Thursday, April 19, 2007

What can be done?

If I were a financial advisor, I would be inclined to recommend to my investor to take his/her losses and walk or crawl away. But these people aren’t my clients, they are my parents and I don’t want to let them down or make a mistake. We have decided to pay the Round 1 Premium payment for MBC Policy number 99-0007829. From the information we have, the insured is an 84 year old male with an estimated life expectancy of 5.3 years (per the Social Security tables). When you total all of the actual and proposed future expenses, this policy would show a rate of return of principal of 1.00 or breaking even. Of course this number is only as good as the information we are provided. So far, I only know three MBC investors: my parents, a cousin, and one of my father’s friends. If you are one of the thousands of MBC investors who are in the same situation as us; if you have the time, please make a comment, give me your advise and suggestions. If I can do anything to help you, I will. If I get enough responses agreeing that MBC investors maybe better served by banding together, I will set up a forum site for it. My name is Larry N. Scartz, I am a Land Surveyor in Virginia. My email address is and my business website is

Looking forward to your replies!

Tuesday, April 17, 2007

What is the Receiver Saying - Should I Stay in or Give up

The receiver’s 20th report that can be viewed from their website:

They state that: (copied from the report)
If you retain your interest in the Policy, subject to the risks outlined below, you will receive your pro rata share of the death benefits when the Policy matures. The risks of investment have not changed since the time of your initial investment, and in fact, in certain instances are increased, primarily because you will share the obligation to maintain the Policy with many other investors. These risks include, but are not limited to, (emphasis added) the following:
(a) If at any time until the Policy matures, you, or any other investor retaining his interest in the Policy, fails to timely pay any premiums due, and the other investors don’t assume the obligation to pay the non-paying investor’s premium obligation pro rata, the Policy may be sold, and if it cannot be sold, it could be surrendered, and you could lose your entire investment.
(b) Your obligation to pay the premiums and the cost of administering the Policy will continue until the Policy matures, and the Policy may not mature for many years.
(c) Unless your Policy is a whole-life policy, the annual premium costs could increase each year significantly until the Policy matures and there is no way to calculate how much those premiums could increase until the Policy matures. There is no guarantee how long a Delayed Premium Obligation will pay, or reduce the cost of, premium payments.
(d) In certain instances the face amount of the Policy may actually decrease or the Policy value could be lost completely so that you may lose all or part of your investment.
(e) In certain instances a viator cannot be located and the Policy could mature without anyone’s knowledge.
(f) If the insurance company refuses to pay death benefits upon maturity you may lose all or part of your investment.
I assume that the receiver “risks” listed above are placed in the order of risk – meaning that the investor’s biggest risk is that he is in a partnership with many other investors that he does not know. If that is the case, why doesn’t the receiver reduce this risk for each policy by allowing investors who want to go forward the ability to contact other investors owning the same policy. It also disturbs me that the admin fees and administration costs are being paid to an entity that is a defendant in the government’s suit and was an integral part of Mutual Benefits Corporation from the beginning and continues to be difficult to contact and does not provide adequate explanation to the information it does provide. I can understand the risks described in (a) and (b). I don’t understand why the future annual premiums can’t be estimated as described in (c). I have called Insurance Companies myself on my parents’ policies and received information that the policy was enforce and estimated future premium payments. I don’t know how the circumstance described in (d) can occur if the premiums are being paid, please explain. I don’t understand what the certain instance could be described in (e), shouldn’t future contact with the insured be a part of the original agreement when the policy was purchased? As to (f), if all of the premiums have been paid, and the insurance company refuses to pay the death benefit, shouldn’t VSI take whatever steps necessary to collect. Aren’t we being required to pay them to represent us? Listing this possibility as a risk that only the investor has to carry certainly isn’t right- but is it legal? I can’t decide what the receiver is suggesting for me to do. CAN SOMEONE HELP ME?

Money to the Rats

To help my parents decide which policies to keep and which ones to give up. I created a spreadsheet listing all of the information available for each policy. I also inserted the United States Social Security actuary tables for both men and women and used that information to estimate as best I can future premium costs. Then I added up all of the purchase costs, administration fees, proposed premium fees, estimated future costs and divided the proposed payout by the total costs to give me a rate of principal return. On the seven policies I have information. I have computed a principal rate of return of 0.702 or 70 cents on the dollar. This number would of course be more accurate if I had better data and could even be improved if our percent of ownership of the policy increases. I don’t think there is a possibility of making a profit on this venture and have given my parents the analogy that for the past several years they weren’t investing THEY WERE KEEPING THEIR MONEY IN A MATTRESS AND THAT THE RATS ATE SOME, but maybe not all.

Should we continue paying?

My parents policies are among the 3,052 polices that were voted upon to be kept. It really didn’t matter how my parents voted. The decision to keep, to sell, or dispose of the policy was said to have been determined by the majority vote of the investors owning each policy. I am not aware if any of the actual voting results were ever made available to any investor. Last fall, my parents started receiving annual administration fee invoices ranging from around $177 to $190. The admin fee consists of $175 per investor and the investor’s pro-rata portion of a $195 policy fee. If you divide the $195 by the pro-rata share shown on your invoice you may get a rough estimate of the number of investors owning this policy assuming each investor purchased a similar percentage. So far, my parents have received their premium round 1 invoices for seven policies, all due before the end of June 2007 totaling just over $35,000. The invoice specifies a definite payment due date, a definite payment amount, and a definite period of time that the payment represents (To include reimbursement of payments made on the investors’ behalf by the receiver). It also lists an estimated annual premium payment that the investor must make on future payments. To me, I feel that there are problems in two areas. First, the amount of Premium Payment Round 1 for the payment period stated can only be achieved if all investors make their payments. I am almost certain that some investors will not be able to pay these expenses and others may decide not to chance “throwing good money after bad” and forfeit their interest in the policies. If the receiver or VSI had provided information on the number of investors for each policy and the percentage of the vote to keep, investors thinking about trying to save at least part of their investment would have been able to estimate the probable cost of the second round payment and plan accordingly. I also have a problem with the estimated annual premium as shown. All of my parents’ policies are universal life policies, where the annual premiums go up each year. The estimated annual premium costs for several years forward needs to be provided so that a more accurate idea of future money needs can be computed.

Very Little Contact after May 2004

My parents bought their first viatical in July 2001 and were quite surprised that it “matured” (a nice way of saying the insured died) within six months. They bought another one in January 2002 and it also “matured” in less then a year. Starting March 2002 through February 2004, they purchased twenty-four additional viaticals investing approximately $450,000 dollars. According to Viatical Services, Inc. (VSI), none of these policies have “matured” even with the average age of the insured being near 80. My parents and I have always been suspicious of the first two policies legitimacy, but we were never able to get any verifying information from VSI.

Since May 2004, getting any information from the receiver or VSI has been very hard. I have called the receiver, emailed the receiver, posted questions to the receiver on their website, and have never gotten a response. I have talked to VSI personnel twice, even had one to return a call, but never received answers to emails. Once, I was requested to fax them information, but their fax machines always registered busy, even on nights, weekends, and holidays and I finally gave up. I even went to their address in Pompano Beach, but all I found was a mail box. I am aware that the receiver posts information on their website, including frequently asked questions that were helpful, but they didn’t seem to realize that many of the investors were senior citizens not very comfortable using computers to send or receive data.