Arrowhead’s Co-CEOs Ruyak, Walker Discuss Dual Leadership Structure

By | April 19, 2004

In just 20 years, Arrowhead General Insurance Agency Inc. has grown from a small general agency specializing in nonstandard automobile business in California, to one of the nation’s largest privately held general agencies writing personal and commercial lines, as well as specialty lines programs in more than 20 states from coast to coast. While no one can argue Pat Kilkenny, Arrowhead’s chairman and founding father, has successfully led the company through the trials and tribulations of its massive growth since purchasing the struggling firm in 1983. But today, the general agency has two new faces that aim to lead Arrowhead through the next 20 years of expansion.

In December 2003, Arrowhead made a move to restructure its senior leadership roles by creating dual chief executive officer positions. Frank Ruyak and Chris Walker share the title of co-CEO for Arrowhead General Insurance Agency.

Ruyak, who also holds the title of president, is a familiar face. He has been at the helm of Arrowhead since 2000, and has been tasked as co-CEO with running the company’s operations, including production, product development and support services.

Walker, who joined the company in December 2003, has been initially tasked with the company’s market development functions and new business opportunities. Prior to joining Arrowhead, Walker served as vice-chairman at Aon Reinsurance Intermediaries. He began his career with E.W. Blanch Company in 1980, later taking on the roles of president and COO. He was named chairman and CEO in 2001 until sale of the company.

Both Ruyak and Walker also serve as members of the Arrowhead Group Board of Directors.

Earlier this year, Frank Ruyak and Chris Walker sat down with the Insurance Journal to discuss their unique co-CEO leadership structure, the benefits of having multiple CEOs, and of course, the challenges. Below are excerpts from that video interview, which can be viewed in full on Insurance Journal’s Web site at: www.insurancejournal.com/broadcasts.

Insurance Journal: When did the concept first evolve of bringing in a co-CEO position to Arrowhead?

Frank Ruyak: Well, we started talking to Chris early in 2003. What we were looking for was someone to come in and fill a gap that Pat Kilkenny (chairman of Arrowhead) and I both felt existed in our management structure.

My background is very different than Pat’s. My whole background is from the underwriting side. I started my career with Prudential Reinsurance in the mid-1970s and I joined Constitution Re in 1981 and stayed with that company as president and COO until the sale in 1998. So, my whole background has really been on the operational side—the company side of the business. Pat’s background had much more of a focus on the marketing and distribution.

Then Chris brings an awareness and access to the overall marketplace that neither one of us had … well, we had it in part … but we didn’t have the totality of it. And I mean there was also a little bit of an age differential (he is actually younger than me). It’s good to bring some new blood in and we talked about it. It was interesting when we really looked at how Chris fit into the organization.

[At first] we looked at the more traditional things. He could be president of this, vice president of this, or an executive vice president, and then we just felt going with a co-CEO title really defined what his role really would be. We look at this as being a participative management team.

Between Chris, Pat and I, we fill a lot of the areas of expertise we need to run Arrowhead, build it and take it to the next level. By giving that title [co-CEO], you are at the same level. It’s a little different because you know there are some inherent problems and dangers [in a co-CEO structure], but we felt it was well worth the risk.

Chris Walker: I’ve known Pat Kilkenny as a customer of Blanch’s for a number of years (goes back to the ’80s) and I’ve known Frank really since the early ’80s and I’ve held both those guys in the highest regard. So, we’ve continued to talk over the years and at a certain part in time, we started talking about how maybe we should do something together, and those conversations led to me joining Arrowhead in December of 2003.

I really view this group we have as a real triumvirate. We’ve got Pat who has really built this agency from a monoline, California non-standard auto type of agency to a very dynamic, diversified operation with tremendous growth. So, he’s really been the visionary and he’ll continue to do that. He certainly brings that skill of looking forward; looking for opportunities to get into the marketplace; looking for the place where other people are; things like that. And he’s really good at that.

Frank has the underwriting expertise. He has the knowledge of working for large public companies. He comes at issues and problems from that perspective, a little different.

I come more from a marketing background in terms of being a reinsurance broker. So, my angle on how to attack a problem or how to exploit an opportunity is going to be a little different from Frank’s, a little different from Pat’s. We may end up at the very same place at the end of the day but we may start from different points of reference. We may come around the bend a little differently but we may end up in the very same place.

It’s really three people with different backgrounds and perspectives that are trying to make an organization continue to grow and be as profitable and successful as it has been in the past with our business partners. It’s pretty exciting.

IJ: Now speaking about your role here at Arrowhead, Frank, you joined the company in 2000 as president and CEO, is that correct?

Ruyak: That is correct.

IJ: Clearly there may be times when you don’t end up at the same place at the end of the day, so in going back to what you said earlier Frank, there could be potential danger with an equal level of leadership. How has this been addressed? What has been addressed to resolve something if there is a conflict between people of equal power?

Ruyak: We really haven’t had that problem yet. I think when and if we get to that point, we’ll have a very frank discussion about it and I really think that the skill sets of the individuals involved will pretty much carry the day.

If it’s more of an operational or structural issue I think my voice will be heard. If it’s more of a marketing question, then Chris will probably carry the day. If it’s something that really involves the future of the company and it’s something that looks at growth and expansion, it’s going to be more Pat’s call. But to date we haven’t had those problems. They will happen. I don’t foresee it being often and when they do occur, they will be resolvable.

Walker: We are talking every day, every hour, so if we anticipate those differences in opinion those will be brought to the surface pretty quickly. And ultimately, let’s face it, Pat is still the chairman. He’s the largest shareholder obviously, so he probably has a little more to say than Frank and I do.

IJ: As a Co-CEO, do you have distinguished responsibilities within your role? Or is it really a joint effort for all of the duties?

Walker: Frank has the luxury of being here four years; I’ve been here about four months or so. Frank certainly has a tremendous knowledge and depth of the organization. The people know him, they trust him, they respect him, and I’m sort of the new guy. I know a lot of the people but I really don’t know them as well as Frank does.

Frank certainly from a day-to-day standpoint, from a management standpoint, from a knowledge standpoint, he’s the man. He’s the guy they’re turning to and I’m still learning the ropes, trying to contribute as much as I can but Frank certainly on a day-to-day basis is running the show.

IJ: Do you plan on restructuring or redeveloping any of your other senior management positions in this new transition of leadership?

Ruyak: The way that we’ve structured Arrowhead is different than most other general agencies. We’ve built a common infrastructure and that infrastructure services our various operating divisions. We have eight distinctive operating divisions now that manage 14 distinct products. And what we’d like to do in the future, as we do now, is use that infrastructure to help build the company and the service and the support for the operating divisions, and really have those people focus at a divisional level on both underwriting and producing profitable business.

IJ: Are there any plans to move into some new states, or other expansions?

Ruyak: I think what we’re looking at in terms of growth is there’s going to be a fair amount of organic expansion both in the states we’re in now and [new states]. We are looking toward a studied and controlled way to grow geographically.

We’re active right now in 27 states but still the preponderance of what we do is based in the western U.S. We’re a very large factor now in California and by extension in Oregon, Washington, Arizona and Nevada.

We’re also growing in certain classes of business in the eastern U.S. We’re looking to grow on a controlled basis geographically and we’re going to continue to look for business opportunities that really fit our model, which is a very definable class of business. Our growth will be by moving slowly and steadily into some new lines of business, but a lot of it’s going to be organic over the next two or three years.

Now the mix itself is one of the differentiators of Arrowhead. When I joined this company in 2000, about 70 percent of our business was personal lines business. This past year, that number has dropped to about 40 percent or 42 percent. And we expect that our real growth will start somewhere in that range, say 35 percent to 40 percent personal and 60 percent to 65 percent commercial lines as we go forward.

IJ: What was the thinking behind that change to increase commercial business?

Ruyak: We did it for a couple reasons. For one, the market opportunities for an underwriting managing general agent are stronger in some of the commercial lines. Two, and probably more important for us, it gives us the ability to downsize specific divisions if we have to take really proactive steps with a book of business. If you write only one line of business in one state, you live and die with that line of business. And if your results start to get out of sync, you’re left with very few choices. I mean you really have to take some drastic steps. The fact that we have this kind of diversity in our book of business really allows us to—if the numbers aren’t working the way they should be—blow it up and rebuild it, start again. I think the best example for us is our non-standard auto book. We actually reduced by 50 percent a few years ago in reaction to the state of the market in California. We reduced the book from somewhere north of $200 million to somewhere in the area of $90 million. Without the diversity, it’d be a lot harder to do that.

Walker: I think that overall where we see the book going, we have some tremendous business partnerships right now in place with some terrific insurance companies, some terrific reinsurance companies, and we’ve got certain tenets in this operation that are critical to our ongoing operation and success. One of those is we want to make sure that we understand that we protect those relationships and build on those relationships on a very profitable basis but they’re near and dear to us.

As we look at opportunities in the marketplace we certainly want to have ongoing conversations with those business partners to make sure that they agree with our observation of where the opportunity is, that they agree with our game plan and how to take advantage of that opportunity, how to get in the marketplace quickly and get the business at our terms and conditions, things like that. Because we want to make sure that those business partners are protected, and those business partners grow with us in a very profitable way. So we pay very close attention to that as well.

IJ: When did that take place, the Internet delivery?

Ruyak: The project really started in the mid to late nineties, and culminated in the creation of an Internet-based delivery system for both pricing and binding that was up and running in 2001.

IJ: How has the feedback been from agents that you currently work with?

Ruyak: It’s been very good. It becomes a reasonably seamless process for them. The data goes in, it generates the policy, what you do is eliminate as many of the mistakes that happen in re-entering data. It happens in most insurance companies.

IJ: Now you mentioned that you’re moving into the commercial lines automation side, automating that process, to what extent has that been developed?

Ruyak: It varies by line, we do a fairly large artisan contractors program in the western U.S. and that’s available on an Internet-based delivery system. We will be using it for architects and engineers products, we’re doing a commercial wind facility in the southeast so we’re using that as a basis for furthering that product. So there’s a fair amount of diversity in what we do.

IJ: Do you experience any hurdles working with commercial lines? Personal lines have definitely taken off in terms of automation and being able to have instant policy issuance and such but commercial lines is obviously more detailed.

Ruyak: It really varies by the line. I mean some things are reasonably technology driven, and we do a large DIC and earthquake facility and that is the business that doesn’t lend itself to Internet delivery because there’s a lot of sophistication, there’s a lot of data transfer, the underwriting process through AXIS/DIC is different. But it does apply to the artisan contractors, professional liability and commercial auto pretty well.

IJ: Lastly, was Chris the One for this job, or did you develop the position first and then sought him out?

Ruyak: It was probably both. We knew what we wanted and Chris actually was the ideal candidate.

Walker: This was their idea for the title. I was just excited about coming to Arrowhead. I have a tremendous amount of respect for the company that Pat’s built, the fact that he brought someone like Frank on who’s got a tremendous wealth of knowledge, respect and expertise in the industry, so for me it was an easy decision. From a certain standpoint, it’s a great challenge for me, because it’s a different part of the industry.

The people who are running our divisions in San Diego and around the country are just real professionals. I don’t really foresee problems, we talk a lot, we communicate a lot, we’re friends but we also respect each other professionally. And as said earlier, we do bring different perspectives, different knowledge and different backgrounds into the situation so it’s really been a lot of fun so far.

Topics California USA Agencies Leadership Reinsurance

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