Company Reports Book Value of $0.37 per Share

BOCA RATON, FL / ACCESSWIRE / October 15, 2020 / Emergent Capital, Inc. (OTCQX:EMGC) ("Emergent" or the "Company"), today reported its financial results for the third fiscal quarter ended August 31, 2020.

Emergent indirectly owns a 27.5% equity investment, having an estimated fair value of approximately $152.5 million at August 31, 2020, in White Eagle Asset Portfolio, LP ("White Eagle"), which holds a portfolio of life settlements and was previously a wholly-owned subsidiary of the Company. The Company primarily earns income through change in fair value and distributions from its equity investment in White Eagle.

Third Quarter 2020 and Recent Highlights

  • Total income from continuing operations was $4.3 million as compared to income of $86.9 million in the prior year quarter;
  • Net loss from continuing operations was $1.0 million, or $0.01 loss per diluted share, as compared to a net income from continuing operations of $80.2 million, or $0.41 per diluted share in the prior year quarter;
  • White Eagle had 13 policies maturity with a face value of approximately $43.2 million, gain on maturity of $30.0 million, and weighted average age at maturity of 88.9 years with an average remaining life expectancy of 54 months or 4.5 years;

White Eagle Portfolio Highlights

 
  Three Months Ended August 31, 2020  
 
  (dollars in thousands)  
Life insurance policies
    500  
Face value of life settlements
  $ 2,367,540  
Average age of insured (years)
    85.9  
Average life expectancy of insured (years)
    6.6  
Average death benefit per policy
  $ 4,735  
Average monthly premium per policy
  $ 17.4  
         

"White Eagle performed well in the third quarter with 13 policy maturities that yielded an aggregate benefit of $43.2 million," said Pat Curry, Emergent's Chairman and Chief Executive Officer. "While COVID-19 has slowed the processing times to produce and confirm death certificates in certain states, which has impacted White Eagle collections, we believe this to be a temporary issue that will not have a lasting or material impact on distributions."

Three Months Ended August 31, 2020 Financial Results Summary

  • Income from continuing operations was $4.3 million, a decrease of $82.6 million from the prior year quarter, primarily driven by:
    • $2.0 million distribution from the investment in the limited partnership;
    • $2.3 million change in the fair value of the investment in limited partnership excluding distribution; and
    • $90.7 million reduction in change in fair value gain for deconsolidated subsidiaries included in prior year quarter due to the re-consolidation of Lamington and related subsidiaries.
  • Total expense from continuing operations was $5.3 million, a decrease of $1.4 million from the prior year quarter, primarily due to:
    • $1.3 million decrease in SG&A expenses attributable to a decrease in legal expense, a decrease in professional fees, a decrease in personnel costs.
  • Net loss from continuing operations of $1.0 million, or $0.01 loss per diluted share, for the three months ended August 31, 2020, compared to a net income from continuing operations of $80.2 million, or $0.41 loss per diluted share for the three months ended August 31, 2019.

Nine Months Ended August 31, 2020 Financial Results Summary

  • Total income from continuing operations was $32.2 million as compared to income of $34.2 million in the prior year;
  • Net income from continuing operations was $16.1 million, or $0.09 per diluted share, as compared to a net income from continuing operations of $16.9 million, or $0.10 per diluted share in the prior year;
  • White Eagle had 33 policies maturity with a face value of approximately $133.3 million, gain on maturity of $78.5 million, weighted average age at maturity of 88.6 years with an average remaining LE of 49 months or 4.1 years;
    • Income from continuing operations was $32.2 million, a decrease of $2.0 million from the prior year, primarily driven by:
      • $11.4 million net proceeds from the Sun Life settlement;
      • $6.0 million distribution from the investment in the limited partnership;
      • $14.6 million change in the fair value of the investment limited partnership excluding distribution; and
      • $37.9 million reduction in change in fair value gain for deconsolidated subsidiaries included in prior year due to the re-consolidation of Lamington and related subsidiaries.
  • Total expense from continuing operations was $13.7 million, an decrease of $476,000 from the prior year, primarily due to a combination of:
    • $2.8 million gain on extinguishment of the Convertible Notes; and
    • $3.1 million increase in SG&A expenses attributable in part to one time executive retention agreements and legal and professional fees.

Investment in Limited Partnership Quarterly Highlights:

  • For the third quarter of fiscal 2020, Emergent's 27.5% equity investment in White Eagle resulted in a fair value of approximately $152.5 million;
  • The portfolio experienced 13 policies maturity with aggregate face value of approximately $43.2 million, gain on maturity of $30.0 million, weighted average age of 88.9 years and weighted average remaining life expectancy of 4.5 years. The ratio of realized gain to face value was approximately 69%;
  • The premium/expense reserve account received approximately $34.2 million from the collection account coming from maturity proceeds collected;
  • Approximately $30.3 million was distributed from the premium/expense reserve as follows:
    • $26.6 million was utilized to pay premiums;
    • $1.7 million was used to pay facility-related expenses; and
    • $2.0 million was utilized for distribution to Emergent to satisfy the requirement of the Class B monthly distribution.

Investment in Limited Partnership Nine Months Ended August 31, 2020

  • The portfolio experienced 33 policies maturity with aggregate face value of approximately $133.3 million, gain on maturity of $78.5 million, weighted average age of 88.6 years and weighted average remaining life expectancy of 4.1 years. The ratio of realized gain to face value was approximately 59%;
  • Approximately $10.0 million in maturity proceeds was distributed to the Class A Partner to satisfy the Class A minimum return from the collection account;
  • The premium/expense reserve account received approximately $107.2 million from the collection account coming from maturity proceeds collected;
  • Approximately $85.2 million was distributed from the premium/expense reserve as follows:
    • $74.0 million was utilized to pay premiums;
    • $5.2 million was used to pay facility-related expenses; and
    • $6.0 million was utilized for distribution to Emergent to satisfy the requirement of the Class B monthly distribution.

Subsequent Event

On October 15, 2020, Emergent and its wholly-owned subsidiary Red Reef Alternative Investment, LLC filed voluntary petitions for relief under chapter 11 of title 11 of the United States Code in the United States Bankruptcy Court for the District of Delaware. More information was disclosed by the Company in its Current Report on Form 8-K filed with the Securities and Exchange Commission on October 15, 2020.

The Company had 158,655,140 shares of common stock outstanding, treasury shares of 608,000 and an undiluted book value of $0.37 per share at August 31, 2020.

About Emergent Capital, Inc.

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

Safe Harbor Statement

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

Company Contact:

Investor Relations
Rob Fink
FNK IR
646.809.4048
IR@emergentcapital.com
www.emergentcapital.com

Emergent Capital, Inc.
CONSOLIDATED STATEMENTS OF OPERATIONS

 
  Three Months Ended August 31,     Three Months Ended August 31,     Nine Months Ended August 31,     Nine Months Ended August 31,  
 
  2020     2019     2020     2019  
 
  (in thousands, except share and per share data)  
Income
     
Change in fair value of life settlements
  $ -     $ (42 )   $ -     $ (37 )
Change in fair value of investment in limited partnership, net of distributions
    4,250       (5,821 )     20,601       (5,821 )
Change in fair value of investment in deconsolidated subsidiaries
    -       90,710       -       37,941  
Gain on life settlements, net
    -       -       743       -  
Other income
    57       2,052       10,875       2,145  
Total income (loss)
    4,307       86,899       32,219       34,228  
Expenses
                               
Interest expense
    2,743       2,832       7,610       8,370  
Extinguishment of debt
    -       -       (2,815 )     -  
Personnel costs
    444       694       2,833       1,001  
Legal fees
    738       1,448       1,850       2,117  
Professional fees
    619       1,142       2,034       1,470  
Insurance
    519       270       1,360       666  
Other selling, general and administrative expenses
    272       317       792       516  
Total expenses (income)
    5,335       6,703       13,664       14,140  
Income (loss) from continuing operations before income taxes
    (1,028 )     80,196       18,555       20,088  
Provision (benefit) for income taxes
    -       (5 )     2,428       3,213  
Net income (loss) from continuing operations
  $ (1,028 )   $ 80,201     $ 16,127     $ 16,875  
Discontinued Operations:
                               
Income (loss) from discontinued operations, net of income taxes
    -       70       (53 )     36  
Provision (benefit) for income taxes
    -       -       -       -  
Net income (loss)from discontinued operations
    -       70       (53 )     36  
Net income (loss)
  $ (1,028 )   $ 80,271     $ 16,074     $ 16,911  
Income (loss) per share:
                               
Basic income (loss) per share
                               
Continuing operations
  $ (0.01 )   $ 0.51     $ 0.10     $ 0.11  
Discontinued operations
  $ -     $ -     $ -     $ -  
Net income (loss) - basic
  $ (0.01 )   $ 0.51     $ 0.10     $ 0.11  
Diluted (loss) income per share
                               
Continuing operations
  $ (0.01 )   $ 0.41     $ 0.09     $ 0.10  
Discontinued operations
  $ -     $ -     $ -     $ -  
Net income (loss) - diluted
  $ (0.01 )   $ 0.41     $ 0.09     $ 0.10  
Weighted average shares outstanding:
                               
Basic
    157,655,140       156,968,470       157,624,241       156,949,425  
Diluted
    157,655,140       195,979,957       206,696,703       194,867,908  
                                 

Emergent Capital, Inc.
CONSOLIDATED BALANCE SHEETS

 
  August 31,
2020
    November 30, 2019*  
 
  (Unaudited)        
 
  (In thousands except share data)  
 
ASSETS
           
Assets
           
Cash and cash equivalents
  $ 19,054     $ 24,283  
Certificates of deposit
    517       511  
Prepaid expenses and other assets
    1,152       377  
Operating lease asset
    22       -  
Deposits - other
    1,212       1,377  
Life settlements, at estimated fair value
    -       1,297  
Fixed assets, net
    -       18  
Investment in limited partnership, at estimated fair value
    152,450       137,849  
Total assets
  $ 174,407     $ 165,712  
LIABILITIES AND STOCKHOLDERS' EQUITY
               
Liabilities
               
Accounts payable and accrued expenses
  $ 1,337     $ 1,651  
Other liabilities
    -       86  
Operating lease liability
    -       -  
Interest payable - 5.0% Convertible Notes
    159       1,116  
5.0% Convertible Notes, net of discount and deferred debt costs
    64,420       71,022  
Interest payable - 8.5% Senior Secured Notes
    1,118       854  
8.5% Senior Secured Notes, net of deferred debt costs
    46,491       45,675  
Current tax liability
    2,623       3,195  
Total liabilities
    116,148       123,599  
Commitments and Contingencies
               
Stockholders' Equity
               
Common stock (par value $0.01 per share, 415,000,000 authorized at August 31 ,2020 and November 30, 2019; 159,263,140 issued and 158,655,140 outstanding as of August 31, 2020; 158,365,275 issued and 157,757,275 outstanding as of November 30, 2019)
    1,593       1,584  
Preferred stock (par value $0.01 per share, 40,000,000 authorized; 0 issued and outstanding as of August 31, 2020 and November 30, 2019)
    -       -  
Treasury Stock, net of issuance cost 608,000 shares as of August 31, 2020 and November 30, 2019)
    (2,534 )     (2,534 )
Additional paid-in-capital
    334,641       334,576  
Accumulated deficit
    (275,441 )     (291,513 )
Total stockholders' equity
    58,259       42,113  
Total liabilities and stockholders' equity
  $ 174,407     $ 165,712  
                 

* Derived from audited consolidated financial statements.

SOURCE: Emergent Capital, Inc.



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