PA Plans Hold Life Insurance Settlement Investments

June 1, 2010 ( – Two Pittsburgh, Pennsylvania-area county governments have turned to investing a piece of their pension funds in life insurance settlements as a volatility hedge.

A Pittsburgh Post-Gazette news report said Westmoreland County gave Corry Capital Advisors of New York an $8.9-million mandate and Allegheny County gave the firm a $5-million mandate to place in life settlements.

The newspaper said the practice involves buying and selling the rights to the death benefits paid by life insurance policies covering wealthy individuals and that interest in the practice increased during the economic downturn when pension investment officials were searching for instruments moving independently of Wall Street ups and downs.

According to the newspaper, Allegheny County’s investment with Corry Capital was valued at $5.7 million on March 31, less than 1% of the $661-million pension fund. The investment produced returns of 2.9% in the first quarter and 12.1% in the last six months, according to Wilshire.

Westmoreland County’s stake with Corry Capital is valued at $10.6 million, or 3.4% of the $306-million fund’s assets. It produced a first quarter return of 1.8% and earned 10.4% over the last year.

The newspaper said returns are greater if people covered in the policies die sooner than is projected in the actuarial tables.

Through insurance agents, Corry Capital purchases policies of people with an average age of 84 and an average life expectancy of seven years. They have an average death benefit of $4 million. The firm holds the policies for an average of 18 months, then sells them to institutional investors, including European hedge funds.  After expenses, the strategy produced returns of 16.6% last year and 14.8% in 2008, said William Corry, managing partner of Corry Capital Advisors