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The Architect of Life Settlements SM. a NASDAQ Global Select Market company. What Are Life Settlements?. A Life Settlement is the purchase of an existing life insurance policy at a discount to its face amount.

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The Architect of Life SettlementsSM

a NASDAQ Global Select Market company


What Are Life Settlements?

  • A Life Settlement is the purchase of an existing life insurance policy at a discount to its face amount.

  • Policyholders are financially sophisticated individuals or trusts who purchased policies for estate planning or other financial purposes and no longer need the coverage.


Life Settlements were recognized as a legal transaction by the U.S. Supreme Court in 1911.

History and Legal Basis

  • Life Settlements were developed in order to meet the needs of individuals who have life insurance they no longer want or need.


Why invest in life settlements

Reliable Returns Without A Parity of Risk the U.S. Supreme Court in 1911.

Because the key factors affecting yield are initial discount and time, rather than economic conditions, exceptional returns can be realized without a parity of risk to investment capital.

Why Invest in Life Settlements?

  • Inherent Asset Value of Life Settlements

  • Even during the Great Depression, life insurance companies still paid off their policies.

  • True Diversification

  • Life Settlements are immune from fluctuations in the stock and bond market, fuel prices and business cycles.


HOW DOES A the U.S. Supreme Court in 1911.

LIFE SETTLEMENT TRANSACTION WORK?


  • STEP ONE the U.S. Supreme Court in 1911.

  • Seller

  • $5,000,000 policy is presented to LPI, either from the owner of the policy or by a representative of the owner (called a broker) for consideration of an offer.

  • The insured is purported to have a life expectancy of 3-5 years.


  • STEP TWO the U.S. Supreme Court in 1911.

  • Life Partners, Inc.

  • LPI analyzes the policy to ensure:

  • Policy is fully transferable, past contestability period and there are no foreseeable impediments to future payout; and

  • LPI’s independent medical consultant gives opinion that life expectancy of insured is 3-5 years.

  • LPI offers to purchase policy on behalf of its clients based on market demand and economic analysis of policy.


  • STEP THREE the U.S. Supreme Court in 1911.

  • Purchaser

  • Must be an accredited investor.

  • Minimum investment amount is $50,000.

  • Investor may purchase a fractional interest in the policy to further diversify.

  • Qualified or non-qualified funds are acceptable.

  • Investor signs Agency Agreement.

  • Investor signs a Policy Funding Agreement (PFA) for each purchase.

  • Funds are sent to Independent Escrow Agent, NOT to LPI.


  • STEP FOUR the U.S. Supreme Court in 1911.

  • Independent Escrow Agent

  • Holds original policy, PFA, and funds for the acquisition.

  • Holds investment funds and policy documents and verifies transfer with insurance company

  • Disburses and distributes funds at closing as follows:

  • a. Full payment to insured

  • b. Policy premiums are escrowed for life expectancy of insured

  • c. Escrow service fees

  • d. Fees payable to LPI


  • STEP FIVE the U.S. Supreme Court in 1911.

  • Escrow Agent and Purchaser

  • When policy matures, Escrow Agent pays to investor his pro rata share of all proceeds paid out by insurance company under the policy.

  • ROI varies with each purchase depending on cost basis, holding period, return of unused premiums or additions to premium escrow needed to maintain policy and amount paid out under policy.

  • Purchaser has opportunity to have Escrow Agent hold all or a portion of payout for reinvestment or receive entire payout as Purchaser may direct.


WHAT KIND OF RETURNS the U.S. Supreme Court in 1911.

ARE POSSIBLE WITH

LIFE SETTLEMENTS?


Annual compounded return potential 82 year old 5 yr le 6mm face value
Annual Compounded Return Potential the U.S. Supreme Court in 1911.82 Year Old – 5 Yr. LE - $6MM Face Value


Relative risk continuum

Low Risk the U.S. Supreme Court in 1911.

High Risk

Increasing Risk

Alternative Strategies

Traditional Strategies

Stable Value Strategies

Relative Risk Continuum*

Life Settlements - 10%

S&P 500

Avg. Yield

Since 2000:

2.76%

Managed

Futures

GIC/Money

Market

Hedge Funds

Investment

Grade Bonds

Junk Bonds

Treasuries

Emerging Market Stocks

Russell

2000

* Relative placement of indices and asset classes based on subjective and industry accepted risk attributes


Conning Projected Gross Market Size by Face Value the U.S. Supreme Court in 1911.

Source: Conning Research & Consulting, Inc.- 2007


Conning Forecast of Annual Life Settlement Volume the U.S. Supreme Court in 1911.

Source: Conning Research & Consulting, Inc. - 2007


Who the U.S. Supreme Court in 1911.DOESN’T Like Life Settlements?

Insurance Companies

  • Why?

  • Lapsed Policies= HUGE PROFITS

  • Most Policies Lapse By Year 10

  • Policies are priced to market and lapse factor, not to mortality of insured

  • According to the American Council of Life Insurers, approximately 8.5% or $1.4 Trillion in coverage is voluntarily terminated EVERY YEAR!


A different kind of financial services company
A Different Kind of the U.S. Supreme Court in 1911.Financial Services Company

  • LPHI is substantially different from other financial service companies.

  • Life settlements not correlated to market performance, so LPHI revenues and net income are likewise uncorrelated.


No leverage required
No Leverage Required the U.S. Supreme Court in 1911.

  • Life Partners’ business model does not rely on leverage.

  • Life Partners carries almost no debt.

  • Credit crisis has had no adverse impact on Life Partners.

  • While increasing earnings 431% over last year, the company eliminated about $2 million of debt.


Bad economic news is good news for life partners
Bad Economic News is Good News for Life Partners the U.S. Supreme Court in 1911.

  • As traditional investment strategies have disappointed investors, there has been a greater interest in alternative investments such as life settlements.

  • Current economic turmoil is expected to continue.

  • Life Partners is well positioned to take advantage of the increasing interest in alternative investments due to the uncorrelated nature of life settlements.


Life partners history
Life Partners History the U.S. Supreme Court in 1911.

  • Life Partners, Inc. founded in Waco, Texas in 1991

  • Originated concept of life settlements for high net worth seniors in 1997

  • Went public in 2000 via reverse merger in order to demonstrate financial transparency and foster public confidence

  • NASDAQ Small Cap - 2003

  • NASDAQ Global Market in 2007

  • NASDAQ Global Select Market in 2009

  • Current Market Capitalization: $450 million

  • Consistent history of quarterly dividend payments since 2002


The life partners edge
The Life Partners Edge the U.S. Supreme Court in 1911.

  • Key Employee Retention – 12 year average

  • Substantial Intellectual Capital

  • Only company that offers direct fractional ownership interests to retail clients – the most cost-effective method of owning life settlements

  • Oldest company in industry – well established broker relationships with an excellent business reputation

  • Extensive investment in developing proprietary software and processes for high volume of transactions

  • Only publicly traded company operating exclusively in the life settlement industry


The Architect of Life Settlements the U.S. Supreme Court in 1911.SM

a NASDAQ Global Select Market company


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