Rescue Capital Blog Your Money, Your Way

11Jun/13Off

Have questions about selling a structured settlement annuity ?

Posted by Rescue Capital

Anyone looking to sell some or all of their future structured settlement annuity payments usually has a lot of questions. Here are some the most common questions we get every day.

  •  How does the process work ?
  • Do I need to hire a lawyer ?
  • What is a discount rate ?
  • Why do I need a reason to get my money ?
  • What documents do I need ?
  • Can I just sell some of my payments ?
  • Do I have to pay taxes on this money ?
  • How long will it take before I get my money ?
  •  Will the insurance company object to the sale ? 
  • Will I have to be present in court?

I have questions about my structured settlementThe good news is that here at Rescue Capital, we have many years of experience dealing with every type of case in every state and we will be able to answer every one of your questions. More importantly though, every person's situation is unique. After finding out what your goals are and getting some basic information about your case, we will be able to offer you different options that you can weigh out. One of our primary goals is to make sure you understand fully each step of the process and how it impacts you. We want you to feel comfortable knowing that we have your best interests at heart and that will be our top priority from start to finish. So give us a call at 1-866-688-3532. If you don't have time to discuss it, just fill out our simple quote request form online here and we will get back to you when you are ready.

 

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25Jun/12Off

Judge rules against Sovereign Funding

Posted by Dawn Anderson

Rescue Capital can help with structured settlementsAccording to published reports, Judge Marvin J. Garbis ruled against David Springer and Sovereign Funding Group’s motion for summary judgment in favor of plaintiff Woodbridge Structured Funding, LLC. (Woodbridge Structured Funding, LLC v Sovereign Funding et al. Civil action No. MJG-11-3421)1

The judge issued a scheduling order requiring all fact discovery be completed by December 31, 2012. Woodbridge’s complaint states that the defendants allegedly utilize unfair competitive practices including trademark infringement, false advertising, libel, defamation and product disparagement.

Previously, structured settlement factoring company and competitor J.G. Wentworth filed a similar lawsuit against Springer and Sovereign Funding accusing the Maryland based company of comparable allegations as the Woodbridge lawsuit. That lawsuit was settled in March 2012.

In February 2012, it was reported that several other companies/individuals were also victims of the alleged SEO tactics of Sovereign Funding and/or its SEO vendors including MetLife, Pacific Life and industry blogger John Darer.

Source:

1. http://structuredsettlements.typepad.com/structured_settlements_4r/2012/06/maryland-judge-rules-discovery-can-proceed-against-david-springer-and-sovereign-funding.html



7Jun/12Off

Structured Settlement Surveys: Are they statistically relevant?

Posted by Dawn Anderson

Last week J.G. Wentworth released a press release stating that only 6.6% of structured settlement recipients sell their future payments and that those who do sell commonly cite getting out of debt, purchasing a home or vehicle, unexpected medical bills or continuing their education as reasons for selling. [i]

The press release stated that the study was based upon data collected by J.G. Wentworth over the past 20 years but it did not provide any further details regarding the data collection. For instance, how did they obtain the data; how many people were included in the study and did it include data from other factoring companies besides J.G. Wentworth/PeachTree? In addition, there was no mention as to whether discount rate played a considerable role in the annuitants’ decision to sell.

Back in 2008, J.G. Wentworth published an email survey of 115 respondents who previously sold some or all of the payments to J.G. Wentworth in exchange for a lump sum payment. In this survey, only 18% said they were completely satisfied with their structured settlement. 31% said they didn’t wish that there attorney negotiated a single lump sum payment which means that many of them would have liked a lump sum payment. 60% of the respondents sold their payments to pay bills while less than 5% did so in order to buy a house. 30% stated that they would not sell their payments again. J.G. Wentworth only released 9 questions to an industry blogger and did not reveal the remaining questions, the number of individuals the survey was sent to or any other circumstances that could have skewed the results of the survey.[ii]

In the 2006 The National Structured Settlement Trade Association (NSSTA) survey of attorneys involved in structured settlements (43 telephone surveys) and structured settlement recipients (1275 telephone and Internet surveys) 75% of annuitants were happy with their structured settlement and would recommend one. [iii]

In an AIG survey of 1,000 participants, 65% of respondents said they would elect a lump sum payment, while 26% stated that a lump sum was more appropriate to pay bills.[iv]

So if that many people wanted a lump sum payment then why aren’t they selling? In a review of 100 recent factoring transactions it was revealed that the average discount rate was 13.75% with 7.5% being the lowest and 20% being the highest. So you have to question whether the 93.4% of individuals that chose not to sell would have changed their mind IF the discount rate was closer to the 7.5% rate.

As structured settlement annuity premiums continue to decline (10% from 2010 and 20% from 2008)[v], there will be fewer annuitants available to market. While it seems perfectly logical that this would in fact lower the discount rate, if one looks at current trends it mostly will not occur.

For example, the top three companies spend millions of dollars a year in order to entice annuitants to sell. They’re all well established and are household names. Smaller, lesser known companies cannot afford to go head to head in advertising spends with these industry giants so they tend to focus on non-traditional marketings. While some sellers will seek out these smaller players in order to obtain better rates more often than not a first time seller will call one or two companies they see on TV. Which basically means they are going to receive rates of 13% or higher.

While the decline in annuities does not currently seem to be an issue for J.G. Worthworth/Peachtree who already completed a $244 Million Securitization this year[vi], one has to wonder whether primary market decline and increased competition combined with well informed, tech savvy consumers could adversely affect their business in years to come.

J.G. Wentworth had securitizations worth $469,000,000 in 2011 and $579,000,000 in 2010.[vii]  This represents 9.4% and 10% of the annual premiums for those years.


 



8May/12Off

1,500 ELNY short fall victims under pressure to accept payment cuts rather than appeal

Posted by Dawn Anderson

When an injured party is the recipient of a court-awarded compensation it is often encouraged by everyone involved for the party to receive their settlement in the form of periodic payments through a tax-free income stream. The intention is to ensure that the injured party does not prematurely exhaust their settlement funds and have guaranteed income for a specific time period. [2]

As previously reported, Nassau County Supreme Court Justice John Galasso approved a plan to liquidate Executive Life Insurance Company of New York (ELNY) resulting in major losses in benefits for many personal injury victims. [2]
Obviously this causes a great financial burden to those victims who rely on the money in order to support themselves as well as their families. As you can imagine there are many people who disagree with the outcome, specifically the 1,500 annuitants who will be receiving cuts in their payments as a result of the approved liquidation. In some cases these cuts are more than 50%. [1]

According to structured settlement industry expert, Patrick Hindert, the life insurance industry is voluntarily establishing a $100 million “Hardship Fund” to assist those people who are affected the most by the liquidation. This amount only represents 10% of the actual shortfall. [3]

Hindert, quoting several passages from documents sent to shortfall victims, has implied that any appeal and subsequent rejection of Judge Galasso’s order will cancel the conditions for establishing the fund. As a result no payments will be made available to the shortfall victims. [3]

Many individuals are worried by the perceived attempt to strong arm annuitants into accepting the deal rather than appealing the terms of liquidation order. [3]

Speaking for the ELNY structured settlement shortfall victims he represents, attorney Edward Stone states, "These statements represent another strong arm tactic to try to prevent ELNY shortfall victims from pursuing their constitutional rights." [3]

Some victims who chose to remain anonymous believed it would have been more fair if the loss would have been distributed equally among all annuitants rather than single out the 1,500.[3]

One industry expert had a different take stating, “Annuitants received 100% of what was a grossly unreasonable annuity amount.” [5] Implying incompetent regulators who allowed the sales to happen, the poor pricing of annuities as well as the annuitants’ willingness to put all their “eggs in one basket” were part of the reason ELNY failed while others prevailed. [5] This individual suggests that ELNY victims, many of whom were minors at the time, should examine all the facts around their cases, sales literature, correspondence and financial comparison to determine if their parents, lawyers etc were at fault for buying the ELNY annuities in the first place. [5]

Since the 1970’s, life insurers have paid benefits worth approximately $100 billion, according to industry experts.[1] Structured Settlement annuities have been a major source of profits for many life insurance companies including some that are currently experiencing losses. [4] Therefore it comes as a shock to discover that the insurance companies aren’t willing to do more to help the victims.

If annuitants can no longer believe the guarantees stated by insurers, the perceived value of annuities, as a whole, will greatly diminish ultimately decreasing the demand for such products. While the ELNY case may be the only such case of an insured not being able to pay its annuitants, we do not know if it will be the last time this will happen. We do know that any perceived instability by insurers, whether real or imagined, could adversely affect the reputation of an industry that markets itself as a “safer” investment.

Regardless for the reason for ELNY’s demise there needs to be something in place to protect the rights of all annuitants ensuring that their guarantees are honored. Perhaps there is a need for additional legislation, perhaps the system as a whole needs to be re-examined.

1. http://online.wsj.com/article/SB10001424052702304299304577348342869349010.html
2. http://rescuecapital.com/blogs/2012/04/a-bad-day-for-structured-settlement-annuitants/
3. http://s2kmblog.typepad.com/rethinking_structured_set/2012/05/elny-hardship-fund.html
4. http://rescuecapital.com/blogs/2012/04/metlife-first-quarter-2012-losses/
5. http://structuredsettlements.typepad.com/structured_settlements_4r/2012/05/with-all-due-respect-to-elny-victims.html