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.
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