Imperial Holdings, Inc. Announces Fourth Quarter and Year End 2012 Results
Company Closes on $45 Million Bridge Facility
Boca Raton, FL, March 27, 2013 – Imperial Holdings, Inc. (NYSE: IFT) (“Imperial” or the “Company”), a specialty finance company with a focus on providing liquidity solutions to owners of illiquid financial assets, announced today financial results for its fourth quarter and fiscal year ended December 31, 2012.
Quarter Ended December 31, 2012
Total income was $7.2 million for the three months ended December 31, 2012, compared to total income of ($8.1 million) for the three months ended December 31, 2011, an increase of $15.3 million. Total expenses were $10.9 million for the three months ended December 31, 2012 compared to $31.9 million for the three months ended December 31, 2011, a decrease of $21 million. The majority of the decrease in expenses was attributed to significantly lower legal fees related to a government investigation. The Company posted a net loss of $3.7 million, or ($.17), per fully diluted share for the three months ended December 31, 2012, compared to a net loss of $38.7 million, or ($1.82), per fully diluted share, for the three months ended December 31, 2011.
In the Life Finance business segment, income was $3.1 million for the fourth quarter of 2012 compared to income of ($12.1 million) for the fourth quarter of 2011, an increase of $15.2 million. Income was driven by a $2.7 million increase in the fair value of the Company’s portfolio of 214 life insurance policies. At December 31, 2012 the estimated fair value of the Company’s life insurance policies was $113.4 million. The weighted average discount rate used in the Company’s fair value model was 24.01% at December 31, 2012. The aggregate face value of the Company’s portfolio of life insurance policies was $1.1 billion at December 31, 2012. Segment expenses were $4.1 million during the three months ended December 31, 2012 compared to $9.8 million during the three months ended December 31, 2011, a decline of $5.7 million.
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The decrease in expenses was attributed to lower interest expense, amortization of deferred costs and personnel costs, as well as a decrease in the Company’s provision for loan losses. Segment operating loss was $979,000 for the three months ended December 31, 2012, a decrease of $21.0 million over segment operating loss of $22.0 million for the three months ended December 31, 2011.
In the Structured Settlement business segment, income was $4.0 million for the three months ended December 31, 2012 compared to $3.8 million for the three months ended December 31, 2011. Segment expenses decreased by $2.0 million to $4.7 million for the fourth quarter of 2012 compared to $6.7 million in the year ago period. The decrease was attributed to lower marketing costs and general and administrative expenses. Segment operating loss was $660,000 for the three months ended December 31, 2012 compared to a segment operating loss of $2.9 million for the three months ended December 31, 2011. The Company originated 209 transactions during the fourth quarter of 2012 compared to 255 during the same period of 2011.
Full Year Ended December 31, 2012
Total income was $19.1 million for the year ended December 31, 2012, a 57% decrease over total income of $44.2 million for 2011. Total expenses were $63.8 million for the year ended December 31, 2012 compared to total expenses of $83.4 million for 2011, a reduction of $19.6 million, or 24%. Net loss for the year ended December 31, 2012 was $44.6 million, or ($2.10) per share compared to a net loss of $39.2 million or ($2.03) per share for 2011, an increase of $5.5 million or 14%.
As of December 31, 2012, the Company had $20.3 million of cash and cash equivalents, and marketable securities. The book value of the Company at December 31, 2012 was $5.97 per share.
$45 Million Bridge Financing
The Company also announced today it has closed on its previously announced $45 million bridge facility. The facility was provided by affiliates of some of the Company’s largest shareholders, including Indaba Capital Management, Nantahala Capital Management, NS Advisors and Brooklyn Capital Management (a/k/a Bulldog Investors).
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Antony Mitchell, Chief Executive Officer, commented, “We ended 2012 with positive momentum in both our Life Finance and Structured Settlements business segments. During the quarter we benefited from an increase in the fair value of our life settlement assets, as well as significantly lower legal expenses.” Mr. Mitchell added, “More recently, we successfully completed our previously announced $45 million financing facility with some of our major shareholders. It will ensure our ability to make premium payments on our life insurance policies into 2014. The facility also provides us with additional flexibility as we progress towards sourcing a longer term financing solution.”
About Imperial Holdings, Inc.
Imperial is a leading specialty finance company that, through its operating subsidiaries, provides customized liquidity solutions to owners of illiquid financial assets. Imperial’s primary operating units are Life Finance and Structured Settlements. In its Life Finance unit, Imperial purchases and sells life insurance policies. In its Structured Settlements unit, Imperial purchases from individuals long-term annuity payments issued by highly rated U.S. insurance companies. More information about Imperial can be found at www.imperial.com.
Safe Harbor Statement
This press release may contain certain “forward-looking statements” relating to the business of Imperial Holdings, 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 Imperial 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. Imperial’s actual results could differ materially from those anticipated in these forward-looking statements as a result of a variety of factors, unanticipated issues that prevent or delay the Company’s independent registered public accounting firm from concluding its procedures for the year ended December 31, 2012 or that require additional efforts, procedures or review; the investigation by the Securities and Exchange Commission, and potential adverse outcomes associated with the investigation, including payments or fines the Company may be required to make, restrictions placed upon the Company and legal proceedings that may relate to these matters; the possibility that payments due to the Company under certain policies may be delayed; the Company’s ongoing compliance with the coverage ratios and other covenants in the bridge facility; the Company’s ability to repay the bridge facility and to raise other sources of capital; unanticipated issues that prevent or delay the Company from entering into the previously announced settlements of certain shareholder related matters and the amount of legal and indemnification expenses associated with those matters and the investigation into the Company’s premium finance business; and the accuracy of actuarial assumptions underlying the Company’s models. All forward-looking statements attributable to Imperial or persons acting on its behalf are expressly qualified in their entirety by these factors. Other than as required under the securities laws, Imperial does not assume a duty to update these forward-looking statements.
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Contact:
David Sasso
Imperial Holdings, Inc.
Director- Investor Relations
561.672.6114
IR@imperial.com
www.imperial.com
-SELECTED FINANCIAL TABLES FOLLOW-
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Imperial Holdings, Inc. and Subsidiaries
CONSOLIDATED AND COMBINED BALANCE SHEETS
December 31,
| 2012 | 2011 | |||||||
| (In thousands except share data) | ||||||||
| ASSETS | ||||||||
| Assets |
||||||||
| Cash and cash equivalents |
$ | 7,001 | $ | 16,255 | ||||
| Restricted cash |
1,162 | 691 | ||||||
| Certificate of deposit - restricted |
— | 891 | ||||||
| Investment securities available for sale, at estimated fair value |
12,147 | 57,242 | ||||||
| Deferred costs, net |
7 | 1,874 | ||||||
| Prepaid expenses and other assets |
14,165 | 3,277 | ||||||
| Deposits - other |
2,855 | 761 | ||||||
| Interest receivable, net |
822 | 5,758 | ||||||
| Loans receivable, net |
3,044 | 29,376 | ||||||
| Structured settlement receivables at estimated fair value |
1,680 | 12,376 | ||||||
| Structured settlement receivables at cost, net |
1,574 | 1,553 | ||||||
| Investment in life settlements, at estimated fair value |
113,441 | 90,917 | ||||||
| Fixed assets, net |
232 | 585 | ||||||
| Investment in Affiliates |
2,212 | 1,043 | ||||||
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|
|
|
|
|||||
| Total assets |
$ | 160,342 | $ | 222,599 | ||||
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|
|
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| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Liabilities |
||||||||
| Accounts payable and accrued expenses |
$ | 6,606 | $ | 16,336 | ||||
| Other liabilities |
20,796 | 4,279 | ||||||
| Interest payable |
— | 5,505 | ||||||
| Notes payable |
— | 19,277 | ||||||
| Income taxes payable |
6,295 | 6,295 | ||||||
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|
|
|
|
|||||
| Total liabilities |
33,697 | 51,692 | ||||||
| Stockholders’ Equity |
||||||||
| Common stock (80,000,000 authorized; 21,206,121 and 21,202,614 issued and outstanding as of December 31, 2012 and 2011, respectively) |
212 | 212 | ||||||
| Additional paid-in-capital |
238,064 | 237,755 | ||||||
| Accumulated other comprehensive loss |
(3 | ) | (66 | ) | ||||
| Accumulated deficit |
(111,628 | ) | (66,994 | ) | ||||
|
|
|
|
|
|||||
| Total stockholders’ equity |
126,645 | 170,907 | ||||||
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|
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| Total liabilities and stockholders’ equity |
$ | 160,342 | $ | 222,599 | ||||
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Imperial Holdings, Inc. and Subsidiaries
CONSOLIDATED UNAUDITED STATEMENTS OF OPERATIONS
For the Fourth Quarter Ended December 31,
| 2012 | 2011 | |||||||
| (in thousands, except share and per share data) | ||||||||
| Income |
||||||||
| Agency fee income |
$ | — | $ | (94 | ) | |||
| Interest income |
158 | 1,274 | ||||||
| Interest and dividends on investment securities available for sale |
60 | 199 | ||||||
| Origination fee income |
17 | 622 | ||||||
| Realized gain on sale of structured settlements |
3,713 | 360 | ||||||
| Gain on forgiveness of debt |
— | 143 | ||||||
| Unrealized change in fair value of life settlements |
2,741 | (14,241 | ) | |||||
| Unrealized change in fair value of structured settlements |
236 | 3,157 | ||||||
| Servicing fee income |
228 | 367 | ||||||
| Other income |
92 | 117 | ||||||
|
|
|
|
|
|||||
| Total income |
7,245 | (8,096 | ) | |||||
|
|
|
|
|
|||||
| Expenses |
||||||||
| Interest expense |
36 | 1,095 | ||||||
| Provision for losses on loans receivable |
74 | 3,876 | ||||||
| Loss on loan payoffs and settlements, net |
111 | (90 | ) | |||||
| Amortization of deferred costs |
116 | 1,164 | ||||||
| Personnel costs |
3,770 | 4,775 | ||||||
| Marketing costs |
542 | 1,919 | ||||||
| Department of Justice Settlement |
— | 8,000 | ||||||
| Legal fees |
3,135 | 7,910 | ||||||
| Professional fees |
1,662 | 1,533 | ||||||
| Insurance |
618 | 208 | ||||||
| Other selling, general and administrative expenses |
838 | 1,548 | ||||||
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|
|
|
|
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| Total expenses |
10,902 | 31,938 | ||||||
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|
|
|
|
|||||
| Loss before income taxes |
(3,657 | ) | (40,034 | ) | ||||
| Provision (benefit) for income taxes |
6 | (1,352 | ) | |||||
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|
|
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| Net loss |
$ | (3,663 | ) | $ | (38,682 | ) | ||
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| Loss per share: |
||||||||
| Basic |
$ | (0.17 | ) | $ | (1.82 | ) | ||
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| Diluted |
$ | (0.17 | ) | $ | (1.82 | ) | ||
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| Weighted average shares outstanding: |
||||||||
| Basic |
21,206,121 | 21,202,614 | ||||||
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| Diluted |
21,206,121 | 21,202,614 | ||||||
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Imperial Holdings, Inc. and Subsidiaries
CONSOLIDATED UNAUDITED STATEMENTS OF OPERATIONS
For the Year Ended December 31,
| 2012 | 2011 | |||||||
| (in thousands, except share and per share data) | ||||||||
| Income |
||||||||
| Agency fee income |
$ | — | $ | 6,470 | ||||
| Interest income |
2,014 | 8,303 | ||||||
| Interest and dividends on investment securities available for sale |
391 | 640 | ||||||
| Origination fee income |
500 | 6,480 | ||||||
| Realized gain on sale of structured settlements |
11,509 | 5,817 | ||||||
| Realized gain on life settlements, net |
151 | 5 | ||||||
| Gain on forgiveness of debt |
— | 5,023 | ||||||
| Unrealized change in fair value of life settlements |
(5,660 | ) | 570 | |||||
| Unrealized change in fair value of structured settlements |
1,823 | 5,302 | ||||||
| Servicing fee income |
1,183 | 1,814 | ||||||
| Gain on maturities of life settlements with subrogation rights, net |
6,090 | 3,188 | ||||||
| Other income |
1,082 | 602 | ||||||
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|
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| Total income |
19,083 | 44,214 | ||||||
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| Expenses |
||||||||
| Interest expense |
1,255 | 8,524 | ||||||
| Provision for losses on loans receivable |
515 | 7,589 | ||||||
| Loss on loan payoffs and settlements, net |
125 | 3,837 | ||||||
| Amortization of deferred costs |
1,867 | 6,076 | ||||||
| Personnel costs |
16,087 | 18,933 | ||||||
| Marketing costs |
5,023 | 6,104 | ||||||
| Department of Justice Settlement |
— | 8,000 | ||||||
| Legal fees |
26,053 | 12,097 | ||||||
| Professional fees |
6,934 | 5,684 | ||||||
| Insurance |
2,330 | 756 | ||||||
| Other selling, general and administrative expenses |
3,567 | 5,812 | ||||||
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|
|
|
|
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| Total expenses |
63,756 | 83,412 | ||||||
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|
|
|
|
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| Loss before income taxes |
(44,673 | ) | (39,198 | ) | ||||
| Provision (benefit) for income taxes |
(39 | ) | — | |||||
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|
|
|||||
| Net loss |
$ | (44,634 | ) | $ | (39,198 | ) | ||
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|
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| Loss per share: |
||||||||
| Basic |
$ | (2.10 | ) | $ | (2.03 | ) | ||
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| Diluted |
$ | (2.10 | ) | $ | (2.03 | ) | ||
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| Weighted average shares outstanding: |
||||||||
| Basic |
21,205,747 | 19,352,063 | ||||||
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| Diluted |
21,205,747 | 19,352,063 | ||||||
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Life Finance Segment- Selected Operating Data
| For the Three Months Ended December 31, |
For the Twelve Months Ended December 31, |
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| 2012 | 2011 | 2012 | 2011 | |||||||||||||
| Period Acquisitions — Policies Owned |
||||||||||||||||
| Number of policies acquired |
2 | 20 | 31 | 151 | ||||||||||||
| Average age of insured at acquisition |
80.0 | 76.3 | 75.5 | 78.0 | ||||||||||||
| Average life expectancy - Calculated LE (Years) |
11.2 | 11.7 | 13.2 | 10.4 | ||||||||||||
| Average death benefit |
$ | 7,500 | $ | 4,099 | $ | 5,354 | $ | 4,929 | ||||||||
| Aggregate purchase price |
$ | 674 | $ | 6,734 | $ | 5,708 | $ | 56,889 | ||||||||
| End of Period — Policies Owned |
||||||||||||||||
| Number of policies owned |
214 | 190 | 214 | 190 | ||||||||||||
| Average Life Expectancy - Calculated LE (Years) |
10.6 | 10.6 | 10.6 | 10.6 | ||||||||||||
| Aggregate Death Benefit |
$ | 1,073,156 | $ | 935,466 | $ | 1,073,156 | $ | 935,466 | ||||||||
| Aggregate fair value |
$ | 113,441 | $ | 90,917 | $ | 113,441 | $ | 90,917 | ||||||||
| Monthly premium — average per policy |
$ | 10.9 | $ | 10.7 | $ | 10.9 | $ | 10.7 | ||||||||
| End of Period Loan Portfolio |
||||||||||||||||
| Loans receivable, net |
$ | 3,044 | $ | 29,376 | $ | 3,044 | $ | 29,376 | ||||||||
| Number of policies underlying loans receivable |
22 | 138 | 22 | 138 | ||||||||||||
| Aggregate death benefit of policies underlying loans receivable |
$ | 89,650 | $ | 653,493 | $ | 89,650 | $ | 653,493 | ||||||||
| Number of loans with insurance protection |
5 | 91 | 5 | 91 | ||||||||||||
| Loans receivable, net (insured loans only) |
$ | 91 | $ | 20,785 | $ | 91 | $ | 20,785 | ||||||||
| Average Per Loan: |
||||||||||||||||
| Age of insured in loans receivable |
75.5 | 75.0 | 75.5 | 75.0 | ||||||||||||
| Life expectancy of insured (years) |
15.7 | 15.6 | 15.7 | 15.6 | ||||||||||||
| Monthly premium |
$ | 5 | $ | 6 | $ | 5 | $ | 6 | ||||||||
| Loan receivable, net |
$ | 138 | $ | 213 | $ | 138 | $ | 213 | ||||||||
| Interest rate |
13.0 | % | 12.3 | % | 13.0 | % | 12.3 | % | ||||||||
Dollar amounts in thousands
Structured Settlments Segment- Selected Operating Data
| For the Three Months Ended December 31, |
For the Twelve Months Ended December 31, |
|||||||||||||||
| 2012 | 2011 | 2012 | 2011 | |||||||||||||
| Period Originations: |
||||||||||||||||
| Number of transactions |
209 | 255 | 965 | 873 | ||||||||||||
| Number of transactions from repeat customers |
70 | 89 | 333 | 307 | ||||||||||||
| Average purchase discount rate |
18.3 | % | 18.5 | % | 18.7 | % | 18.2 | % | ||||||||
| Face value of undiscounted future payments purchased |
$ | 30,571 | $ | 28,880 | $ | 130,136 | $ | 96,628 | ||||||||
| Amount paid for settlements purchased |
$ | 7,052 | $ | 5,879 | $ | 24,571 | $ | 20,303 | ||||||||
| Marketing costs |
$ | 542 | $ | 1,972 | $ | 5,023 | $ | 6,087 | ||||||||
| Selling, general and administrative (excluding marketing costs) |
$ | 4,131 | $ | 3,951 | $ | 16,524 | $ | 15,864 | ||||||||
| Average Per Origination During Period: |
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| Face value of undiscounted future payments purchased |
$ | 146 | $ | 113 | $ | 135 | $ | 111 | ||||||||
| Amount paid for settlement purchased |
$ | 34 | $ | 23 | $ | 25 | $ | 23 | ||||||||
| Time from funding to maturity (months) |
142.8 | 152.7 | 132.1 | 152.1 | ||||||||||||
| Marketing cost per transaction |
$ | 3 | $ | 8 | $ | 5 | $ | 7 | ||||||||
| Segment selling, general and administrative (excluding marketing costs) per transaction |
$ | 20 | $ | 15 | $ | 17 | $ | 18 | ||||||||
| Period Sales: |
||||||||||||||||
| Number of transactions originated and sold |
247 | 15 | 939 | 601 | ||||||||||||
| Realized gain on sale of structured settlements |
$ | 3,713 | $ | 360 | $ | 11,509 | $ | 5,817 | ||||||||
| Average sale discount rate |
10.3 | % | 17.4 | % | 10.6 | % | 10.5 | % | ||||||||
| End of Period Portfolio: |
||||||||||||||||
| Number of transactions on balance sheet |
90 | 356 | 90 | 356 | ||||||||||||
Dollar amounts in thousands