State Mutual's plan to go public seen bolstering fund unit.

Executives at 440 Financial Group are expecting their company to reap big benefits from a decision by its parent to go public.

State Mutual Life Assurance Co., a Massachusetts insurance company owned by its policyholders, is converting to a public stock company. The move, known in the insurance industry as a "demutualization," is designed to improve State Mutual's access to capital.

The ability to more easily raise capital means State Mutual will be better equipped to invest in its growing businesses, company executives say.

One of those businesses is 440 Financial, a mutual fund distribution firm based in Worcester, Mass. Among its biggest bank clients: Fleet Financial Group and Banc One Corp.

Beefing Up Research

Robert Legasey, a 440 executive vice president, said he would like additional capital to build 440's market research function and to expand its capabilities in the 401(k) retirement services business.

"When you buy market research, you buy what everyone else is buying," Mr. Legasey said. "We want to provide something more targeted to our customers' needs."

Indeed, 440 Financial's marketing savvy is believed to have helped it land the Fleet Financial and Banc One accounts. In telemarketing circles, it is known as the servicer behind the flowers-by-phone business known as 1-800 Flowers.

Technology Needs

As the bank mutual fund industry grows, the distributors of the funds are finding that they, too, must grow. Sophisticated systems are needed to properly service a growing family of funds, and that is sending some bank distributors searching for new sources of capital.

"There is very little room for small players in this business," said Eli Neusner of Cerulli Associates Inc., a Boston-based consulting firm. "There are small companies out there, but to be successful going forward, you are going to need to be big."

Another bank fund distributor, Winsbury Co. of Columbus, Ohio, gained deeper pockets in October when it was purchased by Bisys, a bank technology firm in Little Falls, N.J.

Approvals Pending

State Mutual began to demutualize last summer. The process, which must be approved by policyholders and a bevy of regulators, is expected to be completed in the summer of 1994, said John F. Kelly, the company's general counsel.

As part of the demutualization, State Mutual plans to merge with its public affiliate, Allmerica Property and Casualty Cos. The combined entity would be a public holding company that would own State Mutual and all of Allmerica's operating subsidiaries, including 440 Financial.

When the demutualization is complete, Mr. Kelly said, the holding company would consider raising additional capital through a public offering.

According to Mr. Legasey, 440 Financial, which has 900 full-time employees, is in discussions with five or six potential new bank clients.

Besides investing in the company's market research systems, Mr. Legasey said new capital could be used to beef up its 401(k) capabilities, possibly by offering a retirement product in conjunction with Banc One or Fleet.

For reprint and licensing requests for this article, click here.
MORE FROM AMERICAN BANKER