The extinguished hateful look became a warm smile.
“How many is it, darlin’?” she asked Josh.
Momentarily confused, he picked up the thread.
“Tenth,” he said.
She tapped Josh on the shoulder and wrinkled her
nose at Bob. “Still a kid. He’s still got lots to learn.”
Bob laughed. “That he has.”
The waitress topped off their mugs and moved to another table in need of service.
Bob explained what he’d found out about Pinnacle Investments.
His discovery was punctuated with mouthfuls
of food snatched from the plate in front of him.
“The first thing you need to understand is you didn’t cash in your life insurance policy.” Bob swallowed the mouthful of food and waved a fork at Josh.
“But that’s what you did for me, isn’t it?”
“No. I made a viatical settlement. That basically means Pinnacle Investments gave you a cash settlement that was a percentage of the face value of your policy.
They continue paying your monthly contributions until you die.”
“Why do that? Why continue paying my contributions?”
“Because
when you’re dead, they collect on the policy.
That’s how viatical settlements work. In effect, you made them the beneficiary of your life insurance.”
Josh picked up his coffee. “So why did you do that and not cash in the policy?”
“Because you wanted a lot of money quick. If I surrendered your policy, I would have gotten next to nothing, a few thousand at best. But by making a viatical
settlement, I got you a serious slice of your policy back.”
“The fifty-seven thousand.”
“Right, which is about ten percent of the face value.
And that’s still a poor payout. If you were terminally ill or very old, you would have received a cut of up to seventy-five percent of the face value.”
“Jeez, that would have been well into six figures.”
Wide-eyed, Josh was astonished by the money that
could be raked in.
“Yeah, that’s what got viatical companies into
trouble—the large up front payoffs. Viatical settlements became big business at the beginning of the
nineties when people saw easy money could be made.”
“How?”
“AIDS. Many medical insurance polices wouldn’t
cover AIDS patients, so a lot of people would have become destitute if a number of companies hadn’t
popped up giving them a large cut of their life policy while they were still alive. Bingo—a lot of very sick people lived out their last days worry and debt free.
And viatical companies got what they wanted, a quick, surefire return on an investment. The estimated life expectancy of an AIDS patient was a year, maybe two.
The investment firms paid the monthly dues and passed over some cash. Everybody was happy.”
Josh sneered. “Sounds a bit ghoulish, living off the dead and profiteering off someone’s misery. They must be willing their clients to die.”
“Yeah, but they did you a good turn when you
needed it.”
No denying it, he had benefited from the system—at the time. “So what went wrong? We wouldn’t be here unless something had happened.”
“Smart boy. Medical breakthroughs. There have
been several successful AIDS drugs put on the market over the last few years that have changed the world for their patients. The life expectancy of AIDS patients has increased by ten years, and in ten years, who knows, there might even be a cure. So the viatical companies were screwed. Suddenly the big short-term profits dried up. Their clients had the cash to buy the drugs and got the better end of the deal. The companies started going to the wall, paying out too much too soon with no likely return in sight, plus they still had all those monthly dues to cover. The ones that diversified survived. They moved onto other terminal illnesses like cancer, heart disease—all the biggies medical science doesn’t have an answer for.”
Bob stopped to drink his coffee and Josh let the information sink in.
Bob continued. “The other way some viatical companies survived was to act as an agent. They acted as
intermediaries for private investors or investment clubs who made large cash payments for some poor sap’s life insurance. Little did they know they might have to wait a decade to get anything when they thought a check would be in the mail in twelve months. I remember seeing the late night infomercials ages ago.”
“So what’s Pinnacle Investments’s story?”
“They were one of the founding companies in the industry, setting up a division to specifically get a steal on the rest. They bought big and were paid out bigger.
Most of their clients were AIDS patients, but they’d already moved into all kinds of terminal diseases. The
annual report was a shareholder’s dream, with major growth in the early nineties. But, the ninety-eight report was the complete opposite. The viatical division
was sinking the rest of the firm. But in ninety-nine they almost broke even, two thousand they showed a profit again. Tiny in comparison, but a profit.” Bob illustrated his information with printouts of financial data
taken from Pinnacle Investments’s Web pages. He removed a sheaf of papers from the envelope he brought
with him and passed it to Josh.
Briefly, Josh scanned the papers. “So they got over the hump,” he said, offering a logical conclusion he didn’t believe.
“Yeah, but for their success their clients had to die when the trend was for them to live. The rest of their competitors either went bust or were bought out.”
“How do they account for their success?” Josh pushed his plate away. The discussion had sapped his hunger.
“Are you finished with that?” Bob asked, nodding at Josh’s plate.
“Yeah, knock yourself out.”
Bob hijacked the remainder of the hash brown between his knife and fork, and put it onto his plate.
“You should never let food go to waste. It should be a crime,” he said, and made a piece of Josh’s breakfast disappear. “To answer your question, the official statement for their renewed fortunes is shrewd management.
They say their investment spread is much wider
and not as vulnerable as their competition. The laws have relaxed on who can make a viatical settlement. It used to be the terminally ill, but now it’s anyone over seventy-five.”
“But I was neither of those.”
“That’s right, but I got you in on your lifestyle as a pilot and recreational rock climber.”
“Yeah, I used to rock climb, but I stopped after
Abby was born.” Once an avid climber in the Sierras, he had given it up at Kate’s request. Although he’d never had a serious fall—only a minor mishap that landed him two days in the hospital—she didn’t relish the thought of bringing up a baby with no father.
“Yeah, but you might take it up again and I told
them there’s hereditary cancer on the male side.”
Josh studied the black coffee in his mug. His reflection stared back, dark and distorted in the shimmering
