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Betty's Corner


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Life Settlements Pitched to Managers

A firm that specializes in buying life-insurance policies for investment purposes has shown a $50 million life-settlement portfolio to a half dozen hedge fund managers. Lifeline Program of Atlanta began talking to the unidentified fund operators over the past month. The firm soon plans to approach three other firms with an appetite for life-settlement investments: Apollo Global Management, Cerberus Capital and Fortress Investment. In its marketing pitch, Lifeline is touting its strict underwriting standards, telling potential buyers that the policies are supported by timely premium payments and updated medical records for the original beneficiaries.

Lifeline assembled the pool of life settlements with financial backing from five private investors. The firm and its backers are prepared to sit on the assets if they don't get the price they're looking for. Founded in 1989, Lifeline acquires universal-life policies at substantial discounts to their face value, then sells them to investors willing to maintain the premium payments until the original policyholders die. The investors are then entitled to collect the death benefits.

Over the years, Lifeline has traded $1.4 billion of life settlements. It also makes money as a servicer of the policies. Lifeline bills itself as a specialist in "clean" assets - that is, policies that are current and can be traded without raising legal or regulatory red flags. Some players in the life-settlement market focus on distressed assets that can be picked up on the cheap, but also are at risk of losing value if the underlying policies are found to be defective. In that case, an investor can pay millions of dollars in annual premiums but never get to collect the death benefits.


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