Back to basics.20 Dec 2020 18:24
The US Life Insurance market is absolutely massive at $19Trillion with $57Billion policies lapsing each year. Of these, less than $3Billion of policies are settled each year, leaving the remaining $54Billion that lapse, there to be bought. The market will grow over the next 10 years as the number of seniors (Age 65+) is projected to continue rising from the 42 million in 2012 to an estimated 70 million in 2030. So, both the supply of qualified policies, as well as demand for life settlements will continue to grow.
The Deal, a business intelligence and news service wrote in their publication in June 2019, The Life Settlement Report, that the life settlement industry saw substantial growth 2018. Their research showed a 28% increase in policies sold, to 2,587 last year, from 2,027, and an even larger 35% increase in volume by face amount. Face amount increased by about $1 billion, to $3.8 billion.
Those retiring now, and over the next 10 years, are used to using the internet which is ideal for targeted marketing which will build awareness that Life Settlement is a great option, far better than surrender or lapsing. Indeed Legislation is already present in 6 states in the US to ensure life policy holders are made aware of the settlement option.
Alpha, with SLIM and Colva, have in-house actuarial expertise specific to life policies - a quality not found in the usual settlement businesses. Alpha has one of the top Life Settlements market makers, Danny Swick, with $8Billion of trading experience, Jason Sutherland is linked with Blackstone Tactical Opportunities Group and has negotiated and structured multiple warehouse facilities between $30mn and $600mn and Austin King has his extensive connections for the sales.
The Black Oak Fund and it’s hybrids are an ‘uncorrelated’ asset class which is not affected by the usual financial markets. This is known to be of particular interest to UHNW Investors and Institutional Investors alike especially after the recent upheaval in the stock, commodity, and other financial markets. Additionally Alpha has structured a tax-efficient system which is especially attractive to these classes of investor and KPMG has validated a 16.2% annualised return.
I see no reason why DS shouldn’t achieve his target of $100mn (£80mn) by end 2021, this will produce an annual income of £600k for ALGW which, as GS said, will mean the company will break even. If the BOAGF reaches £250mn by end 2022 that’s an annual income of over £1.8mn for ALGW. On the Hybrid side of the business, each Separate Managed Account that is signed up could well produce an additional annual income of £240k.
I try not to get carried away with the potential of ALGW but 20p/share by the end of 2021 is well within reach. I’ve said it before but DYOR.
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