Another major US bank JP Morgan announced today that it was exiting life settlement investing as reported by DealFlow Media in this article but at the same time good friends of ours the Trannen Fund announce they are ramping up all across Asia.

So what are the implications of that? Is investing in life insurance a poor decision? Absolutely not.  I think that it speaks volumes on two levels, about our industry and more broadly about the US financial services sector.

JP Morgan join another high profile exit by Goldman Sachs earlier this year both citing dissappointment that the industry was showing so little growth. The fact is that foreign money has been a dominant force in life settlements growth since the start. Europe and increasingly Asia have the perspective needed for investing in this space. Investment banks are really misnamed in that they are really transaction banks their model is to make fees off of transactions…they are not investors.  The fact is that life settlements are complex assets to own and manage and understand and so simply cannot be reduced to exhange tradeable assets…its an investment not a trading opportunity. And a great one at that.

In addition, in this authors opinion these major banks are still in horrific financial shape. The fact is the accounting rules allow them to value their book according to whatever they want to report and they are dependent on a life support of free money from the Fed.  With all this support they are still not healthy and are still in triage. When a patient is in triage treating the gaping wound is what is important…Getting the right vitamins and nutrients for a long healthy life are not exactly a concern.

By contrast Asian wealth is exploding and these are investors seeking to amass assets. So it is no surprise to us that investors, with their own cash (not free money from the fed) are looking seriously at life settlements and specialist private funds that can get them the assets. The fact is these two announcements when viewed together are a perfect case study of the wealth transfer that is happening in the world. 

Life settlements is certainly not a huge asset class $10B – $20B seems to be the consensus…and in my view it will always remain relatively small. The references and hyperbole refering to the $20T life insurance market falsely represent the market potential. There simply are not that many high net worth seniors who can legitimately buy large life policies and then want to sell them, so get real about the potential. But it is a powerful asset to own and can add return and reduce volatility in a portfolio.  Investors with enough capital and perspective will increasingly want to understand and invest in life insurance. And those kind of individuals and organizations are not US investment banks.

When you retired you learned about all of the benefits that accompany being a senior.  As a member of the Golden Years community, you have access to discounts that others wish for.  One benefit that makes the rest of the population envious is an alternative investment, Life Settlements.  With Life Settlements, you are able to get  cash from an insurance policy that you already have.  The money you paid into your policy was meant to benefit your family, but if you have a need for cash now or simply no longer wish to pay the expensive premiums this could be a very profitable solution.  Life Settlements do not require you to divulge the reason you need the money. A life insurance policy is your property and like real estate, stocks or any other asset you own you have the absolute right to sell it, no questions asked.

Senior problems fixed by a better alternative

When you are accepted into the Golden Years community, many doors are opened to you.  You have earned certain privileges, you may  also have access to cash that others do not if you own life insurance.  As a senior, you may have the option to sell your life insurance like you might stocks or bonds that you own, for a large cash lump sum. 

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