A Minnesota insurance company plans to buy a local thrift to recapture some of the money it pays out to policyholders each year.
ReliastarFinancial Corp.'s deal to buy Citizens Community Bancshares, St. Cloud, Minn., illustrates the interest insurance companies have taken in owning a piece of the S&L industry. The Reliastar acquisition is expected to close in the third quarter.
Fourteen insurance holding companies own thrifts, and observers expect more acquisitions. The Office of Thrift Supervision is reviewing a request by Principal Financial Group, the nation's 10th-largest life insurer, to enter the thrift business.
"I'm surprised we haven't seen more of this," said Ronald R. Glancz, a partner at the Venable law firm in Washington. "Insurance companies provide services to consumers. And that's what thrifts are-they are consumer banks. It's a very good mix."
Reliastar, which has more than $19 billion of assets, said it plans to buy the $40 million-asset Citizens so it can offer consumer credit and deposit products such as credit cards, certificates of deposit, and money market accounts.
John G. Turner, Reliastar's chairman and chief executive officer, said it would sell the thrift's products through Reliastar offices.
"Our intent is not to establish a network of community banks throughout the country," Mr. Turner said in a written statement.
Michelle Giordano, senior life insurance analyst at J.P. Morgan Securities in New York, said Reliastar studied what happened to its annual $2 billion in annuity and life insurance payouts and discovered that many customers put their money in CDs.
She said the company wanted access to a thrift so it could provide CDs and cross-sell its products to thrift customers.
"They're looking for a thrift that would take deposits, and this would suit them very well," Ms. Giordano said. "It fits in with their strategy."
Observers say more nonbanking companies are discovering the benefits of the thrift charter.
Mr. Glancz said he's been approached by a major chain of home improvement stores that's considering buying a thrift so it can provide financing for customers.
The advantages of buying a thrift include the ability to borrow cheaply from Federal Home Loan banks, Mr. Glancz said.
Under federal law, nonbanking organizations can own only one thrift, but they can easily branch across state lines.
"The beauty of it is you don't need to own more than one," Mr. Glancz said. "You can have offices in all 50 states."
