ARBITRATION DAMAGES - Apparently trying to keep up with jury damages, an arbitration panel hit mutual fund company Waddell & Reed with punitive damages of $25,000,000...a record in securities arbitration and roughly equivalent to the company's second quarter earnings.  The amount is likely to be reduced by the National Association of Securities Dealers' arbitration panel. The dispute arose when Waddell allegedly waged a campaign to discredit producer Stephen Sawtelle with his clients after terminating him.

NATIONWIDE ACQUIRING PROVIDENT MUTUAL – In what is described as a sponsored demutualization, Nationwide Financial Services is acquiring Provident Mutual Life Insurance Co. for $1.56 billion. The transaction, which has been approved by the boards of directors of both companies, is expected to close in the second quarter of 2002. Eligible policyholders of Provident Mutual will receive shares of Nationwide common stock, cash and policy credits.

ACCESS, YES, LAWSUITS, NO - That's the Association of Health Insurance Advisors (AHIA) reaction to the Patients' Bill of Rights legislation that passed the House of Representatives.  AHIA remains concerned that the bill would expand the scope and venues for patient litigation, which would inevitably discourage employers, particularly small employers, from sponsoring plans for their employees. We agree.

ALLSTATE SUED – A group of 27 former Allstate agents is seeking class-action status for a lawsuit filed against the insurance giant.  The suit claims that 6,400 employee agents were fired as part of a "mass termination program" designed to save money and get rid of agents older than 40.

DEMUTUALIZATION UPDATE - Policyholders of Prudential, the No. 1 U.S. life insurer by assets, have approved its plan to convert to a publicly-traded company. Prudential said it planned to sell 89 million shares, or about 16% of the company, at about $30 a share. With private share sales, the insurer could raise about $3 billion overall. Both MetLife and John Hancock shares doubled in the 12 months following their IPOs early last year, as investors returned to reliable old-economy businesses. Boston-based life insurer Liberty Mutual is also in the process of demutualizing.
 

COMMISSIONS SUIT – The National Auto Agents Alliance (NAAA), which had announced plans to file suit against several insurance companies that had been cutting commissions, has decided to comply with the wishes of several State Insurance Departments who have requested that the NAAA attempt to talk through the commission issues with companies who have been cutting commissions before a suit is filed. The NAAA would like to "open up a dialogue with companies that have been arbitrarily and capriciously reducing commissions."
  
FAITH-BASED FRAUD - Over the past several years, scam artists have duped nearly 100,000 investors with claims that their deals were endorsed by the Highest Authority.  Principals of Greater Ministries International Church of Tampa, Florida were just sent to prison, but only after bilking the public for $578 million between 1993 and 1999. The operation was just a Ponzi scheme with a religious twist. There are legitimate sources for people who want to reflect their religious and ethical beliefs through their investments. Check out a few at http://www.socialfunds.com.

FOREIGN RUMORS - Aegon is said to be eyeing Britain's Royal & Sun Alliance as a potential acquisition. Zurich Financial Services called a report that it was about to sell its Scudder asset management business to Germany's Deutsche Bank "total speculation."

HMOs RETURN TO PROFITABILITY - According to Weiss Ratings, the nation's HMO industry turned a profit last year for the first time since 1996. The 492 HMOs earned $990 million, compared to a cumulative loss of $1.8 billion in the three years from 1997 to 1999.

DONE DEAL – The Fed has okayed the merger of Wachovia and First Union and the merger is expected to be completed next month.  The combined bank will take the name Wachovia Corp., but will be based in Charlotte, N.C., home of First Union.

HIGH BUSINESS - AIG has received a license in Nepal, making it the first global life insurer allowed into the Himalayan kingdom. FYI, the license required 50 million Nepali rupees ($666,500) as the company's working capital.

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INVESTMENT ADVICE – Under current law, mutual funds, banks and insurance companies that administer 401(k) plans are prohibited from providing advice about a participant's specific investments.  That would change if H.R. 2269 becomes law.  The legislation would remove that barrier, enabling employers to provide workers with access to advice from the administrators of their plans, so long as the advisors disclose fees and any potential conflicts of interest.

AGENTS WORKING HARDER – The busy 1990s are over, but everyone still seems to be working harder just to stay in the same place, and insurance agents are no exception. A time-honored ratio of how many calls an agent needs to make in order to get a sale no longer holds true says LIMRA. The "Purdue Formula" (published in 1948) of 10 face-to-face meetings, five closing interviews and one sale per week no longer cuts it. LIMRA's new formula is get in front of 15 people and hold six closing interviews in order to make one sale.

GETTING THE WORD OUT – A federal judge has ordered the Bush administration to follow Medicare law and notify all 40 million Medicare beneficiaries of their health plan choices (including private Medicare+Choice plans) by October 16.  The administration, which decided earlier this year to allow private Medicare plans to file their cost and benefit information with the federal government more than two months after the July 1 date required by law, argued that the extension would make it difficult to gather plan information in time for the October mailing.  The court rejected that argument, stating that the administration's logic "is similar to that of a child who kills his parents and then seeks pity as an orphan."

PRACTICE SUCCESSION – In what is believed "unmatched in the insurance industry," Prudential Insurance has announced a buy-back and agent succession program. The plan allows agents the opportunity to sell their practice to a qualified successor when the agent retires or leaves the business. The sale price for the business is negotiated between the buyer and the seller. The price not only reflects commission streams and tangible assets, but also good will, customer relationships and future sales opportunities. This can mean that agents have the potential to realize more value for their business than that offered by traditional life insurance vesting.

DIRECT ROUTE? - Here is a question posted by Gib Kerr, CFP on August 7 on the FPI forum. "Should ChFC's be granted CFP Certificant status without further testing and subject only to certain miscellaneous requirements?"  Some think it is a good idea, subject to CE requirements. If you want to "weigh-in," go to
http://www.financial-planning.com/wwwboard1/messages/2412.html

QUOTE SITES – According to the Consumer Federation of America, out of 25 insurance quoting sites they surveyed, only six quoted the lowest price available. Recommendation here is that if you purport to have the lowest price...you need to have it.

VA PREMIUM CUT – The VA is cutting premium rates for VGLI policyholders between the ages of 30 and 59.  The cuts, which range from 5% to 24% depending on the policyholder's age, take effect on premium bills mailed after July 9.

NAME CHANGE – Education IRAs have a new name.  In honor of one of their principal sponsors, the late Sen. Paul Coverdell of Georgia, they have been renamed Coverdell Education Savings Accounts.

HOW DO YOU SCORE? – Lenders have used credit scores for decades to rate potential borrowers.  Credit scores are three-digit numbers, usually between 300 and more than 800...the higher the number, the more creditworthy the borrower (about 700 or higher is generally considered a good risk).  Problem is that borrowers rarely get to see their scores, and knowledge of your credit score may help in bargaining for a lower interest rate.  A California law now requires lenders to give borrowers in that state a copy of their credit score and two bills have been introduced in Washington that would do the same nationwide.  In the meantime, we non-Californians can obtain our credit scores for a price ($12.95) through a service called Score Power, available at either http://www.myfico.com or http://www.equifax.com.   

WEB FEAR - A recent Gomez Advisors study shows that only 25% of stockbrokers introduce their clients to their companies' Internet products and services. On the other hand, 85% of "wealth managers" and 70% of independent registered advisers do so. More details at:
http://www.financial-planning.com/pubs/fpi/20010803101.html

STOCK RATINGS***** - Morningstar has introduced a Morningstar Rating for stocks.  The ratings of from one to five stars are based on its analysts' estimates of a stock's fair value relative to its current market price.  There is also an associated risk measure, identifying stocks as high, medium or low risk based on company and industry factors.

INVESTING ON YOUR OWN? - Average investors may be in over their heads when buying stocks. In fact, in a recent survey, only 16% of the participants knew that there is no organization to protect investors from stock market losses.