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With just a flip of the switch, J.G. Wentworth materially increased the size of its market, paving the way for an expected increase in overall transaction volume.

Specifically, the company has entered the so-called lifetime payments segment of the structured settlement business. The business exists because for many individuals, their settlements and the payments they receive are structured in two broad tranches, or portions. In the first tranche, payments are guaranteed for a set number of years. Even if the annuitant dies, the payments are still made to the client’s estate. In the second tranche, payments are made so long as the annuitant or plaintiff is alive. A typical structured settlement might provide an individual with $2,000 per month guaranteed for 10 years, thereafter guaranteed for as long as he or she is alive.

With the addition of this new business, the consumer is the big winner, according to J.G. Wentworth’s Dan Bonner. “Many times we would talk to prospective customers who had 20 years of payments, but only three or four were guaranteed, and it was difficult to offer them the kind of lump sum they really needed or wanted. Now there are many, many more options we can offer them.”

Mr. Bonner attributes the change to shifts in investor sentiment on Wall Street. “Since our business model involves selling our structured settlements in the form of bonds to Wall Street investors, we were constrained by what the market would buy in the aftermarket.” But the performance of annuity-backed bonds has been so strong that other investors are taking notice, he explained. “Ultimately, our entry into this business is really a function of the new demand for annuity-backed products among institutional investors.”

According to Mr. Bonner, the new product is increasing transaction volume. “We’ve been working with existing clients who wish to sell non-guaranteed payments. We are also speaking to new clients who have yet to do a transaction to let them know there is a liquidity option available to them. It’s taking time, because there are so many of them, but they’re thrilled, and so are we.”