Cover
Cover - shares | 9 Months Ended | |
Sep. 30, 2020 | Nov. 10, 2020 | |
Cover [Abstract] | ||
Document Type | 10-Q | |
Amendment Flag | false | |
Document Quarterly Report | true | |
Document Period End Date | Sep. 30, 2020 | |
Document Transition Report | false | |
Entity File Number | 001-36615 | |
Entity Registrant Name | GWG HOLDINGS, INC. | |
Entity Central Index Key | 0001522690 | |
Current Fiscal Year End Date | --12-31 | |
Document Fiscal Period Focus | Q3 | |
Document Fiscal Year Focus | 2020 | |
Entity Incorporation, State or Country Code | DE | |
Entity Tax Identification Number | 26-2222607 | |
Entity Address, Address Line One | 325 North St. Paul Street, Suite 2650 | |
Entity Address, City or Town | Dallas | |
Entity Address, State or Province | TX | |
Entity Address, Postal Zip Code | 75201 | |
City Area Code | 612 | |
Local Phone Number | 746-1944 | |
Title of 12(b) Security | Common Stock | |
Trading Symbol | GWGH | |
Entity Current Reporting Status | Yes | |
Entity Interactive Data Current | Yes | |
Entity Filer Category | Non-accelerated Filer | |
Entity Small Business | true | |
Entity Emerging Growth Company | false | |
Entity Shell Company | false | |
Entity Common Stock, Shares Outstanding | 33,094,664 |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets - USD ($) $ in Thousands | Sep. 30, 2020 | Dec. 31, 2019 |
ASSETS | ||
Cash and cash equivalents | $ 93,766 | $ 79,073 |
Restricted cash | 15,990 | 20,258 |
Investment in life insurance policies, at fair value | 787,260 | 796,039 |
Life insurance policy benefits receivable, net | 36,418 | 23,031 |
Loans receivable, net of discount | 229,961 | 232,344 |
Allowance for loan losses | (2,914) | 0 |
Loans receivable, net | 227,047 | 232,344 |
Fees receivable | 31,571 | 29,168 |
Financing receivables from affiliates | 0 | 67,153 |
Other assets | 53,501 | 30,135 |
Goodwill | 2,384,121 | 2,358,005 |
TOTAL ASSETS | 3,629,674 | 3,635,206 |
LIABILITIES | ||
Senior credit facility with LNV Corporation | 203,907 | 174,390 |
L Bonds | 1,154,519 | 926,638 |
Seller Trust L Bonds | 366,892 | 366,892 |
Other borrowings | 100,178 | 153,086 |
Interest and dividends payable | 23,821 | 16,516 |
Deferred revenue | 35,848 | 41,444 |
Accounts payable and accrued expenses | 33,235 | 27,836 |
Deferred tax liability, net | 52,500 | 57,923 |
TOTAL LIABILITIES | 1,970,900 | 1,764,725 |
Redeemable noncontrolling interests | 1,246,753 | 1,269,654 |
COMMON STOCK | ||
(par value $0.001; shares authorized 210,000,000; shares issued and outstanding, 33,094,664 and 33,033,793 as of September 30, 2020 and December 31, 2019, respectively) | 33 | 33 |
Common stock in treasury, at cost (2,500,000 shares as of both September 30, 2020 and December 31, 2019) | (24,550) | (24,550) |
Additional paid-in capital | 178,969 | 233,106 |
Accumulated deficit | (200,935) | (76,501) |
TOTAL GWG HOLDINGS STOCKHOLDERS’ EQUITY | 120,630 | 333,979 |
Noncontrolling interests | 291,391 | 266,848 |
TOTAL STOCKHOLDERS’ EQUITY | 412,021 | 600,827 |
TOTAL LIABILITIES & STOCKHOLDERS’ EQUITY | 3,629,674 | 3,635,206 |
Redeemable Preferred Stock | ||
STOCKHOLDERS’ EQUITY | ||
Redeemable preferred stock | 49,068 | 74,023 |
Series 2 Redeemable Preferred Stock | ||
STOCKHOLDERS’ EQUITY | ||
Redeemable preferred stock | $ 118,045 | $ 127,868 |
Condensed Consolidated Balanc_2
Condensed Consolidated Balance Sheets (Parenthetical) - USD ($) | Sep. 30, 2020 | Dec. 31, 2019 |
Common stock, par value (in usd per share) | $ 0.001 | $ 0.001 |
Common stock, authorized (in shares) | 210,000,000 | 210,000,000 |
Common stock, issued (in shares) | 33,094,664 | 33,033,793 |
Common stock, outstanding (in shares) | 33,094,664 | 33,033,793 |
Treasury stock (in shares) | 2,500,000 | 2,500,000 |
Redeemable Preferred Stock | ||
Preferred stock, par value (in usd per share) | $ 0.001 | $ 0.001 |
Preferred stock, authorized (in shares) | 100,000 | 100,000 |
Preferred stock, outstanding (in shares) | 59,681 | 84,636 |
Preferred stock, liquidation preference | $ 60,029 | $ 85,130 |
Series 2 Redeemable Preferred Stock | ||
Preferred stock, par value (in usd per share) | $ 0.001 | $ 0.001 |
Preferred stock, authorized (in shares) | 150,000 | 150,000 |
Preferred stock, outstanding (in shares) | 137,341 | 147,164 |
Preferred stock, liquidation preference | $ 138,142 | $ 148,023 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Operations - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
REVENUE | ||||
Gain on life insurance policies, net | $ 14,122 | $ 17,792 | $ 43,355 | $ 59,219 |
Interest income | 12,928 | 3,935 | 39,588 | 11,273 |
Trust services revenues | 4,556 | 0 | 14,412 | 0 |
Other income (loss) | (3,093) | 484 | 33,504 | 947 |
TOTAL REVENUE | 28,513 | 22,211 | 130,859 | 71,439 |
EXPENSES | ||||
Interest expense | 40,792 | 28,290 | 113,805 | 83,752 |
Employee compensation and benefits | 33,777 | 9,137 | 123,321 | 21,085 |
Legal and professional fees | 7,830 | 2,594 | 21,636 | 10,263 |
(Recapture of) provision for loan losses | (4,986) | 0 | 2,914 | 0 |
Other expenses | 4,550 | 3,549 | 13,057 | 12,316 |
TOTAL EXPENSES | 81,963 | 43,570 | 274,733 | 127,416 |
LOSS BEFORE INCOME TAXES | (53,450) | (21,359) | (143,874) | (55,977) |
INCOME TAX EXPENSE (BENEFIT) | 22,444 | 0 | (613) | 0 |
NET LOSS BEFORE INCOME (LOSS) FROM EQUITY METHOD INVESTMENT | (75,894) | (21,359) | (143,261) | (55,977) |
Income (loss) from equity method investment | (1,431) | 956 | (4,279) | (371) |
NET LOSS | (77,325) | (20,403) | (147,540) | (56,348) |
Net loss attributable to noncontrolling interests | 12,745 | 0 | 23,106 | 0 |
Less: Preferred stock dividends | 3,569 | 4,232 | 11,235 | 12,806 |
NET LOSS ATTRIBUTABLE TO COMMON SHAREHOLDERS | $ (68,149) | $ (24,635) | $ (135,669) | $ (69,154) |
NET LOSS PER COMMON SHARE | ||||
Basic (in usd per share) | $ (2.23) | $ (0.75) | $ (4.44) | $ (2.09) |
Diluted (in usd per share) | $ (2.23) | $ (0.75) | $ (4.44) | $ (2.09) |
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING | ||||
Basic (in shares) | 30,584,719 | 33,033,420 | 30,552,233 | 33,010,100 |
Diluted (in shares) | 30,584,719 | 33,033,420 | 30,552,233 | 33,010,100 |
Condensed Consolidated Statem_2
Condensed Consolidated Statements of Cash Flows - USD ($) $ in Thousands | 9 Months Ended | |
Sep. 30, 2020 | Sep. 30, 2019 | |
CASH FLOWS FROM OPERATING ACTIVITIES | ||
Net loss | $ (147,540) | $ (56,348) |
Adjustments to reconcile net loss to net cash flows used in operating activities: | ||
Change in fair value of life insurance policies | (23,476) | (48,031) |
Amortization of deferred financing and issuance costs | 13,345 | 9,982 |
Amortization of upfront fees | (5,356) | 0 |
Amortization of debt discount, net | 274 | 0 |
Amortization and depreciation on long-lived assets | 827 | 0 |
Accretion of discount on financing receivable from affiliate | 0 | (1,292) |
Provisions for uncollectible policy benefits receivable | 0 | 201 |
Non-cash interest income | (38,530) | 0 |
Non-cash interest expense | 1,795 | 0 |
Loss from equity method investment | 4,279 | 371 |
Loss on fair value of put options | 3,191 | 0 |
Provision for loan losses | 2,914 | 0 |
Deferred income tax | (4,621) | 0 |
Equity-based compensation | 96,618 | 1,365 |
Forfeiture of vested equity-based compensation | (36,267) | 0 |
(Increase) decrease in operating assets: | ||
Life insurance policy benefits receivable | (13,387) | (1,109) |
Fees receivable | (2,643) | 0 |
Accrued interest on financing receivable | 0 | (5,124) |
Other assets | (2,634) | (4,557) |
Increase (decrease) in operating liabilities: | ||
Accounts payable and other accrued expenses | 8,306 | (8,432) |
NET CASH FLOWS USED IN OPERATING ACTIVITIES | (142,905) | (112,974) |
CASH FLOWS FROM INVESTING ACTIVITIES | ||
Investment in life insurance policies | 0 | (32,249) |
Return of investment for matured life insurance policies | 32,255 | 20,685 |
Purchases of fixed assets | (2,498) | 0 |
Financing receivables from affiliates issued | 0 | (50,000) |
Equity method investments | (10,144) | (10,000) |
Net change in loans receivable | 11,169 | 0 |
Investment in put options | (14,775) | 0 |
NET CASH FLOWS PROVIDED BY (USED IN) INVESTING ACTIVITIES | 16,007 | (71,564) |
CASH FLOWS FROM FINANCING ACTIVITIES | ||
Borrowings on senior debt | 28,530 | 3,937 |
Repayments of senior debt and other borrowings | (50,000) | (21,649) |
Purchase of noncontrolling interest | (1,195) | 0 |
Proceeds from issuance of L Bonds | 317,302 | 278,239 |
Payments for issuance of L Bonds | (82,206) | (92,095) |
Issuance of common stock | 8 | 58 |
Payments for redemption of preferred stock | (34,779) | (6,135) |
Preferred stock dividends | (11,235) | (12,806) |
Tax distribution to noncontrolling interest | (5,592) | 0 |
NET CASH FLOWS PROVIDED BY FINANCING ACTIVITIES | 137,323 | 132,987 |
NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH | 10,425 | (51,551) |
CASH, CASH EQUIVALENTS AND RESTRICTED CASH | ||
BEGINNING OF PERIOD | 99,331 | 125,436 |
END OF PERIOD | 109,756 | 73,885 |
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION | ||
Interest paid | 97,098 | 75,153 |
Premiums paid, including prepaid | 52,136 | 51,586 |
NON-CASH INVESTING AND FINANCING ACTIVITIES | ||
L Bonds: Conversion of accrued interest and commissions payable to principal | 1,296 | 1,086 |
Conversion of Promissory Note (see Note 6) | 70,565 | 0 |
Employee payroll tax liability on restricted equity units | 1,555 | 0 |
Business combination measurement period adjustments: | ||
Loans receivable | 26,116 | 0 |
Other borrowings | ||
CASH FLOWS FROM FINANCING ACTIVITIES | ||
Payments for deferred financing costs and issuance costs | (3,307) | 0 |
L Bonds | ||
CASH FLOWS FROM FINANCING ACTIVITIES | ||
Payments for deferred financing costs and issuance costs | $ (20,203) | $ (16,562) |
Condensed Consolidated Statem_3
Condensed Consolidated Statements of Changes in Stockholders' Equity - USD ($) | Total | Redeemable Preferred Stock | Common Stock | Additional Paid-in Capital | Accumulated Deficit | Treasury Stock | Total GWG Holdings Stockholders’ Equity | Noncontrolling Interests |
Beginning balance at Dec. 31, 2018 | $ 281,058,000 | $ 215,973,000 | $ 33,000 | $ 249,662,000 | $ (184,610,000) | |||
Beginning balance (in shares) at Dec. 31, 2018 | 245,883 | 33,018,161 | ||||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||||
Net loss | (56,348,000) | (56,348,000) | ||||||
Issuance of common stock | 419,000 | 419,000 | ||||||
Issuance of common stock (in shares) | 58,009 | |||||||
Repurchase of common stock | (361,000) | (361,000) | ||||||
Repurchase of common stock (in shares) | (42,750) | |||||||
Redemption of redeemable preferred stock | (6,155,000) | $ (6,155,000) | ||||||
Redemption of redeemable preferred stock (in shares) | (6,155) | |||||||
Preferred stock dividends | (12,806,000) | (12,806,000) | ||||||
Equity-based compensation | 246,000 | 246,000 | ||||||
Ending balance at Sep. 30, 2019 | 206,053,000 | $ 209,818,000 | $ 33,000 | 237,160,000 | (240,958,000) | |||
Ending balance (in shares) at Sep. 30, 2019 | 239,728 | 33,033,420 | ||||||
Beginning balance at Jun. 30, 2019 | 233,534,000 | $ 212,738,000 | $ 33,000 | 241,318,000 | (220,555,000) | |||
Beginning balance (in shares) at Jun. 30, 2019 | 242,648 | 33,033,420 | ||||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||||
Net loss | (20,403,000) | (20,403,000) | ||||||
Redemption of redeemable preferred stock | (2,920,000) | $ (2,920,000) | ||||||
Redemption of redeemable preferred stock (in shares) | (2,920) | |||||||
Preferred stock dividends | (4,232,000) | (4,232,000) | ||||||
Equity-based compensation | 74,000 | 74,000 | ||||||
Ending balance at Sep. 30, 2019 | 206,053,000 | $ 209,818,000 | $ 33,000 | 237,160,000 | (240,958,000) | |||
Ending balance (in shares) at Sep. 30, 2019 | 239,728 | 33,033,420 | ||||||
Beginning balance at Dec. 31, 2019 | 600,827,000 | $ 201,891,000 | $ 33,000 | 233,106,000 | (76,501,000) | $ (24,550,000) | $ 333,979,000 | $ 266,848,000 |
Beginning balance (in shares) at Dec. 31, 2019 | 231,800 | 30,533,793 | ||||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||||
Net loss | (130,231,000) | (124,434,000) | (124,434,000) | (5,797,000) | ||||
Net loss | (147,540,000) | |||||||
Issuance of common stock | 534,000 | 534,000 | 534,000 | |||||
Issuance of common stock (in shares) | 60,871 | |||||||
Redemption of redeemable preferred stock | (34,778,000) | $ (34,778,000) | (34,778,000) | |||||
Redemption of redeemable preferred stock (in shares) | (34,778) | |||||||
Preferred stock dividends | (11,235,000) | (11,235,000) | (11,235,000) | |||||
LiquidTrust promissory note conversion | (70,565,000) | (44,274,000) | (44,274,000) | (26,291,000) | ||||
Equity-based compensation | 96,485,000 | 140,000 | 140,000 | 96,345,000 | ||||
Forfeiture of vested equity-based compensation | (36,267,000) | (36,267,000) | ||||||
Accrual for employee payroll taxes due on restricted equity units | (1,554,000) | (1,554,000) | ||||||
Adjustment to noncontrolling interest for change in ownership of Common Units | 698,000 | 698,000 | (698,000) | |||||
Purchase of noncontrolling interest | (1,195,000) | (1,195,000) | ||||||
Ending balance at Sep. 30, 2020 | 412,021,000 | $ 167,113,000 | $ 33,000 | 178,969,000 | (200,935,000) | (24,550,000) | 120,630,000 | 291,391,000 |
Ending balance (in shares) at Sep. 30, 2020 | 197,022 | 30,594,664 | ||||||
Beginning balance at Dec. 31, 2019 | 1,269,654,000 | |||||||
Redeemable noncontrolling interests | ||||||||
Net loss | (17,309,000) | |||||||
Tax distribution to noncontrolling interest | (5,592,000) | |||||||
Ending balance at Sep. 30, 2020 | 1,246,753,000 | |||||||
Beginning balance at Jun. 30, 2020 | 540,772,000 | $ 177,402,000 | $ 33,000 | 225,537,000 | (136,355,000) | (24,550,000) | 242,067,000 | 298,705,000 |
Beginning balance (in shares) at Jun. 30, 2020 | 207,311 | 30,537,481 | ||||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||||
Net loss | (65,639,000) | (64,580,000) | (64,580,000) | (1,059,000) | ||||
Net loss | (77,325,000) | |||||||
Issuance of common stock | 524,000 | 524,000 | 524,000 | |||||
Issuance of common stock (in shares) | 57,183 | |||||||
Redemption of redeemable preferred stock | (10,289,000) | $ (10,289,000) | (10,289,000) | |||||
Redemption of redeemable preferred stock (in shares) | (10,289) | |||||||
Preferred stock dividends | (3,569,000) | (3,569,000) | (3,569,000) | |||||
LiquidTrust promissory note conversion | (70,565,000) | (44,274,000) | (44,274,000) | (26,291,000) | ||||
Equity-based compensation | 23,275,000 | 53,000 | 53,000 | 23,222,000 | ||||
Accrual for employee payroll taxes due on restricted equity units | (1,554,000) | (1,554,000) | ||||||
Adjustment to noncontrolling interest for change in ownership of Common Units | 698,000 | 698,000 | (698,000) | |||||
Purchase of noncontrolling interest | (934,000) | (934,000) | ||||||
Ending balance at Sep. 30, 2020 | 412,021,000 | $ 167,113,000 | $ 33,000 | $ 178,969,000 | $ (200,935,000) | $ (24,550,000) | $ 120,630,000 | $ 291,391,000 |
Ending balance (in shares) at Sep. 30, 2020 | 197,022 | 30,594,664 | ||||||
Beginning balance at Jun. 30, 2020 | 1,264,031,000 | |||||||
Redeemable noncontrolling interests | ||||||||
Net loss | (11,686,000) | |||||||
Tax distribution to noncontrolling interest | (5,592,000) | |||||||
Ending balance at Sep. 30, 2020 | $ 1,246,753,000 |
Nature of Business
Nature of Business | 9 Months Ended |
Sep. 30, 2020 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Nature of Business | Nature of Business Organizational Structure GWG Holdings, Inc. (“GWG Holdings”) conducts its life insurance secondary market business through a wholly-owned subsidiary, GWG Life, LLC (“GWG Life”), and GWG Life’s wholly-owned subsidiaries, GWG Life Trust, GWG DLP Funding IV, LLC (“DLP IV”) and GWG DLP Funding V Holdings, LLC (“DLP V Holdings”). DLP V Holdings is the sole member of GWG DLP Funding V, LLC (“DLP V”), which holds certain life insurance policies. GWG Holdings’ has indirect interests in loans collateralized by cash flows from other alternative assets. These loans are held by The Beneficient Company Group, L.P. (“Ben LP,” including all of the subsidiaries it may have from time to time — “Beneficient”) and its general partner, Beneficient Management, L.L.C. (“Beneficient Management”). Prior to December 31, 2019, GWG Holdings’ investment in Beneficient was accounted for as an equity method investment. On December 31, 2019, as more fully described below, Beneficient became a consolidated subsidiary of GWG Holdings. Ben LP is the general partner of Beneficient Company Holdings, L.P. (“BCH”) and owns 100% of the Class A Subclass A-1 and A-2 Units of BCH. BCH is the holding company that directly or indirectly receives all active and passive income of Beneficient and allocates that income among the units issued by BCH. As of September 30, 2020, BCH has issued general partnership Class A Units (Subclass A-1 and A-2), Class S Ordinary Units, Class S Preferred Units, FLP Units (Subclass 1 and Subclass 2), Preferred Series A Subclass 1 Unit Accounts, Preferred Series A Subclass 2 Unit Accounts, and Preferred Series C Unit Accounts. BCH issued to Ben LP Preferred Series A Subclass 2 Unit Accounts as part of the transaction with GWG Holdings discussed below. Preferred Series A Subclass 2 Unit Accounts hold the same rights and privileges as the Preferred Series A Subclass 1 Unit Accounts. The 5th Amended and Restated Limited Partnership Agreement (“LPA”) of BCH allows for Preferred Series A Subclass 0 Unit Accounts (“Preferred A.0”) to be issued once the trust charters are received (as discussed in more detail below). GWG Holdings also has a financial interest in FOXO BioScience LLC (“FOXO”, formerly InsurTech Holdings, LLC), which, through its wholly-owned subsidiaries FOXO Labs Inc. (“FOXO Labs”, formerly, Life Epigenetics Inc.) and FOXO Life, LLC (“FOXO Life”, formerly, youSurance General Agency, LLC), seeks to commercialize epigenetic technology for the longevity industry and offer life insurance directly to customers utilizing epigenetic technology. All of the aforementioned legal entities are organized in Delaware, other than GWG Life Trust, which is governed by the laws of the state of Utah. Unless the context otherwise requires or we specifically so indicate, all references in this report to “we,” “us,” “our,” “our Company,” “GWG,” or the “Company” refer to these entities collectively. Our headquarters are located in Dallas, Texas. Nature of Business GWG Holdings, through its wholly-owned subsidiary GWG Life, purchased life insurance policies in the secondary market and has built a large, actuarially diverse portfolio of life insurance policies backed by highly rated life insurance companies. These policies were purchased between April 2006 and November 2019 and were funded primarily through sales of L Bonds, as discussed in Note 10. Beginning in 2018, GWG Holdings made a strategic decision to reorient its business and increase capital allocated toward providing liquidity products to a broader range of alternative assets through investments in Beneficient. We believe that the investments in Beneficient will transform GWG Holdings from a niche provider of liquidity to owners of life insurance to a full-scale provider of trust and liquidity products and trust services to holders of a broad range of alternative assets. As a result of such strategic decision, GWG Holdings’ business today is focused on raising capital from securities offerings and using the proceeds from such offerings to grow GWG Holdings’ alternative asset exposure through investments in Beneficient in the form of equity investments and/or loans to Beneficient or related entities. GWG Holdings believes funding Beneficient’s operations will generally produce higher actual and risk-adjusted returns than those we can achieve from life insurance policies acquired in the secondary market. Furthermore, although we believe that our portfolio of life insurance policies is a meaningful component of a diversified alternative asset portfolio, we do not anticipate purchasing additional life insurance policies in the secondary market, and we continue to explore strategic alternatives for our life insurance portfolio aimed at maximizing its value, including a possible sale, refinancing or recapitalization of the portfolio. Beneficient is a financial services firm based in Dallas, Texas that provides liquidity solutions for high net worth (“HNW”) individuals and small-to-mid- (“STM”) sized institutions, which previously had few options to obtain early liquidity for their alternative asset holdings. On September 25, 2018, Beneficient applied for trust charters from the Texas Department of Banking to merge into to-be organized limited trust associations. Beneficient submitted revised charter applications on March 6, 2020. As of November 19, 2020, the trust charters have not been issued to Beneficient. As such, Beneficient has closed a limited number of transactions to date, but intends to significantly expand its operations if and when the trust charters are issued. Beneficient was formed in 2003 but began its current operations in September 2017. Beneficient operates primarily through its subsidiaries, which provide Beneficient’s products and services. These subsidiaries include: (i) Beneficient Capital Company, L.L.C. (“BCC”), through which Beneficient offers loans and liquidity products; (ii) Beneficient Administrative and Clearing Company, L.L.C. (“BACC”), through which Beneficient provides services for fund and trust administration and plans to provide custody services; (iii) Pen Indemnity Insurance Company, LTD (“Pen”), through which Beneficient plans to offer insurance services; and (iv) Ben Markets Management Holdings, L.P., formerly called ACE Portal, L.L.C. (“Ben Markets”), through which Beneficient plans to provide an online portal for direct access to Beneficient’s financial services and products. Beneficient’s primary operations pertain to its liquidity products whereby Beneficient extends loans collateralized by cash flows from illiquid alternative assets and provides services to the trustees who administer the collateral. Beneficient’s core business products are its Exchange Trust, LiquidTrust and the InterChange Trust (introduced in 2020). Beneficient’s clients select one of these products and place their alternative assets into the custody trust that is a constituent member of a trust structure called the “ExAlt Plan ™ ” (comprised of the Exchange Trusts, LiquidTrusts, Custody Trusts, Collective Trusts, and Funding Trusts). The ExAlt Plan ™ then delivers to Beneficient’s clients the consideration required by the specific product selected by those clients. At the same time, Beneficient, extends a loan to the ExAlt Plan ™ . The proceeds (cash, securities of Ben LP or its affiliates, or other forms of consideration, as applicable) of that loan received by the ExAlt Plan ™ are ultimately paid to the client. The cash flows from the client’s alternative asset support the repayment of the loan plus any related interest and fees. In 2018 and 2019, GWG Holdings and GWG Life consummated a series of transactions (as more fully described below) with Beneficient that has resulted in a significant reorientation of the Company’s business and capital allocation strategy in addition to changes in the Company’s Board of Directors and executive management team. The Exchange Transaction On August 10, 2018 (the “Initial Transfer Date”), the first of two closings was completed (the “Initial Transfer”) as contemplated by a Master Exchange Agreement between GWG Holdings, GWG Life, Ben LP and certain other parties (the “Seller Trusts”), which governs the strategic exchange of assets among the parties (the “Exchange Transaction”). On the Initial Transfer Date: • GWG Holdings issued to the Seller Trusts Seller Trust L Bonds due 2023 (the “Seller Trust L Bonds”) in an aggregate principal amount of $403.2 million, as more fully described below; • Beneficient purchased 5,000,000 shares of GWG Holdings’ Series B Convertible Preferred Stock, par value $0.001 per share and having a stated value of $10 per share (“Series B”), for cash consideration of $50.0 million, which shares were subsequently transferred to the Seller Trusts; • in consideration for GWG Holdings and GWG Life entering into the Master Exchange Agreement and consummating the transactions contemplated thereby, Ben LP, as borrower, entered into a commercial loan agreement (the “Commercial Loan Agreement”) with GWG Life, as lender, providing for a loan in a principal amount of $200.0 million (the “Commercial Loan”); • Ben LP delivered to GWG Life a promissory note (the “Exchangeable Note”) in the principal amount of $162.9 million; and • the Seller Trusts delivered to GWG Holdings 4,032,349 common units of Ben LP (“Common Units”) at an assumed value of $10 per unit. On December 28, 2018, the final closing of the above transaction occurred, and the following actions took place (the “Final Closing” and the date upon which the Final Closing occurred, the “Final Closing Date”): • in accordance with the Master Exchange Agreement, and based on the net asset value of alternative asset financings as of the Final Closing Date, effective as of the Initial Transfer Date, (i) the principal amount of the Commercial Loan was reduced to $182.0 million, (ii) the principal amount of the Exchangeable Note was reduced to $148.2 million, and (iii) the principal amount of the Seller Trust L Bonds was reduced to $366.9 million; • the Seller Trusts refunded to GWG Holdings $0.8 million in interest paid on the Seller Trust L Bonds related to the Seller Trust L Bonds that were issued as of the Initial Transfer Date but cancelled, effective as of the Initial Transfer Date, on the Final Closing Date; • the accrued interest on the Commercial Loan and the Exchangeable Note was added to the principal amount of the Commercial Loan, as a result of which the principal amount of the Commercial Loan as of the Final Closing Date was $192.5 million; • the Seller Trusts transferred to GWG Holdings an aggregate of 21,650,087 Common Units and GWG Holdings received 14,822,843 Common Units in exchange for the Exchangeable Note, upon completion of which GWG Holdings owned (including the 4,032,349 Common Units received by GWG Holdings on the Initial Transfer Date) 40,505,279 Common Units; • Ben LP issued to GWG Holdings an option (the “Option Agreement”) to acquire the number of Common Units, interests or other property that would be received by a holder of Preferred Series A Subclass 1 Unit Accounts of BCH; and • GWG Holdings issued to the Seller Trusts 27,013,516 shares of GWG Holdings common stock (including 5,000,000 shares issued upon conversion of the Series B). Description of the Assets Exchanged Seller Trust L Bonds On August 10, 2018, in connection with the Initial Transfer, GWG Holdings, GWG Life and Bank of Utah, as trustee, entered into a Supplemental Indenture (the “Supplemental Indenture”) to the Amended and Restated Indenture dated as of October 23, 2017 (the “Amended and Restated Indenture”). GWG Holdings entered into the Supplemental Indenture to add and modify certain provisions of the Amended and Restated Indenture necessary to provide for the issuance of the Seller Trust L Bonds. The maturity date of the Seller Trust L Bonds is August 9, 2023. The Seller Trust L Bonds bear interest at 7.5% per year. Interest is payable monthly in cash. After the second anniversary of the Final Closing Date, the holders of the Seller Trust L Bonds will have the right to cause GWG Holdings to repurchase, in whole but not in part, the Seller Trust L Bonds held by such holder. The repurchase may be paid, at GWG Holdings’ option, in the form of cash, a pro rata portion of (i) the outstanding principal amount and accrued and unpaid interest under the Commercial Loan, and (ii) Common Units, or a combination of cash and such property. The Seller Trust L Bonds are senior secured obligations of GWG Holdings, ranking junior only to all senior debt of GWG Holdings, pari passu in right of payment and in respect of collateral with all “L Bonds” of GWG Holdings (see Note 10), and senior in right of payment to all subordinated indebtedness of GWG Holdings. Payments under the Seller Trust L Bonds are guaranteed by GWG Life (see Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations ). Series B Convertible Preferred Stock The Series B converted into 5,000,000 shares of GWG Holdings common stock at a conversion price of $10 per share upon the Final Closing. Commercial Loan The $192.5 million principal amount under the Commercial Loan is due on August 9, 2023; however, it is extendable for two five-year terms. Ben LP's obligations under the Commercial Loan are unsecured. The principal amount of the Commercial Loan bears interest at 5.0% per year. From and after the Final Closing Date, one-half of the interest, or 2.5% per year, is due and payable monthly in cash, and one-half of the interest, or 2.5% per year, accrues and compounds annually on each anniversary date of the Final Closing Date and becomes due and payable in full in cash on the maturity date. In accordance with the Supplemental Indenture governing the issuance of the Seller Trust L Bonds, upon a redemption event or at the maturity date of the Seller Trust L Bonds, GWG Holdings, at its option, may use the outstanding principal amount of the Commercial Loan, and accrued and unpaid interest thereon, as repayment consideration of the Seller Trust L Bonds. The Commercial Loan and its related interest are eliminated upon consolidation. Exchangeable Note At the Final Closing date, the principal amount of the Exchangeable Note was exchanged for 14,822,843 Common Units, and the accrued interest on the Exchangeable Note was added to the principal balance of the Commercial Loan. Option Agreement In connection with the Final Closing, GWG Holdings entered into the Option Agreement with Ben LP. The Option Agreement gave GWG Holdings the option to acquire the number of Common Units that would be received by the holder of Preferred Series A Subclass 1 Unit Accounts of BCH, if such holder were converting on that date. There was no exercise price and the Company could exercise the option at any time until December 27, 2028, at which time the option automatically settled. The carrying value of the Option Agreement eliminates upon consolidation. Effective August 11, 2020, as a result of the Exchange Agreement entered into by the parties on December 31, 2019 (discussed below), and the mutual agreement of the parties, the Option Agreement was automatically exercised under the provisions of the Option Agreement. As such, GWG Holdings received $57.5 million of Common Units at a price per unit equal to $12.50 per unit. The exercise of the Option Agreement has no impact on the Company’s condensed consolidated financial statements as it is eliminated in consolidation. Common Units of Ben LP In connection with the Initial Transfer and Final Closing, the Seller Trusts and Beneficient delivered to GWG Holdings 40,505,279 Common Units. These units represented an approximate 89.9% interest in the Common Units as of the Final Closing Date (although, on a fully diluted basis, GWG Holdings’ ownership interest in Common Units would be reduced significantly below a majority of those issued and outstanding). These amounts eliminate upon consolidation. Purchase and Contribution Agreement On April 15, 2019, Jon R. Sabes, the former Chief Executive Officer and a former director of GWG Holdings, and Steven F. Sabes, the former Executive Vice President and a former director of GWG Holdings, entered into a Purchase and Contribution Agreement (the “Purchase and Contribution Agreement”) with, among others, Ben LP. Under the Purchase and Contribution Agreement, Jon and Steven Sabes agreed to transfer all 3,952,155 of the shares of GWG Holdings’ outstanding common stock held directly or indirectly by them to BCC (a subsidiary of Ben LP) and AltiVerse Capital Markets, L.L.C. (“AltiVerse”). AltiVerse is a limited liability company owned by an entity related to Beneficient’s founders, including Brad K. Heppner (GWG Holdings’ Chairman and Beneficient’s Chief Executive Officer and Chairman) and an entity related to Thomas O. Hicks (one of Beneficient’s current directors and a director of GWG Holdings). GWG Holdings was not a party to the Purchase Agreement; however, the closing of the transactions contemplated by the Purchase and Contribution Agreement (the “Purchase and Contribution Transaction”) were subject to certain conditions that were dependent upon GWG Holdings taking, or refraining from taking, certain actions. The closing of the Purchase and Contribution Transaction occurred on April 26, 2019. In connection with such closing, BCC and AltiVerse executed and delivered a Consent and Joinder to the Amended and Restated Pledge and Security Agreement dated October 23, 2017 by and among GWG Holdings, GWG Life, Messrs. Jon and Steven Sabes and the Bank of Utah, which provides that the shares of GWG Holdings’ common stock acquired by BCC and AltiVerse pursuant to the Purchase and Contribution Agreement will continue to be pledged as collateral security for GWG Holdings’ obligations owing in respect of the L Bonds and Seller Trust L Bonds. The Investment and Exchange Agreements On December 31, 2019, GWG Holdings, Ben LP, BCH, and Beneficient Management entered into a Preferred Series A Unit Account and Common Unit Investment Agreement (the “Investment Agreement”). Pursuant to the Investment Agreement, GWG Holdings transferred $79.0 million to Ben LP in return for 666,667 Common Units and a Preferred Series A Subclass 1 Unit Account of BCH. In connection with the Investment Agreement, GWG Holdings obtained the right to appoint a majority of the board of directors of Beneficient Management, the general partner of Ben LP. As a result, GWG Holdings obtained control of Ben LP and began reporting the results of Ben LP and its subsidiaries on a consolidated basis beginning on the transaction date of December 31, 2019. See Note 4 for more details on the accounting for the consolidation. GWG Holdings’ right to appoint a majority of the board of directors of Beneficient Management will terminate in the event (i) GWG Holdings’ ownership of the fully diluted equity of Ben LP (excluding equity issued upon the conversion or exchange of Preferred Series A Unit Accounts of BCH held as of December 31, 2019 by parties other than GWG Holdings) is less than 25%, (ii) the Continuing Directors of GWG Holdings cease to constitute a majority of the board of directors of GWG Holdings, or (iii) certain bankruptcy events occur with respect to GWG Holdings. The term “Continuing Directors” means, as of any date of determination, any member of the board of directors of GWG Holdings who: (1) was a member of the board of directors on December 31, 2019; or (2) was nominated for election or elected to the board of directors with the approval of a majority of the Continuing Directors who were members of the board of directors at the time of such nomination or election. Following the transaction, and as agreed upon in the Investment Agreement, GWG Holdings was issued an initial capital account balance for the Preferred Series A Subclass 1 Unit Account of $319.0 million. The other holders of the Preferred Series A Subclass 1 Unit Accounts are principally an entity related to the founders of Ben LP and an entity related to one of the directors of both GWG Holdings and Beneficient (the “Related Account Holders”), and the aggregate capital accounts of all holders of the Preferred Series A Subclass 1 Unit Accounts after giving effect to the investment by GWG Holdings was $1.6 billion. GWG Holdings’ Preferred Series A Subclass 1 Unit Account is the same class of preferred security as held by the Related Account Holders. If the Related Account Holders exchange their Preferred Series A Subclass 1 Unit Accounts for securities of GWG Holdings, the Preferred Series A Subclass 1 Unit Account of GWG Holdings will also convert into Common Units (so neither GWG Holdings nor the founders would hold Preferred Series A Subclass 1 Unit Accounts). Also, on December 31, 2019, in a transaction related to the Investment Agreement, GWG Holdings transferred its interest in the Preferred Series A Subclass 1 Unit Account to its wholly-owned subsidiary, GWG Life. In addition, on December 31, 2019, GWG Holdings, Ben LP and the holders of Common Units entered into an Exchange Agreement (the “Exchange Agreement”) pursuant to which the holders of Common Units from time to time have the right, on a quarterly basis, to exchange their Common Units for common stock of GWG Holdings. The exchange ratio in the Exchange Agreement is based on the ratio of the capital account associated with the Common Units to be exchanged to the market price of GWG Holdings common stock based on the volume weighted average price of GWG Holdings common stock for the five consecutive trading days prior to the quarterly exchange date. The Exchange Agreement is intended to facilitate the marketing of Ben LP’s products to holders of alternative assets. Preferred Series C Unit Purchase Agreement On July 15, 2020, GWG Holdings entered into a Preferred Series C Unit Purchase Agreement (“UPA”) with Ben LP and BCH. The UPA was reviewed and approved by the Special Committee of the Board of Directors of GWG Holdings. Pursuant to the UPA, and provided it has adequate liquidity, GWG Holdings has agreed to make capital contributions from time to time to BCH in exchange for Preferred Series C Unit accounts of BCH during a purchasing period commencing on the Effective Date and continuing until the earlier of (i) the occurrence of a Change of Control Event (as defined below) and (ii) the mutual agreement of the parties (the “Purchasing Period”). A “Change of Control Event” shall mean (A) the occurrence of an event that results in GWG Holdings’ ownership of the fully diluted equity of Beneficient is less than 25%, the Continuing Directors (as defined below) of GWG Holdings cease to constitute a majority of the board of directors of GWG Holdings, or certain bankruptcy events occur with respect to GWG Holdings, and (B) the listing of Common Units on a national securities exchange (a “Public Listing”). The term “Continuing Directors” means, as of any date of determination, any member of the board of directors of GWG Holdings who: (1) was a member of the board of directors on December 31, 2019; or (2) was nominated for election or elected to the board of directors with the approval of a majority of the Continuing Directors who were members of the board of directors at the time of such nomination or election. If, on or prior to the end of the Purchasing Period, a Public Listing occurs, the BCH Purchased Units shall be automatically exchanged for Common Units, or another unit of Beneficient, as the parties may mutually agree (the “Beneficient Units”), at the lower of (i) the volume-weighted average of the Beneficient Units for the 20 trading days following the Public Listing, and (ii) $12.75. In addition, at any time following the Effective Date, all or some of the Preferred Series C Unit Accounts purchased under the UPA may be exchanged for Beneficient Units at the option of the Company (exercised by its Special Committee of the Board of Directors or, if such committee is no longer in place, the appropriate governing body of the Company); provided that, if Company exchanges less than all of the Preferred Series C Unit Accounts purchased under the UPA, then, immediately after giving effect to such exchange, the Company shall be required to continue to hold Preferred Series C Unit Accounts with a capital account that is at least $10 million. The exchange price for such Beneficient Units shall be determined by third-party valuation agents selected by GWG Holdings and Beneficient. The Exchange Transaction, the Purchase and Contribution Transaction, the Investment and Exchange Agreements, and the UPA, are referred to collectively as the “Beneficient Transactions”. |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 9 Months Ended |
Sep. 30, 2020 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Summary of Significant Accounting Policies | Summary of Significant Accounting Policies Basis of Presentation — The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the U.S. Securities and Exchange Commission (“SEC”) requirements for interim reporting, which allows certain footnotes and other financial information normally required by Generally Accepted Accounting Principles in the United States of America (“GAAP”) to be condensed or omitted. In our opinion, the condensed consolidated financial statements contain all adjustments (consisting of only normal recurring adjustments) necessary for the fair presentation of the Company’s financial position and results of operations. These statements should be read in conjunction with the consolidated financial statements and notes included in our Annual Report on Form 10-K for the year ended December 31, 2019, filed with the SEC on March 27, 2020 (“2019 Form 10-K”). The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year. Significant accounting policies are detailed in Note 2 to the consolidated financial statements included in the Company’s 2019 Form 10-K. Summarized below are those new or revised significant accounting policies, including those that resulted from the consolidation of Beneficient on December 31, 2019. Use of Estimates — The preparation of the Company’s condensed consolidated financial statements in conformity with GAAP requires management to make significant estimates and assumptions affecting the reported amounts of assets and liabilities at the date of the condensed consolidated financial statements, as well as the reported amounts of revenue during the reporting period. Management regularly evaluates estimates and assumptions, which are based on current facts, historical experience, management’s judgment, and various other factors that we believe to be reasonable under the circumstances. Actual results may differ materially and adversely from our estimates. Material estimates that are particularly susceptible to change, in the near term, relate to: the determination of the fair values of assets acquired, liabilities assumed and noncontrolling interests under business combinations accounting guidance; the determination of the assumptions used in estimating the fair value of our investments in life insurance policies; determining the grant date fair value for equity-based compensation awards; determining our allowance for loan losses; evaluation of potential impairment of goodwill and other intangibles; and the value of our deferred tax assets and liabilities. Loans Receivable — Loans are recorded at their fair value at the acquisition date, change-of-control date, or other liquidation event. Credit discounts are included in the determination of fair value; therefore, an allowance for loan losses is not recorded as of the date of valuation. Purchased loans are evaluated upon acquisition and classified as either purchased credit impaired (“PCI”) or non-purchased credit impaired (“non-PCI”). PCI loans reflect credit deterioration since origination such that it is probable as of the date of valuation that Beneficient will be unable to collect all contractually required payments. For PCI loans, expected cash flows as of the date of valuation in excess of the fair value of loans are recorded as interest income over the life of the loans using a level yield method if the timing and amount of the future cash flows is reasonably estimable. Subsequently, increases in cash flows over those expected at the acquisition date are recognized prospectively as interest income. Decreases in expected cash flows due to credit deterioration are recognized by recording an allowance for loan loss. Beneficient does not report PCI loans as nonperforming due to the accretion of interest income. For non-PCI loans, the difference between the fair value and unpaid principal balance (“UPB”) of the loan as of the date of valuation, referred to as a purchase premium or discount, is amortized or accreted to interest income over the contractual life of the loans using the effective interest method. In the event of prepayment, the remaining unamortized amount is recognized in interest income. Impaired loans include non-accrual loans and partially charged-off loans. The accrual of interest on impaired loans is discontinued when, in management’s opinion, doubt exists about the full collectability of principal and interest. When a loan is placed on non-accrual status, all previously accrued and unpaid interest is charged against income. If the ultimate collectability of principal, wholly or partially, is in doubt, any payment received on a loan on which the accrual of interest has been suspended is applied to reduce principal first. Once all principal has been received, additional interest payments are recognized on a cash basis as interest income. Loans are returned to accrual status once collection of contractually required principal and interest is reasonably assured. At such time, the accrual of interest and amortization of any remaining discount shall resume. Any interest income that was applied to the principal balance is not reversed and is subsequently recognized as an adjustment to yield over the remaining life of the loan. Allowance for Loan Losses — The allowance for loan losses is a valuation allowance for probable incurred credit losses in the portfolio. Management’s determination of the allowance is based upon an evaluation of the loan portfolio, impaired loans, economic conditions, volume, growth and composition of the collateral to the loan portfolio, and other risks inherent in the portfolio. Management applies risk factors to categories of loans and individually reviews all impaired loans above a de minimis threshold. Management relies heavily on statistical analysis, current net asset value (“NAV”) and distribution performance of the underlying alternative asset collateral and industry trends related to alternative asset investments to estimate losses. Management evaluates the adequacy of the allowance by reviewing relevant internal and external factors that affect credit quality. The cash flows generated from the collateral are the sole source of repayment of the loans and related interest. Beneficient recognizes the charge-off in the period in which it is confirmed. Therefore, impaired loans are written down to their estimated net present value. Goodwill and Identifiable Intangible Assets — Goodwill and other identifiable intangible assets are initially recorded at their estimated fair values at the date of acquisition. Goodwill and other intangible assets having an indefinite useful life are not amortized for financial statement purposes. In the event that facts and circumstances indicate that the goodwill or other identifiable intangible assets may be impaired, an interim impairment test would be required. Intangible assets with finite lives are amortized over their useful lives. We perform required annual impairment tests of our goodwill and other intangible assets as of October 1 for our reporting units. The goodwill impairment test requires us to make judgments and assumptions. The test consists of estimating the fair value of each reporting unit based on valuation techniques, including a discounted cash flow model using revenue and profit forecasts and recent industry transaction and trading multiples of our peers, and comparing those estimated fair values with the carrying values of the assets and liabilities of each reporting unit, which includes the allocated goodwill. If the estimated fair value is less than the carrying value, we will recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, any loss recognized will not exceed the total amount of goodwill allocated to that reporting unit. This evaluation includes multiple assumptions, including estimated discounted cash flows and other estimates that may change over time. If future discounted cash flows become less than those projected by us, future impairment charges may become necessary that could have a materially adverse impact on our results of operations and financial condition in the period in which the write-off occurs. Equity-Based Compensation — The Company measures and recognizes compensation expense for all equity-based payments at fair value on the grant date over the requisite service period. GWG Holdings uses the Black-Scholes option pricing model to determine the fair value of stock options and stock appreciation rights. For restricted stock grants (including restricted stock units), fair value is determined as of the closing price of GWG Holdings’ common stock on the date of grant. As it is not publicly traded, Beneficient uses various methods to determine the grant date fair value of its equity-based compensation awards, as more fully described in Note 12. Equity-based compensation expense is recorded in employee compensation and benefits in the condensed consolidated statements of operations. The determination of fair value of equity-based payment awards on the date of grant is affected by our stock price and a number of subjective variables. These variables include, but are not limited to, the expected stock price volatility over the term of the awards, the expected duration of the awards, the results of a probability-weighted discounted cash flow analysis and observable transactions. We account for the effects of forfeitures as they occur. The risk-free interest rate is based on the U.S. Treasury rates at the date of grant with maturity dates approximately equal to the expected life at grant date. Volatility is based on the standard deviation of the average continuously compounded rate of return of five selected companies. Earnings (Loss) per Common Share — Basic earnings (loss) per share attributable to common shareholders are calculated using the weighted-average number of shares outstanding during the reported period. Diluted earnings (loss) per share are calculated based on the potential dilutive impact of our redeemable preferred stock (“RPS”), Series 2 redeemable preferred stock (“RPS 2”), restricted stock units, warrants (if applicable) and stock options. Net earnings, less any preferred dividends accumulated for the period (whether or not declared), is allocated to common stock. Basic earnings per common share is computed by dividing net earnings available to common stockholders by the weighted average number of common shares. Diluted earnings per common share is computed in a similar manner, except that the denominator is increased to include the number of additional common shares that would have been outstanding if potentially dilutive common shares were issued using the treasury stock method in the case of restricted stock units, warrants and options, or the if-converted method in the case of RPS and RPS 2. Our dilution calculation also takes into account the weighted average number of shares of a subsidiary that are exchangeable for shares of GWG Holdings common stock. Reclassification — Certain prior year amounts have been reclassified for consistency with the current year presentation. Specifically, our equity method investment in FOXO as of December 31, 2019, was reclassified to other assets in the condensed consolidated balance sheets to maintain consistency with the current year presentation. This reclassification had no effect on the reported results of operations. Additionally, payments for issuances of L Bonds were previously combined with payments for redemptions of L Bonds in the condensed consolidated statements of cash flows. These payments are now presented separately within the cash flows from financing activities section. This change had no effect on the reported net cash flows provided by financing activities. Newly Adopted Accounting Pronouncements — In January 2017, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2017-04, Goodwill, (Topic 350) . This standard simplifies how an entity is required to test goodwill for impairment by eliminating Step 2 from the goodwill impairment test. Step 2 measures a goodwill impairment loss by comparing the implied fair value of a reporting unit’s goodwill with the carrying amount of that goodwill. Under the new guidance, goodwill impairment loss will be measured on the basis of the fair value of the reporting unit relative to the reporting unit’s carrying amount rather than on the basis of the implied amount of goodwill relative to the goodwill balance of the reporting unit. ASU 2017-04 is effective for annual periods beginning after December 15, 2019, including interim periods within those periods, for public business entities. The Company adopted this ASU on January 1, 2020, and the adoption did not have a material impact on its condensed consolidated financial statements and related disclosures. In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework — Changes to the Disclosure Requirements for Fair Value Measurement , which eliminates, adds and modifies certain disclosure requirements for fair value measurements. The guidance is effective for fiscal years and interim periods beginning after December 15, 2019. Certain of the amendments require prospective application, while the remainder require retrospective application. The Company adopted this ASU on January 1, 2020, and it did not have a material impact on its condensed consolidated financial statements and related disclosures. In March 2020, the SEC amended Regulation S-X to create Rules 13-01 and 13-02. These new rules reduce and simplify financial disclosure requirements for issuers and guarantors of registered debt offerings. Previously, with limited exceptions, a parent entity was required to provide detailed disclosures with regard to guarantors of registered debt offerings within the footnotes to the consolidated financial statements. Under the new regulations, disclosure exceptions have been expanded and required disclosures may be provided within Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations rather than in the notes to the financial statements. Further, summarized financial information covering guarantor balance sheets and income statements are permitted, replacing the previously required condensed consolidating financial statements. Summarized financial information only needs be disclosed for the current fiscal year rather than all years presented in the financial statements as was previously required. The amendments were subsequently included in the FASB codification through the issuance of ASU No. 2020-09, Debt (Topic 470) in October 2020. The guidance will become effective for filings on or after January 4, 2021, with early adoption permitted. The Company elected to early adopt the new regulations during the second quarter of 2020. Our summarized guarantor financial information is now presented in Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations. Accounting Pronouncements Issued But Not Yet Adopted — In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments , which changes the impairment model for most financial assets and certain other instruments, including trade and other receivables, held-to-maturity debt securities and loans. There have been numerous codification improvements and technical corrections issued through subsequent ASUs since the issuance of ASU No. 2016-13. The standard requires entities to use a new, forward-looking “expected loss” model that is expected to generally result in the earlier recognition of allowances for losses. The guidance is effective for annual periods beginning after December 15, 2022, including interim periods within those years, for smaller reporting companies, as defined by the SEC, but early adoption is permitted. The Company is evaluating the potential impact of this guidance on our consolidated financial statements. ASU 2019-12, Income Taxes: Simplifying the Accounting for Income Taxes (Topic 740), was issued in December 2019. The amendments in ASU 2019-12 eliminate certain exceptions related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. ASU 2019-12 also clarifies and simplifies other aspects of the accounting for income taxes. ASU 2019-12 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020, for public business entities. Early adoption is permitted, including adoption in any interim period. The Company is evaluating the impact of this ASU on its consolidated financial statements and disclosures. ASU 2020-04, Reference Rate Reform (Topic 848) was issued in March 2020. The amendments in ASU 2020-04 provide optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. ASU 2020-04 can be applied by all entities as of the beginning of the interim period that includes March 12, 2020, or any date thereafter, and entities may elect to apply the amendments prospectively through December 31, 2022. The Company is evaluating the impact of this ASU on its consolidated financial statements and disclosures. ASU 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity was issued in August 2020. The amendments in ASU 2020-06 simplify the accounting for convertible instruments by removing major separation models and removing certain settlement condition qualifiers for the derivatives scope exception for contracts in an entity’s own equity, and simplify the related diluted net income per share calculation for both Subtopics. ASU 2020-06 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2023, for smaller reporting companies, as defined by the SEC. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. The Company is evaluating the impact of this ASU on its consolidated financial statements and disclosures. |
Restrictions on Cash
Restrictions on Cash | 9 Months Ended |
Sep. 30, 2020 | |
Cash and Cash Equivalents [Abstract] | |
Restrictions on Cash | Restrictions on Cash Under the terms of our second amended and restated senior credit facility with LNV Corporation (“LNV Credit Facility”, discussed further in Note 10), we are required to maintain collection and payment accounts that are used to collect policy benefits from pledged policies, pay annual policy premiums, interest and other charges under the facility, distribute funds to pay down the facility, and distribute excess funds to the borrower (GWG DLP Funding IV, LLC). The agents for the lender authorize the disbursements from these accounts. At September 30, 2020 and December 31, 2019, there was a balance of $16.0 million and $20.3 million, respectively, in these collection and payment accounts. |
Business Combination
Business Combination | 9 Months Ended |
Sep. 30, 2020 | |
Business Combinations [Abstract] | |
Business Combination | Business Combination Prior to December 31, 2019, GWG Holdings owned 41,505,279 Common Units, for a total limited partnership interest in the Common Units of approximately 90.2%. This investment was historically accounted for using the equity method (see Note 8). On December 31, 2019, GWG Holdings entered into the Investment Agreement and Exchange Agreement as described in Note 1. Pursuant to the Investment Agreement, GWG Holdings transferred $79.0 million to Ben LP in return for 666,667 additional Common Units and a Preferred Series A Subclass 1 Unit Account of BCH, which increased GWG Holdings’ ownership of Common Units to approximately 95.5%. Also, on December 31, 2019, in a transaction related to the Investment Agreement, GWG Holdings transferred its interest in the Preferred Series A Subclass 1 Unit Account to its wholly-owned subsidiary, GWG Life. In connection with the Investment Agreement, GWG Holdings obtained the right to appoint a majority of the board of directors of Beneficient Management, the general partner of Ben LP. As a result, GWG Holdings obtained control of Ben LP, resulting in the consolidation of Ben LP as of December 31, 2019, in accordance with ASC 805, Business Combinations . As a result of the change-of-control, GWG Holdings was required to remeasure its existing equity investment at fair value prior to consolidation. At December 31, 2019, GWG Holdings’ equity investment in Common Units had a carrying value of $368.6 million, prior to the additional investment noted above. GWG Holdings estimated the fair value of its preexisting investment in Ben LP to be approximately $622.5 million, resulting in the recognition of a gain, which is provisional, of $253.9 million during the fourth quarter of 2019. This gain was included in gain on consolidation of equity method investment in the Company’s consolidated statement of operations for the year ended December 31, 2019. This gain was partially offset by the remeasurement to fair value of the Commercial Loan Agreement between GWG Life and Ben LP and the Option Agreement between GWG Holdings and Ben LP, which resulted in a net loss of $4.2 million. The net gain on consolidation of equity method investment after remeasurement of these preexisting balances was $249.7 million. GWG Holdings’ proportionate share of the earnings or losses from Ben LP was recognized in earnings (loss) from equity method investment in the consolidated statement of operations from August 10, 2018 until December 31, 2019 (see Note 8 for further information) and was previously recorded on a one-quarter lag basis. In connection with the consolidation of Beneficient, the one-quarter lag was discontinued. The following table summarizes the fair value measurement of the assets acquired and liabilities assumed (in thousands): Fair Value at Acquisition Date Measurement Period Adjustments (1) Adjusted Fair Value at Acquisition Date ASSETS Loans receivable (1) $ 232,344 $ (26,116) $ 206,228 Fees receivable 29,168 — 29,168 Investment in public equity securities 24,550 — 24,550 Other assets 14,053 — 14,053 Intangible assets (2) 3,449 — 3,449 Total identifiable assets acquired 303,564 (26,116) 277,448 LIABILITIES Other borrowings 153,086 — 153,086 Commercial loan agreement from parent 168,420 — 168,420 Other liabilities and deferred revenue 105,866 — 105,866 Accounts payable and accrued expenses 13,713 — 13,713 Total liabilities assumed 441,085 — 441,085 Net liabilities assumed (137,521) (26,116) (163,637) NONCONTROLLING INTERESTS Common Units not owned by GWG Holdings (3) 181,383 — 181,383 Class S Ordinary Units 85,448 — 85,448 Class S Preferred Units 17 — 17 Preferred Series A Subclass 1 Unit Accounts 1,269,654 — 1,269,654 Total noncontrolling interests 1,536,502 — 1,536,502 ACQUISITION CONSIDERATION Cash, less cash acquired 61,479 — 61,479 Fair value of preexisting investment in Common Units (4) 622,503 — 622,503 Fair value of noncontrolling interest 1,536,502 — 1,536,502 Total estimated consideration 2,220,484 — 2,220,484 Less: Net liabilities assumed (137,521) (26,116) (163,637) Resulting preliminary goodwill $ 2,358,005 $ 26,116 $ 2,384,121 ______________________________________________ (1) As a result of additional information obtained about the collateral value used in the valuation of the loan portfolio for certain collateral dependent loans, the Company recorded measurement period adjustments during the nine months ended September 30, 2020, which resulted in a decrease to loans receivable of $26.1 million with a corresponding adjustment to goodwill. The measurement period adjustments are comprised of $14.6 million during the three months ended March 31, 2020 and $11.5 million during the three months ended June 30, 2020. (2) Includes an insurance license valued at $3.1 million and a non-compete agreement valued at $0.3 million. (3) Calculated as 1,974,677 Common Units not owned by GWG Holdings at December 31, 2019, multiplied by the $15 per unit derived from the enterprise valuation of Beneficient on that date. Also includes $151.8 million of equity-based payment awards that were granted by Beneficient prior to the change in control but were not replaced by awards of GWG Holdings upon the change in control. These awards were treated as noncontrolling interests in accordance with ASC 805, Business Combinations . (4) Calculated as 41,505,279 Common Units owned by GWG Holdings prior to the change in control multiplied by the $15 per unit derived from the enterprise valuation of Beneficient. Methods Used to Determine Equity Value and to Fair Value Assets and Liabilities The following is a description of the valuation methodologies used to estimate the fair value of equity and the fair values of major categories of assets acquired and liabilities assumed. In many cases, determining the fair value of equity and the acquired assets and assumed liabilities required management to estimate cash flows expected from those assets and liabilities and to discount those cash flows at appropriate rates of interest. This determination required the utilization of significant estimates and management judgment in accounting for the change-of-control event. Loans receivable — The loan portfolio was valued using current accounting guidance that defines fair value as the price that would be received to sell an asset or transfer a liability in an orderly transaction between market participants at the measurement date. Level 3 inputs were utilized to value the loan portfolio and included the use of present value techniques employing cash flow estimates and incorporated assumptions that marketplace participants would use in estimating fair values, specifically market interest rate and general credit fair value assumptions. In instances where reliable market information was not available, management used assumptions in an effort to determine reasonable fair value. There was no carryover related allowance for loan losses. Cash and cash equivalents and fees receivable — Cash and cash equivalents and fees receivable were valued using their current carrying amounts, which approximate fair value. Investment in public equity securities — The fair value of the investments in public equity securities was determined using quoted market prices. As these were investments by Beneficient in the common stock of GWG Holdings, these amounts were eliminated in consolidation and treated as treasury stock. Other assets — Other assets include miscellaneous receivables that were valued using the current carrying amount as that amount approximates fair value due to the relatively short time between their origination date and the fair value date. Miscellaneous intercompany receivables were eliminated in consolidation. Intangible assets — Intangible assets include an insurance license and a non-compete agreement. Both assets were valued using their current carrying amount, which approximates fair value. Other borrowings and commercial loan agreement from parent — The measurement of the fair value of other borrowings and Commercial Loan Agreement from parent was based on market prices that generally are observable for similar liabilities at commonly quoted intervals and is considered a level 2 fair value measurement. The Commercial Loan Agreement between Beneficient and GWG Life was eliminated in consolidation. Other liabilities and deferred revenue — The carrying amounts of other liabilities and deferred revenue approximate their fair value. The Option Agreement between Beneficient and GWG Holdings was eliminated in consolidation. Accounts payable and accrued expenses — Due to their short-term nature, the carrying amounts of accounts payable and accrued expenses approximate the fair value. Miscellaneous intercompany payables were eliminated in consolidation. Noncontrolling interests — The values for each noncontrolling interest component were calculated after determination of an overall enterprise value for the Company. The enterprise value of the Company was determined using the Option Pricing Model (“OPM”) Backsolve approach under the market method. The OPM Backsolve approach uses a Black-Scholes option pricing model to calculate the implied equity value of the firm. Once an overall equity value was determined, amounts were allocated to the various classes of equity based on the security class preferences. The inputs to the OPM Backsolve approach are the equity value for one component of the capital structure, expected time to exit, the risk-free interest rate and an assumed volatility based on the volatility of similar publicly traded companies. The OPM Backsolve estimates include Level 3 inputs. Goodwill — The resulting excess of the overall enterprise value after deducting the fair values of assets acquired and liabilities assumed is recognized as goodwill. The goodwill recognized is the result of the inherent value associated with the assembled business after all separately identifiable assets acquired and liabilities assumed are deducted from the enterprise value. The excess estimated enterprise value of Beneficient over the fair value of its net assets is primarily attributable to the potentially large and underserved market that Beneficient is seeking to address, including the estimated demand from HNW individuals and STM size institutions seeking liquidity for their professionally managed alternative assets. None of the goodwill is expected to be deductible for income tax purposes. The goodwill is allocated to our Beneficient reporting unit. The initial accounting for the estimates of equity values, which includes noncontrolling interests, the fair value of loans receivable, and any separately identifiable intangibles was based on the facts and circumstances that existed as of the acquisition date. Should management obtain new information during the measurement period, in addition to that discussed above, about facts and circumstances that existed at the acquisition date, further adjustments to the fair values assigned to these items could occur during the measurement period of up to one year from the acquisition date. Any such adjustment will result in corresponding adjustments to goodwill. The following unaudited pro forma financial information presents the combined results of operations of GWG Holdings for the three and nine months ended September 30, 2019, as if the acquisition of Ben LP had occurred as of January 1, 2019 (in thousands, except per share data): Three Months Ended September 30, 2019 Nine Months Ended September 30, 2019 Total Revenue Pro forma $ 36,532 $ 123,242 As reported 22,211 71,439 Net Loss Attributable to Common Shareholders Pro forma $ (26,761) $ (66,564) As reported (24,635) (69,154) Net Loss per Diluted Common Share Pro forma $ (0.81) $ (2.02) As reported (0.75) (2.09) The unaudited pro forma financial information is presented for informational purposes only. It is not necessarily indicative of what our condensed consolidated results of operations actually would have been had the acquisition occurred at the beginning of each year, nor does it attempt to project the future results of operations of the combined company. The unaudited pro forma financial information above gives effect to the following: • Deconsolidation of certain Beneficient trusts included in the ExAlt Plan ™ ; • Reduction of Beneficient interest expense related to acquisition-date debt principal payments; and • Elimination of intercompany transactions, including the Commercial Loan Agreement and Option Agreement. |
Investment in Life Insurance Po
Investment in Life Insurance Policies | 9 Months Ended |
Sep. 30, 2020 | |
Investments, All Other Investments [Abstract] | |
Investment in Life Insurance Policies | Investment in Life Insurance PoliciesThe Company’s investments in life insurance policies include unobservable inputs that are significant to their overall fair value. Changes in the fair value of these policies, net of premiums paid, are recorded in gain (loss) on life insurance policies, net in our condensed consolidated statements of operations. Fair value is determined on a discounted cash flow basis that incorporates life expectancy assumptions generally derived from reports obtained from widely accepted life expectancy providers (other than insured lives covered under small face amount policies — those with $1.0 million in face value benefits or less — which utilize either a single fully underwritten, or simplified report based on self-reported medical interview), assumptions relating to cost-of-insurance (premium) rates and other assumptions. The discount rate we apply incorporates information about the discount rates observed in the life insurance secondary market through competitive bidding observations (which have recently declined for us as a result of our decreased purchase activity) and other means, fixed income market interest rates, the estimated credit exposure to the insurance companies that issued the life insurance policies and management’s estimate of the operational risk yield premium a purchaser would require to receive the future cash flows derived from our portfolio as a whole. Management has significant discretion regarding the combination of these and other factors when determining the discount rate. As a result of management’s analysis, a discount rate of 8.25% was applied to our portfolio as of both September 30, 2020 and December 31, 2019. Portfolio Information Our portfolio of life insurance policies, owned by our subsidiaries as of September 30, 2020, is summarized below: Life Insurance Portfolio Summary Total life insurance portfolio face value of policy benefits (in thousands) $ 1,921,067 Average face value per policy (in thousands) $ 1,777 Average face value per insured life (in thousands) $ 1,913 Weighted average age of insured (years) 82.9 Weighted average life expectancy estimate (years) 6.9 Total number of policies 1,081 Number of unique lives 1,004 Demographics 74% Male; 26% Female Number of smokers 43 Largest policy as % of total portfolio face value 0.7 % Average policy as % of total portfolio face value 0.1 % Average annual premium as % of face value 3.7 % A summary of our policies organized according to their estimated life expectancy dates, grouped by year, as of the reporting date, is as follows (dollars in thousands): As of September 30, 2020 As of December 31, 2019 Years Ending December 31, Number of Policies Estimated Fair Value Face Value Number of Policies Estimated Fair Value Face Value Three months ending December 31, 2020 3 $ 3,351 $ 3,375 8 $ 5,869 $ 6,342 2021 25 24,270 28,848 55 62,061 79,879 2022 66 67,724 93,448 90 89,074 138,723 2023 114 114,510 184,202 128 123,352 222,369 2024 118 126,943 228,041 109 103,111 217,053 2025 111 86,759 194,267 113 74,223 171,961 Thereafter 644 363,703 1,188,886 648 338,349 1,184,646 Totals 1,081 $ 787,260 $ 1,921,067 1,151 $ 796,039 $ 2,020,973 We recognized life insurance benefits of $39.8 million and $27.5 million during the three months ended September 30, 2020 and 2019, respectively, related to policies with a carrying value of $13.5 million and $6.6 million, respectively, and as a result recorded realized gains of $26.3 million and $20.8 million, respectively. We recognized life insurance benefits of $105.2 million and $80.9 million during the nine months ended September 30, 2020 and 2019, respectively, related to policies with a carrying value of $32.3 million and $20.7 million, respectively, and as a result recorded realized gains of $72.9 million and $60.2 million, respectively. The aforementioned carrying value, which represents the aggregate cost basis in the policies that matured during the period, is considered a return of investment within the investing section of the condensed consolidated statements of cash flows. Changes in fair value of policies and the other components of the net gain on life insurance policies, as detailed below, are included in the operating section of the condensed consolidated statements of cash flows. A reconciliation of gain (loss) on life insurance policies is as follows (in thousands): Three Months Ended Nine Months Ended 2020 2019 2020 2019 Change in estimated probabilistic cash flows (1) $ 14,723 $ 17,908 $ 47,923 $ 52,161 Unrealized gain on acquisitions (2) — 472 — 6,775 Premiums and other annual fees (18,235) (17,219) (53,060) (49,055) Face value of matured policies 39,803 27,470 105,194 80,927 Fair value of matured policies (22,169) (10,839) (56,702) (31,590) Gain on life insurance policies, net $ 14,122 $ 17,792 $ 43,355 $ 59,218 ___________________________________________ (1) Change in fair value of expected future cash flows relating to our investment in life insurance policies 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. There were no policy acquisitions during the three or nine months ended September 30, 2020. Estimated premium payments and servicing fees required to maintain our current portfolio of life insurance policies in force for the next five years, assuming no mortalities, are as follows (in thousands): Years Ending December 31, Premiums Servicing Total Three months ending December 31, 2020 $ 13,088 $ 405 $ 13,493 2021 78,959 1,620 80,579 2022 91,220 1,620 92,840 2023 102,859 1,620 104,479 2024 112,033 1,620 113,653 2025 124,556 1,620 126,176 $ 522,715 $ 8,505 $ 531,220 Management funds the majority of the premium payments and servicing fees estimated above from cash flows realized from life insurance policy benefits, and to the extent necessary, with additional borrowing capacity created as the premiums and servicing costs of pledged life insurance policies become due, under the LNV Credit Facility and the net proceeds from our offering of L Bonds as described in Note 10. Management funds premiums and servicing costs of non-pledged life insurance policies with cash flows realized from life insurance policy benefits from our portfolio of life insurance policies and net proceeds from our offering of L Bonds. The proceeds of these capital sources are used for: additional allocations to Beneficient; policy premiums and servicing costs of life insurance policies; working capital; and financing expenditures including paying principal, interest and dividends. |
Loans Receivable
Loans Receivable | 9 Months Ended |
Sep. 30, 2020 | |
Receivables [Abstract] | |
Loans Receivables | Loans Receivable Beneficient Loans Receivable Loans receivable held by the Company as of September 30, 2020 and December 31, 2019, were originated primarily through the initial capitalization transactions of Beneficient in 2017 and 2018. These loans are collateralized by the cash flows from the portfolio of alternative assets held in the custody of certain trusts of the ExAlt Plan ™ . The outstanding principal balance was $460.6 million and $425.9 million as of September 30, 2020 and December 31, 2019, respectively, which included $200.6 million and $154.7 million of inception-to-date interest income paid-in-kind, respectively. Components of the carrying value of loans receivable were as follows for the periods presented below (in thousands): September 30, 2020 December 31, 2019 Loans receivable, net of discount $ 229,961 $ 232,344 Allowance for loan losses (2,914) — Loans receivable, net $ 227,047 $ 232,344 As described in Note 4, on December 31, 2019, a change-of-control event occurred that resulted in the application of push-down accounting, and all of Beneficient’s assets and liabilities were recorded at fair value. Certain of the purchased loans were determined to be PCI loans under ASC 310-30, Loans and Debt Securities Acquired with Deteriorated Credit Quality , as defined in Note 2, with the remaining loans accounted for under ASC 310-20, Nonrefundable Fees and Other Costs . For loans accounted for under ASC 310-20, the discount arising due to the difference between each loan’s carrying value and the estimated fair value at the time of acquisition will be accreted into interest income over its remaining contractual life. Should management obtain new information about facts and circumstances that existed at the acquisition date, additional adjustments to the fair values assigned to acquired loans could occur during the measurement period of one year from the acquisition date. The following table reflects the fair value of non-PCI and PCI loans as of December 31, 2019, the date of the change-of control (in thousands): Fair value of non-PCI loans $ 86,436 Fair value of PCI loans $ 145,908 The fair values above do not include the downward measurement period adjustments totaling $26.1 million discussed in Note 4. The following table reflects the outstanding principal balance and carrying amounts of the non-PCI loans (in thousands): September 30, 2020 December 31, 2019 Carrying Value Unpaid Balance Carrying Value Unpaid Balance Loans receivable $ 93,625 $ 140,997 $ 86,436 $ 129,304 The following table reflects the outstanding principal balance and carrying amounts of the PCI loans (in thousands): September 30, 2020 December 31, 2019 Carrying Value Unpaid Balance Carrying Value Unpaid Balance Loans receivable $ 133,422 $ 319,607 $ 145,908 $ 296,627 As of December 31, 2019, total contractually required payments receivable, including interest, on PCI loans over the remaining contract period was $772.2 million. This assumes all loans accrue interest through maturity, with maturities on loans that existed at December 31, 2019 ranging from 2029 to 2030. Cash flows expected to be collected at the acquisition date totaled $235.6 million. The difference between total cash flows expected to be collected and the fair value of the loans represents accretable yield. The following table presents a rollforward of the accretable yield for the three and nine months ended September 30, 2020 (in thousands): Three Months Ended Nine Months Ended Balance, beginning of period $ 66,383 $ 89,647 Accretion (7,899) (22,863) Decrease in accretable yield (a) — (8,300) Balance, end of period $ 58,484 $ 58,484 ___________________________________________ (a) Includes changes in the accretable yield due to both transfers from the nonaccretable difference and the impact of changes in the expected timing of cash flows. The changes in the allowance for loan losses for the three and nine months ended September 30, 2020 are as follows (in thousands): Three Months Ended Nine Months Ended Beginning balance $ 7,900 $ — (Recapture) provision (4,986) 2,914 Charge-offs and other, net — — Ending balance $ 2,914 $ 2,914 As of September 30, 2020, the allowance for loan losses was $2.9 million, $2.3 million of which was related to PCI loans. There were no net charge-offs related to PCI loans during the three and nine months ended September 30, 2020. During the three months ended September 30, 2020, a loan loss provision recapture of $5.0 million was recorded, all of which was related to PCI loans. The quarter-to-date loan loss provision recapture was due to an increase in expected cash flows from the underlying collateral for certain PCI loans. During the nine months ended September 30, 2020, a loan loss provision expense of $2.9 million was recorded, $2.3 million of which was related to PCI loans. The year-to-date loan loss provision expense was primarily due to a decrease in expected cash flows. As a result of the push-down accounting described in Note 4, the loans were recorded at fair value and there was no carryover allowance for loan losses recorded as of December 31, 2019. Promissory Note-LiquidTrusts On May 31, 2019, GWG Life entered into a Promissory Note (the “Promissory Note”), made by Jeffrey S. Hinkle and Dr. John A. Stahl, not in their individual capacity but solely as trustees of The LT-1 LiquidTrust, The LT-2 LiquidTrust, The LT-5 LiquidTrust, The LT-7 LiquidTrust, The LT-8 LiquidTrust and The LT-9 LiquidTrust (collectively, the “LiquidTrust Borrowers”). Pursuant to the terms of the Promissory Note, GWG Life funded a term loan to the LiquidTrust Borrowers in an aggregate principal amount of $65.0 million (the “Loan”). The Loan was made pursuant to GWG Holdings’ strategy to further diversify into alternative assets (beyond life insurance) and ancillary businesses and was intended to better position Beneficient’s balance sheet, working capital and liquidity profile to satisfy anticipated Texas Department of Banking regulatory requirements. The Loan bears interest at 7.0% per annum, with interest payable at maturity, and matures on June 30, 2023. The loan is reported in financing receivables from affiliates in the consolidated balance sheets and included accrued interest receivable of $2.2 million as of December 31, 2019. There was no allowance for loan losses related to the Promissory Note as of December 31, 2019. On September 30, 2020, GWG Holdings, GWG Life, BCH, Ben LP, BCC, and the LiquidTrust Borrowers entered into an agreement (the “Promissory Note Repayment”) by which the parties agreed to repay the Promissory Note and any related accrued interest for a $75.0 million Preferred Series C Unit Account (the “Preferred C”) of BCH that Ben LP issued to the LiquidTrust Borrowers for no consideration; however, the transaction ultimately increased the value of the collateral of Beneficient's loan portfolio. The $75.0 million of Preferred C received by GWG Life was transferred to GWG Holdings upon execution of the Promissory Note Conversion, which increased GWG Holdings’ ownership percentage in Beneficient. As part of the agreement, if Beneficient has not received a trust charter as of the one-year anniversary of the Promissory Note Conversion, or if no trust charter filing is still pending or in the process of being refiled, GWG Holdings would receive an additional $5.0 million of Preferred C. The outstanding balance of the Promissory Note on September 30, 2020, immediately prior to the transaction, with accrued and unpaid interest thereon, was $70.6 million. |
Fair Value Definition and Hiera
Fair Value Definition and Hierarchy | 9 Months Ended |
Sep. 30, 2020 | |
Fair Value Disclosures [Abstract] | |
Fair Value Definition and Hierarchy | Fair Value Definition and Hierarchy ASC 820, Fair Value Measurements and Disclosures (“ASC 820”), establishes a hierarchical disclosure framework that prioritizes and ranks the level of market price observability used in measuring assets and liabilities at fair value. Market price observability is affected by a number of factors, including the type of investment, the characteristics specific to the investment and the state of the marketplace, including the existence and transparency of transactions between market participants. Assets and liabilities with readily available and actively quoted prices, or for which fair value can be measured from actively quoted prices in an orderly market, generally will have a higher degree of market price observability and a lesser degree of judgment used in measuring fair value. ASC 820 maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring the use of observable inputs whenever available. Observable inputs are inputs that market participants would use in pricing the asset or liability developed based on market data obtained from third-party sources. Unobservable inputs are inputs that reflect assumptions about how market participants price an asset or liability based on the best available information. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (i.e., the “exit price”) in an orderly transaction between market participants at the measurement date (a non-distressed transaction in which neither seller nor buyer is compelled to engage in the transaction). The fair value hierarchy prioritizes the inputs into three levels based on the observability of inputs as follows: Level 1 — Valuations based on quoted prices in active markets for identical assets or liabilities that the Company has the ability to access as of the measurement date. Valuations are based on quoted prices that are readily and regularly available in an active market. Level 2 — Valuations based quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in in markets that are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable market data. Level 3 — Valuations based on inputs that are unobservable, are derived from other valuation methodologies, including option pricing models, discounted cash flow models and similar techniques, and are not based on market exchange, dealer, or broker traded transactions. Level 3 valuations incorporate certain assumptions and projections in determining the fair value assigned to such instruments. A financial instrument’s categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The availability of observable inputs can vary by types of assets and liabilities and is affected by a wide variety of factors, including, for example, whether an instrument is established in the marketplace, the liquidity of markets and other characteristics particular to the transaction. To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised by management in determining fair value is greatest for assets and liabilities categorized in Level 3. Financial instruments measured at fair value on a recurring basis The Company’s financial assets and liabilities carried at fair value on a recurring basis, including the level in the fair value hierarchy, on September 30, 2020 and December 31, 2019 are presented below (in thousands). As of September 30, 2020 Level 1 Level 2 Level 3 Total Assets: Investments in put options $ 11,584 $ — $ — $ 11,584 Investments in life insurance policies — — 787,260 787,260 As of December 31, 2019 Level 1 Level 2 Level 3 Total Assets: Investments in life insurance policies $ — $ — $ 796,039 $ 796,039 The following is a description of the valuation methodologies used for financial instruments measured at fair value on a recurring basis: Investment in put options On July 17, 2020, Beneficient, through its subsidiary CT Risk Management, L.L.C., made aggregate payments of $14.8 million to purchase put options against a decrease in the S&P 500 Index. The options have an aggregate notional amount of $300.0 million and are designed to protect the net asset value of the interests in alternative assets that collateralize Beneficient’s loan portfolio against market risk. One-half of the put options expire in July 2022 with the remaining put options expiring in July 2023. Changes in the fair value of the options are recognized directly in earnings. The fair value of the options is recorded in the other assets line item of the condensed consolidated balance sheets, and changes in the fair value of the options are recognized directly in earnings in the other income (loss) line item of the condensed consolidated statements of operations. Investments in life insurance policies The estimated fair value of our portfolio of life insurance policies is determined on a quarterly basis by management taking into consideration a number of factors, including changes in discount rate assumptions, estimated premium payments and life expectancy estimate assumptions, as well as any changes in economic and other relevant conditions. The discount rate incorporates information about discount rates observed in the life insurance secondary market through competitive bidding observations (which have declined recently as a result of our decreased purchase activity) and other means, fixed income market interest rates, the estimated credit exposure to the insurance company that issued the life insurance policy and management’s estimate of the operational risk yield premium a purchaser would require to receive the future cash flows derived from our portfolio as a whole. Management has significant discretion regarding the combination of these and other factors when determining the discount rate. Under our Longest Life Expectancy portfolio valuation methodology, we: i) utilize life expectancy reports from third-party life expectancy providers for the pricing of all life insurance policies; ii) apply a stable valuation methodology driven by the experience of our life insurance portfolio, which is re-evaluated if experience deviates by a specified margin; and iii) use relevant market observations that can be validated and mapped to the discount rate used to value the life insurance portfolio. These inputs are then used to estimate the discounted cash flows from the portfolio using the ClariNet LS probabilistic and stochastic portfolio pricing model from ClearLife Limited, which estimates the expected cash flows using various mortality probabilities and scenarios. The valuation process includes a review by senior management as of each quarterly valuation date. We also engage ClearLife Limited to prepare a net present value calculation of our life insurance portfolio using the inputs we provide on a quarterly basis. The following table reconciles the beginning and ending fair value of our Level 3 investments in our portfolio of life insurance policies (in thousands): Three Months Ended Nine Months Ended 2020 2019 2020 2019 Beginning balance $ 794,706 $ 799,266 $ 796,039 $ 747,922 Total gain in earnings (1) 6,021 14,181 23,476 48,031 Purchases — 711 — 32,250 Settlements (2) (13,467) (6,640) (32,255) (20,685) Transfers into Level 3 — — — — Transfers out of Level 3 — — — — Ending balance $ 787,260 $ 807,518 $ 787,260 $ 807,518 _________________________________________ (1) Net change in fair value (2) Policy maturities at initial cost basis The net activity in the table above is reported in gain on life insurance policies, net, in the condensed consolidated statements of operations. There have been no transfers between levels for any assets or liabilities recorded at fair value on a recurring basis or any changes in the valuation techniques used for measuring the fair value as of September 30, 2020 and December 31, 2019. The following table provides quantitative information about the significant unobservable inputs used in the fair value measurement of the Company’s Level 3 fair value assets: As of September 30, 2020 As of December 31, 2019 Weighted-average age of insured, years* 82.9 82.4 Age of insured range, years 63-100 62-101 Weighted-average life expectancy, months* 82.8 86.2 Life expectancy range, months 0-240 0-240 Average face amount per policy (in thousands) $ 1,777 $ 1,756 Discount rate 8.25 % 8.25 % _______________________________ (*) Weighted-average by face amount of policy benefits Life expectancy estimates and market discount rates for a portfolio of life insurance policies are inherently uncertain and the effect of changes in estimates may be significant. For example, if the life expectancy estimates were increased or decreased by four and eight months on each outstanding policy, and the discount rates were increased or decreased by 1% and 2%, with all other variables held constant, the fair value of our investment in life insurance policies would increase or decrease as summarized below (in thousands): Change in Life Expectancy Estimates Minus Minus Plus Plus September 30, 2020 $ 98,909 $ 46,028 $ (62,483) $ (115,452) December 31, 2019 $ 113,812 $ 57,753 $ (55,905) $ (111,340) Change in Discount Rate Minus 2% Minus 1% Plus 1% Plus 2% September 30, 2020 $ 84,613 $ 40,314 $ (36,802) $ (70,497) December 31, 2019 $ 91,890 $ 43,713 $ (39,790) $ (76,118) Financial instruments measured at fair value on a non-recurring basis There were no assets or liabilities measured at fair value on a non-recurring basis as of September 30, 2020. As of December 31, 2019, Beneficient’s assets and liabilities were recorded at fair value in the consolidated balance sheet due to the application of purchase accounting in accordance with ASC 805 as described in Note 4. Carrying amounts and estimated fair values The Company is required to disclose the estimated fair value of financial instruments, whether or not recognized in the condensed consolidated balance sheets, for which it is practicable to estimate those values. These fair value estimates are determined based on relevant market information and information about the financial instruments. Fair value estimates are intended to represent the price at which an asset could be sold or the price at which a liability could be settled. However, given there is no active market or observable market transactions for many of the Company’s financial instruments, estimates of fair values are subjective in nature, involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimated values. Nonfinancial instruments are excluded from disclosure requirements. The carrying amounts and estimated fair values of the Company’s financial instruments not recorded at fair value were as noted in the tables below (in thousands). As of September 30, 2020 Level in Fair Value Hierarchy Carrying Amount Estimated Fair Value Financial assets: Cash, cash equivalents and restricted cash 1 $ 109,756 $ 109,756 Life insurance policy benefits receivable, net 1 36,418 36,418 Loans receivable, net of allowance for loan losses and discount 3 227,047 257,764 Fees receivable 1 31,571 31,571 Financial liabilities: Senior credit facility 2 $ 203,907 $ 213,117 L Bonds and Seller Trust L bonds 2 1,521,411 1,638,227 Other borrowings 2 100,178 101,368 Other liabilities 1 57,056 57,056 As of December 31, 2019 Level in Fair Value Hierarchy Carrying Amount Estimated Fair Value Financial assets: Cash, cash equivalents and restricted cash 1 $ 99,331 $ 99,331 Life insurance policy benefits receivable, net 1 23,031 23,031 Loans receivable, net of allowance for loan losses and discount 3 232,344 232,344 Fees receivable 1 29,168 29,168 Financing receivables from affiliates 2 67,153 59,608 Financial liabilities: Senior credit facility with LNV Corporation 2 $ 174,390 $ 184,587 L Bonds and Seller Trust L Bonds 2 1,293,530 1,390,288 Other borrowings 2 153,086 153,086 Other liabilities 1 44,352 44,352 Other liabilities is comprised of the interest and dividends payable and accounts payable and accrued expenses line items on the condensed consolidated balance sheets as of September 30, 2020 and December 31, 2019. |
Equity Method Investments
Equity Method Investments | 9 Months Ended |
Sep. 30, 2020 | |
Equity Method Investments and Joint Ventures [Abstract] | |
Equity Method Investments | Equity Method Investments FOXO BioScience LLC (formerly, InsurTech Holdings, LLC) On November 11, 2019, GWG contributed the common stock and membership interests of its wholly-owned subsidiaries, FOXO Labs and FOXO Life (“Insurtech Subsidiaries”), to a legal entity, FOXO, in exchange for a membership interest in FOXO. Although GWG Holdings currently owns 100% of FOXO’s equity, we do not have a controlling financial interest in FOXO because the managing member has substantive participating rights. Therefore, we account for our ownership interest in FOXO as an equity method investment. The transaction resulted in a loss of control of the Insurtech Subsidiaries and, as a result, we deconsolidated the subsidiaries and recorded an equity method investment balance during the fourth quarter of 2019. The loss of control required us to measure the equity investment at fair value. We determined the fair value of our investment in FOXO approximated the carrying value of $3.4 million, which was primarily comprised of cash and fixed assets contributed to the entity during the fourth quarter of 2019. We recognized a loss on equity method investment of $1.6 million during the fourth quarter of 2019, resulting in a balance of $1.8 million as of December 31, 2019. The following table includes a rollforward of the equity method investment in FOXO (in thousands): Three Months Ended Nine Months Ended Beginning balance $ 7,773 $ 1,761 Contributions 3,884 13,051 Loss on equity method investment (1,431) (4,279) Other 10 (297) Ending balance $ 10,236 $ 10,236 In accordance with the operating agreement of FOXO, as of September 30, 2020, GWG Holdings is committed to contribute an additional $5.0 million to the entity through October 2021. Our investment in the membership interest of FOXO is presented in other assets in our condensed consolidated balance sheets. Our proportionate share of earnings or losses from our investee is recognized in earnings (loss) from equity method investments in our condensed consolidated statements of operations. The Beneficient Company Group, L.P. During 2018, we acquired 40,505,279 million Common Units for a total limited partnership interest in the Common Units of approximately 89.9% as of December 31, 2018. On June 12, 2019, we acquired an additional 1,000,000 Common Units from a third party for a cash investment of $10.0 million. Prior to December 31, 2019, our investment in Common Units was presented in equity method investment on our condensed consolidated balance sheets. Our proportionate share of earnings or losses from our investee was recognized in earnings (loss) from equity method investments in our condensed consolidated statements of operations. We recorded our share of the earnings or loss of Beneficient through September 30, 2019, on a one-quarter lag. On December 31, 2019, we obtained control of Beneficient and consolidated Beneficient as of that date in accordance with ASC 805, Business Combinations . See Note 4 for further information on the business combination. In connection with the consolidation, we discontinued the one-quarter reporting lag. Pre-consolidation financial information after the elimination of any intercompany transactions pertaining to Beneficient is summarized in the table below (in thousands): Three Months Ended June 30, 2019 Nine Months Ended June 30, 2019 Total revenues $ 28,151 $ 69,262 Net loss 9,696 (36,345) Net gain (loss) attributable to Ben LP common unitholders 1,080 (11,439) GWG portion of net earnings (loss) 956 (1) (371) (2) _____________________________________________ 1. Our portion of Beneficient’s net earnings (loss) from March 31, 2019 to June 30, 2019. This amount was recognized during the three months ended September 30, 2019. 2. Our portion of Beneficient's net earnings (loss) from October 1, 2018 to June 30, 2019. This amount was recognized during the nine months ended September 30, 2019. |
Variable Interest Entities
Variable Interest Entities | 9 Months Ended |
Sep. 30, 2020 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Variable Interest Entities | Variable Interest Entities In accordance with ASC 810, Consolidation , the Company assesses whether it has a variable interest in legal entities in which it has a financial relationship and, if so, whether or not those entities are variable interest entities (“VIEs”). For those entities that qualify as VIEs, ASC 810 requires the Company to determine if the Company is the primary beneficiary of the VIE, and if so, to consolidate the VIE. VIEs for which the Company is the Primary Beneficiary On March 20, 2020, CT Risk Management, LLC (“CT”) was created as a Delaware limited liability company to reduce the impact of a potential market downturn on the alternative assets used to collateralize receivables held by Beneficient by distributing any potential profits to the Collective Trusts thereby offsetting any reduction in the value of the alternative assets. The LLC agreement was amended and restated on April 16, 2020. There was no activity of CT until July 2020 when Beneficient made a capital contribution of $14.8 million, which was used to purchase the put options reflected in the condensed consolidated balance sheet as of September 30, 2020. CT is considered a VIE as the at-risk equity holder, Beneficient, does not have all of the characteristics of a controlling financial interest due to Beneficient’s receipt of returns being limited to its initial investment in CT. The Company concluded that Beneficient is the primary beneficiary of CT as it has the power to direct the most significant activities and has an obligation to absorb potential losses of CT. Accordingly, the results of CT are included in the Company’s condensed consolidated financial statements. As of September 30, 2020, the condensed consolidated balance sheets include assets of this consolidated VIE with a carrying value of $11.6 million, which is recorded in the other assets line item. Additionally, the Company recorded a $3.2 million loss on investment for the three and nine months ended September 30, 2020, which is reported in the other income (loss) line item of the condensed consolidated statements of operations. VIEs for which the Company is Not the Primary Beneficiary We determined that the LiquidTrust Borrowers are VIEs, but that we are not the primary beneficiary of these VIEs. We do not have the power to direct any activities of the LiquidTrust Borrowers that most significantly impact the Borrower’s economic performance. The Company’s exposure to risk of loss in the LiquidTrust Borrowers is limited to its financing receivable from the LiquidTrust Borrowers. The Company also determined that certain other trusts included within the ExAlt Plan TM used in connection with Beneficient’s operations are VIEs, but that we are not the primary beneficiary of these VIEs. The Company does not have both the power to direct the most significant activities of the trusts and the obligation to absorb losses or right to receive benefits that could potentially be significant to the trusts. The Company’s investments in the trusts are carried in loans receivable in the condensed consolidated balance sheets. The Company’s exposure to risk of loss was determined as the amortized cost of the loans to the trusts, any earned but unpaid fees or expenses plus any remaining potential contributions for unfunded capital commitments and cash reserve commitments. We determined that FOXO is a VIE, but that we are not the primary beneficiary of the VIE. We do not have the power to direct any activities of FOXO that most significantly impact its economic performance. The Company’s exposure to risk of loss in FOXO is limited to its equity method investment in the membership interests of FOXO and its remaining unfunded capital commitments. The following table shows the classification, carrying value and maximum exposure to loss with respect to the Company’s unconsolidated VIEs (in thousands): September 30, 2020 December 31, 2019 Carrying Value Maximum Exposure to Loss Carrying Value Maximum Exposure to Loss Loans receivable $ 227,047 $ 293,847 $ 232,344 $ 335,255 Financing receivables from affiliates — — 67,153 67,153 Equity method investment 10,236 15,236 1,761 19,661 Accounts payable and accrued expenses (2,583) — (2,515) — Total $ 234,700 $ 309,083 $ 298,743 $ 422,069 |
Debt
Debt | 9 Months Ended |
Sep. 30, 2020 | |
Debt Disclosure [Abstract] | |
Debt | Debt Senior Credit Facility with LNV Corporation On November 1, 2019, DLP IV entered into a second amended and restated senior credit facility with LNV Corporation, as lender, and CLMG Corp., as the administrative agent on behalf of the lenders under the agreement, which replaced the amended and restated senior credit facility dated September 27, 2017 that previously governed DLP IV’s senior credit facility. The LNV Credit Facility makes available a total of up to $300.0 million in credit to DLP IV with a maturity date of September 27, 2029. Subject to available borrowing base capacity, additional advances are available under the LNV Credit Facility at the LIBOR rate described below. Such advances are available to pay the premiums and servicing costs of pledged life insurance policies as such amounts become due. Interest will accrue on amounts borrowed under the LNV Credit Facility at an annual interest rate, determined as of each date of borrowing or quarterly if there is no borrowing, equal to (a) the greater of 1.50% or 12-month LIBOR, plus (b) 7.50% per annum. The effective rate at September 30, 2020 was 9.00%. Interest payments are made on a quarterly basis. Under the LNV Credit Facility, DLP IV has granted the administrative agent, for the benefit of the lenders under the agreement, a security interest in all of DLP IV’s assets. In conjunction with entering into the LNV Credit Facility, DLP IV pledged life insurance policies having an aggregate face value of approximately $298.3 million as additional collateral and received an advance of approximately $37.1 million (inclusive of certain fees and expenses incurred in connection with the negotiation and entry into the LNV Credit Facility). We were in compliance with all covenants of the LNV Credit Facility at September 30, 2020, and continue to be as of the date of this filing. As of September 30, 2020, approximately 76.9% of the total face value of our life insurance policies portfolio is pledged to LNV Corporation. The principal amount outstanding under this facility was $213.1 million and $184.6 million at September 30, 2020 and December 31, 2019, respectively. There were unamortized deferred financing costs of $9.2 million and $10.2 million as of September 30, 2020 and December 31, 2019, respectively. Obligations under the LNV Credit Facility are secured by a security interest in DLP IV’s assets, for the benefit of the lenders, through an arrangement under which Wells Fargo Bank, N.A. serves as securities intermediary. The life insurance policies owned by DLP IV do not serve as direct collateral for the obligations of GWG Holdings under the L Bonds and Seller Trust L Bonds. The difference between the amount outstanding and the carrying amount on our condensed consolidated balance sheets is due to netting of unamortized debt issuance costs. L Bonds We began publicly offering and selling L Bonds in January 2012 under the name “Renewable Secured Debentures”. These debt securities were re-named “L Bonds” in January 2015. L Bonds were publicly offered and sold on a continuous basis under a registration statement permitting us to sell up to $1.0 billion in principal amount of L Bonds through January 2018. On December 1, 2017, a registration statement relating to an additional public offering was declared effective permitting us to sell up to an additional $1.0 billion in principal amount of L Bonds on a continuous basis through December 2020. We reached the maximum capacity on this offering during the third quarter of 2020. On June 3, 2020, a registration statement relating to an additional public offering was declared effective permitting us to sell up to $2.0 billion in principal amount of L Bonds on a continuous basis through June 2023. These bonds contain the same terms and features as our previous offerings. We are party to an indenture governing the L Bonds dated October 19, 2011, as amended (“Indenture”), under which GWG Holdings is obligor, GWG Life is guarantor, and Bank of Utah serves as indenture trustee. Effective December 31, 2019, we entered into Amendment No. 2 to the indenture, which primarily modified the calculation of the debt coverage ratio to allow the Company greater flexibility to finance and to anticipate the potential impacts of GWG Holdings’ expanding relationship with Beneficient. We were in compliance with the covenants of the indenture at September 30, 2020, and as of the date of this filing. We publicly offer and sell L Bonds under a registration statement declared effective by the SEC and have issued Seller Trust L Bonds under a Supplemental Indenture, as described below. We temporarily suspended the offering of our L Bonds on May 1, 2019 as a result of our delay in filing certain periodic reports with the SEC. We recommenced our L Bond offering on August 8, 2019. The bonds have renewal features under which we may elect to permit their renewal, subject to the right of bondholders to elect to receive payment at maturity. Interest is payable monthly or annually depending on the election of the investor. At September 30, 2020 and December 31, 2019, the weighted-average interest rate of our outstanding L Bonds was 7.22% and 7.15%, respectively. The principal amount of L Bonds outstanding was $1.2 billion and $0.9 billion at September 30, 2020 and December 31, 2019, respectively. The difference between the amount of outstanding L Bonds and the carrying amount on our condensed consolidated balance sheets is due to netting of unamortized deferred issuance costs, cash receipts for new issuances and payments of redemptions in process. Amortization of deferred issuance costs was $4.3 million and $3.2 million for the three months ended September 30, 2020 and 2019, respectively. Amortization of deferred issuance costs was $12.4 million and $9.2 million for the nine months ended September 30, 2020 and 2019, respectively. Future expected amortization of deferred financing costs as of September 30, 2020 is $45.8 million in total over the next seven years. Seller Trust L Bonds On August 10, 2018, in connection with the Initial Transfer of the Exchange Transaction described in Note 1, GWG Holdings issued Seller Trust L Bonds in the amount of $366.9 million to the Seller Trusts. The maturity date of the Seller Trust L Bonds is August 9, 2023. The Seller Trust L Bonds bear interest at 7.50% per year. Interest is payable monthly in cash. After December 28, 2020, the holders of the Seller Trust L Bonds will have the right to cause GWG Holdings to repurchase, in whole but not in part, the Seller Trust L Bonds held by such holder. The repurchase may be paid, at the option of GWG Holdings, in the form of cash, and/or a pro rata portion of (i) the outstanding principal amount and accrued and unpaid interest under the commercial loan between GWG Life and Ben LP entered into on August 10, 2018 and (ii) Common Units, or a combination of cash and such property. The principal amount of Seller Trust L Bonds outstanding was $366.9 million at both September 30, 2020 and December 31, 2019. Other Borrowings As of September 30, 2020 and December 31, 2019, Beneficient had borrowings that consisted of the following (in thousands): September 30, 2020 December 31, 2019 First Lien Credit Agreement $ 27,373 $ 77,477 Second Lien Credit Agreement 72,245 72,184 Other borrowings 2,606 2,538 Unamortized debt premiums (discounts) (2,046) 887 Total Other Borrowings $ 100,178 $ 153,086 Beneficient First and Second Lien Credit Agreement On May 15, 2020, Beneficient executed a Term Sheet with its lender to amend its then senior credit agreement and subordinated credit agreement. The resulting Second Amended and Restated First Lien Credit Agreement and Second Amended and Restated Second Lien Credit Agreement (collectively, the “Second Amendments”) was executed on August 13, 2020, with terms and conditions substantially consistent with the Term Sheet, as further described below. Prior to the execution of the Second Amendments, other amendments extended the June 30, 2020 maturity dates of both loans to August 13, 2020, while Beneficient and the lender finalized the amended and restated credit agreements. Additional agreements were entered into on June 10, 2020, and on June 19, 2020, consistent with the Term Sheet, whereby Beneficient agreed to repay $25.0 million of the then outstanding principal balance and pay an extension fee of 2.5% of the outstanding aggregate principal balance of the loans, calculated after the $25.0 million repayment, on July 15, 2020. A total of $28.6 million was paid on July 15, 2020, which included the $25.0 million principal payment, related accrued interest thereon, and the extension fee described above. GWG Holdings, GWG Life, and a newly formed entity, DLP V, have also entered into the credit agreements with respect to provisions related to the potential future assumption of the loans by DLP V as described below. The amendments extend the maturity date of both loans to April 10, 2021, and increase the interest rate on each loan to 1-month LIBOR plus 8.0%, with a maximum interest rate of 9.5%. The loans are payable in three installments of $25.0 million on each of September 10, 2020, December 10, 2020, and March 10, 2021, with the remaining balance payable on April 10, 2021. Through September 30, 2020, all principal and interest due under the Second Amendments have been paid. The amendments provide for the assumption of the loans by DLP V pursuant to a Third Amended and Restated First Lien Credit Agreement, upon satisfaction of certain conditions precedent, including the issuance of Beneficient’s trust company charters by the Texas Department of Banking. The amendments provide that DLP V will receive Preferred C interests in exchange for assuming Beneficient’s amended loans in an amount equal to 110% of the then outstanding loan balance. Upon assumption of the loans, the lender will receive a fee of 2.0% of the then outstanding balance of the loans. Furthermore, upon assumption of the loans, the Commercial Loan Agreement between GWG Life and Beneficient will be assumed by GWG Life USA, LLC, a wholly owned subsidiary of GWG Holdings, in exchange for Class A Subclass A-2 Units of BCH equivalent to the outstanding principal balance of the debt evidenced by the Commercial Loan Agreement. In connection with the assumption of the loans by DLP V, the lender will be granted a security interest in the Preferred Series A Subclass 1 Unit Accounts of BCH held by GWG Life and the life insurance policies held by DLP V, which are to be contributed to DLP V from GWG Life Trust. In connection with the agreement by DLP V to assume the loans upon the issuance of Beneficient's trust company charters, (i) the lender will be permitted to make capital contributions of up to $152.0 million in exchange for a Preferred Series A Subclass 1 Unit Account of BCH for an equal amount of cash for two years after the assumption of the loans; should the lender elect to make such a capital contribution, GWG Holdings or one of its subsidiaries will be allowed to exchange an amount of Preferred C into Preferred Series A Subclass 1 Unit Accounts or contribute cash for Preferred Series A Subclass 1 Unit Accounts, in certain circumstances, in order to maintain its relative ownership percentage of the Preferred Series A Subclass 1 Unit Accounts; (ii) BHI, which owns a majority of the Class S Ordinary Units, Preferred Series A Subclass 1 Unit Accounts, and FLP Subclass 1 Unit Accounts issued by BCH, will grant certain tax-related concessions related to the transaction to the lender as may be mutually agreed upon between the parties, and (iii) in exchange for the tax-related concessions to be agreed between the parties, (a) 5% of BHI’s Preferred Series A Sub Class 1 Unit Account, which will be held by the lender, may convert, upon delivery of notice by BHI or its designee, to a Preferred A.0 Unit Account of BCH, and (b) recipients of a grant of Preferred Series A Subclass 1 Unit Accounts from BHI will have the right to put an amount of Preferred Series A Subclass 1 Unit Accounts to Beneficient equal to any associated tax liability stemming from any such grant; provided that the aggregated associated tax liability shall not relate to more than $30 million of grants of Preferred Series A Subclass 1 Unit Accounts from BHI; and provided, further, that such a put cannot be exercised prior to July 1, 2021. There has been no liability recorded for the put right as of September 30, 2020, as the transfer of Preferred Series A Subclass Unit Accounts has not occurred. The amended loan terms and ancillary documents contain covenants that (i) prevent Beneficient from issuing any securities senior to the Preferred Series A Subclass 1 or Preferred A.0 Unit Accounts; (ii) prevent Beneficient from incurring additional debt or borrowings greater than $10.0 million, other than trade payables, while the loans are outstanding; (iii) prevent, without the written consent of the lender, GWG Life Trust or DLP V from selling, transferring or otherwise disposing any of the life insurance policies held by GWG Life Trust as of May 15, 2020, except that life insurance policies may be sold, transferred, or otherwise disposed of, provided that concurrent with the assumption of the loans by DLP V, a prepayment of the loans would be required, if necessary, to maintain certain loan-to-value percentages, after giving effect to such sale, transfer or disposal; and (iv) prevent, without the written consent of the lender, GWG Holdings from selling, transferring, or otherwise disposing of any Preferred Series A Subclass 1 Unit Accounts held as of May 15, 2020, other than to DLP V. These covenants are materially similar to the terms under the Third Amended and Restated First Lien Credit Agreement once assumed by DLP V. As of September 30, 2020, Beneficient was in compliance with all covenants. The assumption set forth in the amendments are subject to, among other things, the satisfaction of certain closing conditions, some of which may be outside of the parties’ control. These loans are not currently guaranteed by GWG. |
Stockholders' Equity
Stockholders' Equity | 9 Months Ended |
Sep. 30, 2020 | |
Equity [Abstract] | |
Stockholders' Equity | Stockholders’ Equity GWG Holdings Equity Common Stock In September 2014, GWG Holdings consummated an initial public offering of its common stock resulting in the sale of 800,000 shares of common stock at $12.50 per share, and net proceeds of approximately $8.6 million after the payment of underwriting commissions, discounts and expense reimbursements. In connection with this offering, the common stock of GWG Holdings was listed on the Nasdaq Capital Market under the ticker symbol “GWGH.” The 2018 transactions between GWG Holdings, GWG Life, Beneficient and the Seller Trusts described in Note 1 ultimately resulted in the issuance of 27,013,516 shares of GWG Holdings common stock to the Seller Trust in exchange for Common Units. The shares were offered and sold in reliance upon the exemption from registration provided by Section 4(a)(2) under the Securities Act of 1933, as amended. Also, the Purchase and Contribution Agreement described in Note 1 ultimately resulted in the sale of 2,500,000 shares of GWG Holdings common stock to BCC, and the contribution of 1,452,155 shares of GWG Holdings common stock to AltiVerse. Pursuant to the Exchange Agreement described in Note 1, commencing on December 31, 2019, holders of Ben LP Common Units have the right to exchange their Common Units for common stock of GWG Holdings. The exchange ratio in the Exchange Agreement is based on the ratio of the capital account associated with the Common Units to be exchanged to the market price of the common stock of GWG Holdings based on the volume weighted average price of GWG Holdings’ common stock for the five consecutive trading days prior to the quarterly exchange date. No Ben LP Common Units have been exchanged for common stock of GWG Holdings through September 30, 2020. On November 15, 2018, the Board of Directors of GWG Holdings approved a stock repurchase program pursuant to which the Company was permitted, from time to time, to purchase shares of its common stock for an aggregate purchase price not to exceed $1.5 million. Stock repurchases were able to be executed through various means, including, without limitation, open market transactions, privately negotiated transactions or otherwise. The stock repurchase program did not obligate the Company to purchase any shares, and expired on April 30, 2019. The following table includes information about the stock repurchase program for the nine months ended September 30, 2019 (dollar amounts in thousands, except per share data): 2019 Monthly Period Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of the Program Maximum Dollar Value of Shares that Remained Under the Program January 2019 42,488 $ 8.47 52,523 $ 1,072 February 2019 202 8.88 52,725 1,070 (1) No stock was repurchased after February 2019, and the stock repurchase program expired on April 30, 2019. Redeemable Preferred Stock On November 30, 2015, our public offering of up to 100,000 shares of RPS at $1,000 per share was declared effective. Holders of RPS are entitled to cumulative dividends at the rate of 7% per annum, paid monthly. Dividends on the RPS are recorded as a reduction to additional paid-in capital, if any, then to the outstanding balance of the preferred stock if additional paid-in capital has been exhausted. Under certain circumstances described in the Certificate of Designation for the RPS, additional shares of RPS may be issued in lieu of cash dividends. The RPS ranks senior to our common stock and pari passu with our RPS 2 (see further details in the section below) and entitles its holders to a liquidation preference equal to the stated value per share (i.e., $1,000) plus accrued but unpaid dividends. Holders of RPS may convert their RPS into our common stock at a conversion price equal to the volume-weighted average price of our common stock for the 20 trading days immediately prior to the date of conversion, subject to a minimum conversion price of $15.00 and in an aggregate amount limited to 15% of the stated value of RPS originally purchased from us and still held by such purchaser. Holders of RPS may request that we redeem their RPS at a price equal to their stated value plus accrued but unpaid dividends, less an applicable redemption fee, if any, as specified in the Certificate of Designation. Nevertheless, the Certificate of Designation for RPS permits us in our sole discretion to grant or decline redemption requests. Subject to certain restrictions and conditions, we may also redeem shares of RPS without a redemption fee upon a holder’s death, total disability or bankruptcy. In addition, after one year from the date of original issuance, we may, at our option, call and redeem shares of RPS at a price equal to their liquidation preference. In March 2017, we closed the RPS offering to additional investors having sold 99,127 shares of RPS for an aggregate gross consideration of $99.1 million and incurred approximately $7.0 million of related selling costs. At the time of its issuance, we determined that the RPS contained two embedded features: (1) optional redemption by the holder, and (2) optional conversion by the holder. We determined that each of the embedded features met the definition of a derivative; however, based on our assessment under ASC 470, Debt , (“ASC 470”) and ASC 815, Derivatives and Hedging , (“ASC 815”), we do not believe bifurcation of either the holder’s redemption or conversion feature is appropriate. Series 2 Redeemable Preferred Stock On February 14, 2017, our public offering of up to 150,000 shares of RPS 2 at $1,000 per share was declared effective. The terms of the RPS 2 are largely consistent with those of the RPS, other than the conversion and redemption features discussed below. Holders of RPS 2 may, less an applicable conversion discount, if any, convert their RPS 2 into our common stock at a conversion price equal to the volume-weighted average price of our common stock for the 20 trading days immediately prior to the date of conversion, subject to a minimum conversion price of $12.75 and in an aggregate amount limited to 10% of the stated value of RPS 2 originally purchased from us and still held by such purchaser. We may, at our option, call and redeem shares of RPS 2 at a price equal to their liquidation preference (subject to a minimum redemption price, in the event of redemptions occurring less than one year after issuance, of 107% of the stated value of the shares being redeemed). In April 2018, we closed the RPS 2 offering to additional investors having sold 149,979 shares of RPS 2 for an aggregate gross consideration of $150.0 million and incurred approximately $10.3 million of related selling costs. The RPS 2 was determined to have the same two embedded features discussed in the RPS section above (optional redemption and optional conversion by the holder). We do not believe bifurcation of either the holder’s redemption or conversion feature is appropriate. Beneficient Equity As of September 30, 2020, BCH, a consolidated subsidiary of Ben LP, has issued general partnership Class A Units (Subclass A-1 and A-2), Class S Ordinary Units, Class S Preferred Units, FLP Units (Subclass 1 and Subclass 2), Preferred Series A Subclass 1 Unit Accounts, Preferred Series A Subclass 2 Unit Accounts, and Preferred Series C Unit Accounts. The Preferred Series A Subclass 0 Unit Accounts were created under the 5th Amended and Restated LPA; however, none have been issued as of September 30, 2020. The 5th Amended and Restated LPA of BCH governs the terms of these equity securities. Common Units As of September 30, 2020 and December 31, 2019, Beneficient has a total of 48,749,630 and 44,146,623 Common Units issued and outstanding, respectively. As of September 30, 2020 and December 31, 2019, GWG owns 46,887,963 and 42,171,946, Common Units, respectively, which are eliminated in consolidation. The remaining issued and outstanding Common Units are recorded in the condensed consolidated balance sheet in the noncontrolling interests line item. Preferred Series A Subclass 0 (Noncontrolling Interests) On July 15, 2020, BCH, a consolidated subsidiary of Ben LP, amended its limited partnership agreement in a 5th Amended and Restated LPA, which created a new subclass of Preferred Series A Unit Accounts, the Preferred A.0. As a subclass of the Preferred Series A Unit Accounts, the Preferred A.0 receives the same preferred return on a quarterly basis as the other Preferred Series A subclasses. However, the Preferred A.0 is senior to all other classes of preferred equity, including the other subclasses of Preferred Series A in terms of allocations of profits, distributions, and liquidation. The Preferred A.0 can be converted into Class S Units at the election of the holder, at a price equal to (x) prior to the initial public listing, the per Common Unit fair market value as determined by the general Partner and (y) following the initial public listing, the lesser of (i) $10 and (ii) if the Common Units are listed on a national securities exchange, the volume-weighted average closing price of a Common Unit as reported on the exchange on which the Common Units are traded for the twenty (20) days immediately prior to the applicable exchange date, or if the Common Units are not listed on a national securities exchange, then the volume-weighted average closing price of a security traded on a national securities exchange or quoted in an automated quotation system into which the Common Units are convertible or exchangeable for the twenty (20) days immediately prior to the applicable exchange date. Preferred Series A Subclass 1 (Redeemable Noncontrolling Interest) BCH, a consolidated subsidiary of Ben LP, has non-unitized equity outstanding. The Preferred Series A Subclass 1 Unit Accounts are non-participating and convertible on a dollar basis. In 2019, Preferred Series A Subclass 1 Unit Account holders signed an agreement to forbear the right to receive an annualized preferred return in excess of a rate determined materially consistent with the methodology below until, initially, the earlier of December 31, 2019 or three months following the issuance of the limited trust association charters by the Texas Department of Banking. The charters from the Texas Department of Banking were not issued as of December 31, 2019. In 2020, this forbearance agreement was extended through September 30, 2020. The income allocation methodology under this forbearance agreement was as follows: • First, Ben, as the sole holder of Class A Units issued by BCH is allocated income from BCH to cover the expenses incurred solely by Ben; • Second, the remaining income at BCH is allocated 50% to the aggregate of Class A Units and Class S Ordinary Units and 50% to Preferred Series A Subclass 1 Unit Accounts, until the Common Units issued by Ben receive a 1% annualized return on the Common Unit account balance; • Third, after the 1% annualized return to the Common Unit issued by Ben is achieved, additional income is allocated to the Preferred Series A until the Preferred Series A is allocated the amount required under the LPA, (as amended); and • Finally, any remaining income is allocated under the terms of the current LPA (pro-rata between the Class A Units and Class S Ordinary Units). If and when the forbearance agreement expires, account holders will be entitled to a compounded quarterly preferred return. The preferred return to be paid to Preferred Series A Unitholders is limited by a quarterly preferred return rate cap that is based on the annualized revenues of BCH. Annualized revenues are defined as four times the sum of total quarterly interest, fee and dividend income plus total noninterest revenues. This quarterly rate cap is defined as follows: • 0.25% if annualized revenues are $80 million or less; • 0.50% if annualized revenues are greater than $80 million but equal to or less than $105 million; • 0.75% if annualized revenues are greater than $105 million but equal to or less than $125 million; • 1.00% if annualized revenues are greater than $125 million but equal to or less than $135 million; • 1.25% if annualized revenues are greater than $135 million but equal to or less than $140 million; and • If over $140 million, the preferred return calculation is based on a fraction (i) the numerator of which is (A) the positive percentage rate change, if any, to the seasonally adjusted CPI-U covering the period from the date of the last allocation of profits to such holders, plus (B) (x) 2% prior to an Initial Public Offering (as defined in the BCH LPA) by Ben and (y) 3% thereafter, and (ii) the denominator of which is one minus the highest effective marginal combined U.S. federal, state and local income tax rate in effect as of the beginning of the fiscal quarter for which such determination is being made for an individual resident in New York City, New York, assuming (1) that the aggregate gross income allocable with respect to the quarterly preferred return for such fiscal year will consist of the same relative proportion of each type or character (e.g., long term or short term capital gain or ordinary or exempt income) of gross income item included in the aggregate gross income actually allocated in respect of the quarterly preferred return for the fiscal year reflected in the BCH's most recently filed Internal Revenue Service Form 1065 and (2) any state and local income taxes are not deductible against U.S. federal income tax. The definition of Initial Public Offering includes an event, transaction or agreement pursuant to which the Common Units are convertible or exchangeable into equity securities listed on a national securities exchange or quotation in an automated quotation system. No amounts have been paid to the Preferred Series A Subclass 1 Unit Account holders related to the preferred return from inception through September 30, 2020. In connection with the issuance of Preferred Series A Subclass 2 Units as part of the Option Agreement, the preferred return of Preferred Series A Subclass 1 Unit Account holders is reduced by the preferred return allocated to the Preferred Series A Subclass 2 Units during the period the Option Agreement remains outstanding. Additionally, certain Preferred Series A Subclass 1 Unit Account holders agreed to be specially allocated any income or losses associated with the Beneficient Management Partners, L.P. Equity Incentive Plan and certain other costs. Upon election by a holder, the Preferred Series A Unit Accounts (other than Preferred Series A Subclass 2 Unit Accounts) are, at any time on or after January 1, 2021, convertible in an amount of Preferred Series A Unit Accounts (other than Preferred Series A Subclass 2 Unit Accounts), equal to 20% of their Sub-Capital Accounts into Class S Ordinary Units (with the right to convert any unconverted amount from previous years in any subsequent years). Upon an election, a holder of Preferred Series A Subclass 1 Unit Accounts will be issued Class S Ordinary Units necessary to provide the holder with a number of Class S Ordinary Units that, in the aggregate, equal (a) the balance of the holder’s capital account associated with the Preferred Series A Subclass 1 Unit Accounts being converted divided by (b) either (x) prior to an initial public offering, the appraised per Class A Unit fair market value as determined by Beneficient or (y) following an initial public offering, the average price of a Common Unit for the thirty (30) day period ended immediately prior to the applicable conversion date. The holder of such newly issued Class S Ordinary Units may immediately convert them into Common Units. Additionally, effective December 31, 2030, if the Preferred Series A Subclass 1 Unit Accounts have not been converted, they will redeem for cash in an amount equal to the then outstanding capital account balance of the accounts. If available redeeming cash (as defined in the LPA) is insufficient to satisfy any such redemption requirements, BCH, on a quarterly basis, will redeem additional Preferred Series A Units until all such Preferred Series A Units have been redeemed. The Preferred Series A Subclass 1 Unit Accounts are subject to certain other conversion and redemption provisions. The current LPA of BCH also includes certain limitations of BCH, without the consent of a majority-in-interest of the Preferred Series A Unit Account holders, to (i) issue any new equity securities and (ii) except as otherwise provided, incur indebtedness that is senior to or pari passu with any right of distribution, redemption, repayment, repurchase or other payments relating to the Preferred Series A Unit accounts. Further, BCH cannot, prior to the conversion of all the Preferred Series A Unit accounts, incur any additional long-term debt unless (i) after giving effect to the incurrence of the new long-term debt on a pro forma basis, the sum of certain preferred stock, existing debt and any new long-term indebtedness would not exceed 55% of BCH’s net asset value (“NAV”) plus cash on hand, and (ii) at the time of incurrence of any new long-term indebtedness, the aggregate balance of BCH’s (including controlled subsidiaries) debt plus such new long-term debt does not exceed 40% of the sum of the NAV of the collateral underlying the loan portfolio of BCH and its subsidiaries plus cash on hand at Ben LP, BCH and its subsidiaries. The Preferred Series A Subclass 1 Unit Accounts are recorded in the condensed consolidated balance sheet in the redeemable noncontrolling interest line item. Preferred Series C Unit Accounts The 5th Amended and Restated LPA also created a new class of preferred equity, the Preferred Series C Unit Accounts. The Preferred Series C Unit Accounts are non-participating and convertible on a basis consistent with the UPA discussed in Note 1. Account holders are entitled to a compounded quarterly preferred return based on a fraction, the numerator of which is (a) the sum of an inflation adjustment amount, plus (1) 0.5% prior to the initial public listing and (2) 0.75% following the initial public listing, and the denominator of which is (b) 1 minus the means of the highest effective marginal combined U.S. federal, state and local income tax rate (including the rate of taxes under Section 1411 of the Code) for a Fiscal Year prescribed for an individual resident in New York, New York (taking into account (a) the nondeductibility of expenses subject to the limitations described in Sections 67 and 68 of the Code and (b) the character (e.g., long-term or short-term capital gain or ordinary or exempt income) of the applicable income, but not taking into account the deductibility of state and local income taxes for U.S. federal income tax purposes), based on the Partnership’s most recently filed IRS form 1065. BCH calculates two Preferred Series C Unit Accounts capital accounts: the Liquidation Capital Account and the Conversion Capital Account. In calculating the Conversion Capital Account, the Preferred Series C Unit Accounts are allocated profits and losses junior to the Preferred Series A Unit Accounts. In calculating the Liquidation Capital Account, the Preferred Series C Unit Accounts are allocated profits and losses pari passu with the Preferred Series A Unit Accounts. Following the exchange of any Preferred Series C Unit Accounts into Common Units under the UPA described in Note 1, the excess of the profits and losses allocated to the Preferred Series C Unit Accounts under the Liquidation Capital Account will be deemed the “Excess Amount.” This Excess Amount will be specially allocated at each tax period in accordance with the principals of Treasury Regulation Section 1.704-1(b)(4)(x), to the Preferred Series A Subclass 1 Units Accounts, prior to any amount of profit, income or gain being allocated to any other class of units (other than the Preferred A.0) or limited partners until such special allocations equal, in the aggregate, such Excess Amount. The only conversion, redemption, or exchange rights available to the Preferred Series C Unit Accounts are those rights afforded in accordance with the UPA, described in Note 1, or such similar agreement. While any amount of Preferred Series C Unit Accounts is outstanding, BCH cannot make any distributions, other than tax distributions and redemptions, distributions upon a liquidation of BCH, and distributions of net consideration received from a sale of BCH, without the prior consent of a majority in interest of the holders of the Preferred Series C Unit Accounts. As of September 30, 2020, GWG owns $161.0 million of Preferred Series C Unit Accounts. The Preferred Series C Unit Accounts are eliminated upon consolidation. Class S Ordinary Units As of both September 30, 2020 and December 31, 2019, BCH had issued and outstanding 5.7 million Class S Ordinary Units. The Class S Ordinary Units participate on an as-converted basis pro-rata in the share of the profits or losses of BCH and subsidiaries following all other allocations made by BCH and its subsidiaries. As limited partner interests, these units have limited voting rights and do not entitle participation in the management of BCH’s business and affairs. The Class S Ordinary Units are exchangeable for Common Units on a one-for-one basis, subject to customary conversion rate adjustments for splits, distributions and reclassifications, as well as compliance with any applicable vesting and transfer restrictions. Each conversion also results in the issuance to Ben LP of a Class A Unit of BCH for each common unit issued. The Class S Ordinary Units are recorded in the condensed consolidated balance sheet in the noncontrolling interests line item. Class S Preferred Units The limited partnership agreement of BCH allows it to issue Class S Preferred Units. The Class S Preferred Units are entitled to a quarterly preferred return that is limited by the quarterly preferred return rate cap described above for Preferred Series A Subclass 1 except for when annualized revenues exceed $140 million, the Class S Preferred return is based on a fraction (i) the numerator of which is (A) the positive percentage rate change, if any, to the seasonally adjusted CPI-U covering the period from the date of the last allocation of profits to such holders, plus (B) 0.75 percent, and (ii) the denominator of which is one minus the highest effective marginal combined U.S. federal, state and local income tax rate in effect as of the beginning of the fiscal quarter for which such determination is being made for an individual resident in New York City, New York, assuming (1) that the aggregate gross income allocable with respect to the quarterly preferred return for such fiscal year will consist of the same relative proportion of each type or character (e.g., long term or short term capital gain or ordinary or exempt income) of gross income item included in the aggregate gross income actually allocated in respect of the quarterly preferred return for the fiscal year reflected in the Ben Group Partnership’s most recently filed IRS Form 1065 and (2) any state and local income taxes are not deductible against U.S. federal income tax. The Class S Preferred Units also participate on an as-converted basis pro-rata in the share of the profits or losses of BCH and subsidiaries following all other allocations made by BCH and its subsidiaries. As limited partner interests, these units are generally non-voting and do not entitle participation in the management of BCH’s business and affairs. Generally, the Class S Preferred Units are exchangeable for Common Units in Ben LP on a 1.2-for-1 basis, subject to customary conversion rate adjustments for splits, distributions and reclassifications, as well as compliance with any applicable vesting and transfer restrictions. Each conversion also results in the issuance to Ben LP of a Class A Unit for each Common Unit issued. Holders of Class S Preferred Units may elect to convert into Class S Ordinary Units in connection with a sale or dissolution of BCH. No amounts have been paid to the Class S Preferred Unit holders related to the preferred return from inception through September 30, 2020. The Class S Preferred Units are recorded in the condensed consolidated balance sheet in the noncontrolling interests line item. |
Equity-Based Compensation
Equity-Based Compensation | 9 Months Ended |
Sep. 30, 2020 | |
Share-based Payment Arrangement [Abstract] | |
Equity-Based Compensation | Equity-Based Compensation As of September 30, 2020, the Company has outstanding equity-based awards under the GWG Holdings 2013 Stock Incentive Plan, the Beneficient Management Partners, L.P. (“BMP”) Equity Incentive Plan, and the Ben Equity Incentive Plan, as more fully described in the sections below. 2013 Stock Incentive Plan GWG Holdings adopted the 2013 Stock Incentive Plan in March 2013, as amended on June 1, 2015, May 5, 2017 and May 8, 2018. Participants under the plan may be granted incentive stock options and non-statutory stock options; stock appreciation rights; stock awards; restricted stock; restricted stock units; and performance shares. Eligible participants include officers and employees of GWG Holdings and its subsidiaries, members of our Board of Directors, and consultants. Option awards generally expire 10 years from the date of grant. As of September 30, 2020, the Company has granted stock options, stock appreciation rights (“SAR”), and restricted stock units (“RSU”) under this plan. During the nine months ended September 30, 2020, a total of 84,018 stock options held by employees vested. Additionally, as a result of stock option exercises, 3,688 shares of common stock were issued to employees, net of shares forfeited to satisfy tax withholding obligations. Upon the exercise of SARs, the Company is obligated to make cash payments equal to the positive difference between the market value of the Company’s common stock on the date of exercise less the market value of the common stock on the date of grant. The liability for the SARs as of September 30, 2020 and December 31, 2019 was $0.7 million and $0.6 million, respectively, and was recorded within accounts payable and accrued expenses in the condensed consolidated balance sheets. During the nine months ended September 30, 2020, 57,183 of the RSUs held by employees and directors vested. BMP Equity Incentive Plan The Board of Directors of Beneficient Management, Ben LP’s general partner, adopted the BMP Equity Incentive Plan in 2019. Under the BMP Equity Incentive Plan, certain directors and employees of Ben are eligible to receive equity units in BMP, an entity affiliated with the board of directors of Beneficient Management, in return for their services to Ben. The BMP equity units eligible to be awarded to employees are comprised of BMP’s Class A Units and/or BMP’s Class B Units (collectively, the “BMP Equity Units”). The BMP Equity Units awarded in 2019 and during the three and nine months ended September 30, 2020, included some awards that were fully vested upon grant date, and some awards that are subject to service-based vesting over a four-year period from the date of hire. Expense recognized for these awards is specially allocated to certain holders of redeemable noncontrolling interests. As BMP’s equity is not publicly traded, the fair value of the BMP Equity Units is determined on each grant date using a probability-weighted discounted cash flow analysis. This fair value measurement is based on significant inputs not observable in the market and thus represents a Level 3 measurement within the fair value hierarchy. The resultant probability-weighted cash flows are then discounted using a rate that reflects the uncertainty surrounding the expected outcomes, which the Company believes is appropriate and representative of a market participant assumption. During second quarter 2020, 1,963,969 vested units were forfeited and returned as a result of an agreement allowing Beneficient to recover the aforementioned units held by one former director of Beneficient (see further discussion below). Ben Equity Incentive Plan The Board of Directors of Beneficient Management adopted the Ben Equity Incentive Plan in September 2018. Under the Ben Equity Incentive Plan, Ben is permitted to grant equity awards, in the form of restricted equity units (“REUs”) representing ownership interests in Common Units. Settled awards under the Ben Equity Incentive Plan dilute Ben’s Common Unitholders. The total number of Common Units that may be issued under the Ben Equity Incentive Plan is equivalent to 15% of the number of fully diluted Common Units outstanding, subject to annual adjustment. All REUs are subject to two performance conditions, both of which were met during 2019. Additionally, if a change-of-control event occurs prior to July 1, 2021, then all units, vested and unvested, will settle within 60 days. Any transaction where GWG Holdings obtains the right to appoint a majority of the members of Beneficient Management’s Board of Directors is expressly excluded from the definition of change-of-control for the REUs. Awards will generally be subject to service-based vesting over a multi-year period from the recipient’s date of hire, though some awards fully vest upon grant date. While providing services to Ben, if applicable, certain of these awards are subject to minimum retained ownership rules requiring the award recipient to continuously hold Common Unit equivalents equal to at least 15% of their cumulatively granted awards that have the minimum retained ownership requirement. As Ben LP’s equity is not publicly traded, the fair value of the REUs is estimated on the grant date using recent equity transactions involving third parties, which provides the Company with observable fair value information sufficient for estimating the grant date fair value. During second quarter 2020, 507,500 vested units were forfeited as a result of an agreement allowing Beneficient to recover the aforementioned units held by one former director of Beneficient. Beneficient recognized $36.3 million of other income as a result of this recovery of equity-based compensation, including both BMP Equity Units and REUs. A substantial majority of the former director's equity-based compensation units were fully vested, and the majority of the related expense was allocated to certain holders of noncontrolling interests and recorded in prior periods. The provisions of the award agreements related to the forfeiture of vested units resulted in the previous expense being recorded to other income in the year-to-date period, accordingly. During third quarter 2020, 515,000 units were granted to a senior partner director subject to a performance condition. The performance condition has not been met as of September 30, 2020. As the performance condition of the grant is based on a liquidity event, recognition of the related compensation cost is deferred until the condition has been met. Total unrecognized compensation cost related to this award is approximately $6.4 million as of September 30, 2020. The following table summarizes the award activity, in number of units, for each plan during the nine months ended September 30, 2020: Balance at December 31, 2019 Granted Vested Exercised Forfeited Recovery of Vested Awards Balance at September 30, 2020 Vested Stock Options 673,341 — 84,018 (20,136) (109,671) — 627,552 SAR 200,745 18,556 45,529 (1,284) (4,541) — 259,005 RSU — — 57,183 — — — 57,183 BMP Equity Units 7,980,037 4,580,888 496,142 — (31,618) (1,963,969) 11,061,480 REUs 2,164,742 3,033,956 341,223 — (14,000) (507,500) 5,018,421 Unvested Stock Options 232,040 — (84,018) — (66,625) — 81,397 SAR 174,880 125,269 (45,529) — (27,067) — 227,553 RSU 244,083 — (57,183) — (57,183) — 129,717 BMP Equity Units 180,000 2,963,800 (496,142) — (347,599) — 2,300,059 REUs 246,500 2,682,072 (341,223) — (282,400) — 2,304,949 Total Stock Options 905,381 — — (20,136) (176,296) — 708,949 SAR 375,625 143,825 — (1,284) (31,608) — 486,558 RSU 244,083 — — — (57,183) — 186,900 BMP Equity Units 8,160,037 7,544,688 — — (379,217) (1,963,969) 13,361,539 REUs 2,411,242 5,716,028 — — (296,400) (507,500) 7,323,370 The holders of certain of the units issued under the BMP Equity Incentive Plan and the Ben Equity Incentive Plan, upon vesting, have the right to convert the units to shares of GWG Holdings common stock per the Exchange Agreement discussed in Note 1. As such, units vested and issued under Beneficient’s equity incentive plans may result in dilution of the common stock of GWG Holdings. The following table presents the components of equity-based compensation expense recognized in the condensed consolidated statement of operations (in thousands): Three Months Ended Nine Months Ended 2020 2019 2020 2019 Stock options $ 53 $ 74 $ 140 $ 319 Stock appreciation rights 282 327 171 323 Restricted stock units — 263 (38) 687 BMP equity units 12,392 — 51,515 — REUs 10,831 — 44,830 — Total equity-based compensation $ 23,558 $ 664 $ 96,618 $ 1,329 Unrecognized equity-based compensation expense, excluding the expense related to the performance award discussed above, totaled approximately $38.3 million as of September 30, 2020. We currently expect to recognize equity-based compensation expense of $4.1 million during the remainder of 2020, and the remainder thereafter based on scheduled vesting of awards outstanding as of September 30, 2020. The following table presents the equity-based compensation expense expected to be recognized over the next five years based on scheduled vesting of awards outstanding, excluding the award subject to the performance condition discussed above, as of September 30, 2020 (in thousands): Stock Options SAR REUs BMP Equity Units Total Three months ending 2020 $ 42 $ 55 $ 1,947 $ 2,012 $ 4,056 2021 109 200 7,818 7,982 16,109 2022 19 153 5,729 5,851 11,752 2023 — 56 2,889 2,517 5,462 2024 — — 567 396 963 Total $ 170 $ 464 $ 18,950 $ 18,758 $ 38,342 |
Income Taxes
Income Taxes | 9 Months Ended |
Sep. 30, 2020 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | Income Taxes The Company applies an estimated annual effective rate to interim period pre-tax income to calculate the income tax provision for the quarter in accordance with the principal method prescribed by the accounting guidance established for computing income taxes in interim periods. Prior to 2020, the Company determined the quarterly income tax provision using a discrete year-to-date calculation. Consolidated income tax expense was $22.4 million for the three months ended September 30, 2020, and consolidated income tax benefit was $0.6 million for the nine months ended September 30, 2020. The Company’s effective tax rate was 0.4% for the nine months ended September 30, 2020. The income tax expense for the three months ended September 30, 2020 primarily reflects the effects of a gain allocated to GWG Holdings from Ben LP and an increase to the valuation allowance on the Company’s net deferred tax assets (described below). The income tax benefit for the nine months ended September 30, 2020 primarily reflects the effects of a gain allocated to GWG Holdings from Ben LP and a change in state taxing jurisdictions. After the change-of-control transaction with Ben LP on December 31, 2019, the Company moved its headquarters from Minnesota to Texas. This move resulted in a change in the state deferred tax rate from 9.8% to 0%. In the third quarter 2020, GWG Holdings was allocated a gain from its investment in Ben LP. The tax effects of these items have been recorded as discrete items. The Company currently records a valuation allowance against its deferred tax assets that cannot be realized by the future reversal of existing temporary differences. Due to the uncertain timing of the reversal of certain of these temporary differences due to the constraint described below, they cannot be considered as a source of future taxable income for purposes of determining a valuation allowance; therefore, the vast majority of the deferred tax liability cannot be utilized in determining the realizability of the deferred tax assets. This is often referred to as a “naked credit.” Due to a prior deemed ownership change, net operating loss carryforwards are subject to Section 382 of the Internal Revenue Code. The Company reassessed its valuation allowance during the third quarter of 2020 and determined it will no longer utilize the reversal of a temporary difference related to the Company's preferred equity ownership in Beneficient, until such time as the preferred equity is no longer constrained, as a source of income to realize existing deferred tax assets related to the net operating loss and Section 163(j) limitations. As a result, the valuation allowance on the deferred tax assets increased as of September 30, 2020, which resulted in a larger net deferred tax liability (naked credit) as of September 30, 2020. The naked credit as of September 30, 2020 is specifically related to GWG Life’s investment in the Preferred Series A Subclass 1 Unit Accounts described in Note 1. The disposition of this investment is constrained by the Pledge and Security Agreement in favor of the holders of the L Bonds of GWG Holdings. As such, the timing of recognition of the necessary taxable income related to this investment and the future reversal of this temporary difference cannot be predicted. We continue to monitor and evaluate the rationale for recording a full valuation allowance for the net amount of the deferred tax assets in excess of the deferred tax liabilities that are not constrained. We intend to continue maintaining a full valuation allowance on these net deferred tax assets until there is sufficient evidence to support the reversal of all or some portion of these allowances. Release of the valuation allowance would result in the recognition of certain deferred tax assets and a decrease to income tax expense for the period the release is recorded. However, the exact timing and amount of the valuation allowance release are subject to change on the basis of the level of profitability that we are able to actually achieve. |
Loss per Common Share
Loss per Common Share | 9 Months Ended |
Sep. 30, 2020 | |
Earnings Per Share [Abstract] | |
Loss per Common Share | Loss per Common Share The computations of basic and diluted income (loss) attributable to common shareholders per share for the three and nine months ended September 30, 2020 and 2019 are as follows (in thousands, except share data and per share data): Three Months Ended Nine Months Ended 2020 2019 2020 2019 Numerator: Net loss attributable to common shareholders $ (68,149) $ (24,635) $ (135,669) $ (69,154) Denominator: Basic – weighted average common shares outstanding 30,584,719 33,033,420 30,552,233 33,010,100 Effect of dilutive securities — — — — Diluted – weighted average common shares outstanding 30,584,719 33,033,420 30,552,233 33,010,100 Basic loss per common share $ (2.23) $ (0.75) $ (4.44) $ (2.09) Diluted loss per common share $ (2.23) $ (0.75) $ (4.44) $ (2.09) For the three months ended September 30, 2020 and 2019, RPS, RPS 2, restricted stock units, and stock options for a potential 2,222,118 and 2,737,679 shares, respectively, were not included in the calculation of diluted earnings per share because we recorded a net loss during these periods and the effects were anti-dilutive. For the nine months ended September 30, 2020 and 2019, RPS, RPS 2, restricted stock units, and stock options for a potential 2,377,628 and 2,698,524 shares, respectively, were not included in the calculation of diluted earnings per share because we recorded a net loss during these periods and the effects were anti-dilutive. Potentially dilutive instruments issued by Ben LP that are ultimately exchangeable into GWG common stock were also excluded from the calculation of diluted earnings per share for the three and nine months ended September 30, 2020 because we recorded a net loss during this period and the effects were anti-dilutive. |
Segment Reporting
Segment Reporting | 9 Months Ended |
Sep. 30, 2020 | |
Segment Reporting [Abstract] | |
Segment Reporting | Segment Reporting The Company has two reportable segments consisting of Secondary Life Insurance and Beneficient. Corporate & Other includes certain activities not allocated to specific business segments. These activities include holding company financing and investing activities, and management and administrative services to support the overall operations of the Company and from November 1, 2019, include our equity method investment in FOXO. The Secondary Life Insurance segment seeks to earn non-correlated yield from our portfolio of life insurance policies. Our Beneficient segment consists of the assets and operations of Ben LP and its subsidiaries. Beneficient became a consolidated subsidiary of GWG Holdings as of December 31, 2019, as described in Note 4. Ben LP provides a variety of trust services, liquidity products and loans for alternative assets and illiquid investment funds, and other financial services to HNW individuals. Prior to December 31, 2019, we accounted for our investment in the Common Units under the equity method. These segments are differentiated by the products and services they offer as well as by the information used by the Company’s chief operating decision maker to determine allocation of resources and assess performance. Earnings before taxes (“EBT”) is the measure of profitability used by management to assess performance of its segments and allocate resources. Segment EBT represents net income (loss) excluding income taxes and includes earnings (loss) from equity method investments and gain on consolidation of equity method investment. Three Months Ended Nine Months Ended Revenue: 2020 2019 2020 2019 Secondary Life Insurance $ 14,422 $ 18,238 $ 44,800 $ 61,199 Beneficient 14,091 3,709 86,042 9,723 Corporate & Other — 264 17 517 Total $ 28,513 $ 22,211 $ 130,859 $ 71,439 Three Months Ended Nine Months Ended Interest Expense: 2020 2019 2020 2019 Secondary Life Insurance $ 24,983 $ 21,410 $ 72,022 $ 63,114 Beneficient 15,809 6,880 41,783 20,638 Corporate & Other — — — — Total $ 40,792 $ 28,290 $ 113,805 $ 83,752 Three Months Ended Nine Months Ended Interest Income: 2020 2019 2020 2019 Secondary Life Insurance $ 209 $ 226 $ 1,056 $ 1,594 Beneficient 12,719 3,709 38,532 9,678 Corporate & Other — — — 4 Total $ 12,928 $ 3,935 $ 39,588 $ 11,276 Three Months Ended Nine Months Ended Segment EBT: 2020 2019 2020 2019 Secondary Life Insurance $ (12,147) $ (9,169) $ (39,314) $ (19,792) Beneficient (33,819) (2,214) (86,347) (11,286) Corporate & Other (8,915) (9,020) (22,492) (25,270) Total (54,881) (20,403) (148,153) (56,348) Income tax benefit 22,444 — (613) — Net income (loss) $ (77,325) $ (20,403) $ (147,540) $ (56,348) Total Assets: September 30, 2020 December 31, 2019 Secondary Life Insurance $ 907,197 $ 904,363 Beneficient 2,675,370 2,721,546 Corporate & Other 47,107 9,297 Total $ 3,629,674 $ 3,635,206 The total assets of the Beneficient segment at both September 30, 2020 and December 31, 2019 includes goodwill of $2.4 billion, which represents all of the goodwill on the Company’s condensed consolidated balance sheet as of the end of each reporting period. |
Commitments and Contingencies
Commitments and Contingencies | 9 Months Ended |
Sep. 30, 2020 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | Commitments and Contingencies Litigation — In the normal course of business, we are involved in various legal proceedings. In the opinion of management, any liability resulting from such proceedings would not have a material adverse effect on our financial position, results of operations or cash flows. Commitments — GWG Holdings is committed to contribute an additional $5.0 million to FOXO through 2021, with an additional $1.2 million in the three months ending December 31, 2020 and $3.8 million in 2021. Beneficient had $35.3 million and $73.8 million of gross potential capital commitments as of September 30, 2020 and December 31, 2019, respectively, representing potential limited partner capital funding commitments on the alternative asset fund collateral for its loans above any cash reserves. The decrease in gross potential capital commitments from December 31, 2019 is due to the liquidation of the underlying funds and removal of the related commitment. The trust holding the interest in the limited partnership for the alternative asset fund is required to fund these limited partner capital commitments per the terms of the limited partnership agreement. To the extent that the associated trust cannot pay the capital funding commitment, Beneficient is obligated to lend sufficient funds to meet the commitment. Capital commitments generally originate from limited partner agreements having fixed or expiring expiration dates. The total limited partner capital funding commitment amounts may not necessarily represent future cash requirements. |
Concentration
Concentration | 9 Months Ended |
Sep. 30, 2020 | |
Risks and Uncertainties [Abstract] | |
Concentration | Concentration Life Insurance Carriers Our portfolio consists of purchased life insurance policies written by life insurance companies rated investment-grade by third-party rating agencies, including A.M. Best Company, Standard & Poor’s and Moody’s. As a result, there may be concentrations of policies with certain life insurance companies. The following summarizes the aggregate face value of insurance policies with individual life insurance companies exceeding 10% of the total face value of our portfolio. Life Insurance Company September 30, 2020 December 31, 2019 John Hancock Life Insurance Company 14.66 % 14.23 % The Lincoln National Life Insurance Company 11.23 % 11.55 % AXA Equitable Life Insurance Company 10.72 % 10.63 % The following summarizes the number of insureds’ state of residence exceeding 10% of the total face value of our portfolio: State of Residence September 30, 2020 December 31, 2019 California 17.95 % 17.46 % Florida 14.99 % 14.86 % Loans Receivable Beneficient’s underlying portfolio companies primarily operate in the United States, with the largest percentage, based on NAV, operating in semiconductor and equipment, diversified financials, and telecommunications industries. |
Subsequent Events and Other Mat
Subsequent Events and Other Matters | 9 Months Ended |
Sep. 30, 2020 | |
Subsequent Events [Abstract] | |
Subsequent Events and Other Matters | Subsequent Events and Other Matters Proposed Amended and Restated Certificate of Incorporation On July 6, 2020, GWG Holdings filed documents with the SEC seeking authority to potentially effect an exchange of its equity securities for securities issued by GWG Holdings or one or more of its subsidiaries (“subsidiary securities”) by adopting an Amended and Restated Certificate of Incorporation of GWG Holdings (the “Amended Charter”). The proposed Amended Charter has been adopted by the Board of Directors of GWG Holdings, which declared its advisability, based upon a recommendation from a Special Committee of independent and disinterested directors. It has also been approved through a written consent from the holders of a majority of the outstanding shares of GWG Holdings’ common stock. To become effective, the Amended Charter must also be approved by the holders of a majority of the outstanding shares of RPS and RPS 2, each series voting separately as a class. We plan to solicit the consent of the holders of our RPS and RPS 2 to the Amended Charter. While we believe such an exchange of equity securities may be a potential avenue to create efficiencies, no plans have been approved to exchange either the common stock, RPS or RPS 2 of GWG Holdings or the specific terms or issuer of any such securities that may be issued in connection therewith. The proposed Amended Charter provides that the value for which each share of common stock to be exchanged may not be less than the greater of (i) $10 (subject to certain adjustments), or (ii) the volume weighted average price (“VWAP”) of the common stock for the twenty (20) trading days immediately prior to the date of any notice of exchange. The Amended Charter also requires that at least one class of the subsidiary securities to be listed on a national securities exchange prior to, or at the time of, the exchange. In addition, the Amended Charter would permit GWG Holdings to exchange all of the RPS and RPS 2 for preferred equity securities of GWG Holdings or one or more of its subsidiaries (the “subsidiary preferred interest”) with substantially similar terms to that of the RPS and RPS 2, provided that, the Amended Charter requires the subsidiary preferred interest to have the following preferential terms: • accrue monthly cumulative dividends of not less than 7.5% per annum, subject to increase in the Board’s discretion, on the stated value of such subsidiary preferred interest; and • be subject to conversion into common equity securities of the issuer of the subsidiary preferred interest or a subsidiary thereof on terms substantially similar to those governing the conversion of the current RPS and RPS 2; provided, that the conversion price shall not be greater than $12 per common equity securities. The Amended Charter would also provide for an exclusive forum in the state of Delaware for certain potential claims by stockholders, as specified in the Amended Charter. There can be no assurance that GWG Holdings will receive the required consents of the holders of the RPS and RPS 2, and the Company has not approved any plans to exchange either the common stock or the RPS or RPS 2 or the terms or issuer or issuers of any securities issued in connection therewith, and there can be no assurance that any such exchange will occur or what the terms of the securities to be issued in connection with such exchange will be, other than as provided for in the Amended Charter. Any such exchange would be subject to approval of the terms of any such exchange by the Board of Directors of GWG Holdings and conditions precedent, some of which are outside of the Company’s control, including the issuance of trust company charters from the Texas Department of Banking. COVID-19 In December, 2019, a novel strain of coronavirus and the associated respiratory disease (“COVID-19”) was first reported in Wuhan, China. Less than four months later, on March 11, 2020, the World Health Organization declared COVID-19 a pandemic. The extent of COVID-19’s effect on the Company’s operational and financial performance will depend on continuing developments, including the duration, spread and intensity of the pandemic, all of which are uncertain and difficult to predict considering the rapidly evolving landscape. Although a substantial majority of our employees continue to work remotely, we have maintained our operations at or near normal levels. We have not experienced any significant disruptions due to operational issues, loss of communication capabilities, technology failure or cyber-attacks. The Company continues to raise capital, receive interest income and insurance policy benefits, pay interest and dividends and otherwise meet its ongoing obligations. However, depending on the extent of the ongoing economic crisis resulting from the pandemic and its impact on the Company’s business, the pandemic could have a material adverse effect on our results of operations, financial condition and cash flows. As discussed in our 2019 Form 10-K, management performs goodwill and intangible asset impairment testing annually, during the fourth quarter, or when events occur, or circumstances change that would more likely than not indicate impairment has occurred. The Company recorded goodwill on December 31, 2019, as a result of the transactions with Beneficient discussed in Note 4 to the condensed consolidated financial statements, and the measurement period remains open as of the date of this filing. Due to the significance of the COVID-19 pandemic, management performed a qualitative assessment of the goodwill of the Beneficient reporting unit as of September 30, 2020. Management concluded that the potentially large and underserved market that Beneficient is seeking to address, including the estimated demand from HNW individuals and STM size institutions seeking liquidity for their professionally managed alternative assets, has not been negatively affected by the COVID-19 pandemic such that it is more likely than not that the fair value of the Beneficient reporting unit would exceed its carrying value as of September 30, 2020. Therefore, the impact of the COVID-19 pandemic through September 30, 2020 was not a triggering event to perform a quantitative test. The annual quantitative test as of October 1, which is in the process of being finalized as of the date of this filing, is the first annual assessment since the recognition of this goodwill. The Company has experienced lower-than-forecasted operating results during the first nine months of 2020. These conditions will be considered during the respective annual impairment evaluation of goodwill as of October 1, 2020. If the estimated fair value is less than the carrying value, the Company would be required to recognize an impairment charge for the amount by which the carrying amount exceeds Beneficient’s fair value; however, the loss recognized would not exceed the total amount of Beneficient’s recorded goodwill. Liquidity and Capital Resources As of September 30, 2020, we had cash, cash equivalents and restricted cash of $109.8 million. We generated net losses attributable to common shareholders of $135.7 million and $69.2 million for the nine months ended September 30, 2020 and 2019, respectively. As of November 6, 2020, we had cash, cash equivalents and restricted cash of approximately $95.1 million. Besides funding operating expenditures and having sufficient cash to fund anticipated additional investments in Beneficient primarily for its lending products and working capital needs, we are obligated to pay other items such as interest payments and debt redemptions, and preferred stock dividends and redemptions. We expect to satisfy these obligations and fund our operations through anticipated operating cash flows, receipt of proceeds from our insurance policies, sales of additional L Bonds, and, potentially, additional borrowings under existing debt facilities or new borrowings with other third-party lenders or asset sales. GWG Holdings has a history of selling L Bonds dating back to January 2012. GWG Holdings may not be able sell additional L Bonds on terms as favorable to the Company as past transactions or in quantities sufficient to fund all of the Company’s operating requirements. Additionally, the Company may not be able to obtain additional borrowing under existing debt facilities or new borrowings with other third-party lenders. To the extent that GWG Holdings or its subsidiaries raise additional capital through the future issuance of debt, the terms of those debt securities may include terms that adversely affect the rights of our existing debt and/or equity holders or involve negative covenants that restrict GWG Holdings’ ability to take specific actions, such as incurring additional debt or making additional investments in growing the operations of the Company. If GWG Holdings is unable to fund its operations and other obligations, or defaults on its debt, then the Company will be required to either i) sell assets to provide sufficient funding or ii) to raise additional capital through the sale of equity and the ownership interest of our equity holders may be diluted. Based on projections of anticipated operating cash flows, receipt of proceeds from our insurance policies, sales of additional L-Bonds, and, potentially, additional borrowings under existing debt facilities or new borrowings with other third-party lenders, we believe that we will have sufficient cash resources to finance our operations, satisfy our other obligations, and to fund anticipated additional investments in Beneficient through November 19, 2021. Policy Benefits and L Bonds Subsequent to September 30, 2020 through November 6, 2020, policy benefits on 9 policies covering 8 individuals have been realized. The face value of insurance benefits of these policies was $7.7 million. Subsequent to September 30, 2020 through November 6, 2020, we have issued approximately $63.4 million of L Bonds. Loans Receivable |
Summary of Significant Accoun_2
Summary of Significant Accounting Policies (Policies) | 9 Months Ended |
Sep. 30, 2020 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Basis of Presentation | Basis of Presentation — The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the U.S. Securities and Exchange Commission (“SEC”) requirements for interim reporting, which allows certain footnotes and other financial information normally required by Generally Accepted Accounting Principles in the United States of America (“GAAP”) to be condensed or omitted. In our opinion, the condensed consolidated financial statements contain all adjustments (consisting of only normal recurring adjustments) necessary for the fair presentation of the Company’s financial position and results of operations. These statements should be read in conjunction with the consolidated financial statements and notes included in our Annual Report on Form 10-K for the year ended December 31, 2019, filed with the SEC on March 27, 2020 (“2019 Form 10-K”). The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year. Significant accounting policies are detailed in Note 2 to the consolidated financial statements included in the Company’s 2019 Form 10-K. Summarized below are those new or revised significant accounting policies, including those that resulted from the consolidation of Beneficient on December 31, 2019. |
Use of Estimates | Use of Estimates — The preparation of the Company’s condensed consolidated financial statements in conformity with GAAP requires management to make significant estimates and assumptions affecting the reported amounts of assets and liabilities at the date of the condensed consolidated financial statements, as well as the reported amounts of revenue during the reporting period. Management regularly evaluates estimates and assumptions, which are based on current facts, historical experience, management’s judgment, and various other factors that we believe to be reasonable under the circumstances. Actual results may differ materially and adversely from our estimates. Material estimates that are particularly susceptible to change, in the near term, relate to: the determination of the fair values of assets acquired, liabilities assumed and noncontrolling interests under business combinations accounting guidance; the determination of the assumptions used in estimating the fair value of our investments in life insurance policies; determining the grant date fair value for equity-based compensation awards; determining our allowance for loan losses; evaluation of potential impairment of goodwill and other intangibles; and the value of our deferred tax assets and liabilities. |
Loans Receivable and Allowance for Loan Losses | Loans Receivable — Loans are recorded at their fair value at the acquisition date, change-of-control date, or other liquidation event. Credit discounts are included in the determination of fair value; therefore, an allowance for loan losses is not recorded as of the date of valuation. Purchased loans are evaluated upon acquisition and classified as either purchased credit impaired (“PCI”) or non-purchased credit impaired (“non-PCI”). PCI loans reflect credit deterioration since origination such that it is probable as of the date of valuation that Beneficient will be unable to collect all contractually required payments. For PCI loans, expected cash flows as of the date of valuation in excess of the fair value of loans are recorded as interest income over the life of the loans using a level yield method if the timing and amount of the future cash flows is reasonably estimable. Subsequently, increases in cash flows over those expected at the acquisition date are recognized prospectively as interest income. Decreases in expected cash flows due to credit deterioration are recognized by recording an allowance for loan loss. Beneficient does not report PCI loans as nonperforming due to the accretion of interest income. For non-PCI loans, the difference between the fair value and unpaid principal balance (“UPB”) of the loan as of the date of valuation, referred to as a purchase premium or discount, is amortized or accreted to interest income over the contractual life of the loans using the effective interest method. In the event of prepayment, the remaining unamortized amount is recognized in interest income. Impaired loans include non-accrual loans and partially charged-off loans. The accrual of interest on impaired loans is discontinued when, in management’s opinion, doubt exists about the full collectability of principal and interest. When a loan is placed on non-accrual status, all previously accrued and unpaid interest is charged against income. If the ultimate collectability of principal, wholly or partially, is in doubt, any payment received on a loan on which the accrual of interest has been suspended is applied to reduce principal first. Once all principal has been received, additional interest payments are recognized on a cash basis as interest income. Loans are returned to accrual status once collection of contractually required principal and interest is reasonably assured. At such time, the accrual of interest and amortization of any remaining discount shall resume. Any interest income that was applied to the principal balance is not reversed and is subsequently recognized as an adjustment to yield over the remaining life of the loan. Allowance for Loan Losses — The allowance for loan losses is a valuation allowance for probable incurred credit losses in the portfolio. Management’s determination of the allowance is based upon an evaluation of the loan portfolio, impaired loans, economic conditions, volume, growth and composition of the collateral to the loan portfolio, and other risks inherent in the portfolio. Management applies risk factors to categories of loans and individually reviews all impaired loans above a de minimis threshold. Management relies heavily on statistical analysis, current net asset value (“NAV”) and distribution performance of the underlying alternative asset collateral and industry trends related to alternative asset investments to estimate losses. Management evaluates the adequacy of the allowance by reviewing relevant internal and external factors that affect credit quality. The cash flows generated from the collateral are the sole source of repayment of the loans and related interest. Beneficient recognizes the charge-off in the period in which it is confirmed. Therefore, impaired loans are written down to their estimated net present value. |
Goodwill and Identifiable Intangible Assets | Goodwill and Identifiable Intangible Assets — Goodwill and other identifiable intangible assets are initially recorded at their estimated fair values at the date of acquisition. Goodwill and other intangible assets having an indefinite useful life are not amortized for financial statement purposes. In the event that facts and circumstances indicate that the goodwill or other identifiable intangible assets may be impaired, an interim impairment test would be required. Intangible assets with finite lives are amortized over their useful lives. We perform required annual impairment tests of our goodwill and other intangible assets as of October 1 for our reporting units. The goodwill impairment test requires us to make judgments and assumptions. The test consists of estimating the fair value of each reporting unit based on valuation techniques, including a discounted cash flow model using revenue and profit forecasts and recent industry transaction and trading multiples of our peers, and comparing those estimated fair values with the carrying values of the assets and liabilities of each reporting unit, which includes the allocated goodwill. If the estimated fair value is less than the carrying value, we will recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, any loss recognized will not exceed the total amount of goodwill allocated to that reporting unit. This evaluation includes multiple assumptions, including estimated discounted cash flows and other estimates that may change over time. If future discounted cash flows become less than those projected by us, future impairment charges may become |
Equity-Based Compensation | Equity-Based Compensation — The Company measures and recognizes compensation expense for all equity-based payments at fair value on the grant date over the requisite service period. GWG Holdings uses the Black-Scholes option pricing model to determine the fair value of stock options and stock appreciation rights. For restricted stock grants (including restricted stock units), fair value is determined as of the closing price of GWG Holdings’ common stock on the date of grant. As it is not publicly traded, Beneficient uses various methods to determine the grant date fair value of its equity-based compensation awards, as more fully described in Note 12. Equity-based compensation expense is recorded in employee compensation and benefits in the condensed consolidated statements of operations. The determination of fair value of equity-based payment awards on the date of grant is affected by our stock price and a number of subjective variables. These variables include, but are not limited to, the expected stock price volatility over the term of the awards, the expected duration of the awards, the results of a probability-weighted discounted cash flow analysis and observable transactions. We account for the effects of forfeitures as they occur. The risk-free interest rate is based on the U.S. Treasury rates at the date of grant with maturity dates approximately equal to the expected life at grant date. Volatility is based on the standard deviation of the average continuously compounded rate of return of five selected companies. |
Earnings (Loss) per Common Share | Earnings (Loss) per Common Share — Basic earnings (loss) per share attributable to common shareholders are calculated using the weighted-average number of shares outstanding during the reported period. Diluted earnings (loss) per share are calculated based on the potential dilutive impact of our redeemable preferred stock (“RPS”), Series 2 redeemable preferred stock (“RPS 2”), restricted stock units, warrants (if applicable) and stock options. Net earnings, less any preferred dividends accumulated for the period (whether or not declared), is allocated to common stock. Basic earnings per common share is computed by dividing net earnings available to common stockholders by the weighted average number of common shares. |
Reclassification | Reclassification — Certain prior year amounts have been reclassified for consistency with the current year presentation. Specifically, our equity method investment in FOXO as of December 31, 2019, was reclassified to other assets in the condensed consolidated balance sheets to maintain consistency with the current year presentation. This reclassification had no effect on the reported results of operations. |
Newly Adopted and Not Yet Adopted Accounting Pronouncements | Newly Adopted Accounting Pronouncements — In January 2017, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2017-04, Goodwill, (Topic 350) . This standard simplifies how an entity is required to test goodwill for impairment by eliminating Step 2 from the goodwill impairment test. Step 2 measures a goodwill impairment loss by comparing the implied fair value of a reporting unit’s goodwill with the carrying amount of that goodwill. Under the new guidance, goodwill impairment loss will be measured on the basis of the fair value of the reporting unit relative to the reporting unit’s carrying amount rather than on the basis of the implied amount of goodwill relative to the goodwill balance of the reporting unit. ASU 2017-04 is effective for annual periods beginning after December 15, 2019, including interim periods within those periods, for public business entities. The Company adopted this ASU on January 1, 2020, and the adoption did not have a material impact on its condensed consolidated financial statements and related disclosures. In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework — Changes to the Disclosure Requirements for Fair Value Measurement , which eliminates, adds and modifies certain disclosure requirements for fair value measurements. The guidance is effective for fiscal years and interim periods beginning after December 15, 2019. Certain of the amendments require prospective application, while the remainder require retrospective application. The Company adopted this ASU on January 1, 2020, and it did not have a material impact on its condensed consolidated financial statements and related disclosures. In March 2020, the SEC amended Regulation S-X to create Rules 13-01 and 13-02. These new rules reduce and simplify financial disclosure requirements for issuers and guarantors of registered debt offerings. Previously, with limited exceptions, a parent entity was required to provide detailed disclosures with regard to guarantors of registered debt offerings within the footnotes to the consolidated financial statements. Under the new regulations, disclosure exceptions have been expanded and required disclosures may be provided within Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations rather than in the notes to the financial statements. Further, summarized financial information covering guarantor balance sheets and income statements are permitted, replacing the previously required condensed consolidating financial statements. Summarized financial information only needs be disclosed for the current fiscal year rather than all years presented in the financial statements as was previously required. The amendments were subsequently included in the FASB codification through the issuance of ASU No. 2020-09, Debt (Topic 470) in October 2020. The guidance will become effective for filings on or after January 4, 2021, with early adoption permitted. The Company elected to early adopt the new regulations during the second quarter of 2020. Our summarized guarantor financial information is now presented in Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations. Accounting Pronouncements Issued But Not Yet Adopted — In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments , which changes the impairment model for most financial assets and certain other instruments, including trade and other receivables, held-to-maturity debt securities and loans. There have been numerous codification improvements and technical corrections issued through subsequent ASUs since the issuance of ASU No. 2016-13. The standard requires entities to use a new, forward-looking “expected loss” model that is expected to generally result in the earlier recognition of allowances for losses. The guidance is effective for annual periods beginning after December 15, 2022, including interim periods within those years, for smaller reporting companies, as defined by the SEC, but early adoption is permitted. The Company is evaluating the potential impact of this guidance on our consolidated financial statements. ASU 2019-12, Income Taxes: Simplifying the Accounting for Income Taxes (Topic 740), was issued in December 2019. The amendments in ASU 2019-12 eliminate certain exceptions related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. ASU 2019-12 also clarifies and simplifies other aspects of the accounting for income taxes. ASU 2019-12 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020, for public business entities. Early adoption is permitted, including adoption in any interim period. The Company is evaluating the impact of this ASU on its consolidated financial statements and disclosures. ASU 2020-04, Reference Rate Reform (Topic 848) was issued in March 2020. The amendments in ASU 2020-04 provide optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. ASU 2020-04 can be applied by all entities as of the beginning of the interim period that includes March 12, 2020, or any date thereafter, and entities may elect to apply the amendments prospectively through December 31, 2022. The Company is evaluating the impact of this ASU on its consolidated financial statements and disclosures. ASU 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity was issued in August 2020. The amendments in ASU 2020-06 simplify the accounting for convertible instruments by removing major separation models and removing certain settlement condition qualifiers for the derivatives scope exception for contracts in an entity’s own equity, and simplify the related diluted net income per share calculation for both Subtopics. ASU 2020-06 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2023, for smaller reporting companies, as defined by the SEC. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. The Company is evaluating the impact of this ASU on its consolidated financial statements and disclosures. |
Business Combination (Tables)
Business Combination (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Business Combinations [Abstract] | |
Fair Value Measurement of Assets Acquired and Liabilities Assumed | The following table summarizes the fair value measurement of the assets acquired and liabilities assumed (in thousands): Fair Value at Acquisition Date Measurement Period Adjustments (1) Adjusted Fair Value at Acquisition Date ASSETS Loans receivable (1) $ 232,344 $ (26,116) $ 206,228 Fees receivable 29,168 — 29,168 Investment in public equity securities 24,550 — 24,550 Other assets 14,053 — 14,053 Intangible assets (2) 3,449 — 3,449 Total identifiable assets acquired 303,564 (26,116) 277,448 LIABILITIES Other borrowings 153,086 — 153,086 Commercial loan agreement from parent 168,420 — 168,420 Other liabilities and deferred revenue 105,866 — 105,866 Accounts payable and accrued expenses 13,713 — 13,713 Total liabilities assumed 441,085 — 441,085 Net liabilities assumed (137,521) (26,116) (163,637) NONCONTROLLING INTERESTS Common Units not owned by GWG Holdings (3) 181,383 — 181,383 Class S Ordinary Units 85,448 — 85,448 Class S Preferred Units 17 — 17 Preferred Series A Subclass 1 Unit Accounts 1,269,654 — 1,269,654 Total noncontrolling interests 1,536,502 — 1,536,502 ACQUISITION CONSIDERATION Cash, less cash acquired 61,479 — 61,479 Fair value of preexisting investment in Common Units (4) 622,503 — 622,503 Fair value of noncontrolling interest 1,536,502 — 1,536,502 Total estimated consideration 2,220,484 — 2,220,484 Less: Net liabilities assumed (137,521) (26,116) (163,637) Resulting preliminary goodwill $ 2,358,005 $ 26,116 $ 2,384,121 ______________________________________________ (1) As a result of additional information obtained about the collateral value used in the valuation of the loan portfolio for certain collateral dependent loans, the Company recorded measurement period adjustments during the nine months ended September 30, 2020, which resulted in a decrease to loans receivable of $26.1 million with a corresponding adjustment to goodwill. The measurement period adjustments are comprised of $14.6 million during the three months ended March 31, 2020 and $11.5 million during the three months ended June 30, 2020. (2) Includes an insurance license valued at $3.1 million and a non-compete agreement valued at $0.3 million. (3) Calculated as 1,974,677 Common Units not owned by GWG Holdings at December 31, 2019, multiplied by the $15 per unit derived from the enterprise valuation of Beneficient on that date. Also includes $151.8 million of equity-based payment awards that were granted by Beneficient prior to the change in control but were not replaced by awards of GWG Holdings upon the change in control. These awards were treated as noncontrolling interests in accordance with ASC 805, Business Combinations . (4) Calculated as 41,505,279 Common Units owned by GWG Holdings prior to the change in control multiplied by the $15 per unit derived from the enterprise valuation of Beneficient. |
Pro Forma Financial Information | The following unaudited pro forma financial information presents the combined results of operations of GWG Holdings for the three and nine months ended September 30, 2019, as if the acquisition of Ben LP had occurred as of January 1, 2019 (in thousands, except per share data): Three Months Ended September 30, 2019 Nine Months Ended September 30, 2019 Total Revenue Pro forma $ 36,532 $ 123,242 As reported 22,211 71,439 Net Loss Attributable to Common Shareholders Pro forma $ (26,761) $ (66,564) As reported (24,635) (69,154) Net Loss per Diluted Common Share Pro forma $ (0.81) $ (2.02) As reported (0.75) (2.09) |
Investment in Life Insurance _2
Investment in Life Insurance Policies (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Investments, All Other Investments [Abstract] | |
Schedule of life insurance portfolio | Our portfolio of life insurance policies, owned by our subsidiaries as of September 30, 2020, is summarized below: Life Insurance Portfolio Summary Total life insurance portfolio face value of policy benefits (in thousands) $ 1,921,067 Average face value per policy (in thousands) $ 1,777 Average face value per insured life (in thousands) $ 1,913 Weighted average age of insured (years) 82.9 Weighted average life expectancy estimate (years) 6.9 Total number of policies 1,081 Number of unique lives 1,004 Demographics 74% Male; 26% Female Number of smokers 43 Largest policy as % of total portfolio face value 0.7 % Average policy as % of total portfolio face value 0.1 % Average annual premium as % of face value 3.7 % |
Summary of policies organized by estimated life expectancy rates | A summary of our policies organized according to their estimated life expectancy dates, grouped by year, as of the reporting date, is as follows (dollars in thousands): As of September 30, 2020 As of December 31, 2019 Years Ending December 31, Number of Policies Estimated Fair Value Face Value Number of Policies Estimated Fair Value Face Value Three months ending December 31, 2020 3 $ 3,351 $ 3,375 8 $ 5,869 $ 6,342 2021 25 24,270 28,848 55 62,061 79,879 2022 66 67,724 93,448 90 89,074 138,723 2023 114 114,510 184,202 128 123,352 222,369 2024 118 126,943 228,041 109 103,111 217,053 2025 111 86,759 194,267 113 74,223 171,961 Thereafter 644 363,703 1,188,886 648 338,349 1,184,646 Totals 1,081 $ 787,260 $ 1,921,067 1,151 $ 796,039 $ 2,020,973 |
Schedule of reconciliation of gain (loss) on life insurance policies | A reconciliation of gain (loss) on life insurance policies is as follows (in thousands): Three Months Ended Nine Months Ended 2020 2019 2020 2019 Change in estimated probabilistic cash flows (1) $ 14,723 $ 17,908 $ 47,923 $ 52,161 Unrealized gain on acquisitions (2) — 472 — 6,775 Premiums and other annual fees (18,235) (17,219) (53,060) (49,055) Face value of matured policies 39,803 27,470 105,194 80,927 Fair value of matured policies (22,169) (10,839) (56,702) (31,590) Gain on life insurance policies, net $ 14,122 $ 17,792 $ 43,355 $ 59,218 ___________________________________________ (1) Change in fair value of expected future cash flows relating to our investment in life insurance policies 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. There were no policy acquisitions during the three or nine months ended September 30, 2020. |
Schedule of estimate that premium payments and servicing fees required to maintain our current portfolio of life insurance policies | Estimated premium payments and servicing fees required to maintain our current portfolio of life insurance policies in force for the next five years, assuming no mortalities, are as follows (in thousands): Years Ending December 31, Premiums Servicing Total Three months ending December 31, 2020 $ 13,088 $ 405 $ 13,493 2021 78,959 1,620 80,579 2022 91,220 1,620 92,840 2023 102,859 1,620 104,479 2024 112,033 1,620 113,653 2025 124,556 1,620 126,176 $ 522,715 $ 8,505 $ 531,220 |
Loans Receivable (Tables)
Loans Receivable (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Receivables [Abstract] | |
Schedule of carrying value of loans receivable | Components of the carrying value of loans receivable were as follows for the periods presented below (in thousands): September 30, 2020 December 31, 2019 Loans receivable, net of discount $ 229,961 $ 232,344 Allowance for loan losses (2,914) — Loans receivable, net $ 227,047 $ 232,344 The following table reflects the outstanding principal balance and carrying amounts of the non-PCI loans (in thousands): September 30, 2020 December 31, 2019 Carrying Value Unpaid Balance Carrying Value Unpaid Balance Loans receivable $ 93,625 $ 140,997 $ 86,436 $ 129,304 The following table reflects the outstanding principal balance and carrying amounts of the PCI loans (in thousands): September 30, 2020 December 31, 2019 Carrying Value Unpaid Balance Carrying Value Unpaid Balance Loans receivable $ 133,422 $ 319,607 $ 145,908 $ 296,627 |
Fair value of loans | The following table reflects the fair value of non-PCI and PCI loans as of December 31, 2019, the date of the change-of control (in thousands): Fair value of non-PCI loans $ 86,436 Fair value of PCI loans $ 145,908 |
Schedule of rollforward of the accretable yield | The following table presents a rollforward of the accretable yield for the three and nine months ended September 30, 2020 (in thousands): Three Months Ended Nine Months Ended Balance, beginning of period $ 66,383 $ 89,647 Accretion (7,899) (22,863) Decrease in accretable yield (a) — (8,300) Balance, end of period $ 58,484 $ 58,484 ___________________________________________ (a) Includes changes in the accretable yield due to both transfers from the nonaccretable difference and the impact of changes in the expected timing of cash flows. |
Changes in the allowance for loan losses | The changes in the allowance for loan losses for the three and nine months ended September 30, 2020 are as follows (in thousands): Three Months Ended Nine Months Ended Beginning balance $ 7,900 $ — (Recapture) provision (4,986) 2,914 Charge-offs and other, net — — Ending balance $ 2,914 $ 2,914 |
Fair Value Definition and Hie_2
Fair Value Definition and Hierarchy (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Fair Value Disclosures [Abstract] | |
Financial assets and liabilities carried at fair value on a recurring basis | The Company’s financial assets and liabilities carried at fair value on a recurring basis, including the level in the fair value hierarchy, on September 30, 2020 and December 31, 2019 are presented below (in thousands). As of September 30, 2020 Level 1 Level 2 Level 3 Total Assets: Investments in put options $ 11,584 $ — $ — $ 11,584 Investments in life insurance policies — — 787,260 787,260 As of December 31, 2019 Level 1 Level 2 Level 3 Total Assets: Investments in life insurance policies $ — $ — $ 796,039 $ 796,039 |
Reconciliation of level 3 investments | The following table reconciles the beginning and ending fair value of our Level 3 investments in our portfolio of life insurance policies (in thousands): Three Months Ended Nine Months Ended 2020 2019 2020 2019 Beginning balance $ 794,706 $ 799,266 $ 796,039 $ 747,922 Total gain in earnings (1) 6,021 14,181 23,476 48,031 Purchases — 711 — 32,250 Settlements (2) (13,467) (6,640) (32,255) (20,685) Transfers into Level 3 — — — — Transfers out of Level 3 — — — — Ending balance $ 787,260 $ 807,518 $ 787,260 $ 807,518 _________________________________________ (1) Net change in fair value (2) Policy maturities at initial cost basis |
Quantitative information about the significant unobservable inputs | The following table provides quantitative information about the significant unobservable inputs used in the fair value measurement of the Company’s Level 3 fair value assets: As of September 30, 2020 As of December 31, 2019 Weighted-average age of insured, years* 82.9 82.4 Age of insured range, years 63-100 62-101 Weighted-average life expectancy, months* 82.8 86.2 Life expectancy range, months 0-240 0-240 Average face amount per policy (in thousands) $ 1,777 $ 1,756 Discount rate 8.25 % 8.25 % _______________________________ (*) Weighted-average by face amount of policy benefits |
Concentration of risk - change in life expectancy estimates | Life expectancy estimates and market discount rates for a portfolio of life insurance policies are inherently uncertain and the effect of changes in estimates may be significant. For example, if the life expectancy estimates were increased or decreased by four and eight months on each outstanding policy, and the discount rates were increased or decreased by 1% and 2%, with all other variables held constant, the fair value of our investment in life insurance policies would increase or decrease as summarized below (in thousands): Change in Life Expectancy Estimates Minus Minus Plus Plus September 30, 2020 $ 98,909 $ 46,028 $ (62,483) $ (115,452) December 31, 2019 $ 113,812 $ 57,753 $ (55,905) $ (111,340) Change in Discount Rate Minus 2% Minus 1% Plus 1% Plus 2% September 30, 2020 $ 84,613 $ 40,314 $ (36,802) $ (70,497) December 31, 2019 $ 91,890 $ 43,713 $ (39,790) $ (76,118) |
Schedule of carrying amounts and estimated fair values of the Company's financial instruments | The carrying amounts and estimated fair values of the Company’s financial instruments not recorded at fair value were as noted in the tables below (in thousands). As of September 30, 2020 Level in Fair Value Hierarchy Carrying Amount Estimated Fair Value Financial assets: Cash, cash equivalents and restricted cash 1 $ 109,756 $ 109,756 Life insurance policy benefits receivable, net 1 36,418 36,418 Loans receivable, net of allowance for loan losses and discount 3 227,047 257,764 Fees receivable 1 31,571 31,571 Financial liabilities: Senior credit facility 2 $ 203,907 $ 213,117 L Bonds and Seller Trust L bonds 2 1,521,411 1,638,227 Other borrowings 2 100,178 101,368 Other liabilities 1 57,056 57,056 As of December 31, 2019 Level in Fair Value Hierarchy Carrying Amount Estimated Fair Value Financial assets: Cash, cash equivalents and restricted cash 1 $ 99,331 $ 99,331 Life insurance policy benefits receivable, net 1 23,031 23,031 Loans receivable, net of allowance for loan losses and discount 3 232,344 232,344 Fees receivable 1 29,168 29,168 Financing receivables from affiliates 2 67,153 59,608 Financial liabilities: Senior credit facility with LNV Corporation 2 $ 174,390 $ 184,587 L Bonds and Seller Trust L Bonds 2 1,293,530 1,390,288 Other borrowings 2 153,086 153,086 Other liabilities 1 44,352 44,352 |
Equity Method Investments (Tabl
Equity Method Investments (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Equity Method Investments and Joint Ventures [Abstract] | |
Rollforward of equity method investment | The following table includes a rollforward of the equity method investment in FOXO (in thousands): Three Months Ended Nine Months Ended Beginning balance $ 7,773 $ 1,761 Contributions 3,884 13,051 Loss on equity method investment (1,431) (4,279) Other 10 (297) Ending balance $ 10,236 $ 10,236 |
Schedule of financial information pertaining to Company | Pre-consolidation financial information after the elimination of any intercompany transactions pertaining to Beneficient is summarized in the table below (in thousands): Three Months Ended June 30, 2019 Nine Months Ended June 30, 2019 Total revenues $ 28,151 $ 69,262 Net loss 9,696 (36,345) Net gain (loss) attributable to Ben LP common unitholders 1,080 (11,439) GWG portion of net earnings (loss) 956 (1) (371) (2) _____________________________________________ 1. Our portion of Beneficient’s net earnings (loss) from March 31, 2019 to June 30, 2019. This amount was recognized during the three months ended September 30, 2019. 2. Our portion of Beneficient's net earnings (loss) from October 1, 2018 to June 30, 2019. This amount was recognized during the nine months ended September 30, 2019. |
Variable Interest Entities (Tab
Variable Interest Entities (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Variable Interest Entities | The following table shows the classification, carrying value and maximum exposure to loss with respect to the Company’s unconsolidated VIEs (in thousands): September 30, 2020 December 31, 2019 Carrying Value Maximum Exposure to Loss Carrying Value Maximum Exposure to Loss Loans receivable $ 227,047 $ 293,847 $ 232,344 $ 335,255 Financing receivables from affiliates — — 67,153 67,153 Equity method investment 10,236 15,236 1,761 19,661 Accounts payable and accrued expenses (2,583) — (2,515) — Total $ 234,700 $ 309,083 $ 298,743 $ 422,069 |
Debt (Tables)
Debt (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Debt Disclosure [Abstract] | |
Other borrowings | As of September 30, 2020 and December 31, 2019, Beneficient had borrowings that consisted of the following (in thousands): September 30, 2020 December 31, 2019 First Lien Credit Agreement $ 27,373 $ 77,477 Second Lien Credit Agreement 72,245 72,184 Other borrowings 2,606 2,538 Unamortized debt premiums (discounts) (2,046) 887 Total Other Borrowings $ 100,178 $ 153,086 |
Stockholders' Equity (Tables)
Stockholders' Equity (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Equity [Abstract] | |
Stock repurchase program | The following table includes information about the stock repurchase program for the nine months ended September 30, 2019 (dollar amounts in thousands, except per share data): 2019 Monthly Period Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of the Program Maximum Dollar Value of Shares that Remained Under the Program January 2019 42,488 $ 8.47 52,523 $ 1,072 February 2019 202 8.88 52,725 1,070 (1) No stock was repurchased after February 2019, and the stock repurchase program expired on April 30, 2019. |
Equity-Based Compensation (Tabl
Equity-Based Compensation (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Share-based Payment Arrangement [Abstract] | |
Summary of award activity | The following table summarizes the award activity, in number of units, for each plan during the nine months ended September 30, 2020: Balance at December 31, 2019 Granted Vested Exercised Forfeited Recovery of Vested Awards Balance at September 30, 2020 Vested Stock Options 673,341 — 84,018 (20,136) (109,671) — 627,552 SAR 200,745 18,556 45,529 (1,284) (4,541) — 259,005 RSU — — 57,183 — — — 57,183 BMP Equity Units 7,980,037 4,580,888 496,142 — (31,618) (1,963,969) 11,061,480 REUs 2,164,742 3,033,956 341,223 — (14,000) (507,500) 5,018,421 Unvested Stock Options 232,040 — (84,018) — (66,625) — 81,397 SAR 174,880 125,269 (45,529) — (27,067) — 227,553 RSU 244,083 — (57,183) — (57,183) — 129,717 BMP Equity Units 180,000 2,963,800 (496,142) — (347,599) — 2,300,059 REUs 246,500 2,682,072 (341,223) — (282,400) — 2,304,949 Total Stock Options 905,381 — — (20,136) (176,296) — 708,949 SAR 375,625 143,825 — (1,284) (31,608) — 486,558 RSU 244,083 — — — (57,183) — 186,900 BMP Equity Units 8,160,037 7,544,688 — — (379,217) (1,963,969) 13,361,539 REUs 2,411,242 5,716,028 — — (296,400) (507,500) 7,323,370 |
Components of equity-based compensation expense | The following table presents the components of equity-based compensation expense recognized in the condensed consolidated statement of operations (in thousands): Three Months Ended Nine Months Ended 2020 2019 2020 2019 Stock options $ 53 $ 74 $ 140 $ 319 Stock appreciation rights 282 327 171 323 Restricted stock units — 263 (38) 687 BMP equity units 12,392 — 51,515 — REUs 10,831 — 44,830 — Total equity-based compensation $ 23,558 $ 664 $ 96,618 $ 1,329 |
Schedule of equity-based compensation expense vesting of award outstanding | The following table presents the equity-based compensation expense expected to be recognized over the next five years based on scheduled vesting of awards outstanding, excluding the award subject to the performance condition discussed above, as of September 30, 2020 (in thousands): Stock Options SAR REUs BMP Equity Units Total Three months ending 2020 $ 42 $ 55 $ 1,947 $ 2,012 $ 4,056 2021 109 200 7,818 7,982 16,109 2022 19 153 5,729 5,851 11,752 2023 — 56 2,889 2,517 5,462 2024 — — 567 396 963 Total $ 170 $ 464 $ 18,950 $ 18,758 $ 38,342 |
Loss per Common Share (Tables)
Loss per Common Share (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Earnings Per Share [Abstract] | |
Schedule of basic and diluted income (loss) per share | The computations of basic and diluted income (loss) attributable to common shareholders per share for the three and nine months ended September 30, 2020 and 2019 are as follows (in thousands, except share data and per share data): Three Months Ended Nine Months Ended 2020 2019 2020 2019 Numerator: Net loss attributable to common shareholders $ (68,149) $ (24,635) $ (135,669) $ (69,154) Denominator: Basic – weighted average common shares outstanding 30,584,719 33,033,420 30,552,233 33,010,100 Effect of dilutive securities — — — — Diluted – weighted average common shares outstanding 30,584,719 33,033,420 30,552,233 33,010,100 Basic loss per common share $ (2.23) $ (0.75) $ (4.44) $ (2.09) Diluted loss per common share $ (2.23) $ (0.75) $ (4.44) $ (2.09) |
Segment Reporting (Tables)
Segment Reporting (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Segment Reporting [Abstract] | |
Segment information | Three Months Ended Nine Months Ended Revenue: 2020 2019 2020 2019 Secondary Life Insurance $ 14,422 $ 18,238 $ 44,800 $ 61,199 Beneficient 14,091 3,709 86,042 9,723 Corporate & Other — 264 17 517 Total $ 28,513 $ 22,211 $ 130,859 $ 71,439 Three Months Ended Nine Months Ended Interest Expense: 2020 2019 2020 2019 Secondary Life Insurance $ 24,983 $ 21,410 $ 72,022 $ 63,114 Beneficient 15,809 6,880 41,783 20,638 Corporate & Other — — — — Total $ 40,792 $ 28,290 $ 113,805 $ 83,752 Three Months Ended Nine Months Ended Interest Income: 2020 2019 2020 2019 Secondary Life Insurance $ 209 $ 226 $ 1,056 $ 1,594 Beneficient 12,719 3,709 38,532 9,678 Corporate & Other — — — 4 Total $ 12,928 $ 3,935 $ 39,588 $ 11,276 Three Months Ended Nine Months Ended Segment EBT: 2020 2019 2020 2019 Secondary Life Insurance $ (12,147) $ (9,169) $ (39,314) $ (19,792) Beneficient (33,819) (2,214) (86,347) (11,286) Corporate & Other (8,915) (9,020) (22,492) (25,270) Total (54,881) (20,403) (148,153) (56,348) Income tax benefit 22,444 — (613) — Net income (loss) $ (77,325) $ (20,403) $ (147,540) $ (56,348) Total Assets: September 30, 2020 December 31, 2019 Secondary Life Insurance $ 907,197 $ 904,363 Beneficient 2,675,370 2,721,546 Corporate & Other 47,107 9,297 Total $ 3,629,674 $ 3,635,206 |
Concentration (Tables)
Concentration (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Risks and Uncertainties [Abstract] | |
Schedules of Concentration of Risk, by Risk Factor | The following summarizes the aggregate face value of insurance policies with individual life insurance companies exceeding 10% of the total face value of our portfolio. Life Insurance Company September 30, 2020 December 31, 2019 John Hancock Life Insurance Company 14.66 % 14.23 % The Lincoln National Life Insurance Company 11.23 % 11.55 % AXA Equitable Life Insurance Company 10.72 % 10.63 % |
Schedule of the number of insurance contracts | The following summarizes the number of insureds’ state of residence exceeding 10% of the total face value of our portfolio: State of Residence September 30, 2020 December 31, 2019 California 17.95 % 17.46 % Florida 14.99 % 14.86 % Loans Receivable |
Nature of Business (Details)
Nature of Business (Details) | Jul. 15, 2020USD ($)day$ / shares | Dec. 31, 2019USD ($)shares | Jun. 12, 2019shares | Dec. 28, 2018USD ($)extensionTerm$ / sharesshares | Aug. 10, 2018USD ($)$ / sharesshares | Apr. 15, 2019shares | Sep. 30, 2014shares | Sep. 30, 2020USD ($)shares | Sep. 30, 2020USD ($)dayshares | Sep. 30, 2019shares | Dec. 31, 2018shares | Aug. 11, 2020USD ($)$ / shares | Nov. 11, 2019 |
Debt Instrument [Line Items] | |||||||||||||
Financing receivables from affiliates | $ | $ 67,153,000 | $ 0 | $ 0 | ||||||||||
Investment, assumed value (in usd per share) | $ / shares | $ 10 | ||||||||||||
Average closing price (in usd per share) | $ / shares | $ 12.50 | ||||||||||||
Shares acquired (in shares) | shares | 666,667 | ||||||||||||
GWG common shares transferred (in shares) | shares | 3,952,155 | ||||||||||||
Consideration transferred | $ | $ 79,000,000 | ||||||||||||
Change of control event, ownership threshold | 25.00% | 25.00% | 25.00% | ||||||||||
Convertible units, automatic exchange, number of trading days | day | 20 | ||||||||||||
Convertible units, automatic exchange, unit price (in usd per share) | $ / shares | $ 12.75 | ||||||||||||
Convertible units, automatic exchange, minimum required capital account if all units not converted | $ | $ 10,000,000 | ||||||||||||
Ben LP | |||||||||||||
Debt Instrument [Line Items] | |||||||||||||
Convertible units, automatic exchange, number of trading days | day | 20 | ||||||||||||
Common Stock | |||||||||||||
Debt Instrument [Line Items] | |||||||||||||
Issuance of stock (in shares) | shares | 27,013,516 | 800,000 | 57,183 | 60,871 | 58,009 | ||||||||
Common stock issued upon conversion of preferred stock (in shares) | shares | 5,000,000 | ||||||||||||
Ben LP | |||||||||||||
Debt Instrument [Line Items] | |||||||||||||
Ownership interest | 89.90% | ||||||||||||
Investment (in shares) | shares | 40,505,279 | 4,032,349 | |||||||||||
Investment owned | $ | 319,000,000 | $ 57,500,000 | |||||||||||
Shares acquired (in shares) | shares | 1,000,000 | 40,505,279 | |||||||||||
Ben LP | Merger Consideration | |||||||||||||
Debt Instrument [Line Items] | |||||||||||||
Investment (in shares) | shares | 21,650,087 | ||||||||||||
Ben LP | Exchange of Exchangeable Note | |||||||||||||
Debt Instrument [Line Items] | |||||||||||||
Investment (in shares) | shares | 14,822,843 | ||||||||||||
Affiliated Entity | Ben LP | Commercial Loan | |||||||||||||
Debt Instrument [Line Items] | |||||||||||||
Financing receivables from affiliates | $ | $ 182,000,000 | $ 200,000,000 | |||||||||||
Notes and interest receivable | $ | $ 192,500,000 | ||||||||||||
Commercial loan, number of extensions | extensionTerm | 2 | ||||||||||||
Commercial loan, term | 5 years | ||||||||||||
Commercial loan, interest rate | 5.00% | ||||||||||||
Commercial loan, interest rate, due and payable monthly | 0.025 | ||||||||||||
Commercial loan, interest rate, due at maturity | 0.025 | ||||||||||||
Affiliated Entity | Ben LP | Exchangeable Note | |||||||||||||
Debt Instrument [Line Items] | |||||||||||||
Financing receivables from affiliates | $ | $ 148,200,000 | $ 162,900,000 | |||||||||||
Seller Trusts and Beneficient | |||||||||||||
Debt Instrument [Line Items] | |||||||||||||
Ownership interest | 89.90% | ||||||||||||
Shares acquired (in shares) | shares | 40,505,279 | ||||||||||||
InsurTech Holdings, LLC [Member] | |||||||||||||
Debt Instrument [Line Items] | |||||||||||||
Ownership interest | 100.00% | ||||||||||||
Series B Convertible Preferred Stock | |||||||||||||
Debt Instrument [Line Items] | |||||||||||||
Issuance of stock (in shares) | shares | 5,000,000 | ||||||||||||
Preferred stock, par value (in usd per share) | $ / shares | $ 0.001 | ||||||||||||
Preferred stock, liquidation preference per share (in usd per share) | $ / shares | $ 10 | ||||||||||||
Cash consideration | $ | $ 50,000,000 | ||||||||||||
Common stock issued upon conversion of preferred stock (in shares) | shares | 5,000,000 | ||||||||||||
Conversion price (in usd per share) | $ / shares | $ 10 | ||||||||||||
Series A Preferred Stock | Ben LP | |||||||||||||
Debt Instrument [Line Items] | |||||||||||||
Member capital | $ | $ 1,600,000,000 | ||||||||||||
Seller Trust L Bonds due 2023 | |||||||||||||
Debt Instrument [Line Items] | |||||||||||||
Principal amount | $ | $ 366,900,000 | $ 403,200,000 | |||||||||||
Interest received | $ | $ 800,000 | ||||||||||||
Debt, weighted average interest rate | 7.50% |
Restrictions on Cash (Details)
Restrictions on Cash (Details) - USD ($) $ in Millions | Sep. 30, 2020 | Dec. 31, 2019 |
Cash and Cash Equivalents [Abstract] | ||
Restricted cash collection and payment accounts | $ 16 | $ 20.3 |
Business Combination - Addition
Business Combination - Additional Information (Details) - USD ($) $ / shares in Units, $ in Thousands | Jun. 30, 2020 | Dec. 31, 2019 | Sep. 30, 2020 | Jun. 30, 2020 | Mar. 31, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 |
Business Acquisition [Line Items] | ||||||||
Consideration transferred | $ 79,000 | |||||||
Additional common units issued | 666,667 | |||||||
Decrease to loans receivable | $ 26,100 | |||||||
Equity-based payment awards | $ 23,558 | $ 664 | $ 96,618 | $ 1,329 | ||||
Ben LP | ||||||||
Business Acquisition [Line Items] | ||||||||
Common units held prior to acquisition (in shares) | 41,505,279 | |||||||
Ownership percentage prior to acquisition | 90.20% | |||||||
Consideration transferred | $ 79,000 | |||||||
Additional common units issued | 666,667 | |||||||
Ownership percentage after acquisition | 95.50% | |||||||
Carrying value of investment prior to acquisition | $ 368,600 | |||||||
Fair value of investment prior to acquisition | $ 622,503 | 622,503 | ||||||
Remeasurement gain | 253,900 | |||||||
Remeasurement loss | 4,200 | |||||||
Remeasurement gain, net | 249,700 | |||||||
Decrease to loans receivable | $ 11,500 | $ 14,600 | $ 26,100 | |||||
Indefinite-lived intangible assets | 3,100 | |||||||
Finite-lived intangible assets | $ 300 | |||||||
Common units not owned by GWG Holdings (in shares) | 1,974,677 | |||||||
Enterprise valuation (in usd per share) | $ 15 | |||||||
Equity-based payment awards | $ 151,800 | |||||||
Common units owned by GWG Holdings (in shares) | 41,505,279 |
Business Combination - Fair Val
Business Combination - Fair Value Measurement of Assets Acquired and Liabilities Assumed (Details) - USD ($) $ in Thousands | Jun. 30, 2020 | Dec. 31, 2019 | Sep. 30, 2020 | Sep. 30, 2019 |
ACQUISITION CONSIDERATION | ||||
Goodwill | $ 2,358,005 | $ 2,384,121 | ||
Measurement Period Adjustments | ||||
Loans receivable | 26,116 | $ 0 | ||
Ben LP | ||||
ASSETS | ||||
Loans receivable | 232,344 | 206,228 | ||
Fees receivable | 29,168 | 29,168 | ||
Investment in public equity securities | 24,550 | 24,550 | ||
Other assets | 14,053 | 14,053 | ||
Intangible assets | 3,449 | 3,449 | ||
Total identifiable assets acquired | 303,564 | 277,448 | ||
LIABILITIES | ||||
Other borrowings | 153,086 | 153,086 | ||
Commercial loan agreement from parent | 168,420 | 168,420 | ||
Other liabilities and deferred revenue | 105,866 | 105,866 | ||
Accounts payable and accrued expenses | 13,713 | 13,713 | ||
Total liabilities assumed | 441,085 | 441,085 | ||
Net liabilities assumed | (137,521) | (163,637) | ||
NONCONTROLLING INTERESTS | ||||
Common Units not owned by GWG Holdings | 181,383 | 181,383 | ||
Class S Ordinary Units | 85,448 | 85,448 | ||
Class S Preferred Units | 17 | 17 | ||
Preferred Series A Subclass 1 Unit Accounts | 1,269,654 | 1,269,654 | ||
Total noncontrolling interests | 1,536,502 | 1,536,502 | ||
ACQUISITION CONSIDERATION | ||||
Cash, less cash acquired | $ 61,479 | 61,479 | ||
Fair value of preexisting investment in Common Units | 622,503 | 622,503 | ||
Fair value of noncontrolling interest | 1,536,502 | 1,536,502 | ||
Total estimated consideration | $ 2,220,484 | 2,220,484 | ||
Less: Net liabilities assumed | (137,521) | (163,637) | ||
Goodwill | $ 2,358,005 | 2,384,121 | ||
Measurement Period Adjustments | ||||
Loans receivable | (26,116) | |||
Total identifiable assets acquired | (26,116) | |||
Net liabilities assumed | (26,116) | |||
Less: Net liabilities assumed | (26,116) | |||
Resulting preliminary goodwill | $ 26,116 |
Business Combination - Pro Form
Business Combination - Pro Forma Financial Information (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
Total Revenue | ||||
Pro forma | $ 36,532 | $ 123,242 | ||
As reported | $ 28,513 | 22,211 | $ 130,859 | 71,439 |
Net Loss Attributable to Common Shareholders | ||||
Pro forma | (26,761) | (66,564) | ||
As reported | $ (68,149) | $ (24,635) | $ (135,669) | $ (69,154) |
Net Loss per Diluted Common Share | ||||
Pro forma (in usd per share) | $ (0.81) | $ (2.02) | ||
As reported (in usd per share) | $ (2.23) | $ (0.75) | $ (4.44) | $ (2.09) |
Investment in Life Insurance _3
Investment in Life Insurance Policies - Portfolio Information (Details) $ in Thousands | 9 Months Ended | |
Sep. 30, 2020USD ($)smokerlifepolicy | Dec. 31, 2019USD ($)policy | |
Investments, All Other Investments [Abstract] | ||
Total life insurance portfolio face value of policy benefits | $ 1,921,067 | $ 2,020,973 |
Average face value per policy | 1,777 | |
Average face value per insured life | $ 1,913 | |
Weighted average age of insured | 82 years 10 months 24 days | |
Weighted average life expectancy estimate | 6 years 10 months 24 days | |
Total number of policies | policy | 1,081 | 1,151 |
Number of unique lives | life | 1,004 | |
Demographics, percent male | 74.00% | |
Demographics, percent female | 26.00% | |
Number of smokers | smoker | 43 | |
Largest policy as % of total portfolio face value | 0.70% | |
Average policy as % of total portfolio face value | 0.10% | |
Average annual premium as % of face value | 3.70% |
Investment in Life Insurance _4
Investment in Life Insurance Policies - Summary of Policies by Estimated Life Expectancy (Details) $ in Thousands | Sep. 30, 2020USD ($)policy | Dec. 31, 2019USD ($)policy |
Number of Policies | ||
Three months ending December 31, 2020 | policy | 3 | 8 |
2021 | policy | 25 | 55 |
2022 | policy | 66 | 90 |
2023 | policy | 114 | 128 |
2024 | policy | 118 | 109 |
2025 | policy | 111 | 113 |
Thereafter | policy | 644 | 648 |
Totals | policy | 1,081 | 1,151 |
Estimated Fair Value | ||
Three months ending December 31, 2020 | $ 3,351 | $ 5,869 |
2021 | 24,270 | 62,061 |
2022 | 67,724 | 89,074 |
2023 | 114,510 | 123,352 |
2024 | 126,943 | 103,111 |
2025 | 86,759 | 74,223 |
Thereafter | 363,703 | 338,349 |
Totals | 787,260 | 796,039 |
Face Value | ||
Three months ending December 31, 2020 | 3,375 | 6,342 |
2021 | 28,848 | 79,879 |
2022 | 93,448 | 138,723 |
2023 | 184,202 | 222,369 |
2024 | 228,041 | 217,053 |
2025 | 194,267 | 171,961 |
Thereafter | 1,188,886 | 1,184,646 |
Totals | $ 1,921,067 | $ 2,020,973 |
Investment in Life Insurance _5
Investment in Life Insurance Policies - Reconciliation of Gain (Loss) (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
Life Settlement Contracts, Fair Value Method, Gain (Loss) [Abstract] | ||||
Change in estimated probabilistic cash flows | $ 14,723 | $ 17,908 | $ 47,923 | $ 52,161 |
Unrealized gain on acquisitions | 0 | 472 | 0 | 6,775 |
Premiums and other annual fees | (18,235) | (17,219) | (53,060) | (49,055) |
Face value of matured policies | 39,803 | 27,470 | 105,194 | 80,927 |
Fair value of matured policies | (22,169) | (10,839) | (56,702) | (31,590) |
Gain on life insurance policies, net | $ 14,122 | $ 17,792 | $ 43,355 | $ 59,218 |
Investment in Life Insurance _6
Investment in Life Insurance Policies - Estimated Future Premium Payments and Servicing Fees (Details) $ in Thousands | Sep. 30, 2020USD ($) |
Premiums | |
Life Settlement Contracts, Investment Method, Premiums to be Paid, Fiscal Year Maturity [Abstract] | |
Three months ending December 31, 2020 | $ 13,088 |
2021 | 78,959 |
2022 | 91,220 |
2023 | 102,859 |
2024 | 112,033 |
2025 | 124,556 |
Total | 522,715 |
Servicing | |
Life Settlement Contracts, Investment Method, Premiums to be Paid, Fiscal Year Maturity [Abstract] | |
Three months ending December 31, 2020 | 405 |
2021 | 1,620 |
2022 | 1,620 |
2023 | 1,620 |
2024 | 1,620 |
2025 | 1,620 |
Total | 8,505 |
Total | |
Life Settlement Contracts, Investment Method, Premiums to be Paid, Fiscal Year Maturity [Abstract] | |
Three months ending December 31, 2020 | 13,493 |
2021 | 80,579 |
2022 | 92,840 |
2023 | 104,479 |
2024 | 113,653 |
2025 | 126,176 |
Total | $ 531,220 |
Investment in Life Insurance _7
Investment in Life Insurance Policies - Additional Information (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | Dec. 31, 2019 | |
Fair Value Measurement Inputs and Valuation Techniques [Line Items] | |||||
Benefits recognized from insurance policies | $ 39.8 | $ 27.5 | $ 105.2 | $ 80.9 | |
Carrying value of life insurance policies | 13.5 | 6.6 | 32.3 | 20.7 | |
Realized gains from life insurance policies | $ 26.3 | $ 20.8 | $ 72.9 | $ 60.2 | |
Measurement Input, Discount Rate | Valuation Technique, Discounted Cash Flow | |||||
Fair Value Measurement Inputs and Valuation Techniques [Line Items] | |||||
Discount rate applied to portfolio | 8.25% | 8.25% | 8.25% |
Loans Receivable - Components (
Loans Receivable - Components (Details) - USD ($) $ in Thousands | Sep. 30, 2020 | Jun. 30, 2020 | Dec. 31, 2019 |
Receivables [Abstract] | |||
Loans receivable, net of discount | $ 229,961 | $ 232,344 | |
Allowance for loan losses | (2,914) | $ (7,900) | 0 |
Loans receivable, net | $ 227,047 | $ 232,344 |
Loans Receivable - Fair Value (
Loans Receivable - Fair Value (Details) - USD ($) $ in Thousands | Sep. 30, 2020 | Dec. 31, 2019 |
Accounts, Notes, Loans and Financing Receivable [Line Items] | ||
Loans receivable, net | $ 227,047 | $ 232,344 |
Non-PCI loans | ||
Accounts, Notes, Loans and Financing Receivable [Line Items] | ||
Loans receivable, net | 86,436 | |
PCI loans | ||
Accounts, Notes, Loans and Financing Receivable [Line Items] | ||
Loans receivable, net | $ 145,908 |
Loans Receivable - Principal Ba
Loans Receivable - Principal Balance and Carrying Amounts (Details) - USD ($) $ in Thousands | Sep. 30, 2020 | Dec. 31, 2019 |
Accounts, Notes, Loans and Financing Receivable [Line Items] | ||
Loans receivable, unpaid balance | $ 460,600 | $ 425,900 |
Non-PCI loans | ||
Accounts, Notes, Loans and Financing Receivable [Line Items] | ||
Loans receivable, carrying value | 93,625 | 86,436 |
Loans receivable, unpaid balance | 140,997 | 129,304 |
PCI loans | ||
Accounts, Notes, Loans and Financing Receivable [Line Items] | ||
Loans receivable, carrying value | 133,422 | 145,908 |
Loans receivable, unpaid balance | $ 319,607 | $ 296,627 |
Loans Receivable - Rollforward
Loans Receivable - Rollforward of Accretable Yield (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended |
Sep. 30, 2020 | Sep. 30, 2020 | |
Certain Loans Acquired in Transfer Accounted for as Debt Securities, Accretable Yield Movement Schedule [Roll Forward] | ||
Balance, beginning of period | $ 66,383 | $ 89,647 |
Accretion | (7,899) | (22,863) |
Decrease in accretable yield | 0 | (8,300) |
Balance, end of period | $ 58,484 | $ 58,484 |
Loans Receivable - Changes in A
Loans Receivable - Changes in Allowance for Loan Losses (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
Accounts Receivable, Allowance for Credit Loss [Roll Forward] | ||||
Beginning balance | $ 7,900 | $ 0 | ||
(Recapture) provision | (4,986) | $ 0 | 2,914 | $ 0 |
Charge-offs and other, net | 0 | 0 | ||
Ending balance | $ 2,914 | $ 2,914 |
Loans Receivable - Additional I
Loans Receivable - Additional Information (Details) - USD ($) | Sep. 30, 2020 | Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | Jun. 30, 2020 | Dec. 31, 2019 | May 31, 2019 |
Accounts, Notes, Loans and Financing Receivable [Line Items] | ||||||||
Loans receivable outstanding principal balance | $ 460,600,000 | $ 460,600,000 | $ 460,600,000 | $ 425,900,000 | ||||
Inception-to-date interest income paid-in-kind | 200,600,000 | 200,600,000 | 200,600,000 | 154,700,000 | ||||
Downward measurement period adjustment to PCI loans | 26,100,000 | |||||||
Business combination, acquired receivables, gross contractual amount | 772,200,000 | |||||||
Certain loans acquired in transfer not accounted for as debt securities, acquired during period, cash flows expected to be collected at acquisition | 235,600,000 | |||||||
Allowance for loan losses | 2,914,000 | 2,914,000 | 2,914,000 | $ 7,900,000 | 0 | |||
Charge-offs and other, net | 0 | 0 | ||||||
(Recapture of) provision for loan losses | (4,986,000) | $ 0 | 2,914,000 | $ 0 | ||||
Loan amount | 0 | 0 | 0 | 67,153,000 | ||||
Increase (decrease) to equity for promissory note conversion, resulting in change in ownership | 70,565,000 | 70,565,000 | ||||||
Decrease to financing receivable from affiliates for promissory note conversion | 70,565,000 | $ 0 | ||||||
Noncontrolling Interests | ||||||||
Accounts, Notes, Loans and Financing Receivable [Line Items] | ||||||||
Increase (decrease) to equity for promissory note conversion, resulting in change in ownership | 26,300,000 | 26,291,000 | 26,291,000 | |||||
Additional Paid-in Capital | ||||||||
Accounts, Notes, Loans and Financing Receivable [Line Items] | ||||||||
Increase (decrease) to equity for promissory note conversion, resulting in change in ownership | 44,300,000 | 44,274,000 | 44,274,000 | |||||
PCI loans | ||||||||
Accounts, Notes, Loans and Financing Receivable [Line Items] | ||||||||
Loans receivable outstanding principal balance | 319,607,000 | 319,607,000 | 319,607,000 | 296,627,000 | ||||
Allowance for loan losses | 2,300,000 | 2,300,000 | 2,300,000 | |||||
Charge-offs and other, net | 0 | 0 | ||||||
(Recapture of) provision for loan losses | (5,000,000) | 2,300,000 | ||||||
LiquidTrust borrowers | Affiliated Entity | ||||||||
Accounts, Notes, Loans and Financing Receivable [Line Items] | ||||||||
Loan amount | $ 70,600,000 | $ 70,600,000 | $ 70,600,000 | $ 65,000,000 | ||||
Loan interest rate | 7.00% | 7.00% | 7.00% | |||||
Interest receivable | 2,200,000 | |||||||
Allowance for loan losses | $ 0 | |||||||
Decrease to financing receivable from affiliates for promissory note conversion | $ 70,600,000 | |||||||
LiquidTrust borrowers | Affiliated Entity | Beneficient Company Holdings Preferred C Investment | ||||||||
Accounts, Notes, Loans and Financing Receivable [Line Items] | ||||||||
Conversion of note receivable to capital | 75,000,000 | |||||||
Conversion of note receivable, additional potential capital interests | $ 5,000,000 | $ 5,000,000 | $ 5,000,000 |
Fair Value Definition and Hie_3
Fair Value Definition and Hierarchy - Assets and Liabilities at Fair Value on a Recurring Basis (Details) - USD ($) $ in Thousands | Sep. 30, 2020 | Dec. 31, 2019 |
Put Option | ||
Assets: | ||
Assets | $ 11,584 | |
Life Insurance Policy | ||
Assets: | ||
Assets | 787,260 | $ 796,039 |
Level 1 | Put Option | ||
Assets: | ||
Assets | 11,584 | |
Level 1 | Life Insurance Policy | ||
Assets: | ||
Assets | 0 | 0 |
Level 2 | Put Option | ||
Assets: | ||
Assets | 0 | |
Level 2 | Life Insurance Policy | ||
Assets: | ||
Assets | 0 | 0 |
Level 3 | Put Option | ||
Assets: | ||
Assets | 0 | |
Level 3 | Life Insurance Policy | ||
Assets: | ||
Assets | $ 787,260 | $ 796,039 |
Fair Value Definition and Hie_4
Fair Value Definition and Hierarchy - Additional Information (Details) - USD ($) | Jul. 17, 2020 | Sep. 30, 2020 | Sep. 30, 2019 |
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | |||
Aggregate payments to purchase put options | $ 14,775,000 | $ 0 | |
Put Option | |||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | |||
Aggregate payments to purchase put options | $ 14,800,000 | ||
Notional amount of put options | $ 300,000,000 |
Fair Value Definition and Hie_5
Fair Value Definition and Hierarchy - Reconciliation of Level 3 Investments (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
Schedule of reconciliation of investments in life insurance policies | ||||
Beginning balance | $ 794,706 | $ 799,266 | $ 796,039 | $ 747,922 |
Total gain in earnings | 6,021 | 14,181 | 23,476 | 48,031 |
Purchases | 0 | 711 | 0 | 32,250 |
Settlements | (13,467) | (6,640) | (32,255) | (20,685) |
Transfers into Level 3 | 0 | 0 | 0 | 0 |
Transfers out of Level 3 | 0 | 0 | 0 | 0 |
Ending balance | $ 787,260 | $ 807,518 | $ 787,260 | $ 807,518 |
Fair Value Definition and Hie_6
Fair Value Definition and Hierarchy - Quantitative Information about Unobservable Inputs (Details) - Life Insurance Policies - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | 12 Months Ended |
Mar. 31, 2020 | Sep. 30, 2020 | Dec. 31, 2019 | |
Fair value of our portfolio of life insurance policies | |||
Weighted-average age of insured, years | 82 years 10 months 24 days | 82 years 4 months 24 days | |
Weighted-average life expectancy, months | 7 years 2 months 6 days | 6 years 10 months 24 days | |
Average face amount per policy | $ 1,777 | $ 1,756 | |
Discount rate | 8.25% | 8.25% | |
Minimum | |||
Fair value of our portfolio of life insurance policies | |||
Age of insured range, years | 63 years | 62 years | |
Life expectancy range, months | 0 months | 0 months | |
Maximum | |||
Fair value of our portfolio of life insurance policies | |||
Age of insured range, years | 100 years | 101 years | |
Life expectancy range, months | 240 months | 240 months |
Fair Value Definition and Hie_7
Fair Value Definition and Hierarchy - Effect of Changes of Estimates on Fair Value (Details) - USD ($) $ in Thousands | Sep. 30, 2020 | Dec. 31, 2019 |
Change in Discount Rate | Minus 2% | ||
Summary of change in fair value of the investment in life insurance policies | ||
Change in fair value of the investment in life insurance policies | $ 84,613 | $ 91,890 |
Change in Discount Rate | Minus 1% | ||
Summary of change in fair value of the investment in life insurance policies | ||
Change in fair value of the investment in life insurance policies | 40,314 | 43,713 |
Change in Discount Rate | Plus 1% | ||
Summary of change in fair value of the investment in life insurance policies | ||
Change in fair value of the investment in life insurance policies | (36,802) | (39,790) |
Change in Discount Rate | Plus 2% | ||
Summary of change in fair value of the investment in life insurance policies | ||
Change in fair value of the investment in life insurance policies | (70,497) | (76,118) |
Minus 8 months | Change in Life Expectancy Estimates | ||
Summary of change in fair value of the investment in life insurance policies | ||
Change in fair value of the investment in life insurance policies | 98,909 | 113,812 |
Minus 4 months | Change in Life Expectancy Estimates | ||
Summary of change in fair value of the investment in life insurance policies | ||
Change in fair value of the investment in life insurance policies | 46,028 | 57,753 |
Plus 4 months | Change in Life Expectancy Estimates | ||
Summary of change in fair value of the investment in life insurance policies | ||
Change in fair value of the investment in life insurance policies | (62,483) | (55,905) |
Plus 8 months | Change in Life Expectancy Estimates | ||
Summary of change in fair value of the investment in life insurance policies | ||
Change in fair value of the investment in life insurance policies | $ (115,452) | $ (111,340) |
Fair Value Definition and Hie_8
Fair Value Definition and Hierarchy - Fair Value of Financial Instruments (Details) - USD ($) $ in Thousands | Sep. 30, 2020 | Dec. 31, 2019 |
Level 1 | Carrying Amount | ||
Financial assets: | ||
Cash, cash equivalents and restricted cash | $ 109,756 | $ 99,331 |
Life insurance policy benefits receivable, net | 36,418 | 23,031 |
Fees receivable | 31,571 | 29,168 |
Financial liabilities: | ||
Other liabilities | 57,056 | 44,352 |
Level 1 | Estimated Fair Value | ||
Financial assets: | ||
Cash, cash equivalents and restricted cash | 109,756 | 99,331 |
Life insurance policy benefits receivable, net | 36,418 | 23,031 |
Fees receivable | 31,571 | 29,168 |
Financial liabilities: | ||
Other liabilities | 57,056 | 44,352 |
Level 2 | Carrying Amount | ||
Financial assets: | ||
Financing receivables from affiliates | 67,153 | |
Financial liabilities: | ||
Senior credit facility | 203,907 | 174,390 |
L Bonds and Seller Trust L bonds | 1,521,411 | 1,293,530 |
Other borrowings | 100,178 | 153,086 |
Level 2 | Estimated Fair Value | ||
Financial assets: | ||
Financing receivables from affiliates | 59,608 | |
Financial liabilities: | ||
Senior credit facility | 213,117 | 184,587 |
L Bonds and Seller Trust L bonds | 1,638,227 | 1,390,288 |
Other borrowings | 101,368 | 153,086 |
Level 3 | Carrying Amount | ||
Financial assets: | ||
Loans receivable, net of allowance for loan losses and discount | 227,047 | 232,344 |
Level 3 | Estimated Fair Value | ||
Financial assets: | ||
Loans receivable, net of allowance for loan losses and discount | $ 257,764 | $ 232,344 |
Equity Method Investments - Rol
Equity Method Investments - Rollforward (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
Increase (Decrease) In Equity Method Investments [Roll Forward] | ||||
Contributions | $ 10,144 | $ 10,000 | ||
Loss on equity method investment | $ (1,431) | $ 956 | (4,279) | $ (371) |
FOXO | ||||
Increase (Decrease) In Equity Method Investments [Roll Forward] | ||||
Beginning balance | 7,773 | 1,761 | ||
Contributions | 3,884 | 13,051 | ||
Loss on equity method investment | (1,431) | (4,279) | ||
Other | 10 | (297) | ||
Ending balance | $ 10,236 | $ 10,236 |
Equity Method Investments - Fin
Equity Method Investments - Financial Information (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||||
Sep. 30, 2020 | Sep. 30, 2019 | Jun. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | Jun. 30, 2019 | |
Schedule of Equity Method Investments [Line Items] | ||||||
Total revenues | $ 28,513 | $ 22,211 | $ 130,859 | $ 71,439 | ||
Net loss | (147,540) | (56,348) | ||||
Net gain (loss) attributable to Ben LP common unitholders | (68,149) | (24,635) | (135,669) | (69,154) | ||
GWG portion of net earnings (loss) | $ (1,431) | $ 956 | $ (4,279) | $ (371) | ||
Ben LP | ||||||
Schedule of Equity Method Investments [Line Items] | ||||||
GWG portion of net earnings (loss) | $ 956 | $ (371) | ||||
Ben LP | ||||||
Schedule of Equity Method Investments [Line Items] | ||||||
Total revenues | 28,151 | 69,262 | ||||
Net loss | 9,696 | (36,345) | ||||
Net gain (loss) attributable to Ben LP common unitholders | $ 1,080 | $ (11,439) |
Equity Method Investments - Add
Equity Method Investments - Additional Information (Details) - USD ($) $ in Thousands | Dec. 31, 2019 | Jun. 12, 2019 | Sep. 30, 2020 | Dec. 31, 2019 | Sep. 30, 2019 | Jun. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | Jun. 30, 2019 | Dec. 31, 2018 | Nov. 11, 2019 |
Schedule of Equity Method Investments [Line Items] | |||||||||||
GWG portion of net earnings (loss) | $ (1,431) | $ 956 | $ (4,279) | $ (371) | |||||||
Shares acquired (in shares) | 666,667 | ||||||||||
Contributions | 10,144 | $ 10,000 | |||||||||
Commitment to contribute to FOXO | |||||||||||
Schedule of Equity Method Investments [Line Items] | |||||||||||
Commitment | $ 5,000 | $ 5,000 | |||||||||
FOXO | |||||||||||
Schedule of Equity Method Investments [Line Items] | |||||||||||
Ownership interest | 100.00% | 100.00% | |||||||||
Equity method investment, underlying equity in net assets | $ 3,400 | ||||||||||
GWG portion of net earnings (loss) | $ 1,600 | ||||||||||
Equity method investments | $ 1,800 | $ 1,800 | |||||||||
FOXO | Commitment to contribute to FOXO | |||||||||||
Schedule of Equity Method Investments [Line Items] | |||||||||||
Commitment | $ 5,000 | $ 5,000 | |||||||||
Ben LP | |||||||||||
Schedule of Equity Method Investments [Line Items] | |||||||||||
Ownership interest | 89.90% | ||||||||||
GWG portion of net earnings (loss) | $ 956 | $ (371) | |||||||||
Shares acquired (in shares) | 1,000,000 | 40,505,279 | |||||||||
Contributions | $ 10,000 |
Variable Interest Entities (Det
Variable Interest Entities (Details) - USD ($) $ in Thousands | 1 Months Ended | 3 Months Ended | 9 Months Ended | |
Jul. 31, 2020 | Sep. 30, 2020 | Sep. 30, 2020 | Dec. 31, 2019 | |
Variable Interest Entity [Line Items] | ||||
Assets | $ 3,629,674 | $ 3,629,674 | $ 3,635,206 | |
Loans receivable | 227,047 | 227,047 | 232,344 | |
Accounts payable and accrued expenses | (33,235) | (33,235) | (27,836) | |
CT Risk Management, LLC [Member] | ||||
Variable Interest Entity [Line Items] | ||||
Capital contribution | $ 14,800 | |||
Variable Interest Entity, Primary Beneficiary | ||||
Variable Interest Entity [Line Items] | ||||
Assets | 11,600 | 11,600 | ||
Loss on investment | 3,200 | 3,200 | ||
Carrying Value | Variable Interest Entity, Not Primary Beneficiary | ||||
Variable Interest Entity [Line Items] | ||||
Loans receivable | 227,047 | 227,047 | 232,344 | |
Financing receivables from affiliates | 0 | 0 | 67,153 | |
Equity method investment | 10,236 | 10,236 | 1,761 | |
Accounts payable and accrued expenses | (2,583) | (2,583) | (2,515) | |
Total | 234,700 | 234,700 | 298,743 | |
Maximum Exposure to Loss | Variable Interest Entity, Not Primary Beneficiary | ||||
Variable Interest Entity [Line Items] | ||||
Loans receivable | 293,847 | 293,847 | 335,255 | |
Financing receivables from affiliates | 0 | 0 | 67,153 | |
Equity method investment | 15,236 | 15,236 | 19,661 | |
Accounts payable and accrued expenses | 0 | 0 | 0 | |
Total | $ 309,083 | $ 309,083 | $ 422,069 |
Debt (Details)
Debt (Details) | Jul. 15, 2020USD ($) | May 15, 2020USD ($) | Nov. 01, 2019USD ($) | Sep. 30, 2020USD ($)installments | Sep. 30, 2019USD ($) | Sep. 30, 2020USD ($)installments | Sep. 30, 2019USD ($) | Dec. 31, 2019USD ($) | Jun. 03, 2020USD ($) | Aug. 10, 2018USD ($) | Dec. 01, 2017USD ($) | Jan. 31, 2012USD ($) |
Debt Instrument [Line Items] | ||||||||||||
Effective interest rate | 9.50% | 9.50% | ||||||||||
Seller Trust L Bonds | $ 366,892,000 | $ 366,892,000 | $ 366,892,000 | $ 366,900,000 | ||||||||
Repayment of principal | $ 25,000,000 | $ 25,000,000 | ||||||||||
Extension fee percentage | 0.025 | |||||||||||
Repayment of principal, interest, and extension fee | $ 28,600,000 | |||||||||||
Loan installments | installments | 3 | 3 | ||||||||||
Outstanding balance | 110.00% | |||||||||||
Outstanding balance, fee | 2.00% | 2.00% | ||||||||||
Permitted maximum capital contributions in exchange | $ 152,000,000 | $ 152,000,000 | ||||||||||
Time after assumption of loans | 2 years | |||||||||||
Percentage of outstanding units | 5.00% | 5.00% | ||||||||||
Tax liability from grant | $ 30,000,000 | $ 30,000,000 | ||||||||||
Additional debt or borrowings threshold | $ 10,000,000 | $ 10,000,000 | ||||||||||
L Bonds | ||||||||||||
Debt Instrument [Line Items] | ||||||||||||
Debt offering, maximum principal amount | $ 2,000,000,000 | $ 1,000,000,000 | ||||||||||
Debt offering, additional principal amount | $ 1,000,000,000 | |||||||||||
Debt, weighted average interest rate | 7.22% | 7.22% | 7.15% | 7.50% | ||||||||
Long-term debt, gross | $ 1,200,000,000 | $ 1,200,000,000 | $ 900,000,000 | |||||||||
Amortization | 4,300,000 | $ 3,200,000 | 12,400,000 | $ 9,200,000 | ||||||||
Debt issuance costs, gross | $ 45,800,000 | $ 45,800,000 | ||||||||||
Amortization period of deferred financing cost | 7 years | |||||||||||
LNV Corporation | ||||||||||||
Debt Instrument [Line Items] | ||||||||||||
Senior credit facility | $ 300,000,000 | |||||||||||
LIBOR floor | 1.50% | |||||||||||
Basis spread on variable rate | 8.00% | |||||||||||
Effective interest rate | 9.00% | 9.00% | ||||||||||
Additional collateral pledged | 298,300,000 | |||||||||||
Advance received | $ 37,100,000 | |||||||||||
Portfolio pledged, percentage | 76.90% | |||||||||||
Line of credit facility, maximum month-end outstanding amount | $ 213,100,000 | 184,600,000 | ||||||||||
Unamortized deferred financing costs | $ 9,200,000 | $ 9,200,000 | $ 10,200,000 | |||||||||
LNV Corporation | LIBOR | ||||||||||||
Debt Instrument [Line Items] | ||||||||||||
Basis spread on variable rate | 7.50% |
Debt - Components of Debt (Deta
Debt - Components of Debt (Details) - USD ($) $ in Thousands | Sep. 30, 2020 | Dec. 31, 2019 |
Debt Instrument [Line Items] | ||
Unamortized premium | $ (2,046) | $ 887 |
Other borrowings | 100,178 | 153,086 |
Senior Credit Agreement | ||
Debt Instrument [Line Items] | ||
Other borrowings, gross | 27,373 | 77,477 |
Subordinate Credit Agreement | ||
Debt Instrument [Line Items] | ||
Other borrowings, gross | 72,245 | 72,184 |
Other Borrowings | ||
Debt Instrument [Line Items] | ||
Other borrowings, gross | $ 2,606 | $ 2,538 |
Stockholders' Equity - Stock Re
Stockholders' Equity - Stock Repurchase Program (Details) - USD ($) $ / shares in Units, $ in Thousands | 1 Months Ended | |
Feb. 28, 2019 | Jan. 31, 2019 | |
Equity [Abstract] | ||
Number of shares repurchased (in shares) | 202 | 42,488 |
Average price paid (in usd per share) | $ 8.88 | $ 8.47 |
Total number of shares purchased as part of the program (in shares) | 52,725 | 52,523 |
Maximum dollar value of shares that remained under the program | $ 1,070 | $ 1,072 |
Stockholders' Equity - Addition
Stockholders' Equity - Additional Information (Details) | Jul. 15, 2020day | Jul. 06, 2020 | Dec. 28, 2018shares | Feb. 14, 2017day$ / sharesshares | Apr. 15, 2019shares | Apr. 30, 2018USD ($)shares | Mar. 31, 2017USD ($)shares | Nov. 30, 2015day$ / sharesshares | Sep. 30, 2014USD ($)$ / sharesshares | Sep. 30, 2020USD ($)$ / sharesshares | Sep. 30, 2020USD ($)day$ / sharesshares | Sep. 30, 2019shares | Dec. 31, 2019USD ($)shares | Nov. 15, 2018USD ($) |
Stockholders' Equity (Textual) | ||||||||||||||
Common stock transactions between shareholders (in shares) | shares | 3,952,155 | |||||||||||||
Stock repurchase program, authorized amount | $ 1,500,000 | |||||||||||||
Preferred stock, dividend rate, percentage | 7.50% | |||||||||||||
Common stock, outstanding (in shares) | shares | 33,094,664 | 33,094,664 | 33,033,793 | |||||||||||
Convertible units, automatic exchange, number of trading days | day | 20 | |||||||||||||
Preferred return prior to initial public offering, numerator, basis spread over CPI | 0.50% | |||||||||||||
Preferred return after initial public offering, numerator, basis spread over CPI | 0.75% | |||||||||||||
Preferred return, numerator, basis spread over effective income tax rate | 1.00% | |||||||||||||
Investment in life insurance policies, at fair value | $ 787,260,000 | $ 787,260,000 | $ 796,039,000 | |||||||||||
Eliminations | Preferred Series C Unit Accounts | ||||||||||||||
Stockholders' Equity (Textual) | ||||||||||||||
Investment in life insurance policies, at fair value | $ 161,000,000 | $ 161,000,000 | ||||||||||||
Ben LP | Eliminations | ||||||||||||||
Stockholders' Equity (Textual) | ||||||||||||||
Investment (in shares) | shares | 46,887,963 | 46,887,963 | 42,171,946 | |||||||||||
Common Stock | ||||||||||||||
Stockholders' Equity (Textual) | ||||||||||||||
Issuance of common stock (in shares) | shares | 27,013,516 | 800,000 | 57,183 | 60,871 | 58,009 | |||||||||
Common stock, par value (in usd per share) | $ / shares | $ 12.50 | |||||||||||||
Net proceeds | $ 8,600,000 | |||||||||||||
BCH | ||||||||||||||
Stockholders' Equity (Textual) | ||||||||||||||
Annualized return required | 1.00% | |||||||||||||
Quarterly preferred return cap, percent, threshold one | 0.25% | |||||||||||||
Quarterly preferred return cap, percent, threshold two | 0.50% | |||||||||||||
Quarterly preferred return cap, percent, threshold three | 0.75% | |||||||||||||
Quarterly preferred return cap, percent, threshold four | 1.00% | |||||||||||||
Quarterly preferred return cap, percent, threshold five | 1.25% | |||||||||||||
Quarterly preferred return cap, revenue, threshold one | $ 80,000,000 | |||||||||||||
Quarterly preferred return cap, revenue, threshold two, minimum | 80,000,000 | |||||||||||||
Quarterly preferred return cap, revenue, threshold three, minimum | 105,000,000 | |||||||||||||
Quarterly preferred return cap, revenue, threshold four, minimum | 125,000,000 | |||||||||||||
Quarterly preferred return cap, revenue, threshold five, minimum | 135,000,000 | |||||||||||||
Quarterly preferred return cap, revenue, threshold two, maximum | 105,000,000 | |||||||||||||
Quarterly preferred return cap, revenue, threshold three, maximum | 125,000,000 | |||||||||||||
Quarterly preferred return cap, revenue, threshold four, maximum | 135,000,000 | |||||||||||||
Quarterly preferred return cap, revenue, threshold five, maximum | 140,000,000 | |||||||||||||
Quarterly preferred return cap, revenue, threshold six | $ 140,000,000 | |||||||||||||
Preferred return prior to initial public offering, numerator, basis spread over CPI | 2.00% | |||||||||||||
Preferred return after initial public offering, numerator, basis spread over CPI | 3.00% | |||||||||||||
Preferred return, numerator, basis spread over effective income tax rate | 1.00% | |||||||||||||
Sub-capital accounts, percentage | 20.00% | |||||||||||||
Limit on indebtedness, capital percent of NAV threshold | 55.00% | 55.00% | ||||||||||||
Limit on indebtedness, debt percent of NAV threshold | 40.00% | 40.00% | ||||||||||||
Ben LP | ||||||||||||||
Stockholders' Equity (Textual) | ||||||||||||||
Common stock, outstanding (in shares) | shares | 48,749,630 | 48,749,630 | 44,146,623 | |||||||||||
Capital contributions permitted (in usd per share) | $ / shares | $ 10 | $ 10 | ||||||||||||
Convertible units, automatic exchange, number of trading days | day | 20 | |||||||||||||
Common Stock | ||||||||||||||
Stockholders' Equity (Textual) | ||||||||||||||
Issuance of common stock (in shares) | shares | 27,013,516 | |||||||||||||
Common Stock | BCC | ||||||||||||||
Stockholders' Equity (Textual) | ||||||||||||||
Common stock transactions between shareholders (in shares) | shares | 2,500,000 | |||||||||||||
Common Stock | AltiVerse | ||||||||||||||
Stockholders' Equity (Textual) | ||||||||||||||
Common stock transactions between shareholders (in shares) | shares | 1,452,155 | |||||||||||||
Redeemable Preferred Stock | ||||||||||||||
Stockholders' Equity (Textual) | ||||||||||||||
Preferred stock, authorized (in shares) | shares | 100,000 | |||||||||||||
Preferred stock, par value (in usd per share) | $ / shares | $ 1,000 | |||||||||||||
Preferred stock, dividend rate, percentage | 7.00% | |||||||||||||
Preferred stock, liquidation preference per share (in usd per share) | $ / shares | $ 1,000 | |||||||||||||
Debt instrument, convertible, threshold trading days | day | 20 | |||||||||||||
Debt instrument, convertible, conversion price (in usd per share) | $ / shares | $ 15 | |||||||||||||
Preferred stock redemption, percentage | 15.00% | |||||||||||||
Issuance of preferred stock (in shares) | shares | 99,127 | |||||||||||||
Proceeds from (repurchase of) redeemable preferred stock | $ 99,100,000 | |||||||||||||
Payments of stock issuance costs | $ 7,000,000 | |||||||||||||
Series 2 Redeemable Preferred Stock | ||||||||||||||
Stockholders' Equity (Textual) | ||||||||||||||
Preferred stock, authorized (in shares) | shares | 150,000 | |||||||||||||
Preferred stock, liquidation preference per share (in usd per share) | $ / shares | $ 1,000 | |||||||||||||
Debt instrument, convertible, threshold trading days | day | 20 | |||||||||||||
Debt instrument, convertible, conversion price (in usd per share) | $ / shares | $ 12.75 | |||||||||||||
Preferred stock redemption, percentage | 10.00% | |||||||||||||
Issuance of preferred stock (in shares) | shares | 149,979 | |||||||||||||
Payments of stock issuance costs | $ 10,300,000 | |||||||||||||
Preferred stock redemption price | 107.00% | |||||||||||||
Aggregate gross consideration | $ 150,000,000 | |||||||||||||
Series A Preferred Stock | BCH | ||||||||||||||
Stockholders' Equity (Textual) | ||||||||||||||
Income allocation percentage | 50.00% | |||||||||||||
Class A and S units | BCH | ||||||||||||||
Stockholders' Equity (Textual) | ||||||||||||||
Income allocation percentage | 50.00% | |||||||||||||
Class S Ordinary | BCH | ||||||||||||||
Stockholders' Equity (Textual) | ||||||||||||||
Preferred units issued (in shares) | shares | 5,700,000 | 5,700,000 | 5,700,000 | |||||||||||
Preferred units outstanding (in shares) | shares | 5,700,000 | 5,700,000 | 5,700,000 | |||||||||||
Common stock exchange ratio | 1 | 1 | ||||||||||||
Class S Preferred Units | ||||||||||||||
Stockholders' Equity (Textual) | ||||||||||||||
Preferred return, numerator, basis spread over effective income tax rate | 1.00% | |||||||||||||
Common stock exchange ratio | 1.2 | 1.2 | ||||||||||||
Preferred return, annualized revenue threshold | $ 140,000,000 | |||||||||||||
Preferred return, numerator, basis spread over CPI | 0.75% |
Equity-Based Compensation - Awa
Equity-Based Compensation - Award Activity (Details) | 9 Months Ended |
Sep. 30, 2020shares | |
Stock Options | |
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding [Roll Forward] | |
Balance (in shares) | 905,381 |
Granted (in shares) | 0 |
Vested (in shares) | 0 |
Exercised (in shares) | (20,136) |
Forfeited (in shares) | (176,296) |
Recovery of vested awards (in shares) | 0 |
Balance (in shares) | 708,949 |
Stock Options | Vested | |
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding [Roll Forward] | |
Balance (in shares) | 673,341 |
Granted (in shares) | 0 |
Vested (in shares) | (84,018) |
Exercised (in shares) | (20,136) |
Forfeited (in shares) | (109,671) |
Recovery of vested awards (in shares) | 0 |
Balance (in shares) | 627,552 |
Stock Options | Unvested | |
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding [Roll Forward] | |
Balance (in shares) | 232,040 |
Granted (in shares) | 0 |
Vested (in shares) | (84,018) |
Exercised (in shares) | 0 |
Forfeited (in shares) | (66,625) |
Recovery of vested awards (in shares) | 0 |
Balance (in shares) | 81,397 |
SAR | |
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Number of Shares [Roll Forward] | |
Balance (in shares) | 375,625 |
Granted (in shares) | 143,825 |
Vested (in shares) | 0 |
Exercised (in shares) | (1,284) |
Forfeited (in shares) | (31,608) |
Recovery of vested awards (in shares) | 0 |
Balance (in shares) | 486,558 |
SAR | Vested | |
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Number of Shares [Roll Forward] | |
Balance (in shares) | 200,745 |
Granted (in shares) | 18,556 |
Vested (in shares) | (45,529) |
Exercised (in shares) | (1,284) |
Forfeited (in shares) | (4,541) |
Recovery of vested awards (in shares) | 0 |
Balance (in shares) | 259,005 |
SAR | Unvested | |
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Number of Shares [Roll Forward] | |
Balance (in shares) | 174,880 |
Granted (in shares) | 125,269 |
Vested (in shares) | (45,529) |
Exercised (in shares) | 0 |
Forfeited (in shares) | (27,067) |
Recovery of vested awards (in shares) | 0 |
Balance (in shares) | 227,553 |
RSU | |
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Number of Shares [Roll Forward] | |
Balance (in shares) | 244,083 |
Granted (in shares) | 0 |
Vested (in shares) | 0 |
Exercised (in shares) | 0 |
Forfeited (in shares) | (57,183) |
Recovery of vested awards (in shares) | 0 |
Balance (in shares) | 186,900 |
RSU | Vested | |
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Number of Shares [Roll Forward] | |
Balance (in shares) | 0 |
Granted (in shares) | 0 |
Vested (in shares) | (57,183) |
Exercised (in shares) | 0 |
Forfeited (in shares) | 0 |
Recovery of vested awards (in shares) | 0 |
Balance (in shares) | 57,183 |
RSU | Unvested | |
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Number of Shares [Roll Forward] | |
Balance (in shares) | 244,083 |
Granted (in shares) | 0 |
Vested (in shares) | (57,183) |
Exercised (in shares) | 0 |
Forfeited (in shares) | (57,183) |
Recovery of vested awards (in shares) | 0 |
Balance (in shares) | 129,717 |
BMP Equity Units | |
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Number of Shares [Roll Forward] | |
Balance (in shares) | 8,160,037 |
Granted (in shares) | 7,544,688 |
Vested (in shares) | 0 |
Exercised (in shares) | 0 |
Forfeited (in shares) | (379,217) |
Recovery of vested awards (in shares) | (1,963,969) |
Balance (in shares) | 13,361,539 |
BMP Equity Units | Vested | |
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Number of Shares [Roll Forward] | |
Balance (in shares) | 7,980,037 |
Granted (in shares) | 4,580,888 |
Vested (in shares) | (496,142) |
Exercised (in shares) | 0 |
Forfeited (in shares) | (31,618) |
Recovery of vested awards (in shares) | (1,963,969) |
Balance (in shares) | 11,061,480 |
BMP Equity Units | Unvested | |
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Number of Shares [Roll Forward] | |
Balance (in shares) | 180,000 |
Granted (in shares) | 2,963,800 |
Vested (in shares) | (496,142) |
Exercised (in shares) | 0 |
Forfeited (in shares) | (347,599) |
Recovery of vested awards (in shares) | 0 |
Balance (in shares) | 2,300,059 |
REUs | |
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Number of Shares [Roll Forward] | |
Balance (in shares) | 2,411,242 |
Granted (in shares) | 5,716,028 |
Vested (in shares) | 0 |
Exercised (in shares) | 0 |
Forfeited (in shares) | (296,400) |
Recovery of vested awards (in shares) | (507,500) |
Balance (in shares) | 7,323,370 |
REUs | Vested | |
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Number of Shares [Roll Forward] | |
Balance (in shares) | 2,164,742 |
Granted (in shares) | 3,033,956 |
Vested (in shares) | (341,223) |
Exercised (in shares) | 0 |
Forfeited (in shares) | (14,000) |
Recovery of vested awards (in shares) | (507,500) |
Balance (in shares) | 5,018,421 |
REUs | Unvested | |
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Number of Shares [Roll Forward] | |
Balance (in shares) | 246,500 |
Granted (in shares) | 2,682,072 |
Vested (in shares) | (341,223) |
Exercised (in shares) | 0 |
Forfeited (in shares) | (282,400) |
Recovery of vested awards (in shares) | 0 |
Balance (in shares) | 2,304,949 |
Equity-Based Compensation - Equ
Equity-Based Compensation - Equity-Based Compensation Expense (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Equity-based compensation | $ 23,558 | $ 664 | $ 96,618 | $ 1,329 |
Stock options | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Equity-based compensation | 53 | 74 | 140 | 319 |
SAR | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Equity-based compensation | 282 | 327 | 171 | 323 |
Restricted stock units | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Equity-based compensation | 0 | 263 | (38) | 687 |
BMP equity units | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Equity-based compensation | 12,392 | 0 | 51,515 | 0 |
REUs | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Equity-based compensation | $ 10,831 | $ 0 | $ 44,830 | $ 0 |
Equity-Based Compensation - Fut
Equity-Based Compensation - Future Compensation Expense (Details) $ in Thousands | Sep. 30, 2020USD ($) |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
2020 | $ 4,056 |
2021 | 16,109 |
2022 | 11,752 |
2023 | 5,462 |
2024 | 963 |
Share-based payment arrangement, nonvested award, cost not yet recognized, amount | 38,342 |
Stock Options | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
2020 | 42 |
2021 | 109 |
2022 | 19 |
2023 | 0 |
2024 | 0 |
Share-based payment arrangement, nonvested award, cost not yet recognized, amount | 170 |
SAR | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
2020 | 55 |
2021 | 200 |
2022 | 153 |
2023 | 56 |
2024 | 0 |
Share-based payment arrangement, nonvested award, cost not yet recognized, amount | 464 |
REUs | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
2020 | 1,947 |
2021 | 7,818 |
2022 | 5,729 |
2023 | 2,889 |
2024 | 567 |
Share-based payment arrangement, nonvested award, cost not yet recognized, amount | 18,950 |
BMP Equity Units | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
2020 | 2,012 |
2021 | 7,982 |
2022 | 5,851 |
2023 | 2,517 |
2024 | 396 |
Share-based payment arrangement, nonvested award, cost not yet recognized, amount | $ 18,758 |
Equity-Based Compensation - Add
Equity-Based Compensation - Additional Information (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2020 | Jun. 30, 2020 | Sep. 30, 2020 | Sep. 30, 2019 | Dec. 31, 2019 | |
Equity-Based Compensation (Textual) | |||||
Equity-based compensation clawback income | $ 36,267 | $ 0 | |||
Share-based payment arrangement, nonvested award, cost not yet recognized, amount | $ 38,342 | 38,342 | |||
Compensation expense remaining vesting in 2020 | $ 4,100 | ||||
Ben Equity Incentive Plan | |||||
Equity-Based Compensation (Textual) | |||||
Shares reserved for issuance, as a percentage of fully diluted common units outstanding | 15.00% | 15.00% | |||
Change of control, unit settlement term | 60 days | ||||
Percentage of common units | 15.00% | ||||
Equity-based compensation clawback income | $ 36,300 | ||||
Stock Options | |||||
Equity-Based Compensation (Textual) | |||||
Share-based compensation arrangement by share-based payment award, options, vested (in shares) | 0 | ||||
Share-based payment arrangement, nonvested award, cost not yet recognized, amount | $ 170 | $ 170 | |||
Stock Options | 2013 Stock Incentive Plan | |||||
Equity-Based Compensation (Textual) | |||||
Share-based compensation arrangement by share-based payment award, expiration period | 10 years | ||||
Share-based compensation arrangement by share-based payment award, options, vested (in shares) | 84,018 | ||||
Stock Options | 2013 Stock Incentive Plan | Employee | |||||
Equity-Based Compensation (Textual) | |||||
Shares issued, shares, share-based payment arrangement, before forfeiture (in shares) | 3,688 | ||||
Stock Appreciation Rights | 2013 Stock Incentive Plan | |||||
Equity-Based Compensation (Textual) | |||||
Other accrued liabilities | 700 | $ 700 | $ 600 | ||
Restricted stock units | 2013 Stock Incentive Plan | |||||
Equity-Based Compensation (Textual) | |||||
RSUs vested (in shares) | 57,183 | ||||
BMP Equity Units | |||||
Equity-Based Compensation (Textual) | |||||
Share-based payment arrangement, nonvested award, cost not yet recognized, amount | $ 18,758 | $ 18,758 | |||
BMP Equity Units | BMP Equity Incentive Plan | |||||
Equity-Based Compensation (Textual) | |||||
Share-based compensation arrangement by share-based payment award, award vesting period | 4 years | ||||
Recovery of vested awards (in shares) | 1,963,969 | ||||
Director | Restricted stock units | Ben Equity Incentive Plan | |||||
Equity-Based Compensation (Textual) | |||||
Awards granted (in shares) | 515,000 | ||||
Share-based payment arrangement, nonvested award, cost not yet recognized, amount | $ 6,400 | $ 6,400 | |||
Director | Restricted stock units | Ben Equity Incentive Plan | Nonemployee | |||||
Equity-Based Compensation (Textual) | |||||
Recovery of vested awards (in shares) | 507,500 |
Income Taxes (Details)
Income Taxes (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
Income Tax Disclosure [Abstract] | ||||
Income tax expense (benefit) | $ 22,444 | $ 0 | $ (613) | $ 0 |
Effective income tax rate | 0.40% |
Loss per Common Share - Schedul
Loss per Common Share - Schedule of EPS (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
Numerator: | ||||
Net losses attributable to common shareholders | $ (68,149) | $ (24,635) | $ (135,669) | $ (69,154) |
Denominator: | ||||
Basic - weighted average common shares outstanding (in shares) | 30,584,719 | 33,033,420 | 30,552,233 | 33,010,100 |
Effect of dilutive securities (in shares) | 0 | 0 | 0 | 0 |
Diluted - weighted average common shares outstanding (in shares) | 30,584,719 | 33,033,420 | 30,552,233 | 33,010,100 |
Basic loss per common share (in usd per share) | $ (2.23) | $ (0.75) | $ (4.44) | $ (2.09) |
Diluted loss per common share (in usd per share) | $ (2.23) | $ (0.75) | $ (4.44) | $ (2.09) |
Loss per Common Share - Additio
Loss per Common Share - Additional Information (Details) - shares | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
Earnings Per Share [Abstract] | ||||
Anti-dilutive shares excluded from calculation of diluted earnings per share (in shares) | 2,222,118 | 2,737,679 | 2,377,628 | 2,698,524 |
Segment Reporting - Segment Rec
Segment Reporting - Segment Reconciliations (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | Dec. 31, 2019 | |
Segment Reporting Information [Line Items] | |||||
Total revenues | $ 28,513 | $ 22,211 | $ 130,859 | $ 71,439 | |
Interest expense | 40,792 | 28,290 | 113,805 | 83,752 | |
Interest income | 12,928 | 3,935 | 39,588 | 11,276 | |
Net loss before income tax benefit | (54,881) | (20,403) | (148,153) | (56,348) | |
Income tax expense (benefit) | 22,444 | 0 | (613) | 0 | |
NET LOSS | (77,325) | (20,403) | (147,540) | (56,348) | |
Assets | 3,629,674 | 3,629,674 | $ 3,635,206 | ||
Operating Segments | Secondary Life Insurance | |||||
Segment Reporting Information [Line Items] | |||||
Total revenues | 14,422 | 18,238 | 44,800 | 61,199 | |
Interest expense | 24,983 | 21,410 | 72,022 | 63,114 | |
Interest income | 209 | 226 | 1,056 | 1,594 | |
Net loss before income tax benefit | (12,147) | (9,169) | (39,314) | (19,792) | |
Assets | 907,197 | 907,197 | 904,363 | ||
Operating Segments | Beneficient | |||||
Segment Reporting Information [Line Items] | |||||
Total revenues | 14,091 | 3,709 | 86,042 | 9,723 | |
Interest expense | 15,809 | 6,880 | 41,783 | 20,638 | |
Interest income | 12,719 | 3,709 | 38,532 | 9,678 | |
Net loss before income tax benefit | (33,819) | (2,214) | (86,347) | (11,286) | |
Assets | 2,675,370 | 2,675,370 | 2,721,546 | ||
Corporate & Other | |||||
Segment Reporting Information [Line Items] | |||||
Total revenues | 0 | 264 | 17 | 517 | |
Interest expense | 0 | 0 | 0 | 0 | |
Interest income | 0 | 0 | 0 | 4 | |
Net loss before income tax benefit | (8,915) | $ (9,020) | (22,492) | $ (25,270) | |
Assets | $ 47,107 | $ 47,107 | $ 9,297 |
Segment Reporting - Additional
Segment Reporting - Additional Information (Details) $ in Thousands | 9 Months Ended | |
Sep. 30, 2020USD ($)Segment | Dec. 31, 2019USD ($) | |
Segment Reporting [Abstract] | ||
Number of reportable segments | Segment | 2 | |
Goodwill | $ | $ 2,384,121 | $ 2,358,005 |
Commitments and Contingencies (
Commitments and Contingencies (Details) - USD ($) $ in Millions | Sep. 30, 2020 | Dec. 31, 2019 |
Other Commitments [Line Items] | ||
Gross potential capital commitments | $ 35.3 | $ 73.8 |
Commitment to contribute to FOXO | ||
Other Commitments [Line Items] | ||
Commitment | 5 | |
Commitment, remainder of 2020 | 1.2 | |
Commitment, 2021 | $ 3.8 |
Concentration - By Company (Det
Concentration - By Company (Details) | Sep. 30, 2020 | Dec. 31, 2019 |
John Hancock Life Insurance Company | ||
Concentration Risk [Line Items] | ||
Face value percentage of insurance policies with specific life insurance companies | 14.66% | 14.23% |
The Lincoln National Life Insurance Company | ||
Concentration Risk [Line Items] | ||
Face value percentage of insurance policies with specific life insurance companies | 11.23% | 11.55% |
AXA Equitable Life Insurance Company | ||
Concentration Risk [Line Items] | ||
Face value percentage of insurance policies with specific life insurance companies | 10.72% | 10.63% |
Concentration - By State (Detai
Concentration - By State (Details) | Sep. 30, 2020 | Dec. 31, 2019 |
California | ||
Concentration Risk [Line Items] | ||
Percentage of insurance policies held in specific states | 17.95% | 17.46% |
Florida | ||
Concentration Risk [Line Items] | ||
Percentage of insurance policies held in specific states | 14.99% | 14.86% |
Subsequent Events and Other M_2
Subsequent Events and Other Matters (Details) $ / shares in Units, $ in Thousands | Jul. 06, 2020class$ / shares | Nov. 06, 2020USD ($)individualpolicy | Sep. 30, 2020USD ($) | Sep. 30, 2019USD ($) | Sep. 30, 2020USD ($) | Sep. 30, 2019USD ($) | Dec. 31, 2019USD ($) | Dec. 31, 2018USD ($) |
Subsequent Event [Line Items] | ||||||||
Exchange transaction, minimum fair value of common stock required for exchange (in dollars per share) | $ / shares | $ 10 | |||||||
Exchange transaction, number of trading days for measurement of common stock price | 20 days | |||||||
Exchange transaction, number of classes of subsidiary securities required to be listed on a national securities exchange prior to exchange transaction | class | 1 | |||||||
Preferred stock, dividend rate, percentage (not less than) | 7.50% | |||||||
Preferred stock, conversion price, maximum (in dollars per share) | $ / shares | $ 12 | |||||||
Cash, cash equivalents and restricted cash | $ 109,756 | $ 73,885 | $ 109,756 | $ 73,885 | $ 99,331 | $ 125,436 | ||
Net losses attributable to common shareholders | $ (68,149) | $ (24,635) | (135,669) | (69,154) | ||||
Loans receivable originated | $ 0 | $ 50,000 | ||||||
Subsequent Event | ||||||||
Subsequent Event [Line Items] | ||||||||
Cash, cash equivalents and restricted cash | $ 95,100 | |||||||
Number of policies realized | policy | 9 | |||||||
Number of individuals covered under policies realized | individual | 8 | |||||||
Face value of insurance benefits | $ 7,700 | |||||||
L Bonds Issued | 63,400 | |||||||
Loans receivable originated | $ 8,100 |