Abacus Aims to Sell In-Force Policies to the Insurers

What You Need to Know

Abacus went public in July 2023.
It has used some of the capital raised to create a DIY policy value estimator tool.
The firm is also offering life insurers and pension plans a death tracking service.

A company that buys in-force life insurance policies from the customers hopes to sell some of the policies to life insurance companies.

Jay Jackson, the CEO of Abacus Life, talked about his company’s efforts to sell policies to life insurers last week, during a conference call the company held to go over results for the fourth quarter of 2023 with securities analysts.

“There is a significant carrier that we work with now,” Jackson said. “There are more that we’re in deep conversations with.”

For life insurers, buying in-force policies through the life settlement market can be a way to help consumers free the capital locked inside their policies while reducing the amount of old, unwanted “legacy liabilities” on their own balance sheets, Jackson said.

If life insurers begin buying in-force policies, that will add to the amount of cash Abacus can use to buy policies, Jackson added.

What it means: Older clients with unwanted permanent life insurance policies, or unwanted term life policies that can be converted into permanent life policies, may find life settlement firms competing more ferociously than ever for a chance to buy the policies.

The life settlement market: Life settlement firms are companies that buy in-force life insurance policies from people believed to have a relatively short life expectancy.

Abacus itself noted in the Form 10-K annual report it filed with the U.S. Securities and Exchange Commission that the typical insured is 75 or older.

Abacus estimated that U.S. customers let about $200 billion in life insurance coverage lapse every year and that life settlement firms manage to buy only about $6 billion of the lapsing death benefits.

Traditionally, some life insurers have questioned whether life settlement firms should be allowed to buy policies, pay the premiums and throw off insurers’ assumptions about how likely policies are to lapse.

Life settlement firms argue that they make life insurance policies more useful and more valuable, by creating the same kind of “secondary market,” or aftermarket, for life insurance policies that already exists for items such as shares of stock, bonds, houses, cars and books.

One early publicly traded life settlement company, Life Partners Holdings, failed in 2015 because of the effects of problems with inaccurate lifespan estimates.

Abacus: Abacus is an Orlando, Florida, based company that obtained a Nasdaq listing in July 2023.

The company has 106 employees and relationships with 78 institutional investors.

It buys policies through life settlement brokers, a network of about 30,000 retail agents and advisors, and direct-to-consumer systems.

It keeps many of the policies, sells others to investors that can manage their own life insurance policy portfolios, and serves as a policy seller and life policy portfolio manager for other investors.

When Abacus helps investors buy policies, it charges an origination fee of about 2% of the death benefit, up to a maximum of $20,000 per policy.

The firm can also manage, or service pools of life insurance policies for outside investors for a flat rate per policy or a servicing fee equal to about 0.5% of the portfolio asset value.