Monday, September 1, 2008

General Casualty: Flounder to Flourish

General Casualty 's transformation under QBE ownership resembles a Cinderella story.
The Sun Prairie insurance company 's status went from neglected stepchild as a part of former owner Winterthur U.S. Holdings to a favored family member with QBE Insurance Group, Australia 's largest international insurance corporation.
QBE, which bought General Casualty and related companies for $1.16 billion early last year, has big plans for the Sun Prairie campus, which is slated to become one of two QBE data centers worldwide. The parent company is consolidating operations around the country and moving jobs to Sun Prairie in support areas that include information technology, finance, human resources and actuarial services.
"We 're going to use that campus going forward as the backbone for shared services, " said Peter Christen, president and chief executive of QBE Regional Insurance, a group of four companies including General Casualty. "The vast majority of our people are located there. "
QBE 's outlook on General Casualty is in sharp contrast to the local insurance company 's previous owner.

After Winterthur was acquired by Credit Suisse, an international Swiss bank, in 1997, General Casualty 's influence dwindled in the organization, said senior vice president of claims Jim Blair. Even flying a Swiss flag outside the Sun Prairie offices didn 't improve its standing.
"(Credit Suisse) didn 't have a lot of presence in the U.S., and the whole North American area was deemed non-core for them, " Blair said. "They were really much more interested in what was happening in the rest of the world. "

Improved status
Ratings firms reflect General Casualty 's improved status as part of QBE. A.M. Best upgraded the company 's rating to A-minus after the acquisition was completed last year, and Standard & Poor 's upgraded its rating for QBE Regional Insurance from stable to positive on July 21.
S&P analyst Sid Ghosh said the regional insurance subsidiary could earn the higher A+ rating of its parent, QBE the Americas, when General Casualty and Unigard, a related insurance firm in Washington, become fully integrated into the parent company.

"We believe it 's going to happen, " he said. "The question is how long it will take. "

The changes for General Casualty come during what analysts view as a soft insurance market, when competition drives down rates and squeezes profits, said Charles Krueger, chairman of executive education at the UW-Madison School of Business.

The company 's premium volume last year was $1.07 billion, down from $1.15 billion the year before and the fourth consecutive year of premium declines.

"Many companies after acquisitions look to cutting costs through expense-saving synergies, " Krueger said. "I do not believe we have seen significant cost-cutting initiatives at General Casualty, but management must be concerned that they do not undercut their core business value of talent and relationships with their agents. "
In fact, the network of 1,700 independent agents for General Casualty and Unigard and the companies ' infrastructure were key elements that attracted QBE, Christen said.
QBE was among a half dozen companies interested in buying General Casualty.
"We did not have a direct insurance infrastructure in the U.S., " said John LaCava, chief administrative officer of QBE the Americas. "We felt this would be a foundational piece for us. "
Developing the Sun Prairie campus as one of two QBE data centers worldwide means that policy records, invoices and other data for the entire group of companies would be stored locally. That 's only part of QBE 's plans.
"We 're taking some functions we 've had around the United States and we 're consolidating and bringing those jobs here, " LaCava said. "We see this as such a good, mature, well-run organization that it 's very easy now to scale from that. "

Community bonus
Sun Prairie Mayor Joe Chase said he 's glad General Casualty, the city 's largest employer with a local work force of nearly 900, is in an expansion mode instead of contraction, which sometimes follows sales of companies.

"We really appreciate that effort they 're going through to keep their headquarters in Sun Prairie, " he said. "They bring quality jobs to our community, they have the potential to expand in our community and we see that as a bonus. "
Wisconsin generates more business than any other state for the QBE regional brand, said Rich Kalina, regional vice president of Wisconsin operations.
Of General Casualty 's $271 million in Wisconsin premium revenue, $100 million is in personal insurance and $171 million is in commercial insurance. Last year, the company handled 48,000 claims and has 220,000 policies in force in the state.
Kalina said the QBE partnership has generated local opportunities. The company is recruiting Wisconsin agents to sell farm insurance through QBE 's Farmers Union Insurance, and General Casualty now has the capability to sell specialty insurance for fine art or antiques through another QBE sister company.
"We 're starting to see some synergies with some other companies that are owned by QBE, " Kalina said.

Three weeks ago, he said, General Casualty also kicked off a new rating methodology for personal auto insurance that includes hundreds of new rating elements such as credit scores.
The importance of General Casualty to QBE 's global strategy was illustrated in May when the entire QBE corporate board came from Sydney, Australia, to visit the newly acquired Sun Prairie operation. Board members held a quarterly meeting and spent 1 days at the campus.
"The parting comments were that we have to make sure we come through here at least once a year, " LaCava said. "They recognize what an important part of QBE it will be. "

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