defined benefits fund accelerated class. overview markets today unknown risks needed opportunity to...
TRANSCRIPT
DEFINED BENEFITS FUND
ACCELERATED CLASS
Overview
Markets today Unknown risks Needed opportunity to overcome market
concerns 21st Century replacement for With Profits
Today's Presentation
An overview of Traded Life Policies (TLP’s) as an asset class
What are TLP’s? Why TLP’s are an important asset class Why people sell their policies The TLP market place How TLP’s are purchased How TLP’s are valued within a fund
What are TLP’s?
United States Issued Life Assurance Policies United Kingdom Issued Endowment Policies Policy purchased at discount from fixed maturity value,
generating guaranteed profit when the policy pays out
Example Holdings
Axa Clerical Medical Commercial Union Sun Life American General Life Norwich Union Prudential John Hancock Life Standard Life Pacific Life Friends Provident
Important Asset Class?
TLPs offer a fixed return to the investor Unaffected by other investment fluctuations Returns in the fund are extremely smooth Natural maturity point eliminating the need to find a
future buyer Net historic returns 9% p.a.
Market Today
Policies purchased from those aged 65 or over More accurate and finite life expectancy tables Policies in force two years plus – beyond contestability Regulated market maker gives competitive pricing and
protects buyer and seller
Why do people sell their policies?
Estate planning Change original beneficiary Strip out accumulated value to provide
income replace with cheaper term Key-Man Premiums no longer affordable
Market Growth
----------- 1990 $50 million
------------ 1999 $ 1 billion
------------ 2001 $ 4 billion
------------ 2006 $12 billion
Issued US Life Policies $13,000 billion
How are TLP’s purchased?
A life expectancy (LE) is obtained Illustration made to establish future premium
liability Offer made for policy – US law requires 3 offers
before a policy is traded
Next Step
Funds deposited in US based Escrow Account Life Assured, Policyholder and Beneficiaries sign transfer Policy transferred to new owner Funds released from Escrow to the seller Insurance Company notes new beneficiaries and purchase is complete
Calculations
Establish life expectancy (LE) Calculate future premium liability Create an actuarial model to unwind future profits
Example of Policy Selected for Fund
LE 64 Months Sum Assured $1,000,000 Purchase Price $ 629,215 Includes Premium to LE $ 97,275 Net Purchase Price $ 531,940
Return 58.93%
81 Year old – New York Life.
Life Expectancy
Annual Premium $ 18,239
Expected Return $370,785
Annual Return
13.10%
11.05%
9.56%
Months
Low LE 54
Average LE 64
High LE 74
Open Ended Investment
Aurora is an open ended investment Flexible investment term Shares redeemable upon demand Monthly fund valuations provided Regulated mutual fund
Disaster Scenario!
Annual Premium $18,239
Population LE 110 monthsLE x 2128 months
Annual Return 3.53%Annual Return 4.69%
Invest
USD class minimum $10,000 110% allocation from day one $11,000 invested 7 Year investment recommended - (No exit charges
after 7 years) 1.25% p.a. management charge Target 7 – 9% annual growth
10% EXTRA ALLOCATION
• INVEST $50,000
• DAY ONE BECOMES $55,000
• YEAR END TARGET MINIMUM
•17%
HOT OFF THE PRESS!
November 2007 - Annual return 9.35%
Investor with enhancement and $100,000
Return at end of First Year 20.3%
AURORA
Should you have any questions or require any further information please contact:
PCP Support
Tel: +357 25817488 Fax: +357 25749755 Website: www.pcpfunds.com Email: [email protected]