There are so many ways to screw up" an insurance company, says Evan Greenberg, New York-based chief executive of Ace Ltd., visiting his North American headquarters a block from Independence Hall on Tuesday.
Ace counts Bermuda as its hometown, Switzerland as its headquarters, and Philadelphia as its biggest employment center, with more than 2,200 workers in Wilmington and Lafayette Hill, and on Walnut Street.
How do you wreck an insurer? By investing or marketing poorly; by failing to collect useful customer and industry data and use it quickly; and, mostly, by not charging enough, so that claims, when they come in, wipe you out, as in the record-breaking wreck of Philadelphia's Reliance Insurance Co. and a string of Pennsylvania medical-malpractice insurers at the
start of the 2000s.
Instead, Greenberg says, Ace is enduring the current "soft market" for corporate insurance by refusing to cut prices to meet rivals desperate for business at a time when the U.S. economy is slow.
"We're in the math business," says Brian E. Dowd, Philadelphia-based head of Ace's American businesses. "We're not antigrowth. But when the data says it's not time to grow, we're OK with shrinking" in some business lines.
The company has remained profitable; its share return is an average 8 percent annually since just before the stock market collapsed in 2008, trailing rival Chubb Corp., pulling even with its Bermuda rival XL Capital, and far exceeding longtime industry leader American International Group (AIG) and most other big insurers.
In fact, Ace's financial assets have been growing, as the company puts surplus capital to work in acquisitions such as Tuesday's two deals: a $1.1 billion buyout of Iowa-based crop insurer Rain & Hail Insurance Services Inc. and a $200 million acquisition of a Malaysian business insurer.
Greenberg grew up in the business. His father, Maurice "Hank" Greenberg, made AIG the largest U.S.-based insurer, running it from the 1960s until 2005, three years before the notorious government bailout of AIG's failing securities-lending and trading units.
Evan was a rising star at AIG in the 1990s but left in 2001 in an exodus of executives seeking opportunities elsewhere as his father clung to power.
Greenberg was in Philadelphia to mark Ace's 25th birthday, though the company's roots here stretch to colonial times: They include the former Insurance Co. of North America, which Ace bought from Cigna Inc. in 1999.
Ace was founded by a group of U.S. companies, including Merck, GlaxoSmithKline, DuPont, and Dow Chemical, among others, seeking cheaper liability and disaster premiums. Based in Bermuda, Ace paid very low taxes compared with its U.S. competitors. It has since gone public and diversified into everything from construction and accident to corporate directors' and workers' compensation insurance.
If it's a tough time to sell insurance, it's a good time to make deals, Greenberg concluded: "I think the next couple of years are going to produce a lot of opportunity around the world."
Will they borrow?
"Although Washington insists that reluctant lenders are holding back the economy, small-business owners don't agree and see little benefit from the 'jobs bill,' " writes William Dunkelberg, professor at Temple University and economist for the National Federation of Independent Businesses, in a report for the West Conshohocken-based brokerage Boenning & Scattergood, citing the federation's latest monthly survey of 874 members who own small firms.
The bill, which moved closer to Senate passage Tuesday, would give states and businesses up to $12 billion in job-targeted tax credits and give banks up to $30 billion in capital to encourage loans.
But tax cuts don't translate to business investments or job hires "unless prospects for a return improve," Dunkelberg notes. "A record 52 percent of small-business owners simply don't want a loan. . . . Only 4 percent reported financing as their top business problem."