How the Fall of NC Mutual Hurt Black America

Durham was once called “the Capital of the Black Middle Class” and the “City on the Hill for Blacks.” It was home to more Black millionaires per capita than any other place in America. And it was headquarters to the world’s largest Black-owned and -operated business: North Carolina Mutual Life Insurance Company.

But in December of 2018, NC Mutual, which once played a critical role in providing capital to support the hopes and dreams of African-Americans across the country, quietly entered into receivership with the North Carolina Department of Insurance. Receivership, also known as rehabilitation, is similar to bankruptcy.

The nearly 123-year-old North Carolina Mutual is set for liquidation early this year. This liquidation does not come as a surprise to anyone who has closely followed the story of NC Mutual, or “The Mutual,” as it is often called. If liquidation is the equivalent of dying, then The Mutual’s wheezy death rattle has been audible for several years.

At its peak, NC Mutual was more than a steady, trusted insurance company for Black people when they could not buy insurance elsewhere. Through job creation and reinvestments in local Black communities, NC Mutual was Black America’s venture capital firm before that concept was even coined. In the face of redlining and exclusion, Black Americans reinvested their dollars into their own ideas, businesses, and communities.

But integration, while welcomed and pursued by many Black people, proved to be a double-edged sword for NC Mutual and many other Black businesses. The company slowly declined in the last few decades as Black customers, with expanded options, took their business elsewhere—and white customers failed to reciprocate support for Black businesses. 

Understanding the life—and looming death—of NC Mutual is not only instructive for those interested in the company cofounded by seven prominent African-American men in Durham more than a century ago, but also in understanding the economic rise and fall of Black America. 

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At the heart of capitalism is entrepreneurship. To be successful, one must possess capital. Black America’s first relationship to American capitalism was serving, literally, as the capital and providing the entrepreneurial capability.

Like many other industries in the early United States, the business of insurance was inextricably tied to Black Americans through slavery. Some of the earliest policies insured the lives of slaves as collective cargo across the brutal Middle Passage, followed by policies that covered the individual lives of slaves for their plantation masters. 

These plantation policies were sometimes taken out on field hands, but most often were taken out by slaveholders who were worried about the potential deaths of slaves performing valuable entrepreneurial work, such as blacksmithing, carpentry, or factory work.

However, because insurance on slaves was meant to benefit the slaveholder, it provided no benefit to the slaves themselves. Consequently, early in American slavery, benevolent societies developed on plantations by the enslaved for very practical reasons. These efforts allowed slaves to care for the sick and bury the dead with dignity. This carried over to the communities of free Blacks.

The Free African Society was formed in Philadelphia in 1787, and was the forerunner to the The African Insurance Company, founded in 1810 and considered the first Black insurance company. 

NC Mutual was founded in Durham in 1898. In that era, there was a debate as to what the best route was for the Black race to advance in America. The most heated debate was between the two towering figures of that time: Booker T. Washington and W.E.B. Du Bois.  

Washington, a former slave, argued that blacks were the best positioned to become successful entrepreneurs, since they were responsible for much of the skilled labor and trades in the South during slavery. Du Bois countered that the high rate of illiteracy, coupled with the lack of business education and restrictive “Black Codes,” would make that an impossibility.

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Booker T. Washington // Photo courtesy of Wikipedia Commons

Washington, to appease white philanthropists in what became known as the “Atlanta Compromise” speech of 1895, petitioned whites to support Black entrepreneurship through contracting relationships, in exchange for Blacks not seeking accommodations like social integration or voting rights. 

Du Bois, born following the end of slavery in an integrated northeastern town and who would go on to become Harvard’s first Black Ph.D., labeled Washington’s thinking an “old attitude of adjustment and submission,” and as accepting “the alleged inferiority of the Negro races.” He urged Black people to pursue political power, civil rights, and higher education. 

Washington and Du Bois would not find agreement on another topic for a decade and a half, until within a year of one another—in 1910 and 1911—they separately visited Durham. Both agreed that Durham was one of the most remarkable places they had ever seen for Negroes. 

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W.E.B. Du Bois // Photo courtesy of Wikipedia Commons

It is likely that these two leaders saw reflections of their own philosophies in Durham. Washington saw an entrepreneurial and comparatively wealthy Black community; Du Bois saw a highly-educated Black population exercising political power and laying the foundation for civil rights.  

More surprisingly, the South finally seemed to produce an enclave where Black people could achieve the higher aims of life. While millions of African-Americans were fleeing the South during the Great Migration of the 20th Century, Durham had a net gain of Blacks as they flocked to the city for opportunity and upward mobility.  

If it was not quite “a new heaven and a new earth,” as Washington envisioned, then certainly it was a small oasis from the normal racial storms.

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America is a nation of paradoxes: A country that professes to hold freedom, liberty, and justice for all was built on the backs of slaves. In 1898, the year that The Mutual was founded, five Black Americans won the Congressional Medal of Honor for their valor in the Spanish-American War. That same year, more than 100 Black Americans were lynched.  

North Carolina is equally paradoxical. The Mutual was chartered in Durham on Oct. 20, 1898. Exactly three weeks later, on Nov. 10, just 150 miles southeast in Wilmington, one of America’s most infamous race massacres took place.

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N.C. Mutual Insurance Company's first office in 1902. The largest Black-owned insurance company in the world began in the small office of C.C. Spaulding (left) and his clerk, Miss Dore Whitted // Photo courtesy of Durham County Library

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Durham's Main Street trolley tracks in 1910 // Photo courtesy of Durham County Library

NC Mutual wasn’t the first Black insurance company chartered in the United States, but it became the dominant player. Insurance, from its beginning, worked much as it does today. Both the insurers and the insured identify risk, calculate its likelihood, and discern what such risk is worth. Insurance is the rare business where people pay for the service with hopes of not having to use it.

When NC Mutual was founded, it was to address the one human certainty: mortality. Drawing on the history of the Free African Society, Black people simply wanted dignity in death, since most could not get it in life. So The Mutual sold small life insurance policies that paid small death benefits to provide a respectable burial.

For a people who often survived the suffering of the here and now by thinking of a better life in the hereafter, finding some dignity in death meant a great deal. So, Black customers paid their dollar-a-week premiums to The Mutual for that one guaranteed eventual outcome.

Just as they do today, actuaries wrote policies for those whom they think death is the farthest away in hopes of maximizing premium income. The amount of money that accumulates from the beginning of the payments until a payout is due is called the float. Insurance companies invest the float to generate profits for the firm that will allow for future payout of the death benefit, along with a tidy sum left over.  

The premiums that we pay to our insurers—for life, home, auto, or other coverage—generates a float, and that float makes its way into investment vehicles that drive our modern economy. Some refer to it as The Warren Buffett Way, referencing the world’s richest investor, who built a fortune largely on investing the float from the insurance firms that he owns and manages, such as GEICO and Gen Re.

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N.C. Mutual Life Insurance Company Headquarters ca. 1930 // Photo courtesy of Durham County Library

The founders of NC Mutual operated the same way. As enterprising Black entrepreneurs generated ideas that needed capital, they found a willing and shrewd investor in The Mutual. Entrepreneurs would march up to NC Mutual, make a pitch for an idea, sometimes leaving with an investment, and sometimes not. What they did leave with was the knowledge that their intellectual and entrepreneurial capital mattered.  

The status of Black Durham upon the visits of Washington and Du Bois, a decade after the founding of The Mutual, attests to the power of the company. In that decade, it had helped to spur hundreds of businesses, thousands of homeowners, and other institutions, who all benefited from investments made by The Mutual, directly or indirectly. In Durham, The Mutual invested in banks, investment firms, churches, real-estate investment corporations, home-lending enterprises, hospitals, schools, charitable organizations, and factories.

In the years that followed, The Mutual, by establishing outposts in other communities across America, would also help jump-start those local economies. This included the anchoring investment in America’s first Black-owned textile mill, the Warren Clay Coleman Mill, in Concord, North Carolina, which also included an investment from Durham’s wealthiest family, the Dukes.

During the time of social and economic segregation, The Mutual thrived. The decade immediately prior to the Great Depression was known as “the Golden Age of Black Entrepreneurship.” This is not to say that life for the African-American during segregation was a rosy one, only that dollars did manage to circulate within and throughout the community. But that period wouldn’t last.

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Integration turned out to be a doubled-edged sword for the Black community.  It produced the foundations of a society that would see much Black progress in the decades that followed. Financially, however, it turned out to be a one-way street.  

In the years following integration, Black leaders hoped that as Black customers began patronizing white businesses, white customers would do the same at Black businesses,  creating the shared prosperity that Booker T. Washington predicted, while resulting in the social and political elevation of the Black population that W.E.B. Du Bois espoused.  

Instead, Black dollars went into the white community without reciprocation, leaving Black America economically hollow.

By the late 1980s, NC Mutual had grown to become the largest Black- and minority-owned insurance company in the world, with nearly $8 billion of coverage and 50 offices across the country, mostly across the South, but also in Black staples like Chicago, Detroit, Washington and Philadelphia. It’s not by coincidence that those cities saw increases in the Black middle class.

NC Mutual and other Black insurance companies provided jobs for local Black residents, when other opportunities for upward mobility were unavailable to them. In 1988, the 31 Black insurance companies in the United States employed about 5,000 people, and had $806 million in assets and nearly $25 billion of insurance “in force,” or active. 

Though these figures appear impressive, Black insurers were in decline, and The Mutual was carrying an increasing burden of representation for the industry. NC Mutual accounted for a third of that insurance in force and over a quarter of the assets for the entire black industry. The next year, premiums for white firms grew by 12% while declining by over 5% for black firms.

Eleven Black firms were merged from 1977 to 1989. These black firms generally served the lowest-income folks in the spectrum, with white firms gradually, then quickly, picking off middle-class Black customers. 

That’s because white firms, with more access to capital than Black firms based on historic discrimination, were at an advantage following social integration. They introduced an array of new products and actively marketed to Black consumers for the first time. When Black insurers could not match the product and pricing options, an increasing number of Black consumers moved their business to white firms.  

In addition, many Black customers, after being disrespected and denied service by white businesses for years, decided to patronize white firms to force those firms to serve them—without realizing its severe financial impact on Black businesses. This is a pattern that would be experienced across all industries.

By 2000, NC Mutual had $77.3 million in revenue and 258 employees, and was still large by African-American business standards. But its best years were in the rearview mirror, and it paled in comparison to its white counterparts. The largest white insurance firm that year was AIG, with nearly $46 billion in revenue and 61,000 employees.  

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The North Carolina Mutual Glee Club in 1929 // Photo courtesy of Duke Archives

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John Merrick's barbershop in Durham. Merrick co-founded NC Mutual in 1898 // Photo courtesy of Durham County Library

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N.C. Mutual executives in the early 1920s // Photo courtesy of Durham County Library

Today, NC Mutual stands as the last remaining Black insurance firm in the United States. Any day now, it will be vanquished from the landscape.  

Another part of its fall was a bad investment that it made with a reinsurer a few years back, which resulted in the loss of $34 million. In 2016, NC Mutual filed lawsuits against five corporate defendants and one individual defendant for fraud and breach of fiduciary duty, among other claims. Though The Mutual ultimately won its lawsuit, it recovered almost no money. The loss of these funds were a final blow to the insurer’s solvency.

More than a decade ago, AIG was provided a bailout worth nearly $150 billion—just one of many financial firms saved by the U.S. government following the financial fallout of 2008, when many of them made bad bets as well. However, NC Mutual is not considered too big to fail, so no government or congressional rescue attempt came. 

Black-owned firms were once considered critical members of the overall business landscape. Less so today.

The path of The Mutual is also the path of the broader Black business community. In 2020, the federal government, responding to the COVID-induced recession, used paycheck protection dollars to again prop up white-owned firms, while at least 41% of black businesses shut their doors, likely permanently. Several analyses of the federal pandemic response found that even highly-qualified Black businesses were routinely denied or not offered PPP loans.

The existence of large Black businesses is becoming a thing of the past. The repercussions can be seen across Black America, as its wealth collectively declines. A 2017 report by the Institute for Policy Studies, a progressive research group, used Federal Reserve data to project that if the racial wealth divide is left unaddressed, median Black household wealth is on a path to decline to zero by 2053. The pandemic has exacerbated that trend.

“The declining wealth of households of color is already taking a significant toll on the broader economy,” the report said. It noted that the nation’s overall median wealth decreased nearly 20% from 1983 to 2012, from $78,000 to $64,000 in 2013 adjusted dollars. During that period, white median wealth slowly rose, but Black median wealth fell by 75%. 

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On March 2, 1902, NC Mutual’s earliest building was burned down, an act of arson for daring to be the tallest in downtown Durham. Subsequently, in 1921, it erected a new building, intentionally built several floors shorter than the city’s tallest white-owned building.

NC Mutual’s current building opened in 1966, with Vice President Hubert Humphrey attending the dedication ceremony. The building would stand as the tallest in Durham for another two decades, a symbol of hope and progress, and a monument to Black business achievement.   

Some of that hope was lost when the latest building was sold in 2006 in an attempt to slow The Mutual’s free fall.

Now all hope is lost. The remnants of the North Carolina Mutual Life Insurance Company—the building it once occupied, which still towers over western downtown Durham, or its iconic name atop that building, for however long that remains—are symbols of the promise and peril of the Black experience in America.  

Following social integration, the nation was supposed to see a rise for all populations. The Mutual was supposed to not only grow to be the largest Black insurance firm in America (and ultimately the world), but to have a chance at being the largest insurance firm of any kind. It was not expected to be a guarantee, but at least a possibility. That was the hope and promise of the slave.

There is not likely to be much fanfare on the day The Mutual officially closes its doors. There will be some news stories. A few. There may be a tribute to the past. There can be dignity in the life of The Mutual, and dignity in its death. After all, companies close every day.  

But how did we let the last of its kind disappear from our ecosystem? In an America with disappearing Black anchor economic institutions, it’s not only a problem for Black America, but for everyone.  

At its apex, North Carolina Mutual showed that representation matters in a capitalist society, through the investment of capital into the entrepreneurial aspirations of diverse populations. But all is not lost, if we’re willing to recommit to the work ahead of us. 

That work must begin with rebuilding a stronger, more sustainable, and more diverse Black business landscape, beginning with firms that can and will provide capital to Black entrepreneurs. Only then can we create an equitable society where everyone can prosper. 

Death can represent rebirth—but only if action accompanies it. Let’s hope that the death of The Mutual will prove that there is life after death.  

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Photo of a weathered mural in the Hayti neighborhood, once dubbed “Black Wall Street” by Booker T. Washington in Durham, North Carolina // Casey Toth/AP Images

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Henry McKoy, Ph.D., is a member of the faculty at North Carolina Central University, where he serves as Director of Entrepreneurship. He also holds academic appointments at UNC-Chapel Hill and Duke University, and was an Aspen Institute Scholar and Innovation Fellow at Harvard’s Kennedy School of Government. A former banker, he was assistant N.C. commerce secretary in the administration of Gov. Beverly Perdue.

Cover Photo: The NC Mutual Building in Durham // Photo by Matt Robinson