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A consortium of IFAs and investors, including Norwich & Peterborough (N&P), are in talks to unite to try to save troubed Keydata backer Lifemark, which needs immediate investment to the tune of £13m.
IFAs certainly have the most incentive to help, along with any financial institutions exposed to the fund.
But let us get this clear: even with a £13m cash injection Lifemark will not be home and dry.
Former Lifemark director and Keydata founder Stewart Ford, who also has a financial interest in keeping the fund afloat, is making "impossible" (according to the fund's administrator) promises to investors that if saved, Lifemark will pay out all their missed interest payments.
But if IFAs put cash into Lifemark they will only get it back on a medium and long term basis if maturities on the underlying life policies come back into line with the life expectancy forecasts when the polices were bought.
If a policy matures one year later than expected, Lifemark has to pay the premium until maturity. All cash supporting the policy until maturity is then not available to bondholders.
If there are lots of incorrect life expectancy estimates then Lifemark will continue to suffer unexpected levels of premiums being paid over an indeterminate time period.
This not only creates a liquidity issue but also potentially a solvency issue.
Short-term financing of the kind potentially being proposed by the rescue consortium is essential to allow Lifemark to secure premium payments in 2010, because the fund is facing a serious absence of mortalities.
However, at present, life expectancy assessments and cost figures used by Ford to assure IFAs and investors of the health of the fund are in dispute.
Ford believes right now the average age of the original policyholders is more than 84 years and their average life expectancy is no more than four years.
But the original American policy holders' life expectancies are protected by data privacy laws in the US. Therefore, there are no revised figures available for individual polices, meaning Ford's quotes can only be projections based on original life expectancies when the polices were first bought. And those are based on underwriting models which have so far massively failed to accurately predict dates of death.
Ford also says the total amount needed to maintain the Lifemark portfolio is around £19.5m a year. But administrators KPMG say Lifemark pays on average £1.95-£2.6m a month in premiums, so it is difficult to see how Ford's figure would be enough for a year.
Advisers looking at a potential rescue deal will have to think very carefully about what they are getting into. However, although there are risks involved they will also fear a greater threat of Lifemark going under and any value still left in the portfolio being lost. The FSA will pull any deal apart with a fine tooth comb and IFAs thinking of joining the rescue bid would be advised to do the same.
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Down the drain
This ida is - in my opinion - a waste of time and money. Just stop clutching at straws and look at the basics: 1. Key Data is in Administration 2. Key Data had misled everyone. KPMG wanted their reference removed from the literature and Norton Rose said it was non compliant. 3. There were secret, very large ‘commission payments paid to offshore accounts – how shady is that! Just get on with it and pay the duped customers out in full. Use the bail out funds and presumably Mr Ford himself will be subject (once investigations are complete) to several financial sanctions. Not least because of due diligence failings. Elias was a know crook before he met Ford, why didn’t Ford know about his background and if he did what was he thinking of doing business with such a crook? This is before regulatory consideration of the failings mentioned above and no doubt other significant failings which the Regulator will uncover. Is there any doubt that this was a very sloppy and poorly run organisation? If found culpable other sequestrated assets (such as Mr Ford’s Swiss assets , his UK assets, the secret commissions and his offshore Trust Funds – not to mention a zonking fine that should be imposed by the FSA) could all help to make an orderly wind down. Any balances will no doubt have to be found via additional levies. After the cap it falls to the industry as a whole. May as well bite the bullet and move on.
Posted by: Harry Katz
Down the drain
This ida is - in my opinion - a waste of time and money. Just stop clutching at straws and look at the basics: 1. Key Data is in Administration 2. Key Data had misled everyone. KPMG wanted their reference removed from the literature and Norton Rose said it was non compliant. 3. There were secret, very large ‘commission payments paid to offshore accounts – how shady is that! Just get on with it and pay the duped customers out in full. Use the bail out funds and presumably Mr Ford himself will be subject (once investigations are complete) to several financial sanctions. Not least because of due diligence failings. Elias was a know crook before he met Ford, why didn’t Ford know about his background and if he did what was he thinking of doing business with such a crook? This is before regulatory consideration of the failings mentioned above and no doubt other significant failings which the Regulator will uncover. Is there any doubt that this was a very sloppy and poorly run organisation? If found culpable other sequestrated assets (such as Mr Ford’s Swiss assets , his UK assets, the secret commissions and his offshore Trust Funds – not to mention a zonking fine that should be imposed by the FSA) could all help to make an orderly wind down. Any balances will no doubt have to be found via additional levies. After the cap it falls to the industry as a whole. May as well bite the bullet and move on.
Posted by: Harry Katz
Down the drain
This ida is - in my opinion - a waste of time and money. Just stop clutching at straws and look at the basics: 1. Key Data is in Administration 2. Key Data had misled everyone. KPMG wanted their reference removed from the literature and Norton Rose said it was non compliant. 3. There were secret, very large ‘commission payments paid to offshore accounts – how shady is that! Just get on with it and pay the duped customers out in full. Use the bail out funds and presumably Mr Ford himself will be subject (once investigations are complete) to several financial sanctions. Not least because of due diligence failings. Elias was a know crook before he met Ford, why didn’t Ford know about his background and if he did what was he thinking of doing business with such a crook? This is before regulatory consideration of the failings mentioned above and no doubt other significant failings which the Regulator will uncover. Is there any doubt that this was a very sloppy and poorly run organisation? If found culpable other sequestrated assets (such as Mr Ford’s Swiss assets , his UK assets, the secret commissions and his offshore Trust Funds – not to mention a zonking fine that should be imposed by the FSA) could all help to make an orderly wind down. Any balances will no doubt have to be found via additional levies. After the cap it falls to the industry as a whole. May as well bite the bullet and move on.
Posted by: Harry Katz
There is nothing like...
....effective regulation and this is nothing like effective regulation.
Posted by: Evan Owen
Simple answer
As Ford is so sure of the viability of Lifemark, and as he is taking a £200M premium at maturity himself, the answer is so simple - Ford buys out Lifemark by re-imbursing all bondholders their original investments plus any interest due, and he will make a fortune, whilst we 'victims' are not made to pay for it. Gets everyone off the hook, and Ford walks away with the goldmine he believes Lifemark/Keydata to be,
Posted by: Tony Tobin
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Down the drain
This ida is - in my opinion - a waste of time and money. Just stop clutching at straws and look at the basics: 1. Key Data is in Administration 2. Key Data had misled everyone. KPMG wanted their reference removed from the literature and Norton Rose said it was non compliant. 3. There were secret, very large ‘commission payments paid to offshore accounts – how shady is that! Just get on with it and pay the duped customers out in full. Use the bail out funds and presumably Mr Ford himself will be subject (once investigations are complete) to several financial sanctions. Not least because of due diligence failings. Elias was a know crook before he met Ford, why didn’t Ford know about his background and if he did what was he thinking of doing business with such a crook? This is before regulatory consideration of the failings mentioned above and no doubt other significant failings which the Regulator will uncover. Is there any doubt that this was a very sloppy and poorly run organisation? If found culpable other sequestrated assets (such as Mr Ford’s Swiss assets , his UK assets, the secret commissions and his offshore Trust Funds – not to mention a zonking fine that should be imposed by the FSA) could all help to make an orderly wind down. Any balances will no doubt have to be found via additional levies. After the cap it falls to the industry as a whole. May as well bite the bullet and move on.
Posted by: Harry Katz