WASHINGTON - The Office of Thrift Supervision on Wednesday granted a charter to the National Association of Mutual Insurance Cos., making it the first trade group authorized to operate a thrift.
Namic's membership comprises about 1,100 property and casualty insurance companies in more than 40 states, Canada, and Europe.
The group's thrift will be based in Carmel, Ind., but will operate nationwide under the name Assurance Partners Bank. David T. Fronek, formerly senior vice president of First Chicago NBD Corp.'s retail lending services division, is to be thrift's president and chief executive officer.
"This is a unique banking venture with outstanding market opportunities," Mr. Fronek said in an interview Wednesday. "But we're not the only game in town. There is a lot of competition."
Assurance Partners, which plans to open in June, has been initially capitalized with $12.5 million from 262 of Namic's members in 35 states and two Canadian provinces. Its products will be sold by independent agents representing these companies.
The thrift plans to start by offering home equity, automobile, personal, consumer, mortgage, and small-business loans. It could offer some savings products, but not checking accounts. Its initial primary funding source will be certificates of deposit from insurance company investors.
Though the government has granted charters to cooperatives, unions, and other nonprofits, this is the first time an application had been approved for an industry trade group. Regulators said this and other unique aspects of the application prompted them to zero in on the thrift's growth strategy, sales network, and capital.
"We want to make sure the growth is controlled and they can achieve a certain amount of profitability," said Scott M. Albinson, managing director of supervision at OTS.
Namic's business plan anticipates gaining only $100 million of assets during its first three years.
Assurance Partners' sales initially will be confined to the Indianapolis area and will expand to other Indiana markets this year. Expansion into other states is expected late this year or in early 2001, Mr. Fronek said. Regulators said the gradual rollout is designed to ensure that enough agents are interested in selling the products.
"It is kind of untested how successful that delivery mechanism will be," Mr. Albinson said. "It's not quite clear [whether agents] are all going to sign up for this," he said, adding, "we were comfortable there was a level of interest or we never would have approved it."
He called the large number of companies in different parts of the country that invested in the thrift "pretty impressive."
Nevertheless, regulators noted, Namic members are typically smaller firms and lack the deep pockets of their large insurance company brethren. As a condition of the approval, Assurance Partners must maintain core capital of at least 10% for the first five years. If capital falls below that level, the thrift would have to take prescribed steps to restore it, lest it face action by regulators.
Assurance Partners has no plans for a branch banking network, Mr. Fronek said.
"We're going to try to operate without bricks and mortar," he said. "Our delivery system is essentially using our agency network," mail and the Internet.
The thrift stills needs regulatory approval of a comprehensive management plan to ensure compliance with fair lending and other consumer protection laws. The plan must also cover loan underwriting standards and methods to handle consumer complaints.
Namic applied for the charter in June 1998. Mr. Albinson said that "we had to take a little extra time" to approve the application to discuss its concerns with the founders and to understand how the thrift's broad number of investors would exercise control.
The application by a larger insurance trade group - the Independent Insurance Agents of America - is still pending. Under that September 1998 filing, some 300,00 agents would be able to sell banking products and services.