Growth Beneath the Radar

Don’t be fooled by the AIG headlines: Not all of the insurance industry is in retreat mode.

In some pockets of the Northeast and Mid-Atlantic, carriers are continuing to pursue downright aggressive growth strategies – and many are even seeing positive short-term results and have a good outlook for what’s to come.

Last month, for example, The Hanover Insurance Group – headquartered in my hometown of Worcester, Mass. – announced that it had been upgraded by ratings agency S&P.

Now for any company, a ratings upgrade would be a reason to rejoice. But for The Hanover particularly – which barely five years ago, was on the verge of collapse – it’s confirmation that dramatic steps and changes in its approach were a recipe for success. It marked the third time in fifteen months that the company had been upgraded by a major ratings firm. And given the financial crisis dragging down balance sheets across the world, three upgrades is downright unheard of.

Fred Eppinger, The Hanover CEO who oversaw this dramatic turnaround, said the upgrade was “a very important mark in the journey we have undertaken and I would argue that this allows us to be one of the most important companies for independent agents over the next two years. We have grown more than anyone over the last several years and we’re in a position to really help agents.”

Eppinger said The Hanover has invested a significant amount of capital in services and new products to help agents do their jobs. But it’s also been investing in specialty lines products and companies – such as The Hanover’s Aug. 2008 acquisition of Windsor, Conn.-based AIX Holdings Inc.

As a result, the specialty lines business at The Hanover has jumped from $65 million in revenue to $500 million in the last year – a huge jump that is indicative of Eppinger’s future plans for the company, he said.

But it’s not only well known players like The Hanover that are betting big on growth for the insurance industry.

Take for instance Upstate New York-based DCAP Group – which last month said it was ditching the agency franchising business to buy an insurance company (see p. 18). The strategy: Take a long-established, under-capitalized mutual insurance company (Commercial Mutual Insurance Co.) and turn it into a publicly traded insurer that will be known as Kingstone Insurance Co.

These are just two recent examples of companies moving aggressively to grow and expand amid a business environment that is downright frightening. There are many others that have done so recently. Take for instance Narragansett Bay Insurance Co. of Rhode Island, which over the last year has secured $200 million in financing to pursue property insurance in challenging areas like coastal New York.

Massachusetts, too, is seeing semi-aggressive expansion efforts in its personal auto insurance market. Allstate (see p. 10) just announced plans to expand into the state – on the very same day Geico wrote its first policy there. And while those last moves are probably not good news for independent agents, take comfort in the bigger picture: Growth – the linchpin of business prosperity – is beginning to rear its head in the insurance world.

And that’s something any industry watcher is pleased to report.

Topics Market