Emergent Capital, Inc. Announces Third Quarter 2016 Results

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November 7, 2016 4:10 PM EST

BOCA RATON, Fla., Nov. 7, 2016 /PRNewswire/ -- Emergent Capital, Inc. (NYSE: EMG) ("Emergent" or the "Company"), today announced its financial results for the three and nine month periods ended September 30, 2016.

Three Months Ended September 30, 2016

Total income from continuing operations was $4.8 million for the three month period ended September 30, 2016 compared to $2.8 million for the same period in 2015. The increase was primarily due to a $4.0 million gain on the maturity of two policies compared to a $2.4 million gain on maturity of two policies for the same period in 2015.

The following table provides a summary of the components of income from the Company's life settlements.

Three Months EndedSeptember 30, 2016

Three Months EndedSeptember 30, 2015

Change in estimated probabilistic cash flows

$

21,143

$

19,870

Premiums paid during period

(18,414)

(16,826)

Change in life expectancy evaluation

(2,008)

(4,258)

Unrealized gain on acquisitions

—

1,460

Realized gain on maturities

4,014

2,421

Change in fair value of life settlements

$

4,735

$

2,667

 

Total expenses from continuing operations were $13.3 million for the three month period ended September 30, 2016 compared to $21.0 million for the same period in 2015. The decrease was primarily attributable to an $8.8 million charge related to the extinguishment of the Secured Notes during the quarter ended September 30, 2015, and a reduction of $1.5 million, $719,000 and $642,000 in legal fees, interest expense and personnel costs, respectively.

The Company reported a net loss from continuing operations of $8.5 million, or $(0.31) per diluted share for the three month period ended September 30, 2016, compared to a net  loss of $13.5 million, or $(0.48) per diluted share for the same period in 2015. The net loss for the quarter ended September 30, 2015 includes an income tax benefit of $4.7 million. There was no income tax benefit during the quarter ended September 30, 2016.

Nine Months Ended September 30, 2016

Total income from continuing operations for the nine month period ended September 30, 2016 was a loss of $2.6 million compared to total income of $43.8 million during the same period in 2015.  The loss is primarily due to a $25.4 million reduction in realized gains due to policy maturities and further impacted by the adoption of the 2015 VBT, which reduced the fair value of the Company's life settlements by $17.6 million.

The following table provides a summary of the components of income from the Company's life settlements.

Nine Months EndedSeptember 30, 2016

Nine Months EndedSeptember 30, 2015

Change in estimated probabilistic cash flows

$

57,762

$

60,588

Premiums paid during period

(52,750)

(48,243)

2015 VBT Adoption

(17,638)

—

Change in life expectancy evaluation

(12,252)

(18,700)

Change in discount rates

7,149

3,841

Unrealized gain on acquisitions

262

5,856

Realized gain on maturities

14,777

40,240

Change in fair value of life settlements

$

(2,690)

$

43,582

Total expenses from continuing operations were $23.2 million for the nine month period ended September 30, 2016 compared to $67.5 million for the same period in 2015.  The reduction was primarily associated with the adoption of the 2015 VBT which resulted in a $15.7 million reduction in the fair value of the Revolving Credit Facilities, an $8.8 million reduction associated with the extinguishment of the Secured Notes, and a $5.7 million reduction in operating expenses primarily due to a $5.0 million decrease in legal expenses compared to the nine month period ended September 30, 2015.

The Company reported a net loss from continuing operations of $25.8 million, or $(0.94) per fully diluted share, for the nine month period ended September 30, 2016 compared to a net loss of $16.7 million, or $(0.70) per fully diluted share, for the same period in 2015. The net loss for the nine month period ended September 30, 2015 includes an income tax benefit of $7.0 million.  The Company did not recognize an income tax benefit during the nine month period ended September 30, 2016.

Life Settlements Portfolio Highlights

On September 30, 2016, the estimated fair value of the Company's 623 life insurance policies was $483.4 million compared to $461.9 million for 632 life insurance policies at December 31, 2015. The weighted average discount rate was 16.52% on September 30, 2016 compared to 17.02% on December 31, 2015. The aggregate face value of the Company's portfolio of life insurance policies was approximately $3.0 billion on September 30, 2016.

During the quarter, two life insurance policies that served as collateral under the revolving credit facilities matured totaling $12.8 million.

As of September 30, 2016, the Company had cash and cash equivalents and certificates of deposit of $24.9 million and a Book Value per share of $6.95.

Conference Call

The Company will be hosting a conference call today at 5:00 pm ET. To join the call, please dial toll free (855) 656-0929, or from outside the U.S. (412) 317-6021. The conference call will also be broadcast live through a link on the Investor Relations section of the Company's website at www.emergentcapital.com. Please visit the website at least 10 minutes prior to the call to register, download and install any necessary audio software.

About Emergent Capital, Inc.

Emergent (NYSE: EMG) is a specialty finance company that invests in life settlements. More information about Emergent can be found at www.emergentcapital.com.

Safe Harbor StatementThis press release may contain certain "forward-looking statements" relating to the business of Emergent Capital, Inc. and its subsidiary companies. All statements, other than statements of historical fact included herein are "forward-looking statements." These forward-looking statements are often identified by the use of forward-looking terminology such as "believes," "expects" or similar expressions, and involve known and unknown risks and uncertainties. Although Emergent believes that the expectations reflected in these forward-looking statements are reasonable, they do involve assumptions, risks and uncertainties, and these expectations may prove to be incorrect. Investors should not place undue reliance on these forward-looking statements, which speak only as of the date of this press release. Other than as required under the securities laws, Emergent does not assume a duty to update these forward-looking statements.

-SELECTED FINANCIAL TABLES FOLLOW-

 

Emergent Capital, Inc.

CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

For the Three Months EndedSeptember 30,

For the Nine Months EndedSeptember 30,

2016

2015

2016

2015

(in thousands, except share and per share data)

Income

Change in fair value of life settlements

$

4,735

$

2,667

$

(2,690)

$

43,582

Other income

32

102

125

201

Total income (loss)

4,767

2,769

(2,565)

43,783

Expenses

Interest expense

7,895

8,614

21,330

21,491

Extinguishment of Secured Notes

—

8,782

—

8,782

Change in fair value of Revolving Credit Facilities

(551)

(4,203)

(16,121)

13,489

Personnel costs

1,303

1,945

5,133

5,425

Legal fees

1,833

3,370

5,361

10,345

Professional fees

2,136

1,579

5,347

5,284

Insurance

200

309

639

966

Other selling, general and administrative expenses

494

585

1,511

1,671

Total expenses

13,310

20,981

23,200

67,453

Income (loss) from continuing operations before income taxes

(8,543)

(18,212)

(25,765)

(23,670)

Benefit for income taxes

—

(4,721)

—

(6,981)

Net income (loss) from continuing operations

$

(8,543)

$

(13,491)

$

(25,765)

$

(16,689)

Discontinued Operations:

Income (loss) from discontinued operations

(54)

(147)

(248)

(640)

Benefit for income taxes

—

(34)

—

(224)

Net income (loss) from discontinued operations

(54)

(113)

(248)

(416)

Net income (loss)

$

(8,597)

$

(13,604)

$

(26,013)

$

(17,105)

Basic and diluted income (loss) per share:

Continuing operations

$

(0.31)

$

(0.48)

$

(0.94)

$

(0.70)

Discontinued operations

$

—

$

—

$

(0.01)

$

(0.02)

Net income (loss)

$

(0.31)

$

(0.48)

$

(0.95)

$

(0.72)

Weighted average shares outstanding:

Basic and Diluted

27,614,441

28,084,254

27,529,120

23,827,030

 

 

 

Emergent Capital, Inc.

CONSOLIDATED BALANCE SHEETS

September 30, 2016

December 31, 2015*

(Unaudited)

(In thousands except share data)

ASSETS

Assets

Cash and cash equivalents

$

9,801

$

12,946

Cash and cash equivalents (VIE)

9,098

7,395

Certificates of deposit

6,008

2,501

Prepaid expenses and other assets

1,488

1,017

Deposits - other

1,347

1,347

Life settlements, at estimated fair value

7,810

11,946

Life settlements, at estimated fair value (VIE)

475,585

449,979

Receivable for maturity of life settlements (VIE)

20,088

18,223

Fixed assets, net

256

322

Investment in affiliates

2,384

2,384

Total assets

$

533,865

$

508,060

LIABILITIES AND STOCKHOLDERS' EQUITY

Liabilities

Accounts payable and accrued expenses

3,550

$

3,051

Accounts payable and accrued expenses (VIE)

521

419

Other liabilities

395

360

Interest payable - Convertible Notes

768

2,272

Convertible Notes, net of discount and deferred debt costs

59,532

56,812

Interest payable - Senior Secured Notes

200

—

Senior Secured Notes, net of discount and deferred debt costs

29,209

—

White Eagle Revolving Credit Facility, at estimated fair value (VIE)

182,128

169,131

Red Falcon Revolving Credit Facility, at estimated fair value (VIE)

61,451

55,658

Total liabilities

337,754

287,703

Commitments and Contingencies

Stockholders' Equity

Common stock (par value $0.01 per share, 80,000,000 authorized at September 30, 2016 and December 31, 2015; 28,836,573 issued and 28,228,573 outstanding as of September 30, 2016; 28,130,508 issued and 27,522,508 outstanding at December 31, 2015)

288

281

Preferred stock (par value $0.01 per share, 40,000,000 authorized; 0 issued and outstanding as of September 30, 2016 and December 31, 2015)

—

—

Treasury Stock, net of cost (608,000 shares as of September 30, 2016 and December 31, 2015)

(2,534)

(2,534)

Additional paid-in-capital

307,210

305,450

Accumulated deficit

(108,853)

(82,840)

Total stockholders' equity

196,111

220,357

Total liabilities and stockholders' equity

$

533,865

$

508,060

    *      Derived from audited consolidated financial statements.

 

 

 

Selected Operating Data (dollars in thousands):

Three Months Ended September 30,

Nine Months Ended September 30,

2016

2015

2016

2015

Period Acquisitions — Policies Owned

Number of policies acquired

—

3

1

41

Average age of insured at acquisition

—

85.4

90.3

85.0

Average life expectancy — Calculated LE (Years)

—

5.6

2.3

5.4

Average death benefit

$

—

$

6,232

$

690

$

2,924

Aggregate purchase price

$

—

$

2,679

$

16

$

30,534

End of Period — Policies Owned

Number of policies owned

623

634

623

634

Average Life Expectancy — Calculated LE (Years)

9.2

10.0

9.2

10.0

Aggregate Death Benefit

$

2,953,796

$

2,997,903

$

2,953,796

$

2,997,903

Aggregate fair value

$

483,395

$

457,810

$

483,395

$

457,810

Monthly premium — average per policy

$

10.6

$

8.9

$

10.6

$

8.9

Period Maturities

Number of policies matured

2

2

10

14

Average age of insured at maturity

85.2

86.8

85.6

84.1

Average life expectancy - Calculated LE (Years)

1.8

5.4

3.7

7.4

Aggregate death benefit

$

12,800

$

3,700

$

29,980

$

53,468

Gains on maturity

$

4,014

$

2,421

$

14,777

$

40,240

Proceeds collected

$

7,000

$

28,280

$

27,980

$

47,519

 

Logo - http://photos.prnewswire.com/prnh/20150902/263203LOGO

 

To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/emergent-capital-inc-announces-third-quarter-2016-results-300357431.html

SOURCE Emergent Capital, Inc.


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