PIA meets with Tower Group, Adirondack, NJ Skylands on plans for future

[Following the meeting with PIANY, Adirondack on June 7, 2010, told its agents that the company soon "will reach the end of the formal plan ... to reduce our hurricane exposure on Long Island." The company announced that all agents can start quoting and writing HO-3 package new business on Long Island, effective immediately.—ed.]

Officials from Tower Group Inc., Adirondack Insurance Exchange and New Jersey Skylands have been touring New York and New Jersey, meeting with agents to talk about the planned purchase by Tower of OneBeacon Insurance Group's personal-lines division. Control of the management companies that run Adirondack and Skylands passes to Tower Group as part of the deal, which, overall, includes business in six states.

The companies recently met with the Professional Insurance Agents of New York State Inc. to share information on the transaction, which is expected to close around June 30, 2010, pending regulatory approvals. PIANY has a standard policy of interviewing companies about changes affecting a significant number of its members. PIA reported on the deal to its members shortly after the plan was announced in early February.

PIANY Secretary Eugene Sandy, chair of PIANY 's company relations program, and Past President Jeffrey Greenfield posed questions to Bruce Sanderson, CIC, managing vice president for Tower Group, Thomas McDaniel, president and CEO of Adirondack and regional president of New Jersey Skylands, and Mark McDonnell, CPCU, AIM, AAM, AIT, vice president, marketing for Adirondack and New Jersey Skylands.

Agents reassured: no changes. "We've been assuring our agents that everything will be the same for them on the day after the sale closes as it was the day before," McDonnell told PIA.

"It will be the same people on the phone, the same voice, the same knowledge of you and your office, the same claims staff," added McDaniel. "Tower will keep the OneBeacon platforms going forward, so there will be no disruption in technology. It will be the same systems, the same product and the same brand."

PIA commended plans to retain many of OneBeacon's existing personnel, and to keep the company's existing claims operations going forward. "That will be a big deal for agents," Greenfield responded.

Plans for growth. "Tower wants to grow in personal lines," Sanderson said. "By adding to what we can already offer in the New York and New Jersey personal-lines markets, the transaction will be particularly powerful. Agents will be getting a single, stronger market that can consider all of their needs.

Tower's current writings in New York and New Jersey total around $640 million, Sanderson reported. The deal could add approximately $170 million in personal-lines volume in New York, and another $75 million in New Jersey. "Approaching $900 million, the combination should rank Tower among the top agency companies in this combined state market," according to Sanderson.

Tower's second buy. This is Tower's second acquisition from OneBeacon. In 2004, Tower Group purchased renewals of OneBeacon's standard commercial business in New York, totaling around $80 million at that time. Renewal rights for OneBeacon's remaining nonspecialty commercial lines went to The Hanover Insurance Group in a deal announced late last year. In 2001, Liberty Mutual Group acquired OneBeacon's business and operations (personal and commercial) in 42 states and the District of Columbia.

Tower's assumption of the personal-lines book "will complete OneBeacon's transformation into a specialty company," according to OneBeacon CEO Mike Miller.

Due in part to Tower's 2004 commercial-lines buy, about 50 percent of the companies' agents in New York and New Jersey already represent both carriers, PIA was told. Agents representing only Adirondack or New Jersey Skylands are being directed to the Tower field staff to apply for a commercial-lines appointment with Tower and multiple appointments had already been considered at the time of the meeting.

Business issues discussed. During the meeting, several business issues were discussed. One is the growing prevalence of premium-comparison systems.

"About 70 percent of OneBeacon quotes now start in a comparative rater," McDonnell reported.

McDaniel noted that because the reciprocal structure "lives on" intact after the deal, no change in agents' contracts will be required.

Many agents' questions have centered on the nature of the transaction as it affects the reciprocals, he continued. Technically, Tower Group will be acquiring only the management companies acting as attorneys-in-fact for the reciprocals—not the insurers themselves. But Tower also will be in a position "to invest in the business and build out our capabilities, making things possible that we have been wanting to do," McDaniel explained.

Agents confirm value of package product. McDaniel explained that Tower will acquire OneBeacon's signature package product. "The package is our image. Tower will invest in the package technology to make it more robust. This investment is seen as key to growth," he added.

OneBeacon's personal-lines agents were told: "Tower will … adopt our OneChoice product suite, including CustomPac, and will use our OneChoice Web Platform" (Feb 2, 2010, letter from Mike McSally, senior vice president, personal lines).

Multiple Adirondack agents identified the company's package product as its "main strength" in PIANY's 2009 Company Performance Survey.

Value of PIANY survey reports. "We find PIA's survey reports very helpful every year," McDonnell told PIANY. "Now, we're able to look at trends—our year-over-year results. We'll be reminding our agents to participate again this year, and sending them a link to your survey."

Each year, PIANY makes detailed reports available to individual companies. Reports identify what agents regard as the company's "main strength," things agents want to see improved, and how the company's performance stacks up in 20 different areas.

PIANY's 2010 Company Performance Survey is open to members and nonmembers and can be found at the association's Web site, www.pia.org through June 2010.