Delinquently

Well, it's been a month or so since the rather surprising announcement by Genworth Financial that they were going to close down their structured annuity division at the end of August, and thus removing a couple of the great names of the settlement industry, First Colony Life and Mayflower Life, from the roster of markets.

In the emails and phone calls i've had with various industry people, brokers, company reps, etc, there we a couple of major themes that ran through their observations.

1. The announcement totally came out of the blue. Typically you can see some of this coming, either as a result of an investment downgrade, merger, business reversal or a prolonged period of poor pricing. None of those were the case with Genworth as their pricing had been reasonably competitive, their financial's were strong and they had come out of their spin off from GE Capital with generally very good reviews.

 2. People are were expecting some contraction of the market, but Genworth was not a name anyone tossed out as a likely candidate to stop writing structures. With Genworth making a very strong push on the variable and fixed annuity business it would have seemed to be a natural to keep the structured annuity side running, but clearly the management at Genworth didn't like their margins, or more likely the prospects for growth, and decided it was better off placing it's resources elsewhere.

3. Genworth's withdrawal high lighted the issue that is facing our industry, and that is that we are not on a plateau, but we are in fact contracting. With each quarter it become more and more apparent that other financial vehicles such as trusts, variable annuities, mutual funds, banks, etc, are capturing most of the cash in settlements. If the only growth a life market can get is from cannibalizing premium from other markets, that's not a healthy allocation of resources and will eventually lead to a life company taking a hard look at their reasons for staying in a market.

As I have told others, I wasn't surprised a market decided to leave, but I was surprised it was Genworth. I still expect before year end we will have at least one more announcement regarding a market leaving. The Companies still writing settlement annuties are:

Allstate Life, American General, Aviva, Fidelity & Guarantee, Hartford Life, John Hancock, Liberty Life, Mass Mutual Life, Met Life, NY Life, Pacific Life, Prudential, Symetra and Travelers. Which one will decide to pull out next is pretty much anyone's guess.

It's been over two weeks now since the Murphy vs IRS decision was handed down by the Federal Appeals court, in which opinion Judge Ginsburg offered a sweeping repudiation of the theory that all litigation proceeds that aren't directly tied to physical injury or sickness are income, and therefore, taxable. The general reaction of tax professionals and court watchers is that the Murphy decision will be contested to the Supreme Court and eventually overturned, but I personally don't think it is a guarantee at all that it would be reversed.

However, my larger concern, and the theme of this particular post is to discuss my belief that the "settlement industry" is once again failing to seize the day and aggressively agree with this stunning decision and line up on the side of the broken and beaten in society, at least from a tax stand point.

Lets look at the facts. Murphy v IRS is largely a philosophical shift away from the concept that all proceeds from litigation that aren't directly tied to personal physical injury or sickness should be taxable. It is a repudiation of the Treasury and Big Government theory that because you were molested, because you were defamed, because you were wrongfully imprisoned you some how "earned income" for the return of your human capital that an award in those areas implies. I, and others in our business, have been troubled for a long time that there exists a gross inequity in that someone who is raped and beaten obtains a tax free award under section 104(a)(2) but that someone who is systematically molested, abused and traumatize mentally and emotionally over a period of years was in a position where there award was taxable.

Judge Ginsburg in his decision for the court largely attacked and swept away the techno/tax law babble that supported that flimsy argument and went to the heart of what is equitable and just. It is what Judges are supposed to do and he did it masterfully. My concern is that the fall out of this, if you read the blogs and news commentary on it, is that all the "tax and lobby guys", who typically have all the warmth, humor and joy of a rock, are upset that the Judge messed with their precious tax code in such a dramatic way, and as a matter of policy and protecting their turf, they want to see it reversed, "just because".

I think it would be a great PR and general business move if the Settlement Industry in the form of NSSTA, the SSP and the Life Insurance industry got their lobbyists out, went up to Congress and made it absolutely clear that we as an industry are choosing to side with molestation victims, wrongfully jailed prisoners, people who have been defamed and abused and ask to have the code amended permanently to correct this injustice and not leave it in the hands of the courts. Congress has the power to make this permanent, and I think it would be a bold and powerful statement by NSSTA and SSP to come out and proclaim our belief that the prior position was wrong and that we agree with Judge Ginsburg.

To often we are seen as the bad guys, the money changers in the Temple, who debate how many angel dance on the head of a pin, instead of looking after the broken, abused and beaten among us. Lets hope this doesn't turn into another "policy debate" but instead is seen as a chance to lead and demonstrate our firm belief in taking care of those who can't take care of themselves, or at the very least, not supporting those who would tax human suffering as income.  

Researchers have shown that criminal opportunity significantly predicts school-based adolescent victimization. However, little is known about the extent to which opportunity for school-based victimization might be gendered. In this study, the authors drew from criminal opportunity and feminist research and extended the principle of homogamy to explore how gender interacts with opportunity and school-based victimization. Data collected from 2001 to 2004 from 10,522 students in 111 middle and high schools throughout Kentucky were used to examine whether indicators of criminal opportunity placed students, particularly girls, at heightened risk for school-based theft and physical assault victimization. The results of gender-specific hierarchical logistic regression models indicated that measures of criminal opportunity were significantly related to theft and assault for both sexes. Equality-of-coefficient tests supported gendered effects for some opportunity indicators, with differences indicating that the effects of risk and protective factors for victimization were heightened for girls.

The 1990s saw concerted legislative efforts to increase the mechanisms through which juveniles could be transferred to the adult court. Beginning research exists on how the public feels about transferring youths out of the juvenile justice system, but it is somewhat dated and does little to illuminate the reasons people support transfer. Using a statewide sample and factorial survey design, this study assesses how public views are related to multiple factors, including offense and offender characteristics, views on the appropriate aims of juvenile sentencing, perceptions of juvenile maturity, and expectations about the results of transferring juvenile cases to the adult criminal justice system. Our findings suggest that people want transfer used sparingly and selectively and that support is greatest when they believe that the adult system can provide effective rehabilitation as well as punishment. Implications are discussed.

Research and theory about female gang involvement remain scarce. Drawing on the National Longitudinal Study of Adolescent Health, this study addresses whether males and females differ in risk factors associated with gang membership (e.g., community characteristics, parent-child relationships, associations with deviant friends). Integrating theory and research from social disorganization, social control, and feminist perspectives on crime/ delinquency, few differences are found between boys and girls in terms of risk factors associated with gang membership and outcomes associated with gang involvement. Instead, the results indicate that parental social control, attachment, and involvement; school safety; peer fighting; age; and race similarly influence boys' and girls' gang involvement.

"They are systematically setting up the most decisive confrontation that we've ever seen," the leading Republican politician told The Jerusalem Post, referring to news reports about the administration's approach to the Israeli-Palestinian conflict.

"There's almost an eagerness to take on the Israeli government to make a point with the Arab world," he said, speaking to the Post ahead of his speech before the American Israel Public Affairs Committee's annual conference.

He called US President Barack Obama's program of engagement on Iran a "fantasy," and his Middle East policies "very dangerous for Israel." He summed up Obama's approach as "the clearest adoption of weakness since Jimmy Carter."

On Sunday, May 3, 2009, at about 9:30 p.m., an 18-year-old woman was in the parking lot of a market located in the 10900 block of Sherman Way in the City of Burbank.  As she was getting into her car, a suspect approached her on foot and asked if she would give him a ride out of the area because he had just been attacked by local gang members.

The victim agreed to take the man to Victory Boulevard and Vineland Avenue.  Once there, the suspect pulled out a knife and threatened the victim with it.  He forced the victim to drive him to the City of Santa Clarita where he sexually assaulted her inside her vehicle. He then drove away in her car and left her behind.

The Securities and Exchange Commission is considering changing a formula that critics say often allows public companies to low-ball in regulatory filings just how much top executives are paid.

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