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Investing In Life Settlements


Academic year: 2021

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Investing In Life Settlements


What are Life Settlements?

What are Life Settlements?

¾ 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


Five Investment Considerations

Five Investment Considerations

1. Track Record

2. Safety

3. Yield (Anticipated Return)

4. Liquidity


Life Partners Track Record

*Average annualized ROI based on historical data from 9/10/1991 to 6/30/2008 of 2,019 maturities. Individual ROI will vary based on holding period of asset. No specific return is guaranteed or implied. Past performance deos not guarantee future results.



• 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.


• 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.


• This is purely a buy and hold investment. Your profit will be returned only upon the maturity of the policy that

you purchase.


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.


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 ONE Insured (Seller)

1. A policy that will pay $3,000,000 on maturity is sold for $1,500,000.

2. 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 THREE Investor (Purchaser)

1. Must be an accredited investor or institutional investor.

2. Minimum investment is $50,000.

3. 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.


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.

5. Commissions payable to brokers.

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.

Procedure Flow Chart


True Diversification

True Diversification

Unlike  most  other  investments,  Life  Settlements  are 

Unlike  most  other  investments,  Life  Settlements  are 

completely  immune  from  fluctuations  in  the  stock  and 

completely  immune  from  fluctuations  in  the  stock  and 

bond market, interest rates and business cycles. 

bond market, interest rates and business cycles. 

Why Invest in Life Settlements?

Why Invest in Life Settlements?

Risk Amelioration with the Potential for Excellent Returns

Risk Amelioration with the Potential for Excellent Returns

Because the key factors affecting yield are simply discount 

Because the key factors affecting yield are simply discount 

and  time,  rather  than  economic  or  business  conditions, 

and  time,  rather  than  economic  or  business  conditions, 

exceptional  returns  can  be  realized  with  low  risk  to 

exceptional  returns  can  be  realized  with  low  risk  to 

investment capital.

investment capital.

Inherent Asset Value

Inherent Asset Value

Even during the Great Depression, life insurance companies 

Even during the Great Depression, life insurance companies 

still paid their policy obligations.

still paid their policy obligations.


Check is made payable to: “Dunnam & Dunnam LLP – Escrow” to establish the account.

Investment funds are placed in an escrow account for the investor at JP Morgan Chase Bank.

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

Policies become fully funded and are closed (ownership is transferred at the insurance company).

“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.








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