Abacus Aims to Sell In-Force Policies to the Insurers

The firm has used some of the cash it has raised recently from investors to organize consumer-oriented advertising campaigns and to get consumers’ attention with a free, web-based life policy value estimator.

Because Abacus has developed systems to verify whether the people insured by the life policies it manages have died, it can also sell participant life tracking services to life insurers, pension plans and other organizations.

The earnings: Abacus has changed its operations since it went public, and its current operations are not directly comparable to its old operations.

The company reported $9 million in net income and $24 million in operating income for 2023 on $66 million in revenue.

The company is increasing its focus on active management of policies held on its own books, with the value estimated based on what the current fair market value appears to be.

Total active management revenue increased to $61 million, from $43 million in 2022.

The company bought 382 policies through its active management division in 2023, sold 196 policies to 10 other investors, and collected $828,226 in death benefits on three policies that matured.

The company ended 2023 with about $122 million in value tied to 287 policies accounted for using the fair value method. About 20% of the fair value was tied to policies issued by John Hancock.

The company valued its 30,000 advisor relationships at $12.6 million, or about $4,200 each.

The life insurers: Jackson said he believes that the fact that Abacus is a publicly traded company with an easy-to-use life policy value estimator on its website will make life settlement investments more appealing for all institutional investors, including life insurers.

“The challenge from the carrier’s perspective is that they’ve kind of looked at our industry over time,” he said. “Maybe they haven’t had the best experience or the highest level of opinion of our industry historically.”

In the past, some life settlement firms have noticed life insurers trying to buy back customers’ policies, in an effort to get policies with very high interest rate guarantees off the books. Those life settlement firms have accused the life insurers buying back the policies of engaging in life settlement business without following life settlement business rules.

The life insurers buying back the policies “validate what we’re doing,” Jackson said. “And that provides additional education to those policyholders. They’re like, ‘Gosh, I should treat my policy like equity, not like debt.’ Why would you ever let this thing go, stop making premium payments, if it has a true equity value?”

Jackson said he thinks the life insurers’ buyback efforts validate what the life settlement firms are doing.

The insureds: Jackson emphasized that Abacus continues to be eager to buy policies through brokers and retail agents and advisors.

But he said the company hopes to expand the market by making insured consumers who are happy with Abacus’ price offers comfortable with selling policies directly to Abacus.

“For us, you don’t need an auction to know the value of a life insurance contract,” he said. “You need a calculator. There’s a lot of greater opportunity for the policyholder to have a much better understanding of what their policy is worth without having to pay significant intermediary costs. Because of that, we’re able to acquire more policies in a much more efficient way.”

Jay Jackson. Credit: Abacus Life