Legacy Financial

Structured Settlement Annuities

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We are now offering In-Force, Structured Settlement Annuities.  These annuities offer a simple and affordable way for buyers to meet financial goals, such as saving for retirement or a child’s education or improving overall returns on a balanced portfolio.  They are not widely known to the general public nor are they generally accessible.  As such, they provide a limited opportunity to sophisticated investors to invest in safe, fixed return annuities at superior rates of interest.

What is a Structured Settlement Annuity?

A Structured Settlement Annuity (“Annuity”) is a contract issued by an insurance company as part of a structured settlement to fund the payment of damages for personal injury over a period of time. It guarantees the holder or annuitant a payment stream over a fixed term at a fixed rate of interest. Unless otherwise specifically stated the Annuity is paid regardless of whether the measuring life is alive or deceased, meaning these payments are NOT life contingent.  Structured Settlement Annuities are sold by structured settlement annuitants to a broker at a discount in exchange for a lump sum payment. The broker, in turn, offers these Annuities for resale at a fixed rate of interest and fixed term to astute buyers such as you.

Who makes the payments?

Each Structured Settlement Annuity that we offer is paid directly to you by a U.S. based Insurance Company with a credit rating that is generally AAA to A rated by Standard and Poor’s.

How is the Interest Rate determined?

The interest rate for each Annuity is determined by the market, what a buyer is prepared to accept as a return on their purchase taking into consideration the annuity attributes such as the annuity term, insurance company credit rating, and average life. Generally the market interest rate is much higher than that offered on traditional annuities with the same attributes paid by the same insurance companies directly.
The interest rate for each Structured Settlement Annuity is represented as an “effective rate”—compounded annually based on a 365 day year. This is standard practice in the annuity industry. Interest rates are recorded to an accuracy of 2 decimal places (e.g. 6.14%).

Why are Interest Rates on the Structured Settlement annuities higher than those offered by Insurance Companies Direct?

The rate of return on a Structured Settlement Annuity is typically higher than the rate available for a comparable annuity purchased direct from the issuing insurance company for two reasons:
  • The Annuity has been “previously owned” with attributes such as payment term, payment amounts and average life that cannot be changed.
  • Because the broker purchases the Annuities at discount prices from existing annuitants, it can pass along these preferred rates to its buyers.

What is the typical Structured Settlement Annuity term and investment amount?

The present value of an Annuity generally ranges between $50,000.00 and $150,000.00 but can be higher or lower. Investments of this size tend to appeal to high net worth buyers. Terms can range from 1 to 35 year terms, but are typically 5 to 20 years.  They can provide lump sum payouts, monthly or yearly income payouts, or a combination of both.

What are the Benefits of Investing in Structured Settlement  Annuities?

It is generally considered to be a good vehicle for conservative buyers. Monies are invested by the insurance company primarily in government securities and high-grade corporate bonds, and they offer guaranteed interest rates. Because we only offer annuities paid by insurance companies with among the highest Standard and Poor’s credit ratings, the annuities are among the safest form of fixed term financial products available today.
Structured Settlement Annuities can provide above average returns for the fixed income portion of a balanced portfolio. Because the typical return of fixed income products is often below average, these Annuities can boost the overall portfolio performance by enhancing this lowest performing segment.

What are the Risks?

Like all financial products, Structured Settlement  Annuities are not risk free and every buyer must determine whether a such an Annuity meets their risk tolerance and financial objectives. The risks associated with these Annuities are:
  • The security of the Annuity is directly related to the financial health of the insurance company that issued the annuity and its ability to pay claims and to the terms of the court order that accompanies each transaction.
  • The Annuities are not deposits and are not insured by the Federal Deposit Insurance Corporation (FDIC) or any other federal government agency. They may be partially guaranteed by State Guaranty Associations but we make no representations or warranties in this regard.
  • The Annuities are subject to interest rate risk. Market interest rates may rise while the rate of return on the annuity is locked in. Fixed income products with longer terms to maturity are usually more sensitive to changes in interest rates. One method of hedging interest rate risk during a volatile rate period is to build an annuity ladder by buying a series of annuities over an extended period of time thereby rate averaging the changing interest rates.
  • The Annuities are monetized in U.S. Dollars. Foreign buyers may be subject to currency exchange risk.
  • The Annuities must be held to term and therefore are not liquid investments.

Give us a call for your free informational Buyers Guide or with any questions you have – we will be glad to show you how this unique product may benefit your portfolio.

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