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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2022
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)
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Delaware |
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46-2348863 |
(State or other jurisdiction of incorporation or organization) |
|
(I.R.S. Employer Identification No.) |
8700 W. Bryn Mawr Avenue, Suite 900S, Chicago Illinois |
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60631 |
(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 |
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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☐ |
Non-accelerated filer |
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☒ |
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Smaller reporting company |
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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 November 11, 2022 was 14,875,000.
Table of Contents
Part 1. Financial Information
Item I. Financial Statements
Vericity, Inc.
Interim Condensed Consolidated Balance Sheets
(dollars in thousands)
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September 30, |
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December 31, |
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2022 |
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2021 |
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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; $328,365
and $326,591) |
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$ |
293,213 |
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$ |
352,383 |
|
Mortgage loans (net of valuation allowances of $87 and $69) |
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46,839 |
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47,487 |
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Policyholder loans |
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6,660 |
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|
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6,371 |
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Other invested assets |
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3,644 |
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|
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2,140 |
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Total investments |
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350,356 |
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|
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408,381 |
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Cash, cash equivalents and restricted cash |
|
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12,703 |
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|
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22,399 |
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Accrued investment income |
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3,547 |
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|
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2,590 |
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Reinsurance recoverables (net of allowances of $149 and $149) |
|
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212,063 |
|
|
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184,131 |
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Deferred policy acquisition costs |
|
|
92,186 |
|
|
|
95,715 |
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Commissions and agent balances (net of allowances of $340 and $432) |
|
|
33,408 |
|
|
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28,689 |
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Intangible assets |
|
|
1,635 |
|
|
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1,635 |
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Deferred income tax assets, net |
|
|
27,504 |
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|
|
12,700 |
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Other assets |
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|
34,090 |
|
|
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31,767 |
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Total assets |
|
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767,492 |
|
|
|
788,007 |
|
Liabilities and Shareholders' Equity |
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|
|
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Liabilities |
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|
|
|
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Future policy benefits and claims |
|
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443,396 |
|
|
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416,039 |
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Policyholder account balances |
|
|
78,511 |
|
|
|
80,494 |
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Other policyholder liabilities |
|
|
46,757 |
|
|
|
49,202 |
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Policy dividend obligations |
|
|
9,394 |
|
|
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12,669 |
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Reinsurance liabilities and payables |
|
|
8,032 |
|
|
|
6,927 |
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Long-term debt |
|
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28,310 |
|
|
|
22,412 |
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Short-term debt |
|
|
6,472 |
|
|
|
3,966 |
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Other liabilities |
|
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27,805 |
|
|
|
23,394 |
|
Total liabilities |
|
|
648,677 |
|
|
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615,103 |
|
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 |
|
|
15 |
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|
|
15 |
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Additional paid-in capital |
|
|
39,840 |
|
|
|
39,840 |
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Retained earnings |
|
|
109,024 |
|
|
|
122,120 |
|
Accumulated other comprehensive (loss) income |
|
|
(30,064 |
) |
|
|
10,929 |
|
Total shareholders' equity |
|
|
118,815 |
|
|
|
172,904 |
|
Total liabilities and shareholders' equity |
|
$ |
767,492 |
|
|
$ |
788,007 |
|
See notes to interim condensed consolidated financial statements
1
Vericity, Inc.
Interim Condensed Consolidated Statements of Operations
(dollars in thousands, except earnings per share)
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Three Months Ended September 30, |
|
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Nine Months Ended September 30, |
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2022 |
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2021 |
|
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2022 |
|
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2021 |
|
|
|
(Unaudited) |
|
|
(Unaudited) |
|
|
(Unaudited) |
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(Unaudited) |
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Revenues |
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|
|
|
Net insurance premiums |
|
$ |
24,468 |
|
|
$ |
24,932 |
|
|
$ |
73,474 |
|
|
$ |
75,662 |
|
Net investment income |
|
|
4,126 |
|
|
|
3,377 |
|
|
|
11,390 |
|
|
|
10,241 |
|
Net (losses) gains on investments |
|
|
(1,272 |
) |
|
|
(126 |
) |
|
|
490 |
|
|
|
2,687 |
|
Other-than-temporary-impairments (OTTI) |
|
|
(298 |
) |
|
|
— |
|
|
|
(401 |
) |
|
|
(3 |
) |
Earned commissions |
|
|
11,267 |
|
|
|
11,632 |
|
|
|
32,792 |
|
|
|
34,062 |
|
Insurance lead sales |
|
|
1,259 |
|
|
|
2,057 |
|
|
|
3,773 |
|
|
|
5,289 |
|
Other income |
|
|
144 |
|
|
|
65 |
|
|
|
419 |
|
|
|
202 |
|
Total revenues |
|
|
39,694 |
|
|
|
41,937 |
|
|
|
121,937 |
|
|
|
128,140 |
|
Benefits and expenses |
|
|
|
|
|
|
|
|
|
|
|
|
Life, annuity, and health claim benefits |
|
|
17,505 |
|
|
|
19,192 |
|
|
|
47,622 |
|
|
|
58,574 |
|
Interest credited to policyholder account balances |
|
|
646 |
|
|
|
746 |
|
|
|
2,100 |
|
|
|
2,219 |
|
Operating costs and expenses |
|
|
23,133 |
|
|
|
24,537 |
|
|
|
72,859 |
|
|
|
70,613 |
|
Amortization of deferred policy acquisition costs |
|
|
4,086 |
|
|
|
3,297 |
|
|
|
13,237 |
|
|
|
10,475 |
|
Total benefits and expenses |
|
|
45,370 |
|
|
|
47,772 |
|
|
|
135,818 |
|
|
|
141,881 |
|
(Loss) income before income tax |
|
|
(5,676 |
) |
|
|
(5,835 |
) |
|
|
(13,881 |
) |
|
|
(13,741 |
) |
Income tax (benefit) expense |
|
|
(591 |
) |
|
|
(248 |
) |
|
|
(785 |
) |
|
|
(924 |
) |
Net (loss) income |
|
$ |
(5,085 |
) |
|
$ |
(5,587 |
) |
|
$ |
(13,096 |
) |
|
$ |
(12,817 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share for the periods |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
|
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
|
|
(Unaudited) |
|
|
(Unaudited) |
|
|
(Unaudited) |
|
|
(Unaudited) |
|
Weighted average shares outstanding, basic and diluted |
|
|
14,875,000 |
|
|
|
14,875,000 |
|
|
|
14,875,000 |
|
|
|
14,875,000 |
|
Basic earnings per share |
|
$ |
(0.34 |
) |
|
$ |
(0.38 |
) |
|
$ |
(0.88 |
) |
|
$ |
(0.86 |
) |
Diluted earnings per share |
|
$ |
(0.34 |
) |
|
$ |
(0.38 |
) |
|
$ |
(0.88 |
) |
|
$ |
(0.86 |
) |
See notes to interim condensed consolidated financial statements
2
Vericity, Inc.
Interim Condensed Consolidated Statements of Comprehensive (Loss) Income
(dollars in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
|
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
|
|
(Unaudited) |
|
|
(Unaudited) |
|
Net (loss) income |
|
$ |
(5,085 |
) |
|
$ |
(5,587 |
) |
|
$ |
(13,096 |
) |
|
$ |
(12,817 |
) |
Other comprehensive (loss) income, net of tax: |
|
|
|
|
|
|
|
|
|
|
|
|
Net unrealized (losses) gains on investments |
|
|
(10,964 |
) |
|
|
(1,292 |
) |
|
|
(40,993 |
) |
|
|
(4,607 |
) |
Total other comprehensive (loss) income |
|
|
(10,964 |
) |
|
|
(1,292 |
) |
|
|
(40,993 |
) |
|
|
(4,607 |
) |
Total comprehensive (loss) income |
|
$ |
(16,049 |
) |
|
$ |
(6,879 |
) |
|
$ |
(54,089 |
) |
|
$ |
(17,424 |
) |
See notes to interim condensed consolidated financial statements
3
Vericity, Inc.
Interim Condensed Consolidated Statements of Changes in Shareholders’ Equity
(dollars in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
|
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
|
|
(Unaudited) |
|
|
(Unaudited) |
|
Common stock |
|
|
|
|
|
|
|
|
|
|
|
|
Balance – beginning of period |
|
$ |
15 |
|
|
$ |
15 |
|
|
$ |
15 |
|
|
$ |
15 |
|
Balance – end of period |
|
$ |
15 |
|
|
$ |
15 |
|
|
$ |
15 |
|
|
$ |
15 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional paid-in capital |
|
|
|
|
|
|
|
|
|
|
|
|
Balance – beginning of period |
|
$ |
39,840 |
|
|
$ |
39,840 |
|
|
$ |
39,840 |
|
|
$ |
39,840 |
|
Balance – end of period |
|
$ |
39,840 |
|
|
$ |
39,840 |
|
|
$ |
39,840 |
|
|
$ |
39,840 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retained earnings |
|
|
|
|
|
|
|
|
|
|
|
|
Balance – beginning of period |
|
$ |
114,109 |
|
|
$ |
131,547 |
|
|
$ |
122,120 |
|
|
$ |
138,777 |
|
Net (loss) income |
|
|
(5,085 |
) |
|
|
(5,587 |
) |
|
|
(13,096 |
) |
|
|
(12,817 |
) |
Balance – end of period |
|
$ |
109,024 |
|
|
$ |
125,960 |
|
|
$ |
109,024 |
|
|
$ |
125,960 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated other comprehensive (loss) income |
|
|
|
|
|
|
|
|
|
|
|
|
Balance – beginning of period |
|
$ |
(19,100 |
) |
|
$ |
13,286 |
|
|
$ |
10,929 |
|
|
$ |
16,601 |
|
Other comprehensive (loss) income |
|
|
(10,964 |
) |
|
|
(1,292 |
) |
|
|
(40,993 |
) |
|
|
(4,607 |
) |
Balance – end of period |
|
$ |
(30,064 |
) |
|
$ |
11,994 |
|
|
$ |
(30,064 |
) |
|
$ |
11,994 |
|
Total shareholders' equity |
|
$ |
118,815 |
|
|
$ |
177,809 |
|
|
$ |
118,815 |
|
|
$ |
177,809 |
|
See notes to interim condensed consolidated financial statements
4
Vericity, Inc.
Interim Condensed Consolidated Statements of Cash Flows
(dollars in thousands)
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, |
|
|
|
2022 |
|
|
2021 |
|
|
|
(Unaudited) |
|
Cash flows from operating activities |
|
|
|
|
|
|
Net (loss) income |
|
$ |
(13,096 |
) |
|
$ |
(12,817 |
) |
Adjustments to reconcile net (loss) income to net cash (used) provided by operating activities: |
|
|
|
|
|
|
Depreciation and amortization and other non-cash items |
|
|
3,187 |
|
|
|
2,477 |
|
Interest credited to policyholder account balances |
|
|
2,100 |
|
|
|
2,219 |
|
Deferred income tax |
|
|
(3,908 |
) |
|
|
(924 |
) |
Net gains (losses) on investments |
|
|
(490 |
) |
|
|
(2,687 |
) |
Other-than-temporary-impairments |
|
|
401 |
|
|
|
3 |
|
Interest expense |
|
|
931 |
|
|
|
1,149 |
|
Change in: |
|
|
|
|
|
|
Equity securities |
|
|
— |
|
|
|
4,887 |
|
Accrued investment income |
|
|
(957 |
) |
|
|
45 |
|
Reinsurance recoverables |
|
|
(27,932 |
) |
|
|
(17,616 |
) |
Deferred policy acquisition costs |
|
|
3,529 |
|
|
|
(6,528 |
) |
Commissions and agent balances |
|
|
(4,719 |
) |
|
|
(11,538 |
) |
Other assets |
|
|
(2,407 |
) |
|
|
(1,186 |
) |
Insurance liabilities |
|
|
30,687 |
|
