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Emergent Capital, Inc. Announces Second Quarter 2017 Results

BOCA RATON, Fla., Aug. 14, 2017 /PRNewswire/ -- Emergent Capital, Inc. (OTCQB: EMGC) ("Emergent" or the "Company"), today announced its financial results for the three and six month periods ended June 30, 2017.

Emergent Capital, Inc. logo (PRNewsFoto/Emergent Capital, Inc.)

Three Months Ended June 30, 2017

Total income from continuing operations was $3.5 million for the three month period ended June 30, 2017 compared to a loss of $15.8 million for the same period in 2016. Income from continuing operations for the three months ended June 30, 2016 was significantly impacted by the adoption of the U.S. Society of Actuaries 2015 Valuation Basic Table("2015 VBT"), which resulted in a reduction in the fair value of the Company's life settlements by approximately $17.6 million. Income was also impacted by a $2.7 million gain on the maturity of three policies during the quarter ended June 30, 2017 compared to a $2.5 million gain on maturity of two policies for the same period in 2016.

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



Three Months Ended
June 30, 2017


Three Months Ended
June 30, 2016

Change in estimated probabilistic cash flows


$

23,181



$

17,789


Premiums paid during period


(21,451)



(17,683)


2015 VBT Adoption




(17,638)


Change in life expectancy evaluation


(1,091)



(8,177)


Change in discount rates




7,149


Unrealized gain on acquisitions




262


Realized gain on maturities


2,743



2,485


Change in fair value of life settlements


$

3,382



$

(15,813)







Total expenses from continuing operations were $9.9 million for the three month period ended June 30, 2017 compared to income of $6.0 million for the same period in 2016. Expenses for the quarter ended June 30, 2016 were primarily impacted by the adoption of the 2015 VBT, which resulted in a  $15.7 million reduction for the change in the fair value of the White Eagle and Red Falcon Revolving Credit Facilities (together, the "Revolving Credit Facilities".) Expenses for the quarter ended June 30, 2017 were also impacted by a $778,000 increase in interest expense associated with increased borrowings on the Company's White Eagle Revolving Credit Facility, which was offset by a reduction in operating expenses of $2.7 million primarily related to a decrease in legal fees and personnel costs.

The Company reported a net loss from continuing operations of $6.5 million, or $(0.23) per diluted share for the three month period ended June 30, 2017, compared to $9.8 million, or $(0.36) per diluted share for the same period in 2016.

Six Months Ended June 30, 2017

Total income from continuing operations for the six month period ended June 30, 2017 was $29.0 million compared to a loss of $7.3 million during the same period in 2016. The increase is primarily due to the adoption of the 2015 VBT during the six months ended June 30, 2016, which reduced the fair value of the Company's life settlements by $17.6 million, and an $8.2 million increase in realized gains due to policy maturities.

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



Six Months Ended

June 30, 2017


Six Months Ended

June 30, 2016

Change in estimated probabilistic cash flows


$

45,782



$

36,619


Premiums paid during period


(42,034)



(34,336)


2015 VBT Adoption




(17,638)


Change in life expectancy evaluation


6,207



(10,244)


Change in discount rates


(40)



7,149


Unrealized gain on acquisitions




262


Realized gain on maturities


19,007



10,763


Change in fair value of life settlements


$

28,922



$

(7,425)







Total expenses from continuing operations were $33.6 million for the six month period ended June 30, 2017 compared to $9.9 million for the same period in 2016. Expenses during the six months ended June 30, 2016 were significantly impacted by the adoption of the 2015 VBT, which resulted in a $15.7 million reduction in the fair value of the Revolving Credit Facilities. The Company's expenses for the six months ended June 30, 2017 were impacted by an increase of $2.3 million in interest expense associated primarily with increased borrowings on the White Eagle Revolving Credit Facility and the 8.5% Senior Unsecured Convertible Notes, which was offset by a $4.1 million reduction in operating expenses primarily due to a $1.9 million and $1.7 million decrease in legal expenses and personnel costs, respectively, compared to the six month period ended June 30, 2016.

The Company reported a net loss from continuing operations of $4.6 million, or $(0.16) per fully diluted share, for the six month period ended June 30, 2017 compared to a net loss of $17.2 million, or $(0.63) per fully diluted share, for the same period in 2016.

Life Settlements Portfolio Highlights

On June 30, 2017, the estimated fair value of the Company's 614 life insurance policies was $526.3 million compared to $498.4 million for 621 life insurance policies at December 31, 2016. The weighted average discount rate was 16.39% and 16.37% at June 30, 2017 and December 31, 2016, respectively. The aggregate face value of the Company's portfolio of life insurance policies was approximately $2.9 billion on June 30, 2017.

During the quarter, three life insurance policies that served as collateral under the revolving credit facility matured with a face value totaling $5.2 million.

As of June 30, 2017, the Company had cash and cash equivalents and certificates of deposit of $23.7 million and a Book Value per share of $5.92.

About Emergent Capital, Inc.

Emergent (OTCQB: EMGC) is a specialty finance company that invests in life settlements. More information about Emergent can be found at www.emergentcapital.com

Safe Harbor Statement

This press release may contain certain "forward-looking statements" relating to the business of Emergent Capital, Inc. and its subsidiary companies. All statements, other than statements of historical fact included herein are "forward-looking statements." These forward-looking statements are often identified by the use of forward-looking terminology such as "believes," "expects" or similar expressions, and involve known and unknown risks and uncertainties. Although Emergent believes that the expectations reflected in these forward-looking statements are reasonable, they do involve assumptions, risks and uncertainties, and these expectations may prove to be incorrect. Investors should not place undue reliance on these forward-looking statements, which speak only as of the date of this press release. Other than as required under the securities laws, Emergent does not assume a duty to update these forward-looking statements.

-SELECTED FINANCIAL TABLES FOLLOW-

Emergent Capital, Inc.
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)



For the Three Months Ended
June 30,


For the Six Months Ended
June 30,


2017


2016


2017


2016


(in thousands, except share and per share data)

Income


Change in fair value of life settlements

$

3,382



$

(15,813)



$

28,922



$

(7,425)


Other income

79



27



129



93


Total income

3,461



(15,786)



29,051



(7,332)


Expenses








Interest expense

8,163



7,385



15,698



13,435


Change in fair value of Revolving Credit Facilities

(1,785)



(19,667)



10,046



(15,570)


Personnel costs

1,049



2,274



2,133



3,830


Legal fees

657



1,710



1,652



3,528


Professional fees

1,204



1,568



2,807



3,211


Insurance

198



194



390



438


Other selling, general and administrative expenses

449



525



913



1,017


Total expenses

9,935



(6,011)



33,639



9,889


Income (loss) from continuing operations before income taxes

(6,474)



(9,775)



(4,588)



(17,221)


(Benefit) provision for income taxes








Net income (loss) from continuing operations

$

(6,474)



$

(9,775)



$

(4,588)



$

(17,221)


Discontinued Operations:








Income (loss) from discontinued operations

(35)



(127)



(225)



(194)


(Benefit) provision for income taxes








Net income (loss) from discontinued operations

(35)



(127)



(225)



(194)


Net income (loss)

$

(6,509)



$

(9,902)



$

(4,813)



$

(17,415)


Basic and diluted income (loss) per share:








Continuing operations

$

(0.23)



$

(0.36)



$

(0.16)



$

(0.63)


Discontinued operations

$



$



$

(0.01)



$

(0.01)


Net income (loss)

$

(0.23)



$

(0.36)



$

(0.17)



$

(0.64)


Weighted average shares outstanding:








Basic and Diluted

28,169,414



27,491,768



28,159,080



27,486,508



 

 

Emergent Capital, Inc.
CONSOLIDATED BALANCE SHEETS



June 30,
 2017


December 31,
 2016*


(Unaudited)




(In thousands except share data)

ASSETS




Assets




Cash and cash equivalents

$

623



$

2,246


Cash and cash equivalents (VIE)

22,042



9,072


Certificates of deposit

1,006



6,025


Prepaid expenses and other assets

4,525



1,112


Deposits - other

1,377



1,347


Life settlements, at estimated fair value

736



680


Life settlements, at estimated fair value (VIE)

525,546



497,720


Receivable for maturity of life settlements (VIE)

21,911



5,000


Fixed assets, net

185



232


Investment in affiliates

2,384



2,384


Total assets

$

580,335



$

525,818


LIABILITIES AND STOCKHOLDERS' EQUITY




Liabilities




Accounts payable and accrued expenses

6,214



$

2,590


Accounts payable and accrued expenses (VIE)

718



593


Other liabilities

227



359


Interest payable - Promissory Notes

11




Promissory Notes

1,892




Interest payable - Convertible Notes

2,382



2,272


Convertible Notes, net of discount and deferred debt costs

66,061



60,535


Interest payable - Senior Secured Notes

200



213


Senior Secured Notes, net of discount and deferred debt costs

29,482



29,297


White Eagle Revolving Credit Facility, at estimated fair value (VIE)

304,874



257,085


Total liabilities

412,061



352,944


Commitments and Contingencies




Stockholders' Equity




Common stock (par value $0.01 per share, 80,000,000 authorized at June 30, 2017 and December 31, 2016; 29,021,844 issued and 28,413,844 outstanding as of June 30, 2017 and December 31, 2016

290



290


Preferred stock (par value $0.01 per share, 40,000,000 authorized; 0 issued and outstanding as of June 30, 2017 and December 31, 2016)




Treasury Stock, net of cost (608,000 shares as of June 30, 2017 and December 31, 2016)

(2,534)



(2,534)


Additional paid-in-capital

307,860



307,647


Accumulated deficit

(137,342)



(132,529)


Total stockholders' equity

168,274



172,874


Total liabilities and stockholders' equity

$

580,335



$

525,818



 *      Derived from audited consolidated financial statements.

 


 

Emergent Capital, Inc.
Selected Operating Data (dollars in thousands):




Three Months Ended June 30,


Six Months Ended June 30,



2017


2016


2017


2016

Period Acquisitions — Policies Owned









Number of policies acquired




1





1


Average age of insured at acquisition




90.3





90.3


Average life expectancy — Calculated LE (Years)




2.3





2.3


Average death benefit


$



$

690



$



$

690


Aggregate purchase price


$



$

16



$



$

16


End of Period — Policies Owned









Number of policies owned


614



625



614



625


Average age of insured


82.9



81.9



82.9



81.9


Average death benefit per policy


$

4,729



$

4,746



$

4,729



$

4,746


Average Life Expectancy — Calculated LE (Years)


8.7



9.4



8.7



9.4


Aggregate Death Benefit


$

2,903,899



$

2,966,388



$

2,906,899



$

2,966,388


Aggregate fair value


$

526,282



$

473,046



$

526,282



$

473,046


Monthly premium — average per policy


$

11.5



$

10.3



$

11.5



$

10.3


Period Maturities









Number of policies matured


3



2



7



8


Average age of insured at maturity


88.8



88.9



83.5



85.9


Average life expectancy - Calculated LE (Years)


3.5



3.7



3.5



5.1


Aggregate death benefit


$

5,223



$

4,200



$

43,073



$

17,180


Gains on maturity


$

2,743



$

2,485



$

19,007



$

10,763


Proceeds collected


$

16,173



$

5,500



$

26,173



$

20,980


 

 

SOURCE Emergent Capital, Inc.

For further information: Steve Scott, Emergent Capital, Inc., Director, Life Finances, 561.995.4240, IR@emergentcapital.com, www.emergentcapital.com

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