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The investors in line to revitalize the 157-year old Pawtucket Mutual Insurance and its subsidiary Narragansett Bay Insurance companies plan to rebuild the Rhode Island firms by staying small and focusing on coverage for middle market homeowners, including coastal risks, in Massachusetts, Rhode Island and on New York’s Long Island.
The four investors, who have formed Providence Insurance Managers LLC, are putting up $5 million for the names, licenses and Maple Street office building in Pawtucket; they will also assume about any outstanding claims. Their group includes a former insurance executive with more than 35 years of insurance industry experience and local businessmen with backgrounds in media, investments and insurance.
Their plan is to write policies beginning in January 2006 through a network of about 20 to 30 smaller independent insurance agents. They hope to attract agencies that previously represented the companies and win back former policyholders, some of whom will be offered discounted premiums.
Pawtucket Mutual and Narragansett have been under state control since May 2003 and state officials have been looking for a buyer since then. A number of potential suitors expressed interest over the months as business slipped away and surplus eroded. Now after two years, the PIM business plan has won the endorsement of state regulators although the court overseeing the rehabilitation of the two insurers must still approve it. The group hopes to close soon.
There are no policies remaining in the companies whose combined direct written premium reached its peak of $95 million in 2002, and whose policyholder surplus peaked at $49 million in 1998.
All remaining claims and liabilities will be all shifted to one of the companies, leaving a clean slate at the other so management can pursue a rating from insurance company rating organizations like A.M. Best, according to the plan.
The investors plan a second round of financing by the end of this year which they see raising from $25 million to $50 million in additional capital.
PIM’s founder Stewart H. “Nick” Steffey will serve as president and chief executive officer of the companies. Steffey’s 35 years insurance career has included executive stints at Chubb, Connecticut General/INA and Liberty Mutual. His accomplishments include the start-up and building of Liberty International Holdings, Inc. (a subsidiary of the Liberty Mutual Group) into a $1 billion company from 1993-1998. After that, he started Boston International Capital, a consulting firm for small and medium-sized insurance companies. He created PIM this year to take advantage of the Pawtucket Mutual opportunity.
Steffey is not looking to recreate his previous large insurance carrier environment. His aim is to keep Pawtucket and Narragansett small and focused. He would be happy to write about $15 million to $20 million in business after one year and $50 to $75 million after five years. He defined the market as homes valued between $175,00 and $800,000.
To accomplish these goals, the PIM business plan calls for the utilization of real time home valuations, state-of-the-art catastrophe modeling and easy web-based access and binding for agents.
“We want to be really good at homeowners,” Steffey told Insurance Journal. Steffey believes that using the right technology and agents, his company will be able to write coastal and other risks that are turned away by larger insurers, which too often view almost any home in a state with a coast as an undesirable property.
“The key to the model is to look at each location as a separate risk,” Steffey said. This includes separating the catastrophe-related premium from the non-catastrophe-related premium in coastal locations, he added.
Steffey has a simple vision of how he would like his companies to be perceived down the road. “Good value for the money and easy to use,” is how he sums it up.
There are about 18 employees left out of the 180 who were on board at the time the state took over. Steffey aims to retain some top managers from the old regime, including Vincent DelNero as chief operating officer, Ray Deschennes as vice president of marketing, Linda Prevost as vice president for underwriting, Al Cavalho as head of systems, and Paul Liberty as vice president for claims.
This is an edited version of an original report apearing in the May 23, 2005 print edition of Insurance Journal East.