Financial Stock Investor’s Alert – GWG Holdings Inc (NASDAQ:GWGH)

On Wednesday, GWG Holdings Inc (NASDAQ:GWGH) gained 3.33% with the overall traded volume of 1,012.00 shares below its average volume of 2,864.00 shares. The company has the market value of $51.68M and its EPS ratio for the past year was $-0.66. The company finished business at $9.30.

GWG Holdings, Inc. (GWGH), the parent company of GWG Life, a financial services company committed to transforming the life insurance industry through disruptive and innovative products and services, today declared its financial results for the fourth quarter and full year ended December 31, 2016.

Fourth Quarter 2016 Financial Summary:

Total revenue for the fourth quarter ended December 31, 2016 was $16.90M, as contrast to $6.0M for the same period in 2015. Realized gain from policy benefits for the fourth quarter was $10.50M, as contrast to $0.80M for the same period in 2015. The Company recognized $14.10M of life insurance policy benefits in the fourth quarter, as contrast to $1.50M in the same period of 2015. Total unrealized gain from policy acquisitions during the fourth quarter was $8.70M, as contrast to $5.80M for the same period in 2015.

Total expenses for the fourth quarter of 2016 were $21.10M, as contrast to $13.60M for the same period in 2015. The increase was because of additional interest expense as a result of higher debt balances outstanding, costs and fees associated with our new senior credit facility, raised compensation and benefits costs because of growth in the number of employees and other expenses because of insurance costs and marketing and business development expenses.

Full Year 2016 Financial Summary:

Total revenue for the full year ended December 31, 2016 was $69.50M, as contrast to $39.60M in 2015. Realized gain from policy benefits for the full year was $37.50M, as contrast to $26.70M in 2015. The Company recognized $48.50M of life insurance policy benefits in 2016, as contrast to $31.20M in 2015. Total unrealized gain from policy acquisitions in 2016 was $38.20M, as contrast to $24.60M in 2015.

Total expenses for 2016 were $72.30M, as contrast to $50.50M in 2015. The increase was because of additional interest expense as a result of higher debt balances outstanding, raised compensation and benefits costs because of growth in the number of employees (from 50 to 70) and other expenses because of insurance, shareholder relations, marketing and business development expenses.  The proportion of our expenses amongst our major categories – compensation and benefits, interest, legal and professional and other – were very similar for both the quarter and year ended December 31, 2016.

“This was a break-out year for the Company’s continued growth and development. We have made key progress in key areas that have created an engine of future growth for the Company,” said Chief Executive Officer Jon Sabes.

Sabes cited the direct impact of the Company’s record capital raise that has enabled it to grow its portfolio of life insurance policies.  The portfolio of policies itself generated a record $48.50M of cash flow in 2016, reflecting the size, diversity and age of the policies. “Raising capital and growing our portfolio are the most important measures of success for us,” Sabes said. “Over the long run, greater portfolio scale and diversity will enable us to generate noteworthycash flows and earnings.”

As a result, GWG Life paid senior consumers $82.40M, more than 10 times the cash surrender value of $7.90M offered them by the issuing life insurance carriers in 2016. “This is making a positive, meaningful difference in the lives of the clients we work with,” Sabes said.

Sabes also cited the impact on the Company of the epigenetic methylation technology for prediction of human lifespan optioned from UCLA and now being applied to GWG Life’s underwriting process. “We introduced what we believe is the most stimulating aspect of our business since its founding 11 years ago with the acquisition of this technology that we are now applying to our current business, and will seek to apply to the life insurance industry at large,” Sabes said. “We are devoted to continue reinventing the life insurance industry, starting with the value proposition of the secondary market and finishing with an insurtech revolution to life insurance products themselves.”

“In 2016, we made noteworthy progress towards our objective of growing our balance sheet and improving our capital structure,” said William Acheson, Chief Financial Officer.  “The addition of a new long-term dedicated credit facility, together with changes to our L Bond offering, and the success of our Redeemable Preferred Stock offering not only improved the duration matching of our financing and life insurance portfolio, but also added permanent equity to the balance sheet,” Acheson continued.  “These changes, combined with the record amount of cash flow recognized from our portfolio of life insurance during the year, fuel our optimism for 2017 and beyond.”

Technical Analysis:

The company has 5.98M shares outstanding and 0.10% shares of the company were owned by institutional investors. The company has 0.90 values in price to sale ratio while price to cash ratio was recorded as 2.80. The company earned $-3.40M in prior twelve months on revenue of $58.60M. It beta stands at 0.00.

Analyst recommendation for this stock stands at 2.00.

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