Come together

Last summer, Milwaukee-based Catholic Knights and Shorewood-based Catholic Family Life Insurance announced their intent to merge. Both entities are Catholic fraternal organizations that offer life insurance and related products to their members, which are predominantly members of the Catholic Church.

The organizations are expected to merge this spring and will move into Catholic Knights’ downtown Milwaukee office building at 1100 W. Wells St. The combined entity, whose name has yet to be determined, will have about 115 employees and between $1.1 billion and $1.2 billion in assets under management. The united organization will have about 120,000 members in 27 states. The largest concentration will be in Wisconsin.

Bill O’Toole Jr., president and CEO of Catholic Knights, will be CEO of the combined entity. He recently spoke with BizTimes Milwaukee’s Eric Decker about the reasons for the merger and the integration process.
BizTimes: Why does it make sense for Catholic Knights and Catholic Family Life Insurance to merge?

O’Toole: “It makes sense on so many levels. Catholic Knights and Catholic Families being both located both here in Milwaukee with the same mission and the same common bonds of Catholic fraternals. We budget, we plan and we project to save in excess of $3 million dollars annually beginning in 2011 with the merger. Our net operating income this year for Catholic Knights will be about $3.2 million. So, if we can double our net operating income by 2011, that would be a big stride. With the economies of scale we can give back more to the community and more to our members. We will be more competitive in the landscape of insurance.”

BizTimes: Where are the companies in the merger process? When do you expect the two companies to combine?

O’Toole: “Our delegate members (are voting) on the merger agreement. The voting takes place in both organizations. In our case, it is around 355 delegates who vote. We have to have two-thirds of those delegates approve (the merger) and the same (is true) with Catholic Families. The boards of directors approved the agreement in early December. So then the membership was fully notified, the delegates received all of the documentation and so now they are voting. Let’s assume the voting is successful and completed. Our effective date of coming together is April 1. Now, the (Wisconsin Insurance) Commissioner has to sign off following the certification from both organizations of the vote. We see 2010 as really a year of integration.”

: In every merger, it seems like one entity ultimately absorbs another. Which entity is absorbing the other in this case?

O’Toole: “The reality is that Catholic Knights is about $875 million in assets and Catholic Families is about $275 million in assets. So that is the reality. We are 80,000 members and they are 40,000 in members. But we don’t look at this as an acquisition. We are treating this as a merger as equals. We share the same bonds and the mission. There have been no funds exchanged.”

: You said that beginning in 2011, you expect roughly $3 million in annual costs savings. Where is this $3 million coming from? Will people be losing their jobs?

O’Toole: “The (Catholic Family) building (lease) alone is over half a million dollars right off the top. In terms of people, you are talking consolidating $1 million to $1.5 million. Then you have your insurance administration systems. You know your computer systems, and software licenses, all of those things combined will give you some economies. Principally the biggest one is people. If Catholic Knights (has about) 100 and Catholic Families is around 40, then we would be around 140 (together). We need to be closer to 115 in size. We will approach this reduction, if you will, from the standpoint first of early retirement.

“We are very concerned about anybody losing their job in this kind of environment. The package we will put together, which isn’t finalized, will include significant resources to assist with placement and it will help with health care significantly and provide them with the appropriate amount of compensation given the amount of time and years that they have put in with their respective organization. The key is you have to be very fair and transparent with people.”

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