This is a problem, that no one in the industry could foresee. Transamerica, AXA, Hancock and others are touching the 3rd rail by slamming COIs, to make up for their high min int rates they can't attain in these artificial int rate environments.
The point of these COI bumps is to reduce the int drain and to drive up lapses, which will alleviate reserve pressure too.
But these pools with premium reserves getting modeled will be subjected to meltdown on some policies now.
AXA is delaying their COI pops until March 2016. Get ready, there will be heaps of class actions filed and plenty of calls for action coming in from insureds/owners to their respective Stare Ins Commissioner.
Shareholders had fair warning and a simple stock trade exit opportunity for many many years. Many were suckered in by dividend yield searches, but never undertook the task to investigate the quality of those dividends.
Great answer. The reality is the plan that got everyone to bite, was never backed up with cash flows, updated premiums/reserves and an actuarial lense looking forward. But I doubt the Judge will allow another preying upon your funds, even though $25 million of maturities has been set aside to pay the "professionals" at $600+ per hour. Your returns not only face the pressure of increasing COI, but the unrestrained grab by the plethora of peoples supposedly there to protect your interests. The devil os in the details.
If you have representation, its time for them to provide guidance for whatever they have been paid.
I'm not sure this had to be handled this way and at this expense since bankruptcy.
Anyone see a conflict with Granieri involved considering his former employer was doing the LEs for several years? Not sure of his role right now, but IMHO I wouldn't have him on the bus.
No LPHI didn't pass the smell test for LISA. I recollect they tried to sue their way in....fail!
There was a decade of warning signs about LPHI and how they conducted themselves. Their 10k and 10Q were filled with indications of things askew. These investors didn't buy LPHI fractionals, they were SOLD them.....and thus much like we now find with annuities, too high of a commission forced the moral hazard..
But what most people don't realize as the lawyers spout about commissions snd fees, a life agent gets upwards of 95% of the first year premium on a life insurance policy as a commission.......in the scheme of things, that's not disclosed and it's miniscule compared to the LS cascade.....
Higher than warranted int rate assumptions can mask COIs too. Some brokers would goose the int rates on illustrations because it suppressed premiums with interest spin off. I think Kurt was playing with his trains too much and allegedly allow parties int the caboose.
Have the premiums financed with a rabbinical contract, and you'll have zero put of pocket when the contestability period ends. This was allegedly akin to printing money in Williamsburg/Brooklyn.
GPRO is years behind on this Vapor ware product.
Other purveyors are marching well ahead on the value curve.
Look up Lily Camera.....CES best product 2016.....they've positioned as a camera not a drone (which it is).
Besides Polaroid is going to have a solid snack on the Session.
Driven to a commodity so fast in typical fashion, the mgmnt was waxing up their boards or feeding their pets under their desks.
I doubt it goes into distribution until the premium reserves are sufficient to meet whatever cash flow model they devise is satisfied. Why are parties resistant to going after additional licensees?
Spot on. There were RAPs on some and other loads that could have been managed too.
Variable ULs are in the pool with aggressive assumptions (apart from being securities to begin with) and probably term product that went beyond the conversion option. The CCHs generated by LPI are problematic as the assumptions for the underlying illustrations were never disclosed. I'm not sure why they overloaded premiums on so many policies other than it helped drive commissions for licensees as it elevated the raise.
What was the end game?
Check it yourself..I didn't say that. LS impacted the lapse ratios.....and it is a topic discussed within his company AXA. Attend some LS conferences or subscribe to industry papers.....COI increases are creating pain for some portfolios as will be the case with the LPI fractionals.
We may be able to agree one thing, many policies were mispriced during a downturn in Life insurance sales as a means to make them more attractive. Those were eventually targeted for Life settlements.
Also some of the policies seeing the COI hits were also written with high minimum int rates...let's say 5%+.....and they are a drag on the issuer.
If I recollect, the older CCHs which LPI generated had contrived level premiums to age 100 or when the policy term expired, older cases ran to age 95 with no extension riders, later ones to age 100. The premiums paid on those was much higher than necessary (not optimized) and some have large accumulated cash values, some to the tune of millions overfunded!! Other later CCHs were of the "optimized" variety and didn't provide a view beyond the illustrated horizons. Many investors has been paying premium calls per because the escrow acct was exhausted even though the policy had cash values that could fund several years of premium.
There is a huge step up in COI as they age, but there is also the COI increases that have been announced by several insurers, which may make a bad situation even worse.
Considering I swim with an actuary at AXA in SF and we specifically discussed this very aspect of lapses being impacted by the life settlements industry, I'll call you on this. Underpriced, low COI/Premium policies eventually became targeted by the LS industry and we're produced in great volumes in the policy mills,of Williamsburg. Yes pure profit isn't the proper term, but you know how it cascades.
COIs usually get redressed when a company goes into insolvency and the acquirer rights the ship.
But to your point, these may have not hit the embedded lapse assumptions the acquirectuaries priced, but LS certainly assured it wouldn't.
Scare tactic? Hardly. ...I've steered many during the decade this scam was rolling. Where were you?
COI increases have been coming now......from insurers you've named...plus AXA as well. Some increases are as,much as 200% and NO ONE in the industry could for see this tactic by issuers to give the LS industry a solid kick. The insurers based their premiums on lapse based pricing.....when a policy lapses, its pure profit once the reserves are released. But LS reduced the lapses by giving an alternative and this in turn crimped the insurance companies profits. These increases aren't across the board, but on certain products/classes, which may have been underpriced to begin with.
If these are COI increases, its impacting all insureds/owners.....which may now drive lapses up.
But I think you deserve a detailed explanation from the trustee.