Many Advisors Have No Idea What Life Policy Assets Are Worth: Jay Jackson

Abacus hopes to complete the Eres merger, change the name of the combined company to Abacus Life Inc., and have its stock trading on Nasdaq, under the symbol “ABL,” by July 27.

Jackson is hoping that having 20 years of net positive earnings will help get Abacus respect from investors once it goes public.

“We’re an established business,” he said.

The Opportunity

Abacus based the estimate that life policy resale value could account for about 6% to 8% of a typical advisor’s assets partly on an assumption that a typical advisor has 100 to 500 clients, with two-thirds having owned life insurance and 30% being old enough to be of interest to life settlement companies.

The Challenges

One challenge facing Abacus is life insurance companies’ moves to increase policy owners’ cost-of-insurance charges.

A second challenge is efforts by some life insurers to use higher-than-normal cash surrender value figures if certain owners give up their policies. That, in effect, puts the insurers in competition with the life settlement companies, Jackson said.

But Jackson said that, in some ways, the enhanced cash surrender value initiatives validate the value of what life settlement companies do.

A third challenge is the mortality forecasting uncertainty created by the COVID-19 pandemic.

It’s still not clear whether COVID-19 significantly shortened the lives of many insureds who would have lived for several more years, or if the pandemic simply accelerated the deaths of insureds who already had short life expectancies, Jackson said.

A fourth challenge is the reputation concerns created by some life insurers’ hostility toward the life settlement concept, and problems at earlier life settlement companies, such as Life Partners, a company that eventually failed because of reliance on overly pessimistic life expectancy estimates.

“Continued public opposition to the life settlement industry, as well as actual or alleged wrongdoing by participants in the industry, could have a material adverse effect on the company and its investors, including on the value and/or liquidity of the company’s investments,” according to the Eres proxy filing.

But Jackson predicted that public education and the need for the life settlement market will win people over.

“This is a real benefit to people with policies, and it’s a real benefit to the investors,” he said.

Jay Jackson. (Photo: Abacus Life)