(1) As of February 3, 2011, the Company had 3,600,000 shares of common stock outstanding. The impact of the Company’s corporate conversion has been applied on a retrospective basis to January 1, 2009 to determine earnings per share for the years ended December 31, 2011, 2010 and 2009. As of December 31, 2013, there were 21,237,166 issued and outstanding shares.
The discount rate incorporates current information about market interest rates, the credit exposure to the insurance company that issued the life insurance policy and our estimate of the risk premium an investor in the policy would require. The extent to which the fair value could vary in the near term has been quantified by evaluating the effect of changes in the weighted average discount rate on the death benefit used to estimate the fair value. If the weighted average discount rate were increased or decreased by 1/2 of 1% and the other assumptions used to estimate fair value remained the same, the change in estimated fair value would be as follows (dollars in thousands):
A considerable portion of the fair value of the Company’s note payable derives from the timing of receipt of future policy proceeds. Should life expectancies lengthen such that policy proceeds are collected further into the future, the fair value of this debt will decline. Conversely, should life expectancies shorten, the fair value of this debt will increase. Considerable judgment is required in interpreting market data to develop the estimates of fair value.
Interest Income. Interest income was $28,000 for the year ended December 31, 2013 compared to $1.7 million in 2012, a decrease of $1.7 million. During the years ended December 31, 2013 and 2012, the Company originated no loans. Interest income declined as the balance of loans receivable, net decreased from $3.0 million as of December 31, 2012 to zero as of December 31, 2013 due to loan maturities. Loans outstanding declined from 22 to zero at December 31, 2013. As a result of the voluntary termination of our premium finance business and maturity of all outstanding loans, we have ceased earning interest income.
(Loss) / Gain on life settlements, net. Loss on sale of life settlements, net was $2.0 million for the year ended December 31, 2013 compared to income of $151,000 in 2012. During the year ended December 31, 2013, the Company surrendered two policies resulting in a gain of approximately $255,000 and received proceeds of $1.0 million; sold eight policies resulting in a loss of approximately $922,000 with proceeds received of $5.8 million, and lapsed 20 policies resulting in a loss of $1.3 million. There were no surrendered policies for the year ended December 31, 2012. The amount of $151,000 for the year ended December 31, 2012 was associated with the sale of six policies during that period resulting in a gain of approximately $291,000 and a loss of $140,000 for a policy lapse.
Net loss from continuing operations for the year ended December 31, 2012 was $42.0 million as compared to a net loss of $33.8 million for the year ended December 31, 2011, an increase of $8.2 million or 24%. Total income from continuing operations was $5.1 million for the year ended December 31, 2012, a reduction of $27.2 million over total income from continuing operations of $32.3 million during the same period in 2011. Total expenses from continuing operations were $47.1 million for the year ended December 31, 2012 compared to total expenses from continuing operations of $66.1 million incurred during the same period in 2011, a decrease of $18.9 million, or 29%.
Origination Fee Income. Origination fee income was $500,000 for the year ended December 31, 2012, compared to $6.5 million for 2011, a decrease of $6.0 million, or 92%. Origination fee income decreased due to a decline in the average balance of loans receivable, net, as noted above. Also, the Company reduced origination fees charged after ceasing the LPIC program, under which the majority of origination fees were passed along to the LPIC provider. Origination fees as a percentage of the principal balance of the loans originated was 25.0% during 2011. As a result of the voluntary termination of our premium finance business, we did not originate any loans or loan origination fees during 2012.
Change in Fair Value of Life Settlements. Change in fair value of life settlements was a loss of approximately $5.7 million for the year ended December 31, 2012 compared to a gain of $570,000 in 2011, a decrease of $6.2 million. This loss was primarily driven by increased life expectancy inputs to the Company’s fair value model reflected in the updated life expectancy reports procured by the Company in respect of 149 insured lives. These reports showed that, in the aggregate, there was less health impairment and thus longer life expectancies relative to the original life expectancy reports inputted into the Company’s fair value model. The $570,000 unrealized change in fair value recorded during the year ended December 31, 2011 included $3.0 million attributable to revisions made to the application of our valuation technique and assumptions used in our fair value calculation made in the quarter ended March 31, 2011, as described in Note 2, “Summary of Significant Accounting Policies.”
Interest Expense. Interest expense was $1.3 million for the year ended December 31, 2012 compared to $8.5 million for 2011, a decrease of $7.3 million, or 85%. The decrease in interest expense is due to a decline in notes payable from $19.3 million as of December 31, 2011 to zero as of December 31, 2012. These notes payable, the majority of which were guaranteed under insurance provided by the LPIC Provider which was discontinued as of December 2010, declined as premium finance loans serving as collateral for these notes matured during the year ended December 31, 2012.