The U.S. structured settlement industry in 2013 continued to define itself into three related markets (primary, secondary and settlement planning) with the liquidations of Executive Life Insurance Company of New York (ELNY) and Reliance Insurance Company representing important industry storylines.
This blog post reviews 2013 non-ELNY and non-Reliance primary market developments - focusing on structured settlement annuity sales. Subsequent S2KM blog posts will address structured settlement developments for the 2) settlement planning and 3) secondary markets and summarize 4) ELNY and Reliance-related events.
Primary Market Premium
Primary market structured settlement annuity premium and the number of structured cases have increased slightly during 2013 compared with 2012 based upon third quarter industry results compiled by Melissa Evola. Projected 2013 annual premium totals, however, will fall substantially short of the historic 12 month industry high ($6,226,578,725 in 2008) after consistently averaging close to $6 billion annually from 2001-2007.
Evola reports 2013 third quarter primary market annuity premium of $3,736,499,370 resulting from 19,656 cases ($190,094 per case average). Comparable third quarter results for:
- 2012 - $3,565,368,323 premium from 18,706 cases ($190,600 per case).
- 2008 - $4,429,915,586 premium from 25,545 cases ($173,416 per case).
Adding these 2013 third quarter results to historic U.S. structured settlement totals, S2KM estimates the following primary market metrics from 1976 thru September 2013:
- Total annuity premium: $137.4 billion.
- Total structured settlement cases: 790,000.
- Average annuity premium: $174,000.
Individual Annuity Provider Results
Although overall 2013 third quarter results do not differ significantly from 2012, individual company production has changed dramatically per Evola's report. Berkshire Hathaway, which re-entered the market in 2011 following a multi-year hiatus, has assumed primary market leadership. Berkshire Hathaway generated $1,034,199,209 of structured settlement annuity premium (28% of the industry total) during the first nine months of 2013.
Berkshire Hathaway's structured settlement annuity premium and market share since 2011:
- 2011 - $116,458,245 annual premium (2% market share)
- 1st - $4,976,847
- 2nd - $11,311,378
- 3rd - $39,880,339
- 4th - $60,289,681
- 2012 - $824,962,720 annual premium (17% market share)
- 1st - $97,187,721
- 2nd - $193,222,438
- 3rd - $181,111,553
- 4th - $353,441,008
- 2013 - $1,034,199,209 nine months premium (28% market share)
- 1st - $339,325,403
- 2nd - $340,049,486
- 3rd - $354,824,320
- 4th - ?
With announced departures of Allstate and John Hancock during 2013, the U.S. structured settlement market now consists of eight annuity providers. Nine month 2013 sales results for other structured settlement annuity providers (per Evola's report) plus the rounded increase (+) or decrease (-) from comparable 2012 results:
- Pacific Life - $600,146,000 (- $13 million)
- MetLife - $564,000,000 (+ $57 million)
- Amgen/USL - $434,691,262 (+ $25 million)
- Liberty Life - $409,286,609 (+ $118 million)
- Prudential Life - $372,700,000 (- $124 million)
- New York Life - $192,317,226 (- $75 million)
- Mutual of Omaha - $50,407,140 (+ $8 million)
Non-qualified assignments represent transfers of periodic payment obligations that do not meet the requirements of IRC section 130. Unlike qualified assignees, non-qualified assignees are subject to income tax on the amount they receive from whatever entity assigns (or more accurately "delegates") periodic payment obligations to assignees who purchase annuities to fund obligations for claimants who do not qualify for tax exclusions under IRC section 104(a)(1) or (2) - such as employment discrimination cases or deferred attorney fees.
Despite projections of a large and growing market, only two structured settlement annuity providers (AmGen and Liberty) currently offer non-qualified assignments. Nine month 2013 non-qualified assignment sales of $124,287,610 have declined more than $19 million compared with comparable 2012 sales totals according to Evola's report.
Growing the Primary Market
Many industry observers view the United States structured settlement primary market as a strategic, underperforming segment of the larger personal injury settlement planning market. S2KM looked at some of the related issues in a three-part 2013 blog series titled "Growing the Primary Market"
- Part 1 - Daniel Durbin's survey of primary market leaders.
- Part 2 - NSSTA and NASP 2013 Fall Conferences.
- Part 3 - NSSTA's marketing boot camp - "What business are we in?"
S2KM supplemented this analysis with a report on the developing global insurance capital standard which poses additional challenges for structured settlement annuity providers.
For S2KM's previous annual structured settlement industry reports, see the structured settlement wiki.