Life settlement industry players have this message for institutional investors: Life settlement portfolios made money in 2018.
In 2018, in the stock and bond markets, “there was no place to hide,” Dan Young, a senior managing director at Vida Capital, said today in New York, at the Life Insurance Settlement Association’s 2019 institutional investor conference. “Everything moved in the same direction.”
But, in the life settlement market, returns were positive, Young said.
(Related: Life Settlement Investors Head to New York)
Comprehensive market figures are still scarce in the U.S. life settlement market. Some attendees at the conference said their gut feeling is that overall life settlement returns might have been somewhere between 5% and 10% in 2018.
Alan Buerger, chief executive officer of Coventry, a major life settlement company, said that he believes returns have been “in the low to mid teens.”
Regardless of what the exact numbers are, “the market is growing organically again,” Buerger said. “All signs point to continued growth and progress.”
The life settlement market gives holders of life insurance policies a mechanism for selling policies to unrelated parties, through “secondary market” transactions.
Life settlement companies may either hold the policies acquired themselves, through “warehousing,” or sell the policies to hedge funds and other institutional investors, through the tertiary market.
Deal Flow and Conning have used a variety of sources to assemble some market data.
Buerger cited Deal Flow reports that the number of policies sold in the United States increased to 2,027 in 2017, from 1,123 in 2015, and that the total amount of death benefits provided by the policies sold increased to $2.8 billion, from $1.6 billion.
Buerger also talked about a Conning estimate that U.S. consumers may hold policies with about $150 billion in total death benefits that could be prime candidates for life settlement transactions.