Emergent Capital, Inc. Announces Fourth Quarter and Year-End 2015 Results and Subsequent Developments

Company Reports Book Value of $8.01 per Share

New Senior Secured Notes Subsequently Issued Totaling $21.2 Million

Mar 14, 2016, 16:24 ET from Emergent Capital, Inc.

BOCA RATON, Fla., March 14, 2016 /PRNewswire/ -- Emergent Capital, Inc. (NYSE: EMG) ("Emergent" or the "Company"), today announced its financial results for the three months and year ended December 31, 2015.

Three Months Ended December 31, 2015

Total income from continuing operations was $3.1 million for the three months ended December 31, 2015 compared to income from continuing operations of $24.8 million for the same period in 2014. This decrease was a result of a change in the fair value of life settlements primarily driven by discount rate adjustments as well as a decrease in policy acquisitions during the period.

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

Three Months Ended

December 31, 2015

Three Months Ended December 31, 2014

Change in estimated probabilistic cash flows

$

16,087,268

$

18,570,328

Premiums paid during period

(16,679,958)

(14,880,865)

Change in life expectancy evaluation

(1,329,075)

307,129

Change in discount rates

(2,769,807)

11,596,643

Unrealized gain on acquisitions

95,885

3,418,490

Realized gain on maturities

7,730,983

5,803,303

Change in fair value of life settlements

$

3,135,296

$

24,815,028

 

Total expenses from continuing operations were $18.5 million for the three months ended December 31, 2015 compared to $13.5 million for the same period in 2014.  The increase was primarily related to legal fees of $10.4 million including a one-time payment of $6.5 million relating to the Company's indemnification obligations for the conclusion of the United States Attorney's Office (USAO) Investigation.

The Company reported a net loss from continuing operations of $13.7 million, or $(0.49) per diluted share for the three months ended December 31, 2015, compared to net earnings of $8.7 million, or $0.32 per diluted share, for the same period in 2014. The net loss for the three months ended December 31, 2015 includes an income tax benefit of approximately $1.7 million compared to an income tax expense of $2.6 million for the same period in 2014.

Year Ended December 31, 2015

Total income from continuing operations was $46.9 million for the year ended December 31, 2015 compared to $43.8 million for the same period in 2014. The increase was primarily due to a $2.6 million increase in the change in fair value of life settlements.

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

Year Ended December

31, 2015

Year Ended December

31, 2014

Change in estimated probabilistic cash flows

$

76,707,356

$

72,275,001

Premiums paid during period

(64,923,395)

(55,459,396)

Change in life expectancy evaluation

(20,029,291)

(10,655,781)

Change in discount rates

1,070,696

15,700,091

Unrealized gain on acquisitions

5,951,916

5,855,283

Realized gain on maturities

47,939,749

16,412,596

Change in fair value of life settlements

$

46,717,031

$

44,127,794

 

Total expenses were $86.0 million for the year ended December 31, 2015 compared to $48.8 million for the same period in 2014. The increase was primarily due to a $17.7 million increase in the change in fair value (liability) of the Company's revolving credit facilities due to reduction in the discount rate after amending the White Eagle Revolving Credit Facility, along with projected earlier repayments due to maturities. These were partially offset by increased borrowings, the lengthening of life expectancies of certain insureds underlying policies pledged as collateral in the facility and increases in the projected cost of insurance, an increase in the extinguishment of the senior secured notes totaling $8.8 million, higher interest expense of $11.1 million, as well as higher legal fees of $7.1 million mainly attributable to a one-time payment of  $6.5 million required by the Company's indemnification obligations for the conclusion of the USAO Investigation on December 31, 2015.

The Company reported a net loss from continuing operations of $30.4 million, or $(1.22) per diluted share, for the year ended December 31, 2015, compared to a net loss of $5.2 million, or $(0.24) per diluted share, for the same period in 2014. The net loss for the year ended December 31, 2015 includes an income tax benefit of approximately $8.7 million compared to income tax expense of $125,000 for the same period in 2014.

As of December 31, 2015, the Company had cash and cash equivalents of approximately $20.3 million.  The Company had 28,130,508 shares outstanding, treasury shares of 608,000 and an undiluted book value of $8.01 per share at December 31, 2015.

Life Settlements Portfolio Highlights

At December 31, 2015, the estimated fair value of the Company's 632 life insurance policies was $461.9 million compared to $388.9 million for 607 life insurance policies at December 31, 2014. The weighted average discount rate was 17.02% at December 31, 2015 compared to 17.77% at December 31, 2014. The aggregate face value of the Company's portfolio of life insurance policies was approximately $3.0 billion at December 31, 2015. During the fourth quarter, the Company experienced three policy maturities totaling $13.9 million. To date in 2016, the Company has experienced five additional policy maturities totaling $11.0 million. All of the aforementioned maturities occurred within the Company's revolving credit facilities.

Antony Mitchell, Chief Executive Officer of Emergent, commented: "During the quarter, we had what we believe are two seminal events. First, after amending our White Eagle Revolving Credit Facility, we expect to receive significant cash flows the from White Eagle and Red Falcon portfolios over the next three years.  Second, the Justice Department's investigation of certain former employees related to our legacy premium finance business ended with a civil resolution and with no admissions of wrong doing. As a result, we expect our future legal fees to be significantly lower. These two events should dramatically improve our cash management capabilities going forward." Mr. Mitchell continued, "Lastly, today, we announced that we raised over $21.2 million in a private debt offering and expect to raise up to $30.0 million in total."

Conference Call

The Company will be hosting a conference call today at 5:00 P.M. 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 Capital (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 Statement

This 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

For the Years Ended December 31,

2015

2014

(in thousands, except share and per share data)

Income

Interest income

$

22

$

29

Loss on life settlements, net

(41)

(426)

Change in fair value of life settlements

46,717

44,128

Other income

193

85

Total income

46,891

43,816

Expenses

Interest expense

27,286

16,245

Extinguishment of Secured Notes

8,782

Change in fair value of Revolving Credit Facilities

12,197

(5,472)

Change in fair value of conversion derivative liability

6,759

Personnel costs

6,384

8,763

Legal fees

20,739

13,620

Professional fees

7,133

5,254

Insurance

1,275

1,667

Other selling, general and administrative expenses

2,194

2,006

Total expenses

85,990

48,842

Loss from continuing operations before income taxes

(39,099)

(5,026)

(Benefit) provision for income taxes

(8,719)

125

Net loss from continuing operations

$

(30,380)

$

(5,151)

Discontinued Operations:

Loss from discontinued operations

(644)

(601)

Benefit for income taxes

232

Net loss from discontinued operations

(644)

(369)

Net loss

$

(31,024)

$

(5,520)

                 Loss per share:

                        Basic loss per share:

Basic loss per share from continuing operations

$

(1.22)

$

(0.24)

Basic loss per share from discontinued operations

$

(0.03)

$

(0.02)

Basic loss per share available to common shareholders

$

(1.25)

$

(0.26)

                        Diluted loss per share:

       Diluted loss per share from continuing operations

$

(1.22)

$

(0.24)

       Diluted loss per share from discontinued operations

$

(0.03)

$

(0.02)

       Diluted loss per share available to common shareholders

$

(1.25)

$

(0.26)

       Weighted average shares outstanding:

        Basic and diluted

24,851,178

21,354,567

 

Emergent Capital, Inc.

CONSOLIDATED STATEMENTS OF OPERATIONS

For the Three Months Ended December 31,

2015

2014

(in thousands, except share and per share data)

Income

Interest income

$

6

$

7

Loss on life settlements, net

(41)

Change in fair value of life settlements

3,136

24,815

Other income

8

13

Total income

3,109

24,835

Expenses

Interest expense

5,795

5,080

Change in fair value of Revolving Credit Facilities

(1,292)

(915)

Personnel costs

960

2,136

Legal fees

10,394

4,498

Professional fees

1,849

1,692

Insurance

309

414

Other selling, general and administrative expenses

523

641

Total expenses

18,538

13,546

Loss (income) from continuing operations before income taxes

(15,429)

11,289

(Benefit) provision for income taxes

(1,737)

2,577

Net loss (income) from continuing operations

$

(13,692)

$

8,712

Discontinued Operations:

Loss (income) from discontinued operations

(5)

85

Benefit for income taxes

(223)

Net (loss) income from discontinued operations

(228)

85

Net loss (income)

$

(13,920)

$

8,797

                 Earnings per share:

                        Basic (loss) earnings per share:

Basic (loss) income per share from continuing operations

$

(0.49)

$

0.41

Basic loss per share from discontinued operations

$

(0.01)

$

Basic (loss) income per share available to common shareholders

$

(0.50)

$

0.41

                        Diluted (loss) earnings per share:

       Net (loss) income from continuing operations

(13,692)

8,712

       Add: Interest expense associated with convertible debt, net of tax

 

1,448

       Adjusted net (loss) income from continuing operations

(13,692)

10,160

       Net (loss) income from discontinued operations

(228)

85

       Diluted (loss) income per share from continuing operations

$              (0.49)

$         0.32

       Diluted loss per share from discontinued operations

$              (0.01)

       Diluted (loss) income per share available to common shareholders

$              (0.50)

$         0.32

                      Weighted average shares outstanding:

        Basic

27,890,227

21,361,930

       Add: Restricted Stock

26,725

       Add: Convertible debt using the "if converted" method

10,464,941

       Diluted

27,890,227

31,853,596

 

Emergent Capital, Inc.

CONSOLIDATED BALANCE SHEETS

December 31,

2015

2014

(In thousands except share data)

ASSETS

Assets

Cash and cash equivalents

$

12,946

$

51,166

Cash and cash equivalents (VIE)

7,395

3,751

Certificate of deposit

2,501

Prepaid expenses and other assets

1,017

1,502

Deposits - other

1,347

1,340

Deposits on purchases of life settlements

1,630

Structured settlement receivables, at estimated fair value

384

Structured settlement receivables at cost, net

597

Life settlements, at estimated fair value

11,946

82,575

Life settlements, at estimated fair value (VIE)

449,979

306,311

Receivable for maturity of life settlements (VIE)

18,223

4,000

Fixed assets, net

322

355

Investment in affiliates

2,384

2,384

Deferred debt costs, net

1,797

3,936

Total assets

$

509,857

$

459,931

LIABILITIES AND STOCKHOLDERS' EQUITY

Liabilities

Accounts payable and accrued expenses

$

3,051

$

6,140

Accounts payable and accrued expenses (VIE)

419

423

Other liabilities

360

1,256

Interest payable - Convertible Notes

2,272

2,272

Convertible Notes, net of discount

58,609

55,881

Interest payable - Secured Notes

261

Secured Notes, net of discount

24,036

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

169,131

145,831

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

55,658

Deferred tax liability

8,728

Total liabilities

289,500

244,828

Commitments and Contingencies

Stockholders' Equity

Common stock (par value $0.01 per share, 80,000,000 authorized; 28,130,508 and 21,402,990 issued and outstanding as of December 31, 2015 and 2014, respectively)

281

214

Preferred stock (par value $0.01 per share, 40,000,000 authorized; 0 issued and outstanding as of December 31, 2015 and 2014)

Treasury Stock, net of cost (608,000 and 0 shares as of December 31, 2015 and 2014, respectively)

(2,534)

Additional paid-in-capital

305,450

266,705

Accumulated deficit

(82,840)

(51,816)

Total stockholders' equity

220,357

215,103

Total liabilities and stockholders' equity

$

509,857

$

459,931

    

Selected Operating Data (dollars in thousands):

Three Months Ended December 31,

Twelve Months Ended December 31,

2015

2014

2015

2014

Period Acquisitions — Policies Owned

Number of policies acquired

2

14

43

16

Average age of insured at acquisition

71.0

85.3

85.0

85.2

Average life expectancy — Calculated LE (Years)

9.3

6.0

5.4

5.9

Average death benefit

$

485

$

4,053

$

2,811

$

4,444

Aggregate purchase price

$

160

$

12,807

$

30,695

$

16,296

End of Period — Policies Owned

Number of policies owned

632

607

632

607

Average Life Expectancy — Calculated LE (Years)

9.9

10.7

9.9

10.7

Aggregate Death Benefit

$

2,979,352

$

2,931,066

$

2,979,352

$

2,931,066

Aggregate fair value

$

461,925

$

388,886

$

461,925

$

388,886

Monthly premium — average per policy

$

9.1

$

7.8

$

9.1

$

7.8

 

SOURCE Emergent Capital, Inc.



RELATED LINKS

http://www.emergentcapital.com