May 25, 2022

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GWG HOLDINGS, INC. – 10-K – MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

The following discussion should be read in conjunction with the consolidated
financial statements and accompanying notes and the information contained in
other sections of this report. This discussion and analysis is based on the
beliefs of our management, as well as assumptions made by, and information
currently available to, our management.
Unless the context otherwise indicates, all references in this Management's
Discussion and Analysis of Financial Condition and Results of Operations, or
MD&A, to the "Company," "we," "us," "our" or "ours" or similar words are to GWG
Holdings Inc. and its direct and indirect wholly-owned and consolidated
subsidiaries, references to "GWG Holdings" refer to GWG Holdings Inc.,
references to "GWG Life" refer to GWG Life, LLC (a wholly-owned subsidiary of
GWG Holdings), references to "DLP IV" refer to GWG DLP Funding IV, LLC (a
wholly-owned subsidiary of GWG Life), references to "DLP V Holdings" refer to
GWG DLP Funding V Holdings, LLC (a wholly-owned subsidiary of GWG Life),
references to "DLP V" refer to GWG DLP Funding V, LLC (a wholly-owned subsidiary
of DLP V Holdings), references to "DLP VI Holdings" refer to GWG DLP Funding
Holdings VI, LLC (a wholly-owned subsidiary of GWG Life), references to "DLP VI"
refer to GWG DLP Funding VI, LLC (a wholly-owned subsidiary of DLP VI Holdings),
references to "Ben LP" refer to The Beneficient Company Group, L.P. (a
consolidated subsidiary of GWG Holdings), references to "Beneficient" refer to
Ben LP and all of its consolidated subsidiaries, references to "BCH" refer to
Beneficient Company Holdings, L.P. (of which Ben LP is the general partner),
references to "Beneficient Management" refer to Beneficient Management, L.L.C.
(the general partner of Ben LP), references to "BCC" refer to Beneficient
Capital Company, L.L.C. (a subsidiary of Ben LP), references to "BACC" refer to
Beneficient Administrative and Clearing Company, L.L.C. (a subsidiary of Ben
LP), references to "Pen" refer to Pen Indemnity Insurance Company, LTD (a
subsidiary of Ben LP), references to "Ben Markets" refer to Ben Markets L.L.C.
(a subsidiary of Ben LP), references to "FOXO" refer to FOXO Technologies Inc.
(formerly, FOXO BioScience LLC, an equity investee of GWG Holdings), references
to "FOXO Labs" refer to FOXO Labs Inc. (formerly, Life Epigenetics Inc., a
wholly-owned subsidiary of FOXO), references to "FOXO Life" refer to FOXO Life
LLC (formerly, youSurance General Agency, LLC, a wholly-owned subsidiary of
FOXO); references to the "ExAlt Plan™ ", refer to a trust structure comprising
customized trust vehicles (the "ExAlt Trusts", and each, an "ExAlt Trust").
Overview
We are an innovative financial services firm based in Dallas, Texas, that is a
leader in providing unique liquidity solutions and services for the owners of
illiquid investments. In 2018 and 2019, GWG Holdings and GWG Life consummated a
series of transactions (as more fully described in Item 1. Business) with The
Beneficient Company Group, L.P. ("Ben LP," including all of the subsidiaries it
may have from time to time - "Beneficient"). On December 31, 2019, GWG Holdings
obtained the right to appoint a majority of the board of directors of
Beneficient Management. As a result of this change-of-control event, GWG
Holdings reported the results of Beneficient on a consolidated basis beginning
on the transaction date of December 31, 2019. As further described in Note 23 to
the consolidated financial statements, on August 13, 2021, GWG Holdings and Ben
LP, and BCH (as defined below) entered into a non-binding term sheet (the "Term
Sheet") which, if completed, is expected to result in, among other things, the
deconsolidation of Beneficient from GWG Holdings.
Beneficient is a financial services company, based in Dallas, Texas, that
markets an array of liquidity and trust administration products to alternative
asset investors primarily comprised of mid-to-high-net-worth individuals having
a net worth between
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$5 million and $30 million ("MHNW") and small-to-midsize institutional investors
and family offices with less than $1 billion in investable assets ("STMIs"). Ben
LP plans to offer its products and services through its five operating
subsidiaries, which include (i) Ben Liquidity, L.L.C. and its subsidiaries
(collectively, "Ben Liquidity"), (ii) Ben Custody, L.L.C. and its subsidiaries
(collectively, "Ben Custody Admin"), (iii) Ben Insurance, L.L.C. and its
subsidiaries (collectively, "Ben Insurance"), (iv) Ben Markets, L.L.C., and its
subsidiaries (collectively, "Ben Markets") and (v) The Beneficient Company Group
(USA), L.L.C ("Beneficient USA"). Ben Liquidity plans to operate a trust company
that is a Kansas Technology Enabled Fiduciary Financial Institutions ("TEFFI")
authorized to serve as an alternative asset custodian, trustee and lender with
statutory powers granted for each of these activities and permitting Ben
Liquidity to provide fiduciary financing for certain of its customer liquidity
transactions. Ben Custody Admin plans to operate a Texas trust company that is
being organized to provide its customers with certain administrative, custodial
and trustee products and specialized services focused on alternative asset
investors. Ben Insurance has been chartered as a Bermuda based insurance company
that plans to offer certain customized insurance products and services covering
risks relating to owning, managing and transferring alternative assets. Ben
Markets is in the regulatory process for acquiring a captive registered
broker-dealer that would conduct certain of its activities attendant to offering
a suite of products and services from the Beneficient family of companies.
Certain of Ben LP's operating subsidiary products and services involve or are
offered to certain of the ExAlt Trusts, which operate for the benefit of the
Non-Controlling Interest Holders, and are consolidated subsidiaries of Ben LP
for financial reporting purposes (such trusts are and may individually be
referred to as Custody Trusts, Collective Trusts, LiquidTrusts, and Funding
Trusts). Beneficient USA employs a substantial majority of the executives and
staff for Beneficient's operating subsidiaries to which Beneficient USA provides
administrative and technical services.
We believe that Beneficient's operations will generally produce higher
risk-adjusted returns than those we can achieve from life insurance policies
acquired in the secondary market; however, returns on equity in life
settlements, especially with the current availability of financings on favorable
terms, appear to be an attractive option to diversify our exposure to
alternative assets, and we have begun exploring the feasibility of acquiring
such policies. Furthermore, although we believe that our portfolio of life
insurance policies is a meaningful component of a growing diversified
alternative asset portfolio, we continue to explore strategic alternatives for
our life insurance portfolio aimed at maximizing its value, including a possible
sale, refinancing, recapitalization, partnership, reinsurance guarantees, life
insurance operations or other transactions involving of our life insurance
portfolio, as well as pursuing other alternatives to increase our exposure to
alternative assets. These operations are in addition to allocating capital to
provide liquidity to holders of a broader range of alternative assets, which we
currently provide through GWG Holdings' and GWG Life's investments in
Beneficient.
GWG Holdings completed the transactions with Beneficient, in part, to provide
the Company with a significant increase in assets and common stockholders'
equity. In addition, the transactions with Beneficient may provide us with the
opportunity for a diversified source of future earnings within the alternative
asset industry. We believe the Beneficient transactions and the other strategies
we are pursuing will transform GWG Holdings from a niche provider of liquidity
to owners of life insurance to a diversified provider of financial products and
services with exposure to a broad range of alternative assets.
Critical Accounting Policies
Critical Accounting Estimates
The preparation of our consolidated financial statements in accordance with the
accounting principles generally accepted in the United States of America
("GAAP") requires us to make significant judgments, estimates, and assumptions
that affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. We base our judgments, estimates, and assumptions on
historical experience and on various other factors believed to be reasonable
under the circumstances. Actual results could differ materially from these
estimates. We evaluate our judgments, estimates, and assumptions on a regular
basis and make changes accordingly.
Material estimates that are particularly susceptible to change, in the near
term, relate to: determining the assumptions used in estimating the fair value
of our investments in life insurance policies; determining the grant date fair
value for equity-based compensation awards; determining the allowance for loan
losses as an input to the allocation of income (loss) to Beneficient's equity
holders; and evaluation of potential impairment of goodwill and other
intangibles. We believe these estimates are likely to have the greatest
potential impact on our consolidated financial statements and accordingly
believe these to be our critical accounting estimates. Below we discuss the
critical accounting policies associated with these estimates.

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Valuation of Life Insurance Policies
We account for the purchase of life insurance policies in accordance with ASC
325-30, Investments in Insurance Contracts, which requires us to use either the
investment method or the fair value method. We have elected to account for all
of our life insurance policies using the fair value method.
We initially record our purchase of life insurance policies at the transaction
price, which is the amount paid for the policy, inclusive of all external fees
and costs associated with the acquisition. At each subsequent reporting period,
we remeasure the investment at fair value in its entirety and recognize the
change in fair value as unrealized gain (loss) in the current period, net of
premiums paid. Changes in the fair value of our life insurance portfolio are
based on periodic evaluations and are recorded in our consolidated statements of
operations as changes in fair value of life insurance policies.
The fair value of our life insurance policies is determined as the net present
value of the life insurance portfolio's future expected cash flows (policy
benefits received and required premium payments) that incorporates life
expectancy estimates obtained when the policy was purchased and current discount
rate assumptions. We refer to our valuation methodology as the Longest Life
Expectancy methodology. This methodology utilizes a portfolio mortality
multiplier ("PMM") that allows us to "fit" projections to actual results, which
provides a basis to forecast future performance more accurately. The table below
compares the actual-to-expected ("A2E") mortality cash flow experience of our
life insurance portfolio using this methodology. We have achieved expected
mortality cash flow experience accuracy of 96% under the Longest Life Expectancy
methodology through December 31, 2020.
                    [[Image Removed: gwgh-20201231_g1.jpg]]

Should performance sufficiently deviate in the future from these projections,
the A2E analysis will be re-examined to determine if the resultant PMM still
results in the most accurate fitting of the projections to actual results.
Adjustments to the PMM would then be made based on that analysis if warranted.
A discount rate is used to calculate the net present value of the expected cash
flows. The discount rate used to calculate fair value of our portfolio
incorporates the guidance provided by ASC 820, Fair Value Measurements and
Disclosures. We utilized an 8.25% discount rate to estimate the fair value of
our portfolio of life insurance policies at both December 31, 2020 and 2019.

As we have ceased acquiring insurance policies, we no longer have direct access
market-based factors that previously served as a key input to our discount rate.
However, we engaged a third-party firm to provide recent market data on
comparable assets to support our discount rate as of December 31, 2020. We also
continue to use fixed income market interest rates, credit exposure to the
issuing insurance companies and our estimate of the operational risk yield
premium a purchaser would apply to the future cash flows derived from our
portfolio of life insurance policies as inputs to our discount rate.
The determination of the discount rate used in the valuation of the Company's
life insurance policies requires management judgment and incorporates
information that is reasonably available to management as of the date of the
valuation. The discount rate we utilize assumes an orderly and arms-length
transaction (i.e., a non-distressed transaction in which neither seller nor
buyer is compelled to engage in the transaction), which is consistent with
related GAAP guidance. The carrying

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value of policies held at the end of each quarterly reporting period is adjusted
to current fair value using the fair value discount rate applied to the entire
portfolio as of that reporting date.

We engaged ClearLife Limited, owner of the ClariNet LS actuarial portfolio
pricing software we use, to prepare a net present value calculation of our life
insurance portfolio as of December 31, 2020. ClearLife Limited processed policy
data, future premium data, life expectancy estimate data, and other actuarial
information to calculate a net present value for our portfolio using the
specified discount rate of 8.25%. ClearLife Limited independently calculated the
net present value of our portfolio of 1,058 policies to be $791.9 million and
furnished us with a letter documenting its calculation. A copy of such letter is
filed as Exhibit 99.1 to this report.
Life expectancy estimates and market discount rates for a portfolio of life
insurance policies are inherently uncertain and the effect of changes in
estimates may be significant. For example, if the life expectancy estimates were
increased or decreased by four and eight months on each outstanding policy, and
the discount rates were increased or decreased by 1% and 2%, with all other
variables held constant, the fair value of our investment in life insurance
policies would increase or decrease as summarized below (in thousands):
                               Change in Life Expectancy Estimates
                        Minus         Minus          Plus            Plus
                      8 Months       4 Months      4 Months        8 Months
December 31, 2020    $  97,837      $ 45,536      $ (61,713)     $ (114,099)
December 31, 2019    $ 113,812      $ 57,753      $ (55,905)     $ (111,340)



                                    Change in Discount Rate
                      Minus 2%      Minus 1%       Plus 1%        Plus 2%
December 31, 2020    $ 82,983      $ 39,560      $ (36,151)     $ (69,284)
December 31, 2019    $ 91,890      $ 43,713      $ (39,790)     $ (76,118)



See Note 5 - Investment in Life Insurance Policies and Note 7 - Fair Value
Measurements in the notes to the accompanying audited consolidated financial
statements for additional information related to our valuation of life insurance
policies.
Equity-Based Compensation
The Company measures and recognizes compensation expense for all equity-based
payments at fair value on the grant date over the requisite service period. GWG
Holdings uses the Black-Scholes option pricing model to determine the fair value
of stock options and stock appreciation rights. For restricted stock grants
(including restricted stock units), if any, fair value is determined as of the
closing price of GWG Holdings' common stock on the date of grant. As it is not
publicly traded, Beneficient uses various methods to determine the grant date
fair value of its equity-based compensation awards.
The fair value of the Beneficient Management Partners, L.P. ("BMP") Equity Units
is determined on the grant date using a probability-weighted discounted cash
flow analysis. This fair value measurement is based on significant inputs not
observable in the market and thus represents a Level 3 measurement within the
fair value hierarchy. The resultant probability-weighted cash flows are then
discounted using a rate that reflects the uncertainty surrounding the expected
outcomes, which the Company believes is appropriate and representative of a
market participant assumption.
The fair value of Ben LP's restricted equity units ("REUs") was determined for
substantially all of the awards granted in 2020, by using the valuation
techniques consistent with those utilized to determine the acquisition date
equity values arising from GWG Holdings obtaining a controlling financial
interest in Beneficient. These valuation techniques relied upon the OPM
Backsolve approach under the market method as more fully described in Note 4 to
the consolidated financial statements. For the REUs granted in the latter
portion of 2020, which is a de minimis amount of the total 2020 REUs, we
utilized valuation techniques consisting of the income approach and market
approach. For awards granted in 2019, the fair value of the REUs was estimated
using recent equity transactions involving third parties, which provided the
Company with observable fair value information sufficient for estimating the
grant date fair value.
Beneficient's Income Allocation
Net income (loss) attributable to noncontrolling interest holders is subject to
Beneficient's income allocation in accordance with the governing limited
partnership agreement of BCH as more fully described in Note 11.

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The consolidated financial statements of Beneficient reflect the assets,
liabilities, revenues, expenses, investment income and cash flows of
Beneficient, including, after December 31, 2019, all of the trusts in the ExAlt
PlanTM on a gross basis, and a portion of the economic interests certain of the
ExAlt Trusts, held by the residual beneficiaries, are attributed to
noncontrolling interests in the accompanying consolidated financial statements.
Interest income earned by Beneficient from the ExAlt Trusts is eliminated in its
consolidation. However, because the eliminated amounts are earned from, and
funded by, its noncontrolling interests, Beneficient's attributable share of the
net income from the ExAlt Trusts is increased by the amounts eliminated.
Accordingly, the elimination in consolidation of interest income and, for
periods after December 31, 2019, certain fee revenue has no effect on net income
(loss) attributable to Beneficient or holders of Common Units.
For purposes of income allocation to Beneficient's equity holders, interest
income is generally comprised of contractual interest, which is computed at a
variable rate compounding monthly, interest recognized on certain of the ExAlt
Loans through the effective yield method, and an amortized discount that is
recognized ratably over the life of the ExAlt Loan.
As a result of the change-of-control event discussed in Note 9 to the
accompanying audited consolidated financial statements on December 31, 2019 and
the resulting valuation performed under ASC 805, the existing loan portfolio
between Ben and the ExAlt Trusts was evaluated as of December 31, 2019, for
credit deterioration based on the intentions of all parties that the income
allocations provisions of Ben operate under US GAAP as if the ExAlt Trusts were
not consolidated for financial reporting purposes. Further, as required under
ASC 805, each ExAlt Loans between Beneficient and the ExAlt Trusts was evaluated
and classified as either purchased credit impaired ("PCI") or non purchased
credit impaired ("non-PCI"). For PCI loans, expected cash flows as of the date
of valuation in excess of the fair value of loans are recorded as interest
income over the life of the loans using a level yield method if the timing and
amount of the future cash flows is reasonably estimable. Subsequently, increases
in cash flows over those expected at the acquisition date are recognized
prospectively as interest income. Decreases in expected cash flows due to credit
deterioration are recognized by recording an allowance for loan loss. For
non-PCI loans, the difference between the fair value and unpaid principal
balance of the loan as of the date of valuation is amortized or accreted to
interest income over the contractual life of the loans using the effective
interest method. In the event of prepayment, the remaining unamortized amount is
recognized in interest income, which is eliminated upon the consolidation of the
ExAlt Trusts for financial reporting purposes.
Allowance for Loan Losses
The allowance for loan losses, which is eliminated in consolidation, is an input
to Beneficient's allocation of income to equity holders of Ben LP. The allowance
for loan losses is a valuation allowance for probable incurred credit losses in
the portfolio. Management's determination of the allowance is based upon an
evaluation of the loan portfolio, impaired loans, economic conditions, volume,
growth and composition of the collateral to the loan portfolio, and other risks
inherent in the portfolio. Currently, management individually reviews all ExAlt
Loans due to the low volume and non-homogenous nature of the current portfolio.
Management relies heavily on statistical analysis, current NAV and distribution
performance of the underlying alternative asset interests and industry trends
related to alternative asset investments to estimate losses. Management
evaluates the adequacy of the allowance by reviewing relevant internal and
external factors that affect credit quality. The cash flows from the underlying
alternative assets interests are the sole source of repayment for the ExAlt
Loans and related interest. Beneficient recognizes any charge-off in the period
in which it is confirmed. Therefore, impaired ExAlt Loans are written down to
their estimated net present value.
Interest income, for purposes of determining income allocations to Beneficient's
equity holders, is adjusted for any allowance for loan losses, which was
approximately $5.4 million for the year ended December 31, 2020.
Goodwill and Identifiable Intangible Assets
Goodwill and other identifiable intangible assets are initially recorded at
their estimated fair values at the date of acquisition. Goodwill and other
intangible assets having an indefinite useful life are not amortized for
financial statement purposes. In the event that facts and circumstances indicate
that the goodwill or other identifiable intangible assets may be impaired, an
interim impairment test would be required. Intangible assets with finite lives
are amortized over their useful lives. We perform required annual impairment
tests of our goodwill and other intangible assets as of October 1 for our
reporting units.
The goodwill impairment test requires us to make judgments and assumptions. The
test consists of estimating the fair value of each reporting unit based on
valuation techniques, including a discounted cash flow model using revenue and
profit forecasts and recent industry transaction and trading multiples of our
peers. We then compare those estimated fair values with the carrying values of
the assets and liabilities of each reporting unit, which includes the allocated
goodwill. If the estimated fair value is less than the carrying value, we will
recognize an impairment charge for the amount by which the carrying amount

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exceeds the reporting unit's fair value; however, any loss recognized will not
exceed the total amount of goodwill allocated to that reporting unit.
For 2020, the annual goodwill impairment analysis did not result in any
impairment charges. Our impairment evaluation included a qualitative assessment,
which considered whether there were indicators of potential impairment following
the recent completion of the business combination accounting. In addition, our
evaluation included a quantitative analysis, which included multiple
assumptions, including estimated discounted cash flows and other estimates that
may change over time. For example, a key assumption in determining the fair
value of our reporting units is forecasting free cash flow generated by our
business over the next five years and includes assumptions regarding expected
growth of new service offerings and products. While our assumption reflects
management's best estimates of future performance, the estimates assume
Beneficient capturing a significant market share of liquidity transactions
during the next five years leading to a substantial rate of growth of new
service offerings and products, revenues and assets over the next five years
ending December 31, 2025. These estimations are uncertain to occur, and to the
extent the Company falls short of achieving our expected growth in revenues and
assets over the next four years, material impairments of our goodwill may occur
in the near term. For example, a 15% decline in our annual projected volume of
liquidity transactions reflected in the Company's forecasts would require
impairments to begin to be recorded assuming all other assumptions on which the
forecasts are built remain constant. Because the Company's forecasts are
predicated on estimating future volume for new service offerings and products,
the Company's actual future volume of liquidity transactions reflected in the
Company's forecasts may fall short of management's forecasts by 15% or greater
and may result in a partial or full write down of our goodwill balance, which
totaled $2.4 billion at December 31, 2020. In light of Beneficient's significant
recurring losses from operations, negative cash flows from operations, and
delays in executing its business plans, there could be potential triggering
events identified and resulting impairment of goodwill recorded during the
annual impairment test during the fourth quarter of 2021. While management can
and has implemented strategies to address these events, changes in operating
plans or adverse changes in the future could reduce the underlying cash flows
used to estimate fair values and could result in a decline in fair value that
would trigger future impairment charges of the reporting unit's goodwill
balance.
In addition, as reflected in Note 23 to the accompanying audited consolidated
financial statements, the Company is evaluating potential strategic transactions
that, if consummated, may result in the deconsolidation of Beneficient as GWG
Holdings will no longer own a controlling financial interest in Beneficient. As
we evaluate various strategic changes for the investment in Beneficient, we may
make further changes to the Company's forecasted cash flows and such changes
could result in losses upon deconsolidation of our subsidiary or may result in
increased risk of future goodwill impairment charges. If future discounted cash
flows become less than those projected by us, future impairment charges may
become necessary that could have a materially adverse impact on our results of
operations and financial condition in the period in which the write-off occurs.

Recent Developments
We define "recent developments" as material transactions or matters that
occurred in the most recent fiscal quarter or in the period between the end of
the fiscal quarter and the filing of the quarterly or annual financial
statements with the SEC. The following recent developments are described in more
detail in the notes to the accompanying audited consolidated financial
statements. A reference to the corresponding note is included below:
•The amendment of Beneficient's Credit Agreements (Note 23).
•On December 31, 2020, GWG Holdings, GWG Life and Bank of Utah entered into a
supplemental indenture (the "Liquidity Bond Supplemental Indenture") providing
for the issuance of up to $1.0 billion in aggregate principal amount of two new
series of L Bonds known as "Liquidity Bonds" (Note 10).
•During the fourth quarter of 2020, Beneficient executed 9 liquidity
transactions pursuant to which customers sold interests in private equity funds
with an aggregate net asset value of $15.1 million to certain of the ExAlt
Trusts in exchange for agreed upon consideration. In connection with these
transactions, GWG Life issued $0.5 million of principal in Liquidity Bonds on
December 31, 2020.
•Subsequent to December 31, 2020 and through the date of this filing,
Beneficient executed 10 liquidity transactions pursuant to which customers sold
interests in private equity funds with an aggregate net asset value of $5.6
million to certain of the ExAlt Trusts in exchange for agreed upon
consideration. In connection with certain of these transactions, GWG Life issued
an aggregate of $0.3 million of principal in Liquidity Bonds on January 8, 2021
and January 15, 2021.

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•In addition, on March 25, 2021, Beneficient filed provisional patent
applications pending on certain of its systems and processes underlying its
liquidity products and trust services. These patent applications cover the
following aspects of Beneficient's business:
•Ben ExAlt PlanTM Patent Application.
?ExAlt Plan. System and process for providing liquidity to customers for their
alternative assets.
•Underwriting Systems Patent Applications.
?AltScore. Alternative asset quality scoring system.
?ValueAlt. Method to value interests in alternative asset funds.
?AltRating. Method to assign credit ratings to structured debt that is backed by
alternative assets.
•Risk Assessment and Risk Reduction Patent Applications.
?AltC. Tool to measure portfolio concentration relative to an established limit
or target.
?OptimumAlt. Portfolio optimization and allocation tool specifically designed
for alternative asset funds.
?AlphaAlt. Proprietary forecast of expected returns and cash flows for
alternative asset fund types.
?AltQuote. Real-time indicator of liquidity solutions for holders of alternative
assets.
•In April 2021, the Kansas Legislature adopted, and the governor of Kansas
signed into law, a bill that would allow for the chartering and creation of
Kansas trust companies, known as Technology Enabled Fiduciary Financial
Institutions ("TEFFIs"), that provide fiduciary financing (e.g., lending to
ExAlt Trusts), custodian and trustee services in all capacities pursuant to
statutory fiduciary powers, to investors and other participants in the
alternative assets market, as well as the establishment of alternative asset
trusts. The legislation became effective on July 1, 2021 and designates an
operating subsidiary of Ben LP, Beneficient Fiduciary Financial, L.L.C. ("BFF")
as the pilot trust company under the TEFFI legislation. A conditional trust
charter was issued by the Kansas Bank Commissioner to a subsidiary of Ben LP on
July 1, 2021. Under the pilot program, BFF will not be authorized to exercise
its fiduciary powers as a TEFFI until the earlier of the date the Kansas Bank
Commissioner promulgates applicable rules and regulations or December 31, 2021.
The bill also permits the Kansas Bank Commissioner to request a six-month
extension of the pilot program period, which could delay Beneficient's
permission to exercise its fiduciary powers under the charter until July 1,
2022. As a result, the directors of GWG Holdings who serve on the new TEFFI
trust company Board of Directors resigned their membership, effective June 14,
2021, on GWG Holdings' Board of Directors to devote their time to serving as
directors of the Beneficient TEFFI trust company, which the Company believes is
the highest and best use of their available time and skills and will support the
development of the Beneficient TEFFI trust company and the successful execution
of Beneficient's business plan (Note 23).
•On June 28, 2021, DLP IV entered into a Third Amended and Restated Loan and
Security Agreement with LNV Corporation (the "Third Amended Facility") that
resulted in a $52.5 million advance from LNV Corporation, or $51.2 million
including certain fees and expenses incurred in connection with the entry into
the Third Amended Facility (Note 23).
•On August 11, 2021, GWG DLP Funding VI, LLC, a Delaware limited liability
company ("DLP VI"), entered into a Credit Agreement (the "NF Credit Agreement")
with each lender from time to time party thereto and National Founders LP, a
Delaware limited partnership, as the administrative agent (the credit facility
evidenced by such NF Credit Agreement, the "NF Credit Facility") that resulted
in a one-time $107.6 million advance with a scheduled maturity date of August
11, 2031 (Note 23). Approximately $56.7 million of such advanced amount was used
to pay off the remaining amount due under the Third Amended Facility.
•On August 13, 2021, GWG Holdings, Ben LP, and BCH entered into a Term Sheet
that contemplates a series of transactions which, if completed, will result in,
among other things, (i) GWG Holdings receiving certain proposed enhancements to
its investments in Beneficient; (ii) GWG Holdings no longer having the right to
appoint directors of the board of directors of Beneficient Management; and (iii)
Beneficient no longer being a consolidated subsidiary of GWG Holdings (Note 23).

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•On September 7, 2021, DLP IV entered into a Fourth Amended and Restated Loan
and Security Agreement with LNV Corporation, as lender, and CLMG Corp., as the
administrative agent on behalf of the lenders under the agreement (the "Fourth
Amended Facility") that resulted in a $30.3 million advance from LNV
Corporation, with such advance including amounts to cover certain fees and
expenses incurred in connection with the entry into the Fourth Amended Facility
(Note 23).
•An update on the current state of the Company and potential impact of the
COVID-19 pandemic (Note 23).
Asset Diversification
As of December 31, 2020, we held a combined portfolio of assets consisting of
78% of fair value secondary life insurance policies and 22% of indirect
interests in alternative assets held by certain of the ExAlt Trusts. The table
presented below reflects classifications based on GWG Holdings' and
Beneficient's current exposure types as of December 31, 2020 (dollar amounts in
thousands). Additional information regarding the Collateral portfolio is
available on its website at www.trustben.com. The information on Beneficient's
website is not part of, or incorporated by reference in, this report.
                    Exposure Type                            Value         Percent of Total
Near-Duration Life Insurance Policies (1)                $   329,277                 32.5  %
Intermediate-Duration Life Insurance Policies (1)            299,812                 29.6  %
Long-Duration Life Insurance Policies (1)                    162,823                 16.1  %
Growth Stage Private (2)                                      72,887                  7.2  %
Late Stage Venture Backed (2)                                 54,144                  5.3  %
Corporate Buyouts (2)                                         34,235                  3.4  %
Early Stage Venture Backed (2)                                31,483                  3.1  %
Other (2)                                                     29,145                  2.8  %
Total                                                    $ 1,013,806                100.0  %

______________________________________________________

(1)Represents fair value of life insurance policies.
(2)Represents the net asset value ("NAV") of the interests in alternative assets
that provide cash flows, which comprise the Collateral of the ExAlt Loans,
excluding the collateral exchanged in the Collateral Swap, which is eliminated
in consolidation. These ExAlt Loans eliminate upon consolidation in the
presentation of our consolidated financial statements NAV calculation reflects
the most current report of NAV and other data received from firm/fund sponsors.
If no such report has been received, Beneficient estimates NAV based upon the
last NAV calculation reported by the investment manager and adjusts it for
capital calls and distributions made in the intervening time frame.
The underlying exposure data represents GWG Holdings' exposure to life insurance
policies included in its portfolio and its exposure to the underlying Collateral
of Beneficient's loan portfolio to the ExAlt Trusts. Exposure type reflects
classifications based on each company's portfolio as determined by management.
Figures are based on third-party information and other relevant information as
determined by management. "Other" includes private debt strategies, natural
resources strategies, and hedge funds. "Near-Term", "Intermediate-Term", and
"Long-Term" life insurance policies represent policies with life expectancies
between 0 - 47 months, 48 - 95 months, and 96 - 240 months, respectively.
The following sections contain information on each of the secondary life
insurance assets and the interests in alternative assets held by certain of the
ExAlt Trusts separately.

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Secondary Life Insurance Assets
Our portfolio of life insurance policies, owned by GWG Holdings' subsidiaries as
of December 31, 2020, is summarized below:
                       Life Insurance Portfolio Summary

Total life insurance portfolio face value of policy benefits (in
thousands)

                                                              $                   1,900,715
Average face value per policy (in thousands)                            $                       1,797
Average face value per insured life (in thousands)                      $                       1,943
Weighted average age of insured (years)                                                          83.1
Weighted average life expectancy (LE) estimate (years)                                            6.9
Total number of policies                                                                        1,058
Number of unique lives                                                                            978
Demographics                                                                     74% Male; 26% Female
Number of smokers                                                                                  40
Largest policy as % of total portfolio face value                                              0.7  %
Average policy as % of total portfolio                                                         0.1  %
Average annual premium as % of face value                                                      3.8  %


Our portfolio of life insurance policies, owned by GWG Holdings' subsidiaries as
of December 31, 2020, organized by the insured's current age and the associated
number of policies and policy benefits, is summarized below:

Distribution of Policies and Policy Benefits by Current Age of Insured

                                                                                                              Percentage of Total
                                                                           Policy Benefits                                                           Weighted Average
    Min Age                Max Age              Number of Policies          (in thousands)        Number of Policies         Policy Benefits            LE (Years)
       63                     69                                  42       $      49,535                       4.0  %                   2.6  %                   10.21
       70                     74                                 191             222,761                      18.1  %                  11.7  %                    10.6
       75                     79                                 206             349,467                      19.5  %                  18.4  %                    9.44
       80                     84                                 213             375,926                      20.0  %                  19.7  %                    7.54
       85                     89                                 229             556,339                      21.6  %                  29.3  %                    4.84
       90                     94                                 153             296,310                      14.5  %                  15.6  %                    2.99
       95                    100                                  24              50,377                       2.3  %                   2.7  %                    2.09
Total                                                  1,058               $   1,900,715                     100.0  %                 100.0  %                    6.92



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Our portfolio of life insurance policies, owned by GWG Holdings' subsidiaries as
of December 31, 2020, organized by the insured's estimated life expectancy
estimates and associated policy benefits, is summarized below:
        Distribution of Policies by Current Life Expectancies of Insured
                                                                                                                            Percentage of Total
                                                                                        Policy Benefits
   Min LE (Months)              Max LE (Months)             Number of Policies           (in thousands)         Number of Policies          Policy Benefits
          0                           47                                      300       $     518,044                       28.4  %                   27.3  %
         48                           71                                      225             421,774                       21.3  %                   22.2  %
         72                           95                                      192             318,497                       18.1  %                   16.8  %
         96                           119                                     150             283,899                       14.2  %                   14.9  %
         120                          143                                     109             167,195                       10.3  %                    8.8  %
         144                          179                                      71             145,581                        6.7  %                    7.7  %
         180                          240                                      11              45,725                        1.0  %                    2.3  %
Total                                                               1,058               $   1,900,715                      100.0  %                  100.0  %


We rely on the payment of policy benefit claims by life insurance companies as a
significant source of cash inflow. The life insurance assets we own represent
obligations of third-party life insurance companies to pay the benefit amount
under the policy upon the mortality of the insured. As a result, we manage this
credit risk exposure by generally purchasing policies issued by insurance
companies with investment-grade credit ratings from Standard & Poor's, and
diversifying our life insurance portfolio among a number of insurance companies.
The yield to maturity on bonds issued by life insurance carriers reflects, among
other things, the credit risk (risk of default) of such insurance carrier. We
follow the yields on certain publicly traded life insurance company bonds
because this information is part of the data we consider when valuing our
portfolio of life insurance policies for our financial statements.
The average yield to maturity of publicly traded life insurance company bonds
data we consider as inputs to our life insurance portfolio valuation process was
1.15% as of December 31, 2020. We believe this average yield to maturity
reflects, in part, the financial market's judgment that credit risk is low with
regard to these carriers' financial obligations. The obligations of life
insurance carriers to pay life insurance policy benefits ranks senior to all of
their other financial obligations, including the senior bonds they issue. As of
December 31, 2020, 96.3% of the face value benefits of our life insurance
policies were issued by insurers having an investment-grade credit rating (BBB
or better) by Standard & Poor's.
As of December 31, 2020, our ten largest life insurance company credit exposures
and the Standard & Poor's credit rating of their respective financial strength
and claims-paying ability is set forth below:
         Distribution of Policy Benefits by Top 10 Insurance Companies
                   Policy Benefits        Percentage of Policy                                                           Ins. Co.
    Rank            (in thousands)           Benefit Amount                      Insurance Company                      S&P Rating
     1             $     279,792                       14.7  %       John Hancock Life Insurance Company                    AA-
     2                   212,879                       11.2  %       Lincoln National Life Insurance Company                AA-
     3                   200,936                       10.6  %       Equitable Life Insurance Company                       A+
     4                   164,391                        8.6  %       Transamerica Life Insurance Company                    A+
     5                   157,755                        8.3  %       Brighthouse Life Insurance Company                     AA-
     6                    87,339                        4.6  %       American General Life Insurance Company                A+
     7                    84,998                        4.5  %       Pacific Life Insurance Company                         AA-
     8                    67,376                        3.5  %       ReliaStar Life Insurance Company                       A+
     9                    59,808                        3.1  %       Security Life of Denver Insurance Company              A+
     10                   57,153                        3.0  %       Protective Life Insurance Company                      AA-
                   $   1,372,427                       72.1  %



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ExAlt Trusts' Investment in Alternative Assets
Beneficient's primary operations, which commenced on September 1, 2017, consist
of offering its liquidity and trust administration services to its customers,
primarily through certain of Ben LP's operating subsidiaries, Ben Liquidity (as
defined below) and Ben Custody Admin (as defined below), respectively. Ben
Liquidity offers simple, rapid and cost-effective liquidity products to its
customers through the use of customized trust vehicles, the ExAlt Trusts, that
facilitate the exchange of a customer's alternative assets for consideration
using a unique financing structure. A subsidiary of Ben Liquidity makes ExAlt
Loans to certain of the ExAlt Trusts. Ben Liquidity generates interest and fee
income earned in connection with such ExAlt Loans to certain of the ExAlt
Trusts, which are collateralized by the cash flows from the exchanged
alternative assets (the "Collateral"). Ben Custody Admin provides trust
administration services to the trustees of certain of the ExAlt Trusts that own
the exchanged alternative asset following a liquidity transaction for fees
payable quarterly. The Collateral supports the repayment of the loans plus any
related interest and fees. Since the ExAlt Trusts are consolidated, Ben LP's
operating subsidiary ExAlt Loans and interest and fee income are eliminated in
the presentation of our consolidated financial statements.
The ExAlt Trusts' investments in alternative assets are the source of the
Collateral supporting the ExAlt Loans. These assets consist primarily of limited
partnership interests in various alternative investments, including private
equity funds. These alternative investments are valued using NAV as a practical
expedient. Changes in the NAV of these investments are recorded in investment
income, net in our consolidated statements of operations. The ExAlt Trusts'
investments in alternative assets provide the economic value creating the
Collateral to the ExAlt Loans made in connection with each liquidity
transaction.
The ExAlt Trusts held interests in alternative assets with a net asset value of
$221.9 million and $342.0 million at December 31, 2020 and December 31, 2019,
respectively. As of December 31, 2020, the ExAlt Trusts' portfolio had exposure
to 117 professionally managed alternative investment funds, comprised of 327
underlying investments, 91 percent of which are investments in private
companies.
The portfolio of alternative assets, excluding the collateral exchanged in the
Collateral Swap, which is eliminated in consolidation, covers the following
industry sectors and geographic regions as of the dates shown below (dollar
amounts in thousands):
                                                                                                               (As Restated)
                                                                   December 31, 2020                         December 31, 2019
                                                                                 Percent of                                Percent of
                  Industry Sector                              Value               Total                Value                Total
Diversified Financials                                     $   28,462                 12.8  %       $    27,418                  8.0  %
Telecommunication Services                                     27,401                 12.3  %            27,059                  7.9  %
Food and Staples Retailing                                     24,450                 11.0  %            20,507                  6.0  %
Software and Services                                          23,310                 10.5  %            22,573                  6.6  %
Utilities                                                      21,740                  9.8  %            15,733                  4.6  %
Semiconductors and Semiconductor Equipment                     21,271                  9.6  %            14,658                  4.3  %
Not Applicable (e.g., Escrow, Earnouts)                        18,138                  8.2  %            26,569                  7.7  %
Health Care Equipment and Services                             14,682                  6.6  %            92,418                 27.0  %
Pharmaceuticals, Biotechnology and Life Sciences(1)             3,415                  1.5  %            52,202                 15.3  %
Other(1)                                                       39,025                 17.7  %            42,875                 12.6  %
Total                                                      $  221,894                100.0  %       $   342,012                100.0  %



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                                                                                                             (As Restated)
                                                                 December 31, 2020                         December 31, 2019
                                                                               Percent of                                Percent of
                    Geography                                Value               Total                Value                Total
North America                                            $   95,569                 43.1  %       $   211,722                 61.9  %
Western Europe                                               50,219                 22.6  %            46,719                 13.7  %
Asia                                                         36,436                 16.4  %            29,144                  8.5  %
Latin & South America                                        25,255                 11.4  %            22,377                  6.5  %
Other(2)                                                     14,415                  6.5  %            32,050                  9.4  %
Total                                                    $  221,894                100.0  %       $   342,012                100.0  %

_______________________________________________________________

(1)Industries in this category each comprise less than 5 percent as of
December 31, 2020. Pharmaceuticals, Biotechnology and Life Sciences is shown
separately as it comprised greater than 5 percent as of December 31, 2019.
(2)Locations in this category each comprise less than 5 percent.
Assets in the portfolio consist primarily of interests in alternative investment
vehicles (also referred to as "funds") that are managed by a group of U.S. and
non-U.S. based alternative asset management firms that invest in a variety of
financial markets and utilize a variety of investment strategies. The vintages
of the funds in the portfolio as of December 31, 2020 ranged from 1993 to 2018.
As the ExAlt Trusts grow its portfolio, it will monitor the diversity of the
portfolio through the use of concentration guidelines. These guidelines were
established, and will be periodically updated, through a data driven approach
based on asset type, fund manager, vintage of fund, industry segment and
geography to manage portfolio risk. Beneficient will refer to these guidelines
when making decisions about new financing opportunities; however, these
guidelines will not restrict Beneficient from entering into financing
opportunities that would result in Beneficient having exposure outside of its
concentration guidelines. In addition, changes to the ExAlt Trusts' portfolio
may lag changes to the concentration guidelines. As such, the ExAlt Trusts'
portfolio may, at any given time, have exposures that are outside of its
concentration guidelines to reflect, among other things, attractive financing
opportunities, limited availability of assets, or other business reasons. Given
the ExAlt Trusts' limited operating history, the portfolio as of December 31,
2020 had exposure to certain alternative investment vehicles and investments in
private companies that were outside of those guidelines.
Classifications by industry sector, exposure type and geography reflect
classification of investments held in funds or companies held directly in the
portfolio. Investments reflect the assets listed by the general partner of a
fund as held by the fund and have a positive or negative net asset value.
Typical assets include portfolio companies, limited partnership interests in
other funds, and net other assets, which are a fund's cash and other current
assets minus liabilities. The underlying interests in alternative assets are
primarily limited partnership interests, and the limited partnership agreements
governing those interests generally include restrictions on disclosure of
fund-level information, including fund names and company names in the funds.
Industry sector is based on Global Industry Classification Standard (GICS®)
Level 2 classification (also known as "Industry Group") of companies held in the
portfolio by funds or directly, subject to certain adjustments by us. "Other"
classification is not a GICS® classification. "Other" classification reflects
companies in the GICS® classification categories of Automobiles & Components,
Banks, Capital Goods, Commercial & Professional Services, Consumer Durables &
Apparel, Consumer Services, Energy, Food, Beverage & Tobacco, Household &
Personal Products, Insurance, Materials, Media & Entertainment, Real Estate,
Retailing, Tech Hardware & Equipment, and Transportation. N/A includes
investments assets that we have determined do not have an applicable GICS® Level
2 classification, such as Net Other Assets and investments that are not
operating companies.
Investment exposure type reflects classifications based on each fund's current
investment strategy stage as determined by us. "Other" includes private debt
strategies, natural resources strategies and hedge funds.
Geography reflects classifications determined by us based on each underlying
investment. "Other" geography classification includes Israel, Australia,
Northern Europe, and Eastern Europe.

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Principal Revenue and Expense Items
During the years ended December 31, 2020 and 2019, we earned revenues from the
following primary sources:
•Revenue Realized from Maturities of Life Insurance Policies. We recognize the
difference between the face value of the policy benefits and carrying value when
an insured event has occurred and determine that collection of the policy
benefits is realizable and reasonably assured. Revenue from a transaction must
meet both criteria in order to be recognized. We generally collect the face
value of the life insurance policy from the insurance company within 45 days of
our notification of the insured's mortality, but this collection time varies
depending on the insurance company and individual policy.
•Change in Fair Value of Life Insurance Policies. We value our life insurance
portfolio investments for each reporting period in accordance with the fair
value principles discussed herein, which reflects the expected receipt of policy
benefits in future periods, net of premium costs, as shown in our consolidated
financial statements.
•Investment Income. Includes the change in net asset value of the alternative
assets held by certain of the ExAlt Trusts as well as the change in fair value
of repurchase options issued by certain of the ExAlt Trusts.
•Interest Income. During the year ended December 31, 2019, and thus prior to the
consolidation of Beneficient. interest income primarily included interest income
on the Promissory Note and Commercial Loan Agreement. Interest earned on the
Promissory Note and the Commercial Loan Agreement was eliminated in
consolidation with Beneficient beginning January 1, 2020. As such, interest
income during the year ended December 31, 2020 only includes interest earned
from policy benefits receivable and cash held in banks.
•Other Income. Includes changes in the fair value of Beneficient's investment in
put options, L Bond redemption fees, and other miscellaneous income.
Additionally, includes income totaling $36.3 million recognized during the
second quarter of 2020 by Beneficient as a result of the forfeiture of vested
equity-based compensation related to one former director of Beneficient.
During the years ended December 31, 2020 and 2019, our main components of
expense are summarized below:
•Interest Expense. Includes interest incurred under the second amended and
restated senior credit facility with LNV Corporation (as amended from time to
time, "LNV Credit Facility"), as well as interest on GWG Holdings' L Bonds,
Seller Trust L Bonds and other outstanding indebtedness, including Beneficient's
debt due to related parties. When we issue debt, we amortize the financing costs
(commissions and other fees) associated with such indebtedness over the
outstanding term of the financing and classify it as interest expense.
•Employee Compensation and Benefits. Employee compensation and benefits includes
salaries, bonuses and other incentives and costs of employee benefits. Also
included are significant non-cash compensation expenses totaling $110.7 million
related to Beneficient's equity incentive plans for the year ended December 31,
2020.
•Selling, General and Administrative Expenses. We recognize and record expenses
incurred in our business operations, including operations related to the
purchasing and servicing of life insurance policies, the origination and
servicing of ExAlt Loans and costs associated with trust administration. These
expenses include legal and professional fees, sales, marketing, occupancy and
other expenditures.
Additional components of our net earnings include:
•Earnings (Loss) from Equity Method Investment. Prior to the Investment and
Exchange Agreements on December 31, 2019, we accounted for GWG Holdings'
investment in the common units of Ben LP ("Common Units") using the equity
method. Under this method, we recorded our share of the net earnings or losses
attributable to holders of Common Units, on a one quarter lag, as a separate
line on our consolidated statements of operations. We also account for GWG
Holdings' investment in FOXO as an equity method investment, which is also
included in earnings (loss) from equity method investment in our consolidated
statements of operations. We had losses of $7.3 million and $4.1 million from
equity method investments during the years ended December 31, 2020 and 2019,
respectively.
•Gain on Consolidation of Equity Method Investment. In conjunction with the
consolidation of Beneficient on December 31, 2019, we remeasured our preexisting
equity method investment to fair value, resulting in a gain due to

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the increase in the estimated fair value compared to our existing book value.
The gain on consolidation of Beneficient on December 31, 2019 was $243.0
million. Refer to Note 4 to the consolidated financial statements for further
information.
Results of Operations - 2020 Compared to 2019
The following is our analysis of the results of operations for the periods
indicated below. This analysis should be read in conjunction with our
consolidated financial statements and related notes (dollar values in
thousands).

Net Income (Loss) Attributable to Common Shareholders
Net loss attributable to common shareholders was $168.5 million for 2020
compared to net income attributable to common shareholders of $70.5 million for
2019. The results of operations for 2020 reflect the consolidation of
Beneficient compared to an equity method investment in 2019. The year ended
December 31, 2020 includes significant non-cash equity based compensation
expense of $110.7 million related to Beneficient's equity incentive plans. The
net income for 2019 was primarily driven by the net gain of $243.0 million
realized upon consolidation of Beneficient. More details regarding revenue and
expenses in 2020 compared to 2019 are included in the discussion below.
Revenue from Secondary Life Insurance
                                                                              Year Ended
                                                                             December 31,
                                                                        2020               2019

Revenue realized from maturities of life insurance policies $ 86,923 $ 91,882
Revenue recognized from change in fair value of life insurance
policies

                                                               34,114             49,015
Premiums and other annual fees                                        (71,439)           (65,577)
Gain on life insurance policies, net                                $  

49,598 $ 75,320

Attribution of gain on life insurance policies, net:
Change in estimated probabilistic cash flows, net of premium and
other annual fees paid

                                              $  (7,976)         $   1,609
Net revenue recognized at maturity                                     57,574             69,122
Unrealized gain on acquisitions                                             -              6,921
Change in life expectancy evaluation                                        -             (2,332)
Gain on life insurance policies, net                                $  49,598          $  75,320

Number of policies acquired                                                 -                 83
Face value of purchases                                             $       -          $  97,316
Purchases (initial cost basis)                                      $       -          $  32,356
Unrealized gain on acquisition (% of face value)                            -  %             7.1  %

Number of policies matured                                                 92                 78
Face value of matured policies                                      $ 

125,109 $ 125,148
Net revenue recognized at maturity event (% of face value matured) 46.0 %

            55.2  %


Revenue from changes in estimated probabilistic cash flows, net of premiums
paid, was a charge of $8.0 million in 2020 compared to a credit of $1.6 million
in 2019. The decrease of $25.7 million in gain on life insurance policies for
the year ended December 31, 2020, over the comparable prior year period, was
driven by a combination of no gain on policy acquisitions, maturities of life
insurance policies with a higher cumulative cost basis, and higher premiums
paid.
The Company did not purchase any life insurance policies during 2020. The face
value of policies purchased in 2019 was $97.3 million. The resulting unrealized
gain on acquisition was $6.9 million in 2019. The absence of an unrealized gain
on acquisition in the current period is the result of a strategic decision to
significantly reduce capital allocated to purchasing additional life insurance
policies through the secondary market and to increase capital allocated toward
providing liquidity to a broader range of alternative assets, primarily through
additional investments in Beneficient. On December 31, 2019, GWG

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Holdings obtained the right to appoint a majority of the board of directors of
the general partner of Ben LP. As a result of this change-of-control event, we
reported the results of Ben LP and its subsidiaries on a consolidated basis
beginning on the transaction date of December 31, 2019. We believe that
Beneficient's operations will generally produce higher risk-adjusted returns
than those we can achieve from life insurance policies acquired in the secondary
market; however, returns on equity in life settlements, especially with the
current availability of financings on favorable terms, appear to be an
attractive option to diversify our exposure to alternative assets, and we have
begun exploring the feasibility of acquiring such policies. Furthermore,
although we believe that our portfolio of life insurance policies is a
meaningful component of a growing diversified alternative asset portfolio, we
continue to explore strategic alternatives for our life insurance portfolio
aimed at maximizing its value, including a possible sale, refinancing,
recapitalization, partnership, reinsurance guarantees, life insurance operations
or other transactions involving of our life insurance portfolio, as well as
pursuing other alternatives to increase our exposure to alternative assets.
The face value of matured policies was $125.1 million for each period presented.
The net revenue recognized at maturity was $57.6 million and $69.1 million,
respectively, reflecting a decrease in revenue attributable to maturity events
of $11.5 million primarily from maturities of policies with a higher cumulative
cost basis in 2020 compared to 2019.
There were no net revenue charges from change in life expectancy evaluation in
2020 compared to a charge of $2.3 million in 2019. The resulting net revenue
increase of $2.3 million primarily resulted from refinement of life expectancy
data that occurred during 2019 that were nonrecurring in 2020.
Investment Income, Interest Income and Other Income (in thousands)
                                     Year Ended December 31,
                           2020          2019        Increase/(Decrease)
Investment income       $ 44,106      $      -      $             44,106
Interest income            1,594        15,646                   (14,052)
Other income              29,073         1,310                    27,763
Total                   $ 74,773      $ 16,956      $             57,817


Investment income was added as result of the consolidation of Beneficient on
December 31, 2019. Investment income was $44.1 million during the year ended
December 31, 2020, and is comprised of $17.6 million decrease in net asset value
of the alternative assets held by certain of the ExAlt Trusts and $61.7 million
increase in fair value of repurchase options issued by certain of the ExAlt
Trusts.
Interest income decreased $14.1 million during the year ended December 31, 2020,
compared to the same period in 2019, primarily due to the consolidation of
Beneficient, which eliminated interest earned on the Promissory Note and
Commercial Loan Agreement beginning January 1, 2020. Interest income on the
Promissory Note entered into on May 31, 2019, was $2.2 million during 2019.
Interest income earned on the commercial loan between GWG Life and Beneficient
was $11.3 million during the year ended December 31, 2019. Interest income
recognized during the year ended December 31, 2020 and 2019, also includes
interest earned from policy benefits receivable and cash held in banks, which in
the aggregate was $1.3 million and $2.1 million, respectively. The decrease was
driven by lower average cash balances and slightly lower interest rates in 2020
compared to 2019.
Other income increased during the year ended December 31, 2020 compared to the
same period in 2019. Other income for the year ended 2020 includes $36.3 million
of income recognized during the second quarter of 2020 by Beneficient as a
result of the forfeiture of vested equity-based compensation related to one
former director of Beneficient. A substantial majority of the former director's
equity-based compensation units were fully vested, and the related expense was
recorded in prior periods. This income was offset by a $7.8 million decrease to
the fair value of Beneficient's put options during 2020. Other income during the
year ended December 31, 2019, includes L Bond early redemption fees and other
miscellaneous income from legacy initiatives of GWG Holdings.

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Interest and Operating Expenses (in thousands)
                                                                      Year Ended December 31,
                                                                                                Increase/
                                                            2020               2019            (Decrease)

Interest expense (including amortization of deferred
financing costs)

                                        $ 154,616          $ 114,844          $   39,772
Employee compensation and benefits                        146,363             28,309             118,054
Legal and professional fees                                30,075             12,824              17,251
Other expenses                                             18,227             15,896               2,331
Total expenses                                          $ 349,281          $ 171,873          $  177,408


Interest expense, including amortization of deferred financing costs, increased
$39.8 million during the year ended December 31, 2020 compared to the same
period in 2019. The increase in interest expense was primarily due to the
increase in the average outstanding L Bonds in 2020 compared to 2019,
contributing $26.5 million of increased interest expense, including amortization
of deferred financing costs. Also, the consolidation of Beneficient beginning
December 31, 2019, increased interest expense by $11.3 million for the year
ended December 31, 2020 compared to the same period in 2019, related to
Beneficient's debt due to related parties. Additionally, $3.8 million of
increased interest expense, including amortization of deferred financing costs,
during the year ended December 31, 2020, compared to the same period in 2019,
was due to increased interest paid on the LNV Credit Facility associated with a
higher average principal balance outstanding. Finally, these increases were
partially offset by a $1.8 million decrease in interest expense on Seller Trusts
L Bonds related to the portion of Seller Trust L Bonds eliminated as of
September 30, 2020 as a result of the Collateral Swap discussed in Note 1 to the
consolidated financial statements.
The increase in employee compensation and benefits in 2020 compared to 2019 was
primarily related to the consolidation of Beneficient on December 31, 2019.
Specifically, the Company recognized $110.7 million of equity-based compensation
expense during the year ended December 31, 2020, related to Beneficient's equity
incentive plans. Beneficient's Board of Directors adopted the equity incentive
plans in 2018 and 2019 and approved the granting of equity incentive awards
during the second quarter of 2019 to certain directors and in the first quarter
of 2020 to certain employees. Awards are generally subject to service-based
vesting over a multi-year period from the recipient's date of hire, though some
awards fully vested upon the grant date. As of December 31, 2020, over 78% of
the awards granted under Beneficient's equity incentive plans had vested.
Expense associated with these awards is based on the fair value of the equity on
the date of grant. As Ben LP's equity is not publicly traded, the fair value of
the equity awards is estimated on the grant date using the most recent valuation
received from a reputable third-party valuation firm, which provides the Company
with observable fair value information sufficient for estimating the grant date
fair value.
In addition to Beneficient's equity-based compensation expense, we recognized
additional retention, severance and other costs in the first quarter of 2020
related to the relocation of GWG Holdings' principal offices from Minneapolis to
Dallas in late 2019.
The increase in legal and professional fees in 2020 compared to 2019 is
primarily the result of the consolidation of Beneficient on December 31, 2019,
which added $19.0 million of legal and professional fees during the year ended
December 31, 2020. The increase attributable to the consolidation of Beneficient
was partially offset by lower consulting fees during 2020, compared to 2019.
The increase in other expenses during the year ended December 31, 2020 compared
to the same period of 2019, is primarily the result of the consolidation of
Beneficient on December 31, 2019, which added $7.6 million of other expenses
during 2020. These increases were partially offset by lower business insurance,
contract labor and other operating expenses of GWG Holdings and subsidiaries
during the comparable periods.
FOXO Initiatives
During 2019, we incurred $5.5 million of expenses related to the development of
intellectual property surrounding advanced epigenetic testing technology. These
expenses were included in the loss from our equity method investment in FOXO
during 2020.

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On November 13, 2020, FOXO BioScience LLC converted to a corporation and is now
known as FOXO Technologies Inc. GWG's previous membership interest in the LLC
converted to preferred equity in FOXO. We believe that as a separate entity
(rather than as a small subsidiary of a large financial services holding
company), the FOXO businesses can reach their maximum potential in terms of
marketing and branding, attraction of talent, appropriate peer group comparisons
and, ultimately, return to its owners. We expect FOXO's costs to increase in the
future, which will affect our consolidated earnings through our earnings (loss)
from equity method investment. Under GWG Holdings' subscription agreement with
FOXO, we are obligated to invest approximately $20.0 million in FOXO over a two
year period ending in October 2021, of which $16.2 million has been funded
through December 31, 2020.
Income Taxes
We realized $16.4 million in income tax benefit and $71.9 million in income tax
expense for the years ended December 31, 2020 and 2019, respectively, which
resulted in effective tax rates of 7.9% and 34.8%, compared to the statutory
federal income tax rate of 21.0% for both periods.
The following table provides a reconciliation of our income tax expense
(benefit) at the statutory federal income tax rate to our actual income tax
expense (in thousands):
                                                                            Year Ended December 31,
                                                                2020                                        2019
                                                                                                       (As Restated)
Statutory federal income tax (benefit)         $    (43,339)                  21.0  %       $      33,449                21.0  %
State income taxes (benefit), net of federal
benefit                                              (2,995)                   1.5  %              12,962                 8.1  %
Change in valuation allowance                        20,688                  (10.0) %              25,547                 5.8  %
Noncontrolling interest                               7,718                   (3.7) %                   -                   -  %
Other permanent differences, net                      1,538                   (0.9) %                 (93)               (0.1) %
Total income tax expense (benefit)             $    (16,390)                   7.9  %       $      71,865                34.8  %


The most significant temporary differences between GAAP net income (loss) and
taxable net income (loss) are the treatment of interest costs, policy premiums
and servicing costs with respect to the acquisition and maintenance of the life
insurance policies and revenue recognition with respect to the fair value of the
life insurance portfolio.
As of both December 31, 2020 and 2019, valuation allowances were recorded
against the total amount of non-permanent deferred tax assets. Indefinite-lived
deferred tax assets of $2.8 million in 2020 were comprised of an interest
expense limitation under Internal Revenue Code Section 163(j) and the
tax-effected net operating loss ("NOL") created beginning in 2019.
At December 31, 2020, we had federal NOL carryforwards of $58.0 million
resulting in related deferred tax assets of $12.2 million, and state NOL
carryforwards of $24.3 million resulting in related deferred tax assets of
$1.9 million. At December 31, 2019, we had federal NOL carryforwards of $29.7
million resulting in related deferred tax assets of $6.2 million, and state NOL
carryforwards of $29.6 million resulting in related deferred tax assets of
$2.3 million. The NOL carryforwards subject to expiration (i.e., those generated
prior to 2018) will begin to expire in 2031. Future utilization of NOL
carryforwards is subject to limitations under Section 382 of the Internal
Revenue Code. This section generally relates to a more than 50 percent change in
ownership over a three-year period. As a result of the Exchange Transaction, a
change in ownership for tax purposes only has occurred as of December 28, 2018.
As such, the annual utilization of our net operating losses generated prior to
the ownership change is limited. However, net unrealized built-in gains on our
life insurance policies result in an increase in the Section 382 limit over the
five-year recognition period, which resulted in $0.5 million of current tax
liability in 2020 and a nominal amount in 2019.
After the change-of-control transaction with Ben LP on December 31, 2019, GWG
Holdings moved its headquarters from Minnesota to Texas. This move resulted in a
change in the state deferred tax rate from 9.8% to 0%. In the third quarter
2020, GWG Holdings was allocated a gain from its investment in Ben LP. The tax
effects of these items were recorded as discrete items.
The Company currently records a valuation allowance against its deferred tax
assets that cannot be realized by the future reversal of existing temporary
differences. Due to the uncertain timing of the reversal of certain of these
temporary differences associated with the constraint described below, they
cannot be considered as a source of future taxable income for

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purposes of determining a valuation allowance; therefore, the vast majority of
the deferred tax liability cannot be utilized in determining the realizability
of the deferred tax assets. Due to a prior deemed ownership change, net
operating loss carryforwards are subject to Section 382 of the Internal Revenue
Code.
The Company reassessed its valuation allowance during the third quarter of 2020
and determined it will no longer utilize the reversal of a temporary difference
related to GWG Holdings' preferred equity ownership in Ben LP, until such time
as the preferred equity is no longer constrained, as a source of income to
realize existing deferred tax assets related to the net operating loss and
Internal Revenue Code Section 163(j) limitations. As a result, we recorded a
large net deferred tax liability as of December 31, 2020. The effects of the
reassessment of the valuation allowance on the deferred tax liability as of
December 31, 2019 are reflected in Note 21 to the consolidated financial
statements. The net deferred tax liability as of December 31, 2020 is
specifically related to GWG Life's investment in the Preferred Series A Subclass
1 Unit Accounts described in Note 1 to the consolidated financial statements.
The disposition of this investment is constrained by the Pledge and Security
Agreement in favor of the holders of the L Bonds of GWG Holdings. As such, the
timing of recognition of the necessary taxable income related to this investment
and the future reversal of this temporary difference cannot be predicted.
We continue to monitor and evaluate the rationale for recording a full valuation
allowance for the net amount of the deferred tax assets in excess of the
deferred tax liabilities that are not constrained. We intend to continue
maintaining a full valuation allowance on these net deferred tax assets until
there is sufficient evidence to support the reversal of all or some portion of
these allowances. Release of the valuation allowance would result in the
recognition of certain deferred tax assets and a decrease to income tax expense
for the period the release is recorded. However, the exact timing and amount of
the valuation allowance release are subject to change on the basis of the level
of profitability that we are able to actually achieve.
On March 27, 2020, Congress passed and the President signed into law the
Coronavirus Aid, Relief, and Economic Security Act (the "CARES Act"), which
included significant changes to U.S. Federal income tax law. However, the only
change that is expected to affect the Company is the modification to Section
163(j), which increased the allowable business interest deduction from 30% of
adjusted taxable income to 50% of adjusted taxable income.
Revenue and Earnings before Tax by Reportable Segment - 2020 Compared to 2019
We have two reportable segments: 1) Beneficient and 2) Secondary Life Insurance.
Corporate & Other includes certain activities not allocated to specific business
segments. These activities include holding company financing and investing
activities, and management and administrative services to support the overall
operations of the Company and GWG Holdings' equity method investment in FOXO.
Comparison of revenue by reportable segment for the periods indicated (in
thousands):
                                    Year Ended December 31,
                                                         Increase/
Revenue:                      2020           2019        (Decrease)
Secondary Life Insurance   $  51,359      $ 78,002      $  (26,643)
Beneficient                   72,950        13,738          59,212
Corporate & Other                 62           536            (474)
Total                      $ 124,371      $ 92,276      $   32,095


The primary drivers of the changes from 2019 to 2020 were as follows:
•Secondary Life Insurance revenue decreased by $26.6 million for the year ended
December 31, 2020, over the comparable period in 2019 primarily as a result of a
$25.7 million decrease in gain on life insurance policies driven by a
combination of no gain on policy acquisitions, maturities of life insurance
policies with a higher cumulative cost basis, and higher premiums paid. Also
contributing to the decrease in the Secondary Life Insurance segment revenues
was a decrease of $0.9 million in interest and other miscellaneous income during
2020 compared to 2019.
•Beneficient segment revenue for the year ended December 31, 2020, represents
the consolidated operations of Beneficient, compared to an equity method
investment in Beneficient during the same period in 2019. As such, the year
ended 2020 includes $61.7 million of investment income recognized related to
repurchase options issued by certain of the ExAlt Trusts and a $17.6 million
downward adjustment to NAV of alternative assets held by certain of the ExAlt
Trusts, which are consolidated subsidiaries of Ben LP, whereas the year ended
2019 primarily includes

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$11.3 million of interest income on the Commercial Loan between GWG Life and Ben
LP and $2.2 million of interest income on the Promissory Note between GWG Life
and the ExAlt Trusts, both of which were eliminated in consolidation beginning
December 31, 2019. Additionally, there was $36.3 million of income recognized
during the second quarter by Beneficient as a result of the forfeiture of vested
equity-based compensation related to one former director of Beneficient. A
substantial majority of the former director's equity-based compensation units
were fully vested, and the related expense was recorded in prior periods.
Finally, this was offset by a $7.8 million decrease to the fair value of
Beneficient's put options during 2020.
•Corporate & Other revenue was de minimis during the year ended December 31,
2020. The year ended 2019 includes minimal revenue related to a legacy merchant
cash advance subsidiary of GWG Holdings. GWG Holdings no longer participates in
the merchant cash advance industry.
Comparison of earnings (loss) before tax by reportable segment for the periods
indicated (in thousands):
                                                                            Year Ended December 31,
                                                                                                         Increase/
Segment Earnings (Loss) Before Tax(1)                          2020                  2019                (Decrease)
                                                                                 (As Restated)
Secondary Life Insurance                                   $  (59,684)         $      (27,694)         $   (31,990)
Beneficient(1)                                               (139,575)                222,443             (362,018)
Corporate & Other(2)                                          (32,970)                (35,470)               2,500
Total                                                      $ (232,229)         $      159,279          $  (391,508)

__________________________________

(1)Includes earnings from equity method investments and gain on consolidation of
equity method investments for the year ended December 31, 2019, as presented in
our consolidated statements of operations, related to GWG Holdings' equity
method investment in Beneficient prior to December 31, 2019.
(2)Includes loss from equity method investments for the year ended December 31,
2020, as presented in our consolidated statements of operations, related to GWG
Holdings' investment in FOXO.
The primary drivers of the changes in earnings (loss) before tax for the year
ended December 31, 2020, compared to the same period of 2019 were as follows:
•Secondary Life Insurance loss before tax increased by $32.0 million as a result
of the following:
•$25.7 million decrease in the gain on life insurance policies, net as described
above in the revenue discussion; and
•$14.2 million increase in interest expense as a result of higher average debt
outstanding; partially offset by
•A decrease in operating expenses of $8.9 million, primarily resulting from
lower employee compensation and benefits, lower business insurance costs, and
lower legal fees.
•Beneficient segment experienced a net loss of $139.6 million in 2020 compared
to earnings of $222.4 million in 2019, primarily due to the consolidation of
Beneficient on December 31, 2019. During 2019, we accounted for Beneficient
using the equity method on a one-quarter lag, and the amount reported represents
our proportionate share of the losses of Beneficient for the period presented.
The one-quarter lag was discontinued with the consolidation of Beneficient on
December 31, 2019. The consolidation of Beneficient resulted in a net gain of
$243.0 million related to the remeasurement to fair value of GWG Holdings'
preexisting equity method investment in Beneficient. The loss of Beneficient for
the year ended December 31, 2020, was primarily driven by $107.8 million of
non-cash charges for equity incentive compensation. During the year ended
December 31, 2020, Beneficient's losses were partially offset by $36.3 million
of income recognized as a result of the forfeiture of vested equity-based
compensation related to one former director of Beneficient as described in the
revenue comparison discussion above.
•Corporate and Other operating loss was lower during December 31, 2020, compared
to 2019, primarily due to lower legal and consulting fees as we incurred higher
fees in 2019 as a result of the Beneficient transactions.

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Liquidity and Capital Resources
As of December 31, 2020 and 2019, we had approximately $124.2 million and
$115.8 million, respectively, in combined available cash, cash equivalents, and
restricted cash. We generated net losses from operations for the years ended
December 31, 2020 and 2019 totaling $208.5 million and $151.5 million. As of
October 15, 2021, we had approximately $54.3 million in combined available cash,
cash equivalents, and restricted cash. Besides funding operating expenditures,
we are obligated to pay other items such as interest payments and debt
maturities, and preferred stock dividends and redemptions.

We have historically financed our businesses primarily through a combination of
L Bond sales, preferred stock sales, the LNV Credit Facility, and the NF Credit
Facility. We have also financed our business through proceeds from life
insurance policy benefit receipts, cash distributions from the ExAlt Trusts'
alternative asset portfolio, dividends and interest on investments, and
Beneficient's debt due to related parties. We have traditionally used proceeds
from these sources for policy acquisition, policy premiums and servicing costs,
working capital and financing expenditures including paying principal, interest
and dividends. We have also used proceeds to allocate capital to Beneficient;
however, if Ben LP becomes an independent company per the Term Sheet discussed
in the "Recent Developments" section above, the Company expects that Ben LP
would reduce its reliance on GWG Holdings to fund its operations and would raise
future capital from other sources. Ben LP's capital raising efforts and
participation in liquidity transactions may include the issuance of equity or
debt of Ben LP or one of its subsidiaries, and the newly issued securities may
be dilutive to GWG Holdings' and GWG Life's investments in Ben LP and BCH and
may include preferential terms relative to GWG Holdings' and GWG Life's
investments in Ben LP and BCH, as applicable.
We currently fund our business primarily with debt that generally has a shorter
duration than the duration of our long-term assets. The resulting
asset/liability mismatch can result in a liquidity shortfall if we are unable to
renew maturing short term debt or secure suitable additional financing. In such
a situation, we could be forced to sell assets at less than optimal (distressed)
prices. Substantially all of our life insurance policies are pledged as
collateral under the LNV Credit Facility and the NF Credit Facility and we would
not be able to dispose of them without compliance with the terms of those credit
facilities. We heavily rely on GWG Holdings' L Bond offering to fund our
business operations, including, among other things, interest and principal
payments on the existing L Bonds and capital allocations to Beneficient. We
temporarily suspended the offering of GWG Holdings' L Bonds, commencing April
16, 2021, as a result of our delay in filing certain periodic reports with the
SEC, including this 2020 Form 10-K, and were required to seek alternative
sources of capital.
As a result of the suspension of GWG Holdings' L Bond offering, on June 28, 2021
(as described in more detail above), we pledged additional life insurance
policies as collateral and received an additional advance of $51.2 million under
the Third Amended Facility. Subsequently, on August 11 2021, we entered into the
NF Credit Agreement (as described in more detail above and in Note 23 to the
accompanying audited consolidated financial statements) and received a one-time
advance of $107.6 million. Approximately $56.7 million of such advanced amount
was used to pay off the remaining amount due, including interest and penalties,
under the Third Amended Facility and the additional pledged life insurance
policies used as collateral for the Third Amended Facility were released and
pledged under the NF Credit Facility. Further, on September 7, 2021, DLP IV
entered into the Fourth Amended Facility, that replaced the aforementioned Third
Amended Facility. The Fourth Amended Facility resulted in an additional advance
of $30.3 million from LNV Corporation, with no additional pledged collateral.
Primarily due to the current suspension of GWG Holdings' L Bond offering, the
Company may require additional capital to continue its operations over the next
twelve months if our ability to sell L Bonds dissipates, or if we are forced to
suspend the L Bond offering. However, the Company may not be able to obtain
additional borrowings under existing debt facilities or new borrowings with
other third-party lenders. To the extent that GWG Holdings or its subsidiaries
raise additional capital through the future issuance of debt, the terms of those
debt securities may include terms that adversely affect the rights of our
existing debt and/or equity holders or involve negative covenants that restrict
GWG Holdings' ability to take specific actions, such as incurring additional
debt or making additional investments in growing the operations of the Company.
If GWG Holdings is unable to fund its operations and other obligations, or
defaults on its debt, then the Company will be required to either i) sell assets
to provide sufficient funding, ii) exercise our right to decline requests for
early L Bond redemptions or redemptions of preferred stock, or iii) to raise
additional capital through the sale of equity and the ownership interest of our
equity holders may be diluted. Substantially all of our life insurance policies
are pledged as collateral under the LNV Credit Facility and the NF Credit
Facility and we would not be able to dispose of them without compliance with the
terms of those credit facilities.

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We anticipate recommencing the offering of GWG Holdings' L Bonds once we become
current with our filing obligations and satisfy applicable NASDAQ listing
requirements. Once we become current with our filing obligations with respect to
the L Bonds, we may be limited in the origination channels in which we sell our
L Bonds in the event that we are unable to meet the applicable NASDAQ listing
requirements in a timely manner, which could result in the L Bonds no longer
being "covered securities" for federal securities law purposes which would
subject the offer and sale of L Bonds to potentially extensive state "blue sky"
securities law requirements. If for any reason we are forced to suspend GWG
Holdings' L Bond offering, are limited in our origination channels in which we
sell our L Bonds, or demand for GWG Holdings' L bonds dissipates, our business
would be adversely impacted and our ability to service and repay our debt
obligations, much of which is short term, would be compromised, thereby
negatively affecting our business prospects and viability.
We had $97.4 million borrowing base capacity, excluding any potential capacity
for premiums and servicing costs, under the LNV Credit Facility as of
December 31, 2020. Additional future borrowing base capacity for premiums and
servicing costs, created as the premiums and servicing costs of pledged life
insurance policies become due and by additional policy pledges to the facility,
if any, exists under the LNV Credit Facility at the sole discretion of the
lender. The LNV Credit Facility has certain financial and nonfinancial
covenants, and we were in compliance with these debt covenants as of
December 31, 2020, and December 31, 2019, and continue to be so as of the filing
date of this report. Subsequent to December 31, 2020, we received additional
advances through amendments to the LNV Credit Facility and entered in to the NF
Credit Facility (as described in more detail above and in Note 23 to the
accompanying audited consolidated financial statements).
Beneficient is obligated to make debt payments totaling $74.5 million on certain
outstanding borrowings through May 30, 2022 under the terms of the Amendment No.
1 to the Second Amended and Restated Credit Agreements as discussed further in
Note 23 to the accompanying audited consolidated financial statements. Primarily
due to both the forthcoming debt payments under the Credit Agreement and Second
Lien Credit Agreement and the anticipated deconsolidation of Beneficient from
GWG Holdings, as discussed previously and in Note 23 to the accompanying audited
consolidated financial statements, which is expected to result in reduced
reliance by Beneficient on GWG Holdings to fund its operations, Beneficient will
require additional liquidity to continue its operations over the next twelve
months. We expect Beneficient to satisfy these obligations and fund its
operations through anticipated operating cash flows, proceeds from distributions
on the alternative assets portfolio, additional investments into Beneficient by
GWG Holdings and/or other parties and, potentially refinancing with other
third-party lenders some or all of the existing borrowings due prior to their
maturity. Beneficient is currently in the process of raising additional equity,
which is anticipated to close during the fourth quarter of 2021 and/or the first
quarter of 2022.

Beneficient may not be able to refinance or obtain additional financing on terms
favorable to the Company, or at all. To the extent that Beneficient raises
additional capital through the future sale of equity or debt, the ownership
interest of its existing equity holders may be diluted. The terms of these
future equity or debt securities may include liquidation or other preferences
that adversely affect the rights of its existing equity unitholders or involve
negative covenants that restrict Beneficient's ability to take specific actions,
such as incurring additional debt or making additional investments in growing
its operations. If Beneficient defaults on these borrowings, then it will be
required to either i) sell assets to repay these loans or ii) to raise
additional capital through the sale of equity and the ownership interest of our
equity holders may be diluted. Moreover, if Beneficient were to sell assets to
avoid a default of these borrowings, then the price at which Beneficient sold
such assets may not reflect the carrying value of those assets as reflected in
our consolidated financial statements, especially in the event of a bulk or
distressed sale.
As noted in the "Results of Operations" section above, on November 11, 2019, GWG
Holdings contributed the common stock and membership interests of its then
wholly-owned FOXO Labs and FOXO Life subsidiaries to FOXO in exchange for a
membership interest in the entity. On November 13, 2020, FOXO BioScience LLC
converted to a corporation and is now known as FOXO Technologies Inc. With the
corporate conversion, GWG Holdings' previous membership interest in the LLC
converted to preferred equity. GWG Holdings has contributed $16.2 million in
cash to FOXO through December 31, 2020, and is committed to contribute an
additional $3.8 million to the entity through October 2021, all of which was
contributed by such date.

The potential NASDAQ delisting and our current inability to sell L Bonds as
discussed above, in combination with significant recurring losses from
operations, negative cash flows from operations, delays in executing our
business plans, and any potential negative outcome from the ongoing SEC
investigation discussed elsewhere in this Form 10-K, raise substantial doubt
about our ability to continue as a going concern for the next 12 months
following the filing of this Form 10-K.

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Financings Summary
We had the following outstanding debt balances as of December 31, 2020 and 2019,
with the following weighted average interest rate as calculated for the years
ended December 31, 2020 and 2019 (dollars in thousands):
                                                                December 31, 2020                                December 31, 2019
                                                    Principal Amount         Weighted Average        Principal Amount         Weighted Average
Issuer/Borrower                                        Outstanding            Interest Rate             Outstanding            Interest Rate
GWG DLP Funding IV, LLC - LNV senior credit
facility                                            $      202,611                     9.12  %       $      184,586                     9.57  %
GWG Holdings, Inc. - L Bonds                             1,277,881                     7.21  %              948,128                     7.15  %
GWG Holdings, Inc. - Seller Trust L Bonds                  272,104                     7.50  %              366,892                     7.50  %
Beneficient - Debt due to related parties                   77,176                     6.50  %              152,199                     4.59  %
Total                                               $    1,829,772                     7.43  %       $    1,651,805                     7.26  %

The table below reconciles the face amount of our outstanding debt to the
carrying value shown on our balance sheets (dollars in thousands):

                                                               December 31, 2020           December 31, 2019
Senior credit facility with LNV Corporation
Face amount outstanding                                      $          202,611          $          184,586
Unamortized deferred financing costs                                     (8,881)                    (10,196)
Carrying amount                                              $          

193,730 $ 174,390

L Bonds and Seller Trust L Bonds:
Face amount outstanding                                      $        1,549,985          $        1,315,020
Subscriptions in process                                                 17,978                      15,839
Unamortized selling costs                                               (48,957)                    (37,329)
Carrying amount                                              $        

1,519,006 $ 1,293,530

Debt due to related parties:
Face amount outstanding                                      $           77,176          $          152,199
Unamortized premium (discount)                                             (916)                        887
Carrying amount                                              $           76,260          $          153,086


In January 2015, GWG Holdings began publicly offering up to $1.0 billion of L
Bonds as a follow-on to our earlier $250.0 million public debt offering. In
January 2018, GWG Holdings began publicly offering up to $1.0 billion L Bonds as
a follow-on to GWG Holdings' earlier L Bond offering.

On June 3, 2020, a registration statement relating to an additional public
offering was declared effective permitting us to sell up to $2.0 billion in
principal amount of L Bonds on a continuous basis through June 2023. These bonds
contain the same terms and features as our previous offerings. We have raised
$231.2 million under this offering since it was declared effective.
Through December 31, 2020, the total amount of L Bonds sold under all offerings,
including renewals, was $2.1 billion. As of December 31, 2020 and 2019, we had
approximately $1.3 billion and $0.9 billion, respectively, in principal amount
of L Bonds outstanding (exclusive of Seller Trust L Bonds).
On August 10, 2018, GWG Holdings, GWG Life and the Bank of Utah, as trustee,
entered into the L Bond Supplemental Indenture to the Amended and Restated
Indenture. GWG Holdings entered into the L Bond Supplemental Indenture to add
and modify certain provisions of the Amended and Restated Indenture necessary to
provide for the issuance of the Seller Trust L Bonds. GWG Holdings issued Seller
Trust L Bonds in the amount of $366.9 million to the Seller Trusts in connection
with the Exchange Transaction. As a result of the Collateral Swap discussed in
Note 1 to the consolidated financial statements, $94.8 million of the Seller
Trust L Bonds are eliminated upon consolidation. The maturity date of the Seller
Trust

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L Bonds is August 9, 2023. The Seller Trust L Bonds bear interest at 7.5% per
annum. Interest is payable monthly in cash (see Note 10 to the accompanying
audited consolidated financial statements). The Amended and Restated Indenture
was subsequently amended on December 31, 2019, primarily to modify the
calculation of the Debt Coverage Ratio in the Indenture to provide GWG Holdings
with the ability to incur indebtedness (directly or through a subsidiary of GWG
Holdings) that is payable in capital stock of GWG Holdings or mandatorily
convertible into or exchangeable for capital stock of GWG Holdings that would be
excluded from the calculation of the Debt Coverage Ratio. On December 31, 2020,
we entered into the Liquidity Bond Supplemental Indenture to add and modify
certain provisions of the Amended and Restated Indenture necessary to provide
for the issuance of the Liquidity Bonds in a principal amount of up to $1.0
billion.
The weighted-average interest rate of GWG Holdings' outstanding L Bonds
(excluding the Seller Trust L Bonds) as of December 31, 2020 and 2019, was 7.21%
and 7.15%, respectively, and the weighted-average maturity at those dates was
3.19 and 3.21 years, respectively. GWG Holdings' L Bonds (other than the Seller
Trust L Bonds and the Liquidity Bonds) have renewal features. Since we first
issued GWG Holdings' L Bonds, we have experienced $768.7 million in maturities,
of which $406.3 million has renewed through December 31, 2020, for an additional
term. This renewal activity has provided us with an aggregate renewal rate of
approximately 52.9% for investments in these securities.
Future contractual maturities of L Bonds (including the Seller Trust L Bonds and
Liquidity Bonds) at December 31, 2020 are as follows (in thousands):
Years Ending December 31,
2021(1)                          $   463,686
2022                                 293,038
2023                                 191,446
2024                                 121,105
2025                                 167,433
Thereafter                           313,277
                                 $ 1,549,985

__________________________________

(1)As of December 31, 2020, we had approximately $366.9 million in principal
amount of Seller Trust L Bonds outstanding, of which $94.8 million are held by
the ExAlt Trusts and are eliminated in consolidation. Accordingly, the net of
these amounts, $272.1 million, is presented in the table above. As the second
anniversary of the Final Closing Date has passed, the holders of the Seller
Trust L Bonds now have the right to cause GWG Holdings to repurchase, in whole
but not in part, the Seller Trust L Bonds held by such holder within 45 days. As
such, while the maturity date of the Seller Trust L Bonds is in August 2023,
their contractual maturity is reflected in 2021, as that is the period in which
they could become payable. The repurchase may be paid, at GWG Holdings' option,
in the form of cash, and/or a pro rata portion of (i) the outstanding principal
amount and accrued and unpaid interest under the Commercial Loan Agreement, and
(ii) Common Units, or a combination of cash and such property.
The L Bonds (including the Seller Trust L Bonds and Liquidity Bonds) are secured
by all of our assets and are subordinate to the LNV Credit Facility and the NF
Credit Facility.
On September 27, 2017, we entered into a $300 million amended and restated
senior credit facility with LNV Corporation in which DLP IV is the borrower. As
of December 31, 2020, we had approximately $202.6 million outstanding under the
senior credit facility. On November 1, 2019, we entered into the LNV Credit
Facility, which replaced the prior agreement governing the facility. A
description of the agreement governing the LNV Credit Facility is set forth
below under the caption "Amendment of Credit Facility with LNV Corporation." We
intend to use the proceeds from this facility to maintain our portfolio of life
insurance policies, for liquidity and for general corporate purposes.
Beneficient had borrowings with an aggregate carrying value of $76.3 million and
$153.1 million as of December 31, 2020, and December 31, 2019, respectively.
This aggregate outstanding balance includes a first lien credit agreement and a
second lien credit agreement with respective balances, including accrued
interest, of $2.3 million and $72.3 million at December 31, 2020, and $77.5
million and $72.2 million as of December 31, 2019, respectively. These amounts
exclude an unamortized discount of $0.9 million as of December 31, 2020, and an
unamortized premium of $0.9 million as of December 31, 2019. Both credit
agreements were amended and restated on August 13, 2020, which extended the
maturity for both to April 10,

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2021, as discussed in detail in Note 10 to the consolidated financial
statements. In accordance with the terms of the Second Amendments, both loans
accrue interest at a rate of 1-month LIBOR plus 8.0%, with a maximum rate of
9.5%. Prior to the Second Amendments, both loans accrued interest at a rate of
1-month LIBOR plus 3.95%, compounded daily. On March 10, 2021, and again on June
28, 2021, Beneficient executed amendments to both credit agreements that, among
other items, extended the maturity for both agreements to May 30, 2022, as
discussed in more detail in Note 23 to the consolidated financial statements.
These loans are not currently guaranteed by GWG Holdings or GWG Life.
Beneficient has additional borrowings maturing in 2023 and 2024 with an
aggregate principal balance outstanding, including accrued interest, of $2.6
million and $2.5 million as of December 31, 2020 and December 31, 2019,
respectively.
Future contractual maturities of Beneficient's debt due to related parties as of
December 31, 2020 are as follows (in thousands):
Years Ending December 31,
2021                          $ 74,548
2022                                 -
2023                               750
2024                             1,856
2025                                 -
Thereafter                           -
                              $ 77,154


We expect to meet our ongoing operational capital needs for, among other things,
GWG Holdings' and GWG Life's investments in Beneficient, alternative asset
investments, policy premiums and servicing costs, exploring opportunities to
establish a life insurance company, working capital and financing expenditures
including paying principal, interest and dividends through a combination of the
receipt of policy benefits from our portfolio of life insurance policies, net
proceeds from GWG Holdings' L Bond offering, dividends and interest from
investments, distributions from the alternative assets held by certain of the
ExAlt Trusts, future preferred and common equity offerings, and funding
available from the LNV Credit Facility. We estimate that our liquidity and
capital resources are sufficient for our current and projected financial needs
for at least the next twelve months given current assumptions. However, if we
are unable to continue GWG Holdings' L Bond offering for any reason, and we are
unable to obtain capital from other sources, our business will be materially and
adversely affected. In addition, our business will be materially and adversely
affected if we do not receive the policy benefits we forecast and if holders of
GWG Holdings' L Bonds fail to renew with the frequency we have historically
experienced. In such a case, we could be forced to sell our investments in life
insurance policies to service or satisfy our debt-related and other obligations.
A sale under such circumstances may result in significant impairment of the
recognized value of our portfolio.
Capital expenditures have historically not been material and we do not
anticipate making material capital expenditures in 2021.
Alternative Assets and Secured Indebtedness

The following information is specifically related to GWG Holdings, Inc. and its
subsidiaries (not including the assets and liabilities held by Beneficient or
any eliminations in consolidation).
The following table seeks to illustrate the impact that a hypothetical sale of
our portfolio of life insurance assets (at various discount rates, including the
discount rate used to value our portfolio at December 31, 2020), and the
realization of the investment in Common Units, investment in Preferred Series A
Subclass 1 Unit Account of BCH, investment in Preferred Series C Unit Account of
BCH (a substantial majority of the net assets of which are currently represented
by intangible assets and goodwill), and the Commercial Loan Agreement (in each
case, at their respective carrying amounts and assuming no discount for lack of
marketability or transaction costs, which could be substantial) would have on
our ability to satisfy our debt obligations as of December 31, 2020. The
investment in Common Units, investment in Preferred Series A Subclass 1 Unit
Account of BCH, investment in Preferred Series C Unit Account of BCH, and
Commercial Loan Agreement are discussed in detail in Note 1 and other applicable
notes to the accompanying audited consolidated financial statements. The amounts
in the table below do not include the consolidation of the assets and
liabilities of Beneficient and related eliminations as of December 31, 2020. In
all cases, the sale of the life insurance assets owned by DLP IV will be used
first to satisfy all amounts owing under the LNV Credit Facility. The net sale
proceeds remaining after satisfying all obligations

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under the LNV Credit Facility would be applied to the L Bonds and Seller Trust L
Bonds on a pari passu basis. All dollar amounts in the table below are in
thousands.
Life Insurance Portfolio Discount Rate                8.25%(1)                 10.00%                  12.00%                  14.00%                

16.12%

Value of life insurance portfolio                 $      791,911          $      730,648          $      670,923          $      620,023          $  573,799
Common Units                                             438,194                 438,194                 438,194                 438,194             438,194
Preferred Series A Subclass 1 Unit Account
of BCH                                                   319,030                 319,030                 319,030                 319,030             

319,030

Preferred Series C Unit Account of BCH                   195,578                 195,578                 195,578                 195,578             195,578
Commercial Loan Agreement                                180,080                 180,080                 180,080                 180,080             180,080
Cash, cash equivalents and policy benefits
receivable                                               120,616                 120,616                 120,616                 120,616             120,616
Other assets                                              20,082                  20,082                  20,082                  20,082              20,082
Total assets                                           2,065,491               2,004,228               1,944,503               1,893,603           1,847,379
Less: Senior credit facility(2)                          202,611                 202,611                 202,611                 202,611             

202,611

Net after senior credit facility                       1,862,880               1,801,617               1,741,892               1,690,992           1,644,768
Less: L Bonds(3)                                       1,644,773               1,644,773               1,644,773               1,644,773           1,644,773
Net remaining                                     $      218,107          $      156,844          $       97,119          $       46,219          $       (5)
Impairment to L Bonds                               No impairment           No impairment           No impairment           No Impairment          

Impairment

__________________________________

(1)The discount rate used to calculate the fair value of our life insurance
portfolio as of December 31, 2020.
(2)This amount excludes unamortized deferred financing costs.
(3)Amount represents aggregate outstanding principal balance of L Bonds and
Seller Trust L Bonds prior to eliminations as of December 31, 2020.
The above table illustrates that our ability to fully satisfy amounts owing
under the L Bonds and Seller Trust L Bonds would likely be impaired upon the
sale or the realization of the investment in Common Units, investment in
Preferred Series A Subclass 1 Unit Account of BCH, investment in Preferred
Series C Unit Account of BCH and Commercial Loan Agreement at their respective
carrying amounts, plus all our life insurance assets at a price equivalent to a
discount rate of approximately 16.12% or higher at December 31, 2020. At
December 31, 2019, the likely impairment occurred at a discount rate of
approximately 26.78% or higher. Based on a preliminary analysis, at September
30, 2021, management expects the likely impairment, as calculated in accordance
with the table above, to occur at a discount rate of approximately 8.50% or
higher. The above hypothetical analysis is included for informational purposes
only, and the results of such analysis have no bearing on the current ability of
GWG Holdings to market and sell L Bonds or to satisfy amounts owing under the L
Bonds and Seller Trust L Bonds.
The table does not include any allowance for transactional fees and expenses
(which expenses and fees could be substantial) nor any discount for lack of
marketability associated with a portfolio sale or the realization of the
investment in Common Units, investment in Preferred Series A Subclass 1 Unit
Account of BCH, investment in Preferred Series C Unit Account of BCH and
Commercial Loan Agreement, respectively, and is provided to demonstrate how
various discount rates used to value our portfolio of life insurance assets
could affect our ability to satisfy amounts owing under our debt obligations in
light of our senior secured lender's right to priority payments under our senior
credit facility with LNV Corporation.
The table also assumes GWG Holdings will realize the full amounts of the
investment in Common Units, investment in Preferred Series A Subclass 1 Unit
Account of BCH, investment in Preferred Series C Unit Account of BCH, and
Commercial Loan Agreement. However, the ultimate value of GWG Holdings' and GWG
Life's investments in Beneficient depends on multiple factors, including the
expected growth of new service offerings and products. Since predicting the rate
of growth attributable to newly launched products is inherently uncertain, there
is no assurance that GWG Holdings will recover the full book basis of its
investments in Beneficient. Additionally, there is currently no market for the
aforementioned assets, and a market may not develop. Our Commercial Loan
receivable and a portion of GWG Holdings' and GWG Life's investment in the
Common Units may be used as consideration for retiring the Seller Trust L Bonds
upon a redemption event or at the maturity of the Seller Trust L Bonds (see Note
10 to the accompanying audited consolidated financial statements). This table
also does not include the yield maintenance fee we are required to pay in
certain circumstances under the LNV Credit Facility, which could be substantial.
The above table should be read in conjunction with the information contained in
other sections of this report, including Critical Accounting Policies -
Valuation of Life Insurance Policies and the notes to the accompanying audited
consolidated financial statements.

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Amendment of Credit Facility with LNV Corporation
Effective November 1, 2019, DLP IV entered into the LNV Credit Facility. The LNV
Credit Facility makes available a total of up to $300.0 million in credit to DLP
IV with a maturity date of September 27, 2029. Subject to available borrowing
base capacity, additional advances are available under the LNV Credit Facility
at the LIBOR rate described below. Such advances are available to pay premiums
and servicing costs of pledged life insurance policies as such amounts become
due. Interest will accrue on amounts borrowed under the LNV Credit Facility at
an annual interest rate, determined as of each date of borrowing or quarterly if
there is no borrowing, equal to (a) the greater of 1.50% or 12-month LIBOR, plus
(b) 7.50% per annum. The effective rate at December 31, 2020 was 9.00%. Interest
payments are made on a quarterly basis.
Under the LNV Credit Facility, DLP IV has granted the administrative agent, for
the benefit of the lenders under the facility, a security interest in all of DLP
IV's assets. As with prior collateral arrangements relating to the senior
secured debt of GWG Holdings and its subsidiaries (on a consolidated basis), GWG
Life's excess equity value of DLP IV after satisfying all amounts owing under
the LNV Credit Facility is available as collateral for the obligations of GWG
Holdings under the L Bonds and Seller Trust L Bonds (although the life insurance
assets owned by DLP IV do not themselves serve as direct collateral for those
obligations).
We are subject to various financial and non-financial covenants under the LNV
Credit Facility, including, but not limited to, compliance with laws,
preservation of existence, financial reporting, keeping of proper books of
record and account, payment of taxes, and ensuring that neither DLP IV nor GWG
Life become an investment company. As of December 31, 2020, we were in
compliance with all financial and non-financial covenants.
In addition, the LNV Credit Facility has certain reporting obligations that
require DLP IV to deliver audited annual financial statements no later than
ninety days after the end of each fiscal year. Due to the failure to issue GWG
Life, LLC audited financial statements for 2020 to LNV Corporation within 90
days after the end of the year, we were in violation of our financial reporting
obligations under the LNV Credit Facility. CLMG Corp., as administrative agent
for LNV Corporation, has issued a limited deferral extending the delivery of
these reports to May 17, 2021. We regained compliance on May 17, 2021, when the
audited annual financial statements of GWG Life were delivered to LNV
Corporation.

On June 28, 2021, DLP IV entered into the Third Amended Facility with LNV
Corporation, as lender, and CLMG Corp., as the administrative agent on behalf of
the lenders under the agreement, that replaced the aforementioned LNV Credit
Facility. The Third Amended Facility resulted in an additional advance of $52.5
million from LNV Corporation.

In conjunction with entering into the Third Amended Facility, DLP V transferred
life insurance policies having an aggregate face value of approximately $440.6
million to DLP IV which were pledged as additional collateral to the Third
Amended Facility, and DLP IV received proceeds of approximately $51.2 million
(net of certain fees and expenses incurred in connection with the negotiation
and entry into the Third Amended Facility). The Third Amended Facility sets
forth interest and other terms and covenants similar those included in the
previous LNV Credit Facility. The Third Amended Facility was paid off on August
11, 2021, with a portion of the proceeds from the NF Credit Facility described
below.
On September 7, 2021, DLP IV entered into the Fourth Amended Facility with LNV
Corporation, as lender, and CLMG Corp., as the administrative agent on behalf of
the lenders under the agreement, that replaced the aforementioned Third Amended
Facility. The Fourth Amended Facility resulted in an additional advance of $30.3
million from LNV Corporation. The Fourth Amended Facility sets forth interest
and other terms and covenants similar those included in the previous LNV Credit
Facility.
Credit Facility with National Founders LP

On August 11, 2021, DLP VI, entered into the NF Credit Agreement with each
lender from time to time party thereto and National Founders LP, as the
administrative agent. On August 11, 2021, a one-time advance of approximately
$107.6 million was made to the DLP VI under the NF Credit Facility with a
scheduled maturity date of August 11, 2031. Approximately $56.7 million of such
advanced amount was used to pay off the remaining amount due, including interest
and penalties, under the Third Amended Facility. Amounts borrowed under the NF
Credit Facility bear interest on each day on the outstanding principal amount on
such day at a per annum rate, determined on a daily basis, generally equal to
5.5% up to a 65% of the loan to value percent as calculated in accordance with
the NF Credit Agreement, and 7.0% on anything above that loan to value percent.

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A portion of the proceeds from the funding under the NF Credit Facility was used
to purchase life insurance policies that were owned by DLP IV, which used the
funds to repay the most recent advance of $52.5 million plus interest and
penalties under the LNV Credit Facility described above. At August 11, 2021, the
aggregate face value of life insurance policies owned by DLP VI, was
approximately $433.1 million. As of such date, the aggregate face value of life
insurance policies owned by DLP IV was approximately $1.42 billion.
We are subject to various financial and non-financial covenants under the NF
Credit Facility, including, but not limited to, compliance with laws,
preservation of existence, financial reporting, keeping of proper books of
record and account, payment of taxes, and ensuring that neither DLP VI nor GWG
Life become an investment company. Additionally, we are required to maintain a
Debt Coverage Ratio not to exceed 90%. As of August 31, 2021, we were in
compliance with all financial and non-financial covenants in the NF Credit
Facility.
Cash Flows
Interest and Dividend Payments
We finance our businesses through a combination of: life insurance policy
benefit receipts; principal, dividends and interest receipts from investments;
distributions from the alternative assets held by the ExAlt Trusts; debt and
equity offerings; and the LNV Credit Facility and the NF Credit Facility. We
have historically relied on debt (L Bonds and the LNV Credit Facility) and
equity (preferred stock) financing for the majority of our cash expenditures
(for policy acquisition, policy premiums and servicing costs, working capital
and financing expenditures including paying principal and interest on existing
debt, and for GWG Holdings and GWG Life making investments in Beneficient) as
the amount of cash flows from the realization of life insurance policy benefits
and cash flows from our other investments has been insufficient to meet all of
our needs. This has resulted in the Company incurring substantial indebtedness
and, to a lesser extent, obligations to make dividend payments on our classes of
preferred stock.
Beneficient primarily finances its business through repayments on ExAlt Loans.
Such repayments are funded from a portion of the cash distributions the ExAlt
Trusts receive from their alternative assets and additional investments in
Beneficient by GWG Holdings and/or other parties. See Note 10 to the
accompanying audited consolidated financial statements for details on the
amendments of Beneficient's credit agreements. Beneficient uses proceeds from
these sources to fund liquidity transactions and potential unfunded capital
commitments, working capital, debt service payments, and costs associated with
potential future products. Beneficient also anticipates the need to establish
sufficient regulatory capital if and when its Texas trust company charter is
issued or the Kansas TEFFI trust company becomes operational. Additionally,
Bermuda insurance statutes and regulations, and the policies of the BMA, require
that Pen, among other things, maintain a minimum level of capital and surplus,
satisfy solvency standards, and restrict dividends and distributions.
Beneficient Capital Markets will also be subject to regulations of the SEC and
FINRA that require, among other things, Beneficient Capital Markets to maintain
a minimum level of capital.
Our total interest expense of $154.6 million and $114.8 million for the years
ended December 31, 2020 and 2019, respectively, represent the largest cash
expense in each period. Preferred stock cash dividends were $14.6 million and
$16.9 million for the years ended December 31, 2020 and 2019, respectively.
While reducing our cost of funds and increasing our common equity base are
primary goals of the Company, until we do so we will continue to expend
significant amounts of cash for interest and dividend payments and will thus
continue to rely heavily on our ability to raise cash from GWG Holdings' L Bond
offering, LNV Credit Facility and other means as they are developed and
available.
Life Insurance Policy Premium Payments
The payment of premiums and servicing costs to maintain life insurance policies
represents one of our most significant requirements for cash disbursement. When
a policy is purchased, we are able to calculate the minimum premium payments
required to maintain the policy in-force. Over time as the insured ages, premium
payments will increase. Nevertheless, the probability we will be required to pay
the premiums decreases as mortality becomes more likely. These scheduled
premiums and associated probabilities are factored into our expected internal
rate of return and cash-flow modeling. Beyond premiums, we incur policy
servicing costs, including annual trustee, policy administration and tracking
costs. Additionally, we incur significant financing costs, including principal,
interest and dividends. Both policy servicing costs and financing costs are
excluded from our internal rate of return calculations. We finance our
businesses through a combination of life insurance policy benefit receipts,
dividends and interest on other investments, equity offerings, debt offerings,
and advances under the LNV Credit Facility and NF Credit Facility.

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The amount of payments for anticipated premiums, including the requirement under
the LNV Credit Facility and NF Credit Facility to maintain a two month
cost-of-insurance threshold within each policy cash value account, and servicing
costs that we will be required to make over the next five years to maintain our
current portfolio, assuming no mortalities, is set forth in the table below (in
thousands):
Years Ending December 31,         Premiums       Servicing         Total
2021                             $  72,445      $    1,655      $  74,100
2022                                89,436           1,655         91,091
2023                               100,953           1,655        102,608
2024                               110,044           1,655        111,699
2025                               122,438           1,655        124,093
                                 $ 495,316      $    8,275      $ 503,591



Our anticipated premium expenses are subject to the risk of increased
cost-of-insurance charges (i.e., "COI" or premium charges) for the life
insurance policies we own. We did not receive any notices of COI rate changes in
2019. We have received COI increases on six policies during the year ended
December 31, 2020.
We have no known pending cost-of-insurance increases on any policies in our
portfolio, but we are aware that cost-of-insurance increases have become more
prevalent in the industry. Thus, we may see additional insurers implementing
cost-of-insurance increases in the future.
Life Insurance Policy Benefit Receipts
For the quarter-end dates set forth below, the following table illustrates the
total amount of face value of policy benefits owned, and the trailing 12 months
of life insurance policy benefits realized and premiums paid on our portfolio.
The trailing 12-month benefits/premium coverage ratio indicates the ratio of
policy benefits realized to premiums paid over the trailing 12-month period from
our portfolio of life insurance policies.
                                     Portfolio Face           12-Month Trailing            12-Month Trailing                 12-Month Trailing
                                         Amount               Benefits Realized              Premiums Paid              Benefits/Premiums Coverage
Quarter End Date                      (in thousands)           (in thousands)                (in thousands)                        Ratio
March 31, 2016                       $  1,027,821          $             21,845          $            28,771                                  75.9  %
June 30, 2016                           1,154,798                        30,924                       31,891                                  97.0  %
September 30, 2016                      1,272,078                        35,867                       37,055                                  96.8  %
December 31, 2016                       1,361,675                        48,452                       40,239                                 120.4  %
March 31, 2017                          1,447,558                        48,189                       42,753                                 112.7  %
June 30, 2017                           1,525,363                        49,295                       45,414                                 108.5  %
September 30, 2017                      1,622,627                        53,742                       46,559                                 115.4  %
December 31, 2017                       1,676,148                        64,719                       52,263                                 123.8  %
March 31, 2018                          1,758,066                        60,248                       53,169                                 113.3  %
June 30, 2018                           1,849,079                        76,936                       53,886                                 142.8  %
September 30, 2018                      1,961,598                        75,161                       55,365                                 135.8  %
December 31, 2018                       2,047,992                        71,090                       52,675                                 135.0  %
March 31, 2019                          2,098,428                        87,045                       56,227                                 154.8  %
June 30, 2019                           2,088,445                        82,421                       59,454                                 138.6  %
September 30, 2019                      2,064,156                       101,918                       61,805                                 164.9  %
December 31, 2019                       2,020,973                       125,148                       63,851                                 196.0  %
March 31, 2020                          2,000,680                       120,191                       65,224                                 184.3  %
June 30, 2020                           1,960,826                       137,082                       66,846                                 205.1  %
September 30, 2020                      1,921,067                       149,415                       67,931                                 220.0  %
December 31, 2020                       1,900,715                       125,109                       69,734                                 179.4  %



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We believe that the portfolio cash flow results set forth above are consistent
with our general investment thesis that the life insurance policy benefits we
receive will continue to increase over time in relation to the premiums we are
required to pay on the remaining polices in the portfolio. Nevertheless, we
expect that our portfolio cash flow on a period-to-period basis will remain
inconsistent as we have reduced capital allocated to acquiring a larger, more
diversified portfolio of life insurance policies.
Inflation
Changes in inflation do not necessarily correlate with changes in interest
rates. We presently do not foresee any material impact of inflation on our
results of operations in the periods presented in our consolidated financial
statements.
Off-Balance Sheet Arrangements
Unfunded Capital Commitments
The ExAlt Trusts had $35.6 million and $34.9 million of potential gross capital
commitments as of December 31, 2020 and December 31, 2019, respectively,
representing potential limited partner capital funding commitments on the
interests in alternative asset funds. The trust holding the interest in the
limited partnership for the alternative asset fund is required to fund these
limited partner capital commitments per the terms of the limited partnership
agreement. Capital funding commitment reserves are maintained by the associated
trusts within the ExAlt PlanTM created at the origination of each trust for up
to $0.1 million. To the extent that the associated ExAlt Trust cannot pay the
capital funding commitment, Beneficient is obligated to lend sufficient funds to
meet the commitment. Any amounts advanced by Beneficient to the ExAlt Trusts for
these limited partner capital funding commitments above the associated capital
funding commitment reserves held by the associated ExAlt Trusts are added to the
ExAlt Loan balance between Beneficient and the ExAlt Trusts and are expected to
be recouped through the cash distributions from the interests in alternative
asset fund that collateralizes such ExAlt Loan.
Capital commitments generally originate from limited partner agreements having
fixed or expiring expiration dates. The total limited partner capital funding
commitment amounts may not necessarily represent future cash requirements.
Beneficient considers the creditworthiness of the investment on a case-by-case
basis. At both December 31, 2020 and December 31, 2019, Beneficient had no
reserves for losses on unused commitments to fund potential limited partner
capital funding commitments.

Unfunded Commitments
Beneficient had $1.1 million of unfunded commitments on liquidity solution
transactions as of December 31, 2020, related to liquidity transactions in
process as of that date. There were no reserves for unfunded commitments as of
December 31, 2020, and all amounts in process were fully funded in the first
quarter of 2021.
Equity Method Investee Commitments
GWG Holdings has contributed $16.2 million in cash to FOXO to date through
December 31, 2020, and is committed to contribute an additional $3.8 million to
the entity through October 2021, all of which was contributed by such date.
Credit Risk and Interest Rate Risk
We review the credit risk associated with our portfolio of life insurance
policies when estimating its fair value. In evaluating the policies' credit
risk, we consider insurance company solvency, credit risk indicators, economic
conditions, ongoing credit evaluations, and company positions. We attempt to
manage our credit risk related to life insurance policies typically by
purchasing policies issued only from companies with an investment-grade credit
rating by either Standard & Poor's, Moody's, or A.M. Best Company. As of
December 31, 2020, 96.3% of our life insurance policies, by face value benefits,
were issued by companies that maintained an investment-grade credit rating (BBB
or better) by Standard & Poor's.
The LNV Credit Facility, NF Credit Facility, and Beneficient's debt due to
related parties are floating-rate financings. In addition, our ability to offer
interest and dividend rates that attract capital (including in our continuous
offering of L Bonds) is generally impacted by prevailing interest rates.
Furthermore, while GWG Holdings' L Bond offering provides us with fixed-rate
debt financing, our Debt Coverage Ratio is calculated in relation to the
interest rate on all of our debt financing, exclusive of our Seller Trust L
Bonds. Therefore, increases in interest rates impact our business by increasing
our borrowing costs and reducing availability under our debt financing
arrangements. Earnings from our life insurance portfolio are based upon the
spread, if any, generated between the return on the portfolio and the total cost
of our financing (excluding cost of

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financing for the Seller Trust L Bonds). As a result, increases in interest
rates will reduce the earnings we expect to achieve from our investments in life
insurance policies.
The ExAlt Trusts hold investments in alternative assets, which are exposed to
risks related to markets, credit, currency, and interest rates. Currently, all
of these alternative assets consist of private equity limited partnership
interests, which are primarily denominated in the U.S. dollar, Euro, and
Canadian dollar. The underlying portfolio companies primarily operate in the
United States and Western Europe, with the largest percentage, based on NAV,
operating in diversified financials, telecommunications services, food and
staples retailing, and software and services industries.
As of December 31, 2020, and 2019, all of the ExAlt Loans, which are eliminated
upon consolidation, are collateralized by the cash flows originating from the
ExAlt Trusts' investments in alternative assets. These ExAlt Loans are a key
determinant in income (loss) allocable to Beneficient's equity holders, and thus
GWG Holdings. Beneficient has underwriting procedures and utilizes market rates.
Additionally, Beneficient has purchased put options to protect the net asset
value of the interests in alternative assets held by certain of the ExAlt Trusts
from impacts associated with a broad market downturn. Finally, the ExAlt Trusts
applicable trust agreements allow for excess cash flows from a collective pool
of alternative assets to be utilized to repay the ExAlt Loans they have with
Beneficient when cash flows from the customer's originally alternative assets
are not sufficient to repay the outstanding principal, interest, and fees.
Guarantee and Collateral Provisions of L Bonds
GWG Holdings' L Bonds are offered and sold under a registration statement
declared effective by the SEC, and GWG Holdings has issued Seller Trust L Bonds
under the L Bond Supplemental Indenture, as described in Note 10 to the
consolidated financial statements. The L Bonds and Seller Trust L Bonds are
secured by substantially all the assets of GWG Holdings and a pledge of all of
GWG Holdings' common stock held by BCC and AltiVerse Capital Markets, L.L.C., a
limited liability company owned by an entity related to the Ben Initial
Investors, including Brad K. Heppner (GWG Holdings' former Chairman, who served
in such capacity from April 26, 2019 to June 14, 2021, and Beneficient's current
Chief Executive Officer and Chairman), and an entity related to Thomas O. Hicks
(one of Beneficient's current directors and a former director of GWG Holdings)
("AltiVerse"). Together, BCC and AltiVerse represent approximately 12% of our
outstanding common stock, and are guaranteed by GWG Life and a corresponding
grant of a security interest in substantially all the assets of GWG Life. As a
guarantor, GWG Life has fully and unconditionally guaranteed the payment of
principal and interest on the L Bonds and Seller Trust L Bonds. GWG Life's
equity in GWG Life Trust, DLP IV, and DLP V Holdings serves as collateral for
GWG Holdings' L Bond and Seller Trust L Bond obligations. As of December 31,
2020, substantially all of our life insurance policies were held by DLP IV, DLP
V, or GWG Life Trust. The policies held by DLP IV are not direct collateral for
the L Bonds as such policies are pledged under the LNV Credit Facility.
On December 31, 2020, GWG Holdings, GWG Life and Bank of Utah, as trustee,
entered into the Liquidity Bond Supplemental Indenture that provides for the
issuance of two series of Liquidity Bonds, as described in Note 10 to the
consolidated financial statements. The Liquidity Bonds are issued by GWG Life
and guaranteed by GWG Holdings. The Liquidity Bonds are secured by the same
collateral as the other L Bonds.
Furthermore, regarding the obligations of GWG Holdings and its subsidiaries as
of December 31, 2020:

(1) The Seller Trust L Bonds are secured obligations of GWG Holdings, ranking
junior to all senior debt of GWG Holdings and pari passu in right of payment and
in respect of collateral with all L Bonds of GWG Holdings (see Note 10 to the
accompanying audited consolidated financial statements). Payments under the
Seller Trust L Bonds are guaranteed by GWG Life. The assets exchanged in
connection with the Beneficent transaction are available as collateral for all
holders of the L Bonds and Seller Trust L Bonds. Specifically, the Common Units
are held by GWG Holdings and the Commercial Loan is held by GWG Life.

(2) The Liquidity Bonds are secured obligations of GWG Life, ranking junior to
all senior debt of GWG Holdings or GWG Life and pari passu in right of payment
and in respect of collateral with all L Bonds of GWG Holdings. Payments under
the Liquidity Bonds are guaranteed by GWG Holdings.

(3) The terms of the LNV Credit Facility require that we maintain a significant
excess of pledged collateral value over the amount outstanding on the LNV Credit
Facility at any given time. Any excess after satisfying all amounts owing under
the LNV Credit Facility is available as collateral for the L Bonds (including
the Seller Trust L Bonds and Liquidity Bonds).

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The following represents summarized financial information as of December 31,
2020 and December 31, 2019, with respect to the financial position, and for the
year ended December 31, 2020, with respect to results of operations. The tables
present summarized financial information of GWG Holdings and GWG Life on a
combined basis after elimination of (i) intercompany transactions and balances
among such entities, including GWG Holdings' interest in GWG Life, and (ii)
equity in earnings from and investments in any subsidiary that is a
non-guarantor (including DLP IV, DLP V, GWG Life Trust and Beneficient). The
summarized financial information has been prepared in accordance with Rule 13-01
of Regulation S-X.

Summarized Balance Sheet Information (in thousands, not intended to balance):
                                                                                         (As Restated)
                                                           December 31, 2020           December 31, 2019
Assets(1)
Cash, cash equivalents and restricted cash               $           65,556          $           60,365
Financing receivables from affiliates                                     -                      67,153
Other assets                                                          6,366                       8,659
Total assets                                             $           71,922          $          136,177
Liabilities
L Bonds                                                  $        1,246,902          $          926,638
Seller Trust L Bonds                                                366,892                     366,892
Interest and dividends payable                                       12,086                      12,491
Accounts payable and accrued expenses                                 7,347                       3,093
Deferred tax liabilities                                             51,469                      71,855
Total liabilities                                        $        1,684,696          $        1,380,969
Equity
Redeemable preferred stock and Series 2 redeemable
preferred stock                                          $          156,833 

$ 201,891

______________________________________

(1) Assets exclude: i) GWG Holdings' investment in GWG Life of $1.2 billion as
of both December 31, 2020 and December 31, 2019; ii) GWG Holdings' aggregate
investments in non-obligor subsidiaries of $643.1 million and $439.4 million as
of December 31, 2020 and December 31, 2019, respectively; and iii) GWG Life's
aggregate investments in and loans to non-obligor subsidiaries of $1.2 billion
as of both December 31, 2020 and December 31, 2019.

Summarized Statement of Operations Information (in thousands):

                                                                  Year Ended
                                                              December 31, 2020
       Total revenues                                        $          100,518

       Interest expense                                                 125,012
       Other expenses                                                    38,155
       Total expenses                                                   163,167
       Loss before income taxes and preferred dividends                 

(62,649)

       Income tax expense (benefit)                                     (19,849)
       Preferred dividends                                               14,630
       Net loss                                              $          (57,430)



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Debt Coverage Ratio
GWG Holdings' L Bond borrowing covenants require us to maintain a Debt Coverage
Ratio not to exceed 90%. The Debt Coverage Ratio is calculated by dividing the
sum of our total interest-bearing indebtedness (other than Excluded Indebtedness
defined and described in note 5 to the table below) by the sum of our cash, cash
equivalents, restricted cash, life insurance policy benefits receivable, the net
present value of the life insurance portfolio, and, without duplication, the
value of all of our other assets as reflected on our most recently available
balance sheet prepared in accordance with GAAP.
GWG Holdings' and GWG Life's investments in Beneficient and GWG Life's ownership
interests in the holding companies that own DLP IV and DLP VI, which own
substantially all of the life insurance portfolio, secure our obligations under
the L Bonds, and are illiquid assets. Although GWG Holdings and GWG Life own
debt and equity securities of Beneficient, a substantial majority of the net
assets of Beneficient are currently represented by goodwill, an intangible
asset. The calculation of Beneficient's goodwill required the utilization of
significant estimates and management judgment, as discussed elsewhere in this
2020 Form 10-K. As a result, the carrying value of those assets as reflected in
our consolidated financial statements may not necessarily reflect the current
market price for those assets, especially in the event of a bulk or distressed
sale. Proceeds from L Bond sales will be primarily used for the repayment of L
Bond maturities, interest payments and other operating expenses of GWG Holdings,
and as otherwise specified in the prospectus for the L Bonds. GWG Holdings may
also continue to use a portion of the proceeds from L Bond sales to make
investments in Beneficient. Because advances may be used by Beneficient for
working capital purposes, such investments may not increase the tangible assets
securing the L Bonds. If the trustee for the L Bonds were forced to sell all or
a portion of the collateral securing them, there can be no assurance that the
trustee would be able to sell them for the prices at which we have recorded them
in our consolidated financial statements, and the trustee might be forced to
sell them at significantly lower prices.
The discount rate we use for the net present value of our life insurance
portfolio for this calculation may not be the same discount rate we use for our
GAAP valuation and is not necessarily reflective of the amount we could realize
upon a sale of the portfolio (dollars in thousands):
                                                                                           (As Restated)
                                                              December 31, 2020          December 31, 2019
Life insurance portfolio policy benefits                     $       1,900,715          $       2,020,973
Discount rate of future cash flows(1)                                     7.46  %                    7.55  %
Net present value of life insurance portfolio policy         $         822,859          $         826,196
benefits
All cash and cash equivalents (including restricted cash)              106,282                     81,780
Life insurance policy benefits receivable, net                          14,334                     23,031
Financing receivables from affiliates(2)                               180,080                    258,402
Investments in Common Units(2)(3)(4)                                   438,194                    313,443
Investment in Preferred Series A Subclass 1 Unit Account(4)            319,030                    319,030
Investment in Preferred Series C Unit Account(4)                       195,578                          -
Option Agreement and other assets (3)                                   20,082                     54,365
Total Coverage (5)                                           $       2,096,439          $       1,876,247

Total Indebtedness (5)                                       $       1,519,107          $       1,146,646

Debt Coverage Ratio                                                      72.46  %                   61.10  %

__________________________________

(1)Weighted-average interest rate paid on indebtedness, excluding that of Seller
Trust L-Bonds, as required under the indenture governing the L Bonds.
(2)The Promissory Note, previously included in financing receivables from
affiliates, was converted to Preferred Series C on September 30, 2020.
(3)The Option Agreement was exercised and converted to Common Units effective
August 11, 2020.
(4)Generally represents the value of the investment in Beneficient as of
December 31, 2019 for investments that existed at the time of the
change-in-control transaction, or the value at the time of purchase for
investments that were made subsequent to December 31, 2019. As noted above,
these are illiquid investments that are carried at book basis and not market
value.
(5)Total Coverage excludes the assets of Beneficient. Total Indebtedness is
equal to the total liabilities balance of GWG Holdings (excluding the
liabilities of Beneficient) as of December 31, 2020, other than Excluded
Indebtedness. "Excluded Indebtedness" means

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indebtedness that is payable at GWG Holdings' option in capital stock of GWG
Holdings or securities mandatorily convertible into or exchangeable for capital
stock of GWG Holdings, or any indebtedness that is reasonably expected to be
converted or exchanged, directly or indirectly, into capital stock of GWG
Holdings. This change in the definition of the Debt Coverage Ratio was defined
in Amendment No. 2 to the Amended and Restated Indenture entered into as of
December 31, 2019 (see Note 10 to the accompanying audited consolidated
financial statements).
As of December 31, 2020 and 2019, we were in compliance with the Debt Coverage
Ratio. Based on a preliminary analysis, the Company expects the Debt Coverage
Ratio to be approximately 82% as of September 30, 2021.