Imperial Holdings (NYSE:IFT), a finance company, priced its IPO February 7 at $10.75 per share after cutting its expected range, giving a first day return of 0.6%.
Business Overview (from prospectus)
We are a specialty finance company founded in December 2006 with a focus on providing premium financing for individual life insurance policies issued by insurance companies generally rated “A+” or better by Standard & Poor’s or “A” or better by A.M. Best Company and purchasing structured settlements backed by annuities issued by insurance companies or their affiliates generally rated “A1” or better by Moody’s Investors Services or “A-” or better by Standard & Poor’s. In our premium finance business we earn revenue from interest charged on loans, loan origination fees and fees from referring agents. We have historically relied on debt financing to operate this business. Since 2007, the United States’ capital markets have experienced extensive distress and dislocation due to the global economic downturn and credit crisis. Lenders in the premium finance market generally exited the market or increased their lending rates and required more assurances such as additional collateral support and third-party guarantees. As a result, our financing cost for a premium finance transaction increased significantly. For the nine months ended September 30, 2010, our financing cost was approximately 31.1% per annum of the principal balance of the loans compared to 14.5% per annum for the twelve months ended December 31, 2007. With the net proceeds of this offering we intend to fund our future premium finance transactions with equity financing instead of debt financing. Over time we expect that this will significantly reduce our cost of financing and help to generate higher returns for our shareholders.
Offering: 16.7 million shares at $10.75 per share. Net proceeds of approximately $130 million from the offering will be used for premium lending activities.
Lead Underwriters: FBR Capital Markets (FBCM), JMP Securities (NYSE:JMP), Wunderlich Securities
Total income for the nine months ended September 30, 2010 was $60.4 million as compared to $73.4 million for the same period in 2009...Total expenses for the nine months ended September 30, 2010 was $76.9 million as compared to $78.8 million for the same period in 2009...Net loss for the nine months ended September 30, 2010 was $16.4 million as compared to $5.4 million for the same period in 2009...
The market for premium finance is very competitive. A policyholder has a number of ways to pay insurance premiums which include using available cash, borrowing from traditional lenders such as banks, credit unions and finance companies, as well as more specialized premium finance companies like us. Competition among premium finance companies is based upon many factors, including price, valuation of the underlying insurance policy, underwriting practices, marketing and referrals. Our principal competitors within the premium finance industry are CMS, Inc., Insurative Premium Finance Ltd. and Madison One as well as smaller, less well known companies. Life settlement companies that compete with our premium finance business by providing liquidity to policyholders through the sale of life insurance policies include Coventry First LLC, Life Partners Holdings, Inc. (NASDAQ:LPHI) and ViaSource Funding Group, LLC, as well as smaller, less well known companies. It is possible that a number of our competitors may be substantially larger and may have greater market share and capital resources than we have. There are a number of competitors in the structured settlement market. Competition in the structured settlement market is primarily based upon marketing, referrals and quality of customer service. Based on our industry knowledge, we believe that we are one of the larger acquirers of structured settlements in the United States. Our main competitors are J.G. Wentworth & Company, Inc., Peachtree Settlement Funding, Novation Capital LLC (a subsidiary of Encore Financial Services), Settlement Capital and Stone Street Capital.