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LPHI: This Life Partner May Not Be Good for You

Article raises some issues and considerations, take it as an alert for further due diligence.

I am neither long nor short, just providing some fundamentals, experience, and outlook.

Comments:
1. I have assessed business plans in this market segment. Historically, the ones making most money with least risk in this segment have been the sales/producers/interm... Reinsurers, rumoured as Lloyds, took losses particularly with, rumoured risk structure, of taking the risk that the insured lived beyond two years and without any capping of the risk (ie, open-ended beyond year two).

2. The profits pie/circle was large but as:
(a) the market becomes more mainstream (more competitors, increasing awareness through TV ads, articles, etc)
(b) capital providers better understand that there is risk, and demand a return commensurate with risk even in a low rate environment, cost of capital is greater due to scarcity and systemic risks
(c) insurers and reinsurers adopt structures to better manage risk, and charge higher rates
etc etc
then there is likely to be a re-balancing or the proportion of the profits amongst stakeholders

3. Take each process/function/servi... of the business, and list good/best practice in one column, and then list what Life Partners or other companies do for each service.

4. Alignment of interests. I would like to see any revenue producing (or revenue-based incentivized) organization to also be aligned in the profitability of the risks that are underwritten. By this I mean the profits of the risks underwritten, not the stock price.

Just some considerations.

Disclosure: neither short nor long from an investment perspective, and no business relationship with Life Partners. From a potential client perspective, remain neutral as potentially may advise any stakeholder in the business (capital providers, risk bearers, underwriters, operational/adminstrat... service providers, investment/asset management providers, consumers, distributors/deal sourcers, etc.)