UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549-1004
FORM 10-Q
| ☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended March 31, 2018
| ☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from ___________ to ___________
Commission file number 000-55783
Commission file number 000-55784
Life Partners Position Holder Trust
Life Partners IRA Holder Partnership, LLC
(Exact name of registrants as specified in their charters)
| | |
(State or other jurisdiction of incorporation or organization) | | (I.R.S. Employer Identification Nos.) |
| | |
| 2001 Ross Ave., Suite 3600, Dallas TX | | |
| (Address of principal executive offices) | | (Zip Code)75201 |
214-698-7893
(Registrants’ telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year, if changed since last report)
Indicate by check mark whether the registrants: (1) have filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrants were required to file such reports), and (2) have been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrants have submitted electronically and posted on their corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrants were required to submit and post such files). Yes ☒ No ☐
Indicate by check mark whether the registrants are large accelerated filer, accelerated filers, non-accelerated filers, smaller reporting company filers, or emerging growth companies. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act (Check one):
| | Large accelerated filers | ☐ | Accelerated filers | ☐ | |
| | Non-accelerated filers | ☐ | Smaller reporting companies | ☒ | |
| | | | Emerging growth companies | ☐ | |
If emerging growth companies, indicate by check mark if the registrants have elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.☐
Indicate by check mark whether the registrants are shell companies (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
The registrants do not have any voting or non-voting equity securities.
APPLICABLE ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrants have filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes ☐ No ☒
| Item 1. | Financial Statements and Supplementary Data |
Index to Financial Statements
Life Partners Position Holder Trust
| Unaudited Financial Statements for the three months ended March 31, 2018 | |
| 3 |
| 4 |
| 5 |
| 6 |
| 7 |
Life Partners IRA Holder Partnership, LLC
| Unaudited Financial Statements for the three months ended March 31, 2018 | |
| 19 |
| 20 |
| 21 |
| 22 |
| 23 |
LIFE PARTNERS POSITION HOLDER TRUST
MARCH 31, 2018 AND DECEMBER 31, 2017
| | | March 31, 2018 | | | December 31, 2017 | |
| | | (Unaudited) | | | (Audited) | |
| Assets | | | | | | |
| Cash | | $ | 523,550 | | | $ | 1,800,047 | |
| Maturities receivable | | | 22,124,537 | | | | 19,438,534 | |
| Prepaids and other assets | | | 306,265 | | | | 81,703 | |
| Restricted cash and cash equivalents | | | 71,342,810 | | | | 76,304,593 | |
| Life insurance policies | | | 257,560,021 | | | | 272,140,787 | |
| | | | | | | | | |
| Total assets | | $ | 351,857,183 | | | $ | 369,765,664 | |
| | | | | | | | | |
| Liabilities | | | | | | | | |
| Notes payable | | $ | 64,105,423 | | | $ | 74,086,192 | |
| Assumed tax liability | | | 1,967,382 | | | | 2,243,302 | |
| Premium liability | | | 30,013,580 | | | | 30,225,729 | |
| Maturity liability | | | 24,983,283 | | | | 23,643,936 | |
| Accounts payable | | | 665,521 | | | | 34,507 | |
| Assumed liabilities | | | - | | | | 18,293 | |
| Accrued expenses | | | 1,538,756 | | | | 572,317 | |
| | | | | | | | | |
| Commitments and Contingencies (Note 2) | | | | | | | | |
| | | | | | | | | |
| Total liabilities | | | 123,273,945 | | | | 130,824,276 | |
| | | | | | | | | |
| Net assets | | $ | 228,583,238 | | | $ | 238,941,388 | |
See accompanying notes to financial statements
LIFE PARTNERS POSITION HOLDER TRUST
THREE MONTHS ENDED MARCH 31
| | | 2018 | | | 2017 | |
| | | (Unaudited) | | | (Unaudited) | |
| Income | | | | | | |
| Change in fair value of life insurance policies | | $ | (7,888,733 | ) | | $ | 10,392,095 | |
| Other income | | | 67,997 | | | | 11,563 | |
| | | | | | | | | |
| Total (loss) income | | | (7,820,736 | ) | | | 10,403,658 | |
| | | | | | | | | |
| Expenses | | | | | | | | |
| Interest expense | | | 1,119,853 | | | | 1,816,056 | |
| Legal fees | | | 672,550 | | | | 1,243,374 | |
| Professional fees | | | 649,238 | | | | 1,055,604 | |
| Other general and administrative | | | 95,773 | | | | 122,674 | |
| | | | | | | | | |
| Total expenses | | | 2,537,414 | | | | 4,237,708 | |
| | | | | | | | | |
| Net (decrease) increase in net assets resulting from operations | | $ | (10,358,150 | ) | | $ | 6,165,950 | |
See accompanying notes to financial statements
LIFE PARTNERS POSITION HOLDER TRUST
STATEMENTS OF CHANGES IN NET ASSETS
THREE MONTHS ENDED MARCH 31
| | | 2018 | | | 2017 | |
| | | (Unaudited) | | | (Unaudited) | |
| | | | | | | |
| Net assets, beginning of period | | $ | 238,941,388 | | | $ | 203,749,554 | |
| Net (decrease) increase in net assets resulting from operations | | | (10,358,150 | ) | | | 6,165,950 | |
| | | | | | | | | |
| Net assets, end of period | | $ | 228,583,238 | | | $ | 209,915,504 | |
| Net asset value per unit: | | | | | | | | |
| Number of units | | | 1,202,532,887 | | | | 1,012,364,792 | |
| Net assets per unit | | $ | 0.19 | | | $ | 0.21 | |
See accompanying notes to financial statements
LIFE PARTNERS POSITION HOLDER TRUST
THREE MONTHS ENDED MARCH 31
| | | 2018 | | | 2017 | |
| | | (Unaudited) | | | (Unaudited) | |
| Cash flows from operating activities: | | | | | | |
| Net (decrease) increase in net assets resulting from operations | | $ | (10,358,150 | ) | | $ | 6,165,950 | |
| Adjustments to reconcile net (decrease) increase in net assets to net cash used in operations: | | | | | | | | |
| Change in fair value of life insurance policies | | | 7,888,733 | | | | (10,392,095 | ) |
| Change in assets and liabilities: | | | | | | | | |
| Premiums receivable, net | | | - | | | | 6,345 | |
| Prepaids and other assets | | | (224,562 | ) | | | (96,061 | ) |
| Assumed tax liability | | | (275,920 | ) | | | - | |
| Creditor trust funding | | | - | | | | (5,000,000 | ) |
| Premium liability | | | (212,149 | ) | | | 20,078,219 | |
| Maturity liability | | | 1,339,347 | | | | (15,772,311 | ) |
| Accounts payable | | | 631,014 | | | | 3,750,001 | |
| Assumed liabilities | | | (18,293 | ) | | | (5,405,124 | ) |
| Accrued expenses | | | 985,670 | | | | 295,627 | |
| Net cash flows used in operating activities | | | (244,310 | ) | | | (6,369,449 | ) |
| Cash flows from investing activities: | | | | | | | | |
| Premiums paid on life settlements | | | (10,282,164 | ) | | | (7,263,898 | ) |
| Proceeds from maturities of life settlements, net | | | 14,288,194 | | | | (1,924,483 | ) |
| Net cash flows provided by (used in) investing activities | | | 4,006,030 | | | | (9,188,381 | ) |
| Cash flows from financing activities: | | | | | | | | |
| Payments on notes payable | | | (10,000,000 | ) | | | - | |
| Net cash flows used in financing activities | | | (10,000,000 | ) | | | - | |
| | | | | | | | | |
| Net decrease in cash | | | (6,238,280 | ) | | | (15,557,830 | ) |
| | | | | | | | | |
| Cash, beginning of period | | | 78,104,640 | | | | 110,331,921 | |
| | | | | | | | | |
| Cash, end of period | | $ | 71,866,360 | | | $ | 94,774,091 | |
| | | | | | | | | |
| Supplemental cash flow information: | | | | | | | | |
| Cash | | $ | 523,550 | | | $ | 5,059,002 | |
| Restricted cash | | | 71,342,810 | | | | 89,715,089 | |
| | | | | | | | | |
| Total cash | | $ | 71,866,360 | | | $ | 94,774,091 | |
| | | | | | | | | |
| Cash paid for interest | | $ | 819,787 | | | $ | 1,917,699 | |
See accompanying notes to financial statements
LIFE PARTNERS POSITION HOLDER TRUST
NOTES TO FINANCIAL STATEMENTS
(unaudited)
Note 1 - Operations and Significant Accounting Policies
Operations
Life Partners Position Holder Trust (the “Trust”) was created on December 9, 2016, pursuant to the Revised Third Amended Joint Plan of Reorganization of Life Partners Holdings, Inc., et al., dated as of October 27, 2016, which we call the “Plan,” that was confirmed by order of the United States Bankruptcy Court for the Northern District of Texas, Fort Worth Division (“Bankruptcy Court”) on November 1, 2016. Life Partners Holdings, Inc. was the parent company of Life Partners, Inc., a Texas corporation, and its wholly-owned subsidiary LPI Financial Services, Inc., a Texas corporation (collectively, the “Debtors”). From 1991 until 2014, Life Partners, Inc. was a specialty financial services company engaged in the business of purchasing individual life insurance policies from third parties by raising money from the offer and sale to investors of “fractional interests” in such policies with a face value of approximately $2.2 billion as of December 31, 2016 (“Policies”). LPI Financial Services, Inc. was organized to bill and collect certain fees charged to investors in connection with the business.
In connection with its formation and the inception of its activities on December 9, 2016, the Trust issued a total of 1,012,355,948 units of beneficial interest (the “Units”) to the fractional interest holders having claims in the Debtors bankruptcy pursuant to the Plan. Each fractional interest holder received a Unit for each dollar of expected death benefit such holder contributed to the Trust. As of March 31, 2018 and December 31, 2017, there were 10,415 and 10,187 holders of the 1,202,532,887 and 1,162,059,511 Units outstanding, respectively. The Trust owns a portfolio of life insurance policies; a portion of the policies is encumbered by the beneficial interest of continuing fractional interest holders. The Trust’s portion of the portfolio consists of 3,108 and 3,140 life insurance policies, with fair values of $257.6 million and $272.1 million and an aggregate face value of approximately $1.3 billion and $1.3 billion at March 31, 2018 and December 31, 2017, respectively. The fair value of the interests in the life insurance policies owned by continuing fractional interest holders are not reflected in the financial statements of the Trust.
Description of Securities
Units represent beneficial interests in the Trust, and all holders of Units are entitled to receive cash distributions from the Trust in accordance with their respective Pro Rata Shares. A Trust beneficiary’s respective “Pro Rata Share” means the ratio, expressed as a percentage, of (i) the number of Units which such Trust beneficiary is the registered owner, to (ii) the total number of Units outstanding as of the measurement date, subject to modification for purposes of distributing any recovered assets.
Under the Plan, the Trustee will distribute at least annually to the Unit holders all of the distributable cash (as defined in the Position Holder Trust Agreement) generated during each calendar year, subject to any reserve established by the Trustee reasonably necessary to maintain the value of the Registrant’s assets or to meet claims and contingent liabilities. The Trustee may not make a distribution until the Trust repays a $55.0 million loan with Vida Capital (“Exit Loan Facility”) in full. All distributions by the Trust will be made in accordance with such holder’s Pro Rata Share of the outstanding Units.
Summary of Significant Accounting Policies
Basis of Presentation
In the opinion of management, the financial statements of the Trust as of March 31, 2018 and for the three months ended March 31, 2018 and 2017 include all adjustments and accruals, consisting only of normal, recurring accrual adjustments, which are necessary for a fair presentation of the results for the interim periods. These interim results are not necessarily indicative of results for a full year.
Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) have been condensed in or omitted from this report pursuant to the rules and regulations of the United States Securities and Exchange Commission (the “SEC”). These financial statements should be read together with the consolidated financial statements and notes thereto included in the Trust’s Annual Report on Form 10-K for the year ended December 31, 2017.
Certain reclassifications have been made to the 2017 financial statement and footnote amounts in order to conform to the 2018 presentation.
The Trust’s primary purpose is the liquidation of the Trust’s assets and the distribution of proceeds to its beneficial interest holders. The Trust expects that fulfilling its purpose requires a significant amount of time, and that the Trust will have significant ongoing operations during that period due to the nature of its assets and its plan to maximize the proceeds to its beneficiaries by maintaining the majority of its life insurance policies until maturity. As a result, the Trust has concluded that its liquidation is not imminent, in accordance with the definitions under accounting principles generally accepted in the United States of America and has not applied the liquidation basis of accounting in presenting its financial statements. The Trust will continue to evaluate its operations to determine when its liquidation becomes imminent and the liquidation basis of accounting is required.
Adoption of New Accounting Standard
In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09 (“ASC 606”) “Revenue from Contracts with Customers,” which supersedes the revenue recognition requirements in ASC 605 “Revenue Recognition” (“ASC 605”), and requires entities to recognize revenue when control of the promised goods or services is transferred to customers at an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The Trust adopted ASC 606 as of January 1, 2018 using the retrospective transition method. There is no impact to the Trust’s recognition of revenue associated with the adoption of ASC 606.
Investments in Life Insurance Policies
The Trust accounts for its interests in life insurance policies at fair value in accordance with ASC 325-30, Investments in Insurance Contracts. The Trust initially recognized the life insurance policies transferred at its inception at their fair market value on December 9, 2016 and the Trust will estimate the fair value of its life insurance policies and recognize changes therein at each subsequent reporting period.
Fair Value of Life Insurance Policies
The Trust follows ASC 820, Fair Value Measurements and Disclosures, in estimating the fair value of its life insurance policies, which defines fair value as an exit price representing the amount that would be received if an asset were sold or that would be paid to transfer a liability in an orderly transaction between market participants at the measurement date. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability.
As a basis for considering such assumptions, the guidance establishes a three-level fair value hierarchy that prioritizes the inputs used to measure fair value. Level 1 relates to quoted prices in active markets for identical assets or liabilities. Level 2 relates to observable inputs other than quoted prices included in Level 1. Level 3 relates to unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. The Trust’s investments in life insurance policies are considered to be Level 3 as there is currently no active market where the Trust is able to observe quoted prices for identical assets and the Trust’s valuation model incorporates significant inputs that are not observable.
The Trust’s valuation of life insurance policies is a critical estimate within the financial statements. The Trust currently uses a probabilistic method of valuing life insurance policies, which the Trust believes to be the preferred valuation method in its industry. The Trust calculates the assets’ fair value using a present value technique to estimate the fair value of the projected future cash flows. The most significant assumptions in estimating the fair value are the Trust’s estimate of the insureds’ life expectancy and the discount rate. See Note 6, “Fair Value Measurements.”
Income Recognition
The Trust’s investments in life insurance policies are its primary source of income. Gain or loss is recognized from ongoing changes in the portfolio’s estimated fair value, including any gains or losses at maturity. Gains or losses from maturities are recognized at receipt of a death notice or verified obituary for an insured party, and determined based on the difference between the death benefit and the estimated fair value of the policy at maturity.
Premiums Receivable
The Trust assumed the Debtors’ receivables related to life insurance policy premiums and service fees that were paid by the Debtors on behalf of fractional interest holders prior to the Trust’s effective date. After December 9, 2016, the policy premiums allocable to continuing fractional interest holders are those persons’ obligations and not the Trust. If a continuing fractional interest holder defaults on future premium obligations, such position is deemed contributed to the Trust in exchange for the number of Units provided by the Plan.
The Trust maintains an allowance for doubtful accounts for estimated losses resulting from the inability to collect premiums and service fees receivable. Such estimates are based on the position holder’s payment history and other indications of potential uncollectability. After all attempts to collect a receivable have failed, receivables are written off against the allowance. At March 31, 2018 and December 31, 2017, the allowance for doubtful accounts was $5.0 million, all of which was for receivables assumed from the Debtors on the effective date. Outstanding receivable balances may be recoverable pursuant to the Trustee’s set-off rights under the Plan.
Maturities Receivable
Maturities receivable consist of the Trust’s portion of life insurance policy maturities that occurred but payment was not received as of the end of the reporting period.
Income Taxes
No provision for state or Federal income taxes has been made as the liability for such taxes is attributable to the Unit holders rather than the Trust. The Trust is a grantor trust with taxable income or loss passing through to the Unit holders. In certain instances, however, the Trust may be required under applicable state laws to remit directly to state tax authorities amounts otherwise due to Unit holders. Such payments on behalf of the Unit holders are deemed distributions to them.
The FASB has provided guidance for how uncertain tax positions should be recognized, measured, disclosed, and presented in the financial statements. This requires the evaluation of tax positions taken or expected to be taken in the course of preparing the Trust’s tax returns to determine whether the tax positions are more-likely-than-not of being sustained when challenged or when examined by the applicable taxing authority. The Trust has no material uncertain income tax positions as of March 31, 2018 or December 31, 2017.
The Trust also assumed income tax liabilities of the Debtors at its inception which total approximately $2.0 million and $2.0 million as of March 31, 2018 and December 31, 2017, respectively, related to taxes, penalties, and interest from the Debtors’ 2008, 2009 and 2010 income tax returns. These obligations bear interest at 4% annually and are due in full by January 2020.
Accounts Payable and Accrued Expenses
Accounts payable and accrued expenses primarily include professional services, legal fees, and expected litigation settlements, some of which are obligations assumed by the Trust that were incurred prior to the effective date of the Trust. The Trust also accrues liabilities for state taxes payable and other miscellaneous accruals. The Trust accrues liabilities when costs are incurred and such costs can be reasonably estimated.
Premium Liability
As of March 31, 2018 and December 31, 2017, the Trust has $30.0 million and $30.2 million, respectively, in liabilities for future payment of premium obligations. To the extent advanced premiums received from continuing fractional holders are not used for premium payments, they are refunded to the respective continuing fractional holder.
Maturity Liabilities
As of March 31, 2018, and December 31, 2017, the Trust holds $25.0 million and $23.6 million, respectively, of maturities collected on behalf of continuing fractional holders pending payment.
Use of Estimates
The preparation of these financial statements, in conformity with generally accepted accounting principles in the United States of America (“GAAP”), requires the Trust to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting periods. Actual results could differ from these estimates and such differences could be material. The estimates related to the valuation of the life insurance policies represent significant estimates made by the Trust.
Risks and Uncertainties
The Trust encounters economic, legal, and longevity risk. The two main components of economic risk potentially impacting the Trust are market risk and concentration of credit risk. The Trust’s market risks include interest rate risk and the risk of declines in valuation of the Trust’s life insurance policies, including declines caused by the selection of increased discount rates associated with the Trust’s fair value model. It is reasonably possible that future changes to estimates involved in valuing life insurance policies could change and result in material effects to the future financial statements. Concentration of credit risk is the risk that an insurance carrier who has issued life insurance policies held by the Trust does not remit the amount due under those policies due to the deteriorating financial condition of the carrier or otherwise. Another credit risk potentially impacting the Trust is the risk continuing fractional holders may default on their future premium obligations, increasing the Trust’s premium liability.
The main components of legal risk are (i) the risk that an insurer could successfully challenge its obligation to pay policy benefits upon the death of an insured and (ii) that an insured’s family could successfully challenge the Trust’s entitlement to the benefits of an insurance policy. In the event that either an insurer or an insured’s family was successful in challenging the Trust’s right to payment, there is also risk that the Trust would not be able to recover the premiums it paid towards the insurance policy.
Longevity risk refers to the reasonable possibility that actual mortalities of insureds in the Trust’s portfolio extend over longer periods than are anticipated, resulting in the Trust paying more for premiums.
The Trust maintains the majority of its cash in several accounts with a commercial bank. Balances on deposit are insured by the Federal Deposit Insurance Corporation (“FDIC”). However, from time to time the Trust’s balances may exceed the FDIC insurable amount at its banks.
Note 2 - Commitments and Contingencies
Litigation
In accordance with applicable accounting guidance, the Trust establishes an accrued liability for litigation and regulatory matters when those matters present loss contingencies that are both probable and estimable. In such cases, there may be an exposure to loss in excess of any amounts accrued. When a loss contingency is not both probable and estimable, the Trust does not establish an accrued liability. As a litigation or regulatory matter develops, the Trust, in conjunction with any outside counsel handling the matter, evaluates on an ongoing basis whether such matter presents a loss contingency that is probable and estimable. If, at the time of evaluation, the loss contingency related to a litigation or regulatory matter is not both probable and estimable, the matter will continue to be monitored for further developments that would make such loss contingency both probable and estimable. When a loss contingency related to a litigation or regulatory matter is deemed to be both probable and estimable, the Trust will establish an accrued liability with respect to such loss contingency and record a corresponding amount of litigation-related expense. The Trust will then continue to monitor the matter for further developments that could affect the amount of any such accrued liability. There have been no material changes to any litigation matters during the three months ended March 31, 2018.
Indemnification of Certain Persons
Under certain circumstances, the Trust may be required to indemnify certain persons performing services on behalf of the Trust for liability they may incur arising out of the indemnified persons’ activities conducted on behalf of the Trust. There is no limitation on the maximum potential payments under these indemnification obligations and, due to the number and variety of events and circumstances under which these indemnification obligations could arise, the Trust is not able to estimate such maximum potential payments. The Trust has not made any payments under such indemnification obligations and no amount has been accrued in the accompanying financial statements for these indemnification obligations of the Trust.
Note 3 - Restricted Cash
The Plan imposes restrictions on the Trust to maintain certain funds in segregated accounts. As of March 31, 2018 and December 31, 2017, the Trust has $71.3 million and $76.3 million, respectively, in restricted cash. The restricted cash accounts are for monies distributable to the fractional interest holders in policies that matured prior to the Plan becoming effective, premium reserves, premium obligations, and collateral deposits.
Note 4 - Life Insurance Policies
As of March 31, 2018, the Trust owns an interest in 3,108 policies of which 585 are life settlement policies and 2,523 are viaticals (the “PHT Portfolio”). The PHT Portfolio’s aggregate face value is approximately $1.3 billion as of March 31, 2018 of which $1.1 billion is attributable to life settlements and $192.0 million is attributable to viaticals. The PHT Portfolio’s aggregate fair value is $257.6 million as of March 31, 2018 of which $256.2 million is attributable to life settlements and $1.4 million is attributable to viaticals.
As of December 31, 2017, the Trust owned an interest in 3,140 policies of which 600 are life settlement policies and 2,540 are viaticals. The PHT Portfolio’s aggregate face value is approximately $1.3 billion as of December 31, 2017 of which $1.1 billion is attributable to life settlements and $179.1 million is attributable to viaticals. The PHT Portfolio’s aggregate fair value is $272.1 million as of December 31, 2017 of which $270.6 million is attributable to life settlements and $1.5 million is attributable to viaticals.
Life expectancy reflects the probable number of years remaining in the life of a class of persons determined statistically, affected by such factors as heredity, physical condition, nutrition, and occupation. It is not an estimate or an indication of the actual expected maturity date or indication of the timing of expected cash flows from death benefits. The following tables summarizes the Trust’s life insurance policies grouped by remaining life expectancy as of March 31, 2018 and December 31, 2017:
As of March 31, 2018:
| Remaining Life Expectancy (Years) | | Number of Life Insurance Policies | | Face Value | | Fair Value | |
| 0-1 | | 13 | | $ | 26,953,412 | | $ | 21,799,806 | |
| 1-2 | | 25 | | | 46,530,624 | | | 27,959,567 | |
| 2-3 | | 51 | | | 72,112,549 | | | 33,229,395 | |
| 3-4 | | 70 | | | 102,719,754 | | | 34,525,137 | |
| 4-5 | | 124 | | | 235,202,937 | | | 53,607,023 | |
| Thereafter | | 2,825 | | | 797,944,169 | | | 86,439,093 | |
| | | 3,108 | | $ | 1,281,463,445 | | $ | 257,560,021 | |
| Remaining Life Expectancy (Years) | | Number of Life Insurance Policies | | Face Value | | Fair Value | |
| 0-1 | | 21 | | $ | 45,189,634 | | $ | 36,855,871 | |
| 1-2 | | 33 | | | 61,077,238 | | | 36,814,730 | |
| 2-3 | | 60 | | | 65,934,777 | | | 30,372,137 | |
| 3-4 | | 57 | | | 94,187,235 | | | 31,657,796 | |
| 4-5 | | 130 | | | 211,916,460 | | | 50,004,422 | |
| Thereafter | | 2,839 | | | 784,622,390 | | | 86,435,831 | |
| | | | | | | | | | |
| | | 3,140 | | $ | 1,262,927,734 | | $ | 272,140,787 | |
Estimated premiums to be paid by the Trust for its portfolio during each of the five succeeding fiscal years and thereafter as of March 31, 2018, are as follows:
| 2018 | | $ | 36,197,385 | |
| 2019 | | | 55,283,243 | |
| 2020 | | | 56,855,662 | |
| 2021 | | | 52,725,217 | |
| 2022 | | | 46,253,255 | |
| Thereafter | | | 185,441,065 | |
| | | | | |
| Total | | $ | 432,755,827 | |
The Trust is required to pay premiums to keep its portion of life insurance policies in force. The estimated total future premium payments could increase or decrease significantly to the extent that insurance carriers increase the cost of insurance on their issued policies or that actual mortalities of insureds differ from the estimated life expectancies. Additionally, if the continuing fractional holders default on their future premium obligations, the Trust’s premium liability may increase.
The Trust’s estimated total future premium payable are $432.8 million as of March 31, 2018. This is an increase of $24.4 million from the total estimated future premiums of $408.4 million as of December 31, 2017. The increase in estimated premiums payable is primarily due to actual mortalities being longer than estimated life expectancies.
The Trust anticipates funding the estimated premium payments from maturities of life insurance policies. It also maintains premium reserves and access to lines of credit.
Note 5 - Notes Payable
On December 9, 2016, the Trust obtained a term loan from Vida Opportunity Fund, LP, an affiliate of Vida Capital, Inc., for $55.0 million. Interest accrues at 11% of outstanding balance per annum and is paid quarterly. Principal is due in full on December 9, 2018, but is not subject to a prepayment penalty. Substantially all of the Trust’s assets collateralize the loan. As of March 31, 2018 and December 31, 2017, the outstanding balances were $25.0 million and $35.0 million, respectively.
On December 9, 2016, the Trust entered into a revolving line of credit with Vida Longevity Fund, LP, an affiliate of Vida Capital, Inc., for $25.0 million. Interest accrues at 11% of outstanding balance and is paid quarterly. The line of credit matures on December 9, 2018, at which point any amount outstanding is due in full. As of March 31, 2018 and December 31, 2017, no amounts have been drawn on the line of credit.
In accordance with the Plan, the Trust issued notes totaling approximately $36.5 million in exchange for claims against the Debtor’s estate and the incidental interests in life insurance policies. Those policies collateralize the Trust’s obligations under the notes. Interest accrues at 3% of outstanding balance and is paid annually in December. Principal is due in full on December 9, 2031. In accordance with the note, beginning in December 2017, the Trust is required to make annual payments to a sinking fund to pay future interest and principal. Such fund is included in restricted cash on the accompanying balance sheets. As of March 31, 2018 and December 31, 2017, the outstanding balance of the notes was $36.5 million.
On March 28, 2017, the Trust, was ordered to pay the Chapter 11 trustee’s fees totaling $5.5 million. The first payment of $2.8 million was paid in 2017. The remaining balance is in the form of a note payable in the amount of $2.8 million and is due in three equal annual payments on January 1 beginning in 2019. The note does not bear interest as ordered by the Court, thus the note has been discounted by $0.2 million, based on an implied interest rate of 3% as of December 31, 2017. As of March 31, 2018 and December 31, 2017, the outstanding balance was $2.6 million.
Future scheduled principal payments on the above notes payable and required sinking fund contributions are as follows as of March 31, 2018:
| | | Sinking Fund | | Notes Payable |
| 2018 | $ | 2,432,886 | $ | 25,000,000 |
| 2019 | | 2,432,886 | | 916,667 |
| 2020 | | 2,432,886 | | 916,667 |
| 2021 | | 2,432,886 | | 916,666 |
| 2022 | | 2,432,886 | | - |
| Thereafter | | 21,887,452 | | 36,493,298 |
| | | | | |
| Total | $ | 34,051,882 | $ | 64,243,298 |
Note 6 - Fair Value Measurements
The Trust carries its life insurance policies at fair value. Fair value is defined as an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.
Fair value measurements are classified based on the following fair value hierarchy:
Level 1 - Valuation is based on unadjusted quoted prices in active markets for identical assets and liabilities that are accessible at the reporting date. Since valuations are based on quoted prices that are readily and regularly available in an active market, valuation of these products does not entail a significant degree of judgment.
Level 2 - Valuation is determined from pricing inputs that are other than quoted prices in active markets that are either directly or indirectly observable as of the reporting date. Observable inputs include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, and interest rates and yield curves that are observable at commonly quoted intervals.
Level 3 - Valuation is based on inputs that are both significant to the fair value measurement and unobservable. Level 3 inputs include situations where there is little, if any, market activity for the financial instrument. The inputs into the determination of fair value generally require significant management judgment or estimation.
The balances of the Trust’s assets measured at fair value on a recurring basis as of March 31, 2018 and December 31, 2017, are as follows:
As of March 31, 2018:
| | | Level 1 | | | Level 2 | | | Level 3 | | | Total Fair Value | |
| Assets: | | | | | | | | | | | | |
| Investment in life insurance policies | | $ | - | | | $ | - | | | $ | 257,560,021 | | | $ | 257,560,021 | |
| | | | | | | | | | | | | | | | | |
| | | $ | - | | | $ | - | | | $ | 257,560,021 | | | $ | 257,560,021 | |
| | | Level 1 | | | Level 2 | | | Level 3 | | | Total Fair Value | |
| Assets: | | | | | | | | | | | | |
| Investment in life insurance policies | | $ | - | | | $ | - | | | $ | 272,140,787 | | | $ | 272,140,787 | |
| | | | | | | | | | | | | | | | | |
| | | $ | - | | | $ | - | | | $ | 272,140,787 | | | $ | 272,140,787 | |
Quantitative Information about Level 3 Fair Value Measurements
| | | Fair Value at 3/31/2018 | | | Face Value at 3/31/2018 | | Valuation Technique(s) | | Unobservable Inputs | | Range (Weighted Average) | |
| | | | | | | | | | | | | |
| Life insurance policies | | $ | 257,560,021 | | | $ | 1,281,463,446 | | Discounted cash flow | | Discount rate | | | 25.8%-31.8 | % |
| | | Fair Value at 12/31/2017 | | | Face Value at 12/31/2017 | | Valuation Technique(s) | | Unobservable Inputs | | Range (Weighted Average) | |
| | | | | | | | | | | | | |
| Life insurance policies | | $ | 272,140,787 | | | $ | 1,262,927,734 | | Discounted cash flow | | Discount rate | | | 25.4%-31.8 | % |
Following is a description of the methodologies used to estimate the assets’ fair value measured on a recurring basis and within the above fair value hierarchy.
In assessing and determining the PHT Portfolio’s valuation, the Position Holder Trust retained Lewis & Ellis, Inc. as its principal actuaries. The PHT Portfolio’s value was estimated using an actuarially based approach incorporating net cash flows and life expectancies. This approach applies a monthly mortality scale as generated by the specific life expectancy (“LE”) and/or a default mortality multiplier of each insured which is used to project the PHT Portfolio’s present value of net cash flows (death benefits less premium payments and Servicing Company compensation). The mortality scale is actuarially rolled forward from the LE underwriting date to the valuation date. The Trust will not obtain current medical information for each insured which would be necessary to update the LE’s due to the significant time and financial burden that would be required. Accordingly, as LE’s become aged, less weight will be applied to them and more weight will be placed with the default mortality multiplier. A 25% discount will be applied quarterly starting 21 months past the underwriting date until the aged LE date is fully discounted and replaced by the default mortality multiplier. An LE that is 24 to 26 months old will have a 50% discount, an LE that is 27 to 29 months old will have a 75% discount, and an LE greater than or equal to 30 months will solely use the default mortality multiplier, as described below.
If a policy did not have a LE, or the LE became aged, a default mortality multiplier, based on the mortality tables developed by the U.S. Society of Actuaries was applied. Currently, the mortality multipliers used are 100% for the life settlements and 350% for the viaticals, regardless of gender. On a quarterly basis, we will compare actual mortalities to expected mortalities and refine the mortality multipliers as appropriate.
The Servicing Company is paid 2.65% of each maturity as compensation. The estimated cash flows of the Policies are net of such compensation.
The monthly net cash flows with interest and survivorship were discounted to arrive at the PHT Portfolio’s estimated value as of March 31, 2018 and December 31, 2017. Future changes in the life expectancies and estimated cash flows could have a material effect on the PHT Portfolio’s fair value, and the Trust’s financial condition and results of operations.
Life expectancy sensitivity analysis
The table below reflects the effect on the PHT Portfolio’s fair value if the actual life expectancy experienced is 5% less or 5% more than is currently estimated. If the life expectancy estimate increases by 5% or decreases by 5%, the change in estimated fair value of the life insurance policies as of March 31, 2018 and December 31, 2017 would be as follows:
As of March 31, 2018 Life Expectancy Months Adjustment | | Average Life Expectancy | | Value | | | Change in Value | |
| -5% | | | | $ | 272,762,555 | | | $ | 15,202,534 | |
| No change | | 3.8 years | | $ | 257,560,021 | | | $ | - | |
| + 5% | | | | $ | 241,792,499 | | | $ | (15,767,522 | ) |
As of December 31, 2017 Life Expectancy Months Adjustment | | Average Life Expectancy | | Value | | | Change in Value | |
| -5% | | | | $ | 286,717,730 | | | $ | 14,576,943 | |
| No change | | 3.6 years | | $ | 272,140,787 | | | $ | - | |
| + 5% | | | | $ | 257,057,325 | | | $ | (15,083,462 | ) |
Discount rate
The discount rate is another significant input in the fair value determination. The Trust’s estimate incorporates market factors, the size of the portfolio, and various policy specific quantitative and qualitative factors including known information about the underlying insurance policy, its economics, the insured and the insurer.
The effect of changes in the weighted average discount rate on the death benefit and premiums used to estimate the PHT Portfolio’s fair value has been analyzed. If the weighted average discount rate increased or decreased by 2 percentage points and the other assumptions used to estimate fair value remained the same, the change in estimated fair value as of March 31, 2018 and December 31, 2017 would be as follows:
As of March 31, 2018 Rate Adjustment | | | Value | | | Change in Value | |
| + 2% | | | $ | 245,330,489 | | | $ | (12,229,532 | ) |
| No change | | | $ | 257,560,021 | | | $ | - | |
| - 2% | | | $ | 271,092,809 | | | $ | 13,532,788 | |
As of December 31, 2017 Rate Adjustment | | | Value | | | Change in Value | |
| +2% | | | $ | 259,806,309 | | | $ | (12,334,478 | ) |
| No change | | | $ | 272,140,787 | | | $ | - | |
| - 2% | | | $ | 285,785,223 | | | $ | 13,644,436 | |
Future changes in the discount rates used by the Trust to value life insurance policies could have a material effect on the Trust’s yield on life settlement transactions, which could have a material adverse effect on the Trust’s financial condition and results of operations.
The Trust re-evaluates its discount rates at the end of every reporting period in order to estimate the discount rates that could reasonably be used by market participants in a transaction involving the Trust’s life insurance policies. In doing so, the Trust engages third party consultants to corroborate its assessment, engages in discussions with other market participants and extrapolates the discount rate underlying actual sales of insurance policies.
Credit Exposure to Insurance Companies
The following table provides information about the life insurance issuer concentrations that exceed 10% of total death benefit or 10% of total fair value of the Trust’s life insurance policies as of March 31, 2018:
| Carrier | | Percentage of Face Value | | | Percentage of Fair Value | | | Carrier Rating | |
| The Lincoln National Life Insurance | | | 10.6 | % | | | 13.5 | % | | | A+ | |
| Transamerica Financial Life Insurance | | | 9.5 | % | | | 12.2 | % | | | A+ | |
| John Hancock Life Insurance (USA) | | | 7.5 | % | | | 12.4 | % | | | A+ | |
The following table provides information about the life insurance issuer concentrations that exceed 10% of total death benefit or 10% of total fair value of the Trust’s life insurance policies as of December 31, 2017:
| Carrier | | Percentage of Face Value | | | Percentage of Fair Value | | | Carrier Rating | |
| The Lincoln National Life Insurance | | | 11.5 | % | | | 13.6 | % | | | A+ | |
| Transamerica Financial Life Insurance | | | 9.4 | % | | | 11.5 | % | | | A+ | |
| John Hancock Life Insurance (USA) | | | 7.9 | % | | | 12.4 | % | | | A+ | |
The following table provides a roll-forward in the changes in fair value for the Trust’s life insurance policies:
| Balance at December 31, 2017 | | $ | 272,140,787 | |
| Realized gain on matured policies | | | 11,064,379 | |
| Unrealized loss on assets held | | | (18,953,112 | ) |
| Change in fair value | | | (7,888,733 | ) |
| | | | | |
| Matured policies, net of fees | | | (16,974,197 | ) |
| Premiums paid | | | 10,282,164 | |
| Balance at March 31, 2018 | | $ | 257,560,021 | |
| Balance at December 31, 2016 | | $ | 263,579,040 | |
| Realized gain on matured policies | | | 11,372,839 | |
| Unrealized loss on assets held | | | (980,744 | ) |
| Change in fair value | | | 10,392,095 | |
| | | | | |
| Matured policies, net of fees | | | (12,255,875 | ) |
| Premiums paid | | | 7,263,898 | |
| Balance at March 31, 2017 | | $ | 268,979,158 | |
Other Fair Value Considerations - All assets and liabilities except for the life insurance policies, which includes cash, maturities and premium receivable, notes payable and premium and maturity liability, are accounted for at their carrying value which approximates fair value.
LIFE PARTNERS IRA HOLDER PARTNERSHIP, LLC
MARCH 31, 2018 AND DECEMBER 31, 2017
| | | March 31, 2018 | | | December 31, 2017 | |
| | | (Unaudited) | | | (Audited) | |
| Assets | | | | | | |
| Investment in Life Partners Position Holder Trust | | $ | 139,569,717 | | | $ | 150,752,520 | |
| | | | | | | | | |
| Total assets | | $ | 139,569,717 | | | $ | 150,752,520 | |
| | | | | | | | | |
| Liabilities | | | | | | | | |
| Due to the Life Partners Position Holder Trust | | $ | 114,984 | | | $ | 35,526 | |
| | | | | | | | | |
| Total liabilities | | $ | 114,984 | | | $ | 35,526 | |
| | | | | | | | | |
| Net assets | | $ | 139,454,733 | | | $ | 150,716,994 | |
See accompanying notes to financial statements
LIFE PARTNERS IRA HOLDER PARTNERSHIP, LLC
THREE MONTHS ENDED MARCH 31
| | | 2018 | | | 2017 | |
| | | (Unaudited) | | | (Unaudited) | |
| Income | | | | | | |
| Equity income (loss) from Life Partners Position Holder Trust | | $ | (11,182,803 | ) | | $ | 3,369,450 | |
| Expenses | | | | | | | | |
| Professional fees | | $ | 79,458 | | | $ | - | |
| | | | | | | | | |
| Increase (decrease) in net assets | | $ | (11,262,261 | ) | | $ | 3,369,450 | |
See accompanying notes to financial statements
LIFE PARTNERS IRA HOLDER PARTNERSHIP, LLC
STATEMENTS OF
CHANGES IN NET ASSETS
THREE MONTHS ENDED MARCH 31
| | | 2018 | | | 2017 | |
| | | (Unaudited) | | | (Unaudited) | |
| | | | | | | |
| Net assets, beginning of period | | $ | 150,716,994 | | | $ | 139,451,651 | |
| Increase (decrease) in net assets | | | (11,262,261 | ) | | | 3,369,450 | |
| | | | | | | | | |
| Net assets, end of period | | $ | 139,454,733 | | | $ | 142,821,101 | |
| Net asset value per unit: | | | | | | | | |
| Number of units | | | 734,249,706 | | | | 689,030,859 | |
| Net assets per unit | | $ | 0.19 | | | $ | 0.21 | |
See accompanying notes to financial statements
LIFE PARTNERS IRA HOLDER PARTNERSHIP, LLC
THREE MONTHS ENDED MARCH 31
| | | 2018 | | | 2017 | |
| | | (Unaudited) | | | (Unaudited) | |
| Cash flows from operating activities | | | | | | |
| Net income (loss) from operations | | $ | (11,262,261 | ) | | $ | 3,369,450 | |
| Adjustments to reconcile net increase in net assets to net cash used in operations: | | | | | | | | |
| Investment in Life Partners Position Holder Trust | | $ | 11,182,803 | | | $ | (3,369,450 | ) |
| Change in assets and liabilities: | | | | | | | | |
| Due to the Life Partners Position Holder Trust | | | 79,458 | | | | - | |
| Net cash used in operating activities | | $ | - | | | $ | - | |
| Net change in cash | | $ | - | | | $ | - | |
| Cash, beginning of period | | $ | - | | | $ | - | |
| Cash, end of period | | $ | - | | | $ | - | |
See accompanying notes to financial statements
LIFE PARTNERS IRA HOLDER PARTNERSHIP, LLC
NOTES TO FINANCIAL STATEMENTS
(unaudited)
Note 1 - Operations
The Life Partners IRA Holder Partnership, LLC (the “Partnership”) was created on December 9, 2016, pursuant to the Revised Third Amended Joint Plan of Reorganization of Life Partners Holdings, Inc., et al. (the “Debtors”), dated as of October 27, 2016, which we call the “Plan,” that was confirmed by order of the United States Bankruptcy Court for the Northern District of Texas, Fort Worth Division (“Bankruptcy Court”) on November 1, 2016. Life Partners Holdings, Inc. was the parent company of Life Partners, Inc., a Texas corporation, and its wholly-owned subsidiary LPI Financial Services, Inc., a Texas corporation. From 1991 until 2014, Life Partners, Inc. was a specialty financial services company engaged in the business of purchasing individual life insurance policies from third parties by raising money from the offer and sale to investors of “fractional interests” in such policies. LPI Financial Services, Inc. was organized to bill and collect certain fees charged to investors in connection with the business.
In connection with its formation and the inception of its activities on December 9, 2016, the Partnership issued limited liability company interests (“Member Interests”) in satisfaction of claims against the Debtors. The only assets of the Partnership are beneficial interest units of the Trust. The Partnership held 734,249,706 and 733,164,743 units as of March 31, 2018 and December 31, 2017, respectively, of the Trust’s outstanding units totaling 1,202,532,887 and 1,162,059,511 as of March 31, 2018 and December 31, 2017, respectively. The sole purpose of the Partnership is to hold Trust interests to permit holders of partnership interests to participate in distributions of the proceeds of the liquidation of the Trust. The Partnership was created to allow IRA holders to hold an interest in an entity classified as a partnership for federal tax purposes, rather than the assets of a grantor trust, such as the Trust. The Partnership’s sole asset is its investment in the Trust and it engages in no other business activity.
Note 2 - Significant Accounting Policies
Equity Method Accounting
The Partnership accounts for its investment in the Trust using the equity method of accounting in accordance with Accounting Standards Codification (ASC) 323, Investments – Equity Method and Joint Ventures. The Partnership and the Trust are closely connected, with a common trustee and common management. As a result of this common oversight and control, as well as the Partnership’s position as the majority holder of the Trust’s beneficial interest units, the Partnership is considered to have significant influence under the provisions of ASC 323, resulting in the application by the Partnership of the equity method of accounting.
The following table presents the financial data resulting from Trust transactions:
Balance Sheet Data
| | | March 31, 2018 | | | December 31, 2017 | |
| | | (Unaudited) | | | (Audited) | |
| | | | | | | |
| Investment in life insurance policies | | $ | 257,560,021 | | | $ | 272,140,787 | |
| All other assets | | | 94,297,162 | | | | 97,624,877 | |
| | | | | | | | | |
| Total assets | | $ | 351,857,183 | | | $ | 369,765,664 | |
| | | | | | | | | |
| Total liabilities | | $ | 123,273,945 | | | $ | 130,824,276 | |
| | | | | | | | | |
| Net assets | | $ | 228,583,238 | | | $ | 238,941,388 | |
Income Statement Data
| | | Three Months Ended March 31, 2018 | | | Three Months Ended March 31, 2017 | |
| | | (Unaudited) | | | (Unaudited) | |
| | | | | | | |
| Change in the fair value of life insurance policies | | $ | (7,888,733 | ) | | $ | 10,392,095 | |
| Other income | | | 67,997 | | | | 11,563 | |
| | | | | | | | | |
| Total income | | $ | (7,820,736 | ) | | $ | 10,403,658 | |
| | | | | | | | | |
| Total expenses | | $ | 2,537,414 | | | $ | 4,237,708 | |
| | | | | | | | | |
| Net (decrease) increase in net assets resulting from operations | | $ | (10,358,150 | ) | | $ | 6,165,950 | |
Income Taxes
No provision for state or Federal income taxes has been made as the liability for such taxes is attributable to the members rather than the Partnership. In certain instances, however, the Partnership may be required under applicable state laws to remit directly to state tax authorities amounts otherwise due to members prior to any distributions. Such payments on behalf of the members are deemed distributions to them.
The Financial Accounting Standards Board (the “FASB”) has provided guidance for how uncertain tax positions should be recognized, measured, disclosed, and presented in the financial statements. This requires the evaluation of tax positions taken or expected to be taken in the course of preparing the Partnership’s tax returns to determine whether the tax positions are more-likely-than-not of being sustained when challenged or when examined by the applicable taxing authority. The Partnership has no material uncertain income tax positions as of March 31, 2018 nor December 31, 2017.
Use of Estimates
The preparation of these financial statements, in conformity with generally accepted accounting principles in the United States of America (“GAAP”), requires the Partnership to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting periods. Actual results could differ from these estimates and such differences could be material
Risks and Uncertainties
The Partnership, due to the nature of its assets and operations, is subject to significant risks and uncertainties affecting the Trust which encounters economic risk. The two main components of economic risk potentially impacting the Partnership’s interest in the Trust are market risk and concentration of credit risk. The market risks include interest rate risk and the risk of declines in valuation of the Trust’s life insurance policies, including declines caused by the selection of increased discount rates associated with the Trust’s fair value model. Concentration of credit risk is the risk that an insurance carrier who has issued life insurance policies held by the Trust, does not remit the amount due under those policies due to the deteriorating financial condition of the carrier or otherwise. It is reasonably possible that future changes to estimates involved in valuing life insurance policies could result in material effects to the Partnership’s financial position and results of operations.
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations. |
You should read the following discussion in conjunction with the consolidated financial statements and accompanying notes and the information contained in other sections of this quarterly report on Form 10-Q. The statements in this discussion and analysis concerning expectations regarding Life Partners Position Holder Trust’s future performance, liquidity and capital resources, as well as other non-historical statements in this discussion and analysis, are forward-looking statements. The actual results of the Trust could differ materially from those suggested or implied by any forward-looking statements.
Business Overview
The Life Partners Position Holder Trust (“Position Holder Trust” or “Trust”) and the Life Partners IRA Holder Partnership, LLC (“IRA Partnership” or “Partnership”) came into existence on December 9, 2016, as a result of the Plan of Reorganization confirmed pursuant to the Chapter 11 bankruptcy proceeding initiated in 2015 by Life Partners Holdings, Inc. At the time of its establishment by the Bankruptcy Court, the Trust’s primary asset was a life insurance portfolio of 3,252 Policies, with an aggregate fair value of $470.7 million and an aggregate face value of approximately $2.2 billion at December 9, 2016. Adjustments in the calculation of the aggregate fair value of the PHT Portfolio may occur over time as maturities ensue in the PHT Portfolio and life expectancies change.
The Bankruptcy Court organized the Trust and the IRA Partnership in order to liquidate the assets of the Debtors in a manner calculated to conserve, protect and maximize the value of the assets, and to distribute the proceeds thereof to the Trust’s securities holders in accordance with the Plan. The Trust and IRA Partnership have no other business interests nor operations and will not acquire any additional life insurance policies in the future. The Trust’s beginning assets and liabilities were contributed pursuant to the Plan as of December 9, 2016.
Continuing Operations
While the Position Holder Trust is a liquidating trust with no intent to continue or to engage in a trade or business, the nature of the life insurance policies assets being liquidated are such that it is not practical or advantageous to simply liquidate the Policies by disposing of them. In this regard, there is no viable secondary market for the Policies, nor is there another practical means of disposing of them or monetizing them in the near term.
The Position Holder Trust expects that fulfilling its liquidating purpose will require a significant amount of time. As such, the Trust will have significant ongoing operations during that period due to the nature of its assets and its plan to maximize the proceeds to its beneficiaries by maintaining the majority of its Policies until maturity. As a result, the Trust has concluded that its liquidation is not imminent, in accordance with the definitions under accounting principles generally accepted in the United States and has not applied the liquidation basis of accounting in presenting its financial statements. The Trust will continue to evaluate its operations to determine when its liquidation becomes imminent and the liquidation basis of accounting is required.
The IRA Partnership operations consist entirely of its interests in the operations of the Trust and will continue as long as the Trust is liquidating its assets. The Partnership utilizes the equity method of accounting for its interests in the Trust and recognizes its proportionate interest in the results of the Trust’s continuing operations accordingly.
Results of Continuing Operations
Three months ended March 31, 2018
The Position Holder Trust’s net decrease in net assets resulting from operations for the three months ended March 31, 2018 was $10.4 million. The Trust recognizes income on its respective portion of the Policies primarily from changes in their aggregate fair value. There was no tax expense nor benefit for the three months ended March 31, 2018. The following are the components of net decrease in net assets resulting from operations for the three months ended March 31, 2018:
| Income | | $ | (7,820,736 | ) |
| Expense | | | (2,537,414 | ) |
| Net decrease in net assets resulting from operations | | $ | (10,358,150 | ) |
The following table provides a roll-forward of the fair value of life insurance policies for the three months ended March 31, 2018:
| Balance at December 31, 2017 | | $ | 272,140,787 | |
| Realized gain on matured policies | | | 11,064,379 | |
| Unrealized loss on assets held | | | (18,953,112 | ) |
| Change in fair value | | | (7,888,733 | ) |
| | | | | |
| Matured policies, net of fees | | | (16,974,197 | ) |
| Premiums paid | | | 10,282,164 | |
| Balance at March 31, 2018 | | $ | 257,560,021 | |
The change in fair value of the Trust’s life insurance Policies is primarily due to realized gains on maturities, unwinding the discount over time, and changes in valuation assumptions, including mortality and discount rates.
As of March 31, 2018, the aggregate portfolio held 3,108 Policies with an estimated fair value of $435.9 million compared to 3,140 Policies with an estimated fair value of $471.6 million at December 31, 2017, a decrease of $35.7 million. Of the aggregate portfolio’s estimated fair value as of March 31, 2018, $257.6 million is attributable to the PHT Portfolio and $178.3 million to the continuing fractional holders. As of March 31, 2018, the Policies’ aggregate death benefit was approximately $2.1 billion, which was comprised of $1.8 billion in life settlement contracts and $249.7 million in viatical contracts.
The Policies were valued using a base or foundational discount rate of 15%, with further valuation adjustments based upon the size of the insured pool, life expectancy data, distinctions between life settlement and viatical policies and whether the Policies are whole life, convertible term or non-convertible term policies and with a post-adjustment weighted average discount rate of 25.8% for Life Settlements and 31.8% for Viaticals. See, Note 6, “Fair Value Measurements” to the accompanying consolidated financial statements.
Interest expense for the three months ended March 31, 2018 primarily consisted of note payable interest on two note payables.
Three months ended March 31, 2017
The Position Holder Trust’s net increase in net assets resulting from operations for the three months ended March 31, 2017 was $6.2 million. The Trust recognizes income on its respective portion of the Policies primarily from changes in their aggregate fair value. There was no tax expense nor benefit for the three months ended March 31, 2017. The following are the components of net decrease in net assets resulting from operations for the three months ended March 31, 2017:
| Income | | $ | 10,403,658 | |
| Expense | | | (4,237,708 | ) |
| Net increase in net assets resulting from operations | | $ | 6,165,950 | |
The following table provides a roll-forward of the fair value of life insurance policies for the three months ended March 31, 2017:
| Balance at December 31, 2016 | | $ | 263,579,040 | |
| Realized gain on matured policies | | | 11,372,839 | |
| Unrealized loss on assets held | | | (980,744 | ) |
| Change in fair value | | | 10,392,095 | |
| | | | | |
| Matured policies, net of fees | | | (12,255,875 | ) |
| Premiums paid | | | 7,263,898 | |
| Balance at March 31, 2017 | | $ | 268,979,158 | |
The change in fair value of the Trust’s life insurance Policies is primarily due to realized gains on maturities, unwinding the discount over time, and changes in valuation assumptions, including mortality and discount rates.
As of March 31, 2017, the aggregate portfolio held 3,235 Policies with an estimated fair value of $480.3 million compared to 3,252 Policies with an estimated fair value of $470.7 million at December 31, 2016, an increase of $9.6 million. Of the aggregate portfolio’s estimated fair value as of March 31, 2017, $269.9 million is attributable to the PHT Portfolio and $210.4 million to the continuing fractional holders. As of March 31, 2017, the Policies’ aggregate death benefit was approximately $2.2 billion.
The Policies were valued using a base or foundational discount rate of 15%, with further valuation adjustments based upon the size of the insured pool, life expectancy data, distinctions between life settlement and viatical policies and whether the Policies are whole life, convertible term or non-convertible term policies and with a post-adjustment weighted average discount rate of 25.0% for Life Settlements and 31.7% for Viaticals.
Interest expense for the three months ended March 31, 2017 primarily consisted of interest on two notes payables.
Liquidity and Capital Resources
The principal sources of the Trust’s operating liquidity are certain investment maturities and premium collections. The principal uses of that liquidity include payments to unit holders in connection with maturity payouts and payment of premiums on policies and general and administrative expenses.
The primary needs for working capital are to pay premiums on Policies and expenses relating to the administration of the Trust and its assets. The Trust is authorized for the use of collected death benefits, called the “Maturity Funds Facility,” from which the Trustee may borrow on a short-term revolving basis to fund its premium reserves. The Trust is also entitled to access the cash surrender value included in the beneficial ownership registered in its name to use for any purpose permitted by the Position Holder Trust Agreement, including to satisfy its share of the premium obligations relating to the Policies. If any such use results in a decrease in the death benefit payable under the related Policy, the decrease will be taken out of the Position Holder Trust’s share of the maturity proceeds of the Policy or, if the Trust’s share is insufficient, the Trust must make up the difference. Fees for servicing the Policies will be paid out of the death benefits paid on Policies in an amount equal to 2.65% of the death benefits paid.
At March 31, 2018, the Position Holder Trust had $71.9 million of cash primarily consisting of $2.6 million held to pay Policy premiums, $27.8 million held to pay for premiums collected and due on behalf of the continuing fractional holders, $25.2 million held to pay maturities collected and owed to current fractional holders, $15.8 million held as collateral deposits on debt, and $0.5 million was available to pay for operating expenses of the Trust. At December 31, 2017, the Position Holder Trust had $78.1 million of cash primarily consisting of $5.7 million was held to pay Policy premiums, $30.2 million was held to pay for premiums collected and due on behalf of the continuing fractional holders, $18.8 million was held to pay pre and post effective date maturities collected and owed to current fractional holders, $16.6 million was held as collateral deposits on debt, and $1.8 million was available to pay for operating expenses of the Trust.
The Trust’s total outstanding liabilities decreased by $7.5 million from $130.8 million at December 31, 2017, to $123.3 million at March 31, 2018. The decrease was mainly attributable to the expenditure of cash to pay outstanding liabilities associated with the payout of funds, offset by increase in liabilities for maturities owed to Continued Functional Interest Holders.
During the three months ended March 31, 2018 and 2017, the Position Holder Trust paid premiums on Policies totaling $10.3 million and $7.3 million, respectively on the PHT Portfolio. Also, for the three months ended March 31, 2018 and 2017 there were maturities of $17.0 million and $12.3 million, respectively.
The Position Holder Trust paid off $10.0 million of its outstanding notes payable during the three months ended March 31, 2018. There were no financing activities during the three months ended March 31, 2017.
In addition, the Trust was required by the Plan to contribute $12 million to the creditors’ trust over the three-year period following the effective date. An initial $2 million was contributed to the creditors’ trust on December 9, 2016, and an additional $5 million was contributed in both January and December 2017.
Loan Facilities
Vida Opportunity Fund, LP, an affiliate of Vida Capital, Inc. provided the $55 million Exit Loan Facility needed to provide for consummation of the reorganization transactions contemplated by the Plan. At the same time, Vida Longevity Fund, LP, also an affiliate of Vida Capital, Inc., provided a $25 million revolving line of credit. The obligations are secured by liens on virtually all of the Position Holder Trust’s assets.
Outstanding debt for the period ended March 31, 2018 was $64.1 million and included $25.0 million of outstanding principal on the Vida Opportunity Fund, LP loan, $36.5 million secured 15-year promissory note issued by the Trust to the IRA Holders (“IRA Notes”), and $2.6 million to an individual. Outstanding debt for the period ended December 31, 2017 was $74.1 million and included $35.0 million of outstanding principal on the Vida Opportunity Fund, LP loan, $36.5 million of New IRA Notes, and $2.6 million to an individual.
The Plan authorizes the Trustee to use the Maturity Funds Facility to borrow on a short-term revolving basis to fund its premium reserves. The Position Holder Trust is also entitled to access the cash surrender value included in the beneficial ownership registered in its name from time to time to use for any purpose permitted by the Position Holder Trust Agreement, including to satisfy its share of the premium obligations relating to the Policies. If any such use results in a decrease in the death benefit payable under the related Policy, the decrease will reduce the Trust’s share of the maturity proceeds of the Policy, or if the Trust’s share is insufficient, it must make up the difference.
New IRA Notes
The Debtors’ estate included 1,177 security holders who held their positions through their individual retirement accounts (“IRA”), which are prohibited investments for an IRA. As a result, the Plan included a mechanism to resolve the IRA investors’ claims by establishing the IRA Partnership and authorizing the issuance of the New IRA Notes.
The Position Holder Trust was authorized to issue New IRA Notes in a principal amount of $63.7 million bearing interest at 3.0% per annum, due 2031. As of March 31, 2018, there were $36.5 million of New IRA Notes outstanding. Interest is payable annually in December.
If the Trust elects to redeem any New IRA Notes, it must notify the New IRA Note trustee of the redemption date and the principal amount to be redeemed at least 60 days before the redemption date (unless a shorter period is satisfactory to the trustee). If fewer than all the New IRA Notes are being redeemed, the notice must also specify a record date not less than 15 days after the date of the notice of redemption is given to the New IRA Note trustee. The New IRA Note trustee will select the notes to be redeemed on a pro rata basis in denominations of $100 principal amount and higher integral multiples of $100.
Other Notes Payable
On March 28, 2017, the Bankruptcy Court allowed $5.5 million to be paid as compensation for the services rendered by H. Thomas Moran as the Chapter 11 Trustee, with fifty percent (50%), or $2.8 million, paid promptly. The remaining amount is to be paid in cash pursuant to the terms of an unsecured promissory note issued by the Trust. The note does not bear interest and the principal amount will be paid in three equal annual installments on January 1 of 2019, 2020 and 2021, with the full principal amount paid no later than December 30, 2021, or in full on or after January 1, 2019.
Off-Balance Sheet Arrangements
As of March 31, 2018, and December 31, 2017, the Position Holder Trust and IRA Partnership had no off-balance sheet arrangements.
Critical Accounting Policies
Position Holder Trust
Investments in Life Insurance Policies
The Trust accounts for its interests in life insurance policies at fair value in accordance with ASC 325-30, Investments in Insurance Contracts. The Trust initially recognized the life insurance policies transferred at its inception at their fair market value on December 9, 2016 and the Trust will estimate the fair value of its life insurance policies and recognize changes therein at each subsequent reporting period.
Fair Value of Life Insurance Policies
The Trust follows ASC 820, Fair Value Measurements and Disclosures, in estimating the fair value of its life insurance policies, which defines fair value as an exit price representing the amount that would be received if an asset were sold or that would be paid to transfer a liability in an orderly transaction between market participants at the measurement date. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability.
As a basis for considering such assumptions, the guidance establishes a three-level fair value hierarchy that prioritizes the inputs used to measure fair value. Level 1 relates to quoted prices in active markets for identical assets or liabilities. Level 2 relates to observable inputs other than quoted prices included in Level 1. Level 3 relates to unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. The Trust’s investments in life insurance policies are considered to be Level 3 as there is currently no active market where the Trust is able to observe quoted prices for identical assets and the Trust’s valuation model incorporates significant inputs that are not observable.
The Trust’s valuation of life insurance policies is a critical estimate within the financial statements. The Trust currently uses a probabilistic method of valuing life insurance policies, which the Trust believes to be the preferred valuation method in its industry. The Trust calculates the assets’ fair value using a present value technique to estimate the fair value of the projected future cash flows. The most significant assumptions in estimating the fair value are the Trust’s estimate of the insureds’ life expectancy and the discount rate. See Note 6, “Fair Value Measurements.”
Income Recognition
The Trust’s investments in life insurance policies are its primary source of income. Gain or loss is recognized from ongoing changes in the portfolio’s estimated fair value, including any gains or losses at maturity. Gains or losses from maturities are recognized at receipt of a death notice or verified obituary for an insured party, and determined based on the difference between the death benefit and the estimated fair value of the policy at maturity.
Premiums Receivable
The Trust assumed the Debtors’ receivables related to life insurance policy premiums and service fees that were paid by the Debtors on behalf of fractional interest holders prior to the Trust’s effective date. After December 9, 2016, the policy premiums allocable to continuing fractional interest holders are those persons’ obligations and not the Trust. If a continuing fractional interest holder defaults on future premium obligations, such position is deemed contributed to the Trust in exchange for the number of Units provided by the Plan, as recently modified by the Bankruptcy Court
The Trust maintains an allowance for doubtful accounts for estimated losses resulting from the inability to collect premiums and service fees receivable. Such estimates are based on the position holder’s payment history and other indications of potential uncollectability. After all attempts to collect a receivable have failed, receivables are written off against the allowance. At March 31, 2018 and December 31, 2017, the allowance for doubtful accounts was $5.0 million, all of which was for receivables assumed from the Debtors on the effective date. Outstanding receivable balances may be recoverable pursuant to the Trustee’s set-off rights under the Plan.
Maturities Receivable
Maturities receivable consist of the Trust’s portion of life insurance policy maturities that occurred but payment was not yet received as of the reporting period.
Income Taxes
No provision for state or Federal income taxes has been made as the liability for such taxes is attributable to the Unit holders rather than the Trust. The Trust is a grantor trust with taxable income or loss passing through to the Unit holders. In certain instances, however, the Trust may be required under applicable state laws to remit directly to state tax authorities amounts otherwise due to Unit holders. Such payments on behalf of the Unit holders are deemed distributions to them.
The Financial Accounting Standards Board (the “FASB”) has provided guidance for how uncertain tax positions should be recognized, measured, disclosed, and presented in the financial statements. This requires the evaluation of tax positions taken or expected to be taken in the course of preparing the Trust’s tax returns to determine whether the tax positions are more-likely-than-not of being sustained when challenged or when examined by the applicable taxing authority. The Trust has no material uncertain income tax positions as of March 31, 2018 or December 31, 2017.
The Trust also assumed income tax liabilities of the Debtors at its inception which total approximately $2.0 million and $2.0 million as of March 31, 2018 and December 31, 2017, respectively, related to taxes, penalties, and interest from the Debtors’ 2008, 2009 and 2010 income tax returns. These obligations bear interest at 4% annually and are due in full by January 2020.
Accounts Payable and Accrued Expenses
Accounts payable and accrued expenses primarily include professional services, legal fees and expected litigation settlements, some of which are obligations assumed by the Trust that were incurred prior to the effective date of the Trust. The Trust also accrues liabilities for state taxes payable and other miscellaneous accruals. The Trust accrues liabilities when costs are incurred and such costs can be reasonably estimated.
Premium Liability
As of March 31, 2018 and December 31, 2017, the Trust holds $30.0 million and $30.2 million, respectively, in escrow for future payment of premium obligations. To the extent advanced premiums received from continuing fractional holders are not used for premium payments, they are refunded to the respective continuing fractional holder.
As of March 31, 2018 and December 31, 2017, the Trust holds $25.0 million and $23.6 million, respectively, of maturities collected on behalf of continuing factional holders pending payment.
Risks and Uncertainties
The Trust encounters economic, legal, and longevity risk. The two main components of economic risk potentially impacting the Trust are market risk and concentration of credit risk. The Trust’s market risks include interest rate risk and the risk of declines in valuation of the Trust’s life insurance policies, including declines caused by the selection of increased discount rates associated with the Trust’s fair value model. It is reasonably possible that future changes to estimates involved in valuing life insurance policies could change and result in material effects to the future financial statements. Concentration of credit risk is the risk that an insurance carrier who has issued life insurance policies held by the Trust, does not remit the amount due under those policies due to the deteriorating financial condition of the carrier or otherwise. Another credit risk potentially impacting the Trust is the risk continuing fractional holders may default on their future premium obligations, increasing the Trust’s premium liability.
The main components of legal risk are (i) the risk that an insurer could successfully challenge its obligation to pay policy benefits upon the death of an insured and (ii) that an insured’s family could successfully challenge the Trust’s entitlement to the benefits of an insurance policy. In the event that either an insurer or an insured’s family was successful in challenging the Trust’s right to payment, there is also risk that the Trust would not be able to recover the premiums it paid towards the insurance policy.
Longevity risk refers to the reasonable possibility that actual mortalities of insureds in the Trust’s portfolio extend over longer periods than are anticipated, resulting in the Trust paying more for premiums.
The Trust maintains the majority of its cash in several accounts with a commercial bank. Balances on deposit are insured by the Federal Deposit Insurance Corporation (“FDIC”). However, from time to time the Trust’s balances may exceed the FDIC insurable amount at its banks.
Recently Adopted Accounting Pronouncement
In May 2014, the FASB issued Accounting Standards Update (“ASU”) No. 2014-09 (“ASC 606”) “Revenue from Contracts with Customers,” which supersedes the revenue recognition requirements in ASC 605 “Revenue Recognition” (“ASC 605”), and requires entities to recognize revenue when control of the promised goods or services is transferred to customers at an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The Trust adopted ASC 606 as of January 1, 2018 using the retrospective transition method. There is no impact to the Trust associated with the adoption of ASC 606.
IRA Partnership
Equity Method Accounting
The Partnership accounts for its investment in the Trust using the equity method of accounting in accordance with Accounting Standards Codification (ASC) 323, Investments – Equity Method and Joint Ventures. The Partnership and the Trust are closely connected, with a common trustee and common management. As a result of this common oversight and control, as well as the Partnership’s position as the majority holder of the Trust’s beneficial interest units, the Partnership is considered to have significant influence under the provisions of ASC 323, resulting in the application by the Partnership of the equity method of accounting.
Income Taxes
No provision for state or Federal income taxes has been made as the liability for such taxes is attributable to the members rather than the Partnership. The Partnership is a limited liability company with taxable income or loss passing through to the members. In certain instances, however, the Partnership may be required under applicable state laws to remit directly to state tax authorities amounts otherwise due to members. Such payments on behalf of the members are deemed distributions to them.
FASB has provided guidance for how uncertain tax positions should be recognized, measured, disclosed, and presented in the financial statements. This requires the evaluation of tax positions taken or expected to be taken in the course of preparing the Partnership’s tax returns to determine whether the tax positions are more-likely-than-not of being sustained when challenged or when examined by the applicable taxing authority. The Partnership has no material uncertain income tax positions as of March 31, 2018 nor December 31, 2017.
The Partnership, due to the nature of its assets and operations, is subject to significant risks and uncertainties affecting the Trust which encounters economic risk. The two main components of economic risk potentially impacting the Partnership’s interest in the Trust are market risk and concentration of credit risk. The market risks include interest rate risk and the risk of declines in valuation of the Trust’s life insurance policies, including declines caused by the selection of increased discount rates associated with the Trust’s fair value model. Concentration of credit risk is the risk that an insurance carrier who has issued life insurance policies held by the Trust, does not remit the amount due under those policies due to the deteriorating financial condition of the carrier or otherwise. It is reasonably possible that future changes to estimates involved in valuing life insurance policies could change and result in material effects to the Partnership’s financial position and results of operations.
| Item 3. | Quantitative and Qualitative Disclosures About Market Risk. |
Not applicable
| Item 4. | Controls and Procedures. |
Evaluation of Disclosure Controls and Procedures
The Position Holder Trust, under the supervision and with the participation of its management, including the Trustee, evaluated the effectiveness of the design and operation of the Position Holder Trust’s “disclosure controls and procedures” (as defined in Rule 13a-15(e) or Rule 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this report. Based on that evaluation, the Trustee concluded that the Position Holder Trust’s disclosure controls and procedures were not effective as of March 31, 2018.
In preparing the financial statements for the year ended December 31, 2017, for the Position Holder Trust and the IRA Partnership, we identified a material weakness in our internal control over financial reporting, as defined by the SEC guidelines for public companies. The material weakness identified relates to the Position Holder Trust and the IRA Partnership having not yet established processes and controls sufficient to ensure the accuracy of data and information regarding its Policies, insured parties and position holder interests on an ongoing basis. In addition, such controls are not fully implemented at the servicer and subservicer, and relevant controls to monitor the performance of those organizations are not yet in place.
Remediation Plan and Actions
The Trust is actively working on the entity level and computer general and application controls in response to this assessment. We began implementing entity level controls to provide oversight on financial reporting and cash management provided by the servicing company. In addition, the servicing company has begun to implement new accounting and operating systems that incorporate appropriate accounting controls over their assigned functions. We believe that the continued implementation of these measures will address and remedy this material weakness in our internal control over financial reporting by December 31, 2018.
Changes in Internal Control Over Financial Reporting
Except as described above, there were no other changes in the Trust’s internal control over financial reporting (as such defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) within the fiscal quarter to which this report relates, that have materially affected, or reasonably likely to materially affect, the Trust’s internal control over financial reporting.
PART II—OTHER INFORMATION
| Item 1. | Legal Proceedings. |
There have been no material changes to any litigation matters during the three months ended March 31, 2018.
Not required for smaller reporting companies.
| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds |
None.
| Item 3. | Defaults upon Senior Securities. |
None.
| Item 4. | Mine Safety Disclosures. |
Not applicable.
| Item 5. | Other Information. |
None
Exhibit No. | Description |
| | |
| Rule 13a-14(a) Certification |
| Section 1350 Certification |
| | |
| 101.INS | XBRL Instance Document. |
| 101.SCH | XBRL Taxonomy Extension Schema Document. |
| 101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document. |
| 101.DEF | XBRL Taxonomy Extension Definition Linkbase Document. |
| 101.LAB | XBRL Taxonomy Extension Label Linkbase Document. |
| 101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrants have duly caused this report to be signed on their behalf by the undersigned thereunto duly authorized.
Dated: May 14, 2018
| | LIFE PARTNERS POSITION HOLDER TRUST |
| | |
| | By: /s/ Eduardo S. Espinosa |
| | Eduardo S. Espinosa, Trustee |
| | |
| | LIFE PARTNERS IRA HOLDER PARTNERSHIP, LLC |
| | |
| | By: /s/ Eduardo S. Espinosa |
| | Eduardo S. Espinosa, Manager |
