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Phoenix Prepares To Launch Life Settlement Business

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Phoenix Life Insurance Company may open its life settlement business in the next 3 weeks.

The business, Phoenix Life Solutions, is in the process of negotiating distribution agreements with 4 brokerage general agencies, Christopher Macklem said here today at an investment symposium organized by the Society of Actuaries, Schaumburg, Ill.

Macklem is an actuary at Phoenix, a unit of the Phoenix Companies Inc., Hartford.

Phoenix Companies first announced the formation of the life settlements subsidiary in September 2007.

Phoenix Life Solutions will work with “very large face amount policies,” both from Phoenix and from other insurers, Macklem said.

The maximum commission will be 20% of the value created in the settlement of a policy, and the provider fee will be 5% of the valued created, Macklem added.

The maximum commission and the provider fee both will be about half the typical levels, Macklem estimated.

Macklem reported that Phoenix has decided against forming joint ventures with potential partners such as a medical underwriting company or a life settlement distributor.

Instead, Phoenix will be building its own life settlement capabilities, Macklem said.

During a panel discussion, Macklem:

- Conceded that acting as both a life insurer and a life settlement company could lead to pressure on Phoenix to increase policy cash surrender values.

- Noted that Phoenix would be competing with other life settlement companies for brokerage general agency business.

- Reported that brokerage general agencies seem to be willing to send life settlement business to Phoenix, even if Phoenix pays a lower commission rate.

- Suggested that the lower commissions and lower internal rate of return expectations will help make Phoenix Life Solutions competitive.

Macklem and another panel discussion speaker, Hasham Malik, chief capital markets officer with Peachtree Settlement Funding, Boynton Beach, Fla., also talked about ways to apply the life settlements approach to new products.

Phoenix Life Solutions will invest in level-premium term policies, and it eventually might go after annuities, Macklem said.

“In the long term,” he said, “there are possibilities there as well as with [immediate annuities].”

Malik said he thinks there are opportunities to profit from investing in any type of insurance product that is vulnerable to pricing inefficiencies.

Malik also talked about Peachtree finance strategies.

Peachtree is developing an open-ended, pass-through hedge fund that will be based in the United Kingdom, and it also is working with a European bank to develop a structured note program that will offer capital protection of up to 80%, Malik said.

The note program will give institutional investors a chance to invest in life settlements without spending hundreds of millions of dollars, Malik said.


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