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© Copyright 2005
US FlagMay 1, 2005 Edition
The Life Insurance Valuation Proposal is fast becoming a key component of financial planning. 

Do you know the fair market value of your client’s Life Insurance policy? Whether you are an insurance agent, financial advisor, CPA, trust officer, or lawyer, you may find yourself dealing with a life insurance policy owned by a client, trust, or business, and this question will arise. Can you provide the answer? You know the fair market value of your client’s largest assets and financial holdings. Asset valuation is a key component of financial planning and vital to making informed decisions. If you don’t know the fair market value of your client’s life insurance policy, you should, and it may not be the cash surrender value dictated by the insurance carrier.

Professionals are increasing value in the client relationship by using the Life Insurance Valuation Proposal© from 1st Life Settlements. The Life Insurance Valuation Proposal© is a general principle client introduction tool that simply and logically introduces your clients to life settlements and the concept of Fair Market Value for their life insurance policy. 

In the past, advisors had only one way to measure policy value, the surrender value dictated by the policy carrier. All this has changed; in the recent past, a secondary insurance market has evolved because banks, hedge funds, and institutional funding companies have seen the value and stability of purchasing life insurance policies. As a result, advisors can access the secondary insurance market using an established system to perform insurance valuations. In many cases, insurance valuations result in a fair market value 3 to 4 times the (cash) surrender value of the policy. 

“Many professionals are incorporating Life Settlements into their practice to add value to their client relationship and fulfill their fiduciary duty to explore all viable life insurance options,” says M. Shane McGonnell, Senior Partner of 1st Life Settlements. “The Life Insurance Valuation Proposal© has proven to be the best solution when introducing Life Settlements to their clients.”

The Life Insurance Valuation Proposal© is an important part of The Life Settlement Selling System™ available exclusively to affiliates of 1st Life Settlements. 

To learn more about 1st Life Settlements and the Life Insurance Valuation Proposal©, call 800-667-0305 or visit www.1stLifeFinancial.com/freekit.html
Industry News

NYSE, ARCHIPELAGO TO MERGE, GO PUBLIC - The New York Stock Exchange will merge with electronic market Archipelago to gain an electronic trading platform. Additionally the move is said to allow the Big Board to go public. The move was unexpected and certainly unprecedented. The current 1,366  seat holders (owners) will receive about $400 million each, as well as continuing ownership of 70% of the new company, to be called the NYSE Group, Inc. Reason: To remain competitive with more efficient electronic trading exchanges. The move will probably also signal the end of "floor-based" trading.

WORKERS LACK HEALTH INSURANCE – Based on data provided by the Centers for Disease Control and Prevention, the Robert Wood Johnson Foundation estimates that more the 20 million working Americans have no health insurance. Based on other estimates that put the total uninsured at 45 million, we assume that we have about 25 million unemployed without insurance. This survey also revealed that 41% of these uninsured Americans have trouble seeing a doctor when they need to, compared to only 9% of insured adults. Based partially on this study, U.S. Senators launched "Cover the Uninsured Week" (May 1 - 8) with Presidents Ford and Carter as chairmen. Something has to be done, but is the glass half full or half empty? Looks to us like 59% of these uninsureds are able to see a doctor when needed. Regardless, see details about Cover the Uninsured Week at http://www.CoverTheUninsuredWeek.org.

STATES AND THE UNINSURED - According to a Hewitt Associates study, more than 30 states have introduced legislation to help uninsured and underinsured workers.  At least 10 states are considering legislation, known as "pay or play," that would require employers of a certain size to provide basic health care coverage or, alternatively, to contribute to a state fund for public health care costs.  Other states are considering whether to require businesses to provide health care to employees in order to be awarded state contracts.  Another approach is to publicize the names of companies whose employees receive public health care assistance.  Massachusetts adopted this approach in February.

SPITZER SETTLEMENTS, DETERIORATING RESULTS - WFG Capital Advisors' research among leading brokers indicates that many firms continue to report an escalating decline in revenue.  "The recent settlements with various attorney generals would indicate that the market segment is aggressively seeking resolution of all regulatory impediments. As many firms resolve impending investigations and opt to forego contingent awards, the industry faces further challenges to replace lost revenues and to continue to demonstrate growth. Clearly, the Spitzer settlements with Marsh and Aon serve as critical catalysts for many industry leaders to look upon."

WILLIS PROFITS OFF 51% - Recent settlement costs and related severance expenses have cut insurance broker Willis' quarterly profit by 51.3%. Predictably, the company has now identified about 500 positions to be eliminated. So to recap: Some regulator gets a ton of money, the culprits get severance pay, the stockholders lose money, rank and file employees get laid off and the class action "lawyers" are circling. 

MORE AIG TROUBLES – NY regulators have asked for an audit of how AIG booked its workers' compensation premiums. Allegedly, the company booked premiums for covering workers' compensation as premiums for general liability to avoid paying its true share into various workers' compensation funds. California is also looking into whether AIG kept funds that should have gone to the state's workers' compensation system.  The New York Times is reporting that AIG has delayed its annual report because internal audits have uncovered at least $1 billion more in accounting problems.

ASBESTOS LITIGATION REFORM – According to the American Insurance Association, while asbestos trust fund legislation recently introduced in the Senate contains a few improvements over previous drafts, it still falls significantly short of meeting core goals that would earn it insurance industry support. Further, the Fairness in Asbestos Injury Resolution Act of 2005 (FAIR Act) has provisions that would allow asbestos claims to leak back into the tort system.

LABOR NOT HAPPY WITH ASBESTOS FUND BILL EITHER - The AFL-CIO claims that the bipartisan asbestos bill "fails to ensure victims just and timely compensation and would leave tens of thousands of individuals with no remedy at all." The AFL-CIO said it would keep working to obtain "the changes that would allow us to support the bill."
 
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NEXT! SPITZER PROBES LENDERS - New York's Attorney General Eliot Spitzer has turned his sights on mortgage lenders to see if they discriminated against minorities by charging higher interest rates and fees. Some government data have shown minority borrowers often pay higher rates and fees. Expect to see the usual suspects with Citigroup leading the lineup.

BIG P&C CAT LOSSES – Catastrophic P&C losses in the first quarter will exceed $2.1 billion...the largest first quarter loss since the $2.6 billion lost in 1996.

WELLPOINT DOING WELL – The nation's biggest health insurer reported that its quarterly profit more than doubled...mainly due to its $16.5 billion merger with Anthem.  Reuters says, "Managed health care firms are making record profits, despite medical costs, which are ballooning at a rate several times inflation."

MET MOVES - MetLife is no longer considering selling its 51% stake in Reinsurance Group of America (RGA) for the purpose of funding its proposed acquisition of Citigroup's Travelers Life & Annuity business. On January 31, 2005, MetLife stated it would consider partially financing the proposed acquisition with up to $3.0 billion of asset sales, including potentially its holdings in RGA. Since that time, MetLife has entered into agreements for the sale of assets, and determined that it has sufficient alternate means of financing the acquisition to allow it to retain its interests in RGA.  In other MetLife news, Chairman Robert Benmosche has announced plans to retire next spring and the company's current president and chief operating officer, C. Robert Henrikson, has been elected to succeed him.  Henrikson started with MetLife as a salesman about 33 years ago.  Finally, Chairman Benmosche and Connecticut Governor Rell announced an agreement to keep 1,310 jobs in Hartford following Met's acquisition of Travelers.

P&C INSURANCE INDUSTRY'S NET INCOME CLIMBS – According to the Insurance Services Office (ISO) and the Property Casualty Insurers Association of America (PCI), the U.S. property/casualty insurance industry's net income after taxes climbed 29% to a record $38.7 billion in 2004, up from $30 billion in 2003.  Underwriting achieved a $9.9 billion positive swing from a $4.9 billion net loss in 2003 to a $5 billion net gain in 2004.  Insurers bucked 25 years of net underwriting losses and five catastrophic hurricanes to attain these record results.

IDENTITY THEFT ALSO ON SPITZER'S RADAR – The New York Attorney General has not only started to look into lenders, but is also seeking stronger state laws against identity theft and computer hacking.

LIFE INSURANCE ACTIVITY DECLINES - According to the MIB Group, March applications for individually underwritten life insurance in North America declined -2.3% year-over-year, marking the eighth decline in application activity over the past 12 months. The U.S. MIB Life Index(SM) declined -1.6% in March, year-over-year. Applications by age demographic for the first quarter remained stable with past trends: ages 0-44 and 45-59 declined -3.5% and -1.5% respectively, with continued growth in ages 60+, up +3.2% year-over-year.

MORE INSURANCE M&As IN 2004 BUT LESS DOLLARS – According to Conning, the total number of mergers and acquisitions (M&As) in the insurance industry increased in 2004, driven by the health/managed care and distribution sectors. The M&A transaction total rose over the prior year for the first time since 2001. However, a lack of mega-merger deals of $10 billion or more in any sector left the total transaction values under $15 billion - the second lowest in 10 years. Despite the lack of giant deals, industry sectors continued a slow but noteworthy progression toward consolidation.
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Marketing/Tax Update
DIFFERING VIEWS: ESTATE TAX REPEAL - Consistent with previous endorsements, the Big "I" (Independent Insurance Agents & Brokers of America) has praised the House for passing legislation that would permanently repeal the estate tax because "the death tax disproportionately and negatively impacts small and family-owned businesses" and "the reemergence of this tax could...hinder the perpetuation of family-owned small businesses."  Expressing a contrary view, the Small Business Council of America (SBCA) expressed concern that more small businesses would be hurt if the estate tax were to be permanently repealed in 2010, than if the law were frozen in 2009.  Their primary concern is with the loss of the step-up in basis upon repeal of the estate tax.  Instead of repeal, the SBCA is calling for reform of the estate tax that would increase the estate tax exemption, preserve the step-up in basis at death, reunify the estate and gift tax exemptions, reduce the top estate tax rates and exempt a portion of retirement plan assets from the estate tax.  "By implementing these steps, small business owners who have worked a lifetime to build their companies will be virtually exempt from the estate tax system which is the professed goal of many in Congress. Additionally, by implementing these proposals, many small business owners will find themselves in a better tax position than they would if the proposed repeal were to take place."

DIFFERING VIEWS: LTC TAX INCENTIVES - Karen Ignagni, president of America's Health Insurance Plans, testified in favor of an "above the line" tax deduction for LTC insurance at a Congressional hearing, saying that private LTC insurance can play an important role in helping to protect Medicare and Medicaid from the costs of caring for the elderly.  In contrast, many long-term care experts cast doubt that the percentage of LTC costs paid by private insurers would significantly reduce Medicare/Medicaid outlays and that tax "credits are likely to primarily benefit those who would have purchased long term care insurance even in the absence of credits."

DIFFERING VIEWS: ASSOCIATION HEALTH PLANS (AHPs) - The House has passed Association Health Plan legislation that would allow the formation of interstate groups to help small businesses band together outside of state regulation to buy affordable health insurance.  Several business groups and President Bush have endorsed the concept.  The Senate, however, has yet to be convinced, citing concerns that AHPs could result in a system of poorly financed, poorly supervised health plans that, at best, would help small businesses with healthy employees get somewhat lower rates.  Another concept being advanced is state and regional small business health insurance purchasing pools, such as those already in place in California and Florida.

SOCIAL SECURITY REFORM - In Thursday night's press conference, President Bush said that he remains optimistic about passage of his proposed reforms to Social Security.  In addition to discussing the need for a system of private Social Security accounts, the president also endorsed adjustments to the way Social Security benefits are adjusted for inflation.  In contrast, a top Federal Reserve official, Fed Governor Edward Gramlich, is calling for removal of the cap on wages subject to the Social Security payroll tax and raising the retirement age.

UL RISKS AND RETURNS - Tillinghast estimates that 50% of universal life products sold today contain some form of no-lapse guarantee. While hot sellers, some are questioning the expected level of return on these products and the degree of risk assumed. These products also have generated significant activity on the regulatory front. Click here to see Tillinghast's take on the financial issues related to UL products and their assessment of a UL product with NLG features.

STRUCTURED SETTLEMENT SALES RECORD - Sales from MetLife structured settlement business totaled over $907 million in 2004, a new company sales record. According to Tillinghast, U.S. torts system costs were over $246 billion in 2003. Of that total, approximately 65% - or $156 billion - is paid to claimants and plaintiffs (or to their attorneys). In 1982, Congress passed legislation that allowed claimants in personal injury, wrongful death and workers compensation lawsuits to receive their settlement awards as a stream of tax-free income payments through a structured settlement annuity. Prior to the legislation, settlements were awarded as single lump sums, and claimants were often burdened with the task of managing that money themselves.
 
AUTO INSURANCE PREMIUMS - Insurance.com reports a decrease in auto insurance rate quotes of nearly 2% during the past quarter. According to the report, the average consumer received an annual auto insurance quote of $2,304 in the first quarter of 2005. This is a $39, or 1.7%, decrease over the average annual premium quoted in 2004. The decrease is a welcome relief after a 6% increase in quotes from 2003 to 2004.

SMALL BUSINESS OWNERS WARY – Sam's Club has released a new Small Business Confidence Index survey revealing that less than half of the nation's small business owners believe the U.S. economy will be strong in the next six months. The survey also found that small business owners rank health insurance as their most important expense, followed by broadband access, phone service, fuel and advertising.

THE TAXMAN COMETH – The IRS is asking for an extra $446 million to help it collect the estimated $300 billion gap between taxes owed and taxes paid. Expect crackdowns on abusive of tax shelters and more audits for wealthy individuals.

PENSION CONTRIBUTIONS WITHHELD? – Congress and President Bush's pension reforms designed to prevent the collapse of the Pension Benefit Guaranty Corp are creating some unwanted results. Apparently some companies are considering holding back contributions to employee retirement plans in order to take advantage of a funding requirement that would disappear if the administration's pension reform is approved by Congress. In a Senate hearing, some pension experts reported that the reform rules could drive up the cost of traditional pensions.  Another concern is that the elimination rules that permit "smoothing" of what appear to be temporary fluctuations in the value of stocks in pension portfolios could cut stock allocations in those plans by about 13%, reshaping the market for long-term debt securities.

CIRCUMVENTING INSURABLE INTEREST LAWS - Leading life insurance industry organizations are working together to prevent the expansion of state insurable interest laws that would facilitate so-called "investor-owned life insurance" (IOLI). IOLI involves charitable organizations and permits third-party investors to acquire interests in life insurance policies that they would otherwise be prohibited from acquiring directly. NAIFA, AALU and the ACLI have now become aware that there may be other arrangements that bypass the purpose of state insurable interest laws governing the purchase and ownership of life insurance. These other arrangements include situations in which individuals purchase life insurance with the intention of transferring that insurance to third-party investors a relatively short time later. "Life insurance insurable interest statutes have been enacted across the country to ensure that life insurance is purchased by those with a recognized, pre-existing interest in the life of an insured. This purpose is not accomplished if the intent from the outset is to sell the policy to someone who lacks insurable interest."

FINDING NEW INSURANCE CUSTOMERS - Agents, brokers and insurers are finding new clients among women, the self-employed, young families and other groups that aren't typically recognized for their sales potential, according to a recent survey conducted by Best's Review. Survey respondents, 59% of whom are agents, brokers or advisers, also named lower- and middle-income families, hospitality businesses, first-time home buyers, fraternal organizations and small businesses owned by women as groups with which they have had particular success. "We have been very successful at reaching the blue-collar workers," said one agent. "Our focus is the labor unions, and we have great penetration." Ethnic groups also were mentioned often, particularly Hispanics. Complete results of the survey are available in the May edition of Best's Review. To subscribe, go to http://www.bestreview.com/subscribe.

"TRUMPED" DUCK - Beginning on May 2, the Aflac Duck will appear in a new TV commercial with the newest Mrs. Trump, Melania.  According to Dan Amos, chairman and CEO of Aflac, "The commercial gives the duck a voice in a very clever and entertaining way.  We were pleased that Melania Trump was available to help the duck talk about the benefits of Aflac with glamorous appeal."

HANDBOOK UPDATES VETERANS BENEFITS - A new edition of the popular handbook Federal Benefits for Veterans and Dependents by the Department of Veterans Affairs (VA) updates the rates for certain federal payments and outlines a variety of programs and benefits for American veterans. The handbook can be downloaded free from VA's Web site at http://www.va.gov/opa/feature.

AMERICAN COLLEGE AND NAIFA OFFER NEW DESIGNATION - The American College and the National Association of Insurance and Financial Advisors (NAIFA), will offer a new Financial Services Specialist (FSS) designation. The program is based on the successful sales skills training model of the insurance-based LUTCF designation program. The courses are organized through the same network of NAIFA local associations and agencies. Sounds good! Details at http://www.naifa.org.