The next step for Delos Insurance Company–a New York-based program specialist launched in 2006–may be a move to become a public company, according to the firm's chairman, Detlef Steiner.
Indeed, Mr. Steiner told National Underwriter that not only is his company's goal of writing $700 million in program premiums well within reach, but he might need more capital to finance all the business in the pipeline–perhaps from the public equity market.
Mr. Steiner briefed NU on his progress last month in the Bahamas during the American Association of Managing General Agents annual conference.
Reviewing his company's brief history, Mr. Steiner said the journey to set up Delos started with Lightyear Capital, a private equity group that acquired Sirius American Insurance Company from White Mountains.
With a capital infusion bringing Delos' surplus to $200 million, part of the strategic plan was to invest in people and systems because Sirius American "was a little rusty and small," he said, reporting that by the end of 2006, the book was only $130 million.
With those expenses now out of the way, Delos expects to wind up 2007 with $500 million in premiums.
"It is not difficult to get $500 million in premium. It's difficult to get to $500 million performing well," Mr. Steiner said, reporting that the company is getting "a decent return" with a combined ratio in the very low 90s.
"There's more to come because MGAs like our strategy," he added.
At Delos, Mr. Steiner (who was formerly the chief executive officer of Clarendon), still adheres to a model he put in place at his former company–one of doing MGA business exclusively, while outsourcing major functions, such as underwriting, policy issuance and claims-handling to the MGAs.
"We believe in program business, and MGAs appreciate this–that we love MGAs," he said, noting that Delos works with very professional MGAs, distinguishing them from "fly-by-night people" through strong due diligence.
Mr. Steiner said that while the company started with just seven programs inherited from Sirius America, the count has already doubled and he anticipates having 20-to-22 programs in place by the end of the year.
Delos targets large programs with a minimum of $20 million in premiums, he said, noting that the first three put on the books each had in excess of $50 million.
All three were workers' compensation programs–two in California, which puts a natural limit on California comp going forward. "There are opportunities [there] that are still very good, but you don't want to put all eggs in one basket," he explained.
The remainder of the book is varied, ranging from nonstandard auto to health insurance for college students, he said. "We are not driven by any line of business. We write everything non-life," he said.
At the request of Delos' investors, the one type of business the company does not currently write is catastrophe-exposed property. "That might change," he said, going on to provide a glimpse of the future.
"Next year we expect to be in the range of $700-to-$800 million [in premiums], and we'll need more capital," he said.
"The most expensive way to finance insurance is to put more capital from private investors in, because they have high-return expectations," he added. "It's much cheaper to buy reinsurance."
However, he noted, "you cannot buy everything in reinsurance. We are not a fronter–we want to keep the risks," noting that Delos reinsures 40-to-50 percent of its book.
The other way to get money is by going public. "That might happen," he said, adding that some investors want to cash out and the market is good.
In addition, Delos recently created a wholly owned subsidiary, Naxos Insurance Company, to write on an excess and surplus lines platform.
"There is some business out there that needs E&S and, quite honestly, you want to be flexible and not have to file products and prices and wait for three months until the regulators come back and respond," Mr. Steiner explained.
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