MLA works directly with the client, carrier, servicer, and other third party entities to ensure a complete execution of a portfolio recovery plan. MLA conducts a full pricing and legal review of each policy (active and lapsed) so that a plan of action can be defined for each. As part of our pricing review, re-optimized premiums are calculated to ensure the most efficient level of funding for each policy.
While it may seem surprising, MLA has restored portfolios where policies had actually lapsed (by oversight or bad judgment), therefore recovering a significant portion of portfolio value and preventing further decay. This service may be particularly valuable in a foreclosure situation, where a struggling fund may have let policies requiring high premiums to lapse, and a new owner may not have the agility and knowledge to save policies currently in grace or reinstate those that have already been rendered inactive.
MLA coordinates necessary premium payments to be made in a timely manner, and together with the servicer, manages the ordering of required medical records and life expectancy reports. MLA has an infrastructure in place to handle this complex exchange of information and provides the client with a reinstatement schedule detailing each policy, NPV at reinstatement, estimated catch up premium required, and ongoing log of progress made on each reinstatement case.
In a distressed portfolio situation, there is a heightened need for increased positive cash flow and therefore reduced premium expenditure. MLA has developed a process whereby a portfolio owner or manager is able to pinpoint policies that have little probability of ever generating a positive return, thus allowing them to be lapsed to free up premium funds, or in some cases even sold to investors with a different risk profile or view of mortality. Policies are assessed for lapse candidacy through a series of sensitivity and liquidity analyses, tailored to the preferred assumptions of our client. Not only does this analysis highlight policy which would be favorable lapse candidates, it also indicates the point in time at which each policy becomes cash flow neutral, the probability of it reaching that point, and NPV under multiple alternate mortality scenarios.
An additional analysis of potential lapse policies, is the comparison of client mortality assumptions to other market participants. Using different assumptions may highlight that there is value in selling the asset to a different party. MLA has both an understanding of buyer assumptions as well as the relationships to facilitate these value enhancing trades.