Emergent Capital, Inc. Announces First Quarter 2020 Results
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Emergent Capital, Inc. Announces First Quarter 2020 Results

Monday, April 20, 2020 4:30 PM
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Topic:
Earnings

Company Reports Book Value of $0.34 per Share

BOCA RATON, FL / ACCESSWIRE / April 20, 2020 / Emergent Capital, Inc. (OTCQX: EMGC) ("Emergent" or the "Company"), today reported its financial results for the first quarter of 2020.

First Quarter 2020 and Recent Highlights

  • Total Income from continuing operations was $18.8 million as compared to a loss of $33.9 million in the prior year quarter;
  • Net income from continuing operations was $12.5 million, or $0.07 per diluted share, as compared to a net loss from continuing operations of $37.5 million, or $0.24 loss per diluted share in the prior year quarter;
  • Emergent's 27.5% equity investment in White Eagle Portfolio had nine policy maturities with a face value of approximately $46.9 million, gain on maturity of $23.8 million, average age at maturity of 88.4 years with an average LE of 44 months or 3.7 years;
  • Emergent settled with Sun Life for $36.1 million related to 31 life insurance policies with face values totaling $163.5 million;
  • Emergent redeemed $8.0 million principal of the 5.0% Convertible Notes in exchange for cash consideration of $4.8 million inclusive of unpaid interest; and
  • White Eagle Portfolio to date during the second quarter of 2020, has had seven policy maturities totaling $28.9 million through April 20, 2020.

White Eagle Portfolio Highlights

 
  Three Months Ended February 29, 2020  
 
  (in thousands)  
Life insurance policies owned
    524  
Face value of life settlements
  2,453,152  
Average age of insured
    85.5  
Average life expectancy of insured
    6.8  
Average death benefit per policy
  4,682  
Average annual premium per policy
  194  
Average monthly premium per policy
  16.2  
 
       

"Our investment assets performed well in the first quarter providing Emergent with a strong foundation to build on in 2020,"

said Pat Curry, Emergent's Chairman and Chief Executive Officer. "With nine policy maturities that yielded an aggregate benefit of $46.9 million, the first quarter of 2020 was the most active quarter in the history of Emergent and the White Eagle portfolio. Thus far, our second quarter for 2020, which ends May 31st, has seven policy maturities totaling $28.9 million. We are actively working to maximize the return of our 27.5% equity investment in the White Eagle Portfolio and closely evaluating how the impact of the COVID-19 Pandemic will affect how we value and report our investment assets. Our portfolio is highly concentrated geographically, with the last known location of more than 60% of insureds believed to be in New York, California and Florida, three states that have been hardest hit by the current pandemic. As of the end of the first quarter, the portfolio had an average insured age of 85.5 years and an average life expectancy of 6.8 years across the 524 policies in the portfolio, and it is likely that the level of maturities will accelerate over time as the gap between average age and expectancy narrows."

First Quarter 2020 Financial Results Summary

  • Income from continuing operations was $18.8 million, an increase of $52.7 million from the prior year quarter, primarily driven by:
    • $11.4 million Sun Life settlement;
    • $2.0 million distribution from the investment in the limited partnership;
    • $5.4 million change in the fair value of the investment limited partnership; and
    • $33.9 million reduction in change in fair value loss of deconsolidated subsidiaries included in prior year
  • Total expense from continuing operations was $3.9 million, a slight increase of $338,000 from the prior year quarter, primarily due to:
    • $2.8 million gain on extinguishment of the Convertible Notes; and
    • $3.5 million increase in SG&A expenses attributable in part to one time executive retention agreements and legal and professional fees.
  • Net income from continuing operations of $12.5 million, or 0.07 per diluted share, for the three months ended February 29, 2020, compared to a net loss from continuing operations of $37.5 million, or $0.24 loss per diluted share for the three months ended February 28, 2019.

Investment in Limited Partnership Quarterly Highlights:

  • For the first quarter of fiscal period 2020, Emergent's 27.5% equity investment in White Eagle resulted in a fair value of approximately $143.2 million;
  • The portfolio experienced nine maturities with aggregate face value of approximately $46.9 million, gain on maturity of $23.8 million, weighted average age of 88.4 years and weighted average life expectancy of 3.7 years. The ratio of realized gain to face value was approximately 51%;
  • The premium/expense reserve account received approximately $26.9 million from the collection account coming from maturity proceeds collected;
  • $26.2 million was distributed from the premium/expense reserve as follows:
    • $22.5 million was utilized to pay premiums;
    • $1.8 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.

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
[email protected]
www.emergentcapital.com


SELECTED FINANCIAL TABLES FOLLOW

Emergent Capital, Inc.
CONSOLIDATED STATEMENTS OF OPERATIONS

 
  Three Months Ended February 29,     Three Months Ended February 28,  
 
  2020     2019  
 
  (in thousands, except share and per share data)  
Income
     
Change in fair value of life settlements
  -     2  
Change in fair value of investment in limited partnership, net of distributions
    7,351       -  
Change in fair value of investment in deconsolidated subsidiaries
    -       (33,965 )
Gain on life settlements, net
    743       -  
Other income
    10,716       46  
Total income (loss)
    18,810       (33,917 )  
Expenses
               
Interest expense
    2,394       2,763  
Extinguishment of debt
    (2,815 )     -  
Personnel costs
    1,954       169  
Legal fees
    909       (5 )
Professional fees
    857       335  
Insurance
    317       179  
Other selling, general and administrative expenses
    264       101  
Total expenses (income)
    3,880       3,542  
Income (loss) from continuing operations before income taxes
    14,930       (37,459 )
Provision (benefit) for income taxes
    2,428       -  
Net income (loss) from continuing operations
  12,502     (37,459 )
Discontinued Operations:
               
Income (loss) from discontinued operations, net of income taxes
    (64 )     (17 )
Provision (benefit) for income taxes
    -       -  
Net income (loss)from discontinued operations
    (64 )       (17  )
Net income (loss)
  12,438     (37,476  
Income (loss) per share:
               
Basic income (loss) per share
               
Continuing operations
  0.08     (0.24 )
Discontinued operations
  -     -  
Net income (loss) - basic
  0.08     (0.24 )
Diluted (loss) income per share
               
Continuing operations
  0.07     (0.24 )
Discontinued operations
  -     -  
Net income (loss) - diluted
  0.07     (0.24 )  
Weighted average shares outstanding:
               
Basic
    157,568,811       156,919,099  
Diluted
    199,922,673       156,919,099  

Emergent Capital, Inc.
CONSOLIDATED BALANCE SHEETS

 
  February 29,
2020
    November 30, 2019*  
 
  (Unaudited)        
 
  (In thousands except share data)  
ASSETS
           
Assets
           
Cash and cash equivalents
  25,117     24,283  
Certificates of deposit
    513       511  
Prepaid expenses and other assets
    2,381       377  
Operating lease asset
    125       -  
Deposits - other
    1,377       1,377  
Life settlements, at estimated fair value
    -       1,297  
Fixed assets, net
    12       18  
Investment in limited partnership, at estimated fair value
    143,201       137,849  
Total assets
  172,726     165,712  
LIABILITIES AND STOCKHOLDERS' DEFICIT/EQUITY
               
Liabilities
               
Accounts payable and accrued expenses
  1,623     1,651  
Other liabilities
    40       86  
Operating lease liability
    133       -  
Interest payable - 5.0% Convertible Notes
    159       1,116  
5.0% Convertible Notes, net of discount and deferred debt costs
    63,779       71,022  
Interest payable - 8.5% Senior Secured Notes
    854       854  
8.5% Senior Secured Notes, net of deferred debt costs
    45,933       45,675  
Current tax liability
    5,623       3,195  
Total liabilities
    118,144       123,599  
Commitments and Contingencies
               
Stockholders' Deficit/Equity
               
Common stock (par value $0.01 per share, 415,000,000 authorized at February 29,2020 and November 30, 2019; 159,277,966 issued and 158,669,966 outstanding as of February 29, 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 February 29, 2020 and November 30, 2019)
    -       -  
Treasury Stock, net of issuance cost (608,000 shares as of February 29, 2020 and November 30, 2019)
    (2,534 )     (2,534 )
Additional paid-in-capital
    334,598       334,576  
Accumulated deficit
    (279,075 )     (291,513 )
Total stockholders' deficit/equity
    54,582       42,113  
Total liabilities and stockholders' deficit/equity
  172,726     165,712  

* Derived from audited consolidated financial statements.

SOURCE: Emergent Capital, Inc. 

Emergent Capital, Inc.
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