They Do THAT, Too!

Diversification Spurs San Antonio-Based SWBC to Great Heights

Top 100 Agency Profile
Ranking No. 13
(ranking based on 2007 figures)

Agency Name: SWBC
Headquarters: San Antonio, Texas
Year Founded: 1976
2008 Total P/C Premium: $645.3 million
2007 Total P/C Premium: $481.0 million
2008 Other than P/C: $176.5 million
2007 Other than P/C: $232.7 million
% Commercial: 62%
% Personal: 15%
2008 P/C Revenue: $246.3 million
2007 P/C Revenue: $158.7 million
Agency Principals: Charles Amato, Gary Dudley
Number of Divisions: 13
Number of employees: 1,250

Charlie Amato says Gary Dudley got him into the insurance business. Dudley doesn’t deny it, and why should he? From humble beginnings as entrepreneurial partners selling insurance out of the trunks of their cars, the two have created a world-class diversified financial services company — with 13 divisions and offices throughout the United States — that generates nearly a billion dollars in annual revenue and employs 1,250 people.

For more than 30 years Amato and Dudley have operated San Antonio-based SWBC as a 50-50 partnership and neither would have it any other way. Friends and fraternity brothers in college, Amato went into banking after graduation and Dudley entered the insurance business after serving in the Marines, and as a coach and teacher.

“I worked for a company that sold specialty products to credit unions, insurance products,” Dudley said. “It was a small company out of Michigan. And they hired Charlie. He was in San Antonio and I was Houston. We were basically just sales people, worked out of the trunk of our cars. That company, we determined after a short period of time didn’t have the clients’ best interest at heart. They didn’t treat their customers and employees the way we felt like they should treat them. So Charlie and I left and formed SWBC. We didn’t call it that in the very beginning but that’s who we were.”

That sense of fairness and the dedication to treating their customers and their employees with the utmost respect remains the foundation of the company today and it has served them well — as has their determination to diversify the company, both geographically and product-wise.

SWBC’s corporate slogan, We Do That Too, “really tells the story,” Dudley said. “When we started we were selling insurance products to financial institutions,” Dudley explained. “We started out with one product. As a result of the client liking how we delivered and did what we said we were going to do, they’d ask us for another product.”

Most of the products and services SWBC offers have been developed at the request of a client and that makes good business sense, Amato says. After all, the more products you can sell to one client the more cost efficient those transactions become.

While diversified, all of the company’s products and divisions are related and complementary, and they all begin with the customer. Even so, sometimes customers’ product requests are declined because they don’t make sense or because they would be too short lived, Dud-ley explained. But, he added, when a client requests a product, “we research it with a lot of other clients that we’ve had long term relationships with and they can be a judge, and say ‘yeah, we would like that product as well.’ Then we’ll proceed with developing that product and building it.”

There’s no doubt that with the hundreds of products and services the company has to offer, it is diversified. Insurance agency? Check. Risk managers? Check. Insurance company? Check. Real estate? Check. Technology? Check. Mortgage origination? Check. Employee benefits and wealth management? Check. Plus reinsurance, equities brokerage, collection services, call center, insurance wholesaler — the list goes on.

“Everything interconnects,” Amato said. For instance, SWBC owns 51 percent of a real estate business. We’re “an insurance agency, and we own an insurance company, and we have money to invest,” he said. “So besides putting money into CDs and stocks, equity, corporate bonds, we thought real estate would be another investment for us, to give us another option. So basically everything we do is connected.” And, “if you think about it, all those projects have to be insured,” Amato added.

An REO Niche

Early on, SWBC developed a recognized expertise in insuring real estate owned (REO) properties — a niche that grew out of, again, clients’ interests. The company’s involvement in the niche began “years and years ago as a request from some of our clients that were starting to repossess properties,” Dudley said.

Having previously written coverage through Lloyd’s of London, Dudley and Amato turned to Lloyd’s for help developing a product to protect financial institutions and their repossessed, unoccupied properties. While it’s been a profitable business for some time, the REO sector has been a real growth area for the company during the current economy and SWBC is one of the top two agencies in the country for this type of product.

Standard insurance companies “don’t have the appetite to insure vacant property or empty property. So that’s why REO insurance has become so popular in today’s environment — because it’s designed specifically for repossessed properties that are unoccupied,” Amato explained.

“REO was a nice, diversified part of the agency” when he joined the company in 2006, said Nick Grant, CEO of the Property and Casualty division of SWBC Insurance Services. By the end of that year the country was headed into a difficult mortgage market, followed by the economic downturn and tightening of the credit market.

“The whole mortgage industry started sliding and that’s when they started taking properties,” Grant said. “Seeing that, Gary and Charlie urged me to develop more of a marketing arm.” Grant then hired a producer whose “sole job is to cover the whole United States, reaching out to anybody that services a mortgage and may be taking properties back.”

Some of the institutions currently being forced to take properties back have never had to do that before, so it’s a sensitive issue, Grant said. The REO program can insure the property against hazards and flood, among other things, and can be set up to do so on a month-to-month basis. “Our program is an extremely cost effective, user-friendly program,” Grant said. “It allows monthly billing. And the reason I point that out is that the properties have to be insured, and we believe we go about it in the most cost effective, efficient manner for the institutions.”

And, he added, SWBC has the ability to underwrite the program and tailor it to clients’ specific needs.

A Broader Mix

While the percentage of REO business in SWBC’s property casualty division increased from 17 percent in 2007 to 23 percent in 2008, commercial lines continue to make up the bulk of the division’s writings. In 2008, commercial lines represented 62 percent of the P/C business, down slightly from 2007. Personal lines came in at 15 percent in 2008, compared with 16 percent in 2007.

On the commercial side the agency writes a wide variety of SIC codes. However, Grant said, “every agency leans towards certain industries. … We do a number of banks; we’re very good at doing banks. We’ve been very successful with property managers, commercial buildings, multi-purpose office buildings, we have great markets there. And for whatever reason the agency has gravitated toward restaurants. We write a lot of the nicer, high end restaurants here in San Antonio and we have excellent markets in that area, as well.”

The agency also serves a broad mix of small, medium and large business customers.

“We have our share of smaller accounts,” Grant said. “We’ve been successful in partnering with companies like Hartford and Travelers that will make small account servicing, or what we call special account servicing, for the smaller client.”

SWBC’s growth is linked to its customers’ growth, he explained, and with small businesses it’s especially important to handle their accounts in a cost effective way. “We’re sensitive to that. … [We] realize that a start-up restaurant may not represent a huge premium, but then it picks up and takes off, and you’re part of the growth process.”

The agency also sees growth opportunities in middle market accounts, especially in construction accounts, which is an area of special expertise for Grant.

“When I came in, the agency was predominantly a white collar business, no real blue collar construction or artisan contractors, and I’d cut my teeth in this industry on construction,” Grant said. So he went on a search for the right people to help grow a concentration in construction, general contractors, subs, artisan contractors and the like. Now, SWBC has an experienced construction team that includes a producer, a CSR, and loss control and claims personnel.

Grant added that SWBC writes a number of large-sized accounts, as well. Dudley and Amato “have never met anybody they didn’t think they could insure,” and that attitude filters down throughout the organization, he said. “You could be Frank’s Palette Manufacturing down the road or you could be any large corporation. They wouldn’t hesitate to ask the CEO of Southwest Airlines or anybody else — why aren’t we writing your insurance?”

Whether an account is large, small or medium-sized, or whether it’s personal lines or commercial, one thing the agency strives for is to make sure its customers’ exposures are protected appropriately. “We make every effort to get our prospects, our clients to understand that we’re not insurance sales people,” Grant said. “Our producers are people that go in and expose risk. We go to a client and look at their exposure and make sure they’re fully aware of what’s at risk. And then we provide options to insure the risk.”

Embracing Technology

SWBC has experienced tremendous growth since its founding in 1976, but in the past four years it has more than doubled in size. One enabling component of SWBC’s success is its total and complete embrace of technology, which both Dudley and Amato both see as yet another example of expansion into an area of business that complements the company’s existing strengths.

“We’re a high technology company,” Dudley said. “We have 100 computer programmers on our staff, for instance, to design programs and keep our systems running.”

SWBC in 2008 increased its technological investment by buying a stake in Pennsylvania-based Akcelerant Software LLC, which develops software, including collections software, for the financial services industry. And recently, SWBC made an additional investment to facilitate the purchase of one of Akcelerant’s Canadian competitors.

“A lot of our financial institutions — credit unions and community banks — use this collections software,” Amato said. As a result of the investment, SWBC established a payment reminder services unit that makes after-hours soft collection calls for clients.

The calls are made from a facility SWBC built two years ago — a spacious, light-filled, state-of-the-art contact center large enough to house 400 employees. The proprietary software tracks accounts that are past due and collection personnel make payment reminder calls. In addition, the call center staff can take payments while the customer is on the line.”The results have been remarkable,” Dudley said.

“The financial institution hires us on their behalf,” he added. “We started that about two years ago before we knew what the economy was going to do, as a request from one of our clients. That has turned out be our fastest growing division.”

An Entrepreneurial Spirit

Like many business owners, Amato and Dudley are quick to credit their management team and employees for the company’s achievements. “I’d stand up and put our 1,250 people against any company in the country,” Dudley said. “They just have that — ‘I want to help, I want to take care of the client'” — attitude.

Both Amato and Dudley stand firmly behind the notion that if “you hire the right people, they hire the right people,” Dudley says. And believing that talented people associate with talented people, they put their money where their mouth is — they pay their employees to refer potential employees to the company.

If a referred employee stays on the job a minimum of six months, the referring employee gets $200. Once an employee successfully refers five new hires, they get an extra $1,000. So, for referring five people who are a good fit, the referring employee can make $2,000.

SWBC also compensates its employees well, Amato says, “because we feel that’s the only way we can compete with the public companies. Some people here are making a lot of money and we’re proud of that. We have some people who over a period of years have made more money than Gary and I … and we love it.”

SWBC encourages each of its 13 division leaders to run their units as if they owned them, Dudley said. It makes for a very entrepreneurial atmosphere and one that allows the company to “turn on a dime,” as Amato says, and react quickly and efficiently to their clients’ needs. Because SWBC is privately held, if a manager comes to one of the owners — to discuss ideas or for an investment in their division — unlike in a publicly traded company, they can give that manager an immediate answer.

Amato said they’ve been encouraged to go public and have been approached by equity firms interested in investing in SWBC, but so far they’re not interested. Going public would not fit the company’s business model, Amato said, “because it would take some of our entrepreneurial creativity away from us. If we want to form a new division and lose money for three years, that’s our privilege — we can do it and we can afford it.”

Topics Property Property Casualty Construction