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Life Settlement Firm Fires Back

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A publicly traded life settlement firm says an article in a business newspaper has given a misleading description of its operations.

The Wall Street Journal has printed an article that quotes sources who say Life Partners Holdings Inc., Waco, Texas (Nasdaq GS:LPHI), may have underestimated the life expectancies of the insureds who used Life Partners to sell life insurance policies to investors.

“As trade publications have reported, this phenomenon has been experienced throughout the life settlement industry and is not exclusive to [Life Partners],” Life Partners Chairman Brian Pardo says in a public letter addressed to investors.

Life Partners “calculates sensitivity of return utilizing [life expectancy (LE) ] to set a reasonable premium escrow amount, and does not rely exclusively upon LE as the primary factor for profitability,” the firm says.

Life Partners only handles policies that are economically feasible even if the insured outlives the insured’s life expectancy by a number of years, the firm says.

Most investors protect themselves by buying fractional interests in a number of policies, rather than buying just one policy, the firm says.

“While the LE for some of those policies may be exceeded, the purchaser may receive the proceeds on others significantly prior to their LE timeframe,” the firm says. “It is the overall return on the funds that each purchaser dedicates to the purchase of policies that matters, not just the selected policies on which LE may have been exceeded.”

Life Partners also says it believes the Wall Street Journal article raises “unwarranted issues” about the firm’s fee structure.


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