Post on 04-Jun-2018
8/13/2019 Tony Falcone Presentation - 9-7-07
http://slidepdf.com/reader/full/tony-falcone-presentation-9-7-07 1/27
September 7, 2007
Emerson Cammack Lecture Series
8/13/2019 Tony Falcone Presentation - 9-7-07
http://slidepdf.com/reader/full/tony-falcone-presentation-9-7-07 2/27
Insurance – what is it?
8/13/2019 Tony Falcone Presentation - 9-7-07
http://slidepdf.com/reader/full/tony-falcone-presentation-9-7-07 3/27
“Insurance . . . its cringe factor ranks rightup there with such joys as filling out
your income tax return. Or balancingyour checkbook when the bank saysyou‟re $500 overdrawn. Or perhaps
shopping for your own cemetery plot.”
8/13/2019 Tony Falcone Presentation - 9-7-07
http://slidepdf.com/reader/full/tony-falcone-presentation-9-7-07 4/27
“Insurance allows individuals or
organizations to exchange the risk of alarge loss for the certainty of smaller
periodic payments, known as premiums.
The exchange (or transfer) of risk is laidout in a legal contract called the
insurance policy, which spells out thecoverage, compensation, and/or other
benefits.”
Source: Insurance Information Institute
8/13/2019 Tony Falcone Presentation - 9-7-07
http://slidepdf.com/reader/full/tony-falcone-presentation-9-7-07 5/27
5
Commercial insurance
• Most commonly used organizational risk management tool
• Worldwide, insurance premiums exceed $3 trillion ($1 trillionin the US)
• More than 2 million US workers are employed in theinsurance industry (2.1% of the overall workforce)
– 100 billion in payroll
– 13 billion in state taxes
Source: Insurance Information Institute
8/13/2019 Tony Falcone Presentation - 9-7-07
http://slidepdf.com/reader/full/tony-falcone-presentation-9-7-07 6/27
History
8/13/2019 Tony Falcone Presentation - 9-7-07
http://slidepdf.com/reader/full/tony-falcone-presentation-9-7-07 7/277
A history lesson (albeit brief) . . .
• Marine insurance in thelate middle ages – Merchants / bankers
concerned with loss due topiracy and storms
– Bankers providedguarantees against loss;merchants paid the bankersin exchange for protection
• Fire insurance – Evolved after great Londonfire of 1666
– First US insurance companystarted by Ben Franklin in1752
8/13/2019 Tony Falcone Presentation - 9-7-07
http://slidepdf.com/reader/full/tony-falcone-presentation-9-7-07 8/278
RLI‟s Rich History
• 1961 – founded a contact lens insuranceagency, Replacement Lens Inc.
• 1965 – private holding company formed andacquired United Founders, Ins. Co.(formerly Main Mutual)
• 1969 – private holding company renamedRLI Corp.
• 1971 – RLI common stock first traded onNASDAQ
• 1975 – became Peoria's first EmployeeStock Ownership Company
8/13/2019 Tony Falcone Presentation - 9-7-07
http://slidepdf.com/reader/full/tony-falcone-presentation-9-7-07 9/279
RLI‟s Rich History
• 1977 – began underwriting specialtycommercial property and casualty coverages
• 1987 - RLI common stock moved to NYSE;opened commercial casualty division
• 1992 – established surety division
• 1997 – opened transportation division
• 2005 – opened marine division
8/13/2019 Tony Falcone Presentation - 9-7-07
http://slidepdf.com/reader/full/tony-falcone-presentation-9-7-07 10/27
What’s the score?
8/13/2019 Tony Falcone Presentation - 9-7-07
http://slidepdf.com/reader/full/tony-falcone-presentation-9-7-07 11/27
The premiumdollar (industry)
53¢Claims
32¢
Underwriting Expense /Commissions 10¢Claims Expense
5¢Profit
8/13/2019 Tony Falcone Presentation - 9-7-07
http://slidepdf.com/reader/full/tony-falcone-presentation-9-7-07 12/27
The premiumdollar (RLI YE
2006)
38¢Claims
25¢
Underwriting Expense /Commissions 10¢Claims Expense
27¢Profit
8/13/2019 Tony Falcone Presentation - 9-7-07
http://slidepdf.com/reader/full/tony-falcone-presentation-9-7-07 13/27
95
100
105
110
115
120
7 0
7 1
7 2
7 3
7 4
7 5
7 6
7 7
7 8
7 9
8 0
8 1
8 2
8 3
8 4
8 5
8 6
8 7
8 8
8 9
9 0
9 1
9 2
9 3
9 4
9 5
9 6
9 7
9 8
9 9
0 0
0 1
0 2
0 3
P&C Industry Combined Ratio
2001 = 115.7
2002 = 107.2
2003F = 103.2*
2003:Q1 Actual = 99.5
Combined
Ratios
1970s: 100.3
1980s: 109.2
1990s: 107.7
2000s: 111.0
Sources: A.M. Best; III
8/13/2019 Tony Falcone Presentation - 9-7-07
http://slidepdf.com/reader/full/tony-falcone-presentation-9-7-07 14/27
RLI Historical Combined Ratio
95
100
105
110
115
120
7 0
7 1
7 2
7 3
7 4
7 5
7 6
7 7
7 8
7 9
8 0
8 1
8 2
8 3
8 4
8 5
8 6
8 7
8 8
8 9
9 0
9 1
9 2
9 3
9 4
9 5
9 6
9 7
9 8
9 9
0 0
0 1
0 2
0 3
90.489.1 90.188.4 95.8 95.8 92.4 93.1
RLI
8/13/2019 Tony Falcone Presentation - 9-7-07
http://slidepdf.com/reader/full/tony-falcone-presentation-9-7-07 15/27
Products
8/13/2019 Tony Falcone Presentation - 9-7-07
http://slidepdf.com/reader/full/tony-falcone-presentation-9-7-07 16/27
Primary Commercial Products
Automobile
Property
Umbrella
Workers’
Compensatio
n
Marine
(Inland /Ocean)
GeneralLiability
x
Surety
8/13/2019 Tony Falcone Presentation - 9-7-07
http://slidepdf.com/reader/full/tony-falcone-presentation-9-7-07 17/27
Home
Auto
Dwelling Fire
Umbrella Boat
Motorcycle
RV
Primary Personal Products
8/13/2019 Tony Falcone Presentation - 9-7-07
http://slidepdf.com/reader/full/tony-falcone-presentation-9-7-07 18/27
Property
25%
Casualty
65%
Surety
10%
RLI Q1 2007 Product Summary
Vision UW Method
Underwriter 85.1%
eCommerce 14.9%
Geographical Spread
Major Product Groups Segmentation
California 18.6%
New York 16.4%Florida 14.7%
Texas 7.7%
Strategy Key Producers % of GWP byCompany
Mt. Hawley Ins. Co. 54.8%
RLI Ins. Co. 43.3%
RLI Indemnity Co. 1.9%
As a leading provider of specialized insurance andfinancial services, RLI is focused on building and
managing a portfolio of innovative products andsolutions that meet and surpass the expectations ofour shareholders.
General Liability 27.5%
Surety 10.4%
E&S Property (less DIC) 9.6%
Personal Umbrella 8.2%
Transportation 7.8%
DIC 7.4%
Millions
CRC Ins. Services 15.1
Swett & Crawford 6.3
Program Brokerage 5.8
Colemont Ins. 5.5
Marsh & McLennan 4.8
•Grow core business by expandinggeographic coverage and UW capacity
•Leverage information technology toincrease productivity and reduce expenseratio
•Grow underwriting profits while improvingrisk management techniques
Executive Products 6.2%
Commercial Umbrella 5.4%
Marine 5.1%
Programs 4.2%
Hawaii Homeowners 1.9%
eXS 1.2%
% of GWP by Product Group
8/13/2019 Tony Falcone Presentation - 9-7-07
http://slidepdf.com/reader/full/tony-falcone-presentation-9-7-07 19/27
8/13/2019 Tony Falcone Presentation - 9-7-07
http://slidepdf.com/reader/full/tony-falcone-presentation-9-7-07 20/2720
Direct Distribution
Insurance
Company
Insured
8/13/2019 Tony Falcone Presentation - 9-7-07
http://slidepdf.com/reader/full/tony-falcone-presentation-9-7-07 21/2721
Independent (Retail) Agent
Insurance
Company
Insured
Insurance
Company
Insurance
Company
Retail Agent
8/13/2019 Tony Falcone Presentation - 9-7-07
http://slidepdf.com/reader/full/tony-falcone-presentation-9-7-07 22/2722
Wholesale Agent
Insurance
Company
Insured
Insurance
Company
Insurance
Company
Retail Agent
Wholesale Agent
8/13/2019 Tony Falcone Presentation - 9-7-07
http://slidepdf.com/reader/full/tony-falcone-presentation-9-7-07 23/27
Roles and careers
8/13/2019 Tony Falcone Presentation - 9-7-07
http://slidepdf.com/reader/full/tony-falcone-presentation-9-7-07 24/2724
The transaction . . .
• Primary roles – Agent
– Underwriter
– Underwriting Assistant
– Claims Representative
– Risk Control Representative
– Actuary
8/13/2019 Tony Falcone Presentation - 9-7-07
http://slidepdf.com/reader/full/tony-falcone-presentation-9-7-07 25/27
25
Commercial Lines Underwriting . . .
• Overall underwriting process – Gather information
– Evaluate information
– Identify appropriate program terms/conditions
– Implement program
– Monitor program and take additional action if appropriate
• In addition to insurance applications . . .
– Financial status of applicant
– Character / reputation of applicant
– Past losses incurred by applicant
– Other sources of data
8/13/2019 Tony Falcone Presentation - 9-7-07
http://slidepdf.com/reader/full/tony-falcone-presentation-9-7-07 26/27
My personal journey . . .
8/13/2019 Tony Falcone Presentation - 9-7-07
http://slidepdf.com/reader/full/tony-falcone-presentation-9-7-07 27/27
From broadcast journalism . . .
• Bowling Green State University „94 – B.S. in Journalism
• Westfield Group – Trainee
– Marketing Manager in Bowling Green and Cleveland
– Corporate Instructor
– Underwriting Practices Manager
• Selective Insurance Group – Agency Management Specialist
• RLI – Assistant Vice President, Home Office Underwriting