Member Spotlight Interview with Stephen Luongo from AIR Asset Management

TL;DR

Life settlements involve the sale of life insurance policies for a cash transaction to provide liquidity, offering a better option than the cash surrender value provided by insurance companies.

Transcript

hello everyone this is richard c wilson at the family office club and today we're doing a member spotlight interview with uh steve luongo from air asset management which is a life settlement focused investment fund we've had seven or eight of our investors go into life settlements through covid this is an area where every time i bring it up somebod... Read More

Key Insights

• 🛟 Life settlements offer a way for individuals to monetize their unused life insurance policies, providing liquidity and potentially higher payouts.
• 🛟 The life settlement market is considered a socially responsible investment, as it helps individuals benefit from an asset they may not have known existed.
• 🖐️ Awareness of life settlements has been increasing, and companies like Coventry Direct have played a significant role in promoting the market.
• 🛟 Life settlements offer diversification and non-correlation to traditional markets due to their reliance on mortality and life expectancy, making them attractive to investors seeking stability.
• ✳️ Building a diversified portfolio of life settlements with a significant number of policies can mitigate concentration risks and enhance risk-adjusted returns.
• 😷 It is unlikely that advancements in medical treatments, such as a cure for cancer, would have a substantial impact on short-term returns due to the nature of life settlement portfolios and various factors that need to align.
• 🛟 Due diligence for potential investors should focus on understanding the primary risks associated with life settlements and how the assets are valued.
• 🛟 Many wealth management firms may overlook life settlements due to unfamiliarity or limited knowledge, but it can be a valuable addition to clients' portfolios.

Questions & Answers

Q: What is a life settlement?

A life settlement refers to the sale of a life insurance policy, where the insured person receives a cash payment greater than the cash surrender value but less than the death benefit, and the buyer continues to pay premiums until the insured's death.

Q: Why would someone choose a life settlement over the cash surrender value offered by insurance companies?

Life settlements provide individuals with a higher payout compared to the cash surrender value, allowing them to receive more immediate liquidity. It can be a better option for individuals needing funds for various reasons, such as healthcare expenses or reducing premiums.

Q: What are the primary risks associated with investing in life settlements?

The primary risks of investing in life settlements include changes in life expectancy, concentration risks related to specific health conditions, and regulatory risks. Understanding these risks is crucial for potential investors.

Q: How are life settlement assets valuated?

Valuation of life settlement assets involves a comprehensive analysis of factors such as life expectancy, impairments, and policy details. It is important for investors to understand how the assets in the portfolio are valued to assess the risks and potential returns.

Summary & Key Takeaways

• Life settlements are a transfer of risk between an insured person and a buyer, where the buyer pays the insured an amount greater than the cash surrender value but less than the death benefit of the policy.

• Life settlements allow individuals to monetize their life insurance policies, which can benefit both wealthy individuals looking to reduce premiums and individuals in need of funds for healthcare expenses.

• The life settlement market has been growing, driven by increased knowledge and consumer interest, and it offers diversification and non-correlation to traditional markets.