By Dealflow Media
J.P. Morgan is getting out of the life settlement market, a person familiar with the company said.
The person told The Life Settlements Wire that J.P. Morgan expects to wind down its operation over the next few months.
J.P. Morgan is the second major investment bank to exit the market in recent months. Goldman Sachs said it was leaving the market in January, disappointed in its lack of growth.
J.P. Morgan had entered the business around 2007. It had a smaller operation than its competitors, employing fewer than 10 people in its life finance business, the person familiar with the company said.
Rob Finfer, chief executive of Bethesda, Md.-based life settlement broker Integrity Capital Partners said he hasn’t seen J.P. Morgan purchasing policies for at least a year.
“I would not have referred to them as a major player in the life settlement space,” Finfer said. Still, “I’m disappointed when any funding source decides to leave the space, especially in the environment where we have so many excellent policies for sale.”
J.P. Morgan spokesman Brian Marchiony declined to comment.
Commentary by Michael Abraham:
As Robert points out there is nothing positive about losing a funder, but it is this commentator’s view that most. if not all. of these institutions entered the market under the illusion that this could be a large and growing market. While one reads that the size of the possible market is in the region of many hundreds of billions, I seriously doubt this. In fact, the statements made by Deutsche Bank, that there are not enough policies available, clearly highlights this issue. There are many, many policies but not the high face value ones required by the larger investors. Ask yourself this question – what percentage of the policies are available or will be sold? My experience of the UK TEP market says very few. I believe it unlikely that the market was ever able to encourage people to sell much more than 5% of the policies that were surrendered or lapsed. My own research says that in 2002 when over £11billion of policies were lapsed, the market hit circa £500m. Why? Fear, inertia, ignorance? Certainly not lack of coverage with advertising, press releases, editorials, radio, television and cinema throughout Britain. So will the US be any different? The other main question is what percentage of the market is large face? As large face policies are taken out on the wealthy would it be a surprise if the percentage were less than 10%? And if only 5% are sellers, how big is the possible market really? Well you do the math!
http://lifesettlements.dealflowmedia.com/wires/article.cfm?id=bfcggzqsnitdezm
