TRI-CITY BROKERAGE INC.Posted On: Sep. 6, 1998 12:00 AM CST
50 California St., Suite 2000,
San Francisco, Calif. 94111;
415-986-5050; fax: 415-986-5004;
Premium volume $435,000,000 $454,850,811
Gross revenues* $31,200,000 $31,200,000
Employees 173 186
Commercial lines 100% 100%
Admitted business 80% 80%
Non-admitted 20% 20%
* BI estimate
Tri-City has got new capital to grow with and a new equity partner, but it remains the largest, and one of the few remaining independent national wholesalers.
In July, Bermuda-based EXEL Ltd. said it was acquiring 25% of Tri-City's common stock for $8 million in cash. The deal was intended to help Lloyd's managing agency The Brockbank Group develop a U.S. midmarket distribution strategy. Brockbank is a unit of Bermuda-based Mid Ocean Reinsurance Co., Ltd., which has merged with EXEL.
"All the money is going to go into the company," said Tri-City President and Chief Executive Officer John G. Hahn. "We're going to use it to grow the company." It will support the strategies Tri-City has followed the past four years and will be used to continue to build new business in the program and managing general agency area, and, possibly, to make acquisitions, he said.
"We think the timing's good in our field" to look at acquiring firms that offer specialized or unique capabilities whose owners are attracted by a privately held firm that will still allow them to do their "own thing," Mr. Hahn said.
He anticipates Tri-City also will benefit from its Brockbank tie. "We're going to be looking to develop business with the London marketplace, and, hopefully, into Bermuda as well," he said. Mr. Hahn said he'd like to see the relationship bring Tri-City more MGA, program or brokerage business involving the London market.
Mr. Hahn contends that Tri-City's position as the largest and one of the only independent national wholesalers remains intact despite the EXEL investment; EXEL is an insurer, not a retail broker, he said. At the same time, Mr.Hahn said, "I think we can help develop new business together better than we could apart."
Meanwhile, Tri-City continues to focus on its three basic strategies: to continue to support the brokerage side of the business, working with about 2,000 agents and brokers; to offer unique capabilities or expertise to its retail broker customers; and to underwrite, which includes MGA and program business.
Tri-City reported $435 million in premium volume in 1997, down 4.4% from $454.9 million in 1996. Business Insurance estimates its gross revenues remained stable, though, at about $31.2 million. For 1998, Tri-City anticipates a 5% decline in premium volume and a commensurate decline in its gross revenues, said Mr. Hahn.
Meanwhile, the sources of its business are shifting. In 1997, casualty accounted for $161 million in premiums, or 37% of its business, down from 44% in 1996; property generated $102 million in premiums, or 23% of the total, down slightly from 25% in 1996; professional liability accounted for $93 million in premiums, or 21.5%, up from 16% in 1996; program business generated $36 million in premiums, or 8%, up from 6.5%; and MGA business generated $17 million, or nearly 3.8% of the total, up from less than 2%.
Tri-City's two remaining businesses--benefits, with $18 million in premiums, or about 4%; and marine and energy, with $7 million, or 1.5% of the total--had generated virtually no business in 1996, said Mr. Hahn, who observed that until two or three years ago, casualty, property and professional liability were Tri-City's core businesses.
"I think that casualty may come down some more, and property will probably come down and professional liability will continue to grow," said Mr. Hahn.
One new area of specialized expertise is Global Risk Strategies, a Dublin, Ireland-based startup risk management consulting firm in which Tri-City has a minority interest.
The company specializes in offering risk management services to lenders and banks, owners and developers and large engineering and construction companies that participate in building and operating project-financed infrastructure jobs in the United States and overseas.
Global Risk has developed risk transfer and risk financing models that allow these companies to manage their business risk; it represents "pretty significant" opportunities for Tri-City, said Mr. Hahn. The company uses Tri-City's San Francisco office.
Also new is Tri-City Partners, which offers structured finance solutions that enable corporations, real estate investment trusts and other real estate owners to better manage balance sheet and cash liquidity problems associated with their real estate assets, according to Mr. Hahn.
It also represents an opportunity for another Tri-City operation, Tri-City Capital Markets, the wholesaler's joint venture with privately held investment bank Castlebridge Partners in Chicago, which provides blended insurance and financial market solutions for balance sheet risks.
Another particularly promising opportunity for Tri-City lies with brokers who leave the alphabet houses to form their own retail brokerages, said Mr. Hahn. Tri-City is seeking ways to help these operations as they outsource various functions. This could involve providing servicing capabilities or marketing or underwriting expertise in areas including directors and officers and errors and omissions liability insurance, said Mr. Hahn.
It is a somewhat similar approach to Integrated Risk Services, a joint venture with the Hobbs Group, where Tri-City provides its wholesale capabilities to the retail broker, although no company is formed. Integrated Risk Services has been "a tremendous success," said Mr. Hahn.
Benefit plans continue to be a promising area for Tri-City as well. Its Long Island office operates Tri-City Benefits L.L.C., which develops plans for small to midsize companies.
Tri-City remains optimistic about this business, said Mr. Hahn. "It's an area that we want to be in for the long term," in conjunction with Tri-City's ONtrak voluntary benefits program, a benefits communication program and tracking system. The expertise provided by these programs can help brokers that do not have specialized services in these areas, said Mr. Hahn.
Marine and energy are still promising as well, said Mr. Hahn. The brokerage facility deals with a variety of marine businesses, including blue water, brown water, hull and cargo lines.
In light of Tri-City's new relationship with Brockbank, "we're hoping to sometime next year possibly have underwriting authority" for some of this business, said Mr. Hahn. There are a "significant amount of national opportunities in this area," he said.
Jersey, City, N.J.-based Five Star Managers, Tri-City's underwriting facility, which has D&O, E&O and intellectual property liability programs, also remains a mainstay of Tri-City's business.
Tri-City has put an "enormous" amount of time and money into technology, Mr. Hahn added. "We are making tremendous leaps and bounds as far as getting the product into customers' hands" and making the process from quoting to binding the business more efficient.
Last year, Tri-City consolidated its Edison, N.J., operations into its New York office. Any new offices would be the result of an acquisition, said Mr. Hahn.
Some of Tri-City's leading insurance company markets are: Acceptance Insurance Co., ACE USA; Admiral Insurance Co., American International Group Inc.; Associated International; Berkshire Hathaway; Chubb Group; CNA Insurance Cos.; Essex Insurance Co.; Evanston Insurance Co., the Executive Risk Group; Fireman's Fund Group; First State Insurance Co., General Star Indemnity Co.; Great American Cos.; Gulf/Travelers Specialty; Lloyd's of London; Reliance National Insurance Co.; RLI Insurance Co.; Royal & Sun Alliance Group; St. Paul Fire Cos.; United Capitol; and Zurich Insurance Group.
Besides Mr. Hahn, other principal officers are: Executive Vps Scott W. Gunnison, George P. Hilditch, Alexander M. Kullman, Daniel S. Real, Michael P. Tilton and Edward W. Ulshafer. Robert B. Dillon is chief operating officer, and Leo P. O'Reilly is chief financial officer.
Tri-City is a member of NAPSLO.