The Asset Class of US Life Settlements grows up; the first UK FSA approved offering is now available to retail investors.
US Life Settlements are not new, having been around since the 1990’s. Growing pains have been experienced over the years and a number of early investors suffered as a consequence. Not surprisingly, there is some negativity from this quarter but the general misconceptions, about the workings of the asset class, can be dispelled by appropriate education. Currently, it appears all too easy for it to be blamed for the failures, or indeed fraudulent activities, of some involved and the use of sensational headlines such as “Death Bonds” and the like does little to endear them to the mainstream investment community.
In order for financial advisers to make appropriate client specific choices, it is most important for those promoting US Life Settlements as an investment opportunity to provide information sufficient for them to both understand the general relevance of the asset class and to be able to distinguish between one product offering and another. Space here permits but an overview but Opus Life Assets Plc will be providing just such information over the coming months.
What is a US Life Settlement?
A Life Settlement is legally defined as the process by which an individual sells his or her own life insurance policy to a third party investor. There are two types of settlement, Viatical, where the seller is terminally ill and has a life expectancy of less than 24 months and Senior Life Settlements, where the seller may have some impairment to health and has a life expectancy of between 3 and 15 years. The basis of the Opus Life Assets plc offering is the acquisition of Senior Life Settlements.
There are many reasons why an individual might decide not keep a life insurance policy in force but the choices are to lapse it and lose all value, surrender it to the issuing life insurance company for a meagre sum, or sell it to a third party. The significantly higher returns and “win-win” nature generated by the sale of policies to third party investors is the market driver.
Opus Life Assets Plc
In creating its offering, Opus assumed the positions of the financial adviser and investor and set about addressing the issues we believed to be of paramount importance when making investment decisions. Our fundamental objective was to deliver a mechanism for investment that provides a level of return commensurate with the risk being taken in a way that allows focus on the asset and its appropriateness, rather than upon structural concerns.
About Evans Randall
Evans Randall is a privately held investment banking and private equity group specialising in alternative asset investments. Formed in 1993, we have arranged and / or invested in approximately US$35 billion of transactions around the world and have experience of operating across a range of jurisdictions including the UK, USA, Canada, Australia, New Zealand, Ireland, Germany, the Netherlands, Belgium, France, Bermuda, Guernsey, Jersey, Malta, Luxembourg, Bahrain, the UAE and Saudi Arabia. Our real estate portfolio is expected to grow to around £5.5 billion (US$11 billion) by the end of 2009 with typical transactions in the range of £100 million (US$200 million) to £500 million (US$1 billion).
Opus Life Assets Plc offering in the asset class of US Senior Life Settlements is the Group’s first offering to the retail investment market.
Contact:
Paul Bruton or Andrew Pinnegar
Managing Directors
Opus Life Assets Plc
Evans Randall Group
Queensbury House
3 Old Burlington Street
Mayfair, London W1S 3AE
T: +44 (0) 20 7072 2200
E: pb@evansrandall.com
www.opusla.co.uk
Under the only prospectus currently approved by the UK Financial Services Authority in this asset class, Opus Life Assets plc issues corporate bonds with maturities of 5, 7 and 10 years. Consistent with the performance of the asset, they pay principal and interest at maturity, are listed on the Irish Stock Exchange and secured upon an ever increasing portfolio of US Senior Life Settlements, where the underlying life insurance companies have an average rating of AA (S&P).
Having a minimum investment of £5000, the bonds are available in Sterling, US Dollars, Euros and Swiss Francs with target returns related to currency and term.
Displaying the characteristics of a zero, the bonds are eligible for SIPP, SAS and ISA investment but treated as income producing for UK taxpayers. However, Opus has provided access for tax sensitive investors through its Guernsey feeder and consequently, returns will currently be subject to CGT and not IT.
The bonds have a number of distinguishing features:
- The only UK FSA approved method of accessing asset class
- Defined maturities for investor certainty
- NAV calculations independently undertaken and audited No exclusive service providers – mitigating potential conflicts of interest
- Asset eligibility criteria fully disclosed in prospectus
- Portfolio marked to mortality not market (as a mortality event is the only true measure of performance)
- Investors protected from US Withholding Tax by utilisation of US:UK Tax Treaty
Conclusion
Over the last 9 years, the average performance has been in excess of 9% net of fees and the regulatory framework, methodologies for underwriting and pricing have significantly improved over this period. In these increasingly uncertain times, diversification into alternative assets should not be overlooked and US Life Settlements offer an investment opportunity that is neither affected by the machinations of stock markets nor the price of oil.