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Analyst Looks At NFP Life Settlement Unit

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Advanced Settlements Inc. might have a 15% share of the U.S. life settlement market.

John Nadel, an analyst at Fox-Pitt, Kelton, New York, gives that estimate in a discussion of Advanced Settlements, a life settlement firm, and its corporate parent, National Financial Partners Corp., New York.

The typical fee structure in a life settlement transaction is based on either 6% of the face amount of the policy settled or about 33% of the amount of the life settlement proceeds in excess of the cash surrender value, Nadel writes in the note, which is based on a meeting with NFP executives.

In a typical case, about 33% of the fees go to the life settlement broker and the rest to the policy seller’s agent, Nadel writes.

Advanced Settlements generated $127 million of value in excess of cash surrender value for seniors who settled their policies in 2005, and that is probably about 15% of total market volume, Nadel estimates, citing statistics from the Advanced Settlements Web site and the Life Settlement Association of America, Orlando, Fla.

NFP executives now say life insurers may put a damper on the life settlement market by charging more for life insurance issued to older customers and working harder to avoid selling policies to applicants who seem likely to resell the policies once the 2-year contestability period ends, Nadel writes.

But Nadel predicts Advanced Settlements’ life settlement volume could still grow about 7% this year.