GWG Holdings, Inc. - FORM 10-Q

Attached files

file	filename
EX-99.1 - LETTER FROM MODEL ACTUARIAL PRICING SYSTEMS, DATED JULY 17, 2017 - GWG Holdings, Inc.	f10q0617ex99i_gwgholdings.htm
EX-32.1 - CERTIFICATION - GWG Holdings, Inc.	f10q0617ex32i_gwgholdings.htm
EX-31.2 - CERTIFICATION - GWG Holdings, Inc.	f10q0617ex31ii_gwgholdings.htm
EX-31.1 - CERTIFICATION - GWG Holdings, Inc.	f10q0617ex31i_gwgholdings.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2017

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES ACT OF 1934

For the transition period from _________ to ________

Commission File Number: None

GWG HOLDINGS, INC.

(Exact name of registrant as specified in its charter)

Delaware		26-2222607
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

220 South Sixth Street, Suite 1200

Minneapolis, MN 55402

(Address of principal executive offices, including zip code)

(612) 746-1944

(Registrant’s telephone number, including area code)

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 and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post 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.

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☐ (Do not check if a smaller reporting company)	Smaller reporting company	☒
		Emerging growth company	☒

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

As of August 10, 2017, GWG Holdings, Inc. had 5,783,555 shares of common stock outstanding.

GWG HOLDINGS, INC.

Index to Form 10-Q

for the Quarter Ended June 30, 2017

		Page No.
PART I.	FINANCIAL INFORMATION

Item 1.	Financial Statements	1
	Condensed Consolidated Balance Sheets as of June 30, 2017, and December 31, 2016	1
	Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2017 and 2016	2
	Condensed Consolidated Statements of Cash Flows for the three and six months ended June 30, 2017 and 2016	3
	Consolidated Statement of Changes in Stockholders’ Equity	5
	Notes to Condensed Consolidated Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	28
Item 4.	Controls and Procedures	58

PART II.	OTHER INFORMATION

Item 5.	Other Information	59
Item 6.	Exhibits	60

SIGNATURES		61

PART I—FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

GWG HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

	June 30, 2017 (unaudited)			December 31, 2016
A S S E T S
Cash and cash equivalents	$	52,293,472		$	78,486,982
Restricted cash		46,159,631			37,826,596
Investment in life insurance policies, at fair value		577,049,552			511,192,354
Secured MCA advances		3,525,381			5,703,147
Life insurance policy benefits receivable		6,970,000			5,345,000
Deferred taxes, net		1,620,303			-
Other assets		3,875,810			4,688,103
TOTAL ASSETS	$	691,494,149		$	643,242,182

L I A B I L I T I E S & S T O C K H O L D E R S’ E Q U I T Y
LIABILITIES
Senior Credit Facilities	$	149,008,826		$	156,064,818
Series I Secured Notes		6,680,961			16,404,836
L Bonds		400,832,308			381,312,587
Accounts payable		4,160,097			2,226,712
Interest payable		14,387,044			16,160,599
Other accrued expenses		2,535,674			1,676,761
Deferred taxes, net		-			2,097,371
TOTAL LIABILITIES		577,604,910			575,943,684

STOCKHOLDERS’ EQUITY

CONVERTIBLE PREFERRED STOCK
(par value $0.001; shares authorized 40,000,000; shares outstanding 2,671,663 and 2,640,521; liquidation preference of $20,037,000 and $19,804,000 as of June 30, 2017 and December 31, 2016, respectively)		19,732,262			19,701,133

REDEEMABLE PREFERRED STOCK
(par value $0.001; shares authorized 100,000; shares outstanding 99,127 and 59,183; liquidation preference of $99,127,000 and $59,183,000 as of June 30, 2017 and December 31, 2016, respectively)		97,728,821			59,025,164

SERIES 2 REDEEMABLE PREFERRED STOCK
(par value $0.001; shares authorized 150,000; shares outstanding 22,536 and 0; liquidation preference of $22,536,000 and $0 as of June 30, 2017 and December 31, 2016, respectively)		20,979,019			-

COMMON STOCK
(par value $0.001: shares authorized 210,000,000; shares issued and outstanding 5,783,555 and 5,980,190 as of June 30, 2017 and December 31, 2016, respectively)		5,784			5,980
Additional paid-in capital		-			7,383,515
Accumulated deficit		(24,556,647	)		(18,817,294	)
TOTAL STOCKHOLDERS’ EQUITY		113,889,239			67,298,498

TOTAL LIABILITIES & EQUITY	$	691,494,149		$	643,242,182

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

- 1 -

GWG HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

	Three Months Ended					Six Months Ended
	June 30, 2017			June 30, 2016		June 30, 2017			June 30, 2016
REVENUE
Gain on life insurance policies, net	$	11,296,266		$	20,383,347	$	30,696,086		$	38,097,059
MCA income		133,583			223,255		380,159			368,216
Interest and other income		237,737			170,880		679,686			216,100
TOTAL REVENUE		11,667,586			20,777,482		31,755,931			38,681,375

EXPENSES
Interest expense		12,246,025			9,764,657		25,490,241			18,913,811
Employee compensation and benefits		3,741,299			3,071,507		6,904,360			5,537,705
Legal and professional fees		1,330,589			1,304,353		2,276,937			2,510,481
Provision for MCA advances		878,000			300,000		878,000			400,000
Other expenses		2,883,098			2,032,685		5,663,420			4,344,845
TOTAL EXPENSES		21,079,011			16,473,202		41,212,958			31,706,842

INCOME (LOSS) BEFORE INCOME TAXES		(9,411,425	)		4,304,280		(9,457,027	)		6,974,533
INCOME TAX EXPENSE (BENEFIT)		(3,717,174	)		1,822,030		(3,717,674	)		2,906,747

NET INCOME (LOSS)		(5,694,251	)		2,482,250		(5,739,353	)		4,067,786

Preferred stock dividends		2,031,097			600,924		3,898,857			1,112,155
NET INCOME (LOSS) ATTRIBUTABLE TO COMMON SHAREHOLDERS	$	(7,725,348	)	$	1,881,326	$	(9,638,210	)	$	2,955,631
NET INCOME (LOSS) PER SHARE
Basic	$	(1.34	)	$	0.32	$	(1.69	)	$	0.50
Diluted	$	(1.34	)	$	0.30	$	(1.69	)	$	0.49

WEIGHTED AVERAGE SHARES OUTSTANDING
Basic		5,777,724			5,967,098		5,710,909			5,954,944
Diluted		5,777,724			8,017,349		5,710,909			8,002,335

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

- 2 -

GWG HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

(unaudited)

	Three Months Ended						Six Months Ended
	June 30, 2017			June 30, 2016			June 30, 2017			June 30, 2016
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)	$	(5,694,251	)	$	2,482,250		$	(5,739,353	)	$	4,067,786
Adjustments to reconcile net income (loss) to net cash flows from operating activities:
Change in fair value of life insurance policies		(15,235,502	)		(21,241,376	)		(29,119,335	)		(32,772,929	)
Amortization of deferred financing and issuance costs		1,497,948			2,527,974			4,164,151			3,312,162
Deferred income taxes		(3,717,174	)		1,851,018			(3,717,674	)		2,906,747
Preferred stock dividends payable		363,959			166,472			700,748			330,049
(Increase) decrease in operating assets:
Life insurance policy benefits receivable		2,005,000			9,083,817			(1,625,000	)		(6,829,022	)
Other assets		(557,988	)		(1,210,892	)		868,330			(1,037,466	)
Increase (decrease) in operating liabilities:
Due to related party		(1,970	)		(1,814,173	)		(9,785	)		(101,781	)
Accounts payable and other accrued expenses		1,038,855			(775,213	)		2,256,087			1,192,756
NET CASH FLOWS USED IN OPERATING ACTIVITIES		(20,301,123	)		(8,930,123	)		(32,221,831	)		(28,931,698	)

CASH FLOWS FROM INVESTING ACTIVITIES
Investment in life insurance policies		(19,432,338	)		(24,373,714	)		(42,121,671	)		(48,700,036	)
Carrying value of matured life insurance policies		3,014,834			1,691,764			5,383,808			6,302,243
Investment in Secured MCA advances		(39,671	)		(1,293,829	)		(39,671	)		(5,647,414	)
Proceeds from Secured MCA advances		653,315			907,649			1,423,702			1,025,792
NET CASH FLOWS USED IN INVESTING ACTIVITIES		(15,803,860	)		(23,068,130	)		(35,353,832	)		(47,019,415	)

CASH FLOWS FROM FINANCING ACTIVITIES
Net borrowings on (repayments of) Senior Credit Facilities		(3,845,037	)		(3,000,000	)		(7,099,537	)		17,000,000
Payments for issuance of senior debt		(1,076,118	)		-			(1,190,412	)		-
Payments for redemption of Series I Secured Notes		(4,348,372	)		(485,350	)		(9,798,261	)		(5,722,743	)
Proceeds from issuance of L Bonds		31,875,811			36,757,771			56,744,470			71,126,660
Payments for issuance and redemption of L Bonds		(15,025,566	)		(11,753,782	)		(39,197,163	)		(22,663,475	)
Transfer from (payments to) restricted cash		1,931,958			8,667,826			(8,333,035	)		(8,818,894	)
Issuance (repurchase) of common stock		4			166,125			(1,603,556	)		212,670
Proceeds from issuance of preferred stock		34,301,747			9,472,673			61,480,941			10,501,209
Payment for issuance and redemption of preferred stock		(3,318,211	)		(845,361	)		(5,722,437	)		(1,617,914	)
Payment of preferred stock dividends		(2,031,097	)		(600,924	)		(3,898,857	)		(1,112,155	)
NET CASH FLOWS PROVIDED BY FINANCING ACTIVITIES		38,465,119			38,378,978			41,382,153			58,905,358

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		2,360,136			6,380,725			(26,193,510	)		(17,045,755	)

CASH AND CASH EQUIVALENTS
BEGINNING OF PERIOD		49,933,336			10,998,625			78,486,982			34,425,105
END OF PERIOD	$	52,293,472		$	17,379,350		$	52,293,472		$	17,379,350

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

- 3 -

GWG HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS – CONTINUED

(unaudited)

	Three Months Ended				Six Months Ended
	June 30, 2017		June 30, 2016		June 30, 2017		June 30, 2016
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Interest paid	$	14,323,000	$	10,294,000	$	26,548,000	$	16,399,000
Premiums paid	$	11,646,000	$	8,995,000	$	22,606,000	$	17,441,000
Stock-based compensation	$	89,000	$	41,000	$	406,000	$	50,000
NON-CASH INVESTING AND FINANCING ACTIVITIES
Series I Secured Notes:
Conversion of accrued interest and commissions payable to principal	$	-	$	142,000	$	-	$	187,000
L Bonds:
Conversion of accrued interest and commissions payable to principal	$	397,000	$	370,000	$	905,000	$	661,000
Series A Preferred Stock:
Issuance of Series A Preferred Stock in lieu of cash dividends	$	166,000	$	171,000	$	337,000	$	339,000
Investment in life insurance policies included in accounts payable	$	1,296,000	$	780,000	$	1,296,000	$	780,000

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

- 4 -

GWG HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY

(unaudited)

	Preferred Stock			Preferred			Common			Common Stock			Additional Paid-in			Accumulated			Total
	Shares			Stock			Shares			(par)			Capital			Deficit			Equity

Balance, December 31, 2015		2,781,735		$	20,784,841			5,941,790		$	5,942		$	14,563,834		$	(19,209,203	)	$	16,145,414

Net income (loss)		-			-			-			-			-			391,909			391,909

Issuance of common stock		-			-			36,450			36			244,149			-			244,185

Redemption of Series A Preferred Stock		(239,749	)		(1,788,451	)		1,950			2			19,498			-			(1,768,951	)

Issuance of Series A Preferred Stock		98,535			704,743			-			-			-			-			704,743

Issuance of Redeemable Preferred Stock		59,183			59,025,164									(4,133,525	)					54,891,639

Preferred stock dividends														(3,537,288	)					(3,537,288	)

Issuance of stock options		-			-			-			-			226,847			-			226,847
Balance, December 31, 2016		2,699,704		$	78,726,297			5,980,190		$	5,980		$	7,383,515		$	(18,817,294	)	$	67,298,498

Net income (loss)		-			-			-			-			-			(5,739,353	)		(5,739,353	)

Redemption of common stock		-			-			(200,445	)		(200	)		(1,603,360	)		-			(1,603,560	)

Redemption of Series A Preferred Stock		(17,033	)		(126,997	)		3,810			4			-			-			(126,993	)

Issuance of Series A Preferred Stock		48,175			210,230									-						210,230

Issuance of Redeemable Preferred Stock and Series 2 Redeemable Preferred Stock, net of costs		63,041			60,247,764									(2,017,487	)					58,230,277

Redemption of Redeemable Preferred Stock and Series 2 Redeemable Preferred Stock		(561	)		(561,277	)														(561,277	)

Preferred stock dividends*					(122,323	)								(3,776,534	)					(3,898,857	)

Issuance of stock options					66,408									13,866						80,274
Balance, June 30, 2017		2,793,326		$	138,440,102			5,783,555		$	5,784		$	-		$	(24,556,647	)	$	113,889,239

*Preferred stock dividends were paid from additional paid-in capital until the latter was exhausted in the second quarter of 2017. Subsequent dividends were charged against the carrying values of the respective series of the Company’s preferred stock resulting in a difference between the Company’s preferred stock book balances and liquidation preference of the respective series of preferred stock.

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

- 5 -

GWG HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

(1)

Nature of Business and Summary of Significant Accounting Policies

Nature of Business – We are a financial services company committed to finding new ways of disrupting and transforming the life insurance and related industries. We built our business by creating opportunities for consumers to obtain significantly more value for their life insurance policies as compared to the traditional options offered by the insurance industry by creating a secondary market. We are enhancing and extending these activities through innovation in our products and services, business processes, financing strategies, and advanced epigenetic technologies. At the same time, we are creating opportunities for investors to receive income and capital appreciation from our investment activities in the life insurance and related industries.

GWG Holdings, Inc. and all of its subsidiaries are incorporated and organized in Delaware. Unless the context otherwise requires or we specifically so indicate, all references in these footnotes to “we,” “us,” “our,” “our Company,” “GWG,” or the “Company” refer to GWG Holdings, Inc. and its subsidiaries collectively and on a consolidated basis. References to the full names of particular entities, such as “GWG Holdings, Inc.” or “GWG Holdings,” are meant to refer only to the particular entity referenced.

On December 7, 2015, GWG Holdings formed a wholly owned subsidiary, GWG MCA, LLC. On January 13, 2016, GWG MCA, LLC was converted to a corporation and became GWG MCA Capital, Inc. GWG MCA Capital, Inc. (“GWG MCA”) was formed to provide cash advances to small businesses.

On August 25, 2016, GWG Holdings formed a wholly owned subsidiary, Actüa Life & Annuity Ltd. (“Actüa”), to engage in various life insurance related businesses and activities related to its exclusive license for “DNA Methylation Based Predictor of Mortality” technology.

Use of Estimates – The preparation of our 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 consolidated financial statements, as well as the reported amounts of revenue during the reporting period. We regularly evaluate 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. Our actual results may differ materially and adversely from our estimates. The most significant estimates with regard to these consolidated financial statements relate to (1) the determination of the assumptions used in estimating the fair value of our investments in life insurance policies, and (2) the value of our deferred tax assets and liabilities.

Cash and Cash Equivalents – We consider cash in demand deposit accounts and temporary investments purchased with an original maturity of three months or less to be cash equivalents. We maintain our cash and cash equivalents with highly rated financial institutions. The balances in our bank accounts may exceed Federal Deposit Insurance Corporation limits. We periodically evaluate the risk of exceeding insured levels and may transfer funds as we deem appropriate.

Life Insurance Policies – Accounting Standards Codification 325-30, Investments in Insurance Contracts (“ASC 325-30”), permits a reporting entity to account for its investments in life insurance policies using either the investment method or the fair value method. We elected to use the fair value method to account for our life insurance policies. We initially record our purchase of life insurance policies at the transaction price, which is the amount paid for the policy, inclusive of all external fees and costs associated with the acquisition. At each subsequent reporting period, we re-measure the investment at fair value in its entirety and recognize the change in fair value as unrealized gain (revenue) in the current period, net of premiums paid.

In a case where our acquisition of a policy is not complete as of a reporting date, but we have nonetheless advanced direct costs and deposits for the acquisition, those costs and deposits are recorded as “other assets” on our balance sheet until the acquisition is complete and we have secured title to the policy. On June 30, 2017 and December 31, 2016, a total of $339,000 and $42,000, respectively, of our “other assets” comprised direct costs and deposits that we had advanced for policy acquisitions.

We also recognize realized gain (or loss) from a life insurance policy upon one of the two following events: (1) our receipt of notice or verified mortality of the insured; or (2) our sale of the policy, filing of change-of-ownership forms and receipt of payment. In the case of mortality, the gain (or loss) we recognize is the difference between the policy benefits and the carrying values of the policy once we determine that collection of the policy benefits is realizable and reasonably assured. In the case of a policy sale, the gain (or loss) we recognize is the difference between the sale price and the carrying value of the policy on the date we receive sale proceeds.

- 6 -

GWG HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Other Assets – Actüa is engaged in various life insurance related businesses and activities related to its exclusive license for the “DNA Methylation Based Predictor of Mortality” technology for the life insurance industry. The cost of entering into this license agreement is listed as “other assets.”

Stock-Based Compensation – We measure and recognize compensation expense for all stock-based payments at fair value over the requisite service period. We use the Black-Scholes option pricing model to determine the weighted-average fair value of options. For restricted stock grants, fair value is determined as of the closing price of our common stock on the date of grant. Stock-based compensation expense is recorded in general and administrative expenses based on the classification of the employee or vendor. The determination of fair value of stock-based payment awards on the date of grant using an option-pricing model is affected by our stock price as well as by assumptions regarding a number of subjective variables. These variables include, but are not limited to, the expected stock price volatility over the term of the awards, and actual and projected employee stock option exercise behaviors.

The expected terms of the options are based on evaluations of historical and expected future employee exercise behavior. 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 comparable companies over the previous 52 weeks. We have not historically issued any common stock dividends and do not expect to do so in the foreseeable future. Forfeitures for both option and restricted stock grants are estimated at the time of the grant and revised in subsequent periods if actual forfeitures differ from estimates.

Deferred Financing and Issuance Costs – Loans advanced to us under our senior credit facilities, as described in Notes 5 and 6, are reported net of financing costs, including issuance costs, sales commissions and other direct expenses, which are amortized using the straight-line method over the term of the facility. The Series I Secured Notes and L Bonds, as respectively described in Notes 7 and 8, are reported net of financing costs, which are amortized using the interest method over the term of those borrowings. The Series A Convertible Preferred Stock (“Series A”), as described in Note 9, is reported net of financing costs (including the fair value of warrants issued), all of which were fully amortized using the interest method as of June 30, 2017. Selling and issuance costs of Redeemable Preferred Stock (“RPS”) and Series 2 Redeemable Preferred Stock (“RPS 2”), described in Notes 10 and 11, are netted against additional paid-in-capital and against the principal balance of the preferred stock.

Earnings (loss) per 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 Series A, RPS, RPS 2, warrants and stock options. Due to our net loss for the three and six months ended June 30, 2017, there are no dilutive securities.

Recently Issued Accounting Pronouncements – On April 7, 2015, the FASB issued Accounting Standards Update No. 2015-03, Simplifying the Presentation of Debt Issuance Costs (“ASU 2015-03”), as part of its simplification initiative. ASU 2015-03 changes the presentation of debt issuance costs by presenting those costs in the balance sheet as a direct deduction from the related debt liability. Amortization of the costs is reported as interest expense. We adopted ASU 2015-03 effective January 1, 2016, as required for public reporting entities.

On February 25, 2016, the FASB issued Accounting Standards Update 2016-02 Leases (“ASU 2016-02”). The new guidance is effective for fiscal years beginning after December 15, 2018. ASU 2016-02 provides more transparency and comparability in the financial statements of lessees by recognizing all leases with a term greater than twelve months on the balance sheet. Lessees will also be required to disclose key information about their leases. Early adoption is permitted. We are currently evaluating the impact of the adoption of this pronouncement and have not yet adopted ASU 2016-02 as of June 30, 2017.

In March 2016, the FASB issued Accounting Standards Update 2016-09 (“ASU 2016-09”) to simplify the accounting for stock compensation related to the following items: income tax accounting, award classification, estimation of forfeitures, and cash flow presentation. The new guidance is effective for fiscal years beginning after December 15, 2016. We are currently in the process of adopting this pronouncement.

(2)

Restrictions on Cash

Under the terms of our senior credit facilities (discussed in Notes 5 and 6), we are required to maintain collection and escrow accounts that are used to fund the acquisition of policies, pay annual policy premiums, pay interest and other charges under the facility, and collect policy benefits. The agents for the lenders authorize disbursements from these accounts. At June 30, 2017 and December 31, 2016, there was a balance of $46,160,000, and $37,827,000, respectively, in these restricted cash accounts.

- 7 -

GWG HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

(3)

Investment in Life Insurance Policies

Life insurance policies are valued based on unobservable inputs that are significant to their overall fair value. Changes in the fair value of these policies are recorded as gain or loss on life insurance policies, net of premiums paid on those policies, in our 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 (i.e., $1 million in face value benefits or less), assumptions relating to cost-of-insurance (premium) rates and other assumptions. The discount rate we apply incorporates current information about discount rates applied by other reporting companies owning portfolios of life insurance policies, the discount rates observed in the life insurance secondary market, market interest rates, the credit exposure to the insurance companies that issued the life insurance policies and management’s estimate of the risk premium a purchaser would require to receive the future cash flows derived from our portfolio as a whole. Management has 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 10.81% was applied to our portfolio as of June 30, 2017 as compared to 10.96% as of December 31, 2016.

A summary of our policies, organized according to their estimated life expectancy dates as of the reporting date, is as follows:

	As of June 30, 2017						As of December 31, 2016
Years Ending December 31,	Number of Policies		Estimated Fair Value		Face Value		Number of Policies		Estimated Fair Value		Face Value
2017		4	$	3,044,000	$	3,375,000		11	$	14,837,000	$	16,939,000
2018		11		16,462,000		20,853,000		23		30,830,000		42,564,000
2019		61		64,377,000		92,676,000		55		57,556,000		88,858,000
2020		96		92,535,000		159,203,000		93		85,414,000		159,814,000
2021		85		71,872,000		142,961,000		86		73,825,000		158,744,000
2022		88		80,308,000		184,162,000		66		56,909,000		147,222,000
2023		80		58,506,000		166,527,000		64		44,953,000		128,581,000
Thereafter		368		189,946,000		755,606,000		292		146,868,000		618,953,000
Totals		793	$	577,050,000	$	1,525,363,000		690	$	511,192,000		1,361,675,000

We recognized life insurance benefits of $10,935,000 and $9,829,000 during the three months ended June 30, 2017 and 2016, respectively, related to policies with a carrying value of $3,014,000 and $1,692,000, respectively, and as a result recorded realized gains of $7,920,000 and $8,137,000, respectively. We recognized life insurance benefits of $29,910,000 and $29,067,000 during the six months ended June 30, 2017 and 2016, respectively, related to policies with a carrying value of $5,384,000 and $6,302,000, respectively, and as a result recorded realized gains of $24,526,000 and $22,765,000, respectively.

Reconciliation of gain on life insurance policies:

	Three Months Ended June 30,						Six Months Ended June 30,
	2017			2016			2017			2016
Change in estimated probabilistic cash flows	$	16,446,000		$	17,972,000		$	32,849,000		$	27,425,000
Unrealized gain on acquisitions		8,044,000			9,822,000			18,646,000			17,841,000
Premiums and other annual fees		(11,859,000	)		(8,995,000	)		(22,949,000	)		(17,441,000	)
Change in discount rates(1)		4,143,000			629,000			4,143,000			838,000
Change in life expectancy evaluation (2)		(6,662,000	)		(1,545,000	)		(8,604,000	)		(914,000	)
Realized gain on maturities		7,920,000			8,137,000			24,526,000			22,765,000
Fair value of matured policies		(6,736,000	)		(5,637,000	)		(17,915,000	)		(12,417,000	)
Gain on life insurance policies, net	$	11,296,000		$	20,383,000		$	30,696,000		$	38,097,000

(1) The discount rate applied to estimate the fair value of the portfolio of life insurance policies we own was 10.81% as of June 30, 2017, compared to 10.96% as of December 31, 2016 and 11.05% as of June 30, 2016. The carrying value of policies acquired during each quarterly reporting period is adjusted to current fair value using the fair value discount rate applied to the entire portfolio as of that reporting date.

(2) The change in fair value due to updating independent life expectancy estimates on certain life insurance policies in our portfolio.

- 8 -

GWG HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

We currently estimate that 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:

Years Ending December 31,	Premiums		Servicing		Premiums and Servicing Fees
Six months ending December 31, 2017	$	24,455,000	$	654,000	$	25,109,000
2018		52,611,000		654,000		53,265,000
2019		58,206,000		654,000		58,860,000
2020		65,722,000		654,000		66,376,000
2021		74,105,000		654,000		74,759,000
2022		83,310,000		654,000		83,964,000
	$	358,409,000	$	3,924,000	$	362,333,000

Management anticipates funding the premium payments estimated above with proceeds from the receipt of policy benefits from our portfolio of life insurance policies, net proceeds from our offering of L Bonds and RPS 2, and from our senior credit facilities. The proceeds of these capital sources may also be used for the purchase, financing, and maintenance of additional life insurance policies.

(4)

Fair Value Definition and Hierarchy

Accounting Standards Codification 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 independent 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.

The hierarchy is broken down 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. Since valuations are based on quoted prices that are readily and regularly available in an active market, valuation of these products does not entail a significant degree of judgment.

●	Level 2 - Valuations based on one or more quoted prices in markets that are not active or for which all significant inputs are observable, either directly or indirectly.

●	Level 3 - Valuations based on inputs that are unobservable and significant to the overall 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.

Level 3 Valuation Process

The estimated fair value of our portfolio of life insurance policies is determined on a quarterly basis by our portfolio management committee, taking into consideration 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 current information about discount rates applied by other reporting companies owning portfolios of life insurance policies, the discount rates observed in other competitive purchases in the life insurance secondary market, market interest rates, the credit exposure to the insurance company that issued the life insurance policy and management’s estimate of the risk premium a purchaser would require to receive the future cash flows derived from our portfolio as a whole. Management has discretion regarding the combination of these and other factors when determining the discount rate.

- 9 -

GWG HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

These inputs are then used to estimate the discounted cash flows from the portfolio using the Model Actuarial Pricing System probabilistic portfolio price model, which estimates the cash flows using various mortality probabilities and scenarios. The valuation process includes a review by senior management as of each valuation date. We also engage a third-party expert to independently test the accuracy of the valuations using the inputs we provide on a quarterly basis. See Exhibit 99.1 filed herewith.

The following table reconciles the beginning and ending fair value of our Level 3 investments in our portfolio of life insurance policies for the periods ended June 30, as follows:

	Three months ended June 30,						Six months ended June 30,
	2017			2016			2017			2016
Beginning balance	$	545,397,000		$	387,402,000		$	511,192,000		$	356,650,000
Purchases		19,432,000			24,869,000			42,122,000			48,700,000
Maturities (initial cost basis)		(3,014,000	)		(1,692,000	)		(5,384,000	)		(6,303,000	)
Net change in fair value		15,235,000			21,241,000			29,120,000			32,773,000
Ending balance	$	577,050,000		$	431,820,000		$	577,050,000		$	431,820,000

In the past, we periodically updated the independent life expectancy estimates on the insured lives in our portfolio, other than insured lives covered under small face amount policies (i.e., $1 million in face value benefits or less), on a continuous rotating three-year cycle, and through that effort attempted to update life expectancies for approximately one-twelfth of our portfolio each quarter. Currently, however, the terms of our senior credit facility with LNV Corporation require us to attempt to update life expectancies on a rotating two-year cycle.

The following table summarizes the inputs utilized in estimating the fair value of our portfolio of life insurance policies:

	As of June 30, 2017			As of December 31, 2016
Weighted-average age of insured, years *		81.5			81.6
Weighted-average life expectancy, months *		82.6			83.2
Average face amount per policy	$	1,924,000		$	1,973,000
Discount rate		10.81	%		10.96	%

(*) Weighted average by face amount of policy benefits

Life expectancy estimates and market discount rates are, by their nature, 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%, while all other variables were held constant, the fair value of our investment in life insurance policies would increase or decrease as summarized below:

Change in Fair Value of the Investment in Life Insurance Policies

	Change in life expectancy estimates
	minus 8 months		minus 4 months		plus 4 months			plus 8 months

June 30, 2017	$	78,665,000	$	39,075,000	$	(38,334,000	)	$	(75,932,000	)
December 31, 2016	$	69,253,000	$	34,601,000	$	(33,846,000	)	$	(67,028,000	)

	Change in discount rate
	minus 2%		minus 1%		plus 1%			plus 2%

June 30, 2017	$	60,606,488	$	29,002,000	$	(26,678,000	)	$	(51,277,000	)
December 31, 2016	$	53,764,000	$	25,728,000	$	(23,668,000	)	$	(45,491,000	)

- 10 -

GWG HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Other Fair Value Considerations

The carrying value of receivables, prepaid expenses, accounts payable and accrued expenses approximate fair value due to their short-term maturities and low credit risk. Using the income-based valuation approach, the estimated fair value of our Series I Secured Notes and L Bonds, having a combined aggregate face value of $414,666,000 as of June 30, 2017, is approximately $424,793,000 based on a weighted-average market interest rate of 6.60%. The carrying value of the senior credit facilities reflects interest charged at the commercial paper rate or 12-month LIBOR, as applicable, plus an applicable margin. The margin represents our credit risk, and the strength of the portfolio of life insurance policies collateralizing the debt. The overall rate reflects market, and the carrying value of the facility approximates fair value.

GWG MCA participates in the merchant cash advance industry by directly advancing sums to merchants and lending money, on a secured basis, to companies that advance sums to merchants. Each quarter, we review the carrying value of these advances and loans, and determine if an impairment reserve is necessary. At June 30, 2017 one of our secured loans was potentially impaired. The secured loan to Nulook Capital LLC had an outstanding balance of $2,060,000 and a loan loss reserve of $1,478,000 at June 30, 2017. We deem fair value to be the estimated collectible value on each loan or advance made from GWG MCA. Where we estimate the collectible amount to be less than the outstanding balance, we record a reserve for the difference. We recorded an impairment charge of $870,000 for the quarter ended June 30, 2017.

The following table summarizes outstanding warrants related to our Series A offering (see Note 9) and the Company’s initial public offering as of June 30, 2017:

Month issued	Warrants issued		Fair value per share		Risk free rate			Volatility			Term
September 2012		2,500	$	0.72		0.31	%		40.49	%	5 years
September 2014		16,000	$	1.26		1.85	%		17.03	%	5 years
		18,500

(5)

Credit Facility – Autobahn Funding Company LLC

Through GWG DLP Funding III, LLC (“DLP III”) we are party to a $105 million senior credit facility with Autobahn Funding Company LLC (“Autobahn”), with a maturity date of June 30, 2018. The facility is governed by a Credit and Security Agreement (the “Agreement”), and DZ Bank AG Deutsche Zentral-Genossenschaftsbank (“DZ Bank”) acts as the agent for Autobahn under the Agreement. On September 14, 2016, we paid off this senior credit facility in full with funds received from a new senior credit facility with LNV Corporation as described in Note 6.

Advances under the facility bear interest at a commercial paper rate of the lender at the time of the advance, or at the lender’s cost of borrowing plus 4.25%.

The amount outstanding under this facility was $0 at both June 30, 2017 and December 31, 2016, respectively. GWG Holdings is a performance guarantor of the various obligations of GWG Life, as servicer, under the Agreement. Obligations under the facility are secured by our pledge of ownership in our life insurance policies to DZ Bank through an arrangement under which Wells Fargo serves as securities intermediary.

The Agreement has certain financial (as described below) and non-financial covenants, and we were in compliance with these covenants at both June 30, 2017 and December 31, 2016.

We have agreed to maintain (i) a positive consolidated net income on a non-GAAP basis (as defined and calculated under the Agreement) for each complete fiscal year, (ii) a tangible net worth on a non-GAAP basis (again, as defined and calculated under the Agreement) of not less than $45 million, and (iii) cash and eligible investments of $15 million or above.

Consolidated non-GAAP net income and non-GAAP tangible net worth for the four quarters ended and as of June 30, 2017, as calculated under the Agreement, was $29,590,000 and $225,661,000, respectively.

No life insurance policies were pledged and no funds were available for additional borrowings under the facility at June 30, 2017 and December 31, 2016.

- 11 -

GWG HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

(6)

Credit Facility – LNV Corporation

On September 14, 2016, we entered into a senior credit facility with LNV Corporation as lender through our subsidiary GWG DLP Funding IV, LLC. The Loan Agreement governing the facility makes available a total of up to $172,300,000 in credit with a maturity date of September 14, 2026. Additional quarterly advances are available under the Loan Agreement at the LIBOR rate as defined in the Loan Agreement. Interest will accrue on amounts borrowed under the Loan Agreement 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 12-month LIBOR or the federal funds rate (as defined in the agreement) plus one-half of one percent per annum, plus (B) 5.75% per annum. The effective rate at June 30, 2017 was 7.59%. Interest payments are made on a quarterly basis.

The amount outstanding under this facility was $155,625,000 at June 30, 2017 and $162,725,000 at December 31, 2016. Obligations under the facility are secured by a security interest in DLP IV’s assets, for the benefit of the lenders under the Loan Agreement, through an arrangement under which Wells Fargo 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 its L Bonds or Series I Secured Notes. The difference between the outstanding balance as of June 30, 2017 and the carrying amount relates to unamortized debt issuance costs.

The Loan Agreement requires DLP IV to maintain a reserve account in an amount sufficient to pay 12 months of servicing, administrative and third party expenses identified under the Loan Agreement, and 12 months of debt service as calculated under the Loan Agreement. As of June 30, 2017, the amount set aside in this specific reserve account was $27,523,000.

The Loan Agreement has certain financial and nonfinancial covenants, and we were in compliance with these covenants at June 30, 2017 and December 31, 2016.

No funds were available for additional borrowings under the facility at June 30, 2017.

(7)

Series I Secured Notes

Series I Secured Notes (“Series I”) are legal obligations of GWG Life and were privately offered and sold from August 2009 through June 2011. The Series I are secured by the assets of GWG Life and are subordinate to obligations under our senior credit facilities (see Notes 5 and 6). We are party to a Third Amended and Restated Note Issuance and Security Agreement dated November 1, 2011, as amended, under which GWG Life is obligor, GWG Holdings is guarantor, and Lord Securities Corporation serves as trustee of the GWG Life Trust (“Trust”). This agreement contains certain financial and non-financial covenants, and we were in compliance with these covenants at both June 30, 2017 and December 31, 2016.

The Series I were sold with original maturity dates ranging from six months to seven years, and with fixed interest rates varying from 5.65% to 9.55% depending on the term of the note. The Series I have renewal features under which we may elect to permit their renewal, subject to the right of noteholders to elect to receive payment at maturity. Since September 1, 2016, we are no longer renewing the Series I.

Interest on the Series I is payable monthly, quarterly, annually or at maturity depending on the election of the investor. At June 30, 2017 and December 31, 2016, the weighted-average interest rate of our Series I was 8.72% and 8.68%, respectively. The principal amount of Series I outstanding was $6,815,000 and $16,614,000 at June 30, 2017 and December 31, 2016, respectively. The difference between the amount outstanding on the Series I and the carrying amount on our balance sheet is due to netting of unamortized deferred issuance costs and including redemptions in process. Overall, interest expense includes amortization of deferred financing and issuance costs of $29,000 and $74,000 for the three and six months ended June 30, 2017 and $82,000 and $193,000 for the three and six months ended June 30, 2016. Future expected amortization of deferred financing costs is $134,000 in total over the next five years.

- 12 -

GWG HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Future contractual maturities of Series I payable, and future amortization of their deferred financing costs, at June 30, 2017 are as follows:

Years Ending December 31,	Contractual Maturities		Amortization of Deferred Financing Costs
Six months ending December 31 ,2017	$	749,000	$	3,000
2018		2,376,000		25,000
2019		1,024,000		17,000
2020		1,725,000		41,000
2021		941,000		48,000
	$	6,815,000	$	134,000

(8)

L Bonds

Our L Bonds are legal obligations of GWG Holdings. Obligations under the L Bonds are secured by the assets of GWG Holdings and by GWG Life, as a guarantor, and are subordinate to the obligations under our senior credit facilities (see Notes 5 and 6). 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 are 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. 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. The Indenture contains certain financial and non-financial covenants, and we were in compliance with these covenants at June 30, 2017 and December 31, 2016.

Effective September 1, 2016, we ceased selling 6-month and 1-year L Bonds until further notice. In addition, effective September 1, 2016, the L Bond interest rates that we offer changed to 5.50%, 6.25%, 7.50% and 8.50% for the 2-, 3-, 5- and 7-year L Bonds, respectively. 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 June 30, 2017 and December 31, 2016, the weighted-average interest rate of our L Bonds was 7.30% and 7.23%, respectively. The principal amount of L Bonds outstanding was $407,850,000 and $387,067,000 at June 30, 2017 and December 31, 2016, respectively. The difference between the amount of outstanding L Bonds and the carrying amount on our 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 $927,000 and $2,856,000 for the three and six months ended June 30, 2017 and $1,721,000 and $3,289,000 for the three and six months ended June 30, 2016. Future expected amortization of deferred financing costs as of June 30, 2017 is $13,539,000 in total over the next seven years.

Future contractual maturities of L Bonds, and future amortization of their deferred financing costs, at June 30, 2017 are as follows:

Years Ending December 31,	Contractual Maturities		Amortization of Deferred Financing Costs
Six months ending December 31, 2017	$	47,068,000	$	353,000
2018		108,772,000		2,181,000
2019		116,767,000		4,128,000
2020		49,062,000		2,147,000
2021		28,753,000		1,411,000
Thereafter		57,428,000		3,319,000
	$	407,850,000	$	13,539,000

(9)

Series A Convertible Preferred Stock

From July 2011 through September 2012, we privately offered shares of Series A of GWG Holdings at $7.50 per share. In the offering, we sold an aggregate of 3,278,000 shares for gross consideration of $24,582,000. Holders of Series A are entitled to cumulative dividends at the rate of 10% per annum, paid quarterly. Dividends on the Series A are accumulating and are recorded as a reduction to additional paid-in capital. Under certain circumstances described in the Certificate of Designation for the Series A, additional Series A shares may be issued in lieu of cash dividends at the rate of $7.00 per share.

- 13 -

GWG HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Holders of Series A are entitled to a liquidation preference equal to the stated value of their preferred shares (i.e., $7.50 per share) plus accrued but unpaid dividends. Holders of Series A may presently convert each share of their Series A into 0.75 shares of our common stock at a price of $10.00 per share.

As of June 30, 2017, we issued an aggregate of 521,000 shares of Series A in satisfaction of $3,647,000 in dividends on the Series A, and an aggregate of 696,000 shares of Series A were converted into 522,000 shares of our common stock. As of June 30, 2017, we had 2,672,000 Series A shares outstanding with respect to which we incurred aggregate issuance costs of $2,838,000, all of which is included as a component of additional paid-in capital.

Purchasers of Series A in our offering received warrants to purchase an aggregate of 431,954 shares of our common stock at an exercise price of $12.50 per share. The grant date fair value of these warrants was $428,000. As of June 30, 2017, none of these warrants had been exercised and 413,000 warrants have expired. The weighted-average remaining life of these warrants was 1.94 and 0.56 years at June 30, 2017 and December 31, 2016, respectively.

In September 2014, we completed, at our discretion, a public offering of our common stock and, as a result, the Series A was reclassified from temporary equity to permanent equity. We may redeem Series A shares at a price equal to 110% of their liquidation preference ($7.50 per share) at any time. As of June 30, 2017, we have redeemed an aggregate of 439,000 shares of Series A.

(10)

Redeemable Preferred Stock

On November 30, 2015, our public offering of up to 100,000 shares of Redeemable Preferred Stock (“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. 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 Series A, 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 presently 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 by such holder from us and still held by such holder.

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. Nevertheless, the Certificate of Designation for RPS permits us complete 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.

As of June 30, 2017, we had sold 99,127 shares of RPS for aggregate gross consideration of $99,127,000, and incurred approximately $7,019,000 of selling costs related to the sale of those shares. On March 31, 2017, we closed the RPS offering to investors.

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 and that the RPS should be considered an equity host for the purposes of assessing the embedded derivatives for potential bifurcation. Based on our assessment under Accounting Standards Codification 470 “Debt” (“ASC 470”) we do not believe bifurcation of either the holder’s redemption or conversion feature is appropriate.

- 14 -

GWG HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

(11)

Series 2 Redeemable Preferred Stock

On February 14, 2017, our public offering of up to 150,000 shares of Series 2 Redeemable Preferred Stock (“RPS 2”) at $1,000 per share was declared effective. Holders of RPS 2 are entitled to cumulative dividends at the rate of 7% per annum, paid monthly. Dividends on the RPS 2, when payable, will be recorded as a reduction to additional paid-in capital. Under certain circumstances described in the Certificate of Designation for the RPS 2, additional shares of RPS 2 may be issued in lieu of cash dividends.

The RPS 2 ranks senior to our common stock and pari passu with our Series A and RPS, 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 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 by such holder from us and still held by such holder.

Holders of RPS 2 may request that we redeem their RPS 2 shares at a price equal to their liquidation preference, less an applicable redemption fee, if any. Nevertheless, the Certificate of Designation for RPS 2 permits us complete discretion to grant or decline requests for redemption. Subject to certain restrictions and conditions, we may also redeem shares of RPS 2 without a redemption fee upon a holder’s death, total disability or bankruptcy. In addition, 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).

As of June 30, 2017, we had sold 22,536 shares of RPS 2 for aggregate gross consideration of $22,536,000, and incurred approximately $1,078,000 of selling costs related to the sale of those shares.

At the time of its issuance, we determined that the RPS 2 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 and that the RPS 2 should be considered an equity host for the purposes of assessing the embedded derivatives for potential bifurcation. Based on our assessment under ASC 470 we do not believe bifurcation of either the holder’s redemption or conversion feature is appropriate.

(12)

Income Taxes

We had a current income tax liability of $0 as of both June 30, 2017 and December 31, 2016. The components of deferred income tax expense (benefit) for the three and six months ended June 30, 2017 and 2016, respectfully, consisted of the following:

	Three Months Ended						Six Months Ended
	June 30,			June 30,			June 30,			June 30,
	2017			2016			2017			2016
Income tax provision (benefit):
Current:
Federal	$	(27,000	)	$	(23,000	)	$	-		$	-
State	$	(7,000	)	$	(6,000	)	$	-		$	-
Total current tax expense (benefit)		(34,000	)		(29,000	)					-
Deferred:
Federal	$	(2,798,000	)	$	1,397,000		$	(2,818,000	)	$	2,203,000
State	$	(885,000	)	$	454,000		$	(900,000	)	$	704,000
Total deferred tax expense (benefit)		(3,683,000	)		1,851,000			(3,718,000	)		2,907,000
Total income tax expense (benefit)		(3,717,000	)		1,822,000			(3,718,000	)		2,907,000

We provide for a valuation allowance when it is not considered “more likely than not” that our deferred tax assets will be realized. At both June 30, 2017 and December 31, 2016, based upon all available evidence, we provided a valuation allowance of $2,164,000 against deferred tax assets related to the likelihood of recovering the tax benefit of a capital loss on a note receivable from a related entity and other capital losses.

The Company is engaged in acquiring of life insurance policies and holding them to maturity. Due to the nature of holding policies and the aging of the underlying insureds, it will be more likely than not that the Company will recognize taxable income as the policies in our portfolio start maturing at an accelerated rate in the near future. Due to this we believe that sufficient taxable income will be recognized during the net operating loss carryover period to utilize the reported deferred tax asset, and that no additional valuation allowance, other than that already recorded, is required.

- 15 -

GWG HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Accounting Standards Codification 740, Income Taxes (“ASC 740”) requires the reporting of certain tax positions that do not meet a threshold of “more likely than not” to be recorded as uncertain tax benefits. It is management’s responsibility to determine whether it is “more likely than not” that a tax position will be sustained upon examination, including resolution of any related appeals or litigation, based upon the technical merits of the position. Management has reviewed all income tax positions taken or expected to be taken for all open years and determined that the income tax positions are appropriately stated and supported. We do not anticipate that the total unrecognized tax benefits will significantly change prior to June 30, 2017.

Under our accounting policies, interest and penalties on unrecognized tax benefits, as well as interest received from favorable tax settlements, are recognized as components of income tax expense. At June 30, 2017 and December 31, 2016, we recorded no accrued interest or penalties related to uncertain tax positions.

Our income tax returns for tax years ended December 31, 2013, 2014, 2015 and 2016 remain open to examination by the Internal Revenue Service and various state taxing jurisdictions. Our tax return for tax year 2012 has now been examined by the IRS (finalized April of 2015) but is open for examination by various state taxing jurisdictions.

(13)

Common Stock

In September 2014, we consummated an initial public offering of our 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, we listed our common stock on the Nasdaq Capital Market under the ticker symbol “GWGH.”

(14)

Stock Incentive Plan

We adopted our 2013 Stock Incentive Plan in March 2013. The Compensation Committee of our Board of Directors is responsible for the administration of the plan. 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. As of June 30, 2017, 3,000,000 common stock options are issuable under the plan.

Stock Options

Through June 30, 2017, we had issued stock options for 1,532,000 shares of common stock to employees, officers, and directors under the plan. Options for 740,000 shares have vested, and the remaining options are scheduled to vest over three years. The options were issued with an exercise price between $6.35 and $10.38 for those beneficially owning more than 10% of our common stock, and between $4.83 and $10.76 for all others, which is equal to the estimated market price of the shares on the date of grant. The expected annualized volatility used in the Black-Scholes model valuation of options issued during the period was 20.0%. The annual volatility rate is based on the standard deviation of the average continuously compounded rate of return of five selected comparable companies over the previous 52 weeks. A forfeiture rate of 15% is based on historical information and expected future trend. As of June 30, 2017, stock options for 679,000 shares had been forfeited and stock options for 70,000 shares had been exercised.

On April 17, 2017, GWG Holdings, Inc. entered into a Separation Agreement with Mr. Jon Gangelhoff. Under this agreement, Mr. Gangelhoff retired and resigned his position as Chief Operating Officer. In addition, all of Mr. Gangelhoff’s unvested outstanding common stock options at the time of his separation were vested under the Separation Agreement.

Outstanding stock options:

	Vested			Un-vested			Total
Balance as of December 31, 2015		483,703			569,912			1,053,615
Granted during the year		22,500			608,350			630,850
Vested during the year		251,788			(251,788	)		-
Exercised during the year
Forfeited during the year		(19,926	)		(82,140	)		(102,066	)
Balance as of December 31, 2016		738,065			844,334			1,582,399
Granted year-to-date		20,100			213,300			233,400
Vested year-to-date		165,783			(165,783	)		-
Exercised year-to-date		(42,000	)		-			(42,000	)
Forfeited year-to-date		(142,119	)		(99,415	)		(241,534	)
Balance as of June 30, 2017		739,829			792,436			1,532,265

- 16 -

GWG HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Compensation expense related to unvested options not yet recognized is $541,000. We expect to recognize this compensation expense over the next three years ($89,000 in 2017, $217,000 in 2018, $167,000 in 2019, and $68,000 in 2020).

Stock Appreciation Rights (SARs)

As of June 30, 2017, we have issued SARs for 280,472 shares of common stock to employees. The strike price of the SARs was between $7.84 and $10.38, which was equal to the market price of the common stock at the date of issuance. As of June 30, 2017, 114,031 of the SARs were vested. On June 30, 2017 the market price of GWG’s common stock was $10.58.

Outstanding Stock Appreciation Rights:

	Vested		Un-vested			Total
Balance as of December 31, 2015		-		-			-
Granted during the year		106,608		133,127			239,735
Forfeited during the year		-		-			-
Balance as of December 31, 2016		106,608		133,127			239,735
Granted during the year		4,063		36,674			40,737
Vested during the year		3,360		(3,360	)
Forfeited during the year		-		-			-
Balance as of June 30, 2017		114,031		166,441			280,472

A liability for the SARs was recorded on June 30, 2017 in the amount of $316,000 and compensation expense was charged for the amount of $312,000.

Upon the exercise of SARs, the Company is obligated to make cash payment equal to the positive difference between the fair market value of the Company’s common stock on the date of exercise less the fair market value of the common stock on the date of grant.

(15)

Net Loss per Common Share

We have outstanding Series A, RPS and RPS 2, as described in Notes 9, 10 and 11. The Series A, RPS and RPS 2 are anti-dilutive to our net loss or income attributable to common shareholders calculation at both June 30, 2017 and 2016. We also issued warrants to purchase common stock in conjunction with the sale of Series A (see Note 9). Both those warrants and our vested stock options are anti-dilutive at both June 30, 2017 and 2016 and have not been included in the fully diluted net loss per common share calculation.

(16)

Commitments

We are party to an office lease with U.S. Bank National Association as the landlord. On September 1, 2015, we entered into an amendment to our original lease that expanded the leased space to 17,687 square feet and extended the term through 2025. Under the amended lease we are obligated to pay base rent plus common area maintenance and a share of building operating costs. Rent expenses under this agreement were $110,000 and $223,000 during the three and six months ended June 30, 2017 and $123,000 and $232,000 for the three and six months ended June 30, 2016.

Minimum lease payments under the amended lease are as follows:

Six months ending December 31, 2017	$	90,000
2018		185,000
2019		191,000
2020		198,000
2021		204,000
2022		210,000
2023		217,000
2024		223,000
2025		230,000
	$	1,748,000

- 17 -

GWG HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

(17)

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.

(18)

Guarantee of L Bonds

We are publicly offering and selling L Bonds under a registration statement declared effective by the SEC, as described in Note 8. Our obligations under the L Bonds are secured by substantially all the assets of GWG Holdings, a pledge of all our common stock held individually by our largest stockholders, and by a guarantee and corresponding grant of a security interest in substantially all the assets of GWG Life. As a guarantor, GWG Life has fully and unconditionally guaranteed the payment of principal and interest on the L Bonds. Substantially all of our life insurance policies are held by DLP III, DLP IV and the Trust. GWG Life’s equity in DLP III and DLP IV serve as collateral for our L Bond obligations. The policies held by DLP III and DLP IV are not collateral for the L Bond obligations as such policies serve as direct collateral for the senior credit facilities.

The consolidating financial statements are presented in lieu of separate financial statements and other related disclosures of the subsidiary guarantor and issuer because management does not believe that separate financial statements and related disclosures would be material to investors. There are currently no significant restrictions on the ability of GWG Holdings or GWG Life, the guarantor subsidiary, to obtain funds from its subsidiaries by dividend or loan, except as described in these notes. A majority of insurance policies we own are subject to a collateral arrangement with LNV Corporation described in Note 6. Under this arrangement, collection and escrow accounts are used to fund premiums for the insurance policies and to pay interest and other charges under the senior credit facility.

The following represents consolidating financial information as of June 30, 2017 and December 31, 2016, with respect to the financial position, and for the three and six months ended June 30, 2017 and 2016, with respect to results of operations and cash flows of GWG Holdings and its subsidiaries. The parent column presents the financial information of GWG Holdings, the primary obligor for the L Bonds. The guarantor subsidiary column represents the financial information of GWG Life, the guarantor subsidiary of the L Bonds, presenting its investment in DLP III, DLP IV and the Trust under the equity method. The non-guarantor subsidiaries column presents the financial information of all non-guarantor subsidiaries, including DLP III, DLP IV and the Trust.

- 18 -

GWG HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Condensed Consolidating Balance Sheets

June 30, 2017	Parent			Guarantor Subsidiary			Non-Guarantor Subsidiaries		Eliminations			Consolidated

A S S E T S

Cash and cash equivalents	$	49,632,850		$	1,451,260		$	1,209,362	$	-		$	52,293,472
Restricted cash		-			4,454,226			41,705,405		-			46,159,631
Investment in life insurance policies, at fair value		-			41,720,141			535,329,411		-			577,049,552
Secured MCA advances		-			-			3,525,381		-			3,525,381
Life insurance policy benefits receivable		-			-			6,970,000		-			6,970,000
Deferred taxes, net		1,620,303			-			-		-			1,620,303
Other assets		3,030,391			1,435,297			352,461		(942,339	)		3,875,810
Investment in subsidiaries		473,239,085			429,798,593			-		(903,037,678	)		-

TOTAL ASSETS	$	527,522,629		$	478,859,517		$	589,092,020	$	(903,980,017	)	$	691,494,149

L I A B I L I T I E S & S T O C K H O L D E R S’ E Q U I T Y

LIABILITIES
Senior credit facilities	$	-		$	(1,076,118	)	$	150,084,944	$	-		$	149,008,826
Series I Secured Notes		-			6,680,961			-		-			6,680,961
L Bonds		400,832,308			-			-		-			400,832,308
Accounts payable		1,166,827			1,377,121			1,616,149		-			4,160,097
Interest and dividends payable		10,312,340			1,087,782			2,995,669		(8,747	)		14,387,044
Other accrued expenses		1,321,915			990,255			1,157,096		(933,592	)		2,535,674
TOTAL LIABILITIES		413,633,390			9,060,001			155,853,858		(942,339	)		577,604,910

STOCKHOLDERS’ EQUITY
Member’s capital		-			469,799,516			433,238,162		(903,037,678	)		-
Convertible preferred stock		19,732,262			-			-		-			19,732,262
Redeemable preferred stock and Series 2 redeemable preferred stock		118,707,840			-			-		-			118,707,840
Common stock		5,784			-			-		-			5,784
Accumulated deficit		(24,556,647	)		-			-		-			(24,556,647	)
TOTAL STOCKHOLDERS’ EQUITY		113,889,239			469,799,516			433,238,162		(903,037,678	)		113,889,239

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	527,522,629		$	478,859,517		$	589,092,020	$	(903,980,017	)	$	691,494,149

- 19 -

GWG HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Condensed Consolidating Balance Sheets (continued)

December 31, 2016	Parent			Guarantor Subsidiary		Non-Guarantor Subsidiaries		Eliminations			Consolidated

A S S E T S

Cash and cash equivalents	$	28,481,047		$	49,360,952	$	644,983	$	-		$	78,486,982
Restricted cash		-			2,117,649		35,708,947		-			37,826,596
Investment in life insurance policies, at fair value		-			41,277,896		469,914,458		-			511,192,354
Secured MCA advances		-			-		5,703,147		-			5,703,147
Life insurance policy benefits receivable		-			-		5,345,000		-			5,345,000
Other assets		3,854,233			2,056,822		810,640		(2,033,592	)		4,688,103
Investment in subsidiaries		429,971,148			352,337,037		-		(782,308,185	)		-

TOTAL ASSETS	$	462,306,428		$	447,150,356	$	518,127,175	$	(784,341,777	)	$	643,242,182

L I A B I L I T I E S & S T O C K H O L D E R S’ E Q U I T Y

LIABILITIES
Senior credit facilities	$	-		$	-	$	156,064,818	$	-		$	156,064,818
Series I Secured Notes		-			16,404,836		-		-			16,404,836
L Bonds		381,312,587			-		-		-			381,312,587
Accounts payable		853,470			731,697		641,545		-			2,226,712
Interest and dividends payable		9,882,133			3,743,277		2,535,189		-			16,160,599
Other accrued expenses		862,369			544,032		2,303,952		(2,033,592	)		1,676,761
Deferred taxes, net		2,097,371			-		-		-			2,097,371
TOTAL LIABILITIES		395,007,930			21,423,842		161,545,504		(2,033,592	)		575,943,684

STOCKHOLDERS’ EQUITY
Member’s capital		-			425,726,514		356,581,671		(782,308,185	)		-
Convertible preferred stock		19,701,133			-		-		-			19,701,133
Redeemable preferred stock		59,025,164			-		-		-			59,025,164
Common stock		5,980			-		-		-			5,980
Additional paid-in capital		7,383,515			-		-		-			7,383,515
Accumulated deficit		(18,817,294	)		-		-		-			(18,817,294	)
TOTAL STOCKHOLDERS’ EQUITY		67,298,498			425,726,514		356,581,671		(782,308,185	)		67,298,498

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	462,306,428		$	447,150,356	$	518,127,175	$	(784,341,777	)	$	643,242,182

- 20 -

GWG HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Condensed Consolidating Statements of Operations

For the three months ended June 30, 2017	Parent			Guarantor Subsidiary			Non-Guarantor Subsidiaries		Eliminations			Consolidated
REVENUE
Policy servicing income	$	-		$	133,250		$	-	$	(133,250	)	$	-
Gain on life insurance policies, net		-			201,685			11,094,581		-			11,296,266
MCA income		-			-			133,583		-			133,583
Interest and other income		69,221			30,134			164,558		(26,176	)		237,737
TOTAL REVENUE		69,221			365,069			11,392,722		(159,426	)		11,667,586

EXPENSES
Policy servicing fees		-			-			133,250		(133,250	)		-
Interest expense		8,325,874			391,061			3,555,266		(26,176	)		12,246,025
Employee compensation and benefits		2,109,562			1,529,188			102,549		-			3,741,299
Legal and professional fees		284,756			179,461			866,372		-			1,330,589
Provision for MCA advances		-			-			878,000		-			878,000
Other expenses		1,885,146			650,320			347,632		-			2,883,098
TOTAL EXPENSES		12,605,338			2,750,030			5,883,069		(159,426	)		21,079,011

INCOME (LOSS) BEFORE EQUITY IN INCOME OF SUBSIDIARIES		(12,536,117	)		(2,384,961	)		5,509,653		-			(9,411,425	)

EQUITY IN INCOME OF SUBSIDIARIES		3,124,692			7,241,779			-		(10,366,471	)		-

INCOME (LOSS) BEFORE INCOME TAXES		(9,411,425	)		4,856,818			5,509,653		(10,366,471	)		(9,411,425	)

INCOME TAX BENEFIT		(3,717,174	)		-			-		-			(3,717,174	)
NET INCOME (LOSS)		(5,694,251	)		4,856,818			5,509,653		(10,366,471	)		(5,694,251	)
Preferred stock dividends		2,031,097			-			-		-			2,031,097
NET LOSS ATTRIBUTABLE TO COMMON SHAREHOLDERS	$	(7,725,348	)	$	4,856,818		$	5,509,653	$	(10,366,471	)	$	(7,725,348	)

For the three months ended June 30, 2016	Parent			Guarantor Subsidiary			Non-Guarantor Subsidiaries		Eliminations			Consolidated
REVENUE
Policy servicing income	$	-		$	-		$	-	$	-		$	-
Gain on life insurance policies, net		-			-			20,383,347		-			20,383,347
MCA income		-			-			223,255		-			223,255
Interest and other income		71,222			706			157,927		(58,975	)		170,880
TOTAL REVENUE		71,222			706			20,764,529		(58,975	)		20,777,482

EXPENSES
Policy servicing fees		-			-			-		-			-
Interest expense		7,530,444			644,735			1,648,452		(58,975	)		9,764,656
Employee compensation and benefits		1,638,893			1,283,968			148,646		-			3,071,507
Legal and professional fees		783,596			476,505			44,252		-			1,304,353
Other expenses		1,519,349			425,354			387,982		-			2,332,685
TOTAL EXPENSES		11,472,282			2,830,562			2,229,332		(58,975	)		16,473,201

INCOME (LOSS) BEFORE EQUITY IN INCOME OF SUBSIDIARIES		(11,401,060	)		(2,829,856	)		18,535,197		-			4,304,281

EQUITY IN INCOME OF SUBSIDIARIES		15,705,341			18,835,036			-		(34,540,377	)		-

INCOME BEFORE INCOME TAXES		4,304,281			16,005,180			18,535,197		(34,540,377	)		4,340,281

INCOME TAX EXPENSE		1,822,030			-			-		-			1,822,030
NET INCOME		2,482,250			16,005,180			18,535,197		(34,540,377	)		2,482,250
Preferred stock dividends		600,924			-			-		-			600,924
NET INCOME ATTRIBUTABLE TO COMMON SHAREHOLDERS	$	1,881,326		$	16,005,180		$	18,535,197	$	(34,540,377	)	$	1,881,326

- 21 -

GWG HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Condensed Consolidating Statements of Operations (continued)

For the six months ended June 30, 2017	Parent			Guarantor Subsidiary			Non-Guarantor Subsidiaries		Eliminations			Consolidated
REVENUE
Policy servicing income	$	-		$	186,275		$	-	$	(186,275	)	$	-
Gain on life insurance policies, net		-			1,701,012			28,995,074		-			30,696,086
MCA income		-			-			380,159		-			380,159
Interest and other income		154,228			49,010			543,643		(67,195	)		679,686
TOTAL REVENUE		154,228			1,936,297			29,918,876		(253,470	)		31,755,931

EXPENSES
Policy servicing fees		-			-			186,275		(186,275	)		-
Interest expense		17,587,908			677,415			7,292,113		(67,195	)		25,490,241
Employee compensation and benefits		4,038,357			2,750,770			115,232		-			6,904,359
Legal and professional fees		777,571			440,549			1,058,817		-			2,276,937
Provision for MCA advances		-			-			878,000		-			878,000
Other expenses		3,548,149			1,533,051			582,221		-			5,663,421
TOTAL EXPENSES		25,951,985			5,401,785			10,112,658		(253,470	)		41,212,958

INCOME (LOSS) BEFORE EQUITY IN INCOME OF SUBSIDIARIES		(25,797,757	)		(3,465,488	)		19,806,218		-			(9,457,027	)

EQUITY IN INCOME OF SUBSIDIARIES		16,340,730			21,305,986			-		(37,646,716	)		-

INCOME (LOSS) BEFORE INCOME TAXES		(9,457,027	)		17,840,498			19,806,218		(37,646,716	)		(9,457,027	)

INCOME TAX BENEFIT		(3,717,674	)		-			-		-			(3,717,674	)
NET INCOME (LOSS)		(5,739,353	)		17,840,498			19,806,218		(37,646,716	)		(5,739,353	)
Preferred stock dividends		(3,898,857	)		-			-		-			(3,898,857	)
NET LOSS ATTRIBUTABLE TO COMMON SHAREHOLDERS	$	(9,638,210	)	$	17,840,498		$	19,806,218	$	(37,646,716	)	$	(9,638,210	)

For the six months ended June 30, 2016	Parent			Guarantor Subsidiary			Non-Guarantor Subsidiaries		Eliminations			Consolidated
REVENUE
Policy servicing income	$	-		$	13,417		$	-	$	(13,417	)	$	-
Gain on life insurance policies, net		-			-			38,097,059		-			38,097,059
MCA income		-			-			368,216		-			368,216
Interest and other income		106,019			1,012			198,946		(89,877	)		216,100
TOTAL REVENUE		106,019			14,429			38,664,221		(103,294	)		38,681,375

EXPENSES
Policy servicing fees		-			-			13,417		(13,417	)		-
Interest expense		14,618,037			1,301,971			3,083,680		(89,877	)		18,913,811
Employee compensation and benefits		3,175,323			2,113,049			249,333		-			5,537,705
Legal and professional fees		1,378,335			1,011,155			120,991		-			2,510,481
Other expenses		2,777,326			1,394,028			573,491		-			4,744,845
TOTAL EXPENSES		21,949,021			5,820,203			4,040,912		(103,294	)		31,706,842

INCOME (LOSS) BEFORE EQUITY IN INCOME OF SUBSIDIARIES		(21,843,002	)		(5,805,774	)		34,623,309		-			6,974,533

EQUITY IN INCOME OF SUBSIDIARIES		28,817,535			35,136,402			-		(63,953,937	)		-

INCOME BEFORE INCOME TAXES		6,974,533			29,330,628			34,623,309		(63,953,937	)		6,974,533

INCOME TAX EXPENSE		2,906,747			-			-		-			2,906,747
NET INCOME		4,067,786			29,330,628			34,623,309		(63,953,937	)		4,067,786
Preferred stock dividends		(1,112,155	)		-			-		-			(1,112,155	)
NET INCOME ATTRIBUTABLE TO COMMON SHAREHOLDERS	$	2,955,631		$	29,330,628		$	34,623,309	$	(63,953,937	)	$	2,955,631

- 22 -

GWG HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Condensed Consolidating Statements of Cash Flows

For the three months ended June 30, 2017	Parent			Guarantor Subsidiary			Non-Guarantor Subsidiaries			Eliminations			Consolidated
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)	$	(5,694,251	)	$	4,856,818		$	5,509,653		$	(10,366,471	)	$	(5,694,251	)
Adjustments to reconcile net income to net cash flows from operating activities:
Equity of subsidiaries		(3,124,692	)		(7,241,779	)		-			10,366,471			-
Change in fair value of life insurance policies		-			(134,399	)		(15,101,103	)		-			(15,235,502	)
Amortization of deferred financing and issuance costs		926,816			28,964			542,168			-			1,497,948
Deferred income taxes		(3,717,174	)		-			-			-			(3,717,174	)
Preferred stock dividends payable		363,959			-			-			-			363,959
(Increase) decrease in operating assets:
Life insurance policy benefits receivable		-			600,000			1,405,000			-			2,005,000
Other assets		(32,646,205	)		(23,493,280	)		(297,040	)		55,878,537			(557,988	)
Increase (decrease) in operating liabilities:
Due to related party		398,030			-			(400,000	)		-			(1,970	)
Accounts payable and accrued expenses		1,213,002			(1,405,114	)		1,230,967			-			1,038,855
NET CASH FLOWS USED IN OPERATING ACTIVITIES		(42,280,515	)		(26,788,790	)		(7,110,355	)		55,878,537			(20,301,123	)

CASH FLOWS FROM INVESTING ACTIVITIES
Investment in life insurance policies		-			-			(19,432,338	)		-			(19,432,338	)
Carrying value of matured life insurance policies		-			256,152			2,758,682			-			3,014,834
Investment in Secured MCA advances		-			-			(39,671	)		-			(39,671	)
Proceeds from Secured MCA advances		-			-			653,315			-			653,315
NET CASH FLOWS USED IN INVESTING ACTIVITIES		-			256,152			(16,060,012	)		-			(15,803,860	)

CASH FLOWS FROM FINANCING ACTIVITIES
Net borrowings on senior credit facilities		-			-			(3,845,037	)		-			(3,845,037	)
Payments for issuance of senior debt		-			(1,076,118	)		-			-			(1,076,118	)
Payments for redemption of Series I Secured Notes		-			(4,348,372	)		-			-			(4,348,372	)
Proceeds from issuance of L Bonds		31,875,811			-			-			-			31,875,811
Payments for issuance and redemption of L Bonds		(15,025,566	)		-			-			-			(15,025,566	)
Payments to restricted cash		-			(893,893	)		2,825,851			-			1,931,958
Issuance of member capital		-			31,450,843			24,427,694			(55,878,537	)		-
Issuance of common stock		4			-			-			-			4
Proceeds from issuance of preferred stock		34,301,747			-			-			-			34,301,747
Payments for issuance and redemption of preferred stock		(3,318,211	)		-			-			-			(3,318,211	)
Payments of preferred stock dividends		(2,031,097	)		-			-			-			(2,031,097	)
NET CASH FLOWS PROVIDED BY FINANCING ACTIVITIES		45,802,688			25,132,460			23,408,508			(55,878,537	)		38,465,119

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		3,522,173			(1,400,178	)		238,141						2,360,136

CASH AND CASH EQUIVALENTS
BEGINNING OF THE PERIOD		46,110,677			2,851,438			971,221			-			49,933,336

END OF THE PERIOD	$	49,632,850		$	1,451,260		$	1,209,362		$	-		$	52,293,472

- 23 -

GWG HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Consolidating Statements of Cash Flows (continued)

For the three months ended June 30, 2016	Parent			Guarantor Subsidiary			Non-Guarantor Subsidiaries			Eliminations			Consolidated
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	2,482,250		$	16,005,180		$	18,535,197		$	(34,540,377	)	$	2,482,250
Adjustments to reconcile net loss to net cash flows from operating activities:
Equity of subsidiaries		(15,705,341	)		(18,835,036	)		-			34,540,377			-
Change in fair value of life insurance policies		-			-			(21,241,376	)		-			(21,241,376	)
Amortization of deferred financing and issuance costs		2,261,032			(282,257	)		549,199			-			2,527,974
Deferred income taxes		1,851,018			-			-			-			1,851,018
Preferred stock dividends payable		166,472			-			-			-			166,472
(Increase) decrease in operating assets:
Life insurance policy benefits receivable		-			-			9,083,817			-			9,083,817
Other assets		(21,796,633	)		(12,903,506	)		-			33,489,247			(1,210,892	)
Increase (decrease) in operating liabilities:
Due to related party		(71,975	)		17,802			(1,760,000	)		-			(1,814,173	)
Accounts payable and other accrued expenses		1,458,476			130,596			(2,364,285	)		-			(775,213	)
NET CASH FLOWS USED IN OPERATING ACTIVITIES		(29,354,701	)		(15,867,221	)		2,802,552			33,489,247			(8,930,123	)

CASH FLOWS FROM INVESTING ACTIVITIES
Investment in life insurance policies		-			-			(24,373,714	)		-			(24,373,714	)
Carrying value of matured life insurance policies		-			-			1,691,764			-			1,691,764
Investment in Secured MCA advances		-			-			(1,293,829	)					(1,293,829	)
Proceeds from Secured MCA advances		-			-			907,649			-			907,649
NET CASH FLOWS USED IN INVESTING ACTIVITIES		-			-			(23,068,130	)		-			(23,068,130	)

CASH FLOWS FROM FINANCING ACTIVITIES
Net repayment of senior credit facilities		-			-			(3,000,000	)					(3,000,000	)
Payments for redemption of Series I Secured Notes		-			(485,350	)		-			-			(485,350	)
Proceeds from issuance of L Bonds		36,757,771			-			-			-			36,757,771
Payments for issuance and redemption of L Bonds		(11,753,782	)		-			-			-			(11,753,782	)
Payments to restricted cash		-			(116,672	)		8,784,498			-			8,667,826
Issuance of member capital		-			18,951,362			14,537,885			(33,489,247	)		-
Issuance of common stock		166,125			-			-			-			166,125
Proceeds from issuance of preferred stock		9,401,118			-			71,555			-			9,472,673
Payments for issuance and redemption of preferred stock		(838,021	)		-			(7,340	)		-			(845,361	)
Payments of preferred stock dividends		(600,924	)		-			-			-			(600,924	)
NET CASH FLOWS PROVIDED BY FINANCING ACTIVITIES		33,132,287			18,349,340			20,386,598			(33,489,247	)		38,378,978

NET INCREASE IN CASH AND CASH EQUIVALENTS		3,777,586			2,482,119			121,020			-			6,380,725

CASH AND CASH EQUIVALENTS
BEGINNING OF THE PERIOD		6,274,035			4,340,365			384,225			-			10,998,625

END OF THE PERIOD	$	10,051,621		$	6,822,484		$	505,245		$	-		$	17,379,350

- 24 -

GWG HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Consolidating Statements of Cash Flows (continued)

For the six months ended June 30, 2017	Parent			Guarantor Subsidiary			Non-Guarantor Subsidiaries			Eliminations			Consolidated
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)	$	(5,739,353	)	$	17,840,498		$	19,806,218		$	(37,646,716	)	$	(5,739,353	)
Adjustments to reconcile net loss to net cash flows from operating activities:
Equity of subsidiaries		(16,340,730	)		(21,305,986	)		-			37,646,716			-
Change in fair value of life insurance policies		-			(1,193,821	)		(27,925,514	)		-			(29,119,335	)
Amortization of deferred financing and issuance costs		2,855,809			74,384			1,233,958			-			4,164,151
Deferred income taxes		(3,717,674	)		-			-			-			(3,717,674	)
Preferred stock dividends payable		700,748			-			-			-			700,748
(Increase) decrease in operating assets:
Life insurance policy benefits receivable		-			-			(1,625,000	)		-			(1,625,000	)
Other assets		(27,138,260	)		(55,534,365	)		458,179			83,082,776			868,330
Increase (decrease) in operating liabilities:
Due to related party		1,089,895			320			(1,100,000	)		-			(9,785	)
Accounts payable and other accrued expenses		1,637,970			(1,563,846	)		2,181,963			-			2,256,087
NET CASH FLOWS USED IN OPERATING ACTIVITIES		(46,651,595	)		(61,682,816	)		(6,970,196	)		83,082,776			(32,221,831	)

CASH FLOWS FROM INVESTING ACTIVITIES
Investment in life insurance policies		-			-			(42,121,671	)		-			(42,121,671	)
Carrying value of matured life insurance policies		-			751,576			4,632,232			-			5,383,808
Investment in Secured MCA advances		-			-			(39,671	)		-			(39,671	)
Proceeds from Secured MCA advances		-			-			1,423,702			-			1,423,702
NET CASH FLOWS USED IN INVESTING ACTIVITIES		-			751,576			(36,105,408	)		-			(35,353,832	)

CASH FLOWS FROM FINANCING ACTIVITIES
Net repayment of senior credit facilities		-			-			(7,099,537	)		-			(7,099,537	)
Payments for issuance of senior debt					(1,076,118	)		(114,294	)		-			(1,190,412	)
Payments for redemption of Series I Secured Notes		-			(9,798,261	)		-			-			(9,798,261	)
Proceeds from issuance of L Bonds		56,744,470			-			-			-			56,744,470
Payments for issuance and redemption of L Bonds		(39,197,163	)		-			-			-			(39,197,163	)
Payments to restricted cash		-			(2,336,577	)		(5,996,458	)		-			(8,333,035	)
Issuance of member capital		-			26,232,504			56,850,272			(83,082,776	)		-
Payments for issuance and redemption of common stock		(1,603,556	)		-			-			-			(1,603,556	)
Proceeds from issuance of preferred stock		61,480,941			-			-			-			61,480,941
Payments for issuance and redemption of preferred stock		(5,722,437	)		-			-			-			(5,722,437	)
Payments of preferred stock dividends		(3,898,857	)		-			-			-			(3,898,857	)
NET CASH FLOWS PROVIDED BY FINANCING ACTIVITIES		67,803,398			13,021,548			43,639,983			(83,082,776	)		41,382,153

NET INCREASE IN CASH AND CASH EQUIVALENTS		21,151,803			(47,909,692	)		564,379			-			(26,193,510	)

CASH AND CASH EQUIVALENTS
BEGINNING OF THE PERIOD		28,481,047			49,360,952			644,983			-			78,486,982

END OF THE PERIOD	$	49,632,850		$	1,451,260		$	1,209,362		$	-		$	52,293,472

- 25 -

GWG HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Consolidating Statements of Cash Flows (continued)

For the six months ended June 30, 2016	Parent			Guarantor Subsidiary			Non-Guarantor Subsidiaries			Eliminations			Consolidated
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	4,067,786		$	29,330,628		$	34,623,309		$	(63,953,937	)	$	4,067,786
Adjustments to reconcile net income to net cash flows from operating activities:
Equity of subsidiaries		(28,817,535	)		(35,136,402	)		-			63,953,937			-
Change in fair value of life insurance policies		-			-			(32,772,929	)		-			(32,772,929	)
Amortization of deferred financing and issuance costs		3,909,923			(1,446,463	)		848,702			-			3,312,162
Deferred income taxes		2,906,747			-			-			-			2,906,747
Preferred stock dividends payable		330,049			-			-			-			330,049
(Increase) decrease in operating assets:
Life insurance policy benefits receivable		-			-			(6,829,022	)					(6,829,022	)
Other assets		(60,457,838	)		(37,895,574	)		-			97,315,946			(1,037,466	)
Increase in operating liabilities:
Due to related party		(2,802,976	)		1,195			2,700,000			-			(101,781	)
Accounts payable and accrued expenses		2,240,523			717,298			(1,765,065	)		-			1,192,756
NET CASH FLOWS USED IN OPERATING ACTIVITIES		(78,623,321	)		(44,429,318	)		(3,195,005	)		97,315,946			(28,931,698	)

CASH FLOWS FROM INVESTING ACTIVITIES
Investment in life insurance policies		-			-			(48,700,036	)		-			(48,700,036	)
Carrying value of matured life insurance policies		-			-			6,302,243			-			6,302,243
Investment in Secured MCA advances		-			-			(5,647,414	)		-			(5,647,414	)
Proceeds from Secured MCA advances		-			-			1,025,792			-			1,025,792
NET CASH FLOWS USED IN INVESTING ACTIVITIES		-			-			(47,019,415	)		-			(47,019,415	)

CASH FLOWS FROM FINANCING ACTIVITIES
Net borrowings on senior credit facilities		-			-			17,000,000			-			17,000,000
Payments for redemption of Series I Secured Notes		-			(5,722,743	)		-			-			(5,722,743	)
Proceeds from issuance of L Bonds		71,126,660			-			-			-			71,126,660
Payments for issuance and redemption of L Bonds		(22,663,475	)		-			-			-			(22,663,475	)
Payments to restricted cash		-			(2,822,051	)		(5,996,843	)		-			(8,818,894	)
Issuance of common stock		212,670			-			-			-			212,670
Proceeds from issuance of preferred stock		10,429,654			-			71,555			-			10,501,209
Payments for issuance and redemption of preferred stock		(1,610,574	)		-			(7,340	)		-			(1,617,914	)
Payments of preferred stock dividends		(1,112,155	)		-						-			(1,112,155	)
Issuance of member capital		-			57,813,874			39,502,072			(97,315,946	)		-
NET CASH FLOWS PROVIDED BY FINANCING ACTIVITIES		56,382,780			49,269,080			50,569,444			(97,315,946	)		58,905,358

NET INCREASE IN CASH AND CASH EQUIVALENTS		(22,240,541	)		4,839,762			355,024			-			(17,045,755	)

CASH AND CASH EQUIVALENTS
BEGINNING OF THE PERIOD		32,292,162			1,982,722			150,221			-			34,425,105

END OF THE PERIOD	$	10,051,621		$	6,822,484		$	505,245		$	-		$	17,379,350

- 26 -

GWG HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

(19)

Concentrations

We purchase life insurance policies written by life insurance companies having investment-grade ratings by independent rating agencies. As a result, there may be certain concentrations of policies with life insurance companies. The following summarizes the face value of insurance policies with specific life insurance companies exceeding 10% of the total face value of our portfolio.

Life insurance company	June 30,			December 31,
	2017			2016
John Hancock		14.13	%		14.36	%
AXA Equitable		12.69	%		13.42	%
Lincoln National		10.86	%		11.22	%
Transamerica		10.31	%		*

* percentage does not exceed 10% of the total face value.

The following summarizes the number of insurance policies held in specific states exceeding 10% of the total face value of our portfolio:

State of Residence	June 30,			December 31,
	2017			2016
Florida		20.30	%		19.42	%
California		19.29	%		20.72	%

(20)

Subsequent events

Since June 30, 2017, we have issued approximately $15,789,000 of L Bonds.

Since June 30, 2017, we have issued approximately $12,762,000 of RPS 2.

As of the date of this report, we exercised our contractual rights to call for the redemption of our Series I Secured Notes and our Series A Preferred Stock and all outstanding warrants related to our Series A offering.

- 27 -

ITEM 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

You should read the following discussion in conjunction with the condensed consolidated financial statements and accompanying notes and the information contained in other sections of this report. This discussion and analysis is based on the beliefs of our management, as well as assumptions made by, and information currently available to, our management.

Risk Relating to Forward-Looking Statements

This report contains forward-looking statements that reflect our current expectations and projections about future events. Actual results could differ materially from those described in these forward-looking statements.

The words “believe,” “could,” “possibly,” “probably,” “anticipate,” “estimate,” “project,” “expect,” “may,” “will,” “should,” “seek,” “intend,” “plan,” “expect,” or “consider” and similar expressions are intended to identify forward-looking statements but are not the exclusive means of identifying such statements. Forward-looking statements are subject to risks and uncertainties, which could cause actual results to differ materially from such statements. Many of the forward-looking statements contained in this report can be found in our MD&A discussion and in the updates we provide in Part II, Item 5 “Other Information.”

●	changes in the secondary market for life insurance;
●	changes resulting from the evolution of our business model and strategy with respect to the life insurance industry;
●	our limited operating history;
●	the valuation of assets reflected on our financial statements;
●	the reliability of assumptions underlying our actuarial models, including our life expectancy estimates;
●	our reliance on debt financing;
●	risks relating to the validity and enforceability of the life insurance policies we purchase;
●	risks relating to our ability to license and effectively apply technologies to improve and expand the scope of our business;
●	our reliance on information provided and obtained by third parties;
●	federal, state and FINRA regulatory matters;
●	competition in the secondary market of life insurance;
●	the relative illiquidity of life insurance policies;
●	our ability to satisfy our debt obligations if we were to sell our entire portfolio of life insurance policies;
●	life insurance company credit exposure;
●	cost-of-insurance (premium) increases on our life insurance policies;
●	general economic outlook, including prevailing interest rates;
●	performance of our investments in life insurance policies;
●	financing requirements;
●	risks associated with the merchant cash advance business;
●	the various risks associated with our attempts to commercialize our M-Panel technology;
●	litigation risks;
●	restrictive covenants contained in borrowing agreements; and
●	our ability to make cash distributions in satisfaction of dividend obligations and redemption requests.

We caution you that the foregoing list of factors is not exhaustive. Forward-looking statements are only estimates and predictions, or statements of current intent. Actual results, outcomes or actions that we ultimately undertake could differ materially from those anticipated in the forward-looking statements due to risks, uncertainties or actual events differing from the assumptions underlying these statements.

JOBS Act

On April 5, 2012, the Jumpstart Our Business Startups Act of 2012, or JOBS Act, was enacted. Section 107 of the JOBS Act provides that an “emerging growth company” can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act of 1933 for complying with new or revised accounting standards. This means that an “emerging growth company” can make an election to delay the adoption of certain accounting standards until those standards would apply to private companies. We are an emerging growth company and have elected to delay our adoption of new or revised accounting standards and, as a result, we may not comply with new or revised accounting standards at the same time as other public reporting companies that are not “emerging growth companies.” This exemption will apply for a period of five years following our first sale of common equity securities under an effective registration statement (September 2019) or until we no longer qualify as an “emerging growth company” as defined under the JOBS Act, whichever is earlier.

- 28 -

Overview

We are a financial services company disrupting and transforming the life insurance industry and related industries with innovative products and services. We built our business by creating opportunities for consumers to obtain significantly more value for their life insurance policies as compared to the traditional options offered by the insurance industry by creating a secondary market. We are enhancing and extending these activities through innovation in our products and services, business processes, financing strategies, and advanced epigenetic technologies that we expect will improve insurance predictive underwriting analytics. At the same time, we are creating opportunities for investors to receive income and capital appreciation from our life insurance investment activities and the businesses we create in the life insurance and related industries.

Critical Accounting Policies

Critical Accounting Estimates

The preparation of our consolidated financial statements in accordance with the Generally Accepted Accounting Principles (GAAP) requires us to make significant judgments, estimates, and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. We base our judgments, estimates, and assumptions on historical experience and on various other factors believed to be reasonable under the circumstances. Actual results could differ materially from these estimates. We evaluate our judgments, estimates, and assumptions on a regular basis and make changes accordingly. We believe that the judgments, estimates, and assumptions involved in valuing our investments in life insurance policies have the greatest potential impact on our consolidated financial statements and accordingly believe these to be our critical accounting estimates. Below we discuss the critical accounting policies associated with these estimates as well as certain other critical accounting policies.

Ownership of Life Insurance Policies—Fair Value Option

We account for the purchase of life insurance policies in accordance with ASC 325-30, which requires us to use either the investment method or the fair value method. We have elected to account for all of our life insurance policies using the fair value method.

The fair value of our life insurance policies is determined as the net present value of the life insurance portfolio’s future expected cash flows (policy benefits received and required premium payments) that incorporates current life expectancy estimates and discount rate assumptions.

Fair Value Components – Medical Underwriting

Unobservable inputs, as discussed below, are a critical component of our estimate for the fair value of our investments in life insurance policies. We currently use a probabilistic method of estimating and valuing the projected cash flows of our portfolio, which we believe to be the preferred and most prevalent valuation method in the industry. In this regard, the most significant assumptions we make are the life expectancy estimates of the insureds and the discount rate applied to the expected future cash flows to be derived from our portfolio.

The 2015 Valuation Basic Table (“2015 VBT”) finalized by the Society of Actuaries is based on a much larger dataset of insured lives, face amount of policies and more current information compared to the dataset underlying the 2008 Valuation Basic Table. The new 2015 VBT dataset includes 266 million policies compared to the 2008 VBT dataset of 75 million. The experience data in the 2015 VBT dataset includes 2.55 million claims on policies from 51 insurance carriers. Life expectancies implied by the 2015 VBT are generally longer for male and female nonsmokers between the ages of 65 and 80, while smokers and insureds of both genders over the age of 85 have significantly lower life expectancies. We adopted the 2015 VBT in our valuation process in June 2016.

For life insurance policies with face amounts greater than $1 million and that are not pledged under any senior credit facility (approximately 30% of our portfolio by face amount of policy benefits) we attempt to update the independent life expectancy estimates on a continuous rotating three year cycle. For life insurance policies with face amounts greater than $750,000 that are pledged under the LNV senior credit facility (approximately 58% of our portfolio by face amount of policy benefits) we are presently required to update the independent life expectancy estimates every two years.

Our prior experience in updating independent life expectancy estimates has generally resulted in shorter life expectancies of the updated insureds within our portfolio, but often not as short as we had projected. This has resulted in reductions to the fair value of our portfolio in the amounts of $6.7 million and $8.6 million for the three and six months ended June 30, 2017, respectively. As our life insurance portfolio continues to grow, we may experience additional and material adjustments to the fair value of our portfolio due to updating independent life expectancy estimates.

- 29 -

In July 2017, Lincoln National Life Insurance Company announced pending cost-of-insurance rate (i.e., premium) increases for certain life insurance policies which were effected on August 1, 2017. We identified two affected policies in our portfolio. We have requested updated policy illustrations in order to calculate the change in fair value resulting from the expected increased premiums. In August 2017, Transamerica Life Insurance Company announced pending cost-of-insurance rate increases for certain life insurance policies that will be effected on the policy anniversary dates. We identified three affected policies in our portfolio. We are aware of one additional pending cost-of-insurance increase affecting one other policy in our portfolio.

Fair Value Components – Required Premium Payments

We must pay the premiums on the life insurance policies within our portfolio in order to collect the policy benefit. The same probabilistic model and methodologies used to generate expected cash inflows from the life insurance policy benefits over the expected life of the insured are used to estimate cash outflows due to required premium payments. Premiums paid are offset against revenue in the applicable reporting period.

Fair Value Components – Discount Rate

A discount rate is used to calculate the net present value of the expected cash flows. The discount rate used to calculate fair value of our portfolio incorporates the guidance provided by ASC 820.

The table below provides the discount rate used to estimate the fair value of our portfolio of life insurance policies for the period ending:

	June 30, 2017		December 31, 2016
	10.81%		10.96%

The change in the discount rate incorporates current information about discount rates applied by other reporting companies owning portfolios of life insurance policies, discount rates observed by us in the life insurance secondary market, market interest rates, credit exposure to the issuing insurance companies, and our estimate of the risk premium a purchaser would require to receive the future cash flows derived from our portfolio of life insurance policies. Management has discretion regarding the combination of these and other factors when determining the discount rate. The discount rate we choose assumes an orderly and arms-length transaction (i.e., a non-distressed transaction in which neither seller nor buyer is compelled to engage in the transaction), which is consistent with related GAAP guidance. The carrying value of policies acquired during each quarterly reporting period are adjusted to their current fair value using the fair value discount rate applied to the entire portfolio as of that reporting date.

We engaged Model Actuarial Pricing System, Inc. (“MAPS”) to prepare a calculation of our life insurance portfolio. MAPS owns and maintains the portfolio pricing software we use. MAPS processed policy data, future premium data, life expectancy estimate data, and other actuarial information to calculate a net present value for our portfolio using the specified discount rate of 10.81%. MAPS independently calculated the net present value of our portfolio of 793 policies to be $577.0 million and furnished us with a letter documenting its calculation. A copy of such letter is filed as Exhibit 99.1 to this report.

Deferred Income Taxes

Under ASC 740, deferred tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. A valuation allowance is established for deferred tax assets that are not considered “more likely than not” to be realized. Realization of deferred tax assets depends upon having sufficient past or future taxable income in periods to which the deductible temporary differences are expected to be recovered or within any applicable carryback or carryforward periods. After assessing the realization of the net deferred tax assets, we believe that it is “more likely than not” that we will be able to realize all of our deferred tax assets other than those which have resulted from capital losses.

Deferred Financing and Issuance Costs

Financing costs, which include issuance costs, sales commissions and other direct expenses incurred under the senior credit facilities, were capitalized and are amortized using the straight-line method over the term of the senior credit facilities. The Series I Secured Note obligations are reported net of financing costs, which are amortized using the interest method over the term of each respective borrowing. The L Bonds are reported net of financing costs, which are amortized using the interest method over the term of each respective borrowing.

- 30 -

Principal Revenue and Expense Items

We earn revenues from the following three primary sources.

●

Life Insurance Policy Benefits Realized. We recognize the difference between the face value of the policy benefits and carrying value when an insured event has occurred and we determine that settlement and collection of the policy benefits is realizable and reasonably assured. Revenue from a transaction must meet both criteria in order to be recognized. We generally collect the face value of the life insurance policy from the insurance company within 45 days of our notification of the insured’s mortality.

●

Change in Fair Value of Life Insurance Policies. We value our portfolio investments for each reporting period in accordance with the fair value principles discussed herein, which reflects the expected receipt of policy benefits in future periods as shown in our consolidated financial statements, net premium costs.

●	Sale of a Life Insurance Policy. In the event of a sale of a policy, we recognize gain or loss as the difference between the sale price and the carrying value of the policy on the date of the receipt of payment on such sale.

Our main components of expense are summarized below.

●

Selling, General and Administrative Expenses. We recognize and record expenses incurred in our business operations, including operations related to the purchasing and servicing of life insurance policies. These expenses include salaries and benefits, sales, marketing, occupancy and other expenditures.

●

Interest Expense. We recognize and record interest expenses associated with the costs of financing our life insurance portfolio for the current period. These expenses include interest paid to our senior lenders under our senior credit facilities, interest paid on our L Bonds and other outstanding indebtedness such as our Series I Secured Notes. When we issue debt, we amortize the financing costs associated with such indebtedness over the outstanding term of the financing, and classify it as interest expense.

Results of Operations — Three and Six Months Ended June 30, 2017 Compared to the Same Periods in 2016

The following is our analysis of the results of operations for the periods indicated below. This analysis should be read in conjunction with our consolidated financial statements and related notes.

Revenue.

	Three Months Ended June 30,						Six Months Ended June 30,
	2017			2016			2017			2016
Revenue recognized from maturities of life insurance contracts		7,920,000			8,137,000			24,526,000			22,765,000
Revenue recognized from change in fair value of life insurance contracts	$	15,235,000		$	21,241,000		$	29,119,000		$	32,773,000
Premiums and other annual fees		(11,859,000	)		(8,995,000	)		(22,949,000	)		(17,441,000	)
Gain on life insurance contracts, net	$	11,296,000		$	20,383,000		$	30,696,000		$	38,097,000
Other income		372,000			394,000			1,060,000			584,000
Total revenue	$	11,668,000		$	20,777,000		$	31,756,000		$	38,681,000

Number of policies matured		9			6			19			12
Face value of matured policies	$	10,935,000		$	19,238,000		$	29,910,000		$	29,067,000
The change in fair value related to new policies acquired during the period	$	8,044,000		$	9,822,000		$	18,645,000		$	17,841,000

(1)

The discount rate applied to estimate the fair value of the portfolio of life insurance policies we own was 10.81% as of June 30, 2017, compared to 10.96% as of December 31, 2016 and 11.05% as of June 30, 2016. The carrying value of policies acquired during each quarterly reporting period is adjusted to current fair value using the fair value discount rate applied to the entire portfolio as of that reporting date.

- 31 -

Expenses.

	Three Months Ended June 30,						Six Months Ended June 30,
	2017		2016		Increase/ Decrease		2017		2016		Increase/ Decrease
Employee compensation and benefits (1)	$	3,741,000	$	3,071,000	$	670,000	$	6,904,000	$	5,538,000	$	1,366,000
Interest expense (including amortization of deferred financing costs) (2)		12,246,000		9,765,000		2,481,000		25,490,000		18,914,000		6,576,000
Legal and professional expenses (3)		1,331,000		1,304,000		27,000		2,277,000		2,510,000		(233,000	)
Provision for MCA loans (4)		878,000		300,000		578,000		878,000		400,000		478,000
Other expenses (5)		2,883,000		2,033,000		850,000		5,664,000		4,345,000		1,319,000
Total expenses	$	21,079,000	$	16,473,000	$	4,606,000	$	41,213,000	$	31,707,000	$	9,506,000

(1)	We hired additional members to our sales, marketing and policy acquisition teams. At June 30, 2017 we employed 76 employees and on June 30, 2016, we employed 66 employees.
(2)	Increase in all periods was due to the increase in our average debt outstanding.
(3)	Increase for the three months ended June 30, 2017 over the same period of 2016 is due to increased legal fees associated with MCA collections. Decrease for the six months ended June 30, 2017 over the same period of 2016 is due to fewer SEC filings.
(4)	Increase is due to further impairment of the Nulook loan due to decreased recovery estimates.
(5)	Increase is due to public relations, sales and marketing costs associated with growing and servicing our network of independent financial advisors and appointed agents.

Deferred Income Taxes.

The Company is engaged in acquiring of life insurance policies and holding them to maturity. Due to the nature of holding policies and the aging of the underlying insureds, it will be more likely than not that the Company will recognize taxable income as the policies in our portfolio start maturing at an accelerated rate in the near future. Due to this, we believe that sufficient taxable income will be recognized during the net operating loss carryover period to utilize the reported deferred tax asset, and that no additional valuation allowance, other than that already recorded, is required.

Income Tax Expense. For both the three and six months ended June 30, 2017, we realized income tax benefits of $3.7 million. In the three and six months ended June 30, 2016, we had an income tax expense of $1.8 million and $2.9 million, respectively. The effective tax rate for the three and six months ended June 30, 2017 was 39.5% and 39.3% and for the three and six months ended June 30, 2016, was 42.3% and 41.7%, respectively.

The following table provides a reconciliation of our income tax expense at the statutory federal tax rate to our actual income tax expense:

	Three Months Ended									Six Months Ended
	June 30, 2017					June 30, 2016				June 30, 2017					June 30, 2016
Statutory federal income tax (benefit)	$	(3,200,000	)	34.0	%	$	1,463,000	34.0	%	$	(3,215,000	)	34.0	%	$	2,371,000	34.0	%
State income taxes (benefit), net of federal benefit		(607,000	)	6.5	%		281,000	6.5	%		(609,000	)	6.4	%		456,000	6.5	%
Other permanent differences		90,000		(1.0	)%		78,000	1.8	%		106,000		(1.1	)%		80,000	1.2	%
Total income tax expense (benefit)	$	(3,717,000	)	39.5	%	$	1,822,000	42.3	%	$	(3,718,000	)	39.3	%	$	2.907,000	41.7	%

The most significant temporary differences between GAAP net income and taxable net income are the treatment of interest costs with respect to the acquisition of the life insurance policies and revenue recognition with respect to the mark-to-market of the life insurance portfolio.

- 32 -

Liquidity and Capital Resources

We finance our business through a combination of life insurance policy benefit receipts, origination fees, equity offerings, debt offerings, and our senior credit facilities. We have used our debt offerings and our senior credit facilities primarily for policy acquisition, policy servicing, and portfolio-related financing expenditures including paying principal and interest.

As of June 30, 2017 and December 31, 2016, we had approximately $105.4 million and $121.7 million, respectively, in combined available cash, cash equivalents, policy benefits receivable, if any, and available borrowing base surplus capacity, if any, under our senior credit facilities for the purpose of purchasing additional life insurance policies, paying premiums on existing policies, paying portfolio servicing expenses, and paying principal and interest on our outstanding financing obligations.

Financings Summary

We had the following outstanding debt balances as of June 30, 2017 and December 31, 2016:

	As of June 30, 2017					As of December 31, 2016
Issuer/Borrower	Principal Amount Outstanding		Weighted Average Interest Rate			Principal Amount Outstanding		Weighted Average Interest Rate
GWG Holdings, Inc. – L Bonds	$	407,850,000		7.30	%	$	387,067,000		7.23	%
GWG Life, LLC – Series I Secured Notes		6,815,000		8.72	%		16,614,000		8.68	%
GWG DLP Funding IV, LLC – Senior credit facilities		155,625,000		7.59	%		162,725,000		7.34	%
Total	$	570,290,000		7.40	%	$	566,406,000		7.30	%

In November 2009, our wholly owned subsidiary GWG Life began a private placement of Series I Secured Notes to accredited investors only. This offering was closed in November 2011. As of June 30, 2017 and December 31, 2016, we had approximately $6.8 million and $16.6 million, respectively, in principal amount of Series I Secured Notes outstanding. Effective as of the date of this report, we exercised our contractual right to call for the redemption of the Series I Secured Notes. We expect that our redemption of outstanding Series I Secured Notes will occur on or about September 8, 2017 and require us to pay an aggregate of approximately $6.6 million.

In June 2011, we concluded a private placement offering of Series A for new investors, having received an aggregate $24.6 million in subscriptions for our Series A. These subscriptions consisted of $14.0 million in conversions of outstanding Series I Secured Notes and $10.6 million of new investments.

As of both June 30, 2017 and December 31, 2016, we had approximately $19.7 million of Series A stated value outstanding. As of the date of this report, we exercised our contractual right to call for the redemption of the Series A Preferred Stock and all related outstanding warrants. We expect that our redemption of outstanding Series A Preferred Stock and related warrants will occur on or about October 9, 2017 and require us to pay an aggregate of approximately $22.2 million.

In January 2012, we began publicly offering up to $250.0 million in debt securities (initially named “Renewable Secured Debentures” and subsequently renamed “L Bonds”) that was completed in January 2015.

On September 24, 2014, we consummated an initial public offering of our 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 deduction of underwriting commissions, discounts and expense reimbursements.

In January 2015, we began publicly offering up to $1.0 billion of L Bonds as a follow-on to our earlier $250.0 million public debt offering. Through June 30, 2017, the total amount of these L Bonds sold, including renewals, was $749.8 million. As of June 30, 2017 and December 31, 2016, respectively, we had approximately $407.9 million and $387.1 million in principal amount of L Bonds outstanding.

In October 2015, we began publicly offering up to 100,000 shares of our RPS at a per-share price of $1,000. As of June 30, 2017, we had issued approximately $99.1 million stated value of RPS. As of June 30, 2017, we no longer offer RPS.

- 33 -

On February 14, 2017, we began publicly offering up to 150,000 shares of RPS 2 at a per-share price of $1,000. As of June 30, 2017, we have issued approximately $22.5 million stated value of RPS 2.

The weighted-average interest rate of our outstanding Series I Secured Notes as of June 30, 2017 and December 31, 2016 was 8.72% and 8.68%, respectively, and the weighted-average maturity at those dates was 1.96 and 1.14 years, respectively. Effective September 1, 2016, we no longer renew the Series I Secured Notes.

The weighted-average interest rate of our outstanding L Bonds as of June 30, 2017 and December 31, 2016 was 7.30% and 7.23%, respectively, and the weighted-average maturity at those dates was 2.27 and 2.13 years, respectively. Our L Bonds have renewal features. Since we first issued our L Bonds, we have experienced $341.9 million in maturities, of which $207.8 million has renewed through June 30, 2017 for an additional term. This has provided us with an aggregate renewal rate of approximately 61% for investments in these securities. Effective September 1, 2016, we discontinued the sales and renewals of 6-month and 1-year L Bonds.

Future contractual maturities of Series I Secured Notes and L Bonds at June 30, 2017 are:

Years Ending December 31,	Series I Secured Notes		L Bonds		Total
Six months ending December 31, 2017	$	749,000	$	47,068,000	$	47,817,000
2018		2,376,000		108,772,000		111,148,000
2019		1,024,000		116,767,000		117,791,000
2010		1,725,000		49,062,000		50,787,000
2021		941,000		28,753,000		29,694,000
2022		-		24,773,000		24,773,000
Thereafter		-		32,655,000		32,655,000
	$	6,815,000	$	407,850,000	$	414,665,000

The L Bonds and Series I Secured Notes are secured by all of our assets, and are subordinate to our senior credit facilities. The L Bonds and Series I Secured Notes are pari passu with respect to a security interest in our assets pursuant to an intercreditor agreement (see Notes 7 and 8).

We maintain a $105 million senior credit facility with Autobahn/DZ Bank through DLP III. The senior credit facility is used to pay the premium expenses related to our portfolio of life insurance policies. As of both June 30, 2017 and December 31, 2016, we had no amounts outstanding under that senior credit facility, no life insurance policies were pledged, and we maintained an available borrowing base of $0 million. On September 14, 2016, we paid off the Autobahn/DZ Bank senior credit facility in full with funds received under a new senior credit facility with LNV Corporation as described in Note 6.

On September 14, 2016, we entered into a $172 million senior credit facility with LNV Corporation in which DLP IV is the borrower. We intend to use the proceeds from this facility to grow and maintain our portfolio of life insurance policies, for liquidity and for general corporate purposes. As of June 30, 2017 we had approximately $155.6 million outstanding under the LNV senior credit facility.

We expect to meet our ongoing operational capital needs through a combination of the receipt of policy benefits from our portfolio of life insurance policies and net proceeds from our L Bonds and RPS 2 offerings. We expect to meet our policy acquisition, servicing, and financing capital needs principally from the receipt of policy benefits from our portfolio of life insurance policies, net proceeds from our offering of L Bonds and RPS 2, and from our senior credit facilities. We estimate that our liquidity and capital resources are sufficient for our current and projected financial needs for at least the next twelve months given current assumptions. However, if we are unable to continue our offerings for any reason (or if we become unsuccessful in selling our securities), and we are unable to obtain capital from other sources, our business will be materially and adversely affected. In addition, our business will be materially and adversely affected if we do not receive the policy benefits we forecast and if holders of our L Bonds or Series I Secured Notes fail to renew with the frequency we have historically experienced. In such a case, we could be forced to sell our investments in life insurance policies to service or satisfy our debt-related and other obligations.

Capital expenditures have historically not been material and we do not anticipate making material capital expenditures in 2017 or beyond.

- 34 -

Debt Financing Summary

The table below reconciles the face amount of our outstanding debt to the carrying value shown on our balance sheet:

	As of June 30, 2017			As of December 31, 2016
Total senior facilities and other indebtedness
Face amount outstanding	$	155,626,000		$	162,725,000
Unamortized selling costs		(6,617,000	)		(6,660,000	)
Carrying amount	$	149,009,000		$	156,065,000

Series I Secured Notes:
Face amount outstanding	$	6,815,000		$	16,614,000
Unamortized selling costs		(134,000	)		(209,000	)
Carrying amount	$	6,681,000		$	16,405,000

L Bonds:
Face amount outstanding	$	407,850,000		$	387,067,000
Subscriptions in process		6,521,000			5,882,000
Unamortized selling costs	$	(13,539,000	)	$	(11,636,000	)
Carrying amount	$	400,832,000		$	381,313,000

Portfolio Assets and Secured Indebtedness

At June 30, 2017, the fair value of our investments in life insurance policies of $577.0 million plus our cash balance of $52.3 million and our restricted cash balance of $46.2 million, plus matured policy benefits receivable of $7.0 million, totaled $682.5 million representing an excess of portfolio assets over secured indebtedness of $105.4 million. At December 31, 2016, the fair value of our investments in life insurance policies of $511.2 million plus our cash balance of $78.5 million and our restricted cash balance of $37.8 million, plus matured policy benefits receivable of $5.3 million, totaled $632.9 million, representing an excess of portfolio assets over secured indebtedness of $66.4 million.

The following forward-looking table seeks to illustrate the impact that a hypothetical sale of our portfolio of life insurance assets at various discount rates would have on our ability to satisfy our debt obligations as of June 30, 2017. In all cases, the sale of the life insurance assets owned by DLP III and DLP IV will be used first to satisfy all amounts owing, if any, under the respective senior credit facilities. The net sale proceeds remaining after satisfying all obligations under the senior credit facilities would be applied to L Bonds and Series I Secured Notes on a pari passu basis.

Portfolio Discount Rate	10%		11%		12%		13%		14%		15%		16%
Value of portfolio	$	599,960,000	$	571,539,000	$	545,377,000	$	521,240,000	$	498,920,000	$	478,238,000	$	459,034,000
Cash, cash equivalents and policy benefits receivable		105,423,000		105,423,000		105,423,000		105,423,000		105,423,000		105,423,000		105,423,000
Total assets		705,383,000		676,962,000		650,800,000		626,663,000		604,343,000		583,661,000		564,457,000
Senior credit facilities		155,625,000		155,625,000		155,625,000		155,625,000		155,625,000		155,625,000		155,625,000
Net after senior credit facilities		549,758,000		521,337,000		495,175,000		471,038,000		448,718,000		428,036,000		408,832,000
Series I Secured Notes and L Bonds		414,665,000		414,665,000		414,665,000		414,665,000		414,665,000		414,665,000		414,665,000
Net after Series I Secured Notes and L Bonds		135,093,000		106,672,000		80,510,000		56,373,000		34,053,000		13,371,000		(5,833,000	)
Impairment to Series I Secured Notes and L Bonds		No impairment		No impairment		No impairment		No impairment		No impairment		No impairment		Impairment

- 35 -

The table illustrates that our ability to fully satisfy amounts owing under the L Bonds and Series I Secured Notes would likely be impaired upon the sale of all our life insurance assets at a price equivalent to a discount rate of approximately 15.69% or higher. At December 31, 2016, the likely impairment occurred at a discount rate of approximately 13.94% or higher. The discount rate used to calculate the fair value of our portfolio was 10.81% and 10.96% at June 30, 2017 and December 31, 2016, respectively.

The table does not include any allowance for transactional fees and expenses associated with a portfolio sale (which expenses and fees could be substantial), and is provided to demonstrate how various discount rates used to value our portfolio could affect our ability to satisfy amounts owing under our debt obligations in light of our senior secured lender’s right to priority payments. This table also does not include the yield maintenance fee, which could be substantial, we are required to pay in certain circumstances under our senior credit facility with LNV Corporation. You should read the above table in conjunction with the information contained in other sections of this report, including our discussion of discount rates included under the “Critical Accounting Policies — Fair Value Components – Discount Rate” caption above. This discussion and analysis is based on the beliefs of our management, as well as assumptions made by, and information currently available to, our management.

Cash Flows

The payment of premiums and servicing costs to maintain life insurance policies represents our most significant requirement for cash disbursement. When a policy is purchased, we are able to calculate the minimum premium payments required to maintain the policy in-force. Over time as the insured ages, premium payments will increase. Nevertheless, the probability we will actually be required to pay the premiums decreases as mortality becomes more likely. These scheduled premiums and associated probabilities are factored into our expected internal rate of return and cash-flow modeling. Beyond premiums, we incur policy servicing costs, including annual trustee, tracking costs, and debt servicing costs, including principal and interest payments all of which are excluded from our internal rate of return (“IRR”) calculations. Until we receive a sufficient amount of proceeds from the policy benefits, we intend to pay these costs from our senior credit facilities, when permitted, and through the issuance of debt securities, including the L Bonds, and equity securities including our preferred stock offerings.

The amount of payments for anticipated premiums and servicing costs that we will be required to make over the next five years to maintain our current portfolio, assuming no mortalities, is set forth in the table below.

Years Ending December 31,	Premiums		Servicing		Premiums and Servicing Fees
Six months ending December 31, 2017	$	24,455,000	$	654,000	$	25,109,000
2018		52,611,000		654,000		53,265,000
2019		58,206,000		654,000		58,860,000
2020		65,722,000		654,000		66,376,000
2021		74,105,000		654,000		74,759,000
2022		83,310,000		654,000		83,964,000
	$	358,409,000	$	3,924,000	$	362,333,000

- 36 -

Our anticipated premium expenses are subject to the risk of increased cost-of-insurance charges (i.e., premium charges) for the universal life insurance policies we own. In July 2017, Lincoln National Life Insurance Company announced pending cost-of-insurance rate increases for certain life insurance policies which were effected on August 1, 2017. We identified two affected policies in our portfolio. We have requested updated policy illustrations and in order to calculate the change in fair value resulting from the expected increased premiums. In August 2017, Transamerica Life Insurance Company announced pending cost-of-insurance rate increases for certain life insurance policies that will be effected on the policy anniversary dates. We identified three affected policies in our portfolio. We are aware of one additional pending cost-of-insurance increase affecting one other policy in our portfolio. As a result, we expect that our premium expense will increase and the fair value of the policy and our portfolio will be negatively impacted once the insurer has specified and implemented the proposed increases. Except as noted above, we are not aware of cost-of-insurance increases by other insurers, but we are aware that cost-of-insurance increases have become more prevalent in the industry. Thus, we may see additional insurers implementing cost-of-insurance increases in the future.

For the quarter-end dates set forth below, the following table illustrates the total amount of face value of policy benefits owned, and the trailing 12 months of life insurance policy benefits collected and premiums paid on our portfolio. The trailing 12-month benefits/premium coverage ratio indicates the ratio of policy benefits received to premiums paid over the trailing 12-month period from our portfolio of life insurance policies.

Quarter End Date	Portfolio Face Amount		12-Month Trailing Benefits Collected		12-Month Trailing Premiums Paid		12-Month Trailing Benefits/ Premium Coverage Ratio
December 31, 2014		779,099,000		18,050,000		23,265,000		77.6	%
March 31, 2015		754,942,000		46,675,000		23,786,000		196.2	%
June 30, 2015		806,274,000		47,125,000		24,348,000		193.5	%
September 30, 2015		878,882,000		44,482,000		25,313,000		175.7	%
December 31, 2015		944,844,000		31,232,000		26,650,000		117.2	%
March 31, 2016		1,027,821,000		21,845,000		28,771,000		75.9	%
June 30, 2016		1,154,798,000		30,924,000		31,891,000		97.0	%
September 30, 2016		1,272,078,000		35,867,000		37,055,000		96.8	%
December 31, 2016		1,361,675,000		48,452,000		40,240,000		120.4	%
March 31, 2017		1,447,558,000		48,189,000		42,753,000		112.7	%
June 30, 2017		1,525,363,000		49,295,000		45,414,000		108.5	%

We believe that the portfolio cash flow results set forth above are consistent with our general investment thesis: that the life insurance policy benefits we receive will continue to increase over time in relation to the premiums we are required to pay on the remaining polices in the portfolio. Nevertheless, we expect that our portfolio cash flow on a period-to-period basis will remain inconsistent until such time as we achieve our goal of acquiring a larger, more diversified portfolio of life insurance policies. As our receipt of life insurance policy benefits increases, we expect to use these cash flows to begin paying down our outstanding indebtedness and purchase additional life insurance policies.

Inflation

Changes in inflation do not necessarily correlate with changes in interest rates. We presently do not foresee any material impact of inflation on our results of operations in the periods presented in our consolidated financial statements.

Off-Balance Sheet Arrangements

We are party to an office lease with U.S. Bank National Association as the landlord. On September 1, 2015, we entered into an amendment that expanded the leased space to 17,687 square feet and extended the term through August 31, 2026 (see Note 16).

Credit Risk

We review the credit risk associated with our portfolio of life insurance policies when estimating its fair value. In evaluating the policies’ credit risk, we consider insurance company solvency, credit risk indicators, economic conditions, ongoing credit evaluations, and company positions. We attempt to manage our credit risk related to life insurance policies typically by purchasing policies issued only from companies with an investment-grade credit rating by either Standard & Poor’s, Moody’s, or A.M. Best Company. As of June 30, 2017, 96.3% of our life insurance policies, by face value benefits, were issued by companies that maintained an investment-grade rating (BBB or better) by Standard & Poor’s.

- 37 -

Interest Rate Risk

Our senior credit facilities are floating-rate financing. In addition, our ability to offer interest and dividend rates that attract capital (including in our continuous offering of L Bonds and RPS 2) is generally impacted by prevailing interest rates. Furthermore, while our L Bond and RPS 2 offerings provide us with fixed-rate debt and equity financing, our debt coverage ratio is calculated in relation to the interest rate of our debt financing. Therefore, fluctuations in interest rates impact our business by increasing our borrowing costs, and reducing availability under our debt financing arrangements. We calculate our portfolio earnings based upon the spread generated between the return on our life insurance portfolio and the total cost of our financing. As a result, increases in interest rates will reduce the earnings we expect to achieve from our investments in life insurance policies.

Non-GAAP Financial Measures

Non-GAAP financial measures disclosed by our management are provided as additional information to investors in order to provide an alternative method for assessing our financial condition and operating results. These non-GAAP financial measures are not in accordance with GAAP and may be different from non-GAAP measures used by other companies, including other companies within our industry. This presentation of non-GAAP financial information is not meant to be considered in isolation or as a substitute for comparable amounts prepared in accordance with GAAP. See our consolidated financial statements and our financial statements contained herein.

We use non-GAAP financial measures for maintaining compliance with covenants contained in our borrowing agreement with Autobahn/DZ Bank and for management’s assessment of our financial condition and operating results without regard to GAAP fair value standards. The application of current GAAP fair value standards, especially during a period of significant growth of our portfolio and our company may result in current period GAAP financial results that may not be reflective of our long-term earnings potential or overall financial condition. Management believes that our non-GAAP financial measures permit investors to understand long-term earnings performance without regard to the volatility in GAAP financial results that can and does occur during this stage of our portfolio and company growth.

Therefore, in contrast to a GAAP fair valuation (mark-to-market), we seek to measure the accrual of the actuarial gain occurring within the portfolio of life insurance policies at our expected internal rate of return based on statistical mortality probabilities for the insureds (using primarily the insured’s age, sex, health and smoking status). The expected internal rate of return tracks actuarial gain occurring within the policies according to a mortality table as the insureds’ age increases. By comparing the actuarial gain accruing within our portfolio of life insurance policies against our adjusted operating costs during the same period, we can estimate, manage and evaluate the overall financial performance of our business without regard to mark-to-market (fair value) volatility. We use this information to balance our life insurance policy purchasing and manage our capital structure, including the issuance of debt and utilization of our other sources of capital, and to monitor our compliance with borrowing covenants. We believe that these non-GAAP financial measures provide information that is useful for investors to understand period-over-period operating results separate and apart from fair value items that can have a disproportionately positive or negative impact on GAAP results in any particular reporting period.

Our senior credit facility with Autobahn/DZ Bank requires us to maintain a “positive net income” and “tangible net worth,” each of which are calculated on an adjusted non-GAAP basis using the method described below, without regard to GAAP-based fair value measures. In addition, our senior credit facility with Autobahn/DZ Bank requires us to maintain an “excess spread,” which is the difference between (i) the weighted average of our expected internal rate of return of our portfolio of life insurance policies; and (ii) the weighted average of the Autobahn/DZ Bank senior credit facility’s interest rate. These non-GAAP measures (i.e., positive net income, tangible net worth, and an excess spread) are common non-GAAP measures of financial performance and condition in the industry.

In addition, the Indenture governing our L Bonds and the note issuance and security agreement governing our Series I Secured Notes require us to maintain a “debt coverage ratio” designed to ensure that the expected cash flows from our portfolio of life insurance policies is reasonably expected to be able to adequately service our total outstanding indebtedness. This ratio is calculated using non-GAAP measures in the method described below, again without regard to GAAP-based fair value measures.

Non-GAAP Investment Cost Basis	As of June 30, 2017			As of December 31, 2016
GAAP fair value	$	577,050,000		$	511,192,000
Unrealized fair value gain (A)		(293,745,000	)		(264,625,000	)
Adjusted cost basis increase (B)		281,924,000			248,377,000
Non-GAAP investment cost basis (C)	$	565,229,000		$	494,944,000

(A)	This represents the reversal of cumulative unrealized GAAP fair value gain of life insurance policies.
(B)	Adjusted cost basis is increased to include interest, premiums and servicing fees that are expensed under GAAP.
(C)	This is the non-GAAP cost basis in life insurance policies from which our expected internal rate of return is calculated.

- 38 -

Excess Spread. Management uses the “total excess spread” to gauge expected profitability of our investments. The expected IRR of our portfolio is based upon future cash flow forecasts derived from a probabilistic analysis of our policy benefits received and policy premiums paid in relation to our non-GAAP investment cost basis (“Expected IRR”).

	As of June 30, 2017			As of December 31, 2016
Expected IRR		11.05	%		11.34	%
Total weighted-average interest rate on indebtedness for borrowed money (1)		7.40	%		7.30	%
Total excess spread (2)		3.65	%		4.04	%

(1)	Represents the weighted-average interest rate paid on all interest-bearing indebtedness as of the measurement date, determined as follows:

Indebtedness	As of June 30, 2017		As of December 31, 2016
Senior credit facilities	$	155,626,000	$	162,725,000
Series I Secured Notes		6,815,000		16,614,000
L Bonds		407,850,000		387,067,000
Total	$	570,291,000	$	566,406,000

Interest Rates on Indebtedness
Senior credit facilities	7.59	%	7.34	%
Series I Secured Notes	8.72	%	8.68	%
L Bonds	7.30	%	7.23	%
Weighted-average interest rates paid on indebtedness	7.40	%	7.30	%

(2)	Calculated as the Expected IRR minus the weighted-average interest rate on interest-bearing indebtedness (1).

Adjusted Non-GAAP Net Income. We calculate our adjusted non-GAAP net income by recognizing the actuarial gain accruing within our life insurance portfolio at the Expected IRR against our adjusted cost basis without regard to fair value. We net this actuarial gain against our adjusted operating costs during the same period to calculate our net income on a non-GAAP basis. Our senior credit facility with Autobahn/DZ Bank requires us to maintain a positive net income calculated on an adjusted non-GAAP basis.

	Three Months Ended June 30,						Six Months Ended June 30,
	2017			2016			2017			2016
GAAP net income (loss) attributable to common shareholders	$	(7,725,000	)	$	1,881,000		$	(9,638,000	)	$	2,956,000
Unrealized fair value gain (1)		(15,235,000	)		(21,241,000	)		(29,119,000	)		(32,773,000	)
Adjusted cost basis increase (2)		22,739,000			16,373,000			44,461,000			31,740,000
Accrual of unrealized actuarial gain (3)		7,505,000			7,460,000			12,415,000			13,527,000
Total adjusted non-GAAP net income (loss) (4)	$	7,284,000		$	4,473,000		$	18,119,000		$	15,450,000

(1)	Reversal of unrealized GAAP fair value gain of life insurance policies for current period.
(2)	Adjusted cost basis is increased to include interest, premiums and servicing fees that are expensed under GAAP.
(3)	Accrual of actuarial gain at the Expected IRR.
(4)	We must maintain an annual positive consolidated net income, calculated on a non-GAAP basis, to maintain compliance with our senior credit facility with Autobahn/DZ Bank.

- 39 -

Adjusted Non-GAAP Tangible Net Worth. We calculate our adjusted non-GAAP tangible net worth by recognizing the actuarial gain accruing within our life insurance policies at the Expected IRR of the policies we own without regard to fair value. We net this actuarial gain against our costs during the same period to calculate our adjusted tangible net worth on a non-GAAP basis. Our senior credit facility with Autobahn/DZ Bank requires us to maintain a tangible net worth in excess of $45 million calculated on an adjusted non-GAAP basis.

	As of June 30, 2017			As of December 31, 2016
GAAP net worth	$	113,889,000		$	67,298,000
Less intangible assets (1)		(21,630,000	)		(19,442,000	)
GAAP tangible net worth		92,259,000			47,856,000
Unrealized fair value gain (2)		(293,745,000	)		(264,625,000	)
Adjusted cost basis increase (3)		281,924,000			248,377,000
Accrual of unrealized actuarial gain (4)		145,223,000			132,808,000
Total adjusted non-GAAP tangible net worth	$	225,661,000		$	164,416,000

(1)	Unamortized portion of deferred financing costs and pre-paid insurance.
(2)	Reversal of cumulative unrealized GAAP fair value gain on life insurance policies.
(3)	Adjusted cost basis is increased to include interest, premiums and servicing fees that are expensed under GAAP.
(4)	Accrual of cumulative actuarial gain at the Expected IRR.

Debt Coverage Ratio. Our L Bond and Series I Secured Notes borrowing covenants require us to maintain a debt coverage ratio of less than 90%. The debt coverage ratio is calculated by dividing the sum of our total interest-bearing indebtedness by the sum of our cash, cash equivalents, policy benefits receivable, if any, and the net present value of the life insurance portfolio.

	As of June 30, 2017			As of December 31, 2016
Life insurance portfolio policy benefits (5)	$	1,525,363,000		$	1,361,675,000
Discount rate of future cash flows		7.40	%		7.30	%
Net present value of life insurance portfolio policy benefits	$	686,490,000		$	614,908,000
Cash and cash equivalents		98,453,000			121,659,000
Life insurance policy benefits receivable		6,970,000			-
Total Coverage		791,913,000			736,567,000

Senior credit facilities		155,626,000			162,725,000
Series I Secured Notes		6,815,000			16,614,000
L Bonds		407,850,000			387,067,000
Total Indebtedness	$	570,291,000		$	566,406,000

Debt Coverage Ratio		72.01	%		76.90	%

(5) Weighted-average interest rate paid on indebtedness.

- 40 -

As of June 30, 2017, we were in compliance with the debt coverage ratio.

Expected Portfolio Internal Rate of Return at Purchase. Expected portfolio IRR at purchase is calculated as the weighted average (by face amount of policy benefits) derived from a probabilistic analysis of policy benefits received and policy premiums paid relative to our purchase price for all life insurance policies in the portfolio. This non-GAAP measure isolates our IRR expectation at purchase utilizing our underwriting life expectancy assumptions at that time. This measure does not change with the passage of time as compared to our non-GAAP investment cost basis that increases with the payment of premiums, financing costs, and the effective life expectancy which changes over time, both of which are used to calculate our Expected IRR.

	As of June 30,			As of December 31,
	2017			2016
Life insurance portfolio policy benefits	$	1,525,363,000		$	1,361,675,000
Total number of policies		793			690

Non-GAAP Expected Portfolio Internal Rate of Return at Purchase		15.60	%		15.64	%

We have in the past reported non-GAAP net asset value among our other non-GAAP financial measures. We have determined, however, to cease reporting this measure primarily because we do not believe that it is sufficiently additive to our existing non-GAAP measures in aiding users of our financial statements and disclosures to measure and evaluate our financial condition or operating results. Moreover, we are not aware of other reporting companies in our industry that use this measure to evaluate their financial condition or operating results.

Portfolio Information

Our portfolio of life insurance policies, owned by our subsidiaries as of June 30, 2017, is summarized below:

Life Insurance Portfolio Summary

Total portfolio face value of policy benefits	$	1,525,363,000
Average face value per policy	$	1,924,000
Average face value per insured life	$	2,151,000
Average age of insured (yrs.)*		81.5
Average life expectancy estimate (yrs.)*		6.9
Total number of policies		793
Number of unique lives		709
Demographics		74% Males; 26% Females
Number of smokers		30
Largest policy as % of total portfolio		0.87	%
Average policy as % of total portfolio		0.13	%
Average annual premium as % of face value		3.21	%

* Averages presented in the table are weighted averages.

Our portfolio of life insurance policies, owned by our wholly owned subsidiaries as of June 30, 2017, organized by the insured’s current age and the associated number of policies and policy benefits, is summarized below:

- 41 -

Distribution of Policies and Policy Benefits by Current Age of Insured

							Percentage of Total
Min Age	Max Age	Policies		Policy Benefits		Wtd. Avg. Life Expectancy (yrs.)	Number of Policies			Policy Benefits
95	99		8	$	12,392,000	1.1		1.0	%		0.8	%
90	94		71	$	135,898,000	2.9		8.9	%		8.9	%
85	89		195	$	393,983,000	4.7		24.6	%		25.8	%
80	84		171	$	401,496,000	6.3		21.6	%		26.3	%
75	79		144	$	270,779,000	9.0		18.2	%		17.8	%
70	74		133	$	210,775,000	10.2		16.8	%		13.8	%
60	69		71	$	100,040,000	11.3		8.9	%		6.6	%
Total			793	$	1,525,363,000	6.9		100.0	%		100.0	%

Our portfolio of life insurance policies, owned by our wholly owned subsidiaries as of June 30, 2017, organized by the insured’s estimated life expectancy and associated policy benefits, is summarized below:

Distribution of Policies by Current Life Expectancies of Insured

						Percentage of Total
Min LE (Months)	Max LE (Months)	Policies		Policy Benefits		Number of Policies			Policy Benefits
2	47		212	$	334,511,000		26.7	%		21.9	%
48	71		175		372,072,000		22.1	%		24.4	%
72	95		147		289,037,000		18.5	%		19.0	%
96	119		117		235,105,000		14.8	%		15.4	%
120	143		77		158,601,000		9.7	%		10.4	%
144	199		65		136,037,000		8.2	%		8.9	%
Total			793	$	1,525,363,000		100.0	%	$	100.0	%

We track concentrations of pre-existing medical conditions among insured individuals within our portfolio based on information contained in life expectancy reports. We track these medical conditions within the following ten primary categories: (1) cancer, (2) cardiovascular, (3) cerebrovascular, (4) dementia, (5) diabetes, (6) multiple, (7) neurological disorders, (8) no disease, (9) other, and (10) respiratory diseases. Our primary categories are summary generalizations based on the ICD-9 codes we track on each insured individuals within our portfolio. ICD-9 codes, published by the World Health Organization, are used worldwide for medical diagnoses and treatment systems, as well as morbidity and mortality statistics. Currently, the primary disease categories within our portfolio that represent a concentration of over 10% are multiple, cardiovascular, and other which constitute 27.6%, 19.9%, and 12.4%, respectively, of the face amount of insured benefits of our portfolio as at June 30, 2017.

Portfolio Credit Risk Management

We rely on the payment of policy benefit claims by life insurance companies as our most significant source of cash flows. The life insurance assets we own represent obligations of third-party life insurance companies to pay the benefit amount under the relevant policy upon the mortality of the insured. As a result, we manage this credit risk exposure by generally purchasing policies issued by insurance companies with investment-grade ratings from Standard & Poor manage this credit risk exposure by generally purchasing policies issued.

Approximately 96.3% of life insurance assets in our portfolio were issued by insurance companies with investment-grade credit ratings from Standard & Poor’s, as of June 30, 2017. Our largest life insurance company credit exposures and the Standard & Poor’s credit rating of their respective financial strength and claims-paying ability is set forth below:

Rank	Policy Benefits		Percentage of Policy Benefit Amount			Insurance Company	Ins. Co. S&P Rating
1	$	215,471,000		14.1	%	John Hancock Life Insurance Company (U.S.A.)	AA-
2	$	193,557,000		12.7	%	AXA Equitable Life Insurance Company	AA-
3	$	165,580,000		10.9	%	Lincoln National Life Insurance Company	AA-
4	$	157,254,000		10.3	%	Transamerica Life Insurance Company	AA-
5	$	103,642,000		6.8	%	Metropolitan Life Insurance Company	AA-
6	$	62,293,000		4.1	%	Massachusetts Mutual Life Insurance Company	AA+
7	$	61,025,000		4.0	%	American General Life Insurance Company	A+
8	$	56,422,000		3.7	%	Pacific Life Insurance Company	AA-
9	$	47,390,000		3.1	%	West Coast Life Insurance Company	AA-
10	$	45,670,000		3.0	%	Reliastar Life Insurance Company	A
		1,108,304,000		72.7	%

- 42 -

The yield to maturity on bonds issued by life insurance carriers reflects, among other things, the credit risk (risk of default) of such insurance carrier. We follow the yields on certain publicly traded life insurance company bonds since this information is part of the data we consider when valuing our portfolio of life insurance policies for our financial statements.

Name of Bond	Maturity	YTM			Duration (Years)		Bond S&P Rating
AXA 1.125%	5/15/2028		1.04	%		10.9	A
Manulife Finl 4.15%	3/4/2026		3.18	%		8.7	A
Lincoln National Corp Ind 3.625%	12/12/2026		3.68	%		9.5	A-
Amer Intl Grp 4.875%	6/1/2022		2.71	%		4.9	BBB+
Protective Life 7.375%	10/15/2019		2.31	%		2.3	A-
Metlife 3.048%	12/15/2022		2.60	%		5.5	A-
Prudential Finl Inc Mtns Book 3.5%	5/15/2024		2.85	%		6.9	A
Average yield on insurance bonds			2.62	%		6.9

The table above indicates the current yields to maturity (YTM) for the senior bonds of selected life insurance carriers with durations, on average, that are similar to the life expectancy estimates of our life insurance portfolio. As of June 30, 2017, the average yield to maturity of these bonds was 2.62%, which we believe reflects, in part, the financial market’s judgment that credit risk is low with regard to these carriers’ financial obligations. It should be noted that the obligations of life insurance carriers to pay life insurance policy benefits ranks senior to all of their other financial obligations, such as the bonds they issue. This “super senior” priority is not reflected in the yield to maturity in the table and, if considered, would result in a lower yield to maturity all else being equal. Thus, as long as the respective premium payments have been made, it is highly likely that the owner of the insurance policy will collect the insurance policy benefit upon the mortality of the insured.

Value Proposition. We define the value proposition presented by our portfolio of life insurance assets as our ability to earn superior risk-adjusted returns. At any time, we calculate our returns from our life insurance assets based upon (i) our historical results; and (ii) the future cash flows we expect to realize from our statistical forecasts. To forecast our expected future cash flows, we use the probabilistic method of analysis. The actuarial software we use to produce our expected future cash flows and conduct our probabilistic analysis was developed by the actuarial firm Milliman and is now owned by MAPS. The expected internal rate of return of our portfolio is based upon future cash flow forecasts derived from a probabilistic analysis of our policy benefits received and policy premiums paid in relation to our non-GAAP investment cost basis. As of June 30, 2017, the expected internal rate of return on our portfolio of life insurance assets was 11.05% based on our portfolio benefits of $1.525 billion and our non-GAAP investment cost basis of $565.2 million (including purchase price, premiums paid, and financing costs incurred to date).

We seek to further enhance our understanding of our expected future cash flow forecast by applying a stochastic analysis, sometimes referred to as a “Monte Carlo simulation,” to provide us with a greater understanding of the variability of our future cash flow projections. The stochastic analysis we perform is built within the MAPS actuarial software and provides internal rate of return calculations for different statistical confidence intervals. The results of our stochastic analysis, in which we run 10,000 random mortality scenarios, demonstrates that the scenario ranking at the 50th percentile of all 10,000 results generates an internal rate of return of 11.01%, which is near to our Expected IRR of 11.05%. The stochastic analysis results also reveal that our portfolio is expected to generate an internal rate of return of 10.49% or better in 75% of all generated scenarios; and an internal rate of return of 10.04% or better in 90% of all generated scenarios. As the portfolio continues to grow, all else equal, the percentage of observations that result in an internal rate of return at or very near 11.01% (currently our median, or 50th percentile, internal rate of return expectation) is expected to increase, thereby lowering future cash flow volatility and potentially justifying our use of lower discount rates to value our portfolio.

- 43 -

In sum, we believe our statistical analyses show that, if we can continue to grow and maintain our investments in life insurance assets, then, in the absence of significant negative events affecting our most significant risks, including but not limited to longevity and credit risk, and interest rate and financing risk, those investments will provide superior risk-adjusted returns for our company and provide us with the means to generate attractive returns for our investors.

The complete detail of our portfolio of life insurance policies, owned by our wholly owned subsidiaries as of June 30, 2017, organized by the current age of the insured and the associated policy benefits, sex, estimated life expectancy, issuing insurance carrier, and the credit rating of the issuing insurance carrier, is set forth below.

Life Insurance Portfolio Detail

(as of June 30, 2017)

	Face Amount		Gender	Age (ALB)	LE (mo.) (1)	Insurance Company	S&P Rating
1	$	8,000,000	F	99	10	Massachusetts Mutual Life Insurance Company	AA+
2	$	184,000	M	96	33	Reliastar Life Insurance Company	A
3	$	219,000	M	96	33	Reliastar Life Insurance Company	A
4	$	1,100,000	M	96	16	Reliastar Life Insurance Company	A
5	$	1,500,000	F	96	19	Accordia Life and Annuity Company	A-
6	$	1,000,000	F	95	20	Transamerica Life Insurance Company	AA-
7	$	264,000	F	95	10	Lincoln Benefit Life Company	BBB+
8	$	125,000	F	95	2	Lincoln National Life Insurance Company	AA-
9	$	250,000	M	94	18	North American Company for Life and Health Insurance	A+
10	$	3,500,000	M	94	25	Reliastar Life Insurance Company	A
11	$	250,000	M	94	5	Transamerica Life Insurance Company	AA-
12	$	572,429	F	93	21	Reliastar Life Insurance Company	A
13	$	3,000,000	M	93	25	West Coast Life Insurance Company	AA-
14	$	500,000	F	93	49	John Hancock Life Insurance Company (U.S.A.)	AA-
15	$	5,000,000	F	93	40	American General Life Insurance Company	A+
16	$	2,000,000	F	93	3	Pruco Life Insurance Company	AA-
17	$	400,000	F	93	52	Principal Life Insurance Company	A+
18	$	500,000	F	93	36	Sun Life Assurance Company of Canada (U.S.)	AA-
19	$	5,000,000	F	93	20	John Hancock Life Insurance Company (U.S.A.)	AA-
20	$	1,000,000	F	93	20	Lincoln National Life Insurance Company	AA-
21	$	300,000	F	93	13	West Coast Life Insurance Company	AA-
22	$	1,682,773	F	92	36	Hartford Life and Annuity Insurance Company	BBB+
23	$	500,000	M	92	34	Massachusetts Mutual Life Insurance Company	AA+
24	$	5,000,000	M	92	19	John Hancock Life Insurance Company (U.S.A.)	AA-
25	$	3,100,000	F	92	20	Lincoln Benefit Life Company	BBB+
26	$	1,500,000	F	92	49	Lincoln National Life Insurance Company	AA-
27	$	3,000,000	F	92	23	Lincoln National Life Insurance Company	AA-
28	$	144,000	M	92	44	Lincoln National Life Insurance Company	AA-
29	$	500,000	M	92	34	Reliastar Life Insurance Company	A
30	$	1,000,000	M	92	6	Voya Retirement Insurance and Annuity Company	A
31	$	1,000,000	F	92	32	Pan-American Assurance Company	N/A
32	$	1,000,000	F	91	35	United of Omaha Life Insurance Company	AA-
33	$	3,500,000	F	91	55	John Hancock Life Insurance Company (U.S.A.)	AA-
34	$	500,000	M	91	33	Allianz Life Insurance Company of North America	AA
35	$	1,200,000	F	91	26	Massachusetts Mutual Life Insurance Company	AA+
36	$	1,200,000	F	91	26	Massachusetts Mutual Life Insurance Company	AA+
37	$	375,000	M	91	26	Lincoln National Life Insurance Company	AA-
38	$	5,000,000	M	91	27	John Hancock Life Insurance Company (U.S.A.)	AA-
39	$	500,000	F	91	22	Lincoln National Life Insurance Company	AA-
40	$	5,000,000	F	91	37	Reliastar Life Insurance Company	A
41	$	5,000,000	F	91	14	Lincoln National Life Insurance Company	AA-
42	$	1,000,000	F	91	56	Lincoln National Life Insurance Company	AA-
43	$	1,203,520	M	91	44	Columbus Life Insurance Company	AA
44	$	1,350,000	F	91	25	Lincoln National Life Insurance Company	AA-

- 44 -

	Face Amount		Gender	Age (ALB)	LE (mo.) (1)	Insurance Company	S&P Rating
45	$	3,500,000	F	91	27	Lincoln National Life Insurance Company	AA-
46	$	5,000,000	F	90	33	Massachusetts Mutual Life Insurance Company	AA+
47	$	100,000	M	90	22	American General Life Insurance Company	A+
48	$	2,500,000	F	90	33	American General Life Insurance Company	A+
49	$	2,500,000	M	90	38	Pacific Life Insurance Company	AA-
50	$	4,000,000	F	90	55	Transamerica Life Insurance Company	AA-
51	$	5,000,000	M	90	37	AXA Equitable Life Insurance Company	AA-
52	$	1,103,922	F	90	45	Sun Life Assurance Company of Canada (U.S.)	AA-
53	$	1,000,000	F	90	48	Transamerica Life Insurance Company	AA-
54	$	250,000	F	90	48	Transamerica Life Insurance Company	AA-
55	$	500,000	F	90	27	Transamerica Life Insurance Company	AA-
56	$	1,050,000	M	90	29	John Hancock Life Insurance Company (U.S.A.)	AA-
57	$	5,000,000	M	90	36	AIG Life Insurance Company	A+
58	$	3,000,000	M	90	76	Transamerica Life Insurance Company	AA-
59	$	1,000,000	M	90	27	AXA Equitable Life Insurance Company	AA-
60	$	500,000	M	90	46	Lincoln National Life Insurance Company	AA-
61	$	649,026	F	90	54	Midland National Life Insurance Company	A+
62	$	4,785,380	F	90	28	John Hancock Life Insurance Company (U.S.A.)	AA-
63	$	1,803,455	F	90	54	Metropolitan Life Insurance Company	AA-
64	$	1,529,270	F	90	54	Metropolitan Life Insurance Company	AA-
65	$	800,000	M	90	46	Lincoln National Life Insurance Company	AA-
66	$	400,000	M	90	31	Lincoln National Life Insurance Company	AA-
67	$	977,000	M	90	29	New York Life Insurance Company	AA+
68	$	2,000,000	M	90	26	John Hancock Life Insurance Company (U.S.A.)	AA-
69	$	5,000,000	M	90	36	John Hancock Life Insurance Company (U.S.A.)	AA-
70	$	500,000	F	90	20	Nationwide Life and Annuity Insurance Company	A+
71	$	2,225,000	F	90	67	Transamerica Life Insurance Company	AA-
72	$	3,000,000	F	90	64	Massachusetts Mutual Life Insurance Company	AA+
73	$	1,500,000	M	90	31	Union Central Life Insurance Company	N/A
74	$	300,000	M	90	33	John Hancock Life Insurance Company (U.S.A.)	AA-
75	$	3,000,000	M	90	28	Lincoln National Life Insurance Company	AA-
76	$	2,000,000	M	90	31	John Hancock Life Insurance Company (U.S.A.)	AA-
77	$	396,791	M	90	20	Lincoln National Life Insurance Company	AA-
78	$	1,500,000	M	90	85	Transamerica Life Insurance Company	AA-
79	$	1,000,000	F	90	64	Lincoln National Life Insurance Company	AA-
80	$	1,000,000	F	89	38	Metropolitan Life Insurance Company	AA-
81	$	248,859	F	89	19	Lincoln National Life Insurance Company	AA-
82	$	1,000,000	F	89	46	General American Life Insurance Company	AA-
83	$	500,000	F	89	51	Sun Life Assurance Company of Canada (U.S.)	AA-
84	$	5,000,000	F	89	22	Transamerica Life Insurance Company	AA-
85	$	3,000,000	M	89	30	Transamerica Life Insurance Company	AA-
86	$	1,200,000	M	89	55	Transamerica Life Insurance Company	AA-
87	$	1,000,000	M	89	60	AXA Equitable Life Insurance Company	AA-
88	$	250,000	M	89	61	Metropolitan Life Insurance Company	AA-
89	$	6,000,000	F	89	41	Sun Life Assurance Company of Canada (U.S.)	AA-
90	$	330,000	M	89	52	AXA Equitable Life Insurance Company	AA-
91	$	175,000	M	89	52	Metropolitan Life Insurance Company	AA-
92	$	335,000	M	89	52	Metropolitan Life Insurance Company	AA-
93	$	3,000,000	M	89	58	AXA Equitable Life Insurance Company	AA-
94	$	2,000,000	F	89	33	Beneficial Life Insurance Company	N/A
95	$	250,000	F	89	33	John Hancock Life Insurance Company (U.S.A.)	AA-
96	$	1,000,000	F	89	24	New York Life Insurance Company	AA+
97	$	1,250,000	M	89	21	Columbus Life Insurance Company	AA
98	$	300,000	M	89	21	Columbus Life Insurance Company	AA
99	$	10,000,000	F	89	71	West Coast Life Insurance Company	AA-
100	$	2,500,000	M	89	47	Transamerica Life Insurance Company	AA-
101	$	1,000,000	F	89	36	West Coast Life Insurance Company	AA-
102	$	2,000,000	F	89	36	West Coast Life Insurance Company	AA-

- 45 -

	Face Amount		Gender	Age (ALB)	LE (mo.) (1)	Insurance Company	S&P Rating
103	$	5,000,000	M	89	81	West Coast Life Insurance Company	AA-
104	$	800,000	M	89	39	National Western Life Insurance Company	A
105	$	500,000	F	89	34	Transamerica Life Insurance Company	AA-
106	$	400,000	F	89	34	Lincoln Benefit Life Company	BBB+
107	$	1,269,017	M	89	19	Hartford Life and Annuity Insurance Company	BBB+
108	$	1,500,000	F	89	37	Transamerica Life Insurance Company	AA-
109	$	500,000	F	89	37	Transamerica Life Insurance Company	AA-
110	$	1,000,000	M	89	27	Security Life of Denver Insurance Company	A
111	$	200,000	M	89	33	Lincoln Benefit Life Company	BBB+
112	$	4,445,467	M	89	42	Penn Mutual Life Insurance Company	A+
113	$	7,500,000	M	89	34	Lincoln National Life Insurance Company	AA-
114	$	3,600,000	F	89	50	AXA Equitable Life Insurance Company	AA-
115	$	5,000,000	M	89	62	Lincoln National Life Insurance Company	AA-
116	$	4,513,823	F	89	21	Accordia Life and Annuity Company	A-
117	$	309,000	M	89	21	Transamerica Life Insurance Company	AA-
118	$	100,000	F	89	40	American General Life Insurance Company	A+
119	$	100,000	F	89	40	American General Life Insurance Company	A+
120	$	2,000,000	F	89	58	U.S. Financial Life Insurance Company	N/A
121	$	1,000,000	M	89	26	Lincoln National Life Insurance Company	AA-
122	$	1,000,000	M	88	33	John Hancock Life Insurance Company (U.S.A.)	AA-
123	$	2,000,000	M	88	33	John Hancock Life Insurance Company (U.S.A.)	AA-
124	$	5,000,000	M	88	34	Lincoln National Life Insurance Company	AA-
125	$	1,365,000	F	88	75	Transamerica Life Insurance Company	AA-
126	$	5,000,000	F	88	51	Lincoln National Life Insurance Company	AA-
127	$	250,000	M	88	31	Wilton Reassurance Life Insurance Company	N/A
128	$	1,000,000	F	88	69	Security Life of Denver Insurance Company	A
129	$	200,000	F	88	68	Lincoln National Life Insurance Company	AA-
130	$	1,000,000	M	88	31	Sun Life Assurance Company of Canada (U.S.)	AA-
131	$	1,000,000	M	88	25	Massachusetts Mutual Life Insurance Company	AA+
132	$	1,000,000	F	88	16	State Farm Life Insurance Company	AA
133	$	2,000,000	M	88	77	Transamerica Life Insurance Company	AA-
134	$	209,176	M	88	74	Lincoln National Life Insurance Company	AA-
135	$	8,500,000	M	88	69	Massachusetts Mutual Life Insurance Company	AA+
136	$	1,000,000	M	88	19	Transamerica Life Insurance Company	AA-
137	$	500,000	M	88	63	Metropolitan Life Insurance Company	AA-
138	$	750,000	F	88	63	Lincoln National Life Insurance Company	AA-
139	$	1,500,000	F	88	63	Lincoln National Life Insurance Company	AA-
140	$	400,000	F	88	63	Lincoln National Life Insurance Company	AA-
141	$	1,250,000	F	88	63	Lincoln National Life Insurance Company	AA-
142	$	2,000,000	M	88	34	Lincoln National Life Insurance Company	AA-
143	$	200,000	M	88	54	AIG Life Insurance Company	A+
144	$	500,000	F	88	40	Beneficial Life Insurance Company	N/A
145	$	2,000,000	M	88	64	Lincoln National Life Insurance Company	AA-
146	$	1,800,000	M	88	36	John Hancock Life Insurance Company (U.S.A.)	AA-
147	$	120,500	M	88	23	New England Life Insurance Company	A+
148	$	4,000,000	M	88	34	Metropolitan Life Insurance Company	AA-
149	$	2,000,000	M	88	70	Security Life of Denver Insurance Company	A
150	$	2,000,000	M	88	70	Security Life of Denver Insurance Company	A
151	$	2,000,000	M	88	70	Security Life of Denver Insurance Company	A
152	$	1,500,000	M	88	41	AXA Equitable Life Insurance Company	AA-
153	$	1,500,000	M	87	21	Transamerica Life Insurance Company	AA-
154	$	1,000,000	F	87	55	AXA Equitable Life Insurance Company	AA-
155	$	2,000,000	M	87	37	Metropolitan Life Insurance Company	AA-
156	$	3,000,000	M	87	37	Metropolitan Life Insurance Company	AA-
157	$	1,000,000	M	87	23	John Hancock Life Insurance Company (U.S.A.)	AA-
158	$	2,000,000	F	87	66	AXA Equitable Life Insurance Company	AA-
159	$	5,000,000	F	87	41	Security Life of Denver Insurance Company	A
160	$	3,000,000	F	87	65	Sun Life Assurance Company of Canada (U.S.)	AA-

- 46 -

	Face Amount		Gender	Age (ALB)	LE (mo.) (1)	Insurance Company	S&P Rating
161	$	125,000	M	87	46	Jackson National Life Insurance Company	AA
162	$	2,500,000	M	87	49	Metropolitan Life Insurance Company	AA-
163	$	1,500,000	M	87	67	AXA Equitable Life Insurance Company	AA-
164	$	1,000,000	M	87	38	AXA Equitable Life Insurance Company	AA-
165	$	2,328,547	M	87	32	Metropolitan Life Insurance Company	AA-
166	$	2,000,000	M	87	32	Metropolitan Life Insurance Company	AA-
167	$	5,000,000	M	87	69	Security Life of Denver Insurance Company	A
168	$	3,000,000	F	87	46	Transamerica Life Insurance Company	AA-
169	$	5,000,000	M	87	54	Security Life of Denver Insurance Company	A
170	$	347,211	F	87	23	Pruco Life Insurance Company	AA-
171	$	1,000,000	M	87	31	John Hancock Life Insurance Company (U.S.A.)	AA-
172	$	500,000	M	87	32	New England Life Insurance Company	A+
173	$	4,000,000	F	87	50	Reliastar Life Insurance Company	A
174	$	284,924	M	87	43	Transamerica Life Insurance Company	AA-
175	$	5,000,000	F	87	73	American General Life Insurance Company	A+
176	$	2,000,000	M	87	45	AXA Equitable Life Insurance Company	AA-
177	$	1,750,000	M	87	45	AXA Equitable Life Insurance Company	AA-
178	$	2,000,000	F	87	69	John Hancock Life Insurance Company (U.S.A.)	AA-
179	$	500,000	F	87	19	Transamerica Life Insurance Company	AA-
180	$	2,000,000	M	87	21	Transamerica Life Insurance Company	AA-
181	$	1,425,000	M	87	40	John Hancock Life Insurance Company (U.S.A.)	AA-
182	$	500,000	M	87	37	Hartford Life and Annuity Insurance Company	BBB+
183	$	800,000	M	87	34	Metropolitan Life Insurance Company	AA-
184	$	5,000,000	F	86	81	AXA Equitable Life Insurance Company	AA-
185	$	1,000,000	F	86	65	John Hancock Life Insurance Company (U.S.A.)	AA-
186	$	694,487	M	86	59	Lincoln National Life Insurance Company	AA-
187	$	6,000,000	F	86	102	American General Life Insurance Company	A+
188	$	1,433,572	M	86	37	Security Mutual Life Insurance Company of NY	N/A
189	$	1,500,000	F	86	109	Lincoln Benefit Life Company	BBB+
190	$	1,000,000	F	86	29	Metropolitan Life Insurance Company	AA-
191	$	1,000,000	M	86	43	Columbus Life Insurance Company	AA
192	$	750,000	M	86	67	West Coast Life Insurance Company	AA-
193	$	4,000,000	M	86	21	John Hancock Life Insurance Company (U.S.A.)	AA-
194	$	1,000,000	M	86	58	John Hancock Life Insurance Company (U.S.A.)	AA-
195	$	2,000,000	F	86	79	Lincoln Benefit Life Company	BBB+
196	$	1,000,000	M	86	37	Security Life of Denver Insurance Company	A
197	$	2,000,000	F	86	55	New York Life Insurance Company	AA+
198	$	5,000,000	M	86	68	Lincoln National Life Insurance Company	AA-
199	$	2,400,000	M	86	21	Genworth Life Insurance Company	BB-
200	$	3,000,000	M	86	71	Transamerica Life Insurance Company	AA-
201	$	600,000	M	86	80	AXA Equitable Life Insurance Company	AA-
202	$	7,600,000	F	86	79	Transamerica Life Insurance Company	AA-
203	$	250,000	M	86	12	Midland National Life Insurance Company	A+
204	$	1,000,000	M	86	47	Lincoln National Life Insurance Company	AA-
205	$	450,000	M	86	47	American General Life Insurance Company	A+
206	$	2,500,000	F	86	58	American General Life Insurance Company	A+
207	$	2,500,000	M	86	42	AXA Equitable Life Insurance Company	AA-
208	$	3,000,000	M	86	42	Lincoln National Life Insurance Company	AA-
209	$	500,000	M	86	27	Genworth Life Insurance Company	BB-
210	$	1,980,000	M	86	34	New York Life Insurance Company	AA+
211	$	3,000,000	F	86	31	AXA Equitable Life Insurance Company	AA-
212	$	2,000,000	M	86	57	American National Insurance Company	A
213	$	250,000	M	86	60	Voya Retirement Insurance and Annuity Company	A
214	$	1,800,000	F	86	43	Lincoln National Life Insurance Company	AA-
215	$	1,703,959	M	86	52	Lincoln National Life Insurance Company	AA-
216	$	2,000,000	M	86	39	Metropolitan Life Insurance Company	AA-

- 47 -

	Face Amount		Gender	Age (ALB)	LE (mo.) (1)	Insurance Company	S&P Rating
217	$	500,000	M	86	8	Great Southern Life Insurance Company	N/A
218	$	1,000,000	M	86	41	Hartford Life and Annuity Insurance Company	BBB+
219	$	3,500,000	F	86	82	Lincoln Benefit Life Company	BBB+
220	$	1,000,000	M	86	72	Lincoln National Life Insurance Company	AA-
221	$	1,000,000	M	86	42	Metropolitan Life Insurance Company	AA-
222	$	300,000	M	86	43	New England Life Insurance Company	A+
223	$	200,000	M	85	57	John Hancock Life Insurance Company (U.S.A.)	AA-
224	$	10,000,000	M	85	107	Pacific Life Insurance Company	AA-
225	$	80,000	F	85	40	Protective Life Insurance Company	AA-
226	$	1,000,000	M	85	44	Texas Life Insurance Company	N/A
227	$	500,000	M	85	84	Metropolitan Life Insurance Company	AA-
228	$	2,000,000	M	85	46	National Life Insurance Company	A+
229	$	3,000,000	M	85	26	U.S. Financial Life Insurance Company	N/A
230	$	2,147,816	F	85	99	John Hancock Life Insurance Company (U.S.A.)	AA-
231	$	4,200,000	F	85	98	Transamerica Life Insurance Company	AA-
232	$	325,000	M	85	46	Genworth Life and Annuity Insurance Company	BB-
233	$	175,000	M	85	46	Genworth Life and Annuity Insurance Company	BB-
234	$	850,000	M	85	41	American General Life Insurance Company	A+
235	$	1,900,000	M	85	48	American National Insurance Company	A
236	$	500,000	M	85	30	New York Life Insurance Company	AA+
237	$	500,000	M	85	30	New York Life Insurance Company	AA+
238	$	5,000,000	M	85	39	AXA Equitable Life Insurance Company	AA-
239	$	385,000	M	85	55	Metropolitan Life Insurance Company	AA-
240	$	500,000	M	85	55	Metropolitan Life Insurance Company	AA-
241	$	75,000	M	85	34	Fidelity and Guaranty Insurance Company	BBB-
242	$	1,500,000	M	85	63	Lincoln National Life Insurance Company	AA-
243	$	250,000	M	85	35	Ohio State Insurance Company	N/A
244	$	5,000,000	M	85	84	Banner Life Insurance Company	AA-
245	$	3,500,000	F	85	70	AXA Equitable Life Insurance Company	AA-
246	$	1,000,000	F	85	82	West Coast Life Insurance Company	AA-
247	$	8,500,000	M	85	84	John Hancock Life Insurance Company (U.S.A.)	AA-
248	$	3,000,000	F	85	50	Metropolitan Life Insurance Company	AA-
249	$	750,000	M	85	59	John Hancock Life Insurance Company (U.S.A.)	AA-
250	$	4,500,000	M	85	55	AXA Equitable Life Insurance Company	AA-
251	$	250,000	M	85	35	Transamerica Life Insurance Company	AA-
252	$	2,275,000	M	85	73	Reliastar Life Insurance Company	A
253	$	120,000	F	85	73	Lincoln National Life Insurance Company	AA-
254	$	77,000	F	85	73	Lincoln National Life Insurance Company	AA-
255	$	10,000,000	M	85	64	AXA Equitable Life Insurance Company	AA-
256	$	5,000,000	M	85	59	Transamerica Life Insurance Company	AA-
257	$	300,000	F	85	87	AXA Equitable Life Insurance Company	AA-
258	$	500,000	F	85	87	AXA Equitable Life Insurance Company	AA-
259	$	900,000	M	85	56	Hartford Life and Annuity Insurance Company	BBB+
260	$	340,000	F	85	68	Jackson National Life Insurance Company	AA
261	$	2,000,000	M	85	75	Pacific Life Insurance Company	AA-
262	$	3,500,000	M	85	62	AXA Equitable Life Insurance Company	AA-
263	$	6,217,200	F	85	103	Phoenix Life Insurance Company	BB-
264	$	7,600,000	M	85	81	Transamerica Life Insurance Company	AA-
265	$	3,000,000	M	85	44	Metropolitan Life Insurance Company	AA-
266	$	1,275,000	M	85	37	General American Life Insurance Company	AA-
267	$	2,000,000	F	85	79	Lincoln National Life Insurance Company	AA-
268	$	2,247,450	F	85	43	Transamerica Life Insurance Company	AA-
269	$	1,000,000	M	85	35	American General Life Insurance Company	A+
270	$	750,000	M	85	70	AXA Equitable Life Insurance Company	AA-
271	$	500,000	F	85	78	Metropolitan Life Insurance Company	AA-
272	$	400,000	M	85	32	Transamerica Life Insurance Company	AA-
273	$	3,500,000	M	85	46	Pacific Life Insurance Company	AA-
274	$	2,500,000	M	85	46	AXA Equitable Life Insurance Company	AA-

- 48 -

	Face Amount		Gender	Age (ALB)	LE (mo.) (1)	Insurance Company	S&P Rating
275	$	3,000,000	M	84	50	Protective Life Insurance Company	AA-
276	$	1,500,000	M	84	50	American General Life Insurance Company	A+
277	$	2,000,000	F	84	86	Transamerica Life Insurance Company	AA-
278	$	1,000,000	M	84	52	Lincoln National Life Insurance Company	AA-
279	$	1,500,000	M	84	55	Pacific Life Insurance Company	AA-
280	$	600,000	M	84	54	Massachusetts Mutual Life Insurance Company	AA+
281	$	5,000,000	M	84	90	American General Life Insurance Company	A+
282	$	250,000	M	84	123	Reliastar Life Insurance Company	A
283	$	10,000,000	M	84	55	Lincoln National Life Insurance Company	AA-
284	$	1,000,000	M	84	134	Reliastar Life Insurance Company	A
285	$	1,000,000	F	84	59	American General Life Insurance Company	A+
286	$	2,000,000	F	84	69	Lincoln National Life Insurance Company	AA-
287	$	1,995,000	F	84	63	Transamerica Life Insurance Company	AA-
288	$	838,542	M	84	103	Transamerica Life Insurance Company	AA-
289	$	10,000,000	M	84	62	New York Life Insurance Company	AA+
290	$	1,000,000	M	84	51	Hartford Life and Annuity Insurance Company	BBB+
291	$	1,000,000	M	84	51	Jackson National Life Insurance Company	AA
292	$	417,300	M	84	82	Jackson National Life Insurance Company	AA
293	$	2,300,000	M	84	10	American General Life Insurance Company	A+
294	$	2,500,000	F	84	55	Reliastar Life Insurance Company	A
295	$	5,000,000	F	84	42	Massachusetts Mutual Life Insurance Company	AA+
296	$	5,000,000	M	84	61	Transamerica Life Insurance Company	AA-
297	$	2,000,000	M	84	53	Ohio National Life Assurance Corporation	A+
298	$	1,000,000	M	84	53	Ohio National Life Assurance Corporation	A+
299	$	500,000	F	84	85	AXA Equitable Life Insurance Company	AA-
300	$	2,400,000	M	84	55	Phoenix Life Insurance Company	BB-
301	$	350,000	M	84	22	Jackson National Life Insurance Company	AA
302	$	5,000,000	M	84	74	Lincoln National Life Insurance Company	AA-
303	$	5,000,000	F	83	61	Security Mutual Life Insurance Company of NY	N/A
304	$	5,000,000	M	83	71	AXA Equitable Life Insurance Company	AA-
305	$	6,000,000	M	83	87	Transamerica Life Insurance Company	AA-
306	$	8,000,000	M	83	67	AXA Equitable Life Insurance Company	AA-
307	$	850,000	F	83	81	Zurich Life Insurance Company	A
308	$	550,000	M	83	98	Genworth Life Insurance Company	BB-
309	$	500,000	M	83	47	West Coast Life Insurance Company	AA-
310	$	1,680,000	F	83	53	AXA Equitable Life Insurance Company	AA-
311	$	1,000,000	F	83	74	Lincoln National Life Insurance Company	AA-
312	$	2,000,000	M	83	67	New York Life Insurance Company	AA+
313	$	1,250,000	M	83	83	Metropolitan Life Insurance Company	AA-
314	$	1,000,000	M	83	62	AXA Equitable Life Insurance Company	AA-
315	$	1,000,000	M	83	41	American General Life Insurance Company	A+
316	$	1,600,000	M	83	68	John Hancock Life Insurance Company (U.S.A.)	AA-
317	$	1,700,000	M	83	68	John Hancock Life Insurance Company (U.S.A.)	AA-
318	$	1,000,000	M	83	51	AXA Equitable Life Insurance Company	AA-
319	$	1,500,000	M	83	52	Lincoln Benefit Life Company	BBB+
320	$	10,000,000	F	83	50	Transamerica Life Insurance Company	AA-
321	$	50,000	M	83	69	Transamerica Life Insurance Company	AA-
322	$	3,000,000	M	83	92	John Hancock Life Insurance Company (U.S.A.)	AA-
323	$	10,000,000	M	83	53	Hartford Life and Annuity Insurance Company	BBB+
324	$	1,750,000	M	83	66	AXA Equitable Life Insurance Company	AA-
325	$	5,000,000	M	83	61	AXA Equitable Life Insurance Company	AA-
326	$	300,000	F	83	58	Hartford Life and Annuity Insurance Company	BBB+
327	$	250,000	M	83	80	American General Life Insurance Company	A+
328	$	2,502,000	M	83	128	Transamerica Life Insurance Company	AA-
329	$	170,000	F	83	48	Reliastar Life Insurance Company	A
330	$	240,000	M	83	29	Lincoln National Life Insurance Company	AA-

- 49 -

	Face Amount		Gender	Age (ALB)	LE (mo.) (1)	Insurance Company	S&P Rating
331	$	10,000,000	M	83	95	John Hancock Life Insurance Company (U.S.A.)	AA-
332	$	10,000,000	M	83	88	Pacific Life Insurance Company	AA-
333	$	1,210,000	M	83	50	Lincoln National Life Insurance Company	AA-
334	$	3,000,000	F	83	89	West Coast Life Insurance Company	AA-
335	$	7,000,000	M	83	69	Genworth Life Insurance Company	BB-
336	$	8,000,000	M	82	109	Metropolitan Life Insurance Company	AA-
337	$	500,000	M	82	39	Genworth Life and Annuity Insurance Company	BB-
338	$	3,000,000	M	82	127	Metropolitan Life Insurance Company	AA-
339	$	300,000	F	82	83	Metropolitan Life Insurance Company	AA-
340	$	600,000	M	82	38	Lincoln National Life Insurance Company	AA-
341	$	800,000	M	82	63	North American Company for Life And Health Insurance	A+
342	$	8,000,000	F	82	90	John Hancock Life Insurance Company (U.S.A.)	AA-
343	$	2,000,000	M	82	17	Metropolitan Life Insurance Company	AA-
344	$	3,000,000	F	82	52	AXA Equitable Life Insurance Company	AA-
345	$	3,000,000	F	82	52	AXA Equitable Life Insurance Company	AA-
346	$	1,000,000	F	82	73	Lincoln Benefit Life Company	BBB+
347	$	1,000,000	M	82	77	Penn Mutual Life Insurance Company	A+
348	$	6,000,000	M	82	106	AXA Equitable Life Insurance Company	AA-
349	$	320,987	F	82	89	John Hancock Life Insurance Company (U.S.A.)	AA-
350	$	130,000	M	82	38	Genworth Life Insurance Company	BB-
351	$	700,000	M	82	84	Banner Life Insurance Company	AA-
352	$	1,000,000	M	82	84	John Hancock Life Insurance Company (U.S.A.)	AA-
353	$	1,000,000	M	82	117	Protective Life Insurance Company	AA-
354	$	2,000,000	F	82	74	Pacific Life Insurance Company	AA-
355	$	2,000,000	M	82	66	Metropolitan Life Insurance Company	AA-
356	$	2,000,000	M	82	66	Metropolitan Life Insurance Company	AA-
357	$	218,362	M	82	113	Lincoln National Life Insurance Company	AA-
358	$	100,000	M	82	69	Prudential Insurance Company of America	AA-
359	$	1,029,871	M	82	124	Principal Life Insurance Company	A+
360	$	2,000,000	F	82	60	Transamerica Life Insurance Company	AA-
361	$	1,500,000	F	82	61	Protective Life Insurance Company	AA-
362	$	3,500,000	M	82	68	Metropolitan Life Insurance Company	AA-
363	$	687,006	M	82	66	The State Life Insurance Company	AA-
364	$	250,000	F	82	86	Accordia Life and Annuity Company	A-
365	$	3,000,000	M	82	106	Principal Life Insurance Company	A+
366	$	200,000	M	82	35	Pruco Life Insurance Company	AA-
367	$	1,700,000	M	82	47	Lincoln National Life Insurance Company	AA-
368	$	180,000	F	82	78	Midland National Life Insurance Company	A+
369	$	500,000	M	82	35	Transamerica Life Insurance Company	AA-
370	$	3,000,000	M	81	30	Pacific Life Insurance Company	AA-
371	$	3,000,000	M	81	30	Minnesota Life Insurance Company	A+
372	$	3,000,000	M	81	30	Pruco Life Insurance Company	AA-
373	$	3,000,000	M	81	75	Reliastar Life Insurance Company	A
374	$	5,000,000	M	81	81	Pacific Life Insurance Company	AA-
375	$	5,000,000	M	81	81	Pacific Life Insurance Company	AA-
376	$	4,000,000	M	81	66	Lincoln National Life Insurance Company	AA-
377	$	250,000	M	81	60	United of Omaha Life Insurance Company	AA-
378	$	3,601,500	M	81	80	Transamerica Life Insurance Company	AA-
379	$	1,000,000	M	81	80	Sun Life Assurance Company of Canada (U.S.)	AA-
380	$	200,000	M	81	58	Protective Life Insurance Company	AA-
381	$	150,000	M	81	58	Protective Life Insurance Company	AA-
382	$	150,000	M	81	58	Protective Life Insurance Company	AA-
383	$	350,000	M	81	58	Lincoln National Life Insurance Company	AA-
384	$	1,187,327	M	81	80	Transamerica Life Insurance Company	AA-
385	$	5,000,000	M	81	112	Principal Life Insurance Company	A+
386	$	150,000	M	81	77	MetLife Insurance Company USA	A+
387	$	500,000	M	81	65	American General Life Insurance Company	A+
388	$	5,000,000	M	81	91	John Hancock Life Insurance Company (U.S.A.)	AA-

- 50 -

	Face Amount		Gender	Age (ALB)	LE (mo.) (1)	Insurance Company	S&P Rating
389	$	100,000	M	81	95	Protective Life Insurance Company	AA-
390	$	7,000,000	M	81	71	Lincoln Benefit Life Company	BBB+
391	$	100,000	M	81	52	North American Company for Life And Health Insurance	A+
392	$	1,000,000	M	81	99	Lincoln National Life Insurance Company	AA-
393	$	6,799,139	M	81	105	AXA Equitable Life Insurance Company	AA-
394	$	476,574	M	81	58	Transamerica Life Insurance Company	AA-
395	$	250,000	M	81	80	AXA Equitable Life Insurance Company	AA-
396	$	5,500,000	M	81	105	Metropolitan Life Insurance Company	AA-
397	$	2,250,000	M	81	79	Massachusetts Mutual Life Insurance Company	AA+
398	$	4,000,000	M	81	79	Lincoln National Life Insurance Company	AA-
399	$	4,300,000	F	81	94	American National Insurance Company	A
400	$	1,000,000	F	81	107	John Hancock Life Insurance Company (U.S.A.)	AA-
401	$	6,000,000	M	81	103	AXA Equitable Life Insurance Company	AA-
402	$	200,000	M	81	52	Kansas City Life Insurance Company	N/A
403	$	200,000	M	81	43	Lincoln National Life Insurance Company	AA-
404	$	6,000,000	M	81	92	AXA Equitable Life Insurance Company	AA-
405	$	5,000,000	F	81	101	Reliastar Life Insurance Company	A
406	$	750,000	M	81	55	Lincoln National Life Insurance Company	AA-
407	$	3,000,000	M	81	80	Principal Life Insurance Company	A+
408	$	5,000,000	M	80	121	Lincoln National Life Insurance Company	AA-
409	$	3,000,000	M	80	71	American General Life Insurance Company	A+
410	$	70,000	M	80	37	Pioneer Mutual Life Insurance Company	N/A
411	$	800,000	F	80	85	Prudential Insurance Company of America	AA-
412	$	5,000,000	M	80	65	John Hancock Life Insurance Company (U.S.A.)	AA-
413	$	500,000	M	80	54	John Hancock Life Insurance Company (U.S.A.)	AA-
414	$	5,000,000	M	80	74	John Hancock Life Insurance Company (U.S.A.)	AA-
415	$	200,000	M	80	84	Lincoln National Life Insurance Company	AA-
416	$	1,250,000	M	80	83	AXA Equitable Life Insurance Company	AA-
417	$	1,000,000	M	80	107	Transamerica Life Insurance Company	AA-
418	$	800,000	M	80	107	Columbus Life Insurance Company	AA
419	$	3,000,000	F	80	74	New York Life Insurance Company	AA+
420	$	1,009,467	M	80	45	John Hancock Life Insurance Company (U.S.A.)	AA-
421	$	4,000,000	M	80	55	Metropolitan Life Insurance Company	AA-
422	$	2,500,000	M	80	73	Massachusetts Mutual Life Insurance Company	AA+
423	$	2,500,000	M	80	73	Massachusetts Mutual Life Insurance Company	AA+
424	$	5,000,000	M	80	44	John Hancock Life Insurance Company (U.S.A.)	AA-
425	$	1,000,000	M	80	70	Transamerica Life Insurance Company	AA-
426	$	500,000	M	80	96	Transamerica Life Insurance Company	AA-
427	$	500,000	F	80	109	Columbus Life Insurance Company	AA
428	$	775,000	M	80	108	Lincoln National Life Insurance Company	AA-
429	$	929,975	M	80	63	Lincoln National Life Insurance Company	AA-
430	$	1,445,000	F	80	89	AXA Equitable Life Insurance Company	AA-
431	$	1,500,000	F	80	89	AXA Equitable Life Insurance Company	AA-
432	$	1,000,000	M	80	71	Lincoln National Life Insurance Company	AA-
433	$	325,000	M	80	31	American General Life Insurance Company	A+
434	$	3,750,000	M	80	35	AXA Equitable Life Insurance Company	AA-
435	$	1,000,000	M	80	95	Metropolitan Life Insurance Company	AA-
436	$	550,000	M	80	65	Pruco Life Insurance Company	AA-
437	$	300,000	M	80	65	Pruco Life Insurance Company	AA-
438	$	800,000	M	80	85	Minnesota Life Insurance Company	A+
439	$	1,000,000	M	80	87	Massachusetts Mutual Life Insurance Company	AA+
440	$	1,200,000	F	80	97	AXA Equitable Life Insurance Company	AA-
441	$	5,000,000	M	80	161	West Coast Life Insurance Company	AA-
442	$	2,000,000	F	80	45	Transamerica Life Insurance Company	AA-
443	$	1,000,000	M	80	65	Ameritas Life Insurance Corporation	A+
444	$	2,000,000	M	80	65	Metropolitan Life Insurance Company	AA-

- 51 -

	Face Amount		Gender	Age (ALB)	LE (mo.) (1)	Insurance Company	S&P Rating
445	$	1,358,500	M	80	65	Metropolitan Life Insurance Company	AA-
446	$	500,000	M	79	121	Prudential Insurance Company of America	AA-
447	$	1,000,000	M	79	99	Metropolitan Life Insurance Company	AA-
448	$	1,200,000	F	79	118	Athene Annuity & Life Assurance Company	A-
449	$	2,840,000	M	79	78	Transamerica Life Insurance Company	AA-
450	$	750,000	M	79	75	North American Company for Life and Health Insurance	A+
451	$	1,000,000	M	79	75	John Hancock Life Insurance Company (U.S.A.)	AA-
452	$	500,000	M	79	75	North American Company for Life and Health Insurance	A+
453	$	50,000	M	79	33	Lincoln National Life Insurance Company	AA-
454	$	4,000,000	F	79	79	Transamerica Life Insurance Company	AA-
455	$	1,000,000	F	79	62	John Hancock Life Insurance Company (U.S.A.)	AA-
456	$	2,000,000	M	79	87	Lincoln National Life Insurance Company	AA-
457	$	2,000,000	M	79	87	Lincoln National Life Insurance Company	AA-
458	$	5,000,000	M	79	105	Lincoln National Life Insurance Company	AA-
459	$	4,000,000	M	79	132	John Hancock Life Insurance Company (U.S.A.)	AA-
460	$	300,000	M	79	67	Lincoln National Life Insurance Company	AA-
461	$	1,750,000	M	79	51	John Hancock Life Insurance Company (U.S.A.)	AA-
462	$	5,000,000	M	79	89	Transamerica Life Insurance Company	AA-
463	$	1,000,000	M	79	107	Principal Life Insurance Company	A+
464	$	500,000	F	79	126	Ohio National Life Assurance Corporation	A+
465	$	6,250,000	M	79	176	John Hancock Life Insurance Company (U.S.A.)	AA-
466	$	750,000	M	79	102	General American Life Insurance Company	AA-
467	$	600,000	M	79	71	Protective Life Insurance Company	AA-
468	$	400,000	M	79	105	John Hancock Life Insurance Company (U.S.A.)	AA-
469	$	300,000	M	78	65	Penn Mutual Life Insurance Company	A+
470	$	500,000	F	78	141	Accordia Life and Annuity Company	A-
471	$	5,000,000	M	78	123	AXA Equitable Life Insurance Company	AA-
472	$	1,000,000	M	78	90	Accordia Life and Annuity Company	A-
473	$	3,000,000	M	78	84	Pruco Life Insurance Company	AA-
474	$	3,000,000	F	78	93	John Hancock Life Insurance Company (U.S.A.)	AA-
475	$	200,000	F	78	131	West Coast Life Insurance Company	AA-
476	$	250,000	M	78	121	Accordia Life and Annuity Company	A-
477	$	1,100,000	M	78	125	Accordia Life and Annuity Company	A-
478	$	3,000,000	M	78	91	Protective Life Insurance Company	AA-
479	$	2,000,000	F	78	105	Accordia Life and Annuity Company	A-
480	$	2,200,000	F	78	127	Reliastar Life Insurance Company	A
481	$	4,000,000	M	78	56	Massachusetts Mutual Life Insurance Company	AA+
482	$	10,000,000	M	78	119	AXA Equitable Life Insurance Company	AA-
483	$	2,500,000	M	78	126	John Hancock Life Insurance Company (U.S.A.)	AA-
484	$	2,500,000	M	78	126	John Hancock Life Insurance Company (U.S.A.)	AA-
485	$	1,000,000	F	78	115	John Hancock Life Insurance Company (U.S.A.)	AA-
486	$	1,000,000	F	78	118	American General Life Insurance Company	A+
487	$	7,000,000	F	78	108	Pacific Life Insurance Company	AA-
488	$	100,946	F	78	146	Genworth Life and Annuity Insurance Company	BB-
489	$	2,000,000	M	78	92	Genworth Life Insurance Company	BB-
490	$	350,000	M	78	98	AXA Equitable Life Insurance Company	AA-
491	$	600,000	M	78	98	AXA Equitable Life Insurance Company	AA-
492	$	1,000,000	M	78	71	Pacific Life Insurance Company	AA-
493	$	2,000,000	M	78	105	Transamerica Life Insurance Company	AA-
494	$	200,000	M	78	104	Prudential Insurance Company of America	AA-
495	$	2,000,000	F	78	153	Lincoln National Life Insurance Company	AA-
496	$	150,000	M	78	92	Genworth Life Insurance Company	BB-
497	$	490,620	M	78	74	Ameritas Life Insurance Corporation	A+
498	$	2,000,000	M	78	52	Athene Annuity & Life Assurance Company	A-
499	$	7,097,434	M	78	144	Lincoln National Life Insurance Company	AA-
500	$	5,000,000	M	78	49	West Coast Life Insurance Company	AA-
501	$	1,000,000	M	77	71	Metropolitan Life Insurance Company	AA-
502	$	730,000	M	77	88	Transamerica Life Insurance Company	AA-

- 52 -

	Face Amount		Gender	Age (ALB)	LE (mo.) (1)	Insurance Company	S&P Rating
503	$	5,000,000	M	77	135	Pruco Life Insurance Company	AA-
504	$	1,000,000	M	77	114	Transamerica Life Insurance Company	AA-
505	$	750,000	M	77	100	Protective Life Insurance Company	AA-
506	$	250,000	M	77	91	Midland National Life Insurance Company	A+
507	$	3,000,000	M	77	46	Accordia Life and Annuity Company	A-
508	$	1,000,000	M	77	135	AXA Equitable Life Insurance Company	AA-
509	$	200,000	M	77	60	Reliastar Life Insurance Company	A
510	$	500,000	M	77	89	AXA Equitable Life Insurance Company	AA-
511	$	3,000,000	M	77	100	John Hancock Life Insurance Company (U.S.A.)	AA-
512	$	5,000,000	M	77	100	John Hancock Life Insurance Company (U.S.A.)	AA-
513	$	1,000,000	M	77	114	Security Life of Denver Insurance Company	A
514	$	5,000,000	M	77	128	Massachusetts Mutual Life Insurance Company	AA+
515	$	5,000,000	M	77	128	Massachusetts Mutual Life Insurance Company	AA+
516	$	8,000,000	M	77	86	Metropolitan Life Insurance Company	AA-
517	$	1,000,000	M	77	82	Transamerica Life Insurance Company	AA-
518	$	1,000,000	M	77	146	Security Mutual Life Insurance Company of NY	N/A
519	$	1,000,000	M	77	91	Athene Annuity & Life Assurance Company of New York	A-
520	$	355,700	M	77	96	Security Life of Denver Insurance Company	A
521	$	6,500,000	F	77	64	General American Life Insurance Company	AA-
522	$	5,000,000	M	77	75	Lincoln Benefit Life Company	BBB+
523	$	250,000	M	77	127	West Coast Life Insurance Company	AA-
524	$	750,000	F	77	72	Delaware Life Insurance Company	BBB+
525	$	1,000,000	M	77	92	General American Life Insurance Company	AA-
526	$	1,000,000	M	77	104	Transamerica Life Insurance Company	AA-
527	$	2,000,000	M	77	138	John Hancock Life Insurance Company (U.S.A.)	AA-
528	$	250,000	M	76	87	Lincoln Benefit Life Company	BBB+
529	$	600,000	M	76	62	United of Omaha Life Insurance Company	AA-
530	$	100,000	M	76	107	Transamerica Life Insurance Company	AA-
531	$	3,000,000	F	76	142	Security Life of Denver Insurance Company	A
532	$	200,000	M	76	59	Metropolitan Life Insurance Company	AA-
533	$	100,000	M	76	59	Metropolitan Life Insurance Company	AA-
534	$	3,172,397	M	76	65	Pacific Life Insurance Company	AA-
535	$	2,000,000	M	76	99	Protective Life Insurance Company	AA-
536	$	1,500,000	M	76	99	Protective Life Insurance Company	AA-
537	$	100,000	M	76	46	AXA Equitable Life Insurance Company	AA-
538	$	500,000	M	76	82	AXA Equitable Life Insurance Company	AA-
539	$	500,000	M	76	96	United of Omaha Life Insurance Company	AA-
540	$	750,000	M	76	22	North American Company for Life And Health Insurance	A+
541	$	4,000,000	F	76	130	American General Life Insurance Company	A+
542	$	300,000	M	76	71	AIG Life Insurance Company	A+
543	$	500,000	M	76	81	AIG Life Insurance Company	A+
544	$	300,000	M	76	30	Lincoln National Life Insurance Company	AA-
545	$	172,245	F	76	48	Symetra Life Insurance Company	A
546	$	5,004,704	M	76	125	American General Life Insurance Company	A+
547	$	2,000,000	M	76	111	Pruco Life Insurance Company	AA-
548	$	415,000	M	76	107	AIG Life Insurance Company	A+
549	$	5,000,000	M	76	121	AIG Life Insurance Company	A+
550	$	4,000,000	M	76	100	Security Mutual Life Insurance Company of NY	N/A
551	$	2,000,000	M	76	92	American General Life Insurance Company	A+
552	$	10,000,000	F	76	126	Reliastar Life Insurance Company	A
553	$	1,000,000	F	76	141	John Hancock Life Insurance Company (U.S.A.)	AA-
554	$	7,500,000	F	76	164	Security Life of Denver Insurance Company	A
555	$	500,000	M	76	65	American General Life Insurance Company	A+
556	$	250,000	M	76	66	Genworth Life and Annuity Insurance Company	BB-
557	$	3,000,000	F	76	103	General American Life Insurance Company	AA-
558	$	300,000	F	76	124	Minnesota Life Insurance Company	A+

- 53 -

	Face Amount		Gender	Age (ALB)	LE (mo.) (1)	Insurance Company	S&P Rating
559	$	667,738	M	76	77	MONY Life Insurance Company of America	AA-
560	$	370,000	F	76	117	Minnesota Life Insurance Company	A+
561	$	4,547,770	F	75	167	Principal Life Insurance Company	A+
562	$	500,000	M	75	80	Protective Life Insurance Company	AA-
563	$	2,000,000	M	75	101	Phoenix Life Insurance Company	BB-
564	$	1,000,000	M	75	85	Security Life of Denver Insurance Company	A
565	$	500,000	M	75	31	Midland National Life Insurance Company	A+
566	$	1,000,000	M	75	143	John Hancock Life Insurance Company (U.S.A.)	AA-
567	$	750,000	M	75	141	Lincoln Benefit Life Company	BBB+
568	$	150,000	M	75	95	Genworth Life Insurance Company	BB-
569	$	1,000,000	M	75	90	Transamerica Life Insurance Company	AA-
570	$	3,000,000	M	75	65	AXA Equitable Life Insurance Company	AA-
571	$	1,000,000	F	75	135	Companion Life Insurance Company	AA-
572	$	1,000,000	M	75	131	John Hancock Life Insurance Company (U.S.A.)	AA-
573	$	500,000	M	75	54	William Penn Life Insurance Company of New York	AA-
574	$	8,000,000	F	75	122	West Coast Life Insurance Company	AA-
575	$	100,000	M	75	35	Voya Retirement Insurance and Annuity Company	A
576	$	250,000	F	75	147	AXA Equitable Life Insurance Company	AA-
577	$	3,000,000	M	75	104	Transamerica Life Insurance Company	AA-
578	$	500,000	M	75	104	New York Life Insurance Company	AA+
579	$	500,000	M	75	104	New York Life Insurance Company	AA+
580	$	800,000	M	75	114	John Hancock Life Insurance Company (U.S.A.)	AA-
581	$	190,000	M	75	95	Protective Life Insurance Company	AA-
582	$	100,000	M	75	142	Protective Life Insurance Company	AA-
583	$	2,000,072	M	75	159	American General Life Insurance Company	A+
584	$	89,626	F	75	109	Union Central Life Insurance Company	N/A
585	$	400,000	M	75	73	Protective Life Insurance Company	AA-
586	$	500,000	M	75	87	Delaware Life Insurance Company	BBB+
587	$	1,784,686	M	75	145	Transamerica Life Insurance Company	AA-
588	$	100,000	M	75	134	Genworth Life Insurance Company	BB-
589	$	250,000	F	75	163	Protective Life Insurance Company	AA-
590	$	8,000,000	M	74	160	Metropolitan Life Insurance Company	AA-
591	$	500,000	M	74	115	Ameritas Life Insurance Corporation	A+
592	$	370,000	M	74	115	Ameritas Life Insurance Corporation	A+
593	$	1,000,000	F	74	112	United of Omaha Life Insurance Company	AA-
594	$	500,000	M	74	90	Lincoln National Life Insurance Company	AA-
595	$	1,841,877	M	74	112	Metropolitan Life Insurance Company	AA-
596	$	500,000	M	74	98	William Penn Life Insurance Company of New York	AA-
597	$	100,000	M	74	102	Protective Life Insurance Company	AA-
598	$	500,000	M	74	120	Metropolitan Life Insurance Company	AA-
599	$	2,500,000	M	74	96	John Hancock Life Insurance Company (U.S.A.)	AA-
600	$	500,000	M	74	126	Pruco Life Insurance Company	AA-
601	$	1,000,000	M	74	99	John Hancock Life Insurance Company (U.S.A.)	AA-
602	$	500,000	M	74	73	Phoenix Life Insurance Company	BB-
603	$	8,600,000	M	74	143	AXA Equitable Life Insurance Company	AA-
604	$	485,000	M	74	145	Metropolitan Life Insurance Company	AA-
605	$	2,500,000	M	74	97	American General Life Insurance Company	A+
606	$	100,000	M	74	96	Transamerica Life Insurance Company	AA-
607	$	1,500,000	M	74	118	Lincoln National Life Insurance Company	AA-
608	$	1,500,000	M	74	118	Lincoln National Life Insurance Company	AA-
609	$	1,500,000	M	74	118	Lincoln National Life Insurance Company	AA-
610	$	1,500,000	M	74	119	American General Life Insurance Company	A+
611	$	1,500,000	M	74	119	American General Life Insurance Company	A+
612	$	2,000,000	M	74	123	John Hancock Life Insurance Company (U.S.A.)	AA-
613	$	2,500,000	M	74	129	Banner Life Insurance Company	AA-
614	$	800,000	M	74	77	Commonwealth Annuity and Life Insurance Company	A-

- 54 -

	Face Amount		Gender	Age (ALB)	LE (mo.) (1)	Insurance Company	S&P Rating
615	$	300,000	M	74	103	New England Life Insurance Company	A+
616	$	1,167,000	M	74	44	Transamerica Life Insurance Company	AA-
617	$	3,042,627	M	74	103	Massachusetts Mutual Life Insurance Company	AA+
618	$	450,000	M	74	110	Jackson National Life Insurance Company	AA
619	$	1,500,000	M	74	102	Metropolitan Life Insurance Company	AA-
620	$	10,000,000	M	74	136	John Hancock Life Insurance Company (U.S.A.)	AA-
621	$	10,000,000	M	74	110	AXA Equitable Life Insurance Company	AA-
622	$	2,500,000	M	73	45	Transamerica Life Insurance Company	AA-
623	$	750,000	M	73	122	Security Life of Denver Insurance Company	A
624	$	1,000,000	M	73	95	Accordia Life and Annuity Company	A-
625	$	3,000,000	M	73	152	John Hancock Life Insurance Company (U.S.A.)	AA-
626	$	2,000,000	M	73	93	New York Life Insurance Company	AA+
627	$	2,000,000	M	73	93	New York Life Insurance Company	AA+
628	$	5,000,000	M	73	121	John Hancock Life Insurance Company (U.S.A.)	AA-
629	$	250,000	F	73	101	Protective Life Insurance Company	AA-
630	$	2,500,000	M	73	107	Lincoln National Life Insurance Company	AA-
631	$	2,500,000	M	73	107	John Hancock Life Insurance Company (U.S.A.)	AA-
632	$	2,000,000	M	73	113	Voya Retirement Insurance and Annuity Company	A
633	$	1,500,000	M	73	113	Voya Retirement Insurance and Annuity Company	A
634	$	390,025	M	73	137	Genworth Life and Annuity Insurance Company	BB-
635	$	230,000	M	73	109	Transamerica Life Insurance Company	AA-
636	$	139,398	F	73	18	Lincoln National Life Insurance Company	AA-
637	$	500,000	M	73	29	North American Company for Life and Health Insurance	A+
638	$	600,000	M	73	29	West Coast Life Insurance Company	AA-
639	$	300,000	M	73	107	Protective Life Insurance Company	AA-
640	$	190,000	F	73	183	Protective Life Insurance Company	AA-
641	$	250,000	M	73	61	American General Life Insurance Company	A+
642	$	160,000	M	73	85	RiverSource Life Insurance Company	AA-
643	$	267,988	M	73	46	Minnesota Life Insurance Company	A+
644	$	75,000	F	73	94	American General Life Insurance Company	A+
645	$	600,000	M	73	78	AXA Equitable Life Insurance Company	AA-
646	$	4,000,000	M	73	133	MONY Life Insurance Company of America	AA-
647	$	1,000,000	F	73	151	American General Life Insurance Company	A+
648	$	1,000,000	F	73	136	Reliastar Life Insurance Company	A
649	$	420,000	M	73	114	RiverSource Life Insurance Company	AA-
650	$	4,000,000	M	73	139	AXA Equitable Life Insurance Company	AA-
651	$	250,000	M	72	44	Protective Life Insurance Company	AA-
652	$	650,000	F	72	65	Security Life of Denver Insurance Company	A
653	$	1,000,000	M	72	122	AIG Life Insurance Company	A+
654	$	500,000	M	72	112	Ohio National Life Assurance Corporation	A+
655	$	400,000	M	72	187	Protective Life Insurance Company	AA-
656	$	232,000	M	72	171	Protective Life Insurance Company	AA-
657	$	185,000	M	72	123	Genworth Life and Annuity Insurance Company	BB-
658	$	750,000	M	72	117	Transamerica Life Insurance Company	AA-
659	$	1,350,000	M	72	93	Lincoln National Life Insurance Company	AA-
660	$	1,250,000	M	72	93	West Coast Life Insurance Company	AA-
661	$	5,000,000	M	72	172	John Hancock Life Insurance Company (U.S.A.)	AA-
662	$	1,500,000	F	72	145	Pruco Life Insurance Company	AA-
663	$	5,000,000	M	72	84	Transamerica Life Insurance Company	AA-
664	$	2,400,000	M	72	85	Transamerica Life Insurance Company	AA-
665	$	500,000	M	72	86	Transamerica Life Insurance Company	AA-
666	$	500,000	M	72	86	North American Company for Life And Health Insurance	A+
667	$	10,000,000	M	72	160	Principal Life Insurance Company	A+
668	$	420,000	M	72	123	Protective Life Insurance Company	AA-
669	$	100,000	M	72	39	Genworth Life and Annuity Insurance Company	BB-
670	$	300,000	M	72	39	Genworth Life Insurance Company	BB-
671	$	314,000	M	72	131	Genworth Life Insurance Company	BB-
672	$	250,000	M	72	131	Genworth Life Insurance Company	BB-

- 55 -

	Face Amount		Gender	Age (ALB)	LE (mo.) (1)	Insurance Company	S&P Rating
673	$	150,000	M	72	28	Protective Life Insurance Company	AA-
674	$	150,000	M	72	28	AXA Equitable Life Insurance Company	AA-
675	$	1,000,000	M	72	48	John Hancock Life Insurance Company (U.S.A.)	AA-
676	$	5,000,000	M	72	107	John Hancock Life Insurance Company (U.S.A.)	AA-
677	$	5,000,000	M	72	107	John Hancock Life Insurance Company (U.S.A.)	AA-
678	$	100,000	M	72	129	Protective Life Insurance Company	AA-
679	$	5,000,000	M	72	143	Metropolitan Life Insurance Company	AA-
680	$	250,000	F	71	113	Ohio National Life Assurance Corporation	A+
681	$	57,500	M	71	87	Lincoln National Life Insurance Company	AA-
682	$	1,000,000	M	71	161	Protective Life Insurance Company	AA-
683	$	6,000,000	M	71	186	AXA Equitable Life Insurance Company	AA-
684	$	1,000,000	M	71	148	Transamerica Life Insurance Company	AA-
685	$	400,000	M	71	153	Lincoln National Life Insurance Company	AA-
686	$	100,000	M	71	93	Massachusetts Mutual Life Insurance Company	AA+
687	$	92,000	F	71	191	Protective Life Insurance Company	AA-
688	$	300,000	M	71	187	John Hancock Life Insurance Company (U.S.A.)	AA-
689	$	2,000,000	M	71	152	Hartford Life and Annuity Insurance Company	BBB+
690	$	1,500,000	M	71	65	Lincoln National Life Insurance Company	AA-
691	$	250,000	M	71	92	Massachusetts Mutual Life Insurance Company	AA+
692	$	500,000	M	71	154	Protective Life Insurance Company	AA-
693	$	250,000	M	71	176	Lincoln National Life Insurance Company	AA-
694	$	1,500,000	M	71	98	Midland National Life Insurance Company	A+
695	$	202,700	M	71	109	Farmers New World Life Insurance Company	N/A
696	$	500,000	M	71	103	Lincoln Benefit Life Company	BBB+
697	$	700,000	M	71	109	Massachusetts Mutual Life Insurance Company	AA+
698	$	3,000,000	M	70	147	Guardian Life Insurance Company of America	AA+
699	$	385,741	M	70	93	Security Life of Denver Insurance Company	A
700	$	750,000	M	70	127	North American Company for Life And Health Insurance	A+
701	$	100,000	F	70	157	North American Company for Life and Health Insurance	A+
702	$	1,532,043	M	70	145	John Hancock Life Insurance Company (U.S.A.)	AA-
703	$	1,000,000	M	70	179	AXA Equitable Life Insurance Company	AA-
704	$	1,000,000	M	70	80	AXA Equitable Life Insurance Company	AA-
705	$	4,000,000	M	70	125	MetLife Insurance Company USA	A+
706	$	1,000,000	M	70	80	Protective Life Insurance Company	AA-
707	$	200,000	M	70	172	Protective Life Insurance Company	AA-
708	$	2,000,000	M	70	164	John Hancock Life Insurance Company (U.S.A.)	AA-
709	$	2,000,000	M	70	106	Transamerica Life Insurance Company	AA-
710	$	1,000,000	M	70	106	Genworth Life Insurance Company	BB-
711	$	5,000,000	M	70	110	John Hancock Life Insurance Company (U.S.A.)	AA-
712	$	4,000,000	M	70	110	AXA Equitable Life Insurance Company	AA-
713	$	175,000	F	70	103	Lincoln National Life Insurance Company	AA-
714	$	1,000,000	M	70	155	Accordia Life and Annuity Company	A-
715	$	1,000,000	M	70	56	Protective Life Insurance Company	AA-
716	$	1,000,000	M	70	123	Transamerica Life Insurance Company	AA-
717	$	1,000,000	M	70	123	Protective Life Insurance Company	AA-
718	$	2,000,000	M	70	74	Metropolitan Life Insurance Company	AA-
719	$	2,000,000	M	70	74	Metropolitan Life Insurance Company	AA-
720	$	1,000,000	M	70	145	John Hancock Life Insurance Company (U.S.A.)	AA-
721	$	400,000	F	70	134	AXA Equitable Life Insurance Company	AA-
722	$	500,000	M	70	152	Lincoln National Life Insurance Company	AA-
723	$	1,000,000	M	69	39	AXA Equitable Life Insurance Company	AA-
724	$	250,000	M	69	142	State Farm Life Insurance Company	AA
725	$	200,000	M	69	142	State Farm Life Insurance Company	AA
726	$	1,200,000	M	69	118	Massachusetts Mutual Life Insurance Company	AA+
727	$	1,000,000	M	69	130	Transamerica Life Insurance Company	AA-
728	$	1,000,000	M	69	151	Lincoln National Life Insurance Company	AA-
729	$	250,000	F	69	68	Transamerica Life Insurance Company	AA-
730	$	2,500,000	M	69	153	Pruco Life Insurance Company	AA-

- 56 -

	Face Amount		Gender	Age (ALB)	LE (mo.) (1)	Insurance Company	S&P Rating
731	$	2,500,000	M	69	153	Pruco Life Insurance Company	AA-
732	$	3,000,000	M	69	141	Genworth Life Insurance Company	BB-
733	$	1,200,000	M	69	141	Genworth Life Insurance Company	BB-
734	$	500,000	M	69	37	Voya Retirement Insurance and Annuity Company	A
735	$	750,000	M	69	153	Northwestern Mutual Life Insurance Company	AA+
736	$	2,000,000	M	69	164	John Hancock Life Insurance Company (U.S.A.)	AA-
737	$	250,000	F	69	149	Protective Life Insurance Company	AA-
738	$	150,000	M	69	111	Protective Life Insurance Company	AA-
739	$	3,000,000	M	69	139	Transamerica Life Insurance Company	AA-
740	$	100,000	M	69	116	Phoenix Life Insurance Company	BB-
741	$	13,250,000	M	69	199	TIAA-CREF Life Insurance Company	AA+
742	$	500,000	M	69	112	Lincoln National Life Insurance Company	AA-
743	$	156,538	F	69	100	New York Life Insurance Company	AA+
744	$	560,000	M	69	109	AXA Equitable Life Insurance Company	AA-
745	$	1,100,000	M	69	146	John Hancock Life Insurance Company (U.S.A.)	AA-
746	$	3,000,000	M	69	185	John Hancock Life Insurance Company (U.S.A.)	AA-
747	$	300,000	M	69	86	Protective Life Insurance Company	AA-
748	$	400,000	M	68	183	Lincoln National Life Insurance Company	AA-
749	$	3,000,000	M	68	94	Reliastar Life Insurance Company	A
750	$	2,000,000	M	68	94	AXA Equitable Life Insurance Company	AA-
751	$	2,000,000	M	68	94	AXA Equitable Life Insurance Company	AA-
752	$	1,000,000	M	68	43	Lincoln National Life Insurance Company	AA-
753	$	1,000,000	M	68	73	Transamerica Life Insurance Company	AA-
754	$	5,000,000	M	68	97	Athene Annuity & Life Assurance Company	A-
755	$	1,000,000	M	68	141	Sun Life Assurance Company of Canada (U.S.)	AA-
756	$	900,000	M	68	172	American General Life Insurance Company	A+
757	$	846,510	M	68	121	Lincoln National Life Insurance Company	AA-
758	$	846,210	M	68	121	Lincoln National Life Insurance Company	AA-
759	$	5,000,000	M	68	113	Lincoln National Life Insurance Company	AA-
760	$	600,000	M	68	80	William Penn Life Insurance Company of New York	AA-
761	$	229,725	F	68	99	Hartford Life and Annuity Insurance Company	BBB+
762	$	105,798	F	68	127	Lincoln Benefit Life Company	BBB+
763	$	67,602	F	68	127	Allstate Life Insurance Company of New York	A+
764	$	1,000,000	M	68	102	The Savings Bank Life Insurance Company of Massachusetts	A-
765	$	5,616,468	M	68	174	John Hancock Life Insurance Company (U.S.A.)	AA-
766	$	4,383,532	M	68	174	John Hancock Life Insurance Company (U.S.A.)	AA-
767	$	320,000	M	68	154	Transamerica Life Insurance Company	AA-
768	$	250,000	M	68	155	Pruco Life Insurance Company	AA-
769	$	250,000	M	68	190	Zurich Life Insurance Company	A
770	$	750,000	M	67	78	Massachusetts Mutual Life Insurance Company	AA+
771	$	350,000	F	67	79	Assurity Life Insurance Company	N/A
772	$	492,547	M	67	90	AXA Equitable Life Insurance Company	AA-
773	$	320,581	M	67	20	American General Life Insurance Company	A+
774	$	400,000	M	67	125	Jackson National Life Insurance Company	AA
775	$	500,000	F	67	163	Banner Life Insurance Company	AA-
776	$	350,000	M	67	91	RiverSource Life Insurance Company	AA-
777	$	989,361	M	67	142	General American Life Insurance Company	AA-
778	$	200,000	M	67	155	Prudential Insurance Company of America	AA-
779	$	200,000	M	67	155	Prudential Insurance Company of America	AA-
780	$	750,000	M	67	121	Pacific Life Insurance Company	AA-
781	$	500,000	F	67	124	AIG Life Insurance Company	A+
782	$	650,000	M	67	177	Lincoln National Life Insurance Company	AA-
783	$	250,000	M	66	140	Conseco Life Insurance Company	BBB+
784	$	2,000,000	F	66	168	Metropolitan Life Insurance Company	AA-
785	$	250,000	F	66	171	Principal Life Insurance Company	A+
786	$	500,000	M	66	69	Transamerica Life Insurance Company	AA-

- 57 -

	Face Amount		Gender	Age (ALB)	LE (mo.) (1)	Insurance Company	S&P Rating
787	$	265,000	M	66	151	Protective Life Insurance Company	AA-
788	$	250,000	M	66	113	Transamerica Life Insurance Company	AA-
789	$	10,000,000	M	66	58	Lincoln National Life Insurance Company	AA-
790	$	540,000	M	66	164	West Coast Life Insurance Company	AA-
791	$	350,000	M	65	116	Hartford Life and Annuity Insurance Company	BBB+
792	$	3,500,000	M	65	192	Prudential Insurance Company of America	AA-
793	$	150,000	M	60	90	Jackson National Life Insurance Company	AA
	$	1,525,362,833

(ALB)	Age Last Birthday - the insured’s age is current as of the measurement date.
(1)	The insured’s life expectancy estimate, other than for a small face value insurance policy (i.e., a policy with $1 million in face value benefits or less), is the average of two life expectancy estimates provided by independent third-party medical-actuarial underwriting firms at the time of purchase, actuarially adjusted through the measurement date. Numbers in this column represent months.

ITEM 4.

CONTROLS AND PROCEDURES.

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures designed to provide reasonable assurance that information required to be disclosed in our reports filed pursuant to the Securities Exchange Act of 1934 is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance the objectives of the control system are met.

As of June 30, 2017, our Chief Executive Officer and Chief Financial Officer carried out an evaluation of the effectiveness of our disclosure controls and procedures as such term is defined in Rule 13a-15(e) under the Securities and Exchange Act of 1934, as of the end of the period covered by this report. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded our disclosure controls and procedures were effective.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting identified in connection with management’s evaluation pursuant to Rules 13a-15(d) or 15d-15(d) of the Securities Exchange Act of 1934 during the period covered by this report that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Management’s Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f). Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of the financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures are being made only with proper authorizations; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of our assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

- 58 -

Our management, under the supervision of and with the participation of the Chief Executive Officer and Chief Financial Officer, assessed the effectiveness of our internal control over financial reporting as of March 31, 2017 based on criteria for effective control over financial reporting set forth by the Committee of Sponsoring Organizations of the Treadway Commission, 2013 framework in “Internal Control—Integrated Framework.” Based on this assessment, our management concluded that, as of the evaluation date, we maintained effective internal control over financial reporting.

ITEM 5.

OTHER INFORMATION

Life Insurance Secondary Market Update

This quarter we experienced a noticeable increase in activity and interest in the life insurance secondary market across the entire spectrum of market constituents. This increased activity and interest was marked by the National Association of Insurance Commissioners (“NAIC”) policy bulletin issued July 19, 2017 in support of products we provide that the bulletin described as “innovative private market solutions for financing Americans’ long-term care needs.” The NAIC, citing GWG’s August 25, 2016 presentation, discussed how consumers could exchange the market value of their life insurance policies for products designed to fund long-term care expenses. The use of a life insurance policy to generate resources to fund long-term care was pioneered by our Executive Vice President, Chris Orestis. Today, we are the only company in the life insurance industry that provides this innovative product to pay for long-term care expenses.

We have been working to create an innovative product suite for consumers based on the market value of their life insurance policy. To deliver this product suite, we are establishing partnerships with life insurance sales organizations seeking to deliver long-term care “point of need” product solutions. The interest among life insurance sales organizations for the product solutions we provide is strong and appears to be increasing. This recent market experience leads us to believe that the life insurance secondary market may be reaching an important stage in its overall development and growth potential.

We remain committed to developing and delivering an innovative suite of financial products based upon the market value of life insurance. At this time, we believe we are uniquely situated with the strategy, infrastructure and market position necessary to lead the development of a more robust life insurance secondary market. Our focus for the remainder of 2017 will be to continue building a profitable portfolio of life insurance policies; refining the product suite we offer consumers owning life insurance; and partnering with life insurance sales organizations that will ultimately provide us with life insurance policies for evaluation, consideration, and purchase.

M-Panel Technology Update

This quarter we made advances in our wholly owned “insurtech” M-Panel technology division, which we have renamed as Life Epigenetics Inc. This division was founded on the belief that advanced technology can meaningfully improve the accuracy of life expectancy underwriting for our life insurance secondary market policy purchases. We continue to press ahead with the development and use of a commercialized epigenetic test based upon the “DNA Methylation Based Predictor of Mortality” technology we exclusively licensed in May 2017 from the University of California, Los Angeles (UCLA). In the process of refining our understanding of our M-Panel technology, we are now of the belief that our proprietary epigenetic testing has the potential to significantly impact underwriting for the entire life insurance industry. In order to commercialize this technology and fully explore the opportunity within the life insurance industry, we retained insurance innovation expert Tom Nodine to lead this division as our Executive Vice President. Mr. Nodine is now charged with commercializing our proprietary epigenetic technology applications and applying it the entire life insurance industry. As such, our priority has been to firm up our ability to provide scaled epigenetic testing and refine the predictive outputs derived from our proprietary epigenetic tests.

This quarter we strengthened our M-Panel technology by working with top actuarial consultants to analyze our process of translating our “DNA Methylation Based Predictor of Mortality” into individual actuarial mortality profiles. The actuarial consultants reported that the process we developed was “acceptable and consistent with established actuarial principles,” an important confirmation of our strategy. In addition, we identified and are solidifying relationships with key laboratory partners who can support scaled testing for the global life insurance industry. Finally, we refined our life expectancy predictor and made significant progress in adding additional epigenetic biomarkers that are predictive of other key life insurance underwriting parameters. The focus of this division for the remainder of 2017 will be to meet with insurance companies, reinsurance companies, and other potential partners to conduct scaled trials and explore how our M-Panel technology can best serve their global life insurance needs and how we can create the most shareholder value therefrom.

- 59 -

ITEM 6.

EXHIBITS

Exhibit
31.1		Section 302 Certification of the Chief Executive Officer (filed herewith).
31.2		Section 302 Certification of the Chief Financial Officer (filed herewith).
32.1		Certification of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. §1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith).
99.1		Letter from Model Actuarial Pricing Systems, dated July 17, 2017 (filed herewith).
101.INS		XBRL Instance Document
101.SCH		XBRL Taxonomy Extension Schema Document
101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF		XBRL Taxonomy Extension Definition Linkbase Document
101.LAB		XBRL Taxonomy Extension Label Linkbase Document
101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document

- 60 -

SIGNATURES

Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	GWG HOLDINGS, INC.

Date: August 10, 2017	By:	/s/ Jon R. Sabes
		Chief Executive Officer

Date: August 10, 2017	By:	/s/ William B. Acheson
		Chief Financial Officer

- 61 -

EXHIBIT INDEX

Exhibit
31.1		Section 302 Certification of the Chief Executive Officer
31.2		Section 302 Certification of the Chief Financial Officer
32.1		Certification of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. §1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
99.1		Letter from Model Actuarial Pricing Systems, dated July 17, 2017
101.INS		XBRL Instance Document
101.SCH		XBRL Taxonomy Extension Schema Document
101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF		XBRL Taxonomy Extension Definition Linkbase Document
101.LAB		XBRL Taxonomy Extension Label Linkbase Document
101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document

- 62 -

Attached files

GWG Holdings, Inc. Reports

Also read