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19 Nov 2013 16:15
19 November 2013
Alternative Asset Opportunities PCC Limited
(the "Company")
Interim Management Statement
This interim management statement relates to the period from 1 July 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
The original published net asset value per share as at 30 June 2013 was 55.6 pence, but the Annual Report and Accounts adjusted this figure to 48.5 pence, a reduction of 12.8%, and explained the reasons for this change. Over the period to 31 October 2013, the Company's net asset value per share decreased by 1.9% from the adjusted figure to 47.6 pence. As at 31 October 2013, the shares were trading at a 13.9% discount to the net asset value.
Five policy maturities on five lives were identified during the period. The gain from one policy maturity was recognised in the 31 July 2013 NAV adding circa 2.1 pence to the NAV per share. The gains from the other four policy maturities were recognised in the 31 October 2013 NAV, adding a total of 1.5 pence to the NAV per share. There have been, in aggregate, 50 policy maturities since the Fund's inception.
The Company's loan agreement with Allied Irish Banks plc is due to expire on 31 March 2014. The Company is currently in the process of negotiating a renewal of the loan agreement beyond that date. As at 18 November 2013, following repayment of the above maturity proceeds, there are no borrowings under the agreement and the cash balance stands at $1,708,096.
Material events and transactions in the period and since 31 October 2013
At the Annual General Meeting held on 13 November 2013 an ordinary resolution was passed to approve the continuance of the US Traded Life Interests Fund of the Company until the Annual General Meeting to be held in 2014.
The Board is not aware of any other material events during the period from 1 July 2013 to 31 October 2013, or in the period from 1 November 2013 to the date of this announcement, which would have had a material impact on the financial position of the Company.
The tables below aim to give investors an appreciation of the effects of differing assumptions 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 April 2013), or for the remaining policies an adjusted LE based on the most recent LE obtained, increased by 12%. The average LE is shown for reference (4.9 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 allows investors to assess the effects of policy sales if, for example, the portfolio was to be liquidated.
- The second line shows the effect of a further increase of one year in the valuation LEs.
- The third line shows the effect of a decrease of one year in the valuation LEs.
- Finally, the fourth line 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 LE assessments.
Sensitivity Matrix
Net Asset Value in pence per share on various assumptions as at 31 October 2013
Mortality Assumptions | Average LE | Discount Rates applied to cash flows | |||
10% | Current (12%) | 16% | 20% | ||
Latest LE | 4.9 | 50.7 | 47.6 | 42.4 | 38.3 |
+1 year for all LEs | 5.9 | 37.7 | 34.9 | 30.5 | 27.1 |
- 1 year for all LEs | 3.9 | 65.1 | 61.8 | 56.2 | 51.6 |
Using 2008 VBT | 5.0 | 50.4 | 47.2 | 41.8 | 37.6 |
Source: SL Investment Management Limited
Distribution of Life Expectancy estimates
The following table shows the distribution by LE band of the death benefit and number of lives in the portfolio. Lives are grouped by 6 month LE bands and the table shows the number of lives and the total death benefit in each group. The LEs are the valuation LEs used for the 31 October 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 Lives | Death Benefit |
0 ≤ LE < 0.5 | 0 | $ - |
0.5 ≤ LE < 1 | 0 | $ - |
1 ≤ LE < 1.5 | 0 | $ - |
1.5 ≤ LE < 2 | 1 | $ 1,300,000 |
2 ≤ LE < 2.5 | 2 | $ 5,500,000 |
2.5 ≤ LE < 3 | 1 | $ 2,000,000 |
3 ≤ LE < 3.5 | 5 | $ 11,450,000 |
3.5 ≤ LE < 4 | 10 | $ 14,036,918 |
4 ≤ LE < 4.5 | 16 | $ 26,109,334 |
4.5 ≤ LE < 5 | 8 | $ 13,075,240 |
5 ≤ LE < 5.5 | 14 | $ 30,650,000 |
5.5 ≤ LE < 6 | 8 | $ 9,714,265 |
6 ≤ LE < 6.5 | 6 | $ 8,861,438 |
6.5 ≤ LE < 7 | 7 | $ 12,401,195 |
7 ≤ LE < 7.5 | 3 | $ 11,000,000 |
7.5 ≤ LE < 8 | 2 | $ 2,500,000 |
LE ≥ 8 | 2 | $ 3,000,000 |
Total | 85 | $ 151,598,390 |
Top ten holdings
By reference to the most recent portfolio valuation of the Company as at 31 October 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 October 2013 |
American General Life Insurance Company (TX) | 10 | 20.35% |
Lincoln National Life Insurance Co | 14 | 18. 32% |
Transamerica Life Insurance Company | 18 | 16.21% |
Massachusetts Mutual Life Insurance Co | 5 | 7.55% |
MetLife Insurance Company of Connecticut | 6 | 5.02% |
Security Life of Denver Insurance Co | 1 | 4.84% |
John Hancock Life Insurance Company | 6 | 4.48% |
New York Life Insurance and Annuity Corp | 5 | 4.08% |
Aviva Life and Annuity Company of NY | 4 | 3.95% |
Genworth Life Insurance Company | 1 | 2.47% |
Company Information
Launch date 25 March 2004
EPIC TLI
Year end 30 June
Report & Accounts 2013 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 interim and annual report and accounts 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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