A refocusing at Allmerica

Rough Notes, Jan 1999 by Pillsbury, Dennis

Allmerica offers variety of products and stable market for independent agents

Allmerica Property & Casualty Companies, Inc., traces its roots back to 1852 when The Hanover Fire Insurance Co. started operating in New York City. The word "Fire" was dropped from the name in 1958. In 1973, The Hanover Insurance Co. moved its corporate domicile to New Hampshire. Administrative offices, which had moved to Worcester, Massachusetts, in 1969, remained in that location. Allmerica, a Delaware holding company, was incorporated in 1992 and acquired 100% of Hanover under a plan of reorganization.

Hanover's sister company, Citizens Insurance Co. of America, Howell, Michigan, was formed in 1915 as Citizens Mutual Automobile Insurance Co. It converted to a stock company in 1974 under its current name. At that time, Hanover acquired all outstanding stock of the company.

While personal lines represents the majority of business written by both companies, they also offer a wide array of commercial lines and group offerings. Today, Allmerica P&C is in the midst of a reorganization designed to make it more responsive to the needs of the independent agents that represent it and to its policyholders. We talked to Bob Restrepo, the new president and chief executive officer of Allmerica Property & Casualty Cos., about the restructuring. Bob came to Allmerica P&C about six months ago from Travelers, where he headed up the personal lines area.

According to Restrepo, Allmerica P&C is taking steps to:

achieve stronger market and customer focus in order to become more competitive

integrate product lines, systems and operations to further reduce costs

invest more in new technology, but better leverage these investments

adapt the field structure to better support regional and national sales and service programs

To support this strategy, the group is aligning its business into five market segments. "Three of the five market segments will be centered in hubs that will continue our strong regional company presence," Restrepo says. "Our Worcester, Massachusetts, hub will serve the East. Our hub in Howell, Michigan, will be our Midwestern Regional Company. At our Atlanta, Georgia hub, we are creating another regional company, which I call Hanover South.

"The remaining two market segments are comprised of two recently formed business units. Allmerica Voluntary Benefits will market and sell group auto, homeowners and life insurance through employers, associations and institutions. It also will develop new products for these growing market channels. Allmerica Specialty Products will market, sell and underwrite health and disability coverage, alternative risk management capabilities, other program business and new products such as integrated workers compensation and benefits products."

Restrepo explains that "we don't want to be too many things. We decided to focus on these five markets after a process that involved really figuring out where we had been successful and how we should build on those areas to differentiate ourselves."

He continues, "One of our strengths rested in the fact that our local knowledge allowed us to provide stable markets for independent agents in difficult states. We do very well in New Jersey, for example, and we're one of the largest workers comp providers in Maine. It involves knowing with whom to do business and how to do business, learning how to best operate given the unique requirements of the state."

Turning to voluntary benefits, Bob points out that Allmerica P&C already writes some $600 million in group property/casualty and sees this as a strong and growing market. (See the June 1998 issue for details on the company's growing, sponsored marketing arena.)

In the area of specialty markets, Restrepo predicts that integrated products for the middle market will become an important market as workers comp premiums begin to stabilize. Coupled with the fact that health costs are going up, "this should help create an environment where integrated products are attractive." Right now, he admits, "clients are comfortable due to very soft workers comp premiums."

Integrated products are "attractive in terms of workplace safety and helping to better manage the total costs of risk. You don't have cost shifting and are able to implement good return-to-work programs for employees whether they are suffering from occupational or nonoccupational injuries or illnesses."

In addition to the current lack of any outcry for integrated products at the moment, Bob notes that "we also are constrained by the fact that we basically operate in only 18 states and have to focus on companies that operate within the region. However, we plan to be operating nationally in the next 18 months." Allmerica P&C's target for integrated products is employers with at least 100 employees. "Ideally, however, we are looking for employers with 200 to 2,000 employees."

Allmerica P&C offers two integrated products-MedCompOne which integrates group health, disability and comp; and DisabilityCompOne which integrates just disability and comp.