Trying To Sell 19 Year Annuity At Discount...any Ideas?

[WECpoker]

Hi

I received an immediate 19 year annuity that pays $9,000 per year in May of each year (next payment 2010--total of payments $171,000) written by Genworth Insurance. The Present Value in May was calculated at $113,000. I am trying to sell this annuity at a fair discount so I can receive a lump sum, and whoever buys it can get it much cheaper then if they buy an annuity directly from the Insurance Company. Arizona Law allows transfers of Annuities so that would present no problems (and the insurance contract allows for them).

After research I have discovered the following:

1) There are many firms the will buy these annuities (and structured settlements, lottery winnings, etc), but they are an extreme rip-off and are basically stealing from people who do not know better
2) I have tried contacting many banks for a loan using the annuity as collateral. Almost all will not even entertain, although banks used to make these loans at one time. I do have one bank considering at the moment.

If anyone has any ideas that I have overlooked I would appreciate it!!!! I am thinking of advertising in classified ads in financial newspapers or websites...but if anyone has an idea which would be best I thank you in advance.
http://www.early-retirement.org/for...03&i=ddd96fcc65654adc87325472c59115e30e103b4a

 

[TomCat]

IF? I did it correctly...net present value of 19 payments of $9,000 is about $105K at a 5% internal rate of return. I am quite sure it would be difficult to get anyone to buy this at a 5% internal rate of return. What are the offers from those in the business of buying fixed payment streams

What would due diligence find re: Genworth Insurance?

My guess is that it will be difficult to "sell" this payment stream for a discount rate that you may think is fair?

FWIW...Tom

P.S. At 10% rate of return the present value is about $74K. That may be getting closer to a potential sale? I am sure others have more experience...TMR

 

[Texas Proud]

From what I have seen... do a present value at the market rate and then multipy by .6 (from about .5 to .7 according to how big)...

SO, if you PV is correct.. then $67,800 is what you would get..

If Tomcat is correct... $63,000....

and it can be lower than that since it is small and the administration costs are high... compared to a big lottery winning...

The other thing would be if Genworth would change who get's the money.... some are structured that they pay the named party, but can not change... so even more cost to make sure the buyer gets their money.

Sorry to say, you think it is more valuable than anybody else... and the 'fair' price is the price of a willing seller and a willing BUYER...

Good luck in your search...

 

[haha]

From what I have seen... do a present value at the market rate and then multipy by .6 (from about .5 to .7 according to how big)...

SO, if you PV is correct.. then $67,800 is what you would get..

If Tomcat is correct... $63,000....

and it can be lower than that since it is small and the administration costs are high... compared to a big lottery winning...

The other thing would be if Genworth would change who get's the money.... some are structured that they pay the named party, but can not change... so even more cost to make sure the buyer gets their money.

Sorry to say, you think it is more valuable than anybody else... and the 'fair' price is the price of a willing seller and a willing BUYER...

Good luck in your search...

Genworth is not exactly the US Treasury. A few months ago the stock sold around $1. I don't know what a rational offer for this thing might be, assuming that it is transferable, but I wouldn't start to be interested until the numbers in the quote above were given at least a 50% haircut.

If you want to sell to me around there, PM me and I'll have a look.

Ha

 

[Texas Proud]

We got an opening offer...

Some curiosity comes to me.... how did you get this annuity? Was it a settlement for some reason? Can you break the contract?

It sounds to me like you did not invest in this annuity.... so whoever structured it for you is at fault. Go talk to them and see what they are willing to do.

 

[WECpoker]

IF? I did it correctly...net present value of 19 payments of $9,000 is about $105K at a 5% internal rate of return. I am quite sure it would be difficult to get anyone to buy this at a 5% internal rate of return. What are the offers from those in the business of buying fixed payment streams

What would due diligence find re: Genworth Insurance?

My guess is that it will be difficult to "sell" this payment stream for a discount rate that you may think is fair?

FWIW...Tom

P.S. At 10% rate of return the present value is about $74K. That may be getting closer to a potential sale? I am sure others have more experience...TMR

Nice reply Tom

What are the offers from those in the business of buying fixed payment streams

They are basically offering between 30K 50K max..prolly would strongly consider at 74K..that is much more fair to both parties imo. Although I am looking for 80K to 90K...74 is in realm of sensibility.

What would due diligence find re: Genworth Insurance?

Genworth had some issues from underlying Mortgage Loans I think it was, that drove stock to $1+, but they seemed to explain it well at the time, and they are spin off of General Electric..so I dont think they would go down. They were a great stock play in Nov, March. Stock closed at $13 today so I like them.

 

[WECpoker]

We got an opening offer...

Some curiosity comes to me.... how did you get this annuity? Was it a settlement for some reason? Can you break the contract?

It sounds to me like you did not invest in this annuity.... so whoever structured it for you is at fault. Go talk to them and see what they are willing to do.

Cant break contract and Genworth says only thing I can do is sell it to person or entity at this point. No ones fault at structure...was handed to me now I have to make the most sensible financial decision with it

Appreciate all your comments everyone...

 

[CybrMike]

I might be interested in the $50K range. Not sure of all the legal ins and outs but I'd want to get an attorney involved and I'd only do it if payments could be transferred to my name.

 

[Texas Proud]

The 30K seems very low.... the 50K is in the range I had mentioned.... being a small annuity and all...

As someone said, if you could change the name at Genworth it might be worth a bit more than if you have to set up a trust, have the deposits sent to the trust and then forwarded to the buyer... and if Genworth would not even put it in a trust name... then I don't see anybody buying...


To me... unless there is something else going on is to keep the annuity... cashing out is a big time cost... and have you thought about the tax ramifications? Maybe they are in your favor, but they might not be....

 

[TomCat]

$50 K purchase results in Internal Rate of Return (IRR) of roughly 17.1%...$30K is IRR of 29.79%...IF due diligence (DD) left any doubts about repayment the $30K (29.79% IRR) to $50K (17.1% IRR) purchase range does not appear to be unreasonable. Better the DD...the closer to $50K. Purchase price could be higher if Genworth were a triple A credit...could also be lower if DD found other specific credit "issues". I hope you got this from winning a lottery (or equivalent) vs a cash investment

BTW...my first post Net Present Value numbers (NPV) were in error ...I left off one cash payment of $9K...NPV did not change much as it was out in year 19. 19 cash payments of $9K discount to $108.7 @ 5% and $75.3 @ 10%.

All of these numbers use 20 full years...ie; cash out today...and first cash in one year...this ignores the fact that first cash payment is actually in 9 months...should not change the results very much.

Thanks...Tom the CPA...rely on at your own risk...

 

[WECpoker]

Again..thanks for discussion

One thing I didnt mention is you can actually request payment 12 months in advance, so that changes things at least a little.

But Im sure no person would buy it if the annuity was not paid directly to them (and I wouldn't blame them). There are two ways to have the annuity paid directly; (1) If Genworth agrees to make the change (contract language allows them to approve changes) then it is easy enough, (2) In Arizona you can also go to court to mandate changes. Had went thru this with companies that quoted purchase prices.

As far as Tax implications--yeah--taking all into account. The less offered the more it pushes the "definately not a good financial idea".

 

[brewer12345]

Just a dumb question, but could you borrow momey now and use the annuity stream to pa it off over time? Sort of roll your own sales price.

 

[megacorp-firee]

Just a dumb question, but could you borrow momey now and use the annuity stream to pa it off over time? Sort of roll your own sales price.

Not dumb at all... approaching brilliant.
In my w*rking days, we would call it thinking outside the box ... or at least approaching the edges.

Very Nice Brewer.

 

[TomCat]

Not dumb at all... approaching brilliant.
In my w*rking days, we would call it thinking outside the box ... or at least approaching the edges.

Very Nice Brewer.

The original post stated that he had tried to get a loan...and I think was still working on such. Re-read the post point 2)...Tom

 

[megacorp-firee]

The original post stated that he had tried to get a loan...and I think was still working on such. Re-read the post point 2)...Tom

That's what happens when you get old and forgetful. Thanks.

 

[segfault]

Do you have other assets or income to qualify for a loan? If not, you will probably need to find a banker who actually has approval authority (hard to find nowadays). They might be willing to set up a loan where you assign the payments to the bank, and the payments are used to pay off the loan balance. You'd probably still be on the hook if the insurance underwriter went belly-up.

 

[haha]

Can you imagine going to a banker and asking for a 19 year non-callable fixed interest loan against a Genworth Annuity?

I can't.

 

[segfault]

Can you imagine going to a banker and asking for a 19 year non-callable loan against a Genworth Annuity?

I can't.

Nope, if the OP gets a loan against the annuity, it wouldn't be a non-recourse loan. I'm guessing the Genworth issue is one of the reasons for wanting to get out of the annuity.

Some states do have guarantee programs for insurance and annuities up to a certain amount, so the annuity may be protected by that.