Investor Presentaiton
EXPLANATION OF NON-GAAP FINANCIAL MEASURES
Explanation of Non-GAAP Financial Measures
We have discussed above below certain GAAP and non-GAAP financial measures that our management uses in conjunction with GAAP financial measures as an integral part of managing
our business and to, among other things:
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monitor and evaluate the performance of our business operations and financial performance;
facilitate internal comparisons of the historical operating performance of our business operations;
review and assess the operating performance of our management team;
analyze and evaluate financial and strategic planning decisions regarding future operations; and
plan for and prepare future annual operating budgets and determine appropriate levels of operating investments.
Non-GAAP financial measures used by us may be calculated differently from, and therefore may not be comparable to, similarly titled measures used by other companies. These non-GAAP
financial measures should be considered along with, but not as alternatives to, our operating performance measures as prescribed by GAAP.
Annuity Premiums - SAP
Annuity premiums, also referred to as sales or direct written premiums, do not correspond to revenues under GAAP, but are relevant metrics to understand our business performance. Under
statutory accounting principles, or SAP, our annuity premiums received are treated as premium revenue. Our premium metrics include all sums paid into an individual annuity in a given period.
We typically transfer all or a substantial portion of the premium and policy obligations to reinsurers. Ceded premium represents the premium we transfer to reinsurers in a given period. Retained
premium represents the portion of premium received during a given period that was not ceded to reinsurers and will either be reinsured in a subsequent period or retained by us. We typically
retain premiums prior to transferring them to reinsurers to facilitate block and other reinsurance transactions involving portfolios of annuity premiums.
Fees Received for Reinsurance
We utilize fees received for reinsurance as an economic measure to evaluate our financial performance. We calculate fees received for reinsurance by summing two components: 1)
amortization of deferred gain on reinsurance, which is a line item from our GAAP Consolidated Statements of Comprehensive Loss; and 2) deferred coinsurance ceding commission, which is a
line item from our GAAP Consolidated Statements of Cash Flows.
Management Expenses
In addition to total expenses, we utilize management expenses as an economic measure to evaluate our financial performance. Management expenses consist of total GAAP expenses
adjusted to eliminate items that fluctuate from quarter to quarter in a manner unrelated to core operations, which we believe are useful in analyzing operating trends. The most significant
adjustments to arrive at management expenses include the use of management interest credited (as discussed below), the exclusion of stock-based compensation and the exclusion of the
mark-to-market option allowance expense (included in other operating expenses) payable to reinsurers to cover their obligations under FIA policies we have reinsured with them. We believe
the combined presentation and evaluation of total expenses together with management expenses provides information that can enhance an investor's understanding of our underlying
operating results.
Management Interest Credited
We utilize management interest credited, a component of management expenses, as an economic measure to evaluate our financial performance. GAAP interest credited contains
significant technical considerations related to fair value accounting with respect to the mark-to-market change in the FIA embedded derivative liability and change in actuarial valuation of
the FIA reserve, both of which are sensitive to changes in the market as well as changes in actuarial assumptions. Due to these technical considerations that we believe are less meaningful to
management and investors, we exclude the GAAP interest credited expense related to our FIA products and include the amortized cost of options we purchase to service our FIA policy
obligations. The sum of GAAP interest credited related to our multi-year guaranteed annuity ("MYGA") products and the amortized cost of options we purchase to service our FIA products
constitutes management interest credited.
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