Structured Settlements 4Real® Blog: Structured Settlements | Settlement Planning News and John Darer Reviews

Structured Settlement Production Surpasses $2B For Second Quarter in a Row

by John Darer CLU ChFC MSSC CeFT RSP CLTC

The Structured Settlement Industry got off to a great start in Q1 2023, with substantial increases over Q1 2022. The structured settlement industry saw its second straight quarter with in excess of $2B in production.

Summary

1. The structured settlement industry placed $2,069,165,084 of premium in Q1 2023.
• This represents an increase of $904,770,552 or +77.7% Q1 YOY and the second straight quarter with industry production in excess of $2B.
2. Structured settlement industry case count totaled 7,180 in Q1 2023.
• This represents an increase of 2,572 cases or +55.8% Q1 YOY
3. Average structured settlement premium per case was $288,185 in Q1 2023.
• This represents an increase of $35,495 per case or +14% Q1 YOY   Source: Matthew Ross

MetLife was the leading company in terms of Q1 2023 production with $584,900,000. MetLife structured settlement underwriting companies are Mettropolitan Tower Life Insurance Company and Metropolitan Life Insurance Company. The former is the primary underwriting company and the latter is the MetLife underwriting company that has been in business since the 19th Century, having been founded in 1868.

Pacific Life was the second leading structured settlement annuity issuing life insurance company, not far behind behind MetLife, with $513,699,241  Together MetLife and Pacific Life made up more than 50% of the undustry's Q1 2023 production, combining for more than $1B in production between them in Q1. Pacific Life writing companies include Pacific Life Insurance Company in all states except New York and Pacific Life and Annuity Company for all structured settlement cases with a nexus to New York (e.g. venue, parties).

In third place in terms of production was USAA LIfe, which exploded in growth, leaning into its sweet spot on long term structured settlement payouts with $357,000,000

In fourth was New York Life Insurance Company, with $222,229,672, founded in 1845.

IStructure, the first and only uncapped index linked structured settlement annuity issued by Independent Life Insurance Company (the only structured settlement annuity issuer that issues structured settlement annuities  as its sole product line), is running at about 60% of Independent Life Insurance company sales according to company sources this author spoke with. Independent did $130,313,000 in Q1

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John Darer Reviews Broker's Claim that Structured Settlement Brokers Issue Annuity Policies

by Structured Settlement Watchdog

Who Issues Structured Settlement Annuity Policies?

Here's one answer...

"Structured settlement brokers...and are responsible for issuing the annuity policy to the plaintiff"- FAQ answer from the website of a California licensed insurance agent and structured settlement broker , retrieved April 29, 2023

 

According to the Insurance Information Institute however

 

"Annuities can be purchased through insurance agents, financial planners, banks and life insurance carriers. However, only life insurance companies issue policies".  See How are annuities sold? | III

 

Is an Annuity Policy "issued to the plaintiff" When a Structured Settlement Is Established?

 

No, an annuity policy is never issued to the plaintiff when a structured settlement is established. See How Structured Settlements Work | Structured Settlements Explained (4structures.com)

 

Structured settlement annuities can be purchased by Defendants, Insurance Companies for Defendants, or Qualfied Assignment Companies.

 

April is Financial Literacy Month – a month intended to raise awareness on planning for a secure financial future. It’s also a time to reflect on the state of your personal finances and explore opportunities to improve them one step at a time. 

 

Publishing what should be basic information directed to consumers, that is bereft of the accurate truth, would not be acceptable standard for someone who just passed a state insurance licensing exam, let only someone with decades of experience in structured settlements.

 

Let's try to do better, eh?

 

 

 

 

 

Pacific Life and Prudential Are Named Among World's Most Ethical Companies 2023 by Ethisphere

by John Darer CLU ChFC MSSC CeFT RSP CLTC

Pacific Life and Prudential, leading life insurance companies that issue structured settlement annuities, have been named among the World's Most Ethical Companies for 2023. For Pacific Life the Ethisphere recognition is for the 6th time, while for Prudential it is for the 9th time. Both Pacific and Prudential have been in business since the 19th Century.

How Does the Ethisphere Determine the World's Most Ethical Companies?

In 2006, Ethisphere launched the World’s Most Ethical Companies® recognition program to measure and showcase the superior achievements of organizations that are committed to doing business with ethics and integrity. The process is rigorous and objective. It includes a 200-point assessment, documentation review, and research into an organization’s reputation and ethical practices. The process itself provides a way for organizations to assess their own programs against leading practices. World’s Most Ethical Companies honorees also enjoy recognition of their exceptional ethics and compliance programs. Ethisphere also broadly shares the World’s Most Ethical Companies data to help all organizations understand and improve programs

Read more about the Ethisphere annual recognition program.

Structured Settlement Annuities Close to ALL TIME RECORD in 2022 Primary Market Production

by John Darer CLU ChFC MSSC CeFT RSP CLTC

Structured settlement annuities had a RECORD 4th quarter of 2022, as increasing awareness of rising interest rates looking good against a volatile stock market, plummeting crypto and hard work by industry members, catapulted industry production to close to its all time record achieved in 2019. 

The structured settlement primary market produced  $779.5M in December 2022 to end Q4 2022 with $2.075B in production. The total for 2022 was $6,037,899,790 according to industry sources.  The number does not included non qualified strucured settlement products.

1. The industry placed $2,090,161,453 of premium in Q4 totaling $6,037,899,790 for the year.

·        This represents an increase of $939,304,942 or +81.6% Q4 YOY

·        YTD this represents an increase of $1,807,552,714 or +42.7%

2. Industry case count totaled 5,979 in Q4, totaling 21,341 for the year.

·        This represents an increase of 1,526 cases or +34.3% Q4 YOY

·        YTD this represents an increase of 1,843 cases or +9.5%

3. Average case size was $349,584 in Q4, averaging $282,925 for the year.

·        This represents an increase of $91,139 per case or +35.3% Q4 YOY

·        YTD this represents an increase of $65,961 per case or +30.4%

How Structured Settlement Industry Was Affected in Covid Era

Despite a return to structured settlement production highwater mark to the north of $6B in 2018 and the all-time record in 2019, the  rapid deceleration in interest rates in the early part of the Covid-19 pandemic, together with court closures that constricted the supply line of cases coming up for trial, played a role in the drop in structured settlement industry wide production.  

Last updated February 19, 2023

John Darer Reviews | Are Structured Settlements Tax-Free?

by John Darer CLU ChFC MSSC CeFT RSP CLTC

 

Are Structured Settlements tax free?  That is the question.

 

One answer appearing on the Internet from a settlement planning firm states:

 

1. Income tax exemption: Structured settlement payments—including growth—are 100% income tax-free. 

 

Comment: TRUE, if the payments represent damages that qualify for an exclusion from gross income set forth in IRC 104(a)(1), IRC 104(a)(2) or IRC 139F. Generally, worker's compensation, personal physical injury or physical sickness, wrongful death and wrongful incarceration. It is not the structured settlement payments themselves that drives the tax treatment, it is what the parties agree the damages the structured settlement payments represent compensation for and how that is applied in the tax code.

 

2. While lump sum cash settlements are income tax-free for physical injury cases, if the money is placed in a traditional investment, then any growth is subject to income taxes.

 

Comment:  Not exactly. The answer fails to recognize capital investments that produce capital gains.

The term capital gain refers to the increase in the value of a capital asset when it is sold from what you paid for it. 

A short term gain or loss is when the asset is disposed of in one year or less. A long term capital gain or loss occurs if an asset is sold after holding for more than one year. The asset must be disposed of (sold) in order to realize a capital gain or loss.  In other words, unrealized gains and losses that reflect an increase or decrease in the value of an investment are not considered a taxable capital gain.

So it would be inaccurate to say that "if the money is placed in a traditional investment, then any growth is subject to income taxes".

 

 

 

 

House Ways And Means Commitee Requests Lump Sum Dissipation Study

by John Darer CLU ChFC MSSC CeFT RSP CLTC

Smucker "Pumps Up the Jam" on Premature Lump Sum Dissipation Study with Murphy

The American Association of Settlement Consultants (AASC) announced November 10, 2022, that members of the House Ways and Means Committee, led by Lloyd Smucker of Pennsylvania and Gregory F. Murphy of North Carolina have formally r equested a government-funded study assessing the long-term economic and lifestyle impact of premature lump-sum settlement dissipation.

Perhaps the dictionary is trying to tell us something!

The task will be assigned to Honorable Gene Dodaro, the Comptroller General of the United States and head of the Government Accountability Office (GAO), who will assess the feasibility of conducting the study and respond accordingly.

In their request, the Congressmen strongly stated the need for authoritative data on the troubling incidence of premature dissipation associated with lump-sum cash settlements, “For low-income Americans and or disabled individuals, settlement income is depended upon to cover essential costs such as mortgage payments, accident-related medical expenses, and other basic living expenses." 

"We are deeply concerned by historical data showing legal settlements made in the form of lump sum payments to injured parties and their families quickly dissipate, leaving victims without income when they need it most.” they said, according to the AASC release,

What is the Incidence and Impact of Premature Distribution on Injured Parties?

In addition to analyzing the incidence and impact of premature dissipation on injured parties, the request also asks that the study assess the long-term impact on mortgage foreclosures, medical debt, and other personal debt. With the availability of data that paints a complete picture of premature dissipation’s negative impact, injured parties will be able to make a more educated decision and fully assess the risk associated with cash versus annuitization of payments.

Better Than 5% Income Tax Free on Structured Settlements

by John Darer CLU ChFC MSSC CeFT RSP CLTC

Now is the time to make good use of stuctured settlements and build enduring guaranteeed income streams

Compelling yields in Excess of 5% are possible on intermediate and long term cash flows.  On November 1, 2022 for example, I locked-in a 10 year certain plan with a 5.7% Internal Rate of Return with a  daily rate from United States Life Insurance Company in the City of New York. 

So what does 5.7% tax-free mean?

Taxable Equivalent Yields at Different  Hypothetical Tax Rates

15%        6.705%

18%        6.951%

28%        7.916%

31%        8.261%

33%        8.507%

40%        9.500%

50%      11.400%

See expanded taxable equivalent yield chart

What about investing in the Stock Market?

Well you're not going to put all your eggs in one basket are you?  But let's say you did and if you had the fortitude to stay in the S&P 500 from January 3, 2000 to December 31, 2021 you would have averaged 9.52%.

However, if you missed just the 20 biggest trading days in the S&P 500 from January 3, 2002 to December 31, 2021 you would have averaged only 2.6%. If you missed the 30 biggest trading days the averag would onl have been 0.43% (and it goes downhill from there), according to the J.P. Morgan Asset Mnaagement 2022 Retirement Guide published March 3, 2022 p 44. Read Structured Settlement Rate of Return Compared to Alternative Investments (4structures.com) for more details.

Note: Structured settlement rates vary by insurance company and other factors such as duration. Read more about structured settlement quotes

Which Structured Annuity Issuers Are Among A. M. Best List of Largest Insurers?

by John Darer CLU ChFC MSSC CeFT RSP CLTC

Insurance groups that include current and former structured settlement annuity issuers represent more than 43% of the largest life insurance groups in the United States.

• Prudential  (1)
• MetLife (2)
• New York Life(3)
• Massachusetts Mutual Life (4,  former structured settlement annuity issuer)
• AIG Life & Retirement  (6, soon to be Corebridge Financial)
• Lincoln Financial (8, acquired Liberty Life of Boston structured settlement block, reinsured by Protective Life, #26)
• John Hancock (10)
• Brighthouse Financial  (15, includes legacy Travelers Insurance Company/ legacy MetLife Insurance Company of CT structures)
• Pacific Life (16)
• Athene (19, includes former Aviva,  CGNU and CGU Life structured settlement business)
• Talcott Resolution  (21, formerly known as Hartford Life)
• Protective Life (26, reinsurer of Lincoln Life of Boston structured settlement business-formerly Liberty LIfe of Boston)
• Genworth (30, roll up and spin off of First Colony, American Mayflower, GE Capital Assurance Company, GE Capital Life  Assurance company of NY)

Source: A. M. Best 2022 List of Largest US Insurerance Groups, published July 2022.

While size matters, it is only one of the criteria one should use in selecting an insurance company to fund a structured settlement.

List of current structured settlement annuity issuers in the USA and their ratings.

 

 

 

 

If You See a Qualified Assignment and Release Like This, Seek a Second Opinion

by Structured Settlement Watchdog

A Qualified Assignment and Release which includes the following, raises more questions than answers. If you see one it probably deserves a second opinion.

QUALIFIED ASSIGNMENT AND RELEASE

Defined Terms

Assignor:___________________ Qualified Settlement Fund,  ( QSF may be adminstered by company related to settlement planner)

Assignee: Qualified Assignment Company related to the settlement planner.

Qualified Funding Asset:  Annuity

Issuer of Qualified Funding Asset :  Metropolitan Life Insurance Company

12. In exchange for "legal payment rights" pursuant to 5891 of the IRC, to the Periodic Payments specified in Paragraph 15. Claimant hereby releases and discharges the defendants and/or respondents with regard to the Periodic Payments, and agrees to only look to  (name of Assignment Company owned by settlement planner firm holding company)

_____________________________________________________________________

SIDE BAR (sponsored by "What's Your Vector Victor?")

Why is the Clamaint releasing and discharging "Defendants and/or Respondents" in the settlement planner's Qualified Assignment and Release document from a QSF?  Wouldn't the "Defendants and/or Respondents" have been released and discharged when the money was deposited in the QSF under the "resolve or satisfy" clause in  § 1.461-2(c)(2)?

Claimant is to Respondent as Defendant is to Plaintiff. See my September 18, 2014 post, What's the Difference between Plaintiff or Claimant, Defendant or Respondent?

________________________________________________________

13. In the event of notice of an application to any court for the transfer of the payment rights under this agreement, (name of Assignment Company owned by settlement planner firm holding company) reserves the right to  effectuate an immediate transfer of ownership of the "Qualified Funding Asset"

Metropoltan Life Will Not Issue a Structured Settlement Annuity to a Settlement Planning Firm's Assignment Company

This author has confirmed with Metropolitan Life Insurance Company, that Metropolitan Life Insurance Company WILL NOT issue a structured settlement annuity to a qualified assignment company other than its own. Furthermore, since MetLife spun off its retail division to form Brighthouse,  a transition which was finalized August 7, 2017, MetLife does not issue retail annuities.

Factored Structured Settlement Payments Bought as an Investment Are Not An Annuity

The acquistion of someone elses' structured settlement payment rights is not the purchase of a structured settlement annuity, in accordance with National Association of Insurance commissioner (NAIC) Statutory Issue Paper No. 160, or an annuity under the laws of most states. In 37 states, investors in other people's structured settlement payment rights do not have the same statutory protections.

What is a Qualified Funding Asset?

According to IRC 130(d)

"For purposes of this section, the term "qualified funding asset" means any annuity contract issued by a company licensed to do business as an insurance company under the laws of any State, or any obligation of the United States, if—

(1) such annuity contract or obligation is used by the assignee to fund periodic payments under any qualified assignment,

(2)the periods of the payments under the annuity contract or obligation are reasonably related to the periodic payments under the qualified assignment , and the amount of any such payment under the contract or obligation does not exceed the periodic payment to which it relates,

(3)such annuity contract or obligation is designated by the taxpayer (in such manner as the Secretary shall by regulations prescribe) as being taken into account under this section with respect to such qualified assignment, and

(4)such annuity contract or obligation is purchased by the taxpayer not more than 60 days before the date of the qualified assignment and not later than 60 days after the date of such assignment".

 

It is clear from the plain reading of IRC 130(d) that obligation refers to any obligation of the United States. So the puzzle is what is the settlement planner getting the payee into here? 

 

If you would like more information on the essentials of  structured settlement documentation, this video may be helpful.

 

 

Structured Settlement Annuity Issuers with A Ratings from Weiss Research

by John Darer CLU ChFC MSSC CeFT RSP CLTC

Two life insurance companies that issue structured settlement annuities have earned A- or better ratings from Weiss Research

• New York Life Insurance Company A-
• Pacific Life Insurance Company A-

"Weiss insurance ratings outperformed 3 to 1." United States Government Accountability Office (GAO) 

Weiss Ratings | John Darer Reviews What is a Weiss Rating? - Structured Settlements 4Real® Blog: Structured Settlements | Settlement Planning News and John Darer Reviews (typepad.com)

 

 

Last updated February 11, 2024