Current Events in February 2003

February 26, 2003
Manufacturers Life Insurance Company, Allianz Life Insurance Company of North America, Kemper Investors Life Insurance Company, Phoenix Life Insurance Company, and AIG Life Insurance Company were among 71 companies downgraded by Weiss Ratings, Inc., in its recent review of 983 life and health insurers.

A total of 22 companies, including Transamerica Life Insurance Company of New York, American Pioneer Life Insurance Company, Midwest Security Life Insurance Company, Life of the South Insurance Company, and Sierra Health and Life Insurance Company, received upgrades by Weiss, the nation's leading independent provider of ratings and analyses of financial services companies, mutual funds, and stocks.

Manufacturers Life Insurance Company (Toronto, Canada) was downgraded to C (Fair) from B- (Good) due to a rapid decline in earnings since September 30, 2001. Net income plunged $499.8 million, from a $46.7 million profit in the first nine months of 2001 to a $453.1 million loss for the same period in 2002. The decline in profitability has significantly weakened the companys capital position, with capital and surplus falling 36 percent, from $1.3 billion at September 30, 2001 to $852.3 million at the end of the third quarter 2002. The company's risk-adjusted capital ratio also declined, falling to 0.57 compared to a ratio of 1.37 at September 30, 2001.

Allianz Life Insurance Company of North America (Minneapolis, Minn.) was downgraded to C (Fair) from B (Good) due to a substantial decline in earnings. Net income fell $274.1 million, from an $83.7 million profit in 2000 to a $190.4 million loss for the first nine months of 2002. The decline in earnings considerably weakened the company's capital position, which dropped from $808.7 million at year-end 2000 to $727 million at the end of the third quarter 2002.

Kemper Investors Life Insurance Company (Schaumburg, Ill.) was downgraded to a C+ (Fair) from a B- (Good). The downgrade reflects a progressive decline in the company's net income, from a $30.2 million loss in the first three quarters of 2001 to a $163.2 million loss for the same period in 2002. Return on equity (ROE) fell to -91.7 percent compared to a -9.8 percent ROE at September 30, 2001.

Phoenix Life Insurance Company (Enfield, Conn.) was downgraded to a C (Fair) from a B- (Good) due to a significant decline in earnings. Net income plummeted from a $266.1 million profit in 2000 to a $105.5 million loss for the first nine months of 2002. The company's risk-adjusted capital ratio also decreased, falling to 0.87 compared to a ratio of 1.32 at year-end 2000. Capital and surplus decreased by $678.3 million, from $1.3 billion at December 31, 2000 to $644.5 million at the end of the third quarter 2002.

AIG Life Insurance Company (Wilmington, Del.) was lowered to C+ (Fair) from B- (Good) based on a steady decline in earnings since December 2000. Net income decreased from an $18.7 million loss in 2000 to a $37.3 million loss for the first nine months of 2002. Contributing to the loss was a steep decline in premium income, from $1.4 billion in 2000 to $812 million in the first three quarters of 2002.

22 Companies Receive Weiss Safety Rating Upgrades

Transamerica Life Insurance Company of New York (Purchase, N.Y.) was upgraded to B- (Good) from C+ (Fair) based on steadily improved performance since September 30, 2001. Net income increased by $10.3 million, from a $9.2 million loss for the first nine months in 2001 to a $1.1 million profit for the same period in 2002. The increase in profitability has enabled the company to enhance its capital position, with capital and surplus jumping $67.2 million to $95.2 million as of the third quarter 2002 compared to $28 million one year earlier. Paid-in surplus, which rose from $83.9 million at September 30, 2001 to $148.9 million at September 30, 2002, also contributed to the company's improved capitalization.

American Pioneer Life Insurance Company (Orlando, Fla.) was upgraded to C- (Fair) from D+ (Weak) due to continuous improvement in its capital position since December 2000. Premium income rose from $43.2 million in 2000 to $56.7 million for the first nine months of 2002. Capital and surplus increased by $6.8 million to $21.2 million at the end of the third quarter 2002 compared to $14.4 million at December 31, 2000.

Midwest Security Life Insurance Company (Onalaska, Wis.) was upgraded to B- (Good) from C+ (Fair) based on steadily increasing premiums and the ability to control expenses, enabling the company to augment its capital position. Premium income jumped $31.3 million, from $118.7 million during the first nine months of 2001 to $150 million during the same period in 2002. Net income increased from $5.3 million during the first three quarters in 2001 to $10 million one year later. Likewise, return on equity increased to 29.6 percent compared to 21.8 percent in 2001.

Life of the South Insurance Company (Nashville, Ga.) has exhibited improvement in profitability since September 2001 and was upgraded to C- (Fair) from D (Weak). Net income increased by $1.5 million, from $0.1 million in the first three quarters of 2001 to $1.6 million in the first three quarters of 2002. The increase in earnings helped the company's capital position as capital and surplus rose to $12.3 million compared to $10.3 million at September 30, 2001.

Sierra Health and Life Insurance Company (Las Vegas, Nev.) was upgraded to C- (Fair) from D+ (Weak) due to improved profitability, which has given the company a stronger capital position. Net income increased from a $9.2 million loss at year-end 2000 to a $1 million profit in the first nine months of 2002. As a result, return on equity rose to 7.3 percent by the end of the third quarter 2002, compared to -73.9 percent in 2000. The company also improved its investment portfolio by continuing to avoid investments in junk bonds while decreasing its stock holdings by 58 percent.

Weiss Ratings issues safety ratings on more than 15,000 financial institutions, including HMOs, life and health insurers, Blue Cross Blue Shield plans, property and casualty insurers, banks and brokers. Weiss also rates the risk-adjusted performance of more than 11,000 mutual funds and more than 9,000 stocks. Weiss Ratings is the only major rating agency that receives no compensation from the companies it rates. Revenues are derived strictly from sales of its products to consumers, businesses, and libraries.

Consumers needing more information on the financial safety of a specific company can purchase a rating and summary analysis for as little as $7.95 through the Weiss Ratings website at www.WeissRatings.com, or starting at $15 by calling 800-289-9222.

After a federal judge said its conduct "almost borders on criminal," Ford late last week settled a lawsuit involving the deaths of two passengers killed when a Ford E350 van flipped over on a Kentucky highway in 1996. The case had been scheduled to go to trial today (Monday) in Chicago.

Terms of the settlement were not disclosed. Ford faces numerous other lawsuits resulting from rollovers and other accidents involving the 15-passenger vans. The federal government is also investigating the safety of the Ford vans as well as other 15-passenger vans.

Attorney James Lowe of Cleveland, representing the victims, had demand that Ford turn over records of safety tests it had conducted on the vans but Ford denied it had any such data. Lowe claimed the company was deliberately concealing evidence showing the large vans, commonly used by schools and churches, are prone to roll over.

U.S. District Judge Robert Gettleman of Chicago ordered the company to turn over the safety records and gave Ford attorneys a tongue-lashing when they repeated the claim that no such records existed.

"I don't want to believe lawyers would come and risk their licenses and livelihoods and professional reputations by making false statements to a court ... it almost borders on criminal," Gettleman said.

The company agreed to a settlement a short time later.

Ford issued a statement denying any attempts to conceal or withhold information and repeated its contention that the van is safe.

The company noted that the 1996 accident occurred when the driver fell asleep at the wheel. Thirteen passengers were aboard at the time.

As the nation prepares for war with Iraq, thousands of military personnel are being called to active duty, making them eligible for debt relief under a World War II-era law known as the Soldiers and Sailors Credit Relief Act. The protection applies to debt of all kinds -- including auto loans, credit cards and mortgages. Unfortunately, some businesses don't seem to know that.

The law provides that when you are called to active duty, your lenders are required by law to immediately reduce the interest rate on your loan to 6 percent. You must, of course, notify the lender in writing. The letter must be sent by certified mail, return receipt requested, and should include a copy of your mobilization orders. Be sure to provide your full name and account number.

Your letter should also include a brief description of why your income has been significantly reduced by the call-up.

The lender is required by law to immediately comply with your request. The law provides that benefits must be retroactive. In other words, if you were called up in December 2002 and you notify your lenders in February 2003, they must credit you for payments you made in December and January at a higher rate.

Also, the reduction in the interest rate must by accompanied by a reduction in your monthly payment. The lender can't require you to make the same monthly payment and simply apply more of the payment to principal.

Note: the law applies only to debts incurred prior to reporting for active duty. If you buy a car while on leave, the law does not apply.

Leases

There are also special protections for leases and rentals. If you entered into a lease before being called into active duty, you may terminate the lease before to its expiration. You must give 30 days notice and the rent must be paid up when the lease is terminated.

As for evictions, if you or your dependants fall behind in lease or rent payments, you cannot be evicted without a court order. Only a court can order the eviction of military personnel and their dependants. You will have to satisfy the judge that military service has affected your ability to pay. The court may then order the eviction delayed for up to three months.

Other Issues

Private life insurance policies cannot lapse, terminate or be forfeited for nonpayment while you are on active duty -- and for two years thereafter.

Garnishments, attachments A court may stay or vacate any attachments or garnishments against active duty military personnel during the period of active duty and for 60 days after the active duty ends.

Other court actions If you are involved in other legal matters -- including divorce, bankruptcy and foreclosure -- you may request a delay until you have been released from active duty.

The statute of limitations is automatically extended to account for any delays you may be granted.

Legal Assistance

If you have any difficulties, questions or concerns about any of the matters mentioned above, you should consult with the legal assistance attorney assigned to your unit. Every unit has such an officer assigned to it.

By the way, these protections apply not only to units of the Army, Navy, Air Force and Marines but also to the Coast Guard, National Oceanic and Atmospheric Administration and officers of the Public Health Service.

Television infomercials and scores of Web sites promote the supposed benefits of "coral calcium," a dietary supplement that its promoters say can help cure "over 200 degenerative diseases caused by calcium deficiency."

Among the most aggressive promoters is Robert R. Barefoot, of Wickenberg, Arizona, who has gained a wide audience with his relentless advertising and marketing schemes. But medical authorities dispute Barefoot's claims.

"Calcium intake is an important factor in bone health and may play some role in the prevention of colon cancer. Barefoot has embellished these simple facts to create an elaborate scheme to promote his publications and coral calcium products," said Stephen Barrett, M.D., chairman of Quackwatch, a Web site that targets dubious medical claims.

"For people who need to consume extra calcium, purified calcium carbonate pills are safer and far less expensive than 'coral calcium,'" Barrett said.

Thousands of Web sites refer to Barefoot as "Dr. Robert Barefoot" or "Robert Barefoot, Ph.D." However, according to Barrett, he is not a medical doctor and does not have a Ph.D. degree.

The curriculum vitae that Barefoot submitted when he was called as a witness in a 1999 court action described his formal education after high school as "1964 -- Northern Alberta Institute of Technology, Chemistry" and "1967 -- Graduated with Honors, Chemical Research Technology."

"This means that his highest educational credential is a diploma that reflects three years of coursework, which is less than would be required to obtain a regular bachelor's level college degree!" Barrett said.

Kevin Trudeau, who hosts Barefoot's current infomercial, has been the object FTC regulatory action for false advertising. In 1998, in connection with six infomercials that he developed, Trudeau signed a consent agreement to pay $500,000 in consumer redress, be barred from making false claims for products in the future, and establish a $500,000 escrow account or performance bond to assure compliance, Barrett says in an article on his Web site.

As for "coral calcium," Barefoot's ads say it is derived from "remnants of living coral that have fallen from coral reefs, as a result of wave action or other natural processes." In fact, "coral remnants" are limestone, which coral organisms originally manufacture as a protective shell. Since coral reefs are protected by law, "coral calcium" is made by grinding up limestone that no longer contains live organisms.

Limestone has no unique health properties. It is merely calcium carbonate, with some magnesium and trace amounts of many other minerals. Limestone fertilizer, available at garden centers, costs as little as a dollar for an 80-pound bag.

More information is available on the Quackwatch site.