Approach
A secured note is only as sound as the arithmetic beneath it.
The mathematics of security.
Most issuers ask investors to accept their conclusions. We prefer to set out the conditions under which our programme meets its obligations, and the probability that those conditions hold.
The core of the programme
The programme rests on two identities and one test.
Identity one
Coverage
The assets behind the notes, counted at face value, stay well ahead of the notes outstanding.
Identity two
Cash
Each year, income from the portfolio exceeds the coupon and the cost of running the programme.
The test
Probability
Both identities are tested together across 10,000 simulated futures.
The Company’s endeavour, not a guarantee. Investment in the Notes involves risk, including possible loss of principal. Binding terms are set out in the offering documents.
Identity one
Coverage
Asset coverage compares what the portfolio is worth at face value with the notes outstanding. Policies are counted at the amount the insurer pays, notes at principal and cash at book value, and any past-due asset is excluded. The Company endeavours to maintain asset coverage of at least 1.50x at all times.
Because life settlement policies are bought well below their face amount, each dollar placed in them adds roughly two dollars of coverage. This is the engine of the structure, and the reason the long end of the portfolio carries the principal. A face amount is a future contractual payment, not a present market value, so coverage is always read alongside premium commitments, timing and available liquidity.
Identity two
Cash
Coverage protects principal, but a coupon must be paid in cash. Each year, income from the policy book and interest on the short-duration book after expected losses, together with liquidity held for the purpose, must exceed the coupon and the costs of running the programme.
Liquidity held for the purpose bridges the predictable cash of the short book and the less predictable timing of policy proceeds.
The test
Probability
The two identities are tested together across 10,000 simulated futures. Each one draws the timing of every policy, a common longevity factor across the pool, and each year's credit losses across the short-duration book. Losses follow the one-factor model that underlies the Basel capital framework.
Open to examination
Every assumption behind our projections is documented, and our models reproduce every figure. Institutions conducting due diligence can examine them with the Company, under confidentiality.
Discuss due diligence