Emergent Capital, Inc. Announces Third Quarter 2018 Results

BOCA RATON, FL / ACCESSWIRE / November 16, 2018 / Emergent Capital, Inc. (OTCQX: EMGC) (“Emergent” or the “Company”), today announced its financial results for the three month and nine month periods ended September 30, 2018.

Third Quarter 2018 Financial Highlights

Total income from continuing operations was $29.7 million for the three month period ended September 30, 2018 compared to $24.5 million for the same period in 2017. Income was impacted by a $20.1 million gain on the maturity of six policies during the quarter compared to an $11.6 million gain on maturity of three policies for the same period in 2017.

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

Three Months Ended September 30, 2018

Three Months Ended September 30, 2017

Change in estimated probabilistic cash flows

$
23,363

$
21,779

Premiums paid during period

(22,681
)

(21,068
)

Change in life expectancy evaluation

845

(1,388
)

Change in discount rates

7,681

13,452

Realized gain on maturities

20,091

11,597

Change in fair value of life settlements

$
29,299

$
24,372

Total expenses from continuing operations were $18.0 million for the three month period ended September 30, 2018 compared to $17.1 million for the same period in 2017. The increase was primarily attributable to an increase of $5.4 million on the loss in fair value of the White Eagle Revolving Credit Facility, $1.1 million increase in professional fees offset mainly by a $2.0 million loss on extinguishment of debt, $1.8 million decrease in interest expense and $1.4 million decrease in personnel costs.

Our results for the three months ended September 30, 2018 was impacted by a net tax benefit of approximately $2.5 million which includes an estimated tax expense of approximately $584,000 which represents cash taxes paid during the period and reversal of estimated tax expense from prior quarter of approximately $3.1 million.

The Company reported net income from continuing operations of $14.3 million, or $0.07 per diluted share, for the three month period ended September 30, 2018, compared to a net income of $4.2 million, or $0.03 per diluted share, for the same period in 2017.

Nine Months Ended September 30, 2018

Total income from continuing operations was $40.9 million for the nine month period ended September 30, 2018 compared to $53.5 million for the same period in 2017. Income was impacted by a $48.1 million gain on the maturity of eighteen policies during the quarter compared to a $30.6 million gain on maturity of ten policies for the same period in 2017.

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

Nine Months Ended September 30, 2018

Nine Months Ended September 30, 2017

Change in estimated probabilistic cash flows

$
69,501

$
67,563

Premiums paid during period

(67,577
)

(63,101
)

Change in life expectancy evaluation

(19,058
)

4,818

Change in discount rates

9,263

13,411

Realized gain on maturities

48,091

30,603

Change in fair value of life settlements

$
40,220

$
53,294

Total expenses from continuing operations were $39.6 million for the nine month period ended September 30, 2018 compared to $50.7 million for the same period in 2017. The decrease was primarily attributable to a $7.0 million decrease on the loss in fair value of the White Eagle Revolving Credit Facility, $2.1 million decrease in interest expense, $2.0 million in loss on the extinguishment of debt and $1.8 million decrease in personnel costs, offset by increases of $1.2 million in professional fees and $607,000 in legal fees.

Our results for the nine months ended September 30, 2018 was impacted by tax expense of approximately $584,000 relating to cash taxes paid during the period.

The Company reported net income from continuing operations of $689,000, or $0.00 per diluted share, for the nine month period ended September 30, 2018, compared to a net loss of $372,000, or $(0.01) per diluted share, for the same period in 2017.

Life Settlements Portfolio Highlights

On September 30, 2018, the estimated fair value of the Company’s 590 life insurance policies was $588.9 million compared to $567.5 million for 608 life insurance policies at December 31, 2017. The weighted average discount rate was 15.66% and 15.95% at September 30, 2018 and December 31, 2017, respectively. The aggregate face value of the Company’s portfolio of life insurance policies was approximately $2.8 billion on September 30, 2018.

During the quarter ended September 30, 2018, six life insurance policies that served as collateral under the White Eagle Revolving Credit Facility matured with a face value totaling $32.5 million.

As of September 30, 2018, the Company had cash and cash equivalents and certificates of deposit of $32.6 million and a book value per share of $1.25.

On November 14, 2018, two of Emergent’s subsidiaries, White Eagle General Partner, LLC and Lamington Road Designated Activity Company, chose to commence voluntary chapter 11 bankruptcy proceedings in the U.S. Bankruptcy Court for the District of Delaware. The filings were authorized in order to protect Emergent’s ultimate ownership interests in White Eagle Asset Portfolio, LP (“White Eagle”), which is the entity that owns substantially all of the Company’s portfolio of life insurance policies. Emergent’s indirect interests in White Eagle, which are held through White Eagle General Partner, LLC and Lamington Road Designated Activity Company, were at risk as a result of the possibility that the lender to White Eagle, an affiliate of Beal Bank, may have unilaterally, and without any advance notice, taken voting control of White Eagle under the auspices of an asserted and unjustified technical event of default. Subsequent to such filings, White Eagle and the lender entered into a standstill agreement through 12:00 p.m. Noon Pacific time on November 26, 2018, to facilitate negotiations.

About Emergent Capital, Inc.

Emergent (OTCQX: 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.

Company Contact:

Investor Relations
Rob Fink
Hayden IR
646.415.8972
IR@emergentcapital.com
www.emergentcapital.com

-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,

2018

2017

2018

2017

(in thousands, except share and per share
data)

Income

Change in fair value of life settlements

$
29,299

$
24,372

$
40,219

$
53,294

Other income

415

116

649

245

Total income

29,714

24,488

40,868

53,539

Expenses

Interest expense

7,982

9,773

23,383

25,471

Loss
on extinguishment of debt

–

2,018

–

2,018

Change in fair value of White Eagle Revolving Credit Facility

6,566

1,163

4,189

11,209

Personnel costs

623

2,040

2,329

4,174

Legal fees

446

821

3,080

2,473

Professional fees

1,755

667

4,654

3,475

Insurance

193

198

590

587

Other selling, general and administrative expenses

398

381

1,370

1,294

Total expenses

17,963

17,061

39,595

50,701

Income (loss) from continuing operations before income taxes

11,751

7,427

1,273

2,838

(Benefit) provision for income taxes

(2,537
)

3,210

584

3,210

Net
income (loss) from continuing operations

$
14,288

$
4,217

$
689

$
(372
)

Discontinued Operations:

Income (loss) from discontinued operations before income taxes

(13
)

(33
)

(18
)

(257
)

(Benefit) provision for income taxes

–

Net
income (loss) from discontinued operations

(13
)

(33
)

(18
)

(257
)

Net
income (loss)

$
14,275

$
4,184

$
671

$
(629
)

Basic income (loss) per share:

Continuing operations

$
0.09

$
0.04

$
–

$
(0.01
)

Discontinued operations

$
–

Net
income (loss) – basic and diluted

$
0.09

$
0.04

$
–

$
(0.01
)

Diluted income (loss) per share:

Continuing operations

$
0.07

$
0.03

$
–

$
(0.01
)

Discontinued operations

$
–

Net
income (loss) – diluted

$
0.07

$
0.03

$
–

$
(0.01
)

Weighted average shares outstanding:

Basic

155,872,138

115,462,646

155,824,327

57,580,062

Diluted

210,535,600

137,083,825

174,415,402

57,580,062

Emergent Capital, Inc.
CONSOLIDATED BALANCE SHEETS

September 30, 2018

December 31, 2017*

(Unaudited)

(In thousands except share data)

ASSETS

Assets

Cash
and cash equivalents

$
2,209

$
18,131

Cash
and cash equivalents (VIE Note 4)

29,347

13,136

Certificates of deposit

1,016

1,010

Prepaid expenses and other assets

767

617

Prepaid expenses and other assets (VIE Note 4)

Deposits – other

1,377

Life
settlements, at estimated fair value (Note 15)

1,043

750

Life
settlements, at estimated fair value (VIE Note 4 & Note 15)

587,810

566,742

Receivable for maturity of life settlements (VIE Note 4)

48,435

30,045

Fixed assets, net

145

Investment in affiliates

2,384

Total assets

$
674,526

$
634,390

LIABILITIES AND STOCKHOLDERS’ EQUITY

Liabilities

Accounts payable and accrued expenses

$
1,831

$
2,015

Accounts payable and accrued expenses (VIE Note 4)

1,243

753

Other liabilities

217

451

Other liabilities (VIE Note 4)

–

Interest payable – 8.5% Convertible Notes (Note 10)

8.5%
Convertible Notes, net of discount and deferred debt costs (Note
10)

1,160

1,098

Interest payable – 5.0% Convertible Notes (Note 11)

485

1,432

5.0%
Convertible Notes, net of discount and deferred debt costs (Note
11)

69,535

68,654

Interest payable – 8.5% Senior Secured Notes (Note 13)

124

132

8.5%
Senior Secured Notes, net of deferred debt costs (Note 13)

34,124

33,927

White Eagle Revolving Credit Facility, at estimated fair value (VIE Note 4 & Note 9)

367,931

329,240

Total liabilities

476,719

437,748

Commitments and Contingencies (Note 17)

Stockholders’ Equity

Common stock (par value $0.01 per share, 415,000,000 authorized at September 30, 2018 and December 31, 2017; 159,028,458 issued and 158,420,458 outstanding as of September 30, 2018;158,495,399 issued and 157,887,399 outstanding as of December 31, 2017)

1,590

1,585

Preferred stock (par value $0.01 per share, 40,000,000 authorized; 0 issued and outstanding as of September 30, 2018 and December 31, 2017)

–

Treasury Stock, net of issuance cost (608,000 shares as of September 30, 2018 and December 31, 2017)

(2,534
)

Additional paid-in-capital

334,118

333,629

Accumulated deficit

(135,367
)

(136,038
)

Total stockholders’ equity

197,807

196,642

Total liabilities and stockholders’ equity

$
674,526

$
634,390

* Derived from audited consolidated financial statements.

Selected Operating Data (dollars in thousands):

Three Months Ended September 30,

Nine Months Ended September 30,

2018

2017

2018

2017

End of Period – Policies Owned

Number of policies owned

590

611

590

611

Average age of insured

84.1

83.2

84.1

83.2

Average death benefit per policy

$
4,737

$
4,726

$
4,737

$
4,726

Average Life Expectancy – Calculated LE (Years)

7.8

8.5

7.8

8.5

Aggregate Death Benefit

$
2,794,652

$
2,887,827

$
2,794,652

$
2,887,827

Aggregate fair value

$
588,853

$
555,222

$
588,853

$
555,222

Monthly premium – average per policy

$
13.9

$
11.8

$
13.9

$
11.8

Period Maturities

Number of policies matured

Average age of insured at maturity

87.1

80.3

85.6

82.6

Average life expectancy – Calculated LE (Years)

4.7

6.8

4.7

4.4

Aggregate death benefit

$
32,500

$
16,500

$
86,435

$
59,573

Gains
on maturity

$
20,091

$
11,597

$
48,091

$
30,603

Proceeds collected

$
32,000

$
8,200

$
68,045

$
34,373

SOURCE: Emergent Capital, Inc.

ReleaseID: 528322

Go Top