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Allendale merger tops insurance stories

Stacey Myers

01/04/1999

Allendale Mutual Insurance merging with two companies to form one large,
Johnston-based entity; Metropolitan Life Insurance Co. announcing it
will reduce costs 10 percent nationally, including cutting some jobs
here in Rhode Island; and several mutual insurers opting to go public.
Those were some of the insurance stories grabbing attention this year.
It was a competitive year for insurance carriers.
Thomas Taylor, president and chief executive officer of Amica Mutual
Insurance Co. said in a December interview, “I have never seen a more
ferocious, competitive environment than I am seeing in this business
right now.
“We are seeing, on a countrywide basis, rate wars, price wars. It’s been
largely fueled by capital gains from a long-running bull market. There
are companies that are drawing down those earnings right to the bottom
line, and they’re slashing rates to grow market share,” he said.
To stay competitive in this environment Amica launched its first
national advertising campaign this year, including television spots. The
goal, Taylor explained, is to generate more business where Amica doesn’t
have a strong foothold, and to dilute the risks posed by hurricane-
susceptible East Coast accounts.
“We recognized that if we were indeed going to retain market share and
hopefully grow that we would really have to become much more visible,”
he said.
In August it was announced the headquarters of Factory Mutual Insurance
Co. will be located in Johnston, after completion of the merger of
Allendale, Arkwright Mutual Insurance Co. of Waltham, Mass., and
Protection Mutual Insurance Co. in Park Ridge, Ill. Shivan Subramaniam,
now head of Allendale, was named CEO of the new company.
Though some overlapping jobs will be eliminated, the deal is expected to
bring an extra 100 jobs to Johnston over the next two years. The
companies jointly own Factory Mutual in Norwood,Mass., which helps
insurance clients minimize losses through research and training.
“Financially we’re going to be much stronger, much bigger,” said John J.
Pomeroy, Allendale’s vice president, secretary and general counsel
during an August interview.
Company officials also said there was no interest to become part of a
trend for mutual companies to become publicly-held.
In May, Boston’s John Hancock Mutual Life Insurance Co., the nation’s
12th largest life insurer, announced plans to go public and begin
selling stock. That conversion came on the heels of Prudential, the
nation’s largest insurer, declaring its plans to go public and was
expected to inspire other mutual insurance companies to follow suit.
But in Rhode Island the leaders of several mutual insurers, including
Donald G. Vass of Beacon Mutual Insurance Co., said they had no plans to
take their companies public.
“Stock companies are driven to increase the value of stock for
stockholders,” said Amica’s Taylor.
“I think the recent wave we’ve seen with regard to demutualizations has
been driven by a need to access capital markets, and make acquisitions,
and do all of those kinds of infrastructure building things that
demutualization will bring. But it also does something else too – and I
don’t think the public is terribly aware of it – is that in a
demutualization process, (becoming) a stock company really does enrich
some high-level individuals who run those organizations.”
In other 1998 news, nearly 10 years of litigation was ended in June,
when the U.S. Court of Appeals in Boston denied Allstate Insurance Co.’s
appeal of a $12.7 million federal jury award in a ground water
contamination case. The case stemmed from a 1974 chemical spill at the
former Peterson/Puritan Aerosol Co. plant in Cumberland.
In 1979, when the extent of the damage was discovered, the owner CPC
International Corp. had a $25 million umbrella policy with another
insurance company. Allstate later bought that company. The insurer
denied the claim since it involved environmental damage. An attorney for
CPC said the court decision could help businesses file claims in
accidental environmental damage cases.

Also in June, Beacon Mutual announced it could disburse almost $5.5
million in dividends to about 8,300 workers’ compensation policyholders
by year’s end. The first check went to Steere Excavating Co. in
Chepachet.
“This has been a year of favorable loss experience due to increased
safety awareness among employers and employees and return-to-work
programs,” Vass said.
This was good news for Rhode Island, which saw its four largest workers’
compensation insurance writers, including Liberty Mutual Co., stop
offering coverage here in 1991 because they were losing too much money.

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