PIANJ meets with Peerless Insurance, new Safeco Insurance

Fresh from a series of meetings with their New Jersey agents, executives with Peerless Insurance sat down with PIANJ's leadership and explained the company's plans to expand its presence in the Garden State, under the Peerless Insurance and Safeco brands.

"Premium-wise, this is our biggest state and we see this as a great opportunity, and intend to be a player here for the long term," said Mike Christiansen, CPCU, ARM, Peerless president and chief executive officer. Christiansen met with PIANJ President Gary C. Rygiel, CIC, CPCU, ARM, CRM, AIS, and other PIANJ leaders in the conference room of Rygiel's Millstone Township agency.

With Christiansen were Gary Waggoner, CPCU, FLMI, Peerless regional vice president and Chris Alexander, regional manager for Safeco Insurance. The gathering was the third in a series of discussions held by PIANJ with companies doing business through PIANJ members. Christiansen and his team thanked Peerless agents for the company's "phenomenal results," where they met or exceeded all of the company's financial plans. Clearly, the company's focus going forward will include maintaining comparable profit margins while successfully integrating previously separate carriers into a cohesive organization.

The Safeco acquisition

Christiansen reviewed briefly for PIANJ the acquisition last year of Seattlebased Safeco Insurance Corp., by Peerless parent Liberty Mutual Group. He explained synergies the move produced for Liberty Mutual's Agency Markets business unit in terms of geographic balance, distribution force and products. "We like to say the fit couldn't be better if we had used a dating service," Christiansen quipped.

Liberty Mutual completed its acquisition of Safeco in September 2008, making Liberty the fifth-largest property/casualty insurer in the United States. It was formerly sixth-largest, based on 2007 direct written premium of $20.2 billion, while Safeco had 2007 direct written premium of $5.9 billion. Liberty Mutual Agency Markets had revenues of $5.6 billion in 2007. Combined, the organization will have approximately 14,000 independent agencies.

With Safeco, "we're now the number three writer of personal lines through independent agents [behind Travelers and Progressive]," Alexander said. "We're aiming to become number one. Realistically, you don't achieve that goal by staying out of a $5 billion marketplace like New Jersey's personal-auto market. We are seriously evaluating the opportunity to add personal auto to our product lineup in the state," he added. (New Jersey also was the eighth most profitable state for personal auto in the decade ending in 2007, with an average 10-year profit margin of 10.6 percent of direct earned premium.)

Liberty Mutual recently announced plans to use the Safeco brand for all of its Agency Markets personal lines business throughout the United States. For commercial, Agency Markets will retain the regional identities of its eight existing companies, including Peerless in the Northeast. Safeco's regional organization for personal lines will mirror the Agency Markets' existing commercial-lines regions.

Responsible for personal-lines profit and growth throughout Safeco's eight-state Northeast territory will be Victor M. Pepin, vice president and Northeast regional general manager. Pepin most recently served as vice president of personal lines with Peerless Insurance and will continue to be based in Keene, N.H.

According to Alexander, "We'll be balancing national resources like Safeco's brand and technology with the strong regional structure of Agency Markets, retaining more decision-making authority at the regional level than the previous, more centralized Safeco approach." The new Safeco will be a purely independent-agent focused personal-lines carrier, PIANJ was assured. "When you look at Liberty Mutual's recent business investments, they have invested mainly in independent agents," Christiansen pointed out. "The Agency Markets segment is now at $12 billion and growing."

Garden State plans

The transition to Safeco for Peerless' existing personal book in New Jersey will wait on approval for Safeco to re-enter the Garden State's personal-lines market, Christiansen explained. Like a number of other carriers, Safeco left during the upheavals of the 1970s. Peerless agents will continue to write personal-lines business under the Peerless brand until Safeco has a filed personal-lines product offering in the state. An implementation review is ongoing, but the transition is anticipated in 2010, Christiansen said; however, the actual date will depend on regulatory approval as well as information-technology issues.

Liberty Mutual's presence in New Jersey should help smooth the way for Safeco, Christiansen predicted, recounting how Liberty's Massachusetts experience helped out when Peerless recently re-entered the Bay State, where it had been absent since the 1980s. Plentiful auto experience in New Jersey from Liberty Mutual's existing distribution channels would help develop Safeco's filings, although the Safeco products will be distinct in terms of features, rates and commission, he added. "We're committed to having a bundled, package approach as one option," he said.

Technology plans

The acquisition brings with it access to SafecoNow® Quote & Issue technology platform for independent agents, which will be used for personal lines country-wide. In New Jersey, use of this platform will commence with new business; the Peerless personal-lines book will be transferred later. Safeco also brings a fully functioning 24/7 service center, a feature that Agency Markets had started to develop prior to the acquisition.

Safeco consistently has scored well above average for overall technology in PIA's Company Performance Surveys (in Connecticut, New Hampshire and New York state), including two recent top-five placements for Real Time functionality (Connecticut and New York state, 2008). "Great rating system—easy to use," a Connecticut personal-lines agent said.

On the commercial side, Peerless, Ohio Casualty and Safeco business reside on their own computer platforms. The Ohio Casualty and Safeco acquisitions doubled Peerless' volume in New Jersey. Business from the three companies' platforms will be integrated one time to a new enhanced commercial-lines system, which will incorporate the best features of each, such as Ohio Casualty's paperless environment.

PIANJ Secretary Tom Henkler, who is active in the AUGIE technology effort, encouraged the Peerless executives to include successful commercial lines download in their integration plans; PIANJ provided Peerless with the AUGIE document explaining the role this functionality plays for agents.

Growth projections

Asked about Peerless' commercial-lines business projections for 2009, Christiansen said that several factors are expected to foster growth. "First, we experienced growth in 2008 of around 2.5 to 3 percent. Also, we will have an expanded production force and enhanced products this year. We have great opportunities with many new agency relationships. Additionally, we believe the opportunity exists for positive rate movement."

For the industry as a whole, Christiansen said, he believes the fourth quarter of 2008 "won't be all that great. Companies won't add to surplus, and when that happens, it generally means higher rates." In response to a PIANJ query, he acknowledged that an unknown factor will be economic conditions in 2009 and a possible reduction in the exposure base that could result from less economic activity.

PIANJ encouraged the Peerless group to continue its training and development of new insurance professionals. Based on personal experience, Liberty's training ground "is just what we need," said PIANJ past President Andy Harris, CIC, CPCU, ARM. The groups exchanged information on their recruitment programs, including Liberty's existing internships and PIANJ's Project Y, with its résumé bank and outreach to New Jersey area college students.

"It's extremely valuable to expose company trainees to the agency environment, and vice versa," observed PIANJ President-elect Bill Vowteras, CPIA, suggesting that the organizations explore ways to do so more systematically in the future.

Asked by PIANJ Director Nick SanFilippo how agents can work most effectively to grow with Peerless, Christiansen said they should come up with a meaningful plan that focuses on specific accounts and specific books. "Have a point of arrival in mind, and a way to get there. Then make sure the underwriting staff and management is aware and backs you up, regarding your business plan. But, if it is not a fit and it isn't going to work, both sides should just say it."

Also discussed with Peerless: The crowded personal auto market in the Garden State and PIANJ's campaign to "take back personal lines;" the importance of a respected brand; and the growing importance of multicompany rating functionality.—Kiehl