Midwest Holding Inc. Reports Second Quarter 2021 Results

LINCOLN, Neb., Aug. 12, 2021 /PRNewswire/ — Midwest Holding Inc. («Midwest») (NASDAQ: MDWT), today announced financial results for its second…

LINCOLN, Neb., Aug. 12, 2021 /PRNewswire/ — Midwest Holding Inc. («Midwest») (NASDAQ: MDWT), today announced financial results for its second quarter ended June 30, 2021. 

Second Quarter 2021 Highlights

  • GAAP revenue was $8.9 million in the second quarter of 2021, compared to negative $12.5 million in the second quarter of 2020
  • GAAP net (loss) income was a net loss of $5.0 million in the second quarter of 2021, compared to a net loss of $16.6 million in the second quarter of 2020
  • Annuity direct written premiums under statutory accounting principles (non-GAAP) grew 26% to $125.9 million in the second quarter of 2021, compared to $99.7 million in the second quarter of 2020  
  • Non-GAAP management revenue grew 184% to $9.1 million in the second quarter of 2021, compared to $3.2 million in the second quarter of 2020
  • Non-GAAP management operating income (loss) available to common stockholders was income of $0.8 million in the second quarter of 2021, compared to a loss of $0.6 million in the second quarter of 2020

From Co-Chief Executive Officer A. Michael Salem

This was a solid quarter for Midwest, and we continue to execute on our plan and strengthen our position as an industry leader.

On a macro level, our opportunity remains as strong as ever: the U.S. wealth management and financial services value chain continues to be under flux. Asset managers are becoming insurance companies, traditional insurers are divesting assets, private equity is aggregating, technology is circling. We expect this industry realignment to continue for some time – with the true winners to be determined in decades not years.

Midwest is, in fact, built for this environment – from the ground up – as a technology-enabled life and annuity company. At the forefront of our vision is our commitment to driving value to our customers and partners. We do this as an open architecture product developer. Our platform allows us to aggregate and curate alternative asset management that we repackage and distribute to individuals seeking to fund their retirement and institutions seeking unique, uncorrelated returns. Our business is positioned to be aligned with these key stakeholders by connecting them to attractive products with top customer service, all powered by information and technology. We believe we have the people, the platform, and the vision to be a long-term winner in this market.

In the past quarter, we solidly executed in pursuit of our opportunity.

  • Importantly, we advanced our reinsurance pipeline, including closing a key transaction that helped to drive our financial results. As we’ve said before, these pipes take time to build but we are building them to support long-term sustainable growth
  • Additionally, we advanced our technology and operating infrastructure – crucially positioning us for long-term scalability
  • And we also expanded our distribution efforts, notably adding Nate Thompson with over two decades of experience, to spearhead this important area of our growth

Q2 2021 Key Performance Indicators and Non-GAAP Financial Measures

Annuity Premiums*

For the second quarter of 2021, annuity direct written premiums (statutory non-GAAP) grew 26% to $125.9 million, compared to $99.7 million in the second quarter of 2020. Ceded premiums for the second quarter of 2021, decreased 3% to $86.1 million, compared to $88.7 million in the second quarter of 2020. 

MYGA and FIA direct written premiums accounted for 21% and 79%, respectively, of total annuity direct written premiums in the second quarter of 2021.

* Non-GAAP; see discussion below for a reconciliation to GAAP.

Management Revenue*

For the second quarter of 2021, management revenue (a non-GAAP measure) was $9.1 million, an increase of 184% compared to $3.2 million in the second quarter of 2020. The components of management revenue in the second quarter of 2021 include:

  • $4.9 million of net revenue on reinsurance, primarily ceding commissions
  • $3.2 million of investment income, net of expenses
  • $0.7 million service fee revenue, net of expenses
  • $0.4 million of other revenue

*Non-GAAP; see discussion below for a reconciliation to GAAP.

Management Operating Income (Loss) Available to Common Shareholders*

For the second quarter of 2021, management operating income (loss) available to common shareholders increased to income of $0.8 million in the second quarter of 2021, compared to a loss of $0.6 million in the second quarter of 2020.

* Non-GAAP; see discussion below for a reconciliation to GAAP.

General & Administrative Expenses

For the second quarter of 2021, general and administrative or «G&A» expenses totaled $5.9 million compared to $3.7 million in the second quarter of 2020. G&A expenses include salaries, benefits and other operating expenses, while excluding $1.5 million of non-cash stock-based compensation and $1.3 million of non-cash mark-to-market of our derivative option allowance.*

* Non-GAAP; see discussion below for a reconciliation to GAAP.

Explanation of Non-GAAP Financial Measures

We have discussed above below certain non-GAAP financial measures that our management uses in conjunction with GAAP financial measures as an integral part of managing our business and to, among other things:

  • monitor and evaluate the performance of our business operations and financial performance;
  • facilitate internal comparisons of the historical operating performance of our business operations;
  • review and assess the operating performance of our management team;
  • analyze and evaluate financial and strategic planning decisions regarding future operations; and
  • plan for and prepare future annual operating budgets and determine appropriate levels of operating investments.

Non-GAAP financial measures used by us may be calculated differently from, and therefore may not be comparable to, similarly titled measures used by other companies. These non-GAAP financial measures should be considered along with, but not as alternatives to, our operating performance measures as prescribed by GAAP.

Annuity Premiums – SAP

Annuity premiums, also referred to as sales or direct written premiums, do not correspond to revenues under GAAP, but are relevant metrics to understand our business performance. Under statutory accounting practices, or SAP, our annuity premiums received are treated as premium revenue. Our premium metrics include all sums paid into an individual annuity in a given period. We typically transfer all or a substantial portion of the premium and policy obligations to reinsurers. Ceded premium represents the premium we transfer to reinsurers in a given period. Retained premium represents the portion of premium received during a given period that was not ceded to reinsurers and will either be reinsured in a subsequent period or retained by us. We typically retain premiums prior to transferring them to reinsurers to facilitate block and other reinsurance transactions involving portfolios of annuity premiums.

Management Revenue

In addition to total revenue, we have consistently utilized management revenue as an economic measure to evaluate our financial performance. Management revenue consists of GAAP revenue excluding the impact of items that fluctuate from quarter to quarter in a manner unrelated to our core operations, which we believe are useful in analyzing operating trends. The most significant adjustments to arrive at management revenue eliminate the impact of net realized gains or losses on investments. These adjustments include the elimination of net realized gains or losses on investments related to the fair value accounting for derivatives used to hedge the fixed indexed annuity («FIA») index credits and mark-to-market change in the FIA embedded derivative liability. We believe the combined presentation and evaluation of total revenue together with management revenue provides information that can enhance an investor’s understanding of our underlying operating results.

Net Revenue on Reinsurance

We have consistently utilized net revenue on reinsurance, a component of management revenue, as an economic measure to evaluate our financial performance. Net revenue earned on reinsurance represents ceding commissions and other reinsurance-related fees paid to us during the period.

Management Expenses

In addition to total expenses, we have consistently utilized management expenses as an economic measure to evaluate our financial performance. Management expenses consist of total GAAP expenses adjusted to eliminate items that fluctuate from quarter to quarter in a manner unrelated to core operations, which we believe are useful in analyzing operating trends. The most significant adjustments to arrive at management expenses include the use of management interest credited (as discussed below), the exclusion of stock-based compensation and the exclusion of the mark-to-market option allowance expense (included in other operating expenses) payable to reinsurers to cover their obligations under FIA policies we have reinsured with them. We believe the combined presentation and evaluation of total expenses together with management expenses provides information that can enhance an investor’s understanding of our underlying operating results.

Management Interest Credited

We have consistently utilized management interest credited, a component of management expenses, as an economic measure to evaluate our financial performance. GAAP interest credited contains significant technical considerations related to fair value accounting with respect to the mark-to-market change in the FIA embedded derivative liability and change in actuarial valuation of the FIA reserve, both of which are sensitive to changes in the market as well as changes in actuarial assumptions. Due to these technical considerations that we believe are largely unhelpful to management and investors, we exclude the GAAP interest credited expense related to our FIA products and include the amortized cost of options we purchase to service our FIA policy obligations. The sum of GAAP interest credited related to our multi-year guaranteed annuity («MYGA») products and the amortized cost of options we purchase to service our FIA products constitutes management interest credited.

Management Operating Income (Loss) Available to Common Stockholders

In addition to net income (loss), we have consistently utilized management operating income (loss) available to common stockholders as an economic measure to evaluate our financial performance. Management operating income (loss) available to common stockholders consists of management revenue (discussed above) net of management expenses (discussed above) and then tax-effected at 21% assumed tax rate.

SPECIAL CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

Certain statements contained or incorporated by reference in this release constitute forward-looking statements. These statements are based on management’s expectations, estimates, projections and assumptions. In some cases, you can identify forward-looking statements by terminology including «could,» «may,» «will,» «should,» «expect,» «plan,» «anticipate,» «believe,» «estimate,» «predict,» «potential,» «intend,» or «continue,» the negative of these terms, or other comparable terminology used in connection with any discussion of future operating results or financial performance. These statements are only predictions and reflect our management’s good faith present expectation of future events and are subject to a number of important factors and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements.

Factors that may cause our actual results to differ materially from those contemplated or projected, forecast, estimated or budgeted in such forward-looking statements include among others, the following possibilities:

  • our business plan, particularly including our reinsurance strategy, may not prove to be successful;
  • our reliance on third-party insurance marketing organizations to market and sell our annuity insurance products through a network of independent agents;
  • adverse changes in our ratings obtained from independent rating agencies;
  • failure to maintain adequate reinsurance;
  • our inability to expand our insurance operations outside the 21 states and District of Columbia in which we are currently licensed;
  • our annuity insurance products may not achieve significant market acceptance;
  • we may continue to experience operating losses in the foreseeable future;
  • the possible loss or retirement of one or more of our key executive personnel;
  • intense competition, including the intensification of price competition, competitive pressures from established insurers with greater financial resources, the entry of new competitors, and the introduction of new products by new and existing competitors;
  • adverse state and federal legislation or regulation, including decreases in rates, limitations on premium levels, increases in minimum capital and reserve requirements, benefit mandates and tax treatment of insurance products;
  • fluctuations in interest rates causing a reduction of investment income or increase in interest expense and in the market value of interest-rate sensitive investment;
  • failure to obtain new customers, retain existing customers, or reductions in policies in force by existing customers;
  • higher service, administrative, or general expense due to the need for additional advertising, marketing, administrative or management information systems expenditures;
  • changes in our liquidity due to changes in asset and liability matching;
  • possible claims relating to sales practices for insurance products; and
  • lawsuits in the ordinary course of business.

Earnings Teleconference Information

The Company will host a conference call to discuss financial and operating results for the second quarter 2021 on Friday, August 13, 2021, at 12:00 p.m. Eastern Time. The Company also plans to release its second quarter 2021 results on the investor relations section of its website at https://ir.midwestholding.com after the close of the financial markets on Thursday, August 12, 2021.

CONFERENCE CALL DETAILS

To pre-register for this call, please go to the following link (you will receive your access details via email): https://www.incommglobalevents.com/registration/q4inc/8368/midwest-holding-inc-q-22021/

WEBCAST DETAILS (Audience)

Use this link to access the audience view of the webcast.

https://event.on24.com/wcc/r/3196018/ECFF30E8A916B80EF3703FA822982247

A replay of the webcast will be made available after the call on the Investor Relations page of the Company’s website at https://ir.midwestholding.com

About Midwest

Midwest Holding Inc. is a rapidly growing, technology-enabled, services-oriented annuity platform. Midwest designs and develops in-demand annuity products that are distributed through independent distribution channels, to a large and growing demographic of U.S. retirees. Midwest originates, manages and transfers these annuities through reinsurance arrangements to asset managers and other third-party investors, who are actively seeking these financially attractive products. Midwest also provides the operational and regulatory infrastructure and expertise to enable asset managers and third-party investors to form, capitalize and manage their own reinsurance capital vehicles.

For more information, please visit www.midwestholding.com

Investor contact: ir@midwestholding.com

Media inquiries: press@midwestholding.com

 


Consolidated Balance Sheets



June 30, 2021


December 31, 2020


(Unaudited)




Assets







Fixed maturities, available for sale, at fair value

(amortized cost: $580,914,162 and $369,156,068, respectively)

$


588,861,261


$

377,163,358

Mortgage loans on real estate, held for investment



130,372,068



94,989,970

Derivative instruments



16,422,394



11,361,034

Equity securities, at fair value (cost: $46,887,832 in 2021 and zero in 2020)



46,924,170



Other invested assets



40,813,176



21,897,130

Investment escrow





3,174,047

Federal Home Loan Bank (FHLB) stock



500,000



Preferred stock



4,728,375



3,897,980

Notes receivable



5,810,328



5,665,487

Policy loans



51,529



45,573

Total investments



834,483,301



518,194,579

Cash and cash equivalents



70,278,979



151,679,274

Deferred acquisition costs, net



21,419,245



13,456,303

Premiums receivable



333,835



313,601

Accrued investment income



10,448,869



6,806,836

Reinsurance recoverables



45,237,046



32,146,042

Intangible assets



700,000



700,000

Property and equipment, net



114,434



103,964

Operating lease right of use assets



287,660



348,198

Other assets



3,114,239



1,533,179

Assets associated with business held for sale



1,058,180



1,118,783

Total assets

$


987,475,788


$

726,400,759

Liabilities and Stockholders’ Equity







Liabilities:







Benefit reserves

$


12,477,017


$

12,775,773

Policy claims



159,118



161,703

Deposit-type contracts



848,714,996



597,868,472

Advance premiums



422



2,541

Deferred gain on coinsurance transactions



24,872,873



18,198,757

Lease liabilities:







Operating lease



331,350



396,911

Other liabilities



18,260,351



9,552,791

Liabilities associated with business held for sale



1,053,226



1,114,312

Total liabilities



905,869,353



640,071,260

Contingencies and Commitments







Stockholders’ Equity:







Preferred stock, $0.001 par value; authorized 2,000,000 shares; no shares issued and outstanding as of June 30, 2021 or December 31, 2020





Voting common stock, $0.001 par value; authorized 20,000,000 shares; 3,737,564 shares issued and outstanding as of June 30, 2021 and December 31, 2020, respectively; non-voting common stock, $0.001 par value, 2,000,000 shares authorized; no shares issued and outstanding June 30, 2021 and December 31, 2020, respectively



3,738



3,738

Additional paid-in capital



135,232,817



133,592,605

Treasury stock



(175,333)



(175,333)

Accumulated deficit



(60,115,614)



(53,522,078)

Accumulated other comprehensive income



6,660,827



6,430,567

Total stockholders’ equity



81,606,435



86,329,499

Total liabilities and stockholders’ equity

$


987,475,788


$

726,400,759




Consolidated Statements of Comprehensive Loss

(Unaudited)















Three months ended June 30, 


Six months ended June 30, 



2021


2020


2021


2020


Revenues













Premiums

$


$

30


$


$

51


Investment income, net of expenses


3,220,026



(397,842)



6,107,389



843,136


Net realized gain (loss) on investments


4,059,926



(12,819,871)



(589,179)



9,780,139


Amortization of deferred gain on reinsurance


587,737



338,269



1,048,593



520,707


Service fee revenue, net of expenses


671,804



385,674



1,109,950



765,892


Other revenue


357,814



10,387



606,783



20,213


Total revenue (loss)


8,897,307



(12,483,353)



8,283,536



11,930,138


Expenses













Interest credited


3,931,216



(128,052)



1,584,813



83,150


Benefits




4,016



79



(3,087)


Amortization of deferred acquisition costs


524,336



100,388



1,027,073



140,897


Salaries and benefits


4,513,944



1,354,934



7,441,171



2,179,830


Other operating expenses


4,174,196



2,305,687



2,644,899



3,630,800


Total expenses


13,143,692



3,636,973



12,698,035



6,031,590


(Loss) income continuing from operations before taxes


(4,246,385)



(16,120,326)



(4,414,499)



5,898,548


Income tax expense


(746,689)



(479,513)



(2,179,037)



(887,429)


Net (loss) income attributable to Midwest Holding, Inc.


(4,993,074)



(16,599,839)



(6,593,536)



5,011,119


Comprehensive income (loss):













Unrealized gains (losses) on investments arising during the three months ended June 2021 and 2020, net of offsets, net of tax ($119,677 and $4.9 million, respectively); unrealized gains (losses) on investments arising during the six months ended June 2021 and 2020, net of offsets, net of tax ($61,207 and $1.6 million, respectively)


373,392



6,673,662



1,336,272



2,502,690


Unrealized losses on foreign currency




(976)





(406,255)


Less:  Reclassification adjustment for net realized gains on investments, net of tax for the three months ended June 20, 2021 and 2020 ($208,655 and $216,772, respectively), and net of tax for the six months ended June 20, 2021 and 2020 ($294,004 and $242,962, respectively)


(784,942)



12,819,871



(1,106,012)



(9,780,139)


Other comprehensive (loss) income


(411,550)



19,492,557



230,260



(7,683,704)


Comprehensive (loss) income

$

(5,404,624)


$

2,892,718


$

(6,363,276)


$

(2,672,585)


Earnings (loss) income per common share













Basic

$

(1.34)


$

(6.53)


$

(1.76)


$

2.19


Diluted

$

(1.34)


$

(6.53)


$

(1.76)


$

2.18











Consolidated Statements of Cash Flows



(Unaudited)








Six months ended June 30, 



2021


2020

Cash Flows from Operating Activities:










Net (loss) income attributable to Midwest Holding, Inc.






$

(6,593,536)


$

5,011,119

Adjustments to arrive at cash provided by operating activities:











Net premium and discount on investments







(438,382)



104,947

Depreciation and amortization







25,405



804,289

Stock options







1,769,567



25,022

Amortization of deferred acquisition costs







1,027,073



140,897

Deferred acquisition costs capitalized







(9,041,477)



(4,118,436)

Net realized losses (gains) on investments







589,179



(9,780,139)

Deferred coinsurance ceding commission







6,674,116



3,908,889

Changes in operating assets and liabilities:











Reinsurance recoverables







(13,529,299)



(4,304,381)

Interest and dividends due and accrued







(3,642,033)



(1,960,229)

Premiums receivable







(20,234)



6,310

Policy liabilities







7,333,531



3,958,101

Other assets and liabilities







7,121,121



8,678,265

Other assets and liabilities – discontinued operations







(483)



6,280

Net cash (used for) provided by operating activities







(8,725,452)



2,480,934

Cash Flows from Investing Activities:











Fixed maturities available for sale:











Purchases







(342,717,164)



(107,759,107)

Proceeds from sale or maturity







132,752,125



18,409,038

Mortgage loans on real estate, held for investment











Purchases







(51,978,684)



(35,531,866)

Proceeds from sale







16,596,586



2,069,950

Derivatives











Purchases







(9,850,552)



(2,643,989)

Proceeds from sale







3,062,687



Purchase of equity securities







(46,924,170)



Other invested assets











Purchases







(32,291,974)



(7,011,102)

Proceeds from sale







16,915,404



5,612,112

Purchase of restricted common stock in FHLB







(500,000)



Preferred stock







(778,681)



Notes receivable









(5,488,101)

Net change in policy loans







(5,956)



(35,158)

Net purchases of property and equipment







(34,642)



(45,513)

Net cash used in investing activities







(315,755,021)



(132,423,736)

Cash Flows from Financing Activities:











Finance lease









(111)

Capital contribution







(129,355)



14,941,533

1505 Capital LLC purchase









(500,000)

Receipts on deposit-type contracts







249,519,268



147,486,013

Withdrawals on deposit-type contracts







(6,309,735)



(658,936)

Net cash provided by financing activities







243,080,178



161,268,499

Net (decrease) increase in cash and cash equivalents







(81,400,295)



31,325,697

Cash and cash equivalents:











Beginning







151,679,274



43,716,205

Ending






$

70,278,979


$

75,041,902












Supplementary information











Cash paid for taxes






$

1,500,000


$














Supplemental Information – Annuity Premiums (SAP);

Reconciliation – Management Revenue to GAAP Revenue

(Unaudited)



Three months ended June 30,


Six months ended June 30,


2021


2020


2021


2020

Annuity Premiums (SAP)












MYGA direct written premiums

$

26,191,111


$

27,400,367


$

35,560,073


$

58,965,873

FIA direct written premiums


99,674,226



72,270,636



213,959,195



88,520,140

Annuity direct written premiums


125,865,337



99,671,003



249,519,268



147,486,013

Ceded premiums


86,105,933



88,717,954



133,570,212



114,446,652













Annuity Premiums Statistics












Premiums ceded %


68%



89%



54%



78%













Direct written premiums growth y-o-y %:












MYGA


(4%)



(9%)



(40%)



54%

FIA


38%



NMF



142%



NMF

Total


26%



233%



69%



286%













Direct written premiums composition %:












MYGA


21%



27%



14%



40%

FIA


79%



73%



86%



60%

Total


100%



100%



100%



100%














Three months ended June 30,


Six months ended June 30,


2021


2020


2021


2020

Management Revenue












Net revenue on reinsurance

$

4,863,927


$

3,213,218


$

7,722,709


$

4,429,596

Investment income, net of expenses


3,220,026



(397,842)



6,107,389



843,136

Service fee revenue, net of expenses


671,804



385,674



1,109,950



765,892

Other revenue


357,814



10,387



606,783



20,213

Management revenue – total

$

9,113,571


$

3,211,437


$

15,546,831


$

6,058,837














Three months ended June 30,


Six months ended June 30,


2021


2020


2021


2020

Net Revenue on Reinsurance












Amortization of deferred gain on reinsurance

$

587,737


$

338,269


$

1,048,593


$

520,707

Adjustments:












Add: Deferred coinsurance ceding commission


4,276,190



2,874,949



6,674,116



3,908,889

Net revenue on reinsurance

$

4,863,927


$

3,213,218


$

7,722,709


$

4,429,596














Three months ended June 30,


Six months ended June 30,


2021


2020


2021


2020

Reconciliation – Management Revenue to GAAP Revenue









Total revenue – GAAP

$

8,897,307


$

(12,483,353)


$

8,283,536


$

11,930,138

Adjustments:












Less: Premiums




(30)





(51)

Less: Net realized gains on investments


(4,059,926)



12,819,871



589,179



(9,780,139)

Add: Deferred coinsurance ceding commission


4,276,190



2,874,949



6,674,116



3,908,889

Management revenue – total

$

9,113,571


$

3,211,437


$

15,546,831


$

6,058,837















Supplemental Information – Reconciliation – Management Expenses to GAAP Expenses

(Unaudited)



Three months ended June 30,


 

Six months ended June 30,


2021


2020


 

2021


 

2020

Management Expenses












G&A

$

5,893,361


$

3,722,329


$

1,144,452


$

5,860,404













Management interest credited


1,739,682



172,677



2,882,091



215,928

Amortization of deferred acquisition costs


524,336



100,388



1,027,073



140,897

Expenses related to retained business


2,264,018



273,065



3,909,164



356,825

Management expenses – total

$

8,157,379


$

3,995,394


$

15,053,616


$

6,217,229














Three months ended June 30,


 

Six months ended June 30,


2021


2020


2021


2020

G&A












Salaries and benefits – GAAP

$

4,513,944


$

1,354,934


$

7,441,171


$

2,179,830

Other operating expenses – GAAP


4,174,196



2,305,687



2,644,899



3,630,800

Subtotal


8,688,140



3,660,621



10,086,070



5,810,630

Adjustments:












Less: Stock-based compensation


(1,508,227)



(13,088)



(1,769,567)



(25,022)

Less: Mark-to-market option allowance


(1,286,552)



74,796



2,827,949



74,796

G&A

$

5,893,361


$

3,722,329


$

11,144,452


$

5,860,404














Three months ended June 30,


 

Six months ended June 30,


2021


2020


2021


2020

Management Interest Credited












Interest credited – GAAP

$

3,931,216


$

(128,052)


$

1,584,813


$

83,150

Adjustments:












Less: FIA interest credited – GAAP


(3,404,569)



200,463



(586,063)



6,201

Add: FIA options cost – amortized


1,213,035



100,266



1,883,341



126,577

Management interest credited

$

1,739,682


$

172,677


$

2,882,091


$

215,928














Three months ended June 30,


 

Six months ended June 30,


2021


2020


2021


2020

Reconciliation – Management Expenses to GAAP Expenses








Total revenue – GAAP

$

13,143,692


$

3,636,973


$

12,698,035


$

6,031,590

Adjustments:












Less: Benefits




(4,016)



(79)



3,087

Less: Stock-based compensation


(1,508,227)



(13,088)



(1,769,567)



(25,022)

Less: Mark-to-market option allowance


(1,286,552)



74,796



2,827,949



74,796

Less: FIA interest credited – GAAP


(3,404,569)



200,463



(586,063)



6,201

Add: FIA options cost – amortized


1,213,035



100,266



1,883,341



126,577

Management expenses – total

$

8,157,379


$

3,995,394


$

15,053,616


$

6,217,229
















Supplemental Information – Reconciliation – Management Operating Income (Loss) Available to Common Stockholders to GAAP Net Loss Attributable to Midwest Holding Inc.

(Unaudited)



Three months ended June 30,


Six months ended June 30,


2021


2020


2021


2020

Reconciliation from Net Loss Attributable to Midwest Holding Inc. – GAAP to Management Operating Income Available to Common Stockholders

Net loss attributable to Midwest Holding Inc. – GAAP

$

(4,993,074)


$

(16,599,839)


$

(6,593,536)


$

5,011,119

Adjustments:












Less: Premiums




(30)





(51)

Less: Net realized gains on investments


(4,059,926)



12,819,871



589,179



(9,780,139)

Add: Deferred coinsurance ceding commission


4,276,190



2,874,949



6,674,116



3,908,889

Less: Benefits




4,016



79



(3,087)

Less: Stock-based compensation


1,508,227



13,088



1,769,567



25,022

Less: Mark-to-market option allowance


1,286,552



(74,796)



(2,827,949)



(74,796)

Less: FIA interest credited – GAAP


3,404,569



(200,463)



586,063



(6,201)

Add: FIA options cost – amortized


(1,213,035)



(100,266)



(1,883,341)



(126,577)

Less: Income tax expense – GAAP


746,689



479,513



2,179,037



887,429

Add: Effective tax expense at 21% assumed tax rate


(200,800)



164,631



(103,575)



33,262

Total adjustments


5,748,466



15,980,513



6,983,176



(5,136,249)

Management operating income (loss) available to common stockholders

$

755,392


$

(619,326)


$

389,640


$

(125,130)

























Management operating income (loss) available to common stockholders per common share






Basic

$

0.20


$

(0.24)


$

0.10


$

(0.05)

Diluted

$

0.20


$

(0.24)


$

0.10


$

(0.05)













Weighted average shares outstanding – basic


3,737,564



2,540,588



3,737,564



2,291,629

Weighted average shares outstanding – diluted


3,776,169



2,542,482



3,776,169



2,293,523



























Supplemental Information – Retained and Reinsurance Balance Sheets (GAAP)

(Unaudited)




















June 30, 2021


December 31, 2020




















Retained


Reinsurance


Consolidated


Retained


Reinsurance


Consolidated

Assets


















Total investments

$

378,874,422


$

455,608,879


$

834,483,301


$

185,367,430


$

332,827,149


$

518,194,579

Cash and cash equivalents


30,530,673



39,748,306



70,278,979



102,334,579



49,344,695



151,679,274

Accrued investment income


3,378,438



7,070,431



10,448,869



1,955,938



4,850,898



6,806,836

Deferred acquisition costs, net


21,419,245





21,419,245



13,456,303





13,456,303

Reinsurance recoverables




45,237,046



45,237,046





32,146,042



32,146,042

Other assets


4,143,746



1,464,602



5,608,348



2,685,341



1,432,384



4,117,725

Total assets

$

438,346,524


$

549,129,264


$

987,475,788


$

305,799,591


$

420,601,168


$

726,400,759

Liabilities and Stockholders’ Equity


















Liabilities:


















Policyholder liabilities

$

308,727,024


$

552,624,529


$

861,351,553


$

191,887,322


$

418,921,167


$

610,808,489

Deferred gain on coinsurance transactions


24,872,873





24,872,873



18,198,757





18,198,757

Other liabilities


23,140,192



(3,495,265)



19,644,927



9,384,013



1,680,001



11,064,014

Total liabilities

$

356,740,089


$

549,129,264


$

905,869,353


$

219,470,092


$

420,601,168


$

640,071,260

Stockholders’ Equity:


















Voting common stock


3,738





3,738



3,738





3,738

Additional paid-in capital


135,057,484





135,057,484



133,417,272





133,417,272

Accumulated deficit


(60,115,614)





(60,115,614)



(53,522,078)





(53,522,078)

Accumulated other comprehensive income


6,660,827





6,660,827



6,430,567





6,430,567

Total Midwest Holding Inc.’s stockholders’ equity

$

81,606,435


$


$

81,606,435


$

86,329,499


$


$

86,329,499

Total liabilities and stockholders’ equity

$

438,346,524


$

549,129,264


$

987,475,788


$

305,799,591


$

420,601,168


$

726,400,759


Note: 1505 Capital had approximately $388 million of total third-party assets under management as of June 30, 2021.

 

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SOURCE Midwest Holding Inc.