Imperial Holdings, Inc. Announces Third Quarter 2014 Results

Company Reports Book Value of $9.63 per Share

BOCA RATON, Fla.--()--Imperial Holdings, Inc. (NYSE: IFT) ("Imperial" or the "Company"), a specialty finance company with a focus on providing liquidity solutions to owners of illiquid financial assets, announced today its financial results for the three and nine month periods ended September 30, 2014.

Three Months Ended September 30, 2014

Total income from continuing operations was a loss of $3.6 million for the three months ended September 30, 2014 compared to total income of $14.8 million for the same period in 2013. The loss for the three months ended September 30, 2014 was primarily driven by a decrease of $6.0 million in the fair value of certain policies within the Company’s portfolio of life settlements. The reduction in fair value was primarily driven by the lengthening of certain life expectancies estimates updated during the three month period and partially offset by a decrease in the weighted average discount rate. The decrease was offset by a gain of $2.4 million in the fair value of two policies acquired during the quarter. Total expenses were $2.9 million for the three months ended September 30, 2014 compared to $8.7 million for the same period in 2013. The decrease was primarily driven by a decrease in fair value of the Company’s revolving credit facility of $8.4 million resulting from the lengthening of certain life insurance policies within the revolving credit facility.

The Company reported a net loss from continuing operations of $4.3 million, or ($.20) per fully diluted share, for the three months ended September 30, 2014, compared to net income of $6.1 million, or $.29 per fully diluted share, for the same period in 2013.

Nine Months Ended September 30, 2014

Total income from continuing operations was a $19.0 million for the nine months ended September 30, 2014 compared to $82.6 million for the same period in 2013. The reduction in income for the nine months ended September 30, 2014 was primarily driven by the one-time gain associated with the acquisition of 422 polices during the second quarter of 2013. Total expenses were $35.3 million for the nine months ended September 30, 2014 compared to $34.6 million for the same period in 2013.

The Company reported a net loss from continuing operations of $13.9 million, or ($.65) per fully diluted share, for the nine months ended September 30, 2014, compared to net income of $47.9 million, or $2.26 per fully diluted share, for the same period in 2013.

As of September 30, 2014, the Company had cash and cash equivalents of approximately $58.4 million and had 21,402,990 shares outstanding with a per share book value of $9.63.

Life Settlements Portfolio Highlights

At September 30, 2014, the estimated fair value of the Company’s 595 life insurance policies was $350.4 million compared to $303.0 million for 612 life insurance policies at December 31, 2013. The weighted average discount rate was 18.56% at September 30, 2014 compared to 19.14% at December 31, 2013. The aggregate face value of the Company's portfolio of life insurance policies was approximately $2.9 billion at September 30, 2014. During the quarter, the Company acquired two policies for $3.5 million that added $14.4 million in face value to its portfolio.

Antony Mitchell, Chief Executive Officer of Imperial, commented: “During the third quarter, the Company began deploying the proceeds of its convertible note offering which was completed earlier this year and we have created a significant and attractive pipeline of business. We continue to focus on growth and diversification of our portfolio and plan to steadily increase our investments well into 2015. We believe there are ample opportunities in the space and we expect our future deployment to provide a meaningful return on our investment.”

Conference Call

The Company will host a conference call today at 5:00 P.M. ET. To join the call please dial US Toll Free (877) 312-5529 or from Outside of the US (253) 237-1147 and provide Conference ID 14450816 when prompted.

The conference call will also be broadcast live through a link on the Investor Relations section of the Company’s website at www.imperial.com. Please visit the website at least 10 minutes prior to the call to register, download and install any necessary audio software.

About Imperial Holdings, Inc.

Imperial is a leading specialty finance company that provides customized liquidity solutions to owners of illiquid financial assets. More information about Imperial can be found at www.imperial.com.

Safe Harbor Statement

This press release may contain certain "forward-looking statements" relating to the business of Imperial Holdings, 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 Imperial 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, Imperial does not assume a duty to update these forward-looking statements.

Imperial Holdings, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
        September 30,   December 31,
2014   2013*
(Unaudited)
(In thousands except share data)
ASSETS
Assets
Cash and cash equivalents $ 53,745 $ 14,722
Cash and cash equivalents (VIE) 4,647 7,977
Restricted cash - 13,506
Prepaid expenses and other assets 1,717 1,331
Deposits - other 1,353 1,597
Deposits on purchase of life settlements 50 -
Structured settlement receivables, at estimated fair value 383 660
Structured settlement receivables at cost, net 599 797
Investment in life settlements, at estimated fair value 54,914 48,442
Investment in life settlements, at estimated fair value (VIE) 295,469 254,519
Receivable for maturity of life settlements (VIE) - 2,100
Fixed assets, net 202 74
Investment in affiliates 2,385 2,378
Deferred debt costs, net   2,295     -  
Total assets $ 417,759   $ 348,103  
 
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Accounts payable and accrued expenses $ 5,209 $ 2,977
Accounts payable and accrued expenses (VIE) 337 341
Other liabilities 1,039 21,221
Interest payable - senior unsecured convertible notes 768 -
Revolving Credit Facility debt, at estimated fair value (VIE) 142,661 123,847
Senior unsecured convertible notes, net of discount 55,250 -
Income taxes payable - 6,295
Deferred tax liability   6,383     -  
Total liabilities 211,647 154,681
Commitments and Contingencies
Stockholders' Equity
Common stock (par value $0.01 per share, 80,000,000 authorized; 21,402,990 and
21,237,166 issued and outstanding as of September 30, 2014 and December 31, 2013, respectively) 214 212
Additional paid-in-capital 266,511 239,506
Accumulated deficit   (60,613 )   (46,296 )
Total stockholders' equity   206,112     193,422  
Total liabilities and stockholders' equity $ 417,759   $ 348,103  
 
* Derived from audited consolidated financial statements.

Imperial Holdings, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
         
For the Three Months Ended For the Nine Months Ended
September 30, September 30,
2014   2013   2014   2013  
Income (in thousands, except share and per share data)
Interest income $ 9 $ - $ 22 $ 28
Interest and dividends on investment securities available for sale - - - 14
Loss on life settlements, net - (461 ) (426 ) (1,708 )
Change in fair value of life settlements (Notes 8 & 11) (3,643 ) 15,262 19,313 81,948
Servicing fee income - - - 310
Other income 17 8 72 2,015
       
Total (loss) income   (3,617 )   14,809     18,981     82,607  
 
Expenses
Interest expense 4,303 1,158 11,165 12,020
Loss on extinguishment of Bridge Facility - - - 3,991
Change in fair value of Revolving Credit Facility debt (Notes 9 & 11) (8,375 ) 66 (4,556 ) (5,295 )
Change in fair value of conversion derivative liability (Notes 10 & 11) - - 6,759 -
Gain on loan payoffs and settlements, net - - - (65 )
Amortization of deferred costs - - - 7
Personnel costs 1,910 1,924 6,627 6,216
Legal fees 2,943 3,271 9,121 11,254
Professional fees 1,143 1,503 3,562 3,564
Insurance 414 478 1,253 1,475
Other selling, general and administrative expenses   544     303     1,365     1,476  
Total expenses   2,882     8,703     35,296     34,643  
(Loss) income from continuing operations before income taxes (6,499 ) 6,106 (16,315 ) 47,964
Benefit (provision) for income taxes   2,235     -     2,452     (40 )
Net (loss) income from continuing operations $ (4,264 ) $ 6,106   $ (13,863 ) $ 47,924  
Discontinued Operations:
(Loss) income from discontinued operations, net of income taxes $ (249 ) $ 55   $ (454 ) $ 1,627  
Net (loss) income $ (4,513 ) $ 6,161   $ (14,317 ) $ 49,551  
 
Earnings per share:
Basic and diluted earnings per common share
Continuing operations $ (0.20 ) $ 0.29 $ (0.65 ) $ 2.26
Discontinued operations $ (0.01 )   -   $ (0.02 ) $ 0.08  
Net (loss) income $ (0.21 ) $ 0.29   $ (0.67 ) $ 2.34  
Weighted average shares outstanding:        
Basic weighted average common shares outstanding   21,361,930     21,219,880     21,352,086     21,215,344  
 

Diluted weighted average common shares outstanding

  21,361,930     21,223,027     21,352,086     21,215,392  

Life Finance Business Center        
For the Three Months Ended For the Nine Months Ended
September 30, September 30,
2014 2013 2014 2013
 
Period Acquisitions — Policies Owned
Number of policies acquired 2 2 2 432
Average age of insured at acquisition 84.5 72.7 84.5 77.7
Average life expectancy - Calculated LE (Years) 5.6 15.9 5.6 12.7
Average death benefit $ 7,176 $ 6,000 $ 7,176 $ 4,749
Aggregate purchase price $ 3,488 $ 245 $ 3,488 $ 58,645
 
End of Period — Policies Owned
Number of policies owned 595 622 595 622
Average Life Expectancy - Calculated LE (Years) 11.0 11.9 11.0 11.9
Aggregate Death Benefit $ 2,888,289 $ 2,999,040 $ 2,888,289 $ 2,999,040
Aggregate fair value $ 350,383 $ 292,383 $ 350,383 $ 292,383
Monthly premium — average per policy $ 7.6 $ 7.5 $ 7.6 $ 7.5

Contacts

Imperial Holdings, Inc.
David Sasso, 561-955-4300
Director- Investor Relations
IR@imperial.com
www.imperial.com

Contacts

Imperial Holdings, Inc.
David Sasso, 561-955-4300
Director- Investor Relations
IR@imperial.com
www.imperial.com