American General Corp. is joining the growing ranks of insurers starting trust companies to hold onto investment clients.
Insurance companies-including Aetna Life and Casualty and New York Life Insurance Co.-have been opening trust subsidiaries to handle more of their customers' needs, including institutional custody and even personal trust business.
Houston-based American General received approval this month from the Texas Department of Banking to open Valic Trust Co. as a wholly owned subsidiary of the underwriter's Variable Annuity Life Insurance Co.
A $30 billion-asset company, Valic manages retirement programs for more than 22,000 organizations and serves more than 1.5 million participant accounts.
Valic made headlines in 1995 when the Supreme Court rejected its suit against NationsBank Corp. The pivotal ruling gave banks the authority to sell annuities.
Ironically, Valic now is entering a business-custody-traditionally done by banks.
"It's a limited-purpose trust company to perform custodialfunctions for our regular retirement plan business customers," a Valic spokeswoman said. The company declined to comment further.
Other insurers starting trust companies in the United States in recent years include Allmerica Financial Corp., Pacific Mutual Life Insurance Co., Penn Mutual Insurance Co., Phoenix Home Life Mutual Insurance Co., Provident Mutual Life Insurance Co., and Sun Life Assurance of Canada.
Valic Trust, capitalized with $2 million, received a warm welcome from Texas regulators, who are reveling in the state's economic resurgence.
"This new Texas state-chartered trust company is indicative of the strong financial market Texas is currently exhibiting," Catherine A. Ghiglieri, commissioner of the state banking department, said in a press release.
"Fiduciary services in nonbank financial businesses continue to grow in Texas, reflecting both demand and investor willingness," Ms. Ghiglieri added.