Union Bank of California says its recent purchase of CNA Trust Co.’s retirement plan trust and record keeping business is a strategic move to bolster sales in a mature market and increase its distribution reach.
Piet Westerbeek, the executive vice president and division head for institutional services and asset management, said the San Francisco bank made the deal because the Chicago insurer CNA’s trust unit had built a successful business and the purchase gave Union Bank a new distribution channel, outsourcing.
“This acquisition makes Union Bank one of the top five banks in this business,” he said. And, pro forma, the deal moves the bank into 25th place in Spectrem Group’s ranking of retirement plans served.
The purchase “reflects the changing plan service environment and underscores our commitment to grow our retirement plan business,” said Mr. Westerbeek. His competitors for retirement plan sales include Wachovia Retirement Services; CitiStreet, the joint venture between Citigroup Inc. and State Street Corp.; and Wells Fargo & Co.
The deal also doubled Union Bank’s retirement plan business, said Mr. Westerbeek, bringing its defined contribution assets to more than $10 billion.
Another thing that made CNA’s trust company attractive to Union Bank was its access to small 401(k) plans. “We have been in the mid- and large-sized end of the market and have had some success winning new business, but there is an end game to that,” Mr. Westerbeek said.
“There’s a point where you are not going to sign on a lot of new plans,” he said. Mr. Westerbeek explained that CNA Trust specialized in small-plan management, where the most opportunity lies in the 401(k) sector.
The outsourcing business that came with the deal and the fact that it operates under a fee-based system were also attractive to Union Bank. It will now be able to offer products to other service providers and not just through direct sales to 401(k) plan sponsors.
Location also played a role in the deal, he said. The CNA trust unit is in Costa Mesa, Calif., in the Los Angeles area, which complements Union Bank’s headquarters in San Francisco.
Mr. Westerbeek said that CNA Trust had approached Union Bank with the idea of a deal, noting that it was “itself looking to liquidate and sell off parts of its business to get back to its core business.”
Calls to CNA Trust were not returned by press time.
Regarding further deals, Mr. Westerbeek said the bank is always looking for suitable opportunities, especially in its institutional trust and asset management businesses, but he declined to disclose its expansion plans.
Union Bank, the flagship subsidiary of UnionBanCal Corp., serves retirement plans in 40 states, Puerto Rico, Canada, and Guam. CNA Trust specializes in retirement plan services for insurance companies, mutual fund families, broker-dealers, and other financial institutions.
