Emergent Capital, Inc. Announces First Quarter 2016 Results
Boca Raton, Fla., May 9, 2016 – Emergent Capital, Inc. (NYSE: EMG) ("Emergent " or the "Company"), today announced its financial results for the three month period ended March 31, 2016.
Three Months Ended March 31, 2016
Total income from continuing operations was $8.5 million for the three month period ended March 31, 2016 compared to income from continuing operations of $13.0 million for the same period in 2015. This decrease was primarily due to a $3.4 million reduction in realized gains from policy maturities.
The following table provides a summary of the components of income from the Company's life settlements.
Three Months Ended March 31, 2016 | Three Months Ended March 31, 2015 | |||||||
Change in estimated probabilistic cash flows | $ | 18,828,990 | $ | 21,093,601 | ||||
Premiums paid during period | (16,653,465) | (15,528,155) | ||||||
Change in life expectancy evaluation | (2,066,712) | (11,092,090) | ||||||
Change in discount rates | — | 3,332,671 | ||||||
Unrealized gain on acquisitions | — | 3,420,895 | ||||||
Realized gain on maturities | 8,278,763 | 11,685,383 | ||||||
Change in fair value of life settlements | $ | 8,387,576 | $ | 12,912,305 | ||||
Total expenses from continuing operations were $15.9 million for the three month period ended March 31, 2016 compared to $19.1 million for the same period in 2015. The decrease was primarily related to a reduction of $1.9 million in legal expenses and $680,000 in professional fees. The decrease in legal fees was primarily related to the USAO Investigation that concluded on December 31, 2015.
The Company reported a net loss from continuing operations of $7.4 million, or $(0.27) per diluted share for the three month period ended March 31, 2016, compared to a net loss of $4.2 million, or $(0.19) per diluted share for the same period in 2015. The net loss for the three month period ended March 31, 2015 includes an income tax benefit of approximately $1.9 million. There was no tax benefit included in the net loss for the three month period ended March 31, 2016.
Life Settlements Portfolio Highlights
On March 31, 2016, the estimated fair value of the Company’s 626 life insurance policies was $475.4 million compared to $461.9 million for 632 life insurance policies on December 31, 2015. The weighted average discount rate was 16.92% on March 31, 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 March 31, 2016. During the quarter, six life insurance policies that served as collateral under the revolving credit facilities matured totaling $13.0 million.
Antony Mitchell, Chief Executive Officer of Emergent, commented: “We remain keenly focused on reducing our cash expenses going forward. In the first quarter we benefited from lower operating expenses, excluding interest and other related financing costs, which resulted in a $2.9 million, or 34%, reduction year over year.” Mr. Mitchell continued, "Looking ahead, we expect cash costs to decline further while we look for opportunities to maximize value from our maturing portfolio."
As of March 31, 2016 the Company had cash and cash equivalents of $47.9 million and a Book Value per share of $7.74.
Conference Call
The Company will be hosting a conference call today at 4:30pm 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.
Company Contact:
David Sasso
Emergent Capital, Inc.
Senior Vice President, Corporate Development & Investor Relations
561.995.4300
IR@emergentcapital.com
www.emergentcapital.com
# # #
-SELECTED FINANCIAL TABLES FOLLOW-
Emergent Capital, Inc.
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
For the Three Months Ended March 31, | ||||||||
2016 | 2015 | |||||||
(in thousands, except share and per share data) | ||||||||
Income | ||||||||
Change in fair value of life settlements | 8,388 | 12,912 | ||||||
Other income | 66 | 68 | ||||||
Total income (loss) | 8,454 | 12,980 | ||||||
Expenses | ||||||||
Interest expense | 6,050 | 6,278 | ||||||
Change in fair value of Revolving Credit Facilities | 4,097 | 4,139 | ||||||
Personnel costs | 1,557 | 1,728 | ||||||
Legal fees | 1,818 | 3,761 | ||||||
Professional fees | 1,643 | 2,323 | ||||||
Insurance | 244 | 346 | ||||||
Other selling, general and administrative expenses | 490 | 507 | ||||||
Total expenses | 15,899 | 19,082 | ||||||
Income (loss) from continuing operations before income taxes | (7,445 | ) | (6,102 | ) | ||||
Benefit for income taxes | — | 1,937 | ||||||
Net income (loss) from continuing operations | $ | (7,445 | ) | $ | (4,165 | ) | ||
Discontinued Operations: | ||||||||
Income (loss) from discontinued operations | (68 | ) | (256 | ) | ||||
Benefit for income taxes | — | 99 | ||||||
Net income (loss) from discontinued operations | (68 | ) | (157 | ) | ||||
Net income (loss) | $ | (7,513 | ) | $ | (4,322 | ) | ||
Basic and diluted income (loss) per share: | ||||||||
Continuing operations | $ | (0.27 | ) | $ | (0.19 | ) | ||
Discontinued operations | $ | — | $ | (0.01 | ) | |||
Net income (loss) from continuing operations | $ | (0.27 | ) | $ | (0.20 | ) | ||
Weighted average shares outstanding: | ||||||||
Basic and Diluted | 27,481,249 | 21,361,930 | ||||||
Emergent Capital, Inc.
CONSOLIDATED BALANCE SHEETS
March 31, 2016 | December 31, 2015* | ||||||
(Unaudited) | |||||||
(In thousands except share data) | |||||||
ASSETS | |||||||
Assets | |||||||
Cash and cash equivalents | $ | 32,450 | $ | 12,946 | |||
Cash and cash equivalents (VIE) | 15,446 | 7,395 | |||||
Certificate of deposit | 2,502 | 2,501 | |||||
Prepaid expenses and other assets | 1,687 | 1,017 | |||||
Deposits - other | 1,347 | 1,347 | |||||
Deposits - other (VIE) | 150 | — | |||||
Deposits on purchases of life settlements | 31 | — | |||||
Life settlements, at estimated fair value | 14,490 | 11,946 | |||||
Life settlements, at estimated fair value (VIE) | 460,870 | 449,979 | |||||
Receivable for maturity of life settlements (VIE) | 15,588 | 18,223 | |||||
Fixed assets, net | 302 | 322 | |||||
Investment in affiliates | 2,384 | 2,384 | |||||
Total assets | $ | 547,247 | $ | 508,060 | |||
LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||
Liabilities | |||||||
Accounts payable and accrued expenses | $ | 4,479 | $ | 3,051 | |||
Accounts payable and accrued expenses (VIE) | 436 | 419 | |||||
Other liabilities | 1,732 | 360 | |||||
Interest payable - Convertible Notes | 768 | 2,272 | |||||
Convertible Notes, net of discount and deferred debt costs | 57,673 | 56,812 | |||||
Interest payable - Senior Secured Notes | 215 | — | |||||
Senior Secured Notes, net of discount and deferred debt costs | 29,069 | — | |||||
White Eagle Revolving Credit Facility, at estimated fair value (VIE) | 182,311 | 169,131 | |||||
Red Falcon Revolving Credit Facility, at estimated fair value (VIE) | 57,660 | 55,658 | |||||
Total liabilities | 334,343 | 287,703 | |||||
Commitments and Contingencies | |||||||
Stockholders’ Equity | |||||||
Common stock (par value $0.01 per share, 80,000,000 authorized; 28,130,508 issued and 27,522,508 outstanding as of March 31, 2016 and December 31, 2015) | 281 | 281 | |||||
Preferred stock (par value $0.01 per share, 40,000,000 authorized; 0 issued and outstanding as of March 31, 2016 and December 31, 2015) | — | — | |||||
Treasury Stock, net of cost (608,000 shares as of March 31, 2016 and December 31, 2015) | (2,534 | ) | (2,534 | ) | |||
Additional paid-in-capital | 305,510 | 305,450 | |||||
Accumulated deficit | (90,353 | ) | (82,840 | ) | |||
Total stockholders’ equity | 212,904 | 220,357 | |||||
Total liabilities and stockholders’ equity | $ | 547,247 | $ | 508,060 | |||
* Derived from audited consolidated financial statements.
Selected Operating Data (dollars in thousands):
Three Months Ended March 31, | |||||||||
2016 | 2015 | ||||||||
Period Acquisitions — Policies Owned | |||||||||
Number of policies acquired | — | 30 | |||||||
Average age of insured at acquisition | — | 86.0 | |||||||
Average life expectancy — Calculated LE (Years) | — | 5.0 | |||||||
Average death benefit | $ | — | $ | 2,798 | |||||
Aggregate purchase price | $ | — | $ | 25,411 | |||||
End of Period — Policies Owned | |||||||||
Number of policies owned | 626 | 632 | |||||||
Average Life Expectancy — Calculated LE (Years) | 9.7 | 10.4 | |||||||
Aggregate Death Benefit | $ | 2,969,670 | $ | 3,001,987 | |||||
Aggregate fair value | $ | 475,360 | $ | 429,550 | |||||
Monthly premium — average per policy | $ | 9.6 | $ | 8.2 | |||||
Period Maturities | |||||||||
Number of policies matured | 6 | 5 | |||||||
Average age of insured at maturity | 85 | 83 | |||||||
Average life expectancy - Calculated LE (Years) | 5.5 | 9.8 | |||||||
Aggregate death benefit | $ | 12,980 | $ | 13,188 | |||||
Gains on maturity | $ | 8,279 | $ | 11,685 | |||||
Proceeds collected | $ | 15,480 | $ | 13,000 | |||||
Company Contact:
David Sasso
Emergent Capital, Inc.
Senior Vice President, Corporate Development & Investor Relations
561.995.4300
IR@emergentcapital.com
www.emergentcapital.com