Life Partners Matches Estimates

Life Partners Holdings Inc. (LPHI - Snapshot Report) reported fiscal 2010 third quarter results on Monday. The company’s net income grew 15.8% to $8.4 million, compared to $7.3 million in the year-ago quarter. Earnings per share of 57 cents easily surpassed the year-ago result of 49 cents, though it came in-line the Zacks Consensus Estimate.
 
Life Partners is a financial services company and the parent company of Life Partners Inc., which is engaged in the secondary market for life insurance known as life settlements. These financial transactions involve the purchase of life insurance policies at a discount to their face value for investment purposes.

Life Partners operating revenues are derived from fees for facilitating life settlement transactions, which involve sale of an existing life insurance policy to another party. By selling the policy, the policyholder receives an immediate cash payment, while the purchaser takes an ownership interest in the policy and receives the death benefit under the policy when the insured dies.
 
The company posted a 10.2% year-over-year growth in gross revenues to $31 million primarily due to an 18.7% increase in average revenue per settlement to $595,524. Life Partners witnessed a growing demand for its services due to factors, such as trend towards diversifying portfolios and avoid economically sensitive investments. Brokerage fees, as a percentage of gross revenues, declined 250 basis points (bps) year over year to 46.8%, which led to 15.6% growth in net revenues to $16.5 million.
 
Operating expenses rose by 6.3% year over year to $3.9 million due to higher settlement costs, premium advances and bonuses. However, the top-line growth more than offset the increase in operating expenses. Consequently, Life Partners recorded an 18.8% growth in operating income to $12.6 million from $10.6 million in the year-ago period.
 
At the end of the quarter, Life Partners had cash and cash equivalents of $22 million, compared to $20 million in the year-ago quarter. During the first nine months of the current fiscal, the company deployed $9.5 million towards payment of dividends and $7.7 million towards purchasing policies for investment purposes.
 
Looking ahead, Life Partners expects continued growth in demand for life settlements as uncertain macroeconomic environment compel investors to seek alternative investment avenues. The Zacks Consensus Estimate on the company’s earnings for the fiscal year ending February 2010 is currently pegged at $2.18 per share, which has remained stable over the past 2 months.
 
Shares of Life Partners Holdings jumped more than 5% after the positive news to close at $20.97 yesterday on the Nasdaq.

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