Things are looking
somewhat ominous for Life Partners Holdings (LPH), one of the
oldest and largest life settlements companies in the US, which has
acknowledged that it is under investigation by the Securities and
Exchange Commission (SEC).
LPH was vague in its
statement on the reasons for the SEC’s investigation. According to
financial publication The Wall Street Journal, the SEC is
investigating Texas-based LPH’s method of estimating life
expectancies of insured individuals, a key factor in determining
the value of a policy in a life settlements deal. According to
The Wall Street Journal, LPH uses a Reno, Nevada-based
physician to provide life expectancy estimates.
Go deeper with GlobalData
Established in 1991, LPH
reports having completed more than 127,000 transactions for its
client base of 27,000 high net worth individuals and institutions
relating to the purchase of 6,400 policies with a total face value
of $2.8bn. It is the only listed life settlements company in the US
and is listed on the NASDAQ exchange. Since December, LPH’s share
price has fallen about a third.
Indicative of high
profitability levels to be had in the life settlements market, in
its financial year to 28 February 2010, LPH achieved a 41.7% return
on equity and a 35.5% return on total assets. It reported total
assets of $81m at end of November.
LPH has also enjoyed significant growth in all key
business and profit metrics over its past four financial years
with, for example, net income increasing from $4.99m in 2006/07 to
$46.04m in 2009/10.
