Press Releases

Emergent Capital, Inc. Announces Third Quarter 2017 Results

BOCA RATON, Fla., Nov. 2, 2017 /PRNewswire/ -- Emergent Capital, Inc. (OTCQB: EMGC) ("Emergent" or the "Company"), today announced its financial results for the three and nine month periods ended September 30, 2017.

Emergent Capital, Inc. logo (PRNewsFoto/Emergent Capital, Inc.)

Three Months Ended September 30, 2017

Total income from continuing operations was $24.5 million for the three month period ended September 30, 2017 compared to $4.8 million for the same period in 2016. Income was impacted by an $11.6 million gain on the maturity of three policies during the quarter compared to a $4.0 million gain on maturity of two policies for the same period in 2016.

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



Three Months Ended
September 30, 2017


Three Months Ended
September 30, 2016

Change in estimated probabilistic cash flows


$

21,779


$

21,143

Premiums paid during period


(21,068)


(18,414)

Change in life expectancy evaluation


(1,388)


(2,008)

Change in discount rates


13,452


Realized gain on maturities


11,597


4,014

Change in fair value of life settlements


$

24,372


$

4,735






 

Total expenses from continuing operations were $17.1 million for the three month period ended September 30, 2017 compared to income of $13.3 million for the same period in 2016. Expenses for the quarter ended September 30, 2017 were impacted by a $1.9 million increase in interest expense associated with increased borrowings and interest rate on the Company's White Eagle Revolving Credit Facility and approximately $2.0 million of loss on extinguishment of debt for the 15.0% Senior Secured Notes. The increase in expense was offset by a reduction in operating expenses of $1.9 million primarily related to a decrease in legal fees and professional fees of approximately $1.0 million and $1.5 million respectively.

Our results were impacted by a tax expense of approximately $3.2 million which comprised estimated cash taxes to be paid of approximately $878,000 and deferred tax expense of approximately $2.3 million.

The Company reduced its headcount from 20 employees to 12 employees during the three months ended September 30, 2017 and recognized a onetime severance cost of approximately $1.0 million related to this reduction, which is included in personnel cost and is being paid over a period of twelve months.

The Company reported net income from continuing operations of $4.2 million, or $0.03 per diluted share for the three month period ended September 30, 2017, compared to a net loss of  $8.5 million, or $(0.31) per diluted share for the same period in 2016.

Nine Months Ended September 30, 2017

Total income from continuing operations for the nine month period ended September 30, 2017 was $53.5 million compared to a loss of $2.6 million during the same period in 2016. Income for the nine months ended September 30, 2017 was comprised mainly of a gain on maturity of ten life settlements of $30.6 million compared to a net gain of $14.8 million on maturity of ten life settlements during the same period in 2016. During the nine months ended September 30, 2016, the Company adopted the 2015 Valuation Basic Tables ("2015 VBT"), smoker and gender distinct tables to determine the value of the policies. The adoption 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 Ended
September 30, 2017


Nine Months Ended
September 30, 2016

Change in estimated probabilistic cash flows


67,563


$

57,762

Premiums paid during period


(63,101)


(52,750)

2015 VBT Adoption



(17,638)

Change in life expectancy evaluation


4,818


(12,252)

Change in discount rates


13,411


7,149

Unrealized gain on acquisitions



262

Realized gain on maturities


30,603


14,777

Change in fair value of life settlements


$

53,294


$

(2,690)















 

Total expenses from continuing operations were $50.7 million for the nine month period ended September 30, 2017 compared to $23.2 million for the same period in 2016. Expenses during the nine months ended September 30, 2016 were significantly impacted by the adoption of the 2015 VBT, which resulted in a $15.7 million reduction in the fair value of the Revolving Credit Facilities.

The Company's expenses for the nine months ended September 30, 2017 were impacted by an increase of $4.1 million in interest expense of which approximately $3.9 million is associated  with increased borrowings on the Company's White Eagle Revolving Credit Facility, $1.9 million for the 8.5% Senior Unsecured Convertible Notes which included a onetime debt modification cost of approximately $2.5 million, offset by a $3.2 million reduction for the Red Falcon Revolving Credit Facility which was repaid in December 2016.  Expenses were also impacted by approximately $6.0 million reduction in operating expenses primarily due to a $2.9 million, $1.9 million and $1.0 million decrease in legal fees, professional fees and personnel costs, respectively, when compared to the nine month period ended September 30, 2016.

Our results were impacted by a tax expense of approximately $3.2 million which comprised estimated cash taxes to be paid of approximately $878,000 and deferred tax expense of approximately $2.3 million.

The Company reported a net loss from continuing operations of $372,000, or $(0.01) per fully diluted share, for the nine month period ended September 30, 2017, compared to a net loss of $25.8 million, or $(0.94) per fully diluted share, for the same period in 2016.

Life Settlements Portfolio Highlights

On September 30, 2017, the estimated fair value of the Company's 611 life insurance policies was $555.2 million compared to $498.4 million for 621 life insurance policies at December 31, 2016. The weighted average discount rate was 15.93% and 16.37% at September 30, 2017 and December 31, 2016, respectively. The aggregate face value of the Company's portfolio of life insurance policies was approximately $2.9 billion on September 30, 2017.

During the quarter, three life insurance policies that served as collateral under the revolving credit facility matured with a face value totaling $16.5 million.

As of September 30, 2017, the Company had cash and cash equivalents and certificates of deposit of $36.7 million and a Book Value per share of $1.28.

About Emergent Capital, Inc.
Emergent (OTCQB: EMGC) 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 (UNAUDITED)



For the Three Months Ended
September 30,


For the Nine Months Ended
September 30,


2017


2016


2017


2016


(in thousands, except share and per share data)

Income


Change in fair value of life settlements

$

24,372



$

4,735



$

53,294



$

(2,690)


Other income

116



32



245



125


Total income

24,488



4,767



53,539



(2,565)


Expenses








Interest expense

9,773



7,895



25,471



21,330


Loss on Extinguishment of Debt

2,018





2,018




Change in fair value of Revolving Credit Facilities

1,163



(551)



11,209



(16,121)


Personnel costs

2,040



1,303



4,174



5,133


Legal fees

821



1,833



2,473



5,361


Professional fees

667



2,136



3,475



5,347


Insurance

198



200



587



639


Other selling, general and administrative expenses

381



494



1,294



1,511


Total expenses

17,061



13,310



50,701



23,200


Income (loss) from continuing operations before
income taxes

7,427



(8,543)



2,838



(25,765)


(Benefit) provision for income taxes

3,210





3,210




Net income (loss) from continuing operations

$

4,217



$

(8,543)



$

(372)



$

(25,765)


Discontinued Operations:








Income (loss) from discontinued operations

(33)



(54)



(257)



(248)


(Benefit) provision for income taxes








Net income (loss) from discontinued operations

(33)



(54)



(257)



(248)


Net income (loss)

$

4,184



$

(8,597)



$

(629)



$

(26,013)


Basic income (loss) per share:








Continuing operations

$

0.04



$

(0.31)



$

(0.01)



$

(0.94)


Discontinued operations

$



$



$



$

(0.01)


Net income (loss) - basic

$

0.04



$

(0.31)



$

(0.01)



$

(0.95)


Diluted income (loss) per share:








Continuing operations

$

0.03



$

(0.31)



$

(0.01)



$

(0.94)


Discontinued operations

$



$



$



$

(0.01)


Net income (loss) - diluted

$

0.03



$

(0.31)



$

(0.01)



$

(0.95)


Weighted average shares outstanding:








Basic

115,462,646



27,614,441



57,580,062



27,529,120


Diluted

137,083,825



27,614,441



57,580,062



27,529,120



 

 

Emergent Capital, Inc.

CONSOLIDATED BALANCE SHEETS



September 30,
 2017


December 31,
 2016*


(Unaudited)




(In thousands except share data)

ASSETS




Assets




Cash and cash equivalents

$

21,689



$

2,246


Cash and cash equivalents (VIE)

14,004



9,072


Certificates of deposit

1,007



6,025


Prepaid expenses and other assets

795



1,112


Deposits - other

1,377



1,347


Life settlements, at estimated fair value

721



680


Life settlements, at estimated fair value (VIE)

554,501



497,720


Receivable for maturity of life settlements (VIE)

30,200



5,000


Fixed assets, net

166



232


Investment in affiliates

2,384



2,384


Total assets

$

626,844



$

525,818


LIABILITIES AND STOCKHOLDERS' EQUITY




Liabilities




Accounts payable and accrued expenses

$

3,024



$

2,590


Accounts payable and accrued expenses (VIE)

832



593


Other liabilities

210



359


Interest payable - 8.5% Convertible Notes

21



2,272


8.5% Convertible Notes, net of discount and deferred debt costs

1,077



60,535


Interest payable - 5.0% Convertible Notes

485




5.0% Convertible Notes,  net of discount and deferred debt costs

68,358




Interest payable - 15.0% Senior Secured Notes



213


15.0% Senior Secured Notes, net of deferred debt costs



29,297


Interest payable - 8.5% Senior Secured Notes

124




8.5% Senior Secured Notes, net of deferred debt costs

33,863




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

316,166



257,085


Deferred tax liability

2,332




Current tax liability

878




Total liabilities

427,370



352,944


Commitments and Contingencies




Stockholders' Equity




Common stock (par value $0.01 per share, 415,000,000 authorized at September 30, 2017 and
80,000,000 at December 31, 2016; 156,572,976 issued and 155,964,976 outstanding as of
September 30, 2017 and 29,021,844 issued and 28,413,844 outstanding as of December 31,
2016

1,565



290


Preferred stock (par value $0.01 per share, 40,000,000 authorized; 0 issued and outstanding as
of September 30, 2017 and December 31, 2016)




Treasury Stock, net of issuance cost (608,000 shares as of September 30, 2017 and December
31, 2016)

(2,534)



(2,534)


Additional paid-in-capital

333,601



307,647


Accumulated deficit

(133,158)



(132,529)


Total stockholders' equity

199,474



172,874


Total liabilities and stockholders' equity

$

626,844



$

525,818



 *      Derived from audited consolidated financial statements.


 

 

Selected Operating Data (dollars in thousands):




Three Months Ended
September 30,


Nine Months Ended
September 30,



2017


2016


2017


2016

Period Acquisitions — Policies Owned









Number of policies acquired








1


Average age of insured at acquisition








90.3


Average life expectancy — Calculated LE (Years)








2.3


Average death benefit


$



$



$



$

690


Aggregate purchase price


$



$



$



$

16


End of Period — Policies Owned









Number of policies owned


611



623



611



623


Average age of insured


83.2



82.2



83.2



82.2


Average death benefit per policy


$

4,726



$

4,741



$

4,726



$

4,741


Average Life Expectancy — Calculated LE (Years)


8.5



9.2



8.5



9.2


Aggregate Death Benefit


$

2,887,827



$

2,953,796



$

2,887,827



$

2,953,796


Aggregate fair value


$

555,222



$

483,395



$

555,222



$

483,395


Monthly premium — average per policy


$

11.8



$

10.6



$

11.8



$

10.6


Period Maturities









Number of policies matured


3



2



10



10


Average age of insured at maturity


80.3



85.2



82.6



85.6


Average life expectancy - Calculated LE (Years)


6.8



1.8



4.4



3.7


Aggregate death benefit


$

16,500



$

12,800



$

59,573



$

29,980


Gains on maturity


$

11,597



$

4,014



$

30,603



$

14,777


Proceeds collected


$

8,200



$

7,000



$

34,373



$

27,980


 

 

SOURCE Emergent Capital, Inc.

For further information: Steve Scott, Emergent Capital, Inc., Director, Life Finances, 561.995.4240, IR@emergentcapital.com, www.emergentcapital.com

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