Study by Phoenix Life Solutions, Milliman Explores Impact of Underwriting Assumptions on Life Settlement Assets

Investors in settled life insurance policies need to thoroughly understand the impact of underwriting and mortality assumptions on investment performance, according to a new analysis issued today by Phoenix Life Solutions, a subsidiary of The Phoenix Companies, Inc. (NYSE: PNX).

The study observes that the mortality assumptions underlying life expectancy estimates are a key factor in determining the economic value of life insurance policies. These assumptions are the result of traditional life insurance underwriting techniques applied to older age groups that comprise the target market for life settlements, say the study’s co-authors, Ed Mohoric, consulting actuary, Milliman USA, and Robert O. Kinney,M.D., vice president and medical director, Phoenix Life Solutions.

“Life settlements portfolios are a relatively new asset class, so their short-term results are not necessarily predictive of their long-term experience,” said John K. Hillman, president and chief executive officer of Phoenix Life Solutions. “Investors who don’t fully understand the factors that were used to determine the life
expectancy estimates of life settlement portfolios could face significantly different returns on their investments than anticipated.”

The study was commissioned by Phoenix Life Solutions, which was founded last year to explore new ways to help institutional investors achieve more stable and reliable returns from life settlement portfolios, and to meet the evolving needs of high-net-worth customers who may wish to monetize their life insurance policies.

A life insurance settlement allows a policy owner to sell an unneeded or unwanted policy to a financial institution in exchange for an immediate lump sum cash settlement. The new owner of the policy then pays the premiums to keep the policy in force, and ultimately collects the death benefit. Life settlement companies often bundle settled policies into portfolios that are offered to institutional investors.

The study’s authors call life expectancy estimates the “single most important factor in calculating the value of a life settlement policy.” However, they see a potential risk in life expectancy estimators’ use of industrystandard valuation mortality tables when assessing life expectancy by age and sex categories because the recent experience of life insurance companies shows Americans are living longer than the tables’ estimates.

“It is absolutely essential to understand the underlying mortality assumptions and underwriting processes used to develop the life expectancy estimate,” Hillman said.

A copy of the study is available at www.phoenixwm.com/public/products/pls/index.jsp and at www.milliman.com

About Milliman

Milliman, whose corporate offices are in Seattle, serves the full spectrum of business, financial, government and union organizations. Founded in 1947 as Milliman & Robertson, the company has 47 offices in principal cities in the United States and worldwide. Milliman employs more than 2,000 people, including a professional staff of more than 900 qualified consultants and actuaries. The firm has consulting practices in employee benefits, healthcare, life insurance/financial services, and property and casualty insurance. Milliman’s global financial risk management practice is responsible for the management and execution of hedging programs in excess of US $500 billion. For further information, visit www.milliman.com.

About Phoenix

With roots dating to 1851, The Phoenix Companies, Inc. (NYSE:PNX) helps individuals and institutions solve their often highly complex personal financial and business planning needs through its broad array of life insurance, annuities and investments. The company’s products and services reflect deep insights into the wants and needs of consumers and financial professionals gleaned from research, including its Phoenix Wealth Survey, conducted annually since 2000. Phoenix has been recognized for its people-friendly programs by Working Mother magazine, the National Association of Female Executives and The Princeton Review. In 2007, Phoenix had annual revenues of $2.6 billion and total assets of $30.2 billion. For more information, visit www.phoenixwm.com.

Contacts

The Phoenix Companies, Inc.
Joe Fazzino, 860-403-6015
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