General Information and Documents for Secure Investment Services, Inc. and American Financial Services, Inc.

IMPORTANT BULLETIN

How much will the receivership estate distribute to me?

All approved claims will be paid on a pro rata basis from the entire pool of receivership assets.

The pool of receivership assets includes all assets the receivership estate possesses and any income earned from them. For example, the receivership estate currently owns 100% of 31 insurance policies. If those policies mature or the Receiver sells them, all proceeds will go to the pool available for distribution. This means it no longer matters in which policy you originally invested, you now have an interest in the entire pool of assets.

The Receiver will distribute pooled assets to investors on a pro rata basis according to the amount of your claim. That means an investor with a $40,000 claim will receive exactly double the distribution as an investor with a $20,000 claim. In other words, all investors will recover the same percentage of their investment through the distribution process. For example, if the pool contained $2 million and there were $10 million of approved claims, each investor would be paid 20% of their approved claim amount.

Right now it is impossible to tell how much will actually be distributed to investors. The largest single determining factor is how the life insurance policies perform. As explained above, the pool of receivership assets currently contains 31 life insurance policies. If those insureds die while the receivership estate owns the policies, then it greatly increases the amount of money in the pool of receivership assets. On the other hand, if the Receiver is forced to sell some or all of the policies, it would generate much less income because the market for life insurance policies is very poor. For example:

     -     The Receiver gets the highest return when an insured dies while the receivership estate owns that policy. In that case, the insurance company typically pays 100% of the death benefit face amount. (Meaning a $1,000,000 policy would pay roughly $1,000,000.)

     -     While Mr. Quilling was counsel for a receiver in another case several years ago, the receivership estate was forced to sell policies for 26.58% of the death benefit face amount. (Meaning a $1,000,000 policy would have sold for $265,800.)

     -     While Mr. Quilling was receiver in another case, the receivership estate was forced to sell policies in Fall 2008 for 14.19% of the death benefit face amount. (Meaning a $1,000,000 policy would have sold for $141,900.)

Obviously he prefers to hold policies as long as he can so they might mature. Unfortunately that requires him to pay premiums to keep the policies in force. The premiums in this case currently run about $______ a year and will increase over time. If the Receiver runs out of funds and available credit to pay those premiums, he could be forced to sell some or all of the policies.

I filed a claim with the Receiver. Has the policy in which I originally invested matured?

Since claims are paid from the entire pool of receivership assets, your share of the distribution has nothing to do with the policy in which you originally invested. The receivership estate's interest in each policy will ultimately benefit all investors with an approved claim.

For informational purposes only, the following policies matured since the Receiver was appointed in August 2007:

DAM-A&D
ELK-H
FOW-S(1)
FOW-S(2)
KIL-D
MAT-P
SWA-R (this is different than the SWA-R&G policy that has not matured)

Note: To protect the insureds' identities, these descriptions include the first three letters of an insured's last names and the first letter of the insured's first names. For example, a policy insuring John Smith would be the SMI-J policy and a policy insuring John & Mary Smith would be the SMI-J&M policy.

How long will it be until I receive my distribution from the receivership estate?

It is difficult to forecast when a distribution will actually occur but we can describe what must happen before the distribution takes place.

First, the Receiver needs to receive claim forms from the remaining investors who wish to receive a distribution. If you have not done so already, please fill out the court-approved claim form (available here) and return it to the address listed. Second, the Receiver needs to contact investors to verify their claim amounts and recommend each for approval or disapproval by the Court. Third, the Receiver needs to conclude any litigation that may result in a net recovery for the receivership estate. Finally, as explained above, the Receiver must liquidate all of the policies either by having them mature or by selling them.

The Receiver has already completed or is in the process of completing the first three items. The last item-liquidating the insurance policies-is the one that will actually determine when a distribution occurs. He does not know how long that will take. It is unlikely the Receiver can pay premiums long enough for all policies to mature, so he will probably liquidate the policies in a couple different ways-some will mature when the insureds die, some unfavorable policies will be sold to pay premiums on more favorable ones, and some unfavorable policies may be abandoned if they cannot be sold.

In analyzing these issues, the Receiver is guided by his overall objective to maximize the receivership estate's value, which ultimately increases the final distribution to investors.

Is there an updated life expectancy report that shows the insured's current health condition?

It is the Receiver's experience that life expectancy reports are unreliable and no one can accurately predict an insured's death. Nevertheless, the Receiver has obtained several updated life expectancy reports based on the insureds' recent medical information. Although earlier reports projected most insureds would die by now, the updated reports project most could live 5 to 12 more years.

When I invested in this policy, it had a bond that would mature. Is the bonding company going to pay the full death benefit for this policy?

No, there will be no recovery from these bonding companies. It is the Receiver's experience that the life-settlement bond industry is generally a fraud. Here is additional information on each of companies that issued the so-called bonds:

International Fidelity & Surety Ltd. ("IFS") is allegedly located in Vanuatu. The Receiver exposed it as a fraud run by David Goldenberg and Mark Wolok, each of whom were indicted in a criminal case. Goldenberg has since committed suicide and Wolok will likely go to prison. The company never had the ability to pay its bond obligations and never will.

Provident Capital & Indemnity ("PCI") is located in Costa Rica. Last fall the Receiver and his Costa Rican counsel personally met with PCI's president, who stated the bonds were never "active" even though PCI accepted full payment and never notified Don Neuhaus about it. Because the receivership estate cannot effectively sue and collect from a Costa Rican company in the United States, the Receiver negotiated an agreement for PCI to return the premiums paid for those bonds. Not surprisingly, PCI has failed to make good on that payment. The Receiver has concluded the company is nothing more than a shell run by unscrupulous businessmen hiding in foreign contries and taking advantage of legal protections there.

Balgi-SinoRe ("Balgi") is supposedly located in Australia. The Examiner's office investigated the Balgi bonds, which were supposedly assumed by a company called Sino Re. Records indicate there was once an Australian entity registered as Sino Reinsurance Pty. Ltd. Its registered agent was Chooi S. Beh in Melbourne. Efforts to reach that company were fruitless and the Examiner's investigation leads to a conclusion there is substance to Sino Re or likelihood of recovery.