Imperial Holdings, Inc. Announces Third Quarter 2012 Results

  Imperial Holdings, Inc. Announces Third Quarter 2012 Results

Business Wire

BOCA RATON, Fla. -- January 15, 2013

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, today announced financial results for its third
quarter ended September 30, 2012.

Total income (loss) was ($14.2 million) for the three months ended September
30, 2012, compared to total income (loss) of ($1.8 million) for the three
months ended September 30, 2011, an increase of $12.4 million. Total expenses
were $17.3 million for the three months ended September 30, 2012, compared to
$18.6 million for the three months ended September 30, 2011, a decrease of
$1.3 million. A significant portion of the Company’s expenses during third
quarter of 2012 is attributable to the proposed settlements of the class
action and related litigation that arose in the wake of the now settled
federal investigation of the Company's legacy premium finance business. The
Company established a reserve for the settlements with a corresponding
receivable for insurance recoveries. The net expense of $5.1 million is
included in the Company’s total expenses for the three months ended September
30, 2012. Included in this amount is a non-cash charge of $3.1 million
associated with the future issuance of 2 million warrants and $500,000
associated with the future issuance of common stock, as contemplated in the
proposed settlement terms. The final value of the warrants will be determined
at issuance. The Company posted a net loss of $31.5 million or $1.48 per fully
diluted share for the three ended September 30, 2012, compared to a net loss
of $12.6 million, or $0.59 per fully diluted share, for the three months ended
September 30, 2011.

In our life finance segment, income (loss) was ($17.0 million) during the
third quarter of 2012 compared to income (loss) of ($5.5 million) for the
third quarter of 2011, an increase of $11.5 million. Income (loss) was driven
by a ($17.5 million) aggregate decline in the fair value of the Company's
portfolio of 212 life insurance policies to $102.3 million. This decline
resulted from applying updated life expectancy reports, which the Company
began procuring in anticipation of a capital raising transaction. At September
30, 2012, however, the Company only applied updated reports with respect to
143 of the 212 lives represented in its portfolio and believes that insureds
who have deteriorated in health are generally less likely to be responsive to
requests for updated medical information. As such, any deteriorations in the
health of unresponsive insureds are not reflected in the fair value
calculation for the third quarter. For the year ago quarter, the life finance
segment posted income (loss) of ($5.5 million), inclusive of a $14.1 decline,
to $92 million, in the fair value of the Company's then portfolio of 170 life
insurance policies. Fair value of the Company's investment in life settlements
compared to the prior year period was also negatively impacted by the increase
in weighted average discount rate used in the Company's fair value model to
24.61% at September 30, 2012 from 19.51% at September 30, 2011. Segment
expenses were $3.7 million during the three months ended September 30, 2012
compared to $11.2 million during the three months ended September 30, 2011, a
decline of $7.5 million. Segment operating loss was $20.7 million during the
three months ended September 30, 2012, an increase of $4.0 million over
segment operating loss of $16.7 million recorded during the three months ended
September 30, 2011.

In our Structured Settlement business segment, income was $2.8 million for the
three months ended September 30, 2012 compared to $3.4 million for the three
months ended September 30, 2011. Segment expenses decreased by $1.6 million to
$5.3 million during the third quarter of 2012 compared to $6.9 million in the
year ago period, driven by a decrease in advertising expenses of $720,000 and
payroll and related costs of $516,000 attributable to a reduction of head
count. Segment operating loss was $2.5 million during the three months ended
September 30, 2012 compared to segment operating losses of $3.5 million
recorded during the three months ended September 30, 2011. The Company
originated 253 transactions during the third quarter of 2012 compared to 211
during the same period of 2011, a 19.9% increase.

As of September 30, 2012, the Company had $40.6 million of cash and cash
equivalents, and marketable securities. The Company has subsequently reported
it has cash and cash equivalents, and marketable securities of $20.3 million
at December 31, 2012. The aggregate face value of the Company's portfolio of
life insurance policies was $1.1 billion and the book value of the company at
September 30, 2012 was $6.14 per share.

Antony Mitchell, Chief Executive Officer, commented, “Our financial results
during the quarter were impacted adversely by non-cash adjustments to the fair
value of our investments in life settlements. The decrease in portfolio value
resulted from updating certain life expectancy reports in anticipation of a
potential financing transaction. Moving forward, we are keenly focused on our
cash position and are pursuing financing opportunities to ensure the
preservation and maximization of the value of our balance sheet assets.”

“To that end, in our Structured Settlements business segment, we have better
aligned our expenses with revenues and expect to operate that business segment
near breakeven or better starting with the first quarter of 2013,” concluded
Mr. Mitchell.

About Imperial Holdings, Inc.

Imperial is a leading specialty finance company that, through its operating
subsidiaries, provides customized liquidity solutions to owners of illiquid
financial assets. Imperial’s primary operating units are Life Finance and
Structured Settlements. In its Life Finance unit, Imperial purchases and sells
life insurance policies. In its Structured Settlements unit, Imperial
purchases from individuals long-term annuity payments issued by highly rated
U.S. insurance companies. 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. Imperial's actual
results could differ materially from those anticipated in these
forward-looking statements as a result of a variety of factors, including the
Company’s ability to resolve the previously disclosed issues relating to the
delay in its ability to complete and file its periodic reports; unanticipated
issues that require additional efforts, procedures or review; ability of the
Company or its independent registered public accounting firm to confirm
relevant information or data; the Company’s ability to design or improve
internal controls to address identified issues; the impact upon operations of
legal compliance matters or internal controls review; the investigation by the
Securities and Exchange Commission, and potential adverse outcomes associated
with the investigations, including payments or fines the Company may be
required to make, restrictions placed upon the Company and legal proceedings
that may relate to these matters; the possibility that payments due to the
Company under certain policies may be delayed; the amount of legal expenses
for which the Company is reimbursed under its directors and officers insurance
policy; the accuracy of actuarial assumptions underlying the Company’s models;
the effect of policy premium payments on the Company’s liquidity; the
Company’s continued ability to pay policy premiums; unanticipated accounting
issues or audit issues regarding the financial data for the affected periods
and future periods; and expenses associated with the foregoing, including
costs of legal compliance matters or matters relating to the ongoing internal
investigation and additional matters discussed in Imperial's periodic reports
that are filed with the Securities and Exchange Commission and available on
its website at www.sec.gov. All forward-looking statements attributable to
Imperial or persons acting on its behalf are expressly qualified in their
entirety by these factors. Other than as required under the securities laws,
Imperial does not assume a duty to update these forward-looking statements.

Structured Settlements Business Segment Data
                                                               
                        For the Three Months Ended   For the Nine Months Ended
                        September 30,                September 30,
                        2012           2011        2012          2011     
Period Originations:
Number of                  253            211           756           618
transactions
Number of
transactions from          94             78            263           218
repeat customers
Average purchase           18.9    %      17.6   %      18.8    %     18.0   %
discount rate
Face value of
undiscounted future     $  34,186       $ 26,033     $  99,565      $ 67,749
payments purchased
Amount paid for         $  5,604        $ 5,774      $  17,519      $ 14,425
settlements purchased
Marketing costs         $  1,034        $ 1,806      $  4,481       $ 4,266
Selling, general and
administrative          $  4,226        $ 5,095      $  12,392      $ 10,969
(excluding marketing
costs)
Average Per
Origination During
Period:
Face value of
undiscounted future     $  135          $ 123        $  132         $ 110
payments purchased
Amount paid for         $  22           $ 27         $  23          $ 23
settlement purchased
Time from funding to       121.9          147.9         129.2         151.9
maturity (months)
Marketing cost per      $  4            $ 9          $  6           $ 7
transaction
Segment selling,
general and
administrative
(excluding marketing
costs) per              $  17           $ 24         $  16          $ 18
transaction
Period Sales:
Number of
transactions               252            178           692           586
originated and sold
Realized gain on sale
of structured           $  2,187        $ 2,243      $  7,796       $ 5,460
settlements
Average sale discount      10.7    %      10.6   %      10.7    %     10.3   %
rate
End of Period
Portfolio:
Number of
transactions on            130            115           130           115
balance sheet

Life Finance Business Segment Data
                                                              
                  For the Three Months Ended       For the Nine Months Ended
                  September 30,                    September 30,
                  2012              2011         2012           2011      
                                                                   
Period
Acquisitions —
Policies Owned
Number of
policies             9                 52            29              131
acquired
Average age of
insured at           76.1              78.4          75.1            78.2
acquisition
Average life
expectancy -         12.7              10.1          13.4            10.1
Calculated LE
(Years)
Average death     $  4,817           $ 5,547       $ 5,206         $ 5,056
benefit
Aggregate         $  2,255           $ 24,451      $ 5,034         $ 50,155
purchase price
                                                                   
End of Period
— Policies
Owned
Number of            212               170           212             170
policies owned
Average Life
Expectancy -         10.5              10.5          10.5            10.5
Calculated LE
(Years)
Aggregate         $  1,058,156       $ 853,492     $ 1,058,156     $ 853,492
Death Benefit
Aggregate fair    $  102,328         $ 91,967      $ 102,328       $ 91,967
value
Monthly
premium —         $  10.9            $ 11.0        $ 10.9          $ 11.0
average per
policy
                                                                   
End of Period
Loan Portfolio
Loans
receivable,       $  5,394           $ 46,446      $ 5,394         $ 46,446
net
Number of
policies
underlying           31                179           31              179
loans
receivable
Aggregate
death benefit
of policies       $  135,725         $ 868,752     $ 135,725       $ 868,752
underlying
loans
receivable
Number of
loans with           11                121           11              121
insurance
protection
Loans
receivable,       $  1,821           $ 29,923      $ 1,821         $ 29,923
net (insured
loans only)
Average Per
Loan:
Age of insured
in loans             75.8              75.2          75.8            75.2
receivable
Life
expectancy of        15.2              15.2          15.2            15.2
insured
(years)
Monthly           $  6               $ 6           $ 6             $ 6
premium
Loan
receivable,       $  186             $ 259         $ 186           $ 259
net
Interest rate        12.9       %      12.2    %     12.9      %     12.2    %
                                                                   
Period
Originations:
Number of
loans
originated (by
type):
Type 1*              -                 6             -               44
Type 2**             -                 2             -               11
Principal
balance of        $  -               $ 2,549       $ -             $ 18,385
loans
originated
Aggregate
death benefit
of policies       $  -               $ 38,000      $ -             $ 311,850
underlying
loans
originated
Average Per
Origination
During Period:
Age of insured       -                 76.0          -               75.7
at origination
Life
expectancy of        -                 13.8          -               14.5
insured
(years)
Monthly
premium (year     $  -               $ 7           $ -             $ 11
of
origination)
Death benefit
of policies
underlying        $  -               $ 4,750       $ -             $ 5,377
loans
originated
Principal
balance of the    $  -               $ 319         $ -             $ 334
loan
Interest rate        -                 14.0    %     -               14.0    %
charged
Agency fee        $  -               $ 118         $ -             $ 110
Agency fee as
% of principal
balance
Type 1*              -                 43.4    %     -               39.0    %
Type 2**             -                 29.1    %     -               20.7    %
Origination       $  -               $ 80          $ -             $ 80
fee
Annualized
origination
fee as % of          -                 18.9    %     -               24.3    %
principal
balance
                                                                   
                                                                   
* We define Type 1 loans as loans that are collateralized by life insurance
policies that have been in force less than two years.
                                                                   
** We define Type 2 loans as loans that are collateralized by life insurance
policies that have been in force longer than two years.

Imperial Holdings, Inc. and Subsidiaries
CONSOLIDATED AND COMBINED BALANCE SHEETS
                                                             
                                                                  
                                              September 30,       December 31,
                                              2012               2011       
                                              (Unaudited)
                                              (In thousands except share data)
  ASSETS
Assets
  Cash and cash equivalents                   $   16,455          $  16,255
  Restricted cash                                 1,148              691
  Certificate of deposit - restricted             -                  891
  Investment securities available for sale,       24,173             57,242
  at estimated fair value
  Deferred costs, net                             123                1,874
  Prepaid expenses and other assets               14,634             3,277
  Deposits - other                                2,078              761
  Interest receivable, net                        1,356              5,758
  Loans receivable, net                           5,394              29,376
  Structured settlement receivables at            2,496              12,376
  estimated fair value, net
  Structured settlement receivables at            1,783              1,553
  cost, net
  Investment in life settlements, at              102,328            90,917
  estimated fair value
  Fixed assets, net                               289                585
  Other receivable                               2,062            1,043   
  Total assets                                $   174,319        $  222,599 
                                                                  
  LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
  Accounts payable and accrued expenses       $   11,237          $  16,336
  Other liabilities                               24,993             4,279
  Interest payable                                358                5,505
  Notes payable                                   1,222              19,277
  Income taxes payable                           6,295            6,295   
  Total liabilities                               44,105             51,692
Commitments and contingencies (Note 16)
Stockholders' Equity
  Common stock (par value $0.01 per share
  80,000,000 and 80,000,000 authorized;
  21,206,121 and 21,202,614 issued and
  outstanding as of September 30, 2012 and        212                212
  December 31, 2011, respectively)
  Additional paid-in-capital                      237,960            237,755
  Accumulated other comprehensive (loss)          7                  (66     )
  Accumulated deficit                            (107,965  )       (66,994 )
  Total stockholders' equity                     130,214          170,907 
  Total liabilities and stockholders'         $   174,319        $  222,599 
  equity

Imperial Holdings, Inc. and Subsidiaries
CONSOLIDATED AND COMBINED STATEMENTS OF OPERATIONS (UNAUDITED)
                                                                
                 For the Three Months Ended          For the Nine Months Ended
                 September 30,                       September 30,
                  2012           2011             2012           2011       
                 (in thousands, except per share data)
                                                                      
Income
Agency fee       $ -              $ 937              $ -              $ 6,564
income
Interest           252              2,289              1,856            7,031
income
Interest and
dividends on
investment         72               247                332              441
securities
available for
sale
Origination        45               1,753              483              5,858
fee income
Realized gain
on sale of         2,187            2,240              7,796            5,457
structured
settlements
Realized gain
on sale of         -                -                  291              5
life
settlements
Gain on
forgiveness of     -                198                -                4,880
debt
Unrealized
change in fair     (17,530    )     (14,074    )       (8,401     )     14,811
value of life
settlements
Unrealized
change in fair
value of           409              928                1,587            2,145
structured
settlements
Servicing fee      271              376                955              1,447
income
Gain on
maturities of
life
settlements        -                3,188              6,090            3,188
with
subrogation
rights, net
Other income      123            155              989            481        
                                                                      
Total income       (14,171    )     (1,763     )       11,978           52,308
                                                                      
                                                                      
Expenses
Interest           141              1,660              1,219            7,431
expense
Provision for
losses on          -                3,583              441              3,712
loans
receivable
(Gain) loss on
loan payoffs
and                (139       )     261                14               3,927
settlements,
net
Loss on life
settlement         140              -                  140              -
write off
Amortization
of deferred        254              1,409              1,751            4,913
costs
Personnel          3,595            4,836              12,317           14,158
costs
Marketing          1,034            1,754              4,481            4,185
costs
Legal fees         9,328            1,821              22,918           4,187
Professional       1,559            1,452              5,272            4,238
fees
Insurance          626              186                1,712            548
Other selling,
general and       771            1,652            2,730          4,173      
administrative
expenses
Total expenses    17,309         18,614           52,995         51,472     
(Loss) income
before income      (31,480    )     (20,377    )       (41,017    )     836
taxes
(Benefit)
provision for     (5         )    (7,827     )      (46        )    1,352      
income taxes
Net loss         $ (31,475    )   $ (12,550    )     $ (40,971    )   $ (516       )
                                                                      
Loss per
share:
Basic            $ (1.48      )   $ (0.59      )     $ (1.93      )   $ (0.03      )
Diluted          $ (1.48      )   $ (0.59      )     $ (1.93      )   $ (0.03      )
Weighted
average shares
outstanding:
Basic             21,206,121     21,202,614       21,205,622     18,728,435 
Diluted           21,206,121     21,202,614       21,205,622     18,728,435 

Contact:

Imperial Holdings, Inc.
David Sasso, 561-672-6114
Director-Investor Relations
IR@imperial.com
www.imperial.com
 
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