BRANT HICKEY & ASSOCIATES

BRANT HICKEY & ASSOCIATES

Structured Settlements: Flying High after 30 Years!! Structured settlements were first utilized in the late 1970 s on the cases arising from Thalidomide causing brain injuries and deformities to babies born after their mothers took the drug as a fertility measure. Since then, Congress and the IRS took measures to insure the long term security by codifying Section 104(a)(2) and Section 130. Structured settlements are used in a wide range of cases, obviously in aviation related claims, but also in other personal injury areas such as medical malpractice, auto and trucking claims, construction and other general liability situations. Also, environmental clean up sites, the 911 Fund and the current Fund authorized for the clean up workers from the 911 site will also allow for the use of structured settlements. However, the unsettling trend of little or no growth in the use of structured settlements is rather troubling. Their rise was rapid in the early 80 s, when claims specialists and plaintiff counsel rushed to lock in the unusually high interest rates of 12-14% tax free, paid on the return. Looking back, this was probably our worst enemy, as interest stabilized into the 7-8% range, and people were holding out thinking higher rates were ahead. Today, approximately $5-$6billion is spent on structured settlements, and while that may sound like a lot of money, it only represents about 4-5% of the total paid out in claims dollars each year. 2

The industry should readjust its thinking and promote structured settlements as a guaranteed lifetime payment. There is no other investment vehicle on the market that can provide a stable benefit without risk, and payable for the lifetime of the claimant. The industry should not try to compare itself to other long term investment vehicles because this product is designed specifically to provide protection. We constantly attempt to paint the picture clearly for the claimant that this money is not like a windfall inheritance or lottery winning, whereby it can be invested later for a retirement or rainy day fund. Those investments usually are for the long haul, and can take on the fluctuations of the market and still be viable in 20 or 30 years. But we have seen it happen way to often where the money is taken in cash and within 3 to 5 years it is gone. The temptation of easy money scams of it s your money and have it now, threaten the structured settlement business like no other threat. These companies prey on unsuspecting claimants and charge unbelievably high interest rates to get their money now. There was a reason that the plaintiff and defense counsel, along with the defendant, took the time to settle the claim successfully for all sides and then have structured settlement specialists arrange a lifetime payment with an A or higher rated life insurance company: 3

LONG TERM SECURITY. The economic downturn in 2008 was not the beginning of a long term crisis, it was the result of questionable investment practices the whole decade prior. In the past ten years, the S&P 500 index of domestic stocks had a 10 year return of -3.4%. The Dow Jones Industrial Average fell 33.8% for calendar year 2008, with 4 of the 20 BIGGEST daily percentage declines in Dow history happening in the last 4 months of 2008. NASDAQ had their worst year ever in 2008, falling 40.5%. What does this mean to an injured party or a surviving spouse trying to replace lost wages and daily living expenses? It means disaster! It means that if they had placed their $1million settlement into a trust account, with a 60/40 ration of equity and bonds, and took at the $50,000 per year necessary for expenses, their account will run out of money in about 10 years under the current scenario. And even as the markets start to rebound, they can never recover enough in time to save the account. That is the biggest difference between a normal investment and a structured settlement: the money is needed immediately and cannot withstand the volatility of the markets. One of the great things for me working in the aviation environment is dealing with highly professional and skilled attorneys, claims specialists, and insurance companies. The level of professionalism is the highest in the industry and because of that, most cases are clearly steered towards a structured settlement. 4

The life insurance industry also took some blows during the financial meltdown, but ended up in a stronger position. Not one annuitant lost a penny in the downturn, and in fact, no person has lost any money with a structured settlement in the time they have been offered! Met Life for example, lost more than $2 billion in the meltdown, and its shares are more than 40% below the 71 they hit in 2007, but they have taken over as the industry leader, now writing over $1 billion per year in structured settlement annuities. They have over $530 billion in assets, never took a dime of TARP Funds, and currently hold 432% risk-based capital ratio. That means its total capital is 4 times its risked based capital, a sign of financial security. We say Structured settlements: guaranteed to last a lifetime, and in utilizing companies like Met Life, all of the parties involved in the settlement of aviation claims can be assured there will be no financial setbacks down the road. But all of us need to do a better job promoting structured settlements. Plaintiff counsel should utilize a structured settlement specialist just as the defendant, and together, a proper plan can be put in place. In the early 80 s when interest rates where high, I believe we fell into the trap of selling the structure based on the return, and not on the value of the long term security. It cannot be emphasized enough that not one annuitant in 30 years has lost money. The greatest satisfaction in this industry is knowing that a family, devastated by the loss of a loved one, or horrifically injured, has been given an opportunity to move forward and have financial security. 5

I just met with a potential claimant to talk about his options when his case is resolved. He was a 24 year old young man, injured in a car accident caused by a tire failure. Although he is certainly able to make a decision, he brought his mother along to our meeting. The first thing she told me was that she should have taken a structure 5 years before, after she settled her own case and received $700,000. She told me that ALL of her money was gone, squandered by her since departed husband on a fishing camp, 2 boats, jet skis, ATV s etc. This is the true value of structured settlements. We work with financial planners, accountants and trust advisors all of the time on these cases, and what I learned was if the annuity was in place to maintain the standard of living and pay the daily expenses, their jobs were easier because they don t have to account for those things with the remaining up front cash. Therefore, the volatility and fluctuating markets can be overcome with a long term investment strategy that does not have annual payments removed from the fund. A properly designed structured settlement takes the financial worry away from the claimant, allows the defendant and plaintiff to settle a case that is fair to everyone, and eliminates the uncertainty of jury verdicts. I would urge all of the parties involved in aviation claims to at least give a structured settlement professional the opportunity to discuss the potential for an annuity on every case, even if the claimant is reluctant. Once the proposal is shown and the questions are answered, most of the time a portion ends up in the annuity. 6

Gary Brant President Brant Hickey & Associates 1810 Mt. Nebo Rd. Pittsburgh, Pennsylvania 15143 (800) 364-6488 / Fax (412) 356-1011 http://www.branthickey.com gbrant@branthickey.com Gary L. Brant specializes in the design and implementation of structured settlements involving annuity products and settlement trusts throughout the United States. A pioneer in the field of settlement annuities, he has served Fortune 500 companies, insurance companies, government agencies and law firms. Since 1981, Mr. Brant has participated in more than thousands of cases involving structured settlements, including cases in Singapore, Korea, Mexico, London, and South America. Specializing in catastrophic medical malpractice, environmental, aviation, workers compensation, general tort, and workers compensation portfolio liabilities. Mr. Brant is often the facilitating link between plaintiff and defense. His skills ensure successful claims, resolution by highlighting the many benefits of the tax-free, guaranteed payments of structured settlements. Mr. Brant graduated from Mount St. Mary's College with a degree in business and finance. He has published several articles on the advantages of structured settlements and has served on many committees of the National Structured Settlement Trade Association (NSSTA), including Chairing the Public Relations Committee of the NSSTA, The Marketing Committee, Long Range Planning Committee, and The Legislation/Regulation Committee BRANT HICKEY & ASSOCIATES, INC Structured Settlement Specialists 7