Featured Article
Life Settlements Market is Getting Back on Track
Investment News, October 24, 2010
Confidence has returned, and the Wall Street heavyweights are back on the scene. Although the names may have changed, a new crop of top-notch hedge funds, private-equity groups and investment bankers are getting more and more involved.
We also have seen some major attitude shifts in recent months.
One change is that we may finally be free of the false notion that portfolios of policies from the stranger-owned-life-insurance days were being freely traded. Many investment groups entered the market expecting to find portfolios of this nature ripe for the taking.
Yes, there were thousands of policies sold to providers during the past five years. And it is theoretically possible that bundles of these policies could be cobbled together into solid, performing portfolios.
However, the reality is that these policies weren't purchased with the concept of building a solid portfolio in mind.
Frankly, the notion that a hodgepodge of policies purchased over several years, and sometimes with questionable insurable interest, could be pooled into a well-performing portfolio is akin to an urban legend. If there is a robust market for such portfolios, we haven't seen it. The reality is that today's life settlement investor is looking for a well-constructed portfolio that was aggregated with long-term returns and goals in mind.
Policy flow also has shifted in recent months. A number of companies re-entered the market this year and were inundated with policies that had been on the market for some time.
Many of these policies had been "looking for a home" since the market dried up and weren't suitable for aggregation into a portfolio. During this period, provider companies were forced to "kiss a lot of frogs" and sort through the pent-up demand in order to start aggregating new portfolios.
Recently, there has been a noticeable change in the policies coming in for evaluation. The first is a change in agent attitude toward the industry. Confidence is returning. Policies which, for example, fit into the traditional box of "no longer being needed by the policyholder" are available, versus those being purchased for the specific point of selling later. The industry is returning to its roots after straying with the stranger-owned policies of recent years.
As a reminder, the best policies for life settlements are those owned by seniors who no longer need or who no longer can afford them.
Key-man policies, which are owned by businesses on the lives of executives who are no longer in their employ, also have been drivers of the market. We are returning to such policies at a rapid rate.
Moving forward, the overall goals of the industry remain the same as when the year started. Provider companies must continue to exercise greater control of their capital, and their overall goals need to align with that capital.
On the whole, policies with better characteristics for life settlements are coming forth. We attribute this to two key factors.
The life settlements industry continues to evolve at a rapid rate. Fortunately, we have seen several positive developments in recent months that show that the industry is on track and that future expectations will likely be met. For agents and brokers, new funding sources will help expand the market for policies.
Because the option to sell an insurance policy for a profit is now available again for seniors, we expect to see continued growth.
New industry best practices and more-detailed medical exams will improve underwriting and in some cases help raise offers. On the whole, the future remains bright.
The life settlements industry continues to evolve at a rapid rate. Fortunately, we have seen several positive developments in recent months that show that the industry is on track and that future expectations will likely be met.
Raising Cash From the Less Usual Places
New York Times, November 4, 2010
SUPPORTING a family can be tough in a good economy. Add today's tight credit market, high unemployment and depressed home prices, and there's a good chance many stuck in the generation sandwich are thinking about last resorts for obtaining additional cash to pay for expenses like senior living care. Read more...
Conning: Life Settlements Slumped in 2009
National Underwriter, October 28, 2010
The life settlements market was hit hard in 2009 by a major decline in investments in the market, according to a new study by Conning Research & Consulting.
Life settlement funds were choked off from buying new policies "by the retreat of investor capital through 2009, following both the financial crisis and market specific issues of the prior year," says Scott Hawkins, an analyst at Conning, Hartford. Continue....
Life Settlements Continue to Gain Momentum as an Asset Class
Insurance News Net, October 27, 2010
WACO, Texas--(BUSINESS WIRE)-- As it enters its third decade, the life settlements industry continues to gain attention as an alternate asset class for individuals and financial services companies to consider when developing investment strategies.
Life settlement product structures can vary. One approach is for an issuer to pool policies and use them as the underlying assets in a public or private securities offering similar to a mutual fund, where a large pool of investors own units or shares of the offering. Another approach used by institutional investors is to purchase a portfolio of whole policies that might contain 100 or more policies. This approach is favored by large institutions with the funds needed to buy the policies. Read more...
