10-K/A: Abacus Life Files Amended 10-K to Include Predecessor Audit Report

Abacus Life, Inc. files an amendment to its 2023 annual report to include the predecessor audit report for Abacus Settlements, LLC and audited financials for the six months ended June 30, 2023.

Summary

• Abacus Life, Inc. has filed an amendment to its original 10-K report for the fiscal year ended December 31, 2023.
• The amendment includes the Predecessor Report of Independent Registered Public Accounting Firm for Abacus Settlements, LLC, which was inadvertently omitted from the original filing.
• The financial statements of Abacus Settlements, LLC for the six months ended June 30, 2023, have been audited and are included in this amended report.
• The original 10-K included unaudited financials for this period.
• The amended 10-K also includes certain conforming changes and corrections of typographical errors.
• The company has attached updated certifications from the Principal Executive Officer and Principal Financial Officer as required by the Sarbanes Oxley Act of 2002.
• No other amendments are being made to the original 10-K, and the report does not reflect events occurring after the original filing date.

Sentiment

Score: 5

Explanation: The document presents a mixed picture. While the company highlights its growth and market position, it also acknowledges significant risks and challenges. The financial results show a decrease in net income and adjusted earnings, which tempers the positive aspects. The document is factual and does not attempt to overly promote the company.

Positives

• The company has a proven track record of growth and strong asset returns.
• The company is operational in 49 states, which is a key differentiator in the industry.
• The company has a multi-faceted and dynamic revenue model.
• The company has a proprietary risk-rating platform that measures the risk of life insurance contracts.
• The company has a Policy Value Calculator that drives origination by instantly valuing policies.
• The company has a dynamic platform to service bundles of policies for third-party institutions.
• The company has access to capital markets as a publicly traded company.
• The company has a proven ability to deploy capital and scale.

Negatives

• The company's valuation of life insurance policies is uncertain.
• The company could fail to accurately forecast life expectancies.
• The company's policy acquisitions are limited by the market availability of life insurance policies.
• The company may experience increased competition from originating life insurance companies, life insurance brokers, and investment funds.
• There has been a negative public perception of the life settlement industry.
• The company or third parties the company relies upon could fail to accurately evaluate, acquire, maintain, track, or collect on life settlement policies.
• There is a risk of fraud in the origination of the original life insurance policy or in subsequent sales of the life insurance policy.
• The company may become subject to claims by life insurance companies, individuals and their families, or regulatory authorities.
• The company may be subject to certain U.S. state securities laws.
• The company could in the future be required to register as an investment company under the Investment Company Act.
• The company faces privacy and cyber security risks related to its maintenance of proprietary information.
• The company's business may be subject to additional or different government regulation in the future.
• There is currently no direct legal authority regarding the proper federal tax treatment of life settlements.
• The company may not be able to liquidate its life insurance policies.
• The company assumes the credit risk associated with life insurance companies and may not be able to realize the full value of insurance company payouts.
• The company's success is dependent upon the services of its experienced management and talented employees.
• The company's intellectual property rights may not adequately protect the company's business.
• The company may become subject to intellectual property disputes.
• Pandemics, along with rising interest rates and inflation, may disrupt the ability of the company and its providers to originate life settlement policies.
• The company may discover additional material weaknesses in its system of internal financial and accounting controls and procedures.
• The market price of the company's notes may be volatile or may decline regardless of the company's operating performance.
• The company's ability to timely raise capital in the future may be limited.
• The company's management has limited experience in operating a public company.
• Changes in tax regulations or their interpretation could negatively impact the company's cash flows and results of operations.
• The company's indebtedness may restrict its operations.
• The company's stock repurchase program may not enhance long-term stockholder value and could increase the volatility of the market price of the company's common stock and diminish the company's cash.

Risks

• The company's valuation of life insurance policies is uncertain, and erroneous valuations could have a material adverse impact on the company's business.
• The company could fail to accurately forecast life expectancies, which could result in a lower return on the company's life settlement policies.
• The company's policy acquisitions are limited by the market availability of life insurance policies that meet the company's eligibility criteria.
• The company may experience increased competition from originating life insurance companies, life insurance brokers, and investment funds.
• The life settlement industry faces political opposition from life insurance companies, which could have a material adverse effect on the company's business.
• The company or third parties the company relies upon could fail to accurately evaluate, acquire, maintain, track, or collect on life settlement policies.
• There is a risk of fraud in the origination of the original life insurance policy or in subsequent sales of the life insurance policy.
• The company may become subject to claims by life insurance companies, individuals and their families, or regulatory authorities.
• Life settlements in which the company invests are not currently regulated under the federal securities laws, but if deemed to be securities would require further compliance with federal and state securities laws.
• The company could in the future be required to register as an investment company under the Investment Company Act.
• The company faces privacy and cyber security risks related to its maintenance of proprietary information.
• The company's business may be subject to additional or different government regulation in the future.
• There is currently no direct legal authority regarding the proper federal tax treatment of life settlements.
• There have been lawsuits in various states questioning whether a purchaser of a life insurance policy has the requisite insurable interest in the policy.
• The failure of the company to accurately and timely track and pay premium payments on the life insurance policies it holds could result in the lapse of such policies.
• The originating life insurance company may increase the cost of insurance premiums, which would adversely affect the company's returns.
• The company may not be able to liquidate its life insurance policies.
• The company assumes the credit risk associated with life insurance companies and may not be able to realize the full value of insurance company payouts.
• The company's success is dependent upon the services of its experienced management and talented employees.
• The company's intellectual property rights may not adequately protect the company's business.
• The company may become subject to intellectual property disputes.
• Pandemics, along with rising interest rates and inflation, may disrupt the ability of the company and its providers to originate life settlement policies.
• The company may discover additional material weaknesses in its system of internal financial and accounting controls and procedures.
• The market price of the company's notes may be volatile or may decline regardless of the company's operating performance.
• The company's ability to timely raise capital in the future may be limited.
• The company's management has limited experience in operating a public company.
• Changes in tax regulations or their interpretation could negatively impact the company's cash flows and results of operations.
• The company's indebtedness may restrict its operations.
• The company's stock repurchase program may not enhance long-term stockholder value and could increase the volatility of the market price of the company's common stock and diminish the company's cash.

Future Outlook

The company believes it is well-positioned to capitalize on the anticipated market growth in the life settlements industry. The company plans to expand its marketing and launch national television advertising campaigns. The company also plans to continue to invest in technology and marketing infrastructure to drive education and awareness of life settlements. The company expects to realize future revenue through licensing agreements with Abacusmarketplace.com, although it does not expect it to have a material impact on the company's future financial results in the near term.

Management Comments

• Abacus Life Inc.'s mission is to educate all life insurance policy owners that their life insurance policy is personal property and to educate investors about alternatives to traditional investments using lifespan based products as a core strategy.
• The company is democratizing the life insurance space through groundbreaking new channels: ABL Tech, ABL Wealth, and ABL Longevity Growth and Income Funds.
• The company helps financial advisors and their clients understand that a life insurance policy is personal property and selling it for a fair market value is a legitimate, safe and viable choice that creates more investment options for the client.

Industry Context

The life settlements industry is a growing market that helps policyholders monetize their life insurance policies, which often lapse or are surrendered. The industry is currently underpenetrated, capturing only a small percentage of the potential market. Abacus Life is positioned as a leader in this industry, with a focus on technology and education to drive further growth.

Comparison to Industry Standards

• Abacus Life's 20% market share in the life settlements industry, based on 2021 data, positions it as a significant player compared to other companies in the sector.
• The company's ability to operate in 49 states is a key differentiator, as many competitors face high barriers to entry due to regulatory requirements.
• The company's average trade spreads of 20% and capital recycling rate of 3.6 times per year are metrics that can be compared to other firms in the life settlements space.
• The company's focus on technology, such as its risk-rating heat map and Policy Value Calculator, sets it apart from traditional life settlement brokers.
• The company's servicing of policies for large institutions like KKR and Apollo demonstrates its ability to handle complex portfolios, which is a benchmark for industry leaders.

Legal Proceedings

• The company is not currently a party to any material legal proceedings.

Related Party Transactions

• The company has a related-party relationship with Nova Trading (US), LLC and Nova Holding (US) LP.
• The company earns servicing revenue related to policy and administrative services on behalf of Nova Funds portfolio.
• The company also originates policies for the Nova Funds and earns origination fees.
• The company has a related party receivable due from LMA related to transaction expenses.

Stakeholder Impact

• Shareholders may be impacted by the volatility of the company's stock price and the potential for dilution from the exercise of warrants.
• Employees may be impacted by changes in the company's financial performance and strategic direction.
• Customers may be impacted by the company's ability to provide services and products.
• Suppliers may be impacted by the company's financial stability and ability to pay for goods and services.
• Creditors may be impacted by the company's ability to repay its debts.

Next Steps

• The company plans to expand its marketing and launch national television advertising campaigns.
• The company plans to continue to invest in technology and marketing infrastructure to drive education and awareness of life settlements.
• The company expects to realize future revenue through licensing agreements with Abacusmarketplace.com.

Key Dates

Keywords

life settlements, life insurance policies, alternative asset management, longevity, actuarial technology, origination, portfolio management, risk rating, financial advisors, institutional investors, insurance, mortality, underwriting, securities, HIPAA, data privacy, cybersecurity