For Educational Purposes Only

Transcription

1 For Educational Purposes Only

2 A Life Settlement is simply the sale of an existing life insurance policy that is no longer wanted or needed. The seller sells and transfers their ownership and beneficiary rights to the policy for a cash payment. The investor buys the policy at a discount and holds it until maturity and receives the full face value. In this asset, one is always buying at the lowest and selling at the highest.

3 In 1911 the Supreme Court ruled in Grigsby Vs Russell that insurance policies are legally viewed as financial assets which may be sold to a third party, just an any other tangible investment can be sold at the owner s discretion. Institutional Life Settlements - since 1911 Retail Life Settlements since 1997

4 Only U.S. Legal Reserve life insurance contracts are considered. Legal Reserve companies are the most financially sound insurance companies in the world. In the history of the United States, there has never been a case where a valid policy has not been paid. * * Paul Moe, Chair and CEO of Living Benefits, life settlement buyer for Warren Buffett s Berkshire Hathaway

5 A great number of Life settlement policies purchased are business policies and estate planning policies. They are part of what we call special use policies. 96% of these policies lapse within 8 years, and no death benefit is ever paid by the insurance company. This creates trillions of dollars of free cash flow for the insurance companies.

6 In 2006, for instance, insurance companies reduced their financial exposure by 1.1 trillion when 19.8 million policyholders stopped paying premiums, according to Insurance Information Institute. In comparison, the industry paid death benefits on only 2.2 million policies. -Charles Duhigg, Late in Life, Finding a Bonanza in Life Insurance.

7 Consider what happens when business owners and wealthy individuals don t need or want insurance policies anymore? What if they sell their businesses or their estates become liquid, or they determine that they can no longer afford the premiums. What are their options?

8 Most insurance companies would tell these policyholders that they have 3 options: They can take cash value and cancel their policy. They can take a paid-up policy for a much lesser amount. Or, they can let the cash value pay the premiums for a period of time and then let the policy lapse.

9 These 3 options are very good for the insurance company. Why? Because they save the insurance company billions of dollars each year, by ensuring that they don t ever have to pay the death benefit.

10 But what they don t tell the policyholders is that they have a forth option: they could sell their insurance policy to an investor for its fair market value. The fair market value is whatever someone is willing to pay for the policy on the secondary market. On average a Life Settlement will pay the insured approximately 60% of all the premiums they have paid in over the years. This is called a Life Settlement. It is turning a death benefit into a living benefit.

11 Life Settlements are still uncommon knowledge to most people. Even the majority of those in the financial services industry are still ignorant of this asset. According to Conning Research, less than 15% of all professionals who should be knowledgeable about this asset have any working knowledge of it at all.

12 It has been used primarily as an institutional /commercial investment for decades. It has only been made available to the retail investor in the past few years and only through a small number of companies. Most security firms do not offer their clients information or the opportunity to invest in life settlements

13 Recognized by: USA Today Wharton School of Business Wall Street Journal AARP Kiplinger s American Cancer Society Bloomberg Time Magazine MSNBC Business Week Dateline The Economist 60 Minutes Motley Fool American Institute of CPAs

14 A Multi-Billion $$$ Industry Major financial publications continue to attest to the growth of the industry. ABA Banking Journal Business Week Wharton University of Pennsylvania The New York Times The Economist

15 We expect the Life Settlement business, an emerging secondary market for life insurance, will grow more than ten-fold to $160 Billion over the next several years. Sanford C. Berstein, Research Call

16 Big Industry, Big Investors Why? Their pursuit of this market is related to the degree of protection and the avoidance of market and economist risk. The Return of their Principal and Return on their Principal are contractual obligations of highly rated insurance companies and not subject to any market or economic considerations.

17 Safety and Security -Contractual Agreements with A rated or better Legal Reserve Life Insurance Companies -Uncorrelated to stock market, oil prices, interest rates or even terrorism Diversification for an existing portfolio -Reduces volatility in an investment portfolio by avoidance of market and worldly events No Management Fees -All fees are included in the acquisition cost -No reduction in working capital due to fees Liquidity -Medium to Long term -A buy and hold type asset Performance -Absolute Payout -Preservation of principal Clear expectation of payment -The exact dollar gain is known Win-Win Investment -Insured receives > cash -Investor receives > solid gains

18 Bloomberg says Life Settlements are the only asset which can truly be said to provide absolute returns. They are not correlated to any traded market whether stock, bond, currency or commodity markets nor to political or economic upheaval. Once invested the only variable affecting a Fund s return is the life expectancy of the policies held.

19 Now the average accredited investor can invest in the Life Settlement market that has typically only been available to institutional investors like banks, hedge funds and Warren Buffett, because of fractionalizing.

20 Fractionalizing is the practice of selling small fractions or percentages of a large policy. Many of the special use policies on the market are $5 Million face amounts and higher. Until now, the average individual investor could not participate in buying policies of that size. Fractional participation in a policy now allows an individual to invest in a life settlement on their investment level.

21 Nothing is perfect, and Life Settlements are no exception. It is not a liquid investment. You should not put any money in Life Settlements that you might need before the policy matures. There is the possibility of a premium call. If all premiums in escrow are spent before the policy matures, a premium call will occur.

22 Life Settlements are easily implemented into any existing plan, whether it be a Cash account, Trust, Traditional IRA, IRA rollover, SEP, Roth or Corporate 401k plan. For more information and details, please contact the person who presented you with this educational overview.