Emergent Capital, Inc. Announces Third Quarter 2018 Results
Boca Raton, Fla., 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.
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| | 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) | 48 |
| | 53 |
|
| Deposits - other | 1,377 |
| | 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 | 90 |
| | 145 |
|
| Investment in affiliates | 2,384 |
| | 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) | 48 |
| | — |
|
| Interest payable - 8.5% Convertible Notes (Note 10) | 21 |
| | 46 |
|
| 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 | ) | | (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 | | 6 |
| | 3 |
| | 18 |
| | 10 |
|
| 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 |
|
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Company Contact:
Investor Relations
Rob Fink
Hayden IR
646.415.8972
IR@emergentcapital.com
www.emergentcapital.com
