Friday, November 29, 2013

Giving Thanks for a Mild Atlantic Cyclone Season

Photo of Illinois tornado devastation. A concert "Rock to the
Rescue" will be held Dec. 4 for victims. Click here for details. 
By Mark E. Ruquet

The day after Thanksgiving this 2013, the insurance industry should be giving thanks to Mother Nature’s magnanimity. Unlike last year, when many of us here in the New York and New Jersey region were still reeling from Superstorm Sandy, we have avoided major tropical cyclone activity along the Atlantic, especially late in the year.

The tropical storm season for both the Pacific and Atlantic ends tomorrow, Nov. 30. Unless there is a sudden burst of cyclone activity, this year’s Atlantic season will prove to be one of the mildest in a while. In the Atlantic, there were 13 named storms this season. The worst of the Atlantic storms were Hurricanes Humberto and Ingrid in September with maximum sustained winds of 85 mph. Of those two, only Ingrid made landfall, striking Mexico, which turned into a challenging weather event for the nation.

Mexico suffered a double whammy when Hurricane Ingrid and Hurricane Manuel in the Pacific struck the nation in the same week to produce close to $6 billion in economic loss and claim more than 200 lives. Aon Benfield put insured losses at close to $1 billion.

In terms of human and economic impact, Super Typhoon Haiyan is at the top of the list. The storm struck the Philippines Nov. 8 decimated Leyte province with sustained winds of 195 mph.  In terms of insured loss, this is a minor event. AIR Worldwide issued a statement estimating insured losses would range between $300 million and $700 million. However, in economic terms, the catastrophe modeling service put range of loss at $6.5 billion and $14.5 billion.

Victims of the typhoon are straining to recover and just survive. To get some money flowing into the economy locals are now hired to help with the clean-up. The death toll, estimated at 10,000, has officially climbed to over 5,000. Families struggle to put their lives back together after the loss of loved ones and their means of earning a living either from the loss of their livelihood or the family’s breadwinner.

Closer to home, storms have raised havoc over the Midwest once more, producing late season tornadoes that destroyed or damaged 1,000 homes around Washington, Ill. According to Insurance Journal, an official with catastrophe modeler RMS put the insured loss at around $1 billion, the first severe weather event of that size for the industry in November. A benefit concert "Rock to the Rescue" is scheduled for Dec. 4. 

Elsewhere in the world, winter storms in Europe have come as an unwelcomed surprise. A windstorm in late October, struck Denmark, Germany, the United Kingdom, France, Netherlands, and Sweden causing between $2 billion and $3 billion in insured damage. Torrential rainfall in Italy on Nov. 18 caused flash flooding in Sardinia, taking 17 lives and prompting Italian officials to declare a state of emergency.

Looking back, for us survivors of Superstorm Sandy, even those still waiting to get back into their homes a year later, we can be thankful we dodge the severe weather bullet this year—and we hope for decades to come.



Tuesday, November 26, 2013

Progressive Loses Its Vision

The adventures of Flo, the Progressive insurance spokeswoman dressed in white, touting the virtues of the company's pricing and option models, may just not be the same with the passing of the company's visionary leader over the weekend.

Chairman Peter B. Lewis passed away over the weekend of heart attack, according to several media sources.

Lewis, 80, was Progressive's chief executive officer for 35 years taking over the company from his father, Joe Lewis in 1937. He stepped down in 2000 and was named non-executive chairman.

Lewis will be replaced by CEO Glenn Renwick, 58.


Friday, November 22, 2013

Casualty of the Affordable Care Act: a Critic

By Mark E. Ruquet

The foul-up surrounding the rollout of the Affordable Care Act has claimed one of its first victims, but he had nothing to do with the design of the technology at the heart of the administration’s nightmare.

Late last week, Washington D.C. Mayor Vincent C. Gray dismissed Insurance Commissioner William P. White after the commissioner criticized the president’s plan to allow holders of sub-par health insurance policies to renew the plans for a year.

The New York Times says that Gray released a statement criticizing President Barack Obama’s plan before clearing it with the mayor. Gray contends that it was normal procedure for his office to issue statements without clearance.

Gray’s office did not comment.

The Washington Post reports that there were heated exchanges between White and Gray’s office after the release of the commissioners statement.  White went to great lengths to save his job, but the mayor “lost faith” in the commissioner’s judgment.

PPACA may have cost one commissioner his job, but at least the administration has come to its senses and made a high profile attempt to seek help and advice from the people who have to make sure the plan is ultimately implemented properly: the state insurance commissioners.

On Wednesday, members of the National Association of Insurance Commissioners met with the president and other White House officials to discuss the Administration’s efforts to stem criticism that the president lied when he people they could keep the insurance policy they liked after PPACA took effect.

In a statement, NAIC President and Louisiana Commissioner Jim Donelon said that after working hard to make sure policies were compliant with PPACA, the proposed changes “are creating a level of uncertainty that we must work together to alleviate.”  He added that the commissioners would work to “implement changes that make sense” while protecting consumers.

The statement was non-committal about what the commissioners would ultimately decide, which should not be a surprise since not all states have embraced PPACA and created exchanges for individuals in need of adequate healthcare coverage, leaving it to the federal exchange to do the work. In fact, the president’s remedy for extending the pre-PPACA plans is meeting resistance in some states.

Yesterday, California’s healthcare exchange—Covered California—rejected extension of non-compliant plans saying doing so would lend to confusion among consumers and might keep healthy customers out of the risk pool. Close to 80,000 people have enrolled in California’s exchange, the Los Angeles Times said, and about 1 million people have non-compliant policies in the state.

In the end, the insurance commissioners may end-up inadvertently bailing out the president on this one. The West Virginia MetroNews said West Virginia has joined a dozen other states in rejecting the president’s call to extend the non-compliant policies. In essence, the president can say he came up with a solution, but the commissioners rejected it because it was unworkable.

A year from now, after they have ironed out the kinks in the software, and 40 million Americans who never had coverage see the benefits of the program, this will be forgotten—and replaced by some other immediate crisis. It’s just a question whether it will be the Republicans or Democrats who will do a better job of mucking things up.

Monday, November 18, 2013

Mellissa 13th Named Storm of Atlantic Hurricane Season

National Hurricane Center reports 13th named
storm of the Atlantic Hurricane season.
By Mark E. Ruquet

While the Midwest is beginning to recover from a series of devastating tornadoes and people pick-up the pieces from Typhoon Haiyan in the Philippines, the Atlantic Hurricane season has virtually been forgotten. That does not mean it hasn't been a busy one nevertheless.

The National Hurricane Center reports that Subtropical Storm Melissa formed this morning over the Central Atlantic with maximum sustained winds of 50 mph. The storm is expected to strengthen to a tropical storm by tomorrow. There are no coastal warnings or watches in effect. Melissa's path is not expected to threaten the East coast.

The storm is the 13th named storm of the 2013 Atlantic Hurricane Storm season which extends to Nov. 30.

Tornadoes Rip Through Midwest; 6 Dead in Illinois

Photo from FEMA photo library 
By Mark E. Ruquet

The National Weather Service reports a major storm system ripped through the Midwest yesterday resulting in scores of homes damaged and at least six deaths in Illinois.

The NWS Storm Prediction Center says there were 82 tornado reports yesterday and 546 high wind reports. The figures are subject to change as duplicate reports are eliminated.

Tornado activity was concentrated in Illinois, Indiana and Kentucky. Tornadoes were also reported in Missouri, Michigan and Ohio.

Illinois was the worst hit, with an F4 tornado hitting Washington, Ill. The Weather Channel reports that 500 homes were damaged in the town.  


Friday, November 15, 2013

Devastation to the Philippines a Minor Loss for Insurers

By Mark E. Ruquet

Aerial photo of Tacloban on Nov. 11 posted on USAID site
Photo Credit AFP/Noel Celis

As the residents of the Philippines struggle to survive the impact of Super Typhoon Haiyan, it is worth noting how this storm demonstrates the divide between the developed and under-developed worlds.

Haiyan, which hit the island nation on Nov. 8 with sustained winds estimated at 190 mph, wiped out the city of Tacloban and other towns and villages that aid workers continue to have great difficulty trying to access. After a week, the relief effort is reportedly ramping up in earnest and essential supplies of food and water are getting out to the populace. After the survivors bury their dead, estimated to be as high as 10,000 and debris is cleared, the rebuilding will begin.

The promise of an insurer is to make one whole again, but only a few will see the benefits of that pact. Catastrophe modeler Eqecat estimates insurance losses from Haiyan is not expected to exceed $100 million.  Eqecat notes that there will be some “high value” losses, but the lack of insurance penetration has spared the industry a major hit.

By contrast, Superstorm Sandy, which struck the coast of New Jersey and New York City in 2012, cost the insurance industry close to $19 billion, with another $7.5 billion coming out of the coffers of the National Flood Insurance Program. The storm is considered the fifth costliest natural catastrophe event in history.


Insurance has provided some comfort to the victims of Sandy—even though one doesn’t have to go far to hear a word of dissatisfaction about the claims process or the result, but at least there was some financial backing to help. Many people in the Philippines will not be so lucky and they will be looking to the global community for help after they’ve shed tears for loved ones lost and begun the clean-up, something we here in New York and New Jersey can identify with.

Monday, November 11, 2013

3Q Results for Insurance Broker’s Profitable—for Most

The four major global insurance brokers 3rd quarter revenue
continued a positive trend--for the most part. 
By Mark E. Ruquet

If the four major U.S. insurance brokers are any indication, producers should be enjoying continued revenue growth through 2013 as commercial premiums continue their steady climb, despite signs that the industry may be reigning in rate increases in some lines of business.

Within the past two weeks Marsh & McLennan, Aon, Willis and Arthur J. Gallagher reported third quarter revenue growth ranging from 2 to 5 percent, with Arthur J. Gallagher outperforming the group.

AJG reported the largest third quarter revenue jump of the four at 29 percent to $836 million, and organic growth of more than 6 percent. Despite its success, the broker missed investment analyst’s consensus earnings by 5 cents a share, coming in at 57 cents or net income of $75 million. AJG’s performance for the first nine months of this year reflects the same strength with revenues increasing 24 percent to $2.3 billion and net income up 29 percent to $209 million.

Willis had the next best results—in terms of revenue—for the quarter as revenues were up 5 percent and organic growth was just shy of 6 percent. Revenues beat analyst consensus estimate by close to $9 million. A net loss of $27 million, or loss per share of 15 cents, tempered the broker’s results. Willis blamed the loss on the early extinguishment of debt to the tune of $60 million and expense of $1 million for related fees. Judging the brokers performance based on adjusted net income for continued operations, the firm missed consensus by 1 cent coming in at 19 cents a share. So far this year, revenues increased 5 percent over the first nine months to $2.74 billion, while net income dropped 17 percent to $297 million.

Aon managed to beat analyst’s expectations with earnings per share beating consensus by 9 cents a share. The firm’s net income rose 25 percent to $256 million on revenue of $2.8 billion, an increase of 2 percent. Earnings per share rose 20 cents to 82 cents a share. For the nine months, net income was up 10 percent to $758 million, with revenue increase of 2 percent, or $207 million, to $8.6 billion. The firm reported organic growth overall of 3 percent driven by its risk solutions business.

Marsh & McLennan appears to have regained its position as the top brokerage firm, reporting third quarter revenues of more than $2.9 billion, an increase of 3 percent over the prior year. Net income rose 5 percent to $253 million. The results were in line with analyst’s expectations. Revenues over the nine months rose 2.5 percent to $9.15 billion with net income of $1.05 billion, up 15 percent. The company’s risk and insurance segment, made up primarily of insurance broker Marsh and reinsurance broker Guy Carpenter, showed revenues for the third quarter and nine months of this year up 4 percent to close to $1.5 billion and $4.96 billion, respectively. Organic growth for both periods increased 3 percent.

The chief executives at all four firms were upbeat about their company’s performance.

Willis’ Chief Executive Officer Dominic Casserly said the firm delivered “strong top line growth” and a strengthened balance sheet by refinancing portions of its near term debt to take advantage “of the favorable debt market.”

Aon’s CEO Greg Case said the firm “is on track for a solid finish to 2013 and continues to strengthen the platform of long-term growth, strong fee cash flow generation and increased financial flexibility in 2014.”

AJG’s Chairman, President and CEO, J. Patrick Gallagher Jr. had the most to crow about in the company’s performance, scoring two major acquisitions in the third quarter with New Jersey-based Bollinger and London-based Giles Group of Companies. AJG expects the two to generate over $240 million in revenue, adding 1,600 employees to the firm. Gallagher was probably speaking for many of the brokers when he said the firm is “encourage by the state of the rate environment, adding, “We believe we are in a new era of proactive and rational rate setting by carriers, which bode well for the brokerage industry.”

However, if there was anything to give pause to the celebration in revenue growth, there was the release of the October MarketScout Barometer that indicates a slight drop in overall rate increases by 1 percent for both commercial and personal lines from the previous month. MarketScout’s CEO Richard Kerr said the drop was “a slight loss of steam” that needs to be watched. He attributed the drop in personal lines to the light catastrophe season. Commercial lines witnessed dramatic decreases in businessowners policies—from plus-5 percent to plus-3 percent—and general liability rates—from plus-6 percent to plus-3 percent.


Another view of the markets came from Steven P. Hearn, Chairman and CEO of Willis Global explaining during a conference call that reinsurance rates on the global stage are down 5 percent overall, and lower on North America to as much as 25 percent. On the insurance side, he said Property and Casualty is up as much as 5.5 percent. He pointed out that while rates affect revenues, Willis’ performance also comes from fees and new business—which was very strong for Willis and the other brokers cited new business as one important ingredient driving their revenue.

Thursday, November 7, 2013

Brown & Brown Searching for New CFO

Insurance broker Brown & Brown's Chief Financial Officer Cory T. Walker is leaving the firm and a search is on the way for his replacement.

The Daytona Beach, Fla.-based firm said late last week that Walker will retire in March after the company makes its annual regulatory financial filing for the year 2013.

Walker joined Brown & Brown in 1992, spending 17 of his 22 years with the company as CFO.

J. Powell Brown, president and chief executive officer called Walker "a valued leader and resource."

Monday, November 4, 2013

Zurich Says No 'Undue Pressure' in CFO's Suicide

According to reports, a statement from global insurer Zurich says no undue pressure was placed on Chief Financial Officer Pierre Wauthier, who committed suicide in August, by then Chairman Josef Ackermann. The statement also says the company was cleared of any financial misreporting.  

Healthcare.gov: It Will Get Fixed

By Mark E. Ruquet

Everyone has an opinion on this issue, so I feel I would be remiss if I did not add my own two cents to the debate.

I feel the healthcare system in this country is broken.  The inequity of our system that denies healthcare to millions because they cannot afford the insurance premiums should embarrass all of our elected representatives and business leaders.

The Patient Protection and Affordable Care Act, more popularly known as Obamacare, while far from perfect, is at least a step in the right direction to provide coverage to a greater number of Americans. That said, the computer glitches we have seen are appalling. It amounts to a waste of time, money and erosion in confidence for buyers. If the government cannot make the sight work properly, how can a buyer be certain they are getting the right coverage at the right price?

No one should be too surprised that issues would arise during the initial rollout, but to make the sight utterly unusable is either a sign of incompetence or ignorance. Somebody dropped the ball big time.

That said, the cadre of opponents trying to gut the program has not helped. This is not an excuse, but I can imagine a group of professionals in the Department of Health and Human Services feeling so much pressure to get the sign-up launched by Oct. 1 that they failed to understand the technical issues that resulted in what amounts to a system meltdown.

The opponents have not helped matters. The Congressional hearings are a charade of outrage by House Republicans. They cannot be happier. However, no representative has expressed a workable alternative or spent much time identifying problems with Obamacare and offering solutions—other than let’s start over.

Of course, the Obama administration has no one to blame but itself. Anyone hear of Beta testing? We do not need Congressional hearings to tell us that the system did not go through adequate testing phase before rollout. If it had, we would be moving onto the real issue: Does the program provide affordable healthcare to those who need it?  

In a recent column by Nicholas D. Kristof, he quoted Dr. J. Scott Gibson saying, “Website problems are a nuisance. Life and death is when you need care and can’t afford to get it.”

Access to Healthcare.gov will be fixed; but the need for adequate coverage will remain until the millions without coverage or with inadequate coverage have a decent insurance plan. Too many people die today because they failed to see their doctor in time. A superpower should do better.