DEFINED BENEFITS FUND ACCELERATED CLASS
Overview Markets today Unknown risks Needed opportunity to overcome market concerns 21 st Century replacement for With Profits
Today's Presentation An overview of Traded Life Policies (TLPs) as an asset class What are TLPs? Why TLPs are an important asset class Why people sell their policies The TLP market place How TLPs are purchased How TLPs are valued within a fund
What are TLPs? United States Issued Life Assurance Policies United Kingdom Issued Endowment Policies Policy purchased at discount from fixed maturity value, generating guaranteed profit when the policy pays out
Example Holdings Axa Clerical Medical Commercial Union Sun Life American General Life Norwich Union Prudential John Hancock Life Standard Life Pacific Life Friends Provident
Important Asset Class? TLPs offer a fixed return to the investor Unaffected by other investment fluctuations Returns in the fund are extremely smooth Natural maturity point eliminating the need to find a future buyer Net historic returns 9% p.a.
Market Today Policies purchased from those aged 65 or over More accurate and finite life expectancy tables Policies in force two years plus – beyond contestability Regulated market maker gives competitive pricing and protects buyer and seller
Why do people sell their policies? Estate planning Change original beneficiary Strip out accumulated value to provide income replace with cheaper term Key-Man Premiums no longer affordable
Market Growth $50 million $ 1 billion $ 4 billion $12 billion Issued US Life Policies$13,000 billion
How are TLPs purchased? A life expectancy (LE) is obtained Illustration made to establish future premium liability Offer made for policy – US law requires 3 offers before a policy is traded
Next Step Funds deposited in US based Escrow Account Life Assured, Policyholder and Beneficiaries sign transfer Policy transferred to new owner Funds released from Escrow to the seller Insurance Company notes new beneficiaries and purchase is complete
Calculations Establish life expectancy (LE) Calculate future premium liability Create an actuarial model to unwind future profits
Example of Policy Selected for Fund LE 64 Months Sum Assured $1,000,000 Purchase Price $ 629,215 Includes Premium to LE $ 97,275 Net Purchase Price $ 531,940 Return 58.93% 81 Year old – New York Life.
Life Expectancy Annual Premium $ 18,239 Expected Return $370,785 Annual Return 13.10% 11.05% 9.56% Months Low LE54 Average LE64 High LE74
Open Ended Investment Aurora is an open ended investment Flexible investment term Shares redeemable upon demand Monthly fund valuations provided Regulated mutual fund
Disaster Scenario! Annual Premium $18,239 Population LE110 months LE x 2128 months Annual Return 3.53% Annual Return 4.69%
Invest USD class minimum $10, % allocation from day one $11,000 invested 7 Year investment recommended - (No exit charges after 7 years) 1.25% p.a. management charge Target 7 – 9% annual growth
10% EXTRA ALLOCATION INVEST $50,000 DAY ONE BECOMES $55,000 YEAR END TARGET MINIMUM 17%
HOT OFF THE PRESS! November Annual return 9.35% Investor with enhancement and $100,000 Return at end of First Year 20.3%
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