Midwest Holding Inc.

Q1 2021 Earnings Conference Call


spk_0: ladies and gentleman most welcome to the midwest holding incorporated que at twenty twenty one my name is katie and i'll be coordinating a cold dead if you'd like to all of the question during the presentation you may do so by pressing donald followed by one on your telephone keypad are now had a ritual host on bumbling to begin tom please go ahead
spk_1: good afternoon and welcome to neglect holborn first quarter two thousand and twenty one earnings call this is tom bumbler of business development here at midwest joining need for close presentation or be our coast years and founders michael fallon and mike minute as well as our chief financial officer gabbert iraq yesterday evening midwest issued are que en two thousand twenty one earnings release announcing our financial results during today's call will references letter a copy of which can be found on the investor relations page of our website and i are got new was holding dot com while this call reflect items discussed with in that document for more comprehensive information about our financial performance we also encourage you to read through our form ten que which has been filed the securities and exchange commission before we begin our remind you that matters is government today's call workload forward looking statements related to our operating performance financial goals in his outlook which are based on marriage with current belief and assumptions these forward looking statements reflect our opinions as of the data this call and we undertake no obligation or of i was information as result new developments that may occur forward looking statements are subject to various risks uncertainties and other factors that could cause or actual results to differ materially from those expected and described today in addition we are subject to a number of risks that may significantly impact our business and financial results for more detailed description of our risk factors once again please review or form tanker or the able to a discussion of factors that could cause the company actual results to differ materially from the statements a replay of a conference call be available on our website under the investor relations section i would also like to remind you that during the call we'll discuss some not get measures and discussing midwest performance you can find the reconciliation of those historical measures to the nearest comparable doubt measures in our earnings release and thank you lastly we are pleased to announce that mike and mike i have been selected of speakers are piper sandlers virtual midwest life insurance tour on thursday may twentieth their discussion will begin at nine thirty am central time like by senior research analyst john burnage please reach out to john burnage or a member of the paper sandler keane if you're interested in attending without altering the call over to michael fallon michael based on a good afternoon everyone agreed to join you today to abort on the solid progress we're making midwest we continue to execute on our business plan and remain uniquely positioned to capitalize on a life annuity supply chain the opportunity in our state significant arbiter small had been validated by the industry but while condoms in large financial institutions struggled to adapt due to their size and complexity we are executing mid west what in fact built for this opportunity built from scratch the manufacture and distribute individual like an annuity products on behalf of third party at at managers and investors the difficulty and complexity of our industry create a natural low around our success we have an extremely unique and talented team then dedicated to our vision and it is our ability to execute that will ultimately separate us from the pack our goal is to build a platform capable of generating significant long term earning power we are not here to build a very good small company our opportunity is to build a transformational company in in order to do that we must build an incredible infrastructure including investment in technology distribution asset management and operations and we must manage our capital and are grow else we are pleased with our progress in the quarter in pursuit of this long term mission first of all our premium volumes remain strong with one hundred and twenty three point seven million in written a nudie premium representing one hundred fifty nine percent grow from boy seven point eight million in the first quarter of last year with man's revenues going one hundred twenty six percent during the quarter to six point four million from two point eight million in the first quarter of two thousand and twenty we are also making strong progress a building a leading technology and operation platform not only allowing us to officially scale but also providing of incredible third party revenue opportunity in our ring insurance program we have significantly expanded our distribution capabilities for products positioning us for scale will access to capital for years to come but our tradition to larger more strategic source of the reinsurance capital takes time we have an extremely valuable product and we will be deliberate normally should ships we coffee in our ability to execute on our long term reinsurance strategy we'll also built the beginnings of a solid asset management platform attracting top talent to lead our efforts including fifteen or five ceo eric delmonico had traitor elliott's farmer it had of credit brad schneider admittedly aren't as good income was below our target for the corner and we have been slow to and that the proceeds from our december public offering as we continue to develop we insurance and attic man's bit relationships we expect us to correct finally managed you aren't after relation and financial freedom taishan as a new public company had been a work in progress we still have more work to do but we are moving in the right direction the laughing of day before hand is over to my is that we had an extremely talented in committed management cheat we are well aligned we are focused and we are poised to deliver results bar stakeholders
spk_2: and and we continue to execute as we have we truly have an opportunity to become a leading lights in a new platform
spk_1: my thanks like all we're building an incredible company our long term approach has given us sustainable advantages allow us to invest in our growth as such we'll continue to capitalize on our unique opportunities and distribution private development asset management and range on services he didn't with distribution we see value in our limited distribution model across additional distribution channels where our current partners are not strongly rather than it such as independent banks broker dealers and our eyes in the park area we continue to differentiate for simplification our ability to manufacture new products that are simple competitive an easy to integrate onto our distribution partners infrastructure is a key competitive advantage of our technology platform at michael mentioned we have made she cheated hires and asset management combining access to insurance liabilities and asset management capabilities and back common theme over the past many years we believe our ass at light twist on your theme is the long term winter and we expect to see more farms following our lead to the extent that they can and addition to the new hires we are investing in our infrastructure to support the long term still doughty and as the management beat and as an intern and will benefit army insurance business as well regarding the insurance or expanding reinsurance product sweet allows institutional investors multiple ways to access insurance company lie luggage or partners receive all the benefits of the shards liabilities without cackling distribution policy ministration among other competitive notes and the insurance industry we have turned our insurance company into an intermediary that provide insurance as a service to our institutional clients the generation that symbiotic for us and our partners we gained capacity to originate more you read without being burdened with the capital strain and the best address bar partners gain access to in demand policy liabilities regarding our reinsurance type why we have a number of letters much had signed and hope to announce the details of these rain shorts partnerships in the future about the these partnerships is in part due to the platforms flexibility to offer an entire suite arrange short solution ranging from sidecar dustbins joint ventures i amaze all the way to secure funding back to payments last week we announced an american life became a member of the federal home on bank drew this them ship black and white can access to ellen liquidity lines as well as an attractive funding source or qualifying mortgage loans in addition to the senior members are asset management team we're excited to announce the nomination to exceptionally counted individuals toward why directors anti callahan and diane davis nancy has over twenty five years of expand the technology financial services and shards she's currently the global vice president for strategy grows of sep services of a young previous leadership positions at a edgy and reuters
spk_0: diane has over three years of experience and life insurance as an actuary in your head and she and multiple insurance companies including camper jared and farmers insurance we look forward to the invaluable insight both will provide and locking and to the last it elected to serve as directors of the upcoming meeting a soccer hello dad i'll carry over to daddy or zero
spk_3: thanks mike and good afternoon everyone i am pleased with the continued progress made during the quarter and the financial position of our company and the first quarter of twenty twenty one management revenue was six point four million up hundred and twenty six percent from the first quarter of twenty twenty and
spk_0: the management earning power basis or revenue for the quarter was ten million up two hundred and seventy four percent on the first quarter of twenty twenty management operating income loss available to common shareholder in the quarter decrease to a loss of point four million or three point one million in come on a management earnings power basis
spk_3: compared to income of white five million or point six million income on a management earnings power basis in the first quarter of twenty twenty
spk_0: going forward we will be sharing our management earning power he now which we used to measure the to arrange power of the business taking into account the timing of reinsurance transaction as well as je ne that we attribute to investment in future growth of the business in this quarter you do or excess cash balances were also adjusting our investment income based on target are away
spk_3: as mike and michael mentioned we continue to see an opportunity to invest in growth across the entire for their first quarter of twenty twenty one je ne expenses excluding stock based compensation and mark to market of the drift derivative option allowance total five point three million compared to two point one million and first quarter twenty twenty
spk_0: the approximate fifteen percent of gain a this quarter to be directly related to activities connected to investing in the future growth of the business as we continue to settle into our new role as it publicly listed company we're focused on increasing our exposure in the market and strengthening our communication a presentation of our business to investors an example of the level of detail we are committed to providing can be found in our gap interest cut it like this line contains a lot of technical accounting noise and does little to help investors understand our financial performance
spk_3: so we're now backing that number out along with the derivative we used to hedge and adding a management interest credited line to our expenses
spk_0: we will continue to improve our financial presentation and explanation as we move forward with that we will now open the line for question ladies and gentlemen if you'd like to offer question please press style followed by one on your telephone keypad now have you change your mind please press style followed by two
spk_4: i'm i'm preparing to also question please ensure your phone is unlimited lately
spk_1: of as send comes from matt quality from jmp matt the line is now open thanks for the morning
spk_5: cause open we can maybe start with get the top line production and and talk a little about kind of the mix in the quarter
spk_1: obviously i'm i'm mumbai do by do slow down a bit and and feels good a flea bomb in you talk a little bit about kind of the competitive environment and what might have driven yoga to fit into better sure they get on yeah but don't like a mark and certainly has been a bit more competitive on in the quarter so i think that your your see a little bit job a reduction as well not really chafing that market at the moment on on value of the as or or have generally been yum more attractive to us because we can differentiate ourselves in terms of the product die as was your the servers that were able to provide all need it in terms of like eight year the general overall production all during the beliefs you reality in the first quarter you're just from a layover from the your the holiday season back in the december that your we would expect can see he yelled slights slow down on the guy with with respect to the general next it's it's really just about the in response to what we're seeing our competitors doing good good or any done in oh god that are you want advantage politically motivated by go on we are see it opportunity in expanding our distribute them in the my you're right we are in it's about dumping i think that you know weaken your because of our produce your ability to enter move new to an old your quickly and easily i think the others were an opportunity for us to do that while also added in the my your up you don't really have something that when there's an opportunity and me how good we insurance capacity that something that we can grow in pretty easily do we don't expect that to be as a corrected it is the producer necessarily court reporter a little bit more sense that we can have it environment get again and the burden we didn't that within the next question this in terms of you know it either the feel for overall volume i mean you're mike i appreciate your comment on a you said about in the pipeline operators partners building on but how how much i get funded by volume that was produced the order wage did you did your hold back navy based on market environment vs like in the fact that your your warehousing a lot now and kind of waiting for kind of the get those partnerships finalized and to be for producing a lot more yeah sure i agree i think that's fair as as we build reinsurance capacity and that are the unique nature of our of our business and finalized gonna be the of really quite gail the relationship that we're working on that allows is that you your strength in the pricing and be more compare oh that and that the virtual your goal and value proposition of our business or you think there some attribution that and you know when we speak to a reinsurance mall market in our reinsurance partners you know they're really focused on how much bigger weekend get ah
spk_4: i enjoy i think that should play out nicely as we move as we move forward and continued executed at this point
spk_1: he added on that boy to live in the a baby concerns the wrong word that when when we think about a pop like production that almost bought the other side terms of we should be thinking more about the oh how quickly you can ramp to cut out the up speed their desire you when leave and yellow lab the oh god partnerships are signed on and and don't do it doesn't matter you expect that that have any impact on can either that the pieces of state expansion or be of your partnerships on front end the as we think about that you're gonna learn that the appetite from that research partners for your the liabilities and your ability to gotta tell that he out expectations yeah i figure that's really young you know know that the circle you know that the that were playing and and in as we know about city they have helping them and we demonstrate that we carry slow grow the business young than yeah i think he owes it's very very well well positioned my game one at that he i think what really what i want added that we are we're making those efforts now to expand your stay expansion your distribution exaggerated so that it's going to be really set up of when you and your that gaddafi is ready be taken up so were made king all the effort scanning in the background your for your feet the future growth
spk_6: great and then one one more question again
spk_1: the you are michael you eat he commented on the money or be comment about i read that the build a talent at at picking up i on can you give it a little more color on kind of the what is your long term vision for for the asset management piece of your business what are you trying to build right yeah i'm so the star with the the synergies obviously i think have been demonstrated between insurance and out the management and so where we have extremely high energy on your with our business with the alternative as that there's a community and i was an extremely large market place but what we see our of wow you where we're not a building infrastructure
spk_0: a yearly to partner with that management in so what we've done is to bring in a very senior asset management atmospheres bad credit you're trading professional help of manage those relationships and bring those relationships to the business
spk_1: that is not to build your true out me as big infrastructure he did when we look at the value chain are those partnerships in one was out there right now is it just it extremely valuable in we can access it on a partnership faces which is very attracted to i
spk_7: great thank you very much for the color but the luck
spk_1: a now my next question comes from john bon asian from piper sandler john please go ahead thank you very much and maybe sticking with that fifteen or five in the question that add do anticipate it will go well beyond just premiums retained or she how should be taken about the growth of than a u n yeah so yeah it it is going to go grow beyond premiums retain so out with respect to rb insurance products there's there's really two types of product that we offer our wanted out to act that managers who will be bringing their own asset and rapid management ah in the second is really with respect to third party capital that is not going to be bringing out and asset management album so it's really with respect to that second group will be driving the growth of it you know thought capital a you an arm as a big you'd you'd you you're aware of about does your three quarters of our reinsure orcs or partners to date are using the patina five on asset management and we have a number of odd those reinsurance agreement in the pipeline were your bible yeah he the as manager hundred is not only one problem with that yeah over the long term job we expect i you know about fifty fifty split his i think what what i expect a would be if we were to say it today in terms of retaining the active management would have their third party capital vs or out against me proud okay on a three hour both on thanks are you clearly there is a bit of a caster egg and a quarter can you talk about
spk_5: your outlook or timeline on a the actually naqqash drag on a many with him and how the fhlb of topeka can help of that and help on funding and prada construction
spk_1: right yeah so i with respect to the cash drag we we do expect to you could put that cash to work on your if if not here in the second quarter or be your winding up and in the third quarter ah we gyllenhaal nonbank is it kid is going to be a source of look at it before us and we'll actually enable us to run at almost zero cash balances and because we will be able to your path security pledged norman bank and draw down on the quality i i need it on in the new program for outside the we we had not had gotten all that new mechanics lockdown like that it's certainly got it in the works and additionally your had a a big huge huge huge kind of alluding to is there are a product next that can be offered out to our reinsurers are based on lock the hmong bank i'm jozsef about is something that we all are exploring and and and be do we we do believe the dirt yeah would we should be other to offer to too yeah the
spk_7: that financing to be financed by third party capital providers
spk_1: yeah i'm john the other thing i just want a going to add on law firm of light the of the reinsurance relationships that we're building with third party active managers are are also providing us you know we'll you need an opportunistic flow that that in so the synergies then we have on the aftermath of our business that way to stop in the way that we can partner with your really you know know who we believe are the best acid of managers you're out there no oh well our ability to invest for our own balance sheet or third party are investing means are inclined then all to our reinsurance pipeline final some a really kind of finding built the different ways we can interact and partner with without it manages to be a very strong component of the opportunity okay that that well hopeful many dovetailing on that me it seems like with the a maybe it's just tiny but with fhlb mission for topeka that you know competitive liquidity line that he feels some comfort level our new distribution on my get some can you talk about it that like imo was nice day something possibly bigger yeah so i would say it's it's it's really some of the the other distribution lying outside of the imo sell and as you're aware of the limited distribution strategy has been very successful for us in the ilo channel and we are looking to take that same strategy into your some of the other channels are touching while your drug dealers the banks and the i am we we are making was getting any headway in breaking into some of those channels and god we we do feel yes you see likely for you know my the product which is a very simple product i think it it it sounds well through through those caves channels on that are your future migrants will probably be there look at not helpful on and then maybe on the reinsurance on structure structuring needs little lower in the first quarter a reasonable think that it as you will to the year that there be some about a hockey stick ah as the new reinsurance at him into relationships i'll be upset that it's still probably does a that ninety percent targeting that have yes the ninety percent target is is still our expectations for our our twenty twenty one and garden a exactly as you described as yeah we would expect the beach reinsurance agreements would be taking our cue line and que to
spk_6: your production and or yeah even anything i was left over from ah your twenty twenty are potentially such that i we ensure we may have reinsurance in a particular quarter that is higher than or production on and that that's why the reasons why we we're
spk_1: giving giving some a little bit more and guidance or or or thought process on on what our quarterly earnings power is ah with so that you can see like it's it kind of based on our production of premium but that year depending on the timing of the reinsurance your that profitability or gonna show up and are on your earnings differently okay bonzo night percent seems what you think it's a reinsurance to six hundred million in sales also same about what you're you're also still thinking about as well yes no change any like projection of it or that's fantastic and a my last question i let others ask but can you talk about your tall addressable market the that you did you're heading in where you see the appeal it's a the next three years more i'm so couple different you know adjustable market that that we look at at at a company honestly don't know how to individual agents we also have it out as the individual new market and then the life been held market so that you know that on the liability side and you know those are you know what were we really want to get it very very low low market shares
spk_8: a of those markets i figure maybe more at seventeen days is blatantly an individual liberty market
spk_0: intel you know because of that we don't have good as much around your overall global growth of the market but that being said the tailwind area demographic tail and gonna think that your could come through around tax object products that were riding your really really are very strong our products for our financial planning or an individual investors and zone you know we really like you know the overall market well even though you know what really get a guideline or growth in our is or increase your from the dirty village voice a total market share on your in and beyond our it the also look at you know are really insurance
spk_1: products ah and that the form of an alternative after in a product and in that market you know is it even bigger and that market the in the trillion and so on and on and we also have a good alternative investments in an area that really should grow in in the individual investor and financial planning market and we look at our individual investors and regional nesters your wifi they're very underweight alternative ah and and there's an opportunity you know they are so overall you know that the market the way in our our massive and got your opportunity is no you build your the best our business plan they combine both your insurance an alternate out management i we think our daily thanks for the answers no thank you john
spk_0: as a reminder to ask any further questions please press style followed by one on a telephone keep out now
spk_1: i can three hundred another question again from john bon it's from pot of john please go ahead
spk_0: what many one more on dog the pricing dynamic that you're seen on feeding commission's ah direction alley where you feel that she held up well ah in the navy does that would between fixing back and my at all they get

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