• Filing Date: 2018-05-10
  • Form Type: 10-Q
  • Description: Quarterly report
v3.8.0.1
Life Settlements (Life Insurance Policies)
3 Months Ended
Mar. 31, 2018
Investments, All Other Investments [Abstract]  
Life Settlements (Life Insurance Policies)
Life Settlements (Life Insurance Policies)

The Company accounts for policies it acquires using the fair value method in accordance with ASC 325-30-50 Investments-Other-Investment in Insurance Contracts. Under the fair value method, the Company recognizes the initial investment at the purchase price. For policies that were relinquished in satisfaction of premium finance loans at maturity, the initial investment is the loan carrying value. For policies purchased in the secondary or tertiary markets, the initial investment is the amount of cash outlay at the time of purchase. At each reporting period, the Company re-measures the investment at fair value in its entirety and recognizes changes in the Statements of Operations in the periods in which the changes occur.

As of March 31, 2018 and December 31, 2017, the Company owned 603 and 608 policies, respectively, with an aggregate estimated fair value of life settlements of $567.6 million and $567.5 million, respectively.

The weighted average life expectancy calculated based on death benefit of insureds in the policies owned by the Company at March 31, 2018 was 8.1 years. The following table describes the Company’s life settlements as of March 31, 2018 (dollars in thousands):
Remaining Life Expectancy (In Years)*
Number of
Life Settlement
Contracts
 
Estimated Fair
Value
 
Face
Value
0 - 1
9

 
$
31,822

 
$
38,774

1 - 2
12

 
31,769

 
48,028

2 - 3
29

 
60,552

 
113,070

3 - 4
36

 
59,685

 
159,501

4 - 5
53

 
88,757

 
248,700

Thereafter
464

 
295,043

 
2,244,730

Total
603

 
$
567,628

 
$
2,852,803

*Based on remaining life expectancy at March 31, 2018, as derived from reports of third party life expectancy providers, and does not indicate the timing of expected death benefits. See "Life Settlements" in Note 14, "Fair Value Measurements" of the accompanying consolidated financial statements.

The weighted average life expectancy calculated based on death benefit of insureds in the policies owned by the Company at December 31, 2017 was 8.3 years. The following table describes the Company’s life settlements as of December 31, 2017 (dollars in thousands):
Remaining Life Expectancy (In Years)*
Number of
Life Settlement
Contracts
 
Estimated Fair
Value
 
Face
Value
0-1
9

 
$
29,520

 
$
36,474

1-2
13

 
30,362

 
42,718

2-3
25

 
46,609

 
92,780

3-4
32

 
68,439

 
168,946

4-5
60

 
98,516

 
281,865

Thereafter
469

 
294,046

 
2,257,704

Total
608

 
$
567,492

 
$
2,880,487


*Based on remaining life expectancy at December 31, 2017, as derived from reports of third party life expectancy providers, and does not indicate the timing of expected death benefits. See "Life Settlements" in Note 14, "Fair Value Measurements" of the accompanying consolidated financial statements.

Estimated premiums to be paid for each of the five succeeding fiscal years and thereafter to keep the life insurance policies in force as of March 31, 2018, are as follows (in thousands):
 
 
Remainder of 2018
$
68,542

2019
98,849

2020
102,051

2021
101,723

2022
98,224

Thereafter
788,220

 
$
1,257,609



The amount of $1.26 billion noted above represents the estimated total future premium payments required to keep the life insurance policies in force during the life expectancies of all the underlying insured lives and does not give effect to projected receipt of death benefits. The estimated total future premium payments could increase or decrease significantly to the extent that insurance carriers increase the cost of insurance on their issued policies or that actual mortalities of insureds differs from the estimated life expectancies.