Midwest Holding (MDWT) 14 May 212021 Q1 Earnings call transcript

Ladies and gentlemen, welcome to the Midwest Holding Inc. Q1 2021. My name is Katie, and I'll be coordinating your call today. [Operator Instructions] I will now hand you over to your host, Tom Bumbolow, to begin. Tom, please go ahead.

to First welcome Call. XXXX and afternoon, Midwest Quarter Holding's Earnings Good is Business of Bumbolow, here This Head Development Tom at Midwest.

today's and well release, announcing Joining Founders, Midwest issued Officer, for presentation financial XXXX our evening, be me earnings QX Co-CEOs Debra Michael Havranek. Yesterday Salem our results. Mike as as our our Minnich; Chief Financial will and

During which of on found Relations page can our today's at the call, we will reference this be letter, a copy ir.midwestholding.com. website of Investor

document, our will for financial filed call While which Exchange reflect and about encourage within that Commission. has Securities comprehensive items our more this performance, you discussed information to Form been also we the read with through XX-Q,

related outlook, you reflect of on statements matters call, revise to Before as forward-looking result we a and beliefs These today's that want which undertake management's begin, the this performance, this no current we discussed assumptions. that our I obligation to financial goals, may occur. our new are date as of to opinions and developments information operating forward-looking based of business call remind statements on will include

Forward-looking cause actual to various and materially risks, statements described differ and those our from expected results that factors are today. subject other to could uncertainties

are to we and financial number that of results. risks significantly addition, In subject impact a may our business

remind some performance. actual you in during company's call, For of see Midwest's the website a like section. on our would under description that please factors statements. A to risk our conference where the could the of be to Relations Form from a these cause will discuss I XX-K, discussing will detailed review discussion more non-GAAP available will replay factors, differ Investor once our again, that also materially of we results measures this call you

historical XX-Q. the release You measures can comparable in measures earnings the of nearest and our GAAP to those reconciliation find

Barnidge. Tour Life Sandler's pleased Mike as a Piper out attending. With John are on you're Lastly, to analyst, and to research Piper the or interested Midwest been at Please senior of John the for by have Michael? will X:XX turn Their XX. I'll Salem. Barnidge we over Virtual discussion Thursday, to Central speakers reach call Insurance begin that, led selected Michael Sandler Time, that May announce team, Michael in a.m. if member

and Tom, are you we making pleased everyone. good to on afternoon, Thanks, the I'm Midwest. today progress to at report solid join

We in The life execute the to chain. and uniquely our supply and is to continue on our plan capitalize opportunity business remain annuity space positioned significant. on

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vision, separate unique an have We the will pack. us talented our to extremely ability from that that execute is it to and is dedicated ultimately team our and

long-term earnings significant goal Our power. generating platform capable a to build of is

not a are build We good to here company. small very

transformational technology, in must company, including infrastructure, operations, our and distribution, to asset to and an build is we and and opportunity must Our incredible order capital a we that, investment growth. our build management do in manage

long-term this in our progress pleased are the in mission. with quarter We pursuit of

of revenues $XXX.X XXXX. during quarter growing in XXX% representing annuity remained million in million first First $XX.X XXX% $X.X in million of growth last year, premium, our with written premium strong from management the of first from quarter with the to all, $X.X the volumes million quarter

our our only operations and also opportunity. In third-party reinsurance efficiently in progress providing incredible scale, building allowing leading are time. for larger, not but technology positioning capital us us capabilities years takes expanded We access products, a strategic strong reinsurance transition to more our for significantly to of also program, capital our scalable come. revenue sources us making we platform, to distribution for But to have

and will we be in valuable have We relationships. our deliberate extremely an product,

in reinsurance strategy. long-term ability confident our execute to on are We our

a Schneider. We Eric have also to asset Monaco; proceeds quarter the platform, we including solid from income Elliot target have for efforts below offering. lead December Trader, investment been invest Head slow Head talent the built of our our and to management top XXXX's the Credit, beginnings of our public CEO, our was attracting Del Sperber; as Brad Admittedly,

develop continue correct. asset to we expect to this As reinsurance and we management relationships,

a work team. public last to the The work that Mike thing been an committed Relations still I before presentation but do, progress. this and say talented Investor and financial new our a we We company right direction. to in over is management I'll has managing hand are in have extremely we as more Finally, have moving

aligned. well are We

as focused, are are we continue to leading life truly opportunity become annuity Mike? an execute results platform. our and We stakeholders. we we we have, deliver and poised to for And have as a to

an Thanks, building Michael. We're incredible company.

in Our to advantages, allowing our long-term invest us sustainable has approach growth. us given

distribution RIAs. will partners not capitalize we strongly product product where banks, independent represented, our services. and distribution our management value continue unique then simplification. As see reinsurance In such channels are to our asset area, continue and And limited dealers on such, distribution, to differentiate the in with as development, we distribution, current model through across broker opportunities we in additional

Our ability partners' onto easy advantage infrastructure competitive are competitive products key new to our our technology and to manufacture of distribution platform. simple, integrate a is that

mentioned, and past twist expect to asset-light the capabilities Michael management, a over We made winner, long-term been to we have firms and As to the more our that theme common years. is they believe a strategic following liabilities theme this our management many hires asset on in has extent can. see lead we combining access asset insurance

as our we to addition in scalability will are well. business These hires, turn, to infrastructure the reinsurance long-term management. In in our investing in support new these asset investments, benefit

multiple suite expanding company our reinsurance ways investors reinsurance, liabilities. access Regarding allows institutional insurance product to

liabilities the all insurance insurance the and the receive without competitive administration in partners policy tackling distribution of benefits other among modes industry. Our

institutional to our capacity our our being This without while partners. annuities originate We into that access symbiotic with investment insurance our to more the insurance-as-a-service and is clients. have the intermediary turned to gain We burdened gain partners us and capital risk, policy provides innovation company for strain an in-demand liabilities.

partnerships announced have ranging future. a our of from an the pipeline, offer number intent member flexibility Regarding of breadth the and of part is agreements. Last platform's suite announce Life an way Federal competitive reinsurance reinsurance became loans. to all ventures, this an partnerships American of lines investments, to letters Home in we qualifying IMAs, funding source reinsurance sidecar joint a of we details Life the entire backed funding due Bank. these for American as the Through hope to solutions, as in attractive of the The these mortgage to access Loan well liquidity can secured week, signed membership,

Zurich Growth of Vice services nomination held and meeting over In Diane team, the financial technology, Callahan will the We Business President companies, years of AIG welcome and and if currently has CEO of Board at including Diane exceptionally of multiple Kemper, upcoming the Farmers for senior we insights life X management is of over Services, having SAP to to and look in to insurance. as and them addition of insurance an in experience X Directors, to our talented to serve to provide stockholders. at our insurance forward directors Nancy has announce Reuters. as invaluable of positions Insurance. leadership Head previous Actuary, members Global Midwest, both years asset and the individuals the Strategy elected are She experience excited and XX Davis. Nancy of

So I'll CFO. our that, turn Deb, to with it over

of pleased $X.X in XXXX. continued Management company. $X.X the $X.X made quarter basis and quarter In on XXXX. million from million, and common a XXX% on our of the earnings loss, the operating $XX position on Mike, the of revenue of $X.X of management earnings during Thanks, the management revenue $X.X with afternoon, financial a I the power income up income good quarter everyone. XXX% to or the power to management million million for income first available quarter million million, a XXXX. basis from quarter our quarter first management loss And the first up basis, quarter was of was progress compared XXXX, decreased of the shareholders power earnings to in first a income, or am

the our as in also this target quarter, ROA. business. In future G&A which as timing power Going of we true P&L, to we're account cash we transactions forward, will investment growth business, investment be attribute excess our of earnings our we balances, management power the reinsurance based use on measure income due the into adjusting our taking of well the sharing to earnings that to

continue the Michael platform. and see growth invest in Mike As mentioned, opportunity we an to across to entire

option growth XXXX, of totaled $X.X compensation investment XX% G&A to G&A to first quarter activities and the the to quarter excluding the the first approximate the quarter compared connected of expenses, directly mark-to-market of derivative We stock-based allowance, the in to million XXXX. related For be this $X.X of million of business. in future

on to contains settle continue of exposure of are market into a are business life. investors. of level presentation committed noise we increasing example technical found As publicly and lot can detail in our does new the be little our to GAAP in accounting credited help performance. our our investors strengthening to our and financial understand interest we role and the communication to company, we listed focused providing of line our An This a as

credited our along expenses. hedge we So out backing interest we're that to management now used to with derivatives line number and a adding the

financial line forward. With will we explanation will that, the for We our now as continue we improve questions. to and move presentation open

first Our from Carletti Instructions] question from comes Matt JMP. [Operator

just quarter. then what the down grew there? a of talk about could made might nicely. in a competitive the and the bit little have decisions bit MYGA production of we FIA maybe mix kind kind Obviously, talk and hoping start was about I you the the Can and environment little with has driven you a topline slow

bit the MYGA The Thanks, competitive been Sure. has more market certainly quarter. Matt. in a

a I because as terms to moment. we're well little FIAs as differentiate the And at not product are of So the think market ourselves the provide. in chasing bit more really service you're a us to we're that can attractive of generally design as able that seeing that been reduction we

of of we But we're bit competitors to from production, just expect to just a In a the seasonality our in in kind it's December overall way slight doing. is in to what terms there the of slowdown. mix, response the kind -- of quarter first back respect really holiday the see season over seeing with like would from general that general

ahead. changed in Okay. Has -- anything go

Sorry.

want is just to Michael. add I Yes. Matt. something This quickly,

an our of expanding that enter that opportunity position, our opportunity for that's grow reinsurance is good the us think product, to add when do in we distribution our I an we and is the easily, MYGA there we in opportunity -- seeing I in that. MYGA so and there something quickly something also are have would can think easily. because that's to an that channels ability is that something pretty capacity, We really I new can and product

be competitive environment. And little quarter-to-quarter so that expect a don't producing sensitive kind to bit distant necessarily and the a more we of to

this a lead question. kind And Perfect. next into Okay. is of perfect my

like maybe hold versus based partnerships in to lot and of more? a fact -- Just was kind kind can volume mean, of a deal the on on building. appreciate producing that the partners I kind waiting that market Mike, for good overall of if of how reinsurance you're for the pipeline quarter back of finalized produced environment was a those get much, guess, I now before terms warehousing of But your in you volume. the give lot you comments I did

Sure. Yes.

I think that's fair.

on, business we the build then of of and the be circle us relationships more our to competitive. the business. nature that's our quite some and that of scalable part we're pricing capacity, that working virtuous that's proposition and really and strengthen reinsurance value And finalize As allows unique the of

much how get. to some reinsurance I speak the are market we when focused they that. attribution And think to and we So there's our bigger really reinsurance partners, can on do

so continue and execute forward think And as business the move should out we I that nicely play plan. to

from signed? kind Yes. more be this think those or kind do your of other ramp because about how of expect state their is of when pace appetite about these I it of kind almost to any think -- of liabilities to are fulfill thinking we you expectations? mean, can the expansion maybe to your and we their the on front end? reinsurance the when that kind that feed impact in the topline partnerships on that either that terms wrong desires concerns does of should side or word, about the quickly of of production, point, on should that you kind but partnerships partners How the we for kind And ability

Yes.

yes, that's there capacity, the the -- we're as demonstrated we've anything they business. really circle confidence we that I playing. think, I have positioned. that And you that very add? And that's we is think -- it's grow to Mike, can can we want well build

be Yes. up. what really wanted we're be add now that -- No, I that think up to set ready that those state cetera, really is when it's is expansion, expand efforts et I to taken going to distribution, making capacity so to

growth. efforts in making we're kind all the So the for background future of the

your if talent the us XXXX. of about opening are is one And your What question, a just vision more your for you long-term more bit give build? management you piece color the then on build of I kind little a what commented -- you Michael, in Can asset of of kind to the at trying business? comments could. Great. little

Right.

I to demonstrated So with between obviously, think, the start been management. insurance asset have and synergies,

community, synergies extremely with really value, asset And our of building with alternative management. marketplace. large But is partner management an high what we is extremely infrastructure business, that with our kind asset and so we see have we're to where the

look just infrastructure true business. not we And us. is to value in a because access management, to relationships at can is partnership management bring which so done senior credit, when manage to there is it bring help it professionals and what trading to is valuable, and us out and build we've asset chain, right extremely what's very risk partnerships the now those we the very those relationships basis, those attractive management, asset But on to

from Piper Our Barnidge from John next question comes Sandler.

of will anticipate premiums maybe thinking the question it you about and Matt how with that sticking beyond grow the XXXX Or And growth had. be just retained? AUM? Do we should

is Yes. beyond going retained. grow Yes, to premiums it

we to to respect out not with with asset X who third-party offer: management. be to One So types our the bringing really product, really assets own respect that management; is products their is their capital second going is asset and/or there and reinsurance is asset managers, be of bringing will to that

AUM. growth with it's that respect the XXXX really So be the to of second we'll group, Capital driving

XXXX to aware our will of X/X in I number As are reinsurance we asset have think XXXX date asset and about management, of agreements those a you're the partners reinsurance where manager. using the pipeline be the

yes, asset John, retaining it I we capital over kind our -- the John, long is, about with expect expectation if the think, the terms split management we our term, of to think, third-party today be, what term, would versus we expect were say I long management passive XX-XX product. over asset of in

maybe cash product and very the you that funding of exiting quarter. FHLB help help That's on drag? of Topeka drag Okay. was timeline Clearly, your outlook And or bit can maybe on Can helpful. that with in that, and construction? within the a talk there a cash how about

Right. Yes.

drag, to quarter, put So to here cash expect in be third in the the that we to the that up with work, cash if respect quarter. winding do second not

to in Bank program almost needed. be is have Loan the so for Loan to liquidity at will This on be that mechanics Home we have is it is Home not to down, and us actually will as securities but gotten that the run us and because locked that down all new the going draw had able Regarding works. liquidity us balances certainly a Bank, we of cash a to zero pledged source for enable

providers. mix third-party -- Bank be to, Home capital to to financing And that exploring. out think can alluding you're there financed by I the is is should something be based on to kind we be that believe we there offer do that reinsurers Loan offered access, our a product -- Additionally, to able of that we are that that

John, wanted of building flows of opportunistic also with managers And of The Mike. reinsurance relationships unique top Yes. that and to assets. other I the really just us kind providing we're third-party asset add-on thing are

that we for ability discussed we our business managers on then so ways own funnel. And synergies of the can out in with management the really believe there the reinsurance are both sheet, that the side our our we've who asset balance to best that investing asset we partner and our also have third-party grow pipeline clients our invest reinsurance

be we So asset finding of strong can with partner we're interact component managers kind the very really the different to ways opportunity. of a in

but with timing, admission that that Okay. MYGA. level it competitive dovetailing on feel new FHLB some lines mean for the comfort -- just with that. That's you it's the really I liquidity like on with helpful. maybe and seems Topeka Maybe distribution

is bigger? talk IMOs, So can something possibly states, you that about, like new

Yes.

I the of say, of some lines distribution So really IMO. it's the outside other would

strategy in us you're So has as aware, the distribution for channel. limited successful the been IMO very

take same as dealers, of and We are some looking strategy the channels, other the RIA. broker banks to the into the that such

significant we making is some in for headway and simple product. are specifically into those the which breaking very product, a MYGA feel channels, We of do

it sells probably through MYGA think will types that future be I growth well our those channels there. of

guys was hockey a that Is through to on that that's hit it there'll reinsurance does have? target up as then such as helpful. think in we that management self-structuring, asset that probably still the be first quarter. lower you reasonable opening No, Okay. reinsurance it a maybe relationships these the the stick little somewhat of XX% new year it And look are that

and QX the giving than that in such thought based the that our that's why on QX that from can timing of even is earnings of it's profitability of guidance expectation we particular more that quarter you reinsurance to our little that XXXX. production. you taking see one would of differently. over some our have earnings And may quarterly is expect left And power XXXX reinsurance reasons process -- a depending higher is on is would a we on for in But the are that we our so target production reinsurance premium. XX% was these or show still kind our exactly what our it's bit anything like described, production going potentially The as be Yes. agreements and/or up

Okay.

thinking what seems XX% reinsurance. million in So same you're about also still what for $XXX thinking as With also well? you're sales, about

No Yes. projection. in that change

And you talk others I'll you That's total your that my can being about let market hitting? the ask. Okay. you're maybe see last where say, But think that years? question, over, fantastic. next X addressable today you And

Sure.

a So as there different agents. that of addressable markets of a is kind look at company. couple we Obviously, individual

have and also annuity and market We life just the then the individual health market.

XX on at basis really points very, the we're Those are Of of market -- very the market. annuity liability that's individual think I low side. of markets, kind running we're shares. at maybe those So

the -- really, of products could focus so investors. that much the tailwinds, being that, really tax, we're of financial things some individual for demographic through don't we writing come said, that And overall the are and the as around strong that around because market. But tailwind growth products of planning very

of product. the trillions. that basis form even our really of our bigger, market like market an points that's market that total of well, growth beyond is we asset really share. And XX going products that, to in look kind and though so what as alternative is And drive kind And market even then the also reinsurance is the from is increase of we at the our overall

that there that market. grow there. look investments think and an individual financial is And so and investors, and very alternatives, they're that planning investors investor should in we underweight and we individual opportunity also area the an alternative retail think We at -- really is

think the and opportunity combines both are build markets is the asset So that massive, we're which overall, we're business we our and really alternative to doing. best in insurance that plan management,

Sandler. have So from John we again Instructions] from question [Operator Barnidge Piper another

MYGAs actually you're commissions, seeding fixed the does that on maybe index held more at all? well. then you between it's up dynamics on one pricing and seeing see that it, directionality Maybe differ And where

I can John. take that, Yes.

of we a we very being bit So duration, on reinsurance our shorter X-year The products. is MYGA margins see kind stable our in have MYGA a also and now.

could get shorter little the less you relative a bit the product, we -- FIA. paid duration in So to

some we is other, right look as other structures, have kind some of But each very, on So top very all of when of reinsurance well there. our at companies movement they're stable. there as and our it around generally, margins seems who replicated

there anything add? that's think what to you I is So we're seeing wanted there. Mike,

nothing No, to add.

Okay.

further no have questions. We

hand will back our I speaker So team. to it

the much. anybody a have Well, that Thank appreciate with connecting forward support conversation look and you. would very and Thank we one-on-one questions investor the with like us. to you to

call. Thank and this for you today's Ladies joining. gentlemen, concludes

may disconnect lines. your now You