A publicly traded life settlement firm has accused a competitor of using inaccurate information about how it values life insurance policies to hurt its reputation and drive down its stock price.
Abacus Global Management has filed a suit against Coventry First and Alan Buerger, the firm's co-founder and chairman, in a state court in Orange County, Florida.
Both Abacus and Coventry buy in-force life insurance policies from the original policy owners or other owners in exchange for the right to collect the death benefits.
Coventry says the life expectancy estimates that Abacus gets from Lapetus Solutions are too short and that the short estimates increase the reported value of the policies that Abacus buys.
The complaint: Abacus maintains that Coventry describes how it gets and uses life expectancy estimates incorrectly and that Coventry has worked to persuade short sellers — investors who profit when stock prices go down — to "write a hit piece on Abacus" based on the inaccurate allegations.
A short seller published an article based on Coventry's views in June. The article caused the price of Abacus stock to fall 21% within minutes and eliminated $287.4 million in market capitalization, or stock value, over the next four weeks, according to the Abacus complaint.
"Coventry's relentless campaign against Abacus has caused substantial harm to the company and its stockholders," Abacus said.
Coventry and Buerger have defamed Abacus, and Buerger has interfered with Abacus' relationships with its investors, Abacus said.
Coventry's statement: Coventry said in a statement that it continues to believe that Abacus is using life expectancy estimates that systematically underestimate the lifespans of life insurance policy insureds.
Abacus said in the complaint that it uses market-based fair value accounting to value the policies on its balance sheet, rather than a life expectancy valuation model. That assertion conflicts with a document filed with the U.S. Securities and Exchange Commission indicating that Abacus asset valuations depend partly on information from medical underwriting firms, Coventry said.
The Abacus response: Abacus does not use life expectancy estimates to value policies today, but independent life expectancy estimation firms do affect the fair-value valuations, by affecting policy transaction prices, an Abacus spokesman said in a response to Coventry's statement.
The SEC filing Coventry cites mentions Lapetus, but the filing is for a life settlement fund that has not yet gone into operation, and the Lapetus life expectancy estimates will be just one of many factors that the fund managers consider when buying policies, the Abacus spokesman said.
The fund also will also consider actual policy sale price data and life expectancy estimates from five Lapetus competitors, the Abacus spokesman said.
One indication that Abacus has a reasonable approach to policy valuations is that investors usually pay prices higher than the Abacus value estimate when they buy policies from Abacus, the spokesman said.
Credit: Shutterstock
© Arc, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to TMSalesOperations@arc-network.com. For more information visit Asset & Logo Licensing.