The president of Argo's E&S operations traced the changes by pointing to particular specialty insurance lines, and then to names of individual division leaders, that would move from boxes under the Colony Insurance and Argo Specialty branches on one flowchart to different spots on a new Colony Specialty map.
But some of the most relevant changes, he suggested, were not entirely evident from a simple side-by-side analysis of the two diagrams, as he supplemented the review of the graphic depiction with a discussion of key benefits for employees and brokers. Two such benefits, he said, will be stopping an exodus of talented employees to competitors and eliminating obstacles for broker partners.
"Our folks felt like they didn't have a career path from company to company" under the structure that was in place prior to the Oct. 12, 2010 announcement, Mr. Levinson said, explaining one of the less obvious benefits of putting two of Argo's three specialty operations together.
"If you worked for Colony [Insurance], which is generally our smaller business, there wasn't a path to go into Argo Specialty," which housed the more complex specialty business and middle market business, he said. Employees, therefore, "felt like their fates were sealed, and they would leave and go work for other carriers in the area," he reported.
Mr. Levinson, who joined Argo Group from ACE Westchester in March last year, also described layers of unnecessary expense and inconsistencies that existed when the E&S/specialty divisions were Argo Pro, Argo Specialty and Colony. Each of the three companies had a president and Mr. Levinson sat above all three before the Argo Specialty and Colony units were put together and rebranded as Colony Specialty.
"That was expensive," Mr. Levinson said, adding that there was not only redundancy built into the prior organizational structure, but there were also inconsistencies in the way each company ran its claims and underwriting processes.
In addition, the setup was difficult for brokers to understand and navigate, he said, noting, for example, that all three companies had casualty business, Colony had three kinds of commercial auto business (transportation binding, brokerage and garage), and Argo Pro housed environmental liability, which was "a weird fit" for a company that is primarily a professional lines underwriter.
"As a broker, you didn't know where you should go with certain lines of business, and somehow our producers didn't have appointments [with all] three companies. They might have access to go to just one, or to [Company] One and Two, but not the third," he said, concluding that the old structure "became an obstacle as opposed to a tool to help [Argo] do more business."
Summing up, Mr. Levinson said the restructuring--from a three-tier, 13-product E&S operation to a two-tier, five-product one--was designed "to help us eliminate some of the inconsistencies, to help us create career paths for our people, as well as to be actually more efficient, less expensive."
The new tiers are Colony Specialty and Argo Pro. The Colony Specialty products now are: casualty, property, environmental, transportation and binding, Mr. Levinson said, adding that there is a possibility that personal lines will be added in the future.
In addition, he said the restructuring involved the reassignments of some executives to different roles--roles that "play to their strengths."
"That was the most difficult part of this whole thing"--and potentially the most beneficial, Mr. Levinson said. "Revisiting the org chart wasn't that difficult. Figuring out who could really help us move and what their roles needed to be was challenging."
Mr. Levinson said some of the moving players on the leadership team were:
o Sam Anderson, who took on the role of president of marketing, business development and producer management.
o Mike Fleischer, another ACE Westchester veteran, who became Colony Specialty's chief underwriting officer.
o Mark Richards, who became senior vice president of Colony Specialty's casualty operation.
Mr. Richards, as leader of the casualty business, is likely to ultimately focus on accounts in the space between $15,000 and $50,000 accounts, Mr. Levinson said, noting that Colony Insurance's former niche was $15,000 general liability policies, while Argo Specialty was targeting casualty business in the $50,000-$60,000 range.
John Keane, he said, will continue as president of Argo Pro.
Asked whether any employees would be moving to different locations as the restructuring is set in motion, Mr. Levinson confirmed that moving "to be closer to the point of sale" is indeed part of the plan. "We are moving some resources from what was known as 'brokerage casualty' [at Colony Insurance] into the old Argo Specialty offices" around the country," he said.
"If you want to have casualty really act like one department, then you need to have the Argo Specialty and the Colony folks closer together," he said, giving an example of a Richmond, Va.-based Colony brokerage casualty employee who "raised her hand" to move to one of the old Argo Specialty offices in New York, hoping to improve her skills handling smaller business and to move on to tackle the challenges of more complex business by being part of a bigger unit.
As for the reassignments of executives, Mr. Levinson used Mr. Anderson as an example of how each person's new role will play to his or her individual strengths, noting that the personable Mr. Anderson is particularly good at relationship building, making him a natural candidate for producer management.
Mr. Anderson will also work to "develop some meaningful relationships with the ultimate insureds," Mr. Levinson noted, suggesting that relationships with "the top 50" insureds will "create value between the retailer, the wholesaler and us."
"We're really supportive of the wholesale distribution channel--have always been and will continue to be. So if you believe that, then having Sam reach out to an insured sitting right next to you as the wholesaler--bridging and building that relationship--is a good thing," Mr. Levinson asserted.
Asked about the possibility that a wholesaler would hesitate to have the insurer's representative sit down with the risk manager of a large account, Mr. Levinson said he had never seen that happen during his career. "I have been involved in this business for a long time, and anytime we sit down with a renewal insured--an incumbent account--or a perspective insured, our chances of retaining that business or writing that new account probably double," he said.
"The odds get so much better for us and for the wholesaler. So if you believe we're dedicated to the wholesaler, which we are, [and] if you believe we're not going to cut you out, which we're not, then why wouldn't you bring someone like Sam or me out to see a client and let them know how important their business through you [the wholesaler] is to us," he asked. In that way, the wholesaler can "start to strengthen and build that relationship, [and] we move away from being a commodity to actually being a company that supports them and their business needs," Mr. Levinson said.
NEXT STOP: PERSONAL LINES?
During the NU interview, Mr. Levinson described a possible future foray into personal lines as "aspirational," noting that if and when the segment is added, Mr. Fleischer would lead the division as chief underwriter along with the rest of the Colony Specialty book.
Mr. Levinson's interest in personal lines is partly a function of his own prior experience and partly based on the stickiness of the business, he said.
"I have had my homeowners insurance with the same carrier for almost 15 years," he said. "I haven't shopped it. I don't think the premium has gone down."
"So I look at [personal lines] and say the rest of this business is going to continue to be cyclical. Personal lines generally sticks, and if you can start to bring some ballast to your book to offset some of the cyclicality of the rest of the business, that's good."
"The margins are good," he added, noting that he saw the benefits of having a personal lines operation firsthand during a 10-year stint at Chubb, a longtime player in the personal lines market, and after another 10 years at ACE, which recently started a personal lines operation. He said Argo's "aspirational" book would focus on high-valued homeowners business with E&S-type exposure. A good description, he said, is "bad boys with toys and bad girls with pearls"--a market where there's some rate and where the carrier can solve problems.
That mindset will carry over to existing commercial lines operations, Mr. Levinson said when asked if any changes in mix or appetite are on the near-term horizon.
"I don't want to get pigeon-holed [with] people thinking about us for any specific class or line of business. That's a dangerous position to be in," he said, suggesting that a better position has brokers thinking of Colony Specialty "as a problem solver."
"They've got an account that's got an exposure....It's a discontinued product and the standard market can't figure out what to do with it. That's when we come to the table and where we add value because we're thoughtful. We've got good underwriters and we're able to come up with a solution," he said. "It may not be the cheapest solution, but it's a solution to an insured's problem."
MORE CHANGE AHEAD
Mr. Levinson also envisions having the company's Denver-based actuaries become more embedded in the underwriting operations of the insurer and looking for anomalies to help shape the company's appetite for risk. For example, if bricklayers in New York are running loss ratios that are 20 points better than average, "then we should do more," and if they're 20 points worse, "then we ought to jettison them, or get more rate or higher deductibles," he said.
"The actuaries won't be just a support group off to the side," he said. "We're clearly looking to use data to make better underwriting decisions," he said.
Asked about another potential change going forward--in the number of relationships with specialty wholesalers and general agents--Mr. Levinson confirmed that the number of producers who placed business for Colony Insurance could be slashed by as much as 50 percent.
"Based on the numbers, with the three different companies operating somewhat independently, there were far too many Colony appointments," he said. "So there's definitely a deliberate effort to look at who's supporting our business, and who's meaningful, and who has opportunity, and who is really just treating us like a commodity and not valuing what we do," he said, noting that the marketing department is charged with the task of sorting through the appointments over the next six months.