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10 May 2013 11:04
10 May 2013
Alternative Asset Opportunities PCC Limited
(the "Company")
Interim Management Statement
This interim management statement relates to the period from 1 January 2013 to the date of publication of this statement and has been prepared solely to provide additional information in order to meet the relevant requirement of the UK Listing Authority's Disclosure and Transparency Rules, and should not be relied on by Shareholders, or any other party, for any other purpose.
The Company is a closed-ended Guernsey registered protected cell company with one cell known as the US Traded Life Interests Fund (the "Fund").
Investment objective
The Company's investment objective in respect of the Fund is to provide investors with an attractive capital return through investment predominantly in a diversified portfolio of US Traded Life Interests ("TLIs").
Financial position and performance
Over the period to 31 March 2013, the Company's net asset value per share increased by 4.1% to 56.5 pence. As at 31 March 2013, the shares were trading at a 15.9% discount to the net asset value.
One policy maturity on one life was identified during the period. The gain from the policy maturity will be recognised in the 30 April 2013 NAV adding circa 0.2 pence to the unadjusted NAV per share. There have been, in aggregate, 42 policy maturities across 35 lives since the Fund's inception. Following the policy maturity identified during the period the Company now holds 105 policies covering 92 lives.
As previously announced, the Company's loan facility with Allied Irish Banks plc has been extended to 31 March 2014. As at 31 March 2013, total borrowings were US$4,238,906. Even assuming no further maturities before 31 March 2014, the facility is sufficient to pay all premiums.
The Board is not aware of any other material events during the period from 1 January 2013 to 31 March 2013, or in the period from 1 April 2013 to the date of this announcement, which would have had a material impact on the financial position of the Company.
The table below aims to give investors an appreciation of the effects on valuation of different assumptions as to both LE and IRR.
- The first line of NAVs in the table uses the 'Latest LE' assumption, that is to say either an LE based on a recently updated assessment obtained on or after 1 January 2011 or, for the remaining 34% of the portfolio by face value (the 'non-updated policies'), either the original LE assessed at the time of purchase or an LE updated before 31 December 2010. The average LE is shown for reference (4.5 years). NAV is then shown at four different discount rates, ranging from 10% to 20%. This shows the effect of IRR on current value, and it also allows investors to assess the effects of conducting forced sales at higher IRRs.
- The second line uses the assumption that updated LEs obtained for the non-updated policies would broadly follow those already obtained for other policies, resulting in an LE increase of 10% on the non-updated policies. In practice, the LE changes exhibited by actual revised assessments vary widely and the Board does not feel it is necessarily correct to extrapolate the changes for the non-updated policies. The overall effect is to increase average LE by 0.2 years.
- The third line assumes an increase in LE of 20% on the non-updated policies. The effect on NAV is proportionate to that shown in the second line with an incremental increase in LE of 0.2 years.
- Finally, the fourth line (entitled "no underwriting") shows the outcome of assuming LEs are simply based on the current table of life expectancies for the general population, the 2008 Valuation Basic Table, i.e. ignoring medical assessments. The Board does not suggest that this is a realistic assumption, but it gives a measure of the degree to which the portfolio is dependent on assessed LEs being shorter than for the population as a whole.
Sensitivity Matrix
Net Asset Value in pence per share on various assumptions as at 31 March 2013
Mortality Assumptions | Weighted Average LE | Discount Rates applied to cash flows | |||
10% | Current (12%) | 16% | 20% | ||
Latest LE | 4.5 | 60.2 | 56.5 | 50.2 | 45.2 |
+10% for LE dates before 01/01/2011 | 4.7 | 57.7 | 54.1 | 48.0 | 43.1 |
+20% for LE dates before 01/01/2011 | 4.9 | 55.4 | 51.9 | 45.9 | 41.2 |
No underwriting | 5.2 | 52.0 | 48.2 | 42.1 | 37.2 |
Source: SL Investment Management Limited
Distribution of Life Expectancy estimates
The following table shows the distribution by death benefit of the policies in the portfolio by LE band. Policies are grouped by 6 month LE bands and the table shows the number of policies and the total death benefit in each group. The LEs are the valuation LEs used for the 31 March 2013 valuation.
It is important to note that the LE is an average of the estimated length of future lifetime for an individual with a given age and health status. The table is not, therefore, a prediction of when actual maturities will occur and is thus not a cashflow forecast.
LE Band (Years) | Number of Policies | Death Benefit |
0 ≤ LE < 0.5 | 0 | $- |
0.5 ≤ LE < 1 | 0 | $- |
1 ≤ LE < 1.5 | 0 | $- |
1.5 ≤ LE < 2 | 4 | $1,700,000 |
2 ≤ LE < 2.5 | 2 | $5,500,000 |
2.5 ≤ LE < 3 | 3 | $2,447,134 |
3 ≤ LE < 3.5 | 11 | $21,016,451 |
3.5 ≤ LE < 4 | 23 | $35,650,000 |
4 ≤ LE < 4.5 | 15 | $16,652,440 |
4.5 ≤ LE < 5 | 10 | $8,611,438 |
5 ≤ LE < 5.5 | 14 | $18,134,732 |
5.5 ≤ LE < 6 | 7 | $13,250,000 |
6 ≤ LE < 6.5 | 11 | $21,151,195 |
6.5 ≤ LE < 7 | 3 | $14,600,000 |
7 ≤ LE < 7.5 | 3 | $3,500,000 |
7.5 ≤ LE < 8 | 0 | $- |
LE ≥ 8 | 0 | $- |
Total | 106 | $162,213,390 |
Source: SL Investment Management Limited
Top ten holdings
By reference to the most recent portfolio valuation of the Company as at 31 March 2013, the largest ten investments held by the Company, measured by life office exposure, were as follows:
Issuer | Number of policies | % of totalassets as at31 March 2013 |
American General Life Insurance Company (TX) | 12 | 22.32% |
Lincoln National Life Insurance Co | 14 | 18.28% |
Transamerica Life Insurance Company | 19 | 15.73% |
John Hancock Life Insurance Company | 9 | 5.77% |
Massachusetts Mutual Life Insurance Co | 5 | 5.60% |
MetLife Insurance Company of Connecticut | 6 | 4.56% |
Security Life of Denver Insurance Co | 1 | 4.38% |
Aviva Life and Annuity Company | 4 | 3.88% |
New York Life Insurance and Annuity Corp | 5 | 3.46% |
Pacific Life Insurance Company | 4 | 2.83% |
Company Information
Launch date 25 March 2004
EPIC TLI
Year end 30 June
Report & Accounts Annual Report posted October, Half-yearly posted February
AGM November
Price Information Financial Times (under INVESTMENT COMPANIES, listed as 'AltAstsOpps.')
Investor Information
The latest available portfolio information included in the Half Yearly and Annual Reports can be accessed via www.allianzgi.co.uk/TLI (under the Professional Investors section).
By order of the Board
Alternative Asset Opportunities PCC Limited
Enquiries:
Peter Ingram
Company Secretary Tel: 020 7065 1467
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