Life Partners IRA Holder Partnership 10Q 2022 Q1 Quarterly report

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, 2022

☐	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)

Texas

81-6950788

81-4644966

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification Nos.)

2001 Bryan Street, Suite 1800, Dallas, TX		75201
(Address of principal executive offices)		(Zip Code)

214-560-5404

(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 every Interactive Data File required to be submitted 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 such files). Yes ☒ No ☐

Indicate by check mark whether the registrants are large accelerated filers, 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 ☐

LIFE PARTNERS POSITIONS HOLDERS TRUST

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PART I FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements (Unaudited)
Life Partners Position Holder Trust
	Page No.
Consolidated Balance Sheets as of March 31, 2022 and December 31, 2021	3
Consolidated Statements of Operations for the three months ended March 31, 2022 and 2021	4
Consolidated Statements of Changes in Net Assets for the three months ended March 31, 2022 and 2021	5
Consolidated Statements of Cash Flows for the three months ended March 31, 2022 and 2021	6
Notes to the Consolidated Financial Statements	7

Life Partners IRA Holder Partnership, LLC

Balance Sheets as of March 31, 2022 and December 31, 2021	18
Statements of Operations for the three months ended March 31, 2022 and 2021	19
Statements of Changes in Net Assets for the three months ended March 31, 2022 and 2021	20
Statements of Cash Flows for the three months ended March 31, 2022 and 2021	21
Notes to Financial Statements	22

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	24
Item 3. Quantitative and Qualitative Disclosures about Market Risk	33
Item 4. Controls and Procedures	34

PART II OTHER INFORMATION

Item 1. Legal Proceedings	35
Item 1.A Risk Factors	35
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	35
Item 3. Defaults Upon Senior Securities	35
Item 4. Mine Safety Disclosures	35
Item 5. Other Information	35
Item 6. Exhibits	35

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LIFE PARTNERS POSITION HOLDER TRUST

CONSOLIDATED BALANCE SHEETS

	March 31, 2022		December 31, 2021
	(Unaudited)		(Audited)
Assets
Cash	$	447,412	$	425,675
Maturities receivable		10,652,045		22,926,955
Prepaids and other assets		799,509		736,944
Restricted cash and cash equivalents		102,253,917		94,514,226
Life insurance policies		190,557,840		190,324,232

Total assets	$	304,710,723	$	308,928,032

Liabilities
Notes payable	$	5,276,987	$	6,541,334
Premium liability		26,182,108		27,708,630
Maturity liability		2,159,747		4,078,582
Accounts payable		568,159		541,082
Distributions payable		98,385		160,584
Accrued expenses		259,350		537,200

Commitments and Contingencies (Note 2)

Total liabilities		34,544,736		39,567,412

Net assets	$	270,165,987	$	269,360,620

See accompanying notes to consolidated financial statements

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LIFE PARTNERS POSITION HOLDER TRUST

CONSOLIDATED STATEMENT OF OPERATIONS

	For the Three Months Ended March 31,
	2022		2021
	(Unaudited)		(Unaudited)
Income
Change in fair value of life insurance policies	$	3,778,484	$	54,102,856
Other income		212,219		672,335

Total income		3,990,703		54,775,191

Expenses
Interest expense		45,899		121,950
Administrative and filing fees		0		260,000
Legal fees		664,914		297,834
Professional fees		2,363,132		1,596,943
Other general and administrative		96,497		204,235

Total expenses		3,170,442		2,480,962

Increase in net assets resulting from operations	$	820,261	$	52,294,229

See accompanying notes to consolidated financial statements

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LIFE PARTNERS POSITION HOLDER TRUST

CONSOLIDATED STATEMENT OF CHANGES IN NET ASSETS

	For the Three Months Ended March 31,
	2022			2021
	(Unaudited)			(Unaudited)

Net assets, beginning of period	$	269,360,620		$	237,903,138
Distribution declared to unit holders		0			(20,000,000	)
Redemption of units		(14,894	)		(230,871	)
Net increase in net assets resulting from operations		820,261			52,294,229

Net assets, end of period	$	270,165,987		$	269,966,496
Net asset value per unit:
Number of units		1,241,056,320			1,232,382,656
Net assets per unit	$	0.22		$	0.22

See accompanying notes to consolidated financial statements

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LIFE PARTNERS POSITION HOLDER TRUST

CONSOLIDATED STATEMENT OF CASH FLOWS

THREE MONTHS ENDED MARCH 31,

	2022			2021
	(Unaudited)			(Unaudited)
Cash flows from operating activities:
Net increase in net assets resulting from operations	$	820,261		$	52,294,229
Adjustments to reconcile net increase in net assets to net cash used in operations:
Change in fair value of life insurance policies		(3,778,484	)		(54,102,856	)
Change in assets and liabilities:
Prepaids and other assets		(62,565	)		(243,916	)
Premium liability		(1,526,522	)		(2,115,025	)
Maturity liability		(1,918,835	)		(1,440,985	)
Accounts payable		27,077			60,111
Distribution payable		(62,199	)		(6,502	)
Accrued expenses		(277,850	)		(2,359,747	)
Net cash flows used in operating activities		(6,779,117	)		(7,914,691	)
Cash flows from investing activities:
Premiums paid on policies		(16,456,178	)		(14,963,100	)
Net proceeds from maturities of policies		32,275,964			19,709,830
Net cash flows provided by investing activities		15,819,786			4,746,730
Cash flows from financing activities:
Redemption of Units		(14,894	)		(230,871	)
Payment on notes payable		(1,264,347	)		0
Net cash flows used in financing activities		(1,279,241	)		(230,871	)

Net increase (decrease) in cash		7,761,428			(3,398,832	)

Cash and cash equivalents, beginning of period		94,939,901			100,446,778

Cash and cash equivalents, end of period	$	102,701,329		$	97,047,946

Supplemental cash flow information:
Cash	$	447,412		$	634,370
Restricted cash and cash equivalents		102,253,917			96,413,576

Total cash and cash equivalents	$	102,701,329		$	97,047,946

Cash paid for interest	$	11,249		$	0

See accompanying notes to consolidated financial statements

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LIFE PARTNERS POSITION HOLDER TRUST

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Note 1 - Operations and Summary of Significant Accounting Policies

Operations

Life Partners Position Holder Trust (the “Position Holder Trust” or 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, as amended. The Trust holds and manages individual insurance policies from third parties.

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, 2022, and December 31, 2021, there were 6,498 and 6,454 holders of the 1,241,056,320 and 1,236,955,963 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 positions in 2,466 and 2,493 life insurance policies, with aggregate fair values of $190.6 million and $190.3 million and aggregate face values of approximately $0.9 billion on March 31, 2022, and December 31, 2021. The fair value of the interests in the life insurance policies owned by continuing fractional interest holders are not reflected in the Trust’s financial statements.

Unit Redemption

On September 16, 2020, the U.S. Bankruptcy Court for the Northern District of Texas approved the Trustee’s Motion to Approve Redemption of Additional Units and Member Interests, granting the Trustee the authority to redeem Trust Units in the Life Partners Position Holder Trust and Member Interests in the Life Partners IRA Holder Partnership, LLC, at the discretion of the Trustee and Manager, when financially or administratively practicable. In first quarter of 2022, the Trust redeemed 65,086 Units for a total of $14.9 thousand. In first quarter of 2021, the Trust redeemed 1,215,113 Units for a total of $230.9 thousand.

Included in the redemption in the first quarter of 2021, the Trust redeemed 788,765 units for $149.9 thousand held by the Life Partners Creditors’ Trust. The Life Partners Position Holder Trust and the Life Partners Creditors’ Trust share the same Trust Governing Board. The redemption was executed to reduce the administrative burden of the Life Partners Position Holder Trust and to facilitate the expected termination of the Life Partners Creditor’s Trust. The units were redeemed at the same price per unit as all other redemptions performed at the same or similar time and in line with the Motion approved by the U.S. Bankruptcy Court for the North District of Texas.

Covid-19 Pandemic Update

The novel coronavirus (COVID-19) pandemic has not had a material adverse effect on the Trust’s operations during the quarter ending March 31, 2022. The extent to which the Trust will be impacted by the outbreak will largely depend on future developments, which are highly uncertain and cannot be accurately predicted, including new information which may emerge concerning the severity of the outbreak and actions by government authorities to contain the outbreak or treat its impact, among other things.

COVID-19 has not impacted the Trust’s ability to realize maturity receivables and pay its premium obligations or other expenses. The Trust will continue to monitor the impact of risk associated with mortality experience, default on future premium obligations by the continuing fractional holders which would increase the Trust’s premium obligations and any risk associated with default on payment obligations by the insurance policy carriers. As of March 31, 2022, management has not made a determination as to how COVID-19 has impacted the Trust’s mortality figures and there remains uncertainty if or how much future mortality might be impacted by the pandemic.

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Summary of Significant Accounting Policies

Basis of Presentation

In the opinion of management, the financial statements of the Trust as of March 31, 2022 and for the three months ended March 31, 2022 and 2021 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, 2021 and the Plan.

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.

Basis of Consolidation

The consolidated financial statements of Life Partners Position Holders Trust include the accounts of the Life Partners Position Holders Trust and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated.

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. Any resulting changes in fair value estimates are reflected in operations in the period the change becomes apparent.

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’ longevity, anticipated future premium obligations and the discount rate. See Note 6, “Fair Value Measurements.”

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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 to 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, 2022, and December 31, 2021, the allowance for doubtful accounts was $0.3 million and fully offsets the recorded receivables. Outstanding receivable balances may be recoverable pursuant to the Trustee’s set-off rights under the Plan.

Maturities Receivable

Maturities receivables consist of the Trust’s portion of life insurance policy maturities that occurred, but payment was not yet received as of the end of the reporting period.

Premium Liability

Premium liabilities are funds in escrow on behalf of continuing fractional holders for future payment of their premium obligations. If such funds are not used for such continuing fractional holder’s premium payments, they are refunded to the respective continuing fractional holder.

Maturity Liability

Maturity liabilities are maturities collected on behalf of continuing fractional holders pending payment to those fractional holders, including a reserve for unallocated funds from the inception of Trust.

Distributions Payable

Distributions payable are distributions declared by the Trust pending payment to Unit holders.

Income Taxes

No provision for state or federal income taxes from operations 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 withhold amounts otherwise due to Unit holders and remit them directly to state or federal tax authorities. 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, 2022, and December 31, 2021.

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Use of Estimates

The preparation of these financial statements, in conformity with 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 main components of economic risk potentially impacting the Trust are market risk, concentration of credit risk, and the increasing cost of insurance 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 materially affect 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 carrier’s deteriorating financial condition 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 obligations. The increasing cost of insurance risk includes the carriers’ attempts to change a policy’s cost of insurance. While some cost of insurance increases are anticipated and taken into consideration in the Trust’s forecasts, other cost of insurance increases are unilaterally imposed by the carrier.

The main components of legal risk are: (i) the risk that an insurer could successfully challenge its obligation to pay policy benefits at maturity; and (ii) that an insured’s family could successfully challenge the Trust’s entitlement to an insurance policy’s benefits. In either case, there is also risk that the Trust would be unable 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 in premiums and delaying its collection of death benefits. Further, increased longevity may encourage additional continuing fractional holders to default on their premium obligations, increasing the Trust’s positions and its premium payment burden. The Trust management continues to evaluate any potential impact; however, such future revisions could have a material impact on the valuation.

The Trust maintains the majority of its cash and cash equivalents 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 amounts.

Accounting Guidance Not Yet Adopted

In June 2016, the FASB issued new guidance (ASU 2016-13, Financial Instruments - Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments), effective for fiscal years beginning after December 15, 2022 and interim periods within those fiscal years. Notable amendments in this update will change the accounting for impairment of most financial assets and certain other instruments in the following ways:

	·	financial assets (or a group of financial assets) measured at amortized cost will be required to be presented at the net amount expected to be collected, with an allowance for credit losses deducted from the amortized cost basis, resulting in a net carrying value that reflects the amount the entity expects to collect on the financial asset at purchase

	·	credit losses relating to available-for-sale fixed maturity securities will be recorded through an allowance for credit losses, rather than reductions in the amortized cost of the securities. The allowance methodology recognizes that value may be realized either through collection of contractual cash flows or through the sale of the security. Therefore, the amount of the allowance for credit losses will be limited to the amount by which fair value is below amortized cost because the classification as available for sale is premised on an investment strategy that recognizes that the investment could be sold at fair value, if cash collection would result in the realization of an amount less than fair value

	·	the income statement will reflect the measurement of expected credit losses for newly recognized financial assets as well as the expected increases or decreases (including the reversal of previously recognized losses) of expected credit losses that have taken place during the period. The measurement of expected credit losses is based on relevant information about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount

	·	disclosures will be required to include information around how the credit loss allowance was developed, further details on information currently disclosed about credit quality of financing receivables and net investments in leases, and a rollforward of the allowance for credit losses for available-for-sale fixed maturity securities as well as an aging analysis for securities that are past due

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The amendments in this ASU may be early adopted during any interim or annual period beginning after December 15, 2018. The Trust is currently evaluating the impact of this new accounting guidance on its financial statements and does not plan to early adopt.

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. Such matters will continue to be monitored for further developments.

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. The Trust maintains insurance to mitigate its exposure to this contingency risk.

Note 3 - Restricted Cash and Cash Equivalents

The Plan imposes restrictions on the Trust to maintain certain funds in segregated accounts. As of March 31, 2022, and December 31, 2021, the Trust has $102.3 million and $94.5 million, respectively, in restricted cash and cash equivalents. The restricted cash accounts are for: maturities, premium reserves, premium obligations, and collateral deposits on debt.

Note 4 - Life Insurance Policies

As of March 31, 2022, the Trust owns an interest in 2,466 policies of which 345 are life settlement policies and 2,121 are viaticals (the “PHT Portfolio”). The PHT Portfolio’s aggregate face value is approximately $0.9 billion as of March 31, 2022, of which $0.7 billion is attributable to life settlements and $0.2 billion is attributable to viaticals. The PHT Portfolio’s aggregate fair value is $190.6 million as of March 31, 2022, of which $180.6 million is attributable to life settlements and $10.0 million is attributable to viaticals.

As of December 31, 2021, the Trust owned an interest in 2,493 policies of which 356 are life settlement policies and 2,137 are viaticals. The PHT Portfolio’s aggregate face value was approximately $0.9 billion as of December 31, 2021 of which $0.7 billion was attributable to life settlements and $0.2 billion was attributable to viaticals. The PHT Portfolio’s aggregate fair value was estimated at $190.3 million as of December 31, 2021 of which $180.6 million was attributable to life settlements and $9.7 million was 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. See: Note 6 – Fair Value Measurements, below for a more detailed discussion of this change in estimating the insureds’ longevity. The following tables summarize the Trust’s life insurance policies grouped by remaining life expectancy as of March 31, 2022 and December 31, 2021:

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As of March 31, 2022:

Remaining Life Expectancy (Years)	Number of Life Insurance Policies		Face Value		Fair Value
0-1		—	$	—	$	—
1-2		1		3,298		2,693
2-3		3		2,052,445		974,198
3-4		90		143,767,489		46,018,200
4-5		189		414,352,166		108,662,847
Thereafter	2183			321,203,652		34,899,902
		2,466	$	881,379,050	$	190,557,840

As of December 31, 2021:

Remaining Life Expectancy (Years)	Number of Life Insurance Policies		Face Value		Fair Value
0-1		—	$	—	$	—
1-2		1		3,298		2,681
2-3		3		2,052,445		994,282
3-4		86		138,284,017		42,512,877
4-5		190		421,616,744		109,869,222
Thereafter		2,213		334,851,375		36,945,170
		2,493	$	896,807,879	$	190,324,232

Estimated premiums to be paid by the Trust for its portfolio during each of the five succeeding calendar years and thereafter as of March 31, 2022, are as follows:

2022 remaining	$	48,387,393
2023		61,046,480
2024		52,973,400
2025		45,190,763
2026		38,411,070
Thereafter		134,631,630

Total	$	380,640,736

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, as the continuing fractional holders default on their future premium obligations, the Trust’s premium liability will increase.

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.

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Note 5 - Notes Payable

Effective January 30, 2019, the Trust had a $15 million revolving credit facility with Veritex Community Bank of Dallas, Texas (Veritex Credit Facility), with an initial 2-year term and interest at 6%. Effective January 29, 2021, the Trust renewed the revolving credit facility for an additional 2-year term. As part of the renewal, the revolving credit facility was increased to $25.0 million and shall bear interest at the rate of 5% per annum. The Veritex Credit Facility will continue to be secured by a lien on the Position Holder Trust’s assets. There are no amounts outstanding as of March 31, 2022, and December 31, 2021.

In accordance with the Plan, the Trust issued New IRA Notes of $35.9 million in December 2016 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 New IRA Notes, beginning in December 2017, the Trust is required to make annual payments to a sinking fund for the principal payment due at maturity. Such fund is included in restricted cash on the accompanying balance sheet.

For the quarter ending March 31, 2022, the Trust redeemed in full New IRA Notes having an outstanding balance of $67,000 or less. The amount paid in connection with the redemption was $1.3 million and only funds set aside in a sinking fund established pursuant to the Bankruptcy Plan for that purpose was used. Accrued interest on all New IRA Notes through the redemption dates was paid as well. For the quarter ending March 31, 2021, the Trust did not redeem any New IRA Notes.

As of March 31, 2022, and December 31, 2021, the outstanding balances of the New IRA notes was $5.3 million and $6.5 million, respectively. The sinking fund associated with these notes had balances of $47.5 thousand and $37.5 thousand at March 31, 2022 and December 31, 2021, respectively.

Future scheduled principal payments on the long-term debt are as follows as of March 31, 2022:

Years Ending December 31,	Long-Term Debt
2022	$	0
2023		0
2024		0
2025		0
2026		0
Thereafter		5,276,987

Total	$	5,276,987

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.

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The balances of the Trust’s assets measured at fair value on a recurring basis as of March 31, 2022 and December 31, 2021, are as follows:

	As of March 31, 2022		As of December 31, 2021
Assets:
Investments in Life Insurance Policies
Level 1	$	0	$	0

Level 2	$	0	$	0

Level 3	$	190,557,840	$	190,324,232

Total Fair Value	$	190,557,840	$	190,324,232

Quantitative Information about Level 3 Fair Value Measurements

Life insurance policies	March 31, 2022		December 31, 2021
Fair Value		$190,557,840		$190,324,232

Face Value		$881,379,050		$896,807,879

Valuation Techniques		Discounted cash flow		Discounted cash flow

Unobservable Inputs		Discount rate, Mortality assumptions		Discount rate, Mortality assumptions

Weighted average discount rates
Life settlements		15.0%		15.0%
Viaticals		20.0%		20.0%

Mortality assumptions - 2015 VBT mortality multipliers:
Life settlements		85% - 90%		85% - 90%
Viaticals		350%		350%

In assessing and determining the PHT Portfolio’s valuation, the Position Holder Trust retained Lewis & Ellis, Inc. as its principal actuaries.

The following is a summary of the methodology used to estimate the assets’ fair value measured on a recurring basis and within the above fair value hierarchy. The overall methodology did not change during the current or prior year.

The PHT Portfolio’s value was estimated using an actuarially based approach incorporating net cash flows and life expectancies as determined by a default mortality multiplier based on the 2015 Valuation Basic Table produced by the U.S. Society of Actuaries (“VBT”) as opposed to specific life expectancies of insureds as the mortality multipliers from the VBT Ultimate table provide more accurate longevity projections across the portfolio. A default mortality multiplier for each insured was used to project the PHT Portfolio’s present value of net cash flows (death benefits less premium payments and servicing company compensation).

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As of March 31, 2022 and December 31, 2021, the default mortality multipliers used are 90% for the life settlement males, 85% for the life settlement females, and 350% for the viaticals regardless of gender. On a quarterly basis, the Trust compares actual mortalities to expected mortalities to refine its analysis.

The Trust continually evaluates and updates its forecasts of future premium obligations for individual policies. The Trust considers these potential changes to estimated future cash flows in its consideration of the discount rate.

The Trust also continues to monitor historical deaths on a quarterly basis. We will compare actual to expected mortalities to refine our mortality multipliers; such that they reasonably “validate” based on our analysis of trends.

The monthly net cash flows with interest and survivorship were discounted to arrive at the PHT Portfolio’s estimated value as of March 31, 2022 and December 31, 2021. Future changes in the longevity estimates 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, 2022 and December 31, 2021 would be as follows:

As of March 31, 2022 As of Life Expectancy Months Adjustment		Weighted Average Life Expectancy

			Fair Value		Change in Fair Value
	-5%		$	205,080,016	$	14,522,176
No change		4.8 years	$	190,557,840		—
	+5%		$	175,343,448	$	(15,214,392	)

As of December 31, 2021	Weighted Average Life			Change in Fair
As of Life Expectancy Months Adjustment	Expectancy	Fair Value		Value
-5%		$	205,107,243	$	14,783,011
No change	4.8 years	$	190,324,232		—
+5%		$	174,841,781	$	(15,482,451	)

Cost of Insurance

Over the past several years, various insurers have increased the cost of insurance tables used in certain of their policies. The PHT Portfolio has not been exempt from these increases. Because the cost of insurance affects the premiums paid, an increase in the cost of insurance negatively impacts the affected policies’ valuation. The fair value estimates take into account all known increases in the cost of insurance.

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 PHT’s Portfolio, and various policy specific quantitative and qualitative factors including known information about the underlying insurance policy, its economics, the insured and the insurer.

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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, 2022 and December 31, 2021 would be as follows:

As of March 31, 2022	Fair Value		Change in Fair Value
Rate Adjustment	Fair Value		Change in Fair Value
+2%	$	177,310,180	$	(13,247,660)
No change	$	190,557,840	—
-2%	$	205,748,236	$	15,190,396

As of December 31, 2021	Fair Value		Change in Fair Value
Rate Adjustment	Fair Value		Change in Fair Value
+2%	$	176,945,811	$	(13,378,421)
No change	$	190,324,232	—
-2%	$	205,683,115	$	15,358,883

Future changes in the discount rates used by the Trust to value life insurance policies could have a material effect on the fair value of the Portfolio, 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.

In the first quarter of 2021, the Trust’s actuarial firm, Lewis and Ellis, modified the discount rate used to value the portfolio. This change had a material impact on the fair value of the Trust’s portfolio. These changes were made as a result of i) The full on-boarding by NorthStar of the Trust’s portfolio, which produced more clarity into premium streams, the Trust’s ability to track insureds and thus deaths. ii) The majority of premium streams have been fully optimized. This not only improves clarity into the Trust’s payment obligations, it also resulted in cost savings for the Trust. iii) The importance of having specific LEs for the senior life settlement portion of the portfolio has been diminished by the fact that the average age of the insureds has now surpassed the age of 90, and iv) the Trust has now exited bankruptcy which increases the marketability of the Trust’s portfolio.

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, 2022:

Carrier

Percentage of

Face Value

Percentage of

Fair Value

Carrier Rating

Transamerica Financial Life Insurance

9.4

12.3

A+

John Hancock Life Insurance Company

7.4

10.9

A+

Carrier

Percentage of

Face Value

Percentage of

Fair Value

Carrier Rating

Transamerica Financial Life Insurance

9.2

12.0

John Hancock Life Insurance Company

7.3

10.7

A+

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Changes in Fair Value

The following table provides a roll-forward of the fair value of life insurance policies for the three months ended March 31, 2022 and 2021:

	2022			2021
Balance at January 1,	$	190,324,232		$	159,179,912
Realized gain on matured policies		15,322,029			23,821,181
Unrealized gains (losses) on assets held		(11,543,545	)		30,281,675
Change in estimated fair value		3,778,484			54,102,856
Matured policies, net of fees		(20,001,054	)		(27,808,947	)
Premiums paid		16,456,178			14,963,100
Balance at March 31,	$	190,557,840		$	200,436,921

Other Fair Value Considerations - All assets and liabilities except for the life insurance policies, which includes cash, maturities receivable, notes payable, and premium and maturity liability, are accounted for at their carrying value which approximates fair value.

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LIFE PARTNERS IRA HOLDER PARTNERSHIP, LLC

BALANCE SHEETS

	March 31, 2022		December 31, 2021
	(Unaudited)		(Audited)
Assets
Investment in Life Partners Position Holder Trust	$	160,411,697	$	160,464,925
Total assets	$	160,411,697	$	160,464,925
Liabilities
Distributions payable	$	12,968	$	85,557
Due to the Life Partners Position Holder Trust	$	442,102	$	358,013
Total liabilities	$	455,070	$	443,570
Net assets	$	159,956,627	$	160,021,355

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LIFE PARTNERS IRA HOLDER PARTNERSHIP, LLC

STATEMENTS OF OPERATIONS

	For the Three Months Ended March 31,
	2022			2021
	(Unaudited)			(Unaudited)
Income
Equity (loss) income from Life Partners Position Holder Trust	$	(53,228	)	$	30,464,362
Expenses
Professional fees		11,500			13,000
(Decrease) increase in net assets resulting from operations	$	(64,728	)	$	30,451,362

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LIFE PARTNERS IRA HOLDER PARTNERSHIP, LLC

STATEMENTS OF CHANGES IN NET ASSETS

	For the Three Months Ended March 31,
	2022			2021
	(Unaudited)			(Unaudited)
Net assets, beginning of period	$	160,021,355		$	142,714,810
Distribution declared to IRA Partnership Holders		0			(11,964,259	)
Redemption of Member Interests		0			(81,445	)
(Decrease) increase in net assets		(64,728	)		30,451,362
Net assets, end of period	$	159,956,627		$	161,120,468
Net asset value per unit:
Number of units		736,880,175			737,227,275
Net assets per unit	$	0.22		$	0.22

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LIFE PARTNERS IRA HOLDER PARTNERSHIP, LLC

STATEMENTS OF CASH FLOWS

THREE MONTHS ENDED MARCH 31,

	2022			2021
	(Unaudited)			(Unaudited)
Cash flows from operating activities:
Net (decrease) increase in net assets resulting from operations	$	(64,728	)	$	30,451,362
Adjustments to reconcile net increase in net assets to net cash used in operations:
Equity loss (income) from Life Partners Position Holder Trust		53,228			(30,464,362	)
Change in assets and liabilities:
Due to Life Partners Position Holder Trust		84,089			37,897
Net cash provided by operating activities		72,589			24,897

Cash flows from investing activities:
Redemption of units by Life Partners Position Holder Trust		0			81,445
Net cash flows provided by investing activities	0				81,445

Cash flows from financing activities:
Redemption of Partnership Member Interests		0			(81,445	)
Distributions to IRA Partnership Member Interest holders		(72,589	)		(24,897	)
Net cash flows used in financing activities		(72,589	)		(106,342	)

Net change in cash	$	0		$	0
Cash, beginning of period	$	0		$	0
Cash, end of period	$	0		$	0

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LIFE PARTNERS IRA HOLDER PARTNERSHIP, LLC

NOTES TO FINANCIAL STATEMENTS

(unaudited)

Note 1 - Operations

The Life Partners IRA Holder Partnership, LLC (the “IRA Partnership” or “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.

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 Life Partners Position Holder Trust. The Partnership held 736,880,175 and 736,885,944 units as of March 31, 2022 and December 31, 2021, respectively, of the Trust’s outstanding units totaling 1,241,056,320 and 1,236,955,963 as of March 31, 2022 and December 31, 2021, respectively. The sole purpose of the Partnership is to hold Trust interests to permit holders of Member 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.

Unit Redemption

On September 16, 2020, the U.S. Bankruptcy Court for the Northern District of Texas approved the Trustee’s Motion to Approve Redemption of Additional Units and Member Interests, granting the Trustee the authority to redeem Trust Units in the Life Partners Position Holder Trust and Member Interests in the Life Partners IRA Holder Partnership, LLC, at the discretion of the Trustee and Manager, when financially or administratively practicable. In first quarter of 2022, the Trust did not redeem any Units held by the Partnership. In first quarter of 2021, the Trust redeemed 428,657 Units held by the Partnership for a total of $81.4 thousand. In turn, the Partnership redeemed member interest of $81.4 thousand in the first quarter of 2021. There were no redemptions in the first quarter of 2022.

Included in the redemption total above, the Trust redeemed 390,626 units for $74.2 thousand held by the Life Partners Creditors’ Trust in first quarter of 2021. The Life Partners Position Holder Trust and the Life Partners Creditors’ Trust share the same Trust Governing Board. The redemption was executed to reduce the administrative burden of the Life Partners Position Holder Trust and to facilitate the expected termination of the Life Partners Creditor’s Trust. The units were redeemed at the same price per unit as all other redemptions performed at the same or similar time and in line with the Motion approved by the U.S. Bankruptcy Court for the North District of Texas.

Covid-19 Pandemic Update

The Partnership’s only investment is in the Life Partners Position Holder’s Trust. As such, the Partnership’s income is largely dependent on the Trust’s operations and the Partnership would be significantly impacted by any adverse effects of the novel coronavirus (COVID-19) pandemic on the Trust’s operations.

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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 summary financial information for the Trust:

Balance Sheet Data

	March 31, 2022		December 31, 2021
	(Unaudited)		(Audited)
Investment in life insurance policies	$	190,557,840	$	190,324,232
All other assets		114,152,883		118,603,800
Total assets	$	304,710,723	$	308,928,032
Total liabilities	$	34,544,736	$	39,567,412
Net assets	$	270,165,987	$	269,360,620

Income Statement Data

	Three Months Ended March 31, 2022		Three Months Ended March 31, 2021
	(Unaudited)		(Unaudited)
Change in fair value of life insurance policies	$	3,778,484	$	54,102,856
Other income	$	212,219	$	672,335
Total income	$	3,990,703	$	54,775,191
Total expenses	$	3,170,442	$	2,480,962
Net increase in net assets resulting from operations	$	820,261	$	52,294,229

Distributions Payable

Distributions payable are distributions declared by the Partnership pending payment to Interest holders.

Due to Life Partners Position Holders Trust

The Partnership does not have its own cash accounts, and its operating expenses and distributions to its Unit holders are paid on behalf of the Partnership by the Trust. The Partnership settles its liabilities to the Trust through reduction of the funds it receives from distributions made by the Trust.

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 by members prior to any distributions. Such payments on behalf of the members are deemed distributions to them.

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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, 2022 nor December 31, 2021.

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 and changes in other assumptions to 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 financial statements and accompanying notes as well as the financial statements and the notes to those statements in our 2021 Form 10-K. The statements in this discussion and analysis concerning expectations regarding Life Partners Position Holder Trust’s (“Position Holder Trust” or “Trust”) and the Life Partners IRA Holder Partnership, LLC’s (“IRA Partnership” or “Partnership”) 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 and Partnership could differ materially from those suggested or implied by any forward-looking statements.

Business Overview

The Position Holder 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, as amended. The Plan became effective on December 9, 2016.

As of March 31, 2022, and December 31, 2021, there were 6,498 and 6,454 holders of the 1,241,056,320 and 1,236,955,963 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 positions in 2,466 and 2,493 life insurance policies, with aggregate fair values of $190.6 million and $190.3 million and aggregate face values of approximately $0.9 billion on March 31, 2022, and December 31, 2021. The fair value of the interests in the life insurance policies owned by continuing fractional interest holders are not reflected in the Trust’s financial statements.

The Bankruptcy Court organized the Trust and the 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.

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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 Plan requires that the continuing fractional holders pay premium calls within 60 days of the day the Trust sends an invoice. The failure of a continuing fractional holder to timely pay a premium call on a position results in a premium default with respect to that position. Upon a premium default, the continuing fractional holder is deemed to have contributed its position to the Trust in exchange for Units. Section 5.05(c) of the Plan requires that the Trust reduce the number of Units issued upon a default by 20% – the subsection (c)(i) discount.

The 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.

Closing of Bankruptcy Cases

On March 29, 2021, Judge Mark Mullin, United States Bankruptcy Court, Northern District of Texas, Fort Worth Division, entered its Order Approving: (I) Creditors’ Trustee’s Final Report and Amended Application for Final Decree Closing Bankruptcy Cases and Related Relief; and (II) Position Holder Trust’s Amended Post-Confirmation Report and Joinder in Amended Application for Final Decree Closing Bankruptcy Cases.

The Court found that the bankruptcy cases filed as in re Life Partners Holdings, Inc., et. al. Case No. 15-40289, In re Life Partners Inc. Case No. 15-41995, and In re LPI Financial Services, Inc., Case No. 15-41996 (the “Bankruptcy Cases”), have been fully administered and, in the best interests of the reorganized debtors, the successor trusts, their beneficiaries and all parties-in-interest, the Court decreed the Bankruptcy Cases closed.

The closing of the Bankruptcy Cases does not change the continued administration of the Life Partners Creditors’ Trust, the Life Partners Position Holder Trust or the Life Partners IRA Holders Partnership, LLC under their constituent agreements. Accordingly, the Life Partners Position Holder Trust and the Life Partners IRA Holders Partnership, LLC shall continue to operate as they have under the confirmed plan of reorganization.

Unit Redemption

Included in the redemption in 2021, the Trust redeemed 788,765 units for $149.9 thousand held by the Life Partners Creditors’ Trust. The Life Partners Position Holder Trust and the Life Partners Creditors’ Trust share the same Trust Governing Board. The redemption was executed to reduce the administrative burden of the Life Partners Position Holder Trust and to facilitate the expected termination of the Life Partners Creditor’s Trust. The units were redeemed at the same price per unit as all other redemptions performed at the same or similar time and in line with the Motion approved by the U.S. Bankruptcy Court for the North District of Texas.

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Covid-19 Pandemic Update

COVID-19 has not impacted the Trust’s ability to realize maturity receivables and pay its premium obligations or other expenses. The Trust will continue to monitor the impact of risk associated with mortality experience, default on future premium obligations by the continuing fractional holders which would increase the Trust’s premium obligations and any risk associated with default on payment obligations by the insurance policy carriers. As of March 31, 2022, management has not made a determination as to how COVID-19 has impacted the Trusts mortality figures and there remains uncertainty if or how much future mortality might be impacted by the pandemic.

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. Any resulting changes in estimates are reflected in operations in the period the change becomes apparent.

Fair Value of Life Insurance Policies

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.

Income Recognition

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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, 2022 or December 31, 2021.

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

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 in premiums and delaying its collection of death benefits. Further, increased longevity may encourage additional continuing fraction holders to default on their premium obligations, increasing the Trust’s positions and its premium payment burden. The Trust management is still evaluating any potential impact; however, such future revisions could have a material impact on the valuation.

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 amounts.

Accounting Guidance Not Yet Adopted

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	·	financial assets (or a group of financial assets) measured at amortized cost will be required to be presented at the net amount expected to be collected, with an allowance for credit losses deducted from the amortized cost basis, resulting in a net carrying value that reflects the amount the entity expects to collect on the financial asset at purchase

	·	credit losses relating to available-for-sale fixed maturity securities will be recorded through an allowance for credit losses, rather than reductions in the amortized cost of the securities. The allowance methodology recognizes that value may be realized either through collection of contractual cash flows or through the sale of the security. Therefore, the amount of the allowance for credit losses will be limited to the amount by which fair value is below amortized cost because the classification as available for sale is premised on an investment strategy that recognizes that the investment could be sold at fair value, if cash collection would result in the realization of an amount less than fair value

	·	the income statement will reflect the measurement of expected credit losses for newly recognized financial assets as well as the expected increases or decreases (including the reversal of previously recognized losses) of expected credit losses that have taken place during the period. The measurement of expected credit losses is based on relevant information about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount

	·	disclosures will be required to include information around how the credit loss allowance was developed, further details on information currently disclosed about credit quality of financing receivables and net investments in leases, and a rollforward of the allowance for credit losses for available-for-sale fixed maturity securities as well as an aging analysis for securities that are past due

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. Due to 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.

Due to Life Partners Position Holders Trust

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.

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, 2022, nor December 31, 2021.

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Use of Estimates

Risks and Uncertainties

The Partnership, due to the nature of its assets and operations, is subject to significant risks and uncertainties affecting the Trust. 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.

Results of Continuing Operations

The Policies were valued as of March 31, 2022 and December 31, 2021 with a distinction between life settlement and viatical policies and whether the Policies are whole life, convertible term or non-convertible term policies and with a discount rate of 15.0% for life settlements and 20.0% for viaticals. See, Note 6, “Fair Value Measurements” to the accompanying financial statements.

Three Months Ended March 31, 2022 Compared to Three Months Ended March 31, 2021

Results of Operations for the Trust

Net increase in net assets for the three months ended March 31, 2022 was $0.8 million as compared to a net increase in net assets of $52.3 million for the same period last year. The following are the components of net change in net assets resulting from operations for the three months ended March 31, 2022 and 2021:

	Three Months Ended March 31,
	2022		2021		Change			% Change
Income	$	3,990,703	$	54,775,191	$	(50,784,488	)		(93	)%
Expenses		3,170,442		2,480,962		689,480			28	%

Increase in net assets	$	820,261	$	52,294,229	$	(51,473,968	)		(98	)%

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, 2022 and 2021. The primary decrease in income is due to the change in valuation of the investment portfolio as described in Note 6 “Fair Value Measurements” in the accompanying financial statements.

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The following table provides a roll-forward of the fair value of life insurance policies for the three months ended March 31, 2022 and 2021:

	2022			2021
Balance at January 1,	$	190,324,232		$	159,179,912
Realized gain on matured policies		15,322,029			23,821,181
Unrealized gains (losses) on assets held		(11,543,545	)		30,281,675
Change in estimated fair value		3,778,484			54,102,856
Matured policies, net of fees		(20,001,054	)		(27,808,947	)
Premiums paid		16,456,178			14,963,100
Balance at March 31,	$	190,557,840		$	200,436,921

The change in estimated fair value of the Trust’s life insurance Policies includes realized gains on matured policies in addition to unrealized gains (losses) on policies which is affected by changes in valuation assumptions, including mortality and discount rates. On a quarterly basis, management compares actual maturities to projected maturities to refine and validate its analysis. See, Note 6, “Fair Value Measurements” to the accompanying consolidated financial statements.

Expenses

	Three Months Ended March 31,
	2022		2021		Change			% Change
Interest		45,899		121,950	$	(76,051	)		(62	)%
Administrative and filing fees		—		260,000		(260,000	)		(100	)%
Legal fees		664,914		297,834		367,080			123	%
Professional fees		2,363,132		1,596,943		766,189			48	%
Other general and administrative		96,497		204,235		(107,738	)		(53	)%
Total expenses	$	3,170,442	$	2,480,962	$	689,480			28	%

The increase in total expenses of $0.7 million is primarily due to an increase in legal expenses associated with ongoing projects and litigation as well as an increase in professional fees associated with a change in the policy intermediary. The increase in expenses is offset by a decrease in interest expense from the pay down of debt, a decrease in administrative and filing fees due to termination of the bankruptcy proceedings, as well as an overall reduction of general administrative fees.

Results of Operations for the Partnership

The net decrease in net assets for the three months ended March 31, 2022 was $64.7 thousand as compared to a net increase in net assets of $30.5 million for the same period in the last year.

The Partnership recognizes income on its respective portion of the Trust which is controlled by its investment in the Trust’s life insurance Policies and the changes in their aggregate fair value. The primary increase in income and net assets is due to the change in valuation of the investment portfolio as described above in the section related to the Trust.

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Liquidity and Capital Resources

Overview and Cash Flow

The principal source of the Trust’s operating liquidity is the Trust’s share of the death benefits from the maturity of life insurance policies, dividend income and refund of premiums paid on behalf of others. The principal uses of that liquidity include payment of premiums on policies, liquidation of existing debt, payment of general and administrative expenses and distribution to the Unit holders, if any.

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. The Trust believes that these financial resources, in addition to proceeds from maturities, line of credit, and Maturity Funds Facility, are sufficient for it to continue its operations and to issue funds, as necessary, throughout the twelve months after the date of this report.

Capital Resources

Loan Facilities

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

In accordance with the Plan, the Trust issued New IRA notes of $35.9 million in December 2016 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 notes, beginning in December 2017, the Trust is required to make annual payments to a sinking fund for the principal payment due at maturity. Such fund is included in restricted cash on the accompanying balance sheet.

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Liquidity and Financial Condition

At March 31, 2022, the Position Holder Trust had $102.7 million of cash primarily consisting of $61.7 million held to pay policy premiums on behalf of Trust and the continuing fractional holders, $2.2 million held to pay continuing fractional holders for maturities collected, $38.4 million held as collateral deposits on debt, policy premiums, and future distributions, and $0.4 million was available to pay for operating expenses of the Trust.

At December 31, 2021, the Position Holder Trust had $94.9 million of cash primarily consisting of $63.6 million held to pay policy premiums on behalf of Trust and the continuing fractional holders, $4.3 million held to pay continuing fractional holders for maturities collected, $26.6 million held as collateral deposits on debt, policy premiums, and future distributions, and $0.4 million was available to pay for operating expenses of the Trust.

The Trust’s total outstanding liabilities decreased by $5.1 million from $39.6 million at December 31, 2021, to $34.5 million at March 31, 2022. The decrease was mainly attributable to the pay down of debt and decrease of premium and maturity liabilities.

During the three months ended March 31, 2022 and 2021, the Position Holder Trust paid premiums on Policies totaling $16.5 million and $15.0 million, respectively on the PHT Portfolio. Also, for the three months ended March 31, 2022 and 2021, there were net proceeds from maturities received of $32.3 million and $19.7 million, respectively.

The Trust has a liquidity risk associated with the payment of premiums by the continuing fractional interest holders. Under the Plan, the Trust bills continuing fractional interest holders for their share of premiums due over the coming twelve months. If a continuing fractional interest holder fails to pay its share of the premiums on a position, the continuing fractional interest holder defaults and the position is deemed to have been contributed to the Trust in exchange for Units. The Trust is then responsible for the premium payments related to the defaulted interest. Therefore, a significant increase in the non-payment by continuing fractional interest holders may adversely affect the liquidity of the Trust.

Off-Balance Sheet Arrangements

As of March 31, 2022, and December 31, 2021, the Trust and Partnership had no off-balance sheet arrangements.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

Market risk is the risk of potential economic loss principally arising from adverse changes in the fair value of financial instruments. The major components of market risk are credit risk and interest rate risk. As of March 31, 2022, we did not hold a material amount of financial instruments for trading purposes.

Credit Risk

Credit risk consists primarily of the potential loss arising from adverse changes in the financial condition of the issuers of the life insurance policies that we own.

The following table provides information about the life insurance issuer concentrations that exceed 10% of total death benefit and 10% of total fair value of our life settlements as of March 31, 2022.

Carrier

Percentage of

Face Value

Percentage of

Fair Value

Carrier Rating

Transamerica Financial Life Insurance

9.4

12.3

A+

John Hancock Life Insurance Company

7.4

10.9

A+

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Interest Rate Risk

The revolving line of credit with Veritex was established at a fixed interest rate. Accordingly, fluctuations in interest rates during the period ending March 31, 2022, did not impact the Trust’s operations.

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our trustee and chief financial officer, conducted an evaluation of our disclosure controls and procedures, as such term is defined under Rules 13a-15(e) and 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Based on this evaluation, our trustee and chief financial officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this Quarterly Report on Form 10-Q.

Limitations on Controls

Our disclosure controls and procedures and internal control over financial reporting are designed to provide reasonable assurance of achieving their objectives as specified above. Management does not expect, however, that our disclosure controls and procedures or our internal controls over financial reporting will prevent or detect all error and fraud. Any control system, no matter how well designed and operated, is based on certain assumptions and can provide only reasonable, not absolute, assurance that its objectives will be met. Further, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, within the Trust or Partnership have been detected.

Changes in Internal Control Over Financial Reporting

No changes were made to our internal control over financial reporting during our most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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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, 2022.

Item 1A. Risk Factors.

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

Item 6. Exhibits.

Exhibit No.		Description

31.1		Rule 13a-14(a) Certification
31.2		Rule 13a-14(a) Certification
32.1		Section 1350 Certification
32.2		Section 1350 Certification
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.

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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 10, 2022

	LIFE PARTNERS POSITION HOLDER TRUST

	By:	/s/ Michael J. Quilling
		Michael J. Quilling, Trustee

	LIFE PARTNERS IRA HOLDER PARTNERSHIP, LLC

	By:	/s/ Michael J. Quilling
		Michael J. Quilling, Manager

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Life Partners IRA Holder Partnership 10-Q2022 Q1 Quarterly report

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