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DUBLIN, Ohio-Everywhere, companies are looking to do things cheaper and faster. Credit unions are no exception as evidenced by the hundreds of mergers each year, most to offer a broader range of better services for less outlay of funds. Credit union vendors are feeling this strain of consolidation and compensating for it. One such company is American Share Insurance, which provides primary share insurance coverage in eight states and excess coverage through its wholly-owned subsidiary, Excess Share Insurance, in 34 states plus the District of Columbia. “It’s a common concern at the company and at the board table all the time,” ASI President and CEO Dennis Adams commented. “My opinion on consolidation is pretty simple,” the CPA said. “You’ve seen it in banks. You’ve seen it in credit unions. It’s going to continue.” He noted that larger credit unions are continuing to work out more sophisticated mergers. They have become more like “business deals” for growth and economies of scale, while a lower percentage of mergers have been involuntary in recent years. There have been some “good-size” credit unions merging, Adams observed. “Our credit unions tell us that. We sense that.” Though the number of ASI-insured credit unions has trended downward in the last few years from 223 in 2000 to 187 in 2005 (see chart), insurance in force has more than doubled in the same time period from $6.2 billion to $13.7 billion, demonstrating the consolidation. It could actually be a positive, he said, given that ASI had no claims payments in 2005, which Adams described as “uncanny.” He explained that he often hears from smaller institutions that the regulatory burden is too much and so they decide to merge. “In an audit, our objective is to make sure some of our smaller credit unions are aware of what their obligations are under the regs,” he said. In other instances, credit unions complain about profitability. They make the determination to merge rather than raising loan rates or dropping savings rates, Adams said. To counterbalance industry consolidation, he said, “We identify internally the larger institutions because of how more sophisticated their balance sheet has become.” These credit unions may be facing more complex problems and asset-liability management issues to the point they decide a merger is the best option. ASI’s “auditing and examining.have been upgraded and continue to be upgraded,” Adams added. The private insurer brought on one new credit union for primary insurance in 2005 with around $150 million in assets, above average size for ASI, according to the CEO. He declined to name the institution at this time because the entire deal is not finalized. Adams said there are a number of reasons credit unions decide to go with ASI over federal primary deposit insurance. Probably the top one is coverage up to $250,000 per account rather than the NCUSIF’s generally $100,000 per member. Others feel supervisory pressure from NCUA as the insurer and are looking to avoid dual regulators. Finally, Adams surmised, “I think our credit unions like working with a business partner with a genuine vested financial interest.” On the other hand, the excess insurance arm-ESI-has experienced growth in both numbers and dollars. ASI and ESI excess insurance in force was $2.7 billion for 280 credit unions in 2000. At year-end 2005, it had grown to 370 credit unions with $5.5 billion of insurance in force. Adams said the company is not looking to expand beyond the 34 states and Washington, D.C. in the near-term. For ESI to expand geographically, he said, “It takes two things: a favorable regulator setting and credit union demand.” -

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