Cigna Corp.’s getting approval last month to change its Illinois-chartered trust company, CG Trust Co., into a nationally chartered thrift called Cigna Bank and Trust has put a new wrinkle in worksite marketing and the insurer-bank combination.

Executives of the new thrift, which is to operate through the Internet and by telephone, are not planning to sell banking products to the insurer’s traditional customers. Instead, Cigna Bank and Trust, which is to open its virtual doors next month, will prospect among employees of companies that have their retirement and employee benefits plans with Cigna.

Martin J. Geitz, president of Cigna Bank and Trust, said its parent company already has access to 1.6 million people through its retirement plans and even more through its group life plans. He hopes the thrift will attract those who want to manage their bank and retirement accounts in one place.

Cigna Corp. has $95.1 billion of assets under management, including $55.2 billion in the retirement benefits and investment services division, and it will only be able to offer banking services to plan participants whose employers approve it. The company is contacting employers to see whether they will let Cigna solicit their workers.

His initial prospecting strategy will be to offer checking and savings accounts, home loans, certificates of deposit, individual retirement accounts, and other banking products, Mr. Geitz said. “About 80% of people’s wealth is in the workplace, with retirement savings and salary,” he said.

Cigna Bank and Trust will have no branches or automated teller machines, but it will market its products through direct mail and quarterly account statements.

Cigna is developing a Web site that will offer banking and retirement products and services. The site is scheduled to be started in the second half of the year. Until then the thrift will operate through a call center.

Mr. Geitz also said he plans for the thrift to offer loan options to employees who are thinking about borrowing against their 401(k) assets.

Borrowing against these assets is not always the best option, Mr. Geitz said. For starters, employees who are fired or leave the company of their own volition must either pay back the assets before leaving or pay an expensive penalty.

Also, “employers are generally not happy about employees’ borrowing from their 401(k) plan,” he said. “It’s an administrative hassle.”

The Web site’s financial planning tools will compare borrowing options and let employees figure out whether borrowing from a 401(k) is the best solution, he said.

Mr. Geitz said Cigna is looking at how many of its retirement plan customers would actually be interested in these banking services, so he had no projections of market penetration.

The thrift also intends to offer its services to group life beneficiaries. “About 20,000 customers roll through our life insurance program at any given time,” he said.

Mr. Geitz said the company paid out more than $1 billion last year in group life claims. The initial payouts usually go into a draft account, a type of interest-bearing checking account insurance companies maintain for beneficiaries. Usually, about 20% to 30% of the beneficiaries move that money into their banks, he said.

He said he would like Cigna to be able to provide both banking and investment services to hold on to those customer assets.

Cigna sold its individual life business to Lincoln National in 1998.

Ann Mahrdt, a consultant at Spectrem Group in New York, said that opening a thrift offers benefits for a retirement plan provider that go beyond the fees it could earn.

“Providers are looking for ways to get a better relationship or get loyalty tied to them among their retirement population,” she said. “Their ultimate goal is to capture the IRA rollover.”

Spectrem research shows that when employees leave a company and must roll over their 401(k) into an IRA, only 20% select their 401(k) provider to handle the IRA, Ms. Mahrdt said, so that when employees leave, the provider loses customers.

All retirement plan providers are trying to keep these customers loyal to them, she said. “One way to do that is to be their provider of choice for all their financial services.”

This is not as difficult to do as some may think, Ms. Mahrdt said. According to Spectrem research, the 401(k) provider is the primary financial services provider for some people — notably the young affluent — because that is where these people keep the largest share of their assets.

But other observers said they are skeptical that Cigna could turn enough of its retirement customers into banking customers to make it worth the trouble.

Cigna’s effort is “an example of trying to pick off small pieces of bank business,” said Kenneth Kehrer, president of Kenneth Kehrer Associates in Princeton, N.J. “It seems a stretch that the retirement plan would be the gateway to everything else.”

Customers with no other financial services needs besides a checking account and a retirement plan might find the combination convenient, but those with multiple accounts — retirement, banking, mutual fund, and brokerage — would be better served by leaving their accounts where they are and using an account aggregator, he said.

Valerie Jordan, president of Jordan & Jordan Associates in Belchertown, Mass., said that because the convergence of banks and insurance is only in its infancy, cross-selling plans like Cigna’s are just a first step.

“Cross-selling opportunities are multifaceted,” she said, and it is difficult to predict their success or failure simply by looking at the first group of customers an insurer approaches.

Though a lot of insurers have jumped on the bandwagon by offering online banking — “it’s a craze,” she said — the verdict is still out on whether these insurer-owned thrifts will be able to attract enough customers to be profitable.

“You still have a cost of doing business,” when opening a thrift, she said. The insurers must ask themselves: “Is it worth it for me as a company to offer this service? In some instances, the answer is ‘no.’”


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