Protest through profits.

• Author: Bailey, David
• Position: North Carolina Mutual Life Insurance Co. - Economic Almanac

It was a business born and raised on bias.

"The few companies that would write insurance on blacks charged exorbitant rates," says William J. Kennedy 111, president and CEO of North Carolina Mutual Life Insurance Co. in Durham. Back then, black funerals were often financed by donations dropped into a man's hat - placed bottom up on his coffin.

John Merrick, a barber and landlord, decided there had to be a better way. In 1898, he, Dr. Aaron Moore and five other well-to-do blacks chipped in $50 apiece to form North Carolina Mutual and Provident Association, which grew into the nation's largest black-owned financial institution. That happened, Kennedy says, "because blacks believed in blacks."

It has been a marriage of convenience. Blacks across America built N.C. Mutual, which has 1,000 employees and $7.95 billion of insurance in force, by buying from the company "with a soul and a service." N.C. Mutual, in turn, provided blacks with life, health and fire insurance, mortgage money and support in their fight for basic civil rights. Problem is, the company is still wedded to a concept its market has long since divorced: that blacks should, whenever possible, buy from other blacks.

One legacy of the civil-rights movement has been the belief that good citizens don't pick a banker, broker or insurance agent based on race. And that's become a big problem for N.C. Mutual - one that casts a shadow on its future profitability.

Jim Crow was spreading his wings wide when N.C. Mutual came into being. After the collapse of Reconstruction in the 1870s, poll taxes, literacy clauses and other barriers eroded the rights blacks had gained after their emancipation. White terror and the U.S. Supreme Court's support of states' rights were well on their way to disfranchising most Southern blacks.

The same year N.C. Mutual was founded, the Democrats' campaign to make the state safe for white rule" culminated in the Wilmington race riot, which historian William S. Powell has called "perhaps the bloodiest white supremist coup d'etat in North Carolina history." At least 11 blacks died in the massacre. The next day, militia with fixed bayonets banished prominent white Republicans and black leaders. Even the mayor, a black man, left town.

"Politically, for the black man, there was no survival," writes Walter Weare, author of a scholarly history of N.C. Mutual.

Adopting the philosophy of Booker T. Washington - capitalism and hard work would neutralize racism through economic gains - the company's founders became business leaders by default. "For the black businessman, success could serve as a means of protest that advanced pride and relieved feelings of aggression," Weare writes, "and he might savor the success for what it was-a racial victory."

A lot of N.C. Mutual's success came from being in the right place at the right time. For one thing, blacks in Durham made enough money to buy insurance. Excluded from most cotton-mill jobs, they were welcome in tobacco factories. "As a raw city of the New South," Weare writes, "Durham...