David R. Evanson
Press Release, Winter, 2008
For Immediate Release
J.G. Wentworth Analysis:
With Household Debt Topping 100% of Disposable Income, Credit Crunch Puts Focus on Illiquid Financial Assets
Liquidity options provide consumers financial flexibility in turbulent markets
January 31, 2008, Bryn Mawr, PA – Consumers concerned about the impact of the credit crunch on their family’s finances are increasingly inquiring about ways to access the value of their illiquid financial assets, including life insurance policies, annuities and even legal settlements, specialty finance company J.G. Wentworth said.
Over the last 10 years, total U.S. household debt rose 133 percent and is nearly $13 trillion, according to the Insurance Information Institute. This would equal almost $50,000 per household, which is about the median gross income. Moreover, according to a report by Bank of America, there is an estimated $360 billion worth of adjustable rate mortgages due to reset in 2008 to much higher interest rates – therefore leading many Americans to liquidate assets to assure their families’ financial stability.
“While easy access to consumer credit contributed to the current credit crunch,” said Michael Goodman, CEO of J.G. Wentworth Inc., “that’s of little comfort to borrowers who are finding it difficult to remain current on their debt. The emerging secondary markets for illiquid financial assets like life insurance and annuities offer consumers another option for managing their debt, especially when they are unable to refinance their existing debt with the financial institutions that allowed them to borrow in the first place.”
Since secondary markets for many illiquid financial assets were established in the 1990s, the combined value of the most commonly held assets in this category has grown to rival the total market capitalization of all of the companies listed on the New York Stock Exchange, which is now approximately $27 trillion.
Total Value Est. # of
Of Outstanding Americans
Asset Assets Owning these Assets
Life Insurance $18 trillion 154 million
Annuities $2.2 trillion 17 million
Private Mortgage Loans $3.1 trillion 7.5 million
Structured Legal Settlements $100 billion 2 million
Sources: American Council of Life Insurers, LIMRA International, The Federal Reserve Board, The U.S. Census Bureau and J.G. Wentworth estimates.
As an example of the value that individuals can realize in secondary markets for their illiquid financial assets, consider a four-year-old immediate annuity. This annuity, initially bought for $1.58 million, pays its owner (or the owner’s estate) $7,865 per month for the next 16 years and thereafter just the annuity owner for as long as he or she lives. By selling just $4,000 of the total monthly $7,865 payment for the next 16 years, the annuity owner could realize immediate proceeds of $448,000.
“For more than 15 years, J.G. Wentworth has offered consumers liquidity for financial assets they were told are illiquid,” said Ken Murray, Chief Marketing Officer. “The need has always been there, but in the current environment, when lenders themselves are strapped for funds and credit is not as accessible, consumers need to be aware of the options they have through the secondary markets so they can address changes in their financial situation.”
About the J.G. Wentworth family of companies
J.G. Wentworth, Inc. based in Bryn Mawr, PA, is the nation’s oldest, largest and most respected buyer of deferred payments for illiquid financial assets like structured settlements, annuities and life insurance policies. Since 1992, J.G. Wentworth has purchased over $2.5 billion of future payment obligations from consumers and is also the nation’s largest securitizer of structured settlement and annuity backed notes. The companyzzs notes are rated AAA by Standard & Poorzzs and Aaa by Moodyzzs.
For more information about J.G. Wentworth, go to www.jgwentworth.com.