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Insurance association for mutual companies wins approval to open federal bank

A trade association representing mutual (policyholder-owned) insurance companies has received the blessing of federal regulators to open a new financial institution.

Regulators say yes
to New York Life

By Associated Press

Federal regulators have given New York Life Insurance Co., one of the nation's biggest insurers, permission to operate a federally insured thrift specializing in trust services.

The Office of Thrift Supervision announced Feb. 17 its approval for New York Life, which is owned by its policyholders, to open New York Life Trust Co.

New York Life, based in Manhattan, has some $90.4 billion in assets, 3 million policyholders, and 10,000 agents nationwide. The new thrift will offer trust services, which include acting as an investment adviser or custodian of trust funds or property held in trust, executing wills, and acting as guardian of an estate or trustee of an IRA account.

The Office of Thrift Supervision on Feb. 15 approved a thrift charter sought by the National Association of Mutual Insurance Companies (NAMIC).

The federal thrift, to be named Assurance Partners Bank, was created with the backing of a consortium of 262 insurance companies in 35 states and two Canadian provinces. Those firms belong to NAMIC, which includes about 1,200 property and casualty insurance companies in more than 40 states, Canada, and Europe.

Bank president David T. Fronek says the insurance companies belonging to NAMIC effectively will own the bank. NAMIC-member insurance companies invested $12.5 million in the bank prior to the filing of the thrift charter application with the OTC in July 1998.

"They would have an opportunity at marketing banking-related products to their policyholders in conjunction with their agents,'' Fronek says of the insurance companies. "Their involvement with the bank is in providing referrals.''

Scheduled to begin operating in June, Assurance Partners will be run from an office in Carmel, Ind. Initially, the bank plans to offer home equity, automobile, personal, consumer loans, residential first-mortgage loans, and small-business loans. The bank will be open to the general public, but will not offer checking or savings accounts or insurance products.

"You wouldn't consider us to be a bricks-and-mortar operation,'' Fronek says. Loans will be offered through insurance company members of NAMIC and their agents in the Indianapolis area. However, the bank plans to expand to other states through its affiliations with insurance companies and their agents.

"We'll see how it progresses in the next two, three, or four years,'' Fronek says. Money for the loans will come from insurance companies that belong to NAMIC, as well as from individual investors in the thrift.

Approval by the Federal Deposit Insurance Corp., which is reviewing the deposit insurance application, is pending.

While the bank is open to the public, Fronek expects most of the customers to be policyholders. And the bank's marketing research has found that many of the policyholders live in small towns and rural areas where there is less banking competition.

Editor's Note: The Assurance Partner's Bank has since changed its name to the American Partners Bank.  Jan. 9, 2007

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