MADISON, Wis. — Recently announced staff reductions at CUNA Mutual Group are not an indication it's on the same path followed earlier by some troubled corporate credit unions, its chief executive says.
The company cut 73 staffers, most from its Madison office (read more about it at www.cujournal.com and search "CUNA Mutual") "We hear a bit of banter in the market, 'CUNA Mutual Group, you're just like the corporates, when are you going to fall over?'" CUNA Mutual CEO Jeff Post told Credit Union Journal. "But there are many differences between CUNA Mutual and the average corporate."
For one thing, the company best known for insuring CUs is capitalized at a rate of 20%, compared with the 5% at some corporates, Post said. "Second, my understanding is that the corporates had 60% of assets tied up in some kind of mortgage-related security, while ours is more like 9%," he added.
"We don't like to compare ourselves to the corporates. We feel as bad as anyone about what has happened," Post said, but after hearing such comparisons being made, he felt he needed to address concerns about CUNA Mutual's losses and financial standing. "You won't read about CUNA Mutual Group's demise any time soon. Did we take some losses? Absolutely, but our structure and our situation is different."
Post said the company's one-year-old trading desk has only gained in importance as a result of the market meltdown. "We got burned on residential mortgage-backed securities like everyone else because we relied on outside agencies just like everyone else," he said. "But that's why our trading desk is more critical than ever. We have put together our own internal ratings on any security we buy."
The recent joint venture between CUNA Mutual and Madison Investment Advisors means changes coming down the pike for both investment teams as they start working together, but it doesn't signal any move by CUNA Mutual to get out of this arena but rather an effort to build better expertise and spread the costs over a larger portfolio.
While CUNA Mutual Group recently reported cost-cutting measures of its own, Post said the company is seeing a sharper focus on trimming expenses among credit unions across the board-but they appear to being very careful not to cut corners in the process.
"We see a sharper focus on costs; that's why we're driving $50 million of costs out of our operation," he said. "What we see more than anything else, especially in the sand states, is cutting back on marginal business lines they're in, CUSO, or other things that aren't making money. They're asking, 'Can I afford to continue in this business?'"
But those CUs not cutting back on their bond coverage. In fact, Post said, if anything, CUs looking size up, not down, as they look to protect themselves the best they can.
Just as you can't cost-cut your way to revenue, Post said that when credit unions aren't busy trying to control expenses, they are looking at the other side of the balance sheet for revenue opportunities. "We have some products, like Member Connect, which really require almost no investment but have substantial revenue opportunities, and we can't keep it on the shelf. But the stuff that requires an upfront investment, we are seeing those slowing down."
Despite the troubled times, CUNA Mutual remains committed to serving credit unions, Post said, noting the company's investment in the ongoing legal contest over UBIT between credit unions and the IRS.
"We still support the credit union movements, the leagues, CUNA. We roll back about $40 million to $50 million a year to the system," he said. "We will always continue to drive change; change for the better."
