THE LAST BIG SHOW – One of the oldest and largest U.S. mutual insurance companies officially began selling stock through its IPO this week. Prudential Financial (PRU) launched the largest initial public offering ever in the insurance business and raised $3.03 billion, making it the largest insurance IPO on record, just topping MetLife's offering last year. PRU shares debuted at $27.50 per share on Wednesday, ended their first full day of trading on Thursday at $29.30, a 6.5% increase, and are trading at about 85% percent of book value.  By comparison, MetLife shares are now trading at about 1.5 times book value.  On Monday, Prudential will begin mailing 454.6 million shares to its 11 million policyholders, making it one of the nation's most widely held stocks.

ENRON – From number 7 on the Fortune 500 to bankrupt in months seems impossible, but Enron did it and without help from terrorists...at least not armed terrorists. This mess is a national business disaster. Not only employees and shareholders are suffering...look at these projected losses from major insurers: SAFECO, $20 million; Everest Re; $25 million; CNA, $50 million; John Hancock. $320 million; Principal, $171 million; Chubb, $220 million; Zurich $100 million; Aegon, $300 million; ING, $195 million; Fortis, $68 million. The total damage to all companies could exceed $6 billion.

PREMIUMS RISE – Lloyd's of London said on Wednesday it expected to take in a record $17.7 billion of insurance premiums next year. Reason: surging premiums since the WTC attack.

LIFE AND HEALTH INSURERS PROFITS OFF – Profits of the nation's life and health insurers declined $6 billion, or 42 percent, during the first six months of 2001, compared to the same period in 2000, according to Weiss Ratings. Causes included falling demand, falling yield on investments and rising defaults on junk bonds.  Life insurers, however, have a brighter outlook, at least in the short term, as the Sept. 11 attacks have created a large upsurge in demand for life insurance.

SEPT. 11 POLICY SEARCH – As we reported earlier, the Medical Information Bureau (MIB) keeps a seven-year archive of application information of people who have applied for life insurance. They have offered their help in identifying potential policies insuring victims of Sept. 11, but their problem is "for whom to search."  If you know of anyone killed in the attack, you might want to submit their names to MIB for a search. Also, if you know any folks at the American Red Cross, encourage them to provide their definitive list of victims of the attacks to MIB to help its over 550 life insurance company members identify if any of those victims had an in-force life insurance policy.
 

SOCIAL SECURITY INVESTMENTS – The presidential commission on Social Security reform has recommended three possible plans to divert part of the 12.4 percent payroll tax into personal investment accounts and reducing Social Security benefits accordingly.  Two of the proposed plans would also further reduce guaranteed benefits from Social Security.  A side benefit of this partial privatization could be to give all workers a sense of ownership in our great country. Imagine if everyone had a "savings passbook" that showed the actual value of his/her government-sponsored retirement account.  It's highly unlikely, however, that Congressional action on the proposals will begin before the 2002 congressional elections.

CFP DEGREE – Effective Jan. 1, 2006, all new CFP licensees will be required to earn a bachelor's degree before they can hold the CFP mark.

HOT STOCK FINE – Credit Suisse First Boston (CSFB) is apparently set to pay $100 million to settle federal charges that it mishandled hot stock offerings during the end of the bull market. Other Wall Street firms could follow and, while not a legal precedent, it could provide ammunition for a flood of lawsuits accusing firms of improper handling of initial public offerings.

BAD CUTS – ING will slash 15% of its work force (1,600 jobs) in the U.S. due to global economic slowdown and as part of its integration with newly purchased Aetna and ReliaStar. CNA is cutting 1,850 jobs, about 10% of its staff, and exiting the variable life insurance and annuity business. American Express has said it plans to eliminate 5,500 to 6,500 jobs. Aetna, the largest health insurer, is slashing 6,000 jobs, about 17% of its work force, due to rising medical costs and to shed "unprofitable membership in government-sponsored plans." Met and MONY are also cutting staff. However, life insurers may fare better than brokerages and banks, since demand for life insurance surged after Sept. 11 and usually holds up in a recession.

ASBESTOS AWARD – After a Maryland jury awarded $30 million in asbestos damages against Halliburton's Dresser Industries subsidiary, Halliburton stock dropped 42.5%.  That was before the company announced that it expects insurance to cover most of the costs of the verdicts against the company. Total Halliburton asbestos legal loses could add up to over $150 million.

DUCK MIGRATES NORTH – Citing lower taxes, AFLAC announced plans to move from Georgia to Nebraska.
 

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VARIABLE DECLINE – While total sales of life insurance continued to decline in the third quarter, the trend away from variable products and toward universal and whole life accelerated, according to LIMRA International's quarterly survey tracking new individual life insurance sales. The psychological impact on sales since Sept. 11 is not yet reflected in the results, but a recent report from the Medical Information Bureau (MIB) showed an increase in applications.

RETIREMENT REMINDER – The new year will bring a number of retirement plan changes:

* For defined benefit plans, the maximum benefit increases from $140,000 to $160,000.
* The defined contribution maximum increases to $40,000 from $35,000 this year.
* 401(k) limits increase from $10,500 to $11,000, SIMPLE limits increase to $7,000 from $6,500 and maximum 457 plan contributions jump to $11,000 from $8,500 in 2001.
* Finally, don't forget that employees over age 50 will be able to contribute an additional $1,000 to 401(k) plans and an additional $500 to IRAs in 2002.

CONSUMER INFORMATION SOURCE – The National Association of Insurance Commissioners has launched the Consumer Information Source web site, designed to enable consumers to locate specific company information, as well as to file consumer complaints and review information on resolved complaints against a company.  The site is located at http://www.naic.org/servlet/cis.Main. 

SANDWICHED GENERATION – According to an Allstate survey, Baby Boomers who already feel sandwiched between financial obligations to children and aging parents can look forward to more of the same, plus unprecedented levels of debt for themselves in retirement. Findings indicate that 37 percent will be financially responsible for parents or children during retirement and 7 percent will be responsible for both. The survey also revealed that Baby Boomers have saved an average of only 12 percent of the total they will need to meet even basic living expenses in retirement.

LATE BLOOMERS – Some parents may be on Social Security before their children get out of high school. Consider: In 1999 over 14,000 women over age 40 had babies; the 1989 the figure was just over 9,000; 11% of all newborn babies in 1999 had a father age 40 or over; the 1989 the figure was under 8%. This report is from Prudential, Plc. via Sweden. The numbers may be even higher in the U.S.

PLAN TO RAISE COSTS FOR THE SICK – A health plan that causes sick people to pay more money than healthy ones? How awful! The New York Times has taken issue with insurers over a "new health plan" that allows families with low medical expenses to save money, while requiring those with higher expenses to pay more. The Times opined that such a plan could discourage sick folks from getting needed health care. The plan is less expensive than traditional managed care and, in essence, provides an allowance for first dollar expenses, a corridor to be paid by the employee and then all or most costs covered by the insurance company. To us it sounds like a good plan that shifts some of the decision making to the patient, but Princeton economist, Uwe Reinhardt, says, "The effect will be to shift more of the costs into the pockets of the sick people. The insurance industry has decided that if you are sick, you ought to eat the costs. It's a very dubious social policy."

725,000 LOSE HEALTH COVERAGE – Since the official start of the recession in March, more than 725,000 people have lost their health insurance, according to Families USA. That includes 345,000 who lost coverage mainly due to the September 11 attacks. Congress is groping for a solution...perhaps paying 75% of COBRA costs, which now average $600 per month. We suggest they consider the "corridor" plan described above.

SURRENDER RIDERS – In light of the uncertainty in the estate tax law, Pacific Life has added no cost riders to its most popular estate tax policies that guarantee that a policyowner can surrender the policy within 60 days of a complete repeal of the Federal Estate Tax after Dec. 31, 2010 without incurring the surrender charges.

GENETIC DISCRIMINATION – According to Reuters, expect legislation banning genetic discrimination in insurance policies by the end of 2002, despite the gaps between "consumer groups who want strong protections, employers who want to avoid stiff penalties for inadvertent violations, and scientists who want access to information for research purposes."

ORIENTAL TRADERS – China became a member of the World Trade Organization (WTO) and quickly granted several major insurers licenses to do business in that country. Some winners: NYL, AIG, AON and MET.

PIONEERS MERGE – Quotesmith has acquired Insure.com, the popular and content-rich Internet-based provider of consumer insurance news, information and decision-making tools. Quotesmith will use the content and traffic of Insure.com to increase traffic to its site.