GWGH - Earnings call transcript Q3 2020

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Dan Callahan

Thank you. Good afternoon, everybody. My name is Dan Callahan, Director of Communication for GWG Holdings. Welcome to our Third Quarter 2020 Earnings Webcast.

On the webcast with me today are Murray Holland, our President and Chief Executive Officer; Brad Heppner, Chairman of the Board of GWG Holdings; and Tim Evans, our Chief Financial Officer.

we'll process. submitted today, through obtained remarks registration the our be questions taking in Following a questions gotten We've few more give information. you we think will or of as we you be we a if don't at to there'll of But the slide end get present today, have presentation. result a yours questions context of the anything one if

can e-mail an you answer. us, You call get us, and we'll

and webcast results, subject assumptions the we on made today, Any risks include to of update to statements statements any are financial no as along make made Some projected as statements a new are forward-looking that certain webcast events. and on result uncertainties. forward-looking or with information obligation them of this today, on based future

that risks available will could forward-looking reports. and and through the and factors The cause Investor different results in XX-Q is be our of and website list can our being sample tab. statements be earnings to at from XX-K Relations gwgh.com on webcast found our materially be in release recent actual most Our recorded

President So our it I'll Chief Executive Murray? turn over to Murray with Officer, that, Holland. and

Murray Holland

XXXX. on Dan, review a items like thank we'd Beneficient’s GWG to and very third agenda of you number much. quarter Today,

session. tools Then The operations. then finish we first the be and will Q&A by have results update with financial third metrics update about the developed that events COVID-XX quarter Beneficient been review Beneficient third the and corporate talk we risk during is an on quarter, update, cover and will underwriting XXXX management will Brad a about then Ben Heppner

This very $XX life insurance million favorably in with we First, of with portfolio our quarters. performance just strong prior have under compares maturities. reported

sales, capital billion raised closed a offering, through Beneficient $X.X including raising quarter bond $XX million $XXX L in we bond in month million September. $X L success in sourced Continued from October and sources. of originations partners, right at general this $XXX RIAs, the origination foundations, XXXX quarter pipeline family a various just approximately and million has in built of offices, after in other million our closed

quarter firm our new independent here full combined job Grant was to firms recognized with done our an engaging to includes on Beneficient and The We're to have We opinion basis Grant quarterly GWG have with Beneficient GWG our balances. internationally another developments. and portfolio. accounting quarter financings This accounting Thornton the Holdings third hired for assist first good audit loan review and internal in related accounting very firm firm. internationally Beneficient public the a to firm. pleased very on We've to and valuations prepare engaged recognized oversight taken internationally company’s auditing Thornton loan cost management steps controls. they've Beneficient’s consult as recognized department of and of

portfolio multi-year hedge the potential back functions, and purchased a allow quarter, market third scale the minimize protect to which Beneficient’s middle increase During and began and we corrections we both against office loan and costs to GWG Ben automating accuracy. business, will our

The life and material market performance experienced is non-correlated During portfolio the by impact to COVID-XX market. our pandemic, maturities. based portfolio on movements of have from the consequently no the affected not we insurance is

dividends, to pay L relatively of and and our a the are worked capital, meet period, during focusing income raise health receive partners, The And ongoing employees face operating bond of majority we mid-March. pandemic. our on the have policies, had to home from strong otherwise this and we've our this our in sales of continue all obligations. energy employees, benefits, time have safety We of insurance to and of spent on investors committed receive lot and business since

it Heppner, of GWG Board Holdings. Brad? Chairman hand to to the like the Brad I'd Next, over of

Brad Heppner

a to year that institutions. mid- high-net liquidity our on advanced a to Good of early our and XXXX, worth created nearly providing joint GWG over small- of assets and XXX professionally everyone. a strategic alternative It market expanded in Thank ago. strategy employees. individuals afternoon, further of also mid-sized And and Ben managed you, December, to Murray. underserved vast workforce partnership a

During XXXX, build services, by focused of we to systems. products, have the our and foundation unique introducing efforts companies our

to created. the to Some small our when past grown of challenges their these to for efforts This need has faced need provide all advisors liquidity for years a we by opportunity products. a now protect. companies systems, we in managed alternative We time in products believe institutionally liquidity services our intend that patents of there's We basically file at these by U.S.-based net believe great poise have and investors XXXX individuals of and asset families institutions trillion driven assets. hold value and who the few substantially line liquidity over for of an for by our $X scale

a that has under small are unions. growth only our held a of how and individuals half to And and alternative there's half by U.S. billion that that the different worth Today, sheet. industry liquidity. net addition, families hospitals excludes today small that $X $X.X asset past large for by types liquidity for that in that at that in interval funds investors reason needs. large of the alternative asset U.S. of now having XX% liquidity, $XXX them traded. by $X are The We growing. to and real than million. Now holders continues exchange deliver liquidity in closer XX all segment needing individuals and communities. hold other foundations, in are There billion that institutions trillion hedge to XX% which of fit evolved the our these category. trillion assets number over is held But decrease. held $X quite NAV held are marketplace. now are much and people X,XXX a by as balance have the That's $X endowments, that having billion estate know And families the those is institutions, required assets and assets market take over for institutions greater to of It's small by our This this with investors, us how investments look of years these have BDCs

market For for access the individuals, market. U.S. small and do the That institutions. consultants a have of have And their several market are for to firms. their fact, transactions. middle big is own bankers, each the liquidity. for big their markets of built institutions, who each Typically, where intermediary they firms liquidity advisers. the built ones auctioneers accounting there in has party transactional law ability They not families acquisition, the own and and the the by often example, It mergers type and pricing secondary built in intermediaries, institutions are was own

complicated liquidity from expensive. It's anywhere six it expensive. those It's They out process, needs a health often needs to need to and life be liquidity family more need alternatives don't it very They planning be needs. It's small have needs. changes. have Individuals from simple. the it So the institutions business can months. big They that much of can't There's institutions, XX cannot requirements. and and take All rapid. They individuals it's state a that that get too a a have They now just reason simpler. it. need to they for market. afford their

easier the of providing much them when process to products business few cost-effective transaction create a liquidity, for they to and need went small and liquidity simplifies for a line ago simplifies provide rapid institutions a market it, manner work to years entire that with that built and than we to into big services institutions So gaining liquidity. the their individuals the access

very always that company. private investment is Our not like investment suite to adviser. liquidity highlight We're We Beneficient is not strategy including financial an I a unique simple. and services a trust solutions. and trust fund of we're provide an solutions,

promoted deploy cover as business institution is to to liquidity cost have a balance competition. investors. off with permanent a attorneys, investors they We on capital needs every their that's money from alternative return They private did. raised and sheet have that own Our asset capital They to typically pay lower to institutions profits, with their our rate of costs a very to seven-figure expectation. and transaction they advisory who that and with consultants managers, than liquidity along model institutional equity large liquidity transaction typically balance paid the intermediaries sheet Street Wall of interest asset expensive our our fees to fund to financial operate provide high operate of and

than managers, liquidity our than companies. than is for on our of This XX% not ourselves functions substantially costs investors, all capital. reason are competition, costs of inside means we hand of have lawyers, these that secondary cost providers’ lower these the Our our outside lower more the companies other do often all do

liquidity associated individuals the how to to similar operates market we our to arm other of underserved costs operates. lending based delivering ways institutions. cut found asset Our bank And with and

us proprietary cuts operate capital, execution what intend built needs with and lower our To a clients, to to products our The platform secure All online for a at opens first is allow to spread it cost XXXX, with the benefit up portal. and what of services developed our among solutions all to us and holding and cost market a the investors transparent specifically of our by the our this investors. with to of valuable the built engage during spread clients our earn be business be liquidity targeted to that AltAccess costs online. to services to we liquidity costs that on to providing and directly lower market Beneficient us these of and and lower compelling We allows them. do our of

allows and simply It's target the Everything clients technology simply to potential can our $XXX on we own market our potential it alternative of $XXX transactions currently our products from This that clients. promote June to alternative XXXX, it few to securities for talk having our next solutions the further proprietary cash, a all to million going be offering, under summer about system Very products being of transact new Murray, manner directly from Murray. we've more asset of third connecting to our sponsors, going and are demand securities over Tim that of can actively and of transactions for platform. business. pipeline. branch mix CFO, It's who our see under introduce the waiting their closings all Beneficient a registered then GWG. have today. to presence, liquidity inflow to launched of over That's evolve Very professionally was without XXXX, of of the other we then to He's launched CEO advertise Central those promote to our to online. those the With our officially million actions Since without their investment private pipeline hand online. market. to their and of needs companies a Beneficient done see going Thank Through advisors, brick-and-mortar sourced a that rapidly cash discuss we solutions bond. beginning that and markets or and of target key and an to provide family launch the legacy quarter. own investors. that, which credit Beneficient to providers or suite that clients can you. about our liquidity. the bank advertise target burden foundations, months. need consideration AltAccess over for end I'm our online assets are happy main from results liquidity all solutions, learn to on tools the introduction of very pricing some the can operate our can our our its liquidity our from in the investors XXXC investments. liquidity solutions our from of appreciate time In offices, for or additional and of managed Our and can a your few been financial he's potential begin provide types enhance without large operations. has Evans, of they from expensive worldwide should We GWG. And technology information street developed with transactions development liquidity to I complete AltAccess the back

Murray Holland

been to risk have you the third I'd you and very tools quarter now management much. with in of that like share thank underwriting Ben's implemented here XXXX. Brad,

an and methodologies, developed and of management of metrics evaluate and optimized construction, risk reflecting original profile and diversified It system. TotalAlt management each loan. alternative TotalAlt. risk the comprehensive valuation, principles portfolio It’s asset by is and Underwriting risk that a simulation was the First collateral system was It’s of Ben's various designed built portfolio portfolio. with as Risk hedging rating the as developed manage using AltRating alternative employing create by built collateral has probabilistic maintain Ben's by and team. for quality models and review to loan specifically a It's well strategies analyze portfolio accepted synchronizing makeup, teams system. risk to Underwriting new are loans. using collateralized grading the tailored to evaluates generated assets. a internally loans to Management score Beneficient’s It existing default to

introduce Evans, Tim? Officer. Financial Tim to Chief like would our I Next

Tim Evans

and XXXX. life then off our of the a Thanks, with results Murray. QX. XXXX we'll QX Happy our portfolio, with end financial here insurance financial about balance Ben over metrics to start portfolio talk the sheet and ahead collateral be We'll we’ll start and for move review and go liquidity to discussion through for and review, go metrics our Let's with XXXX our both

So we total $X.X assets again in excess we have of billion stockholders' $XXX in of see excess million. equity and

a be that able XXXX. And XXXX we as So switch in over QX still discuss some from statement differences sheet last we'll we where balance our QX to to were line income of perspective, metrics, versus quarter. with here those we see from

had gross were QX other expenses loss $XX.X million, up Total in quarter. $X.X And and So had really share million million. XXXX. income per of a million, than about loss net earnings Total share And expenses for $XX.X the earnings XXXX, from expenses, per QX $XX.X similarly million. of more revenue of with by here, the $XX.X we of quarter up $X.XX QX other we up for XXXX. for

constitutes Let's break of these quarter. differences some for what down the

higher gross see really we if at is So what services is $XX.X we that million higher million about by increase and revenues this interest driven look QX. totaling trust the revenue, $X.X being in income for

QX consolidating them. items to consolidating comparing is back this of XXXX, operations now from that where we where we're event XXXX, not of remember Now the these revenue QX were

have this stream in we last showing QX year. didn't revenue So we have XXXX new here that we're

are is policies. difference that currently insurance life Another not we purchasing

What's $X.X that down insurance had is top gain in the at life hedge in policy difference finally driving that's we have portfolio And Murray of the our number do have case not XXXX. that of negative That net QX in we So $X.X see is hedge And we where on bottom. the the purchases then earlier. back we downturn. of market see difference that would the intended section a quarter. here mentioned for the really us again to a protect million

protected of Ben, if hedge was broadly market those way collateral the the QX quality that slightly. be the a that market. in that from so decreased But speaking, to hedge sure again, were increased market the idea time that increase the portfolio, over had and any However, of value equity the the and that would of is had value of decline, would

the we outstanding expenses large coming also significantly part And that expense $XX.X had we the in L more QX that more we have On XXXX period-over-period. period, of have interest XXXX. than for from did of higher Bonds sense makes million because in side,

we would see higher So to expense. expect interest a

long-term like saw is to see a that where large in the grants investing to expect last into setting of fact coming it are compensation also we any But non-cash more these in and ones compensation. we the their would stress that large earlier directly expense. non-cash would to is employees This amount the would expect that place this grants Ben kind just of year, of small given the that in do to Really quarter by turn this future. in amounts was its equity not and that in attributable these not start-up equity and into are nature We non-cash want XXXX. anytime any period this – start just we debts number though getting of a employee cash to the have higher a XXXX, issued into has long-term significant see

that these for any would expenses that to large All compensation don't expect or remainder is future. going hitting XXXX, into expect we have start to the overall over adding we with non-cash period, equity any equity they expected to vesting then would and have and more the would of grants of hires of equity the compensation. any previously new that period the schedule, So see issued

as had Ben negative $X in. we that continue transitionary loan period higher also We and million. $X.X losses GWG million, the expenses for provision period a we And also are of legal recapture had for this

had that that from a collateral, has underlying to be value think our for resets that So related of based actually we we now period, but loss an because million the we fact prior the in one what loss in that Ben's increased will on the $X recapture financings, expense prior loan taken period, potential changes because the loan of by it is repaid.

that's of our a metric summary. So review

million down some sheet have sheet. that strong to the over we've the changes the for credit $X.XX reflected again We really excess move billion, periods we in of fact $X.X side, XXXX. down that's back bit quarters a a paid standpoint, liquidity not in QX of in to to continue compared a assets lot here. Ben's the we the senior We're that balance liquidity have balance and XXXX, for little prior debt billion facility. about Now of From at of on still $XX

that's the loan face have financials decrease the on did liquidity smaller slight in a as of while well. offset So there, balance we by a

total some have the updated total investments, Ben's turned is started look of million. This amounts recently, a of assets. here is Ben's which receivables, at amount we collateral $XXX and on to the loan on funds we including number Now and we slide

stated related of that rate those on the various finances. interest X.X% collects trusts Ben these for annual the of well the also have left, loans for XX% We role see as fees and administrative to receivable its that

So its income income, which again, interest which are down of are collateral of that amounts assets, straps. by portfolio, when we cash repayment captured the we breakdown see the flows Ben's geography, is seeing then the on collateralizing that the really and the the trust broken income, state. services these income and Ben's financings its alternative And industry we're have investment from

portfolio. to Again, secondary face and off nine. seize million over portfolio we Total at is insurance expect policy benefits cash as we perform of the Now with age of look continue quite to continues strong. $XXX the at this over portfolio and the flows billion life $X.XX that value the are insureds portfolio with $X.XX

side than the the that the portfolio. the On which over quarter period these are And for another basis, QX, had more benefit was for $XX of – for trailing covering maintain portfolio. maturities period liquidity the to on in strong months again, maturities just we the million of are required XX a premiums

So we trailing comfortable of then over counterparties XX% just XX, insureds, of counterparty benefits months portfolio. the at it of all risks, here? And over see age portfolio. with XXX%; quality amount at if XX%, majority vast XX. that of age credit beginning of rating in If amount over the the million $XXX on needed the the very two amounts continue XX see over we look to on of our our look order or for September at be the face the benefits times the total so XX%, the really, to we different we policy benefits the policy of on for the it's the more portfolio, of And off premiums it's as cover than of by a breakdown we that

performance So again, portfolio. by the of strong another quarter

back will to I it questions. turn for Dan, you So, now

Dan Callahan

We registration. received questions good allowed a questions. Thanks, people during Tim. to We number of submit

of Our you first question could comment from an event asks, coverage L is regarding advisor of in who liquidation? the Bonds the

Tim Evans

says debt Bond XX% that of assets indenture, can total our indebtedness ratio look take the of effectively If there I that value the that we is the coverage company. Dan. there, of a Sure. cannot at exceed set L which out the one,

does quarter this I so Q end disclosed and as right And towards the company calculation a in quarterly there value debt which And XX% coverage for the debt and out reported of company all set Qs, we've as the of XX% well. coverage ratio. means our that of indebtedness quarter, ratio, we think each that of perform the calculation not the total in the that this assets exceed its of the the of quarter

debt So our the determining coverage debt down different I would value use coverage. in the that assets queue, the which ratio encourage everyone and we to the breaks methodology for of that disclosure review

Dan Callahan

you. Thanks for progressing Tim. One expected? question Is the settlements more of viability life as

Tim Evans

life say methodology. changed methodology an you that it would actual as began is XXXX, expectancy Average GWG evaluation at in that found in methodology, of recall, may our I as are as a back methodology we a LE is. we length what portfolio And Yes, and a And result discussed its using which opposed to longest that K. expected to

XX-K, you talks So actual if our methodology. methodology look well. how true portfolio that performing as XXXX of you that the as in to for extended discussion an there underneath expected that's through the actual see And want about QX will is expected performance to

it's give that there, methodology still and would expected. on again, disclosures more information yes, our as So I performing folks think

Dan Callahan

the will be of future what Murray, business Tim. Thanks the model? GWG

Murray Holland

XXXX, reporting alternative investment since moving to been Ben. strategy away settlements to GWG be in other through going have assets that their from life industry, We is investment its

investment GWG future. and there earlier Heppner, expect experiencing continue we in settlements reported yield that in And yields five And to has investments entered of heard through to the on continue we moved policies business. been we're businesses entities you Q, strategy the the in other Over as or Brad in our assets, yields, consequently alternative from become large subsidiary the highly that in we've a higher have are A declining the to considerably that the substantially. Consequently, the life strategy has is beneficent. experiencing seven very years, last of big not and enough spread not, number producing competitive. well-financed for have space

Dan Callahan

everyone didn't question happy you, get offline. Thank Tim in. your Again, dialed Thanks we're to if Murray. and you to who answered, get you it

email want can you going you quarter us. everybody forward. hear our again. about our to rest of taking a I time and Thank great call or thank the We for to hope You third day. prospects have

GWG (GWGHQ) 23 Nov 202020 Q3 Earnings call transcript