Coventry Now Buying

Unwanted VA Contracts

BY

Coventry First L.L.C., Fort Washington, Pa., has started buying unwanted variable annuities.

The program appears to be the first well-publicized, systematic effort to buy contracts that are still in the accumulation phase.

“Weve thought about doing this for several years,” says Coventry CEO Alan Buerger. “We have registered reps and insurance agents asking about this on a regular basis.”

Coventry, a life settlements company, prefers contracts in which investment performance has been so poor that the value of the death benefits now exceeds the value of the tax benefits.

Selling a VA contract to another party might be a better deal than letting the contract lapse, Coventry says, because the market value of the death benefits is often higher than the surrender value.

U.S. life settlement companies now buy about $5 billion in life policy face value each year, and VA purchase volume could amount to about 10% of life settlement volume, Buerger estimates.

VA resale prices will depend on the carrier, the contract terms and the sellers age, but typical holders might get the current value of their VA principal along with a price equal to about 13% of the death benefit value, Buerger says.


Reproduced from National Underwriter Life & Health/Financial Services Edition, March 25, 2004. Copyright 2004 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.