AP NEWS
Press release content from Globe Newswire. The AP news staff was not involved in its creation.
PRESS RELEASE: Paid content from Globe Newswire
Press release content from Globe Newswire. The AP news staff was not involved in its creation.

GWG Holdings, Inc. Reports Results for the Third Quarter Ended September 30, 2019

November 14, 2019

MINNEAPOLIS, Nov. 14, 2019 (GLOBE NEWSWIRE) -- GWG Holdings, Inc. (Nasdaq: GWGH), a financial services holding company committed to transforming the alternative asset industry through innovative liquidity products and related services for the owners of illiquid alternative investments, today announced its financial and operating results for the third quarter ended September 30, 2019.

Third Quarter 2019 Financial and Operating Highlights

-- Reported continued record realizations from our portfolio of life insurance: o Realized $27.5 million of face amount of policy benefits from 22 life insurance policies during the quarter. o Reported additional policy realizations of $14.5 million from twelve policies through November 14, 2019. o Total 2019 year-to-date realizations of $95.5 million from 73 policies – compared to $71.1 million from 62 policies for the entire year of 2018. o Ended the quarter with a life insurance portfolio of $2.06 billion in face amount of policy benefits consisting of 1,174 policies. -- Reported continued success raising capital to fund our business through the L Bond investment product: o Restarted sales of L Bonds in early August. o Experienced consistent near record levels of demand since the restart with combined L Bond sales for August and September of $107 million. o Hired five new sales executives with strong experience in the sales and marketing of alternative investments. -- Began the process of separating the Company’s insurance technology subsidiaries, Life Epigenetics Inc. and YouSurance General Agency, LLC by contributing these subsidiaries to a newly formed limited liability company InsurTech Holdings, LLC, which is a subsidiary of GWGH and managed by InsurTech Management, LLC, a company controlled by Jon Sabes, former President and Chief Executive Officer of GWGH. -- Reported the inclusion of GWGH in the Russell 2000 Index, the well-known index of small-cap stocks. -- Reported total liquidity (cash, restricted cash and policy benefits receivable) of $144.7 million at November 12, 2019.

“We believe we have put in place many of the key elements we need to successfully execute our strategy of providing products and services to the vast market of owners who hold illiquid alternative investments,” said Murray Holland, GWGH’s Chief Executive Officer. “We look forward to leveraging the best of GWGH and The Beneficient Company Group, L.P. to create a successful model that serves the growing market of investors who need liquidity.”

1. Financial & Operating Highlights

($ Thousands except per share information) Q3 2019 Q3 2018 YTD Q3 2019 YTD Q3 2018 ------------------------------------------ ------------- ------------- ------------- ------------- Revenue $ 22,211 $ 20,937 $ 71,438 $ 59,794 Expenses 43,570 31,459 127,415 79,551 Per Share Data1: Net Income (Loss)2 (0.75 ) (2.52 ) (2.09 ) (5.50 ) Capital Raised (L Bonds) 107,012 68,884 278,239 166,082 Liquidity3, 91,254 131,416 91,254 131,416 Life Insurance Portfolio4 2,064,156 1,961,598 2,064,156 1,961,598 Life Insurance Acquired4 3,155 120,430 96,321 333,078 Face Value of Matured Policies 27,470 7,973 80,927 50,100 TTM Benefits / Premiums5 164.9 % 135.8 % 164.9 % 135.8 %

(1) Attributable to common shareholders (2) Per basic and fully diluted share outstanding (3) Includes cash, restricted cash and policy benefits receivable (4) Face amount of policy benefits (5) The ratio of policy benefits realized to premiums paid on a trailing twelve month (TTM) basis 2. Revenue and Expense Discussion

Third Quarter 2019 vs. Third Quarter 2018:

-- Total revenue was $22.2 million in the current period, compared to $20.9 million in the year ago period primarily due to: o Net revenue recognized at matured policy event was $14.3 million higher, unrealized gain on acquisition was $8.5 million lower (as a result of lower life insurance purchases) and change in estimated probabilistic cash flows net of premium and fees was $3.6 million lower. o Net interest income on our commercial loan, exchange note, and Liquid Trust note was $0.6 million lower. o Other interest income decreased $0.2 million. -- Total expenses were $43.6 million in the current period, compared to $31.5 million in the year ago period primarily due to: o Interest and fees increased by $6.5 million. This change was driven by increased interest on L Bonds of $5.2 million as a result of additional amounts outstanding, increased interest on Seller Trust L Bonds of $2.6 million which were outstanding the entire third quarter of 2019 versus a partial quarter in the year ago period, and partially offset by a decrease in interest on our senior credit facility of $1.3 million. o Operating expenses increased by $5.6 million. Compensation and professional expenses increased by $3.6 million and $1.2 million, respectively, primarily resulting from performance share unit expense and retention incentives associated with the Purchase and Contribution transaction (the strategic transaction with The Beneficient Company Group, L.P. (Beneficient) which occurred in April 2019), as well as increases in legal, audit and other professional fees. Other expenses also increased by $0.8 million due to increases in contract labor, IT expense, travel, and business insurance (also largely driven by the Purchase and Contribution transaction with Beneficient).

Third Quarter Year to Date 2019 vs. Third Quarter Year to Date 2018:

-- Total revenue was $71.4 million in the current period, compared to $59.8 million in the year ago period primarily due to: o Net revenue recognized at matured policy event was $29.1 million higher, charges on life expectancy updates were $4.9 million lower, unrealized gain on acquisition was $15.0 million lower (as a result of lower life insurance purchases), and a change in estimated probabilistic cash flows net of premiums and fees and change in life expectancy was $12.7 million lower as compared to the year ago period. o Interest income from the commercial loan, exchangeable note, and Liquid Trust promissory note increased $5.4 million and other income decreased $0.1 million. -- Total expenses were $127.4 million in the current period, compared to $79.6 million in the year ago period primarily due to: o Interest and fees increased by $28.7 million year over year. Outstanding L Bonds increased over this time period resulting in $16.6 million of additional interest expense, Seller Trust L Bonds, which were issued in August 2018, increased interest expense by $16.4 million and senior credit facility interest decreased by $4.3 million. o Operating expenses increased by $19.1 million. Compensation and professional expenses increased by $8.6 million and $6.5 million, respectively, primarily resulting from performance share unit expense and retention incentives associated with the Purchase and Contribution transaction, as well as increases in legal and professional fees. Other expenses also increased by $4.0 million primarily driven by an increase in business insurance purchased in connection with the Purchase and Contribution transaction with Beneficient.

3. Life Insurance Portfolio Statistics

Portfolio Summary:

Total life insurance portfolio face value of policy benefits $ 2,064,156,000 Average face value per policy $ 1,758,000 Average face value per insured life $ 1,887,000 Average age of insured (years)* 82.3 Average life expectancy estimate (years)* 7.3 Total number of policies 1,174 Number of unique lives 1,094 Demographics 74% Male; 26% Female Number of smokers 45 Largest policy as % of total portfolio face value 0.64 % Average policy as % of total portfolio face value 0.09 % Average annual premium as % of face value 3.2 %

* Averages presented in the table are weighted averages.

Distribution of Policies and Benefits by Current Age of Insured:

Percentage of Total ---------------- Number Number Policy Wtd. of Policy of Avg. Min Age Max Age Policie Benefits Policie Benefit LE s s s (Years ) ------- ------- ------ --------------- ------ ------ ----- 95 101 18 $ 36,052,000 1.5 % 1.8 % 2.2 90 94 145 284,908,000 12.4 % 13.8 % 3.3 85 89 249 587,733,000 21.2 % 28.5 % 5.1 80 84 251 456,526,000 21.4 % 22.1 % 7.9 75 79 223 341,449,000 19.0 % 16.5 % 9.8 70 74 214 284,739,000 18.2 % 13.8 % 11.1 60 69 74 72,749,000 6.3 % 3.5 % 11.6 ----- - ------------- ----- ----- Total 1,174 $ 2,064,156,000 100.0 % 100.0 % 7.3 ----- - ------------- ----- -----

4. Life Insurance Policy Originations

Life Insurance Portfolio Activity:

Three Months Ended Nine Months Ended September 30 September 30 - ------------------------ - ------------------------- 2019 2018 2019 2018 - --------- - ----------- - ---------- - ----------- Total policy benefits purchased $ 3,155,000 $ 120,430,000 $ 96,321,000 $ 333,078,000 Life insurance policies purchased 6 89 81 233 Average policy benefit purchased $ 526,000 $ 1,353,000 $ 1,189,000 $ 1,430,000 Direct policy benefits purchased $ 1,305,000 $ 16,524,000 $ 19,397,000 $ 29,561,000 Direct insurance policies purchased 3 17 27 39

5. Additional Information Gain (Loss) on Life Insurance Policies:

Three Months Ended Nine Months Ended September 30, September 30, ------------------------------ ------------------------------ 2019 2018 2019 2018 ------------- ------------- ------------- ------------- Change in estimated probabilistic cash $ 17,908,000 $ 19,069,000 $ 52,161,000 $ 55,483,000 flows(1) Unrealized gain on acquisitions(2) 472,000 9,021,000 6,775,000 21,790,000 Premiums and other annual fees (17,219,000 ) (14,765,000 ) (49,000,000 ) (39,670,000 ) Change in discount rates(3),(4) — — — — Change in life expectancy evaluation(5) — 73,000 — (4,890,000 ) Face value of matured policies 27,470,000 7,973,000 80,927,000 50,100,000 Fair value of matured policies (10,839,000 ) (5,650,000 ) (31,590,000 ) (29,883,000 ) - ----------- - ----------- - ----------- - ----------- Gain (loss) on life insurance policies, $ 17,792,000 $ 15,721,000 $ 59,273,000 $ 52,930,000 net - ----------- - ----------- - ----------- - -----------

Change in fair value of expected future cash flows relating to our investment in life insurance policies (1) that are not specifically attributable to changes in life expectancy, discount rate changes or policy maturity events. (2) Gain resulting from fair value in excess of the purchase price for life insurance policies acquired during the reporting period. The discount rate applied to estimate the fair value of the portfolio of life insurance policies we own (3) was 8.25% at each quarter end in 2019 and at December 31, 2018. This discount rate was 10.45% at September 30, 2018 and December 31, 2017. The discount rate of 8.25% is based on our “longest life expectancy” methodology (among other factors) (4) which was adopted at December 31, 2018, whereas the discount rate of 10.45% is based on our historical “average life expectancy methodology” (among other factors). See our 2018 Form 10-K filed on July 9, 2019 with Securities and Exchange Commission for additional information. (5) The change in fair value due to updating life expectancy estimates on certain life insurance policies in our portfolio.

Policy Benefits Realized and Premiums Paid (TTM):

12-Month Portfolio 12-Month 12-Month Trailing Quarter End Date Face Amount Trailing Trailing Benefits/ ($) Benefits Premiums Premium Realized ($) Paid ($) Coverage Ratio ------------------ -------------- ------------ ----------- -------- September 30, 2015 878,882,000 44,482,000 25,313,000 175.7 % December 31, 2015 944,844,000 31,232,000 26,650,000 117.2 % March 31, 2016 1,027,821,000 21,845,000 28,771,000 75.9 % June 30, 2016 1,154,798,000 30,924,000 31,891,000 97.0 % September 30, 2016 1,272,078,000 35,867,000 37,055,000 96.8 % December 31, 2016 1,361,675,000 48,452,000 40,239,000 120.4 % March 31, 2017 1,447,558,000 48,189,000 42,753,000 112.7 % June 30, 2017 1,525,363,000 49,295,000 45,414,000 108.5 % September 30, 2017 1,622,627,000 53,742,000 46,559,000 115.4 % December 31, 2017 1,676,148,000 64,719,000 52,263,000 123.8 % March 31, 2018 1,758,066,000 60,248,000 53,169,000 113.3 % June 30, 2018 1,849,079,000 76,936,000 53,886,000 142.8 % September 30, 2018 1,961,598,000 75,161,000 55,365,000 135.8 % December 31, 2018 2,047,992,000 71,090,000 52,675,000 135.0 % March 31, 2019 2,098,428,000 87,045,000 56,227,000 154.8 % June 30, 2019 2,088,445,000 82,421,000 59,454,000 138.6 % September 30, 2019 2,064,156,000 101,918,000 61,805,000 164.9 %

Webcast/Conference Call Details

Management will host a webcast/conference call Thursday, November 21 at 4:30 p.m. EST to discuss our financial and operating results. The webcast will give viewers audio and access to PowerPoint slides that illustrate points made during the call. To register for the call and webcast, go to http://get.gwgh.com/q32019webcastinvite.

After the webcast is completed, a replay of it can be accessed at http://get.gwgh.com/q32019webcast.

About GWG Holdings, Inc.

GWG Holdings, Inc. (Nasdaq: GWGH ), a financial services holding company committed to transforming the alternative asset industry through innovative liquidity products and related services for the owners of illiquid alternative investments, is the parent company of GWG Life which owns a portfolio of $2.06 billion in face value of life insurance policy benefits as of September 30, 2019. GWGH has executed a series of strategic transactions with The Beneficient Company Group, L.P., a financial services company providing proprietary liquidity solutions to owners of alternative assets, resulting in the closer alignment of the two companies. This alignment includes changing a number of GWGH management and the board of directors with Beneficient management, directors and affiliated parties. GWGH has also created an independent, special committee of the GWGH board of directors. GWGH’s subsidiary InsurTech Holdings, LLC, owns two companies exploring business applications for the emerging science of epigenetics: Life Epigenetics which is working to commercialize epigenetic technology for the life insurance and related industries; and YouSurance, a digital life insurance agency whose goal is to use epigenetic testing to support health and wellness while reducing the cost of insurance.

For more information about GWG Holdings, email info@gwgh.com or visit www.gwgh.com.

Cautionary Statement Regarding Forward-Looking Statements

This press release contains forward-looking statements that involve substantial risks and uncertainties. All statements, other than statements of historical facts, included in this press release regarding our strategy, future operations, future financial position, future revenue, projected costs, prospects, plans and objectives of management are forward-looking statements. The words “anticipate,” “believe,” “estimate,” “expect,” “intend,” “may,” “plan,” “would,” “target” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. These forward-looking statements include, among other things, statements about our estimates regarding future revenue and financial performance. We may not actually achieve the expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the expectations disclosed in the forward-looking statements that we make. More information about potential factors that could affect our business and financial results is contained in our filings with the Securities and Exchange Commission. Additional information will also be set forth in our future quarterly reports on Form 10-Q, annual reports on Form 10-K and other filings that we make with the Securities and Exchange Commission. We do not intend, and undertake no duty, to release publicly any updates or revisions to any forward-looking statements contained herein.

Media Contact:Dan CallahanDirector of CommunicationGWG Holdings, Inc.(612) 746-1935 dcallahan@gwgh.com

GWG HOLDINGS, INC. AND SUBSIDIARIESCONSOLIDATED BALANCE SHEETS

September 30, December 31, 2019 2018 (unaudited) --------------- --------------- ASSETS Cash and cash equivalents $ 65,680,464 $ 114,587,084 Restricted cash 8,204,705 10,849,126 Investment in life insurance policies, at fair value 807,518,088 747,922,465 Life insurance policy benefits receivable, net 17,369,176 16,460,687 Financing receivables from affiliates 241,185,081 184,768,874 Equity method investment 370,652,128 360,841,651 Other assets 50,391,311 45,437,164 - ------------- - ------------- TOTAL ASSETS $ 1,561,000,953 $ 1,480,867,051 - ------------- - ------------- LIABILITIES & STOCKHOLDERS’ EQUITY LIABILITIES Senior credit facility with LNV Corporation $ 131,717,520 $ 148,977,596 L Bonds 830,341,949 651,402,663 Seller Trust L Bonds 366,891,940 366,891,940 Accounts payable 2,570,842 9,276,507 Interest and dividends payable 16,726,344 18,555,293 Other accrued expenses 6,700,336 4,705,170 - ------------- - ------------- TOTAL LIABILITIES 1,354,948,931 1,199,809,169 - ------------- - ------------- STOCKHOLDERS’ EQUITY REDEEMABLE PREFERRED STOCK (par value $0.001; shares authorized 100,000; shares outstanding 92,124 and 97,524; liquidation preference of $92,661,000 and $98,093,000 as of 81,509,765 86,910,335 September 30, 2019 and December 31, 2018, respectively) SERIES 2 REDEEMABLE PREFERRED STOCK (par value $0.001; shares authorized 150,000; shares outstanding 147,604 and 148,359; liquidation preference of $148,465,000 and $149,225,000 as 128,307,735 129,062,704 of September 30, 2019 and December 31, 2018, respectively) COMMON STOCK (par value $0.001; shares authorized 210,000,000; shares issued and outstanding 33,033,420 as of September 30, 2019 and 33,018,161 as of 33,033 33,018 December 31, 2018) Additional paid-in capital 237,159,909 249,662,168 Accumulated deficit (240,958,420 ) (184,610,343 ) - ------------- - ------------- TOTAL STOCKHOLDERS’ EQUITY 206,052,022 281,057,882 - ------------- - ------------- TOTAL LIABILITIES & EQUITY $ 1,561,000,953 $ 1,480,867,051 - ------------- - -------------

GWG HOLDINGS, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF OPERATIONS(unaudited)

Three Months Ended Nine Months Ended ------------------------------ ------------------------------ September 30, September 30, September 30, September 30, 2019 2018 2019 2018 ------------- ------------- ------------- ------------- REVENUE Gain (loss) on life insurance policies, $ 17,792,324 $ 15,721,513 $ 59,218,532 $ 52,930,008 net Interest and other income 4,418,655 5,215,515 12,219,762 6,863,640 - ----------- - ----------- - ----------- - ----------- TOTAL REVENUE 22,210,979 20,937,028 71,438,294 59,793,648 - ----------- - ----------- - ----------- - ----------- EXPENSES Interest expense 28,289,670 21,799,332 83,751,611 55,010,519 Employee compensation and benefits 9,136,824 5,548,771 21,084,815 12,527,139 Legal and professional fees 2,594,467 1,421,964 10,263,230 3,751,321 Other expenses 3,549,265 2,688,970 12,315,434 8,262,324 - ----------- - ----------- - ----------- - ----------- TOTAL EXPENSES 43,570,226 31,459,037 127,415,090 79,551,303 - ----------- - ----------- - ----------- - ----------- INCOME (LOSS) BEFORE INCOME TAXES (21,359,247 ) (10,522,009 ) (55,976,796 ) (19,757,655 ) INCOME TAX EXPENSE (BENEFIT) — — — — - ----------- - ----------- - ----------- - ----------- NET INCOME (LOSS) BEFORE EARNINGS (LOSS) (21,359,247 ) (10,522,009 ) (55,976,796 ) (19,757,655 ) FROM EQUITY METHOD INVESTMENT Earnings (loss) from equity method 955,751 — (371,281 ) investment - ----------- - ----------- - ----------- - ----------- NET INCOME (LOSS) (20,403,496 ) (10,522,009 ) (56,348,077 ) (19,757,655 ) Preferred stock dividends 4,231,641 4,313,542 12,806,173 12,356,513 - ----------- - ----------- - ----------- - ----------- NET INCOME (LOSS) ATTRIBUTABLE TO COMMON $ (24,635,137 ) $ (14,835,551 ) $ (69,154,250 ) $ (32,114,168 ) SHAREHOLDERS - ----------- - ----------- - ----------- - ----------- NET INCOME (LOSS) PER COMMON SHARE Basic $ (0.75 ) $ (2.52 ) $ (2.09 ) $ (5.50 ) Diluted $ (0.75 ) $ (2.52 ) $ (2.09 ) $ (5.50 ) WEIGHTED AVERAGE COMMON SHARES OUTSTANDING Basic 33,033,420 5,894,639 33,010,100 5,840,880 Diluted 33,033,420 5,894,639 33,010,100 5,840,880