Imperial Holdings, Inc. Announces Fourth Quarter and Year End 2012 Results

Imperial Holdings, Inc. Announces Fourth Quarter and Year End 2012 Results

Company Closes on $45 Million Bridge Facility

BOCA RATON, Fla.--(BUSINESS WIRE)-- Imperial Holdings, Inc. (NYS: IFT) ("Imperial" or the "Company"), a specialty finance company with a focus on providing liquidity solutions to owners of illiquid financial assets, announced today financial results for its fourth quarter and fiscal year ended December 31, 2012.


Quarter Ended December 31, 2012

Total income was $7.2 million for the three months ended December 31, 2012, compared to total income of ($8.1 million) for the three months ended December 31, 2011, an increase of $15.3 million. Total expenses were $10.9 million for the three months ended December 31, 2012 compared to $31.9 million for the three months ended December 31, 2011, a decrease of $21 million. The majority of the decrease in expenses was attributed to significantly lower legal fees related to a government investigation. The Company posted a net loss of $3.7 million, or ($.17), per fully diluted share for the three months ended December 31, 2012, compared to a net loss of $38.7 million, or ($1.82), per fully diluted share, for the three months ended December 31, 2011.

In the Life Finance business segment, income was $3.1 million for the fourth quarter of 2012 compared to income of ($12.1 million) for the fourth quarter of 2011, an increase of $15.2 million. Income was driven by a $2.7 million increase in the fair value of the Company's portfolio of 214 life insurance policies. At December 31, 2012 the estimated fair value of the Company's life insurance policies was $113.4 million. The weighted average discount rate used in the Company's fair value model was 24.01% at December 31, 2012. The aggregate face value of the Company's portfolio of life insurance policies was $1.1 billion at December 31, 2012. Segment expenses were $4.1 million during the three months ended December 31, 2012 compared to $9.8 million during the three months ended December 31, 2011, a decline of $5.7 million. The decrease in expenses was attributed to lower interest expense, amortization of deferred costs and personnel costs, as well as a decrease in the Company's provision for loan losses. Segment operating loss was $979,000 for the three months ended December 31, 2012, a decrease of $21.0 million over segment operating loss of $22.0 million for the three months ended December 31, 2011.

In the Structured Settlement business segment, income was $4.0 million for the three months ended December 31, 2012 compared to $3.8 million for the three months ended December 31, 2011. Segment expenses decreased by $2.0 million to $4.7 million for the fourth quarter of 2012 compared to $6.7 million in the year ago period. The decrease was attributed to lower marketing costs and general and administrative expenses. Segment operating loss was $660,000 for the three months ended December 31, 2012 compared to a segment operating loss of $2.9 million for the three months ended December 31, 2011. The Company originated 209 transactions during the fourth quarter of 2012 compared to 255 during the same period of 2011.

Full Year Ended December 31, 2012

Total income was $19.1 million for the year ended December 31, 2012, a 57% decrease over total income of $44.2 million for 2011. Total expenses were $63.8 million for the year ended December 31, 2012 compared to total expenses of $83.4 million for 2011, a reduction of $19.6 million, or 24%. Net loss for the year ended December 31, 2012 was $44.6 million, or ($2.10) per share compared to a net loss of $39.2 million or ($2.03) per share for 2011, an increase of $5.5 million or 14%.

As of December 31, 2012, the Company had $20.3 million of cash and cash equivalents, and marketable securities. The book value of the Company at December 31, 2012 was $5.97 per share.

$45 Million Bridge Financing

The Company also announced today it has closed on its previously announced $45 million bridge facility. The facility was provided by affiliates of some of the Company's largest shareholders, including Indaba Capital Management, Nantahala Capital Management, NS Advisors and Brooklyn Capital Management (a/k/a Bulldog Investors).

Antony Mitchell, Chief Executive Officer, commented, "We ended 2012 with positive momentum in both our Life Finance and Structured Settlements business segments. During the quarter we benefited from an increase in the fair value of our life settlement assets, as well as significantly lower legal expenses." Mr. Mitchell added, "More recently, we successfully completed our previously announced $45 million financing facility with some of our major shareholders. It will ensure our ability to make premium payments on our life insurance policies into 2014. The facility also provides us with additional flexibility as we progress towards sourcing a longer term financing solution."

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, unanticipated issues that prevent or delay the Company's independent registered public accounting firm from concluding its procedures for the year ended December 31, 2012 or that require additional efforts, procedures or review; the investigation by the Securities and Exchange Commission, and potential adverse outcomes associated with the investigation, 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 Company's ongoing compliance with the coverage ratios and other covenants in the bridge facility; the Company's ability to repay the bridge facility and to raise other sources of capital; unanticipated issues that prevent or delay the Company from entering into the previously announced settlements of certain shareholder related matters and the amount of legal and indemnification expenses associated with those matters and the investigation into the Company's premium finance business; and the accuracy of actuarial assumptions underlying the Company's models. 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.

Imperial Holdings, Inc. and Subsidiaries

CONSOLIDATED AND COMBINED BALANCE SHEETS

December 31,

2012

2011

(In thousands except share data)

ASSETS

Assets

Cash and cash equivalents

$

7,001

$

16,255

Restricted cash

1,162

691

Certificate of deposit - restricted

-

891

Investment securities available for sale, at estimated fair value

12,147

57,242

Deferred costs, net

7

1,874

Prepaid expenses and other assets

14,165

3,277

Deposits - other

2,855

761

Interest receivable, net

822

5,758

Loans receivable, net

3,044

29,376

Structured settlement receivables at estimated fair value

1,680

12,376

Structured settlement receivables at cost, net

1,574

1,553

Investment in life settlements, at estimated fair value

113,441

90,917

Fixed assets, net

232

585

Investment in affiliates

2,212

1,043

Total assets

$

160,342

$

222,599

LIABILITIES AND STOCKHOLDERS' EQUITY

Liabilities

Accounts payable and accrued expenses

$

6,606

$

16,336

Other liabilities

20,796

4,279

Interest payable

-

5,505

Notes payable

-

19,277

Income taxes payable

6,295

6,295

Total liabilities

33,697

51,692

Stockholders' Equity

Common stock (80,000,000 authorized; 21,206,121 and 21,202,614
issued and outstanding as of December 31, 2012 and 2011,
respectively)

212

212

Additional paid-in-capital

238,064

237,755

Accumulated other comprehensive loss

(3

)

(66

)

Accumulated deficit

(111,628

)

(66,994

)

Total stockholders' equity

126,645

170,907

Total liabilities and stockholders' equity

$

160,342

$

222,599

Imperial Holdings, Inc. and Subsidiaries

CONSOLIDATED UNAUDITED STATEMENTS OF OPERATIONS

For the Fourth Quarter Ended December 31,

2012

2011

Income

(in thousands, except share and per share data)

Agency fee income

$

-

$

(94

)

Interest income

158

1,274

Interest and dividends on investment securities available for sale

60

199

Origination fee income

17

622

Realized gain on sale of structured settlements

3,713

360

Gain on forgiveness of debt

-

143

Unrealized change in fair value of life settlements

2,741

(14,241

)

Unrealized change in fair value of structured settlements

236

3,157

Servicing fee income

228

367

Other income

92

117

Total income

7,245

(8,096

)

Expenses

Interest expense

36

1,095

Provision for losses on loans receivable

74

3,876

Loss on loan payoffs and settlements, net

111

(90

)

Amortization of deferred costs

116

1,164

Personnel costs

3,770

4,775

Marketing costs

542

1,919

Department of Justice Settlement

-

8,000

Legal fees

3,135

7,910

Professional fees

1,662

1,533

Insurance

618

208

Other selling, general and administrative expenses

838

1,548

Total expenses

10,902

31,938

Loss before income taxes

(3,657

)

(40,034

)

Provision (benefit) for income taxes

6

(1,352

)

Net loss

$

(3,663

)

$

(38,682

)

Loss per share:

Basic

$

(0.17

)

$

(1.82

)

Diluted

$

(0.17

)

$

(1.82

)

Weighted average shares outstanding:

Basic

21,206,121

21,202,614

Diluted

21,206,121

21,202,614

Imperial Holdings, Inc. and Subsidiaries

CONSOLIDATED UNAUDITED STATEMENTS OF OPERATIONS

For the Year Ended December 31,

2012

2011

Income

(in thousands, except share and per share data)

Agency fee income

$

-

$

6,470

Interest income

2,014

8,303

Interest and dividends on investment securities available for sale

391

640

Origination fee income

500

6,480

Realized gain on sale of structured settlements

11,509

5,817

Realized gain on life settlements, net

151

5

Gain on forgiveness of debt

-

5,023

Unrealized change in fair value of life settlements

(5,660

)

570

Unrealized change in fair value of structured settlements

1,823

5,302

Servicing fee income

1,183

1,814

Gain on maturities of life settlements with subrogation rights, net

6,090

3,188

Other income

1,082

602

Total income

19,083

44,214

Expenses

Interest expense

1,255

8,524

Provision for losses on loans receivable

515

7,589

Loss on loan payoffs and settlements, net

125

3,837

Amortization of deferred costs

1,867

6,076

Personnel costs

16,087

18,933

Marketing costs

5,023

6,104

Department of Justice Settlement

-

8,000

Legal fees

26,053

12,097

Professional fees

6,934

5,684

Insurance

2,330

756

Other selling, general and administrative expenses

3,567

5,812

Total expenses

63,756

83,412

Loss before income taxes

(44,673

)

(39,198

)

Provision (benefit) for income taxes

(39

)

-

Net loss

$

(44,634

)

$

(39,198

)

Loss per share:

Basic

$

(2.10

)

$

(2.03

)

Diluted

$

(2.10

)

$

(2.03

)

Weighted average shares outstanding:

Basic

21,205,747

19,352,063

Diluted

21,205,747

19,352,063

Life Finance Segment-Selected Operating Data