Phoenix Home Life Mutual Insurance Co. is launching its own Connecticut-based trust subsidiary, eliminating the need to use banks as trustees for its clients' investment management needs.
The Hartford, Conn.-based insurance company is establishing Phoenix Charter Oak Trust Co. for the clients of its investment management firm, Phoenix, Duff & Phelps, which has $36 billion under management.
Approval of permanent trust powers from the Connecticut Banking Department is expected in the next two weeks.
Phoenix is latest example of an insurance underwriter that has chosen to enter the trust business, a traditional province of banks.
Insurers are making this move as part of a defensive strategy to retain investment assets that otherwise might go to a bank or another trustee. The firms also are trying to get their traditional insurance customers to open trust accounts with them.
"Major insurance companies view limited trust companies as a way of addressing their investment customers" said John S. Carusone, president of Bank Analysis Center Inc., a Hartford-based investment banking firm. '
Other insurance companies with trust subsidiaries include New York Life Insurance Co.'s NYL Trust Co., Penn Mutual Insurance Co.'s Penn Trust Co., Aetna Life and Casualty's AETrust Co., Pacific Mutual Life Insurance Co.'s affiliate Columbus Circle Trust Co., Sun Life Assurance's New London Trust and Provident Mutual Life Insurance Co.'s American Guaranty and Trust.
Phoenix's core clientele of small-business owners and wealthy individuals will be targeted by its national distribution network of 2,000 career agents and brokers.
"It is pointed at the high end of the individual life insurance market," said Richard H. Booth, executive vice president of strategic development of Phoenix Home Life Mutual and president of its trust company.
Phoenix Charter Oak Trust will manage, administer and invest trust funds in managed accounts of at least $1 million. The company will also accept smaller investments in its 21 mutual funds.
According to its trust application, Phoenix anticipates over $600 million in trust assets under management by 1999, primarily from individual clients.
"Trust products and estate planning are very much a need that they have and they are filling that need outside of Phoenix Home Life," Mr. Booth added.
Without trust powers, insurance companies have no way to retain assets under management that leave when life insurance policy beneficiaries receive payment.
"They take that money in a lump sum and walk across the street to a trust company," said Robert M. Taylor 3d, an attorney who focuses on banking and insurance regulation at Day, Berry & Howard in Hartford.