UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
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☒ |
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended March 31, 2020
OR
|
☐ |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO |
Commission File Number 001-38945
VERICITY, INC.
(Exact name of Registrant as specified in its Charter)
|
Delaware |
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46-2348863 |
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(State or other jurisdiction of incorporation or organization) |
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(I.R.S. Employer Identification No.) |
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8700 W. Bryn Mawr Avenue, Suite 900S, Chicago Illinois |
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60631 |
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(Address of principal executive offices) |
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(Zip Code) |
Registrant’s telephone number, including area code: (312) 288-0073
Securities registered pursuant to Section 12(b) of the Act:
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Title of each class |
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Trading Symbol |
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Name on each exchange on which registered |
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Common Stock, Par Value $0.001 per share |
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VERY |
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NASDAQ Capital Market |
Indicate by check mark whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES ☒ NO ☐
Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files). YES ☒ NO ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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Large accelerated filer |
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☐ |
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Accelerated filer |
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☐ |
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Non-accelerated filer |
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☒ |
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Smaller reporting company |
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☒ |
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Emerging growth company |
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☒ |
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|
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES ☐ NO ☒
The number of shares of Registrant’s Common Stock outstanding as of May 14, 2020 was 14,875,000.
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Page |
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PART I – |
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Item 1. |
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Financial Statements (Unaudited) (at March 31, 2020 and December 31, 2019 and for the Three Months Ended March 31, 2020 and 2019)
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1 |
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2 |
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Interim Condensed Consolidated Statements of Comprehensive Income (Loss) |
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3 |
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Interim Condensed Consolidated Statements of Changes in Equity |
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4 |
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5 |
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Notes to the Interim Condensed Consolidated Financial Statements |
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6 |
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6 |
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7 |
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12 |
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12 |
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13 |
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15 |
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16 |
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19 |
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20 |
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20 |
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21
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Item 2. |
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Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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22 |
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Item 4. |
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34 |
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PART II – |
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34 |
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Item 1. |
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34 |
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Item 1A. |
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35 |
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Item 2. |
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35 |
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Item 3. |
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35 |
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Item 4. |
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35 |
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Item 5. |
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35 |
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Item 6. |
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36 |
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37 |
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Item I. Financial Statements
Vericity, Inc.
Interim Condensed Consolidated Balance Sheets
(dollars in thousands)
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March 31, |
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December 31, |
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2020 |
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2019 |
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(Unaudited) |
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(Audited) |
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Assets |
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Investments: |
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Fixed maturities – available-for-sale – at fair value (amortized cost; $305,528 and $294,402) |
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$ |
315,259 |
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$ |
314,921 |
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Equity securities – at fair value (cost; $6,520 and $6,350) |
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2,485 |
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5,231 |
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Short-term investments - at fair value (amortized cost; $250 and $29,742) |
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250 |
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29,757 |
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Mortgage loans (net of valuation allowances of $44 and $53) |
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51,686 |
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51,835 |
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Policyholder loans |
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6,021 |
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6,040 |
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Other invested assets |
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104 |
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104 |
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Total investments |
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375,805 |
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407,888 |
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Cash and cash equivalents |
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53,206 |
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37,842 |
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Accrued investment income |
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2,461 |
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2,780 |
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Reinsurance recoverables |
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140,271 |
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132,870 |
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Deferred policy acquisition costs |
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89,235 |
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85,776 |
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Commissions and agent balances (net of allowances of $545 and $545) |
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12,800 |
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11,270 |
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Intangible assets |
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1,635 |
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1,635 |
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Deferred income tax assets, net |
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12,523 |
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9,440 |
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Other assets |
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24,824 |
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32,281 |
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Total assets |
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712,760 |
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721,782 |
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Liabilities and Shareholders' Equity |
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Liabilities |
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Future policy benefits and claims |
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349,886 |
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335,766 |
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Policyholder account balances |
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86,063 |
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87,517 |
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Other policyholder liabilities |
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26,234 |
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25,063 |
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Policy dividend obligations |
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10,520 |
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11,453 |
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Reinsurance liabilities and payables |
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6,967 |
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15,382 |
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Long-term debt |
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17,724 |
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16,601 |
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Short-term debt |
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4,444 |
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3,999 |
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Other liabilities |
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14,336 |
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13,584 |
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Total liabilities |
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516,174 |
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509,365 |
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Commitments and Contingencies (Note 6) |
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Shareholders' Equity |
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Common stock, $.001 par value, 30,000,000 shares authorized, 14,875,000 shares, issued and outstanding |
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15 |
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15 |
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Additional paid-in capital |
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39,840 |
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39,840 |
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Retained earnings |
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155,227 |
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163,805 |
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Accumulated other comprehensive income (loss) |
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1,504 |
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8,757 |
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Total shareholders' equity |
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196,586 |
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212,417 |
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Total liabilities and shareholders' equity |
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$ |
712,760 |
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$ |
721,782 |
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See notes to interim condensed consolidated financial statements
1
Interim Condensed Consolidated Statements of Operations
(dollars in thousands, except earnings per share)
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Three Months Ended March 31, |
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2020 |
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2019 |
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(Unaudited) |
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(Unaudited) |
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Revenues |
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Net insurance premiums |
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$ |
30,056 |
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$ |
23,089 |
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Net investment income |
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3,572 |
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3,820 |
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Net realized investment (losses) gains |
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(3,057 |
) |
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1,048 |
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Other-than-temporary-impairment (OTTI) |
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(54 |
) |
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— |
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Earned commissions |
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4,125 |
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3,746 |
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Insurance lead sales |
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1,588 |
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1,435 |
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Other income |
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83 |
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55 |
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Total revenues |
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36,313 |
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33,193 |
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Benefits and expenses |
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Life, annuity, and health claim benefits |
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20,761 |
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16,244 |
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Interest credited to policyholder account balances |
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783 |
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|
801 |
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Operating costs and expenses |
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23,529 |
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18,907 |
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Amortization of deferred policy acquisition costs |
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976 |
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3,140 |
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Other expenses |
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— |
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22 |
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Total benefits and expenses |
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46,049 |
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39,114 |
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(Loss) income from operations before income tax |
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(9,736 |
) |
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(5,921 |
) |
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Income tax (benefit) expense |
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(1,158 |
) |
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314 |
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Net (loss) income |
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$ |
(8,578 |
) |
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$ |
(6,235 |
) |
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Earnings per share for the periods |
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Three Months Ended March 31, |
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2020 |
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2019 |
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(Unaudited) |
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(Unaudited) (Pro forma) |
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Weighted average shares outstanding, basic and diluted |
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14,875,000 |
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14,875,000 |
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Basic earnings per share |
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$ |
(0.58 |
) |
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$ |
(0.42 |
) |
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Diluted earnings per share |
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$ |
(0.58 |
) |
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$ |
(0.42 |
) |
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The 2019 pro forma earnings per common share—basic and diluted—presented on the above Interim Condensed Consolidated Statements of Operations is intended to depict the impact of the Conversion because neither Vericity, Inc., nor the Predecessor, had, prior to the Conversion, any outstanding common shares. The above table presents the 2019 pro forma net loss and weighted average common shares outstanding used in the computation of earnings per common share and earnings per common share – assuming dilution. |
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See notes to interim condensed consolidated financial statements
2
Interim Condensed Consolidated Statements of Comprehensive Income (Loss)
(dollars in thousands)
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Three Months Ended March 31, |
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2020 |
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2019 |
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(Unaudited) |
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Net (loss) income |
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$ |
(8,578 |
) |
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$ |
(6,235 |
) |
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Other comprehensive income (loss), net of tax: |
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Net unrealized gains (losses) on investments |
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(7,253 |
) |
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4,698 |
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Total other comprehensive income (loss) |
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(7,253 |
) |
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4,698 |
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Total comprehensive (loss) income |
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$ |
(15,831 |
) |
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$ |
(1,537 |
) |
See notes to interim condensed consolidated financial statements
3
Interim Condensed Consolidated Statements of Changes in Shareholders’ Equity
(dollars in thousands)
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Three Months Ended March 31, |
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2020 |
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2019 |
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(Unaudited) |
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Common stock |
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Balance – beginning of period |
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$ |
15 |
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$ |
— |
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Common stock issued |
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— |
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— |
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Balance – end of period |
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$ |
15 |
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$ |
— |
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Additional paid-in capital |
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|
|
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Balance – beginning of period |
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$ |
39,840 |
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$ |
— |
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Proceeds net of offering costs |
|
|
— |
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|
|
— |
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Balance – end of period |
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$ |
39,840 |
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$ |
— |
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|
|
|
|
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Retained earnings |
|
|
|
|
|
|
|
|
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Balance – beginning of period |
|
$ |
163,805 |
|
|
$ |
174,558 |
|
|
Cumulative effect adjustment from changes in accounting guidance, net of tax |
|
|
— |
|
|
|
8,571 |
|
|
Balance after adjustments – beginning of period |
|
|
163,805 |
|
|
|
183,129 |
|
|
Net (loss) income |
|
|
(8,578 |
) |
|
|
(6,235 |
) |
|
Balance – end of period |
|
$ |
155,227 |
|
|
$ |
176,894 |
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated other comprehensive income (loss) |
|
|
|
|
|
|
|
|
|
Balance – beginning of period |
|
$ |
8,757 |
|
|
$ |
(2,368 |
) |
|
Other comprehensive (loss) income |
|
|
(7,253 |
) |
|
|
4,698 |
|
|
Balance – end of period |
|
$ |
1,504 |
|
|
$ |
2,330 |
|
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Total shareholders' equity |
|
$ |
196,586 |
|
|
$ |
179,224 |
|
See notes to interim condensed consolidated financial statements
4
Interim Condensed Consolidated Statements of Cash Flows
(dollars in thousands)
|
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Three Months Ended March 31, |
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|||||
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2020 |
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2019 |
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(Unaudited) |
|
|||||
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Cash flows from operating activities |
|
|
|
|
|
|
|
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Net (loss) income |
|
$ |
(8,578 |
) |
|
$ |
(6,235 |
) |
|
Adjustments to reconcile net (loss) to net cash provided (used) by operating activities: |
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|
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|
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Depreciation and amortization and other non-cash items |
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|
594 |
|
|
|
453 |
|
|
Interest credited to policyholder account balances |
|
|
783 |
|
|
|
801 |
|
|
Deferred income tax |
|
|
(1,158 |
) |
|
|
94 |
|
|
Net realized investment (losses) gains |
|
|
3,057 |
|
|
|
(1,048 |
) |
|
Other-than-temporary-impairment |
|
|
54 |
|
|
|
— |
|
|
Interest expense |
|
|
303 |
|
|
|
208 |
|
|
Change in: |
|
|
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|
|
|
|
|
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Equity securities |
|
|
(171 |
) |
|
|
(69 |
) |
|
Accrued investment income |
|
|
319 |
|
|
|
393 |
|
|
Reinsurance recoverables |
|
|
(7,401 |
) |
|
|
(3,173 |
) |
|
Deferred policy acquisition costs |
|
|
(3,459 |
) |
|
|
(48 |
) |
|
Commissions and agent balances |
|
|
(1,530 |
) |
|
|
(1,136 |
) |
|
Other assets |
|
|
8,736 |
|
|
|
(496 |
) |
|
Insurance liabilities |
|
|
15,972 |
|
|
|
1,185 |
|
|
Other liabilities |
|
|
(7,607 |
) |
|
|
(2,161 |
) |
|
Net cash (used) by operating activities |
|
|
(86 |
) |
|
|
(11,232 |
) |
|
Cash flows from investing activities |
|
|
|
|
|
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|
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Sales, maturities and repayments of: |
|
|
|
|
|
|
|
|
|
Fixed maturity securities |
|
|
10,717 |
|
|
|
17,636 |
|
|
Short-term investments |
|
|
29,800 |
|
|
|
— |
|
|
Mortgage loans |
|
|
520 |
|
|
|
763 |
|
|
Limited partnership interests |
|
|
— |
|
|
|
110 |
|
|
Purchases of: |
|
|
|
|
|
|
|
|
|
Fixed maturity securities |
|
|
(22,188 |
) |
|
|
(10,419 |
) |
|
Short-term investments |
|
|
(250 |
) |
|
|
— |
|
|
Mortgage loans |
|
|
(363 |
) |
|
|
(2,502 |
) |
|
Limited partnership interests |
|
|
— |
|
|
|
(38 |
) |
|
Change in policyholder loans, net |
|
|
19 |
|
|
|
(68 |
) |
|
Other, net |
|
|
(1,878 |
) |
|
|
(1,182 |
) |
|
Net cash provided by investing activities |
|
|
16,377 |
|
|
|
4,300 |
|
|
Cash flows from financing activities |
|
|
|
|
|
|
|
|
|
Debt issued |
|
|
3,167 |
|
|
|
3,137 |
|
|
Debt repaid |
|
|
(1,901 |
) |
|
|
(1,680 |
) |
|
Deposits to policyholder account balances |
|
|
110 |
|
|
|
126 |
|
|
Withdrawals from policyholder account balances |
|
|
(2,303 |
) |
|
|
(2,303 |
) |
|
Net cash (used) by financing activities |
|
|
(927 |
) |
|
|
(720 |
) |
|
Net increase (decrease) in cash and cash equivalents |
|
|
15,364 |
|
|
|
(7,652 |
) |
|
Cash, cash equivalents and restricted cash – beginning of period |
|
|
37,842 |
|
|
|
20,984 |
|
|
Cash, cash equivalents and restricted cash – end of period |
|
$ |
53,206 |
|
|
$ |
13,332 |
|
|
Supplemental cash flow information |
|
|
|
|
|
|
|
|
|
Non-cash transactions |
|
$ |
— |
|
|
$ |
— |
|
|
Cumulative effect adjustment from changes in accounting guidance, net of tax |
|
$ |
— |
|
|
$ |
8,571 |
|
See notes to interim condensed consolidated financial statements
5
Notes to Interim Condensed Consolidated Financial Statements
(dollars in thousands)
Note 1 – Summary of Significant Accounting Policies
Description of Business
Vericity, Inc. (the Company) is a Delaware corporation organized to be the stock holding company for Members Holding Company (Members) and its subsidiaries. On August 7, 2019, the Company completed the initial public offering of 14,875,000 shares of its common stock at a price of $10.00 per share (the IPO). The IPO was conducted in connection with the conversion of Members Mutual Holding Company from mutual to stock form and the acquisition by the Company of all of the capital stock of Members following its conversion to stock form after its plan of conversion and amended and restated articles of incorporation were approved at a special meeting of eligible members on August 6, 2019 (the Conversion). As a result of the Conversion, the Company became the holding company for converted Members Mutual Holding Company and its indirect subsidiaries, including Fidelity Life Association (Fidelity Life) and Efinancial, LLC (Efinancial).
The Company operates as a holding company and currently has no other business operations. Fidelity Life is an Illinois‑domiciled life insurance company that was founded in 1896. Fidelity Life markets life insurance products through independent and affiliated distributors and is licensed in the District of Columbia and all states, except New York and Wyoming. Efinancial markets life and other products for non‑affiliated insurance companies and sells life products for Fidelity Life.
The accompanying interim condensed consolidated financial statements present the accounts of the Company and subsidiaries for the three months ended March 31, 2020 and March 31, 2019 and at March 31, 2020 and December 31, 2019. These interim condensed consolidated financial statements and notes should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report in the Form 10-K for the year ended December 31, 2019. The results of operations for the interim periods should not be considered indicative of results to be expected for the full year.
Basis of Presentation
These interim condensed consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (GAAP). The unaudited interim condensed consolidated financial information furnished herein reflects all adjustments which are, in the opinion of management, necessary to fairly state the results for the interim periods presented. All such adjustments are of a normal recurring nature. All intercompany accounts and transactions have been eliminated in consolidation. The consolidated results of operations for the interim periods presented are not necessarily indicative of results for the full year. Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been omitted from this report, as is permitted by such rules and regulations. Accordingly, these interim condensed consolidated financial statements should be read in conjunction with the financial statements as of and for the year ended December 31, 2019, and notes thereto, included in the Form 10-K.
Use of Estimates
The preparation of interim condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The more significant estimates employed in the preparation of the interim condensed consolidated financial statements include the determination of the valuation of investments in fixed maturities and equity securities, investment impairments, the valuation of deferred tax assets, future policy benefits and other policyholder liabilities.
Accounting Standards Adopted
On January 1, 2020, the Company adopted ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement, to improve the effectiveness of disclosures in the Notes to the Interim Condensed Consolidated Financial Statements included in this Form 10-Q.
Recent Developments
The outbreak of the novel coronavirus (“COVID-19”) in many countries continues to adversely impact global commercial activity and has contributed to significant volatility in financial markets. The measures governments worldwide have enacted to combat the pandemic have resulted in disruptions in global and local supply chains and have led to adverse impacts on economic and
6
market conditions as well as increases in unemployment. The severity of COVID-19 and duration of government containment actions impacts both employees and customers of the Company and presents material uncertainty and risk with respect to the Company’s performance, liquidity, results of operations, and financial condition.
The stress and disruption placed on the global economy and financial markets from the outbreak of COVID-19 may continue to have near and long-term negative effects on investment valuations, returns, and credit allowance exposure. The Company will continue to closely monitor the situation, including potential negative impacts on sales of new policies and mortality; however, due to the highly uncertain nature of these conditions, it is not possible to reliably estimate the length and severity of COVID-19 or its impact to the Company’s operations, but the effect could be material.
The Company continuously monitors its investment strategies and individual holdings with consideration of current and projected market conditions, the composition of the Company’s liabilities, projected liquidity and capital investment needs, and compliance with investment policies and state regulatory guidelines.
Available‑for‑Sale Securities
The amortized cost, gross unrealized gains, gross unrealized losses, fair value, and OTTI loss included in accumulated other comprehensive income (AOCI) of fixed maturities available-for-sale are as follows:
|
|
|
March 31, 2020 |
|
|||||||||||||||||
|
Fixed maturities |
|
Amortized Cost |
|
|
Unrealized Gain |
|
|
Unrealized Loss |
|
|
Fair Value |
|
|
OTTI Losses |
|
|||||
|
U.S. government and agencies |
|
$ |
14,531 |
|
|
$ |
3,063 |
|
|
$ |
(1 |
) |
|
$ |
17,593 |
|
|
$ |
— |
|
|
U.S. agency mortgage-backed |
|
|
37,429 |
|
|
|
1,985 |
|
|
|
(5 |
) |
|
|
39,409 |
|
|
|
— |
|
|
State and political subdivisions |
|
|
26,970 |
|
|
|
1,632 |
|
|
|
(102 |
) |
|
|
28,500 |
|
|
|
— |
|
|
Corporate and miscellaneous |
|
|
132,283 |
|
|
|
11,863 |
|
|
|
(3,054 |
) |
|
|
141,092 |
|
|
|
— |
|
|
Foreign government |
|
|
131 |
|
|
|
28 |
|
|
|
— |
|
|
|
159 |
|
|
|
— |
|
|
Residential mortgage-backed |
|
|
8,110 |
|
|
|
175 |
|
|
|
(355 |
) |
|
|
7,930 |
|
|
|
(380 |
) |
|
Commercial mortgage-backed |
|
|
18,831 |
|
|
|
426 |
|
|
|
(541 |
) |
|
|
18,716 |
|
|
|
— |
|
|
Asset-backed |
|
|
67,243 |
|
|
|
101 |
|
|
|
(5,484 |
) |
|
|
61,860 |
|
|
|
— |
|
|
Total fixed maturities |
|
$ |
305,528 |
|
|
$ |
19,273 |
|
|
$ |
(9,542 |
) |
|
$ |
315,259 |
|
|
$ |
(380 |
) |
|
|
|
December 31, 2019 |
|
|||||||||||||||||
|
Fixed maturities |
|
Amortized Cost |
|
|
Unrealized Gain |
|
|
Unrealized Loss |
|
|
Fair Value |
|
|
OTTI Losses |
|
|||||
|
U.S. government and agencies |
|
$ |
14,195 |
|
|
$ |
1,907 |
|
|
$ |
— |
|
|
$ |
16,102 |
|
|
$ |
— |
|
|
U.S. agency mortgage-backed |
|
|
38,542 |
|
|
|
1,044 |
|
|
|
(52 |
) |
|
|
39,534 |
|
|
|
— |
|
|
State and political subdivisions |
|
|
23,246 |
|
|
|
1,561 |
|
|
|
(64 |
) |
|
|
24,743 |
|
|
|
— |
|
|
Corporate and miscellaneous |
|
|
132,108 |
|
|
|
15,311 |
|
|
|
(280 |
) |
|
|
147,139 |
|
|
|
— |
|
|
Foreign government |
|
|
131 |
|
|
|
40 |
|
|
|
— |
|
|
|
171 |
|
|
|
— |
|
|
Residential mortgage-backed |
|
|
8,820 |
|
|
|
421 |
|
|
|
(26 |
) |
|
|
9,215 |
|
|
|
(306 |
) |
|
Commercial mortgage-backed |
|
|
18,685 |
|
|
|
681 |
|
|
|
(31 |
) |
|
|
19,335 |
|
|
|
— |
|
|
Asset-backed |
|
|
58,675 |
|
|
|
306 |
|
|
|
(299 |
) |
|
|
58,682 |
|
|
|
— |
|
|
Total fixed maturities |
|
$ |
294,402 |
|
|
$ |
21,271 |
|
|
$ |
(752 |
) |
|
$ |
314,921 |
|
|
$ |
(306 |
) |
7
Actual maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. Maturities of mortgage-backed and asset-backed securities may be substantially shorter than their contractual maturity because they may require monthly principal installments and such loans may prepay principal. The amortized cost and fair value of fixed maturities available-for-sale by contractual maturity, are presented in the following table:
|
|
|
March 31, 2020 |
|
|||||
|
|
|
Amortized Cost |
|
|
Fair Value |
|
||
|
Due in one year or less |
|
$ |
13,493 |
|
|
$ |
13,582 |
|
|
Due after one year through five years |
|
|
41,178 |
|
|
|
40,929 |
|
|
Due after five years through ten years |
|
|
24,475 |
|
|
|
27,273 |
|
|
Due after ten years |
|
|
94,769 |
|
|
|
105,560 |
|
|
Securities not due at a single maturity date — primarily mortgage and asset-backed |
|
|
131,613 |
|
|
|
127,915 |
|
|
Total fixed maturities |
|
$ |
305,528 |
|
|
$ |
315,259 |
|
Fixed maturities with a carrying value of $3,982 and $3,398 were on deposit with governmental authorities as required by law at March 31, 2020 and December 31, 2019 respectively.
The Company’s fixed maturities portfolio was primarily composed of investment grade securities, defined as a security having a rating of Aaa, Aa, A, or Baa from Moody’s, AAA, AA, A, or BBB from Standard & Poor’s, or National Association of Insurance Commissioners (NAIC) rating of NAIC 1 or NAIC 2. Investment grade securities comprised 98.3% and 98.2% of the Company’s total fixed maturities portfolio at March 31, 2020 and December 31, 2019, respectively.
Short-Term Investments
The Company owned $250 and $29,757 of short-term investments as of March 31, 2020 and December 31, 2019, respectively.
Mortgage Loans
The Company makes investments in commercial mortgage loans. The Company, along with other investors, owns a pro rata share of each loan. The Company participates in 33 such investment instruments with ownership shares ranging from 2.7% to 30.0% of the trust at March 31, 2020. The Company owns a share of 288 mortgage loans with an average loan balance of $180 and a maximum exposure related to any single loan of $555. Mortgage loan holdings are diversified by geography and property type as follows:
|
|
|
March 31, 2020 |
|
|
December 31, 2019 |
|
||||||||||
|
|
|
Gross Carrying Value |
|
|
% of Total |
|
|
Gross Carrying Value |
|
|
% of Total |
|
||||
|
Property Type: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retail |
|
$ |
16,731 |
|
|
|
32.3 |
% |
|
$ |
16,892 |
|
|
|
32.6 |
% |
|
Office |
|
|
12,056 |
|
|
|
23.3 |
% |
|
|
12,160 |
|
|
|
23.4 |
% |
|
Industrial |
|
|
8,439 |
|
|
|
16.3 |
% |
|
|
8,517 |
|
|
|
16.4 |
% |
|
Mixed use |
|
|
6,183 |
|
|
|
12.0 |
% |
|
|
6,240 |
|
|
|
12.0 |
% |
|
Apartments |
|
|
3,996 |
|
|
|
7.7 |
% |
|
|
3,713 |
|
|
|
7.2 |
% |
|
Medical office |
|
|
3,134 |
|
|
|
6.1 |
% |
|
|
3,163 |
|
|
|
6.1 |
% |
|
Other |
|
|
1,191 |
|
|
|
2.3 |
% |
|
|
1,203 |
|
|
|
2.3 |
% |
|
Gross carrying value of mortgage loans |
|
|
51,730 |
|
|
|
100.0 |
% |
|
|
51,888 |
|
|
|
100.0 |
% |
|
Valuation allowance |
|
|
(44 |
) |
|
|
|
|
|
|
(53 |
) |
|
|
|
|
|
Net carrying value of mortgage loans |
|
$ |
51,686 |
|
|
|
|
|
|
$ |
51,835 |
|
|
|
|
|
8
|
|
|
March 31, 2020 |
|
|
December 31, 2019 |
|
||||||||||
|
|
|
Gross Carrying Value |
|
|
% of Total |
|
|
Gross Carrying Value |
|
|
% of Total |
|
||||
|
U.S. Region: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
West South Central |
|
$ |
12,336 |
|
|
|
23.9 |
% |
|
$ |
12,498 |
|
|
|
24.1 |
% |
|
East North Central |
|
|
12,021 |
|
|
|
23.2 |
% |
|
|
12,080 |
|
|
|
23.3 |
% |
|
South Atlantic |
|
|
11,535 |
|
|
|
22.3 |
% |
|
|
11,637 |
|
|
|
22.4 |
% |
|
West North Central |
|
|
4,202 |
|
|
|
8.1 |
% |
|
|
4,241 |
|
|
|
8.2 |
% |
|
Mountain |
|
|
4,114 |
|
|
|
8.0 |
% |
|
|
4,153 |
|
|
|
8.0 |
% |
|
Middle Atlantic |
|
|
2,809 |
|
|
|
5.4 |
% |
|
|
2,831 |
|
|
|
5.5 |
% |
|
East South Central |
|
|
3,100 |
|
|
|
6.0 |
% |
|
|
3,133 |
|
|
|
6.0 |
% |
|
New England |
|
|
108 |
|
|
|
0.2 |
% |
|
|
110 |
|
|
|
0.2 |
% |
|
Pacific |
|
|
1,505 |
|
|
|
2.9 |
% |
|
|
1,205 |
|
|
|
2.3 |
% |
|
Gross carrying value of mortgage loans |
|
|
51,730 |
|
|
|
100.0 |
% |
|
|
51,888 |
|
|
|
100.0 |
% |
|
Valuation allowance |
|
|
(44 |
) |
|
|
|
|
|
|
(53 |
) |
|
|
|
|
|
Net carrying value of mortgage loans |
|
$ |
51,686 |
|
|
|
|
|
|
$ |
51,835 |
|
|
|
|
|
During the three months ended March 31, 2020 and March 31, 2019, $363 and $2,502 of new mortgage loans were purchased, respectively, which did not include second lien mortgage loans. There were no taxes, assessments, or any amounts advanced that were not included in the mortgage loan balances at March 31, 2020 and December 31, 2019. At March 31, 2020 and December 31, 2019, the Company had 5 mortgage loans with a total carrying value of $527 and $528 that were in a restructured status, respectively. There were no impairments for mortgage loans at March 31, 2020 and December 31, 2019.
The changes in the valuation allowance for commercial mortgage loans were as follows:
|
|
|
Three Months Ended March 31, 2020 |
|
|
Year Ended December 31, 2019 |
|
||
|
Beginning balance |
|
$ |
53 |
|
|
$ |
236 |
|
|
Net decrease in valuation allowance |
|
|
(9 |
) |
|
|
(183 |
) |
|
Ending balance |
|
$ |
44 |
|
|
$ |
53 |
|
At March 31, 2020 and December 31, 2019, the Company had no mortgage loans that were on nonaccrual status.
At March 31, 2020 and December 31, 2019, the Company had a commitment to make investments in mortgage loans in the amount of $359 and $359, respectively.
Net Investment Income
The sources of net investment income are as follows:
|
|
|
Three Months Ended March 31, |
|
|||||
|
|
|
2020 |
|
|
2019 |
|
||
|
Interest from: |
|
|
|
|
|
|
|
|
|
Fixed maturities |
|
$ |
||||||