From Policy to Profit: Unlocking The Hidden Value of Life Insurance | Jay Jackson

Eric Chemi 0:05
Welcome to Wealthion. I’m Eric Chemi. We haven’t talked enough about insurance, specifically life insurance in these recent episodes. And I read a note that life insurance for a lot of people is their second biggest assets, something we don’t think about, right. But there’s this huge amount of money that’s waiting for you being invested. And at some point, you’ll either get it or your family will get it, there’s a beneficiary to it. But we don’t think enough about it. It has major implications for how people invest the impact of interest rates, and what decisions they’re making along the way. So I’m pleased to have Jay Jackson on the show with me today, he’s the CEO of abacus life, which a company focused on life insurance in particular, it sells life insurance, and it’s a company to publicly traded people can invest in the company themselves. So Jay, thank you so much for coming on. I know you’ve had a long career in investments and insurance on Wall Street. So you’ve done so many things, just walk me through the basic example here of maybe the biggest misconception a normal person has about life insurance.

Jay Jackson 1:08
Sure. The biggest misconception the way people treat life insurance is that they don’t treat it like an asset. And as you highlighted, I’ve been in variety of different investing in investing firms, I’ve invested personal assets, obviously, I’ve worked with high net worth clients in equities and worked in Munis and, and this was a unique asset class. What’s interesting is that I’m one of the few people that call it an asset class. Most people, when they look at their life insurance policy, they look at it like that, meaning that they take out a life insurance policy, they’re going to pay on it every single month, but it’s a benefit that they’re not truly going to see themselves. And what I mean by that is that if you look at life insurance as an industry, right now, the size scale of it is just massive. Life insurance in IP, which is owned by individuals here in the United States is a $13 trillion market. 13 trillion. That’s two and a half times the US residential real estate market, but very few people pay attention to it. What’s fascinating of the 13,000,000,000,090% are nine out of 10, life insurance policies are 90% of that 13 trillion never pays a claim. So if you really think about it, the life insurance companies, one of the greatest businesses in the world, right? Where you’d collect premiums, and you only have to pay out 10% of the time. And it’s not because the life insurance companies have done something nefarious here. And they haven’t, it’s what happens is, is that people treat life insurance like debt, meaning that it’s an expense to their, to their bottom line. So let’s just take somebody who is now 75 years old, after paying into their life insurance policy for 20 years. They don’t look at that like a mortgage payment, which is how they should instead, they look at that and they say, Okay, well, that’s the insurance I never wanted or had to use, thank God, when in reality that has been accreting value the entire time. And so what do they typically do when they’re 75? Their kids are in their 50s. And they say to themselves, I don’t need a million dollars, or 2 million or half a million dollars of life insurance coverage, I’m just going to stop paying on it. And when that occurs, who wins? That 90% scenario I just gave you right? Meaning that the life insurance carriers a big winner in that when you fill out a life insurance documentary contract for the very first time, the very first section of that contract, do you know what it’s called? No, it’s called owner. So when you fill out a life insurance form, pay attention to this the next time you do it, look at the terminology they use in that contract. A life insurance policy is just a contract. And on that contract, the first section is the owner, which is you, which means you own this contract, not anyone else, not the carrier, you’re the owner, which means is the owner of a contract, which goes all the way back to the Supreme Court 1911 In Grigsby V. Russell was a fundamental decision for life insurance. And the first part of that decision says this life insurance is personal property. That’s why you’re the owner. Therefore, it can be sold and transferred to a third party. What’s fascinating about that, is it no one treats it that way? If they did, there is zero chance that 90% of policies with lapse without ever someone knowing the market value of their life insurance policy, you personally or any of your listeners would never, ever sell their home. Right? without at least having some sort of third party valuation done, or more importantly, understanding what the market value of that home actually is. And that is what’s occurring and it’s a tragedy. Because on average, we’re paying seven to eight times over what that lapse amount is and it’s just a solve for what the market value is.

Eric Chemi 4:47
Okay, we have so much to talk about here. Okay, this is good. This is good. So let’s let’s walk through to you’re referring to it as an asset class in the same way like stocks or bonds or an asset class, is that right? That’s correct. it okay. And then reminding us it’s like something chilling to take 13 shilling. What was the number you gave?

Jay Jackson 5:05
13 trillion, which is two and a half times us residential real estate market to

Eric Chemi 5:11
13 trillion is is what number? What is that the value of 13 trillion

Jay Jackson 5:16
It’s the amount of life insurance policy and force meaning that effectively in its simplest form, everyone who has a life insurance policy, they, they, they take it out, and they say, Hey, I took out a million dollar life insurance policy, that million dollars represented is represented as that 13 trillion. So that is all of the what we would say exposure that the life insurance companies have, if the entire population of the United States all passed away today, right? And the life insurance company had to pay their heirs, they would have to pay out $13 trillion to make that payment.

Eric Chemi 5:53
Got it. That sounds more like if everyone who had a life insurance passed away 13 showing us the payment. Or if you think of it as $1 million per let’s say, the average person, right, let’s just make up a number. There’s 13 million of those out there, right? Because China’s 13 million million, right, right, then, yeah, you were saying so only 10% Ever get paid out. Correct that that seems crazy, because everyone dies in the end, right,

Jay Jackson 6:20
but no one no one has their life insurance policy still in force. Oh, they give it up, they stopped paying it up, they just stopped paying on it. And it’s because people don’t treat their life insurance policy, like an asset. They look at it like, Oh, this is like my credit card debt. They don’t understand that it accretes in value and has a market value. And if they did, 90% would never lapse. And that’s our mission. That’s my religion to get out there and tell people that, hey, this thing, this life insurance policy that you thought was literally just to be used at some point in the future, if and when that occurred, actually has a value? And it has a market value?

Eric Chemi 6:59
Is it because the word insurance is used as opposed to something else? I don’t need the insurance. You know, my kids are old enough. Now I’ve made enough money like I don’t need it. So I’m just gonna, it’s like car insurance. I don’t have the car don’t need it. Because that word is getting in people’s mind.

Jay Jackson 7:16
I think so I think that, you know, when people look at insurance, again, they look at it something they never want to have to use, therefore it It can’t have value. Right? They just look at it. This is a wrapper to an asset. What I tell people every day is that you’re right. And that thinking is is that it is a wrapper, but the asset is you. And what’s what happens is it as you age, think about it, it gets more and more valuable every day. So think about it. Now, just really quickly from the investor

Eric Chemi 7:47
closer to the pit, you’re closer to death. So it’s more likely to pay out sooner,

Jay Jackson 7:51
it is well and it’s any decrease in positive value, it gets more and more valuable every year you age. Right? Because if you think about it, your contract end date, if this were a mortality drill, if this were a zero coupon bond, as you got closer to the maturity date, it increases in value significantly, right, the last two years of zero, typically trade at a premium or something much higher. Same thing happens here. Right? The sad. The fact is, and I would say it’s a sad fact, because most people don’t take this into consideration. Eric, I have bad news for everyone, we are all going to eventually have a mortality event it is going to happen, when it occurs is actually quite predictable as you age. Because when you get into your 70s, and even your 80s you can do a look back and re underwrite and understand what that medical profile looks like and say, Okay, I’m 80 years old, I take the entire population who have the exact same genetic profile, as well as historical medical profile. All of those distributions occur. And my average lifespan at this point might be seven years. Right? I look at this even further. It’s not just life insurance. If you look at estate planning in general, what’s mind blowing to me is how much reliability we put into target date funds without any real back background or understanding of how we’re present how we’re presenting our own target to that date. Right? When I acquire a life insurance policy, and I give someone that data, and I say, you know your average lifespan based upon historical data, other people just like you all the things that I just laid out physician review is around seven years. Why are you planning to age 95? Right, it’s nonsense. And, and what’s amazing financial advisors do the same thing. They’re just uncomfortable about having that discussion, and we all have to get more comfortable pushing it out.

Eric Chemi 9:47
They just keep saying okay, you’re you’re gonna live to 100 like everyone’s living to 100 that kind of thing. And that’s,

Jay Jackson 9:51
here’s it here’s a fun fact about let me do 100 There’s never been a Centurion over six feet tall. I don’t know how tall you are on this cast. My guess is you’re probably the You know, who knows, but if you’re

Eric Chemi 10:01
at least six feet, but maybe 5’11, if I’m shrinking a little bit, yeah, in that

Jay Jackson 10:05
case, when you get to 90, you’re going to be saying you’re 5’11. So you can make it. But the point is, we

Eric Chemi 10:11
know one six feet tall it’s ever lived to 100.

Jay Jackson 10:14
No, here’s the here’s the real facts, if you have no idea if you cure every disease known to humankind, everyone, heart disease, cancer, right? Let’s just start with cancer. If you cure cancer, do you know how much how long lifespan is increased? Total for the population? How much? 3.2 years? That’s it. That’s it, if you cure every disease known to humankind, you know how much the lifespan increases 5.6 On average, so let’s start to have a real conversation about what this really means. People have this fear of running out of money, right in their retirement, but we’re not providing them any real data in and I’m speaking to the general financial industry to support that says, Well, this is why that fear makes sense. And instead we run from it. I do something much differently. I give them the lifespan data. And what we say is we say okay, now that we understand what the lifespan is, let’s look at what the fair market value of your life insurance policy is. Sure, in seven years, the payout to your heirs will be a million dollars. However, at age 80. Today, that could be worth $300,000, not zero, don’t laughs it for nothing.

Eric Chemi 11:22
And are you talking about? Term, Whole universal variable? Which life insurances are you talking about? Yeah.

Jay Jackson 11:30
So when you get up to past age 75, there’s not much term left? No one is used term at 75. Right? So we’re ignoring

Eric Chemi 11:37
term, I assume it’s? Yeah, like it’s actually 35 to 65. And that’s it.

Jay Jackson 11:43
And that’s it. And then it’s 65, you have to make a decision. You’re gonna have to say, Okay, I really can’t get term if I can, it’s not going to be great. It’s going to be pretty expensive. I’m now want to think about having permanent life insurance to age 100, or 120, or whatever the protocol may be. And at that point, you’re going to acquire either a whole life or universal or an indexed universal, but Universal Life means something that effectively it’s flexible premium. In a nutshell, here’s what happens. You’re going to start to over fund your premiums early, right. So at age 6055, etc. When you take that policy out for you to have a target premium that stays consistent, ultimately, to let’s say, age 100, you’re going to overfunded early meaning, you know, your cost of Term insurance at age 55 is much cheaper than what it is at 75. Right. So you’re going to overfunded that because permanent life insurance is going to cost you more money at age 55 overfunded, meaning you’re going to build a cash value, you build that cash value, so that when you get to age 75, you use the excess cash value to fund the increasing cost of insurance over time. The challenge in that math is it generally is specifically the last decade, when you look at the interest rate environment we’ve been in. Those were underfunded. And so now at age 80, you don’t have the cash built up to continue the policy at that premium level, which is why your premiums ultimately may go up. And we see that occur very, very often, whole life, your self funding. But even with whole life, what happens is, again, as people turn age 80, they see this massive cash value, they’re effectively self funding a big part of any of their maturity claim. And therefore they’re going to get a loan against it, or they’ll just take the cash and use that for other needs that they may have at age 80 or 85. And so, you know, the primarily, you know, we’re looking at those over the age of 65, those that have universal life policies, we estimate that and it’s a growing number every year to be around 233 billion last year, 250 billion this year, 260 the next year, because as the aging population continues to retire, just like we talked about in the baby boomers saw this market just gets bigger and bigger and bigger. And the tragedy for us is that I think is great as we’re doing is spreading this message and people are starting to get accustomed to what they hear. Our entire industry only captured less than 2% of that 233 billion last year. And it’s because of education. It’s because of understanding and people starting to understand that wait a minute, my life insurance has a value.

Eric Chemi 14:16
Right, right. Yeah. So So tell me then so in abacus I assume you are you’re buying these policies from people or there are there’s there’s a transaction you said yeah, they’re the owner, let’s say the 75 year old version of me Yeah, got its life insurance. It’s going to pay out when I died, but I don’t know how long I’m gonna live. I don’t want to keep making these payments. Normally I would just be like about just walk away from it. But you’re now all of a sudden there’s an opportunity for Hey, Abacus is here. They’ll buy Eric’s life insurance. Explain what the what is the transaction now for that 75 year old to get him with something and not with zero. First

Jay Jackson 14:56
is information and education. We do run On television commercials, I apologize in advance I’m on them. So if you’ve seen me on those, you know, I’ve got a blue. It’s like a sweater. That’s a blend between Ted lasso and Mr. Rogers. But it seems to work. But one of the big things that we did is we put a calculator to the same instant calculator that we were using on our customer service desk, which effectively has the ability to solve for net present value. And all we need is some basic information, the gender, the age, policy type and policy size. And with that, we instantly put out a valuation based upon what that person thinks their own health criteria is. So why do we ask about health criteria? And why is that so important? Well, what we’re trying to establish is that lifespan number, some people are healthier than others. So you might have a future payment obligation of 12 years, you might have a future payment obligation of six years, our premises, which show you how the calculation is actually calculated for net present value, which includes lifespan, future cost, and then investor rate of return. And we provide all of that data to the policyholders. More importantly, we traditionally work in a large part of our business that is with Ras financial advisors and insurance agents. In fact, over the last, gosh, almost 20 years of our company’s history, we’ve partnered with over 30,000 advisors over that time period, and and and during that process has

Eric Chemi 16:29
been no enemies, because when you partner with them, so 30,000 advisors arise, what is partnership look like. So

Jay Jackson 16:34
this is their client. And what we tell them is, is that we want to provide you the information so you and your client can make a suitable decision whether this is the right decision for them or not. One of the things we’ll tell clients frequently is, here’s the math, right? If it’s over the next seven years, this is your premium obligation over the next seven years, and this is the rate of return, you should pay your estate. Frankly, you should keep this policy however, your your market value, and today’s numbers could be 250 $300,000 per million, our average payout per million is around 22%, historically, so it’s a significant number. We also find this really useful in large family offices, we see this in business transactions frequently they ask us for us to do the valuation of the contract, because it has real net present value, how we work with financial advisors, and most importantly, this is a highly regulated transaction. We are regulated in every state that requires it, which is 42 states were licensed and 41 of them every state but Alaska. And there’s some reasonings for that, that has to do with their regulatory environment in general. But the point being is is that these are state regulated documents that are used in the acquisition price, we make sure that the beneficiaries of that contract before they sell it are informed and sign off, we also get letter of competencies from the policyholders physician. So therefore, we can do a look back here and say, Okay, this is a real transaction that has a real dollar value. And that transaction itself is highly regulated, and it puts abacus in a unique position. Because we’re so regulated, there’s not very many of us and other companies in the space that can do this. We are currently the only public publicly traded company in our space and getting the SEC caught up to speed on how we’re doing a state regulated transaction was its own, certainly hurdle. But we’re very proud that we were able to work through that process. And and and we we enjoy being a publicly traded company, because it’s brought a lot of very positive awareness to our transaction. Is

Eric Chemi 18:33
this I read viatical is this by articles were?

Jay Jackson 18:37
So vertical is a little bit of an older term and that but specifically, what if I article is is is someone has a lifespan of less than two years or 24 months, then I mean, some states will call that an article and what we, what,

Eric Chemi 18:51
who knows if you have a two year or less lifespan unless you have some terminal disease,

Jay Jackson 18:55
generally, it’s a terminal disease. However, unless you’re at nine, right, you’re at nine years old, there’s a high probability that’s probably two to three years, right. So it’s age and or some sort of terminal disease. It’s not an area of practice that we focus on. We use this mainly in estate planning, the average size of the life insurance policy we acquire is 1.5 million. And you know, the average what we would say lifespan is almost eight years. However, there are circumstances where you have shorter lifespans, the first thing we do is we educate those consumers and say your policy may have a rider called an accelerated death benefit. Pursue that first meeting, go to the life insurance company and see if they’ll give you up to 50% sometimes of that claim, and though you can use in today’s dollars, because there’s some people that might want to use that for different types of treatments that they may be seeking alternative treatments, but we do work with a number of individuals that that are, you know, kind of working through different types of terminal disease and they’re looking for liquidity in their policy.

Eric Chemi 19:54
Oh, rather than wait till they die and get one and a half million, maybe get 750 ran right now

Jay Jackson 20:01
from the life insurance company. And yeah, and if it’s to your contract again, it comes to the math, a lot of times you’ll see those contracts transacted 75% of face, right? So instead of 1.5, might be 1.2. So they’re getting the bulk of those assets now. And then we have to just factor in the future premiums, etc. The other things that we do often in those types of cases where you have a shorter lifespan, we keep their beneficiaries on the contract for a certain percentage of that 1.5 million. So it might be 20 or 30%. However, the math works, and then plus provide some sort of cash option, right? So it’s a bit of a hybrid transaction where they get to maintain it stay on the policy, but in addition to that, they’ll also receive some upfront net present value today. Okay,

Eric Chemi 20:42
okay. And then what? What, what is the technology behind all this? Because if someone goes to the website that you mentioned technology, is there AI involved? Is it just hardcore, crazy math to try to figure out exactly how much everyone is worth and how long they’re going to live? Like, what what’s the tech behind all this?

Jay Jackson 21:02
Sure, it takes a long time to aggregate the data first, right? I mean, technology in itself, and AI in itself doesn’t function without the inputs. And we’ve got 20 year history of those inputs of really tracking different types of mortality experiences related to different types of impairments, right, related to different types of genetics, and family history, we then aggregate all of that data along with utilizing third party lifespan firms that have medical actuaries on staff and their own sets of data. And then additionally, that will will seek a physician review as well. But then you now you overlay the technology on top of that. So now you can actually look at all of the circumstances, what AI means to me is really large language models, the ability to process reams and reams and reams of data in an effective, efficient way that can be recalled easily. And we do use that. And we use that in a sense so that we can provide information to our clients in a very timely way to their financial advisors in a very timely way. I think what you touch on is super important is that the aggregation of lifespan data over the next five years is going to fundamentally change how we do financial services, and

Eric Chemi 22:11
financial services like even just your regular stock and bond investing all of that. Absolutely.

Jay Jackson 22:15
In fact, we’re looking now we’re working now we part of our verticals is what’s called ABL wealth and inside ABL wealth. ABL is our ticker symbol. ABL Wealth Advisors is a firm that we have launched as a subsidiary of our publico in the last, really, six months is when we started the process and building out even ETF models structured around someone’s lifespan. So, you know, effectively just making the target date funds scenario much more personal and much more accurate to that individual. Right? You know, so many of us just pick like 2035 target date fund and have no idea why. Now we can do that with some precision, but most important, importantly in a very customizable, personal way. And you start to have those conversations now with financial advisors and how they’re structuring these, what you’re going to find is is that you know, forever if you go back and financial services, people talked about this 4% was the magic number for swip. And the reason why is that they’re running this outdates 95, or further. And what we say is, why are you doing a 4% swip. On someone with a five year lifespan, that’s not

Eric Chemi 23:17
gonna give you 20% You’ll be fine. Like,

Jay Jackson 23:20
it might not be quite that much, but it might be 12 will be 10. Right? When you think about how annuities are issued, doing medically underwritten annuities would then give you significantly more monthly income. If you had a better structure on understanding what the lifespan is. What

Eric Chemi 23:35
how do you figure out lifespan? What are the data points you’re looking at? sure that that helps you predict a lifespan better than what had been happening before?

Jay Jackson 23:44
Well, in large data matters here. Right? So you’re what you’re doing is you’re taking an individual and you’re comparing them to a distribution curve of lifespan of individuals that have very similar traits. And so aggregating that information is the first challenge and then being able to cross reference it against other circumstances.

Eric Chemi 24:02
But so what are the traits? What are the factors that tend to matter the most obviously, we know gender age, in the job, we’ve medically

Jay Jackson 24:09
underwrite someone, there’s, there’s, as this continues to evolve, we’re gonna see genetics play more and more significant trait, right? You know, there are some recognizable genes at this point, like there’s a fox oh three A, if you have the we all have it. But if you have that genotype turned on, it could indicate that you have a 50% higher probability to living past age 90, right? Those things are really interesting. It doesn’t mean that that is the end all predictor of what your lifespan is. It’s a combination of factors and the biggest factors that we see that will impact your lifespan. One is BMI, you know, how much and how much weight are you carrying above your muscle mass at certain ages is super important. And then what are the complications in relationship to that, you know, BMI, diabetes, kidney disease, cardiovascular disease, and then historically looking at how that’s impacted. As your family, those things really matter, but I’ll tell you a step further are things like community? Right, understanding what the community is like? Are they living near relatives? You know, we have a strong belief that, you know, one of the things that we asked frequently, I’ll tell you what, to all your listeners on this podcast, if you want to give someone a gift, who’s over a 75, you can give them significant extension in lifespan by doing one thing, have sending them a subscription? And I’m not going to tell which firm you should do it with send them a subscription to learn a second language. There’s a couple of companies out there that have them. Why? Think about what that does? One, it activates their neurological, right to what else does it do? Build communication? Three, what else community for travel movement? Right engagement. And fourth purpose, I think that the mental aspects and neurological aspects of who we are, are going to really matter on a go forward basis. What when I speak at conferences, I you know, I share some of the specs, some of the facts that they that you and I just spoke about, you know, in relationship that you know, over six foot and those things, and they’re fun, and people kind of like well, okay, but what I really tell them is, is that I’m going to give you the greatest gift, the greatest gift I can give you is the last 10 years of your life back. Right? That’s the data that we look at. And ultimately, we feel pretty confident when you get past age 90 Things start to deteriorate no matter how old you are. You just saw the former first lady from Jimmy Carter just just pass away. And how old was she? In the 90s? Right? 90, I think she was 96. Right? She lived to 100, Charlie

Eric Chemi 26:43
Munger, Charlie Munger didn’t get to make

Jay Jackson 26:46
it. If you didn’t make it. Like it’s it’s such a fallacy to say you are. Right, you’re talking about someone who had the best health care ever. Right. She had attended she had people watching out for and she had community. And so I think when you really start to think about these things, now is how do I adopt this into as an RA or financial advisor or anyone and into my practice? Life insurance is such a key component to finding liquidity, so to increase assets under management to find liquidity for your clients who weren’t actually realizing that had liquidity. And now you apply that to other financial assets. And in adding kind of a customized solution, I think we’re gonna see a huge impact on the financial planning practice over the next five years because of this. What’s

Eric Chemi 27:35
one example like that how financial planning may change, if you just had to pick the biggest change you’re predicting to see? Yeah,

Jay Jackson 27:42
one I, first and foremost, and this is a little self serving, but people are going to start treating life insurance like an asset. Okay, they really talked about, just like we spoke about when that happens, let’s just think about that 233 billion laughs over the age of 65. Let’s just break down some of those numbers. If you just take the folks that are over age 80, that may have had a policy there that could have been sold at a higher market market value. You’re still talking, you know, to the tune of actual cash payouts. 40 $50 billion. Right, how much was allocated to target date funds last month, right? Like, just think about the scale of that number? How many times have advisors heard, I can show you how to increase your AUM, when I’m sitting there saying you’ve got a 7x in your book, and you’re ignoring it. That is a massive shift that could increase the amount of AUM that financial advisors are able to capitalize liquidity into other assets. That’s such a huge shift, because then where does that go? Right, that goes into other funds that goes into other type of liquid options when you can see how this one funds the other. And then the second piece to that is, I think that we’re going to have to have customized financial solutions based on someone’s lifespan. And I think that’s going to have a monster impact on how we do things like estate planning how we set up systematic withdrawal plans, right, the entire impact of that conversation. And if you as an advisor are not in front of that your competition will be

Eric Chemi 29:08
how do I know how long I’m gonna live for a year?

Jay Jackson 29:11
It’s interesting, you’re probably pretty good. I mean, I can tell you, you know, we can we can go through it. I like to joke and say, I’m a lot of fun at the holiday party. I’m like the carny in the corner. And, you know, it was like, hey, what do I got? And I’m like, like, to be honest, like, drink up, because you have, you’re not going to go on. So have a great time.

Eric Chemi 29:31
You know, someone like me, round number 3940. Hear that? Yeah. It’s like, okay, is it 70s and 80s? At 90, right, because those are all still so far away. But those are massively different. Yeah.

Jay Jackson 29:42
I think the way I would think about it is that when we look at population today in that in that segment, 35 to 55, and you remove things like SSH, mortalities that happened during COVID, etc. And you just look at that timeframe. I think your next goal is What are we going to do to 65? Because part of that statistic, when you look at the general population, and you see males average lifespan to age 78, might be a little, I think, 77 and a half now, that’s also includes mortality rates related to infants, it includes mortality rates left and right,

Eric Chemi 30:18
that’s starting with zero. So once you’ve made it to 40, you’re already gonna, you’re already

Jay Jackson 30:23
there. Right? So now you’re looking in your 80s, for sure. Right? And and also take a quick look at your family history, right? Understand that the things you do when you’re 40, or 50, you can have a major impact. When you’re 80, I would tell you, there’s a really high probability and you and you have to discount accidents and other things that happen. But it really, if those are out of the equation, you have a really high probability of living to 80, you also have a really high probability of living to age 90, right? What is your 80s going to look like for you? That’s the question you have to ask yourself, I see some

Eric Chemi 30:57
really great living people in their 80s. And we see some people who are really strong, right,

Jay Jackson 31:01
one of the first times I think, in our countries, I say, history, is that where we saw an increase in lifespan for those over the age 65, but a decrease in health span. Meaning that yeah, you’re gonna live day 8889. But at age 82, things start going really badly for you. And that’s not a life, right? It’s not the dignity that people want in their 80s. And so we start to have conversations with people generally not 3940 or even 55 years old, because currently, we’re very focused on what that looks like, for their life insurance policy. So we’re typically working with seniors 65 Plus, right, but the same principles apply. Right? And it’s that mindset of how do you want this to look, we know that having a sound financial plan can relieve a lot of stress, when you’re at what

Eric Chemi 31:52
was the impact of COVID? Sure, interesting.

Jay Jackson 31:56
In our demographic, you would think that it would have been significant. But remember, the people were underwriting if you’re 75. Plus, you know, what we saw in COVID, was that many of these individuals already had significant impairments and COVID. Maybe accelerated those a little bit. You know, I can give you a classic example. And I use this often, and I’m not a COVID conspiracy theorists, I’m not any of that. I’m just telling you the facts. We had underwritten an individual who had been diagnosed with pancreatic cancer. That was two years prior to COVID. He passes away during COVID, the death certificate came back and what did it say?

Eric Chemi 32:37
It could have said either pancreatic cancer, it could have said COVID It actually

Jay Jackson 32:40
said COVID. Right. We know he passed away pancreatic cancer,

Eric Chemi 32:45
I see like he was gonna pass away at that time anyway, if COVID never exists, right?

Jay Jackson 32:49
Right. But then when you look at the the reporting on that for a number of reasons, you know, one of the it’s a whole nother issue that I have and just how we report cause of death. In our country, generally, it’s just primary, we don’t report all the other things that are potentially involved here. And that ultimately hurts government agencies like we did a call at the NIH six months ago. And the NIH was asking us for data related to what they call co impairments. And we saw things in COVID. That started to happen at the very end of 2019. For example, you know, we were tracking 73 to 75 year old and we have one of the largest life tracking and mortality tracking databases we work, we can work with state and pension funds and insurance companies help them identify when these occur. But we’re also tracking comorbidities along the way, or what we call ko impairments,

Eric Chemi 33:40
other things that you have in your body that that might affect you. Yeah,

Jay Jackson 33:43
so we started to see it was really fascinate, we started to see that those that had a BMI over 30 with kidney disease and diabetes, we saw this excess mortality start to happen around the age of 74, like in November, December of 2019. And it was a leap off the page and like, man, that’s weird flow. It

Eric Chemi 34:00
was really bad. March of 2020. Before the shutdowns,

Jay Jackson 34:04
yes. And we were like the flu is really bad. Like what’s going on? This is some sort of, but it was at the time you’re like I, you know, we interesting, let’s keep an eye on it. And then of course, you saw it really take off in March. So you know, I think the conversations with the NIH and others are using these type of cohort co impairment strategies to help predict what the next pandemic might look like. And who that might impact.

Eric Chemi 34:30
Is it crazy because I’ve had conversations people, you know, they don’t say it on camera, they say it privately say, Look, maybe there should never have been a shutdown and all the inflationary spending afterwards. Everybody got COVID. Anyway, everyone who was going to die of COVID died anyway, like you said was was and we’re facing it now because now we’re dealing with this massive stimulus that we’re trying to deal with, because we had all these shutdowns and covertly Are we now still four years later paying for something that we could have simply not done because like you said, that was a personal opinion. had a cancer, that person was going to pathway regardless, and we didn’t need to shut down the economy.

Jay Jackson 35:04
Sure. I mean, I think you know, all of us could say that about different markets and things that have happened over the last 100 years, right. Like, in retrospect, everything you said, I absolutely agree with. In the time, I think there was so much unknown, we weren’t sure about some of those things. Like I had some statistical data. But it wasn’t enough to support saying, hey, let’s not do this. And and I think that’s where people stood now. Again, I’m not on either side of that argument. I’m just about facts and

Eric Chemi 35:30
better data. It’s like you have better data than anyone else. That’s

Jay Jackson 35:33
correct. We have very accurate data, I will tell you as a business, we were based in Florida, and we never shut down, partly because we were sending checks to seniors. And we were processing mortality claims, we were tracking medical data, and that was useful to the state. But in addition to that, yeah, we had really good data to support what where we were as a business and a company, I think, you know, the biggest thing that I that I hope everyone takes away from what happened with COVID is that we didn’t apply any type of real, I think, thought process in the decision process that people based upon having COVID Whether you had the vaccine or not, right. So, you know, being able to be how long did immune characteristics take place post COVID, if you had had it without it. And I think that made a big, I think that was a poor part of the decision process? Because you know, for the same reason, if you catch the flu during the flu season, you don’t go get a flu shot after that. Right. Like

Eric Chemi 36:34
it’s over. Yeah, yeah, we

Jay Jackson 36:35
take that into consideration everywhere else, everywhere else. But in that system process, we weren’t I think, you know, they weren’t doing that. And I think, you know, there’s a lot of mindset around that. I don’t want to go down that road, but I think, yeah, I have the data. And we can, we can, you know, we look at people who survived COVID, who, you know, in that same target group who were healthier, right? If I were to give advice to anyone today is if you have a hard lesson from that, it’s exercise, it’s eat better, right? It’s take care of your bodies. And and because when you get to age 75, I don’t care if it’s COVID, or anything else, you were, frankly, more vulnerable. And the things you do and you’re 39 and 40, or 50, or 55 have a massive impact. It’s

Eric Chemi 37:26
all the same advice, isn’t it? Right? It’s like sleep, eat better exercise. Okay. Yeah. cures everything, apparently.

Jay Jackson 37:32
Yeah, well, I know it cures everything, but it still gives you a better shot.

Eric Chemi 37:36
Yeah. Then the last thing, you know, interest rates higher right. Now, what does that do? Obviously, we know, these insurance products, very sensitive to interest rates, especially, you know, the company. So what impact what effects are you seeing right now in terms of how people are behaving? And then how you’re trying to manage that investment portfolio?

Jay Jackson 37:54
Sure. So we’ll start with how people are behaving. It’s given us a pretty unique opportunity in this environment, frankly, for as people are seeking liquidity from their assets. They’re much more open to learning that, oh, I had no idea my life insurance had this value. Maybe I should pursue that. And so as a business and company, I’m telling you anything that is not public, you look at our third quarter earnings results, you know, we’re up 20%, top line and 26%, adjusted EBITA. Right. So, you know, this is the type of year where, you know, we’re going to see more increase than we ever had before. Right. When we look at our advertising, we seem from 10 to 12,000 inquiries per month from people seeking advice and information about this. So I think that’s a key indication to what people are looking for from an economy, right? They’re, they’re in this interest rate environment. Yeah, they might be earning more money market, but things are costing them more and they’re they’re they’re looking at other options and being opened other options for liquidity. Friend now shifting to an investor point of view, and investor point of view, as you see cost of capital increase, right, that can actually impact what the net present value is of that contract. Ultimately, back to the policyholder, right. So the discount rates we were using three years ago, in a near zero interest rate environment were obviously much lower in that factor calculation, meaning the payouts were higher to the policyholder than than they would be today where you’ve got interest rates near all time highs, right? So there’s some impact there where we sit as a company as the market maker and the origination company. You know, that’s all based on new origination. So we adjusted that very, very quickly. I think, overall, though, is an investment asset class. Let’s just look at it from a pure investor point of view. This is an essentially uncorrelated asset driven by you know, mortality experience. So it’s much like a mortality driven zero coupon where my Counterparty is the insurance company themselves, which is a rated or better, you have double digit level returns on a contract that’s in cash reserved at the counterparty if you didn’t know that. This was insurance, you would back the truck up, you would say, How do I get as much of this as I can. And I think so now from an economy point of view, we’re really, really interesting asset class. So as a public company, as an investment, people are literally, you know, reaching out frequently, we’re coming out with investment products for RAs, we have a 40 act interval fund that’s in process that’s public, which will be daily, Val give people access to this asset, because that’s why we went public to give people access, inform them from an investment point of view, because historically, this asset has been reserved for the largest private asset managers in the world. And now we’re making it available to every investor. And I think that’s an important piece to where it says it’s an very interesting sliver or piece and someone’s investment. And

Eric Chemi 40:49
then you have just the one final final takeaway, then for someone just watching this. So they remember one thing is, it’s simply, if I, if I’m understanding, it, just don’t let these policies lapse, they always have some kind of value, they almost always have some kind of value, talk to somebody get that value, don’t just let it lapse, if I remember one thing, is that right

Jay Jackson 41:09
it is, is you can go even to our website, we have a free calculator cost you nothing, no one’s gonna call you right away. Like it’s one of those things that you put in a couple of pieces you’re contacting, and then you’d have to worry about getting some email and say, then we’ll give you the numbers, we give you the numbers, right that people hate that people hate it, I hate it. That’s why I didn’t do it. Now I got crucified, by the way, by marketing for that. They’re like, you can’t just give the data away. And I’m like, trust me, it’ll all work out. It’s fine, give people the information, gender, they just got to put in their their gender size of policy, a couple of quick inputs, what they think their health is, and then literally, instantly they get, hey, this is what your policy might be worth from a net present value. And then from there, they can schedule an appointment. But whether you because a lot of people don’t want to maybe they’re uncomfortable, and they don’t want to reach out, they want to talk to somebody, they just want to get a kind of an instant idea. And we do that now online. So it’s really easy for people to do Abacus life.com They can do it.

Eric Chemi 42:02
But just come and then. Yeah, so then tell me where are you? Right? I know you’re in a hotel. What do you what are you doing? How are you joining us?

Jay Jackson 42:11
That’s that’s a great question. I was afraid you might ask that it was kind of fun. They. So we are again, heavily regulated. So I am, oddly enough in Las Vegas at a conference related to insurance regulation and regulatory, even from the political front. So, you know, we meet with governors of of every party, and talk to them about getting this message out, right? Because it has an impact on things like Medicaid, right, you take somebody who’s going to potentially have to liquidate all their assets to qualify for Medicaid to get into a long term care facility, because the burden is too much on their family the cost at 10 to 15,000 a month, but life insurance policy gets ignored. And we’re sitting here saying there’s

Eric Chemi 42:54
hundreds of taxpayers, as taxpayers, we want them to get the money from their life insurance, because, oh, we have to pay for their Medicaid anyway. So they get everything they’ve got don’t let

Jay Jackson 43:05
everything don’t let this lapse

Eric Chemi 43:07
insurance. Money.

Jay Jackson 43:09
That’s right. And and frankly, I want to say this to the insurance companies, they’re really not the bad guy here, in a sense, I mean, they’re there to run a profitable business. I’ll also add that even the insurance companies are now some of our biggest clients, we help them optimize some of that kind of legacy, what they call, you know, policies that were put out. And the insurance company might actually buy that back through us. And we obviously let the client know that. And in that scenario, that’s a really a huge win, right? Because now the insurance companies remove this off their books, there’s no mortality experience that someone’s then waiting to occur. And the ultimate policyholder got today’s net present value, which is what they really want. And the policy is off the book. So you know, there’s there’s lots of strategies here. But when you think about us as an institutional investor, or an investor into whether it’s publico whether it’s into these other assets. It’s really exciting, right? And we’re truly just scratching the surface here. And it’s all education based.

Eric Chemi 44:06
Amazing, Jay, thank you so much. This has been fantastic change. Because the calculators there, the information is here. I really hadn’t thought about this myself before about letting these policies void. So I’m glad to people who are listening and watching and thinking about all that. And then as it relates to everything else that you do it as it relates to your your stock portfolio, your bond portfolio, your target date, fund, what are you doing in retirement? So, Jay, thank you so much for coming on the show today. Guys. Thank you. And for people watching, listening, you weird all these things, mistakes you can make with your finances. If you’re not sure what you’re doing with your finances, and you don’t have a financial advisor, like Jay is talking about you go to Wealthion.com We’ve got a short form too. You can put in your email just like the abacus life short form and a couple of basic things. If you’re looking to talk to somebody, we’ve got some investment professionals that we endorse, again, it’s free, there’s no commitment, there’s no obligation. You can have conversations if you try To figure out questions like this, we’ve got those professionals that we endorse at wealthy on.com. And if you liked this episode as much as I did, please like it, share it, subscribe, forward it, tell your friends, all of those things help get the word out there. So the algorithms keep popping it up for more and more people to listen and to watch. So thank you again for watching this episode of Jay Jackson and I, thanks for watching Wealthion. I’m Eric Chemi. We’ll see you next time.