly, because larger commissions are associated with larger face value life insurance contracts, brokers have focused on larger contracts and the industry has developed origination practices and underwriting procedures to accommodate such practices. As a result, the industry’s traditional approaches to underwriting and purchasing life insurance assets are ill suited for small face policies. For example, procuring complete medical records, two separate life expectancy reports, and engaging in related activities, can be time consuming and expensive, and these same costs cannot be justified when purchasing smaller life insurance assets.

 

To more fully realize the potential of the direct origination channel we have built, we have developed what we believe to be an efficient, cost-effective, and reliable method of underwriting and purchasing small face policies. In sum, our method is focused on obtaining enough medical information to generate reliable life expectancy estimates, and thereby make informed purchase decisions. We expect to refine this process over time and, to the extent possible, use new technologies to enhance this process and our overall business.

 

To that end, we have recently announced the execution of our option to exclusively license “DNA Methylation Based Predictor of Mortality” technology from the University of California, Los Angeles (UCLA) and discovered by Dr. Steven Horvath. In 2013, Dr. Horvath reported that human cells have a mechanism that records “biological age” progression, based on DNA methylation that is independent from “chronological age.” In 2016, Dr. Horvath discovered a specific set of DNA methylation-based bio-markers that are highly predictive of all-cause mortality. The discovery was made through a statistical analysis of bio-markers found in DNA samples from over 13,000 individuals whose health was studied for decades. The implications of Dr. Horvath’s discovery are simple and profound: Individual lifespans can now be estimated with significantly greater precision. We intend to implement aspects of this technology in our underwriting protocols and to explore how this technology may have commercial value to the primary life insurance, long-term care, and annuity businesses.

30

RISK FACTOR UPDATE

 

The following risk factors are hereby added to the prospectus. You should read these risk factors carefully and in conjunction with the other risk factors disclosed in the prospectus.

 

Accuracy of the life expectancy estimates and mortality curves we use for small face contracts could have a material and adverse effect on our results of operation and financial condition.

 

As of September 30, 2016, we owned 306 “small face” life insurance policies (i.e., a contract with $1 million in face value benefits or less) having $164 million in face value of insurance benefits. The underwriting processes and mortality curves we use to evaluate, price and purchase small face contracts may be different from, and, as a result, may not be as reliable as, the processes we use for life insurance contracts with larger face values of benefits. While we obtain life expectancy reports from third-party evaluators based on medical evidence, the processes used to develop these life expectancy reports are less extensive than traditional methods. Although we have professional actuarial guidance in the use and application of mortality curves to price and value small face contracts, the application of these mortality curves may not be as reliable as or more subject to adjustment than the processes we use for larger face value of benefits. As the face value of our small face contracts increases relative to the size of our total portfolio, the accuracy with which we have estimated life expectancies and mortality curves for these contracts will become increasingly material to our business. Any shortcomings in the processes we have used to evaluate, price, purchase and value the small face contracts we own could have a material and adverse effect on our results of operation and financial condition. Any such outcomes would likely have a negative and possibly material effect on the price of our common stock and our ability to satisfy our debts.

 

We may in the future rely, in part, on new and unproven technology as part of our underwriting processes. If the mortality predictions we obtain through use of this technology proves inaccurate, our results of operation and financial condition could be materially and adversely affected.

 

We recently exercised our option to license, on an exclusive basis, new technology that we believe may be applied to assist us with the mortality predictions in the course of underwriting and valuing life insurance contracts. This technology, however, has not yet been commercially applied in the manner we envision, and it possible that we will be unable to elicit more accurate mortality predictions through its use. It is also possible that the mortality predictions we obtain through the use of this technology will prove inaccurate, and perhaps materially so. In such a case, our failure to accurately forecast mortalities could have a material and adverse effect on our results of operation and financial condition, which could in turn materially and negatively affect the price of our common stock and our ability to satisfy our debts.

 

The technology we license may subject us to claims of infringement or invalidity from third parties, and the magnitude of this risk to our business generally rises if and as we become more successful in employing and relying on the technology. Any such claims would be complex and costly, and adverse outcomes could undermine the competitive advantages we seek.

 

Our reliance on technology will subject us to the risk that other parties may assert, rightly or wrongly, that our intellectual property rights are invalid or violate the rights of those parties, as well as the risk that our intellectual property rights will be infringed upon by third parties. Any outcome that invalidates our intellectual property rights or that otherwise diminishes the competitive advantages obtained, at least in part, through the use of those rights could have a material and adverse effect on our competitive position and our prospects.

31

FINANCIAL INFORMATION

GWG HOLDINGS, INC.

Table of Contents

 

 

Page

Condensed Consolidated Balance Sheets as of September 30, 2016 (unaudited) and December 31, 2015

 

F-1

Condensed Consolidated Statements of Operations for the nine months ended September 30, 2016 and 2015 (unaudited)

 

F-2

Condensed Consolidated Statement of Cash Flows for the nine months ended September 30, 2016 and 2015 (unaudited)

 

F-3

Notes to Condensed Consolidated Financial Statements

 

F-6

F-1

GWG HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS

 

 

September 30,
2016
(unaudited)

 

December 31,
2015

ASSETS

Cash and cash equivalents

 

$

18,773,828

 

 

$

34,425,105

 

Restricted cash

 

 

15,688,025

 

 

 

2,341,900

 

Investment in life insurance contracts, at fair value

 

 

477,585,100

 

 

 

356,649,715

 

Secured MCA advances

 

 

6,113,831

 

 

 

 

Life insurance contract benefits receivable

 

 

6,129,022

 

 

 

 

Other assets

 

 

3,131,107

 

 

 

2,461,045

 

TOTAL ASSETS

 

$

527,420,913

 

 

$

395,877,765

 

 

 

 

 

 

 

 

 

 

LIABILITIES & STOCKHOLDERS’ EQUITY

LIABILITIES

 

 

 

 

 

 

 

 

Senior Credit Facilities

 

$

63,699,385

 

 

$

63,279,596

 

Series I Secured Notes

 

 

17,553,307

 

 

 

23,287,704

 

L Bonds

 

 

379,858,737

 

 

 

276,482,796

 

Accounts payable

 

 

2,442,449

 

 

 

1,517,440

 

Interest payable

 

 

13,633,640

 

 

 

12,340,061

 

Other accrued expenses

 

 

645,343

 

 

 

1,060,786

 

Deferred taxes, net

 

 

3,242,586

 

 

 

1,763,968

 

TOTAL LIABILITIES

 

$

481,075,447

 

 

$

379,732,351

 

 

 

 

 

 

 

 

 

 

STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CONVERTIBLE PREFERRED STOCK

 

 

 

 

 

 

 

 

(par value $0.001; shares authorized 40,000,000; shares outstanding 2,649,665 and 2,781,735; liquidation preference of $19,872,000 and $20,863,000 on September 30, 2016 and December 31, 2015, respectively)

 

 

19,772,931

 

 

 

20,784,841

 

 

 

 

 

 

 

 

 

 

REDEEMABLE PREFERRED STOCK

 

 

 

 

 

 

 

 

(par value $0.001; shares authorized 100,000; shares outstanding 33,201; liquidation preference of $33,176,600 on September 30, 2016)

 

 

33,176,600

 

 

 

 

 

 

 

 

 

 

 

 

 

COMMON STOCK

 

 

 

 

 

 

 

 

(par value $0.001: shares authorized 210,000,000; shares issued and outstanding 5,980,190 and 5,941,790 on September 30, 2016 and December 31, 2015)

 

 

5,980

 

 

 

5,942

 

Additional paid-in capital

 

 

15,226,449

 

 

 

17,149,391

 

Accumulated deficit

 

 

(21,836,494

)

 

 

(21,794,760

)

TOTAL STOCKHOLDERS’ EQUITY

 

 

46,345,466

 

 

 

16,145,414

 

 

 

 

 

 

 

 

 

 

TOTAL LIABILITIES & EQUITY

 

$

527,420,913

 

 

$

395,877,765

 

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

 

Nine Months Ended

 

 

September 30,
2016

 

September 30,
2015

 

September 30,
2016

 

September 30,
2015

REVENUE

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gain on life insurance contracts, net

 

$

13,509,755

 

 

$

8,189,261

 

 

$

51,606,815

 

 

$

33,446,556

 

MCA income

 

 

286,225

 

 

 

 

 

 

654,441

 

 

 

 

Interest and other income

 

 

124,998

 

 

 

93,841

 

 

 

341,098

 

 

 

233,516

 

TOTAL REVENUE

 

 

13,920,978

 

 

 

8,283,102

 

 

 

52,602,354

 

 

 

33,680,072

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EXPENSES

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

 

11,983,968

 

 

 

8,650,149

 

 

 

32,009,934

 

 

 

23,149,030

 

Employee compensation and benefits

 

 

2,912,463

 

 

 

2,308,246

 

 

 

8,450,168

 

 

 

6,180,886

 

Legal and professional fees

 

 

586,830

 

 

 

822,077

 

 

 

3,097,312

 

 

 

1,988,261

 

Other expenses

 

 

2,863,212

 

 

 

2,231,341

 

 

 

7,608,057

 

 

 

5,646,402

 

TOTAL EXPENSES

 

 

18,346,473

 

 

 

14,011,813

 

 

 

51,165,471

 

 

 

36,964,579

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

INCOME (LOSS) BEFORE INCOME TAXES

 

 

(4,425,495

)

 

 

(5,728,711

)

 

 

1,436,883

 

 

 

(3,284,507

)

INCOME TAX EXPENSE (BENEFIT)

 

 

(1,428,130

)

 

 

(2,097,633

)

 

 

1,478,617

 

 

 

(664,905

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NET LOSS

 

$

(2,997,365

)

 

 

(3,631,078

)

 

$

(41,734

)

 

$

(2,619,602

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss attributable to preferred shareholders

 

 

421,026

 

 

 

343,644

 

 

 

1,103,896

 

 

 

1,041,648

 

INCOME (LOSS) ATTRIBUTABLE TO COMMON SHAREHOLDERS

 

$

(2,576,339

)

 

 

(3,287,434

)

 

$

1,062,162

 

 

$

(1,577,954

)

NET INCOME (LOSS) PER SHARE

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

(0.50

)

 

 

(0.61

)

 

$

(0.01

)

 

$

(0.44

)

Diluted

 

$

(0.50

)

 

 

(0.61

)

 

$

0.13

 

 

$

(0.44

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

WEIGHTED AVERAGE SHARES OUTSTANDING

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

5,978,322

 

 

 

5,937,320

 

 

 

5,962,938

 

 

 

5,894,956

 

Diluted

 

 

5,978,322

 

 

 

5,937,320

 

 

 

8,092,196

 

 

 

5,894,956

 

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

 

Nine Months Ended

 

 

September 30,
2016

 

September 30,
2015

 

September 30,
2016

 

September 30,
2015

CASH FLOWS FROM OPERATING ACTIVITIES

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

$

(2,997,365

)

 

$

(3,631,078

)

 

$

(41,734

)

 

$

(2,619,602

)

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gain on life insurance contracts

 

 

(21,073,226

)

 

 

(14,516,881

)

 

 

(53,846,155

)

 

 

(26,651,363

)

Amortization of deferred financing and issuance costs

 

 

2,765,743

 

 

 

1,933,776

 

 

 

6,077,905

 

 

 

1,891,772

 

Deferred income taxes

 

 

(1,428,130

)

 

 

(1,916,686

)

 

 

1,478,617

 

 

 

(664,905

)

Preferred stock dividends payable

 

 

333,565

 

 

 

173,993

 

 

 

663,614

 

 

 

509,225

 

(Increase) decrease in operating assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Life insurance contract benefits receivable

 

 

700,000

 

 

 

2,142,986

 

 

 

(6,129,022

)

 

 

1,392,986

 

Other assets

 

 

419,836

 

 

 

(417,990

)

 

 

(617,630

)

 

 

(774,539

)

Increase (decrease) in operating liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Due to related party

 

 

(80,949

)

 

 

 

 

 

(182,730

)

 

 

 

Accounts payable and other accrued expenses

 

 

(3,216,990

)

 

 

2,534,269

 

 

 

(2,024,234

)

 

 

3,836,715

 

NET CASH FLOWS USED IN OPERATING ACTIVITIES

 

 

(24,577,516

)

 

 

(13,697,611

)

 

 

(54,621,369

)

 

 

(23,079,711

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CASH FLOWS FROM INVESTING ACTIVITIES

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment in life insurance contracts

 

 

(25,770,326

)

 

 

(13,626,842

)

 

 

(74,470,362

)

 

 

(23,850,860

)

Carrying value of matured life insurance contracts

 

 

1,078,889

 

 

 

80,000

 

 

 

7,381,132

 

 

 

3,822,983

 

Investment in Secured MCA advances

 

 

(1,965,896

)

 

 

 

 

 

(7,613,310

)

 

 

 

Proceeds from Secured MCA advances

 

 

220,911

 

 

 

 

 

 

1,246,703

 

 

 

 

NET CASH FLOWS USED IN INVESTING ACTIVITIES

 

 

(26,436,422

)

 

 

(13,546,842

)

 

 

(73,455,837

)

 

 

(20,027,877

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net borrowings on (repayments of) Senior Credit Facilities

 

 

(10,761,048

)

 

 

 

 

 

6,238,952

 

 

 

(7,150,000

)

Payments for redemption of Series I Secured Notes

 

 

(541,275

)

 

 

(890,586

)

 

 

(6,264,018

)

 

 

(4,508,130

)

Proceeds from issuance of L Bonds

 

 

64,350,430

 

 

 

37,122,127

 

 

 

135,477,090

 

 

 

87,620,483

 

Payments for issuance and redemption of L Bonds

 

 

(14,373,447

)

 

 

(19,363,047

)

 

 

(37,036,922

)

 

 

(32,376,104

)

Proceeds from (increase in) restricted cash

 

 

(4,527,232

)

 

 

651,630

 

 

 

(13,346,126

)

 

 

(2,975,507

)

Issuance of common stock

 

 

31,515

 

 

 

 

 

 

244,185

 

 

 

582,000

 

Proceeds from issuance of preferred stock

 

 

20,786,332

 

 

 

 

 

 

31,287,541

 

 

 

 

Payments for issuance and redemption of preferred stock

 

 

(2,556,859

)

 

 

(21,187

)

 

 

(4,174,773

)

 

 

(295,185

)

NET CASH FLOWS PROVIDED BY FINANCING ACTIVITIES

 

 

52,408,416

 

 

 

17,498,937

 

 

 

112,425,929

 

 

 

40,897,557

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

 

 

1,394,478

 

 

 

(9,745,516

)

 

 

(15,651,277

)

 

 

(2,210,031

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CASH AND CASH EQUIVALENTS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BEGINNING OF PERIOD

 

 

17,379,350

 

 

 

38,198,189

 

 

 

34,425,105

 

 

 

30,662,704

 

END OF PERIOD

 

$

18,773,828

 

 

$

28,452,673

 

 

$

18,773,828

 

 

$

28,452,673

 

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

 

Nine Months Ended

 

 

September 30,
2016

 

September 30,
2015

 

September 30,
2016

 

September 30,
2015

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION

 

 

 

 

 

 

 

 

 

 

 

 

Interest and preferred dividends paid

 

$

11,516,000

 

$

5,385,000

 

$

28,683,000

 

$

18,529,000

Premiums paid

 

$

11,785,000

 

$

6,603,000

 

$

29,225,000

 

$

19,069,000

Stock-based compensation

 

$

162,000

 

$

176,000

 

$

213,000

 

$

208,000

NON-CASH INVESTING AND FINANCING ACTIVITIES

 

 

 

 

 

 

 

 

 

 

 

 

Series I Secured Notes:

 

 

 

 

 

 

 

 

 

 

 

 

Conversion of accrued interest and commissions payable to principal

 

$

47,000

 

$

61,000

 

$

234,000

 

$

188,000

L Bonds:

 

 

 

 

 

 

 

 

 

 

 

 

Conversion of accrued interest and commissions payable to principal

 

$

854,000

 

$

491,000

 

$

1,515,000

 

$

929,000

Issuance of Series A Preferred Stock in lieu of cash dividends

 

$

170,000

 

$

172,000

 

$

509,000

 

$

507,000

Investment in life insurance contracts included in accounts payable

 

$

1,603,000

 

$

559,000

 

$

1,603,000

 

$

559,000

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

F-5

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 — Through its wholly owned subsidiaries, GWG Holdings, Inc. owns a portfolio of life insurance contracts. As of the date of this report, our portfolio had an aggregate fair value of $477.6 million. We earn income from changes in the fair value of our portfolio and through the benefits we receive from the life insurance contracts we own. We are also involved in other lines of business, including a business that collects commissions for facilitating the conversion of term life insurance contracts into universal, or permanent, life insurance, and a business that participates in the merchant cash advance industry by advancing sums to merchants and lending money to businesses that advance sums to merchants. Operating results for the three- and nine-month periods included in this report are not necessarily indicative of the results that may be expected for the year ending December 31, 2016.

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.

Use of Estimates — The preparation of our consolidated financial statements in conformity with GAAP requires management to make 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. The Company regularly evaluates estimates and assumptions, which are based on current facts, historical experience, and various other factors that it believes to be reasonable under the circumstances. The actual results experienced by the Company may differ materially and adversely from the Company’s 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 contracts, 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 Contracts — ASC 325-30, Investments in Insurance Contracts (“ASC 325-30”), permits a reporting entity to account for its investments in life insurance contracts using either the investment method or the fair value method. We elected to use the fair value method to account for our life insurance contracts. Under the fair value method, we recognize our initial investment at the purchase price. At each subsequent reporting period, we re-measure the investment at fair value in its entirety and recognize the change in fair value as revenue in the current period net of premiums paid. We use the term “life insurance contracts” to have the same meaning as “life insurance policies.”

We also recognize realized gain (revenue) from a life insurance contract upon one of the two following events: (1) our receipt of notice or verified mortality of the insured; or (2) our sale of the contract, filing of change-of-ownership forms and receipt of payment. In the case of mortality, the gain (or loss) we recognize is the difference between the contract benefits and the carrying values of the contract once we receive notice or verify the mortality of the insured. In the case of a contract sale, the gain (or loss) we recognize is the difference between the sale price and the carrying value of the contract on the date of our receipt of sale proceeds.

In a case where our acquisition of a contract 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 secured title to the contract. On September 30, 2016 and December 31, 2015, a total of $34,000 and $31,000, respectively, of our “other assets” comprised direct costs and deposits that we advanced for contract acquisitions.

Other Assets — GWG acquired the exclusive option to license “DNA Methylation Based Predictor of Mortality” technology from the University of California, Los Angeles (UCLA). The technology was discovered by Dr. Steven Horvath and is featured in the September 2016 edition of Aging. In 2013, Dr. Horvath reported that human cells

F-6

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

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

have a mechanism that records biological aging progression based on DNA methylation that is independent from chronological aging progression. In 2016, Dr. Horvath discovered a specific set of DNA methylation-based bio-markers that are highly predictive of all-cause mortality. The discovery was made through a statistical analysis of bio-markers found in DNA samples from over 13,000 individuals whose health had been studied for decades. The implications of Dr. Horvath’s discovery are simple and profound: A biostatistician can review a specific set of identified bio-markers and develop a highly predictive analytical model of an individual’s lifespan. The cost of entering into this exclusive option agreement is listed as “other assets”.

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, 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 issuance costs, sales commissions and other direct expenses, which are amortized using the interest method over the term of those borrowings. The Series A Preferred Stock, as described in Note 9, is reported net of issuance costs, sales commissions (including the fair value of warrants issued) and other direct expenses, all of which were fully amortized using the interest method as of December 31, 2015. Selling and issuance costs of Redeemable Preferred Stock and MCA Preferred Stock, described in Notes 10 and 11, are netted against additional paid-in-capital.

Earnings (loss) per Share — Basic earnings (loss) per share attributable to non-redeemable interests 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 outstanding Series A Preferred Stock, Redeemable Preferred Stock, warrants and stock options.

Recently Adopted 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.

Reclassification — Certain 2015 amounts have been reclassified to conform to ASU 2015-03, and that adoption reduced our assets, together with a corresponding reduction to our liabilities, by approximately $2,288,000 as of December 31, 2015. There was no impact on our statements of operations in 2015, and these reclassifications had no effect on our reported consolidated net income or loss for prior periods.

(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 contracts, pay annual contract premiums, pay interest and other charges under the facility, and collect contract benefits. The agent for the lender authorizes the disbursements from these accounts. At September 30, 2016 and December 31, 2015, there was a balance of $15,688,000, and $2,342,000, respectively, in these restricted cash accounts.

(3) Investment in Life Insurance Contracts

Life insurance contracts are valued based on unobservable inputs that are significant to their overall fair value. Changes in the fair value of these contracts are recorded as gain or loss on life insurance contracts, net of cash premiums paid on those contracts, in our consolidated statements of operations. Fair value is determined on a discounted cash flow basis that incorporates life expectancy assumptions derived from reports obtained from widely accepted life expectancy providers, assumptions relating to cost-of-insurance (premium) rates and other assumptions. The discount rate we apply incorporates current information about discount rate applied by other reporting companies owning portfolios of life insurance contracts, the discount rates observed in the life insurance secondary market, market interest rates, our credit exposure to the insurance companies that issued the life insurance contracts 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.

F-7

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

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

As a result of management’s analysis, discount rates of 11.07% and 11.09% were applied to our portfolio as of September 30, 2016 and December 31, 2015, respectively.

We recognized life insurance benefits of $5,300,000 and $357,000 during the three months ended September 30, 2016 and 2015, respectively, related to contracts with a carrying value of $1,078,000 and $80,000, respectively, and as a result recorded realized gains of $4,221,000 and $277,000. We recognized life insurance benefits of $34,367,000 and $29,732,000 during the nine months ended September 30, 2016 and 2015, respectively, related to contracts with a carrying value of $7,381,000 and $3,823,000, respectively, and as a result recorded realized gains of $26,986,000 and $25,909,000.

Reconciliation of gain on life insurance contracts:

 

 

Three Months Ended
September 30,

 

Nine Months Ended
September 30,

 

 

2016

 

2015

 

2016

 

2015

Change in fair value

 

$

21,073,000

 

 

$

14,517,000

 

 

$

53,846,000

 

 

$

26,651,000

 

Premiums and other fees

 

 

(11,784,000

)

 

 

(6,605,000

)

 

 

(29,225,000

)

 

 

(19,114,000

)

Contract maturities

 

 

4,221,000

 

 

 

277,000

 

 

 

26,986,000

 

 

 

25,909,000

 

Gain on life insurance contracts, net

 

$

13,510,000

 

 

$

8,189,000

 

 

$

51,607,000

 

 

$

33,446,000

 

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

Years Ending December 31,

 

Premiums

 

Servicing

 

Premiums
and
Servicing Fees

Three months ending December 31, 2016

 

$

10,449,000

 

$

188,000

 

$

10,637,000

2017

 

 

43,155,000

 

 

750,000

 

 

43,905,000

2018

 

 

46,847,000

 

 

750,000

 

 

47,597,000

2019

 

 

50,813,000

 

 

750,000

 

 

51,563,000

2020

 

 

56,633,000

 

 

750,000

 

 

57,383,000

2021

 

 

63,222,000

 

 

750,000

 

 

63,972,000

 

 

$

271,119,000

 

$

3,938,000

 

$

275,057,000

Management anticipates funding the premium payments estimated above with proceeds from our senior credit facilities, proceeds from additional debt and equity financing, and proceeds from maturities of life insurance contracts. The proceeds of these capital sources may also be used for the purchase, financing, and maintenance of additional life insurance contracts.

(4) Fair Value Definition and Hierarchy

ASC 820, Fair Value Measurement (“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 developed 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-8

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 contracts 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 (i) current information about discount rate applied by other reporting companies owning portfolios of life insurance contracts, (ii) the discount rates observed in the life insurance secondary market, (iii) market interest rates, (iv) our credit exposure to the insurance company that issued the life insurance contract and (v) management’s estimate of the risk premium a purchaser would require to receive the future cash flows derived from our portfolio as a whole.

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 herewith.

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

 

 

Three months ended
September 30,

 

Nine months ended
September 30,

 

 

2016

 

2015

 

2016

 

2015

Beginning balance

 

$

431,820,000

 

 

$

301,499,000

 

 

$

356,650,000

 

 

$

282,883,000

 

Purchases

 

 

25,770,000

 

 

 

13,626,000

 

 

 

74,470,000

 

 

 

23,851,000

 

Maturities (carrying value)

 

 

(1,078,000

)

 

 

(80,000

)

 

 

(7,381,000

)

 

 

(3,823,000

)

Net change in fair value

 

 

21,073,000

 

 

 

14,517,000

 

 

 

53,846,000

 

 

 

26,651,000

 

Ending balance (September 30)

 

$

477,585,000

 

 

$

329,562,000

 

 

$

477,585,000

 

 

$

329,562,000

 

We periodically update the independent life expectancy estimates on the insured lives in our portfolio, other than insured lives covered under small face amount contracts (i.e., $1 million in face value benefits or less), on a continuous rotating three-year cycle. Accordingly, we update life expectancies for approximately one-twelfth of our portfolio each quarter.

F-9

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 contracts:

 

 

As of
September 30,
2016

 

As of
December 31,
2015

Weighted-average age of insured, years

 

 

81.8

 

 

 

82.6

 

Weighted-average life expectancy, months

 

 

81.8

 

 

 

79.3

 

Average face amount per contract

 

$

2,035,000

 

 

$

2,386,000

 

Discount rate

 

 

11.07

%

 

 

11.09

%

These assumptions 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 contract, 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 contracts would increase or (decrease) as summarized below:

Change in Fair Value of the Investment in Life Insurance Contracts

 

 

Change in life expectancy estimates

 

 

minus
8 months

 

minus
4 months

 

plus
4 months

 

plus
8 months

September 30, 2016

 

$

64,713,000

 

$

32,215,000

 

$

(31,450,000

)

 

$

(62,258,000

)

December 31, 2015

 

$

48,339,000

 

$

24,076,000

 

$

(23,501,000

)

 

$

(46,482,000

)

 

 

 

Change in discount rate

 

 

minus 2%

 

minus 1%

 

plus 1%

 

plus 2%

September 30, 2016

 

$

50,097,000

 

$

23,990,000

 

$

(22,096,000

)

 

$

(42,492,000

)

December 31, 2015

 

$

35,024,000

 

$

16,786,000

 

$

(15,485,000

)

 

$

(29,803,000

)

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 $402,416,000 as of September 30, 2016, is approximately $414,023,000 based on a weighted-average market interest rate of 6.36%. 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 contracts collateralizing the debt. The overall rate reflects market, and the carrying value of the facility approximates fair value.

Our wholly owned subsidiary GWG MCA Capital, Inc. (“GWG MCA”) participates in the merchant cash advance 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 September 30, 2016, one of our secured loans to Nulook Capital LLC was potentially impaired. The secured loan to Nulook Capital LLC had an outstanding balance of $3,215,000 and a loan loss reserve of $400,000 at September 30, 2016. 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.

F-10

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 as of September 30, 2016:

Month issued

 

Warrants
issued

 

Fair value
per share

 

Risk
free rate

 

Volatility

 

Term

December 2011

 

68,937

 

$

0.22

 

0.42

%

 

25.25

%

 

5 years

March 2012

 

38,130

 

$

0.52

 

0.38

%

 

36.20

%

 

5 years

June 2012

 

161,840

 

$

1.16

 

0.41

%

 

47.36

%

 

5 years

July 2012

 

144,547

 

$

1.16

 

0.41

%

 

47.36

%

 

5 years

September 2012

 

2,500

 

$

0.72

 

0.31

%

 

40.49

%

 

5 years

September 2014

 

16,000

 

$

1.26

 

1.85

%

 

17.03

%

 

5 years

 

 

431,954

 

 

 

 

 

 

 

 

 

 

 

 (5) Credit Facility — Autobahn Funding Company LLC

Through our subsidiaries GWG DLP Funding II, LLC (“DLP II”) and GWG DLP Funding III, LLC (“DLP III”), we are party to a $105 million revolving 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 the revolving senior credit facility in full with funds received from a new senior secured term loan 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%. We make interest payments on a monthly basis. The effective rate of interest was 5.42% at September 14, 2016 and 5.58% at December 31, 2015. The weighted-average effective interest rate, after excluding an unused line fee, was 5.46% and 5.42% for the three months ended September 30, 2016 and 2015, respectively, and 5.54% and 5.81% for the nine months ended September 30, 2016 and 2015, respectively.

The amount outstanding under this facility was $0 and $65,011,000 at September 30, 2016 and December 31, 2015, respectively. GWG Holdings is a performance guarantor of the various obligations of GWG Life, LLC (“GWG Life”), as servicer, under the Agreement. Obligations under the facility are secured by our pledge of ownership in our life insurance contracts to DZ Bank through an arrangement under which Wells Fargo serves as a securities intermediary.

The Agreement has certain financial (as described below) and non-financial covenants, and we were in compliance with these covenants at September 30, 2016 and December 31, 2015.

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) maintain cash and eligible investments of $15 million or above. Consolidated non-GAAP net income and non-GAAP tangible net worth as of and for the four quarters ended September 30, 2016, as calculated under the Agreement, was $33,877,000 and $149,361,000, respectively.

Total funds available for additional borrowings under the facility at December 31, 2015, was $39,989,000. At September 30, 2016, the amount outstanding was $0 and there were no policies pledged to the facility.

F-11

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

(6) Credit Facility — LNV Corporation

On September 14, 2016, we entered into a senior secured term loan with LNV Corporation (“LNV”) as lender through our subsidiary GWG DLP Funding IV, LLC (“DLP IV”) as borrower. The facility is governed by a Loan and Security Agreement (the “Loan Agreement”), with CLMG Corp. (“CLMG”) acting as administrative agent on behalf of the lender under the Loan Agreement. The Loan Agreement 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. Interest will accrue on amounts borrowed under the agreement at an annual interest rate, determined as of each date of 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. Interest payments are made on a quarterly basis.

At September 30, 2016, the amount outstanding under this facility was $71,250,000 and total funds available for additional borrowing, net of required reserve, was $76,629,000.

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 security intermediary.

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 November 10, 2016, the amount set aside in the reserve account is $27,500,000.

The Agreement has no financial covenants and certain non-financial reporting covenants, and we were in compliance with these covenants at September 30, 2016.

(7) Series I Secured Notes

Series I Secured Notes (“Notes”) are legal obligations of GWG Life and were privately offered and sold from August 2009 through June 2011. The Notes 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 September 30, 2016 and December 31, 2015.

The Notes 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 Notes 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. Effective September 1, 2016, we no longer anticipate renewing the Notes.

Interest on the Notes is payable monthly, quarterly, annually or at maturity depending on the election of the investor. At September 30, 2016 and December 31, 2015, the weighted-average interest rate of our Notes was 8.63% and 8.47%, respectively. The principal amount of Notes outstanding was $17,830,000 and $23,578,000 at September 30, 2016 and December 31, 2015, respectively. The difference between the amount outstanding on the Notes and the carrying amount on our balance sheet is due to netting of unamortized deferred issuance costs. Overall, interest expense includes amortization of deferred financing and issuance costs of $82,000 and $275,000 for the three and nine months ended September 30, 2016 and $49,000 and $260,000 for the three and nine months ended September 30, 2015. Future expected amortization of deferred financing costs is $277,000 in total over the next six years.

F-12

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

(7) Series I Secured Notes (cont.)

Future contractual maturities of Notes payable and future amortization of their deferred financing costs at September 30, 2016 are as follows:

Years Ending December 31,

 

Contractual
Maturities

 

Amortization
of Deferred
Financing Costs

Three months ending December 31, 2016

 

$

1,177,000

 

$

5,000

2017

 

 

10,522,000

 

 

88,000

2018

 

 

2,401,000

 

 

49,000

2019

 

 

1,023,000

 

 

22,000

2020

 

 

1,766,000

 

 

55,000

Thereafter

 

 

941,000

 

 

58,000

 

 

$

17,830,000

 

$

277,000

 (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 September 30, 2016 and December 31, 2015.

Effective September 1, 2016, we discontinued the sales of 6-month and 1-year L Bonds. In addition, effective September 1, 2016, the L Bond interest rates 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 September 30, 2016 and December 31, 2015, the weighted-average interest rate of our L Bonds was 7.16% and 7.18%, respectively. The principal amount of L Bonds outstanding was $384,586,000 and $282,171,000 at September 30, 2016 and December 31, 2015, 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 and cash receipts for new issuances in process. Amortization of deferred issuance costs was $2,073,000 and $5,362,000 for the three and nine months ended September 30, 2016 and $1,892,000 and $4,232,000 for the three and nine months ended September 30, 2015. Future expected amortization of deferred financing costs as of September 30, 2016 is $11,622,000 in total over the next eight years.

Future contractual maturities of L Bonds, and future amortization of their deferred financing costs, at September 30, 2016 are as follows:

Years Ending December 31,

 

Contractual
Maturities

 

Amortization
of Deferred
Financing Costs

Three months ending December 31, 2016

 

$

23,548,000

 

$

115,000

2017

 

 

112,987,000

 

 

1,708,000

2018

 

 

101,130,000

 

 

3,106,000

2019

 

 

78,098,000

 

 

3,222,000

2020

 

 

19,291,000

 

 

784,000

Thereafter

 

 

49,532,000

 

 

2,687,000

 

 

$

384,586,000

 

$

11,622,000

F-13

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

(9) Convertible Preferred Stock

From July 2011 until September 2012, we privately offered shares of Series A Preferred Stock (“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 included as interest expense in the statements of operations. 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 the rate of $10.00 per share.

As of September 30, 2016, we issued an aggregate of 447,000 shares of Series A in satisfaction of $3,129,000 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 September 30, 2016, we had 2,650,000 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 September 30, 2016 and December 31, 2015, none of these warrants were exercised, and the weighted-average remaining life of these warrants was 0.68 and 1.43 years, respectively.

In September 2012, we completed 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 under the Certificate of Designation at a price equal to 110% of their liquidation preference ($7.50 per share) at any time. As of September 30, 2016, we have redeemed an aggregate of 277,000 shares of Series A.

(10) Redeemable Preferred Stock

Beginning November 30, 2015, we began publicly offering up to 100,000 shares of Redeemable Preferred Stock (“RPS”) at $1,000 per share. Holders of RPS are entitled to cumulative dividends at the rate of 7% per annum, paid monthly. Dividends on the RPS are included as interest expense in the statements of operations. 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 liquidation preference 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 to decline requests for redemption in certain circumstances. 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 September 30, 2016, we had sold 33,201 shares of RPS for aggregate gross consideration of $33,177,000, and incurred approximately $2,399,000 of selling costs related to the sale of those shares.

F-14

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

(11) GWG MCA Capital, Inc — 9% Preferred Stock

Beginning March 31, 2016, GWG MCA began privately offering up to 2,000,000 shares of GWG MCA 9% Preferred Stock (“MCA Preferred”) at $10.00 per share. Holders of MCA Preferred are entitled to cumulative dividends at a rate of 9% per annum, paid monthly. Dividends on the MCA Preferred are included as interest expense in the statements of operations. As of September 30, 2016, a total of 7,155 shares of MCA Preferred had been sold for aggregate gross consideration of $72,000 and approximately $7,000 of selling costs related to the sale of these shares were incurred.

Holders of MCA Preferred were redeemed as of September 30, 2016 at the stated value of their shares plus accrued but unpaid dividends.

(12) Income Taxes

We had a current income tax liability of $0 as of both September 30, 2016 and December 31, 2015. The components of current and deferred income tax expense for the three and nine months ended September 30, 2016 and 2015, respectfully, consisted of the following:

 

 

Three Months Ended

 

Nine Months Ended

 

 

September 30,
2016

 

September 30,
2015

 

September 30,
2016

 

September 30,
2015

Income tax provision (benefit):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Federal

 

$

 

 

$

(141,000

)

 

$

 

$

 

State

 

$

 

 

$

(40,000

)

 

$

 

$

 

Total current tax expense (benefit)

 

 

 

 

 

(181,000

)

 

 

 

 

 

Deferred:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Federal

 

$

(1,082,000

)

 

$

(1,488,000

)

 

$

1,121,000

 

$

(504,000

)

State

 

$

(346,000

)

 

$

(429,000

)

 

$

358,000

 

$

(161,000

)

Total deferred tax expense (benefit)

 

 

(1,428,000

)

 

 

(1,917,000

)

 

 

1,479,000

 

 

(665,000

)

Total income tax expense (benefit)

 

 

(1,428,000

)

 

 

(2,098,000

)

 

 

1,479,000

 

 

(665,000

)

We provided a valuation allowance against the deferred tax asset related to a note receivable, which was charged-off for financial reporting purposes, because we believe that, when realized for tax purposes, it will result in a capital loss that will not be utilized because we have no expectation of generating a capital gain within the applicable carryforward period. Therefore, we do not believe that it is “more likely than not” that the deferred tax asset will be realized.

We also provided a valuation allowance against the deferred tax asset related to a tax basis capital loss generated with respect to our settlement and subsequent disposal of an earlier investment in Athena Structured Funds PLC. As we have no expectation of generating capital gains with the applicable carryforward period, we do not believe that it is “more likely than not” that the deferred asset will be realized.

The primary differences between the September 30, 2016 effective tax rate and the statutory federal rate are the accrual of non-deductible preferred stock dividend expense of $2,153,000, state taxes, and other non-deductible expenses. 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 contracts and revenue recognition with respect to the mark-to-market of our life insurance portfolio.

F-15

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

(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.”

On June 24, 2015 we issued 60,000 restricted common shares at $9.70 per share, determined by the closing market price on the date of grant, to a vendor as payment for services to be rendered over three years. The cost of these shares is amortized over a 12-month period. On March 17, 2016, we issued an additional 6,500 restricted common shares at an average price of $7.16 per share, determined by the closing market price on the date of grant, to this same vendor for additional services provided to us. On April 25, 2016, we issued 25,000 restricted shares of common stock at $6.25 per share, determined by the closing market price on the date of grant, to a vendor as a form of payment for services the vendor is providing to us, which is expensed in the current period.

(14) Stock Incentive Plan

We adopted our GWG Holdings 2013 Stock Incentive Plan in March 2013. The Compensation Committee of our Board of Directors administers the plan. Incentives 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. 2,000,000 common shares are presently issuable under the plan.

Stock Options — Through September 30, 2016, we issued stock options for 1,237,000 shares of common stock to employees, officers, and directors under the plan. Options for 687,000 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 $10.18 for those beneficially owning more than 10% of our common stock, and between $6.00 and $10.25 for all others, which is equal to the estimated market price of the shares on the date of grant using Black-Scholes binomial option pricing model. The expected annualized volatility used in the Black-Scholes model valuation of options issued during the period was 25.5%. 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 September 30, 2016, stock options for 415,000 shares were forfeited and stock options for 28,000 shares were exercised.

Outstanding stock options:

 

 

Vested

 

Un-vested

 

Total

Balance as of December 31, 2014

 

314,288

 

 

685,813

 

 

1,000,101

 

Granted during the year

 

79,500

 

 

273,700

 

 

353,200

 

Vested during the year

 

238,999

 

 

(238,999

)

 

 

Exercised during the year

 

(27,667

)

 

 

 

(27,667

)

Forfeited during the year

 

(121,417

)

 

(150,602

)

 

(272,019

)

Balance as of December 31, 2015

 

483,703

 

 

569,912

 

 

1,053,615

 

Granted during the year

 

22,500

 

 

239,948

 

 

262,448

 

Vested during the year

 

187,473

 

 

(187,473

)

 

 

Forfeited during the year

 

(6,676

)

 

(72,824

)

 

(79,500

)

Balance as of September 30, 2016

 

687,000

 

 

549,563

 

 

1,236,563

 

Compensation expense related to un-vested options not yet recognized is $420,000. We expect to recognize this compensation expense over the next three years ($14,000 in 2016, $240,000 in 2017, $109,000 in 2018, and $57,000 in 2019).

F-16

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

(14) Stock Incentive Plan (cont.)

Stock Appreciation Rights (SARs) — On September 19, 2016 we issued SARs for 145,388 shares of the common stock to employees. The strike price of the SARs was $8.76, which was equal to the market price of the common stock at the close of business on September 19, 2016. 56,358 of the SARs were vested as of September 30, 2016, on which date the market price of the common stock was $8.82. A forfeiture rate of 15% was used in calculating our liability for the SARs.

Outstanding Stock Appreciation Rights:

 

 

Vested

 

Un-vested

 

Total

Balance as of December 31, 2015

 

 

 

Granted during the year

 

56,358

 

89,030

 

145,388

Vested during the year

 

56,358

 

89,030

 

145,388

Forfeited during the year

 

 

 

Balance as of September 30, 2016

 

56,358

 

89,030

 

145,388

A liability for Stock Appreciation Rights - Compensation Expense was recorded on September 30, 2016 in the amount of $3,381 and Compensation Expense was charged for the same amount.

(15) Net Income per Common Share

We have outstanding Series A, as described in Note 9. The Series A are dilutive to our net income per common share calculation for the nine-month period ended September 30, 2016. They are anti-dilutive for the three-month period ended September 30, 2016 and for both three and nine-month periods ended September 30, 2015. 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 for both three and nine-month periods ended September 30, 2016 and 2015 and have not been included in the fully diluted net loss per common share calculation. We issued RPS (see Note 10). The RPS is dilutive for the nine-month period ended September 30, 2016 and anti-dilutive for the three-month period ended September 30, 2016.

(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 August 31, 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 these lease arrangements were $102,000 and $71,000 for the three months ended September 30, 2016 and 2015, respectively, and $306,000 and $193,000 for the nine months ended September 30, 2016 and 2015, respectively.

Minimum lease payments under the amended lease are as follows:

Three months ending December 31, 2016

 

$

44,000

2017

 

 

178,000

2018

 

 

185,000

2019

 

 

191,000

2020

 

 

198,000

2021

 

 

204,000

2022

 

 

210,000

2023

 

 

217,000

2024

 

 

223,000

2025

 

 

230,000

2026

 

 

38,000

 

 

$

1,918,000

F-17

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

(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 Bond 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 the 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 GWG’s life insurance contracts are held by wholly owned subsidiaries of GWG Life: DLP III, DLP IV and the Trust. GWG Life’s equity ownership in these subsidiaries serves as collateral for the L Bond obligation. The life insurance contracts held by DLP III and DLP IV are not direct collateral for the L Bond obligations but do 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 provided herein. A majority of insurance contracts we own are subject to a collateral arrangement with LNV described in Note 6. Under this arrangement, collection and escrow accounts are used to fund premiums for the insurance contracts and to pay interest and other charges under the senior credit facility.

The following represents consolidating financial information as of September 30, 2016 and December 31, 2015, with respect to the financial position, and for the three and nine months ended September 30, 2016 and 2015, 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 presents 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.

F-18

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

(18) Guarantee of L Bonds (cont.)

Condensed Consolidating Balance Sheets

September 30, 2016

 

Parent

 

Guarantor
Subsidiary

 

Non-Guarantor
Subsidiaries

 

Eliminations

 

Consolidated

ASSETS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

13,312,751

 

 

$

4,372,845

 

$

1,088,232

 

$

 

 

$

18,773,828

 

Restricted cash

 

 

 

 

 

4,438,025

 

 

11,250,000

 

 

 

 

 

15,688,025

 

Investment in life insurance contracts, at fair value

 

 

 

 

 

 

 

477,585,100

 

 

 

 

 

477,585,100

 

Secured MCA advances

 

 

 

 

 

 

 

6,113,831

 

 

 

 

 

6,113,831

 

Life insurance contract benefits receivable

 

 

 

 

 

 

 

6,129,022

 

 

 

 

 

6,129,022

 

Other assets

 

 

4,706,121

 

 

 

1,224,386

 

 

54,726

 

 

(2,854,126

)

 

 

3,131,107

 

Investment in subsidiaries

 

 

422,185,881

 

 

 

429,441,035

 

 

 

 

(851,626,916

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

TOTAL ASSETS

 

$

440,204,753

 

 

$

439,476,291

 

$

502,220,911

 

$

(854,481,042

)

 

$

527,420,913

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

LIABILITIES & STOCKHOLDERS’ EQUITY (DEFICIT)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

LIABILITIES

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Senior credit facilities

 

$

 

 

$

 

$

63,699,385

 

$

 

 

$

63,699,385

 

Series I Secured Notes

 

 

 

 

 

17,553,307

 

 

 

 

 

 

 

17,553,307

 

L Bonds

 

 

379,858,737

 

 

 

 

 

 

 

 

 

 

379,858,737

 

Notes payable to related parties

 

 

 

 

 

 

 

2,700,000

 

 

(2,700,000

)

 

 

 

Accounts payable

 

 

699,507

 

 

 

99,705

 

 

1,643,237

 

 

 

 

 

2,442,449

 

Interest payable

 

 

9,798,735

 

 

 

3,588,954

 

 

400,077

 

 

(154,126

)

 

 

13,633,640

 

Other accrued expenses

 

 

259,722

 

 

 

351,896

 

 

33,725

 

 

 

 

 

645,343

 

Deferred taxes, net

 

 

3,242,586

 

 

 

 

 

 

 

 

 

 

3,242,586

 

TOTAL LIABILITIES

 

 

393,859,287

 

 

 

21,593,862

 

 

68,476,424

 

 

(2,854,126

)

 

 

481,075,447

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

STOCKHOLDERS’ EQUITY (DEFICIT)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Member capital

 

 

 

 

 

417,882,429

 

 

433,744,487

 

 

(851,626,916

)

 

 

 

Convertible preferred stock

 

 

19,772,931

 

 

 

 

 

 

 

 

 

 

19,772,931

 

Redeemable preferred stock

 

 

33,176,600

 

 

 

 

 

 

 

 

 

 

33,176,600

 

Common stock

 

 

5,980

 

 

 

 

 

 

 

 

 

 

5,980

 

Additional paid-in capital

 

 

15,226,449

 

 

 

 

 

 

 

 

 

 

15,226,449

 

Accumulated deficit

 

 

(21,836,494

)

 

 

 

 

 

 

 

 

 

(21,836,494

)

TOTAL STOCKHOLDERS’ EQUITY (DEFICIT)

 

 

46,345,466

 

 

 

417,882,429

 

 

433,744,487

 

 

(851,626,916

)

 

 

46,345,466

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)

 

$

440,204,753

 

 

$

439,476,291

 

$

502,220,911

 

$

(854,481,042

)

 

$

527,420,913

 

F-19

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, 2015

 

Parent

 

Guarantor
Subsidiary

 

Non-Guarantor
Subsidiaries

 

Eliminations

 

Consolidated

ASSETS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

32,292,162

 

 

$

1,982,722

 

 

$

150,221

 

$

 

 

$

34,425,105

 

Restricted cash

 

 

 

 

 

2,102,257

 

 

 

239,643

 

 

 

 

 

2,341,900

 

Investment in life insurance contracts, at fair value

 

 

 

 

 

 

 

 

356,649,715

 

 

 

 

 

356,649,715

 

Other assets

 

 

1,742,074

 

 

 

688,071

 

 

 

30,900

 

 

 

 

 

2,461,045

 

Investment in subsidiaries

 

 

269,886,254

 

 

 

291,295,951

 

 

 

 

 

(561,182,205

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

TOTAL ASSETS

 

$

303,920,490

 

 

$

296,069,001

 

 

$

357,070,479

 

$

(561,182,205

)

 

$

395,877,765

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

LIABILITIES & STOCKHOLDERS’ EQUITY (DEFICIT)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

LIABILITIES

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Senior credit facilities

 

$

 

 

$

(1,000,000

)

 

$

64,279,596

 

$

 

 

$

63,279,596

 

Series I Secured Notes

 

 

 

 

 

23,287,704

 

 

 

 

 

 

 

 

23,287,704

 

L Bonds

 

 

276,482,796

 

 

 

 

 

 

 

 

 

 

 

276,482,796

 

Accounts payable

 

 

280,988

 

 

 

157,217

 

 

 

1,079,235

 

 

 

 

 

1,517,440

 

Interest payable

 

 

8,529,959

 

 

 

3,544,626

 

 

 

265,476

 

 

 

 

 

12,340,061

 

Other accrued expenses

 

 

717,365

 

 

 

343,421

 

 

 

 

 

 

 

 

1,060,786

 

Deferred taxes, net

 

 

1,763,968

 

 

 

 

 

 

 

 

 

 

 

1,763,968

 

TOTAL LIABILITIES

 

 

287,775,076

 

 

 

26,332,968

 

 

 

65,624,307

 

 

 

 

 

379,732,351

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

STOCKHOLDERS’ EQUITY (DEFICIT)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Member capital

 

 

 

 

 

269,736,033

 

 

 

291,446,172

 

 

(561,182,205

)

 

 

 

Convertible preferred stock

 

 

20,784,841

 

 

 

 

 

 

 

 

 

 

 

20,784,841

 

Common stock

 

 

5,942

 

 

 

 

 

 

 

 

 

 

 

5,942

 

Additional paid-in capital

 

 

17,149,391

 

 

 

 

 

 

 

 

 

 

 

17,149,391

 

Accumulated deficit

 

 

(21,794,760

)

 

 

 

 

 

 

 

 

 

 

(21,794,760

)

TOTAL STOCKHOLDERS’ EQUITY (DEFICIT)

 

 

16,145,414

 

 

 

269,736,033

 

 

 

291,446,172

 

 

(561,182,205

)

 

 

16,145,414

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)

 

$

303,920,490

 

 

$

296,069,001

 

 

$

357,070,479

 

$

(561,182,205

)

 

$

395,877,765

 

F-20

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 nine months ended
September 30, 2016

 

Parent

 

Guarantor
Subsidiary

 

Non-
Guarantor
Subsidiaries

 

Eliminations

 

Consolidated

REVENUE

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Origination and servicing income

 

$

 

 

$

13,417

 

 

$

 

$

(13,417

)

 

$

 

Gain on life insurance contracts, net

 

 

 

 

 

 

 

 

51,606,815

 

 

 

 

 

51,606,815

 

MCA income

 

 

 

 

 

 

 

 

654,441

 

 

 

 

 

654,441

 

Interest and other income

 

 

181,828

 

 

 

31,137

 

 

 

282,259

 

 

(154,126

)

 

 

341,098

 

TOTAL REVENUE

 

 

181,828

 

 

 

44,554

 

 

 

52,543,515

 

 

(167,543

)

 

 

52,602,354

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EXPENSES

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Origination and servicing fees

 

 

 

 

 

 

 

 

13,417

 

 

(13,417

)

 

 

 

Interest expense

 

 

25,477,320

 

 

 

1,856,909

 

 

 

4,829,831

 

 

(154,126

)

 

 

32,009,934

 

Employee compensation and benefits

 

 

4,894,006

 

 

 

3,151,107

 

 

 

405,055

 

 

 

 

 

8,450,168

 

Legal and professional fees

 

 

1,642,252

 

 

 

1,308,959

 

 

 

146,101

 

 

 

 

 

3,097,312

 

Other expenses

 

 

4,241,825

 

 

 

2,197,133

 

 

 

1,169,099

 

 

 

 

 

7,608,057

 

TOTAL EXPENSES

 

 

36,255,403

 

 

 

8,514,108

 

 

 

6,563,503

 

 

(167,543

)

 

 

51,165,471

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

INCOME (LOSS) BEFORE EQUITY IN INCOME OF SUBSIDIARIES

 

 

(36,073,575

)

 

 

(8,469,554

)

 

 

45,980,012

 

 

 

 

 

1,436,883

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EQUITY IN INCOME OF SUBSIDIARY

 

 

37,510,458

 

 

 

46,497,731

 

 

 

 

 

(84,008,189

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

INCOME BEFORE INCOME TAXES

 

 

1,436,883

 

 

 

38,028,177

 

 

 

45,980,012

 

 

(84,008,189

)

 

 

1,436,883

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

INCOME TAX EXPENSE

 

 

1,478,617

 

 

 

 

 

 

 

 

 

 

 

1,478,617

 

NET INCOME (LOSS)

 

$

(41,734

)

 

$

38,028,177

 

 

$

45,980,012

 

$

(84,008,189

)

 

$

(41,734

)

F-21

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 nine months ended
September 30, 2015

 

Parent

 

Guarantor
Subsidiary

 

Non-
Guarantor
Subsidiaries

 

Eliminations

 

Consolidated

REVENUE

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Origination and servicing income

 

$

 

 

$

2,022,774

 

 

$

 

$

(2,022,774

)

 

$

 

Gain on life settlements, net

 

 

 

 

 

 

 

 

33,446,556

 

 

 

 

 

33,446,556

 

Interest and other income

 

 

38,944

 

 

 

61,694

 

 

 

132,878

 

 

 

 

 

233,516

 

TOTAL REVENUE

 

 

38,944

 

 

 

2,084,468

 

 

 

33,579,434

 

 

(2,022,774

)

 

 

33,680,072

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EXPENSES

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Origination and servicing fees

 

 

 

 

 

 

 

 

2,022,774

 

 

(2,022,774

)

 

 

 

Interest expense

 

 

18,011,890

 

 

 

1,984,356

 

 

 

3,152,784

 

 

 

 

 

23,149,030

 

Employee compensation and benefits

 

 

4,671,183

 

 

 

1,509,703

 

 

 

 

 

 

 

 

6,180,886

 

Legal and professional fees

 

 

1,427,388

 

 

 

560,873

 

 

 

 

 

 

 

 

1,988,261

 

Other expenses

 

 

3,251,606

 

 

 

2,297,063

 

 

 

97,733

 

 

 

 

 

5,646,402

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

TOTAL EXPENSES

 

 

27,362,067

 

 

 

6,351,995

 

 

 

5,273,291

 

 

(2,022,774

)

 

 

36,964,579

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

INCOME (LOSS) BEFORE EQUITY IN INCOME OF SUBSIDIARIES

 

 

(27,323,123

)

 

 

(4,267,527

)

 

 

28,306,143

 

 

 

 

 

(3,284,507

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EQUITY IN INCOME OF SUBSIDIARY

 

 

24,038,616

 

 

 

28,305,979

 

 

 

 

 

(52,344,595

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NET INCOME (LOSS) BEFORE INCOME TAXES

 

 

(3,284,507

)

 

 

24,038,452

 

 

 

28,306,143

 

 

(52,344,595

)

 

 

(3,284,507

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

INCOME TAX BENEFIT

 

 

(664,905

)

 

 

 

 

 

 

 

 

 

 

(664,905

)

NET INCOME (LOSS)

 

$

(2,619,602

)

 

$

24,038,452

 

 

$

28,306,143

 

$

(52,344,595

)

 

$

(2,619,602

)

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 (continued)

For the three months ended
September 30, 2016

 

Parent

 

Guarantor
Subsidiary

 

Non-
Guarantor
Subsidiaries

 

Eliminations

 

Consolidated

REVENUE

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gain on life insurance contracts, net

 

 

 

 

 

 

 

 

13,509,755

 

 

 

 

 

13,509,755

 

MCA income

 

 

 

 

 

 

 

 

286,225

 

 

 

 

 

286,225

 

Interest and other income

 

 

75,808

 

 

 

30,126

 

 

 

83,313

 

 

(64,249

)

 

 

124,998

 

TOTAL REVENUE

 

 

75,808

 

 

 

30,126

 

 

 

13,879,293

 

 

(64,249

)

 

 

13,920,978

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EXPENSES

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

 

9,747,128

 

 

 

554,938

 

 

 

1,746,151

 

 

(64,249

)

 

 

11,983,968

 

Employee compensation and benefits

 

 

1,718,683

 

 

 

1,038,058

 

 

 

155,722

 

 

 

 

 

2,912,463

 

Legal and professional fees

 

 

263,917

 

 

 

297,804

 

 

 

25,109

 

 

 

 

 

586,830

 

Other expenses

 

 

1,464,498

 

 

 

803,106

 

 

 

595,608

 

 

 

 

 

2,863,212

 

TOTAL EXPENSES

 

 

13,194,226

 

 

 

2,693,906

 

 

 

2,522,590

 

 

(64,249

)

 

 

18,346,473

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

INCOME (LOSS) BEFORE EQUITY IN INCOME OF SUBSIDIARIES

 

 

(13,118,418

)

 

 

(2,663,780

)

 

 

11,356,703

 

 

 

 

 

(4,425,495

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EQUITY IN INCOME OF SUBSIDIARY

 

 

8,692,923

 

 

 

11,361,329

 

 

 

 

 

(20,054,252

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

INCOME (LOSS) BEFORE INCOME TAXES

 

 

(4,425,495

)

 

 

8,697,549

 

 

 

11,356,703

 

 

(20,054,252

)

 

 

(4,425,495

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

INCOME TAX BENEFIT

 

 

(1,418,130

)

 

 

 

 

 

 

 

 

 

 

(1,428,130

)

NET INCOME (LOSS)

 

$

(2,997,365

)

 

$

8,697,549

 

 

$

11,356,703

 

$

(20,054,252

)

 

$

(2,997,365

)

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 three months ended
September 30, 2015

 

Parent

 

Guarantor
Subsidiary

 

Non-
Guarantor
Subsidiaries

 

Eliminations

 

Consolidated

REVENUE

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Origination and servicing income

 

$

 

 

$

1,004,024

 

 

$

 

$

(1,004,024

)

 

$

 

Gain on life settlements, net

 

 

 

 

 

 

 

 

8,189,261

 

 

 

 

 

8,189,261

 

Interest and other income

 

 

13,922

 

 

 

54,813

 

 

 

25,106

 

 

 

 

 

93,841

 

TOTAL REVENUE

 

 

13,922

 

 

 

1,058,837

 

 

 

8,214,367

 

 

(1,004,024

)

 

 

8,283,102

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EXPENSES

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Origination and servicing fees

 

 

 

 

 

 

 

 

1,004,024

 

 

(1,004,024

)

 

 

 

Interest expense

 

 

6,980,132

 

 

 

525,391

 

 

 

1,144,626

 

 

 

 

 

8,650,149

 

Employee compensation and benefits

 

 

1,759,589

 

 

 

548,657

 

 

 

 

 

 

 

 

2,308,246

 

Legal and professional fees

 

 

598,530

 

 

 

223,547

 

 

 

 

 

 

 

 

822,077

 

Other expenses

 

 

1,195,417

 

 

 

995,026

 

 

 

40,898

 

 

 

 

 

2,231,341

 

TOTAL EXPENSES

 

 

10,533,668

 

 

 

2,292,621

 

 

 

2,189,548

 

 

(1,004,024

)

 

 

14,011,813

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

INCOME (LOSS) BEFORE EQUITY IN INCOME OF SUBSIDIARIES

 

 

(10,519,746

)

 

 

(1,233,784

)

 

 

6,024,819

 

 

 

 

 

(5,728,711

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EQUITY IN INCOME OF SUBSIDIARY

 

 

4,791,035

 

 

 

6,024,762

 

 

 

 

 

(10,815,797

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NET INCOME (LOSS) BEFORE INCOME TAXES

 

 

(5,728,711

)

 

 

4,790,978

 

 

 

6,024,819

 

 

(10,815,797

)

 

 

(5,728,711

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

INCOME TAX BENEFIT

 

 

(2,097,633

)

 

 

 

 

 

 

 

 

 

 

(2,097,633

)

NET INCOME (LOSS)

 

$

(3,631,078

)

 

$

4,790,978

 

 

$

6,024,819

 

$

(10,815,797

)

 

$

(3,631,078

)

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 nine months ended
September 30, 2016

 

Parent

 

Guarantor
Subsidiary

 

Non-
Guarantor
Subsidiaries

 

Eliminations

 

Consolidated

CASH FLOWS FROM OPERATING ACTIVITIES

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

(41,734

)

 

$

38,028,177

 

 

$

45,980,012

 

 

$

(84,008,189

)

 

$

(41,734

)

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Equity) of subsidiaries

 

 

(37,510,459

)

 

 

(46,497,730

)

 

 

 

 

 

84,008,189

 

 

 

 

Gain on life insurance contracts

 

 

 

 

 

 

 

 

(53,846,155

)

 

 

 

 

 

(53,846,155

)

Amortization of deferred financing and issuance costs

 

 

5,982,802

 

 

 

(1,364,614

)

 

 

1,459,717

 

 

 

 

 

 

6,077,905

 

Deferred income taxes

 

 

1,478,617

 

 

 

 

 

 

 

 

 

 

 

 

1,478,617

 

Preferred stock dividends payable

 

 

663,614

 

 

 

 

 

 

 

 

 

 

 

 

663,614

 

(Increase) in operating assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Life insurance contract benefits receivable

 

 

 

 

 

 

 

 

(6,129,022

)

 

 

 

 

 

 

(6,129,022

)

Other assets

 

 

(114,885,990

)

 

 

(92,168,163

)

 

 

 

 

 

206,436,523

 

 

 

(617,630

)

Increase (decrease) in operating liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Due to related party

 

 

(2,867,225

)

 

 

(15,505

)

 

 

2,700,000

 

 

 

 

 

 

(182,730

)

Accounts payable and accrued expenses

 

 

2,396,503

 

 

 

2,889,525

 

 

 

(7,310,262

)

 

 

 

 

 

(2,024,234

)

NET CASH FLOWS USED IN OPERATING ACTIVITIES

 

 

(144,783,872

)

 

 

(99,128,310

)

 

 

(17,145,710

)

 

 

206,436,523

 

 

 

(54,621,369

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CASH FLOWS FROM INVESTING ACTIVITIES

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment in life insurance contracts

 

 

 

 

 

 

 

 

(74,470,362

)

 

 

 

 

 

(74,470,362

)

Carrying value of matured life insurance contracts

 

 

 

 

 

 

 

 

7,381,132

 

 

 

 

 

 

7,381,132

 

Investment in Secured MCA advances

 

 

 

 

 

 

 

 

(7,613,310

)

 

 

 

 

 

(7,613,310

)

Proceeds from Secured MCA advances

 

 

 

 

 

 

 

 

1,246,703

 

 

 

 

 

 

1,246,703

 

NET CASH FLOWS USED IN INVESTING ACTIVITIES

 

 

 

 

 

 

 

 

(73,455,837

)

 

 

 

 

 

(73,455,837

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net borrowings on Senior Credit Facilities

 

 

 

 

 

 

 

 

6,238,952

 

 

 

 

 

 

6,238,952

 

Payments for redemption of Series I Secured Notes

 

 

 

 

 

(6,264,018

)

 

 

 

 

 

 

 

 

(6,264,018

)

Proceeds from issuance of L Bonds

 

 

135,477,090

 

 

 

 

 

 

 

 

 

 

 

 

135,477,090

 

Payments for redemption and issuance of L Bonds

 

 

(37,036,922

)

 

 

 

 

 

 

 

 

 

 

 

(37,036,922

)

Proceeds from (increase in) restricted cash

 

 

 

 

 

(2,335,768

)

 

 

(11,010,358

)

 

 

 

 

 

(13,346,126

)

Issuance of common stock

 

 

244,185

 

 

 

 

 

 

 

 

 

 

 

 

244,185

 

Proceeds from issuance of preferred stock

 

 

31,215,986

 

 

 

 

 

 

71,555

 

 

 

 

 

 

31,287,541

 

Payments for issuance and redemption of preferred stock

 

 

(4,095,878

)

 

 

 

 

 

(78,895

)

 

 

 

 

 

(4,174,773

)

Issuance of member capital

 

 

 

 

 

110,118,219

 

 

 

96,318,304

 

 

 

(206,436,523

)

 

 

 

NET CASH FLOWS PROVIDED BY FINANCING ACTIVITIES

 

 

125,804,461

 

 

 

101,518,433

 

 

 

91,539,558

 

 

 

(206,436,523

)

 

 

112,425,929

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

 

 

(18,979,411

)

 

 

2,390,123

 

 

 

938,011

 

 

 

 

 

 

(15,651,277

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CASH AND CASH EQUIVALENTS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BEGINNING OF THE PERIOD

 

 

32,292,162

 

 

 

1,982,722

 

 

 

150,221

 

 

 

 

 

 

34,425,105

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

END OF THE PERIOD

 

$

13,312,751

 

 

$

4,372,845

 

 

$

1,088,232

 

 

$

 

 

$

18,773,828

 

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 nine months ended
September 30, 2015

 

Parent

 

Guarantor
Subsidiary

 

Non-
Guarantor
Subsidiaries

 

Eliminations

 

Consolidated

CASH FLOWS FROM OPERATING ACTIVITIES

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss)

 

$

(2,619,602

)

 

$

24,038,452

 

 

$

28,306,143

 

 

$

(52,344,595

)

 

$

(2,619,602

)

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Equity) of subsidiaries

 

 

(24,038,617

)

 

 

(28,305,978

)

 

 

 

 

 

52,344,595

 

 

 

 

Gain on life settlements

 

 

 

 

 

 

 

 

(26,651,363

)

 

 

 

 

 

(26,651,363

)

Amortization of deferred financing and issuance costs

 

 

2,832,487

 

 

 

260,455

 

 

 

(1,201,170

)

 

 

 

 

 

1,891,772

 

Deferred income taxes

 

 

(664,905

)

 

 

 

 

 

 

 

 

 

 

 

(664,905

)

Convertible, redeemable preferred dividends payable

 

 

509,225

 

 

 

 

 

 

 

 

 

 

 

 

509,225

 

(Increase) decrease in operating assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Policy benefits receivable

 

 

 

 

 

 

 

 

1,392,986

 

 

 

 

 

 

 

1,392,986

 

Other assets

 

 

(40,145,769

)

 

 

(26,745,888

)

 

 

 

 

 

66,117,118

 

 

 

(774,539

)

Increase (decrease) in operating liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accounts payable and accrued expenses

 

 

4,503,624

 

 

 

123,222

 

 

 

(790,131

)

 

 

 

 

 

3,836,715

 

NET CASH FLOWS USED IN OPERATING ACTIVITIES

 

 

(30,425,246

)

 

 

(30,629,737

)

 

 

1,056,465

 

 

 

66,117,118

 

 

 

(23,079,711

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CASH FLOWS FROM INVESTING ACTIVITIES

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment in life settlements

 

 

 

 

 

 

 

 

(23,850,860

)

 

 

 

 

 

(23,850,860

)

Carrying value of matured life insurance contracts

 

 

 

 

 

 

 

 

3,822,983

 

 

 

 

 

 

3,822,983

 

NET CASH FLOWS USED IN INVESTING ACTIVITIES

 

 

 

 

 

 

 

 

(20,027,877

)

 

 

 

 

 

(20,027,877

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Repayment of senior credit facilities

 

 

 

 

 

 

 

 

(7,150,000

)

 

 

 

 

 

(7,150,000

)

Payments for redemption of Series I Secured Notes

 

 

 

 

 

(4,508,130

)

 

 

 

 

 

 

 

 

(4,508,130

)

Proceeds from issuance of L Bonds

 

 

87,620,483

 

 

 

 

 

 

 

 

 

 

 

 

87,620,483

 

Payments for redemption and issuance of L Bonds

 

 

(32,376,104

)

 

 

 

 

 

 

 

 

 

 

 

(32,376,104

)

Payments from restricted cash

 

 

 

 

 

(2,306,300

)

 

 

(669,207

)

 

 

 

 

 

(2,975,507

)

Issuance of common stock

 

 

582,000

 

 

 

 

 

 

 

 

 

 

 

 

582,000

 

Payments for redemption preferred stock

 

 

(295,185

)

 

 

 

 

 

 

 

 

 

 

 

(295,185

)

Issuance of member capital

 

 

 

 

 

39,176,335

 

 

 

26,940,783

 

 

 

(66,117,118

)

 

 

 

NET CASH FLOWS PROVIDED BY FINANCING ACTIVITIES

 

 

55,531,194

 

 

 

32,361,905

 

 

 

19,121,576

 

 

 

(66,117,118

)

 

 

40,897,557

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

 

 

(4,092,363

)

 

 

1,732,168

 

 

 

150,164

 

 

 

 

 

 

(2,210,031

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CASH AND CASH EQUIVALENTS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BEGINNING OF THE PERIOD

 

 

30,446,473

 

 

 

216,231

 

 

 

 

 

 

 

 

 

30,662,704

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

END OF THE PERIOD

 

$

26,354,110

 

 

$

1,948,399

 

 

$

150,164

 

 

$

 

 

$

28,452,673

 

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 three months ended
September 30, 2016

 

Parent

 

Guarantor
Subsidiary

 

Non-
Guarantor
Subsidiaries

 

Eliminations

 

Consolidated

CASH FLOWS FROM OPERATING ACTIVITIES

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

(2,997,365

)

 

$

8,697,549

 

 

$

11,356,703

 

 

$

(20,054,252

)

 

$

(2,997,365

)

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Equity) of subsidiaries

 

 

(8,692,924

)

 

 

(11,361,328

)

 

 

 

 

 

20,054,252

 

 

 

 

Gain on life insurance contracts

 

 

 

 

 

 

 

 

(21,073,226

)

 

 

 

 

 

(21,073,226

)

Amortization of deferred financing and issuance costs

 

 

2,072,879

 

 

 

81,849

 

 

 

611,015

 

 

 

 

 

 

2,765,743

 

Deferred income taxes

 

 

(1,428,130

)

 

 

 

 

 

 

 

 

 

 

 

(1,428,130

)

Preferred stock dividends payable

 

 

333,565

 

 

 

 

 

 

 

 

 

 

 

 

333,565

 

(Increase) in operating assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Life insurance contract benefits receivable

 

 

 

 

 

 

 

 

700,000

 

 

 

 

 

 

700,000

 

Other assets

 

 

(54,428,152

)

 

 

(54,272,589

)

 

 

 

 

 

109,120,577

 

 

 

419,836

 

Increase (decrease) in operating liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Due to related party

 

 

(64,249

)

 

 

(16,700

)

 

 

 

 

 

 

 

 

(80,949

)

Accounts payable and other accrued expenses

 

 

155,980

 

 

 

2,172,227

 

 

 

(5,545,197

)

 

 

 

 

 

(3,216,990

)

NET CASH FLOWS USED IN OPERATING ACTIVITIES

 

 

(65,048,396

)

 

 

(54,698,992

)

 

 

(13,950,705

)

 

 

109,120,577

 

 

 

(24,577,516

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CASH FLOWS FROM INVESTING ACTIVITIES

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment in life insurance contracts

 

 

 

 

 

 

 

 

(25,770,326

)

 

 

 

 

 

(25,770,326

)

Carrying value of matured life insurance contracts

 

 

 

 

 

 

 

 

1,078,889

 

 

 

 

 

 

1,078,889

 

Investment in Secured MCA advances

 

 

 

 

 

 

 

 

(1,965,896

)

 

 

 

 

 

 

(1,965,896

)

Proceeds from Secured MCA advances

 

 

 

 

 

 

 

 

220,911

 

 

 

 

 

 

220,911

 

NET CASH FLOWS USED IN INVESTING ACTIVITIES

 

 

 

 

 

 

 

 

(26,436,422

)

 

 

 

 

 

(26,436,422

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net repayment of Senior Credit Facilities

 

 

 

 

 

 

 

 

(10,761,048

)

 

 

 

 

 

 

(10,761,048

)

Payments for redemption of Series I Secured Notes

 

 

 

 

 

(541,275

)

 

 

 

 

 

 

 

 

(541,275

)

Proceeds from issuance of L Bonds

 

 

64,350,430

 

 

 

 

 

 

 

 

 

 

 

 

64,350,430

 

Payments for redemption and issuance of L Bonds

 

 

(14,373,447

)

 

 

 

 

 

 

 

 

 

 

 

(14,373,447

)

Proceeds from (increase in) restricted cash

 

 

 

 

 

486,283

 

 

 

(5,013,515

)

 

 

 

 

 

(4,527,232

)

Issuance of member capital

 

 

 

 

 

52,304,345

 

 

 

56,816,232

 

 

 

(109,120,577

)

 

 

 

Issuance of common stock

 

 

31,515

 

 

 

 

 

 

 

 

 

 

 

 

31,515

 

Proceeds from issuance of preferred stock

 

 

20,786,332

 

 

 

 

 

 

 

 

 

 

 

 

20,786,332

 

Payments for issuance and redemption of preferred stock

 

 

(2,485,304

)

 

 

 

 

 

(71,555

)

 

 

 

 

 

(2,556,859

)

NET CASH FLOWS PROVIDED BY FINANCING ACTIVITIES

 

 

68,309,526

 

 

 

52,249,353

 

 

 

40,970,114

 

 

 

(109,120,577

)

 

 

52,408,416

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NET INCREASE IN CASH AND CASH EQUIVALENTS

 

 

3,261,130

 

 

 

(2,449,639

)

 

 

582,987

 

 

 

 

 

 

1,394,478

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CASH AND CASH EQUIVALENTS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BEGINNING OF THE PERIOD

 

 

10,051,621

 

 

 

6,822,484

 

 

 

505,245

 

 

 

 

 

 

17,379,350

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

END OF THE PERIOD

 

$

13,312,751

 

 

$

4,372,845

 

 

$

1,088,232

 

 

$

 

 

$

18,773,828

 

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 three months ended
September 30, 2015

 

Parent

 

Guarantor
Sub

 

Non-
Guarantor
Sub

 

Eliminations

 

Consolidated

CASH FLOWS FROM OPERATING ACTIVITIES

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss)

 

$

(3,631,078

)

 

$

4,790,978

 

 

$

6,024,819

 

 

$

(10,815,797

)

 

$

(3,631,078

)

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Equity) of subsidiaries

 

 

(4,791,035

)

 

 

(6,024,762

)

 

 

 

 

 

10,815,797

 

 

 

 

Gain on life settlements

 

 

 

 

 

 

 

 

(14,516,881

)

 

 

 

 

 

(14,516,881

)

Amortization of deferred financing and issuance costs

 

 

1,103,312

 

 

 

49,339

 

 

 

781,125

 

 

 

 

 

 

1,933,776

 

Deferred income taxes

 

 

(1,916,686

)

 

 

 

 

 

 

 

 

 

 

 

(1,916,686

)

Convertible, redeemable preferred stock dividends payable

 

 

173,993

 

 

 

 

 

 

 

 

 

 

 

 

173,993

 

(Increase) decrease in operating assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Policy benefits receivable

 

 

 

 

 

 

 

 

2,142,986

 

 

 

 

 

 

2,142,986

 

Other assets

 

 

(22,146,946

)

 

 

(15,631,849

)

 

 

 

 

 

37,360,805

 

 

 

(417,990

)

Increase (decrease) in operating liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accounts payable and other accrued expenses

 

 

2,010,129

 

 

 

(105,418

)

 

 

629,558

 

 

 

 

 

 

2,534,269

 

NET CASH FLOWS USED IN OPERATING ACTIVITIES

 

 

(29,198,311

)

 

 

(16,921,712

)

 

 

(4,938,393

)

 

 

37,360,805

 

 

 

(13,697,611

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CASH FLOWS FROM INVESTING ACTIVITIES

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment in life settlements

 

 

 

 

 

 

 

 

(13,626,842

)

 

 

 

 

 

(13,626,842

)

Carrying value of matured life insurance contracts

 

 

 

 

 

 

 

 

80,000

 

 

 

 

 

 

80,000

 

NET CASH FLOWS USED IN INVESTING ACTIVITIES

 

 

 

 

 

 

 

 

(13,546,842

)

 

 

 

 

 

(13,546,842

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Payments for redemption of Series I Secured Notes

 

 

 

 

 

(890,586

)

 

 

 

 

 

 

 

 

(890,586

)

Proceeds from issuance of L Bonds

 

 

37,122,127

 

 

 

 

 

 

 

 

 

 

 

 

37,122,127

 

Payments for redemption and issuance of L Bonds

 

 

(19,363,047

)

 

 

 

 

 

 

 

 

 

 

 

(19,363,047

)

Proceeds (payments) from restricted cash

 

 

 

 

 

(2,203,800

)

 

 

2,855,430

 

 

 

 

 

 

651,630

 

Issuance of member capital

 

 

 

 

 

21,730,944

 

 

 

15,629,861

 

 

 

(37,360,805

)

 

 

 

Payments for redemption preferred stock

 

 

(21,187

)

 

 

 

 

 

 

 

 

 

 

 

(21,187

)

NET CASH FLOWS PROVIDED BY FINANCING ACTIVITIES

 

 

17,737,893

 

 

 

18,636,558

 

 

 

18,485,291

 

 

 

(37,360,805

)

 

 

17,498,937

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

 

 

(11,460,418

)

 

 

1,714,846

 

 

 

56

 

 

 

 

 

 

(9,745,516

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CASH AND CASH EQUIVALENTS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BEGINNING OF THE PERIOD

 

 

37,814,528

 

 

 

233,553

 

 

 

150,108

 

 

 

 

 

 

38,198,189

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

END OF THE PERIOD

 

$

26,354,110

 

 

$

1,948,399

 

 

$

150,164

 

 

$

 

 

$

28,452,673

 

F-28

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

(19) Concentrations

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

Life insurance company

 

September 30,
2016

 

December 31,
2015

AXA Equitable

 

14.3

%

 

14.0

%

John Hancock

 

13.0

%

 

12.7

%

Lincoln National

 

11.5

%

 

 

*

Transamerica

 

10.1

%

 

 

*

____________

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

The following summarizes the number of insurance contracts insuring the lives of persons living in specific states exceeding 10% of the total face value held by us:

State of Residence

 

September 30,
2016

 

December 31,
2015

California

 

21.1

%

 

25.2

%

Florida

 

19.0

%

 

20.0

%

 (20) Subsequent events

Subsequent to September 30, 2016, two policies covering two individual matured. The life insurance contract benefits of these policies were $3,240,000 and we recorded realized gains of $2,539,000 on these policies.

Subsequent to September 30, 2016, we have issued approximately $6,911,000 in additional principal amount of L Bonds, and 7,350 shares of RPS for gross consideration of approximately $7,350,000.

On October 28, 2016, DLP IV completed the closing of the second of two initial advances contemplated under a Loan and Security Agreement with LNV. At this closing, a total of $92,900,000 in loan proceeds were obtained by DLP IV, of which approximately $16,250,000 was used to fund a reserve account required under the Loan and Security Agreement.

F-29

$100,000,000 of Redeemable Preferred Stock

Maximum of 100,000 Shares of Redeemable Preferred Stock

GWG HOLDINGS, INC.

______________________________

PROSPECTUS SUPPLEMENT

______________________________

November 10, 2016