StoneCross Capital Insurance-Linked Longevity Certificates (SILC)


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Shariah-compliant alternative asset class

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StoneCross Capital Insurance-Linked Longevity Certificates (SILC)

  2. 2. StoneCross Capital Company Profile • SCC I, Ltd., an exempted company with limited liability incorporated under the laws of the Cayman Islands (“Issuer”). • StoneCross Capital, LLC, a limited liability company organized under the laws of Delaware (“Manager”), will serve as the Manager of the Issuer. • StoneCross Capital is the first U.S.-based asset management company that creates and customizes Shariah-compliant insurance-linked longevity products, and provides advisory services to global financial institutions with longevity product initiatives directed to Islamic investors. ©2009 StoneCross Capital LLC. CONFIDENTIAL
  3. 3. StoneCross Capital Company Focus • Applied proven management strategy and product design in the longevity asset class to the principles of Islamic law. • Create an opportunity for institutions in the Islamic community to diversify their holdings and satisfy future product demands. • Alternative asset class that is not correlated to any other asset class in the market. • Create a low-risk, low volatility alternative to Sukuk market. • Develop a high level of transparency. • Deliver above average returns while protecting principal by over- collateralizing pool of longevity assets. ©2009 StoneCross Capital LLC. CONFIDENTIAL
  4. 4. Shari’ah-compliant Insurance-Linked Longevity Certificate (“SILC”) • Issuer: StoneCross Capital, Ltd. • Security: Certificate issued by Issuer • Min. Size: US$100 million • Max. Size: US$250 million • Projected Returns: 6% net annual in arrears • Maturity: 10 year • Asset Protection: U.S. Life Insurance Company • Manager: StoneCross Capital, LLC • Custodian: Wells Fargo Bank, N.A. • Islamic Bank: HSBC Amanah Financial Services • U.S. Counsel: King & Spalding LLP • Cayman Counsel: Maples and Calder • Auditors: Ernst & Young LLP ©2009 StoneCross Capital LLC. CONFIDENTIAL
  5. 5. Key Benefits • 6% annual returns • 100% principal protection • Shariah-compliant • Non-correlated to any other asset class in the market • Low volatility • Transparency • Attractive risk adjusted returns • Access to the U.S. longevity markets • Skilled investment team with over 15 years of experience in the longevity market ©2009 StoneCross Capital LLC. CONFIDENTIAL
  6. 6. SILC vs. Sukuk SILC Sukuk Annual Current Return 6% p.a. 3.5% - 6% p.a. Shariah-compliant YES NO Principal Protection YES NO Low Volatility YES NO Non-Correlated Assets YES NO ©2009 StoneCross Capital LLC. CONFIDENTIAL
  7. 7. Longevity Assets • A longevity asset is an in-force life insurance policy issued by a domiciled U.S. Life Insurance Company. • The asset is purchased at a discount to the policy’s net maturity benefit but at a premium to the policy’s cash surrender value. • The market for longevity assets exists because many policy owners would prefer to receive cash from a sale of their policy immediately, rather than the net maturity benefit proceeds their estate would receive at maturity. • Typically this is because net maturity benefit proceeds no longer meet a policy owner’s estate and financial planning goals, or the policy owner no longer is willing or able to pay future premiums. ©2009 StoneCross Capital LLC. CONFIDENTIAL
  8. 8. Longevity Market Opportunity • Still in its initial growth phase Estimated Policy Face Amount Eligible for the Longevity Asset Market 1) • An aging population (USD in billions) • Increased need to supplement retirement income • Decreasing estate tax burden • Dramatic growth potential • U.S. citizens over age 65 will grow from 34 million today to a projected 69 million by 2030 representing over 25% of U.S. population* • $13 Trillion of life insurance 1) Longevity Asset Market: Increasing Capital and Investor Demand, Conning Research & Consulting, Inc., October 2007. currently in force in the U.S. *U.S. Bureau of the Census ©2009 StoneCross Capital LLC. CONFIDENTIAL
  9. 9. Shari’ah Compliance • The assets of Issuer and of the Subsidiaries will consist of a combination of Assets that are in compliance with principles of Islamic Shariah and Assets that are not in compliance with principles of Islamic Shariah. • The percentage of longevity assets will over-collateralize the entire structure and will ensure repayment of the principal and profit of the Certificate. • The Certificate will be secured by all of the assets of Issuer. • Shariah-compliant assets will be interests in real estate and other Shariah-compliant assets. • Non-Shariah-compliant assets will be U.S. life insurance policies and other insurance related products. ©2009 StoneCross Capital LLC. CONFIDENTIAL
  10. 10. Shari’ah Advisors • Sheikh Nizam Yaquby - Independent Shari’ah Consultant, Manama, Bahrain Sheikh Nizam Yaquby is a renowned Shari’ah scholar and advisor to numerous Islamic banks and companies, including Abu Dhabi Islamic Bank, Islamic Investment Company of the Gulf, Bahrain, and the Arab Islamic Bank, Bahrain. He pursued traditional Islamic studies in Mecca, India and Morocco under the guidance of eminent Islamic scholars including Sheikh Abdullah Al-Farisi and Sheikh Muhammad Saleh al-Abbasi. He has a BA in Economics and Comparative Religion from McGill University, Montreal, Quebec. He is a PhD candidate in Islamic Law at the University of Wales. Sheikh Yaquby has published several books on Islam and Islamic law and is a frequent speaker at Islamic conferences. • Sheikh Yusuf Talal DeLorenzo Sheikh Yusuf is widely published on the subject of Islamic jurisprudence and is recognized internationally for his leading role in the field of Islamic finance. He is the author of the three volume “Compendium of Legal Opinions on the Operations of Islamic Banks” and was responsible for the development of an online course on the “Principles of Islamic Investing” for the Dow Jones University. He is a member of the Shari’ah advisory boards of the Dow Jones Islamic Market Indexes, Morgan Stanley Islamic Global Equity Fund, Oasis Asset Management (South Africa), the Royal Bank of Canada, the Royal Bank of Scotland, the Bank of Ireland, Société General and Guidance Financial. ©2009 StoneCross Capital LLC. CONFIDENTIAL
  11. 11. Uncorrelated Asset Class • The recent deterioration of the credit markets and an increased recognition of the correlation among most asset classes has spurred interest in alternative investment ideas. • Longevity is a new and emerging asset class with participation from mainstream institutional investors. • Longevity risk is generally considered uncorrelated to other markets and offers above average returns. • Historical data supports the actuarial assumption that there is zero correlation between mortality rates and the capital markets. 1) 1) Report for the Association of British Insurers on Key Correlation Assumptions in ICA for Life Office, Deloitte and Touche LLP, May 2005. ©2009 StoneCross Capital LLC. CONFIDENTIAL
  12. 12. Highly Regulated Industry • Fitch notes that the US life insurance industry is relatively well-positioned to weather an environment of capital markets volatility and market illiquidity. The insurers have limited liquidity exposures which mitigate the impact of current market illiquidity across the industry. The industry’s risk-based capital position was very strong going into 2008, with many companies holding capital at levels close to or above the ‘AAA’ threshold based on Fitch’s economic capital model. • Moody’s believe that life insurers are healthier than most other troubled financial- services sectors. Their report points out that most life insurers have strong liquidity profiles and are not dependent on accessing the capital markets for their operations. • AM Best notes that historically in troubled economic times, life companies have generally reacted prudently by reducing exposures when possible and enhancing liquidity. The current capital levels for the industry, albeit down roughly 10% from year-end 2007 remains sound. • For the few that may fail, state legislatures have enacted guaranty funds for the protection of policyholders and claimants so that the public is not harmed. 1) 1) NAIC – National Association of Insurance Commissioners website article. ( Source: News Releases by NAIC, Moody’s Investors Service Press Release, Business Wire, Dow Jones News Service, and Reuters News ©2009 StoneCross Capital LLC. CONFIDENTIAL
  13. 13. High Credit Quality Assets Carriers S&P A.M. Best Fitch Moody's Phoenix Life A-/Stable A/Stable A+/Negative A3/Stable Lincoln National Life AA/Positive A+/Stable AA/Stable Aa3/Stable American National Insurance Company AA/Stable A+/Stable Aq NA A+/Watch Dev A/Negative AA-/Rating Aa3 American General Life AA/Stable A++/Stable AA/Stable Aa3/Stable Pacific Life Insurance Company Sun Life Assurance Company of Canada (US Branch) AA+/Stable A++/Stable AA/Stable Aa2/Stable AA/Stable A+/Stable AA/Stable Aa3/Stable AXA Equitable Life AA+/Stable A++/Stable AA+/Stable Aa2/Stable Columbus Life Insurance Company John Hancock Life Insurance Company USA AAA/Stable A++/Stable AA+/Stable Aa1/Stable *Sample selection of company’s insurance contracts represented in pool of longevity assets. ©2009 StoneCross Capital LLC. CONFIDENTIAL
  14. 14. High Quality Service Providers •King & Spalding LLP will serve as U.S. and International legal counsel •Maples and Calder will serve as Cayman Islands legal counsel •Ernst & Young LLP will serve as our Auditor •HSBC Amanah will serve as our Islamic bank •Wells Fargo Bank, N.A. will serve as our will serve as the Paying Agent, Securities Intermediary and Asset Custodian ©2009 StoneCross Capital LLC. CONFIDENTIAL
  15. 15. Shari’ah Asset Managers Todd D. Gillespie – Managing Partner, Chief Investment Officer Mr. Gillespie is a Co-Founder and Managing Partner of StoneCross Capital. He serves as the Chief Investment Officer and Portfolio Manager for the SILC structures. He is responsible for product structuring, life policy acquisition, asset administration and daily management of the firm’s operations. Mr. Gillespie has successfully structured, acquired, assembled and managed portfolios of policies totally $1.2 Billion in face amount. His tenure in the industry has made him one of the most experienced, profitable and desired managers in the longevity asset industry. Mr. Gillespie was the Founding Principal of Southcoast Investment Group, Inc. and has held positions in Merrill Lynch and The Private Bank at Bank of America. Anthony R. Bufinsky – Managing Partner, President – Shari’ah Structured Finance Mr. Bufinsky is a Co-Founder and Managing Partner of StoneCross Capital. He serves as the President of Shariah Structured Finance where his responsibilities involve product structuring and investor relationship management. Mr. Bufinsky was an executive with HSBC Bank USA and HSBC Securities globally in various capacities of increasing responsibility. His last position with HSBC was in the Amanah Finance Wealth Management Group as Vice President where he was on the lead team responsible for structuring and servicing the HSBC Amanah Global Properties Income Fund, which is one of the largest open ended Shariah Compliant Real Estate Funds with assets in excess of US $2 Billion. His other duties at HSBC Amanah involved client origination, structuring and servicing transactions based under Shariah Principle and Law. Mr. Bufinsky started his career with HSBC Bank USA in New York as a Vice President in the Corporate Trust and Loan Agency Group (CTLA) responsible for Administration and Trust sales of structured finance, CDO/CLO/ABCP/MTN's, insurance linked notes, project finance, and Islamic finance (Shariah) based instruments. ©2009 StoneCross Capital LLC. CONFIDENTIAL