Last week the National Association of Mutual Insurance Companies announced plans to charter a thrift so its members can make loans to policyholders.

The Indianapolis-based group-whose 1,200 members account for a third of all property/casualty insurance premiums in the United States-figures the people who buy personal, agricultural, and small-business insurance will take out personal, farm, and small commercial loans as well.

The trade group follows five companies, including industry giant State Farm, to the Office of Thrift Supervision, where thrift charter applications are decided.

American Banker asked several people to react to the insurance industry's interest in entering the banking business.

Alice M. Dittman, chairman, Cornhusker Bank, Lincoln, Neb.

This is one more part of our business on the chopping block. We don't like it. They are chartering a unitary thrift that has more powers than a bank, and it gives them entry into the area of commerce. That is something that banks under the current rules cannot compete with.

David J. Pratt, senior vice president of federal affairs, American Insurance Association

We have been telling our members for more than a year that it would be a good idea to apply for a thrift charter. It is prudent to at least look at that option. This is a way for insurance companies to remain competitive as banks move into the insurance business.

A federal thrift charter offers an insurance company a uniform set of rules and a good distribution option. There's an increased recognition that this would be a way for insurance companies to enter the consolidated marketplace.

Kenneth Kehrer, insurance and banking consultant, Princeton, N.J.

Banking is much more profitable than the business of insurance. The rates of return on capital are 20% to 25%, and teens or single digits in the insurance industry. They (insurers) have the opportunity to get to these customers first in many cases. Banking seems particularly attractive to property/casualty insurers, probably because of the cross-selling opportunities from insuring things like autos and homes to lending on autos and homes.

Valerie Jordan, insurance and banking consultant, Belchertown, Mass.

It's a great opportunity for someone who is a one-man band to provide customers with farm, home, and equipment loans and then turning around and sell insurance for them. There are no pitfalls because they (insurers) have been lending money to ventures where they've been investing in land development deals. Insurance companies used to be the shopping mall kings.

Kenneth Abt, president, First Federal Savings of Middletown, N.Y.

There is starting to be a recognition that the thrift charter isn't the worst thing in the world. This ... really shows that HR 10 is going in the wrong direction. (HR 10, the financial services reform bill moving through Congress, would eliminate the federal thrift charter.)

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