Great American’s Incoming CEO Wants Insurer Looking for 2026’s Disruptors Today
December 23, 2016 by Renée Kiriluk-Hill
CINCINNATI – Disruption is a given and insurers who want to remain relevant need to keep one step ahead of it, according to incoming Great American Insurance Group President and Chief Executive Officer Gary Gruber.
“What I want our units to do is look out over the next five to 10 years. What are you going to do to handle disruption 10 years from now?” Gruber told Best’s News Service. “If you recognize it after it’s in play, it’s too late. Something else is coming down the pike.”
Gruber, a Cincinnati native who started at Great American in 1977 as a college graduate after a professor recommended the company, succeeds Donald Larson on Jan. 1 (Best’s News Service, Dec. 7, 2016).
“I’ve never updated my resume since the day I walked in here. I got plenty of calls from headhunters, especially when I was in finance,” but Great American believed in him, supported him and gave him opportunities to advance his career, Gruber said.
Great American Insurance Cos. are specialty property/casualty writers with more than 100 locations in North American, Western Europe and Asia. It is the largest of five property/casualty divisions within American Financial Group Inc. Great American Co. and 10 companion carriers have an inter-company pooling arrangement, according to an A.M. Best Credit Report, under which Great American Co. retains all of the combined business. The company also assumes all business written by Great American Lloyd’s Insurance Co., earning a management fee.
“My job is to keep the momentum going,” said Gruber. “Our operating model is the key to our success.” He was there in the late 1980s when then-CEO Carl H. Lindner III shifted the company focus to specialty P/C lines. They outperformed mainstream commercial and personal lines, Gruber said, and Great American now has 34 business units, with another six planned within three-to-four years.
Each unit operates autonomously to reach corporate goals and objectives, the incoming CEO said, allowing them agility to meet market demands. Through markets hard and soft, “producers look at us as specialists … We have a long-term view. We reward underwriting profitability, not top-line growth, but we get top-line growth, too.”
Great American gained approval this year to extend the license of member company El Aguila Compañía de Seguros, S.A. de C.V. in Mexico to create a 30-line property/casualty business. It has operated since 1994 as a specialty automobile insurer (Best’s News Service, May 12, 2016). The move came about, Gruber said, because the company had a chance to hire what he called a superior management team previously with QBE.
“They developed a business plan we liked,” and Great American’s culture embraces an entrepreneurial spirit, said Gruber.
He said he’s taking a wait-and-see approach to how the election of Donald Trump as president of the United States might impact business in Mexico. In the United States, he envisions a number of positive changes. For instance, he said a quicker approval process for medications already vetted and in use in other countries could help injured workers and improve lives.
Tax reform is a top priority, he said, and he thinks corporate rates will improve during a Trump administration. “The complexity of our tax policy today just isn’t good for the American business environment. It will be interesting to see how it impacts Bermuda and the tax advantages [insurance] companies have there. It will be a good thing for those of us domiciled in the U.S.”
The federal crop program is important to Great American, the fourth-largest multiperil crop insurer in the United States in 2015, based on direct premiums written, according to BestLink. Trump garnered “a lot of support from the heartland, I don’t think he’ll do anything detrimental,” said Gruber. “As they say, only time will tell.”
Last month American Financial Group completed its merger with National Interstate Corp., a deal valued earlier at $660 million. American Financial acquired the shares of National Interstate not previously owned by Great American (Best’s News Service, Nov. 11, 2016). National Interstate’s primary line is commercial automobile liability, and Gruber sat on the company’s board for more than 20 years.
“Commercial auto is very tough, the toughest class in the marketplace today,” said Gruber. “We keep seeing development. People have been dealing with bad statistics, which means their pricing’s off.”
National Interstate has a solid management team, and it needs to reduce the insurer’s combined ratio to achieve an acceptable return on equity within the next couple of years, he said.
Great America has a dedicated predictive analytics unit working with each business unit. It’s a tech-driven world in terms of data and analytics, machine learning, wearables that can reduce workers’ comp injuries and more, Gruber said, and end-user expectations have changed.
“Nothing gets done in our economy without insurance. We’re not manufacturing anything, but we make a promise,” he said. That makes insurance the ultimate people business. “It’s all people, day in and day out.”
Great American net premiums written rose 4.3% in 2015 to $2.35 billion, according to its A.M. Best Credit Report. Net income increased to $294 million, compared with $221 million in 2014. The combined ratio improved 1.6 points to 90. Operating performance reflects a disciplined operating strategy and specialty market knowledge, multiple distribution channels, diversified products, excellent geographic spread of risk and access to data through a sophisticated technology platform, the report said.
Great American Insurance Co. currently has a Best’s Financial Strength Rating of A+ (Superior). Other operating entities of American Financial Group Inc. have Best’s Financial Strength Ratings of A+ (Superior) to B++ (Good).
(By Renée Kiriluk-Hill, associate editor, BestWeek: Renee.Kiriluk-Hill@ambest.com)
