A structured settlement factoring company allows an individual who is receiving structured settlement payments to cash out in exchange for a lump sum payment. In exchange for this service, the company collects a fee so as to earn a return on its capital. The company makes a determination as to how secure the future cash flows are, the time value of money and then provides the cash settlement to the recipient, discounting for its perceived level of risk and time.
2010 was a great year for most structured settlement factoring companies. Record low rates created attractive propositions for annuitants, a struggling economy was a catalyst for more annuitants to sell their annuities, and ample investor funds supported the influx of cases. It was the perfect storm for many of the companies within the industry.
Towards the end of 2011, some structured settlement factoring companies could see their demise.
Below are 5 predictions for the structured settlement factoring industry for the upcoming year.
The Wall Street Journal on Friday, July 23, 2010 published an article titled “Another Can’t-Miss Deal That Can Miss Spectacularly“.
This article is inaccurate and misleading on a number of accounts.
Firstly, our Group has transacted over $350 million in these types of payments with zero defaults.
Secondly, the liquidity risk that is mentioned in the article is a risk common to many investment insurance annuities and is not unique to annuities purchased on the secondary market. It is a risk that is fully disclosed in our Group’s Buyers Guide that is given to all prospective buyers. Buyers accept this risk because the guaranteed nature of the investment with significantly superior fixed rates of return are worth it. The investments are designed as long-term holds and should not be purchased for short term strategies. For example, they qualify for IRA plans.