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

First Amendment Ratings Defense Fails For Standard & Poors in New Mexico

Credit ratings are not always protected opinion under the First Amendment, according to a federal judge's decision in New Mexico. The November 12, 2011 decision is a win for investors who lost money on mortgage-backed securities and a defeat for credit rating agencies who regularly invoke First Amendment free speech protection to defend against lawsuits over their ratings.

In Genesee County Employees' Retirement System et al v. Thornburg Mortgage Securities Trust 2006-3 et al, U.S. District Court, District of New Mexico, No. 09-00300, the rating agencies argued that the Constitution protected them from claims they issued inflated ratings on more than $5 billion of securities issued in 2006 and 2007 and backed by loans from former Thornburg Mortgage Inc and other lenders. The court rejected the rating agency defendants' arguments that the First Amendment provides any protection to them under the facts of this case on the basis that the ratings were shared with too small a group of investors to deserve the broad protection sought.

For further information on the case please read this Reuters report by Jonathan Stempel

Standard & Poors has come under criticism over the years. Examples include having rated Executive Life Insurance Company paper AAA until January 1990, despite its massive junk bond holdings. The company collapsed a little more than a year later.  S&P lowered its rating on Lehman Brothers from A+ to A in June 2008, just 3 months before Lehman filed for bankruptcy on September 15, 2008.  

 

 

 

 

S&P Takes Action on Insurance Groups Following U.S. Sovereign Downgrade

Fallout from the Standard & Poor’s Ratings Services lowering of its long-term sovereign credit rating on the United States of America to ‘AA+’ incudes rating agency action on 10 U.S.-based insurance groups.

Effective August 8, 2011 S&P lowered to ‘AA+’ from ‘AAA’ its financial strength ratings on the member companies of five U.S. insurance groups:

1. Knights of Columbus
2. New York Life  (issues structured settlement annuities)***
3. Northwestern Mutual
4. Teachers Insurance & Annuity Assoc. of America (TIAA)
5. United Services Automobile Assoc. (USAA)    (issues structured settlement annuities)

S&P assigns an outlook on the ratings on all of these companies to negative.

Concurrent with the above action, Standard & Poor’s affirmed the ‘AA+’ financial strength ratings on the members of five other insurance groups

• Assured Guaranty  (municipal bond insurer)
• Berkshire Hathaway (current structured settlement annuity issuer and guarantors in group)
• Guardian
• Massachusetts Mutual  (former structured annuity issuer)
• Western Southern — and revised the outlooks on ratings on these companies to negative from stable.

The 10 insurance groups operate in the U.S. and generally have significant holdings of U.S. Treasury and agency securities. For the insurers with the most exposure, these investments constituted as much as 200% of total adjusted capital at year-end 2010, according to S&P. S&P dropped its rating on United States soverign debt from "AAA" to "AA+" on August 5, 2011.

S&P opined "very strong financial profiles and favorable business profiles support the ‘AA+’ ratings on the 10 affected U.S. insurance groups. In our view, these companies maintain very strong capital and liquidity. In addition, we believe that the significant retail insurance liabilities–such as whole life insurance and deferred annuities–that some of these companies have are less prone to withdrawals or surrenders than institutional liabilities.”

Susan E. Voss, president of the National Association of Insurance Commissioners and Iowa Insurance Commissioner said the following in response to the Standard & Poor's ratings action:

“There is no impact on insurer investments in U.S. government and government-related securities from the actions recently taken by the rating agencies. Risk-based capital and asset valuation reserves are unaffected. State insurance regulators and the NAIC will consider changes to our regulatory treatment if it becomes necessary in the future

***By comparison, it should be noted that on June 16, 2011 A.M. Best Co affirmed the financial strength rating of A++ (Superior) and issuer credit ratings (ICR) of "aaa" of New York Life Insurance Company at a time when the possibility of an S&P downgrade was already" on the table".

Weiss Group, LLC buys back Financial Institutions Ratings Business

Weiss Group, LLC, announced May 6, 2010 that it has bought back the bank and insurance company ratings company which it had sold to TheStreet  in 2006, restoring the business to its wholly owned subsidiary, Weiss Ratings.

Unlike A.M. Best, Moodys, S&P and Fitch, Weiss Ratings accepts no compensation of any kind from the companies it rates, deriving its revenues exclusively from the sale of ratings and data to consumers and others via public libraries and the Internet.

Read the Weiss press release  May 6, 2010

 

 

Rating Agencies Under Fire Again. This Time Over Sovereign Debt

" Even today, it as if nothing happened between '07 and '09" Joey McBrennan of Taipan Publishing on May 7, 2010,  “Too many people are relying on the rating agencies to determine the quality of their municipal bond holdings. What you’ll find, for those who don’t want to do the work, is that the rating agencies tend to downgrade a bond AFTER most people making the effort already know the bond is in trouble."

On May 5, 2010 Bill Gross of PIMCO aimed his turrets on the rating agencies over their failure to assess risk on sovereign debt on MSNBC.

 

 

 

 

Financial Reform, The Rating Agencies and the Structured Settlement Purchase Decision

by John Darer CLU ChFC CSSC RSP Rating agencies have been used by agents,brokers and purchasers of insurance for years as part of their due diligence. Yet Executive Life Insurance Company and its New York subsidiary,Executive Life Insurance Company of New York, were rated AAA only months before their collapse in 1991. 17 years later the integrity of the ratings agencies is again called into question at the depth of the recent financial crisis we now call "The Great Recession". Some feel that money paid to be reviewed presents an enormous conflict of interest. In this video, LBN Chairman Mark Wahlstrom and John Darer, a Registered Settlement Planner and President of 4structures.com, LLC, discuss recent news concerning the agencies that rate insurance companies, banks and other financial institutions which appeared in a March 22, 2010 article in USA Today. Proposed legislation would add a layer of liability which would allow potential lawsuits against the ratings agencies under certain conditions. Wahlstrom and Darer further discuss the impact of ratings actions on insurance purchase decisions, including structured settlements.

Standard & Poors Affirms Hartford Life ratings

Annuitants with Hartford Life structured settlements will be interested in Standard & Poors rating action on Hartford Financial Services Group and its subsidiaries, which includes former structured annuity issuer, Hartford Life Insurance Company

S&P credit analyst Shellie Stoddard is quoted in The Insurance Journal as saying:

"The ratings affirmation reflects our opinion that HIG's brand and franchise survived a tumultuous 2008 and 2009 intact. HIG has retained strong competitive positions in U.S. savings and retirement, group life and disability, and small and middle commercial and personal lines property/casualty markets. Meanwhile, it has exited certain institutional funding and international markets and repositioned itself in the U.S. retirement market with a lower-risk variable annuity offering"

While the ratings have been affirmed the outlook has been changed to negative from stable due to net income recovering more slowly than expected due to investment impairments and realized losses.

Hemming the backwash of some bitter elements in the structured settlement industry, Standard & Poors DID NOT assign any value whatsoever to the individual or collective contributions of attorney Richard B. Risk, Jr., the Society of Settlement Planners or the Spencer v Hartford "groupies" to the rating action.

Spencer v Hartford "groupies" do "the wave" 

Hartford Life Insurance Company current ratings (March 17, 2010):

AM Best A

Fitch A-

S&P A

Moodys A3

Ratings of Structured Settlement Company Pacific Life and Annuity Affirmed by Moodys and S&P

 

Pacific Life's ratings have been afformed

by John Darer CLU ChFC MSSC RSP CLTC

 

The third party financial ratings of Pacific Life Insurance Company and Pacific Life & Annuity Company were affirmed by Moody's and Standard & Poor's. 

Pacific Life and Annuity Company is a structured settlement annuity issuer and one of the handful of such companies that will write business in the state of New York.

Moody's affirmed an A1 rating (5th highest out of 21 rating categories) and also revised its outlook on the ratings from negative to stable.  Standard & Poor's affirmed a AA- rating (4th highest out of 21 rating categories) and maintained its negative outlook.

Fitch Ratings lowered Pacific's rating to A+ (5th highest out of 21 rating categories) and also revised its ratings outlook on both companies from negative to stable. As rating agencies reevaluate their rating methodology, downgrades have been more prevalent in the life insurance industry.  For example, Fitch Ratings issued 42 downgrades last year for life insurance companies.

Pacific Life was one of the major life insurance companies whose ratings initially suffered due to exposure to guarantees on its variable annuity business when the market tanked in 2008. It is comforting to see it return to a stable outlook.

 

 

 

Peach Holdings Gets S&P Upgrade to CCC+ (Outlook Negative), Senior Secured to CCC-

by Structured Settlement Watchdog®

Standard & Poors  issued new credit ratings on Peach Holdings, the parent of cash now pusher Peachtree Settlement Funding on August 26, 2009.

As stated on the Standard & Poors website, an obligation rated 'CCC' is currently vulnerable to nonpayment, and is dependent upon favorable business,financial, and economic conditions for the obligor to meet its financial commitment on the obligation. In the event of adverse business, financial, or economic conditions, the obligor is not likely to have the capacity to meet its financial commitment on the obligation.

This author would never suggest anyone sell their structured settlement payment rights to Peachtree Settlement Funding in the first place.

1. The company has engaged and continues to engage in false advertising. Simply read the tab on Peachtree Settlement Funding to the right of this blog for our archive.
2. The company does not have a reputation for competitive discount rates. While riding the gravy train, Peachtree charged rates in the mid to high teens when others were considerably lower. Great for investors, sucks for consumers  with structured settlements in need of the type of service Peachtree and others offer.
3. Upon information and belief the company engages in the servicing of structured settlement payments.

Questions

• Should annuitants whose payments are being serviced by Peachtree Settlement Funding be worried?
• Should any life insurance companies who entered into servicing agreements with Peachtree Settlement Funding be rethinking their strategy not to split payments?
• At one point Peachtree Settlement Funding was a member or sponsor of the Society of Settlement Planners ( see Download Peachtree Still in SSP 10-10-2006 Google)  Did any SSP members refer their clients, or any annuitant to Peachtree Settlement Funding during the time that Peachtree was a member of the SSP, or at any other time?
  
• Given that the S&P ratings for Peachtree , the JG Wentworth "close call" and the fact that business inevitably ends up in servicing agreement,  doesn't the SSP and/or those members of the SSP feel it might be a good time to legally determine what happens to their client in the event the servicer goes belly up?
  

"Peach's funding options remain strained because the company has no access to revolving warehouse lines.The outlook is negative, reflecting the company's funding of new originations with forward flow arrangements"  Standard & Poors (on Peach) August 26, 2009

Financial Ratings of Structured Settlement Companies

by John Darer CLU ChFC MSSC RSP CLTC

4structures.com, LLC has compiled a helpful chart which shows the life insurance companies who currently write structured settlements funded with a structured settlement annuity. The financial ratings from AM Best, Moodys, S&P and Fitch are also shown for each of structured annuity issuers and is regularly updated.

Click the link to access the chart Structured Settlement Annuity Companies

 

New York Life Chief Investment Officer Says No Need For TARP

Gary Wendlandt

, chief investment officer and vice chairman of New York Life Insurance Company, said in an interview with Dow Jones Newswire on Friday May 15, 2009 that, with more than

$12 billion

in surplus capital at the end of 2008, "we have more than enough capital to achieve our strategic objectives."

April 6, 2009 Video of New York Life CEO Ted Mathas

New York Life Insurance Company remains the only structured settlement annuity company that has the absolute top ratings from A. M Best, Moodys, Standard & Poors and Fitch  (A++, Aaa, AAA, AAA)

Would you like to see a New York Life structured settlement quote?

Simply complete and submit this secure online form, or call toll-free 888-325-8640