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We issue Fixed Rate Asset Backed Notes primarily collateralized by payments from a pool of rights arising under court ordered structured settlement payment purchase contracts, court ordered lottery payment purchase contracts and annuity payment purchase contracts. These notes are typically sold to institutional investors.
As the largest purchaser in the U.S. of future payment streams from structured settlements, The J.G. Wentworth Company® provides customers with lump-sum cash payments, in exchange for a certain number of fixed scheduled future payments. These payments are purchased by The J.G. Wentworth Company®, based upon a discount rate that is negotiated with each of our customers.
Structured settlements, our largest product category, are used by insurance companies to settle claims on behalf of their customers. They are contractual arrangements under which an insurance company agrees to make fixed, periodic payments to an individual as compensation for a claim typically arising out of a personal injury. In 2012, approximately 90% of the insurance companies issuing the structured settlement payment streams that we purchased, were rated “A3” or better by Moody’s. The structured settlement payments we purchase have long average lives of more than ten years, and cannot be prepaid.
Customers desire liquidity for a variety of reasons, including debt reduction, housing, business opportunities, education and healthcare costs.
We fund our purchases of payment streams with low cost and short and long-term, non-recourse financing. We initially fund these purchases through committed warehouse lines.
We intend to undertake a securitization of these assets approximately three times annually, subject to our discretion. We finance the purchase of payment streams using a combination of other committed financing sources and our operating cash flow.
To date, The J.G. Wentworth Company® and their predecessors have purchased over $9.1 billion of structured settlement payments streams and have completed 39 asset-backed securitizations, totaling over $5.6 billion.