UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
For the quarterly period ended
OR
Commission File Number
(Exact name of Registrant as specified in its Charter)
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(State or other jurisdiction of incorporation or organization) |
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(I.R.S. Employer Identification No.) |
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(Address of principal executive offices) |
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(Zip Code) |
Registrant’s telephone number, including area code: (
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
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Trading Symbol |
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Name on each exchange on which registered |
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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.
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).
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 |
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Accelerated filer |
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Smaller reporting company |
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Emerging growth company |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES ☐ NO
The number of shares of Registrant’s Common Stock outstanding as of May 12, 2023 was
Table of Contents
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PART I – |
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1 |
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Item 1. |
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Interim Condensed Consolidated Statements of Comprehensive (Loss) Income |
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Interim Condensed Consolidated Statements of Changes in Shareholders' Equity |
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Notes to the Interim Condensed Consolidated Financial Statements |
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Item 2. |
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Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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Item 4. |
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PART II – |
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Item 1. |
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Item 1A. |
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Item 2. |
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Item 3. |
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Item 4. |
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Item 5. |
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Item 6. |
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Part 1. Financial Information
Item I. Financial Statements
Vericity, Inc.
Interim Condensed Consolidated Balance Sheets
(dollars in thousands)
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March 31, |
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December 31, |
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2023 |
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2022 |
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Assets |
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Investments: |
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Fixed maturities – available-for-sale – at fair value (amortized cost; $ |
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$ |
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$ |
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Mortgage loans (net of allowances for credit losses of $ |
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Policyholder loans |
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Other invested assets |
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Total investments |
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Cash, cash equivalents and restricted cash |
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Accrued investment income |
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Reinsurance recoverables (net of allowances for credit losses of $ |
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Deferred policy acquisition costs |
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Commissions and agent balances (net of allowances for credit losses of $ |
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Intangible assets |
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Deferred income tax assets, net |
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Other assets |
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Total assets |
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Liabilities and Shareholders' Equity |
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Liabilities |
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Future policy benefits and claims |
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Policyholder account balances |
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Other policyholder liabilities |
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Policy dividend obligations |
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Reinsurance liabilities and payables |
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Long-term debt |
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Short-term debt |
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Other liabilities |
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Total liabilities |
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Shareholders' Equity |
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Common stock, $ |
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Additional paid-in capital |
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Retained earnings |
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Accumulated other comprehensive (loss) income |
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Total shareholders' equity |
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Total liabilities and shareholders' equity |
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$ |
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$ |
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See notes to interim condensed consolidated financial statements
1
Vericity, Inc.
Interim Condensed Consolidated Statements of Operations
(dollars in thousands, except earnings per share)
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Three Months Ended March 31, |
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2023 |
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2022 |
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Revenues |
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Net insurance premiums |
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$ |
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$ |
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Net investment income |
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Net (losses) gains on investments |
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Earned commissions |
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Insurance lead sales |
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Other income |
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Total revenues |
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Benefits and expenses |
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Life, annuity, and health claim benefits |
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Interest credited to policyholder account balances |
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Operating costs and expenses |
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Amortization of deferred policy acquisition costs |
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Total benefits and expenses |
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(Loss) income before income tax |
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Income tax (benefit) expense |
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Net (loss) income |
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$ |
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$ |
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Earnings per share for the periods |
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Three Months Ended March 31, |
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2023 |
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2022 |
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(Unaudited) |
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(Unaudited) |
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Weighted average shares outstanding, basic and diluted |
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Basic earnings per share |
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$ |
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$ |
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Diluted earnings per share |
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$ |
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$ |
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See notes to interim condensed consolidated financial statements
2
Vericity, Inc.
Interim Condensed Consolidated Statements of Comprehensive (Loss) Income
(dollars in thousands)
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Three Months Ended March 31, |
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2023 |
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2022 |
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Net (loss) income |
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$ |
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$ |
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Other comprehensive (loss) income, net of tax: |
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Change in net unrealized (losses) gains |
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Total other comprehensive income (loss) |
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Total comprehensive income (loss) |
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$ |
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$ |
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See notes to interim condensed consolidated financial statements
3
Vericity, Inc.
Interim Condensed Consolidated Statements of Changes in Shareholders’ Equity
(dollars in thousands)
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Three Months Ended March 31, |
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2023 |
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2022 |
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Common stock |
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Balance – beginning of period |
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$ |
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$ |
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Balance – end of period |
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$ |
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$ |
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Additional paid-in capital |
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Balance – beginning of period |
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$ |
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$ |
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Balance – end of period |
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$ |
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$ |
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Retained earnings |
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Balance – beginning of period |
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$ |
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$ |
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Cumulative effect adjustment from changes in accounting guidance, net of tax |
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( |
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— |
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Balance after adjustments - beginning of period |
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$ |
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$ |
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Net (loss) income |
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Balance – end of period |
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$ |
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$ |
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Accumulated other comprehensive income (loss) |
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Balance – beginning of period |
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$ |
( |
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$ |
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Other comprehensive (loss) income |
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( |
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Balance – end of period |
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$ |
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$ |
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Total shareholders' equity |
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$ |
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$ |
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See notes to interim condensed consolidated financial statements
4
Vericity, Inc.
Interim Condensed Consolidated Statements of Cash Flows
(dollars in thousands)
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Three Months Ended March 31, |
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2023 |
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2022 |
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Cash flows from operating activities |
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Net (loss) income |
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$ |
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$ |
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Adjustments to reconcile net (loss) income to net cash (used) provided by operating activities: |
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Depreciation and amortization and other non-cash items |
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Interest credited to policyholder account balances |
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Deferred income tax |
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Net investment losses (gains) |
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Interest expense |
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Change in: |
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Accrued investment income |
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( |
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Reinsurance recoverables net |
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Deferred policy acquisition costs |
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Commissions and agent balances |
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( |
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Other assets |
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( |
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Insurance liabilities |
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Other liabilities |
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Net cash (used) provided by operating activities |
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Cash flows from investing activities |
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Sales, maturities and repayments of: |
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Fixed maturities |
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Mortgage loans |
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Purchases of: |
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Fixed maturities |
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( |
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Mortgage loans |
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( |
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( |
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Other invested assets |
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( |
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( |
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Change in policyholder loans, net |
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( |
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( |
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Other, net |
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( |
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Net cash provided (used) by investing activities |
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Cash flows from financing activities |
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Debt issued |
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— |
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Debt repaid |
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( |
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Deposits to policyholder account balances |
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Withdrawals from policyholder account balances |
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( |
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Net cash (used) provided by financing activities |
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( |
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Net (decrease) in cash, cash equivalents and restricted cash |
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Cash, cash equivalents and restricted cash – beginning of period |
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Cash, cash equivalents and restricted cash – end of period |
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$ |
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$ |
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Supplemental cash flow information |
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— |
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See notes to interim condensed consolidated financial statements
5
Vericity, Inc.
Notes to Interim Condensed Consolidated Financial Statements
(dollars in thousands)
Note 1 – Summary of Significant Accounting Policies
Description of Business
Vericity, Inc. (the Company) is a Delaware corporation organized to be the stock holding company for Members Holding Company (Members) and its subsidiaries. On August 7, 2019, the Company completed the initial public offering of
The Company operates as a holding company and currently has no other business operations. Fidelity Life is an Illinois‑domiciled life insurance company that was founded in 1896. Fidelity Life markets life insurance products through independent and affiliated distributors and is licensed in the District of Columbia and all states, except New York and Wyoming. Efinancial markets life and other products for non‑affiliated insurance companies and sells life products for Fidelity Life.
The accompanying interim condensed consolidated financial statements present the accounts of the Company and subsidiaries for the three months ended March 31, 2023 and March 31, 2022 and at March 31, 2023 and December 31, 2022. These interim condensed consolidated financial statements and notes should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report in the Form 10-K for the year ended December 31, 2022. The results of operations for the interim periods should not be considered indicative of results to be expected for the full year.
Basis of Presentation
These interim condensed consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (GAAP). The unaudited interim condensed consolidated financial information furnished herein reflects all adjustments which are, in the opinion of management, necessary to fairly state the results for the interim periods presented. All such adjustments are of a normal recurring nature. All intercompany accounts and transactions have been eliminated in consolidation. The consolidated results of operations for the interim periods presented are not necessarily indicative of results for the full year. Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been omitted from this report, as is permitted by such rules and regulations. Accordingly, these interim condensed consolidated financial statements should be read in conjunction with the financial statements as of and for the year ended December 31, 2022, and notes thereto, included in the Form 10-K.
Use of Estimates
The preparation of interim condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The more significant estimates employed in the preparation of the interim condensed consolidated financial statements include the determination of the valuation of investments in fixed maturity, investment impairments, the valuation of deferred tax assets, future policy benefits and other policyholder liabilities.
Adopted Accounting Pronouncements
In June 2016, the FASB issued , Financial Instruments— Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The new guidance requires that Other-Than-Temproary Impairment (OTTI)on a debt security will be recognized as an allowance going forward, such that improvements in expected future cash flows after an impairment will no longer be reflected as a prospective yield adjustment through net investment income, but rather a reversal of the previous impairment and recognized through net gains (losses) on investments. The guidance also requires enhanced disclosures. In March 2022, the FASB issued ASU 2022-02 – Financial Instruments—Credit Losses (Topic 326): Troubled Debt Restructuring and Vintage Disclosure. This ASU was issued to eliminate the troubled debt restructuring recognition and measurement guidance for creditors that have
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Cumulative effect adjustment from changes in accounting guidance, net of tax. The Company has also assessed fixed maturities - available-for-sale, reinsurance recoverables and commissions and agent balances and determined no additional allowance for credit losses is needed. We also adopted the required disclosures within Note 2 Investments, Note 4 Reinsurance, Note 9 Accumulated Other Comprehensive Income and Note 10 Business Segments.
Note 2 – Investments
The Company continuously monitors its investment strategies and individual holdings with consideration of current and projected market conditions, the composition of the Company’s liabilities, projected liquidity and capital investment needs, and compliance with investment policies and state regulatory guidelines.
Fixed Maturities
The amortized cost, gross unrealized gains, gross unrealized losses, fair value, and net of allowances for credit losses are included in accumulated other comprehensive income (AOCI) of fixed maturities available-for-sale are as follows:
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March 31, 2023 |
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Fixed maturities |
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Amortized |
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Unrealized |
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Unrealized |
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Fair |
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U.S. government and agencies |
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$ |
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$ |
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$ |
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$ |
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U.S. agency mortgage-backed |
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State and political subdivisions |
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Corporate and miscellaneous |
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Foreign government |
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— |
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Residential mortgage-backed |
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Commercial mortgage-backed |
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Asset-backed |
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Total fixed maturities |
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$ |
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$ |
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$ |
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$ |
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December 31, 2022 |
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Fixed maturities |
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Amortized |
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Unrealized |
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Unrealized |
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Fair |
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OTTI |
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U.S. government and agencies |
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$ |
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$ |
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$ |
( |
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$ |
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$ |
— |
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U.S. agency mortgage-backed |
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