LINCOLN, Neb., Nov.14, 2022 /PRNewswire/ -- Midwest Holding Inc. ("Midwest") (NASDAQ: MDWT), today announced financial results for the third quarter of 2022.
Third Quarter 2022 Highlights:
- GAAP net income was $7.4 million compared to a $(3.1) million GAAP net loss incurred in the third quarter of 2021. GAAP earnings were $1.96 per share (diluted) versus the $(0.82) per-share loss in Q3 2021.
- GAAP total revenue was $19.0 million compared to total revenue of $5.8 million in the third quarter of 2021. Total revenue was increased by net investment income of $12.9 million compared to $6.2 million in third quarter of 2021, as invested assets grew to $1.4 billion as of September 30, 2022, compared with $942.8 million as of September 30, 2021 . The increase in investment income was offset by a decline in the market value of derivatives.
- Annuity direct written premium under statutory accounting principles ("SAP"), a non-GAAP measure, was $255.5 million, up 63.8% compared to $156.0 million in second quarter of 2022 and up from $117.9 million in 2021's third quarter. The mix of our new business was 64.6% Multi-Year Guaranteed Annuities (MYGA) and 35.4% Fixed Indexed Annuities (FIA).
- Ceded premiums (SAP) were $113.7 million for the quarter compared with $60.1 million in the third quarter of the prior year. The cession rate for the quarter, or that portion of our written premiums that we reinsured, was 44.5% compared with 51% for the same period of 2021.
- A new reinsurance arrangement was executed effective at the end of the third quarter which provided an additional 10-15% of capacity for the MYGA product.
- Total expenses benefited from negative interest credited due to the fall in value of the options embedded in our liabilities and the gain on mark-to-market value of the options allowance classified in other operating expenses. Overall, salaries and benefits were down while other operating expenses, excluding the gain on the mark-to-market of the options allowance, were up from continuing to build foundational capabilities to support potential growth in the business along with costs that are variable with increased premiums written related to technology support, distribution, product design and premium taxes.
Georgette Nicholas, CEO of Midwest noted, "We had another quarter of strong results from the actions we have taken this year to position the Company for continued growth. We benefited from strong market trends and a focus on distribution, pricing and products achieving an increase in premiums written in the third quarter. We are benefiting from movements in interest rates, as consumers seek stable returns, and from the performance of our investment portfolio. We also executed a new reinsurance arrangement effective at the end of the third quarter to provide additional capital support on the MYGA product given the market demand. Overall, the third quarter trends position us for a strong finish for the year."
Ms. Nicholas concluded: "We have positioned the Company well to execute on the opportunities before us, which are substantial, and to build on the value of our platform. The focus of the team continues to be on the key drivers of growth and profitability: Deepening distribution relationships, state expansion to support sales growth, reinsurance, investment management, and operational readiness and efficiency. With these five keys to our strategy, we will deliver on our commitment to shareholders to produce strong growth paired with a high return on capital."
Q3 2022 versus Q3 2021 on a GAAP basis
Midwest reported GAAP net income of $7.4 million in the third quarter of 2022 compared to a $(3.1) million GAAP net loss incurred in the third quarter of 2021. On a diluted, per-share basis, this year's quarterly net income was $1.96 compared with the $(0.82) per-share loss reported in the third quarter of 2021.
Investment income in 2022's third quarter was $12.9 million compared with $6.2 million in the prior- year's third quarter. Driving the change was an increase in invested assets as well as performance on those assets, benefiting from core capabilities developed around sourcing assets with a higher yield - generating approximately a 5.5% return on the investment portfolio.
Amortization of deferred gain on reinsurance reached $1.2 million in the third quarter of 2022 compared with $662,000 in the third quarter of 2021 primarily due to growth in the deferred gain on co-insurance on our balance sheet, which reflects ceding commissions received on reinsurance of business to third parties.
Service fee revenue was $118,000 versus $628,000 in the prior year third quarter. Service fee revenue consists of fee revenue generated for our asset-management services provided to third-party clients. Assets under management for third parties was $494.5 million on September 30, 2022, compared to $471.1 million on June 30, 2022 .
Other revenue finished at $569,000 compared with $400,000 in the prior-year quarter. Other revenue consists primarily of revenue we generate by providing ancillary services, such as policy administration, to third parties and policy surrender charges.
Our total expenses on a GAAP basis were $14.3 million versus $9.2 million in the prior year third quarter. Interest Credited was up during the quarter due to an increase in the embedded derivatives of $8.8 million along with interest earned at $2.6 million . This was offset by the mark-to-market adjustment of $(5.8) million . Salaries and benefits were $3.7 million in Q3 2022 compared to $4.0 million in Q3 2021 as we continue to seek operational improvement and work on technology initiatives.
Guidance
We continue to see intense competition in the fixed annuity market around pricing and new competitors. We have taken actions to maintain a competitive position and have seen positive results from these actions and improved sales momentum in the third quarter. With the positive market trends and the premium written so far, we will have a strong finish for the year.
State expansion efforts remain a key priority. We have active applications in process and will provide updates as they progress.
Given these dynamics, we are confident in anticipated premiums written being in the range of $700 million to $750 million (SAP) for the year. We expect the mix in product sales to be 60% towards MYGA this year, given increasing interest rates and market volatility and 40% FIA. We would expect that to move back towards 75% FIA and 25% MYGA in future years.
Given the close of an additional reinsurance arrangement at the end of the third quarter and the current margins being generated on retained business, we now anticipate ceding approximately 40% of new business overall for the year. The goal will be to cede, on average, approximately 70-90% of our premium in a year to generate ceded commission fees and manage capital but given the strong investment performance retaining more at this time drives more value for the business. Demand from our existing reinsurance partners is strong and we have capacity in place to cover anticipated written premium through them with the potential to grow along with additional potential reinsurance transactions in the pipeline.
Overall, we have made progress on managing costs and bringing them in line as we have transitioned through the year. Given the increase in premiums written expected for the year and the impact that will have on premium taxes, technology support and product fees, we now expect general and administrative expenses on a management basis, a non-GAAP measure, to be within approximately $31 -32 million for the full year 2022.
Q3 2022 Key Performance Indicators and Non-GAAP Financial Measures
In addition to GAAP measures, Midwest's management utilizes a series of key performance indicators (KPIs) and non-GAAP measures to, among other things:
- monitor and evaluate the performance of our business operations and financial performance;
- facilitate internal comparisons of the historical operating performance of our business operations;
- review and assess the operating performance of our management team;
- analyze and evaluate financial and strategic planning decisions regarding future operations;
- plan for and prepare future annual operating budgets and determine appropriate levels of operating investments; and
- facilitate comparison of results between periods and to better understand the underlying historical trends in our business and prospects.
These non-GAAP measures are not a substitute for GAAP measures; however, management believes that when used in conjunction with the GAAP measures, the non-GAAP measures can contribute to investors' understanding of our business. Non-GAAP financial measures used by us may be calculated differently from, and therefore may not be comparable to, similarly titled measures used by other companies. These non-GAAP financial measures should be considered along with, but not as alternatives to, our operating performance measures as prescribed by GAAP.
Annuity Premiums (a KPI)
For the third quarter of 2022, annuity direct written premiums were $255.5 million compared with $156.0 million at second quarter of 2022 and up from $117.9 million in the third quarter of 2021. Ceded premiums were $113.7 million in third quarter of 2022 compared to $59.9 million in 2022's second quarter, whereas ceded premiums were $60.1 million in the third quarter of 2021. Of the third quarter 2022 sales, approximately 64.6% was in the MYGA category and the remaining 35.4% consisted of sales of FIAs.
Three months ended September 30, | Nine months ended September 30, | ||||||||||
(In thousands) | 2022 | 2021 | 2022 | 2021 | |||||||
Annuity Premiums (SAP) | |||||||||||
Annuity direct written premiums | $ | 255,515 | $ | 117,926 | $ | 509,660 | $ | 367,446 | |||
Ceded premiums | (113,738) | (60,062) | (213,761) | (193,632) | |||||||
Net premiums retained | $ | 141,777 | $ | 57,864 | $ | 295,899 | $ | 173,814 | |||
Fees Received for Reinsurance (a KPI)
We use this non-GAAP figure to measure our efforts to secure third-party capital to back our reinsurance programs. Fees Received for Reinsurance sums two components: Amortization of deferred gain on reinsurance, which is a line item in our Consolidated Statements of Comprehensive Income (Loss), and deferred coinsurance ceding commission, which is a line item in our Consolidated Statements of Cash Flows.
For the third quarter of 2022, fees received for reinsurance totaled $4.5 million compared with $3.6 million in the third quarter of 2021.
Three months ended September 30, | Nine months ended September 30, | |||||||||||
(In thousands) | 2022 | 2021 | 2022 | 2021 | ||||||||
Fees received for reinsurance | ||||||||||||
Fees received for reinsurance - total | $ | 4,500 | $ | 3,589 | $ | 10,126 | $ | 11,312 | ||||
General and Administrative Expenses (a non-GAAP measure)
We monitor this figure to track our overhead. It includes salary and benefits and other operating expenses; however, it excludes non-cash stock-based compensation and the non-cash mark-to-market-adjustment of our option budget allowance.
G&A expense in the third quarter of 2022 was $9.0 million, up from $7.0 million at second quarter 2022 and compared with $6.2 million in the prior year third quarter. Overall, salaries and benefits were $3.8 million (down from $4.0 million ) while other operating expenses, excluding the gain on the mark-to-market of the options allowance, were up from building foundational capabilities to support potential growth in the business along with costs that are variable with increased premiums written related to technology support, distribution, product design and premium taxes.
Three months ended September 30, | Nine months ended September 30, | |||||||||||
2022 | 2021 | 2022 | 2021 | |||||||||
G&A | ||||||||||||
Salaries and benefits - GAAP | $ | 3,751 | $ | 4,025 | $ | 12,366 | $ | 11,466 | ||||
Other operating expenses - GAAP | 2,317 | 4,124 | (1,744) | 6,769 | ||||||||
Subtotal | 6,068 | 8,149 | 10,622 | 18,235 | ||||||||
Adjustments: | ||||||||||||
Less: Stock-based compensation | 670 | (996) | 287 | (2,765) | ||||||||
Less: Mark-to-market option allowance | 2,224 | (941) | 13,905 | 1,887 | ||||||||
G&A | $ | 8,962 | $ | 6,212 | $ | 24,814 | $ | 17,357 | ||||
Management Expenses (a non-GAAP measure)
We use this metric to monitor the expenses of our business on a cash basis. Importantly, we exclude from the calculation of management expenses the index interest credited related to our FIAs because this expense is hedged. Instead, we add back to Management Expenses the period's amortization of options previously purchased to provide this hedge. We view this amortized cost as our true cost of funds. Management Expenses also excludes the mark-to-market adjustment of our option budget allowance.
Management Expenses and non-cash stock-based compensation
For the three months ended September 30, 2022, the sum of salaries and benefits and other operating expenses totaled $6.1 million compared to $8.1 million for the three months ended September 30, 2021 . For the three months ended September 30, 2022, as disclosed above, included in these expenses is mainly salaries, benefits, and other operating expenses, along with a benefit of $2.2 million of non-cash mark-to-market option allowance of our derivative option allowance, which we exclude in our management G&A.
Three months ended September 30, | Nine months ended September 30, | |||||||||||
2022 | 2021 | 2022 | 2021 | |||||||||
Management Expenses | ||||||||||||
G&A | $ | 8,962 | $ | 6,212 | $ | 24,814 | $ | 17,357 | ||||
Management interest credited | 4,752 | 3,230 | 10,594 | 6,110 | ||||||||
Amortization of deferred acquisition costs | 1,193 | 753 | 3,095 | 1,780 | ||||||||
Expenses related to retained business | 5,945 | 3,983 | 13,689 | 7,890 | ||||||||
Management expenses - total | $ | 14,907 | $ | 10,195 | $ | 38,503 | $ | 25,247 | ||||
Three months ended September 30, | Nine months ended September 30, | |||||||||||
2022 | 2021 | 2022 | 2021 | |||||||||
G&A | ||||||||||||
Salaries and benefits - GAAP | $ | 3,751 | $ | 4,025 | $ | 12,366 | $ | 11,466 | ||||
Other operating expenses - GAAP | 2,317 | 4,124 | (1,744) | 6,769 | ||||||||
Subtotal | 6,068 | 8,149 | 10,622 | 18,235 | ||||||||
Adjustments: | ||||||||||||
Less: Stock-based compensation | 670 | (996) | 287 | (2,765) | ||||||||
Less: Mark-to-market option allowance | 2,224 | (941) | 13,905 | 1,887 | ||||||||
G&A | $ | 8,962 | $ | 6,212 | $ | 24,814 | $ | 17,357 | ||||
Three months ended September 30, | Nine months ended September 30, | |||||||||||
2022 | 2021 | 2022 | 2021 | |||||||||
Management Interest Credited | ||||||||||||
Interest credited - GAAP | $ | 5,682 | $ | 284 | $ | (6,489) | $ | 1,868 | ||||
Adjustments: | ||||||||||||
Less: FIA interest credited - GAAP | (3,041) | 549 | 11,124 | (38) | ||||||||
Add: FIA options cost - amortized | 2,111 | 2,397 | 5,959 | 4,280 | ||||||||
Management interest credited | $ | 4,752 | $ | 3,230 | $ | 10,594 | $ | 6,110 | ||||
Three months ended September 30, | Nine months ended September 30, | |||||||||||
2022 | 2021 | 2022 | 2021 | |||||||||
Reconciliation - Management Expenses to GAAP Expenses | ||||||||||||
Total expenses - GAAP | $ | 14,294 | $ | 9,186 | $ | 9,573 | $ | 21,883 | ||||
Adjustments: | ||||||||||||
Less: Benefits | (1,351) | - | (2,345) | - | ||||||||
Less: Stock-based compensation | 670 | (996) | 287 | (2,765) | ||||||||
Less: Mark-to-market option allowance | 2,224 | (941) | 13,905 | 1,887 | ||||||||
Less: FIA interest credited - GAAP | (3,041) | 549 | 11,124 | (38) | ||||||||
Add: FIA options cost - amortized | 2,111 | 2,397 | 5,959 | 4,280 | ||||||||
Management expenses - total | $ | 14,907 | $ | 10,195 | $ | 38,503 | $ | 25,247 | ||||
SPECIAL CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements contained or incorporated by reference in this release constitute forward-looking statements. These statements are based on management's expectations, estimates, projections and assumptions. In some cases, you can identify forward-looking statements by terminology including "could," "may," "will," "should," "expect," "plan," "anticipate," "believe," "estimate," "predict," "potential," "intend," or "continue," the negative of these terms, or other comparable terminology used in connection with any discussion of future operating results or financial performance. These statements are only predictions and reflect our management's good faith present expectation of future events and are subject to a number of important factors and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements.
Factors that may cause our actual results to differ materially from those contemplated or projected, forecast, estimated or budgeted in such forward-looking statements include among others, the following possibilities:
- intense competition, including pricing, competitive pressures from established insurers with greater financial resources, the entry of new competitors, and the introduction of new products by new and existing competitors;
- our business plan, particularly including our reinsurance strategy, may not prove to be successful;
- our reliance on third-party insurance marketing organizations to market and sell our annuity insurance products through a network of independent agents;
- adverse changes in our ratings obtained from independent rating agencies;
- failure to maintain adequate reinsurance;
- our inability to expand our insurance operations outside the 22 states and District of Columbia in which we are currently licensed;
- our annuity insurance products may not achieve significant market acceptance;
- we may continue to experience operating losses in the foreseeable future;
- the possible loss or retirement of one or more of our key executive personnel;
- adverse state and federal legislation or regulation, including decreases in rates, limitations on premium levels, increases in minimum capital and reserve requirements, benefit mandates and tax treatment of insurance products;
- fluctuations in interest rates causing a reduction of investment income or increase in interest expense and in the market value of interest-rate sensitive investment;
- failure to obtain new customers, retain existing customers, or reductions in policies in force by existing customers;
- higher service, administrative, or general expense due to the need for additional advertising, marketing, administrative or management information systems expenditures;
- changes in our liquidity due to changes in asset and liability matching;
- possible claims relating to sales practices for insurance products; and
- lawsuits in the ordinary course of business.
Earnings Teleconference information and Details
Midwest Holding has announced plans to host a conference call to discuss financial and operating results for the third quarter of 2022 on November 15, 2022, at 8:30 a.m. Eastern Time . The Company also posted those results on the investor relations section of its website at https://ir.midwestholding.com after the close of the financial markets on November 14, 2022.
To register for this conference call, please use the following link:https://www.netroadshow.com/events/login'show=7e33e531&confId=42860. Registrants will receive a confirmation email with dial-in details.
The call may also be accessed via webcast at this link: https://events.q4inc.com/attendee/219439433
A replay of the webcast will be made available after the call on the Investor Relations page of the Company's website at https://ir.midwestholding.com
About Midwest Holding Inc.
Midwest Holding Inc. is a growing, technology-enabled, services-oriented annuity platform. Midwest designs and develops annuity products that are distributed through independent distribution channels, to a large and growing demographic of U.S. retirees. Midwest originates, manages and typically transfers these annuities through reinsurance arrangements to asset managers and other third-party investors. Midwest also provides the operational and regulatory infrastructure and expertise to enable asset managers and third-party investors to form and manage their own reinsurance capital vehicles.
For more information, please visit www.midwestholding.com
Investor contact: [email protected]
Media inquiries: [email protected]
Consolidated Balance Sheets | ||||||
September 30, 2022 | December 31, 2021 | |||||
(In thousands, except share information) | (Unaudited) | |||||
Assets | ||||||
Fixed maturities, available for sale, at fair value | $ | 1,048,081 | $ | 683,296 | ||
Mortgage loans on real estate, held for investment | 204,423 | 183,203 | ||||
Derivative instruments | 11,840 | 23,022 | ||||
Equity securities, at fair value (cost: $12,762 in 2022 and $22,158 in 2021) | 9,325 | 21,869 | ||||
Other invested assets | 78,569 | 35,293 | ||||
Investment escrow | 344 | 3,611 | ||||
Federal Home Loan Bank (FHLB) stock | 501 | 500 | ||||
Preferred stock | 21,579 | 18,686 | ||||
Notes receivable | 6,189 | 5,960 | ||||
Policy loans | 21 | 87 | ||||
Total investments | 1,380,872 | 975,527 | ||||
Cash and cash equivalents | 208,664 | 142,013 | ||||
Deferred acquisition costs, net | 39,377 | 24,530 | ||||
Premiums receivable | 364 | 354 | ||||
Accrued investment income | 23,915 | 13,623 | ||||
Reinsurance recoverables | 5,791 | 38,579 | ||||
Intangible assets | 700 | 700 | ||||
Property and equipment, net | 1,990 | 386 | ||||
Operating lease right of use assets | 2,179 | 2,360 | ||||
Receivable for securities sold | 13,026 | 19,732 | ||||
Other assets | 9,190 | 2,113 | ||||
Total assets | $ | 1,686,068 | $ | 1,219,917 | ||
Liabilities and Stockholders' Equity | ||||||
Liabilities: | ||||||
Benefit reserves | $ | 12,953 | $ | 12,941 | ||
Policy claims | 2,963 | 237 | ||||
Deposit-type contracts | 1,537,583 | 1,075,439 | ||||
Advance premiums | 2 | 1 | ||||
Deferred gain on coinsurance transactions | 35,464 | 28,589 | ||||
Lease liabilities | ||||||
Operating lease | 2,192 | 2,364 | ||||
Payable for securities purchased | 20,941 | 5,546 | ||||
Other liabilities | 34,100 | 9,044 | ||||
Total liabilities | 1,646,198 | 1,134,161 | ||||
Stockholders' Equity: | ||||||
Voting common stock, $0.001 par value; authorized 20,000,000 shares; 3,737,564 shares issued | - | - | ||||
4 | 4 | |||||
Additional paid-in capital | 138,166 | 138,452 | ||||
Treasury stock | (175) | (175) | ||||
Accumulated deficit | (53,276) | (70,159) | ||||
Accumulated other comprehensive loss (income) | (52,943) | 2,634 | ||||
Total Midwest Holding Inc.'s stockholders' equity | 31,776 | 70,756 | ||||
Noncontrolling interests | 8,094 | 15,000 | ||||
Total stockholders' equity | 39,870 | 85,756 | ||||
Total liabilities and stockholders' equity | $ | 1,686,068 | $ | 1,219,917 | ||
Consolidated Statements of Comprehensive Loss | ||||||||||||
Three months ended September 30, | Nine months ended September 30, | |||||||||||
(In thousands, except per share data) | 2022 | 2021 | 2022 | 2021 | ||||||||
Revenues | ||||||||||||
Investment income, net of expenses | $ | 12,938 | $ | 6,196 | $ | 29,721 | $ | 12,303 | ||||
Net realized loss on investments | 4,135 | (2,115) | (14,676) | (2,704) | ||||||||
Amortization of deferred gain on reinsurance transactions | 1,239 | 662 | 3,251 | 1,711 | ||||||||
Service fee revenue, net of expenses | 118 | 628 | 1,632 | 1,738 | ||||||||
Other revenue | 569 | 400 | 1,530 | 1,007 | ||||||||
Total revenue | 18,999 | 5,771 | 21,458 | 14,055 | ||||||||
Expenses | ||||||||||||
Interest credited | 5,682 | 284 | (6,489) | 1,868 | ||||||||
Benefits | 1,351 | - | 2,345 | - | ||||||||
Amortization of deferred acquisition costs | 1,193 | 753 | 3,095 | 1,780 | ||||||||
Salaries and benefits | 3,751 | 4,025 | 12,366 | 11,466 | ||||||||
Other operating expenses | 2,317 | 4,124 | (1,744) | 6,769 | ||||||||
Total expenses | 14,294 | 9,186 | 9,573 | 21,883 | ||||||||
Net income (loss) before income tax expense | 4,705 | (3,415) | 11,885 | (7,828) | ||||||||
Income tax expense | (1,250) | 351 | (3,848) | (1,828) | ||||||||
Net income (loss) after income tax expense | 3,455 | (3,064) | 8,037 | (9,656) | ||||||||
Less: Income attributable to noncontrolling interest | (3,975) | - | (8,845) | - | ||||||||
Net income (loss) attributable to Midwest Holding Inc. | 7,430 | (3,064) | 16,882 | (9,656) | ||||||||
Comprehensive (loss) income: | ||||||||||||
Unrealized gains (losses) on investments arising | (26,114) | 1,085 | (55,483) | 2,421 | ||||||||
Unrealized losses on foreign currency | (951) | (505) | (94) | (1,611) | ||||||||
Less: Reclassification adjustment for net realized | (27,064) | 580 | (55,577) | 810 | ||||||||
Comprehensive loss | $ | (19,634) | $ | (2,484) | $ | (38,695) | $ | (8,846) | ||||
Impairment | ||||||||||||
Total other-than-temporary impairment | ||||||||||||
Portion of impairment loss recognized in OCI | 346 | - | 880 | - | ||||||||
Net other-than-temporary impairment loss recognized in net income | - | - | - | - | ||||||||
$ | 346 | $ | - | $ | 880 | $ | - | |||||
Income (loss) per common share | ||||||||||||
Basic | $ | 1.99 | $ | (0.82) | 4.52 | (2.58) | ||||||
Diluted | $ | 1.96 | $ | (0.82) | $ | 4.45 | $ | (2.58) | ||||
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY | |||||||||||||||||||||
Three months ended September 30, | |||||||||||||||||||||
Additional | |||||||||||||||||||||
Treasury | Common | Paid-In | Retained | Noncontrolling | Total | ||||||||||||||||
(In thousands) | Stock | Stock | Capital | Earnings | AOCI* | Interest | Equity | ||||||||||||||
Balance at March 31, 2022 | $ | (175) | $ | 4 | $ | 138,838 | $ | (60,707) | $ | (25,877) | $ | 12,413 | $ | 64,496 | |||||||
Net income (loss) | - | - | - | 7,431 | - | - | 7,431 | ||||||||||||||
Employee stock options | - | - | (672) | - | - | - | (672) | ||||||||||||||
Unrealized gains on investments, net of taxes | - | - | - | - | (27,066) | - | (27,066) | ||||||||||||||
Noncontrolling interest | - | - | - | - | - | (4,319) | (4,319) | ||||||||||||||
Balance, September 30, 2022 | $ | (175) | $ | 4 | $ | 138,166 | $ | (53,276) | $ | (52,943) | $ | 8,094 | $ | 39,870 | |||||||
Balance at March 31, 2021 | $ | (175) | $ | 4 | $ | 135,233 | $ | (60,114) | $ | 6,661 | $ | - | $ | 81,609 | |||||||
Net income (loss) | - | - | - | (3,064) | - | - | (3,064) | ||||||||||||||
Additional capital raise related expenses | - | - | 7 | - | - | - | 7 | ||||||||||||||
Employee stock options | - | - | 996 | - | - | - | 996 | ||||||||||||||
Unrealized gains on investments, net of taxes | - | - | - | - | 580 | - | 580 | ||||||||||||||
Balance, June 30, 2021 | $ | (175) | $ | 4 | $ | 136,236 | $ | (63,178) | $ | 7,241 | $ | - | $ | 80,128 | |||||||
Nine months ended September 30, | |||||||||||||||||||||
Additional | |||||||||||||||||||||
Treasury | Common | Paid-In | Retained | Noncontrolling | Total | ||||||||||||||||
(In thousands) | Stock | Stock | Capital | Earnings | AOCI* | Interest | Equity | ||||||||||||||
Balance, December 31, 2021 | $ | (175) | $ | 4 | $ | 138,452 | $ | (70,158) | $ | 2,634 | $ | 15,000 | $ | 85,757 | |||||||
Net income (loss) | - | - | - | 16,882 | - | - | 16,882 | ||||||||||||||
Employee stock options | - | - | (286) | - | - | - | (286) | ||||||||||||||
Unrealized gains on investments, net of taxes | - | - | - | - | (55,577) | - | (55,577) | ||||||||||||||
Noncontrolling interest | - | - | - | - | - | (6,906) | (6,906) | ||||||||||||||
Balance, June 30, 2022 | $ | (175) | $ | 4 | $ | 138,166 | $ | (53,276) | $ | (52,943) | $ | 8,094 | $ | 39,870 | |||||||
Balance at December 31, 2020 | $ | (175) | $ | 4 | $ | 133,592 | $ | (53,522) | $ | 6,431 | $ | - | $ | 86,330 | |||||||
Net income (loss) | - | - | - | (9,656) | - | - | (9,656) | ||||||||||||||
Additional capital raise related expenses | - | - | (121) | - | - | - | (121) | ||||||||||||||
Employee stock options | - | - | 2,765 | - | - | - | 2,765 | ||||||||||||||
Unrealized losses on investments, net of taxes | - | - | - | - | 810 | - | 810 | ||||||||||||||
Balance, September 30, 2021 | $ | (175) | $ | 4 | $ | 136,236 | $ | (63,178) | $ | 7,241 | $ | - | $ | 80,128 | |||||||
Consolidated Statements of Cash Flows | ||||||
Nine months ended September 30, | ||||||
(In thousands) | 2022 | 2021 | ||||
Cash Flows from Operating Activities: | ||||||
Gain (loss) attributable to Midwest Holding, Inc. | $ | 16,882 | $ | (9,656) | ||
Adjustments to arrive at cash provided by operating activities: | ||||||
Net premium and discount on investments | (6,982) | (1,529) | ||||
Depreciation and amortization | 229 | 38 | ||||
Stock options | (287) | 2,765 | ||||
Amortization of deferred acquisition costs | 3,095 | 1,780 | ||||
Deferred acquisition costs capitalized | (18,285) | (12,449) | ||||
Net realized loss on investments | 14,676 | 2,704 | ||||
Deferred gain on coinsurance transactions | 6,875 | 9,601 | ||||
Changes in operating assets and liabilities: | ||||||
Reinsurance recoverables | 33,698 | (6,659) | ||||
Interest and dividends due and accrued | (10,292) | (5,368) | ||||
Premiums receivable | (10) | (20) | ||||
Deposit-type liabilities | (17,245) | - | ||||
Policy liabilities | 2,740 | 14,763 | ||||
Receivable and payable for securities | 22,100 | - | ||||
Other assets and liabilities | 17,698 | 4,947 | ||||
Other assets and liabilities - discontinued operations | - | - | ||||
Net cash provided by operating activities | 64,892 | 917 | ||||
Cash Flows from Investing Activities: | ||||||
Fixed maturities available for sale: | ||||||
Purchases | (692,348) | (480,700) | ||||
Proceeds from sale or maturity | 296,179 | 204,452 | ||||
Mortgage loans on real estate, held for investment | ||||||
Purchases | (75,985) | (97,075) | ||||
Proceeds from sale | 58,033 | 25,749 | ||||
Derivatives | ||||||
Purchases | (22,981) | (14,496) | ||||
Proceeds from sale | 3,232 | 4,314 | ||||
Equity securities | ||||||
Purchases | - | (38,972) | ||||
Proceeds from sale | 12,772 | - | ||||
Purchase of equity method securities | ||||||
Other invested assets | ||||||
Purchases | (48,302) | (58,437) | ||||
Proceeds from sale | 3,334 | 34,965 | ||||
Purchase of restricted common stock in FHLB | (1) | (500) | ||||
Preferred stock | (2,893) | (3,128) | ||||
Notes receivable | - | - | ||||
Net change in policy loans | 66 | (9) | ||||
Net purchases of property and equipment | (1,830) | (54) | ||||
Net cash used in investing activities | (470,724) | (423,891) | ||||
Cash Flows from Financing Activities: | ||||||
Net transfer to noncontrolling interest | (6,906) | - | ||||
Capital contribution | - | (121) | ||||
Receipts on deposit-type contracts | 509,660 | 367,446 | ||||
Withdrawals on deposit-type contracts | (30,271) | (14,543) | ||||
Net cash provided by financing activities | 472,483 | 352,782 | ||||
Net increase (decrease) in cash and cash equivalents | 66,651 | (70,192) | ||||
Cash and cash equivalents: | ||||||
Beginning | 142,013 | 151,679 | ||||
Ending | $ | 208,664 | $ | 81,487 | ||
Supplementary information | ||||||
Cash paid for taxes | $ | 2,870 | $ | 3,711 | ||
SOURCE Midwest Holding Inc.
