What Financial Advisors Need to Know About Life

Settlements Today

What Financial Advisors Need to Know About Life

Settlements Today

VERIS WebcastOctober 28, 2008

J. Russel Dorsett, CLU

A network of independently owned and operated life settlement brokers

Dedicated to:• Local service on a national basis

• Transparency

• Compliance

• Professionalism

Bringing Liquidity to Life . . .

Challenging times . . .• On-going financial crisis is having an impact

• Dramatic reduction in global liquidity

• Some major players have (at least temporarily) left the space

• “Table revisions” by 21st has led to uncertainty about portfolio values

• LEs are longer

• Expected rates of return are higher

• “dropped deals”

The Life Settlement Market The Life Settlement Market

The Life Settlement Market The Life Settlement Market

Impact of “buyer’s market”• Marginal files (longer LEs, younger insureds, higher

premiums, too much CSV, etc.) aren’t attracting offers

• Quality files are attracting fewer (and lower) offers−LEs tend to be 20 -30% longer than a year ago−Expected returns have moved up

Despite a difficult market, files are still being sold and are funding

Flow of new cases holding up well

The Life Settlement Market The Life Settlement Market

Good news/bad news:• High level of interest in the asset class continues

• Despite uncertainty about past LEs, portfolio valuations have held up well (especially compared to the markets overall)

• “Uncorrelated” nature of the asset class has been reinforced—and is more desirable than ever

• Money managers can’t stay on the sidelines forever—especially as interest rates (and asset values) continue to decline

As markets stabilize• “Alternative” asset classes likely to receive higher allocations

• Life settlements are among the most desirable asset classes in this space

The Life Settlement Market The Life Settlement Market

Good news/bad news• Policy holder awareness of and interest in settlements

continues to grow

• In an period of generally declining asset values, the settlement of an in-force policy may be the only source of cash for some seniors

The primary market is flat• Applications for new insurance declining for many

companies

• Only bright spot for many is large policies on seniors

• It is sometimes easier to talk about delivering checks rather than having someone write one . . .

The Life Settlement Market The Life Settlement Market

Life settlements are rapidly moving into a regulated environment• California, Illinois, and New York all came close to passing

legislation this year

• NY will likely re-consider legislation in the up-coming special session

• Florida is also potentially re-visiting settlement law

• Some of the “bad” provisions in NAIC/ACLI approach could spill over into primary market regulation

“STOLI” concerns and litigation impacting closing requirements

The Life Settlement Market The Life Settlement Market

Very few buyers currently for financed policies, but still should be explored as a exit strategy

Good value available for policies in the “sweet spot”

For more marginal cases, consider paying another quarterly and letting things settle a bit

Credibility with providers and funders, technical expertise, and closing ability more important than ever . . .

What Financial Advisors Need to Know About Life

Settlements Today

What Financial Advisors Need to Know About Life

Settlements Today

VERIS WebcastOctober 28, 2008

J. Russel Dorsett, CLU