Beyond Structured Settlements

Structured Settlement 2016 Annuity Sales

Among many recent structured settlement industry developments, perhaps the most significant and impressive has been the continuation of sustained primary market annuity sales growth - especially in the context of various industry challenges. These challenges have included: 1) the aftermath of the ELNY insolvency; 2) continuation of historic low interest rates; 3) public exposure of unsavory secondary market business practices; and 4) a generational transition within the structured settlement industry.

Despite these challenges, primary market annuity sales (on a comparative basis with prior years) totaled $5.73 billion in 2016 (based upon 24,750 cases with an average case size of $231,478) according to industry estimates compiled and recently distributed by Melissa Price. 2016 sales totals compare favorably, and show a steady increase, compared with similar sales totals for these prior years::

• 2015 - $5.35 billion
• 2014 - $5.25 billion
• 2013 - $5.13 billion
• 2012 - $4.82 billion

For the first time, Ms Price's 2016 report included structured settlement annuity sales by USAA. Although USAA is a member of the National Structured Settlement Trade Association (NSSTA), it is S2KM's understanding that USAA is one of multiple "affiliated" life companies that limits its structured settlement sales to internal USAA claims only. Typically, because these companies don't compete for external business, they don't report their sales data.

Inclusive of USSA, 2016 structured settlement sales totaled $5.80 billion (based upon 25,201 cases with an average case size of $230,320. Even including USSA, the 2016 annual premium totals still fall short of the historic 12 month industry high ($6.2 billion in 2008) after consistently averaging close to $6 billion annually from 2001-2007.

It should also be noted, that while structured settlement premium has continued to increase since 2012, the number of structured cases has not noticeably increased - resulting in an ever-increasing average case size. This development may be explained by more structured settlement brokers transitioning to a settlement planning approach, which by definition targets larger cases. For example, Ringler, historically the largest U.S. structured settlement broker, has recently re-branded itself as "the largest settlement planning company in the nation."

Incorporating the USAA 2016 numbers, and adding the 2016 results to historic U.S. structured settlement totals, S2KM estimates the following primary market metrics from 1976 thru 2015:

• Total annuity premium: $156 billion.
• Total structured settlement cases: 879,000
• Average annuity premium: $177,474

Berkshire Hathaway continued its recent primary market leadership in 2016 by generating $1.504 billion of structured settlement annuity premium - a 15% percent increase from 2015. For the first time since 2011, two companies exceeded $1 billion in structured settlement annuity sales as Pacific Life increased its 2016 total to $1.186 billion from its year earlier total of $871MM - a 36% percent increase.

The U.S. structured settlement market now consists of nine NSSTA-member annuity providers who report their structured settlement annuity sales - down from more than 20 as recently as 2002. 2016 sales results (rounded in millions) for the seven other structured settlement annuity providers (per Ms Price's report) plus the rounded percentage increase (+) or decrease (-) from comparable 2015 results:

• MetLife: $815MM (+6%)
• Amgen: $688MM (+12%)
• Liberty Life: $513MM (-6%)
• New York Life: $487MM (+32%)
• Prudential: $399MM (-48%)
• Mutual of Omaha: $141MM (+44%)
• USAA: $72MM (first report)

Ms Price's 2016 compilation also reports an annual increase in annuity premium for non-qualified structured settlement assignments (from $190.3 million in 2015 to $199.2 million in 2016) as a portion of the overall structured settlement numbers. Non-qualified assignments represent transfers of periodic payment obligations that do not meet the requirements of IRC sections 130 and 104(a)(1) or (2) including deferred attorney fees.

From S2KM's perspective, several factors help to explain the sustained primary market sales growth:

• Increased Industry Unity - As former SSP President Neil Johnson pointed out in 2014, for many years, an historical lack of structured settlement industry unity created a drain - a drain on financial resources ... a drain on productivity ... a drain on our public image ... a drain on physical and emotional health. Lack of unity diverts attention from productive projects." Recent leaders of NSSTA, SSP and NASP have encouraged greater cooperation and focused their associations on more productive projects.
  • SSP - As an organization, SSP is no longer a political advocate for injury victims' rights. As Joe Tombs, its current President, stated in this recent S2KM interview: "A year ago, we decided to abandon taking 'political' positions.'' Instead, Tombs added: "1) SSP has substantially expanded its membership; 2) we have re-focused on professional settlement planning as our primary Mission and purpose; 3) we have pretty much put to bed the idea that we oppose NSSTA; and 4) we have developed a new set of Professional Practice Standards which we will introduce during our 2017 Annual Conference."
  • NSSTA - Although NSSTA continues to advocate for structured settlements, NSSTA has likewise undertaken its own initiatives toward achieving greater industry unification. As identified by former NSSTA President Michael Goodman in 2014, these initiatives have included: 1) a strong relationship with the AAJ; 2) improved dialogue with the SSP; 3) guest educational participation involving SSP and NASP representatives; 4) successful cooperation with NASP to enact revised structured settlement protection legislation in multiple states.
• Market Research - Among the structured settlement growth opportunities, expanded use by traditional stakeholders represents arguably the number one priority - a priority which NSSTA highlighted during 2014 by commissioning CLM Advisors to conduct a three-part survey of senior claims executives (Part 1); front line claims professionals (Part 2); and plaintiff attorneys (Part 3). For S2KM's summary and analysis of these surveys, see:
  • Senior Claim Executives
  • Claim Professionals
  • Plaintiff Attorneys
• Transitional Goals- During NSSTA' 2015 Annual Meeting, Goodman announced a series of transitional growth-oriented goals for NSSTA and its members: 1) modifying NSSTA's traditional "protect and preserve" message to inspire primary market growth; 2) moving beyond "interest rate selling"; 3) moving beyond a focus on factoring; 4) identifying and pursuing new markets for structured settlement annuities; 5) adding one or more new life company providers; 6) engaging new, younger structured settlement brokers; 7) providing a new and improved training initiative.
• Growth Initiative Committee - To help support these goals, NSSTA's Board of Directors established a new NSSTA "Industry Growth Initiative," "designed to identify opportunities to expand the use of structured settlements and bring those opportunities to the structured settlement industry marketplace." The first Growth Initiatives to be selected and approved:
  • Rejuvenate Defense Programs (including casualty insurers, commercial insureds and TPAs) - Originally the prime movers for structured settlements, many defense insurers have reduced or completely abandoned their structured settlement programs citing a variety of reasons.
  • Amend the Federal Employee Compensation Act - FECA, which provides workers compensation like benefits for federal workers, currently does not permit structured settlements.
  • Convertible Deferred Lump Sums - As a sales response to "low interest rates", the Growth Committee proposed a new structured settlement feature. As envisioned, the convertible deferred lump sum would allow a structured settlement recipient to select a future lump sum that would automatically convert on its payment date into a series of predetermined periodic payments payable at whatever annuity rates offered at the time of conversion by the issuing life company.
  Under current President Len Blonder and current Growth Committee Chair Sean Coleman, the number of Growth Initiatives continues to expand with assistance from new NSSTA Communications and Marketing Director Abbey Hudson.
• Educational and Lobbying Support - To support its Growth Initiative, NSSTA has also expanded both its educational and certification programming as well as its strategic lobbying and lobbying partnerships. Educational Committee Co-Chairs Jordan Bossler and Nolan Robinson, CSSC Co-Chairs Karen Meyers and Patricia Fairhurst, and their respective committees, plus Compliance and Administrative Director Debbie Sink provide NSSTA with its strongest-ever group of educational resources. NSSTA Executive Director Eric Vaughn, who also serves as Vice Chair of the American Association for People with Disabilities (AAPD) and manages the Congressional Structured Settlement Caucus , has continued to expand NSSTA's lobbying outreach thru strategic relationships with national special needs attorney associations.

Ms Price's reports do not provide information about the structured settlement secondary market. For S2KM's most recent estimates of secondary market metrics, see this prior blog post. Based upon industry sources, it is S2KM's understanding that structured settlement secondary market sales declined during 2016.

Structured Settlement Update - 2015 Annuity Sales

Structured settlement primary market annuity sales increased by $97,315,462 (approximately 2%) to $5,347,578,153 in 2015 compared with $5,250,262,691 in 2014 according to industry estimates compiled and recently distributed by Melissa Evola Price. Total 2015 structured settlement cases, however, decreased to 25,152 from 26,572 a year earlier for an average case premium of $212,610.

The 2015 annual premium totals still 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.

Adding these 2015 results to historic U.S. structured settlement totals, S2KM estimates the following primary market metrics from 1976 thru 2015:

• Total annuity premium: $150 billion.
• Total structured settlement cases: 853,800
• Average annuity premium: $175,700.

Berkshire Hathaway continued its recent primary market leadership in 2015 by generating $1.306 billion of structured settlement annuity premium - an eight (8%) percent decline from 2014 but still 24% of the 2015 industry total. Evola Price's report did not indicate how much of Berkshire Hathaway's premium was attributable to reinsurance and/or non-qualified structured settlement sales.

The U.S. structured settlement market now consists of eight annuity providers (down from more than 20 as recently as 2002) which are members of the National Structured Settlement Trade Association (NSSTA). 2015 sales results (rounded in millions) for the seven other structured settlement annuity providers (per Evola Price's report) plus the rounded percentage increase (+) or decrease (-) from comparable 2013 results:

• Pacific Life: $871 MM (+13%)
• MetLife: $772 MM (-11%)
• Prudential: $772 MM (+8%)
• Amgen: $613 MM (+29%)
• Liberty Life $548 MM (-10%)
• New York Life: $368 MM (+18%)
• Mutual of Omaha: $98 MM (+113%)

Evola Price's 2015 compilation also reports an annual increase in annuity premium for non-qualified structured settlement assignments (from $182.3 million in 2014 to $190.3 million in 2015) as a portion of the overall structured settlement numbers. Non-qualified assignments represent transfers of periodic payment obligations that do not meet the requirements of IRC sections 130 and 104(a)(1) or (2) including deferred attorney fees.

Although Evola Price's report does not indicate the percentage of structured settlement premium and/or annuities attributable to workers compensation Medicare set-aside (WCMSA) cases, WCMSAs have become an increasingly important submarket for structured settlements. S2KM has previously estimated that as much as eight (8%) percent of recent structured settlement premium and 24 percent of recent structured settlement annuities are attributable to WCMSAs.

Evola Price's reports do not provide information about the structured settlement secondary market. For S2KM's most recent estimates of secondary market metrics, see this prior blog post.

Structured Settlements 2015 - 1

Market Metrics

Although its new "Growth Initiative" has represented a well-publicized, number one priority of the National Structured Settlement Trade Association (NSSTA) during 2015, the results of this initiative have not yet produced a noteworthy impact on structured settlement annuity sales.

As reported by Melissa Evola Price, the United States structured settlement primary market has continued to slowly recover from its 2012 nadir during 2015 with first nine months annuity sales of $3.96 billion resulting from 18,635 cases - a premium increase of 3% compared to $3.86 billion resulting from 19,778 cases for the same period in 2014. The average per case annuity premium has increased to $212,703 from $195,305.

Based upon these results, 2015 annual structured settlement annuity sales can be expected to approximate $5.4 billion. The projected 2015 annual premium totals, however, will still fall substantially short of the historic 12 month industry high ($6.2 billion in 2008) after consistently averaging close to $6 billion annually from 2001-2007.

Recent Annual Structured Settlement Annuity Premium

• 2015 (third quarter) - $3.96 billion
• 2014 - $5.25 billion
• 2013 - $5.13 billion
• 2012 - $4.82 billion
• 2011 - $4.97 billion
• 2010 - $5.5 billion
• 2009 - $5.4 billion
• 2008 - $6.2 billion

Adding the 2015 Third Quarter results to historic U.S. structured settlement totals, S2KM estimates the following primary market metrics from 1976 thru September 2015:

• Total annuity premium: $148.7 billion.
• Total structured settlement cases: 847,200
• Average annuity premium: $175,600.

Nine month 2015 sales results (in millions) for individual structured settlement annuity providers (per Price's report) which are members of the National Structured Settlement Trade Association (NSSTA) plus the rounded increase (+) or decrease (-) from comparable 2014 results:

• Berkshire Hathaway: $974 MM (-12%)
• Pacific Life: $642 MM (+16%)
• MetLife: $592 MM (-13%)
• Prudential: $563 MM (+22%)
• Liberty Life: $422 MM (-2%)
• Amgen: $408 MM (+8%)
• New York Life: $298 MM (+45%)
• Mutual of Omaha: $65 MM (+63%)

Low Interest Rates

Many structured settlement industry participants attribute decreased sales to low interest rates. Market yields on U.S. Treasury securities at 30 year constant maturity peaked at 13.45 percent in 1981. Here are several historic average annual rates for 30 year Treasury securities (source: U.S. Department of the Treasury):

• 2015 (as of December 28) - 2.95%
• 2014 - 2.97%
• 2013 - 3.96%
• 2012 - 2.95%
• 2011 - 3.91%
• 2010 - 4.25%
• 2009 - 4.08%
• 2008 - 4.28%
• 2007 - 4.84%
• 2000 - 5.94%
• 1990 - 8.61%
• 1980 - 11.27%

Submarkets - Multiple noteworthy submarkets, each with significant structured settlement growth potential, are incorporated within the annuity production numbers set forth above. With the exception of non-qualified assignments funded with life insurance annuities sold by NSSTA members, S2KM is not aware of published metrics for these submarkets.

• Non-Qualified Assignments
  • Non-qualified assignments represent transfers of periodic payment obligations that do not meet the requirements of IRC section 130. They are generally used to defer taxable damage awards such as punitive damages as well as contingent attorney fees. Because they do not benefit from the favorable tax treatment of IRC 130, most non-qualified assignees are "off-shore" companies located in jurisdictions which do not tax the funds received by the assignee as income.
  • Two NSSTA-member annuity providers (Liberty Life and American General) currently offer and separately report non-qualified sales
  • Reported nine month 2015 non-qualified structured settlement sales by Liberty and Amgen totaled $159.0 million compared with $113.2 million in 2014 - a substantial increase which does not include non-qualified sales by a growing number of non-NSSTA member companies.
  • Release 58 of "Structured Settlements and Periodic Payment Judgments" (S2P2J) features an expanded analysis of the non-qualified market.
• Medicare Set-Asides
  • A Medicare set-aside (MSA) is an administrative and funding mechanism utilized in certain categories of settlements to protect Medicare's interests as "secondary payer" under the Medicare Secondary Payer (MSP) statute.
  • Although Federal law does not define MSAs, or mandate specific types of MSA funding mechanisms, CMS (the responsible federal agency) has established certain basic requirements for workers compensation MSAs (WCMSAs).
  • Under current CMS rules, structured settlement annuities have an inherent cost advantage over lump sum alternatives for funding WCMSAs resulting from the method CMS prescribes for calculating present values.
  • Although industry reporting does not currently separate MSA annuity sales, S2KM has previously estimated that eight (8%) percent of 2013 structured settlement premium and 24 percent of 2013 structured settlement annuities were attributable to WCMSAs.
  • Although no specific CMS rules or requirements currently exist for liability MSAs, one professional MSA administrator has informed S2KM that liability MSAs now represent 30% of his company's cases and the percent is growing.
• Special Needs Trusts
  • Established by Congress in 1993 as part of the Omnibus Budget and Reconciliation Act, Special Needs Trusts (SNTs) provide an authorized method for disabled individuals to hold an unlimited amount of assets in trust without disqualification for certain means-tested government benefits including Social Security Income and Medicaid.
  • When utilized as part of a personal injury settlement, SNTs are frequently funded with structured settlement annuities.
  • Similar to MSAs, industry reporting does not currently separately report SNT annuity sales.
  • Although an important strategic relationship clearly exists between structured settlement brokers and special needs attorneys, neither professional community have fully embraced the other for reasons explained in prior S2kM blog posts.
  • As a result, continuing opportunities exist to expand structured settlements funding of SNTs as well as other government benefit programs promoted by special needs attorneys such as the ABLE Act and the Affordable Care Act.

How large is the potential U.S. annual structured settlement market?

Based on recent Towers Watson studies, S2KM has previously estimated that more than $170 billion of United States tort costs (excluding workers compensation) represented payments to injury victims and their attorneys during 2014. Within that framework, and in the context of an S2KM interview, NSSTA President Michael Goodman recently stated his own estimate of potential market size for the structured settlement industry to be $8 to $10 billion range per year.

Secondary Market

Unlike the primary structured settlement market, which has experienced modest annual sales increases since 2012, the secondary market appears to have regressed according to industry experts. As a point of reference, based on interviews with industry experts in 2012, S2KM estimated 2012 structured settlement secondary market activity to be:

• 12,000 secondary market transfers - with less than 120 contested by annuity owners and/or providers.
• $360 million of total secondary market purchases (money paid to transferors).
• $30,000 average individual transfer.

Following zero (0%) percent growth in 2013, the number of secondary market transfers appears to have declined as much as 15% during 2014 with another decrease of as much as 7% predicted in 2015, according to various industry sources.

This decline in secondary market transfers received further confirmation from:

• An exhibit to J.G. Wentworth's December 10, 2015 SEC Form 8-K which indicates a $48 million drop in structured settlement revenue for the first three quarters of 2015 compared with the same 2014 period ($764MM vs. $812 MM).
• J.G. Wentworth's current stock price - which closed on the New York Stock Exchange at $1.82 per share on December 28, 2015 down from its historic high of $19.59 on February 28, 2014.

Industry experts estimate J.G. Wentworth currently controls between 65-72% of the U.S. secondary structured settlement market.

Based upon the 2013-2015 transfer estimates indicated above, S2KM further updates its estimates of historic (1986-2015) structured settlement secondary market metrics as follows:

• 168,000 transfers - involving 84,000 structured settlement recipients.
• $5 billion - aggregate sums paid to transferor structured settlement recipients.
• $12.9 billion - aggregate periodic payments purchased by secondary market companies.

For S2KM's summary of 2015 structured settlement issues and developments, see this blog post.
For S2KM's prior year summaries of the structured settlement market, see the structured settlement wiki.

NSSTA 2015 Fall Conference

Although the National Structured Settlement Trade Association (NSSTA) did not promote a specific theme for its 2015 Fall Educational Conference, one of the speakers succinctly captured the program's overall purpose and accomplishment when he described NSSTA's new Industry Growth Initiative as "changing the focus of our future."

Industry Growth Initiative

NSSTA's website description of its Industry Growth Initiative highlights "a significant decline in production since its peak at $6.3 Billion in 2008" and asserts "we do an excellent job protecting our industry" before announcing that "this year we want all NSSTA members to focus their time, energy and resources on new opportunities to expand the use of structured settlements-to grow our industry."

NSSTA President Michael Goodman utilized his Opening Conference Comments in Phoenix (as well as a preconference interview with S2KM) to describe the status and organizational structure of the NSSTA Industry Growth Initiative.

"My first priority as President of NSSTA," Goodman stated, "is to identify growth opportunities for the structured settlement industry. First, we asked all NSSTA members to submit ideas for growth at [email protected] . Second, I tried to put together a NSSTA Growth Committee consisting of a highly talented cross section of industry leaders with diverse perspectives. Third, the Committee evaluated all of the 28 (to date) NSSTA member growth proposals and selected three for NSSTA Board of Directors approval to develop immediate implementation plans with success metrics."

Goodman introduced the NSSTA Growth Committee members including co-Chairmen William Goodman, Sean Coleman, John McCulloch and John Arendt. Speaking for the Committee, Coleman enthused: "I love our change of focus. Historically, NSSTA has been reactive, dodging bullets. The Growth Initiative redirects our mindset and focus. It encourages us to become proactive. The Growth Committee has already surpassed by highest expectations."

Goodman and the Committee co-Chairmen identified the following three NSSTA Growth Initiatives already selected and approved:

• Rejuvenate Defense Programs (including casualty insurers, commercial insureds and TPAs) - Originally the prime movers for structured settlements, many defense insurers have reduced or completely abandoned their structured settlement programs citing a variety of reasons. Beginning with three target carriers, the Committee plans to analyze the causes, and ultimately revitalize the programs, to create new prototype defense program models. Note: NSSTA recently commissioned surveys of Senior Claims Executives; and front line Claims Professionals which S2KM summarized and evaluated in prior blog posts.
• Amend the Federal Employee Compensation Act (FECA) - FECA, which provides workers compensation like benefits for federal workers, currently does not permit structured settlements. With payouts totally approximately $4.5 billion per year, FECA represent an attractive potential market for structured settlements with administrative cost savings being one justification for a legislative amendment. Based upon preliminary interviews, the Growth Committee believes FECA stakeholders view structured settlements favorably. The Committee is gathering statistical data to support its proposal and building grassroots support.
• Convertible Deferred Lump Sums - As a sales response to "low interest rates", the Growth Committee is proposing a new structured settlement feature. As envisioned, the convertible deferred lump sum would allow a structured settlement recipient to select a future lump sum that would automatically convert on its payment date into a series of predetermined periodic payments payable at whatever annuity rates offered at the time of conversion by the issuing life company. A Canadian broker attending the NSSTA conference stated that at least one Canadian life company already offers this structured settlement product feature. The Committee anticipates whichever annuity provider introduces this product feature in the U.S. will probably also seek an IRS private letter ruling.
• Note: NSSTA's Growth Committee identified a fourth preliminary initiative (Dissipation Study) - to confirm that injury victims squander lump sums. However, this initiative is currently on hold. For background, see this 2009 S2KM review of Jeremy Babener's legal research paper analyzing historic dissipation studies.

Factoring Update

Goodman also addressed the state of the structured settlement industry including a "factoring update". As part of this report, Goodman confirmed that NSSTA and the National Association of Settlement Purchasers (NASP) have agreed to cooperate legislatively in several states to seek the following consumer protection amendments for state structured settlement protection statutes:

• No forum shopping.
• Payee required to attend hearing.
• Stricter application of approval requirements.
• Advanced notice of transfer.
• Required disclosure of prior transfers.

Supporting this cooperative initiative, NSSTA has begun offering its members a new Judicial Education Training Seminar - taught in Phoenix by John McCulloch and Stephen Harris. Goodman also announced he will be a featured speaker at NASP's 2015 Annual Conference next week in Las Vegas - the first serving NSSTA President to do so. Perhaps anticipating his NASP appearance, and cognizant of the recent Washington Post article ("a perfect storm for factoring"), Goodman advised the NSSTA Conference attendees: "Factoring is not a zero sum game. What is bad for them is not always good for us."

Additional Conference Presentations

Many structured settlement participants believe control of the primary structured settlement market, and future market growth, have shifted from the defense to plaintiff attorneys and their injury victim clients. Although NSSTA has been slow to embrace plaintiff-focused personal injury settlement planning, NSSTA's Fall Conference included two presentation featuring plaintiff representatives:

• A Trial Lawyer Panel - moderated by Ryan Garrison with plaintiff attorneys Julio Zapata and Francisco Gutierrez; plus
• An introduction to the National Association of Trial Lawyers Executives (NATLE) by Gayle Bennett, Deputy Director of the New Mexico Trial Lawyers Association.

Both plaintiff presentations emphasized opportunities to expand the market for structured attorney fees. Both plaintiff attorneys expressed a preference for advisors who are "knowledgeable not just about structured settlements but also other investment vehicles."

In addition to the Judicial Education Training session mentioned above, three other NSSTA presentations addressed educational issues and programs:

• Best Practices for Structured Settlement Case Resolution - During her excellent review of structured settlement fundamentals, Betty Gregware expressed serious concern about the general quality of structured settlement documentation and the need to increase competence across the industry.
• Professional Broker Education - Gregware, Melissa Price and Debbie Sink introduced a new educational program NSSTA is developing primarily for individuals who are new to the structured settlement industry. They also provided an administrative overview of "NSSTA University" whereby NSSTA partners with members to secure CE credits for member-sponsored educational seminars for insurance claims departments or law firms.
• MSSC Paper Presentation - Mal Deener moderated a panel featuring Trish Fairhurst, Richard Carroll and other members of the first graduating class of NSSTA's new Masters Structured Settlement Consultant (MSSC) professional designation. Each MSSC graduate is required to submit a paper and these papers will be published on NSSTA's website. NSSTA will offer its next MSSC program beginning April 27, in conjunction with its Certified Structured Settlement Consultant (CSSC) program, at the University of Notre Dame

Separate from, but related to, NSSTA Growth Initiative, NSSTA's Board of Directors has appointed a Special Needs Attorney Task Force to develop strategic relationships with special needs attorney professional associations and to identify collaborative marketing opportunities with special needs attorneys more generally. NSSTA member Carola Davis and Special Needs Alliance attorney Patty Sitchler initiated a NSSTA presentation/discussion in Phoenix which hopefully will continue and expand to the benefit of both professional communities.

A critical factor, both challenge and opportunity, for growing the primary structured settlement market concerns succession planning. What new generation of distributors, or distribution channel(s), or business models, will emerge (and when) to replace and build upon the accomplishments of the pioneering generation (now in their 60s and 70s) who originated the structured settlement market in the late 1970s? NSSTA's Fall Conference featured two presentations addressing these issues:

• Succession Planning - Presenter Jim Early looked at the succession issue primarily from the point of view of the individual producer. Among his observations: "nepotism works in the structured settlement industry" and "a lack of capital has prevented the primary market from bringing in and training new people."
• Diversity Discussion - Angel Viera and Stacy McCall offered a convincing case for promoting greater diversity among new structured settlement professionals as a key component for future growth. Their presentation included and elicited several thought-provoking observations including: 1) "From a demographic perspective, our industry should mirror the people we serve" and 2) "Our industry suffers from a lack of diversity of thinking. Where do we find new voices and perspectives?"

Lifetime payments represent a valuable, optional structured settlement benefit which can be further enhanced from a pricing perspective when rated ages are applicable. Kevin Puckett and Ken Kiefer expounded on these important issues during their presentation about Mortality, Morbidity & Rated Ages.

NSSTA members Susan Clark and Robert Caples introduced Arnie Begler and Scott Henry, representing Pipitone Group, NSSTA's new public relations firm, and together they discussed NSSTA's Communications Program. Because journalists, as well as their readers, frequently confuse the primary and secondary structured settlement markets, Pipitone's "first test" was responding to the aforesaid Washington Post article. Pipitone's stated assignment is "to find the best communications practices and bring them to NSSTA" which will include designing a new NSSTA website. Among NSSTA's priorities, and Pipitone's challenges, will be attempting to reclaim the "structured settlement" brand inclusive of Google searches which currently are dominated by secondary market companies.

NSSTA Executive Director Eric Vaughn concluded NSSTA's Fall Conference with a Government Relations Update - his characteristically insightful and energizing overview of structured settlement legislative and regulatory activities. Among other accomplishments, Vaughn was recently named Vice Chairman of the American Association of People with Disabilities (AAPD).

Other recent NSSTA-related S2KM blog posts:

• Michael Goodman Interview
• NSSTA Marketing Surveys
  • Senior Claim Executives
  • Claim Professionals
  • Plaintiff Attorneys
• NSSTA 2015 Structures 202 Conference
• NSSTA 2015 Annual Conference

Structured Settlement Surveys - 2

The National Structured Settlement Trade Association (NSSTA), in partnership with CLM Advisors, has recently completed a three-part structured settlement survey project of senior claims executives (Part 1), claims professionals (Part 2) and plaintiff attorneys (Part 3) the results of which provide NSSTA members with marketing tools for discussions with the audiences surveyed.

Complementing NSSTA's surveys, NSSTA member and structured settlement provider Prudential recently published the results of its own 2013 survey of 400 claimants who had entered into a settlement of a physical injury or workers’ compensation claim of at least $100,000 from 2003 to 2013.

Considered together, these four surveys provide valuable insights into how key stakeholders currently view the structured settlement market. They also provide a point of reference for, and comparison with, other structured settlement market surveys several of which have been completed or updated since S2KM published this previous blog post in November 2008.

What follows are brief summaries of prior structured settlement surveys. In subsequent blog posts, S2KM will review and evaluate the most recent NSSTA and Prudential surveys.

• NSSTA 2006: Survey of Plaintiff Attorneys and Structured Settlement Recipients - This NSSTA-sponsored survey was titled: "A Study of the Structured Settlement Process Conducted on behalf of the National Structured Settlement Trade Association" and was directed by Robert E. Hoyt, the Dudley L. Moore, Jr. Chair of Insurance at the Terry College of Business at the University of Georgia. It consisted of attorneys involved in structured settlements (43 telephone surveys) and structured settlement recipients (1275 telephone and Internet surveys). Among the reported results:
  • Only 7% of personal injury settlements between $75,000 and $100,000 include structured settlements; and only 30% of personal injury settlements above $1 million included structured settlements.
  • When asked: "Whom do you prefer to use for purposes of financial planning for your clients?" , surveyed attorneys responded: trust company/department - 30%; Financial planner - 28%; Structured settlement consultant - 23%; No response - 19%.
• American General 2007: Survey about Structured Settlement Public Awareness - Sponsored by AIG American General and conducted by Esearch.com, Inc. in September 2007, this survey included 1000 U.S. participants - 80% had no connection with any personal injury case; 20% had previously been involved directly or indirectly through a family member in a personal injury case. Respondents who had no connection to a personal injury case were asked to read two hypothetical scenarios and answer questions on how they would react.Those with a direct connection to a personal injury case were not only asked to read the hypothetical scenarios, but also to answer questions based upon their real life experience. AIG's conclusion: the structured settlement industry needs to better educate Americans about structured settlements.
• J.G. Wentworth 2008: Survey of Structured Settlement Recipients - The survey consisted of 115 structured settlement recipients who had previously sold payment rights to J.G. Wentworth. The survey questions addressed both primary and secondary market issues, focusing upon the reasons the respondents: 1) first agreed to a structured settlement; and 2) then subsequently sold (transferred) some or all of their structured settlement payment rights. S2KM's prior reporting about the survey's primary market questions, responses plus related S2KM comments appears here. S2KM's prior reporting about the survey's secondary market questions, responses plus related S2KM comments appears here.
• Jeremy Babener 2009: Dissipation Legal Research Paper - Titled "Justifying the Structured Settlement Tax Subsidy: The Use of Lump Sum Settlements," this paper examines and challenges the myth of the squandering injury victim. In it, Babener refutes the existence of any published study supporting the statistic that "90% of lump sum recipients dissipate their recoveries within five years" and identifies 12 existing dissipation studies relevant to structured settlements that reach a contradictory conclusion: injury victims have no greater propensity to dissipate money than non-injury victims.
• Towers Watson 2011: "Update of U.S. Tort Cost Trends" - The 2011 update represents the 15th study of U.S. tort costs, and the most recently published, by Towers Watson. Note: a Tower Watson representative has informed S2KM it has no current plans to publish further updates. The 2011 study reported $264.6 billion of 2010 U.S. tort costs and excluded: 1) no-fault auto insurance; 2) property coverages; 3) workers compensation; 4) certain extraordinary (one time) costs. Tower Watson's 2002 study had previously translated overall tort costs in 2001 into these additional cost categories and percentages: 1) administrative costs - 21%; 2) defense costs - 14%; 3) plaintiff attorneys -19%; 4) economic loss - 22%; and 5) non-economic loss - 24%. Based on the 2011 study and utilizing Tower Watson's 2002 "best estimate" of payout percentages, S2KM has estimated that since 2011 more than $170 billion of United States tort costs annually have represented payments to injury victims and their attorneys.
• Claims & Litigation Management Alliance (CLM) 2011: "National Litigation Management Study" - This survey of litigation management executives analyzed 30 litigation-related service areas including structured settlements. Commissioned by CLM (formerly the Council on Litigation Management ) and conducted by Revere Advisory, it identified structured settlement as the "most penetrated external initiative" among 30 litigation-related service areas analyzed based upon interviews with leading litigation management executives. CLM membership includes: corporations, insurance companies, government agencies, defense attorneys and law firms plus individuals "who participate in litigation and the management thereof (Corporate Counsel; Risk, Claims and Litigation Managers; Adjusters and Service Providers etc.)."
• Daniel Durbin 2013: Survey of Structured Settlement Brokers - Durbin, a former NSSTA President and Senior Structured Settlement Sales Manager with Allstate Life, conducted an informal survey with a group of leading structured settlement brokers to obtain their input and evaluate their interest in representing a potential new structured settlement product provider. Durbin identified himself as part of an investor group of individuals including insurance executives who see underdeveloped opportunities in the structured settlement primary market. Although Durbin has not published the results of his survey, he has presented to several industry groups and stated that the survey showed the interest is high as long as the new firm is financially strong with competitive rates.
• Melissa Evola Price 2002-2015: Quarterly Reports of NSSTA Member Structured Settlement Annuity Provider Sales - Melissa Evola Price's quarterly structured settlement report, selectively distributed to NSSTA members, is now copyrighted by her company, Structured Financial Associates, Inc. (SFA). Price and SFA have granted S2KM permission to publish selected portions of her report on both S2KM's blog ("Beyond Structured Settlements") and the structured settlement wiki. Her reports include historical data from 1975-2001 which is sourced with permission from "Structured Settlements and Periodic Payment Judgments" (S2P2J).  Evola Price most recently reported 2015 first quarter structured settlement annuity premium of $1,332,047,252, an increase of more than $230 million (21%) compared with the 2014 first quarter structured settlement annuity premium of $1,101,839,529.

Structured Settlement Primary Market Growth

The 2015 First Quarter Report of structured settlement annuity provider sales recently compiled and selectively distributed by Melissa Evola Price provided welcome news for the industry.

Structured settlement 2015 first quarter annuity premium of $1,332,047,252 increased by more than $230 million (21%) compared with the 2014 first quarter annuity premium of $1,101,839,529. This 2015 first quarter total is the largest since 2009 when reporting companies produced $1,418,930,180 of structured settlement annuity premium.

Annual structured settlement premium reached its historic 12 month industry record of $6,226,578,725 in 2008 after consistently averaging close to $6 billion annually from 2001-2007. Annual premium totals dropped off sharply from 2009 (following the 2008 financial crisis) thru 2012 before showing modest improvements in 2013 and 2014.

Note: Melissa Evola Price's quarterly structured settlement report is now copyrighted by her company, Structured Financial Associates, Inc. (SFA). Price and SFA have granted S2KM permission to publish selected portions of her report on both S2KM's blog ("Beyond Structured Settlements") and the structured settlement wiki.

The improved 2015 first quarter structured settlement sales appear to result, in significant part, from a purposeful, renewed marketing focus by the National Structured Settlement Trade Association (NSSTA) and its members including:

• Marketing Boot Camp - NSSTA transfigured its 2013 Fall Educational Conference into a "Marketing Boot Camp" - "designed to help every member who attends learn how to increase the number of referrals they get from their clients and how to develop new clients."
• Structures 202 - NSSTA revised its prior Structures 101 educational program (primarily for case managers) in 2015 to attract and assist "Next Generation" structured settlement participants who are new to the market and rapidly replacing the pioneering generation of professionals who created the structured settlement industry in the 1970s and 1980s.
• NSSTA University - During its Fall 2014 Conference, NSSTA announced a new "NSSTA University" service whereby NSSTA will partner with any member to secure CE credits for member-sponsored educational seminars or insurance claims departments or law firms.
• MSSC - Complementing and extending its Certified Structured Settlement Consultant (CSSC) Professional Certification Program, NSSTA has added a new Master's Certificate in Structured Settlement Consulting (MSSC). NSSTA recognized and honored the most recent graduates of both programs during its 2015 Annual Meeting.
• New Market Surveys - In partnership with CLM Advisors, NSSTA's Marketing Committee commissioned a three part survey project during 2014 to provide its members with valuable marketing tools for discussions with the audiences surveyed. These surveys have now been completed: Part 1 (senior claims executives); Part 2 (claims professionals); Part 3 (plaintiff attorneys).
• Prudential Survey - Complementing NSSTA's new market surveys, NSSTA member and structured settlement provider Prudential recently published the results of its 2013 survey of 400 claimants who had entered into a settlement of a physical injury or workers’ compensation claim of at least $100,000.

In addition to these marketing initiatives, NSSTA finally appears to be encouraging some degree of structured settlement "industry unity".  NSSTA President Michael Goodman highlighted the following recent "NSSTA successes" during NSSTA's 2015 Annual Meeting:

• A strong relationship with the American Association for Justice (AAJ);
• Improved dialogue with the Society of Settlement Planners (SSP);
• Guest educational participation involving SSP and National Association of Settlement Purchasers (NASP) representatives;
• Successful cooperation with NASP to enact revised structured settlement protection legislation in Illinois.

Do the positive 2015 first quarter results anticipate further growth in the structured settlement primary market? And, if so, what resources and strategies will be required?

S2KM will address these questions in subsequent blog posts based in part on the results of the most recent structured settlement market surveys sponsored by NSSTA and Prudential.

For S2KM's most recent structured settlement primary market reports, see:

• Structured Settlements 2014 - Primary Market
• Structured Settlement Update - 2014 Annuity Sales

NSSTA 2015 Annual Meeting

Continuing to advance a theme of "industry unity", which now appears to encompass some collaborative political lobbying as well as education, the National Structured Settlement Trade Association (NSSTA) hosted its 2015 Annual Meeting April 22-24 in Washington, D.C.

Incoming NSSTA President Michael Goodman highlighted these developments during his introductory address when he listed among other recent NSSTA successes: 1) a strong relationship with the American Association for Justice (AAJ); 2) improved dialogue with the Society of Settlement Planners (SSP); 3) guest educational participation involving SSP and National Association of Settlement Purchasers (NASP) representatives; as well as 4) successful cooperation with NASP to enact revised structured settlement protection legislation in Illinois.

The new Illinois legislation provides an antidote for problems created by the Brenston case. Among other changes to the prior Illinois statute, the new legislation also includes provisions to: 1) restrict forum shopping; 2) require the seller of payment rights to appear in person at the court hearing (unless the court determines that good cause exists to excuse the payee from appearing); and 3) require disclosure of prior transfers.

Representatives of both NSSTA and NASP have expressed their intent to cooperate in pursuing similar legislative reforms in other states including Florida, Tennessee, Virginia and Wisconsin.

Goodman also identified several goals for NSSTA during his term as President. These include: 1) modifying NSSTA's traditional "protect and preserve" message to inspire primary market growth; 2) moving beyond "interest rate selling"; 3) moving beyond a focus on factoring; 4) identifying and pursuing new markets for structured settlement annuities; 5) adding one or more new life company providers; 6) engaging new, younger structured settlement brokers; 7) providing a new and improved training initiative.

Goodman will be joined on the NSSTA Board by two newly-elected Directors: Jim Early and Geoff Kissel. They replace retiring Directors John Machir and Dan Goodmann. John McCulloch was re-elected to a new three year term of directorship. McCulloch was also honored as NSSTA's annual President's Award winner. Karen Meyers and Bill Wakelee were named recipients of NSSTA's annual Leadership Award.

NSSTA Executive Director Eric Vaughn updated members on the Structured Settlement Caucus which is co-chaired by Congressmen John Lewis and James Sensenbrenner and currently consists of 53 congressional members. The objectives of the Caucus include: 1) expanding the base of Congressional support for structured settlements; 2) educating new members of Congress about structured settlements; and 3) protecting and promoting structured settlements.

As an important auxiliary portion of its meeting, Vaughn and 125 NSSTA members "Took the Hill" to meet with Senators and Representatives. Their efforts received strong encouragement from Congressman Lewis who exhorted NSSTA members "to make some noise."

"Stand up! Speak up!" Lewis urged. "Structured settlements have always enjoyed strong bipartisan Congressional support. They are the right and necessary thing to do. They work by providing long term financial security for injury victims to live with dignity."

NSSTA and its Education Committee face a continuing challenge: how best to educate its members, who possess varying degrees of experience and who market to a diverse group of structured settlement producers and decision makers, to deliver high value services to their respective clients. NSSTA has addressed this challenge with multiple new initiatives:

• Structures 202 provides a comprehensive program of case management fundamentals and business development opportunities. Unlike Structures 101 (a prior NSSTA educational program for case managers), Structures 202 is also designed for structured settlement brokers who are new to the market and therefore includes an important, primarily plaintiff-oriented, business development component.
• Complementing and extending its Certified Structured Settlement Consultant (CSSC) Professional Certification Program, NSSTA has added a new Master's Certificate in Structured Settlement Consulting (MSSC). NSSTA recognized and honored the most recent graduates of both programs during its 2015 Annual Meeting.
• During its Fall 2014 Conference, NSSTA announced a new "NSSTA University" service whereby NSSTA will partner with any member to secure CE credits for member-sponsored educational seminars or insurance claims departments or law firms.
• In partnership with CLM Advisors, NSSTA's Marketing Committee has commissioned a three part survey project to provide its members with valuable marketing tools for discussions with the audiences surveyed. Part 1 (claims executives) and Part 2 (claims adjustors) have been completed. Part III will survey plaintiff attorneys.

In addition, from S2KM's perspective, NSSTA continues to upgrade its traditional educational conferences.

SPEAKERS AND TOPICS - NSSTA 2015 Annual Meeting

• Kevin Silo - Opening Remarks
• Congressman John Lewis - Keynote Speaker
• Michael Goodman - NSSTA Agenda and Objectives
• Sally Greenberg - Consumer & Legal Protections for Injury Victims
• Mike Montemurro and John Stanton - Internal Revenue Service Update
• Taylor Smith, Ronna Ruppelt, Robert Sampson - Delivering High Value Services to Claims Professionals
• Karen Meyers, Anne Marie VonBank, Cody Shively - Trigger Trusts
• Christi Fried, Paul Hansen, Phil Sanders - Trust Asset Allocation and Structured Settlements
• Stephen Harris, Timothy O'Driscoll and Peter Vodola - Judicial Education
• Susan Clark and Melissa Price - NSSTA Took the Hill
• Michael Miller, Earl Nesbitt, John McCulloch - Factoring Panel Discussions
• Dr. Quincy Krosby - Macro Economics and the Financial Markets
• Nancy Bond - Life Care Planning

For additional S2KM reporting about past NSSTA conferences, see the structured settlement wiki.