Midwest Swings to Profit in Q2; Results Miss Estimates

Nebraska-based financial services firm Midwest Holding’s (MDWT) second-quarter 2021 financial results have failed to meet expectations. The company offers in-demand annuity products that it transfers to asset managers and other third-party investors through reinsurance arrangements.

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Midwest reported adjusted earnings per share (EPS) of $0.20, compared to a loss of $0.24 per share in the second quarter of 2020. It, however, missed the Street’s estimate of $0.41.

Total revenue amounted to $8.9 million, falling short of analysts’ expectations of $10.38 million. The company reported a negative $12.5 million as revenue in the second quarter of 2020.

Annuity direct written premiums grew 26% year-over-year to $125.9 million and management revenue increased 184% to $9.1 million. (See Midwest stock chart on TipRanks)

The Co-CEO of Midwest, A. Michael Salem, said, “On a macro level, our opportunity remains as strong as ever: the U.S. wealth management and financial services value chain continues to be under flux. Asset managers are becoming insurance companies, traditional insurers are divesting assets, private equity is aggregating, technology is circling. We expect this industry realignment to continue for some time.”

The company’s shares fell nearly 5% to close at $36.95 on Thursday.

Last month, Piper Sandler analyst John Barnidge maintained a Buy rating on the stock but reduced the price target to $70 from $76 (89.5% upside potential). The analyst said, “Life insurance valuations are higher than just a quarter prior, which suggests this is a stock pickers’ focused market for outperformance prospectively as opposed to a broad macro trade.”

Overall, the stock has a Moderate Buy consensus based on 1 Buy. The average Midwest Holding price target of $70 implies upside potential of 89.5%. Shares have lost 33.3% year-to-date.