We engaged a third party, Model Actuarial Pricing Systems (MAPS), to prepare a third-party valuation of our life settlement portfolio. MAPS owns and maintains the portfolio pricing software we use. MAPS processed policy data, future premium data, life expectancy estimate data, and other actuarial information we supplied to calculate a net present value for our portfolio using the specified discount rate of 11.09%. MAPS independently calculated the net present value of our portfolio of 396 policies to be $356.6 million, which is the same fair value estimate we used on the balance sheet as of December 31, 2015, and furnished us with a letter documenting its calculation. A copy of such letter is filed as Exhibit 99.1 to this report.
We have also provided a valuation allowance against the deferred tax asset related to a tax basis capital loss generated with respect to our settlement and subsequent disposal of an earlier investment in Athena Structured Funds PLC (see “Notes to Consolidated Financial Statements” Note 10). As we have no expectation of generating capital gains with the applicable carry-forward period, we do not believe that it is more likely than not that the deferred asset will be realized.
(1) We hired additional members to our sales, marketing and information technology teams. At the end of 2014 we employed approximately 40 employees, at the end of 2015 our headcount rose to approximately 50 employees.
Income Tax Expense. We realized income tax benefits of $3.5 million and $2.4 million in 2015 and 2014, respectively. The effective tax rate for the 12 months ended December 31, 2015 and 2014, was 32.2% and 28.7%, respectively, compared to a statutory rate of 34%. In 2015 and 2014, there were significant permanent differences between income before income taxes and taxable income. The primary permanent differences in those years are the accrual of preferred dividends reported as interest expense for financial reporting purposes and meals and entertainment expenses. The dividends charged to interest expense were $2.1 million and $2.4 million in 2015 and 2014, respectively.
In January 2015, we registered a $1.0 billion public debt offering of our L Bonds with the SEC. The $1.0 billion L Bond offering was as a follow-on offering to our $250.0 million public debt offering of Renewable Secured Debentures (subsequently renamed L Bonds) that was registered with the SEC and completed January 2015. Through December 31, 2015, the total amount of these L Bonds sold, including renewals, was $437.9 million. As of December 31, 2015 and 2014, we had approximately $282.2 million and $186.4 million, respectively, in principal amount of L Bonds outstanding.
We maintain a $105 million revolving senior credit facility with Autobahn/DZ Bank through GWG Life’s wholly-owned subsidiaries DLP II and DLP III. The revolving senior credit facility is used to pay the premium expenses related to our portfolio of life insurance policies. As of December 31, 2015 and 2014, we had approximately $65.0 million and $72.2 million, respectively, outstanding under the revolving senior credit facility, and maintained an available borrowing base surplus of $40.0 million and $20.6 million, respectively. Effective May 11, 2015, we amended and restated our senior credit facility to reduce the interest cost and extend the term of the facility to June 2018 (see note 5 to our condensed consolidated financial statements).
(4) Adjusted cost basis is increased to interest, premiums and servicing fees which are expensed under GAAP.
A presentation of our excess spread and our total excess spread is set forth below. Management uses the “total excess spread” to gauge expected profitability of our investments, and uses the “excess spread” to monitor compliance with our borrowing.
(C) This is the non-GAAP cost basis in life insurance policies from which our expected internal rate of return is calculated.
(3) We must maintain an excess spread of 2.00% relating to our revolving senior credit facility to maintain compliance under such facility.
We have audited the accompanying consolidated balance sheets of GWG Holdings, Inc. and Subsidiaries as of December 31, 2015 and 2014, and the related consolidated statements of operations, stockholders’ equity and cash flows for the years then ended. We also have audited GWG Holdings, Inc. and Subsidiaries' internal control over financial reporting as of December 31, 2015, based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) (2013 framework). These consolidated financial statements are the responsibility of the company's management. Our responsibility is to express an opinion on these consolidated financial statements and an opinion on the company's internal control over financial reporting based on our audits.
● selling any collateral or creating or permitting to exist any adverse claim upon any collateral;
The Company began issuing Series A Preferred Stock September, 1, 2011, as described in note 8. The Series A Preferred Stock is anti-dilutive to the net loss per common share calculation at December 31, 2015 and 2014. The Company has also issued warrants to purchase common stock in conjunction with the sale of convertible preferred stock, discussed in note 8. The warrants and vested stock options are anti-dilutive at December 31, 2015 and 2014 and have not been included in the fully diluted net loss per common share calculation.
Subsequent to December 31, 2015, five policies covering five individuals have matured. The combined insurance benefits of these policies were $9,238,000. The Company recorded realized gains of $6,162,000 on these five policies.
Subsequent to December 31, 2015, the Company has issued approximately an additional $30,341,000 in principal amount of L Bonds.