Life Partners Reports Earnings

Life Partners says it completed 61 settlements with a total policy face value of $31 million during the second quarter, compared with 78 settlements with a total policy face value of $16 million during the second quarter of 2005.

Average revenue increased to $107,977 per settlement, from $62,753, Life Partners says.

Unusual expenses include a $336,572 charge related to the impairment of a limited partnership, Life Partners says.

“The limited partnership was designed to invest $50 million in life settlement contracts purchased through Life Partners during fiscal 2007,” Life Partners says in its Form 10-Q quarterly report. “Due to the stringent underwriting standards that the general partner applied to the available contracts, the limited partnership purchased no policies prior to Aug. 13, 2006. Pursuant to the terms of the limited partnership agreement, we terminated the arrangement without penalty as of Aug. 13, 2006. As a result, we took an impairment expense to our limited partnership asset of $336,575 last quarter and have taken a similar impairment of $336,572 this quarter.”

Life Partners notes that it faces a suit filed in a state court in McLennan County, Texas, which alleges that the company breached its contract with policy purchasers by selecting life insurance policies insuring individuals who were not actually terminally ill. The suit also deals with complaints from the policy purchasers about the need to supply premium to fund policies for which the premium escrow funds have been exhausted.

“We believe there are numerous and substantial legal and factual issues which will prevent this matter from being certified as a class action and which will not support the claims made in this case,” Life Partners says. “We intend to vigorously defend this action, but we cannot predict or guarantee the outcome of the action.”

Life Partners also has reported a $223,743 boost to net income resulting from a new rule from the Financial Accounting Standards Board, Norwalk, Conn. The change lets a life settlement company value the policies purchased for its own account at the purchase value, rather than using the difference between the purchase price and the cash value as the carrying value.