When Principal Financial Group applied for a savings and loan charter in December, some observers predicted more insurers would follow its lead.

Last month some of them began to make their moves.

State Farm Mutual Auto Insurance Co., the largest home and auto insurer in the nation, hired a banker from First of America Bank Corp. to develop a plan to start a savings and loan. It will apply for a charter later this year.

Also last month, Minneapolis-based ReliaStar announced it plans to buy Citizens Community Bancshares, a $40 million-asset thrift in St. Cloud, Minn., so it can offer bank products including certificates of deposit and trust products to its insurance customers.

Meanwhile Chicago-based CNA Insurance Cos. is "assessing the options," said Robert G. Miller, vice president of corporate business development.

Call it revenge of the insurance companies. At a time when banks are making inroads in the insurance business, a growing number of insurance firms see the thrift charter as a doorway to dabbling in consumer banking.

Insurance companies are prohibited from owning banks, but they are allowed to own thrifts. The Office of Thrift Supervision regulates 18 insurance companies that have S&L charters.

Eventually the laws will change and the walls separating banks from insurance companies will crumble, predicts John G. Turner, chairman of ReliaStar. But before they do, a number of insurers may get a jump on things by attaining S&L charters so they can offer bank products through insurance offices.

"We'll continue to see insurance companies move toward broadening their product lines, especially those products that banks uniquely offer," said Mr. Turner, whose one-year term as chairman of the American Council of Life Insurers expired last November.

Mr. Turner said insurers have come a long way in warming to the idea of selling bank products. Indeed, the governing board of the life insurer's association is considering developing policy on the issue, said Kenneth Vest, a spokesman.

Steven Ollenburg, designated president of Principal Bank, the tentative name for the Iowa insurer's proposed thrift, said more insurers may move quickly to apply for thrift charters because there's concern that future laws won't let them.

"If you're going to do it, I think it's time to go ahead and do it," Mr. Ollenburg said. "Secondly, I think there's the continued blurring of lines between financial services."

As for State Farm, "We saw the trends and how the industry is moving," said spokesman Stephen Whitmer. "We don't want to be left behind."

The company, based in Bloomington, Ill., simply wants to serve its insurance customers, who will ultimately demand banking products, Mr. Whitmer said.

State Farm hired Stan Ommen, who was a regional president for First of America Illinois, on May 7. Hiring an experienced bank executive was one of the things the insurer needs to make application with the OTS, Mr. Whitmer said.

Of course, insurers are reacting to what has been happening in the banking industry-the push for expanded insurance powers. Andsome bankers say they have no problem competing with insurers for bank customers.

"As long as it works both ways," said Thomas Kelly, a spokesman for First Chicago NBD Corp. "As long as we're allowed to compete with them."

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