Fireman’s Fund Ready to Rally

Fireman’s Fund’s financials, like other insurance carriers’, got bruised a little in the first half of 2010, following some heavy catastrophe losses. But company President and CEO Mike LaRocco said he’s “very bullish” about the company’s future. In particular, he believes the independent insurance agency distribution system and technology will give his company a leading edge in the U.S. property/casualty insurance industry.

Weathering the Storm

The U.S. property/casualty industry experienced modest growth in premiums written and a deterioration in underwriting profitability and net investment income in the first half of 2010, particularly as a soft market and price declines and higher than expected catastrophe losses challenged the industry.

Fireman’s Fund reported gross written premiums for the first half of 2010 of $1.9 billion, net premiums of $1.6 billion, and pre-tax income of $116.8 million, noting the toll of catastrophes and continued soft market conditions from both a top-line and bottom-line perspective. The P/C industry as a whole reported a $6.07 billion drop in pre-tax operating income in the first half of the year, when comparing 2010 to 2009, according to SNL Financial. Net premiums written of $213 billion were 0.6 percent lower in the first half of 2010, than in 2009 in the same period.

In particular, the Novato, Calif.-based insurer had significant claims due to heavy flooding and wind issues in the Midwest and East. “We had a lot of water damage and wind damage that was primarily in the Midwest, but also in the Southeast and Northeast as well,” LaRocco said, noting that claims costs to repair property, automobiles and restore people’s valuables also has been increasing.

Despite the bruising caused by Mother Nature, LaRocco said he sees sunnier days ahead. “It’s hard to make a prediction but I think we’ve hit the bottom and we’re going to start coming into a better place,” he said, with the caveat that “so much of it depends on the overall economy.”

Technology a Trump Card

Using its exclusive independent agency distribution system and by leveraging technology, LaRocco said Fireman’s Fund is building the foundation to meet the needs of today’s and tomorrow’s consumers.

He admits that the company has been weak in technology, operating like several other insurance carriers with “old legacy systems.” But the company is making heavy investments in this area to fix its weakness. In January 2009, Fireman’s Fund’s parent company Allianz invested $100 million into the company, largely to upgrade the company’s infrastructure, technology and products, and make it easier for independent agents and brokers to do business with the carrier.

“The insurance industry has always been under-invested in technology. We were bad as well,” LaRocco said. “So we’re trying to fix that old legacy system and update those things, and that’s really kind of the day-to-day processing of work.”

Meanwhile, the insurance carrier is trying to get ahead of the curve by leveraging social media to reach consumers who want more flexible options in reaching their financial advisors.

“Social media is interesting in that you can leverage Twitter, you can leverage Facebook, you can do an iPhone application. And the neat thing is that you can do some of that outside of your old, lousy technology,” he said. “We are going to fix that going in this path, but there’s a whole bunch of stuff you can do that’s not really connected to your old technology. Even though we’re trying to catch [the competition] over here, over here we can play in that space right now.”

Fireman’s Fund said it has taken an aggressive stance with social media, promoting the company, its products and philanthropy efforts on Facebook, Twitter and through blogging. The company also has services to help its independent agency partners build their Web sites, as well as provide streaming content to agents’ sites to improve the online experience.

“I’m fanatic about the fact that independent agents have a real opportunity through social media to become even more important in the distribution channel,” LaRocco said. “I think it’s going to lead us to a lot of wonderful opportunity going forward.”

He explained his belief that the growing base of future customers has been raised on social media, going to their Facebook friends – instead of the Internet – to gather information. His daughters, ages 24 and 19, are examples, he said, as they may choose to buy insurance over the Internet – but that doesn’t preclude the independent insurance agent from being the contact and conduit through social media.

“Future small-business owners many not necessarily want to have a face-to-face visit with an agent, but they may want to use Skype,” LaRocco said. “They want to open up their laptop and be speaking to their agent, who could be virtually, literally anywhere, but using Skype as a way to talk with them, and using WebEx as a way to get data and information. This group of consumers doesn’t necessarily choose some of the direct-response companies for any other reason but they provide them an approach that meets their lifestyle needs. “Well, the technology has evolved in such a way that agents can be that same contact for those potential customers and can have the additional value of, as they grow in their lives and need more financial advice, being a trusted financial advisor.”

In the relationship between insurance carriers and agents, if both sides can become more effective in using technology, it’s going to become a more efficient relationship, LaRocco added.

“We’re clearly locked with independent agents; we believe that it’s the best way for customers to buy insurance. If we can help independent agents become more effective through the use of technology like social media or their own Web sites, then I think that makes us jointly successful.”

To Market, to Market

Fireman’s Fund also hopes to grow by increasing its product offerings. The company continues to expand its green insurance offerings, for instance. Additionally, LaRocco said the company is moving forward with its mass market strategy. In June 2009, the company announced it would be creating personal insurance products for home coverage, auto coverage, incidental coverages and umbrella coverages, that “average Americans” need. The auto product has launched in 11 states, with “mixed results,” but continues to make progress, according to the president/CEO.

“It’s not going as quickly as we would like, but we had said all along that as we enter into automobile insurance and middle-market home and small-business commercial, that we want to do it the right way,” LaRocco said. “You can’t put a product in the marketplace without the right technological platform, because agents want to have an efficient way to issue that business. It’s a very profitable business, but it’s a low-margin business, so you’ve got to be able to deal with those products efficiently. So we’re building that technology, and it just takes time.”

Ultimately, Fireman’s Fund aims to be an even bigger national carrier than it already is. While the company is known for its high net worth and affluent products in personal lines and niches such as entertainment in commercial lines, the company has a larger geographic footprint than many people perceive – despite its California roots. And it aims to take those steps even further.

“We are very bullish on our future,” LaRocco said. “Right now, we are a fairly small player in the United States property/casualty industry. But we’ve got very specific plans to become a significant player in this marketplace.”