Executive Life of New York liquidation, a tree falling in the forest that no one hears

In case you aren't aware, Executive Life of New York, the crazy aunt in the attic of the structured settlement industry, is in the process of seeking approval to liquidate what remains of the company, after a 21 year "rehab" that by all reasonable standards was strange, to say the least. 

Unless you are an active member of the structured settlement trade association, NSSTA, one of the impacted ELNY annuity owners or an insurance industry geek, there is an excellent chance you have no clue that there is about to be the first significant shortfall in promised payments to structured settlement beneficiaries since our industry was established in the late 1970's. Our profession will be quick to point out that it only impacts 15% of the total policyholders of ELNY, but it is significant none the less and even one policyholder being impacted is one too many.

The total lack of coverage of this by the main stream financial press is amazing to say the least, as the insurance and financial industry has closed ranks with some very nervous politicians from New York State to do their best Leslie Neilsen "Naked Gun" imitation by claiming there is "nothing to see here" as the fireworks factory explodes behind him.

Nothing to see here...ELNY rehab is fait accompli.

A couple of the industry insiders who have reported on this and done a good job laying out the mess of the last 21 years and the "plan" to liquidate the remaining assets, are listed below:

Patrick Hindert and his coverage of the hearings on the S2KM Blog

Insurance Advocate Magazine and their details analysis of the cause, impact and results of the ELNY failure authored by NY Attorney Peter Bickford.

Court House News coverage and hearing summary of March 22, 2012.

Additionally NSSTA has provided an information page for those who are facing a shortfall in payments to apply for assistance from the $100 million hardship fund established by the insurance industry.

However, beyond that it is slim pickings to find any meaningful in depth reporting on this issue and it is hard not to draw the conclusion that is exactly the way the structured settlement profession wants it. Lets face it, the fact that even a small number of annuity beneficiaries are going to be facing a substantial cut in benefits is not exactly a big flag we want to wave in front of past or future clients. One of our profession's proudest claims has been that no structured settlement beneficiary has ever not gotten 100% of their promised payments. This no longer is true and that is going to be an albatross around our necks for some time going forward. 

Yet what I find amazing in all of this is if you go to an industry meeting, either the SSP or NSSTA and ask brokers if THEY ever sold an ELNY contract, it's sort of like getting people to admit they voted for Nixon in 1974 after he resigned due to Watergate. No one claims they supported him, yet Nixon won 49 states and was elected in a landslide. Similarly BILLIONS of ELNY premium was written in the late 1980's and early 1990's, and thousands of annuitants are at risk of losing benefits, yet brokers are strangely silent on their role in this fiasco, as if it was someone else, way over there, who pour billions in premium into a highly risky company to fund long term life time payments and huge balloon payments at future dates, which are now coming due and can't be honored. 

As I thankfully never sold an Executive Life of NY annuity, or Executive Life of California, I have been spared the trauma of having to deal with any of my personal clients experiencing a payment shortfall. ( In fact I have old letters begging clients to not use these firms as it was clear the junk bonds supporting these annuities were built on sand.) Still, I wonder what other brokers who clearly sold a LOT of these contracts are doing to work with or service those clients who are dealing with this mess. Are they contacting them to discuss and explain options, or are they hiding in their storm bunkers hoping this all blows over and that the "industry" solves the issue and it simply goes away? I suspect the names of those facing shortfall's, who are primarily those who executed qualified assignments, are public record now and are the big settlement firms going back and cross checking to see if they can get their clients to be first in line for the hardship dollars? I would certainly hope so, but I doubt that is the case.

I wonder about a lot when it comes to ELNY, but the biggest question I have, which is only going to be answered going forward, is what kind of stain is this going to put on our profession and our foundational product, the structured settlement annuity? Obviously a huge number of safe guards and regulatory changes have been put in place since 1992, all for the protection of consumers and policy holders, and it has made the structured settlement annuity probably the single most secure insurance product available. That's all great and I share that data with clients every day.

However, to cover up or to try and minimize the impact to the ELNY beneficiaries, or to pretend this is just a tiny sliver of all annuity holders is irresponsible on the part of our profession in my opinion, and I hope that a brighter light is shown on the entire 21 year ELNY rehab process. What ever plan is approved by the Judge in NY State on the liquidation, and there are clearly no good choices at this point, that we as a profession get a full and transparent post mortem on the obvious mismanagement of the fund, so that we as advisors and stakeholders never have to repeat this process or subject any other annuitant to the fear and confusion many are facing today as this "rehab" crawls to it's painful conclusion. 

Learn more about the author of this page, Mark Wahlstrom by visiting Wahlstrom & Associates web page.

What's the matter with Structured Settlements?

In this week's edition of Speaking of Settlements, national structured settlement expert, Mark Wahlstrom, looks at some of the empirical data on structured settlement premium written, interest rate trends and the shrinking number of life markets involved in the structured settlement market. 

Mark's conclusion is that there are some fundamental problems in the structured settlement profession as evidenced by shrinking premium, diminished interest from life markets and an aging and static based of structured settlement brokers actively engaged in the profession. Money for nothing-structured settlement brand is lost

The myth that structured settlement annuity sales have shrunk as a result of lower interest rates is exposed to some degree by the fact that fixed annuity and income annuity sales for the rest of the financial planning industry are up, even at record levels, for certain lines, all with the same interest rate levels the structured settlement profession use as an excuse for poor results. It begs the question as to why structured settlement sales have declined 20% over the last two years, when the rest of the financial service industry is seeing gains of 6% to 15% on similar lines over the same time period. 

If interest rates can not be blamed for this drastic decline, then what is at work in the structured settlement profession to cause such severe drops in premium?

Mark's answer is that the structured settlement brand name has been taken over by the factoring profession and that it is now going to be almost impossible to salvage the integrity of the product in the minds of consumers. The steady drum beat and message that implies that a structured settlement is something to be rid of, ( "It's your money, and you want it NOW!") has polluted the minds of NEW potential clients to a degree that they all wonder why they would ever want to be in a structured settlement when it appears that everyone is trying to get out of one. 

Obviously, those in the structured settlement profession are well versed on the value, importance and integrity of the structured settlement, but as Mark Wahlstrom warned repeatedly over the last five years, the settlement profession's pathetic budget to counter this adverse message from factoring companies has doomed the profession to the loss of it's brand identity with potential newclients.

Listen to this week's edition of Speaking of Settlements and watch for next week's discussion on the implications of the lost battle for the mind's of new customers and what brokers, planners and attorney's can do to manage their professional practice going forward. 

Hartford Financial Group exits the structured settlement annuity market...again..

In what came as a mild surprise to the financial and structured settlement professions, it was announced earlier today that Hartford Financial would be closing down it's life and annuity divisions and putting them into "run off" status pending a possible sale. The Hartford Financial Services Group

The stated objective of this move was to address the companies lagging stock price, which has been trading at 50% of book value, and is down 15% over the last year. The firms largest single shareholder, John Paulson whose hedge fund is reported to own 8.5% of the Hartford Financial Services Group, (HIG) had in a analyst phone call last month made it clear that management needed to do something to boost the value of the stock. Today that "something" became apparent as The Hartford will now concentrate on it's property casualty business, as well as it's group pension division, and cut ties with it's life and annuity markets.

In this special report, Mark Wahlstrom, the President of Wahlstrom & Associates and a leading commentator on structured settlements and annuity products, looks at some of the key questions surrounding this announcement. Such as:

• The immediate impact of the S&P ratings of Hartford Life and Annuity being dropped to BBB+ in the wake of the announcement.
• What concerns if any should policyholders of Hartford annuity contracts have as this enters run off status.
• What brought about the demise of this line of business for Hartford? Was it the on going drag of overly generous variable annuity policy provisions agreed to during robust equity markets?
• Is this an indication of problems among annuity companies or an isolated situation specific to The Hartford.

Learn more by watching the full video interview and subscribe to Mark Wahlstrom's commentary on The Settlement Channel, a featured broadcast here on The Legal Broadcast Network.

Does selling a structured settlement to a senior citizen expose agents to criminal prosecution?

A recent court case in California should give pause to virtually every structured settlement planner, agent or broker in the country as it seems to indicate that the sale of annuity products to seniors or claimants with impaired decision process could lead to criminal prosecution.

In this weeks “ Speaking of Settlements “ video broadcast, Mark Wahlstrom looks at the recent case of annuity agent Glen Neasham, a 52 year old annuity agent in California, who was recently convicted of felony theft charge and sentenced to 90 days in jail for selling a $175,000 annuity to an 83 year old woman who prosecutors alleged exhibited signs of dementia at the time of the sale. He was prosecuted under what are broadly referred to as “Elder Abuse” statutes that cover not only physical or nursing home abuse, but increasingly exploitation of seniors in the decision process of handling investments, savings and financial planning. 

The article, written by WSJ staff reporter Leslie Scism, does an excellent job of covering the facts of the case and looking at the issues involved. You can read the full article by clicking here.

However, in this weeks broadcast Mark Wahlstrom elaborates on how this might impact structured settlement planners, annuity agents and others who deal with anyone over the age of 65. A great number of laws have been passed that REQUIRE banks and other’s to report suspected elder abuse or inappropriate influence in the planning or sales prospect, as happened in this case, making the likelihood of other such cases being pressed in other states quite high.

Some of the issues at stake here for structured settlement planners going forward are:

• If state laws now indicate that any person doing planning over the age of 65 is considered elderly and is thus covered under these statutes, do planners and agents need to take particular care in dealing with anyone 65 or older if recommending a structured settlement annuity?
• If the compensation for annuity sales in the form of a commission is going to be used to establish “criminal intent” as was the case in the Neasham prosecution, are there additional disclosures necessary on how an agent is compensated when dealing with any impaired claimant or senior?
• How might this decision impact the structured settlement factoring business? If the high cost of “getting out of the product” is used as evidence of harming the clients, as it was in this case, what does this say about factoring company advertising and inducements to “ get your cash now” when it causes demonstrated financial loss to claimants in many cases to proceed down that path?

We anticipate there will be a great deal of follow up on this case and others like it around the country and we will continue to follow it and comment on how it might impact structured settlement sales and consulting moving forward.

Wahlstrom to speak at Society of Settlement Planners annual meeting

The Society of Settlement Planners is taking an innovative step forward in how they are handling their annual meeting this year in Las Vegas, NV. The three day event, which starts April 29th and runs through May 1, is open to anyone who is interested in or currently working in the area of structured settlements, settlement planning or providing investment or funding programs for the settlement profession.

Mark Wahlstrom Society of Settlement Planners Conference from Sequence Media on Vimeo.

What makes this unusual is that they are including annual membership in the organization as part of the event fee of $800, creating an unusual value at a time where convention costs, CE events and hotels for meetings such as this are becoming ridiculously expensive. They will be hosting it at the Vdara Hotel on the Strip and from past experience this is a great location for a meeting of this type as it is removed from the casino floor or monster convention hotels that make it almost impossible to network with attendees at the event.

Mark Wahlstrom will be speaking on the topic, " So you think it's bad now?", a look at the last five years of the structured settlement profession and the challenges facing settlement planners and the industry moving forward, among them:

• The reality of a continued low interest rate environment for the next 24 to 36 months, which has a huge impact on fixed rate, long term payment products such as structured settlement annuities.
• Continued and accelerating advertising and marketing by the secondary settlement market, aka factoring companies and the confusion that advertising has created with claimants and others about what the structured settlement product really is
• A circle the wagons and burn the infidels mentality among the entrenched structured settlement firms regarding alternative products for the the structured settlement market.
• Looming pressure and marketing from banks, trust companies, investment managers and others that sell against our product.
• An almost complete failure by our profession to effectively market our services and brand due to limited budgets, commitment and follow through at our associations, provider companies and major settlement firms.

Still, with all of that said, amazing opportunities continue to open up each and every day to partner with other professionals, expand markets, elevate our brand and profession if we would only raise our sites to do more than settle old scores and hold on to the tiny slivers of market share we have left.

Watch this little preview video and consider attending the SSP annual this year for an agenda that will cover a wide range of topics, speakers and ideas as we once again attempt to kick start the growth of our profession so that we can better serve injured and hurting people who need our advice and expertise.