2nd Oct 2013 10:01
LONDON (Alliance News) - Alternative Asset Opportunities PCC Ltd Wednesday said its net asset value over the year declined by just over 40%, which the company put down to its issue of 32 million shares earlier in the year, but its borrowings feel sharply.
Alternative Asset Opportunities said the face value of life insurance policies matured in the 12 months to June 30 was USD5.7 million against USD8.2 million in premiums paid on those policies over the same period. For the same period last year, those figures were USD16.9 million and USD8.4 million respectively, though last year's figures included 8 matured policies against this year's 7.
The company takes on the life insurance policies of US-based policyholders who want to cash in before they die. The company then takes on the premium payments and takes income when the policies mature. The longer a policy takes to mature, the more premium payments the company has to make before maturity.
Alternative Asset Opportunities said its net asset value per share dropped to 48.5 pence on June 30, compared with 81.2 pence at the same point last year.
However, its borrowings dropped to USD5.9 million as a result of the share issue, compared with USD29.2 million last year, though the company warned that it may in the future have to use the proceeds from maturing TLIs to pay off borrowings.
The company's investment objective is to give capital returns to investors through investment in LTIs.
With an average life insured age of nearly 90 years and an average life expectancy of five years, the company said its portfolio has investment gain potential because the total death benefit of its policies is USD159.9 million against a prevailing valuation of USD56 million. Last year the same figures were USD165.6 million and USD65.4 million, respectively.
The risk to the company is that the life expectancy of those original policyholders exceeds the anticipated average life expectancy, which would cause the company to pay more in premiums, thereby increasing its costs against the eventual maturity.
The company added that it does not anticipate having to pay tax to the US Internal Revenue Service on maturities from policies it held before becoming a UK tax resident. The company said it would challenge any claim to tax by the IRS, adding that if it does have to tax the the amount would not exceed USD4.7 million before interest an any applicable penalties.
It has no current plans to acquire new policies, though it said it is open to selling in the right conditions.
The company doesn't invest in so-called viatical policies, under which the original policyholder is terminally ill with a life expectancy of less than two years.
Alternative Asset Opportunities shares were Wednesday quoted at 41.5 pence, down 0.5 pence, or 1.2%.
By Samuel Agini; [email protected]; @samuelagini
Copyright 2013 Alliance News Limited. All Rights Reserved.
Related Shares:
TLI.L