MUTUAL FUND WOES - We're seeing some "ripples" that may suggest a need on the part of the mutual fund industry to take a long, hard look at itself and how it does business.  For example, Vanguard founder and former chairman John Bogle asserts that the mutual fund industry "has lost its way," becoming far more of a "marketing business" than an "investment business."  Harvard Business School professor Michael Porter says that "mutual funds are no longer the incredible bargains they used to be."  Among the problems: investors can now create and trade their own portfolios of stocks for about the same cost or less than fund managers; mutual fund investors and managers are turning from longer-term investors to short-term speculators; rather than continuing to add more funds to choose from, the industry needs to focus on creating better-performing/lower-cost funds; and increasing competition from the diversified products of banks and insurance companies. 

METLIFE - Life insurance giant MetLife Inc. was added to the Fortune 500 Index.  MetLife ranked #53 on Fortune's annual list of the 500 largest companies and became eligible for the Index when it completed its demutualization.  Met also announced plans to have a bank up and running by the first quarter of 2001.  An Internet presence for the bank is expected, but the company is undecided on whether the bank will also exist as a bricks-and-mortar institution.  The decision on whether to establish a new bank from scratch or purchase an existing one also hasn't been made.

DELIVERING HEALTH BENEFITS - A Booz Allen & Hamilton survey of Fortune's "100 Best Companies to Work For" found that most of these companies anticipate a longer-term shift to defined contribution health care benefits as a way to better manage health care cost inflation.  In such an environment, employees would be given a budget to purchase health care benefits that suit their individual needs.  While the pace of this change might be slowed by consumer reluctance to accept a new system, the report predicts that the change is inevitable.

THE GERMANS ARE COMING - German insurance giant Allianz AG plans to invest hundreds of millions of euros a year in new Internet technology and form partnerships with Internet firms. Their plan is to establish a "global portal" that will give individual companies in its group an Internet presence.

LEVITT REPORT – SEC Chairman Arthur Levitt recently reiterated the commission's intentions to overhaul the regulations governing investment advisors by adopting major proposals in regard to pay-to-play practices, trading practices and advisor registration. Meanwhile, in a speech to international corporate regulators meeting in Australia, Mr. Levitt questioned the future of the New York Stock Exchange, describing it as "cumbersome" and less able than Asian and European exchanges to deal with the competition posed by electronic trading systems.

CONSECO DEAL - Investment News reports a deal is in the works for an investor group being assembled by Lehman Brothers to acquire Conseco's finance operations.  In a bit of irony, one of the members of the investor group is reported to be Lawrence Coss, the founder of Green Tree Financial Corp., the purchase of which by Conseco contributed to the company's financial woes.

VIATICAL WOES - The viatical industry is receiving a lot of bad press because of a few "bad apples." The latest incidents involve a recent FBI raid of six viatical companies in four states and the arrest of eight fraud suspects in Florida. Here is how the scheme works. The "perps" submit false information on life insurance applications in order to obtain coverage from various insurers, and then "warehouse" the policies for two years to satisfy the contestability period. The policies are then sold to viatical settlement providers, which then market the fraudulently-obtained policies to unsuspecting investors.  While the Viatical and Life Settlement Association (VLSAA) is supportive of strong regulatory action to combat fraud, the VLSAA is also demanding that insurance companies "adopt minimum underwriting requirements in all of their policies, including guaranteed and jet issue policies to help prevent fraud and to establish greater supervisory authority over the behavior and conduct of their agents."

OFFER WITHDRAWN - We reported in the 5/15 E-News that EDS had made an offer to acquire Policy Management Systems (PMSC), an insurance industry software vendor.  That offer, however, was suddenly withdrawn by EDS, which would only say that "we have withdrawn our offer following due diligence."  The price of PMSC stock fell more than 33% on news of the EDS withdrawal.

UPS AND DOWNS - According to the Securities Industry Association, revenues for U.S. brokerages reached a record $57 billion in the first quarter of this year.  Wall Street analysts, however, are predicting that the second quarter could be a different story, with trading volumes sharply reduced from the levels seen earlier this year.

QUACKENBUSH AMBUSH - Accompanied by a criminal defense attorney, California Insurance Commissioner Charles Quackenbush denounced the legislators who are probing his conduct, claimed he was ambushed and stormed out of a hearing. The act moved lawmakers from both political parties to unite in immediate agreement to subpoena Quackenbush and compel his testimony.