Michael Abraham

American International Group is seeking to garner support from investors and credit ratings firms for the sale of securities backed by life insurance policies on older people.

So far, AIG has failed in its attempt to get support of the controversial securities, named “death bonds” and “collateralized death obligations” by critics. Standard & Poor’s has refused to provide the securities with a credit rating, citing an S&P report outlining the “unique risks” of the securities.

In addition, life insurance industry trade group American Council of Life Insurers has criticized the practice, arguing it could encourage fraud when agents paid through commissions and others may entice older people to purchase and sell their life insurance policies. Furthermore, it is bad for the industry’s reputation, life insurers have said.

AIG has about $18 billion in anticipated death benefits in its life settlements portfolio.

Commentary by Michael Abraham:

If AIG can’t get a rating, you have to ask what are the ‘unique risks’?  The obvious one of course is the life expectancy risk .  This writer believes that one of the ways (possibly only?) is to ensure that there are many VARIED lives in that portfolio

http://pwcaster.us/r/wire/d/contentFocus/?pcID=56d1a4d514c31c9871e5076919710f2f

Author: David Martin

A lot of investors are investing in investment policies that are of great help to them . If you also are looking for some superior and beneficial investment policy where you can make vast proceeds on your investments, then life settlement investment funds is the correct investment policy for you. Life settlements are now playing a more significant role as a part of a diversified portfolio.

It’s been almost 3 to 4 decades that life settlements have assisted numerous massive depositors to earn good profits on their investments made. However, earlier this investment policy was meant for high profile people or huge business entities were able to enjoy the benefits of this plan. Still today, even individual investors can enjoy the advantage of life settlement investment fund where you need not buy the entire life settlement at one time, you can purchase different plans in small parts. This also saves you from the high risk on investment in single policy, provided you are investing in the right company.

The companies producing life settlement investment funds sign a contract with the policy customers after the transaction is complete and closes. There is a written agreement between the investor and the provider where the investor agrees to provide the sufficient amount of fund to purchase the policy. This denotes that the investor is solely responsible for the fiscal transaction yet in specific cases, the provider acts on behalf of the depositor and invests his personal income to acquire the life settlement investment policy for its portfolio.

Hedge funds are the popular life settlement investment funds that are commonly purchased by several investors. The US investment corporations provide great concessions and different incentive schemes to elders who purchase the policy and the corporation collects the amount of the policy after the policy owner dies. Other popular life settlement funds are the Global Macro Hedge funds. The advisor of the company foresees the global overall monetary changes and assists them get profits by laying a bet on them. The other profitable fund is the Multi strategy hedge fund where the organizers use several effective strategies to earn profit from the assets that are pooled by several other investors. Green hedge funds, Event driven hedge funds and the African hedge funds are some different kind of investment funds that might prove to be beneficial to the financiers.

Due to the rising financial constraints in the financial market, life settlement funds are the best way to earn returns on investments, where most of them offer greater than average returns. Due to several other plans, the risk is somewhat less because the depositor is able to vary the threat and income during the investment period. You will find numerous banks and authorized lenders from where you can purchase these life settlement policies. However, before purchasing the scheme, it is important for the investor to understand the fees and charges which are stated by any economic organization supplying their financial products. The greater the investment the greater is the risk involved, so it is recommended to invest in some reliable product that will surely yield profits in future.

Commentary by Michael Abraham:

this is really a clumsy article where the point gets somewhat lost but all in all I have to agree’ life settlements are good’,  in fact, ‘now life settlements are legal’, to paraphrase Gordon Gekko!

Originally Posted on11 January 2011

If there ever is a way to make a buck somehow, put your (theoretical) money on someone uncovering it and using it to their full advantage. Sometimes, people make money off of other people’s deaths too. I am not talking about something morbid like assassinations either; I am simply talking about those dealing in life settlements. Sometimes referred to as viatical settlements, these life settlements are essentially a gamble on death at its basest. Here’s why I say so; life settlements means a life insurance policy is sold to someone for less than its value and the buyer becomes the beneficiary. And so, the buyer then waits for the policy holder to pass away, in which case he will collect the money due to him. It’s quite morbid, actually.

Of course, this isn’t a topic everyone can write about or read about, but it does serve its purpose at times. Let’s try and be a bit objective and look at this from the point of view of both the seller of the policy (or the policy holder) and the buyer who will be the beneficiary. Now, more often than not these policies will involve the sale of a policy of very high face value, something in the range of $250,000 or even more. But there is a twist to be had in the tale. The policy holders that do sell their life insurance policies often are on death’s doorstep. Think of someone afflicted by a terminal illness or someone who is elderly and whose health is ailing.

It is always necessity that is the mother of invention, and it is necessity that has created this proxy market of life settlements. The people selling these life settlements have a life expectancy of two years or less. The whole idea of this marketplace was born when AIDS sprung to prominence in the 1980’s. These AIDS patients, knowing that they were running on borrowed time, sold off their life insurance. They did this in order to get the money they needed for medical bills that were always mounting. And from there the market spread to other terminal illnesses. It is a bit morose, but it is how life settlements came about.

Commentary by Michael Abraham:

I am just going to object to the first two sentences as I have not read any further! Who makes money on others’ deaths apart from undertakers, etc.?  Life insurance companies base their  whole operations on judging death rates and much of their profits come from people who die early.  What is an annuity rate if not a bet on death? Really, what nonsense!

• Story by: Cara Waters
• Magazine: FTAdviser
• Published Wednesday , April 13, 2011

A life settlement firm has falsely claimed “approval” from the Financial Services Authority (FSA) in correspondence with financial advisers and marketing literature.

A life settlements fund has been erroneously described as being “approved” by the FSA in correspondence with advisers and in advertising literature, the fund’s distributor has confirmed.

Simon Cooper, a broker at the investment house Earlmont, sent emails to financial advisers saying: “Dear investment professional, I am delighted to introduce to you a new life settlement offering that has been approved by the FSA and will soon be open for UK investors. Please contact me if you would like further information on the HC I Life Settlement fund.”

The website for LS Acquisitions, the United States-based operator of the fund, refers to “authorisation” by the FSA but then claims this authorisation amounts to “approval”.

The website states: “With the successful regulatory authorization and launch of the Strategic Life Settlement Fund, LS Acquisitions is pleased to announce that the HC I Life Settlement Fund, a UK feeder fund into the Strategic Life Settlement Fund (the Master Fund), was formally authorized by the FSA on February 28th 2011.

“This approval has been well received in the UK and opens up the opportunity for consistent subscriptions from residents from the UK being able to take advantage of the tax benefits afforded due to the Dublin registration of the master fund.”

Huet Capital, the authorised corporate director of the fund, also published a press release stating that “regulatory approval” had been received from the FSA for the fund.

The release said: “Huet Capital Ltd is pleased to announce that regulatory approval has been received from the Financial Services Authority for The HC I Life Settlement Fund, a Qualified Investor Scheme.”

The distributor of the fund, UK Innovative Financial Designs, confirmed the fund did not have FSA approval and said the use of the word approval was an error.

Jane Berntsen, marketing director for UK Innovative Financial Designs said: “This is a typing error – wrong use of word should definitely have read authorisation not approval.”

A spokesperson for the FSA confirmed HC was authorised rather than “approved” by the regulator.

Joseph Eyre, media relations manager at the FSA said: “The FSA has authorised the HC I Life Settlement Fund to operate as a QIS.

“QIS are authorised funds which may only be sold to certain categories of investors and are not marketed to retail investors. The FSA has verified that the proposal complies with the QIS rules.”

Jeremy Brettell, chief executive of life settlement product provider SL Investment management, said: “It sounds confusing as the FSA does not approve funds so it would be unreasonable to claim the life settlement fund was approved.”

Mr Brettell said he was also “slightly concerned” about the reference on the LS Acquistions website to sales to “residents of the UK”, which implied sales of the fund to a retail market via IFAs, something the FSA is uncomfortable with.

LS Acquisitions was not available for comment.

Commentary by Michael Abraham : as this fund is being trumpeted as the ‘best thing since sliced bread’ management really need to beware such statements from their salesmen and should stop criticising other funds in particular, they only damage the industry in general.  The ‘main man’ should know better, he has after all been this way before!

http://www.ftadviser.com/FTAdviser/Investments/News/article/20110413/1d5e8bfc-651e-11e0-a63e-00144f2af8e8/Life-settlement-firm-falsely-claims-FSA-approval.jsp

DOW JONES NEWSWIRES

The Securities and Exchange Commission charged Provident Capital Indemnity Ltd., its president and the firm’s purported outside auditor, with conducting an alleged life settlement bonding fraud.

According to the agency’s complaint, which was filed in a Virginia District Court, PCI is an offshore company located in Costa Rica that provides financial guarantee bonds on life settlements and claims to protect investors’ interests in life insurance policies by promising to pay the death benefit if the insured lives beyond his or her estimated life expectancy.

From at least 2004 to March of last year, PCI issued about 197 bonds backstopping numerous bonded offerings of investments in life insurance policies with a face value of more than $670 million.

The SEC alleges that PCI, as well as President Minor Vargas Calvo, and auditor Jorge L. Castillo misrepresented PCI’s ability to satisfy its obligations under its bonds. They allegedly made “material misrepresentations about the assets that backed PCI’s bonds, PCI’s credit rating, the availability of reinsurance to cover claims on PCI’s bonds, and whether PCI’s financial statements had been audited,” the SEC said.

The complaint further alleges that Castillo never conducted an audit of PCI and instead issued clean audit reports at Vargas’s bidding, thereby supporting the illusion that PCI had materially larger assets and greater financial wherewithal to support its obligations under the life settlement bonds.

The SEC also alleged PCI and Vargas represented that PCI was backed by a ” bouquet” of “reputable reinsurers” that would backstop PCI’s obligations under its life settlement bonds. PCI didn’t have that bouquet of reinsurance, the SEC alleges.

PCI’s website touts the company has a “fully recognized insurance company” with “strict underwriting guidelines” that is reflected in the company’s high rating with Dunn and Bradstreet. The SEC alleges that PCI’s “audited” financial statements were provided to Dunn and Bradstreet, which then issued the company’s favorable rating based on PCI’s reported net worth.

The investigation into the allegations is still ongoing. A PCI representative wasn’t immediately available to comment on the allegations.

-By John Kell

  (END) Dow Jones Newswires

  01-19-111727ET

  Copyright (c) 2011 Dow Jones & Company, Inc

Commentary by Michael Abraham:

 Unfortunately there is nothing positive one can say about this – string em up!

http://www.nasdaq.com/aspx/stock-market-news-story.aspx?storyid=201101191727dowjonesdjonline000480&title=sec-alleges-offshore-company-conducted-life-settlement-bond-fraud

SEC Probes Company Over Life-Span Data

By MARK MAREMONT And LESLIE SCISM

The Securities and Exchange Commission is investigating Life Partners Holdings Inc., a Waco, Texas, company that has arranged for investors to buy several billion dollars of life-insurance policies from their original owners, according to four people who have been contacted recently by the agency.

As part of its probe, the SEC’s enforcement division has been seeking experts to analyze the way Life Partners has estimated the life expectancies of the insured individuals, these people say. The estimates—projections of how long the people might have to live—are a crucial part of the investment equation.

The shorter an insured person’s expected life span, the more Life Partners generally can charge for that policy, because investors expect a faster payout. If the death comes later than anticipated, not only is the policy payout delayed, but investors who buy policies or parts of them must continue to pay premium bills while they wait to collect on a death benefit.

Life Partners executives on Wednesday didn’t respond to requests for comment.

Questions about the accuracy of Life Partners’ life-expectancy estimates were the focus of a December Page One article in The Wall Street Journal. The article reported that many of the insured people are living well beyond the company’s estimates, suggesting that the 10% or 15% yearly returns promoted to Life Partners’ investor clients may prove elusive for many.

The company has said it remains confident in its methodology, and that even if many insured people outlive their projected life spans, investors likely will still make respectable single-digit annual returns.

Attractive projected returns for clients are a key part of Life Partners’ formula for success. One of the fastest-growing small companies in the U.S. in recent years, Life Partners reported earnings of $29.4 million on $113 million of revenue for its fiscal year ended Feb. 28, 2010.

Life Partners says it has sold 6,400 policies with a face value of $2.8 billion to 27,000 clients since its 1991 founding. Life Partners extracts often-hefty fees in the deals, averaging $308,000 apiece for the 201 policies sold in its most recent fiscal year. Investors often buy pieces of multiple policies.

The company uses a Reno, Nev., physician, Donald T. Cassidy, to provide its life-expectancy estimates. Wednesday, Dr. Cassidy didn’t respond to requests to his office for comment. He declined to be interviewed for the Journal’s earlier story.

Rick Bergstrom, an actuary in Bellevue, Wash., who has worked in the life-settlements field since 1997, said an attorney from the SEC’s Fort Worth, Texas, office called him last week, to ask whether he could help analyze Life Partners’ life-expectancy projections.

Mr. Bergstrom said he and a partner five years ago examined Dr. Cassidy’s work for an institutional investor that was thinking of hiring the physician. They concluded Dr. Cassidy was using an “unrealistic” approach that tended to produce inaccurately short life expectancies, Mr. Bergstrom said.

Scott Gibson, an actuary at Lewis & Ellis Inc. in Richardson, Texas, said he recently received a similar call from an SEC attorney, adding that “nothing has come of it at this point.”

An SEC spokesman said he couldn’t confirm or deny the existence of any investigation into Life Partners.

In an interview with the Journal last week, an investor from St. Augustine, Fla., said he was personally assured in 2007 by Life Partners’ chief executive, Brian Pardo, that the company’s accuracy record on life-expectancy projections was “extremely high.”

The investor, Charles A. Snell, a 71-year-old commercial real-estate developer, said in 2007 he invested $750,000 in Life Partners’ fractional policies after traveling to Waco to meet with Mr. Pardo. Mr. Snell said he asked Mr. Pardo: “How accurate? Like 70 to 80%?” He said Mr. Pardo nodded and replied: “In that ballpark.”

Of the six policies Mr. Snell invested in, most of the insureds were estimated to have five years or less to live. None have yet died, and he said he recently received a notice he will owe $20,000 in additional premiums by May. Mr. Snell, who hasn’t yet earned any return on his investment, said he feels misled.

It isn’t clear what action, if any, the SEC could take involving Life Partners. Although the company is publicly traded, it won a federal appeals court ruling 15 years ago that its life-settlement transactions weren’t subject to federal securities laws.

Some states have claimed Life Partners’ fractional-policy sales make it subject to state securities law. Life Partners in 2008 settled a fraud suit filed by Colorado regulators, agreeing to repurchase policies from many investors in that state. The settlement came with no finding of fraud.

Based on data Life Partners filed with the Texas Department of Insurance, the Journal found that, for policies sold from 2002 through 2005, insured people outlived Life Partners’ projections about 90% of the time. Many of those policies were on HIV-positive people; Life Partners since 2004 mostly has sold policies on older people.

http://newsroom-magazine.com/2011/governance/justice-department/justice-charges-provident-capital-indemnity-in-massive-fraud-scheme/

Justice Charges Provident Capital Indemnity In Massive Fraud Scheme

“PCI is accused of lying to investors across the globe to sell more than half a billion dollars worth of ‘guaranteed’ bonds which turned out to be worthless,” said U.S. Attorney MacBride. “This case is another example of how the members of the Virginia Financial and Securities Fraud Task Force are working to detect, deter and punish financial fraudsters who target investors throughout Virginia, the nation and the world.”

Commentary by Michael Abraham:

 This is a real worry – can someone please explain the difference between the Life Partners business model and that of the now defunct Mutual Benefits Corporation – which cost this writer dear! I feel sorry for their investors but do hope that should this collapse a manager is appointed not a self serving liquidator!

http://online.wsj.com/article/SB10001424052748703951704576092300545767640.html

Posted on08 January 2011

Jan 07, 2011 08:06 ET

ORLANDO, FL–(Marketwire – January 7, 2011) – Recent buying activity affirms institutional investors’ growing interest in making life settlements an important part of their investment portfolios.

To meet the increased demand of investors seeking to learn more about life settlements, the Life Insurance Settlement Association (LISA) will host its first conference on March 2 tailored to the needs of institutional investors. The conference will be held in New York at the Harvard Club.

“Life settlements provide a double benefit for institutional investors. They are uncorrelated to other assets and can provide attractive returns compared with fixed income alternative investments,” Darwin Bayston, LISA’s executive director explains.

“Investors really want to understand what this asset class is all about. As the voice of the life settlement industry, we are on a mission to present an informative, unbiased and valuable one day program.” Experts will cover topics that will give institutional investors specific, technical knowledge that will facilitate their participation in the life settlement market. Among the areas to be covered are life expectancies, life settlement valuations and portfolio construction, optimizing cash flows from a life settlement portfolio and measuring a portfolio’s performance.

The conference provides a perspective particularly suitable to long-term institutional investors. It will be particularly beneficial to public and private pension fund sponsors, endowment and foundation sponsors, private equity investors, hedge fund sponsors, mutual fund managers and wealth fund managers.

Institutional investors need to understand this maturing and viable asset class which is now regulated in 40 states offering potential investors greater transparency and full disclosure. Conning & Company estimates that there was approximately $35 billion in life settlement face value in force at year-end 2009. And, the firm continues, the market has the potential to grow to roughly $100 billion over the next decade.

Qualified institutional investors will receive one complimentary registration to attend this inaugural conference.

LISA’s mission is to promote the development, integrity and reputation of the life settlement industry and to promote a competitive market for the people it serves.

For more information, contact: on LISA Darwin Bayston Executive Director (407) 894-3797 on Conference Registration or Press Credentials Events Department (407) 894-3797

Commentary by Michael Abraham 

a great initiative!

Author: Laura Miller

Troubled building society Norwich & Peterborough (N&P) has admitted its advisers gave “inappropriate” advice to a customer who invested the bulk of their SIPP in Keydata, in a case lawyers involved say mirrors dozens of other claims.

N&P, which is being circled by rivals as a potential takeover target, faces a multi-million pound claim of poor advice from hundreds of angry Keydata investors.

They allege they were mis-sold or over-exposed to life settlement fund Lifemark, which was marketed by Keydata before its collapse in 2009, following advice from N&P advisers.

Related articles

N&P have staunchly defended their advice process. But in a letter responding to one investor’s complaint seen by IFAonline it admits its 2007 recommendation was wrong for the customer.

The letter says investing £50,000, or around two-thirds of his SIPP, in a single Lifemark-backed Keydata product exposed the investor to “a greater risk” should Keydata fail.

This risk could have been “better accommodated” by investing the £50,000 across a wider range of investment funds, it adds.

Lawyers say the concession by N&P could now set a precedent for other claims against the building society from SIPP investors who believe they were over exposed to Keydata plans.

N&P has made no offer of compensation to the investor, who has now hired law firm Regulatory Legal to get his cash back.

The letter shows the investor initially wanted to buy an annuity, but was instead advised to invest two-thirds of their SIPP into a Keydata growth plan.

They were also advised to transfer their equity ISA into the monthly income option of the Keydata plan.

Regulatory Legal is poised to lodge a 390-strong group of claims with the Financial Ombudsman (FOS) against N&P amounting to about £18m.

However, CEO Matthew Bullock has said the society could suffer losses of around £50m because of its Keydata exposure.

Regulatory Legal’s clients claim they have been forced to reject an FSCS’ offer to compensate investors who relied mainly on Keydata brochures, as N&P failed to follow FSA rules to provide the documents at the point of sale.

FSCS claims are paid for by levy payers out of a shared pool. However, N&P would be forced to meet the cost of FOS rulings, which offer more generous compensation terms to investors, out of its own pocket.

As a building society N&P is not allowed to tap the stock market to raise fresh capital, but could use the merger route to consolidate its balance sheets and augment reserves.

Coventry Building Society is understood to be the front runner to take over its ailing rival, though this has not been confirmed by N&P.

Keydata was put into administration by the FSA for insolvency as a result of a tax liability on 8 June 2009.

Investors have been unable to access their investments since. Lifemark is facing severe liquidity problems and the threat of insolvency, despite receiving an emergency loan of about £7m in October, including £1.5m from N&P.

An N&P spokesperson says: “The customer has not yet suffered a loss as their investment has not yet matured.

“We are continuing to work with the regulatory community to reach a resolution for all of our Keydata customers and not only those who have made formal complaints, and we hope a final resolution is reached in the early part of 2011.”

Commentary by Michael Abraham:

This is really painful for the life settlement industry particularly as Life settlements and their operation have nothing to do with what is an out and out  fraud, but unfortunately the investment funds that were stolen were earmarked for policy purchase.  Just more grist to the mill of those who criticise settlements!
Read more: http://www.ifaonline.co.uk/ifaonline/news/1935055/-admits-66-sipp-investment-keydata-inappropriate#ixzz1CDqxVKdh

Betting on death

Puget Sound Business Journal – by Kelly Gilblom , Staff Writer

Date: Friday, January 7, 2011, 3:00am PST

Source: Conning Research & Consulting

Frenzied sales of securities backed by bad mortgages nearly toppled the financial system two years ago. Now, a new kind of security is on the rise, this one backed by the life insurance policies of senior citizens.

The securities, known as “death bonds,” and “senior life settlements,” are being sold in significant amounts in Washington state, and could be putting local banks and other investors at risk, regulators say.

The securities are created by bundling together the ordinary life insurance policies of owners who want to cash out. Owners typically sell the policies for a fraction of their payout value, …

Read more: Washington state banks are at risk buying ‘senior life settlements’ | Puget Sound Business Journal

Commentary by Michael Abraham

Let’s sell some papers – call life settlements death bonds! This article is so puerile it is not worth further comment! 

By Noah Buhayar -

Gerova Financial Group Ltd., the Bermuda-based investment company, said it acquired about $1.2 billion of insurance policies and loans and arranged financing for further purchases in the life-settlements market.

Gerova purchased the portfolio from Los Angeles-based hedge fund HM Ruby Fund LP with $11 million in cash and $94 million in stock, according to a statement released on PR Newswire today. The company said it arranged a five-year, $50 million line of credit.

Commentary by Michael Abraham:

 Thank god another blighted portfolio out of circulation!