Seeking A New Policy For Growth

With their numbers dwindling, black insurers map out a plan for survival

Last October, in a quiet ceremony, Nathan A. Chapman Jr., founder of Baltimore-based Chapman Worldwide Financial Services, proposed marriage to Universal Life Insurance Co. (No. 7 on the be insurance companies with assets of $9.3 million). Size does count, Chapman has observed, and that’s why he’s putting his company’s considerable resources behind Universal. When the deal is complete, the new company will be christened Chapman Universal.

"We have a Travelers’ type of strategy," says the acquisition-hungry investment banker, referring to the $83 billion merger between Travelers Group Inc. and Citicorp that created the mega-institution Citigroup. "There’s a need to address the total needs of clients and be able to pinpoint products that help them accomplish their financial objectives. By having all those products under one roof, we think we’ll be better able to accomplish that."

Very little fanfare attended the move, Chapman explains, because "we want to make sure that we announce the complete restructuring [of Universal] with new product lines, an expanded sales force [in place] and Internet access."

Earlier in the year, Universal had streamlined its operations, transferring the management of its life policies to a Houston firm, American Capitol Insurance Co., and cutting its sales force from approximately 320 agents to 40. In addition, the firm closed 19 district offices in as many cities. The leaner Universal began entertaining suitors. "Our board had been looking to either go with a merger with one of the other predominantly black companies or do something like this," says Universal COO Eldredge M. Williams. "I think Mr. Chapman just happened to be the right person at the right time, and he seems to have some good plans for Universal."

In fact, Williams believes that the survival of black-owned insurance companies will depend on their willingness to join forces with each other or form other strategic alliances, such as the union between Universal and Chapman.

They had better move quickly to stop the erosion of their ranks. The past decade has been a virtual bloodbath: the number of black-owned insurers has declined by roughly 68%, from 31 on the 1989 be insurance companies list to 10 on this year’s ranking. The casualties have included such stalwarts as Chicago’s Supreme Life Insurance Co. of America; Louisville, Kentucky-based Mammoth Life and Accident Insurance Co. and New York’s United Mutual Life Insurance Co.

To compete in today’s environment, the survivors have embraced "the bigger the better" as their motto and sought to form lucrative partnerships that will enable their firms to offer a myriad of products under one roof. The jury is still out on whether marriages such as Chapman-Universal will reap positive earnings growth or an influx of customers.

According to Robert Hartwig, Ph.D., vice president and chief economist at the Insurance Information Institute in New York, even the big boys have been feeling the pinch. "Competition is very intense, which is keeping down prices, so companies are merging to bolster revenues," says Hartwig. In

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