A Preview of Life Partners' Earnings

| About: Life Partners (LPHI)

Yahoo Finance shows Life Partners Holdings (NASDAQ:LPHI) to announce earnings Tuesday, but a reader gave me a heads up that a SEC filing hit Friday, so we already have the news despite the lack of a press release. The company already pre-announced to the upside in December [Dec 15: Life Partners Holdings Pre Announces ... to the Upside], and in this environment, the few & proud who can do that, are to be taken notice of. Everything continues to look solid for this "non correlated" asset; they hit exactly the numbers they guided to less than a month ago.

Their year end is February 2009 (to be reported in April), at which point analysts have a $2.27 yearly EPS (58 cents is the target for their last fiscal quarter). At $42, this will give them a trailing PE of 18.5 if the price does not change between here and there. Since there is no public competitor, I don't know what a fair PE will be; they had 40% type of growth year over year. Analysts are conservative for next year saying that growth rate will be cut in half.

The company also announced a 5:4 split last week

  • Life Partners Holdings, Inc. (NasdaqGS: LPHI - News) today announced that its Board of Directors has approved a 5-for-4 split of the company’s common stock which will be paid in the form of a stock dividend on February 16, 2009 to shareholders of record as of February 6, 2009.

Chart continues to say to buy on all dips - hopefully the next time the market falters we can add quite a bit down there in the mid to upper $30s

  • We reported net income of $7,282,878 for the three months ended November 30, 2008 (hereafter “the Third Quarter of this year”), compared to net income of $5,215,695 for the three months ended November 30, 2007 (hereafter “the Third Quarter of last year”). Our stronger net income resulted primarily from a 46% increase in revenues and our ability to keep brokerage fees and operating and administrative expenses in line with revenues. While the number of settlements transacted increased from 52 to 56, the average revenue per settlement increased by 35%, and total revenues net of brokerage fees increased by 44%.
  • Revenues - Revenues increased by $8,805,204 or 46% from $19,298,726 in the Third Quarter of last year to $28,103,930 in the Third Quarter of this year. This increase was due primarily to a 55% increase in our total business volume (i.e. the total face value of all settlements transacted by us during a period) from $125,897,330 in the Third Quarter of last year to $195,459,950 in the Third Quarter of this year, continuing a trend toward transactions with larger face amounts. This resulted in a 35% increase in the average revenue per settlement.
  • Expenses – Operating and administrative expenses increased by 53% or $1,259,419 from $2,384,461 in the Third Quarter of last year to $3,643,880 in the Third Quarter of this year due primarily to increases in settlement costs, legal expenses and employee and executive bonuses. The largest component - general and administrative expense – declined 1.8% as a percentage of net revenues from the Third Quarter of last year to the Third Quarter of this year. Because of the trend toward higher face value policies, our substantial investment in proprietary software and our improvements in automated processing procedures, we have been able to continue to increase our business volume to a greater extent than the increase in general and administrative expenses.


  • We continue to produce strong financial results and expect that our growth trends will continue. We believe our company and our industry is fundamentally sound and well positioned to deal with the current uncertainty in the financial and capital markets. Our life settlements are not correlated to the financial or commodities markets, which increases their appeal in uncertain times. Further, we have comfortable amounts of cash and cash equivalents. We carry little or no operational debt and do not rely on leverage in our capital structure. We do rely, however, upon the availability of investment capital. While it is conceivable that a deeper financial crisis could diminish the supply of investment capital throughout the economy, our experience during the First Nine Months of this year indicates that greater investment capital will be placed in life settlements. We believe this is due to the fact that returns in life settlements are not correlated to the performance of the financial markets.
  • Our operating strategy is to increase cash flows generated from operations by increasing revenues while controlling brokerage and operating and administrative expenses. We believe that domestic and international demand for life settlements, especially from institutional clients, will continue to grow as the prospects for economic conditions remain uncertain and investors look for alternative investments. In response to the projected growth in demand for qualified life settlement transactions, on the demand side, we are exploring the use of special purpose entities to expand our market for life settlement investments and continue efforts to attract institutional clients. On the supply side, we are increasing our advertising and professional awareness marketing to potential sellers of policies and to strengthen our broker network.

[Nov 6: Bookkeeping: Beginning Position in Life Partner Holdings]

Disclosure: Long Life Partners Holdings in fund; no personal position

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