Posted on 07 Mar 2013 by Neilson
With interest rates hovering at rock bottom, insurance companies are focusing more on underwriting, said the newly promoted leaders of Sparta Insurance Holdings Inc.
"We saw rate increases of 6% in 2012 and for the first three months of 2013, it was more like 7%," said Ralph E. Jones III, who was recently promoted to chief executive officer from president and chief operating officer. "With a low interest rate environment, there's a heightened concentration on underwriting results in the industry. This is a good thing."
The largest increases were in workers' comp and property, and "we expect those lines to continue to increase in 2013," said Brian D. First, who was promoted to succeed Jones as president and COO. He was formerly executive vice president and chief underwriting officer.
Company co-founder George L. Estes III, who had been CEO, will continue to serve as the company's executive chairman.
Sparta, which stands for specialty program and risk transfer alternatives, was founded in 2007 as a U.S. property/casualty underwriting company writing unbundled commercial program business.
The privately held company was backed by private equity firms Corsair Capital (which also invested in Axis Capital Holdings and Catlin Group Ltd.); York Capital Management; Primus Capital; KBW Capital Partners and investment bank Goldman Sachs.
"We had about $300 million in capital to start the enterprise in 2007, and had annual premiums of $320 million in 2012. We've been profitable the last two years and are hopefully sailing into a better competitive environment," Jones said. "We didn't start at the best of times in the insurance cycle, but have been able to achieve a niche that has been successful for us."
The overall program marketplace is estimated to be about $20 billion. "We're a relatively small market, but we do well because we are totally dedicated to this market," Jones said.
Even thought the company gets about $1 billion in new business submissions a year, "we decline to pursue many of them," First said. A good portion of this business is underpriced or has catastrophe exposure that the company isn't willing to accept.
The company writes business in all 50 states and all commercial lines, First said. "We're not overweighted in any state or any business," he said.
The company focuses on the transportation and food service segments and also specializes in professional liability, Jones said.
Jones joined Sparta as president in September 2012. A 30-year veteran of the insurance industry, Jones has held senior positions at Chubb Corp., Arch Worldwide Insurance and Hiscox Insurance Co. Ltd. Most recently, before joining Sparta, he was president and COO of Everest Re.
First was a member of the initial management team responsible for launching the company in 2007. His past jobs included stints leading the alternative risk program units at Travelers and Hartford.
The company writes unbundled commercial property/casualty insurance programs for customers who include small to medium-size insureds organized by program administrators. Sparta operates in two business segments, alternative risk transfer and specialty programs, according to BestLink, A.M. Best's online financial system.
From 2007 to 2011, the only year the company has produced a statutory net income was in 2007, when it booked a net income of $509,000. The company posted a net loss for the next four years, finishing 2011 with a net loss of $5.2 million, according to BestLink. But for the first nine months of 2012, the company was back in the black, posting net income of $2.8 million, according to BestLink, www.ambest.com/bestlink. The company's five-year average combined ratio from 2007 to 2011 was 113.4. The combined ratio for the first nine months of 2012 had improved to 98.9.
Sparta Insurance Co. currently has a Best's Financial Strength Rating of A- (Excellent).