You’ve probably heard of the controversial investment schemes buy people’s life insurance policies, pay them an annual amount, and then collect money when each people die.
If the people die early, and you only end up subsidizing them for a few years, you get big gains.
But when people live to be freakishly old, and you end up subsidizing them for a long time before the payoff, it’s a big loser.
It’s somewhat macablre, but not necessarily scandalous.
But investors in a Deutsche Bank are alleging fraud, after one fund failed to deliver.
Der Spiegel: Karl-Georg von Ferber, a lawyer who represents an association of investors, points to the db Kompass Life 1 annual report for 2006. The policies that had been purchased by the fund are listed in detail. Only two of them had an estimated policy period of four years or less with many listed as not maturing for 10 years or more. Nevertheless, the report promised investors a return of 7.5 per cent per year beginning already in 2007. “The way I see it, investors were knowingly misinformed,” Ferber says.
But Deutsche bank says it’s not fraud, they have a much more innocent explanation
Deutsche Bank has refused to comment on the criminal complaints. The bank explains away the funds’ non-performance by pointing to the recent increase in US life expectancy. As a result, they wrote to investors, “fewer policies matured than expected.” Mortality tables, upon which the funds are based, have changed since 2005, the bank explained.
That’s got to be awkward for the bank, that they got screwed cause people have been living longer.
But if only they’d anticipated the recession, they might have seen it coming.
As we’ve noted before, when unemployment goes down, mortality goes up (for whatever reason).