Life Insurance Settlements:
An Asset Class Uncorrelated To Traditional Markets
WHAT IS A LIFE INSURANCE SETTLEMENT?

   A Life Insurance Settlement (“Life Settlement”) is the sale 
     of an existing ...
THE SAFETY OF A LIFE INSURANCE CONTRACT

   The Life Insurance Policy ‐ Features protect the client
              –      U...
THE SAFETY OF A LIFE INSURANCE COMPANY
The Life Insurance Company
   – Closely regulated by each State’s Insurance Departm...
THE LIFE SETTTLEMENT INDUSTRY
•   With a much higher degree of regulation, the 
    industry has attracted major players i...
TRADITIONAL MARKET CONDITIONS
• Traditional equity market assets reflect 
  market conditions.
• In recent times losses ha...
LIFE SETTTLEMENTS PROVIDE SAFETY OF PRINCIPAL

• Life Settlements are not correlated to         “… the continued influx of...
WHAT ARE THE BENEFITS TO THE POLICY OWNER?

• Typically, insurance companies offer    Example
  few options for exit strat...
WHAT ARE THE ACCREDITED INVESTOR BENEFITS?
                                                     Example
• Life Settlements...
CONFIDENTIAL INFORMATION
This material has been prepared specifically for you by Strategic Market Resources , LLC (SMR). T...
2205 Forest Hills Drive
               Suite 10
 Harrisburg, PA 17112
Phone: (888) 876-7552
  Fax: (717) 545-9559
Email: i...
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Smr Life Setttlements Overview

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Depicts the simplicity of a Life Settlement and its usefulness as an investment.

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Smr Life Setttlements Overview

  1. 1. Life Insurance Settlements: An Asset Class Uncorrelated To Traditional Markets
  2. 2. WHAT IS A LIFE INSURANCE SETTLEMENT? A Life Insurance Settlement (“Life Settlement”) is the sale  of an existing life insurance policy to a third party for  more than its cash surrender value but less than its net  death benefit.1 The life insurance policy is a non‐contestable unilateral  contract that is guaranteed to pay out the face value  that it was written for. 1. Life Insurance Settlement Association, www.thevoiceoftheindustry.com
  3. 3. THE SAFETY OF A LIFE INSURANCE CONTRACT The Life Insurance Policy ‐ Features protect the client – Unilateral, Non‐contestable contract – 2 year contestability period – Underwriting – Policy Assignability1 – Over 100 year track record that has never failed to perform 1. Grigsby v. Russell 1911: US Supreme Court; Ruled that owners of insurance policies have the right to transfer their policy just like any other asset they own.
  4. 4. THE SAFETY OF A LIFE INSURANCE COMPANY The Life Insurance Company – Closely regulated by each State’s Insurance Department • NAIC – “From conservative accounting rules and mandatory annual CPA audits to investment regulations/limitations and minimum  capital/surplus requirements, a state insurance regulator’s “toolbox” allows insurers to handle greater losses than other  parts of the financial sector in down‐market cycles.” NAIC Sept 2008: State Regulators: AIG Insurers Able To Pay Claims, State Solvency Standards Protect Policyholders – Reserve requirements far exceed minimum standards • Risked Based Capital Ratio (RBC)1 – Average RBC for life Insurers in 2007= 407% – 93% of life insurers held an RBC of 200% or more in 2007 » These insurers held 99% of the industry’s assets ACLI 2008: 2008 Life Insurers Fact Book – State Guarantee Associations for Life Insurers • Prior to reaching the State guarantee association, the State’s Insurance Commissioner attempts to  rehabilitate the insurer and then liquidate assets.   – Policies are generally sold to other solvent life insurers who will honor the full claim upon maturity. • State Guarantee Association protects policyholders from insurer insolvency by honoring claims • State Guarantee Associations have provided protection for more than 2.3 million policyholders.2 1. Risked Based Capital ratio (RBC) = Total Adjusted Capital / Risked Based Capital (risks/liabilities in insurer operations) RBC is the minimum capital required to avoid triggering regulatory action. 2. NOLHGA – National Organization of Life and Health Insurance Guarantee Associations
  5. 5. THE LIFE SETTTLEMENT INDUSTRY • With a much higher degree of regulation, the  industry has attracted major players in the  investment community such as Goldman Sachs,  Credit Suisse, Warren Buffett and Morgan Stanley.  • The Life Settlement market is targeted to reach  over $150 billion by 2016.1 • The total outstanding dollar value of life insurance  “…over the long‐term, we feel  the settlement business, if  policies is approximately $27 trillion (USD). 2 conducted in a responsible  manner, could have favorable  • The average settlement policy pays policy owners  ramifications for  4 to 6 times the policy’s cash value. 3 policyholders and the life  insurance industry.”  • It is estimated that 90% of all life insurance  Bernstein Research Call 2005:  Life Insurance  Long View – Life Settlements Need Not Be  policies lapse. 3 Unsettling  1. Conning Research & Consulting, Life Settlement Market, Increasing Capital and Investor Demand, 2007 2. ACLI 2008: 2008 Life Insurers Fact Book 3. Life Insurance Settlement Association: www.thevoiceoftheindustry.com
  6. 6. TRADITIONAL MARKET CONDITIONS • Traditional equity market assets reflect  market conditions. • In recent times losses have risen above  40%. • Potential for negative rates of return. “…subcommittee member Rep.  • Uncertainty regarding the outcome exists  Alan Grayson (D ‐ FL) cautioned  the committee to not confuse  with traditional market investments. the Wall Street mischief that led  to the current economic  • Investments are exposed to the volatility  hardships with an industry  that's "helping people get the  of today’s marketplace. full value of their policies."“ LISA (via FinancialContent.com) Sept 2009: LISA  Delivers Senate Testimony on Industry’s Value to  Consumers and Dismisses the Media’s  Sensationalist Take on the Industry
  7. 7. LIFE SETTTLEMENTS PROVIDE SAFETY OF PRINCIPAL • Life Settlements are not correlated to  “… the continued influx of  capital as institutional  traditional markets in any way. investors sought non‐ correlated investment  • A Life Settlement (Life Insurance contract)  opportunities. At the same  accretes in value over time. time, we noted growing  participation of smaller  • Life Settlements provide investors with an  investors in life  settlements mutual funds.” absolute fixed dollar amount of return. Conning Research & Co 2007: Life  Settlement Market: Increasing Capital and  • 100% certainty of event/performance. Investor Demand
  8. 8. WHAT ARE THE BENEFITS TO THE POLICY OWNER? • Typically, insurance companies offer  Example few options for exit strategies from  unneeded policies.  Cash surrender  values normally reach only 3‐5% of the  policy’s face value.1 • The Life Settlement industry has  provided policy owner’s with an option  of a secondary market.   • Settlement values range from 4 to 6  times cash surrender values. 1 1. Life Insurance Settlement Association, www.thevoiceoftheindustry.com
  9. 9. WHAT ARE THE ACCREDITED INVESTOR BENEFITS? Example • Life Settlements are absolutely not  correlated to any traditional market. • A Life Settlement investment produces an  absolute fixed dollar amount of return. • Life insurance is a non‐contestable, unilateral  contract.   • Death benefits are guaranteed to be paid  regardless of market status.  The product has  not failed to produce for the past 100 years. • Investing in large numbers of Life  Settlements ensures greater predictability of  the investment. Calculation based on policy with face value of $2,000,000, annual premium of $30,000 and an initial settlement value of $500,000.
  10. 10. CONFIDENTIAL INFORMATION This material has been prepared specifically for you by Strategic Market Resources , LLC (SMR). This analysis has been provided at your request and on a confidential basis. All material contained herein, including proposed terms and conditions are for discussion purposes only. Finalized terms and conditions are subject to further discussion and negotiation. This document does not constitute an offer or an invitation to invest in any way with SMR. Opinions expressed are our present opinions only. The information included herein is based on a set of assumptions which form the basis of one of our current pricing models. The models and methodology used for the purposes of this analysis may not be used in the future by SMR and are subject to change at SMR’s discretion. Different modeling methodologies and/or assumptions could result in significantly different values. The information provided herein was supplied in good faith based on information that we consider reliable, but we do not represent or warrant that it is accurate or complete, or that it should be relied upon as such and we are not responsible for any errors or omissions that may occur. For the avoidance of doubt, this information will not form part of any contract between us. Transactions described in this material may give rise to substantial risk and are not suitable for all investors. SMR does not provide accounting, tax or legal advice; such matters, as well as the suitability of a potential transaction or investment, should be discussed with your advisors and or counsel. In addition, we mutually agree that, subject to applicable law, you may disclose any and all aspects of this material that are necessary to support any U.S. federal income tax benefits, without SMR imposing any limitation of any kind. SMR, by virtue of its status as an advisor, underwriter or otherwise, may possess or have access to non-public information relating to the companies and assets that are referred to in this material, and does not intend to disclose such status or non-public information. This material has been issued by Strategic Market Resources, LLC. Further information on any Life Settlement Investment mentioned in this material may be obtained upon request. © Strategic Market Resource , LLC. & Co-owned affiliates 2009 All Rights Reserved. This document is intended for financial professionals or accredited investors only.
  11. 11. 2205 Forest Hills Drive Suite 10 Harrisburg, PA 17112 Phone: (888) 876-7552 Fax: (717) 545-9559 Email: info@smr-llc.com www.smr-llc.com

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