Insurance Trade Group Plans Thrift Of Its Own

An insurance industry trade group announced plans Tuesday to charter a federal thrift so its members may lend to policyholders.

The move by the National Association of Mutual Insurance Companies, coming on the heels of similar plans by insurance companies, highlights the convergence of rival segments of the financial services business.

H. Rodgin Cohen, a partner at the New York law firm of Sullivan & Cromwell, called the application "groundbreaking."

It is part of the march toward "a homogenization of financial services," he said. "As insurance companies see banks offering what were traditionally insurance products, insurance companies want to offer what were traditionally bank products. But they are all financial services."

The Indianapolis-based association said it would file an application at the Office of Thrift Supervision by yearend. If approved, it would mark the first time a trade group has obtained a thrift charter.

Starting in 1998, the proposed institution-NAMIC Bank SA-would offer automobile, farm, and small business loans through the group's 1,200 property and casualty insurance company members.

Thrift industry leaders cheered the move. Paul A. Schosberg, president of America's Community Bankers, said the application should bolster efforts to save the thrift charter, which Congress is considering abolishing.

"It underscores the economic viability of the charter," Mr. Schosberg said. "It also adds to our army of allies."

However, banking industry representatives questioned why NAMIC didn't create a finance company if it only wants to make loans.

"We would like to see what the heck they are really up to," said James D. McLaughlin, director of regulatory and trust affairs for the American Bankers Association. "You do not need a thrift charter to make loans."

Larry L. Forrester, NAMIC's president, said the group chose a thrift charter because it allows nationwide operations under a single set of regulations. Finance companies are subject to the rules in various states.

The thrift would give NAMIC's member companies the ability to cross- market complementary banking products, he said. Large banks and insurance companies are striking alliances to offer products jointly and threatening to shut out the regional and local insurance companies that NAMIC represents.

"It permits our companies to have access to these financial services and remain independent," Mr. Forrester said.

Loans would be funded as member companies deposited excess cash in certificates of deposits. Mr. Forrester said the thrift would not offer checking or other retail deposit accounts.

NAMIC Bank plans to raise $15 million in a stock offering late this year. The trade association would own class A shares in the thrift's holding company and control a majority of the board; members would own class B shares.

The insurance companies with requests for thrift charters pending at OTS are State Farm Mutual Automobile Insurance Co., Principal Financial Group, Transamerica Corp., and Travelers Group. Reliastar Financial Corp. requested clearance last week to purchase a St. Cloud, Minn., thrift.

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