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 December 1, 2005
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RECORD LOSSES -
Losses from
Hurricane Wilma are expected to push year-to-date insured catastrophe
losses to $50.3 billion, an all-time record. Hurricanes
Katrina,
Rita and Wilma together account for $45.2 billion of the total
catastrophe loss in 2005.
CONFERENCE
ON AGING
- A 4-day White House Conference on Aging is set to begin on December
11 in Washington. The agenda, a copy of which is available here,
includes long-term care and income planning issues.
BIRD
FLU BILLIONS
– Some researchers have put a number to a potential "life
insurance tsunami." S&P predicts that an avian influenza
pandemic
could cost U.S. insurers $15 to $20 billion and worldwide losses
ranging from $71 to $200 billion.
BOOMERS
NOT A DRAG?
– Despite widespread concerns about aging boomers creating a
"retirement tsunami" that will put a serious drag on the economy, many
experts believe the impact won't be that great. "It's not going to
cause a revolution," says Gregory Spencer of the U.S. Census
Bureau. "We have a society where you can react and make
changes.
Legislators do react and do take care of their constituents." He points
out that a growing population has actually been good for Florida's
economy. That is all well and good, but where will the money come from
for long-term care, Social Security, Medicare, public pensions, etc.?
As the authors of a best-selling book, "The Coming Generational Storm,"
put it, "Basically, all the forces that can enlarge the retired elderly
population are in overdrive. The forces that would expand the younger
(and working) population paying for Social Security and Medicare taxes
are in reverse. The result is a kind of perfect demographic storm."
NO
CRIMINAL CHARGES
- NY Attorney General Eliot Spitzer has decided not to pursue criminal
charges against former AIG CEO Hank Greenberg in connection with the
insurer's accounting scandal. Instead, Spitzer's office will
focus on civil fraud allegations already filed against Greenberg and
AIG.
EXECUTIVE
LIFE SAGA
CONTINUES – After turning the insurance industry
on its
ear 20 years ago using interest assumptions of 12% and more, Executive
Life continues to make headlines. A U.S. court has ordered French
billionaire Francois Pinault to pay $189 million plus interest to
victims in the case. California regulators had filed a massive fraud
lawsuit over the 1991 takeover of Executive Life and its valuable junk
bond portfolio for a fraction of its value.
STARTLING
STATS ON
ID THEFT - Research by the Better Business Bureau shows
that
almost half of all ID theft is committed by relatives or close friends
of the victim. The thefts included property deeds, insurance policies,
beneficiary change forms, utility bills, and wills. Sad commentary on
the human condition. Other findings: thieves procured personal data
online in only 12% of all ID theft cases and ID theft cost Americans
$52.6 billion last year.
PENSION
UNDERFUNDING
ENCOURAGED – The National
Underwriter reports the SEC saying that current "defined
benefit
pension rules give employers an incentive to put in too little cash and
invest plan assets recklessly." Among the reasons: The current pension
system puts most of the burden of failure on employees and the Pension
Benefit Guaranty Corp. Further, since employers are required to
contribute to the PBGC to pay for other people's pension benefits, they
start with an incentive to contribute too little.
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GE
SELLS ANOTHER INSURANCE UNIT -
General Electric plans to sell most of its reinsurance business to
Swiss Re for up to $7.6 billion. This follows GE's spin off of its life
insurance and mortgage insurance company, Genworth Financial. GE still
has a 25% stake in Genworth, which it plans to sell off next year.
MASSACHUSETTS
SUES MASSMUTUAL
– MassMutual is being sued by its home state for ignoring
requests to produce documents in the investigation of malfeasance at
its OppenheimerFunds unit. Some of the legal actions against MassMutual
are seen as fallout from the actions of fired CEO Robert O'Connell.
WALL
STREET'S HUGE
BONUS TIME - MarketWatch
calls it greed season on Wall Street. That is when the firms divide up
the profits and issue bonuses...estimated to exceed an average of
$500,000 per employee..."$105,000 to first-year associates right out of
business school, up to $6,000,000 or more for top
executives." As
the MarketWatch
reporter puts
it: "It is war, yes, war. One Wall Street is winning because its enemy
is a confused bunch of wimps. Oh, that's too blunt for your delicate
ears? Well, I'm mad as hell, wondering why you're not mad as hell. The
first thing you must do is wake up: The Wall Street Greed Machine is
your worst enemy. Here are two rules to help you wake up. Rule One:
Never trust anything you hear from anyone on Wall Street -- no brokers,
no bankers, no analysts, no reports, no talking heads. Trust no one.
Rule Two: Never forget Rule One." You do have to wonder exactly what
they do to earn that kind of money.
MORE
ON PRU PROWL – Despite
"no comments" from Chairman Art Ryan, rumors persist that Prudential is
assembling a war chest in anticipation of making one or more major
acquisitions. "Prudential must be thinking about a deal - they have to
be out there looking" but for whom? Best guess is Lincoln
National. If that comes to pass, it raises the question of
what
Pru would do about Lincoln's acquisition of Jefferson-Pilot, which has
yet to close. Other potential targets include ING's U.S.
operations and Tokyo-based Sony Life.
GM
WOES - General Motors will cut
about 9% of its 325,000 workforce (30,000 jobs) and close nine North
American plants by 2008 in an effort to start making money again after
loosing nearly $4 billion so far this year. Despite huge pension
liabilities and escalating health care costs, CEO Rick Wagoner says the
company is on solid ground.
PBGC
WOES -
The Pension Benefit Guaranty Corp. ran a $23 billion deficit in the
quarter ending September 30. According to PBGC Executive
Director
Bradley Belt, unless Congress acts soon, "the money available to pay
benefits is eventually going to run out."
LITTLE
GUYS LOSE IN FRAUD CASES
– A U.S. Chamber of Commerce study reveals that 40% of
institutional investors reap gains from securities fraud litigation,
but small investors recover only two cents on the dollar. The Chamber,
arguing that the system is not aiding average mom-and-pop investors, is
using the study to begin a push for securities litigation reform
legislation.
LINSCO/PRIVATE
LEDGER CHAIRMAN SELLS
- LPL Chairman Todd Robinson is selling a 60% stake in his company's
two private-equity firms. Reports put the value of the country's
largest independent broker-dealer at about $2.5 billion.
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MUTUAL
FUND EXPENSE ANALYSER –
Check out NASD's new and improved Mutual Fund Expense
Analyzer,
which delivers fee and expense information for virtually all of the
more than 18,000 mutual funds and 160 Exchange Traded Funds
(ETFs). The new expense analyzer will also estimate and graph
a
fund's value over time - for any holding period specified by the user,
as well as over a 20-year period - providing a running total of
expenses the investor would pay during each period.
MUTUAL
FUND
BREAKPOINT TOOL – Then review the NASD's new Mutual Fund Breakpoint
Search Tool
that offers users a groundbreaking way to research eligibility for
breakpoint discounts. Investors and brokers can look up breakpoint
schedules and linkage rules for mutual funds with front-end sales
charges.
COMPETING
TAX BILLS
- Both the House and Senate have passed legislation that extends a
variety of tax breaks. One major different is that the Senate
bill extends increased AMT exemption levels, while the House bill does
not. It's a pretty safe bet that the final legislation will
include the AMT extension.
CHARITABLE
GIFTS UP
– Investment
News
reports that, despite hurricanes, a tsunami and escalating energy
prices, 2005 could be a banner year for charitable giving. "The
critical year-end giving season, during which many charities collect as
much as 50% of their total contributions, doesn't go into full swing
until after Thanksgiving. But early indications suggest that
benevolence is on the rise, according to charitable organizations and
financial advisers." One word of caution: the charities still have
ongoing needs for services other than those associated with
disasters...please don't forget them in your 2005 gifting program.
SNOOPING
OR
BLUEPRINTING? - A new service apparently will allow you to
cheaply snoop on your neighbors...or, maybe more productively, to learn
more about your prospects. Located at http://www.onlineinvestigation.net,
for $30 a year they promise you can investigate virtually anyone.
Available information includes: people search, background checks,
criminal records, DMV driving files, property records, tax lien search,
marriage/divorce records, death records, license plate lookup, social
security traces, phone number lookup, bankruptcies, unclaimed money
search, etc.
LIFE
APPS DOWN AGAIN
- MIB reports a 3.2% decrease in life apps for October 2005 compared to
October 2004.
LIFE
RATES DOWN, LTC
RATES UP - Insurance Information Institute reports
nonsmoker for
a male age 40 at $352 per year for $500,000 of 20-year term-life.
Reasons: competition, operating efficiencies and longevity. However,
the current longevity trend is putting upward pressure on long-term
care premiums.
HOUSING
MARKET
PEAKED? – According to the National Association
of
Realtors, sales of existing U.S. homes dropped 2.7% in October and the
number of unsold homes on the market rose 3.5% to 2.87 million, the
most in nearly 20 years. This could signal that the red-hot housing
market is cooling.
NO SALE
-
Reports from New Orleans suggest that it's difficult for people to buy
houses there. Reason...they can't get homeowners
insurance.
Many companies have either pulled out of that market or drastically
scaled back activity. On a related note, President Bush has
signed into law legislation that dramatically increases the borrowing
authority of the government's flood insurance program to $18.5 billion
from $3.5 billion.
PROBLEMS
CONTINUE
- A Government Accountability Office report indicates that abusive
sales of financial services products continue to be made to military
personnel. Various pieces of legislation to address this
problem
are "in the works."
BLUE
VISA -
Blue Cross/Blue Shield and Visa will be offering co-branded health
account payment cards to members of Blue Cross and Blue Shield.
MORE ON
HSA
– Some 1 million Americans have opened health savings
accounts
since they were authorized two years ago, and some are predicting 30
million HSAs by 2015. Drivers are the spiraling cost of medical care
and potential tax savings. Don't forget that an HSA can be used for
dental, over-the-counter drugs, vision, acupuncture, chiropractors,
medical-related travel and more.
BORROWING
MORE
- A Principal Financial study reports that more baby boomers are
borrowing from their 401(k) plans...12.1% in 2004, up from 10.5% in
2002.
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