Co-operators life insurance Ltd.’s acquisition of a majority stake in CUMIS Group Ltd. is just the latest move by Co-operators Group Ltd., the Guelph, Ont.-based parent of the Regina-based insurer, in the parent firm’s overall growth strategy.

The deal for CUMIS, based in Burlington, Ont., will boost Co-operators’ presence in the life insurance business, says a senior executive with Co-operators Life. At the same time, it will allow Co-operators to strengthen its ties to the Canadian credit union system.

“We’ve looked at CUMIS as being a natural fit for us for a long time,” says Kevin Daniels, chief operating officer of Co-operators Life. Co-operators and Vancouver-based Central 1 Credit Union had announced the deal to buy CUMIS from Madison, Wis.-based CUNA Mutual Group in September, and closed the transaction, valued at approximately $245 million, on Dec. 31.

CUMIS is the dominant provider of a variety of insurance-related products and services to Canadian credit unions, including creditor and mortgage insurance; life, disability and critical illness insurance; and home, auto and travel insurance. CUMIS also provides insurance and wealth-management services to credit unions themselves and to their employees. Co-operators Life and CUMIS have had an insurance marketing partnership for 23 years.

In 2008, CUMIS’s life insurance operation generated $162 million in premium revenue, while its property and casualty operation generated $76 million in premium revenue. In comparison, Co-operators Group had $634 million in life premium revenue and $2.2 billion in P&C premium revenue in 2008.

Under the new ownership structure, Co-operators Life will own about 73% of CUMIS and assumes responsibility for the firm’s day-to-day operations. Kathy Bardswick, president and CEO of Co-operators Group, will become the new CEO of CUMIS, replacing Kenn Lalonde, who left the firm in December. Daniels adds the COO role at CUMIS to his current responsibilities.

Central 1 will own the remaining 27% of CUMIS, and have representation on CUMIS’s board. “This deal falls within our strategic mandate to provide top-notch wholesale services,” says Don Rolfe, president and CEO of Central 1, which provides the credit unions of British Columbia and Ontario with liquidity management and trade-association services, among other things.

Co-operators Life says it intends to maintain CUMIS as a separate business unit, serving the credit union market exclusively. “We have two different approaches to distribution,” Daniels says. “CUMIS’s approach is to and through credit unions, and that’s why we’ll maintain the brand for that market. Then we have Co-operators-branded products that go through our agency distribution system.”

Over the next year, Co-operators will focus on integration, looking for ways to achieve efficiencies between Co-operators Life and CUMIS, Daniels says, in terms of back-office technology and duplication in lines of business within the two companies, among other things. During the integration period, CUMIS will continue to serve credit unions as it has been doing.

Over the longer term, however, Daniels expects that there will be opportunities to enhance the product lineup and service delivery for both CUMIS and Co-operators Life. “We’ll be looking at products at both CUMIS and Co-operators, and we’ll determine which products have the best potential for growth and which resonate best with clients,” Daniels says. “We’ll begin to rationalize those and look for opportunities maybe even to create new products, depending on what the demand is.”

The deal for CUMIS isn’t the only recent acquisition by Co-operators Life. In November, the latter firm bought the 50% of Westminster, B.C.-based WestCu Insurance Services Ltd., a three-branch, P&C insurer, that it didn’t already own. In July, Co-operators bought Vancity Insurance Services Ltd., a 17-branch, Vancouver-based P&C insurer, from Vancouver City Savings Credit Union. In January 2009, Co-operators bought three-branch North Shore Insurance Services, also based in B.C. The three moves have significantly boosted Co-operators’ B.C. presence.

For the time being, however, Co-operators Life may be taking a break from making any deals, Daniels suggests: “Integrating two companies the size of Co-operators Life and CUMIS is a significant task. I would not want to jeopardize that with another acquisition, so I’m not actively looking. But if an opportunity presented itself, we would certainly look at it, because we’re still strongly capitalized as an organization.”

The CUMIS deal strengthens the numerous ties that already exist between Co-operators, Central 1, the other provincial centrals and CUMIS. Central 1 and the other provincial credit union centrals are among the 47 member-owners of Co-operators. CUMIS and the provincial credit union centrals, including Central 1, own Vancouver-based Credential Financial Inc. , the wealth-management provider to Canada’s credit union system, in an equal partnership.

@page_break@The deal also means that CUMIS is now a wholly-owned Canadian company, something both Central 1 and Co-operators cited as a positive element in the deal. IE