Investing In Life Settlements

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Morris Lindsey
8 years ago
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1 Investing In Life Settlements

2 What are Life Settlements? A life settlement is simply the purchase of an existing life insurance policy at a discount to its full face amount. The price of the policy is negotiated and sold by the owner at a discount, allowing the owner to receive an immediate cash payment to use as he or she wishes. The purchaser then takes an ownership interest in the policy and receives the full death benefit when the insured dies. The transaction is similar to a zero-coupon bond, except the purchaser does not know the exact maturity date.

The price of the policy is negotiated and sold by the owner at a discount, allowing the owner to receive an immediate cash payment

3 Five Investment Considerations 1. Track Record 2. Safety 3. Yield (Anticipated Return) 4. Liquidity 5. Diversification

4 Life Partners Track Record

5 Safety: Policies are issued by America s oldest and most financially sound life insurance companies. Low risk to investment capital with the opportunity for superior returns. Dunnam & Dunnam LLP holds all investment funds as independent escrow and closing agent. All transactions are regulated by the Texas Department of Insurance and the Texas Department of Banking. Yield: Your return is immune to fluctuations in the stock market, bond market, interest rates and business cycles. LPI has handled over 5,800 policies and the average annualized return on matured policies has been over 14%. Even though there is no guarantee on the rate of return of your policy, LPI has a 17-year history of rating and underwriting policies. Liquidity: This is purely a buy and hold investment. Your profit will be returned only upon the maturity of the policy that you purchase. Diversification: LPI believes in diversifying your investment portfolio (only 25% to 35% in a buy and hold product such as life settlements). Life Settlements offer a truly diversified and completely non-correlated investment. LPI Facts: One of the oldest and most active Viatical and Life Settlement companies in the industry (started in 1991). The company has over 18,000 investors to date. The parent company is publicly held (NASDAQ: LPHI) adding a very high level of transparency. LPI has purchased over 5,800 policies to date. LPI has assisted in policy transactions that have totaled over $1 billion in face value. Over 2,000 policies have matured.

Yield: Your return is immune to fluctuations in the stock market, bond market, interest rates and business cycles.

6 STEP ONE Insured (Seller) 1. A policy that will pay $3,000,000 on maturity is sold for $1,500, The insured has a life expectancy of 4 to 6 years and is paying $42,790 every year in premiums. 3. The insured enters into an agreement with Life Partners (LPI) to sell the policy. 4. The policy and a copy of the agreement are forwarded to Dunnam & Dunnam LLP. STEP SIX Investor The investor receives the pro rata share of all proceeds paid out by the insurance company plus any unused premiums held in escrow when the policy matures. The actual rate of return is determined by the policy maturity date. STEP TWO Life Partners, Inc. (LPI) LPI analyzes the policy to ensure that the policy: 1. Satisfies the company s strict purchase criteria. 2. Is transferable and is past the suicide date and contestability period. 3. Life expectancy of the insured is assessed by independent medical examiners to be 4 to 6 years. STEP FOUR Dunnam & Dunnam LLP (Escrow and Closing Agent) 1. Receives a copy of the original policy, the Policy Funding Agreements and all funds for acquisition. 2. As the escrow & closing agents: a) Handles all the investment funds as fiduciary. b) Verifies the policy ownership transfer and premium amounts. c) Maintains policy, pays premiums, distributes proceeds. 3. Pays all fees as agreed with the insured. STEP FIVE Fees & Costs Dunnam & Dunnam LLP pays or deducts the following fees and costs when the transaction closes which are included in the acquisition cost: 1. Full payment to the insured. 2. Policy premiums are escrowed for the full life expectancy. 3. Dunnam & Dunnam LLP s escrow service fees. 4. Fees payable to LPI. Procedure Flow Chart (Sample Policy Only) 5. Commissions payable to brokers. STEP THREE Investor (Purchaser) 1. Must be an accredited investor or institutional investor. 2. Minimum investment is $50, May purchase fractional portion or the entire policy. 4. Qualified (IRA) or non-qualified funds are acceptable for investment. 5. Highly suitable investment for IRA or other growth oriented vehicles. 6. Investor signs Agency Agreement. 7. Investor signs a Policy Funding Agreement for each policy purchased. 8. Funds are transferred directly to JP Morgan Chase Bank N.A. fbo Dunnam & Dunnam LLP, the acting escrow agent on behalf of investors.

STEP SIX Investor The investor receives the pro rata share of all proceeds paid out by the insurance company plus any unused premiums held in escrow when the policy matures.

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12 Why Invest in Life Settlements? Inherent Asset Value Even during the Great Depression, life insurance companies still paid their policy obligations. True Diversification Unlike most other investments, Life Settlements are completely immune from fluctuations in the stock and bond market, interest rates and business cycles. Risk Amelioration with the Potential for Excellent Returns Because the key factors affecting yield are simply discount and time, rather than economic or business conditions, exceptional returns can be realized with low risk to investment capital.

True Diversification Unlike most other investments, Life Settlements are completely immune from fluctuations in the stock and bond market,

13 Purchase and Funding Procedures 1. Check is made payable to: Dunnam & Dunnam LLP Escrow to establish the account. 2. Investment funds are placed in an escrow account for the investor at JP Morgan Chase Bank. 3. Policies become available for placement of funds (policies are fractionalized to diversify risk). 4. Policies become fully funded and are closed (ownership is transferred at the insurance company). 5. Closing Documents are sent to investor as evidence of their purchase position. Note: The funding process normally takes between 30 and 90 days for 5-10 fractional policy positions. Your funds are held in an FDIC insured escrow account at JP Morgan Chase Bank until all of your funds are invested in specific policies.

$Policies become available for placement of funds (policies are fractionalized to diversify risk). 4.$

Institutional Profitability Brought to the Individual Investor

Institutional Profitability Brought to the Individual Investor THE EMERGING LIFE SETTLEMENT MARKET Introduction Over the last 15 years, institutions such as Berkshire Hathaway, Credit Suisse and Morgan