CUNA Mutual Group acquisition doubles firm's retirement business

Karen Rivedal

Jun. 24, 2009 (McClatchy-Tribune Regional News delivered by Newstex) -- CUNA Mutual Group will double its stake in the retirement-plan business in a single stroke next week by purchasing a Kansas-based administrator of 401(k), profit-sharing and related plans.

CUNA Mutual's acquisition of CPI Qualified Plan Consultants in Great Bend, Kan., will result in the Madison-based insurance company servicing about 7,500 retirement plans with assets nearing $10 billion. It also represents the company's first full-scale venture beyond the credit-union marketplace for one of its core products, company leaders said.

"We think it's a great time to do this from a strategic standpoint," said Kevin Thompson, CUNA Mutual senior vice president of asset accumulation, in an interview Wednesday. "CUNA Mutual is a strong organization that is committed to growing."

The sale, for an undisclosed cash sum, is expected to be completed Tuesday.

CUNA Mutual officials said CPI is the largest employee-owned, third-party administrator of retirement plans in the U.S. Incorporated in 1972, the company has more than 400 employees who keep records for employee benefit plans, including 401(k), profit-sharing, 403(b) retirement plans, flexible benefit and non-qualified deferred-compensation retirement plans.

"It's an extremely good fit -- culturally, operationally and financially," Thompson said, noting it was important to member-owned CUNA Mutual to find a similarly structured company to buy. "This acquisition demonstrates our commitment to the retirement-plan marketplace and is a critical first step in supporting our rapid expansion into new markets."

Other similarities between the two firms include that they are both Midwest-based, with a majority of their retirement-plan business in the micro- and small-plan market, defined as including plans with assets up to $10 million.

CUNA Mutual provides financial services including insurance to credit unions and their members. Its core products include credit insurance; property, life and casualty insurance; and fidelity bonds. CUNA Mutual also currently administers more than 4,000 retirement plans with assets totaling $5 billion for credit union members around the nation.

The acquisition of CPI will not trigger any job cuts or other business changes at either CUNA Mutual or CPI, Thompson said, and the hope is that the purchase will eventually create new jobs.

"The strategy behind the acquisition is to dramatically grow the business through additional distribution outlets," Thompson said. "CPI has 13 regional sales offices that are not in the credit-union marketplace. So we would hope (the acquisition) would have a positive effect on jobs in the Madison and Great Bend areas."

CUNA Mutual employs about 4,000 people, including 2,000 in Madison. Some 800 Madison employees are represented by a union.

News of the acquisition of CPI comes less than three weeks after CUNA Mutual leaders announced a plan to shave $50 million in operating expenses this year in response to lagging revenues during the national recession.

Thompson on Wednesday noted that funds for the CPI purchase came not from operating revenues but from the company's stable assets.

Founded in Madison in 1935, CUNA Mutual is seen as a leader in its core credit-union related businesses, capturing about 95 percent of the credit union bond market, 88 percent of property and casualty insurance coverage; 65 percent of the credit insurance market; and 55 percent of the retirement fund market.

Thompson said CUNA Mutual's purchase of CPI would not increase that 55 percent credit-union market share because CPI handles plans mostly for non-credit union members. And that was a key reason CUNA Mutual wanted it.

"We set a strategy as an organization under (CEO) Jeff Post to look for opportunities to diversify into new markets," Thompson said. "We will maintain our absolute commitment to credit unions while looking for ways to grow, and because of those very high market shares (in the credit union business), we needed to look for additional markets and opportunities and we think this (acquisition) is an excellent example of that."

CUNA Mutual's other recent forays into market and/or product diversification include crop insurance and smaller-scale, experimental offerings of student loans and credit insurance for farm cooperatives. Earlier this week, CUNA Mutual also announced a partnership with health-insurer Humana (NYSE:HUM) to allow the marketing of Medicare-related policies to credit unions nationwide starting later this year.

Thompson said CUNA Mutual leaders had been researching a possible retirement-plan expansion, ending with the CPI acquisition, for about a year and a half.

According to a news release issued by CUNA Mutual, industry expert Fred Barstein, CEO of 401kExchange, described the acquisition as a blending of "two well-run firms with solid upper management" that would raise CUNA Mutual's profile while strengthening CPI's bottom line.

"It's not often you find such a good match that will be beneficial to everybody," Barstein said. "The instant increase in size and scale will make CUNA Mutual Group a more well-known name in the retirement marketplace."

CUNA Mutual was ranked No. 1 last year in investment and recordkeeping by 401kExchange.com, while CPI earned No. 2 and No. 3 rankings in the same categories, officials said.

CUNA Mutual last year finished a three-year transformation under Post in which about 600 Madison jobs were eliminated, some operations were moved to Texas and Iowa, the sale force was reorganized and company operations were streamlined. At the end of 2008, CUNA Mutual also ended company-paid health benefits for retirees and salaries for non-union employees were frozen for this year.

Under the cost-cutting plan announced June 5, the company is eliminating 73 jobs -- including 52 in Madison -- by early July and making its pension benefits generally less generous for remaining non-union employees. Other expense savings were to come from project reductions and eliminations, less contracted work and reduced company travel.

CUNA Mutual last year posted a net loss of $149 million following net income of $184 million in 2007. CUNA Mutual has been operating in a shrinking and more competitive marketplace for several years, as credit unions consolidate and some turn to other insurance companies for coverage.

Newstex ID: 35992054