Nearly eight years after the $851 million Arrowhead Credit Union bought a firm to bring a plethora of insurance services to its membership, it recently announced that losses and lackluster profits led to the cooperative selling the subsidiary.
The San Bernardino, Calif.-based Arrowhead sold Sawyer Cook Insurance for an undisclosed price on Feb. 26, the CU's CEO, Larry Sharp, confirmed with Credit Union Times. The firm was acquired by First Line Insurance Services, which has offices in southern California and Colorado and clients nationwide. FLIS negotiates with large and small insurance providers to bring services to its clients and is a direct managing general agent for Lloyds of London, according to Arrowhead.
"It had not been profitable for us. It had losses that we did not want," Sharp said. "If you got a company that's not producing income, the decision is to either fix it or sell it."
Sharp said Arrowhead has an agreement that allows it to continue serving Arrowhead members. The agreement does not have an end date, but it can be canceled with notice, he added. The number of and total dollar amount of members' insurance policies was not available. When members click on the insurance link on Arrowhead's Web site, they are directed to Sawyer Cook's site.
"The real issue for us is we're able to move off losses we were having on an ongoing basis. Being in this economy and the times were in, that was a good decision for us," Sharp said. "At the same time, we tried to preserve service to our members with the service agreement."
One of the CU's subsidiaries, Arrowhead Financial Group, bought Sawyer Cook in 2002. The insurance firm has morphed several times over its nearly 90-year span. Founded in 1924 as Dexter, Sawyer Real Estate & Insurance, in 1960 it merged with Richard Cook and took on its current moniker. The company offers business, health, personal and marine insurance and specializes in business services, including workers' compensation, general liability and employee benefits. According to an automated phone greeting, the insurance firm was identified as Sawyer Cook and Co.
Sawyer Cook also offered investment and financial planning services through the Arrowhead Investment Center. Sharp said that relationship will continue.
The sale is the latest in several cost-cutting moves for Arrowhead. In 2009, the CU closed four of its 28 branches and laid off nearly 60 employees. Arrowhead had to raise it capitalization ratio after state regulators discovered it was significantly undercapitalized. According to NCUA December 2009 call report data, the wholly owned Arrowhead Financial Group, had total assets of $4.59 million and $22.82 million in total capital. The CUSO had a loss of $18.8 million.
After a 10-year run, Arrowhead shut down Arrowhead Trust Inc. in 2005. At the time, Sharp said the trust firm did not live up to financial expectations even after acquiring a bank's $300 million retirement plan portfolio. Arrowhead Trust sold its self-directed individual retirement assets to Fiserv Investment Support Services, a unit of Fiserv Inc., transferring more than 1,000 accounts valued at approximately $48 million.
Meanwhile, Sharp said he is unsure how the latest insurance deal will impact Arrowhead's bottom line and disputed a media report that mentioned the sale will add $750,000 to the CU's projected profit for 2010.
"We haven't determined what it will actually be. We're still running the figures," Sharp said.
FLIS President Lynda Andrews told The Press-Enterprise that the privately held insurance company is finalizing marketing plans for Sawyer Cook and negotiating agreements with other CUs in the region to offer insurance products, according to a March 9 article.