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1stLifeSettlements




HURRICANE KATRINA

Our thoughts and prayers are with the people of New Orleans, South Louisiana and the Mississippi Gulf Coast.  The disaster that's unfolding is difficult for most of us to comprehend.  For those who wish to help, the Red Cross is accepting donations on their website (www.redcross.org).
INSURED COSTS - The estimates of costs to insurers from Hurricane Katrina are understandably all over the map at this point in time.  It's safe to say, however, that the storm will be one of the costliest in U.S. history.

TIMELY ADVICE - September is National Disaster Preparedness Month.  In the wake of Hurricane Katrina, all of us would be well served by evaluating how prepared we would be in the event of a disaster.  The City of Houston has a Preparedness Checklist available here.

$1.08 BILLION JUDGMENT REVERSED - The Illinois Supreme Court reversed a $1.08 billion class-action judgment against State Farm in a case alleging the company used unsafe parts (which were generic rather than original manufacturer parts) to repair damaged vehicles.  The court ruled both that the trial court should not have given the case class-action status and that the plaintiffs failed to establish damages.  We call this a victory for common sense!

INDICTMENTS/FINE - Eight former executives of accounting firm KPMG were indicted earlier this week on a charge of conspiring to defraud the IRS by setting up fraudulent tax shelters to help rich clients dodge an estimated $2.5 billion in taxes.  The firm itself avoided an indictment by admitting its role and agreeing to pay $456 million in penalties.  According to IRS Commissioner Mark Everson, the firm's conduct had "exceeded clever lawyering and accounting and amounted to plain theft from the people."

SPIN OFF - American Express is spinning off its financial advisors business, now known as Ameriprise Financial Inc., to its shareholders on September 30.  After the distribution, Ameriprise will be an independent, publicly-traded company.

INCOME STAGNANT/POVERTY UP - That's the report from the Census Bureau for 2004, making this the first time on record that household income has failed to increase for five straight years.  Potential reasons include technology and global trade holding down pay and the rising cost of health care benefits eating into salary increases.  Fewer employees receive health care benefits from their employers, but coverage under Medicaid and military health benefits grew.

SPEAKING OF HEALTH INSURANCE - The news isn't particularly encouraging.  Survey after survey show health insurance premiums increasing at a rate greater than inflation.  For example, a report from the U.S. Agency for Healthcare Research and Quality found that workers who receive health insurance coverage through their employers paid an average of 79% more in 2003 than they did in 1996.  Even after adjusting for inflation, there was a 51.2% increase over the seven-year period.  The main culprits are said to be expensive new medical technology and the rising use and cost of prescription drugs.  Pretty scary!
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CEO'S DOWNFALL - According to a report in the Wall Street Journal, MassMutual's board fired CEO Robert O'Connell in June in part because he allegedly "made unauthorized trades in a shadow retirement account."

BYE BYE - Allmerica is exiting the life insurance business by selling its variable life insurance and annuity business, Allmerica Financial Life Insurance and Annuity Company, to Goldman Sachs for a reported $385 million.  The company plans to focus on property and casualty insurance.

MORGAN STANLEY WOMEN GET MONEY – A total of 67 women will share $40.6 million paid by Morgan Stanley in a sex bias settlement that determined the company denied women raises and promotions, paid them less than men, excluded them from company events, and subjected them to lewd behavior. Specific awards are confidential but the average is about $606,000. In 1992, State Farm Insurance agreed to the largest sex bias settlement, a $240 million payout to more than 800 women.

BISYS RESTATES FINANCIALS AND CFO RESIGNS – BISYS will restate three years of financial reporting and is in talks to settle an SEC probe over its mutual fund services business. The CFO is resigning and being replaced by Bruce Dalziel, former CFO of DoubleClick Inc., an Internet marketing company.

NYSE FINES MERRILL LYNCH - The New York Stock Exchange fined Merrill Lynch $10 million for supervisory and operational failure to deliver prospectuses and product descriptions to customers. In fact, they failed to insure the delivery of prospectuses in about 64,000 transactions over a 1-1/2 year period.

WADDELL & REED REIMBURSEMENTS – During 2001 and 2002, Waddell & Reed exchanged thousands of variable annuity contracts for a purportedly similar product. The NASD conducted an investigation and found that the exchanges were not suitable for many of the investors and the brokerage firm will repay more than 5,000 customers nationwide as much as $11 million.

CAPITAL ONE, HIBERNIA DEAL OKAYED - The Federal Reserve has okayed the merger of credit card giant Capital One with Hibernia, a major retail bank in Louisiana and Texas. The deal is worth about $5 billion, but St. Patrick's Day in New Orleans will never be the same.  (We just hope New Orleans will be ready to host a St. Patrick's Day celebration of any kind in March 2006!)

BLOCKBUSTER CLASS ACTION CHECK - My wife just received some great news!  She was a lucky plaintiff in Boehr vs. American Express.  Amount?  A whopping $0.41 check that must be deposited by Jan. 8, 2006 or it will be "void and not to be reissued."  We plan to spend every cent of it on our Mediterranean cruise!
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IT PAYS TO SHOP - Weiss Ratings released its analysis of Medigap premium rates, proving once again that it pays to shop around.  A few highlights:  the national average premium for a Medigap policy covering a 65-year-old female ranged from $1,159 to $3,443, with even more startling pricing disparities on specific plans (e.g., premiums for the popular Plan C varied from $651 to more than $9,000).  Weiss (http://www.weissratings.com) offers a Shopper's Guide to Medicare Supplement Insurance for $45.  Sounds like it might be a good investment!

GENERATION GAP - A survey by New York Life Investment Management revealed a startling gap between Baby Boomers (age 41-59) and GenXers (age 26-40) when it comes to paying for a child's college education, with Boomers significantly less likely to contribute to children's college fund than GenXers.  Apparently Boomers are much more interested in "achieving/sustaining their current lifestyle and living well in retirement."

PRODUCER HURDLES - According to a report from LIMRA, producers identified the following as their major business challenges: attracting new clients, compliance, developing business relationships with CPAs, attorneys and other advisors, developing their own expertise and identifying a successor.

INCOME UP - Some good news...the College for Financial Planning and the Financial Planning Association report that certified financial planners' gross income increased 27% over 2004, from $219,000 to $277,800.

STOP PLAYING GAMES - That's the word from the IRS when it comes to employers and insurers valuing life insurance contracts used in employee compensation arrangements.  Apparently some aggressive tax planners have been using life insurance and annuities with artificially low cash values (which then translate into low taxable values) to fund compensation plans.  New IRS regulations are intended to require reasonable estimates of "fair market value."  More information is available at http://www.treasury.gov/press/releases/js2694.htm

COMPARABLE CONTRIBUTIONS - That's what the IRS wants from employers that are contributing to HSA plans for employees.  The concern is that employers will use health savings account plans to favor some employees over others.  The IRS proposed regulations can be found here:  http://www.treasury.gov/press/releases/reports/reg_13864704_.pdf

BUSY IRS - The IRS has issued a temporary regulation "forbidding taxpayers from cutting their taxes by using complicated strategies to temporarily reduce the stated value of annuities shifted into Roth IRAs" from traditional IRAs.  A copy of the temporary regulation can be found here: http://www.treasury.gov/press/releases/reports/081905%20td9220.pdf

TOO LITTLE, TOO LATE - A Fidelity Investments survey found that a third of U.S. workers are having to push back retirement.  Reasons:  they haven't saved enough to retire, they started saving too late and/or they need to hold onto employer-paid health benefits.

IF PLANNING FALLS SHORT, MOVE ABROAD – Retiring Americans are expected to spend some retirement abroad, but for some it won't just be a vacation...they will be lured overseas by a more affordable cost of living and perhaps temperate weather. Mexico, Costa Rica and Panama are common retirement havens, but Nicaragua, Honduras, Ecuador and English-speaking Belize are making a push to attract retirees. Consider: In Costa Rica, auto insurance is $100 a year, utilities are next to nothing, Costa Rica's version of Medicare is about $600, a nice home costs about $40,000 and a housekeeper costs about $5 a week.

MOST AND LEAST EXPENSIVE SCHOOLS – Education costs are right up there with medical costs in rates of increases that have far outstripped inflation. Tuition alone can set you back $30,000 a year at some private colleges. "Like anything else, it's supply and demand," says Jeff Selingo, at the Chronicle of Higher Education. "With more students graduating from high school - and a college degree considered an essential quality to securing a good job - colleges are able to charge more for their services." Click here to see the 10 most and least expensive private and public colleges in the country.

RETIREMENT INCOME INSURANCE – MetLife and New York Life are offering annuities with a new twist..."longevity insurance," if you will. You contribute a single sum during your 50s and 60s and draw a specific guaranteed income at say age 80. Example: Pay $33,800 at age 65 and guarantee yourself $1,000 per month at age 80. This may be the ultimate insurance against "living too long" and sounds like a pretty good idea!

ORGANIZED FINANCIAL LIFE – Here are five steps to an organized financial life from author Christine Benz:  1. Learn what to stash and what to trash. 2. Know where to put what you keep. 3. Create a master directory. 4. Stay on top of incoming mail, 5. Take advantage of technology. Click here to see the complete article. One strong endorsement for technology: If you aren't paying your bills online, you are wasting a lot of time, energy and money on stamps!

FREE CREDIT REPORTS - Federally-mandated free reports from the three major credit bureaus (Equifax, TransUnion and Experian) are now available to all residents of the U.S., with the Eastern states being added on September 1.  If you haven't ordered these reports, take a little time and do so.  The official website for the reports is http://www.annualcreditreport.com.  Beware, however...there are a slew of imposter sites with very similar website addresses and a misspelling of the Web address could land you on one of them.  To avoid this potential problem, you can start at the FTC site - http://www.ftc.gov/credit - which has a link to the official site.  A reminder about the availability of these free credit reports is a great reason to get in touch with your clients!

SENIORS STILL BUYING VAs - A comprehensive survey by Claritas shows that, despite state and federal investigations, senior citizens continue to purchase variable annuities.  The percentage of annuities purchased through brokers or other investment professionals jumped from 52% in 2003 to 57% in 2004. However, over the same period, purchases made through insurance companies declined from 30% to 25%.  The mean age for the purchase was 59 for insurers, 60.5 for brokers and 65 for banks.

COMPANIES EXPANDING BENEFITS, LTCI LEADS WAY- A MetLife study shows that amid rising healthcare costs, employers are seeking cost-effective ways to enhance their benefits offerings. The result: many companies are expanding their benefits packages by supplementing employer-funded offerings with voluntary benefits, for which employees pay some or all of the costs. In particular, long-term care insurance (currently offered by 33% of the companies included in the analysis) is the fastest growing employee benefit, up 61% over the past four years. Disability insurance (39%) is the second most popular in terms of growth, up 28% during the same period.

COMPANY-PAID INSURANCE TREASURED – AP reports that the upward spiral of health care costs in recent years has made employer-sponsored health coverage a premium perk for many workers.  In fact, 58% of adults say a health plan is the best choice among possible employee benefits. The next option, a $500 salary increase, was cited by only 14%, a 401(k) plan with a company match was chosen by 12%, and 8% chose paid life and disability insurance. Only 2% picked an additional five vacation days a year.

ASSET-BASED LTC – This product continues to intrigue. It allows you to retain your assets, yet cover yourself and your spouse for most long-term care needs. Coverage kicks in if a spouse dies or needs to go into an assisted living facility, nursing home, or requires home health care. It also can help shelter assets from potential creditors. It might offer an alternative to your clients who are balking at LTCI premiums.

FDIC MONEY SMART - Federal Deposit Insurance Corporation has developed an online curriculum designed to educate the public on money management skills. The course is very basic but could be helpful for your client's children. Go to http://www.fdic.gov/consumers/consumer/moneysmart. Click on 'Computer-Based Instruction' to enter Money Smart CBI Online course. You'll find an Information Booth with tips on budget considerations, budgeting tools, buying a car, checking account, etc. Also, if you are interested in teaching a class to high school students based on Money Smart, the entire course is free for the asking.

RETIREES SPEND LESS – Some people don't want to believe this, but consumer spending decreases in retirement and continues to decrease the older the retirees get.  A recent study in the Financial Planning Journal shows the average consumer spending for 55-64 year-olds is $44,330, for 65-74 year-olds is $32,242 and for 75 year-olds is just $23,759. If spending does in fact decline in retirement, there is less need to save and invest as much, but with the U.S. saving rate at zero, let's just keep this a secret.