Abacus Life (ABL), which initially sold an issue of baby bonds on 11/10/2023 has now sold more of the same issue, 1 million shares (bonds) more. The initial issuance was for 1.24 million bonds with 186,000 overallotment bonds.
The new issuance of the 9.875% fixed rate senior notes due 2028 was originally intended to be 600,000 shares (bonds), but was upsized to $25 million plus an overallotment of $3.75 million.
The new bonds are the same ticker ABLLL—which closed today at $24.97.
Abacus Life (ABL) describes themselves as an alternative asset manager--what they do is provide ‘liquidity’ to those with life insurance policies who want to monetize them.
Deep due diligence should be done by those contemplating a purchase of these bonds as the company has a short life as a public company and came public through a SPAC in late 2022. With the limited history I will not even consider these bonds–although after a few quarters of operating and publishing of financials I may be open to an investment–not now though.
Lots of whatifs, hedges, extreme niche, failures of similar companies… I’d rather go to a casino, and spend the gambling money on black jack.
Mr C I remember someone commenting about insurance companies that tried this business model in the past. I think it was regarding Phoenix insurance and how they got in trouble for the same business model and got out of it. I think it was Grid or Bea. My only comparison to this was my experience with Country Wide 14 or 15 years ago. These were the people who did questionable loans and would have went bk if B of A had not bought them. Where do you think the managers who ran Country Wide ended up at? I wonder if some of the people involved in earlier failed life insurance buyouts are associated with Abacus.
Personally I am not interested in Abacus. This thought is just an idea if someone wants to research the background of the officers and directors of this company prior to investing.
Charles, Phoenix had problems with Long Term Care policies written long ago. Not enough premium monies to cover the expensive LTC payments. They have gotten recapitalized but still very modest credit quality. So their business wasnt the same. Several companies got hurt by LTC policies back in the day. So this business isnt like that. This Abacus thing isnt an insurance company. I guess its what Tim says they call themselves. An asset manager.
I originally thought these guys were doing viatical settlements. Not so much..
As you guys already know financial institutions usually like to either play the spread game or trade their book or lastly hold to maturity (or death in this case). Given this scenario asset/liability management is crucial for a company like Abacus.
So in order to take more debt with this high of a coupon, the asset side needs to provide a profit that can;
produce a spread above cost of financing
buy and then sell (with already mentioned carrying costs eating return).
hold till death – pay premiums until maturity
I don’t think what they are doing is some kind of scam. I think they are filling a need for liquidity either for corporations, institutions, and HNW individuals.
The underlying assets (policies) can be cherry picked for return, trade value, or cash flow. Risk can also be dialed in to the most to least based on insurer ratings.
Now whether or not this is a profitable business model, only time will tell.
Saying that, I am in for very small amount now.
It is an interesting business nonetheless.
NWGG,
“Like” for citing “viatical.” I just HAD to look it up! ; )
I did quick dive trying to understand them last night, so I might as well summarize here. While they’ve only been public for a short while, they’ve been in business for 20 years. My quick impression is that they have a solid basis for a company: they buy life insurance policies from individuals (either directly from the customer or via brokers or agents), continue paying for the policy until the original owner dies, and then collect the proceeds.
The margins are really good: the hard part maintaining cash flow for buying the policies and paying their continuance until they start collecting proceeds. To help with this, they only hold a small percentage of the policies they buy. They try to pick the most lucrative, and then resell the rest. Interestingly, they are planning to launch a “1940 Act Interval Mutual Fund” later this year to allow direct investment.
Here’s a Seeking Alpha article from last year with more explanation: https://seekingalpha.com/article/4651521-abacus-life-have-they-cracked-life-settlements
And here’s the 3Q 2023 Board Presentation with more specifics https://ir.abacuslifesettlements.com/static-files/7c9039c2-e71e-4286-86fb-c16ec41981c3
I wouldn’t consider investing in either their common or preferred with how little I currently know, but I was at least convinced that they might bear further research. Also, very little of the common stock is publicly available (2.4%), and almost everything else is locked up with insiders for 24 months “post-closing”. A question in case anyone knows: when was that closing?
Nathan–your take is pretty much like mine. Seems like it should be a good viable business, but I personally want to see more ‘data’ before any commitment.
Believe it or not, they also have warrants. Not many insurance companies have warrants, perhaps its from the SPAC transaction.