Q2 2022 Midwest Holding Inc Earnings Call

of the options embedded in our liabilities and the increase in mark-to-market value of the options allowance. Salaries and benefits and other operating expenses, excluding the option mark, saw a small improvement as we continued to build the business and work on technology initiatives. Salaries and benefits were $4.3 million for the quarter, down 4 percent, compared to $4.5 million in the prior year's second quarter. As we grow, managing expenses continues to be an area of focus and we're making progress to bring costs further in line as the year progresses. Now turning to guidance for 2022, based on our current views of business and the market. With the positive trends we saw in the second quarter and the premium written at the start of the third quarter, along with the backlog and process, we're confident in the anticipated premiums written being in the range of $500 to $600 million for the year. While our goal continues to be to feed, on average, approximately 70 to 90 percent of premium in the year, we're currently running at approximately 40 percent. Timing of closing additional reinsurance deals can be delayed due to various factors and will vary quarter to quarter as new agreements are reached. Demand from our existing reinsurance partners is strong and we have capacity in place to cover anticipated written premiums through them with the potential to grow along with potential reinsurance transactions in the pipeline. We're also working to warehouse more premium in our reinsure Seneca Re for potential use in the future reinsurance arrangements. We are making progress towards bringing general and administrative expenses on a management basis, a non-GAAP measure, within approximately 27 years.

to $28 million for the full year 2022. The continued performance of the business, actions being taken, and the potential for growth continue to build value in the platform. And as we move forward, our opportunity is strong, and the team at Midwest is committed to positioning the business for continued growth.

year 2022. The continued performance of the business, actions being taken, and the potential for growth continue to build value in the platform. And as we move forward, our opportunity is strong, and the team at Midwest is committed to positioning the business for continued growth. Now I'll open it up for questions.

Thank you.

So if you would like to ask a question, please press star followed by one and telephone keypad. If you change your mind, please press star followed by two. If you are not prepared to ask a question, please ensure your phone is unmuted locally.

The first question comes from John Barnidge from Piper Sandlot. John , you may begin.

Thank you very much and good morning. With Mike is going to be 60% of sales in 22, how should we be thinking about a blended heating commission rate for the second half of the year.

Yeah, good morning, John . I think, again, as we see kind of.

more of the production coming through MIGA given some of the movement in rates, investors and consumers kind of trending towards that product. On average we get somewhere between 2.5 to 3.5 percent commission versus kind of 5 percent on a FEA. We do think again that that'll potentially put some pressure on the downward trend on the seating commission in the third quarter and the fourth. We're running right now at about 5.25 percent seating commission.

Again, it depends a little bit on the product that we write and the reinsurance arrangements that we get in place. I think overall though, we feel very confident that we're holding our premium or our seated commission up as we look at the reinsurance transactions that we're looking at.

Okay, great, thank you. And a follow up to that, I know the hope is to do 70 to 90% reinsurance as relationships expand. But if no new relationships are added, does the level of premiums that were reinsured off in the first half of the year seem like a reasonable run rate barring that?

Yeah, I think if we didn't do anything different, right, that's not an unreasonable rate. I think we feel like we have the opportunity to grow a couple of our existing relationships where there's capacity and they're relatively new. So we think there's opportunity there as well as we do think that there's opportunity to close a transaction or two in the back half of the year as we look at the pipeline of interest and reinsure that we have in place and some of the work that we've been doing. So I think we're...

We feel very confident that to right the 500 to 600 million, we've got capacity in place to hold that. If not, we also have capital in place to retain it, which has a positive impact in the sense of you see that in the investment income as we hold and retain more, right? We're benefiting from that. is better…

Great. Thank you very much. Best of luck in the quarter ahead.

Thanks, John .

As a reminder, to ask any other questions, please press star followed by 1 on your telephone keypad.

So that's star followed by one.

It appears we have no questions at this moment, so I'm going to hand back to the management team for any final remarks.

Thanks, we appreciate all of you joining today and your interest in Midwest and look forward to talking to you over the next few weeks.

Take care. Have a great day.

This concludes today's call. Thank you for joining. You may now disconnect your lines.

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