The 51 year-old female had retained a key man policy after the sale of her business to a private equity firm. A year later, she received a diagnosis of a manageable form of cancer. Recognizing that this health change likely created value in the policy that was of minimal consequence to her estate, she responded to a TV advertisement about life settlements.

With that single direct buyer using heavy-handed tactics to compel her to execute a sale agreement, her advisor engaged 1908 to ensure that she was receiving fair value for the policy; she subsequently received a high bid of $900,000 in 10 days, netting her 5.5x what she would have netted with the direct single buyer and at least $230,000 more than if she’d used a broker. It’s unlikely, though, given that only one bidder in the market ascribed any value to the policy, that a broker process would have yielded the $900,000 offer in the open bid process. The winning bidder in this case would have seen no/low demand in the market with their opening, much lower bid, as there is no incentive to bid aggressively unless there is market demand to incent higher bids.

The original owners and insureds of the policy, a healthy couple in their late 70’s, had a few years earlier sold the policy to a third-party LLC in which their beneficiaries retained an interest.

Despite the insureds’ good health and relative youth, the policy's no lapse guarantee made it very attractive to a universe of investors, as the only risk to an owner was duration and greater expense, not return. While the policy would become increasingly expensive as the insureds aged, the death benefit grew correspondingly, to a maximum of more than $8,000,000.

While we quickly received a number of bids, ranging from $650,000 to the winning bid of $802,500, it was a complex case that took longer to close than our typical transaction because the policy was held in a trust owned by an LLC, controlled by a 3rd party investor, in which the original beneficiaries still retained a minority interest and right to reject a sale to protect their ultimate projected payout.

The advisor, who was referred to us by a large institutional asset manager, had grown so troubled by a broker’s opaque and prolonged process - and the fee structure - that he canceled the engagement and sought an alternative solution for the sale of his 91 year-old widow client’s policy. The policy, which had no remaining cash value and was draining $25,000/year in premiums, had become unnecessary upon the death of the last beneficiary of the trust that owned the policy.

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• Blind, best-and-final auction process yielded $167,400 higher max bid

• 7.5% vs. 33% broker fee

• More efficient process resulted in bids in 5 days (vs 90)

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Because of her advisor’s principled concern about the egregious fees, she received, after a five-day auction, $224,595 more in proceeds than the incumbent life settlement broker process yielded.

Without the proactive engagement of their advisor, the couple would unwittingly have foregone almost $650,000 in windfall proceeds from a policy whose term was months from expiring. The 61 year-old insured's recent diagnosis of a manageable form of cancer created value in the soon-to-expire term policy.

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As a first step, the firm’s insurance professionals engaged us to assess the likely market value of the policy, to inform a decision whether to convert the policy to Universal Life policy. A quick market scan made it clear that there were several conversion options that would likely have value to at least a few market buyers.

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Importantly, this case highlights the implications of our blind, best-and-final auction process - while the high bid was $700,000, the second-highest bid was only $50,000. The auction process employed by brokers not only takes far too long to complete, it would never have revealed the value that an outlier bidder placed on the policy, likely yielding a winning bid of $60,000. 

The trustee of a Trust that held a term policy on the moderately impaired 67 year-old insured engaged us regarding the potential for a settlement of the term policy that was two months from expiring. She had intended to let the policy expire, but realized that it would make sense to explore whether a converted policy might yield something in a sale.

The insured, who also funded the Trust, had a complex medical history that resulted in variable views of his life expectancy. Given his age, buyers' actuaries would need to forecast a life expectancy of <20 years for the policy to have any value at auction.

Our blind, best and final auction process, however, ensured that those bidders with a view of a shorter life expectancy would not be able to curate their bids to be only sufficiently higher to win the auction, but rather to the actual value they ascribed to the policy. The policy received a handful of bids, with a max bid of $200,000 - yielding a much better outcome for the Trust than lapsing it would have.

The UHNW couple, a 79 year-old female and 85 year-old male, maintain a charitable Trust with significant assets, including several life insurance policies. The life insurance was becoming increasingly expensive and the family, their advisors, and the Trustee assessed, given the exhausted cash value of each policy, that the best interest of the Trust would be to exit two of the policies.

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We had engaged the firm, with more than $10 billion of in-force life insurance across 1,500 clients, just a few months prior. Although they had used life settlement brokers for years for similar situations, they assessed that our approach would yield significant benefit beyond what their previous broker could deliver. Indeed, we conducted a 5-day auction and received winning bids totaling $5,300,000 and net proceeds of $4,770,000 (with this client firm, we each receive fees for service of 5%).

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Even if a broker could have secured the same bids (unlikely), the Trust would have received $1,200,000 less than the net we enabled the advisor to deliver due to their egregious fee structure.