Presentation on theme: "Life Settlements: a Wise Investment for Uncertain Times"— Presentation transcript:
1 Life Settlements: a Wise Investment for Uncertain Times Thank you, Mike. And thank all of you for joining us today, for your interest in life settlements as a prudent investment in these challenging and uncertain financial times.Today, I would like to introduce Life Equities Exchange to you, generally describe life settlements and the different investment benefits and uses they offer, explain the specific investment opportunity that is offered today and ultimately assist you in taking advantage of the opportunity by helping you complete your investment.Presented by Life Equities Exchange, LLC
2 LEE Management – Joe Pinsonneault Joe Pinsonneault is a natural, born entrepreneur. Joe has enjoyed unparalleled success in a number of ventures starting at a young age. For example, early in his professional life, Joe was the youngest Buick dealer in North America. His successes have included high-end automotive sales, real estate development (at one time owning a portfolio valued in excess of $200 Million) and investments in alternative financial products. Joe possesses the rare ability to identify financial opportunities – even in the most unstable, turbulent and daunting times. Joe has successfully pursued a host of opportunities where others could perceive no hope. Despite the economic challenges that we have all faced, and will continue to face, Joe has found a prudent investment for today’s investors, Life Settlements. Joe contributes his considerable entrepreneurial expertise, business acumen and dogged determination to offer sound financial opportunities to individual investors who have previously been unable to participate in the life settlement market.LEE was created in response to the losses the recent and current economy have produced – clearly there was, and is, a need for a prudent investment, we identified it – life settlements, and then we carefully developed a conservative investment strategy and assembled a team to manage risks and offer a sound investment to you.
3 LEE Management – Scott Kaisler Scott’s predominant business experience has been as the Director of Regulatory Risk, Compliance and Investor Due Diligence for GMAC Residential Funding Corporation for more than a decade. Scott headed a team responsible for the acquisition and management of a portfolio with an approximate value $40 Billion. The implosion of the financial services industry, turmoil in capital markets and devastation of real estate values underscored the need to find a prudent investment opportunity for turbulent economic times. Life Settlements is that product. Scott now focuses his knowledge and experience on the acquisition and management of Life Settlements for the benefit of investors through Life Equities Exchange.Scott received his B.A., cum laude, from Butler University in Indianapolis, Indiana and his J.D., magna cum laude, from the University of San Diego in San Diego, California. He has served as a Judge Pro Tem and Judicial Arbitrator of the California Superior Court, in the County of San Diego.LEE was created in response to the losses the recent and current economy have produced – clearly there was, and is, a need for a prudent investment, we identified it – life settlements, and then we carefully developed a conservative investment strategy and assembled a team to manage risks and offer a sound investment to you.
4 About LIFE EQUITIES EXCHANGE LEE Identified the Need and Assembled a Team of Top Professionals to Provide the Solution for Investors:Company born from recent economic eventsNeed and solutionConservative investment philosophyCarefully developed investment opportunityTeam of top professionals to execute strategiesLEE was created in response to the losses the recent and current economy have produced – clearly there was, and is, a need for a prudent investment, we identified it – life settlements, and then we carefully developed a conservative investment strategy and assembled a team to manage risks and offer a sound investment to you.
5 The Economy is Our #1 Concern Job LossesForeclosuresBank FailuresBankruptciesReduced IncomeRuined CreditNo RetirementUnfortunately, for the past few years the news has been filled with discouraging headlines and it doesn’t appear that relief is in sight
6 Concerns for InvestorA distressed economy has direct consequences for the investor:a volatile stock market…… resulting in present and potential lossesgreatly reduced real estate values…… resulting in losses up to 40%Who is making money in this “new normal” Hedge funds, asset managers wealth advisors who have access to alternative asset classes. We believe an asset class that has been available to these advisors is giving them an opportunity to make money, and they are taking advantage of this opportunity.Unpredictability and erosion of traditional investment values is the “new investment reality.”
7 Costs of a Safe-HarborWall Street Journal, June 27, 2011 “Take My Cash Please… …Nervous Treasurys Investors Give Up on Returns Altogether” “Investors seeking shelter…are pushing safe-harbor yields so low that they are lending to the U.S. government for free, or even paying a small fee to do so.”Who is making money in this “new normal” Hedge funds, asset managers wealth advisors who have access to alternative asset classes. We believe an asset class that has been available to these advisors is giving them an opportunity to make money, and they are taking advantage of this opportunity.
8 Opportunity for the Investor Life SettlementsThe Warren Buffets of this world, the “big” investors, the hedge funds, etc. have access to alternative asset classes regular investor do not have.One such asset class that has been available to these investors is life settlements.Wall Street is focusing on life settlements and beginning efforts to create securities comprised of pools of life settlements. However, that is going to take time and that gives us a window of opportunity to act quickly and offer this investment to you.
9 What is a Life Settlement? Definition:A life settlement is a financial transaction in which the owner of a life insurance policy sells an unneeded policy to a third party for significantly more than its cash surrender value and less than its face value.A life settlement is simply a life insurance policy on another person. How does it work? Why would someone sell their life insurance? Why would someone buy it? However, before I proceed I would like to pause and address an issue that may be of concern – is this a morbid out of the mainstream business of speculating on the death of another human being? It does involve an inescapable reality. But the life insurance industry, one of the oldest, most stable and respected businesses in the U.S. if not the world is based upon this consideration. This is an extension of that industry that effectively serves the needs of policy owners, insured individuals and investors.
10 Choices for the Insured Choices Benefits for the Seller/Insured:If insured no longer wants or needs life insurance policy……he/she has 3 choices:The owner of a policy or the insured may no longer want or need the policy for a number of reasons: their estate planning needs have changed, they have out-lived their beneficiaries, there is no longer a business purpose served by the policy (such as key person insurance upon retirement), they need cash, or they cannot afford the premiums. There are 3 choices – lapse, surrender or sell.1. Let the policy lapse and get nothing;2. Surrender the policy for very little cash (less than 10% of the paid premium)s; or3. Sell it to a third party.
11 Reality Check This is the reality: The sad truth is that the overwhelming majority of policies are permitted to lapse or are surrendered…providing the insured or policy owners little or no benefit.Insurance Information Institute 2005
12 A Choice for the Insured: Sale to a Third Party Sale of Life Insurance Policy to a third party means that…Example:A $1,000,000 policy – depending on the individual condition of the insured – is valued…The sale of a life insurance policy, life settlement, is by far the best option for the owner of the policy. What are the benefits for the investor or buyer of the life settlement?3rd Party Buyersomewhere between $150,000 to $500,000which is on average 10 – 30 times higher than the Cash Surrender Value
13 Benefits for the Buyer (Investor) Life Settlements used to be the exclusive terrain for institutional investors and hedge funds. Now, they are also available for the regular investor……the buyer benefits from the Life Settlement in a number of ways.He may use it as:Straight-forward InvestmentWealth Preservation ToolLife Insurance SubstituteHedge ToolCollateral for BorrowingAn investment or purchase of a life settlement can be used in a number of ways: simple investment that does not expose your investment to risk of loss while offering a potential for a substantial return on investment, wealth preservation tool, alternative life insurance for those of us that may not qualify for life insurance or affordable insurance due to medical conditions, a hedge tool and even collateral for borrowing.See how it works for the buyer in an example…
14 Life Settlement: Sample Data Let’s work with a typical Life Settlement:Policy Face Value: $1,000,000Policy Purchase Price: $370,000Annual Premium: $40,000Let me show you an example of how the investment in a single policy would work. The policy will pay $1,000,000 in benefits, it can be purchased for $380,000 and it has a premium of approximately $40,000/year. The insured has a statistical life expectancy of 7 years and a projected life expectancy of 10 years as calculated by an independent, nationally recognized and reputable life expectancy provider.* life expectancy according to general statistical/population data** life expectancy calculated by actuarial provider based on individual data and statistical mortality tables (for the insurance company)
15 Life Settlement as Investment Here is how a typical Life Settlement works for the buyer:This chart reflects how the investment works using our example: $380,000 purchase price, annual premiums and the cash payout. We don’t know when the benefits will be paid, but we do know that they will be paid. As we work through the years, we can see what our example would produce for the investor.…a good investment!
16 Life Settlement as Wealth Preservation Tool Traditional investments to preserve your wealth, such as real estate and stocks, have been affected by uncertainties of the financial and economic crisis. Their loss in value has been dramatic…Real estate has lost 30 – 60% of its value over the past yearsWhat we used to consider safe investments, we now see quite differently. For example, a number of years ago when I started to work with GMAC, I had this smug confidence that “as GM goes to goes the nation.” I had a great and secure job, yet all of the market forces (real estate values, stock markets, bonds, interest rates) have made it difficult to find wise investment. What is needed is an uncorrelated asset that is not affected by these forces, that’s a life settlement.Stocks are still % lower than before the financial crisisLife Settlements are unaffected by those fluctuations……which makes it an effective wealth preservation tool.
17 Low Risk AssetOn the Relative Risk Spectrum Life settlements range on the Low Risk end.As we consider risks of different types of investments, we find life settlements at the low risk end of the spectrum and pooled settlements even lower.
18 Life Settlement as Life Insurance Substitute Due to a number of factors (e.g., health concerns and medical conditions), not everyone is capable of obtaining life insurance for themselves at all or at an affordable price.An investment in a Life Settlement can provide similar benefits for one’s family and possibly result in the payout of benefits while the investor is still around to enjoy them.Buy your life insurance without applying for it…Some of us may not qualify for life insurance or affordable insurance due to medical conditions. A life settlement is a great alternative – buy it without a medical exam or application and live to enjoy the benefits.…and live to enjoy the benefits.
19 Life Settlement as Hedge Tool In a volatile economy where traditional assets like stocks and real estate values have lost some of their value and where values are fluctuating a great deal, a life settlement can be used to hedge against such losses effectively.Life settlement effectively counterbalance any losses resulting from market fluctuations, protecting the overall value of the portfolio from any losses.It works as an insurance policy for any diversified portfolio.A strong investment portfolio should have diversification as a risk management strategy and a life settlement investment must be considered in the effective management of any portfolio to counterbalance any losses due to market forces affecting other assets in the portfolio.
20 Life Settlements: The Risks All that sounds to good to be true?Have a quick look at the principal potential risks and decide for yourself…Limited LiquidityLongevity Risk (= uncertainty when policy matures)Additional Premium PaymentsNo Cash Flow Before MaturityEvery investment has risk. A life settlement is no different. Our Private Placement Memorandum specifically and thoroughly addresses risks, but I would like to share, in particular, these risks with you. We are offering an opportunity for individual investors. However, you can’t buy and sell life settlements like stocks. As a result, there is limited liquidity. Perhaps the greatest risk is longevity risk. Although we know benefits will be paid, we don’t know when. As a result, there is the corresponding risk of paying additional premiums for longer than anticipated. And it is important to keep in mind that there will be no cash flow until the benefits are paid.There are other potential risks. For an extensive risk evaluation please consult our Private Information Memorandum.
21 Investment in Life Settlements The Framework and Investment In this portion of the presentation, I will share LEE’s investment philosophy and team to execute our mission of providing an excellent investment opportunity for you and I will review the specific investment that we are proud to offer today.Presented by Life Equities Exchange, LLC
22 LEE’s Investment Strategy What are the principal elements of LEE’s Investment Strategy?Conservative Buy CriteriaPolicies Vetted by Top LawyersPooling of Similar Policies7+ Year Premium ReserveOngoing Servicing/TrackingOnly First-Rate PartnersOur mission is to deliver to our investors a prudent, sound investment that has the potential for a significant return by identifying, eliminating and managing risks in all of our activities and particularly at critical times in the life cycle of this investment. At the outset, we have developed very strict, conservative guidelines for the policies that we will buy, before we secure the policies for our investors they are thoroughly reviewed and vetted by top lawyers that specialize in life settlements, to distribute longevity risk we pool similar policies for investors, we have developed a multi-tiered premium reserve and payment strategy that is incorporated in your investment, we employ experience and respected life settlement servicers and we have developed strategic relationships with first rate partners.
23 Partners Lee Has Assembled a Team of Top Professionals: Premier Legal Counsel: Morris, Manning & Martin, LLP; James W. Maxson, Esq.Accountants: Hutchinson, Bloodgood CPAsEscrow Agent: Bank of UtahLife Expectancy Providers: 21st Services and AVS UnderwritingTrustee: Bank of UtahThese relationships and team of professionals include Jim Maxson, one of the most – if not the most – prominent attorneys specializing in life settlements, our auditors, nationally recognized, independent life expectancy providers and the Bank of Utah whose team of professionals are experts in acting as an escrow holder and trustee for life settlements.
24 LEE’s Buy Criteria (“Buy Box”) Which Policies Does LEE Buy?Top Insurance Company: Favorable rating (at least “A” from Fitch, Moody’s, A.M. Best and S&P);Policy Type: Generally, Universal Life only; no near-term policy maturity dates;Age of Insured: 78 years of age or older;Life Expectancy: Approximately 120 months or less;Annual Premium Load: Annual Premiums: 4.5% (level) of face value of policy;Seasoned Policy Only: Policy must be older than 2 years (=non-contestable)We worked with our legal counsel to define the types of policies that we will only buy. Again this criteria (our buy box) has been created to eliminate certain risks at the outset. These are some of the more significant requirements of any policy we will consider purchasing.
25 Policies Vetted by Lawyers All policies are vetted & checked to make sure policies are without significant operational, reputation or potential litigation challenges.In particular they are looking that the policies..Are not contestable (seasoned more than 2 years);Are no STOLIs (Stranger Originated Life Insurance);Have no premium financing;Don’t involve an insolvency;Have no liens/encumbrances;Are issued to Only U.S. resident insureds;Have clean legal documentation to ensure effective transfer of ownership and death benefits;Show no evidence of misrepresentations or concealment of material facts or medical conditions in application or application process.Have at least two independent Life Expectancy calculations/projections provided from reputable providers.No issues relative to procurement of policy from owner/insured.What Are the Lawyers Looking For?Before we acquire, and in turn, offer any policy to our investors; each policy is subjected to a thorough due diligence review by professionals, including our lawyers. Again, some of the issues that are examined (also part of our buy box criteria) are to eliminate any issues with the policies.
26 Tracking & ServicingHow Does LEE Make Sure the Policies Are Properly Tracked and Serviced?LEE engages a professional, independent third-party company specialized in the business of tracking insured lives under life insurance policies to track and monitor the policy.LEE has life expectancies on the insureds prepared by top-rated third- party companies in the business of providing life expectancy reports.We engage only experienced, reputable life settlement servicers that will constantly monitor and track insureds’ mortality, premiums and payments with the Bank of Utah, and timely process claims for benefits, the receipt of benefits (again in conjunction with the Bank of Utah) and distributions to investors.
27 LEE Custom SolutionsLEE can provide an array of offerings to satisfy any customer demandsProduct Variations: single policies, LEE trust, custom trustCustomer Variations: individual investor, wholesale distributor, corporate and institutional investorsThe rationale is like the old saying, “Don’t put all of your eggs in one basket.” Here your investment is spread among policies in the pool, increasing the potential that one or more will pay-off earlier than expected in the event another matures later.
28 Premium Reserve Why a Funded Premium Reserve? LEE will place a sum equal to the premium due for 7 plus years in an independent third- party escrow, and a number of other steps to…assure the policies are protected and stay in force;free the investor from making any premium payments for at least 7 years.We are addressing longevity risk and the need to pay premiums. At the same time, we don’t want to contact investors and request additional advances for premiums.
29 Premium Reserve Details How Does the Premium Reserve Work?LEE has established a multilevel plan (“Premium Reserve”) in order to provide that premium payments are made until the date of maturity of the policies in the pool.Placement of funds for each policy’s premiums in a premium escrow account sufficient to pay premiums for a period of 7 years.An additional general premium reserve is established to pay premiums on policies not fully paid by level one. The money for the additional premium reserve is generated by the Trustee/Escrow Agent withholding 3 % of all policy cash payouts at the time of maturity.Any leftover funds from unused premiums of matured policies is withheld by the Trustee/Escrow Agent and kept in the Premium Reserve.On the fourth level, the compounded interest income derived from the premium reserve is withheld by the Trustee/Escrow Agent and added to the Premium Reserve.Once all policies are paid out any unused premium reserves are distributed to the Investors.How does the premium reserve strategy work? It is a four-tiered approach: Funds collected from investors at time of the investment that are placed with the Bank of Utah, as Trustee, to hold and pay premiums as they come due. The second tier is withholding a portion (3%) of all policy benefit payouts (again held by the Trustee) to pay any premiums if needed. Any leftover funds from unused premiums on a policy or policies will be retained by the Trustee and used to pay premiums on the remaining policies, again if needed. Finally, interest will be generated from the funds held by the Trustee, which will be added to the premium reserve. As a result, the premium will be covered for 7 years.
30 What is the “Trust Fund” Investor purchases a fractional interest in a pool of Life Settlements through a Trust Account administered by Bank of Utah (as Trustee).The Trustee takes ownership of the pool of Life Settlements, for the investor as irrevocable beneficiary.Upon execution of the Purchase Agreement the Trust will take ownership of such Life Settlement and issues a confirmation to the investor certifying that he/she is the irrevocable (fractional) beneficiary.The Trustee’s other responsibilities are to maintain the Premium Reserve account for the purpose of making the premium payments and to disburse the death benefits in accordance with the assignments of benefits relating to that policy.LEE has contracted with a well-established servicer to perform a certain post-closing policy maintenance services and, upon maturity, to file a claim for the death benefits with the appropriate insurance company.Investor buys a fractional interest in a pool of Life Settlements, ownership of the pool is held by the Trustee with the investor as the irrevocable beneficiary. Upon completion of the purchase, the Trust takes ownership and issues a confirmation to the investor certifying that he or she has an irrevocable fractional interest as beneficiary in the Trust. The Trustee is also responsible for making sure the premiums are paid, that a claim for death benefits is filed and benefits are distributed to the Trust beneficiaries (investors) on a timely basis.
31 Trust Fund This graphic shows how the Trust Fund works: Here is a short-forward graphic of how the Trust works. The Bank of Utah is the Trustee who works for you, the investors/beneficiaries.
32 Transaction Overview This graphic shows how the Transaction works: Investment Funds placed in EscrowAt Closing of Escrow: - Purchase Price to Seller - Policies transferred to TrusteeTrustee Issues Trust Certificates to InvestorsHow does the transaction work? We have another graphic for you. One thing that I should point out is that at the close of escrow money for the premium reserve fund also goes to the Trustee to hold, invest and pay premiums.
33 Buyer QualificationsAn investment in life settlements is not for everybody. We strongly advise and encourage you to seek the counsel of your own independent legal and tax experts before making any decision to participate in it. You also have to qualify as “Accredited Investor” as defined in Rule 501 of Regulation D of the Federal Securities & Exchange Commission.Despite our enthusiasm and confidence in this investment, life settlements are not for everyone –our Private Placement Memorandum addresses risks and consult your own advisors to see if it’s right for you. We also want to assist you in that determination. As a result, you must be qualified as an Accredited Investor under Reg D of the Federal Securities & Exchange Commission.
34 “Accredited Investor” Requirements The principal categories of accredited investors are as follows:1) Directors, executive officers, and general partners of the issuer, including general partners of general partners in two-tier syndicating.2) Purchasers whose net worth either individually or jointly with their spouse equals or exceeds $1 million.3) Natural person purchasers who have income in excess of $200,000 in each of the two most recent years and who reasonably expect an income in excess of $200,000 in current year (or $300,000, jointly with their spouse).A business entity will be treated as a single accredited investor unless it was organized for the specific purpose of acquiring the securities offered, in which case each beneficial owner of the security is counted separately.If you fall within one of the above categories……you are qualified to invest in life settlements.The primary categories of Accredited Investors are…if you are in one of these categories, you are qualified to invest in life settlements.
35 Private Information Memorandum Package Investment ProcedureHow can you participate?…have a look at our Private Information Memorandum Package which contains …Private Information Memorandum Please read carefully through it before making any investment decisionPurchase Agreement This is the actual contract that needs to be signed. It contains the (1) purchase contract, (2) the Investor Suitability Questionnaire, and (3) the detailed description of the policies and the pool.At the conclusion of the presentation we have a number of individuals here to help you complete your participation. Now we will take a brief break and then have a question and answer session.Private Information Memorandum Package
36 Life Settlements… …an investment for today Thank you, Mike. And thank all of you for joining us today, for your interest in life settlements as a prudent investment in these challenging and uncertain financial times.Today, I would like to introduce Life Equities Exchange to you, generally describe life settlements and the different investment benefits and uses they offer, explain the specific investment opportunity that is offered today and ultimately assist you in taking advantage of the opportunity by helping you complete your investment.Presented by Life Equities Exchange, LLC
37 Life Settlement Market Trends Big investors have already identified life settlements as a desirable investmentAIG’s $8 Billion portfolio used as to repay nearly $2 Billion of “bail-out”Institutional demand and appetite is growingLEE was created in response to the losses the recent and current economy have produced – clearly there was, and is, a need for a prudent investment, we identified it – life settlements, and then we carefully developed a conservative investment strategy and assembled a team to manage risks and offer a sound investment to you.
38 Goldman Sachs, Deutsche Bank and JP Morgan Chase BloombergMay 16, 2011My experience was for more than a decade a great experience as we sailed on the tide of real estate appreciation. But then risks that were taken in the name of competition wrought havoc on the industry and our entire economy. Credit risks included lower FICO scores, no doc loans, NINJA loans. Collateral risks included 100% financing. Wall Street then concentrated these risks by bundling up these loans into securities that have been performed horribly. Clearly, a investment is needed that is not tied to the stock market, interest rates, real estate market or other factors.
39 Window of Opportunity There is no better time than today… Opportunity previously within domain of big investors only, now available to individual investors:Act before more capital enters the market…… driving up pricesGet in early…… lesson learned from mortgage and real estateWho is making money in this “new normal” Hedge funds, asset managers wealth advisors who have access to alternative asset classes. We believe an asset class that has been available to these advisors is giving them an opportunity to make money, and they are taking advantage of this opportunity.There is no better time than today…
40 Presented by Life Equities Exchange, LLC Thank You!Thank you, Mike. And thank all of you for joining us today, for your interest in life settlements as a prudent investment in these challenging and uncertain financial times.Today, I would like to introduce Life Equities Exchange to you, generally describe life settlements and the different investment benefits and uses they offer, explain the specific investment opportunity that is offered today and ultimately assist you in taking advantage of the opportunity by helping you complete your investment.Presented by Life Equities Exchange, LLC