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

Asset-Backed Alert "Ass-It Backward" on SuttonPark Capital Structured Settlement Securitization

by Structured Settlement Watchdog

In a case of stick to what you know,  shambolic reporting has exposed Asset-Backed Alert for not knowing what they are talking about when it comes to structured settlements.

In a November 8, 2019 paragraph announcing a looming $700 million securitization of structured settlement cash flows by SuttonPark Capital, Asset-Backed Alert demonstrates the not so subtle characteristics of an ignoramus about structured settlements.

"In a typical structured settlement, a judge might award a plaintiff in a personal-injury case millions of dollars but give the defendant years to pay it off. In many cases, plaintiffs are eager to sell the receivable to an investor in exchange for a discounted lump-sum payment. The same is true of lottery winners who elect to receive their payouts over 20 years"

How Asset-Backed-Alert Got It Wrong

• Nobody, but nobody is awarded a structured settlement.
  
• A settlement is a compromise. Nobody is awarded a compromise.  Read What is a Structured Settlement? for more information.
• Following settlement, a person receiving a structured settlement payment is no longer a plaintiff, they are an annuitant or a payee.

 

When Life Insurers Buy Fat Profit Structured Settlement Payment Rights vs Hardship Commutations

by Structured Settlement Watchdog

Some settlement professionals have expressed concern (and even outrage) when a structured settlement annuity issuer has offered (or contemplated offering) hardship commutations to its insureds, while seemingly in blissful ignorance of what has really going on.

The Wikipedia entry for Burt Kroner's Client First Settlement Funding cites a 1997 Wall Street article listing its buyers as John Hancock Mutual Life Insurance Co., Boston; SunAmerica, Los Angeles and Great-West Life & Annuity Insurance Co., Englewood, Colorado**. That financial institutions, such as life insurance companies, purchase structured settlement payments rights (generally through a securitization of a pool of  structured settlement payments rights) is used as a "follow the leader" sales pitch by purveyors of structured settlement payment rights (using the scam label "secondary market annuities") to individual investors, including injury victims via settlement planners and retirees via financial advisers.

Some of the worst fat profit structured settlement factoring deals for sellers have been sold to financial institutions by originators such as Seneca One.  For example in the 2014  Lauren Nesbitt case, the acquired structured settlement payments were assigned to a Philadelphia life insurer, Reliance Standard Life Insurance Company with an estimated $1 million profit spread [see my April 5, 2016 post  Seneca One Hosed MetLife Structured Settlement Annuitant for $1MM Spread to Profit Unrelated Life Insurer]. Reliance Standard also sells annuities to consumers according to its website.

Which is better, a life insurance company offering a controlled low discount rate option for its insureds, or a "free for all" in which annuitants are exposed to fat profit deals that are then assigned to life insurance companies and other financial institutions?

1. There is a need for multiple solutions
2. There is the simple fact that there is a large block of structured settlement payment rights associated with life insurers who no longer offer structured settlement annuities. Those annuitants may need a liquidity option down the road.
3. A competitive market is a good thing.
4. Why shouldn't a life insurer take steps to protect its insureds?
5. Is it ok for an insurer to buy structured settlement payment rights as long as it is not from its own insureds (about whom it has a vested interest in keeping happy?)

** note WSJ article references lottery payouts

AIG: The Short and "Winding Down" Road With Imperial Holdings, Inc.

‪by John Darer CLU ChFC CSSC RSP

Imperial Holdings has issued a revised registration statement, S1-A, with the Securities and Exchange Commission  ("SEC"), in conjunction with its Initial Public Offering (IPO). The statement was published on October 1, 2010

It includes the following:
 
"On September 30, 2010, we entered into a wind down agreement with Slate (A unit of AIG whereby
as of December 31, 2010, we will cease selling structured settlements to Slate.  Under the wind down agreement, which amends our existing arrangement with Slate,  we will continue submitting structured settlements to Slate through November 15, 2010 for purchase by December 31, 2010".  (see Imperial Holdings, Inc.  S1-A page F-37 in Notes to Consolidated and Combined Unaudited Financial Statements)

As an aside, this author has canvassed representatives of other current structured settlement annuity issuers to dislcose whether or not their firm makes investment in structured settlement securitizations and has received no disclosure at the time of this writing.

Both sides of house need to be aware of what each is doing to avoid conflicts and misperceptions

In my opinion It is important to assure that insurers who are writing structured settlements are not then purchasing secondary market deals or securitizations from "cash now pushers" who have charged excessive discount rates to tort victims whose circumstances have resulted in the need to liquidate some of their structured settlements down the road. In the opinion of this author the market place should be developing a solution which affords a fair price to sellers and affords reasonable opportunities to buyers as an asset class, including tort victims. 

 

Structured Settlement Payment Rights: "Insurance Cos. Buy Them In Secondary Market, So Why Shouldn't We?" Why Shouldn't Tort Victims?

"This transaction established a new, more liquid benchmark in the asset backed market which was underlined by strong investor demand from insurance companies, money managers and hedge funds.” Stefano Sola Chief Investment Officer for J.G. Wentworth, Philadelphia Business Journal April 23, 2010

Insurance Companies Are Buying Structured Settlement Payment Rights in Securitizations

If it wasn't out there it is now. Insurance companies ARE buying structured settlement payment rights in the secondary market through securitizations of portfolios like the one that  Sola referred to for $252 million that included both structured settlement and annuity backed receivables.

Some Structured Settlement Brokers and Settlement Planners Want In on the Game

And those that are active in the trading of structured settlement payment rights, including one or two that are members of NSSTA and/or SSP say if the big boys are doing it why shouldn't our clients?  Despite the lack of industry standard, there is nothing illegal about it either.

Since it's not on the agenda at any of the trade association meetings, what are your thoughts?

Incidentally the J.G. Wentworth securitization has been referred to by JG as "the largest-to-date in the structured settlement industry". So there you have it, not the settlement purchasing industry but the "structured settlement industry".

 

 

 

Structured Settlements Industry 2009 | A Review of the Year's Impactful Stories

by John Darer CLU ChFC CSSC RSP

The Doom and Gloom concerning structured settlement annuity issuers of late 2008 has abated somewhat. At this time last year our industry was in the throes of significant     uncertainty created by the government bailout of AIG. the sudden withdrawal of Aviva from the structured settlement market and the media reports creating jitters about The Hartford and others and which weighed heavily on our minds. Other stories (not necessarily in chronological order)

1. From what we've been hearing, 2009 saw a number of industry producers taking meaningful hits to their production, particular in the early part of the year.Others saw flat to slight increases in production. Perhaps my experience is an anomaly, but I've noticed a meaningful increase in activity since July 2009.
2. Following the Madoff fraud exposed in late 2008 which had nothing to do with structured settlements, 2009 brought us $16.5B in fresh exposed frauds including two purportedly about structured settlements that weren't. Media characterization of Scott Rothstein as a "mini Madoff" added to the stigma.  The cherubic Rothstein didn't even come close. Credit to Mark Wahlstrom, Jan Schlictmann, Roger Bernstein, Peter Arnold. Bruce DeBacher, Matt Bracy and this author John Darer for their considerable collective efforts to diffuse and undo any damage done when former Elian Gonzalez' and U.S. attorney Kendall Coffey mislabeled structured settlements in a complaint against Rothstein which sparked a media mislabeling frenzy.
3. The "Connecticut Woman" factoring saga gave us a live case which underscored (1) the need for structured settlement consultants, settlement planners and plaintiff lawyers to ask more questions about, and do a better job of addressing plaintiffs' immediate liquidity needs; (2) the fact that fast cash now (for structured settlements) is a load io B.S.; (3) the need for regulation of the advertising practices of factoring companies; (4) the potential exposure to the settlement consultant and attorney for failing to address the aforementioned need that resulted in a loss of principal in line with stock market losses, from a safe investment. To remind everyone the woman took an estimated 30% hit to principal to sell the payment rights and had to wait 6 months to get the money to address her immediate cash needs.
4. The issue of Structured Settlement Servicing was brought to the forefront. Allegations that certain structured settlement annuity issuers were not slicing or dicing structured settlement payments to multiple payees when an annuitant only wanted to sell part of their structured settlements to meet emergency liquidity needs. The result is a structured settlement servicing agreement in which all of the payments, not just the sold payments, are paid to the servicing company (the factoring company, Structured Asset Funding in the CT Woman case), which then takes its cut and passes the balance of the payment to the annuitant. This raised the issue of what happens to the annuitant's payments in the event of Chapter 7 bankruptcy of the servicing factoring company? In a series of pod casts John Darer addressed the structured settlement servicing issue together with guest, Houston attorney Bruce Akerly.
5. The issue of credential puffery in the structured settlement industry was brought to the forefront and substantially improved. Through the considerable public efforts of this author NSSTA has now published guidelines on promoting the Certified Structured Settlement Consultant certification. It's only too bad it took so long and required extreme peer pressure to get it right.
6. Prudential's decision to withdraw from the non qualified structured settlement market was a biggy. The market has not quite filled the void.  As other industry commentators have noted, there are considerable opportunities in this area for insurers and settlement professionals.
7. JG Wentworth Chapter 11 Bankruptcy.  Call it shadenfreude, but I consider this one of the best things to happen for the industry in 2009. (1) These guys really needed some humility; (2) The bankruptcy disclosure made by JG Wentworth coughed up some useful information supplying proof that the size of factored structured settlements does not match up against the perception by plaintiff attorneys created by the advertising noise;  (3)The continuous bombardment of false advertising "cash now" that $40 million will buy you was tempered dramatically.
8. The withdrawal of Hartford from the structured settlement market place was not unexpected. The parent company suffered jitters for almost 12 month before the life company withdrawal,  due to fears over its exposure to credit default swaps and variable annuity guarantees. During those months the companies structured annuity rates were rarely competitive. Hartford Financial services Group, Inc. stock has rebounded from its 52 week lows of 3.33 over 7 fold.  It was sad to see some long time industry colleagues lose their jobs but many of them have landed on their feet. Industry veteran Mal Deener has landed at Symetra and John Meaney is trying his hand at settlement planning with Delta.
9. In a number of published legal decisions, the United States continued to render useless, the attempts to factor annuities placed as part of Federal Tort Claims Act settlements. 
10. One can observe that more settlement firms are making an Investment in websites and other web 2.0 technology. This blog has highlighted the information on static content websites are boring, neither attract or retain traffic and sometimes embarrassing when failure to update outdated information comes to light. Industry members caught in the headlights have simply had to put up with the minor annoyance of peer pressure for the greater good.
11. The nation's first Registered Settlement Planners (RSP) rolled off the assembly line. This author was among the first in the United States to earn the designation. Kudos to the leadership of the Society of Settlement Planners for laying the foundation, and to Joe Tombs and his crew at Texas Tech for the delivery. The RSP designation has a lot of promise, yet it faces significant challenges to become a force which will be covered in a separate post. 
12. Priority guidance for single claimant qualified settlement funds has been removed from the 2009-2010 United States Treasury Priority guidance list
13. Jeremy Babener, a 3rd year law student at NYU challenged a statistic that alleged basis of the structured settlement tax subsidy in a white paper. Babener was "pimped" all over by Patrick Hindert as if he was the "Elvis Presley of structured settlements".  The "Dissipation Myth Bab-oon" road show hit a new low at the annual meeting of the National Association of Settlement Purchasers in November.
14. While Hindert, in his annual summary, places the take over of The Settlement Services Group by Forge as a seminal event, we simply see it as a way for Forge to justify having defense brokers in an organization that markets itself as plaintiff exclusive. The timing of the announcement suspiciously followed our September post about an anonymous plaintiff exclusive organization that had defense brokers.
15. In 2009 the industry lost some good people due to cancer, Mary Lynn Izzo and Richard G. Halpern. Most people loved Mary Lynn. While the brilliant and innovative Richard Halpern was not universally loved by the industry, he was an important force in the history of the structured settlement industry,  who challenged the status quo and succeeded (by a wide margin). I was sad to lose both of these friends this year. 
16. After extended period of reductions, the 10 year bond is again approaching 4% and the 30 year bond approaching 5% as I type. It is my prediction and others that by end of 2010 we may see 10 year bonds in the 5.5% range with a meaningful increase in the long bond. 
17. As an aside and some industry news just "sliding in the door" at year's end, the popular Jeanne Ragusa, formerly at Aviva, has joined John Hancock as Internal Sale Manager.

Concluding with a light hearted summary of the events of 2009, courtesy of JIb Jab...

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Patrick Hindert Update on Structured Settlement Securitizations-1

The Executive Director of The Settlement Services Group (TSSG) has produced the first in a series of posts about structured settlement securitizations on the S2KM blog.

Hindert's selection of tags is interesting. Tagging is a way of organizing and/or classifying information on the Internet. Sometimes it’s done by just one person (the content creator, in this case Patrick Hindert), and other times it can be done by a community (social tagging.), such as for example if you tag a person's name on an old photo posted on Facebook.

Hindert has tagged the following categories in relation to the structured settlement securitization post, among others

• Settlement Consulting
• Settlement Planning
• Structured Settlement Transaction Diagram
• Structured Settlement Annuity
• Settlement Planners
• Henderson v Sciateco
• Periodic Payment Judgments

Hindert's tagging raises the obvious question   "Are settlement consultants and settlement planners getting involved with structured settlement securitizations in any way?"

That includes as investors or directly, or indirectly, placing their clients into structured settlement securities/securitizations in private or registered securities transactions?  Why else would HIndert tag these key words? TSSG even announces its expertise in structured settlement transfers on its website?

The tag for Henderson v Sciateco is most interesting in terms of relevance.The case refers to the recent California appellate court decision which held that public policy supports state court approved factoring transactions. In his previous post about the NASP Annual Meeting state that IRC 5891 does not contain a clear statement of public policy about factoring, even though one of them referred to examples of IRC 5891 legislative history that contradict any claim that public policy is against structured settlement factoring.

Is it possible that Hindert is hatching a scheme for "industry growth" that contemplates settlement planners and settlement consultants using structured settlement securities to finance the long term financial obligations to their clients in lieu of or in addition to annuities?  Frankly, and I emphasize that this is my personal opinion, I don't find this to be far fetched at all.

Stay tuned!