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Life Settlements

Life Settlements

Monday, June 21, 2010

J.P. Morgan Exiting Life Settlement Market

By Dealflow Media

J.P. Morgan is getting out of the life settlement market, a person familiar with the company said.

The person told The Life Settlements Wire that J.P. Morgan expects to wind down its operation over the next few months.

J.P. Morgan is the second major investment bank to exit the market in recent months. Goldman Sachs said it was leaving the market in January, disappointed in its lack of growth.

J.P. Morgan had entered the business around 2007. It had a smaller operation than its competitors, employing fewer than 10 people in its life finance business, the person familiar with the company said.

Rob Finfer, chief executive of Bethesda, Md.-based life settlement broker Integrity Capital Partners said he hasn’t seen J.P. Morgan purchasing policies for at least a year.

“I would not have referred to them as a major player in the life settlement space,” Finfer said. Still, “I’m disappointed when any funding source decides to leave the space, especially in the environment where we have so many excellent policies for sale.”

J.P. Morgan spokesman Brian Marchiony declined to comment.

Thursday, June 3, 2010

Life Insurers to Settle with Life Settlements?

A recent article in Seeking Alpha examined the love hate relationship between life insurance carriers and the life settlement industry. If the carriers can't beat em, should they join em? Below is an excerpt from Clark Troy's article.

New York Life and the Actuarial Society of Greater New York hosted Michael Fasano of Fasano Associates for a seminar called “Mortality Curves: Lessons from Life Settlement Underwriting” on Friday, May 28. On the face of it, this would not seem very shocking, were it not for the enmity general shown to the life settlements industry by life insurers. Life settlements, and particularly stranger-owned life insurance (STOLI), have in recent years been the bĂȘte noire of the life insurance industry. Life insurance trade association the American Council of Life Insurers has vigorously lobbied for strong legislation protecting senior citizens (and its own profitability) from fraudulent life settlement origination such as STOLI, and large states and key life settlements markets such as New York and California have enacted such laws. The life settlements industry, acknowledging that the unsavory practices of STOLI have besmirched its image, also generally supports such legislation.

However, much as it may hate and fear the life settlements industry, life insurers and reinsurers have shown an interest in life expectancy providers such as Fasano Associates (the other two leaders are American Viatical Services and 21st Services), who estimate the longevity of senior citizens who are considering entering into a life settlement transactions. These vendors provide the key data point for evaluating life settlements and, in so doing, have accumulated considerable expertise and data assets for estimating how long older people with health problems are likely to live. This is obviously something life insurers are interested in too. Although the life expectancy providers have had some pretty major hiccups along the way, they’ve acquired enough domain knowledge that insurers are curious.

Could a life insurer or reinsurer seek to partner with or acquire a life expectancy provider? It’s not outside the realm of possibility, but it would depend on pricing, which would in turn depend on how the life settlements market was doing as a whole. For the life settlements market to flourish, institutional investors need to be in a risk-seeking mode. Through the first quarter of 2010, with accommodative fiscal policy successfully encouraging a global risk trade and thinning spreads between sovereign and corporate as well as G20 and emerging market debt, prospects for life settlements -- an asset with non-correlated fixed income like returns – might have been thought to be encouraging, although in fact the flows of capital towards life settlements slowed. The big institutional investors to date have been German, primarily pension funds, and German institutional investors have other things on their minds these days.

Originally Published - Seeking Alpha, Jun 2, 2010