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

AIG to Separate AIG Life & Retirement as Part of Restructuring

by John Darer CLU ChFC MSSC CeFT RSP CLTC 

On October 26, 2020 American International Group announced that it would begin the process of separating the AIG Life & Retirement division from AIG with the goal to establish two independent, market-leading companies.

The process is expected to last several years.  If one looks to the blue books of the insurers and old A.M. Best reports one can see that American General has paid billions in dividends to the parent company. If some of that money can now be kept at American General, it has to be a positive that should favorably impact pricing to consumers.

AIG Life & Retirement

Who is AIG Life and Retirement?

AIG Life & Retirement consists of four operating segments: Individual Retirement, Group Retirement, Life Insurance and Institutional Markets. It includes the following major U.S. life insurance companies: American General Life Insurance Company  (established 1926); The Variable Annuity Life Insurance Company  (1955); and The United States Life Insurance Company in the City of New York (1850).

The AIG LIfe & Retirement Group is to be spun off and rebranded as Corebridge Financial  UPDATE

Life insurance and annuities, including structured settlement annuities and funding agreements, are issued by American General Life Insurance Company (AGL), Houston, TX except in New York, where issued by The United States Life Insurance Company in the City of New York (US Life). The latter is the oldest stock life insurance company in the United States and was acquired by American General in 1997. American General was acquired by AIG in 2001. Western National, acquired by American General in 1997 and Variable Annuity Life Insurance Company acquired by American General in 1967 were also underwriters of structured settlement annuities in the past.

On May 11, 2001 the Chicago Tribune reported that "the race for scale in U.S. life insurance stepped up Friday, as global insurance giant American International Group reached an agreement to acquire fellow insurer American General Corp. for about $23 billion in stock". The deal was reported by the Chicago Tribune as "the largest ever in insurance" and "would create the largest U.S. insurer by far, and sends a signal to all other U.S. life insurers and annuity sellers that they have to get much bigger to compete.

Recent Innovation by American General

American General has recently introduced a number of periodic payment innovations to the structured settlement market

• Interest Rate Linked Structured Settlements  (IRLSS).  Here American General creates an opportunity to get into a structured settlement now, but create certainty in the form of add on future income streams at then prevailing rates if they higher than a certain benchmark on a future measuring date(s).
• Non Qualified Assignment Facility with Domestic Assignment Company and Ability to Defer Here a fabulous opportunity to create customized and predictable stream(s) of future payments using a Funding Agreement issued by American General, or United States Life in the City of New York (for New York cases). An option to defer without having to go offshore.

These structured settlement and settlement planning products are only available through licensed insurance agents appointed through the structured settlement distribution channel of the underwriting companies.

Beware Structured Settlement Secondary Market Cacodemons

It's Halloween all year round for the hellhounds and vultures of the structured settlements secondary market. They want your structured settlement candy. The incorrigible fiends drool for your large financial candy bars at bite size prices. Naturally when such an announcement is made, you can expect fake news and speculation from those looking to induce gullible people into to a pennies on the dollar financial blood letting.  One company, whose founder Robert Shapiro is now in jail on a 25 year stint, deliberately targeted structured settlement annuitants of AIG subsidiaries during the 2008 financial crisis. Annuitants that stayed the course received their payments. Those that sold to factoring companies lost money

 

 

 

AIG Structured Settlements | Livingston County New York Lawyer's Misnomer

by John Darer® CLU ChFC MSSC CeFT® RSP CLTC

A big thanks goes out to Livingston County, New York attorney Kevin Van Allen continuing to post a June 6, 2013 missive concerning AIG, Mr. Billed "Oh No! My Structured Settlement is with AIG!" leaving good opportunity for commentary.

Get your facts straight "Sluggo"

Van Allen: "Structured settlements are also a good deal for the defendant's insurance company, as they pay less money to the structuring company than they would pay up front to the client".

Comment:  Structured settlements benefit both sides. Van Allen implies some shortchanging, but Van Allen's missive is simply not an accurate reflection of what typically happens. 

 How structured settlements work.  Mandatory disclosures under New York General Obligations Law Section 5-1702 would reveal the cost of a structure, as would any New York structured settlement expert retained by plaintiff or their counsel. Furthermore, money is not paid to the "structuring company", it is paid to a qualified assignment company. 

Van Allen: "One of the largest structured settlement companies is American International Group. Yes, that AIG. Understandably, many people who have structured their case with AIG are worried that they will get nothing if AIG goes belly-up. Just what would they receive if their structured settlement company went bankrupt?"

Comments:

1. American International Group is neither a structured settlement company now, nor was it in June 2013, when Van Allen's post was published, nor in September 2008 when AIG was bailed out. Readers should note that at the time attorney Van Allen published his post it had been well publicized that In December 2012, the Treasury Department sold off the last of its remaining shares of AIG. In total, the government and taxpayers made a $22.7 billion profit from the AIG bailout. 2 That's because AIG was worth a lot more in 2012 than in 2008.

Here is an excerpt from the Wikipedia entry for American International Group:

American International Group, Inc., also known as AIG, is an American multinational finance and insurance corporation with operations in more than 80 countries and jurisdictions. The company operates through three core businesses: General Insurance, Life & Retirement, and a standalone technology-enabled subsidiary General Insurance includes Commercial, Personal Insurance, U.S. and International field operations. Life & Retirement includes Group Retirement, Individual Retirement, Life, and Institutional Markets.

2. American International Group's legal reserve insurance subsidiaries are regulated life insurance companies that issue structured settlement annuities. Structured settlement annuities issued by American General Life Insurance Company are distributed only through appointed agents in all states other than the State of New York.  In the State of New York, structured settlement annuities are underwritten by AIG subsidiary United States Life Insurance Company in the City of New York (US Life) which was founded in 1850.

US Life is one of the few life insurance companies currently writing structured judgment annuities to enable Defendants and/or their insurers, to comply with New York CPLR 5032 and CPLR 5042, also known as Articles 50A and 50B

American General was founded in 1926.

3. AIG serves 87% of the Fortune Global 500 and 83% of the Forbes 2000. AIG was ranked 49th on the 2016 Fortune 500 list. According to the 2016 Forbes Global 2000 list, AIG is the 87th largest public company in the world. On December 31, 2016 AIG had $76.3 billion in shareholder equity.

AIG was a central player in the financial crisis of 2008. It was bailed out by the federal government for $180 billion, and the government took control. The Financial Crisis Inquiry Commission (FCIC) of the US government concluded AIG failed primarily because it sold massive amounts of insurance without hedging its investment. Its enormous sales of credit default swaps were "made without putting up initial collateral, setting aside capital reserves, or hedging its exposure — a profound failure in corporate governance, particularly its risk-management practices."  (Wikpedia)The US government sold off its shares after the crisis and completed the process in 2012.  On October 20, 2010, a published article entitled "Bank Bailout Returns 8.2% Beating Treasury Yields"  Bloomberg reported "The U.S. government’s bailout of financial firms through the Troubled Asset Relief Program provided taxpayers with higher returns than yields paid on 30-year Treasury bonds -- enough money to fund the Securities and Exchange Commission for the next two decades"

4. Can the a life insurer issuing a structured settlement annuity go bankrupt?  The Bankruptcy and Consumer Protection Act of 2005 amended the bankruptcy code and continued the long standing bar against insurance company bankruptcies. 

Neither a domestic insurer nor "a foreign insurance company", engaged in such business in the United States" are eligible for relief under Chapter 7. 11 U.S.C. § 109(b)(2)-(3).

Van Allen: "Well, that depends. There is a law in New York that basically says if the insurance company with whom you have contracted for a structured settlement goes bankrupt, you may be eligible to receive payment from the Life Insurance Guaranty Corporation of New York. (LIGC) LIGC was created by the State of New York to compensate people for their loss, under certain conditions, when the insurance company that owes them the dough goes under.

So how does this work? Assume that Peter Plaintiff was injured in a car accident and that his case was resolved by jury verdict or settlement, after payment of all fees and expenses, for $475,000. This payment would be made by Doug Defendant's insurance company. Instead of accepting the $475,000 up front, Peter decides to "structure" his payout instead, by which Doug's insurance company pays maybe $450,000 to the settlement company. (The $25,000 difference is the benefit that Doug's insurance company realizes by the structured settlement) The settlement company (AIG, for instance) then promises to pay Peter a total of $900,000 by making monthly payments to him of $$$$ for the next xxx years. If AIG were to go bankrupt before anything were paid to Peter, LIGC would step in and pay Peter $450,000. Peter would not get the $900,000 AIG promised to pay, nor would he get the $475,000, which was the original amount Doug's company was obligated to pay. But at least he gets $450,000".

Comments: 

1. New York State insurance law precludes agents from discussing the mentioned entity, however I will say that Van Allen's example distorts the facts, which are readily available on the internet.

2. See above re inability of insurer to file for bankruptcy.

3. The consideration for settlement of a lawsuit includes payment of all fees and expenses, may include payment of liens and up front cash as well as periodic payments.

4. The insurance company does not pay a check to the settlement company, they pay by check or wire transfer to the qualified assignment company related to the structured settlement annuity issuing life insurance company or, in rare instances, buy and hold the annuity themselves  to fund their obligation.

Losing all their Money, Really?

Even in the unusual circumstances of Executive Life Insurance Company of New York Liquidation, which was liquidated in 2013 after more than 22 years of rehabilitation,  nobody "got nothing". Most didn't lose anything.

A structured settlement expert holding a New York insurance license is a good resource for New York residents.

Postscript

Since 2020, Mr. Van Allen has been Hon. Kevin G. Van Allen, a New York Supreme Court Judge the 7th Judicial District in Livington County. 

In September 2022,  AIG Life Insurance and Retirement became Corebridge Financial after a successful Initial Public Offering.  United States Life Insurance Company in the City of New York is a subsidiary of Corebridge Financial.

Last updated March 7, 2023

 

Who Owns a Structured Settlement Annuity?

by John Darer CLU ChFC MSSC CeFT RSP CLTC

Who Owns a Structured Settlement Annuity?

The majority of structured settlement annuities are owned by qualified assignment companies not the payees of the structured settlement.  The structured settlement annuities are purchased as a qualified funding asset subject to the terms of IRC 130(d). All structured settlement annuities used to fund taxable damages or attorney fees purchased are purchased by a non-qualified assignment company as part of a non-qualified assignment. As such they may be owned by a company specializing in non-qualified assignments.

A case in point would be American General Life Insurance Company and United States Life Insurance Company in the City of New York, subsidiaries of Corebridge Financial (formerly AIG Life & Retirement), which use AGL Assignment Company LLC for non qualified assignments. Where a qualified assignment is to be utilized, American General Annuity Services Corporation is the qualified assignment company. Another example is Independent LIfe Insurance Company which uses different assignment companies for qualfied and non-qaualified assignments,

In the case of MetLife Assignment Company, Inc, MetLife's assignment company owns structured settlement annuities funding both tax-exempt and taxable damages. 

Merchants of Factored Structured Settlement Payment Rights/Receivables Often Get It Wrong

Merchants of factored structured settlement payment rights mislabel factored structured settlement payment rights to prospective investors and to financial advisors, who may then market the mislabeled receivables to investors incorrectly as annuities.

Immediate Annuities (Dot) Com, a New Jersey broker of structured settlement payments and one of several companies that conducts such business using the debunked label  Secondary Market Annuity, which is not an annuity at all.  

Immediate Annuities (dot) com states, inaccurately, that  "A Secondary Market Annuity (also called an 'SMA') refers to a transaction in which the current owner of an income annuity sells his future income steam to a third-party in exchange for a lump-sum payment. Annuity income streams most commonly originate from lawsuit settlements, lottery winnings, or immediate annuities".

Immediate Annuities (dot ) com is not correct because it inaccurately suggests that a structured settlement payee is the owner of the income annuity funding a structured settlement. In fact, nothing could be further from the truth when it comes to structured settlement ownership.

It's hard to believe that Immediateannuities.com continues to use the debunked term "Secondary Market Annuity" or its plural "Secondary Market Annuities" when

1. The National Association of Insurance Commissioners does not recognize acquired structured settlement payment rights as annuities or insurance product.  See Statutory Issue Paper No. 160, which was finalized April 6, 2019.
2. There is no protection for investors in the event of insolvency in the 37 states that have adopted the 2017 Revisions to the Life & Health Guaranty Associations Model Act (#520). Investors should not feel comfortable in the 13 states that have yet to adopt, because the Model Act has a reach back provision that applies to such acqusitions before or after the adoption of the 2017 Revisions in a state.
3. Past and ongoing litigation that in some cases HAS resulted, and in pending cases MAY result in losses for investors in structured settlement payment rights. 

Pay Attention to the Settlement Agreement and Release!

A settlement agreement establishing the structured settlement will expressly state that the assignment company has all rights of ownership of the annuity. The structured settlement payee only owns the right to receive the periodic payments from a structured settlement as part of the consideration for a release of liability. The payee does not own the structured settlement annuity. It is the structured settlement payment rights that are transferable as long as the transaction complies with state and Federal law.

Last updated January 30, 2024