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

MetLife's US Domiciled Non Qualified Structured Settlement Option

by John Darer CLU ChFC MSSC CeFT RSP CLTC

MetLife will offer a US domiciled non qualified structured settlement option for employment, environmental, breach of contract and other types of taxable damages in early 2018. The underwriting company will be Metropolitan Tower Life Insurance Company. Full details to follow during the roll out which expected in or about mid-January 2018.

Metropolitan Tower Life Insurance Company Structured Settlements

MetLife announced on May 3, 2017 that Metropolitan Tower Life Insurance Company  ("MetLife Tower Life"), a Delaware company and wholly owned subsidiary, would become the primary underwriting company for structured settlement annuities.  Metropolitan Tower Life was the successor-in-interest to Metropolitan Insurance and Annuity Company ("MIAC)" that was the qualified assignment company used by MetLife structured settlements  until about 13 years ago. At the time it was announced April 26, 2005, MetLife stated that "structured settlement annuities in-force and/or issued prior to December 1, 2004 are the responsibility of Metropolitan Tower Life Insurance Company", which held an A+(Superior) rating from A.M. Best as it does today, with a current size category XV.  The company is rated Aa3 (High Quality) by Moodys.

Under the qualified assignment program, MetLife Assignment Company Inc., (MACI) is the qualified assignment company.  Upon information and belief the MACI facility will be expanded to take on non qualified structured settlement cases. The periodic payment obligations assigned MACI are guaranteed by Met Tower Life under an Evidence of Guarantee.  With $4B+ in assets, Metropolitan Tower Life is a considerably smaller underwriting company in terms of assets than Metropolitan Life Insurance Company. It does however have a strong surplus position of 16.5% of general account assets and a Comdex rating of 96, that exceeds Metropolitan Life Insurance Company  [Source: Vital Signs].  

Read more about Non Qualified Structured Settlements |  Using Structured Settlements to Help Resolve Taxable Damage Lawsuits

 

Independent Life Insurance Company | New Insurer Only Issues Structured Settlement Annuities

by John Darer ® CLU ChFC MSSC CeFT ® RSP CLTC

Independent Life Insurance Company is a new structured settlement annuity provider, in creation for four years, that has been designed with valuable input from structured settlement industry leaders.

Introducing a new structured settlement annuity issuer run by seasoned professionals

Independent Life Insurance Company is exclusively focused on providing annuities for the structured settlement market.

As a newly formed and capitalized life insurance company, Independent Life does not have legacy structured settlement annuities on its books with pricing out of alignment with today’s low investment environment, factors which contributed to certain companies leaving the structured settlement marketplace in the last decade.

A formal announcement will be made in San Antonio during the Fall Meeting of the National Structured Settlements Trade Association the week of October 18, 2017 with an opportunity to meet the Independent Life executive team:

• James D. Atkins, Chief Executive Officer 
  
• Donald J. Herrema, Chief Investment Officer
• Daniel P. Durbin, VP of Marketing and Sales
• Patrick J. Hindert, VP of Business Development

Independent Life's structured settlement value proposition

• Annuities only for the structured settlement market
• Comprehensive medical underwriting for qualifying cases
• Competitive upper-tier pricing
• Unparalleled service and support
• Ongoing financial support for broker and planner initiatives that promote the growth of our industry for the benefit of all stakeholders
• An executive team with previous structured settlement experience totaling over 100 years in marketing, sales, training, and annuity pricing
• Domiciled in a major state with an excellent regulatory reputation

Who is James D. Atkins?

James D. Atkins is the Chief Executive Officer of the Independent Life Insurance Company. Atkins is the former CEO of Legal & General America. Prior to this position Atkins spent 25 years under the GE Financial Services umbrella (First Colony Life Insurance, GE Financial Assurance, and Genworth). During this time he acted in a variety of capacities including the roles of Chief Actuary and Capital Markets Leader. When he joined First Colony it was new in a fledgling structured settlement niche. During his tenure First Colony became one of the largest writers of structured settlement annuities. At its peak First Colony managed in excess of $10 Billion of Structured Settlement contracts. Atkins has broad relationships with the leading reinsurance companies active in the U.S. market and is an experienced insurance company  executive.

Who is Donald J. Herrema?

Donald J. Herrema is the Vice Chairman and Chief Investment Officer for Independent Life. Mr. Herrema held a variety of senior leadership positions including being CEO of several, in asset and wealth management, banking, mutual funds, banking and real estate. He began his career at Wells Fargo Bank in his native California, rising through the ranks to become President of Wells Fargo Securities and Head of Mutual Funds. Moving to New York City, Don joined Bessemer Trust, becoming COO and then CEO, leading a period of strong growth in revenues and profitability. Later, he was the Founder, Chairman and CEO of Atlantic Trust, now a subsidiary of CIBC (Canada). Additionally, Don served as Managing Director and Head of Private Wealth Management at Morgan Stanley. He culminated his active working career as Executive Vice Chairman of Kennedy Wilson, a NYSE listed global real estate firm.

Mr. Herrema's Director and Advisor roles include being Independent Chair and Director of TD Bank's US Mutual Funds, Independent Director of AbelNoser Holdings LLC., Independent Director of Lepercq, de Neuflize (both New York City and Luxembourg), Advisor to the Board of Fund Evaluation Group, Senior Advisor at Stone Point Capital, Past President of the Bank Securities Association, Independent Director of Cedars Bank, and an Advisory Board member of Education Equity and NYPPEX.  [ Source:  LInkedin]

Who is Patrick J. Hindert?

Patrick J. Hindert is Vice President of Business Development for Independent Life. Hindert has been a leader in the structured settlement industry since 1977. He previously served as President of Benefit Designs, a national structured settlement intermediary, which he owned and managed for 22 years. He has also served as President of the National Structured Settlement Trade Association (NSSTA) and as Executive Director of the Society of Settlement Planners (SSP). Hindert is co-author of Structured Settlement and Periodic Payment Judgments, a legal treatise updated semi-annually since 1986, which is utilized by NSSTA and SSP in their certification programs. Hindert previously authored the blog “Beyond Structured Settlements” and has been a frequent speaker at national conferences sponsored by NSSTA, SSP, NAMSAP, ASNP, NASP and NAELA. Hindert served as keynote speaker at the first national structured settlement conference in Australia in 1994. He provided expert testimony to the United States House Ways and Means Committee in 1981 prior to enactment of the Periodic Payment Settlement Act of 1982.

Independent Life Insurance Company is not related to Independent Life & Accident, of Jacksonville, which was merged into American General Life Insurance Company in 1997.

American General was subsequently purchased by AIG in 2001 and it was part of AIG L& Retirement Division, which was renamed Corebridge Financial in a September 2022 spinoff.

 

 

 

 

What is Risk Based Capital? Safety of Structured Settlements and Insurance Cos Part 2

by John Darer CLU ChFC MSSC RSP CLTC

Risk Based Capital is an important regulatory tool designed to maintain solvency of insurance companies.

What is Risk Based Capital?

Risk-based capital is a method developed by the National Association of Insurance Commissioners ( NAIC) to measure the minimum amount of capital that an insurance company needs to support its overall business operations. Risk-based capital is used to set capital requirements considering the size and degree of risk taken by the insurer. For example, it requires a company with a higher amount of risk to hold a higher amount of capital. Capital provides a cushion to a company against insolvency. Currently there are four major categories of risk that must be measured to arrive at an overall risk-based capital amount. These categories are:

• Asset Risk- a measure of an asset's default of principal or interest or fluctuation in market value as a result of changes in the market.
• Credit Risk- a measure of the default risk on amounts that are due from policyholders, reinsurers or creditors.
• Underwriting Risk- a measure of the risk that arises from under-estimating the liabilities from business already written or inadequately pricing current or prospective business.
• Off-Balance Sheet Risk- a measure of risk due to excessive rates of growth, contingent liabilities or other items not reflected on the balance sheet..

RBC formula requirements can be higher or lower than the fixed state minimum capital requirements (which are typically $1 to $2 million), but each insurance company must meet both sets of standards. For virtually all medium to larger insurers, the capital requirements generated by the RBC formula are higher than the state fixed capital standards.

What Are The Origins of Risk Based Capital Standard?

The NAIC’s Risk Based Capital Standard for life insurance companies was established in 1993 as an early warning system for U.S. insurance regulators [separate RBC for P&C in 1994 and health insurers in 1998]. The adoption of the U.S. RBC standard was driven by a string of insurer insolvencies that occurred in late 1980s and early 1990s, such as Baldwin United, Charter and Executive Life and ELNY. The NAIC established a working group to look at the feasibility of developing a statutory risk-based capital requirement for insurers. The RBC regime was created to provide a capital adequacy standard that is related to risk, raises a safety net for insurers, is uniform among the states, and provides regulatory authority for timely action.  It has two main components:

• The risk-based capital formula, that established a hypothetical minimum capital level that is compared to a company’s actual capital level, and
• A risk-based capital model law that grants automatic authority to the state insurance regulator to take specific actions based on the level of impairment.

What Tools Does a Regulator Have Under the Risk Based Capital Standard?

Regulators have the authority and statutory mandate to take preventive and corrective measures that vary depending on the capital deficiency indicated by the Risk Based Capital result. These preventive and corrective measures are designed to provide for early regulatory intervention to correct problems before insolvencies become inevitable, thereby minimizing the number and adverse impact of insolvencies. The NAIC RBC formula generates the regulatory minimum amount of capital that a company is required to maintain to avoid regulatory action.

There are four levels of action that a company can trigger under the formula:

1. Company action
2. Regulatory action
3. Authorized control
4. Mandatory control levels.

Each Risk Based Capital level requires some particular action on the part of the regulator, the company, or both. For example, an insurer that breaches the Company Action Level must produce a plan to restore its Risk bsed Capital levels. This could include adding capital, purchasing reinsurance, reducing the amount of insurance it writes, or pursuing a merger or acquisition.

Risk Based Capital formulas are constantly under review for refinement,iImprovement in factors and updating for new risks and a changing environment.

See 2016 RBC update at: http://www.naic.org/insurance_summit/documents/insurance_summit_160517_financial_risk_based_capital_update.pdf

Bibliography

1. NAIC website
2. NAIC White Paper The US National State Based System of Insurance Financial Regulation and the Solvency Modernization Initiative 2010 http://www.naic.org/documents/committees_e_us_solvency_framework.pdf
3. Rick Based Capital For Insurers Model Act January 2012 http://www.naic.org/store/free/MDL-312.pdf
4. Recommended Approach for Updating Regulatory Risk-Based Capital Requirements for Interest Rate Risk for Fixed Annuities and Single Premium Life Insurance June 2014, American Academy of Actuaries http://www.naic.org/documents/committees_e_capad_lrbc_aaa_c3pi_report_140611.pdf

Risk Based Capital for Insurers in the United States Illinois State University  https://math.illinoisstate.edu/krzysio/MAT483/RBC.pdf

Related Reading

What is Surplus? Safety of Structured Settlements and Insurance Cos Part 1

 

Deferred Acquisition Cost Tax | Looking Under The Insurance Company Hood

by John Darer CLU ChFC MSSC CeFT RSP CLTC

Could insurance companies, including those that issue structured settlement annuities, offer more to their customers if a 27-year-old revenue sapping regressive Federal tax were abolished? 

The Deferred Acquisition Cost Tax (DAC Tax), introduced with the Revenue Reconciliation Act of 1990 which established IRC 848, is a federal tax on insurers [ including insurers that issue structured settlement annuities} that does not allow insurers to immediately deduct expenses incurred in putting business on the books,

What's the FAQ DAC?

even though the expenses are actual. These expenses often exceed the premiums paid in the early years of different types of insurance. Therefore, insurers are taxed on the premiums paid before any profits are made. This is a phantom tax on nonexistent money. The formula artificially inflates the taxable income of insurers for the current year by deferring expenses to future years. In theory, after an insurer starts to recoup the deferred expenses, a credit is issued toward the current year’s tax bill, which is inflated as a result of the current year’s DAC. However, the only way for the insurer to even approach break even is to stop growing. Otherwise, the dissipation of surplus restricts an insurer’s ability to write new business and it reduces funds needed for product development.

 Contrast this with modified cash basis accounting required by state regulators. Statutory accounting is a modified cash basis of accounting. Expenses are written off when paid, whether the asset is admitted or not.

The impact of this growth-inhibiting, regressive tax on smaller companies is dramatic, according to the National Alliance of Insurance Companies. This tax policy has disproportionately retarded the growth of the smaller insurers. These companies have the ability and need for greater growth than the larger companies. While larger companies, which have mature surpluses, may opt for a slow growth or no-growth strategy in order to counter the effects of the DAC Tax, this option is not available to smaller companies. In fact, some small companies are paying Federal Income Tax well in excess of 100% of statutory income says NALC.

A comment appearing on the Actuarial Outpost boils it down nicely:  "Taxes impact earnings which impacts the amount of money you have to invest. By paying more taxes earlier there is less money to earn interest on, and the effect is cumulative". 

In an environment where government seems to want to cut taxes and create jobs and growth, it seems that this is a worthy button to push.

If have the urge to explore your inner geek, you may find the Society of Actuaries Federal DAC Tax  to be a helpful read, with a little espresso.

 

Aviva/CGU Structured Settlement Annuitants Face Tighter Payment Dates Due to New TPA

by John Darer CLU ChFC MSSC RSP CLTC

If you are receiving structured settlement payments from a structured settlement annuity that was originally issued by Aviva Life Insurance Company, Aviva Life Insurance Company of New York, CGU Life Insurance Company, CGU Life Insurance Company of New York and predecessor structured settlement issuing companies, you may be facing a delay from the payment date that you have become accustomed to. Here's why.

Aviva stopped writing structured settlements at the end of 2008. In October 2013 the US operations of Aviva were sold to Athene.  While Athene is an annuity issuer that is growing in prominence, its entities do not issue structured settlement annuities so there is no new premium coming in and the acquired portfolio is in run off. When a portfolio is in run off the acquirer hopes to make a profit on its investment spread and savings on administrative costs.

The "delay" is due to decision by Athene to use a Third Party Administrator (TPA), Concentrix, a fintech company which, ostensibly due to the anticipation of increased operational efficiencies, has mitigated the need to send out payments so far in advance to result in payments to be made on time.

Although not legally required to do so when payments were not made electronnically, Aviva used to mail payments out really early to make sure they were received on time. It was not unheard of to have payments mailed as much as 20 days early.  As a result, many annuitants became accustomed to receiving payments early instead of the payment dates in the settlement agreement or qualified assignment and set up their bill payments on the expectation of receiving payments at the earlier time.   Athene sent out written notices to annuitants.

888-285-4332, the former Aviva and Athene structured settlement customer service number is now answered by employees of Concentrix.

 

 

 

Insurers Who Issue Structured Settlement Annuities Among 2017 Fortune World's Most Admired Companies

by John Darer® CLU ChFC MSSC RSP CLTC

The life insurance companies that issue structured settlement annuities or periodic payment reinsurance are perennially among the world's largest and most admired corporations.

Prudential Financial is the most admired life insurance company in the world according to the 2017 Fortune world's most admired companies. Newark, NJ based Prudential subsidiary, The Prudential Insurance Company of America, in business since 1875, underwrites and issues structured settlement annuities.

I may be too y0ung to drink at a "BAR-Co", but not too young to admire the jewels of the insurance industry

Berkshire Hathaway was not only the top in the P&C insurance industry sector, it is the 4th most admired company in the world in the 2017 Fortune survey. Berkshire Hathaway subsidiaries, Berkshire Hathaway Life Insurance Company of Nebraska, First Berkshire Hathaway Life Insurance Company, National Indemnity Company, Columbia Insurance Company and BHG Structured Settlements, Inc. participate in the structured settlement marketplace

Other companies whose subsidiaries are current and former structured annuity issuers include:

New York Life Insurance Company and Massachusetts Mutual, 3rd and 5th respectively in the life insurance sector that includes annuities

In addition to Berkshire Hathaway, which tops the P&C sector in the survey, USAA is #2 and Liberty Mutual is ranked 7th in the P&C sector. Liberty Mutual and its subsidiary Liberty Life Assurance Company of Boston participate in the structured settlement marketplace and through its relationship with BARCO Assignments Ltd., is currently the only structured settlement annuity funded non qualified structured settlement program in the marketplace.

According to its website, Fortune in collaboration with Korn Ferry Hay Group, started with approximately 1,500 companies: the Fortune 1,000 -- the 1,000 largest U.S. companies ranked by revenue and non-U.S. companies in Fortune's Global 500 database with revenue of $10 billion or more. Fortune then selected the 15 largest for each international industry and the 10 largest for each U.S. industry, surveying a total of 680 companies from 30 countries. To create the industry lists, 3,800 executives, directors, and analysts were asked to rate companies in their industry on nine criteria, from investment value to social responsibility. A company's score must rank in the top half of its industry survey to be listed.  Fortune has been compiling this survey on both a global and US domestic basis for over 30 years.

Structured Settlement Rated Ages | The Good News Is That People Are Living Longer...

by John Darer  CLU ChFC MSSC RSP CLTC

AIG Structured Settlements recently announced that it was going to revise all active rated ages downward to better align its rated ages with its actual mortality experience. A February 21, 2017 company statement to its agents said that the impact of this revision will lower a rated age by no more than 5 years.

My rated age is perfectly aligned, in puppy years of course

What Are Structured Settlement Rated Ages?

A rated age is an age used in the pricing of life contingent structured settlement annuities that reflects the opinion of the annuity issuer's medical underwriter on the life expectancy of a prospective annuitant. So if a 50 year old has a rated age of 65, that simply means that the structured settlement expert can calculate the cost of funding $10,000  in monthly medical costs for the rest of the plaintiff's life based on a 65 year old's price, which will be much cheaper.  Rated ages vary from company to  company.  Some companies will not do rated ages at all.  It's important to note that the highest rated age does not necessarily result in the cheapest price.  For example. a company with better base rate may be more competitive even with a lower rate.

Period certain or guaranteed lump sum payments are not affected by a rated age.  

Is this anything to be concerned about?

It is not uncommon for an insurer to revise its underwriting in response to changing experience.The rated age action announced by AIG Structured Settlements is a responsible decision for a company that is in business to insure long term obligations. It reflects very positively on AIG's quality control. In its notice AIG reaffirmed its commitment to the structured settlement industry.

AIG Structured Settlements underwrites structured settlement annuities through two AIG subsidiaries, American General Life Insurance Company  (Est. 1925) and United States LIfe Insurance Company in the City of New York  (Est. 1850) and its annuities are available though appointed agents authorized for the structured settlement product line. United States Life is one of the few companies that will underwrite annuities to fund future damages on New York Structured Judgments.

Interesting research on mortality stats

Mortality in the United States, 2015 by Jiaquan Xu, M.D., Sherry L. Murphy, B.S., Kenneth D. Kochanek, M.A., and Elizabeth Arias, Ph.D.   NCHS Brief No. 267   December 2016

 

Structured Settlement Annuity Insurers Part of The Top 10 US Holding Cos.

by John Darer® CLU ChFC MSSC RSP CLTC

Structured settlement annuities continue to be written by the largest, most well capitalized and reserved insurance companies.  Findings by A.M. Best suggest the current is no exception

MetLife Inc  (3)., Prudential Financial,Inc (5) AIG (9) and  Berkshire Hathaway Inc. (14) are 4 out of the World's 25 largest insurance companies, according to a new report by A.M. Best, based on 2013 non-banking assets.

5 out of the top 10 US insurance holding companies by size AND revenue, currently write structured settlement annuities through their subsidiaries

TOP US Insurance Holding Companies (2014)

By Size

1. Met Life Inc.                               $902B+
2. Prudential Financial, Inc.        $766B+
3. Berkshire Hathaway,  Inc.       $526B+
4. AIG                                                $515B+

10.  Pacific Mutual                          $137B+

 

By Revenue

1. Berkshire Hathaway Inc.          $194B+

4. MetLife Inc.                                $  73.3B+

5. AIG                                                $  66.B+

7. Prudential Financial Inc.            $ 56B +

9. Liberty Mutual                              $39.6B+

 Source:  Understanding the Insurance Industry,  November 2015 by A.M. Best

Top Insurers by  Capital and Surplus (2014)

P&C

1. Berkshire Hathaway Insurance Group   (inlcudes Columbia Insurance Company, National Indemnity Company and other subsidiaries that underwrite,  or guarantee,  structured settlements

3.  AIG

4. USAA

6.  Liberty Mutual

  (guarantor of Liberty Life Assurance Company of Boston) 

 

Life

4. New York Life Insurance Company

6. Metropolitan Life Insurance Company

8.  Prudential Insurance Company of America

10. AGC Life Insurance Company  (guarantor of structured settlement written through AIG subsidiaries, American General Life Insurance Company and United States Life Insurance Company in the City of New York)

How Safe Are Structured Settlement Annuities?

by John Darer® CLU ChFC MSSC CeFT RSP CLTC

Annuities are contracts that are issued by life insurance companies.  A structured settlement annuity is a type of annuity contract. A number of the life insurance companies that issue structured settlement annuity contracts have been in business for over 100 years, with several in operation since the 1800s! 

4structures.com LLC  has compiled a "structured settlement annuity company museum" on Pinterest containing interesting exhibits of architectural images, vintage advertising and emphemera associated with these companies that highlight their longevity.

Ratings agencies such as A.M. Best,  Fitch, Weiss, Moody’s, and Standard & Poor’s analyze and rate the insurance companies that issue structured settlement annuities.

Companies offering structured settlement annuity contracts must be first approved by the Department of Insurance or Department of Financial Services in each state that they do business. 

State regulators evaluate the insurance company's solvency and its compliance with state insurance laws and other regulations. Insurers are subject to mandatory annual audits and other financial compliance measures. Insurer reserves must hold assets sufficient to equal or exceed the contractual payment obligations.

The assets backing the reserves may not be removed from the insurance company. Insurer general accounts support the obligations of the insurance companies, not the obligations of its parent company or other subsidiaries. 

A classic recent example of how that works would be in the 2008-2009 financial crisis.  Following the AIG bail out in September 2008, some expressed concern about AIG subsidiaries that issued structured settlement annuities, yet the reserves backing the obligations of those subsidiaries could not be invaded by the parent, or AIG Financial Products, which was the division of AIG that oversaw the credit default swap business that was at the root of the crisis.

Generally, under Federal law, life insurance companies cannot file for bankruptcy protection.

The only instance where structured settlement annuitants have lost money stems from 1980s era sales of Executive Life Insurance Company of New York structured settlement annuities, where it was argued in a 2012 legal proceeding  that New York state regulators mismanaged the assets of the ELNY estate after taking over the company in April 1991. 

Last updated May 4, 2024

New York Structured Settlement Annuity Issuers 2018

by John Darer® CLU ChFC MSSC CeFT® RSP CLTC

The following New York licensed insurance companies issue structured settlement annuities heading into 2018:

Historic New York Life and Met Life Buildings in New York City

• First Berkshire Hathaway Life Insurance Company
• Liberty Life Assurance Company of Boston
• Metropolitan Life Insurance Company
• New York Life Insurance Company
• Pacific Life and Annuity Company
• The Prudential Insurance Company of America
• United States Life Insurance Company in the City of New York

Click here for more detailed information about each of these New York licensed structured settlement annuity issuers, including ratings, names of qualified assignment companies for New York structured settlements  and guarantors.

Click here to visit the Structured Settlement Company museum on Pinterest. The Structured Settlement Annuity Museum is curated by 4structures.com LLC and is filled with exhibits that demonstrate the longevity of insurance companies that back structured settlement obligations, some of whom date all the way back into the 1800s!

Click here to watch my video about all of the primary structured settlement annuity issuers, included those available in states other than New York.