Structured Settlements – Industry Analysis

1. Structured Settlements – Industry Analysis Structured Settlement Industry Analysis – Primary and Secondary MarketsPresenter & ModeratorPatrick J. HindertManaging DirectorThe Settlement Services Group, LLCpjhindert@tssg.net Venetian Resort NASP 2010 Conference Las Vegas, NV November 10-12, 2010

2. Structured Settlement: Definition “We have the Answers” What is a Structured Settlement? “Structured settlement” is defined for tax purposes in IRC Section 5891(c)(1). A claimant-centric structured settlement may provide a potential financial solution and security, featuring promised periodic payments, in lieu of a single lump-sum. “Structured Settlement and Periodic Payment Judgments” by Daniel W. Hindert, Joseph J. Dehner and Patrick J. Hindert, illustrates structured settlements with the following diagrams:

3. 1965-1975 1975-1981 1982-1987 1988-1994 1995-2000 2001-2005 2006-2007 2008-2009 2010 Regulatory Government MMSEA enacted Benefits Taxation State Legislation Financial Interest Rates/ Credit & Regs Secondary Market 1st Transfer 1st of 48 state Symetra Symetra S2 Protection launches resigns Acts Clearscape NSSTA Business NSSTA adopts NSSTA restricts SSP adoptsStandards ofProf. Conduct Code of Ethics factoring by Standards & Members Practices Class Action Weil v. Macomber v. Spencer v. Manufacturers Travelers Harford Lawsuits Disclosure LTR 83-3035 HIPAA Grillo case Insolvencies Baldwin- Monarch ELNY agreement AIG bailoutLehman Bros bankruptcy United Capital Associations NAELA NSSTA NASP founded SSP founded NAMSAP NASP 1st affiliate founded founded founded conference Structured Settlement: History “We have the Answers” 2001 Stage 3 - Settlement Consulting “Accountability & Planning Era” Stage 1 “Lump-sum” 1982 Stage 2 - Structured Settlement “Claim Management Era” • Primary & Secondary Markets • Blended Products • Claimant-Centric Solutions • Multiple Stakeholders • Risk Analysis • Safe Harbors • SingleRecovery Rule“Cash & Close” • Exceptions: • Work Comp • No-Fault • Periodic Payments • Annuity Financing • Qualified Assignment • Defendant Control • “Gray Market” Hallmark Functions OBRA ’80Incl. MedicareSecondary Payer Act (MSP) CMSMSP Regs 42 CFR 411.46 MedicaidOmnibus Reconciliation Budget Act CMS ‘01Issues MSP‘Patel’ policy memo (1st of 14 memos) Social Security Act Medicare/Medicaid DeficitReductionAct US v.Baxter Health Care Reform Structured Settlement RevenueRulings Small Bus. Job ProtectionAct ‘96 Rev Proc93-34 (Re: 468B) Tax PayerRelief Act ‘97(WC-§130QAR) Periodic PaymentSettlement Act (§130 QAR) TaxReformAct Victims of Terrorism Tax Relief Act (‘911 Fund’) American Job Creation Act TAMRA 468B Regs (IRS Project) CA Supreme Courtapproves MICRA Model Periodic Payment of Judgments Act Model State Structured Settlement Protection Act Revised UCC Article 9 NAIC Model Compensation DisclosureStatement Uniform Periodic Payment of Judgments Act NY,FL,MA,MN adopt S2 disclosure rules Pennsylvania Rule 229.2 NAIC Model Unfair TradeProtection Act Uniform Prudent InvestorAct ‘Dodd-Franks’ Interestrates bottom Credit & Liquidity Crisis Interest RatesPeak FresnoCountyCases 48 StatesS2 Protection Acts ABA Model RulesNAELA adopts Code of Ethics Saltzburg andChemerinsky(’06 paper to ABA) Joseph v.City of NY GrammLeach Biley First Executive/ Executive Life (CA) ELNY (possible)Insolvency JG Wentworth bankruptcy

4. Or Or Or Or Or Or Structured Settlement-Stage 3 (Complex- Secured Creditor) “We have the Answers” Primary (Creation) & Secondary (Transfer) Markets – Accountability and Planning Secured Creditor $ Claimant/Payee w/ Periodic Payment Rights Key: Interested Parties Post Settlement Transfer Agmt w/ PPR Transfer Order Primary Market $ Settlement Agreement & Release Premium + Non-Qualified Assignment Secondary Market Promiseto Pay $ Defendant Alternative Payees Currently Primary Market Only Payments Post Settlement PPRTransfer Order 468B Funding Order Court Court MSA Payments Transfer Notices Premium + Qualified Assignment $ MSA Arrangement 468B Fund-‘QSF’ Discount Cash Trust Payments Premium + Qualified Assignment Settlement Preservation Trust Funding Company / Transferee Trust Payments $ Structured Settlement Assignee Special Needs Trust Annuity Ownership/ Obligation to Pay Corpus at Death Premium Annuity Pledged to Secured Creditor $ Non-Profit Annuity Issuer State/Medicaid Post-transfer Annuity Payments Residual to Claimant Estate Residual Pre-transfer Annuity Payments Annuity Payments

5. Settlement Consulting “We have the Answers” Increasing risk and costs associated with increasing regulation and claimant choices are driving Stage 3 structured settlement industry participants to a new and very different business model – Settlement Consulting. Stakeholder Settlement Choices Increasing Many Settlement Consulting Business Model: Claimant Centric Planning Focused Regulation / Public Policy Low High Claim Management Business Model: Defendant Centric Commission Focused Few Risk / Cost Stage 1 Stage 2 Stage 3 1982 2001 2010 Spencer v. Hartford Settlement Time

6. Contact Information “We have the Answers” Patrick Hindert Managing Director pjhindert@tssg.net Phone: 513-899-2100 Mobile: 513-248-2452 9057 Swigert Road Loveland, Ohio 45150 The Settlement Services Group, LLC(TSSG)www.tssg.net Timothy Morbach Director of Sales ttmorbach@tssg.net Phone: 734-335-7452 Mobile: 734-718-8718 Fax: 734-404-6276 16115 Weatherfield Drive Northville, Michigan 48168-2316 Pat is co-author with Daniel W. Hindert and Joseph J. Dehner of “Structured Settlement and Periodic Payment Judgments,” published by American Lawyer Media