Opulen Capital Life Settlement: Life Settlements to the Rescue

Even the big guns are turning to the life settlements market in an attempt to resurrect the faltering economy. News that AIG has become the first company to successfully securitize a pool of life settlement policies was big enough. But that the company is using a portion of the proceeds to pay down its loan to the federal government is precedent setting. AIG’s business unit Risk Finance led efforts to securitize life settlement policies with a face value near $8.4 billion. That transaction alone netted over $2 billion. The $8.4 billion is being transferred to the Federal Reserve Bank of New York in the form of securitization notes that will start AIG down the path to paying down the company’s $152 billion loan. The deal received an A.M. Best rating, though Best declined to publish the rating because the deal was private.

Securitizing via the life settlements market is not always successful. An attempt by Ritchie Capital Management to securitize $1.57 billion in life settlements was thwarted by allegations by the New York Attorney General that the policy originator, Coventry First, was bid rigging. (Most charges against Coventry First have since been dismissed.)

Other companies have attempted the market, but have fallen short of securitizing life settlement pools. The reason? There simply aren’t enough policies with short life expectancies to make securitization happen. Due to the shortage of viable life settlement policies, building a portfolio of life settlement policies could be a long, costly process for the investor, thus causing many investors to shy away from securitization deals.

In fact, A.M. Best released its research on the life settlement policies available and found that a mere 8 percent of policy holders attempting to enter the life settlements market have life expectancies determined by medical personnel to be 6 years or fewer. As a result, more people compete for these policies and fewer securitizations occur.

Clearly until the market for life settlements expands and buyers find that perfect storm of conditions, securitization of the life settlement market will be slow. So slow, in fact, that this was only the second rated securitization in the life settlement industry in the last 5 years. In what many contend was not a true life settlement securitization deal, Legacy Benefits securitized $70.3 million (this deal having been rated by Moody’s). However, the Legacy deal included annuities, which were used to enhance the collateral of the deal.

AIG’s use of the life settlements market to securitize and pay down its debt shows the flexibility of the industry, and how life settlements can be utilized in less traditional ways to increase wealth and alleviate financial strains.

Located in La Jolla, California, Opulen Capital is a specialized financial services firm focusing on products and services tailored for senior citizens. Opulen Capital is one of the leading firms offering Life Settlement opportunities for high net worth clientele. We leverage unrivaled experience and exclusive relationships in the life settlement marketplace to structure, obtain, and sell life insurance products to maximize cash profits for our valued clients. Opulen Capital’s mission is to continue to provide the best solutions for our clients through the highest level of integrity and service. For more information, visit our website at http://www.OpulenCapital.com or call Opulen at 877-OPULEN-1 (877-678-5361)