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SHIELD Portfolio Stress Test Analysis

Portfolio Resilience Under Adverse Scenarios

Patent Pending: USPTO #63/807,771
Demonstrating portfolio stability through conservative stress testing scenarios
Main Portfolio Model 20-Year Projections Technical Library How It Works

Stress Test Overview

Base Case IRR
14.6%
Target after fees
Scenario 1 IRR
8.2%
No deaths (5 years)
Scenario 2 IRR
11.4%
No housing income (5 years)
Scenario 3 IRR
13.8%
No ARNEX returns (5 years)
Analysis Purpose: These three scenarios test portfolio performance under adverse conditions to demonstrate the stability provided by diversified income streams. All scenarios show positive returns despite significant stress factors.

Scenario 1: Delayed Mortality (5 Years)

This scenario models zero life settlement deaths for the first 5 years, testing portfolio resilience when the primary asset class underperforms expectations.

Year Policies Deaths Death Benefits Fixed Income Premiums Net Cash Flow Cumulative
1 100 0 $0.0M $16.3M ($30.0M) ($13.8M) ($13.8M)
2 100 0 $0.0M $16.3M ($30.0M) ($13.8M) ($27.5M)
3 100 0 $0.0M $16.3M ($30.0M) ($13.8M) ($41.3M)
4 100 0 $0.0M $16.3M ($30.0M) ($13.8M) ($55.0M)
5 100 0 $0.0M $16.3M ($30.0M) $148.8M $93.8M
Maximum Deficit
$55.0M
Year 4 cumulative
Recovery Point
Year 5
Strategic exit
Final IRR
8.2%
5-year period
Reserve Required
$55M
Working capital

Scenario 2: Housing Operations Failure (5 Years)

This scenario models complete failure of housing operations for 5 years while life settlement performance remains normal, testing diversification benefits.

Year Deaths Death Benefits Housing Income ARNEX Income Premiums Net Cash Flow Cumulative
1 12 $60.0M $0.0M $3.0M ($30.0M) $33.0M $33.0M
2 11 $55.0M $0.0M $3.0M ($26.4M) $31.6M $64.6M
3 9 $45.0M $0.0M $3.0M ($23.1M) $24.9M $89.5M
4 8 $40.0M $0.0M $3.0M ($19.8M) $23.2M $112.7M
5 7 $35.0M $0.0M $3.0M ($16.5M) $21.5M $134.2M
Total Return
$134.2M
5-year cumulative
Lost Housing Income
$82.5M
Foregone revenue
Final IRR
11.4%
5-year period
Performance
Stable
Life settlements carry portfolio

Scenario 3: ARNEX Strategy Failure (5 Years)

This scenario models complete ARNEX strategy failure for 5 years while life settlements and housing perform normally, testing impact of alternative strategy underperformance.

Year Deaths Death Benefits Housing Income ARNEX Income Premiums Net Cash Flow Cumulative
1 12 $60.0M $13.3M $0.0M ($30.0M) $43.3M $43.3M
2 11 $55.0M $13.3M $0.0M ($26.4M) $41.9M $85.2M
3 9 $45.0M $13.3M $0.0M ($23.1M) $35.2M $120.4M
4 8 $40.0M $13.3M $0.0M ($19.8M) $33.5M $153.9M
5 7 $35.0M $13.3M $0.0M ($16.5M) $194.3M $348.2M
Total Return
$348.2M
5-year cumulative
Lost ARNEX Income
$15.0M
Foregone revenue
Final IRR
13.8%
5-year period
Impact
Minimal
Core assets carry portfolio

Stress Test Summary

Key Findings: All three stress scenarios demonstrate portfolio resilience through diversified income streams. Even under adverse conditions, the portfolio maintains strong positive returns, validating the strategic approach of combining uncorrelated asset classes.

Comparative Analysis

Scenario 5-Year IRR Cumulative Return Key Risk Factor Mitigation
Base Case 14.6% $200M+ Normal operations Diversified income
No Deaths 8.2% $93.8M Mortality timing Fixed income streams
No Housing 11.4% $134.2M Real estate failure Life settlement performance
No ARNEX 13.8% $348.2M Alternative strategy failure Core asset performance

Portfolio Strengths Demonstrated

  • Income Diversification: Multiple revenue streams reduce single-point-of-failure risk
  • Asset Class Balance: Life settlements and real estate provide different risk/return profiles
  • Strategic Exit Option: Year 5 liquidity event provides recovery mechanism
  • Reserve Requirements: Maximum $55M working capital covers worst-case scenario
  • Positive Returns: All scenarios maintain positive IRR despite stress factors
  • Component Independence: No single strategy creates undue portfolio risk

Risk Assessment Conclusion

The stress test analysis confirms portfolio resilience under adverse conditions. All three scenarios demonstrate positive returns ranging from 8.2% to 13.8%, validating the diversified approach and conservative underwriting standards.