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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

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

For the quarterly period ended June 30, 2023

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO

Commission File Number 001-38945

 

VERICITY, INC.

(Exact name of Registrant as specified in its Charter)

 

 

Delaware

 

46-2348863

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

1350 E Touhy Avenue, Suite 205W, Des Plaines, Illinois

 

60018

(Address of principal executive offices)

 

(Zip Code)

Registrant’s telephone number, including area code: (312) 288-0073

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading Symbol

 

Name on each exchange on which registered

Common Stock, Par Value $0.001 per share

 

VERY

 

NASDAQ Capital Market

Indicate by check mark whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YesNo

Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files). YesNo

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

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

The number of shares of Registrant’s Common Stock outstanding as of August 12, 2023 was 14,875,000.

 

 


Table of Contents

 

 

 

Page

 

 

 

 

 

PART I –

 

Financial Information

 

 

1

Item 1.

 

Financial Statements (Unaudited) (at June 30, 2023 and December 31, 2022 and for the three and six months ended June 30, 2023 and 2022

 

1

 

 

 

 

 

 

 

Interim Condensed Consolidated Balance Sheets

 

1

 

 

Interim Condensed Consolidated Statements of Operations

 

2

 

 

Interim Condensed Consolidated Statements of Comprehensive (Loss) Income

 

3

 

 

Interim Condensed Consolidated Statements of Changes in Shareholders' Equity

 

4

 

 

Interim Condensed Consolidated Statements of Cash Flows

 

5

 

 

Notes to the Interim Condensed Consolidated Financial Statements

 

6

 

 

 

Note 1 – Summary of Significant Accounting Policies

 

6

 

 

 

Note 2 – Investments

 

7

 

 

 

Note 3 – Policy Liabilities

 

12

 

 

 

Note 4 – Reinsurance

 

13

 

 

 

Note 5 – Closed Block

 

13

 

 

 

Note 6 – Commitments and Contingencies

 

15

 

 

 

Note 7 – Assets and Liabilities Measured at Fair Value

 

16

 

 

 

Note 8 – Long and Short-term Debt

 

19

 

 

 

Note 9– Accumulated Other Comprehensive (Loss) Income

 

20

 

 

 

Note 10 – Business Segments

 

20

 

 

 

Note 11 – Subsequent Events

 

22

 

 

 

 

 

 

Item 2.

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

23

Item 4.

 

Controls and Procedures

 

36

 

 

 

 

PART II –

 

Other Information

 

36

Item 1.

 

Legal Proceedings

 

36

Item 1A.

 

Risk Factors

 

36

Item 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds

 

37

Item 3.

 

Default upon Senior Securities

 

37

Item 4.

 

Mine Safety Disclosures

 

37

Item 5.

 

Other Information

 

37

Item 6.

 

Exhibits

 

38

Signature

 

 

 

39

 

 


Part 1. Financial Information

Item I. Financial Statements

Vericity, Inc.

Interim Condensed Consolidated Balance Sheets

(dollars in thousands)

 

 

 

 

June 30,

 

 

December 31,

 

 

 

2023

 

 

2022

 

 

 

(Unaudited)

 

 

(Audited)

 

Assets

 

 

 

 

 

 

Investments:

 

 

 

 

 

 

Fixed maturities – available-for-sale – at fair value (amortized cost; $332,423
   and $
331,946, net of allowances for credit losses of $0 and $0)

 

$

303,514

 

 

$

298,138

 

Mortgage loans (net of allowances for credit losses of $280 and $83)

 

 

42,911

 

 

 

45,270

 

Policyholder loans

 

 

6,991

 

 

 

6,699

 

Other invested assets

 

 

3,048

 

 

 

3,693

 

Total investments

 

 

356,464

 

 

 

353,800

 

Cash, cash equivalents and restricted cash

 

 

6,611

 

 

 

9,776

 

Accrued investment income

 

 

3,701

 

 

 

3,006

 

Reinsurance recoverables (net of allowances for credit losses of $126 and $126)

 

 

223,973

 

 

 

214,862

 

Deferred policy acquisition costs

 

 

88,262

 

 

 

90,189

 

Commissions and agent balances (net of allowances for credit losses of $336 and $338)

 

 

48,782

 

 

 

34,766

 

Intangible assets

 

 

1,635

 

 

 

1,635

 

Deferred income tax assets, net

 

 

29,039

 

 

 

28,437

 

Other assets

 

 

34,454

 

 

 

33,607

 

Total assets

 

 

792,921

 

 

 

770,078

 

Liabilities and Shareholders' Equity

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

Future policy benefits and claims

 

 

473,042

 

 

 

453,763

 

Policyholder account balances

 

 

73,395

 

 

 

77,443

 

Other policyholder liabilities

 

 

35,501

 

 

 

47,486

 

Policy dividend obligations

 

 

9,506

 

 

 

9,515

 

Reinsurance liabilities and payables

 

 

6,741

 

 

 

6,246

 

Long-term debt

 

 

34,525

 

 

 

30,213

 

Short-term debt

 

 

8,618

 

 

 

6,976

 

Other liabilities

 

 

36,213

 

 

 

27,093

 

Total liabilities

 

 

677,541

 

 

 

658,735

 

Commitments and Contingencies (Note 6)

 

 

 

 

 

 

Shareholders' Equity

 

 

 

 

 

 

Common stock, $.001 par value, 30,000,000 shares authorized, 14,875,000 shares, issued and outstanding

 

 

15

 

 

 

15

 

Additional paid-in capital

 

 

39,840

 

 

 

39,840

 

Retained earnings

 

 

101,571

 

 

 

101,660

 

Accumulated other comprehensive (loss) income

 

 

(26,046

)

 

 

(30,172

)

Total shareholders' equity

 

 

115,380

 

 

 

111,343

 

Total liabilities and shareholders' equity

 

$

792,921

 

 

$

770,078

 

 

See notes to interim condensed consolidated financial statements

1


Vericity, Inc.

Interim Condensed Consolidated Statements of Operations

(dollars in thousands, except earnings per share)

 

 

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

 

 

 

(Unaudited)

 

 

(Unaudited)

 

 

(Unaudited)

 

 

(Unaudited)

 

Revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

Net insurance premiums

 

 

$

23,743

 

 

$

26,846

 

 

$

48,081

 

 

$

49,006

 

Net investment income

 

 

 

4,489

 

 

 

3,798

 

 

 

8,836

 

 

 

7,264

 

Net (losses) gains on investments

 

 

 

(337

)

 

 

110

 

 

 

(876

)

 

 

1,659

 

Earned commissions

 

 

 

15,432

 

 

 

10,488

 

 

 

30,181

 

 

 

21,525

 

Insurance lead sales

 

 

 

804

 

 

 

1,276

 

 

 

2,026

 

 

 

2,514

 

Other income

 

 

 

606

 

 

 

213

 

 

 

1,111

 

 

 

275

 

Total revenues

 

 

 

44,737

 

 

 

42,731

 

 

 

89,359

 

 

 

82,243

 

Benefits and expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

Life, annuity, and health claim benefits

 

 

 

12,613

 

 

 

15,319

 

 

 

28,984

 

 

 

30,117

 

Interest credited to policyholder account balances

 

 

 

684

 

 

 

726

 

 

 

1,373

 

 

 

1,454

 

Operating costs and expenses

 

 

 

25,716

 

 

 

24,573

 

 

 

51,484

 

 

 

49,726

 

Amortization of deferred policy acquisition costs

 

 

 

2,982

 

 

 

4,239

 

 

 

6,630

 

 

 

9,151

 

Total benefits and expenses

 

 

 

41,995

 

 

 

44,857

 

 

 

88,471

 

 

 

90,448

 

Income (loss) before income tax

 

 

 

2,742

 

 

 

(2,126

)

 

 

888

 

 

 

(8,205

)

Income tax expense (benefit)

 

 

 

763

 

 

 

223

 

 

 

790

 

 

 

(194

)

Net income (loss)

 

 

$

1,979

 

 

$

(2,349

)

 

$

98

 

 

$

(8,011

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per share for the periods

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

 

 

 

(Unaudited)

 

 

(Unaudited)

 

 

(Unaudited)

 

 

(Unaudited)

 

Weighted average shares outstanding, basic and diluted

 

 

 

14,875,000

 

 

 

14,875,000

 

 

 

14,875,000

 

 

 

14,875,000

 

Basic earnings per share

 

 

$

0.13

 

 

$

(0.16

)

 

$

0.01

 

 

$

(0.54

)

Diluted earnings per share

 

 

$

0.13

 

 

$

(0.16

)

 

$

0.01

 

 

$

(0.54

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See notes to interim condensed consolidated financial statements

2


Vericity, Inc.

Interim Condensed Consolidated Statements of Comprehensive (Loss) Income

(dollars in thousands)

 

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

 

 

(Unaudited)

 

 

(Unaudited)

 

Net income (loss)

 

$

1,979

 

 

$

(2,349

)

 

$

98

 

 

$

(8,011

)

Other comprehensive (loss) income, net of tax:

 

 

 

 

 

 

 

 

 

 

 

 

Change in net unrealized (losses) gains

 

 

(2,187

)

 

 

(14,803

)

 

 

4,126

 

 

 

(30,029

)

Total other comprehensive (loss) income

 

 

(2,187

)

 

 

(14,803

)

 

 

4,126

 

 

 

(30,029

)

Total comprehensive (loss) income

 

$

(208

)

 

$

(17,152

)

 

$

4,224

 

 

$

(38,040

)

 

See notes to interim condensed consolidated financial statements

3


Vericity, Inc.

Interim Condensed Consolidated Statements of Changes in Shareholders’ Equity

(dollars in thousands)

 

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

 

 

(Unaudited)

 

 

(Unaudited)

 

Common stock

 

 

 

 

 

 

 

 

 

 

 

 

Balance – beginning of period

 

$

15

 

 

$

15

 

 

$

15

 

 

$

15

 

Balance – end of period

 

$

15

 

 

$

15

 

 

$

15

 

 

$

15

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional paid-in capital

 

 

 

 

 

 

 

 

 

 

 

 

Balance – beginning of period

 

$

39,840

 

 

$

39,840

 

 

$

39,840

 

 

$

39,840

 

Balance – end of period

 

$

39,840

 

 

$

39,840

 

 

$

39,840

 

 

$

39,840

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Retained earnings

 

 

 

 

 

 

 

 

 

 

 

 

Balance – beginning of period

 

$

99,592

 

 

$

116,458

 

 

$

101,660

 

 

$

122,120

 

Cumulative effect adjustment from changes in accounting guidance, net of tax

 

 

 

 

 

 

 

 

(187

)

 

 

 

Balance after adjustments - beginning of period

 

$

99,592

 

 

$

116,458

 

 

$

101,473

 

 

$

122,120

 

Net income (loss)

 

 

1,979

 

 

 

(2,349

)

 

 

98

 

 

 

(8,011

)

Balance – end of period

 

$

101,571

 

 

$

114,109

 

 

$

101,571

 

 

$

114,109

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated other comprehensive income (loss)

 

 

 

 

 

 

 

 

 

 

 

 

Balance – beginning of period

 

$

(23,859

)

 

$

(4,297

)

 

$

(30,172

)

 

$

10,929

 

Other comprehensive income (loss)

 

 

(2,187

)

 

 

(14,803

)

 

 

4,126

 

 

 

(30,029

)

Balance – end of period

 

$

(26,046

)

 

$

(19,100

)

 

$

(26,046

)

 

$

(19,100

)

Total shareholders' equity

 

$

115,380

 

 

$

134,864

 

 

$

115,380

 

 

$

134,864

 

 

See notes to interim condensed consolidated financial statements

4


Vericity, Inc.

Interim Condensed Consolidated Statements of Cash Flows

(dollars in thousands)

 

 

 

Six Months Ended June 30,

 

 

 

2023

 

 

2022

 

 

 

(Unaudited)

 

Cash flows from operating activities

 

 

 

 

 

 

Net income (loss)

 

$

98

 

 

$

(8,011

)

Adjustments to reconcile net (loss) income to net cash (used) provided by operating activities:

 

 

 

 

 

 

Depreciation and amortization and other non-cash items

 

 

2,366

 

 

 

2,250

 

Interest credited to policyholder account balances

 

 

1,373

 

 

 

1,454

 

Deferred income tax

 

 

(1,454

)

 

 

(1,820

)

Net investment losses (gains)

 

 

876

 

 

 

(1,659

)

Interest expense

 

 

1,091

 

 

 

730

 

Change in:

 

 

 

 

 

 

Accrued investment income

 

 

(695

)

 

 

(434

)

Reinsurance recoverables, net

 

 

(9,111

)

 

 

(18,024

)

Deferred policy acquisition costs

 

 

1,927

 

 

 

3,322

 

Commissions and agent balances

 

 

(14,016

)

 

 

(1,617

)

Other assets

 

 

1,518

 

 

 

(1,580

)

Insurance liabilities

 

 

7,397

 

 

 

16,525

 

Other liabilities

 

 

6,821

 

 

 

(235

)

Net cash (used) provided by operating activities

 

 

(1,809

)

 

 

(9,099

)

Cash flows from investing activities

 

 

 

 

 

 

Sales, maturities and repayments of:

 

 

 

 

 

 

Fixed maturities

 

 

32,097

 

 

 

26,062

 

Mortgage loans

 

 

3,126

 

 

 

2,794

 

Other invested assets

 

 

454

 

 

 

 

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