Presentation on theme: "Life Settlements: a Wise Investment for Uncertain Times Presented by Life Equities Exchange, LLC."— Presentation transcript:
Life Settlements: a Wise Investment for Uncertain Times Presented by Life Equities Exchange, LLC
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 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.
About LIFE EQUITIES EXCHANGE Company born from recent economic events Company born from recent economic events Need and solution Need and solution Conservative investment philosophy Conservative investment philosophy Carefully developed investment opportunity Carefully developed investment opportunity Team of top professionals to execute strategies Team of top professionals to execute strategies LEE Identified the Need and Assembled a Team of Top Professionals to Provide the Solution for Investors:
The Economy is Our #1 Concern Job Losses Foreclosures Bank Failures Bankruptcies Reduced Income Ruined Credit No Retirement
Concerns for Investor A distressed economy has direct consequences for the investor: a volatile stock market… … resulting in present and potential losses greatly reduced real estate values… … resulting in losses up to 40% Unpredictability and erosion of traditional investment values is the “new investment reality.”
Costs of a Safe-Harbor Wall 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.”
Opportunity for the Investor The 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. Life Settlements
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.
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: 1. Let the policy lapse and get nothing; 2. Surrender the policy for very little cash (less than 10% of the paid premium)s; or 3. Sell it to a third party.
Reality Check This is the reality: Insurance Information Institute 2005
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… somewhere between $150,000 to $500,000 which is on average 10 – 30 times higher than the Cash Surrender Value 3rd Party Buyer
Benefits for the Buyer (Investor) Straight-forward Investment Wealth Preservation Tool Life Insurance Substitute Hedge Tool Collateral for Borrowing 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: See how it works for the buyer in an example…
Life Settlement: Sample Data Policy Face Value: $1,000,000 Policy Purchase Price: $370,000 Annual Premium: $40,000 Let’s work with a typical Life Settlement: * 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)
Life Settlement as Investment Here is how a typical Life Settlement works for the buyer: …a good investment!
Life Settlement as Wealth Preservation Tool Life Settlements are unaffected by those fluctuations… …which makes it an effective 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 years Stocks are still % lower than before the financial crisis
Low Risk Asset On the Relative Risk Spectrum Life settlements range on the Low Risk end.
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… …and live to enjoy the benefits.
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.
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… There are other potential risks. For an extensive risk evaluation please consult our Private Information Memorandum. Limited Liquidity Longevity Risk (= uncertainty when policy matures) Additional Premium Payments No Cash Flow Before Maturity
Investment in Life Settlements The Framework and Investment Presented by Life Equities Exchange, LLC
LEE’s Investment Strategy Conservative Buy Criteria Policies Vetted by Top Lawyers Pooling of Similar Policies 7+ Year Premium Reserve Ongoing Servicing/Tracking Only First-Rate Partners What are the principal elements of LEE’s Investment Strategy?
Partners Premier Legal Counsel: Premier Legal Counsel: Morris, Manning & Martin, LLP; James W. Maxson, Esq. Accountants: Accountants: Hutchinson, Bloodgood CPAs Escrow Agent: Escrow Agent: Bank of Utah Life Expectancy Providers: Life Expectancy Providers: 21 st Services and AVS Underwriting Trustee: Trustee: Bank of Utah Lee Has Assembled a Team of Top Professionals:
LEE’s Buy Criteria (“Buy Box”) 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) Which Policies Does LEE Buy?
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?
Tracking & Servicing 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. How Does LEE Make Sure the Policies Are Properly Tracked and Serviced?
LEE Custom Solutions LEE can provide an array of offerings to satisfy any customer demands Product Variations: single policies, LEE trust, custom trust Customer Variations: individual investor, wholesale distributor, corporate and institutional investors
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. Why a Funded Premium Reserve?
Premium Reserve Details 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. 1.Placement of funds for each policy’s premiums in a premium escrow account sufficient to pay premiums for a period of 7 years. 2.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. 3.Any leftover funds from unused premiums of matured policies is withheld by the Trustee/Escrow Agent and kept in the Premium Reserve. 4.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 Work?
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.
Trust Fund This graphic shows how the Trust Fund works:
Transaction Overview 1.Investment Funds placed in Escrow 2.At Closing of Escrow: - Purchase Price to Seller - Policies transferred to Trustee 3.Trustee Issues Trust Certificates to Investors This graphic shows how the Transaction works:
Buyer Qualifications An 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.
“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). 4)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.
Investment Procedure Private Information Memorandum Package How 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 decision Purchase 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.
Life Settlements… … an investment for today Presented by Life Equities Exchange, LLC
Life Settlement Market Trends Big investors have already identified life settlements as a desirable investment AIG’s $8 Billion portfolio used as to repay nearly $2 Billion of “bail-out” Institutional demand and appetite is growing
Goldman Sachs, Deutsche Bank and JP Morgan Chase Bloomberg May 16, 2011
Window of Opportunity Opportunity previously within domain of big investors only, now available to individual investors: Act before more capital enters the market… … driving up prices Get in early… … lesson learned from mortgage and real estate There is no better time than today…
Thank You! Presented by Life Equities Exchange, LLC