W. R. Berkley Co. has sold its interest in InsurBanc, the savings bank created by the Independent Insurance Agents & Brokers of America to serve independent agents, as part of a trend by insurance companies to divest their thrifts in an effort to avoid federal regulation.
The bank was sold to Connecticut Community Bank N.A., a bank controlled by W.R. Berkley, W.R. Berkley’s chairman and chief executive officer.
W.R. Berkley Co. will receive approximately $15.5 million in cash and securities from CCB as a result of the transaction. The Company also received 493,051 preferred shares of ACBancorp.
The IIABA said it will remain a minority shareholder in InsurBanc, and that the president and CEO of InsurBanc, David W. Tralka, the president and CEO of CCB. All employees of InsurBanc will become employees of CCB.
W.R. Berkley said that the company has the right to require its chairman and CEO to purchase its ACBancorp shares for an amount equal to approximately $1.5 million. The company can do this at any time prior to the third anniversary of the closing of the transaction.
The company acquired InsurBanc, which was created by the Independent Insurance Agents and Brokers of America but which was struggling to garner enough assets to make it viable, in 2001, for $22 million.
Berkley owns 75.5 percent of CCB. Berkley’s son, W. Robert Jr., president and chief operating officer of W.R. Berkley, owns 0.5 percent of the bank.
The data was contained in a proxy statement filed this afternoon by W.R. Berkley with the Securities and Exchange Commission. According to the proxy statement, the sale of InsurBanc to Connecticut Community Bank N.A. became final April 1.
Insurance companies are divesting their thrifts because under the Gramm-Leach Bliley financial services reform law, they are now subject to stronger scrutiny than before by the Federal Reserve Board as a thrift holding company.
Northwestern Mutual, Prudential Financial and Massachusetts Mutual have all reduced their thrifts to trust banks in order to escape Fed scrutiny as a thrift holding company.
In the proxy statement, W.R. Berkley company justified its divesture of the thrift because, as a savings and loan holding company, W.R. Berkley would have become subject to enhanced regulation by the Fed.