Life Partners Holdings, Inc., through its subsidiary, Life Partners, Inc., operates as a financial services company that provides purchasing services for life settlements in the United States. The company facilitates life settlement transactions by identifying, examining, and purchasing the policies as an agent. Its financial transactions involve the purchase of life insurance policies at a discount to their face value for investment purposes. The purchasers of life settlements include high net worth individuals and institutional purchasers.
In a way it is very easy to narrow down purchases right now because so few companies have good charts. This is one of them; aside from the depths on October 10th LPHI has held its 50 day moving average since mid July. It is now back down to it ($34) after peaking at $42 last week. On the negative side this stock has had a monster run since the March lows when it was a teenager (bottomed around $12).
Investopedia has a nice article on the business from April 2008 - granted it was much cheaper then.
- The credit markets may have most of the economy in shackles, but one emerging industry stands to benefit handsomely from the turmoil. Life Partners Holdings (Nasdaq:LPHI) is the largest broker of so-called "life settlements", which enable policyholders to sell their life insurance policies at a discount for cash now. These life settlements are uncorrelated to the stock market and economy and are quickly drawing the attention of many institutional investors.
- Life Partners is a financial services company that facilitates viatical and life settlement transactions between high net worth individuals and professional investors. In fact, it is one of the best-positioned companies in the $15 billion industry with a Rolodex of 18,000 accredited institutional investors and more than 50,000 transactions since 1991.
- The recent economic turmoil has only increased business. Life settlements enable struggling individuals to not only receive cash now but also avoid paying any future premiums. When all is said and done, it is estimated that some 95% of term life insurance policies and over 80% of permanent life insurance policies lapse and become worthless.
- This means there is a $14 trillion potential market with the largest segment - baby boomers - becoming eligible to trade their policies. That's a huge opportunity for companies like Life Partners.
- Unfortunately, there is no benchmark to base Life Partners earnings multiple off of since it is the only public company in the industry.
- The life settlement industry is still relatively new, so it faces a somewhat unsettled legal foundation that is often challenged. Life Partners is facing lawsuits in Virginia, Utah and Colorado, but the company does not anticipate any of these will have a material adverse affect on its business
- Institutional buyers will purchase $15 billion in life insurance policies this year, according to estimates by Doug Head, the executive director of the Life Settlement Industry Association. That’s a 25% increase from last year and a 1,500% increase from five years ago. Will this growth continue?
- The life settlement industry is no different from any industry with supply and demand components of its growth rate. The supply is from policy owners wanting to sell and the demand is from institutions purchasing. Most agents and brokers are already familiar with the supply component of policies to be life settled: Sellers want to receive cash from unwanted or unneeded insurance that would otherwise lapse. Sellers want to use the settlement proceeds to improve their insurance or investment program.
The company announced a cash dividend Oct 22nd. (7 cents on top of their normal 1 cent)
- Life Partners Holdings, Inc. (NASDAQ GM: LPHI) announced today that it will pay a quarterly cash dividend of $0.08 per share. This amount includes the ordinary quarterly dividend of $0.07 per share plus the company’s traditional “Christmas Bonus” of $0.01 per share. The cash dividend will be paid to shareholders of record as of November 30, 2008 on or about December 15, 2008.
- For the quarter ended August 31, 2008, Life Partners expects to report $25.9 million in revenues, a 47% increase over the $17.6 million it reported for the same period last year. For the first half of the year ended August 31, 2008, the company expects to report revenues of $50.4 million, which is a 43% increase compared to $35.2 million for the same period last year.
- For the quarter, Life Partners expects to report a 56% increase in net earnings which were $6.6 million or $0.56 per share compared with earnings of $4.3 million or $0.36 per share for the same period of last year. For the six months ended August 31, 2008, the company expects to report earnings of $12.9 million or $1.08 per share compared with $9.1 million or $0.76 per share for the same period last year.
- Additionally, the company intends to report a five-fold increase in its investment in policies purchased for its own account from just over $1 million at February 29, 2008, to $6.3 million at August 31, 2008.
We are starting the company as a 2.5% position in the upper $33s. (thanks to Charles G for the idea)
Long Life Partner Holdings in fund; no personal position
1 comments:
Thanks for sharing your article! Life insurance is very common nowadays. A lot of people access to this because they want easy access to extra cash for emergency purposes. But have you heard of viatical settlement? Most haven't. A viatical is considered an investment of sorts to some, but a big scam to others. If you are misguided enough to think payday loans are bad, check this out. How it works is that a person who is the insured party of a life insurance policy names someone (other than say, their spouse and children) as their beneficiary for a fee, either to just get cash to spend, or to pay for things such as medical expenses. Some consider it among the worst scams around. It can be avoided through sound financial planning, which is infinitely superior to stooping to a viatical.
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