CUNA Mutual Group is in danger of losing what may be its biggest customer.
In an open letter to select industry officials, Citizens Equity Federal Credit Union chief executive John Siefken blasted the industry's largest insurance provider, claiming its prices are too high and that it's in the pocket of trade group insiders.
CUNA Mutual Group "is starting to show signs of being noncompetitive in the bond and credit insurance areas, as many of you have already learned," Mr. Siefken wrote in the Sept. 22 letter.
"Once that is reconfirmed through competitive bidding, we will leave them in a heartbeat," he wrote, even through Citizens Equity is the corporate's "largest credit insurance premium provider."
Mr. Siefken, who has been one of the Madison, Wis., insurer's biggest critics, declined in an interview to expand on the letter.
"I think it speaks for itself," he said.
He declined to say how much Citizens Equity paid in premiums last year, but he said CUNA Mutual had told him the credit union was its biggest contributor.
CUNA spokesman Larry Blanchard, asked in an interview if the threat was taken seriously, replied that Mr. Siefken and Citizens Equity are "good partners of CUNA Mutual."
"We've had an excellent relationship," Mr. Blanchard said, "and we look forward to an excellent relationship."
But clearly the Peoria, Ill., credit union executive doesn't think everything is excellent. In his open letter he charges that CUNA is becoming less competitive because it is losing money and focus by branching into new lines of business.
Mr. Siefken cited the mutual insurer's financial management program, Plan America, and its failed line of mutual funds as examples.
CUNA Mutual's board "just doesn't understand" that the operation "is supposed to be a credit union insurance company," the letter said.
Mr. Siefken said in his letter that he pulled Citizens Equity out of Plan America when he found the program's employees "worked hard to disintermediate funds from credit unions."
Citizens Equity never considered selling the insurer's line of mutual funds, Mr. Siefken added. Those products were folded earlier this year for lack of interest.
Mr. Blanchard denied that any of CUNA Mutual's ventures had jacked up the prices of its core insurance products.
Mr. Siefken claimed in his letter that the only way to change the status quo at the insurer was to change the board, which he charged was strongly influenced by the Association of Credit Union League Executives.
By recently increasing its retirement age, the board blocked new blood from coming in, Mr. Siefken wrote. Instead, it will continue to be "a dumping ground for those who play ball" with the executives group, he declared.
Mr. Siefken has praised CUNA Mutual president Mike Kitchen, but in the letter he said he doubted Mr. Kitchen could force the board to change. The Mr. Kitchen asked for a year to show that CUNA Mutual insurance is a better deal for Citizens Equity than competitors offer, Mr. Siefken wrote.
"We are giving Mike the time," he wrote. However, Citizens Equity believes that CUNA Mutual "will continue having expense problems" if its board "insists on subsidizing noninsurance programs and operations with our insurance premiums," Mr. Siefken wrote.
"The makeup of his board makes me believe that Mike is fighting a losing battle."
Mr. Blanchard defended the board's decision to boost the retirement age to 70 from 68.
"It wasn't too long ago that people retired at 62 or 65, but now people work longer," he said. "People are healthier, more vibrant." Mr. Blanchard said the average age of the 17 directors was in the early 60s.
Mr. Blanchard declined to comment on Mr. Siefken's charge that the board was controlled by the league executives association.
"I'm not sure that warrants a response," he said.
Mr. Blanchard pointed out that CUNA Mutual has received an A rating from A.M. Best and a AA rating from Duff & Phelps.
But Mr. Siefken's letter makes it clear that high grades aren't enough.
"There can be no loyalty to a group that is not competitive and does not represent credit unions," he wrote. It is not enough that CUNA Mutual says it is a credit union insurance company, Mr. Siefken wrote. "In the future, they will have to competitively bid for our business."