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The Architect of Life Settlements SM

The Architect of Life Settlements SM. a NASDAQ Global Select Market company. What Are Life Settlements?. A Life Settlement is the purchase of an existing life insurance policy at a discount to its face amount.

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The Architect of Life Settlements SM

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  1. The Architect of Life SettlementsSM a NASDAQ Global Select Market company

  2. What Are Life Settlements? • A Life Settlement is the purchase of an existing life insurance policy at a discount to its face amount. • Policyholders are financially sophisticated individuals or trusts who purchased policies for estate planning or other financial purposes and no longer need the coverage.

  3. Life Settlements were recognized as a legal transaction by the U.S. Supreme Court in 1911. History and Legal Basis • Life Settlements were developed in order to meet the needs of individuals who have life insurance they no longer want or need.

  4. Reliable Returns Without A Parity of Risk Because the key factors affecting yield are initial discount and time, rather than economic conditions, exceptional returns can be realized without a parity of risk to investment capital. Why Invest in Life Settlements? • Inherent Asset Value of Life Settlements • Even during the Great Depression, life insurance companies still paid off their policies. • True Diversification • Life Settlements are immune from fluctuations in the stock and bond market, fuel prices and business cycles.

  5. HOW DOES A LIFE SETTLEMENT TRANSACTION WORK?

  6. STEP ONE • Seller • $5,000,000 policy is presented to LPI, either from the owner of the policy or by a representative of the owner (called a broker) for consideration of an offer. • The insured is purported to have a life expectancy of 3-5 years.

  7. STEP TWO • Life Partners, Inc. • LPI analyzes the policy to ensure: • Policy is fully transferable, past contestability period and there are no foreseeable impediments to future payout; and • LPI’s independent medical consultant gives opinion that life expectancy of insured is 3-5 years. • LPI offers to purchase policy on behalf of its clients based on market demand and economic analysis of policy.

  8. STEP THREE • Purchaser • Must be an accredited investor. • Minimum investment amount is $50,000. • Investor may purchase a fractional interest in the policy to further diversify. • Qualified or non-qualified funds are acceptable. • Investor signs Agency Agreement. • Investor signs a Policy Funding Agreement (PFA) for each purchase. • Funds are sent to Independent Escrow Agent, NOT to LPI.

  9. STEP FOUR • Independent Escrow Agent • Holds original policy, PFA, and funds for the acquisition. • Holds investment funds and policy documents and verifies transfer with insurance company • Disburses and distributes funds at closing as follows: • a. Full payment to insured • b. Policy premiums are escrowed for life expectancy of insured • c. Escrow service fees • d. Fees payable to LPI

  10. STEP FIVE • Escrow Agent and Purchaser • When policy matures, Escrow Agent pays to investor his pro rata share of all proceeds paid out by insurance company under the policy. • ROI varies with each purchase depending on cost basis, holding period, return of unused premiums or additions to premium escrow needed to maintain policy and amount paid out under policy. • Purchaser has opportunity to have Escrow Agent hold all or a portion of payout for reinvestment or receive entire payout as Purchaser may direct.

  11. WHAT KIND OF RETURNS ARE POSSIBLE WITH LIFE SETTLEMENTS?

  12. Annual Compounded Return Potential82 Year Old – 5 Yr. LE - $6MM Face Value

  13. Low Risk High Risk Increasing Risk Alternative Strategies Traditional Strategies Stable Value Strategies Relative Risk Continuum* Life Settlements - 10% S&P 500 Avg. Yield Since 2000: 2.76% Managed Futures GIC/Money Market Hedge Funds Investment Grade Bonds Junk Bonds Treasuries Emerging Market Stocks Russell 2000 * Relative placement of indices and asset classes based on subjective and industry accepted risk attributes

  14. Conning Projected Gross Market Size by Face Value Source: Conning Research & Consulting, Inc.- 2007

  15. Conning Forecast of Annual Life Settlement Volume Source: Conning Research & Consulting, Inc. - 2007

  16. WhoDOESN’T Like Life Settlements? Insurance Companies • Why? • Lapsed Policies= HUGE PROFITS • Most Policies Lapse By Year 10 • Policies are priced to market and lapse factor, not to mortality of insured • According to the American Council of Life Insurers, approximately 8.5% or $1.4 Trillion in coverage is voluntarily terminated EVERY YEAR!

  17. A Different Kind of Financial Services Company • LPHI is substantially different from other financial service companies. • Life settlements not correlated to market performance, so LPHI revenues and net income are likewise uncorrelated.

  18. No Leverage Required • Life Partners’ business model does not rely on leverage. • Life Partners carries almost no debt. • Credit crisis has had no adverse impact on Life Partners. • While increasing earnings 431% over last year, the company eliminated about $2 million of debt.

  19. Bad Economic News is Good News for Life Partners • As traditional investment strategies have disappointed investors, there has been a greater interest in alternative investments such as life settlements. • Current economic turmoil is expected to continue. • Life Partners is well positioned to take advantage of the increasing interest in alternative investments due to the uncorrelated nature of life settlements.

  20. Life Partners History • Life Partners, Inc. founded in Waco, Texas in 1991 • Originated concept of life settlements for high net worth seniors in 1997 • Went public in 2000 via reverse merger in order to demonstrate financial transparency and foster public confidence • NASDAQ Small Cap - 2003 • NASDAQ Global Market in 2007 • NASDAQ Global Select Market in 2009 • Current Market Capitalization: $450 million • Consistent history of quarterly dividend payments since 2002

  21. The Life Partners Edge • Key Employee Retention – 12 year average • Substantial Intellectual Capital • Only company that offers direct fractional ownership interests to retail clients – the most cost-effective method of owning life settlements • Oldest company in industry – well established broker relationships with an excellent business reputation • Extensive investment in developing proprietary software and processes for high volume of transactions • Only publicly traded company operating exclusively in the life settlement industry

  22. The Architect of Life SettlementsSM a NASDAQ Global Select Market company

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