We've all been talking about private equity investing in life settlements for a while. The rumors have persisted for the past year and the whispers have grown louder throughout 2010. Finally, a report of movement about private equity in the life settlement world has come out naming Cerebus Capital as the funding source for Proverian Capital. Cerebrus is one of the largest PE firms in the United States.
While I am sure Proverian wouldn't admit if Cerebrus is their funding source, this is a huge win for Proverian. You know anyone that can buy Chrysler and live to tell about it is well capitalized.
I for one applaud Cerebrus for jumping into the longevity market. I have a feeling this will pave the way for other PE firms to jump in as well.
www.cerberuscapital.com
Life Settlements
Showing posts with label life settlement market. Show all posts
Showing posts with label life settlement market. Show all posts
Tuesday, December 21, 2010
Wednesday, July 28, 2010
GAO Study Finds that Life Settlements Deliver Almost 8 Times Surrender Value to Seniors
When evaluating a life settlement, the first question is always how much will a policy sell for? The better question is, how much more will a life settlement net than surrendering it to the life insurance carrier. Financial decisions are never made in a vaccum and the relative value of an insurance asset on the scondary market is best compared with the perceived value of a surrender. The GAO has finally given some fantastic context to this discussion with a recent report.
HUDSON, Ohio--(BUSINESS WIRE)-- The U.S. Government Accountability Office recently issued a long anticipated report on the state of the emerging Life Settlement market. One of the key findings, based on analysis of over 1,000 life settlement transactions, was that seniors selling their policies in a life settlement transaction received almost 8 times as much money as they would have had they surrendered the policy to the insurance company. “This confirms what we have been saying all along, life settlements are good for consumers and result in maximizing policy value for seniors who no longer want or need their life insurance policy,” said Brian Smith, President of the Life Settlement Institute. For example, proceeds of a life settlement may help a senior pay for long term care.
Using just the 1020 policies relied upon in the study means that life settlements delivered $232 million more value to seniors than they would have received from the issuing insurance company. The study shows that seniors would have received $37.4 million if they surrendered their policy but instead received over $269 million from the life settlement transactions.
The study also found that although the vast majority of states have adopted pervasive regulation of the life settlement market, some have yet to do so and differences among state laws can be significant. Smith added: “This finding also comes as no surprise to us. We have been working with state legislators and state insurance regulators to adopt consistent model legislation across the country and eliminate such discrepancies. Last year we helped get legislation enacted in several states including New York and California. However, there are 50 states and it takes time to get these initiatives passed. The National Conference of Insurance Legislators (NCOIL) Model Life Settlement Act is a very good bill and we will continue to support its adoption around the country.”
HUDSON, Ohio--(BUSINESS WIRE)-- The U.S. Government Accountability Office recently issued a long anticipated report on the state of the emerging Life Settlement market. One of the key findings, based on analysis of over 1,000 life settlement transactions, was that seniors selling their policies in a life settlement transaction received almost 8 times as much money as they would have had they surrendered the policy to the insurance company. “This confirms what we have been saying all along, life settlements are good for consumers and result in maximizing policy value for seniors who no longer want or need their life insurance policy,” said Brian Smith, President of the Life Settlement Institute. For example, proceeds of a life settlement may help a senior pay for long term care.
Using just the 1020 policies relied upon in the study means that life settlements delivered $232 million more value to seniors than they would have received from the issuing insurance company. The study shows that seniors would have received $37.4 million if they surrendered their policy but instead received over $269 million from the life settlement transactions.
The study also found that although the vast majority of states have adopted pervasive regulation of the life settlement market, some have yet to do so and differences among state laws can be significant. Smith added: “This finding also comes as no surprise to us. We have been working with state legislators and state insurance regulators to adopt consistent model legislation across the country and eliminate such discrepancies. Last year we helped get legislation enacted in several states including New York and California. However, there are 50 states and it takes time to get these initiatives passed. The National Conference of Insurance Legislators (NCOIL) Model Life Settlement Act is a very good bill and we will continue to support its adoption around the country.”
Tuesday, July 27, 2010
Life Settlement Industry Poised for Growth
We've been seeing evidence of a recovery in the life settlement market for the past couple of months. Providers are buying for new funding sources, brokers are closing more deals and an index that tracks the industry has been pointing to a more positive market. Scott Page, the president and CEO of the Lifeline Program, wrote a great article which provides some background information on the current life settlement market and reasons to be optimistic moving forward. As the head of an Atlanta, Ga based life settlement provider he is indeed on the front lines and has a great vantage point. The following is an excerpt from the National Underwriter, which was published on 7/26/10.
For the first time in 24 months, the forecast for the life settlement industry is bright, particularly after surviving a perfect storm situation in 2008. The life settlement market was whipsawed two years ago when a dramatic change in life expectancy tables combined with the collapse of the credit markets to nearly cripple the industry.
The fallout was significant: Credit disappeared, hedge funds fled, offers were pulled, some companies folded and consumers ultimately suffered. However, the life settlement business has once again proven to be resilient as funding sources have returned, and the industry has another opportunity to flourish—as long as it is done the right way this time. The companies in our industry need to focus primarily on the long haul, while the goals of the capital sources need to align with the goals of the providers and the rest of the industry.
At the moment, there are a number of large players poised to help bring the industry back to prior glory. But there are challenges ahead. The industry is facing what can be best described as a crisis of confidence, which can be seen at both ends of the business.
At one end, capital sources, including hedge funds and private equity groups, remain wary. Some got burned badly from polluted portfolios containing policies with insurable-interest question marks and origination concerns. Fortunately, regulators have finally cracked-down on stranger-owned policies.
At the other end, there are skeptical agents and brokers who were let down when policy offers were pulled—sometimes inexplicably, often unprofessionally and usually with little or no notice. In between, providers had little control of the situation and were forced to make excuses that left agents and brokers scrambling for answers. It was a difficult time, and the industry as a whole has the scars to prove it.
Looking back, perhaps the industry needed the shake-up, painful as it was. The life settlement industry is unique and challenging. Too many new companies jumped into the business with little experience but a lot of attitude. They quickly secured a bunch of state licenses and started vacuuming up policies without understanding the intricacies of the business. We saw ignorance of origination and insurable interest risks; poor medical underwriting; disregard for transparency and standardization; and a complete lack of understanding of how to track the insured and manage the asset class.
As previously mentioned, the future for the industry is, indeed, bright. Moving forward, the industry needs to address the confidence issues head-on and ensure that these situations never happen again. Foremost, the goals of the providers must be better aligned with the capital. Ideally, the provider companies should have their own capital or a least direct control of the capital. Transparency also emerges again as a key factor. Full disclosure of fees and commissions adds to the industry’s legitimacy, but we need to go even further and begin to present unimpeachable proof of funds when offers are made. This is of tremendous value to brokers, agents and consumers.
In the short term, a key factor is pent-up demand. Only a select few policies have been purchased during the past year, and there are thousands of seniors who are interested in selling their policies as soon as possible.
For institutions, this means that portfolios can be aggregated to specific goals very quickly and at reasonable costs. Providers who have aligned with the new capital sources have an opportunity to grow quickly but with more control over their business.
For agents and brokers, new funding sources are emerging. This will help revive a practice area and profit center that had been dormant. As the industry embraces transparency and new best practices, such as requiring proof-of-funds letters, confidence will begin to rise and the industry will once again flourish.
For consumers, there is great promise. While offers might not be at the levels of a few years ago, the market is coming back. The option to sell an insurance policy for a profit is now available again for seniors. This in itself is an encouraging development.
Improved underwriting and more sophisticated medical exams also work in the consumer’s favor. Some providers are performing in-person paramedical examinations, just like insurance companies at policy origination, to secure the most up-to-date medical picture of policyholders. This improves underwriting and in some cases will help raise offers.
After weathering the perfect storm, the industry is poised for growth. As long as the lessons learned remain at the top of the mind, and the industry is responsible with its capital while always focusing on seniors as the primary client, then the players and the pieces are in place for the life settlement industry to once again flourish.
For the first time in 24 months, the forecast for the life settlement industry is bright, particularly after surviving a perfect storm situation in 2008. The life settlement market was whipsawed two years ago when a dramatic change in life expectancy tables combined with the collapse of the credit markets to nearly cripple the industry.
The fallout was significant: Credit disappeared, hedge funds fled, offers were pulled, some companies folded and consumers ultimately suffered. However, the life settlement business has once again proven to be resilient as funding sources have returned, and the industry has another opportunity to flourish—as long as it is done the right way this time. The companies in our industry need to focus primarily on the long haul, while the goals of the capital sources need to align with the goals of the providers and the rest of the industry.
At the moment, there are a number of large players poised to help bring the industry back to prior glory. But there are challenges ahead. The industry is facing what can be best described as a crisis of confidence, which can be seen at both ends of the business.
At one end, capital sources, including hedge funds and private equity groups, remain wary. Some got burned badly from polluted portfolios containing policies with insurable-interest question marks and origination concerns. Fortunately, regulators have finally cracked-down on stranger-owned policies.
At the other end, there are skeptical agents and brokers who were let down when policy offers were pulled—sometimes inexplicably, often unprofessionally and usually with little or no notice. In between, providers had little control of the situation and were forced to make excuses that left agents and brokers scrambling for answers. It was a difficult time, and the industry as a whole has the scars to prove it.
Looking back, perhaps the industry needed the shake-up, painful as it was. The life settlement industry is unique and challenging. Too many new companies jumped into the business with little experience but a lot of attitude. They quickly secured a bunch of state licenses and started vacuuming up policies without understanding the intricacies of the business. We saw ignorance of origination and insurable interest risks; poor medical underwriting; disregard for transparency and standardization; and a complete lack of understanding of how to track the insured and manage the asset class.
As previously mentioned, the future for the industry is, indeed, bright. Moving forward, the industry needs to address the confidence issues head-on and ensure that these situations never happen again. Foremost, the goals of the providers must be better aligned with the capital. Ideally, the provider companies should have their own capital or a least direct control of the capital. Transparency also emerges again as a key factor. Full disclosure of fees and commissions adds to the industry’s legitimacy, but we need to go even further and begin to present unimpeachable proof of funds when offers are made. This is of tremendous value to brokers, agents and consumers.
In the short term, a key factor is pent-up demand. Only a select few policies have been purchased during the past year, and there are thousands of seniors who are interested in selling their policies as soon as possible.
For institutions, this means that portfolios can be aggregated to specific goals very quickly and at reasonable costs. Providers who have aligned with the new capital sources have an opportunity to grow quickly but with more control over their business.
For agents and brokers, new funding sources are emerging. This will help revive a practice area and profit center that had been dormant. As the industry embraces transparency and new best practices, such as requiring proof-of-funds letters, confidence will begin to rise and the industry will once again flourish.
For consumers, there is great promise. While offers might not be at the levels of a few years ago, the market is coming back. The option to sell an insurance policy for a profit is now available again for seniors. This in itself is an encouraging development.
Improved underwriting and more sophisticated medical exams also work in the consumer’s favor. Some providers are performing in-person paramedical examinations, just like insurance companies at policy origination, to secure the most up-to-date medical picture of policyholders. This improves underwriting and in some cases will help raise offers.
After weathering the perfect storm, the industry is poised for growth. As long as the lessons learned remain at the top of the mind, and the industry is responsible with its capital while always focusing on seniors as the primary client, then the players and the pieces are in place for the life settlement industry to once again flourish.
Monday, July 12, 2010
Life Settlement Broker Closes Doors
Life settlements broker Invescor Ltd. has shut down, citing the sluggish demand for the alternative investments last year. “You were looking at a perfect storm: The capital markets were constricted, and those who were buying policies were buying them low,” said Michael Leibowitz, president and chief executive.
He made the announcement in a memo to the firm's associates, and news of the closing was first reported in The Life Settlements Report. Invescor officially closed July 1.
In its life settlements business, Invescor was paid based on the offer price that investors quoted for a life insurance policy. But that activity slowed down last year and into the beginning of this year as institutional investors purchased fewer policies.
The slowdown in business also proved fatal to the life settlements group at The Goldman Sachs Group Inc. After dedicating significant resources to it, the company pulled the plug earlier this year.
Some institutional-investor activity is coming back, but the offers are still very low, and investors remain very selective about the policies they want to buy, Mr. Leibowitz said.
“It's just not enough volume to continue operating in that business model,” he said.
Invescor's broker-dealer — Invescor Wholesale BD Inc. — was was involved in the life settlements operation, but won't be shut down, Mr. Leibowitz said. He said that he isn't at liberty to discuss the broker-dealer in greater detail.
Observers said that the recent exits from the life settlements industry could make room for new participants.
“There will always be an ebb and flow in terms of funding sources, but certainly, investment banks and broker-dealers aren't the big players,” said Christian Evulich, vice president of business development at Amrita Financial Inc., a settlements broker. The new money is coming from domestic and international hedge funds, along with pension funds overseas, he said.
The slowdown in activity seems to have given way to a broader range of policies available to investors and an increase in funding sources, Mr. Evulich said.
But the numbers don't seem to bear that out just yet. The Amrita Life Settlement Index, which measures demand for insurance policies on the secondary market, hit 460 last month, down 14.3% from 536.6 in May.
“We're not alarmed that there are others exiting the business, and we wouldn't be surprised if there were others,” Mr. Evulich said.
By Darla Mercado, Investment News - July 11, 2010
He made the announcement in a memo to the firm's associates, and news of the closing was first reported in The Life Settlements Report. Invescor officially closed July 1.
In its life settlements business, Invescor was paid based on the offer price that investors quoted for a life insurance policy. But that activity slowed down last year and into the beginning of this year as institutional investors purchased fewer policies.
The slowdown in business also proved fatal to the life settlements group at The Goldman Sachs Group Inc. After dedicating significant resources to it, the company pulled the plug earlier this year.
Some institutional-investor activity is coming back, but the offers are still very low, and investors remain very selective about the policies they want to buy, Mr. Leibowitz said.
“It's just not enough volume to continue operating in that business model,” he said.
Invescor's broker-dealer — Invescor Wholesale BD Inc. — was was involved in the life settlements operation, but won't be shut down, Mr. Leibowitz said. He said that he isn't at liberty to discuss the broker-dealer in greater detail.
Observers said that the recent exits from the life settlements industry could make room for new participants.
“There will always be an ebb and flow in terms of funding sources, but certainly, investment banks and broker-dealers aren't the big players,” said Christian Evulich, vice president of business development at Amrita Financial Inc., a settlements broker. The new money is coming from domestic and international hedge funds, along with pension funds overseas, he said.
The slowdown in activity seems to have given way to a broader range of policies available to investors and an increase in funding sources, Mr. Evulich said.
But the numbers don't seem to bear that out just yet. The Amrita Life Settlement Index, which measures demand for insurance policies on the secondary market, hit 460 last month, down 14.3% from 536.6 in May.
“We're not alarmed that there are others exiting the business, and we wouldn't be surprised if there were others,” Mr. Evulich said.
By Darla Mercado, Investment News - July 11, 2010
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.
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 bête 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
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 bête 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
Monday, March 1, 2010
Goldman Sachs Exits Life Settlements
National Financial Partners Corp. has taken on full ownership of Institutional Life Services LLC, a venture that The Goldman Sachs Group Inc. recently exited.
Institutional Life Services LLC started out in 2007 as a venture between NFP, affiliates of Goldman and Genworth Financial Inc. Back then, it was intended to act as a life settlement exchange.
Genworth and Goldman have since pulled out of the investment, but. According to a filing with the Securities and Exchange Commission, NFP took on full ownership of the enterprise in December.
ILS will act as a life settlement provider, rather than as a life settlement index, according to the filing. NFP also bought full ownership of Institutional Life Administration LLC.
NFP’s acquisition of the full ILS business came just before Goldman announced its departure from the life settlements arena by shuttering its QxX mortality index and closing down Longmore Capital, a life settlements provider.
Goldman’s vision of a booming institutional market simply wasn’t bearing fruit, Goldman spokesman Michael DuVally had said.
NFP has been a player on the retail side of the life settlements business. Some of its affiliates provide those services to investors who want to sell an unneeded policy.
That corner of the business hasn’t always been simple, though. NFP’s commission and fee revenue declined last year to $948.3 million, from $1.15 billion in 2008. The dropoff stemmed, in large part, from falling sales of the company’s retail life and life settlements products, which tend to be high-commission products
Further, the company’s affiliates have had a number of legal brushes related to life settlements. Media personality Larry King sued NFP-affiliated firm The Meltzer Group Inc. in 2007 for breach of fiduciary duty. He claimed he was told to buy $10 million in life insurance coverage and then sell it to another party for $550,000. Mr. King received a settlement in that claim.
In another suit filed last year in Ohio, Louis Levin, an 81-year-ancient investor, claimed NFP-affiliate Howard Kaye Insurance Agency Inc. — along with principal Howard Kaye and Barry Kaye and Associates Inc. — advised him to buy a $5 million policy. According to the suit, the defendants told Mr. Levin he would earn a “substantial profit” for selling the policy on the life settlements market. The firm wasn’t able to locate buyers, and Mr. Levin wound up spending $322,000 on premiums. He is suing for breach of contract. NFP itself was not named in any of these suits.
Institutional Life Services LLC started out in 2007 as a venture between NFP, affiliates of Goldman and Genworth Financial Inc. Back then, it was intended to act as a life settlement exchange.
Genworth and Goldman have since pulled out of the investment, but. According to a filing with the Securities and Exchange Commission, NFP took on full ownership of the enterprise in December.
ILS will act as a life settlement provider, rather than as a life settlement index, according to the filing. NFP also bought full ownership of Institutional Life Administration LLC.
NFP’s acquisition of the full ILS business came just before Goldman announced its departure from the life settlements arena by shuttering its QxX mortality index and closing down Longmore Capital, a life settlements provider.
Goldman’s vision of a booming institutional market simply wasn’t bearing fruit, Goldman spokesman Michael DuVally had said.
NFP has been a player on the retail side of the life settlements business. Some of its affiliates provide those services to investors who want to sell an unneeded policy.
That corner of the business hasn’t always been simple, though. NFP’s commission and fee revenue declined last year to $948.3 million, from $1.15 billion in 2008. The dropoff stemmed, in large part, from falling sales of the company’s retail life and life settlements products, which tend to be high-commission products
Further, the company’s affiliates have had a number of legal brushes related to life settlements. Media personality Larry King sued NFP-affiliated firm The Meltzer Group Inc. in 2007 for breach of fiduciary duty. He claimed he was told to buy $10 million in life insurance coverage and then sell it to another party for $550,000. Mr. King received a settlement in that claim.
In another suit filed last year in Ohio, Louis Levin, an 81-year-ancient investor, claimed NFP-affiliate Howard Kaye Insurance Agency Inc. — along with principal Howard Kaye and Barry Kaye and Associates Inc. — advised him to buy a $5 million policy. According to the suit, the defendants told Mr. Levin he would earn a “substantial profit” for selling the policy on the life settlements market. The firm wasn’t able to locate buyers, and Mr. Levin wound up spending $322,000 on premiums. He is suing for breach of contract. NFP itself was not named in any of these suits.
Wednesday, February 10, 2010
European Life Settlement Trade
As the life settlement market struggles to recover from a tough 2008 and 2009, a group of American life settlement representatives are embarking on a European trade mission. This is exactly the kind of proactive thinking that we need more of in the industry to lift from the difficult times we are now facing. The idea is to cultivate international activity in the US longevity market. Below is an excerpt of the press release.
LUXEMBOURG, February 08, 2010 -- Carlisle Management Company, a leading alternative assets manager and manager of the Luxembourg Long Term Growth Life Settlement Fund, today announced its sponsorship of the First European Life Settlements Trade Mission.
"We are extremely pleased to be a part of the foundation for a European based life settlement organization, ELSA sets standards for the European life settlement industry and promotes transparency by providing accurate, authoritative information to the investment community," said Tim Mol, Carlisle's Chief Operating Officer.
A life settlement is the transfer of ownership and beneficiary rights of an unwanted or unneeded life insurance policy in exchange for a cash settlement. Life settlements represent an estimated $12 billion annual secondary market and one of the fastest growing financial sectors today. As capital sources continue to search for stable returns and low volatility, life settlements are already playing a significant role in the asset allocation strategies of leading banks, financial institutions, insurance companies and mutual funds.
LUXEMBOURG, February 08, 2010 -- Carlisle Management Company, a leading alternative assets manager and manager of the Luxembourg Long Term Growth Life Settlement Fund, today announced its sponsorship of the First European Life Settlements Trade Mission.
"We are extremely pleased to be a part of the foundation for a European based life settlement organization, ELSA sets standards for the European life settlement industry and promotes transparency by providing accurate, authoritative information to the investment community," said Tim Mol, Carlisle's Chief Operating Officer.
A life settlement is the transfer of ownership and beneficiary rights of an unwanted or unneeded life insurance policy in exchange for a cash settlement. Life settlements represent an estimated $12 billion annual secondary market and one of the fastest growing financial sectors today. As capital sources continue to search for stable returns and low volatility, life settlements are already playing a significant role in the asset allocation strategies of leading banks, financial institutions, insurance companies and mutual funds.
Friday, January 29, 2010
5 Things To Know About Life Settlements
As someone who has been in the life settlement industry it gets old hearing people bash life settlements. My philosophy is that they aren't for everyone, but if they can help you or a loved one...why knock it? In the interest of being fair and balanced, I am passing along some "tips" that everyone should take into consideration about life settlements.
From Money Magazine, Jan. 26, 2010
1. Your parents may be getting sold on these
In some retirement hot spots, such as South Florida, advertising for "life settlements" is ubiquitous. The pitch? Sell us your permanent (cash-value) life insurance policy and you can have a chunk of the death benefit now. In exchange, the company buying the policy becomes the owner and beneficiary and gets the full payout when you die.
Most settlement firms want policies likely to pay off within 10 years, so the elderly are prime targets. For those who anticipate running out of money, it's an appealing idea.
You'll probably hear this sell more often in the coming years: Wall Street is turning pools of insurance policies into tradable securities (as it did with mortgages), which will increase investor demand.
2. It's hard to know a good deal from a bad one
The life settlement industry is run by small investment firms, and there isn't a central marketplace to solicit bids. So there's no "going rate." A 70-year-old man with high blood pressure and heart disease could get offers from $116,000 to $162,000 for a $1 million policy, reports broker Golden Gateway Financial (compared with about half that if he surrendered it to the insurer). Thus, it pays for anyone considering a settlement to get several bids.
3. Brokers help obscure the process
Since many settlement firms won't deal with consumers directly, shopping around typically means going to one or more brokers. But brokers' fee structures vary widely -- from 1% of the death benefit to 15% of the difference between the offer and the policy's surrender value -- and they're not always transparent. That makes it tricky to compare offers, says Connecticut insurance commissioner Thomas Sullivan. So ask for the offers minus all charges.
4. Your insurer hates them
Insurance companies assume some policyholders will stop paying premiums -- meaning the firms will have to foot only a small surrender value, vs. a big death benefit. Since investors make good on policies that might otherwise lapse, insurers pay more death benefits, which makes them none too happy.
That's led many insurers to sweeten the payout for surrendering. Some even let you partially cash out but keep the policy active at a lesser death benefit. It's worth asking the insurer what it could do for you, and weighing that against settlement offers.
5. There are alternatives
Before taking a settlement, "you have to ask, 'Who will go unprotected if this policy is sold?' " says Steven Weisbart of the Insurance Information Institute. If it's your parents who can't bear the premiums, you may want to help. It'll be worth your investment if you stand to inherit, or if keeping the policy in force means you won't be financially supporting Mom when Dad passes on.
If your folks just need money but still could benefit from the policy, help them consider other options, such as selling their home or taking out a reverse mortgage.
From Money Magazine, Jan. 26, 2010
1. Your parents may be getting sold on these
In some retirement hot spots, such as South Florida, advertising for "life settlements" is ubiquitous. The pitch? Sell us your permanent (cash-value) life insurance policy and you can have a chunk of the death benefit now. In exchange, the company buying the policy becomes the owner and beneficiary and gets the full payout when you die.
Most settlement firms want policies likely to pay off within 10 years, so the elderly are prime targets. For those who anticipate running out of money, it's an appealing idea.
You'll probably hear this sell more often in the coming years: Wall Street is turning pools of insurance policies into tradable securities (as it did with mortgages), which will increase investor demand.
2. It's hard to know a good deal from a bad one
The life settlement industry is run by small investment firms, and there isn't a central marketplace to solicit bids. So there's no "going rate." A 70-year-old man with high blood pressure and heart disease could get offers from $116,000 to $162,000 for a $1 million policy, reports broker Golden Gateway Financial (compared with about half that if he surrendered it to the insurer). Thus, it pays for anyone considering a settlement to get several bids.
3. Brokers help obscure the process
Since many settlement firms won't deal with consumers directly, shopping around typically means going to one or more brokers. But brokers' fee structures vary widely -- from 1% of the death benefit to 15% of the difference between the offer and the policy's surrender value -- and they're not always transparent. That makes it tricky to compare offers, says Connecticut insurance commissioner Thomas Sullivan. So ask for the offers minus all charges.
4. Your insurer hates them
Insurance companies assume some policyholders will stop paying premiums -- meaning the firms will have to foot only a small surrender value, vs. a big death benefit. Since investors make good on policies that might otherwise lapse, insurers pay more death benefits, which makes them none too happy.
That's led many insurers to sweeten the payout for surrendering. Some even let you partially cash out but keep the policy active at a lesser death benefit. It's worth asking the insurer what it could do for you, and weighing that against settlement offers.
5. There are alternatives
Before taking a settlement, "you have to ask, 'Who will go unprotected if this policy is sold?' " says Steven Weisbart of the Insurance Information Institute. If it's your parents who can't bear the premiums, you may want to help. It'll be worth your investment if you stand to inherit, or if keeping the policy in force means you won't be financially supporting Mom when Dad passes on.
If your folks just need money but still could benefit from the policy, help them consider other options, such as selling their home or taking out a reverse mortgage.
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