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
LEE Identified the Need and Assembled a
Team of Top Professionals to Provide the
Solution for Investors:
•
Company born from recent
economic events
•
Need and solution
•
Conservative investment
philosophy
•
Carefully developed investment
opportunity
•
Team of top professionals to
execute strategies
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
Life Settlements
• 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.
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…
3rd Party Buyer
• somewhere between
$150,000 to $500,000
• which is on average 10 – 30 times
higher than the Cash Surrender
Value
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 Investment
Wealth Preservation Tool
Life Insurance Substitute
Hedge Tool
Collateral for Borrowing
See how it works for the buyer in an example…
Life Settlement:
Sample Data
Let’s work with a typical Life Settlement:
• Policy Face Value: $1,000,000
• Policy Purchase Price: $370,000
• Annual Premium: $40,000
* 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:
YEAR
1
2
3
4
5
6
7
8
9
10
Cost
$370,000
$410,000
$450,000
$490,000
$530,000
$570,000
$610,000
$650,000
$690,000
$730,000
Annual
Premium
$0
$40,000
$40,000
$40,000
$40,000
$40,000
$40,000
$40,000
$40,000
$40,000
Cash Payout at
Maturity
$1,000,000
$1,000,000
$1,000,000
$1,000,000
$1,000,000
$1,000,000
$1,000,000
$1,000,000
$1,000,000
$1,000,000
Return on
Investment
$630,000
$550,000
$510,000
$470,000
$430,000
$390,000
$350,000
$310,000
$270,000
$230,000
Return in % on Total
Investment
170%
134%
113%
96%
81%
68%
57%
48%
39%
32%
Even if the insured lives 5 years beyond the projected expectancythere will still be a
positive cash flow at maturity.
…a good investment!
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 years
Stocks are still 20 - 30% lower than before the financial crisis
Life Settlements are unaffected by those fluctuations…
…which makes it an effective wealth preservation tool.
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…
• Limited Liquidity
• Longevity Risk
(= uncertainty when policy matures)
• Additional Premium Payments
• No Cash Flow Before Maturity
There are other potential risks. For an extensive risk evaluation please consult
our Private Information Memorandum.
Investment in
Life Settlements
The Framework and Investment
Presented by Life Equities Exchange, LLC
LEE’s Investment Strategy
What are the
principal elements
of 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
Partners
Lee Has Assembled a Team of Top Professionals:
• Premier Legal Counsel:
Morris, Manning & Martin, LLP; James W.
Maxson, Esq.
• Accountants:
Hutchinson, Bloodgood CPAs
• Escrow Agent:
Bank of Utah
• Life Expectancy Providers:
21st Services and AVS Underwriting
• Trustee:
Bank of Utah
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)
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..
What Are
the Lawyers
Looking For?
•
•
•
•
•
•
•
•
•
•
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.
Tracking & Servicing
How 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 thirdparty companies in the business of
providing life expectancy reports.
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
Why a Funded Premium Reserve?
LEE will place a sum equal to the premium
due for 7 plus years in an independent thirdparty 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.
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.
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.
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
This graphic shows how the Transaction works:
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
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
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
Private Information
Memorandum Package
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