Alternative Asset Opps Pcc Share Discussion Threads

[skyship] 31/8/2016 14:15

Hi - can anyone help?

I'm trying to find the cost to the Company of making the occasional capital repayments.

The last one was of 2p back in Jun'14; but so far unable to find reference to the cost - other than the basic 2p/share of course - just the costs. £10k, £15k, £20k maybe...

[extrader] 27/7/2016 11:46

Hi Sleepy,

"The expected acceleration in maturities" has been expected for years and hasn't happened. Why should it happen now?

Why ever not ? is much harder to explain ;-> !!

ATB

[sleepy] 19/7/2016 10:34

They had an average age of 91 last year but, as usual, fewer than expected maturities

[cockerhoop] 18/7/2016 15:19

Because the insured now have an average age of 92! They are though showing every sign of having discovered eternal life!!

[sleepy] 18/7/2016 15:14

"The expected acceleration in maturities" has been expected for years and hasn't happened. Why should it happen now?

[ironstorm] 16/7/2016 12:19

Welcome RNS - Nav now 51.1 which includes some of the increased costs. I think we can make a similar assumption for the others and reduce NAV to 50p. Discount is 20%. Anyone who bought at recent lows will be very pleased.

Exchange rate movements was the most significant impact. I am not expecting lots more from this but their may be a bit more.

Now we just need the expected acceleration in maturities to turbo charge NAV.

Great hedge in this climate.

[langland] 23/6/2016 14:38

Thank you for posting that. I had not seen that before.

[courant] 23/6/2016 13:47

Sounds like good news to me, I'd welcome a sale to close the fat discount and remove the risk of further "cost of insurance" issues. Although this will involve giving up future returns, I think the risk reward profile here has materially changed. From the May factsheet:

New investment capital continues to enter the life settlement market. This is being driven by investor demand for asset classes with low
correlation to the traditional capital markets. This has always been one of the key attractions of life settlements, but is particularly
pertinent given the current high volatility in global equity markets.
Sustained demand for life settlement policies in the secondary and tertiary markets is supporting market prices, which are expected to
remain at current levels for the foreseeable future. Larger investors will continue to look to the tertiary market in an attempt to source
blocks of policies from existing portfolio holders. A number of large tertiary transactions have been reported over the past 6 months.
The average life insured age for policies seen in the secondary market is approximately 82 years. Therefore with an average life insured
age of 92 years, the Company holds a portfolio with materially different characteristics to the policies generally available in the market.
The total death benefit of the policies held in the portfolio is $121.6m, versus a valuation of $44.8m.
It remains the intention of the Board to hold the majority of policies to maturity, but the possibility of selective policy sales will continue
to be kept under review as the portfolio develops.

[langland] 23/6/2016 13:13

In the light of recent market developments this looks like a reasonable thing to explore. Our fund probably lacks scale in the greater scheme of things and may appeal to a much larger US outfit. Potential for 45-50 maybe?

[courant] 12/5/2016 12:21

Extrader - this was highlighted as a risk, and has been mentioned in annual reports IIRC, certainly I was fully aware of this possibility before investing. What's surprising is the scale of the increase, which is unprecedented and, as the class actions suggest have more to do with covering historic losses, than any fundamental shift in the future cost of the individual policies (which is what the COI provision was meant to be for). Hence the legal action.

Other comments here are good. Yes exactly, it's not the immediate impact of the fall in NAV that is the issue, it's the ultimate residual value and the valuation floor. My inclination was to cut my holding to take risk off the table in the absence of information and clarity. Could be an interesting buying opportunity too, or a slide to a much lower valuation!

[argoal] 12/5/2016 11:50

Papy02,

All valid points.

The other elemet of Nav that isn't at risk is the cash they have, ~$5M at last count, although you could argue that much of this is now needed for increased premium payments so less for distribution.

I don't think the share price fall is a major overreaction all things considered but it may also prove to be a great buying opportunity.

It is just hard to tell what will happen.

[papy02] 12/5/2016 11:28

Argoal,

Agreed, so likely worst case NAV 25p.

From an optimists menu:

5% of policies (by face value) already had avg 10% COI increase (which is baked into current NAV), so less likely to have 2nd round?

30% of policies (by valuation) have stated no current plans for COI increases, as of last Interims

TRansamerica increases so far only affect 2/3 of face value with that insurer, rest (4% of total face value) less likely to be increased now?

Last interims state 43% of policies by valuation were at risk, ie had not stated no COI planned, nor COI already annced at that time

The NAV calc discounts the face value at 12% pa for avg 4.4 yrs, and the premia by the same but for avg 2.2 yrs, which over dramatises the impact on actual cash outcome. E.g. The 51% NAV hit on the Transamerica policies, is kindof the % hit on what's left after an assumed 12% pa return has been taken out.

Certainly the NAV is now very uncertain, but 25 p worst case is prob not going to happen.
I think / hope the share price has over-reacted to this admittedly catastrophic announcement.

[cockerhoop] 12/5/2016 11:07

I find the cost of insurance numbers involved here really difficult to get my head round!

We have policies with a face value of only $9.9m and the annual increase is rising by $800,000 suggesting approx a $1.6m annual cost. The premiums seem completely disproportionate to the payout bearing in mind these policies have run for many years.

[extrader] 12/5/2016 10:50

Hi all,

I come back to the point that the apparent ability of the policy issuer to amend premia unilaterally partway through policy life seems to be a pretty basic risk to have missed.

What recourse does TLI have to its lawyers ?

ATB

[argoal] 12/5/2016 10:44

The company has suddenly become very difficult to value.

We know that around 10% of policies have had their Nav reduced by 50% due to this COI increase. Total reduction in Nav or around 5%

But we have two big unknowns:

What percentage of policies will ultimately be affected by the COI increases and what the percentage increase in premiums will be for those policies?

Applying a 50% discount to the last published Nav appears prudent in the absence of any further information from the company on the risks here.

[bdroop] 12/5/2016 10:27

First instinct is that the drop ( and spread ) is overdone.
Second instinct is not sure how to play it due to the nature of the investment.
Volume is low.
I'd like to think the BoD would consider some buy backs to restore some value here, once they work out risk and bank balances faced with overpaying for the insurance...

[skyship] 12/5/2016 10:19

Input text below into Google and loads of info to be read:

Class action against Transamerica Life Insurance Company for COI increases to premium rates for some classes of life policies

[courant] 12/5/2016 08:54

Double ouch. Was going to sell half my holding this am but this price movement now seems overdone...

[papy02] 11/5/2016 21:53

Ouch indeed. I've started the reading but struggling to find much to help estimate potential overall impact here, to inform whether to hold or sell now.

[courant] 11/5/2016 20:58

Ouch. Got some reading to do, it seems there is quite a bit on the web about the class action against Transamerica...

[extrader] 11/5/2016 17:24

Hi all,

If premium uplift to 6 policies with face value of 9.9/118 can knock NAV by 5%, a possible 'significant adverse effect' seems an understatement.

I'm surprised (to put it mildly) that the business model permitted this contingency.

ATB

[davebowler] 11/5/2016 16:17

Potential increase in the 'Cost of Insurance' (COI)

The interim report for the six months to December 2015 referred in some detail to insurers applying increases to applicable premium rates. These are known as 'cost of insurance' (COI) increases. COI increases have historically been very rare and, although they can be implemented each year by the insurer, until September 2015 the Company had not experienced any such increases since its launch in 2004. To date, only three of the Company's 26 insurers have applied COI increases, on seven out of the 75 policies in the portfolio with a face value of $6m, with an average increase of 10% (as referred to in the interim report).

A small number of insurers have recently applied aggressive COI increases to premium rates for some classes of policy. So far, we have received only one confirmed notice of such an aggressive increase from Banner Life Insurance Company, but we have now been advised by our Investment Manager that on a further six policies issued by Transamerica Life Insurance Company (with a face value of $9.9m out of a total portfolio face value of $118m) substantial increases may be made which, if implemented, would raise the future premiums payable on these policies by 97% on average. Such increases would take effect between June and October 2016 resulting in additional premiums of approximately USD$800,000 in the year to 30 June 2017. The impact on the valuation of these six policies would be a reduction of 51%, which would have a negative impact on the Company's net asset value of around 5%.

Clearly your Board is extremely concerned by this possible development. If other insurers decide to implement increases of the order of magnitude indicated by Transamerica, this could have a significant adverse effect on the Company's net asset value.

It would appear that insurers are not required to provide a detailed explanation to policy holders to justify COI increases and therefore it is not clear why premiums should be increased. The aggressive increase in premiums by certain insurers has resulted in a number of class actions in the USA against them, two of the recipients being the two insurance companies named above. In conjunction with our advisers we are monitoring developments carefully and will update shareholders in due course.


Enquiries:
Alastair Moreton
Stockdale Securities Tel: [phone]

Charles Tracy
Chairman Tel: [phone]

[yieldsearch] 11/5/2016 16:07

Rns out potential reduction in nav due to increase "costs of insurance"

[skyship] 15/3/2016 13:17

NAV = 51.7p + 1.4p to come from February maturity = 53.1p
========================================================

15 March 2016

The Board of Alternative Asset Opportunities PCC Limited (the "Company") announces that the net asset value of the US Traded Life Interests Fund at 29 February 2016 was 51.7 pence per share. This represents an increase of 0.2 pence per share from the NAV at 31 January 2016.

It is estimated that exchange rate movements during the month had a positive impact of approximately 0.9 pence per share. Valuation changes had no impact in the month. Premiums and other administration expenses cost approximately 0.7 pence per share.

The Company's borrowings as at 29 February 2016 stood at US$nil. Total cash amounted to US$5,906,925.

The policy maturity notified on 22 February 2016 with a face value of US$4,000,000, continues through the verification process. Once certified it is expected that this will have a positive impact of approximately 1.4p on the NAV.

[poacher45] 08/3/2016 10:09

Think the main plus is the average age is 92 for each policyholder and they have more male polices. The average age for men is at least 1year less than women. With the average age span being 88 approx the polices should now start maturing quicker.