by John Darer® CLU ChFC MSSC RSP CLTC
Melissa Evola-Price's structured settlement industry production reports have become a Rorshach Test of sorts. A recent tradition following each annual release is the predictable droning cynicism of industry curmudgeon, Patrick Hindert, which yet again fails to inspire. His decade long quest to figuratively tie anything not "nailed down" to factoring, is simply "la vache qui rit".
On the other hand there ARE people who are optimists and successful ones at that.
Structured Settlement Industry is "Grinding Out The 1-0"
I am a lifelong fan of Chelsea FC in London England. Chelsea, a team currently sitting at the top of the Premier League with an assembled pool an exceptional talent and character that is equally adept at defeating opponents with skill, creativity and power, as it is at grinding out 1-0 victories. In the 2004-2005 championship winning season, more than 25% of the teams wins were by this result. It is the latter where I see a parallel strength to the structured settlement industry of this moment in time. Our industry is populated by skilled professionals who are mentally capable of "playing for 90 minutes and grinding out 1-0 victories"
Explain " Grinding Out the 1-0" in the Structured Settlement Context
Structured settlements aren't sexy and never were. but consider that the 2% year over year industry growth (as measured by annuity premium) was achieved despite lingering low interest rates and a trend of tightened up medical underwriting by annuity issuers. This is the second straight year of a structured settlement recovery by the nominal metric of annuity premium.
What this could mean is:
- Safety, security and guarantees are ultimately more important to consumers of structured settlements than interest rates.
- Comparable bond rates and CD rates fail to impress
- Older claimants are possibly more likely to agree to a structure to address longevity risk
- The ways in which a structured settlement is positioned in the settlement plan and the need(s) addressed by the structured settlement may have changed.
- We are seeing the results of improvements in education and training of both industry members, attorneys and consumers and a growing level of sophistication.
- Lower interest rates mean higher costs to establish the funding of life care plans and the cost to fund elements of damages in New York structured judgments under CPLR Articles 50A and 50B.
- The structured settlement industry has historically shown the strength to absorb and overcome negative developments. More recently:
- The 2013 withdrawals of John Hancock and Allstate have proved to be a non-event from the standpoint of industry production. With the exception of structured installment sales, there has been no loss of capacity as other companies have simply absorbed the production.
- Neither the ELNY liquidation itself, nor any blogs, podcasts, trade journals mainstream televsion or publications are causing industry production to decrease.
- The Ringler and EPS Class Actions related to ELNY era alleged actions have not affected industry production
- If what has been alleged in the Insurers' Complaint against Ringler is true, I expect that rogue former structured settlement broker Mike Woodyward of Dallas, will be arrested and eventually be incarcerated over his alleged Ponzi scheme. I believe that representatives of insurers will be able to discern how none of the cases involved structured settlements per se (they went through the same channel), how things went horribly wrong with Woodyard, how the manner in which funds were transmitted was irregular and how they could have been prevented by a simple common place procedure.
Worthy of note from this side of Evola Price's " Rorshach test"
- Berkshire Hathaway has been on an upward trajectory in the 4 years since its return to the marketplace. Berkshire continues to dominate, but other carriers are holding their own. Premiums to MetLife, Prudential, New York Life and Liberty each grew in 2014. Pacific Life is still one of the leading companies despite a year over year reduction.
- The Liberty story is a very good one. Liberty, through BARCO offers the only US domestic structured annuity funded** and US domestic insurer guaranteed non qualified assignment program available to self insureds. With the withdrawal of MetLife from the reinsurance market place, tax deferred structured settlements are a niche market place now populated by Liberty/BARCO, National Indemnity ( no self-insureds) and some other entities non under the auspices of the insurance industry.
Evola-Price's numbers do not reflect:
- Personal Settlement Annuities issued by MetLife Insurance Company (USA) after constructive receipt has occurred, within 90 days of settlement.
- Use of non structured settlement annuities to fund MSAs.
- Non qualified assignments produced through Structured Assignments Inc., Havelet Assignments, Brook Hollow or other non qualified assignment companies, including two being pitched by a Buffalo New York structured settlement broker to the trial lawyer community.
- Assets under management acquired through the work of industry members.
- The evolution and growing use of recycled payment streams from factored structured settlements, annuities and other cash flows to partially fund a plaintiff's future needs or as an investment by the trustee of a trust on behalf of a plaintiff.
A colleague of mine said he had one of his best years ever in 2014 and another just wrote a $41 million case. I'm equally proud of integrating skills I have developed as a Sudden Money adviser into my practice, to help serve clients better, continue to add more value and close cases that might have been more challenging to do before.
**recycled payment streams are technically not annuities, even if the payment stream acquired is backed by an insurer. Some recycled payments streams are subject to servicing arrangements. The servicing company may not have the same asset base or financial strength as the underlying issuer and insolvency of the servicing company, or back up servicer, if applicable, could cause additional costs to a partial seller. I first brought this up in 2009 and did a series of video podcasts with Dallas bankruptcy attorney Bruce Akerly.
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