1 / 27

Different Views

Gain insights into the investor and lender/borrower perspectives on US life settlements. Explore the opportunities, risks, and returns associated with this asset class.

bguidry
Download Presentation

Different Views

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Different Views Investor & Lender/Borrower Perspectives On US Life Settlements

  2. THIS DOCUMENT WAS PREPARED SOLELY FOR INFORMATIONAL PURPOSES.  THE INFORMATION CONTAINED HEREIN WAS OBTAINED FROM SOURCES BELIEVED TO BE RELIABLE.  HOWEVER, NO REPRESENTATION IS MADE THAT SUCH INFORMATION IS ACCURATE OR COMPLETE. THIS DOCUMENT SHALL NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO PURCHASE ANY SECURITIES, INVESTMENT PRODUCT OR INVESTMENT ADVISORY SERVICES DESCRIBED IN THIS PRESENTATION.  ANY SUCH OFFER SHALL ONLY BE MADE PURSUANT TO A DEFINITIVE PRIVATE PLACEMENT MEMORANDUM OR OTHER SIMILAR MATERIALS.  YOU SHOULD REVIEW CAREFULLY THE PRIVATE PLACEMENT MEMORANDUM FOR THE RELEVANT FUND, INCLUDING THE DESCRIPTION OF THE RISKS, FEES, EXPENSES, LIQUIDITY RESTRICTIONS AND OTHER TERMS OF INVESTMENT IN THE FUND, BEFORE MAKING A DECISION TO INVEST. TARGET INVESTMENT RETURNS AND PAST PERFORMANCE RETURNS ARE INCLUDED IN THIS PRESENTATION ONLY FOR COMPARATIVE PURPOSES AND AS A GUIDELINE TO ASSIST PROSPECTIVE INVESTORS IN EVALUATING THE INVESTMENT STRATEGY DESCRIBED IN THIS PRESENTATION AND ITS IMPLICIT RISK/REWARD RATIO.  TARGETED RETURNS ARE SUBJECTIVE DETERMINATIONS BY CORRY CAPITAL BASED ON A VARIETY OF FACTORS THAT IT CONSIDERS RELEVANT, SUCH AS THE HISTORICAL PERFORMANCE OF OTHER SIMILAR INVESTMENTS AND INVESTMENT VEHICLES.  TARGETED RETURNS DO NOT REFLECT EITHER ACTUAL PAST PERFORMANCE OR A GUARANTEE OF FUTURE PERFORMANCE.  THERE CAN BE NO ASSURANCE THAT ANY RETURN TARGET WILL BE MET.  PAST PERFORMANCE RESULTS MAY NOT BE INDICATIVE OF FUTURE RESULTS. THIS PRESENTATION IS INTENDED EXCLUSIVELY FOR THE PERSON TO WHOM IT HAS BEEN DELIVERED BY CORRY CAPITAL, AND MAY NOT BE REPRODUCED OR REDISTRIBUTED TO ANY OTHER PERSON WITHOUT THE PRIOR CONSENT OF CORRY CAPITAL. CORRY CAPITAL ADVISORS IS AN INVESTMENT ADVISOR REGISTERED WITH THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION (“SEC”). CCA MANAGES SEVERAL AFFILIATED FUNDS. FOR A DETAILED DISCUSSION OF CCA AND ITS INVESTMENT ADVISORY FEES SEE THE FIRM’S FORM ADV PART 1 AND PART 2A ON FILE WITH THE SEC.

  3. Panel Participants

  4. Rory O’Connell Emergent Capital, Inc. CFO / CCO (o) 1-561-995-4202 (c) 1-973-271-7106 RO’Connell@emergentcapital.com The largest public life settlement-centric company NYSE Listed (Ticker: EMG) Own 633 policies representing approximately $3 Billion in Face Value Portfolio Fair Market Value exceeds $475mm Successfully raised approximately $575mm since 2011 in various equity, debt and non-recourse facilities Top 5 Purchaser/Owner of Life Settlements in the U.S. Highly experienced senior management team Team of 20 in pricing, underwriting and due diligence Leader in premium optimization Licensed to “life settle” policies in 37 states

  5. J. Brian Bailey CSG Investments, Inc. Managing Director – Life Settlements (o) 1-469-467-5597 (c) 1-817-773-3502 bbailey@csginvestments.com CSG Investments, Inc. is a global buy-and-hold institution headquartered in Dallas, Texas. We provide flexible and creative capital solutions for all types of commercial and industrial customers. CSG Investments is an affiliate of Beal Financial Corporation, founded in 1988, which has over 20 years of disciplined operating history.  Through BFC, it is also an affiliate of Beal Bank and Beal Bank USA, both strongly capitalized financial institutions. What we offer: Direct one-stop source of capital for transactions from $30 million to $700 million Life Settlement financing with no secondary guarantees or mortality hedges required Term Loan and Revolver structures Premium funding capability from 7 to 15 years Certainty of funding with no syndication risk

  6. William Corry Corry Capital Advisors COO WCorry@CorryCapital.com Over 25 years of Financial Services and Life Insurance experience Corry Capital Advisors (CCA), Created in late 2007 is an investment fund offering services to institutional investors CCA is a licensed provider able purchase policies directly, avoiding heavy intermediary fee load maximizing returns to investors. CCA does not charge acquisition/transaction fees to its investors. CCA raises capital primarily from Institutional Investors – typical commitments range from $10M to $100M. CCA has several funds in the US as well as a recently launched Luxembourg structure. The funds are closed end, open end and segregated accounts. The firm has offices in New York City and Pittsburgh PA.

  7. Financing Life Settlements

  8. What’s involved in financing a Life Settlement Portfolio • Long-term stable equity sponsor • Complete infrastructure with skillsets in collateral underwriting, due diligence, life policy reverse-engineering, pricing and premium optimization • An Asset Class for Professionals

  9. What’s involved in financing a Life Settlement Portfolio • Detailed Underwriting • Specialized • Time Consuming • Professional • Expensive • Yields Tangible Results – Substantially better visibility as to portfolio performance and marketability

  10. What’s involved in financing a Life Settlement Portfolio • Exhaustive File Review Process • Longevity / Impairment Analysis • 3rd Party LE Estimates and Policy Level Discount Rates drive Market Pricing • Internal LE Estimates drive Cash Flow Expectations • Stress Testing utilizing Monte Carlo models • Break Even Analysis at Policy level • Portfolio Composition drives Facility Structuring

  11. Institutional Leverage in the Life Settlement Market today • Structured Financings with third party servicers/custodians/etc. • 7 to 15 yr. Term • $30mm to $700mm with no syndication risk • Two lending structures primarily used by my firm • Term Loan • Follows Term Loan B model as used in the Corporate Capital Markets • Term / Revolver Hybrid • More in line with traditional ABL lending models with availability driven by a Borrowing Base Calculation

  12. Institutional Credit FacilitiesThe Participants

  13. The Participants • Equity Sponsor / Portfolio Manager • Servicer • Securities Intermediary • Custodial Services • Back-Up Servicer/Manager

  14. Equity Sponsor – Emergent Capital • The largest public life settlement-centric company • NYSE Listed (Ticker: EMG) • Own 633 policies representing approximately $3 Billion in Face Value • Portfolio Fair Market Value exceeds $475mm • Successfully raised approximately $575mm since 2011 in various equity, debt and non-recourse facilities • Top 5 Purchaser/Owner of Life Settlements in the U.S. • Highly experienced senior management team • Team of 20 in pricing, underwriting and due diligence • Leader in premium optimization • Licensed to “life settle” policies in 37 states

  15. Portfolio Manager - Corry Capital Advisors

  16. Portfolio Manager - Corry Capital Advisors

  17. Servicer – Role in Financing • Operator and facilitator of all Servicing processes. • Authoritative source for data • Transparent access for all parties to portfolio data and documents • Process Coordination / Separation of Duties • Work closely with securities intermediary or trustee, owner, & portfolio manager on all servicing processes • Responsible to carry out all servicing processes • Separation of duties requires that asset related actions (e.g. payment, changes, requests) have approval from owner / manager • Operate as the back office for the portfolio manager • Operate independently, provide data and reports to all parties (portfolio manager / owner, administrator, lender, etc.)

  18. Securities Intermediary / Custodian • Securities Intermediary • Custodian • Premium-Paying Agent • Escrow Agent • Sub-Custodian

  19. Back-Up Servicer / Manager • Provides monthly, independent 3rd Party Valuations • Provides backstop in case of problems with either Servicer or Manager • Monitors policy status and premium payments • Verifies premium optimization • Maintains full back-up copy of all policy files

  20. Institutional Credit FacilitiesThe Structures

  21. Term Loan “B” Structure • Up to 60% initial LTV with additional advances at discretion of Lender upon request of Borrower • Interest paid in cash quarterly • Required Minimum Amortization due Quarterly • Cash Flow Sweep based on then current LTV • 7 to 10 year terms available • $30mm to $700mm in size

  22. Revolving Structure • Borrowing Base driven availability designed to cover all premiums/expenses associated with ownership of a Life Settlement Portfolio • 40% to 50% initial LTV with 60% LTV Cap • Interest paid in cash quarterly • Contingent Interest due upon each Policy Maturity • Required Minimum Amortization due Quarterly • Cash Flow Sweep based on then current LTV • No longevity hedge required • Aligns nicely in a Securitization type framework

  23. Revolving Structure • Why does this structure make sense? • Efficient allocation of capital • An investor with $200mm of capital has 2 options: • Purchase & Reserve • Purchase & Finance • Advantages • no forced policy sales to fund premium obligations • 100% larger portfolio means substantially lower return volatility • cash flow released to investor as soon as LTV dips below 50% • Expected 50% increase in $$ return to investor after cost of credit facility

  24. SecuritizationAre More Efficient Capital Structureson the Horizon?

  25. The Capital Structure • Class A-1 Super Senior Revolver • Funds ongoing premiums/expenses associated with the Policies • 12 yr Term w/ 10 yr Revolving Period • Class A-2 Senior Term Loan • Funds approximately 45% of initial purchase price of Portfolio • 12 yr Term amortizing in parallel with the Class A-1 • Class B Notes • Funds remainder of purchase price as well as necessary reserve accounts • Structured with ability to PIK for between 3 and 5 years • 10 yr Term with turbo amortization through free cash flow • Rating presently requires backstop from rated re-insurance company that can take several forms • Sponsor/Equity

  26. What’s Next? • Presently working on a true securitization with publicly placed bonds that loosely follows what’s the structure I’m going to describe • Portfolio of Life Settlement Policies are being identified presently and we hope to start due diligence sometime over the next 4 to 6 weeks • ~$200mm A+ rated Class B Notes paying ~250 to 350 bps over treasuries w/ tail risk insurance provided by A+ rated Bermuda based reinsurer • Notes are presently spoken for but assuming we are able to get this deal to closing, I anticipate a 2nd structure to follow closely on its heals • With a little luck in our favor, next year we’ll be focused on discussing how securitization is changing the market, not just what institutional financing looks like!

  27. Questions? Opportunities for the Structured Finance Market: Financing & Securitization

More Related