A life settlement is simply the sale of an existing life insurance policy, of someone age 65 or above, on the secondary market for more than its cash surrender value. What is a life settlement? 1

Do I let my policy lapse? Do I take any cash value from the insurance company? 2

The United States Supreme Court case of Grigsby v. Russell, 222 U.S. 149 (1911) established a Life Insurance policy as private property, which may be assigned at the will of the owner. 3

Universal Policies 85% Do not end up in death benefits getting paid 4

Term Policies 95% Do not end up in death benefits getting paid. 5

National Underwriter Confirms… According to the National Underwriters Magazine in September 2004:  Majority of policyholders let their policy lapse.  Or surrender the policy for minimal cash value. 6

In 2010, approximately $972 billion dollars worth of life insurance death benefits lapsed in the US, and of that number a significant amount belonging to seniors – that is an extraordinary amount of missed opportunities. 7

8 LIFE SETTLEMENT: RISKS TO SENIORS SUMMARY OF COMMITTEE INVESTIGATION MAJORITY STAFF SENATOR HERB KOHL, CHAIRMAN APRIL 29,2009 On April 29, 2009, the United States Special Committee on Aging conducted a study and came to the conclusion that Life Settlements, on average, yield 8x more than the cash surrender value offered by Life Insurance companies.

9 Cash Surrender Value vs. Life Settlement Payout The reason is simple as to why you should understand what the true market value of your policy is worth. If you are accepting the cash surrender value (CSV) on your life policy without considering the market value, you may be leaving money on the table. ** These columns illustrate several actual cases. There is no set percentage of face amount paid. Criteria such as premium amount, type of policy, age, health, and life expectancy of the insured affect the settlement offer.

Life Settlements: A Solution to a Growing Problem For Seniors 10

 72-year-old male, $1.8 million dollar universal policy  81-year-old female, $1.5 million dollar universal policy  73-year-old male, $3 million dollar universal policy 11 Examples of Paid Up Benefit Transactions

 A 72-year-old male held a $1.8 million dollar universal policy in trust. The policy had been taken out in 1992 by the family for estate planning purposes. To benefit his children. Due to the low interest rate environment over the last several years, the $13,600 annual premium was no longer keeping the policy in good standing and the cash value was eroding quickly. Over the years they have contributed a total of $245,000 in annual premiums, so the family was shocked to see the last annual statement reflects a cash value of only $23,600. Realizing they would need to substantially increase annual contributions they needed a solution. The family wanted to retain some coverage but was not financially able to gift additional money to the trust. They were very pleased that a paid up benefit transaction enabled them to retain $300,000 of coverage with no future premium payments. 12 Examples of Paid Up Benefit Transactions

 An insured female age 81 had a universal life policy with a face amount of $1.5 million and a cash value of $116,400. A paid up benefit transaction made it possible for the policy owner to retain $500,000 in death benefits with no future premium obligation. In 2008 the insured’s daughter purchased 2 identical $1.5 million dollar policies in preparation for her mother’s estate tax liability. After several years the mothers projected tax liability changed. The family had a concern over the premium payment and a need for a reduced amount of insurance coverage. A cash offer was received of $250,000 but the family declined the offer and kept both policies. One of our funding sources suggested a paid up benefit transaction. This allowed the family to retain $500,000 in death benefits without future premium obligation. Combined with the other policy this gave her a total of $2 million in coverage while reducing the overall premium outlay. 13 Examples of Paid Up Benefit Transactions

 A 73 year old male with a $3 million universal policy with $0 cash value. The policy owner retained a decreasing death benefit beginning at $2.1 million with no future premium obligation by receiving a paid up benefit transaction. In 1997 the insured purchased 3 $1 million dollar term policies through a trust to help transfer ownership of the family business to his children. After several years he asked his advisor to explore the life settlement option but decided to continue funding the policies as he had experienced a change in health. As the conversion deadline for the policies approached, he contacted his advisor again. His advisor understood the policy owner’s discomfort with the increasing premiums but wanted them to maintain some coverage. A policy valuation yielded a cash offer of $200,000 per policy. They considered selling 1 or 2 to help fund and remaining premiums. Then they considered a paid up benefit transactions allowing them to maximize the death benefit without premium obligations. Based on the insured’s health and need for insurance a decreasing benefit option was a good fit. The policy owner retained coverage with no future premium obligation beginning at $2.1 million for the first 5 years, $1.3 million for the following 5 years and continuing at $1 million thereafter. 14 Examples of Paid Up Benefit Transactions

 75-year-old male, $1 million dollar universal policy 15 Example of Cash Transaction

 As circumstances change so do our financial goals. Shortly after the passing of his wife, a 75-year-old man with a $1,000,000 universal life policy was discussing his finances with his advisor. The advisor suggested he consider a life settlement transaction as he no longer had a need for the policy. The policy did not have any cash value. Our manger was able to solicit multiple bids from institutional funders. The client accepted a high offer of $150,000 for the policy. Upon receipt of the payout, the seller placed a majority of his proceeds into his granddaughters college fund. 16 Example of Cash Transaction

 Policy review  Settlement application  Market acceptance  Exchange – Multiple institutional investors  Receive offer  Accept offer  Close the sale Process – Next steps 17

 Licensed as a life settlement broker?  We have almost 20 years experience with life settlements.  What constitutes a policy that is viable for a life settlement? Do you know?  What is the due diligence?  What is the fee agreement?  What about medical reviews?  Are the medical review companies acceptable to the purchaser of the life settlement?  Do you have the time to keep up to date with changes in the industry?  What about acceptance of the offer? Closing documents?  Who is buying the policy? Do you have sources of money already ready to go in order to purchase your policies?  THIS IS WHAT WE DO 18 You have a choice, do life settlements on your own or with an experienced team