The industry's market will keep eroding as the crime rate and vehicle accidents decline
Los Angeles, CA (PRWEB) April 12, 2013
The Settlement Funding Companies industry has had a tough five years, with industry revenue expected to fall an average of 5.1% annually in the five years to 2013. The revenue fall has occurred primarily due to the prevailing low interest rates and an erosion of total structured settlement premiums available to convert into lump sums. Total structured settlements are underpinned by the number of vehicle accidents and the crime rate, which have fallen an average of 2.0% and 2.3%, respectively, over this time. In addition, the industry performs better when interest rates are high. According to IBISWorld industry analyst Dale Schmidt, high interest rates make alternative investments more attractive to consumers with structured annuities and, therefore, encourage more consumers to borrow against these annuities for money in the present. However, interest rates on treasuries fell in the four years through 2012, reaching a low of 1.8%.
The industry will experience some growth in the short term, though. Interest rates will return to growth over 2013, leading to 0.6% revenue growth in 2013 to reach $654.5 million. Growing interest rates and limited consumer income growth will encourage more consumers to use industry services to convert expected settlement payments into present lump sums, continues Schmidt. Market share concentration in the Settlement Funding Companies industry is high. The industry's two largest operators are JG Wentworth and Peachtree Financial Solutions. The remaining industry revenue is dispersed among hundreds of operators. The majority of the remaining operators are small local or regional companies. Concentration has increased slightly during the past five years, since the merger of JG Wentworth and Peachtree. While the two companies still operate independently, they are able to refer potential clients to one another depending on their financial needs. Mergers and acquisitions within the industry are relatively rare; as a result, concentration is expected to remain mostly unchanged during the next five years.
However, the systemic problems affecting this industry will remain. The crime rate and the number of vehicle accidents will continue falling, eroding the potential market for industry operators. In addition, during the past five years, Executive Life Insurance Company of New York, a primary issuer of structured settlement annuities met its downfall and was liquidated. This circumstance will, for the first time in history, lead to some beneficiaries of these annuities to not receive 100.0% of their expected payments. The popularity of structured settlements rested partly on their perfect track record of full payment, so this will aid in eroding total structured settlement annuities that can ultimately be purchased by industry companies. For more information, visit IBISWorld’s Settlement Funding Companies in the US industry report page.
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IBISWorld industry Report Key Topics
This industry provides funding to plaintiffs in a lawsuit before the case is in the settlement process. Companies make an investment or cash advancement in lawsuits with a high probability of favorable settlement for plaintiffs. Firms then retain a portion of the settlement amount as a payment for the risk they incurred.
Key External Drivers
Industry Life Cycle
Products & Markets
Products & Services
Globalization & Trade
Market Share Concentration
Key Success Factors
Cost Structure Benchmarks
Barriers to Entry
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