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Life Settlement Assets’ board mulling options to reduce the discount

Life Settlement Assets B shares : LSAB

Life Settlement Assets (LSAA) has announced its results for the year ended 31 December 2022. LSAA’s Board says that, now the MBC litigation is complete, it is actively considering further options to reduce this discount, which will be communicated to Shareholders in due course. Key highlights from the results are as follows:

  • Finalisation of MBC litigation
    • Formal acceptance on 2 March 2023 by the US Court of the southern District of Florida, Miami Division, of the sale of life policies portfolio to Acheron Portfolio Trust (APT), on behalf of the Company.
    • Mitigation of operational risk with fractional interests in policies now able to be consolidated into policies 100% owned by APT.
    • More cost-effective operations in the future with a significant reduction in future legal costs.
    • Reduced need to retain cash following the life policies portfolio purchase, together with a resumption of dividends payable by the Company.
  • Net Asset Value development
    • USD 109.9m, representing an uplift of USD 0.6m during the year.
  • Maturities
    • Maturities totalling US$ 7.2m were declared – of these, US$20.9m were non-HIV policies, and US$6.3m were HIV policies.
  • Costs
    • Decrease in total ongoing charges ratio from 7.6% to 7.1% of NAV in 2022.
    • Decrease in ongoing charges ratio excluding policy servicing fees and legal costs from 3.6% to 3.0% of NAV.
    • The Company has agreed a reduction of the Investment Manager performance fee from 20% to 10% of the total distributions made by the Company over the agreed hurdle rate.
  • Dividend
    • Since the year end, following the initial indication of the ruling of the US Court, LSA announced on 2 February 2023, the declaration of a special dividend of USc6.0209 per share totalling approximately US$3.0m, which was paid to Shareholders on 24 February 2023.

Comments from Michael Baines, chairman of LSA

“The successful conclusion of your Company’s long running litigation against MBC marks a significant development in our strategy of unlocking value for Shareholders. It removes an important area of risk, builds value, and unlocks alternatives for the deployment of funds arising on the maturity of policies. It also means that the Board’s attention can focus solely on the broader risk issues in the portfolio, including that of HIV mortality.

“The Board is acutely aware of the impact that last year’s cash retention policy has had on the level of discount at which LSA’s shares trade. Therefore, in addition to the announcement of a special dividend and a return to the previous approach to dividend payments generally, the Board is actively considering further options to reduce this discount, which will be communicated to Shareholders at the appropriate time.

“Given that the non-HIV portfolio is now expected to mature faster than the HIV portfolio, we will continue to closely monitor research on mortality in general to guide future decisions. The past track record of assessing risk across the portfolio gives the Board confidence that outcomes should be achieved which will continue to underpin the value proposition for Shareholders.”

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