© Copyright 2006
US FlagJune 1, 2006 Edition
1stLifeSettlements


WEST COAST ACQUIRES EMPIRE GENERAL - West Coast Life and Empire General will be merged as of July 1, 2006.  The combined companies will market under the West Coast name and all operation will apparently be shifted to the West Coast home office.

ENRON EXES GUILTY - Former Enron Corp. chiefs Kenneth Lay and Jeffrey Skilling were convicted Thursday of conspiracy to commit securities and wire fraud. Lay was also convicted of bank fraud and making false statements to banks in a separate trial related to his personal banking. The former corporate titans are now convicted felons facing years in prison.

REGIONS,AMSOUTH MERGE - The two Birmingham, AL banks will merge in a deal said to be worth about $10 billion. Regions Bank and AmSouth Bank are expected to close the merger by the end of the year, creating the country's 10th largest bank. It will keep the Regions name.

NYSE ADDRESSES BROKER BONUSES FOR CHANGING FIRMS - The NYSE will issue a publication advising investors to be careful about following a broker to a new company. Compensation for brokers who move their blocks of business to new firms can create a conflict of interest in which the broker has a financial incentive to generate trades that a client might not need. "We're not suggesting that it's a bad thing when a broker changes firms, but investors should know how their broker is being paid."

SNOW OUT, PAULSON IN - Treasury Secretary John Snow has resigned and will be replaced by Goldman Sachs Chairman Henry M. Paulson Jr.  Paulson has been chairman of Goldman Sachs for more than eight years. It is considered one of the premier financial firms on Wall Street and has sent a number of its top executives to high positions in Washington.

INDICTMENTS FOR CLASS ACTION LAW FIRM – Adding credibility to many peoples' belief that class action lawsuits are very close to legal (now read, illegal) lotteries, the nation's leading class-action securities law firm, Milberg Weiss, Bershad & Schulman, and two of its partners are being charged with making more than $11 million in secret payments to individuals who served as plaintiffs in over 150 lawsuits. The illegal payments spanned two decades and generated nearly a quarter of a billion dollars in legal fees for the firm. In fact, the firm is said to have taken over $45 billion from corporations over the past 20 years.  If there is any justice left the "system," it should put the firm out of business and the principles in jail.

VA WARS MAY RESULT IN CONSOLIDATIONS – According to John Walters, president of the Hartford's wealth management division, in an effort to stay up with competitors, insurers are attempting to out do each other by increasing the lifetime guarantees of their variable annuities. "For clients with old annuity products, it often makes sense to move them into newer products so they can get the lifetime guarantees but that has resulted in trading of assets within the VA space, rather than true organic growth." He predicts more consolidation in the industry, as insurers seek scale to hedge these guarantees.

TRANS-ATLANTIC STOCK MARKET - The NYSE has made a $10.2 billion offer to acquire European exchange operator Euronext, which operates the Paris, Brussels, Amsterdam and Lisbon exchanges and a derivatives market in London.  Euronext shareholders have approved the merger, which would create a trans-Atlantic exchange with listings worth some $27 trillion.  Over at the Nasdaq, however, things aren't looking as rosy...S&P cut Nasdaq's credit rating to junk-bond levels, citing concerns over the exchanges borrowing to fund a possible acquisition of the London Stock Exchange.

HEALTH BENEFIT BROKERS INVESTIGATION - The Ohio Department of Insurance is investigating UnitedHealth and WellPoint to determine if the brokers revealed enough about their compensation arrangements to government agency clients. Suspicion is that the brokers accepted compensation from the carriers while holding themselves out to be working in the sole interest of public entity clients.  Ohio public pension funds are also taking UnitedHealth to court over alleged improper use of executive stock options.

SPITZER ASKS FOR INFORMATION - Principal has received an official request for information from the office of New York Attorney General Eliot Spitzer about the marketing and sale of retirement products and services. This is never a good sign.

GENWORTH LOOKING – Genworth is targeting $1 billion or more of "bolt-on" acquisitions in 2006. If acquisitions don't present themselves, expect the company to offer share repurchases.

MEDICARE THE PROBLEM - Former Federal Reserve Chief Alan Greenspan says the biggest problem facing the country is Medicare and not Social Security. "Social Security will get resolved," he said. "The real problem is Medicare." Basic problem is that the country has committed to a program it can't afford.  While raising a "red flag" about Social Security, Treasury Secretary John Snow also conceded at the Bond Market Association conference that Medicare is an even greater concern.

LAPSE IN JUDGMENT - Fed chairman Ben Bernanke has apologized for a lapse in judgment regarding comments he made to a reporter hinting at a pause in interest rate hikes.  Mr. Bernanke promised to limit future communications to established channels and testimony.  None of us is perfect and it's kind of refreshing to see a public official actually apologize.

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CITIGROUP PAYS $98 MILLION IN OVERTIME – Well, we really don't see the logic of requiring overtime pay for commission-based employees. Citigroup is now the fourth major financial firm to settle a class-action suit regarding overtime pay. Citigroup's settlement was for roughly 20,000 advisors and trainees in New York, New Jersey and California. Others hit recently: UBS paid $87 million, Morgan Stanley paid $42.5 million (and still faces more suits), Merrill Lynch paid $37 million for only their California producers. Firms continue to settle for millions, citing litigation expense and negative exposure as reasons for not taking the matter before a judge. Shareholders lose and the plaintiffs' lawyers laugh their way to the bank.

FANNIE MAE PAYS $400 MILLION – Fannie Mae will pay $400 million to settle charges it manipulated its accounting in order to ensure bonuses for senior management.

CLASS ACTION AGAINST AIG – A class action suit alleges that AIG-owned companies violated securities laws by failing to properly disclose that they had been aggressively pushing their sales force to sell funds which provided incentives and rewards based on sales volume. AIG firms involved are Royal Alliance Inc., SunAmerica, FSC, Sentra, Spelman and Advantage Capital. This follows a NASD fine levied last year for essentially the same allegations. Sure seems like "piling on" to allow class action lawyers to follow with their suits when regulators paid for by you and me have done all the research!

SEC PROBES USE OF STOCK OPTIONS - At least 15 companies are under investigation by the Justice Department, the SEC or both. The regulators are trying to determine whether the companies deliberately moved back their option grants to dates when the stock price was lower, helping to ensure that the options would make money for the executives who received them. "The stock-option game is supposed to confer the potential for profit, but also some risk," said John Freeman, a professor of business ethics at the University of South Carolina Law School who was a special counsel to the SEC during the 1970s. "When in essence the executives are betting on yesterday's horse races, knowing the outcome, there's no risk whatever."

THREATS AND INTIMIDATION - According to Investment News, the NASD's ombudsman's office is investigating claims by broker-dealers that NASD enforcement staff members are using threats and intimidation to extract settlements.  "Chief among the concerns raised are threats allegedly being made by NASD enforcement staff members to charge broker-dealer executives as individuals if their firms don't agree to settle charges and pay proposed fines."

AMERPRISE PAYS EXXON WORKERS – The NASD is requiring an Amerprise sub to pay 32 retired Exxon Mobil workers $22 million.  The Exxon employees, most of whom live in the Baton Rouge area, claimed the firm placed their retirement savings into risky variable annuities and mutual fund B-shares. The lucky Louisianans collected one of the largest arbitration awards ever levied against a Wall Street firm.

HARTFORD PAYS $20 MILLION - Hartford will pay $16.1 million to plan sponsors for improper broker compensation practices, as well as an additional $3.9 million to be split between New York and Connecticut, whose officials discovered the company's use of "sham" expense reimbursement reports to promote sales of its group terminal and maturity funding annuity products.

PUBLIC STRIP CLUB – Rick's Cabaret International, a Nasdaq-listed strip club, became the first "gentleman's club" to go public in 1995. Apparently, the company is attempting to woo investment bankers and analysts with free admission and reduced drinks at its "Due Diligence Balls." Regulators are taking a hard look at these activities, evidenced by the firing of four Morgan Stanley employees who were reportedly let go after inappropriate activities at a Phoenix strip club late last year.
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TIPRA 2005 - Click here for a summary of the Tax Increase Prevention and Reconciliation Act of 2005, signed into law on May 17, 2006.

FEE-ONLY PLANNERS HAPPY – Business is good for fee-only planners. A survey of the National Association of Personal Financial Advisors membership showed that between 2003 and 2005 both revenue and the number of clients grew at an average annual rate of 21% and assets under management increased by 30%. And profit? Up 46%.

NASD TO EXPAND DISCLOSURE FORM TO ANNUITIES – NASD is proposing to extend its proposed mutual fund point-of-sale disclosure form to other securities and, in some form, to "all types of annuities." The disclosure proposal form is referred to as "Profile Plus."  In a speech at the NASD Spring Securities Conference, NASD Chairman Robert Glauber also voiced his concerns about the complexity of equity-indexed annuities..."Frankly, the challenges of adequately disclosing to a potential customer the material features of an equity-indexed annuity are daunting, to put it mildly."

DISCONNECT - A new Merrill Lynch study reveals a startling disconnect between how Americans and their employers view retirement.  In the "new retirement," individuals cite a desire to "cycle" between periods of work and leisure, as well as change their line of work.  Employers, however, don't appear to have devoted much thought on how to retain the older, skilled workers of the baby boom generation.  Another disconnect revealed by the study is between spouses, who often have very different views about their "ideal" retirement plan.  A copy of the study is available here.

ANNUITY GRADES – A study by New York Life revealed that 48% of advisors gave themselves "Cs" when asked to grade themselves on explaining annuity products to consumers. 80% of advisers said that better advisor education would be an important factor in enabling them to sell more annuities for retirement income purposes. Here is a novel idea. If you want to feel comfortable and sell more annuities, subscribe yourself and/or your advisors to the Virtual Sales Assistant (VSA). It contains about 15 NASD reviewed, turnkey presentation on various annuity concepts and dozens of concept "one pagers. Check it out at vsa.fsonline.com. Broker-dealers can call Bill O'Quin, CLU, ChFC, RFC at 225-387-9845 for quantity pricing.

YOUR OWN PENSION VIA FIXED IMMEDIATE ANNUITY – With all the bad press about annuities, here is an article you might want to read and send to clients and prospects. The article starts with "There's something very reassuring about knowing you'll get a regular check in retirement." Studies show that retirees with guaranteed incomes are happier than those without, regardless of net worth. I can personally attest to the fact that a regular retirement income that I can't screw-up has made for a very happy (semi) retirement. Well, maybe the Prozac has helped a little! Seriously, click here for a good article for you and your clients.

NATIONAL RETIREMENT PLANNING WEEK - Scheduled for the week of November 13, National Retirement Planning Week is designed to heighten public awareness of the need for individual retirement planning.  More information will be available in coming months at www.RetireOnYourTerms.org.

TOP INTERNET TRENDS - Norvax, a web application developer, has released a whitepaper outlining the Internet trends affecting agents and carriers.  A free copy of the report is available at www.norvax.com/9trends/.

FLOOD INSURANCE OVERHAUL - The Senate is debating legislation that would raise annual flood insurance premiums, stiffen coverage requirements and redraw flood maps. 

NAME CHANGE - Quotesmith has changed its corporate name to Insure.com (www.insure.com).

ANNUITY-LTC HYBRID - At a House hearing, the ACLI made the case that Congress should help Americans save for retirement and long-term care costs through the same product...an annuity-LTC hybrid.  Such a product would require a change in federal law, permitting insurers to include LTC insurance in an annuity contract.

EXPENSES & PERFORMANCE, NOT BOARD – According to a survey by the Investment Company Institute, 74% of mutual fund investors sought information about fees and expenses and 69% asked about performance before buying shares. Only 15% of investors examined information about the fund's board of directors. 

WARY OF INDIVIDUAL STOCKS – A Securities Industry Association study shows 90% of equity investors own mutual funds, but more than half of those do not own individual stocks. Probably a smart move for those with limited assets and saving for retirement.

HEALTH PREMIUMS GROW BUT AT A REDUCED RATE – According to a study by PricewaterhouseCoopers on behalf of America's Health Insurance Plans (AHIP), health insurance premiums are growing at a reduced rate, despite increased utilization and higher costs, while health insurance plans' efforts are easing drug cost increases. The study found that premiums increased 8.8% between 2004 and 2005, which is 36% lower than the 13.7% increase a similar report found in 2002. Must be a pony in there somewhere...