EMERGENT CAPITAL, INC. - FORM 8-K - EX-99.1 - EXHIBIT 99.1 - July 9, 2020

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Emergent Capital, Inc. Announces Second Quarter 2020 Results
Company Reports Book Value of $0.37 per Share

Boca Raton, Fla., July 9, 2020 – Emergent Capital, Inc. (OTCQX: EMGC) ("Emergent" or the "Company"), today reported its financial results for the second fiscal quarter ended May 31, 2020.
 
Second Quarter 2020 and Recent Highlights

•
Total income from continuing operations was $9.1 million as compared to a loss of $18.8 million in the prior year quarter;

•
Net income from continuing operations was $4.7 million, or $0.02 per diluted share, as compared to a net loss from continuing operations of $25.9 million, or $0.16 loss per diluted share in the prior year quarter;

•
Emergent’s 27.5% equity investment in White Eagle Portfolio had 11 policies maturity with a face value of approximately $43.2 million, gain on maturity of $24.7 million, and weighted average age at maturity of 88.6 years with an average remaining LE of 50 months or 4.2 years;

•
White Eagle Portfolio to date during the third quarter of 2020, has had five policies maturity totaling $12.5 million through July 9, 2020.

White Eagle Portfolio Highlights
 
 
Three Months Ended May 31, 2020
 
 
(dollars in thousands)
Life insurance policies

 
513

Face value of life settlements
 
$
2,410,376

Average age of insured
 
85.7

Average life expectancy of insured

 
6.7

Average death benefit per policy

 
$
4,699

Average annual premium per policy

 
$
203

Average monthly premium per policy

 
$
16.9

 
 
 

"Our investment assets performed well in the second quarter as we continue to evaluate how the COVID-19 pandemic is impacting the overall portfolio," said Pat Curry, Emergent’s Chairman and Chief Executive Officer. "We had 11 policy maturities during the second quarter that yielded an aggregate benefit of $43.2 million, and thus far, our third quarter for 2020, which ends August 31st, has yielded five policies maturity totaling $12.5 million. 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, the three states that have produced the highest number of confirmed COVID cases to date."


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Three Months Ended May 31, 2020 Financial Results Summary
•
Income from continuing operations was $9.1 million, an increase of $27.9 million from the prior year quarter, primarily driven by:

◦
$2.0 million distribution from the investment in the limited partnership;
◦
$7.0 million change in the fair value of the investment limited partnership excluding distribution; and
◦
$18.8 million reduction in change in fair value loss of deconsolidated subsidiaries included in prior year quarter

•
Total expense from continuing operations was $4.4 million, a slight increase of $553,000 from the prior year quarter, primarily due to:

◦
$855,000 increase in SG&A expenses attributable increase in professional fees, insurance and personnel costs offset by a decrease in legal fees.

•
Net income from continuing operations of $4.7 million, or $0.02 per diluted share, for the three months ended May 31, 2020, compared to a net loss from continuing operations of $25.9 million, or $0.16 loss per diluted share for the three months ended May 31, 2019.


Six Months Ended May 31, 2020 Financial Results Summary

•
Total income from continuing operations was $27.9 million as compared to a loss of $52.7 million in the prior year;

•
Net income from continuing operations was $17.2 million, or $0.09 per diluted share, as compared to a net loss from continuing operations of $63.3 million, or $0.40 loss per diluted share in the prior year;

•
Emergent’s 27.5% equity investment in White Eagle Portfolio had 20 policies maturity with a face value of approximately $90.1 million, gain on maturity of $48.4 million, weighted average age at maturity of 88.5 years with an average remaining LE of 46 months or 3.9 years;

•
Income from continuing operations was $27.9 million, an increase of $80.6 million from the prior year, primarily driven by:
•
$11.4 million net proceeds from the Sun Life settlement;
•
$4.0 million distribution from the investment in the limited partnership;
•
$12.4 million change in the fair value of the investment limited partnership excluding distribution; and
•
$52.8 million reduction in change in fair value loss of deconsolidated subsidiaries included in prior year

•
Total expense from continuing operations was $8.3 million, an increase of $891,000 from the prior year, primarily due to:

•$2.8 million gain on extinguishment of the Convertible Notes; and
•
$4.4 million increase in SG&A expenses attributable in part to one time executive retention agreements and legal and professional fees.

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 May 31, 2020.

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Investment in Limited Partnership Quarterly Highlights:
•
For the second quarter of fiscal 2020, Emergent’s 27.5% equity investment in White Eagle resulted in a fair value of approximately $150.2 million;

•
The portfolio experienced 11 policies maturity with aggregate face value of approximately $43.2 million, gain on maturity of $24.7 million, weighted average age of 88.6 years and weighted average remaining life expectancy of 4.2 years. The ratio of realized gain to face value was approximately 57%;

•
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 $46.1 million from the collection account coming from maturity proceeds collected;

•
Approximately $28.7 million was distributed from the premium/expense reserve as follows:
◦
$25.0 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.

Investment in Limited Partnership Six Months Ended May 31, 2020

•
The portfolio experienced 20 policies maturity with aggregate face value of approximately $90.1 million, gain on maturity of $48.4 million, weighted average age of 88.5 years and weighted average remaining life expectancy of 3.9 years. The ratio of realized gain to face value was approximately 54%;

•
The premium/expense reserve account received approximately $73.0 million from the collection account coming from maturity proceeds collected;

•
Approximately $55.0 million was distributed from the premium/expense reserve as follows:
◦
$47.4 million was utilized to pay premiums;
◦
$3.5 million was used to pay facility-related expenses; and
◦
$4.0 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.

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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
 
 







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Emergent Capital, Inc.
CONSOLIDATED STATEMENTS OF OPERATIONS
 
Three Months Ended May 31,
 
Three Months Ended May 31,
 
Six Months Ended May 31,
 
Six Months Ended May 31,
 
2020
 
2019
 
2020
 
2019
 
(in thousands, except share and per share data)
Income
 
 
 
 
Change in fair value of life settlements
$
—

 
$
4

 
$
—

 
$
6

Change in fair value of investment in limited partnership, net of distributions
9,000

 
—

 
16,351

 
—

Change in fair value of investment in deconsolidated subsidiaries
—

 
(18,804
)
 
—

 
(52,769
)
Gain on life settlements, net
—

 
—

 
743

 
—

Other income
101

 
46

 
10,817

 
93

Total income (loss)
9,101


(18,754
)
 
27,911

 
(52,670
)
Expenses
 
 
 
 
 
 
 
Interest expense
2,473

 
2,775

 
4,867

 
5,538

Extinguishment of debt
—

 
—

 
(2,815
)
 
—

Personnel costs
435

 
138

 
2,389

 
307

Legal fees
203

 
725

 
1,112

 
720

Professional fees
559

 
(57
)
 
1,416

 
278

Insurance
524

 
217

 
841

 
396

Other selling, general and administrative expenses
255

 
98

 
520

 
200

Total expenses (income)
4,449

 
3,896

 
8,330

 
7,439

Income (loss) from continuing operations before income taxes
4,652

 
(22,650
)
 
19,581

 
(60,109
)
Provision (benefit) for income taxes
—

 
3,218

 
2,428

 
3,218

Net income (loss) from continuing operations
$
4,652

 
$
(25,868
)
 
$
17,153

 
$
(63,327
)
Discontinued Operations:
 
 
 
 
 
 

Income (loss) from discontinued operations, net of income taxes
10

 
(16
)
 
(53
)
 
(33
)
Provision (benefit) for income taxes
—

 
—

 
—

 
—

Net income (loss)from discontinued operations
10

 
(16
)
 
(53
)
 
(33
)
Net income (loss)

$
4,662

 
$
(25,884
)
 
$
17,100

 
$
(63,360
)
Income (loss) per share:
 
 
 
 
 
 
 
Basic income (loss) per share
 
 
 
 
 
 
 
Continuing operations
$
0.03

 
$
(0.16
)
 
$
0.11

 
$
(0.40
)
Discontinued operations
$
—

 
$
—

 
$
—

 
$
—

Net income (loss) - basic
$
0.03

 
$
(0.16
)
 
$
0.11

 
$
(0.40
)
Diluted (loss) income per share

 

 
 
 
 
Continuing operations
$
0.02

 
$
(0.16
)
 
$
0.09

 
$
(0.40
)
Discontinued operations
$
—

 
$
—

 
$
—

 
$
—

Net income (loss) - diluted
$
0.02

 
$
(0.16
)
 
$
0.09

 
$
(0.40
)
Weighted average shares outstanding:
 
 
 
 
 
 
 
Basic
157,648,168

 
156,960,046

 
157,608,707

 
156,939,797

Diluted
175,581,286

 
156,960,046

 
204,522,043

 
156,939,797






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Emergent Capital, Inc.
CONSOLIDATED BALANCE SHEETS
 
May 31, 2020
 
November 30, 2019*
 
(Unaudited)
 
 
 
(In thousands except share data)
ASSETS
 
 
 
Assets
 
 
 
Cash and cash equivalents
$
21,284

 
$
24,283

Certificates of deposit
515

 
511

Prepaid expenses and other assets
1,674

 
377

Operating lease asset
72

 
—

Deposits - other
1,377

 
1,377

Life settlements, at estimated fair value
—

 
1,297

Fixed assets, net
—

 
18

Investment in limited partnership, at estimated fair value
150,200

 
137,849

Total assets
$
175,122

 
$
165,712

LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
Liabilities
 
 
 
Accounts payable and accrued expenses
$
951

 
$
1,651

Other liabilities
40

 
86

Operating lease liability
66

 
—

Interest payable - 5.0% Convertible Notes
1,007

 
1,116

5.0% Convertible Notes, net of discount and deferred debt costs
64,097

 
71,022

Interest payable - 8.5% Senior Secured Notes
865

 
854

8.5% Senior Secured Notes, net of deferred debt costs
46,207

 
45,675

Current tax liability
2,623

 
3,195

Total liabilities
115,856

 
123,599

Commitments and Contingencies
 
 
 
Stockholders’ Equity
 
 
 
Common stock (par value $0.01 per share, 415,000,000 authorized at May 31,2020 and November 30, 2019; 159,263,140 issued and 158,655,140 outstanding as of May 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 May 31, 2020 and November 30, 2019)
—

 
—

Treasury Stock, net of issuance cost (608,000 shares as of May 31, 2020 and November 30, 2019)
(2,534
)
 
(2,534
)
Additional paid-in-capital
334,620

 
334,576

Accumulated deficit
(274,413
)
 
(291,513
)
Total stockholders’ equity

59,266

 
42,113

Total liabilities and stockholders’ equity

$
175,122

 
$
165,712


 *    Derived from audited consolidated financial statements.


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EMERGENT CAPITAL, INC. Reports