GWG Holdings, Inc. (NASDAQ:GWGH) Q3 2019 Earnings Conference Call - Final Transcript

Nov 21, 2019 • 04:30 pm ET

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GWG Holdings, Inc. (NASDAQ:GWGH) Q3 2019 Earnings Conference Call - Final Transcript

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Executive
Murray T. Holland

type of investments that larger financial institutions such as pension funds, endowments and foundations have had access to over the last 25 years or 30 years that individuals are just now getting access to. So the liquidity that BEN provides and the GWG provides are liquidity for primarily life changes of high net worth individuals, and these include a number of life events, traditionally events such as death or disability, divorce, and business needs. They're also used for state planning and other investment opportunities.

During the last quarter, we've had a number of events that have happened with GWG, including we've had maturities that exceeded in 2019 over 2018. We successfully restarted the L Bonds sales program in early August of 2019. We hired five new sales executives with strong experience in alternative asset investments. We've been included in the Russell 2000 Index of small-cap stocks, and we have begun the separation of the Insurtech Subsidiaries, Life Epigenetics and YouSurance as we've disclosed to you over the last year or so.

And with that, I would like to hand it over to Tim Evans, our Chief Financial Officer of GWG. Tim?

Executive
Timothy L. Evans

Thank you, Murray, and thanks to everyone who is on the call. I would like to go through a few different items today, beginning with our 2019 GWG Q3 financial metrics review; we then move on to GWG's balance sheet and our liquidity position; talk about our security sales, and then finish with continually strong news on our life insurance portfolio and the performance of the portfolio.

So let's begin with a summary of our metrics. As we always do at GWG, we look at our performance results quarter-over-quarter, and what we see looking at Q3 versus Q2 is that we've had very similar results quarter-over-quarter, which is really to be expected as the work that we've done in Q3 largely matches what was done in Q2 as we are preparing to see how the connection between GWG and its investment in BEN can be brought to a better fruition.

So what we see as far as our net income is that we had about $5 million less net income pretax in Q3, that driven really by two big factors. Number one, on the revenue side, lower purchase gain, both in rate and volume. This is to be expected as we've said for some time as we are allocating assets on capital away from the purchase of new policies. We would expect to see lower purchase gains there, and that is further enhanced by lower expenses of about $2.4 million, most of that coming from lower personnel expenses in Q3 related to the completion of the transactions that were conducted in Q2. So very similar results quarter-over-quarter.

One thing -- another thing that's similar as we go to our balance sheet is the size and strength of the balance sheet, still right under $1.6 billion, a lot of that value came in through Q3 of '18 with our transaction